Member Exclusive   //   June 4, 2024

DTC Briefing: Brands adjust to conflicting consumer signals heading into summer

This is the latest installment of the DTC Briefing, a weekly Modern Retail+ column about the biggest challenges and trends facing the volatile direct-to-consumer startup world. More from the series →

Operating a consumer startup in 2024 means trying to adjust quickly to multiple, conflicting signals about the state of the consumer. 

The majority of Americans think that their own finances are OK, but less than a quarter think that the national economy as a whole is doing well. Retail sales were flat in April, suggesting that people are pulling back on spending, but then a record number of Americans booked flights for Memorial Day weekend.

In turn, the state of direct-to-consumer startups is a mixed bag right now. Executives report seeing sales up in some categories but down in others, and it can be difficult to see where the through line is. Now, heading into summer, DTC startups are adjusting. 

Summer is typically a slower sales period for many brands, as it lacks a big sales event like Black Friday. In turn, the brands themselves have a bigger onus to figure out how to drum up excitement during the summer months. It’s even more critical this summer when customers are pickier than they have been in recent memory.

For some, that means they are running more promotions, albeit trying to keep them to a slim selection of products rather than extensive site-wide sales. Brands are also focused on figuring out what it will take to get customers to buy now. This can be accomplished through more curated drops and by more closely tying marketing messaging to what people are actually doing this summer. 

Essentially, the focus for many founders and marketers is: What does it take to get a shopper to buy from our brand, right now, instead of going to another competitor (or simply not buying at all)?

Aaron Luo, co-founder and CEO of bag brand Caraa, said he feels like the sentiment among fellow CEOs is that “it’s been a rough first two quarters.”

He admitted that there’s been a “slowdown” in Caraa’s business, although he did not share specifics. He said that sales for Caraa’s travel bags remain strong, while sales are down among Caraa’s more fashion-focused products. 

“People are just going out less — or if they’re going out, it’s more in a casual setting,” he said. 

Luo isn’t too worried about any slowdown in consumer spending because Caraa isn’t a venture-backed business and much of the brand’s inventory is evergreen. Still, this Memorial Day weekend, Caraa decided to do something different: it offered 30% off on slings. Historically, the brand hasn’t always offered promotions around Memorial Day. But, Luo said, he felt Caraa was “leaving money on the table” if the brand didn’t do a sale because consumers have come to expect it. 

So Caraa decided to offer a discount on one product — one that it felt would be in high demand over Memorial Day weekend. 

“We were very targeted, very specific, in terms of, hey, here’s a product where we think customers can use for when they start traveling in the summer,” Luo said. 

Luo isn’t alone. All the executives interviewed for this article expressed similar sentiments. Five years ago, many direct-to-consumer brands built their reputations on never or rarely offering discounts. Yet now, as consumers become more price-sensitive, more executives say they are seeing shoppers wait to make purchases during periods in which they know there will be sales. It’s not just during Black Friday, but also during second-tier sales periods like Presidents’ Day and Memorial Day.

More reported participation in these sales periods, especially during the summer. Home goods brand Italic hosted its first-ever sale during Memorial Day, offering 25% off all full-price items. The company’s head of growth, Avi Arora, said sales were up more than 100% year-over-year compared to last Memorial Day.

Arora said that Italic has noticed shifting shopping behaviors so far this year. Shoppers’ behavior appears to be bifurcated. It is harder to get customers to buy during evergreen periods. But when there is a “moment” — that is, when there is a new product launch or a sale — sales are up compared to that same “moment” last year. What that tells Italic, Arora said, is that customers are waiting to buy – and, that they need more coaxing and education during these evergreen moments. 

It also means that Italic is trying to create more of these “moments” to convince customers to buy right now. And that doesn’t always mean running a sale. For example, Italic is moving up some product launches to create more of these “moments.” It will have around three product launches this June. Italic will also be doing more marketing this summer centering its jewelry collection as ideal for summer wedding season.

Still, it’s a balancing act. 

“The whole mission of the brand is luxury without labels and we’re not overcharging for our products,” Arora said. As such, Italic tries to not lean too much into promotions and instead is focused on “creating our own moments around either new products or restocks,” he added. 

How successfully a brand navigates this challenging period depends not just on its marketing and promotional period but also on how it manages some of the other fundamentals of retail, like inventory buys. 

