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Major Brands Are Testing Out DTC & Subscription Models. Should You?
In the uncertain and quickly changing retail environment we are living through, traditional retail companies are seeking new ways to become, or remain, nimble. And while global pandemics don’t necessarily seem like opportune times to launch new business ventures, for retailers introducing direct-to-consumer (DTC) business models, there has arguably never been a better time.
DTC Sales Rise Prior To & Throughout Pandemic
For shoppers, the coronavirus further highlighted the convenience and simplicity that comes with a DTC model. The ease of visiting a website, choosing favorite products and having them delivered days later is appealing in the eyes of most modern consumers. The popularity of DTC brands has steadily increased over the years. Just last year, DTC online sales reached an impressive $14.28 billion, with that figure expected to grow more than 24% in 2020.
According to Neil Saunders, Managing Director of Global Data, DTC will continue to “be more enticing for CPG companies because it will give them a way to boost their product penetration while having greater control over the supply chain.”
Major Retail Brands Test Out The DTC Business Model
Even prior to the pandemic, DTC sales stood as one of the top-rising retail trends, with signs pointing to further gains as the outbreak continues. Many retail brands, however, are playing catchup when it comes to hopping on the DTC bandwagon, and are now launching their own sites in an effort to drive revenue and understand consumers in a deeper way.
PepsiCo recently debuted two DTC websites, PantryShop.com and Snacks.com, where consumers can order from an assortment of Pepsi’s most popular food and beverage brands. According to Progressive Grocer, Pepsi positioned the launch of both sites as a response to pandemic buying habits and a way to “help build the company’s ecommerce prowess over the long term.”
For the 122-year old brand to invest in a new DTC platform, it knew it had to go beyond just offering consumers another way to purchase Pepsi products. Instead, Pepsi aimed to differentiate their ecommerce sites, giving shoppers reasons to continually select the Pepsi sites instead of competitor sites. “The test for DTC always is, can you provide a value proposition that really resonates with the consumer, right? Because that's when you get the repeats. That’s when you get the sustainable proposition,” said Gibu Thomas, Pepsi’s Head of Ecommerce. “We'll continue to invest in it and will continue to iterate and pivot until we find the propositions that consumers find delightful and sticky.”
The data and deep analytical resources employed by Pepsi have paid off significantly with their latest DTC efforts, too. “The end-to-end capabilities that we’re using for PantryShop.com were developed completely in-house, which allows us to move with increased speed and iterate based on consumer feedback,” Thomas added.
Impossible Foods, known for its plant-based meat substitutes, launched a new DTC site in June, allowing consumers to buy the award-winning, plant-based Impossible Burger and cook it from the comfort of their own homes. Each order comes in compostable and recyclable packaging with free delivery. According to Progressive Grocer, Impossible Foods believes DTC is “a natural fit for this pandemic world, and the company promises to reflect ongoing trends and shifts in consumer behavior.”
“As demand for online shopping surges and many grocery stores impose quotas on meat, home cooks can purchase Impossible Burger in larger quantities on the company’s website,” Impossible Foods shared.
In May, Kraft Heinz launched its first-ever DTC business line, “Heinz To Home,” offering bundles of shelf-staple items like beans and spaghetti for home deliveries, all based on consumer tastes and trends. The DTC website caters to consumers stuck at home during the health crisis, unwilling or unable to enter traditional grocery stores. Jean Philippe Nier, Kraft Heinz’s Head of Ecommerce, said now is “the best opportunity to ever try a DTC site.”
A prime example of a retail brand looking to capitalize on shifting consumer behaviors, Ocean Spray launched its own DTC option with the introduction of Atoka. A line of plant-based beverages, Atoka is available strictly through the Ocean Spray DTC online site, and is geared toward consumers who “are looking for ways to expand their holistic and health-and-wellness habits while at home,” according to the DTC brand.
Ocean Spray is playing off two major consumer trends (which were growing before and throughout the pandemic): consumers doing more food shopping from their homes and the ongoing demand for healthy and natural food and beverages options. “Consumers understand how important a healthy diet is, especially during times of a health scare, and are looking to invest in their health,” said Rizal Hamdallah, Ocean Spray’s Global CIO. “Consumers are becoming more proactive towards their health, driving demand for such products.”
The implementation of a DTC model goes beyond just offering consumers an alternate, convenient option to shopping. DTC allows traditional brands to collect useful first-party data, which in turn opens the door to personalized customer experiences, direct relationships with consumers, strengthened brand loyalty and long-term growth. The DTC model also provides brands with the ability to better track which marketing campaigns generate sales. For example, it can be challenging for marketers to know if their email sent a consumer to a grocery store to purchase Impossible Burgers, but an email sending a consumer directly to the Impossible Burger website to purchase an item can be easily tracked.
“As we iterate on these platforms with the direct feedback we get from consumers, we’ll learn a lot about what really matters to them, which will help inform both our retail strategy and what the future of our DTC efforts look like,” said Thomas of PepsiCo.
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