Reasons DTC Brands Struggle After IPO

I wrote last year about how poorly DTC companies were performing in the public markets. Unfortunately now, with some key exceptions, it’s worse. Here’s a representative sample of public DTC brands, the same as last year. - Allbirds (Footwear). Down 98% from peak. Market cap: $100mm - Blue Apron (Food). Acquired for 95% less than peak. Market cap: $100mm - Smile Direct Club (Teeth aligners). Down 100% (bankrupt). MC: $0 - Warby Parker (Eyewear). Down 76%. MC: $1.6B - Bark (Pets). Down 93%. MC: $220mm - Honest Co (Eco-products). Down 83%. MC: $378mm. - FIGS (Scrubs). Down 90%. MC: $824mm - Stitchfix (Clothing). Down 98%. MC: $318mm - Purple (Mattresses). Down 95%. MC: $197mm  - Rent the Runway (Clothing rental). Down 98%. MC: $26mm - HelloFresh (Food): Down 93%. MC: $1.2B - Hims (telemedicine). Down 36% from peak but 56% up(!) from De-SPAC price. MC: $3.3B As of this time last year, most DTC stocks were down 85-90% from peak. Now, if anything, it’s closer to 90-95%. But last year, DTC brands were not unique–nearly all stocks were down. NASDAQ, for example, was down 23% from its 2021 peak. But today, NASDAQ is at an all time high. Why is DTC different? It’s because even though the market flipped two years ago to rewarding profitability in addition to growth, most public DTC businesses can’t seem to make the transition. They just don’t make money. Here are the net income profiles of the companies mentioned above for 2023: - Allbirds: -$153mm - Blue Apron: -$111mm - Smile Direct Club: ? (Bankrupt) - Warby Parker: -$63mm - Bark: -$46mm - Honest Co: -$39mm - FIGS: $23mm - Stitchfix: -$122mm - Purple: -$121mm - Rent the Runway: -$114mm - HelloFresh: $19mm - Hims: -$26mm Figs and HelloFresh are the only companies to have been (barely) profitable in 2023. Most companies' net income margins were -10% to -90%. One company to positively call out is Hims, which lost $26mm last year but in the last 2 years has cut its losses 75% while growing revenue 220%. Hims will very likely grow into meaningful profitability and so is worth $3.3B. Similarly positive is Oddity, which IPO’d and made $59mm in 2023. Oddity’s market cap is $2.5B. Hims and Oddity are among the only DTC businesses trading near or above their IPO prices. But many others are in real trouble. How did we get here? Most public DTC businesses were VC funded and prioritized growth at all costs. This was fine when it’s what the market rewarded. Now that investors are focused on profitability, I suspect that many of these businesses are, counterintuitively, too large for their own good. Fueled by VC, they overshot their market size and are spending too much on ads and team to maintain a revenue scale that’s inconsistent with making money. It’s going to be painful, but I predict many of these companies are going to have to shrink meaningfully–likely outside of the public markets–in order to become sustainably profitable brands. Investors know this and are valuing them accordingly. #dtc

