Consumer products companies must adapt to the ever-changing digital environment that is e-commerce. In fact, approximately 79% of Americans now shop online, on the internet, or their phones, up from just 22% back in 2000. Additionally, the Amazon effect indulges today’s consumer with benefits such as same day doorstep delivery, guaranteed low prices, access to products across countless categories, and even voice search assistants (e.g. Amazon’s Alexa). E-commerce has enabled a new level of consumer-centricity and has created an environment where now some of the trendiest and most-relatable companies launch and operate purely online. Iconic companies like Warby Parker, Dollar Shave Club, and Quip are a few direct-to-consumer (DTC) success stories that come to mind.
These companies appeal to the many demands of today’s consumer by providing convenience via seamless online experiences, consumer-centric supply chains, beautifully designed packaging, and personalized notifications. Large consumer products companies are uniquely positioned to meet the same consumer demands, if not surpass them. There are, however, many considerations when building a digital transformation strategy. For example:
- As a pre-digitally founded consumer products company, how do you adapt to the rapidly evolving digital retail world?
- What changes must be made to your supply chain to ensure a seamless online to offline experience for your customers?
- Should you partner with an eTailer (e.g. Amazon or Jet.com), create a website of your own (e.g. Warby Parker), or a combination of both (e.g. P&G’s Tide)?
As many consumer products companies are transitioning in the digital transformation strategy, there are some key themes they can use to evaluate the future of their digital sales channels.
How do I win in the Direct-to-Consumer space?
Clarkston has researched over a hundred large consumer products companies involved in e-commerce to uncover best practices when formulating an e-commerce strategy. The following highlights 6 examples of companies that are winning based on best practices:
- Play on your core strengths: Proctor and Gamble created the Tide Wash Club, a direct-to-consumer subscription business for its Tide Pods. P&G’s plays on its undoubted expertise in all things laundry.
- Gain an advantage with unique consumer data: Unilever acquired Dollar Shave Club to not only gain a strong entry into the direct-to-consumer shaving market dominated by rival P&G but also to acquire unique consumer insights data to drive future product development, packaging design and online interaction with customers pre and post-purchase. Another example is through the use of Google analytics, L’Oréal discovered that ombré hair color was trending and responded with a new product, supported by a dedicated consumer marketing plan.
- Leverage your established consumer base: Nestle has built a large customer base from years of delivering five-gallon jugs. It can now leverage the earned entry into the home.
- Offer personalization, simplicity, and choice: Nike’s NIKEiD is an online service that allows customers to purchase and create their own gear online by customizing color, design, and performance features.
- Identify and empower niche communities: Patagonia secures customer loyalty through its “Worn Wear” website, where environmentally-conscious consumers can purchase second-hand clothing at a discount and trade their own used duds for gift certificates.
- Strategically partner with eTailers and other consumer-centric channels: Nike recently agreed to sell products through Amazon for enhanced visibility, accessibility and shipping speed. They also sell products through Instagram in an initiative called the “consumer direct offense,” in efforts to meet consumers where they are and maintain their reputed brand image.
What else should I be considering on DTC?
In addition to understanding best practices and examples where companies are executing on those best practices, we highlight additional considerations that should be into your digital transformation strategy.
Brand control and customer experience
How much control do you want over your brand online? eTailers allow for increased visibility to a larger set of consumers but lack the flexibility to provide a truly personalized tour of your brand and its benefits. For example, Warby Parker’s Prescription Check app takes a mere 20 minutes and only requires your phone and a computer to administer the required eye tests.
Access to unique customer data
Online sales allow a glimpse into your customer’s data including information like gender, demographics, items purchased, and frequency of purchases. This allows you to build direct relationships with customers through data-driven analysis, personalized notifications, emails, and follow-ups pre- and post-purchase. Some companies see online as merely a branding platform to drive consumer loyalty and acquire insightful data.
Can your current systems handle a potential change in tracking inventory, receiving sales, dealing with returns? Some organizations run the risk of losing efficiencies in transitioning from the case and pallet packs to eaches sales units.
Having more visibility is great, but maintaining your product descriptions, updates, pictures, and quantity information across multiple channels requires detailed processes, reliable systems, and a digitally savvy workforce. Ensure also that you are marketing effectively across all platforms with SEO optimized, relevant content.
Fulfillment and supply chain
The Amazon effect has forced companies to meet the very high shipping expectations from consumers: 2-day, same day, hour delivery. Take the time and effort to change traditional, old-school logistics supply chain processes to ensure readiness for the conditionally high consumer expectations.
Companies building e-commerce capabilities will need to assess their cultural digital readiness. Do you have agile methodologies in place to adapt to the fast-paced changes of e-commerce? Are you willing to test and learn quickly with your own platform or an eTailer’s platform? Building a sustainable culture of change is important to digital readiness.
Does my product fit the direct-to-consumer business model?
Technologies like Amazon’s Alexa voice-search assistant and companies like Jet.com’s cost-saving business model are disrupting the consumer goods market from its very foundation. Having built iconic brands and products, how do these companies navigate their potential success in the direct-to-consumer business model?
Clarkston Consulting leverages our direct-to-consumer Brand Compass to help companies determine a brand’s aptitude for success in the DTC space. If you’re interested in learning more about this approach and the supporting research, contact us to set up a conversation.
Co-author and contributions by Christian Olsen.