Nowadays, Direct-to-customer (D2C) brands have become digitally native brands with a strong foothold in eCommerce retail. As such, they are bound by customers' expectations from online stores, including free shipping, fast delivery, and real-time order tracking.
Needless to say, D2C brands face stiff competition from their B2C (Business to Consumer) counterparts when it comes to customer experience. For the continual growth of D2C businesses, it is absolutely essential that a robust shipping and delivery strategy. This article serves as a Direct-to-customer shipping guide and discusses how to get started with D2C shipping.
1) What is the D2C Business Model?
True to its name, a D2C business sells its products directly to consumers bypassing all known intermediaries in a retail system. It eliminates the need to distribute and sell products via wholesalers, retailers, stockists, and distributors.
Direct-to-customer companies are thus well-known for retaining maximum self-sufficiency. Many D2C brands believe in building native websites and social media presence to connect with target customers. These companies forgo overhead costs by choosing online sales channels in building retail stores.
Here, brands initiate direct sales, retain a lump sum revenue and directly interact with customers. Consumers worldwide may already know some well-established ones like H&M, Nike, and Lenovo.
These companies have complete control over their supply chain and dictate their brand experience. One of the prime factors supporting consumers’ purchasing decisions is their fast order fulfillment and delivery times.
The major determinant of the success of a fledgling D2C company, therefore, lies in its fulfillment and shipping strategy. In the following sections, we describe more about D2C shipping and fulfillment.
2) 2 Ways D2C Businesses Can Proceed with Fulfillment and Shipping
One of the defining characteristics of a D2C brand new to the market is self-fulfillment or processing and completing orders in-house. However, as brands grow with outpouring customer orders, many D2C brands take recourse with 3PLs and fulfillment providers.
2.1) In-House Fulfillment
In this type of fulfillment system, the brand stores and manages inventory in its own facility. The infrastructure involved here can be a physical storefront or a warehouse. The company hires its own staff members to sort, pick and pack the products received from customers.
Similarly, in-house fulfillment can mean brands using their own transport agents or fleet to complete door-to-door deliveries. In most cases, however, companies partner with at least one carrier company, like FedEx or UPS, to facilitate their shipping operations.
Budding startups in the D2C space depend on the gig economy trend of crowdsourced delivery to kickstart their last-mile logistics. In this case, companies make contracts with transportation companies like Doordash and Uber to deliver shipments. These businesses possess a local fleet network and drivers who take up the delivery of parcels in that area.
Crowdsourced shipping is an excellent way to deliver packages on the same day to customers, especially if the brand has a storefront nearby. D2C brands can use crowdsourced shipping options to fulfill local demands and, as they grow, branch out their own fleet.
2.2) 3PL-led Fulfillment
One of the primary hindrances to the growth of a D2C company is its lack of scalability. This happens mostly in self-fulfillment situations where a brand experiences a surge in demand but lacks adequate resources to fulfill them on time. This is why many companies turn to 3PLs or Amazon (Fulfillment by Amazon) to scale their fulfillment operations.
The 3PL takes charge of the order fulfillment process, including receiving products from suppliers, storing them in the center, and managing inventory. They proceed with the same in-house fulfillment policy, from picking and packing inventory to shipping them with a carrier partner.
Moreover, 3PLs have greater efficiency in customizable fulfillment and shipping solutions like branded packaging, kitting, returns, and quality control. They have the greater storage capacity to keep bulk inventory in stock and offer negotiated carrier rates that brands otherwise miss out on.
Like crowdsourced funding, a 3PL having multiple warehouses can efficiently distribute inventory across a region or the country. Brands can offer one-day, two-day, or even same-day shipping by partnering with 3PLs with shipping capacity like FedEx.
3) A Breakdown of the D2C Shipping Processes for Beginners
In eCommerce, fulfillment, and shipping goes hand-in-hand. This means the preparation for the shipping process starts as soon as an order is placed with a D2C company. Here is a complete breakdown of the Direct-to-customer shipping process for beginners in the field:-
3.1) Order creation
This is the stage where the customer follows the workflow to place their orders with the brand. The typical workflow includes selecting the item and adding it to the cart for checkout. After this, they provide the delivery address and select the delivery method and time frame. Thereafter, they pay for the shipment that finally confirms their order creation.
3.2) Order processing and manifestation
Once the order is created and registered in the brand’s order management system, the next stages of order processing and manifestation are initiated. Order processing involves the primary steps in order preparation for pickup and final delivery.
The selected inventory is picked and packed. The required shipping label and airway bill are generated. Lastly, a carrier company is designated to carry out the last-mile delivery.
3.3) Picking and packing the product
Picking and packing begin the stage of order fulfillment. The company staff or the 3PL workforce locates and picks the item from the storage racks or bins and sends it to the packaging desk. After that, the item is packed in a box or a customized branded box, cushioned with fillers, and sealed along with the shipping label.
