Over the last few months, MTM has been working with the IAB UK (Internet Advertising Bureau), taking an in-depth look at the UK’s leading Direct to Consumer (DTC) brands to understand their impact on the changing economy (for example, Freddie’s Flowers and Hello Fresh). Our study, ‘Born Online’, was released in September and is available on the IAB’s website here.
DTC brands are enjoying significant success in the UK, often (but not always) bypassing traditional retailers and threatening to disrupt their business models. The IAB wanted to explore these brands to understand the drivers of their success, and how their behaviour helps them stand out in today’s crowded retail landscape; which brands were the most successful in cutting through the noise, in generating awareness and attracting customers?
Our project drew on input from a mixture of UK and international brands that, with their unique approach to business and brand development, have built widely recognised identities and loyal customer bases – often in a very short space of time.
Now we’re heading into Christmas, we’ve gift-wrapped (too early?) 5 of the key takeaways from our report:
- Almost 4 in 10 of the online population have purchased from a leading DTC brand
When presented with a list of 50 of the leading 50 DTC brands in the UK, 97% of the online population are aware of at least one, demonstrating that these brands (particularly ones like HelloFresh, Naked Wines, Gousto and Made.com) are household names. Furthermore, 39% have purchased something from one of these brands at some point. There also appears to be a ‘super group’ of DTC consumers, with 10% of the online population having purchased from more than 5 of the 50 listed DTC brands.
- DTC purchasers are brand advocates, who pay extra for convenience, personalisation and ethical products
Our research shows that DTC customers share many behaviours and preferences. They are likely to be early adopters, tell people about the brands they love and be willing to pay extra for convenience, personalisation and ethical products. While they are more likely to live in London and tend to be younger and more affluent than the average consumer, DTC customers come from a range of places, age groups and socioeconomic backgrounds.
- DTC brands start with a clear vision and purpose, ensuring their values are reflected in everything they do
Founders of DTC brands are often passionate about an idea or gap in the market that they have identified. They establish the brand’s purpose clearly from the start, keep it authentic and live up to their values, which earns the respect and support of customers and employees, super-charging their performance. There is also a move towards launching businesses with ambitions beyond sales and profit – often offering innovative products that are good for customers, employees and the planet.
- DTC brands listen to feedback and make data-driven decisions to improve their products and super-serve customers
Having a direct relationship with their consumers allows DTC brands to interact with each customer individually, super-serving their needs and preferences. Over time, the data DTC brands collect becomes a major asset, enabling an experimental, test-and-learn culture that supports continuous improvement. By controlling product design and each customer journey, DTC brands can adjust their products and sales processes quickly, allowing them to test customer reactions to changes. As a result, their products are the result of years of careful experimentation and optimisation and DTC brands can quickly adapt to changing customer preferences.
- DTC brands are born digital, using flexible sales and marketing channels to support their rapid growth
DTC brands rely heavily on digital sales channels that allow them to reach a wide customer base and scale rapidly, especially in the early stages of their growth. Many have also built their brands through online advertising, where they apply the same data-driven approach they take to product development. While some DTC brands use offline sales and marketing channels as they evolve, they do so when the time is right and in a way that fits with their broader sales strategy and experimental mindset.
A summary of our methodology:
- Identifying 50 of the UK’s leading DTC brands across eight sectors;
- Conducting a 2,000 strong consumer survey exploring the demographics, behaviours and preferences of today’s DTC consumers;
- Interviewing 16 DTC founders and CEOs, agency partners working with DTC clients and investors active in this space.