The Top Ways to Grow a Direct to Consumer (DTC) Brand
It has never been easier to set up a retail business and many founders believe a direct to consumer business is the way to go. These businesses start out selling online and include the likes of Warby Parker, The Honest Company, Glossier and Casper. eCommerce sales from direct to consumer retailers are strong, up 45.5% in the United States in 2020 and up an estimated 15.9% in 2021 to reach an estimated $129.3 billion in sales this year.
But growth and success in this channel does not come easy. Everyday our social media feeds are flooded with ads from yet another online business. So in a crowded segment what is the best strategy for success? Take a page from the playbooks of the following direct to consumer businesses who have figured out how to stand out from the crowd.
1. Brooklinen
Sometimes a scrappy approach works best. To drum up interest in Brooklinen when the founders were starting out they didn’t sit back and take a passive approach or invest in a lot of expensive PR. Instead they got into a rented van and drove around New York City dropping off samples of their bedsheets to 60 bloggers and other people in the media industry. They included a handwritten note with each package of bedsheets explaining that they are a husband and wife team and how they wanted to change the bedding industry. “It was well-received, and we made a quarter million dollars in the first month,” said Rich Fulop, co-founder of Brooklinen. “Our Kickstarter backers were very happy about that and made lots of referrals for us. Then we started growing our social presence and email marketing.”
Digital marketing isn’t the only way to advertise. Brooklinen has long been a fan of advertising in the subway system. It has run campaigns where it plasters its ads in every prominent space in a subway station. Getting on and off a train and walking through a subway station is often the kind of captive time which is getting harder to come by. Speaking about subway advertising, Jasmine Rayonia, Director of growth marketing at Brooklinen, has said that subway advertising creates: “a captive audience for storytelling” that allows Brooklinen “to connect with ... customers and tell them about who we are and what we sell.”
Thinking about the ways to advertise outside of the standard instagram ad is important if you want to standout. “A lot of people tend to think, myself [Rich Fulop] included, you have a great product. If you build a great looking website, people will come, and you’re going to sell millions of units,” says Fulop. “It doesn’t really work like that in reality. Having new strategies to acquire customers and drive traffic to the site, is definitely the hardest piece to learn with no prior experience.” “It’s easy to throw money away.” “To do it efficiently, in a responsible way that you’re actually making money, is very challenging.”
2. BarkBox
Deciding whether to sell on Amazon is a question all direct to consumer brands face. Many brands decide not to sell on Amazon worried Amazon might start selling the same products as they do or they don’t want to lose access to customer data. In the past Matt Meeker, co-founder and CEO of Bark, has said he views Amazon as: “both a threat and potential partner.” But Bark decided to launch on Amazon in 2018 and was one of the first brands to join Amazon’s subscription service that allows Amazon customers to sign up for product subscriptions directly on Amazon’s website.
Bark decided to sell on Amazon because its where consumers are searching for products and having a large volume of customer reviews made up for some loss of control and insight. “We wanted to use Amazon as a customer acquisition channel, same as Facebook and Instagram, where there’s a higher cost of acquisition. Being early is a huge advantage on Amazon, as it was on Facebook in 2012,” said Meeker. “That’s part of what makes it appealing. Customer trust with Amazon also helps a lot, and the idea of Amazon introducing the product to people was promising to us.”
To prepare for selling on Amazon Bark built a small team to work on its Amazon business and hired a consultant with experience selling on Amazon. The team spent a year developing its Amazon strategy which included identifying high margin, high volume products within the pet category on Amazon. “The idea was to reverse engineer our products to find out where the most opportunity for product development was, and then build the line out from there,” said Meeker. Bark eventually started selling on Amazon with five products. Bark has seen success with its Amazon business, reporting earlier this year in its filing to go public that its Amazon business grew at a yearly rate of 150%.
Many direct to consumer brands get trapped into using digital marketing as their only means of acquiring new customers. But over time that can prove to be very expensive. Digitally native menswear retailer Bonobos struck a deal in 2012 to sell its merchandise at Nordstrom. Speaking about the need to have a physical presence Bonobos co-founder Andy Dunn has said the brand's "most profitable business" is its partnership with Nordstrom. Dunn has also said that e-commerce is a "tremendously challenging, frequently unprofitable business."
Not wanting to be late to the party, in 2017 BarkBox began selling in Target and now it sells through 23,000 retailers including Costco and Amazon. At the end of the day the internet provides a great start but you have to go where the people are. Even Amazon has stores, over 600 of them and the Wall Street Journal reported recently Amazon is planning to open department stores.
