The way forward for small businesses in India
By: Akash Gehani, Co-Founder and COO, Instamojo
As marketplaces struggle to fulfill customer orders and retail stores continue to stay shut, consumers now turn to the brands’ websites or online stores to directly purchase products, giving rise to the D2C eCommerce sector in India.
A direct-to-consumer (D2C) model allows businesses to take control of their product distribution by eliminating middlemen, wholesalers, and retailers. It allows brands to sell their products online to consumers directly. Major brands such as Loreal, PepsiCo, and Nike have also adopted the D2C model to stay aligned to the changing market needs. Selling directly provides end-to-end control of the journey of one’s product. It gives direct contact with customers, providing opportunities to deliver value, address pain points, and create a standout brand experience.
An eCommerce marketplace comes with its own terms and conditions about products and services, has its own shipping policies, and can even have its own warehousing. Marketplaces take care of payments and shipping and warehousing for the sellers. The platform charges sellers a commission for listing and shipping products/services and provides only neutral discoverability. On the other hand, building your own online store on store builders or website providers allow you a greater deal of flexibility in operations. It allows you more control and you can integrate your own shipping and payment partners while building your own store.
The benefits of D2C channels for businesses
Personalized customer experience
When sales to end customers is outsourced to a middleman, only they have access to the customer data. Whether it is retailers or online marketplaces, this information is not usually shared.
On the contrary, if you decide to sell products to consumers directly, you have the advantage of collecting first-party data and understand your customers better. This data will help the brand in cross-selling and upselling. New customer acquisitions are made easy by using what you know about your current customers.
With a direct connection to customers, you can learn more about their experiences and needs. It allows you to improve your products based on customer feedback. You can find out the likes and dislikes of the customers and develop new iterations quickly. It provides an opportunity for the company to quickly learn which products are a hit and which might need some adjustments.
Better customer relationships
The opportunity to develop direct customer relationships is one of the biggest benefits of moving to the D2C approach. Your digital channels can provide valuable insights into your customers’ attitudes, shopping data, and preferences. Using this data, you can build meaningful relationships with customers at each touchpoint. It allows you to create desirable customer experiences.
For example, a leading bicycle maker began a D2C channel. Their customer data indicated that gender-differentiated sizes were not required as every rider was unique. The company saved millions by eliminating male and female-specific bikes.
The dependency on distribution partners is removed with D2C, giving you more shelf space. By going direct to consumers, you are flexible to reach consumers and offer your products even though they don’t live near a retailer. This also solves the problem of customers not having access to your product when the retail store runs out of stock. This gap can be filled with one’s very own D2C eCommerce channel.
Improving profit margins
Through a D2C channel, you gain the entire amount your customer pays. That means a higher product profit margin for your brand. In alternate sales methods, distributors purchase goods at significant discounts while other intermediaries and marketplaces charge a commission.
Small business owners today have more options than before to set up their online businesses. You can choose between independent online stores, have your own website or sell your products on an online marketplace. However, the overall benefits of selling D2C are much higher.
The benefits of D2C eCommerce include more control to entrepreneurs and business owners over the payouts, the brand persona, and overall business operations. It allows you to take control of your own business. Further, setting up your own eCommerce website or online store is now fast and easy. It does not require you to have the technical knowledge and allows you to focus full time on building your business.
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