June 06, 2019

As retail store closures continue at an alarming rate, consumer goods brands have fewer channels to sell their products outside of retail and ecommerce behemoths like Amazon, Walmart and Costco. This reality has many in the consumer goods industry looking to sidestep retail and online marketplaces altogether by selling to their customers directly.

An overwhelming 99% of consumer goods leaders surveyed by Salesforce in February 2019 said that they were investing in direct-to-consumer (D2C) strategies of some kind, leaving 1% who said it was not a priority.

In the current retail and ecommerce climate, it’s no surprise that brands are seeking alternatives to the limited options they have now. Some 42% of consumer goods leaders polled said the challenges of brick-and-mortar retailers were negatively affecting their business. This is perhaps because the same companies that are putting smaller retailers out of business also sell private-label brands online and in-store—leaving consumer goods brands not only with fewer options, but increased competition within search results and on the shelves next to them.

Nearly half of consumer goods leaders said that retailers' private-label products were seen as a threat to their business, Salesforce found. Amazon in particular has hundreds of private-label brands across virtually every product category, according to a March 2019 study by ecommerce research firm Marketplace Pulse.

In the Salesforce survey, 51% of respondents saw Amazon’s Marketplace (where products are purchased through Amazon, rather than purchased by Amazon at wholesale cost) as a critical threat, and 68% believed that consumers were more loyal to Amazon than their own brands.

Traditional consumer goods brands face another hurdle: competition from native D2C brands that have already won over a large online audience. US brands said that D2C competitors were a bigger ecommerce challenge than private-label brands and Amazon's growing influence, according to a September 2018 survey conducted by Feedvisor and Morning Consult.

For some larger consumer goods companies, the idea of investing in a D2C strategy has manifested as acquisitions of the successful startups that disrupt their industry. The recently announced purchase of razor company Harry’s by Schick owner Edgewell Personal Care evokes the age-old business adage: If you can’t beat them, acquire them.

Courtesy of eMarketer

 

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