‘A Reckoning.’ The Direct-to-Consumer Craze Is Slamming Into Reality.
An industry built on cheap Facebook ad space and low-cost shipping is crashing with no bottom in sight
They were the hottest names in tech. Brands like Warby Parker, Stitch Fix, FIGS, and Allbirds pioneered a new form of retail, one that went “direct to consumer” — via the internet — instead of selling through established outlets. Riding the promise of low overhead, no middlemen, and a seemingly infinite pool of customers, these companies’ valuations soared well into the billions. They appeared unstoppable. But today, they’re crashing hard with no bottom in sight.
A gloomy confluence of rising Facebook ad prices, worsening ad measurement, soaring shipping costs, newly-sober public markets, and smaller-than-anticipated customer bases are dealing “DTC” companies a harsh blow. A Big Technology analysis of public DTC companies with market caps of more than $800 million found nearly every one of these companies are dealing with revenue contraction, shrinking margins, runaway losses, or a combination of all three. Together, they’ve lost billions in market cap in 2022, drastically underperforming the market in an already bad year.
“There’s certainly a reckoning happening,” said Orchid Bertelsen, COO of Common Thread…
