How COVID-19 is Changing Direct to Consumer Sales

COVID-19 is challenging the way the CPG companies look at direct to consumer sales.

It’s not likely that Jeff Besos will be feeling threatened anytime soon, but the spread of COVID-19 has made CPG brands drastically more aware of how they conduct their direct-to-consumer (D2C) sales. Although Amazon is a convenient platform to use for selling food product, the online equivalent to Wal-Mart does not give the user, or brand for that matter, much of the ability to have personal connection with their customers or control the appearance of their brand in the eyes of the consumer. As a result, more companies have begun to turn their focus onto their own direct-to-consumer channel in an effort to regain stronger branding image and representation under their own umbrella.

Cutting Costs

As a brand listing items through Amazon’s professional plan, the $39.99 monthly feel seems simple enough, but the costs and fees add up. Sellers on this plan pay various closing fees and referral fee percentages which can range from 6% to 25% (an average of 13%).

“I don’t think most people realize how expensive to ship products through Amazon as [a company] gets bigger over time,” Scott Stevens, founder and managing partner of New York-based investment company Grays Peak Capital, said recently. “At some point, it’s just more profitable for them to sell directly through their own websites as opposed to Amazon.”

Direct-to-consumer giant, Amazon, has a fee list as long as a CVS receipt

Holy fees! While Amazon might be a great way to drum up revenue and increase exposure, over time the costs really can diminish profit potential. With the incidence of COVID-19 giving CPG companies an extreme example, more and more are beginning to see the advantage in growing their own loyal customer base by marketing and selling through their own website.

Controlling the Narrative

From the time a consumer finds a product on Amazon, to the moment they click “Buy Now”, the user experience is dictated by Amazon’s brand messaging. Then, if brands opt for Amazon fulfillment, It is then packaged, fulfilled and delivered by Amazon employees. The actual CPG brand exposure in the whole direct-to-consumer process becomes all direct and no consumer. The CPG brand exposure becomes limited and therefore they find themselves having to create CTA’s for the buyer to visit the website, although some never do. Once a company plugs into Amazon, they may find that a brand experience is crafted for them based on the customers Amazon experience. It’s the risk of out-sourcing.

According to Scott Stevens at Grays Peak Capital:  “Amazon is great if a consumer is in the discovery mode, but it is relatively limited when it comes to helping people understand what items are organic, vegan or dairy-free, besides offering product descriptions and reviews.”

While the plug and play option of setting up your brand on a professional seller plan might be enticing, there’s a lot that the consumer doesn’t get to experience that the CPG brand may want them to, limiting rapport-building and overall buyer experience.

Anything Can Happen

 Post COVID-19, it’s any brand’s game. The food industry, heck, our society is in a VUCA state. VUCA standing for volatility, uncertainty, complexity, and ambiguity. It is during these times that holes are poked in our business operations at a rapid rate and our ability to pivot and evolve becomes crucial to our survival.. As brands begin to see the downsides of typical direct to consumer sales, they have the opportunity to tighten operations, redistribute budget funds and change the definition of “business as usual”.
Within this time lies the perfect opportunity to reconnect with the consumer, remember core values, and operate from them in a way that builds rapport. It’s a time where efficiency and effectiveness can collide as goods are made available to the customer in need with a message they can relate with.

According to the Harvard Business Review (photo credit), VUCA can be a time of great potential and possibility. A place where exponential growth can take place with the right strategy.

You might be a CPG brand trying to decide what’s best for your company in regards to direct to consumer sales or perhaps you’re a manufacturer who has only just begun to bring their product to market. COVID-19 may have brought devastation beyond compare, but it has also shifted the industry to a place where anything is possible. In this time, we are discovering more ways to connect and advocate with one another to do one of the most instinctual, nurturing things we can do — feed our country.

So as a shift in your thought process, a silver-lining if you will, we ask you this: what opportunities have you not considered? And we encourage you to go, connect and grow so we can all work together as one to feed our families and the families of our country, in the best way we possibly can.

Do you need an updated nutrition panel for your CPG product? During COVID-19 LabelCalc is offering free nutrition analytics, reporting, 2020 FDA formatted nutrition panel and accompanying ingredient and allergen statements. Check it out. We support you.

What is LabelCalc?

LabelCalcⓇ is one of FoodCalc LLC’s two nutrition analysis products, created to help meet the needs of the food industry. Based in San Francisco, CA, we are a nationally recognized provider of online nutrition analysis that is fast, accurate, and FDA-compliant.

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