Where e-commerce was formerly perceived as a rising threat to brick-and-mortar retailers, many traditional brands are now turning to the direct brand e-commerce route after seeing the advantages of online sales. New Jersey luxury bedding seller Boll & Branch is an illustrative example. The company’s retail outlet features displays and customer service, but no purchases are carried out of the store: all are mailed directly to the consumer, just as at Amazon.
Macy’s, JCPenney and even brokerage firms such as Credit Suisse are among the traditional brands making the shift to e-commerce. The direct brand e-commerce model is so compelling to retailers and other brands for multiple reasons, including increased profits, better customer experience, and more straightforward inventory management. Here’s a closer look at some of the advantages of going the direct brand e-commerce route.
Looking at E-commerce for Increasing Profit by Cutting Costs
One primary reason brands are turning to direct e-commerce is that the lowered costs can increase profit margins significantly. By going straight to the customer instead of through wholesalers and retailers, brands can cut out the losses that come from using middlemen. This doesn’t necessarily require eliminating wholesalers and retailers entirely, but you can change your marketing mix to emphasize more direct sales. You can also gain better leverage over retailing partners you use by developing independent distribution channels instead of relying on single channels. Furthermore, you gain the advantage of directly acquiring your customers for future communications and follow-up marketing.
How much more profit can a brand earn? Marketing Land runs some sample numbers to compare how a traditional brand with a minimal e-commerce presence model stacks up against maintaining a robust e-commerce operation. It shows that a brand making $4 million in gross profit from traditional sales could make $4.5 million by emphasizing direct-to-consumer sales.
Boosting Repeat Business with Enhanced Customer Experience
Direct e-commerce sales can also improve your customers’ experiences, boosting satisfaction ratings. When you deal directly with your customers, you have more opportunity to use marketing touches to educate them about your products, helping them make better product selections that meet their needs. You can also draw from customer data analytics to provide more personalized sales experiences.
Consumers appreciate these differences. Over half of manufacturers who begin selling directly to consumers report an increase in customer satisfaction.
Making Inventory Management Easier
Using a direct brand e-commerce model can also help simplify your inventory management. When you sell directly to the buyer, you can gauge your inventory to your actual sales volume and scale up naturally to meet increasing demand, says Sufi Khan Salaiman, vice president of e-commerce and digital at thermal imagery camera manufacturer FLIR Systems and overseer of security camera systems brand Lorex Technology. Salaiman says Lorex originally got into e-commerce as a way to sell off excess inventory that had accumulated through returns. After growing the e-commerce business into its own operation, Lorex discovered the benefits that online sales represented for keeping inventory at manageable levels and avoiding overstock issues.
Higher profit margins, greater customer satisfaction, and easier inventory management are three reasons companies are turning to direct brand e-commerce sales models. By building direct brand e-commerce sales into your business model, your company can also enjoy the benefits of more streamlined inventory, better repeat business, and higher gross profits.