The document discusses the necessity for companies to adopt direct-to-consumer (D2C) logistics as e-commerce continues to grow, highlighting the disadvantages of relying on third-party logistics (3PL). It outlines the benefits of D2C, such as cost savings and higher customer engagement, while providing insights into the changes in consumer behavior exacerbated by the COVID-19 pandemic. Additionally, the document presents a seven-step approach for companies to prepare their existing warehouse infrastructure for D2C operations.

1. Don’t get left behind in logistics.
+49 152 5367 4254
Im Altenschemel 86, 67435 Neustadt an der Weinstraße
arnulf.hornbach@flowprime.de
D2C Business
is Taking Off
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2. By fulfilling and delivering ecommerce orders
to the end-consumer directly, companies can
generate considerable savings.
Cutting the 3rd Party Logistics services enables
economies of scale. As global ecommerce is rising,
companies are urged to incorporate their D2C
logistics above to their existing B2B operations.
Flowprime D2C Takeover 1
Our proposed approach not only
helps you to overcome the challenges,
but Flowprime offers an agile solution
implementation that results in a com-
petitive advantage in the long run.
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3. Flowprime D2C Takeover 2
After talking with industry-leading companies,
the typical distribution model was described
often by the organizations. Your typical consumer-
goods-producing company has its own warehouse,
while you are running B2B logistics by yourself.
This involves delivering the products to your
Retail and Wholesale customers by yourself.
At this point on, it will be up to the B2B customer
how the products will reach the end-consumer.
Your organization might also have its own Retail
Stores, where stationary customers can simply
walk-in and buy the desired product.
Your company has an online shop as well, customers
can place an order anytime. However, these orders
are fulfilled by 3rd Party Logistics providers. They
store your company’s products with your competitors
and fulfill the online orders.
TYPICAL
DISTRIBUTION
MODEL
Today’s
Situation
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4. Flowprime D2C Takeover 3
We believe that the typical distribution model has
to be challenged since it cannot keep up with the
ongoing ecommerce trends and user expectations.
The solution is in your hands and we will tell you
how you can solve all the challenges that come
along with taking over your D2C channel.
Today’s
Situation
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5. Flowprime D2C Takeover 4
IT’S NOT OPTIONAL,
ECOMMERCE IS A MUST
There are manifold reasons behind how and why
the retail ecommerce growth rate could reach 16%
in Western Europe and 16.2% in Germany by the
end of 2020. The first one is the accessibility of
online stores, as the internet penetration expands
and the usage of smartphones is the new norm,
shopping online is possible 24/7.
Ecommerce
on the Rise
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6. Flowprime D2C Takeover 5
The second reason for ecommerce growth is
convenience, since buyers no longer have to
spend on transportation and can spare a lot
of time as well by just ordering comfortably
from their living rooms.
Buyers can compare the offers of various shops
in just a few minutes, making sure that they
purchase the best available offer on the market.
Modern e-payment solutions are secure, reliable,
and helpful in handling the traffic of the worldwide
ecommerce sales volume, which was projected to
riseto €3617 billion euros by 2020 and to €5626
billion euros by 2023 (Emarketer, 2020).
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7. Flowprime D2C Takeover 6
The third reason is the customized ads through
online channels. Thanks to digital technologies
(cookies, AI, digital marketing) every individual
can receive customized offers and recommended
products based on their preferences. In contrast,
it would take longer for store staff to understand
your customer’s preferences to a great extent.
The fourth reason is the community nature of
online stores. As people can submit reviews and
provide detailed feedback, buyers are in possession
of much more information. Also, shop assistants in
physical stores just focus on selling products
without much consideration on the community.
Lastly, the range of products available in an online
store is usually wider, as it usually provides access
to the overall stock level of the company.
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8. Flowprime D2C Takeover 7
HAVING AN ONLINE SHOP
IS THE NEW NORM
If we look at the arguments on why companies decide
to have ecommerce, there are not much debate. The
number of targeted people in ecommerce could be
significantly higher, as online stores can sell globally.
The missing-out factor is also considerable since not
having an online retail shop is a growing competitive
disadvantage. By looking at the numbers, companies
are afraid of missing out on the expected growth of
€91.6 billion EUR in Western Europe and the €13.6
billion EUR in Germany between 2020 and 2024.
