Interim Management for retail and eCommerce

D2C: The Direct-Flight Approach

Direct to Consumer (D2C) in the real sense reflects the skeletal form of trading or exchange between the source (producer) and the destination (end customers). The producer sells directly to customers. A person or a business enterprise produces something, carries it to the market, and sells it to customers. However, in the real world, such short-sighted simplicity of the supply chain does not exist. The role of other entities is imminent to complete the supply chain. These entities are logistical services, warehousing solutions, distributors, and retailers. Goods manufactured in one place might have to be transported over long distances through an established supply chain network to make them available in the targeted markets and offered for sale to end customers via retailers.

Most global FMCG brands engage in multiple B2B contracts with other intermediary entities in their distribution function. They exercise strict control over the operational performance standards for the distributors and retailers. In return, these intermediaries earn commissions and margins. But such a distribution model does not count as D2C because of the ownership-based involvement of external business entities in the value chain. It is also true that many FMCG brands have now launched their own eCommerce website from where customers can buy products online with the feature of home delivery. But even with this, such companies might still be using their existing B2B and B2C infrastructure.

The moment a company establishes its own independent logistics and distribution network to give effect to direct sales, such a model would fall in the ambit of D2C. The dimensions and complexities of the supply chain are not reduced but the supply chain and distribution activities are managed and executed by the manufacturer under D2C in a far more ownership-based approach than B2B.

The similarity between B2C and D2C lies in the fact that they both sell to the end customers; a B2C retailer indirectly and a D2C brand directly.

Why D2C

Quicker access to internal business data and information

Businesses need specific, timely, and accurate data and information for formulating effective marketing and sales strategies and improvising existing ones to adapt to the market demand and customer requirements on the go. For example, if a certain product is not going well with customers, businesses tend to cut down their investments into such products. The dimensions of the supply chain cause a certain degree of latency in the communication process. Businesses have to confirm their assessments based on data inputs from multiple sources and regions. Pending assessments and decisions, manufacturing and supply chain activities continue to pump products into the distribution process. D2C shortens the time required for the communication of business data and information from customers or retail stores to the strategy makers of a company.

Better CRM systems, CX strategies, and personalisation

Every business strives to know its customers better and understand consumer behaviour more precisely. This helps them to develop better products and solutions and improve the quality of services. Better, continued alignment of products and services with customer priorities plays a vital role in developing long-term customer loyalty. To be able to do so, businesses need to develop closer networking with customers with the ambit of routine business-customer activities. In D2C, businesses get this much-needed opportunity to establish direct contact with their customer base. Tons of valuable data and information (including experience) becomes available to businesses in D2C through both offline and online channels. These data could be analysed to derive meaningful insights targeted for building robust CRM systems, forging better strategies for enhancing customer experience, and improved efforts for personalisation.

Better control over operations

Apart from aiding in planning and strategy formulation, D2C also lets businesses exercise strict control over their operations. In D2C, businesses eliminate their dependencies on the intermediary entities for the implementation of business strategies and maintenance of the operational procedures and standards. By being in charge of the supply chain and distribution activities, D2C businesses enjoy greater autonomy in trying to make things happen as they want. It is easier to implement and secure adherence to SOPs when the business processes and operations are executed internally. This leverage is compromised with the direct or indirect involvement of intermediaries. Take for example a restaurant operating via any food delivery aggregator. In such a model, a business has no control over the delivery function. This could sometimes play against the brand name of the restaurants. In events like delayed delivery and incomplete or inaccurate food items, customers remain in the dark as to the cause of the deviation. Even a mistake on the part of the aggregator will leave its brunt on the restaurants.

Eliminate reliance on poorly-performing intermediaries

The performance of distributors and retailers affect the overall performance of a retail brand or manufacturer. When the performance of these intermediaries is not up to the expected standards, it is time to re-evaluate continuance with the distribution strategy and partners. By going D2C, businesses get complete control over their supply and distribution operations. It eliminates their reliance on the performance of external entities. Businesses can ensure better adherence to the operational requirements. Processes and operations can be better aligned with the business strategies and goals and objectives. For example, a branded restaurant chain can contemplate going D2C instead of adopting the aggregator route. This will give them greater control in meeting the operational standards attuned to the marketing strategies. Of course, going D2C will involve business planning, business model assessment, and other think-tank activities.

