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MARKETPLACE BLOG.

Tips to Help You Sell More Online with Shopify & Amazon.

Why Manufacturers Should Build Direct to Consumer Channels.

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August 05, 2020 @ 3:41PM

By: Paul Stainton

SUMMARY

Canadian companies with D2C channels are winning in a big way. Here are the top reasons why your brand should start building your D2C channels now (5 min read).

If you haven’t started building D2C channels for your brand, it’s time to start now.

E-commerce is here to stay, and it’s affecting every category of product. The 2020 Canadian E-commerce Report shows that “wholesalers, distributors, and manufacturers have a unique opportunity to create direct-to-consumer (D2C) to drive higher profitability.”

2020—specifically the Covid-19 pandemic—has also amplified the need for manufacturers to have concrete D2C strategies in place. Manufacturers have learned the hard way that relying on a retail-only model is risky business.

These recent events have created a silver lining for many manufacturers: with Canadian e-commerce spending reaching an all-time high in 2019, it’s expected to nearly double (to the tune of $108 billion) by 2023.

The Incredible Benefits of Selling D2C

Canadian manufacturers aren’t standing still.

From controlling their brand narrative to increasing profit while reducing margins, wholesalers, distributors, and manufacturers are winning with solid D2C strategies.

Let’s look at the top six reasons why you should consider D2C e-commerce solutions:

#1 - Increase sales

D2C Ecommerce Channels Can Increase Production

In Canada Post’s 2020 Canadian E-commerce Report, they found that 58% of online shoppers discovered new online retailers by searching for specific items, using search engines such as Google or Amazon. They also found that 52% of consumers visit manufacturer sales channels intending to make a purchase.

In a study performed by Forrester Research, manufacturers experienced exciting sales increases with a D2C-based channel offering:

“Depending on the product category, net margin dollars per unit doubles with D2C. One vendor interviewed for this report reported seeing increases among customers from 50% to as high as 400%.”

Even with the logistics of moving from a wholesale shipping model to a single-product shipping model, wholesalers, distributors, and manufacturers are seeing returns like never before. Many companies are turning to partner platforms like Amazon and Shopify to manage shipping costs, making D2C a realistic way to get their products into more customer’s hands.

Moving to an omnichannel approach can not only increase your net sales but also improve your margins. Without middleman markups from retailers, your company sees an even greater per-unit profit.

BOTTOM LINE - Building D2C channels allows you to sell more products to more customers, increasing your sales margins and maximizing profits.


#2 - Unlock customer data

Direct access to consumer data can lead to innovation

It used to be that wholesalers, distributors, and manufacturers could only gain insights through information retailers chose to share or by conducting expensive market research.

Trying to understand your customers this way isn’t the best way to get to know them, and severely lengthens the time it takes to react to rapidly changing consumer trends.

The D2C intervention is a game-changer for Canadian manufacturers.

D2C e-commerce sites give your company hard data for every stage of the customer journey. You can observe your consumer behaviour, such as purchasing habits, and can take a tailored approach to your product offerings and promotions accordingly.

D2C e-commerce partners like Amazon and Shopify can also give you key information about how your customers are shopping and when they make their purchasing decisions.

By understanding current customer behaviour, you can fine-tune everything from product to packaging, react to real-time trends, and mitigate issues as they come up before any damage can set in.

BOTTOM LINE - D2C allows you to connect with your customers in meaningful ways, giving you instant access to customer data and direct power over influencing consumer behaviour.


#3 - Control your brand experience

Digital buying helps extend quality control right to delivery

There is one word that sums up why Canadian manufactures are turning to D2C: control.

More than ever, consumers are demanding a high-touch experience, especially from Canadian brands.

With the valuable consumer insight that D2C enables, you can create and control your digital buying experience from start to finish, providing a positive—even meaningful—brand experience.

Canada Post also reports a waning interest in cross-border shopping, with Canadian shoppers looking for more Canadian-made products from Canadian-owned retailers more than ever before.

