According to a survey by Brandshop in 2016, 90% of US consumers prefer to buy goods directly from the manufacturer if they could. Globally, the idea of selling directly to consumers is still nascent but it will soon become the new frontier in retail and manufacturing. We already see a trend where giant multinationals are acquiring platforms selling directly to consumers and experimenting their own direct to consumer models. Examples include Unilever which acquired Dollar shave club for $1 billion to enable them to be part of the direct to consumer play and Proctor and Gamble who are currently experimenting with a subscription model by selling Tide pods directly to their consumers through a customized platform.
Why is this happening? Consumers are demanding better experiences and customer service from companies. Use of intermediaries makes it difficult for companies to control their brands’ relationship with consumers, and to directly collect and respond to consumer feedback. Selling directly to consumers enables a brand to better control consumers’ journey and gather more detailed insight to improve product and customer experience.
For manufacturers, direct to consumers models can be a hard row to hoe. Despite the fact that selling directly to consumers comes with a lot of benefits, manufacturers would still like to maintain their relationships with their distributors as they play a key role in the sales process. However, manufacturers need to start appreciating the pivotal role of technology and the opportunities that come with technology and start taking over their customers’ buying experience, communication and collect insights that can be leveraged on to improve the customers’ experience as well as the products. Some of the benefits that come with selling directly to consumers include; reduced warehousing costs, higher margins, controlled customer experience and real-time consumer data analytics
Getting down to the brass tacks, this shift cannot happen overnight and it is still important to appreciate the role that distributors, wholesalers and retailers play in reaching potential customers. Dealing directly with consumers may be like a fish out of water for the manufacturers and they may not be willing to go out on a limb on this. However, manufacturers can start by adopting a model commonly known as Direct to Store. The direct to store model enables manufacturers to deliver products directly from their own warehouses to the retail stores hence eliminating the need to rely on the existing warehouse and distribution networks. To execute this model seamlessly, logistics can be a fly in the ointment given that there are daunting challenges in the existing infrastructure. Improving logistics could involve leveraging technology to enhance logistics capabilities and streamline the processes. The Direct to Store model enables the manufacturers to establish a closed loop network from their warehouse to various retail outlets while making multiple stops.
How can manufacturers establish a direct to store model? The first step is to analyse the current retailer stores in the value chain. Understanding their demand value and the frequency of orders will enable the company to forecasts the demand as well as optimise the delivery schedule and route plan to ensure that the customer needs are met on time. Due to the multiple stops, loss of goods could be a risk and therefore proper tracking and delivery confirmations are crucial in curbing losses. With Technology, the manufacturing industry is ripe for this sea change and this is the right time to start testing ways of controlling the consumer journey. Manufacturers may decide to build the technology and the logistics capabilities in-house or outsource the logistics operations to technology companies like Sendy, which is a technology platform that connects businesses to all vehicle types enabling them to place delivery orders through the platform real time, track their orders and deliver to multiple destinations.
Does this model make sense for all manufacturers? The strategic objectives of the organization determine whether the model should be prioritised. For example, If the manufacturer values control of deliveries especially when delivery windows are tight or if direct contact with retailers is a critical element to customer satisfaction, then the model would be ideal in helping the organization meet these objectives.
What does it take for this model to work? An optimized customer experience and operational efficiency are the key success factors for the Direct to Store model. This involves real-time visibility of the deliveries, smart real-time alerts in case of any problems and end to end unified control of the whole delivery process. Technology plays a crucial role in driving effectiveness and efficiency in logistics operations with the aim of establishing a competitive edge with a rapid ROI hence enabling manufacturers to get a bigger bang for their buck.
Article by Priscilla Muhiu, Head of Marketing, Sendy Ltd.