going direct: exploring the d2c opportunity in uk consumer
TRANSCRIPT
COLOURBOX/Prathan Chorruangsak
www.s im on-kuc he r.c om
Going Direct: Exploring the D2C opportunity in UK Consumer Goods
10th Feb 2020
James Brown
London office1 Plough PlaceLondon EC4A 1DE, UKTel. +44 20 7832 6700 james .b [email protected]
Going Direct: Exploring the D2C opportunity in UK consumer goods
3rd in a series of webinars
22nd Apr 2020 – Preparing for recovery: Implications and actions for Revenue Management in UK Consumer Goods
24 th Nov 2020 - Outlook 2021: Revenue Management in UK Consumer Goods
10 th Feb 2021 – Going Direct: Exploring the D2C opportunity in UK Consumer Goods
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Going Direct: Exploring the D2C opportunity in UK consumer goods
Direct to Consumer(D2C)
What do we mean by going direct?
Why should CG companies in the UK market be looking at this?
How do successful companies approach this?
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Before we begin: Audience & scope today
Going Direct: Exploring the D2C opportunity in UK consumer goods
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Going Direct: Exploring the D2C opportunity in UK consumer goods
Sourece : ONS
Context: UK was already a global leader in ecommerce, and 2020 of course accelerated the shift online
£99bnIn online retail sales in 2020
26.2% Share of retail sales
87% Over 16 year olds shop online
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COLOURBOX / Pressmaster
Online shoppers
55%
32%
29%
28%
24%
22%
22%
18%
18%
17%
13%
13%
13%
12%
8%
0% 10% 20% 30% 40% 50% 60%
Clothing
Meals/restaurant food
Books, newspapers, magazines
Furniture & home accessories
Computers, tablets, phones
Childrens products
Cosmetics, beauty or wellness products
Cleaning & personal hygiene
Consumer electronics
Sporting foods
Food or beverage (grocery)
Medicine or supplements
DVD /Blue Ray
CD etc.
Vehicles & spare parts
Share of re spondents
Note(s): United Kingdom (Grea t Brita in); 2020; 16 years and older; 1 ,800**; bought within the las t 12 months .Source(s ): Office for National Sta tistics (UK)
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Context: Which ever consumer category you are in, someone is buying it –and selling it - online
Most popular goods purchased online in Grea t Brita in 2020
Going Direct: Exploring the D2C opportunity in UK consumer goods 6
Going Direct: Exploring the D2C opportunity in UK consumer goods
Source : Barc lays – “A Direc t Approach”
Context: When it comes to buying direct
57%Of shoppers order some items direct from manufacturer
24% 27%
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Source: Simon -Kucher & Partners
D2C is one format in the "own retail" business offering profitable growth in a digital Consumer Journey
D2C/E2C ("own e -com")
Web shop: se lling via own website d irectly to consumer
Marketplaces: se lling via third party providers d irectly to consumers
Distance sellingPure Online Player
3rd party shop on online porta lOnline shopping clubs
TV shoppingMail order
...
