The direct-to-consumer brand economy is getting stronger and it continues to transform the traditional marketing landscape. A new report by IAB titled “How to Build a 21st Century Brand 2019,” shows how DTC brands are disrupting the industry and the ways they’re finding success. This report comes a day after IAB released a list of the 250 DTC brands to watch.
Most importantly, these direct brands are acquiring individual consumers from a cost-per-acquisition to a lifetime value strategy through Facebook, podcasting, building community and direct delivery.
On February 11, at the IAB Leadership Meeting, CEO Randall Rothenberg addressed the direct brand transformation. Rothenberg began the presentation by saying “In broad strokes, the business of our business is changing.”
The power of these disruptor brands comes from personalization through customer data collection and managing individual customer relationships. According to IAB, CAC-to-LTV is the “new purchase funnel” and the heart of the direct brand lifecycle. Community building is a big part of this. Consumers are more in control of what they buy and are receiving honest information about a brand from other consumers is critical. The report showed 70 percent of Glossier’s online sales come from peer referrals and Fabletics’ customers in areas with physical stores spend more through all their channels.
The report also uncovered omnichannel shopping is foremost, while strictly buying via brick-and-mortar stores is taking a back seat.
Last year, was the “peak retail apocalypse” according to IAB. Over 12,000 stores were forecasted to close compared to 9,000 in 2017. The future of malls seems bleak, around one out of every four malls could be closed by 2022.
For brands to survive, they must change their model, or they won’t survive the competition. Consumers are increasingly getting most of their information and goods through mobile. Around 40 percent of e-commerce is from mobile. From 2015 to 2017, there was a 133 percent increase in how much time adults spent on an app or website on a tablet. In those three years, the time spent watching live TV decreased by 14 percent.
DTC businesses, like Birchbox, Dollar Shave Club and Warby Parker are acquiring customers through mobile and via many platforms. Some even pioneered their own marketing methods. For example, Ipsy—a monthly subscription beauty bag—started marketing through YouTube influencer videos and Glossier launched its own media “Into the Gloss,” a beauty blog. However, the report found around 90 percent of DTC brands launched with a Facebook dominant strategy.
You’ve heard it before: storytelling and the content are vital to connecting with consumers.
The report highlighted Bombas, an athletic sock brand that advertised on podcasts, and measured their campaign performance using vanity URLs which led to a sign-up form to get a coupon code. The report says, “In a given week, ~50-60 percent of new customers could be attributed from paid channels… with podcasting ranging from 15 percent to 40 percent of that.”
“After more than 100 years, the consumer brand economy is moving away from an ‘indirect brands’ model,” said Rothenberg in a statement. “These indirect brands that you all know by their household names long dominated through owned and operated, high-barrier, capital-intensive supply chains. Revenue resulted only after a series of third-party handoffs from brand to publisher to retailer. In contrast, the new ‘direct brands’ model that builds value through low-barrier, capital-flexible, leased or rented supply chains, and revenue results from the direct relationships between the company and its end consumers. Any brand that wants to survive must prepare for this new reality.”
