Logo Logo
  • Platform
    • Product
      • Why Core dna
        See how Core dna transforms your digital business.
      • eCommerce
        Grow, manage, B2B & B2C commerce in one platform.
      • CMS
        Control your digital properties from the same dashboard.
      • DXP
        Build, manage, and scale your digital properties in one place.
      By Role
      • Partners
        Learn about our partner program and how you can join.
      • Developers
        Modernize your web presence without ripping or replacing anything.
      • Executives
        Empower marketers, free up IT team and slash costs at the same time.
      • Marketers
        Total control, without the development team.
      Company
      • Customers
        Helping power the digital presence of hundreds of customers
      • Features
        Content and commerce features.
      • Services
        From digital transformation strategy to scaling your digital business.
      • Admin login
        Access to Core dna DXP 1 admin
  • Solutions
    • Use Cases
      • B2B
        Go directly to customers with an all-in-one B2B platform.
      • B2C
        Connect to shoppers anytime, anywhere with our B2C eCommerce solution
      • Marketplace
        Multi-vendor eCommerce marketplace platform.
      • Content
        Craft content with ease, then deliver it anywhere.
      • Headless
        A hybrid headless platform loved by marketers and developers.
      • Infrastructure
        Advanced cloud infrastructure built for scale and security.
      By Industry
      • Direct to Consumers / Manufacturing
        Get the tools and experience to thrive in the new direct-to-consumer world.
      • Education
        Create a powerful online presence with your school website.
      • Franchises
        Seamlessly push brand-approved marketing to all locations or specific locations - easily.
      • Retail
        Sell with excellence in-store and online.
      • Media
        Don’t just break news, break news everywhere.
      • Travel & Tourism
        Give travellers the speed and reliability they demand.
  • Resources
    • Partners
      • Partners Overview
      • Become a partner
      Insights
      • Blog
      • Guides
      • FAQ
      Developers
      • Getting started
      • Documentation
      • API
  • Pricing
  • Get started
Request demo
 
  1. Home
  2. Core dna insights

D2C Benefits: Here's Why Manufacturers Are Going D2C

D2C Benefits: Here's Why Manufacturers Are Going D2C
Sam Saltis 6 min read
D2C eCommerce | Agency Growth | Manufacturing

Obviously cutting the middleman out of the equation provides the potential for CPG brands to earn a higher margin and have direct access to their consumers and their data. 

“The internet has practically eradicated the need for middlemen in today's economy, so it's time for eCommerce companies to adapt. D2C [allows manufacturers] to make the same profit at a lower price [for] the customer - it's a total win-win. If the customer is willing to buy direct, they can do so without much effort,” said Nate Masterson, CEO of Maple Holistics.

In coinciding with the rise of D2C eCommerce, Amazon have also been encouraging manufacturers to follow suit. In May 2017, they invited manufacturing companies to a three-day event in Seattle to persuade them to go D2C and make use of Amazon’s fulfillment center. 

“One of the main driving factors we have witnessed with our manufacturing clients is the influence of social media marketing. This new way of distribution allows manufacturers to communicate and build relationships [directly] with consumers,’ said Curt Doherty, CEO, CNC Machines Network.

In a hurry? Here’s what you’ll find in this article:

  • What D2C Trends Have We Seen?
  • Startup vs. Legacy, Who Has The Upper Hand?
  • The Benefits of Selling D2C
  • To gain a better understanding of the customer
  • Faster to market
  • Increased control over brand, product, and reputation
  • Omnichannel commerce
  • Won’t Going D2C Damage Our Retailer Relationships?
Ecommerce business guide

How to take your business direct to consumer in 2021: The ultimate guide

Strategies, insights, and tips on how to start and scale a direct-to-consumer business.

 

What D2C trends have we seen?

According to a recent report by IRI, online sales will account for 10% of all CPG sales by 2022, which will be up by approximately 1.4% from 2015. The same study also predicts that 18% of non-food CPG products are going to be purchased online by 2020.

Whatsmore, further research conducted by 1010Data highlighted that in the US, health supplements, pet care, laundry, dish, and cleansers have been the fastest growing CPG categories:

  • Health supplements represent the biggest online category. Out of $2.6 billion in sales, 25% were online CPG sales.
  • Pet care has seen year-on-year growth of 67%. The pet care sector is the fastest-growing category out of the three. Notably, this growth has been driven by pet care brands that focus on natural products which include the likes of Chewy and Foster & Smith.
  • Laundry, dish, and cleansers are one of the smaller categories that have been growing significantly due to pantry box and subscription models.

 

Startup vs. legacy: Who has the upper hand?

Most of these D2C success stories that we have observed have come from CPG startups. Startups are able to embrace an entrepreneurial culture and are more agile than larger, legacy CPG brands since they can move from ideation, design, implementation to product launch much faster.

Legacy CPG brands, who usually hold a monopoly in a particular sector and have established connections with retailers, are not pressurized to innovate since they are literally sitting on a large profit pool. And since they’ve become set in their ways of doing business, it is nearly impossible for them to think outside-of-the-box or pivot towards a new direction. This is why startups have the upper hand.

