Tag: manufacturers

Six Key Benefits of Going Direct to Consumer (D2C)

6 Key Benefits of Going Direct to Consumer (D2C)

Direct-to-Consumer (D2C) is an e-commerce strategy where manufacturers have end-to-end control of creating, marketing and selling their products directly to consumers via digital channels. Compared to traditional retail, which relies on distributors and wholesalers, the D2C model takes out the middleman, allowing manufacturers more control over their brands. This business model is disrupting traditional retail because it offers several competitive advantages over traditional retail strategies, including:

Increased control over brand messaging and consumer engagement.

The traditional manufacturer-retailer relationship leaves little room for manufacturers to control their brand. While they do have control over packaging and other marketing activities, once the product is handed over to retailers, manufacturers can no longer influence the sale, build a relationship with consumers or gather data. Manufacturers may spend a lot on advertising, but it’s ultimately the retailers that present the product to the consumer.

More opportunities to innovate.

Most retailers follow a set standard when selling. They often shy away from selling products that are new and have no track record of being a “hot-selling” item. Manufacturers are then restricted to producing what retailers want. D2C allows manufacturers to launch new products at a smaller scale, test with selected demographics and gather feedback. This way, manufacturers can understand what their customers want, produce what sells, and improve where applicable.

Direct access to customers and their data.

Direct contact with customers through each stage of the buying process — including post sales — allows the collection of their email addresses, location, social media profiles, purchasing preferences, etc. Learning consumer buying behaviors helps manufacturers optimize existing products and, possibly, even create new product lines.

Gain higher margins.

Manufacturers achieve higher margins by eliminating the middlemen from the picture. A middleman selling their products means they only make profit on the markup from cost to gross sale. D2C allows brands to sell products at the same price as retailers, positively impacting their bottom line.

Stronger brand loyalty.

Manufacturers have more autonomy in terms of providing their customers with better service and support with D2C. They can exploit their connection with consumers to establish strong relationships and drive retention through targeted marketing campaigns.

Expanded market opportunities.

Manufacturers are no longer restricted by geography when selling D2C. They can go global by just selling to the right customer segments, in the right market.

Adopting a D2C strategy is beneficial from a financial and operational standpoint. However, it is always a good idea to create forward-looking plans to ensure that the model remains consistent in delivering what the consumers demand. Therefore, it is important to continuously disrupt the strategy to always cater to the unpredictable needs of consumers and effectively scale well into the future.

Consumer Behavior Keeps Shifting Due to COVID-19 Pandemic – Part 2

Consumer Behavior Keeps Shifting Due to COVID-19 Pandemic – Part 2

In part one of our series, we looked at new data on emerging consumer habits due to the COVID-19 pandemic. In part two, we will be looking a little ahead. There have been new developments regarding the virus itself, with many experts fearing the possibility of it returning to the northern hemisphere in the fall. If that occurs, we could see the same trends that we’ve talked about before once again. However, this time we may be able to be proactive if restricted living policies are reestablished in the latter part of the year.

 

Online sales shift based on lockdown status

It’s still too early to tell, but the boost in e-commerce activity caused by lockdowns may be less permanent than initially predicted. Countries that have extended lockdown policies such as the UK or France have continued to maintain high e-commerce sales. In contrast, others like Denmark, where lockdowns have begun to ease, have seen a drop in e-commerce sales1. Even if this is the case, it is still uncertain if this will also occur in every country that is beginning to ease restricted living.

So, what does this mean for brands?

In short, those that benefited from the increase of online sales should not be complacent. After all, gaining customers is one thing, but retaining them is another. There are strategies that brands can use to retain as many shoppers as possible once limitations are lifted, including:
 
/        Engaging customer support

/        Enhanced loyalty programs

/        Increased promotions and discounts

/        Personalized shopping experiences

/        Improved communications

/        Extended returns
 
Take note from Vuori, an athletic apparel brand that used some of the strategies above to improve consumer engagement. Forced to close their stores due to the pandemic, they switched their attention entirely to e-commerce. To boost shop sales, Vuori offered discounts to consumers that shopped at their existing locations, while enabling them to shop for their favorite items online. Vuori also shifted their messaging to improve engagement, making it timely to align with the reality that consumers are facing today. Furthermore, they prioritized their web and mobile experiences2.

