Ratheesh is the COO of OpsVeda, an Operational Intelligence software company. His interests include impact of technologies on Supply Chains.
For many brand owners, this is a new dynamic. Online is no longer just another means of ordering and fulfillment, but also an important element of their brand image. That means they can’t consign “online” to selling through Amazon and some social media engagements. Online must contribute to the consumer’s buying experience just like many brand-owned stores have been doing for a long time. Brand owners have recognized this and have been trying to have more control over their consumers’ online experiences. Their need to control the brand’s online narrative is so critical that some have even walked away from multi-brand retail platforms.
Owners seeking more control of their brands from multi-brand retailers is a pre-pandemic story. For example, Nike exited from Amazon in late 2019. Not all brands will go to that extent, though many agree that a Direct-to-Consumer (DTC) strategy encompassing all aspects of the consumer’s experience is the way forward.
However, those embracing DTC are realizing that there’s much more to it than a slick web-shop. Ease of use of the website is only one part of the experience equation. The relevance of the products presented to the user, their actual availability and the order delivery — all of these elements are integral to the experience for the consumer.
For brand owners, DTC is turning out to be like the Borromean rings — an arrangement of multiple rings where each one appears to be tightly linked to every other at first glance, but in reality delinking any single ring will make the others come apart individually. Similarly, the DTC model either works well in its entirety or all the components come across as disconnected delivering consumer experiences so poor that DTC engagements will have an adverse impact on the brand.
Types Of DTC Deployment
Implementations vary, but there are three “rings” you will find in every DTC deployment: 1. online engagement, 2. demand-supply matching and 3. logistics integration.
Online engagement platforms like Shopify generally take care of online presence, branding, product catalog, web store and fulfillment tracking. Given its visible impact on the brand image, companies have even invested in VR/AR applications that allow consumers to virtually try products before they buy.
The demand-supply matching “ring” does a 360-degree reading of demand signals to ensure supply alignment. Operational intelligence platforms are a typical choice for this continuous matching and rebalancing act.
The last “ring,” logistics integration may appear simple because many e-commerce platforms have easy integrations with 3PLs like DHL and Fedex. But the real problem is knowing the current and to-be inventory at the assembly lines and warehouses — especially those managed by 3PLs. Visibility into stocks at brand-owned stores and retail partners is also needed if store pickup is offered. Similar visibility to inbound stocks enables rerouting based on demand signals.
It’s not hard to imagine why the failure of a single link will make every DTC ring perform as though they’re all disconnected. It might appear, for example, that the link between the demand-supply engine and the logistics partners won’t affect the web-shop. But for exemplary experience, the most optimal pickup point should be prescribed to consumers choosing that delivery mode. The choices evaluated will depend on anticipated stock at different locations. Computation of the same requires proper integration between the demand-supply matching engine and the logistics partners.
Given this fragile interconnectedness of DTC, what measures will ensure experiences that a brand can be proud of? Of course, the technical robustness of each “ring” is an obvious answer. Beyond that?
Align Digital Assets To DTC Goals
First, figure out your DTC goals. This might seem like an obvious first step, but it’s worth mentioning because the digital assets and their linkages need to be aligned to those goals. If it’s about buying experience, then voice interfaces and VR/AR applications may be worthwhile investments. On the other hand, if super-efficient fulfillment is a goal, integration with 3PL systems assumes importance. If the primary goal is to handle counterfeits, then a blockchain-based provenance tracker may be considered.
Demand Signal Visibility
As the adage goes, the best way to manage a supply chain is to know the demand chain. The digital world provides a plethora of data points that brands can use to understand demand patterns and shifts. Search terms on the web-shop, interactions on various product pages, geolocation of visitors — everything is an input for better forecasts. The signals can be from outside the firewall, too — social media comments and weather data to name a few.
Ensure Partner Readiness
A significant part of the consumer experience is dependent on the brand owner’s partners. Traditionally, partners get measured on quality and timeliness. Their ability to capture and share data should get equal attention, which may require deep integration with 3PLs and suppliers — sometimes even with their ERP systems. Both accuracy and currency of shared data will influence the functioning of every ring. The robustness of these data exchanges is important, and tools like MuleSoft may help.
Boost Agility By Reducing Latency
It’s difficult to say how much of the erraticism of the pandemic will continue, but an agile DTC strategy can improve brand loyalty through better product availability. Lowering data acquisition and processing latency is the key to agility. Managers should carefully evaluate different demand signals and decide the latency they can afford. Similar decisions need to be taken on the supply side, too — inventory at company warehouses, 3PLs and perhaps even retail partners must be fed to all the three rings at the right cadence.
To conclude, the linkages between the Borromean DTC “rings” need as much attention as the “rings” themselves. Brand owners should plan for both sturdiness and comprehensiveness of the linkages. That will transform the DTC setup from a mere web-shop to a brand equity booster.