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As many states are continuing to order non-essential retail stores to stay closed, and shoppers tighten their wallets, startup founders are having to take a look at what costs they can cut to ensure their can keep their business running through the coronavirus outbreak. Many startups are cutting their digital advertising spend. Others are trying to renegotiate leases. Many founders are taking extreme pay cuts themselves, and asking their executive teams to as well. And, ultimately many of them are also having to layoff or furlough staff, or asking them to take unpaid leave as well. Modern Retail will be tracking the job and salary cuts announced by startups, by date of when they were first reported, in order to get a better sense of how the coronavirus outbreak will impact the burgeoning direct-to-consumer industry.
Many brands have relied on out of home ads, like subway takeovers, to diversify away from social and digital. But now that everyone is staying home, these businesses are being forced to rethink where best to reach audiences and how to message to them.
As shoppers in the U.S. and Europe are spending more time in their homes thanks to shelter in place orders, apparel brands are seizing the opportunity by offering sales on items like loungewear and leggings, and marketing their products as essentials for people working at home. Everlane is hosting a sale this week where shoppers can get a discount if they buy two pairs of leggings or two sweatshirts. Universal Standard is having a mix and match sale where if customers buy three products from a selection of tank tops, t-shirts, and sweaters, they get 30% off. It's an easier lift for some companies than others.
For the past couple of years, investors have been urging direct-to-consumer brands to rely less on digital advertising to acquire new customers. While they may be hesitant to admit it, many direct-to-consumer advertising brands are pulling back on their advertising spend on Facebook and Google as they anticipate shoppers will tighten their wallets in the coming months.
It seems like every day Amazon is changing the rules for its sellers. Some are seeing huge gains, others are seeing huge losses. What's clear, however, is that the platform has dramatically changed over the last few weeks and many brands feel left in the dark.
Some investors have speculated that the coronavirus could lead to a rise in sales for e-commerce startups, as more people shop online instead of visiting stores. But, that doesn't mean that these startups are completely in the clear. Direct-to-consumer startups, in their never-ending quest to acquire customers more cheaply, have been moving to open more stores in recent years. Others also rely on in-person events to reach new potential new customers.
Melanie Kahn, founder of Illinois-based beverage brand Poppilu Antioxidant Lemonade, was relying on the annual Natural Products Expo West event to help move her business forward in a number of ways. She was hoping to meet with potential investors during the event, which was supposed to be held between March 3 and 7 and get her company in front of new retailers. Plus, she had a new product to promote, for kids.
This week, Neighborhood Goods opened its third location in Austin, Texas. With it, the company is also offering brands a new digital dashboard to better understand store analytics. As more physical retail concepts become popular with digital brands, the ability to analyze and contextualize real-time data is increasingly becoming table stakes.
More and more companies are announcing plans to have most employees work remotely. For smaller DTC brands, that rely on both selling physical products and having a scrappy agile work culture, this is especially difficult. But as the coronavirus spreads, so too does the need for a work contingency plan.
Though stocks are tumbling and some businesses are facing big obstacles, the coronavirus is causing some brands to see big gains. In the DTC space, companies offering higher-end home and health products have observed more new customers and bigger order sizes. It makes sense: Why go to Costco when you can buy nice toilet paper online?
Companies that sell primarily direct-to-consumer already faced a tough time raising venture capital funding in 2020. And that was before an outbreak of COVID-19. Most investors say it's too early to tell if other venture capital firms will prove less willing to make investments in the coming months, and certain categories like like travel may be more negatively impacted than others. But nearly all are counseling companies to rethink their growth projections for 2020, and start thinking now about how they can tighten up expenses in a worst case scenario.
Andrea Lisbona, founder and CEO of hand sanitizer brand Touchland, was hoping for a year of fast revenue growth. But her projections were completely shot out of the water thanks to a surge in demand over the past few weeks for hand sanitizer, caused by people buying more of the product over concerns of catching the coronavirus, or COVID-19. Lisbona said that within the past few weeks, Touchland has sold more than 250,000 orders, which works out to about 800% growth.
DTC healthcare startup Ro announced a new assessment tool for COVID-19. It's the latest -- and perhaps most extreme -- example of businesses shifting strategies to deal with the epidemic. Questions abound about how such a program will be executed.
Everyone is trying to get their hands on hand sanitizer and other cleaning products in the wake of the coronavirus. One top brand on Amazon is retooling its strategy in the height of the increased demand. Modern Retail chatted with its head of e-commerce about how it's approaching this dramatically changing retail landscape.
Last January, direct-to-consumer furniture brand Article took a step that's still relatively unusual for a startup: it launched an in-house last-mile delivery program. As an online-only startup that has yet to open a single store, Article viewed building its own in-house delivery operation as a necessary customer service investment. The biggest benefit of launching ADT is that it has allowed Article to reduce delivery times. The company is now able to deliver roughly half of its orders in under a week, compared to 30% in 2018
Individual brands are copying the Amazon aggregator model and trying to scoop up their own marketplace sellers. The addition of CBD brand Grove underscores that interest in the Amazon aggregator business model is spreading -- but that doesn’t mean established companies are rushing to acquire marketplace products quite yet.
Read MoreAt the Modern Retail Summit, retail marketers will discuss everything from the Amazon effect to new infrastructure to the shift in the direct-to-consumer world.
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