Member Exclusive   //   September 26, 2023

DTC Briefing: The new rules of brand collaborations

This is the latest installment of the DTC Briefing, a weekly Modern Retail+ column about the biggest challenges and trends facing the volatile direct-to-consumer startup world. More from the series →

Collaborations have taken over retail and now it’s no longer a question of if, but when, brands pursue them. 

At their best, collaborations have the potential to turn around a brand by introducing it to a new audience. Take Crocs, which reinvented itself in the past five years and returned to sales growth on the back of kitschy collabs with musicians like Justin Bieber and Post Malone, as well as fast-food chains like KFC. But at their worst, collaborations risk being widely panned in news outlets and across social media — as New Balance’s recent collaboration with Blue Bottle was — if the collaboration comes across as boring or as too much of a cash grab.

Thus, there’s no clear-cut formula for a surefire collaboration success. Oftentimes, the advice given about what makes a good partnership evangelizes broad generalities: it has to be authentic, it has to involve two like-minded brands. But what that means in practice is that it can’t feel too far-fetched from something the companies might respectively produce on their own. That also means not partnering with brands that are antithetical to what another brand stands for. Additionally, amid a tough economic climate, many brands are looking for partnerships to achieve multiple goals: an often expensive collab can’t just drive press mentions — it also must get people to go visit stores or help the brand lower customer acquisition costs. 

Mike Salguero, founder of meat subscription startup ButcherBox, recently predicted on social media that 2024 will be “the year of partnerships,” which he attributes to rising customer acquisition costs, This, however has been cited as the impetus for partnerships many times over the years.

Sharing resources
The traditional channels of Meta and Google are just getting more and more and more expensive, Salguero told me. And, he said he’s seen more companies reaching out to ButcherBox than ever before asking, “hey, why don’t we share email lists?” or “let’s do a co-promotion.” Salguero said that partnerships are something that ButcherBox has not historically done a lot of, but will be looking to do more next year. 

One of the simplest ways that brands can partner together is by doing a co-branded giveaway on social media. Oftentimes, people have to participate in the giveaway by signing up for a respective brands’ mailing list, or by following both brands on social media, so brands have the added benefit of gaining additional email subscribers or social media followers through these.

A heavier lift is for two brands to work together on co-branded products; but these have the added benefit of driving actual sales, and they are more likely to drive press mentions, since companies are actually releasing new items.

Lisa Bubbers, co-founder and chief brand officer at Studs, said that collaborations have been a focus for the piercing startup since launching in 2019. “For Studs, we always felt like earscaping was how you unlocked your self-expression and your personal style,” she said. In contrast to more serious, premium jewelry brands, Bubbers said Studs wanted to position itself as a more “fun” upstart. 

Collaborations, then, offer Studs one way to push the boundaries of what items have traditionally been seen in jewelry. 

Some of Studs’ previous collaborations include a holiday party that the company hosted with celebrity gossip site Deuxmoi and a co-branded collection with influencer Serena Kerrigan. 

On Tuesday, Studs released its first series of products designed in collaboration with another company: burger earrings and an earscape set designed in partnership with Shake Shack. 

Bubbers said Studs got the idea to partner with Shake Shack from a previous collection; a couple years ago, Studs released a New York-themed collection that proved popular, featuring items like a dumpling, a martini, a bagel and a burger stud.

The elements of a hit collaboration
When asked what makes a successful collaboration, Bubbers said that particularly in the case of apparel or accessories, it has to be “wearable” — and not something too far-fetched from what the company would produce on its own. 

Similarly, Kimberly Lam, senior director of marketing at beverage brand Sanzo, told me in an email that a good collaboration is about “creating something of value to our combined brands.” This summer, Sanzo produced some of its first co-branded products outside of the beverage space, creating a Sanzo-themed pickleball paddle, as well as sunglasses inspired by the colors of its beverage flavors in partnership with eyeglasses brand Covry. 

Being able to reach new audiences is also a key consideration. Cowboy boot brand Tecovas recently released its first-ever collaboration with a fashion designer, a capsule collection created with Kristopher Brock.

