You need to know this: 

• YouTube execs spent a day in April with DTC brands like TechStyle, Fabletics, Imperfect Produce and Savage x Fenty to understand how it can grab share from Facebook, still the primary channel for start-ups acquiring customers.
• Edgewell Consumer Healthcare, owner of Schick, just bought Harry’s Shave Club for $1.4bn to reinvent itself as a next generation consumer goods company and compete with the slew of DTC start-ups. It plans to diversify from its reliance on retailers by using Harry's as the template for its entire brand portfolio.
• Edgewell wants to get closer to its customers with direct transactions and data via e-commerce and its online club approach.
• It follows Unilever’s $1bn-plus acquisition of the DTC pin-up, Dollar Shave Club, in 2015, just three years after launch.
• Nike’s DTC business will hit $16bn in sales by end of FY 2020, up from $10.4bn FY 2018.
• PepsiCo said last year e-commerce sales, including direct-to-consumer and direct-to-business, hit $1bn.
• DTC brands control the customer data, experience and relationship.

• P&G, L’Oréal and Nestlé (an early DTC with Nespresso) are making acquisitions all over the world – learning direct sales models and CX to lessen their reliance on traditional retailers and compete with e-commerce giants like Amazon.
• P&G's chief brand officer Marc Pritchard says: "E-commerce and direct-to-consumer are growing. We think the small can help the big get faster and the big can help the small grow faster." 
• Molson Coors is getting in on the act too, launching e-commerce platforms that deliver its beer brands direct to customer homes. 
• “We’ve reached this tipping point. Consumers are desperate for something new,” says Anjali Lai, senior analyst at Forrester.
• Tim Armstrong, former Google, AOL and Oath Media CEO has launched "the dtx company", with five DTCs in its launch portfolio, focused primarily on women:
  • SMS health drinks company Dirty Lemon
  • Manicure company Olive & June
  • Footwear maker Margaux
  • Bra maker ThirdLove
  • Workwear for women, Argent
  • “I’m not negative on adtech and I’m not negative on media, I’m just not in them anymore," says Armstrong.
• Outside of Dollar Shave Club and Harry's, acquisitions or IPOs of larger DTCs have been slow - eyewear start-up Warby Parker and $1bn US mattress brand Casper are being closely watched.

What about Australia?

• Temple & Webster, the homewares start-up, considered the worst IPO of 2016 is on the mend. 
• In 2016 Temple & Webster's share price tanked -  from $1.10 to 12c. Last year it recovered to 55c and now is back at circa $1.30.
• For the December half, Temple & Webster revenues were up 40% to $49.3m and active customers were up 32% to 231,000.
• Melbourne DTC, The 5th Watches, only sells on the fifth of every month, is shipping globally and first year sales topped $10m.
• Threadsmiths is going direct with apparel lines that repel stains using "hydrophobic" materials.
• Bondi apparel brand Venroy shut its wholesale division to go direct.
• Kirin-owned Lion is going direct too with boutique bars and entertainment precincts in Sydney, Melbourne, Singapore, San Francisco, London and beyond.
• But... one-time Australian DTC and e-commerce darlings like Surfstitch and upscale footwear DTC Birds of Prey have both been liquidated.
• The director of the University of Queensland's MBA program, Associate Professor Tim Kastelle, says the average start-up success rate is 8-10%. New product launches from existing companies is 18% but when companies are "effective at getting closer to customer needs", success rates can get up around 40-45%  
• The co-founder of VC firm Greycroft, Alan Patricof, wrote in the Financial Times recently: "From my vantage point in the venture capital industry, it is apparent that many start-ups are failing or changing their business models because of their dependence on Amazon, Facebook or Google. The situation has progressed to the point where venture capitalists discount companies that rely on a digital platform to reach their markets."
• Good luck with your DTC adventures.

It's messy - here's why:

• The Digitally Native Vertical Brand (DNVB) models are shifting. Version 1.0 is embodied by Casper, which many DTCs are looking to as their North Star for a successful IPO. Casper's model, like many, is to launch a brand online quickly, sell primarily through e-commerce, then move just as quickly into physical retail expansion. Casper is stocked in Target, which is also an investor.
• What is loosely described as DNVB  2.0 is where brands like skincare, makeup and body products direct-to-consumer company Glossier, alongside travel site Away, are more socially native on sites like Instagram and lean more heavily on highly engaged digital communities rather than expanding offline distribution for growth. Melbourne watch company The 5th sits in this camp too.    
• But Dollar Shave Club's executive creative director Matt Knapp told Mi3 what worked in social five years ago for his firm - Facebook essentially built the business early on - is much harder now. Many DTCs are moving to legacy media to hasten brand building, awareness and win new direct customers. Let's hear him out:

"Dollar Shave Club rode the wave of that first kind of Facebook direct response world, where people were getting a lot of growth in that category. It's definitely still a huge channel for us, but there's so much competition now in that medium that we've had to move. The cost to run ads there is much more expensive and more competitive and because you've [acquired] a certain amount of the market, the growth you had initially starts to plateau. A lot of brands that were doing strictly online, Facebook-type stuff, are now going offline. They're coming out with big brand outdoor campaigns and TV - because there's an element of legitimacy that those big offline channels give you."

• So we're now in the crossover zone. Start-ups want to tap legacy media for legitimacy, cachet and brand building while the bigger players want to mimic start-ups with their velocity and small-scale authenticity.