Why Incumbent Brands Are Purchasing D2C Businesses
Brands without any access to customer data are fighting a battle with one arm tied behind their back. This is not a new trend, the only thing that's new is that more and more brands are now taking action.
Even Budweiser has been saying you can now get a beer shipped to the store through their retailers. Attempting to eliminate any channel conflict and trying to get closer to the consumer.
Well, Nestle has recently acquired Freshly, a subscription home delivery business for up to $1.5B -- I view this as Nestle D2C.
This space has been historically difficult to crack. Retention is difficult and costs are high. Many of these VC-backed and IPO firms struggled until the pandemic hit. Will it be different after the pandemic goes away?
BTW - It has to be rough as a CEO when your celebratory announcement tells the world that you have a tough earn-out ahead of you.
There was a lot of discussion about companies pivoting D2C, and the data issues that arise with that - both for consumers, and for companies (are they getting useful data? do they know what to do with the data they acquire? how can they translate this to customer loyalty and more dollars?)
Joe Pak posed some curious questions: “Would be interesting to get a list of D2C brands and acquisition costs to see how sustainable this model is. Maybe on one end you have Wish, Warby Parker, AllBirds, etc. What's it like moving forward? Wasn't one of the reasons for Groupon's demise super high acquisition costs and not retention? I know Wish/Groupon are different type of companies. But I'm assuming all spend a ton of money on Google/FB and keep hoping to grow!”
Nicholas Howell added that it is essential to ensure that “merchants have access to their own customer behavior and related data, so that they can action upon these insights for the benefit of all involved. Open, fair, transparent. Too long have technology companies been barriers in this regard, hoarding the data to themselves and leaving merchants in the dark; this must change. It's time for merchants to regain control of their hard-earned customer relationships.”
Juliana J. summed it up pretty succinctly: “it's insane to think you can win in ecommerce without customer data.”
