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A Deep Dive Into The Flurry of DTC IPOs

Apr 10, 2022

The last five years, 2017-2021, have been a ‘coming of age’ period for several DTC brands. In addition to a lot of transformation in the way DTC brands operate, we saw a flurry of activity in terms of DTC brands going public. At least 15 DTC companies came out with an IPO in the last couple of years. While not all of these brands were completely digital, all of them had a significant online sales channel presence.

 

We at AGP were curious to peel the layers and look at what exactly was going on in the sector.

 

Here are some highlights from our study:

Number of DTC IPOs

There were nine IPOs in 2021 with at least three of them in August 2021 alone. Seven of these IPOs were in the Fashion and Apparel category.

 

 

Years to go public

Digital natives took significantly less time since inception to go for an IPO than brands with physical store presence.

 

 

Digital native and DTC brands also attracted relatively high valuations than omnichannel brands.

 

DTC brands have taken longer to go public due to the time shift that has happened due to the pandemic.

 

Post-pandemic IPO brands also attracted relatively higher valuations while accumulated deficits were reduced significantly. While post-pandemic IPO cohort companies seem to have taken longer to go public, the average revenues at the time of IPO were lower than the pre-pandemic IPO cohort by 42%.

 

 

Marketing Expenses

DTC brands having physical stores have built a relatively bigger customer base than digital natives and omnichannel companies.

 

 

The customer acquisition cost goes up higher every month as digital gets expensive but few SKUs under a strongly positioned brand are supposed to give the right air cover for the brand to reign in their customer acquisition costs. Comparing operating cash flows and marketing expenses of brands having ‘many SKUs’ and ‘fewer SKUs’ (depending on product lines, models, and variants), we find that more brands with a lower SKU count are burning cash than ones with many SKUs. Embracing complexity helps.

 

 

The customer acquisition cost goes up higher every month as digital gets expensive but few SKUs under a strongly positioned brand are supposed to give the right air cover for the brand to reign in their customer acquisition costs. Comparing operating cash flows and marketing expenses of brands having ‘many SKUs’ and ‘fewer SKUs’ (depending on product lines, models, and variants), we find that more brands with a lower SKU count are burning cash than ones with many SKUs. Embracing complexity helps.

 

 

Before and after IPO

A few DTC and digital-native brands have completed at least one business cycle after IPO. While there was no discernible change in marketing expenses before and after their respective IPOs, few have improved upon their profits.

Notable among companies with high marketing expenses are SmilesDirect Club which is trying to build a niche market with a single SKU (3D printed clear teeth aligners) and Casper, the mattresses brand. Both these brands have fewer SKUs and have had a high marketing expense before IPO.

 

 

List of 15 DTC brands featured in the analysis:

Name Ticker Product SKU Count Type Incorporated IPO Year Online Direct Revenue
Warby Parker WRBY Eyewear  Many SKU DTC Brand 2010 2021 40%
Allbirds BIRD Footwear Fewer SKU DTC Brand 2014 2021 89%
Casper CSPR Mattresses  Fewer SKU DTC Brand 2014 2020 87%
Stitch Fix SFIX Customised Clothing  Many SKU Digital Native 2011 2017 100%
SmileDirectClub SDC Dental Equipment  Fewer SKU Digital Native 2014 2019 100%
Blue Apron APRN Meal kits Fewer SKU Digital Native 2012 2017 100%
FIGS FIGS PPC Apparel  Fewer SKU Digital Native 2013 2021 98%
On Running ONON Footwear Many SKU Omnichannel 2010 2021 38%
Barkbox BARK Pet Supplies Many SKU DTC Brand 2012 2021 88%
Torrid CURV Apparels Many SKU Omnichannel 2001 2021 70%
Brilliant Earth BRLT Jewellery Many SKU DTC Brand 2005 2021 80%
A.K.A. BRANDS AKA Fashion and Apparel Many SKU Digital Native 2018 2021 78%
Hims & Hers Inc HIMS Telehealth Fewer SKU Omnichannel 2013 2020 66%
Yeti Group YETI Drinkware Many SKU Omnichannel 2006 2018 30%
The Honest Co HNST Baby and Beauty Many SKU Omnichannel 2012 2021 33%

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