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Is coronavirus the D2C ‘tipping point’ for manufacturers?

26 June 2020

The impact of the coronavirus is forcing some manufacturers to rethink the way they distribute their products – with a surge in interest in developing online eCommerce platforms so that they can go direct to consumers (D2C).

For others, the pandemic has accelerated plans to make the move to open up channels specifically for end users, either as a main route to market or as a second distribution stream.

That’s the findings from Access, a Manchester-based integrated creative marketing and digital agency, which has seen a spike in enquiries from a cross section of manufacturing sectors who are all exploring their options not only to preserve their businesses, but also to potentially grow them.

Managing Director Simon Landi said that speed at which many manufacturers pivoted at the peak of the crisis to make much-need respirators and personal protective equipment for the NHS and other vital services, has given them the idea that they can switch other parts of their business too – including their sales channels.

“UK manufacturing was magnificent during the onset of the pandemic by the way in which it responded to the national call to make PPE and other equipment – and the speed of change was incredible,” said Simon.

“It has highlighted just how quickly manufacturers can adapt in a crisis and move almost seamlessly from making one thing to something completely different.

“And I think this has got some firms curious. If they can change their manufacturing processes, what else can they change? It feels like UK manufacturing is reaching a tipping point on a number of fronts and revelations like D2C are exciting new worlds for some companies.”

Access’s finding are in line with the Going Direct report from Barclays which shows UK manufacturing is on a direction of travel towards a greater emphasis of D2C.

Barclay’s report cites research by Cranfield University that shows that UK manufacturers are also keen to explore the possibilities of D2C – with almost half (48%) of manufacturers already building channels to support the strategy, and 87% seeing D2C as relevant to their products and consumers.

The bank predicts that the UK manufacturing sector could add £13.3bn of D2C revenue in 2025 through greater investment and more effective business strategies to support the D2C approach. This is a 15% growth over the coming five years. And, using this sales strategy, D2C could also create 31,400 new jobs.

Three main hurdles to overcome

Whilst momentum for D2C is gathering pace, Simon Landi points out that there are still three barriers that are holding some manufacturers back.

1. Alienating business to business (B2B) customers and backlash from partners within the distribution chain. For many manufacturers, these existing relationships have been forged over many years and it’s only natural to worry about biting the hand that fed their business for many years.

One of the big advantages of D2C is that manufacturers can dip their toe in the water – with Heinz as a good example. It launched it’s Heinz to Home service during lockdown, not as a way to bypass retailers but as a way to add value to consumers who may have been struggling to purchase their favourite Heinz brands such as baked beans and ketchup at a time when getting to the supermarket or online shopping was problematic.

Manufacturers are missing lucrative revenue streams if they don’t respond to what end user consumers need and they shouldn’t think of it in terms of cutting out the middle-man, more like creating new routes to market that sit alongside existing paths.

2. The business upheaval. Hopefully, as pivoting has shown, many manufacturers can respond quickly and decisively to change so introducing D2C isn’t the upheaval that firms fear.

3. Uncertainty over the return on investment in tech and additional resource required to make the shift successful. A common misconception if that manufacturers can simply move to direct selling as a bolt on to their business by adding a Shopify plug-in, creating an eCommerce team and bringing in a third-party distribution partner. However, in Access’ experience successful businesses who’ve entered the D2C and eCommerce market are ones that have engendered change across the entire operation – and this approach creates a stronger and more stable platform from which to grown and realise the return on investment.

Summing up, Simon Landi says that 2020 has seen a seismic shift for manufacturers, with part of that shift heading towards D2C.

“There is a world of opportunity opening up to companies right across the manufacturing spectrum, he said. “Some have fully embraced it, some have had to tolerate it as a means to keep trading, and some don’t think it’s for them.

“But what’s very clear is that D2C is here to stay as the consumer appetite to purchasing directly online and having products shipped straight to their front door is the new normal.”

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