Rapidly evolving customer expectations mean that the shipping landscape for manufacturers is also changing quickly.
In the past, your shipping strategies may have been limited to fulfilling bulk orders, picking full cases, building pallets and shipping truckloads of products to big box distribution centers. But if that's your current model, you're probably discovering that it's no longer enough.
Instead, more and more manufacturers are now fulfilling thousands of smaller orders and shipping them directly to consumers (DTC). You may have already started shipping DTC, or perhaps you’re considering it. If so, there are good reasons to do so.
- E-commerce was growing fast even before the pandemic hit, increasing 14.9% in 2019.
- COVID-19 has accelerated e-commerce growth by 4-6 years, with May up 77% year over year, to $82.5 billion, according to Forbes.
- Online sales grew nearly 50% in April 2020.
- BOPIS (buy online, pick up in-store) transactions grew 195% in May 2020 alone.
- And the National Retail Federation forecasts that retail sales during 2020 will increase between 3.5 percent and 4.1 percent to more than $3.9 trillion despite uncertainty from the lingering trade war, coronavirus and the presidential election.
That kind of growth is simply too big to ignore. If you're a manufacturer without a DTC strategy already in place, it's time to get one.
Manufacturing and DTC in Action
Direct-to-consumer (DTC) shipping strategies can take on many flavors, but the most basic scenario is when a manufacturer sells and ships products directly to buyers, skipping traditional retail stores, distributors or other middlemen. As a result, the manufacturer can sell products at lower price points and have much more control over product creation, marketing and distribution.
This strategy sounds an awful lot like business-to-consumer (B2C) models, but there’s a slight difference:
- Business-to-Consumer (B2C) - Retailers like Target who partner with many manufacturers and distributors to sell a variety of products to consumers.
- Direct-to-Customer (DTC) – Manufacturers who sell directly to consumers through e-commerce, mail order or within branded retailers.
All DTC brands are B2C since they sell directly to consumers. But not all B2C companies are D2C since they typically source their products from partners. It’s important to note that manufacturers aren't limited to shipping directly from plants or warehouses. Hybrid models can include combinations of:
- Using marketplaces like eBay, Amazon or niche sites
- Permanent pop-up shops in brick-and-mortar locations
- Partnering with specialized online retailers
- Establishing flagship stores
- Drop shipping
The Benefits of DTC for Manufacturers
Let’s talk about the main advantages of DTC strategies.
1. Own your customer data.
Manufacturers are no longer in the dark when it comes to who their buyers are. In the past, retailers retained all their customer data. With DTC, you now know who is buying your product and where they're located, as well as their preferences and habits. As a result, you have the opportunity to build relationships and loyalty directly.
2. Be more competitive.
Take advantage of faster go-to-market. Contracts and negotiations with retailers and distributors for price, placement and prime space are a thing of the past. As soon as you have a product ready for sale, you can test your markets and make offers.
3. Provide a better customer experience.
Manufacturers with DTC capabilities have more control over the entire consumer experience. You can offer order and marketing personalization as well as more seamless and branded sales and service interactions. Your reputation will no longer suffer because a partner's customer service falls short.
4. Earn higher profits.
Manufacturers with DTC strategies have much more control over pricing. You are no longer constrained by your competitors' products, pricing or shelf location in retail settings.
The Challenges of Implementing DTC
The advantages of DTC are compelling. But it is a big decision as well as a major operational shift (and it seems like a lot to take on at any given time of the year). To be successful, you'll need to have the right systems and resources in place.
With a DTC strategy, you are managing a more complex supply chain. With that comes greater risk of disruption because you’re shipping to thousands of end customers instead of a few partners. You should expect to feel pains from…
1. Increased order volume
2. Managing consistent and efficient warehouse practices
3. Managing drop shipping requirements
4. Controlling shipping methods and costs
In addition, manufacturers may face increased cyber risks. You're now controlling more sensitive customer and financial data. That means cyber-security will be a major concern and priority. Security breaches can disrupt business and harm your reputation, especially if payment data, passwords, or personal health information are compromised.
There's a lot to consider. Fortunately, the right parcel shipping solution can make the transition easier.
Finding the Best DTC Solution
Homegrown or patched-together temporary solutions may help you get started on your DTC journey, but you may notice that your team is struggling to keep up with parcel volume and staying carrier compliant. Your costs may be steadily increasing or your customer service isn’t quite where you’d like it to be. The right multi-carrier parcel shipping software can take your shipping to the next level. Your organization will be better able to:
- Manage higher shipping volumes. A good WMS coupled with a strong parcel shipping solution can help warehouse personnel focus on managing increased parcel volume while automating complex back-end shipping processes and details.
- Improve customer experience. Manufacturers can offer more shipping options at the best prices, while keeping customers updated with the latest availability and tracking information.
- Increase efficiency and lower costs. Leverage the fastest carrier engines in the world with ProShip. Automatically choose the best value for every shipment while continuously meeting your delivery promises. Identify the closest inventory source to the customer and find the best shipping method among hundreds of carriers and services.
- Integrate your systems and streamline processes. Parcel shipping software can seamlessly integrate with your WMS, ERP, EDI , OMS, and CRM platforms to significantly improve customer experience and lower shipping costs.
- Find proper support. Make sure your small parcel shipping software is state-of-the-art. You want excellent customer service that responds to issues within a short, specific timeframe and a vendor that keeps its promises and provides regular, frequent system updates and upgrades.
- Make compliance easy. Stay up-to-date on carrier disruptions and seasonal surcharges and print accurate, carrier-compliant shipping labels in seconds to meet the customer’s desired delivery date and avoid fines.
Get Your DTC Strategy Open for Business
There has never been a better time for manufacturers to embrace DTC. If you've been on the fence, or if you've tried to transition on your own using your existing systems (but struggling), ProShip is here to help.
Reach out to one of our experts today and learn how quickly and easily you can implement the DTC strategies that are perfect for your business.
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