Is it time to make the switch? 

If you have a business, primarily reliant on the traditional wholesale or retail distribution model, you might be wondering if DTC is the right path for you. It’s a fair question, and one that deserves a clear understanding as there are obvious benefits, but also financial implications and barriers to entry including internal capabilities, online infrastructure, access to capital, and a highly competitive marketplace including AMAZON. 

According to a recent IAB study, over two-thirds of consumers have come to expect direct access to a brand, and about 67% of customers have used a company’s social media for customer support. 

For most businesses, the most obvious hurdles are organizational and operational deficiencies combined with competing in a very crowded market.  In reality, the biggest challenge is the revenue and profit losses that occur when wholesale is decreased and DTC is being built. Brands that have relied on revenue from the wholesale partners to invest in the business are at a massive disadvantage when compared to the digitally native brands that use investor funds to develop and promote their DTC channel.  The key is BALANCE.  As you gradually turn off one channel, you continue to optimize and strengthen the other. 

But, if you agree that the majority of commerce is done on the internet, and the best decisions are made with data, then this is the only option for growth.  

The benefits of a DTC business are clear: 

• 100% control of your brand and communication 
• Ability to test price and promotion 
• Access to data about your customers 
• More profitable than selling through retailers 
• Control of the product development calendar and delivery to market 

How to make the switch:  
Before jumping to buy some turnkey software solution, you need to

1- Start with your CUSTOMER: 

• Where are they consuming products, services and content? 
• What is motivating them to engage and spend? 
• What do they love about your brand? 
• What do they expect from you? 
• How can you serve them 24/7? 
• Why would they shop from you vs. alternatives? 

2- Study your direct and indirect COMPETITORS:  

• What is their value proposition? 
• How are they differentiating themselves? 
• How and where are they communicating with customers? 
• Why are they winning? 

3- Evaluate your CAPABILITIES: 

• Do you have the online infrastructure to execute? 
• Do you have shipping / warehousing capabilities? 
• Do you have expertise in content creation and digital marketing?
• Do you have a clear understanding of what data to use? 
• Can you make data driven decisions? 

4- Understand the COST: 

• ​How much capital do you need to invest upfront? 
• What revenue losses can you expect and handle by decreasing wholesale?
• What is the difference in your profitability? 
• What capital do you need to consistently invest in online marketing? 
• What capital do you need to invest in organizational capability? 
• What will you save by changing your business model? 

Go where your customer is … now. 

My advice: don’t settle for what’s kind of working today. Challenge yourself to make BIG things happen tomorrow. Work within your financial and organizational constraints and do what you can afford to do NOW.  You can layer on and spend more as business improves and resources become available. In this time of constant change, it is critical to make a move so you are better prepared to ride the wave in lieu of getting wiped out.  
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If you want to go where your customer is, you will quickly realize DTC is not an option but an imperative. Building a direct relationship with your customers and delivering the right product, at the right time, at the right price, will foster a better customer  experience.  With a better brand experience, your customers become loyalists and then evangelists, and will do a lot of the selling for you. 

Move the Needle, Disruption, Unpack, Push Back, Low-hanging Fruit…..  

Any of these sound familiar? Like you just heard them (or even used them) on your last ZOOM call? These cliches have become the “script” within the corporate world. And let’s not forget PIVOT …  that was cliche before we were leaning in!  But in the wave of the pandemic and the unprecedented number of struggling businesses, “pivot” deserves some unpacking. 

Transitioning a core business or diversifying into adjacent categories or distribution channels is critical for survival. But for many companies, this shift into new customer segments, product categories, revenue models, pricing strategies, etc. is uncharted territory. To succeed, it requires the same surgical approach and consideration you would use launching a new brand. While time is of the essence, a delicate balance of speed and comprehension will yield the best result. You can be quick, but don’t be in a hurry!   

Over the past few months, I’ve been working with owners and operators in hospitality, food & beverage, accessories, apparel, and design who are eager, and in some cases desperate, to pivot their business. I have found that regardless of industry, I consistently pose a series of questions (below) to proactively uncover inevitable issues or glaring opportunities.  

Here is my list:  

1. What will you be famous for? Does your new concept reinforce your brand’s mission and vision? If yes, and you can clearly articulate what you will be known for in the minds of the customer, you’re well on your way. If you’re unsure, you may be at risk of diluting your brand and confusing your customer. 

 

1. Do you still know your customer? I mean really know your customer?  The pandemic has significantly, and some would argue permanently, changed consumers’ attitudes, behaviors and spending habits. To fully comprehend the impact to your business, you need to assess the “new” behaviors, priorities and values of your customer. When you get to a granular level of understanding, you can develop an effective filter for decision making. 

 

1. How is your situational awareness? Can you identify your direct and indirect competitors, and dissect them? How are they competing? Why are they winning?  Who is their target customer? What is their value proposition? What makes them famous? When you thoroughly understand the competitive landscape, you can hone the best approach. My advice: Do something new and different. Create a new market that meets and exceeds the needs and expectations of your customer.   

 

1. Does your organizational structure and talent support your new strategy? Do you have the internal capabilities and skills to execute, or do you need to hire third parties? There are benefits to both, and the answer lies in developing your strategy first and then evaluating your organization. Be prepared to admit that the team you have may not be the team you need.  

 

1. Is everyone on the bus?  Your shareholders, investors, executive team, and board members? Receiving early and candid feedback and gaining alignment saves time and resources while also keeping your employees informed and motivated. Lack of strategic alignment is one of the primary reasons why many businesses fail to achieve their objectives. 

There is no way to anticipate all the items that may impact your goal.  But one way is to keep asking yourself, “If this fails, why?” Be exhaustive with the list up front, it will serve you well and preserve your precious resources. 

Last, develop a rigorous process for review and adjustment. If you cannot poke holes in your own strategy, surround yourself with people who can. At the end of the day, stay nimble, patient, and let’s circle back if you need more guidance! ​