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Established FMCG companies face significant challenges in adding D2C channel to their Supply Chain network.
I have seen many leading FMCG companies trying to get into Direct-to-Consumer (D2C) channel, as it looks quite lucrative from outside. They have seen the enormous success of brands like Mamaearth, which started with D2C and built a profitable and high growth portfolio.
However, adding D2C to the already existing conventional channels has been quite challenging for most companies. They have struggled to keep the promised service levels, struggled with return logistics, and the targeted profitability has been elusive. Why is it so difficult to manage it?
Success in D2C channel requires a fundamental redesign of the Supply Chain network. Minor tweaking of the current policies, processes and practices just doesn’t work. We need to ship out in pieces, work with couriers instead of trucks, and be agile to deal with demand variability without the cushion of channel inventory.
It reinforces the point that significant changes in consumer offerings must involve a redesign of the supply chain.