The e-commerce sector has been steadily growing in recent years. Increased smartphone adoption, affordable internet services, and evolving consumer demands are further fueling it. Apart from creating multiple growth opportunities in diverse sectors, this surge in eCommerce is also spurring growth in the logistics industry and multiple business models, such as D2C.
With a direct approach toward selling, the D2C business ecosystem provides a win-win opportunity for both manufacturers and buyers to obtain better margins and prices by eliminating the role of middlemen in the process. The value of D2C eCommerce sales is estimated to reach USD 212.9 billion by 2024, up from USD 128.3 billion in 2021.
Among other reasons, logistics solutions help accelerate the transformation of D2C eCommerce. Whether established businesses or digitally native brands, companies are increasingly looking for the best logistics solutions for D2C eCommerce to scale up effectively. This empowers them to focus on key business aspects without any worries about inventory storage, order packaging, and shipment handling.
But then again, what features do these best logistics solutions for D2C eCommerce offer, and how can businesses distinguish them from generic eCommerce logistics solutions? What are the core challenges in D2C eCommerce logistics, and how can smart logistics solutions help businesses overcome these challenges?
Let us explore answers to these and many other questions.
Direct-to-consumer (D2C) is a strategy in which a company produces, markets, sells, and ships a product directly to the customer. Selling directly to the consumer streamlines the distribution process by eliminating any middlemen, such as third-party retailers and distribution partners. This allows D2C companies to offer products for a lower price than brands using traditional retail business models while maintaining end-to-end control over business operations.
Take a quick look at the following stats that outline the popularity of D2C eCommerce:
There are several approaches to meeting the demands of D2C brands, and here are the four most prominent ones:
In-house order fulfillment, also known as self-fulfillment, occurs when a D2C eCommerce brand completes all stages of the fulfillment process internally rather than using a drop shipper or fulfillment company. In-house fulfillment necessitates both warehouse space and warehouse management.
When a third-party order fulfillment company handles the shipping, storing, and order or return processing, this is referred to as fulfillment through a 3PL partner. The fulfillment company’s employees will be in charge of the entire fulfillment process. Because inventory is stored in a 3PL-controlled warehouse, businesses that use outsourced fulfillment do not need to invest in warehouse facilities.
A company that utilizes a combination of the above order fulfillment options employs a hybrid fulfillment model. Some orders, such as custom-made items or perishable goods, may be processed in-house by a company. Some businesses use drop-shipping for infrequently purchased items or items that are too large or expensive to store in-house. It is ideal for companies that need more flexibility or are experiencing rapid growth.
D2C businesses enjoy certain advantages, like, lower entry barriers and direct connection with customers. But significant difficulties must be overcome to establish a sustainable and profitable brand. To appreciate the utility of the best logistics solutions for D2C eCommerce, one has to understand the potential pitfalls in this sector.
Below, we share the most crucial logistics challenges D2C businesses face.
Massive proportions of information and data are generated by different digital channels. However, as the data is not distributed evenly across platforms, D2C brands find it difficult to analyze this information. This makes it challenging to make key decisions under time restrictions. In the face of increasing competition in the D2C market, data-driven decision-making is critical to D2C’s success.
The data can be transformed into actionable insights that businesses can use to gauge insights and assist in quick, efficient decision-making. For this purpose, smart and automated software is required.
The major challenge for D2C brands is the rise in digital competition. Increased competition has reduced the profitability of D2C channels. The majority of the brands have increased their eCommerce presence. A survey reported that 57% of senior executives opined that their MNCs would significantly invest in D2C sales channels in 2022.
This means that more direct-to-consumer brands will compete to sell similar products. If a brand is unable to meet the needs of its customers, customers will quickly abandon it in favor of a competitor.
Brands try to cater to customers’ demands from the moment they enter an eCommerce site, displaying products that may interest them based on their location, demographic profile, previous purchases, and other factors, or risk losing their attention.
D2C businesses must also deal with increasingly demanding consumers and offer them exactly what they need precisely on time. This necessitates that brands boost their efforts to customize the customer experience.
Customers expects a consistent shopping experience regardless of the device they use to communicate with brands. They expect to begin shopping for a product on their mobile phone, then go home and complete their purchase while browsing other similar products and even spying on competitors to determine who offers the best price.
Even if they shop in-store, they are willing to go to the eCommerce store to find a prospective discount or alternative product. This omnichannel customer experience is becoming increasingly common, and D2C brands must integrate it into their strategies to compete.
D2C brands can become victims of their very own growth if their fulfillment strategy is unable to keep up with their expansion. Order processing and fulfillment can experience lengthy delays as order volumes increase.
Furthermore, scalable fulfillment entails both scaling up and scaling down. Consumer demand is never consistent, with order volumes experiencing fluctuations and peaks throughout the entire year. For example, it is well known that demand skyrockets in the run-up to the festive period and holidays.
But unless D2C eCommerce brands can handle the post-holiday calm just as efficiently as the rush, their fulfillment operation could cost dearly due to ongoing running costs. An intelligent logistics solution for D2C eCommerce has inbuilt resilience to handle seasonal fluctuations.
D2C eCommerce brands are now expected to pay for home delivery, and shipping costs end up eroding already thin profit margins. High DIM weights and peak season surcharges, for example, can drive up shipping charges to unsustainable levels.
