The direct-to-consumer landscape in retail

For some brands across the industry, 2023 got off to a rocky start.

Companies such as Hydro Flask owner Helen of Troy and apparel brand Everlane laid off employees at the start of January. Within weeks, beauty company Morphe filed for bankruptcy and Kristin Bell’s skin care line Happy Dance shuttered. 

2023 closed out in a similar manner to which it started.

Direct-to-consumer dental care company SmileDirectClub officially shut down in December, leaving customers in the dark, and athletics brand Bandier was searching for a buyer of its IP and assets. 

However, some companies thrived during 2023, even on the public market. Oddity — owner of beauty brands Il Makiage and SpoiledChild— filed to go public in June (with documents revealing an annual net income from 2020 through 2022) and wound up trading at a higher share price than it initially projected. In August, brand incubator The Center agreed to sell the buzzy skin care brand Naturium to E.l.f. Beauty for $355 million. 

So what trends can be gleaned from 2023 to predict the year ahead? Here’s a look at what to expect in the direct-to-consumer space in 2024.

1. Athletics competition heats up

The athletics market — which is dominated by brands like Nike and Adidas — has seen some worthy competitors gain market share lately.

Athletics brand On became successful in the public markets as the visible innovation in its running sneakers gained popularity among specific athletics communities. The Swiss company reported an annual net income for fiscal year 2022 and has steadily seen its net revenue increase since fiscal year 2018.

For its long-term targets, On plans to double net sales to at least 3.55 billion Swiss francs (about $3.9 billion at the time it was announced) between 2023 and 2026, according to investor day information it announced in October. The footwear company also anticipates exceeding 60% gross profit margin by 2026. It’s aiming to gain more market share with product growth through the release of new speed technologies, expanded apparel offerings and entering the training category. 

Also bringing competition to the game is Deckers-owned Hoka. The footwear and apparel brand’s second-quarter net sales grew 27.3% to $424 million, as reported in October. Deckers’ DTC business was “the fastest-growing component of revenue growth in the second quarter,” with Hoka seeing a 46% increase in the channel, Deckers President and CEO Dave Powers said on a call at the time. 

Throughout 2023, Hoka hit quarterly sales records, and Powers noted in May that Hoka is expected to become a $2 billion brand in the near term. The company launched its first global marketing campaign in 2022 and Powers believes there is more white space opportunity through category expansion. 

Both Hoka and On have been focusing more on their DTC growth after years of establishing brand awareness through wholesale. With these companies projecting further growth and the potential for new brands to debut on the market, 2024 will surely see continued competition within athletics.

2. Deals, deals, deals ... potentially

Merger and acquisition — as well as IPO — activity had fallen in 2022 after a surge in 2021, per a February S&P Global Market Intelligence report. Declines continued in 2023, with deal market activity contracting by about 20% compared to the year before, per analysis from PwC of S&P Global Market Intelligence data.

Throughout 2023, however, several deals did come to fruition. Fashion brand Scotch & Soda in March announced it would be acquired by Bluestar Alliance after it filed for bankruptcy in the Netherlands. L’Oréal in April engaged in one of the year’s biggest deals to acquire luxury brand Aesop for $2.5 billion. Universal Standard that same month also reached a deal to buy the plus-sized brand Henning.

In one of the most high-profile sales during the year, Walmart sold off Bonobos to Express and WHP Global for $75 million as part of a larger play to offload its acquisitions.

Generally though, deal-making was slow in 2023 and consolidation and divestiture made up most of the transactions, according to S&P Global Market Intelligence’s 2024 M&A Outlook report. 

The end of rate hikes, dampened macroeconomic volatility and pent-up demand could potentially increase M&A activity in the coming year, bringing back more transactions from private equity groups, per S&P Global Market Intelligence. Additionally, the emergence of artificial intelligence as a solution to various business problems could prove to increase tech acquisitions next year.

Overall, the heavily weak M&A activity over the past two years is likely to create some positive numbers in select sectors during the year. 

3. The risk of bankruptcy

There was no shortage of bankruptcies and general distress across the retail industry in 2023. Store closures, layoffs and Chapter 11 filings seemed to be an almost regular occurrence.

During the first nine months of the year, commercial Chapter 11 bankruptcies soared 61% year over year to 4,553, per Epiq Bankruptcy. Corporate bankruptcies fell in November, but year-to-date total filings as of early December exceeded all yearly totals going back a decade excluding 2020, according to S&P Global Market Intelligence.

DTC sleepwear brand Lunya’s major bet on owned retail contributed to its Chapter 11 filing in June, while Kristen Bell’s Hello Bello entered bankruptcy proceedings in October following issues getting its supply chain up and running. Showfields and Scotch & Soda also joined the ranks of companies that turned to bankruptcy. 

Looking toward 2024, bankruptcy risk is likely to still be prevalent.

“For many issuers, the new interest-rate dynamics could be unsustainable, leading to defaults and bankruptcies,” S&P Global Ratings said in its Global Credit Outlook 2024 report from December.

4. Channel expansion

Plenty of brands have started switching up their traditional distribution model, which can prove to be a vital move for a DTC brand.

Many digitally native brands have begun to embrace a more hybrid distribution model to retain customers, according to a study from GlobalData released in December. The usage of pop-ups to test new markets and working with new wholesale partners could help businesses scale, per the study.

Apparel and footwear brand Allbirds started selling through Amazon in November, joining digitally native brands like Our Place, Care/of and Peloton in moving onto the e-commerce site. Avocado Green Mattress entered wholesale through home retailer Living Spaces in April, and beauty brand Glossier began selling through Sephora in early 2023. 

But a complete shift toward wholesale isn’t reflected across the industry, as some brands have started focusing more on their DTC channels after forming brand awareness through strong wholesale partnerships.

Athletics brand On has been focused on its DTC channels, even growing those sales faster than wholesale during some quarters, and luxury brand Canada Goose has done the same by deepening its commitment to owned retail expansion. 

Finding a balance between distribution channels is likely to continue in 2024. 

“Overall, the diverse performance and innovations of DTC brands prove that the model is no longer one size fits all,” Neil Saunders, managing director of retail at GlobalData, said in a statement in December. “While wholesale may be the path to success for some brands, others are reaping the benefits of stronger margins through DTC channels, proving that the business model can still be a strong avenue for growth.”

5. Stores on the rise

Store openings were already off to a good start in 2023, riding on the fact that major U.S. retailers opened more stores than they closed in 2022, according to a Feburary report from Coresight Research. Could 2024 prove to be another strong year for expanding footprints?

Other than distressed retailers looking to cut costs, plenty of brands turned to brick-and-mortar to grow.

DTC athletic apparel brand Vuori in December opened its second New York City store, adding to its goal to reach 100 stores by 2026, with the expectation to launch 20 to 25 new stores every year. Lululemon increased its store opening plans in August, aiming for 55 net new stores by the end of 2023. Additionally, Salt Life continued to execute on its footprint expansion plans in November with the opening of its seventh store that year. 

And it was also a year when several brands entered owned retail for the first time.

Healthcare apparel company Figs in November opened its first brick-and-mortar store at a location in Los Angeles surrounded by healthcare clinics. Hair care company Ceremonia in July opened a flagship store in New York City and apparel brand Lulus in December reentered owned retail for the first time in years with a new store.

6. The fight for funding

Funding was a struggle point for many private brands during 2023.

In addition to several down quarters, global venture funding in October decreased about 24% year over year to $21 billion, per data from Crunchbase. Venture funding to U.S. companies reached $11 billion, representing just over 50% of total global funding. Additionally, funding to brands at any stage of their life — including seed funding, Series A, etc. — dropped year over year.

That’s not to say venture firms didn’t invest at all. Beauty e-commerce company Thirteen Lune at the beginning of 2023 raised $8 million in a seed funding round, brick-and-mortar DTC platform Leap in June got $15 million in capital and resale company Trove in August secured $30 million in a Series E round.

But down rounds are expected to increase in 2024 thanks to continued macroeconomic factors despite advancements and interest in AI, according to an outlook report by consulting firm Cambridge Associates in December.

Based on the drop in startup funding throughout 2023, some brands have looked toward alternatives. For example, DTC plant company The Sill launched a WeFunder campaign in September, inviting customers to invest in the brand, according to details emailed to Retail Dive.

7. Founder exits

As several DTC brands get older, the needs of the business change and therefore, leadership sometimes needs to shift with it.

In 2023, several companies saw co-founders switch up their involvement in their companies. In May, Allbirds co-founder Tim Brown announced he would step down from the co-CEO role he shared with co-founder Joey Zwillinger. Brown now serves as the brand’s chief innovation officer.

DTC bedding brand Brooklinen saw its co-founder Rich Fulop exit the CEO position in July, with a company spokesperson noting that “this year felt like the right time after a lot of focus on expansion over the past few years … and because of how well the business was doing.”

Additionally, Grove Collaborative co-founder Stuart Landesberg stepped away from the CEO role in August — with former Zulily CEO Jeff Yurcisin taking over — to align the company “more closely with future growth and market expansion initiatives.”

With more brands looking to improve profitability as they age in 2024, co-founder shakeups could persist. 

8. Pricepoint expansion

Price is certainly on customers' minds as inflation continues to impact shopping habits.

Throughout the last year, several brands expanded their price offerings to attract more customers.

Menstrual care company Thinx in January of 2023 released its more affordable underwear line on its website. Thinx For All had already been available through select wholesale partners including Target and CVS. 

Additionally, lingerie brand Adore Me expanded an exclusive, lower-priced collection, Adored by Adore Me, through Walmart as it explores wholesale as a distribution method. Luxury brand Goop — known for its high-end reputation — debuted a cheaper skin care range through Target and Amazon in October called Good.Clean.Goop.

