Ten Reasons Your D2C Brand will Fail

Let me start by stating the obvious and informing you that there are many more than 10 reasons for a D2C brand to fail. In fact, by the time you read this article, a few more will be added to the list.

Look around you, or in fact and if you aren’t already right now, browse through your phone and check out the numerous applications you have for ordering your favourite coffee, your go-to toothbrush, medication and as you see the list and direct accessibility towards brands goes on and on!

If you’re a founder of a brand, a team member or an investor in them, then you’re bound to make mistakes. Over the course of accelerating and investing in multiple brands, we’ve often gone over what should be done to scale your D2C Brand. In this article, let’s wear the cynical hat and go ahead with the perspective of why your brand will fail.

1. Scaling Too Soon

For founders, at times there’s nothing like the adrenaline rush of explosive growth. While growth is good, scaling too fast is NOT always the way to survive. Instead, to be able to identify profitability and being capital efficient is a more attuned way of ensuring you know when and how fast to scale.

Here are three ways to identify if you’re scaling too soon:

• Your outflow and your profit margins are not correlated and off-balance
• Your growth is defined not by repeated usage but by first-time adopters
• You’re not being able to concentrate on stabilising your costs

2. Building Your Product For Everyone

Please, please, don’t try to be relevant to everyone. The task of a brand is to create the fear of missing out (FOMO) for a consumer or creating a dire need. Certain brands end up reversing this and get “FOMO” instead when they can’t reach all audiences.

It’s simple. The more unique target audiences you look to cater to, the more your costs of servicing a user goes up. Now while this could relate to one-time sales, servicing everyone doesn’t help focus on the core to any brand, which is their repeat users.

An exercise, I feel always works in narrowing your core customer is, by breaking down and mapping out a day in their life. It’s key to know what other habits your consumer has, where they spend their time and money apart from your sector.

Secondly, identify a core proposition this consumer needs. Simply, don’t sell your product, sell the outcome of your product. The best way you can do this is by consistently surveying your customer set.

Create a habit of hearing from them often and keep taking feedback.

3. Setting Your Standards Basis Your Conversion Rate

Let’s go through an example of this. Here are the statistics for 2 days of activity on an ecommerce site-

• Day 1: 5% conversion rate
• Day 2: 10% conversion rate.

Which day performed better? If you just look at the conversion rate, it looks like it’s Day 2. Now let’s look at more statistics like the number of unique visitors and sales for both days:

• Day 1: 4% conversion rate where we have 5,000 unique visits and 200 sales
• Day 2: 10% conversion rate where we have 1,000 unique visits and 100 sales.

Now, it looks like Day 1 performed better.

Quite simply, you can’t just take the conversion rate by itself when you set standards and predictability for the future. Assess it alongside parameters that help dissect whether the conversion was circumstantial or has a formula that can be replicated.

To decode this, when you set your costs, derive at an average cost of conversion rather than estimations made on your best performance. Lastly, segment your conversion by breaking up different customer sets, distinguishing between SKUs, and even communication and marketing initiatives that stood out.

Play to your advantage of being early-stage with such granular assessment that will further help you double down on key products that are winners and help phase out efforts that are causing more harm than good to your brand.

4. Focusing On Product, Not Communication

Too often D2C brands focus on building the products, which is not wrong. But a product without education and awareness is a recipe for failure. Knowing your consumer through the methods discussed above, helps you allocate the exact tonality and messaging that works for your consumer set.

More importantly, being consistent and relevant is key.

An example I love is how Perfora, the oral care brand, without fail communicates the internal working of their company and what their brands stand for, each Sunday through newsletters. Again, here, creating a habit for their consumers is helping them further build their brand love.

Lastly, communication is not just a tool between brands and consumers, it’s a key resource you should use to convey your performance and plans with your investors too. So, don’t hold back on quality when it comes to communication.

5. Making Packaging & Positioning Wait

A mistake often made is when we do not prioritise packaging and positioning.

Unlike the phrase, don’t judge a book by its cover, D2C brands are judged by their packaging, simply because the first impression made of a D2C brand as you can’t touch, feel, or experience it, and therefore, most of that pressure leads to the need for your packaging to do the job in acquiring a viewer into a prospective consumer.

