2PM - The Tale of Two DTCs

Two DTC Brands (Read Here): Both companies set out to take on Nike and Adidas. The eventual divergence of their paths can be attributed to a number of differences in decisions: funding methods, geographies, early adopters, and design philosophies. But what ultimately set one shoe brand up for international dominance ($8+ billion market cap) and the other into survival mode ($100 million market cap) came down to this: comfort.

Why everyone you know is wearing On running shoes

Two DTC Brands Thanks to its gentle color palette and innovative-yet-unobtrusive cirrocumulus silhouette, the On has effectively displaced the last lifestyle sneaker to become so ubiquitous it felt like the default: the eco-friendly New Zealand brand Allbirds’ Wool Runner.

Also: "The juggernaut continues to roll for On Holding. The Swiss sports brand reported the strongest quarter in its history Tuesday morning with a jump of 46.5 percent in net sales to 480.5 million Swiss francs, driven in large part by its direct-to-consumer business. As a result, the company will focus primarily on its own DTC efforts..." (WWD)

Allbirds quietly debuts on Amazon

Two DTC Brands The new partnership with Amazon comes as Allbirds said it expects lower wholesale sales in the second half of the year and into the first half of 2024, with improvement expected in the back half of 2024.

The DTC Power List, sponsored by Bold Metrics. All categories of the list have been updated with major movement throughout the list.  Latest Update: 11/25. The DTC Power List, sponsored by Bold Metrics. Biggest movers: My Gardyn, Fussy, Dame, Chubbies Shorts, Huron, and MadHappy. Four companies that fell more than 200 positions: Black Rifle Coffee (-516), Huckberry (-397), Blume, Universal Standard, and Fyrn.

800+ Brands Measured

Snoop Dogg blew PR smoke for a fire pit brand - did it work?

Generally Impressive Commerce Solo Brands will go down as one of the most impressive and fundamentally sound DTC operations of the era and it is still widely ignored. // Snoop’s recent viral posts were a clever influencer marketing strategy for Solo Stove. With 82.9 million followers on Instagram and between 20-40 million on each of Facebook, TikTok and X, Snoop is big business on social. His Instagram post announcing he was quitting had 4.7 million likes and 174,000 comments.

Cars.com revs commerce with specialized retail media network

Generally Impressive Commerce A marketplace of this size launching a retail media network that is differentiated from others in a meaningful way is a short-term path to increased profitability. // A big part of that support comes from the first-party data Cars.com is sitting on. The website gets 25 million to 30 million unique visitors a month.

Trends: consumers grow more value-driven and pragmatic

November - December With Thanksgiving right around the corner, let's take a look at the retail trends emerging out of this early stage of the holiday season, in particular, how a year's economic uncertainty and a summer...

Holiday shopping: consumer frustrations revealed in new study

November - December The survey found that 54 percent of respondents would shop at another site if a retailer’s site or app loaded too slowly. “Interestingly, more than one-third of shoppers also indicated they are likely to reconsider finalizing a holiday purchase when they reach the checkout page if a promotion doesn’t work,” the report’s authors noted

Thrasio prepares for bankruptcy

Monday Letter Feature 👇🏽 Betting on brands that did well on Amazon seemed like a smart bet but Amazon held the power to grow or diminish brands featured on its platform. Thrasio launched before Amazon shifted to retail media as its next profit-generation strategy. Organic growth by third-party brands was no longer a given as a result. // Thrasio was valued at $5 billion to $10 billion as of 2021. But online sellers like Thrasio, known as Amazon aggregators, have been pressured as shoppers have curtailed their online purchases since the height of the Covid-19 pandemic.

Why some DTC brands are raising debt, not venture capital

Monday Letter Feature 👇🏽 But unlike with venture capital, where investors often encourage heavy marketing spending to capture market share, managing loans requires a more measured approach. The discipline it takes to manage loans can lead start-ups to make smarter spending decisions.

Walmart is widening the gap with Amazon in grocery eCom

Monday Letter Feature 👇🏽 Growth is still happening (even for several top performing DTCs) but mostly at the enterprise marketplace level. // The retailer's share of the online grocery market will expand to nearly 27% by the end of 2024, while Amazon's will slip to 18.5%, according to Insider Intelligence.

Shein files for US IPO

Monday Letter Feature 👇🏽 Fast-fashion has been gaining popularity in the United States with Shein partnering with SPARC Group, a joint venture between Forever 21 owner Authentic Brands and mall operator Simon Property, as the online fashion retailer and its rivals look to expand their market reach.

