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.
In order to increase revenue, BlendJet — a startup that sells portable blenders — is increasingly selling products from other companies.
Last year, BlendJet added a marketplace section to its website that features protein powders and frozen fruit packets from other companies, in addition to some of its own accessories. According to CEO Ryan Pamplin, BlendJet wanted to launch a marketplace because the company increasingly realized that people wanted to buy food and ingredients they could use alongside their BlendJets, but that it wouldn’t be feasible to “make every ingredient in the world.”
Today, the marketplace is a “multi-million dollar” a year business, according to Pamplin — which is still a drop in the bucket, given that BlendJet is a nine-figure business. But BlendJet’s strategy is one that’s increasingly being adopted by direct-to-consumer startups as customer acquisition costs rise. Brooklinen, for example, has had a marketplace since 2019 that features home decor and accessories. Smaller startups want more stable and cheaper ways to get in front of new customers, while larger startups are looking for lower-lift ways to drive up average order value, and get more data on what their customers are interested in as their businesses get bigger.
Today, BlendJet is selling products from roughly 10 brands through its marketplace. Pamplin said that the next brand BlendJet will start carrying on its marketplace is Happy Viking, a plant-based food company from Venus Williams.
BlendJet uses a cross-selling app called Carro to manage the marketplace; startups have to be on Shopify in order for BlendJet to feature their products on its website. When a customer places an order for, say, Soylent powder through BlendJet, Soylent fulfills the order, but BlendJet handles all customer communication and receives payment from the customer. In general, Pamplin said that Carro takes a 5% cut of each transaction, but that BlendJet works out a revenue share agreement with each startup that sells through its marketplace. Carro, meanwhile also charges the companies who use its services to launch their own marketplaces a monthly fee; Pamplin said that BlendJet pays Carro $1,000 per month.
Pamplin said that BlendJet sources products for its marketplace in a few different ways. Carro connected BlendJet to some of the brands that now sell through its marketplace; others were sourced from a survey sent to customers, asking them what they like to make using their BlendJets.
One of the benefits BlendJet pitches brands on its marketplace is that BlendJet can invest more time and energy promoting that brand’s products compared to other, bigger marketplaces. For example, each product detail page on the marketplace features videos showing how the product might be used in a BlendJet. Pamplin said that BlendJet films the majority of these videos itself, because the company is often already shooting recipe videos every day. BlendJet also offers a subscribe and save option on marketplace products; Pamplin said that this accounts for one-third of marketplace purchases.
“It’s really about being a great partner and supporting the continued purchase of consumables through our marketplace on an ongoing basis,” Pamplin said.
Then, once a customer adds a BlendJet to their online cart, BlendJet recommends other accessories to add to their order — like a portable sleeve or a BlendJet tote bag — as well as some of the products from its marketplace. Pamplin said that within the last 30 days, customers who have added marketplace products to their orders purchase an average of 8.4 items, with an average order value of $110.
Chris Toy, CEO of freelance marketer platform MarketerHire, said he’s seen an uptick in interest from brands looking to sell — or at the very least, promote — brands from other products. That’s partially because there are more technology startups, like Carro, offering to help brands do this. He cited Disco as one such example, a startup that allows brands to feature products from other brands on their post-purchase pages. In March, Disco raised a $20 million series A, and on its home page, specifically positions its solution as one that can help brands lower their customer acquisition costs in light of Apple’s privacy changes.
While Toy said that venture-backed, direct-to-consumer startups are often “precious” about what brands they look to partner with, he said that launching a marketplace is a common move among larger brands; he cited Apple as one such example, which sells accessories from third parties on its own website.
For the brands who sell through another company’s marketplace, it can be a more stable way to acquire new customers compared to Facebook and Google’s auction-based models. Meanwhile, the brand that launches the marketplace, “you get revenue, but most importantly, you also get data — to see what your customers like and if you really want to, to source that thing and launch your own proprietary version.”
BlendJet’s strategy represents an evolution in terms of how brands are thinking of partnering up — historically, many partnerships have been short-term or tied to limited-edition products. For example, Bark partnered with Glossier in 2019 to sell limited-edition dog toys. But as customer acquisition costs continue to rise, partnerships and cross-selling are becoming a much more permanent part of brands’ strategies.
