There have been many ideas, good & bad, on how to implement programs that keep consumers happy, but even the greatest ideas have trouble surviving due to the processes & (lack of) people involved. At the end of the day, the primary objective is the one that ends up suffering the most. Our consumer.
How do suppliers, retailers, & consumers see D2C?
There are two main types of D2C with each of those having several variations. Those with exclusive retailers involved in the process, and those without. I guess there is a sort of 3rd one that partners with local retailers to provide support to consumers who purchase directly from the manufacturer, but for the sake of not overcomplicating things, I am going to draw a line based on where the D2C purchase originates. As in, whose website did they purchase it from? Why am I drawing the line there? Keep reading!
I think the origin of purchase is the key metric to start from. Without torturing you with my overly complicated & meandering thought process, I’m treating purchases that come (or appear to come from), a retailer’s own website just like a walk-in purchase. Even if it ships from elsewhere (drop ship) directly to the customer, from the very beginning, that consumer sees their purchase as one that comes with that traditional local business. If the consumer purchases directly from a supplier’s site (without being redirected to a local retailer), even if it ships to the shop for the customer to pick up, the consumer knows deep down that the shop is nothing more than contracted support with limited powers. (never assume the consumer values a retailer more in this situation).
I know I know… depending on the products involved, there are several versions of this that may or may not wiggle its way into my generalized containers of definition, but let’s not focus on that. We’re here so everyone can gain a better understanding of each other’s perspectives, abilities, and expectations so we can better serve our consumers.
Almost 20 years ago, I worked for a large manufacturer that sold to distributors, retailers, & consumers. By far, we sold more to distributors/OEM, because we knew that dealing with the general public was a pain in the ass. Of course, we made more per product by essentially cutting out not one, but TWO middle persons distributors & retailers), but the truth was, the consumer preferred buying through shops because, if there was a problem, calling a 1-800 number for support strikes fear into people. Of course, while we sold to shops, they were a pain as well… but not in the same sense. Just having to internally arrange hundreds of shipments was costly & time-consuming. It was already hard enough predicting all of the logistics around ordering (several months ahead of time), stocking, warehousing, & shipping, and the customer service processes weren’t to be taken lightly. However, selling to a distribution network was a walk in the park. Distributors have assigned buyers, usually in specific categories, who commit to purchases before manufacturers even start the manufacturing process. While we made a lot less per product (the margin distance between landed, wholesale, and retail vary, but not by anything crazy), the risks & responsibilities were reduced astronomically. Plus, we wanted to focus as many resources as possible on making better products to maintain demand. Sustaining our business health revolved around making better products first rather than sell sale sail!!!
Despite the changes in consumer behavior & growth of eCommerce, I believe this theology is still (should be) vital in sustaining good business health today. So what does this mean for you and taking on D2C?
Is D2C helping us… or taking us away from what we do best?
The standout issues I have observed with D2C as a whole surround how it’s being presented, and who is expected to manage it.
- Suppliers establish what works for them, often with a skeleton staff managing it, and present it with a process that retailers and/or consumers are expected to work around. When you consider the ever-increasing number of suppliers independently creating (& modifying) their D2C programs and the challenges of managing the inconsistencies retailers & consumers face… well, you get the picture.
- Then you have D2C programs being shoved into various kinds of retailers that weren’t designed to handle or support an entirely different selling platform. Bicycle retailers, who have historically run thin, rarely have the ability to maximize a single (much less several) new platforms that require a whole new set of processes & risks… especially when the risks vs rewards are questionable. I don’t care who you are… no retailer in any industry likes to deal with problems when they didn’t have a hand in making sure things were handled properly from the start. And pardon my bluntness… if anyone assumes consumers understand our processes, or worse, expects consumers to empathize with us if it wasn’t our fault… well, you should probably stay in the back counting rim strips.
If we were selling boring household goods or electronics, this wouldn’t be as big of a deal. When it comes to all things bicycle, we’re buying & selling within an established culture & community. We’re not a buy-n-fly industry where we sell something and never see that consumer again. While selling items online directly or through mass online marketplaces might work for some things, we need to consider if those avenues match our identities and business structure. Too often I see what could be deemed, ‘misguided ambition’ where someone sees something work in other industries and assumes, it will work the same for them if they follow the same process. In extreme cases, I have seen new businesses establish themselves around being a D2C business and even existing ones basically shut down only to reopen as a D2C business. In those cases, they have a much better chance of succeeding because they’ve established a single & manageable identity. When we try to modify an existing business into a hybrid brick & mortar/D2C business, the margins for error & frustration for all involved, go up.
So should or shouldn’t we D2C?
D2C in our industry is not (yet) natural… but it is essential. Too often I have seen it used as a crutch more so than a long-term solution and I don’t think consumers see it much differently. So what are the problems and how can we fix them? Without sounding too obvious, it started with poor communication, feedback, and consideration… with expectations set too high, by everybody. Let’s look at it from the bottom up:
- Consumers are confused as they now (think they) know everything after a couple of online searches and it’s become gray as to who has their back. (don’t make me be blunt again).
- Retailers, many who are already struggling, don’t have the resources (people, time, & capital), to properly manage even the best D2C programs due to having to consider & manage several variations of them at once.
- Suppliers, just like shops, have similar problems and base too many decisions on too little feedback, hence making it harder for all retailers to manage.
For the same reasons manufacturers value distributors, (lower risk & responsibility due to predictability), the supply channels need an improved level of feedback & forecasting. I’ve said this many times to people in discussions, but forecasting is should be more important than sales to the supply channel. I was initially shocked to see how poorly supply management was handled during & immediately after the COVID boom, but realized, this is an industry that too often doesn’t have a 2, 3, 5, much less a 10-year plan. Even the few who understand & carry out forecasting, still struggle because no amount of forecasting can be effective when it’s swimming in a sea of guesses.
I’m not saying everyone needs to go out and buy a crystal ball, but a little goes a long way when you’re practically starting with nothing. I’ve been in countless situations where retailers complain to me about items that are out of stock on the same day a supplier complains about having too much and needs to move it. Everyone that wants to waste more time pointing fingers needs to stand in front of the mirror because most of our industry’s problems are in some way associated with all involved. Programs like D2C will have a lower success rate, much less be maximized unless we develop it (properly) from the root up. That starts with having some formal conversations on a widespread scale (eh hem… there is a place for that right HERE).
Let’s Discuss!
- What are some of the things that would make D2C more manageable?
- What would make consumers happy?
- How can we reduce & manage the risks to both our businesses and consumers?
- What kind of programs do you steer away from even though you love their products?
- What kind’s of programs seem to work and you wished others would do?
I know it may feel like I’m twisting the knife by stirring this up, but honestly, I wish I had started this conversation 20 years ago once I began to understand what the various sides of our industry and the consumer valued… and what we needed from each other.