Klarna collapsing and The House Party Playbook

Consumer defaults are rising fast and how one rock band is teaching DTC brands how to go viral (without ads).

Author

The DTC Times
May 25, 2025

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If you’re only looking at CPMs and CACs, you’re missing the bigger shifts.

This week, we’re zooming out to show how platform power plays, consumer credit fragility, and one unexpected house party tour are reshaping what real DTC marketing looks like in 2025.

Here’s what we’re breaking down:

  • 📉 The BNPL Crash That Should Scare You More Than the Fed — How Klarna’s losses expose a cohort-level liability hiding inside your checkout flow.

  • 🧠 The Tools Are Evolving. Are You? — Google and Shopify just dropped some of the most powerful upgrades we’ve seen in years.

  • ⚙️ The All-American House Party Strategy — What a rock band’s backyard tour teaches us about engineering cultural peaks and brand heat

  • 🚀 Quick Hits — Meta’s new incrementality feature, AppLovin’s ecom rise, and… a Rick Rubin x Anthropic collab you probably didn’t see coming.

Let’s get into it 👇

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📉 The BNPL Crash That Should Scare You More Than the Fed

Klarna’s crashing.

The Buy Now, Pay Later (BNPL) darling just posted a net loss of $99M for Q1 2025. Klarna — like most BNPL platforms — fronts the money for purchases, collects fees from merchants, and profits from late fees or interest on missed payments.

The cause is rising defaults from American consumers who are increasingly unable to pay their installment purchases.

Klarna’s credit losses surged 17% YoY to $136M. More than 40% of Klarna users are returning items. And some DTC brands are realizing they’re losing money on every BNPL-driven sale once returns and churn are factored in

🔗 Learn more: NBC, FT, Morning Brew

And it’s not just Klarna.

The Entire BNPL Sector Is Under Stress

Other BNPL platforms — Affirm, Afterpay, Zip, and Sezzle — are exposed to the same consumer credit fragility. Delinquencies are rising across the board.

34% of BNPL users have missed at least one payment, and nearly a quarter report stress about upcoming payments. The CFPB is tightening regulations, classifying BNPL providers as credit card lenders, which will bring higher compliance costs and operational complexity

🔗 Read more about the emerging risks of BNPL: Deloitte, Fox Business, Forbes

As competition grows and consumers increasingly use BNPL to buy essentials rather than discretionary items, default risk climbs and average order value shrinks.

🔎 What This Means for DTC:

  • BNPL customers might drive revenue, but often deliver negative LTV due to returns and missed payments.

  • Finance teams are now auditing payment method profitability cohort by cohort, and for many, Klarna isn’t making the cut.

  • Some fashion and wellness brands are phasing it out entirely or retargeting their lowest-returning Klarna users.

  • Rising regulation may push fees or friction back onto merchants.

Learn More: For a deeper dive into how BNPL platforms work and why they're structurally vulnerable, see this 2023 cross-country analysis from the Bank for International Settlements:

🧠 Takeaway: BNPL platforms are moving from conversion boosters to financial liabilities.

Between rising delinquencies, regulatory heat, and shrinking consumer solvency, brands need to question whether their payment stack is fueling growth or silently bleeding margin.

Also: Check out the entire Leyla Kuni X thread for a spicier take on how the BNPL model reflects the vulnerabilities exposed in The Big Short.

🧠 Mega Announcements from 2 Mega Players

Two important players in your stack just recently shipped some of their ambitious upgrades yet.

Shopify and Google aren't just rolling out new features. They're quietly reshaping what it means to build, market, and scale a DTC brand.

Here’s a taste of what they announced 👇

🔧 Shopify: From Platform to Operating System

Shopify's Summer '25 Edition, codenamed Horizons, includes over 150 updates, and the message is clear: build faster, run leaner, scale smarter.

Highlights:

  • AI Store Generation & Modular Blocks: Describe your brand, and Shopify builds a storefront in minutes. Modular blocks mean your team can now iterate, test, and launch pages without devs.

  • Sidekick on Steroids: Campaign planning, content suggestions, even image generation — Sidekick now functions like a real assistant across devices.

  • True Omnichannel Parity: Unified credits, POS branding, and hybrid fulfillment (ship + carry out) mean customers get a seamless brand experience online or offline.

  • Global Control Center: With Markets and multi-entity dashboards, scaling internationally no longer means reinventing ops from scratch.

Strategic POV: Shopify isn’t a “tool” anymore. It’s the OS your brand runs on. Brands can start ditching no-code duct tape and centralizing workflows here.

🧠 Google: From Search Engine to AI Co-Pilot

Google I/O 2025 didn’t just announce features; it hinted at the collapse of the traditional customer journey.

