PYMNTS MonitorEdge May 2024

Volatility and Uncertain Access to Capital Roil Direct to Consumer Brands

For direct to consumer companies, volatility may be the key certainty in an uncertain environment.

The latest evidence came amid reports from The New York Times and other sites that Ampla — which offers lines of credit and corporate cards to what it terms “new economy” companies — is looking for a buyer.  The company has also reportedly frozen at least some of its customer accounts and has laid off workers.   

On its website, the company notes that as a “commerce enablement platform,” its solutions offer “capital that scales,” and that firms “automatically increase [their] access to capital in real-time” as the client firms grow. 

Banking Services, Too

“Take advantage of free unlimited draw requests to provide your business capital when you need it most,” the site says, alongside other offerings such as checking accounts and up to $3 million in FDIC insurance for funds on deposit through Thread Bank. The capital is in turn used to fund operations for customers that, per the Ampla site, include natural food brands and health and wellness firms that leverage online channels and eCommerce interactions to reach end users.

The pressures on Ampla come less than a year after the company announced that it had secured a $258 million credit warehouse with Goldman Sachs and Atalaya Capital Management. In the release, Ampla said, The deal comes at a time when Ampla is evolving its product offering to encompass a full suite of financial tools, including Growth Capital, Digital Banking, Insights, and its new Visa Corporate Card. Ampla recently reached major milestones, surpassing over $1.5 billion in originations, and processing a run-rate of $6 billion in transactions through its platform.”

The greenfield opportunity is there for direct to consumer sites.  PYMNTS Intelligence data indicated earlier this year that 28% of consumers prefer to shop directly on a brand’s site. The data show that an even greater percentage of younger consumers prefer this direct to consumer route: 43% of Gen Z opt for the model. Another 32% each of millennials and bridge millennials prefer a brand website over a merchant’s online store. The percentage of consumers who prefer spending money at a brand’s online store rises to more than 30% of individuals who make more than $100,000.

Room for Improvement

But there’s significant room for improvement, as consumers perceive brands as underperforming in providing competitive prices, seamless checkout processes and multiple payment methods. The research shows that only 20% of consumers say that brands edge online marketplaces and retailer’s sites on those metrics, while 50% said they consider how easy the checkout process is when selecting a digital merchant.

We note that these initiatives would take investment and working capital to fine-tune operations; capital is, of course expensive. In other evidence that the traditional spigots for growth might be tightening, Crunchbase estimated  that early stage funding of direct to consumer companies was down by more than 90% in 2023 as measured from a 2021 peak, to about $130 million last year.