Peak Direct-to-Consumer (Long Sharks to Jump)
We’ve been discussing direct-to-consumer (“DTC”) digitally-native-vertical-brands (“DNVBs”) since our inception because we thought it was important to give restructuring professionals a more well-rounded narrative about what is transpiring in retail today. We hope that at least some of you have been paying attention and have baked the overall trend into your talking points: let your more-neanderthalic peers/competitors lazily repeat “the Amazon Effect” at every turn. You know what’s up.
And so, of course, there’s now a DTC DNVB for basically everything. Like, literally. Have erectile disfunction? There’s a DTC DNVB for that (at least two, actually). Want organic feminine products? There’s a DTC DNVB for that. Glasses? We all know that one. Mattresses? Damn straight Mattress Firm knows those. You name it and there’s probably a DTC DNVB for it.
And so now, of course, there are at least two DTC DNVB paint brands out there competing for your hard-earned dollars. That’s right: paint. They’re called Clare ($2mm of seed funding back in September) and Backdrop.
Interestingly, their stories sound remarkably similar. From Clare’s website:
Paint has the power to completely transform a space and that’s exciting. But the first step — paint shopping — is universally known as a headache. Anyone who’s shopped for paint knows the process can be confusing, overwhelming, and downright painful. We believe shopping for paint should be a joy, not a hassle, so we took on an archaic industry to reinvent the entire experience. We’ve created a better way, an expertly curated color palette, the highest quality paint, no-mess, no-fuss color sampling, and the best painting supplies all delivered to your door. Plus, guidance to get you going and keep you inspired along the way.
And, this, from Backdrop’s website:
Welcome to Backdrop. Where we believe choosing your new backdrop should be easy and painting should fun. Let's be honest, painting today is pretty painful. From multiple trips to the hardware store to tiny crappy color cards; from messy sampling to expensive supplies—the paint industry is deeply outdated. Backdrop is here to change that—we're making more than just paint. We're transforming the whole process of painting. We've done the hard work so you don’t have to—from curating the perfect color palette to sourcing the highest quality supplies. We’ve got you covered with everything you need and nothing you don’t to get your job done right . . . whatever “right” looks like to you. After all, we think you’re the expert at choosing your life’s backdrop.
We get it: paint shopping is “painful.” We get it: there are too many colors and the sweet spot, apparently, is 50-55 options. We get that a $45-$49 price point is where it’s at. And we get that paint cans are annoying to open and have terrible design. But, really? Is this the future of paint shopping? Can an upstart paint company really scale based on brand identity built on newly designed paint cans with fancy fonts and disrupt the long-standing incumbents in the space?
Look, the effect on big consumer products companies by the likes of Dollar Shave Club, Glossier and others is real. But they’re also recurring categories: men need replacement blades and women run out of makeup. And so is this one of those bits where we argue that The Sherwin-Williams Company ($SHW) is effed and that another brick-and-mortar retailer is heading to the bankruptcy bin? No. It’s not. It’s one of those bits where we say the brand-based DTC DNVB trend is really starting to jump the shark. This is beginning to remind us of the Uber-for-X craze that led to…well, what, exactly? A lot of #BustedTech.
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Speaking of DTC DNVBs apparently the paradox of choice is very real because in addition to having too many paint colors to choose from for your newborn’s room, there are also too many stroller options. And apparently millennials get flustered when researching the various products. So, enter…wait for it…a new DTC DNVB stroller company named Colugo.
As Iobst began to explore the stroller market, he discovered some problems. First, the industry had evolved in the age of the big box store, so brands were used to selling products through retailers like Buy Buy Baby and Target (and increasingly Amazon), which inevitably meant that customers were paying middleman markups of about 40%. And many stroller brands offer many models, all with slightly different features and price points, which added a layer of complexity to an already unpleasant shopping experience. One stroller might have more shock-absorbing wheels, while another might have a bigger basket underneath. “Expecting parents are already trying to process so much new information,” says Iobst. “Now they have to compare tiny features in a product that is entirely new to them.”
Oy. We love how entrepreneurs “paint” their customers like complete f*cking idiots.
But…but…maybe Iobst is, gulp, on to something…?
Colugo offers a lighter simpler newly-designed collapsable stroller with a baked-in rain cover and customizable features. It has a 100-day trial period and a $285 price point. It actually sounds like a pretty strong product and, to put the cherry on top, Iobst is deploying the playbook of fellow Wharton byproduct, Warby Parker, by talking about “community” and “brand.”
These concepts are also starting to jump the shark. Then again, have you ever visited a Mommy Facebook group? If ever the word “community” might actually apply…. 🤔🤔
And so short Babies “R” Us.
Oh. Wait. No need.