DTC, or direct-to-consumer, brands were once the darlings of 2010’s commerce. With several brands worth billions at their peak, they were once thought to have been the future of shopping…
That is until many DTC companies started going belly up.
What happened to the golden era of DTC?
How Did DTC Brands Get Their Start?
DTC brands grew in popularity during the mid-2010s. At this time, smaller companies started realizing how difficult it was to break into the world of wholesale.
When you’re a small business…
Wholesale at larger stores means competition with legacy brands with established customer bases.
Not to mention, there is no control over how your products are displayed when you go the wholesale route.
To combat this, brands started selling their products on their own websites. And they began marketing with ads on social media sites such as Instagram and YouTube. Many other DTC brands started working with influencers to put ads in their videos and podcasts.
This gave brands absolute control over where and how their products are marketed, and how they are displayed to customers.
Not to mention, there was less competition when it came to marketing online.
IN RESPONSE TO THIS STRATEGY OF SUCCESS, DTC BRANDS EXPLODED IN POPULARITY.
Some brands became household names during this period:
- Allbirds
- Casper Mattresses
- Peloton
- Glossier
- And most notably, Warby Parker
The combination of incredible marketing strategies and more venture capitalists open to taking risks…
ed to a huge wave of funding dedicated to DTC companies.
 In 2012, funding for DTC companies was about $60 billion… but in 2021, that number climbed to $164 billion in 9 short years.Â
The pandemic was the final high point for many companies, as consumers’ lives shifted completely online…
But if DTC brands dominated e-commerce ten years ago…
Why are so many companies the furthest from profitability they’ve ever been?
What Went Wrong?
Despite the glamour and success of the new era of digital-first e-commerce that DTC brands represented…
Out of 22 publicly traded DTC companies, more than half of them have seen a decline in 50% of their stock prices since going public.
Companies like Smile Direct Club and Winc, a wine subscription box, have declared bankruptcy…
With Blue Apron quietly following in their footsteps.
SO WHAT EXACTLY TURNED THE DTC GOLDMINE INTO AN UNPROFITABLE GHOST TOWN?
Due to rising interest rates and increasingly unstable geopolitical tensions…
Investing in DTC has dropped significantly post-pandemic.
Not to mention… DTC brands have been putting all of their spending into customer acquisition.
This means that all the brand’s marketing initiatives are going into getting new customers rather than retaining their existing ones.
Between 2017 and 2022, customer acquisition spending increased by 60%. The average customer acquisition cost for companies is $70/customer.
To put it simply… if a new customer doesn’t spend more than $70 at the average DTC brand…
The company is losing money.
The Lucky Few DTC Brands To Survive…
While their compatriots are starting to flounder with no profits to keep them afloat…
There are a handful of DTC brands that have been able to not only survive post-pandemic…
But thrive and grow as companies.
Warby Parker is both the blueprint for and the success story that many upcoming DTC brands aspire to.
THEIR SECRET? NOT RELYING ON E-COMMERCE AS THE END-ALL-BE-ALL OF THEIR BRAND.Â
When the company launched in 2010, they knew that even with a DTC model, they would have to shift to brick-and-mortar stores eventually…
Now… most of their sales come from physical locations, not their website.
While many DTC brands have shunned entirely the concept of selling in stores…
The fact that many DTC companies are failing to make ends meet paired with the case study of Warby Parker’s success represents one thing:
THE WHOLESALE MIDDLEMAN STILL HAS A PURPOSE IN CONSUMERS’ LIVES.
Regardless of what the future holds for the DTC model, one thing is certain…
If they want the success of their competition…
DTC brands must be able to adapt to the wants of their buyers instead of expecting buyers to change their shopping habits.
Be Great,
GCTV Staff
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