UMD Marketing Expert Explains the Rise in Firms From Blue Apron to Warby Parker
Cosmetics seller Birchbox and meal-delivery firm Blue Apron are two of the direct-to-consumer brands reshaping the way we buy.
If it seems like everyone you know has eyeglasses from Warby Parker, cosmetics from Birchbox, razors from Dollar Shave Club and dinner from Blue Apron, then welcome to 2019.
Nearly half of U.S. consumers—48%, according to a recent study—have bought from a direct-to-consumer (DTC) brand. These consumers are a coveted group, skewing younger and more affluent than those who are loyal to traditional brands. Roughly 84% of them are 53 or younger, and most have a household income above $75,000.
Those aren’t the only factors that make these consumers so desirable. It’s what they do when they buy something they love: They tell their friends, family and other social media followers.
That’s helping to fuel the success of DTC brands, said P.K. Kannan, Dean’s Chair in Marketing Science at the University of Maryland’s Robert H. Smith School of Business. He said the boom in disruptor success comes down to three key factors.
The power of the social pitch
Many thriving DTC brands pitched consumers directly via social media—a cheap alternative to the big-money advertising routes that legacy brands traditionally have taken.
For example, while Gillette was placing expensive advertisements on television and in established glossy men’s magazines, its startup rivals were creating social media outreach strategies with a compelling to-hell-with-those-prices vibe.
“In Harry’s case, the brand was using social media and pitching directly to men, with a pitch that said, ‘You’ve been overpaying for razors,’” Kannan said.
For years, Gillette had been making minor innovations in razors, adding blades for closer shaves and increasing its prices with every step. Harry’s saw an opening and cut in.
The importance of user reviews
Word of mouth has always been one of the most powerful marketing tools. Bold marketing campaigns can virtually gain superpowers on social media.
People liked the messages from the razor upstarts and shared them, and that translated into a surge in new customers and influencers who were willing to try them—then post their reviews.
“The whole game changed,” Kannan said. “Previously, if a no-name brand entered the marketplace with a pitch that said, ‘Hey, buy my products. They’re cheaper,’ I might not trust that brand. But if I have 10 or 15 other people writing reviews saying, ‘I tried it. This is great,’ then I might try it.”
The beauty of the subscription model
Many of the direct-to-consumer brands, including Harry’s and Dollar Shave Club, BarkBox dog supplies service and Stitch Fix clothing style service, are structured around the subscription model. Dozens of others appeal to just about every consumer segment out there.
Under the typical subscription plan, a brand sends a parcel of goods to a member every week or month, under some kind of purchase agreement. It’s a business plan that delights investors and investor analysts for the steady stream of revenue it connotes.
“Along the way, the customer and that brand are creating a relationship,” Kannan said. “Investors and investor analysts are very happy. They can easily see what your cash flow will be going forward, based on your number of customers. And they can easily do the valuation of your company.”
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