| HN Mirror

> I think it's just that the people who make the goods often have no market sense and rely on outsourcing it for 90% of their sales.

I've worked on a few client projects that involved large, successful, but traditional consumer goods companies try their hand at a direct to consumer (D2C) model.

As other comments have alluded to, there's tension involved when a manufacturer starts to be seen as a direct competitor by their distributors. Shopper marketing teams can quickly shift from having incredibly collaborative relationships and partnerships with their retailers to adversarial relationships with cutbacks on shelf space and promotional support. Some manufacturers are more risk tolerant than others on the impact that a D2C channel will create, and that may be reflected in the pricing for their D2C channel.

But that's only one side of the picture. Even at clients that don't care at all about the risk to existing distributor relations, they can rarely make their D2C channel profitable, let alone cost-competitive with retail channels. At manufacturers: marketing teams are competent in mass market campaigns and retailer-driven promotions, designed and measured using approximations and proxy metrics (due to having limited if any access to consumer level information), digital teams are competent in creating promo microsites and brochure sites, and operations teams are competent in efficiently moving goods at pallet and truckload scales. And all of the vendor and agency relationships are also around those competencies.

All of that tends to work against the D2C model. Direct response, performance marketing campaigns tend to require a completely different skillset than your marketing team currently has (and the agencies they use have). Your creative, UX, and development teams and processes are likely not the best fit for the needs of ecommerce and conversion rate optimization. And you'll either need to outsource order fulfillment to a third party or be very disruptive to your logistics org when they have to mix in packing and shipping $50 orders with 10+ SKUs to consumers along with their usual duties of shipping $5,000+ orders of 1 SKU to a retailer. Plus your shipping costs will be incredibly painful, as consumers have come to expect shipping to be quick and cheap/free, but you'll need to use new shipping vendors for retail package delivery and likely won't have the volume to get all that great of prices.

Add up the inefficiencies at each stage, and even with pricing that isn't competitive with retail distributors, many manufacturers operate their D2C channel at a loss. They're happy if their loss is low enough to write off the D2C channel as a marketing expense and strategically important enough to subsidize. Breaking even and being self-sufficient is seen as a success, and profit (and growth) is only ever talked about when you need to pitch executives internally for a cash infusion every couple of years.