Reaching out to customers like never before

The services of Starlink, Elon Musk’s satellite-based internet service, is available for booking by customers via the company’s official website from anywhere in the globe. The same is true for Netflix or Amazon Prime. These products are a huge leap forward in the D2C hierarchy. Businesses are now reaching out to customers and markets across the globe as if it is nothing. It has become possible due to technological advancements and utilising them for creating value for customers.

With the availability of relevant and emerging technologies, it only makes sense that businesses that seek to adopt D2C can now do so in a far more effective manner. D2C can assume the form of any or both brick & mortar and eCommerce. With the right IT strategy and best-fit technologies, D2C retail brands and businesses can avail the best of both worlds.

Challenges faced by D2C businesses

High setup requirements

Going D2C means the initial setup and capital requirements are going to be high. We are not considering manufacturing here. But even without that, administrative offices have to be set up at multiple places, leasing costs and rental securities have to be paid, licensing fees can be hefty sometimes, warehouses and distribution centres have to be custom-furnished, down payment for goods vehicles, purchase of industrial equipment to be used in retail stores and distribution warehouses, etc. These setup expenditures remain for a long period in the books of accounts until they are written off in a phased manner. They also carry an impact on profitability. If these aspects are not properly accounted for in business and financial planning, it could put immense stress on the operational income at some point in the near future and render an inability to repay the long-term debts.

Unfeasibility of the D2C business model

The whole D2C thing may look rewarding. It could also be an ideal distribution strategy for many businesses. But will the conceived business model work? Poor business modelling is one of the most undermined D2C challenges. The concept of business model does not care whether it is D2C or any other mode of distribution. The notion here is revenue-generating potential and profitability. Many D2C-based initiatives often fail because they misread buyer behaviour and past trends. We can use the example of successful FMCG brands trying out direct to consumer retail. These companies are successful with the traditional distributor-retail model. But they fail to replicate similar success rates with D2C models. Customer habits and preferences play a decisive role here. Buying groceries and other consumer goods from nearby grocery and departmental stores is still the most preferred mode of purchasing for a majority of customers. Even quick commerce has not been able to bring any major behavioural shift with their attractive hyper-quick delivery timelines. Failure to attract customers to targeted products, services or even channels renders a business model ineffective. A big company can still take the risk but it is not advisable for D2C startups and SMEs to jump at D2C without planned certainty of their direct to consumer business model.

Curating CX in a digital environment

D2C businesses have to directly reach out to their customers for advertising and promotion and serve their customers directly. There is a massive distance to be covered between production (business) and sale (customer). In this journey, digital platforms and technologies play a big role. And it is not something that has happened today. Only a couple of decades ago, radios were a popular and effective solution for mass advertising purposes. They still are. Today, this dependence has shifted towards social media platforms. Earlier, in television advertisements, customers were provided phone numbers to place their orders. Today, customers can place their orders over company websites. A major part of the customer shopping journey now traverses through digital platforms from advertising and digital visibility to order fulfilment and customer support.

In D2C, without the presence of intermediaries, the physical information bridge is not present. When there are intermediaries, problems and issues reach a company in a refined way. Companies address the issues raised by distributors. Distributors do the same to retailers. And customers raise their complaints to retailers.

D2C businesses have to rely heavily on data and analytics. Owning data is an advantage but at the same time, it also presents the challenge of managing tons of data generated all over the distribution network. This data would not mean much if businesses do not know how to associate such data with customer experience.

Also, generating the right data is equally important. Whether the CX objectives are achieved or not could not be determined if the right data is not generated in the digital systems in place.

Planning and execution for the complete value chain

In D2C, a company is responsible for its entire distribution function. Every function, process and operation associated with the distribution function, which is carried out internally, has to be executed through a framework of planned operational planning. These include inventory management, warehouse management, logistics management, order fulfilment, and customer support.

