Direct-to-Consumer (DTC) channel set for take-off in manufacturing finds LCP Consulting and Cranfield report.
With revenue growth remaining challenging, almost half (48 per cent) of manufacturers are racing into building Direct-to-Consumer (DTC) channels, with almost all (87 per cent) seeing DTC relevant to their products and consumers.
These findings are published in a new report today (23 March 2017), by LCP Consulting and The Centre for Supply Chain Management at Cranfield University. The report is based on a survey of over 100 manufacturing executives from major global players including two of the world’s largest automotive manufacturers and several of the world’s largest companies. A third of the respondents were from major manufacturers in the Food & Beverage sector.
Those manufacturers leading the move into DTC (‘Leaders’), expect DTC to grow by 5 per cent CAGR (Compound Annual Growth) over the next five years. But, ‘Followers’ remain steadfast that growth will come from retail – expecting 6.5 per cent CAGR over five years. As a result, DTC Leaders plan to invest around 1.5 times more revenue into DTC than Followers over five years.
The report states that moving from a CPG manufacturer to a DTC model is not straightforward, and manufacturers must ask themselves if this is the right decision. The main considerations include establishing a brand presence, building an e-commerce platform, potentially opening stores, distribution, fulfilment, and ever-important last-mile fulfilment.
To find revenue growth from DTC the report says that companies need to personalise the experience for their customers. Manufacturers should improve demand forecasting and planning, better understand the Cost-to-Serve, and optimise their supply chain distribution networks to ensure the digital consumer can make a seamless transaction. Manufacturers highlighted in the survey that ‘guaranteed delivery’, ‘speed of delivery’, ‘ease of access’ and ‘convenience’ are all key success factors.
Will Shepherd, Partner from LCP Consulting said:
“Those manufacturers who have already integrated a front and back end DTC model have the ability to deliver a seamless omni-channel experience for their customers. For them, an omni-channel approach is core to delivering significant long-term growth and value.
Ultimately, it is those manufacturers who respond to additional customer demands and adopt new models that will reap the rewards.”
Despite the risks and investment required, the report highlights five DTC advantages:
- Control and clarity of brand – through product, packaging, and brand message
- Full share of the ‘customer experience’ – brand alignment throughout the purchasing process
- Speed to market – development, testing and introduction without seasonal delays or other retail interruptions
- Direct access to the customer – yielding a wealth of valuable data and insight
- Assortment access – providing consumer choice from the full product range, not a limited sample
Professor Richard Wilding OBE, Professor of Supply Chain Strategy Logistics, Procurement and Supply Chain Management at Cranfield School of Management commented:
“Manufacturers are increasingly focused on gaining control of the supply chain through to the consumer, this benefits them by gaining direct understanding about consumer preferences with regards to products and services, thus reducing costs and increasing value for both parties.”
Will Shepherd from LCP Consulting concluded:
“DTC offers manufacturers the opportunity to market, sell and distribute goods directly to the consumer, bypassing traditional wholesale and retail channels. This channel can bring businesses new opportunities as well as dilemma – both of which vary, depending on the products and markets in question.”
For a copy of the LCP Consulting and Cranfield Report, please visit: www.lcpconsulting.com