No. 721: THE DTC BACKLASH 😬

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Welcome to No. 721. The most read stories from Friday's member brief: on name, image, and likeness (2PM Members đź”“). And Andrea Hernández headlines again. I swear she's taking over (Food & Wine). Read 2PM on Hernández from November 2020.

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The News / New Yorker: The saga suggests the gulf between the messaging and the reality of a certain type of online brand, and the ease with which customers accept the stories such companies sell. As an avid follower of Great Jones’s Instagram, I certainly assumed that it had more than six employees. I never would have guessed that at one point it had none.

Analysis / On DTC Backlash: The New Yorker article was on the "illusion of the millennial aesthetic" and it appears that there is reckoning. According to industry operator and analyst Nate Poulin, venture capitalists have invested roughly $22 billion into DTC brands and the total liquidity, thus far, has been about $25 billion. Of that $22 billion invested, many were into brands that were meant to "disrupt the industry." These were modern brands positioned for the upwardly mobile: beautifully designed, quietly sourced, and well-packaged. It was an aura of excess that propelled design houses to position DTC brands as products for H.E.N.R.Y. But what happens when the consumer falls on hard times? For much of America's workforce, the past 15 months were just that. And many of life's luxuries were traded for the steady, the essential, and the trusted. DTC brands, for the most part, are not that. 

The question writer Kyle Chayka raises is around whether or not we actually need all this brand disruption, and if the new crop of millennial brands prioritized aesthetic and marketing over functionality. The DTC backlash has begun. I have an opinion as to why:2pm_email_heading.jpg

 

According to Chayka, Great Jones is one example of the dysfunction of DTC and how a crop of colorways that look good on Instagram can cover a much more troubled company behind the scenes. Other brands either don't stand up to the quality test or are so overtly "millennial" that they impose: an unnamed brand selling bath towels failed to stand up to more reliable brands, while Away suitcases feel like an embarrassing relic, he writes. Away, however, is an example of a company that has returned to the forefront. Today, it resembles more "orange" than "green." As the company near's IPO, it moves towards the bottom of the hierarchy - even if the products remain elevated. Their most recent advertisement was well-received

On whether or not the millennial brands will stick around, the problem is boiled down to functionality and reliability:

Perhaps it will fade out when customers learn that a compelling narrative is not the same thing as the integrity of a product or of the business selling it. We’ve seen many times before how the growth-at-all-costs startup mentality can backfire.

Reliability has been an incredibly important feature in what we buy over the past year-plus, which brought about anxiety and uncertainty. In more difficult times, legacy brands become the preferred purchase. There's something to be said about consistency and quality in the middle of a pandemic. Despite spending a lot of time on our phones, being served Instagram ads for new brands and products, the standbys won out. The millennial DTC brands represent a certain amount of excess that falls out of fashion during a crisis. In times of recession or duress, customers flock to brands that feel like necessities. That has meant good news for the old guard, the standbys that might blend in on a Target shelf but are reliable in their quality.

For DTC brands, the next step of growth will be proving themselves as essentials, not just aesthetic excess for a specific cohort of customers that, when put up against a wall, may not prove so loyal. I believe that the faster they prove essential, the less likely these stories will dominate the narrative. And this year will see a number of brands that were once "nascent" become members of the old guard. 

By Hilary Milnes and Web Smith, 2PM 

This year's Olympics uniforms are shockingly trendy

DTC Brands / GQ: Earlier this week, Kim Kardashian’s Skims became the official provider of Olympic undergarments, suggesting that no element of the Olympic wardrobe should go un-collaborated. (Ralph Lauren, apparently, has not traditionally provided Olympic athletes with underwear.)

Editor's Note: here is a short list of brands that could take Ralph Lauren's role in 2024. 

Amazon is investing in unplanned grocery with Anycart

eCommerce / Modern Retail: Anycart is a kind of Kayak.com for online grocery that aggregates goods from a number of different online stores, including Amazon, Whole Foods, Vons, Safeway Albertsons and Stop & Shop and Giant. Anycart is a marginal player for now, but it is exploring a new method for how to inspire people to make more impulse purchases online: build a platform for shoppable recipes.

Inside Goat's plans to merge sneaker resale and retail

Luxury ReCommerce / Vogue Business: Straddling luxury retail and resale could help differentiate Goat from other players, attracting Gen Z consumers who value fluidity in their shopping experiences. “We’re creating a leading, highly differentiated luxury and lifestyle brand that is uniquely positioned at the intersection of the primary and resale markets,” says Goat CEO Eddy Lu.

