25 minute read
D2C DIRECTIONS
RISKY BUSINESS
Driven to diversify, more and more furniture manufacturers are choosing to supplement/augment their established sales channels by going direct to the consumer (D2C). But what might this mean for the traditional supplierretailer model?
ONE IMPORTANT FACTOR IS WHERE THEY ARE IN THEIR
D2C JOURNEY
Steve Adams, CEO, Mattress Online Furniture brands have long sold their products directly to the public at the same time as going through stockists, but the practice rarely sits comfortably.
Manufacturers might argue that they go D2C out of necessity, or because establishing their own stores or transactional websites is the most effective way to raise their brand’s profile. Retailers generally see such approach as cannibalistic – biting the hand that feeds, so to say – and potentially depriving them of sales.
Pandemic pressure created even greater need for manufacturers to explore new ways to stay solvent, and, given repeated store closures, a direct ecommerce channel must have looked a very attractive option.
But how might taking this path be received by stockists, and how can such reinvention be negotiated? Faced with opposition, some pull back. Others press on, regardless of the potential fallout. Others still formulate a hybrid model, insisting that doing so delivers the best results for both parties.
In 2019, for example, Ekornes opened its first Stressless brand store, on Tottenham Court Road. UK MD James Thompson said the move would support independent retailers, lifting the brand’s profile and offering stockists training and merchandising assistance, while giving the manufacturer a greater understanding of the challenges those stockists faced – all while selling at RRP. Early on, James stated that the majority of the “vast number of quotes” the store generated were eventually converted in customers’ local retailers. “Many are choosing to support their local shop,” he said.
Either way, without close consultation and a firm understanding of the benefits, most retailers meet any mention of ‘going D2C’ with suspicion – if not outright hostility.
Furniture News asked its regular contributors for their thoughts …
Cutting out the middleman often comes at a price … (photo courtesy 123RF/ilixe48)
Mike Murray, MD, Land of Beds: We understand the D2C model, and the associated pros and cons. If you happen to be the market leader with super-high brand recall, like Nike or Apple, then this model will work well for you – as long as you have excellent digital skills and deep pockets when it comes to marketing spend to back it up. It all comes down to brand, marketing spend and your internal business structure. If you do not have the above, it could have catastrophic consequences if you alienate your current retail customer base.
Andy Stockwell, buyer/manager, Gardiner Haskins: D2C is a doubleedged sword for retailers. On the face of it, suppliers selling direct to end consumers seems like bad news. Who better to buy from than the people who make/supply the product? It cuts out the middleman and the slice of the profit they build into the price, so it surely must be cheaper.
You’d also think any issues would be resolved more quickly by the supplier, not having to go through the retailer first. Why would any retailer be happy about D2C selling?
A lot depends on how the process works and why suppliers choose to go D2C. It can be a way to establish a ‘generally available’ price, creating a genuine RRP for the product which retailers can then show a discount against in-store.
Essentially, this means suppliers selling their products for more than the retailers do. It seems counter-intuitive, but it helps promote greater sales through retailers, and any sales made direct to consumers will be at higher margins.
The other way it can benefit retailers is when they get a cut from the sale. Harrison Spinks are successfully doing this with their award-winning Velocity range. It’s a partnership between the retailer, who has to show the mattresses in-store, and the supplier, who gives a credit for each mattress sold to the retailer who directs the customer to the supplier’s website. It’s a mutually beneficial relationship which demonstrates how D2C selling, done right, can be a good thing for retailers.
Anne Davies, owner, Room to Grow: Manufacturers going D2C is incredibly frustrating for a retailer. We spend a great deal of time, resources and budget marketing our brands, and for a supplier to go direct we are simply creating another channel for our customers to find them directly.
Anne Davies
The manufacturer can be more price competitive, and it really is a hard hit for a retailer. We would look to buy from the factories directly if one of our key suppliers acted this way. I think the manufacturers see it as a quick win, but retail is complex and expensive, and the supplier runs the risk of losing their key retailers if they antagonise them by doing this – they need to be sure going D2C will outweigh the loss in retailers they could face.
Emma Leeke, MD, Leekes Retail: We would carefully review our relationship with any supplier who chooses to go direct to consumers in a meaningful way.
GOOD THING FOR RETAILERS
Steve Adams, CEO, Mattress Online: I’m comfortable (mostly) with my manufacturers going direct if managed transparently. Product ranges ideally should have clear differences, promotional activity should be aligned to show a consistent message and (if relevant) share a joint on/off promotional calendar.
