Well-known e-commerce and wholesale channels like Amazon and Alibaba are bracing for a new spike in competition from consumer brands that offer higher quality and more specialized products through their own online retailers. Since the outbreak of COVID-19 direct-to-consumer sales are experiencing a drive in sales, and will be for the foreseeable future.
So why such a sudden pivot to DTC sales? Well, its likely than many CPG brands will want to gain better control of their supply chains and create a more direct link between them and their consumers.
“I don’t think most people realize how expensive to ship products through Amazon as [a company] gets bigger over time,” Scott Stevens – founder and managing partner of New York-based investment company Grays Peak Capital. Grays Peak has made several investments recently as it hopes to use its digital buildup strategy to strengthen the online baby food category. They took over Healthy Mama, which offers health and nutrition foods for pregnant women, as well as organic infant and toddler snacks company NurturMe.
In a nutshell, at a certain point it becomes more profitable to go it alone, and also allows companies to interact with their consumers one-to-one.
With people now relying more than ever on online stores and delivery services, e-commerce operations will only accelerate from here on out.
As more specialized online retailers enter the market, they also need to make sure their logistics are cost-effective so their direct-to-consumer models can maintain profitability. This can be done through diversification of product portfolios, for example.
“The biggest challenge when you do DTC as a snack company is whether there is enough margin in the box that allows the seller to pay for the delivery,” he said. “I’ll be in trouble if you order three bags of potato chips online, and I spend $7 for the shipping fee”.- Jim Tompkins, the CEO of Tompkins International, which helps direct-to-consumer companies reinvent digital commerce and supply chain.
Tompkins, who spent more than four decades of his career developing supply chain solutions to consumer companies, said the key takeaway from the coronavirus pandemic is that brands need to be agile with their inventory.
Our partners at Eatable Adventures will be delving into this DTC model and exploring the kind of opportunities it will present after this crisis. Join us this Thursday May 7th for our next webinar on “The rise of DTC Food Startups”. We have invited a number of key guest startups such as Cortilia, the popular D2C service for direct sales that offers food from the field right to your door. We will be talking to Emna Neifar, Chief Commercial Officer of this leading retailer, to discover the key to their success. We will also be hosting Ivan Farneti, Founding Partner of Five Seasons, an investment fund with several foodtech companies under its wing, such as YFood, which has just received a whopping 16 million in funding in the midst of the COVID crisis. Interested? Sign up here!