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Direct-to-Consumer (DTC) channel set for take-off in manufacturing

  • Manufactures leading the way in DTC expect rapid growth
  • Doing nothing could be a high-risk for manufacturers
  • Report highlights key DTC capabilities and advantages

With revenue growth remaining challenging, almost half (48 per cent) of manufacturers are racing into building Direct-to-Consumer (DTC) channels, with almost all (87 per cent) seeing DTC relevant to their products and consumers. 

These findings are published in a new report[1] today (23 March 2017), by LCP Consulting and The Centre for Supply Chain Management at Cranfield University. The report is based on a survey of over 100 manufacturing executives from major global players including two of the world’s largest automotive manufacturers and several of the world’s largest companies. A third of the respondents were from major manufacturers in the Food & Beverage sector[2]

Those manufacturers leading the move into DTC (‘Leaders’[3]), expect DTC to grow by 5 per cent CAGR (Compound Annual Growth) over the next five years. But, ‘Followers’ remain steadfast that growth will come from retail – expecting 6.5 per cent CAGR over five years. As a result, DTC Leaders plan to invest around 1.5 times more revenue into DTC than Followers over five years. 

The report states that moving from a CPG manufacturer to a DTC model is not straightforward, and manufacturers must ask themselves if this is the right decision. The main considerations include establishing a brand presence, building an e-commerce platform, potentially opening stores, distribution, fulfilment, and ever-important last-mile fulfilment. 

To find revenue growth from DTC the report says that companies need to personalise the experience for their customers. Manufacturers should improve demand forecasting and planning, better understand the Cost-to-Serve, and optimise their supply chain distribution networks to ensure the digital consumer can make a seamless transaction. Manufacturers highlighted in the survey that ‘guaranteed delivery’, ‘speed of delivery’, ‘ease of access’ and ‘convenience’ are all key success factors. 

Will Shepherd, Partner from LCP Consulting said:

“Those manufacturers who have already integrated a front and back end DTC model have the ability to deliver a seamless omni-channel experience for their customers. For them, an omni-channel approach is core to delivering significant long-term growth and value.

Will Shepherd continued:

Ultimately, it is those manufacturers who respond to additional customer demands and adopt new models that will reap the rewards.” 

Despite the risks and investment required, the report highlights five DTC advantages:

 

  • Control and clarity of brand – through product, packaging, and brand message
  • Full share of the ‘customer experience’ – brand alignment throughout the purchasing process
  • Speed to market – development, testing and introduction without seasonal delays or other retail interruptions
  • Direct access to the customer – yielding a wealth of valuable data and insight
  • Assortment access – providing consumer choice from the full product range, not a limited sample 

 

Professor Richard Wilding OBE, Professor of Supply Chain Strategy Logistics, Procurement and Supply Chain Management at Cranfield School of Management commented:

“Manufacturers are increasingly focused on gaining control of the supply chain through to the consumer, this benefits them by gaining direct understanding about consumer preferences with regards to products and services, thus reducing costs and increasing value for both parties.” 

Will Shepherd from LCP Consulting concluded:

“DTC offers manufacturers the opportunity to market, sell and distribute goods directly to the consumer, bypassing traditional wholesale and retail channels. This channel can bring businesses new opportunities as well as dilemma – both of which vary, depending on the products and markets in question.” 

-ENDS-

 

Press contact
David Pippett
DWP Public Relations Limited
Tel: +44 1225 335675/07899 798197
Email: david@dwppublicrelations.co.uk

 

About the report survey
LCP Consulting worked with The Centre for Supply Chain Management at Cranfield University to conduct the independent research with 100 manufacturing directors and department heads operating in the UK and around the world. Research was conducted from July to September 2016. Respondents included two of the world’s largest automotive manufacturers and several of the world’s largest companies. A third of the respondents were from major manufacturers in the Food & Beverage sector. 

About LCP
LCP Consulting is the leading global specialist consultancy in business operations and customer-driven supply chain management - unlocking significant and sustainable business value for its clients.  LCP helps design and realise innovative business operating models, through end-to-end supply chain strategies founded in commercial reality. Working alongside its clients at every stage in this journey, LCP provides the right blend of broad business and specialist expertise, a rigorous and analytical fact-based approach, underpinned with leading edge thinking. 

About Cranfield School of Management
Cranfield has been a world leader in management education and research for 50 years, helping individuals and organisations learn and succeed by transforming knowledge into action. We are dedicated to creating responsible management thinking, improving business performance and inspiring the next generation of business leaders. We work to change the lives of our students and executives by encouraging innovation and creative thinking, as well as the drive to succeed and make a real impact on their organisations. 

Organisations as diverse as Jaguar Land Rover, BAE Systems, Royal Dutch Shell, L’Oréal, UNICEF and the African Development Bank have benefited from our work, which ranges from management research projects, through staff talent management development on our MBA courses, to customised executive programmes. 

Cranfield is one of an elite group of Schools worldwide to hold the triple accreditation of: AACSB International (the Association to Advance Collegiate Schools of Business), EQUIS (European Quality Improvement System) and AMBA (the Association of MBAs). 

It is in the Top 10 International Business Schools in the Forbes’ ranking. 

Our customised executive education programmes are ranked 10th in the world, according to the latest Financial Times survey, and are best in the world for international reach. Over 15,000 people come to Cranfield each year to benefit from our executive and professional development programmes.



[1] LCP Consulting worked with Cranfield School of Management to conduct the independent research with 100 manufacturing directors and department heads operating in the UK and around the world. Research was conducted from July to September 2016. Respondents included two of the world’s largest automotive manufacturers and several of the world’s largest companies.
[2] Almost two thirds of Food & Beverage companies surveyed were listed and employed more than 10,000 employees. Over half (53 per cent) had annual revenues over £1billion.
[3] The survey found that there were both ‘Leaders’, that had either mature or developing a DTC capability, and ‘Followers’ – who are yet to start the journey. Each view things very differently regarding the opportunity.

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