Warehousing & Fulfillment

Direct to Consumer (DTC) Fulfillment for Fast-Growing Brands

Warehousing & Fulfillment
February 8, 2024
11 min read

Learn how a scalable Direct to Consumer Fulfillment solution can help you increase sales, improve margins, and grow your brand sustainably.

Table of Contents

What Is Direct to Consumer Fulfillment (DTC fulfillment)?

Why Sell Direct to Consumer

Consumer Expectations for DTC Fulfillment

How to Optimize DTC Fulfillment

Ware2Go’s DTC Fulfillment Services

What Is Direct to Consumer Fulfillment (DTC fulfillment)?

Direct to Consumer (DTC) fulfillment is the process of delivering a product to an end consumer after a sale is made through a direct channel – meaning there is no intermediary in the sale such as a retailer or marketplace.

eCommerce and DTC are sometimes used interchangeably, but ecommerce refers to any transaction made electronically, including business to business (B2B) ecommerce and third-party sales on an ecommerce marketplace like Amazon.

Why Sell Direct to Consumer

The pendulum has swung back and forth in terms of the outlook of digital native or D2C only brands. In 2020, many brands had a meteoric rise, as online shopping habits accelerated. 

However, the rising cost of paid social advertising and updates to the Apple iOS privacy policy has hampered growth for many of these brands. Major DTC brands like Billie and Casper have moved into big box retailers like Walmart and Target.

What’s clear is that any business that wants to remain resilient in the face of changing consumer shopping habits needs to implement a multichannel selling strategy that includes D2C sales. The benefits of selling direct to consumer include:

  • Higher margins
  • Direct access to consumers
  • Complete control of brand experience
  • Greater brand affinity

Brands that expose themselves to shoppers across multiple sales channels have a greater chance of discovery. With time, consumers can be directed from less profitable channels to a direct channel if the brand can offer the same fulfillment and delivery experience shoppers have come to expect from ecommerce giants like Amazon and Walmart.

In fact, a recent consumer survey revealed that 63% of consumers would rather purchase directly from a brand’s ecommerce site if price and shipping speed are comparable to marketplace listings.

Consumer Expectations for DTC Fulfillment

Customer experience is paramount to success when selling direct to consumer. Shoppers choose to do business with D2C brands to have a more personalized experience. Many believe that D2C brands offer higher-quality products and better customer service.

And in today’s digital-first economy, shipping and fulfillment is a major part of customer service. Today’s shoppers have come to expect fast shipping from brands and retailers of all sizes. In fact, 65% of consumers expect small brands to ship as fast, or faster, than big box retailers.

D2C fulfillment is also an important driver of customer lifetime value (CLV). A full 79% of consumers are more likely to make a second purchase after a positive delivery experience, and as the cost of acquiring a new customer can be up to 5x the cost retaining an existing customer, driving a repeat purchase can have a serious impact on margins.

In fact, customer acquisition costs are a major consideration for DTC sales. eCommerce marketplaces attract a wide range of shoppers and offer more opportunities for exposure than a DTC website alone. And with the rising cost of Pay per Click (PPC) advertising in general, and paid social media advertising specifically, DTC brands should double down their focus on retaining customers once they’ve converted a sale.

How to Optimize DTC Fulfillment

Successful DTC fulfillment hinges on a few key factors to ensure customer satisfaction, profitability, and flexibility to keep up with changes in demand, including:

1. Inventory Distribution

Distributing inventory across multiple strategically-located warehouses is the most effective way to meet consumer expectations for fast shipping. Fulfilling from a single warehouse on the West Coast, for example, gives you two options: make East Coast customers wait 4-5 days for a long-zone ground shipment or over–pay for an expedited shipping solution like Next-Day Air.

Forward staging inventory closer to pockets of demand lowers time in transit (TNT) on final mile deliveries and enables you to ship to your best customers via 2-day Ground Shipping.

2. Find a Scalable Solution

The good news: D2C sales can sometimes experience explosive growth. The bad news: traditional fulfillment solutions have a hard time keeping up with large spikes in demand.

Partnering with an on-demand warehousing partner will allow you to pay only for the space and labor you need when you need it. This allows you to keep operating costs low, knowing you have extra capacity on reserve when you need it.