 

Preparing for the next COVID-19 wave

As many pandemics have done in the past, the COVID-19 pandemic may resurge in waves3. Whether these waves will be fueled by the lessening of restricted living and social distancing policies, or due to seasonal aspect of the virus, remains to be seen. However, when it comes to consumer behavior, brands may likely see similar trends repeat should there be a resurgence of the virus later in the year.

This means that brands must prepare for potential store closures and another bout of increased e-commerce activities. It would then be wise to follow Vuori’s example and focus on e-commerce and social media to maintain and improve engagement with consumers.

Brands like Vuori, however, had an advantage over other brands when the pandemic hit – they had embraced a D2C strategy early on, making it easier for them to focus on e-commerce and to move away from physical stores when the need arose. This initiative helped them naturally adapt to the changes brought by the pandemic.

Unfortunately, most brands are not yet prepared for e-commerce. A few months ago, only 17% of brand executives believed their organizations were leading competitors in e-commerce, and 71% said their businesses were merely catching up or keeping pace4. With everything that has happened since, more brands have taken a serious look at their e-commerce strategy. For those who don’t have anything in place, time may not be on their side.

 

Looking ahead

If the experts are right, the world may face another COVID-19 wave in the fall or winter on the northern hemisphere. Therefore, brands have a very short time to put a strategy in place and acquire the tools and capabilities needed for them to be ready on time. Furthermore, we must remember that it’s not just about benefiting from the increase in e-commerce activity borne from restricted living policies, brands must also implement ways to build and bolster customer loyalty and engagement if they want to retain them in the long run.

Consumer Behavior Keeps Shifting Due to COVID-19 Pandemic – Part 1

[Blog] Consumer Behavior Keeps Shifting Due to COVID-19 – Part 1

A couple of weeks ago, we looked at how the COVID-19 pandemic is impacting consumer behavior, specifically shopping habits. We discussed the differences in attitudes across age groups and genders. In this two-part series, we’ll look into the latest data on how consumer behavior is continuously changing, especially in countries that are still under stay at home or shelter in place orders.

New habits are being formed

Given the current global situation, it’s not surprising that there’s an increase in e-commerce orders. The spike since early March in the US and Canada has been significant—with online orders going up by 80% and buyers converting 8.8% more than the same period last year1. However, this isn’t unique to North America. Europeans are also placing more online orders, with pure-play e-commerce brands seeing an average increase of 40% to 80% year-on-year growth2.

To illustrate, take a look at Emarsys and Good Data’s interactive map tracking how Covid-19 is affecting consumer expenditure across the globe2:

Year-over-year growth rate of online transactions from ccinsight.org

* Year-Over-Year Growth Rate of Online Transactions

Furthermore, recent research indicates that the drastic increase in e-commerce sales may not only be attributed to the shift from offline to online in shopping. For example, there are consumers that have supplementary income or more time in their hands who are picking up new activities or hobbies to keep busy at home. This could become a growing factor contributing to the growth of online sales in the coming months3. If so, it could mean that new and lasting habits outside of shopping are being adopted by consumers due to the restrictions in place. This could be a positive development for some brands as this development may indicate a new or expanded consumer base – one that they will have to engage with if they want to transition them into long-term customers.

Contrasts across age groups

Our previous piece examined how different age groups have reacted to the pandemic, and found a stark contrast between them. However, more recent surveys show that ongoing restrictions are blurring the lines between age groups in some areas, such as how respondents are being financially affected by the pandemic4:

/        24% from the age group 30 to 44 years old

/        28% from the age group 45 to 64 years old

/        21% from 65 and older

That said, millennials continue to be the most cautious and concerned group when it comes to financial matters, with an Elon University4 survey finding that worries over “personal financial situation” still vary per age group:

/        80% from the age group 25 to 44 years old

/        78% from the age group 18 to 24 years old

/        74% from the age group 45 to 64 years old

/        62% of those 65 and older

Another poll found that 59% of millennials have taken or planned to take steps to save cash due to the pandemic’s effects on the economy.