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9. Flowprime D2C Takeover 8
THE GROWTH CONTINUES
An interesting statistic is the Compound Annual
Growth Rate (CAGR). It shows the growth per-
centage over a specified number of years as if
the growth had happened steadily each year over
that time period. According to Digital Market
Outlook (2020), the retail ecommerce sales CAGR
will be 8.10% Worldwide and 6.50% in Germany.
It means that on average, the sales from
ecommerce will grow by 8.10% and 6.50%
respectively every year between 2020 & 2024.
One explanation about the difference between the
worldwide and the German growth rate is that
Germany is already in a great position in terms of
ecommerce and digital adaptation, while a lot more
countries are still in the adoption phase, which allows
greater acceleration.
Accordingly, higher CAGR (e.g. 20.2% in Turkey) can
be observed in developing countries, where ecomm-
erce trends are just starting to flourish and the
investments to digitization and ecommerce have
only recently started flowing into the country.
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10. Flowprime D2C Takeover 9
Accelerated by
the COVID-19 Crisis
Global ecommerce completed 5 years’ worth of growth
in just a couple of months, stated by IBM and Adobe in
two independent reports. Let’s take a look at the factors
that contributed to this massive surge in ecommerce.
QUARANTINE, LOCKDOWNS,
AND RISK OF INFECTION
MOTIVATES SPENDING
MORE TIME AT HOME
The first, and probably the most important reason is
social distancing. People are either prohibited from
going out or they fear going out because of the risks
involved. This leads to the next point, namely that
people started to order groceries, avoiding the long
waiting lines inside or in front of supermarkets.
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11. Flowprime D2C Takeover 10
As a result, grocery deliveries experienced a 31%
growth in Germany. As people had to convert their
living rooms to a home office, they started ordering
office supplies, comfortable furniture, and cozy clo-
thing. Many countries discouraged traveling abroad.
Local pubs & bars were also closed. This resulted in
people spending their free time and holidays at home
through DIY refurbishments and home-gardening.
The best option for socializing is spending a night
with the closest friends at one’s home or garden.
Garden furniture and alcoholic drinks as a major
part of the online shopping basket. Numbers mean
a lot, as the growth of online sales in the categories
both furniture & alcohol grew by 5% in Germany,
compared to pre-COVID era numbers.
Last, but not least, as most of the cinemas, yoga
studios, gyms are closed or allowed to operate with
only limited visitors, people order different gadgets
& devices to supplement their hobbies. For example,
ordering fitness and wellness equipment grew by 8%
in Germany.
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12. Flowprime D2C Takeover 11
Global ecommerce completed 5 years’ worth of growth
in just a couple of months, stated by IBM and Adobe in
two independent reports. Let’s take a look at the factors
that contributed to this massive surge in ecommerce.
NEW HABITS OF ONLINE
PURCHASING REQUIRE
NEW EXPERIENCES
One of the newest forms of live support in webshops
is size assistance that helps people to select the size
that fits perfectly. By doing so, stores not only gain
a good point at the customers, but they can reduce
returns as well.
Another example of exceptional live service is the
online vision examination by the eyewear company,
Mister Spex. After the examination is done, and the
buyer selects their eyewear, multiple paying options
are available, including paying in installments, which
increases trust in the customer.
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13. Flowprime D2C Takeover 12
Free and contactless deliveries are being done by
companies. Both practices push the customer forward
in the buying process. The delivery methods of curbside
pickup and buy-online-pickup-in-store are new trends
that experienced a growth of 74% and 49% respectively
in Germany. Additionally, buyers value frequent messag-
ing regarding delivery status, because it ensures them
that their order is progressing transparently and that
the store cares.
The effects of a pandemic are expected to remain
with us, even after subsequent waves. People will be
reluctant to return to the old ways of shopping.
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14. Flowprime D2C Takeover 13
NO REAL ECONOMIES OF SCALE
WITH 3RD-PARTY LOGISTICS
Let us examine the reason companies with existing warehouse
management should do their D2C logistics themselves. Since
we are talking in an ecommerce context, we are going to use
the term D2C, which means direct-to-customer. This question
can be broken down into a classic make or buy decision. In this
case, the company ships its products directly to the customer
without having a 3PL provider as a middle man.
