‘Member when every startup wanted to be “the Warby Parker of (their product category)”?

That was in 2019-20, heading into the pandemic (which itself was great for DTC in general).

Let’s check the scoreboard now, 5 years on:

Smile Direct Club? Bankrupt, Sept 2023 (owing nearly $1B)

Blue Apron? Sold for pennies on the dollar.

Allbirds? Trading under $7, down 99% from its peak.

And Warby Parker itself? Down over 80%.

Even the survivors are barely surviving:

Wayfair: Down 89% from peak

Stitch Fix: Down 95%

Rent the Runway: Down 98%

These aren’t cherry-picked examples. The entire DTC sector has dropped even harder than the dot-com crash!

And the brutality doesn’t show signs of letting up anytime soon.

Customer acquisition costs keep soaring to wild new heights. iOS privacy changes killed targeted advertising, which never really returned. Digital marketing is nowhere near as trackable as it once was.

It’s just super expensive to get good traffic, and the platforms aren’t helping.

Google does everything it can to push algorithm-driven junk clicks to online stores, often at obscene costs per click. I’ve seen click bids of US $90 on products selling for not much more.

Meta, TikTok and Pinterest are just as bad.

There are things you can do, but it means NOT doing what no longer works, hoping for miraculous results.

The surviving brands are frantically adapting:

• Warby Parker now has more physical stores than ever
• Allbirds is in major retailers
• Wayfair slashed 730 jobs last week and is moving into more retail stores
• Everyone’s hunting for sustainable economics

In I Need That, I write about how success often blinds us to changing realities. These companies didn’t merely run into evolving consumer needs. They discovered that “cutting out the middleman” usually means becoming one — with all the costs and none of the advantages!

Action for today: Look at your unit economics without the growth story. Are you building a business, or mostly buying customers you can’t afford?

Need help evaluating your product’s path to sustainable growth? Graphos Product has been guiding innovators for over 30 years. Hit reply if you’d like to discuss your strategy.

Laurier

Product Payoff: When Nike launched its big direct-to-consumer push, it held onto its retail partners. Proving the middleman can be your margin insurance, and not necessarily the enemy!