Major e-commerce and wholesale channels, such as Amazon and Alibaba, are bracing for increased competition from consumer brands that offer higher quality, more specialized products through their own online retailers, as the COVID-19 pandemic will likely drive direct-to-consumer sales for the foreseeable future.
As more specialized online retailers enter the market, they also need to ensure the cost effectiveness of logistics so their direct-to-consumer models can maintain profitable.
One way to achieve that is to diversify product portfolios in their own categories, according to Jim Tompkins, the CEO of Tompkins International that helps direct-to-consumer companies reinvent digital commerce and supply chain.
“The biggest challenge when you do DTC as a snack company is whether there is enough margin in the box that allows the seller to pay for the delivery,” he said. “I’ll be in trouble if you order three bags of potato chips online, and I spend $7 for the shipping fee.
“So what we do here, for example, is to help companies come up with a package that has two bags of pretzels, two bags of popcorns, and some nuts, so I can sell you a family snack pack while not losing money because of the delivery.”