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    Direct to Retail (D2R)

    Direct to Retail (D2R) has emerged as a game changer in recent times, churning up the entire retailing landscape. A win-win model for both retailers and brand owners, it helps to enhance and maintain consumer satisfaction at optimal levels.

    What is D2R Model

    Direct to retail definition:  D2R is essentially a direct relationship or agreement between the licensor (franchise owner)/manufacturer and the retailer. In such a deal, the retailer effectively becomes both the licensee and the seller of the product, i.e. the licensed merchandise. In a direct to retail model, the retailer takes charge of product development and the overall manufacturing process for the products agreed upon under the license agreement, also having the rights to sell them through his stores. In return, the retailer pays a royalty to the franchise like other licensees.

    Examples of direct to retail licensing are Marks & Spencer boasting of an agreement with Thomas and Friends, and Disney Consumer Products Apparel division’s first deal with H&M in 2000, both of which continue till the present day. Moreover, Disney and Nickelodeon are giant global licensors who sell their own licensed products in their own exclusive stores. This is a specific example where licensors are retailers as well. 

    A direct retail pharmacy / community pharmacy/ drugstore / chemist on the hand is a pharmacy where prescription-based and OTC (Over-the-counter) drugs are sold directly to patients, unlike a hospital pharmacy. They can operate independently, or as a supermarket pharmacy, a chain pharmacy or a mass merchandiser pharmacy, which has an authorized government license to provide medicines to the general public at retail prices. Few examples of direct omnichannel retail pharmacy chains include MedPlus, Apollo, MedLife, CVS Health, Rite Aid Pharmacy and Walgreen.

    Need for D2R

    Helps to boost margins: With retail price wars and cut-throat competition becoming commonplace, margins are being continuously squeezed. To quickly boost up these margins to acceptable levels and increase profitability, retailers are slipping into the shoes of the licensees themselves by eliminating middle men and distributors who used to be licensees earlier.

    Outsmarting competition through cheaper products: The manufacturer direct to retail store framework helps both channels in edging out potential competition. Margins can be suitably increased in the form of cheaper products, resulting in gains for all.

    Lower turnaround time for deliveries: With the middle channel and distributors out of the picture, a direct to retail model can have lower turnaround times with respect to product deliveries. Prominent D2R retailers like Primark, Matalan and H&M all boast of super-fast lead times, helping them to remain up-to-date with the latest consumer trends, while providing really cheap items.

    Advantage to Manufacturers/Businesses

    Getting licensing programs off the ground: Direct to retail format businesses have been increasing over the years due to increased margins. Licensors are wary of the fact that some licensees might not be committed. They choose the direct retailer format just to get their licensing programs off the ground and start functioning.

    More brands, limited shelf space and retail consolidation: Direct to retail has become the preferred go-to-market strategy for many manufacturers and licensors now, enabling them to display their merchandise on physical shelves. This is because of various reasons, i.e. numerous brands in the licensing fray, limited shelf space and consolidation in the retail business.

    Long-term relationships a reality: A direct to retail distribution strategy allows the manufacturer or seller to take the licensing deep and build a long, fruitful partnership with retail associates. This is the key to D2R success in the long run. The retailer or licensee is conscious of the fact that their products won’t be in-store one minute and out the next. The manufacturer and retailer can share a close connect, and can together try out new products and concept strategies.

    If a D2R brand is underperforming, a retailer will generally try to arrest this by fine tuning the product specifications (example: its design and packaging) before finally taking it off the shelf. Even if he forced to remove it, the “Other Products” mindset will make him look out for other potential products from the same partner.

    One-at-a-time approach helps to address current gaps: Since manufacturing and licensing is only one part of the retail supply chain, a licensor will often be given limited time by a retailer, who has lot of other things to take care of. Instead of the manufacturer presenting his whole product strategy to the retailer, a more efficient approach is to spot current gaps and address them mutually. Thus, a one-a-time plan of action would help in addressing issues more efficiently.

