Things are pretty good. 

They aren’t great, to be sure. There’s a contentious US election on the horizon, interest rates are still pretty high, and there are some hangovers we’re still trying to get over (COVID, ZIRP, Crypto). There was like 6 months of people panicking about Meta performance to kick off the year too.

But things in consumer are mostly starting to stabilize. The back-and-forth whiplash that began at the start of 2020 seems to be finally over. 

AI is getting interesting, but we haven’t entered the Terminator phase so it’s not a Global Thing To Worry About (yet). 

Instead, execs and business leaders are getting back to focusing on normal stuff. Like how to grow profitably. 

Today we share a growth playbook from one of DTC’s best thinkers and top agencies. Plus we look at where the American consumer is spending their dollars these days.

Check it out: 

• How to be profitable in DTC ← We break down a 1-hour-long presentation you should probably watch anyway.

• Consumer preference shift? ← A look at what kinds of companies are thriving. And which aren’t.

• Could be useful… ← A couple of AI tools worth trying

• Quick hits ← Drama around BetterBrands + the latest Meta bug

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Playbook: how to be profitable in DTC in 2024 

This is based on this video by the Common Thread Co. called “Truths We Learned from 67+ Eight-Figure Brands That Actually Produced Profit in 2024”. We wanted to summarize some of the insights and opinions shared by Taylor Holiday, but you should watch the whole thing.

Macro-wise, the economy is fine. 

Not great, but nowhere near the years leading up to the 2008 financial crisis. 

Just…fine. 

Micro-wise (as in, in DTC), it’s also fine. Smaller companies are doing a little better than bigger ones. Companies over 7-8 figures grew 14% YoY. 

Fine. 

According to the DTC Confidence Index, built by Steven Rekuc and modeled after the Consumer Confidence Index (OECD), people expect the economy to improve in the future. The outlook is always negative, but right now it’s not the worst. 

Nor is it the best. 

It’s fine. 

Consumer and household debt has been climbing since 2019, though. Ah, but it’s also much lower than in the entire decade leading up to the 2008 financial crisis. 

What does this all mean for eCommerce?

As you know (or at least sense), it’s one of the most competitive industries ever. We play the ad auction game every day, where someone is always willing to pay a bit more and increase the CAC for everyone.

Put a product on Amazon and watch your margins go poof.

There’s also an increasing amount of discounts, which indicate a difficulty generating demand at full price. 

Together, these point toward one phenomenon: an increasingly difficult time acquiring new customers efficiently. It’s not just you. It’s an entire $213 billion industry getting over a reality check after a black swan event. 

• Retail shut down.

• Interest rates were 0.

• The government handed out free money.

• The only option was DTC. 

• It’s over, and it isn’t coming back. 

Brands that reached 7 to 8+ figures then think they won because their game was so smooth. But the game is easy when the tailwind is that strong.

So here’s the current state of play…

Money was cheap. Now it’s not.

• Venture funding in DTC is down 97%.

• The cost of debt is up 195%.

• Meta CPM is up 130%.

And you have to grow your business by producing cash flow just to buy inventory.

So you need to be profitable. 

We all know what the game comes down to. Ads. 

At least, ads will be a big part of it. 

How would you rate your ad game? 

If it makes you feel any better, 95% of new customers at Common Thread Collective don’t know how to allocate their media dollars. 

And that’s despite the fact that there are more measurement solutions than ever before. In fact, the more options there are, the more difficult it becomes to understand the outcomes. And the easier it is for media buyers or agencies to justify whatever it is they’re doing. 

There is always a view that says “it’s working”! 

Here’s how you get things back on track according to CTC →  

Step 1. Use cost controls 

Instead of setting the same budget every day and praying for efficient spend, set an efficiency target.

“But won’t that limit my spend?”, you answer. 

Yes, but there’s a trick. 

Step 2. Make enough creative and you will increase spend 

We’re talking a ton of ads.

“But won’t that cost me so much it’s not worth it?”

Maybe - unless you use AI. 

“But doesn’t AI suck?”

Ish. You can definitely tell when it’s AI, but there are good and bad ways to use it. There’s probably at least one good way to use it for your particular situation. 

It’s also improving every day, so keep an eye out. Also, all sorts of new tools are springing up to help increase creative volume and diversity.

