Who is your Customer

 

Going from Retailer-first to Consumer-first

To compete in today’s eCommerce market, brands first need to ask themselves “Who is your customer?” Traditional retail distribution networks place brand manufacturers at one end of the supply chain and end consumers at the opposite end. The reality of this kind of network is that brands don’t have a direct relationship with consumers – instead, a brand’s first priority is to keep the distributor and/or retailer happy, not the end consumer.

Brand Manufacturer – Distributor – Retailer – End Consumer

By separating the brand from the consumer, distributors and retailers become the brand’s customers rather than the person who is actually using their product. This retailer-first approach limits a brand’s ability to adapt in real-time to consumer demand and causes brands to lose sight of what makes their products works.

In the digital marketplace, a retailer should never be a barrier between a brand and the end consumer. It should be a tool to facilitate the customer experience – a customer experience which is still fully controlled and monitored by the brand. So when you ask yourself “Who is your customer?” the answer should be the end consumer, not the middleman.

Why Legacy Brands are Lagging

Brands that predate the eCommerce age are at a disadvantage. Digital native brands are consistently outperforming legacy brands that are accustomed to the traditional supply chain, which encourages them to view distributors and retailers as their customers. This approach may still work in traditional retail, but as eCommerce continues to displace brick-and-mortar stores, brands that remain set in their ways will be left behind.

It’s true that one way to keep retailers happy is to make a product that customers like and will therefore keep buying, but it’s easy for brands to lose touch with their audience if they only interact with them through a middleman. Start-ups and digital native brands (DNBs) avoid this problem by taking a customer-first approach. Even when not selling direct to the consumer, DNBs are interacting with consumers at every step of their purchasing journey, from discovery to unboxing.

Legacy brands are now trying to learn from DNBs in order to compete in the modern marketplace. For example, Unilever has experimented with taking a “start-up approach” to product development by recently enabling a small 5-person team to develop and launch a new premium hair care and skin cleansing line, ApotheCARE Essentials. By attempting to correct for the tendency of large organizations to hinder innovation and versatility, Unilever has taken a step in the right direction. But they still operate within a traditional supply-chain structure, so they may still be at a disadvantage.

Direct-to-Consumer

Many digital native brands have chosen to solve this problem but cutting out the middleman entirely, resulting in a resurgence in the popularity of direct-to-consumer (DTC) sales. Companies like Casper, Warby Parker and Dollar Shave Club have experience runaway growth using a DTC model. This approach enables brands to both manufacture their products and sell them directly to the consumer. This comes with two critical advantages:

1. By selling directly to the consumer the manufacturer can minimize distribution costs, which in turn enables them to keep the price lower in order to compete with established brands. For example, Dollar Shave Club was able to undercut the price of Gillette and other leading razor brands by both cutting out the retailer and by signing customers up for a subscription service.
2. A DTC model means that the brand manufacturer is always interacting directly with the end consumer. This allows them full control over the customer experience while also learning more about them by collecting unique personal information and data about purchasing habits and online behavior.

A direct-to-consumer experience can be highly personalized since DTC brands have the ability to incorporate customer data and feedback back into their products and services in real-time. DTC brands have become the envy of the eCommerce market by doing one thing better than anyone else: knowing their customers.

The Best of Both Worlds?

eCommerce is displacing physical retail and direct-to-consumer brands are a big part of the reason why. But Amazon and other major online retailers are growing even faster than eCommerce as a whole. Even some of the most successful DTC brands now sell through other retailers as well as their own channel. For many online brands, the best approach would be to sell both DTC as well as through some major retailers in order to reach the widest audience.

This best-of-both-worlds approach is effective as long as brands never lose sight of who their customer is. It’s absolutely critical that brands modernize their supply chain so that they can monitor and engage with the customer experience from end to end. Whether this means operating their own eCommerce store or working with numerous distributors and retailers – or both – brands need to use the latest technologies to forge strong, direct relationships and to understand their customers’ behaviors and desires in order to stand out in today’s digital marketplace.