Direct-To-Consumer Growth Fuels Supply Chain Innovation
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While the pandemic and subsequent ecommerce explosion drove strong demand for true omnichannel supply chain commerce solutions, it also fuelled a less immediately obvious longer-term move towards direct-to-consumer (D2C) fulfilment too.
Where suppliers of wholesale goods (including everything from FMCG goods to electrical appliances), often ship large, bulky consignments of cargo through industrial supply chains to distribution centres and then on to stores, companies selling to consumers must manage the flow of individual shipments, such as a single box of running shoes, or a polo shirt, direct to a customer’s home or preferred collection point.
Footwear, apparel and electronics manufacturers were amongst the earliest adopters to have stepped up their D2C offerings through the Covid-19 pandemic as stores and retailers closed their doors and brands struggled to find new avenues to reach their customers.
As the lines between what a retailer or manufacturer used to be and what they are today become more opaque, almost every company is in some way, shape or form, making attempts to get closer to their consumers. Take Adidas as an example. D2C sales helped to boost revenue at Adidas in the last year, and its own ecommerce website now accounts for more than 20 percent of its business. It recently reported that online sales grew by double-digits through large parts of 2022 too.
Another example of a modern, successful D2C strategy is that which America’s own sporting leviathan, Nike has implemented. Since 2017, the company has actively reduced its number of retail partners (last year it withdrew from Urban Outfitters) to concentrate on growing its own online and bricks & mortar presence – its Oxford Circus flagship store in the UK and the intuitive members app are fine examples of this strategic move, providing ‘loyal’ members with a greater range of bespoke, limited edition offerings not available beyond Nike’s own online and physical retail ecosystem.
The shift to this model has given Nike full control over its customer relationships and crucially, its customer’s associated data, making customer journeys and user experiences richer and more native in equal measure.
Similar to Adidas’ announcement however, the D2C model has also increased the fulfilment costs per item: from managing logistics and supply chains, to hiring the right talent capable of creating those exceptional customer experiences, these extra costs can consume profits if unaccompanied by an agile and pragmatic supply chain strategy.
“D2C sales helped to boost revenue at Adidas in the last year, and its own ecommerce website now accounts for more than 20 percent of its business.”
If brands truly wants to harness the benefits of D2C, and serve millions of customers in a cost effective, sustainably-minded way rather than a network of third-party retail stores, they need to be nimble in every department – especially when it comes to supply chains.
The movement towards D2C fulfilment is well illustrated by the efforts made by Nike and Adidas over the last year, and, by operating effective D2C channels, they are enjoying the freedom to optimise their logistics and deliveries, while meeting the exacting expectations of their customers.
D2C is the latest iteration in a long line of retail supply chain evolutions and while finding the right balance may prove challenging in the short-term, the size of opportunity is huge for retailers and particularly wholesale brands as this route offers a wholly new touchpoint to interact with customers, not previously available.
At Manhattan Associates our unified supply chain commerce platform is informed and inspired by more than thirty years of supply chain and commerce experience across retail, apparel, food, and wholesale distribution, working with some of the world’s most well-known brands including, Adidas, Lacoste, L’Oreal and Brooks Brothers.
We also know that the key to success is to start from the ground up and build strong foundations for success. And, in the case of retailers looking to ride the D2C wave, this means first looking to their own supply chain networks and the IT infrastructure that underpins it.
For more information on how your business can enhance its D2C supply chain capabilities, please visit: www.manh.com/en-sg
Written by Richard Wright, Managing Director, SEA, at Manhattan Associates
Questions & Answers
Q.Which types of goods were earliest to adopt D2C offerings during the pandemic?
Which types of goods were earliest to adopt D2C offerings during the pandemic?
Footwear, apparel, and electronics manufacturers were among the first to increase their D2C offerings. This happened as stores closed and brands sought new ways to reach customers during the Covid-19 pandemic.
Q.How have D2C sales impacted Adidas's revenue in the last year?
How have D2C sales impacted Adidas's revenue in the last year?
D2C sales have helped to boost Adidas's revenue over the past year. Its own e-commerce website now accounts for over 20 percent of its business, with online sales showing double-digit growth through much of 2022.
Q.What is a significant drawback of the D2C model for companies like Nike and Adidas?
What is a significant drawback of the D2C model for companies like Nike and Adidas?
The D2C model has increased the fulfilment costs per item for companies. These extra costs, from managing logistics to hiring talent, can erode profits if not managed with an agile supply chain strategy.
Q.What is Nike doing to concentrate on its D2C strategy?
What is Nike doing to concentrate on its D2C strategy?
Since 2017, Nike has actively reduced its number of retail partners, such as withdrawing from Urban Outfitters last year. It is focusing instead on growing its own online presence and physical stores, like its Oxford Circus flagship.
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