If you’ve got a pulse and an Instagram account, you’ve likely noticed that almost weekly there are new direct-to-consumer brands vying for your attention and loyalty: beautifully designed toothbrushes, houseplants, paint, loafers, window treatments, smoothies, vitamins, and mattresses delivered exactly how and when you need them.
“Consumers are searching for more authentic brands,” says Mark Elkins, a partner at McKinsey who specializes in consumer products. The direct-to-consumer market is made of brands selling their own products on their own branded sites (with total control over content, pricing, and consumer data), and it is absolutely exploding. New research from Diffusion shows that one-quarter of Americans are shifting purchases in wellness, apparel, big retail, and tech from traditional outlets to direct-to-consumer brands. Sonya Brown, a investor at Norwest in Silicon Valley, where her firm has invested in many direct-to-consumer startups, from loafers maker Birdies to men’s activewear Vuori, says the space “is really about building an enthusiast brand.”
The gold standard? Warby Parker. Having just celebrated a decade in business this February, the company has opened more than 115 stores, reached profitability in 2018, and was reportedly valued at $1.75 billion in 2018. “When the four of us launched the company as students at the Wharton School of the University of Pennsylvania, ‘direct to consumer’ wasn’t a widely used phrase, much less an industry,” says cofounder and co-CEO Neil Blumenthal. “Our thesis was if you have direct relationships with customers, you can provide greater value and create better experiences. Customers like that.”
Indeed, myriad startups and their VC backers have taken to dubbing themselves the “the Warby Parker of [insert consumer product here]” in ads, magazine articles, and on social media to communicate some standard of efficiency and value. But it turns out that positioning your startup as the next Warby Parker, and actually becoming the next Warby Parker, are two very different things.
“These questions are at the heart of what we’ve been beating our chest about for a while,” says Morgen Newman, cofounder at feminine care company Cora. “Warby was one of the first and most classic examples of this new wave of business-to-consumer opportunity.” Newman, whose company uses its website, a subscription service, Target, and Amazon to reach its customer base, notes that since he and his partner Molly Hayward started Cora the market has changed. “When we launched in 2016, subscription boxes were all the rage. You could get beef jerky for your dog delivered to your door every month,” says Newman. “Advertising on Facebook, you could find incredible growth and efficiency. But now the rest of the world is online. The market catches up and rectifies these business models.”
A quick scan of recent headlines reflects the market challenges too. Popular brands such as Birchbox (25% layoffs in staff worldwide), Casper (a touch-and-go IPO and reported drop in valuation), and now Outdoor Voices (layoffs following founder Tyler Haney’s departure) have all been struggling to make their businesses work, despite high visibility, tons of capital, and celebrated products. Elkins contends that a clear view of purpose and an unwavering commitment to the consumer fall at the root of a brand’s success or failure. “When I see companies with a serious business,” says Elkins, “they are built on a different level.” Data rules the day, and how brands use that data to communicate with and understand their customers is paramount.
It’s no surprise that at Warby Parker, building out a data-science team came early in the company’s growth, with collection and analytics at every level of the business. “Warby people are more proud of their Warby glasses than any other pair they’ve had before, and they were a better deal,” says Newman. “Brand is the root of it, but it goes back to founders who actually thought about their customers, versus the ones who thought about a business model innovation.”
That’s where scalability comes into play and where the Warby model really resonates with so many founders and CEOs. There’s a difference between leveraging different channels (direct mail, social media, original content) and truly, very precisely meeting your customers where they need you to be, says Elkins. For Blumenthal’s part, his best advice to budding entrepreneurs is to do the required legwork to deeply understand not only the problem you’re solving but also the market, its size, and its limitations. Showing some restraint and growing thoughtfully are tough, too, particularly when there’s plenty of capital to go around and there are incentives to prioritize growth above all else.
Marisa Sharkey, cofounder and president at Birdies, notes that sometimes bringing your business back to basics with brick and mortar goes a long way in keeping tabs on the market—and your customers. Opening a flagship Birdies store in San Francisco, she says, has been a huge asset to her company. “The furniture layout has customers sitting, chatting, and trying on shoes together in a way that fosters connections,” says Sharkey. “Creating that camaraderie and support for women in their real life is our broader mission…We also get immediate feedback and use it in all aspects of our decision making.” Andrew Dudum, CEO at health care and wellness company Hims & Hers, agrees. After two years in business selling prescriptions, supplements, and health care services online, the company is planning to open its first pharmacy, in Columbus. “You need to be able to talk to customers in very different ways,” he says. “This is about a multi-touch approach, at its core, starting at the basics and adding value. A lot of that can’t be done in the digital world.”
As is the case in every business, says Brown, execution is everything, and it isn’t always a simple play. Scaling and growing your good idea is the tough part, particularly if you’re not first to market. “It is so easy to trip over your feet,” says Hayward. “If you’re starting something because it’s a cool idea, but you don’t know how to run that business, it’s easy to misunderstand how complex it becomes. There’s only so much shelf space. You really have to stand out and pull ahead of the pack pretty quickly.”
Of course, the pack is growing daily, and Blumenthal is rooting for all sorts of new brands on the horizon. “Businesses are going to start, and businesses are going to fail,” he says. “That’s not an indictment on the direct-to-consumer model. People love value. And what’s value? The ratio of quality to price. They prefer better customer experiences to worse customer experiences. Those principles will never go away. And businesses that are direct to consumer are best positioned to provide great value and great customer experiences because of their direct relationships with their customers. I’m as optimistic as I’ve ever been, provided the fundamentals are strong.”
And, of course, while brands vie to be the next Warby Parker, it’s still fun to root for Warby Parker too.
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