if I had a fund, this will take up 80% of my portfolio in Europe as I understand the DTC market and this—is no brainer asymmetric bet
I’ve had the pleasure of building 3 shopify stores in the Pakistani market between 2020 and 2021 and during that time I consumed a disproportionate amount of stuff on e-commerce, starting from the Shopify Masters podcast to the Nerd Marketing podcast by Drew Sanocki and every interview of Ezra Firestone I could lay my hands on.
The conclusion is this-all money in DTC is made on the 2nd sale, the first sale barely covers the cost of running ads to acquire the customer
the biggest driver of recurring revenue in DTC e-commerce is “owned media”
Owned media means email addresses, phone numbers and postal addresses of customers, the customer give to your brand with permission that the brand can reach them again and again and again with promotions and offers
so your brand will not have to give Facebook another $49.97 to get a sale
That’s why the brands give you 20% off for giving your email.
Now, DTC e-commerce is the exact opposite of Amazon.
Amazon optimises for FBA, fulfilled by Amazon where you have no way of getting the contact information of your customer.
For every DTC brand, having the email address or the phone number of the customer is like oxygen but these are virtual means, emails get deleted, and when you switch to another app the pixels showing the email your brand sent are now showing instagram feed.
the human brain categories email as ‘something which can vanish’
But when you send them a postcard…
With your brand’s catalogue.
Your brain knows this is ‘real’
No amount of pixel changes will ever make the physical, printed catalogue go away.
It will remain in their house, it will be picked up by their kids this season, it will be picked up by their friends on the weekend, and by the grandmother the next month and if you’ve got QR codes in there, there will be traffic, waves of it, headed to your store.
The top 1% of DTC brands have either realised this or will realise this in future. But you have realised this now, this is the inflection point, after this will be exponential growth, this is the right time to invest in something like this.
And the top 1% of e-commerce operators, like Drew, have realised this and to that end he has started a company called PostPilot.
as things stand, optilyz the only/dominant player in EU in this space
Currently it is reported that optilyz has an annual revenue of $3.1M
I can confidently say, they will be a unicorn in 7-9 years time.
Hence, optilyz is an amazing bet—their customers include HelloFresh, Marc O’Polo, Esprit, Deichmann, Flaconi and Tchibo.