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Consumer Products: Unlocking Value From D2C Models
Consumer Products companies can create a revenue stream that allows for more freedom and control over first-party data, which opens new opportunities.
Consumer Products companies have traditionally trailed other online retailers when it comes to establishing direct-to-consumer (D2C) models, leaving potential revenue on the table as consumer habits become increasingly more digital. According to a recent Publicis Sapient research on consumer spending trends, e-commerce saw a 31 percent increase in transactions as physical retail slowed in the wake of the COVID-19 pandemic -- resulting in a new, more digitally driven “normal.”
Looking ahead, there is significant headroom for CPG companies to embrace D2C. Analysis from eMarketer/Publicis Sapient projects that D2C for CPG companies will grow to about 15 percent market penetration by 2024 – up from 11 percent reported in 2020. More aggressive growth cases forecast market penetration of up to 20 percent by 2024 – almost double the amount of customer reach CPGs are experiencing today.
The need for CPGs to explore alternate revenue streams like direct-to-consumer is clear. But to get started with establishing the right D2C model, build organizational buy-in and investment focus, CPGs must first understand where the greatest opportunities for value creation exists within their organization. In this first part of this series, we’ll take a closer look at what value drivers exist for CPG firms in the D2C space, and the role they play when assessing how to build a scalable D2C strategy.
Understanding Value Drivers for D2C
As we already know, D2C creates value to consumers through multiple drivers:
But the value D2C provides to the business is generally less understood. D2C offers companies several business-value drivers that extend well beyond the revenue it generates. In order to truly maximize D2C opportunities, CPGs must focus on evaluating, assessing and measuring D2C initiatives based on direct value (new revenue streams), as well as the more holistic, indirect value (both monetary and non-monetary). The indirect value pool is often the missing part of the equation – not considering and including it results in missed opportunities.
A look at how indirect value drivers could lead to the 1.4x-1.7x increase in overall value if CPG companies pursue direct-to-consumer strategies.
Direct Value: New Revenue
Establishing new revenue streams through D2C channels allows for continued growth and scalability looking ahead, offering a foundation for incremental sales growth through innovation as D2C continues to grow in popularity. For some industries -- like food and beverage, which currently offers fewer D2C commerce options when compared to apparel and luxury goods, there are unique opportunities to pioneer D2C efforts now and stay ahead of the curve as a digital leader.
Indirect Value
Quantifying indirect value is critical for prioritizing specific D2C initiatives vs. other competing investments. At Publicis Sapient, we have found that indirect value drivers can be worth 1.4-1.7x direct value.
The Path to D2C
CPG companies have a lot to gain from investing in building out D2C capabilities. Creating a revenue stream that allows for more freedom and control over first-party data opens up new doors for building deeper consumer relationships, more personalized experiences and greater brand affinity across both online and offline channels. Capturing the full value potential from D2C requires CPG companies to focus on both indirect value and direct value that capitalizes on unique opportunities to push their organization forward in a digitally enabled world.
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