Direct-to-consumer startups have now been grappling with manufacturing delays, increased prices of raw materials and astronomical costs for shipping containers for close to a year and a half now. And the challenges show no signs of subsiding.
For the past few years, Warby Parker has been cited as an example of the rare direct-to-consumer startup capable of turning a profit -- the company first noted in 2017 that it achieved profitability on an EBITDA basis. But when the company filed its S-1 last week, it revealed that the path to profitability remains bumpy -- and it served as a good proxy for the biggest challenges DTC brands face in 2021 in turning a profit.
After years of scooting by on beautiful aesthetics, some startups are feeling the ripple effects of DTC disillusionment. That is, customers (and high-profile writers) are increasingly expressing remorse after spending a premium to buy beautiful cookware or bedding from a startup that they think is more ethical than traditional retailers.
Despite the fact that shoppers are likely to receive a dozen-plus emails from retailers each day, direct-to-consumer startups are constantly trying to wedge their way into people’s promotions tabs. And email marketing is only likely to become more crucial -- and more complicated -- for any burgeoning DTC startups, thanks to privacy-focused changes in the digital marketing landscape.
With holiday planning well underway, DTC startups are planning for the 2021 holiday season to be just as chaotic as last year's. While they hope that carriers like UPS and FedEx will be better equipped to deal with the surge in e-commerce orders, port delays are shipping container shortages are in some cases worse than last year.
Last March, airports became ghost towns and as a result, airport advertising ground to a halt. While some brands are exploring airport advertising again, some are waiting until closer to the holidays, which will be the biggest advertising season for them anyways.
Styling service Stitch Fix told employees yesterday in an internal message that the company would be making changes to when stylists can work -- changes that stylists have to accept in the next two weeks, or resign. Three stylists told Modern Retail that they felt the changes were one of many ways that the stylist role had gotten less flexible over the years -- though flexibility has long been a selling point as Stitch Fix has tried to recruit stylists.
Rarely, if ever, does a startup’s first year in business go according to plan -- but DTC founders who launched their businesses in 2020 had to deal with an unprecedented amount of chaos. Now, going into their second year of business, these startups are ramping up marketing investments, and resuming some of the brand-building tactics they previously had to put on hold.
Within the past several years there has been an explosion of new specialty marketplaces through which e-commerce brands can also sell their products. As a result, e-commerce brands have more options than ever before when considering where to sell their products online -- and many of them are expressing more interest in moving beyond DTC distribution earlier on.
Last September, Gap Inc. relaunched its loyalty program in order to encourage people to shop and redeem rewards across all four of its brands -- Banana Republic, Old Navy, Athleta and the namesake Gap brand. Now roughly ten months into the program, Gap is making a greater push to get more people to sign up, by making it easier to redeem points and adding more perks.
Getting products manufactured overseas, transporting them over to the United States and shipping them out to customers globally is still nearly as difficult as it was in 2020 -- and in some cases more difficult. As a result, nearly every decision that a burgeoning e-commerce startup has to make these days has to account for shipping or production delays on every little item.
Last summer, brands took a muted approach to marketing. Now, the mood is much more celebratory as some brands are rushing to host their first in-person events in nearly eighteen months. Many of these events are being planned on the fly, as some brands were hesitant to plan any indoor events until a month or two ago.
Health care is shaping up to be the next area of interest for big-box retailers, with companies like Dollar General and Walmart searching for ways to boost their medical credibility. Two recent announcements highlight the new arms race.
Roughly two months after the iOS14 update rolled out, direct-to-consumer startups are still trying to understand the impact of it. The impact felt by DTC startups has widely varied, according to the four media marketers and media buyers. Multiple brands reported their cost per impressions (CPMs) rising on Facebook since the iOS14 update, while the conversion and purchase-related data Facebook reports back seems to be less accurate.
Over the past year, many retail startups experimented with virtual events. But for Monica + Andy, an eight year old baby clothing brand, virtual events became a regular part of its marketing strategy. Now, Monica + Andy presents a potential case study as to how DTC brands might approach events going forward: CEO Monica Royer said she expects half of Monica + Andy's events to be virtual, half in-person, going forward.
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