Intro
Every month, when we sit down to review the books with clients, I hear the exact same question:
“What are you seeing in the market”?
As one of the only CFO and accounting firms specializing in ecom, we have the advantage of seeing the books across dozens of $1M to $100M+ brands.
Our position gives us unfair insight into how the market’s changing. So many business owners are in the dark. We want to start changing that.
This report draws on the combined financials of more than thirty private and public DTC companies to show you – in specific numbers – where the market changed last year, how brands responded, and what you might expect this year.
Use it to battle test your plans for 2025.
Inside, you’ll find no-fluff forecasting aids, including benchmarks for GM, CM, EBITDA, and more, anecdotal stories on how companies and preserving and growing margin, related data from public companies, and commentary from a CFO’s perspective.
We worked really hard on this, investing hundreds of hours, and thousands of dollars to make it.
Going in, I thought the hardest part would be finding signal in the noise. But in reality, most of the effort was spent getting the data to a point where we could compare apples to apples.
And that’s a microcosm of our industry as a whole.
The business itself isn’t that complicated. It doesn’t take a 25-year veteran CFO or a data scientist to untangle. It just requires that you put in the work – wrestling with the data, categorizing things properly, determining what’s critical.
It’s not sexy, but it’s immensely valuable.
Follow along in 2025.
We’re investing heavily to bring you even more insights like this to grow your brand. To get those, add me on LinkedIn, and subscribe to our email.
2025 Executive Summary
Our data for private companies explores the trailing twelve months (TTM) from Dec. 2023, through the end of November, 2024, comparing performance to the previous twelve month period (Previous TTM). For more on our methods, see the Methods chapter.
Key Themes From The Year
On average, smaller brands struggled this year, with a few notable exceptions, while bigger brands tended to get much bigger. When we look down the P&L across our private cohorts, we see:
- Revenue was up, with YoY growth averaging ~27% overall, dropping to ~24% when we remove high and low outliers.
- Gross margin was about even, dropping ~2% for brands under $10M in revenue, and growing ~7% for those over $50M.
- Contribution margin was down 2% overall, but the pain wasn’t felt equally. Brands under $50M saw a ~3-16% drop, while those over $50M saw ~28% lift
- EBITDA saw a similar split, falling dramatically among smaller brands (primarily due to fixed costs), while rising ~61% for those over $50M
Heading Into 2025
A few big call-outs for brands as you look to the year ahead…
- Everybody’s coming for your margin: Costs are rising in several areas, with no end in sight. Founders need to be proactive about protecting margin in 2025 (more on this throughout the report).
- Hope is not a strategy: Many went into 2024 hoping to drive revenue. When that didn’t materialize, they hoped Q4 would save them. Too much hope kept them from slashing fixed costs or under-performing SKUs. Don’t make this mistake in ‘25.
- Invest In A Budget: The most important thing you can do – have a budget that’s realistic, and holds you and your team accountable to goals. This report will help.
How To Use This Report
Every ecom company needs a budget for the year. One that’s clear, realistic, and can be used to hold you and your team accountable. It should triangulate off three things:
- Your Past Performance: The strongest indicator of what you can expect to see in the year ahead
- Other Private Peers: An ideal benchmark, but typically, the data is scattered among podcast interviews or kept under wraps (until now)
- Public Companies: Even if you never plan to be a huge publicly-traded company, there’s a lot you can learn from their SEC filings as you plan for growth
This report makes it easier than ever before.
Each section starts with analysis of our private company data, showing exactly how brands in our client cohorts did on key metrics across the previous two periods, including average performance, absolute growth, and relative growth year-over-year.
You’ll also find breakouts showing performance at different percentiles. These give you a better idea of the full range we see, including the upper and lower-bounds, which are particularly important for budget planning.
Use them to assess your performance in 2024, and more important, to gut-check your growth assumptions for 2025.
For example… Planning 150% growth for your 7-figure brand?
We saw it happen. But it’d put you in the top 5% of companies at that size, so plan accordingly, and be honest with yourself about where you think you fall.
Finally, A Word On Goals
There’s a fourth crucial component you need to take into account when planning your budget for next year: the founder’s personal goals.
This is something we often work through with our CFO clients.
The benchmarks are important. But what’s best for the business is not always the same thing as what’s best for the founder, and sometimes your personal goals will take priority. Otherwise, what’s all of this for?
