The evolving dynamics of the direct-to-consumer market


The evolving dynamics of the direct-to-consumer market

David Carr

Mahabis, the upmarket slipper maker and one time DTC (direct-to-consumer) poster child is in administration, but the brand began with a business model rather than a product, says David Carr, Strategy Director at Digitas. And other DTC brands are also feeling the pinch.

Direct-to-consumer brands are “shaking up retail”. They are “disrupting CPG”. They are “killing the big brands” and, in the words of Terry Kawaja of LUMA Partners, they are the reason you need to “Fire your CMO”.

The headlines are alarmingly impressive for a +20-year-old channel where no one can agree on the name.

DTC, d2c, DNVBs (Digitally-native vertical brands), Instabrands, digital-private-label…the explosion of terms is on a par with the proliferation of products and brands in the brave new dis-intermediated marketplace.

Whenever someone claims that [X] is going to kill [Y], or [A] is going to disrupt the entire [B] category or [C] industry, the answer is often “maybe but not in the way you think”. Video did not kill the radio star or else I wouldn’t be sitting on nagging recommendations to listen to several hundred Podcasts.

What is exciting is that the collision forges both parties into something new.

Channelling George Box’s “All Models are wrong, some are useful” mantra I believe:

  1. Don’t believe the DTC hype-merchants or the newly-fashionable contrarians: DTC has changed marketing but not as either agenda would have us believe. DTC’s Darwinian customer-centricity has established a blueprint for effective digital channel marketing excellence, in so doing it has raised the consumer expectations that all brands must meet.
  2. DTC brands have delivered a jolt to complacent brands who have been delivering product ‘innovations’ that are really marginal improvements and too focused on cost-cutting. Big brands need to re-focus on consumer insight combining non-commoditised data with empathy to deliver ‘demand-led growth’, particularly in a world of zero-based budgeting.
  3. Marketers need to learn outside their direct competition. Think about experiential and perceptual competition. Watch how those DTC brands operate — where they spend money, who they spend it with, and how they’re organised internally.
  4. Traditional brands should use their scale, access, partners and potential for long-term, detail thinking. This can often be a luxury for a DTC brand. Let it nurture customer obsession and more distinctive emotional propositions. Think about the interplay between the marketing budget and the often comparably vast trade budget. 5–7% of trade budgets go to retailer media which is often inefficient and ripe for re-evaluation.

Read the full article on WARC here.