The evolution of manufacturing technology & the shift towards direct-to-consumer strategies

Electronic commerce, also known as ‘E-commerce’, has become a dominant force in this transformation. In essence, it is the purchase and sale of goods and services over an electronic network (common platforms include renowned named like Shopify, Amazon and social commerce via Instagram or TikTok). E-commerce platforms have grown exponentially, and consumers have placed heavier reliance on these platforms post covid-19 pandemic, due to an intensified shift towards online consumerism during lockdown. More recently, this trend has continued to cultivate within the sector, with continuing advancements in manufacturing technologies such as artificial intelligence (‘AI’), augmented reality (‘AR’) and machine learning (‘ML’). These technological advancements are providing platforms with greater user-friendly interfaces, personalised shopping experiences and flexible/efficient checkout options.

Consequentially, businesses are now adopting and looking to embrace E-commerce to meet an increasing consumer demand, particularly within the manufacturing sector. More manufacturers are now opting to sell products directly to consumers (‘D2C’) (along with other businesses) via E-commerce platforms, blurring the lines between business to consumer (‘B2C’) and business to business (‘B2B’) transactions with manufacturers. By enabling them to reach the end consumer, they are experiencing a growth in their profit margins through direct sales to consumers for retail prices, rather than a wholesale price to the ‘middleman’ (wholesalers, retailers and distributors) at. Traditional methods of purchase which consisted of browsing through product catalogues and bookmarking products for order are fading; consumers are now dealing day-to-day with manufacturers. This is allowing such businesses to diversify their customer base, capture new market opportunities and develop their brand awareness.

Advancement in technologies

The E-commerce revolution and its rapid growth is driven by advancements in online businesses, mobile technology and more recently AI and ML (as defined above). Such technologies are providing capacity for manufacturers to analyse large amounts of data and customer behaviour/preferences which in turn generates insights for businesses to enhance the customer shopping experience vastly. This enables manufacturers to personalise product recommendations, streamline supply chain management and handle various customer service tasks - from frequently asked questions to the tracking of recently placed orders via AI generate chatbots, which can now; in essence, improve efficiency by reducing the workload for individuals working within customer services and allowing for instant responses to customer queries. Additionally, AI and ML also assist businesses in leveraging dynamic pricing by adjusting stock prices based on factors like demand, inventory levels and competitor pricing. The opportunities and endless efficiencies these technologies provide are key for manufacturers dealing directly with consumers via E-commerce.

AR represents another game-changing technology which allows consumers to integrate digital shopping elements into the real world. Within E-commerce this provides the consumer with the ability to visualise manufacturers products in a real-world context, prior to making a purchase (rather than visiting a retailer) – for instances IKEA permits consumers to virtually place furniture in their homes to see how it looks and fits, whilst Ray-Ban offers virtually ‘try-ons’ for eyewear using a smartphone camera.

Other innovations, such as the ‘Internet of Things’ (‘IoT’), are also influencing the shape and direction of E-commerce. IoT represents a network of interconnected devices embedded with sensors and software to exchange, feedback and analyse data. This is transforming logistics and supply chain management. Manufacturers can now track and monitor their inventory in real-time IoT sensors and devices. For instance, Zara uses this technology to prevent stock-outs or overstocking at warehouses by tracking inventory and ensuring the availability of products.

In essence, the technological advancements in E-commerce, logistics and data analytics are facilitating a major shift for manufacturers from B2B to D2C, allowing manufacturers greater operational efficiency within a digital marketplace.

How can we assist?

If your manufacturing business is considering embracing digital transformation and considering transitioning to a D2C model (or if you already have), our specialist commercial team is here to assist with a range of legal matters and obligations to endure your business remains compliant and protected.

For manufacturers looking to deal directly with consumers, it’s crucial to understand your legal obligations to consumers under the Consumer Rights Act 2015, The Consumer Contracts (Information, Cancellation and Charges) Regulations 2013 and The Consumer Protection from Unfair Trading Regulations 2008. We can advise on these areas of legislation, as well as assisting on any drafting and negotiation of policies, terms and conditions or commercial agreement. Additionally, any business looking to join the E-commerce revolution in order to deal directly with consumers, Forbes offer guidance with drafting the terms of use for your E-commerce platform, meeting obligations under data protection law, domain name registration and any brand protection necessary.