4 Predictions for the DTC Market

Retail's New Cool Factor

The fact that the digital economy has reshaped the mindset of consumers, brands and retailers is no longer news to us. Across every consumer category, the path to purchase has become incredibly complex; engaging social media, digital assistants, smart phones and a multitude of other channels. And not only has our path to purchase evolved, but we are faced with an increasing number of brands and retailers to choose from. Together, these changes have resulted in our expectations and demands skyrocketing.

With many retailers struggling to increase their market share against these relentless competitors, brands have been forced to re-evaluate the ways in which they engage with followers and consumer. For an increasing number of brands, this evolution in retail has resulted in more advanced direct-to-consumer strategies.

The DTC model is changing the face of consumer marketing altogether and it is not a trend expected to slow down anytime soon. According to the Interactive Advertising Bureau (IAB), two-thirds of consumers expect to have a direct connection between themselves and a brand. This opens countless opportunities for brands who facilitate and promote this direct accessibility, diving head first into consumer desires, demands and most importantly, wallets.

Much like emotional connections are retails new premium, the DTC model is retail’s new cool factor. It is not just a matter of the brand itself, but the key attributes of the consumer and what entices them to purchase. But what does the future hold for DTC strategies?
Online Shopping is booming

The DTC Consumer Attributes

Before we dive into our predictions for the future of DTC brands in 2020, it’s important to acknowledge the key consumer traits within the direct to consumer model. Research highlights than the majority of DTC consumers tend to be younger and more affluent, usually born within a digital advanced environment. They are generally early adopters of new brands who are creating innovative products or experiences, particularly if they are operating ethically. The IAB also recognise that 75% of these DTC early adopters will purchase without looking at the price, if they feel they trust the brand and its values.

With each of these heightened expectations for DTC brands, we highlight 4 predictions for the future:

1. Product Diversity

With incredibly modest budgets, often fuelled by kick-starter campaigns, DTC brands often begin with a single product to disrupt the market. However, their direct relationship with shoppers and social media follows, simplifies the process of obtaining data. The brand can precisely monitor the mindsets, buying habits and feedback of their customers and begin to build a more expansive product range based on this.

Casper is the perfect example of a DTC brand which has impressively diversified its offering. As a digitally native brand, they pioneered the online ‘mattress-in-a-box’ concept which revolutionised the way we purchase mattresses. The success of this unique product offering was widely recognised across multiple platforms, allowing the brand to magnify their presence in the industry. The mattress may be the Casper ‘original’, but they now offer sheets to help you sleep, and dog beds for canine pals to be as comfortable as their owner.

However, it is not just product diversity which sees Casper thrive; it is the escalation of brand purpose. When they opened The Dreamery, their pilot ‘nap’ store in the U.S, Casper successfully pivoted from mattress company to sleep company. They remain a DTC brand, maintaining the ‘mattress-in-a-box’ concept; except they now maintain a relationship with consumers which is rooted in sleep and overall wellbeing.

We Predict: DTC brands will modify the traditional sales model, choosing to sell more than a product but an education, a lifestyle and a purpose.

Casper

2. Global Subscriptions

For some individuals, the concept of online orders may be capitalising on our ‘culture of laziness’. However, our modern economy favours the option of being able to purchase products without even leaving the house; something which has been greatly advantageous in the current COVID-19 climate. For DTC brands, the importance is placed on long-term returns and not short-term sales. Much like the Casper reference above, these brands are not just selling products online, but providing consistent and increasing consumer value.

The rise in subscription offerings is one of the most prevalent trends of 2020. As consumers, we strive for convenience and subscriptions have become integral to achieve this. Rather than spending hours at the local supermarket or venturing into the city for a day of ‘essentials’ shopping, consumers can choose the convenience of a subscription which is delivered straight to home. Frey and Smol are just two examples of household laundry subscriptions, delivered on a regular basis to the consumer and permanently eliminating the stress of running out. In a similar vein, brands such as Gruum and Beauty Pie allow shoppers to curate their own skincare subscriptions based purely on their individual requirements. And finally, the food and drink industry. From Hello Fresh and Pasta Evangelists through to Beer 52, we can have our weekly sustenance prepared and delivered without much effort at all.

