These 10 DTC darlings helped pave the way for digitally native brands

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Based on a publication  from Caroline Jansen in Retail Dive, These 10 DTC darlings helped pave the way for digitally native brands. Where are they now?.

Estos 10 favoritos de DTC ayudaron a hacer camino para las marcas nativas digitalmente

While several brands have experienced success through acquisitions, public listings or investments from larger retailers, others haven’t been as fortunate.

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Around a decade ago, when many DTC darlings were launching, the retail landscape looked much different than it does today. E-commerce and social media weren’t as sophisticated as they are now, and larger retailers and brands were «los[ing] their way trying to appeal to more and more people,» according to Katie Thomas, who leads the Kearney Consumer Institute, a think tank at consulting firm Kearney.

This presented an opportunity in the market to cater to a more niche subset of consumers. The combination of gaps needing to be filled in the market, a call from consumers for more transparency from brands and the growing popularity of e-commerce helped fuel the rise of early direct-to-consumer companies.

«These brands identified that they had enough direct-to-customer opportunities that they could build an identity and build a distinctive strategy to engage customers directly,» said Tyler Higgins, retail practice lead and managing director at AArete.

DTC brands oftentimes started out focusing on one key product, like a mattress, eyeglasses or a suitcase. They built their identities and grew communities of loyal customers around these products, but quickly learned that in order to reach new customers and retain existing ones, they needed to expand.

«That’s really the challenge — the single product isn’t necessarily going to be enough for you unless your goal really is just to have an exit strategy and get acquired,» Thomas said.

Over the years, online shopping has exploded, propelled further by social media channels doubling as commerce channels. And though this has, in a way, made it easier for brands to enter the market, it’s also made it more difficult — and more expensive — for them to break through to consumers. «It’s easier to launch, but I think it’s drastically more challenging to grow,» Higgins said.

And the ability to use social channels to drive awareness and create communities of customers also lends the potential to generate negative attention to a brand as well, according to Matt Katz, a managing partner at SSA & Company. «Brands need to be very careful about the type of awareness they’re creating because the quick growth can be quickly reversed to rapid decline,» he said.

Further complicating the success of DTC brands has been the cost to acquire customers online, which has driven many companies to take their brands offline, whether through partnerships with larger retailers, pop-ups or permanent stores of their own.

«They realized that with brick and mortar, the customer acquisition cost is lower; they have access to new, different types of customers; and they have the ability to manage their financials better in that landscape because social media costs … have gone up,» Higgins said, adding that «now, direct-to-consumer brands are realizing that their long-term growth is going to continue to still be heavily predicated on retail growth as well.»

While «digitally native» has virtually become synonymous with «direct-to-consumer,» it’s simply a starting place for these brands and does not preclude them from where they need to go, Katz said. «Brands and retailers need to be everywhere the consumer is, and the consumer will dictate where it is he or she wants to be,» he said. «It’s a brand’s or retailer’s requirement to be there.»

For brands looking to enter the market, as well as existing DTCs with a community of followers, finding ways to innovate and differentiate the brand’s offerings will be critical for long-term success.

«The challenge now for brands is to think about, ‘OK, really what is this differentiation or this niche that I’m trying to appeal to?'» Thomas said.

The past decade has led several companies in the inaugural class of DTC brands to have great success, including through IPOs, acquisitions or investments from big names in the industry. Others, however, haven’t been as fortunate. Custom menswear brand J. Hilburn, for example, last year filed for Chapter 11 bankruptcy protection, while other brands have shuttered entirely.

From IPOs and acquisitions to C-suite shuffling, here’s a look at where 10 early DTC players ended up.

1. Casper

Courtesy of Casper, Bed Bath & Beyond

Casper aimed to disrupt the way consumers purchase mattresses through its bed-in-a-box model. Since its founding in 2014, the brand has expanded beyond mattresses into other categories like dog beds, CBD gummies and a smart nightlight.

Casper has formed partnerships with over 25 retailers, including Target, Nordstrom, Costco, Sam’s Club, Bed Bath & Beyond and Mattress Warehouse. As of September, the brand operated 72 retail stores. And in March of 2019, Casper reached a $1.1 billion valuation following a funding round.

In early 2020, before the pandemic was fully realized in the U.S., Casper filed for an initial public offering. Before making its public debut in February of that year, the brand cut its share price from an initial range of $17 to $19 a share to a range of $12 to $13 a share.

Despite high hopes for the brand, Casper’s stock price hit an all-time low of $3.18 a share less than two months after going public and has yet to return to its opening share price.

This article was originally published in Retail Dive


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