Marcel Bens is Managing Partner and COO of Emil Capital Partners, an early-stage investment firm focused on companies in the Better-for-You consumer goods and services space. The views expressed here are those of the author.
Direct-to-consumer (DTC) has been a hot trend in CPG for a few years, bolstered by the global pandemic. The trend has resulted in a spike of new market entrants, emboldened by the ability to price competitively and to cut out some of the middlemen, especially during a time of increasing delays along the supply chain. Yet misconceptions about DTC abound for brands and retailers alike.
As a brand, going direct can mean better margins and the benefit of owning the relationship with the consumer — especially the valuable data they provide. For the consumer, there is the added convenience of having items shipped directly to their home. For these reasons it can be easy to believe that DTC is the most important channel — maybe even the only channel — for a brand to focus on and that it represents some of the biggest competition for the retailer.
One glaring misconception rooted in thinking DTC is the only channel for brands is believing that shoppers won’t miss the in-person retail experience — particularly in food and beverage, where nearly 80% of consumers say they prefer to shop in brick-and-mortar stores. Shoppers have proven they will remain loyal to retailers of their choice, and very few are interested in having to order direct from every separate brand they consume. In addition, across all consumer goods, shoppers still prefer an in-person experience and research shows they tend to spend more in-store than they do online.
The pandemic has brought its own growth for brick-and-mortar retailers, which brands should take note of, but it has also brought its own challenges. Supply chain issues and staffing constraints are at an all-time high, and retailers are considering how they can best consolidate across fewer SKUs in the hopes of keeping shelves stocked. Competition is fierce as consumers look to find stores that can deliver what they need when they need it.
Rather than seeing DTC as competition, retailers should recognize its significant potential to boost sales. As retailers manage increased traffic amid high pressure to attract and satisfy shoppers, their own brand strategy has become critically important. Individual brands with a strong DTC base can extend that consumer loyalty to retailer partners, especially when they share a similar set of values or broader mission. For example, brands that champion sustainability, inclusivity and social justice, overall health and wellness and general better-for-you categories often create highly loyal brand enthusiasts.
Even with upward trends in DTC, retail still delivers the strongest catalyst for growth for most brands. Despite record-setting growth for retailers during the pandemic, retailers still need to partner with compelling brands that attract and delight shoppers. This presents a fantastic opportunity for brands and retailers alike to improve their partnership.
For brands, knowing the consumer means knowing the retailer
Brands looking to make it onto a retailer’s shelves need an intrinsic understanding of their consumer’s behavior, including how and where she likes to shop. It can be tempting to want to target a whole host of retailers but for many brands, especially smaller ones, that can be an ambitious and costly goal that doesn’t pay off in the long run. One strong retailer relationship is enough to launch a brand and attract additional investment, so focus on finding the ideal partner for you.
How do you know which is the right retailer for your brand? Go back to basics. Visit those stores where you want to get distribution, walk the aisles and see how your product might fit into the shopping experience. Understand your consumer and where she likes to shop, then figure out how you can get your product on that retailer’s shelves.
Once you’ve established the right retail partnership for your product, it’s important to nurture the relationship. Getting on shelf takes work, but so does staying on shelf. Delight your consumer by letting her know that your brand is available where she shops. You should consider your retail distribution as a brand-building opportunity and surround it with support.
Remember that the consumer’s experience of brick-and-mortar retail goes far beyond the moment of decision in the store aisle. It’s critical that brands consider the full partnership — starting from the first consideration of purchase when the consumer is making a list or scrolling through social media and seeing recommendations. It continues during the actual shopping experience and carries through to the final consumption of the product when the consumer decides whether or not to make a repeat purchase. Each of these moments represents an opportunity to imbue a message that reinforces your brand’s unique voice. It also offers a chance to strengthen allegiance with your retail partner.
For retailers, don’t shy away from brands with strong DTC platforms
A brand's DTC platform is not the competition. In fact, it can serve as one of your greatest marketing tools. As a retailer, you have the opportunity to provide value to a brand’s existing consumer base by making their favorite products easier to access via your own store’s shelves.
We know most shoppers do not buy everything online all the time. A brand with solid e-commerce sales means it has a strong following, which offers more ways to reach your customer and entice them into your store.
When evaluating new brands, consider the relationships they have with their own consumers and where overlaps may exist with your shopper. If there is cohesion between your brand ethos or your core shopper, it represents a powerful opportunity to more easily build or expand on customer relationships.
We know the best brands are those that solve a problem for the consumer. These problems are not always solved online, especially across food and beverage, which is why brick-and-mortar retail continues to be the undisputed leader. Not all brands can or should try and do both. Often, focusing on a strong retail partnership will yield far greater value and brand exposure.
The right retail fit can be the catalyst for launching brands into the stratosphere, while retailers benefit from the opportunity to boost their own image, improve customer relationships and continue to provide value via access to in-demand products and brands.