Is the collapse of Brandless a sign that the DTC model is potentially another dot-com bubble ready to burst?
This is, firstly, a pertinent question we must ask. Secondly, we need to be hyper mindful of the first major collapse of a billion-dollar DTC brand.
The DTC model is a thing of genius. Over the past decade, so many new and great businesses have seen huge success in a short space of time. However, I do have reservations with regard to the sustainability of the model. Brandless bore testament to that, showing us one amazing thing: It’s not for every business.
We shouldn’t specifically criticize Brandless for it, either. Instead, we need to take a collective step back in order to work out the real reason for its demise and learn as much as possible from it.
Brandless was, alas, just not meant to be, and we can compare the scenario it found itself into the dot-com bubble, which ran from the mid-90s and burst in the early 2000s.
Of course, this tech epoch was far more dramatic, but parallels can be drawn and applicable lessons gleaned. Brands started to shut down due to the sustainability of the dot-com model while the best of those players ultimately rose to and still remain on top.
This is the reason some DTC brands can be sustainable. And not only that, these brands will one day become international powerhouses.
Here’s how best to achieve this for your DTC brand.
Vanity metrics such as impressions and reach are too much of a focus. What we should really be caring about is the public adoption of these new companies. You may be backed to the tune of a quarter billion, but throwing money at the problem doesn’t usually fix it.
Brandless had an amazing start. They posted multiple times a day on social and published influencer posts, PR and other forms of media, but over the last six or so months seemed to disappear.
The most important part of DTC is staying in front of your customer consistently with meaning, not just a high overall frequency.
While doing this, you need to create a connection, not a relationship. A connection and a relationship are similar, but creating a connection is meant to draw a line between two things. A relationship is one that shares attributes.
You can have a connection without a relationship and vice versa. This is huge when we look at advertising in DTC. If companies like Brandless focused more on the connections they created during their early years, they could have been more successful.
Ability to adapt
Brandless had a brilliant idea. It didn’t work out this time, but based on the current statement on its website—“We’re hopeful the future holds a new version of Brandless and that we see you again”—that we’ll see them again.
The biggest issue Brandless had was its financial model. It’s not possible to sell products of quality constantly to different people at a goal price of $3.
You could have the best supply chain and manufacturing process in the world, but the current DTC cost of acquisition per consumer good is averaging $22. This means a customer has to buy 7.33 products from Brandless to even cover that cost. Couple this with the sales funnel, remarketing and post-sale, and this isn’t an experience that makes consumers want to.
In its defense, Brandless did have a model that stood out from the crowd, and for that we should be thankful, as it helped push the global DTC market in the right direction.
That said, for a company this size and with the backers it had, I’m surprised they didn’t say something to their consumers about its pricing issues, given how consumers expect honesty and transparency from brands in today’s world.
If you’re not making money but people like what you have to offer, then change it. Brandless’ whole model was price availability for many different products. A brand doesn’t need the same (or similar) pricing for everything. As long as you are under average market pricing, have a high perceived value and offer high quality it can change the cost.
Something courageous Brandless could have done would be to talk to their consumers about the pricing issues they were facing seven months ago before it came to this. Changing the model is OK. And if you’re open about it with the right messaging, people are usually OK with it, too.
With the close of Brandless, we all look to the future to see what might be next for the chopping board or what is going to change the world. We should learn from Brandless that it’s OK to change, adapt and be loud. DTC isn’t for all businesses, and less than 20 years ago, DTC wasn’t even really a thing.