Are DTC brands still primed for growth?
Some direct-to-consumer (DTC) brands have gained traction during the pandemic while others appear to have lost some advantages as traditional retailers and more brand manufacturers accelerate digital shifts.
Among favorable findings, a survey of 89 DTC brands from Totem Media conducted last June showed that the wide majority found growth in the early months of the pandemic as most retailers dependent on purchases made in stores were seeing declines. Digital capabilities and agility were seen enabling DTC brands to more quickly pivot online for selling, marketing and customer service.
Diffusion’s “2021 DTC Purchase Intent Index” that came out last November indicated that DTC brands are “permeating mainstream consumer consciousness.”
The study showed 43 percent of Americans are knowledgeable about at least one DTC brand. Of the respondents familiar with DTC brands, 44 percent believe DTC brands produce a higher quality product at a lower price point than traditional competitors and 23 percent perceive DTC brands to be an authority of what’s cool and on trend.
Scalefast’s just-released annual “DTC Hype Report,” however, found that traditional retailers and legacy brand manufacturers have gained ground over the past six months as they’ve ramped up their digital capabilities. In a year of “immense uncertainty,” consumers also found comfort with more familiar brands, according to the study.
Disruption at Brandless, Active Voices and Birchbox, as well as the lackluster Casper initial public offering, have been seen as signs of challenges facing DTC brands.
Allbirds, the eco-friendly wool sneaker brand, received a $1.7 billion valuation in a funding round last October. Funding opportunities for the majority of DTC brands, however, were becoming skimpier even prior to the pandemic as the marketplace became more competitive and advertising across social feeds became significantly more pricey.
“It’s a very crowded market, and it’s an expensive market,” Susan Lyne, BBG Ventures’ managing partner recently told Glossy. “DTC companies have to have something beyond a good product. They have to have values that are aligned with new consumer preferences and, in some cases, very strong content marketing, as well as a distribution advantage.”
- DTC Brands – Response To Covid – Totem Media
- Going mainstream: Diffusion’s 2021 Direct-to-Consumer Purchase Intent Index – Diffusion PR
- One in Three Americans See No Difference Between Buying From a DTC Company and a Traditional Retailer – Doubled From 2020 – Scalefast
- C Susan Lyne: DTC companies need ‘something beyond a good product’ – Glossy
- Covid Has Direct-To-Consumer Brands Pumping Resources Into Expanded Services, Digital Channels – Forbes
- The end of the Series A: While tech financing booms, DTC brands face a new reality – Digiday
- Despite hungry VCs, DTC brands are rethinking their fundraising approach – Modern Retail
DISCUSSION QUESTIONS: Do you still see advantages in being a DTC-first brand or can many traditional retailers and brands now match their digital prowess? What advice would you have for DTC-breakout wannabees?