Megatrend: Direct-to-consumer brands explode

A new Interactive Advertising Bureau study finds that companies like Warby Parker, Blue Apron and Casper are not just fads, but are growing in response to an “enduring shift" in the way the consumer economy operates towards personalized, custom brands. 

Why it matters: Americans are shifting consumption habits to brands centered on direct-to-consumer relationships. These distributors have nimble supply chains and are flexible enough to serve consumer needs in real-time. 

Major brands are being cannibalized by the rise of direct-to-consumer newcomers. And while most of these direct brands are small, the impact on incumbents has been "pronounced and severe,"  says IAB President Randall Rothenberg, who presented data about this at the IAB's annual conference in California Monday. 

• In the men’s grooming category Gillette’s share of the U.S. men’s-razors business fell to 54% in 2016, from 70% in 2010 and most of the market share has shifted to Dollar Shave Club, Harry’s, etc.
• In the mattress category, dozens of mattress companies selling direct-to-consumers online (many through social media) garnered more than 5% of the market in 2016 – and on their way to doubling share in 2017.
• Grocery store revenue growth is projected to be about 1% annually through 2022. But over that same period, the market for meal kits is expected to grow by a factor of 10x. 

Sensing a shift to direct, brands are trying to reinvent their marketing strategies  to serve customized audiences. 

• 95% of advertisers use demographic data, including personal data, location information, and interests, to target prospects they know almost nothing about, according to a new report from Salesforce.

• 66% of digital advertising spend next year will go to the most customized targeting platforms on the web: Google Search, YouTube, Facebook, and Instagram — and those figures don’t even include additional platforms or display advertising exchanges owned by their parent companies.

The media industry also has to take into consideration how this trend will affect their ability to make money. 

• TV advertising is becoming more personalized, but as we've detailed before, adoption of automated TV marketing has been very slow, with less than 10% of the $70 billion TV advertising market being sold digitally today. 

Our thought bubble: Customization and agility is everything in the new consumer economy.  Brands and news organizations need to rewire their supply chains around this trend, or they're toast.