🟢 What's to learn from how (most) DTC startups failed

Philippe MEDA -

Direct-to-Consumer startups (DTC, or sometimes DTM for direct-to-market) were all the craze mid-2010s. Heralded by businesses like Casper, Away, or Warby Parker the core strategy was very seducing. Take an old and proven retail idea (selling mattresses) and make it as simple as possible in every way possible to disrupt incumbents at internet speed.

Simplifying as a game-changer

The simplification strategy was three-fold:

Simplify the brick-and-mortar value chain by cutting everything down to a website with direct deliveries. Simplify the offer and inventory by concentrating on a handful of finely tuned references with remarkable value. Simplify the customer experience with ultra-responsive and generous try-out period and return policies.

In some way, the only genius of these businesses was that they were starting fresh. Starting from scratch in a market where consumers natively speak Internet is amazing. It allows you to eliminate all the legacy retail parts and focus on efficiency. A beautiful case of leapfrog innovation, if any.

And because of all this, investors flocked to throw money at DTC entrepreneurs causing the usually inflated valuations.

Don't get me wrong, though, if these businesses weren't rocket science in terms of strategy and indeed weren't "tech," they were still powerful game-changers. Which innovation is all about. As I was discussing in 2018, Casper-like projects deserve their start-UP label much more than your average deeptech project.

Our first takeaway is obvious but worth remembering:

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Simplifying a business model can be a fierce game-changer. Not only because it can cut into the legacy cost structure but also because it can give you a chance to directly interact with your final customer, understand the market better and at a granular scale, and allow for faster market-fit improvement cycles.

As an extra, if your current business operates through distributors, retailers, or even more complex value chains, here's an exciting challenge to run as a workshop: