21 November 2021 D2C: what it is, advantages, and how to structure logistics for this new business model E-commerce is a democratic channel that has opened up space not only for retailers. With the advancement of online sales platforms and the growing adoption of this new type of consumption, industries have realized that there would be an interesting opportunity to offer their products directly to the end consumer, without the need for a retailer or distributor. This type of sale, called D2C (Direct to Consumer or DCT), is becoming stronger every day. Companies like Nike, Nestlé, and Unilever Group, in addition to tech giants, are already present in the electronic channel and foresee significant growth. According to a study conducted by Salesforce in 2019, 99% of the leading consumer goods brands in the market are already investing in D2C strategies. Another survey, conducted by Bringg, revealed that 87% of industries consider D2C highly relevant for both the product and consumers. And nearly half (47%) use this channel to increase their profits. This is the case with Nike. According to the Econsultancy website, in recent years, the company has made improvements to its e-commerce site and the NikePlus membership program, which offers customers a range of benefits, including early access to new products, member-exclusive products, and free returns for 30 days. And, as highlighted by a Market Realist survey, the company’s earnings in D2C could reach $16 billion this year. From this Nike initiative, it is possible to perceive a key point that attracts industries to D2C: the possibility of creating stronger and more direct relationships with consumers, being able, for example, to turn feedback into new products and solutions. With this, they are able to have an agile and simplified sales process and constantly seek to improve their customers’ experience. The result is an increase in sales and revenue. What is D2C? Terms like B2B (Business to Business) or B2C (Business to Consumer) are already well-established, and D2C (Direct to Consumer) introduces another sales concept that has also generated good results. It involves business and transactions carried out between industry, franchisees, importers, and distributors and the end consumer, without intermediaries within the supply chain. And it is precisely through e-commerce that D2C has strengthened, as it has facilitated this direct relationship with the customer, without the need to invest in a physical store. With the tools offered by digital sales, industries are able to measure data and understand consumer habits and preferences, turning them into an important competitive advantage. Additionally, they can increase market share by offering more than one sales channel and various shopping experiences to their customers. In summary, we can list the main advantages of D2C: ☑ Qualification of the customer shopping experience: by controlling the end-to-end distribution flow, manufacturers are more able to offer a qualified shopping experience to their consumers; ☑ Closer relationship with the customer: knowing the consumer is the first step to satisfying them today and in future opportunities, as well as enabling actions and strategies to leverage sales, such as launches and promotions; ☑ Better brand positioning: direct sales avoid incorrect brand perceptions triggered by a poor retail shopping experience, for example; ☑ Increased revenue: with the correct sales tactics in D2C, companies can leverage their sales, having an additional source of income; ☑ Performance optimization: with customer feedback, it is possible to constantly improve performance and in a more assertive way. Despite offering several structures, D2C requires a series of precautions. In the following topic, check what should be evaluated. Considerations before starting D2C When migrating to D2C sales, it is important to prepare a comprehensive plan that covers all aspects of your business. You should ask some necessary questions: – Is your team and partners ready, and is your infrastructure capable of supporting the strategy change? – Is your warehouse ready to meet the new picking, shipping, exchange, and return models? – Is your business plan complete? – Are your business partners ready and do they understand your strategy? – Are your IT systems and operating procedures aligned? – How will your marketing plan support the initial launch to customers? Their systems and operations must focus on order management, and although they are already doing this for B2B customers, D2C operations have additional requirements, including payment options, sales tax, split order shipping, individual item returns, and more. And everything must revolve around a single purpose: providing the best experience for your customer. When your strategy is in place and the infrastructure is set, you will need to ensure that your retail partners are also prepared. They must know their purpose with D2C sales. One tip is to start by selling products that are not available in the physical store, launching new items and evaluating their performance before they reach stores. You can also choose to sell outlet, refurbished, or offline products. Remembering that all these strategies require different logistics from those used for supplying stores and distributors, for example. Check out some tips in the following topic. Tips for D2C Logistics It is already clear that preparing the logistics operation is a crucial factor to ensure success in D2C, after all, the processes for fulfilling e-commerce orders are different from those used to supply stores and retailers. Some points require more attention, such as: The operation of a warehouse in an industry is mainly based on separation in large volumes (complete pallets, for example) or closed boxes (own packaging), using picking modes such as order picking or bulk picking. However, these formats do not work for D2C