“Less is more.” In our world of on-demand shows and same-day delivery, the spirit of this sage advice feels far away. After all, one-stop-shops like Amazon and Walmart attract customers by embracing a “more is more” philosophy – everything you could possibly want right at your fingertips.
Flying in the face of these all-in-one juggernauts is a growing industry of direct-to-consumer (DTC) companies specializing in targeted products and providing luxury feel at an accessible price point. From bed sheets to luggage and mattresses to vitamins, the DTC landscape is growing fast. The secrets to its success lie in lifestyle-focused and social-savvy branding as well as specialization within the affordable-luxury market, resulting in continuously deepening appeal among Millennials and Gen Z. Zeroing in on these elements helps DTC and non-DTC companies succeed with selective shoppers from these generations.
The Anatomy of a DTC Product
While DTC products are often sleek, pared down, high-quality versions of ubiquitous products, the most appealing aspects of these companies are their aspirational brand experiences. Branding and marketing strategies that go to the heart of identity particularly appeal to Millennials, who seek out brands that feel innovative and modern and that communicate something about them as consumers (e.g., being unique). Gen Zers take it one step further, using brands as platforms for their public selves, thoughts, and philosophies.
Beyond creating high-quality specialized products, successful DTC companies create lifestyles to go along with their products. They craft a wider brand experience that transcends the vertical and draws on the values and aspirations of their audience. Instead of simply purchasing the product, consumers are invited to take part in a movement.
Millennials use brands to create a more personal, “internal” identity, so they gravitate towards brand experiences that communicate an aspirational identity. DTC companies that do not explicitly label their products (i.e., Everlane and Warby Parker) help Millennials cultivate that identity while making them feel savvy and in-the-know. Gen Z, a generation shaped by the ubiquity of social media, uses brands to bolster their public persona. They feed off of brands with strong public personalities like Glossier, participating in brand communities and incorporating them into their own external identity.
Escaping the traditional retail model gives brands freedom and flexibility to engage with their customers in fresh new ways and across all aspects of their lives — from walking down the street to perusing their phones. Sometimes they forego traditional marketing platforms in favor of social media and influencer campaigns. Others make traditional platforms their own with eye-catching billboards or ads in the New York City Subway.
Additionally, DTC brands know that online is key when reaching Millennial and Gen Z shoppers. Carefully curated and inviting marketing pulls customers onto design-savvy websites that introduce shoppers to the look and feel of the products. As experts in native advertising, they create visually striking social media content that feel more like consumers’ “cool friend” than an ad. Even when DTC brands opt for brick-and-mortar shops, they leverage them as tactile brand experiences rather than just a sales channel (e.g., Away, Birchbox, and Casper).
Finally, DTC brands are careful to price their products right. Instead of making a play for the luxury or budget ends of the spectrum, they focus on owning the middle. There they make the case for a high-end lifestyle at attainable prices, accessible to a much broader range of buyers.
Millennials and Gen Zers experience a daily onslaught of stuff in their lives, which is why they increasingly value innovation and simplicity in products. Combined with a growing affinity for a minimalist aesthetic, this landscape creates prime territory for new DTC brands to move in and challenge existing behemoths with products they pitch as essential. Of course, this does not preclude customization. In fact, core to many DTC brands is a commitment to deliver to all their customers, from cosmetic shades for every skin tone (e.g., Glossier) to sophisticated tweaks that add a personal touch (e.g., Away).
Millennials, who tend to be driven by technological advances, see an added benefit in products that deliver superior technical engineering and innovation. Personalized vitamin packs, high-tech luggage, and sock-less sneakers — all speak to the Millennial drive to seek out and incorporate new technology into their every day.
Savvy young shoppers know when they’re being taken for a ride, so they gravitate towards brands that do one or two things really, really well. This in turn leads to a higher level of brand trust. After all, if a brand stakes its entire portfolio on a single idea, it’s a safe bet they’ll deliver on their word.
What’s Next: How Gen Z Will Tackle DTC
Thanks largely to Millennial consumers, DTC brands have made a lasting mark on a wide range of industries, and they show no sign of slowing down. However, whereas Millennials have gravitated towards DTC products’ purity and minimalism, Gen Zers may have other needs:
- DTC brands must cater to the individual as well as the generation, providing modular and customizable experiences that give Gen Zers a chance to differentiate themselves within a brand.
- As the boundary between digital and physical becomes ever thinner, brands must work to develop fluidity between digital and physical platforms and make themselves accessible in all parts of their consumers’ media and lives.
- Gen Z looks for brands with purpose that speak to important social causes. While immediacy is important, Gen Z also demands transparency and authenticity from its brands in everything from pricing to business practices.
- Some DTC brands have created a community of consumers, but others have some work to do. For Gen Z, brands have the chance to become family members. But with intimacy comes a responsibility to listen and adjust. A one-way relationship won’t work for this generation — the conversation must go both ways.
Millennials have driven the rise of DTC brands, and Gen Zers are growing into their purchasing power. Each has distinct needs and drivers that affect their relationships with their chosen brands. As a team of social scientists and consumer behavior experts, Insight Strategy Group has closely followed both generations as they’ve grown and continues to dive deep into the inter- and intra-generational differences.
With a new cohort of shoppers taking the stage, we can provide the generational insights to shed light on these budding consumers. Coupled with our deep expertise across lifestyle brands, Insight is uniquely positioned to help all create lifelong bonds with Millennials and Gen Z alike.