Podcast: D2C eCommerce - The Case for Selling Direct

Welcome to “The End to End eCommerce Playbook” hosted by Maginus. We’ll share tips, tactics and real customer insights to help you take your online business to the next level.

Podcast: D2C eCommerce – The Case for Selling Direct

Direct to Consumer (D2C) ECommerce is expected to grow by 71% this year alone. Find out why many manufacturers are rising above disruption with D2C eCommerce.

In just 15 minutes, you’ll learn:

• The Case for Selling Direct
• What is the ‘Distributor Disconnect’?
• Aidan Connor, the former Global Digital Platform Manager at Mayborn, will share his experience going direct-to-consumer with Tommee Tippee, focusing on the customer journey and personalisation.

If you’re viewing this page in an Edge browser, you can listen to the podcast on Spotify. Simply click on the button below.

You might be wondering why our podcasts mention Maginus…. Digital Goodie acquired Maginus back in December 2019. The two products have now combined and in September 2020 Naveo Commerce was born!

Transcript

Hey everyone, welcome to The End-to-End eCommerce playbook hosted by Maginus (a Naveo Commerce company). I’m Toby Clements, Account Executive at Maginus. Today we’re sharing an extract from our DTC eCommerce webinar that we hosted back in May. At the time of the recording we were in the early stages of lockdown it’s fair to say it was a strange time for us all. Retail stores temporarily shut down, Amazon suspended shipments to its warehouses and consumers were staying at home. As a result, businesses of all shapes and sizes have lost their main channel to market.

The Centre for Retail Research predicts that by the end of the year a total of over 20,000 retail stores will have pulled down their shutters for the final time. This is why we believe setting up a direct to consumer eCommerce channel should be considered as an insurance policy against an uncertain future for manufacturers, brands and distributors. So keep listening to hear from Aiden Connor today’s guest who’s a consultant at RICS. He’ll be sharing his experience with working with the likes of Tommee Tippee – helping them go direct to consumer.

The podcast itself is split into two parts. In part one, Aiden will outline the case for selling direct to consumer and the distributor disconnect….and in part two we outline three approaches you can take to avoid damaging your retail relationships and 10 things you should consider when preparing to go D2C.

Right, let’s get started.

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Aidan: Thanks very much everybody for being here. I’m Aiden Connor, I’m currently Head of Digital Experience at the Royal Institute of Chartered Surveyors. Previously I was Global Digital Platform Manager at Mayborn Group, and International Digital and eCommerce Marketing Manager at Rayovac Energizer and I’ll pull some kind of real-world examples from both of the latter two today.

So, why go D2C?

The businesses that I’ve worked with in the past – the reason that they’ve gone direct to consumer is to take control and put their customer first. So you can remove that disconnect between you the brand manufacturer and the consumer themselves.

According to Forbes over a third of consumers report that they bought directly from a brand’s manufacturer’s website last year and the number of manufacturers selling direct to consumer is expected to grow by 71%  to more than 40% of all manufacturers. So what is the opportunity for B2B to go to D2C? Well without selling directly the end-user it’s very difficult to shape their thinking, influence their purchasing decisions and understand what motivates them. Especially in the manufacturing world where you have a lack of control as to where your products are positioned in a store (which can quite often be next to your competitor’s products). If your consumer chooses your product over a competitor on a retail site you may have won the sale but you’ve missed a huge opportunity to build a relationship. So by dealing directly with your customers – manufacturers can get a much clearer view of who they are, what they want and don’t want and how best to engage with them. So by orchestrating the entire journey from discovery to purchase not only do you have invaluable data at your fingertips you have this option to own and nurture these relationships and improve your overall brand’s image.

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So, who are you taking back control from? So there are two kinds of institution or organisation that you’re taking back control from – the first one is your key accounts and the second one are the global marketplaces. So key accounts will try and leverage cash flow against you, they will try and leverage your individual sales targets so if you know sales guy needs to hit his number by the end of the quarter he’s almost more on their team about what’s happening with your price or your terms than he is on yours. They’ll also try and barter with you based on economies of scale – if they’ve had a great year selling your products – they won’t use that to invest in a partnership with you they’ll try and use that to reduce the price per unit and turn it to their own advantage. These global marketplaces are now just the new digital vision of these traditional bricks and mortar retailers but what they’ll do is they’ll leverage customer demand and although they’re actually providing a service to you like for example on Amazon – they will actually impose SLA’s and fines onto you and remove you from that supply chain. So, for example, Amazon recently last year actually backed out of their next day commitment for prime in some areas now it’s just free, fast shipping that is usually the next day. So you know in terms of that control over that channel it’s another loss of control but the biggest loss across all of these is most likely, depending on your industry, is the pricing and the true SRP. So all of these retailers or marketplaces will discount your product and the opening gambit will never be the standard retail price. So it means that the perception of your customer and the value that your products are worth will be so much lower than actually the true SRP which you can reinforce with your own D2C transaction. But what I wanted to do was share with you a real example from 2019 which was when Mothercare closed …so working at Tommee Tippee …obviously you know Mothercare was a massive account for us in terms of our bricks and mortar retail partnership with them. They were our biggest bricks and mortar partner within our biggest market in the UK. Although it didn’t necessarily lead to a loss of earning within the market because you know the mums and dads who are going to shop at these stores were still going to have to buy their stuff elsewhere. It was about a mad scramble to be able to then think okay they were going to go and buy Tommee Tippee from Mothercare, they still need to buy Tommee Tippee. Now as luck would have it we had actually launched the Tommee Tippee direct consumer store the month before this all happened so and we upgraded our spend we made sure that actually our communication with all the customers was around “you know it’s a real sad time about Mothercare but you know look we’re here direct” and actually that proposition and our ability to really up weight that communication and own that entire channel was so quick that actually, as far as I’m aware, it didn’t have the negative impact that it could have done had we not had a direct to consumer channel – and we would have had to support the other retailers to try and get them to invest in Tommee Tippee stuff more when you know all of the other competitors are doing the same.