Canadian vs Cross-Border Shopping Trends

Source: Canadian E-commerce Trends 2020

D2C e-commerce lets you share your brand story with consumers in a meaningful way. From product write-ups to telling your brand’s birth story, you can purposefully connect with shoppers who care at every stage of the buying process, even after they have purchased your product.

BOTTOM LINE - D2C allows you to control your brand story at every stage of the buying process, allowing you to capitalize on competitive advantages over international brands.


#4 - Bring innovation to market faster

Convert customer insights into product innovation

More insight into your customer can also pave the path towards innovation.

Manufacturers often shy away from innovation because of the risks involved. On average, a new product launch can take 18+ months, from inception to the sales floor. That’s a long time with a lot of effort.

Retailers are also risk averse. The decision to stock a new innovative product without a sales history is often considered too precarious.

With D2C, manufacturers can mitigate these risks by allowing them to launch new products on a smaller scale. You can develop a specific product, test it with a tighter and more controlled demographic, get their feedback, make adjustments, and perfect the product before a wider-scale launch.

BOTTOM LINE - D2C allows you to innovate products in a controlled environment that your consumers love.


#5 - Develop better relationships with retailers

Improved Logistics & Product Innovation Can Help Offset Retailers Concerns

While one of the first concerns about creating D2C channels is creating a negative relationship with retailers, it can have quite the opposite effect.

As more and more retailers are closing their doors or facing bankruptcy in 2020, those that are left standing are being careful with their brand and product offerings. They are even less likely to take chances on unproven innovations from manufacturers who have diversified outside of their proven product lines.

They also understand the increasing need for an omnichannel approach, as they watch their competitors and cohorts fall into trouble.

Retailers are looking more and more for your “sure thing,” and by testing your product lines on D2C sites, you can offer them a wealth of data into your already proven product successes.

You can also set better guidelines in placement and marketing efforts on behalf of retailers, based on consumer insights into purchasing behaviour, including point-of-sale recommendations.

Plus, by developing a drop ship, referral or even an affiliate marketing program, retailers can access your entire inventory of online products to satisfy their customers' needs without having to carry all of those products themselves.

And now that you are set up - logistics wise - to handle smaller quantity orders, that will help your retail partners sell more with less risk.

BOTTOM LINE - Give retailers a piece of mind with your products by backing up with your ready D2C successes.


#6 - Rely less on retailers

Direct-to-Consumer Ecommerce Models

The other side of this is that you can reduce your reliance on retailers to sell your products for you.

Canadian wholesalers, distributors, and manufacturers are feeling more and more margin pressure from retailers as their expenses increase.

Retailers charging a “Covid-19 Tax” are looking to both consumers and suppliers to offset the costs of PPE, new hygiene protocols, and additional staff with fewer customers-per-store allowances, on top of already high overhead costs.

With more and more retailers having to close their doors, the competition for shelf space has also increased, which is shrinking opportunities for Canadian manufacturers to get their products in the hands of consumers.

D2C allows you to increase the breadth and depth of customers on a 24/7 model, hedging typical disruptions in retailers' sales windows. It gives your company the freedom to live outside the retailer model, and

Without having to compete for shelf space, you have control over how your products stand out from competitors, and how consumers find you during the coveted online decision-making moment, Google’s self-defined Zero Moment of Truth.

D2C gives you the control and freedom to weather any storm outside of normal retailer responses.

A similar American study by Forrester Research found that the same segment of shoppers would prefer to purchase directly from the manufacturer.

A D2C e-commerce site can help you reduce your reliance on retailers to sell your products while connecting directly to consumers who are ready and willing to purchase directly from you.

BOTTOM LINE - Reducing your reliance on retailers to sell your product is not only smart but also makes good business sense in today’s market.


Ready to start selling direct-to-consumer?

If you are looking to create your own direct-to-consumer e-commerce channel, now is a great time to start and Shopify e-commerce themes provide a quick, easy, and effective way to get your products in front of potential customers.

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