June 27, 2022 How Manufacturers Can Side Step Inflation Woes

Using the power of e-commerce to sell directly to consumers can help manufacturers increase margins and offset inflationary pressures.

By Cathy Tie, CEO of Locke Bio, for Industry Today

For many manufacturers, a direct-to-consumer (DTC) sales model can mean the difference between surviving inflation and crumbling under its weight.

Right now, offsetting low margins is the top priority of many manufacturers. As record-setting inflationary pressures continue to squeeze most industries worldwide, 73% of manufacturers plan to hike the prices of their products, according to PwC. And these issues aren’t likely to halt soon; 68% of manufacturers also feel that inflation is likely to remain elevated through the end of 2022, if not beyond.

When it comes to controlling margins, manufacturers have an especially challenging time. The intermediaries standing between you and your customers – from retailers and wholesalers to advertisers and distributors – make it difficult to cut costs and keep profits. That’s why it’s essential that manufacturers remain agile in their business model to ensure their organization – as well as the customers they serve – won’t succumb to inflationary pressures.

Up until recently, manufacturers needed support from powerful intermediaries, because they often lacked the know-how and capital to reach consumers directly. Thankfully, new e-commerce solutions, digital marketing platforms, and backend tools have made it both easy and cost-effective for manufacturers to take ownership over their supply chain, thus cutting out the need for these middlemen.

And, as an increasing number of consumers turn to online marketplaces for their favorite goods and services – everything from sleepwear to supplements – there’s a huge untapped market just waiting for manufacturers to take advantage. Eighty-one percent of consumers in the United States say they plan to buy from a direct-to-consumer (DTC) brand by 2023. With numbers like these, it’s now time for manufacturers across industries to consider launching their own DTC e-commerce brand, or partnering with a DTC e-commerce brand, to augment more traditional sales methods.

Why Should Your Business Switch to an E-Commerce Model?

There’s a lot to be gained if you’re a manufacturer looking to launch your own DTC e-commerce brand, including:

• You’ll take ownership of your supply chain.
  Negotiating with third parties is time-consuming and exhausting, not to mention expensive. For smaller manufacturers, this is one of the biggest blessings of the DTC model – you don’t have to worry about getting your foot in the door with big retailers because you can sell directly to your target audience instead. Even the largest, most well-established manufacturers can enjoy this kind of agency as well; the ability to move product quickly and with much less red tape is a definite perk.
• You’ll cut costs, while still passing savings to consumers.
  The ability to easily increase your margins is a powerful incentive for pursuing a DTC model. Whether you’re trying to offset inflation-related costs or looking for yet another revenue stream, cutting middlemen out of the equation means you can enjoy a larger piece of the profits.
  This also means you’ll be able to cut down on daily operating costs. If you sidestep the intermediaries formerly responsible for elements like marketing, brand management, or sales – and replace them with a digital DTC storefront – you’ll be able to pass that financial savings onto the customer through more competitive pricing.
• You’ll foster better relationships with your consumer base.
  One of the best benefits of adding a DTC e-commerce model to your organization’s sales channel is the ability to get to know your customer base directly instead of relying on analytics through the third party selling for you. This enables you to access consumer data that can drive future marketing efforts and, ultimately, attract more of your target audience to your online presence.
  Of course, as you get to know your customers, they’re getting to know your brand directly too. This, in turn, encourages brand loyalty and engagement, which can also boost sales and help you build a following to leverage in the future.

Whether it’s supply chain bottlenecks, inflation, labor shortages, or the next global pandemic, manufacturers must be equipped to handle the ebbs and flows of today’s hectic market. By getting ahead of the curve and switching to a DTC model that allows you to secure your organization’s future, promote growth, and retain profits, you’re not just ensuring your organization’s longevity – you’re also setting the stage for future growth.

About the Author:
Cathy Tie is the Founder and CEO of Locke Bio, a digital health platform company that streamlines the launch of a fully integrated, branded Telehealth service. Cathy is recognized in Silicon Valley as the youngest founder to raise venture capital in biotech and is a Thiel Fellow. She has also been recognized by Forbes in their annual 30 Under 30 listing.

https://www.lockebio.com/

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