Welcome to The Backroom, a window into what goes on behind the scenes as the Retail Dive team covers the stories and trends reshaping retail. You can check out all our podcast episodes (past and present) here and listen on Apple Podcasts, iHeartRadio and Spotify. 

Over the past year, the direct-to-consumer industry experienced a variety of obstacles.

A lag in funding impacted many smaller private brands, layoffs were enacted to cut costs and consumers tightened their budgets for discretionary purchases. With investors prioritizing profitability, "DTC" has evolved from being a model companies centered their businesses on, to becoming merely a channel brands use alongside other avenues.

In 2023, several companies — like Showfields and SmileDirectClub — filed for bankruptcy, long standing brand founders stepped down from the chief executive position and some companies filed for initial public offerings.

The team broke down what we can expect to see during the year ahead, ranging from brands finding a balance with wholesale to continued disruption in the athletics category.

Resource links:

• 8 DTC trends to follow in 2024
• 8 DTC brands to keep an eye on in 2024
• A look at DTC acquisitions in 2023 so far

Sponsored content

By ARM Treasure Data

Direct-to-consumer (DTC) brands are on the rise, upending traditional retail. Companies with cult-like status include fast-rising newcomers like Casper, Third Love, Warby Parker, Allbirds and Harry’s. These digitally native brands—many in lifestyle categories like beauty, apparel and home furnishings—are selling directly to customers, without relying on distribution through department stores, boutiques or other retailers. 

But for this type of marketing to be successful, DTC brands need to speak to their customers as individuals. And how do you create relationships that feel personal—even if you’ve got millions of customers, and maybe the only thing they have in common is an interest in what you sell?

Data-driven customer personalization is a way to cement relationships and develop customer loyalty in an omnichannel world. According to research by J.D. Power, two-thirds of all U.S. consumers today expect a direct connection to the companies from which they buy goods and services.

DTC selling proves the power of recognizing your customers as individuals. The following tips help all marketers, but especially those in the DTC space.

3 Strategies to Win DTC Customer Loyalty

1. Optimize for mobile first.

Most DTC darlings have invested heavily in a mobile app strategy. Their apps act as a streamlined, easy-to-use platform for marketing and selling their own products, encouraging regular use and seamlessly handling transactions. Plus, a brand app usually provides much more detailed data about customer interactions, more consistently, than many other data streams.

For example, Warby Parker’s app (which boasts 57.6k ratings in the App Store and is ranked 4.9 stars out of 5) combines augmented reality and face mapping so users can try on “virtual glasses” without having to order them. Traditional retailer Bed Bath & Beyond also uses augmented reality in its mobile app to help make purchase decisions easier for users. The technology offers a 360-degree view of products, various color choices and additional styles of the items they want to buy.  

2. Capture customer data.

In addition to the customer data collected by a mobile app, there are troves of first-party data you might already be gathering:

• Email addresses and social profiles in CRMs
• Geographics and demographics
• Behavioral data from website analytics
• Cross-platform data
• Customer support information

For years, warranties and postcard promotions successfully gathered direct consumer contact information and details. Now, direct digital channels streamline the process, working in concert with other marketing initiatives. First-party data is easy to collect and manage, especially if you use a customer data platform (CDP). 

Additional data sources are second-party (typically gathered via partners) and third-party data (often purchased from data aggregators). These help round out customer profiles for a complete picture of each consumer. Once all of the data has been collected, ingested, and assembled into individual customer profiles, companies can enable deeply personal and sophisticated campaigns. 

3. Build 1:1 personalized relationships with your customers.

Brands can’t afford to turn off potential customers with one-size-fits-all mass marketing and merchandising. When customers go directly to a brand’s website to research or buy, they expect a highly customized experience tailored to their own preferences and online behavior. 

"Blasting emails to everyone who tried samples or bought a particular product won’t lead to customer delight. Detecting a mood swing in each customer and changing the tone of push notifications does.” says Kenji Yoshimoto, chief analyst for direct marketing at Shiseido.

Shiseido executives wanted to make sure their customer loyalty experience was highly personalized. They analyzed data to understand customers’ evolving preferences so they could adapt offers and marketing strategies to each individual, throughout their lives. Leveraging Arm Treasure Data’s CDP helped Shiseido analyze historical customer purchase data, demographic information, and recent behavior all at the same time, and in one place. 

As a result, Shiseido accomplished its goal, driving a 20 percent in-store revenue increase per loyalty program member over the course of a year, an 11 percent overall revenue increase, and a 38 percent growth in net income year-over-year.

DTC Is an Opportunity to Engage Your Customers and Forge Relationships

Upstart innovators are disrupting the industry, re-thinking customer relationships and loyalty—and turning data-driven customer insights into massive financial rewards. The digital revolution has changed consumer shopping behaviors and expectations everywhere. To learn how to use customer data to become a force to be reckoned with, check out this Forbes special report on customer data as a competitive weapon.

Amer Sports, which filed for an IPO in January, began trading on the New York Stock Exchange in February, raising about $1.37 billion. The retailer, which owns brands including Wilson Sporting Goods, Arc’teryx and Salomon, sold 105 million shares for $13, several dollars lower than the $16 to $18 share price range it touted a couple of weeks ago. The IPO puts its valuation at more than $6 billion.

“It's really important in terms of just access to capital,” Arc’teryx CEO Stuart Haselden told Retail Dive shortly after trading began. “This will help us reset the capital structure of the company. It'll free up more financial resources for us to put into our growth strategy. So that's like one of the primary reasons for the IPO. And I think it will naturally also just elevate the company and all of its brands as we compete for talent, as we compete for resources.”

Amer Sports said in its F-1 filing with the Securities and Exchange Commission that it intends to use the net proceeds from the IPO to repay all of its outstanding borrowings on its existing shareholder loans, and any leftover proceeds to repay a portion of the borrowings on its revolving facility.

Asked about the lower share price, Haselden said, “we're really focused on the long term, to be candid. We're happy that we're out and we feel like the stock is trading in a responsible way.”

The sporting goods conglomerate has grown substantially over the last few years, recording $3.5 billion in revenue in 2022, up 16% from 2021. Revenue growth in 2021 was even higher, climbing 25% over 2020. Since 2019, Amer Sports has increased its net store count by nearly 70%, reaching 330 owned retail stores as of Sept. 30, 2023. Most of those locations belong to Arc’teryx and Salomon, which run 138 and 114 stores, respectively. For Arc’teryx, more store growth is on the horizon.

The outdoor gear brand opened 23 stores in 2023, with plans for slightly more than that in 2024, according to Haselden. The retailer will keep up that cadence “for the foreseeable future,” Haselden said, with the long-term possibility of hitting more than 500 stores globally. For the near future, more than half of its stores are planned for North America, which combined with China represents 80% of the brand’s revenue. Europe and Asia are also growth areas — Japan was the brand’s fastest-growing country in 2023 — and Arc’teryx will open stores there as well as in Australia.

“This is a durable company that has brands that have long legacies and pretty exciting growth prospects,” Haselden said. “For Arc’teryx, specifically, we've seen just a very long runway of exciting growth. With our retail expansion in particular, we've got really exciting new store openings in almost every region where we operate. We feel like those store openings will be a sharp point of how we build the brand awareness.”

Leaning into direct-to-consumer channels is a big part of Amer Sports’ growth strategy. The company in its F-1 said an effective DTC strategy was “integral” to the growth of the business, but noted that it would take more capital expenditure to support the store rollouts across its brands. DTC accounted for 29.5% of Amer Sports’ revenue in 2022, up substantially from 2020, when that number was 21.7%. In the first nine months of 2023, DTC penetration was 27.2% and e-commerce penetration was 14.6%, with the company noting it has “significant runway” to expand digital penetration.

Haselden credits Arc’teryx’s DTC and store strategy with unlocking a new growth trajectory for the brand, and said it has the strongest direct-to-consumer capabilities of the Amer Sports portfolio. According to data firm Earnest Analytics, Arc’teryx’s DTC sales outgrew competitors like Patagonia, Nike and The North Face over much of 2023, with sales up almost 83% year over year in October.

Over the past three or four years, Amer Sports as a whole has doubled its business and Arc’teryx has more than doubled its business, Haselden said, adding that Arc’teryx doesn’t “see those growth algorithms changing.” Asked if Arc’teryx is profitable on a net income basis, Haselden said the brand has “very attractive margins that are best in class.” Amer Sports recorded a net loss of $252.7 million in 2022 and was projecting a net loss of as much as $234 million for 2023.

According to Haselden, being part of a conglomerate does come with benefits over stand-alone brands. The Amer Sports’ portfolio is able to pool demand for certain materials, like technical fabrics, nabbing better pricing as a collective than the brands would be able to achieve individually. Arc’teryx helps advise others in the group on real estate and store openings, and in return Wilson, Salomon and others offer up their own capabilities. Arc’teryx’s entire footwear offering up until now, for example, has been designed and developed through a partnership with Salomon, Haselden said.

That’s changing now, thanks to a footwear design and development center that Arc’teryx built in Portland, Oregon, a couple of years ago. In 2024, the brand will launch its first three models from that team. The move represents a dedication to the category, which is “an important anchor” for Arc’teryx during the summer months, when its cold-weather gear is not as relevant. 

“Innovation in footwear helps us to grow more relevant in activities like hiking, trail running and climbing,” Haselden said.

As Arc’teryx looks toward growth, much of its strategy relies on augmenting what it already has. The women’s business, currently sitting at 22%, is a large focus point, with Arc’teryx planning to add more choices for that consumer and aiming for 40% penetration in the future. The company’s luxury sub-brand Veilance will get more investment as well. Rather than entering new spaces, Arc’teryx plans to refine what it has.

“I think we're in all the categories we want to be in,” Haselden said. “I think it's more about how do we develop our position and our execution and our product assortments within those categories to really achieve our full potential.”

