Challenges Faced by Dtc Businesses

My honest opinion on what’s hurting DTC/Ecom brands in 2025: 1. Tariffs: Brands sourcing from China, Mexico and Canada face rising costs hitting their margins directly. Most aren't prepared. 2. Rising CACs: No brand has found a truly scalable channel since Meta ads 10 years ago. TikTok promised to be the answer but hasn't delivered the same ROI or scale. 3. Endless promotion loops: Running constant discounts creates customers who only buy on sale. It can help acquisition costs but can be tough to manage operationally. 4. Static shipping rates: Leaving significant margin on the table by not optimizing based on product, location, and order value. 5. Ignoring ad monetization: The top 50 retailers generate massive profits from advertising. Amazon makes an estimated 40% of profits from ads, yet most brands act like this opportunity doesn't exist. 6. Declining repeat purchase rates: The deadly combination: higher acquisition costs + lower retention = unsustainable unit economics. 7. SaaS bloat: Subscription tools for everything silently draining profits month after month. Every tool adds up. 8. AI implementation paralysis: Everyone's waiting for AI to reduce expenses but few have concrete implementation plans that deliver actual savings. 9. Overdependence on indirect channels: When customers check out on Amazon or TikTok Shop, you lose the data needed for effective remarketing and relationship building. 10. Failure to diversify into retail: DTC only brands struggle to crack physical retail, missing a major growth and stability channel. The brands that will survive are the ones addressing these hidden profit killers before they become fatal. Not focusing on the next ‘best’ product.

Building a direct-to-consumer (DTC) brand is a non-stop trek filled with potential missteps. Here is what everyone gets wrong... 🚨 In a recent episode of Limited Supply, Moiz Ali and I explored the top mistakes new DTC founders make and how to avoid them. Not Focusing on Sales Early On Many founders generating less than $500K/year lack a repeatable sales channel, relying too heavily on "word of mouth" or referrals. Prioritize identifying one repeatable sales channel—like paid ads, email, influencers, or affiliates. You need just one to start scaling, typically starting with paid ads on Meta or Google. Overestimating Customer Lifetime Value (LTV)  Founders often acquire customers at unprofitable prices, banking on optimistic repeat purchase rates. Aim for near-first-order profitability by adjusting your pricing to make unit economics work. Avoid the pitfall of spending $1 to make 50 cents unless you have substantial capital to test and iterate. Premature Spending Post-Fundraising Spending $250-300K+ on branding before securing a single sale is a common trap. Validate demand first with a simple landing page and basic ads. Invest in branding and custom packaging only after achieving substantial sales. Spending Too Much on Ads Too Soon Founders often ramp up ad spend without refining their product and funnel. Start cautiously, testing different landing pages, copy, offers, and getting early customer feedback before scaling. Neglecting Legal and Contractual Basics Simple mistakes with legal paperwork, like contracts without out clauses, can be disastrous. Always ensure your contracts are airtight and fair, especially with agencies and contractors. Handling Out Clauses Poorly Never sign contracts without out clauses. It’s crucial to have an exit strategy if the partnership doesn’t work out. Maintain leverage and protect your brand. What did I miss that you'd add? Lmk in the comments 😊

We've been working in the hemp beverage space for a couple years. It combines things we love: cannabis, e-commerce, marketing & growth I'm pretty bullish on the category in the next 2-4 years. I think it will become a multi-billion dollar category; with several large exits for players who nail it (just look at bev exits in both the alc / non-alc space to get some comparison points) This year we've helped launch brands for Wu-Tang, Woodstock, High Road Reserve. I'm seeing new brands every month. It's a market share grab at this point. Everyone wants to be a national leader, but I'd recommend owning a region or state first. Here's some learnings / advice. - No; you can't just recreate Brez's playbook for DTC growth. First of all; they have a slick marketing team behind them who has lot of experience & can offset a lot of the marketing ops costs + they have a dynamic founder who is comfortable on camera, making TikToks, etc. This likely won't be something you can implement with success. - If you're selling DTC: you're likely not going to make $ on your first order. Better make sure you have retention dialed in to keep them coming back. - DTC & Distro are 2 VERY different games to play. They will likely require a different set of skill sets or even entirely different teams. Consider bandwidth & budget before diving into both. Distro is easy (getting harder, but still doable) to land doors; driving velocity & growing accounts is the trick. I see # of doors touted as a success metric; when really that's the first step. - DTC is a customer service game, be prepared to handle issues quickly & efficiently. Having a 3PL or quick ship time is key; if it's taking over a week for products to arrive; you may not see that customer return. - Listening to lot of brands at Data Con & from my own exp; getting people to try the product is the biggest driver to growth. In packaged stores; this can be $ as not only do you need people, but you have to give out product. For DTC: it's diff & I'd recommend you test ways to offer discounted samplers, reduced / free shipping, etc to get the product into consumers hands. - Yes; you can run Meta & Google ads, but it's a game of whack a mole. Accounts still get shut down, ads still get denied. The route for Meta usually involves a intermediary landing page which adds another layer of friction to conversion. You'll need to test a lot of creative concepts to find the winner; gone are the days of "media buying" being the main skill; a lot of this is AI & algo driven now; creative is the king. - Being a national leader isn't the only way to win. Look at the craft brewing space; lot of city / regional players did very well & made good money. High Rise & Crescent 9 have done great job of this in their respective markets & now they're growing, but they really owned one market first. Excited to continue to watch this space grow; would love to hear your thoughts!

