Insights

Changing World: Direct to Consumer

June 2, 2019

There is an ongoing proliferation of new innovative brands that develop, test and sell their products directly to the consumer bypassing the traditional brick and mortar retailing route. They are also smart about their marketing and ad spend, eschewing traditional mass market TV campaigns in favor of targeted grassroots marketing. In many categories, these direct players have quickly captured a material share of the market (see figure).

These brands offer significant benefits to consumers:

  • Superior value, by sharing the savings from the retailer’s margin
  • Product customization, through leveraging the data shared by the consumers
  • Community building
  • Convenience of home delivery including planned subscription deliveries

There is hardly a consumer segment that has not been impacted by the emergence of direct to consumer offers. Lower marketing costs, distribution costs and rich interactive experiences enabled by the internet have lowered the barriers to entry. As an illustration, the video that launched Dollar Shave Club cost less than $5,000 to be produced (https://www.youtube.com/watch?v=ZUG9qYTJMsI) vs. an average budget of hundreds of thousands of USD for the normal 30 minute commercial in TV. In addition its distribution was free and achieved millions of views through word of mouth referral.

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