The push for consumer-goods suppliers to sell directly to consumers is a boon for technology companies that can help solve the complexities of the retail supply chain.
Manufacturers of footwear, apparel and electronics are among the sectors growing in direct-to-consumer business, a trend that has accelerated during the Covid-19 pandemic as brick-and-mortar stores collapse and suppliers seek new avenues online. Reaching customers.
Manhattan Associates Inc.,
The Atlanta-based provider of supply chain management software to the retail and manufacturing sectors said revenue grew at a double-digit pace this year, in part due to new corporate customers looking to build on its technology to handle individual consumer orders. Blue Yonder, a subsidiary of Panasonic based in Japan Corporation
It said it has added about 100 new customers for its supply chain management technology this year.
“We’re starting to attract customers that we’ve never done business with before, because years ago, they didn’t need our solutions, but they do today,” said Eddie Capel, CEO of Manhattan Associates.
“Almost every company, in some way, shape or form, is approaching the consumer,” he said.
The direct-to-consumer strategy gained a lot of attention a few years before the outbreak, when startup brands wanted to sell their products directly to customers without wholesalers or third-party retailers. The growth of online marketplaces has helped many direct-to-consumer startups make a name for themselves.
Direct selling start-up brands such as footwear and apparel brand Allbirds Inc.
and home-fitness program provider Peloton Interactive Inc.,
The epidemic initially thrived as more people stayed home and ordered everything online, from groceries to home appliances. Major brand manufacturers have also pushed forward direct selling strategies to capture online shoppers.
Direct-to-consumer logistics for manufacturers can be very different from operations for supplying retail stores.
Suppliers of products, from potato chips to groceries, often ship large quantities of goods through industrial supply chains, usually in packed pallets pulled by tractor trailers to distribution centers or stores. Companies that sell to consumers must manage the flow of individual shipments, such as a single pair of athletic shoes, rather than hundreds of boxes going from a factory to a corporate customer’s loading dock.
The strategy has fueled a growing ecosystem of vendors like Shopify. Inc.,
It is expanding its capabilities to create online tools for sellers and handle logistics for its customers. Supply chain software vendors such as Manhattan Associates, Blue Yonder and Infor Information Co. help companies manage the inventory and flow of goods in their supply chain.
Giant athletic apparel Nike Inc.
He said his direct-to-consumer sales helped offset the decline in his wholesale business during the pandemic.
In the fiscal year ended in May, 24 percent of total revenue came from the company’s digital channels, including its websites and phone apps, Chief Financial Officer Matthew Friend said during a June earnings call. “A more digitally connected Nike is a more valuable Nike,” he said.
Food and beverage companies have also jumped on the direct selling bandwagon. In May 2020, PepsiCo Inc.
Two direct-to-consumer websites—Snacks.com and PantryShop.com—where consumers can order a variety of PepsiCo products. The current head of e-commerce, Gibu Thomas, said at the time that PepsiCo’s new websites were meant to serve consumers who were turning to online shopping for food and beverage purchases.
“We’re starting to see the lines between where the retailer is and where the manufacturer is blurring a lot,” said Terry Esper, associate professor of logistics at Ohio State University’s Fisher College of Business. .
Mr. Esper said the strategy would help suppliers deal with some of the supply chain bottlenecks that have plagued retailers over the past two years.
“Getting a product directly from the manufacturer has fewer touch points, and can probably be done faster as opposed to going through retail networks,” Mr. Esper said. “The growth of this direct-to-consumer model is in many ways challenging the bottlenecks and slowness of that supply chain.”
Michael Relich, CEO of Pacific Sunwear, California LLC, a youth apparel retailer known as Paxun, says the company’s direct-to-consumer strategy gives the retailer more control over its merchandise.
“A large portion of our products are private label that we manufacture or import ourselves,” Mr. Relich said.
Sri Hariharan, vice president of Blue Yonder Corporate, said manufacturers need to think like retailers to gain customer loyalty. The first step is to make the product of your choice available when the customer needs it and deliver it at the speed the customer needs.
“It’s no longer just about being able to support their traditional retail channels, but looking at this expanding channel and also creating their own entity and being relevant to the buyer,” Mr Hariharan said. You need to start thinking differently about supply chain design.
Write Akiko Matsuda at akiko.matsuda@wsj.com
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