There was a time when the boundaries between the manufacturers and the distribution channel were very clear. The manufacturers designed and manufactured products, the distributors acquired those items to sell them in their stores and the final consumers bought them. Simple and effective.
But the appearance of electronic commerce changed the rules of the game and, although it led to a generation of new purely digital distributors, the linear model of the physical world (from manufacturer to retailer and from retailer to consumer) had remained virtually intact.
However, right now this linear model no longer works so well in a digital ecosystem full of technological innovation and highly competitiveness.
From manufacturers to digital 'players'
Consumers have unlimited access to information and many opportunities to compare before buying. They can compare companies, products and prices in a single click. They can get opinions from other users, read product reviews or see the valuation of other buyers before deciding.
With this degree of demand from consumers, brands begin to seriously rethink how their relationship with distributors should be and whether they should take the step of selling directly to consumers: the Direct to Consumer Commerce or D2C.
Although the direct sale from manufacturer to consumer is not something new, the movement of so many brands towards the creation of their own eCommerce sites to sell directly to digital buyers is.
Nike, for example, set out to sell directly to its customers 5,000 million dollars in 2015, and sold 6,600 million at the end of that year, that is, 1,600 million more than expected. And the future plans of this giant manufacturer of sports clothing and footwear are even more ambitious: Nike wants to sell in Direct to Consumer eCommerce 16,000 million dollars in 2020. The data of eCommerce trends reinforce this ambition in Nike, as they advance some websites such as Digital Commerce 360
Pros and Cons of Direct to Consumer eCommerce
One of the experts that analyses the Direct to Consumer eCommerce scenario is Noam Schwartz of SimilarWeb, which labels this trend as a tectonic movement that will quickly change the configuration of the online sales scenario.
There are three main reasons for the attractiveness of Direct to Consumer eCommerce in which all specialists agree: margins and chain value; technology and data; and the active audience.
1. The margins and chain value. One of the keys to the success of the manufacturers is the control and management of the complete chain value that the channel now makes: distribution, logistics, deliveries and payments. If distributors are eliminated, more competences are acquired over the chain value and margins are increased, which, in global terms, makes a lot of sense for the global scale manufacturer.
2. Technology and data. Technology is available to everyone and allows direct access to customer data. And that consumer behaviour data allows manufacturers to understand better what products they should design, manufacture and sell. And, in addition, the technology also allows analysing the digital competence in a very precise way, price monitoring of other brands, stock analysis of other ecommerce or understanding the sales behaviour of the products in any digital distribution channel.
3. The active audience. The audience is the main asset of any brand is an idea that is assumed by all marketing managers, but that can only become a reality when a direct connection is established without intermediaries with customers. Manufacturers are more aware than ever that having control of the relationship with the consumer is decisive for the future of the business.
But, obviously, not all are advantages. Even with an excellent product, buyers do not flock to buy from an ecommerce site. To convert into reality a Direct to Consumer eCommerce it requires a strong investment of capital, human resources, marketing, communication and technology.
Big manufacturers are not discouraged by large investments, especially when they think of consumers who expect a perfect shopping experience. When a manufacturer is present from the first contact with a potential client until it becomes a customer and is loyal to the brand, that brand can propose a unique experience for each moment of contact, something that a distributor could not offer.
And that is only achieved by controlling the entire process, making Direct to Consumer eCommerce.