The McKinsey report notes that currently in Indonesia there are 30 million online shopping transactions worth US$8 billion, with 60 percent of them being carried out online. Apart from marketing products through resellers, dropshippers and retailers, businesses can also distribute and sell products with a direct-to-consumer (D2C) business model.
The D2C business model certainly has its own advantages and challenges for users and shippers compared to other business models. On the one hand, D2C allows the after-owner to control stock so that the sales flow is not affected by distributors or intermediaries.
But on the other hand, D2C also has a number of limitations, such as the lengthy preparations that must be made by business owners. So, is D2C the ideal business model for the current conditions? Check more in the following detailed discussion.
What is the Direct to Customer (D2C) Model?
What is direct to customer d2c model
D2C is a business model that sells without intermediaries such as resellers, dropshippers and retailers. In short, you carry out all stages from production, packaging, sales, to product delivery without involving third parties.
This business model can be done through various channels, from the web, social media accounts, to physical stores that allow you to connect directly with consumers. D2C is only one business model besides B2B, B2C, or C2C, each of which has advantages and disadvantages, as described in the following.
The Strengths and Weaknesses of the D2C Business Model
Like any other business model, D2C certainly has advantages and disadvantages. Quoting from various sources, here are four advantages and three weaknesses of the D2C business model.
Advantages of the D2C Business Model
– More Profits
As a business owner, you can determine the price of the products being marketed. It’s different from third party assistance, so you have to determine a different price because the middleman will increase the price to get a profit margin. That way, you can sell products at a lower price and a bigger profit margin because it’s entirely up to you.
– Identification of Consumer Data
You can connect directly with consumers so that they can get data in the form of characteristics (demographics and psychographics) and consumer behavior (related to habits that lead to purchases). The collected data allows you to make adjustments on the web or selling platforms.
– Creative Determining Product Offerings
You can freely make offers without having to follow the rules on the platform or web belonging to a third party. You can sell products on your own platform so you have the freedom to be more creative in offering products to attract consumers.
– Proximity to Consumers
Direct interaction with consumers can build intimacy so that you can display your brand style more freely. In addition, direct communication also allows you to establish long-term relationships, making it easier for product promotion patterns.
Drawbacks of the D2C Business Model
– Supply Chain Flow
The flow of supply (supply chain) starting from the production, packaging, to shipping stages is certainly overwhelming. Apart from focusing on products and sales, you also have to pay attention to distribution channels.
– Long Preparation
It takes a long preparation starting from learning, experimenting, to implementation to manage the entire supply chain flow. D2C can be quite a complicated choice for those of you who are just starting out in business.
– Dealing with Consumers
Like two sides of a coin, direct interaction with consumers has advantages and disadvantages. That’s because you have to be prepared to face questions up to filing a complaint. In this case, you act as a customer service person who is able to empathize and provide solutions related to products, packaging, and shipping problems.
Challenges Faced by Users in D2C Business
Based on a study conducted by Emizentech that collected various consumer experiences, here are a number of challenges faced by users during the D2C business model.
Omnichannel D2C Delivery
Distribution of OmniChannel D2C shipments is a challenging aspect because you have to know where the products are, be able to make promotions everywhere, and be able to access consumers in any location. Aberdeen Group Inc. revealed, companies with strong OmniChannel customer interaction were able to retain 89 percent of their clients. Meanwhile, companies with low omnichannel user engagement were only able to retain 33 percent of consumers. Businesses that apply the D2C model must be able to meet client requirements while ensuring promotional efforts are in line with the target market.
D2C Portal
Clients have access to details and other facts regarding interactions with the D2C business model. End-to-end consumer engagement allows companies to gather all market and operational facts. Platforms that provide insight into D2C business interactions with consumers help create and maintain loyalty, build a brand community, and have emotional and social bonds with clients. It is very important to have all the relevant information on all D2C routes from all existing consumer channels.
Personalized D2C Experience
Personalization can be one of the main points of business differentiation apart from aspects of price, product customization and head-to-head sales. According to Epsilon, 80 percent of consumers are more likely to buy from a company that offers a personalized experience. In order to be able to provide personalized services, it requires a concept of product design, services, incentives, and interactions that suit each consumer.
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Solutions that Support Convenience for Users
To overcome the challenges faced by users in the midst of implementing the D2C business model, Helios as the HPE distributor in Indonesia presents an exclusive Helios product, the HPE SimpliVity 325 for more flexible storage escalation needs. HPE will help your company deliver servers with scalability and SAP Hana needed by branch offices for real-time business analytics.
HPE SimpliVity 325 offers a fully integrated server solution for simpler data management, scalability and protection of customer data. With a server size of 1U, the HPE SimpliVity 325 is able to provide an extraordinary combination of processor, memory, I/O, InfoSight, and data protection for experiences in edge and VDI environments.
HPE SimpliVity 325 is the ideal solution for distribution needs so that it can encourage business development to be more efficient and to quickly capture opportunities. New AI and container features, cloud data protection, security across the Stack, and data protection allow companies to compete more effectively and efficiently.
Challenges Faced by Shippers in D2C Business
Overcoming last-mile delivery is one of the challenges that shippers often face in the D2C business. This aspect is also the most inefficient and expensive part of the entire shipping process.
Given that all online transaction shipments have unique and distinct shipping addresses, this keeps transportation costs high while efficiency levels are low.
For merchants using a centralized fulfillment strategy, last-mile delivery tends to provide a poor customer experience. This is because orders distributed from one facility will be close to several consumers, but far from others.
If one order has to cross several delivery zones, then there is a possibility of disruption in the form of route planning that is not optimal, traffic congestion, shipping costs become more expensive, or delays between delivery centers before it reaches the consumer.
Solutions that Support Convenience for Shippers
To overcome challenges that are often found during the delivery process, your company can equip couriers with remote device technology, canvasing route tracking, real-time information, and data leakage protection. Helios Informatika Nusantara (HIN) as a digital IT provider will help you overcome problems encountered during the industrial distribution process through the Helios Mobility Suite (HMS) product.
HMS enables enterprise-owned devices and applications to be easily managed and used safely and productively by teams in the field. HMS is equipped with various features, such as GPS-Location Tracking, real-time device information, push notifications, to Security and Control. GPS tracking will accurately track the location of canvasers and couriers in the field during the goods distribution process through location tracking.
That way, the movement and transfer of couriers can be monitored in real-time. In addition, the history tracking feature can also be stored for 30 days to see the courier’s journey for the past month with the aim of ensuring productivity and minimizing fraud during the product distribution process.
Meanwhile, the security and control feature allows the company to monitor the condition of the device being used or not through real-time device information. HMS ensures that it will protect data from potential leaks by sellers, drivers, collectors and couriers in the field by limiting access to several features, such as bluetooth, cameras and others. HMS can also send push notifications when there is an update that you want to roll out to the courier device.
Supervisors can more easily monitor the product distribution process accurately by optimizing GPS performance with work and personal views.
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Helios as an IT Solutions Provider for the Distribution Industry in Indonesia
Simplify the process of distributing goods to consumers in the midst of implementing a B2C business model with a series of HPE SimpliVity 325 and HMS solutions from Helios Informatika Nusantara (HIN). Helios as a digital IT and cloud solution provider will help your business monitor the distribution process to the consumer’s place.
Supported by a reliable, professional and certified IT team, Helios will help your company from the consulting, implementation, maintenance, to after sales support. Interested in using a solution from Helios? Immediately contact WhatsApp Helios Helios to consult directly with our team.
