DTC Dispatch #026

Meta is acting up again, who's surprised?!

🌤️ Where is the warm weather?

This week in DTC Dispatch:

🛍️ TikTok could be banned, but TikTok Shop is thriving

💰️ In its third bankruptcy, Rue21 plans to shutter all locations

💄 A ‘Shark Tank’ beauty brand was criticized for lacking deep foundation shades. It tried to fix it and made it worse.

🖥️ Meta’s ‘set it and forget it’ AI ad tools are misfiring and blowing through cash


TikTok could be banned, but TikTok Shop is thriving

Despite the looming specter of a potential ban in the United States, TikTok's e-commerce sector continues to thrive and expand. As revealed in the inaugural safety report from TikTok Shop, the platform boasted an impressive tally of over 15 million sellers worldwide by the culmination of 2023. Among these, over 500,000 merchants were dedicated to serving the needs of American consumers. Notably, this figure more than doubled within the span of the preceding three months, a noteworthy surge underscored by Bloomberg's reporting.

This exponential growth trajectory isn't happenstance but rather the result of TikTok's concerted efforts to fortify its online retail arm. Throughout the latter half of 2023, the social media platform doubled down on its commitment to fostering a robust e-commerce ecosystem, resulting in the addition of over 6 million new sellers. This strategic move not only broadened TikTok's global marketplace but also strengthened its position as a formidable player in the digital commerce landscape.

Moreover, TikTok Shop has undertaken substantial measures to ensure the safety and integrity of its platform. In an endeavor to maintain high standards, the platform took decisive action by removing 2 million sellers who fell short of its stringent requirements. Additionally, TikTok Shop allocated a substantial sum of $400 million toward enhancing its safety protocols, demonstrating a resolute commitment to providing users with a secure and trustworthy shopping experience.

Our take: TikTok's e-commerce sector is thriving despite potential US regulations, showing the platform's adaptability. The first TikTok Shop safety report highlights its global growth, with over 15 million sellers and 500,000 catering to US consumers by 2023's end. This growth is due to TikTok's focus on strengthening its online retail, adding over 6 million new sellers in the second half of 2023.

TikTok Shop's dedication to safety is evident in its removal of 2 million sellers who didn't meet standards and its $400 million investment in platform security. This success underscores TikTok's ability to innovate and solidifies its position in global e-commerce.

In its third bankruptcy, Rue21 plans to shutter all locations

On Thursday, Rue21 initiated its third Chapter 11 bankruptcy filing in slightly over two decades, submitting documents to the U.S. Bankruptcy Court for the District of Delaware. This move comes as the apparel retailer faces financial challenges, prompting the decision to embark on the process of shuttering all of its 540-plus stores, as detailed in court filings.

As of the latest updates, Rue21's website remains inaccessible, suggesting ongoing updates or maintenance. This hiatus in online operations aligns with the broader restructuring efforts underway within the company.

Notably, Rue21's current predicament marks a significant downturn from its previous attempts at financial recovery. Merely seven years ago, the retailer emerged from bankruptcy proceedings with a considerably reduced footprint, having closed down 420 stores. This prior restructuring aimed to recalibrate the company's operations and finances, yet it appears insufficient to sustain long-term viability in a challenging retail landscape.

This latest Chapter 11 filing echoes Rue21's earlier experience in 2002, when it operated under its original moniker, "Pennsylvania Fashions." At that time, the company underwent a similar reorganization process under Chapter 11, reflecting a recurring pattern of financial turbulence that has plagued the retailer throughout its history.

While Rue21's future remains uncertain amid the current bankruptcy proceedings, its decision to pursue restructuring reflects a concerted effort to address underlying financial issues and position the company for potential future success. However, the closure of all its stores signifies a significant shift in its operational strategy and raises questions about the retailer's ability to adapt to evolving market dynamics and consumer preferences.

Our take: Rue21's third Chapter 11 bankruptcy filing in just over two decades raises doubts about its future success in today's tough retail market. Closing all its 540-plus stores shows how serious its financial problems are, especially compared to past attempts to bounce back.

This situation echoes Rue21's past struggles, like its 2002 reorganization when it was called "Pennsylvania Fashions." Despite cutting down stores in its last bankruptcy seven years ago, it hasn't been enough to stay profitable.

The fact that Rue21's website is down suggests they're working hard to fix things. But closing all stores is a big change and shows they're struggling to keep up with what customers want.

While Rue21 is trying to recover, it's unclear if they can make it work in today's competitive retail world.

A 'Shark Tank' beauty brand was criticized for lacking deep foundation shades. It tried to fix it and made it worse.

Youthforia, a beauty brand, is facing criticism for offering a foundation shade comparable to "tar." Previously, the brand drew flak for its foundation range being too light for deeper skin tones. Despite the backlash, Youthforia has not responded to the uproar surrounding its new shade or the online criticism.

In September 2023, content creator Golloria George reviewed Youthforia's Date Night Foundation and identified two major issues with the range's darkest shade. Firstly, George highlighted that the product, along with the rest of its then-15-shade range, was too light for individuals with deeper complexions like hers. This concern prompted an apology from Youthforia CEO Fiona Co Chan. Secondly, George noted that the shade appeared significantly darker on its packaging and in online photos compared to its real-life application.

When Youthforia introduced 10 new makeup shades in March, George decided to try the new darkest option, shade 600. However, she found that this time the foundation appeared excessively dark, resembling "tar in a bottle." George demonstrated the stark contrast by applying Youthforia's foundation on one side of her face and solid-black face paint on the other to illustrate their similarity. Additionally, she tested Youthforia's foundation in its second-darkest shade, number 590, which was noticeably lighter in tone and still did not match her complexion.

