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Exploring Direct-to-Consumer (D2C) Service Model for traditional CPG/FMCG brands – (Part 4)

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This segment explores a D2C service model as it pertains to food/beverage CPG/FMCG brands; aspects of which; may also be applicable to a multitude of other product categories & service industry verticals

Quick Note: Despite commonalities inherent to the industry, each CPG/FMCG manufacturing brand is relatively unique (size, geographic reach, product/SKU mix, long-term goals, partnerships, etc.) and as such their D2C strategy will be reflective of their individual goals & capabilities

State of Play & Challenges

Amongst a myriad of challenges, food/beverage CPG/FMCG brands are also increasingly seeing their traditional B2B2C channel partners such as supermarkets & grocery retailers transition into competitors themselves (think: private label / store branded product category)

In fact; given the lucrative margins and attractive pricing for consumers; the private label category is only forecasted to continue its exponential growth trajectory across key global markets…

…further placing traditional CPG/FMCG brands in a precarious position; especially since these very traditional B2B2C channel partners (competitors) also serve as an important sales, marketing & distribution channel [more on this topic in a separate post]

So why not offer the same products as a D2C solution?

It seems logical then for CPG/FMCG brands to build a D2C solution that enables consumers direct access to the exact same (or subset) products as their existing B2B2C channels…

But would come with its own set of challenges

On one side… existing B2B2C distribution partners would most likely perceive the CPG/FMCG brands’ ‘as-is’ D2C solution (i.e. end-2-end direct fulfillment of exact same SKUs) as a threat to their business operations; potentially straining their decades old relationship

On the other side… the ‘as-is’ D2C solution may not necessarily address the end consumersWiifm needs – i.e. – what are the benefits of ordering the exact same products directly from the manufacturer; especially when they are readily available from supermarket/grocery stores that I already frequent?”

Optimally managing this delicate balance is one of the many challenges CPG/FMCG brands face in developing a sustainable & CX-centric D2C service

Potential D2C Service Solution

One potential solution for CPG/FMCG brands would be to develop a D2C service that complements their existing B2B2C channels’ offerings with focus on mutually exclusive product portfolio + Value Added Services (VAS)

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How could such a D2C service work?

As a starting point, CPG/FMCG brands could offer exclusive product SKUs; complete with their associated experiential services; delivered through their own network of co/branded D2C omni-channel platforms

For example; one such D2C service could entail offering cross category multi-product sampler box that promotes the brand’s new product launches as well as fulfills ongoing direct sales & replenishments

To further distinguish their D2C service (vs. B2B2C); brands could also focus on offering personalized Value Added Services (think: ready to prepare meal kits) in addition to individual product SKUs

Additionally; CPG/FMCG brands could also explore the option to feasibly create a standalone D2C services oriented sub-brand in alignment with emerging market trends

So…

Whilst traditional CPG/FMCG brands may very well find themselves relying predominantly on their B2B2C channel partners for sales, marketing & distribution in the near future…

…they may also realize longer term benefits in developing a complementary holistic D2C solution; complete with unique product portfolio, VAS & experiential services

Depending on a variety of factors; CPG/FMCG brands could either develop their D2C services entirely in-house or through a joint partnership model (or combination thereof)

Challenges such as capital requirements, operational complexities, etc. would ideally need to be identified & addressed during the initial D2C solution design phase

Forthcoming segments will explore the importance of CX as well as the role of data/insights, connectivity & IoT play in the development and provisioning of D2C services

Stay tuned!