sales, which are primarily split orders. In these cases, to ensure fast picking, it is necessary to use a specific type of separation, avoiding excessive movements at the DC and productivity losses. In many cases, batch picking is chosen, which groups orders, followed by put to wall (divided into a hive). Therefore, before starting D2C sales, it is very important to plan and choose the most appropriate picking model to fulfill e-commerce customer orders, trying to maintain organization between what will go to stores and retailers and what will be shipped directly to the customer. Inventory: layout and control To meet split orders, it is also necessary to have a split stock area, facilitating picking through separators. Therefore, planning the DC layout is also crucial, trying to define the best positions for each product. Along with this, it is essential to have strict inventory control, performing the perfect balance of lines to avoid both stockouts (product not available for sale to the customer) and excess stock that can cause poor space utilization and losses. Reverse Logistics Another peculiarity of direct-to-consumer sales via e-commerce is reverse logistics. Exchanges and returns are now common, and the warehouse must be prepared to handle them in the best way. It is necessary for the product to be inspected and promptly returned to inventory (if in good condition) or sent to a segregated area. Along with this, a credit must be generated for the customer and allow replacement with another product. (Read more about reverse logistics). Shipping and Transportation Regarding shipping, it is necessary to ensure the printing of the waybill along with the shipping label in the packing area. It is worth adding that you will need to calculate and manage transportation with multiple carriers, defining the best option for each order, considering its numerous variables. And again: it is necessary to monitor if everything is being charged correctly, as shipping costs in e-commerce are very relevant. Systems and Integration All the aforementioned processes can gain greater agility, accuracy, and cost savings if you use a WMS system in your warehouse. The software supports various operations, meaning that in the same DC you can serve physical stores and retailers, as well as e-commerce orders, with all the specifications that each operation requires. (See the case of Jequiti). WMS manages all orders and activities; it has multiple picking modes; offers dynamic routing (according to both turnover and storage rules for each item); strategically performs stock rotation (Kanban); tracks and records all moves made. Another ally is the OMS (Order Management System), which helps manage the order end-to-end by centralizing data in one place. With OMS, your company will be able to manage the order comprehensively, from the moment of purchase to the last mile, and the customer will have access to all the information about the status of their order, qualifying the shopping experience. It is also important to remember that these software, as well as ERP, sales systems, and carrier systems, must be perfectly integrated, so there is complete control over sales in each channel and to avoid any type of failure that could damage the relationship with the customer. Real-Time Operation Monitoring Having data on process execution in real-time allows you to assess whether deadlines have been met, checkout execution, employee performance, among other details. And when you have two distinct operations occurring simultaneously, in the same place, it greatly helps to keep the operation productive and organized. With the WMS system, you have the Visual Management functionality, which offers panels and dashboards that inform about the status of each process. If discrepancies are reported, the system issues a notification so that the correction can be made quickly and accurately. Additionally, the system offers a series of KPIs that allow you to evaluate the operation’s performance. Among the important indicators for selling through e-commerce, we can mention stock turnover, order delivery times (learn more about OTIF, OFR, and OCT), average ticket, return rate and reason for return, and transportation cost per package. With Visual Management and KPIs, you can increase the service level, increase warehouse productivity, and optimize space occupancy and labor management. All of this is essential to serve the customer well and reduce costs, making the business profitable. The last mile or last-mile delivery is a point that deserves a lot of attention when a company is about to start a D2C business. The brand’s reputation is directly linked to the quality of service provided to the customer; therefore, meeting delivery times, ensuring that the customer receives exactly what they ordered, ensuring product integrity, among other important details, are fundamental requirements for anyone wanting to strengthen the business. It is also interesting to offer delivery or pickup options so that the customer has greater flexibility in purchasing. Another relevant aspect is the availability of real-time information on the order status, and OMS can greatly assist in this. Finally, it is necessary to be open to customer feedback to make constant improvements. Opportunities vs. Challenges In addition to all the points mentioned, there are many other details that must be considered in D2C planning. Tax, fiscal, and financial issues must be evaluated, as well as the sales platform, marketing, and customer service, for example. That’s why experts say you can’t transition to D2C overnight. However, they see a great business opportunity that can be promising with the right planning, the right strategies, and the support of technology. So being prepared and open to change is what makes the difference! What is D2C? How to Structure Logistics for This Business Model Deagor WMS per ecommerce può aiutarti!