“A successful collaboration is one that brings value and excitement to our existing consumers while at the same time helps reach new audiences,” Tecovas’ senior director of partnerships Robyn Wedgeworth said in an email. She added that a key area of growth that Tecovas is focused on at the moment is growing its women’s business; the collection, which featured boots, dresses and a ranch-inspired scarf, helped the brand do just that.

Appealing to existing audiences doesn’t mean that brands can’t get creative with collaborations. If a brand is known for being the fun kitschy player in their space, like Studs is, then it has more room to play with a greater variety of collaborations. And of course, in the case of the Shake Shack collaboration – Studs had literally already produced a burger earring in the past. 

But what that also means is that brands can’t partner with a brand that is completely antithetical to what it stands for — even if it offers the potential to reach a bigger audience. Salguero, for example, said that ButcherBox will be looking to partner with other brands in the health and wellness space. “We wouldn’t be partnering with, like, Twinkie,” he added. 

In January, underwear startup Parade was subject to some backlash on social media for partnering with Coca Cola on a co-branded line. Users left comments on Reddit and Instagram, questioning how Parade could claim to care about sustainability when it partnered with Coca-Cola, a significant producer of plastic pollution.

While some brands, as Salguero said, are exploring partnerships as a way to lower customer acquisition costs, even the most successful partnerships aren’t typically enough to create an efficient marketing operation. 

For example, Parade while drew ire for its Coca-Cola collaboration, it also secured popular, buzzy partnerships for buzzy fashion brands like Juicy Couture and Ganni. Still, that wasn’t enough to keep Parade operating as an independent brand; the startup sold to lingerie manufacturer Ariela and Associates in what was reportedly a fire sale, as founder Cami Tellez told employees that she was being pushed out and would get essentially nothing out of the deal. 

Thus, making collaborations a serious business driver often involves making multiple, year-long investments. “For many years, collaborations and product partnerships have been at the core of our brand strategy,” Crocs Brand President Michelle Poole said in a recent statement, when the footwear brand announced a two-year-deal with designer Salehe Bembury as the creative director for its Pollex Pod collection.

Finding the right metrics of success
Indeed, today’s DTC executives are cognizant about the limitations of partnerships. Until a company gets to the size of say, Crocs, and is able to do multiple, buzzy collaborations with big designers or celebrities each year, partnerships aren’t going to be a significant sales driver. Rather, they are ways to drive buzz over time.

But that doesn’t mean that brands don’t have goals for collaborations. One particular area of focus for startups now is using collaborations to drive foot traffic, as physical retail sales become more important. 

One reason why Sanzo, for example, decided to do more partnerships this summer was because its retail availability had grown to about 3,000 doors, and the brand could more easily encourage people who discovered Sanzo-inspired glasses on Instagram to also pick up one of their beverages in their local grocery store. “These partnerships allow us to bring our brand to life in the lifestyle space, while differentiating us in a crowded beverage category,” Lam said. 

Similarly, Bubbers said that driving foot traffic was a key focus for the Shake Shack collaboration. In order to promote the collection, Studs will be offering burgers and shakes from the restaurant chain at 11 out of its 19 studios. “It is the first time we are doing this because it is the first time Studs has studios across the country, so we could partner with a national brand like Shake Shack,” Bubbers said.

Bubbers said that Studs looks at three criteria to determine whether or not a partnership is successful: whether or not the partnership drove PR mentions, whether or not it resulted in social media content, particularly from “creators we care about,” and then of course sales. 

Still, “we are never looking for this to drive massive amounts of revenue,” Bubbers said. “If you have fans of the brand, they are looking to you to do something exciting and fun, they are looking to you to see what’s cool.” 

What I’m reading

  • Speaking of collaborations, here’s how craft beer brand Talea has partnered with brands like Olipop and Fishwife on co-branded beverages
  • How baby food brand Little Spoon sought to redesign the Lunchable with its new product line geared toward 4-to-7-year-olds. 
  • Why retailers are so obsessed with EBITDA, and what the many variations of adjusted-EBITDA mean. 

What we’ve covered

  • Aesop is continuing to build out its store footprint after being acquired by L’Oreal, opening four new stores in New York City this year, as well as multiple locations abroad.
  • How brands like Springrose and Zappos are trying to build out more robust offerings in the adaptive fashion space.