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Varun Kashiv Author's Perspective
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10 Minutes read

Why DTC Model is Becoming a Pivotal Retail Channel for Food Brands

Why and How to Take your Food Brand Direct to Consumer (D2C)

According to a study released by RetailDive, a third of U.S. consumers plan to do at least 40% of their shopping from D2C companies in the next five years, and 81% say they'll make at least one purchase from a D2C brand within the next five years.

A trend that barely existed some time ago, brands reaching their consumers directly is an amazing new thing. So, what are the driving factors of this success, and what can traditional brands take away from it?

Food brands have realized the need to reach their consumer directly and are actively trying to take control in their hands, influence their sales directly, and own their consumers. But their core challenge is that they are unsure of what to do.

If your brand wants to win the Direct-To-Consumer game, you can no more `fulfill the orders monotonously. You need to focus on brand-consumer relationship by fulfilling the expectations of modern consumers placing orders with you.

We'll explore why food brands are going direct-to-consumer and what are the direct-to-consumer: challenges and opportunities

Why are Food Brands Going Direct-to-Consumer (D2C)?

Traditional retailers' margin size is decreasing, and their model is downsizing as people shift their preference to online purchases. As the retail begins to fall, brands are rolling out exceptional set of products and innovative DTC strategies, and here is why:

To Build Better Brand-Consumer Relationship: Companies have more control over the perception of their brand, since they are directly communicating with consumers in DtoC model. Consumers' feedback reaches brands directly, they understand and respond to their requirements faster, and can build a loyal consumer-base. It is an opportunity for brands to build direct relationships and sell more to consumers.

There are More Ways to for Consumers to Buy Products: Consumers are fragmented; while some are using mobile devices or tablets, rest are using apps, voice-activated speakers, smartwatches, and rest still prefer brick-and-mortar shops. It becomes imperative to be available for the consumer everywhere, and this ushers in digitization for brands. Besides, with data to segment and target consumers for products so easily available to act upon, brands today prefer to reach the consumers themselves.

Changing Consumer Buying Behavior, Thinking, And Actions: Consumers want brands to reach them: 55% of consumers prefer to buy directly from brands rather than multi-brand retailers. It is consumers’ call to the brands to be more available and get involved with them.

To Address the COVID-19 Outspread: The new realities of COVID-19 bring both challenges and opportunities with it. With digital fitness classes and events going online, restaurants hiring out-of-work waiting staff to deliver food to consumers, people expect deliveries to them at home, so that they don’t have to step out of their house. Your online presence matters to them as they want to make orders online. This makes selling directly to the consumer a brand’s basic requirement.

Brands who have been investing and experimenting with digital capabilities, have a captive audience growing with them.

According to a report by Nielsen.com, "With millions working from home and digital connectivity taking even more of a hold on everyday habits, consumers will have greater motivations and fewer perceived barriers to more actively seek technology-enabled solutions to assist in everyday tasks like shopping. Companies that can leverage technologies-by meeting changing consumer demands online, enabling seamless interactions through direct-to-consumer offerings and enhancing consumer experience with augmented and virtual realities-have the opportunity to earn consumer loyalty well after consumers' concerns subside."

Direct-to-Consumer Challenges and Opportunities

Challenges

  1. Your New Competition is Nimble Digital Native Companies: Taking up this journey direct towards consumers has a scary part. While you have been a legacy brand, now you will have to reinvent the wheel and compete against brands that are digitally native.

  2. Digital Brands are Sweeping the Market Share: Competitor brands who are digital natives, are sweeping the market share. Legacy brands are losing their share to them. For instance, Casper has dominated the entire Google search space by winning bids on each mattress related keyword. Thus, driving a lot of organic and paid traffic. They are driving 32% of the traffic through organic search followed by paid search and display ads (30%).

  3. Transitioning to Distribution Model is the Need: This is a shift from the traditional distribution model to becoming a self-sufficient disruptive brand that builds, markets, sells, and ships the products itself, without any dependency on middlemen is a requirement today.

  4. Controlling the Message and Brand Value Proposition Across Channels: There are a lot of opportunities attached to D2C business model, but so are responsibilities. Part of it is planning and regulating the message and brand value proposition across channels.
    1. Lack of Visibility to Consumer Behavior Insights: e-commerce giants are run on data insights into their consumers' behavior. If you are not ready with insights into your consumers' behavior, then your competition is likely to have an unfair advantage in the market over you. You will need marketing intelligence as a solution to this.

While this poses a unique challenge, there are opportunities for CPG brands to serve customers through Direct-to-Consumer and make them feel like they have control over their own experiences.

Opportunities

  1. Consumer Experience by a Brand is a Key Differentiator: 57% of consumers are heavily influenced by personal experiences and communication from brands themselves — far more than the 16% who say brand reputation alone is what inspires them to buy.
  2. Drive engagement on digital channels with product/bundle/service exclusives: Social is a large contributor to consumer engagement. Brands have a huge opportunity to create opportunities for selling on social media and facilitating consumer service.
  3. Learn about consumer preferences and interests through digital channels and data intelligence and build a stronger relation with your consumers by responding to their requirements.
  4. Brands can also leverage consumer-generated and lifestyle content for consumer recognition, reward and future sales.
Ebook
CPG Industry: Preparing for Direct-To-Consumer Model in Post-COVID Times

End Note

The shift from being a legacy food brand to being a digitally proactive one that reaches out to its consumers has already started. There is no better time than today, to start thinking digitally and bring consumer experience that inspires loyalty and bigger business outcomes.

Varun
Varun Kashiv Director, Customer Experience at Altudo


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