The D2C gold rush is over. Reality has set in. Mamaearth IPO'd at ₹324, crashed to ₹240s (25% down). boAt Lifestyle's valuation reportedly cut by 60% from 2022 highs. SUGAR Cosmetics postponed IPO indefinitely. What went wrong: - Customer Acquisition Costs exploded: - Facebook/Google ads became 3x more expensive post-iOS updates - CAC:LTV ratios deteriorated from healthy 1:3 to barely break-even 1:1.2 No sustainable differentiation: - Same contract manufacturers for everyone - Brand loyalty lasted months, not years - Price wars became the norm Distribution reality hit: - Online penetration plateaued at 4-5% in most categories - Offline expansion required completely different skill sets - Retail partnerships meant margin compression The survivors will be those who: - Built genuine product innovation, not just marketing stories - Developed proprietary manufacturing capabilities - Created repeat purchase behavior through quality - Mastered omnichannel distribution D2C 1.0 was Instagram marketing. D2C 2.0 will be about building real businesses with sustainable unit economics. The brands that survive this shakeout will be the ones worth investing in. P.S. Views are personal. #angelinvesting #startups #entrepreneurship #founders

Direct-to-consumer (DTC) brands had their glory days—but the curtain may be falling on the old, dare I say "legacy," DTC model. Today, #DTC is an essential channel for growth, but the model itself has been tested and found wanting. Consider Allbirds, once the darling of eco-conscious footwear, #IPO dreams, expansion plans… and now, reality checks. Casper, Away, Glossier, Inc., Warby Parker— all rode the high wave of billion-dollar valuations and cheap capital. Yet, some sank: Casper returned to private equity, Outdoor Voices went the same way, and Allbirds shut stores, pivoting to a distributor model to right the ship. Analysts like Simeon Siegel, CFA Siegel at BMO Capital Markets tell it straight: DTC didn’t eliminate the middleman; it became the middleman, bearing all the costs and headaches that come with the territory. With rising customer acquisition costs, thinning venture funds, and waning consumer enthusiasm, DTC brands faced the music. Even mighty brands like @Nike and Peloton —those with rock-solid brand equity—found they couldn’t ditch wholesale partnerships without consequences. As Neil Saunders from GlobalData Plc says, “It’s not where you sell; it’s what you sell.” Brands today aren’t ditching DTC entirely but embracing a hybrid approach, blending wholesale, digital, and brick-and-mortar to reach consumers more effectively - and more profitably. So, to today’s disruptors: Don’t aspire to be a DTC brand. Aspire to be a great brand. Let your products lead, and let the channels follow. #retailing #brands #marketing #businessmodels https://lnkd.in/gqfNYZeA

90% Valuation Drop: What Went Wrong at Good Glamm Group? In 2021, Good Glamm Group (GGG) was a rising star in India’s D2C space, valued at over $1.2 billion. Fast forward to 2025, and the company is now looking to raise funds at a valuation of just $120 million – a staggering 90% drop. What went wrong? 1.) Acquisition spree gone wrong: GGG acquired over 10 brands (Sirona, The Moms Co., Organic Harvest, etc.), but failed to integrate them. Sources claim operational mismanagement led to revenue declines across these brands instead of synergies. 2.) Overpromising, underdelivering: The company promised profitability, an IPO, and international expansionbut instead racked up ₹450 Cr+ ($54M) in debt and failed to meet payment obligations, triggering legal notices from acquired brands. 3.) Layoffs, leadership exits & cash crunch: Multiple rounds of layoffs, delayed salaries, and closure of offices in Delhi & Mumbai signaled deeper financial troubles. Key executives like CEO of Good Brands Co. Sukhleen Aneja and Chief Business Officer Bhavesh Singhal also exited. 