DTC Brands Grabbing More Share of Voice, Pocketbook, Study Finds

DTC brands continued their ascension in 2019 with more than 40% of American consumers making purchases from them, according to the 2020 Direct-to-Consumer Purchase Intent Index from Diffusion PR.

Over the next five years the percentage of consumers planning DTC purchases will grow to 60%, with the most dramatic change propelled by newcomers, Diffusion found. The 14% who shopped DTC for 1%-19% of purchases in 2019 is projected to rise to 25% over five years, while the percentages of those making between 60% and 100% of purchases via DTC will remain largely static.

“Over the past few years, these DTC brands have turned the traditional retail marketplace on its head,” said Kate Ryan, Managing Director of Diffusion U.S. in the report. “We’ve seen the rebirth and redesign of everything from mattresses to sofas to toothbrushes and razors.”

Legacy brands have caught the wave by either acquiring their own direct-to-consumer brands, or investing in the appearance of their own DTC capabilities, Ryan said. “The entire space has readjusted towards trends that DTC brands pioneered, such as experiential retail,” she said. “In turn, DTC brands have also swung to the other end of the spectrum, with many opening traditional storefronts.”

Assessing where traditional retailers are most threatened by DTC, Diffusion found:

  • 35% of consumers are reducing spending in traditional retail on personal health, wellness and beauty products
  • 34% are cutting down on traditional retail in clothing and apparel
  • 32% are cutting down on big box retail in general, including Target, Walmart, CVS, etc.
  • 26% are cutting down on traditional retail in tech and gadgets
  • 21% are cutting down on traditional retail in bags and accessories
  • 20% are cutting down on traditional retail in furniture and home products

“Direct-to-consumer companies have seen such rapid growth, they’ve left long-time industry players questioning which core value offerings are driving consumers to these new entrants,” Diffusion noted in the report. “The data shows that lower costs and fast, free shipping are the leading reasons consumers seek DTC over traditional retailers. Consumers also heavily value the positive media coverage, reviews and customer service of DTC brands.”

The reasons U.S. consumers are increasingly shopping direct-to-consumer include:

  • 48% want lower prices
  • 43% want fast, free shipping and easy returns
  • 26% look for positive media coverage or reviews
  • 26% want superior customer service
  • 22% want better product design
  • 16% want better company and brand design
  • 15% want the company to donate sales proceeds to people in need
  • 12% want a subscription or replenishment service

Ryan said the because DTC startup brands don’t have the sense of trust created by legacy retailers, they’re building credibility through media and reviews, PR and social media, as well as vehicles like standout subway ads and podcast advertising.

The outreach seeks to intersect with where and how consumers are hearing about DTC brands, with 19% coming through social media and influencer posts, 18% from print and online ads, 15% from word of mouth, 14% from print or online reviews or feature, 9% from podcast ads and 6% from public transit ads.

DTC’s impact on the future of retail has both sides stealing from each other’s playbooks and adjusting, Diffusion noted, citing Nike’s launch of its own DTC brand. “When asked whether they view these brands the same as original DTC brands, consumers were largely on board,” the company stated in the report.

“In the same vein, we’ve seen DTC brands move back towards traditional in some ways, like opening more physical locations,” Diffusion’s Ryan said. The research shows consumers would visit the physical store of a DTC brand for these reasons:

  • To get a sense of a product before they buy it (37%)
  • For convenience (32%)
  • To get the product immediately (28%)
  • If a location had multiple DTCs under one roof (27%)

Diffusion’s report was based on figures from YouGov Plc, which surveyed 1,250 adults in October 2019.

Leave a Reply

Your email address will not be published. Required fields are marked *