The consumer electronics industry is made up of companies that manufacture, design, produce, supply and distribute electronic items, accessories, equipment and devices. The manufacture, distribution and sale of communications and entertainment equipment such as digital and video cameras, cell phones, stereos, MP3 players, DVDs, VCRs, calculators and televisions are all part of of the global consumer electronics business. Much of the manufacturing happens in places like Asia, where labor prices are relatively low. Company profiles range from large multinationals with more than 100,000 people to small companies with less than 50 employees that manufacture a single product. Securing product copyrights is a top concern for consumer electronics manufacturers of all sizes. To meet consumer demand, consumer electronics manufacturers continue to focus on next-generation technology as an important part of innovation.
Consumer goods manufacturers spend huge sums of money and invest a multitude of resources in establishing their brands. It starts with product development, design, testing and followed by progress to tooling, production and finally, marketing and distribution. Direct-to-Consumer refers to manufacturers who supply their brands to customers and end-users where the supply is services rather than goods, without intermediaries such as wholesalers or retailers.
Traditionally, products were distributed directly to companies (B2B), which then sold them to end users (B2C). This business-to-business strategy also included the distribution of products through wholesale companies, allowing manufacturers to source in bulk without worrying about the end consumer. This business-to-business route had advantages, but as margins and profits dwindled, brands cut out the middleman and focused on businesses selling directly to consumers.
Compared to the year before the pandemic, the number of companies registered as D2C organizations increased by 88%. Today, startups using this model deliver huge profits of Rs 100 crore in much less time than those using the traditional setup.
Why are consumer brands more inclined towards the D2C approach?
Manufacturers are the proud guardians of their brands and have full control right up to the point of distribution. While they carefully craft supplier agreements, setting out detailed expectations for in-store displays, online marketing, and product presentation, retail execution is often varied and rarely reflects initial expectations.
Previously, the supplier/retailer relationship depended on the ability of account managers to meet required expectations, sometimes by persuasion, and sometimes by contractual stick. However, as retail margins continue to decline, retailers are constantly looking for ways to reduce costs, resulting in fewer employees, less frequent store refits, lower inventory coverage and a multitude of other factors that widen the gap between brand expectations and reality.
Consumer brands seek to build direct relationships with end customers for a variety of reasons:
1- To generate deeper insights into consumer needs
Listening allows you to learn from your customers and converse with them to create better experiences. Quality data enables businesses to gain insightful insights into their customers, which can help them improve their long-term bottom line. Businesses use consumer insights to gain insight into how their target customer thinks and feels. Human behavior analysis allows businesses to truly understand what their customers want and need, and why they feel the way they do.
2- To keep control over their brand experience
Brands need user feedback to improve their customer segmentation and marketing personalization efforts. As D2C commerce gives them greater breadth and depth of consumer data compared to traditional retail models, marketers can more effectively respond to audience inquiries. For example, brands can collect product reviews from their own website and app instead of compiling them from multiple sources, or perform A/B testing to improve their paid ads and email campaigns. mail. This makes it faster and easier for marketers to act on user feedback and deliver the personalized experiences customers are looking for.
3- Differentiate the proposal to the consumer
Direct relationships with end customers help to better understand how products solve the daily problems encountered by the customer and to identify how to bridge the gap between the consumer and the brand.
4- To boost sales
Finally, to maximize profitability and make the products more affordable so that a wider range of customers can purchase the products.
How the D2C approach has benefited the industry.
(i) Increased control over brand messaging and consumer engagement.
Manufacturers have little control over their brand in the traditional manufacturer-retailer relationship. Although manufacturers control packaging and other marketing activities, once the product is released to retailers, they no longer have the ability to influence sales, build consumer relationships, or collect data. Manufacturers can spend a lot of money on advertising, but retailers are ultimately responsible for presenting the product to the consumer.
(ii) More opportunities to innovate.
When it comes to selling, most retailers adhere to a set standard. They frequently avoid selling new products that have no history of hot selling. Manufacturers are then limited to producing only what retailers want. D2C allows manufacturers to test new products on a smaller scale with specific demographics and gather feedback. Manufacturers can better understand what their customers want, produce what sells, and improve products where necessary.
(iii) Direct access to customers and their data.
Customers’ email addresses, location, social media profiles, shopping preferences, and other information may be collected directly from them during the purchase process, including after the sale. Knowing consumer buying habits could help companies improve existing products and perhaps develop new ones.
(iv) Earn higher margins.
By cutting out the middlemen, manufacturers can increase their profit margins. When they sell their items through an intermediary, they only benefit from the mark-up of the gross selling cost. D2C allows brands to offer products at the same price as retailers, leading to increased profits.
(v) Stronger brand loyalty.
With D2C, manufacturers have more freedom to provide better service and support to their customers. They can use their customer relationships to build strong connections and increase retention through tailored marketing activities. Better connections can lead to more customer generation.
(vi) Market opportunities have expanded.
When selling direct to consumers, manufacturers are no longer limited by region. They can just sell to the right consumer groups in the right market to go around the world.
From a financial and operational point of view, a D2C strategy is advantageous. However, creating forward-looking plans is always a smart idea to ensure the model remains consistent in delivering what customers want. Therefore, it is essential to continue to disrupt the strategy in order to meet the ever-changing needs of customers and move effectively into the future.
The opinions expressed above are those of the author.
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