In a 2022 report from Oxford Economics, 72% of 500 commerce executives surveyed said they were prioritizing “increasing margins and profitability” as a strategic goal. Beyond that, 36% said this was their absolute top priority.
This is understandable, given the volatile and unpredictable nature of today’s marketplace. Multiple external pressures — global inflation, stringent trade regulations, supply chain disruptions, and the reality of well informed and tech-savvy consumers with virtually endless options — are making it increasingly difficult to protect profit margins.
Against this backdrop, direct-to-consumer (D2C) selling through digital channels has become the strategic linchpin for protecting profitability across multiple industries. Well executed digital sales channels allow companies to establish direct, lasting relationships with consumers while still maintaining their core modern trade business models and existing partner and channel landscapes. Many small business-to-business (B2B) organizations, in fact, started as native D2C brands, and now larger brands are following suit and adding D2C channels to meet growing consumer expectations.
Adding further complexity is the fact that changing consumer expectations are redefining all aspects of the retail journey. From choosing the right sales channels to sustainable sourcing to easy returns and responsible re-merchandising, retailers are looking for flexible solutions to delight customers and increase profitability without finding themselves in “one-size-only” business models.
The Devil Is in the D2C Details; Fantastic Data Is the Key
As early digital-native adopters such as Allbirds, Dollar Shave Club, and Zappos learned, D2C success does not end at setting up a webshop and mastering direct marketing. It requires a much more expansive strategy and truly knowing your customers so you can meet their evolving needs with new levels of convenience, no matter how they choose to interact with your brand. It is also vital to understand consumers’ behaviors and propensity to abandon brands for reasons that may seem trivial on the surface, and that only begin to make sense in the aggregate.
These same vanguard niche brands also learned that the key to achieving a winning D2C strategy lay in building a technology stack capable of reliably and responsibly gathering data to gain actionable insights across the entire customer life cycle, and using that data to enhance every customer interaction, as well as to optimize business processes across the entire organization.
Despite the accelerating growth of D2C as a share of the overall commerce market, many consumer products companies have optimized their processes and IT landscapes for the modern trade model, where the primary route to market was through retail. This means they often lack the infrastructure and corporate culture needed to achieve a true end-to-end, data-driven strategy, as well as the elevated customer experience it can deliver.
We can define this kind of strategy along five essential elements:
- Value proposition: Offering the right product, on the right channel, for the right price, at minimal introductory risk and cost
- Marketing: Acquiring and engaging consumers to convert them to loyal, direct customers while respecting and protecting their personal data and privacy
- Direct sales channel: Enabling new D2C business models and embedding e-commerce capabilities across the entire customer life cycle
- Fulfillment and post-purchase: Delivering products at scale and on time while reducing costs per transaction, and mastering processes across the fulfillment value chain, including intelligent returns
- Analysis and insights: Using consumer insights to quickly iterate products, services, and experiences through a unified consumer data framework with consistent and compliant data governance; in essence, enabling a data-driven “feedback loop” that increases in value and effectiveness over time
There is also the essential modern go-to-market approach that goes far beyond e-commerce and mailing lists. Beyond e-commerce and selling into traditional brick and mortar department store chains, mom-and-pop stores, specialty retailers, restaurants and bars, salons, and more, engaging multiple business-to-consumer (B2C) marketplaces, such as Amazon, Alibaba, and Etsy, may also be necessary. Social network marketplaces, with their attendant social influencers on platforms such as Instagram, TikTok, YouTube, and Facebook, continue to grow as popular sales channels. For all these reasons, the right technology partner is essential to ensuring an organization is ready to compete and win in this ever-evolving marketplace.
This end-to-end data strategy and the valuable insights it offers can only come from a provider that can connect data from back-end, enterprise resource planning (ERP) solutions to front-end end, customer experience and customer relationship management (CRM) solutions.
As the world’s foremost ERP solution provider, with 50 years of experience in industry-specific business process technology, SAP is in a unique position to help customers connect all of these elements across their business landscapes. From sourcing and procurement to product development and manufacturing to customer engagement and commerce to driving every route to market — our vision is to help every organization become more adaptive and insightful through industry-led solutions that scale with a business, even as the business model evolves.
To empower the modern D2C business for lasting success, SAP offers the ultimate combination of industry expertise, next-generation architecture, and global scale.
The cloud-based SAP portfolio of enterprise-grade CRM and customer experience (CX) solutions are consistently recognized as market leaders by top analysts such as Gartner, Forrester, and IDC — for good reason. For example, SAP’s new approach to composability in digital commerce enables taking advantage of modular cloud software solutions without sacrificing the scale, performance, and reliability of our core commerce platform. This enables a business to move fast on its own terms no matter where it is on its digital transformation journey, so it can evolve at the pace of its customers.
And now, SAP is committed to taking a true industry-led approach to solving our clients’ biggest challenges and empowering them to launch and run the world’s most innovative brands.
SAP’s industry cloud provides a wealth of industry-focused solutions, built by SAP and partners, based on SAP Business Technology Platform (SAP BTP), and deeply integrated with the SAP S/4HANA Cloud and SAP Business Network. These solutions enable users to take advantage of the latest innovations relevant to their industry to help efficiently optimize, extend, and transform core business processes to meet the market with confidence. For consumer products businesses alone, SAP offers more than 40 industry cloud solutions, more than 15 SAP-built solutions, and more than 350 solutions across our vast partner ecosystem. Our offerings for retailers are just as extensive.
Be ready to amaze your customers and be ready for anything the future holds, with SAP as your partner in innovation and profitable growth.
Today’s brands know that amid so much change and competition, they must evolve quickly or get left behind. Future-proofing a business means having the tools to change and scale in a complex, uncertain environment. Intelligent CX from SAP is designed to future proof a business so it can be amazing every time for its customers. Our solutions are:
- Industry-tailored, to meet the most critical needs of an industry and customers
- Connected, with deep integrations that connect back-office ERP data to customer interactions
- Insightful, to enable understanding customers and making the best decisions for the business
- Adaptive, with composable architecture and a vast partner ecosystem in order to build the solution needed now and move fast in the future
Of the 100 biggest companies in the world, 99 run SAP software, representing 87% of total global commerce. Our global presence and scale, industry know-how, and commitment to continuous innovation make SAP the best choice for any organization that wants to build a best-in-class, direct-to-consumer business in a complex global marketplace and improve people’s lives — one great experience at a time.
Future-Proof Your D2C Business Through Intelligent CX
Those attending SAP Sapphire events in 2023, either virtually or onsite, will have the chance to hear our exciting line up of keynote speakers and talk with SAP experts, partners, and customers, as well as peers from across industries to learn what’s happening in established and developing markets around the globe. Register now to reserve your spot.
Ritu Bhargava is president and chief product officer for SAP Industries & Customer Experience.