The Rise of AI-Driven Direct-to-Consumer (DTC) Brands: Personalization, Customer Retention, and Competition with Traditional Retailers

Abstract

The paper investigates AI's revolutionary effects on DTC brands across areas of personalized service and retaining customers and competing against conventional retailers. The analysis examines AI-related strategic improvements of consumer involvement and commercial results together with AI implementation barriers in retail operations. This research used a mixed-method design to integrate numerical survey data obtained from 300 internet consumers with extensive interviewed feedback from marketing experts and AI specialists. Additional information collected from industry reports together with academic literature helped to support the research results. According to customer feedback, implementing recommendation engines, predictive analytics, and chatbots produces significant benefits for personalisation and customer retention. DTC brands demonstrate greater innovative capabilities and digital contact than traditional retailers but the latter lead in logistics operations and consumer trust. More than half of respondents (62%) reported concerns about data privacy in relation to ethical matters. The paper demonstrates how AI functions equally as marketing innovation promoter and ethical dilemma source in marketing strategies. Traditional retailers need to employ AI strategically because DTC brands obtain agility and market insight through these competitors. The study endorses brands to strike an equilibrium between personalization and transparency when working with customers. Research needs to analyze both short-term and long-term effects of AI on consumer trust and loyalty while extending the study to additional business sectors after e-commerce.