Four tips for a successful entry into B2C business
The retail sector is in a constant process of change. While the brick-and-mortar retail sector in particular continues to come under pressure from the ongoing e-commerce boom, completely new opportunities are opening up for other market participants. It has probably never been so easy for manufacturers to enter the end-customer business themselves and bypass previous intermediaries such as wholesalers and retailers. But in order to make the entry into direct sales a success, more serious steps are necessary than the launch of an online shop.
Digitalization has been turning the rules of retail upside down for years. This fact can be observed not only in the inner cities of numerous – mainly small and medium-sized – municipalities. Also in the executive floors of many companies, once immutable truths such as the sequence of the classic supply chain of the B2C business – consisting of manufacturers, wholesalers, retailers and end customers – are increasingly questioned. Manufacturers in particular are increasingly toying with the idea of selling their products to end consumers themselves in order to “finally” be able to work with customer data in-house and establish alternative distribution channels alongside traditional and digital trading partners.
This increasing interest of numerous industrial companies in direct sales has many causes. On the one hand, the arguments that for decades have prompted companies such as Tupperware, Vorwerk or Bofrost to bring their goods to the end customer on their own initiative are still valid: in direct sales, higher margins can be achieved through the lack of retail intermediaries. In addition, the manufacturer retains complete control over its brand presence and can collect important information about its target group through direct customer contact. On the other hand, the entry into direct sales has become much easier in recent years. In times of e-commerce, setting up your own brick-and-mortar shops or a network of agents is no longer a necessary prerequisite for approaching the end consumer. Instead – at least at first glance – launching an online shop is enough.
Launching an online shop is not enough!
On closer inspection, however, it is not quite that simple. Instead, even in times of e-commerce, the entry into direct sales is an extremely complex undertaking for many manufacturers, which requires fundamental strategic considerations and the development of know-how not previously required.
The entry into direct sales radically changes the existing system and process landscape. This creates a considerable string of challenges.
These considerations begin with the initial situation: As a rule, a manufacturer has established business relationships with countless trading partners over the years – a network that is acutely endangered by the establishment of direct sales. After all, with such a plan the manufacturer no longer positions itself only as a supplier, but also as a competitor of its resellers. The risk of delisting is therefore significant unless the manufacturer has such a high level of brand awareness that dealers cannot or will not remove his products from their range even if he is active in direct selling. For such brands, it may be advisable to work more closely with the respective specialist retailers in the field of e-commerce in order to benefit at least indirectly from the opportunities offered by online trading – a model that I have already examined in more detail in an article together with my colleague Uwe Spettnagel.
In addition, the manufacturer has to become very familiar with the implications of the decision to sell and deliver goods directly to end customers. Even if the entry into online trading seems to be easy, the opening of an online shop is not the end of the story. Instead, the move to direct sales radically changes the existing system and process landscape. This results in a considerable string of challenges, which many manufacturers are not aware of due to a lack of experience in B2C business. Based on my personal experience from such projects, I would like to give some hints on how systemic and processual challenges can be mastered holistically and strategically.
Tip 1: The Customer Journey is the starting point for all strategic considerations
Many manufacturers who are dealing with the topic of direct sales for the first time find it difficult to evaluate which changes to the existing process and system landscape are really necessary in order to be successful in B2C business. Frequently you can hear statements like: “A PIM and a CRM are all very well. But do we really need something like that?” In such cases, I always advise manufacturers not to think in terms of systems, but to place the customer with his customer journey at the centre of their considerations.
Does the potential customer, for example, want to deal intensively with the products before buying them because they either – like a drill for example – need explanation or – like a new frying pan for example – have a certain emotional added value? As a manufacturer, you should then create informative and inspiring product data and play it out to the customer via all channels with the help of a PIM system. Does the targeted B2C customer prefer other payment options than my previous B2B customers? Then you should seek a meeting with the respective payment providers as soon as possible and establish the appropriate interfaces. Or is there a certain probability that the customer will need further products or services from your portfolio in the future? Then you should think about the acquisition of a CRM system in order to analyze the preferences of the customer and develop personalized offers.
Such an understanding of the customer journey not only creates a detailed picture of the customer and his needs, but also the blueprint of a system landscape that can satisfy these needs. This customer-centric way of thinking is essential for the success of direct sales. After entering the direct sales market, manufacturers are not the only competitor in this field, but have to hold their own in the B2C market against competitors that have been examining the private customers for years and setting the previous benchmark in terms of service – and in B2C e-commerce, which is already well advanced, this bar is usually much higher than in the usual B2B environment.
Tip 2: The Customer Journey is not limited to your own online shop
The evaluation of the existing process and system landscape on the basis of the Customer Journey is a first step towards meeting the needs of the B2C customer. However, it is often forgotten that the customer journey does not start at the moment the customer enters the online shop. For this reason, not only numerous manufacturers, but also many dealers merely optimize the processes and systems behind their own touchpoints to the customer – and thus leave some promising fields lying dormant.