You may want to:
- Spend more time with kids
- Buy a house this year (or a second one)
- Make some key hires to take work off your plate
You get the picture…
If you don’t budget for them, they’ll just be a pipe dream, and eventually it will take a toll on you.
Most ecom brands (especially those in the 7- to 8-figure range) can’t survive without the founder. So it’s crucial to be honest with yourself about what you really want.
A good CFO will be able to help you identify those goals, and factor them into the budget. So if you want help with any of this, reach out to us here.
1. Revenue Growth
Private Companies
Among private companies we track, 75% saw revenue increase this year. Overall growth averaged ~24% if we remove outliers. But gains weren’t experienced evenly.
Companies with more than $50M in revenue saw outsized gains, while revenue was either flat or down for many smaller clients.
For example, among 7-figure brands, revenue grew just 4% at the 30th percentile, and in the $10-$50M cohort, it was down almost 15% YoY at that level.
Yet even the worst of our $50M+ brands saw double-digit growth in net rev, which reinforces the trend we mentioned in the executive summary – in 2024, big brands got much bigger.
CFO Analysis
When we talk about revenue, we’re really talking about the effect of three forces: price, volume, and mix. We don’t have perfect insight into how every client handled each, but overall, my sense has been:
- Price: Most didn’t raise enough or fast enough
- Volume: Mixed bag, but typically the main source of revenue growth
- Mix: Many were slow to cut low-performing SKUs or didn’t launch enough new products
Overall, revenue was generally flat or down all year for most smaller brands (those under $50M), many of whom were hoping Q4 would save them.
Anecdotally, our CFO’s noticed outperforming teams are typically doing a great job brand-building. They’re exploring “sleepy” categories, with large incumbents, low brand-switching, and little innovation, and they’re launching products into them, designed to appeal to millennial values (e.g., clean, fresh look, better packaging, better-for-you, etc.).
Wholesale was also an important part of the revenue narrative this year…
About half our private companies do some kind of wholesale business, and for them, revenue in that category roughly doubled, growing ~111% on average across all cohorts.
Wholesale also made up a larger segment of revenue for all cohorts.
Heading into 2025, brands that want to build antifragility, and reduce their reliance on Google and Meta, really need to be looking at this channel seriously. Public companies, like e.l.f. Beauty (later in this section) offer useful insights on how to maximize wholesale wins.
Finally, refunds as a percent of gross revenue ticked up ~105 basis points…
For companies under $50M, we saw large gaps between the best and worst performers. Companies over $50M had much less variability.
To mitigate the full impact of refunds, some clients continue to implement gift card issuance in place of cash back, which improves their margins further down the P&L.
In some states – where brands are allowed to retain unredeemed gift card balances after a certain period – the effect on margins is even more pronounced. But there’s a strategic question at play here, and you have to decide whether the trade-off in customer satisfaction is worth the squeeze.
Historically, most clients scrap returns altogether, telling customers to either keep the product, donate it, or simply throw it away. But in the face of rising COGS, it’s becoming more valuable to have a sound reverse logistics strategy in place.
Clients are exploring ways to recover that product.
One took on an inventory loss recovery partner – customers ship returns to the partner, they’re refurbed, resold, and a portion of that money comes back to the P&L.
Public Companies
Among the public companies we track, revenue grew 7.6% on average this year. Outliers were HIMS and e.l.f. Beauty, with 57% and 59% growth respectively.
Median revenue growth was 3.4%.
Roughly a third (five out of fourteen) saw revenues shrink year-over-year. Decreases ranged from -5.3% (Carter’s) to -22.7% (Allbirds).
Companies at the 30th percentile saw revenues shrink by 5.7%. And the 5th percentile was down 17.5%
CFO Analysis
One of the best-performers, e.l.f. Beauty, offers great lessons for any founder who is either new to wholesale, or thinking of getting into it.
In 2024, they were the only one of the five major cosmetic brands to see Q3 volume increase year-over-year, and according to their November earnings call, they were, “the most productive brand on a dollar per foot basis” across their largest retailers (Target, Walmart, Ulta, Superdrug,Boots, and Douglas).
2. Gross Margin
Private Companies
Among the private companies we reviewed, we didn’t observe any strong changes in gross margin.