Stationary retailDepartment s tore
Specia lty re ta il cha inWholesa le Premium Reta il
Big Box Reta ile rsHyper- and Supermarket
…
Own stationary retailFlagship s toreRegular s toreShop-in-shop
Factory outle t center
Cha
nnel
to c
usto
mer St
atio
nary
Onl
ine
B2B B2C
Route to customer
Going Direct: Exploring the D2C opportunity in UK consumer goods 8
Source: Simon -Kucher & Partners research
Going Direct: Exploring the D2C opportunity in UK consumer goods
Nestle Diageo
‘He inztohome.co.uk’ launched April 2020, offe ring bundles of core He inz products
“Very good online traffic a t these early s tages” Head of e-commerce at Kraft Heinz UK
2020 saw a multiple brands trying out D2C offerings in the UK
Launched partne rship with De live roo in May 2020
Selection of chocolates , snacks & coffees via De live roo Essentia ls de live ry p la tform
‘Haigclub .com’ launched Sep tember 2020
Real push to d rive sa les through socia l media
‘Revl.co.uk’ launched Nov 2020, offe ring full range of Molson Coors b rands + drinks and snacks from se lect 3 rd
partie s Curated bundles & “at
home occas ions”
Molson CoorsKraft Heinz
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Going Direct: Exploring the D2C opportunity in UK consumer goods
Investing in new routes to market
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Source: Simon -Kucher & Partners research
Going Direct: Exploring the D2C opportunity in UK consumer goods
Clorox (US) Nike (US)
International examples
PepsiCo (US)
‘pantryshop .com’ and ‘snacks .com’ launched in May 2020 offering s tap le b rands
From conception to implementa tion in less than 30 days
Launched ‘Objective’ in la te 2019, a d igita lly na tive supplement b rand to appeal to younger audiences
Focus on da ta genera tion and personalisa tion
Closed severa l wholesa le accounts in 2020 to focus on D2C s tra tegy through Nike Digita l and own s tores
“The consumer shift to d igita l is permanent, and our d igita l penetra tion will only increase” Nike CEO
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Going Direct: Exploring the D2C opportunity in UK consumer goods
Timely reminder / Bundling and personalising lower value product
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Going Direct: Exploring the D2C opportunity in UK consumer goods
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A big shift for most CG manufacturers!
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Source: Simon -Kucher & Partners
Successful D2C business in a nutshell: Operational and mental transition are key!
A successful D2C bus iness:
Follows a clearly defined strategy and value proposition
Transforms capabilities into commercial guidelines to outline the D2C value p roposition
Has an in-dep th unders tand ing of consumer metrics and masters smart customer acquisition
Is enab led by focused, agile teams and a transformed organisational set -up
Involves all enabling functions to combine and leverage operations centrally in one p lace
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Demons trates an omni -channel mindset which supports execution from concept to scaling
Going Direct: Exploring the D2C opportunity in UK consumer goods 14
Sources: Simon -Kucher p rojec t insights, Macrotrends, Businessinsider, Amazon, Desta tis
Digital channels play an increasingly important role – and everyone’s reason for getting on board is different
Become part of the digital consumer journey
Shift of consumer journey online acce lera ting37% of offline purchasess tart online
Keep up with Amazon
Stock market va lue +74%UK Sales growth +51%
Leverage e -commerce growth
Continuous growth acce lera ted by change in buying in 2020+ 35% growth in UK e-commerce share in 2020
Reduce channel dependency
Manufacturers with dependencies not res ilient in a vola tile world .- 25% re ta il sa les in April 2020 compared to 3 year average
Why put D2C on top of your
agenda?
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… But we end up spending much of the time at arms length from these, working through a retailer who does not share our objectives!
Manufacturer Shopper Consumer
Going Direct: Exploring the D2C opportunity in UK consumer goods 16
When we talk Revenue Management, we talk about identifying the demand/revenue pools for consumption moments and shopper missions…
Manufacturer Distributor Shopper ConsumerRetailer
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Source: Simon -Kucher & PartnersE2E= End to End
Why: D2C contains value creating opportunities, with tremendous potential for growth if executed correctly
Gain control with lower dependency on (dominating) re ta ile rs Realise higher margins due to control on pric ing and promotions Re-inves t trade spend and shopper marketing budge ts
Es tab lish an E2E brand experience for your consumers Use data to build and improve your consumer relationships
Build the ideal organisation to leverage your business Speed up and profit from low barriers to test new products
Commercial
Consumer
Organisation
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Going Direct: Exploring the D2C opportunity in UK consumer goods
How : It’s not all about the tech
“If Netflix was only showing re runs of Fras ie r and Ally McBeal no-one would have s igned up” – Bened ic t Evans
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Source: Simon -Kucher & Partners
D2C in a nutshell: From strategy to go -live – How to reshape and deploy a profitable D2C online business?
