With these tools, you maintain control of your e-commerce in DTC business.
Philip Kehela2/11/2022
The Rise of DTC E-Commerce - and what Corona has to do with it
Table of contents
- Going solo: How do you manage to be successful as a young DTC company with bootstrapping?
- The Tech Stack as a Driving Factor
- Conclusion
DTC (also D2C) stands for "Direct to Consumer" and describes a business model in which a brand or manufacturer sells its goods directly to end consumers. The direct relationship between companies and customers primarily has a central advantage: Reducing dependencies on (intermediate) dealers who act as gatekeepers and influence your business. Direct customer contact also offers better insights about your clientele and gives you a knowledge advantage over the competition based on this data. With full control over sales channels and pricing, DTC companies can present their products in the best possible way to the target group. And on top of that, the DTC approach saves budget in the long run, because existing customers can be addressed more cheaply via their own channels in the long term, no margins are due to middlemen, and the customer relationship can be monetized over the entire lifecycle. Sounds good? It is! So it's no wonder that DTC e-commerce is booming and has become a hot topic in retail in recent years. Not only start-ups, but also many larger brands are increasingly focusing on direct sales channels.
The Corona pandemic has only reinforced this change. Hard lockdowns of all stationary retail led to changes in consumer behavior and were a fire accelerator for online trade. Even delivery stoppages in warehouses of large gatekeepers like Amazon, which were called to stay deliverable with their own logistics chains, further consolidated the DTC business. In this context, it is important to clearly distinguish the various sales opportunities via marketplaces such as Amazon or Otto: The sale of goods to the marketplace itself, which then acts as a dealer and distributes the goods does not fall into the DTC area, while the distribution of own products as a trade brand over marketplaces is classified as hybrid DTC.
Going solo: How do you manage to be successful as a young DTC company with bootstrapping?
Especially young companies and start-ups use the DTC approach to get started with their business idea. In the course of setting up a business, the central question arises: "Start financed by third parties or bootstrapped?" Bootstrapping refers to a type of business start-up financing that works without external funders. Although this approach initially involves strict budgeting and slower growth, bootstrapping also has clear advantages: Without investors and VC, you as founders have full control over your company and the associated goals. The longer founders keep control of their company, the stronger the company's DNA is driven by them. This can have advantages in terms of brand building, for example.
If you have decided to pull through your business self-financed like we did with mokebo, it is extremely important to make smart decisions regarding your tech-stack and your processes. Think carefully about how you use your limited capital and how sustainable you tie it up. Having your own warehouse, for example, involves high costs. That's why we decided against our own logistics and instead opted for hybrid dropshipping in combination with a powerful ERP that gives us a lot of flexibility in terms of interfaces to our manufacturers. In this way, we use the core competence of our exclusive suppliers in terms of production & logistics and handle all processes associated with the product and purchase via the ERP.
For the distribution of your products you should consider which sales channels are relevant for your products and which advantages & disadvantages they carry. An own online shop, created via shop systems like Shopify or Shopware offers many advantages, because you can control content there down to the smallest detail and do not have to pay a commission to the platform compared to marketplaces, which can be connected to your ERP via marketplace connections like Tradebyte. Nevertheless, marketplaces can also make sense to increase the exposure as a brand and to be less dependent on the performance of your own shop. Benefit from their extreme traffic ranges and use the marketplaces as "extended investors" for your business.
Since cost efficiency is of central importance for bootstrapping, the "revenue per employee" is one of the most important KPIs. Our employees are supposed to think and act entrepreneurially and act as CFOs. To drive this metric as high as possible, however, it requires an equally high focus on technology, automation, and the right tools.
Since cost efficiency is of central importance for bootstrapping, the "revenue per employee" is one of the most important KPIs. Our employees are supposed to think and act entrepreneurially and act as CFOs. To drive this metric as high as possible, however, it requires an equally high focus on technology, automation, and the right tools.
The Tech Stack as a Driving Factor
The design of the tech stack significantly shapes your structures & processes. With the right digital tools, you can execute all business activities smoothly and scale much faster. To determine the appropriate tools, it is first important to become aware of the requirements of DTC on various tools. Only with this basis can you then put together your own toolbox in the next step, which meets these requirements. It is important to understand at this point that the demands of DTC on tools are high, but the demands of Bootstrapped DTC are even higher.
Workflows, automation, and technology are the keys to success for a DTC start-up in e-commerce, as many repetitive tasks and time eaters can be solved with automated processes based on technology. When selecting our tools, I primarily considered the following 3 factors: agility, scalability, and e-commerce orientation. Agile, browser-based SaaS tools are essential for mokebo, so that our employees can have real-time access from anywhere in the world. To realize scalability for our business model, it is also important that our tools are data liberal, i.e., adaptable in terms of individual developments, support plug-ins, and offer API interfaces. Ultimately, your tech stack can fully map every business process of the company with the mentioned factors today. It's all about making the right decisions.
