DIRECT-TO-CONSUMER SHIFT BOOSTS RETAIL INVESTMENT IN SUPPLY-CHAIN INNOVATION
Recently I had the opportunity to learn from Manhattan Associate’s Sebastian LeFebure about supply chain innovation based on customer purchasing changes. LeFebure shares insight to the RetailMinded.com audience elaborating on this conversation, ultimately revealing how the movement to D2C is a supply chain revelation that brands such as Adidas and Nike have found success with. Leveraging IT infrastructure and reacting to customer behavior, LeFebure offers insight you can apply to your own unique business. Below, explore what LeFebure has to share and see how it may benefit your own unique business.
Contributed By: Sebastian LeFebure, MD Southern Europe for Manhattan Associates
While the pandemic and subsequent ecommerce explosion have driven strong demand for true omnichannel supply chain commerce solutions, it has also fuelled a less immediately obvious longer-term move towards direct-to-consumer (D2C) fulfilment too.
The requirement to sell directly to consumers has certainly given a boost to technology companies that help untangle the complexities of retail supply chains, brands need to recognise that the logistics of D2C sales can be very different from the conventional operations required to supply traditional retail stores.
Consequently, the move towards D2C models, and rising competition between traditional retail channels and ecommerce, have shifted the importance of fulfilment from triviality to a potentially significant competitive advantage. Today’s shoppers expect fast, low-cost, environmentally aware delivery options (and products), with as many as a 33% abandoning online carts if they consider a shipping date to be too late.
Equally, brands that provide next/same-day deliveries, or practical alternatives such as click-and-collect, buy online pickup in store (BOPIS), curbside collection and buy online return in store (BORIS) tend to attract more customers and establish longer-term bonds of loyalty and repeat purchases.
Examples of D2C Success
Where suppliers of wholesale goods (including everything from FMCG goods to electrical appliances), often ship large, bulky consignments of cargo through industrial supply chains to distribution centres and then on to stores, companies selling to consumers must manage the flow of individual shipments, such as a single box of running shoes, or a polo shirt, direct to a customer’s home or preferred collection point.
Footwear, apparel and electronics manufacturers have been among some of the earliest adopters to have stepped up their D2C offerings during the Covid-19 pandemic as stores and retailers closed their doors and brands struggled to find new avenues to reach their customers.
Although the pandemic fueled enthusiasm for e-commerce is slowly cooling off and plateauing at a new elevated level of normal (this has recently impacted Amazon regarding warehouse space), the D2C phenomenon looks here to stay for the long-term. As the lines between what a retailer or manufacturer used to be and what they are today become more opaque, almost every company is in some way, shape or form, making attempts to get closer to their consumers.
Take Adidas as an example. D2C sales helped to boost revenue at Adidas in the second quarter of its financial year, and its own e-commerce website now accounts for more than 20 percent of its business. It recently reported that online sales grew by double-digits in the second quarter of 2022 too.
Another example of a modern, successful D2C strategy is that which America’s own sporting leviathan, Nike has implemented. Since 2017, the company has actively reduced its number of retail partners (last year it (withdrew from Urban Outfitters) to concentrate on growing its own online and bricks & mortar presence – its Oxford Circus flagship store in the UK and the intuitive members app are fine examples of this strategic move, providing ‘loyal’ members with a greater range of bespoke, limited edition offerings not available beyond Nike’s own online and physical retail ecosystem.
The shift to this model has given Nike full control over its customer relationships and crucially, its customer’s associated data, making customer journeys and user experiences richer and more native in equal measure.
Similar to Adidas’ Q2 announcement however, the D2C model has also increased the fulfilment costs per item: from managing logistics and supply chains, to hiring the right talent capable of creating those exceptional customer experiences, these extra costs can consume profits if unaccompanied by an agile and pragmatic supply chain strategy.
Nimble Is the Name of the Game
If brands truly wants to harness the benefits of D2C, and serve millions of customers in a cost effective, sustainably-minded way rather than a network of third-party retail stores, they need to be nimble in every department – especially when it comes to supply chains.
The movement towards D2C fulfilment is well illustrated by the efforts made by Nike and Adidas in 2022, and, by operating effective D2C channels, they are enjoying the freedom to optimise their logistics and deliveries, while meeting the exacting expectations of their customers.
D2C is the latest iteration in a long line of retail supply chain evolutions and while finding the right balance may prove challenging in the short-term, the size of opportunity is huge for retailers and particularly wholesale brands as this route offers a wholly new touchpoint to interact with customers, not previously available.
At Manhattan Associates our unified supply chain commerce platform is informed and inspired by more than thirty years of supply chain and commerce experience across retail, apparel, food, and wholesale distribution, working with some of the world’s most well-known brands including, Adidas, Lacoste,L’Oreal and Brooks Brothers.
We also know that the key to success is to start from the ground up and build strong foundations for success. And, in the case of retailers looking to ride the D2C wave, this means first looking to their own supply chain networks and the IT infrastructure that underpins it.