Established companies are taking note of the direct-brand revolution and “following fast” in this space via a mix of acquisitions, partnerships and innovations, according to Randall Rothenberg, CEO of the Interactive Advertising Bureau (IAB).
Speaking at the organization’s 2019 Annual Leadership Meeting, he reported that legacy businesses are quickly stepping into the direct-to-consumer arena.
“For brands, publishers and technology companies alike, the battle of the big brands may be the most material fight of the next few years,” he said. (For more, read WARC’s in-depth report: IAB: How big brands can survive – and learn from – the direct-brand revolution.)
As proof, he highlighted various recent acquisitions, such as PetSmart buying pet-focused e-commerce player Chewy’s, Albertsons grocery stores snapping meal-delivery service Plated and Procter & Gamble doing the same with Native deodorant.
“Underlying the acquisitions is a quest for capabilities,” said Rothenberg. In fact, he pointed out, some enterprises simply want to mimic direct brands’ first-party relationship and data capabilities.
“That’s why AB InBev has invested in e-commerce delivery systems, beer-rating applications, and home brew suppliers,” he proposed.
In addition to the growing list of acquisitions, major brands are digging down into their own R&D budgets with strategic investments, accelerators and incubators.
PepsiCo, for example, partnered with Chicago-based food incubator The Hatchery, while L’Oréal’s Founder’s Factory has tapped high-potential early-stage startups at its Digital Incubator Labs in several locations around the world.
Mars Petcare’s Leap Venture Studio is similarly focused on the future of petcare. And the IKEA Bootcamp is working with 20 startups on product development, supply-chain management and retail transformation.
In other instances – say, Colgate-Palmolive’s investment in Hubble Contacts – “some giants are looking to develop recurring revenue streams,” said Rothenberg.
“But by far the greatest articulated need of big incumbents is their desire to aggressively develop digital relationships with individual consumers. That’s the widest chasm they must cross.”
Mark Parker, Nike’s CEO, has described this transition as becoming “more personal at scale". And, in 2017, the sportswear brand, announced an initiative called the Consumer Direct Offense with the same goal in mind.
“Make no mistake what this means: the world’s largest consumer brands – companies that did not know their end-consumers, because the retailers controlled the consumer relationship – now are competing against the retailers and against their disruptor competitors to own those relationships,” said Rothenberg.
Sourced from WARC