THE DTC TIMES

Your Weekly Pulse on What's Actually Moving the Needle

This week’s newsletter is in collaboration with your CFO’s favorite agency, Common Thread Collective.

The Great DTC Shakeout of 2025

Something's happening in the D2C industry that nobody wants to talk about.

The Shopify decline Taylor posted about? It may just be the tip of the iceberg.

We've watched the end of an era play out in real time. The era where you could slap together a Shopify store, throw some money at Facebook ads, and print cash.

Those days are behind us.

The brands currently growing in this moment share three things in common: they rigorously understand their unit economics, they've built operating systems for growth, and they’re accurately measuring results.

INDUSTRY PULSE: The Numbers Everyone's Ignoring

The Consumer Reality Check

Here's what's actually happening in your customers' wallets right now:

Consumer sentiment just hit levels we haven't seen since we started tracking this data. Your customers are getting pickier about where they spend, and the brands winning are the ones who've figured out how to be essential rather than just convenient.

Search behavior is shifting in ways that should make you nervous. Sharp drops in search impressions and app downloads in April suggest that people aren't window shopping as much. When they do show up, they're further along in their buying journey and way more price-sensitive.

The iOS effect keeps evolving in weird ways. Meta ad spend is up 25% YoY in Q1, but here's what nobody's talking about: the brands seeing the best ROAS aren't the ones spending more. They're the ones who've built first-party data systems that make them less dependent on platform targeting.

If you're running a $10M+ brand, this shift creates massive opportunity. While smaller players burn cash trying to maintain growth rates that made sense in 2021, you can invest in the infrastructure that'll dominate when the dust settles.

If you're grinding through the 6-figure range... this is where you separate yourself from the pack. The founders who figure out sustainable unit economics in this environment will have unbeatable advantages when conditions improve.

What 3,500 Brands Just Taught Us

Luke pulled some fascinating data from CTC’s performance database:

The efficiency paradox is real: Average spend increased 8% YoY in Q2, but total revenue was down 1%. Brands are working significantly harder for less. The ones thriving have cracked the code on retention and LTV expansion.

Discounting is becoming a death spiral: Brands offered an average discount of 10% of order revenue vs 8% in 2025. New customer revenue was down 2% YoY. The successful brands in our database have figured out how to maintain pricing power through value, not promotions.

Customer acquisition is getting brutal: CAC climbing faster than LTV across almost every vertical we track. But the brands in our top quartile have actually improved their ratios by focusing on channels where they have sustainable advantages.

Most brands are throwing money at the same tired solutions - more ad spend, deeper discounts, flashier creative.

The winners are going the opposite direction. They're building systematic advantages that compound over time instead of looking for quick fixes that drain cash.

STRATEGY SPOTLIGHT: What's Actually Working on Meta

Taylor's framework here deserves some attention because it cuts through all the surface-level optimization advice that many obsess over.

For $10M+ Brands:

Profit becomes your north star metric. Revenue growth means nothing if it comes at the expense of contribution margin. The brands scaling sustainably right now have religious focus on unit economics that improve over time.

Incrementality testing becomes non-negotiable. Platform-reported ROAS is fantasy math designed to keep you spending. Real measurement shows you which dollars actually move the needle versus which ones just steal credit from other touchpoints.

Creative volume becomes your competitive moat. You should be testing 50+ creative variations per month, with systematic frameworks for ideation, production, and optimization. This isn't about finding the magic ad - it's about building a machine that consistently finds winning angles.

The deeper insight: brands that scale past $50M have figured out how to systematize creative production and testing. They're not trying to capture lightning in a bottle … they're generating lightning themselves.

For 6-Figure Brands Scaling to 7:

This framework is your blueprint, but you need to sequence it properly:

Start with bulletproof unit economics. Before you worry about incrementality testing, you need a clear understanding of your real costs per order, contribution margins, and lifetime value calculations. Most founders in this range are flying blind on the basics.

Focus obsessively on one optimization lever. Don't try to implement all five framework elements simultaneously. Pick your biggest constraint and systematically remove it before moving to the next one.

Build systems that work without you. Your goal isn't to find the next winning ad. Your goal is to build processes that consistently generate winning ads while you focus on higher-leverage activities.

The key insight Taylor's sharing: most brands optimize for metrics that feel good instead of metrics that build businesses.

If you're still celebrating ROAS without understanding incrementality, you're optimizing for fiction.

THE MEASUREMENT PROBLEM: Your Data Is Actively Misleading You

This chart should keep you up at night.

Look at that massive gap between what platforms report and what actually drives incremental revenue. That spread represents millions of dollars in misallocated spend across the D2C ecosystem.

Platforms have structural incentives to show you inflated numbers. They get paid when you increase spend, whether or not that spend actually grows your business.

What This Means at Your Scale:

$10M+ brands: Platform reporting can't be your primary decision-making framework anymore. Implement incrementality testing across all major channels, starting with your biggest spend areas. The brands that figure this out first will have insurmountable advantages in media efficiency.

6-figure brands scaling up: Start with rock-solid contribution margin tracking. Platform ROAS is still useful for day-to-day optimization, but you need to understand your real unit economics before you can meaningfully measure incrementality.

The solution involves layering multiple measurement approaches rather than trusting any single source.

Most brands never graduate beyond platform reporting. They keep investing in channels that appear profitable but are actually just good at claiming credit for sales that would have happened anyway.

The brands that build real measurement systems can reallocate spend from credit-stealers to genuine growth drivers. That's where sustainable competitive advantages come from.