Highlights:

  • AI Mode & Agentic Checkout: Search is now a multimodal conversation. Google helps consumers find, compare, and even buy without leaving the experience.

  • Creative AI Stack (Veo, Imagen, Lyria, Flow): Create cinematic videos, realistic product imagery, and custom soundtracks — all from prompts.

  • AI Max for Campaigns: Google will now optimize bids, creatives, and targeting dynamically. Performance is becoming programmatic at every layer.

  • Gemini Everywhere: From Chrome to Android to Gmail, Google hopes its models will help run the interface of modern commerce.

Strategic POV: Google has been relatively quiet on the marketing and AI front for a long time, but this event marks a major step forward into the battlefield of cutting edge creative and marketing tools.

Learn More:

🕹️ Bonus: Both campaigns include playable experiences!

🧠 Takeaway: Two giants just upgraded your creative and growth stack — for free. Now the question is, how will you leverage them?

⚙️ The All American House Party Strategy: Build a Peak Worth Sharing

Brands are always chasing scale. More ads, better ads, incremental profit, better attribution, etc.

But the All-American Rejects chased connection. And in doing so, they created something most DTC brands spend millions trying to manufacture: a massive marketing moment.

🎼 What They Did

Instead of a traditional album tour, the All-American Rejects launched a DIY "house party tour."

Self-funded. Unannounced. Pop-up shows in backyards, college quads, and bowling alleys. Fans submitted their homes.

The band played. TikTok exploded.

It wasn’t just a concert. It was a distributed, serialized, earned-media machine.

❝

"We played this random house party, and it was this big wake-up call. Of all the shows we’ve played in ten years, that was the one. So we doubled down." — Tyson Ritter

📦 What DTC Brands Should Learn

This is what Taylor Holiday and Common Thread Collective call a "marketing moment” — not a promo, but a cultural movement. A spike in attention that raises the baseline of your brand.

Here’s the elements that made this work:

🔹 1. Self-Fund for Authenticity

The band put $50K of their own money behind the idea. That mattered. It felt real.

Tactic: Run something scrappy, unscalable, and mission-focused or founder-backed:

  • Surprise deliveries to VIP customers

  • Pop-up experiences in top cities

  • No-ad-spend launches driven by word-of-mouth

The ROI isn’t ROAS. It’s narrative control.

🔹 2. Create Excitement With Controlled Chaos

There was no schedule. No rollout. Just cryptic clues, city-by-city reveals, and real FOMO.

Tactic: Slow drip your campaign…

  • Day 1: Blurry teaser

  • Day 2: Soft drop with no CTA

  • Day 3: User reaction

  • Day 4: Recap + next breadcrumb

Make the campaign feel like a series, something to tune into and anticipate. Not a post.

🔹 3. Geographic Inclusion, Strategic Exclusivity

Anyone could apply. Few got selected. That contrast made every city fight to be next.

Tactic: Let customers opt into moments they may not win:

  • Product beta waitlists

  • “Nominate your city for our next pop-up”

  • Surprise drops for selected email subscribers

The key: Implied scarity + the act of opting in creates the engagement.

🔹 4. Stream the Scarcity

The band livestreamed shows via TikTok. That turned 30 people in a backyard into 30,000 viewers.

Tactic: Don’t just film content. Create a stage.

  • Live unboxings

  • Behind-the-scenes drop prep

  • IRL moments that anchor your social/viral narrative

The value isn’t just the in-person experience. It’s the exportable emotion.

🔹 5. Nostalgia as Strategy, Not Aesthetic

This wasn’t retro fonts or throwback merch. It was operational nostalgia. They went back to what made them love the work.

Tactic: Return to your roots and explore things from your early days that “don’t scale”.

  • Hand-drawn thank you letters

  • Reuse early creative formats

  • Feature your first 100 customers

  • Ship like it’s your first month again

Show people you haven’t outgrown what made you worth discovering. Or find a way to remind them of something that shaped your (or their) past.

🖌️ Bonus Layer: How To Peak Strategically

What the Rejects did wasn’t a stunt. It was a peak — the kind Common Thread Collective urges every brand to engineer throughout the year.

Too many brands live on a two-peak calendar: Black Friday and maybe one other promo. The rest is flatline.

CTC’s Four Peaks Theory proposes a better model: design intentional demand spikes that are cultural, not just commercial.

The house party tour? That’s a Q2 peak.
A founder delivery sprint? Q3.
A product resurrection drop with a backstory? Q1.

If you only swing big in November, you're leaving equity (and excitement) on the table. Use this strategy to raise your off-season and build brand heat all year long.

🧠 Takeaway: A lot of marketing money and attention get poured into stuff like trying to scale Meta or TikTok.

That’s not necessarily wrong, but make sure to consider other ways to build brand visibility, hype, and interest outside of trying to find the next scalable winner on FB.

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