We must remember that most of this research was gathered in mid-March in the US. This  period marked the beginning of the restrictive living phase across the country, and therefore, attitudes regarding financial stability and overall concerns about COVID-19 may have changed in the weeks after. However, it is important for businesses to follow these trends, as they will provide glimpses into the concerns and emerging needs of every age group after the social distancing restrictions end.

That’s it for part one! In part two we’ll look into other trends, including how e-commerce is being affected in countries that have started to ease their lockdown policies.

Conversations with Contentserv:
Edon Corporation

Conversations with Contentserv

We are pleased to announce a new interactive video/podcast series called “Conversations with Contentserv.” In this series, we hope to share insights gleaned from customers, partners, executives, and other industry experts.

In this first episode, we speak with Matt Axel, the President of Edon Corporation. Edon is an architectural fiberglass manufacturer located outside of Philadelphia, Pennyslvania. We talk about how his business is handling COVID-19, past economic turndowns, and some other lighter topics. Note that the conversation starts mid-stream, as Matt is talking about the types of products his company creates.

 

COVID-19 is affecting everyone’s shopping behavior differently

With more people staying indoors to curb the spread of COVID-19, it’s no surprise that this new reality might change how and where people shop. Although only time will tell if these changes will be temporary or permanent, we can start to observe how the pandemic is affecting demographic shopping behavior.

Cautious millennials

As a group, millennials are often characterized as careful with their money, meaning they watch how, why, when and where they spend it. For instance, they currently spend $20 less than their age group counterparts did 10 years ago.1 There are several theories that attempt to explain why millennials are this cautious, but the most accepted is that they were shaped by the realities of the 2007 Great Recession. Nonetheless, this group still holds the greatest shopping potential for decades to come, and this is why businesses have been scrambling to understand their shopping behavior to cater to their needs and meet their expectations.

So, how is this pandemic affecting their shopping behavior? In a survey conducted at the start of the outbreak, 54% of millennials said that COVID-19 is significantly or somewhat impacting their purchase decisions – the highest among the generational demographic – compared to 33% of baby boomers, 42% of Gen X, and 49% of Gen Z.2 Furthermore, 39% percent of respondents said they are shopping less frequently in stores with 30% of millennials shopping more often online2.

The millennials’ cautious approach to spending is being reflected by how they have reacted to news about COVID-19 in their communities:3

/        39% say that news about the coronavirus is impacting where and how they shop

/        36% say news about the coronavirus impacts how much they are spending on products

/        40% cut back on spending in preparation for impacts of the coronavirus

/        34% buy more products in anticipation of the spread of the coronavirus

Indifferent boomers

Despite being the age group with the highest risk for COVID-19 complications, boomers show the least concern about contracting the novel coronovirus.5 In fact, only 43% expressed being worried as opposed to 53% of millennials, consequently reflecting how much they will shift their buying behavior in response to the pandemic. For example, only 20% of boomers said they have adopted grocery shopping behavior changes in response to the coronavirus outbreak4.

Typically, older generations tend to be laggards in the adoption of new technologies. This has been the case with boomers and e-commerce, specifically on categories such as groceries or fashion. Despite current increases in adoption of online grocery shopping due to the outbreak, only 22% of boomers are shopping less in-store and just 8% are shopping more frequently online. Even though these numbers are noticeably lower in comparison with other generations, it’s important to note that these changes in behavior may be permanent. Therefore, boomers that try online grocery shopping, for instance, during the pandemic, are likely to continue do so again in the long term.6

Difference across genders

The COVID-19 pandemic is not only affecting consumer behavior across generational lines. Stark contrasts can also be seen between genders, as the coronavirus affects men and women’s shopping habits differently. If women, in general, express higher concerns about the effect of the outbreak, it is men who are more likely to alter their shopping behavior:7

/        33% of men, compared to 25% of women report the pandemic affects how much they spend on products

/        24% percent of men versus 18% of women report higher online shopping

It must be noted that most of the research was conducted at the start of the pandemic. Therefore, it is likely that figures will change as more communities move towards more restrictive quarantine measures.

