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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.
Underpinning Rothy’s store strategy is an emphasis on profitability: According to Rothy’s president Kerry Cooper, the first store is profitable and became so four months in. As more digitally native brands move offline and into their own physical retail stores, these locations have served dual purposes as both marketing plays and sales channels, particularly in the form of pop-ups that ship inventory displayed in stores to customers’ homes.
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.
Plus-size and extended-size fashion brands are launching by the droves, no thanks to wholesale partners. Rather than retailers' buy-in, the direct-to-consumer model's proven success is giving brand founders the go-ahead. More brands are launching to cater to women above a size 14, and are relying on the direct-to-consumer business model rather than wholesale to reach their customer.
Supermaker, which launches today, is a new media site founded by Schmidt and Cantino focused on telling the stories of entrepreneurs, particularly women and people of color who are launching consumer brands with a “conscious agenda” according to Cantino, as well as sharing career and business advice around topics like raising investment funding and commanding successful social campaigns. The site currently features spotlights on brands like Bippy, a sustainable toilet paper company, and Anna Robertson, the founder of Ghana-based apparel brand Yevu.
Terry Kawaja, CEO and founder of strategic advisory firm Luma Partners, anticipates these types of relationships will separate who wins in the DTC category from who disappears. Speaking at the BDMI Media Summit on Thursday, Kawaja positioned this evolution of the category as the natural evolution of an industry that started out independently, but now has to live up to big valuations from investor funding: According to data from Luma, $10 billion has been funneled into roughly 400 direct-to-consumer brands to date.
Burrow, like many other DTC brands that are getting into physical retail for the first time, is leaning heavily on events and experiences to drive people into stores. Its second store is open today in Chicago, which Burrow chose because it's the brand's second-biggest market behind New York City in terms of both revenue and customers.
Under the weight of the category, and increasingly complex business models, the direct-to-consumer label is cracking in its purity, but startup brands still have a similar mission in mind as they navigate their categories: Build sustainable businesses by any means possible (even if that means wholesale) while keeping customer wants and needs firmly rooted in the center of that strategy.
Blue Apron’s rise and fall has become a cautionary tale to other billion-dollar-valued consumer startup unicorns: Profitability may not matter to venture capitalists, but a lack of it can sink a business that’s beholden to stockholders scrutinizing quarter-by-quarter performance.
Retailers’ interest in CBD products is tilting the burgeoning industry’s favor towards traditional players, and away from DTC startups in the space. The digital marketing engines like Facebook, Instagram and Google that help spur the momentum of direct-to-consumer brands still block companies from advertising non-intoxicating cannabidiol products, as they’re derived from cannabis. These platforms have all blocked paid ads promoting CBD products, under their policies against advertising “drug and drug-related products.”
The right formula for a DTC brand's success is often combining the right product with the right PR and marketing. And as more attention has been paid to these upstart brands' channel strategy, the value of PR has come into sharper focus.
Stitch Fix CEO and founder Katrina Lake told investors that the company spent $16 million in brand marketing last quarter, and is looking to spend even more heavily on it during the second half of the year as the company looks to diversify from its “normal bread and butter performance marketing.”
Food52’s strategy is to use the data on what items already sell well through its website and what white spaces exist to determine what products it will launch next, and then use customer feedback to add personal touches.
Having made a collective mark on the retail’s makeup, direct-to-consumer brands are pushing to command more market share in their respective categories while dealing with an existential crisis. Direct-to-consumer retail, launched on the basis of selling directly to customers through owned e-commerce and physical retail, is exploring outside of its own channels to drive growth.
Henry McNamara, a partner at Great Oaks Venture Capital, shared his perspective on the future of the DTC category, around saturation, expected scale and veering off of the internet’s crowded toll roads: Facebook and Instagram.
Location data is no longer limited to geo-fencing, which typically triggers a text or app notification when a person enters a street or store.
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. After launching in 2014, last year Parachute raised $30 million in venture capital to open 20 stores by 2020. Right now, the company now has seven stores in Los Angeles, San Francisco, Portland, New York, Chicago and Dallas.
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