Celebrity-backed retail brand stops direct-to-consumer sales | Official Website of Louis Velazquez, entrepreneur, finance guy and tech innovator

For every Skims or Goop, you get an awful lot of brands that fail, despite celebrity backing.

When the connection between the celebrity, the product, and its audience works, however, the impact can be powerful.

“Celebrity branding operates on the principle of parasocial relationships, where consumers develop one-sided emotional connections with public figures they’ve never met,” according to AM World Group.

Research from the Journal of Consumer Psychology indicates that 67% of consumers are more likely to purchase products associated with celebrities they admire.
This psychological phenomenon creates a unique advantage that traditional marketing strategies cannot replicate. Source: AM World Group

The challenge is that consumers need to feel the connection between brand and celebrity.

“Rihanna’s Fenty Beauty succeeded because it reflected her commitment to inclusivity and diversity, values she consistently championed throughout her music career and public appearances,” the website added.

Celebrity brands have also moved from a direct-to-consumer model to brick-and-mortar stores.

“Kate Hudson, Rihanna, Sarah Jessica Parker, Drake, Gwyneth Paltrow, Pharrell and Reese Witherspoon are not only celebrities and entertainers, they’ve got stores. And companies backed by stars like them are leasing more retail space,” CoStar reported, citing data from the retail brokerage JLL.

Now, a celebrity-backed brand that moved into physical retail has decided to close all its stores in an effort to stay alive.

Honest Company will close all its DTC options.

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Honest Company ends DTC sales

Backed by Jessica Alba, Honest Company was launched to create healthier baby and household products.

In an email to customers, The Honest Company shared that its website and direct sales to consumers will end Dec. 28.

“These updates were made with you, our loyal Honest family, at heart and will allow us to focus on what matters most: developing and designing products that meet our rigorous Honest Standards for you and your loved ones,” the company shared.

All products ordered on or after Nov. 24 will be considered final sale.

“The company will sell its products through other retailers, including Walmart, Target, Amazon, Kroger, and HEB. Its brand site will serve as a hub where shoppers locate retailers where merchandise is sold and will be a place to find product advice and inspiration,” RetailDive shared.

A brief history of The Honest Company

Founded 2011 by Jessica Alba, Christopher Gavigan, and Brian Lee to sell “clean” baby and household products.
Rapid growth with venture capital funding; reached $1B+ valuation by mid-2010s.
Expanded product lines: Baby care, cleaning, and Honest Beauty (2015).
Faced lawsuits over “natural” claims; reformulated products and adjusted marketing.
IPO in 2021 at $1.4B valuation; stock has fluctuated since.
Leadership changes: Alba stepped down as Chief Creative Officer in 2024 and Carla Vernón became CEO.
Mission: Focus on clean ingredients, transparency, and sustainability. Sources: Top Class Action, Honest Investors

Honest Company fights to survive

The Honest Company has been diversifying its retail partners since 2022.

In 2022, the company began selling its products on Walmart’s website and in its physical stores, according to Retail Dive.
That same year, the brand expanded its partnership with Ulta Beauty by offering its products in the retailer’s stores and offering an exclusive line of skin care with the beauty retailer, Retail Dive reported.

“Vernón announced the launch of ‘Transformation 2.0, powering Honest growth,’ a strategic program to focus on core categories — wipes, personal care, and diapers — while exiting lower-margin nonstrategic categories and channels, including honest.com, the apparel provider relationship, and Canada,” the company shared in a press release.

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She explained how the changes will impact the brand.

“Because these categories are lower margin, exiting them only has a modest profit impact in the short term. We are confident these changes will drive greater focus on our core product categories and enable continued growth and improved profit margins.”

“Honest flushable wipes consumption grew over 160% versus the category growth of 2%,” she added.

The company shared its turnaround plan on its investor relations page.

Honest Company has struggled

The company has seen its revenue slide, but it also experienced some positives.

“Honest reported third-quarter revenue of $93 million, a decrease of 7%, with gross margin at 37%, down 140 basis points from the prior year. Positive net income of approximately $1 million was achieved, and adjusted EBITDA was $4 million, with a 4% margin,” it shared in the press release about it turnaround plans.

It also shared why the numbers have been soft.

“The decline in revenue was primarily due to softness in the diapers, apparel, and honest.com businesses, which offset the growth in wipes and personal care. Apparel, honest.com, and Canada collectively represented about 20% of revenue and were described as well below average gross margin businesses,” the retailer added.

Going from DTC to brick-and-mortar is a challenge

“Most DTC brands built their business models around specific digital metrics. Customer acquisition costs, lifetime values, and conversion rates that work beautifully online. But physical retail operates on completely different economics,” RetailBoss shared.

(Honest did not have brick-and-mortar stores).

It’s simple math that hurts most brands and that starts at the cost to acquire a customer.

“If your digital CAC sits around $25 and your average order value hits $50, you have workable margins online. Add shipping, production, and operations, and you can still turn a profit,” the website shared.

“Now add rent, utilities, staff wages, and inventory carrying costs for a physical location. The margins evaporate instantly.”