Direct-to-Consumer is here to stay for the FMCG industry


June 23, 2020
6 MIN READ
Vinculum
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Vinculum
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Today, the businesses are ruled by the Customer. A recent study showed that even if 74% of today’s brands will start disappearing tomorrow, consumers would not care. It’s all about how you connect with your customers.

DTC is here to stay

The concept of direct-to-consumer has been there for a few years however, D2C companies seem to pop up out of nowhere. When we look at the eCommerce market largely, Amazon itself has 80+ private-label brands which are sold “directly to their consumers”.

  • It’s considerable when a brand like Amazon is shifting to direct to consumers approach, this trend is definitely not just a breeze to come and go.
  • DTC is here to stay with several opportunities for eCommerce specially FMCG Industry due to the sudden change in demand and consumer’s preferences towards essential goods &food items more than anything else.
  • The digital presence of the manufacturers is an important factor of their omnichannel approach. This presence is used to acquire information about customers, share information about products, build brand engagement, compare pricing & online collection, etc. and many other shopper solutions.
  • A recent study by eMarketer shows, there are over 400 D2C (direct-to-consumer) brands in operation today. The report also indicates that web traffic to D2C sites has doubled in the past two years.

Direct to Consumer (DTC) Brings New Option for FMCG Brands

Though the DTC model has emerged over the years, it has emerged more strongly amidst the Covid crisis, the impact of which we have discussed in the first part of the Direct to Consumer (DTC) article.

  • We all know how COVID -19 has taken over consumer’s buying decisions, preferences, shopping behavior. With lot more consumers bulk-buying groceries, food and household essentials, they are heading online for buying things especially food items and consumer goods. The changing demand itself is an opportunity for FMCG industry while practicing D2C.
  • Some of the leading FMCG brands are already operating direct to consumer models. In 2019, Nestle launched a DTC website for its KitKat Chocolatory, which allows consumers to buy luxury versions of the confectionery directly from a modified website.
  • Nespresso, another FMCG brand, seen huge success with the DTC channel, selling its coffee capsules on their own website also, through their partnership with Amazon and its brick and mortar stores.
  • A list of FMCG companies which includes brands like ITC, Hindustan Unilever, Dabur, Colgate, Mondelez, Procter & Gamble etc. have moved to DTC as soon as the market landscape changed to cope with the current demand.
  • D2C is proved to be useful model as there are instances where Direct-to-consumer delivery pattern helped in avoiding traditional trade and distributor networks in different containment zones and areas where Covid-19 restrictions were disrupting the last-mile delivery.
  • As companies are facing shortage of staff for the migrant workers are leaving for their homes in the pandemic situation, there is a sudden lack of order in the supply chain across the ecosystem — from finding resources of raw materials, staff for manufacturing and delivery of the finished products. Brands are deploying new strategies to connect directly with the consumer.
    • The latest direct-to-customer initiatives involve smaller to bigger listing brands partnering with different delivery channels and food startups such as Dunzo, Scootsy and Swiggy and streamline the process through communicating resident welfare associations (RWAs).
    • B Sumant, executive director at ITC Ltd. has indicated that these partnerships will boost the power of collaboration as no single brand has a fulfilled way to meet the needs of the nation during this unprecedented time. Needless to say, that ITC is also selling their products through their brand site and portals directly.
    • Brands like Dabur said, different brands are finding innovative ways to make sure supply of essential goods to the consumers is uninterrupted. This point is important as a recent report shows, Dabur has partnered with online delivery channels for their retail outlets to reach out directly to the households.
  • Food ordering firm Swiggy and Zomato has extended its network and the app reflects myriads of consumer goods open to order for the consumers. Swiggy has expanded its store network around 200 cities which is also allowing consumers to order daily necessities like groceries from their neighborhood stores.
  • FMCG companies have turned to hyperlocal delivery platforms rather than Swiggy and Dunzo. These Hyperlocal Platforms are helping in completing orders from specific brand stores or from distribution centers directly, to deliver items at the doorstep.
  • Hyperlocal delivery channels help consumer goods makers find much simpler and smoother access to customers during the lockdown. However, according to eCommerce experts single-brand stores on hyperlocal delivery channels will see low traction as consumers may prefer to buy all essentials, they need together rather than stick to one brand. Thus, partnering with delivery network which provides options to buy from different brands will see a significant growth.

The Bottom Line

D2C for FMCG is of course a key to tackle the need of the hour. It is ignorant to say that D2C will be disappeared as soon as COVID-19 subsides.

For new FMCG brands, or for the starters of DTC on the back of coronavirus – it’s a smart move as even if the corona situation subsides, consumer interest in buying certain products may change a little but that will not eliminate consumers’ purchasing habits of buying directly.

It has been predicted that D2C trend in eCommerce will see enormous growth for FMCG even after COVID-19 subsides, which, in the other hand, could mean new digital opportunities for FMCG Industry.

However, with the new normal of social and physical practices of no contact, Vinculum, as a global SaaS platforms & Solution provider, can help you gauge your eCommerce business with D2C integrations and personalizing Direct-to-Customer Models of your own. Talk to the experts from Vinculum Groups to ensure you are not left behind in the game.

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