Money Matters

How distributors can remain relevant in a direct-to-consumer world

Discover how distributors can remain as valued partners to brands and manufacturers that are embracing the direct-to-consumer model.

September 6, 20227 min read Share

Tesla Motors Inc. has evolved from a car manufacturer into a technology-driven company with a bold direct-to-consumer (DTC) model. Customers can order luxury electric cars through their phones or from Tesla-owned showrooms, cutting out the franchised dealerships that other automobile companies use. That means a better customer experience, no costly dealer mark-ups, and product, service, and brand standards are controlled in-house.

As a wholesale distributor, that’s not exactly music to your ears. Traditionally, your bread and butter is working with manufacturers in the supply chain, managing logistics, warehousing, and sales, to sell to retailers in bulk. In today’s hyper-connected world, traditional distributor networks are no longer the simplest or most efficient way for manufacturers to reach customers.

It’s natural for distributors to have concerns about staying relevant and meeting these increased customer and supplier expectations. You have your own margins to protect in the face of rising costs for goods and fuel—not to mention a potential drop in consumer demand.

While spending in the US remains high, trends such as increasing credit card debt and a 23% rise in auto repossessions suggest that distributors should prepare for a possible market slump. It’s essential for businesses to build resilience and equip themselves to predict and adjust to spikes and drops.

Considering all these challenges together, this is actually an opportunity for distributors to modernize processes and use the latest technologies. From personalized, omnichannel customer offerings to value-added services, here are the starting points to help you become a valued partner in this new era for DTC.

Here’s what we cover in this article:

• Improve your customer experience
• Learn from your customers
• Add more value through services
• Take advantage of customer data with the right infrastructure
• Factor in regulatory considerations
• Stay strict on security
• Finally, get people on board

Improve your customer experience 

Implement an effective e-commerce presence and seamless customer experience, just like an online retailer would do. Customers no longer expect (or want) sales calls, meetings, and other types of offline transactions. They want to find what they want ASAP. Give them the tools to research and purchase from your inventory quickly.

In order to do this, and to increase profitability and resilience, it’s essential to analyze and optimize the cloud/online ecosystem. Customer relationship management (CRM) systems enhance customer engagement by personalizing interactions, streamlining communication, and managing sales pipelines.

You’ll need to meet rising consumer expectations for quick shipping. Supply chain management tools improve inventory tracking, automate fulfillment, and optimize logistics to ensure faster, more efficient deliveries. Consider also offering electronic payment options and providing access to real-time shipping information. Most consumers expect an easy return policy. You will want a streamlined process for handling and refunding returns.

An ERP system can help you achieve this, and will give you real-time information about your operations, cash flow, and inventory too.

Learn more from your customers

When you’re selling directly to customers, you can capture and analyze their data, putting you in an excellent position to meet the modern demand for a more tailored and personalized experience.

What are your best and worst sellers?

Who are your best repeat customers?

What are their buying habits?

Data-gathering, analytics, and AI tools will give you the answers. Already, you’re learning about what inventory to restock or edit away, and how to give customers more of what they want and less of what they don’t.

Make sure you promote your service as directly linked to the behind-the-scenes and real-time distribution information that can deliver an improved customer support and service function. Ensure the chain of communication is short, so it’s easier to handle service delays and returns, and make sure that your approach is customer friendly.

Add more value through services 

Based on the strength of your customer experience, customers will want to work with you again and again. The power of your brand will depend more on above-and-beyond customer care and service.

You may already provide simple value-added services such as product selection, picking, packing, and shipping. However, digital transformation offers you ways to differentiate your business from the competition by providing services that add value and which you can charge extra for, such as:

• Product installation and component assembly
• Product customization
• Field service, maintenance, and quality inspection
• In-house repair
• Just-in-time delivery
• Consulting
• Training and education

Although there will be an understandable focus on e-commerce, it is essential to note that there are other ways that you can reach customers, which means you need an omnichannel mindset across all the touchpoints you have with your customer.

Mini case study #1: Armellini Logistics

Multi-entity group Armellini Logistics operates across 43 states. Taking a proactive stance in a climate of uncertainty, it implemented ERP software to help it adapt to future disruptions. Having chosen a customizable system, it was able to integrate 5 entities into its reports, and automated payment and accounts receivable workflows to improve efficiency and overall cash flow.

