Ditch the Department Store: How DTC Brands Are Taking Back Control

dtc illustration feature

COVID-19 has caused brands to entirely rethink their sales strategies. The past few months have led to an enormous shift toward ecommerce and there is lingering uncertainty as to how and when stores will reopen, and how many consumers will go back.

Regardless, this holiday season is expected to bring massive online sales volumes. To capitalize on this, direct-to-consumer brands must take back control of their sales channels. DTC brands can’t control whether big-box retailers open their storefronts or the number of consumers they allow inside. They also can’t manage the customer experience with the brand, especially given the many variables COVID-19 has thrown at brick-and-mortar retail.

The one thing brands can control is their online sales channel. From checkout to last mile delivery, DTC brands can ensure a seamless ecommerce experience. With the majority of Q4 and holiday shopping expected to shift online, brands must have their entire ecommerce channel prepared for an optimal customer experience. Case in point: according to Voxware, 76% of respondents intend to purchase more than half of their gifts online.

Hindered by Brick and Mortar

DTC brands have typically relied on a blend of online and retail sales. Many startups began by selling exclusively online and then placed products in select department stores and big-box retailers. Some even have their own standalone stores, including inventory-less “guide shops” like Bonobos where consumers can try out products and order them online right there.

In the age of COVID-19, many DTC brands will have to recalibrate and devise new plans. The second a product is on a department store shelf the brand has no control. They can’t prepare for new safety protocols that may hinder the customer experience, and store operating hours may be cut back. Early reports show big-box retailers such as Target, Walmart and Dick’s Sporting Goods will be closed on Thanksgiving Day, with more likely to follow.

With their own physical storefronts, DTC brands can control the in-store experience, but not the safety guidelines from state and local governments. Some locations may be forced to close, leaving brands with an expensive issue to solve.

Ecommerce Takes the Reins

Ecommerce is now the only sales channel brands have complete control over and can rely on in what will be a busy end of the year. Not only does it offer brands complete control, it’s quickly becoming the preferred shopping channel. From our recent research, COVID-19 has encouraged 63% of U.S. consumers to buy goods online who had not considered it before the pandemic.

In order to recoup lost sales from brick-and-mortar closings, DTC brands must prepare their supply chains to handle sustained periods of increased ecommerce volumes. For some, this means expanding distribution space to account for higher volumes, and hiring additional warehouse staff for an extended peak season. For brands that have not yet established expansion plans, it’s likely far too late at this stage, as most fulfillment partners are filled to the brim managing existing client volume that has grown tremendously due to COVID-19.

Alternative Solutions

Alternative fulfillment solutions are a great way for brands to handle peak volumes in 2020, offering a creative and cost-effective option. The goal is to get products to consumers as efficiently as possible. By thinking outside the box and leveraging partners with extensive experience in alternative fulfillment, brands are positioned to win in the coming months.

Pop-up distribution centers or micro-fulfillment centers are a great example. Pop-up DCs have emerged as a way to remove significant friction from the fulfillment process and ensure customers get their orders in a timely fashion. They can be set up anywhere and help brands place inventory closer to the customer. This focus on regional fulfillment is crucial in the face of COVID-19 to shorten the supply chain. This is vital because despite the impacts of COVID-19 on supply chains, 71% of U.S. shoppers expect goods to be delivered in a week or less.

This strategy can be taken a step further with the idea of in-store fulfillment. For DTC brands with stores, turning them into mini distribution hubs can turn lost real estate into a revenue-generating opportunity. Shipping from stores tightens the supply chain and ensures delivery isn’t overly reliant on centralized facilities. Automated solutions can help speed up this process even faster without putting a strain on store associates.

As we approach peak season, DTC brands are at a tipping point. The holidays present a golden opportunity to make up for lost revenue during COVID-19. If they can ditch retailers and take control of their ecommerce channels, success will follow. But their supply chain must be up to the challenge, as the overall customer experience has never been more critical.

Zach Thomann is EVP and GM of PFS

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