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- Can Traditional Brands Be Disruptors In The Direct-To-Consumer Channel?
Can Traditional Brands Be Disruptors In The Direct-To-Consumer Channel?
Product Portfolio Management
Product Lifecycle Management
Food & Beverage
Posted By: Sunil Thomas
This post first appeared on www.forbes.com
Much has been made about the direct-to-consumer (DTC) disruption in, well, every industry. From groceries to beauty to pet supplies, new boutique DTC brands are cropping up every day, including as new verticals within legacy brands.
Kraft-Heinz is now selling its bundles directly to consumers through its Heinz at Home e-commerce initiative. Cracker Barrel has created an online shop that sells its premade mixes and syrups without requiring customers to visit a restaurant location.
For traditional brands, expanding into DTC channels for their product families is necessary for survival. According to a survey from Nielsen and The Food Industry Association, 49% of American consumers shop for packaged goods online. By 2025, internet sales could account for up to 20% of all food sales.
Furthermore, the effects of Covid-19 have only highlighted the difference between the retail model and DTC e-commerce. PepsiCo quickly launched two online stores for its pantry and snack items. Other brands have created hybrid models that integrate personalized e-commerce on their sites with retail locations to offer curbside pickup.
What's the internal secret to this quick pivot and lasting success?
Investing in DTC requires more than building an e-commerce site. An agile digital strategy requires a realignment in how product and consumer data is gathered, used and disseminated across an entire organization. Creating a strong product data architecture is the first step, and we'll explore a few ways brands can start this transformation.
Benefits Of DTC Channels For Retail Manufacturers
Consider the typical supply chain: A new product is manufactured in one location, sold to a broker in another city, stored in a warehouse in different locations and shipped to retail locations across the country or globe. By bringing all of these processes in-house with DTC, brands can avoid these extra steps, negotiations and supply chain costs.
This brings significant advantages:
• Faster product trials and launches: By controlling marketing, sales, order and fulfillment, legacy brands can use all these factors in lockstep to get new products to customers faster. A fully functional e-commerce site creates a much faster path to purchase for consumers.
• Better access to first-party consumer data: Reaching consumers through multiple channels (social, email, apps, digital advertising, website traffic) is the golden ticket to executing strong product and marketing personalization. Manufacturers don't need to rely on supplier and retail partners to piecemeal together demographic and buyer data to drive new product ideation and ingredient, recipe and packaging improvements.
• Rapid innovation in multiple markets: Having in-house customer data analysis also allows brands to expand product offerings in multiple spaces. For example, Ocean Spray was able to launch a vegan brand offshoot and begin selling its wellness tonics online while maintaining its core retail business.
If other traditional brands can capture a fraction of these benefits, they can open the flood gates to new product innovation and better weather turbulent global conditions.
The Challenge: Going Beyond Volume And Packaging
Truly disrupting the DTC space requires manufacturers to take on a new way of thinking about the consumer experience. From product formulation to the front-end website, product data and packaging need to be accurate, dynamic and accessible in real time to consumers and internal R&D and marketing teams.
For traditional brands, I'd argue that the biggest challenge isn't necessarily in the build-out of an e-commerce platform. Instead, manufacturers should first look into how integrated their internal product data is in the pre-purchase processes — R&D, formulation, packaging and more — long before products hit digital shelves. In-house digital marketing and sales can only run smoothly if they're backed by equally modern internal product data systems.
Let's consider the bare minimum type of product information that manufacturers would need to display to consumers: product descriptions, nutritional characteristics, product claims, ingredients, packaging and nutritional info.
Traditionally, manufacturers could simply print this information on labels in mass quantities and ship them to retailers in a one-and-done approach. Now, product packaging isn't just physical packaging. It's everything a consumer interacts with online, from product descriptions on e-commerce listings to mobile advertising assets. Any changes in product characteristics, ingredients and formulations must be continually updated on websites, online product descriptions and digital platforms. That requires manufacturers to seamlessly flow data from R&D formulations to PLM systems to CPG marketing catalogs.
Creating A Dynamic Data System Of Record For Success
The good news is that manufacturers who want to overhaul their data architecture are primed to do so. Brands are already compiling the right types of product and consumer data to successfully build DTC offerings; this data just lives across too many Excel sheets and emails to be leveraged properly.
The solution? Creating one complete system of record for all product information that digital marketing and sales can access and use when creating consumer-facing assets. Internally, that means building out digital workflows that capture product data from supplier management throughout product launch.
Here's what this can look like in practice:
• Integrate R&D with the product launch process. Open up the R&D formulation books to other areas of the business to seamlessly flow data out of a PLM system into CRM, marketing and fulfillment systems.
• Link product characteristics like claims, label and packaging information and nutritional data from an internal recipe. Instead of maintaining testing, formulation and packaging in separate systems, manufacturers can use recipe development as a catch-all system for complete product documentation.
• Add automatic publishing product characteristics to digital channels. Again, successful DTC brands go beyond package printing in volume and integrate internal suppliers, CRM, PLM and SKU systems to create one system of record for promotional use.
The speed of advertising and purchasing on e-commerce platforms today is simply too rapid for manufacturers to continue working with data that require manual oversight. To compete, traditional brands can first look at the untapped data across their internal systems and leverage product data architecture to create one system of record for all product information.