Direct-to-Consumer Can Be a Supply Chain Nightmare, But It Doesn’t Have to Be

Editor’s Note: Johannes Panzer, is Head of Industry Solutions for Ecommerce, Descartes

Today's shopping experience is unlike anything we've ever seen before. Long-gone are the days when consumers can only enter a storefront to buy desired items and supplier, retailer, and customer relationships have all transformed as a result. As the ecommerce and direct-to-consumer (D2C) market expands, more and more companies are looking to introduce this business model into their strategies to capitalize on the trend and leverage new channels to their advantage.

For certain brands, D2C has made selling their vast array of products – pet supplies, mattresses, clothing, you name it – as easy as one click away for consumers. A company like Nespresso, for example, applied this kind of approach by simply removing the middleman and distributing its coffee pods directly to shoppers' doors. It certainly worked.

But not all companies have experienced similar success, and keeping up with increased demand for greater convenience, fast turnaround, and seamless delivery has challenged current D2C brands and new entrants to keep up. While the D2C model eliminates the need for external selling parties and streamlines costs, businesses that move to a highly focused ecommerce approach face uncertainties and challenges to their supply chains and logistics operations that they might not be prepared for without proper strategy in place.

To drive the best results, they need to keep a few things in mind.

Transform existing processes to make way for change

Before the ecommerce boom, suppliers and manufacturers mainly relied on fixed deliveries in large quantities to support sales. Within D2C though, there is far less predictability regarding income for brands, since not all deliveries are fixed. In such a competitive landscape with ever-increasing options for consumers, the market has become much more fragmented than it once was as well. This means companies can't simply add an “ecommerce” channel to their business – rather – they need to shift their entire mindset and supply chain processes and technologies to establish the right foundation from the start.

For example, some suppliers have not designed their supply chain processes to sell an individual package, inherently hindering a smooth transition to ecommerce where individuals require one item shipped to their door. Since many lack the systems that cater to the small batch deliveries needed for D2C, it can be extremely expensive to get products into the hands of consumers. Existing technology platforms may also lack the capabilities to support connections to sales channels such as Amazon, eBay or Shopify, which can result in different disconnects within ordering and delivery practices.

It's therefore important for organizations to properly evaluate their current processes and systems – from warehousing to fulfillment to delivery – and determine the right technology solutions that help them prosper under these new kinds of constraints.

Make order accuracy a priority

In 2019, the consistent accessibility of products online has totally transformed shopper wants and needs and, above all, consumers are primed to expect accuracy from their ecommerce providers. The problem for those looking to implement D2C models, however, comes from outdated systems that were not built for increasingly speedy transactions and deliveries, which can lead to order inaccuracies. These kinds of inaccuracies can tarnish customer relationships, especially since consumers live in a “want it now” economy.

Organizations now need to consider systems that are specifically designed for the ecommerce model. This requires consumer-facing adjustments, such as ensuring what is shown as “in-stock” on a website actually matches the inventory in a warehouse. This holds true for logistical shifts as well, such as an updated sales forecasting methodology. One easy solution for this is to use key cloud-based technologies that leverage automation and ensure an integrated, multichannel warehouse with virtually 100% order accuracy, and a streamlined order-to-delivery process.

Communicate in real-time & be transparent

Instead of just “fast” or “free”, consumers today expect delivery choices when they place an order, for example, same day, next day, 2 day, or time-definite (e.g., Friday between 9-11am). As a result, ecommerce companies need to be able to offer flexible delivery options—and they need to be able to fulfill delivery expectations on time, which has made technologies that optimize more streamlined packing and shipping processes increasingly important.

It's also critical for companies to be prepared to give customers the ability to track the status of their items in real-time. While delivery convenience is a top priority, this kind of transparency is key as well, and the only way to develop a strong, long-lasting relationship with shoppers is by implementing the right communication strategy to provide regular updates on the status of deliveries.

Shoppers always expect to be informed of where their package is located during the delivery journey—and the companies that can't fulfill this need are more likely to experience sales challenges or negative impacts to bottom line results.

Connect the dots to improve your processes

An organization doesn't just pick up ecommerce and implement D2C strategies as a line of business overnight, and not every company gets it right the first time or, for some, at all. Those that succeed though are the ones that consider the technological and logistical hurdles they'll need to overcome early on and develop the right strategies to effectively tackle them.

Despite foreseeable (and sometimes unforeseeable) challenges, it doesn't mean it's impossible to shift to D2C, and change management is what serves as the guide to ensuring the direct-to-consumer business model is executed effectively. By implementing the proper technologies, comprehensive strategies and direct communication with customers, brands are better positioned to excel in the ecommerce space.

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