Is DTC dead?

Selling online is hard.

Pre-2020, it seemed like a new direct-to-consumer startup was launching daily. Industry trends today suggest the model may be losing its luster. So, what sparked this sudden “death?”

Fortune made their hot take, sharing: “The DTC industry as a whole has now passed its peak. No longer the shiny new thing, customers are losing interest, especially as the pandemic brought to light fundamental issues that are out of the brands’ control, despite their assurances that they are better or different from their legacy counterparts.”

Haus, a VC-backed aperitif brand that gained early traction for its all-natural liquors, is the latest direct-to-consumer brand to announce that it will be closing its doors.

Following its launch in 2019, Haus captured audiences with its unique aesthetic, low ABV blends, strong social presence, and innovative business model that allowed them to distribute their products direct-to-consumer. The brand secured $17M in funding and saw 500% growth during the pandemic, seemingly making them a poster child for successful DTC startups. Constellation Brands - the largest beer import company in the US - committed to leading the startup’s $10 million Series A in 2022.

Unfortunately, the aperitif brand reported that their Series A fell through, forcing them to shut down future operations. Haus’s CEO, Helena Price Hambrecht, said that the company went through a series of challenges during the pandemic, including supply chain issues, lack of in-person word of mouth, declining ROAS due to iOS changes, and difficulty securing funding.

This is just one of many examples of DTC brands struggling to survive in today’s challenging CPG landscape. The vast majority have been squeezed from both the supply and the demand side. Previously reliable customer acquisition tools are no longer sustainable with Facebook ROAS dropping 30% post-IOS 14.5, and supply chain costs and delays have reached extremes no model could predict.

2021 saw a dip in consumer interest in the DTC category as a whole, likely due to the unpredictable curveballs that impacted customer experience. Only 69% of Americans said they expect to make at least one purchase from a DTC brand, down from 79% in 2020.

Haus is facing what similar startups are rapidly learning: DTC should be seen as a channel for a brand, not its entire business.

In order to see continual growth, CPG brands can no longer lock themselves down to one business model. They must adapt and support omnichannel experiences, specifically retail ecommerce.

Retail ecommerce was essentially nonexistent pre-pandemic. The process of buying online through a retailer and picking up curbside or in-store was formulated out of necessity–as shoppers stayed home, retailers increased their technical and operational capabilities to survive. In turn, CPG brands pivoted to meet customer preferences and leveraged these new shopping channels. Today, supporting a retail ecommerce experience is table stakes for CPGs looking to scale their business.

So, why and how are we so quickly adapting to this omnichannel shopping experience that didn’t even exist less than a decade ago?

1. Retail ecommerce is solving a myriad of problems for CPG brands, including supply chain challenges, expensive shipping costs (especially for heavy products like alcohol and other liquids), and less reliance on volatile social channels like Facebook for new customer acquisition.

Look to brands like Liquid Death as an example of how companies investing in retail ecommerce can gain serious traction from consumers.

Originally selling only through DTC subscription, Liquid Death’s products are now entirely sold via retail and retail ecommerce as of July 25, 2022. The edgy water company even informed their fans that they’ve made the choice to sell through retailers because they are “much better at lugging cases of water to your front door, so we decided to let them deal with the hard work. Plus, it’ll save you a lot of money.”

The shift to a retail ecommerce-focused business model was a win-win-win for the brand, its retailer relationships, and its customer’s wallets.

2. The shoppability and insights needed for successful retail ecommerce enablement is finally accessible, thanks to platforms like Pear Commerce.

Pear provides CPG brands with the tools needed to make all media shoppable, including landing pages, direct-to-cart links, actionable store locators, and shoppable PDPs that can be embedded on any owned media.

Having the path-to-purchase for a retailer where a consumer already has loyalty is the best way for brands to tap into new audiences and customer acquisition, which is why Pear supports over 2,000 retailers - from Amazon Fresh to the local bodega.

With Pear, brands gain the same level of performance marketing data that was previously exclusive through DTC, giving them the ability to run conversion-optimized campaigns, A/B test content and targeting, and learn who's buying what and where through retail ecommerce.

To beat the headwinds of inflation, supply chain logistics, increasingly high CAC, and an unpredictable fundraising environment, DTC-only brands must explore new channel opportunities and strategies like retail ecommerce.

Learn more about retail ecommerce enablement and how Pear can unlock your brand’s shoppability and real-time, actionable insights by connecting with our team. →

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