The traditional supply chain model is running out of steam. During the last two pandemic-hit years, a growing slew of manufacturers has chosen to market and sell directly to the customer rather than partnering with intermediaries in the supply chain.
As widespread disruptions continue to weaken intermediary links in international supply chains, the trend of going direct-to-customer (D2C) will flourish still further in the coming months.
The spread of COVID-19 has sowed a global supply chain chaos that could still “persist deep into 2023,” according to some experts. It is uncertain as yet when the supply chain crisis will come to a definite end. At the same time, however, it is becoming increasingly obvious that the impact of this prolonged disruption will be felt for much longer than 2023. But unlike events in the initial phases of the pandemic, future supply chain disturbances will not catch everyone completely unprepared. Concerns of a slowdown in supply chain activity appear to be superseded by hopes of business continuity and stability as the D2C model grows progressively more prevalent among global manufacturers.
Many firms have welcomed the trend of D2C adoption in the months leading up to the pandemic’s peak, drawn by the appeal of building, promoting, and distributing products or services directly to the end customer instead of using a third-party intermediary in the supply chain. Industry-leading analysts observe that this business model has been climbing in popularity more steadily ever since:
“One increasingly prominent theme is a need for a stronger direct-to-consumer presence, even in industries that have traditionally relied on business-to-business and intermediary channels. COVID-19 has accelerated D2C adoption, making it necessary for Fortune 500 companies to directly interface with customers.” — Deloitte, The D2C Imperative in the Wake of the Pandemic
This article looks at how enduring this pandemic-spurred adoption of D2C could be and discusses what this shift to a new business model may hold for manufacturers.
D2C Is an Ascending Trend with Staying Power in the Global Manufacturing Sector
Global manufacturers have made one of their boldest attempts yet to cope with ongoing supply chain difficulties and prevent business stagnation. As renewed border restrictions clogged supply chains, forcing firms to jack up prices amid substantial oscillations in demand, raw material scarcity, and dwindling inventories, plenty of manufacturers have galvanized to bypass intermediaries and go straight to the consumer. This revolutionary move has set D2C-driven firms apart, allowing them to strategically meet disruptive supply chain events and offer first-rate products or services at affordable prices. Remarkably, those who rose to the challenge of establishing a presence in the D2C space in times of rapid change and extreme pressure have remained on a steady growth trajectory.
So it is possibly not surprising that the rising adoption of D2C is now evolving into a globally dominant trend. As stated by Statista, D2C online sales are predicted to surpass 129 billion dollars in the U.S. by the end of this year. But can this momentum last? Statistical data clearly suggests so. By the time 2023 ticks around, digitally-native firms in the U.S. alone are expected to generate D2C sales of nearly 44.7 billion, according to the same statistics portal.
The chances are good that D2C will stand as the business model of choice for many global manufacturers in the coming years. This is because customers, too, increasingly demand more D2C offerings. A newly published study reveals that many clients still prefer to “flock to D2C” firms although lockdowns and restrictions have been lifted, thus confirming the staying power of the D2C trend. Additionally, the Direct-to-Consumer Purchase Intent Index reports that 81% of customers—many of whom conclude D2C firms offer better-quality products than traditional competitors—are expected to buy at least once from businesses operating under a D2C model over the next few years. There is no doubt that the manufacturing industry at large will have to adapt quickly and follow this trend.
Even if a return to pre-pandemic normalcy were possible, the presently ascending trend of going D2C is unlikely to peter out in the years ahead. Gradually, an extensive range of products or services should be available for purchase straight from the manufacturer as more customers express their interest in buying direct.
The Pivot to a D2C-Focused Business Model Holds Immense Promise for Manufacturers
In the first part of 2021, manufacturers announced plans to race for global e-Commerce leadership. Nothing has changed on that front. But as the year draws to a close, more firms intensively prioritize D2C e-Commerce. While a lot of manufacturers have used the early pandemic days to take supply chain intermediaries out of their e-Commerce plans, many are only now stepping into D2C e-Commerce to retain end-to-end control of their business.
Recently, D2C has been gaining attention as a key mechanism for navigating choppy supply chain waters—motivating industry players to consider changes in their business models. But there are plenty of other reasons to reduce the traditional dependency on a third party, such as a distributor or retailer, and adopt a D2C-focused mindset. Reaching directly to the customer puts manufacturers in a prime position to:
- Minimize distribution costs as manufacturers exert total control over the path products or services take from their respective firms to end clients
- Claim ownership of all customer data to gain a deeper knowledge of fast-evolving client preferences, expectations, and behavioral patterns
- Use data-driven customer insight to create more uniquely personalized experiences and forge deeper ties with each buyer
- Expand to fast-growing markets to improve sales and profitability
- Offer competitive pricing on value-added products or services and retain more revenue from each customer interaction
Still thoroughly entrenched in a fluid global crisis, manufacturers entering the D2C market will prosper as others merely survive. Accelerating a pivot towards D2C is, at this critical juncture, essential to widen opportunities for sustainable growth. Those who bet big on D2C-driven approaches will come closer to realizing their ambitious e-Commerce growth targets as they use direct sales to establish strong customer relationships without worrying about supply interruptions and delivery delays.