Direct to Consumer Sales
SELLING THROUGH THIRD PARTIES
Key Consumer Issues
Understanding Routes to Market in Digital Retail
Direct Sales
Consumer
B2C Sale
Key suppliers
Key themes
Design & build of website
Host & maintain the website
Payment provider
Fulfilment provider
Ecomm platform provider
Consumer protection
KYC - consumer screening
Product specific regulation
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Design and build projects for website and e-commerce usually are run on an agile development basis.
Often the base website structure and e-commerce engine is pre-built by the supplier and you add on the specifics of your requirements.
Check third party rights over content you incorporate such as images, quotes, text etc.
Consider interfaces required to payment provider and fulfilment providers, as well as your back office systems such as stock control, CRM and availability.
Availability, capacity and load extension when required e.g. at peak trading times, or during promotions.
Location of server and associated data protection issues.
Think about:
Hosting and maintenance is an ongoing service.
Consider:
Geo-blocking if relevant as to territories you are prepared to supply.
How easily you have the power to refresh and update content and special offers.
Make payment methods relevant to your customers available at checkout and understanding the contract terms and service levels in place with your payment processors.
Processing payments in a secure way, in compliance with industry data security standards (e.g. PCI-DSS) is crucial to maintaining customer trust. Regulations on Strong Customer Authentication requiring multi-factor authentication recently came into force.
Many payment methods provide protection to customers who dispute a transaction (e.g. debit and credit cards offer "chargeback" protection)
The payment experience is central to creation of a seamless customer journey and requires the following:
Where you are using an e-comm platform provider it will be important to check how does fulfilment work – is that part of the platform service or do you need to have a fulfilment solution yourself?
The platform may be dedicated (i.e. a white label solution) for the sales of your product direct to consumers or a platform which is open to multiple retailers; e.g. Amazon or ebay. A white label provider has more scope for tailoring to your requirements as if it is not dedicated, then you are unlikely to secure much variation to the terms of business of the platform. It will be important to confirm:
Is the payment provider via the platform or directly with the customer?
Whether platform seller or buyer guarantee/ dispute resolution procedure applies and if you are happy to sign up to the terms of this?
Customer journeys should clearly present key information i.e. pricing and delivery, and the customer should be able to check all information before confirming the order.
If a 'cooling off' period applies to your product under distance selling regulation, the customer will have the right to change their mind, normally within 14 days – you need to provide for this in terms and processes.
All the communications relevant to the sale will be considered part of the contact: ensure that promotional material doesn’t mislead, over-promise, or contradict the terms small print.
Privacy information and consents need factored in.
Complying with anti-money laundering laws by verifying the customer's identity and identifying potentially suspicious transactions
Reducing risks of fraud, payment scams and other
financial crime
Screening customers against lists of international
sanctions targets
Mitigating conflicts of interest and bribery risks by identifying possible connections to Politically Exposed Persons
Know Your Customer checks allow you to better understand your customer base while managing legal risks across a number of areas, including:
As a product owner, you will be familiar with specific regulations applicable to your products. However, if direct to consumer sales are new to your business, you should consider whether there are any additional regulations relating to product sales which now apply to your business. For example, for restricted products requiring age verification checks prior to supply, you should implement policies and procedures to ensure checks are carried out.
Promotional investment commitments which are conditional, targeted (at the right channels) and flexible (to adapt to consumer behaviour shifts)
Clear parameters for any exclusive deals (e.g. by product, channel, territory and duration)
Pricing and rebate structures which are designed to incentivise sales. Allocation of responsibility and liability for key risk areas (e.g. delivery obligations, passing of risk/title, applicable taxes/ tariffs, warranties and limits on liability)
Consumer
B2B Sale via bricks & mortar
Indirect Sales
Key commercial terms
Competition and pricing
GSCOP
Key themes
Wholesaler
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B2B Sale via online
B2C Sale
B2C Sale
Brexit:
cross-border supply
Brand protection (counterfeits)
CMA ecommerce review
Key themes
Pure ecommerce retailer:
online sales
Brick & mortar retailer:
online/offline sales
Clear commercial terms reduce the risk of dispute and facilitate successful partnerships:
Designing supply and distribution agreements to comply with competition regulations and to benefit from available exemptions;
The pros and cons of distribution models (agency, selective distribution, open distribution) and how they interact with direct to consumer channels;
Resale price maintenance; and
Making sure your employees understand the rules (training and compliance).
Competition laws pose a risk to your business if they are not understood and embedded into your ways of working. Issues to consider:
Drafting terms between large retailers and suppliers;
Knowing your rights and responsibilities under GSCOP; and
Interaction with the Groceries Code Adjudicator.
The Groceries Supply Code of Conduct (GSCOP) applies to supply agreements with the UK's largest retailers. Issues to consider:
Trade with Northern Ireland will be impacted by new customs arrangements and regulatory divergence;
Understanding new import/export restrictions, regulations and standards applicable to goods;
Understanding new rules on services, investment and digital trade; and
Developments/ potential divergence between UK and the EU rules and regulatory co-operation.
