For many FMCG companies the ability to build direct relationships with their customers, gather knowledge about their behaviour and in particular, have ownership of the data have been key drivers behind their D2C models. For instance, Jean-Philippe Nier, Heinz’s Head of Ecommerce, told Econsultancy that their D2C offering ‘Heinz to Home’, originally intended as a stop-gap to provide cupboard essentials, has evolved into a longer-term strategy with a long-term vision about data and insight.
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There is also a recognition that there is a need to focus on the proposition rather than compete with retailers. D2C brands should look to not only differentiate themselves, but understand their customers and then deliver value along the entire purchase journey, from when customers first encounter them right through into
However, creating a competitive D2C offering may require a significant overhaul and requires a viable business model. Many of those leading the way with D2C models can be seen to be making it a core part of their business. A report from McKinsey and the World Federation Sporting Goods Industry recommends that in the medium- to long-term, brands in this sector that want to thrive will need to aim for a 20% D2C business or higher. They suggest at that point brands then begin to see a virtuous cycle from D2C sales and higher margins, rather than the “vicious cycle” that comes with less scale of the channel.
Nike has seen considerable success from going direct and credits brand strength, product innovation and scale. With direct sales increasing 28% to $4.7bn (£3.4bn) and Nike Digital now accounting for 21% of total revenue, the brand has set out its aim be a 40% digital business by 2025. Following their review of leading D2C companies, McKinsey found that factors determining success or failure can be focused around three core areas: top leadership committing to its prioritisation, customer-centricity, and attracting and retaining digital talent.
D2C requires new skillsets in order to support scaling customer experiences that are supported with online customer service, and then being able to use first-party data to personalise and deliver seamless experiences.