However, it is not just the convenience of subscriptions which sees these DTC brands thrive, it is the creation of long-term relationships between brands and shoppers. Whilst large online corporations set a standard for efficiency with 1-click purchases, they also removed the ‘joy of discovery’ for consumers. DTC subscriptions have been deemed the answer to this concern, creating an inherently personal relationship and bringing a sense of playfulness back to shopping; even if we still do not need to leave our houses.

We Predict: Subscription-based DTC brands will become the norm in many consumer lifestyles, bolstering the concept of personalised and convenient retail.

Digitally Native

3. Digitally Native

DTC remains the common acronym for this retail evolution, but we are seeing a rise in the term ‘Digitally Native Vertical Brands’ (DVNBs). They are brands born on the internet, but unlike typical e-commerce brands, they control every aspect of their own product distribution and advertising. They do not find issue with localisation of demographic barriers, with the ability to reach a colossal audience worldwide.

However, competing on product alone is far too rudimentary in our current environment. Omnipresence is not strictly divided between ‘online and offline’, there are multiple channels for a brand to uphold. With that in mind, the combination of offering, experience, service and simplicity is what makes a DTC brand work in the eyes of the consumer.

DTC (or DNVB) brands are not just born digitally, every single aspect of their consumer interaction takes place online. Their brand offering is built utilising their digital community, from the individual products through to the meticulous packaging design. The shopping experience is curated with social media at heart, relying on compelling visual content, user-generated posts and affable conversations with brand ambassadors. Finally, with most DVNB brands built as the antidote to tedious retail, consumers find fulfilment in the ease of digital purchasing. For instance, brands such as Gainful, Function of Beauty and Glossier employ online questionnaires to not only curate a personalised experience but capture data for future reference.

However, despite being born on the internet, DNVB brands do not dismiss the importance of bricks and mortar. As they mature as a brand, they begin to appreciate the power of physical activations; viewing them as a complimentary addition to their brand presence.

We Predict: Digitally native brands will continue to thrive, armed with shopper data which can accelerate relevant and required product creation.
Living the brand

4. Living the brand

Engagement and Experience. Two words which have been bandied around multiple sectors almost too much. Yet, whilst the terms themselves are overused, the reality is that they remain of the highest importance. Consumers are no longer buying for the sake of it, they are buying into the product and everything which encompasses it; the value proposition, the experience and the brand narrative.

Whilst we refer to the importance of the internet above, DNVB brands do not eschew bricks and mortar in its entirety. They understand the importance of real-life experiences which connect first hand with the shopper. However, they are reluctant to curate spaces which cannot fully recreate the context required for consumers to fully immerse themselves in the brand. Recognising this shortfall, many forward-thinking DTC brands are becoming more creative and blurring the lines between retail and hospitality.

Direct to consumer brand Muji was born out of a vision for creating useful products which would create a balanced, luxury lifestyle through the art of simplicity. Whilst in London, they transformed their product range into a pop-up ‘apartment’ for the masses, in Asia they opted to explore the concept of a Muji hotel. It is the ultimate brand experience. Consumers become travellers, with the ability to literally eat, shop and sleep the Muji brand. Designed with simple, natural materials and focused on the concept of wellness, the store / hotel hybrid is holistic consumer experience at its best. Muji are essentially advancing the potential for a DTC brand to operate and oversee the entirety of a consumer’s lifestyle; from manufacturing through to hospitality.

Our Prediction: There is extremely fertile ground in the intersection between DTC retail and hospitality and we predict that brands of the future will take the opportunity to create the ‘ultimate destination’, rooted in pure brand expression.

Our Thoughts

Let’s take a second to consider the four predictions holistically. Regardless of physical, digital or social presence, the DTC topography is not based on a singular product, marketing strategy or location. The market of direct to consumer (or DNVB) brands are united by authenticity. They forge real-time connections with their audience, negating the need for any ‘middle-men’ and in turn, create authentic and insightful relationships; reaching shoppers across multiple touchpoints. It is this knowledge of the consumer which not only builds the DTC brand, but powers every interaction afterwards.

The DTC and DNVB acronyms will surely be replaced with new terminologies as we progress, but the quest for creating meaningful ‘direct to consumer’ strategies will continue to hold power over brands. It will become an ingrained approach to brand engagement, progressing from retail’s new cool factor, to our new normal.

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