The new report – ‘A direct approach’ – combines polling1 of manufacturers, logistics firms and consumers with detailed economic modelling2 to assess the impact of D2C sales, where traditional channels of distribution such as retailers and wholesalers are bypassed. The results show that a surge in East of England shoppers going direct will mean sales through this channel total £11.4bn in 2023 – an increase from £8.3bn this year.
The growth is being driven by consumer choices exacerbated by the pandemic. Half of the people from East of England surveyed said they now frequently go direct to manufacturers because they believe they will get a better price (35%) and better service (27%). In addition, (29%) of consumers are buying direct as a conscious decision to support the UK manufacturing sector. The most frequently purchased through the ‘direct approach’ are clothes (43%), electronics (29%) and food and drink (28%) – as well as larger items such as household appliances (20%) and furniture (24%).
Encouragingly for manufacturers, consumers’ newly-formed habits show no signs of abating even after the pandemic, with just over a half (51%) saying they will continue to shop online as much as they do now, and 15% predicting they’ll turn to e-commerce even more often. Shoppers in East of England expect 27% of their home deliveries to come via D2C in 2023, rising from 18% in 2020.
These trends have seen 14% of manufacturers in East of England set-up a D2C channel this year – each investing an average of £305,883 to do so – while 22% have seen an increase in D2C sales. However, despite the growing prominence of direct sales, the vast majority (98%) of manufacturers also continue to work with wholesalers and retailers.
The move to D2C means that many manufacturing firms in East of England are creating jobs: 37% of those introducing direct channels this year have recruited new staff across areas such as customer service. In fact, there could be as many as 15,000 new job roles in East of England supported by D2C sales across the next three years: rising from 40,000 in 2020 to 55,000 in 2023. This is positive news for an industry where, on average, each company has lost 21% of its revenue and 10% of its headcount across 2020.
The logistics sector is also benefiting from the move to D2C. Barclays estimates that around 85 million parcels and packages will be delivered to UK households this year thanks to D2C sales from manufacturers, and that this will rise by around 30% to 110 million in 2023. In fact, logistics firms predict that D2C contracts will account for 50% of their annual revenue in three years’ time, compared to 39% this year. To accommodate this growth, 45% are leasing more vehicles, 42% are employing more staff and 28% are taking on more real estate.
Stephen Ainsworth, Head of Mid Corporate, Barclays Corporate Banking, Eastern Region (pictured), said: “2020 has been a turbulent year for all industries, and the manufacturing sector is no different. However, the increasing demand to procure goods direct from the companies that make them is providing growth opportunities and confidence for manufacturers of all sizes. D2C sales will help manufacturing firms across East of England increase their earnings and protect and create jobs in the next three years: that’s a welcome shot in the arm not only for the industry, but also for the wider UK economy.”
Other notable, nationwide findings from the report include:
- The food and drink manufacturing sector will be the biggest beneficiary of D2C growth in the next three years, adding around £5.7bn of revenue and creating 27,300 new jobs
- Growth in D2C sales could be accompanied by a surge in sustainable deliveries, as 23% of consumers now say that this has an influence on their purchasing decisions
- More than a quarter of manufacturers are already using electric vehicles to deliver packages to consumers as part of their overall fleet
- Meanwhile, over two fifths (42%) of manufacturing firms say that, while they don’t currently use electric vehicles, they have plans to introduce them.
Notes
1 Barclays Corporate Banking commissioned Censuswide to survey 2,037 consumers, 100 senior managers working in transport and logistics, and 613 senior managers working in manufacturing. The research took place in October 2020
2 Barclays Corporate Banking commissioned Development Economics for the economic modelling work. Factors including the survey responses, the ONS’ Annual Business Survey, the ONS’ Business Register and Employment Survey, and the ONS’ Business Population Estimates were factored into the outputs