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Many direct-to-consumer brands have long held off on selling through Amazon. But they can't completely ignore its orbit, as Amazon still sets the conversation in e-commerce. There's a laundry list of DTC brands that have still held off on selling through Amazon -- Glossier, Warby Parker, Allbirds and Away to name a few. But, a few trends emerge among the digitally-native brands that have taken the leap to selling through Amazon.
Pattern, formerly known as Gin Lane, arguably helped create the ubiquitous minimalist DTC aesthetic. But after helping brands like Sweetgreen, Harry’s and Everlane achieve their branding goals, chief creative officer Emmett Shine explains why he's taking a step back and rethinking the model's tropes. "At the end of the day, you have to sell products," he told Modern Retail.
In the direct to consumer space, a foray into retail usually requires getting noticed by big players like Walmart and Target. However, for a select group of home decor-centric brands, Williams-Sonoma-owned West Elm has become a resource for entering brick and mortar. From Leesa and Bearaby, to new cookware brands like Caraway, West Elm's portfolio of brands is looking increasingly like a DNVB hub.
In conversations with a handful of direct-to-consumer startup executives about their holiday marketing plans, the biggest concern cited was figuring out when was the right time to run holiday ads. Both to ensure that customers order far enough in advance so that they get their products by Christmas, and to ensure that they are spending their holiday marketing dollars most efficiently. The executives Modern Retail spoke with said that for the most part, they weren't that concerned about rising digital advertising costs, either because they've been able to further diversify their ad spend away from digital this year, or customer acquisition costs are still lower than they are last year.
As Walmart+ gains momentum, so does the retailer's mission to double down on its DTC offerings. Specifically, the retail giant has been busy signing on digitally-native sexual wellness brands like Lola and Modern Fertility as partners in recent months. The burgeoning program allows DTC brands to reach millions of new customers physically, while the retail chain adds disruptive new brand offerings to its portfolio that target new and younger demographics.
As online sales soar, it's also been a boon for the companies interested in providing funding to these e-commerce businesses. Toronto-based Clearbanc said it's invested more than $1 billion into 3,300 companies, up from roughly 2,000 at the end of last year. Shopify, which has an alternative lending arm called Shopify Capital, reported that it doled out $153 million in financing to e-commerce businesses in the U.S, U.K. and Canada during its second quarter, a 65% increase from the same period last year. As studies project that e-commerce will continue to make up a growing portion of total retail sales even after the pandemic ends, these alternative lenders are betting that the amount of funding e-commerce businesses will need will also only grow.
Despite experiencing record e-commerce sales during the coronavirus, DTC CEOs are trying to prepare for how to handle some worst-case scenarios over the holidays. Specifically, fears over shipping delays and how to compete with deep discounts are keeping them up at night. As they've had to do throughout the coronavirus outbreak, they're trying to figure out what unexpected scenarios to plan for.
As flu season begins and with it possibly a second coronavirus wave, consumers appear more concerned over health and safety than ever. Before, home essentials were in high demand. Now, it's nicer products focused on health and sanitation. Startups like air purifiers maker Molekule, DTC bidet Tushy and emergency kit brand Judy expect the growing interest in their products to follow suit.
Topicals, which makes products for common skin-care ailments, has been using Twitter as a way to engage with customers. Compared to Instagram, Twitter is a great way to have conversations with people. The brand has used it for education, as well as empowerment. And this strategy has led to increased sales.
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.
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.
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.
With in-person sales largely out of the picture this holiday season, brands must adapt to deliver the frictionless experiences that online consumers expect and demand.
At the same time as retailers are racing to perform ever-faster shipping times, they also appear to be upping the incentives for slow delivery. Retailers, including Amazon, Target and Macy's are all offering shoppers discounts in exchange for longer shipping times. And that split might signal a changing mindset for some retailers -- rather than focusing on speed at all costs, some are taking a more nuanced approach to logistics.
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