Survive or Die: Why D2C Brands Must Embrace an Omnichannel Strategy

Hey there,

D2C brands have revolutionised the retail landscape by offering a streamlined approach that bypassed traditional intermediaries, shaking things up by cutting out the middlemen and going straight to the customers.

A few years back, everyone—from VCs to investors—was buzzing about D2C brands like Hims, Allbirds, Warby Parker, and Casper.

They promised higher margins and direct customer relationships, much like the SaaS revolution did for tech.

The Initial Appeal

D2C brands seemed like a dream come true: direct path from manufacturer to consumer, lower prices, more data, and closer customer relationships.

Take Hims, for example, which raised over $207 million pre-IPO by simplifying men’s health and wellness through a subscription model.

Allbirds went public with a $4 billion valuation, focusing on sustainable footwear.

Warby Parker disrupted the eyewear industry with $245 million in funding, offering stylish glasses at lower prices.

And Casper raised $340 million to deliver high-quality mattresses directly to consumers.

But here’s the kicker: customer acquisition costs have skyrocketed.

In the absence of traditional retail partners, D2C brands have had to rely heavily on digital advertising.

Initially, this seemed like a goldmine—targeted ads on platforms like Meta (Facebook) and Google offered a direct route to customers.

However, these platforms have proven to be far more adept at capturing the value of this advertising spend than the D2C brands themselves.

This reliance on digital ads has turned into a financial quicksand for many.

1. Rising Advertising Costs: Digital ad costs have shot up, with CAC increasing by over 60% in some sectors.

2. Dominance of Meta and Google: These platforms dominate the digital ad market. In 2023, Meta's ad revenue reached $134 billion, up from previous years​ (Investor.fb)​. Google, not far behind, pulled in a staggering $224 billion from ads in the same year​ (Statista)​. They effectively act as toll booths on the path to your customers, demanding hefty fees to reach your target audience.

3. High Burn Rates: Many D2C brands are burning through cash. For instance, Casper’s marketing expenses in 2020 were $169 million, nearly matching its net revenue of $439 million.

4. Customer Retention Challenges: D2C brands often face higher churn rates. Customers acquired through online channels tend to be less loyal and more price-sensitive.

And honestly, we’re seeing similar trends at Azio Beauty.

Our CPA has increased by 20% year on year, and digital platforms are becoming less effective and in all honestly, If we don’t pivot to an omnichannel strategy, we might be in trouble.

Key Components of an Omnichannel Strategy

1. Unified customer experience across channels

2. Multiple online channels: Own Shopify / Amazon / TikTok Shop (the more channels, the better)

3. Physical retail: Either own shop or retailers/distributor

Benefits of an Omnichannel Strategy

1. Less reliance on paid media (aka more stable revenue)

2. Increased customer reach

3. Enhanced customer loyalty

4. Higher conversion rates

Why DTC Brands Need to Go Omnichannel Now

Adopting an omnichannel strategy is crucial for DTC brands today.

Consumers now demand seamless and integrated shopping experiences across multiple channels—online, in-store, and via mobile devices.

73% of consumers use multiple channels during their shopping journey.

Customers expect personalisation not just online but also in physical stores.

Increased Competition and Digital Saturation.

The digital marketplace is crowded, making it so hard for DTC brands to stand out through online channels alone (profitably ofc).

Heavy reliance on paid digital advertising can be costly and unsustainable.

Rising Ad Costs. Facebook and Google dominate the digital advertising space, capturing 50% of global digital ad spending.

Investing in direct customer engagement through email marketing, loyalty programs, and social media organic content can reduce dependence on paid ads

By reducing dependency on direct response advertising, DTC brands can allocate more resources to building their brand and focusing on long-term growth strategies.

An omnichannel strategy allows brands to invest in activities that enhance their brand image and customer relationships.

Diversifying marketing spend across multiple channels encourages a more balanced approach to growth.

Our Strategy at Azio Beauty

Step One: Balancing Our Online Sales Mix

We took a good, hard look at our sales over the past year and realised something critical: 90% of our revenue was coming from Shopify, with only 10% from Amazon. Talk about putting all your eggs in one basket! This heavy reliance on Shopify made us vulnerable and overly dependent on a single channel.

What We Did:

• We decided to send more of our stock to Amazon's Fulfilment using Amazon FBA. This means Amazon handles storage, packaging, and shipping for us, making it easier to scale up our presence on their platform.

• We opened up Amazon marketplaces in multiple countries. Each marketplace was set up with optimised listings to cater to local customers, helping us tap into new markets.

Why This Matters: This move should help balance our sales, reducing our dependence on Shopify and tapping into Amazon’s extensive customer base to drive growth. Plus, it spreads our risk across more channels.

Step Two: Small Baby Steps into Physical Retail

Next on our agenda was stepping into physical retail. But we didn’t want to dive into large retailer partnerships straight away. Big retailers can be demanding—they often want a piece of your online sales, which can lead to competition for your branded search terms. We needed our operations to be solid and ready to handle the scale without losing control over our brand’s online presence.

Our Approach:

• Start with Pharmacies: We secured a deal with a distributor to place our products in 1,000 pharmacies by the end of the year. This allows us to manage operations through a single partner, centralising processes while benefiting from the scale of multiple locations.

• Maintain Online Control: By delaying partnerships with large retailers, we keep directing customers searching for our brand straight to our own channels, maximising direct sales and maintaining better control over pricing and customer experience.

Step Three: Preparing for Big Retail Partnerships

Once we’ve nailed our pharmacy expansion, we’ll be ready to take on the big retailers. By then, our operations will be more mature and capable of handling their complex requirements. We won’t be as reliant on our online channels, making us more adaptable and ready to replicate this strategy in new markets.

Key Takeaways:

1. Diversify Your Channels: Don’t rely too much on a single platform. Spread your risk by expanding across multiple online and offline channels.

2. Expand Thoughtfully: Start small with manageable retail partnerships to build operational strength without immediately competing for your branded search traffic.

3. Control Your Brand: Keep direct sales channels active as long as possible to retain customer traffic and control your brand experience.

Our Progress So Far

We’re still on this journey, figuring out the best ways to adapt and thrive. Our goal is to be less dependent on any one platform and build a more resilient business that can handle whatever comes our way.

Got any questions or want to share a tactic I didn’t cover? Reach out 🙂