In March, the fundraising environment for direct-to-consumer startups was "downright frozen," as Michael Duda, managing partner at hybrid accelerator agency and venture capital fund Bullish, put it. Now, March seems like a lifetime ago. Over the past six months, many direct-to-consumer startups in categories ranging from home improvement, health and wellness, and food have struck it big, reporting that their online sales have doubled or tripled while customer acquisition costs have decreased. Consumer investors are starting to close deals again, while investors that had previously soured on DTC startups because of high customer acquisition costs are starting to change their tune.
The rise of low and non-alcoholic cocktail alternatives has been in the works for some time. Now, specialty beverage brands like Seedlip, Ritual Proof Zero and Curious Elixirs are seeing additional demand for their products. As their founders see it, even alcohol drinkers are finding themselves needing to cut back on at-home consumption for health reasons.
As one of the brand founders who've vowed to stay away from Amazon over the years, Camille Rose's Janell Stephens had a change of heart when the pandemic hit. In the past year, she went from attempting to stop second-hand product sales on the site to opening an official Amazon store. Speaking to Modern Retail, the haircare brand's founder and CEO discussed the divisive channel's addition to the company's retail expansion.
The arrival of the pandemic made buying prescription eyewear even more of a nuisance. Not only were many optometry locations shut down, but many Americans also lost their jobs and health insurance in the process. This helped DTC eyewear seller Zenni grow its sales and new customer acquisition in record numbers.
Since launching in 2017, Gravity Products, the parent company behind the weighted Gravity Blankets, has quickly diversified its reach beyond its own website, selling its products through a handful of other retailers' stores and websites.Now, the company is announcing its biggest brick and mortar partnership to-date. This week, Gravity will start selling in 900 Target stores, and through the big-box retailers' website. As Gravity has added more wholesale partners, it has also sought to expand its product line to ensure it offers something unique to each wholesale partner.
CUUP, which sells specialty bras in non-standard sizes, has seen huge growth over the last few months. Like many DTC brands, the company saw a surge in growth in the initial months of the coronavirus pandemic, with March and April year-over-year sales spiking by 322% and 700% respectively. The startup's co-founder and CMO Abby Morgan spoke with Modern Retail about how it tweaked its content strategy over the last few months.
While some direct-to-consumer startups have reported that their online sales have tripled or doubled since the start of the pandemic, not every retail company is benefitting from the e-commerce gold rush. In March and April, demand for certain products like travel accessories and wedding attire all but evaporated as those activities became impossible to do under stay-at-home orders. So companies that sell these types of products are doing something they swore they never would before: offer a sale.
No-show socks are typically a big summer seller for DTC sock company Bombas. But with this summer being different thanks to social distancing, it didn't expect a niche style within the category to come out of customer demand. Co-founder Randy Goldberg spoke to Modern Retail about the line of no-show performance socks, aimed at the growing home fitness trend, and how they're helping the company find a new seasonal revenue source.
At most grocery stores, free samples are out the window. But one vegan frozen food company, Strong Roots, has been trying out a new program with a ghost food truck. Through this, Strong Roots can target regions where it's food is available in stores and then try and get customers to taste it via food delivery apps.
A number of direct-to-consumer startups have reported huge revenue growth during over the past several months, in some cases acquiring double or triple the amount of new customers that they did during the same period last year. Now, their focus is on keeping those new customers. Even though retention is important for DTC startups year-round, it is especially so during the pandemic, as more customers are buying certain types of products online for the first time.
The direct-to-consumer health space has quickly become a hot area for investment, particularly as wellness is top-of-mind for people thanks to the coronavirus pandemic. On Monday, Bloomberg reported that German pharmaceutical company Bayer is acquiring a majority stake in vitamin and supplement startup Care/of. Health and wellness is a popular space for investment because increasingly, that's where people are spending their money. But even DTC startups that don't operate in the health and wellness space can take a page or two from Care/of's playbook.
Despite their ability to reach more customers virtually, digital pop ups have proven to be a challenge for many brands during the Covid-19 era. For companies that rely on sampling and discoverability, this is a time to think outside the box and move away from livestreams. In the case of CBD beverage brand Recess, CEO Ben Witte told Modern Retail the idea is to make virtual popups more profitable as the brand expands markets.
Tech solutions providers have accelerated partnerships with retailers to implement new AI tools beyond autonomous checkout. In recent months, vendors have announced tools for more targeted in-store marketing and social distance compliance as foot traffic picks up again.
Interlace Ventures managing partner Joseph Sartre spoke on the most recent episode of our Modern Retail Talk series about what headless commerce is and why he thinks it's going to be the future for online merchants -- especially now. Modern Retail Talk is our video series where we discuss the latest retail news, as well as dive into issues experts in the space are facing.
Direct-to-consumer startups are, unsurprisingly, turning to one another to navigate their business' through the coronavirus pandemic. Partnerships between direct-to-consumer startups were already becoming more popular before the coronavirus pandemic. But more startups have been turning to partnerships in recent months in order to reach new customers while other marketing tactics like physical pop-ups remain out of the question. It's also a way for startups to test out new product categories, while resources remain tight.
One thing is true for nearly all conversions on Amazon: They’re captured by products on page one of the search results. And a significant share of purchases go to just the top few results.
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