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The days of tossed over branded swag seem long gone, thanks to young brands making branded apparel a core part of their marketing strategy. In recent years, brands like Glossier and SoulCycle proved a community of enthusiastic fans can act as walking billboards. Now, the awareness-growing tactic is being deployed even by new companies. Now, with in-person events out the window, merch is becoming even more important to DTC startups.
Consumer packaged goods, especially those consumer mostly at home, have experienced a resurgence in interest in the past few months. Much like meal kits and alcohol, breakfast cereal lends itself to being consumed at the kitchen table rather than on the go. DTC brand Magic Spoon, which aims to reinvent the cereal category, has been an example of this demand.
There's no shortage of "last chance" sales hitting email inboxes these days, as desperate retailers like Gap and Macy's are trying to squeeze some much-needed revenue out of shoppers. But that also makes it harder for younger startups to grab customers' attention, when every retail company in the world is trying to email them. So, some startups are turning to text message instead to promote sales or key events. Thinx, used text messaging to promote its 30% off sale in August, while Lensabl is encouraging customers to get their first-time discount via text message instead of email.
In March, the fundraising environment for direct-to-consumer startups was "downright frozen," as Michael Duda, managing partner at hybrid accelerator agency and venture capital fund Bullish, put it. Now, March seems like a lifetime ago. Over the past six months, many direct-to-consumer startups in categories ranging from home improvement, health and wellness, and food have struck it big, reporting that their online sales have doubled or tripled while customer acquisition costs have decreased. Consumer investors are starting to close deals again, while investors that had previously soured on DTC startups because of high customer acquisition costs are starting to change their tune.
The arrival of the pandemic made buying prescription eyewear even more of a nuisance. Not only were many optometry locations shut down, but many Americans also lost their jobs and health insurance in the process. This helped DTC eyewear seller Zenni grow its sales and new customer acquisition in record numbers.
Since launching in 2017, Gravity Products, the parent company behind the weighted Gravity Blankets, has quickly diversified its reach beyond its own website, selling its products through a handful of other retailers' stores and websites.Now, the company is announcing its biggest brick and mortar partnership to-date. This week, Gravity will start selling in 900 Target stores, and through the big-box retailers' website. As Gravity has added more wholesale partners, it has also sought to expand its product line to ensure it offers something unique to each wholesale partner.
While some direct-to-consumer startups have reported that their online sales have tripled or doubled since the start of the pandemic, not every retail company is benefitting from the e-commerce gold rush. In March and April, demand for certain products like travel accessories and wedding attire all but evaporated as those activities became impossible to do under stay-at-home orders. So companies that sell these types of products are doing something they swore they never would before: offer a sale.
A number of direct-to-consumer startups have reported huge revenue growth during over the past several months, in some cases acquiring double or triple the amount of new customers that they did during the same period last year. Now, their focus is on keeping those new customers. Even though retention is important for DTC startups year-round, it is especially so during the pandemic, as more customers are buying certain types of products online for the first time.
Despite their ability to reach more customers virtually, digital pop ups have proven to be a challenge for many brands during the Covid-19 era. For companies that rely on sampling and discoverability, this is a time to think outside the box and move away from livestreams. In the case of CBD beverage brand Recess, CEO Ben Witte told Modern Retail the idea is to make virtual popups more profitable as the brand expands markets.
The direct-to-consumer health space has quickly become a hot area for investment, particularly as wellness is top-of-mind for people thanks to the coronavirus pandemic. On Monday, Bloomberg reported that German pharmaceutical company Bayer is acquiring a majority stake in vitamin and supplement startup Care/of. Health and wellness is a popular space for investment because increasingly, that's where people are spending their money. But even DTC startups that don't operate in the health and wellness space can take a page or two from Care/of's playbook.
Direct-to-consumer startups are, unsurprisingly, turning to one another to navigate their business' through the coronavirus pandemic. Partnerships between direct-to-consumer startups were already becoming more popular before the coronavirus pandemic. But more startups have been turning to partnerships in recent months in order to reach new customers while other marketing tactics like physical pop-ups remain out of the question. It's also a way for startups to test out new product categories, while resources remain tight.
All big-box retailers are now trying to become tech companies. That's the takeaway from the news that Walmart is teaming up with Microsoft to submit a bid to acquire TikTok. Acquiring TikTok could help Walmart grow its advertising business astronomically -- and that could be a boon for e-commerce startups looking for somewhere else to spend their money besides the Facebook-Google duopoly.
Nike is cutting ties with some mid-sized wholesale partners. While the move isn't shocking, it brings to light the brand's overall intention to focus on DTC channels. With department stores on the decline, brands like Nike want to focus on getting customers to its own properties. The question remains whether other brands will follow suit.
The weighted blanket brand Bearaby is one brand that's benefitted from the collective stress and lack of sleep among consumers. It has become a bestseller in its category and recently expanded a long term partnership with West Elm. Founder Kathrin Hamm talked to Modern Retail about increasingly tweaking the supply chain and why having a beautiful Instagram feed isn't enough to sustain a company.
TikTok's future in the U.S is unclear, after TikTok announced it plans to sue the Trump Administration over an executive order from early August that had ordered Byte Dance to sell TikTok within 45 days, or the app would be banned in the U.S. But that hasn't stopped direct-to-consumer startups, who are hungry to find alternatives to Facebook, from trying to acquire new customers through the platform.
Seventy-three percent of shoppers now use multiple channels to research and shop before making a purchase. And 90 percent expect consistent interactions across all of those channels.
Party City’s annual October Halloween pop ups have been scaled back by about 90% this year. It also plans to hired 20% fewer seasonal workers. The party supply chain's decision, which counts on the holiday's sales for 20% of its annual revenue, could signal a similar fate for other seasonal pop-ups this year.
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