BoF is away for its annual break until 2nd January. In the meantime, we invite you to explore highlights of our news and analysis from the year.
WHAT YOU NEED TO KNOW TODAY: SATURDAY, DECEMBER 28, 2024 | | | Dear BoF Community,
After the DTC shakeout in the past year, where flagging, unprofitable businesses such as Parade and Outdoor Voices were sold at fractions of their peak valuations, this year saw brands focus on finding the right balance of investing in growth while keeping a lid on costs. Several emerged as winners.
The start-ups that thrived leveraged consumer data to develop products they know their customers will buy, opened stores in regions where they already have a following and advertised with content they know their audiences will pay attention to. Look at shoemaker Larroudé, which grew sales and profits by introducing new products based on materials or silhouettes that are already selling well. A host of traditionally wholesale-driven brands, such as Calvin Klein and Levi's, also adopted these strategies as they focused on their DTC businesses amid the waning influence of department stores and turmoil in luxury e-commerce. The strongest brands used learnings from both DTC and multi-brand retail to find their best, most loyal customers.
What became clear in 2024 was that companies with the most promising growth are ones that create desire for their brand outside of price and convenience. The most successful have built a community of zealots, through in-person events and engaging content, who recruit new customers for them, like activewear brand Bandit Running and skincare start-up Topicals. The dupe brands that mainly appeal to shoppers who can't afford luxury but won't buy Shein, such as Italic, are also looking to create brand identities separate from their affordable price tags.
Looking ahead to 2025, the big unknown for the winners in the sector is whether they will find exits at the valuations they think they deserve. Activewear brand Vuori managed to secure a nearly $6 billion valuation in November, but many brands are less likely to find the same fortunes in the current market. If interest rates keep falling and the incoming presidential administration proves a boon to businesses, we could be in for an influx of M&A activity.
Malique Morris, DTC Correspondent
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