For Direct to Consumer brands trying to improve repeat purchase and customer LTV, there is strong motivation to add new products, and expand beyond a very narrow positioning (with many brands having only a single, hero product).
As CAC rises and acquisition budgets come under pressure, more brands will have to answer the question of whether to launch expanded product arrays or to stay focused on a smaller product offering.
While aggregators have been gobbling up smaller ecommerce brands over the past few years (eg. Thrasio, Pattern), this trend should kick into high gear in the next few years, with much larger DTC brands consolidating and merging with one another, in order to:
- Conserve capital
- Create product offerings with wider appeal
- Expand first party data (customer lists)
- Resell, retarget and improve LTV
- Gain economies of scale with operations
With valuations of top DTCs taking a tumble (Casper, Warby Parker), the prospect of audacious exits are dimming. At the same time, access to capital will be restrained, therefore, the willingness of DTC brands to consolidate may increase very rapidly (as means of ensuring continuity).