- Nescafé’s Millennial campaign gave away 18,900 samples within hours of launching at an unheard of 70% conversion rate
- This year, K-Swiss and its sister brands migrated to Shopify Plus; replatforming three sites, with multiple languages and currencies, in just five weeks
- PepsiCo Frito-Lay debuted a charitable D2C campaign combining influencer marketing with ecommerce and raised $1M
- Even brands as historic as Unilever’s Maille (est. in 1747) and Pernod Ricard’s Absolut Vodka (est. in 1879) are evolving with D2C to offer customers premium products and extend their product lines
For legacy manufacturers, the deck is stacked …
- Slowing growth across in-store retail
- Declining brand and product loyalty
- Rising competition from startups
- Cannibalizing marketplaces
Brand managers — tasked simultaneously with growing profits as well as navigating retailer relationships — are feeling the pressure.
It’s no secret that ecommerce has and will continue to reshape commerce. While online sales only represent 13% of total retail in the US, its year-over-year growth rate far outpaces the overall market and accounts for roughly half of all retail growth:
If direct-to-consumer is ignored or mishandled, CPG organizations will miss out on the fastest-growing sales channel.
This report examines D2C ecommerce in three parts …
By 2022, BI Intelligence projects worldwide ecommerce will make up 17% of total retail. And data from eMarketer puts that percent slightly higher at 17.5%:
To be sure, brick-and-mortar retail is far from dead … but it is evolving.
How does this affect legacy brands and manufacturers?
According to the Interactive Advertising Bureau (IAB), US CPG in-store retail sales are essentially flat across all industries with a mere 0.5% YoY growth.
Worse, last year the world’s top seven fast-moving consumer goods (FMCG) brands saw a mere 1% YoY cumulative growth.
An estimated 81% of shoppers conduct online research before making big purchases. The present and coming reality of how people shop has thrust D2C to the forefront …
Benefits of D2C Ecommerce
Before the benefits of D2C, brands must remember to mitigate the risks of alienating loyal distributors. This means brand managers need to be cognizant of the potential to cannibalize.
Undercutting prices with sales, for instance, hurts bottom lines and potentially damages relationships.
How can you grow revenue while maintaining strong relationships with partners?
The answer is to do something different or complementary to the core competencies that unite manufacturers with traditional retailers; namely …
- Premium-price-point products retailers aren’t interested in stocking
- New products that require detailed educational content to sell
- Co-promotional coupons redeemable through retailers
- Limited-run or online-exclusive products for fans
With that caveat in mind …
The first benefit of D2C is the opportunity to collect customer data. Email addresses, social profiles, psychographics and demographics, geography, etc. allows brands unfiltered access to their ideal customers and purchasing behaviors to help grow or create new lines.
Second is strengthening brand loyalty. The “D” in D2C gives you unfettered connections to customers for better service and support, stronger personal relationships, and even more targeted marketing for retention.
Third, personalized products. Going above and beyond or offering something uniquely customized via D2C — especially for super fans — gives you a competitive edge in an otherwise same-old, same-old CPG landscape.
Fourth, D2C enables you to introduce new product lines or more expensive, premium products. This is especially helpful for rapid testing, iterating, and educating consumers.
Lastly, selling through a distributor means lower profit margins and less control. Offering products directly to consumers allows manufacturers to, at least in part, retain some of the control over the customer’s journey and their own profits.
Research conducted by Bringg reports that 87% of manufacturers rate D2C channels as highly relevant to both products and consumers. Almost half of manufacturers (48%) are turning to D2C channels to help increase revenue share:
Nike’s “Consumer Direct Offense” is projected to represent 80% of the company’s growth through 2020. “The future of sport will be decided by the company that obsesses the needs of the evolving consumer,” said Nike’s CEO, Mark Parker.
On the consumer side, Forbes reported more than a third of online shoppers have bought directly from a manufacturer’s website, and D2C is expected to grow 71%.
As a final note, Deloitte’s whitepaper, “Going digital, going direct,” outlines no less than ten opportunities in which D2C outperforms traditional commerce models:
But what does D2C look like in action?
12 D2C Enterprise Examples
- Maille (Unilever)
- Lay’s Potato Chips
- Seventh Generation (Unilever)
- Oreo (Mondelez International)
- General Electric
- Swash (Whirlpool Labs)
Introduced in 1966, the K-Swiss Classic was the first all-leather tennis shoe. It quickly gained worldwide acclaim and became a style statement both on and off the court.
More than 50 years later, K-Swiss’ modern brand mission is to outfit and inspire the next generation of entrepreneurs. These young leaders are at the forefront of today’s culture, influencing and inspiring young people around the world.
To enable fast-paced growth, K-Swiss and its two sister brands, Supra and Palladium, replatformed to Shopify Plus earlier this year.
With an aggressive timeline, the company leaned on Shopify Plus Agency Partner Guidance for frontend development and customizations as well as backend integrations like …
- SAP’s ERP
- Orliwed for inventory
- Langify for translations, and
- Bronto as their email service provider
In the end, all three websites — in multiple languages and currencies — were launched in just five weeks.
