Over the past half a decade, the tidal wave of niche brands delivering brand-new kinds of products to consumers and doing so online has changed the retail and CPG landscapes forever.
This shift has in some path caused a shakeout in traditional retail, with once-popular retailers announcing store closures (JCPenney, Sears) or even liquidation (Payless, Toys R Us) and has sent fashion houses and CPG brands on a soul-searching travel. The changing demographics and desires of shoppers have also fueled the decline of traditional brands and their distribution mechanisms.
This bleak scenario of incumbent consumer brands is in stark contrast to the rapid emergence of a host of digitally-native Direct to Consumer (D2C) brands. a few D2C brands have been successful enough to become unicorns! Retailers like Walmart, Nordstrom, and Target have quickly adapted to the D2C aeon.
Walmart has made a string of acquisitions beginning with Jet.com and Bonobos. Nordstrom has broadened its assortment to include D2C brands, Target has partnered with Harry’s, Quip, and Flamingo – all of which have rolled out their products in Target’s stores across the country. Target has also invested in Casper, which is the latest D2C brand to become a unicorn.
adventure capital firms have invested over four billion dollars in D2C brands since 2012, with 2018 alone accounting for over a billion. With investment comes pressure to scale and dispatch profits. And this pressure is bringing the focus on some pertinent questions – How are these D2C brands going to evolve and how could they sustain as businesses?
Like always, the pioneering companies find their path and we then derive the playbooks out of them. From PipeCandy’s analysis of several D2C brands, we see the following approaches taken by D2C brands.
Playbook 1: Brand’s purpose anchored around one product category Playbook 2: Brand’s purpose anchored around multiple product categories Playbook 3: Brand’s purpose anchored around aggregation of other brands (for sale or rent)
We discuss the mart size and capital availability factors that influence the paths and the outcomes.
Table of Contents
D2C playbooks Access to capital and how D2C playbooks are impacted The VC path to scale The non-VC path to scale Outcome without hitting scale Roll-ups by strategic buyers Roll-ups by financial buyers Brand incubators
Brand’s Purpose anchored around one product category
Many of these D2C brands that have experienced early properity owe their rise largely to an authentic relationship with consumers that is built on the promise of one product. In many ways, focusing on one product line and a tiny set of SKUs makes total business sense.
Design, Production, Marketing & Customer assist complexities can stay manageable with such deliberate narrowing down of focus.
In some categories, you could stay focused on one product line for a long moment and build a successful company.