The biggest advertising trade group says half of US shoppers are buying direct-to-consumer products, and most big marketers are unprepared

Casper

Nearly half of shoppers are buying products from so-called "disrupter brands," and the big marketing companies are unprepared, according to Randall Rothenberg, CEO of the Interactive Advertising Bureau.
These shoppers are not only relatively young and rich, but they’re interacting with these companies in ways that legacy marketers aren’t ready for.
Old-school marketers need to develop a robust and ongoing influencer marketing strategy or risk being left behind.
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A year after the digital advertising industry’s biggest trade group sounded the alarm bell for big marketers like Procter & Gamble and Unilever, it’s got more bad news for them.

It’s well-established that disruptor brands like mattress maker Casper and hair-loss product company Hims are upending these marketing giants. Now the Interactive Advertising Bureau is out with a new report that attempts to quantify this group of shoppers. It says nearly half of shoppers — 48% — are buying these direct-to-consumer products, and they’re rewriting the rules for how they expect to interact with the companies behind them and what they expect in return.

"Across the US population, half of consumers are now buying disruptor brands," said Randall Rothenberg, CEO of the Interactive Advertising Bureau. "That means half are buying brands that aren’t sold in retail stores. That’s astonishing given how recent the phenomenon is."

For the new report, "Disrupting Brand Preference," IAB worked with Cassandra, part of holding company Engine Group, to field an online survey in May of around 3,000 people, to paint a picture of the DTC shopper.

The big takeaway is, these people are not only numerous, but they’re the kind of customers that brands salivate over — they’re younger and richer than those that only buy from traditional CPG companies.

In fact, the report found, 68% of people who buy DTC products along with traditional ones are age 44 and under and 32% of them have a household income of $75,000 and up. Compare that to people who buy only traditional brands, where 40% are 44 and under and only 18% make $75,000 and up.

People who buy DTC companies actively share and post content about them

Most noteworthy, the buyers of DTC brands behave strikingly differently from people who only buy the old-fashioned stuff. Almost a third of these people are actively creating, sharing, or reposting content about these brands, about twice as many as those who only buy traditional brands. That flies in the face of the ongoing drumbeat about how people are avoiding ads left and right.

"It’s not surprising that buyers of incumbent brands don’t think about the brands," Rothenberg said. "What’s so remarkable about this cohort is how actively engaged they are with the brands themselves. There’s a group of consumers for whom advertising and marketing is actually a lifestyle."

This phenomenon is helped along by the fact that DTC shoppers are heavily influenced by paid influencers that the DTC companies use to promote their products — much more so than people who just buy traditional brands are

Specifically, in learning about new products, one-third of direct-brand buyers are influenced by those paid influencers, compared to just 8% of people who only buy traditional brands, the report found.

The new study follows one released by the IAB last year, "The Rise of the 21st Century Brand," that established how big the direct brands are and how fast they’re growing. The report detailed how direct-to-consumer brands like the subscription service for pets, BarkBox, and luggage maker Away, are threatening those established industries by marketing and selling directly to shoppers.

For the media companies, all is not lost. The bigger DTC companies have realized that to keep growing, they need to expand their marketing activities beyond Facebook and Instagram. This is reflected in their increased spending on TV and other traditional media and the media companies like Viacom and NBCUniversal are stepping up by creating new ad sales approaches that cater to DTC companies’ needs.

To Rothenberg, the traditional marketers are unprepared for the changes wrought by the disruptor companies, though.

"I think too many of them are still thinking, ‘This influencer space is nice to have, we get it,’" he said. "What the study is showing is, influencers today and an influencer strategy is as important as television advertising was in 1964. Any brand that’s not developing, managing, and investing significantly in a strategy for influencers across the platforms that allow them is playing fast and loose with its own future."

But wait, the skeptics might say. Most of these DTC companies are still tiny and unprofitable — hardly big enough on their own to pose a significant threat to the likes of a global powerhouse like P&G. Some might also say the IAB isn’t completely neutral as an observer — the trade group earlier this year expanded its membership to include DTC companies and other brand marketers.

Rothenberg’s point is that the challenger brands don’t have to all win for the legacy companies to feel pain, though.

"They’re small, but you’ve got thousands of these direct brands," he said. "They can get to a quarter point, one point of market share, and you put 20, 30, 40 of them in a category, that ends up being a hit on the incumbent businesses."

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