In recent years, the rise of direct-to-consumer (DTC) business models has disrupted traditional retail and changed the way companies approach their sales and marketing strategies. To understand the benefits and challenges of launching a DTC channel, we spoke to two industry experts, Mert Bürian, Head of Consulting at eBusiness Institute, and Roman Baluta, Head of Digital Commerce Practice at Lingaro.
Helping companies to grow through digital transformation, eBusiness Institute is part of the Lingaro Group, who provide data consulting and analytics services. Together, they provide end-to-end solutions to complex business and data challenges that will drive sustainable business growth for their clients.
In this interview, Mert and Roman discuss the benefits of a DTC channel, the pitfalls to avoid, how to approach DTC, and the technical considerations for launching a successful DTC channel.
Mert, what are the main benefits that a DTC channel can bring to a company?
A DTC channel can provide many advantages to a company. One of the most important benefits is the opportunity to gain a better understanding of customers by collecting data directly from them. This can lead to improved customer insights and a stronger brand building effort, as companies can offer more than just products, they can include services to enhance the customer experience. The ability to quickly launch and test new products based on customer feedback is another advantage of a DTC strategy, which can fuel innovation. Furthermore, by establishing a direct connection with customers and increasing engagement and conversion rates, a DTC strategy can lead to increased revenue.
Mert, what are the pitfalls to avoid when launching a DTC channel?
When launching a DTC business, it’s important to avoid certain pitfalls that could hinder its success.
- Companies should avoid leading with a technology-focused approach and instead emphasise investment in areas such as operations and channel management.
- Decision-makers need to have a full understanding of the unit economics to avoid making short-term decisions that stifle growth.
- Companies must choose the right technology platform that won’t create technical debt, hinder efforts to scale, and add costs, complexities and delays.
- Business building activities in a legacy organisation can be hindered by internal policies, so companies must design the right organisational and operational setup to run the DTC business.
- Companies should avoid underinvesting and borrowing capabilities, as this could limit growth.
Mert, how should a company approach DTC?
A company can approach DTC in a few straightforward steps. Firstly, it’s important to start with a well-defined strategy and answer the question of ‘Why?’ Why is the business looking to move towards a DTC model and what are the specific goals they hope to achieve?
Next, the company should plan their roadmap and understand the unit economics of their business. This includes defining the key components of the business, diagnosing the environment, strategising to create value, delivering on the strategy, and optimising performance through data analysis.
Finally, it’s crucial to define the operational model for the DTC business, taking into consideration the roadmap that was created in the previous step. This operational model will outline how the business will execute their strategy, what processes they will put in place, and what resources they will need to be successful.
Mert, one area that raises challenges for companies that launch a DTC channel is having best-in-class creative assets. How can they overcome these challenges?
You’re right that creative assets are crucial for a successful DTC launch. And it’s also crucial to be able to create them in a scalable, cost-efficient way. To overcome these challenges, companies should partner with the best creative agencies that specialise in this area. Our team at eBusiness Institute and Lingaro has its own in-house Creative Agency, which was built to handle challenges such as these. They can deliver hundreds or even thousands of high-quality creative assets, including creative copywriting, basic and advanced product images, visuals showing products in use, trade-up and cross-sell charts, and many others, for any DTC project.
DTC projects have many critical areas, but if the creative assets are not great, the user experience will suffer and so too will sales.
Roman, what does launching a DTC channel entail from a technical perspective?
Launching a DTC channel involves several considerations: creating a website to host the DTC store, integrating payment gateways to process online transactions, back-end systems to manage orders and inventory, delivery tracking and implementing tools for customer relationship management (CRM), product information (PIM), content (CMS), and data analytics.
A good strategy is to start from an off-the-shelf solution to avoid the complexity of a custom IT development. You want to be able to move fast and leverage a ‘test and learn’ approach.
Nevertheless, as the online business scales, you will need to integrate DTC into your company’s core IT infrastructure in order to stay efficient, the same way as you do with your existing sales channels.
Other important technical considerations for launching a DTC include multi-region and multi-language support, website and transaction security, data protection compliance, and SEO (search engine optimisation).
From a brand perspective, having an integrated tool to manage content assets and track their performance across various markets is essential.
Overall, launching a DTC business in the long run requires a comprehensive and integrated IT infrastructure that can support all business processes linked to a single sales transaction.
It’s important to keep in mind that technology is a tool here, not the purpose. Make sure that you have well defined DTC business objectives in place before shifting your focus to the technology.
Roman, what does a brand manager that would like to launch a DTC channel need to know about the eCommerce platform he’ll use from a technical standpoint?
Fundamentally, you want to have a platform that is robust, fast and supports desktop and mobile in a secure manner. If these elements are not there, you will be overspending on customer acquisition due to higher cost-per-click and lower conversion rates.
Secondly, you need to capture reliable data with eCommerce analytics to understand whether the fundamentals work or not. This data will be critical to steer your DTC initiative based on facts and not assumptions.
Thirdly, the platform should be scalable and able to support the company’s growth as it expands its DTC offerings. Scalability applies to multiple elements:
- Traffic volume in peak and non-peak periods
- Product and services portfolio (including content assets)
- New regions and languages (including integration with local payment and shipping providers)
- Open IT architecture to expand functionality and tailor user experience as you grow
There are many more elements to consider such as personalisation, search capabilities and a promotions engine. However, it’s important not to overcomplicate the initial solution. Time to market is another important factor to keep in mind.
A question for you both. Can you share an example of how you can support companies end-to-end?
Of course. In one example, we worked with a global FMCG company that wanted to grow its online sales but lacked the capabilities to launch a DTC solution on its own.
We built a DTC channel and provided end-to-end consulting, creative and implementation around its operations, including logistics, marketing, UI/UX, creative assets and SAP integration. We collaborated with the client to model logistics processes, prototype the UI/UX, design and deliver a multicarrier solution, and integrate SAP. Based on the UI/UX prototype, we created all the creative assets needed on the platform, such as creative copywriting, basic and advanced product images, and videos supporting the products.
The brand that was launched on the platform is now over 5 years old and remains a valuable asset that delivers 30% year-on-year growth.
We can support companies with end-to-end solutions – from business consulting to creative assets to technical implementation.
We work both with businesses that are just starting their journey into DTC as well as those that have an ongoing programme that is under-performing.
Want to find out how we can help you take advantage of the DTC opportunity?
Read more about our DTC offering and schedule a meeting with one of our experts by visiting our webpage.