Customer loyalty, on the other hand, is at stake. Because of generous policies by eCommerce giants like Amazon, online shoppers have become accustomed to quick, low-cost shipping. This means that D2C eCommerce brands must choose between losing customers by billing for shipping or risking a loss. It can be overcome with the best logistics solutions for D2C eCommerce.
D2C eCommerce brands must deal with a high volume of returns as part of their business. Almost 30% of products ordered online are returned. From defective items to sizing issues, the causes can be many. But the need to tackle such issues efficiently is necessary to set the right customer expectations and reduce the impact on the bottom line.
While returns typically peak directly afterward the holiday season, eCommerce brands must be prepared to handle an influx of returns at any time. When returns processing is slow and cumbersome, returned items begin to pile up at the facilities, resulting in dissatisfied customers and missed resale opportunities. If left unchecked, there is a real danger of dead stock building up. A smart logistics solution for D2C eCommerce allows for better return management.
Brands are resorting to direct-to-consumer marketing to strengthen customer relationships and provide a personalized brand experience. While brands are well aware of the benefits of establishing direct-to-consumer operations, many business owners still cannot establish a strong online presence due to complex business operations and stiff competition from marketplaces and industry peers.
Logistics digital solutions such as dynamic routing, fleet management tools, and last-mile visibility tools enable brands to optimize delivery networks and routes, decrease logistics costs, increase supply chain visibility, and automate manual procedures such as delivery planning and rider allotment.
Whether eCommerce brands want to widen their retail sales by entering the D2C market or optimize current D2C operational processes, implementing smart logistics technology in the D2C supply chain can help them to gain a competitive edge while effectively meeting customer expectations. This is where the best logistics solutions for D2C eCommerce prove to be the key differentiator between business success and failure.
Getting new customers, retaining existing ones, keeping customer acquisition costs low, and gaining a competitive edge are all critical for a D2C brand. A logistics solution can help achieve these and other objectives in an efficient manner. Here is a checklist to help choose the best logistics solution for D2C eCommerce businesses:
Integrating the commerce network benefits D2C eCommerce brands in the long run. Multiple departments require data from the commerce network for the D2C business to function properly. Transparency is essential for developing an agile operation capable of adapting to changing market trends.
It’s an investment that allows the implementation of agile business decisions by streamlining the organization. Businesses that sell directly to consumers no longer rely solely on one sales channel. Successful D2C brands sell through multiple channels, including their own eCommerce store, online marketplaces, and retail outlets.
A D2C brand must invest in inventory management solutions to maintain a centralized database of inventory across multiple warehouses and stores, as well as order management solutions to enable quick order processing by integrating all sales channels into a single platform. The inventory management solution ensures accurate and timely tracking of stocks, sales, and revenue while reducing manual efforts.
The Order Management solution, on the other hand, assists in automatically allocating orders to the appropriate fulfillment source based on various criteria such as location, stock availability, demand channel, and delivery preference.
The supply-chain operation is the backbone of any e-commerce business and can be critical to a brand’s success. A D2C brand requires warehouse management software to assist in receiving inventory, placing it on the designated shelf, improving order picking and shipping, and obtaining real-time inventory information. Because there are multiple sales channels, it is critical for WMS solutions to process orders from all platforms seamlessly so that inventory can be managed appropriately.
A strong WMS can significantly benefit the e-commerce and retail business by lowering labor costs, improving inventory accuracy, increasing operational flexibility, reducing errors while picking and shipping goods, and improving customer service.
D2C brands consider having a smart automatic allocation that takes into account a variety of parameters, including cost, functionality, network, first-attempt delivery rate, and so on, to automatically identify the delivery task to accomplish same-day, next-day, or other fulfillment windows. This eliminates guesswork, speeds up decision-making, reduces order-to-ship time, and enhances on-time dispatch. Similarly, the solution assigns deliveries to the rider based on order weight, dimension, vehicle type, rider’s current workload, proximity to the customer, and other parameters.
Route planning is the process of determining the most cost-effective route while avoiding roadblocks and delays. It’s more difficult than figuring out the shortest path between two points. D2C brands must consider having an intelligent route planning and optimization engine to plot the most efficient routes across multiple touchpoints, increase on-time deliveries and make deliveries more cost-effective.
It’s long been established that today’s customer is tech-savvy. They want affordability, variety, accessibility, and convenience all at the same time. When it comes to optimizing D2C operations, the customer experience must be the center of attention.
D2C brands should invest in tools and solutions to improve the efficiency of their supply chain. Order tracking, shipping details, and real-time updates have become essential tools for most businesses. This increases the transparency and clarity of the entire order-to-delivery process for both the consumer and the brand.
Shipsy’s AI-powered logistics platform is the one-stop logistics solution for industry leaders in the D2C eCommerce sector. It seamlessly connects cross-border and local logistics and improves supply chain operations via intelligent 3PL management. Shipsy’s state-of-the-art solution equips brands with unified interfaces and drag-and-drop features for enhanced user experience and actionable analytics for smarter decision-making.
Adopting smart logistics management tools or advanced last-mile delivery solutions can make D2C deliveries or D2C fulfillment seamless and efficient. Such solutions can digitize the entire delivery management process to ensure quick order fulfillment with complete operational visibility and transparency. They can also reduce the overall delivery costs, leading to improved business profitability and gaining a competitive advantage.
Shipsy is transforming logistics ecosystems to deliver excellent service across industry verticals.
Request a customized demo to gain a 360-degree view of the entire logistics process with process-oriented dashboards, and say goodbye to logistics woes.