2022 DTC ebook
Even before COVID-19 lockdowns, direct-to-consumer (DTC) marketing was picking up steam, with brands such as Harry’s, Bonobos, and Allbirds becoming...
Making direct-
to-consumer
work for your brand
by Joe Beier
How should traditional brands respond to the
surge in DTC momentum?
How should traditional brands respond to the surge in DTC momentum?
Even before COVID-19 lockdowns, direct-to-consumer (DTC) marketing was picking up steam, with brands such as Harry’s, Bonobos, and Allbirds becoming household names and trusted sources of everyday needs. But the pandemic has taken this trend to a new level – with stark consequences for traditional, store-centric brands. A new What’s Next 4 Consumers study from GfK shows that nearly two-thirds (62%) of US consumers have purchased DTC brands in the past 6 months, and almost 4 in 10 (37%) say they will buy more DTC products and services after the pandemic. Recent DTC brand purchase is particularly high among key target groups – young consumers, those with graduate or professional degrees, and those with annual incomes in the $75K to $149K range.(See Chart 1)
Even more telling is the fact that US consumers are choosing DTC brands over traditional on several fronts. A remarkable 70% told GfK that they have switched from a traditional brand to a DTC one in at least one category – and huge numbers see DTC brands as superior to mainstream ones on a variety of key benefits, from convenience to innovation. (See Chart 2.)
These levels are higher across the board among those who have actually purchased DTC products in the past 6 months.
70% told GfK that they have switched from a traditional brand to a DTC one
How can mainstream brands learn from the direct business model, making smart investments and driving innovation?
“Brands and DTC that are doing it well are great storytellers. They've curated every single touchpoint with a customer to tell their brand story in different, interesting ways that really stand out online and build that one-on-one customer connection.”
– Anim Haroon, Constellation Brands
“Most DTC companies are built with a very, very robust data platform that can help fuel storytelling and customization – to really get inside the mind of the consumer.”
– Tara Nolan, BeenThereDoneThat
Nearly all of these DTC-favoring trends are being driven in part by younger consumers. In the GfK study, Americans in the 18-to-35 age group are much more likely than those 51-to-65 to say they are DTC buyers, switched from a traditional brand to a DTC one, and/or will buy more DTC after the pandemic. (See Chart 3)
"Consumers really do care about the full product life cycle”
– Anim Haroon, Constellation Brands
These younger consumers are also more engaged with intangible brand elements, such as social issues. According to GfK Consumer Life, younger consumers are much more likely to say that they only buy from brands that support the causes that they do.
And the latest GfK Green Gauge report shows that Millennials are the generation most likely to take the environment into account when making purchases (44% in 2021), and to say they do volunteer work related to the environment (31%). Many DTC-native brands have already taken on the mantles of sustainability and social justice, creating deeper bonds with many of their most passionate consumers. Shoes from Allbirds, for example, are made from recycled and recyclable ingredients such as recycled bottles and cardboard and castor bean oil. And Blueland sells eco-friendly cleaning products, making carbon-neutral shipping and refillable bottles essential parts of their business model.
“From a values perspective, and from a brand positioning perspective, there is a lot more wiggle room and creativity that can be allowed for DTC brands to introduce themselves to the world.”
– Tara Nolan
“It's super important for them to be fully transparent; sustainability has to be part of their mission. It can't be an add-on, because consumers really do see through that – especially the younger consumers.”
– Anim Haroon
Having the best of both worlds
Having the best of both worlds
We have also seen the line between DTC and traditional brands blur to the point of nearly disappearing. DTC-native companies like Warby Parker and Bonobos have extended their reach and brand presence by selling in stores as well as online. At the same time, mainstream companies like Nike, Adidas, and Samsung have begun to sell direct – through their websites, under new direct-only brands, or through sites that mimic ecommerce storefronts. Some major brands have even taken the M&A shortcut, as when Schick’s parent company bought shaving upstart Harry’s for over $1.3 billion.
The GfK What’s Next 4 Consumers study showed that going DTC seems to give a boost to mainstream brands. Four in ten (39%) US consumers have seen traditional brands selling direct, and fully two-thirds (65%) of those who have seen it say they actually bought mainstream brands this way.
“When we have these different avenues to play with, it essentially is like [your brand] is everywhere, in terms of where your messaging is going and how you're reaching people. So I think that's just important to keep in mind – where we're spending our time and our reach. Because it can feel very easily like a brand is kind of circling you.”
-Tara Nolan
The most common categories for these purchases included clothing and fashion, skincare, and haircare. (See Chart 4.) When Unilever launched its Positive Beauty Growth platform – a DTC play – company president Sunny Jain said, “By harnessing startups’ disruptive approach, we will future-proof our brands.”But DTC also represents a huge adjustment for Fortune 500 companies accustomed to selling en masse through nationwide distributors and big box stores. The one-customer-one-order model may build better relationships, but it can also be hugely expensive – and even distract from the core brands and businesses that still support the company.
“I don't think it's bad for brands to be everywhere. But is your customer there? Before you enter a new channel or a new market, it's very important -- and this is where I see brands fall into pitfalls with DTC – to make sure that the customer is buying in that channel.
– Anim Haroon
DTC and the future of (e)commerce
DTC and the future of (e)commerce
Directly or indirectly, the DTC model is already remaking retail and ecommerce. From customer experience to pricing to service, DTC brands have raised the bar for brand performance, and traditional brands cannot ignore the transformation. GfK’s study found that over one-third (37%) of consumers say they will buy more DTC products and services after the pandemic – including 44% of men and 46% of those earning $75K to $149K a year.
One channel that is already central to direct commerce is social media, where consumer recommendations, influencer storytelling, and proliferating “Buy” buttons create a perfect growing space for DTC brands large and small. In GfK’s study, 32% of Americans said they had bought a direct product via social media, and 40% reported they had shared their feelings about a DTC brand on social channels–with Facebook by far the dominant platform. (See Chart 5.)
Embrace rising expectations
For traditional brands doing DTC or omnichannel, it's going to be pretty important to meet customers in their expectations for next-day or same-day deliver -- getting it now. Constellation has some amazing plans to deliver on that consumer need; that's where I think success stories are going to be made in the next five, 10 years.
For new brands that are going digital and considering DTC, I would really pay attention to the way you acquire customers. Cost of customer acquisition continues to go up; and I always advise new brands to at least make sure 10% of their customers are coming through organic referrals. As you go through the lifetime of the brand, those costs can make it or break it for new brands.
Find adjacent businesses and join forces
If you are behind by not having digitized your business but offer other resources such as distribution and infrastructure, team up with a company who has built an audience off the back of valuable IP and data, and see what you can create together.
Cultivate relationships via informed storytelling
DTC brands have the advantage of being born at the pace of culture and can be data informed, leading to smarter storytelling to foster deeper and better connections with consumers. Make sure your eyes and ears are open and leverage insights to support what you say and where you say it.
DTC brands typically do one thing and do it well. They focus, learn, then build from an informed perspective. Next time you ideate a campaign or build a strategy, make sure you measure in new ways and are not reliant on KPIs that no longer serve your future-focused goals.
