Direct-to-consumer (D2C) commerce surged during the pandemic, promising brands greater control, richer data, and stronger margins. Five years later, that promise is being tested. While legacy brands have integrated D2C into diversified distribution strategies, many digitally native vertical brands (DNVBs) face stalled growth, rising acquisition costs, and persistent profitability challenges. As ecommerce growth normalizes, D2C’s role is shifting, from growth engine to strategic channel. This FAQ examines how the D2C model has evolved and what brands must do to make it profitable in 2026.

What is D2C commerce?

Direct-to-consumer commerce refers to products sold by brand manufacturers directly to consumers via owned and operated websites, apps, and physical stores, bypassing traditional retail intermediaries.

D2C includes:

• Direct sales by established brands that sell via both direct and wholesale distribution (e.g., Nike, Lululemon)
• Direct sales by vertically integrated brands (e.g., Gap, Zara)
• Direct sales by digitally native brands (e.g., Warby Parker, Away); we define digitally native brands (DNVBs) to include only brands founded since 2010 that started as independent online retailers.

D2C does not include:

• Brand sales via consignment or shop-in-shops
• Brand sales via a storefront on an online marketplace (e.g., sales via Amazon or TikTok Shop)
• Traditional retailers’ private label brands (e.g., Costco’s Kirkland brand)
• Sales through marketplaces like Amazon or TikTok Shop

As nearly every major consumer brand now sells direct, D2C no longer distinguishes a brand. It complements broader distribution.

Why is D2C growth slowing down?

While the model drove significant ecommerce growth during the pandemic, its trajectory has slowed. US D2C ecommerce sales will plateau at around 19% of total US retail ecommerce sales by 2025 and will remain flat through 2028, according to a May 2025 EMARKETER forecast.

Several structural factors have eroded the model's viability:

• Rising customer acquisition costs. After Apple's App Tracking Transparency, launched in 2021, the targeted digital advertising that enabled D2Cs, especially DNVBs, to scale efficiently became far more expensive.
• Intensified competition. Established brands adopted D2C tactics while bringing superior brand recognition. Meanwhile, Amazon and retail marketplaces captured more ecommerce share.
• VC funding contraction. The era of cheap capital that subsidized D2C growth ended. Brands that prioritized growth over unit economics faced a reckoning.
• Profitability challenges. Many DNVBs never achieved sustainable margins. Allbirds lost $419 million over five fiscal years on $1.24 billion in sales, per Fortune. Casper was losing about 20 cents for every dollar of revenue around the time of its 2020 IPO, found Business Insider.

High-profile DNVBs like Allbirds and Casper exemplify the challenges facing the category:

• Allbirds peaked at $297.8 million in revenue in 2022 but dropped to $189.8 million by 2024, a 35% decline over two years. Its stock has fallen more than 95% since its 2021 IPO, and Nasdaq issued a delisting warning in 2024 after shares fell below $1. The company has since expanded to Amazon, REI, Nordstrom, and Dick's Sporting Goods, abandoning its D2C-only approach.
• Casper was acquired by Carpenter Co. in October 2024 after years of losses. The company's IPO in 2020 fell 50% short of valuation expectations, and its 100-night return policy eroded margins by approximately 40%. Casper had already been taken private by Durational Capital Management in 2022.

Is D2C still relevant in 2026?

D2C remains strategically relevant because it delivers advantages that marketplaces cannot replicate, including:

• Brand connection. More than 55% of US consumers say they feel more connected to brands when shopping on their websites and nearly 60% shop directly with brands for exclusive benefits, according to a November 2024 survey from EMARKETER and EWS.
• Brand trust. Shoppers consistently cite brand websites as leading sources of trusted product information, particularly in categories like electronics and apparel, found January 2025 Bazaarvoice data.
• First-party data. Direct sales provide first- and zero-party data critical for personalization and long-term retention as third-party cookies become less reliable.

In summary, D2C is less about volume share and more about control: of experience, of data, and of brand narrative.

How is Gen Z forcing brands to rethink D2C?

Gen Z is pushing D2C into its next phase.

This cohort is significantly more likely than the average consumer to buy directly from brands, with 28% reporting regularly purchasing D2C, compared with just 13% of the total population, according to March 2025 data from KPMG.

On the surface, that looks like a major opportunity for brand-owned channels. But Gen Z’s relationship with brands is layered and less predictable than older generations’.

• They are discovering brands in different places. Social platforms are central to their path to purchase, serving as engines of research, validation, and trend formation. For many Gen Z consumers, brand discovery happens in-feed, through creators, short-form video, and peer conversation, rather than through traditional search or retail browsing.
• They are also becoming the first AI-native shopping generation. Some 61% of Gen Z adults have used an AI-powered tool to help with a purchase in the last year, found September 2025 data from PayPal.
• At the same time, Gen Z is less loyal and more price-sensitive. They are open to trying new brands, quick to follow trends, and willing to switch for better value or stronger alignment with their expectations around authenticity and values.

How is AI reshaping D2C strategy?

AI is reshaping how consumers discover and evaluate products, and in turn, what D2C must deliver.

Adobe Analytics found traffic from AI-driven sources to brand sites surged 1,200% between July 2024 and February 2025, signaling how quickly shopping journeys are beginning in generative tools. At the same time, more than 80% of consumers say they trust generative AI search results as much as or more than traditional search, per a January 2025 Attest survey.

As AI becomes a primary layer in product research, brand-owned channels must evolve. Structured data, rich product descriptions, and robust reviews increasingly determine whether a brand surfaces in AI-generated responses.

D2C sites are no longer just ecommerce endpoints. They are becoming AI-ready storefronts, built to serve both human shoppers and the agents guiding them.

How should marketers approach D2C in 2026?

D2C is no longer a business model identity. It is a strategic channel within a diversified commerce ecosystem. In 2026, marketers should focus on five priorities:

• Integrate D2C into an omnichannel growth strategy. Treat D2C as one channel among several. The strongest brands operate owned ecommerce alongside wholesale, marketplaces, retail media, and physical stores.
• Prioritize brand equity and Gen Z relevance. With Gen Z, performance tactics can drive initial trial, but sustained growth depends on building brand relevance and cultural credibility. Authenticity, creativity, community, and social-native engagement must anchor D2C strategy.
• Build first-party data and incentivize direct relationships. Loyalty programs, apps, and exclusive benefits should reward customers for buying direct and sharing preferences.
• Optimize for AI-driven discovery. Discovery is shifting from traditional SEO to AI-mediated research. Structured data, rich product content, and robust reviews are essential for visibility.
• Focus on profitable growth. The era of growth at any cost is over. D2C brands need to focus on improving margins, increasing customer lifetime value, and making each order profitable, not just driving top-line revenue.

We prepared this article with the assistance of generative AI tools and stand behind its accuracy, quality, and originality.

EMARKETER forecast data was current at publication and may have changed. EMARKETER clients have access to up-to-date forecast data. To explore EMARKETER solutions, click here.