Selling directly to the consumer has been a boon to industries such as beauty, food storage and even mattresses. But food is particularly difficult to sell using a D2C model. Consumers buy a variety of foods at a market and are unlikely to start purchasing cases of their favorite chips directly from a manufacturer. Furthermore, shipping just one bag of chips is cost prohibitive. Finally, food is perishable and difficult to keep stocked for long periods of time, awaiting a consumer to click “buy” on their phone. These reasons add up to a slightly antiquated business model for the grocery industry. Read more about this in a blog post we published last year. One startup plans to change the grocery industry and tap into a pseudo D2C business model as well. Imperfect Produce buys the “ugly” or surplus produce that farmers would have otherwise left in their fields. The company then ships subscription boxes of the produce to consumers looking for cheap alternatives to the reddest apples at their local supermarket. "We work directly with the farms and we're buying directly from farms," said Reilly Brock, a content manager at Imperfect Produce. According to Brock, Imperfect focuses on “the ugly and surplus produce because there isn't a market for a lot of it. Despite the fact that appearance doesn't impact flavor or taste or nutrition at all, most grocery stores won't buy ‘ugly’ produce." Imperfect Produce’s primary focus is curbing food waste. Founder and CEO Ben Simon has been concerned about food waste since his college days. While at the University of Maryland he started the Food Recovery Network, a nonprofit focused on reducing food waste in college cafeterias. According to the company’s website, “More than 20% of the fruits and vegetables grown in America never make it off the farm because they aren’t perfect enough for grocery store standards.” Imperfect Produce’s strategy is novel, but not everyone agrees that it’s perfect. Some worry that this national startup will cut into the profits by farms and co-ops who offer community supported agriculture (CSA) programs. In an article published on newfoodeconomy.org, a nonprofit called Phat Beets Produce writes, “Three years later and with a 30-percent drop in customers at our Beet Box CSA, we realized that we were being out-competed by a startup with a glitzy marketing campaign and venture-capital funding.” The article complains that this decline in business has led to cutting back on charitable outreach such as a free farmstand run by the non-profit in an underserved area. It goes on to criticize, “The company has helped to create a market for the “waste” created by industrial agribusiness, selling it to conscious (rather than needy) buyers by branding it as a form of environmental activism.” When Ironbridge spoke with Imperfect Produce, they acknowledged that they’ve created a market for previously unsellable produce, but that doesn’t mean they’re now competing with food banks. Brock also acknowledged that farms need to be large enough to sell to Imperfect Produce. “Even after food bank donations, there's billions of pounds of produce that they can't move,” Brock said of the farms they work with. He continued, “They also don't have a lot of incentive to pick a lot of this stuff…it's cheaper to leave it in the field. So we offer an outlet for farmers.” Imperfect Produce can’t work with every small farm due to logistics. Moving produce is extremely time-sensitive and more about logistics than anything else, Brock explained. As for food banks, California’s food banks can only accept so much produce each year. With the majority of U.S. farms operating in California, that still leaves a huge surplus that would otherwise rot in the fields. Citing the NRDC, Brock says that the U.S. generates about 6 billion pounds of food waste each year. “It's a multi-billion pound problem and right now we have a million-pound solution,” Brock says. Imperfect Produce’s goals revolve around chipping away at the food waste problem in the U.S. True, a traditional CSA program is a purer form of D2C selling. But no CSA could achieve the scale that Imperfect Produce has in just three years. They currently operate in eight cities and have plans for expansion. In those three years, they’ve moved 30 million pounds of ugly or surplus produce. “We want to be a voice for change and positive reform in our food system,” Brock says, adding, “but we realize that we’re not the only solution.” In the history of the grocery industry, no other company has made such strides in delivering a perishable commodity to consumers. Between the popularity of subscription boxes and the technology available, the market is ripe for opportunity in this area. Stay tuned for more on D2C sales. Written by Kim Kelly Consulting

