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In the News

Unilever's Direct E-Commerce Sales Growing Fast

If you are the owner of one of the world's most extensive and best-known consumer product portfolios, you might expect to be well-placed to exploit the opportunities offered by e-commerce.

After a slow start, it looks like Unilever is beginning to feel the benefit of selling directly to consumers using e-commerce.

This article from The Drum explains how Unilever's e-commerce sales are growing by 40% per year, albeit from a low base in 2015. That is twice the global growth rate for e-commerce sales in its fast-moving consumer goods (FMCG) segments.

The use of e-commerce to sell directly to consumers is a significant departure from the traditional use of distribution channels by FMCG manufacturers like Unilever.

If you think about where you are most likely to buy brands like Marmite, Pot Noodle and Lynx (all Unilever brands), it is a retail outlet.

Of course, it is increasingly likely that you'll buy these and other FMCG brands online, using the e-commerce platforms of the major retailers.

However FMCG manufacturers are increasingly attracted to the potential advantages of selling directly to consumers: For example, they might gain:

  • Greater insights into consumer buying behaviour and preferences
  • Direct e-commerce sales allow the manufacturer to have much greater control over how the brand is communicated
  • A higher gross profit margin can be earned (there is no need to pass on a significant margin to the retailer)

The danger of course is that by selling directly, the FMCG manufacturer risks damaging relationships with retailers who still account for the vast majority of sales.

The move by the likes of Unilever and other FMCG giants like L'Oreal to sell directly using e-commerce perhaps points to a shift in the balance of power between manufacturers and retailers. This is a great example to analyse using Porter's Five Forces Model.

So, what is Unilever selling directly to us via e-commerce?

The first direct-to-consumer site was certainly hot stuff. In 2014 Unilever launched a dedicated e-commerce site for its Maille brand, selling top-range mustards that are not widely available in retail stores.

Looking at the Unilever brand portfolio, I couldn't see an e-commerce offering for brands like Marmite, Lynx and SlimFast. Perhaps they are on the way soon...

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