May 19th, 2018
The Current State of ‘Direct to Consumer’ for Brand Manufacturers
The way consumers buy from brands is shifting and, as a result, 57% of manufacturers are now embracing DTC models. Are you ready?
It’s no secret that the digital economy is reshaping the way consumers interact with and buy from brands. Each year, more and more shoppers are shifting their retail spending to online channels, representing an incredible opportunity for brand manufacturers. As the marketplace evolves and eCommerce opens more distribution doors, brands will need to make a choice: adapt or get left behind.
Over the last decade, online retail sales have skyrocketed. In 2007, eCommerce represented 5.1% of total retail sales. Now, in 2017, that number has more than doubled to 11.7%. Global eCommerce sales hit over $1.9 trillion last year and is showing no signs of slowing down with double digit growth forecasted to keep pace through 2020.
Consumers lead the way
The digital revolution has profoundly shifted the way people prefer to buy from brands. Modern consumers’ expectations set a high bar for brand manufacturers looking to stay competitive. From the research phase to the transaction, today’s consumers demand a seamless shopping experience across channels.
52% of US shoppers are already going to manufacturer’s websites with the intent to buy.
Not only do shoppers WANT to buy from brands online, they EXPECT it.
33% of US shoppers prefer to buy direct from manufacturers.
Who’s embracing the change?
As more and more consumers look to the internet to research and fulfill their buying decisions, brands must choose to embrace their customer’s preferences and innovate their models. The manufacturers that are ahead of curve are selling direct on their website and through marketplaces. In fact, more than 57% of manufacturers have already responded to the shift by embracing direct to consumer (DTC) models, representing the fastest growing category in eCommerce.
Brands large and small across industries are racing to embrace the opportunity of selling direct. Here are just a few examples:
- Nike is investing heavily in their direct to consumer model, predicting to grow DTC sales from $6.6 billion in 2015 to $16 billion in 2020.
- In 2017, 61% of all wine revenue came from direct to consumer sales – cheers!
- Even Tesla Motors decided to put their consumers first and go direct.
What does it all mean for you?
Direct to consumer sales represent a major revenue and profit potential for manufacturers. And while this shift ultimately gives brands more control over their customers’ buying experience and pricing, greater visibility into customer insights, significant improvements in customer engagement, and higher margins, the challenges associated with making the move to DTC model are not to be overlooked.
Check back in for more insights on how brand manufacturers can generate higher margins and successfully navigate the shift towards direct to consumer sales.
If you’re a brand manufacturer looking to capitalize on the direct to consumer opportunity or have already started but need help optimizing your channels, Ally is here. Reach out to our team today to explore your brand’s DTC potential.