After the DTC shakeout in the past year, where flagging, unprofitable businesses such as Parade and Outdoor Voices were sold at fractions of their peak valuations, this year saw brands focus on finding the right balance of investing in growth while keeping a lid on costs. Several emerged as winners.
The start-ups that thrived leveraged consumer data to develop products they know their customers will buy, opened stores in regions where they already have a following and advertised with content they know their audiences will pay attention to. Look at shoemaker Larroudé, which grew sales and profits by introducing new products based on materials or silhouettes that are already selling well. A host of traditionally wholesale-driven brands, such as Calvin Klein and Levi’s, also adopted these strategies as they focused on their DTC businesses amid the waning influence of department stores and turmoil in luxury e-commerce. The strongest brands used learnings from both DTC and multi-brand retail to find their best, most loyal customers.
What became clear in 2024 was that companies with the most promising growth are ones that create desire for their brand outside of price and convenience. The most successful have built a community of zealots, through in-person events and engaging content, who recruit new customers for them, like activewear brand Bandit Running and skincare start-up Topicals. The dupe brands that mainly appeal to shoppers who can’t afford luxury but won’t buy Shein, such as Italic, are also looking to create brand identities separate from their affordable price tags.
Looking ahead to 2025, the big unknown for the winners in the sector is whether they will find exits at the valuations they think they deserve. Activewear brand Vuori managed to secure a nearly $6 billion valuation in November, but many brands are less likely to find the same fortunes in the current market. If interest rates keep falling and the incoming presidential administration proves a boon to businesses, we could be in for an influx of M&A activity.
Top Stories
What It Takes to Win at DTC in 2024: The DTC bust of the past two years has cast a cloud on the sector, but emerging fashion brands with a better handle on supply, demand and customer retention are seeing profitable growth.
What Luxury ‘Dupe’ Brands Get Right About Shoppers: Start-ups like Quince and Italic that sell affordable basics made in the same factories as high-end brands are generating massive growth in appealing directly to middle-class shoppers who don’t want to resort to Shein hauls.
Everlane Still Wants to Be a $1 Billion Brand. Is That Even Possible?: Founder Michael Preysman and his investors are back in growth mode after cost cuts and changes to the product mix stabilised the balance sheet but failed to lift sales. Whether the start-up can still become an apparel giant despite several lost years will test if the direct-to-consumer curse can be reversed.
DTC Brands See a Long-Delayed Path to Exit in 2024: While the DTC landscape’s turbulence isn’t completely over for brands, the prospect of a better economy in 2024 is encouraging profitable brands that shied away from M&A last year to start preparing for an exit.
Case Study | How Brands Can Balance DTC and Wholesale: Emerging and established labels today are realising they can’t be exclusively DTC or wholesale. What’s essential is to strike the right balance of both. To do that, brands are streamlining retail partners, better curating products for different channels and leveraging the individual strengths of wholesale and DTC to bolster their sales and profits in each.
How Brands Can Beat the E-Commerce Slowdown: The upside for online sales may be lower than many retailers anticipated. Physical stores and social commerce could make up the gap.
How to Save a DTC Brand Without Crushing Its Soul: The past year has seen a stream of last-minute rescue deals for once-hot start-ups. Acquirers of formerly distressed brands weigh in on how to improve operations and retain what made them special in the first place.
Why DTC Brands Aren’t Swayed by Cheaper Social Media Ads: The cost to advertise on Meta — once digital brands’ primary marketing channel — has finally come down. But start-ups will continue to decrease their reliance on social media, including investing more in offline advertising and in targeting customers on Google, where the intent to buy is higher.
How Emerging Brands Can Build DTC Businesses: In London, where independent labels have been hit hard by the implosion of key stockist Matches, brands like Clio Peppiatt, Marfa Stance and Completedworks have grown direct-to-consumer businesses that peers can learn from.
Why Some Fashion Brands Are Embracing DIY E-Commerce: With rising competition to acquire and retain customers online, digitally native start-ups are determining how to strike a balance between developing their own e-commerce features in-house and partnering with external software providers.
