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Fernando Pacheco (J.P. Morgan Bank Luxembourg S.A.): How will evolving sales models re-shape your Treasury priorities?

As more consumers shop online, what are the implications for Treasurers looking to build a Direct-2-Consumer model into their resiliency planning?

Change is the only constant in life. As is often the case, ancient philosophy (in this case, Heraclitus) describes our modern world perfectly. But even Heraclitus would surely have raised an eyebrow at how dramatically our world has changed in recent months. And as we gradually emerge from COVID-19 isolation, it’s likely some of those behavioural changes will become the norm.

One of the most pronounced impacts could be an accelerated consumer shift away from bricks and mortar retailers to e-commerce and the consequent implications for the emerging Direct-2-Consumer (“D2C”) trend.

Research suggests that one in four consumers are making more purchases online than before the pandemic and 24% of respondents in the UK, Europe’s largest e-commerce market, suggest they will continue shopping as they do now once life returns to normal.

In this context, D2C becomes a matter of business resilience for many firms as they look to serve clients in this ‘new normal’.

D2C brands pre-date Covid-19 of course, with more than 400 estimated to be active globally in Q4 2019; collectively they have taken significant market shares across consumer product staples such as footwear (15%), mattresses (20%) and razors (12%).[2] The automotive industry too is being disrupted, as manufacturers move sales of certain models to online only[3].

A number of incumbents have taken an active interest in establishing their own D2C channels. Some have pursued the M&A route, acquiring D2C brands (i.e., Unilever’s acquisition of Dollar Shave Club), whereas others looked to acquire “bolt-on” capabilities to underpin own brand D2C channels (i.e., Nike’s acquisition of Zodiac, a data analytics firm).  

What factors have influenced the growth of D2C and how should Treasurers respond?


"D2C becomes a matter of business resilience for many firms as they look to serve clients in this ‘new normal"


Lower barriers to entry fuel D2C approach


D2C models have been enabled by lowering barriers to entry across the value chain:

  • Advancement in cloud-based capabilities and “outsourcing platforms” have enabled the emergence of “Supply Chain as a Service” across the production lifecycle.

  • The rise of social media as a credible marketing channel has enabled cost-effective and targeted advertising of target consumers.

  • Advanced analytics (including those offered by marketplaces) have enabled D2C brands to adopt dynamic “just-in-time” inventory models, lowering their working capital needs across the cycle.

With change come challenges


The challenges a company faces as it embarks on its D2C journey will be influenced by the starting point, legacy operating model and its chosen D2C strategy. 

The table below lays out in more detail the scale of challenge faced by treasurers navigating a transition from “legacy” B2B models to D2C models.


































Making the pivot to D2C : How to be a partner to your business ?


As a treasurer, what should you be thinking about as your company embarks on this journey?

  1. Is the company adopting an in-house managed D2C approach or outsourcing to a third party? What are the implications of these models on cash flow exposure to third parties and control over transactional costs? The EU’s second payment services directive (PSD2) supports innovation through open banking, making it easier than ever to connect to third parties and provide a seamless experience to your customer. For example Account Validation is an open banking solution which validates customer account details and ownership to mitigate fraud and failed transactions.

  2. Do you have a credible end-consumer payment strategy that is aligned to the company’s business and country strategy? Offering a wide range of payment options to your clients including credit and debit cards and alternatives such as eWallets is an important consideration. In addition, could a subscription model be appropriate for your D2C channel? Can your acquirer provide you with deep insight and benchmark reporting vs industry peers and advice as you scale internationally? 

  3. Is your platform / legacy system ready to handle the scale of flows? You may want to consider integrating application programming interfaces (APIs), to streamline the collection and transmission of data between your bank and your Enterprise Resource Planning / Treasury Management Systems, giving you real-time visibility of payment flows, on demand and at low cost. 

  4. Which treasury and payment capabilities should you look to build in-house vs. those that you would outsource to partners? For example, we see increasing numbers of our e-commerce clients building out their own fraud tools. This gives them full visibility of their end-to-end payment flows and they can see at a glance the impact changes to functionality have on user experience and client satisfaction.

J.P. Morgan understands that each company faces a unique set of challenges as it considers entering the D2C space. As a partner ambitious for our clients’ success, we bring a full suite of innovative treasury and payments solutions, as well as local expertise, to support them in their journey.


[1] Source: Covid-19 impact on global B2C e-commerce and online payments 2020  p13 citing RetailX and InternetRetailing

[1] M&C Saatchi. Inside Trends 2019: Digital Disruption is being driven by DTC brands.

[1] Tesla: $35,000 Tesla Model 3 Available Now

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