What is D2C ECommerce?
D2C stands for Direct-to-Consumer. When a manufacturing company sells directly to its customers via its online store, such a distribution strategy qualifies as D2C eCommerce. It bypasses all traditional intermediaries like wholesalers, distributors, and retailers in the distribution process. Such a company could even be a foreign entity selling directly to consumers of another country. This, of course, is subject to rules and regulations. For a local or domestic manufacturing company, D2C is a far easier process and a more effective distribution strategy. But given the business-friendly environment in countries like the United Arab Emirates (UAE), international manufacturers find it relatively much easier to penetrate the markets here via the export route. In the Middle East, a huge proportion of eCommerce purchases are sourced internationally. The growth of D2C eCommerce is evident in the increasing share of D2C sales of the total eCommerce sales in the region. Retail eCommerce sales in the region have more than doubled in the period 2015-20.
Why D2C eCommerce?
Since businesses deal directly with their customers in D2C eCommerce, they have better control over brand reputation. Any complaint or feedback reaches directly to the company. It gives them a first-hand understanding of consumer behaviour. There are better insights into existing and developing trends in customers’ tastes and preferences. In the presence of intermediaries, companies have little or no control over how their brands are represented by the middlemen. For example, a shopkeeper may refuse to entertain any refund or exchange of a product that could not meet a buyer’s expectations. Or sometimes retailers fail to merchandise products of particular brands due to mismanagement on the part of the distributors and wholesalers. In such cases, it is not only the reputation of the intermediary that comes in the line of fire but the name of the manufacturing company is also tarnished. And the worst part, the company never gets to know about these kinds of customer experiences meted out by the intermediaries. It becomes difficult for them to ascertain the causes of the downfall in the overall demand in a given market. But in D2C eCommerce, it is the employees or the technological systems that can affect the company’s brand reputation. But because employees and systems are internally managed by a company, there is much better control over the interaction and experience delivered to customers.
Another major plus with D2C eCommerce is that businesses get to know their customers better and quicker. Information is critical when it comes to understanding consumer behaviour. The higher the number of intermediaries, the higher the obstacles in the flow of information from consumers to the company. Intermediaries are separate business entities and it is difficult to make them toe the line with a company’s policies on information-sharing. But with absolute ownership of the distribution process, companies can define and implement centralised business data collection and dissemination based on their planning and strategic decision-making requirements.
Globally, the MENA region represents one of the youngest populations. A huge majority of the youth here are smartphone users. They have already embraced eCommerce. In terms of consumer readiness, these circumstances offer a ready-made platform for D2C eCommerce. In addition to the UAE and KSA, other MENA countries like Qatar, Kuwait, Bahrain, Oman, and Egypt also have impressive eCommerce user penetration.
What is the future of D2C eCommerce?
It is undeniable that D2C will be adopted by more and more manufacturing companies with time. But the rate of adoption of D2C eCommerce largely depends on the warehousing and logistical environment. It may be easier for a selected few manufacturing brands to build their own distribution infrastructure. But a majority of businesses rely on external systems for their distribution process. The middlemen may get eliminated but services providing platforms will play a big role for a major chunk of businesses if they have to go the D2C eCommerce way. Technology, warehousing, and logistics will be the three most important areas of service in the growth of the D2C eCommerce industry.
Countries like the UAE and the Kingdom of Saudi Arabia have one of the best infrastructural facilities for business and trade in the world. Retail and eCommerce are already thriving markets in most of the MENA region. This would not have been possible without the presence of the required infrastructural abilities at the local and domestic levels.
Challenges in MENA’s D2C ECommerce Industry
Getting Past the Wall
Brick and mortar retailing enjoys a mammoth share of the overall retail market not just in the Middle East but all over the world. The increasing offline presence of big domestic and international brands only makes it more difficult for the new and existing D2C eCommerce brands. Although eCommerce has been able to capture market share from the physical retail market it is still not easy for many inherent benefits offered by physical stores. Habit (as a part of consumer behaviour) is one of the leading reasons that keep customers pulling back to physical stores. Validation is another factor that is necessary for certain products and a preference for many customers.
The Invisible Competitors
For both physical and online retailers, the competition from other online players is very difficult to be ascertained with certainty. The eCommerce market potential of the Middle East is far from being a secret. The markets there are getting full of independent domestic and international eCommerce brands. Online marketplaces like Souq, Noon, Amazon and Jumia have intensified their activities to enhance their presence. In such a situation, if business intelligence, data analytics and market research are not attuned to keep a tab on relevant competitive developments, then losing out market share is a real possibility.
