Top 10 Considerations For The Direct-To-Consumer Pivot

The COVID-19 pandemic has shifted consumer food-buying behavior to direct-to-consumer channels. Food companies and online grocers have scrambled to pivot to the increased demand and market opportunities.

Alli Condra, a Davis Wright Tremaine food regulatory lawyer, says the impact of direct-to-consumer food sales on enterprises whose shift that direction may have been more responsive than strategic.

Here is Alli’s top 10 list of recommendations to food companies who are evaluating their direct-to-consumer models:

1. Website Terms and Conditions: If you are driving more consumers to your website to purchase product, make sure that your website terms and conditions are up to date and that they account for the ways consumers engage on the website. If you are collecting consumer information (e.g., email addresses, credit card information), make sure your privacy policy and practices are up to date and in compliance with the most recent privacy policy laws (such as the California Consumer Privacy Act).
2. Marketing and Communication: The direct-to-consumer model may bring with it an increased focus on online advertising – including via websites and social media. If you are promoting your product using social media influencers, ensure compliance with the Federal Trade Commission’s regulations on endorsers and influencers. If products are sold from your website, the FDA’s regulations on food labeling apply to the website. Companies should review website content to make sure that you understand and are comfortable with the risks associated with any health or other claims made about the products. There may be an increase in competitor complaints about online advertising, so review your website and social media for any claims (express or implied) to make sure they are truthful, not misleading, and substantiated.
3. Club or Subscription Model: If you decide to create a club or subscription model, think about what you do with undeliverable merchandise. States laws address what to do with unclaimed property. Consider specific provisions in your consumer terms and conditions to address what you will do if a consumer orders a product and the product is undeliverable or not otherwise picked up (e.g., “if the product is undeliverable, we’ll try to reach you once at last known point of contact, and if we don’t hear from you, we can donate it”). Check your state’s escheat laws for detailed requirements.
4. Shipping Perishable Food: If your food is perishable, consider how to ensure that the product stays refrigerated or frozen throughout the duration of the shipping and delivery process, including any time the package may sit outside of the consumer’s home. For instance, how will you ensure proper delivery and handling at the purchaser’s doorstep, and communicate to consumers that the package containing the perishable food has been delivered?
5. Complaints: There may be an increase in product complaints related to shipping product directly to consumers (e.g., dry ice melted; incorrect quantity or product; smashed box) that would traditionally have been directed to the retailer. A good consumer-complaint policy accounts for these types of complaints, addresses reasonable expectations, and assures good client service.
6. Returns & Recalls: Review your return policy and decide how robust you want the return policy to be. For example, will you accept returns of products for any reason? Or, will you accept returns only in specified situations? Make sure that the return policy is clearly communicated to consumers on your website. Review the recall policy to determine whether it adequately addresses the direct-to-consumer model. For example, if there is a recall, can you easily identify what consumers received the implicated product?
7. Taxes: If you ship products to consumers in other states, determine whether you are subject to any other state and/or local taxes on the products sold and shipped to those states.
8. Warehouses: If you are storing products and shipping them yourself, you may need a state-level license or permit to cover the additional food storage and handling activities. You may also need to register that space with the FDA as a food facility.
9. Third-Party Logistics Companies: If you contract out with a third party logistics (3PL) company to fulfill orders, make sure that you have a contract that addresses issues such as protection of consumer data, insurance for products while stored and shipped, and trademark licenses for proprietary packaging , among other things. Ensure that any specific handling instructions are communicated to the third-party logistics company (e.g., “this end up,” “don’t stack”) to help reduce the number of consumer complaints related to product handling issues.
10. International Shipping: Consider whether you want to ship product to consumers in other countries. Other countries have their own labeling and safety laws and your products may not be in compliance with those countries’ laws. Your trademarks may not be protected in those other countries and may, in fact, infringe on someone else’s trademark. If you don’t want to ship to other countries, clearly communicate that to consumers and have processes in place to ensure that products are not shipped to international customers.