In blow to retailers, Covid made online upstarts even stronger

Bloomberg

Digital brands looked headed for a reckoning a year ago, with bloated valuations, rising advertising costs and ever more competition.
Then the Covid-19 pandemic hit the US and gave a giant gift to brands that mainly sell directly through the web. With their brick-and-mortar competition shuttered and the virus raging, Americans flocked online and loaded up on home goods, comfy clothes and much more.
And this wasn’t just 20-somethings, but pretty much everyone.
This helped remove a big hurdle to continued growth for direct-to-consumer brands: finding new customers.
The bulk of these businesses got off the ground by flooding social media with ads targeted at younger shoppers. This created a winning formula and digital brands flourished last decade.
However, they increasingly faced rising marketing costs as brands selling everything from subscription toothbrushes to cleaning services poured cash into courting the same young cohort. That led many to try to push into the mainstream by opening stores and advertising on television or through direct mail to win shoppers it couldn’t reach online.
Covid helped on this front, too, because industries hit hard by the pandemic, such as restaurants and travel, slashed advertising. That brought down ad rates on the web and in traditional media, creating a big opening for smaller brands.
“At a point, these brands either move into the mainstream or fizzle out,” said Sonal Gandhi, chief product officer for The Lead, a research and events firm focused on e-commerce. Because of the “pandemic and everyone going
online, they can reach the older customers they couldn’t before.”
This is another blow for legacy retailers and brands—many of which have been hammered by the store closures and recession triggered by Covid. The 10 largest public US companies that are either clothing retailers or department stores collectively had $38 billion of revenue wiped out last year, or about a quarter of their 2019 sales, according to estimates compiled by Bloomberg.
At Mack Weldon, a casual basics brand based in New York, the opening in ad markets helped create a boom in new customers during the fourth quarter, according to chief executive officer and founder Brian Berger. And that included gains among senior citizens.