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. To receive it in your inbox every week, sign up here.
Startups that launched within the past year have had to rethink their customer acquisition strategies — and many of them have found a new social app of choice.
The marketing tactics that helped usher in a crop of direct-to-consumer juggernauts like Warby Parker and Casper no longer work for today’s DTC brands. Privacy-related changes — namely from Apple’s iOS14 update — are largely to blame for that, as targeting customers through digital channels like Facebook has become much less effective.
As a result, direct-to-consumer startups that launched within the past year are no longer dedicating 80% of their budget solely to Facebook, as startups like Bombas and Floyd have done. In speaking with startups that launched within the past year or two, one sentiment I’ve heard expressed over and over again is that TikTok has increasingly become their go-to place to find new customers. Young brands often first start by posting a bunch of videos and figuring out what type of organic content is most likely to succeed on TikTok, and then putting paid spend to promote the videos on TikTok — whether that’s on TikTok, or through other digital platforms.
The big question though is just how long brands can make TikTok work. While brands are finding success on TikTok, the platform is only likely to get more crowded with more brands attempting to edge their way into a trending video format. In year two, many of these founders say that their focus will increasingly shift to retaining and re-engaging some of the customers they initially acquired through TikTok, as well as looking to retail distribution and partnerships for scale.
TikTok isn’t quite the new Facebook in the sense that startups are spending 80% of their marketing budget there. But it is the place where new startups are going to make a name for themselves.
Take Wonder Monday, a keto-friendly cheesecake brand that launched in January of 2021, though the company had to press pause for a few months while it found a new manufacturer. Candace Wu said that she and her co-founder, Jonathan Weinstein, had experience running digital ads prior to launching Wonder Monday (the two previously worked on a newsletter startup called Letterloop) and could see the cost of advertising on channels like Facebook rising even prior to launching Wonder Monday.
So, the two decided quickly after launching that they didn’t want to put all of their eggs in one basket — TikTok was continuing to gain traction around the time that they launched, so they decided to experiment first with figuring out what type of content was best suited for TikTok. Now, Wu said, Wonder Monday dedicates roughly 50% of its advertising budget toward TikTok, while the other half goes toward both Google and Facebook.
Wu advises brands to approach TikTok like they are hosting their own TV show — with a few commercials or more call-to-action buttons, promoting the product.
“Not every video you are making is about promoting your product — you are basically storytelling, getting people excited,” Wu said. “You want your content to be like educational, informative, and then you have a few every sprinkled throughout… different TikToks that actually convert people into buying your product.”
Similary, August — a period care brand that sells pads and tampons online — went straight to TikTok when it first launched last June, co-founder Nadya Okamoto told Modern Retail. The company launched its TikTok channel within a month of launching, and quickly went viral on the app – to the point where, Okamoto said, she realized quickly realized the company didn’t have to put as much paid spend behind TikTok as they were initially anticipating.
“Until this month, we really didn’t spend over $10,000 a month on paid [advertising] Omakoto said.
Okamoto said she first turned to TikTok to build brand awareness for August simply because that’s where all of her friends were spending time. On TikTok, Okamoto said trying a bunch of formats and seeing what sticks is key. She said that when she first launched August’s TikTok account, she was creating around 50 to 100 TIkToks a day; now, she estimates it’s about 30.
Okamoto herself has around 3.2 million followers on TikTok, while August the brand has around 220,000. Okamoto said that while August now puts a few thousand dollars a month behind TikTok, her company primarily uses Google ads to retarget people who discover August on TikTok, and subsequently search for the brand. In the second year of building her business, Okamoto said a large focus will be on retargeting people who discovered August on TikTok.
“One of the best things about TikTok is that it’s helped us build a strong email and SMS list,” Okamoto said. “So I’m excited to keep building our organic social channels, but really optimize how we stay in touch with people via email and SMS.”
Supplementing TikTok with partnerships and events
Today’s crop of direct-to-consumer startups also don’t want to rely solely on one app or platform to build brand awareness. As such, many brands are also turning to avenues beyond their own website to promote their products.
Wonder Monday’s Wu said that another big focus for her company is pursuing partnerships with other brands or online marketplaces, to ensure that her company’s products are being discovered in more places. Wu previously worked as a product manager for WW (formerly known as Weight Watchers), so Wonder Monday’s cheesecakes are carried on WW’s online shop, alongside other WW friendly products.
Wu said that Wonder Monday has also frequently done Instagram giveaways, or partnerships with other brands in the form of recipe collaborations that are emailed out to both brands’ respective customers.
“We only partner with brands that have the same mission, values, and ingredient quality as we do,” Wu said.
Meanwhile Gefen Skolnick, founder of Couplet Coffee, said that she first tried to build a following for her coffee brand by hosting queer art show and poetry nights in Los Angeles. The goal was to first build a following among a community, to see how much traction Couplet could get, before she launched Couplet’s Shopify site in February of this year.
“I am personally investing a lot more time, money and effort into community,” Skolnick previously told Modern Retail. “I’m taking a slightly slower [approach] but I’m kind of anchoring my brand in something.” As a result, Skolnick said the company hasn’t spent any money on paid advertising to-date.
Skolnick said that when Couplet Coffee launches paid advertising first, she’ll likely go to Google and TikTok first. But, she said her focus now is “primarily figuring out how to get the best reach most efficiently, so we’re very experimental now.”
While DTC brands may have previously relied on Facebook as their go-to channel for mass-market customers, today’s direct-to-consumer brands want to get into retail more quickly to reach the average consumer.
Couplet Coffee, for example, is available through Lotto.com’s Players Cafe, and launched in Foxtrot earlier this month.
Meanwhile in Wonder Monday’s second year of business and beyond, Wu said that she wants to explore retail opportunities.
Wu said that historically, DTC brands might have been able to “stay DTC for maybe 2-3 years and then you start to grow into Amazon or retail and start to do like collaborations and things like that. But for us I think given the climate, [we] are actually having to do those things a lot faster.”
What I’m reading
- Thingtesting has the lowdown on nine Australian direct-to-consumer startups to know.
- Insider has the scoop from an anonymous former Bolt engineer who was laid off last month, and is now on the hook for tens of thousands of dollars after taking out a loan from the one-click checkout startup to buy vested shares.
- E-commerce furniture giant Wayfair opened its first store under its AllModern brand last week in Massachusetts, with more in the works.
What we’ve covered
- Startups like Fly by Jing and Mosaic want to take over the frozen foods aisle.
- Stitch Fix last week laid off 15% of corporate staff, and revealed that its active client number dropped 5% year-over-year during its fiscal third quarter earnings as demand for styling services continues to wane.
- Crochet startup The Wobbles sends customers a video tutorial with each of its crocheting kits to drive engagement; so far the company has sold over 150,000 kits two years after launching.