Marketplaces and D2C are transforming the sales landscape. Here Bertrand Maugain examines the new models and how the synergies between them and existing eCommerce channels need to be negotiated carefully
The digital imperative
All too often, the Business to Business (B2B) sector has been inclined to think that ‘if it ain’t broke don’t fix it’, but it’s surely no exaggeration to say that Covid broke its traditional sales model forever. Digitalization is now “imperative”, Gartner argues, and B2B has taken this message on board.
The crisis is an opportunity for change and growth. Digitalization transforms the way you do business but also paves the way for new business models. Here I look at D2C
(direct to consumer), and by extension “Direct to Customer”, for manufacturers of business products willing to sell directly to their business customers, bypassing the traditional distribution chain.
D2C or how to talk to your real customers
The D2C model is a response to the growing customer demand for sustainability and provenance. Intermediaries are wasteful. Millennials, in particular, care deeply about proximity to a product or a supplier because it simplifies fulfillment (for them anyway) and gives them more authentic insight into the product.
The advantages for a business selling directly to its end market are obvious: by cutting out the middlemen (and sometimes there are many), it can offer a cheaper product, increase margins — or both.
A strategic, longer-term benefit is that you are finally talking to the users of your products, and not merely to the businesses that transport them, warehouse them, or retail them. This is huge.
The traditional B2B business model denies manufacturers direct insight into the customer experience of its products, making them slow to react to changes in the market. It doesn’t have to be that way. The loungewear startup MeUndies has a “Build a Pack” functionality that allows customers to select unique underwear prints, styles, and matching sets as part of its D2C subscription model. No more asking the shop assistant, just tell the factory directly!
Of course, D2C does not happen overnight; there are challenges. However, those that do make the shift can reap rewards.
A good example is in the UK where, since the pandemic broke out, we’ve seen some breweries and food wholesalers such as Samuel Smiths Brewery, AllGreens and Neals Yard Dairies who have expanded their sales model with D2C offerings. As their B2B route to market was closed (restaurants, hotels and pubs), they regrouped to build (or adapt) an eCommerce presence to reach end-customers directly.
What is interesting is that these businesses intend to keep going with D2C once the lockdowns ease. They are confident that by building their brand, D2C is growing the market for it, and that this will more than offset any loss in revenue from B2B sales to distributors.
Cannibalization is the grisly turn of phrase for one sales channel taking trade from another, and this is certainly a consideration before you commit to D2C. You do not want to alienate your distributors. But while D2C may eat into B2B sales there is also more pie to go round if you plan your foray into D2C carefully, and don’t bite off more than you can chew.
Why you should start small
So where do you start? Logistics are crucial. A typical B2B eCommerce platform is often not connected to direct sales channels; implementations are built around the dispatch of bulk deliveries, and not set up for the fulfillment of individual orders. Inventory will change rapidly and erratically, so suppliers need real-time insight into the stock position. With the right Digital Experience Platform (DXP), integrations to your ERP system for up-to-date product information, prices, and inventory could transfer over from your B2B platform.
You won’t be making your entire offering available for D2C. Start small. Put out a product that you know is very likely to succeed in a D2C context and rely on that promise of quality and consistency to win over customers before taking it to the next level. A lot of D2C pioneers built their business in this way. When it launched, Casper offered just one mattress, Bonobos sold just one style of pants, and Harry’s shipped only one type of razor.
This piecemeal approach echoes the minimum viable product concept, where you test the ground, adjust your product or your D2C product offering without wasting money on an inventory of sub-optimal products.
Is D2C for you?
As we saw, the great benefit of D2C is that it frees you to communicate your story very directly to your end-user. However, many B2B businesses are not set up for this, because their online platforms take the narrow view of being all about the sale and not the brand. In B2B, your customers make rational, long-term decisions; in B2C — and therefore D2C — emotion and impulse have the upper hand. To do both you need a platform that can create radically different customer experiences and transactional journeys from the same source: your great products.
To learn more about the D2C why not download our most recent eBook: The Three Pillars of Successful B2B Digital Transformation, where we reveal we reveal how B2Bs can successfully respond to change and invent the disruption of tomorrow.