Vision& Value
proposition
Capability build ing
Smart customer
acquis ition
Enabling functions
Organi-sa tional
focus
Execution Mode
Going Direct: Exploring the D2C opportunity in UK consumer goods
Vis ion& Value
proposition
Capability build ing
Smart customer
acquis ition
Enabling functions
Organi-sa tional
focus
Execution Mode
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Source: Simon -Kucher & Partners
Structure follows strategy – Is the value proposition and operating model for your D2C business defined?
Vision & value proposition
Manufacturer
Market Consumers
D2C Valueproposition
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Source: Simon -Kucher & Partners
Structure follows strategy – Is the value proposition and operating model for your D2C business defined?
Vision & value proposition
Manufacturer
Market Consumers
D2C Valueproposition
Going Direct: Exploring the D2C opportunity in UK consumer goods
Occas ion
Brand
Pack
Price
Channe l
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Going Direct: Exploring the D2C opportunity in UK consumer goods
Source : Simon-Kucher & Partners
Organisational focus
D2C requires organisational focus: Transform your organisation and D2C set -up to enable your strategy
D2C Go -to -market approach - central or local?
Option 1: One team per local webshop
Web shop
Web shop
Option 2: One centra l team
Web shopWeb shop
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Going Direct: Exploring the D2C opportunity in UK consumer goods
Source : Simon-Kucher & Partners
D2C business requires agility and speed : Successful corporate D2C ventures are ring-fenced teams includ ing a ll critica l functions with full autonomy and freedom.
Organisational focus
D2C requires organisational focus: Transform your organisation and D2C set -up to enable your strategy
D2C Team structure – focused or cross -functional?
D2C product owner
Analytics lead Marketing lead
Analys t
Tech & Ops lead
Head of operations
Content leadCX leadFull s tack developer
Overview : Illus tra tive D2C Team
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Ensure all capabilities are in place and align commercial guidelines with the value proposition
Capability building
Fron
t-en
d
Portfolio Assortment Subscriptions Bundling
Pricing strategy Product pricing Promotion pricing
Subscription pricing
Content & Care Content Planning
Content Creation
Digital asset management
Marketing Brand management Marketing Mix Automation
Consumer Personalisation Member management Segmentation
UX (Experience) Data capture UX management CRM
Back
-end
Channels Digitaladvertising Social media Campaign
management
Suppliers Paymentmanagement
Agencymanagement
Fulfillment management
IT & Analytics Process automation
Systemsintegration
Databasemanagement
Operations Delivery Inbound logistics
Returns management
Governance Monetisation New business development
KPIs and incentives
Consider all required capabilities for a successful D2C business…
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Ensure all capabilities are in place and align commercial guidelines with the value proposition
Capability building
Fron
t-en
d
Portfolio Assortment Subscriptions Bundling
Pricing strategy Product pricing
Promotion pricing
Subscription pricing
Content & Care Content Planning
Content Creation
Digital asset management
Marketing Brand management Marketing Mix Automation
Consumer Personalisation Member management Segmentation
UX (Experience) Data capture UX management CRM
Back
-end
Channels Digitaladvertising Social media Campaign
management
Suppliers Paymentmanagement
Agencymanagement
Fulfillment management
IT & Analytics Process automation
Systemsintegration
Databasemanagement
Operations Delivery Inbound logistics
Returns management
Governance Monetisation New business development
KPIs and incentives
Consider all required capabilities for a successful D2C business
Dynamic pricing
Use a pricing algorithm to adjust your pricing to meet current market dynamics with clear pricing rules
Competitive pricing
Follow a low price strategy to always stay competitiveand attract consumers via low price levels
Value-based (static pricing)
Keep the RRP stable over the full lifetime of a product to emphasize value and ensure consistent value -based pricing hierarchies of your overall portfolio
Product pricing
And align commercial guidelines to strengthen your value proposition:
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COLOURBOX/ -
Source : Simon-Kucher & Partners
Operations are key – don’t underestimate the power of joining all enabling functions in one place
Legal & tax structure
IT
Financial model
Supply chain model
Q&R
Enabling functions
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Source: Simon -Kucher & Partners
Rethink your definition of financial success - are you already a master of smart customer acquisition?
