Cara Salpini Senior Editor
Caroline Jansen Editor
Over the past decade, DTC brands have evolved, causing executives to rethink their strategies.
While many digitally native darlings originally vowed to avoid wholesale in order to pass savings on to consumers, many of those brands are now inking deals with retailers to expand their distribution network. On the other hand, more established brands that previously leaned heavily on the wholesale channel are now exploring the benefits of selling directly to consumers.
The changing industry has also led to a change of hands at several brands in recent years, with founders stepping down in order to usher in more seasoned retail leadership.
APL
“While we are a direct-to-consumer at our core, we always characterized wholesale as profitable marketing,” APL co-founder and co-CEO Ryan Goldston said at the ICR Conference. “We launched at Barney’s, Saks, Bergdorf, Net-a-Porter, Mr. Porter, Harvey Nichols, Selfridges, Le Bon Marché, Level Shoes, Lane Crawford — you name it, we were there.”
Co-founder and co-CEO Adam Goldston added that the brand spent nothing on customer acquisition for the first decade of APL’s existence, leaving it to grow organically. A partnership with Lululemon in 2017 also gave APL insight into what kind of demand there was for its product and how the brand was received in different markets.
“When we launched with Lululemon, we became the only third-party brand and the only footwear brand sold within their stores,” Ryan Goldston said, noting the brand was sold in 23 stores in North America. “We could see how we worked in all of these different markets, whether it was Fifth Avenue, New York; Third Street in Los Angeles; Toronto; Calgary; Edmonton; Nashville; Denver; Dallas — all these different places. In every market we went to, it worked.”
Casper
“We were very loud in the beginning about like, ‘Mattress stores are terrible,’ and ‘It’s a crappy experience,’ and ‘We’re going to only sell online.’ Well, that’s where 80% of the mattresses in the U.S. are sold. So we can either get on board, or we can be small forever. Those are the choices,” Emilie Arel, Casper’s former CEO, said during a panel discussion at the National Retail Federation’s Big Show in New York in January.
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Casper — one of the original disruptors in the mattress industry, promising to pass savings on to consumers by eliminating the middleman and shipping products directly to customers — backtracked on its DTC-only ambitions as it chased growth. The mattress company now sells products through a number of retailers, including Mattress Warehouse, Sam’s Club, Ashley HomeStore and Denver Mattress.
“We chose not to be small forever and so we expanded into wholesale. It’s a consumer decision coupled with an economic decision. The economics are different in wholesale — sometimes better, sometimes worse. It depends on who you’re working with and what the product looks like,” Arel added. “To me, it’s: Where is the consumer? And what do the economics look like? And then go from there.”
Crocs
“We think both channels are super important, right? We’re not planning to be a DTC company, we’re not planning to be a wholesale company, we are planning to leverage both channels of distribution to effectively reach a very large consumer audience,” CEO Andrew Rees said, noting Crocs is 50% wholesale and 50% DTC. “From a geographical perspective, we’re also diversified, with about close to 40% of our business from an international market.”
International is expected to grow faster than the domestic portion of the Crocs business, Rees said, “which gives us access to some fast growing, extremely attractive, international scale.” CFO Anne Mehlman added that the retailer reported record revenue in China in Q4, growing around 80% in that region.
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“But yet China is still underpenetrated compared to the rest of the world,” Mehlman said. “So still a big, long-term opportunity. We also had triple-digit growth in Australia, and strong double-digit growth in a lot of our other international markets.”
At Heydude, the company exited more than half of its “nonstrategic distribution” and has pulled back on digital rights, Mehlman said. “We are very excited for better product and channel segmentation in 2024.”
Purple
“It’s a mixed bag. We’ve got a third of those that are problematic for one reason or another and we’re trying to put our finger on it because it’s the same co-tenancy, it’s the same quality of location and yet two-thirds of them are working and a third of them aren’t,” CEO Rob DeMartini said at the ICR conference of the retailer’s store fleet. “They’re great brand beacons, but they’ve got to make some money.”
