3 Key Questions to Ask When Planning a Direct-to-Consumer Sales Channel
Monday November 13, 2017 | By Ethan Morgan
More and more manufacturers across the consumer goods space are establishing DTC footholds through ecommerce. (If you’re interested in an overview of the direct-to-consumer phenomenon, check out our guide here.)
What are the best practices for setting up a direct-to-consumer presence?
Manufacturers need a go-to-market plan. Let’s break that down with some questions.
Where are their products in demand?
Where is the brand at risk due to sub-standard merchandising, poor service or underpricing?
What prices are currently being charged by retailers in different channels and geographies?
These can be difficult questions for manufacturers to answer if they are not closely involved in the retailing of their products – but they’re vitally important. Together, they give a clear picture of where the opportunities to improve meaningful metrics are.
Where are their products in demand?
Simple economics means that underserved demand is a great opportunity for those with the ability to supply. This is part of the attraction of direct-to-consumer sales for manufacturers – adding a new, higher-margin revenue stream to get more of their products to new customers is a no-brainer.
Unfortunately for most manufacturers, their distribution and retail partners pass information about demand back with a time-lag. Real-time insight is much harder to obtain, and much more valuable. The other primary challenge is that the data from retailers and distributors is inherently limited in what it can show.
For example: a shoe manufacturer has retail partners in the form of a chain of major footwear stores, as well as smaller independent retailers and merchants. All of their partners are in the US, and all are primarily focused on bricks-and-mortar stores with a sideline in ecommerce, usually via their own webstore.
The manufacturer can have some reasonable insight into its market potential within the boundaries of its retailer footprint. So, in physical stores, in the US, they have a picture of how much demand for their products exists. But they cannot possibly know from this data set whether customers on eBay in the UK are actively searching for their product. It cannot tell them how much the market on Amazon in North America would be worth to them.
These challenges are not insurmountable. Through third party services such as Volo, manufacturers can gain insight into existing demand across geographies and channels.
Where is the brand at risk?
The flip side of finding a brand-new opportunity to make revenue is the opportunity to clean up what’s already occurring online. Almost every manufacturer will run into issues at some point with their representation on ecommerce channels, whether in terms of merchandising (nobody wants to see their product on a webstore that looks like it’s from 1999), poor service levels that result in poor customer experiences, or discount pricing that lowers the brand’s value in the eyes of consumers.
Problem channels should also be understood as opportunities, just as new or emerging channels are. That means that for a fully-developed go-to-market plan, manufacturers should be thinking about their current sales channel problem points as well as the rosy future they’re aiming for.
Which prices are being charged for their products across channels, geographies, & retailers?
Pricing is a sensitive topic for many manufacturers when it comes to ecommerce. One of the biggest benefits of selling direct-to-consumer is that by taking direct ownership, they can totally control their price profile and clear out unscrupulous sellers who violate Minimum Advertising Price agreements.
This question really ties the other two together – it’s a mixture of assessing the new money-making opportunity and regaining control of the existing presence and customer experience.
Once manufacturers have a clear sense of pricing and demand data across channels, it can be used to put monetary values on each new opportunity, and clarify the missed revenue on existing ones.
In short, many manufacturers don’t know what they don’t know. In our business, we’ve met with manufacturers who are shocked to learn the potential size of the market they could be addressing online. By putting together a picture of search, price and purchase data across social, marketplaces and search engines, we’re able to give manufacturers the insight they need to see where the opportunities lie.