3. Integrate Technology

Manual processes can slow down operations and leave room for human error. Find a fulfillment provider that not only gives you access to a network of distributed warehouses but can also stitch together those warehouses with a technology platform that integrates directly with your ecommerce shopping cart. Processes that should be automated include:

4. Prioritize Demand Forecasting

Demand forecasting is a mature business function that helps better plan warehousing and labor needs as well as optimize inventory carry costs. Working with a DTC fulfillment partner with the tools and business intelligence to help create an accurate forecast will help you make more strategic decisions around procurement and growth opportunities.

5. Evaluate Profitability at the Shipment Level

It can be easy to mistake sales velocity for growth, but if you’re not measuring profitability at a per-shipment level, you run the risk of selling yourself out of business. Some measures DTC brands can make to improve profitability include:

Incentivizing Larger Carts

It’s much more cost-effective to pick, pack, and ship two products in an order than one. Finding ways to incentivize bulk orders or add additional items to a cart can help offset DTC fulfillment costs.

Carrying Fewer SKUs

Most merchants will find that their top-moving products are driving most of their profits. What’s more, continuing to carry slow-moving SKUs can drag down the profitability of the entire SKU catalog with long-term storage costs. Dropping the low performers from your catalog and doubling down on your best sellers will increase margins and allow you to maximize storage space.

Outsourcing Fulfillment

Managing DTC fulfillment in-house can drive up operating costs and reduce profitability. According to McKinsey, carrying overhead in the wrong areas of your business (such as the supply chain) is one of the five growth traps that can hinder long-term DTC growth.

McKinsey reports that a major consumer electronics brand effectively cut its supply chain costs in half, simply by outsourcing their fulfillment. Owning and operating an in-house fulfillment center ties up working capital that could potentially be invested in other areas of the business, such as product development and marketing.

DTC Fulfillment FAQs

How does DTC fulfillment increase sales?

DTC fulfillment can increase sales through several mechanisms:

  • Faster Delivery: By shipping directly to consumers, DTC brands can often provide faster delivery times, which can lead to increased customer satisfaction and loyalty.
  • Personalized Customer Experience: DTC brands have direct access to customer data, allowing them to personalize marketing efforts, tailor products to specific consumer preferences, and provide a more personalized shopping experience, ultimately leading to higher conversion rates and repeat purchases.
  • Control Over Brand Experience: DTC brands have complete control over the entire customer journey, from discovery to purchase to post-sale support. This enables them to craft a consistent and compelling brand experience, which can enhance brand perception and drive sales.
  • Elimination of Middlemen: By bypassing traditional retail channels and selling directly to consumers, DTC brands can eliminate the markup associated with intermediaries, allowing them to offer competitive pricing while maintaining healthy profit margins.

What are the challenges of DTC fulfillment?

Some challenges of DTC fulfillment include:

  • Logistics Complexity: Managing inventory, order fulfillment, and shipping logistics can be complex and resource-intensive, especially as order volumes scale.
  • Customer Acquisition Costs: Acquiring new customers can be costly, particularly in competitive markets where customer acquisition costs (CAC) are high.
  • Last-Mile Delivery: Ensuring timely and cost-effective last-mile delivery can be challenging, especially in urban areas with high population density and complex delivery routes.
  • Data Security and Privacy: With the collection of customer data comes the responsibility to protect it from security breaches and ensure compliance with data privacy regulations.
  • Brand Building: Building brand awareness and trust without the backing of traditional retail channels can be challenging and requires significant investment in marketing and branding efforts.

What is DTC in ecommerce?

DTC in ecommerce refers to the business model where brands sell their products directly to consumers through their own online channels, such as websites or mobile apps, rather than relying on third-party retailers or distributors. This model allows brands to have more control over the entire customer experience, from marketing and sales to fulfillment and customer support.

What do DTC brands do?

DTC (Direct-to-Consumer) brands sell their products directly to consumers, bypassing traditional retail channels. These brands typically focus on building strong relationships with their customers, leveraging digital marketing channels, and providing a seamless online shopping experience. D2C brands often prioritize factors such as product quality, customer service, and brand authenticity to differentiate themselves in the market and drive customer loyalty.

Ware2Go’s DTC Fulfillment Services

Ware2Go, a UPS Company, is an end-to-end supply chain solution that helps businesses of all sizes fulfill across multiple sales channels – from DTC to B2B. Their nationwide network of warehouses is connected by best-in-class fulfillment technology that allows merchants to manage their entire supply chain through a single platform.

To learn more about how Ware2Go is helping merchants of all sizes compete across digital and traditional sales channels, take a look at our solution.

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