DTC to Retail: Opportunities and Landmines
IIs expanding your brand into retail the right move for your brand?
With retail opening back up and direct to consumer brands struggling with Facebook attribution, many direct to consumer brands or digital-native brands are asking themselves, is it time to further explore an omni-channel strategy.
Two companies offer differing views on the future of retail with Nordstrom being digital first and LVMH sticking with a belief in brick and mortar.:
Here are a couple of recommendations from Greenline:
Nordstrom says they are a digital company. From a recent Financial Times interview:
“We don’t think of ourselves as just a bricks-and-mortar company—we are a digital-first platform” says Chief Technology Officer, Edmond Mesrobian.
LVMH says the majority of its sales will come from brick and mortar.
To determine if retail is the right strategy for your brand, there are a new set of expectations when a digitally native brand looks to expand beyond your own eCommerce site.
As you look to expand your brand and product portfolio to other channels, we wanted to offer some insight as you take this next step.When determining if retail or an omnichannel expansion is right for you, let’s look at the following considerations:
Profitability in the Retail Channel
Owning your Customer
Profitability in the Retail Channel
When looking to expand to retail, it is important to understand the margin stack. Depending on the type of product you can expect national retailers to command up to 50% margins for non-electronic goods.
In addition to the retailer margin, you need to review your packaging. Your efficient packaging may work for your direct-to-consumer sales, but be sure to communicate with your buyer if this works for their stores.
Keep in mind that some national retails will require you to work with GS-1 to officially apply your brand to your UPCs.
Lastly, with retail, whether it is drop ship, online, or brick and mortar placements, it is important to understand returns guidelines and logistics requirements to fully understand the retail margin requirements. We will discuss logistics more later in this article.
Owning your customer
Most digital-native brands are used to owning the customer as they acquire customer data from their website. This helps to fully understand critical metrics such as Lifetime Customer Value and Acquisition cost.
Be sure to build in processes that authentically enable customers to purchase your product from your retail partner and engage with your brand directly. Consider product registration, surveys, and support channels to find ways to get your retail customers to interact with you.
Since there is an intermediary between you and your customer, make sure the user experience is exceptional. Review your product unboxing thoroughly from packaging to user guides. Use the 20 feet rule with your packaging so when your product is in brick and mortar, it needs to catch the customer’s eye from 20 feet.
Look at your retail offering and you may need to determine a unique offer. Do you include an extra cable, pouch, or increased set of products? This can maximize the retail customer’s experience and also assist your margin stack.
When it comes to offering your products to retail, there are logistics costs associated with retail that are incremental to your direct-to-consumer or marketplace fulfillment solutions. Here are a couple of items:
Systems Integration and EDI
Many retailers use unique systems to connect to their suppliers via EDI. There are several EDI partners to work with and you need to find the one that fits you. This does come at an additional cost for both setup and monthly fees. Also, new vendor setups require testing and integration time which could take anywhere from 4-6 weeks (in pre-pandemic timelines).
Carton and Package Labeling
Many retailers have specific labeling requirements and vary from retailer to retailer. This can include carton labeling and individual product labels. These are added touch-points that your operations team and 3PL partner must be aware of. If you do not label correctly, retail partners can and will impose compliance fines if omitted or placed incorrectly.
Shipping and Invoicing
Retailers will have specific shipping windows and during holidays, those windows will tighten up. You cannot ship too early or too late or you risk the order getting a fine or even worse, canceled.
There has been significant growth in 3PL providers who focus solely on DTC fulfillment. But for brands looking to find channels to extend their growth, you should be open to omnichannel opportunities. This leaves brands who want to expand to fend for themselves on channel knowledge and supply chain infrastructure since their current 3PL providers do not offer these services. Many say they can do it, but new questions need to be asked if they are truly up to the task.
How Greenline helps brands.
Greenline is well-positioned to help brand partners with their direct-to-consumer, marketplace, and omnichannel fulfillment. Not only is Greenline a 3PL service provider for direct-to-consumer solutions, but Greenline has over 15+ years of experience in helping brands break into retail. Our infrastructure is already in place to transact through our Distribution as a Service model which helps companies shorten their timeline to retail and consolidate their supply chain costs.
Greenline can be your partner for 3PL services, distribution, or omnichannel supply chain consulting. Contact us today for a free consultation on how we can help you.