The retail industry faced, and continues to face, enormous challenges during the Covid-19 pandemic. In the initial wave of the crisis almost all non-essential stores were closed, creating a crisis for any retailers without a comprehensive omnichannel strategy. The Irish fast fashion chain Primark is a good example - with almost no online presence the brand saw their revenue collapse to zero because of the lockdowns.
Some brands have just decided to bypass retail and go direct to consumer (DTC or D2C). By selling direct, brands can build a strong relationship directly with the end customer and avoid the uncertainty of relying on retailers to carry their products.
For FMCG brands, D2C is often referred to as a subscription strategy, because it’s common for a business to offer a regular delivery of their products in return for a recurring payment - typically every month. This resembles the subscription business model that magazines have used ever since the first publisher started printing and selling them.
Shopping behavior is changing quickly and smart brands need to explore how ideas such as D2C can not only increase sales, but also create an opportunity to build better, more loyal customer relationships.
There are many different examples. If you think about it, the opportunities are endless because there are so many products that we regularly need on a recurring basis, from toothpaste to pet food. But D2C doesn’t always need to be a recurring delivery, brands can develop a direct link to their customers for more immediate sales too.
Heineken has cleverly matched a new D2C strategy with their sponsorship of the Champions League. This creates an opportunity to promote and reinforce the brand during big football games, but also offers the opportunity for viewers to immediately buy beer and snacks for immediate delivery in selected cities. Heineken initially started this “Drinkies” service and even allowed voice commands, so the customer can just call for a cold beer as the big match begins. Drinkies has since evolved into Beerwulf, which operates across a number of countries.
E-commerce accounts for about 8% of sales at Unilever, but the consumer goods giant wants to pivot towards all forms of e-commerce - that 8% figure is expected to dramatically increase. Unilever acquired the enormously successful Dollar Shave Club back in 2016 and has spent the past few years refining this concept and applying it across many of their other brands. Unilever saw a big spike in online grocery orders during the pandemic and the CEO Alan Jope has said in presentations that he believes much of the consumer behavior changes we saw in lockdowns will become permanent.
This is an important point. If consumers are comfortable getting more products delivered, rather than visiting stores, then there is an opportunity for more brands to develop D2C relationships with their customers. The pandemic effect is literally changing how people shop and this creates opportunity.
Building a customer relationship
As the different brands I mentioned demonstrate, there are several D2C models. Unilever can send you a box of razors and soap once a month in exchange for a subscription or Heineken and Beerwulf can deliver beer directly to your home. The common thread is that consumer product companies need to build and manage a direct relationship with their end customers. This is where careful thought needs to be applied because it is essential that your end customer has a great experience with your brand - many other options are almost certainly available.
DSV has extensive experience managing all aspects of global omni-channel logistics, including D2C deliveries. Our team can advise on building a customer community, how to develop insights into customer behavior, brand differentiation, innovation, and growing sales.
This is exactly the expertise that consumer goods companies need to turn a D2C idea into reality. As McKinsey highlights in this research paper on D2C, most consumer good companies have very little experience of e-commerce and directly interacting with customers.
E-Commerce is more than just managing consumer deliveries. Moving from a consumer goods brand that has relationships with retailers to one that directly interacts with customers is a big step. Why not reduce the risk to your brand by working with a partner that can not only help you deliver the service your customers expect, but can advise you on D2C trends and future innovation?
Please leave a comment with your own thoughts on D2C or get in touch with me directly here. You can also check this page for information about our retail e-commerce solutions.
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