High street retail will recover, but spend may never quite return to previous levels. Restaurants and hotels will re-open, but it may be years before business is fully restored.
In the meantime, consumers are buying online like never before, online purchasing has increased by some 50% to 75%. Many consumers have adopted online for the first time, and, of course, many will retain this new habit forever. The SARS outbreak of 2003 changed consumer behaviours in Asia permanently; Covid-19 will do the same throughout the world.
So all consumer products businesses must ask themselves the question: how do I create and grow a B2C online channel?
Consider the experience of two different F&B wholesalers the coronavirus took from thriving concerns to the very edge of survival. Pivoting to direct-to-consumer sales seemed their best shot at staying alive.
The first company is a mid-sized restaurant supply firm. When all the restaurants closed, the company had to find a way to keep selling their stock, much of which was perishable. They hit on the brilliant idea of selling directly to consumers after all. The established grocery delivery services were already overbooked, people were afraid of supermarkets, and many shelves were empty anyway.
At first, it went well. They were successful with high-profile guerilla marketing, and, while they were used to selling in bulk, it wasn’t difficult to repurpose areas of their warehouse to process individual orders for certain products. They put in place new delivery arrangements and temporary customer service and returns handling.
But within a fortnight they became a victim of their own success – overwhelmed by orders, the website crashed. And in the rush to serve their new customers nobody stopped to figure out if they were even making a profit. Now they’re burning through cash, deliveries are late, and they’re losing the goodwill of their customers. Their brand and the reputation of the management has been genuinely damaged, and their next step is uncertain.
The second company is a well-established meat supplier for high-end restaurants. They too nearly panicked when their customers closed their doors. But instead of rushing headlong into a new market, they carefully (but quickly!) considered which products would be more appealing to consumers and how best to fulfil orders. These guys have seized market share and created a new platform for growth.
These stories are being repeated quite literally all over the world. Some companies have pivoted nimbly and look well-placed to survive and thrive in the direct-to-consumer market. Too many others won’t last through the summer.
The ultimate question is, How to pivot? We’re not talking about stopping the bleeding but creating another long-term channel of substance. Obviously, it’s not going to be easy. But this is a whole new opportunity for the long-term; here’s how to get it right from the start.
Step 1: Understand what to sell and what’s not worth the bother
Many wholesalers and bricks-and-mortar retail stores are creating a new online, direct-to-consumer channel. Here are just a few of the sectors in which we’ve seen mid-market businesses pivoting in the past few weeks:
- Fresh foods and ingredients
- Processed foods or meals
- Cleaning products
- Pet products
The first step for any business is to take an honest look at your products and consumers. Successful wholesalers understand the sophisticated business demands of retailers, and successful high-street retailers understand shopper behaviours. But the online buying journey and rationale is different.
What’s selling right now and why? Where are you making money now, and where would you make money online? And who are your customers, what do they buy and why? Don’t make any assumptions; let the data lead you to the answers. These will be the products and people to focus on. (If you’re having issues with reporting, we can help.)
Look for opportunities to upsell and cross-sell. The idea is not to squeeze every penny you can out of your customer, but to serve them better. If they’re buying a cleaning spray, do they need a kitchen roll? If they’re buying pet food, do they need grooming products? Such tactics may seem obvious; after all, we see them whenever we use Netflix or Amazon. Still, companies pivoting quickly to direct-to-consumer sales may miss the obvious opportunities!
This is also a good time to ask yourself what you can get rid of. It’s time to jettison products that aren’t moving, especially if they’re perishables.
With every product you sell, the questions should be quite simple: am I actually making money with it, and is it sustainable?
These are challenging marketing questions, and your own team may have the skills and knowledge. Or you make need external help. Be honest with yourself about the capabilities and limits of your team.
Step 2: Understand how to sell it
Marketing, technical and operational skills need to blend to create an attractive, convenient and reliable engine for bringing people to your products, helping them to buy, delivering, and handling service issues. Establish clear ownership for each function and establish who is accountable for joining all these up.
With direct-to-consumer, every aspect of this journey is critical in how consumers make judgments about your brand. Online DTC marketing skills like SEO, paid search, newsletters, and social are different from B2B wholesale and high-street marketing. Your marketing team may be able to adapt, but they will also need new tools and data to support this transition. Effective integration with price comparison and aggregator systems often makes the difference between success and failure.
While a utilitarian website may have been fine for, say, the above restaurant wholesaler, they will not retain their new customers without an attractive and easy-to-use front end. On the back end, companies like Amazon have inflated customer expectations and simple things like poor packaging, picking errors, unreasonable shipping costs or stock outages can have a very negative effect on your brand.
We can’t stress this enough: streamlined operations are vital to saving time and money and keeping errors to an absolute minimum. Delivery, packing, returns, and customer service are all critical in direct-to-consumer. Each step can make the difference between success and failure. The cost of one wrong delivery, with the subsequent customer service calls, return and resend can wipe out the profit on twenty correct orders.
Front-end to back-end systems may initially be joined by manual efforts when volumes are small. But as the business grows, you must have a plan for systems integration and automation. Customers need accurate product, stock and pricing information; back-end systems must be able to rapidly process new stock; dynamic and intelligent pricing must be automated.
To get live quickly may require much of this to be outsourced, at least at first. Either way, you must always own your brand and set the standards for the customer experience.
So set a realistic plan divided into a series of simple and agile sprints. Ensure clear roles, good communication, and a commitment to jointly overcoming problems. In our experience, success is built on collaboration, fact-based decision-making, and a can-do attitude.
Step 3: Evolve and build
Creating a start-up within an established business creates new challenges. You’ve got to be smart, and you’ve got to rapidly evolve and grow.
What worked on Day 1 may not be right after a month, and probably won’t be right after a year. Decisions about insourcing and outsourcing will need to be revised to start building margin and to create a sustainable core of skills internally. Third party logistics (3PL) and fulfilment strategies mitigate short-term capital barriers and accelerate speed to market but slick systems integration and automation are the real key to scalability.
Reputation management will become increasingly important. Minimising issues and errors not only maximises profits and cash but it also retains your brand promise. Review and rating tools and aggregation engines can become an important part of your marketing strategy.
But these are mid- to longer-term questions that you can tackle after you’re smoothly taking orders and your customers are happy.
Just remember that short-term solutions have a tendency of becoming permanent, and it may be necessary to confront dependencies on other organisations that can end up being serious risks. For example, Amazon is a convenient answer, but they can be very particular; you may or may not want your brand associated with them, and one change to their algorithm may put your business in jeopardy.
We do know for sure is that online is the key to survival. No ambitious business can ignore the consumer revolution that has been accelerated by Covid-19, and the need to embrace multiple routes to market to minimize your risks and maximise your opportunities.
If you have questions or concerns about your own transition to B2C, then please get in touch. We’re helping our clients navigate these issues right now, and we’re always up for a low-pressure chat.
Freeman Clarke is the UK’s largest and most experienced team of part-time (we call it “fractional”) IT leaders. We work exclusively with ambitious organisations and we frequently help our clients use IT to beat their competition. Contact Us and we’ll be in touch for an informal conversation.