Heard the news about internet darling and direct-to-consumer (DTC) aperitif brand Haus? After their Series A funding fell through, they’re selling for scraps.
In a series of tweets on August 8, Haus’s CEO and Co-founder, Helena Price Hambrecht shared the news that has left many in the industry reeling.
After all, it is hard to believe – the brand had a larger-than-life bull run. Launched in 2019, the brand quickly received $17 million in funding. With 64.3K Instagram followers, the brand was a forerunner in the low alcohol-by-volume (ABV) category, a vertical projected to grow by over 30% by the middle of this decade. What’s more, the brand had just announced that they’d crossed $10 million in revenue earlier this year, with a national distribution channel with Winebow in the offing.
But with Constellation Brands backing out of their upfront commitment to the company’s Series A round, Haus has no option but to undergo a voluntary, 30-day ABC (Assignment for Benefit of Creditors) period. For little reason other than ‘timing’.
So what went wrong?
And why are DTC businesses falling like a pack of cards?
Whether or not we believe we’re in the middle of a recession, the signs of a slowdown are clear. And this is especially evident in the eCommerce industry.
While there are specific problems that plagued Haus and Blue Nile (alcohol and jewelry are both difficult segments to fund/sustain), the current trends are not reassuring.
First, the context. From the start of the pandemic in March 2020, to the end of 2021, eCommerce adoption accelerated to projections that were supposed to to have been reached in 5 to 10 years.
But things are changing, and quickly. In addition to people going back to shop from physical stores, there are other factors at play. The war in Ukraine, combined with inflation and the resulting Fed-hiked interest rates, have all led to a decrease in discretionary spending.
Then there are the changes that Apple’s ATT (App Tracking Transparency) framework have introduced to upset the media buying landscape. Gone are the days when you can throw up any ad and customers will rain. The customer acquisition cost via ads has skyrocketed and a lot of brands are struggling to maintain profitability (be economically viable?).
This has meant a return to pre-pandemic adoption rates in eCommerce, with things coming to head with Shopify’s CEO letting go of 10% of his staff. Things aren’t much better for Meta, Google or even Amazon, with all seeing slower growth than expected and revising down their quarterly projections.
And the same is true across multiple industries — advertising, technology, SaaS, shipping, logistics, etc.
Is there a way out? And how long do businesses have to weather the winds?
According to ‘The DTC Guy’ Nik Sharma, Q4 may provide some respite for eCommerce brands, but he expects a sluggish 2023, with recovery possible towards its last quarter.
So what should you do in the meanwhile? And what are your options if your business needs a lifeline?
We’ve put together a cheatsheet with some of the best advice out there.
Some solid strategies you can follow NOW:
And what happens if you need more cash? Here are Nik’s top tips: