How CPG Brands Can Balance D2C E-commerce and Online Retail Partners
If you run the risk of isolating the channel partners your brand was built on, why would it be worth expanding into direct-to-consumer website sales?
This seems to be the million-dollar (sometimes billion-dollar) question that most every CPG brand has been asking itself over the last few years. The balancing act of selling both wholesale (B2B) and direct-to-consumer (D2C) can seem daunting to even the most seasoned CPG professionals, as the fear of channel conflict is real.
Without a well-planned multi-channel strategy, making the choice to directly sell your CPG products can result in alienation from retail partners. Fortunately, with the right strategy in place, it is possible to maintain strong relationships with retailer partners while concurrently selling directly to your target customers.
With competition and threats popping up everywhere, it is imperative that traditional brick-and-mortar retail CPG brands expose themselves to new growth opportunities that allow them to better control their own destiny. In fact, an overwhelming 99% of consumer goods leaders surveyed said that they are currently investing in D2C strategies of some kind.
In this article, I will discuss how CPG brands can effectively balance both D2C e-commerce and online retail partners for maximum e-commerce success.
Communicate With Partners
Before you can tackle how you’ll balance D2C e-commerce within your current business model, you need to discuss why you are making this strategic shift with your existing channel partners. Regardless of whether your D2C website is considered to be a direct competitor or not, your existing retail partners will notice. The best strategy is to be upfront and transparent in your communication, as they will have concerns regarding how their business will be affected. Failure to ease these concerns could result in a massive drop-off of support.
While your retail partners could still dislike the decision to sell direct, how you handle early communications can be the difference between them actively seeking alternative competitor brands to support or still working together to actively build a mutually beneficial partnership.
Create Exclusive Product Offerings
In a previous article about e-commerce strategies, I discussed how one of the most common mistakes CPG brands make is believing that physical retail success can be directly and easily translated into online success and that they can sell the exact same product configurations online as they do offline. In the same regard, effectively selling through both your D2C website and online retail partners requires a re-examination of your digital product offerings.
To successfully balance both D2C e-commerce and online retail partners, create exclusive product offerings using the following strategies:
- Different Pack Sizes: Create different pack sizes for your D2C website and online retail partners based on the unique customer profiles of each.
- Different Bundles: Offer different bundles on your D2C website than you do through your retail partners. These could be variety packs, multi-packs, holiday packs, packs of complementary products, and more.
- Exclusive Local Offerings: Provide retail partners with exclusive local offerings that differentiate them from your D2C website.
- Early Access to New Products: Use your D2C website to launch new products before they’re available through your retail partners, or offer your partners early access to new products before you sell them on your site.
These exclusive offerings should not be seen as a way to create a better overall experience on your D2C site. The goal is to differentiate offerings from your wholesale customers. This will also help mitigate any risk of those products being price-matched across other retail channels and causing profitability challenges with certain internet retailers.
Ensure Price Integrity
Failure to maintain price consistency across all channels, including all digital retail partners, can result in conflicts between channel partners. When the price of a product sold online is not well controlled, there’s a risk of pricing wars. Online pricing wars happen because many digital retailers use website crawlers that extract pricing data. That pricing data is then fed into an algorithm that automatically adjusts that retail partner’s pricing to match or beat the competitor.
This automatic pricing is needed online because customers can easily toggle between several digital retailers to ensure they are getting the best value. For example, if your D2C e-commerce website is selling products at significantly lower prices than your digital retail partners, your online partner sales will plummet. Your retailer partners could then find themselves having to compete on price and may decide they are better off not promoting your products due to the heightened competition.
To ensure these retailers continue to carry your products and not turn to your competitors to fill the gap, make sure to institute and enforce a minimum advertised price (MAP). MAP represents the lowest price you will allow your resellers to advertise one of your products. This allows for a greater level of price integrity that can eliminate switching from customers and the “race to the bottom” caused by website crawlers.
Build Brand Loyalty
Selling directly through your website provides the distinct advantage of creating a captivating customer experience. Retail partners don’t have the same capabilities to offer rich content for every brand they offer on their digital shelves. Because your website can include enhanced imagery and videos, brand history, and additional product information, customers can feel more connected to your brand.
In today’s hyper-competitive CPG market, meeting the rising customer expectations is paramount to creating brand loyalty. With brand loyalty wavering since the Great Recession, D2C websites provide an opportunity for brands to leave lasting impressions on customers at every step of the buying experience. This increased brand loyalty can be beneficial for your retail partners; in fact, Forrester Research found that 54% of brands that sell directly to customers have also seen growth in sales via their channel partners.
To further reduce channel conflict, brands can support digital retail partners by redirecting business to them when possible. With consumers pushing for a greater level of frictionless retail, brands selling direct would be wise not to restrict how, where, or when a customer can purchase and fulfill their order.