4.) Failed omnichannel push: In early 2021, 80% of GGG’s revenue came from online sales. A pivot to offline retail saw huge spending on premium retail spaces & shelf placements, but the products failed to justify the positioning. Expensive discounts burned cash, and now sales have reportedly dropped to one-tenth of last year’s volume. Now, the company is reportedly looking to sell some of its acquired brands—possibly even back to their original founders. Investors have taken massive losses, and a turnaround looks uncertain. GGG’s story is a cautionary tale for D2C brands chasing aggressive growth without a solid foundation. Acquisitions alone can’t build a lasting business—execution, product quality, and financial discipline matter just as much. What are your thoughts on this downfall? Can GGG bounce back? #D2C #StartupLessons #GoodGlammGroup #BusinessStrategy

Allbirds was once worth $4 BILLION.  Last night it sold for just $39 million. What happened? The path from $4B to here wasn’t driven by a single mistake. It was a combination of how the business was built, execution errors, and a narrative that collapsed faster than the business itself. Allbirds started with a simple product. Wool sneakers. They were comfortable, minimalist, and easy to understand. The sustainability angle gave the brand a clear identity, and early customers loved the product. Timing helped. The early to mid-2010s were the golden age for digital customer acquisition. Customer acquisition costs were relatively cheap back then, and investors were rewarding growth over everything else. At that stage, the model worked. Focused product. Clear story. Direct relationship with the customer. Then both the business and its growth drivers started to change: 1️⃣ Assortment Shoes led to more shoes. Then leggings, jackets, dresses. The tight identity that made the brand easy to understand began to blur. 2️⃣ Distribution Allbirds moved into physical retail.  The original “DTC” thesis of “we’ll cut out the retailer and keep the margin” failed as companies realized they had to replace the exposure retailers gave them with their own marketing investment. Except Allbirds took the worst of both worlds: High Fixed cost of retail, without the the natural foot traffic of a Bloomingdale’s or Macy’s. 3️⃣ Cost Ballooned Digital channels became more crowded and less efficient. CAC rose as more brands competed for the same consumer. The edge of pure DTC vs retail was truly gone. Yet that doesn’t fully explain the 99% collapse of the company’s valuation. Revenue declined by about half from the 2022 peak. A big decline, but no-where near a 99% decline. What really happened is the entire story collapsed. In 2021 Allbirds was riding high on a narrative of “Increasing digital habits strengthens a premium DTC brand that will grow profits with scale.” But when the sales volume turned the other way, so did the whole story: ⛔ Volume declines over high fixed costs means expanding losses. ⛔ Focus on product over operations -> inventory pileups & impairments. ⛔ Stronger competition, copycat products, and rising acquisition costs -> now harder to turn it around. Once the narrative broke, valuation dropped faster than the fundamentals. Investors weren’t just reassessing the present; they were reassessing the future—from bright to “can they even survive?” Allbirds built a niche that attracts competition without a way of keeping them out. And then they kept meandering in both product and distribution strategy until it lost the niche that it built. Allbirds is the latest example in apparel that: You don’t get to be early and then drift. You have to keep earning your position. Because once competitors see the profit pool, they come. ♟️ And if your execution slips, they don’t wait. #fashionindustry #businessoffashion #retail

