The new DTC opportunity for CPG companies

Along with the many unprecedented changes brought upon by COVID, we are seeing a shift in how DTC companies operate and deliver their products to their customers. There have been 6,378 retail store closures thus far and Coresight estimates that this number will continue to rise to 12,000 by the year end--with a lot of that sales volume migrating online. Brands that traditionally only sold through marketplaces and/or retail stores are finding new opportunity in DTC eCommerce--and those that have always gone DTC are finding increased demand on their existing DTC channels.

Currently, less than 5% of CPG sales are represented in the eCommerce space according to Shopify. On the flip side, DTC movement accounts for 40% of the sales growth in the sector. Looking at these numbers, DTC eCommerce seems like the next frontier for the CPG companies to master. In fact, in the last 3 years, the eCommerce growth for many categories has been exponential compared to other channels. See the chart below.

Even before the effects of the pandemic, CPG companies were beginning to explore DTC as a way to form closer customer connections even while leveraging the likes of Amazon and retail stores as major channels to increase volume.

We believe that the COVID-19-related increase in this migration to DTC is becoming table stakes for CPG companies that want to grow and stay relevant in the “new normal”. Those companies that take the leap to see benefits include:

1. The ability to collect consumer data: Direct customer connections allow the collection of more, better customer data that then facilitates personalization and--as a result--customer loyalty.

2. More effective marketing campaigns: With both marketing and selling on the same eCommerce platform, it’s easier for businesses to integrate their digital marketing strategy.

3. More control over brand image and reputation: By being DTC, businesses do not have to rely on retailers or other eCommerce channels to properly represent their brand.

4. Speed and agility: Since going DTC gives the brand complete control over both infrastructure and everything that lives on it, changes in anything from online assortment to user experience to tech stack components can be made more quickly and efficiently than they ever could with retail/eCommerce selling partners.

One of our clients, Spiceology Inc located in Spokane, Washington, recently shifted their marketing to match consumer needs in the time of a pandemic. Since many restaurants (Spiceology Inc’s main B2B market) were closed due to COVID19, they had to focus on a new customer base and new channel (DTC) to drive sales.

In an interview with Forbes, CEO of Spiceology, Chip Oversteet said, “Messaging to consumers during the quarantine is challenging, but imagine messaging to chefs, who are shuttering their restaurants in record numbers. Practically overnight, chefs across the country were just trying to avoid bankruptcy. There’s no way to know the situation any individual chef is in, and therefore no way to reach out appropriately to offer them fresher spices, a better organized kitchen, or whatever your value proposition might be. So, we decided to completely shut down our outbound marketing and sales efforts focused on food service and respond only to inbound requests. At the same time, we had to turn 180 degrees and put all our energy into the consumer segment. We broke the golden rule of marketing — only change one variable at a time.”

The company took many measures to revamp and re-direct their efforts to everyday customers. Some of the changes the company made included adding cooking tutorials, recipes, product reviews, smaller container sizes with new packing and even changing the look of their website. And, of course, implementing the FenixCommerce Intelligent Delivery Platform to provide delivery date estimates on product, cart, and checkout pages.

Forbes reported that after these efforts, 80% of the company’s sales are now due to consumers with 10% being from wholesales and the other 10% from chefs. Spiceology took charge and explored new markets and the hard work (and risk) paid off!

We at FenixCommerce couldn’t be more proud to work with Spiceology--and dozens of other DTC brands--to help them adapt to the challenges and opportunities of the pandemic-related “new normal”. If you are a DTC brand looking to leverage the power of accurate delivery date estimates to increase conversion and improve customer experience, get in touch today to see how we can help!