Direct-to-consumer shift puts supply chain agility in the spotlight once more

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While the pandemic and subsequent e-commerce explosion have driven strong demand for true omnichannel supply chain commerce solutions, they have also fuelled a less immediately obvious longer-term move towards direct-to-consumer (D2C) fulfilment.

The requirement to sell directly to consumers has certainly given a boost to technology companies that help untangle the complexities of retail supply chains, brands need to recognise that the logistics of D2C sales can be very different from the conventional operations required to supply traditional retail stores.

Consequently, the move towards D2C models, and rising competition between traditional retail channels and e-commerce, have shifted the importance of fulfilment, from a less important issue to a potentially significant competitive advantage. Today’s shoppers expect fast, low-cost, environmentally aware delivery options (and products), with as many as a 33 per cent abandoning online carts if they consider a shipping date to be too late.

Equally, brands that provide next/same-day deliveries, or practical alternatives such as click-and-collect, buy-online-pickup-in-store (BOPIS), kerbside collection and buy-online-return-in-store (BORIS) tend to attract more customers and establish longer-term bonds of loyalty and repeat purchases.

Suppliers of wholesale goods, including everything from fast-moving consumer goods (FMCG) to electrical appliances, often ship large, bulky consignments of cargo through industrial supply chains to distribution centres and then on to stores. However, companies selling to consumers must manage the flow of individual shipments, such as a single box of running shoes, or a polo shirt, direct to a customer’s home or preferred collection point.

Footwear, apparel and electronics manufacturers have been among some of the earliest adopters to have stepped up their D2C offerings during the Covid-19 pandemic as stores and retailers closed their doors and brands struggled to find new avenues to reach their customers.

Although the pandemic-fuelled enthusiasm for e-commerce is slowly cooling off and plateauing at a new elevated level, the D2C phenomenon looks here to stay for the long-term. As the lines between what a retailer or manufacturer used to be and what they are today become more opaque, almost every company is in some way making attempts to get closer to their consumers.

Take a certain German sporting giant as an example. D2C sales helped to boost its revenue in the second quarter of last financial year, and its own e-commerce website now accounts for more than 20 per cent of its business. It recently reported that online sales grew by double digits in the second quarter of 2022 too.

Another sporting giant, this time from the US provided another recent example of a modern, successful D2C strategy. Since 2017, it has actively reduced its number of retail partners to concentrate on growing its own online and brick-and-mortar presence. Its Oxford Circus flagship store in the UK and the intuitive nature of its members app are fine examples of a more strategic move to provide “loyal” members with a greater range of bespoke, limited-edition offerings restricted to its owned retail ecosystem.

The shift towards D2C has given it full control over its customer relationships and (crucially) the associated customer data, giving it the insight to make customer journeys and user experiences both richer and unique in equal measure.

D2C models have, however, also increased the fulfilment costs per item. From managing logistics and supply chains to hiring the right talent capable of creating those exceptional customer experiences, these extra costs can consume profits if unaccompanied by agile and scalable supply chain strategies.

If retail brands truly want to harness the benefits of D2C channels and serve millions of customers in a cost-effective, sustainable way, they need to be nimble in every department – especially when it comes to supply chains.

The movement towards D2C fulfilment has been well illustrated over the past 12 months by many other brands too. By operating effective D2C channels, they are enjoying the freedom to optimise their logistics and deliveries, while meeting the increasingly changeable and exacting expectations of their customers too.

D2C is the latest iteration in a long line of retail supply chain evolutions. And while finding the right balance may prove challenging in the short term, the opportunity is huge for retailers (particularly wholesale brands), offering a new touchpoint to interact with the end-customer.

For retailers looking to ride the D2C wave in 2023, the key to succeeding is twofold. It will require them to look at not only their overall supply chain capabilities, but also the technology that underpins them. Only when technology delivers capabilities that match the expectations of consumers will retailers be able to truly take advantage of this huge new opportunity.

At Manhattan Associates our unified supply chain commerce platform is informed and inspired by more than 30 years of supply chain and commerce experience across retail, apparel, food and wholesale distribution, working with some of the world’s most well-known and beloved retail brands.

If you want to find out more about how to align your supply chain and omnichannel capabilities to take advantage of the D2C trend, you can find out more here: www.manh.com/en-gb/active.

Originally published on Business Reporter