VERTICAL TRENDS
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Image: La Fourche
Retail and e-commerce Reality bites
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hen American retail brands Warby Parker and Everlane launched in 2010, few observers predicted the explosion of direct-to-consumer (DTC) startups that would emerge over the next decade. Enabled by new infrastructure (in particular Shopify, Stripe and third-party logistics providers) and novel social media marketing channels, these brands often target niche verticals or particular demographics. Initially, startups promised to cut out the middleman and provide unrivalled value relative to traditional brands. Now, many companies make claims about sustainability, transparency, wellness, lifestyle or identity. Each vertical has dozens of venture-backed competitors, and
often hundreds more that are selffinanced. All of this benefits consumers, who have more choices. Founders have spent big with the infrastructure providers: Shopify now has a market capitalisation of $61bn, the digital payment group Stripe is valued at $35bn, and the marketing duopoly of Facebook/ Instagram and Google/YouTube reign supreme in the Western world. But the influx of larger marketing budgets amid slower-growing internet audiences has increased advertising prices, in some cases to the point of zero or negative marginal returns. In other words, the lack of fixed costs from having a base of stores has been more than offset by the increased cost of
online marketing. As a result, 2019 saw many brands pivot to omnichannel: some with pop-up shops, others with glitzy flagship stores, or with in-store experiences made for Instagram. In established stores the aisles are full of upstart brands. In line with this strategy, recent A. T. Kearney research suggests that over 80% of Gen Z prefers shopping in-store to online. Early investors are advising founders to do three things: firstly,
Larger marketing budgets amidst slowergrowing internet audiences has increased advertising prices
