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Is direct-to-consumer the right way to go?

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Think your margins will be better if you sell DTC? Make sure your e-commerce fundamental capabilities are locked in first. DTC could be a more expensive sales strategy than you think.
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June 11, 2023

Why launching B2B sales is more than a sales initiative

One way to widen profit margins is to cut out distributors and intermediaries and sell manufactured goods directly to consumers.

Direct-to-consumer (DTC) models can tighten the connection between companies and their customers (and customers’ data). And it gives owners more control over how their brand is presented in the market.

But there’s a lot more to the equation. Without the right infrastructure and technology behind the e-commerce strategy, the math may not add up.

Before you add a DTC or e-commerce sales channel, make sure these fundamental capabilities are ready to go:


1. Brand development

Manufacturing companies often underestimate the amount of work it takes to develop a consumer brand. Doing it right requires ongoing investment in human capital, advertising and media, technology and analytics. A percentage of sales will need to be reinvested in marketing and brand development, which could offset some of the margin gains.

Brand development also takes time. Unless your products are well-established household names, you’ll need time to ramp up exposure. In the meantime, retailers will be pushing your competitors’ goods.

Make sure you understand your brand’s value proposition compared to competitors and retailers that distribute similar products. Figure out where you rank in the competitive landscape and how much it will cost (in time, money, effort and attention) to steal share of mind away from alternative brands and sales channels.

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2. Order fulfillment

Will customers need to create accounts? Will you accept common payment platforms, such as Apple Pay or PayPal? How quickly do you ship?

If you don’t have a smooth and transparent checkout process, you’re not ready to go DTC.

And once you figure out the checkout process, you have to deliver. Companies such as Amazon have made free freight and two-day (or even same-day) delivery the norm. If DTC companies can’t hit that bar, they risk losing business to competitors that can.

Manufacturing companies that are accustomed to shipping large quantities to a few distributors will need to revamp their fulfillment processes, possibly from top to bottom. They’ll need the ability to drop-ship small quantities, to more locations, more quickly.

Consumers won’t accept two-week delivery windows or ambiguity about a product’s arrival. DTC manufacturers need better forecasting and tracking abilities to keep customers informed. They also need a plan to efficiently manage returns and exchanges.


3. Customer experience

In the distributorship model, manufacturers sell to professional buyers. The buyer’s job is to show up every day and buy, buy, buy. They have budgets and margins to mind, but it’s not their money to spend.

Consumers often have different standards than distributors, especially when it comes to customer experience. To sell to consumers directly, manufacturers need different, slicker e-commerce tools, including mobile channels. Customer service and support channels need to be convenient and connected — and tied into the overarching brand experience.

To deliver a winning customer experience, DTC manufacturers need a deep understanding of the entire buying journey, plus ways to collect and analyze customer sentiment. They need to respond to customers quickly and accurately, nearly 24/7. 

It takes a lot of technology and process work to connect the buying journey and the manufacturing process — and make it simple and seamless for customers.


How Wipfli can help

Wipfli works with companies to help them evaluate and plan e-commerce strategies. Our technologists can help you identify the technology and data you need to power new platforms for growth. Learn more on our e-commerce page.

  • Luis Murgas
    Luis Murgas
    Luis is a transformational leader and innovator with almost two decades of experience helping companies find ways to accelerate business results using technology. Luis’s passion is pairing intellectual curiosity with entrepreneurial optimism to transform businesses.
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