However, retailers and D2C manufacturers need to continue to monitor these behavioral changes closely. Understanding how consumers change will be critical for them to succeed once things return to normal. It’s highly likely that consumers will emerge from this crisis with  changed perceptions, unusual shopping habits or leveraging different technological tools.

How the COVID-19 Pandemic Is Influencing Consumer Behavior

COVID-19 Pandemic Is Influencing Consumer Behavior

The reality of this new pandemic took the world by surprise. People worldwide are still trying to adapt to the idea of prolonged indoor stays. So, now that we are all trying to avoid going out to shop in brick and mortar stores, how has this changed our approach in purchasing goods?  Furthermore, will these adjustments establish new and lasting habits?

Behavior in a time of crisis

In countries heavily impacted by COVID-19, consumers are stockpiling food and other essential items, while isolating themselves from crowds. To find out how and when consumers started showing these behavioral changes, Nielsen1 conducted shopper behavior research that started during the beginning of the pandemic in China and extended to other countries that have also been affected. They monitored consumer trends, as COVID-19 news reached the general public and found out that consumers go through six behavioral stages based on their awareness of the COVID-19 spread in their communities:

1. Proactive health-minded buying: Increased interest in the acquisition of products that maintain well-being or health

2. Reactive health management: Prioritization of products for infection containment (e.g. face masks)

3. Pantry preparation: Higher purchases of shelf-safe products and increased store visits

4. Quarantined living preparation: Increased online shopping, decreased store visits and first signs of strain on the supply chain

5. Restricted living: Possible price gouging due to limited supplies and deterred online fulfillment

6. Living a new normal: Increased health awareness even as people return to their typical daily activities

The study also found out that consumers typically moved from one stage to another in a period of two weeks in areas close to the initial outbreak. However, this happened much faster in other countries where the outbreak started later, such as Italy and the US.

Currently, the only country where consumers are starting to transition to the sixth stage is China, while the US has begun to move towards restricted living. So, what kind of possible long-lasting consumer behavior shifts can we expect as a result? It’s still too early to tell, but clear trends can be seen, which, if sustained, could lead to significant shifts in how consumers shop in the future.

Novel ways to shop

When consumers are faced with shopping restrictions, they find and adopt newer ways to shop through technology. This is especially true when it comes to health and essential items. In 2019, the online grocery shopping market generated about $28.68 billion or a 20% increase from 2018.2 Despite this growth, food and beverage were still one of the smallest e-commerce categories. Last year, it was mostly the younger population segment that tried online grocery shopping, with 55% of 25 to 34-year-olds considering themselves likely to purchase groceries online, in contrast to only 35% of 45 to 54-year-olds expressing the same sentiment.3

US Retail Ecommerce Sales Share, by Product Category, 2019

However, due to the pandemic, older generations are starting to see online shopping as a valid and safe option to obtain groceries. For example, Alibaba reported that in China, online grocery orders placed by people born in the 1960s were four times higher than normal during the Spring Festival or the period were China was still discovering new cases of COVID-19 each day.4

But what about other product categories? With so many consumers entering restricted living situations, there has been a spike in other categories, especially in entertainment and media. That’s not surprising given that staying home increases the amount of content people watch by 60%.5 Video games and video-game internet traffic have seen a 75% increase since restrictions were imposed in the US.6 Of course, not everyone is seeing increases in traffic or purchases, in fact travel sites are experiencing the opposite.

So, do these changes signal a shift into how consumers will behave in the long term? If the holidays are any indicator, even short-term adjustments in behavior can have long term effects. For example, during holidays, there’s an increase in the number of consumers purchasing online or on their mobile devices. We then see this behavior being sustained as new holiday seasons roll in, which means new habits have been established.

Despite the rise in e-commerce activities due to the pandemic, most retailers have a bleak outlook for the rest of the year. This is because e-commerce typically represents only about 16%7 of their sales revenue. With many stores shutting their doors, it is in the best interest of businesses to maintain and grow their e-commerce strategy.

