Public DTC ecommerce growth rates declined ~5x in 2022 vs. 2021. Profitability worsened. Unfortunately, 2023 does not look better.

Here’s a representative sample of public DTC companies revenue growth rates for the last two years:

  • Allbirds (Footwear): ‘20-‘21 Growth Rate: 26% → ‘21-‘22 Growth Rate: 8%
  • Honest Co. (Eco-friendly): 6% → -2%
  • Warby Parker (Eyewear): 37% → 11%
  • FIGS (Scrubs): 60% → 20%
  • HelloFresh (Meals): 60% → 27%
  • Purple (Mattresses): 12% → -21%
  • Hims (Telemedicine): 83% → 94%
  • Bark (Pets): 69% → 34%
  • Smile Direct Club (Aligners): -3% → -26%
  • Grove Collaborative (Bathroom): 5% → -16%
  • AKA Brands (Fashion): 160% → 9%
  • Solo Brands (Outdoor): 206% → 27%
  • Brilliant Earth (Jewelry): 51% → 16%

For the above companies, the median growth rate from 2020 to 2021 was 51% and for 2021 to 2022 it was 11%. That’s down nearly 5x.

As you know, the stock market flipped from rewarding growth at nearly all costs in 2021 to a greater focus on profitability in 2022. Unfortunately, the average public DTC business didn’t slow growth in order to become more profitable; they became less profitable in 2022. Here’s the rundown:

  • Allbirds: 2021 Profit %: -16% → 2022 Profit %: -34%
  • Honest Co.: -12% → -16%
  • Warby Parker: -27% → -18%
  • FIGS: ‘21: -2% → 4%
  • HelloFresh: ‘21: 4% → 2%
  • Purple: 1% → -16%
  • Hims: -40% → -13%
  • Bark: -8% → -13%
  • Smile Direct Club: -16% → -18%
  • Grove Collaborative: -36% → -27%
  • AKA Brands: -1% → -29%
  • Solo Brands: 12% → -1%
  • Brilliant Earth: 1% → 0%

First, I think it’s telling that so few of these brands are profitable at all. Only FIGS and HelloFresh were (barely) profitable in 2022.

And the situation is not improving. Median profit percentage for these brands was -8% in 2021 and -16% in 2022. Last year, growth slowed and profitability declined. Not good.

Why was last year so tough? Several reasons. Supply chain costs escalated, especially ocean shipping rates which spiked 10x. iOS14 massively affected acquisition costs on Facebook / Instagram, the dominant marketing channel for DTC. And, probably most importantly, the gradual dissipation of COVID concern made customers more likely to shop in stores, not online.

So you could argue that 2022 was an anomaly. Unfortunately, it’s starting to become clear that the opposite is true: 2020 and 2021, not 2022, were, because of COVID, the exceptional years. Why? Because the situation is not meaningfully improving this year.

We don’t have first quarter financial results yet for all of the companies above but we have some. Unfortunately, things are not turning around:

  • Allbirds: Q1 ‘23 revenue vs. Q1 ‘22 revenue: -13% (vs. +8% in 2022)
  • FIGS: 9% (vs. 20% in ‘22)
  • Purple: -24% (vs. -21% in ‘22)
  • AKA Brands: -19% (vs. +9% in ‘22)

The combination of increasingly declining growth rates and unprofitability means something is fundamentally wrong with public DTC businesses today. The operators of these brands have a tall task ahead of them.