The direct to consumer (DTC) market is booming and clearly here to stay.
While the global pandemic has caused intense pressure for FMCG brands, it has also created the perfect storm for building direct customer relationships.
With non-essential retail stores closed in many countries for large periods of time, global ecommerce sales rose by 19% during 2020. Bored consumers surfed the web for inspiration, spending their disposable income on exploratory purchases while restaurants, bars and beauty salons were closed.
But aligning market forces aren’t enough to guarantee success. The FMCG space is extremely competitive, and DTC brands need to stand out in order to capture consumer spend.
A strong product proposition is key. However, intelligently designed packaging can also prove highly influential. And unlike retail distribution, the aim of the game isn’t always to compel people to buy as quickly as possible…
What are the brand benefits of selling direct to consumer?
Before we jump into packaging, it’s worth looking at why FMCG brands go direct to consumer in the first place.
While the benefits of a retail distribution model are widely recognised – established footprint, ready-made customer base, wealth of marketing resources – this model involves compromise. Ultimately, it’s the retailer who owns the customer relationships, putting FMCG brands in a weak position.
Launching a DTC channel enables these brands to completely own the consumer experience, and all the data that goes with it. You quickly get to know exactly who your audience is and how they’re buying, helping you to refine marketing campaigns and increase sales.
Data ownership is also a powerful R&D tool. If you can interact directly with consumers then you can gather their feedback and develop your product offering to meet their needs. And with no vendors to negotiate with, the innovation process can be much quicker. For example, bodycare brand Curie used a DTC approach to launch a hydrating hand sanitiser during the pandemic, increasing quarterly revenue by 490%.
Going DTC also makes financial sense. Brands increase profit margins by not having to enter contractual vendor agreements, and capital expenditure is lower if you choose to focus online. Plus, with a digitally focussed strategy, your brand isn’t limited to however many products can be stocked on a crowded shelf.
DTC: established brands vs emerging upstarts
What’s interesting about the DTC model is that it’s appropriate for both established FMCG brands and those who are new to the market.
For brands with a strong consumer following, retail versus direct to consumer doesn’t have to be an either/or choice. By managing relationships respectfully, you can have the best of both worlds; mass exposure on the beauty counter or grocery store shelves, but greater control and creativity in your own ecommerce offering, to nurture customer relationships and widen product assortment.
Store closures and supply issues during the pandemic motivated several internationally renowned FMCG companies to launch or expand their own DTC channel. Two of the best examples of this are the Heinz to Home food packages, and PepsiCo’s Pantry Shop, where consumers can buy food bundles from a combination of their favourite PepsiCo brands.
At the same time, DTC is also a really effective channel for FMCG start-ups. During the pandemic, digitally native brands increased ecommerce sales by 40%, as they were able to focus on product development, brand proposition and consumer marketing, rather than negotiating with retailers.
Ecommerce also gives new brands access to relatively cheap tools through which to grow your audience. Social media is a highly cost-effective marketing platform, with the option to recruit influencers or consumer brand ambassadors in order to increase reach. And the powerful analytics stack behind most social media platforms delivers a lot of data on who your target audience is and how they behave online.
How do you build a strong DTC brand?
While the advantages of DTC are clear for both emerging and existing FMCG brands, it’s not a guaranteed shortcut to success. To compete against (or work alongside) the traditional retail sales model, you need to create a really strong brand DNA and well-crafted product proposition, combined with compelling visual identity.
One of the biggest differences between retail distribution and direct to consumer is the job that your packaging needs to do.
Traditionally, product packaging has one key aim: to grab someone’s attention as they walk past the shelf or scroll down the page.
With a DTC model, however, the way your product looks is more than just an eye catcher; it’s an integral part of your overall brand identity. Packaging provides a pivotal space to outline and embody who you are and what you stand for, in order to develop stronger, longer lasting customer relationships.
The smarter you are in the way you use your physical assets to inform, excite and engage people, the greater chance you have of both securing their loyalty and generating word of mouth marketing. And this identity needs to flow seamlessly from your website to your on-pack visuals as part of a seamless, continuous customer experience.
Of course, getting the ‘right’ packing design and content depends on what your brand is selling, who your target consumers are, and what matters to or resonates with those buyers. But rather than trying to offer you generic advice, it’s more effective if we look at which FMCG brands have made well-crafted packaging central to their DTC success.
Read our blog post: 6 FMCG brands that have nailed their DTC product packaging to see who has their visual identity on point.
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