Last updated: Has the e-commerce bubble burst for DTC brands?

Has the e-commerce bubble burst for DTC brands?

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With all the predictions of a retail apocalypse and the death of traditional retail, it’s only normal to assume online is where you need to be. The internet democratized the tools required to start and scale a retail business.

You need not look far to see a long list of success stories like Warby Parker, Casper, and the Dollar Shave Club, taking full advantage of this digital channel to disrupt industries relatively unchanged for nearly 100 years. 

But this e-commerce bubble may be over, according to Will Nitze, CEO at IQBAR, a protein bar brand. He believes 2022 will be the year everyone’s all in on brick and mortar.

E-commerce bubble: A precarious state

Direct to consumer and CPG brands are facing death by 1,000 cuts. The labor markets, supply chain issues, and inflation have created an incredibly difficult set of circumstances for the physical products industry.

Couple these circumstances with significant changes in the digital marketing space to protect consumer privacy and suddenly Vaynar Media CEO Gary Vaynerchuck’s 2019 prediction about the dire future of DTC seems all more prescient. 

Unfortunately, we may see a lot of DTC brands and CPG companies shut their doors. But those who take the right steps will be able to overcome any slowdown in the e-commerce bubble.

Tackling e-commerce challenges

Compared to traditional retail, there’s still a significantly lower barrier to entry to get an online store up and running. The difficulty for e-commerce isn’t sales, it’s profits.

This issue can be addressed by finding the right marketing and sales channel for your specific product, which may no longer be a digital-only approach. I’m far from giving up on digital channels, and see significant upside if they’re done correctly. However, we need to keep an open mind and look at things differently.

On the backend, it’s a matter of keeping costs down by streamlining and automating what you can, while allowing for quick pivots. On the front end, those that are succeeding and growing are able to hyper differentiate and engage with their customers on a personal level.  

Here are three priorities for DTC brands today:
  1. OmnichannelResearch has found that DTC companies will need to embrace an omnichannel strategy, create tighter ties with their communities, and vertically integrate to increase margins. 
  2. Customer-centric approach – A successful e-commerce channel is impossible without putting customers first.
  3. Agility – A study published in the Harvard Business Review noted that as successful DTC brands mature, they must recognize the need to evolve.

As for adverse changes in labor markets, supply chain, manufacturing, and digital marketing channels, the eternal optimist in me views challenges as creating opportunities.

Beyond e-commerce: How DTC brands can leverage brick and mortar

So if traditional Facebook or Google ads are off the table, you’re feeling the pinch of this difficult macro environment, and fretting about the e-commerce bubble, what should you do?

While e-commerce is critical for success in the DTC space, it doesn’t mean you should disregard more traditional opportunities like brick and mortar retail. Here’s how you can get started:

Get your products into retail outlets. As DTC brands grow, a natural growth strategy is getting your products into retail stores. Given the current macro environment, this strategy may be something to be considered even earlier in your scaling efforts for gross margin protection. Allbirds, for example, now has nearly three dozens stores and recently announced it will sell a selection of its shoes in Nordstrom stores in an effort to boost brand recognition and profits.

Open a store as a marketing strategy. There are always major brands like Nike who can do this profitably, but is this the goal and should it be yours?  Nitze described a store as a physical version of a Facebook Ad. While a brand may lose money on that store, but the number of impressions — the hundreds of thousands of people who have walked by it, seen it, and even bought things from it — makes it worthwhile.  

Managing various sales channels can be tough, but stay focused, positive, and open minded and you’ll not only avoid death by 1,000 cuts, but find yourself ahead of the pack.

Old direct-to-consumer marketing playbooks don’t work today.
Tap into the future of CPG, DTC, engagement, and loyalty HERE

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