👀 𝗧𝗵𝗲 𝗗𝗧𝗖 𝗱𝗿𝗲𝗮𝗺 𝗶𝘀 𝗼𝘃𝗲𝗿. 𝗔𝗻𝗱 𝗯𝗲𝗮𝘂𝘁𝘆 𝗯𝗿𝗮𝗻𝗱𝘀 𝗻𝗲𝗲𝗱 𝘁𝗼 𝘄𝗮𝗸𝗲 𝘂𝗽. There was a time when going direct-to-consumer felt like the golden ticket: No middlemen. Bigger margins. Total control. But in 2025? DTC-only won’t get you to profitability. It might not even get you to break even. Why? 📉 CAC is up. 📉 ROAS is down. 📉 Organic reach isn’t organic anymore. And meanwhile… 📈 Retail is delivering reach, volume, trust, and profitability — at scale. But let’s be clear: You don’t need to abandon DTC. But you can’t rely on it as your core growth engine. Especially if you’re bootstrapped! Because you’re not building a brand, you’re simply burning budget. ❗️𝙏𝙝𝙚 𝙨𝙢𝙖𝙧𝙩𝙚𝙨𝙩 𝙗𝙧𝙖𝙣𝙙𝙨 𝙩𝙤𝙙𝙖𝙮 𝙖𝙧𝙚 𝙖𝙗𝙨𝙤𝙡𝙪𝙩𝙚 𝙢𝙖𝙨𝙩𝙚𝙧𝙨 𝙞𝙣 𝙘𝙝𝙖𝙣𝙣𝙚𝙡 𝙘𝙝𝙤𝙧𝙚𝙤𝙜𝙧𝙖𝙥𝙝𝙮. 🔺 DTC for storytelling and insight. 🔺 Retail for scale and profitability. 🔺 Social for community and discovery. This is the new reality: ❗ 𝙍𝙚𝙩𝙖𝙞𝙡 𝙞𝙨 𝙣𝙤 𝙡𝙤𝙣𝙜𝙚𝙧 𝙟𝙪𝙨𝙩 𝙖 𝙘𝙝𝙖𝙣𝙣𝙚𝙡. 𝙄𝙩’𝙨 𝙖 𝙣𝙚𝙘𝙚𝙨𝙨𝙞𝙩𝙮 𝙛𝙤𝙧 𝙨𝙪𝙨𝙩𝙖𝙞𝙣𝙖𝙗𝙡𝙚 𝙜𝙧𝙤𝙬𝙩𝙝. Think about it: 🌀REFY continues to achieve viral success on social, and is on track to $130M in sales by 2026 with a projected 55% of sales coming from wholesalers like Sephora. Their profit margins? A steady 37%. 🌀Gisou by Negin Mirsalehi was on track to 2,000 offline distribution points in 2024 while looking at a projected $75M in revenue. 🌀And even Glossier, Inc., the poster child for DTC, rebooted through retail — and it’s working. Their Sephora deal was responsible for more than $100M in retail sales alone in 2023, TikTok views for #Glossier surged from one billion to 3 billion and allowed the company to finally turn a profit. ❗️Now what does this mean for your strategy? 🪐 Don’t build DTC-only. Build DTC-smart. 🪐 Design your packaging like it’ll live on shelf. 🪐 Treat retail like a brand moment, not just a distribution deal. 🪐 Use DTC to test, validate, and build leverage for retail negotiations. Thoughts? Drop them below. 😍 #BeautyMarketing #RetailStrategy #OmnichannelGrowth #BrandBuilding #DTC #BeautyIndustry #BeautyTrends2025 #Growth #GrowthStrategy #DigitalStrategy #BrandStrategy #GrowthStrategy #MarketingStrategy

