Brand Disruption Study 2020: Direct Brands Go Mainstream


You’ve seen the headlines:

“Lord & Taylor Sold to Clothing Rental Start-up Le Tote.”

“L’Oreal Debuts Personalized DTC Hair Color Brand.”

“P&G Freshens Grooming Segment with Billie Acquisition”

Why is this happening?  Because the new direct-to-consumer business model is based on the concept that its entire supply chain is increasingly available “as a service.”  Every aspect can be rented/leased. The result? Greater brand agility, more innovation by publishers, and more engaging, personalized consumer experiences—online and off—with “emerging tech” elevating the digital shopping experiences.  In fact, digital data output will triple from 2019 – 2025, powering demand for and availability of personalized services, products, content, and marketing.

The Direct Brand Economy is achieving mainstream status as major brands pivot their own business operations and marketing strategies to address changing consumer behaviors and adopt new technologies.  And the expectations that consumers now have to receive goods and services in two days or faster impacts virtually all brands across every step in their supply chains.  This new business model is impacting every major consumer category and forever changing the way we buy, sell and go-to-market.

IAB has been committed to alerting the digital ecosystem to this transformation, releasing its newest reports, “2020: The Mainstreaming of the Direct Brand Economy” and “2020 IAB 250 Direct Brands to Watch” to educate stakeholders on the trends, developments and milestones set to drive the future  growth of brands. Both reports were presented at the 2020 IAB Annual Leadership Meeting, Feb 9-11 in Palm Desert, CA.

Additionally, IAB added 100 DTC services to watch to our database of Direct Brands. IAB methodology in selecting these brands is a mathematical formula that includes revenue range, employee size range and a social footprint index and y/y social growth. DTC products have been receiving the lion’s share of press and consumer attention—but the 1-1 relationship these services have built with their customers and wider audiences to drive engagement and customer satisfaction cannot be ignored.

Here are key highlights from these presentations on the Direct Brand Economy:

The data economy is being disrupted.

Privacy legislation, the blocking of cookies and tracking of ads. The disruption is real and it’s here and will be soon felt across this ecosystem – from marketing strategies and buying & planning to platform and publisher operations.

  • More than half (52.8%) of US digital marketers feel that government regulation has the potential to impede their ability to derive value from data-driven marketing efforts.
  • Conversely, 69% of companies are building strategies to govern data usage.

Personalization equals relevancy.

Personalization capabilities range from advanced technological channel executions to cross-channel automation & attribution enabling real-time optimizations based on return. Custom media messages embedded in context, bespoke products, and innovative usage of AI are proven personalization tactics driving brand loyalty.

  • 10% more DTCs are allocating budgets for personalization in 2020
  • 50% of digital device consumers will make a purchase and become brand loyal if they receive personalized brand content

The new shopping experience is omnichannel, integrated and brand-driven.

Brands are able to come into existence “store-lessly.” As consumers use keyboards to make purchases across verticals, some of these store-less brands choose to stay online-only. Additionally, a new “Shopify ecosystem” is materializing as a direct-brand alternative to Amazon.

The brick & mortar experience is, therefore, impacted. It now requires brand integration. Experiences. A cool factor. Today’s brick & mortar world is a place where consumers can relate to the product, embrace the brand, delight in it, revel in it and share it. Providing a first-rate customer experience is a number one priority for retailers and brands alike. And brick and mortar is reliant on an online integration:  BOPIS (buy online, pick-up in-store) is the new normal in shopping.

  •  In the last 2 years, Walmart has expanded the number of in-store pickup kiosks by 8x to 1,700 stores and expects curbside service will account for 33% of their digital sales in 2020
  • J.C. Penney is testing new in-store, interactive services including fitness and yoga classes, cooking demonstrations, kids clubhouses, relaxations lounges and cafés
  •  New and evolving retailers and brands are reimagining in-store experiences to be multi-purpose (stores as lifestyle hangouts). Leveraging emerging tech for next-gen customer service experiences (e.g., cashier-less stores and virtual try-ons) and utilizing shipping innovation to speed up delivery times points to the fast‐tracking of the reinvention of the entire brand economy.

The new DTC model applies to media as much as it does to products and services.

The anytime/anywhere delivery of media combined with the fact that total media consumption is at an all-time high (now an average of 48% of our day) means marketers deliver 1-to-1 messaging as a norm. Media companies are in the middle of a streaming war. Consumers have an unprecedented wealth of content and advertisers have significantly greater inventory options. The winner will not be traditional broadcast TV or even digital subscription video services. And the war will be over once consumers cut the cord on traditional broadcast.

  • Compared with the year prior, video viewing through TV‐connected devices has increased by eight minutes/day
  • Video on smartphones and tablets increased by an average total of five minutes/day
  • Podcast & audio streaming are creating breakout brand opportunities; and with a shift away from downloading to streaming, advertising opportunities will evolve

Commerce, content and data are converging.

Traditional, big media companies are no longer the gatekeepers of media. Shoppable advertising on TV, Social, and within ads appearing virtually anywhere. Why? Consumption of video is skyrocketing both as “story-based,” and “me-based,” with, content, commerce, and data are converging.  This has sparked e-tailers to create content, and data companies to merge with publishers.

  • Pinterest launched “Shop the Look mobile ads” enabling retailers to feature up to 25 products in a single ad on mobile devices and direct users to their own retail site.
  • TikTok is beta testing shoppable short‐form videos which allow viewers to click on the in‐app video and be taken directly to the creator’s store without leaving TikTok

In the not-to-distant future, a few very savvy, highly successful, multi-disciplined companies will be the new media gatekeepers.  The winners will be those heavily armed with first-party user data—and have ways to continue to build and maintain that data—and that do/will sell ads and that will/do create content.  And while Regulatory concerns about consumer data are high, it does not yet seem to be affecting companies’ data investments.

For additional insights and greater depth, please read the full report.

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