“Everything is now online, and…we can simply
send them a link.”

Rosanna Winningham, Director of Corporate Services
Armellini Logistics

Take advantage of customer data with the right infrastructure 

Moving towards a DTC strategy means you need to scale your operation to support these additional responsibilities. It may be necessary to update your data and analytics software to centralize your information so you can manage end-to-end distribution processes effectively.

With effective software, predictive sales and accuracy patterns help plan when you need to build up inventory or scale down and run on less, depending on demand. You can make commitments or allocations based on supply, since you know where and when inventory will be available.

Advanced analytics help distributors track demand trends, optimize pricing, and improve decision-making with real-time insights. Better product knowledge and analysis of customer data will give market insights that help you answer questions like:

• What products sell and don’t sell in which markets?
• On which international markets should you focus your attention?
• Which customers should you focus on to make the best profits?
• How are the interests and needs of your customers evolving?

Mini case study #2: Gulf Winds International

Gulf Winds International runs the logistics of more than 300,000 containers a month. The company adopted an ERP system to provide secure cloud access, streamline processes, and access and approve transactions on the go. Now it’s saving three days of intense admin every month, and delivering insights to help drive the business forward.

“Rather than just being reactionary, I’m spending time looking for anomalies or trends that could positively—or negatively—impact our business.”

Emily Hempler, Senior Accountant
Gulf Winds International

Factor in regulatory considerations

Expanding into DTC sales offers growth opportunities but also presents complex regulatory challenges. Ensuring compliance across consumer protection laws, data privacy, industry-specific restrictions, and tax regulations is critical to avoid penalties and maintain trust.

Consumer protection and advertising compliance
DTC sales must adhere to FTC regulations, state consumer protection laws, and the Fair Packaging and Labeling Act to ensure accurate product descriptions, fair pricing, and clear refund policies.

Data privacy and cybersecurity
Distributors collecting consumer data must comply with the CCPA (California Consumer Privacy Act) and PCI DSS (Payment Security Standards) to prevent fraud and protect sensitive information. If you’re selling internationally, GDPR compliance is also essential.

Industry-specific regulations
Certain industries face additional restrictions. In pharmaceuticals and healthcare, FDA and DEA approvals are required for direct sales. Alcohol and tobacco sales require strict age verification and TTB compliance, while food and beverage vendors must adhere to FSMA and local safety laws.

Sales tax and interstate commerce
Following the South Dakota v. Wayfair (2018) ruling, online distributors must navigate complex state nexus laws for sales tax collection, making automated tax solutions a necessity.

Logistics and shipping regulations
Distributors must comply with DOT hazardous materials rules, carrier-specific restrictions, and international trade laws for cross-border shipments.

Stay strict on security

Moving to a DTC model means handling more customer data, which requires robust security measures. Many businesses now rely on cloud-based systems that provide advanced encryption and security protocols, ensuring both data safety and regulatory compliance. With the right security infrastructure, including real-time threat monitoring and data backups, you can protect sensitive customer information while maintaining trust.

Finally, get people on board 

Going DTC is not just creating a fancy e-commerce website.

Working to integrate direct-to-consumer processes may require considerable shifts in the way you work and stakeholder buy-in.

It may require restructuring, additional investment, new staff, and new ways of working, alongside requirements for training. 

Remember that managing a move towards DTC is likely to require a significant change in your business culture.

Setting up an e-commerce strategy may affect the sales arm of your business, and you’ll need the investment and safeguards in place to make sure your digital strategy wins the required return on investment.  

Going DTC is not merely a case of creating a fancy-looking e-commerce website. Working to integrate direct-to-consumer processes may require considerable shifts in the way you work and stakeholder buy-in. It may require restructuring, additional investment, new staff, and new ways of working, alongside requirements for training.

Transitioning to a DTC model will require significant changes in your business culture. Setting up an e-commerce strategy may affect the sales arm of your business, and you’ll need the investment and safeguards in place to make sure your digital strategy wins the required return on investment.