What’s next for DTC?

Consumers now want to get closer to brands. To discover more about the products they’re purchasing and to compare prices with those of competitors. This change in consumer behavior has prompted DTC – as an optimal solution for pet brands wanting to launch new products that customers can purchase easily from their smartphone, tablet or computer.

Convenient and valuable

“It has to be convenient and valuable, and that’s what you deliver in the direct-to-consumer environment, which is where you capture that kind of high-value shopper,” says Terri Rockovich, co-founder and CEO at Los Angeles-based dog food start-up Jinx.

The DTC channel also allows pet brands to customize their products, create experiences and share storytelling that customers value.

Repeat purchases

A couple of years ago, DTC brands were mainly offering fresh and customized dog and cat food. In 2020 – in the middle of the pandemic the DTC market started to get more competitive and subcategories such as treats and supplements increased their market shares.

Most brands are now offering subscription boxes as a core part of their business model. Jinx, for example, combines one-time orders and repeat purchases, with a discount for pet parents that opt for the latter.

For the period from April to September, New York-based BARK announced that revenue from its DTC business had increased by more than 10% to $235.9 million. Subscription shipments reached 7.46 million (+4%), although new subscriptions dropped by 14% to 477,000 users.

Big business goes DTC too

Big corporations are also seeing DTC as an opportunity to look into new business models that put the consumer at the center of the experience. Last year PupBox, a monthly subscription service for dogs bought by Petco in 2017, expanded its offer to cover pets of all ages. And Mars Petcare acquired direct-to-consumer fresh pet food brand Nom Nom Now earlier this year, as an addition to its Royal Canin division.

The power of traditional retail

Despite online being the new trendy way of shopping, traditional offline shopping is generating the interest of DTC players – plus the omnichannel strategy implemented by big retailer corporations.

Walmart and Target in the US are actively looking for partnerships with small companies and start-ups that are exclusively selling their products online, to offer them the chance to increase their visibility on the shelves of the retailers’ stores. “Mass retailers are hungry for new types of customers, and this appetite for change is making them figure out how to create space on their shelves for some of these brands,” says Terri Rockovich from Jinx.

Experts believe that it is smart for DTC brands to think about how they can stand out in these offline environments, while creating brand awareness among retailers that do not have e-commerce as the main shopping channel for pet supplies. “It gives a smaller brand the expansion opportunity and increased visibility by being on thousands of shelves nationwide,” Terri Rockovich adds.

Partnerships like these are also a good way to scale up your business without having to pay high customer acquisition costs. Terri Rockovich has a clear view on that too: “I consider bags on shelves as actual impressions in marketing terms. So if someone walks by you and doesn’t pick you up, and then sees you again the next time, those are all impressions that are building frequency with a potential customer.”

Success in retail channels

Jinx launched its products in 2,000 Walmart locations last March – representing 80% of its sales through the retailer’s channel. In April it also started selling its range through Chewy, and in August through Target.

The company is planning to expand its portfolio in regional grocery by the end of the year. And Terri Rockovich points out that the company strategy is to continue expansion in 2023, expecting to multiply its revenue in a range between 5 and 7 points “mostly credited toward retail distribution.”

BARK has agreements with retailers – including Target, Costco, Walmart, Petco and PetSmart – worth $59.3 million, which accounted for 11.7% of the company’s total revenue in the fiscal year 2022. Its sales focus continues to be omnichannel, including both direct-to-consumer and retail sales.

Pandemic and recession-proof

Insiders don’t think that the DTC momentum is ending anytime soon, believing that more competitors will join the market in the near future as the segment proves to be pandemic and recession-proof.

According to Terri Rockovich, there’s still “a lot of discovery happening regarding brands that are showing up in these online environments through creative advertising. I do think fresh will dominate from the food perspective, but I’m really interested in what’s next”.

DTC players believe that the emerging category of supplements will soon consolidate even more. For the total DTC pet food market, several market forecasts indicate a yearly increase of more than 25% until 2028, when it is expected to reach a value of $8 billion.

Impact on prices

The fiercer the competition gets, the more impact on prices. “The DTC landscape is becoming increasingly crowded, so it will make it more expensive for brands to sell online,” Terri Rockovich admits. In this scenario, she believes companies need to have future-forward thinking about their growth strategy and plan a proper distribution strategy. “You’ve got to think about what’s next almost before you even launch!”

At the end of the day, only strong players with a clear business and sales strategy will survive in the DTC market.