Press commentary on the plight of the direct-to-consumer brands striving to reach profitability. Read the full article

On short- versus long-term profitability for direct-to-consumer brands:

With millions in investment funding, brands like Casper, Hims and Thinx have made a lot of noise in the form of subway takeover ads and performance marketing. With increased competition, the cost of customer acquisition has skyrocketed, so the path to profitability has become even harrier. If a brand spends more to recruit a customer one time than the customer spends in that one purchase, it’s doing so on the faith that the customer will love the brand so much, they’ll buy again, and again, and then tell a few friends about it. That’s the only way the math adds up.

But that’s a gamble that doesn’t always work out.

“You can be unprofitable with a healthy business. If you’re not turning a profit on every single order, you can make up for that with customer profitability — the lifetime value of customers is profitable. You’re not spending more on getting customers than customers are spending on you,” said Richie Siegel, the founder of retail advisory company Loose Threads. “It can be OK to make bets that customers will eventually become profitable, but what typically happens is investors and founders is they get stuck. They sprint, then they don’t notice they’re out of gas until the motor stops running. Then they have nothing to do but sell off what’s left of the motor.”