When we talk about the rise of direct-to-consumer business models, we often talk about category newcomers like Casper, Warby Parker, Away, and Madison Reed. But the rise of B2C business models isn’t just paving the way for new companies, it is also transforming the way historic brands do business.
To stay competitive, or even just relevant, all brands, including B2B businesses, need to understand the proliferation of direct-to-consumer (D2C) business models. This doesn’t mean every B2B brand must reinvent itself entirely. But there are aspects of the direct-to-consumer trend that all companies can learn from.
Driving Factors of the Direct-to-Consumer Economy
Technology innovation has facilitated a variety of changes that make a B2C business model viable for brands. These factors can be broken down into two core categories: business-level changes and consumer/societal trends. Let’s take a look at some aspects of each.
Reimagined Supply Chain
In the past, one of the barriers to entry for companies considering a B2C approach was the daunting task of shipping and fulfilment. The advent of the “supply chain as a service” (SCaaS) concept makes it easy for brands to outsource components of their supply chain . Technology improvements also make it easier to manage your supply chain yourself. (It is worth noting that both SCaaS and ecommerce platforms are possible because of cloud computing. Cloud-based systems make it simple for multiple entities to share and work with data, no matter where they are located.)
By using technology to optimize processes, you may be able to cut costs, and in turn, improve profits and/or reduce prices. Case in point: AprilAire, a leading provider of indoor air quality solutions that partnered with Xivic to build its first-ever eCommerce platform. Before that, it was sending truckloads of its parts to a partner that would sell them online for a markup. We helped AprilAire build out its infrastructure and connect all of its technology–for example, its warehouse scanners to its eCommerce platform–so leadership can always have a real-time view of inventory and sales.
Ecommerce platforms make it easy for businesses to sell directly to consumers. Thanks to rapid changes over the past few years, these systems are now fairly easy to implement, use, and manage. They are also more affordable than ever before. But that doesn’t mean their cheap.
I counsel clients to test the market via a discovery phase before investing in a full ecommerce platform. This process usually entails creating a simple shoppable presence in a traffic-controlled environment to enable businesses to determine whether or not people will buy their products or services directly. Based on this data, we help them determine if investing in an ecommerce platform makes sense.
One advantage of direct-selling solutions is you gain full transparency into your customers’ purchasing behavior. By coupling this with marketing technology tools, you can gain full insight into a customer’s buying journey. You will also own your customer data, and these days, data is one of a company’s most valuable commodities.
But remember, accessing the data is one thing–activating it is another. You will need the tools and skill sets to analyze data so you can make meaningful improvements to your products, marketing, and user experience (UX).
Digitally-enabled Customer Service
If you are going to sell directly to consumers, you need tools and processes for communicating with those customers. Today, building and managing customer service processes is, in some ways, easier than ever, which contributes to the rise of B2C brands and D2C strategies. Companies can use digital tools and automation to deliver 24/7 service, whether via inhouse customer service teams or outsourced solutions. And gone are the days when call centers reigned supreme. Customers are increasingly comfortable engaging with brands via email, social media, and chatbots.
Does technology innovation drive consumer behavior changes or is it the other way around? That is a bit of a “chicken or the egg” question. But certainly, consumer trends dictate brand strategy, and the following changes contribute to the proliferation of B2C models
The Rise of Online Shopping
About a 10th of all shopping dollars are now spent online. That may not sound jaw-dropping, but the growth rate is impressive. In 1992, brick and mortar stores accounted for more than 96 percent of the $2 trillion in U.S. retail sales, according to U.S. Census Bureau figures cited by the IAB. By 2015, non-store retailers had grown to account for 9.4 percent of a $5.3 trillion retail economy. Today, almost two-thirds of Americans say they have bought something on Amazon, according to a new NPR/Marist poll. Mobile plays a role here, too. Consumers are increasingly comfortable shopping on mobile. By 2022, mobile commerce sales are projected to hit $512.77 billion. Bottom line: you no longer need to build a physical store to sell directly to consumers, making it easier and faster to launch B2C models.
Changing Consumer Expectations
The Amazon effect refers to the digital juggernaut’s disruption of the retail market, but the term could also apply to customer expectations. Today’s shopper wants “Amazon-level” service — fast and free shipping and 24/7 customer support. Some brands deem these things too important not to oversee themselves. If a retailer selling your products delivers a subpar experience, you could lose that customer forever.
Customers, particularly younger ones, want to have personal connections with the brands they buy goods or services from. Repeated studies show that millennials expect brands to build relationships with them, and that these relationships play a role in their decision-making processes. One study from the Fashion Institute of Technology found that 48% of millennials are more likely to buy from a brand if they know the people behind it. This trend is causing a growing number of brands to want to own their entire shopping experience.
So what does this all mean for B2C companies? A growing number are experimenting with their own D2C business models to better compete with digital newcomers and keep up with evolving customer expectations. For some enterprise businesses, this means adopting B2C best practices to improve their own; for others, it means changing their model, or adding a new one, so they can sell directly to customers.
A B2C shift is not something to rush or take lightly, no matter how “on trend” it may be. You need to do your due diligence before jumping in, otherwise, you will waste resources or risk making wrong decisions that negatively impact your business. You also need to stay agile, ready and willing to test new approaches and tools–a mindset that doesn’t always come naturally to large enterprises.
But times, they are a’changing. Fail to adopt and you could be left behind–no matter how big you are.
You should always seek consultation from an expert to determine how you can use technology to improve or change your business. Navigating digital transformations is Xivic’s forte. Feel free to reach out to me directly to see if we can help your company use technology to its advantage.