Direct to Consumer Fulfillment (D2C): What is it & How it Works

With the rise of e-commerce and changing consumer behavior, D2C fulfillment has become an increasingly popular strategy for businesses. This model offers many advantages over traditional retail channels, including greater control over the customer experience, increased margins, and improved data analytics – not to mention that it has leveled the playing field and given a voice to smaller businesses. In fact, there are nearly 4 million ecommerce companies in the US alone!

What does direct-to-consumer order fulfillment mean? We will explore its meaning and the critical aspects of D2C fulfillment.

What is D2C Fulfillment?

Direct to Consumer Fulfillment, sometimes referred to as e-commerce fulfillment, is a supply chain strategy in which a company manages inventory and delivers orders directly to consumers, rather than via retail stores or other brick-and-mortar channels. By selling directly to consumers, firms eliminate intermediaries – reducing some of the layers of cost and thereby allowing brands to sell at a lower cost. D2C sellers handle everything from manufacturing or sourcing products to warehousing, shipping, and customer service.

Direct to Consumer fulfillment has a unique advantage in marketing, as they have direct access to their customers. Direct access enables them to collect valuable data on their preferences and behaviors.

Here is a list of ways that D2C companies market their products:

• Social media marketing
• Search engine optimization (SEO)
• Email marketing
• Content marketing
• Referral marketing
• Pay per click Advertising
• Offline marketing, such as events and shows

What Are the Pros of D2C Fulfillment Versus Traditional Retail Strategies?

Direct to Consumer fulfillment eliminates many entry barriers that small businesses faced when trying to break into traditional retail channels. It lowered overhead costs by eliminating the need for a physical storefront or inventory storage. D2C also enables small businesses to establish direct customer relationships, building brand loyalty and customer advocacy.

Direct to Consumer Fulfillment also provides small businesses with valuable data and insights into customer behavior and preferences. This data helps them make more informed product development and marketing strategy decisions.

Small businesses can now set up an online data-driven store with minimal investment, enabling them to compete with larger retailers on a more level playing field. It allows startups to allocate more resources toward product development, marketing, and customer service.

Benefits of D2C Fulfillment Strategies

Direct-to-Customer strategies offer businesses greater control over sales. Enterprises cut out intermediaries giving the ability to manage their supply chain all in-house. This control creates a cohesive brand experience and ensures complete control over customer interactions.

These strategies are more cost-effective than traditional retail strategies. Eliminating intermediaries reduce some of the costs associated with warehousing, shipping, and marketing. You can then pass these cost savings to the customer through lower prices, helping businesses attract price-sensitive consumers.

D2C strategies provide businesses with more direct access to customer data. Companies collect valuable data on customer behavior, preferences, and purchase history by selling products directly to customers. This data informs product development, marketing strategies, and customer service interactions, leading to better outcomes and more satisfied customers.

Direct to Customer strategies are also flexible and responsive to changing market conditions. Since businesses handle the entire sales process in-house, they can respond more quickly to changing market trends and customer needs. This agility helps them stay ahead of the competition and quickly respond to new opportunities.

Is Amazon Considered Direct to Consumer (D2C)?

Yes. Amazon is an online sales channel, and therefore is considered to be a D2C channel. Essentially, Amazon is a marketplace where third-party sellers can offer their products directly to consumers. Amazon also offers Amazon FBA and Amazon FBA fulfillment.

How Does D2C Fulfillment Work?

Managing DTC fulfillment can be complex and time-consuming, requiring companies to handle a range of processes efficiently. Let us look at an overview of how DTC fulfillment works, including the key steps and strategies to streamline the process.

These steps include:

1. Receiving Inventory: Receiving inventory is the first step in the D2C fulfillment process that involves the physical receipt and acceptance of the products the company intends to sell. Once the merchandise is received, you must inspect it against the purchase order to ensure the products have been delivered in the correct quantity and condition.
2. Inventory Management: Inventory management oversees and controls the inventory of products a D2C company plans to sell. It includes maintaining accurate records of the products in stock, tracking their movement, and ensuring products are available in the right quantities at the right time. Effective inventory management ensures the company can fulfill customer orders efficiently and without delays. It involves forecasting demand, ordering products in advance, and monitoring inventory levels to avoid stockouts or overstocking.
3. Order Processing: Order processing involves verifying and validating customer orders before shipment. Once an order is placed, it needs to get reviewed to ensure the order details are accurate, the product is available in inventory, and the customer’s payment has been processed.
4. Picking and Packing: Picking and packing is the physical preparation of the product for shipment. The right products must be picked from inventory, checked for quality, and packed securely to prevent damage during shipping. It involves selecting the right products from inventory, verifying the product against the order, and packaging it in the appropriate size and material for shipping. Depending on the company’s policies, additional items such as packing slips, promotional materials, and address labels may also need to be included.
5. Shipping: Shipping is the physical transportation of the product from the direct-to-consumer fulfillment center to the customer’s shipping address. The product is shipped using an appropriate courier method based on the customer’s location and preferences. Shipping requires efficient coordination, accurate tracking, and compliance with relevant regulations to ensure the product is delivered accurately and on time.

