Can Direct To Consumer Work In Grocery?
When we read this week that PepsiCo is investing further in its e-commerce business, our immediate thought was that the global brand could be considering expanding its direct-to-consumer activities. Its products are well suited to direct-to-consumer selling, a practice that is most suited to non-food CPGs and non-perishable food items that can be bought in bulk.
The benefits of direct-to-consumer selling are clear.
Direct-to-consumer can help brands build a relationship with their customers that otherwise may not exist if the transaction takes place in a grocery store. With direct access to consumers and no distractions from competitors, brands can foster loyalty through carefully curated interactions.
Direct-to-consumer selling gives brands access to the data that was previously only available to grocery retailers. This data gives brands valuable insight into consumer behaviour. The data can be used to optimise the shopping experience, improve product selection and dictate marketing decisions.
Direct-to-consumer selling enables brands to control every aspect of the shopping experience, from the initial search to delivery. Using data, brands can offer a more personalised experience to their customers, including relevant offers and customised content. Not only that, but brands can also ensure that the product is received in perfect condition.
The benefits of direct-to-consumer selling mean that it is potentially worth investing in. It is a model that has worked exceptionally well for companies such as Dollar Shave Club and Warby Parker, but does it translate to grocery? The answer is yes and no.
Convincing consumers to jump on board with the direct-to-consumer model could require a shift in mindset. Although consumers shop around for the best price, grocery shopping is still seen as a chore and efficiency is key. Customers are unlikely to visit several different websites in order to fulfil their grocery requirements. Despite this, it is a strategy that could work well for global food giants such as Unilever whose brands include Knorr and Hellmann's. Rather than creating a one-stop shop for Unilever products, however, their first foray into direct-to-consumer selling involved partnering with QuiqUp through the Unilever Foundry to deliver Hellmann's on demand.
QuiqUp is not alone in offering an easy route to direct-to-consumer for food brands. INS founder Peter Fedchenkov believes that direct-to-consumer will be the number one retail trend of 2018. His marketplace will allow CPGs to sell directly to consumers, bypassing the grocery retailers while benefitting from the advantages of direct-to-consumer selling. This model is the most likely direction food brands will take when considering their options for direct-to-consumer selling.
While direct-to-consumer is not a new concept, for grocery brands it represents a departure from well-established sales and marketing processes and is unlikely to happen overnight. The current trend in online grocery of making recipes shoppable may be a more achievable goal for food brands. Integrating with grocery retailers through 'buy ingredients now' buttons on recipes hosted on the food brand's website can offer increased insights into consumer behaviour if brands are not quite ready to embrace direct-to-consumer selling just yet.