A direct approach: How Covid-19 has accelerated a consumer shift to direct-from-manufacturer orders

For a growing number of UK households, buying goods direct from the producer is now an established habit. This consumer demand is helping manufacturers to surmount the pain of the pandemic with long-term structural gain, says Lee Collinson, Barclays’ Head of Manufacturing, Transport and Logistics.

Parcels from producers: tracking a shift in the way we buy

Major online retailers have famously prospered under lockdown, but new research by Barclays Corporate Banking reveals a quieter revolution in delivery. More than half of UK households now receive products direct from the manufacturers – a pattern accelerated by the pandemic but set to endure after restrictions ease.

Our research and modelling shows:

  • 57% of consumers now order at least some items direct from the manufacturer, a trend that is set to continue beyond the pandemic
  • This shift is opening new revenue streams for logistics providers, whose direct-to-consumer ( D2C) work is expected to soar to 50% of income by 2023. The expansion of the market will also open up new jobs in the sector, compensating for some of those jobs lost to the pandemic
  • Predictions for future D2C sales vastly outstrip expectations of just a year ago. In 2019 our Going Direct report suggested manufacturers could gain an extra value of £13bn by 2025 through this channel. Our new findings post a bigger potential gain of over £23bn in just the next three years
  • D2C delivery is set to boost investment, employment and the wider economy – underpinning 118,000 extra manufacturing jobs supported by D2C sales over the next three years. The West Midlands and North West are among the regions set to benefit most.

Around 85 million parcels have been delivered direct to customers by manufacturers this year – and that volume will grow almost 30% by 2023.

Lee Collinson

Head of Manufacturing, Transport & Logistics, Barclays

Strategies for success

Developing D2C capability can provide a useful additional revenue stream and ensure your business remains competitive against the might of the major online retailers. But consumer expectations have been raised by slick retail operations.

Explore the opportunity

Reappraise investment decisions to take advantage of the market shift towards D2C. Explore how you could benefit from the extra value consumers attach to direct buying relationships with manufacturers, as revealed in our survey.

Evaluate your position

Carry out a rigorous analysis of the costs and opportunities and the returns you expect from D2C. Consider not just the cost of upskilling or recruitment but also a fulfilment system that will meet consumers’ high expectations. Much of retailers’ time is taken up by ‘where is my order’ calls. A technology platform that provides full visibility over orders is key.

Connect with customers

If you are establishing D2C services, make the most of this direct contact with customers. Invest in professional, high-impact and sustainable packaging, with easy return options. Use it to establish your brand, communicate your values and perhaps provide offers on future purchases. And harness your customers’ data to drive repeat sales and tailor your offering.

Take returns seriously

Don’t underestimate the scale of returns, and the time and space required to handle them. Depending on likely volumes, outsourcing this complex process may be the better option. If you decide to handle this in-house, publish a clear returns policy. Set a firm time limit but make it as convenient as possible for customers to return and exchange products, using pre-printed return labels for example. A smooth returns process encourages future custom.

Stay one step ahead of demand

Ensure your system is equipped to alert you to changes in demand. Invest in a platform that can accurately forecast supply, so you can keep producing the most popular products, respond to spikes in demand and keep customers satisfied.

Focus on customer need

Consider the full range of shoppers’ needs. Most manufacturers are unlikely to be able to offer the extensive menu of options offered by the biggest retailers, such as next-day delivery, delivery on a specific day and click and collect. However, consider how you could cater for customers who may be prepared to pay extra for faster delivery, for example, and think about offering free delivery for those who spend over a certain amount.

Choose partners carefully

If you are outsourcing, remember that delivery performance often reflects on the manufacturer. Research the reputation and customer feedback of third-party logistics operators. Scope out the potential for discounted rates for heavier volumes. Consider what level of parcel-tracking capabilities they offer, which can result in better visibility for customers.

Anticipate pain points

For logistics providers, consider how you could make your service more attractive to new D2C clients. Look at the key challenges experienced by manufacturers and think about how you could help overcome these.

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