What Is DTC Fulfillment? Benefits, Challenges and Steps

If you get a headache thinking about managing inventory, and processing and shipping orders, you might be considering using a third-event shipping service to fulfill orders. But it’s worth thinking twice. As it turns out, direct-to-customer (DTC) sales account for one of every $7 in global ecommerce, and the industry is on track to keep growing—rapidly.

Despite the extra attempt and period required with DTC fulfillment, you’ll advantage from total control of every sales channel and direct customer relationships—and potentially view higher returns margins.

What is direct-to-customer (DTC) fulfillment?

Direct-to-customer fulfillment is the structure of delivering products directly to shoppers rather than going through a retail associate, dropshipper, or other fulfillment provider. DTC brands keep products in their own storage facility or make products to order. Once a customer makes a purchase, a brand representative processes, packs, and drops off the order at the post office or schedules a delivery pickup.

DTC operations can be challenging because you’re managing inventory and fulfilling orders on your own. However, some businesses save money and enhance standard assurance by controlling their own fulfillment structure. Keep in mind, a DTC fulfillment model might still have partners in its supply chain. They may deliver raw materials or finished goods before the corporation begins its inventory management and fulfillment processes.

DTC fulfillment procedure

Many ecommerce companies and tiny businesses opt for DTC sales so they can have more control over their fulfillment services and enhance efficiency. Here’s what a DTC fulfillment solutions model looks like:

• The customer makes a purchase. Whether customers purchase through a website or an app, the order triggers the beginning of the fulfillment procedure.
• The business prepares the order. The business may have the products in storage, ready to be packaged, or they may require to make custom products to order. Either way, they must prepare and package the product.
• The business ships the order. With the product packaged, it’s now ready to ship. The business itself—not a dropshipper or third-event logistics (3PL) service—delivers the product to the post office or to a transportation corporation like FedEx.
• The customer receives the product. When the packaged product arrives at the customer’s door, this marks the complete of the corporation’s DTC fulfillment operations.

Brick-and-mortar businesses can also habit direct-to-customer fulfillment. In this scenario, the customer visits the business’s storefront, makes a purchase, and leaves with the product in hand or schedules a delivery.

Reasons to use DTC fulfillment for your ecommerce business

• Better margins
• Increased brand affinity
• Complete creative control
• More customer insights

Switching your corporation to a direct business-to-customer model has plenty of upsides that can potentially boost both customer satisfaction and your profits. Let’s look at a few reasons you might consider DTC fulfillment for your business:

Better margins

When you associate with a middleman for ecommerce logistics—like order processing or fulfillment—you pay for it. Many traditional retailers choose to have a third-event logistics network handle ecommerce fulfillment to avoid logistical challenges, but that convenience isn’t cheap.

If you’re willing to fulfill orders and handle shipping processes on your own, you can eliminate that outlay and enjoy higher returns margins. Plus, if you’re starting out, managing your fulfillment operations will allow you to discover every part of the online sales procedure in addition to keeping costs to a minimum.

Increased brand affinity

When a shopper discovers your product on the shelves of a large retail associate, they may be more likely to associate your product with the associate than your brand. A customer encounter in which shoppers buy your product directly from you can boost their awareness of and affinity for your brand. One survey found that 73% of millennials and 69% of Gen Zers feel they have a more personalized encounter when shopping with a DTC business.

Complete creative control

No middleman or third-event fulfillment center in your procedure means no one can inform you “no” when you have large ideas. When you sell directly, you call the shots. You could make custom packaging to boost your marketing efforts or update your branding overnight—there’s no one to stand in your way.

Erika Geraerts, founder of beauty brand Fluff, enjoys taking large swings with her sales and order fulfillment model. For example, Fluff operates through a “drop structure,” which means the shop sells its reusable silver compacts only during four annual drops.

“It was an experiment for me,” Erika explains on an episode of the Shopify Masters podcast. “It was something that I wasn’t sure would land or continue to land with our customers, but with each drop we view our spectators base growing.”