A notable example is the men’s razor market. Proctor and Gamble's Gillette has been a mainstay in this sector for such a long time. But when startup CPG brands like the Dollar Shave Club, founded in 2011, and Harry’s Shaving, founded in 2013, began selling their razors via monthly subscriptions at a fraction of the price, that market became disrupted.

While Harry’s Shaving continues to sell their razors direct to the consumer with the slogan “Great shave, no middleman”, Dollar Shave Club, on the other hand, went on to be acquired by Unilever for $1 billion in 2016.

When these two startups disrupted the market, it prompted Gillette to launch Gillette Shave Club, which follows a similar business model.

Read this next: How Away Built a D2C Retail Business Empire Based Around...Luggage?

 

The benefits of selling D2C

Besides the obvious benefit of earning higher margins, there are other notable benefits of selling D2C, to which we explain below.

 

[D2C benefit #1] To gain a better understanding of the customer

Before the intervention of D2C, manufacturers rarely interacted with the people who purchased their product. Sure, CPG brands may try to get a good understanding of their target market by doing market research and conducting focus groups. But trying to understand your customers through these methods isn’t necessarily the best way to get to know them.

Ideally, you need to have direct contact with your customer through every stage of the sale process, this also includes the communication that you have with the customer after you sold the product. These types of interactions are very hard to replicate in a focus group.

To give you an example, it is widely known that consumers in the US want to eat healthily. GlobalData reports that 87% of consumers in the US check the ingredients before they purchase a food product, and 75 percent are concerned about consuming too much processed and unhealthy foods. But on the contrary, those same customers, who have said they want to eat healthily, also want to indulge in a gourmet burger served with fries% D2C enables CPG brands to gain direct insights to their consumers and gather data which accurately reflects their behavior.

Read this next: Direct-To-Consumer Brands: 6 D2C Companies That Are Killing It (And What You Can Learn From Them)

 

[D2C benefit #2] Faster to market

Besides being stuck in their ways, another reason why most legacy CPG brands tend to shy away from innovation is that of the extreme risks involved. On average, a new product launch takes between 18 to 36 months - that’s from the point of inception to the point when the product reaches the shop floor. For legacy CPG brands, that is a lot of time and effort.

Plus, most of these legacy CPG firms are publicly traded companies. That means they have to put the needs of their shareholders first and it will be difficult for them to try to convince their shareholders to take a chance on a possible groundbreaking product that may not pay off in 3 years.

Also, most retailers are too risk-averse. The decision to stock a new innovative product without a sales history is most likely to be deemed risky.

With D2C, manufacturers can mitigate these risks by allowing them to launch a new innovative product on a smaller scale. Manufacturers can develop a specific product, test it within a very tight demographic, and then get their feedback. This enables large manufacturing firms to understand what their customers love and hate about the product so they can make the required adjustments where appropriate.

 

Ecommerce business guide

How to take your business direct to consumer in 2021: The ultimate guide

Strategies, insights, and tips on how to start and scale a direct-to-consumer business.

 

[D2C benefit #3] Increased control over brand, product, and reputation

In a traditional manufacturing-retailer relationship, manufacturers could only have full control over their packaging and their outbound marketing activities like TV commercials and billboards. Once the product hits the shelves, CPG brands no longer have control in trying to influence the sale.

Larger manufacturing firms tend to spend big on commercial advertisements. In 2016, Procter & Gamble spent approximately $10.5 billion on advertising alone. And that’s just to tell their consumers who they are and what they sell.

Even though these large CPG brands try to influence as much as they can through commercial advertisements, if retailers struggle to sell their product, then they’re at risk of incurring a loss.

“There's one word that says everything about why retail brands and manufacturers are going D2C: control. In today's hyper-competitive eCommerce world, customers are demanding an all-round high-quality experience. And so having complete control of this from start to finish is much more appealing to many manufacturers than trusting a number of distributors and retail partners to do it for them,” said Matt Warren, Founder & CEO of Veeqo.

 

“..having complete control of [the experience] from start to finish is much more appealing to many manufacturers than trusting a number of distributors and retail partners to do it for them”

 

With D2C, CPG firms maintain complete control over their brand from the moment a customer makes their initial engagement right up until the product has been purchased.

 

[D2C benefit #4] Omnichannel commerce

Another advantage of selling D2C is the potential of selling through omnichannel delivery. CPG brands can set up their online store on a headless commerce platform.

“Omnichannel retailing is becoming a huge player in commerce. This gives customers an integrated buying experience where they can browse and purchase across multiple channels, choose from a range of delivery options and, if necessary, return [it] in a number of ways regardless of which channel [they] originally bought [the product] on,” said Warren.

We’re seeing more people buying through different channels. In a report by MoffettNathanson, 5% of consumers make purchases via a voice assistant device, this is expected to grow to 50% in 2022.

 

“But, won’t going D2C damage our retailer relationships?”

Perhaps one factor that is deterring legacy CPG brands from going down the D2C route is the impact it would have on their current retail relations. Once a CPG company has gained a foothold with a retailer and secured a shelf-space which guarantees domination, it is often assumed that it will be difficult for them to explore the D2C route without risking their market position or alienating their retail partner.