The trend certainly wasn’t as dramatic as it was for overall revenue, or sub-categories, like wholesale.
As with other metrics, bigger companies did better, while those under $50M tended to be either flat or slightly down. Those under $50M also tended to have much bigger differences between the best and worst performers, whereas the over-$50M cohort was more uniform.
CFO Analysis – SKU Rationalization
Not to spoil the surprise later in the report, but ROAS actually increased for the majority of private companies. This is generally good news, but it means companies focused less on gross margin improvement.
Specifically, we observed some companies struggle to either not launch enough new products, or (more damning) were slow to kill low-margin, low-performing SKUs.
One of the biggest mistakes we see brands make is not having a systematic way to review and address low-profitability SKUs.
Partly, this is a matter of resources. Brands under $10M are always strapped for the time, money, and energy it takes to review the product mix. Also, ego is a factor. Ego is what makes founders…
- Slow to kill SKUs they have affection for (because they designed them)
- Over order low-profitability SKUs because they “need” to say in stock
It’s understandable. But this again is why it’s so important to have a clear budget (to the SKU level when applicable), rooted in your goals, to help you stay focused on the big picture when you have hard decisions to make.
Public Companies
Among the public companies we track, gross margin grew 5.4% on average this year. Every company in the set except one (Solo Brands) saw improvement.
The high-performing outlier was The Honest Company, with 33.6% growth – almost 10x the median (which was 3.6%).
Half of tracked companies cut COGS as a percentage of revenue this year. The median clocked a 3.8% decrease, and outliers offer no surprising insights, as in each case COGS rose or fell about in-line with revenue for the year.
The Honest Co. is a great example of the importance of SKU rationalization. In 2023, they started a transformation process laser-focused on profitability.
They implemented a new SKU rationalization program, cutting low-margin business in Europe and Asia, and divesting themselves from low-margin sectors of the cleaning and sanitation spaces. Now, gross margins are up ~1,000 basis points YoY.
3. Contribution Margin
Private Companies
One of the most fragmented, mythical metrics in our industry is contribution margin – if you take nothing else out of this report, bookmark this page for your budget review heading into 2025.
Similar to other metrics, losses were concentrated in the under $50M cohort. Companies in the Under $10M cohort saw the largest declines – nearly 16%. The $10M-$50M cohort was largely flat while the over $50M cohort actually expanded contribution margin by almost 30%.
CFO Analysis
One of the big reasons it’s so hard to get your hands on good contribution margin benchmarks is that it’s not well-defined. Even when it is, it’s not well-reported.
Different companies include different things in the metric, often failing to proactively manage it or keep their financial reports updated so they get an accurate read on where they stand.
It’s possible to find other industry reports on revenue growth or ROAS trends. But no one takes the time and effort to define, calculate, and benchmark contribution margin across cohorts.
And yet, this metric is critical, driving decisions on:
- Product launches
- Channel / country launches
- Supplier negotiations
- Media budgets
- Changes in unit economics
- Pricing
- Reverse logistics policies
We define contribution margin as gross profit, minus variable selling costs (for a full breakdown on what’s included there, see our Methods chapter). We then divide that result by net revenue to get CM %.
As the data above supports, you should be targeting a baseline CM of at least 30% – with some exceptions for dropshippers and high volume/commodity resellers.
As paid spend is usually the largest or 2nd largest line item on the P&L, we’ve broken out total ad spend and ROAS.
On average, companies deployed more ad spend and ROAS increased last year…
A note on ad spend percentiles. Deploying more ad dollars doesn’t inherently equal a better business – i.e. 95th percentile. But we did find it interesting to include the data for consistency.
As you stare at the big numbers in the 95th percentile in disbelief, allow us to provide additional context. We have a diverse client mix of both omnichannel brands and Amazon heavy. Amazon heavy businesses almost always have higher raw ROAS.
ROAS is but one piece of contribution margin. As you benchmark for 2025, focus on overall contribution margin first, and then ask the question: “Given my current unit economics, what does my ROAS have to be to achieve [Insert Target CM]?”
4. EBITDA (Operating Income)
Private Companies
Only a third of private companies we tracked saw EBITDA Percentage grow last year.
Most saw heavy year-over-year losses, averaging -93% for our under-$10M cohort, and -165% for our $10-$50M group.
