2017 was the “Year of the Online Purchase,” according to Inc.com. And for good reason: record after record was broken—including such milestone events as Black Friday, which saw a groundbreaking $5.03 billion in online sales. Thanksgiving and Cyber Monday sales were no less impressive: up 18.3% and 16.8% year-over-year, respectively.1
It’s safe to say direct-to-consumer (DTC) sales are an unstoppable trend, growing at a 15% CAGR (compound annual growth rate) and projected to be 14% to 16% of the entire retail market in America by 2022.2
What is DTB?
With DTB (direct-to-business) sales, manufacturers ship products to small- and mid-sized brick-and-mortar locations, such as specialty retail stores, independent pharmacies, doctor’s offices—anywhere that consumers visit to buy products.
Manufacturers can learn from direct-to-consumer (DTC) best practices to effectively serve the lucrative DTB marketplace.
To fuel such explosive growth, many manufacturers turn to e-commerce fulfillment centers that have deep experience where it counts: meeting the service and delivery demands of consumers whose expectations seem to grow by the day. Best practices in ordering, processing and shipping are essential to delivering a high quality brand experience when consumers want it: NOW.
What can manufacturers learn from DTC best practices to succeed with a related opportunity: direct-to-business (DTB) sales? Just as important, how can the right fulfillment center help develop the most effective strategy and implementation plan to take advantage of this opportunity?
DTB vs. DTC: it’s a matter of scale
While the direct-to-consumer (DTC) marketplace connects manufacturers directly to consumers, DTB connects manufacturers to the small- and mid-sized businesses that sell products to consumers. Specialty retail stores, independent pharmacies—even doctor’s offices that sell dietary supplements—are all examples of the types of DTB customers that manufacturers can target.
From a fulfillment standpoint, the DTB and DTC marketplaces have many similarities. For both markets, the fulfillment center receives orders received from a web portal, processes and then ships them to the appropriate addresses. In each case, technology plays a key role in ensuring the ease of the ordering process, accuracy of processing and timeliness of delivery.
And in each case, the fulfillment center needs intimate knowledge of the supply chain—from manufacturer to end-user—to ensure a seamless and predictably positive brand experience for everyone, all along the way.
But there’s an important difference between the DTB and DTC marketplaces: the size and complexity of the orders. DTB orders have higher quantities in both total SKUS and eaches (items) sold. While a typical DTC order to an average consumer may include two SKUs and two eaches (one item per SKU), a DTB order to a physician’s office might involve 20 SKUs and 40 eaches. So the DTB is more labor intensive and requires the right order management system and expertise to ensure the order is fulfilled correctly and on time—every time.
A fresh look at the future
Manufacturers shipping directly to the point-of-sale is certainly not a new idea: for example, the direct-to-store delivery (DSD) model has been around for years, as manufacturers sought to bypass traditional wholesale and distribution networks to build deeper relationships with the brick-and-mortar locations they relied on for sales.
But in the world of digital marketplaces, old paradigms tend to have a short shelf life. Just consider how Amazon.com has fundamentally changed the way manufacturers and retailers connect. As a result, manufacturers have much clearer visibility to what’s happening at the cash register. And that transparency—translated into clear business insights through data analytics—can improve demand planning, inventory levels and inventory turns, product expirations and much more.
Perhaps most impactful of all, today’s DTB strategy empowers manufacturers to control the brand experience. A critical component of direct-to-consumer success as well, this level of control helps ensure that every aspect of brand engagement meets with the expectations not only of the business, but also its customers.
Conversely, if a business runs out of a product—or doesn’t stock the right SKUs—or can’t offer them at the right price, consumers will be quick to penalize that business via lost sales. And in worst case, lost customers.
Defining DTB best practices
The basic capabilities for DTB success are essentially the same as those used for the DTC marketplace. Then, there are advanced capabilities that improve efficiency and profitability for manufacturers—as well as support the brand experience for businesses and their customers.
Here’s an overview of the basic and advanced best practices that manufacturers and their fulfillment centers can follow to help ensure success:
Basic best practices
Best practice goal: Same-day turnaround from order to warehouse.
Full integration between the manufacturer’s e-commerce system and fulfillment center—to display inventory, provide real-time shipping costs and provide two-way communications.
Order automation, to increase speed and eliminate manual errors.
Complete and automatic visibility of available inventory, including backorder receipt dates.
Best practice goal: Same-day turnaround from warehouse to truck.
Accurate and efficient picking, packing and shipping, via a robust warehouse management system (WMS).
Route each order to the right warehouse, to fulfill the order the fastest.
Best practice goal: From truck to the business’ loading dock or front door as scheduled.
Obtaining the best possible carrier rates, based on the business’ preferred method of shipping, window for accepting shipments and other details.
The right transportation management system (TMS) for automating the choice of carriers and shipping route to meet expectations for both speed and cost-effective rates.
Advanced best practices
Beyond the basics, manufacturers can turn to these advanced practices for optimizing ordering, processing and delivery processes:
Choose or customize the right e-commerce system: to handle larger orders and overall sales volume (than DTC requires) and support a strong brand experience for both the business and its customers. Also, be sure your order management system is compatible with the needs and expectations of an e-commerce environment (vs. using a closed-end, intranet-based platform typically geared for wholesale use alone).
Strong and seamless relationships with carriers: helps ensure smooth problem resolution and customer service at scale and in line with the brand’s image.
EDI solutions: as needed, based on the business requirements of the locations receiving products.
Inventory management: data and analytics to establish par levels based on actual utilization—which help ensure product availability, reduce/eliminate stockouts and prevent expirations (key for time-sensitive products, such as dietary supplements). Also helps businesses make best use of their onsite storage space and work within any limitations. The “Goldilocks” goal is to keep shelves full, but not too full.
Reporting capabilities: so manufacturers have a clear picture of sales activity at the point-of-use, which can help inform demand planning and other business decisions.
Comprehensive packing lists: often used for both receiving and invoicing. Particularly valuable for large and complex orders that require a paper trail.
Direct to success
While the growth in DTC sales is an unprecedented success, don’t lose sight of another lucrative opportunity: direct sales to small- and mid-sized businesses. Many of the same best practices apply for handling order fulfillment, processing and shipping.
And then, there’s one more: the best practice of choosing the right fulfillment partner. Yours should not only understand the similarities and differences of the DTC vs. DTB marketplaces, but also have the capability, expertise and willingness to scale up operations as your business continues to grow.
To learn more, please call 866-991-8244 or visit us online and one of our principals will work directly with you. So together, we can deliver Your Business Everywhere™.
1Inc.com. “3 Things You Need to Know About the Future of Retail Based on 2017 Holiday Shopping Trends.” December 21, 2017. 2Inbound Logistics. “Direct Hit.” July 21, 2017.