Scale or Bust
Amy Jain, CEO and
co-founder of BaubleBar,
founded her fashion-jewelry DTC startup in
company has gone
beyond DTC—also
earning sizable revenue
by selling wholesale and
doing private label and
white label for brands
including Target.
COU
RT
ESY
COMPA
NY
“The temptation is to give the very best price, but then it becomes, ‘Well, shit, we can’t stay in business doing this. We
—Stephen Kuhl, Burrow co-founder
for more companies to challenge the old
guard by following the Warby playbook.
“If you went to your kitchen, your bed-
room, your bathroom, your living room,
and you went through all the stu; that
was in there, from your toothbrush to
your sheets and towels and curtains—
you name it—it could all be Warby-ed.”
Not all Wharton professors have the
same optimism. Kartik Hosanagar, a
Wharton professor of technology and
digital business, has also put his own
money into several student startups,
but he worries that the opportunities
to build large-scale DTC brands online
are limited, because what worked a few
years ago may no longer be possible. “I
keep complaining that I don’t want to
hear another pitch from a student that’s
like ‘the Warby Parker of so-and-so,’;” he
says. “I think there’s a reckoning coming
for these people. These venture-funded
companies trying to scale are going to
find out there’s just no way to make the
numbers work.”
Over the course of several months, I
met with dozens of young entrepreneurs
at Wharton and beyond hawking napkins,
suitcases, mattresses, and tampons. They
all o;ered to connect me with other com-
panies, which sell razors, bras, strollers,
and much more. Two themes emerged.
One, nearly every product category will
see at least one DTC challenger. And two,
largely because of that proliferation, it’s
harder than ever to build a big, profitable
business with the Warby model.
•••
NOT ALL PRODUCT CATEGORIES
ARE CREATED EQUAL
Perhaps you’ve heard a story like this
one. A guy goes to a department store
looking for underwear and finds himself
befuddled by the selection. What’s the
di;erence between the $30 pair and the
$3 pair? Between the Dri-Stretch and the
Climalite pairs? Why does he have to be
standing in this store, anyway? Light
bulb: The underwear business is broken.
The underwear epiphany happened to
Jonathan Shokrian, founder of MeUndies,
a Los Angeles–based DTC underwear
company whose CEO, Bryan Lalezarian,
is another Wharton alum (2012). For Jen
Rubio, co-founder of the luggage maker
Away, it happened when her suitcase
broke on a trip and, on trying to replace it,
she realized there was a gap in the market
between expensive designer suitcases and
low-quality cheap ones. A former Warby
Parker employee, she saw an opportunity
to o;er a better suitcase at a better price,
and sell it online. She teamed up with
another Warby alum, Steph Korey, and has
since raised $31 million in venture capital
from the likes of Forerunner Ventures, an
aggressive DTC investor.
It might be easy to discount these
founding legends as trumped-up mythol-
ogy, but Jesse Derris believes they repre-
sent the first step in building a great new
consumer brand. Derris is founder of the
public relations agency Derris, which
earned its DTC cachet by making Warby
famous. Derris has since worked with
dozens of other D TC companies to estab-
lish their identities, which all share a core
narrative. “I believe I’m getting ripped o;
by X, so I launched a brand to solve the
pain point,” says Derris. “I sometimes call
it a Seinfeld-ism. It’s there, everybody’s
thinking the same thing, but nobody has
verbalized it.”
Bell, the Wharton marketing professor,
has a di;erent characterization of what
D TC companies exploit: “Millennializa-
tion.” Twenty- and 30-something consum-
ers are digital natives with lots of buying
power who have no attachment to mall
brands and big-box stores. Since these
founders are usually Millennials them-
selves, DTC companies speak the mother
tongue—Instagram, experiential market-
ing, brands as lifestyles. Away’s suitcase,
says Bell, “is a decent-enough product”—
he describes it as a 7 or 8 out of 10—“but
the marketing is 10 out of 10. The way it’s
priced, the way it’s distributed, the way it’s
promoted, the way it’s targeted, the way
it’s positioned—that’s really the secret
Whether a D TC startup can actually
deliver better value than its predecessors,
says Warby’s Blumenthal, depends on how
broken the existing market is. In his case,
he learned that the eyewear market was
dominated by one giant conglomerate,
have to make some money.’ ”