2023 marked a pivotal year for many DTC brands.

While overall deal count was down from the peaks of 2021, a number of brands were able to successfully stage their exits. Il Makiage and Spoiled Child parent Oddity, as well as Birkenstock filed for initial public offerings. And Mielle, Great Jones and Otherland were all acquired.

But the year also revealed challenges for a number of original DTC darlings. Allbirds, for instance, enacted layoffs, faced a C-suite shuffle and introduced a transformation plan, which included pulling back on store openings, as it works to reach profitability. Grove Collaborative also faced challenges, including its co-founder stepping down as CEO, declining sales and a shrinking customer base. 

A number of brands also fell into bankruptcy, including Hello Bello, Lunya and the owner of Morphe.

The original DTC playbook is changing, and young brands are finding new ways to connect and resonate with customers. As 2024 kicks off, we highlight some of the rising stars to watch in the DTC space.

1. Merit

Merit launched in January 2021 touting “minimalist, clean, luxury” products.

The makeup brand offers products including a complexion stick, bronzer, blush, mascara, and more recently eye shadow. The company was founded by Katherine Power, who also founded brands like wine company Avaline with Cameron Diaz, skin care brand Versed and media property Who What Wear.

“Merit was founded on the principle that better products have the power to simplify your morning routine,” Power said in a statement in 2022.

The brand uses Power’s philosophy of “five-minute makeup” by streamlining the products it offers.

Merit quickly expanded into wholesale, launching an exclusive partnership with Sephora one month after launching. In February 2021, the brand said it would be available in more than 500 Sephora stores across the U.S. and Canada.

The company raised $20 million in a Series A funding round led by the Growth Fund of L Catterton. There was additional participation from Marcy Venture Partners and Sonoma Brands. Merit at the time said it planned to use the fresh capital to fund its omnichannel expansion.

2. Rhode

Celebrity-backed brands have been gaining steam recently. More than half of celebrity-backed brands fall within the beauty category, and 60% of them were founded in the past six years, according to a JLL report from July 2023.

Hailey Bieber’s Rhode beauty brand quickly grew in popularity since it was founded in 2021. 

“My journey towards healthier skin inspired me to develop products that really work, in a way that’s accessible to everyone,” Bieber said on Rhode’s website. “Rhode is dedicated to making products based in science and great formulation, simplifying many of the mysteries and complex narratives behind efficacious skincare.”

The brand received a growth score — a measure to track how fast a brand is growing, according to Charm.io — of 88.9, on a scale of 100. Charm.io looks across various social media platforms — including Instagram, LinkedIn and TikTok — to analyze likes and engagement, as well as the brand's website traffic to determine its growth score. Rhode also touts 1 million followers on its Instagram page. And as of December, the brand’s website saw a 125% year-over-year uptick in visits, according to data provided to Retail Dive from SimilarWeb.

The brand sells a variety of products, including the Peptide Glazing Fluid, Peptide Lip Treatment and Barrier Restore Cream.

While celebrity-backed brands, especially those in the beauty space, have become increasingly popular, not all have found success. Kristen Bell's CBD skin care brand Happy Dance shut down in 2023, and Ariana Grande bought back the assets of her beauty brand R.e.m. Beauty after the brand's parent company filed for bankruptcy.

3. True Classic

True Classic was founded on the idea of providing men with a well-fitting T-shirt at an accessible price point.

The company officially launched its first tee in 2019, but has expanded its assortment to include activewear and chino pants.

The DTC company has brought its apparel offline through pop-ups with retail platform company Leap, as well as through owned and operated stores. The brand said it plans to scale to 50 to 100 stores over the next two to four years.

True Classic has generated net sales of $250 million in four years, according to Matt Kawadler, chief operating officer. Charm.io gave the brand a growth score of 88.3.

A core part of True Classic’s business is giving back to its community. The brand has partnered with Tiny House Project to help bring awareness to the issue of homelessness within the veteran community. True Classic has expanded its donations to other homeless shelters, schools and communities in need.

4. Quince

Quince was founded on the principle of “making exceptionally high-quality essentials at a price within reach.”

The company, which was founded in 2018, uses premium materials and classic designs, but with an affordable price tag. Quince is able to do that by looking beyond DTC: The company said it “pioneered a manufacturer-to-consumer” model where factories produce inventory that ships directly to consumers. The company’s “factory-direct” model cuts out supply chain middlemen and reduces costs.

Quince sells a range of products, from cashmere sweaters, to leather handbags, to linen duvet covers. It compares itself to well-known retail brands, including Everlane, J. Crew, Brooklinen and Serena & Lily. Quince also prioritizes sustainability by choosing organic materials, using environmentally conscientious packaging and fostering ethical business practices. The company is working toward eliminating its use of virgin plastics and uses 100% compostable packaging and recyclable mailers.

The company in May 2023 announced it raised $77 million in a Series B funding round led by Wellington Management. GGV Capital — as well as existing investors Basis Set Ventures, Insight Partners, Lugard Road and 8VC — also participated in the funding round. At the time, Quince said it looked forward to building out its team and continuing to grow its assortment.

Similar companies have cropped up in the space in recent years, including Italic and Few Moda, offering consumers quality pieces at lower prices.

5. Studs

For years consumers headed to the mall to visit retailers like Claire’s or Piercing Pagoda to get their ears pierced. 

Studs aims to change the piercing experience. The company, which was founded in 2019, “was created to modernize the traditional ‘mall piercing’ experience.”

Studs says it uses needles for its piercings rather than piercing guns, while providing customers with a wide selection of jewelry. The company assists consumers through the piercing process through “earscapes,” which is using ear piercings and stackings to create personalized looks.

Studs in October 2021 announced it secured $20 million in Series B funding, led by Spark Capital with additional participation from Thrive Capital, First Round Capital and Lerer Hippeau. At the time the brand had raised a total of $30 million.

The brand said it would use the funding to drive its physical retail expansion.

“This strategic funding will help accelerate our growth so we can bring our industry-leading piercing experience to more markets across the U.S., while expanding our online offering to meet the needs of our growing customer base,” Anna Harman, Studs CEO and co-founder, said in a statement at the time. “Customers are celebrating self-expression and marking milestones with multiple ear piercings, and we’re excited to help them upgrade their Earscape through a truly differentiated experience.”

Studs this past May opened a store in Washington, D.C.’s popular Georgetown shopping neighborhood.

6. Aura Bora

The beverage aisle in recent years has exploded into a rainbow of different options from countless brands. Among those is Aura Bora, which launched in January 2020.

The brand focuses on sparkling waters made with herbs, fruits and flowers. The products are calorie-free, sugar-free and sodium-free, using natural ingredients.

"It all started when my wife, Madeleine, and I were just messing around with our SodaStream," Paul Voge, CEO and co-founder of Aura Bora, said in a statement in 2020. "We happened to have all these herbs and botanicals in our pantry. One thing led to another, and Aura Bora was born.”

With flavors like Cactus Rose, Lavender Cucumber and Strawberry Basil, Aura Bora’s products aim to provide alternatives to the historically “mediocre flavors” with artificial ingredients in the soda aisle.

Aura Bora also touts its branding as a key differentiator to traditional soft drink brands. The brand took inspiration from nature, with each can featuring illustrations of owls, crocodiles, porcupines and other creatures.

And the brand has teamed up with other food and beverage startups. Aura Bora in 2023 partnered with popular olive oil brand Graza to launch a non-alcoholic olive oil martini cocktail.

7. Made In

While Made In was officially founded in 2017, the idea stemmed from the founders’ 100-year-old, family-owned restaurant supply business.

“When we finally made the leap from supplying to creating, we did so with generations of expertise, passion, and industry knowledge,” the company said on its website. “Not only did we understand what chefs were looking for, but we knew the major pitfalls of the options available to them.” 

The brand sells cookware in a wide range of materials, including stainless clad, nonstick, enameled cast iron and copper. Made In also sells complementary products like knives, plates and glasses.

Made In has expanded its channel distribution by opening stores of its own, beginning with two locations in Austin, Texas.

“We’re proudly found in thousands of restaurants across the world, some of them Michelin-starred. We’re in hundreds of thousands of home kitchens, too,” the company said. “Our goal remains the same: combine the artistry of traditional craftsmanship with the expertise of professional chefs to create new heirlooms that reflect the modern food landscape.”

8. Droplette

Skin care brand Droplette officially launched in early 2021. The company developed a device that delivers a micro-mist of skin care products deep into the skin.

Droplette was founded by Madhavi Gavini and Rathi Srinivas, two MIT-trained scientists. The company has expanded its assortment over the years, launching the second generation of its skin care device, the Droplette 2, this past May. The new product features hardware updates as well as an improved mobile app experience. 

The company in 2021 raised $21 million in a Series B funding round led by Spark Capital and Visible Ventures, according to Crunchbase data.

While Droplette is currently only available to purchase on its website, the brand said it is “considering some retail partnerships soon, so our footprint may expand in the near future.”

Not often will a product with such a simple purpose resonate so much with consumers and attract such a loyal following. And even less likely is that product to come from a brand that’s over 100 years old.

Yet Stanley 1913’s Quencher has defied those odds.

The product has grown wildly popular with consumers in recent years with “Stanley Cup” — a water tumbler, not the trophy awarded to the winner of the National Hockey League championship — amassing about 20 million views on TikTok. The Quencher comes in various sizes, but the 40 oz and 30 oz styles are the most popular, priced between $35 and $50. The product boasts features like a handle; the ability to keep drinks hot for five to seven hours and cold for nine to 11 hours; and the fact that it fits inside of most car cup holders.

But the cup, which was introduced in 2016, only recently went viral. In fact, Stanley wasn’t prioritizing the product at all up until a few years ago.

So how was a 110-year-old company able to pivot to broaden its customer segment and become one of the most popular drinkware brands today?