We already work with many manufacturers who have a D2C strategy, and so far we’ve had no major challenges. One important factor is where they are in their D2C journey. For instance, we sell Nectar, Simba, Dreamcloud and (formerly) Casper – they were D2C before we were their customers.
I do, however have a slightly different perspective if an existing manufacturer chooses to start a D2C arm. This would need a grown-up conversation about cannibalisation of their traditional business, and agreements around PPC bidding.
Gavin Boden, sales director, Rhenus Home Delivery (UK): It’s becoming more and more prevalent for suppliers and manufacturers to create another arm to their business B2C, but still a lot of them don’t want it to be known, with the risk of upsetting their retailers.
Henrik Pontoppidan, director, S2U Design Containers: This has been a trend for many years and it has fostered many discussions, usually simplifying matters too much. First of all, there seems to be two camps arguing that one model is better than the other, for various reasons.
Secondly, what does D2C actually mean? The internet has made it more accessible to run a hybrid, for example, to market direct to the consumer, but letting
Henrik Pontoppidan
a middleman take care of the logistics. This is essentially what happens with the large platforms such as Amazon and Wayfair.
For 15 years in the past, My business was in etailing, with decent success. But I also learned that, like any business model you engage in, it only works if you’re good at it – meaning that you’re actually better at offering something that your target needs, better than your competition. So, there is no right or wrong model when it comes to going D2C, or not.
The traditional furniture business model surely needs to adapt, and its actors need to explore new avenues. But let’s not forget that the mindset of a manufacturer is so different to that of a retailer, which in turn is different to that of a wholesaler. What is important is that wherever you are in the supply chain, you fully understand your own function. Without this understanding, you cannot focus on becoming competitive and add value better than your competition, and you could easily end up as jack of all trades, and master of none. That doesn’t work in a competitive environment.
I used to believe in the idea of ‘cutting out the middleman’ and I did use that route for many years – but now I am a middleman, because I’ve realised the need for this link in the chain.
The fact is that retailers, large, medium or small, cannot handle the huge challenge of marketing their retail business, at the same time as sourcing, QC’ing, carrying out technical development, sampling, searching, selecting and negotiating with factories. This happens through middlemen and consultants.
So yes, I buy direct from factories, and my strength, I guess, is that I know and understand firsthand the challenges of the retailer – and the manufacturer. And I am needed as a middleman – less so as a retailer, and less so as a manufacturer.
Adam Ashborn, founder and creative director, Reborn Marketing & Design: The D2C approach has been on the increase over the last few years, with online platforms really taking off, and businesses who typically avoided D2C are now realising this is another revenue stream available to them.
However, it’s not something that can be controlled easily, now consumers are becoming more familiar with online researching before purchasing. Consumer
Peter Harding, MD, Fairway Furniture
confidence in the brand, along with the purchasing process, will ultimately win over the customer. If you found the same product at the same price with the same warranty, etc, from an unfamiliar supplier at a recognised retailer, I’m sure you would still opt to purchase from that retailer. This is why having a strong brand image, trusted online ecommerce presence and good customer reviews will help towards making a sale.
It’s great for the consumer who’s looking for a good deal, but for businesses it could impact profit margins. That’s why businesses should try to reinvent themselves and stay competitive in the market.
Mike Rowley, CEO, Core Products: Each manufacturer has to make their own decision on this, but has to balance the considerable costs of running a D2C operation against the trade supply route. Personally, I feel that expecting to have both is unwise.
Lee Ness, general manager, Global Upholstery Solutions: We don’t supply to consumers, but I think direct from the factory is becoming more prevalent. It wouldn’t work for us, but I understand the attraction for the manufacturer. Many retailers will obviously push back against the factories for doing this, but that will eventually fail. The only way for retailers to survive is to do two things: have a product that is exclusive; and offer a service that the customer can’t get from a factory. One without the other won’t work.
Peter Harding, MD, Fairway Furniture: Suppliers moving into a D2C model are a threat, but they will inevitably face significant unforeseen challenges. I am of the view that many believe the retail side is ‘easy’, yet a failure to appreciate the support systems needed to properly manage a D2C model will see many who try ultimately struggle.