𝗟𝗶𝗻𝗸𝗲𝗱𝗜𝗻 𝗘𝘅𝗽𝗲𝗿𝘁𝘀 𝘀𝗰𝗿𝗲𝗮𝗺𝗶𝗻𝗴 𝗗𝟮𝗖 𝗯𝗿𝗮𝗻𝗱𝘀 𝗮𝗿𝗲 𝗸𝗶𝗹𝗹𝗶𝗻𝗴 𝗵𝗲𝗿𝗶𝘁𝗮𝗴𝗲 𝗯𝗿𝗮𝗻𝗱𝘀. 𝗕𝘂𝗹𝗹𝘀𝗵𝗶𝘁. 𝗗𝟮𝗖 𝗯𝗿𝗮𝗻𝗱𝘀 𝗮𝗿𝗲 𝗸𝗶𝗹𝗹𝗶𝗻𝗴 𝘁𝗵𝗲𝗺𝘀𝗲𝗹𝘃𝗲𝘀. → Many Early D2C pioneers are All dead. → LTV:CAC ratios are unsustainable. → CAC exploded post-iOS14. Meanwhile, P&G's Tide just launched pods. Unilever's Dove dominates beauty. Heritage brands are thriving. D2C brands are dying. 𝗧𝗵𝗲 𝟱 𝗵𝗮𝗿𝗱 𝘁𝗿𝘂𝘁𝗵𝘀 𝗮𝗯𝗼𝘂𝘁 𝗗𝟮𝗖'𝘀 𝗰𝗼𝗹𝗹𝗮𝗽𝘀𝗲: 𝟭. 𝗧𝗵𝗲 𝘂𝗻𝗶𝘁 𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰𝘀 𝗻𝗲𝘃𝗲𝗿 𝘄𝗼𝗿𝗸𝗲𝗱 ↳ Beverages: $8 product + $12 shipping = customer gone. ↳ Cleaning products: Heavy, low-margin, commodity. ↳ Meal kits: 90% churn in 6 months. Structural failure. ↳ Only beauty and fragrance survive. Barely. ↳ Dr Squatch sold to Unilever to pursue a modern trade play. 𝟮. 𝗖𝗔𝗖 𝗶𝘀 𝗻𝗼𝘄 𝗮 𝗱𝗲𝗮𝘁𝗵 𝘀𝗽𝗶𝗿𝗮𝗹 ↳ Privacy changes destroyed targeting. ↳ Meta/Google duopoly. ↳ Payback period went from 12 months to 3-6 months. ↳ Most brands: CM1 positive, CM3 catastrophic. 𝟯. 𝗦𝘂𝗯𝘀𝗰𝗿𝗶𝗽𝘁𝗶𝗼𝗻 𝗳𝗮𝘁𝗶𝗴𝘂𝗲 𝗶𝘀 𝗿𝗲𝗮𝗹 ↳ Average consumer has 12 subscriptions. Cutting to 5. ↳ "Subscribe & Save" churn rates: 70% year one. ↳ Replenishment fatigue = back to retail habits. ↳ Joy purchases survive. Utility purchases die. 𝟰. 𝗢𝗺𝗻𝗶𝗰𝗵𝗮𝗻𝗻𝗲𝗹 𝗶𝘀𝗻'𝘁 𝗼𝗽𝘁𝗶𝗼𝗻𝗮𝗹 ↳ Retail presence cuts digital CAC by 40%. ↳ Physical visibility = trust = conversion. ↳ Modern Trade = customer acquisition engines. ↳ D2C becomes retention channel, not growth. 𝟱. 𝗣𝗿𝗼𝗱𝘂𝗰𝘁 𝗱𝗲𝘀𝗶𝗴𝗻 𝗱𝗲𝘁𝗲𝗿𝗺𝗶𝗻𝗲𝘀 𝗱𝗲𝘀𝘁𝗶𝗻𝘆 ↳ Blueland tablets: Engineered for shipping efficiency. ↳ Dossier fragrances: High margin, compact, shippable. ↳ Traditional FMCG: Too heavy, too cheap, too replaceable. ↳ If it contains liquid, D2C difficult. 𝗧𝗵𝗲 𝘀𝘂𝗿𝘃𝗶𝘃𝗼𝗿𝘀 𝘁𝗲𝗹𝗹 𝘁𝗵𝗲 𝘀𝘁𝗼𝗿𝘆: Olipop and Poppi: most revenue now from retail. Liquid Death: Walmart's beverage aisle. Dr. Squatch: Unilever bought it to develop modern trade. Where did the "disruptors" all end up? In the same stores as the heritage brands. 𝗧𝗵𝗲 𝟯 𝗺𝗼𝘃𝗲𝘀 𝘁𝗵𝗮𝘁 𝗮𝗰𝘁𝘂𝗮𝗹𝗹𝘆 𝘄𝗼𝗿𝗸: First: D2C for insight, not scale. ... Second: Engineer for economics. ... Third: Contribution margin discipline. ... 𝗧𝗵𝗲 𝗵𝗮𝗿𝗱 𝘁𝗿𝘂𝘁𝗵: D2C isn't dead as a channel. It's dead as a business model. 𝗜𝗳 𝘆𝗼𝘂'𝗿𝗲 𝗿𝘂𝗻𝗻𝗶𝗻𝗴 𝗮 𝗗𝟮𝗖 𝗯𝗿𝗮𝗻𝗱: Calculate your true CM3. Include everything. If it's negative, you're not a business. Fix it. Or fold it. ___________ 👋 Hi, I am Filiberto. Follow me for sharp FMCG strategic insights. If you like this post, you are going to love my newsletter: https://lnkd.in/dFwbrjwG

Tech VCs getting over their skis investing in DTC brands set back CPG investment for a decade Historically VC has been about investing in technology that disrupted big markets and captured lots of value That model didn’t fit consumer brands...until around 2012 it suddenly did: FB/IG ads provided hyper targeted access to your core demographic — stand up a website (Tech!) and suddenly you could “cut out the middleman” and grab a bunch of margin typically “stolen” from you by “antiquated retailers” Apply that to BIG markets (Shoes! Beds! Bags!) and all of a sudden VCs were chomping at the bit (they love TAM) In 2016, Dollar Shave Club was bought for $1 billion by Unilever; by 2018 Bleecker and Chestnut streets were full of DTC storefronts and the VCs behind those brands were celebrating Then things started to