Even if a particular function or process is outsourced, its ownership remains with the D2C company. That means even if a logistics partner is hired for transportation of goods from the factory to warehouses or from a warehouse to stores, or from a distribution centre to end customers, the company remains in strict control over the operations by the means of defined standards of performance, SLAs, etc. The logistic partner is not an intermediary but a hired service provider.

With the presence of distributors and retailers, a lot of operational burden gets shared. But that is not the case with D2C. So, it is not just operational planning but the entire burden of the distribution function lies with the D2C business.

Increased challenges in talent acquisition

More internal business activities mean more internal manpower requirements. The distribution is a massive business function. Both in terms of quality and numbers, the manpower requirements could be very demanding. This puts tremendous pressure on business enterprises to consistently meet the requirements of human capital. A full-fledged team of recruitment specialists are required. And with a larger workforce, D2C businesses also need to maintain the corresponding strength in their HR department.

Outsourcing the recruitment function provides some relief but it does not negate the need to monitor and control the performance and delivery of the service providers. Hired recruitment services also increase the cost of recruitment. It also increases the need for coordination with external agencies to smoothly execute the recruitment and selection process. Sometimes the performance of these external recruiters is not up to the expected standards. In such cases, businesses lose considerable time processing unfit profiles.

Finding the right talent, whether done by in house HR or a hiring agency, is always a challenge. And here we are talking about an entire distribution function. There are varied skill requirements across different areas of the distribution function. Because D2C businesses can have distribution activities going on in several locations, the hiring may be for multiple locations and D2C businesses have to plan their recruitment drives accordingly.

D2C Consulting Services by YRC

We are a boutique retail & eCommerce business consulting firm with over 12 years of experience. We have catered to over 500+ clients in more than twenty verticals. ‘Concept to implementation’ defines the scope of our D2C consulting services and solutions. The service design and delivery are carried out by an expert and experienced team of D2C business consultants. Highlighted next are our services to help us better portray how we could help your D2C business grow from within, in a strategic, planned and systematic manner.

D2C Market Research

Market research is a critical homework for D2C businesses. There may be no market leaders or direct competitors to be followed. From production to end-users, the value a company intends to deliver has a long distance to cover. Market research yields various important informational outcomes for this journey for determining an ideal roadmap, identifying possible and certain challenges and finding the right solutions. Market research can yield important insights in logistics, warehousing, delivery, consumer behaviour, competition, pricing, products, value-added services, digital marketing and promotion, technology, etc. As part of our D2C consulting services, in market research, we deliver a comprehensive and insightful presentation of what is out there and action-recommendations for superior business and marketing planning.

D2C Business Model Development and Validation

A business model seeks to explain how the intended value is going to be created and delivered to customers profitably. This small sentence underpins the success and failure of business ideas. A business model seeks to identify and define:

– Who your customers are? What is the target market segment?
– What is the UVP of your product or business idea? What does it mean to your customers? Will they buy your product/service and what price will they be willing to pay for it?
– What are the best channels to deliver the value to the desired destination?
– How do you intend to build and sustain your customer base with CRM?
– What are the key resources required in completing the value chain?
– What will be the key activities in the value chain?
– Who will be your key partners?
– Will you be able to execute the value chain profitably? What are the important cost elements?

Owing to the extensive ownership and involvement in the value chain, a D2C business model often tends to be an elaborate one. As part of our D2C consulting services, in D2C business model services, we are into the development and validation of new business models as well as scrutinising and redefining the existing models. The ultimate goal is to let clients drive their business with the best possible business model. Various aspects we deal with are UVP, value chain activities, internal capabilities, channel and operational strategy, business technologies, margin feasibility, etc.

D2C Business Plan Development

A business model explains why an idea will work. A business plan proves it. For example, candidates for jobs make many assertions in their resumes and some of the preliminary questions in interviews. Those assertions and other details that are written in the resume may sound very true to the interviewers and resemble a business model. But interviewers also check how strong those apparent and spoken assertions are via relevant and more detailed questions and cross-check the responses and the consistencies in them. This detailing part resembles a business plan. A business plan is a detailed and futuristic assessment of implementing a business idea and achieving the targeted goals and objectives.

