These DTC companies are disrupting the old guard

Brands, such as Stitch Fix, ThirdLove, Chewy and Casper, are maturing to category leaders.

Chewy, The Honest Company, Casper, Stitch Fix and Peloton are a few of the brands topping the Interactive Advertising Bureau’s list of the 250 direct-to-consumer (DTC) brands to watch in 2020.

The bureau analyzed more than 3,500 brands in the growing DTC channel and unveiled category leaders and rising upstarts, during its annual leadership meeting in Palm Desert, Calif. 

This marks the third year the IAB has tracked leading DTC brands and the first year that it incorporated service brands into the mix, as the middleman-cutting, e-commerce model continues to gain consumer acceptance.

Some of the leading DTC service brands are Poshmark, Coursera, Lyft, Instacart, Wag, Postmates and DoorDash, according to the IAB report. 

Leading DTC fashion brands are becoming as familiar as any department-store label: Stitch Fix, AdoreMe, ThirdLove, Untuckit, Outdoor Voices and Allbirds. The same goes for top DTC disruptors in personal care, such as The Honest Company, BeautyCounter, Glossier and Hims.

Customer acquisition increasingly leverages social media referrals from Instagram, Pinterest and TikTok, which is beta-testing shoppable videos. 

The IAB estimated that social now provides 9.1 percent of traffic to DTC sites, up 20 percent over the previous year.

"Disruptor brands don't focus on the next campaign, they focus on using first-party data to build an on-going customer experience, and optimize flexible supply chains to create more supply and delight for their consumers," said Randall Rothenberg, CEO of the IAB.

He added: "They diversify their media spend, leverage social media to create consumer connections and build experiences that keep their customers immersed both digitally and in the physical world. Equally important, they use advanced consumer service capabilities to listen and respond."

Rothenberg highlighted ThirdLove as a leader in converting raw data into product development and related messaging. 

"They use millions of real women's measurements, not size templates, to make and carry bras with more and better fits than any store can stock," he said. "They’ve built a community among their consumers. Together, this has catapulted ThirdLove into No. 3 among online lingerie brands."

In the online spirits segment, Flaviar is connecting based on its curated selection of rare and limited-edition spirits. 

The company cultivates the feeling of a high-end club for aficionados. Customer communications openly aim for disruption. "We’re here to disrupt the pattern. To stir up new emotions and create experiences for you and your friends," states Flaviar content.  

In addition to breaking down the top brands by category leaders, the IAB noted that 53 percent of the 250 to-watch brands were founded by females, indicating far fewer barriers among these e-commerce start-ups. These leaders include the founders of female-friendly brands ThirdLove and Glossier cosmetics and, increasingly, broadscale sites, like the Thrive Market co-founder Kate Mulling.

In another indicator of the new guard, DTC brands don’t necessarily need venture capitalists to survive. Only 11 percent of the IAB 250 are backed by venture capital, including just 11 of the 87 California-based companies on the list, indicating that DTC is ripe for both investments as well as emerging entrepreneurs.  

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