It’s never been easier to start a DTC business. Paradoxically, that’s made it much harder to run a profitable DTC business. Why? Lower barriers to entry has led to stifling competition.

I got my start in DTC in 2014 at Harry’s, the men’s shaving company. Harry’s, launched in 2012, had a custom-built site which required a full team of developers to maintain and update.

When I co-founded Hubble in 2016, we chose to launch on Shopify and only needed 1 developer. Now at Agora, the DTC sites we’re operating have 0 dedicated devs. Shopify has largely replaced the dev team.

But it’s not just Shopify. Brands used to need resources to program emails. Now with Klaviyo, you don’t. Stripe and Gorgias have made payments and customer service much easier, respectively.

It’s not just tools. A few years ago, the best way to acquire customers on Facebook was through interest group targeting. This was hard and required a ton of trial and error. Then came lookalike audiences, which made it easier. Then broad targeting. And now Advantage+ Shopping campaigns, which basically automate targeting, are easiest of all.

Finally, beyond tools and Facebook, the DTC ecosystem has become significantly more mature in the last few years. It’s much easier to hire outsourced talent or an affordable marketing agency. We’re also more sophisticated: DTC Twitter has evolved from LTV / CAC to threads about incremental ROAS and cash conversion cycles.

All of these developments lowered the cost of starting and running a DTC business. Lower costs means more profit, right? Unfortunately, no.

Lower costs means lower barriers to entry. If it’s easier for you to start a DTC brand, it’s easier for everyone else too.

So there’s been an explosion in the number of DTC brands. Exact stats are hard to come by but, as a proxy, there were ~145K Shopify stores in 2014–there are now 4.4 million.

While there are way more brands, from what I can tell, the proportion that are profitable isn’t appreciably greater. This is verifiably true in the public markets where very few DTC brands make money. I’m acquiring private DTC brands now and, while anecdotal, the proportion of meaningfully profitable private brands is also low.

If brands have lower costs now, why aren’t they profitable? Lower barriers to entry led to greater competition in two key areas: acquisition costs and price.

If 10x as many brands are bidding on a more slowly growing number of ad units on, say, Facebook, acquisition costs will rise–it’s supply and demand. Indeed, we’ve seen acquisition costs go up by ~5x in the last decade.

And on the price side, it’s the same story. Many more brands entering the market without a corresponding increase in demand leads to price competition and tremendous profit pressure.

We should celebrate how much easier it is to start a DTC business today. But that doesn’t mean the space is more profitable. If you feel like you need to run faster and faster to stay in place you’re not alone–you do.