New Rules for Scaling a Successful D2C Challenger Brand
The new must-haves and lasting table stakes informing the D2C brand playbook.
By Sonal Gandhi
Chief Content Officer at The Lead
Each year, we talk to hundreds of founders of challenger direct-to-consumer brands to identify the Foremost 50 that are truly challenging the marketplace. Our goal is to identify the common traits these businesses have that are helping them gain market share from incumbents in a tough competitive environment, so others can learn from it.
This year’s Foremost 50 are operating in a very different environment than the earlier generation of digital-native brands. The recipe for building a successful d2c brand is evolving with changing times.
Here are the new must-haves for the D2C playbook.
Profitability: First-purchase profitability is the new gold standard for d2c brands. Many on our list are there while others are striving to be. The goal is to keep the AOV to CAC ratio positive and not rely on customer lifetime value to become profitable.
Creative Customer Acquisition Strategy: To compete for eyeballs in this “attention economy”, young brands have to get creative with both the message and the medium. From going viral on TikTok to unusual product placement and from celebrity investors to tapping into niche communities, the honorees on our list have displayed amazing abilities to think outside the box in order to acquire customers.
De-risked Supply Chain: Young brands don’t have a lot of bargaining power when it comes to their suppliers. The covid-led supply chain disruption has made it essential for startup brands to build deep relationships, negotiate favorable terms and diversify their supplier base.
Channel Diversification: D2C brands of the last decade stayed faithful to digital and direct channel for many early years before branching out. That is not the case anymore, as brands look for faster growth. Wholesale partners and mall operators also seem much more eager to work with growing digital natives brands than in the past.
Thoughtful Category Expansion: Expanding SKUs can help brands improve AOV and LTV, but it can be expensive and distracting from the core mission. It is, however, a consideration each brand must make at a much earlier stage of growth.
But some things remain table stakes.
Product Innovation: Delivering a product that adds value beyond what’s currently available in the market is essential. It also helps to be playing in a rising category such as wellness, or in a category that has few large incumbents with little incentive to disrupt themselves.
Storytelling: Every brand on this year’s list is breaking through because they have a compelling reason to exist, they are great at telling that story, and they are savvy about choosing the right media to get their message across.
Community: Foremost 50 2023 brands, as others before them, have cultivated loyal customer communities to provide input into product development / improvement and for word of mouth marketing. Some brands in turn link themselves to the larger mission of giving back to their customer communities or supporting the causes that important to their community.
“These brands are successful because they understand how to play in a ‘post-channel era’ where customer journeys are not linear and consumers expect to find their products everywhere – the brand’s website, Amazon, marketplaces, or physical retail,” according to Laura Colagrande, Lead Go-to-Market Strategy at Cart.com.
“They not only prioritize operational excellence but also consider themselves and behave like a media company: they build trust and loyalty through consistent, community-relevant content and that helps them retain an ownable audience that is inherently invested in their business.”
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