The DTC (Direct-to-Consumer) approach is gaining immense popularity in the food and beverage industry. Some suppliers are already exploring the lucrative possibilities DTC has to offer. While many are still choosing the retail-only model, the success of others are pushing them to consider selling directly to consumers.
In fact, eMarketer reports that food and beverage DTC is currently the fastest-growing e-commerce segment in the United States.
When COVID-19 landed people at home, the DTC solutions began thriving. With the pandemic ongoing, the benefits of this option are continuing to prove themselves.
Let's take a closer look at what the rise of DTC food and beverage means for your business.
The DTC Food Industry is Booming
Online shopping has been in high demand for many years. The COVID-19 pandemic gave it a significant boost. While clicking to buy clothes and appliances, consumers discovered an opportunity to shop for food without leaving the comfort of their homes.
Suddenly, the demand for online food shopping skyrocketed, pushing food and beverage companies to come up with new solutions. One of them was selling products directly to consumers.
Eliminating the third party benefited both sides. Manufacturers got an opportunity to sell products at a higher price while consumers gained access to personalized offers and convenient delivery. Here are a few important statistics:
- 75% of online food shoppers stay with the first online store they try. (Magento)
- In 2020, food and beverage became the largest online CPG (Consumer Packaged Goods) segment, surpassing health and beauty by 6%. (Shopify)
- About 37% of consumers are interested in a food or drink subscription service. (Magento)
- Compared to general e-commerce, DTC food has higher conversion and retention rates. Meanwhile, the cart abandonment rate is lower (BlueCart)
The downsides for some F&B companies include the rising shipping costs and complex logistics. However, fulfillment service providers rose up to the challenge, allowing their partners to streamline the shipping process and make the DTC transition easy.
How Can You Capitalize?
With the rising demand for DTC food and beverage services, ignoring the opportunity isn't an option. While F&B giants like PepsiCo and Kraft Heinz are reaping the benefits of DTC, smaller businesses aren't far behind.
By choosing the DTC model, you can improve your company's bottom line by:
1. Collecting Customer Data
By working with the consumer directly, an F&B company can collect first-party data. This data is vital to personalizing the customer experience and monetizing the relationship further. The information you can collect includes:
- Social profile
- Purchase behavior
All the above can help you create a successful marketing campaign that brings more consumers to your virtual doorstep. The collected data allows you to personalize the end-to-end experience, minimizing returns in the process.
2. Increase Brand Loyalty
Large and small F&B brands work hard on building brand reputation and improving brand loyalty. Doing this when working with retailers can be harder since you don't have direct access to the consumer.
Once you start a DTC campaign, you can maximize your brand awareness efforts by soliciting feedback and reaching out to consumers directly. This encourages WOMM (Word-of-Mouth Marketing) and gives you an opportunity to create an active brand community.
3. Personalizing Products
Eight out of 10 consumers say that they are more likely to purchase from a brand that provides a personalized experience. Doing this when working through a retailer is complicated, if not impossible. However, a DTC model allows you to offer personalized products.
Consumers can design custom packaging or create personalized sets of goods. This can improve their experience with the company, boost retention rates, and encourage WOMM.
4. Launching Premium Products
DTC allows you to launch new product lines and introduce premium-priced products. With the data you collect from the consumers, you can learn which of them have a higher willingness to pay.
By providing premium products directly to the customer, you can improve their experience while increasing profits. Meanwhile, you can offer them direct access to the full range of products.\
5. Controlling Your Profits
By choosing the DTC model, you gain more control of your potential profit. You also get a variety of opportunities for upselling and cross-selling, which you may miss with a retail-only approach.
When you control your brand's customer journey, get a chance to sell a wider range of products, and gain access to feedback, you can have an easier time maximizing profits.
Additionally, DTC is an excellent opportunity for growth, which both large and small F&B brands don't consider with the retail-only model.
Find Your DTC Fulfillment Partner
With the right approach to marketing, DTC food companies experience a large rise in demand. Not all of them can handle it quickly.
Many benefits of the DTC model can be offset by the wrong approach to fulfillment. Brands that don't have any DTC experience can struggle with fast shipping, custom packaging, inventory tracking, and distribution.
That's where fulfillment partners come in. Instead of hiring a fulfillment team, learning the DTC distribution ropes, and arranging individual shipping, you can delegate all fulfillment aspects to a third party.
A reliable DTC fulfillment partner has the ability to scale as the demand grows while providing such extra perks as custom kitting and shipping discounts. Working with this type of company can make your transition to DTC as smooth as possible.
Reap the Benefits of DTC Food with Smart Warehousing
While your competitors are beginning to take full advantage of the DTC model, there isn't any reason to fall behind. With the demand growing quickly, your company could start reaping the same benefits quickly.
The biggest issue many F&B companies face with the DTC transition is food logistics. By choosing the right having to figure out handling your own packing, shipping, and delivery.
At Smart Warehousing, we help F&B brands enjoy a reliable fulfillment process. We use a highly effective inventory management system, offer 1-2 day temperature-controlled and cold chain shipping, and have a 99% inventory accuracy rate.
To learn more, please contact us and see how Smart can impact your direct-to-consumer business today.