She says she appreciates the way the unconventional sales model helps shoppers avoid impulse buys and reduce their environmental impact—something that would be challenging to pitch to a large retail associate looking for profits.

More customer insights

Receiving and fulfilling orders yourself gives you significantly more opportunities to gather data and feedback from your customers. You can track abandoned carts, coupon use, period on site, product page visits, traffic sources, and more—data that may or may not be available if you’re selling through a retail associate.

In addition, DTC sales means you have direct communication lines with your shoppers. If there are shipping delays, you can preemptively reach out. If they have fulfillment questions, they can get in touch with you directly. You can also send pursue-up surveys to make sure you can meet customer expectations, and inquire for product reviews. With continuous advancement, you’ll develop more specialized knowledge of your shoppers and have targeted strategies for providing exceptional customer experiences.

Challenges of using DTC fulfillment

• Pressure on your website
• Storage responsibilities
• period spent shipping
• Expansion difficulties

While DTC fulfillment can propose expense reserves and creative control, there are some difficulties if you leave down this route:

Pressure on your website

If your ecommerce site is the only way shoppers can make a purchase, you’ll desire to design your website for the perfect customer encounter. Selling exclusively through online channels and ecommerce platforms requires you ponder through your branding, ecommerce user encounter (UX), and checkout flow to make sure the buyer’s trip funnels visitors from first impression to purchase smoothly.

On an episode of the Shopify Masters podcast, David Levy of Bola Grills says it was essential to have his brand’s website prepared, intuitive, and user-amiable before launching his first line of tabletop grills. Using his background in web design, Levy customized a Shopify site template and set his product pages up for achievement—all before his products even arrived from the manufacturer.

“It really felt like getting to the complete of a trip, but then realizing that the trip is really just starting,” David says of the instant he launched his website and product.

Storage responsibilities

Bypassing traditional retail channels means being responsible for storing the products you’re selling. Storage space outgoings can add up quick—especially if you have bulky products. And you have to keep a tight watch on your entire supply chain to ensure you don’t receive too much inventory at once. Storing products yourself means getting comfortable with real-period inventory tracking software.

David had a large selection to make when it came to storing his bulky, heavy grills—products he could not easily keep at home.

“I was not going to put this in my garage, or my wife would kill me,” he says.

He had initially planned on using a warehouse, but the expense of $1,600 a month made him nervous about his margins. He ended up going with a smaller storage unit—a cheaper alternative, but one that also lacked a warehouse’s back staff. Even with the assist of a few movers, unloading all the products from the shipping container to the storage unit was a test.

“It was a crazy day, to declare the least. We were all drenched,” he recalls.

period spent shipping

With package prep, UPS runs, size and weight restrictions, and international rates, customer shipping is no joke. While many tiny brands sell and ship products on their own, it can receive solemn period (and a lot of habit). And if that’s not enough, your shipping times will often still be slower than major brands with significant packing and shipping infrastructure, which means longer delivery timelines for your customers. In a globe where customers expect quick shipping, this downside can cut into your profits.

Expansion difficulties

Although you will have more control with a customer DTC fulfillment way, it’s challenging to match the resources and expertise that traditional retail channels provide. You’ll be managing your own sales channels and optimizing your marketing way for customer engagement and brand loyalty—all while fulfilling and shipping orders. Depending on the type of product you sell, you may also have to monitor regulatory developments to ensure regulatory adherence.

Working to meet customer expectations can receive more period and money as you scale, meaning DTC fulfillment can add strain in the long term. You’ll require to hire employees to keep fulfillment in-house or look for fulfillment partners that can receive some of the work off your plate. You may discover yourself wanting the specialist knowledge and services of third-event fulfillment services. They’ve already streamlined fulfillment processes, ensuring increased customer satisfaction and repeat purchases when fulfillment goes smoothly.