Top 7 Opportunities (and Some Challenges) in D2C in 2024

As we bid farewell to 2023, now is the time for direct-to-consumer (D2C) brands to ready their strategies for 2024. D2C is ending the year on a high note, riding a wave of growth that shows no sign of slowing. According to eMarketer research, D2C sales are expected to exceed $160 billion by the end of 2024.

With rapid D2C growth, however, comes added complexities. Let’s look at some of the 2024 D2C opportunities (and challenges) marketers should prepare for in the year ahead.

First, the challenges …

Cord-Cutting Continues

Around the world, TV ad revenue decreased to 17.9 percent of total ad revenue in 2023. Linear TV, in particular, shows a steady downward trend, with viewership set to decline 8.6 percent in the U.S. by the end of 2023 and 10.7 percent in 2024. Data shows that media networks lost more than 1 million subscribers in Q3 alone, with the major players posting a 12-percent decline in revenue from linear ads. Across the board, cable TV has seen the repercussions of cord-cutting as more viewers abandon it for streaming platforms and premium content.

 Increased Competition

D2C brands should brace for fierce competition in 2024, especially as more traditional retailers make a move into the D2C space. New competition additionally comes from a former D2C marketing ally: the influencer. Once seen as an effective strategy for lowering customer acquisition costs (CAC), influencer marketing is expected to become more expensive in 2024, as influencers become increasingly selective in who they sponsor and pay-to-play increases.

 A growing number of influencers are also choosing to launch their own D2C brands, which means D2C marketers must work harder in 2024 to build relationships with niche influencers who are genuinely passionate about their products.

 Higher Customer Acquisition Costs (CAC)

CAC was already on the rise: between 2015 and 2020, CAC increased an astounding 60 percent and is expected to continue rising in 2024. As such, D2C brands must focus on strategies that have been proven to lower CAC in 2024, such as retargeting and re-marketing, and offset those costs by improving customer retention and lifetime customer value.

 Election-Year Clutter

2024 heralds an election year, which wreaks havoc on consumer attention spans, as well as the advertising landscape. Digital, social, broadcast, out of home, and print marketing channels will be inundated with political ads — driving up CPMs by between 15 percent and 50 percent. D2C brands will need to budget accordingly.

 The Demise of Third-Party Data

D2C brands have long relied on targeted Facebook and Instagram ads to reach their ideal customers. With its iOS 14 update, however, Apple is making it easier for consumers to limit what data is shared by third-party apps, and harder for D2C marketers to leverage consumer data to find and target their customers.

In 2024, many experts predict that third-party cookies that capture this data will be phased out entirely. Which means D2C brands must find creative ways to capture and leverage first-party and zero-party data — information that customers willingly hand over directly to brands to use for ad targeting.

2024 Opens Big Opportunities for D2C

It’s not all doom and gloom, though. Now that we’ve addressed some of the key challenges, let’s turn to the emerging and exciting opportunities that D2C brands should be capturing in the year ahead.

 1. CTV and OTT

In 2023, we saw non-linear TV ad sales on video-on-demand (VOD) platforms, connected TV, and free ad-supported services (FAST) increase by 7 percent. When all is said and done, experts predict that CTV will experience 10.9-percent growth in 2023 and 13.8-percent growth in 2024. Over-the-top (OTT) platforms (think Netflix, Amazon Prime Video, and YouTube) are growing like gangbusters, as well, with revenue expected to exceed $476 billion by 2027.

Driving this growth, more major players are adding advertising tier options to their services in an effort to push consumers to ad-supported plans and drive up revenues. It’s working. By 2025, experts expect streaming ad spending to account for 68 percent of all television ad spend. What’s more, exciting new features like voice-activated purchases will make it possible for consumers to make direct purchases from CTV ads.

 2. Retail Media Networks

More D2C brands will likely take greater advantage of retail media networks (RMNs) in 2024, as well. Owned and operated by retailers like Costco or Amazon, RMNs allow D2C brands to run ads on that retailer’s website, mobile apps, streaming services, email channels, social networks, digital billboards, and in stores — and more. RMNs also equip D2C marketers with that coveted first-party data they need to target their customers. By 2028, research indicates that retail media revenue will surpass the combined revenue of linear TV and CTV.

