Succeeding with Direct-to-Consumer sales

Will Lovatt at Deposco Europe explains how to overcome the barriers to DTC success

 

The traditional retail model is facing significant headwinds in a world beset by shrinking margins, consumer demands for lower prices, and rising costs. In 2020, according to Statista, Direct-to-Consumer (DTC) sales generated by British manufacturers reached £96 billion in 2020, with a projected increase of 25% to reach £120 billion by 2023.

 

Achieving success in DTC, however, goes beyond sales. Businesses must establish a foundation that supports dynamic priorities, consumer preferences, and exercise rigorous cost control. Deposco’s most recent European survey of decision makers in ecommerce; manufacturing; retail; transport and logistics supply chain; and wholesale industries revealed 59% of these organisations had increased their spend over the past three years, with 18% significantly increasing their investment.

 

DTC has expanded beyond niche markets and is now making an impact across an ever-wider range of product categories – from clothing, to health and beauty, and food & drink. The survey showed that 32% of respondents already offer or plan to offer their entire product range through DTC.

 

This is a market whose sales potential is soaring and the survey results indicate an expectation of continuing growth across Europe over the near future and longer term.

 

Scaling the barriers to DTC

While the growth of DTC is  very promising, there are barriers to overcome. Cultural, technological, and financial hurdles need to be addressed when implementing a new DTC fulfilment channel.

 

Change management and the impact on employees pose potential issues to progress, with 17% of organisations in Deposco’s survey citing a lack of skilled staff as a main barrier to achieving DTC success, while 16% mentioned company culture.

 

Some employees can be uncomfortable with the introduction of new ways of working and take time to embrace these new approaches. Leadership, therefore, has a responsibility to set vision and the right cultural environment ready for the new mode of operation.

 

Businesses selling through Direct-to-Consumer channels need to complete appropriate training to get employees onboarded and up-to-speed in the minimum amount of time to be operational, but they also need to build a working environment that embraces change and supports staff in navigating it.

 

The migration to DTC can also result in technology-related challenges. One of the biggest barriers identified in migrating a new DTC operation was ‘ensuring that your warehouse management system can seamlessly fulfil orders,’ highlighted by 21% of the sample.

 

There are a raft of potential issues. For example, a business that uses their ERP or a warehouse management system (WMS) not intended for DTC channels will be very limited in the volume of orders they can accept because critical workflows such as wave picking strategies may not be optimised for high volume DTC pick-pack-ship scenarios. That problem is compounded when the business inevitably needs to bring on more SKUs, locations, and channels.

 

Finding a way forward for DTC

Taken as a whole, these challenges underscore the critical need for brands to manage Direct-to-Consumer logistics on a different level with transparency, precision, flexibility, scale, and control no matter where or how products are being sold. So what is the solution here?

 

Technology is a critical component for DTC success as companies take advantage of the exciting opportunities on offer. More than four in ten of the sample (42%) ranked investing in order management and fulfilment technology among the main ways their businesses look to fulfil customer expectations when operating DTC. Previous generation supply chain execution systems were not architected or intended for the challenges of real-time multi channel operations.

 

Technologies that provide real-time visibility and optimise warehouse operations are especially important when bringing DTC to market alongside other more traditional supply chain processes, a strategy in use by nearly half (43%) of the sample. These capabilities will deliver a positive experience across the whole DTC cycle for ecommerce, manufacturers and retailers alike.

 

Advanced warehouse management and order fulfilment systems will be a prerequisite for operational efficiency and enhanced productivity. The systems landscape will need to be in place to leverage  technologies such as barcode scanning with system directives and validation across all warehouse processes creating a clear repeatable and scalable fulfilment process for teams to work efficiently. 

 

Organisations need systems that enable them to manage all inventory processes inside their warehouse, including receiving, putaway, cycle and physical counting, replenishment, picking, packing and shipping, as well as leveraging various styles of robotics and automation where the business case supports its implementation

 

Having absolute network-wide inventory visibility is critically important for both ecommerce organisations and retailers alike. High service fulfilment is now a driver for the brand experience as warehouse management and order management capabilities move into the spotlight. 

 

Today, best-in-class organisations need to serve their customers in real-time, from any available source of inventory, at the warehouse, from retail stores, dark stores or from stock located at third-party locations, so the systems need to provide a single pane of glass real-time view across the entire supply network.

 

The time to act is now, with the rise of Direct-to-Consumer sales showing no signs of slowing. In this DTC environment, organisations need to find new ways to drive operational efficiencies across increasingly complex fulfilment networks and warehouse environments. 

 

To be able to scale to embrace the new DTC model, it is key that the business ensures it is running high-quality warehouse management and distributed order management systems that are flexible, scalable and capable of continuing to flex to address  new product flows and supply chain practices as and when required.

 

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Will Lovatt is General Manager and Vice President at Deposco Europe

 

Main image courtesy of iStockPhoto.com