    Advantage to Retailer

    Increased profits & product mix differentiation: A direct to retail framework enables retailers to offer high quality premium products with maximum margins, at prices that go easy on the pocket. Additionally, exclusive distribution reduces price competition, minimizing the impact of the discount offer-driven market. By selling exclusive licensed merchandise in their stores, they can differentiate their product mix from competitors.

    Faster time to market: Retailers working with their own set of suppliers can turn around products faster. As soon as a particular business franchise becomes a big hit, retailers can quickly initiate the entire process and bring in associated merchandise to retail shelves in no time. Some licensees specifically work with local manufacturers to cater to demand deadlines.

    Reduced product development time and cost: Strong brand quality for established names provides retailers the ready-made advantage of predefined attributes, in-built positioning and pricing. This simplifies product development and streamlines strategic planning goals, reducing overall costs and time for the same.

    Private label push: Direct to retail helps retailers to push their own private labels, while being in constant sync with current needs and demand. These retailer-backed deals help licensors cater to a niche audience. A retailer knows his business and consumers in and out and better than others, developing and designing products that are exclusively available in their stores. He can source products from existing partners accustomed to supplying private-label brands, helping them to gain margins as well.

    Advantage to Consumers

    Good quality, premium, reasonably priced products are readily available: Consumers are greatly benefitted from the direct to retail model too. Quality, premium products of good variety are available at a reasonable price 365 days in a year. Faster turnaround times mean that customers can get what they want and fast, especially bestselling items which quickly disappear off store shelves.

    Unique customer shopping experience: Exclusively available licensed brands in D2R stores create a unique shopping experience for consumers. Any customer requirement can be quickly met, as brand portfolio is suitably widened, with products exhaustively displayed under one roof. This ensures that customer gratification levels are achieved.

    D2C v/s D2R (Direct to Consumer v/s Direct to Retail)

    Direct to consumer retail is a business model wherein manufacturers market, distribute and sell products directly to consumers without depending on traditional stores and other middlemen. Examples of D2C brands are Beardo, Mama Earth, Ustra in Personal Care, Lenskart, Wrong, FabAlley, One Plus and Boat.

    Direct to consumer vs retail: In contrast to its retail counterparts, Direct to Consumer businesses can constantly experiment and innovate, from shipping directly to consumers to partnerships with physical retailers. They are known as DNVBs or Digitally Native Vertical Brands since their sales channel is online, mainly through their own webstore or mobile app. Sometimes, they also go omnichannel by opening offline stores or pop-ups to complete the overall brand experience.

    D2C models can sell products at lower costs compared to traditional consumer brands, and can maintain end-to-end control over the manufacturing, marketing, and distribution of products. They don’t have to depend on traditional multi-brand retailers for exposure, unlike D2R models, where manufacturers and licensors partner and co-exist with retailers and licensees. In both D2C and D2R, middlemen are effectively eliminated.

    In the new normal post COVID scenario, health & safety measures assume prime importance. Large and medium-sized brands are adopting a D2C online model, boosted by high internet penetration levels and digital shoppers. Many of the earliest and most popular D2C brands gained success online, like Casper, Bonobos, and Dollar Shave Club. Other benefits of D2C include the creation of a good brand relationship with customers leading to increased trust, loyalty and repeat purchases.

    Why D2R is the future?

    D2R Ecosystem – A winning formula: Under a stable direct to retail ecosystem, there is a greater probability of quickly achieving good volumes and success with well entrenched fast-moving brands.

    Reduced marketing costs: Established brands sold under D2R offer the unique advantage of built-in brand equity and consumer loyalty. This minimizes the need for extensive marketing and promotional investments.

    Focused brand owner and retail partner relationship: D2R licensing enables brand owners or licensors to effectively scale up their market presence and mind share and drive incremental revenues, in tie-ups with focused retail partners. On the other side, retailers can get licensed products on shelves in a jiffy. They are always in a position to remain agile and rapidly adapt to consumer feedback, thereby maximizing profitability both ways.

    To ensure its continued success, retailers will need to invest in product design & development, sourcing and brand management. From the brand owner’s perspective, dedicated ground level management will automatically facilitate sound business knowledge and a thorough understanding of the local market (an absolute must in Indian conditions).

