We can never say it too often: today’s retail sector is one of the sectors most reluctant to digitalize.
However, the pandemic has forced all retailers to realize the importance of direct-to-consumer channels. Those who create direct relationships between the brand and customers succeed; Those who don’t, go straight to the wall.
The problem, of course, is that most distributors currently rely on an entire constellation of partners and resellers. However, Direct to Consumer (D2C) is specifically about avoiding middlemen. How do you solve the problem?
Everyone on the bridge
Let’s get to the chase: leaders need to be fully engaged. In a recent article, “The Six Things You Need to Know to Grow Fast in D2C,” McKinsey noted a real lack of commitment from management teams: The job of the CEO, the Board of Directors, and the entire management team should be to shape the details and support the organization’s D2C e-commerce strategy and ambition, translating them into practical KPIs across the various functions of the organization. »
We all know the background of many executive committees: too many strategic priorities, too shy about strategic choices, and a general sense of bureaucratic entropy. Let’s take an example. If a loyalty card sometimes seems like a good idea to satisfy a particular need and create a link between the brand and the consumer, it should not be regulated. According to McKinsey, there are five billion loyalty program membership accounts in the United States alone, and more than half of them are completely inactive. If the decision is not thought through after a discussion between managers and employees, you quickly risk not providing the appropriate solution.
Always be one step ahead
Y + 1 projects, which require adjustment of resources and investments in anticipation of growth, using allocation rules that calculate the share of the investment, given the expected revenue to be realized within a quarter or a year thereafter, should become the next major retail investment.
To put it more simply: consider your future income when making your initial investment. In other words, think like a SaaS business and a customer lifetime value (CLV) factor in customer acquisition cost (CAC). This strategy is closely related to distribution as no actor can fail. This is also what the pandemic has revealed: if stores do not adapt their investment policies, many will not be strong enough to recover from the crisis (no matter how difficult it may be).
Decision making is giving up
You must have already heard this adage…it is very appropriate to apply it to the distribution sector. It is really inevitable that optimizing the e-commerce funnel will create tensions with distributor partners (product catalog, promotions, margins, etc.).
But at the end of the day, when it comes to channel partners and subscriptions, it’s not about choosing between one or the other! Retailers should view these potential cross-channel tensions as opportunities to drive the growth of their brand and their partners.
In fact, the more customer behavior data and insights you get from your D2C project, the more your channel partners will benefit. Real win!
Skip the deal
There are four imperatives to a successful subscription model: avoiding the extraneous approach, offering real value, offering a variety of great experiences, and offering flexible pricing to maintain relationships.
Instead of selling products to strangers, knowing customers is the key today. You need to meet your clients where they live and surprise them regularly. Watch how Netflix brings us new movies every week “for free”.
In France, sports brand Decathlon offers an excellent case study. The company has gone beyond the traditional experience of traditional sports stores with its new service, which manages everything related to sports and consumer sports equipment: offers, insurance, repairs, assistance, refurbishment, etc. It’s basically a complete service about sports.
D2C efforts take time, and the transformation is not instant. But moving to a subscription model will generate large amounts of high-margin recurring revenue in the medium term.
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