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How building a Direct-2-Consumer (D2C) Solution could benefit Traditional CPG/FMCG Brands – (Part 1)

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Meandering through the endless aisles at a local supermarket only to discover my favorite chips & dips were out of stockagain! Only if there was an option to seamlessly purchase (hybrid frictionless) them directly from the food & beverage manufacturing brand?

Perhaps traditional food & beverage manufacturing brands too could benefit from building a holistic Direct-2-Consumer (D2C) solution of their own

This first post in a multi-segmented article briefly outlines the benefits of D2C services as well as key D2C solution types

Although applicable to a broad set of product categories across several industries; this article takes a view on D2C services as it pertains to traditional food & beverage Consumer Packaged Goods (CPG) and Fast Moving Consumer Goods (FMCG) manufacturing brands

Quick Note: Despite commonalities inherent to the industry, each CPG/FMCG manufacturer brand is relatively unique (size, geographic reach, product/SKU mix, long-term goals, partnerships, etc.) and as such their D2C services strategies would differ to suit their individual goals & capabilities


D2C Services… Why Now?

In an increasingly hyper-competitive market, brands are constantly seeking out various strategic initiatives that not only set them apart from their competitors but also improve end consumer relationships in the long term

One such initiative is building platforms, channels & services that enable direct engagement with end consumers (shoppers & customers) in provisioning of bespoke products and seamless experiential services

After all, advancements in ubiquitous connectivity, last-mile logistics, AI, IoT and digital platforms are rapidly enabling businesses across several industry verticals to offer innovative D2C services of their own

Traditional food & beverage CPG/FMCG manufacturing brands have for long been relying on their traditional r/etail (retailers & e-tailers) and supermarket partners to get their products in consumer’s shopping baskets… and all for logical reasons

But they too are increasingly facing myriad of challenges in an evolving post-digital era; notably from newer D2C-first (vertically integrated) startups as well as their traditional distribution partners – r/e-tailers & supermarkets

…from margin pressures through to private-label e/shelf placement, less control over overall consumer experience (CX), end-2-end insights visibility and everything in between

On the other hand, demand for certain types of D2C services (think: direct-2-door meal-kits delivery, curated sample boxes, et al.) have been on the rise across select urban markets and consumer segments

Additionally, consumer behavior too is evolving constantly; demanding unique digital experiences, relevant personalized loyalty programs and much moreall directly from the brands themselves

D2C Services – Key Benefits

All of these ongoing changes & challenges could be viewed as opportunities in disguise

…and like any other traditional industry, CPG/FMCG brands too can combine the best of what has been working with next-gen solutions in building unique value added D2C services of their own

Key common benefits in building a D2C service include –

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1. Exert More Influence & Build Customer Relationship

Investing in building holistic D2C services could help traditional CPG/FMCG brands exert more influence (read: better control) over key aspects of their business; including but not limited to brand management, shopper experience, customer engagement, loyalty, CRM, demand generation/x/up-sell, product pricing/promotions, repeat purchase & other related aspects of marketing operations

2. Strengthen Research, Insights & Analytics Capabilities

Investing in building holistic D2C services could importantly avail traditional CPG/FMCG brands access to comprehensive data points (shopper insights, browsing & purchase behavior, shopping basket analysis, etc.); further strengthening their Research, Insights & Analytics capabilities

3. Diversify Revenue & Counter Business Pressures

Investing in building a holistic D2C services also helps in creating diversified revenue streams (nichè product, markets, etc.) and alleviating multitude of existing business & competitive pressures (costs, margin, shelf placement, private label brand promo, etc.)

Furthermore, each brand could see bespoke benefits unique to the nature of the D2C service application with a potential opportunity (when done right) to become market leaders


Holistic D2C Solution

Technically speaking, the concept of D2C services itself isn’t new… on the contrary businesses have been implementing them in various (nascent) iterations for some time

For example: Those humble (questions, comments, complaints) support hotline phone numbers printed on those chips packet and dips bottle labels

…in essence have been serving as a medium of sorts for customers to directly communicate (passive engagement) with them even if the said chips & dips were purchased from a supermarket distribution channel

This support hotline service is typically representative of a single dimensional type of D2C solution

In the aforementioned scenario, the single dimensional D2C service is originally designed to serve a sole purpose within the business – namely after sales customer support via the brand’s direct channel (phone)

And whilst the direct communication channel may have transformed into officially branded websites in the digital era and post-digital formats today (chat bots, etc.); the underlying single dimensional D2C service themeafter sales customer support – remains the same

There are many reasons why CPG/FMCG brands may choose to build (or start with) single dimensional D2C service, including but not limited to achieving specific short-mid term goals, D2C service evaluation, D2C ROI studies, promoter score improvement and more

Brands could also build concurrent D2C services – multi-dimensional D2C solutions – that correlates with their respective consumer facing business functions (e.g. sales, loyalty/reward servicing, commerce transactions, et al.)

In a multi-dimensional model; brands can design each of the concurrent D2C services to either be tightly integrated with each other

For example: Manufacturers could closely integrate their D2C support service with their D2C sales experience, D2C logistics platforms and D2C loyalty/rewards program across a mix of direct channels (phone, website, IoT, physical retail, et al.) to create a holistic D2C brand & customer experience solution – holistic D2C solution

Ultimately a holistic D2C solution (when done right) could also serve as a gateway for CPG/FMCG manufacturers to develop their own unique brand ecosystem…

…complete with its bespoke product portfolio, experiential services and engagement programs that are tailored to each individual consumer (shoppers & customers)

Designing a holistic D2C solution will consists of varying permutations of strategic initiatives under 3 key D2C modules core interface, services and channels [explored in Part 2]


But…

In developing their own holistic D2C solution, traditional CPG/FMCG manufacturers will face a number of challenges and complexities

…such as maintaining the extremely delicate balance of offering their own branded D2C products & experiential services alongside existing ones provided through their long term (supermarket/retail) distribution partners [explored in Part 3]

Forthcoming segments will explore the holistic D2C solution in further detail; including outlining concept framework, solution variations, implementation scenarios, central role of CX and smart supply chain and more!

Stay tuned!