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Visb ility: Every £ you spend links back to what you ge t
D2C profitability is driven by smart consumer acquisition:
Consumer lifetime value
Key metrics: Retention ra te Revenue / consumer Contribution margin
Consumer acquisition
cost
Key metrics: Channel mix - free vs . pa id channels Avg. cost per click Convers ion ra te
D2C profitability
Smart customer acquisition
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Client example, >€300m baseline revenue
Rapid “growth hacks” disrupted the way e -commerce, marketing, and sales are done…
Sanitised client example
+ €1.1m p.a .
Triple basket at point of sale
Added a "3x add to cart" button next to the s tandard "add to cart" button for top-se lling products
Add to cart
add to cart for free shipping3x
Don't feel like shipping costs?
+ €580k p .a .
Terms and conditions email
Sent out information email about changed te rms and cond itions to add ress cus tomers with no opt-in
Everything is new – we changed our T&C
Dear Martin,
+ €396k p .a .
Push notificationflash sale
Sent out push notifica tions with limited time offer for one hour only to a ll app users
OUR-SHOP 12min ago
◊ FLASH-SALE ◊ for the firs t day of sp ring!
🌸🌸Trip le your bonus points on our-shop .com!
+ €2.6m p .a .
Personalisationin checkout
Personalised the recommended products in check-out based on pas t purchase behavior
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Kickstart into execution: scale your D2C strategy from concept to full deployment
Execution
Discover
Scale
Deliver
Design
Clear value proposition and strategy
Concept developed and go live prepared
Testing and learning with pilot & consumer insights
Full deployment, optimisedway of working & omni -channel mindset
Organisation , team structure and processes designed
Awareness for multi -channel mind -set created
Pilot and roll -out plan prepared Consumer decision journey
understood and value proposition defined
Commercial guidelines aligned with D2C strategy
Onboard team Execute pilot/MVP and capture
learnings Assess gaps in capabilities,
resources & processes Review concept
Fully deploy reviewed concept Scale organisation , processes &
technologies Enforce mindset change Build and grow team
We can support you to excel in all aspects of (re-)shaping and your D2C strategy and (re -) fueling sales growth in your online D2C business!
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COLOURBOX/ -
Source : Simon-Kucher & Partners
Post webinar check: From strategy to implementation –How advanced is your D2C business?
Yes No
8 Do your processes and systems enab le the des ired commercia l se t-up?
1 Do you have a clear strategy for your D2C business and fixed revenue/ profit targets that you want to achieve?
9 Do you have an action plan in p lace how to exploit consumer data you collec ted via D2C channels?
3 Do you ac tive ly manage your channel conflicts ?
Do you have a dedicated team inc lud ing supply chain and IT functions d riving your D2C bus iness?5
2 Do you have a value proposition tha t d ifferentia tes your D2C bus iness vs . other online players?
Does your organisa tion show the required capabilities and set -up to enab le your s tra tegy? 4
Do you know how to create and leverage the optimal marketing mix for your D2C opera tions?6Do you measure your Customer Lifetime Value and the Cost of Customer Acquisition ? 7
Are you successfully operating in an online D2C environment? 10
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Simon-Kuche r | Outlook 2021 | Revenue Management in UK Consumer Goods
Three key takeaways
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2
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Reasons to try D2C mode ls are compelling – increased brand control and reduced re liance on re ta ile rs
Barrie rs in te rms of shopper accep tance , logis tics and technology have fa llen
Inte rnal capab ilitie s and the mindshift needed are – for many – the b igges t barrie r to success
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