No. 317: The DTC Playbook Is a Trap

Highly venture-backed DTCs largely have two pathways to longevity and success. They can sell to an incumbent, much in the same way that Bonobos and Jet.com have sold to Walmart, or they can try their luck and go public. The incumbents are willing to overlook the less than ideal DTC economics because what they’re buying isn’t a business model, it’s ... See more

I think this drives at a more fundamental failing by Brandless in particular, that is likely true broadly: the company’s cost structure was completely unsuited for DTC. My strong suspicion — admittedly biased, given Stratechery’s business model — is that the biggest opportunities in DTC are in niches, and the best way to exploit those niches is by ... See more

Brands playing the long game go to great lengths to become vertically integrated. That is, they own and control their production and supply chains. This requires plenty of upfront capital, to be sure, but the move plumps up a company’s margins and allows for quick product development and iteration.