The Direct-to-Consumer’s Impact on Supply Chains and Its Future

The L.I.N.K. podcast kicks of the new year with a deep look at the direct-to-consumer industry and its future. But first, the managing editor offers a refresher in the subject in today's column.

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Direct-to-consumer brands and strategies are now an integral part of our retail industry, fundamentally shifting supply chains and business models. The concept initially started as a way for smaller, startup brands to get their product out to the consumer without the added red tape and costliness of big business models, relying on the increase of accessible technology. While years ago it was only larger companies with deep pockets that had access to the best technologies, the growth of tech has made it more accessible to smaller companies and even consumers. 

Through technology these startups were able to connect to the consumer directly and ship the products to the consumers' door without any outside influence. For the consumer, it was not only easier and more personal, but it was cheaper as well. Because these products no longer went through outside retailers and logistics companies, price markups were unnecessary. 

An excerpt from Supply and Demand Chain Executive's State of E-Commerce white paper explains more: 

Since COVID-19, many big brands had to take on a DTC strategy to navigate the pandemic. According to Ilya Katsov, head of data science at Grid Dynamics, makers of apparel, snacks and more quickly invested into DTC strategies throughout the past year such as algorithms for inventory optimization in real time, connecting checkout to the warehouse and models for special offers that efficiently fill shipping boxes for greater cost efficiency.

In addition to DTC players setting the standard in how to sell online during the pandemic, online marketplaces also helped set the stage for a new way of digital retail prior to 2020, setting up strategies that became even more prolific following the COVID-19 outbreak.

This new type of e-commerce pushes consumers to want a more direct connection with their brand and product, pushing new forms of supply chains like microfulfillment forward. A new study from LogisticsIQ says that the micro-fulfillment centers (MFCs) market is projected to be worth $36 billion by 2030, according to LogisticsIQ. In fact, annual MFC installations will grow more than 20 times by 2030, from current installed base of about 50 in 2020 to around 6,600 in 2030. And, more than 80% of these MFCs will be deployed in North America in 2022.

DTC will also continue to grow throughout the year and the first month of 2022 is devoted to this subject in our L.I.N.K. podcast series. Stay tuned to hear what the experts say are coming in this sector.