FMCG has traditionally been thought of as a high barrier to entry business. But this principle is starting to be broken by an increasing number of entrepreneurs and challengers developing ‘direct-to-consumer’ FMCG business models.
Direct-to-consumer is defined as e-commerce that cuts out retail and does away with wholesale. The talk is often about these virtual channels being an increasing threat to the conventional retail focused FMCG business. This is not how we see it.
The direct-to-consumer route to market also offers a world of opportunity for the established FMCG players. It just requires a different perspective. We know it can be hard when you are in an established category to look outwards. Sometimes the struggle is to merely even see the possibilities…
For some inspiration, take a look at these unexpected examples of FMCG business models to help provoke your innovation thinking. We have also created some quick fire questions you could use as a springboard for a new direct-to-consumer innovation platform.
1. Pernod Ricard
Earlier this year Pernod Ricard (owner of Absolut Vodka, Havana Club, Malibu, Jameson Irish Whisky and many more) announced that they will be launching a “connected cocktail library”.
The product proposition:
- A minimalist ‘docking station’ holds 6 spirits (70cl each) of your choice, each in a stylish book format with a dispensing tap. The benefit is a far more aesthetically pleasing ‘ornament’ than 6 un-coordinated brands of spirits sitting on your sideboard.
- The ‘docking station’ monitors the levels of the spirits and informs the rest of the system what drinks can be offered, based on this availability.
- It helps create shopping lists and order spirits online, arranging delivery to your door.
- A database of over 300 recipes on the Opn App provides drinks created by top mixologists, presented to the user with step-by-step instructions.
Pernod Ricard have taken the blinkers off, expanded their vision and redefined the parameters and ground they can play in by entering the home entertainment category.
With the ‘internet of things’ how can your business create and aid improved in-home experiences of your products?
2. Laundry Services
There has been no national launch by any of the main FMCG players from the laundry category to date. This does not mean that P&G and Unilever are not testing and learning on a small-scale basis. For example, in Chicago P&G are trialling Tide Spin. It is a laundry and dry cleaning pick-up and delivery service.
The below example from Unilever’s Foundry website (designed to collaborate and explore opportunities with start-ups and innovators) is advertising for startup partners to help encourage consumers to outsource their laundry and dry cleaning.
The principle here is that you don’t have to go big or go it alone. Instead it is worth investigating what ways you could test, learn and work through the key success factors on a small scale. Thus, reducing the risk associated with new FMCG business models.
3. Maille Mustard
Another potential avenue of exploration can be premiumisation. The Unilever brand Maille is a premium mustard brand with considerable heritage (1747). In late 2014 it launched a direct sales website with gourmet flavours and gift sets not available elsewhere. Black truffle and Chablis is their best seller at £29.00 versus £1.49 for a standard jar in a supermarket.
Does your brand have the equity to provide products solely for a direct-to-consumer sales channel?
Reckitt Benckiser has a big vision for their Durex brand. It is no longer just a condom brand. Its range now includes gels and toys to help with bigger, better and more orgasms. By building their direct-to-consumer website it has helped to facilitate the brand stretch and enlarge (pardon the pun!) Durex’s perceived area of expertise and credibility.
Could direct-to-consumer help to draw in sales from adjacent categories or accessories that currently are not part of your brand portfolio and thus generate additional sells revenue?
Late in 2016, Heineken UK announced that its brands would be available to be delivered direct to homes and offices within 20 minutes via Deliveroo.
The home delivery market for restaurant food has boomed in recent years. Euromonitor is predicting that spend on takeaways will hit £8bn a year by the end of the decade. We also know that every beer business is trying to position beer and cider as an accompaniment to food.
Is there an adjacent category that your brand(s) can act as an accompaniment with or have the same usage occasions? Can you piggy back or partner on someone else’s distribution network?
6. Dollar Shave Club
In 2012 Dollar Shave Club started from scratch as a challenger to Gillette. Its proposition was an online subscription club that delivers effective razors and blades to your door at substantially reduced prices.
It took a provoking and educational stance around the idea of why ‘rational’ people need to pay a lot for a razor and blades. Take a look at their hard-hitting launch video. It is a great example of how to break consumers’ attitudes to a category.
Within 36 months it grabbed 6% market share of the US blades & razors business. In 3 years Dollar Shave Club became the number 2 blades & razors brand in the US market. And in the summer of 2016 Unilever brought the business for $1 billion. Unilever did not have a shaving business. But it does have expertise in adjacent categories with the male grooming brands Lynx/Axe, Dove For Men, Brut, Bryclreem etc.
Instead of creating a new business model, could you acquire one?
Quick Fire Starter Questions
From these examples we can build an exercise to help interrogate possible directions an established FMCG business could use to probe a direct-to-consumer business model:
- How can you create an improved in-home or out-of-home experience?
- With the ‘internet of things’, how can new technology create a more exciting or engaging user experience?
- Could your brand have enough equity to command a premium for specialised, non-retail available lines?
- Where could your brand stretch if it was not constrained by current retail categories and shelf space limitations? What adjacent categories or accessories could broaden the brand offer and stretch the brand into equity building places?
- How can you test, learn and identify key success factors on a small scale or with start-up partners?
- What successful direct-to-consumer brand could you purchase? Is there an adjacent category that the business does not currently operate in that could be attractive?