In this later stage of the pandemic — despite inflation cutting into discretionary purchases and higher spending on services like restaurants, travel and entertainment — consumers have headed back to stores, putting a damper on the e-commerce surge of the last couple of years.
That’s being acutely felt at a lot of DTC companies, which have few stores, if any, for customers to go into. Yet many of these disruptors began faltering even before the pandemic, as they were increasingly forced to reckon with how arduous and expensive customer acquisition is without physical locations or wholesale distribution.
These days we’re even witnessing the tumbling of unicorns – those startups that at some point reached or surpassed a billion-dollar valuation. In addition, the number of new retail technology unicorns has dropped by a third from Q4 2021 to Q1 this year, according to a report from CB Insights.
As DTC brands continue to face challenges to their models, here’s a look back at where some digitally native darlings ended up.
Allbirds crossed over to the land of the unicorn four years ago, going public at the end of last year with a familiar DTC story — rising sales and widening losses. At press time, its share price had fallen more than 80% from its initial public offering and the retailer had confirmed layoffs of 8% of its workforce “to ensure our operating structure is set-up for the next phase of growth.”
When filing for its IPO, the shoe e-retailer planned to open “hundreds” of stores, but it still runs very few. With the debut this year of a storefront in New York, the company had just over 40 globally. This year the brand is moving more assertively into wholesale, partnering with Nordstrom and Public Lands in the U.S. and Zalando in Europe. Allbirds has also diversified its assortment by getting into resale.
The unicorn buzz started months before Away achieved it in 2019 — just in time for the pandemic to derail the luggage company’s momentum by drastically curtailing travel. Sales plummeted 90% and the company was forced to furlough half its staff and lay off another 10%. At the end of last year the company brought in yet more new leadership after months of executive turnover and reports of a toxic work culture. Rumors of an IPO have quieted since surfacing in April last year.
When Casper reached unicorn level in 2019 it already had plenty of bragging rights. That included being named Retail Dive’s Startup of the Year and landing partnerships with West Elm, Nordstrom and Target; the latter was also an investor. The online mattress company dreamed of cornering the market on slumber itself and opened a series of stand-alone locations and shop-in-shops. But during its early-2020 IPO, Casper slashed its opening share offer, bringing its valuation down well below unicorn. Failing to achieve profitability, the company apparently put the public markets to sleep, and ended up in a private equity portfolio late last year.
Dollar Shave Club
Unilever plunked down a cool billion for Dollar Shave Club in 2016, but early this year the consumer products giant's CEO, Alan Jope, expressed buyer’s remorse. Speaking to analysts, Jope said some of the conglomerate’s acquisitions were mistakes, and singled out the men’s grooming brand.
“Dollar Shave Club did not deliver as expected, and the economics of the DTC model changed,” Jope said, according to a Seeking Alpha transcript.
It’s changed for DTC grooming rival Harry’s as well, though its unicorn valuation seems to have stuck. Schick maker Edgewell in 2020 terminated their merger agreement after the Federal Trade Commission moved to block it. Since then Harry’s has collected more investments and is seeking growth by acquiring brands.
In 2019, as Glossier earned its unicorn valuation, it was also garnering cult status among beauty consumers. Small steps into brick and mortar were stymied by the pandemic, however, and the DTC brand closed all locations. Last year Glossier staked a comeback on international growth and, once again, stores.
The new year had barely begun, however, when Glossier laid off a third of its workforce and founder-CEO Emily Weiss admitted the brand had made strategic mistakes. A few months later she stepped down as chief executive. Now Glossier is grappling with inflation, announcing price hikes to offset expenses, and on Tuesday confirmed another round of layoffs as it moves away from its DTC-only approach. The company is opening stores again — running five at press time with more to come — and for the first time is a wholesaler, inking a deal with Sephora in July.
Rent the Runway
Rent the Runway joined other disruptors in achieving a billion-dollar valuation in 2019, a time when unicorns didn’t seem all that rare. During the pandemic, though, customers had little use for nice officewear or dressy clothes, and the company tweaked its model last year to allow non-subscribers to purchase used clothing. Its troubles didn’t impede its IPO last fall, although the stock had tumbled to under $5 per share at press time, far below its previous valuation.
This year the company’s sales and active subscriber numbers have recovered, though its loss widened in its most recent quarter. In July, off-pricer Saks Off 5th’s online company announced it will sell pre-owned, pre-rented Rent the Runway items on its website.
Stitch Fix garnered a $1.6 billion valuation at its IPO in 2017, and at one point last year its share price approached $100. But those days are gone as the apparel e-retailer, which missed out on this year’s brief clothing boom, scrambles to figure out how to stem losses and expand beyond its niche apparel box business. Under a new chief executive, who took over from the founder this year, the company has turned to traditional e-commerce, shaken up its styling team, resorted to layoffs, leaned on its digital recommendation engine to differentiate itself from department stores and watched its share price slump to below $10.
Nordstrom threw in the towel on its similar Trunk Club box business earlier this year.
Sneaker resale site StockX was another 2019 unicorn, and last year the footwear business in general was enjoying what NPD Group analysts called “stimulus-fueled comps.” But this year footwear sales are down, and the retailer is running into trouble. In June, StockX said it is laying off 8% of its workforce and making other adjustments, but that it remains in growth mode. The company is also contending with legal challenges from Nike over the authenticity of some of its shoes.