Ditch the Department Store: How DTC Brands Take Back Control
Covid-19 has caused brands to entirely rethink their sales strategies. The past few months have led to an enormous shift in consumer spending toward online channels. There is lingering uncertainty about how and when brick-and-mortar retail locations will re-open. Some shoppers may look to return to the pre-pandemic method of shopping, while others will continue their online shopping behaviors that have been either adopted or expanded due to the pandemic.
Regardless, we are anticipating monumental online sales volume for brands with the approaching holiday season. To capitalize on this transition to online shopping, DTC (direct-to-consumer) brands must take back control of their sales channels. DTC brands can’t control whether big-box retailers open their storefronts or the number of consumers they allow inside. They also can’t manage the customer experience with the brand, especially given the many variables Covid-19 has thrown at brick-and-mortar retail.
The one thing brands can control is their online sales channel. From checkout to last-mile delivery, DTC brands can ensure a seamless e-commerce experience. With the majority of Q4 and holiday shopping expected to shift online, brands must have their entire e-commerce channel prepared for an optimal customer experience. Case in point: According to Voxware, 76% of respondents intend to purchase more than half of their gifts online.
Hindered by Brick-and-Mortar
DTC brands have typically relied on a blend of online and brick-and-mortar retail sales for revenue. Many startups began by selling their products exclusively online and then pivoted to placing goods in select department stores and big-box retailers. Some DTC brands even have their own stand-alone brick-and-mortar locations for consumers to try out products before purchasing.
In the age of Covid-19, many DTC brands will have to recalibrate and devise new plans In the case of the department store, the second a product is on a shelf, the brand has no control. They can’t prepare for the new protocols a retailer will put in place that may hinder the experience a consumer has buying said product — that is, if the store is even open at all. Early reports show big-box retailers such as Target, Walmart, and Dick’s Sporting Goods may be closed on Thanksgiving Day, with more likely to follow.
With their own physical storefronts, DTC brands can control the in-store experience, but not the safety guidelines from state and local governments. Some locations may be forced to close, leaving brands with an expensive issue to solve.
E-Commerce Takes the Reins
Thus, e-commerce becomes the only sales channel brands have complete control over and can rely on in what will be a busy end of the year. Not only does e-commerce offer brands complete control, it’s quickly becoming the preferred shopping channel, whether brick-and-mortar locations are open or closed. From our recent research, Covid-19 has encouraged 63% of U.S. consumers to buy goods online that they had not considered purchasing digitally before the pandemic.
In order to recoup lost sales from brick-and-mortar closings, DTC brands must prepare their supply chains to handle sustained periods of increased e-commerce volume. For some, this means expanding distribution space to account for higher volume and ultimately looking to hire additional warehouse staff given an expected extended peak season. The reality is that, for brands that have not yet established expansion plans, it’s likely far too late at this stage, as most fulfillment partners are filled to the brim managing existing client volume that has grown tremendously due to Covid-19.
Alternative fulfillment solutions are a great way for brands to handle peak volumes in 2020, offering a creative and cost-effective option. The goal is to get products to consumers as efficiently as possible. By thinking outside the box and leveraging partners with extensive experience in alternative fulfillment, brands are positioned to win in the coming months.
Pop-up distribution centers (DC) or micro-fulfillment centers are a great example. Pop-up DCs have emerged as one option that can remove significant friction from the fulfillment process and ensure consumers are getting the goods they need in a timely fashion. Pop-up DCs can be set up anywhere and help online retailers get their products closer to the customer. This focus on regional fulfillment is crucial in the face of Covid-19 to shorten the supply chain and make sure products are as close to end consumers as possible. This is vital as, despite the effects of Covid-19 on supply chains, 71% of US shoppers expect goods to be delivered in a week or less.
This strategy can be taken a step further with the idea of in-store fulfillment. For DTC brands with brick-and-mortar locations, turning storefronts into small distribution hubs can help to turn lost real estate into a revenue-generating opportunity. Items can be shipped out directly from various store locations to tighten the supply chain and ensure delivery isn’t overly reliant on one or two primary distribution centers. Automated solutions can help speed up this process even faster without putting a strain on store associates.
As we inch closer toward peak selling season, DTC brands are at a tipping point. The holidays present a golden chance to make up for lost revenues experienced in the Covid-19 fallout. If brands can ditch the big-box retailers and take control of e-commerce channels, success will follow. But their supply chain must be up to the challenge, as the overall customer experience has never been more critical.
Zach Thomann leads the PFS Operations practice as EVP and GM.