Is It Time To Dump my Resellers?
This is the second in a set of short articles on Direct To Consumer (D2C) sales models. This one explains what you can gain from this approach.
- Gross Margin – the most obvious advantage is an instant increase in gross margin. Of course, all of the functions provided by a traditional sales channel will now need to be addressed by you. But don’t simply take them over, many of the things that they used to do are no longer needed and, possibly, new functions need to be added. With that fat increase in gross margin, you can take it all to the bank, increase your level of customer care, create a competitive price advantage, etc.
- Customer Intimacy – one of the most frequent questions I encounter in a sales channel environment is, ‘who owns the customer relationship?’. This ownership can be both very valuable and very expensive depending on the situation. In a D2C model, you own the customer - which gives you tremendous flexibility in creating policy and handling opportunities.
- Market Agility – in large sales channel networks, it can take months to implement changes in products, features, prices, policies warrantees etc. In a D2C model you can respond to market or competitive issues almost instantly.
- Market Knowledge – as a product or service provider, your very existence depends on a fast and furious flow of information to allow you to make sound business decisions about products, prices, features, quality issues and so on. A D2C model lets you drink directly from that firehouse of un-varnished, pure data to make your business decisions.
- Currency – most of you will remember a game called Broken Telephone where the initial message is successively garbled as it is passed from person to person (I call this message decay). The more members in the communications channel, the greater the probability for decay. And not only that, the further down the channel you go, the less interested the people are in your message. D2C shortens the chain and reduces decay.
- Destiny - your goals are unique. Certainly, some channel members will be in-step for a while but ultimately you or your channel member will need to compromise in order to keep playing together. The D2C model allows you to cut your own trail to success.
OK – so the above are benefits of a D2C model. But (and it’s a big but) it is not for everyone in every situation. You need to look at the value that each member in the value chain is adding to the end user experience. In many cases buyer behavior, technology and logistics systems have eroded the traditional value-add provided by sales channels. In others, the unique value provided by the channel is essential to the end users’ derived value. If you’d like some help figuring that out - let’s talk.