A Direct-to-Consumer Overview
There’s no shortage of coverage of manufacturers in the home improvement space applying successful direct-to-consumer (DTC) strategies. This has executives from every industry wondering if they can also benefit.
The truth is, almost all businesses can take advantage of this trend. In fact, it may be unwise to ignore it.
For those in the building materials and home improvement space, it may not be obvious how or why you would invest in adding a DTC channel. Some may be complacent with their current circumstances while others are beginning to feel the weight of their digital competition.
Whatever the case may be, there is enormous potential in DTC for these types of businesses.
Experimenting with digital transformation can improve their sales, brand image, and long-term growth prospects.
The New Expectations
Today, an omnichannel strategy isn’t an innovation, it’s an expectation.
Many well-established brands have suffered because they failed to keep up with the times. Many neglected digital marketing opportunities for the comfort of their legacy approach or doubted the longevity of the digital shift.
Even businesses that were comfortably selling on Amazon are having to step things up and take more responsibility for their sales.
However, this new era of connecting with the end consumer/user is opening new opportunities to forward-thinking brands. Brands that are ready to diversify their retail and wholesale presence with new digital channels.
The New Customers
The end-user today wants a brand that speaks to them at every touch-point. The pricing isn’t the only concern, the customer experience is in-demand.
Customers of all types will buy almost anything online. If not buying online, they’re certainly researching your products and your competitors’ products online. It’s critical to deliver the best customer experience whether they want to make a purchase online or find important information.
Studies show that potential buyers usually visit the manufacturer’s website before buying from a retailer. They are already touching down on your site, why not sell to them right then and there? At the very least, if you’re not offering additional value, you’re missing out.
You will have to invest in digital transformation to adapt, but customers are waiting for you on the other side.
Building a relationship
An important aspect of a DTC strategy is building a relationship with the end-user. Brands need to establish trust. Customers want to feel connected to a brand and know their story.
These branding intangibles are often the driving force in DTC sales.
Your mission statement, the causes you support, and your customer service all establish your customer’s experience. These become assets that are paramount to your success.
This is especially true when selling building materials and home improvement products. These products can lack a distinct brand identity or fail to connect with customers. A sale can often feel like a purely utilitarian transaction.
“I need X, you sell Y, I’ll pay Z for it.”
This transactional mindset has limitations. Consider this — as a business executive yourself, do you value knowing the businesses you work with, that their team will take care of you, and their mission as an organization? Of course you do. If you’re not building this relationship online and in a way for anyone interested in your products to discover, you’re missing opportunities.
Customers want to know your employees, your story, and your cause. Connecting them to your community is a powerful means of building customer lifetime value.
DTC Benefits
Many doors open up when you connect directly with the end customer.
For Manufacturers
If you choose to sell direct, you benefit from the additional margin. Even if you don’t sell direct but choose to engage directly with the end customer, you’re able to have a more pure interaction with them. Your product benefits, brand, mission, and more are delivered straight from the source — something you currently rely on channel partners to execute flawlessly.
For Wholesalers
It’s actually beneficial for manufacturers to have some direct interaction with consumers as it helps to promote the brand. Imagine your life is made easier because of the additional air support the manufacturers are providing by educating retailers or the end customers come to you — that’s a powerful resource.
Both Manufacturers and Wholesalers
Next, when shopping directly from you, the customer is exposed to a broader spectrum of your products, not just the ones the retailer chooses to promote at your expense. This increases the ability to upsell and cross-sell customers with relevant products they may need.
One of the greatest benefits is the access to customer data which can provide the foundation for even more robust sales strategies focused on loyalty programs, new product development, and more. Customers show you who they are based on their purchasing habits.
Your Products, Your Data
Now that you have built trust with customers it’s time to learn more about them. This is one of the biggest advantages of adding a DTC component to your business.
When customers buy directly from your eCommerce site, you know what they buy and how satisfied they are with their buying experience.
Without taking control of this information and leveraging it to your benefit, you are simply hoping your channel partners will do it for you.
Why would your channel partners benefit from voluntarily sharing detailed information with you and other partners?
Customer Acquisition: Then and Now
Previously, brands had to negotiate with retail and mass media gatekeepers to access the green fields of consumers on the other side.
There has been an upheaval of many retail and media giants by modern forces like Amazon, Walmart, and Facebook. But still, the brand-consumer relationship remains the same. The gatekeepers simply changed.
With new business strategies, made possible through digital and social media and a shift in consumer mentality, these barriers are beginning to crack. More and more brands are seeing the value in selling directly to their customers.
This is the world of DTC digital marketing.
Here, success lies in data and control. With modern marketing platforms, you have unprecedented visibility into data and metrics. Gone are the days of guessing how effective a radio spot or a TV ad was. You now have direct and immediate feedback with digital marketing tools. You can immediately reallocate budget to higher performing campaigns and reduce or pause lesser performing campaigns. You’re now in much greater control over reducing your customer acquisition costs (CACs) and raising customer lifetime value (CLTV).
With a DTC digital marketing strategy, ads can be targeted with laser-like precision, they’re are performance-based options which allow you to control risk and upside, and everything is trackable over time
Win-Win for You and Your Channel Partners
It turns out that manufacturers and wholesalers are hesitating to step into the DTC space. Many are afraid of damaging relationships with current channel partners.
It may seem counterintuitive, but going DTC is beneficial to you and your retail partners.
A study conducted by Forrester Research found that 91% of manufacturers who added a DTC eCommerce channel considered the effect on channel partners to be positive or neutral.
Of the 55% who found it positive, over half said that their retail partners saw an increase in sales of their products. This is because customers who discovered the DTC channel often fulfilled their orders with the retail partners.
Other positive effects include an increase in brand awareness and an increase in the DTC sales of lower volume niche products. This allowed businesses to stock retailers with only the most profitable items.
Again, it’s a win-win.
Channel Partners Give Room for Risk
For those who already have strong channel partners, creating a DTC channel is less risky.
The main struggle with businesses that focus primarily on DTC is income fluctuation. The stability granted by your partners mitigates the risk of digital transformation.
This also opens up doors for experimentation and optimization.
14 percent of manufacturers reported that their direct-to-consumer channel allowed them to test the viability of new products and strategies before pitching them to retailers.
Strategies or products that don’t succeed aren’t a significant setback. They are pulled from the site without damaging customer expectations or retail relationships.
Don’t Get Caught in the Legacy Trap
Having great partners is essential to your business, but it shouldn’t make you one-dimensional. Without revenue diversity, businesses can become dangerously dependent on their partners.
Your channel partners’ stagnation creates risk up and downstream.
In the building materials and home improvement space, this is especially important. Many retailers aren’t sure how or why they would try digital transformation.
These retailers are the ones who decide how your products are sold and what your customers experience. It’s out of your hands whether the customer leaves the store or website satisfied.
It simply isn’t your retail partner’s prerogative to please you with timely and extensive info on the performance of your products. You need a real-time understanding of who your customer is and what they are buying.
This is why a multichannel approach that utilizes DTC eCommerce alongside your channel partners is the best strategy for sustainability.
Conclusion
Going direct-to-consumer affects both sides of the consumer-brand relationship.
The consumer sees a company that is willing to connect with them. One that will reach out to meet them anywhere so they can buy on their own terms. They see the faces behind the brand and what they stand for. They form a connection and become loyal customers because of it.
The brand learns who its customers are and what they respond to. It finds out what works and what doesn’t before negotiating with retailers. It gains insight directly from its customers from the first click through post-purchase. A community forms around their products and services.
The end result is a smarter, more sustainable, more identifiable brand that has a deep connection with its customers.
