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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.
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.
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.
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.
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.
The business landscape was upended overnight when a virus wreaked havoc on the world. Now, digitally native brands are trying to figure out how to operate in this new landscape. In this report, Modern Retail details all the shifts that occurred over the last year.
For years, speciality coffee has been dominated by young, millennial-friendly brands. Now, established roasters who've relied on wholesale distribution for decades are entering the DTC coffee space. Case in point: 44-year-old coffee and tea maker America’s Best Beverage, which just launched Cloudburst Coffee, a line of DTC cold brew. CEO Hovik Azadkhanian says the company has experience and the resources to compete with the likes of Blue Bottle and La Colombe.
Despite their affinity for shirking traditional retail practices, there's one that direct-to-consumer brands can't shake off entirely: the belief that the customer is always right. Or, more commonly, DTC startups like to follow in the footsteps of Amazon, and declare themselves customer-obsessed. But when customers behave badly, it's often retail workers that pay the price. In order for DTC startups to truly champion diversity and inclusion, they have to train their store staff on how to handle racist or belligerent customers.
It's difficult to raise money for your startup -- and even more difficult if you're a person of color. Modern Retail spoke to multiple founders and VCs, and they described the venture capital world as insular, overly cautious and easily dismissive of big markets that cater to diverse segments they don't personally relate to. Several eventually threw in the towel on fundraising, choosing instead to bootstrap their ventures.
Public Goods, an online-only consumer packaged goods company, is making its first foray into physical retail. The startup announced on Tuesday that some of its products like shampoo, toothbrushes and facial cleanser, will now be available for purchase in select CVS stores.But Public Goods' strategy differs from that of other CPG startups in that shoppers have to buy a $59 per year membership in order to buy products from its website. So when Public Goods starts selling in CVS this week, it will be the first time that its products are available for purchase without a membership. It will be an important test for the young startup as to how receptive customers are to buying one-off products from Public Goods at a traditional retail store.
From competing with giant retailers for customer loyalty to improving the supply chain, sectors across the DTC world have been transformed by the pandemic. Five direct to consumer brand founders give their takes about the changes they anticipate when the world eventually emerges from the ongoing crisis.
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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