Direct-to-consumer CPG: Why now?By Will Dutton on October 15, 2020
Since the start of the COVID-19 pandemic, we’ve seen an increasing number of consumer packaged goods (CPG) companies turn their attention to e-commerce, launching new direct-to-consumer (D2C) sales channels for the very first time.
As shoppers continue to prioritize convenience in their day-to-day shopping – why go to the product when the product can come to you? – this presents large CPG organizations with a significant opportunity to build better relationships with consumers. 54% of Americans are now using D2C channels to shop for packaged goods, and with this trend expected to remain for the foreseeable, those businesses that don’t react to this market shift risk missing out on valuable market share.
Why D2C, and why now?
There are several benefits to introducing a D2C offering into your CPG business. The COVID-19 pandemic has seen e-commerce usage skyrocket, with consumers heading online to order everything from pet food to toilet paper. Fuelled by the images of empty supermarket shelves that dominated the media at the height of lockdown, many established CPG businesses – think the likes of PepsiCo, Nestle and Heinz – all launched D2C offerings as part of a seismic shake-up of their existing channels and a bid to satisfy the demands of consumers.
These brands capitalized on a big opportunity to develop closer, one-to-one relationships with their product’s end consumers. This is great for building brand loyalty, while shorter marketing channels with less intermediaries (i.e. retailers or marketplaces) between you and the consumer means you can potentially keep a bigger chunk of the profits, too. However, the biggest benefit of going D2C is being able to gain access to – and keep! – a wealth of customer data, which has long since been a desire of more visionary CPG companies.
Traditional CPGs have had to work with supermarkets and retailers when it comes to data access, whereas a D2C offering can act as a key source of insight . The PepsiCo’s of this world are using these new platforms to A/B test offers and promotions, conduct important customer and user experience research, and using their websites as a testbed for new products, ranges and bundles. The majority of CPGs who have embarked on a D2C journey see it not as a new primary sales channel, but more a place to collect valuable data to inform their future decision making.
However, starting a D2C offering from scratch isn’t easy, and making sense of this wealth of new data at your disposal is easier said than done. Thankfully, there are lessons to be learnt from retail businesses – particularly those rapidly-growing, data-first e-commerce brands – who have spent years perfecting D2C and offering an exemplary customer experience.
We’re currently working with a number of leading CPGs to help them make a success of their D2C journey, introducing Decision Intelligence into their operations to maximize marketing and acquisition efficiency and make data-driven decisions to help streamline the supply chain.