CPG companies have traditionally trailed other online retailers when it comes to establishing direct-to-consumer (D2C) models, leaving potential revenue on the table as consumer habits become increasingly more digital. According to a recent Publicis Sapient research on consumer spending trends, e-commerce saw a 31 percent increase in transactions as physical retail slowed in the wake of the COVID-19 pandemic -- resulting in a new, more digitally driven “normal.”
Looking ahead, there is significant headroom for CPG companies to embrace D2C. Analysis from eMarketer/Publicis Sapient projects that D2C for CPG companies will grow to about 15 percent market penetration by 2024 – up from 11 percent reported in 2020. More aggressive growth cases forecast market penetration of up to 20 percent by 2024 – almost double the amount of customer reach CPGs are experiencing today.
The need for CPGs to explore alternate revenue streams like direct-to-consumer is clear. But to get started with establishing the right D2C model, build organizational buy-in and investment focus, CPGs must first understand where the greatest opportunities for value creation exists within their organization. In this first part of this series, we’ll take a closer look at what value drivers exist for CPG firms in the D2C space, and the role they play when assessing how to build a scalable D2C strategy.
Understanding Value Drivers for D2C
As we already know, D2C creates value to consumers through multiple drivers:
- It provides convenience and reduces friction with easier and more enjoyable shopping experiences
- It provides consumers with unique offerings via access to products or product bundling that is not available anywhere else
- It provides delightful experiences which offer rich category, brand, and product experiences that create value beyond or in addition to the purchase
- It provides attractive price point or savings for consumers not available via traditional retailers and offline channels
But the value D2C provides to the business is generally less understood. D2C offers companies several business-value drivers that extend well beyond the revenue it generates. In order to truly maximize D2C opportunities, CPGs must focus on evaluating, assessing and measuring D2C initiatives based on direct value (new revenue streams), as well as the more holistic, indirect value (both monetary and non-monetary). The indirect value pool is often the missing part of the equation – not considering and including it results in missed opportunities.