The direct-to-consumer model continues to evolve, and companies with a DTC presence are currently facing various challenges. From rising marketing costs, to mastering new digital platforms, to navigating the complexities of wholesale distribution.
From October 16 through October 18, a number of e-commerce executives and experts came together at Modern Retail’s DTC Summit in Naples, Fla. Some of the biggest topics included reducing marketing costs and navigating retail partnerships, especially with big-box stores. Moreover, more retail startups have become cognizant of the need to grow profitably — especially in this climate, when capital is hard to come by.
Below are the key takeaways from the event.
By now, it’s no secret that young brands are trying to optimize their marketing spend by leaning more into organic customer acquisition.
As Nadya Okamoto, co-founder of August period care brand said, sometimes user generated content is the cheapest and quickest way to raise brand awareness. When August launched in June 2021, Okamoto said she was not on TikTok at all — she created and grew a personal account to help spread the word about what would become “the TikTok tampon brand.” At that point, August had raised $2 million in funding, and there was pressure to generate buzz early on. With TikTok being less polished than Instagram, Okamoto said getting on TikTok was a way to reach Gen Z by candidly speaking about periods. Okamoto currently has over 4 million followers on TikTok and 224,000 on Instagram; August’s social accounts have about half a million followers across social media.
“We got our CAC under $5 in the first six months of business,” Okamoto said. This was done by testing hundreds of TikTok posts and focusing on retargeting, as opposed to prospecting. “We needed to figure out how to go viral multiple times a day,” she said. “So for six months, I personally posted 80 to 100 videos a day.” While going viral on TikTok isn’t as easy today as it was even two years ago, Okamoto said Gen Z audiences are more receptive to off-the-cuff content featuring taboo topics like periods. “To this day, I still post content to see what works and what doesn’t.”
Similarly, ready-to-drink spirits brand Spritz Society leans heavily on content creation to build buzz around its latest flavor collaborations. As an influencer-led company, co-founder and CEO Ben Soffer said much of Spritz Society’s customer acquisition efforts revolve around his own social media following, as well as tapping the audiences of other influencers. Recently Spritz Society collaborated with The Skinny Confidential on a pink lemonade spritz. With millions of collective followers, Soffer said this approach has helped Spritz Society sell out of products and attract retailers’ attention. “This gets retailers excited about a new flavor, having seen its success on e-commerce,” he said.
For many bootstrapped companies, spending thousands of dollars on testing paid campaigns is no longer viable. As such, marketers are thinking of ways to market in profitable ways – whether it be working with small and medium-sized influencers, or teaching marketing team members to keep profitability in mind. For example, meat delivery service ButcherBox has been building its affiliate marketing program since day one – helping it stay profitable since launching in 2015. ButcherBox CMO Kiran Smith said the company has maintained many of these creator relationships; It also continues to find success in working with influencers who can authentically promote the brand’s meat delivery service and how to incorporate it into their cooking.
On the internal side, True Classics marketing director Paige Decker said drilling profitability goals into day-to-day operations is key to a healthy marketing playbook. For the young clothing brand, founded in 2019, this means training marketing employees to create cost-effective campaigns by understanding revenue and profit margins.
For brands founded in the golden era of direct-to-consumer, the focus has turned to creating longevity. As the competition for customers’ attention becomes more fierce, creating loyal brand fans is getting more difficult. This is especially true In fashion and apparel, where brands compete not only with other digitally-native brands – but the resources and footprint of legacy retailers.
However, some seasoned DTC executives argue that paid marketing isn’t the only way to grow brands. For instance, for accessories brand Dagne Dover, retention comes down to designing functional products that keep customers coming back.
Dagne Dover co-founder and CEO Melissa Mash said “our customers keep purchasing from us because we’re solving everyday problems.” Mash explained that simple design decisions like the right strap length, while seemingly obvious, resonate with repeat shoppers.
Listening to customers’ needs is another critical tactic for growing a loyal customer base. Aman Advani, co-founder and CEO of Ministry of Supply, said the company has learned about what customers want simply by having the founders talking to them directly.
This began during the pandemic, when Advani began having calls with five customers a day to ask what they think of the brand’s designs. “That’s how we find out that our customers really want a 33-inch waist, for example,” he said. To this day, Advani and Ministry of Supply co-founder Gihan Amarasiriwardena try to keep up with this practice to get direct feedback from customers.
Physical retail and wholesale woes
“Everyday it feels like another retail partner goes down in flames, it’s almost a full time job monitoring that world.”
“I can’t imagine how anyone launches in wholesale profitably at the start – between the distributors and promos, it seems impossible.”
“You need to be constantly fighting to get paid – right now I’m claiming invoices from 2021.”
“Short-term pop-ups are probably not going to make you money.”
“Give the real estate market a little longer, and you might be able to get a better opportunity for better rates.”
Figuring out the influencer/content creation equation
“We work with great influencers but we can’t get them to use their referral links.”
“We do a ton of influencers but not affiliates — we had a program but it was a huge pain in the butt.”
“You need to work with an agency that represents an influencer and make sure the influencer matches your brand — especially if you’re in the luxury space.”
“My question is about making content at scale because you need so much to test without it being an ad — what is in line with your customer.”
Finding the right marketing mix
“We struggle a little bit with prioritizing upper funnel because awareness isn’t always quantifiable and isn’t something you can always measure to the bottom line. We’re constantly juggling resources… and we tend to be more bottom funnel.”
“[TV] became more of a burden than an asset… we switched all that money to direct mail.”
“I would recommend [TV] from a PR perspective — it does help to galvanize and inspire middle America where at least I don’t have huge penetration.”
“We’re really focused on profitability right now, and [Meta is] just not a profitable channel for us right now.”
All eyes on TikTok
“We just can’t track TikTok ads the same way as other social networks.”
“I haven’t seen great results from the [TikTok] ads side, but more so the influencer side.”
“It’s a lot of time and effort to find and work with creators on TikTok Shop — on the operations side it’s a mess because there’s no integration with Shopify.”
Dagne Dover’s year-over-year growth since launching in 2013. The company has kept its wholesale presence minimal, selling through strategic partners like Equinox and Nordstrom.
Percentage of customers purchased Spritz Society for the first time when the Skinny Confidential collaboration dropped.
Number of top customers that Ministry of Supply reaches out to every day for one-on-one feedback.