It took a group of women who didn't even work at the company — but saw the product’s potential — to make the Quencher a hit.

The rise of the Stanley cup

Stanley’s Instagram page features its drinkware in a rainbow of colors — from soft pastels to vibrant hues. Some products are even adorned with etched patterns to add to their appeal. The brand’s website shows women having coffee, a person doing yoga and two women walking and chatting while holding their Stanley drinkware.

While women are now clearly a key focus for the brand, that hasn’t always been the case.

William Stanley invented the steel vacuum-sealed bottle in 1913 and in the century since, “his vacuum bottle evolved from concept to icon and has become an essential part of workdays, road trips and outdoor adventures,” the company said. The company historically targeted workmen and those participating in outdoors activities, like camping and hiking, in its marketing. As recently as 2012, Stanley mentioned that its products resonated with “a 30-year-career veteran policeman” and “a retired Army soldier.”

How did the brand expand beyond its rugged image to something that appealed to a broader customer, who would incorporate the products into their everyday lifestyles? With the help of three women.

Linley Hutchinson, Ashlee LeSueur and Taylor Cannon — the founders of The Buy Guide, an online shopping blog and Instagram account that started in 2017 — were early lovers of the Stanley Quencher.

The Buy Guide’s second post on Instagram, back in November 2017, featured a 40-oz Stanley Quencher. “Of all the insulated cups... this is the one. Just trust,” the post read, touting the product’s features like its handle, straw, ability to keep beverages cold and the fact that it was dishwasher safe.

Once LeSueur discovered the product, she gifted one to both Hutchinson and Cannon to see if they liked the cup just as much as she did. “We quickly fell in love and then it obviously became one of our hero products on The Buy Guide. And so our followers fell in love with it, too,” Hutchinson said.

But the Quencher increasingly became harder to find in stock and appeared to be at risk of being discontinued, Hutchinson recalled. “We had heard that Stanley was discontinuing the 40-oz Quencher,” Hutchinson said. “So we were telling all our followers, ‘Hurry, get your hands on any cup that you can find. We've heard that this is going away. Please tell Stanley that you don't want it to go away, that you love the cup so much.’”

Matt Navarro, senior vice president of global commerce at Stanley, told Retail Dive that while there were no plans to discontinue Quencher production in 2019, “the tumbler wasn’t prioritized at the time.”

An employee who worked at Stanley messaged The Buy Guide and said they agreed that they thought the cup was a great product and brought up The Buy Guide’s experience at a meeting with Stanley executives. However, while many brands work with influencers and accounts like The Buy Guide through affiliate marketing, Stanley had not participated in those programs at the time. Instead, Stanley directed the women to place a wholesale order — with a minimum order quantity of 10,000 cups.

“It was a huge risk,” Cannon said, adding that they had to quickly set up a website, get a warehouse and figure out how to ship the product to consumers. “We ordered those cups and were like, ‘We don't know if we're going to sell out of these tomorrow, or if we're going to be trying to get rid of cups for the rest of our lives.”

It was the group’s first and only wholesale partnership of that kind with a brand. The Buy Guide sold out of its first 5,000 cups in about four days. It sold through the second 5,000 cups in an hour. 

“It blew their minds,” Cannon recalled about Stanley's reaction to how quickly The Buy Guide was able to sell through its cups.

This happened around the same time Stanley was ushering in new leadership that started to see value and potential in the Quencher. The new leaders — including Terence Reilly, Stanley’s global president for Stanley at PMI Worldwide, Stanley’s parent company — “saw the opportunity to prioritize the hydration category as a whole,” Navarro said. “When looking into the product pipeline, we bet on the fact that the Quencher use case fit our new strategy of hydration, color revolution and meeting consumer lifestyle.”

Stanley executives reached out to The Buy Guide to schedule a time to meet with them and flew them out to Colorado where they were attending the Outdoor Retailer conference. “We just sat down with the executive team and were like, ‘You're marketing this cup to the wrong people,’” Hutchinson said.

The Buy Guide wanted to help the brand expand its reach beyond the workmen and outdoorsmen it had typically marketed to in the past.

“We can show them what it would look like if women could market it to women,” LeSueur said. “Stanley had been a company only producing occasional-use items. They were making items for people's camping trips or tailgating. We told them that this cup was a daily-use item. It was an everyday, all-day item. And that it needed to look good in people's homes and kitchens, with their outfits, and not just in the great outdoors.”

The Buy Guide’s following is 97.7% women, with the highest demographic being women aged 35 to 44, according to data The Buy Guide shared with Retail Dive. Almost 100% of its followers are between the ages of 25 and 45.

“Any brand on the planet that isn't marketing to the 25 to 50 year old woman is really missing the mark,” LeSueur said. “Even if you are a men's clothing line — no matter what you are — if you are not finding a way to speak to this 25-to-50-year-old female, you're missing the mark because those are the buyers of our economy. They buy for their families, they buy for their husbands, they buy for their businesses.”

The partnership with The Buy Guide resulted in “successful outreach to new Stanley fans — and new Quencher fans,” Navarro said. It led to word-of-mouth recommendations and heightened demand for the Quencher. “We then focused more of our efforts on this must-have product through our revamped website and via social media.”

The Buy Guide also helped Stanley enter into the universe of affiliate marketing as the brand brought the Quencher back in full force.

Navarro said the affiliate marketing channel has opened Stanley up to new audiences and has allowed consumers to connect more directly with the brand. Using influencer marketing also taps into an emotional connection with consumers, according to Namrata Shah, a partner and global head of consumer and beauty at PERLab, the product redesign practice of Kearney.

“Women talking to women and referring creates a lot more trust in the product and the brand versus the typical marketing tactics and strategies that have been used in the past,” Shah said.

And social media more broadly has led to consumers themselves posting about their experience with the product, extending the brand’s reach even further.

“Frankly, the consumer sort of took over for us in places like TikTok where we have 700 million views of #StanleyTumbler on TikTok,” Navarro said. “All of the videos and content on TikTok are user-generated. So it's really the consumer connecting to our brand through social media, and just putting the consumer first.”

Stanley’s recent success can be credited to the brand’s ability and willingness to shift its focus.

“When they got good indicator data, when they heard from The Buy Guide, when they heard the conversations on social media around what women were talking about and why women like this cup, they pivoted immediately and I think that was the biggest unlock for them,” Shah said. 

That ultimately led to a renaissance in Stanley’s products and carried the brand through the years to cement its relevance with consumers, according to Navarro.

“We are so fortunate to have a 110-year-old brand rooted in American history,” Navarro said. “So many people, especially in the U.S. and North America, have an emotional connection to our brand — from their grandfather taking them fishing with Stanley [products] to working on a job site. Just a deep, emotional connection with our brand, which allowed us to then — through innovation and really through our digital marketing expertise — bring the brand to the 21st century and connect with today's consumer.”

A case for collecting

It’s not just that consumers are buying Stanley’s Quencher tumblers now. Some consumers have gone so far as to fill their cabinets with a rainbow of Stanley cups, adding to their collections when a new colorway or limited-edition drop comes out.

TikTok user @aly_zee12 in a video shows off their collection of 18 Stanley Quencher tumblers in various colors and sizes. Similarly in another video, TikTok user @lindseyharbison displayed about a dozen Stanley Quenchers filling their cabinet.

“When we think about collecting, we try to think about collectibles, which tend to be something you wouldn't think about when you're talking about a Stanley Quencher bottle. You might think that applies to dolls or jewelry,” Peter Danzig, a researcher, psychotherapist and consultant, told Retail Dive. “And that is true. But anything is collectible that has material culture. What's most important is the reason people collect is because it brings them a sense of joy.”

Danzig said that since the pandemic, research around material culture has shown an uptick in people collecting things.

“What we've seen is as a result of the pandemic, when people were under isolation, they were discovering what small joys they found in their day-to-day and finding joy in the little things,” they said.

This corresponds with consumers increasingly leaning into health and wellness trends, including hydration, coming out of the pandemic.

When it comes to collecting, Danzig said, there’s a sense of accomplishment. “There's a visualization of completeness. There's something tangible that you can tie it to. … People collect because it gives them a sense of purpose. It gives them the drive. There is something in the hunt and the find that is exciting for people.”

People may also purchase multiple Quenchers for different areas of their lives — for their morning coffee, for their workouts, to go with different outfits, one to decorate with stickers.

The appeal with Stanley’s Quencher in particular stems not only from the product performing well, but also from how it looks and how it makes customers feel when they use it.

“A brand or product that really will resonate with consumers is when they have the perfect combination of addressing the technical, functional and emotional needs of the consumer,” Shah said. “If you miss any one of these needs, it's going to critically impact either the usability, the user experience or the emotional connect.”

Shah added that a Stanley tumbler not only has a very good technical foundation with features like an ergonomic handle and the ability to fit securely in a cup holder, but it also comes in colors “that goes to the emotional needs of people like me that think about the cup much more as an accessory and not just a water bottle. I want that optionality to determine what is the one that I want to carry with me today as I go around in my daily chores or I go to my Peloton classes.”

Stanley has released a number of collections in various colors, finishes and patterns, as well as some in collaboration with brands like Pendleton and Target’s Hearth and Hand with Magnolia line. To drive even more interest in new releases, the company adopted a tactic around “drops” that’s often seen in sneaker culture and used by streetwear brands.

“There is something so thrilling when somebody is waiting,” Danzig said. People want to see what the item is going to look like, and once they do, it “brings a rush of adrenaline and if they are able to get it — that's dopamine.”

The limited drops generate attention from fans and often cause products to sell out quickly.

“I think there certainly is a promotional strategy around FOMO, fear of missing out, culture and really driving really intense demand for products by offering limited, special-edition drops; partnerships with other really cool, hot, trendy brands; collaborations with celebrities and artists and athletes — has really just helped create the brand status I would say we have today,” Navarro said.

