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.
"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.
2020 was the year East Fork ceramics planned to become profitable. Now, that's likely no longer on the table, but the company is using a new model to better handle its balance sheet: pre-sales. Now, new product lines will all be for sale before they're manufactured, as a way to get capital in as early as possible.
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.
Longevity in the coming year will require “re-imagining at home consumption,” said COO Brian Smith, with restaurants and hospitality down at the moment. Here are some takeaways about how the wine brand has strategized in this current economic climate.
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.
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.
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.
Right now, direct-to-consumer startups have to hope for the best but prepare for the worst, and nowhere is that more evident than within their brick-and-mortar divisions. Most of the executives I spoke with this week said that they don't anticipate being able to re-open their stores until the summer. "I think people are preparing models [in which stores] will open as early as July and as late as October," said Logan Langberg, principal at Imaginary Ventures, which has invested in Camp and Everlane. But it's absolutely critical that when stores re-open, DTC brands are ready.
This quarantine period could prove to be a winning factor in the virtual fitness category. Startups in the space, including Mirror, Tonal among others, are doubling down on the timely trend by introducing new digital products.
For DTC brands, this was the year to reach profitability and expand beyond online. Now, no one can go outside and most sales have plummeted. This changes the strategy, especially for companies that pinned growth on new retail opportunities. How to proceed, however, is unclear.
At Modern Retail's first Plus Talks, WellPath CEO Colin Darretta talked about how he's retooled his DTC wellness brand. He provided tips and insights about how to prepare a supply chain during a global downturn, as well as the business trends he's looking toward.
A month ago, I was talking to the founder of a one-year-old direct-to-consumer startup who was out fundraising. The founder told me it was a weird time to be fundraising. The coronavirus outbreak was just starting in the U.S, and some investors were already starting to get hesitant about deploying capital. Additionally, many of the investors the founder was meeting with were looking for companies that could display a surefire path to profitability, but without sacrificing high growth rates. In the month since then, things have only gotten weirder. Months ago, steps that were being billed as smart and necessary in order for an e-commerce company to become profitable, like expanding wholesale partnerships and opening their retail stores, have now turned into logistical nightmares as most stores remain closed.
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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