Maya Kosoff wrote an article on Medium titled Why All the Warby Parker Clones Are Now Imploding.

« Once you get past all the shiny objects in the DTC [direct-to-consumer] category … it turns out it’s extremely difficult to actually make the economics work. »

« According to eMarketer there are now more than 400 DTC brands. »

« The investors bankrolling these companies are discovering one thing in common — that most of their money is going to expensive and ever-rising customer acquisition costs (CAC) via Google, Facebook, and Instagram. As one DTC investor has put it starkly before: “CAC is the new rent.” »

« And even after these startups get on the treadmill of paying digital rent, they are then finding themselves also paying actual rent. After all, the most effective billboard is an outdoor L.A. luxury mall or an expensive SoHo storefront, which can cost some $60,000 a month. »

« Perhaps the original mistake of the DTCs wasn’t in their vision, but in their decision to take the venture capital in the first place. Now under pressure to grow even faster and at greater scale »

« the dawning realization that building a customer base from scratch is actually quite hard — and incredibly expensive…. Now, everyone is armed with the same millions of dollars in funding; they’re all targeting the same users, and they’re all driving each other’s marketing costs up. (Marketing software company AdStage analyzed its Facebook impressions data and found that the median cost-per-click for Facebook news feed ads has risen from $0.43 during the second quarter of 2018, to $0.64 during the second quarter of 2019.) »

« Last fall, Rittenhouse said Brandless would try to get into major retail stores, shifting away from its online-only business model. Instead of disrupting Target, the company suddenly wanted to be sold in places like Target—a common trend among many once digital-only DTCs. But even this never ended up happening; in January, Brandless announced it would shut down. »

« the one sound piece of its strategy, at least in theory, was going after that repeat customer. The reality is, most of the high-profile DTCs have built their brands on a singular product — whether it’s Warby with glasses, Casper with mattresses, or Away with suitcases… The reality is, most people only need to purchase a suitcase once every five to 10 years. »

« “This appears to be Casper’s business,” tweeted number-crunching Atlantic columnist Derek Thompson. “Buy mattress at $400. Sell at $1,000. Refund/return 20% of them. Keep $400, on avg. Then spend $290 of that on ads/marketing and $270 on admin (finance, HR, IT). Lose $160. Repeat.” »

« From Casper’s S-1, we learned that in the first nine months of 2019, it had a net loss of $67.4 million, after losing $93.2 million in 2018 and $73.1 million in 2017. Its warning to investors? The company may never become profitable. »

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