Direct to Consumer
I never stop being surprised when big FMCG brands say: But what’s the point of selling DTC? We are not retailers, we are brands ! The fact that this is just what consumers expect never crosses their mind.
It’s amazing in this day and age That Consumer goods companies still believe that the Best model to showcase and sell their brands is B2B rather than B2C.
The fact that new consumer first entrants in this space ALL sell Direct to Consumer still doesn’t seem to tip the balance. So what will it take for FMCG companies to finally start realising that building a relationship with a consumer, is no longer about just good branding and good products, it’s about the whole experience, from awareness all the way through to conversion and advocacy. And there should be no-one better to drive this experience than the brand themselves.
Why is Selling direct to consumer the future for Brands.
Beyond the fact that consumers expect it and look to brand touchpoints to be the version of the truth on pricing proposition, there is one key reason why all brands should at least investigate it as a business model. In a world where 1st party data is the new gold, Direct to Consumer Selling give you not only great insight into shopper behaviour, but also allows you to close the loop on the effectiveness of your communications and advertising on owned and paid touchpoints. It’s amazing how brands can put so much into advertising, without really knowing the direct impact on sales !
What’s are USP?
A question i get a lot : But do we need a different range or services, to compete with online retailers? My response is, sure you can think about leveraging DTC for trialing innovation, or testing services like subscriptions, or added value support or content. However Our differentiating factor is that by owning the experience we can drive commerce everywhere, whenever the engagement with the brand is at its highest. Direct to Consumer is not a online sales platform that competes with bit online retailers, Direct to Consumer is an infrstructure and a capability that can be built into all touch points, thus closing the conversion.
If you have a set up to take payments, manage inventory, fulfill and delivery the product, and manage customer service, then you can do DTC. You can close the transaction loop in Social, in chat, offline, on all branded touchpoints, by simply having a headless ecommerce ecosystem. This is the true USP that brands have, as they own the branded touchpoints, the points of engagement and the branded environment in which to build in the conversion capability.
What are the challenges that are raised again and again? I’ve been in eCommerce quite some years, and Direct to COnsumer has always been badly accepted by big global FMCG companies, and the objections are always the same:
Lack of capability: Then outsource at the beginning and build up the capability. Capabilities needed for driving sustainable business models need to evolve with the times. We can’t complacently expect that what’s kept us floating the last 50 years, is set to keep us afloat in the future
Too much baggage: Traditional operational setups, historic partners (in particular retailers) tend to get in the way when we are setting up DTC. FMCG systems are set up to sell bulk to a business customer, not in single parcel to an end consumer. Two solutions here: 1) Work with a strong 3rd party fulfillment partner and set up consignment stock with them. 2) Again, build up this expertise in house and accept that evolution of Operations is inevitable
Not profitable: This is the funniest argument that I hear. I get told: We can never be as profitable as retailers as they have the broad range that gives them scale. Let’s not forget that we have a different margin on the product than them, as we make the product in the first place. In my experience, when set up right, and once a certain scale is reached, Direct to Consumer can actually be one of the most profitable channels. However profitability remains a key focus area when setting up any DTC operation. Think about how to set up the model to scale fast, so that you can drive efficiencies as soon as possible, and reinvest these in drive traffic.
I could write volumes about setting up Direct To Consumer, but will save this for another article. If you are a brand thinking of setting up DTC, please feel free to reach out for some tips. DOn’t discount it, just because it’s not your core expertise. Gone is the world where consumers expect one experience for communications and another one for buying. They expect one end to end experience which is centered around them.
Embrace the end to end consumer experience, or be ready to be seriously disrupted!