2/ First DTC is a channel. It is not a revolutionary new product and it has existed for 20+ yrs.
It is a channel that is great for iterating on a product (because you can change pixels easier than atoms when tweaking packaging, ingredients, etc) but tough for scaling
It is a channel that is great for iterating on a product (because you can change pixels easier than atoms when tweaking packaging, ingredients, etc) but tough for scaling
3/ There was a time when scaling via DTC made sense. That ship sailed…then that ship got burned.
Today DTC companies are almost universally getting crushed under the weight of rising CACs. It is one of many reasons they are moving offline.
Today DTC companies are almost universally getting crushed under the weight of rising CACs. It is one of many reasons they are moving offline.
4/ One result- many of the best consumer investors are out on *DTC only* (but still love omnichannel -as I do)
5/ There are certainly a few polished entrepreneurs who are tricking some late stage investors into giving them tons of $$$ to buy more TV ads.
6/ The result is you have CPG companies that happened to sell through a channel called DTC and because of that get 20X more funding and 30x higher valuations than they should…..at least for now.
7/ But the time of reckoning is coming. This is in part Web’s point here. These companies will get valued eventually off of EBITDA. Or those that will get valued off of revenue will be *far* lower rev multiples than where Tiger/Fidelity etc are pricing them at today.
8/ Down rounds are coming for DTC companies that haven’t found a hack on growth (read: about 99% of them). Those that are lucky enough to escape to the public markets I think will end up seeing really tough stock performance over the subsequent 2-3 yrs and then get bought out.
9/ Kind of feels like musical chairs a little huh?
10/ I’m still looking for more answers to this and don’t mention @mydrunkelephant or @harrys, both of which were at least 50% offline when sold.
11/ The other point that @web makes here is around data and retailers use/interest in it. I think over the next 5 yrs retailer investment into leveraging data (their own and external non-commoditized data) will grow dramatically.
12/ [Editor's note: I had cooled my jets a bit on Twitter over the Holidays but @Web inspired me to come back]
