Mike von Massow
Circumstances Creating Opportunities for Direct to Consumer
Our food system has adapted remarkably well to the pressures of the COVID pandemic. We have also seen some adaptation to the change in shopping behaviours that consumers have exhibited. This adaptation will set a foundation for some of those changes to be permanent if consumers decide they like the alternative. One opportunity for smaller processors and farmers is to establish a web interface with delivery to allow them to deal directly with the consumer. I've spoken to several small food processors who have identified and begun to leverage this opportunity and I expect it to grow.
Several factors are driving this opportunity. First, more of us are buying things, including food, online for delivery to our homes or pick up at a convenient point. While most of us will not spend the time going from store to store to find the price and/or product we want, visiting a second website is a relatively small investment in time. It is easier to comparison shop online and once you find the site you like, reordering is very simple.
Once we take out the requirement to go to the store, multiple shop are also easier from a delivery perspective. The cost of direct to home delivery is going down - I can get beer delivered from my favourite brewery in Toronto (100 km away) next day for $9. I can get deliveries from local companies within the day for nothing. While the delivery cost needs to be smallish relative to the total cost of what you are ordering, this burden has been lessened given the huge volume of delivery vehicles on the road which lowers the cost per delivery. It's also easier to receive products now that many of us are working from home. Coordinating multiple deliveries is much easier if you are at home regardless and most deliveries can simply be dropped without signature. There does remain some threat of theft but that is mitigated by those spending more days working from home.
“It is already difficult enough for small processors to get on the shelves of major retailers. Additional costs may make it even less profitable and provide further impetus to invest in the infrastructure to sell directly to consumers.”
It is also worth noting that large grocery companies are downloading some costs onto their suppliers. It is already difficult enough for small processors to get on the shelves of major retailers. Additional costs may make it even less profitable and provide further impetus to invest in the infrastructure to sell directly to consumers.
There are no doubt challenges associated with selling online and costs associated with both infrastructure and delivery. There is, however, a real opportunity for certain differentiated products to shorten the chain and deal directly with the end consumer. I am seeing more and more companies driving growth through this channel and expect it will continue to become more important.
#supplychain #ecommerce #directtoconsumer #food #foodprocessing #covid #distribution #valuechain
Recommended citation format: von Massow, Michael. "Circumstances Creating Opportunities for Direct to Consumer". Food Focus Guelph (102), Department of Food, Agricultural and Resource Economics, University of Guelph, October 26, 2020.