This year, more than 40 percent of consumer packaged goods (CPG) companies expect to sell products directly to consumers, up from 24 percent in 2012, according to a new report from the Grocery Manufacturers Association and PwC US.
Direct-to-consumer is a potent vehicle for testing products and reaching out to new consumers faster and more effectively than ever before, making the retail store aisle no longer the last mile in the purchase journey, the two organizations concluded in the report, titled "Growth Strategies: Unlocking the Power of the Consumer."
"CPG companies that engage with consumers directly through digital channels and build out their direct-to-consumer processes will have the best advantage for creating new growth," Steven Barr, PwC's U.S. retail and consumer sector leader, wrote in the report.
To demonstrate the market opportunity, the report points out that 52 percent of U.S. consumers are already buying products online directly from manufacturers.
Beyond the immediate sales bump, the benefits of a direct-to-consumer approach could be huge for companies, according to Brent Leary, a partner and cofounder at CRM Essentials. Companies can expect longer customer lifetimes after moving to a direct-to-consumer approach, he says, but even more important, many customers will eventually become brand advocates, talking up the brand to everyone they influence.
For many firms, this is admittedly a new approach, which has prevented direct-to-consumer selling from becoming as common as it needs to be, according to Leary. The problem, he explains, is that many marketers haven't been able to instill the cultural shift needed to really get the most out of the new technology.
Nonetheless, companies will soon have no choice but to adopt a direct-to-consumer approach, Leary adds. "They have to," he says. "Consumers will flock to competitors who get it and are looking to provide the experiences customers expect today."
Certainly one of the biggest and most successful brands in this area is Amazon, a company that many believe wrote the book on the direct-to-consumer approach. "Amazon created a customer-obsessed culture right from the beginning," Leary says.
Amazon has become a master at accommodating consumers' desire for wide selection, fast delivery, and low prices, and consumers now expect the same from all of the other companies with which they do business, without them having to ask them to do it, Leary says.
Amazon can also teach more traditional retailers a few things about how to approach customers, how to use analytics, and how to be a platform and not just a retail Web site, Leary adds.
So where do retailers fit into all of this? Leary says their role has changed, but isn't diminished. "Customers expect more every day, and they expect it faster today than they did yesterday. That's just the world we live in now," he says. "Retailers have to understand that, and create a corporate culture and a technology foundation that allows them to be...flexible, analytical, interactive, and reliable."
The report also notes that companies will need to manage a new set of risks and security concerns. They can no longer expect to remain competitive—and profitable—by offering core products alone. "Today's consumers want solutions; they want experiences and value," concludes Lisa Feigen Dugal, PwC's U.S. retail and consumer advisory leader, in the report.
To fulfill those desires, "culture is the first thing that needs to change," Leary explains, pointing out that companies need to align their internal cultures with the way people live today. "Then the technology will help you deliver the cultural change message to consumers."