ClassPass, which began as fitness boutique-booking app back in 2013, has been rapidly expanding into other areas such as wellness and beauty treatments. In the past year, the platform has added 6,500 non-workout venues to help diversify its marketplace offerings and potential revenue. And the company plans to double down on this area.
Last year, many direct-to-consumer startups saw record sales -- but they also struggled to produce and ship enough product to keep up with customer demand. If the first few weeks of 2021 are any indication, those issues are likely to continue well into the new year. Since the beginning of the pandemic, startups have been scrambling to find ways to speed up production, mostly by adding more suppliers and placing orders for products further in advance. A year later, and the problems persist.
When it comes to art buying, brick and mortar galleries have historically dominated the space, making for an intimidating experience for most everyday shoppers. However, while the art world is struggling without in-person auctions, marketplaces like Artsy are finding that the pandemic is helping expand the market to include young customers.
The direct-to-consumer startup boom has also fueled the rise of a number of secondary industries — for example, buy now pay later services. Affirm just went public this week and if its Wall Street debut is any indication, it’s got some staying power. Affirm disclosed in its S-1 that it generates nearly 30% of its revenue from just one company: Peloton, one of the darlings in the DTC space. But the relationship between buy now pay later services and DTC startups runs deeper than that.
Outdoor furniture company Outer pays its customers to turn their backyards into "showrooms," which prospective new customers can check out as they're deciding whether or not to buy a sofa or a rug from Outer. It's something that the startup has done since launching in mid-2019. But 2020 was the year in which Outer started to prove that its model has traction. The company did more than $12 million in sales in 2020, up from $1.1 million in 2019. Now, the company plans to lean on its customers more to help fuel its growth, as it seeks to expand the showroom model.
For the past several years, more and more people have started abstaining from or cutting back on alcohol during the month of January, as part of a campaign known as Dry January. For startups that sell alcohol-free versions of beer, wine and cocktails, that means this is their month to shine. Modern Retail spoke with founders of startups like Curious Elixirs, Ghia and Ritual Proof Zero about how they are trying to attract new customers this month.
While gyms rush to build out virtual workout products to retain members, seeking out corporate clients has become a growing trend within the industry. From nationwide players like Equinox and Gympass, to regional studios like Fhitting Room, the race to be featured in employers' wellness offerings has begun.
Since the beginning of the pandemic, more consumers have discovered semi-ready health-focused meal kits. Now, emerging startups in this niche category -- which include Factor, Provenance Meals and CookUnity -- are finding a new cohort of customers embracing their delivery menus.
There's two competing narratives right now taking shape in the direct-to-consumer space: one, that venture capital funding is starting to fall out of favor with DTC startups. And two, that it's a great time to raise venture capital funding as a consumer startup, as more investors are finally waking up to the fact that there's a huge opportunity for these companies as more people do more shopping online. But these two concepts aren't necessarily mutually exclusive. Some DTC startups are still raising venture capital money, they're just doing so later on. Or, if they take VC funding, they are taking steps to ensure their cash lasts longer.
New DTC furniture brand Model No. is attempting to corner a market looking for high end designs at affordable prices. But its differentiator, CEO Phillip Raub said, is the automated 3D printing process, which allows for faster assembling and shipping times, along with zero waste manufacturing.
Since taking over as CEO of Thinx in 2017, Maria Molland has sought to turn the startup -- and subsequently the period underwear category -- from a niche player into something that's at home on the shelves of mass-market retailers. To bring about this change, Molland has started to invest more in traditional advertising, running the company's first TV ad in 2019, as well as expanded its wholesale presence. Of course, like over other startup, the coronavirus pandemic threw a wrench in Thinx's plans. Still, Thinx is closing 2020 with close to $80 million in revenue, and ended the year profitable.
Direct-to-consumer startups were among the biggest beneficiaries of more people doing their shopping online in 2020, with some startups like Brooklinen and Prose reporting that their sales more than doubled or tripled this year. Now, going into 2021, DTC startups are out to prove that the sales growth they reported this year isn't just a flash in the pan.
The DTC bubble was supposed to pop in 2020; instead, it became even more inflated. Fears that the pandemic would lead to a dip in consumer spending never panned out for most DTC startups, as the people most likely to be their customers -- young professionals working from home -- subsequently spent more of their money shopping online. Over the course of the year, companies in categories as disparate as hair care and bedding reported that their sales doubled or tripled over the course of the year, even as stores were ordered shut. Now, going into 2021, direct-to-consumer startups are trying to figure out how to best capitalize on the growth they saw this year.
In 2020, new-to-market startups started to do away with branding tactics that have historically been popular on Instagram. Pastels and Sans Serif font have been replaced by bright colors and oversized lettering, while startups are centering their social media centering their social media strategy around busting taboos or reaching customers that have historically been overlooked. As the direct-to-consumer startup space has gotten more crowded, startups have found that they need a different proposition than just creating a new e-commerce experience for mattresses or luggage -- and that requires a new branding playbook
Companies like Airbnb and DoorDash have recently gone public and become the darlings of Wall Street, but there are some players that are notably outside of the current inventory bubble: DTC brands. What began as a warning in 2019 has become a reality in 2020 made more acute by the coronavirus. Most consumer-facing retail startups quite simply won't reach the scale worthy of mid to late stage venture capitalist dollars. In the DTC, that means the mindset is shifting -- and alternatives are being sought out.
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