One of the entrepreneurial wonders of the 21st Century economy is actually not a very new concept at all. Direct-to-the-consumer (DTC) brands have been around since the first mail-order catalogues. Names such as LLBean, Orvis and Lands’ End revolutionized remote selling, as they understood the power of data and measurement in building these enterprises, by earning customer loyalty through superior products and customer service, and generating lifetime value.
So perhaps it’s only natural that in an increasingly digital, social and mobile world — where data enables such direct connections more fluidly and products can be personalized at-scale — DTC startups would come to be powerful brands in their own right. Bonobos, Casper and hundreds of others are rising to disrupt consumption and create new patterns of consumer behavior for even the most everyday product. Just this week, Rent the Runway officially became the newest unicorn in the venture capital investment world.
My small apartment building’s lobby is a testament to these changing behaviors — there’s barely any room for the incoming DTC and related subscription economy shipments, daily. UPS, Amazon, FedEx and USPS — and their contractor networks — are delivering the goods that pile up. No drones just yet.
If You Can’t Beat Them …
Most retailers today report that their biggest threat comes from DTC brands (see Figure 1). Yes, Amazon and private labels also are leading concerns … but the truth is that building a business with seamless data flows enables the customer, and not the product, to be front-and-center. Brands that embrace customer-centricity, and have the customer data directly, cull the benefits.
When database marketing and customer relationship management came of age, we knew that pesky problems such as data silos, legacy systems, senior executive buy-in and lack of data bench strength were crippling. Where entrepreneurs love data and have great products and service, those hurdles don’t exist.
No wonder traditional brands are quickly starting up or buying their own DTC brands and relationships. There’s power in data, and having first-party data relationships with consumers — even as third-party data, and perhaps a few social influencers, enable discovery and facilitate connection – has brought about the mail-order bonanza of the digital age.
Physical retailers are not powerless in this mix — after all, point-of-sale transactions still rule, and hybrids are flourishing (online to offline, buy online pick up in store). It’s how quickly these stores can integrate POS and transaction data with other forms of advertising data, and even serve as data-sharing coops with the brands they carry, to serve customers better. It’s about more relevance and more personalization. We haven’t heard the last roar from Main Street, Big Box and shopping malls. They’ll need to tap data’s power in similar fashion to go back on offense.