As the digital space becomes more and more competitive for user attention and advertising placements, brands start putting the common DTC formulas into question.
Since the pandemic, traditional retailers and mass-market brands have ramped up their digital infrastructures to keep up with consumers. Consumers tend to perceive them as more reliable and find comfort with more familiar brands. How can DTC startups step ahead in the overcrowded digital landscape and compete with more mature brands?
Accelerated competition in the digital space
On the one hand, the market for DTC brands and consumers’ demand is growing. According to eMarketer estimates, in 2021, 35% of the U.S. population are expected to make at least one purchase from a DTC brand, which translates to a 96 million customer base in the U.S. Compared to the previous year, the number of DTC buyers increased by 9.8% (Source: eMarketer).
Even though the DTC market size is projected to grow at a steady pace of 15-17% during 2021-2023, many players face challenges in maintaining their growth trajectory or delivering sustainable profits. Over the last year, traditional brands managed to catch up or even surpass the digital capabilities of independent online retailers. The prominent examples here are Nike, Lululemon, and Chewy.
Consumers tend to trust mass-market brands more, especially when buying must-have products. To a great extent, the DTC models are still better positioned for non-essential categories: users tend to consider these options only when making discretionary purchases. In addition to these shopping patterns, CPM prices in the ‘walled garden’ ecosystems keep rising due to a higher demand; in Q1 2021, social ad CPM increased by almost 16% as compared to the previous year (source: eMarketer).
The competition has accelerated not only because of traditional brands going digital but also due to a higher number of DTC incumbents themselves. Whether it’s the sunglasses or underwear, the similarity is killing the effectiveness of two identical messages. As consumers become more and more immune to ubiquitous strategies, marketers now have to look for more noticeable differences and tap into different perspectives to keep the direct-to-consumer format relevant.
Today successful DTC brands offer value pricing, employ modern branding and new trends, and use diverse digital capabilities to interact with customers. Diffusion’s 2021 DTC Purchase Intent Index reports that 44% of U.S. consumers believe that DTC brands produce a higher quality product at a lower price and only 23% perceive DTC brands to be the arbiters of cool and trendy.
How DTC can scale with native
Purpose-driven gen-Z mindset redefines the rules of audience engagement by focusing on the why, not the what. One way of doing this is by telling which values stay behind the DTC brand, how these products have been built, or being vocal about community causes. For example, the founder of Hint Water published the story of how she found this initial idea to market flavored beverages with no sweeteners.
Shifting from the common strategies, successful DTC brands also become more susceptible to their consumers and mirror what is important to them at the moment. Another possible content strategy is to put some real consumer problems at the forefront and communicate how the promoted product can enhance their lives.
Today, many publishers can help advertisers produce custom branded posts or even have partner studios in charge of creating sponsored content. These branded content projects can take the form of articles, films, interactive quizzes, infographics, ebooks, etc. Native display ads, and particularly content recommendation widgets, can then serve as a distribution method to reach target audiences and bring traffic to these pages.
While content marketing can serve mainly brand leveraging purposes, native ads work at the bottom of the funnel as well. Advertisers can offer special trial samples, discounts, or retarget users who visited sponsored publications. Users who are familiar with the product story and want to support this brand are likely to convert into customers more often.
Final thought
While traditional brands had to resist the disruptive market forces during the pandemic and scale their digital capabilities at a much quicker pace, now is the time to overhaul the established attributes of the DTC model. Today’s e-commerce zeitgeist requires deeper differentiation of the brand messages, as well as diversification of distribution channels.
