Why DTC Beauty Brands Are Thriving?

As direct-to-consumer businesses continue to influence almost every commercial enterprise, highly successful beauty ventures are revolutionizing consumer expectations on a grander scale. This shift provides exceptional opportunities for DTC brands to build unique connections.

2020 is predicted to be the most revolutionary year in the beauty market. The 2020 spirit of beauty is more inclusive than ever, from innovations in hyper-personalized products to the boom of products serving subjects previously considered taboo.

Now valued at $532 billion, this industry is expected to grow between 7 to 10% in the following years. For example, specific categories — skincare, male grooming, and hair — are predicted to have more than 10% sales growth year-over-year.

Beauty's rapid boom has attracted many new beauty players, many of whom introduce new products, innovative solutions, seamless customer experience, fresh ideas, and advanced business models. For example, huge retail giants, such as H&M, have started their beauty journey. At the same time, other retailers focus on AI-Driven solutions and demographics that have historically been under-served by big beauty brands. 

Since the market is highly competitive with the industry's changing face, many companies give their digital efforts a well-needed makeover. The 2020s will see changing consumer perceptions and greater expectations, followed by the brands' advocacy and loyalty, which will drive more demand for the CBD market and attract new players.

As the competition boosts in the following years, it will become crucial for companies to gain accurate and timely customer insights and ‘follow’ the authentic approach to understand the feelings of beauty consumers.

My 2020 prediction for the CBD industry is that it will be an extremely volatile time,” says Olivia Alexander, founder of CBD product company Kush Queen. “Retailers have taken chances on brands that don’t actually have clout. The FDA is now present, and we will see a lot of brands not make it past the next shift in regulation.

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Going Direct-to-Consumer

Direct-to-consumer companies like Birchbox and Glossier have built large consumer bases in a short amount of time. What’s more, big brands such as Walmart and Sephora have also now installed their subscription boxes.

Glossier is one of the most successful examples of a DTC beauty brand. The Glossier brand is unique in establishing a database of thousands of followers before launching a single product. Glossier emphasizes its communication with customers and even goes so far as to let them influence its products.

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According to Richard Kestenbaum, Co-founder, and partner at Triangle Capital LLC,  the direct-to-consumer strategy offers several opportunities. “It eliminates the need to share profits with a retailer. More importantly, selling direct-to-consumer enables two-way communication between the brand and the consumer, without interference from the retailer.”

‍What is Direct-to-Consumer Retail?

The concept is defined as the promotion and sale of products directly from the manufacturer to customers — eliminating the need for channels like marketplaces, intermediaries, brick-and-mortar stores, and third-party retailers.

With less trust in third parties, fewer negotiations, and fewer limitations on fulfillment, the DTC model is an attractive instrument both for start-ups companies who need an easy entry into a market, as well as well-established brands who are eager to grow their online presence while also paying close attention to the customer journey.

How Do Brands Win With the DTC Model?

Many experts are predicting 2020 to be the year of acquisitions and closures in the DTC space. So how should brands adapt and win in this age of increasing competition?

Many famous DTC companies are born out of mission-driven initiatives — whether they’re focused on changing industries like Glossier with skincare, sustainable approaches like 4Ocean, or simply removing barriers to entry to products, like Ro for men’s health. More companies are favoring a direct-to-consumer approach because there is more room for experimentation.

With millennial and Gen-Z shoppers, there is more transparency in retail than ever before — and DTC brands are using multiple channels to communicate with customers. What’s more, some beauty brands went even farther by personalizing the shopping experience – prompting customers to check previous order history, shipping details are pre-populated options, and tailoring the way customers navigate through their website.

In a personalized experience, the items offered by the shop can be personalized and diversified. This is becoming increasingly popular for gift-givers and tech enthusiasts who want a personal touch on their everyday carries.

Younger generations continuously emphasize both aesthetics and experiences that are unique. As a result, many turn away from big brands and, instead, prioritize indie and boutique options that can offer them a more seamless connection. This desire is motivated by a move toward authenticity as Millenials, and Gen Z internalizes their purchases as part of their expression.
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As most companies reach out to consumers directly, powering their brand messaging and ultimately customer engagement, the channel explosion must be transformed.

Brands like Burton and Nike have their D2C models—navigating customers to their websites, mobile apps, or branded retail stores. This innovative omnichannel approach helps brands to engage with consumers previously unserved or underserved by traditional retailers. Brands now have the power to manage and control consumer-facing content, their purchasing stories, and their supply chains.
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Why should DTC brands invest in technology and an AI-driven Omnichannel Approach?

Innovation in Retail

A report presented by CommerceNext and Oracle Customer Experience, “How Leading Retailers and Direct to Consumer Brands Are Investing in Digital,” discovered that DTC brands invest more heavily in acquisition marketing than traditional brands. In addition, DTC brands are increasing investment in advanced technologies such as AI-driven personalization, AI/AR solutions, and customer data platforms to enhance — and disrupt — the shopping experience.

AI-Driven Personalization

According to “How to Manage Customer Service Technology Innovation,” by Gartner, “Gartner predicts that by 2021, 15% of all customer service interactions globally will be handled completely by AI, an increase of 400% from 2017.”

AI can be used to tailor customer data, predict consumer behavior, and target specific groups of potential or existing customers and related ones.

Revieve’s AI-Driven Product recommendation engine, for example, combines market-leading selfie skin diagnostics with in-house computer vision tech that measures over 100 different metrics from the user’s face.

With the help of advanced users’ personal information, their product selection, and personal advice based on their skin analysis, companies can increase shopping cart size, average order value, increase conversions, and decrease shopping cart abandonment.

For instance, AI Skincare Advisor includes age and location as user inputs, and AR Makeup Advisor considers preferred foundation coverage and preferred look.