    To learn more about D2R Business Model, get in touch with YRC experts and explore the opportunity to adopt this model for your products.

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    We work only for Visionaries.

    PROCESS AUTOMATION

    The idea of having Ecommerce Consultants on-board from the beginning itself points towards reducing the involvement of the promoters in daily operations. Ecommerce Businesses willing to be a brand reaping profits & sustaining the competition must ensure that most of their processes should be automated. The more the manual intervention, the more would be the errors.

    In Ecommerce business, you get only 1 chance to impress the customer & if you mess up there, you lose the customer for long.

    Process automation in respect to all the activities pertaining to customers from order receiving to order fulfilment is a must for a seamless experience for the customers.

    Task Management is another grey area where most deadlines fail as 90% of the tasks are assigned manually & are forgotten, unheard, misunderstood or mistaken.

    YRC Team of Ecommerce Management Consultants helps to make maximum of the processes system-driven to ensure minimalistic manual intervention.

    VIDEOGRAPHY & PHOTOGRAPHY

    No matter how good your product is, the customer would know only if it looks good.

    Photography includes the following steps:

    • Cataloguing your products
    • Cataloguing your images
    • Backup your images (A few cloud storage solutions include Dropbox, Google Drive, Bitcasa, Apple’s Cloud Storage etc.)
    • Choose the right camera & lens (You may also outsource the photography to a third party agency)

    DIGITAL MARKETING

    Digital Marketing includes SEO & SMM. SEO i.e. Search Engine Optimization includes activities like back-linking, meta tags, blog-writing etc. to ensure your website ranks on the 1st page on Google Search.

    Next comes SMM i.e. “Social Media Marketing” which as the name suggests including promoting your products on all the social media sites, email marketing, influencer marketing & several other BTL activities.

    These activities are going to be recurring & would decide the traffic on the website, the conversions, whether the right target market is tapped, the likes, the views, the orders, the reviews & much more. YRCs Ecommerce Consultants create a budget for digital marketing right from pre-launch to launch & for each month thereafter.

    Building digital marketing strategies in coordination with the agency, selecting them to signing them off would be the role of YRC.

    This ensures seamless coordination, detailed interactions & desired execution as it is always advisable to work with a single agency than multiple of them.

    IT INTEGRATION

    Selection of the right software for smooth functioning of back-end operations right from production to webstore display would be suggested and integrated by YRC Team.

    YRC’s Team defines SOPs of Product Movement, maps it with the locations & people. They then create a blueprint of all the features required in the software & help in shortlisting & selection.

    IT Integration involves connecting your offline inventories with real-time online webstore so when a sale occurs, inventories get deducted real time across offline as well as online platforms.

    This helps in accurate inventory management, maintaining the MOQs, re-order levels & achieving the optimum inventory levels.

    Some popular software include unicommerce, viniculum for your front-end website management & Genisys for your entire back-end Purchase, Production, Accounting, Invoicing etc. management.

    WAREHOUSE & LOGISTICS PLANNING

    • How many cities or countries you wish to sell in?
    • Where should your Warehouse be located?
    • Should you have one warehouse in each country or city?
    • Should you be having your own delivery team in your base city?
    • Would the 3rd party vendors be reliable? What happens when they lose or misplace your product during delivery?
    • How should I manage the logistics if my goods are coming from different countries?
    • How should the goods be stored and barcoded?
    • How much space do I require for warehouse?
    • I am sure several such questions must be haunting you while you think of starting your own fashion ecommerce brand.

     

    At YRC, our warehousing and logistics experts can help you devise a strategy for all of the above mentioned queries and much more.

    We design the layout of the Warehouse considering the inward, goods processing, software entry, barcoding, outward, goods return, scrap storage, goods stacking & much more.

    Logistics route plan is devised considering the manufacturer to your warehouse and from there to last mile delivery locations.

