Recently a consumer beverage brand striving to bring down the ABV in booze was forced to sell after failing to close a funding round. Although this news was initially surprising, an analysis of DTC companies and how they are currently functioning makes the event not so surprising.
DTC companies in a mix
A closer look at the recently public DTC companies reveals that their valuations are shrinking. For example, the share price of consumer shoe company Allbirds fell to a low of $4.50 after reaching a 52-233k high of $32.44. Moreover, the share prices of Warby Parker, a consumer glasses brand, reached a high of $60.30 per share before plunging to $13.60 earlier this month.
DTC brands nowadays confront a variety of difficulties. Even the most prosperous companies are finding it difficult to compete because of inflation, continuous supply chain problems, and an impending recession. Nearly all of the public DTC companies with a market capitalization of more than $800 million, according to Big Technology research, are experiencing rapid losses, falling margins, or a combination of both.
The DTC sector has currently suffered the most because of Facebook’s soaring ad rates. These businesses have long relied on inexpensive Facebook advertising for growth, but that risky investment is now coming due. Another factor contributing to the downfall of DTC brands is frequent supply chain issues, aggravated by the recent global pandemic.
Orchid Bertelsen, the COO of Common Thread Collective, revealed that the business environment is unforgiving for DTC brands. Common Thread Collective is a popular e-commerce platform working with DTC companies.