Could the direct-to-consumer boom kill retail?
Social media is posing a significant threat to retailers as increasing numbers of manufacturers use online platforms to bypass them and sell directly to the consumer.
Set to be worth £13 billion by 2025, the direct-to-consumer (DTC) market has skyrocketed over the past five years seeing sales jump 55 per cent, now accounting for 16 per cent of all manufacturing sales in the UK according to new research from Barclays.
Barclays’ survey of 500 manufacturing companies found that 72 per cent agree DTC cuts out the middleman and is good news for both manufacturers and consumers, but not for retailers.
“The rise in businesses selling direct to customers is one of the biggest changes the manufacturing industry has seen in generations,” Barlcays head of manufacturing Lee Collinson said.
“As companies go it alone, bypassing wholesalers and retailers, they are increasingly embracing social media and digital channels to advertise and sell their products direct from the factory, and then managing the sales, distribution and after-care themselves.”
Nearly all manufacturers (96 per cent) now sell direct to consumer (DTC) via their own websites, but social media platforms which allow users to buy items are becoming increasingly attractive to manufacturers.
Nearly 80 per cent of manufacturers are currently or plan to or are already selling DTC via Facebook, while a further 72 per cent plan to or are already selling on Instagram.
Of those that have adopting DTC selling, 45 per cent said they had seen increased revenues, 38 per cent said their customer base had grown and 32 per cent said they enjoyed increased speed to market.
Collinson added: “It’s a massive shift and the rewards are potentially huge, with nearly half of companies selling DTC reporting an increase in revenues as a result, along with a bigger customer base and the ability to personalise products.
“Wholesalers and retailers are aware of the challenge and will need to continue to find ways to adapt and flex their approach. DTC comes with its own challenges and requires investment in services, training and IT. The future is likely to involve a mix of DTC, wholesale and retail and there will still be a role for all three channels.”