Will my channel revolt if I introduce a D2C model

“I have an established sales and distribution network. How would I ever be able to set up a direct to Customer sales approach?   Great question. 

Many industries are locked into old ways of working and will find it hard to transition; the automotive industry is a great example. Manufacturers depend on a huge network of franchised dealers who promote, sell, and service their products. They have invested in thousands of employees and systems to make the process work. Building a system that circumvents this seems foolhardy. The investment in their sales channel would be lost (Asset Baggage  (LINK?) ) and the transition from old to new would take years and the resulting revenue disruption would be fatal. 

Nonetheless, GM is having a go at by taking a premium, niche product where the target market is receptive to digital interaction.  Cadillac Live is an online dealership - staffed by actors believe it or not, armed with i-Phones. They will conduct a two-way video tour of the models you are interested in. They will climb in and out of back seats, show you the engine, open the trunk etc. and answer all your questions.  GM is taking responsibility for the front end of the sales process. Once a visitor is interested in buying, they will hand over to a local dealer to consummate the sale. Dealers who don’t want to be a part of their new vision are being bought out by Cadillac at a rate of $300- $500K per dealer. In addition to Cadillac Live, the company is also moving fast into electric vehicles – it remains to be seen if this will be a 100% dealer approach or whether they will expand the functions of Cadillac Live to sell electric Caddies. 

The world has changed. D2C is now a viable, and for many, a better way to do business. So, how do you transition if you already have an established distribution network?

• If you have an existing channel, you should select a high margin niche product and start to take over part of the sales process.
• If you are introducing a new product, consider creating a parallel distribution strategy that is D2C
• If you are planning to expand into a new market – be it a separate niche or a new geography, again, consider establishing a D2C model.

 As mentioned in earlier issues, a D2C model can provide a very powerful differentiator to use against powerful incumbents. It not only provides you with good margins, it can also be a great awareness generator. 

Ask Tesla how they compete with Toyota, Volkswagen, Ford, Toyota, GM, Honda, …. 

See you next time with the article on how to set up a D2C distribution system. 

Be Well, 

Andrew