Quick Facts
- U.S. DTC ecommerce hit $239.75 billion in 2025, representing 19.2% of total retail ecommerce.
- Average ecommerce customer acquisition costs rose 12-18% year over year in 2026, with blended costs landing between $60 and $120 per new customer.
- 60% of DTC brand revenue comes from returning customers, making retention the dominant revenue driver.
The pure-play DTC model is not working for brands that want to grow. That was the central finding from a Modern Retail and Glossy Town Hall held earlier this month, where editors and subscribers debated what separates winning brands from struggling ones in 2026.
The answer, repeated across multiple speakers: strategy around channels, not allegiance to one.
The Channel Question
Modern Retail Senior Fashion Reporter Danny Parisi put it plainly. “A lot of the DTC or primarily DTC brands that I talk to that seem to be doing really well are all doing an integrated model,” he said. “They have some sort of wholesale partnerships, they have a handful of other channels, but the common thread with a lot of the successful ones is they’re very strategic about them and they are often not very numerous.”
Modern Retail Executive Editor Anna Hensel argued that brands can still carry the DTC identity even when selling through third-party retailers, as long as they maintain a close relationship with their customers. “A successful DTC brand today has a clear understanding of what the purpose of each channel is,” she said.
Hensel added that staying entirely DTC only makes sense in narrow cases: brands selling custom products that are hard to move through retail partners, or brands that are exceptionally good at acting on customer feedback.
Brands Already Making the Shift
Parisi pointed to two examples. Universal Standard now sells through Anthropologie. Mejuri recently launched a shop-in-shop at Nordstrom. Both brands built loyal direct audiences before expanding, then used wholesale to reach new customers at scale.
Warby Parker tells a similar story. In 2024, retail stores accounted for more than two-thirds of its revenue, over $440 million. The brand that launched as an online eyewear disruptor now runs its physical stores as its primary revenue engine.
Industry data backs the shift. One study found wholesale was poised to grow 51% in 2024 and account for 60% of brand sales, compared to just 11% from brands’ own stores and 6% from their websites. McKinsey data shows omnichannel customers spend 34% more than single-channel shoppers.
The CAC Problem Is Not Going Away
Paid acquisition economics have deteriorated sharply. Average ecommerce customer acquisition costs increased 40-60% between 2023 and 2025, now averaging between $68 and $84. Meta CPMs reached $22.98 in Q4 2025, and Google Shopping cost-per-click jumped 33.72% over the same period.
Average return on ad spend dropped to 2.87 in 2025, with a median of just 2.04. After accounting for cost of goods, shipping, and overhead, many brands are barely covering their costs on a first purchase.
Privacy changes from iOS 14.5 through iOS 18 reduced targeting precision across paid social. AI-driven ad competition flooded auction environments with automated bidders, inflating CPMs for brands regardless of creative quality.
Retention Is the Revenue Engine
With acquisition costs rising, brands that survive are the ones building repeat purchase behavior. Loyal customers convert at rates of 60-70%, compared to 5-20% for new prospects. A 5% increase in customer retention correlates with a 25% increase in profit.
Loyalty programs are delivering returns. According to a 2025 report, 83% of companies running loyalty programs report positive ROI, with an average return of 4.8 times their investment. Loyalty members generate 12-18% more incremental revenue per year than non-members.
Glossy and Modern Retail Editor Jill Manoff tied the customer relationship directly to brand decision-making. A successful DTC brand, she said, is one that “listens to the customer for data and feedback to inform their next steps.”
What This Means for Operators
The brands gaining ground are treating each channel as a tool with a specific job. Wholesale drives discovery. Physical retail builds brand credibility. Direct channels capture data and margin. The goal is not to own every channel, but to know why each one is there.
With U.S. DTC ecommerce at $239.75 billion in 2025 and projected global D2C markets reaching $595 billion by 2033, the opportunity is large. But the window for brands that rely on a single paid social funnel and no wholesale presence is closing fast.