People are confused when I talk about "you need to follow profitable LTV:CAC." A common counter argument to LTV:CAC is "Just focus on being first order profitable." That's definitely a good piece of wisdom and ensures that you're not burning cash. But, it addresses a symptom with a bandaid rather than looking at the root cause issue of the business. Most direct to consumer brands fail to grow because there is no REASON for a customer to come back and buy more than once. In fact, of the over 1000 brands' data that I have reviewed, only about 20-25% of customers EVER repeat buy. So the logic of "don't worry about LTV, just focus on first order profitability" is sound, but, it's missing the forest for the trees. You need to dig into your business and figure out how and why someone would WANT to come back and buy multiple times. Slapping a basic loyalty program onto your website or coming out with new colors isn't enough. People don't repeat buy usually because: • The product was disappointing • The product isn't consumable / repeatable • There is lack of variety of assortment If you sell something like apparel, you absolutely SHOULD have a healthy cohort of repeat customers who will buy every season with new drops. If you're in a hard goods industry then it's tougher, and you might need to augment your business model with some kind of service or subscription layer of revenue. But, I talk to so many DTC brands that sell a thing that "should" create repeat buying, and yet it doesn't. Rather than continuing to funnel money into acquisition and trying desperately to buy yourself out of a hole (with CAC getting higher and higher over time), you need to examine how can you change to build up your LTV. Every big business in the world, ever, has a high LTV with repeat purchase behavior. Don't set yourself up for failure and just make a churn and burn business. #dtc #bfcm #ecommerce #ltv

DTC is far from attractive to invest in these days… The biggest companies have performed *really* poorly in the stock market: 😬 Allbirds: ⬇️ 96% from its peak 😬 Smile Direct Club: ⬇️ 98% 😬 Stitchfix: ⬇️ 95% And venture capital investors have noticed. From 2021-2022, VC investment fell 42% overall and 36% for US retail. DTC brands need to establish routes to profitability, efficiency is more crucial than ever… Here are 3 problems DTCs are facing + 3 efficiency-based solutions: ❌ Problem: Digital Acquisition Channels Have Regressed When paid social enabled brands to target ads – It was easier to scale and sell efficiently online. 🪦 RIP to those times 🪦 💡 Solution: Invest in Improving CAC That means: ✅ Strong creative strategy ✅ Boosting customer retention ✅ Focusing on improving efficiency above scale ❌ Problem: Capital is More Expensive 📉 Interest rates have gone from 0% to 4+% 📉 Recession anxiety increases risk perception 📉 Market volatility = higher risk premiums 💡 Solution: Financial Discipline Run an audit & optimize anything impacting your burn rate: ✅ Negotiate better terms with your vendors ✅ Cancel underutilized services in your tech stack ✅ Rebalance ad budgets towards your highest-performing platforms Without relying on fresh investment capital 💸 the way we used to. ❌ Problem: Reaching Your Customers is More Expensive Than Ever 📉 Customer Acquisition Costs have increased 75% 📉 Social Media are becoming Entertainment Platforms in competition for eyes 📉 Consumer audiences are more saturated than ever & constantly inundated with ads 💡 Solution: Explore Targeting Solutions Software solutions like Proxima can leverage AI to help you: ✅ Target new audiences ✅ Scale customer acquisition ✅ Acquire high-value customers more efficiently Which will make the money you have go *much* further. Tl;dr: Every single resource you have as a DTC company – ⌛ Time 💪 Effort 💸 Capital Is more precious than ever in 2023. Don’t waste them.

Managing channel conflict is one of the biggest risks to DTC brands launching in retail. With the proliferation of omnichannel as the dominant GTM strategy, one of the biggest risks I don’t see talked about is how to avoid channel conflict between mass retail, Amazon, and DTC. Let’s take a pretty realistic example.   A brand sells a single product for $7 on DTC. But they sell that same product for $10 on Amazon, to account for the higher cost to serve. Finally, Walmart comes knocking and wants to bring this product in, great!  But they want it priced at $5.97. See the issue? The risk is that with Amazon and Walmart as major competitors, they’ll price match off each other. All of a sudden, by launching in Walmart you’ve just majorly cannibalized your Amazon business and now have the potential to do the same thing to your DTC channel. Understanding this risk, planning for it, and mitigating it is one of the major pitfalls to avoid when going omnichannel.