Each week, the Northwoods business development team gathers to talk about the latest web trends, challenges clients face, and client initiatives and success stories. Lately, we’ve spent a lot of time discussing manufacturer interest in selling D2C, an idea that has ballooned into a trend. Many manufacturers see D2C as a Promised Land of unlimited profits.
These days, anyone can create an ecommerce website to sell products. Manufacturers salivate at the prospect of eliminating middlemen and conflicts with multiple dealers and reps. Sales staff and executives tempted by the allure of more profits with fewer headaches are pushing hard for D2C throughout the manufacturing sector.
They should consider Dr. Ian Malcolm’s famous line in Jurassic Park: “Your scientists were so preoccupied with whether or not they could, they didn’t stop to think if they should.” Replace “scientists” with “sales people” or “executives” and you get our cautionary drift.
Our team, after talking with many manufacturers and seeing mistakes first-hand, urges all manufacturers to ask themselves some obvious but critical questions before leaping into D2C:
Why Do We Want to Pursue D2C?
What compelling reason would cause my organization to upend its sales and distribution channels and go D2C? Are sales numbers slipping? Do sales reps struggle with the right messaging to sell your products? Is the current distribution setup inefficient?
“Many manufacturers I talk with struggle to succinctly articulate what they want to sell and who they want to sell to,” said Rick Fessenbecker, Managing Director and partner at Northwoods.
Fessenbecker notes that manufacturers are expert at designing and making products. They devote their time and resources to finding ways to streamline the product-build process. They seek out better, cheaper, more durable materials. They pour effort into a tangible thing that can be seen, felt or experienced.
That leaves little time, energy and resources for marketing, branding and selling, areas where many manufacturers lack expertise, especially in the online marketplace. Many companies must acquire entirely new skill sets to enter D2C.
“Manufacturers are used to solving problems related to technology and equipment,” Fessenbecker said. “They assume that selling direct to a consumer is a problem solved with technology. Going ecommerce for ecommerce’s sake seldom succeeds.”
Our Take: D2C should be considered a moonshot goal fraught with peril. At an absolute minimum, the manufacturer should have a clear understanding of the digital end customer before proceeding.
Can Customers Purchase and Deploy Our Product As-Is, without Assistance?
“I’m routinely disappointed by manufacturers who want to sell a highly customized product as if it were a commodity,” said Doug Lantz. Lantz, a Business Development Manager at Northwoods, has more than 20 years of ecommerce experience. “Selling direct with a configured product via ecommerce is practically impossible. The most successful D2C manufacturers have a discrete products that can be used right out of the box.”
You’d be surprised at how many manufacturers overlook the fact that a product sold online must be useful to the customer. This is why many manufacturers turn to parts or consumables as their entry into selling D2C. It’s easier to sell a replacement nut or bolt online than it is to sell a customized food grade heating unit for meat slurry conveyer.
Ask yourself: Can a consumer look at our product online, buy it, and install and use it with no assistance?
“I often find that manufacturers get enthralled at the idea of a new sales channel,” Lantz said. “Love can be blind; they might not see that their products, lacking expert sales help, will leave buyers feeling abandoned, bewildered or frustrated.”
Our Take: Consider whether your product can be sold and used out of the box, as-is, without assistance. If not, D2C may not be the best option.
Do We Understand Our Digital Consumer’s Buying Journey?
“The manufacturing buzzword now is ‘Digital Transformation,’” said Jim Brophy, Group Director of Digital Marketing and Services at Northwoods. “True Digital Transformation involves identifying consumer touch points and bringing them together within a unifying message across all digital platforms for the purpose of selling products. I’ve found that most manufacturers think of it as an IT problem that requires systems to work with one another. They miss the most important piece: interaction with the consumer.”
Manufacturers typically know their consumers well, in terms of a traditional sales regimen. For many businesses, the sales process has been the same – and many customers have been the same -- for decades. D2C sales, by nature, reach toward a new consumer base. Their end needs may be similar, but their online buying journey differs completely from traditional handshake sales.
“Manufacturers know their consumer almost too well,” Brophy said. “Most manufacturers believe that they can translate their product development research to marketing and sales and thus reach the buyer. But selling direct is a completely different experience. Manufacturers have to start from the beginning by defining a new consumer journey traversed entirely through digital means.”
The Northwoods manufacturing clients who have succeeded with D2C began by defining the very first step of the digital consumer’s sales journey and then defining every step along the way. Who can take on such a task? We suggest someone who understands digital but has no knowledge of the company’s established sales process – a new hire or a vendor such as Northwoods – to map that new consumer sales journey. Fresh eyes can focus on the road ahead and not so much on the rear-view mirror.
Our Take: When going D2C, don’t attempt to apply your traditional sales processes. Start fresh by defining how consumers will find and buy your products digitally.
Are We Able to Deliver?
It’s relatively easy to sell something online, but it’s an entirely different problem to fulfill an order in a world that expects same day delivery. Most beefs between manufacturers and distributors involve slow delivery. D2C can speed it up, but comes with a host of pitfalls.
“With clients considering D2C, I jump right to a set of questions related to fulfilling a sale,” said Tom Pappas, a 20-year-veteran Business Development Manager at Northwoods. “So, you want to sell direct. Your current sales are by the truck load to a distributor. Say the truck holds 100 units. Are you interested fulfilling those 100 units one at a time? Can you get them all out on time? Do you have a fulfillment processor in place? Do you accept credit cards? What is your return policy? Do you have customer service?”
Manufacturers can forget how distributors and/or sales reps handle the end consumer. Distributors and reps have established marketing collateral and sales practices. They have well-tuned payment processing, including advancing credit, accepting various payment forms, and handling returns. They provide customer service, fulfill orders in timely fashion, and deal with the headaches of inventory.
“Going direct to consumer definitely involves some complexity,” Pappas said. “It isn’t insurmountable, but it requires planning and time. Manufacturers should give direct digital selling the same level of research and development that go into a new product.”
Our Take: Selling is difficult; fulfillment is more difficult.
This post barely scratches the surface of what a manufacturer must consider before selling direct to the consumer. Fessenbecker joked about this being the first in a 100-part series. But really, it could be – D2C is that complex.
Manufacturers who decide to sell D2C will succeed if they can clearly define buyers for specific products. That understanding will drive decisions about information users need as they decide whether, when and how much to buy. It will drive decisions about how to present, define, sell and deliver the product. It will drive decisions about the team you put in place or the vendors you choose to make it all happen.
In short, don’t just set up e-commerce and hope for the best. Prepare. Know that preparing requires time, effort, personnel and resources. Do all that, and your business can win at D2C. If you fail to prepare, be prepared to lose a lot of money in a hurry.