Direct-to-consumer startups have been thinking for weeks about how and when they want to re-open their stores. But as the time has come to re-open stores in some states, no one has any better idea of what the right path forward is than they did six weeks ago.
After review, Modern Retail has retracted this article
Just because CAC is down, it doesn't mean aggressive marketing is right for everyone, said Mike Duda at this week's Modern Retail+ Talks. He explained what the new landscape means for DTC brands' future and how to think about longterm growth.
Since launching in 2013, Derris has quickly become one of the go-to public relations agency for direct-to-consumer startups. Since then, its founders Jesse Derris and Matt Higgins have also parlayed the success of Derris into an investing arm. Derris and Higgins are the founders of a fund called Amity Supply, which launched in 2017 with an initial $10 million fund and primarily invests in startups pre-launch. Its portfolio companies include telemedicine brand Hims, and acne care brand Starface.
"Don’t grow fixed costs immediately and stay within the realm of keeping marketing costs flexible,” said CEO Keith Nowak, which comes in handy during inevitable global economic crisis.
For Bacardi, “For us this is part of our larger, long-term strategy," said Lorran Brown Cosby, vp of digital commerce at Bacardi North America.
For many direct-to-consumer founders, it's been six weeks of extreme highs and lows -- some companies have recorded simultaneously some of their best and worst sales days within those same time periods. But even companies that have reported record sales haven't been immune from having to lay employees off. As a result, many DTC founders are finding themselves having to navigate situations that they never have been before, and are having to learn new ways of leading.
Freshly for Business launched this week to provide employer-subsidized meal delivery for remote office workers. CEO Michael Wystrach thinks "many employees would rather get free meals instead of a desk," which can push the service to grow long past the pandemic.
Personal protective equipment like masks, gloves and face shields are in high demand. Many retail companies today see an opportunity in both donating PPE to medical groups who are running low on critical supplies, and sellng it to customers in need. At the beginning of April, direct-to-consumer footwear brand Rothy's announced that it was launching a group called the Open Innovation Coalition to help companies work together to solve the challenges they are facing in trying to manufacture this equipment.
Like other delivery-related trends, text-to-order may finally see mainstream adoption. "Every brand will have a website to feature products and phone numbers for customer service and transactions,” Iris Nova's Zak Normandin said.
Unlike most grocery retailers, the membership wall makes it harder for Thrive Market to tap into the current demand for Thrive Market. "Those coming in aren’t just looking for a short term delivery solution," said CEO Nick Green.
In some ways, it's starting to feel like the early days of the direct-to-consumer boom all over again. A startup's website is once again its most important sales channel, as stores remain closed. Startups are having to operate with as small of a team as possible. And Facebook is once again a cheap place to advertise. Over the past couple of years, the constant refrain has been that DTC startups need to rely less on acquiring customers through Facebook. As more companies started advertising on the platform, Facebook advertising costs started to rise. Now, as more companies are dramatically slashing their advertising budgets in the wake of the coronavirus, Facebook is becoming less crowded.
"Focus on storytelling right now," said Higgins. “DTC is predicated on having a one-to-one interaction," with the customer that can't be emulated if there is a middleman.
Some online brands are seeing sales spike, others are plummeting. They are all dealing with myriad other issues putting pressure on the overall business. Some startups are trying out new digital campaigns to try and account for the vast behavior shifts -- all while staying cognizant of the bizarre times we're all in. It's a difficult tightrope to walk, but showcases brand new marketing terrain.
As more people are considering trying telehealth for the first time, Ro is moving forward with marketing and product expansion plans to introduce its women's focused-brand, Rory to new customers. Last week, Rory ran its first-ever TV ad, and this week launched a new product offering, a customized prescription skincare treatment. Rob Schutz, chief growth officer at Ro, said that the company has been "shipping more product than ever before" over the last month. While he declined to share overall growth numbers for Ro, he said that Google search traffic across its three brands -- Roman, Rory and Zero -- was up 30% between March and April.
Advertisers, from DTCs scrapping for share in a crackling at-home beauty market to seasoned retailers leaning into the quarantined consumer’s e-commerce surge, what’s changing about your campaign KPIs? How are you using data to make choices and effectively budget across channels? What’s working, what’s broken and how will you fix it? Take this survey and get the full results plus a $5 Starbucks gift card.
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