Britain's departure from the European Union presents a number of challenges and opportunities for businesses trading from or with the UK:
Limits of key word advertising/ bidding on competitors' trade marks as key words
Brexit implications for goods exported from UK to EU – is consent from rightsholders required as UK sales will not exhaust EU IP rights?
Preventing online marketplaces selling parallel or counterfeit products
Anti-counterfeiting/parallel goods strategy including regular monitoring/notice and takedowns against ISPs hosting infringing websites
The following challenges of brand management are becoming increasingly common in online platforms:
A UK statutory code of conduct for digital platforms designated as having 'strategic market status' (SMS'), enforced by a new Digital Markets Unit; and
Further reforms under consideration across the world to curb digital platforms and powerful ‘big tech’ companies including Google, Apple, Facebook and Amazon.
There are a number of ongoing initiatives designed to regulate digital platforms such as search engines, social media, app stores, online market places, and price comparison websites.
This includes:
Will they hold stock which they buy from you? Or do they only place an order when they obtain one from a customer?
If this is a new distribution method you are trialling, then the speed of your supply chain to respond to orders, management of stock levels, and IT systems capable of handling the volumes of orders, will all have to be considered. As with any retail distribution channel, you will need to consider retention of the title until paid for the goods by the retailer, and how to deal with slow moving stock/ returns from customers.
Consider the model operated by the e-commerce retailer:
Successful adopters of phygital have demonstrated a commitment to product storytelling, consumer loyalty and fierce collaboration with social media platforms / tech giants.
We are seeing retailers, particularly luxury fashion and beauty brands, accelerating their "phy-gital transformation" strategies as a response to the disruption caused by changing consumer trends and the pandemic.
Retailers are increasingly marrying the physical in store aspects of bricks and mortar with the best features of digital e-commerce and social marketing to create a unique and integrated shopping experience.
General shift from influencers being used on a campaign by campaign in favour of long term contractual relationships
Clear agreement regarding ownership and use of the intellectual property rights in the material created by the influencer
Address extent to which influencer's image rights can be used by the business
Consider controls over the actions of the influencer balanced against responsibility for those actions
Brands are moving away from advertising through "celebrities" in favour of influencers which create real-life authentic engagement:
Consumer
Consumer Engagement
Consumer Engagement
Children's rights
Managing privacy rights
Marketing standards
Key themes
Influencers
Content platforms
Loyalty scheme providers
Programmatic Ad ecosystem & Adtech
Key suppliers
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Consent to marketing
Global data sharing
Sales promotions
Ensure when using content platforms that the advertising is targeting the correct audience and if required put in place age gates and other restrictions to restrict younger audiences
Be wary of fake reviews ensuring that there is a process to ensure reviews are verifiable
Consider how content will be controlled and put in place procedures to monitor
the platform
Marketers should:
Content platforms, being those channels in which a customer can engage with advertising content, can be beneficial for a business as a tool to directly engage with its customers.
Content verification and controls over where digital advertisements appear
Views verification and audit processes
Data sharing practices within the industry
Adtech continues to be scrutinized by UK and European data protection regulators. Real time bidding and related tracking technology is a source of concern. Understanding data flows and being transparent in privacy notices is important. Consider carefully whether to rely on third party plug in ad tech.
This is an area requiring careful navigation due to the complexities of the advertising eco system, including:
Data analysis can power deep insights in to customer behaviour and inform meaningful engagement – providing a bridge between online and offline transactions often
Much of this data will be available when selling via digital channels without the cost of providing a loyalty benefit, but a multichannel offering may mean that loyalty still has a role, and can help provide a seamless customer experience
Perennial argument as to costs of loyalty versus other forms of below the line marketing
Consumer loyalty can be a powerful driver of business but also a provider of rich data beyond SKU level:
Pricing promotions must follow the Chartered Trading Standards Institute Guidance for Traders on Pricing Practices and care should be taken to ensure genuine reference prices and fair price comparisons are used
When running offers for free products such products are truly free
When using words such as "introductory" and "new" the context in which those words are being used has been considered carefully to ensure customers are not misled
Marketers should consider the following:
Clarity for consumers is key - advertisements should not be misleading
The rules apply to all forms of marketing regardless of format and includes all social media platforms including newer platforms such as Tik Tok
Non-compliant marketing runs the risk of an upheld ASA ruling, potential negative publicity along with other consequences such as a referral to Trading Standards
Care should be taken to ensure charity linked promotions are compliant with charity law rules
Marketers should consider the following:
Opt in consent is required which meets GDPR standards.
Marketing can be undertaken without consent – where a "soft opt in" – can be relied on.
Privacy notices should explain sources of data relied on to influence campaigns.
Careful checks of bought in "third party"
lists should be undertaken to ensure consent is adequate for your own campaign.
Electronic marketing evolves with improved use of abandoned basked technology and social media data to influence comms.
UK and EU flows to non-adequate countries need to verified via transfer impact assessments, particularly for customer data sharing.
New EU Standard Contractual Clauses need put in place to replace old clauses and new UK versions are due.