Nostalgia also plays a role in why consumers collect certain items or gravitate to select brands, Danzig said, noting that nostalgia does not necessarily mean the product traces back to one’s childhood; it can stem from the last couple of years.

“Maybe somebody during the pandemic discovered they really liked these water bottles and they remember first discovering them and purchasing each new one or the new colors, and seeing that rainbow when they open the cabinet still brings them a sense of what brought them joy during a very dark time,” Danzig said.

Social media has also helped drive a desire to collect items more recently, Danzig added. “We have seen a huge impact psychologically on the finding of community,” they said. “They actually can comment and say, ‘Oh my gosh, I have that too. I love the function of this.’ or ‘I love this color. I love this visibility.’ And they follow these other people because there's a sense of community. You're being seen, heard and affirmed.

“At least in Western culture, we're based in consumerism and capitalism. We sell things and make a profit. But nobody talks about the joy that people have when they open their cabinets and see the multitude of these water bottles,” Danzig added. “There's a call to action for me with social media where people can get the affirmation where they may not be getting that from your friends or colleagues or family members that people might just be saying, ‘That's just a water bottle. I don't get why you're collecting that.’ When you're navigating online interactions, they're building a sense of community and affirmation that they’re not always able to get, or they're affirming what they know inside, but they didn't know other people liked it as well.”

Lasting power

The Quencher’s popularity has skyrocketed in recent years.

In 2023, Stanley has seen a 275% year-over-year increase in Quencher sales and has experienced a 215% increase in its best-selling category, hydration, according to Navarro. “If we look back over the last six months, we have firmly planted ourselves as the No. 1 drinkware brand in North America,” Navarro added.

In the past few years, the brand has done a good job connecting with both existing and potential customers; committing to their core design principles of form, function and design; and having the ability to act on changing trends, according to Shah.

“They have a phenomenal pulse on the conversations on social media — what are people talking about?” Shah said. “It's the connectivity. It's not just a product that they're putting in the market. It's about listening to the consumers, what really matters to them and actually working on that and bringing that offering to the market.”

The brand, and the Quencher specifically, also appear to be driving trends across the industry — and increasing competition.

Hydro Flask’s parent company, Helen of Troy, said earlier in 2023 that it is making a shift away from water bottles, where it says it is a category leader, to tumblers, where it has a much smaller presence. 

“The market is getting crowded, there are a lot of offerings. But what [Stanley has] done is they've made very quick decisions and pivoted — listening to the consumers, when they had women talking online on social media, they quickly launched a line targeting them, listening to their needs,” Shah said.

Over the years, a number of brands have surfaced as the “hot” water bottle of the moment: Nalgene, CamelBak, S’well and even Hydro Flask. Can Stanley cement its place as a leader in the space?

To Shah, Stanley has staying power, but “they cannot rest on their laurels. What has brought them here is not going to carry them for the next five, 10 years,” Shah said. “They need to get smart about managing the increasing complexity they are taking on as they expand their portfolio because they're trying to get to very different consumer segments. If you don't manage the complexity well, it could hurt you.”

The company has also been purposeful in its distribution, selecting retail partners it knows will resonate with consumers and that will provide a premium and consistent customer experience for its products, according to Navarro. Stanley continues to be “consumer-first,” ensuring that customer demand, feedback and insights are driving the products that the brand brings to market.

“We can't just keep making different colors of the same product,” Navarro said. “We need to bring products that are relevant and innovative in the space.”

IPOs in the retail industry have been few and far between in 2023.

The decision of whether or not to go public has become so precarious that some companies have decided to postpone previously announced plans. Mattress Firm in January announced a pause on its intent to go public, crediting the decision to “ongoing volatility in the IPO market.” Teen accessories company Claire’s in July also announced it would postpone its IPO plans “in light of public equity market conditions.”

IPOs in the U.S. for the first half of 2023 were up slightly at 63 IPOs compared to 51 in the first half of 2022, according to data analysis from EY. 2022 data showed a sharp decline in both merger-and-acquisition as well as IPO activity compared to the year before. Still, the market has slowed significantly from its boom in 2021 — when plenty of online-focused brands capitalized on the renewed consumer interest — with 416 total IPOs happening in the U.S. across industries, per EY.

The unexpected banking crisis, inflation and COVID-19 pandemic volatility have contributed to the slowdown in public offerings, but many of these factors may be starting to subside.

A few IPOs in the consumer and retail sector have brought a smidge of renewed hope in 2023.

Oddity — owner of makeup brand Il Makiage and skin care company SpoiledChild — in July went public, increasing its stock price multiple times before the official debut. Birkenstock in September filed for an IPO, with private equity firm L Catterton expected to control a majority of the combined voting power of its outstanding ordinary shares once the public offering is completed. Instacart made its market debut in September, with its valuation at just below $10 billion.

What do all these companies have in common? A net income.

Instacart reported a net income of $242 million during the first half of 2023, according to SEC filings. Meanwhile, Birkenstock brought in a net profit of 187.1 million euros ($196 million at current rates) during fiscal year 2022 and Oddity recorded  $21.7 million in net income for 2022. 

A focus on profitability — as opposed to a growth-at-all-costs mindset — has worked itself into the industry in 2023. The impact has meant funding for private brands is more competitive, and diversified revenue channels are more important than ever.

So what’s happened to the brands that went public before the market shifted its attitude about the bottom line?

Here’s a look at how some popular brands have performed since their public debut:

Warby Parker

When Warby Parker officially went public in September 2021, its net revenue was thriving. 

Its S-1 filing from the month before revealed that net revenue for the six months ended June 30 was up 53% from the year before at $270.5 million. However, the company maintained an operating loss and net loss in the first half of the year, which were $5.8 million and $7.3 million respectively.

The company went public knowing that it could potentially capitalize on a market where customers often paid high prices for eyeglasses sold through another party.

“By selling directly to our customers and cutting out the middleman, we are able to deliver exceptional value and remarkable customer service while maintaining high gross margins,” co-CEO and co-founder Neil Blumenthal said during the company’s first earnings call with analysts in November 2021.

Since its closing stock price of $53.68 on Oct. 1, 2021, the company’s stock has trended downward, as has the consumer preference for e-commerce with pandemic trends normalizing.

William Blair analysts led by Dylan Carden believe that “Warby Parker has created a strong and lasting brand in the relatively fragmented eyewear market,” according to emailed comments in June — though the picture isn’t perfect.

“At 16 times our initial 2024 adjusted EBITDA estimate, we believe valuation does not fully reflect ultimate earnings power of the model, given lower-than-initially-planned revenue growth and further blind spots from a lack of detailed retail segment disclosure and lower structural gross margins,” Carden said.

Since its public debut, the eyewear company has yet to record an annual net income, though adjusted EBITDA has remained steadily positive since 2018. Warby Parker’s closing stock price on Oct. 2 was $13.27.

On

As a public company, On has been fortunate enough to report an annual net profit during its last fiscal year. 

The athletic footwear brand went public in September 2021 during the IPO boom with an estimated market value of $7.3 billion, according to reporting from Outside at the time. The Swiss brand’s business was predominantly through wholesale — with 37.7% of its net sales through DTC channels the year before — and its Q2 earnings from August showed DTC business share was 36.8%. However, the brand is increasingly focused on owned retail stores for growth.

On has pushed out record quarters, reporting in August that second-quarter net sales increased 52.3% year over year to 444.3 million Swiss francs (about $506.5 million at the time). However, its net income for the quarter dropped 93.3% to 3.3 million Swiss francs.

“We think [On] is one of the strongest growth stories in our space, with great products that are gaining brand awareness, gaining new points of distribution, and selling predominantly at full-price,” Wedbush analysts led by Tom Nikic said in emailed comments after On’s first-quarter earnings results in May. “Though valuation is quite lofty, the company has a tremendous amount of momentum and a long runway for growth.”

The company’s stock price hit a high of around $50 in November 2021, and although it experienced a dip during 2022, its value has been back on the rise throughout 2023. On’s stock price closed at $26.12 on Oct. 2, 2023.

Allbirds

Allbirds’ stock price has plummeted since going public and a rebound has yet to appear. 

When the sustainability-focused lifestyle brand went public in 2021, it had both an annual adjusted EBITDA loss and net loss — two metrics that have since continued to widen. Its latest second-quarter earnings in August showed net revenue continued to drop while its net loss slightly improved year over year.

The recent performance comes as the brand executes a transformation plan, which includes reducing store openings to better focus on profitability. When the plan was announced, the company also revealed that its CFO would exit. At the time of the announcement, the company’s closing stock price dropped more than $1 compared to the day before.

Allbirds in May announced its co-founder and co-CEO Tim Brown would transition to the role of chief innovation officer and that it had recently enacted layoffs.

Allbirds’ closing stock price on Nov. 5, 2021, was $26.03 and has steadily declined. On Oct. 2, 2023, it was $1.15.

Peloton

At its highest, Peloton’s closing stock price hovered around $160. As of Oct. 2, the fitness company’s closing price was $5.39.

The at-home fitness brand has undergone a multitude of changes over the past few years. Several co-founders — including former CEO John Foley — have left the company, hundreds of employees have been laid off and the company entered into its first wholesale deals.

CEO Barry McCarthy joined Peloton in February 2022 and has overseen the company’s new strategic plan. The company’s stock spiked slightly when the executive’s incoming was announced, but it has yet to get close to its high in 2021.

In another strategic shift, Peloton entered into a five-year global partnership with Lululemon wherein Lululemon will exclusively develop co-branded apparel sold through Peloton’s stores and online. The move came after Peloton launched its own private apparel line and settled a lawsuit with Lululemon which accused it of ripping off its designs.

Lovesac

Direct-to-consumer furniture brand Lovesac went public in 2018 prior to the 2021 IPO boom, though the company’s stock did benefit from that year.