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So we know who we need to take back control from but we don’t really know why at this stage. So, a good quote from Bill Gates is, “Your most unhappy customers are your greatest source of learning”. Now in the traditional retail model you actually probably wouldn’t know the individual – you know you would not know as that product flies off the shelf whether actually the fact it’s got a four-star rating is down to the fact that she didn’t like the product, or she just didn’t like the service that she was provided from that particular retailer.

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Rayovac produced 60% of the world’s hearing aid batteries and how could a consumer not know about a brand that manufactures 60% of the product within the market? Well there are two reasons for that.

The first reason is that Rayovac sold or provided more than 90% per cent of the batteries to the NHS which would then go to the consumer – because it wasn’t purchase by the consumer it’s just a medical service – they didn’t take any brand into consideration they were just kind of getting what they were given. So in that respect when it came to buying (you know if they ran out of the standard amount that they would be given) well they’re kind of back in the wild as it were and they don’t have that relationship with the brand. Now conversely when you have the users who go through and they had they’re not entitled to free batteries through the NHS you have the likes of Specsavers and Boots Opticians who actually in some cases would be either buying them white label from Rayovac and branding them as their own product. So in that case actually the user was using Rayovac batteries but didn’t know about it. This leaves a lack of control over that as a sales channel because that retailer at any time could change their manufacturer, keep the packaging almost identical and actually you’ve lost an entire channel – but it’s business as usual as far as the consumer’s concerned. Additionally because of the model within the opticians – because it was such an ancillary product – they were often given away free again by the Specsavers and Boots opticians so that they, and similar businesses, could use it as a little tidbit to try and tempt people in the store, because if you’re picking up a pair of hearing aid batteries for free then they know that you’ve got a hearing aid and that was the real thing that they were interested in [getting consumers to buy]. So that was something that we had to overcome and start to build the brand. Be active within the hearing impaired community to be able to then initiate that conversation with the consumer and build that relationship with the brand.

In both of those examples I’ve talked about getting to know the customer – imagine this is customer insight, this is purchase data, it is information about how the customer is/ where they shop, how long for, how many times did they have to return to a site before they bought. Everything you can possibly imagine and then some of that data will make its way back to the retailer – but the important thing is that it’s only the data that the retailer is interested in themselves. After that, in a traditional model then a little bit of that data then goes back to the distributor and you can see that at every stage this is getting diluted and then by the time it finally gets back to you guys – the brand or the manufacturer – actually this reduction in insights is so severe that actually you may be dealing with incomplete data sets. It may not actually be useful to you anymore because it’s been retweaked and retailored for what the retailer and the distributor need, but it’s not that direct insight straight from the consumer and we call this the “distributor disconnect”.

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The missing data insights are huge and really far-reaching. I just wanted to highlight a few of them for you. When i’m trying to work on this type of project what i do is i try and lump those missing insights into three buckets which are: consumer insights, transactional insights and product insights. So your consumer insights are things are really getting to know the value of your customer. What would happen if you invest further in a customer? What is their lifetime value? So, if you know that a customer’s lifetime values is ten thousand pounds for example, you know you would be willing to invest a lot more in getting that customer on board. What’s their life cycle? How often do they purchase from you? What is the brand perception of you? So if you do start to invest more – actually if they have a negative brand perception will you have a high drop off and you also get to learn about customer retention because one of the really important things about dealing with a customer via a retailer is you don’t know about those sequential transactions…So you know that you sold 5 cars for example or 25 t-shirts but you don’t know if that’s 25 t-shirts to five people or 5  t-shirts to 5 people. You then have the transactional insights so things like return on investment, what’s the cross-sell information, how many people bought jeans with those t-shirts? what’s the cost per acquisition of a customer or a particular sale? and also purchase patterns as well as, are people buying two t-shirts at once? Do they buy them one at a time for example? Then you also get product insights as well so you get – product satisfaction insights, service satisfaction… and this is really important because you’ve got the likes of Amazon or eBay where actually you’ll see a product… they might have a three-star rating but it’s actually because it got delivered late which was no fault of you the manufacturer that it got delivered late – so the product and service insights end up getting lumped into one go for then the customer to make a snap judgement on your product without in many cases reading the comments are associated with those star ratings. You also have the ability to make product improvements having that relationship with the consumers means that you can tweak and try and change things and you’re also a lot faster getting to market with product testing. So when you take all of these into consideration – the reason we’re all in business is that we want to benefit the bottom line and then, of course, it goes without saying that there are the added benefits of the increased margin.

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Now the transition to a new selling model can be daunting not to mention recruiting a new team of eCommerce and online marketing experts. But before you do that – have a look internally see if you currently have employees from a B2C background that can help but from competition – your main focus should be about taking all the knowledge you’ve gathered on your customer and portraying that on a D2C channel. So just a few points i’d like you to take away and consider: Is your warehouse currently set up for the D2C transition? Can you look internally for D2C experience? Reach out to your current partners and learn best practice they’ve been doing it for years and most importantly it’s all about giving your customers the best possible experience.