What is direct to consumer?
Consumers have never been so well connected. With consumers now expecting to engage with products and brands in a much more enhanced manner, there are increasing opportunities for Consumer Products (CP) businesses to interact directly with consumers.
Direct interaction can take many forms – from helping consumers initially research and share views to build their understanding of a product or brand, through to finding and selecting items to purchase and making it convenient to receive the product and return for repeat transactions. Going direct to consumers can be complementary to existing trade relationships, selling personalised or innovative products or a broader product range than wouldn’t necessarily fit within established channels such as a retailer’s product or price hierarchy.
Why is this important?
Consumers are increasingly engaging online as part of the shopping experience – 44% of non-food transactions in the UK last year involved interaction with multiple channels. Moreover, multi-channel customers have higher average transaction values of £130 compared with store only sales at £67.
CP businesses have historically focused on B2B sales through wholesale and retail channels. The physical retail store has been the primary interface with the consumer, utilising the infrastructure and sophisticated supply chains offered by retail partners.
This has created several challenges for CP businesses:
- Strength of their brand has been materially influenced by retailers.
- Retailers have control over product, pricing and positioning.
- Retailers have primary access to all consumer/shopper data through their physical and virtual stores
- Limited opportunity to create personalised consumer experiences, products and communication
- Retailers presence in different markets, has affected international product/brand strategies and the ability to create differentiated products or offers for their consumers.
Defining your direct to consumer strategy
- It is essential that you understand how you will engage with your consumers, as well as understanding the attributes of your current product portfolio in order to identify which markets/geographies/channels will provide the most added value for this direct approach.
- Deloitte can help define your consumer strategic intent and support in the evaluation of whether going direct to consumer opens up potential opportunities to develop new products not suitable for traditional retail channels.
- To communicate and/or sell directly to consumers via digital channels, having the right mobile-enabled website, payment mechanism, or Facebook page can be key to success.
- We have a track record of supporting clients with the careful planning and implementation of digital strategies, integrating required applications in conjunction with existing ERP platforms as necessary and developing digital capabilities.
- If you are looking to acquire the capabilities to go direct to consumers via buying businesses with e-commerce platforms and other distribution mechanisms, then our M&A team can provide you with the right advice and insight at every stage of a M&A transaction – from target identification, consideration of strategic options, due diligence, transaction execution and business integration.
- A new strategy to engage consumers comes with a range of new risks that must be managed to protect your consumers and your brand. It is essential that you understand these risks and develop the right strategy and framework to manage them.
- We understand the risks associated with a direct to market strategy. Whether these are the threat of cyber attack, the loss of sensitive customer data or the wilful damage to your brand, our risk and security practice can help you develop the right strategy.
- There are wider implications when going direct to consumer which need to be considered, for example the tax implications on where goods are procured from, finished goods exported to and the location of your supply chain facilities.
- Deloitte’s tax capability can support you to think through the direct and indirect tax implications of your strategy and how to optimise tax within the supply chain, as well as ensuring relief and R&D credits opportunities are taken, VAT and duties are appropriately reflected in pricing, and tax implications of crossborder transactions are efficiently managed.
- Consumers are becoming increasingly demanding about when they can expect to receive or collect their purchases.
- We can help to identify the impact of these expectations on your existing fulfilment infrastructure and build these capabilities within your organisation to ensure that the consumer experiences a similar service level to that provided by the retail industry.
- Organisations that interact directly with the consumer will obtain a huge amount of information; analysing this data in the right way is critical to informing strategic decision making relating to product portfolios, prices and consumer segmentation.
- The biggest challenge organisations face is not having this analytical capability or the time to realise the value of primary consumer data. Our Analytics capability can address this.
Through our unique breadth of capabilities and experience, Deloitte can help you in successfully achieving each of the critical steps involved in developing a direct to consumer proposition and realise the benefits this opportunity brings.
Connecting with today’s consumer: Building brand value