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DTC Sales are Plateauing. Here's Why.
Three reasons why direct-to-consumer e-commerce sales aren't the sure bet they were just a few years ago.
DTC Sales are Plateauing. Here's Why.
Three reasons why direct-to-consumer e-commerce sales aren't the sure bet they were just a few years ago.
by Tod Maffin (email • LinkedIn • social media)
Today's News
Three Reasons Why DTC E-Commerce is Plateauing
The era of the high double-digit growth for American DTC sellers is coming to an end. And eMarketer this morning is out with a piece explaining why.
It says next year, direct-to-consumer ecommerce sales will make up less than 15% of total retail ecommerce sales. That’s a huge share drop from previous years. And in the years that will follow, eMarketer forecasts sales numbers will plateau.
Why is this happening? According to the piece, three reasons.
Advertising on social media platforms isn’t as cheap as it used to be.
There was a lot of hype around selling D2C back in the age of cheap social advertising, when a brand could scale successfully—and cheaply—by setting up an online shop and promoting through Facebook and YouTube, for example.
Over the last couple of years, social ad impressions have gotten more expensive, and many of the brands that were able to ride the initial wave were not able to sustain that growth.
Newcomer brands have also been discouraged from using that model.
It was also noted that the COVID lockdowns brought in a lot of new online buyers, but that only led to a more in-demand, crowded, and costly ad market.
2. Big brands returning to retail
Many of the big brands that shifted away from bricks-and-mortar sales are coming back to traditional retail.
Nike, for example, has reestablished its partnerships with retailers including Macy’s and DSW after admitting it had “over-rotated” away from wholesale a little more than intended…
Despite the rise of ecommerce and the influence of digital media on shopping behavior, the component of people going to physical stores to make purchases is still too powerful to ignore.
Earlier this year, eMarketer said it expected in-person retail sales to make up almost 84% of all US retail sales this year.
3. “Digitally native” brands not thinking long-term
Digitally native brands, once hailed as disruptors in the ecommerce space, are seeing flat or slowing sales.
Those brands are expected to account for less than 20% of all D2C ecommerce sales by 2026, a significant decline from their initial success.
For many digitally native brands, it was easy to gain customers through promotions and free trials, but there wasn’t enough focus on brand marketing.
When that happens, brands may be able to scale very quickly and attract investor attention, but the lifetime value of your customer isn’t high. This model makes it hard to sustain a quality customer who is willing to pay full price and spend on more products over time.
Google Keeps Backing Away from AI in Search
Google appears to be continuing to back away from AI summaries in search results.
A new study by SE Ranking has finds that AI Overviews appeared in just 7.5% of searches in July, a significant drop from 64% in February during beta testing.
The average length of AI Overviews also dropped by nearly 40% compared to the previous month. Forbes, Business Insider, and Entrepreneur were the most cited media outlets in July.
Google acknowledges “refinements”
Google says it’s refining when and how AI Overviews are shown to make them as useful as possible, including recent technical updates to improve response quality. It said their own numbers don’t match the study’s findings.
Blunders lead to caution
Google scaled back AI Overviews in May after users complained about incorrect and strange answers, such as telling people to eat glue. The company also faced backlash over its Gemini image generator producing historically inaccurate images of people of color.
Niche topics increase
Despite the overall decline, some niche topics, such as relationships, saw an increase in AI Overviews, with just over 40% of related keywords triggering the feature in search results.
Elon Musk Sues Advertiser Group into Closure
On Tuesday, Elon Musk's X filed a lawsuit against the Global Alliance for Responsible Media (GARM), alleging the ad consortium conspired to shut off advertising revenue to X, resulting in billions of dollars in losses.
Yesterday, that organization announced it would shut down because, as a non-profit, it didn’t have the money to fight the case.
GARM was established in 2019 to help marketers address harmful content on digital platforms, and has advised companies on brand safety issues.
X's lawsuit
X's lawsuit alleged that GARM helped trigger a "massive advertiser boycott" following Musk's acquisition of Twitter (later renamed X).
Last year, Musk told advertisers who didn’t like him or his website to “go fuck” themselves, stating that he hoped companies that didn’t support his way of doing business wouldn’t advertise on X.
Apparently he didn’t really mean it, since his company is now suing some of the advertisers who decided to do that.
Musk's legal battles continue
Musk and his companies are involved in numerous high-profile legal battles, including lawsuits against OpenAI (a company he co-founded), Media Matters, and the Center for Countering Digital Hate — all of which say, in one form or another, they had a right to present accurate information about the platform, even if Musk doesn’t like that information.
All it took was a self-described free speech advocate who believes he can say whatever he wants on his own platform but resorts to expensive lawsuits to silence critics.
GARM’s parent body, the World Federation of Advertisers, says it will take up the defence against the lawsuit.
TikTok’s Shopping Trends are “Bending”
TikTok this week published its second annual shopping trend report.
It highlighted three areas it found movement in.
From the report:
Bending Emotions
Consumers seek out brands that recognize their yearning for joy and control in a world bombarded by overwhelming messages to buy.
Brandship: Brands are moving beyond the value of a product, to embodying brand values that resonate with consumers.
Glimmers: Shoppers are seeking mood-boosting purchases that offer a reprieve from the chaos of reality.
Newstalgia: Blending nostalgia with new contexts bridges generations, bringing back old trends to a new audience.
Bending Communities
Communities are becoming sanctuaries of self-care, building bridges of belonging to soothe feelings of loneliness.
Buy it for Life: Shoppers are leaning on the community to inform higher spending decisions.
Community Convergence: Surprising and unexpected brand partnerships are uniting diverse audiences across unlikely communities.
Shopping Across Borders: TikTok users are curious about what's trending in other regions too, opening doors to greater cross-market opportunities.
Bending Relationships
The dynamic between brands and consumers is evolving, characterized by increased collaboration and transparency.
Comments to Concept: Brands that invite customers into the development process are developing stronger bonds.
AI Eases Everyday: Brands and consumers are actively experimenting with AI to resolve decision fatigue in the shopping process.
Looking for Advice in Finance: Consumers are talking about finances more casually, exchanging tips to get more from their money.
Instagram Expands Photo Carousel Limit to 20
Instagram users can now include up to 20 photos or videos in a single carousel post, giving you more room to share content or promotional info.
Instagram has been testing longer carousels over the past few months, increasing the frame limit from 10 to 15 in March.
The platform is also experimenting with text overlays within carousels and recently launched variable presentation formats for images within a carousel set. Users can now showcase a longer series of different sized and aligned images, alongside video clips.
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