Episode 6
Treasurers’ Strategic D2C Role
eCommerce has continued to grow and evolve over recent years, but this expansion has been accelerated by COVID 19 as sales moved rapidly online. It is not simply how customers transact that is changing, however, but the way that sellers engage with them. In the past, many companies sold via distributors or retailers, and/ or third-party marketplaces. This made it difficult to develop direct insights, engage directly with consumers and build loyalty.
For the sixth episode of the Journeys to Treasury podcast, Helen Sanders, speaks with (below, left to right):
Anne-Christin Ahrens, Solution Manager, Billing & Revenue Innovation Management, SAP;
Neil Pein, Head of Payments Transformation, BNP Paribas; and
Nicolas Vincent, Partner, Retail & Consumer, PwC.
Today, companies are developing new business models, based on marketplaces and social media platforms to better understand and respond to customer priorities, personalise their experience, and build relationships. Nicolas Vincent, Partner, Retail & Consumer, PwC notes,
Payments play a key role in the convenience, speed and quality of the customer experience. Given treasurers’ role in facilitating and reconciling efficient, secure payments and collections, they therefore play a core role in business performance and as such, are no longer a cost centre, but a centre for value creation.
A business transformation
In some cases, the move to D2C represents a transformation of companies’ entire product portfolio. For example, customers only want to pay for what they use, when they use it. Anne-Christin Ahrens, Solution Manager, Billing & Revenue Innovation Management, SAP comments,
We have already seen this in the hi-tech sector with digital downloads of films, music etc. but the concept extends to vehicles, such as car sharing, and even medical equipment. Companies are also using the opportunity to wrap around additional services, such as servicing or maintenance contracts, to provide a more convenient customer experience.
These shifting business models result in a change in incoming payment and customer risk dynamics, replacing larger payments from distributors to an increasing volume of lower value payments. Reliability of incoming payments becomes increasingly important as companies take on a greater risk to customers, particularly when adopting subscription or contract models, so direct debit and request to pay instruments may become more important in some markets. In many cases, companies are using the opportunity of online, D2C sales to attract overseas customers, which may require new skills, such as managing escrow, international taxes, customs etc. and the need to manage additional foreign exchange and cash management requirements.
A blended approach
While D2C sales models are becoming more important to many companies, these are often additional to, rather than an alternative to existing sales models. As a result, some are looking at how best to create a complementary offering across channels. Neil Pein, Head of Payments Transformation, BNP Paribas explains,
Companies need to take a unified commerce approach, that gives customers a comparable experience whether they engage through online marketplaces, web shops or physical stores. In some cases, we have helped companies to bring their online offering into stores, enabling them to maximise the goods on display, but enable customers to buy online via in-store tablets if the product they require is not available in-store. This approach also has the benefit of reducing the need to hold large stock levels instore.
From D2C to D2B
It is not only sales to consumers that are experiencing a transformation: there are similar trends taking place in the business-to-business (B2B) space. For example, companies that sell to small and medium-sized businesses often do so through distributors, but online channels enable them to sell direct, create a more personalized experience, and potentially add service ‘bundles’. Software as a service, licensing subscriptions, rentals and pay per use models also offer particularly opportunities for B2B sales, as Anne-Christin Ahrens noted earlier with reference to medical equipment.
The future of digital retail models
Anne-Christin Ahrens, SAP predicts,
We expect the current trend to continue, with more and more of these scenarios emerging. Treasurers should be involved from the very beginning of this business transformation to ensure that issues such as appropriate payment methods, the ability to reconcile payments quickly, and scalability are taken into account, particularly given the move from a high value, low volume payment scenario to low value, high volume. The foreign currency and export considerations also need to be considered if companies are expanding their sales models into new markets. Automation, digitisation, transparency and an understanding of regulatory requirements in each sales market are key drivers of success.
Neil Pein, BNP Paribas agrees,
Treasurers need to be at the centre of the revolution in payments and sales models that we are seeing today. Working closely with a trusted partner bank is essential to ensure that the right payment and cash management solutions are in place, and to gain the necessary insights into payment cultures and regulations in each market.
Nicolas Vincent, PwC concludes,
The benefit of D2C models is the ability to access customers directly to better understand their behaviour, needs and expectations. This data, and using this data to drive strategy, is gold, and companies need to focus on this to derive the full benefit. As we’ve discussed, payments play a major role in the customer experience, which is an area that some treasurers have not been fully focused in the past. As the payment value chain becomes more complex, with more and more solutions, and more cross-border activities, treasurers need to develop their payments expertise, internal connections across the business and understanding of how best to use data. By doing so, they can become a valuable partner to the business and agent of growth.
In the next episode…
Reflections on the 2021 Journeys to Treasury podcast series