Digital Transformation in the CPG Industry: Why DTC is Essential For Your Brand to Stay Competitive
What the post coronavirus ecommerce landscape will look like is still unknown. However, one thing is clear: it accelerated a shift in the Consumer-Packaged Goods (CPG) industry. Even the largest CPG brands suffered significant dips in consumer sales, including Coca-Cola. Many CPG brands relied on sales from vending machines, stores, and entertainment events. In order to survive, many CPG brands began their shift to Direct-To-Consumer (DTC) ecommerce channels.
Many large brands have started to focus on developing diversified distribution channels and pivoting to DTC strategies to compete. To remain relevant and maintain growth, CPG companies must adapt to the digital transformation and invest in DTC models that create dynamic and engaging experiences with their customers.
Let’s discuss the best strategies CPG brands can employ for their ecommerce and DTC strategies and why it’s imperative to start pivoting now before your brand becomes obsolete.
Why DTC Is The Next Step For CPG Brands
Ecommerce continues to grow, and in 2021, ecommerce sales are expected to account for 18.1% of all retail sales worldwide. Although the pandemic may have accelerated the continued shift to ecommerce channels, McKinsey’s consumer-sentiment surveys revealed that US consumers would continue to spend more money through ecommerce channels even after Covid-19 passes. The CPG industry accounts for nearly 10% of the United States GDP, and consumer shopping habits continue to shift towards ecommerce channels. CPG companies must adapt.
CPG brands face many challenges. CPG brands spend 24% of their revenue on marketing compared to the 13% industry average. However, many CPG companies struggle to access informative data to guide their initiatives since many brands sell their products to retailers and marketplaces. DTC strategies allow CPGs to access consumer data to better understand their consumers and cater a strategy that appeals to them to increase engagement. CPGs must begin to cultivate a strong brand affinity online and generate brand loyalty to maintain relevance and market share.
CPG brands must expand their distribution to DTC to stay relevant to their audiences and compete with new DTC startups. Ecommerce expansion has steadily grown, but in 2020, there was an 18% growth, so it’s crucial CPG brands adapt to digital channels. However, many CPG behemoths are hesitant to adapt to DTC, and connecting with their audience directly is a new factor. Customer loyalty, continued online interaction, content distribution, celebrity collaborations, social media marketing, and more all factor into the success of their brands. Although many CPG brands have a lot of work to do on the digital frontier, it’s clear that those that avoid DTC ecommerce channels won’t make it.
CPG Brands Making the Shifts to DTC
Many top brands have begun their shift to DTC channels. Failure to invest in DTC can become detrimental to brands, and fostering a rich DTC model will ensure brands continue to scale and grow. In order to succeed, brands must evaluate how they can reach customers and, more importantly, what customer retention strategies are necessary to retain loyal buyers.
Successful ecommerce brands connect with their audience through a multitude of channels, including social media, email marketing, paid media, SEO, and content marketing. It’s crucial to develop as many ways to reach your customers as possible, especially in the digital space.
Brands leading the way to the shift in DTC include:
- Clorox launched Objective Wellness, a supplement company to reach customers through personalized messages around nutrition. The digitally native brand features an internal data system to store customer feedback to improve product messaging and features.
- Colgate launched Hum, a new intelligent electric toothbrush targeted towards millennials and promoted by a DTC approach and influencer-marketing strategy.
- Ocean Spray Cranberries, Inc. starts its Lighthouse innovation incubator to develop health-focused food and beverages to compete with DTC startups. The DTC initiative includes debuts of Tally-Ho, a line of water enhancers for dogs, and Atoka, a line of plant-based drinks.
- Beyond Meat introduced a new DTC ecommerce site to sell exclusive combo packs of their products and exclusive digital offerings.
- Nestle launched KitKat Chocolatory, a DTC online shop where customers can customize their own premium chocolate bars.
There are boundless possibilities for CPG brands to explore new ways to promote their products in an online DTC environment. CPG companies can no longer rely on only wholesale ventures to survive. They must adapt and rethink their approach to CPG.
Rethinking CPG: DTC Merchandising, Data-Driven Operations, and the New CPG Customer Journey
Due to the pandemic, many restaurants are closing, forcing many CPG brands to lose wholesale food and soda sales. Many packaged goods brands rely on physical retail and national marketing campaigns to promote their products, but now, embracing DTC distribution is essential.
Brands must invest in digital distribution to connect with customers and cultivate loyalty. Although the margins aren’t as rich as wholesale, the consensus is clear that building DTC avenues is worth the time and money. Instead of investing millions into large national campaigns, CPG brands can reap the benefits of digital marketing efforts with more rich analytics and data to inform them of the success or failure of their promotions.
