News that both Unilever and Procter & Gamble are struggling to turn their various DTC acquisitions into profitable businesses comes as new online-only brands increasingly look to brick-and-mortar stores and traditional media.
Unilever famously paid an eye-watering $1bn for Dollar Shave Club back in 2016, since when it has concluded that selling everyday items such as razors as online subscriptions doesn’t make financial sense, according to a person familiar with the matter.
That same source told the Wall Street Journal that the cost of winning new customers is the same online as in store and that the part of the brand’s relative success has relied on consumers not cancelling their subscriptions even after they stop using the razors.
That said, the brand does expect to break even next year and Unilever has the value of the first-party consumer data it has gathered – which was one of the reasons for the acquisition in the first place.
But many DTC brands are headed in the opposite direction, as consumers prefer to pick up FMCG staples in store rather than take on yet another subscription payment. “It can feel expensive and out-of-control to have subscription at home,” points out Megan Bent of growth-equity investment firm Harbinger Ventures.
While P&G has yet to make money out of its DTC acquisitions, in at least one case it fully intended taking the brand into stores. Native, a deodorant now supplemented with soap and toothpaste lines, is available in Target, Walmart and Walgreens; stores account for 40% of sales.
It turns out that people’s shopping habits aren’t changing in the way once anticipated, as P&G discovered when it attempted to sell Tide pods by online subscription.
“It was far too easy for people to just drop Tide in their basket when they go grocery shopping, so subscription wasn’t as big of an idea,” said Sundar Raman, P&G’s president of fabric care in North America. So rather than persist with this idea, P&G is instead making its products easier to find quickly in stores.
And that view is endorsed by Bent: “The thinking has been that convenience is having something dropped off at your front door,” she said. “Really, it’s ‘I want the product when I need it, where I need it’.”
Sourced from Wall Street Journal; additional content by WARC staff