Why it’s time for pet brands to adopt a direct-to-consumer strategy

Traditional distribution models of manufacturer-wholesaler-retailer cannot survive the ever-decreasing margin pressures, as the world battles with a variety of significant challenges. To name a few: consumers demanding lower prices, increasing supply chain costs driven by global container prices, and a fuel price explosion. Plus the economic downturn and cost-of-living crisis everyone is facing.

Profitability gap

Retailers looking for profit improvements have historically sought these from their suppliers, which has always been an unrealistic demand and caused years of conflict between manufacturers and their resellers. The gap between top and bottom line profitability has never been tighter, yet is a challenge that persists.

The answer is simply to cut out the intermediary, which would in the past have been the wholesaler or regional distributor but is now considered to be the retail partner.

The basics

Direct-to-consumer supply enables manufacturers to bypass existing distribution channels of wholesale and retail, instead supplying consumers via their own retail operation or digital sales channels.

While taking control of the customer journey, data gained from having a direct relationship with end users can provide invaluable insights. DTC can improve revenue, especially following the recent decline of the retail industry across the world. It can also improve gross margins, by recovering those previously allocated to retail distribution partners.

Online companies have exploded onto digital markets, heavily disrupting traditional retail sectors. Dollar Shave Club and Harry’s in shaving, Casper in mattresses, and Glossier in beauty products have taken significant market share from incumbents, for example.

But DTC isn’t just about pure-play operators, those that are online only. It’s something that every pet manufacturer should be aware of, so much so that if you don’t currently have a direct-to-consumer strategy, it may be too late.

Benefits on all sides

A DTC strategy has a number of benefits for brands, and also for customers. These range from financial and operational to brand and consumer experience.

Owning the complete distribution channel allows manufacturers to deliver the type of brand experience marketers have only dreamed of. When perfected, it gives consumers the shopping experience they have only dreamed of.

If you’ve ever played the children’s game Whispers, where someone passes a phrase to another, who passes it on, so the whole sentence changes by the time it reaches the last person, you’ll understand the brand manager’s challenge in delivering the whole brand experience they set out to achieve. DTC regains this control and helps to achieve the original brand vision throughout the customer experience.

Having direct access to consumer behaviors – whether through search analytics, on-site data insights, or actual purchase information – is incredibly valuable. This same direct access enables brands to interact with consumers on an almost one-to-one basis.

Brands that deliver e-commerce excellence in their distribution will reap the rewards of increased sales. At a higher financial level, they’ll receive retail selling prices rather than distribution prices.

A DTC strategy also sees margin growth of anywhere between 10% and 30%, giving a significant boost to the bottom line.

Are we ready for this?

While DTC gives plenty of benefits, there are – of course – some considerations that players within the pet industry should take into account before deciding to go down this path.

In addition to the financial upside, DTC doesn’t come without costs – changes to the supply chain, impact on technology and systems, additional resource and subject matter expertise, new marketing channels and more.

There is also the impact on business culture, ethos and partners. How does a direct approach fit with company values? Can your staff and business partners cope with this change? Both people and infrastructure must be ready, willing and aligned to the change of direction.

Getting the tactics right

The companies that have not yet adopted a DTC strategy are often the ones wrestling with the impact on their staff and partners. They are unclear about how it will work in transition. It is important that brands understand their tactics as well as the strategy.

In the words of Chinese military general Sun Tzu, “Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”

Let’s take a closer look at some key strategic areas, as only you can decide on the tactics that are right for your business.

Product range and customer sales support

Even the largest retail stores only have a limited product range available, whereas dedicated brand shops or websites can showcase the entire portfolio, displayed with full brand intent and supporting brand marketing.

Manufacturers don’t have consumer-facing sales channels, so they must build them. It can be a combination of retail stores, transactional websites, mobile apps, digital marketplaces and direct subscription models.

Before the consumer-facing sales channels are opened, the customer support infrastructure should be in place. It will manage pre-sales product inquiries and post-sales questions on a wide range of topics, including: ‘Where’s my order?’ and how to pay, as well as issues with deliveries and delivery services, plus everything to do with refunds. Nobody said this would be easy!

Marketing and distribution partners

Many manufacturers deliver their goods to traditional retail customers on pallets, but a DTC approach reduces this to single-item distribution. That means changing warehouse operations and selecting new delivery partners.

Brand marketing is very different from e-commerce marketing, and may require you to recruit specialist digital marketing experts in customer acquisition and retention, plus learning a whole host of new acronyms: SEO, PPC, CRO, UX, CRM, CX.

Integrated technology

The final pillar in the new building known as DTC is to ascertain if your technology infrastructure can support a consumer-facing operation. This means looking in detail at your ERP system, e-commerce platform (if you have one), and Warehouse Management System (WMS). And finding out whether your system architecture is fully integrated.

Getting it right

Ever-decreasing margins mean manufacturers must be prepared to adapt or risk being left behind by competitors. The rewards are generous, but the risks are higher for brands that get this wrong.