The Future of Digital Retail Is So Bright You Gotta Wear Shades
DTC companies are turning to physical retail in an attempt to prove they are more than just hype
“They make your forehead look big,” my straight-shooting wife belted out with a chuckle. “Okay…” I said, slightly offended. “How about these glasses?” hoping for a more confidence-building response. “Now you look like that televangelist preacher from the 90s, Jim Baker,” she replied.
“I think we’re done here,” I said to the lab-coat-wearing salesperson.
I’ve never found the experience of buying eyewear fun, but when the digital darlings of prescription glasses, Warby Parker, came along, we cheered them on. Warby Parker filled a void in the mature eyewear market, and have since built an elaborate supply-side network and developed a captivating brand strategy. They solved a vexing problem for consumers — the challenge of figuring out which glasses fit their head, face, and personality best — by shipping customers up to five different styles. Most of all, though, the company was dedicated to making the eyewear shopping experience more enjoyable and less clinically draining.
Yet, I worry how the rosy view of Warby Parker’s announcement to go public via a direct listing might fog up our better judgment and prevent the public from seeing the complete picture of the Direct to Consumer (DTC) challenge: making a profit. Last year Warby Parker brought in $393.7 million while logging a loss of -$56.9 million.
Wall Street continues to give Warby Parker — and many other online DTC brands like Allbirds, The Real Real, and Casper — an open checkbook and a hall pass on losing money on the prospect of scale. Could it be that Wall Street, venture capitalist, and founders are hyping up these valuations to get average investors into the market? I think so. While there’s money to be made from DTC in the short term for the early, inside investors, the long-term prospect of average outside investors profiting is slim.
The public hears a lot about how fast the DTC revenues and customer counts are climbing. But we don’t get enough detailed information on how much the costs are increasing, the money they’re losing, or when, if ever, they expect to turn a…