Our take: The Youthforia foundation controversy highlights the beauty industry's ongoing struggle with inclusivity. Despite some brands attempting to expand their shade ranges, situations like this reveal significant gaps.

Youthforia, previously criticized for lacking options for deeper skin tones, is now facing backlash for a shade deemed excessively dark, likened to "tar." This inconsistency suggests the brand hasn't fully addressed the needs of all its customers, regardless of skin tone.

Golloria George's review further highlights the issue. She noted the original shade range's inadequacy for deeper skin tones and discrepancies between product appearance in ads and real life, which can confuse buyers.

While Youthforia's introduction of 10 new shades seemed like a step towards improvement, George's experience with shade 600 indicates they may have missed the mark again. Describing it as "tar in a bottle" emphasizes the extreme nature of the shade, hindering options for deeper skin tones.

This incident underscores the beauty industry's ongoing need for inclusivity. Brands must ensure their products cater to everyone, or risk perpetuating harmful beauty standards.

Hermès brings the exploding color of the Indian bazaar to luxury retail

From the historic neoclassical building at Horniman Circle to the modern Jio World Plaza, Hermès' two showrooms in Mumbai serve as a link between tradition and innovation.

Hermès' latest showroom in Jio World Plaza, Mumbai, is designed as a celebration of craftsmanship. Serving as the brand's second establishment in the city, the store's design pays homage to India's cultural heritage and artisanal skills.

Within the boutique, visitors will find relics and mementos collected over nearly two centuries, including historic portraits of golden orioles and framed collages of vintage horseshoes. Despite its contemporary setting, these items represent the enduring legacy of Hermès. Established in Paris in 1837 by Thierry Hermès, a leather artisan renowned for crafting harnesses for horses, Hermès has evolved to encompass a wide array of pursuits, including menswear (introduced in 1925), watches (1928), and iconic scarves (1937). In 2020, it expanded its offerings to include Beauty, with a dedicated counter at the new Mumbai location. Since 2008, Hermès has maintained a presence in India, with a flagship store in Horniman Circle (2011) and a mall outlet in Delhi. This latest boutique marks its third venture in the country.

Our take: Hermès' new showroom at Jio World Plaza in Mumbai is more than just a retail space—it's a blend of tradition and innovation. By juxtaposing the historic Horniman Circle building with the modernity of Jio World Plaza, Hermès honors its rich heritage while embracing contemporary design.

The showroom celebrates craftsmanship, reflecting Hermès' dedication to quality. Every detail, from intricate designs to curated artifacts collected over nearly two centuries, showcases the brand's commitment to excellence.

Founded in Paris in 1837, Hermès has evolved into a symbol of luxury. While it started with leather craftsmanship, the brand now offers a wide range of products, including menswear, watches, and beauty items, while maintaining its dedication to quality and sophistication.

Since 2008, Hermès has expanded its presence in India, with several boutiques nationwide. The opening of its latest showroom in Mumbai highlights its commitment to the Indian market.

Overall, Hermès' journey in Mumbai—from the historic charm of Horniman Circle to the modernity of Jio World Plaza—represents more than just retail expansion; it's a cultural exchange. It reminds us that true luxury transcends time and place, blending tradition and innovation to create a timeless appeal.

Meta’s ‘set it and forget it’ AI ad tools are misfiring and blowing through cash

Valentine’s Day marked the beginning of chaos for Meta's advertising platform. RC Williams, co-founder of the Philadelphia marketing agency 1-800-D2C, had entrusted Meta's automated ad tools with running campaigns for two clients. However, upon checking the platform, he discovered that Meta had rapidly depleted about 75 percent of both clients' daily ad budgets within a couple of hours.

Williams informed The Verge that the cost per impressions (CPMs) for the ads had skyrocketed to roughly 10 times the usual rate. An average CPM of under $28 had surged to around $250, far exceeding industry norms. This situation would have been problematic enough if the ads had generated any revenue, but they had practically yielded nothing. To put it simply, it felt like spending a week's grocery budget on a premium steak at a restaurant, only to receive a disappointing slider in return.

The Verge interviewed multiple marketers and businesses advertising on Meta's platforms, all of whom recounted similar experiences. Meta's automated ad system was depleting budgets at an alarming rate while failing to generate sales. Small businesses found their ad funds wasted, and many felt compelled to abandon Meta's platforms due to these instances of overspending.

Our take: The Valentine's Day debacle with Meta's advertising platform highlights serious issues with its reliability and effectiveness for businesses. RC Williams' and other marketers' experiences, as reported by The Verge, reveal a troubling trend of overspending and underperformance.

Meta's automated ad tools rapidly drained 75 percent of clients' daily budgets, with cost per impressions (CPMs) soaring up to 10 times the normal rate. This not only wastes money but also fails to generate meaningful returns for businesses.

The analogy of spending a week's grocery budget on a premium steak, only to receive a disappointing slider, captures the frustration felt by advertisers. It's a costly disappointment that hurts businesses' bottom lines.

For small businesses, this overspending on Meta's platform is particularly damaging. With limited budgets, wasting money on ineffective advertising is unacceptable. Many are now considering abandoning Meta's platforms altogether.

Meta's advertising platform should be a valuable tool for businesses, but these incidents paint a different picture. They show a platform that falls short, causing financial losses and frustration. Meta must act swiftly to address these concerns and rebuild trust with its advertisers.

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