Purple’s strategy has had some other rough patches as well, with DeMartini noting that shoppers have shown “a real resistance” to buying expensive mattresses online versus the more affordable options it became known for. Profitability, however, could be reached this year, the executive noted.
“I mean, in all fairness, this company was on the brink for the last couple of years,” DeMartini said, noting that Purple “misread COVID” and didn’t have a good structure for wholesale set up. “I think we’ve turned the corner, we’re going to get healthy and there are places this brand can go, but I don’t want to get ahead of myself here. We’ve got to start consistently taking share in the core business, in the core country, and then figure out how to grow from there.”
Glossier
“We are on year 10 of building a 100-year-old brand,” Kyle Leahy, CEO of Glossier, said during NRF’s Big Show.
The executive, who in 2022 took over as CEO from founder Emily Weiss, said when Glossier launched in 2014, its mission was to change the way the world viewed beauty. That mission remains largely unchanged because, Leahy added, the brands that succeed for decades are the ones consumers can connect with on an emotional level. Reaching those customers across various channels has also been pivotal to its success.
“Ten years ago, this brand was incredibly disruptive in so many ways,” Leahy said. “The integration of content and commerce: We were born out of a blog, Into the Gloss, that Emily created. How do we think about community and commerce and content all together?”
Lovesac
“A sactional setup is typically $5,000, $10,000, $15,000 — $20,000 is not uncommon because people are getting giant basement configurations with stealth tech surround sound embedded,” CEO Shawn Nelson said at the ICR conference. “And as we continue to invent those things year after year after year, they can add it to what they already have. So this designed-for-life benefit to the customer is unlike I think any other brand in product. Forget furniture — in product.”
Nelson said the company is “one of the most successful direct-to-consumer brands, if you want to call it that” and that its return on ad spend is “the best there is.” The brand’s goal is to build products that last and a model that allows shoppers to add to them over time, whether through more couch seats or embedding storage or surround sound systems into them.
“It resonates with humans that have babies, kids, pets, dogs, friends, pizza, wine,” Nelson said. “The product can roll with you as life changes and that design philosophy, obviously, will inform all of our future designs and so we’re working on more additions to this platform and the Sac platform.”
On
“Performance, design and sustainability: This is the DNA of the brand and performance is at the core,” Martin Hoffmann, CFO and co-CEO, said at the ICR Conference. As a result, the number of athletes wearing its products is important, but so is the everyday shopper. “Because the product feels good, it looks good and it’s sustainable, it also addresses the huge lifestyle customer community, which is of course something that is very much intended. At the same time, we need to balance both customer groups. And I think this is what we are seeing.”
On is increasing share with both runners and everyday shoppers, Hoffmann said, opening up opportunities to expand into new sports and categories. Training is one such opportunity, which is the first expansion where On will launch apparel before footwear, co-CEO Marc Maurer said. The company has five co-founders, three of whom are now “very much involved” on the product side, according to Maurer.
“The five of us basically can control the direction of the company through our B shares, which is super important because you know, we’re building this for the long run — and we don’t really care about the next one or two weeks, but we care about what’s going to be the legacy in 20, 30 years from now,” Maurer said. The leadership team has grown much bigger since its founding and is much more diverse now, he added. “I think this is a journey that we will continue in order to make sure that in the long run, innovation and also the operational capability lies in the company and not with just one or two people.”
Brooklinen
“How do you maintain the things that make the company special? But how do you drive more accelerated change?” Brooklinen CEO Billy May said during NRF’s Big Show last month.
May, like Casper’s Arel and Glossier’s Leahy, succeeded the brand’s founder as its CEO. In July, Brooklinen co-founder Rich Fulop announced he would step down as chief executive and in October, May was appointed CEO. During the panel discussion, May noted that in a lot of founder-led businesses, like DTCs, nearly every decision comes back to the founder. And as those brands scale, May added, it becomes increasingly difficult for founders to continue to make every decision, “but a lot of founders fail to recognize that.”
“When you move from a single failure point, to trying to drive more accountability and decision making down into the organization, that requires a change in the way you look at the business, how you manage the business and how you affect the day-to-day operations of the business,” May said.