 3. AI in D2C

Artificial Intelligence (AI) is on everyone’s radar, including D2C marketers. While we’re still in uncertain and ever-evolving territory here, in 2024, we anticipate the AI will play an increasingly influential role in D2C marketing. With its ability to analyze massive amounts of data, AI offers tremendous potential for customer segmentation and hyper-personalization. In 2024, this will become increasingly valuable for creating customized customer experiences, content, and campaigns that breakthrough the clutter. AI can also leverage consumer data to identify the best mix of advertising channels to drive leads and conversions.

D2C marketers will additionally be looking to AI to automate time-consuming tasks and drive efficiencies — including creating copious content (key for SEO). Or take AI-driven chatbots that provide 24/7 customer support, answer common customer questions, and guide customers through the shopping funnel — leaving companies free to direct those human resources elsewhere. For more about AI in marketing, please read my AI article here.

 4. Social Shopping

Then there’s the growing opportunity presented by social shopping — popular with Gen Z and Millennial consumers. With Instagram’s Shoppable Posts, Facebook Shop, and TikTok Shopping, consumers can now buy D2C products directly from a social media post without having to go through the typical e-commerce checkout experience. Experts expect social commerce, also known as livestream shopping, to account for more than $30 billion in sales in 2024, and $2.9 trillion by 2026.

 5. YouTube

While much attention has be focused on TikTok for D2C marketing, we believe that YouTube offers more exciting potential for D2C brands in 2024. This is especially true given that TikTok is still an immature platform with looming uncertainties; consider the recent shut-down of the $1 billion TikTok creator fund that was supposed to pay video creators with large followings for posting content.

 YouTube, on the other hand, has shown sustained growth and stability as a platform, amassing 2.5 billion global users in 2023. Data shows that 90 percent of consumers say that they learn about new brands on YouTube, making this a highly influential channel for D2C marketers. YouTube’s Shorts video feature, launched in 2021, continues to gain traction as well, reaching more than 50 billion daily views in early 2023. Interestingly, according to Pew research, Gen Z now spends more time on YouTube than TikTok.

 6. In-App Advertising

In-app advertising is another area D2C brands should be exploring in 2024. Apple, for instance, plans to launch a host of ad products for native apps, as well as home/lock screen ads. Amazon is also actively growing its ad business with an aggressive goal to reach 13 percent market share by 2024, introducing new opportunities such as ad placements on Prime Video as well as at its Whole Foods stores.

 7. Click & Brick Strategy

Many online D2C brands are now adding a brick-and-mortar retail component ­— either opening their own physical stores or getting their products on the shelves of major retailers like Walmart and Target. Expect to see more of this hybrid click-and-brick strategy in 2024.

How D2C Brands Will Thrive in 2024

One key lesson to take into 2024 is this: D2C brands must adopt a flexible, innovative, sophisticated omnichannel approach to their marketing strategies — encompassing not only traditional channels like linear TV and social media, but emerging opportunities like livestream shopping, RMNs, CTV, in-app advertising, niche influencer marketing, AI tools for targeting and data-mining, and more.

 This is an incredibly exciting time for D2C brands and marketers — filed with possibilities, as well as changes. As we confront the complexities of D2C in 2024, I’m reminded of this Noura quote: “With the right mindset, we can’t lose. We either practice what we’ve learned, or we learn what we need to practice.” At Double Diamond VIP, we take every challenge as an opportunity to learn and improve our D2C methodology. We remain optimistic and enthusiastic about what’s to come for our industry as well as our clients. Connect with us: www.doublediamondvip.com/contact

Nick Pietropinto is the founder and CEO of Double Diamond VIP. He can be reached via email at nick@doublediamondvip.com.

Original Article: https://www.thepdmi.com/post/top-7-opportunities-and-some-challenges-in-d2c-in-2024