The direct-to-consumer brand revolution has been going strong for a decade, but the coronavirus pandemic has created new opportunities for B2B and wholesale manufacturers to flood the consumer market.
Rastelli’s, a New Jersey-based food supplier, fortuitously started a consumer branding business last year, said director of marketing Zachary Paul. Instead of selling products through grocers or wholesale, where its products are rebranded under a different label, Rastelli’s has introduced direct delivery and consumer branding, he said.
The company hasn’t leaned heavily into brand advertising. In the past few months, the affiliate channel has worked best, Paul said. Rastelli’s has appeared in multiple news stories about the best meal delivery or frozen meat ordering options during the crisis, which drove traffic back to the site.
“The beauty of affiliate in my mind is you get the branding exposure if people don’t click on the link, but we only pay for actual customers,” he said.
What’s boosted Rastelli’s DTC ecommerce business most, however, is a shift in consumers’ mindset. Many people weren’t previously comfortable buying fresh food and meat online, Paul said.
“That education piece was always the greatest challenge for us,” he said. “The pandemic meant people were willing to make that leap without us having to invest so much in the education aspect.”
The telemedicine startup Maven Clinic, which focuses on pregnancy and women’s health, also shifted gears from its B2B business – selling as an extension of company health care providers – to direct consumer sales and branding.
Like Rastelli’s, Maven is more focused on direct consumer sign-ups during the pandemic because people are willing to test something new right now without a long, expensive education process beforehand.
“That magical moment of delight when you first took a Lyft or Uber, people are having that realization about telemedicine now, since they’re being forced in many cases to try it,” Maven VP of marketing Julie Binder told AdExchanger in April.
Follow the demand
For other B2B or wholesale sellers, seeing their normal sales channels dwindling to zero spurred the move to DTC sales and marketing.
For AB InBev Mexico, trade sales, bars, restaurants, stadiums and events evaporated during the pandemic, forcing it to quickly shift its focus to ecommerce and Modelorama, a chain of convenience stores backed by the beer company, said Bernardo Santana, VP of retail in Mexico.
AB InBev helped the chains create sites and apps to take orders and set up local delivery, often by bike, he said. In the past three months, more than half a million users have signed up to order through the new system.
And these aren’t temporary or superficial marketing changes. AB InBev told investors on its call last month that it’s changing production to create more large packs of beer, which sell better online, than six-packs or individual bottles or cans, which sell well in stores.
“We are focused on guaranteeing a supply of large packs to our Modeloramas,” Santana said, noting that it isn’t just about ecommerce conversions. During economic downturns, sales move to more affordable options, such as buying in bulk.
Taking market share
Some companies that benefit largely from the DTC evolution aren’t even brands at all, in the common sense.
Procter & Gamble, the icon of brand marketing, is dealing with a bizarre situation where sales of its toilet paper and other paper products such as paper towels and napkins are skyrocketing, while those brands – Charmin and Bounty – actually lose market share.
“Many of our competitors in that business source the industrial or commercial market, as well as the consumer market. Our business is entirely focused on the consumer market,” P&G CFO Jon Moeller told investors during the latest recent earnings report.
In other words, manufacturers that supply businesses and organizations such as offices, hotels, museums and the like are flooding the consumer market, since they had product with nowhere to go and consumers weren’t shopping for their normal brands – they were panic-buying or stocking up on whatever was available.
“We can see a scenario where our business continues to grow at strong double-digit rates and we lose share,” Moeller said.
Enabled by platforms
For some, what makes this sudden change possible is the big three: Google, Facebook and Amazon.
Companies don’t need to develop their own shipping and fulfillment practices: They can just give the keys to Amazon.
And when well-known brands sold out of product or paused advertising as they reevaluated the market, B2B sellers moved in to search and social.
DRINKS, a marketing tech company in the beverage category, saw its customer acquisition costs drop by 90% on Facebook immediately after shelter-in-place orders went into effect, said Louis Amoroso, president of DTC.
DRINKS has both both B2B and DTC business lines. But unlike B2B sales, where set amounts of product are sent every month, DTC transactions can lead to quick reorders, he said. That creates a virtuous cycle where more marketing spend is directed to social media, because the ROI and lifetime value look so good.
The fun won’t last forever, though.
“We were probably the first or second wine company to hit Facebook and Google hard after the crisis,” Amoroso said. “Now every DTC seller, vineyard and wine company is active, so that increases costs and changes the dynamics.”