As we mentioned earlier, many brands hoped Q4 would save them. The downside of that hopefulness was they often didn’t look at fixed costs hard or fast enough.
G&A spending rose across the board…
For easier reading, we’ve arranged the percentile breakout below to show the “best-performing” stats (e.g., the 95th percentile) as those with the lowest spend in their cohort.
For most companies, G&A took a larger chunk of the revenue pie last year…
The over-$50M cohort was the exception. There, revenue growth outpaced increases in G&A spending such that their G&A % of Net Revenue was down 28% year-over-year.
One of the big sources of G&A growth was marketing costs…
By this, we mean fixed marketing costs (e.g., marketing salaries, contractors, website design & maintenance, marketing-related software subscriptions, etc.)
We saw 7-figure brands get more efficient here, but those in the $10-$50M cohort saw costs go up. (Here again, cohort data has been arranged so that top-performers are those with the
lowest costs.)
Anecdotally, much of this additional spend can be attributed to over-hiring.
Revenue growth outpaced the increase in marketing costs for our over-$50M brands…
There, marketing as a percent of net rev averaged just ~2.5% last year, down from 3.3% the year prior.
Brands in our $10-$50M cohort weren’t so lucky. With rising marketing costs, and lower overall revenue, marketing as a percent of net revenue was up ~68% YoY, growing from 3.73% in 2023 to 6.25% in 2024.
CFO Analysis – Everyone is coming for your margin
We all know the Bezos quote, “your margin is my opportunity.” At the time, he simply meant Amazon was willing to delay profits for years while they built
infrastructure to outclass competitors.
Today, it has a different ring.
Amazon.com reported $37B in revenue1 from third party seller services in Q3 of 2024 alone, and we saw fee increases on everything from long term storage to shipping and disposal.
They’re just one of a growing list of parties with eyes on your margin.
Elsewhere, we saw:
- Rising labor costs, domestically and abroad
- Shipping costs rise due to the war in the middle east
- Overhyped growth solutions – like Shopify mobile app builders – that promised the world and grossly underdelivered
And of course, customers always want more for less.
The takeaway is simple: In 2025, everyone is coming for your margin. You need to be looking for ways to protect it.
Major in the majors, first. That means keeping a close eye on COGS and ad-spend. But after that, even small gains can add up as you work your way down the P&L.
Clients found wins in a few key areas last year:
1. Review Add-On Services: Take a magnifying glass to all the Shopify apps charging a percent of revenue to manage things like insurance, BNPL, reverse-logistics, etc. for you. In addition to marginal cost, they may be adding expensive complexity.
For example, one client reviewed a third-party insurance app, and found their support was confusing customers and actually costing his team. They decided to self-insure, winning a few margin points while improving customer experience.
2. GWP > Discounts: This isn’t new, but we’ve seen an uptick in its usage, especially heading into BFCM this year. Done right, it’s a win-win because the extra product is more valuable to the customer than your discount would have been, and the extra money for you is higher-margin.
3. Content Production: We saw several clients transition from paid creators and influencer content to building content production in-house.
4. Cutting / Right Sizing Staff: Letting people go is hard. For some companies though, it became a blessing – uncovering clear inefficiencies and freeing up critical resources (both time and money) to be better deployed elsewhere.
Public Companies
Among public companies, just over half saw a rise in Operating Income in the period of our study.
Outliers are interesting, but must be taken with a grain of salt. Solo, for example, chalked up a -1006% change YoY, but closer inspection shows that’s primarily due to accounting practices (they wrote off $330M in goodwill impairment charges) rather than strict operational performance.
The more interesting note is that a small increase in gross profit can lead to large increases in operating income, like at Hims, Yeti, Warby Parker, and Chewy.
Chewy is a great example. Their reported operating income for the trailing twelve months is $100.3m, up from $14.7m the previous period.
That’s primarily due to a $390m bump in net revenue, as well as slightly higher gross margins, both of which are being driven by increased net sales per active customer, particularly in their pet health sector.
Another driver of gross margin growth is their new sponsored ad business, which gives advertisers preferred placement on Chewy’s marketplace.
According to our review of their most recent earnings call, sponsored adds are their highest-margin product – an interesting reminder that DTC brands aren’t necessarily restricted to physical products when it comes to finding new margin.
