There is a revolution in the e-commerce market: Direct-to-Consumer (DTC). Without knowing what DTC means, you might have already been aware of one or more DTC brands. Within the Asia Pacific, Omnidesk in Singapore and Benithem in Malaysia are prime examples.
DTC refers to merchants that sell directly to their customers instead of going through wholesalers, marketplaces or retailers, and it is growing at a pace like never before.
We are looking at DTC e-commerce sales in the US projected to reach US$175 billion by 2023, a 56 per cent growth from 2020. In India, the market is forecasted to multiply three-fold from 2020 to 2025, reaching a projected US$100 billion in sales.
There is a very good reason why DTC is growing so quickly. DTC players sell directly to the end consumer, bypassing third-party retailers, offering a slew of benefits that make it very attractive and lucrative for both ‘well-established’ and upcoming retailers operating in SEA.
This provides larger profit margins, greater control over the brand image, and the ability to tailor payment solutions specifically to the preferences of the unique and local markets they operate in, thereby improving consumers’ shopping experience.
As the e-commerce landscape in Southeast Asia heats up with 75 per cent of the population going online and a digital economy set to double to US$363 billion by 2025, the time is ripe for local merchants to look beyond their borders and expand into the wider region.
Also Read: Can Singapore truly become a cashless society with payment 3.0?
Bearing that merchants are playing in a crowded marketplace, those looking to grow their business must move fast and embrace new ways of operating to stay ahead of the curve, and payments are an integral part of the plan.
Challenges to tackle
DTC merchants fresh to the game face unique challenges, unlike unestablished brands when expanding into new markets. Given economies of scale, the high transactional and FX fees, and complexities in sending and receiving payments in multiple foreign currencies, they may not have the resources to manage multi-currencies.
Delving deeper into the specific regional challenge of transacting within each unique market, risk and regulations is another area where merchants must grapple with unexpected and foreign challenges and compliance.
When expanding into new markets and tailoring specific payment solutions to the preferences of their target audience, they have to consider offering local payment methods to cater for their new market growth and encourage customer conversions.
Lastly, as with any new business starting out, a major challenge would be access to working capital. It not only acts as a float when supporting daily operations but also enables businesses to capture fast-moving opportunities in a highly dynamic space.
This includes advertising to a wider audience, venturing into new markets and scaling the business further, all of which require funds.
Unifying commerce by consolidating payment
Shaping a growth plan for a DTC business involves expanding into all digital and in-person channels that customers frequent.
Underscoring this plan is the inclusion of a holistic payments strategy that not only provides customers with choice at checkout but also enables the business to: enable cross-border selling (i.e., local payment methods, multi-currency accounts, language capabilities); achieve consistent payment experience across channels; consolidating funds across the marketplace and direct sales channels; and above all, ensure seamless integration of the payments solution with their channel or e-commerce platforms.
Powering payments, then growth
It may prove to be overwhelming to a business that is starting, so having the option to partner with an established payments provider can help these businesses tackle the initial challenges, such as making mass payouts at scale to their sellers, freelancers and suppliers all over the world in the currency and payment method of their payee’s choice.
Also Read: Why smart businesses will prioritise smart payments acceptance
Ideally, payment processes such as cross-border mass payouts, receiving funds and making payments to suppliers, multi-currency accounts, FX optimisation, payment acceptance for direct-to-consumer, and accessing working capital can be synced on a secure single platform for a snapshot view of all their monies.
In all, the empowerment of a payments provider is integral in future-proofing the business to connect in the global digital economy and ensure a customisable, integrated and seamless payments experience.
A prime example of a DTC player optimising a partnership to deliver solutions by embracing a streamlined and unifying process to manage payments is Shoplazza.
They recently announced a partnership to integrate checkout solutions into their web stores to start accepting payments directly from customers worldwide, consolidate their funds across its marketplace and direct sales channel, and use their funds to pay for business expenses such as digital advertising.
This collaboration in the financial solutions space has created greater financial inclusion by removing barriers and complexities to entry to cross-border digital payments for merchants and consumers.
Getting payments right is a pivotal step to empowering independent brands in the region to capitalise on evolving consumer habits in a post-pandemic world and drive business agility.
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