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Chubbies Boy Summer: The shorts brand has been climbing the chart for the previous 11 weeks. This is their first top 20 appearance along with Good American and Yeti. These are three brands that are experiencing quiet but significant growth (and Chubbies is doing it with celebrity or jersey naming rights). It's also an indication of a summer of leisure and social events to come. Sounds about right.

How two P&G veterans are deploying telenovelas to corner the Latina haircare market

Linear Commerce / Fortune: For business partners Cesar Jaramillo and Millie Carrasquillo, behind Rosie and Mariana’s salon chat is their budding hair care line, LatinUS Beauty, and the scene plays out in Lu: The Power of Us, the telenovela series they’ve developed to promote it. In December 2017, Jaramillo phoned veteran product developer Isabel Greaves about the startup. He was hoping she’d be up for some laundry room science experiments and pitching in on the creation of a scripted series that plays out in a salon. 

Sound familiar? P&G essentially invented the soap opera. Here's more on that story. 

How the Karl Lagerfeld brand weathered the pandemic

eCommerce / WWD: Reconfigured a decade ago as a digitally driven brand in the "masstige," or affordable luxury, category, the Karl Lagerfeld company is fulfilling its promise rapidly. "Close to 40 percent of our overall business is conducted via online channels, and this fiscal year, we see this growing to probably close to 50 percent," said Pier Paolo Righi, chief executive officer of the Karl Lagerfeld brand.

9 important CPG industry trends 2021-2025

Data / Exploding Topics: In this post we'll outline 9 of the most important trends impacting the CPG industry right now. Including several trends (like product personalization, direct-to-consumer upstarts, private label brands, and sustainability) that are likely to continue growing into 2025 and beyond.

The rise of psychedelic medicine

DTC Health / Quartz: For millennia, these substances — or the naturally occurring ones from which they were derived — have helped people look inward, or feel connected to a higher power. Decades of research also suggest they are powerful treatments for psychiatric conditions such as PTSD, depression, and addiction, albeit when taken in a supervised setting. 

Archives: The Final Level 

Gone are the days of characterizing its use as “acid trips.” Today, the formerly universally-banned substances are proven useful tools in combating America’s growing scourge of depression and anxiety. Startups like Field Trip have joined Compass Pathways as publicly-traded advocates for psychedelics as therapeutic tools.

The BoF Professional Summit: What's a store for?

Merchandising / Business of Fashion: Web Smith, founder of retail media company 2PM, added that product doesn’t need to dominate a store. He points to direct-to-consumer startup Rowing Blazers — whose flagship (which has since shuttered) was only stocked 30 to 40 percent with actual merchandise. The rest of the store showcased mementos and things that would inspire the customer to think about how Rowing Blazers’ products fit into their lives. “What are the associated things: the moments, the history, the accessories that you were merchandising with — the history of the industry itself?” said Smith. “What are those things that you would associate with the sale of those products?”

How Gwyneth Paltrow turned Goop into a $250 million obsession

Linear Commerce / The Profile: To the Internet, it seemed as if Paltrow had implied her life was so perfect—so full of meditation and intention and juice cleanses and vitamins and antioxidants and all the other things sold by Goop, her $250 million lifestyle business—that even a global health crisis could barely make a dent. Just the carbs, that was all.

Modern-day polymaths on being masters of many domains

Deep Generalism / Men’s Health: Among them you can count some of history’s greatest minds, people whose discoveries and breakthroughs expanded our understanding of the world: Newton, Galileo, Aristotle, Darwin and, of course, arguably the greatest polymath of them all, da Vinci, who once said: “Study the science of art. Study the art of science. Develop your senses  —  especially learn how to see. Realise that everything connects to everything else”.

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Louis Vuitton 2022 by Virgil Abloh (Youtube). The rise and fall of a bitcoin billionaire (Vanity Fair). The fallout at ESPN (NYT). Travel is back (The Points Guy). Here was our take on that (Hot Luggage Summer). Kylie Jenner relaunches cosmetics with vegan offerings (WWD). 

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Unlocked until Midnight. Michigan’s Fab 5, USC’s Reggie Bush, and UCLA’s Ed and Charles O’Bannon literally changed my life. Like many other great athletes of their time, they were later branded “rule breakers” or undeserving of their educations. Today, each of these men would have lived the lives that they deserved without worry of running afoul of antiquated regulations.

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