Business Model Rifts and Modal Shifts
Over the course of the COVID-19 pandemic, businesses have struggled to pinpoint the “right” way to handle change that is stretching far beyond the stay-at-home orders that many are facing today. In this climate, it is nearly impossible for companies to maintain operations as usual.
Leadership must make decisions to assess the impact and pivot swiftly. As consumer behavior adjusts, businesses will evolve into a new normal. In attempting to satisfy shifts in demand and consumer preferences, many businesses have made the leap to Direct-to-Consumer (D2C) delivery.
D2C Fulfillment as a Strategy
Looking at the steep drop off in in-store traffic, it makes sense why companies are leveraging D2C delivery capabilities. Compared with 2019 data, foot traffic in U.S. stores was estimated to be down 58 percent in the third week of March, according to Forbes. Although foot traffic is down, customer expectations remain high. Shifting to a D2C fulfillment model reaches those expectations by offering convenience, speed and safety during a time when people are hesitant to, or frankly ordered not to, leave their homes.
There are several examples of companies that have spent recent months transforming their business models to include D2C. These examples explore the ways in which companies with a variety of business models and levels of modal experience have embraced delivering directly to the end customer.
Baldor Specialty Foods Launches D2C
One week into the pandemic in New York, Baldor Specialty Foods, a business-to-business (B2B) foodservice wholesaler and distributor of produce, meats and fine foods, launched D2C to replace the decrease in restaurant and hotel demand. Baldor was able to make such a substantial shift in its go-to market strategy due to its supply chain agility.
Baldor deployed several strategies which ultimately adapted it to consumer preferences while maintaining its original B2B strategy. First, Baldor pivoted to leveraging straight trucks, which it already used for occasional small deliveries, for D2C home deliveries. Next, Baldor set an order minimum of $250. With consumer behaviors shifting to bulk buying, and the high margins that come with D2C, this protected Baldor’s margins while also not deterring the addition of new customers. Finally, Baldor was able to incorporate SKUs that would cater to D2C online orders and keep its next-day delivery promise, maintaining competitive advantage with its customers.
Santa Monica Seafood Expands to Home Delivery
Before the pandemic, Santa Monica Seafood, a full-service fresh and frozen seafood processor and distributor based in Southern California, was doing upwards of 1,300 deliveries a day on its own fleet in the B2B realm. With the subsequent change in buying patterns, the company sought new opportunities in D2C.
Santa Monica Seafood took D2C a step further by introducing its Seafood Express program, offering a variety of frozen seafood selections and pre-defined menus for home delivery. In order to enable the Seafood Express program, Santa Monica Seafood re-engineered packaging to make these selection kits feasible.
Alongside packaging, the new operational process includes nationwide deliveries with the help of regional and national parcel carriers. With these parcel services that the company already leveraged for restaurants outside of its service area, Santa Monica Seafood was able to create added value for its customers and maintain a competitive advantage over its competitors.
Sysco Leverages Pop-up Concept with “Pop-up, Stock-up” Event
Sysco, the world's largest broadline food distributor, got creative in finding a new way to reach its target customers. The company leveraged an empty event venue parking lot to create a pop-up location, allowing customers to place orders online and pick them up later in a physical location. This “pop-up, stock-up” event not only meets consumer demand, but it alleviates the need for last-mile delivery capabilities and while helping Sysco continue to grow during this unprecedented time.
Combat Lost Demand by Leveraging D2C
COVID-19 brought with it many unique challenges that no industry had previously experienced. A wide range of industries have battled lost demand by leveraging D2C to bring their products directly to the end customer. This strategy has alleviated the consumer’s need to visit public spaces during the pandemic and has created a sense of immediacy in getting customers what they need when they need it.
Is direct-to-consumer fulfillment going to be the ultimate strategy for these industries, among many others, even after the pandemic subsides? The answer is uncertain, but ultimately, consumers will be the deciding factor. After all, it is consumer behavior that drives business decisions.
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Author: Jaclyn Wilton