Going Direct to Consumer While Maintaining Your Relationships with Retailers

Direct to consumer is when a brand sells their product to the end user. In the past, brands often distributed products only through retail partners. For example, a maker of tennis rackets sold them through a sporting goods store. With a direct-to-consumer channel, the same tennis racket maker can sell the equipment directly to the player. Common direct-to-consumer channels include ecommerce websites, apps, and direct sales by phone. D2C channels often complement, rather than replace, traditional retail channels. For example, a confectioner might place their candy in gift shops, and also sell it directly to consumers online.

Many industries are launching direct-to-consumer channels, including telecommunications, grocery, and even automotive, with manufacturers selling vehicles to new owners without the involvement of a dealership.

When a consumer goods company looks beyond its wholesale strategy to include D2C channels, they tap into new opportunities to build relationships with existing customers, expand their reach to new audiences, and grow sales beyond the limitations of current retail partners. They can even use their D2C site to test new products and collect first-party data that can help them improve their business.

One real-world example: A leading bicycle maker opened a D2C channel. They collected data from their customers and learned that gender-differentiated sizes were unnecessary, since every rider was unique. They saved millions of dollars by eliminating male- and female-specific bikes.

Consider the following advantages of going direct to consumer.

When distribution partners sell a company’s products to the end consumers, only those partners have access to that customer data. Those partners, whether they are a retailer or a marketplace like Amazon, tend not to share what they know.

Instead, if a company sells products direct to consumer, they collect that first-party data themselves. They can identify customers and deliver targeted promotions and offers using their website or app, email lists, point-of-sale systems, and social media channels.

Knowing more about their customers helps brands cross-sell and upsell. It can influence product development and marketing tactics. They can acquire new customers more easily by using what they know about current shoppers.

In a traditional wholesale model, many retail distributors are reluctant to stock their shelves with untested products. They may require larger financial commitments to offset potential losses.

A direct-to-consumer channel lets companies try out new products and improve them based on customer feedback. They can survey customers about what they like and don’t like about the products and develop new iterations quickly. For example, the KIND snack company sells products directly to consumers and offers a subscription service and the opportunity for individuals to choose their snacks. This lets customers try out new products before making a bigger commitment. And the company quickly learns which new products are a hit and which might need some adjustments.

Some retail distributors may see a brand’s D2C expansion as a threat to their partnership and to their bottom line. This reaction is understandable. Concerns companies commonly have when brands go D2C include:

• Market oversaturation
• Undercutting prices or other forms of price competition
• Conflicts over physical territories
• Issues from selling to the same target audience in a particular market where both D2C and a retailer or distributor exist

However, a smart D2C strategy can actually complement existing channels and boost sales for everyone. You can help assuage retail partners’ concerns by explaining how your plan can benefit them. Here are five tactics consumer goods companies can use to avoid channel conflict when going direct to consumer.

1. Test new items on your D2C website. This can quickly determine their level of popularity as well as their ideal price points. Then you can use those insights to offer distributors new best-selling items that will fly off the shelves, ensuring both you and your partners thrive.
2. Use acquired customer lists. When retail partners are offering special promotions, you can drive foot traffic and sales to them.
3. Increase investment in marketing. Heightened awareness of and affinity for the brand will make products become even more popular among shoppers at partner retail locations.
4. Create unique or immersive experiences on the D2C channel. Your site becomes a destination for consumers who want to connect with the brand and learn more about it. Knowledge articles, tips, and how-tos can help consumers move along their customer journey. Your site can even tie into retail channels and drive sales there.
5. Give your retail partners access to exclusive merchandise and let them offer discounts that are not available on your D2C channel.

It’s important to recognize and appreciate the symbiotic relationship between your D2C initiatives and your distributor network. That helps you find ways to integrate your marketing efforts and improve sales for everyone. However, some channel conflict is inevitable. Besides your own B2B and B2C channels, it can come from marketplaces and platforms such as Amazon, affiliate networks that promote your products for you, and even your social media channels.

Mitigate that risk and compensate with mutually beneficial initiatives. For example, load up wholesalers with items that have demonstrated broad consumer interest. Keep more specialized items on your D2C site. This plays to the strengths of each channel.