Direct-to-Consumer Brands Are Reshaping the Face of Retail

All of this takes me back to a debate I’ve been having with both my friend Randall Rothenberg of the IAB and my students at Duke’s Innovation and Entrepreneurship Initiative about the relative importance and staying power of brands in the rise of what Randy coined “the direct brand economy.”

What is not up for discussion is whether DTC is fundamentally changing the world of marketing. In many CPG categories, direct brands are capturing all of the category’s growth at the expense of legacy brands. Unlike legacy brands, they have direct access to its customers. They have the data to react to customer complaints and optimize for customer delight in real time. And as they move from online-only to omnichannel, they are changing the face of retail.

The argument against brand is that whoever masters the data wins, constantly optimizing programs to drive down cost of acquisition and growing customer retention. That’s a complete 180 back to the customer relationship management (CRM) origins of the web.

I would argue that brand has never mattered more, with We’s clumsy attempt at pulling the wool over investors’ eyes notwithstanding. Name a single product category in which any offering can claim meaningful and sustainable product superiority, and I’ll eat my proverbial hat.

Harry’s is happily stealing share in the shaving category with a razor that’s five generations behind current technology. Casper sells nice beds, but you can find a lot better. And Warby Parker’s glasses are not, in and of themselves, obviously better than those of either LensCrafters’ at many times the price or Zenni’s at a fraction.

Any product-level advantage a marketer enjoys is either too insignificant to convey a competitive advantage, or if it truly is a breakthrough, it’s one that will be copied in a matter of months.

We already have too many things competing for our attention. If we have to shop one company for our bed, another for our toothbrush, another for our eyeglasses, another for our cosmetics and yet another for our home-delivered meals, we are making a lot of decisions. The only way for a disruptor to win in that clutter is to create a brand that stands above the product offering itself. A brand that, in the greatest tradition of the most powerful and enduring brands of all time, stands for the emotional reasons people come to the category in the first place.

There are over a hundred startups competing with Casper to sell home-delivered mattresses. Some will find success through geographic and socioeconomic segmentation. But Casper is the one that is leading the disruption for a simple reason: even if they launched with a disruptive product, they dominate the space because they wrapped that product in a compelling and engaging brand.

So no, brands will not matter less. Because brand matters more.

But that takes us to the second question, and that’s about the staying power of brands in a DTC world.

The answer to this one is more nuanced because it starts with a simple fact: The barriers to launching a brand have never been lower. No need to start with a brick-and-mortar lease. No need to pay slotting fees. No need to own your supply chain or your marketing stack. It’s all available off the shelf, for rent.

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