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ON EMERGING OPPORTUNITIES

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About the Author:
David Gearhart, CFA
Senior Vice President
David Gearhart is a vice president specializing in research and investment in software-as-a-service (SaaS) and the Internet of Things sector and has played a key role in establishing First Analysis’s Internet of Things franchise. He is a thought leader in his sectors, having authored several widely read white papers. He uses his industry knowledge and expansive network to uncover promising investment opportunities and help companies navigate their strategic paths and accelerate growth. Prior to joining First Analysis in 2011, he was an accountant with The Northern Trust Co. and an options broker with American Option Services. He earned a bachelor’s degree from Purdue University with a concentration in economics and finance and his MBA at DePaul University with a focus on finance and entrepreneurship. He is a CFA charterholder.
First Analysis E-commerce Optimization Team
Matthew Nicklin
Managing Director
David Gearhart
Senior Vice President
Richard Conklin
Managing Director
First Analysis Quarterly Insights
E-commerce Optimization
Brands using smartphones to step up direct consumer engagement
April 8, 2021
  • Brands deeply desire to be close to consumers, as they perceive many benefits of interacting with and selling directly to them online. However, brands avoided selling direct until recently for fear of upsetting traditional distribution partners. The tide has begun to turn as brands have stepped up online consumer engagement and direct sales efforts while increasing investments in technology.
  • The ubiquity of smartphones and their increasing native support for legacy technologies such as QR codes and NFC tags suggests we are at an inflection point toward much greater direct consumer engagement by brands through physical objects, such as their products and signage, and significant investment in technology to enable these efforts. COVID-19 has also accelerated consumers’ embrace of online interactions and shopping, pulling forward a receptiveness to interaction technologies and directly engaging with brands.
  • We believe most brands will subscribe to third-party technologies to ramp up their digital direct engagement efforts. We highlight several innovative technology providers supporting direct interactions that are likely to profit from this dynamic.

TABLE OF CONTENTS

Includes discussion of DMRC and four private companies

Brand shift to direct: Key ongoing trend

Smartphones: Direct avenue to consumers, anywhere and any time

Gateway to many experiences

Some potential stakeholder benefits

Why now?

Creating an engaged culture

Supporting technology to see increased demand

First Analysis E-commerce Optimization Index well off recent peak

E-commerce optimization M&A pace sustains post COVID-19 recovery but slows in Q1

Q1 e-commerce optimization private placements on pace to match two-year high

Brand shift to direct: Key ongoing trend

Brands accrue many benefits from interacting with and selling directly to consumers online, including capturing margin by eliminating intermediaries and increasing sales by better satisfying customers as brands use the data they collect to personalize marketing campaigns and improve customer experience. But despite the fact most brands have maintained dedicated websites for more than a decade, they avoided selling direct until recently for fear of upsetting traditional channel partners, which account for the bulk of their sales.

However, brands are stepping up online consumer engagement and direct sales efforts with increasing technology investments. Established brands see a critical need to be more competitive with newer digital-only players and to that end are pursuing various initiatives – including building more robust websites and integrating to online marketplaces and social media platforms – to engage and sell to customers directly while still selling through traditional distribution partners. The traditional channel now understands that this hybrid approach – blending direct and indirect – is the new normal. We expect most brands to investigate technologies for engaging consumers directly and to invest in those that show promise.

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