Direct to Consumer – Consumer Packaged Goods (CPG) Acceleration in a Post-COVID world
The curtains are finally drawn on the COVID-affected 2020. And as we look back, it’s been a year of major disruptions throughout the industry. One of the silver linings from the last 8 months, however, is that whatever was imagined as the future suddenly became the present or, at the very least, the foundations for the said future were laid.
We have witnessed the doubling of eCommerce sales across channels, with Cyber Monday becoming the largest e-commerce sales day in US history. We have also seen physical stores with reduced presence adapting their role in the ecosystem from an experience center to a mini supply chain hub. Many organizations have also pivoted their business models to monetize and capitalize on the situation. Cases in point: a major cosmetics manufacturer shifting focus to hand sanitizers, a conglomerate focusing on reduced number of product categories, airlines flying no destination flights and bringing the airlines kitchen to homes, etc. Some of these will evolve into permanent models, while others will get flattened and disappear as and when we get the power to deal with the pandemic and crawl back to normalcy.
Within the consumer industry, CPG companies led the bandwagon in innovation, both in the product lines and the operating model. Direct to Consumer (D2C) is one of them, which is certainly not a new concept, but received a major boost.
What is D2C?
D2C, or Direct to Customer, is mainly an e-commerce strategy that allows manufacturers and CPG brands to sell directly to the consumer, bypassing the Retailer or Distributors.
Going D2C has many advantages and offers many areas that CPG companies can leverage. They can access direct insights about their end consumer, eliminating a layer of distributors or retailers in between. This will give them an edge to line up their offerings with maximum contextualization and bring in disruption in product launches. Today, these require multi-player agreements in the ecosystem leading to significant delays in ‘Going to Market’.
Aspects to consider while going the D2C way:
Merchandizing: Not all the products that a company offers are the right candidate for D2C. You need to pick up products that have potential but are niche or not-so-fast moving due to challenges such as reluctance of distributors to push it. Look at targeting non-explored geographies. A subscription model for merchandise like cleaning, beauty, food items could also be an area of focus. But remember, pushing all products in the D2C model may mean CPG companies will end up closing retail channels. So be mindful and pick your products wisely.
Content and Marketing:
While adopting a D2C approach, content and marketing requires a disruptive change with a parallel ecosystem of having the end consumer in mind instead of the corporate buyer. Instead of the traditional fact sheet gamification of product information, concepts like ‘Guided selling’ process, segmented and highly personalized marketing content will steal the thunder. This will eventually lead to increased control over brand and product.
Choosing the right platform: Choosing an e-commerce platform, which is ‘just right’, is a key aspect when you make the move to D2C. Not all fancy features of a modern e-commerce platform may be required or even essential, but it is advised to go for a COTS product for a quicker go-to-market. Based on the initial success, as more and more product lines get in, a completely customized e-commerce platform tailored for the organization will enter the scene. That will be the second level of transformation from a D2C to an online retailer.
Pricing: Pricing will be one of the key differentiators for a D2C business, but not the only one. Different D2C pricing methodologies, like demand-based pricing, loss leader pricing, cost-plus pricing, need to be dynamic. They will be based on the data that CPG companies already have, which can be fine-tuned with data growth as they move forward.
Supply Chain: Digital Supply Chain will undergo the maximum disruption when you choose to adopt the D2C model. Instead of shipping in containers and pallets, supply chain needs to adapt to fulfill a few products and maybe with customizations too, like a sunglass with a name monogrammed on it! A dedicated inventory with a 3 PL partnership will keep the CPG companies ahead in the game for a faster go-to-market. Supply chain will also require integrations with many upstream-downstream systems like procurement, vendors, planning, assembly lines to keep fulfillment cycles quicker.
Helpdesk: Last but not the least, to be successful in the D2C business, a 24*7 helpdesk will be required to address customer concerns, and flexible return policies will need to be put in place. Again, there is a paradigm shift from handling corporates to end consumers. A digital helpdesk augmented with DIY features and digital assistants will hold the key to a transformative experience for customers.
Data Management: In a migration from the traditional model to D2C, all the factors mentioned above are orchestrated by the underlying data platform, which acts as a central nervous system. Considering the humongous consumer data CPG companies generate each day, this aspect separately calls for enterprise data governance, security and privacy elements. While one can start with multiple sources, over a period of time, the goal should be to create single source of truth based on the ‘need-to-know’ principle.
How can Zensar help?
At Zensar, we can help you move fast in your D2C journey by supercharging that central nervous system and engineering your entire shift to perfection. Our expertise and proven methodologies are spread across E-commerce, Supply chain, Digital Marketing and Experience, Data Engineering and AI, Connected Intelligence, Merchandising and Planning. We can further leverage technologies like AI/ML to infuse AI-driven Planning and Forecasting algorithms at more granular levels, to deliver a fully digitalized and reliable supply chain. These are further complemented by our unique solutions like Conversion Rate Optimization (CRO), Digital Experience Platform (DxP), Modular and customizable Big data & Advanced Analytics platform (ZenAnalytica), and Digital Helpdesk Solution, to name a few.