Direct-to-consumer (DTC) businesses have seen a dramatic increase in both sales and popularity during 2020. From 2019 to 2020, sales from companies that operate using a DTC sales model grew by 24.3 percent, and this growth is projected to continue well into the future. A good 3PL helps DTC businesses scale. So, what is a 3pl company used for? In this comprehensive guide, we’ll explain what you need to know for your DTC business.
This is an incredible time for DTC businesses, as more and more consumers shop for everything online from wine to workout gear, vitamins to beauty products, razors, hair dye, and more.
But with all this growth, many DTC companies are feeling stretched a bit thin, and are looking for opportunities to continue to expand their markets and boost sales without overextending themselves.
DTC companies need a way to scale their operations. They need a third-party logistics (3PL) provider. We’re examining what 3PL is all about, and how it’s benefiting DTC companies just like yours.
What is a 3PL Company?
Third-party logistics providers handle logistics and supply chain management for retailers, typically specializing in integrated operations of warehousing, transportation, and delivery. Companies that rely on 3PL firms choose to outsource their distribution, warehouse, and fulfillment services because these services can be scaled and customized to their needs and budget based on market conditions.
3PL services help retailers meet the demands and delivery service requirements. They frequently offer more than just logistics, providing value-added services that are integrated into the entire supply chain, such as:
- Picking and packing
- Inventory management and inventory forecasting
- Order fulfillment management
The actual job description of a 3PL firm isn’t always consistent from provider to provider. Some 3PLs only offer one service like freight forwarding or warehouse management, while others have an entire menu of services that involve more guidance and support to help retailers grow their businesses at every point in the supply chain.
Some 3PL firms even offer modern solutions by incorporating technology into their operations to increase order accuracy and inventory accuracy, and to make the entire fulfillment process a smooth one that operates from a single interface.
How 3PL Providers Can Help Your DTC Operations
Working with a 3PL provider has all kinds of benefits, including:
- Focus on Core Competencies: Since 3PL firms can handle the entire supply chain, DTC companies have more time to devote to growing their brand because they aren’t managing logistics and supply chain duties and strategies on their own.
- Easily Scale Your Operations to Meet Demand: By outsourcing logistics, DTC companies gain flexibility and scalability in their day-to-day operations. As demand fluctuates, DTC brands spend only what they need for consistent service. They can scale up when sales are at an all-time high and scale down during their off-season.
- Use Resources Wisely: One of the main reasons that retailers choose to work with 3PLs is the support they receive to manage inventory and expand into new markets without having to invest in new capital to do so. DTC companies don’t have to wait to acquire the resources to pay for more storage space or a larger team.
- Enjoy Cost Savings: 3PL firms are experts in logistics and supply chain management. With their industry connections, they can negotiate better shipping and warehouse costs to keep your costs low from end to end. They’ll help you save on transportation, warehousing, payroll, and tracking technology because they already have a proven, lost-cost system in place.
- Expertise from Industry Professionals: Inventory management and forecasting? Transport documentation and international compliance? A 3PL provider can advise you on how to expand to new markets without costly delays or inefficiencies.
- Improved Customer Satisfaction: With a 3PL firm, DTC companies benefit from faster response and shipping times and improved services. This helps DTC brands build strong, reliable customer relationships with satisfied customers.
As eCommerce continues to take off, it’s estimated that 40 percent of U.S. internet users believe that at least 40 percent of their purchases will come from direct-to-consumer brands within the next five years.
Why can 3PL services help DTC companies in particular to grow their businesses? For the same reasons that DTC brands are taking off. Consumers love DTC companies because:
- They offer high-value products at relatively affordable prices
- They focus on stellar customer experiences
- They are leaders in innovation and quality
These reasons directly correlate to the benefits that 3PL firms provide. Because 3PLs offer affordable shipping and warehousing rates and handle the supply chain for online retailers, DTC brands can direct all their efforts towards customer satisfaction and product development, while offering quality goods at great values. With the services of 3PLs in place, DTC companies can get back to the core competencies that inspired them to go into business in the first place.
Subscription Services, DTC Companies, and Third-Party Logistics
Subscription services are quickly becoming a large sector of the DTC industry. By 2023, it’s projected that 75 percent of DTC organizations will offer subscription services, and 18 percent of the global DTC market will be composed of subscription services.
We can attribute a lot of subscription marketing success to the fact that customers can build relationships with the brands. They appreciate the cost savings that many subscription services offer, as well as the value of the service. It’s no wonder that the subscription commerce economy has a 17.33 percent compound annual growth rate over 5 years.
How can 3PL services help with a subscription model? The psychology of subscription relies heavily on reliable, affordable service and exceptional customer experiences. Subscription-based DTC companies looking to build reliable, cost-effective supply chain practices and develop long-term customer relationships can benefit directly from the work of 3PL providers.
By handling fulfillment and supply chain obligations for DTC subscription services, 3PL firms free up these companies to focus on their core competencies. So whether that’s passing cost savings onto their customers, developing new products, or delivering memorable customer experiences, these subscription services benefit directly from the work their 3PL firms provide. 3PL firms can also help with scaling subscription commerce efficiently, making them a solid choice for the future of subscription services.
How OceanX Can Help
Scaling a DTC company is a lot like training for a marathon. It can’t happen overnight, and you can’t rely on old strategies to get you to the finish line. You need new tools and improved methods to handle new demand. To grow your brand, you need the support of a 3PL firm that understands the needs of direct-to-consumer companies. Think of us as your running coach, helping you train for a DTC marathon.
As your pick, pack, and deliver partner, we’ll help you expand into new markets, simplify your cost-savings strategies, and personalize shipments to meet the needs of each individual customer. With a single interface, a fully integrated platform, and knowledge and experience that comes from working in the beauty and wellness DTC industry for decades, we’ll become a key part of your team.
If you’re ready to discover more about how our 3PL services can revolutionize your DTC business model, download our informative guide today.