What It Means for Manufacturers and Distributors
The growing trend of consumers wanting to shop directly from brands has been changing the e-commerce space. With consumer demand for direct-to-consumer opportunities, both manufacturers and distributors may need to reconsider their business model and where they fit in with this growing trend. The shift to D2C may seem to benefit manufacturers at the expense of distributors, but we’ll highlight opportunities for both that have been created.
What is Direct-to-Consumer (D2C) E-commerce?
Direct-to-Consumer e-commerce is where a traditionally B2B business begins to sell directly to their end consumers through their own website.
The traditional B2B business model may look something like:
However, when a manufacturer is able to implement a D2C business model, the process is shortened to one relationship:
Consumer research has pointed to an increase in demand for D2C business models, with 55% of consumers preferring to shop directly with a brand instead of going through a retailer. However, some brands have been hesitant to implement this method of shopping, despite being good for both their bottom line and consumer relationships. This hesitancy is brought on by the inability for manufacturers to manage small, individually sized orders rather than bulk quantity orders that they are used to fulfilling when selling to wholesalers, distributors and retailers.
The Growth of D2C Sales
As mentioned above, the majority of consumers would prefer to shop directly with a brand or manufacturer.
62% of B2B professionals have seen evidence that manufacturers, distributors and wholesalers are responding to this need by selling direct-to-consumer.
As manufacturers have increased their ability to sell directly to consumers, demand has followed. In 2019, one-third of B2B consumers reported purchasing directly from a manufacturer’s website. This has resulted in 82% of manufacturers reporting improved relationships with their customers. Ultimately, this change in the traditional B2B business model has resulted in a more customer-centric approach.
When it comes to e-commerce, again this is due to customer demand. The majority of B2B customers have reported preferring to shop online, whether that purchase takes place with a retailer, distributor or the manufacturer. Online shopping has become the standard for the general consumer, and those habits have transformed the B2B shopping experience as well.
Organizations that have invested in D2C e-commerce technology have found new revenue opportunities through this investment. RSM platform partner, Sana Commerce, found that “48% of businesses selling D2C now are able to do so as a direct result of investing in a B2B e-commerce platform. Another 24% believe their e-commerce investment will allow them to leverage D2C e-commerce in the future.”
How Can Distributors Benefit?
With all of the information above, it is hard to see how distributors are not the ones losing out when consumers are more regularly shopping direct from the brand, and manufacturers are investing more in direct customer relationships. But in fact, the D2C opportunity for distributers also represents a $6.6 trillion opportunity.
How can this be the case? Well, the opportunity for distributors has arisen from a few different angles. First, manufacturers have reported that the increased brand awareness and brand loyalty that they are earning from direct to consumer sales has increased lead generation opportunities for their partners, including for their distributers. This has resulted in increased sales across the board, as manufacturers focus on small orders and allow their retail & distribution partners to manage large fulfillment orders. Additionally, manufacturers are now able to test new products with direct to consumer sales before rolling these products out with their partners, which several distributors have reported as beneficial.
The saying ‘A rising tide lifts all boats’ is seen in effect here; where additional revenue manufacturers bring in from direct-to-consumer sales benefits all their partners by creating distribution efficiencies and greater consumer awareness.
For more information about how to get started with D2C e-commerce, reach out via email at email@example.com or by phone at 800.274.3978.