How DTC Became the Retail Experiment of Quarantine
Part I: Pepsi, Heinz Kraft, and wholesale coffee meets Coronavirus and Black Lives Matter.
When you make a list of all the names, it begins to sound a little crazy: PepsiCo and Frito-Lay. PeaTos. Heinz Kraft. These are just a few of the major and emerging brands to launch DTC sites in the past few weeks and months in response to the coronavirus pandemic, which has stranded shoppers from retailers and consumers from supplies.
The logic of the strategy shift is obvious. “In these uncertain times, as more and more consumers are using eCommerce channels to purchase food and beverage products…[we are offering] shoppers another alternative for easy and fast access to products they love,” Gibu Thomas, PepsiCo’s senior vice president and head of eCommerce, said of the company’s foray into the DTC space. Notably, the CPG giant built and launched two DTC sites in less than 30 days.
But between adopting a new model and marketing it, shifting operations and creating a fulfillment apparatus, and more, the move to DTC can be an involved one, especially for larger conglomerates for whom quick shifting is fraught with complication and peril. Even ahead of the pandemic, however, the benefits were there to see. Indeed, before social distancing entered the popular lexicon Clorox, Ocean Spray, and Ben & Jerry's had gotten into the DTC mix.
Over the next two posts, we’ll break down the many reasons—expected and unexpected alike—why the DTC model has emerged as the retail experiment of this year.
The Big Thing: Relevance
In a moment where traditional B2B partnerships are either gone or severely limited, if a business relies on retailers to put their product in customers’ hands, the DTC model is a lifeline.
Take coffee, for example, which everybody needs to survive while working from their couches in their most comfortable apparel. Roasters that took control of their supply chains and changed course saw immediate gains. “The roaster Blk & Bold experienced a 1,400% surge in sales over the past month as well as increased demand on Amazon.” writes Gabriella Barkho for Modern Retail this month. “Similarly, Trade Coffee, which allows customers to shop from 55 roasters, instantly saw a 10-fold increase in customers back in March.”
Knowing that an admired brand has constructed a creative way around a problem is exactly the ingenuity that builds longtime loyalty.
With eCommerce sales booming like never before, going where the customers are represents more than just a way to stay functional during a shutdown. The shift to eCommerce is also about relevance. Knowing that an admired brand has constructed a creative way around a problem is exactly the ingenuity that builds longtime loyalty. It certainly also helps that the DTC model yields greater transparency, which speaks to another defining challenge of retail in 2020.
The Moral Arc of eCommerce
Sidestepping a global pandemic is difficult, responsibly navigating a business during an outbreak of protest and widespread civil unrest is a whole different imperative. But both challenges have one thing in common: Trust is a central component of the equation.
What retailers large and small have seen in recent years (and certainly in recent days for that matter) is that consumers are increasingly drawn to brands that tell a story that connects to their values. Sustainable, responsible, inclusive, fair-trade, organic, and humanely-sourced are unenforceable buzzwords on the corporate scale. But the shorter the distance between a consumer and a brand, the closer a principle can be actionable.
In the wake of national protests over racial inequality in the United States, companies have been pressed to do unprecedented work. In many cases, that means doing more than simply issuing a statement on social media. In fact, as a Morning Consult poll reveals, doing nothing is the only universal negative.More than half (54%) of consumers believe brands "have an important role to play in social conversations about issues like #metoo and race relations," according to research from Kantar Monitor, with younger consumers particularly committed to seeking out “brave brands.”
This is where having the most direct line to the customer eliminates many of the complications of an extended supply chain and the potential baggage of a middleman that may or may not project or embrace similar values. In an era of deep social and political uncertainty, the more control over one’s images and actions the better.
In our next post, we’ll discuss how the DTC model enables brands to get to know their customers better and what DTC businesses will bring to the post-pandemic world.