Direct-to-consumer – or DTC – brands, e-commerce companies that build, market, sell, and ship their products themselves, in lieu of any middlemen, are busy “transforming how people shop,” per CB Insights, and in the process, these brands – which range from unicorns like shaving startup Harry’s, millennial cosmetics co. Glossier, and mattress-maker Casper to fashion companies like Allbirds, Everlane, Warby Parker, Away, Cuyana, and Mejuri – “are radically changing consumer preferences and expectations,” per CB Insights. This includes how they design and package products (Brandless, anyone?) to how they launch products and how they market themselves.
The latter element – marketing and the relative investment in it – is proving to be one of the core differences between traditional retailers and direct-to-consumer brands. According to a new report from CommerceNext, DTC brands are upping their marketing budgets significantly, and outpacing traditional brick-and-mortar retailers. So far this year, 78 percent of the DTC companies that the Brooklyn-based digital marketing and ecommerce industry entity surveyed in conjunction with Oracle revealed that their marketing budgets had increased. That is compared to the 60 percent of traditional retailers that reported a boost.
DTC brands are also beating traditional retailers when it comes to personalization marketing, or marketing that sees companies deliver individualized content to recipients through data collection, analysis, and the use of automation technology. While a 2018 Evergage, Inc. survey found that a whopping 98 percent of marketers agree that personalization helps advance customer relationships, traditional retailers are lagging. CommerceNext reveals that “heading into the 2019 holiday retail season, 67 percent of digital-first DTC brands surveyed have increased personalization budgets, compared to 58 percent of [traditional retail] brands.”
Beyond DTC budgets for marketing growing at a quicker rate, the marketing priorities of DTC brands are veering away from those of traditional retailers. DTC brands “are investing more heavily in solutions that are helping them acquire new customers and retain the ones they have—such as AI for personalization and chatbots, customer data platforms, and programmatic television advertising—especially when compared to their brick-and-mortar counterparts," says Scott Silverman, co-founder of CommerceNext.
According to Veronika Sonsev, another CommerceNext co-founder, “Unencumbered by legacy technology, DTC brands are reporting heavier investment in modern marketing solutions that help them respond more quickly to trends, acquire new customers across multiple channels and build loyalty.”
“If they can overcome some of their early-stage growth challenges of profitability,” she says, namely, “achieving profitability at scale,” a barrier that is listed far less frequently by traditional retailers, “they will continue to take market share.”