Why Your CPG Brand Should Go DTC Now

Written by
redpepper Staff
redpepper Staff
multiple authors
Updated on
May 29, 2024 9:45 PM
CPG brands are shifting to direct-to-consumer (DTC) models for better consumer connection. With DTC, you own the shopping experience, access customer data, and boost profit margins. It’s a game-changer in today’s market.

CPG brands everywhere are pivoting–they’re no longer relying exclusively on wholesale partnerships to distribute their goods. Increasingly, CPG brands are going DTC. That’s because today’s consumers expect to buy online directly from the brands they love.

Whether your CPG brand has thrived or struggled in the last year, it’s a good time to consider what it might mean to improve how you sell to consumers. After all, ecommerce has been making waves for years, and the pandemic has led to a massive acceleration in its growth. In 2020, consumers spent 44% more online than they did in 2019, according to an analysis from Digital Commerce 360.

In this environment, you may be wondering how you can better position your brand to meet the needs of today’s consumers. You want more information about your customers and more control over the experience. You’re wondering how to compete in an ever-changing marketplace that increasingly puts consumers at the helm.

Thankfully, DTC offers an extraordinary chance for CPG brands to reimagine the customer experience. According to Diffusion, two out of every five Americans have made a purchase directly from a brand, bypassing marketplaces like Amazon and Target. At redpepper, we’ve seen– and helped– countless brands develop strategic DTC initiatives that have changed the game. 

Here’s why your CPG brand should turn to DTC today.

You already have what you need.

Leaders at CPG brands often worry about disruptors. That there’s some “little guy” who will nimbly take a big bite out of the market. But you have a unique advantage over any newcomer–you've got all the assets to create something new, more so than any disruptor entering the market. 

When you make innovation a true priority, you can quite literally own the competition—by inventing it yourself. Best of all, you can do it using assets you’ve already created—manufacturing efficiencies, in-house talent that is diverse in skills and expertise, robust database of consumer insights, and much more. Everything that fuels your business now can drive what’s next. Unlike much of the competition, you’re not starting from scratch.

You'll own the shopping experience.

An online shopping experience is an added value to the on-shelf experience in a retail store. When you have a DTC channel, you’ll be able to speak directly to your audience and own the entire shopping experience.

DTC allows you to get more personal, which can help you gain loyal customers. Retail and DTC sales strategies can work together: rather than cannibalizing each other, they can work in tandem to grow sales. 
Take Function of Beauty shampoo, which customizes their products based on information from each consumer. Consumers can find out which shampoo will work best for them on the Function of Beauty website, then pick up whichever product is right for them at a local Target. 

You'll have access to your customers.

When you have a DTC channel, you’ll have a direct line to your customers. Not only will this help you build stronger relationships, but it will also give you the data you need to better target your marketing efforts and ultimately create the products your customers want. 

If you rely exclusively on retail partners to sell your products, you may miss out on gaining information about your customers that can help you better serve them. When you sell DTC, you will have access to first-party data that you own. This will set you up for success as third-party data becomes more and more limited. First-party data will give you a competitive advantage and give you information to fuel research and development. It can also help you grow your database so that you can drive down advertising costs.

For example, we helped Christie Cookie create an email marketing strategy for their DTC channel. Using email lists, they were able to collect and own their data, which allowed them to nimbly adapt on short notice based on what the data showed.

Convincing your team to take the plunge...

Now that you’re clear on why your CPG brand should go DTC, it’s time to get the rest of your team on board. Here are some ideas to share with your team.

Let’s increase the quality of the customer experience.

Customers today want to feel a connection with the brands they buy from, but it’s difficult to create this connection when a third-party retailer is in charge of the transaction. When you own the customer experience completely with DTC, you can improve the overall experience for those who buy. 

There are so many benefits to first-party data– we need a way to get it.

When you have access to first-party data, the world is your oyster. You can survey customers, explore what actions customers take, target existing customers with new products and promotions, and ultimately create a stronger relationship with the customers you serve. It also gives you the opportunity for more targeted marketing efforts, which can help to reduce advertising costs.

Imagine what we could do with a whole new sales channel.

For many CPG brands, DTC is a whole new sales channel with an incredible amount of potential. Often, we see CPG brands that see a 10% increase in sales once they strategically embrace DTC.

We want to be nimble and able to adapt, especially as new competitors emerge.

In a competitive marketplace where it’s easier than ever for a small competitor to set up a brand and a website, you want to be able to make changes quickly. When you’re not starting from scratch and you have an established brand, it’s easier to adapt, as long as you’re strategic.  When you own the customer experience, it’s easier to make these changes.

Let’s increase our profit margins!

Ultimately, you can increase your profit margins with DTC because you are cutting out the third-party retailer. This is an opportunity to save costs while delivering a stellar experience to customers new and old.

Now what?

Going DTC might be the right thing to do when you’re a CPG brand, but that doesn’t make it easy. You’ll need to take a strategic approach with leaders across the company who are bought into the idea. You may also benefit from a partnership with those who have been there–if you’re interested in learning more about how redpepper has helped CPG brands with this transition, get in touch.

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