Relying on manufacturers

As the population of most countries starts to move from quarantine preparations to restricted living, online fulfillment will be challenging due to strains in the supply chain. This has prompted many consumers to turn to Direct to Consumer (D2C) manufacturers to order and receive goods within a normal timeframe.

These D2C manufactures are a growing segment that caters directly to consumers by bypassing standard distribution channels, effectively gaining direct access to consumers. Several of these manufacturers have seen a significant boost in sales due to the pandemic. For example, Peach, a brand that manufactures high-end bath tissue saw new customers increase by 279% over the last two weeks compared to the two weeks prior.8

Awareness of D2C manufacturers has increased in the last few years, with almost 48% of manufacturers racing to build D2C channels, and 87% seeing these channels being relevant to their products and consumers.9 Initially boosted by younger audiences, D2C manufacturers have found success by focusing on specific target audiences and catering to their needs and identities. This D2C trend is expected to continue, and perhaps accelerate, as manufacturers that are still on the fence might finally see the benefits of D2C and make themselves directly available to consumers

However, even D2C manufactures that have found themselves positively impacted by the COVID-19 pandemic will be affected by supply chain issues as consumers start living in quarantine. This means they can’t afford to stand idly by and must find a way to maintain their e-commerce growth once the pandemic is over as well.

Trust and loyalty

The task of continuing to entice consumers to shop online, for both retailers and D2C manufacturers, is grounded on trust in order to foster lasting loyalty. However, building trust, especially in these extreme situations, means more than meeting expectations, but exceeding them. To do so, here are some important approaches to keep in mind:

/ Ease the transition. Make it as seamless as possible for consumers to switch to online shopping. For example, by providing flexibility with payment options and making it easy for them to easily find what they need. This is especially true for consumers who are moving to emerging e-commerce categories, such as groceries, for the first time.

/ Manage expectations. Display accurate stock level information especially for sought-after goods. This includes communicating realistic estimates for delivery and even re-evaluating display ads so that consumers don’t feel misled by services you can’t provide.

/ Foster comfort. Ensure that customers feel confident that their goods will be delivered on time. Encourage them to sign up for subscription services, whether through preferential pricing or other promos to help them feel safe that they will receive their products without delays.

/ Leverage promos and loyalty programs. In times of crisis, consumers are not very price sensitive. However, making price discounts and promotions available, like free shipping, helps nurture goodwill. Increasing loyalty points and rewards programs encourages customers to stay long term.

/ Prioritize customer care. Increase communication to foster a relationship with your customers, as they may feel isolated at this time. Set up a hotline to address any questions or concerns, as well as make sure their comments or reviews online are heard, to maintain a lasting positive image with consumers. Remember that consumers are spending more time online and rely on reviews to make purchasing decisions.

Looking ahead

It’s still too early to tell how much consumer behavior will change due to the COVID-19 pandemic. We’ll learn more and more about the immediate impact on stores and e-commerce as soon as additional countries move through the different stages and into restrictive living. However, it will be a while until we know if these changes in consumer behavior will be long term. In the meantime, retailers and D2C manufacturers should strive to maintain higher levels of e-commerce sales to mitigate the impact of store closures. Manufacturers that haven’t yet adopted a D2C approach must carefully follow how all this is unfolding. They must decide now whether to jump in and create D2C channels to lessen the impact of the pandemic on their sales before it’s too late.

Check back here as we keep track of any new information regarding consumer behavior as the pandemic continues to affect larger portions of the world’s population. Stay safe, and let’s all continue to do all we can to speed up the end of the pandemic in our communities.

How Can Brand Manufacturers Start to Understand End-Consumers?

