UK’s Top 5 Direct to Consumer Startups
The rise in online shopping has contributed largely to the increase in D2C startups because it’s now easier than ever to reach your end user and you don’t necessarily need to account for added overheads or specific training to do that. Many ecommerce businesses are completely autonomous, and it’s this ease in the sales process that has seen many entrepreneurs opt to give the D2C model a go.
Add in the huge revenue that can be made from a successful D2C model (more than £96 billion in sales was made from D2C businesses in 2020, predicted to rise to £120 billion by 2023), and it’s easy to see why this business subset model has started to boom, with many UK businesses being at the heart of the global D2C growth chain.
With such a steep forecast for revenue in the next few years, it’s well worth familiarising yourself with direct to consumer businesses if you haven’t already, and if you’re an established business to consumer retailer, it’s also worth exploring how this model can further complement your existing business.
What does D2C mean?
Before we look at some of the most successful direct to consumer companies, it’s first important to clarify and understand what D2C means. In a nutshell, if a company makes a product themselves and sells the end product directly to the end user (the consumer), this makes them a direct to consumer (D2C) business.
Traditionally, a lot of businesses worked by manufacturing their products and selling them wholesale to a retailer who would sell them to the consumer, meaning a lot of manufacturers didn’t actually liaise or interact with their customers directly.
As the rise of ecommerce has come about, more and more businesses have diversified and realised it’s entirely possible to sell both D2C and B2B (business to business). There are several examples of how these two models work in tandem, including Nike.
Nike is one of the world’s biggest brands and is stocked by countless retailers worldwide, including right here in the UK. As an example, you can buy Nike shoes from Schuh because Nike sells shoes to Schuh wholesale through a B2B model. This means many consumers with Nike products haven’t actually been in contact with Nike because they bought their shoes from a retailer who acted as a B2C (business to consumer) company.
In addition to selling on a B2B basis, Nike also has its shops and ecommerce platform, meaning it can sell the products it manufactures directly to its consumers, making it a D2C business alongside being a B2B business.
What’s the difference between D2C and B2C?
You might be wondering what the difference between D2C and B2C is, and you’d be forgiven because, on the surface, they both result in the consumer getting the same product, but they are, in fact, different.
B2C businesses are among the most common and profitable of all, and they work by buying goods from the manufacturer and selling them to the customer. They’re essentially a middle man. B2C businesses don’t manufacture the goods they sell themselves, they buy them wholesale from another business on a B2B (business to business) basis.
D2C businesses are companies that make their products themselves and sell them directly to the customer without a middle man. Most of the time, D2C businesses are ecommerce and take shape online, but they can open up their stores, as demonstrated in the Nike example we used earlier.
When a manufacturer sells their products to a retailer, they’re a B2B business because they’re operating on a business to business level. It’s possible for a company to be both a B2B and a D2C business, as we’re seeing a lot more of recently.
D2C startups were never considered the norm, but with so many successful up and coming brands coming to the forefront and showcasing how successful they can be when executed properly, we’re seeing more companies adopt this route off the bat.
Successful D2C UK companies
In the world of business, many fail and few succeed to a high level, but it’s possible and the following five direct to consumer startups are prime examples of this.
1. Bloom & Wild
In 2013, Aron Gelbard set up Bloom & Wild, a UK-based letterbox flower company. Taking inspiration from Graze and their letterbox goods approach, the idea behind Bloom & Wild was to make sending and receiving flowers as easy as possible. In less than one minute, customers can order flowers online and send them to loved ones without any hassle. The floral business has been simplified by Bloom & Wild, transforming flowers into an everyday gesture rather than one reserved solely for special occasions.
They’ve raised more than £71 million in funding so far and have recently expanded into the European market, acquiring French retailer, Bergamotte, with hopes of bringing in total revenue exceeding £200 million within the next year. They’ve also put down roots in brick and mortar through their collaboration with Sainsbury’s.
At their current growth rate, Bloom & Wild are on track to achieve their goal of becoming Europe’s premier D2C flower supplier.
Want to learn more about how ecommerce startups can find their funding and prepare for future growth?
2. Eve Sleep
Founded in 2014 by James Fryer, Jas Bagniewski, and Kuba Wieczorek, Eve Sleep has gone on to become one of the most famous luxury suppliers of mattresses in the UK. The company specialises in developing uncomplicated mattresses that support the body and aid a good night’s sleep.
