Roman
Roman founders Rob Schutz, Saman Rahmanian, and Zachariah Reitano, with Thor.
- As the coronavirus devastates swaths of the economy, buzzy Silicon Valley digital-based startups are being forced to pivot fast.
- Many of these businesses raised a lot of money on the promise of rapid growth and now find demand is suddenly drying up as shoppers hunker down and stop buying.
- They're slashing ad budgets, offering free products, and using content to stay connected with shoppers.
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As the coronavirus devastates swaths of the economy, it's forcing buzzy digital-based consumer startups to rapidly pivot.
Many of these Silicon Valley-based businesses raised a lot of money on the promise of rapid growth and now find demand is suddenly drying up as shoppers hunker down and stop buying.
DTC insiders say companies are slashing their advertising by as much as 80% as their sales, especially of nonessential items, have plunged.
Advertisers have to tread lightly with their messaging in a time of crisis.
"Most of my friends are being asked to slash their [marketing] budgets by half," said Andrea Collins, who is VP of marketing for online insurance startup Hippo and a consultant to other DTC startups. "We're still going to survive and prosper, but you have to go back and audit all your marketing material for being out of tune or opportunistic and develop new messages, creative, which all comes at a cost. And it can't be direct-response, because it won't work right now."
Jon Keidan, founder of Torch Capital, an investor in health startups including Ro, Collis Health, and Tia, said that he was advising DTC companies to reduce salaries across the board to preserve people's jobs.
Startups are racing to connect with consumers even as shopping dries up
Some startups are scrambling to find ways to keep connected with consumers even if they might not be in a buying mood.
Baby food startup Tiny Organics is doubling down on the amount of online content it publishes, said Heather Hartnett, CEO of Human Ventures, a VC fund and startup studio that has Tiny Organics in its portfolio.
"This is a moment to shift from direct to consumer to direct to community," she said. "When you have a better relationship with your customer, you're maintaining that continuity and brand."
Health startup Ro, whose services include Roman for men's health, is offering a free digital assessment that people who think they've contracted COVID-19, the disease caused by the coronavirus, can use to ask about their symptoms. Ro will connect them with a free video consultation with a doctor if deemed necessary, Keidan of Torch Capital said.
Others are looking at their supply chains to make sure they can keep delivering product.
Frida, which sells products for newborn babies and their parents, shifted its supply strategy to get supply from the US and Europe and has been stockpiling inventory in case of future workforce stoppages or mandatory quarantines.
"We diversified our supply base and primarily have suppliers domestically and across Europe so we didn't fall victim to some of the supply chain issues that those reliant on Chinese manufacturers did," said Chelsea Hirschhorn, president and CEO. "We used to have 6-12 weeks of stock; we have doubled that."
In the case of Arfa, a direct to consumer brands startup, it took the drastic step of giving away a new personal care product for free to hospitals and health care workers.
"The plan was to do a much more straightforward launch," said Henry Davis, one of the company's cofounders. "We realized that now was not the time to launch as planned, but we had our products and brand ready to go. None of us know what the new normal is going to look like. All we can do is do whatever we can to help right now and bring the value we can - bringing people back to the conversation around consumer goods."
Arfa is fortunate in that it can afford this gesture - for now.
"The economics are different, obviously," Davis said. "We'll do it till the inventory can support it. We don't have unlimited resources."
Read more of Business Insider's coverage of the coronavirus' impact on marketing and media:
- 'Businesses will shut down': The coronavirus threatens to crush direct-to-consumer businesses' wild growth
- How an events agency that has worked with Hilton and Barack Obama is safeguarding its business as the coronavirus wreaks havoc on live events
- TV sports viewing will 'go from bad to abysmal' in the coming months, but analysts say NBCUniversal and Fox are best poised to weather the coronavirus
- Industry analysts break down how the coronavirus could impact giant ad holding companies like WPP and Publicis
- The Tokyo Olympics are facing fresh questions about being postponed or canceled. Here's why that could be terrible for the TV industry