Earlier in 2023, the company made some C-suite changes, with its CFO Donna Dellomo retiring to become a senior strategic adviser and Keith Siegner taking over the role. Jack Krause also announced he would retire from the chief strategy officer role.

The furniture brand reported preliminary second-quarter results in August, saying that net sales are expected to be approximately $154 million while net loss is expected to be in the range of $500,000 to $1.5 million.

Lovesac has had to postpone the release of its formal second-quarter earnings as it works to restate previous financial results, which has resulted in a notification from the Nasdaq regarding delayed 10-Q filings. An SEC filing from Lovesac dated Aug. 15 noted that the company identified errors related to last-mile freight expenses that resulted in operating income and net income being “overstated by approximately $1.5 million to $2.5 million and $1.0 million to $2.0 million, respectively, for fiscal year 2023.” As such, the company has determined that several financial statements for fiscal year 2023 “should no longer be relied upon.”

At its high in June 2021, Lovesac’s closing stock price reached over $90. Its closing price on Oct. 2, 2023, was $19.10.

Purple

Mattress company Purple went public through a deal where it merged with an already public company in 2018, allowing it to skip the standard IPO process.

The company’s stock took a dip between 2018 and 2019, but spiked slightly in February 2020, around the time it announced a partnership with Raymour & Flanigan. Purple’s stock reached about $40 at its height in February 2021, shortly after which the company’s fourth-quarter results showed net revenue increased 39.9% year over year to $173.9 million and net loss decreased to $2.1 million from $12.7 million the year before. 

The company has seen net losses balloon, shifted its strategy more toward premium customers and handled a takeover attempt from an activist investor. Purple received an unsolicited takeover bid from investors Coliseum Capital Management in September 2022, which Purple ultimately rejected.

After months of back and forth where Coliseum attempted to replace a majority of Purple’s board of directors and Purple enacted a poison pill, the parties settled the fight in April. The deal involved Purple creating a cooperative governance framework with Coliseum and adding three directors to its board nominated by Coliseum. Purple terminated its poison pill and Coliseum agreed not to exceed 44.7% ownership in the company.

Purple appointed a former Party City executive as its new CFO in September and its closing stock price was $1.65 as of Oct. 2, 2023.

Over the past few years, Walmart has been unfurling its ties to the host of e-commerce and direct-to-consumer companies it acquired several years ago.

Between 2016 and 2018, the mass retailer moved heavily into the e-commerce space by acquiring ModCloth, Bare Necessities, Jet, Shoes.com, Moosejaw, Bonobos and Eloquii. 

When Walmart bought the plus-size brand Eloquii in 2018, it was Bonobos founder Andy Dunn who was leading the retail giant's DTC companies as its senior vice president of digital consumer brands. At the time, Dunn noted how key DTC growth was for the retailer.

“As the retail landscape evolves at light speed, we remain firm in our belief that it’s not just about selling brands, it’s also about building brands and customer relationships,” Dunn said in a statement shared with Retail Dive at the time. “As such, we are laser-focused on developing a portfolio of direct to consumer brands with a unique assortment you can’t find anywhere else.”

But over the course of just two months in 2023, Walmart entered into agreements to sell two direct-to-consumer apparel brands – Eloquii and Bonobos – and the outdoors retailer Moosejaw.

Plus-size apparel company FullBeauty Brands is taking Eloquii for an undisclosed amount, while WHP Global and Express Inc. agreed to buy menswear brand Bonobos for $75 million – a stark drop from the $310 million Walmart purchased it for.

At first glance, the sales may seem like a sudden departure from Walmart’s direct-to-consumer investments. But the retailer has been steadily shifting its focus toward its core business for years, and divesting these companies is just the latest pivot. Here's what it means for Walmart, and the brands it sold.

The bigger picture

Taking a step back, Walmart has been steadily offloading its e-commerce and DTC endeavors over the course of several years as opposed to just the last few months.

Prior to the sale of Moosejaw, Eloquii and Bonobos, Walmart had already sold off several of the companies acquired during its e-commerce push.

Walmart in 2019 inked a deal to sell vintage-inspired online apparel and accessories store ModCloth to Go Global Retail about two years after the mass merchant purchased it. Walmart acquired it through Jet, an online retailer that Walmart bought in 2016 for $3 billion. Jet has since been discontinued, though Walmart noted at the time the company was “critical to accelerating our omni strategy.”

Shoes.com, which Walmart bought in 2017, was sold to CriticalPoint Capital in 2020. At the same time, Walmart announced it agreed to sell lingerie brand Bare Necessities, which it acquired in 2018, to Delta Galil Industries. 

But Walmart’s steady divestment of its non-core retail businesses extends beyond e-commerce and DTC, according to Senior Managing Director Joe Feldman at Telsey Advisory Group.

“If you go back a few years, they exited their Japanese business, they exited the U.K. business, they’ve exited Brazil,” Feldman told Retail Dive. “They got out of countries where they just weren't as profitable as they would like, or they weren’t as effective. I think this is part of that process of streamlining to getting back to where they can be most impactful and most efficient and profitable.”

The mass retailer sold a majority stake in Japan’s Seiyu supermarket chain in 2020 for more than $1 billion and announced a deal to sell its Asda U.K. business for about $8.8 billion the same year. A couple of years earlier, it sold a majority of its Brazil unit to a private equity firm.

Whether Eloquii, Moosejaw and Bonobos were profitable under Walmart is unknown. The retailer has had little to say about the brands on earnings calls over the past few years and a Walmart corporate spokeswoman told Retail Dive that the company does not break down sales or profits of its categories or businesses.

Regardless, the acquired brands were likely never expected to be a large part of Walmart’s business, according to Feldman, and therefore their sale will likely not move the needle much. 

But what Walmart learned from these brands may have contributed to its e-commerce and marketplace growth. On a Q4 earnings call in 2018, CEO Doug McMillon noted the company was focused on expanding its apparel business, and ModCloth and Bonobos could be leveraged to build its assortment. Now that it's selling them, Walmart says it did just that.

“These acquisitions contributed to accelerating our broader assortment strategy with the addition of new brands, more items and expertise in specialty categories ... The partnerships have been mutually beneficial,” Walmart’s spokeswoman told Retail Dive via email. “The acquired brands played an important role in our assortment expansion and expertise in specialty categories, while Walmart helped them drive online growth and expand their retail footprint through our scale and customer reach.”

In McMillon’s annual letter to shareholders in February, the executive said e-commerce sales reached $82 billion and currently make up 14% of Walmart’s total sales.

And although Walmart is selling Bonobos at a lower price than it initially invested, the business may be well-positioned to take such risks, according to Feldman.

“I think that they found that third-party brands can be just as effective and profitable and maybe more profitable than owning the brand themselves,” Feldman said. “Not being afraid to fail is clearly a part of the Walmart culture these days and I think that that's what helps make them a stronger retailer.”

While Walmart has divested from many digital-first brands and e-commerce endeavors, its track record shows it still views e-commerce and technology as growth points.

Investing ‘where Walmart can be Walmart’

Demonstrating the company’s shifted focus, Walmart’s mentions of “tech” and “fulfillment and delivery” on earnings calls more than doubled from Q1 2019 to Q1 2021, according to data from CB Insights.

The newer strategy can also be seen through its more recent investment activity. Rather than acquiring DTC apparel brands, Walmart is buying retail tech companies.

Walmart acquired the robotic fulfillment company Alert Innovation and purchased a stake in Symbotic in 2022. The retailer also invested in or partnered with nine other companies working on fulfillment technology, according to CB Insights. 

The mass retailer invested in three companies and acquired two in the last-mile delivery space since 2020, which includes its work with drone delivery company DroneUp. Furthermore, Walmart has begun eyeing India’s commerce space with PhonePe and Flipkart, and has used technology from the acquisitions of Zeekit and MemoMi since 2021 for virtual try-on.

“I think it's easy to see they continue to invest in e-commerce,” CB Insights Principal Analyst Laura Kennedy told Retail Dive. “They continue to invest in the parts of e-commerce where Walmart can be Walmart ... something that really shows up in the data that we track is how they've invested and acquired and formed partnerships with a lot of tech companies that ultimately point to the fact that they're selling tech services to other retailers.”

Many of Walmart’s acquisitions and investments have helped it build its B2B services, according to CB Insights, such as its white-label ground delivery service Walmart GoLocal, its marketplace seller program Walmart Fulfillment Services and fulfillment management service Store Assist.

Automation has also been a key focus for Walmart, which in April spoke at large about the topic during its annual investors meeting. Although the retailer has recently enacted layoffs across its e-commerce facilities, Walmart said 65% of stores will have automation capabilities and 55% of fulfillment center volume will move through automated facilities within three years.

“A very large part of their strategy today is on leveraging technology to be more efficient,” Feldman said. “Virtually the entire investor conference that Walmart posted a couple of weeks ago in Tampa was all about automating the warehouses ... And there's this flywheel that comes from that because then you can take those savings and reinvest it into lower prices and lower prices can mean people spend more.”

However, automation and robotics, in general, can be an expensive endeavor, Kennedy added.

“Automating fulfillment is a capital-intensive investment,” Kennedy said. “You're still putting in robots and all that. But the fact that [Walmart is] scaling it is significant to me.”

The retailer had been an early partner with Alert Innovation in 2016, but is just more recently working to expand these capabilities.

“They certainly took their time. They're not putting it everywhere, which tells you that maybe it's not a one-size-fits-all or fixes everything that everybody might think,” Kennedy added. However, the company seems to see a future in the automation space and is thinking carefully about its return on investment as it moves forward.

But as Walmart shifts its focus, a fresh start is on the horizon for Eloquii and Bonobos.

