How CPG brands are shifting to Direct-to-Consumer: global trends and opportunities
During the past few months as the global pandemic continued, enforced isolation saw many consumer packaged goods (CPGs) move to a direct-to-consumer (DTC) model online out of necessity.
But far from being a negative, the DTC model also presents a profound opportunity for brands to not only develop an individual relationship with their existing consumers but to attract an entirely new consumer via a new, more cost-effective, web-based business model.
Internet Retailer reported in 2018, 57 percent of leading Food and CPG manufacturers were already investing in direct-to-consumer offerings, while, according to IAB, Nike’s DTC outpaced its wholesale in 2018.
Even before COVID-19 forced change, CPG manufacturers were starting to realise they need to explore new ways to reach consumers directly so they can better control pricing, messaging and distribution, with the early adopters now enjoying the benefits.
The DTC advantages
The move to DTC has several other advantages as well, the model being more agile and resilient, definite gains in an uncertain environment, plus it offers a lower cost to entry and lowers the cost of maintaining channels.
A study by Direct Brands 2020 for IAB Australia before COVID-19 found direct brands are doing more than just selling online directly to consumers; they are using new channels to reach customers, develop new delivery methods, and communicating strong brand purpose by messaging via their own channels.
Direct control over pricing, promotion, product and distribution are all appealing to brands which were previously at the mercy of distributors and sellers. The opportunity of DTC communication and sales via new channels and routes to market also offers access to first-party data, allowing more insights and a test-and-learn approach to marketing and innovation.
This is all, of course, being facilitated by a new generation of eCommerce platforms like Shopify Plus, which is facilitating payments and automating workflows and data migrations with the latest technology, and providing the ability to target locally and use dedicated branding. A big barrier to entry, developing a bespoke eCommerce platform in-house, has been removed thanks to new eCommerce platforms, making DTC an easy and attractive opportunity.
Who has been getting it right?
Let’s take a look at how three brands around the world that successfully moved their DTC offerings to a more robust eCommerce environment amid the global pandemic.
1. Lindt’s journey transforming the onsite experience online in Canada
Swiss chocolate pioneer Lindt & Sprüngli (Lindt) was preparing for another busy Easter this year, one of the company’s largest annual sales periods. However, as COVID-19 hit, Lindt Canada closed its 56 stores nationwide to protect staff and customers from the pandemic. Without eCommerce functionality, the company had a large inventory of chocolate with no way to get it to its loyal customers who wanted to buy it.
It needed to get an online store up and running quickly, so it didn’t miss this crucial shopping window. On March 25, Lindt contacted Shopify Plus to begin implementing an online store. Once its website domain was secured, Lindt chose a theme and worked with Shopify Plus to create a look and feel that matched Lindt’s branding, also offering a simple catalogue format to showcase its seasonal Easter chocolates.
A limited inventory of 40 SKUs was made available for purchase online, and Lindt selected 16 Canadian stores to provide a curbside pickup system for online orders.
The online store was launched in only five days, enabling Lindt to reach its customers during the second busiest time of year for chocolate sales, and the curbside pickup enabled a level of personalisation to customers never achieved before.
The site was so successful, Lindt is keeping it running and is adding local delivery services, new language capabilities, and an expanded product inventory. The latter includes fresh products like gourmet coffee and milkshakes, and Lindt is leveraging the Shopify Plus Merchant Growth Model, a tailored roadmap for growth offered to all Shopify Plus merchants. The Growth Model guides Lindt’s acquisition, conversion, retention, and operational commerce best practices for its new online store.
2. Heinz boosting its supply model to UK customer amid the pandemic
Heinz products are a staple at the local supermarket, but what happens when the local supermarket is closed, and consumers are no longer able to get them?
This is what Heinz had to reconcile. Heinz has been distributed via retailers since its inception decades ago, leaving it without its distribution channel when retailers closed.
Of particular concern for its UK business were certain vulnerable populations: following a mandate from the British government, residents over 70, or those with health conditions had to remain quarantined at home. Other groups also faced pressure, such as essential and frontline health workers who did not have time to go into stores. Heinz quickly realised it needed to move to a DTC model to sell online to consumers.
Using Shopify Plus and consultants Good Growth, Heinz UK introduced Heinz to Home, launching after just three weeks on April 9. The service offered a limited selection of the popular Heinz Beanz, Tomato Soup, and Spaghetti Hoops packaged as a bundle. Products were delivered in two to three days across the UK.
In keeping with COVID-19 safety best practices, deliveries were contactless. Heinz also wished to remain close to a pledge to support the community, so it partnered with the UK’s Blue Light Card program to enable fast and free delivery for frontline workers.
In the weeks following its launch, Heinz to Home introduced two new product categories, also providing a selection of sauces and baby foods.
After 150 years, Heinz now has a new digital channel, which has been such a success (gaining much positive media and consumer feedback), that it will now form a key part of its strategy.
3. Who Gives A Crap’s rapid transformation to help solve Australia’s toilet paper supply
The humble roll of toilet paper is not something consumers are used to buying directly from manufacturers. And yet, as the recent panic buying clearly demonstrated, it is an essential product that lends itself well to DTC.
During the recent rushed buying of essential items, frustrated Australian consumers could not get toilet paper due to unnecessary hoarding, and turned to DTC retailers instead to source it. As a result, DTC brand Who Gives A Crap (WGAC) reported its sales had increased 800 percent, and its website was flooded with both sales and enquiries.
Ultimately, WGAC sold out of stock for only the third time in its history and has expanded its customer base considerably using its DTC model.
Why DTC is the future
It’s clear many brands have had to pivot quickly to cope in a COVID-19 world. However, those who have shifted their focus to become DTC are not only gaining momentum now, but they will be the ones to emerge from the current challenges stronger than before.
DTC brands develop closer relationships with their customers, can control the user and customer experiences, can personalise their messaging across channels, push important brand purpose communications, and sell at a far lower cost than traditional retailing. As a bonus, manufacturers can collect data directly from their loyal customers to inform future decision-making and innovation.
Whether you want to experiment with selling direct or explore more channels, DTC gives your brand the opportunity to create your own future. To find out how you can take your brand DTC, you can learn more in this free Direct to Consumer Guide.