    UI & UX DESIGNING

    This Step involves 03 distinct parts:

    Part 1: Choosing the right Platform:

    From several platforms available in the market right from Shopify to magento, woocommerce, prestoshop, wordpress etc. you must choose the one that fits best for your business

    Part 2: UX Designing:

    “UX” denotes User Experience, which if put in simple language is building the functional requirements of the website.

    UX Designing includes designing the features required in the website, customer journey map, website features, the browsing features, navigation features, ecommerce order management process flow, checkout cart features, catalogue management, ecommerce payment system, cross selling features & much more.

    “As per statistics, 68% of the customers abandon the carts before payment”

    An interesting UX ensures the customer sticks on to the website for a longer time.

    Part 3: UI Designing:

    UI stands for User Interface, which means designing the look and feel of the website. UI includes using the right colours, elements and the entire aesthetics of the website.

    A good User Interface ensures the user completes the task that he has come for. It navigates the user through the journey of the brand in the simplest but most effective way.

    The UX designer maps out the bare bones of the user journey; the UI designer then fills it in with visual and interactive elements.

    If User experience is the bare bone, user interface wraps it up with an attractive cape.

    At YRC, our team if experts can help you develop the entire User Journey to ensure it is engaging!

    SAMPLING & PRODUCTION

    This step follows the “Designing” Phase, whether you have an in-house design team, freelance designers or an outsourced design company. It is one of the most exciting phases, as here you see your designs turning into products & your ideas turning into reality.

    In most start-up cases, production is outsourced i.e. brands tie-up with the established manufacturers/ job-workers to get their products manufactured.

    Sampling involves multiple 04 Stages, Fit-Sample, Prototype Sample, Pre-Production Sample & the Production Sample.

    Prototype Sample is the first sample provided to the buyer. It can be in any fabric/ colour. This sample is just to understand whether the product design looks equally great in reality.

    Fit Sample, as the name suggests is prepared to check the fit of the garment i.e. the various sizes, length, width etc.

    Pre-production is made by the actual production line. Here the stitching quality and other aspects related to manufacturing are checked. This is the last stage where rejection can be accepted.

    Production Sample is made before the production which is the replica of what is going to be finally produced.

    Once you are through with all this, you are good to go ahead & get your goods manufactured.

    PRODUCT DESIGNING / SOURCING

    Product Designing or Sourcing is the heart of the Ecommerce Fashion Brand.

    Product Designing / Sourcing can be done in several ways, as follows:

    • In-house Design Team
    • Freelance Designers
    • Outsourced Design Team
    • Ready Product Sourcing (From Manufacturer or Wholesaler)

    At YRC, we evaluate your business strategy & business model to arrive at the decision, which of the above ways would be best-fit for your business. In certain cases, product sourcing may be a combination of the above.

    These are the people who are going to build your brand! Whether they are the designers or merchandiser, your brand look is going to be in their hands.

    If you are designing each garment from the scratch, the sourcing would play crucial role in developing design identity of your brand.

    Sourcing includes fabric, trims, lining & all the raw material required to build the garment.

    BRANDING

    Branding is the “Look of the Brand”, right from logo to tagline, the colours used, the brand story, the brand communications on social media, the packaging & all the other aspects which speak directly or indirectly to the customers. Branding constitutes the look & feel of the brand & hence must be thoughtfully planned to match with the product that we are selling.

    Branding must appeal to our target audience. Example : A golden colour logo depicting finesse, art, richness, premium, however beautiful it may be individually cannot go with a brand selling affordable kids wear products. So, your logo must be in-line with your brand positioning, whether you are an expensive brand or a luxury brand or a value for money brand, it must be depicted from your “Branding”.

    It is an integral part to attract the target audience.

    ORGANOGRAMS & SOP’s

    Organogram is the “HR Blueprint” of the business which is created at the onset, to map out the team required across each function at various stages of the business. At the launch, only key people need to be got on board to ensure the project gets started & at this stage, all of them need to multi-task. Similarly, certain financial as well as operational goals are set for addition of the further team. Example, for the operations team, we hire 1 operations manager during the pre-launch phase & we add 1 more only when the business kicks-off & we reach a volume of selling more than 1000 pcs/ month or a turnover of more than 0.1 million USD.

