While digging into the consumer brands that won this year’s honors in CircleUp (see related story below), I got curious about how the investment firm is sizing up the D2C landscape. Patrick Robinson, a general partner at the company, which specializes in backing entrepreneurs, filled me in about what’s currently on his radar.
D2C FYI: What trends are you noticing?
Patrick Robinson: What’s old is new again. At the beginning of the internet, there was this omnichannel buzz.
Five years ago or so, it switched to this idea that direct-to-consumer is the only way you can fully own the customer relationship, talk directly to consumers and provide the best experience.
To a large degree, that is very true. But now we see a massive course reversal. D2C brands realize you need to meet and educate consumers where they are, and often that means working with retailers or becoming a retailer. It’s beneficial for all parties.
D2C FYI: So you’re not so keen on the pure D2C model these days?
Robinson: Honestly, it’s been highly dependent on raising a fair bit of venture capital, and spending much of it on digital marketing. There have been a few successes, but I would argue that there haven’t been enough successes to say, “This is the right way to do it.”
Certainly, it’s worked with all-digital brands like Harry’s and Dollar Shave Club. But that’s a select few instances. Really, the most successful brands were those that pivoted to omnichannel pretty early on.
D2C FYI: Another reversal is that many D2C brands that once vowed to sell just one thing — like sneakers or mattresses — are diversifying. Is that a good thing?
Robinson: I’m optimistic about diversifying. If a company has a phenomenal product and brand that’s built a direct connections with consumers, I would say diversifying is a worthy experiment. People love Allbirds shoes. There’s a good chance the company can make other things people will love, too. And it can help companies with inherent structural challenges: How many pairs of shoes do any of us need to buy each year?
D2C FYI: Is there a downside?
Robinson: Yes. The pessimistic side of me realizes many of these companies have raised an incredible amount of capital, and with that comes expectations about growth rate and overall sales. That might force them to move too quickly into some other categories
D2C FYI: Are there some brands you think are doing an exceptionally good job right now?
Robinson: On the ecommerce side, I think apparel is really, really challenging. Yet Fashion Nova has quietly become just an absolute behemoth in fast fashion, sort of in the same vein as Forever 21. And then Revolve, which just went public, is a little bit more of a mix of third-party labels plus its own brand.
D2C FYI: Besides investing, I imagine you hand out advice to a lot of start-ups. What are your best tips?
Robinson: In the earliest stages of business formation, have a very clear idea of the consumer problem you’re trying to solve. Make sure you have that customer-centricity to say, “Here's the problem. How do we build awareness?”
And second,try to build up a connection with your consumer base in any way that you can. That means avoiding some of the addicting qualities of paid media and customer acquisition. It's never been easier to start a consumer product brand online, between Shopify, Facebook and Instagram. So find ways to reach people without having to pay for it every time.