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.
Direct-to-consumer home goods brand Brooklinen is launching a new line of pillows this week — but it is taking a different approach than it has for past product launches.
Brooklinen will be launching a new sub-brand for the line of pillows, called Marlow. The company will launch a separate e-commerce site for Marlow, but Brooklinen’s website and stores will also still carry the line. CEO Rich Fulop said it will be an “experiment” for Brooklinen, as it is trying to figure out more efficient ways to acquire new customers while adding new products.
Brooklinen first launched with bed sheets in 2014, and now sells a host of other items for the home — ranging from loungewear to towels. According to Fulop, Brooklinen decided to launch Marlow because it believes it can more efficiently acquire new customers with a brand that speaks specifically about the benefits of one product. In many ways, it’s a return to the strategy that many DTC brands launch with: starting with one hero product in the hopes that it will build a cult following.
Brooklinen and other home goods companies are coming off a year-plus of stellar growth, as the pandemic spurred an increase in home goods sales. Fulop said that Brooklinen’s sales were up over 100% between 2019 and 2020 and that sales are still growing, albeit more slowly, this year. As this growth becomes harder to match, companies like Brooklinen are betting on new product lines to keep acquiring new customers.
Brooklinen’s playbook for Marlow
While Brooklinen has sold pillows on its site for several years, Fulop said the company thought the new Marlow line was different enough in order to warrant building an entirely new brand around it. The pillows Brooklinen carries on its website are standard down and down alternatives.
Marlow’s pillows, meanwhile, are made of memory foam. Fulop said that Brooklinen found there’s been an “extraordinary amount of search demand” for memory foam pillows over the past couple of years. The company also decided to incorporate a few of what it believes are unique properties into the Marlow line, based on customer feedback and search data. Brooklinen incorporated antimicrobial fabric into the Marlow line of pillows after that search term became more popular during the coronavirus pandemic. The pillows also contain a gel-infused memory foam that the company claims will keep the pillows cool all night long.
Brooklinen’s plan for Marlow is to test out how well these various features do at attracting new customers, and which messaging performs best in marketing materials. In order to promote the launch of Marlow, Brooklinen will be launching an out-of-home campaign on the New York City subway, as well as running digital ads, including across Facebook and Instagram.
“We are just going to focus on solving these [problems] very, very specifically with a product we are very certain has product-market fit,” Fulop said.
Fulop said that the “ever-changing” nature of Facebook and Instagram advertising was another factor that led Brooklinen to develop a whole new brand for Marlow. “You really have to prioritize what you put in front of people and make it count. With that said, it is really hard for our marketing team to say we are going to lead with pillows when acquiring new customers.”
In the months following the recent iOS14 update — which has led to rising Facebook CPMs and lower conversion rates for many DTC brands — Fulop said that Brooklinen has dedicated more ad spend to television and podcast ads. He said that Brooklinen hasn’t spent less on Facebook and Instagram ads — “we are pretty stable on a year-over-year basis in terms of spend” — but that “additional budget that we potentially would have allocated there” has instead gone to other channels.
In recent years, more consumer companies, ranging from Harry’s to Pattern Brands, have embraced the holding company approach. They’ve either acquired or launched new DTC brands that shared back-end resources like marketing, logistics and customer service across multiple brands. Brooklinen isn’t quite going that far. Fulop said, for now, there will only be a few marketing employees working full-time on Marlow. But he said that Brooklinen is looking to see if “potentially there is an opportunity to replicate this tactic” with future launches.
Home goods remain hot
Brooklinen’s new brand launch also comes at a time when home goods retailers are under pressure to match last year’s sales growth. Not only did e-commerce sales swell during the pandemic, but so did home goods sales, as people spent money they would have normally spent eating out and traveling furnishing their houses instead.
“Across the home category as a whole, this year has been strong even though many retailers lapped tough comparatives,” Neil Saunders, managing director of GlobalData Retail said in an email. “People are still diverting spend from other things, like travel, into retail which is aiding growth.”
The big challenge this year, Saunders said, is that supply chain constraints means many home goods retailers are having trouble meeting demand. But “next year will be more of a challenge in meeting demand because it is very unlikely growth can accelerate by all that much over the stellar year of 2021,” he added.
As a result, more home goods brands like Brooklinen are ramping up product expansion. Outdoor furniture has become a popular area of expansion for DTC brands like Article and Feather, while other retailers like Lowe’s are trying to expand their assortment of decor while the home is still hot.
Going into 2022, Fulop said that Brooklinen is focused on expanding its store footprint — the company is set to open a West Village location in the next few weeks — as well as growing Marlow.
“We can speak to our customers and our prospects very specifically about just [Marlow] which should be a huge advantage,” he said.
DTC exit tracker
While more DTC brands are going public this year, there aren’t as many consumer brands being acquired as there have been in years past.
That’s according to new data from PitchBook, and covered by Retail Dive. According to PitchBook, 114 DTC brands were acquired in 2020 compared to 66 so far this year. Meanwhile, 19 DTC brands have gone public this year, compared to 9 in 2020 and just 7 in 2019.
Allbirds should be one of the next DTC brands to debut on the public market, and how well it is received by Wall Street should be another important data point in whether or not other DTC brands decide to go public in 2022. On Monday, Allbirds unveiled pricing for its listing, offering 19.2 million shares ranging from $12 to $14 a share. If shares are sold at the high end of the range, that would give Allbirds a valuation of $2.2 billion — higher than its last private valuation.
What I’m reading
- After announcing that Blackstone had taken a majority stake in Spanx that valued the shapewear brand at $1.2 billion, founder Sara Blakely spoke on CNBC about the company’s future expansion plans.
- The city of Long Beach announced that it has eased rules on the number of containers that can be stacked on top of one another, in the hopes that it will ease port congestion ahead of the busy holiday season.
- Reef shut down its ghost kitchens in New York City, Business Insider reported, after city officials caught wind of the fact that the startup didn’t have the proper permits.
What we’ve covered
- DTC towel brand Weezie has built its brand on personalization — 70% of orders are embroidered — and as a result, owns its own warehouse to have more control over the personalization process. Here’s how that’s helped Weezie navigate supply chain issues.
- Shopify and Spotify are joining forces in the hopes of getting more musicians to launch their own e-commerce sites.
- PayPal was reportedly considering acquiring Pinterest — here’s how the two companies’ e-commerce ambitions line up.