Which tools are the best for your DTC company, you can only find out in a comparison of the offers of various providers for yourselves. Here are some of the most important categories at a glance:
ERP system
The centerpiece of any DTC E-Commerce company is the Inventory management system. Inventory management systems are often parts of an ERP system. Sometimes the terms are also used synonymously. Here, information and work outcomes from the different departments come together in one place. The ERP plays a central role in product configuration and sales, but also in controlling customer communication through the Customer Success Team. Additionally, the data base of the ERP system can be used to evaluate data and create reports. Because of their flexibility, cloud-based ERPs like plentymarkets, Xentral ERP, Billbee or JTL are increasingly replacing desktop applications ERPs, so-called On-Premise solutions.
E-commerce platforms and shop systems
If you want to create your own online shop, you no longer need large development teams for the first step. Here, Shop systems support and take their place with the No-Code principle and their shop builders. In this context, it needs to be checked whether necessary interfaces to inventory management and online payment systems are available and how scalable the systems are for your own business processes. Popular providers focusing on DTC and e-commerce are Shopify, WooCommerce, Shopware and Spryker.
Collaboration & Communication
To enable collaborative work, it is worth replacing physical servers with Collaboration Tools such as Stackfield or Google Workspace. Entire organizations and individual teams use these software to communicate internally, work together on documents, invite colleagues to meetings, and share knowledge. To communicate important things quickly and avoid full e-mail mailboxes, communication apps such as Slack and Microsoft Teams are useful, depending on the scope of the collaboration tools.
Project Management
In order to organize the various intersections of the business areas in DTC E-Commerce, functioning project management is essential to keep an overview: Project Management Solutions such as Asana, monday.com and Trello support in coordinating tasks, planning long-term projects and achieving team goals. With them, you can structure the workday, measure progress, and increase productivity.
Customer Relationship Management
One advantage of DTC is the monetization of the customer relationship over the entire customer lifetime. CRM Systems play an essential role in using this trump profitably. They capture all relevant information about leads, customers, and companies in one place and are used for the analysis of customer loyalty, processing of tickets and lead and existing customer care. Cloud-based solutions like Zendesk enable completely mobile work and provide access to an ecosystem of tailor-made apps and social media platforms. But CRM Systems like Hubspot Sales Hub and Salesforce CRM also help to secure customer data and connect intelligently for a good relationship.
You want to learn more about the services of Salesforce? You can find all tools and helpful articles about the products on our company overview page of Salesforce.
Digital Accounting
Even accounting and collaboration with the tax advisor can now be digitized. Because DTC E-Commerce means at the same time a high amount of booking records, where every order becomes an outgoing invoice. The right Accounting Software with interfaces to tax consulting are essential here: Tools like SevDesk, TaxDoo or Accounting Butler have recognized exactly this challenge and can create automated bookings with interfaces to the most important ERPs and sales channels.
International E-Commerce Fullfillment
As explained above, with DTC we are experiencing the aspiration to independence from gatekeepers who make customer access difficult. An essential part of value creation here is the end customer logistics, which is best controlled by ourselves. Shipping Software Providers like byrd or Sendcloud offer scalable and digital Ecommerce Fullfillment and support the growth of your online shop with an international logistics network. The system of byrd can be linked to the common marketplaces and shop solutions via interface and supports shipping with internationally common parcel service providers. An extremely interesting solution, which we at mokebo also observe attentively.
Conclusion
As a self-financed DTC start-up in e-commerce, the choice of the right tools and processes is incredibly important. To get started in DTC E-Commerce, you should therefore think in detail about the right tech stack for your company right at the beginning: Which business processes can be digitized with which tools and which processes can be optimized and scaled with it?
The detailed comparison of the solutions from different providers helps you to find out which tools fit your requirements particularly well. For example, make sure you research No-Going-Back solutions, they're going to shape your company in the long run.
The detailed comparison of the solutions from different providers helps you to find out which tools fit your requirements particularly well. For example, make sure you research No-Going-Back solutions, they're going to shape your company in the long run.
Philip Kehela ist Mitgründer von mokebo, einer deutschen Möbelmarke aus Köln. Für den Familienvater lief eigentlich alles nach Plan: Bei Amazon arbeitet er sich nach seinem Einstieg als Dualer Student schnell hoch und baute den Amazon Market Place als Account Manager mit auf. Es folgten weitere Stationen bei Amazon Music und im Silicon Valley. Doch trotz sicherer Position im Weltkonzern war Philip immer klar: Er möchte gemeinsam mit seinem besten Freund Moritz selbst gründen und ein Marktsegment Möbel mit frischen Ansätzen aus dem E-Commerce verbessern: 2018 wagten die beiden gemeinsam den Schritt in die Selbstständigkeit und gründeten die Möbelmarke mokebo, die über einen eignen Webshop sowie reichweitenstarke Plattformen wie otto.de oder Amazon vertrieben wird.
