SA国际传媒

American consumers are used to brands catering to our every whim.

From footwear to skincare to pets, stores and warehouses are stuffed with products targeting every conceivable demographic, however bizarre its tastes. ? eye masks? Zebra print goldfish ?

Any of those things are available with a few clicks. And if current selections aren鈥檛 enough, rest assured founders and product designers will continue to churn out new seasonal offerings at a dizzying pace.

But lately, startup investors don鈥檛 seem to be biting. Per an analysis of SA国际传媒 data, investment in U.S. nonfood consumer products startups has fallen off a cliff. So far this year, they鈥檝e pulled in barely over $150 million across surveyed categories 鈥� on track for the lowest quarterly total in years.

For an idea of how far things have fallen, we chart our quarterly funding below to a selection of consumer products categories 1聽(not including food and beverage).

Funding dries up for aggregators, D2C

The drop-off in funding is particularly pronounced for direct-to-consumer brands and e-commerce aggregators, two areas that were red-hot a little over a year ago.

As the chart above illustrates, the peak for consumer products funding was the latter half of 2021. That鈥檚 when we saw some truly ginormous rounds for aggregators focused on acquiring smaller consumer brands and scaling their presence on and other outlets.

The largest investment recipient, , raised $1.85 billion in equity funding in 2021 to pursue its roll-up strategy, followed by , with $625 million. , which acquires Amazon brands in the consumer packaged goods space, also picked up $380 million that year, while aggregator secured $372 million.

But investor enthusiasm around the space has since soured, and aggregators are scaling back. Thrasio laid off staff and announced plans to replace its CEO last year. Benitago a few months ago and has been tapping the brakes on acquisitions.

Upstart brands, many of which have touted themselves as direct-to-consumer models, are also not seeing so much investor love lately. That鈥檚 a sharp shift from the first quarter of last year, when co-founded shapewear brand raised $240 million, and shaving goods supplier raised $140 million.

So far this year, the only U.S. deal north of $20 million in SA国际传媒鈥檚 beauty, fashion or consumer goods categories was a $40 million round for , a cosmetics brand founded by celebrity makeup artist Mario Dedivanovic.

It hasn鈥檛 helped that venture-funded fashion plays that went public under frothier market conditions in 2021 saw their valuations slashed the following year. So far in 2023, performance has been mixed.

A spring rebound?

Expectations for the broad U.S. retail sector this year, meanwhile, look neither great nor catastrophic.

Economists at retail sales growth of 0.5% in 2023 (or a 0.1% decline when accounting for inflation). Analysts predict that 鈥渂elt-tightening consumers will hinder sales in 2023鈥� compared with previous years.

On the bright side, U.S. unemployment remains low. However, higher interest rates mean consumers are wary about making purchases on credit.

Of course, for an individual retailer, it doesn鈥檛 matter so much if consumers are more profligate or thrifty. What matters is if the thing they are spending on is your product.

Looking at venture funding tallies, it looks like investors are less confident about startups鈥� abilities to convince consumers to try out a new brand or product. Or perhaps they鈥檙e simply pulling back after capitalizing companies so heavily a year or two ago.

Either way, this is likely a temporary state of affairs. Betting against American shoppers鈥� willingness to spend big on the next hot shiny object has never been a long-term winning wager.

Illustration: