Blog Post - Frank Kochenash , Jul 1 2019

Are digitally native DTC brands really direct? Are they even digital?

Are digitally native DTC brands really direct? Are they even digital?

Follow the money. Show me the money. Money talks. Put your money where your mouth is...

Sometimes it's instructive to see where investors are placing their bets. Digiday's article on venture capitalists of Direct-to-Consumer (DTC) reveals strategies from several VCs investing in "DTC brands." These are the capitalists fuelling the "startup brand boom." You know them as digitally native DTC brands. Right?

Synthesising the article, investors find certain characteristics indicative of potentially successful brands. They look for brands that:

  • Align with shifts in popular culture
  • Tap into retail's next generation by representing new customer behaviour
  • Have unique products, multi-channel distribution and differentiation
  • Reach mass audiences in new ways

What I find interesting is that none of these characteristics are specifically about being direct-to-the-consumer. in fact, where distribution is mentioned, being multichannel or new is desired - not necessarily being direct. "Digital" isn't specifically mentioned either, but representing new customer behaviour and reaching mass audiences in "new ways" are probably digital activities or at least involve cleverly using the latest digital technologies.

Trendy, agile, timely - these attributes are valued by investors:

  • Shifts in pop culture, by definition, are ephemeral
  • New customer behaviour is, well, new, regardless of whether it's describing shopping habits or media consumption
  • Unique products that are successful are never unique for long

So, what are the Implications for brands?

  1. Don’t get too hung up on a direct-to-consumer fulfillment model. DTC certainly works in some categories and with for some brands, but if you make soap, is DTC the model?
  2. Don’t get hung up on being digitally native. Focus on customer behaviour and interests. Tapping into a trend or cleverly using a technology to solve a customer pain point is more valuable than a bespoke technical innovation.
  3. . Adjust investment horizon. This may be the biggest takeaway. When we marketers think of successful brands, we tend to think of big brands that took decades to build and are designed to last for decades. But maybe the business plan of the brand of the future looks more like a holiday movie than a manufacturing operation.

These all imply that the approach and toolkit of brand development is changing. Or perhaps more accurately, that there is an alternate approach and toolkit to brand building. Use social channels and highly targeted media targeting and testing early for purposes of product and brand development and validation. Then, invest in broader reaching media and stunts to reach a wide audience. Use highly scalable distribution like Amazon, social commerce, targeted retailers, and DTC in the early phases, then scale out distribution in the ‘go big’ phase.

The current state of Google and Facebook give us “Reach as a service.” The current state of Amazon gives us “Retail as a service.” These are the tools to create mental and physical availability. Brand innovators should use these. But it’s the idea—the cultural trend to tap into, the new customer pain point identified, the unique product to develop—that is needed.

Need more of a steer on the value of DTC as a core plank in your channel mix and ecommerce strategy? Be our guest, with our new report, "why you should consider DTC a key part of your eCommerce strategy".

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