Spend

Earlier this week, I had some conversations on Twitter about the potential of ChatGPT’s new shopping feature. The piece that seemed to hit with people was my view that it doesn’t impact DTC much.

This is probably a hot take, but there is some data here to back this up: Kno collected about 20 million data points on product/brand discovery last year, and a little less than 8% of consumers reported discovering the brand they bought from via search. Everything else was either word of mouth (about 16%), Meta (about 41%) or other media (social or otherwise).

This, on its face, is interesting, but I think the more interesting piece of all of this is why that’s the case.

DTC, while it has Meta to thank for enabling it, is more truthfully built on a mix of envy, desire, and impulse. (Heavy stuff, yeah, but I’m not sure there are less serious words that convey the same meaning…)

The DTC industry, largely, serves the aspirational side of us, and does so by selling us items that fall into our discretionary spending habits. It is why we see a dip in advertising efficiency when we see consumer sentiment dip. We are most tied to consumer emotions.

Taylor Holiday called out that DTC brands are, mostly, fighting over this part of consumers’ budgets and that it’s a small piece of the pie. The goal, he said, is to become part of the “consistent planned expenditure.”

I think he’s right, but I wanted to explore the idea more, because the idea of completely segmenting planned and unplanned spending seems unnatural.

Consider grocery shopping. A lot of grocery shopping is planned.

At least, it feels that way. According to CapitalOne research, though, impulse buys account for up to 62% of grocery sales.

And what about stuff like back-to-school clothes shopping? That’s pretty planned.

But clothes shopping is the most common occasion for impulse shopping, and nearly half of all consumers say they make impulse buys for themselves (which means that, even if you’re at the store to get clothes for your kids, you’re likely to walk out with something for yourself—unplanned).

The point, it seems to me, is that while Taylor is right about the need to move into planned spend, it might be equally as good to move into planned categories where unplanned spend happens freely, because that’s where discovery really happens—ChatGPT or not.