change: CACs rose, growth slowed, Casper botched its IPO and Apple changed its iOS to make ad targeting even harder The investors who were just recently high fiving on the way up were now underwater (crushed under heavy pref stacks) They were quick to throw the industry under the bus: “Consumer products are too capital intensive” “There’s no big outcomes in consumer” “We’re pivoting to e-commerce enablement - picks and shovels!” “DTC just doesn’t work” ...and their peers, their LPs, the media and the ecosystem at large took them at their word The industry dismissed consumer products as a whole, and in doing so it threw the baby out with the bathwater and led a lot of capital to write off CPG But the real story: these were overfunded businesses with good (but not great) products, structurally low repeat purchase and minimal moat Allbirds, Casper and Away raised a combined $700m to create less than that much value in their end state; Unilever sold off Dollar Shave Club at a steep discount 7 years after buying it The lasting misconceptions became core narratives that were only recently violated as the VC community scratches its head at the recent run of big CPG exits that raised modest amounts of capital (Poppi, Siete, LesserEvil, Touchland, Simple Mills) Word lately is that “CPG is back” — it’s just a shame that all these people thought it ever left

𝐒𝐨𝐥𝐨 𝐁𝐫𝐚𝐧𝐝𝐬 - 𝐭𝐡𝐞 𝐥𝐚𝐭𝐞𝐬𝐭 𝐝𝐢𝐬𝐭𝐫𝐞𝐬𝐬𝐞𝐝 𝐃𝐓𝐂 𝐛𝐫𝐚𝐧𝐝 In its recent earnings announcement, Solo Brands raised the alarm that "there is substantial doubt about our ability to continue as a going concern." Solo Brands is just the latest former "DTC darling" to hit rocky times, joining Allbirds, Peloton, Casper, Outdoor Voices and more. After initial DTC success with the Solo Stove, management started to snap up other outdoor-active brands like Oru Kayak, ISLE, IcyBreeze and Chubbies Shorts under the Solo Brands umbrella to apply the same DTC magic. In fact, when Solo Brands went public in 2021 they chose DTC as their stock symbol. Things haven't gone so well since then, with stock falling 99% from $21.03 in November 2021 to $0.22 toady. 𝗧𝗵𝗲 𝗴𝗼𝗼𝗱 𝗻𝗲𝘄𝘀 is that they have a stable of great brands and differentiated products that generate pretty healthy gross margins of over 61%. 𝗧𝗵𝗲 𝗯𝗮𝗱 𝗻𝗲𝘄𝘀 is that the DTC model has saddled them with unsustainable operating expenses -- $435M in 2024 or an eye-watering 96% of sales. Now in fairness, $136M of those expenses were "restructuring, contract termination and impairment charges" and that’s actually down from $249M in 2023. In an attempt to weather the coming storm, they drew $277M on their revolving credit facility in January, taking total debt to over $400M. They likely made that draw now because they "expect to experience difficulty remaining in compliance with the financial covenants in our credit agreement" which would cut them off from future lending. 𝗪𝗵𝗮𝘁'𝘀 𝗡𝗲𝘅𝘁? Major work is going to be needed to turn the company around, starting with taking a hatchet to that 96% operating expense line (albeit a really sleek stainless steel hatchet). Solo Brands has great brands, awesome products, healthy gross margins and a (ironically) healthy wholesale business. Major cuts are needed on the DTC side to refocus on top-of-the-funnel marketing that drives the overall business. Here’s hoping that Solo Brands has the runway to make needed changes and keep these great brands in our outdoor stores. Follow me for more #OutdoorIndustry insights and analysis: Eoin Comerford.

