DTC Why and When
CSG works with many clients who are entering or entertaining the DTC space. Some have successful commercial businesses and are looking to expand their customer base and revenue. Others are moving to direct online connection with customers, cutting out the middleman, and owning their unique customer experience. And then there are the few who….well, just don’t know.
The term “DTC” flies around Linked In and conferences. Many companies are jumping on the DTC bandwagon. Eager to participate in the latest ecommerce trend, fearful of missing the next big opportunity. But, not all companies are ready for DTC, and some would be better served investing in other channels.
Is your company ready to own the customer experience? Tired of ‘big tech’ owning your shipping, product descriptions, and your customer? Afraid of being overtaken or your fresh product ideas stolen and price gauged? It is time to think about DTC.
DTC allows companies to own the customer experience product to delivery. In addition, the direct link to the customer provides valuable insights and feedback that can be silenced in all noise of a big platform. Shipping services can be tailored to the product and unique customers. Branding and experience can be expressive of the company’s ethos.
One of the most frequent drivers is revenue. Many companies are seeking higher profit margins by eliminating platform fees, storage costs, and unpredictable fee structures. A few companies, the mavericks, are moving DTC all the way to the vendor. Eliminating storage and redundant shipping altogether.
Companies operating in commercial spaces are also prime for a DTC move. Selling a product directly to the customer, previously only available through a restaurant, spa or other service providers is an excellent way to build loyalty and drive revenue. Also, customers can access an extended assortment, again growing loyalty and revenue.
This brings us the next big question – When? Now? In a year? It is a big heavy question. DTC required investment and not just dollars. Companies previously reliant on a platform to provide product pages, metrics, payment processing, and fulfillment will have to solve for all aspects of a DTC transaction. Brainpower, experiences, tools, boxes, warehouses, reporting tools…all require investment when moving to a DTC operation.
Commercial operations often have solved for the “front of the house operations”; making a move to DTC seems like a no-brainer. Unfortunately, there is a big difference between shipping pallets and pick and pack. Does your current 3PL support both? What about shipping carriers?
Companies are best positioned to jump into DTC when selling directly fits into a three-year plan. Put more simply – Is DTC part of the company’s growth strategy? If it is not, it will always be a one-off. And one-offs don’t often turn a profit or simply survive.
The time to jump in the DTC pool is when the company is ready to contemplate all aspects of direct shipping, all the way upstream to inventory management and even to purchase orders and manufacturing. In the DTC world, a company will not only store and fulfill differently, but they will also need to order and place inventory dynamically. Bifurcating inventory, thresholds, zone skipping…all play into a successful DTC growth strategy.
Yes, DTC is an excellent way to grow revenue, increase customer acquisition, drive loyalty, and magnify brand presence. But, as any company who has dipped their toe in the serene DTC waters will tell you, there’s piranhas in those waters…and they will eat your lunch.