How to Scale a CPG Sub-Brand: Utilize a BaaS Provider
Investment in direct to consumer is high, particularly in the consumer packaged goods and CPG sub-brand segments. Much of this investment is in digitally native brands like Warby Parker, but multinational fast-moving consumer goods brands like Unilever and Clorox are also investing money to scale up their brand portfolios and sell those products directly to customers. Customers want these types of offerings. PYMNTS’ D2C and the New Brand Loyalty Opportunity Report found that “CPG brands face a unique opportunity to capture customer loyalty and drive engagement.” Specifically, roughly one-half of U.S. customers are buying directly from CPG online stores.
For a brand to grow its CPG sub-brands, partnering with a BaaS provider is a smart choice. Specifically, a third-party expert can help brands with the following four parts of a successful DTC strategy.
An Enterprise eCommerce Platform
Choosing the right platform is paramount, writes Victor Terpstra, CCO at SQLI Digital Experience International. Fast-Moving Consumer Goods (FMCG) brands need an eCommerce solution that lets them connect each CPG sub-brand and launch new stores quickly. That platform must also be able to use the data it collects to personalize the customer experience and improve its offers.
Brands need to consider more than an online store. Brands can sell directly to customers via multiple channels, and navigating those options is sometimes the biggest challenge, writes Cale Guthrie Weissman, Editor-in-Chief at Modern Retail.
Mary Zalla, Global President of Consumer Brands at Landor and Fitch, recommends going even further. Stop thinking of brick and mortar and online stores as separate channels. Integrate them instead. “Sephora makeup artists will now digitally log every product used in a makeup tutorial on an app and send the list to the customer’s profile to be shopped later, either online or in stores,” she offers as an example. “This builds greater brand awareness and brings new users to the platform, both of which are valuable and tangible results of a design strategy that is consumer-experience-first.”
It is essential for CPG companies to partner with a comprehensive eCommerce platform and not just build an online store. Decoupling site front and back-ends makes it easy to add different storefronts at will, ultimately saving brands time and money.
Marketing and Branding
Branding can make or break a DTC push — so much so that Clorox’s Objective Wellness DTC label underwent a rebrand after just one year, writes Glossy’s Liz Flora. Initially, the brand was aimed at Gen X customers, but the brand’s fastest-growing segment was millennials, she explains. To appeal to that market, both the brand and packaging were updated to look less clinical and to widen age appeal.
A CPG sub-brand needs to invest heavily in digital marketing efforts, writes Brian Cluster, Director of Industry Strategy CPG and Retail at Stibo Systems. The goal should be to create “memorable, authentic and rich experiences for their customers online.” Social media platforms have long been the primary marketing channel for DTC brands, notes Lisa Johnston at Sourcing Journal, but brands will need to think about a more nuanced marketing plan going forward, as paid social becomes more competitive and expensive.
Some DTC brands have begun to experiment with marketing channels like catalogs and earned media. To navigate the world of evolving media, companies looking to scale a sub-brand may wish to partner with a third-party expert. They may also want to dedicate specific teams to each brand. Clorox sought to un-silo marketing efforts when launching DTC sub-brand Objective Wellness, writes Marketing Dive’s Chris Kelly. One team runs everything from strategy to budgets to measurement. It also combines in-house teams with third-party agencies to expand the team’s capabilities. Those third-party agencies are integrated into the brand’s marketing team, too.
Operations and Logistics
With logistics, the biggest issue that CPG brands face is shifting away from a bulk distribution network to one that revolves around individual shipments, write Gurram Gopal and Albert Fabregat. “In a world with free same-day or two-day shipping (thanks to Amazon), such a network redesign is not only challenging to implement but also costly,” they write. “Additionally, customers’ expectations when purchasing from the manufacturer’s own website are higher than when consumers buy from retailers’ websites with a variety of brands.”
There are also multiple fulfillment methods for brands to get right, writes Sandra Beckwith at Inbound Logistics. This includes doorstep delivery, click and collect, subscription boxes, and marketplace fulfillment. Unfortunately, she says, many brands struggle to adjust to new customer demand and expectations. The key is to reduce delivery fees wherever possible, Arun Arora, Hamza Khan, Sajal Kohli, and Caroline Tufft at McKinsey write. “Partnership fees, such as referral fees, are a key driver of supply-chain cost.” That is why resellers should establish contracts with providers for all their brands, optimize packaging and provide flexible shipping options.
Brands will be even better-served by partnering with a third-party logistics provider that already has contracts with multiple carriers and an infrastructure built around individual shipments. Economies of scale are baked into that model, allowing 3PLs to deliver a comprehensive fulfillment service that is more cost-effective for a CPG sub-brand than one the brand could build for itself.
Data and Analytics
FMCG and CPG brands still have ground to cover when it comes to data, writes Michyl Culos, European Regional Marketing Manager at Stripe. Being able to own their own customer data is a prime opportunity for a DTC sub-brand, which is why it is so important for them to get it right.
Having control of customer data is one of the three main ingredients of a successful DTC play, says Tom Treanor, Chief Marketing Officer at Treasure Data. Brands need a centralized method of storing customer data and collecting it from different sources. “With all of your customer data in view, you can improve your marketing strategies and customer experience,” he writes. “These platforms also follow data protection regulations and help you tailor messaging. Best of all, you can be in direct contact with your end customers, create loyalty programs and send out promotions based on your schedule.”
Data is the key to Clorox’s success with Objective Wellness, he adds. Using data, Clorox delivers personalized messages to customers and uses feedback to inform new product development. This will mean partnering with data experts for most brands, write BCG’s Justin Manly, Jimmy Royston, and Morgan Sonntag. “Data and analytical-insight partners are critical as well, especially to provide ongoing real-time visibility into online performance, changes in consumer demographics and preferences, and competitors’ moves in the eCommerce realm.”
It is only when a brand is built on data and analytics that it can create a successful DTC flywheel, they say.
For a consumer-goods brand and CPG sub-brand whose businesses were built to reach customers via brick-and-mortar retail outlets, a shift to direct-to-consumer eCommerce poses specific challenges. A business as a service provider like Scalefast addresses each of those, too:
- A BaaS provider can create the digital and logistical infrastructure necessary for FMCG brands to connect all of their sub-brands and launch new stores as needed.
- A BaaS provider brings experience in developing authentic, memorable digital customer experiences.
- A BaaS provider can facilitate the logistical pivot away from bulk distribution and toward individual shipments.
- A BaaS provider can help FMCG brands realize the full benefits of having control over customer data.