E-commerce is a force to be reckoned with, especially when it comes to the fast-moving consumer goods (FMCG) industry. Of the 3 percent growth we’ve seen across the FMCG market this year, Nielsen reports that e-commerce channels are responsible for 82 percent of the influx in sales. Moreover, the World Economic Forum found that the impact of digital transformation on consumer industries is expected to yield $2.95 billion in potential value over the next 10 years. With staggering statistics like these, it’s all the more crucial that FMCG brands fully unlock the potential of their e-commerce platform.
There is perhaps no better way of amplifying e-commerce in consumer goods than by becoming directly connected to the consumers you serve every single day through a direct-to-consumer (DTC) approach. From wine to fashion, many categories have advantageously captured the DTC market—and reaped rewards by doing so. And yet still, many FMCG brands have yet to realize their full potential in a DTC world.
This is the first of a two-part blog series. Here, we’ll discuss why now: why it’s so incredibly important for consumer brands to both understand and unleash their own direct-to-consumer model. Next time, we’ll dig deeper into how to do it successfully.
For those of you who believe you’ve missed your chance, let me assure you: There is no better time to go directly to your consumers. Here’s why:
1. Speed-to-market propels innovative products
“We had the idea first.” It’s a statement we hear from our partners and clients when a competitor manages to squeak by and get to market with a new innovation first. It’s difficult to watch as an idea you’ve painstakingly nurtured goes to the other guy who got there just a little bit sooner. DTC gives you the ability to prevent this—to put your idea in the market quickly and efficiently to learn whether or not it will be successful.
This way of working requires a shift away from typical processes and approaches. It calls for less time debating exactly which innovation or iteration is the correct one, and less financial investment from an already stretched marketing budget. It’s not reckless, not even close. Instead, it’s a calculated endeavor with managed risks. A small, nimble team brings the ideas to life and determines how to continuously test them on your brand’s e-commerce site. In turn, brands receive real-time market data that can be used to optimize products: For example, which product descriptions get the strongest response, which primary packaging colors spark the most interest, which name best captures your key equities, or what content most captivates consumers.
Instead of overspending to create one perfect initiative, implement several variations online for less money, using a test and iterate approach. This will give you a true sense of the innovations that are most compelling to consumers, information you can then use to inform your innovation pipeline.
2. First-party data means real-time insight
Today more than half of every dollar spent at a store is influenced by a digital interaction. Mobile and online play an incredibly important role in the path to purchase. With each click, consumers take us deeper into their lives—their wants, needs, habits, and desires. Without visibility into these online interactions, we miss the opportunity to further the relationship between consumer and brand.
Pretend for a moment that a shopper purchases a product from an end-aisle display. Brand managers might assume that placement was the ultimate purchase driver. But actually, the shopper may have done online research and consulted with others on an online forum before making their final purchase. In this case, the brand team lacked key understanding of what really drove interest and purchase—a missed opportunity, indeed.
DTC programs provide a whole new level of connection with consumers. They allow brands to better understand consumers and better serve them as a result. This goes far beyond data collection, giving brands a chance to translate insight into meaningful action by gathering information about consumers’ interests, mindsets, and behaviors, and then using those insights to optimize the consumer experience.
Nike has gotten in on the game, recently acquiring Zodiac, a consumer data and analytics company, to further its connection with consumers. Vice president and chief digital officer of Nike, Adam Sussman, said that it is partnering with the data-science talent to “power one-to-one relationships with consumers through digital and physical consumer experiences.”
Nike and other companies are gathering a treasure trove of data that enables them to build strong relationships with their customers. Digital disruptors have found the sweet spot that many FMCG brands have missed.
3. Direct-to-consumer programs make retail initiatives bigger and better
There is some concern that DTC is at odds with retail partnerships, when in fact nothing could be further from the truth. For many FMCG brands, DTC is one part of a broader integrated channel strategy, one that serves to benefit all parties involved. Brands who establish a DTC model do so because they see a specific unmet need that the direct relationship seeks to answer. Upon identification of the need, a DTC platform can serve to enrich a consumer experience and complement, not replace, a retail strategy.
Imagine the possibilities that arise when brands and opportunities unite, combining their data and analytics to make initiatives bigger and better than either could have done on their own.
Since the vast majority of FMCG company sales continue to flow through retail channels, it’s critical to stay focused on growing brands at the retailer. Retail growth is not at odds with DTC sales. Instead, by learning and testing your way to successful DTC models, you can optimally scale up for e-retailers or brick-and-mortars with clear data supporting why each of your initiatives will be successful.
Digital disruptors are building their brands online and then moving into retail to prove their success. It’s time for the established brands to work in reverse, creating consumer experiences that work for an omnichannel world.
That’s all for now. Keep an eye out for my next post where I’ll touch on how brands can deliver by going direct to consumer. Until then, remember, there’s no better time to evolve your marketing model and form intentional, direct relationships with your consumers.
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