Strategies for D2C Fulfillment

Here are some strategies used in D2C fulfillment.

• In-house fulfillment: In-house fulfillment involves a company managing its warehouse and fulfillment operations instead of outsourcing to a 3PL company (third party logistics). It allows companies to have more control over the fulfillment process and customer experience and potentially reduce costs. To implement in-house fulfillment, a company must invest in a warehouse, inventory management systems, and shipping infrastructure which might be expensive. The company also needs to hire and train staff to manage the operations, such as pickers and packers, inventory controllers, and shipping clerks.
• Outsourcing fulfillment: Outsourcing fulfillment is another strategy companies use to fulfill D2C orders. It involves contracting with a third-party logistics provider (3PL) to manage the warehouse, inventory, and shipping operations on behalf of the company. Outsourcing fulfillment can be an attractive option for companies without the resources or expertise to manage their operations. By outsourcing, companies can leverage the knowledge and infrastructure of the 3PL to manage the entire fulfillment process. This strategy helps companies reduce fixed costs, such as investing in a warehouse and staffing. It also allows companies to focus on their core competencies. However, the company has less flexibility and control over the fulfillment process, which can impact the customer experience.
• Hybrid fulfillment: Hybrid fulfillment is a strategy that combines in-house and outsourcing fulfillment to fulfill D2C orders. A company may manage some aspects of the fulfillment process in-house with hybrid fulfillment while outsourcing other elements to a 3PL. Hybrid fulfillment allows companies more control over the customer experience while leveraging the expertise and infrastructure of a 3PL. It ensures that the company’s branding and packaging are consistent while reducing costs and increasing efficiency. However, hybrid fulfillment can also be complex and require significant coordination between the in-house and 3PL teams.

Why Using a 3PL for D2C Is Advantageous

Let’s look at the top 6 benefits of using a 3PL for your D2C fulfillment.

1. Cost Savings – Outsourcing logistics to a 3PL can be more cost-effective than building and maintaining an in-house logistics operation. It eliminates the need for businesses to invest in warehouse space, equipment, and personnel. 3PL providers have the expertise and economies of scale and can leverage their purchasing power to negotiate better rates with carriers.
2. Faster Delivery – Using a third-party logistics (3PL) provider for direct-to-consumer (D2C) operations can improve customer delivery times. 3PL providers often have multiple warehouses located strategically, enabling them to fulfill orders quickly and efficiently. This distribution of locations minimizes shipping distances and transit times, resulting in faster delivery times for customers.
3. Scalability – As businesses grow and expand, their logistics needs become more complex, requiring additional resources and infrastructure to support operations. 3PL providers have the flexibility to adapt to changing business needs, hence businesses can leverage their expertise and resources to scale operations quickly and efficiently.
4. Expertise – 3PL providers specialize in logistics, supply chain management, and fulfillment services and have extensive experience managing complex logistics operations. They have the expertise and knowledge to optimize logistics operations, reduce errors, and improve customer experience.
5. Improved Customer Service – Fulfillment companies have the expertise and resources to manage logistics operations efficiently, leading to faster delivery times, accurate order fulfillment, and improved inventory management. They also offer value-added services like order tracking, returns processing, and customer support resulting in higher customer satisfaction and loyalty.
6. Access to Technology – Partnering with a 3PL provider can benefit businesses from access to their technology. 3PL providers invest heavily in technology to streamline logistics operations, provide real-time visibility, and improve efficiency. This access to technology can enable businesses to make data-driven decisions, optimize operations, and enhance the overall customer experience.

Final Thoughts on Direct to Consumer Fulfillment

Direct-to-Consumer fulfillment is a powerful tool for brands looking to establish a closer relationship with their customers. Still, it requires careful planning and execution to be successful. As e-commerce continues to grow and consumers demand more convenience and personalization, companies must consider it to gain a competitive advantage.

Will Schneider

Will Schneider is the Co-Founder and CEO of WarehousingAndFulfillment.com. Previously, he served as CEO of RMC Fulfillment and Clear Stream Fulfillment within the 3PL industry. In addition, Will served as VP of Finance at NetQuote, a leading lead generation company in the insurance vertical. Will has an MBA from the University of Colorado and an undergrad in Accounting, Economics, and Political Science.

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