FINANCE FUNDAMENTALS: Why Your P&L Doesn't Work for D2C

Traditional P&L structures were designed for manufacturing businesses with predictable cost structures and linear scaling.

D2C businesses operate completely differently, but most founders are still using accounting frameworks that hide their most important metrics.

The Four-Quarter System That Actually Makes Sense

Standard P&Ls lump everything into "income" and "expenses." That tells you nothing about where to focus your optimization efforts.

Instead, break your cost structure into four distinct categories…

1. Cost of Delivery (Target: 25%)
Every variable expense required to get product from manufacturer to customer door:

• Product cost (obviously)

• Merchant and payment processing fees

• Freight, receiving, and warehousing

• Shipping and fulfillment

Most P&Ls scatter these across different line items, making it impossible to see your true cost per order. When you group them together, you can instantly spot margin problems and compare efficiency across different product lines or customer segments.

2. Ad Spend (Target: 20%)
Pure platform spend only. Don't include agency fees, creative production costs, or influencer payments here. Just the dollars going directly to Meta, Google, TikTok, and other paid channels.

This separation lets you see the true cost of customer acquisition separate from the cost of managing acquisition. Most brands blend these together and can't tell if they have a media efficiency problem or an operational efficiency problem.

3. Opex (Target: 15%)
Everything else: payroll, software subscriptions, office expenses, professional services, etc.

The key insight: if your Opex exceeds 25% of revenue, you're carrying too much overhead for your current scale. This usually means you hired ahead of the growth or you're paying for systems you don't actually need yet.

4. Profit (Target: 40%)
What remains after the first three categories. This is your actual contribution to building long-term business value.

The Revenue Breakdown That Reveals Hidden Problems

Stop tracking "total sales" as a single number. Break it down to expose the issues killing your margins:

Gross Sales (unit volume × MSRP)
Minus Discounts → Order Revenue
Minus Returns → Total Sales
Minus Taxes and Shipping → Net Sales

The discount line is where most brands bleed out without realizing it. A discount rate that creeps from 8% to 12% can destroy profitability while making your growth numbers look healthy.

Track discount rate month-over-month like you track ROAS. When it starts climbing, you're training customers to wait for sales instead of buying at full price.

Implementation Based on Your Scale

$10M-$50M brands: Implement this structure immediately. Your finance team might resist because it requires reorganizing your chart of accounts, but this view will transform how you make growth decisions. You'll spot problems months earlier and optimize much more effectively.

$50M+ brands: Layer in cohort-specific P&L tracking on top of this structure. You should understand unit economics by acquisition channel, customer segment, and product line. This lets you reallocate resources toward your most profitable growth vectors.

The goal here isn't accounting perfection. It's operational clarity about where your money goes so you can make smarter decisions about where it should go next.

When you can see your business through this lens, optimization becomes obvious. Most of your competitors are still flying blind with traditional accounting structures that tell them nothing useful about how to actually improve performance.

Watch the full breakdown here.

QUICK HITS

CMO Reactions To Most Talked-About DTC Ads of 2025

In this episode of TaylorReacts, Krista Dalton (CMO of Tecovas) and Connor MacDonald (CMO of Ridge) join Taylor Holiday to react to some of the most talked-about ads of 2025.

Ecommerce Intervention: The Liquidity Crisis Facing 8-figure Brands

If you’re looking to future-proof your business and avoid getting squeezed by shrinking margins, this video is a must-watch.

Meta's Attribution Settings Don't Matter Anymore

The Ecommerce Playbook Podcast dismantles the old school attribution windows holding your ad strategy hostage and reveal a simple framework for measuring true incremental ROAS.

Are You Building a Resilient Brand or Delaying The Inevitable?

From survival mode decision making to brand building under pressure, this episode of The Ecommerce Playbook Podcast breaks down what separates strong, adaptable brands from those on the edge of collapse.

TOOLS & TRAINING

For 6-Figure Founders: The UGC Production Machine Workshop from ADmission

Sick of guessing what creative will work? Sick of seeding products to creators and getting unusable content back?

Enter: The UGC Content Machine Workshop from ADmission. 

ADmission is a subscription service that gives entrepreneurs doing 6-7 figures in annual revenue access to the tools, resources, and people of Common Thread Collective. 

And for a limited time, we’re opening up access to our UGC Content Machine Workshop for a fraction of the subscription cost.

The UGC Content Machine Workshop gives 6-figure ecommerce founders the blueprint to crank out high-converting user-generated content, fast. 

No bloated agencies. No endless revisions. Just a proven system to get fantastic, native-to-feed video ads out of content creators.

This training includes:

• The complete, hourlong workshop replay

• The exact Creative Brief template we use with our clients (worth $197 alone)

• ​A complete workflow for organizing and managing creator content

• ​The proven testing methodology that identifies winners quickly

• ​Real examples from brands that have implemented this system

Get instant access to the workshop here.

WHAT'S NEXT

The D2C landscape will continue to change.

The brands that emerge stronger will be the ones that figured out sustainable unit economics, real measurement systems, and operational excellence while their competitors were chasing vanity metrics and quick fixes.

Whether you're scaling from $500K to $5M or from $50M to $500M, the fundamentals remain consistent: build systems that compound, measure what actually matters, and focus on contribution margin over everything else.

Stay profitable,
~The CTC Team

About CTC

Common Thread Collective is an ecommerce profit agency, helping DTC brands produce better financial outcomes by constructing a system for achieving profitable scale.