Business Anti-Biotics for Covid-19 “E-DTC Model”
View(s):Next generation route to market capabilities for disruptive growth in emerging markets
Throughout history in Srilanka, if a consumer needed laundry detergent Soap, toothpaste, or tea, they would visit a general store “f.a <Õ lfâ” fmdä lfâ” ykaÈfha lfâ” iuqmldf¾” (later, the consumer evolved to have the choice of selecting goods for themselves instead of retailer picking / selecting goods for them and the self-service format was born, and later evolved into supermarkets etc.), where providers brought in an assortment of merchandise for customers to choose from.
For years, this is the way it worked: FMCG companies with strong brands, manufactured products and engaged in relationships with retailers, who sold the products the manufacturers created. It was not necessarily the greatest relationship because retailers operated on narrow margins and brands longed for the relationship that retailers were able to build with customers.
Fast forward to the past decade or so and, thanks to advancement in technology and the internet, there are more ways than ever for brands to not only communicate with its consumers but to reach them. They opted to eliminate the middleman and work directly with customers. In Srilanka, up until March 2020, this model was narrowed down only for consumer durables, cheap electronics from China and clothing accessories.
But in April, there was a behavioral explosion, I would call it “the turning point of E-commerce era in Srilanka”, where consumers started to order their essentials via Online.
Today, many companies opt for the direct to consumer sales model, which allows them to sell their products to consumers directly without the help or need of a retail outlet which enrich their bottom line.
Brands that opt for a direct to consumer (DTC) experience typically do it in one of these ways:
Flagship stores – large stores in high-traffic retail locations, like Decathlon Battaramulla
Full-line stores – stores that blend brand awareness, marketing, and sales.
Kiosks or ‘’stores within a store’’- Best Buy giving space to Samsung inside its stores is a type of store-within-a-store. This allows brands control over sales and customer relationships.
Outlet store – once discount spaces, outlet stores are starting to feel like upscale shopping centers.
Pop-up store – more of a marketing strategy than a full-fledged store, pop-up stores help to create buzz over a product for a limited time.
Brand experiences – when brands get involved in extensions of their primary business, such as Keells retailers opening Bakery inside its stores.
(E-DTC) E-commerce – allows consumers to connect with brands through their online stores.
And Today’s spotlight will be on the E-DTC model, which I believe the most effective and efficient solution for local businesses.
What is “E-DTC” Model?
Direct-to-consumer e-commerce, commonly known as D2C e-commerce, is a term for an e-commerce strategy where traditional B2B businesses start selling directly to end-consumers via an e-commerce site. Like for example, Local or Multinational Company in Srilanka selling directly to a customer who will consume their products via their own e-commerce site / Renown Spa-Ceylon enabling consumers to reach them via http://sl.spaceylon.com/.
Traditional RTM vs E-DTC, Differences?
D2C e-commerce is when the manufacturer/producer sells its products/produce directly to consumers from their web store.
E-DTC Direct
Or
E-DTC Indirect
A more traditional retailer business model goes from,
The E- D2C model quite literally “cuts out” the middleman. The traditional retailer business model deals with bulk purchases, so for a manufacturer to start selling direct-to-consumer they’d have to start selling individual items. This essentially is why most manufacturers have not yet switched to a D2C strategy, as their entire business revolves around selling products in bulk.
Benefits of D2C e-commerce?
An omnichannel experience
A huge benefit of having a D2C e-commerce strategy is that manufacturers get full control of all their activities, from packaging to marketing. Meaning they can also create an omnichannel experience (360-degree experience) for their end-consumers.
Control over brand reputation
In a traditional retailer business model, a manufacturer has little control when their products are being sold by retailers. A D2C e-commerce strategy gives a manufacturer back the control over its marketing efforts and sales strategies, and it puts the company directly in contact with the end-consumer. D2C gives a manufacturer total control of its customers’ experience from the research phase to purchase.
Deepening Customer Insights
Manufacturers who have a traditional retailer business model rarely interact with the consumers who have purchased their products. So, they do not have many opportunities to get to know their end-consumers, other than by conducting targeted market research to try to gain a better insight.
But in the E-DTC model, , it’s all about data which gives deeper insight about the complete consumer behavior, via search volumes, purchase patterns etc.
What are the challenges of D2C e-commerce?
Competing with retailers
With a D2C e-commerce strategy, the biggest challenge for manufacturers is having to compete with retailers. As a country which heavily depends on Traditional RTM, shaking the relationship with the retailer is unhealthy. Retailers already have experience in selling to consumers and a good understanding of their clients and the retail market.
Order fulfillment
Newly formed E-D2C companies often struggle with order fulfillment. Not only does a manufacturer have to deliver their products via a last mile delivery model and maintain quality of the product, but they also need to compete with many other online retailers with next-day delivery methods.
Marketing, Sales and Customer service
D2C e-commerce also means that manufacturers need to start looking after their marketing strategies and sales strategies. This often requires setting up a separate e-commerce management team and develop capabilities.
If the company decides to set it up internally, it will enhance the capabilities of their employees but will need a significant portion of time commitment and knowledge search. On the other hand, outsourcing the entire management process will be quite expensive. Therefore, calculated decisions need to be taken at this point.
However, setting up a E-D2C model will never be a “Lego demonstration” where you have all the pieces together with a manual to assemble. Its an Eco system which needs lots of time and commitment to setup. The objective of this article is to provide an overview of the model which is still a newlywed bride to Srilanka.
Chathura Ganegoda
(BSc (USJP), MCIM (UK), MBA(UOC))
“Lead the world to New Dimensions”
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