Enabling the uninterrupted flow of personal data lawfully between jurisdictions is essential to operating on a global basis and has become more challenging post Brexit. The new requirements give business a chance to verify their data sharing practices. Intra-group sharing and supply chain sharing should be checked.
Consider whether your offering is attractive to under 16s. Use of children's data should have a privacy impact assessment run.
Assess privacy information and techniques used to attract under 16s to website content to consider whether such techniques should be revised.
Consider if a privacy centric approach could be a differentiator.
The UK Children's Code means much greater scrutiny is needed of data handling practices that are likely to involve the collection of personal data. Globally we are seeing a general trend in tightening up use of children's data in particular in the US.
Minimising collection of data;
Deletion of data when no longer required;
Testing of systems to ensure that data can be easily retrieved in response to a request; and
Ensuring streamlined policies and procedures to meet statutory deadlines.
Consumers have much more awareness of their data protection rights. Increased data collection leads to greater burdens when responding to data subject rights like requests for access to data. CRM systems are key to management and self service online is becoming more available through privacy centric controls.
Factor in:
Adwords
Be wary of competition law before entering into agreements including adwords bidding restriction.
Agreeing with competitors not to bid on each other's adwords is horizontal cooperation – and is presumptively unlawful.
Restricting distributors from bidding on your adwords inhibits their ability to compete – and is also presumptively unlawful.
Customer Relationship Management System
CRM systems are the beating heart of your business – giving a centrally controlled vision of your customer. Factor in:
how does this interface with your other build aspects;
what do you need the CRM to do now, and into the future;
data segregation is important operating globally to ensure customer data is stored locally;
ensuring customer data rights can be met needs tested.
Consumer
Often the base website structure and e-commerce engine is pre-built by the supplier and you add on the specifics of your requirements.
Check third party rights over content you incorporate such as images, quotes, text etc.
Consider interfaces required to payment provider and fulfilment providers, as well as your back office systems such as stock control, CRM and availability.
Design and build projects for website and e-commerce usually are run on an agile development basis.
Geo-blocking if relevant as to territories you are prepared to supply.
How easily you have the power to refresh and update content and special offers.
Consider:
Availability, capacity and load extension when required e.g. at peak trading times, or during promotions.
Location of server and associated data protection issues.
Think about:
Hosting and maintenance is an ongoing service.
Make payment methods relevant to your customers available at checkout and understanding the contract terms and service levels in place with your payment processors.
Processing payments in a secure way, in compliance with industry data security standards (e.g. PCI-DSS) is crucial to maintaining customer trust. Regulations on Strong Customer Authentication requiring multi-factor authentication recently came into force.
Many payment methods provide protection to customers who dispute a transaction (e.g. debit and credit cards offer "chargeback" protection)
The payment experience is central to creation of a seamless customer journey and requires the following:
Where you are using an e-comm platform provider it will be important to check how does fulfilment work – is that part of the platform service or do you need to have a fulfilment solution yourself?
how does this interface with your other build aspects;
what do you need the CRM to do now, and into the future;
data segregation is important operating globally to ensure customer data is stored locally;
ensuring customer data rights can be met needs tested.
CRM systems are the beating heart of your business – giving a centrally controlled vision of your customer. Factor in:
Is the payment provider via the platform or directly with the customer?
Whether platform seller or buyer guarantee/ dispute resolution procedure applies and if you are happy to sign up to the terms of this?
The platform may be dedicated (i.e. a white label solution) for the sales of your product direct to consumers or a platform which is open to multiple retailers; e.g. Amazon or ebay. A white label provider has more scope for tailoring to your requirements as if it is not dedicated, then you are unlikely to secure much variation to the terms of business of the platform. It will be important to confirm:
Customer journeys should clearly present key information i.e. pricing and delivery, and the customer should be able to check all information before confirming the order.
If a 'cooling off' period applies to your product under distance selling regulation, the customer will have the right to change their mind, normally within 14 days – you need to provide for this in terms and processes.
All the communications relevant to the sale will be considered part of the contact: ensure that promotional material doesn’t mislead, over-promise, or contradict the terms small print.
Privacy information and consents need factored in.
Complying with anti-money laundering laws by verifying the customer's identity and identifying potentially suspicious transactions
Reducing risks of fraud, payment scams and other
financial crime
Screening customers against lists of international
sanctions targets
Mitigating conflicts of interest and bribery risks by identifying possible connections to Politically Exposed Persons
Know Your Customer checks allow you to better understand your customer base while managing legal risks across a number of areas, including:
As a product owner, you will be familiar with specific regulations applicable to your products. However, if direct to consumer sales are new to your business, you should consider whether there are any additional regulations relating to product sales which now apply to your business. For example, for restricted products requiring age verification checks prior to supply, you should implement policies and procedures to ensure checks are carried out.
Consumer
B2C Sale
Direct Sales
Consumer protection
KYC - costumer screening
Product specific regulation
Key themes
Design & build of webdesign
Host & maintain the website
Payment provider
Fulfilment provider
Customer Relationship Management System
Ecomm platform provider
Key suppliers
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Licensing Your Product to Third Parties
Key Consumer Issues
Direct to Consumer Sales