D2C for CPG: Following in retail’s footstepsBy Will Dutton on October 20, 2020
In recent months, a growing number of consumer packaged goods (CPG) companies have begun to place increased importance on the development of their own direct-to-consumer (D2C) channels. The benefits of taking this approach speak for themselves; it gives businesses a platform to test new products and strategies, whilst being able to gather and keep first-party customer data that is worth its weight in gold.
However, getting started with D2C for CPG isn’t straightforward. It’s a nascent model, and many organizations are starting this journey from scratch with little-to-no experience of how to run a successful D2C model.
The good news is that retail businesses have done the hard work for you, and there are certainly some valuable lessons to be learned from those businesses that do D2C well. As we all know, e-commerce adoption has grown significantly in retail in the past two decades, with some rather high profile winners and losers.
Those brands who are winning – look at fast fashion giants such as ASOS and boohoo as examples – have spent years perfecting their e-commerce offering to ensure they deliver the ultimate customer experience. The key ingredient to this is data, and being able to squeeze every last drop of value from data from a wide range of sources. When this is done well, you can power smarter decision making across the entire CPG value chain, from customer acquisition through to order fulfillment.
However, making sense of a vast amount of data sources, particularly when you’re dealing with new D2C channels and added complexity throughout your business, isn’t easy. That’s why the leading retail businesses are utilizing artificial intelligence (AI) in order to generate valuable insights from their data to help them compete and win in the new era.
CPGs looking to launch or enhance a D2C offering can apply the same techniques to their data, too. As one example, AI can help you improve the accuracy of your forecasting in order to optimize decision making, allowing you to know when and where to streamline inventories whilst still ensuring you meet demand across all of your channels.
A common stumbling block for CPGs looking to start D2C is often initial customer acquisition. According to Ali Holmes, Senior E-commerce Director at PepsiCo UK, the “most significant challenge building a D2C model from scratch is economics. The cost of customer acquisition and bringing consumers online is initially expensive.”
However, you can follow in the footsteps of the e-commerce giants who are optimizing their advertising and marketing strategies with AI, to drive higher ROAS by targeting the right customers with the right products at the right time, via the right channel (take a look at our work with Footasylum for more on that!) Let’s not forget about AI’s unique ability to blend data from sources that don’t typically mix, too – this holistic view also allows you to make smarter decisions around pricing, margin protection and order fulfillment, to name just a few.
CPGs entering the D2C market are in a unique position to build an effective, efficient model from the ground up, rather than having to rip and replace or optimize their existing systems. By investing in the right technology now and following in the footsteps of the most successful retailers, you can skip the mistake-making period that they had to deal with in the early years, and capitalize on the best practices they’ve already laid out for you – all while using AI to accelerate your competitive advantage.