For e-commerce brands, the wave of bad economic news is a shot across a bow that heralds a major shift in consumer spending. The break time is ahead. But I think there is room for optimism in the brands that make it.
Why am I eligible to make such a statement? I have spent more than four years as a consumer investment partner at Andreessen Horowitz. There, he met hundreds of consumer companies and worked closely with dozens of companies, from super-growing unicorns to shrinking businesses.
But I’m not an investor writing from Sandhill Tower. I co-founded Canal to help the brand sell more. Since its launch in 2021, we have worked with hundreds of e-commerce brands to expand our product catalogs and expand distribution. Most importantly, we carefully monitor what’s working and what’s not working in the consumer brand.
The more complementary and additive the product is to the catalog, the larger the cart size and the more likely the customer will return it.
The next 18 months will certainly be difficult for many e-commerce operators, but this time we’ll also hone our resilient brands. Here’s what every brand leader needs to know to survive the recession:
Margin is everything
Your expense is eating your world to make the famous wording sneaky. To survive, you need to find out what costs are missing in your margins. Understanding where you’re wasting your spending can help you get rid of unprofitable and risky initiatives.
Disassemble the two major cost centers of e-commerce brands where you can do something:
The DTC playbook was created at a time when customer acquisition was relatively cheap, thanks to digital advertising spending on Facebook. However, the sweet and sweet diet of cheaply acquired customers left the brand overly dependent on unsustainable growth.