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 Northern Ireland shoppers going direct will mean sales through this channel could total £3.93bn in 2023 – an increase from £2.65bn in 2020.
The growth is being driven by consumer choices exacerbated by the pandemic. Two thirds (64%) of the people from Northern Ireland surveyed said they now frequently go direct to manufacturers because they believe they will get a better price (54%) and better service (29%). In addition, a third (31%) 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 (31%), electronics (26%) and food and drink (23%) – as well as larger items such as household appliances (31%) and furniture (20%).
Encouragingly for manufacturers, consumers’ newly formed habits show no signs of abating even after the pandemic, with more than half (54%) saying they will continue to shop online as much as they do now, and around 10% predicting they’ll turn to e-commerce even more often. Shoppers in Northern Ireland expect 31% of their home deliveries to come via D2C in 2023, rising from 24% in 2020.
These trends have seen 6% of manufacturers in Northern Ireland set-up a D2C channel this year – each investing an average of £296,875 to do so – while 27% of those with existing direct channels seeing an increase in D2C sales. However, despite the growing prominence of direct sales, all the NI manufacturers surveyed said that they continue to work with wholesalers and retailers, with this omni-channel approach to market now an emerging trend.
The move to D2C means that many manufacturing firms in Northern Ireland are creating jobs: 29% of those introducing direct channels in 2020 have recruited new staff across areas such as customer service. In fact, there could be as many as 9,000 new job roles in NI supported by D2C sales across the next three years: rising from 18,400 in 2020 to 27,500 by 2023. This is positive news for an industry where, on average, each company has lost 31% of its revenue and 21% of its headcount in 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 by 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.
Lee Collinson, Head of Manufacturing, Transport and Logistics at Barclays Corporate Banking, 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 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 UK 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
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