What the Start-Ups That Avoided the DTC Crash Have in Common

If the buzzword of the direct-to-consumer boom was “disrupt,” the word of the bust is “next.”

When Allbirds announced it was cutting 8 percent of its corporate staff last week, it did so to “set up the next phase of growth.” The RealReal founder and chief executive Julie Wainwright said she was stepping down at “the right time for the next generation of leadership to guide the company through its next chapter.” Glossier CEO Kyle Leahy didn’t use the word, but was with her fellow start-ups in spirit when she cited “unlocking the long-term potential of Glossier” as the impetus for a corporate reorganisation.

There’s a reason so many fashion and beauty start-ups are focused on the future — there isn’t much to celebrate about the present. This week, four of these companies will report second-quarter results: direct-to-consumer brands Allbirds and Warby Parker, resale platforms The RealReal and Poshmark.

All four have a similar story to tell. Their IPOs, from The RealReal in 2019 to Warby Parker in September 2021, capitalised on years of success attracting new customers, thanks to genuinely innovative business models, but also in varying degrees to clever branding and lots and lots of digital advertising. None was consistently profitable, though their executives laid out the case — new stores, automation, sluggish incumbents, rosy projections for customers’ lifetime value — for why it was only a matter of time before they swung into the black.

It hasn’t worked, or at least, not fast enough. These companies were all unicorns several times over when they went public; only Warby Parker can claim that status today. Rising borrowing costs and recession fears mean they can’t count on securing cheap cash from investors and lenders to paper over losses.

Now, when earnings season comes around, these companies are trying to convince investors they can operate like conventional brands, rather than outsiders shattering the status quo. That means putting profitability first, even if it requires tapping the brakes on growth a bit. Store counts are the new customer lifetime value. Wholesale deals are a coup, not a capitulation.

There’s one more newly public company reporting results this week, and it has a different story to tell. Olaplex, the prestige hair care brand that went public the day after Warby Parker last September, built its business the old-fashioned way through salons and endorsements from celebrity hairstylists. Direct sales are the brand’s fastest growing channel, but came after it already had a following, and alongside wholesale deals with Sephora and Ulta.

Not coincidentally, Olaplex has avoided the worst of the start-up crash this year, though its shares are down more than 30 percent. It’s profitable, and not coincidentally its market capitalisation is more than double the other four public companies mentioned in this piece combined.

The lesson here is that sales matter, but where those sales happen, and how much it costs to generate them matters too. Brands that operate like the industry’s incumbents — but with better products and smarter marketing — are thriving. They also have the luxury of borrowing the best of the DTC playbook while sidestepping the traps that have snared so many start-ups. Whether former unicorns can mount a comeback by behaving more like the rivals they tried to disrupt remains to be seen.

What to Watch This Week


Allbirds reports results

MAGIC trade show opens in Las Vegas


Copenhagen Fashion Week begins; shows run through Aug. 12

The RealReal, Olaplex, Inter Parfums, Capri and Ralph Lauren report earnings


Fossil and Shiseido report results

Sneaker Week wraps up in Portland


Warby Parker, Poshmark, Brilliant Earth and Canada Goose report results

Kylie Cosmetics opens a four-day pop-up “glam park” in London’s Covent Garden


UK second-quarter GDP released; last week, the Bank of England warned a recession is increasingly likely later this year

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