Andy Dunn was the Christopher Columbus of digitally-native brands. Although not technically the first to launch, Bonobos was the most well-known brand that started online and sold direct-to-consumer. With Dunn at the helm, and the author of frequent Medium articles, Bonobos built its reputation as the pioneer in the consumer space. It deserves plenty of credit as a result for unleashing a tidal wave of newness.

But like the saying “pioneers take the arrows, settlers take the land,” Bonobos made a number of key mistakes that its successors would and/or should have learned from. It built its own ecommerce and logistics infrastructure, at a significant cost. It raised an immense amount of money to do so—nearly $130 million over six years, which was spent in a much cheaper customer acquisition landscape without the most impressive results—a revenue to spending ratio of only 2:1. It sold to Walmart for $310 million, barely over its previous private round valuation and for about two times revenue.

Dunn would go on to lead Walmart’s newly-created digital brands group, reporting into Marc Lore. Walmart, since 2016, snapped up Jet.com ($3.3 billion), ShoeBuy ($70 million), Moosejaw ($51 million), Modcloth (~$50 million), Bonobos (~$300 million), Eloquii ($100 million) and Bare Necessities (~$100 million)—close to $4 billion in total. Years later, Jet.com is being phased out; Bonobos remains unprofitable even under Walmart’s stewardship and was shopped around to potential buyers; and ModCloth was offloaded to an investment firm.

There are, however, two bright spots:

  1. Eloquii is likely the only acquired brand doing well because of its plus-size focus, which is perfect for Walmart’s audience.
  2. Walmart’s internally incubated mattress brand Allswell, which Dunn launched to compete with the Caspers of the world, and will probably out-earn every digitally-native brand the company bought by the end of 2021.

Last week, Dunn announced that he is leaving Walmart two and a half years after first joining the company, likely walking away from part of his four-year earnout as well. His tenure was very much a mixed bag, built on a flawed strategy (buying unprofitable digitally-native brands) and saved by a time-tested strategy (spinning up private labels for little money and using Walmart’s massive customer base to scale them). The company said as recently as November that “We’ve had great success with incubation.” It did not say it has had “great success with acquisition.”

This result encapsulates the entire dilemma of the 2010s: Billions of dollars of investor capital and millions of hours of attention went towards digitally-native and direct-to-consumer brands while the real money in a hyper-saturated landscape was—and always has been—in private labels. Marketing has always been important for consumer brands and digitally-native brands have been very good at it on the surface. But if you go beneath the surface, you can see that many—not all—brands are unprofitable given their troublesome cost structure of voracious spending on the front-end and back-end without much to show for it. Profitable brands scaled slower, over a longer period of time, building their brand brick-by-brick, not floor-by-floor.

The speed at which unprofitable digitally-native brands have grown starkly contrasts that of private labels, with companies like Target and Walmart scaling their private labels to billions of dollars in revenue in as little as one year (Target’s Cat & Jack hit $2 billion in year-one sales). A built-in audience, a stringent focus on costs and margins, and a diverse marketing strategy makes this possible. The results speak for themselves.

Since starting Loose Threads, we have been fixated on the speed at which digital brands raised capital; tried to stubbornly grow by selling online-only and investing in only one or two digital marketing channels (Facebook); and hired hundreds of employees and focusing on the top line over the bottom line. Soon enough, many leading brands moved into physical retail, opened up in wholesale and marketed beyond Facebook and digital properties—many of the things they said they would never do.

With over a decade of proof, it’s clear that the formula pioneered by Dunn in the late 2000s and into the 2010s did not hold up. Using the internet as a tool to change how brands are built and how they interact with their customers holds water, but it is not a sustainable business model.

Heading into 2020, private labels will only continue to dominate more as rising acquisition costs show no signs of reversing, while independent brands that stay within their means will keep thriving. The focus has, rightfully so, shifted back to the brands (digital or not) that are taking their time and making money along the way. Most of the companies on that list are at least a decade old, making them teenagers, young adults or adults—not infants or toddlers that tried to grow up too fast.