The rise of the modern direct-to-consumer brand, or DTC, was about turning away from the high street experience. For DTC startups, brick and mortar retailers are margin thieves who prevent brands from building closer relationships with their customers.
Killing the middleman is certainly something that has worked for companies like meal set startup Gousto and activewear company Gymshark, both of which achieved unicorn status in 2020. A wave of other DTCs are following in their footsteps, including beauty startup Beauty Pie, which launched $ 100 million in September, and plant-based meal startup Allplants, which is kicking in £ 38 million in October.
But Sifted’s report to the European e-commerce boom shows that, despite these advantages, web shops are also confronted with special challenges and growth difficulties. Based on interviews with founders, VCs and industry experts, you will learn what DTC brands need to look out for.
As more and more startups hope to benefit from the DTC playbook, competition intensifies and the costs of customer acquisition and retention increase. Startups need to become even more adept at marketing by working with influencers and promoting their products via social media channels. At the same time, a new generation of startups is aimed specifically at influencers who can use an existing audience to polish up their DTC brands.
That’s why we saw a few Add DTC marks Celebrity angel to their cap tables to gain an advantage in marketing.
Can you really kill the middleman?
Building a purely online brand can allow DTC startups to get started faster than their brick and mortar counterparts, but not all of them may be able to sustain longer-term growth exclusively online. Depending on what they’re selling and whether people need to test it in person, the future will certainly be a combination of online engagement and in-store experiences, whether pop-up or permanent.
Strive for smooth purchases
From an outside perspective, DTC seems to be mostly about shiny Instagram feeds and eye-catching customer leads – and while these tactics can be effective at attracting customers, they aren’t a guarantee of a purchase being made. And so startups are working hard to make the checkout experience as smooth as possible by expanding their payment options and simplifying login processes.
Sellers spread their bets by expanding their pool of payment options. “We offer a wide range that is adapted to each local market in order to make the buying process as convenient as possible,” says Jennifer Baum-Minkus, co-founder of the German beauty company gitti.
Headache on delivery
What DTC startups may be able to save in rent, they may instead have to spend on the smooth running of their logistics. Shipping costs are a huge headache for you – even more so when a large number of items are returned. Additionally, with growing consumer concerns about the unsustainable nature of e-commerce, startups are under increasing pressure to double-check their suppliers and delivery partners’ credentials.
Ellipsis Brands, for example, was not spared the early chaos in the pandemic in the supply chain, and maintaining adequate inventory remains a major challenge. “There is a shortage of cardboard boxes worldwide, which of course has to do with the fact that e-commerce is going crazy. Recycling plants cannot handle that. Our cardboard supplier is not done with it; they increased overnight from a lead time of three weeks to three months, ”founder Freddy Furber told Sifted.