Will This Be DTC’s First Recession?

Will This Be DTC’s First Recession?

And if it is DTC’s first recession, how can brands survive it?

A recession is looming. At least, that’s what everyone keeps saying (big bank Morgan Stanley and Federal Reserve Chair Jerome Powell included).

And while the 2022 retail landscape definitely gives 2008 vibes, we are not currently in a recession. Not yet, at least.

By definition, a recession is a sustained period of economic decline:

  • Negative GDP
  • Rising unemployment rates
  • Falling retail sales

None of these common identifiers are currently happening at scale.

But we are seeing economic growth slow (down from 5.5% to 3.5% in Q4 2021) and inflation hitting 40-year highs. These could be early warning signs that a recession might hit.

That makes now the perfect time to recession-proof your brand (just in case).

In other situations (a big marketing event, an acquisition, going public), retailers look at what other brands did to inform what they should do. AKA, they steal the existing playbook.

But 15 years after the last US recession, can the playbook retailers used in 2008 still work?

In the No Best Practices newsletter, Alex Greifeld points out:

"Amazon had been in business for 15 years [by 2008], and Net-A-Porter had been online for 8. The iPhone had been around for about a year. Facebook was still restricted to college students, and Instagram didn't exist."

That would make this (as Alex continues to claim) “the first DTC recession,” leaving brands with “no industry-specific playbook to draw from,” right? Not exactly.

Ecommerce got its start way back in 1969 with CompuServe. (Admittedly, this OG experience would be unrecognizable to today’s consumers, but it was DTC all the same.)

Then, online marketplaces took off in the early 1990s (Amazon and eBay did 1m transactions each by 1997). And by the late ’90s, DTC had become immensely popular, thanks to the dot-com bubble.

Note that all these major milestones took place long before the Great Recession in 2008. They even happened before the 2000 dot-com crash (which DTC may or may not have contributed to – it depends on who you ask).

The US has also spent 14% of the time since World War II in a recession.

So, no – this will not be the first DTC recession. Not even close. It will be, however, the first of this scale.

Ecommerce sales grew 50% (reaching $870B) during the COVID-19 pandemic. There are now more DTC brands than ever. And by 2024, online retail is predicted to overtake physical retail.

But I don’t think this online growth makes the proven playbook for operating through a recession obsolete. Maybe, just in need of a few revisions.

After all, surviving a recession isn’t about cheap Instagram ads or operating offline (not inherently, at least). It’s about operational excellence.

And whether we’re talking 2008 or 2022, online or offline, the foundations of operational excellence (as defined by Greg Davidson, co-founder of Lalo) remain largely unchanged:

  1. Reduce waste (time, money, and materials)
  2. Improve your customer experience
  3. Increase margins as you grow

That’s the TL;DR version of DTC’s 2008 playbook. And it’s one that retailers can still win with today – recession or not.