Lastly, if you don’t use AI, cut down on ad cost until it’s lower than the expected revenue per ad (i.e. make statics instead of videos).

Step 3. Take all that extra time and money and rebuild your messaging 

It’s ALL ABOUT THE STORY. 

Why does your product or brand matter, and why now? 

This will affect the outcome of your ad campaigns more than anything else. 

Have you heard of the four peak theory? It’s a strategy in digital for creating at least four peak revenue moments or events during th year.  

Most brands’ 4 big peaks involve BFCM and maybe Prime Day sales these days, but others can vary depending on the story you tell and the alignment with your brand. 

It’s not about how good your ads are, it’s about the moment in time, and the surge in demand it might come with. 

And here’s the trick: you can generate a surge in demand by connecting with a pre-existing sentiment in a target group. 

Example: Born Primitive, who sells “Patriot Inspired Workout Clothing”, built a campaign around a WW2 veteran ceremony on the Normandy D-Day beach. It had limited edition shoes in military themed packaging with a little bottle of sand from the beach, as well as pictures of every veteran who went to the beach. 

Plus they funded the veterans’ trip back to the US. 

The results on new customer acquisition volume and efficiency for the subsequent months were astounding. 

No Meta ads strategy can produce this outcome. 

It’s all about the story. 

Bonus tip #1

The most likely time for your customer to repurchase from you is within the first 60 days, no matter what you sell.

By 113 days, about 80% of people who were going to buy, have bought. 

The others? Long gone.

Stop:

1. Emailing them.

2. Excluding them from ads.

Bonus tip #2

TikTok Shop/Catalog is wayyyyyy better than TikTok Standard Ads. Because TikTok makes more money off of it. 

Also, Facebook Reels Overlay is still the best. 

Takeaway: Taylor has developed an entire, coherent science and operating theory around DTC marketing that goes beyond the typical tactics and strategy you find.

He is determined to connect finance to marketing to ensure profitability, but it doesn’t end there. The 4-peaks theory and focus on brand moments/story is also a bridge between performance and brand marketing.

Consumer preference shift?

For background, Fan Bi runs the Hedgehog Company, which buys and flips struggling DTC companies.

The stocks mentioned in the image refer to:

• LVMH: LVMH Moët Hennessy Louis Vuitton, a global luxury goods company (down 20% year-to-date).

• LULU: Lululemon Athletica, a popular athletic apparel company (down 42% year-to-date).

• TJX: The TJX Companies, Inc., which operates retail stores like T.J. Maxx, Marshalls, etc. (up 25% year-to-date).

• Walmart: Walmart Inc., a multinational retail corporation (up 54% year-to-date).

Oh, and:

Takeaway: The American consumer has become rather price-aware this year. We’ve heard from the community that major sales periods have gone gangbusters for most brands this year, but there has also been a slower recovery after big funnel-clearing events. 

That can be tough for premium luxury brands who aren’t really about discounting. Can’t be a Veblen Good if you do 40% off for BFCM, right? 

That said, this trend hasn’t trickled down to the Dollar Stores, so maybe it’s more about value for dollar than just “the cheapest price wins”. 

So who’s ready for Black Friday? 

Could be Useful…

Hey, remember we mentioned leveraging AI in the first section? 

Sometimes that just means upping the speed of aspects of your creative development, rather than trying to spit out entire ads at scale.

For example - Scriptwriter George Blackman might’ve just made himself obsolete. 

Give it a try here.

And…if it doesn’t work for you, check out @VidIQ.

Takeaway: There are new AI tools coming out every day. One of them has to work for you right?

Quick hits

• Drama in DTC - BetterBrand’s 3PL sent an email out to customers saying BetterBrands has lied to them. 

• The next big AI tool? Concourse: the first AI analyst for corporate finance teams. We’ll be waiting on the first reviews!

• Are you an “I see it, I like it” brand? Or a “problem solver” brand? Here’s what to do for each. 

• Check out JAM!, the first DTC magazine.

• Your latest Meta bug - if you enable automatic adjustments, the system is going to do random stuff to your ads.

• If you’re looking to up your media buying before BFCM, register for this free Meta Ads Mastery webinar.