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Three ways CPG leaders can drive short and long-term value from direct-to-consumer

Gartner 23 Nov 2021 05:09

Direct to Consumer (D2C) has always been an interesting growth opportunity for CPG brands. Leaders see the upside clear as day in terms of increased revenue, larger margins, owning the consumer engagement. CPGs don’t always realize how tough it is to make D2C a success – it’s incredibly tough!

There has been a fluctuating trend of CPG’s moving in and out of the D2C space over the last 10-15 years. At the start, many large CPGs went full speed ahead with huge investments to build the teams and infrastructure to drive it. This came with a significant investment and expectations – most of which weren’t met.

Fast forward to the present day – D2C adoption in CPG is on the rise because of covid-19. The pandemic severely impacted revenue through 3rd party retail. Most CPGs pivoted into D2C to overcome revenue short falls. Data from Gartner’s 2021 digital commerce survey below illustrates this point.

A stacked bar chart showing the go-to-market approach used by B2B, Hybrid and B2C organizations to expedited a digital commerce presence as a result of covid.

D2C takes time to scale

Scaling D2C takes time, it is a longer-term play to deliver business value across revenue, profitability, and consumer insights – it’s a value add not volume model. It takes a growth mindset, commitment, and patience to incubate and grow – which is a challenge given the current external challenges organizations are facing.

Keep it simple. Focus on the minimal viable product, focus hero product(s) and limited editions product bundles to test consumer demand. This will also allow you to learn what it takes to sell direct, plus investment and risk – it gives you a quick exit plan if things don’t work out. If it does work, you can look to scale up!

3. Define a differentiated long term vision for D2C

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