The Honest Company started out with an eCommerce subscription model where it sold a diaper bundle as well as a bundle of skin, bath and household cleaning products. But like many digitally native companies The Honest Company recognized to grow it had to meet its customers where they are and the vast majority of retail sales happen offline (only 12.5% of retail sales in the second quarter of 2021 in the United States were made online).
Seeing the writing on the wall The Honest Company started selling its products in Costco in 2013, in Target in 2014 and on Amazon in 2017. “It’s really important to us to drive accessibility in the market and the best way to do that is as an omni-channel business,” says Nick Vlahos, The Honest Company’s CEO. Selling on Amazon was seen as a way to make the brand more relevant to online shoppers. Today The Honest Company sells 55% of its products online and 45% through retail where you can find the brand’s products at 32,000 retailers.
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4. Warby Parker
Without a large marketing budget at its disposal Warby Parker leveraged the platform of established brands in order to build its own brand when it started out. It did this by relying on PR to generate an audience when its website first launched. Since Warby Parker considers itself a fashion brand it decided it would be best to be featured in the best women’s and the best men’s fashion publications to generate buzz about its business. To achieve this goal Warby Parker hired a PR company which successfully pitched profiling Warby Parker in GQ and Vogue. Both magazines ran stories on the brand on February 15, 2010 the day Warby Parker’s website launched. Based on the buzz generated from both of these publications, Warby Parker’s website ended up crashing after launch. Despite its website crashing Warby Parker was able to meet its first year sales target within three weeks and within four weeks it sold out of its top 15 most popular styles leading to a 20,000 person waiting list for its eye glasses.
Getting found online when you only have an online presence is tough for even the best direct to consumer brands. Leveraging the credibility of other well-known brands to drive traffic to Warby Parker’s website was one of the main reasons it was able to get off to such a great start. Warby Parker credits its ability to land this type of PR to timing as well as having a unique offering. Speaking about getting Vogue to even notice the startup, Neil Blumenthal, co-founder and co-CEO of Warby Parker, said: “I think founders and CEOs often take credit for being the smartest people in the world, but so much is serendipity and timing. We were one of the first of these vertically-integrated brands, so the story was novel.”
Warby Parker also knew the right time to pivot to opening in stores. Dave Gilboa, co-founder and co-CEO of Warby Parker has said, that when they first launched in 2010 having an online business was an effective way to reduce capital costs. The four co-founders were still in college when they started the business. They did not have any external funding therefore opening stores was not an option. But by 2013 and over $100 million in funding at the time, Warby Parker opened its first store in New York.
Since the vast majority of people buy glasses in-person trying to convert those customers to online only shoppers proved too difficult even for a breakout star like Warby Parker. Fast forward to 2021 and Warby Parker is valued at over $5 billion and has over 100 stores.
5. Dirty Lemon
In the beginning beverage maker Dirty Lemon like many direct to consumer brands used Facebook and Instagram to market its products. It even designed product packaging specifically to fit on a 2 x 3-inch screen and focused on a minimal (a.k.a “bland”) aesthetic. But over time the brand found digital marketing to be cost prohibitive.
“Having advertised with Facebook and Instagram since very early on, we saw the cost to acquire customers rise significantly, and it's at a place now where it's just unsustainable. I think that's happening because brands that have historically relied on traditional advertising methods are now shifting their ad dollars to online and to Facebook and Instagram. When that marketplace gets flooded with demand, it raises the price to connect with and acquire customers. As the prices rise and more advertisers enter the marketplace, there was a point for us that it no longer made sense to spend millions and millions of dollars on Facebook and Instagram” said Zak Normandin founder of Dirty Lemon.
“So as the pendulum swings from traditional brands going to digital and away from retail, we're doing the opposite, shifting to retail and away from digital. As a young brand, there's only so many levers we can pull to reach the broader mass market. Shifting to retail is a great way to connect with a local audience but also have an impact on the national scale,” says Normandin.
As with most direct to consumer brands an online only business can only take you so far. To reach a larger customer base brands have to broaden their distribution points. It is easier to discover new products in a physical environment when a consumer is already on a shopping trip and happens to notice an interesting new product. How man/y times have you discovered a new product simply by trying free samples at Trader Joe’s?
Seeing the writing on the wall, last year Dirty Lemon closed a deal that places its beverages at over 500 Walmart stores in the Unites States. While some argue this move may hurt the cachet of the brand, to reach high levels of growth you can’t stay niche forever.
Normandin has called selling its product at Walmart as “the only way forward.” “If you look at the majority of beverage sales, they are either coming from Walmart, Target or Kroger, so we see this as an opportunity to acquire customers profitably” said Normandin. “When you look at what’s happened with Casper and a lot of direct-to-consumer companies that are getting hammered in the public market, it is because they’ve focused so much on spending whatever it takes to acquire customers and drive-top line growth. They’re losing a lot of money.”