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A Closer Look at the Direct-to-Consumer Channel Evolution

Pedro Silva

Managing Principal, Retail Consulting, EPAM
Blog
  • Retail & Distribution

Now more than ever, the focus within the retail industry is on the empowered consumer. This is driving disruptive technology and innovation to create solutions that provide a seamless customer journey, personalization for individual consumers, as well as highly efficient logistics and supply chain management. With that in mind, manufacturers are becoming more involved in the direct-to-consumer space and are hesitant to let go of the opportunities that the market promises. So, what does this mean for the future of retailers?

Many manufacturers have, or are at least considering, launching a direct-to-consumer channel to reach this previously untapped demographic. As a result, their relationships with retailers must evolve as the old business models can no longer compete in a quickly changing retail environment. Manufacturers who navigate these changes with their top partners by adopting next-generation technology solutions will become leaders in the industry.

At the heart of this new era of retail is the ability to manage data to build a robust view of the customer and their shopping habits. Traditionally, manufacturers relied on retailers to deliver a personalized experience based on data-driven insights. Now, to truly understand the needs of today’s customers, they must gain direct access to data to drive product development and logistics, as well as maintain profitability and strong brand awareness. Manufacturers need to take advantage of all of the ways that consumers can interact with their brand through social networks, influencers, peer reviews and cross-border commerce.

One of the companies that has been highly successful at this is Nike, which launched their direct channel back in 1998. Their CEO Mike Parker stated that the goal is to treat each customer as a unique individual by growing all its digital touchpoints starting with their super fans. It will be interesting to see the outcome of Nike’s recent acquisition of Zodiac, a consumer data and analytics company.

Another notable example of this shift in the industry is New Era, one of the largest sports cap manufacturers, and how they started to expand their sales channels. Before transitioning to a direct-to-consumer model, their business model was B2B wholesale. As customer experience began to suffer due to lack of control of the brand through their partners, the company decided to launch their B2C eCommerce platform. The new eCommerce site went live in September 2017 after just five months, and offers a best-in-class customer journey, improved partner experience and allows the company to regain control over their brand experience. Now, New Era can take what they learned from their direct channel and improve all their channels holistically through analytics and insights.

As the direct-to-consumer model continues to gain momentum, retailers are becoming more and more concerned that manufacturers will further disrupt their industry. While traditional retailers have a right to be concerned, there’s something to be said about their experience and history that will may help them withstand disruption. Manufacturers may need to differentiate themselves through customer service models, subscription models or loyalty programs.

It’s inevitable that the retail industry will keep evolving right along with consumer needs. Instead of focusing on manufacturers as competition, retail partners should consider the “better together” outlook. Each side has their unique offering and, together, an even more robust customer experience can be built. Ultimately, focusing efforts on analytics and an appropriate sharing model will be the winning solution for all players that have a stake in the game.  Retailers that partner and share intelligent and actionable insights will become the frontrunners to building sought-after solutions for consumers. This may include premium loyalty programs that involve all touchpoints of the shopping journey as well as shared services for the customer from manufacturers and retailers.

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