The need for consumer-goods suppliers to sell directly to consumers at the start of the pandemic has forced them to manage complex retail supply chains and exacerbated an already strained global supply chain. How has the rise of direct-to-consumer brands and the broader rise of e-commerce affected the global supply chain?
To find out more I spoke with Marne Martin, President of IFS Service Management, about how the direct-to-consumer boom reshaped the global supply chain, what some suppliers are doing to navigate the situation, and the broader trend of retail. IFS specializes in enterprise software development, developing cloud enterprise software for companies around the world who manufacture and distribute goods, build and maintain assets, and manage service-focused operations.
What are direct-to-consumer brands and how are they different from traditional brands in terms of supply chain management?
A direct-to-consumer (DTC) brand is one that has full control over the selling process and its channels, which typically include online, other digital channels or its own branded stores. They avoid dealers or other retailers or wholesalers, instead doing everything in house, including manufacturing, marketing, and selling, thus also capturing all the data in the process. By doing so, it gives them access to more direct data on marketing and sales, allowing them to make rapid adjustments as needed. Sometimes forward and reverse logistics are outsourced where needed but they are still closely managed by the brand.
In the mission to optimize operations for the purchase process, it is important to also account for other phases of the customer journey, such as the returns process. According to a recent IFS survey of global field services companies, there has been a clear uptick in technology adoption and critical investments since 2018. In particular, the research shows a continued investment in reverse logistics, from 25% in 2018 to 54% in 2023 as while returns was always relevant to DTC brand, it is now a critical differentiator, source of profitability, and very important to customer experience. With the rise of e-commerce and DTC sales, the ability to manage reverse logistics is as important as the logistics of getting the products to customers. For DTC brands, this means also having to manage this aspect of retailing themselves, as opposed to letting retail outlets manage it.
How have DTC brands been impacted by events of the last three years?
DTC brands thrived during the pandemic when most people stayed home and ordered everything from groceries and medication to furniture and cars online. The recent bouts of inflation have further propelled consumers to seek out deals online as product and price information is readily available for shoppers to compare and contrast. According to a recent Prosper Insights & Analytics Survey, nearly 30% of consumers are doing more comparative shopping online due to price increases. To capture online shoppers, even conventional brands have pushed forward with direct-selling strategies. However, a perfect storm of labor shortages, port congestion and unprecedented consumer demand created a major headache for direct-to-consumer brands: getting their products to consumers. DTC brands were forced to either find new, creative ways to fulfill consumer demand or disappoint their customers.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe