13 days ago | 3 min read
The Covid-19 pandemic has uprooted existing business models and forced many companies to re-evaluate their methods of doing business. Several new trends in the business world are taking shape- and companies who are quick to adapt will be the clear winners in an increasingly competitive environment.
One such trend emerging is the sharp increase in DTC (Direct To Consumer) spending- which is seeing traditional retailers taking a large hit. Direct To Consumer is defined as purchasers- like you and me- who buy their products direct from the manufacturer- cutting out middle-men like wholesale distributors and retailers- allowing for cost savings to be incurred by the consumer. As retailers continue to decline, Direct To Consumer looks to be a permanent business trend, that will continue to be fueled by demand related to the Coronavirus pandemic.
Another trend that is a direct by-product of Covid is the increase in ordering goods online- from the comfort of one’s own home. China saw a 300% increase in online grocery orders in early 2020 when the virus was just getting started. As it hit North America, an unprecedented demand for essential consumer products like toilet paper and hand sanitizer saw consumers ordering directly from manufacturers, as retailers struggled to keep up with demand, often running out of supplies.
Consumer packaged goods (CPG) is another space with massive online DTC demand. As of right now, nearly half of consumers in the United States shop for CPG online, and US households are projected to spend $850 per year on online food and beverages, according to FMI and Nielson: (https://www.nielsen.com/us/en/press-releases/2018/fmi-and-nielsen-online-grocery-shopping-is-quickly-approaching-saturation/) Many manufacturers in this sector have begun to sell their products via DTC channels- allowing them to reach greater markets and eliminate middle-men. Peach, (www.Peachgoods.com) a DTC supplier of bath tissues, saw their sales increase over 260% in just two weeks in March!
With regular online shopping becoming the new norm, many DTC suppliers will be looking to adopt innovative payment methods that will provide their increased consumer base with convenience and flexibility. Traditionally, DTC payment options have consisted of only Paypal and debit & credit cards. Expanding into offering more modern payment solutions that include a comprehensive payment gateway API (Application Programming Interface) can pay off in spades in terms of the benefits it offers the DTC suppliers. (For more about payment gateway APIs, please see our blog: https://www.apaylo.com/post/why-your-website-should-have-a-payment-gateway-api-to-process-your-sales) Furthermore, American suppliers could benefit greatly from accepting ACH (Automated Clearing House) payments online, given the convenience and low-cost involved in each transaction (For more, see: https://www.apaylo.com/post/the-advantages-of-using-ach-transfers-for-individuals-and-businesses)
It is important to note that payment processors are fairly resilient to economic crises. They can fluctuate in tandem with the general direction of the economy; but they are never disproportionally affected- such as the way travel and tourism industry have been by Covid-19. The increase in demand that payment solutions providers are seeing is likely to be a permanent fixture; with people working from home being the new norm. This is why innovators who are early to the party- such as DTC providers- should also take into account the increased demand for online purchasing; and update their existing payment methods in order to be able to accommodate a larger and more diverse base of global customers.
Ask Apaylo how we can help your DTC business modernize its payment systems! Email us!