Direct To Consumer Trilogy: Part 1 – Fad Or For Real?

 In Shopping

Both traditional brick-and-mortar and established eCommerce retail are being shaken up by a growing number of Direct-to-Consumer (D2C) brands. Bypassing middlemen like big-box stores or Amazon and often using paid campaigns to gain steam, each brand seems to ask why browse around when you can buy the best through me? And for 81% of consumers, the D2C play seems viable.

D2C companies are not new—the early 90s saw a wave of them hit the market, from dELiA*s for teen fashion and Omaha Steaks for meat, styrofoam and dry ice. The wine industry has been a long time player in the D2C game, increasing revenues by opening sales up to cross the barriers of country borders.

But the internet has allowed for a more fundamental shift. Virtual browsing is pretty much like a mail-order catalog, but it’s easier to put everything together with a wide array of eCommerce tools and digital marketing strategy. Multiple sectors, including furniture, home goods, and beauty, are seeing massive shifts from retail and D2C alike. As the landscape for these categories evolves, consumers are starting to think in new ways about shopping online, and the old assumptions surrounding customer loyalty to specific brands and merchants is fading as new, trendy and aggressively advertised products seem to be flooding the marketplace and advertising channels.

Analyzing the performance data gathered using Jumpshot’s Insights tool and data feeds from Jumpshot’s 100-million device panel, we mapped the year-over-year growth for select groups of up and coming D2C brands under multiple retail clusters, inclusive of mattresses, oral hygiene, skin care and hair removal, frames and eyewear, shoes and exercise equipment.

In the first part of a three-part series, we’ll focus on mattresses, shoes and exercise equipment. In part 2 we look at oral hygiene, skin care and hair removal, frames and eyewear and in part 3 we examine the genealogy kit industry and the growing demand for at home genetic testing.

Does D2C Work For All Categories?

The D2C model allows brands to get to know their consumer and in most cases, get instant feedback on what is working and what isn’t; however, the company needs to first find their consumer. Allbirds, the environmentally sound, hyper-comfortable sneaker startup was developed with a $200k grant and has catapulted into the fashion world.

Allbirds has achieved great success and popularity surrounding their D2C brand with the help of creative advertising and a joint partnership with Nordstrom. We tracked the search volume for Allbirds YoY and the brand saw a 109% increase in search volumes from 2017 to 2018 annually.  In the same time period, Allbirds saw almost 60% growth in transactions, from 262K transactions in 2017 to 408k transactions in 2018.  

The shoe category overall is up 3% YoY, so Allbirds’s growth is a strong indicator of the explosive growth that a new, D2C player can achieve. While Amazon is a leader in market share for shoes, it shows 14% negative growth in transactions YoY. Maybe the pressure Amazon places to keep prices low or its problem with counterfeits kept Allbirds away from the retail giant, but  partnering with an established player can help D2C brands break into a larger swath or buyers, so it’s no surprise Allbirds has teamed up with Nordstrom (nordstrom.com has maintained a steady 2.5% market share of online shoe purchases, and has no issues with fake apparel).

This prototype has worked for Allbirds, but it has not become a default success template for all e-Commerce launches. Peloton, the stationary exercise bike company has tried to use a similar model as Allbirds. While Peloton has a strong backing with $325M in new funding, Jumpshot data shows it has lost the steam of its search success YoY. Search volumes for the brand are down 10% year-over-year, showing a slow decline annually despite the increase in showrooms and kiosks in malls across the U.S. and  TV advertisements marketed to men and women during the 2018 holiday season.

Peloton gained product awareness and brand recognition through their promotion and marketing efforts, but it seems the company has an uphill battle to reach the consumer in the same way Allbirds has, and their market is tougher: the exercise machine category as a whole is down 8% year-over-year.

In 2018, Amazon led the category for retail domains online, controlling over 70% of the market and offering a wide variety of exercise bike options to choose from. Peloton only offers one bike with a variety of add-ons available and a subscription model for classes and training sessions. And Peloton isn’t cheap. While consumers are willing to pay for the newest thing with premium materials and advanced technology, Peloton products are valued at a price point that is out of budget for many with the basic bike starting at about $2,000. When compared to other bikes in the market, like those under the brand Echelon, this is double the cost.

So Many Mattresses, So Little Time

A major benefit with D2C brands is they can deliver lower prices without sacrificing quality as they do not have the overhead that conventional physical stores possess.

But what happens when there are several options all at a similar price point?

This is exactly the case for the mattress category. Bear, Casper, Helix, and Leesa all offer similar products at comparable pricing; a queen mattress ranges from $600–$995 across the brands.

With so many alternatives around the same value, what makes one brand stand out among the crowd? One answer is advertising and marketing. Of the 14 domains we looked at using Jumpshot’s data, Casper represented a 22% share of transactions for the retailers as a whole and 57% of the share for the D2C brands under the mattress category. Casper made a huge presence in advertising, using the same NY based creative marketing agency as Allbirds; their messaging and detail around the brand was clear and eye-catching. Casper is the also most affordable of the four brands.

However, their dominance might be slipping: the search volume for the brand is down 21% YoY. The winner in this category for maintaining search momentum is Bear who saw a 60% growth YoY. This gain could represent a payoff of their strategy in marketing the bed to athletes.

At the bottom of the category is Lessa who saw negative 40% growth in organic search volume. Additionally, visits to their site are down 13% year-over-year. Helix is also slowing. Though search counts for the company’s name are seeing moderate growth, web traffic to the domain is down 43% YoY.

In the next installment in this series, we will focus on social media and the influence advertising and marketing has on the D2C market.

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