There are, of course, consumers who are looking for a specific product and who may therefore be heading specifically for the manufacturer’s online shop. In many cases, however, at the beginning of his personal customer journey, the customer only feels an unclear need – for example, the desire for a new drill or frying pan – without already having a particular product in mind. In this case, the customer will first of all research in order to specify his wishes. He will google, read blog posts and customer reviews, go to comparison portals, watch product pictures and videos, search the websites of generic retailers such as Amazon or Otto – and perhaps visit the websites of various manufacturers at some point.
Manufacturers should strive to play their product data to as many additional touchpoints as possible.
In this phase, the aim is both to increase the customer’s need and to direct their interest towards your own products. One of the most effective instruments for this is inspiring product data. If the customer feels well informed by informative product texts and details or is emotionally addressed by stimulating pictures and videos, there is a good chance that he will ultimately decide on your product. However, this effect is only very effective to a limited extent if the elaborately created product data is only used in your own online shop. After all, not all customers will get there.
Instead, manufacturers should strive to play their product data to as many other touchpoints as possible. This includes the press, various blogs or social media channels that can be handled by a PR or marketing department, for example, as well as channels provided by resellers or marketplaces. Finally, these should continue to play a role within the framework of a balanced sales strategy despite the entry into direct sales. Content syndication providers such as Loadbee or Tradebyte can help to reach as many trading partners as possible with little effort.
Tip 3: Complexities and high expenditure slow down e-commerce projects
In B2C business, manufacturers face numerous new challenges that can quickly overtax a company that has so far focused on B2B business. On the systemic side, most manufacturers probably did not need either a PIM or a B2C-suitable CRM for their existing business. Interfaces to common B2C payment providers such as PayPal are also likely to be missing. An ERP, on the other hand, is usually available, but is not designed for handling individual orders. In addition, there are new procedural requirements, since in B2C business other (specifically: faster) workflows normally have to be established. After all, in this business segment no pallets have to be moved, but individual parcels have to be packed and dispatched via B2C parcel services. And then the end customer wants to talk to you! – However, manufacturers have not yet done this. So who will take responsibility and build up the appropriate resources and know-how?
It is advisable to first deliberately remove complexities from the project in order to enter the market quickly, test the B2C business and minimize risks.
Tackling all of these challenges creates significant effort so that the duration and cost of the direct sales project can quickly rise. For this reason, it is advisable to first deliberately remove complexities from the project in order to enter the market quickly, test the B2C business and minimize risks. For example, the warehouse management mentioned above, which poses problems for many manufacturers, could first be outsourced to a logistics service provider with B2C experience.
In this way, the manufacturer can considerably reduce the complexity of the project and accelerate a rapid market entry – consciously taking the disadvantage, however, that part of the margin must be transferred to the service provider and that personal experience can only be gained to a limited extent. These disadvantages, however, are bearable: After all, the manufacturer in direct sales saves the trade margin that he can potentially distribute to other partners without having to accept financial losses. In this way, he can experiment with B2C business without making fixed investments by setting up new warehouse processes. Should direct sales prove successful, there is nothing to prevent the manufacturer from assuming responsibility at a later date for the tasks initially assumed by external service providers in order to subsequently improve the margin or achieve its own learning and economies of scale effects.
Tip 4: Investments are necessary – but they can pay off
But even if certain expenses can be reduced by outsourcing – some investments certainly make sense in order to not only profit financially from the entry into direct sales. For example, this business model generates a lot of end customer data – a valuable asset that manufacturers within the classic supply chain have to work without. Often even relatively small shares of turnover are sufficient to create an acceptable data basis. If, for example, a cookware manufacturer sells 2 million products a year and manages to handle only 10 percent of these transactions via its own online shop, a database of 200,000 product sales is created from which it can draw new conclusions.
The acquisition of a CRM system can help to systematize and analyze this data. On this basis, the manufacturer can regularly address the customer individually, present him with relevant information and offers and in this way bind him closely to himself. Ideally, a community is created in which the customer himself becomes the evangelist of the company.
The digitization of the retail sector offers manufacturers in particular new opportunities to escape the pressure on margins and to develop additional sources of income and customer groups. The supposed simplicity of the entry into e-commerce additionally increases the interest of many producers in direct sales. However, in their euphoria, many manufacturers are not aware of the implications of this step for their system and process landscape – especially due to a lack of experience in e-commerce and B2C business. Successful direct sales require more than just opening an online shop. At the beginning of such a project there should always be a holistic and strategic analysis of the changes necessary for the B2C business. Focusing on the customer and his customer journey can help to identify the steps that are actually necessary.
First published on www.innovation-implemented.com