Thursday, May 16, 2019

Opinion: Winning the DTC game | Advertising Age

Direct to consumer. It’s the only business model that became a trend, spawned an acronym and signaled a revolution in the way we shop. DTC has made mattresses cool, wiped hundreds of millions of shareholder value from legacy businesses and created new millennial billionaires. 

Only now it appears brands are losing their way as they seek to navigate this “new” business model.

The spirit of direct-to-consumer companies was always about using technology to pass on greater value to the customer: cutting out legacy operating systems to undercut existing players and then quickly scaling and beating those who failed to change. That meant lower prices, higher quality and better-designed goods for the consumer. You can’t ask for much more.

But is this business model still working, or are we already losing sight of what made it so appealing in the first place?

WTF is happening to DTC?
A quick glance at Instagram offers some clues. Competing for your attention is a barrage of brands that are all reading from the exact same playbook. Simple, pared-back design? Check. Simplified range? Check. Friendly tone of voice? Check. Transparency and social responsibility? Check. 

 This sea of sameness is not what we were all waiting for. 

 The barriers to entry have not just dropped, they are now so low as to give everyone the belief that they, too, can be an entrepreneur. Swaths of hungry founders are creating products using exactly the same formulas that have absolutely nothing to do with the consumer. This is less about someone with a breakthrough idea and more about a perceived ‘white space’ and access to capital.

These new founders argue that the competition benefits customers. But I propose the opposite. There is now so much rubbish that, in an environment where you cannot touch or feel, it is almost impossible to distinguish what is good and bad. Instagram is rife with incredibly average businesses with poorly developed products burning cheap venture capital money that offer no discernible advantage to customers.

Today, we need to sieve for gold to find a brand that is truly passing on the benefits of the DTC business model.

So how do we get back to basics?

It’s a business model, not a house style. The first rule in branding is to be distinctive or differentiated. New businesses should try to look and act differently from the competition rather than follow some perceived DTC standard. Have we reached peak sans-serif?

Pass on the saving of cutting out the middlemen. The whole point of the DTC model was to give people more value by removing the middlemen. Today, in many instances, it is cheaper for me to buy a mattress or handmade sneaker at a brick-and-mortar retailer than it is online. We must get back to passing on value to the consumer.

Better-quality products. The beauty category has felt the impact of the DTC model the most. Hundreds of millions have been generated, but many budding entrepreneurs are paying little attention to the liquid and formulations in their products. This is leaving many consumers buying cheap bottles with cheap formulas and hip branding for extortionate amounts of money. Brands need to ensure a level of care and not exploit customers. The promise was better quality for your money, not worse.

Responsive, friendly customer service. CX has become more and more important, but small DTC brands have shown themselves to be inept at responding to product or delivery issues. The benefit of the direct relationship with consumers must go further than the sales funnel and be a two-way street of benefits.

The first wave of direct-to-consumer brands paved the way. They brought fresh thinking and a belief in a better way. Brands like Casper, Warby Parker and Away were angry that consumers were getting screwed and created the possibility of higher quality, better-designed goods at lower prices. 

We need to get back to that before we further erode trust levels.

The world does not need another CBD-infused beverage. But the model certainly needs a brand that truly gets back to basics and offers the end user better value, higher quality and better design than they can currently find in a category.

Matt Kandela is CEO of Brooklyn-based design agency Dear Future.


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