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The Future of FMCG: Embracing DTC Without Disrupting Physical Retail

Navigating today’s FMCG landscape involves embracing DTC while preserving physical retail relationships. Find out what guarantees a successful co-existence of digital and physical, aside from data-driven insights and open communication, in this article. 

October 3, 2023

5 mins read

Anastasia Hamurari

In the ever-evolving landscape of Fast-Moving Consumer Goods (FMCG), businesses are constantly seeking innovative ways to reach consumers efficiently and effectively. One such innovation that has gained significant traction in recent years and become an essential part of the modern business ecosystem is Direct-to-Consumer (DTC) commerce.

With ecommerce making up a sizeable chunk of current global FMCG sales, brands and consumers are becoming increasingly interested in DTC and using digital channels to purchase a wide range of FMCG products, including food and drink items. 

Combined with consumers expressing strong interest in receiving their household items directly to their homes, selling directly to consumers is a huge opportunity for FMCG brands.  

While DTC can offer substantial benefits, it also poses new questions about potential conflicts with traditional FMCG routes to market via retail partners. To navigate this delicate balance, it's crucial for FMCG companies to embrace a hybrid approach that leverages both DTC and physical retail channels, also known as an omnichannel business strategy.

In this article, we’ll explore how FMCG businesses can chart a successful course toward a profitable future combining physical store presence with a DTC model that ensures a smooth go-to-market. From creating complementary offers to harnessing data for insights, there are a handful of tactics FMCG brands can employ to thrive in using DTC all while maintaining positive physical retail channels.

The DTC opportunity 

DTC has become a game-changer for many FMCG companies. By establishing a direct connection with consumers, brands can gather valuable first-party data, build brand loyalty and increase profitability.  

In addition, this transition towards DTC presents an opportunity to preserve and better relationships with supermarkets, convenience stores, and other distributors.

These retailers have played a pivotal role in distributing products, expanding market research, and driving sales. Thus, adopting DTC as a channel to create an omnichannel approach can enhance the overall ecosystem by complementing existing retail partnerships and forging new digital pathways for brand success both on and offline.  

Embracing a hybrid omnichannel approach

For brands that have relied on well-established physical retail relationships to reach consumers, the prospect of entering and expanding a DTC offering might seem daunting. However, the opportunity is to approach both channels and be beneficial to the brand’s overall routes to market, it’s not one or another.  

Rather than forsaking physical retail channels, which provide advantages like consumer convenience, heightened visibility, and expanded brand exposure, integrating a DTC approach can serve as the bridge to harmonious coexistence across channels, ultimately offering the consumer the opportunity to shop how and when they prefer.  

Moreover, DTC can act as a catalyst for innovation and adaptability. By embracing a direct-to-consumer strategy, FMCG companies can gain detailed insights into consumer preferences, enabling them to swiftly respond to market trends and evolving customer demands.
 
This agility not only benefits DTC operations but also enhances product offerings and marketing strategies across all channels, reinforcing a brand’s overall competitiveness. Here’s how your brand can adopt this hybrid omnichannel approach

Leverage retailers’ network 

Rather than viewing retailers as competitors to a DTC proposition, FMCG companies can tap into the vast network and contacts that retailers have established. 

Retailers often have valuable insights into local markets, customer preferences, and trends. They have a solid understanding of consumers’ unique demands, too, which contributes to the wealth of knowledge FMCG brands can use to personalize their DTC offering.     

By collaborating with retailers and sharing market data, you can strengthen your brand’s DTC position while ensuring retailers stay engaged and valued. 

Mom and daughter shopping for everyday products at the supermarket

Optimize inventory management 

Inventory management is a critical aspect of any FMCG operation. Companies can use their physical retail presence to optimize inventory levels.  

This means having a clear understanding of which products perform best in different locations and tailoring DTC offerings accordingly. This approach ensures that products are where they are needed most, reducing the risk of overstocking or understocking. 
 
Efficient inventory management not only ensures products reach consumers before their expiration date, reducing unsellable inventory and associated losses but also plays a crucial role in addressing pressing consumer concerns like sustainable packaging.
  
In today’s FMCG landscape where sustainable practices are a growing priority, every effort made to tackle these issues can significantly contribute to building trust and fostering customer loyalty. 

Create complementary offers

A complementary approach to bridge the gap between your direct-to-consumer and traditional retail channels enhances brand collaboration and caters to consumers’ diverse shopping preferences.   

For example, running joint marketing campaigns that drive traffic to physical stores while offering exclusive DTC discounts can be a win-win strategy. This approach fosters cooperation rather than competition. 

Bundled promotions, cross-channel discounts, and loyalty programs also provide added value and convenience, all while emphasizing the strength of the partnership and increasing market penetration.   

Maintain open and transparent communication 

Open and transparent communication is key to managing the transition to a hybrid model successfully with retail partners, and internally throughout your FMCG organization. An omnichannel approach reinforces consistent brand messaging across all channels, and when adapted to each channel, will help customers understand the value proposition each channel offers.   

FMCG companies should keep their retail partners informed about their DTC strategies and seek input and feedback. This collaborative approach builds trust and minimizes any apprehensions retailers may have about DTC initiatives.  

Harness data for insights 

In an increasingly data-driven world, the ability to collect, analyze, and act on data is a competitive advantage. Once the data is analyzed, data-driven insights are an asset for FMCG companies that can be used to personalize their offerings and marketing efforts.  

For instance, data-driven pricing strategies can help FMCG companies determine the optimal price points for their products in both channels. By analyzing market conditions, competitor pricing, and consumer demand, companies can set prices that maximize profitability while remaining competitive.  

Additionally, these insights can guide product development and innovation efforts. By analyzing consumer behaviors, feedback and preferences, FMCG companies can identify opportunities to create new products or improve existing ones that align with consumer desires. 

Choosing the right DTC platform 

Consumers today are more diverse than ever in terms of their shopping preferences. While some seek the digital and personalized experience of online shopping, others still prefer the tangible experience of shopping in physical stores. 

This points to the need to follow an omnichannel model that leverages the strength of both channels within wider go-to-market plans. To achieve the balance between the two, your brand will need to implement a combination of strategies, including leveraging retailers’ network, optimizing inventory management, and harnessing data for insights, among other tactics.   

By recognizing the unique strengths of each channel and fostering collaboration, FMCG companies can easily adapt to evolving consumer expectations and thrive in this omnichannel landscape.  

Ingenuity can help you get started with the adoption of a DTC platform that brings long-term results. The future of FMCG belongs to those who embrace an omnichannel strategy, and we can facilitate your position in the market as a brand with the most optimal digital solution that works in harmony with your established retailer strategy.
  
Our nearly two decades of experience in delivering a complete commerce solution for brands across a variety of niches, including FMCG, makes us a reliable partner. 

Ready to go digital and preserve the relationship you have with physical stores? Get in touch with us today

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