Magento Ecommerce D2C Modelling – is it the holy grail of higher market share, sales and margins?

 

In recent times technological advances and the dawn of the internet have increased the opportunity for direct marketing modelling in ways unimagined previously. With nearly 97% of consumers using online media channels to research and procure products, before activating a purchase train, many manufacturers and suppliers are adopting a direct to consumer marketing and sales model to improve the value chain and win the hearts and minds of an increasingly tech savvy and value demanding consumer population. The number of manufacturers selling directly to consumers is expected to grow 71% within a short time frame and one third of consumers currently declare that they purchased direct from a brand manufacturer‘s website over the past year. D2C is being embraced by a growing number of industries including consumer packaged goods, clothes, travel services, consumer electronics and financial services - to mention but a few.

Consider the value of being able to trace from 80% to 100% of your marketing spend to online purchases. This information could help you reduce your financial outlay on untraceable, unproductive mass marketing media such as TV and radio advertising or outdoor billboard banners without affecting growth. It also beseeches the question whether these marketing strategies have the required current outreach. In the context of technological change most people interact via mobile phone or other media devices and are not as impacted by traditional TV advertisements. D2C modelling catches and analyses a broad sheet of data that enables consumer behavioural traceability and informs marketing strategies to produce positive customer behaviour and sales outcomes.

A sudden wave of new direct to consumer businesses is transforming how people shop. Their modus operandi in merchandising everything ranging from sports footwear to washing up liquid, is irrevocably changing customer expectations and preferences. A new swathe of these disruptive brands are asking serious questions of retail in adapting the direct to consumer sales model - they are manufacturing, marketing, selling and shipping the products themselves. This gives Companies complete end-to-end control over the life cycle of their products. They can use different best-fit distribution models such as shipping direct to consumers, partnership with physical retailers or opening pop-up shops to seal the deal.

The food industry in particular have seen the advantages in D2C modeling by introducing online shopping and direct dropship delivery. The latest challenge for them is to supply a stronger supply chain reinforced with better and faster delivery options including new technologies such as drone delivery capabilities. There is no doubt that this model enables vital data collection from consumers which informs better customer experiences and subscription models and makes customer behavioural predictions at the consumer level much easier. With such key information Food suppliers can provide exactly those products in consumer demand so reducing their supply chain costs and saving on marketing spend on loyal customers who will subscribe anyway.

Those Companies who have persistently remained tied into the old traditional business models  have been sidetracked by their forward thinking competitors who have learned to integrate the online and physical experience. The most intriguing aspect of D2C is how it has managed to exercise the minds of CEOs in awakening their awareness to its inherent disruptive characteristics which effectively cut out the middleman. Many have come to realise that as a sales and marketing model it provides added value through greater cost effectiveness in getting rid of redundant sequences from the product value chain. This impacts the pricing model used by traditional businesses, manufacturers and suppliers, who experience D2C as more economical for their customers and more profitable for themselves. For Companies of varying sizes, adopting digital online sales platforms, using digital devices and embracing social media has enabled and boosted the progressive benefits of using the direct to consumer sales model. We have seen a move away from bricks and mortar towards an increasingly popular online offering but some large businesses seem to have bucked the trend. Rather ironically, Amazon has bought out Whole Foods in 2017. This bricks and mortar strategy however has a clear objective and that is to consolidate and expand their online presence and retail domination.

This D2C model applies not only to the Food Industry but to many other successful Ecommerce Brands. Small start-ups have developed into large online businesses by setting themselves apart in how they design, launch and nurture customer experience and how they market themselves. They are competing more effectively by both rethinking the product and the retail model. On a global scale, Companies such as L’Oreal and Nike use ecommerce portable experiences, mobile apps and out-of-home digital media networks to sustain and grow the conversation initiated on ecommerce websites into the store and deliver a wide choice of personalised offerings at the point of sale. This integrated approach supports, improves or  increases the consumer journey by reacting to changes in customer behaviour and differentiating the brand experience.

Direct interaction via email, ecommerce, mobile loyalty apps, social media and instore media all contribute towards converting big data into happy customers. Direct to Consumer marketers report significant improvement in every metric of consumer engagement and this is particularly cogent with Insurance Companies who have experienced greatly increased customer engagement with improved margins through supporting price with value. American Companies such as Aetna - a managed company selling health care insurance plans and related services, are using advanced private benefits exchanges such as Liazon to secure more direct customer engagement and deliver more personalised consumer experiences. Other successful D2C companies are Casper Mattresses whose growth is predicated upon a policy of personalisation, simplicity, dropship delivery and excellent product returns policy underpinned by product value pricing; Airbnb; Warby Parker valued at $1.75 billion; Dollar Shave Club acquired by Unilever for $1billion; Casper and Harrys; Glossier; Bonobos and BarkBox. Terms and conditions are no longer dictated by Distributors who historically controlled retail. By skipping that element of the traditional retail chain, online D2C operators can not only pass savings onto their customers with lower markups but also take complete control of their brand offering from start to finish. Through unique marketing and reliable deliveries D2C Companies are winning an ever increasing segment of the consumer market.

It is acknowledged in the marketing business that brands need to stay current and relevant in a world of increasingly younger consumers who are not so affected by traditional sales rhetoric or advertising. They are more responsive to peer advertising through messaging on social media channels than any hard sales talk. We should not underestimate the power of peer conversations and their memorable purchase experiences which will always reflect product online accessibility, choice, quality, value, discounts, delivery and returns policy. Manufacturers are reminded of the necessity to get the product and pricing right before making an offering to potential online consumers. Capturing the strength of social proof through peer reviews and cutting out the middleman is the essence of effective sales and marketing strategies in the D2C model. It highlights not only the requisite of fair pricing but also other purchase clinchers such as discounting, money back guarantees, efficient and safe payment portals and fast reliable deliveries.

The greatest endorsement of Magento D2C as a premium online sales service is reviews from satisfied customers whose online purchase experience exceeds expectations in terms of access, value, personalised interaction, simplicity of process and fast reliable shipping. Consumers are drawn to convert by a brand’s authenticity and purchase process transparency. D2C Companies are having to structure their sales and marketing model accordingly. Whilst this model is fast becoming the holy grail for manufacturers and retailers, many of the latter find themselves stuck on the hamster wheel of dependency on intermediaries as the default position. For businesses like these they will have to accommodate the B2B and B2C models as integral to their online sales and marketing strategies going forward.

The future of commerce in general would appear to be moving towards the D2C sales model but there is a continuing need for a fusion of B2C and B2B models as well. Bricks and mortar sales will continue to sit comfortably alongside ecommerce albeit in a reduced capacity.