Furthermore, in a market where the tactile nature of the product remains a major trigger within the buying process, the ability for customers to see the products in person will remain in some form. If suppliers expect their current stockists to stand by and provide showrooms for them, so they can then take the orders themselves direct, it won’t be long before they are struggling to understand why they can’t get customers …
We increasingly try to work with suppliers who genuinely appreciate the work retailers have to put in to deliver business for their factories. Own-label ranges are one route we’ve been going down, trying to build exclusivity where we can.
The traditional furniture business model will, I believe, always have a place – based on the personal service levels that we can offer – but the past 18 months have probably served to accelerate structural change (such as online and D2C moves by suppliers) that would have happened over the next 5-10 years.
Royce Clark, MD, Grampian Furnishers: I think we all need to adapt and work with manufacturers where both sides can benefit. The ones that go 100% D2C may find that this backfires and they still need a physical presence, and I feel there will be an increase in white-label products – the value of the brands within our trade has been diluting for many years
Royce Clark
CONSUMER FIRST
Manufacturer brands taking a trade offer to the wider market is sometimes viewed with suspicion – but what of the businesses that go the other way?
This month, Furniture News meets the people behind four established D2C furnishing brands which have elected to pursue trade sales opportunities alongside their consumer-facing operations.
We ask eve sleep’s Cheryl Calverley, Emma’s Neil Robinson, Luxdeco’s Carina Bartle and Swyft’s Lynne White how and why they took this path, how their message differs from audience to audience, and what potential they see in the sector …
Lynne White
SWYFT
www.swyfthome.com Spokesperson: Lynne White, head of business development
When did your D2C brand first take a B2B route, and why? We always wanted to go this route. My role was created specifically to launch and develop the B2B sector – we knew it was a market that Swyft would work extremely well in, both with retailers and also on the interior design, home staging, build-to-rent and landlord sectors. These sectors still face similar issues that B2C has, where lead times are still long and compromises are being made to enable a faster turnaround to buy a quality sofa.
How did you approach that market? We made sure we did lots of searching for the right retailer and trade partner through many different channels. One pivotal point in our strategy was when we attended two trade shows in January 2020 – this was the first time Swyft had been showcased physically outside of London.
The response was immense, and our strategy was formed literally there and then. We launched with our first trade partners in March 2020, and have gone from strength to strength.
We knew we didn’t want Swyft to be everywhere, so I have been really selective with who we partner with – we work as partners, which really helps develop that relationship between us, the brand, and them.
It’s important to me that our partners really understand what Swyft is about. We are not just a flatpack sofa – we are young, dynamic, and offer sustainability. We move at a rapid pace. Partners have been excited that we launch new models regularly, and offer an exciting product range at a great price and excellent quality. They really appreciate our customer service level too, so if by chance something does go slightly awry, we move fast to rectify it too.
How does your trade-facing communication differ from your consumer-facing work? My role is all about the trade. I have a trade manager who now mainly manages our interiors side – he works with customers that need help with their interior projects, he can offer great advice and, for those that need it, we can now offer Crib 5 fabrics for those projects.
We do send out marketing emails to those trade customers which use more trade-related terminology and more designer-led communications. We usually have many communications with a trade customer before they order, and they enjoy the benefit of that personal service.
We have also created a store PoS to help our retail bricks-and-mortar partners to promote Swyft in-store, and offer giveaways so they can promote Swyft to their social media followers, too.
What’s the growth potential – and limitations? I will limit the number of retail partners we have (I have just launched with John Lewis as our national retail partner). As long as our factory can manufacture stock, then we can continue to grow and there shouldn’t be many limitations.
The potential is huge, and I feel we have only scratched the surface of supplying into the B2B sector.
Can you provide an example or two of how you successfully work with trade partners to achieve results? Launching in John Lewis is a massive result – and is testament to the strength of such a young and new – yet exciting – brand, that constantly delivers. We launched three weeks ago, and we are already well above the forecasted numbers.
EXTREMELY WELL IN
EMMA – THE SLEEP COMPANY
www.emma-sleep.co.uk Spokesperson: Neil Robinson, sales director – retail, UK & Ireland
When did your D2C brand first take a B2B route, and why? In 2016, we launched Emma in the UK with an online-only approach. The mattress market there is one of the most online-driven markets worldwide – every second mattress is purchased online.
