Talent will get you in the door, but
character will keep you in the room.
2020 Marketing Predictions For Retailers And Direct-to-Consumer Brands
Last year was a rollercoaster for the retail industry—ecommerce had the biggest holiday season ever in terms of total online sales and grew 18% compared to last year, while brick-and-mortar retailers closed 9,300 doors over the course of 2019. It was the year of direct-to-consumer (DTC) brands, where many new ecommerce brands took off, but plenty still struggled to turn a profit, especially with the rising cost of acquisition and Amazon knock-offs starting to pillage DTC customers.
Over the last few months, I’ve been working with the CommerceNext advisory board, which includes brands like Nike, Casper, Samsonite and FabFitFun, to understand their priorities and challenges for the coming year (Disclosure: I co-founded CommerceNext). Taking what I’ve learned from this group, I want to kick off the new year by revisiting what lessons marketers learned in 2019 and offering my predictions for what’s ahead in 2020 for both retailers and DTC brands.
1. DTC brands will start to rein in spending and focus on profitability. Coming into 2019, DTC brands were significantly outspending traditional retailers, partially fueled by VC investments. A CommerceNext study revealed that 78% of DTC brands increased their 2019 marketing budget compared to 60% of traditional retailers, and DTC brands were spending a larger percentage of ecommerce revenue on marketing.
After the infamous failed WeWork IPO and large-scale ecommerce companies like Wayfair still not turning a profit, the pressure is growing for brands to achieve profitability.
2. A new marketing channel will emerge as a challenger to Facebook and Google. Prices on Facebook and Google advertising have been increasing for some time, and last year was a breaking point for many brands. With those channels becoming too cost-prohibitive to drive marketing growth at scale, retailers and DTC brands are aggressively testing new marketing channels like Snap, TikTok and partnerships with physical locations like hotels, AirBnB, etc. They are also starting to repurpose old marketing channels like television and direct mail, but using digital tactics for targeting and measurability.
I predict a marketing phoenix will arise from the ashes of all this experimentation and a new channel will prove so effective that it will start to challenge Facebook and Google. I don’t think this new channel will surpass Facebook and Google this year (or even come close), but I predict marketers will start rallying around a new channel in 2020.
3. Brand marketing will take center stage. Over the last few years, marketers filtered more dollars into performance marketing strategies, partly because performance marketing was more measurable than brand marketing. However, the industry has learned that without brand or top-of-the-funnel tactics, bottom-of-the-funnel performance marketing becomes less effective.
For example, Adidas shifted its spending heavily to performance marketing, investing 23% into brand and 77% into performance. As it built out its attribution strategy, they learned that brand activity was actually driving 65% of sales across wholesale, retail and ecommerce. Now, they are moving to a 60:40 split in brand’s favor.
Combine that realization with the fact that brand marketing tactics are becoming more measurable, I predict we’ll see more dollars invested in brand marketing tactics that tell a story like TV, Podcasts and PR.
4. Brand purpose will be more prominent in marketing. As consumers’ social consciousness rises, so does their loyalty to brands with meaningful real-world impact and altruistic purpose. At the same time, smart brands will expand and improve their brand marketing storytelling. In 2020, we’ll see more companies doubling down on their brand purpose, whether it’s sustainability, fair wages, local manufacturing, etc. Even brands with strong brand purposes, like Patagonia, will lean into their brand purpose even more.
5. Marketing teams will reorganize around digital. When I was in media 10+ years ago, mobile was its own business line. It was too new, too small and the traditional digital folks couldn’t be bothered. Now, mobile is completely folded into digital and everything is mobile-first. This is the year when digital will have the same reckoning with traditional marketing tactics.
In 2020, retailers and brands will start breaking down their digital silos and digital will become the foundation for all aspects of marketing. Brands are already using digital strategies to measure and engage on traditional channels like TV and radio. The time has come where every marketer has to be digitally savvy so they think through the entire customer experience, including the digital touchpoints.
In addition, marketers must be adept at learning new platforms and strategies for implementation in order to stay relevant amidst quickly evolving consumer habits.The entire marketing team ethos will need to shift from executing known playbooks to hypothesis-driven experimentation. In turn, this affects hiring practices, from recruiting channel-specific experts to marketers who can oscillate between channels, problem solve, create solutions and analyze.
This year will bring a lot of exciting changes in (and challenges to) traditional marketing strategies for retail and DTC brands. We’re excited to cover some of these predictions and many other marketing strategies at CommerceNext this summer in New York City.