Many manufacturing operations are used to selling to business customers in a very specific, often time-served, way; personal relationships with customers, large-scale deliveries and bulk quantities. And it’s worked, so why change it?
As part of our remit in supporting clients on their journeys of transformation and business growth, we’ve been exploring the current benefits of eCommerce for manufacturers.
We see a shift into eCommerce as a significant trend in the manufacturing sector. Research shows that 77% of manufacturers plan to invest in D2C during the next year and 74% have increased capital expenditure over the last 12 months. Moreover, following the disruption to supply and distribution channels caused by the COVID-19 pandemic, we’re also witnessing many manufacturing businesses now accelerating their planned moves into digital commerce and even D2C.
For businesses either opening up online commerce to existing customers and small businesses, or even selling to direct to end users, there has historically been some common barriers:
- The most common challenge manufacturers face in terms of making the move into online selling is the impact that competing on consumer sales will have on long-standing supplier/manufacturer relationships. A fear of alienating partners within the supply and distribution chain is cited as the reason many businesses are holding back from selling direct to end-users.
- This barrier is closely followed by a fear of ‘breaking what they’ve already got’ by trying to introduce digital commerce, causing disruption to the business as a whole and by not having the right resource. Transitioning a business designed around B2B selling requires an organisation-wide culture shift and the adoption of a servisisation mindset. Maintaining the supply chain and distribution, while bringing in new skills via training or recruitment, requires significant investment in both time and finance. Many businesses don’t feel they have either the resource nor right technology required for this type of customer service and that ‘getting it right’ carries huge risks.
- Other common challenges identified are how to price D2C products in the market and managing the brand experience. The sheer scale of differences in customer orders – from those wanting single unit items and small business orders, through to multi-million pound purchases - can be challenging to service from one web platform. Similarly, if customers perceive that the brand sells single products, new customers may presume that they are too small for large-scale projects that are the bedrock of the business. And vice versa.
- Making eCommerce financially viable in terms of the pick, packing and distribution process was something many businesses battle with when going down this route, as well as the additional time required to service increased customer interactions.
So do the potential benefits of eCommerce and a move to D2C now outweigh these risks?
There are many D2C companies thriving. These are not only the pure-play D2C start-up businesses, like made.com, Abel & Cole, and Casper – who arguably have found it easier to shape their business model with a single minded end user proposition – but many manufacturing businesses have also responded with agility to extend their operations.
Success stories like these include big names such as Procter and Gamble and Heinz, as well as other food brands such as Oppo Ice Cream and Mornflake Mighty Oats who have seen a huge increase in their customer base from making this move.
So why is this such a good move, not only now that many physical stores are shut and existing routes to market have been disrupted, but as a future-building long term growth strategy?
- Increasing Sales & Market Share: Manufacturers selling products directly have been shown to actually increase sales of certain products overall rather than cannibalise them; increasing market share. Wider availability and increased ways to buy products is seen as a positive by customers – many of whom now come to expect to be able to buy from the brand directly as well as through chain-stores or even online channels like Amazon and eBay. It also opens up the potential to sell to small businesses via this channel, as well as end users, giving manufacturers access a broader customer base.
- Faster To Market: A significant benefit is an ability to get products to market faster, responding to customer demand and changing marketplace.
- Gauging Demand: As well as an ability to provide customers with a wider range and choice of products, D2C selling opens up the chance for manufacturers to test new ranges before rolling them out, to gauge if there is a market.
- Data Insight: eCommerce brings big benefits in terms of greater access to customer data, end-user insights and an ability for personalisation. Such insight can transform a business and help to lead future strategies from everything from product development, through to the entire customer experience.
- Organisation-wide Improvements: Focusing entirely on customer needs, as opposed to doing what the business has always done focused more on the wholesale process, can improve all touchpoints and operations.
- Integration With Existing CRMs: For businesses running their sales process through a CRM system anyway, the move is a natural progression.
- Improved Efficiency: It can lead to overall business efficiencies, including improved stock management and order tracking. By introducing a D2C model can create a more efficient sales process overall.
- Option To Sub-brand: For manufacturing brands still nervous about disrupting the status quo with retailers, or ‘breaking what they’ve got’, there is an option to create a separate brand. While the brand is their strength and selling under this name would certainly carry merit, creating a separate brand wouldn’t tarnish the business or confuse customers, current and new.
- Ease of Implementation Through Third Parties: Bringing in specialist fulfilment partners was a common solution; experts that were already geared up to operate to cater for D2C requirements. While a more expensive route initially, this allows for a trial period to indicate that there is a future in eCommerce for the business before moving ahead.
- Greater Control Over Retail Brand Presence: Greater control and clarity over their brand and product promotion is seen as another benefit. As well as creating a brand experience via an online shop, businesses can easily and cost-effectively market their D2C offer in social media channels expanding their reach and visibility.
As with all growth and business-change strategies, a move into D2C requires a full analysis of the opportunities and challenges to ensure it aligns with business objectives. It also requires the right technology. We’ve aligned our own services around the needs of our own clients to be able to support them on their journeys – from strategic insight and planning through to the design and build of new platforms.
If you’d like to discuss in more detail about your plans for moving into D2C, or are wanting to simply know more, get in touch and our planners and strategists would be more than happy to guide you through.