Since the dawn of the traveling salesmen, companies have sold directly to the consumer. But in the early 2000s, the rise of e-commerce made direct-to-consumer sales an option for nearly any manufacturer on the market. This moment created an incredible opportunity for manufacturers to control their brand message and reach out to consumers directly. You can read more about the rise of D2C in Ironbridge’s previous blog post here. In this post, we’ll discuss the various approaches, or channels, a company can take to sell directly to the consumer. E-commerce Likely the most common channel to sell directly to the consumer is via a manufacturer’s website. With the simple addition of an e-commerce interface, manufacturers can outfit their websites to take orders directly from customers. Of course, these manufacturers must also set up the fulfillment process, which can be costly. If done right, a manufacturer can use their website to not only generate sales but to also collect customer data and ultimately have more control over their brand. One company that is making a serious investment in D2C sales is Nike. The company saw digital business rise 18% in Q2 of 2018 according to Quartz. Nike’s goal is to personalize products for its millions of customers. The way the brand plans on doing this is by interacting with customers directly and collecting data. According to a Business Insider article from June 2017, “In short, the company is de-emphasizing its readymade network of retailers to create an even more precise targeting mechanism, and it’s doing so under a program it calls Consumer Direct Offense.” Instead of shipping products to boutiques, big box stores and retailers, Nike is segmenting products amongst its own properties: the app SNKRS, Nike brick-and-mortar stores and Nike outlet stores. Brick-and-mortar stores Although e-commerce broke open D2C for many manufacturers, others have found success for years in brick-and-mortar retail. Think of Apple or designer brands such as Coach. Often these brands are also available through third-party retailers (you can purchase Apple products at Best Buy and a Coach purse at Macy’s). But the brick-and-mortar D2C model still has merits. The stores create brand presence on a city block and also allow for total control over the customer experience. From the facade of an Apple store to the energy given off by their staff of “geniuses,” the entire customer experience is tightly controlled. Operating a brick-and-mortar store is much more costly than selling goods online, but can also be rewarding for the brand’s image. Furthermore, brands can leverage their physical presence with online interaction for omnichannel marketing efforts. Amazon Marketplace Amazon Marketplace is taking out some of the risk of selling D2C. The platform allows manufacturers and third parties to sell goods on Amazon.com. As the leader in e-commerce sales, Amazon’s presence and fulfillment process can help bolster a brand’s D2C sales. Technically the brand is selling through Amazon as an intermediary, but there is still enough interaction and control that Amazon’s Marketplace has become a sort of platform for the D2C model. The main drawback for their model is that Amazon takes a cut of the profits. Many manufacturers see selling D2C as a chance to keep retailer margins and make a larger profit but Amazon Marketplace would cut into that share. Co-op ventures Just like Amazon Marketplace giving retailers a space, certain industries need a little more help selling directly to consumers. Consider the produce industry. Sure, a farmer can sell directly to consumers via a farmer’s market or community supported agriculture program, but growth is limited in these venues. A company called Imperfect Produce is collaborating with farms around the country to sell produce directly to the consumer at a reduced price. According to the company’s website, “Imperfect delivers produce to your door for 30-50% less than the grocery store. We do this by sourcing ‘ugly’ fruits and vegetables that usually go to waste on farms. These fruits and veggies taste the exact same on the inside but look a little ‘wonky’ on the outside.” This D2C model again uses an intermediary, but gets close to serving the consumer directly considering the industry. Multi-level marketing MLM companies employ representatives to sell their products directly to the consumer (as well as recruit other representatives, thus creating multiple levels). Avon was founded in 1886 and gave women career opportunities without having to leave home. The brand was a pioneer in the D2C space. Today, MLM companies are still popular with manufacturers and consumers alike. Many of these companies still rely on female representatives and products traditionally marketed towards women (makeup, cookware, candles, clothing, jewelry, elc.). One major change in the MLM model is the marketing done by representatives. These brand ambassadors no longer have to rely on home parties for the bulk of their revenue. Rather, many representatives use social media to build and maintain a customer base. Conclusion The D2C boom is just getting started. Many new companies are D2C natives and never had a retail presence or brick-and-mortar stores (think Warby Parker and Casper). By leveraging digital marketing and mobile technology, these and other more traditional brands can capture never-before-seen customer insights. And when brands get to know their customer, good things tend to follow. If you’re looking to make moves into D2C or you’re already there, Ironbridge can help. We’ll look at your data and help you determine which marketing strategies are working and what your conversion rates look like. Contact us for a free quote today. Stay tuned for more on D2C sales. Written by Kim Kelly Consulting

Manufacturers are selling direct-to-consumer more than ever before. According to a blog post by the logistics platform Bringg, nearly half of manufacturers are pursuing direct-to-consumer sales and 87% of them report these channels are relevant to their consumers and their products. To understand why such a shift is occurring now, we first have to understand the supply chain that has driven consumer retail for decades.

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What is direct-to-consumer Before e-commerce disrupted retail, manufacturers sold goods to a wholesaler that sold to a retailer that sold to the consumer. Products would go from warehouse to truck, truck to pallet, pallet to shelf before landing in a consumer’s hands. Some businesses always embraced direct-to-consumer (think bottled water delivered to your house), but by and large, consumers visited a store to purchase anything from groceries to home improvement products to clothing. The rise of e-commerce and especially Amazon changed all this. As the diversity in products sold online grows and delivery times decrease, consumer expectations grow. Now, manufacturers can sell goods directly to the consumer via their own website or even through Amazon. Manufacturers are rushing to join the direct-to-consumer revolution. Benefits of direct-to-consumer sales The appeal of selling direct-to-consumer lies in a relationship with consumers. For the first time, manufacturers can have complete control over their brand identity. In the past, intermediaries had control over where products were placed and how consumers experience the product. Now, manufacturers can control these elements like never before. Social media and digital marketing have upended the traditional marketing strategies of manufacturers. Now, the brands can market themselves, develop a strong story and identity and do so at a much lower cost than print or in-store marketing had previously offered. It’s not only natural, but expected for manufacturers to have an e-commerce presence. When was the last time you visited a brand’s website and weren’t able to purchase a product? It’s becoming increasingly rare and manufacturers are anxious to join the masses in selling their products from their own websites. Finally, manufacturers selling direct to the consumer retain far more of the margin they give up to the wholesaler/retailer. Obstacles to selling direct-to-consumer While selling direct-to-consumer has immense appeal, it also poses some challenges. First, a manufacturer needs the infrastructure to sell directly from their warehouses. Remember, most brands are set up to sell large quantities to wholesalers and retail distribution centers. Putting in place the logistics to take individual orders and ship single items to consumers can be costly and inefficient. According to an article written by Frank McGuigan for talkinglogistics.com, “supporting a multi-channel delivery model requires an agile supply chain and exceptional supply chain planning and execution processes and technology to make it work.” Another major challenge for manufacturers is to sell online and via Amazon while retaining profitable relationships with intermediaries like wholesalers and retailers. Essentially, they need to straddle the traditional retail model with the new wave brought on by e-commerce. This is called channel conflict. There are ways to manage channel conflict and we’ll address a few strategies later on in this blog series. How can big data analytics help? If you’re a manufacturer, looking at your own data is the single best way to measure the value of direct-to-consumer sales. If you want to know if your direct-to-consumer channels are working, you have to look at your own data. Ironbridge’s team of expert consultants can help you drill down on sales, inventory and pricing so that you can manage relationships with both retailers and consumers. Contact us for a free quote today. Written by Kim Kelly Consulting.