CPG brands can reach the right consumers faster using DTC merchandising. They can develop content around their company’s mission and develop informative content to build rapport with their visitors. Optimizing their site with a rich keyword research strategy can help consumers find the right products faster from a quick search. Merchandising tools help retailers create a dynamic organization for their visitors to filter products based on categories and navigation.
DTC is the new window shopping. CPGs must create an effective ecommerce marketing funnel to capture qualified traffic. Using analytical tools and data-driven marketing, CPG companies can test different product listing strategies and retail pricing strategies to ensure they not only capture leads but convert them into loyal customers. One thing is for sure, CPGs need an effective DTC ecommerce strategy to thrive in our new digital commerce environment.
5-Step DTC CPG Ecommerce Strategy
If your CPG brand is ready to make the shift to DTC, follow our ecommerce strategy to ensure success.
1. Choose the Right Ecommerce Platform
There are many ecommerce business platforms to choose from, including Squarespace, Wix, and WooCommerce. Brands can manage sales, fulfillment, tell their story, and access data on the visitors coming to their site. However, for established brands looking to scale, lower operating costs, maintain flexibility with the everchanging ecommerce environment, investing in enterprise ecommerce software and technology is essential.
Nogin’s suite of intelligent commerce ecommerce solutions allows partners to gain richer insights into their customer experiences, diagnose and implement solutions in real-time, and leverage predictive analytics to increase conversions, improve customer retention, and meet your ecommerce KPIs. Partners who integrate their existing platform with Nogin gain unparalleled visibility to their entire ecommerce operations, including product inventory, commerce, marketing automation, and order management.
Best of all, Nogin handles every aspect of running your ecommerce storefront, so you can spend more time focusing on your brand. Our team of Nogin Nerds provides comprehensive business support. We continuously invest in research and development, sales optimization, machine learning, and more to maximize marketing campaigns, lower internal operating costs, and increase profits.
Learn more about our enterprise ecommerce solutions and propel your digital operations using future-proof solutions, so you NEVER have to re-platform again.
2. Set Up A Reliable Logistics Provider
CPGs should carefully select a logistics provider to handle order fulfillment. There are many advantages to using a 3PL ecommerce fulfillment provider to ensure reliable, flexible, and cost-effective service to your customers. 3PL fulfillment providers can coordinate receiving orders, inventory management, packing, shipping, and storing products to free up internal resources for your business.
3. Invest in a Customer Data Platform
A customer data platform (CDP) integrates all your data sources, including social media, email marketing, ad campaigns, website traffic, into one centralized database. The Nogin dashboard is the most advanced CDP to view how well your online efforts perform. Predictive analytics and AI process billions of data points for your business to simplify what you need to do to maximize your marketing budget, improve retention, and increase conversions. CPG brands can run tests for new products and determine which sizes, package options, and formulas generate the best results.
4. Deliver Exceptional Customer Service
For CPG brands new to the ecommerce space, providing seamless customer service across all digital channels is essential for any DTC strategy. CPG marketers must deliver customer support via online chat, email, social media, and other avenues to qualify and resolve customer issues proactively. Developing a personalized experience for visitors is imperative for a successful DTC experience, and managing customer relationships is a top priority.
Omnichannel integrations ensure that if a customer issues a complaint through one channel, a customer support representative will receive the necessary info and find a solution before reengaging with the customer. Since most customer service agents work remotely, CPG brands must provide their team with the resources required to efficiently manage customer problems and provide effective solutions efficiently across all channels.
However, they must also help their customer service team provide personalized communications to build a working relationship with their audience. Creating a well-documented CRM with centralized records and customer information will ensure your business is ready to serve your customers through DTC channels.
5. Develop a User-Friendly, Informative Experience on Your Website
Content creation is an excellent way to drive qualified leads to your website. CPG brands can tell their story and mission on their website and provide informative content that aligns with their audience’s queries.
For instance, a company that sells high-end chocolate could develop content around how irresponsibly sourced chocolate hurts the environment or how their organically produced cocoa has added nutritional benefits compared to other brands. Developing a story around your CPG brand will help visitors understand the market superiority of your product and why they should purchase your products over competitors.
Additionally, CPG brands must develop a navigable and customer-first website experience. Visitors should easily and quickly jump around your website and find the information and products they are looking to purchase. Studies estimate that 68% of people do not return to a website with a poor search experience.
Provide a rich customer experience for visitors and create an enticing journey for them to learn about your products, find what they want, and make it as easy as possible to complete purchases. Continue to nurture your audience through email channels to increase customer retention.