From Dynamics365 Team Blog: How consumer goods organizations are adapting by going D2C

From supply chain capacity constraints to distribution channel disruptions, consumer goods organizations have had to innovate to overcome obstacles and find new ways to meet customer demands.

Changes in motion

Even before the pandemic struck, significant changes were underway, reshaping retail and the consumer goods industry. Over the last decade, a rise in digital connectivity led to a rise in e-commerce, driving optimizations across the supply chain. At the same time, an increase in mobile and digital services was reshaping consumer expectations around brand relationships and experiences, while a new generation of consumera generation that is more tech-savvy, highly values-oriented, and thriftywas gaining substantial influence and buying power.

These changes drove mass disruption across many industries, from transportation to hospitality to consumer goods. According to Fortune, in July 2011, Dollar Shave Club launched a no-frills subscription service for men’s razors. Just six years later, almost to the day, it sold to Unilever for a reported $1 billion. Dollar Shave Club was the first high-profile success in a long string of similar direct-to-consumer (D2C) services that followed. From Warby Parker to Casper, to Naturebox, D2C commerce exploded, growing from $6.85 billion in 2017 to $14.28 billion in 2019, and according to eMarketer, D2C e-commerce sales are projected to reach $21.25 billion in 2021, more than a threefold growth in just four years. D2C didn’t just change the way customers purchased goodsit changed the relationship that customers had with consumer goods brands.

Change accelerated by the pandemic

When the pandemic hit in early 2020, the cascading changes that followedboth functional and behavioralwere extreme. As parts of China locked down, access to raw materials and manufacturing services constrained. Consumers, fearing shortages, created shortages, stocking up on goods for themselves and their families. In a May 2020 a study by Suzy showed 50 percent of consumers reported seeing their grocery stores run out of essential goods in the past two weeks.

As physical stores closed and consumers avoided open shopping locales due to health concerns, online spending exploded. In May, online spending hit $82.5 billion, a 77 percent increase year-over-year, while buy online, pick up in-store (BOPIS) grew 195 percent in the same month, according to Forbes. Additionally, COVID-19 accelerated e-commerce growth by four to six years.

It is reasonable to expect some regression in these numbers once there is greater control over the pandemic. For example, in EY’s Future Consumer Index, 93 percent of respondents said shopping in stores will be an important activity once the COVID-19 outbreak is over. Furthermore, consumers now show greater preference for shops, restaurants, and brands that feel local.

But there is also reason to believe many of these trends represent a lasting shift in consumer behavior. To start, despite these numbers, there is no timeline for an end to the outbreak. Nor will there likely be a clear line that delineates the end. Furthermore, over the course of 2020, online shopping has become the primary means of purchasing for massive populations around the globe, and it will likely remain so for the foreseeable future. The longer this persists, the more permanent these changes will become. According to GWI’s July Multi-Market Research, 50 percent of global consumers said they expected to do more online shopping after the pandemic. This was up from 43 percent in April.

Shifting to D2C

In addition to accelerating the shift to online shopping, the pandemic is also accelerating the growth of D2C. Shortly after the lockdown hit, major consumer goods companies, including Pepsi-Co and Heinz, launched D2C portals. For consumer goods organizations, D2C offers many key benefits during the pandemic:

Access to online shoppers

As discussed, online shopping has gone through the roof. Making products available to customers looking to buy online is an obvious win.

More control over distribution

Traditionally, large consumer goods companies have leveraged strong supply chains to guarantee their products were on every shelf, all the time. The pandemic has proven how vulnerable these supply chains can be, completely upending these distribution channels and making it harder for companies to ensure their products were adequately stocked. By going direct to consumers, companies can centralize at least part of their sales and distribution and reduce their reliance upon third-party distributors.

Build relationships with customers

D2C selling provides a unique opportunity to build a relationship with end customers. Logistically speaking, this means being able to remarket to customers, provide coupons directly to customers, and controlling the buying experience. More broadly, it creates an opportunity for brands to engage with customers on a more meaningful level. In tandem with the pandemic, 2020 has been marked by a massive uprising around social issues. Many consumers, particularly young consumers, want to purchase from brands that align with their values. In fact, 72 percent of Gen-Z reported that they were more likely to buy from a company that contributes to social causes, while 69 percent said they'd stop buying from one that contributes to causes with which they disagree, according to WP Engine. So, for brands, the opportunity to interface with consumers directly, instead of only through the window of an intermediary, is incredibly valuable.

Lower cost of entry

Selling D2C seems, in theory, like a beneficial proposition versus wholesale distribution, but in reality, the cost of technology, logistics, inventory management, and shipping has proven a barrier to entry in the past, especially for large established organizations that are slow to change. However, today the cost of entry is lower than ever before. New technologies, such as Microsoft Dynamics 365 Commerce, make it easier for brands to launch e-commerce sites so they can start selling.

The Microsoft Dynamics 365 Commerce team has been working with a number of consumer goods customers to help expand offerings and facilitate better direct to consumer motions. Recently Coca Cola United Bottles, one of the largest bottlers in the US, utilized Dynamics 365 Commerce to directly engage customers across their fundraising division.

How to get started

Dynamics 365 Commerce is making it possible for businesses to quickly launch e-commerce sites so they can start selling direct to customers.

We are currently offering customers the option to partake in a Commerce in a Day session with partners that will stand up a prototype site for retailers to get a better sense of the solution. In addition to this, we are facilitating rapid deployment programs with our partners to ensure quick and quality deployment of e-commerce sites for retailers to get back to business.

Learn more

Visionet Systems, Inc. helps provides rapid implementation of Dynamics 365 Commerce between 2 16 weeks for your business using a unique blend of our experience, accelerators, and enhancers.

Learn more about Dynamics 365 Commerce today or contact us to request a demo or speak to a specialist.

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