3.4) Order Dispatch with Selected Shipping Partner
Once the shipment is ready, the business owner can schedule a pickup date with their chosen carrier in case of in-house fulfillment. Otherwise, the 3PL agent can schedule the pickup and hand over the order to the courier agent to commence the in-transit process. This is the stage where order tracking begins. Ideally, customers are informed that their order is in transit.
3.5) Last-Mile delivery
The in-transit journey of an order can vary depending on the speed of the courier and the delivery method. For example, if a brand chooses priority express, the shipment usually travels via air and can reach the customer within a day or two. In standard delivery, it takes a longer wait time, ranging from three to eight days.
The local carrier agent collects the parcel from the logistics center and delivers it to the customer. The delivery process is declared successful with the smooth handover of the parcel to the customer. Sometimes the agent can also require a signature as proof of delivery.
3.6) Returns and Exchanges
D2C brands are customer-centric and prioritize hassle-free returns and exchange experiences. D2C companies like Patagonia and Jimmy Fairly provide pre-paid return labels with the original shipment creating an easy return shipping experience. They also process returns fairly fast, within seven to eight business days.
Many D2C brands offer a ‘no questions asked’ return policy if the product retains the original tags and quality. They also facilitate product exchanges, replacement, and repair in-store and online. D2C brands also emphasize offering accurate and timely return tracking notifications, loyalty points, and in-store credit systems.
4) 5 Customer Favourite Delivery Methods that D2C Brands Should Leverage
To stand out from a gazillion online businesses, a Direct-to-customer brand’s shipping time and delivery speed can become the major differentiator. For example, if a company can ship parcels within 48 hours, it will likely retain 42% of its online shoppers. Here are 5 delivery methods that brands can leverage to deliver an “Amazon-like” experience to their customers:-
4.1) On-Demand Delivery
On-demand delivery has the shortest delivery timeframe and is highly responsive to a customer’s time preferences. It usually offers high customer gratification points and is most prevalent in online food delivery. A D2C brand with a storefront or a warehouse in the area can assign a carrier to pick and pack the available product.
D2C companies have multiple options to offer on-demand delivery. They can raise an in-house ground fleet, crowdsourced shipping, or partner with carrier companies offering on-demand shipping services. Examples of carriers include DHL’s Express On-Demand Delivery.
4.2) Same-Day Delivery
In this method, the parcel reaches customers on the same day they place their orders with a D2C store. Same-day delivery requires greater logistical expertise and control.
Brands usually pair with carrier companies like FedEx and DHL to use their extensive global fleet network, order-tracking technology, and fast shipping time for same-day deliveries.
4.3) Two-Day Delivery
Two-day (2-day) delivery is the hallmark of an Amazon-like shipping experience that many of us are familiar with and expect from other brands. Though 2-day shipping has become a norm, it remains a premium option, often presented as a subscription model like Amazon Prime.
In order to balance shipping costs with revenue earned, D2C brands can replicate the subscription model or loyalty programs for 2-day shipping. With this, brands can capture loyal customers willing to pay more for premium delivery methods and bolster their brand presence.
4.4) Standard Delivery
Standard on-ground deliveries within three to five days remain afloat in the fiercely competitive delivery market. This is an economical option for many emerging D2C brands. Standard shipping enables them to maintain their shipping costs while delivering products. It is also a budget-friendly option for many customers.
Brands opting for standard deliveries can compensate customers for the lack of expedited shipping with free shipping. In fact, when it comes to free shipping, 7 out of 10 customers are likely to choose standard shipping over a fast shipping option requiring more delivery charges.
4.5) Hyperlocal Delivery
Hyperlocal deliveries are exceptionally fast and meet a city's local demand. This is a good option for brands providing same-day or on-demand delivery to customers. Here, brands partner with hyperlocal delivery partners like Postmates, Doorman, Lalamove, and Dunzo to offer fast deliveries.
5) 8 Ways D2C Brands Can Build Can Scale Their eCommerce Shipping
It is easier to start with eCommerce shipping than to scale it. In this section, we present all the tips and tricks you can employ to quickly scale your shipping services and gain brownie points in customer experience:
5.1) Opt for Multi-Carrier Shipping
As the name suggests, multi-carrier shipping brands integrate with multiple courier partners to manage their deliveries. Usually, multi-carrier shipping works by onboarding a multi-carrier shipping software like EasyPost, ClickPost, or Shippo.
Once the company integrates with one such SaaS tool, it can get the real-time carrier rates of multiple carriers. The business owner can choose the most economical option for that delivery location and parcel weight. Having multiple carriers allows D2C companies to offer delivery options flexibility, better delivery rates, and greater area serviceability.
5.2) Proactive Order Tracking and Customer Notifications
Offering shipping notifications and order tracking alerts are the trademarks of an efficient and customer-conscious post-purchase experience. In fact, 90% of online customers expect their brands to present systematic notifications on the whereabouts of their orders.
