The fifth-annual Foremost 50 Forum hosted by The Lead took place in Manhattan this week.
The list of the Foremost 50 direct-to-consumer (DTC) brands, presented in partnership with cart.com, was further highlighted at the event with the awarding of three winners each in of five categories—Best Omnichannel Strategy, Storytelling, Creative Customer Acquisition, Product Innovation and Assortment Strategy, culminating in sole winners in the categories of Trailblazer Award and the Icon Award, which went to home goods company Pattern Brands. Accepting the award were co-founders Nicholas Ling and Suze Dowling, who started as brand agency Gin Lane before growing into Pattern in 2019 and turning it into a $99 million business through selling products and promoting and acquiring other DTC brands.
Many brands born online that save operational costs by cutting out retail overhead hope to get acquired by bigger fish.
But as Thursday Boot Company co-founder and executive chairman Connor Wilson and Richard Kestenbaum, partner of Triangle Capital and Forbes contributor discussed during an alumni panel discussion, getting that fast infusion of capital for a “parachute exit,” as Wilson described, may not be the best practice any longer for DTC businesses.
“Over-raising capital can be a mistake; raise as little capital as you can,” Wilson said. “You can make a little exit anywhere along the way, but the good brands dilute themselves.”
Wilson said channel diversification is vital for DTCs, as is more novelty in the product line, which his company’s upcoming launch of a denim jacket speaks to.
“If you start building a business with the idea that you’re going to exit in five years, then you’re probably not doing it the right way,” Sonal Gandhi, chief content officer for The Lead told Sourcing Journal. “A lot of the brands now are thinking about it as a long-term, holding onto the business for the long-term, primarily because also they’re not going for those huge VC investment rounds.”
As a result, Gandhi said, there is more focus than ever on product quality.
“The product, really, that’s the basic premise of why you want to bring a new brand [to market]. All that clever marketing and all of those ways you sort of go to market with packaging were all great, but at the end of the day, if you strip it all down, can the product stand on its own?” she said. “That focus on the product, I’m seeing much more intensely now. It’s always been there, but people are getting savvier about the marketing and [customers] really want to know, does this product deliver?”
That’s just one of the many changes she’s seen in this business model that’s been popular for roughly a decade. Focus on how to acquire customers more creatively, ensuring profitability early on, and a post-pandemic push to wholesale are other sea changes Gandhi is witnessing.
The need for an omnichannel platform that includes wholesale in brick-and-mortar retail stores is something New York-based apparel company Flag & Anthem knows well, having begun in wholesale in 2016 and only in recent years navigating into DTC.
“There’s a lot of folks within that group of companies that are DTC-native but are kind of exploring the omnichannel side, whereas we’ve had somewhat of an inverse approach,” Flag & Anthem CEO Brad Gartman, an alumni of Macy’s and Lord & Taylor, told Sourcing Journal. “I guess that’s what was attractive in the impetus for us winning that award.”
Gartman said his company currently does about two-thirds of its business through wholesale and one-third through DTC, which he expect to shift to 60/40 by the end of the year.
“We have omnichannel and very well-balanced sales distribution model, which gives us the ability to pivot,” Gartman said. “We have a pretty robust subscription base… and we always knew there was a vision for the DTC side.”
Flag & Anthem distributes in upwards of 1,500 stores nationwide, but given some of the inventory backlog that emerged in the post-pandemic resurgence of brick-and-mortar, direct-to-customer digital sales are likely to be at a premium the rest of the year.
“When we ship wholesale, we don’t know exactly what it’s going to look like on the floor,” Flag & Anthem co-founder Azod Mohit told Sourcing Journal. “We don’t have our own store, so our website is our store and we’re really able to control what it looks like.”
Getting its own storefront, however, is a goal for Flag & Anthem by early 2024.
“We’re looking to test that within the next year, with likely three to five locations,” Gartman said, adding that cities like Nashville, Chicago, Austin and Dallas would make ideal locations based on a “consumer heat map.”
Another advantage of the DTC approach is better access to and control of customer data, and not just customer data, Mohit points out, but the relationships built out of the trust of sharing an email address or phone number.
“We text with our community and for someone to give you their phone number it means they’re loyal,” Mohit said. “That’s like the most lucrative part of the sales funnel.”
Gandhi said that control of data is what’s attractive to bigger, more established brands.
“Data is [the] most important piece of it,” she said. “They want to know who their customer is, what they want, so they can create the right product for them and the right messaging.”
For smaller brands, the term messaging is usually communicated as storytelling, which was its own category at Tuesday’s awards.
Storytelling winners included skincare brand Fig 1, cannabis tonic Cann and St. Louis-based men’s and women’s apparel company The Normal Brand, run by three brothers Jimmy, Conrad and Lan Sansone.
Jimmy Sansone said they were so strapped for resources that the brothers/CEOs had to do their own modeling, their mother designs their stores and as three of 10 brothers that the key to their storytelling was staying “rooted in family.”
“Storytelling is important for any business in the modern age, but specifically for a consumer facing business, distinguishing yourself by your story is even more important,” Jimmy Sarsone told Sourcing Journal. “Being in St. Louis, there weren’t many fashion startups, so the idea of raising money at the beginning wasn’t something we considered seriously. That meant we bootstrapped it, so anything we could do for the business, we did do. In addition to modeling, that meant sales, picking, packing, shipping, media management, creative, design – really everything.”
Gandhi said she comes up with the Foremost 50 list based on interviews with each brand, taking into account a number of factors. Beyond mere profitability or capital raised, Gandhi finds themes in the interviews, be it intensive research and development, omnichannel or product innovation and uses this intel to form a baseline.
She tries to diversify the list to include a balance between fashion, beauty, food and drink and other products, but in recent years, DTC fashion and clothing sales have declined substantially.
“When we first started, we used to feature a lot more fashion apparel, apparel brands,” Gandhi said. “But we follow the money, so to speak, and a lot of the money lately has been going to beauty and wellness, personal care, food and beverage.”
The Foremost 50 encompassed several other fashion brands to watch, including L Catterton-backed plus-size platform BloomChic, veteran-owned active clothing startup Born Primitive, and premium handbag, footwear and outerwear label Brandon Blackwood. Healthcare apparel maker Care+Wear also got a shoutout on the list, which gave a nod to intimates innovator Harper Wilde and Italic, the luxury-without-luxury-prices company.
Madhappy, the Los Angeles streetwear brand that landed LVMH’s backing, was also tapped as a rising star. Made-in-Spain Margaux got recognized for its size-inclusive premium women’s footwear along with menswear maker Mugsy. Upscale men’s and women’s shoe brand Oliver Cabell and materials science disruptor Pangaia add to the fashion risers along with Public Rec, a men’s and women’s clothing imprint that plays in a sandbox similar to Rhone. State & Liberty’s athletic-fit men’s shirts got the Michigan-based startup on the list, where it rubbed shoulders with Carhartt workwear rival Truewerk.
Wolf & Shepherd, the tech-forward footwear brand stocked by Nordstrom and Brooks Brothers, and Peloton challenger Hydrow, which sells branded workout apparel made by Fabletics, capped off the Foremost 50.