Direct-to-consumer (DTC) brands continue to up-end business models and rewrite the playbook on how to engage customers. So, it shouldn’t be a surprise to anyone in retail that a new report from CommerceNextshows an increasing divide in ecommerce marketing spending and priorities between traditional retailers and digital-first DTC brands.

The research clearly demonstrates that one of the biggest differences between traditional retailers and DTC brands is their investment in marketing. Marketing budgets across all retail business models are on the rise: 65% of respondents said their 2019 budget increased over the previous year. Conversely, only 10% of marketers indicated that they are reducing their budget. However, DTC brands’ budgets are increasing at a higher rate. In 2019, 78% of DTC marketers said their budgets had increased, compared to 60% of traditional retailers.

With larger marketing budgets and consumer tastes veering sharply in their favor, DTC brands are now dictating the terms of a new ecommerce customer experience. DTC brands have methodically seized market share by innovating on product, marketing tactics and technologies. The mattress industry serves as a stark example—dozens of new DTC bed-in-a-box mattress brands have sprung up while the incumbent retailer, Mattress Firm, had to restructure the company in bankruptcy in order to survive.

Unfortunately for DTC brands, the research also shows how this relentless focus on marketing comes with its own subsequent set of growing pains—those that traditional retailers have already worked through. All this innovation has its price, resulting in some notable differences in priorities and challenges between traditional retailers and DTC brands:

• DTC brands are starting to focus on achieving profitability at scale. Nearly 45% of DTC brands named “achieving profitability at scale” as a top barrier to meeting 2019 marketing goals. In contrast, less than 18% of traditional retailers named this as a barrier.
• DTC brands are experiencing concern over finding and retaining top workforce talent. Twenty-six percent of DTC brands named this as a barrier for 2019, compared to 20% of traditional retailers.
• DTC brands focus on new channels over promotions. DTC brands are turning away from the use of promotions in favor of other channels, such as programmatic TV, to attract new customers. Once the domain of only the largest retailers with the biggest budgets, television is now a hearty feeding ground for many digital-first DTC ad campaigns.

Despite varying marketing spends and the resulting challenges for DTC brands, retailers of all business models reported sharing many of the same business woes and goals:

• Acquisition marketing is still the prime directive.Acquisition marketing transcends business models as a top priority for all ecommerce marketers. A full 81% of ecommerce marketers named acquisition as a top investment priority. Ecommerce marketers plan to spend even more on acquisition in 2019.
• Getting a unified view of the customer remains a struggle. Most marketers are not satisfied with their efforts to create a single view of the customer and personalize the customer experience. In 2019, the top innovation investment priority for all ecommerce marketers, regardless of business model, is in customer data platforms.
• Marketers must make faster, more informed decisions.About 30% of ecommerce marketers from both traditional and DTC brands were most challenged by executing quickly enough on marketing initiatives.

Unencumbered by legacy technology, DTC challenger brands are reporting heavier investment in modern marketing solutions that help them respond more quickly to trends, acquire new customers across multiple channels and build loyalty. If they can overcome some of their early-stage growth challenges of profitability and talent, they will continue to take market share.

Traditional brands now have a choice: they can up their marketing investments and adopt new approaches to ecommerce that will help them grow; or, they can slide silently into the history books of traditional retailers unwilling to adapt to changing times.

Source:https://www.forbes.com/sites/veronikasonsev/2019/05/30/direct-to-consumer-brands-are-out-marketing-traditional-retailers-but-it-comes-at-a-cost/