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Allexo Insights

The growth of D2C eCommerce

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Sam Musgrave D2C, COVID19, Recruitment...

Consumers’ ever changing desires and shopping habits have always motivated retailers and brands to constantly adapt how they sell, but the internet, accurate delivery networks and consumers’ increasing desire and ability to get what they want, when they want it makes the marketplace ever more challenging and daunting.

Traditional goods-to-market approaches leave big brands competing for shelf space and the smaller brands are so often disadvantaged. So, it’s not hard to see why direct-to-consumer (D2C) is an increasing trend as brands see the benefits of selling directly to consumers, via their own sales channels, rather than through retailers.

D2C allows brands to reach existing customers in a new way but more importantly it offers a new revenue stream by broadening the brands customer reach.

Numerous businesses are already making real headway with this strategy including pet supplies, delivered diets and snacks, personal grooming and beauty businesses, breweries and chocolate manufacturers and moreover it is granting smaller and newer businesses the same chance and potential gains as their larger often more established competitors.

In January 2013 power brand Gillette had 7 times the online sales that new kid on the block Dollar Shave Club had. Just over 3 years later, in June 2016, Dollar Shave Club’s sales were more than twice the size of Gillette’s online and Unilever bought Dollar Shave Club for a billion dollars!

D2C is appealing to brands on so many levels not least because by cutting out the middlemen there are greater opportunities to control price and margins.

D2C is also proving influential and popular with consumers. Research highlights that 70% of consumers would subscribe to D2C brands for everyday goods, such as cleaning products, cosmetics and healthcare brands.

Plus, the research shows that established D2C brands such as Birchbox, Dollar Shave Club and SimplyCook have conversion rates in the UK of over 1 in every 5 customers who have heard of the brand.

The real power for brands embracing D2C is that they have greater control of the customer relationship which previously would have been in the control of the retailer. The brand can now build their brand and customer engagement through the customer experience they dictate.

With this ownership of the customer relationship comes the power of customer data which in turn can be used to inform on personalising the customer experience and product offering to drive sales.

Clearly a key question for any brand with pre-existing relationships with supermarkets will be whether they will be penalised for pursuing a D2C model. However, as a recent report published by Cranfield University highlights that almost half (48%) of manufacturers are already building channels to drive D2C sales and almost all (87%) see D2C as relevant to their products and consumers, it looks like it will be a model we will be seeing a lot more of in the coming years.

Photo by Photo by Andrea Piacquadio