Brands that have identified as “direct-to-consumer” are throwing out the playbooks of early successes in the space and establishing unique business models, customized to their customers’ buying habits. From fundraising to teaming with wholesale partners, best practices are up for debate, as what’s worked for one brand hasn’t worked for another.
Founders of accessories lines Dears Frances and Caraa are in the middle of taking their companies in very different directions. Below is a breakdown of their strategies as they stand.
Dear Frances: Shifting to pure DTC, armed with a new seed round
U.K.-based luxury footwear brand Dear Frances was started by designer Jane Frances and her husband, managing director Scott O’Connor, to offer modern, sustainably made takes on classic shoe styles, which have since been spotted on Gigi Hadid and Kendall Jenner. In June, the brand received a $2 million seed round from KSR Ventures, serving as the wings Frances and O’Connor were seeking to cut ties with wholesale partners and manage the exclusive sources for their boots and slides.
Monthly, Dear Frances sells an average of 600 to 800 pairs of shoes, which range in price from $275 to $795. The brand declined to share annual revenue, but reported 100 percent year-over-year growth in its first three years and a customer retention rate of nearly 50 percent.
On fundraising:
“At the start, it was important for us to take the business as far as we could [without VC capital],” said O’Connor. “We did a lot of work early on to firm up the positioning of the brand, logistics, production quality in Italy — the business was grounded before we looked to extend further. But in the last six months, we started to feel restricted in terms of the range we wanted to offer. We knew it was time.”
Ad position: web_incontent_pos1
He said the fact that so many DTC brands have seen great, quick success helped, in terms of attracting VC interest. Dear Frances was able to be selective, partnering with an investor sold on the company’s established long-term vision. Others have expressed interest in investing a Seed A round down the line.
The choice retail mix:
“At launch, we certainly saw the importance of having strategic wholesale partners,” said O’Connor. The brand teamed with Shopbop in the U.S. for its reach, and it proved a successful tool for customer acquisition. Internationally, it sold at a handful of specialty retailers in key markets, with a concentration on Europe. Moving to direct-to-consumer now, he said, is a play for maintaining the high quality of product the brand is known for while keeping to an accessible price point. Being able to own the customer experience is also a motive.
Frances said she and O’Connor are confident with the shift, based on the brand’s developed customer base, fueled by relationships built through customer service and on social channels.
Ad position: web_incontent_pos2
A pop-up is planned in the next six to 12 months, to test physical retail and marketing activations like events. In the next couple of weeks, the website will be relaunched, featuring ramped-up content dedicated to the brand story and production processes. A dedicated creative content producer, a photographer and a videographer were just brought on board. The site will also facilitate easier international shopping. It will see monthly drops featuring styles from seasonal collections, as well as the brand’s always-available Timeless collection and, at times, small-batch styles created with partner factories’ unused materials.
Growth plans:
Along with content, marketing is an area the brand is focused on: There are immediate plans to build a digital marketing team to support the paid social and affiliate ads, which the companies relies on heavily for customer acquisition based on findings that customers’ lifetime value outweighs the costs. Increased attention on influencer relations will be a part of that, motivated by the early success gifting key influencers, in the form of boosted demand.
The U.K. and the U.S. will continue to be the focus markets, but Frances and O’Connor see big opportunity in Asia for down the line. And they plan to eventually explore expansion to product categories beyond shoes. They’ll likely test categories through a brand partnership, O’Connor said, noting the brand has yet to enter a collaboration.
Caraa: In growth mode with new categories, wholesale partners
Aaron Luo and Carmen Chen Wu launched as a fitness-focused women’s bag brand selling direct to consumers. As Luo tells it, the brand has been profitable “almost from Day 1.” Its strategy: investing in product development versus branding and marketing, owning the supply chain and avoiding VC funding.
On fundraising:
Luo said Caraa’s investors, which were needed to grow and scale, are exclusively private offices, or angel investors, that are on board with the brand’s direction.
“For brands like ours, a certain danger comes with a lot of DTC funding,” he said. “Investors want you to scale at a speed that’s hard to maintain; their goal is to maximize investment for their investors and raise the valuation. The only solution to grow a retail brand at a fast rate is paying for customers — and it works, so it becomes like a drug.”
He said Caraa does a fair share of digital ads, but less than 30 percent of its customer base comes from them. He’d rather spend on product development, which accounts for 50 percent of the brand’s investment dollars.
“Exit strategy never comes up with our investors,” he said, “For now, we’re focused on the same goal: building.”
The choice retail mix:
Next month, Caraa will launch with a third wholesale partner, Free People — adding to current partners Nordstrom and Equinox. Caraa also designed a collection specifically for Athleta about a year ago — that partnership is set to run through 2019. Luo said he was approached by Free People as the retailer was looking to grow its accessories division in its active category, called Movement. The multi-season partnership will kick off with select styles selling on the Free People site through holiday.
“We are not the type of brand to over-distribute,” said Luo. “We want control over the brand message — plus, when you can buy a product everywhere, it loses some of the magic. But the Free People girl is everything we stand for: independent, fashion-forward, active. It makes sense for us.”
Luo has no plans to open a store anytime soon. He said direct-to-consumer brands often go there because they’ve maxed out what they can do digitally. “Unless they want to do wholesale, they have to open stores,” he said. He noted that stores are less necessary in the bag category, which doesn’t involve sizing.
Growth plans:
Launched with women’s bags exclusively, Caraa started selling men’s bags — a duffel and a backpack in a couple of colorways — earlier this month at Equinox. The motivation for the expansion was more than 5,000 inquiries about the availability of men’s bags, from men, in the last 12 months, Luo said. Eighty percent of those asks came direct through Caraa’s customer service channels, the rest came through Equinox on behalf of customers.
“We did a lot of soul-searching,” he said. “Our ethos at the beginning was all about women empowerment — but looking back, it was more about making her life easier. Then we saw the demand and decided to test out some men’s styles with our male ambassadors, and we went for it. Now we’re bringing fashion to everyone, regardless of gender.”
There are no plans to expand to product categories outside of bags, other than through collaborations. “Our designer comes from the handbag industry, and we are experts at what we do,” Luo said. “And we have a tight, nimble supply chain that works to our advantage.”
Where the brand is looking to expand is internationally, specifically in Europe and Asia. It currently ships worldwide and has a small presence through a couple of retail partners in China — but Luo said to expect bigger news on that front next year.
Bookmarked
Related reads on Glossy
Dagne Dover’s slow and steady path from online to offline retail
“What we realized through our social network is that our customer really wants to see things in person. That’s when we decided to have our first pop-up. We realized we needed to bring brick-and-mortar into our strategy in a big way.”
How DTC brand The Arrivals struck a wholesale deal for the digital era
“Every year since launch, we’ve been discussing when it makes sense to go wholesale. In the beginning, it was: ‘We’ll never do that.’ But over several seasons, we had a handful of learnings, and then Nordstrom came along. It felt like we had all of our ducks in a row.”
How La Ligne relies on traditional retail to shape its modern brand
“Brand allegiance is built through owning the direct customer relationship and showing that you can hear and respond to what customers want. Wholesale, which should be smaller today, is really for getting you on someone’s radar.”