Nestlé, the parent company of many popular CPG brands, wanted to stand out from the myriad of home-brewed coffee choices. So they chose Shopify Plus to power their Nescafé online store – selling coffee and merchandise direct-to-consumer with a custom platform designed for them.
By speaking Millennials’ language, investing heavily in social media, and offering free samples, the site over-delivered by a long shot
The initial goal was to unleash 21,000 free samples over the course of one year. Within a few hours of launching, it was at 90% of that goal and the team had to reevaluate. They tracked a 70% conversion rate, and — thanks to the powers of ecommerce — many samplers became Nescafé customers.
With ABSOLUT ELYX, Pernod Ricard’s Absolut Vodka was able to extend their product line without hurting distributor relationships.
Thanks to its overwhelming popularity, Absolut converted what was originally a holiday campaign into a regular business channel. ABSOLUT ELYX also received a lot of incredible press coverage – from Elle Decoration, Forbes, Marie-Claire, Cool Hunting, and more – which contributed to this shift in marketing.
Since 1747, Maille Mustard has been selling through distributors to their loyal customers. Today, Unilever uses Shopify Plus to power a D2C store that is paving the way for how the brand interacts with their customers in the future.
The success of the Maille D2C site allowed them to grow by offering unconventional items at premium price points that might not fit retail channels, as well as form other partnerships, with Le Creuset, that typically don’t happen via retailers.
For Budweiser’s first foray into consumers goods, Shopify Plus was the ideal platform to sell their new experiential Red Light, as well as other sports-related items.
As the unofficial beer of sports, Budweiser always has fun and engaging ways of offering surprise-and-delight moments for customers. Although their ecommerce store doesn’t sell many items, it’s a great way for Bud to interact with their die-hard fans.
This allows customers to get their Bud gadgets direct from the source with a truly on-brand experience.
Beauty and cosmetics brand CoverGirl has historically only been sold at big box distributors and online marketplaces. By leveraging existing celebrity endorsements, CoverGirl was able to begin experimenting with D2C quickly and, with the help of One Rockwell, launched Shop CoverGirl in just four weeks.
PepsiCo’s Frito-Lay division went D2C as part of its limited-time “Smile with Lay’s” campaign. For each purchase of one of the specially designed bags — which are printed with the smiles of real consumers — the brand made a donation to Operation Smile, an international charity that helps young people who need surgery to correct cleft conditions.
Smile with Lays not only raised $1 million for the charity … they also hosted pop-up shops with mainstream celebrities and generated major media buzz.
Cheetos, the brightly-colored, light-as-air, cheese snack, is a fan favorite. To join the D2C movement, Frito Lay paired an innovative, engaging marketing campaign with the agility and flexibility of Shopify Plus to bring a personalized Cheetos brand experience to life ... a contest platform where customers can submit the most unique Cheetos Crunchy shapes they find for a chance to win $25,000.
Seventh Generation is a feminine hygiene line of products from Unilever. What makes this a stand-out is the customization of their monthly (or bi-monthly) box subscription. By taking the quiz, they will pre-determine the items your V needs to be happy and free every month during the unhappiest times …
While a happy V is a free V, what makes this D2C venture special is the education component they offer to help school women with what they dub “ingredient education.”
To mark their centenary, the Oreo brand wanted to give their customers a reason to celebrate. For the first time ever, parent-brand Mondelez sold Oreo cookies directly to consumers by offering a unique customized packaging as well as in-real-life (IRL) booths at festivals and events across the country.
They choose Shopify Plus to enable the “Oreo Colorfilled” holiday campaign — and launched in a matter of weeks.
With consumers growing more and more eco-conscious, GE teamed up with Shopify Plus to launch their smart lighting and lamp products in a beautifully built online store.
C by GE are Bluetooth-enabled light bulbs that integrate with Amazon Alexa to help integrate a more seamless smart home experience.
Eco-friendly products have a higher price-point which can lead to friction in the buying process — particularly, in store.
By creating C by GE, they’re educating customers on why and how these smarter and eco products are able to help the environment and the consumer save in the long-term. On the back-end it also allows brands by GE to grow a database of forward-thinking customers who are savvy to the benefits of these products for future launches.
Whirlpool Labs Innovation launched Swash in 2017 as a place their customers could buy cleaning accessories directly from Whirlpool. Swash allows for a quick 10-minute cleaning and de-wrinkling of your clothes for those last-minute needs. And it saves from sending clothes to the dry cleaners.
On the heels of its success, Whirlpool has since added two more D2C stores for brands Zera and Vessi.
The lessons from Swash are important: (1) as a new line in the laundry segment, it’s important to educate customers on how this product is to be used and its benefits (no more dry cleaning?), and (2) selling a new-to-market item at a premium price with a subscription model so they never run out of Swash pods.
Profits without Pain with D2C Ecommerce
With the growing trends of D2C, brands need to embrace this new way of business in order to appeal to their customers, while using this channel symbiotically with retailers and other partnerships.
Your customers want to interact directly with you, so give them the opportunity.
If you have questions about D2C ecommerce please get in touch with Vanessa , our resident DTC Brand Expert.