At the end of the day, it is the business numbers that speak. As part of our D2C consulting services, in D2C business plan development, we prepare the financial projections of carrying out the business project or the business idea. Various aspects covered here are capital requirements, operating expenditure, ROI and break-even analysis, revenue and cash flow projections, purchase planning, etc. Our reports can also be used for preparing pitch decks. The reports are also intended to serve as a financial action plan while lending the edge for financial preparedness.

D2C Digital CX Strategy

In D2C, business enterprises are responsible for the entire distribution network. From factory to customers, every operation takes place under their ownership. There is no passing the buck to logistical partners, suppliers, distributors, retailers, or even the delivery partners. Therefore, the brand experience delivered to customers also belongs to the house. For example, food delivery aggregator brands (not D2C though) make serious attempts to ensure that customer experience is of superior quality. Why; because they are in charge of the distribution function between restaurants and customers. Restaurants do not have any stake in the delivery process. If there is any mistake on the part of the restaurants, delivery executives, or the aggregator, it is only the aggregator who tries to compensate for the poor experience meted out to its customers.

Every digital and physical touchpoint in the shopping journey where an interaction takes place adds to the overall experience of customers. Customer interaction begins at a later stage in the value chain. They need not bother if production is planned or the inventory is reaching warehouses on time. Customer experience begins when they see news or advertisements related to a brand on digital media or visit the brand’s eCommerce website or one of its brick and mortar outlets. It extends to post-sales, customer support, CRM, and re-engagement activities.

As part of our D2C consulting services, in CX strategy, our focus is on formulating razor-sharp CX strategies and building customer-focused business systems that could help our clients deliver a superlative experience to their customers. Brand positioning and defining the CX objectives are critical ingredients. Mapping the customer journey and identifying the physical and digital touchpoints is an important part of what we do here.

D2C SOP Development

Every D2C enterprise, whether it is D2C eCommerce or D2C brick and mortar, needs to ensure that it provides quick, hassle-free and transparent services. These standards have to be consistently maintained. Robust operational planning becomes a necessity here. From production to distribution, all business processes and operational activities need to stand planned and mapped in definite terms. There is no room for any operational ambiguity or scope of error.

SOP development is one of our core competencies and flagship services. Defining a robust operational framework for carrying out business operations is our objective. Our ultimate goal is to help clients become process-oriented enterprises that are ready for flawless operations and growth and expansion. Our team of SOP experts and D2C business consultants follow planned and proven processes in service design and delivery.

Software evaluation and SOP-integration

Ecommerce D2C businesses are heavily dependent on technology. Technology has made it easier for them to access wider markets. It has helped them run their business operations more effectively and efficiently. Whether it is the use of software infrastructure or industrial automation, technology has found deep roots in the way businesses function today.

Our team of D2C business consultants help clients formulate their business-IT strategies, identify their software requirements, and implement the same. Our focus area is on software evaluation and SOP-IT integration. In software evaluation, we establish the correlation between business requirements and software functionalities to eventually arrive at the best-fit solutions. We coordinate with the client-chosen software developer in customising the software solutions. This is done to ensure that the software environment is aligned with the SOPs. We offer to design the vendor selection process but we do not develop or sell any software product. The final decision on what product to buy and from whom rests with the client.

Talent Acquisition

In talent acquisition, our service objective is to help D2C businesses build a fit and strong base of human capital in their enterprise by fulfilling their manpower requirements across the organisation structure and value chain. The talent acquisition strategies are formulated as per clients’ specifications and the unique business and industry requirements. HR and SOP experts plan and develop the recruitment process and carry out the hiring activities. Robust processes are followed for systematic evaluation of the candidates. We adhere to the best practices and contemporary industry standards in service design and delivery.

The selected candidates will be on the client’s payroll. YRC experts shall help clients in preparing the financial budget and prioritize the talent acquisition plan to ensure to onboard the right talent at the right time.

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