Maria Costa, director of brand and integrated marketing at M.M.LaFleur, said that she’s still noticing “price sensitivity” among the women’s apparel brand’s customers this year. 

While “we’re definitely seeing these behaviors, they’re a bit more aligned to a more typical retail calendar, at least for our customers,” Costa said. “She’s expecting a sale around Presidents’ Day, she’s expecting a sale that hits on Memorial Day, and we’re not going to fight that.”

But this year, she said, M.M.LaFleur has improved on one key metric: year-over-year increase in full-price sales. 

She attributes that to the brand being more strategic about its buys for its seasonal collections, which it typically drops once every month. This year, she said that M.M.LaFleur has been doing smaller buys for these collections. That actually creates a greater sense of urgency for customers, Costa said. 

“We were hearing from our customers who suddenly jumped back online like two weeks after the collection dropped and realized that a style they had maybe been mulling over had filled out completely in their size,” Costa said.

This signals to Costa that M.M.LaFleur customers have been spending more mulling over a purchase. She attributes that a bit to decision fatigue – that is, customers are having a challenging time figuring out when and where to buy from. 

“How many times do you leave something in your cart, because you’re like, ah, I’m just going to come back and make a decision on that later?” Costa said. In turn, she said, M.M.LaFleur is focused on “finding these opportunities” to tackle that decision fatigue. 

Outdoor Voices finds a buyer: Consortium Brand Partners 

After closing all of its stores in March and laying off the majority of its staff, Outdoor Voices has a new owner. 

Private equity firm Consortium Brand Partners announced on Monday that it had acquired the athleisure brand Outdoor Voices. The terms of the deal were not disclosed. In addition to Outdoor Voices, Consortium Brand Partners also has a majority stake in Reese Witherspoon-founded lifestyle brand Draper James. 

Cory Baker, founder and managing partner at Consortium Brand Partners, said that the firm Partners was introduced to Outdoor Voices through a banker in mid-March. What made Consortium Brand Partners interested in the company, he said, was the fact that “Outdoor Voices was much more about the community and the experience of the outdoors” compared to other athleisure brands. “That, to us, is very trend-resistant,” Baker added.

Additionally, he said that “the [Outdoor Voices] customer was continuously purchasing through all of their financial challenges.” Baker declined to share concrete sales data. But essentially, he said that even though Outdoor Voices was getting pilloried in the press, customers were still buying from the brand.

Baker said that Consortium Brand Partners spoke to Outdoor Voices customers and looked at online engagement, and found that even during this tumultuous period, “customers went online – they bought product, they bought more product.” Now, during this period, Outdoor Voices did offer some steep promotions, like advertising up to 50% off the week of Memorial Day. But, Baker said, the targeted browsing behavior of these customers — searching to see what various styles were available in their size — indicated to Consortium Brand Partners that Outdoor Voices still had engaged customers. And, that they still wanted more products from the brand.

Outdoor Voices president Katie Siano will stay on to lead the brand. Founder chairwoman Ashley Merrill, who invested in the brand back in 2020 with the goal of bringing founder Ty Haney back in some capacity, has exited. 

Going forward, Baker said Consortium Brand Partners is hoping to help Outdoor Voices expand into more categories like swim. He said the team would look into opening new Outdoor Voices stores, probably in 2025, but all of the recently-shuttered stores will remain closed. He said prior leadership signed “leases that were too expensive, [and] holding the company back from growth,” but he believes there is potential for Outdoor Voices in brick-and-mortar. 

Ultimately, Baker said, the Outdoor Voices customer is still there “They just haven’t been spoken to for a while.” 

What I’m reading

  • Shein is close to submitting a confidential filing to go public on the London Stock Exchange, the Information reported. 
  • Birkenstock continues to show solid performance on the public markets, reporting that sales were up 22% year over year during its second-quarter earnings last week. 
  • Shopify is going to stop using the Shopify Plus branding, according to a memo obtained by Business Insider. 

What we’ve covered 

  • How brands like Grove Collaborative, Oats Overnight and Portland Leather Goods are building out Facebook groups for their customers. 
  • With its first pop-up, TikTok-famous Halara is betting on brick-and-mortar retail. 
  • More startups like Cariuma and Caftari are building out corporate gifting program.