The MLM-ification of DTC

“When I think about DTC companies that are raising VC dollars, they are funneling a huge majority of that money back to Facebook and Google,” says House of Wise’s founder, Amanda Goetz. “We’re at this inflection point of e-commerce where I truly believe people are the distribution channel. We are turning to humans over brick-and-mortar and paid ads... See more

As customer acquisition costs rapidly increase, due to higher CPM rates and lower efficiency, the 2014 strategy of cutting costs by stripping out the middle-man no longer works. To be successful (read profitable), DTC needs to get a few critical things right:

The promise of the internet has always been a low barrier to entry enabling unique people and brands to find passionate audiences and sustainable business models. That is more possible now through the combination of direct distribution, vertical focus and (often) direct monetization models. But the brands that can pull off DTC strategies need to be... See more

A lot of DTC brands, across categories, adopted “reviving the middle” strategy in the form of good quality items at affordable prices and excellent service. The downside of this model is that it’s costly, and most of these brands emulating it are VC-funded and not yet profitable. Scaling this model is also a challenge, as costs of supply, productio... See more

The next generation of brands will still start with the story, but the other moats (logistics, distribution, sponsorships, etc) wither from there. We’ll see the next generation of “DTC” (direct to consumer) brands migrate to traditional retail channels, join large cross-brand data co-ops, shift marketing dollars to community management, and generat... See more

Digital has led to market fragmentation in nearly everything. Reduced opportunity costs have spawned a plethora of Direct to Consumer (DTC) brands which will continue for the foreseeable future. Small niche startups will continue to build followings and “tribes” in ways that couldn’t have been imagined in the pre-internet era.