DTC Sales are Plateauing. Here's Why.

[00:00:00] It is Friday, August 9th. Today DTC sales are slowing. Is it the economy? The products? No, but there are three reasons for it. Has Google given up on AI overviews in search? Instagram has a nice update for brands that post a lot of images. And the self-proclaimed

[00:00:18] savior of free speech shuts down an advertising coalition that spoke freely. I'm Tod Maffin. That's Ahead, Today in Digital Marketing. And a small programming note, we have a full team day at the agency today onboarding a

[00:00:33] new client, so today's podcast was produced quite early this morning. If any big news breaks today, of course we will be on it next week. The era of the high double-digit growth for American DTC sellers is coming to an end

[00:00:47] and eMarketer this morning is out with a piece explaining why. It says next year direct-to-consumer eCommerce sales will make up less than 15% of total retail eCommerce sales. That is a huge share drop from previous years. And in the years that follow, eMarketer

[00:01:04] forecasts sales numbers will plateau. So what's happening? According to the piece, three reasons. First, advertising on social media platforms isn't as cheap as it used to be. Quoting an eMarketer analyst in the piece, quote, There was a lot of

[00:01:19] hype around selling DTC back in the age of cheap social advertising, where a brand could scale successfully and cheaply by setting up an online shop and promoting through Facebook and YouTube. Over the last couple of years, social ad impressions have gotten more expensive

[00:01:35] and many of the brands that were able to ride the initial wave were not able to sustain that growth. Newcomer brands have also been discouraged from using that model, unquote. It was also noted in the piece that the COVID lockdowns brought

[00:01:48] in a lot of new online buyers, but that only led to a more in-demand crowded and costly ad market. Second reason, many of the big brands that shifted away from bricks and mortar sales are coming back to traditional retail. Quote, Nike, for example, has reestablished its

[00:02:05] partnerships with retailers, including Macy's, after admitting it had over rotated away from wholesale a little more than intended. Despite the rise of eCommerce and the influence of digital media on shopping behavior, the component of people going to physical stores to make purchases

[00:02:22] is still too powerful to ignore, unquote. Earlier this year, eMarketer said it expected in-person retail sales to make up almost 84% of all U.S. retail sales this year. And third, digitally native brands, once hailed as disruptors in the eCommerce space,

[00:02:39] are now seeing flat or slowing sales. Those brands are expected to account less than 20% of all D2C eCommerce sales by 2026, a significant decline from their initial success. Quote, for many digitally native brands, it was easy to gain customers through promotions and free trials,

[00:02:59] but there wasn't enough focus on brand marketing. When that happens, brands may be able to scale very quickly and attract investor attention, but the lifetime value of your customer isn't high. This model makes it hard to sustain a quality customer who's willing

[00:03:15] to pay full price and spend more on products over time, unquote. There is more information in their full piece. We have a direct link to it in today's email newsletter, which is free

[00:03:24] to sign up to. Just go to todayindigital.com slash newsletter or tap the link at the top of the show notes. Google appears to be continuing to back away from AI summaries and search results. A new study by SE Ranking finds that AI overviews appeared in just

[00:03:43] 7.5% of searches in July, a significant drop from 64% in February during beta testing. The average length of AI overviews also dropped by nearly 40% compared to the previous month. Forbes, Business Insider and Entrepreneur were the most cited media outlets in July.

[00:04:02] Google says it's refining how and when AI overviews are shown to make them as useful as possible, including recent technical updates to improve response quality. It said their own numbers don't match the study's findings. Google scaled AI overviews back in May after users

[00:04:18] complained about incorrect and strange answers, such as telling people to eat glue. The company also faced backlash over its Gemini image generator producing historically inaccurate images of people of color. Despite the overall decline, some niche topics such as relationships

[00:04:35] saw an increase in AI overviews with just over 40% of related keywords triggering the feature in search results. On Tuesday, as we reported here, Elon Musk's ex filed a lawsuit against the Global Alliance for Responsible Media, known as GARM, alleging the ad consortium

[00:04:56] conspired to shut off advertising revenue to ex resulting in billions of dollars in losses. Yesterday, that organization announced it would shut down because as a non-profit, it didn't have the money to fight the case. GARM was established in 2019 to help

[00:05:13] marketers address harmful content on digital platforms and has advised companies on brand safety issues. Ex's lawsuit alleged that GARM helped trigger a quote, massive advertising boycott unquote following Musk's acquisition of Twitter later renamed X. Quoting the verge quote,

[00:05:31] last year Musk told advertisers who didn't like him or his website to go fuck themselves, stating that he hoped companies that didn't support his way of doing business wouldn't advertise on X. Apparently, he didn't really mean it since his company is now suing some

[00:05:47] of the advertisers who decided to do that unquote. Musk and his companies are involved in numerous high profile legal battles, including lawsuits against open AI, a company he co founded incidentally, media matters and the Center for Countering Digital Hate,

[00:06:03] all of which say in one form or another, they had a right to present accurate information about the platform, even if Musk doesn't like that information. Quoting Digiday today quote, all it took was a self described free speech advocate who believes he can say

[00:06:18] whatever he wants on his own platform, but resorts to expensive lawsuits to silence critics unquote. GARM's parent body, the World Federation of Advertisers says it will take up the defense against the lawsuit. TikTok this week published its second annual shopping

[00:06:38] trend report. It highlighted three areas it found movement in first bending emotions. It says consumers seek out brands now that recognize their yearning for joy and control in a world bombarded by overwhelming messages to buy. Specifically, it noticed that brands are

[00:06:55] moving beyond the value of a product to embodying brand values that resonate with consumers and shoppers are seeking mood boosting purchases that offer a reprieve from the chaos of reality. The second trend it calls bending communities. It says communities are becoming

[00:07:09] sanctuaries of self care quote, building bridges of belonging to soothe feelings of loneliness unquote. It notes that shoppers are leaning on that community to inform higher spending decisions and surprising and unexpected brand partnerships seem to be uniting diverse audiences

[00:07:26] across unlikely communities. And finally, bending relationships. It says the dynamic between brands and consumers is evolving characterized by increased collaboration. Brands that invite customers into the development process are developing stronger bonds, and brands and consumers are actively experimenting with AI to resolve decision fatigue in the shopping

[00:07:49] process. We have a link to the full report in today's email newsletter. And finally, Instagram users can now include up to 20 photos or videos in a single carousel post. Instagram has been testing longer carousels over the last few months, increasing the frame

[00:08:08] limit from 10 to 15 in March. The platform is also experimenting with text overlays within carousels and recently launched a bunch of different presentation formats for images within a carousel set. Users can now showcase a longer series of different sized

[00:08:24] and aligned images right alongside video clips. If you are trying to reach marketing decision makers consider an ad on this podcast for our newsletter. Some ad slots are currently just $10

[00:08:39] that will go up at the end of the summer. Tap the link at the top of the show notes or go to today in digital.com slash ads for more information that will do it for the week.

[00:08:48] Today in digital marketing is produced by engage Q digital on the traditional territories of this new name, first nation on Vancouver Island. Our production coordinator is Sarah Guild. Our theme is by Mark Bleviss ad coordination by red circle. I'm Todd Maffin.

[00:09:02] Thank you so much for listening. Have a great weekend. I'll see you on Tuesday.

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