DTC Briefing: Startups were tasked with proving their worth to customers in 2024

That didn’t quite prove to be the case. For many DTC startups, 2024 was another ho-hum year. 

The Federal Reserve didn’t cut interest rates until September, and inflation remained stubbornly high. Thus, the defining theme of 2024 was that startups had to prove their worth to customers.

Chalk it up to inflation or the fact that customers have grown more skeptical of buying based on Instagram ads, but the persistent theme I heard from CEOs in 2024 was that customers were taking longer to buy. For some startups, that meant they reported another near-flat sales year, as they didn’t convert as many new customers as they hoped. The brands that did find success successfully adapted to this new consumer journey and took more time to explain to customers exactly what makes their products different — all while making sure they still hand sound unit economics. 

“If 2023 was the year of profitability, 2024 was the year of proving viability,” Mike Duda, managing partner at Bullish told me.

Zooming out, consumers were still spending plenty in 2024. According to the U.S. Census Bureau, e-commerce sales in the third quarter were up 7.4% year over year, outpacing total retail sales growth. In theory, that should benefit DTC startups. 

This spending, however, flowed into businesses disproportionately. Data from one firm showed that on Black Friday, sales increased at Shein, Temu, Walmart and Amazon, while they fell at Target and Best Buy. And even though they continued to spend, consumers were under more strain and racked up a record $1.14 trillion in credit card debt by August.

On the public markets, some startups like Warby Parker and Hims saw the consumer environment continue to improve as the year went on, raising their full-year outlooks as they projected double-digit sales growth. But by and large, it’s been a rough few quarters for publicly traded DTC startups. Figs and Bark are projecting near-flat sales for their full fiscal years, while Brilliant Earth and Solo Stove have reported double-digit sales declines in the past few quarters.

On the private side, this discrepancy played out in subtle ways as executives found creative ways to avoid admitting that their businesses had a rough year. Some executives I spoke with over the course of the year said that they noticed more customers were waiting until big sales days like Memorial Day or Prime Day to shop. Others noticed that customers were taking longer to buy after first viewing an ad. 

Aaron Luo, co-founder and CEO of bag brand Caraa, has a theory that consumers are taking longer to buy because they have access to more information than ever before. He divides the trajectory of modern consumer startups into two eras: pre-Covid — when customers clamored over startups like Away and Casper because they released a pretty-looking, digitally native version of a consumer staple — and post-Covid, when shoppers were spending a lot more time online, had more time to research and, perhaps, had been previously burned by a hot DTC startup. 

This is exhibited, Luo said, by the fact that inbound engagement with Caraa’s social media and its customer service team has gone up since 2019. Before 2019, Luo said, the customer journey was pretty straightforward — someone might discover Caraa after reading about the brand in Vogue or another publication. Then, they would Google the brand. After that, they would likely spend no more than three minutes on the site before hitting purchase. 

Luo notes that the first big spike Caraa saw in social media and customer service engagement happened during Covid. He attributed this to people having more time on their hands and buying more items online. As a result, they were interacting more with social media posts or asking the customer service team more questions.

But there’s also been a change in the types of questions people have been asking, particularly over the past year. Previously, he said, Caraa customers seemed to use customer service mostly for practical questions about their order; wanting to know where their order was, what was their tracking number or how to get a refund. 

“In 2023 — and especially in 2024 — I think engagement is more around ‘Hey, can you tell me a little bit more about your products?’” Luo said. “Or, ‘Hey, I’m a first-time mom, and I travel a ton — how light is your bag, or does it fit my laptop?” It’s a lot more product-specific question. He said engagement with Caraa’s customer service team was up 18% during the third quarter. 

In turn, Caraa has spent a lot of time recently rethinking the customer journey and ensuring that “we’re really giving [the customer] all the right touchpoints along that particular journey.” Heading into 2025, Luo said, Caraa will begin experimenting with new tactics, though he declined to say yet exactly what those were. “I think we’re going to take a deeper look at discounts,” he said, potentially to convert more first-time customers.

Duda of Bullish said that amid a conflicting consumer environment, a handful of his portfolio companies spent more time in 2024 focusing on getting as many first-time customers as possible to purchase from the brand a second time. 

“All of them increased their AOV, and DTC was a big part of that.” While he said that 2024 “maybe wasn’t a growth year,” he thinks that 2024 was a year of stability for brands that learned how to use their DTC channel wisely and focused on building a relationship with first-time customers to guide them to their second purchase. 

The goal for brands this year, he said, has been to “show that you have a consistent base of consumers to grow from, not a leaky bucket.”

How that base of consumers will be acting going into the new year remains an ongoing question. Inflation is still an issue, but “business excessiveness is starting to come back,” Duda said, based on stock market gains and the money investors are pouring into some startups, like seed-stage AI businesses. 

Still, President-elect Donald Trump’s obsession with tariffs could also further dent consumer spending. 

In turn, Luo said Caraa is trying to remain flexible heading into 2025. While some departments, like design and production, have to make decisions a year in advance, he’s trying not to plan out marketing or sales more than six months in advance. 

“2025 I feel like is going to be a tough year,” he said. “We’re entering a different era, and you can’t really compare [that] with what has happened in the past.” 

What I’m reading

• L Catterton’s Nikhil Thukral spoke with the Business of Fashion about what types of companies he’s interested in backing these days. 
• Brand management firm WHP Global, which also owns brands like Bonobos and Rag & Bone, has acquired the IP of the Vera Wang brand. 
• The Illinois Department of Labor is asking Outfox Hospitality – the new entity that has relaunched Foxtrot – for more than $3.8 million in back wages after failing to give 60 days notice before laying off all employees.

What we’ve covered

• How using social media to show “the good, the bad, the ugly” of building a business helped Mid-Day Squares reach $30 million in revenue. 
• Shopify’s VP of product, Carl Rivera, spoke with Modern Retail about how it’s upgrading the checkout experience to attract more enterprise customers.
• Two years after the nationwide formula shortage, startups like Bobbie and ByHeart have made gains in retail shelf space – but innovation in the category remains difficult.