Their mattresses feature unique contours that mould to your exact needs, and they’ve recently expanded their sleep range to include duvets with clever hot and cold technology, meditation equipment to aid relaxation, and breathable pillows. Their original approach to sleep has seen year on year growth since the company started, with revenue topping £25 million in 2021 and more growth expected in 2022.
With approximately £23.86 million in funding, it’s one of the UK’s most successful direct to consumer startups.
In recent years, meal subscription services have become increasingly popular, and Gousto is widely considered as one of the pioneering companies in the UK. James Carter and Timo Boldt founded Gousto in 2012 with the aim of making healthy, tasty meals at home without all the hassle.
In their 10 years of trading, their team of chefs have prepared more than one million meal kits to be delivered straight to consumers’ doors, but it wasn’t all plain saving. It wasn’t until 2020 that the company first recorded a profit, having made operating losses in the eight years preceding that.
With more than £157 million in funding and underlying profits exceeding £18 million in 2020, Gousto is a prime example of how persistence (and a pandemic) can help a business excel.
Like meal subscription boxes, meal replacements have also seen an explosion in popularity in recent years. One of the companies that has dominated this industry in the UK is Huel. The company was started in 2014 by James Ollie and Julia Hearn and has gone on to become the brand of choice for people looking to supplement their diet and build muscle.
Huel has received approximately £20 million in funding so far and recorded a £71 million turnover in 2020, though its operating profits were less than £1 million. Despite this, the company has seen impressive growth in the last couple of years as more people try their line of powder, bar, ready to drink, and hat and savoury foods.
It’s one of the diverse D2C companies that also doubles up as a B2B company. Customers can buy products directly from the Huel website, but they can also buy products in the likes of Sainsbury’s and from online supplement retailers like Alpha Supplements UK. They are mainly D2C but retain their roots as a company that sells directly to its consumers in an ecommerce format.
Tails.com has received approximately £5 million as a D2C, meaning it’s the company on this list that has the least amount of funding. What’s interesting about this is that in 2014, the company ranked as the fourth-highest growing startup at the 2017 Startup 100 awards, highlighting its success as one of the UK’s top direct to consumer companies.
The business was started in 2013 in Richmond Upon Thames by Graham Bosher, Karen Freeman, Kat Linger, James Davidson, and Steve Webster. This ecommerce-only company provides tailor-made dog food with a focus on developing nutritionally-rich foods for dogs in the same way food is made for humans by the likes of Huel and Gousto.
All food is made fresh and is bespoke to every dog’s needs, tapping into the UK’s £2.9 billion pet care market. In 2019, they hit £23 million in sales but reported a £7 million loss in the same year. Despite this, the company is still attracting investors and is still experiencing unprecedented growth. They’ve made more than eight million dog food meals and in one year experienced revenue growth of 700%.
If Tails.com continues on its current trajectory, it’s highly likely that they will follow in the steps of Gousto and report a profit-making year very soon. Whilst the financials might not sound good, Tails.com is largely regarded as one of the UK’s best examples of a direct to consumer company.
Why launch a D2C startup?
If you’re an entrepreneur and haven’t started a business before, the thought of going down the direct to consumer route can seem daunting due to the fact you’ll be forced to interact with customers from the very start. If you get your customer service approach wrong, you could very easily garner a negative reputation off the bat, and this can be hard to come from.
That being said, most of us have either worked in a customer-facing role or bought something from D2C companies, making us well-versed in the basics of customer service and what is expected. Provided you have the right team around you in the early stages, it’s entirely possible that your business could be the next Gousto or Bloom & Wild.
If you already have an SME, you can diversify your business and create another revenue stream by introducing a D2C arm to your company, helping you grow and progress to unexplored levels.
Making your business stand out from the rest is becoming increasingly difficult with the rise of the internet and the seemingly endless number of competitors. As this list proves, the direct to consumer route is a highly profitable one when well executed, but in order to build a strong foundation for success, you need to be on top of your finances from the very beginning.
This is where the professional team at Accountancy Cloud can help.
How Accountancy Cloud supports direct to consumer companies?
We have extensive experience in supporting new businesses and SMEs who want to grow. Our financial experts are on-hand to help you get your books in order and identify potential growth areas. With live financial dashboards, cash flow tracking, and award-winning support, we can help you get your D2C company off the ground.
Simply get in touch with us to learn more about how our team can help you get on top of your finances, provide advice about getting funding for your D2C business, and manage your cash flow so you can see exactly where your money is coming from and where it’s being spent.