Starting just from naming your company or products.

The point here lies that keeping your brand name easy to remember, actually enables others to be able to talk about it more if your name can be linked to what you stand for.

In our case, calling ourselves Huddle helps us stay true to our value of being an accelerator and early-stage investors. The purpose is to convey that we bring founders closer to everything they need to grow in the ecosystem. Therefore, Huddle became a name and a way of life for everyone within, well the Huddle.

The point I share by repeating myself here is that you need to keep reinstating your positioning through different forms of packaging.

6. Diversifying Too Fast (Or Too Slow)

Those investing in the stock markets might have heard this advice frequently – That a good portfolio consists of 10-12 stocks instead of holding a few. Diversification is a good de-risking strategy. This applies to startups as well.

As your business develops, diversifying your product portfolio is a natural progression and is done by either entering new markets or developing new products.

Let’s take the example here of Wellversed, the brand that is providing packaged food for those with chronic ailments and aiding a cleaner, healthier lifestyle with their products. They started purely with a focus on Keto based products to target diabetics and soon as they created leadership, that’s when they branched into newer products catering to other consumers with chronic issues.

A strategy like this helped them two-fold. It enabled them to reinstate their vision of aiding those with ailments and helped reinforce their expertise in a segment that was there for the taking. As they expanded, they ended up acquiring brands and hiring team members who brought with them additional capabilities, which naturally resulted in diversification.

Three steps are key –

• Just as we covered before, don’t scale too soon and for this focus on your core business.
• Create a team that is strong enough to build across areas of expertise.
• Don’t diversify just for the sake of it.

7. Building A Standalone D2C Platform

This point I believe might be contested by some on what I’m about to suggest but in the early days, it’s important to split your sales efforts across platforms. While this might relate to compromising margins at times, it helps you create more eyeballs and if your product truly sticks with the user, then your website, and retargeting to similar customers becomes the avenue for acquisition through your website.

Over the course of a few months, you can streamline your sales split towards a larger sales share on your platform over marketplaces.

The best way to assess which channels to sell through is by seeing how your comparable brands perform there and analysing if you can afford the margins and targeted marketing for such platforms to further double down on their performance.

8. Selling Your Product For What It Is

Nothing beats a well-told, compelling story in tapping into our intrinsic emotions. If your D2C brand does not have a story to tell, then you need to think again.

Today, the internet and social media have given the opportunity to convey a raw, authentic story behind any small or upcoming product or business that really resonates with the target audience.

When you’re assessing how to convey your story and message, begin by asking these questions about your brand –

• Am I a need or a want for my customer?
• Why would they come back to me?
• If my product wasn’t available, why would they miss me?

9. Trying To Own Everything!

Very few startups find success through one individual’s sole efforts or by trying to own everything. There are two sides to this:

• Either build the best talent from day one, which could cost time, and capital OR
• Use the support of others out there, while selecting which business functions you want to own in-house vs aggregate.

Working with others is like being an octopus, you’ll have more arms to build together, towards the same goal.

This power of collaboration can inject your startup with new ideas, improve your efficiency, and provide you with new resources and connections to leverage in the future.

And let me tell you a secret which you already know – smart networking is an everyday exercise that helps build your brand.

10. Data? What’s That?

With D2C, the barriers to entry for companies can be wafer-thin. Customers form the centre of the business and customers are aware of this fact and which is why they now demand personalization. Personalization was a luxury in past but is now a necessity in 2021.

The more you know about your audience, the easier it becomes to personalize your approach as a D2C brand in creating products for them, communicating what you stand for and retaining them.

Leveraging data to create content that resonates with individuals, sending recommendations, offering tailored promotions, customizing services, the list goes on. It’s interesting that 75% of Netflix’s viewership comes from what its recommendation engine suggests as do for 35% of purchases on Amazon. These two data sets are a testament to how important data visualisation and utilisation is.

To conclude, these are probably 1/10th of the mistakes we will make. The trick is making them fast and knowing once you’ve made them.

So, the question is, which of these 10 mistakes will you save yourself from making?

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.