DTC Briefing: Inflation, an election and a shortened holiday calendar are throwing a wrench in Q4 planning

“There is not a clear signal yet,” she said in terms of consumer sentiment right now. So, she’s thinking about “How do I plan my inventory in the right way for the [holiday] season?” 

Many DTC CEOs are undergoing similar thought exercises right now. While they’ve already been holiday planning for months, more companies are coming to concrete decisions about advertising spend and holiday promotions as the summer comes to a close. This year, brands are still grappling with how to attract price-conscious customers amid sustained inflation. But this year, they’re also thinking about how much to cut their advertising spend (or not) in the lead up to the election. They will also be under pressure to generate more sales, more quickly as the period between Black Friday and Christmas is roughly a week shorter this year. 

Since it was founded in 2014, Bearaby has never run any discounts, even for Black Friday. Hamm said that Bearaby will continue to stick to that approach. She said the brand will do fewer limited-edition colors this holiday season, leaning into its tried-and-true products while consumer demand remains unpredictable. It will however, try to draw in customers with new colorways for some of its cheaper products, like the eye mask. 

“We are trying to stay consistent with the brand and we hope that customers are rewarding us even in more tumultuous times,” Hamm said. 

While holiday promotions seem to kick off earlier and earlier every year, the month of October in particular is going to play a big role in how the fourth quarter goes for brands. That’s because the U.S. presidential election is expected to throw a wrench in ad prices. As the various political campaigns ramp up spending on platforms like Facebook, CPMs are expected to increase.

“We are expecting a really soft October,” Chip Malt, the founder and CEO of cookware brand Made In said. 

In turn, he said, his brand was planning to pull back on ad spend in October. Still other brands are planning to move up their Black Friday promotions. Louis Monoyudis, CMO of Japanese snack subscription startup Bokksu, said at the Modern Retail Marketing Summit last month that his company was planning to kick off its Black Friday promotion at the end of October, because he anticipated that people would be consumed with the election the first two weeks of November.

Malt, for his part, said Made In was not planning to start its Black Friday sale any earlier — it usually kicks off around mid-November. If brands start their sale earlier, he said “then next year you have to comp on an earlier start, and [then] the next year you have to start earlier.” He added “it is like a cycle of death.”

In preparation for the election, Aaron Luo, co-founder CEO of nine-year-old bag brand Caraa, went back and looked at performance data during previous presidential election cycles. He found that during previous election cycles, in the first few days after the election, traffic to the website, as well as conversion rates, decreased. But, he found that traffic picked back up steadily in the days after. He’s expecting a similar pattern this year — that is, he’s not expecting traffic to crater for weeks after the election. 

As a whole, CEOs said that certain economic indicators seem to be steadily improving. The uestion is just whether it will be enough to make a significant difference in holiday performance. For example, the Federal Reserve appears poised to cut rates in September. 

Still, the CEOs I spoke with said they weren’t planning to offer steeper discounts this year, as they see it as a race to the bottom. Instead, they said they plan to be more conservative with inventory, or just not do as many exclusive products this holiday season. 

“I feel good about where we are at with our inventory,” Luo said. “I think if anything, we will reserve our rights to run flash sales if certain styles end up moving slower than usual.”

And, not everyone is preparing for a more muted holiday season. Brompton, the 50-year-old U.K. bicycle brand, has made expansion in North America a big priority over the past few years. Its North American business — which is 55% direct-to-consumer — has doubled since Juliet Scott-Croxford joined as the president of North America three years ago.

In turn, Scott-Croxford said that a big focus for Brompton this holiday season was to continue to build brand awareness and position it as the “ultimate luxury city bike.” The company has various experiences planned throughout the holidays designed to get the most enthusiastic Brompton fans to spend more. It plans to increase AOV this holiday season by adding more options for people to customize or personalize their bikes during select days at their stores. It’s also rolling out complementary merchandise to target those who have become fans of the Brompton brand, such as dog food bowls and coffee mugs. 

“We are really thinking longterm about this, so I would say our consumers don’t expect us to necessarily churn out Black Friday-style deals,” she said. “We are a brand that is built on joy, and obviously the holiday is that perfect time to play into that.”

What I’m reading

• A rarity in the earnings world: Lululemon missed Wall Street’s expectations in its earnings report on Thursday, cutting its full-year guidance as certain product launches like its Breezethrough leggings did not meet expectations. 
• Beauty Independent surveyed a dozen beauty entrepreneurs about their experiences with fintech startups like Ampla, Clearco, Wayfler and more. 
• Business of Fashion has a guide on what to do when your product goes viral.

What we’ve covered

• Cowboy boot brand Tecovas is entering wholesale, starting with Western specialty stores.
• Outerwear brand Filson is launching its first full-fledged women’s line after 127 years in business.
• Brands like Apothékary and Simple Modern have found success in striking licensing deals with entertainment conglomerates like Disney, as well as major sporting leagues.