Brand Differentiation
When a large number of brands and businesses offering the same or similar products exist in a market region, it is always difficult for new businesses to make a unique brand positioning. The same goes for D2C businesses. Almost every big brand in every product category has already gone omnichannel in the GCC and MENA markets. Then there are online marketplace platforms like Amazon, Souq, Noon, Jumia, etc. The competition from local physical retail stores and supermarkets makes things further difficult for D2C. So, unless it is a high-value, unique product or some superlative marketing genius in action, it is hard for D2C brands to outrun the existing competition for a sustainable period.
Keeping Customer Experience above the bar
Gauging customer experience is a tough assessment. It is never easy to assess the psychological impact of a marketing decision on the customer experience. The results take some time to show up. But by then, it could be late. By then, some competitors might have made better changes. By then, customers might make a decision to try another brand. By then, a high-performing sales team might draw less incentive because of lesser sales. If it goes on for long, employees might begin considering changing their jobs. The eCommerce markets like that of the UAE and Egypt are highly competitive. And customer experience is a major variable in the marketing equation. In cities like Dubai and Cairo, where the CX efforts of domestic and international brands are already at global standards, customers carry high expectations from physical and online retail brands from D2C players as well. Superseding these standards is a big D2C eCommerce challenge.
Containing CAC (Customer Acquisition Cost)
In D2C eCommerce, businesses are reliant on the efficacies of their digital marketing efforts. From generating the initial traction in the form of incoming traffic and higher audience engagement to consistently achieving conversion, the ultimate objectives of digital marketing are to expand the customer base, generate more sales, and build brand loyalty. Digital marketing is an ongoing process. It rarely works right with the initial efforts. Businesses often have to inflate their budget to adjust the elements. They end up escalating the acquisition costs (CAC) in this process.
Succeeding at eCommerce Personalisation
Data analytics play the most important role in eCommerce personalisation. But data is of lesser significance if its application is not known. It is important in online business models like D2C to know:
· What they want to do with data,
· What specific data is required,
· How that data is going to be captured
Asking customers to fill up forms and complete surveys is not very motivating. Here too, associating user experience with value is important. Zeroing on that value gives insights for personalisation. Ecommerce personalisation is also difficult because user behaviour on online platforms need not necessarily reflect their traits as consumers. When a large share of the population uses the internet, it includes all types of users including potential customers. User behaviour could be easily misidentified as consumer behaviour. This makes eCommerce personalisation a tricky area of work in the GCC countries where the internet penetration rates are very high.
Why YRC
We are more than a decade, boutique retail & eCommerce business consulting fim. We have served over 500+ clients spanning 20+ verticals with our business solutions and services. We are also an emerging global brand with a service presence in the Asia & MENA region. Our eCommerce D2C eCommerce consulting services and solutions encompass conceptualisation, planning, strategy, implementation assistance and improvisation. The service design and delivery are carried out by a team of expert and experienced D2C eCommerce business consultants. Continue reading for a quick overview of how YRC can help your D2C eCommerce business become a robust enterprise and competitive brand.
We carry out comprehensive studies on the clients’ target markets in terms of an overall perspective, competition, pricing, products, the performance of various sales channels, demand analysis, UVP, etc. We present detailed reports including recommendations and CTAs. This is covered under our D2C market research services. These analytical reports are useful for D2C startups and businesses that are targeting to expand to new markets in the GCC and MENA regions.
If a D2C eCommerce business wants to effectively compete against the prevalent physical and online retail competition in the GCC and MENA region, it will need to come up with a unique value offering that cannot be easily replicated. A strong UVP is the pathway to quicker market penetration. Now what constitutes ‘unique’ and ‘strong’ depends on a business’s existing strengths and prevalent market circumstances. In D2C eCommerce business model development, we help our clients identify their stronghold areas in the business in a given market background. We also map the value chain and define the internal capabilities required to successfully and profitably create and deliver the intended value to its customers.
IT constitutes the operational backbone for an eCommerce entity and it also applies to D2C eCommerce businesses. YRC will help you identify and define the business-IT strategy and software requirements of your D2C eCommerce business. Your unique business, strategic and operational mandates will be duly taken into consideration. The basic goal here will be to ensure that your enterprise is running on the right software platform.
In CX strategy consulting, we assist clients in formulating CX strategies for their business that not only lead to the representation of the intended customer orientation but are also competitively superlative. We map and define the entire customer journey along with the identification of every critical touchpoint and what needs to be done there.
