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A few years ago , it seemed like every new brand making noise in the market was adopting a direct-toconsumer ( DTC ) business model . But fast forward to today , there is a growing list of DTC brands that have either failed to become profitable and folded , or , even more interestingly , been forced to adopt more traditional retail models to survive . The rise , fall and evolution of many high-profile DTC brands raises questions about the future of DTC as a business model . Like many trends , the discourse around DTC is a rollercoaster , ranging from ‘ DTC is dead !’ to ‘ Look at this amazing DTC brand ! Everyone should do this .’ The truth , as is often the case , likely falls somewhere in the middle .
We recently published a peerreviewed academic study 1 in which we systematically reviewed the history of DTC and its impact and value in an evolving retail landscape . Analysing over 80 different rigorous peer-reviewed studies on DTC , we discovered a few common insights that prove the DTC model isn ’ t dead ,
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it ’ s just evolving and , in fact , it could still be a great way for smaller brands to build customer engagement . But first , let ’ s take a look at the history of DTC and why it became so popular .
The history and growth of DTC In the 2010s , early digital-native vertical brands ( DNVB ) such as Warby Parker and Glossier gained a lot of attention for their use of technology to reach consumers online . Building their businesses around technologydriven retail services , and focusing heavily on social and user-generated content , these growing brands aimed to disrupt traditional retail models .
Instead of the standard 30-40 percent trade margin that traditional retailers were factoring in as a cost of selling products , DNVBs went straight to consumers , often through social media , short viral videos , and simple go-to market products , such as Dollar Shave Club ’ s subscription razors and Allbirds ’ sustainable sneakers .
But while these brands are often credited with popularizing the DTC trend ,
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One of the key benefits of DTC is that brands interact directly with shoppers across the customer journey . |
the term itself has been around quite a bit longer . In fact , DTC arose in the 1990s after the commercialization of the internet , when the FDA allowed US pharmaceutical companies to advertise prescription drugs and other legalized pharmaceutical products directly to consumers . What set the DNVBs of the 2010s apart from their predecessors was the amount and velocity of external investment they received .
The brand Bonobos received multiple rounds of funding totalling $ 127.6 million , for example , while Casper , the bedding and furniture company , raised $ 339.7 million before going public in 2020 . ( It was taken private in 2022 by Durational Capital Management after struggling to turn a profit .) Some rode the wave of their success into major acquisitions , like Dollar Shave Club ’ s $ 1 billion sale to Unilever and Bonobos ’ eventual sale to Walmart . ( The retail giant has since sold Bonobos to WHP Global and Express for $ 75 million , after paying $ 310 million for the apparel brand in 2017 .) ►
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Sustainable sneaker brand Allbirds went public in 2021 . |