However, many UK shoppers are also looking for personal advice in-store. They want to see, feel and experience the product offline before buying it. Since 2019, we therefore started to pursue our omnichannel strategy here, offering products both online and offline, to ensure we meet our customers wherever they need us to. Currently, Emma has more than 200 retail partners worldwide, and our products are available at over 3000 physical touchpoints.
How did you approach that market? It has always been important to us that we don’t just adapt the online experience offline. Our retail customers have very different needs than online buyers. Therefore, we created a unique shopping experience for our partnering retail stores.
For example, different marketing assets like light boxes or technical videos simplify the explanation of mattress types, and the presentation, with large, emotional images, gains attraction in the displays of brick-andmortar stores. We also did surveys with our offline customers to learn more about their needs, trying to understand what they want to experience.
How does your trade-facing communication differ from your consumer-facing work? In consumer-facing work, we highlight the risk-free and convenient purchase that our customers can have online. For example, we offer a free trial so that customers feel comfortable ordering a mattress online because they can still
Neil Robinson
return it for free.
In trade-facing communication, we don’t need to focus on this since customers are experiencing the product beforehand (even though we are still offering a 100-night trial regardless). Instead, we want to provide all the information about the product they need in order to facilitate their decision. Furthermore, we differentiate our products by highlighting different USPs to make them easier to comprehend. This is supported by a system of different colours to highlight the distinctions.
What’s the growth potential – and limitations? At Emma, we are convinced that there will always be a more advisory-oriented target group that wants to experience the product before buying it. To be clear, we think the offline experience can never be fully replaced by online shops.
After growing a lot in the online world, we are now investing more in trade, building a local retail team located in the UK, underlining the big growth potential we see. Prospectively, there will be new sleep products that might need even more explanation because they are techy or offering new types of solutions. This is where the offline experience will be irreplaceable – we want to explain this to our customers.
At the same time, the online share in the UK is immense – and after buying a mattress online once, a lot of people won’t miss out on the convenience in their next purchase. As a result, we are convinced of the benefits of an omnichannel approach – both channels will be needed to offer everyone a perfect sleeping experience.
Can you provide an example or two of how you successfully work with trade partners to achieve results? The collaboration with our Emma Select retail partners in general is a good example. Our trade partners offer Emma a strong brand presence in stores, including brand builders with range information along with TV and Emma signage. At the same time, our brand awareness supports our retail partners to get their customers to the stores.
In addition, we offer a transparent product assortment which simplifies the customer’s purchase decision. Our mattresses can also be partnered with a variety of bases.
Lastly, we offer quick delivery, 10-year guarantee and a 100-night free trial. This allows the retailer to display the Emma Select as a varied, supportive and convenient range, making our collaboration a win-win situation.
EVE SLEEP
www.evesleep.co.uk Spokesperson: Cheryl Calverley, CEO
When did your D2C brand first take a B2B route, and why? eve has worked with a number of B2B partners almost since it was first incepted. Customers have a wide range of shopping habits, and eve sleep’s misison is to help give everybody the sleep they need to rise and shine, which means making better sleep accessible to all.
We didn’t want to be exclusive as a brand, and recognise that some shoppers prefer to shop in physical retail, or with retail brands that they’ve used for many years and for a wide range of products, rather than come directly to an ecommerce business.
How did you approach that market? In various ways, depending on the partner. The main priority is understanding the customer of each particular retailer and proposing a product and plan which would fit their customer need. So, customers shopping at a brand such as Argos are looking for a very different thing to a customer in Boots, which is different again from the Next customer.
Cheryl Calverley
How does your trade-facing communication differ from your consumer-facing work? That’s a hard question to answer, because it doesn’t, really! Our brand is our brand, and everyone is a consumer of our product (everyone sleeps!), so we focus on the benefits of our products, what they give you (better mornings) and how they can fit into each customer’s individual (sleep) lives.
What’s the growth potential – and limitations? The retail sector is undergoing a huge amount of flux, but there will always be a role for strong retail brands curating the right range of products for their customers. The potential for us is to reach the customer who perhaps doesn’t know of eve, or is on a different shopping mission to pure ‘sleep wellness’, or who would rather bundle their sleep purchase alongside a range of other goods, such as wider homewares.
These customers will always be better reached in channels other than eve’s D2C channels, and we continue to craft products and offerings to meet exactly these needs with our partners.
