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The Evolution of the DTC Business Model

Thursday, November 14th, 2019

Direct-to-Consumer (DTC) is a fast-paced, rapidly evolving business model that has changed the way we shop. Many of the best known DTC brands are snapping up market share as they compete with older, traditional brands. In order to predict the future of retail, one must predict the future of DTC and therefore look to traditional tactics. 

Below we’ve outlined four predictions for the ways in which we will see DTC brands continue to evolve. 

DTC Will Expand to Brick and Mortar 

DTC brands are born online and rely on conversion through their own websites. However, in order to grow and expand, brick and mortar is becoming an essential key to success. For example, the popular DTC mattress company, Casper, has plans to open 200 retail stores and Warby Parker aims to open 100 stores. Versed, a new DTC skincare brand, decided to launch in retailers before focusing on eCommerce even though their website is positioned as their flagship. Brick and mortar is an important next step for DTC brands to interact with their shoppers and have shoppers experience the lifestyle of the brand.

DTC Brands Will Focus on Above The Line Advertising

DTC brands are now looking preferring to use TV as the best media outlet to reach mass audiences across the U.S. in order to scale and grow their revenues. In 2018, DTC brands spent +60% on TV ads than they did in 2017. DTC brands are also changing the TV ad space. Glossier is launching its first thirty-second TV commercial “Feeling like Glossier” exclusively with ABC. Along with the traditional TV ad, the Glossier and ABC deal includes content for ABC’s website and app. DTC brands are looking toward the TV to scale, but also to create exclusive advertising packages. 

DTC Brands Will Scale for New Shoppers and Growth

As many digitally native brands grow and reach maturity, they need to determine their next steps to scale success. Many DTC brands are creating multiple product extensions or expanding globally. For Example, Casper now sells three types of mattresses, pillows, bed frames, sheets, and even a night light to help you sleep. Many DTC brands are also expanding globally. Allbirds is opening stores in China and London and is targeting other European markets such as Ireland, Poland, Sweden, and Spain. 

DTC Brands Will Continue Broadening into New Channels

DTC brands are now thinking of other channels, including Amazon, as a necessary part of their strategy—instead of as a threat and competitor. Nearly 50% of online purchases are made on Amazon, so in order to grow and meet shoppers where they are, an Amazon strategy needs to be a priority early on. Amazon has a built-in audience who are actively searching and shopping for specific products and therefore allows DTC brands a way of being discovered by new shoppers and expand their market share. 

In the fast-paced, rapidly evolving world of DTC, established brands that have already garnered success online are expanding, evolving and shifting focus in ways that make them look a lot more like traditional brands. What does this mean for the future of cult DTC brands and for new DTC brands coming on the market?

Contributed By: Katie McHattie, Integer Denver
Image Source: Pexels

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