E-commerce: How consumer brands can get it right
Consumer brands need to make direct-to-consumer economics feasible and the customer experience seamless.
By Arun Arora, Hamza Khan, Sajal Kohli, and Caroline Tufft – Consumer brands have been seeking to establish direct relations with end customers for a range of reasons: to generate deeper insights about consumer needs, to maintain control over their brand experience, and to differentiate their proposition to consumers. Increasingly, they also do it to drive sales (see sidebar, “Why go direct?”).
For any brands that have considered establishing a direct-to-consumer (DTC) channel in the past and decided against it, now is the time to reconsider. COVID-19 has accelerated profound business trends, including the massive consumer shift to digital channels. In the United States, for example, the increase in e-commerce penetration observed in the first half of 2020 was equivalent to that of the last decade. In Europe, overall digital adoption has jumped from 81 percent to 95 percent during the COVID-19 crisis.
Many companies have been active in launching new DTC programs during the pandemic. For example, PepsiCo and Kraft Heinz have both launched new DTC propositions in recent months. Nike’s digital sales grew by 36 percent in the first quarter of 2020, and Nike is aiming to grow the share of its DTC sales from 30 percent today to 50 percent in the near future. “The accelerated consumer shift toward digital is here to stay,” said John Donahoe, a Silicon Valley veteran who became Nike president and CEO in January. 1 Our consumer sentiment research shows that two-thirds of consumers plan to continue to shop online after the pandemic.
The vast majority of consumer brands are used to selling through intermediaries, including retailers, online marketplaces, and specialized distributors. Their experience with direct consumer relationships and e-commerce is limited. As a result, they often hesitate to launch an e-commerce channel despite the obvious opportunity it offers. Just 60 percent of consumer-goods companies, at best, feel even moderately prepared to capture e-commerce growth opportunities. more>