Retailers beware: the lure of selling direct is seriously tempting suppliers

Disintermediation is easy to overestimate in the short term and underestimate in the long term.” This quote - from our feature on direct-to-consumer selling - perfectly sums up the conundrum around one of the biggest disruptive trends in fmcg today.

Attempts to cut out traditional retailers are seemingly everywhere. New aggregators like Hubbub, Farmdrop and Hello Fresh are trying to take bites out of fresh baskets, while a growing number of brand owners - Aunt Bessie’s being the latest - are experimenting with B2C selling.

Should the mults be losing sleep over this? At a time when they need to focus on the fundamentals of range, pricing and service, it’s easy to argue there are bigger battles to fight. The aggregators are either London-centric or focused on a narrow band of well-heeled demographics, and most B2C brand ventures (apart from Nespresso) are small beer.

Traditional retail has the scale and (still) a lot of momentum; plus brand owners know going down the B2C route is playing with fire. One retail source recalls how a supplier who started selling direct was told in no uncertain terms they had to “choose to be a supplier or a competitor - but not both”. The fact many suppliers are nevertheless sniffing around this area shows just how strong the lure of going direct is.

Retailers can’t take their hold over brand owners for granted - bruising range rationalisation may well leave some feeling rather less loyal in the future. Nor should they be comforted by the fact logistics constraints are currently keeping a check on attempts at disintermediation. Distribution remains a difficult nut to crack, but this is an area that’s seeing a lot of disruption from Uber, Amazon and other ‘gig economy’ players. And Google has just announced a fresh grocery delivery option through its Google Express service in the US.

Our research suggests up to 35% of British shoppers would be prepared to buy grocery items direct from the manufacturer, if the offer is right (and delivery is cheap or, preferably, free). There may not be a business model today to make such an offer viable, but expect one soon.