In recent years, the rise of the direct-to-consumer (D2C) business model has disrupted traditional retail and changed the way companies approach their sales and marketing strategies. Let’s look at the benefits of having a D2C channel, explore how to approach D2C, check out the pitfalls to avoid, and consider the technical considerations for launching a successful D2C channel.
Main business benefits of having a D2C channel
A D2C channel can provide many advantages to a company. One of the most important benefits is the opportunity to gain a better understanding of customers by collecting data directly from them. This can lead to improved customer insights and a stronger brand building effort. For example, makers of products can also include ancillary services (e.g., repairs and maintenance) to enhance the customer experience.
The ability to quickly launch and test new products based on customer feedback is another advantage of a D2C strategy, which can fuel innovation. Furthermore, by establishing a direct connection with customers and increasing engagement and conversion rates, a D2C strategy can lead to increased revenue.
The ideal way to approach D2C
A company can approach D2C in a few straightforward steps. First, it’s important to answer the question, ‘Why?’ Why is the business looking to move towards a D2C model and what are the specific goals they hope to achieve?
Next, the company should plan their road map and understand the unit economics of their business. This includes defining the key components of the business, diagnosing the environment, strategizing to create value, delivering on the strategy, and optimizing performance through data analysis.
It’s also crucial to define the operational model for the D2C business, taking into consideration the road map that was created in the previous step. This operational model will outline how the business will execute their strategy, what processes they will put in place, and what resources they will need to be successful.
Pitfalls to avoid when launching a D2C channel
The many benefits of having a D2C channel may unfortunately be offset by the following pitfalls:
Companies should avoid leading with a technology-focused approach and instead emphasize investment in areas such as operations and channel management.
Decision-makers need to have a full understanding of the unit economics to avoid making short-term decisions that stifle growth.
Companies must choose the right technology platform that won’t create technical debt, hinder efforts to scale, and add costs, complexities, and delays.
Business-building activities in a legacy organization can be hindered by internal policies, so companies must design the right organizational and operational setup to run the D2C business.
Companies should avoid underinvesting and borrowing capacity from other business units, as this could limit growth.
Overcoming challenges in setting up a D2C business
Marketing a D2C channel requires best-in-class creative assets that many companies don’t have. Creative assets like ad copy and product images are crucial for a successful D2C launch. It’s also important to be able to create them in a scalable, cost-efficient way. To overcome these challenges, companies should partner with the best creative agencies that specialize in this area.
D2C projects have many critical areas, but if the creative assets are not great, the user experience will suffer and so will sales. To illustrate, eBusiness Institute at Lingaro Group can deliver hundreds or even thousands of high-quality creative assets, including creative copywriting, basic and advanced product images, product demo visuals, trade-up and cross-sell charts, and many others, for any D2C project.
Technical considerations for launching a D2C channel
Launching a D2C channel involves several considerations:
Creating a website to host the D2C store
Integrating payment gateways to process online transactions
Configuring back-end systems to manage orders and inventory
Implementing tools for delivery tracking, customer relationship management (CRM), product information management (PIM), content management system (CMS), and analytics
A good strategy is to start with an off-the-shelf solution to avoid the complexity of custom IT development. You want to be able to move fast and use a ‘test-and-learn’ approach. Nevertheless, as the online business scales, you will need to integrate D2C into your company’s core IT infrastructure to stay efficient, the same way you do with your existing sales channels.
Other important technical considerations for launching a D2C include multiregion and multilanguage support, website and transaction security, data protection compliance, and search engine optimization (SEO).
From a brand perspective, having an integrated tool to manage content assets and track their performance across various markets is essential.
Overall, launching a D2C business in the long run requires a comprehensive and integrated IT infrastructure that can support all the business processes that are linked to a single sales transaction. It’s important to keep in mind that technology is a tool here, not the purpose. Make sure that you have well-defined D2C business objectives in place before shifting your focus to implementing D2C-related technology.
Using an e-commerce platform for the D2C channel
First and foremost, they need to have a platform that is robust and fast and supports desktop and mobile devices while still mindful of security and privacy. If these elements are not there, they will overspend on customer acquisition due to higher cost-per-click and lower conversion rates.
They also need to capture reliable data with e-commerce analytics to understand whether the fundamentals work or not. This data will be critical to steer your D2C initiative based on facts and not assumptions.
The platform, too, should be scalable and able to support the company’s growth as it expands its D2C offerings. Scalability applies to multiple elements:
Traffic volume in peak and non-peak periods
Product and services portfolio (including content assets)
New regions and languages (including integration with local payment and shipping providers)
Open IT architecture to expand functionality and tailor user experience as the business and the D2C channel grows
There are many more elements to consider, such as personalization, search capabilities, and a promotions engine. However, it’s important not to overcomplicate the initial solution. Time to market is another important factor to keep in mind.
End-to-end support to D2C businesses
In one example, Lingaro worked with a global FMCG company that wanted to grow its online sales but lacked the capabilities to launch a D2C solution on its own.
To build their D2C channel, we provided end-to-end consulting, creative agency services, and collaborated with the client to model logistics processes, prototype the UI/UX design, deliver a multicarrier solution, and integrate SAP. Based on the UI/UX prototype, we created all the creative assets needed on the platform, such as creative copywriting, basic and advanced product images, and videos supporting the products.
The brand that was launched on the platform is now over five years old and remains to be a valuable asset that delivers 30% year-on-year growth.
We can support companies with end-to-end solutions — from business consulting and creative assets to technical implementation. We work with businesses that are just starting their journey into D2C as well as those that have an ongoing program that is underperforming.
Lingaro Group’s digital commerce practice works with enterprises and global brands in designing, developing, and deploying e-commerce systems and digital marketplaces enabled by data and analytics. Our end-to-end solutions cover the entire journey in digital commerce — from strategic consulting, e-commerce strategy, IT architecture design, UI/UX prototyping and e-commerce development to D2C, B2C, and B2B platforms.