Over the past two decades, there’s been a steady rise in the volume of online traffic, caused by consumers turning to the internet and social media to shop online for everyday essentials without leaving their home. As a result, companies like shoemaker Allbirds Inc., mattress-seller Casper Sleep Inc. and makeup brand Glossier Inc. ushered in a new era of direct-to-consumer (DTC) companies. Understanding the changing retail landscape and the evolution of consumer habits and preferences, these brands rose to prominence thanks to direct distribution, web-only retail, social media marketing and various other factors.
Fast forward to today’s global pandemic, with consumers forced to stay at home, and the volume of online traffic and e-commerce sales has grown substantially. Even those who preferred in-store shopping were forced to rethink how they shopped for goods. In May, digital sales were up 77.8% year over year to $82.5 billion, tracking higher than holiday shopping levels on Black Friday and Cyber Monday, according to data from an industry report.
The disruption of the COVID-19 pandemic has led to a greater demand for sophisticated supply chain technology that can accommodate increased demand for DTC sales, bypassing physical storefronts. At the same time, established players are looking at how they can use supply chain and logistics technology to skip regional distribution centers and get their products into the hands of consumers faster.
Regardless of which phase of reopening each state is undergoing, companies should avoid depending solely on the return of physical storefronts, and pivot their resources to focus on DTC strategies. With the possibility of another wave of the virus in the fall, there’s the strong likelihood of another regional or nationwide shelter-in-place order.
Following are three ways that organizations can build or improve on their own DTC pipeline.
Invest in advanced technology. It’s critical for organizations to employ technology that supports the entire ecosystem: inventory optimization, seamless ordering, last-mile delivery and accurate delivery window timing. Business leaders should re-evaluate their current systems and processes to identify gaps and areas of improvement to the supply chain or operational performance.
Employ data and analytics for key decision making. These underpin supply chain technology. Business leaders should take advantage of the insights made available to them in order to optimize and prioritize decision making in the near and long term.
Using scenario planning and forecasting for key decision-making isn’t enough in today’s unprecedented ecosystem. In the current scenario, traditional forecasting methods won’t be able to provide accurate forecast measurements. As the year of uncertainty continues, supply chain leaders and managers should closely monitor and reference real-time data and analytics for decision making.
Allow for economies of scale. Who knows how long the current situation will last? Is DTC the new normal for retail? It’s critical for supply chain leaders to focus and anticipate on a long-term vision when implementing this type of strategy.
For several leading DTC brands with global manufacturing hubs, shipping products worldwide is not only taking longer, but it’s also getting more expensive, due to supply chain complications and challenges arising from the pandemic.
It’s no secret that e-commerce would become the future of retail, but thanks to challenges created by the pandemic, COVID-19 could be the catalyst for industry-wide disruption. Organizations large and small can adapt to the long-term effects, however, and the foundations they set are critical to success.
Srini Rajamani is vice president and sector head of consumer and life sciences at Wipro.
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