mornin' merry makers 🪦👟💄🚴

some of the smartest, most creative people i've ever come across worked at dtc darlins that are majorly struggling right now, especially now. to name a few allbirds, glossier, outdoor voices, peloton, parachute.

i was a customer of all them. so were most of my millennial coworkers at warby parker & classpass. we admired their branding, their oversized store designs, their cult-like community, their cheeky ads. lots of stuff that is genuinely hard to build & pull off at scale.

BUT

brand love ≠ business viability.
(for about a decade, we confused the two).

many people far smarter than i are breaking down what happened to these companies as a whole. but i’m, as to be expected, most interested in how retail played into & then ultimately against their business strategies.

i believe dtc retail is having its dot-com moment.

speculative capital, untethered valuations, and a growth-at-all-costs logic that papered over the fundamentals until it couldn't anymore. wework was our enron with their “community-adjusted ebitda”(aka webitda) and failed ipo in 2019.

we’re not in a full collapse, but definitely a correction.

today i want to highlight what went wrong with their retail store strategy so that you don’t make the same $$$ mistakes. i know exactly what apple & warby parker did to prevent their stores from going to the retail graveyard.

in 1999, capital flooded toward anything with a .com. valuations untethered from revenue. growth was the only metric. then the market corrected, hard, and only the businesses with real fundamentals came out the other side.

lots of people are making a similar argument about ai now…
but this is a newsletter about retail.

dtc brands, especially those with brick & mortar), have had a similar arc. between 2015 and 2022, digitally native brands with great aesthetics and fast online growth became irresistible to investors. to the point that several went public because the market was hot.

so yet again only the businesses with the real sustainable fundamentals will survive.

same dot-com plot.
similar dtc letters.
different aesthetic.

now let’s get specific on what went wrong here & how it could have been avoided.

turns out there were major cracks on all 4 legs of the profiTABLE, my framework for stress-testing any retail business across the four things that make or break a store's p&l: products, places, people, and processes.

one broken leg wobbles a table.

these brands broke all four…

once upon a not too long a time, everyone wanted the allbirds shoe.

once being the keyword.