Historically, manufacturers have used a tiered distribution system where they have a B2B relationship with distributors, who have a B2B relationship with retailers, who then have a B2C relationship with end-users. Manufacturers provide advertising and branding/messaging for retailers to use, and retailers, in turn, supply manufacturers with customer feedback.1 This is typically as far as their relationship with end-users goes, which is both distant and impersonal, and one they can’t afford in the “Age of the Customer” or “the transition of power from institutions and organizations to customers.”2

Consumer-brand expectations

Today’s consumers have more choices and higher expectations. According to ThinkWithGoogle:3
/ More than 60% of consumers expect brands to give them the information they need when they need it, but less than half feel that brands deliver
/ 59% research online before buying
/ 46% say they check online inventory before heading to the store

However, the information customers seek can only come from manufacturers. That’s why the middleman or big-box retailers, like Walmart, and e-commerce behemoth, Amazon, require manufacturers to supply detailed and rich product information.

Retailers own what manufacturers need

B2C marketing has always been the domain of retailers, and they rely on data to understand their audience. According to a 2019 Deloitte report in collaboration with Google,4 retailers use data to fulfill these objectives:
/ Improve user experience
/ Enhance core sales activities
/ Engage in emerging monetization opportunities

So, how can manufacturers get the data to get acquainted with consumers? They must establish a direct line to consumers by adopting a direct-to-consumer (D2C) business model.

D2C and its benefits

Going direct to consumers means marketing and selling to consumers instead of using a middleman to gain benefits such as:

/ Insight from direct customer data. D2C companies gain access to first-party data, such as identity data (e.g. personal and social media information), quantitative data (e.g. transactional and customer service information), qualitative data (e.g. motivation and opinion)5

/ Brand control and ownership of customer relationships. By going direct, brands have control of their creative output and messaging on digital and social channels.6 They can also lead with their values and build and engage audiences while gathering more data.

/ Upsell and cross-sell opportunities. Based on a consumer’s profile, history and shopping behavior, manufacturers can offer high-end, alternative or complementary choices for shoppers to consider, as well as enable mixing and matching of assortments and other modes of personalization.7

Switching to D2C is not easy

Changing business models is not a simple feat. However, manufacturers can jump start their D2C efforts by:

/ Taking a digital-first approach. Going digital goes beyond moving traditional marketing online. It requires creating a strategy fit for the digital environment a.k.a. producing platform-specific content, optimizing processes and choosing the right tools to execute their vision.

/ Creating a content strategy. It can differ per company and industry, but according to Accenture, focusing on personalization can give manufacturers an edge, as consumers appreciate brands that 1) recognize them 2) offer recommendations and 3) remember them.8

/ Establishing product truth. Manufacturers deal with volumes of complex data – from technical specifications and warranty information to digital assets such as images and videos – which are typically scattered across the organization. Centralizing product data and its management helps improve data quality issues such as inaccurate, incomplete, outdated or lost information. Furthermore, establishing the right processes to optimize operations and promote accountability is also key in the maintenance of data quality in any organization.

/ Enriching content. Rich product content is composed of elements that enhance how shoppers experience a brand. These are a mixture of texts (e.g. attention-grabbing titles, detailed descriptions, etc.), different image types (e.g. 2D, 3D, dynamic, etc.), audio, videos, comparison charts, Q&As and ratings/reviews, etc. By leveraging digital assets, brands can easily produce engaging customer-facing content.

/ Delivering channel-optimized content. Brands must cater to the preferences of the new customers, a.k.a. millennials and Gen Z. They must meet these consumers where they are by delivering content and seamless experience throughout their journey. Today, it’s no longer enough for brands to have just a web shop, but they must be omnipresent,9 in other words everywhere (e.g. on e-commerce sites such as Amazon, manufacturer sites like Google Manufacturing Center, social media platforms, mobile and even on physical shops).

/ Leveraging analytics. Different channels have different KPIs. By optimizing content according to data gathered from each channel’s analytics tools, brands gain insight on the content types and deliveries that resonate with their audience.

In summary, understanding end-consumers starts with data. Brands can only access first-party data by creating a direct line to consumers through D2C. Success in the D2C space requires brands to create exceptional consumer-facing content and efficiently publish it across channels. To do this, they must first get their data in order. Although not simple, many manufacturers have successfully started this journey by using product information management (PIM) solutions. With PIM, organizations can easily manage and deliver rich, accurate, complete and channel-ready product content – anytime, anywhere.