Building a Successful D2C Brand: How to Avoid Two Common Mistakes.

Last week, there was an interesting article in the German business newspaper Handelsblatt about how large corporations fail miserably when it comes to Direct-to-consumer brands.

D2C brands should be pretty straightforward: Take a simple product that can be easily distributed online, invest in a few influencers, and run some ads on Instagram and TikTok. Done. If you then get the logistics managed properly, cash should start rolling in…

At least, that’s what the companies that have been acquiring startups in this space in recent years believed: cool brands, young target audiences, and something digital—win, win, win!

Now comes the big disillusionment: none of it scales, it’s more work than fun, and the core business is suddenly more important anyway. So let’s get rid of it.

“In December, Henkel sold its stake in the company for significantly less than the purchase price, according to industry sources. Henkel CEO Carsten Knobel had hoped the investment would give him a ‘competitive digital advantage.”

Apparently, it’s not quite so easy to buy a “competitive digital advantage” that way—probably because of two misconceptions:

1. D2C needs real brands.
   D2C brands don’t work if they are only seen as cheap sales channels. If so, only for a short time. At best, this results in disposable brands, which the bored consumer will discard faster than an irritated CEO. Real brands require real relationships to maintain long-term competitive advantages. But you don’t build those by collecting leads on social and then keep sending out endless newsletters from noreply@cool-brand.com.

2. Some brands just don’t scale, and that’s okay.
   They exist in a niche, have happy fans there, and drive sustainable sales. If that’s profitable, it could be a good base from which to grow organically. But companies that think they can really scale that thing if they just throw enough money at Meta will quickly leave their former fans behind and continue the rest of this brand’s journey alone. Real relationships often don’t scale. Sorry.

In the end, direct-to-consumer brands can still be great if they are well-thought-out and well-executed. This is especially true given the current brand monotony, often driven just by efficiency. Probably not as a large-scale mega-brand, but in a profitable niche with room for profitable growth within a thriving community of true fans.

However, companies that are used to managing their brands primarily through retail promotions with no real relationship to their customers may want to look elsewhere for that “competitive digital advantage."