Is the DTC model of brand sales dead?
DTC brands face limitations. Explore how Haus, a beverage brand, navigated the rise and fall of DTC, and how Liquid Death expanded successfully through retail ecommerce.
Navigating online sales presents complexity for all brands. The once-thriving direct-to-consumer (DTC) model faces significant challenges, with many brands struggling to sustain growth. While DTC startups were booming pre-2020, the landscape has shifted dramatically, revealing underlying vulnerabilities within the model. Industry trends today suggest the model may be losing its luster. So, what sparked this sudden decline?
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 directly to consumers. The brand saw 500% growth during the pandemic, seemingly making Haus a poster child for successful DTC startups.
“It quickly received $4.5 million of funding and powered through the pandemic with a digitally savvy direct-to-consumer campaign, a rarity given the complications of shipping alcohol across state lines.” -From Bon Appetit’s Stylish Booze Brand Haus Was Buzzing. Why Did It Lose Funding?
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. Haus was recently acquired by The Naked Market, aiming to breathe new life into the brand.
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 overall DTC category, 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: Direct-to-consumer (DTC) should be considered a channel for a brand, not its entire business model.
To experience 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 concept of shopping online and opting for curbside or in-store pickup emerged out of necessity. As consumers remained at home, retailers enhanced their technical and operational capabilities to endure. 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?
Retail ecommerce has emerged as a transformational channel, offering critical, omnichannel solutions for CPG brands.
Unlike DTC models, retail ecommerce solves the following pain points:
Brands like Liquid Death show 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 chosen 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 mutual win for the brand, their retailer relationships, and their customers’ wallets.
CPG brands can now access the tools they need to make all media shoppable from any brand-owned media. Leveraging the path-to-purchase with retailers where consumers already have loyalty is the most effective strategy for brands seeking new audiences and customer acquisition. This is why Pear supports over 3,000 retailers, ranging from Amazon Fresh to local bodegas.
Pear’s suite of tools: including Landing Pages, Direct-to-Cart Links, Store Locators, and embeddable Shoppable PDPs, empowers brands with performance marketing data typically reserved for DTC channels. This allows them to execute conversion-optimized campaigns, conduct A/B testing on content and targeting, and gain insights into purchasing behaviors and locations within retail ecommerce.
To beat the headwinds of inflation, supply chain logistics, increasingly high CAC, and an unpredictable fundraising environment, brands must move beyond the limitations of the DTC-only model. Retail ecommerce, with its blend of operational efficiency and expanded reach, provides a scalable solution for sustainable growth.
Discover how retail ecommerce enablement and Pear can enhance your brand's shoppability and provide real-time, actionable insights. Connect with our team to learn more.
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