I did stream the session on what D2C founders can teach other retailers. The panel had plenty to say about marketing in general, but I was struck by the debate over performance marketing versus brand-building stories.
Panelist David Heath, co-founder and CEO of Bombas, the D2C sock brand, offered the most pointed advice.
He said the six-year-old company, which has built its business by linking every purchase to a sock donation for the homeless, has doubled its ad budget every year, with about 40% going to Facebook.
“And next year, we’re allocating a portion of that to brand marketing, but only because we are ending the year with $30 million on the books,” he told the audience.
He knows many D2C brands rush into brand-building endeavors early on, with investment money. “But my advice is to focus on performance marketing… then, when you have cash on the balance sheet, you can move into brand marketing — this thing we have no real way to track. I wouldn’t risk early capital on stuff like that.”
Heath acknowledged that there needs to be a healthy friction between the two, “like art and science.” He noted that if a company like Nike only did performance marketing, “you’d walk by windows full of nothing but black sneakers, instead of a whole rainbow of colors.”
He was also frank about the distractions that can hurt D2C companies rushing into retail too soon.
Other panelists, including Melissa Mash, CEO and co-founder of Dagne Dover, talked about how helpful retail has been for overall sales, including the company’s Soho popup and presence in Nordstrom. Customers can just how much stuff the company’s totes can hold, she said, translating into real retail sales as well as online growth.
Heath said retail didn’t work so well for Bombas.
“We did one small kiosk,” he said. “It was such a distraction. The kiosk did $500 a day, and at that point, the website was doing $13,000 a day. Yet our people were all concerned about the kiosk. So we shut it down after three weeks.”
Eventually, that’s likely to change. “We’ve grown at triple-digit rates year-over-year” — and when that rate slows, likely between three and five years out, Heath said it will look more closely at retail and wholesale. “Our goal is to build a multibillion brand like Lululemon, and it has yet to be seen if that can happen only by selling online.”
Nate Checketts, co-founder and CEO of Rhone, a men’s performance sportswear brand sold in Equinox gyms as well as online, said he sees this issue a little differently.
He acknowledges that most D2C startups feel the need to be good at everything, and "it’s easy — maybe easier than ever before” to launch. “But it may be harder than ever to go from there to a billion-dollar brand.”
He says Rhone views retail as a way to lower the cost of customer acquisition. “We quickly realized retail is a skill set, and that our popups had to lean in. Not only did we go into it knowing they had to be profit centers, but we wanted them to build brand awareness, deepen loyalty and educate customers. We wanted 100% of foot traffic to know more about our brand,” he said. “You don’t have to choose.”