Where Eloquii and Bonobos are headed

The new owners of Eloquii and Bonobos are more centered around the apparel industry overall, with the brands likely to account for a larger part of their respective businesses than they did at Walmart.

“We always had Eloquii on a list of brands we would be interested in and had a lot of respect for the brand,” FullBeauty Brands CEO Jim Fogarty told Retail Dive. “If you look at what they’re all about, it’s a similar basic mission to what we’re about ... They, like our brands, are not only just bringing [inclusive] sizes, but they also obsess about fit and our teams do as well.”

FullBeauty Brands went through a bankruptcy over the course of 24 hours in 2019. Its restructuring plan gave the company’s ownership to a group of lenders and cut down $900 million in debt.

Since then, the company has been refocused on growth. It won a $41 million bid to acquire plus-size apparel brand Catherines in 2020, adding to its portfolio that also includes Woman Within, KingSize and Swimsuits For All. And it has addressed some of the challenges that led it to bankruptcy in the first place, Fogarty said.

“The gross margins and the inventory weren’t being managed as well as [we] needed to,” Fogarty said of the business prior to bankruptcy reorganization. “So we sort of did a reset along with the merchandise assortments … And just make better, smarter bets and inventory buys.”

For much of FullBeauty Brands’ portfolio, its target customer skews toward the Gen X and baby boomer-aged demographic, Fogarty added. Eloquii brings a younger demographic to the table that FullBeauty Brands is hoping to target more.

Eloquii will become the anchor tenant in a digital mall run by FullBeauty Brands, with Swimsuits For All and June+Vie joining alongside. 

FullBeauty Brands is very focused on online channels, where it says there is still room for growth, as it allows for a stronger free cash flow compared to brick-and-mortar retail. However, physical presence isn’t out of the question, as Eloquii has operated stores in the past.

“I think the team at Eloquii believes that has potential for them, so we're open to talking about all of that,” Fogarty said. “There are lots of direct-to-consumer folks that have, as they look to find more paths to market, gone and opened brick and mortar. It's not in our near-term horizon, but I suppose never say never.”

While the plus-size company mostly focuses on direct-to-consumer channels, many of its brands – including Catherines and Eloquii – do sell select styles through some marketplaces, such as Walmart’s.

As for Bonobos, going to live under WHP Global and Express may seem like a welcome change, given Express’ history in apparel. Express has bet big on growing its DTC business by launching its UpWest brand in 2019 and looking for growth through expanding its physical footprint.

At the time the acquisition was announced, Express Inc. CEO Tim Baxter said in a statement that “Bonobos is delivering double-digit sales growth and we plan to continue that momentum while also realizing operating synergies and other economies of scale.”

Under Walmart, Bonobos experienced workforce cuts and ended up stepping away from its roots by selling a subbrand through Walmart.

But its new parent companies are not without issues. Express’ sales have declined as of late and it received a delisting warning notice from the New York Stock Exchange in April. 

Express is shelling out $25 million for Bonobos' operating assets and assumed liabilities, while WHP Global is paying the remaining $50 million for the Bonobos brand. Toys R Us owner WHP Global took a stake in Express in 2022 for $260 million, forming a strategic partnership between the companies. WHP Global’s portfolio also includes Anne Klein, Lotto and Isaac Mizrahi. In March, WHP Global received a $375 million investment from Ares Management.

Both WHP Global and Express declined to comment further on the acquisition. 

While Bonobos is being sold at a significantly lower price than what Walmart acquired it for years ago, that lower valuation is consistent with how others in the DTC space are faring.

CB Insights data found that as of April 18, the market caps of DTC darlings Warby Parker and Allbirds have fallen 72% and 91%, respectively, since their initial public offerings.

Global venture capital funding during 2022 was down 35% compared to the year before while VC deal activity in retail within the U.S. decreased 36%, all marking a stark change in capital for an industry that is dealing with macroeconomic pressures.

It’s been nearly two years since Vuori announced ambitious plans to open 100 stores by 2026 and expand into international markets.

The announcement came as the activewear brand raked in a whopping $400 million investment at a $4 billion valuation from SoftBank Vision Fund 2. Vuori has remained profitable since 2017, the company told Retail Dive.

And despite other direct-to-consumer brands pulling back on their own retail expansions — Allbirds, for example, earlier this year announced it would slow down store openings as the DTC footwear brand executes on its transformation plan — Vuori’s Vice President of Retail Catherine Pike said the brand is on track to reach its goal.

“We are seeing great engagement and excitement from our local customers, which has encouraged us to continue our expansion plans in the U.S.,” Pike said in an email to Retail Dive.

The brand now operates around 40 stores globally, quadrupling its store footprint since it announced its brick-and-mortar plans in October 2021.

In that time, Vuori has opened in new markets, including Austin, Texas; Boston; Chicago; London; and more recently, Bethesda, Maryland, just outside of Washington, D.C.

“Community is an important pillar of Vuori. When opening in new markets, we look to our existing engaged community in these locations, while considering the ways in which we can introduce the brand to new local customers in the market,” Pike said

The stand-alone stores represent “the ultimate manifestation of our brand and our community centered ethos,” according to Vuori founder and CEO Joe Kudla.

While leaning into its own stores has been valuable to Vuori, the company took an unconventional path when it entered the market. The brand, which was founded in 2015, initially started out by selling its products to third-party fitness studios in order to acquire customers.

“When we originally launched the business we sold primarily to fitness studios to connect directly with people wearing the product at the point of activity, catering specifically to men who were often underserved in this category,” Kudla said in an email. “With that said, we quickly found this channel to be challenging to build a business around on its own and the larger retailers weren’t quite ready to get behind premium mens activewear.”

This led the brand to launch its DTC channel. Vuori’s own channels have allowed it to connect with its customers to hear feedback.

In addition to serving as a point of contact for consumers to interact with brands, another major reason DTC companies turn to brick-and-mortar retail is to help bolster their marketing efforts.

“Many brands use their own retail stores more as a marketing tool, and less as a commerce tool. They want to be places where people are going to see the product,” Matt Powell, adviser at Spurwink River, told Retail Dive. “One of the big challenges for DTC brands is customer acquisition. It's hard to get a new customer to come to you unless you've got really strong word of mouth or social media marketing. So having stores is another way to get people to learn about your brand and become a fan, and also allows you to have a deeper relationship with your current customer.”

And while 100 locations may seem like a lofty goal, especially as other retailers announce store closures, the number of locations isn’t necessarily what’s important as long as the brand is being thoughtful about where it’s opening its stores, according to Nora Kleinewillinghoefer, a partner in the consumer practice of Kearney.

“As we think about retailing right now and brick and mortar, it is secondary locations that are struggling, it's not the primary locations necessarily. It's about being in the right place with your consumer, not just being everywhere,” Kleinewillinghoefer said, adding that stores can be places “where you can talk to somebody about the brand, you can tell your stories, but you can also leverage the more expanded DTC online presence or e-commerce channel to create that breadth of assortment — it doesn't have to be in the retail format. So if you're thoughtful about the format, location and execution, I don't think opening new retail is a problem.”

How early wholesale adoption led Vuori to success

Vuori has also steadily built out its roster of wholesale partners over the years in order to further expand its reach.

“While our early adoption of a direct strategy has served as a big catalyst for our success, partnering with the best retailers across several of [the] industries that are relevant to our customer … has helped ensure we show up where our customers are and provides valuable perspective on how Vuori sits in the market relative to other great brands,” Kudla said.

The brand now sells in retailers from Nordstrom and REI to fitness studios like Equinox, as well as independent outdoor and running stores.

“Embracing wholesale early in our life cycle was a big part of our success. We were a bootstrapped business that started in a garage so we had to find efficient ways to share our product and our story with our customers,” Kudla said, adding that a holistic, multi-channel strategy where the company could stay “in control of our business at wholesale” would allow it to drive awareness for its online business. “The question for us was not whether or not to sell wholesale, but rather how we go about doing it.”

For Vuori, wholesale has also allowed the company to introduce the brand to a more niche customer base and then continue to connect with that consumer down the line at Vuori’s own stores, which feature a wider, more diverse product offering, according to Pike.

DTC brands can learn a lot from their wholesale partners, particularly those retailers that have been operating for a while, according to Kleinewillinghoefer. The retailers not only extend the reach for smaller brands, but they also can teach brands about product placement and storytelling.

“They can create visibility for you in much more effective ways than if you're just going DTC and trying to do it on your own,” Kleinewillinghoefer said.

Standing out in a saturated market

Vuori’s brick-and-mortar plans come off the back of heightened demand in the activewear market. But its early popularity came well before that and it was largely due to what consumer segment it was going after.

“So many of the activewear brands in the marketplace right now are focused on the women's side because they're all chasing Lulu and the success that's been there,” Powell said. “Vuori — it's not entirely a men's focus — but having more of a men's focus set them apart a little bit.”

In recent years, retailers selling activewear and athleisure thrived during the onset of the pandemic as more consumers sought out healthier lifestyles, and apparel became more casual as people started working from home. However, as with many successful things, this led to increased competition.

“With the amount of noise that we're all seeing, everyone can create a cost-effective T-shirt. Creating a product is not the problem. It's differentiating yourself with the storytelling, the quality and the connectivity to the customer,” Kleinewillinghoefer said. “I think Vuori has been making a big splash by being very controlled about how they show up [and] where they show up, particularly when it comes to partnerships like wholesale.”

And while the return to office has contributed to more structured apparel becoming more prominent than during the pandemic, comfortable athleisure styles aren’t going away anytime soon.

“We've completely shifted what’s work appropriate. Work from home is still a very real thing. We are still much more hybrid than we were prior to the pandemic,” Kleinewillinghoefer said. “The acceptability of a more leisurely dress code when you're in your home, for example, is completely changed. Nobody's expecting somebody to sit in their home wearing a dress shirt because there’s just no reason to.”

