To survive today’s marketplace, Interactive Advertising Bureau (IAB) says that brands must be able to sell directly to consumers. New research shows that growth in most consumer categories has shifted to brands focused on direct consumer relationships.
“For incumbent indirect brands, you must become a direct brand,” IAB chief executive officer Randall Rothenberg said with the company’s findings. “For upstart direct brands, you must break through the revenue and share barriers that are keeping you small. For every other company that serves them, you must help them become direct, and grow their business in that environment.”
Brands must traverse the last three miles to the head, to the heart and to the home, says IAB.
Brick-and-mortar stores are closing en masse, but it’s not because consumers don’t like or need retail products anymore. Over the last year, online channels drove 90 percent of fast-moving consumer good (FMCG) such as food and toiletry items, despite brick and mortar stores holding 93 percent of the market.
Why? “A two-way relationship is more valuable than a one-way impression,” says IAB in its new report, The Rise of the 21st Century Brand Economy.
Direct brands like Blue Apron and Dollar Shave Club are disrupting the way consumers expect retail experiences to be. Two-thirds of all US consumers expect direct connectivity to the companies from which they buy goods and services, says IAB, and 67 percent of consumers have used a company’s social media site for servicing.
“It’s not that mass advertising won’t matter,” said Rothenberg. “It will become less valuable as more and more consumer-facing brands cross the chasm and concentrate their activity on creating, reinforcing, and extracting value from their direct consumer relationships.”
The dynamic shift from recognized, but unapproachable brands to direct consumer relationships spans across the board from grocery to mattresses.
Gillette’s share of the US men’s razors market fell from 70 percent in 2010 to 54 percent in 2016, with most of that share shifting to Dollar Shave Club, Harry’s and others.
While grocery store revenue is projected to grow about one percent annually through 2022, the market for meal kits is expected to grow by a factor of 10 times.
Direct-to-consumer mattress companies garnered more than 16 percent of the market in 2016, and are expected to have doubled that share in 2017.
Online shoe retailers sent US brick-and-mortar shoe revenue tumbling 5.2 percent, the biggest year-over-year loss since 2009. It’s hard to drive anywhere without seeing another “store closing” sign at Stride Rite, Crocs or Payless ShoeSource. Meanwhile, online-only retailers like Allbirds, Jack Erwin and M. Gemi have gained nearly 15 points of market share over the past five years.