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THE DIFFERENT WAYS OF DOING D2C

Romain Ledru-Mathe
Published on
December 30, 2021
This is the seventh article in a series of 8 concerning direct-to-consumer. An article will be published each week.

There are several ways to get started with D2C. We saw in the first part different examples of established brands that have chosen to launch their own D2C initiatives: not all of them have done it in the same way. Depending on their level of maturity on the subject, and on existing internal skills, brands often choose to outsource all or part of the necessary operational skills, in particular the logistics (supply chain and delivery) and customer-oriented (marketing, customer service and sales platform). We can thus distinguish four D2C models, from the most intermediated to the most internalized, which each have advantages and disadvantages.


Intermediation models

Go through an already existing marketplace

the brand sells to the end consumer via an existing e-commerce platform managed by a third party, such as Amazon, Cdiscount, PriceMinister, etc. This model has the advantage of being quickly implemented, and of benefiting from the existing traffic of these platforms. It also allows direct access to consumers and control of its offers and prices. However, each platform has a significant entry cost (in terms of skills and knowledge), and adds significant commission fees to the existing margin. In addition, it is not always easy to access consumer data. This may be a good way to start testing DTC, but it may not be sustainable if you want to deepen the relationship with the end consumer. Thus, the brand of drink Hint, originally distributed only in stores, first tested its online offer via Amazon (becoming in a few weeks one of the best-selling drinks on the platform), before creating its own online distribution channel, in order to maintain access to customer data.

Use existing “Retail” distribution channels (“Click and collect”)

the brand is developing a “frontend” showcase site to interact with its consumers and take orders, which are then managed and delivered by an existing store network. This is often the model chosen by traditional retailers who choose to sell online (ready-to-wear, mass distribution) via their own site with a delivery system backed by the existing network (click-and-collect models). or drive). This model makes it possible to quickly launch an online offer, while using existing channels, sometimes even helping to create additional in-store traffic, without additional logistical costs. However, it remains limited to brands that already have their own distribution network and de facto limits the geographic reach of this type of service. Furthermore,

Internalization models

Develop only the “front-end”

to interact with consumers and take orders, but outsource logistics (stocks and delivery): orders are prepared by an external service provider. This model thus makes it possible to control the entire customer relationship and to keep control of prices and offers, and is generally quick to set up. On the other hand, the cost of customer acquisition and retention remains the responsibility of the brand and can prove to be exorbitant if poorly controlled. Logistics outsourcing certainly simplifies operations, but it can be expensive depending on the products chosen (most logistics providers, for example, impose size and weight standards for deliveries). In addition, this method does not make it possible to control the quality of the delivery, which nevertheless has a considerable impact on the customer experience. Some brands also choose to outsource the management of their customer service, sometimes at the risk of not controlling the entire relationship with the consumer. For example, the Danone group has launchedwww.evianchezvous.com , an online delivery service for the group's drinks (individually or in subscription format). Evian Chez Vous relies on the logistics infrastructure of the Danone group, but uses external logistics providers to transport orders from the group's warehouses to customer apartments, a specific delivery activity that did not exist internally.

Management from A to Z:

the brand is developing the frontend, the production lines and setting up the distribution chain (with the option of outsourcing last mile delivery). This D2C model is the only one that allows end-to-end control of the customer experience and relationship (offer, price, data and experience). On the other hand, it is the one that presents the greatest operational complexity since it is a new distribution model. Acquisition costs also remain a charge and this type of model can also compete with the brand's other more traditional sales channels. Saveurs Bières does not just sell its products online: the brand has its own warehouses and its own delivery fleet in order to keep control of all the distribution costs associated with the activity.

These different models thus each have advantages and disadvantages to be arbitrated according to the brand's overall strategy and its stage of development . It may therefore be relevant to start by testing your D2C offer at a lower cost via an intermediary, the time to validate the value proposition and to develop internally the operational structure and the skills necessary for a more integrated model. We often see that brands launch pilots quickly, by outsourcing logistics aspects, before validating the opportunity and investing more heavily in these new distribution channels.

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