The 3PL
Dilemma Most companies ship directly to their B2B customers,
to their retail customers, and to their own retail shops,
which assumes that the company has an own ware-
house and that the company has the capabilities and
processes in place to ship the products by itself.
However, many companies do not ship to their end
consumers directly, but through a 3PL provider. This is
understandable if the company just launched its own
online shop or if the D2C order quantities are low. But
once the percentage of the D2C orders is increasing,
customers are placing higher value and larger quantity
orders, the associated 3PL variable costs for the com-
pany are growing steadily. This hinders the company
from realizing economies of scale.
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15. Flowprime D2C Takeover 14
3PL COSTS AT A STUNNING RATE
How much does a company pay in total to the 3PL provider for
each order? Well, this is pretty individual for every company, but
based on average prices gathered from sources, we can paint
a quite reliable picture.
Let’s consider that...
• The goods are received in boxes.
• One box contains 10 pieces of items.
• The box fits in 1 bin
• The average storage time is 2 months.
• The order consists of 1 item.
• The item is shipped to the same country.
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16. Flowprime D2C Takeover 15
The above assumptions can be true for a digital device,
clothes, or some sports equipment, for example. When
the end customer orders one piece of such item, the
total warehousing fee that the 3PL will charge is €4.37
per order in our example. If we add the inland shipping
cost as well, the amount that the original company has
to pay is €7.67 on average.
Besides this, in case the customer returns it for any
reason (which can happen in 20-30% of the cases with
apparel and footwear products), that is an additional
cost of €3.5. It is clear that the original company pays
a considerable amount after each order.
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17. Flowprime D2C Takeover 16
TURNING 3PL COSTS
INTO D2C PROFITS
If we take a look at the avg. cost of running a warehouse,
the cost structure is similar for 3PL companies and normal
warehouses. In the last 3 years, the avg. cost of 1 sq. meter
warehouse space grew by 10 euros, while the hourly salary
of warehouse staff & management showed an increase of
€1.8 and €2.2, respectively.
3PL providers can handle the increase of costs by increasing
their prices. This is reflected in the average corporate profit
of 3PL companies, which hit 9.77% in 2020. Basically every
incremental increase in this metric means that money flows to
3PL providers from the organizations who use their services.
3PL costs can be saved by the companies and turned into
the operations of shipping directly to customers.
In case a company has a warehouse, process opti-
mization and hiring additional staff workers can be
a considerably quick shift and can result in a more
cost-effective operation.
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18. 17
What’s the
Challenge?
It is worth to take a look at how the
warehousing, fulfillment, and logistics
of the orders from a B2B Consumer
differ from the orders of ecommerce
direct Consumers. By understanding
the main differences, it will be clear
which challenges the fulfillment of
D2C orders impose on the company.

19. Flowprime D2C Takeover 18
Our D2C Takeover
Approach
With an existing warehouse infrastructure, delivering
online orders directly to your customer is the next level.
THE D2C TAKEOVER MODEL
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20. Flowprime D2C Takeover 19
Our D2C Takeover
Approach
1. Increase picking efficiency by selecting
optimal method for each process.
2. Enable continuous delivery creation.
3. Group orders which should be processed alike.
4. Build a fast lane through your warehouse.
5. Allow real flexibility & transparency for customers.
6. Accelerate the outflow with a pack-and-go process.
7. Build a complete returns process in the warehouse.
THE 7 STEPS TO MAKE YOUR
WAREHOUSE D2C-READY
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21. Click to flow
We are an expert group of international Solution Architects
and Developers with an SAP-Logistics background.
FLOWPRIME’S EXPERTISE
Warehouse
Management
Yard
Management
Transport
Management

22. +49 152 5367 4254
Im Altenschemel 86, 67435 Neustadt an der Weinstraße
arnulf.hornbach@flowprime.de
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Your D2C Takeover
Find out how to take over your direct-2-customer
distribution and stop being dependent on 3PLs.
Contact us now and we will give you one free consultation
session to turn our solution proposal into your opportunity.