However, despite the reintroduction of dressier styles driven by a resurgence of in-person events and reopening of offices, there is still solid demand for activewear, Powell added.

“I think a lot of people are really misreading that trend and they're making the assumption that he's going into his closet and throwing all of his hoodies away and buying suits and dress shirts and that's simply just not happening. Did he go out and buy one or two suits for events and maybe for work? Yes, but he's not throwing out his entire activewear wardrobe,” Powell said.

To stay relevant, Vuori has formed partnerships with other brands, including with Clae for footwear and Bala. The brand is also prepping new product launches later in the year.

“Moving into the back half of the year we have some exciting new products that will be launching, with a focus on innovative new fabrics that we can’t wait to introduce to our community as well as expanding in some new exciting categories,” Kudla said.

While M&A activity has been down in 2023 so far, FullBeauty Brands has been bullish on acquisitions.

The inclusive sizing company acquired the intimates brand Cuup in July, just a few months after it acquired the apparel brand Eloquii from Walmart. The terms of both deals were not disclosed.

With the purchase of Cuup, all of the brand’s employees became FullBeauty employees, though Cuup’s co-founder Kearnon O’Molony will not be joining the company, according to details shared with Retail Dive. Cuup co-founder Abby Morgan left the chief marketing officer position at Cuup in April 2022, according to LinkedIn.

FullBeauty’s purchase of Cuup went “very quickly,” FullBeauty CEO Jim Fogarty told Retail Dive.

“This would not be average. ... The needs of the situation, it was important that we move fast,” the executive said. “If you’ve done acquisitions before you get a little bit more credibility.”

Both acquisitions are part of FullBeauty’s goal to attract younger consumers, which has not historically been the company’s core customer demographic, Fogarty added. Both Eloquii and Cuup also share the same focus on sizing inclusivity and innovation that FullBeauty has.

“We wanted to expand into taking care of more of the addressable market and in particular, moving a little lower toward Gen X and millennials,” the executive said. “A lot of businesses will try to take their existing brands and go younger, we knew that that was not ever the way to do it.”

FullBeauty operates a portfolio of brands all focused on inclusive sizing, including Catherines, Woman Within and Jessica London. Though Cuup already has wide-ranging bra sizes, the parent company thinks it can potentially expand Cuup’s band size offerings.

“Cuup was a brand that was similarly focused on hard-to-fit size or size aspects that weren't being dealt with well,” Fogarty said. “They have cracked the code on having a great product that they would describe it as sexy for the woman, not sexy for the man.”

Cuup will join FullBeauty’s digital mall that also houses Eloquii, June+Vie and Swimsuits for All. At the moment, Cuup, Swimsuits for All, June+Vie and Eloquii all sell swimwear in addition to other offerings. All the brands also sell intimates except for Eloquii.

“I think we will clean up some of that shared product,” Fogarty said of the overlap between the brands.

Prior to FullBeauty’s latest acquisitions, the company bought Catherines in a bid for $41 million in 2020. The move came after FullBeauty entered and exited bankruptcy within 24 hours in February 2019.

Leading to the bankruptcy, FullBeauty’s inventory and gross margins weren’t being properly managed, though the company has since reset its merchandise assortments and re-evaluated its inventory purchases, Fogarty previously told Retail Dive.

“We're fortunate to have a nice-sized business that has low capital expenditure requirements,” Fogarty said. “We've also returned with dividends to our shareholders, so you're always trying to look for opportunities to invest back in your own business. ... Our board's very supportive, particularly as the macro environment is tough. That's a great time to be acquiring businesses to make us stronger.”

When 2023 began, retail was starting to experience a slowdown in funding.

In 2021, global venture-based funding rose 111% year over year, according to data from CB Insights’ 2021 State of Venture report.

But that high quickly came tumbling down in 2022, when global funding dropped 35% to $415.1 billion, per CB Insights’ 2022 report. Retail venture capital deal count in the U.S. fell 28% from 2021 to 2022, according to data from PitchBook shared with Retail Dive late last month.

The outlook for funding in 2023 already looked bleak back in January, but the first half of the year may have turned out worse in some ways, Lerer Hippeau partner Andrea Hippeau told Retail Dive.

“I think the longer it stays bad, the worse it gets,” she said. “It becomes a little bit of a systemic issue versus just kind of a blip or a moment in time.”

But what does “worse” actually look like? Here’s a peek at how the funding market turned out during the first six months of the year and what might be on the horizon.

By the numbers

A look at the data so far this year doesn’t paint a pretty picture. 

Global venture capital funding during the first half of 2023 reached just $130.2 billion, which is less than a third of last year’s $421.2 billion year-end total, according to data from CB Insights’ State of Venture Q2 2023 Report.

Median deal size globally is down in 2023 so far across all investor categories, which includes private equity and venture capital, per CB Insights. 

“It's a little bit of a story of haves and have-nots,” Hippeau added. “The very, very best brands and the very, very best companies are still getting funded. But if you're even a dip below best in class, that's when it's becoming extremely challenging.”

For the first and second quarters combined, global funding in retail tech was $9.5 billion, down 76% from the same period in 2022 when funding was $39.6 billion. The number of deals during that time also declined by nearly 50% for the retail tech sector.

Looking at retail overall, funding as of June 23 was at $12 billion globally and $4.2 billion in the U.S., according to data from Crunchbase for the segments Retail Dive follows, such as apparel, consumer goods and cosmetics. The data excludes tobacco, drones, flowers, classifieds, laundry and dry-cleaning. In comparison, retail funding during the first half of 2022 reached $42.9 billion globally and $14.6 billion in the U.S.

The funding process seems to be taking longer overall compared to the last few years of peaked activity, Hippeau noted.

“We're telling companies it's going to take twice as long and you're going to have to talk to twice as many people as you did in the previous cycle for fundraising,” Hippeau added.

Deal count globally for retail was at 237 as of June 27, which is less than a third of last year's full-year total of 735 deals, per PitchBook. Although the numbers exude a sense of doom and gloom, the reality is that some companies are still successfully raising capital.

In perhaps one of the biggest retail deals so far this year, Kim Kardashian’s Skims brand closed a $270 million Series C funding round led by Wellington Management in July. The brand’s valuation reached a whopping $4 billion. 

But you don’t have to be Kim Kardashian to snag fresh funding in a down market. Last month, activewear brand Ten Thousand raised $21.5 million, children’s brand Lalo secured $10.1 million and direct-to-consumer retail platform Leap raised $15 million.

Some food brands have also snagged funding, including Fly By Jing — known for its Sichuan chili crisp — which raised $12 million and Momofuku Goods, which secured $17.5 million, both in March.

But what can the industry expect during the months to come?

What the future holds

There may soon be another wave of funding rounds, with lower totals and lower valuations, as brands run out of options for capital. Hippeau expects the slow market could also lead to forced acquisitions and even companies going out of business as money dries up.

“We haven't seen that yet because of the companies that didn't have to raise. Maybe they raised a big round in 2021 or were very close to being profitable and were able to eke out a few more months before they had to raise,” Hippeau said. “Those companies are going to have to come to market unless they've been able to flip to profitability.”

Already this year, brands have experienced down rounds. Tonal, for example, was valued at $1.6 billion in early 2021 following a funding round, but by early 2023, the company's valuation had fallen to between $550 million and $600 million, according to The Wall Street Journal. Meanwhile, direct-to-consumer sleepwear brand Lunya in June filed for bankruptcy following a slew of issues such as declining consumer demand and a failed bet on retail stores.

Plenty of brands this year have also already been acquired some of which were bought out of bankruptcy. To name a few, hair care brand Mielle was acquired by Procter & Gamble in January, Aesop was bought by L’Oréal for $2.5 billion in April and Walmart sold off Bonobos, Eloquii and Moosejaw.

However, total merger and acquisition value did drop year over year during the second quarter from $1.14 trillion in 2022 to $732.8 billion, according to reporting from Reuters.

The success of Cava’s IPO in June, though, may mean there's an opening in the IPO market with pent-up demand for some segments, according to Hippeau.

“I do think there could be a momentary period of time where the IPO market moves up and maybe that leads to the venture world opening up a little more,” Hippeau said. “But I don't think that necessarily means that there's a full-blown recovery happening.”

Demonstrating some hope in the beauty space, Il Makiage owner Oddity went public in July. Oddity was at first aiming for a valuation of about $1.7 billion through its IPO, but wound up selling shares at a higher price than initially expected. The beauty company touts itself as consumer technology-driven, with centralized technology and data science departments for its brands. That may be an important distinction as the market shifts away from its earlier highs.

During the sector's prime years, direct-to-consumer darling brands were bringing in large amounts of cash. Private label company Brandless snagged $240 million from SoftBank in 2018, Casper reached a $1.1 billion valuation following a $100 million funding round in 2019 and razor brand Harry's was acquired for nearly $1.4 billion that same year. But across the DTC industry, Hippeau says that the current funding market seems to be reflecting some of the adjustments needed in the space.

“With platforms like Shopify and all the other kinds of tools that are out there, the bar is actually way lower to start a brand,” Hippea said. “As an example, why should Target buy a direct-to-consumer brand when they can spin up a brand, hire a branding agency and put up a Shopify site themselves? So I think the bar is lower for entry, which makes the former way of investing harder.”

Amid a sea of redundancy, artificial intelligence may bring forward innovation that the industry hasn’t seen in years. The technology could usher in new e-commerce companies and even improve the capabilities of brands' personalization. It might also reinvigorate venture capital interest in retail.

“AI, at the end of the day, is a really large technological platform shift,” Hippeau said. “We're at the very, very early innings of it. I do think that there's going to be a whole new crop of consumer companies leveraging AI in different ways, whether that's to be more efficient with their operations, so that they’re able to get to profitability faster, or different ways to service consumers.”