D2C stands for Direct-to-Consumer. So you might think that this just means the product is going directly to the consumer and that’s it, end of article. Well, that is sort of vague and doesn’t really help anyone now does it?
Let’s take an example to explain this a bit better. Say you sell socks. You’ve got a thriving sock company, you sell online on your website and also have tons of pairs stocked up at a shopping center such as Kohl’s. Kohl’s comes to you one day and tells you that sales are going so well that they want to offer your amazing socks on their website. Wow, cool, good for you! More business for you. Except, now, you might be in direct to consumer selling. How do you know whether you’ve entered the land of D2C? Well, if Kohl’s is still purchasing wholesale from you and selling it on their website, that’s not D2C. That’s just Kohl’s buying your product and selling it online. D2C is if Kohl’s just lists the product, but the sales get sent to you to fulfill and then you actually ship the products to the customer. Though it’ll look as if it’s coming from Kohl’s, but it’s really from you. Make more sense now?
What Are the Issues with D2C?
Okay, so you control the inventory. Does that sound nice to you? Maybe, maybe not, but with control of the inventory comes great responsibility -- and questions with regards to what in the world to do with a return.
First off, inventory. Like I said, great responsibility. And record-keeping. If you’re selling to Kohl’s in mass quantities, it’s easier to keep in your books because you say okay I sent a thousand socks to Kohl’s, a thousand to Macy’s, done. It’s their problem now if they don’t sell. But now that you’re selling online for these stores, you have to keep track of all the different orders coming in. These orders come to you at all different times, going to completely different locations, all with different packing methods. Instead of selling cartons of socks to Kohl’s and Macy’s, now you’re selling four pairs to Bob in Colorado using Kohl’s packing instructions and two to Stacy in California with Macy’s standards. And there’s a LOT of these smaller orders from all different sales channels. Plus the shipments from your Shopify selling platform (or whatever eCommerce platform you use - if you don’t know yet, check out our article on a few of the top options). That’s more to keep a log of, more hoops to jump through, different standards to adhere to. Even if it seems like or in fact is fewer orders, it’s just more unpredictable. If you’re doing this now and looking for easy ways to manage your D2C orders, check out eZCom Software.
Side note: the retailers are also going to want inventory updates - probably daily or more. They don’t want to sell something that’s not in stock. This inventory update is also called an EDI 846.
Two other pain points worth mentioning with regards to inventory you’re shipping out are Branded Packing Slips and tracking. Like I mentioned before, this package looks to the customer like it’s been sent from Kohl’s, not you. You can’t just slap your packing slip onto the box, it has to be Kohl’s. Therefore you need Branded Packing Slips, or Branded Labels. You need to print these out from the Kohl’s portal, which can take a lot of time, or you need to automate this process via EDI, an API or 3rd party like CommerceHub. You have to send the tracking information to Kohl’s you then send it to the customer. This can take up a lot of time, unless you automate it via a system integration.
For the question of what in the world to do with returns, let’s do another example. You purchase something off Amazon, receive it, hate it, and want to return it. But you hopefully know very well that that product is not coming to you most of the time from Amazon itself, but from a third-party, or really the seller itself. So who does the return go to? Back to you or to Amazon? Surprise, you’ll need to work this out with the retailer ahead of time. Don’t just jump into it without making sure all of these details are figured out.
What about the Benefits of D2C?
If you’re just selling directly to the consumer without any retailer involved, then you get to hold all the profits for yourself, which is cool. But something else I want to mention here that is important is what D2C can do for your business if you aren’t in stores like Kohl’s or Macy’s yet.
So you’ve got the socks and you’re doing well and what happens first is you get this big break that Kohl’s wants to put your socks on their online store. You’re sending the product, getting a cut of the profit a day or so out from the shipment. This is good, you’re probably getting your name out there more and selling more of your product. What’s even better about this though is that it can happen in reverse than my first example. Selling D2C through some type of online store of a major retailer can actually land you in their physical store at some point. They might not want to take a chance on your product to begin with so they put it online where they can make some money off of it without doing much of the legwork (remember, you’re shipping and keeping a log of the inventory and likely receiving returns etc.). This way, if your product sells well online, then they’re more likely to want to stock it in the store. Stocking in the store is going to be good for some of the reasons I listed earlier. You sell in bulk and it’s easier to keep a record of what’s going out. The even better reason though is that Kohl’s is going to get a ton more views of your product than your Shopify store will, pretty much guaranteed with a store that’s large and established.
I’m sorry we picked on Kohl’s this whole article, but remember that this can happen through any department store or the like. If you have any questions about D2C or how to market as a D2C business, feel free to reach out to us!