Pamplin said that over time, the company hopes to build out its marketplace in a few ways. One is to simply add more products. Second, BlendJet is looking at more ways to recommend marketplace products to its customers. Pamplin said that BlendJet is looking at how to upsell customers on marketplace products post-purchase, specifically on its thank you page when customers place an order, but that currently there’s some “technical limitations around Shopify with that.” The company is also looking at doing more bundled promotions with its marketplace brands, potentially tied to live shopping events, as BlendJet appears frequently on QVC.
“All of these things kind of add to the awareness and the mindshare of the brands. What I tell the CEOs and the executives of our partners is look, this is not just this for that, right, right,” Pamplin said. “It’s a strategic alliance between our brands to create incremental growth for each other.”
Three questions with Beth Gerstein, CEO of Brilliant Earth
Brilliant Earth, a direct-to-consumer jewelry brand, was among the rush of startups that went public in 2021, raising $115 million in an initial public offering more than a year and a half ago.
While it has had its ups and downs on the public markets, Brilliant Earth has been one of the beneficiaries of more people hosting weddings this year since most events were canceled in 2020 and 2021 due to the pandemic. In its most recent earnings report on May 12 Brilliant Earth, the company reported net sales of $100 million, up 41.5% year-over-year, as well as net income of $3.4 million.
As the company is growing, it’s increasingly trying to reach new customers — Brilliant Earth launched its first men’s jewelry collection earlier this spring, and recently opened its 19th showroom, in Minneapolis, Minnesota. I spoke with Gerstein about how the company is thinking about expanding its retail presence and adapting to post-pandemic habits, among other topics. Some highlights from the conversation are below, which have been lightly edited for clarity on length
Is there a certain type of neighborhood you’re targeting as you open stores in new cities? I’m curious if you gravitate more towards suburban areas or near a city center?
It’s very dependent upon the actual market. So in larger cities, we tend to go into the major downtown districts with strong retail neighborhoods. We’re in Union Square in San Francisco, for example.
I think it really depends on where people are shopping, where our customers are shopping. And we have good information there. We typically don’t go into indoor malls. But we’ve started to launch in outdoor centers and had great success there as well.
What kind of activity are you seeing in the wedding space and engagement space right now, given that so many people postponed weddings over the course of the pandemic?
Definitely, this is the year of the wedding. There are 2.6 million weddings expected this year, the most since 1984. And we’ve really expanded our bridal assortment to be able to cater to this customer.
Pearl jewelry is having a trend moment. Now, yellow gold is trending, tennis necklaces are trending. And we’ve expanded in a lot of those areas.
For the bridal party, we really want to make sure that we have everyone covered — whether it’s bridesmaid gifts, for the bride or the mother of the bride, and now the father of the bride as well.
With more talk of a potential recession, how are you thinking about it? Is it impacting your strategy for Brilliant Earth at all yet?
I think we have advantages there as well because we don’t stock up on a lot of inventory. We lean heavily on made-to-order. So that allows us to scale up to different customer demand scenarios. I think that’s one way that we’re prepared — we’re capital efficient, we’re inventory light. And so we’re able to really control our costs dynamically in that way.
The great thing about bridal is it’s quite recession resilient. Because people tend to continue to invest in personal relationships during more challenging times.
What I’m reading
- Glossier was the latest direct-to-consumer startup to announce it was raising prices, sending out a message to customers last week, telling them that prices will rise starting July 6 in the U.S. by anywhere from $1 to $4 depending on the product.
- CNBC has a look at what options companies have to cover abortion care and related travel for employees in the wake of the Supreme Court’s ruling on Friday.
- Sweetgreen launched a new rewards program yesterday, which gives customers new incentives each week – like spend $20 to receive $4 off a future purchase – as the fast casual chain tries to figure out what will most incentivize its customers to buy more frequently.
What we’ve covered
- Away launched a new line of bags and packpacks, designed for hiking and camping, as the luggage startup tries to adapt to people’s new post-pandemic travel habits.
- ThredUp told customers over the weekend to boycott Shein’s San Francisco pop-up over the weekend, citing fast fashion’s impact on the environment. While ThredUp has pushed sustainability past, it was the first time the resale app had called out another company.
- Fabletics added a shop-in-shop to one of its retail locations to promote its new shapewear brand, Yitty by Lizzo, as the celebrity-backed athleticwear company looks for more ways to cross-promote its latest brand.