Why didn't brands like Allbirds, Everlane or Casper take over the world? Part 2. The new tariffs didn’t just rattle the markets — it also disrupted some of my thinking around the root causes behind the struggles of once-hot DTC brands. They serve as a reminder of how tough it is to build a profitable and growing brand when you're dealing with physical inventory, supply chains and unpredictable markets. This post follows my previous article published last Tuesday. Profitability has always been a major challenge — but what's causing it to fall short? Competition & mindset Many founders of the 2010s era pursued the wrong goal: disrupting and replacing large incumbents. A revolution did happen, but not in the way they expected. Shopify, Amazon, and social platforms like Instagram and TikTok democratized brand creation and distribution, turning the internet into a massive marketplace with social media as its distribution engine. So millions of brands were launched. Rather than capitalizing on this shift, many millennial brands aimed to be the one brand for everyone... think Away—when the real opportunity lay in serving specific, previously overlooked audiences. As a result, many of these broad-reaching brands suffered a slow decline as new niche brands launched. Undifferentiated Does product still matter in a world where audience is everything? If your goal is to monetize an audience, maybe not. But if you're aiming to build a long-term, sustainable brand, then product is still very much critical. The unfortunate truth about many brands launched is that their edge came mostly from being early to e-commerce and capitalizing on marketing arbitrage. I vividly remember board discussions from those years — the focus was almost entirely on website and growth channels, rarely on the product itself. Those things can be important but they are not the product. Anything new in e-commerce — and even marketing, to some extent — gets commoditized. And if you don’t have a great product to fall back on, what’s left? Discounts and low margins. Inexperience & speed This might be a bit controversial, but I believe one of the biggest challenges that ended up affecting many of my peers — and myself — was simply a lack of experience. In new industries, lack of experience can actually be an advantage—mainly because the playing field is new for everyone, and there’s usually plenty of capital to absorb early mistakes. In inventory-based businesses with relatively tight margins, small mistakes can be fatal, and it may take years to recover from past errors. The real mistake, in hindsight, was pushing to move at fast speed without enough experience. That’s not to say new founders can't succeed — but perhaps it means they should take their time and be more cautious. It's a hard business after all. Why have some brands like On Running succeeded despite facing the same set of conditions? And what makes beauty and CPG different? That will be for another post.

Brands plateau because of weak LTV and over-investment in ads. There are only two ways to make money: 1. Get more customers 2. Get more value from each customer That means that the two paths to growth is customer acquisition (usually "marketing" in all of its forms), and/or trying to keep those customers coming back (lifecycle, loyalty programs, product quality). The reality is that most DTC brands' product is: • Not differentiated • Not particularly valuable • Not associated with status or brand That makes it very difficult for the customer to "care" enough to come back. They might've made an impulse buy, they might even be vaguely satisfied with the product, but they quickly move on to the next flavor of the month. Our data supports this: • 75% of customers on average buy once from a brand • Less than 10% of customers buy more than 3+ times You might be thinking something like "well 50% of our revenue is repeat!" That might be true, but that's very likely propped up by a massively valuable cohort of champions. On average we see your top 5% LTV customers drive something like ~30% of your revenue. What this means is that most brands' customer value is not meaningfully different from their average order value (indeed, it's about 1.3:1). Why is this a problem? Because every product and market has a finite amount of people. When you first get started it might be "easy" for you to grow double or even triple digits per year. Once you start piling up tens of thousands of customers you realize that it gets significantly more difficult. And that's when customer acquisition costs (CAC) start to go up. You'll naturally struggle to find more customers at the same efficient cost unless you have a massive word of mouth lift (very rare), which puts pressure on the P&L. So, you start to look at media effectiveness, maybe a measurement like iROAS (incremental return on ad spend). But most DTC brands' pre-marketing margin is only about 25%. And the average DTC iROAS (after 1200 tests) is about $3. • $3 incremental revenue • -$1 ad spend • -$2.25 non-marketing costs = -$0.25 (3 - 3.25) Uh oh. A loss on that ad spend. Even when factoring in repeat customers. CAC and iROAS will continue to get worse, and brands will often optimize toward more and more short-form tactics because they "need to hit their revenue today." • Promos • Heavy bottom of funnel • New gimmicks and gifts with purchase None of this is going to solve the problem long term. The only solution is: • Make your product worth buying multiple times • Make your product applicable to more TAM • Make your margin better than 25% • Make your iROAS better than $3 Almost all of that has to do with operations, product strategy, and brand building. NOT with performance marketing. NOT with price gimmicks. NOT with a "new app for loyal customers." Most of your problem can be solved with your product, your distribution, and your brand. Start there. Keep going. #dtc #incrementality