Can you provide an example or two of how you successfully work with trade partners to achieve results? Last year we launched an exclusive range of sleep gifts with Boots. It was a funny old year – Christmas cancelled and the high street open and shut – but that partnership not only allowed Boots to explore sleep as a category, it allowed us to identify the right products to launch ongoing on our own site, and to further develop for partners. As such, it acted as not just a retail partnership, but a new product test bed, and to drive brand awareness for eve.
Our most successful longstanding partnership is probably with Argos, and again here I think the power has been in understanding the Argos shopper mission and customer, and evolving our product to really meet that need – which is a different need to that which we serve through our own site, and means this relationship can thrive alongside our D2C business.
Carina Bartle
LUXDECO
www.luxdeco.com Spokesperson: Carina Bartle, VP sales and partnerships
When did your D2C brand first take a B2B route, and why? When LuxDeco was launched in 2012, we assumed that interior designers wouldn’t want to use us because we were potentially treading on their toes a little bit. Back then, the site was very curated – all by theme or by look – something that no-one else was doing at that time, so we didn’t really know how we were going to be received. But it actually went the other way.
A few of our very first customers were trade customers – both interior designers and architects – and the trade element of the business just grew organically from there through word of mouth.
We’ve got two splits of customer base – the residential interior designers, and the part of the industry that works across hospitality projects. Both are very different B2B customers. The residential interior designers came through quick and fast for us, particularly in the UK. We also worked with a lot of international interior designers. With the hospitality clients, we initially had a few organically come through, including major global hotel chains, but we had very limited communication because we weren’t dealing directly with the designer.
How did you approach that market? To build on hospitality specifically, we went directly to the designers that we were working with and essentially pitched our services to them face to face, with a really open conversation to explore what we could do. At the time it was a really unique approach to this market because we were a young and agile business with amazing products from around the world, plus our own lines that were selling really well for residential projects.
We have learned a lot about how to tailor our offer, resulting in a decision to put a team member in Dubai permanently. They’ve been here for a year, and we’ve seen sales increase over +400% and our customer base grow exponentially. It has given us the ability to support and work with the designer or procurement agency locally on exactly what they need, exactly when they need it, because timing is such an important factor in the business.
How does your trade-facing communication differ from your consumer-facing work? Communication with our LuxDeco Pro customer is different to how we deal with our D2C LuxDeco customers – mainly because there’s a lot more regular communication, you’ve got a lot more of an opportunity to build a rapport, and essentially, if someone wants to work with you, you have to make it fun – you have to make them feel comfortable.
Trade communication is very much reflective of the tone that the client uses with us. If a client uses a formal tone, we’ll reply with a formal tone. If a client wants to build a relationship and communicate over WhatsApp, use emojis, jump on the phone and have a chat, you take a different approach. It is always tailored to how they want to work and who they want to work with.
For designers using LuxDeco, they
know they can get accessories, furniture and pretty much anything else from us. We often get a quick WhatsApp or call asking about a specific product or style, and if we can help. We feel like we’re part of their team. That’s one of the things we say when we sign people up for a trade account – we’re an extension of your team, and here to assist.
What’s the growth potential – and limitations? The growth potential for LuxDeco is wider global projects. At the moment our core markets are the UK, Europe, the US and the Middle East. However, we work with global brands and we have global customers, so for us, the growth potential is having teams in different markets – for example, the US. Where we have the Dubai team working alongside the London team and have seen such growth, it’s now about growing into new markets.
The limitations are set by the industry, but the biggest is timescale. For a really beautiful piece of furniture it can take 12-14 weeks, and the industry demands pieces fast. Designers are under more pressure to deliver a scheme that is exceptional, that has detail, but in a really quick timeframe and on a budget.
So, how can we improve the timescale of the deliveries and craftsmanship? It’s important to note that interior design, and the way interior designers work, is such a process. It’s an art. Sometimes, even though the customer demands it, there’s going to have to be some pushback, as meeting their request is not always possible, despite our best efforts. We know that if you rush or need items quicker, quality is going to fall.
Can you provide an example or two of how you successfully work with trade partners to achieve results? We have a trained interior designer in our trade team, so we really understand what they need and can offer additional services. Sometimes we’ll be sent a scheme from a designer, if they’re running out of time, and we’ll assist with the last mile – the heartbeat of a project – which is all the accessories. Once we have the scheme, we can pull together a list of accessories that are available within the timeframe, within budget, and that will work together.
We can even go so far as to do elevations to make sure that things are going to check in the spaces
