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.

Tapping into Today’s Modern Shopper

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The speed at which our world is ever-changing is lightning fast. As the modern shopper’s buying behaviors, mindsets and purchase patterns quickly evolve, I feel it’s imperative to not only understand, but also adapt to this fast-paced evolution.

With the busy life I lead, there’s no question that I am the definition of today’s modern shopper. But what exactly does that mean?  It means I shop around the clock. I want to be in control. I shop and share across multiple channels, from e-commerce to brick-and-mortar to social media. And when I want something, I know just how to get it.

My days are often driven by urgency, convenience and technology. This means you can find me shopping online for quick convenience, perusing savings through various apps, following social media, stopping into my local brick-and-mortar store and relying on mobile reminders. Omnichannel shoppers like myself intersect with multiple touchpoints along the path-to-purchase (so understanding the importance of omnichannel helps me be a smarter marketer to boot), so I love brands that meet me in the channels where I am engaging, shopping and buying, and connect the dots between these channels. A perfect example of this is Neiman Marcus – they know the way into my heart (and my wallet):

  • After perusing their website for the highly coveted Jimmy Choo perfect heel, I found myself on the E! News Fashion page where I was served an ad for the shoes I’d been admiring.
  • I then received a customized email from Neiman Marcus with a “We Thought You’d like….” message and content recommending a few more pairs of shoes – and it included a purchase incentive (sweet!).
  • Embedded into neimanmarcus.com is a “Just for You” section that featured a few pairs of these beautiful heels.
  • And a few days later I received a direct mailer notifying me of an event at a store near me where new arrivals of Jimmy Choo’s would be featured (to drive me into the store I guess to try them on and seal the deal).

Brands like Neiman Marcus use geolocation, web analytics data, clicks, page views and dwell time to make inferences about my behaviors and preferences, and they’ve got it down. They connect with me along different touchpoints as I move throughout my busy life – email, online, direct mail, mobile, in store. They are delivering me relevant, action-oriented and customized content to drive purchase and build loyalty. Maybe even one of these days they’ll convince me to buy from the shelf (or perhaps digital shelf) when I’m feeling a “treat-yourself” day come along.                     

Whatever brand I’m working on, I know that understanding the shopper is a key component and is certainly not a one size fits all.  As the modern shopper journey becomes increasingly complex, I’m fascinated at how we are able to engage and influence their shopping decisions along every step. I want to understand their unique demands, mind states and behavior, and deploy a strategic, effective and action-oriented plan that injects technology, brand value, shopper marketing best practices and industry/brand standards.

In today’s omnichannel world, I want a brand to deliver me what they know I need, remind me of the things I forgot I should have and delight me with things I didn’t even realize I want.

This is how to win me over – after all, I am today’s modern shopper.