Direct-to-consumer (DTC) e-commerce is picking up speed, with retail e-commerce in Singapore growing by 71.1% last year, second only to Argentina. The benefit of selling directly to consumers and bypassing third-party retailers has driven an unprecedented number of organisations to hop onto the DTC bandwagon.
While business-to-business (B2B) organisations explore the potential of this profitable new growth channel, they should also consider the questions that this transition poses. Could employing this strategy harm your channel partnerships? Will traditional partners feel betrayed by this shift? Failing to understand the pros and cons of DTC could lead to lost opportunities or even damage your brand.
The global pandemic has accelerated the changes. With many confined to their homes in 2020, e-commerce engagement soared like never before. Entire industries have adapted and evolved in response to these changes, with many companies thriving due to their existing set ups.
Conversely, many had to deal with a baptism of fire in the absence of their traditional bricks-and-mortar channels. This dramatic shift looks set to alter behaviour across companies, customers, and the number of sales DTC accounts for in the coming years.
Although the pandemic has accelerated these changes, the main driver for changing business models is the growing prominence of e-commerce within the marketplace. This prominence gives B2B organisations a unique opportunity to reach customers at any time and potentially reduce costs.
Photo: eMarketer
The DTC opportunities for B2B
By creating an effective DTC solution, the far-reaching environment and significant advances in e-commerce technology have made it possible for brands to scale and raise awareness quicker than if they were to build a physical store.
Indeed, harnessing a DTC strategy can bring forth many benefits, such as:
- Revenue growth: By opening up a new selling channel, B2B organisations can gain a boost in their revenues. In Singapore alone, 87% of the $237 billion in e-commerce revenue in the services sector was contributed by B2B transactions in 2018, according to the Ministry of Trade and Industry.
- Valuable customer insights: DTC organisations have access to deeper customer data and insights compared to that made available through retail partners, since it is much easier to collect and store data. With new insights easier to attain, businesses can gather important customer insights that will enable data-driven decisions when developing new creative solutions.
- Manage DTC and B2B sales from one location: B2B organisations can maximise technology investment by utilising one e-commerce platform that serves both B2B and DTC customer groups. This will future proof your business and improve efficiencies, giving businesses a single, holistic view of their data to make better use of it. Furthermore, with disruptions to markets becoming commonplace, a new DTC model could decrease the risks of a volatile market.
While growth in the DTC sector is undeniable, B2B organisations are experiencing significant growing pains on the path towards launching DTC e-commerce solutions.
Despite many B2B organisations being well established in their existing models, the dynamic DTC landscape is uncharted territory. These organisations now face the same challenges all brands face online — standing out in a highly competitive and saturated environment.
Not all plain sailing
Additional challenges such as budgeting, managing logistics processes, and measuring the impact on existing channel relationships, will need careful management to ensure customer experience is not jeopardised.
Can you offer evolving product solutions? Cultivating a unique product and service offering is about creating a platform with the capacity to evolve. In today’s competitive e-commerce market, only the organisations that evolve with their customers will capture market share and prosper.
See also: Refreshing the retail experience
As customer demands change, so must the products and services DTC organisations offer them. Case in point, Unilever’s move to a more direct customer service with its FoodServiceDirect model has seen B2B sales and new customer acquisitions each increase by 40% since its launch in 2018.
Organisations that demonstrate intimate knowledge of their evolving customer profile will continually and successfully innovate their offering. We have seen quick wins for DTC converts who have maximised their product offering with innovative ideas, such as global consumer products company Helen of Troy. It leverages multiple Adobe applications, such as Adobe Commerce, for comprehensive e-commerce offerings, and Adobe Analytics to gain real-time customer insights across channels.
So is DTC the future? With substantial growth figures, businesses might be tempted to over-dedicate energy and budget into DTC strategies. However, this needs to be justified to customer requirements.
With everyone still trying to work out what ‘normal’ will look like in the near future, one thing remains clear — DTC is the model an increasing number of businesses are clamouring for. This approach could safeguard the short-term future and evolve into a long-term strategy.
Scott Rigby is the chief technology advisor and principal product manager at Adobe
Main photo: Unsplash