But this isn’t necessarily the case. In a study conducted by Forrester Research, 54% of manufacturers who sell directly to the consumers have seen growth in sales via their channel partners. This is mainly because CPG brands have been re-directing their D2C customers to their retail partners for order fulfillment. Other findings in the Forrester Research include:

  • Over 50% of manufacturers have said that D2C sales helped to improve brand awareness and boosted leads and sales for their channel partners.

  • 14% of manufacturers have reported that their D2C strategy enabled them to test the success of newer and innovative products before pitching them to retailers.

Judging by these findings, the D2C channel is a win-win for both manufacturers and their retail partners.

Read this next: B2B eCommerce: Best Practices, Marketing Strategy & Myths

 

Watch video demo

 

Direct-to-customer: More innovation, higher margins, and greater control

The manufacturing landscape is changing. As more CPG brands opt to sell via D2C, they gain a better understanding of their customer, more control over their brand, and attain more freedom to innovate. Plus, D2C can benefit both retailers and manufacturers, as D2C can help to improve brand awareness and boost leads and sales for retailers.

Want to see how high-growth Direct-to-Consumer companies use Core dna’s commerce platform? Let’s chat.

Sam Saltis
Sam Saltis

An entrepreneur at heart with over 20+ years of experience in building internet software, growing online companies and managing product development.

Loves all things SaaS, technology, and startups.

You can find him feeding his beloved fish when he's back in Australia.

Previous PostGDPR Explained In 5 Minutes: Everything You Need to Know
Back
Next PostWhat Your Business Can Learn From Airbnb Culture

Related guides

Hidden Cost Checklist: Questions To Ask Your Agency
Open-Ended Sales Questions
Going Direct-to-Consumer: The Definitive Guide
See all guides

Related posts

Why are Businesses Going Direct-to-Consumer?

eCommerce Business

Why are Businesses Going Direct-to-Consumer?
9 min read
6 Ways to Increase Audience Engagement on Your Website

Content Marketing

6 Ways to Increase Audience Engagement on Your Website
9 min read
Guide to B2B eCommerce for Manufacturing

eCommerce Business

Guide to B2B eCommerce for Manufacturing
13 min read
5 Direct to Consumer (D2C) Trends for 2022

Content Marketing

5 Direct to Consumer (D2C) Trends for 2022
6 min read
Multi-Vendor eCommerce Marketplace: The Definitive Guide [2022 Edition]

eCommerce Business

Multi-Vendor eCommerce Marketplace: The Definitive Guide [2022 Edition]
9 min read
16 Digital Agency Trends for 2022

Website performance

16 Digital Agency Trends for 2022
10 min read
D2C Marketing: Lessons From Quill's $1 Billion DTC Strategy

Content Marketing

D2C Marketing: Lessons From Quill's $1 Billion DTC Strategy
22 min read
Core dna’s Partner Philosophy: Built to Support Agency Growth

Website performance

Core dna’s Partner Philosophy: Built to Support Agency Growth
4 min read
#AgencyGrowth: How Pearl Lemon Reaches Millions Through Social Media

Digital Marketing

#AgencyGrowth: How Pearl Lemon Reaches Millions Through Social Media
5 min read
7 Idiot-Proof Ways To Position Your Agency For Ultimate Growth

Website performance

7 Idiot-Proof Ways To Position Your Agency For Ultimate Growth
10 min read
Direct-to-Consumer Retail Strategy: How a Luggage Retailer Won Big By Going D2C

eCommerce Business

Direct-to-Consumer Retail Strategy: How a Luggage Retailer Won Big By Going D2C
10 min read
8 Types of Customer Pain Points in eCommerce (And How to Relieve Them)

Content Management

8 Types of Customer Pain Points in eCommerce (And How to Relieve Them)
8 min read
Solutions by Role
  • Partners
  • Developers
  • Executives
  • Marketers
Solutions by Need
  • Intranet
  • Event Management
  • Content Management
  • B2b eCommerce
  • B2c eCommerce
  • Headless
  • Marketing
Solutions by Industry
  • Community
  • Healthcare
  • Finance
  • Technology
  • Hospitality
  • Franchise
  • Education
  • Travel & Tourism
Company
  • About Us
  • Why Core dna
  • Partner Ecosystem
  • Customers
  • Careers
  • Contact Us
  • G2Crowd Reviews
Resources
  • Blog
  • Guides
  • Admin login
Support
  • Help
  • Videos
  • Network Status
  • GDPR
  • Privacy Policy
  • Terms & Conditions
  • Fair Use Policy
Get our latest articles
Success! You've been added to our email list.
Melbourne

348 High Street

Prahran, VIC 3181

Australia

+61 3 85639100

Boston

55 Court St, Level 2

Boston, MA 02108

USA

+1 617 274 6660

Berlin

Belziger Str. 71

Berlin 10823

Germany

+1 617 274 6660

Go wow them! ™ | Core dna copyright ©  2023.