Shopify long-term will be a winner, says RSE Ventures' Matt Higgins
In this article, we explore the insights shared by Matt Higgins, CEO of RSE Ventures, regarding the current state and future prospects of Direct-to-Consumer (DTC) companies. Higgins discusses the challenges faced by DTC companies in the current economic environment, provides recommendations for investors assessing the viability of these companies, and highlights the potential of infrastructure and tools like Shopify and Advantage Plus. Additionally, he shares insights from a course on Tech Talk at Harvard Business School and the role of influencers like Kim Kardashian in driving customer acquisition for DTC businesses.
In a recent discussion, Matt Higgins, CEO of RSE Ventures, shed light on the challenges faced by direct-to-consumer (DTC) companies in the current economic landscape. With the end of the "year of free money" and the boom times, many DTC companies find themselves struggling with high customer acquisition costs and supply chain problems.
Challenges for DTC Companies
Higgins points out that DTC companies became heavily reliant on cheap customer acquisition during the boom times. However, with the reopening of the world, competing in a marketplace with skyrocketing customer acquisition costs and supply chain issues has brought their business models under strain.
Potential Wave of Bankruptcies and Consolidation
As a result of these challenges, Higgins predicts a wave of bankruptcies and consolidation in the DTC sector. Many companies may struggle to secure funding beyond their Series B rounds, resulting in a significant shakeup in the industry.
Assessing Business Model Viability
Investors seeking to assess the long-term viability of DTC companies should focus on those with robust business models that can weather these challenges. Higgins highlights the importance of infrastructure, with companies like Shopify being well-positioned to emerge as winners due to their provision of tools to smaller businesses, including those for customer acquisition.
The Role of Tools and Infrastructure
Higgins also acknowledges the role of tools that enable lower customer acquisition costs in determining the success of DTC companies. He highlights Facebook's Advantage Plus, which utilizes AI to assist DTC companies with customer acquisition. This tool has shown promising results and could be advantageous for long-term success.
Influence of Storytelling and Influencers
Higgins emphasizes the importance of storytelling in capturing customers' attention and standing out in a crowded marketplace. Influencers like Kim Kardashian have a unique advantage in reaching their target audience directly and subsidizing their customer acquisition costs through their involvement in popular conversations. This ability to engage customers directly can be a significant strategic advantage for DTC companies.
While some DTC companies may face challenges due to their premature decisions regarding public offerings and market trends, there are still strong contenders in the space. The key to long-term success lies in understanding the lifetime value of a customer and finding ways to increase customer retention and frequency. By focusing on strategies to sell more products and keep customers coming back, DTC companies can justify their customer acquisition costs and thrive in the future.
Direct-to-Consumer (DTC), customer acquisition costs, supply chain problems, bankruptcies, consolidation, business models, viability, infrastructure, Shopify, tools, Advantage Plus, storytelling, influencers, Kim Kardashian, customer retention, frequency.
Q: What challenges are direct-to-consumer (DTC) companies facing in the current economic environment?
A: DTC companies are grappling with high customer acquisition costs and supply chain problems, as the world reopens and competition intensifies.
Q: How might the current economic conditions impact the fundraising efforts of DTC companies?
A: DTC companies may find it challenging to secure funding beyond their Series B rounds, leading to a wave of bankruptcies and consolidation in the industry.
Q: What factors should investors consider when assessing the viability of DTC companies?
A: Investors should evaluate DTC companies with robust business models that can adapt to the current challenges. Infrastructure, such as tools provided by platforms like Shopify, can play a critical role in determining long-term success.
Q: How can DTC companies overcome high customer acquisition costs?
A: Tools like Facebook's Advantage Plus, which leverages AI to aid in customer acquisition, can help DTC companies reduce their costs and achieve better results.
Q: What advantages do influencers like Kim Kardashian bring to DTC companies?
A: Influencers have the ability to engage their target audience directly, subsidize their customer acquisition costs, and increase brand visibility through their involvement in popular conversations.
Q: What is the key to long-term success for DTC companies?
A: DTC companies should focus on increasing customer retention and frequency by offering more products and engaging customers through effective storytelling. By doing so, they can justify their customer acquisition costs and thrive in the evolving marketplace.