In the third instalment of our ‘D2C Fundamentals’ series, we’re taking our first dive into how D2C looks in specific retail categories. And we’re going to start with the category where brands arguably have the toughest time striking the right balance with D2C offers – FMCG.
For FMCG brands - like all others - combining D2C with other retail channels gives customers the flexibility to select their preferred way of shopping within a seamless omnichannel experience.
However, arguably more than in any other category, FMCG brands have to tread a fine line between introducing their own channels and maintaining a harmonious relationship with traditional retailers.
And that’s because retailers – and physical retailers like the big supermarket chains in particular – continue to dominate the FMCG market.
In our latest Future Shopper report, when we asked consumers where they are most likely to make grocery purchases, 31% said in person at supermarkets, which was, by some distance, the most popular answer. By contrast, just 3% said from brands’ own websites.
On that basis, is there even a business case for D2C in FMCG? Very much so, we believe. First of all, 3% of an enormous market is still a very large market opportunity. 3% of the FMCG market in the UK amounted to £6.36bn in 2021. Second, D2C is growing across the board. The number of consumers who said they made purchases from D2C channels in our latest Future Shopper survey doubled from 7% the previous year to 14%. Once one mode of shopping becomes a habit, it filters through across all categories.
We also found evidence of the important role D2C sites play in the wider customer journey. One in 10 consumers worldwide now say that they look for inspiration for grocery purchases on brand sites, and 11% say they use D2C options to search for items.
In some parts of the world, the figures are higher. 18% of shoppers in the UK use brand sites for inspiration when grocery shopping, and 17% in India use them to search for products. In Colombia, a remarkable 35% of consumers look for grocery shopping inspiration on brand sites, and 34% use them for search.
There’s evidence then of FMCG brands making significant inroads into retail markets with their own D2C offers, particularly around offering choice and flexibility to customers. To do this successfully, some key factors need to be considered:
- Adopting a consumer-centric approach: FMCG brands must comprehend individual customer needs and adapt their D2C offering accordingly. Developing a strong consumer value proposition is essential.
- Product & Pricing: Careful consideration is required for what products and pricing should be offered through D2C without undermining retailers. This could involve product differentiation, varying pack sizes, exclusive products and even trialling new products into the D2C channel before broader distribution.
- Supply Chain & Logistics: This is a key area where brands have an opportunity to deliver against consumer expectations if they are not being met through other channels. Our data confirms that 40% of consumers now expect grocery orders to be delivered in under two hours. Brands need to assess whether these functions can be handled in-house or if outsourcing is a more viable option.
- Data Utilisation: D2C provides brands with the opportunity to gather valuable first party data that can offer insights into consumer behaviour and preferences. This data can be instrumental in guiding product development and shaping effective marketing strategies.
Above all, it’s important for FMCG brands to ensure they strike a balance between D2C and existing retail strategies, so that each channel complements each other. This synergy will allow brands to maximise market reach, enhance customer experience and remain competitive in a dynamic industry.
For a deeper perspective that draws on the insights of leading eCommerce website builder Shopify as well as our own, download the report “What CPG brands need to know about going beyond D2C”.
