How Direct-To-Consumer Sales Can Impact Customer Relationships

Increased communication between brands and the customers they serve has had a tremendous impact on popular sales strategies across different industries. While traditional retail methods are still the majority of sales in the United States, there is a rising trend of brands previously known for their wholesale relationships pivoting towards a direct-to-consumer sales strategy. The main reason behind this shift is that brands now realize the importance of establishing long-term customer relationships, a much easier task to accomplish while interacting directly with consumers.

One of the more prevalent examples of this shift towards direct-to-consumer retail sales strategies is in the footwear industry. Of the major brands in the space, Under Armour currently utilizes DTC sales the most, as it accounts for 31% of their total sales. Nike and Adidas come in second and third, with DTC sales representing 28% and 23% respectively for each brand. However, while these numbers are still only a minority aspect of overall sales, the key statistic is the rapid growth experienced within this segment. In 2012, DTC-sales only accounted for 4% of their total sales package, meaning that there has been a massive upwards trend of brands utilizing this strategy.

To effectively enter the DTC space, it is important to understand what kind of value your unique customer base wants. From a customer’s perspective, the main value proposition of interacting directly with consumers is typically an improved Customer Experience, and a better price point. While investing more effort and resources into the Customer Experience and making the price point more manageable for the customer may seem counter-intuitive to improving the bottom line, when implemented correctly, these costs of forming relationships will be small compared to the continuous benefits your brand will yield once a positive relationship is firmly established. If you’re brand is beginning to formulate a DTC plan, it is important to utilize Customer Experience programs like mystery shopping or voice of customer surveys to capture an accurate and complete picture of these customer desires.

DTC-retailers have a unique advantage in forming customer relationships because of the inherent flexibility granted to the brand, especially compared to those organizations already attached to a wholesaler. This flexibility allows brands to more actively respond to trends and customer feedback, thus resulting in a less stale Customer Experience then wholesale competitors. For example, in the razor industry, Gillette got so used to being an industry leader that when online industry disruptors Dollar Shave Club and Harry’s began to penetrate the market, Gillette was not prepared to make the necessary adjustments in a changing industry. Currently, Gillete is rolling out their own version of the DTC-model, but their offer is still less convenient and more expensive for the customer than what is provided by Dollar Shave Club and Harry’s.

This transition away from wholesale and towards DTC interactions is a microcosm of the overall changes we are seeing in the brand-to-consumer relationship. We are now firmly in, “The Age Of The Customer,” and as a result, brands must find ways to better place their product and service as a way to reduce effort for the consumer. The benefits of a wholesale transaction are virtually one-sided; brands can use price segmentation to get the most profit out of each individual product, along with other monetary gains involved with this strategy. On the flip side, the value of a DTC strategy lies mostly on the side of the customer. However, by interacting directly with consumers, brands can get the most profit out of each individual customer relationship, rather than focusing on the individual product.

1,2 https://www.bloomberg.com/news/articles/2017-09-27/nike-cuts-out-the-middleman-to-sell-you-the-perfect-sneaker

3,4 https://www.forbes.com/sites/shoptalk/2017/01/09/going-straight-to-the-source-todays-thriving-d2c-brands-threaten-monopolistic-industries/#639a37a25190

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