The Direct-to-Consumer Paradox; What Should CPGs Do?

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Ecommerce has settled in for the long haul, which is great news for consumers.

But what about big brands?

With the luxury of near endless choice now available at the touch of a button (or even a voice command), there is less need for people to go to physical stores or to buy known brands.  Along with the explosion of drop shipping, the face of commerce has changed dramatically.

CPG companies are not immune from this shift. After having avoided selling direct-to-consumers (DTC) so as not to compete with their retail partners, many are rethinking their strategies.

For many CPG companies to survive – much less prosper – adding a DTC approach may be their only viable option.

Is DTC Right for All CPG Companies?

Before we describe how your CPG company could wade into the DTC waters, it’s best to first establish whether or not it’s a good idea.

As we’ll touch on below, taking a DTC approach doesn’t necessarily mean competing head-to-head with retailers.

The key to deciding how far to go is by first establishing what role a DTC channel must play. In short, does your company want this channel to help with:

  • Discovering Greater Insights and Innovation

  • Controlling the User Experience

  • Leveraging an Omnichannel Approach

  • Overtaking the Retailer

In the case of that fourth approach, it would mean competing directly with current retail partners.

Once you’ve established what your goal is for DTC, you can begin considering which strategy to adopt.

4 Ways CPG Companies Can Take a DTC Approach

The most obvious problem that a CPG manufacturer will run into when they go DTC is the conflict with their retail partners.

To succeed, these companies need to adopt certain strategies that have already proven to be effective in the world of DTC.

Fortunately, there are four direct-to-consumer approaches that many CPG companies have already adopted and found effective for their transition.

1. Discovering Greater Insights and Innovation

Arguably, one of the greatest opportunities for CPG companies looking to transition into DTC is to learn more about their end-users. This will allow them to create better products and nurture greater trust in their companies.

2. Controlling the User Experience

Research by Salesforce found that 75% of people expect a consistent experience from brands. If you want more control over your brand story, DTC marketing will allow you to communicate your message directly to customers.

3. Leveraging Omnichannel Marketing

Omnichannel retail may be the future, one in which companies engage with customers online before directing them to a brick-and-mortar environment to make their purchases. Manufacturers don’t necessarily need to go to war with retailers. By taking this approach, they can simply drive greater sales while growing their ecommerce footprint.

4. Overtaking the Retailer

Of course, for many CPG companies that first adopt omnichannel marketing, the natural next step will be overtaking retailers. Unless a product needs to be test-driven, tried on, or otherwise seen in-person, these companies will have very little reason to justify the overhead their retail-partners require.

Standing Still Is Not an Option

CPG manufacturers can no longer rely on retail partners to build up their audiences. Instead, they must look for long-term solutions, which guarantee their longevity and sustained success.

One thing these companies cannot do is simply keep up business as usual.

By engaging the market with a DTC approach, big manufacturers risk upsetting some retailers, but they also stand a lot to gain. Not only will they know more about their customers, but they can focus more on their brand story and engagement.

There are much larger profit margins to look forward to, as well.