Direct-to-consumer brands (DTC) are making a splash — for example, Glossier and Rent the Runway just reached unicorn status (a valuation of $1 billion or more) last week. What does this mean for incumbent brands? We’ll be unpacking the DTC trend and its repercussions next week at Forrester’s Consumer Marketing 2019 Forum in New York City, where we’ll also unveil our new research on DTC trends and how marketers can react to them.
Our research found that DTC startups are winning by identifying different ways to deliver value to consumers. For example, Dollar Shave Club founder Michael Dubin explained how mail-order razors solve a customer pain point: Buying razors at a drugstore requires finding an employee to unlock the display case. “You feel like you’re inconveniencing them for helping you get a product,” he told NPR’s How I Built This. DTC brands grasp their window of opportunity by leading a charge toward innovative products and services, such as Rent the Runway’s service that enables women to dress (and feel) like a million bucks at a fraction of the cost. Capturing consumers’ admiration and loyalty, they are beating out legacy companies at growth. Meanwhile, traditional brands and enterprises have struggled to respond not only to the DTC trend but also to the changing demands of empowered customers. As DTC companies gain ground and, in some cases, steal market share, these large brands must find a way to meet consumers’ elevated expectations.
DTC is more than just buzz. Building a DTC model requires companies to adopt a different toolbox and mindset to think about their customers in new ways and beyond the traditional purchase funnel. If traditional brands and enterprises want to keep up, they will need to build stronger direct relationships with their consumers and adopt an aspirational and customer-centric approach. My new research will walk through the considerations large brands must take as they set a DTC strategy: the constraints (related to the brand or execution capabilities), different value propositions (such as curation, community, or customization), and more.
I hope to see you at the Consumer Marketing Forum on April 2–3! Our new DTC research will debut on April 2; feel free to set up an inquiry for a deeper dive.