The Secret Sauce of DTC - An R3 White Paper

The secret sauce of dtc An R3 White Paper

DRIVING TRANSFORMATION FOR MARKETERS & THEIR AGENCIES

the winning edge The concept of direct-to-consumer (DTC) retail is not new yet its approach seems made for times like these. High rents in prime commercial areas, the advance of private equity on the consumer goods business, wide adoption of mobile and social commerce, developed logistic capability, and the rise of social influencers, are just a few elements that suggest that DTC hints to what the future of retail will look like.

DTC pioneers that have gone to beat market leaders at their own game have given the approach a legitimacy that has made marketers and retailers across categories sit up and take notice. It’s not easy for upstarts to win market share from household names that have spent decades building their brands, and the lessons offered from the experience of these agile and innovative companies deliver rich insight for any business. DTC is not just about how people shop, but how products are being developed and how revenue is generated. It is also about how the power of data, artificial intelligence, and machine learning can drive discovery, sales, and loyalty. This was true before the global health pandemic and rings even clearer today.

In this white paper, we review the relationship between the use of marketing innovation, technology and success of DTC brands, and explore the similarities and differences in the role of marketing in driving the growth of these brands. We hope that the insights gathered will not only be of use to marketers looking to shape DTC brands, but valuable to traditional brands looking to enhance their e-commerce strategies and strengthen their engagement online.

2

The Secret sauce of DTC

20 Fastest-Growing DTC Brands According to growth in digital traffic, March 2020

1

2

3

4

5

New Age Beverage Corporation

HelloMD

Nonda

Daily Harvest

Function of Beauty

newagebev.com

hellomd.com

nonda.co

daily-harvest.com

functionofbeauty.com

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

6

7

8

9

10

Pet Plate

BioClarity

Care/of

Veestro

Public Goods

petplate.com

bioclarity.com

takecareof.com

veestro.com

publicgoods.com

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

11

12

13

14

15

Youth to the People

Misfits Market

Honest

Thrive Market

Liquid I.V.

youthtothepeople.com

misfitsmarket.com

honest.com

thrivemarket.com

liquid-iv.com

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

16

17

18

19

20

Great Jones

Rowing Blazers

Home Chef

Chairish

Trendy Butler

greatjonesgoods.com

rowingblazers.com

homechef.com

chairish.com

trendybutler.com

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

Quarter over quarter growth:

461.9%

83.0%

54.2%

42.1%

Source: SimilarWeb

134.6%

75.9%

53.5%

39.3%

124.0%

72.8%

47.9%

37.6%

123.0%

56.6%

47.6%

36.3%

120.9%

54.2%

44.4%

35.6%

3

DRIVING TRANSFORMATION FOR MARKETERS & THEIR AGENCIES

DTC Brands vs. Traditional Brands A Business Model for the Internet Age Companies across categories have entered a new phase in consumer relationships.

Frictionless e-commerce and high levels of mobile penetration have made search engines, social media platforms, microinfluencers, and digital ad placements key parts of the shopper journey; giving life to a retail model that is surfing the wave of connectivity right to your front door.

DTC business models have been around for decades, with companies like Tupperware and Mary Kay infamously bypassing traditional elements and methods of brick-and-mortar retail to build brand and reach audiences.

With digital native customers making up an increasing percentage of the overall consumer demographic, DTC business models have found growing popularity thanks to the preference of technology-savvy shoppers for experiences that are seamless, intuitive, personalized, and immediate.

“We listen to our customers so closely every week, and now we have six years of data on recipe preferences, culinary preferences, ingredient preferences, seasonal preferences, and we’re using that to make the product better and more customizable, to lead to stronger personalization in the future.”

Matt Fitzgerald, VP of Marketing at HelloFresh

4

Traditional retailer VS. direct-to-consumer Traditional Retailer

Direct-to-Consumer

Manufacturer

Manufacturer

Wholesaler

Distributor

Advertising/Website

Retailer

Consumer

Consumer

The Secret sauce of DTC

Warby Parker StoryTelling in email marketing

Launch Strategy Warby Parker has always made it a top-of-the-line priority to highlight its company’s goals. They always want customers and visitors to know the Warby Parker story and brand message from the very beginning.

From the very second a customer signs up for Warby Parker, they will receive a welcome message with the Warby Parker brand story and fun facts about the brand. If a customer only reads the brand story once, the welcome message has already set the tone for all future emails. Whenever the customer opens a coupon code email, they’ll think of the brand’s goal to provide revolutionary prices. When they find out that a pair of glasses were donated because they bought a pair, they’ll think about the brand’s social consciousness.

Results In 2015, the company was valued at $1.2 billion. Warby Parker has built its brand to build relationships. It allows them to build meaningful relationships because it’s a brand that cares.

23

DRIVING TRANSFORMATION FOR MARKETERS & THEIR AGENCIES

Growth Strategy Warby Parker continues to increase its physical presence, having opened its first pop-up locations back in 2011 and its first permanent brick-and-mortar retail store in 2013. Today, the company has nearly 100 locations across the country.

By introducing new seasonal products, Warby Parker tempts their subscribers to check out the newest collection of frames when their customers might not have done so otherwise.

24