Barclays reveals £3.1 billion sales boost to region’s manufacturing industry
A boom in manufacturers selling direct-to-consumer (D2C) will provide a £3.1 billion boost to the East of England industry’s coffers by 2023, research from Barclays Corporate Banking reveals.
The new report – ‘A direct approach’ – combines polling of manufacturers, logistics firms and consumers with detailed economic modelling 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 per cent) and better service (27 per cent).
In addition, (29 per cent) 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 per cent), electronics (29 per cent) and food and drink (28 per cent) – as well as larger items such as household appliances (20 per cent) and furniture (24 per cent).
Encouragingly for manufacturers, consumers’ newly-formed habits show no signs of abating even after the pandemic, with just over a half (51 per cent) saying they will continue to shop online as much as they do now, and 15 per cent predicting they’ll turn to e-commerce even more often.
Shoppers in East of England expect 27 per cent of their home deliveries to come via D2C in 2023, rising from 18 per cent in 2020.
These trends have seen 14 per cent 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 per cent have seen an increase in D2C sales. However, despite the growing prominence of direct sales, the vast majority (98 per cent) 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 per cent 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 per cent of its revenue and 10 per cent 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 per cent to 110 million in 2023.
In fact, logistics firms predict that D2C contracts will account for 50 per cent of their annual revenue in three years’ time, compared to 39 per cent this year. To accommodate this growth, 45 per cent are leasing more vehicles, 42 per cent are employing more staff and 28 per cent are taking on more real estate.
Stephen Ainsworth, head of Mid Corporate, Barclays Corporate Banking, Eastern Region, 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.”