As direct-to-consumer brands have started to branch out from their bread-and-butter digital marketing channels like Facebook and Google and explore channels like TV, out-of-home and direct mail, pressure is building to figure out which of these channels are most effective at driving sales.
Most, if not all, DTC companies don't launch with a loyalty program. Given that these brands are often first built around a single "hero product," that doesn't leave them with much room to offer customers additional add-ons once they spend a certain amount. But, six-year-old lingerie brand ThirdLove decided to launch a loyalty program, called Hooked, in November in conjunction with a revamp of its promotional offerings.
Companies like The RealReal, which is now public, StockX and Poshmark have been garnering increased attention and shining a light on the business of reselling goods. This kind of commerce has been around for years, but these startups believe they're part of a burgeoning and soon-to-be dominant retail industry.
To Harbinger Ventures founder Megan Bent, there are three forces at play in CPG that makes it a ripe category for new investment: Customers are seeking out brands that fit a new set of expectations around ingredients and positioning; big corporations, meanwhile, aren’t innovating and bringing new brands to market as fast as startups; and retailers need differentiated selection to bring customers into stores.
Late last year, DTC footwear brand Allbirds surpassed a $1 billion valuation, making it one of the largest DTC success stories of the last decade. But while an eventual IPO from either Allbirds or one of the other comparable DTC juggernauts like Warby Parker seems inevitable, it won't necessarily open the floodgates for others in the space.
Scott Cutler, the new CEO of StockX, has experience getting brands to work with, not against, resale marketplaces. As the former president of StubHub, Cutler was responsible for signing partnerships with entertainment companies and sports teams to bring a greater air of legitimacy to the resale ticket marketplace. Now, Cutler is looking to convince more brands to join forces with StockX as the sneaker resale landscape gets more crowded.
As Ro, the parent company of telemedicine brands Ro, Rory and Zero, looks to diversify its marketing mix, the company is looking to partner more with institutions that its target audience already trusts. Earlier this month, Roman, its men's focused brand which sells generic hair loss and erectile dysfunction medication over the internet, announced that it signed a multi-year deal with Major League Baseball to sponsor its television and digital media coverage around Father's Day.
Chicago-based startup Foxtrot, which is building a chain of upscale convenience stores, today expanded to its second market with the opening of a store in Dallas. The startup's expansion comes as chains like 7-Eleven and Wawa are also putting more effort into delivery.
Haus, which launches online today, is a new aperitif brand selling directly to customers online. Co-founder Helena Price Hambrecht, which has a background at Silicon Valley startups like Skillshare and Uber, worked with her husband Woody Hambrecht, a winemaker, to plot out a modern spirits brand using the sourcing, processing and bottling systems they already owned. The resulting aperitif is wine-based, and contains 15% alcohol.
Iris Nova, the DTC beverage company that launched in 2015 with Dirty Lemon, plans to invest a total of $100 million into startup consumer brands by 2021. The goal is to build out a modern portfolio company for brands in the CPG space to compete with legacy companies like Coca-Cola and Pepsi.
The round was led by VCs and angel investors including Randa Digital, Amity Supply, Cherry Tree VC, Brian Spaly and Scott Belsky.
For 10 Grove, a bedding brand competing in a category already crowded by other players like Brooklinen, Snowe and Parachute, its vertically integrated supply chain is the cornerstone of how it plans to build a “genuine” direct-to-consumer business, according to founder Rana Argenio.
Physical retail strategies have become integral to the growth of direct-to-consumer brands, as they seek out customers they can't reach online. Members of the first generation of DTC, like Warby Parker and Casper now have aggressive store expansion plans. Home goods brand Parachute is one such brand that's undergoing a rapid physical expansion.
There are no one or two go-to-retailers whose stores fitness startups can start selling their products in before opening their own physical retail space, to learn how their products do in stores. Retailers need to be willing to dedicate floor space for product demos, and to assist with delivery and installation of the bulky equipment. So, startups have been experimenting with pop-ups that allow them to leverage existing retail space to get a better sense of what customers want.
Resident is the latest brands group to form around a collection of retail startups, and it’s betting that a power-in-numbers approach will work in its favor in the crowded DTC mattress category. Resident is now the parent company of mattress brands Nectar Sleep, DreamCloud, Awara and Level Sleep, rug brand Wovenly and Bundle, a furniture line that launched in May.
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