The different playbooks of D2C brands

Over the past half a decade, the tidal wave of niche brands delivering new kinds of products to consumers and doing so online has changed the retail and CPG landscapes forever.

This shift has in some way caused a shakeout in traditional retail, with once-popular retailers announcing store closures (JCPenney, Sears) or even liquidation (Payless, Toys R Us) and has sent fashion houses and CPG brands on a soul-searching journey. The changing demographics and desires of shoppers have also fueled the decline of traditional brands and their distribution mechanisms.

This bleak scenario of incumbent consumer brands is in stark contrast to the rapid emergence of a host of digitally-native Direct to Consumer (D2C) brands. A few D2C brands have been successful enough to become unicorns! Retailers like Walmart, Nordstrom, and Target have quickly adapted to the D2C era.

Walmart has made a string of acquisitions beginning with Jet.com and Bonobos. Nordstrom has broadened its assortment to include D2C brands, Target has partnered with Harry’s, Quip, and Flamingo – all of which have rolled out their products in Target’s stores across the country. Target has also invested in Casper, which is the latest D2C brand to become a Unicorn.

Venture capital firms have invested over four billion dollars in D2C brands since 2012, with 2018 alone accounting for over a billion. With investment comes pressure to scale and deliver profits. And this pressure is bringing the focus on some pertinent questions – How are these D2C brands going to evolve and how could they sustain as businesses?

Like always, the pioneering companies find their path and we then derive the playbooks out of them. From PipeCandy’s analysis of several D2C brands, we see the following approaches taken by D2C brands.

• Playbook 1: Brand’s purpose anchored around one product category
• Playbook 2: Brand’s purpose anchored around multiple product categories
• Playbook 3: Brand’s purpose anchored around aggregation of other brands (for sale or rent)

We discuss the market size and capital availability factors that influence the paths and the outcomes.

Table of Contents

1. D2C playbooks
   1. Playbook 1: Brand’s purpose anchored around one product category
   2. Playbook 2: Brand’s purpose anchored around multiple product categories
   3. Playbook 3: Brand’s purpose anchored around aggregation of other brands (for sale or rent)
2. Access to capital and how D2C playbooks are impacted
3. The VC route to scale
4. The non-VC route to scale
5. Outcome without hitting scale
6. Roll-ups by strategic buyers
7. Roll-ups by financial buyers
8. Brand incubators

Brand’s Purpose anchored around one product category: