Consumer products companies must continually adapt to the ever-changing digital environment that is eCommerce. Approximately 79% of Americans now shop online, on the internet, or on 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, one-click shopping, and even voice search assistants. eCommerce enables a new level of consumer personalization 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 just a few of the many direct-to-consumer (DTC) success stories that come to mind.
These companies provide convenience via seamless online experiences, consumer-centric supply chains, packaging designed for eCommerce, 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 effectively 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 execute a combination of both (e.g. P&G’s Tide)?
As many consumer products companies are finding it necessary to quickly transition in their digital transformation strategy, there are some key themes leaders 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 eCommerce to uncover best practices when formulating an eCommerce strategy. The following highlights 6 examples of companies that are winning based on best practices:
- Play on your core strengths: Procter and Gamble created the Tide Wash Club, a direct-to-consumer subscription business for its Tide Pods. P&G played on its solidified brand foothold in all things laundry.
- Gain an advantage with unique consumer data: In 2016, Unilever acquired digitally-native Dollar Shave Club to not only gain a strong entry into the direct-to-consumer shaving market previously 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 L’Oreal: 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: Nestlé has built a large customer base from years of delivering five-gallon jugs.
- 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 items for gift certificates.
- Strategically partner with eTailers and other consumer-centric channels: In 2017, Nike began selling products through Amazon for enhanced visibility, accessibility, and shipping speed. Nike also sells 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 in DTC?
In addition to understanding best practices, there are some important additional considerations that should be folded 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. Proprietary eCommerce solutions allow for vastly more control over brand and customer experience. For example, Warby Parker’s Prescription Check app takes a mere 20 minutes to assess your eyes and only requires your phone and a computer to administer the required eye tests. Although this is a highly involved digital strategy, it enables Warby Parker to give the consumer a finely tuned experience with the brand.
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, and dealing with returns? Considering your current system flexibility is key, as some organizations run the risk of losing efficiencies in transitioning from the case and pallet packs to individual 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 very high shipping expectations from consumers: 2-day, same day, same 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 eCommerce capabilities will need to assess their cultural digital readiness. Do you have agile methodologies in place to adapt to the fast-paced changes of eCommerce? 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 Walmart.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 today to set up a conversation.
Co-author and contributions by Christian Olsen.