I don’t know how many of you actually saw this, but a lot of people across the country have been receiving printed shopping catalogues—actual hard paper copies—from DTC brands. When the growing gets tough, the tough print catalogs.
I have a hypothesis. While I didn’t smoke anything during the holidays, let me know if that’s the conclusion you’d arrive at, at the end of this essay.
Let’s break some myths first.
Firstly there are a couple of hundred thousand brands that sell directly to consumers through their own websites and not 500 or 1000. But all the attention and press goes to a universe of 1000 brands and that skews all the data.
Digital advertising spend of DTC brands (N=21,700) is predominantly less than $5000 per month. The big spenders you see are exceptions and they are not the rule. But they are the ones who are also omnichannel.
When we say digital advertising is expensive, the question is for whom?
Small and mid-sized DTC brands.
Here’s why: Low SKU count and restricted distribution means less exposure. If you click on an ad, go to a website and if you see a grand total of 5 SKUs, what are the odds of conversion? There is no straying into adjacent products. There is no serendipity. If you walk into Target and don’t see the brand whose ad follows you on your phone, what are the odds of conversion? Zero.
So all else remaining the same, omnichannel brands have an advantage over single channel brands when it comes to extracting value out of the ad dollars. Is that right?
IMO, the same ad dollars work harder – just that attribution does not tell you the story in numbers.
Debate-able POV? Set the frame of reference as a mid-to-large omnichannel brand which happens to have a DTC channel presence. We are now talking about 50 SKUs, marketplace presence and national retail presence. Right?
We wrote a detailed essay about DTC brands setting up physical stores. Printing catalogs and setting up stores or being in stores amortizes the cost over several interactions which are not priced through the (ad) auction model. Besides, the ad spend now has a better surface area across channels for shoppers to convert.
We have a much much larger, deeper study on the state of the DTC market. Our research team has been on it for months now, and the findings are truly fascinating. Here is Werner Geyser from Influencer Marketing Hub with his insights of DTC industry based on our research data.
My conclusion: A brand that goes omnichannel sooner will be better placed for better returns on digital ad spend than the one that stays digitally native. It’s a vicious circle for digital-only brands that depend on digital ads. Omnichannel is a hedge against ad cost inflation. Just that I have no way to prove it. Got data? Want to get on our podcast and talk about this? Hit me up on Twitter.
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