    SOPs are Standard Operating Procedures, a bible to run the entire organization right from Sales, Purchase, HR, Order receiving to Order fulfilment, Inventory Management, Accounts, Warehouse, Logistics, Supply Chain, Production & all the other relevant functions for the business. Business must be organized from its first day of operations; only then the tasks can be delegated.

    At YRC, we design the organization structure, the processes, and approximate time taken to execute each process, job profile of every member within the organization, their KRAs, KPIs & the Reporting Structure.

    CRITICAL PATHWAY

    Critical Pathway Analysis (CPA), is a project management technique which cannot be overlooked while launching an ecommerce fashion brand. Brand launch process is cumbersome with multiple inter-dependent & time-bound tasks involved, which need to be tracked to ensure the project remains on track.

    CPA outlines key tasks across the project, their turnaround time (TAT) & the dependencies of tasks upon each other. It identifies the sequence of tasks, their interdependent steps from inception to completion, their criticalities, and their dates of onset, target dates of completion along with the key responsible person for the respective activities. Critical Pathway helps in understanding the unimportant & not urgent tasks which may jeopardize the execution of the project because of an unexpected snag! It also maps out the potential bottlenecks which might be posed because of the dependencies of tasks upon each other & cases where the next task cannot be commenced before the completion of the previous one.

    CPA detects the minimum & the maximum time involvement of a particular individual or team to execute the task, thereby arriving at the overall deadlines associated with the project.

    At Your Retail Coach, we design the Critical Pathway & review it periodically to ensure the project is on track & the progress is measurable.

    BUSINESS STRATEGY & BUSINESS PLAN

    Business Strategy includes the vision, mission, goals, business model, business plan & strategy for all the functions within the organization.

    Business Strategy is a well-defined plan that outlines who, what, where, why, how & when for the company; for example, who would be the target market, how to attract the target audience, when to launch new products, where to operate from, how to handle competitors, what would be the USP, what would be long term goal of the organization & several other answers to the 5Ws of Strategy.

    Business Strategy aligns the organization towards a common goal. Business SWOT helps company to identify & overcome their weaknesses & focus to sharpen the strengths. Business strategy forecasts future risks and helps business in building skillsets to overcome the potential threats.

    YRC’s Business Plan focuses on creating a “Blueprint” of the business, thereby deriving the feasibility of the concept & gauge whether the opportunity is lucrative to invest time, energy & effort. Business Plan creates cash flow understanding i.e. building inflow & outflow cash projections from Week zero to week 60 i.e. 05 year projection. Business Plan calculates the capital investment, operating costs, one-time costs, recurring costs & all the other numbers relevant to obtain the breakeven sales, return on investment, return on capital, internal rate of return & several other ratios. Business Plan is also one of the important requirements if you are targeting the “Investor Route”. Fund raising becomes extremely transparent & channelized. With business plan panned out clearly, the business will know until what point must it be stretched & where to stop, which reduces the probability of unplanned investments.

    MARKET RESEARCH

    Starting the concept of Ecommerce Fashion brand with Market Research ensures we get detailed understanding of the industry & this research report also acts as a social confirmation for your concept. Market Research helps in understanding the target locations, their population, potential online buyers for your product, competitors for each category, and top selling products of the competitors, competitors’ price range, offers & their responses & much more. Market Research helps in thorough understanding of your brand position as compared to our competitors. It helps in identifying gaps in the market, in your category along with the scope of the said product in the desired market. This will help in validation of your concept & prevents you from making the same mistakes as your fellow brands, eventually saving your time, energy & efforts. This phase is also a make or a break phase, as the market research study may at-times come up with some eye-popping numbers & statistics which might compel you to re-think on your product or category that you are planning to sell or alter your entire concept itself!! Market Research Reports analyse the competitors’ webstore for their traffic, conversion & sales. This is extremely valuable information to derive our inventory budgets & projections, which takes us to our next phase.