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6 Challenges to Navigate When Shifting From Wholesale to Direct-to-Consumer Models

Direct to consumer

The transition from a wholesale-centric business model to include a new direct-to-consumer (D2C) approach presents lucrative opportunities alongside a suite of technical and operational intricacies to consider. While the move brings manufacturing companies closer to end consumers, it also requires several considerations spanning content creation, post-purchase support, and overall brand experience.

Failure to address these challenges up front could result in reputational damage and diminished brand impact. In this article, we cover key areas that require careful consideration when reevaluating channel strategies to ensure a seamless shift to D2C success.

1. Refined Channel Strategy

This initial step involves meticulous product selection and assortment planning. Conducting a margin analysis for the product lineup is imperative, with strategies evolving around initial categories and subsequent expansions. Beyond the physical attributes of products, other factors like ease of presentation, content creation, and ongoing product data management hold the potential to be decisive factors in digital channel conversions.

The D2C model, in contrast to wholesale, necessitates heightened product lifecycle management and product master data administration. Additional time may be needed to set up items before activating, and several processes may need to be reviewed and reconsidered based on requirements around product activation.

2. Precision In Inventory Management and Availability

Alongside a curated product list, a critical assessment revolves around inventory management and the formulation of publishing rulesets.

Unlike conventional ERP solutions, these rules often reside within an Order Management System (OMS). Incorporating a D2C channel into the mix can complicate inventory tracking, particularly if the wholesale and consumer inventories coexist. This complexity extends to warehouse management systems, potentially requiring virtual segmentation tracking and intricate inventory availability rules governance.

Establishing an initial conservative inventory availability strategy is prudent, reducing the risk of over-promising and subsequently jeopardizing customer retention.

3. Navigating Order Processing Complexity and Customer Service

Once products are curated and inventory is streamlined, executing orders and managing the extended supply chain come to the forefront. Shifting from manufacturing order profiles with numerous lines to D2C profiles averaging one to two lines necessitates a recalibration of support systems. Evaluating new call-center functionalities becomes pivotal, especially if items are prone to delays, damages, or customer dissatisfaction, necessitating appeasements or discounts.

Payment integration and security certifications also merit consideration as payment modes transition from invoicing in B2B models to credit cards, PayPal, and gift cards in a direct model.

4. Returns and Refunds Capabilities

Return and refund policies stand as substantial distinctions between wholesale and D2C models. Designing a D2C returns policy encompassing return timelines, fees, and inventory disposition impacts inventory management and operational support. Customer service representatives handling Returns Merchandise Authorization (RMA) processes must adapt to new screens and procedures. Payment refund dynamics differ significantly, with D2C refunds being immediate compared to wholesale returns that often influence account balances.

5. Enhancing Operational and Sales Reporting

The introduction of complexity warrants a comprehensive review of sales and operational reporting. Modifications can range from minor additions to dashboards to a complete overhaul of reporting structures. D2C businesses require faster data flows, necessitating intraday reporting and real-time alerts to address operational challenges promptly.

6. Integration Technology as the Backbone

Underpinning these operational considerations lies a technological transformation. Shifting from batch-driven, large-file exchanges between legacy systems to API-driven synchronous integrations introduces the need for integration platforms. This transition not only streamlines data management but also aligns with operational support strategies.

The shift from wholesale to D2C models offers manifold benefits while introducing an array of integration challenges. By meticulously addressing inventory management, order processing, customer service, and technological integration, manufacturing companies can navigate these hurdles and establish a thriving D2C presence, fortifying brand impact, and customer relationships.

Click here to learn more about our strategic position on Direct to Consumer for Manufacturing, or to schedule a briefing with our team.

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Zach Zalowitz

Zach Zalowitz is considered one of the leading voices in the post-purchase experience space, and has an expertise in order management solutions in the market. Prior to Perficient, he was VP of Digital Technology and Digital Experience at Foot Locker where he oversaw a global team of digital experts focused on the website and mobile app experience. He writes often on the state of digital experience online and instores, and all the parts of the customer journey in between.

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