D2C brands relying on their own infrastructure must strategize how they can extend milestone-based order notifications and tracking alerts. Brands can rely on the carrier service to update customers. But in such cases, companies have to relinquish control over customer communication.
For D2C brands, direct customer communication is one of their strong suits that should ideally be maintained in the post-sales phase. To facilitate a branded communication method, businesses can again integrate with shipping software that streamlines shipping notifications.
5.3) Fulfill Orders Faster with Dark Stores and On-Demand Warehousing
Dark stores can become an excellent option for D2C brands to keep warehousing costs low and store a generous variety of products. A dark store specializes in storing inventory and is usually called a click-and-collect facility. The customers of a D2C company can pick up orders stored in an inventory.
With greater floor space, brands can keep more products than retail outlets. It can also facilitate fast shipping and delivery times since a dark store is usually located nearby urban centers.
Like dark stores, on-demand warehousing allows D2C brands to combine and aggregate inventory. Brands can band together to negotiate lower warehousing costs and labor charges from on-demand warehousing solution providers. They can distribute inventory across demand-centric locations and offer customers affordable 2-3 day shipping options.
5.4) Leverage 3PL Partnerships for Negotiated Carrier Rates
Shipping costs are like viruses that attack the healthy bottom line of a D2C brand. This is especially true during holidays when orders escalate or during peak sales periods like Black Friday in the U.S. or Diwali Sales in India. With an onslaught of orders, brands can outsource their fulfillment to 3PLs with expertise in handling large orders.
On top of accommodating customer orders in bulk, brands can use 3PLs’ large monthly shipment volume to negotiate better carrier rates. This especially benefits companies wanting to expand their carrier network without depending on a single shipping partner.
5.5) Go Green with Sustainable Shipping Practices
Today’s consumers are climate conscious and prefer sustainable brand practices. In a report from Ware2Go, 88% of American consumers say sustainability is a prime factor in going through their purchase with a brand.
Moreover, 68% of consumers say they will spend extra to support sustainable business practices. One of these is green shipping. It includes strategies like offsetting carbon emissions, promoting recyclable packaging materials, or using green energy with electric vehicles.
5.6) Automate Shipping Workflow for Increased Efficiency
Automated shipping refers to using technology such as AI models, ML-generated algorithms, and robotics to increase productivity and shipping efficiency. When processes such as shipping label generation run on autopilot, businesses can divert their focus on areas needing attention, such as optimizing their production cycle.
For D2C brands engaging in self-fulfillment, automated technology is all the more important to save time, reduce manual errors and speed up fulfillment. Automation can help verify orders, monitor carrier rates and hidden costs, track inventory counts, and approve return requests.
They further automate the picking and packing process by installing conveyor belts or automated guided vehicles. ML algorithms can forecast demand and predict optimal routes for shipping cost efficiency. Similarly, a barcoding system can be used to optimize the inventory stocking and counting process in warehouses.
5.7) Promote Loyalty Programs and Free Shipping for Different Customer Segments
As mentioned above, free shipping is a way D2C brands can garner customer attention and stand out of the crowd. They can follow the example of B2C brands establishing loyalty programs to incentivize certain purchasing behavior.
They can segment customers based on their purchasing patterns and repeat engagement and reward them with free shipping or free exchanges. By promoting loyalty programs, D2C businesses can start to create a customer experience for their loyal shoppers. This can further generate interest in the brand and its shipping practices.
5.8) Use Flat Rate Shipping to Lower Shipping Costs
Flat rate shipping is an effective way to offer quality shipping service at a fixed price. Here, D2C businesses can pack all the products that fit inside the flat rate shipping box as long as the weight restrictions are met. For example, USPS Priority Mail Express caps the weight at 70 pounds.
A pair of jeans can weigh something around 5 pounds, while a box of Nike Air Max weighs 1.7 pounds. Therefore, a D2C apparel business can gain a lot of benefits with bulk shipping if they put all the ordered items in a flat box. This can help them lower shipping charges and delivery surcharges, like making more trips to the same customer.
With their customer-centric policies, strong social media presence, and supply chain control, D2C brands are creating memorable customer experiences. However, to thrive in the long run amidst fierce competition, they must focus on upgrading their shipping and delivery mechanism. We hope this guide will help emerging brands create a robust shipping strategy.
7.1) What are some of the Best D2C Shipping carriers?
There are many carriers that fulfill customer expectations for 2-day shipping, eco-friendly shipping, custom packaging, and order visibility. Some of these include DHL, FedEx, UPS, Delhivery, DTDC, Ecom Express, and Blue Dart.
7.2) How can D2c brands reduce shipping costs?
D2C brands can control shipping costs by optimizing packaging to bring down shipment or DIM weight. They can take the help of flat rate shipping, negotiate carrier rates with the help of 3PLs or avail shipping discounts from shipping software.