Our real-world testing was highlighted in the Harvard Business Review
In the beginning, there were catalogs.
In the beginning, there were catalogs. Really big catalogs: at least one edition of the Sears catalog in the early 20th century weighed four pounds and offered over 100K items on 1400 pages. You could buy anything from a teakettle to a kit to build your own house.
From that point onward, the evolution of direct-to-consumer marketing probably felt as heady as it does now. How cool was it to come up with new business models like the negative-option Book-of-the-Month Club or to make a big splash by offering a $35M jet in your holiday catalog?
Of course, catalogs never really went away (Exhibit A: your mailbox), but the whole idea of what it meant to be a direct-to-consumer business got a makeover. Companies like Warby Parker, Allbirds, and Bombas climbed aboard the social media rocketship and powered to $100M before you could say micro-influencer three times fast.
But how novel are they? Are digitally native DTC brands really as innovative as they made themselves out to be?
If there is a theme emerging for 2020, it has to be “second-guessing.” Whether you actually invested in WeWork or just told your grandma that she should take Uber because it created awesome opportunities for the underemployed, you may be feeling abashed, even hornswaggled. And much of this hand-wringing is spilling over into the direct-to-consumer arena.
An abundance of analytical prognostication and good journalism in 2019 means that we are all eating our words in 2020. Frankly, the parade of self-flagellation is getting to be a bit much, with clever cranksters piling on Casper at the moment.
But let’s not make the same mistake twice. While it’s true that some DTC companies overestimate the “lifetime” part of customer lifetime value, there are some gems within the category, not to mention plenty of lessons to learn.
So which product-centered DTC firms have created something truly remarkable—with the underlying economics to show it? We put Warby Parker in this category. They spotted an industry with a near-monopoly and fat margins and entered with a high-quality affordable product supported by smart use of tech—no retail required. It’s disintermediation, but one with some built-in defenses (longitudinal data on your eyeglass prescription, for instance). Weirdly, though, brick-and-mortar retail may be the key to their ultimate success. Next on their list: contact lenses.
Glossier is a winner, too, with a long list of smart moves. And companies that have gotten traction in categories with reusable products—Billie, Grove Collaborative—combined with subscription may have found sweet spots at the intersection of better mousetrap and convenience.
If you are a venture capitalist, DTC is no doubt irksome. It’s rarely “real” tech, meaning that it doesn’t scale the way, say, cloud computing does.
For the rest of us, however, innovation is reward enough, especially if there are lessons for our own work. Useful takeaways from the DTC zeitgeist:
Focus. There is beauty in doing one thing exceptionally well, and companies like Allbirds (sneakers) and Year and Day (dinnerware) offer well-designed products affordably.
Adjacencies. But once you've nailed your category, look nearby, especially if you can leverage a competency or supply chain. If customers love your sneakers, offer them similarly constructed slippers (Allbirds). If they love mattresses, offer them bedding (Casper).
Diversification of marketing channels. “You can grow to $30 million to $50 million in sales using Facebook,” Andrea Hippeau, principal at the VC fund Lerer Hippeau told Modern Retail. “But to build a big, sustainable business, you have to diversify off of digital.”
Sharing. But you don’t have to own your space to test new channels. DTC brands sharing retail space has become a big deal—and thank goodness, since we are getting tired of looking at empty storefronts. Neighborhood Goods just made a splash in our neighborhood, with a complement of DTC brands like Caddis, Cuyana, and Dollar Shave Club. Bulletin and Showfields also have a presence in NYC, and we’ve heard of a few more here and elsewhere.