Will livestreaming be TikTok's Amazon-killer?

Monday Letter Feature 👇🏽 For established mega-marketplaces of engaged users, eCommerce growth is basically an after thought. Most of any growth measured by census data can be attributed to gargantuan operations like these. // Success isn’t guaranteed—and politics could intervene. But given how effectively TikTok has already disrupted the social-media landscape, U.S. e-commerce giants like Amazon should be watching their back.

Monday Letter Feature: The post-pandemic eCommerce boom was a whimper, the 2PM predictions were short-sighted. This post explains the nuanced truth of the matter, the pandemic's online retail boom was great for the well-established (and that's about it). The onset of the COVID-19 pandemic marked a pivotal moment in the world of retail, with an unprecedented acceleration in eCommerce that seemed to herald a new era of opportunity for all players in the digital marketplace. I shouted this theory from the rooftops, going so far as to say: "While online retail is but a fraction of the aggregate retail economy, this shift (one with no end in sight) will be a catalyst for its growth. When the dust settles, brands will see more of their business shifting to online channels." [1]

This will be remembered as wrong. Initially, it was assumed that this shift would universally benefit direct-to-consumer brands, offering a sustainable and significant boost to their businesses. However, this optimistic prediction did not materialize. Instead, the pandemic boom in eCommerce primarily benefited giants like Amazon and other large online marketplaces, while many individual DTC brands encountered economic difficulties.

This native 2PM newsletter feature explores why this unexpected turn of events occurred, challenging initial assumptions and shedding light on the nuanced dynamics of the eCommerce landscape, during and post-pandemic.

Established Infrastructure and Brand Recognition of Marketplaces: Amazon and other large marketplaces had the advantage of established infrastructures pre-pandemic. Their extensive warehousing, sophisticated logistics, and trusted brand names were perfectly positioned to capitalize on the surge in online shopping. These platforms offered a sense of reliability and familiarity, crucial for consumers navigating the uncertainties of a global health crisis.

Economies of Scale and Scope: Large marketplaces benefit from economies of scale, allowing them to offer competitive prices and diverse products, along with efficient delivery – all highly valued during the pandemic. Their scale also enabled them to negotiate better deals, reduce costs, and maintain more resilient supply chains, advantages that smaller DTC brands could not easily replicate. These smaller brands were more vulnerable to the pandemic's supply chain disruptions due to their limited negotiating power and scope.

Digital Marketing Challenges for DTC Brands: The pandemic led to increased competition and costs in digital advertising, a critical channel for DTC brands. The influx of companies vying for online visibility inflated advertising costs, placing smaller brands at a disadvantage. Additionally, changes in digital privacy norms further complicated targeted advertising efforts, disproportionately affecting DTC brands reliant on these strategies for customer acquisition and retention.

Consumer Behavior and Risk Aversion: In times of uncertainty, consumers tend to prefer known and trusted entities. This inclination was evident during the pandemic, with many opting for large, established e-commerce platforms over exploring new DTC brands. The economic uncertainties further amplified this trend, as consumers sought the assurance of quality and reliability over the novelty of new brands.

Broad Product Range and One-Stop Shopping Experience: Marketplaces like Amazon offer an extensive range of products, enabling consumers to fulfill various needs in a single transaction. This convenience was particularly appealing during lockdowns. In contrast, DTC brands often focus on specific niches, which, while potentially beneficial under normal circumstances, was less appealing when consumers prioritized one-stop shopping solutions.

Financial Resilience and Diversification: Larger marketplaces generally have more robust financial foundations and diverse revenue streams, allowing them to better withstand economic shocks. In contrast, many DTC brands, with narrower financial margins and reliance on specific product lines, found it challenging to navigate the turbulent economic conditions brought on by the pandemic.

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The assumption that the pandemic-driven eCommerce boom would universally benefit DTC brands proved to be overly optimistic. While it accelerated the shift to online retail, the benefits were disproportionately reaped by established players, owing to their robust infrastructure, economies of scale, brand recognition, and financial resilience. This period highlighted the challenges smaller, specialized DTC brands face in a market increasingly dominated by eCommerce giants.

The COVID-19 pandemic emerged as one of the worst developments for many DTC brands despite increased awareness and cash flow to the industry. From supply chain woes to logistics headaches to the emergence of returns as a cost center to increased advertising costs - the less established the company, the less likely the age of 2020-2023 operated as a force multiplier as once predicted. Furthermore, DTC brands, which often rely heavily on the energy found in novel customer experiences and/or word-of-mouth, found it challenging to replicate these strengths in a predominantly virtual world.