The Subsidy Is Over: Why Your DTC Brand Is About to Break
The cheap customer acquisition party fueled by Temu and Shein is officially over. For years, their subsidized growth distorted the entire DTC landscape, making it impossible for brands to compete on a level playing field. With their stock prices collapsing (PDD -23.6%, BABA -31.8%) and regulations tightening, the free lunch has ended. Now, DTC brands face the harsh reality of recalibrating their unit economics in a market with permanently inflated consumer expectations and normalizing ad costs.
Three platforms, three answers, one budget to defend. Your GA4 export already holds the answer, and the first finding is free and never leaves your browser. Get your first finding free
By Joris van Huët, Founder & CEOUpdated 2 min read
You did everything right. You built a great product, found a niche, and hustled your way to a growing DTC brand. But for the past two years, it’s felt like you’re running in place. You’re starting to wonder if you’re the problem. You’re not. The game was rigged.
For years, the entire DTC ecosystem has been warped by a single, large distortion: the subsidy black hole created by Temu and Shein. These giants, backed by parent companies Pinduoduo (PDD) and Alibaba (BABA), didn't just compete; they carpet-bombed the market with venture capital-subsidized, below-cost customer acquisition. They bought market share with money they were willing to lose, driving up CPMs for everyone and training consumers to expect impossibly low prices.
But the party is officially over. The market has called their bluff. The era of infinite, cheap capital is ending, and with it, the firehose of subsidies that distorted the true cost of customer-acquisition. On top of that, the de minimis tariff loophole that gave them an unfair advantage is closing. The result? The entire competitive market is about to snap back into place, and the brands that survived the onslaught are in for a rude awakening.
You survived the Temu-pocalypse. Congratulations. Now comes the hard part. You’re now operating in a market where consumers have been conditioned to expect rock-bottom prices, but the artificial subsidies that made those prices possible are gone. Your CPMs might start to normalize, but your customers' expectations won't. You're caught in the middle, and your profit-margin is the casualty.
The old playbook is useless. You can't rely on last-click attribution anymore. It was always a flawed metric, but in the post-subsidy world, it’s a death sentence. You need to understand the true incrementality of your marketing spend. You need to know which channels are actually driving new, profitable customers, and which are just cannibalizing your existing audience. You need a causal-inference engine that can untangle the complex web of cause and effect in your marketing funnel.
This is not about "optimizing" your campaigns. This is about survival. It’s about understanding the fundamental unit economics of your business in a world where the rules have been rewritten. The rest will be a footnote in the history of the great DTC shakeout.
See your true numbers. Run your first read
Frequently asked questions
Why are PDD and BABA stock prices relevant to my DTC brand?
PDD (Pinduoduo) and BABA (Alibaba) are the parent companies of Temu and Shein, respectively.What is the "de minimis tariff loophole" and how does it affect me?
The de minimis rule allows companies to ship packages directly to consumers without paying import tariffs, as long as the value is below a certain threshold. Temu and Shein exploited this to gain an unfair price advantage. As this loophole closes, their costs will rise, leveling the playing field for DTC brands that manufacture and ship from within the US or EU.My CPMs are still high. When will they normalize?
While the subsidies are ending, the ad platforms' algorithms will take time to adjust. More importantly, consumer expectations for low prices and high value are now permanently inflated. Even as CPMs slowly decline, your conversion-rate may not recover without a fundamental shift in your marketing strategy from broad acquisition to high-precision causal-inference.How can I compete in a post-subsidy market?
You can't compete on price, so you must compete on intelligence. This means abandoning vanity metrics like ROAS and focusing on incrementality. You need to know the true causal impact of every dollar you spend and focus your resources on the channels and customers that drive real profit, not just revenue.
Go deeper: Causal attribution, explained.
Sixty-second versions of these ideas: Causality Engine on YouTube Shorts.
Have an audience of ecommerce operators? Earn 20% recurring commission by recommending the €99 read.
Keep reading
Terms in this article
- AttributionAttribution identifies user actions that contribute to a desired outcome and assigns value to each. It reveals which marketing touchpoints drive conversions.
- ClickClick is the action a user takes to interact with a digital advertisement, redirecting them to a website or landing page. Clicks are a fundamental metric for measuring ad engagement and a primary input for click-based attribution models.
- Customer acquisitionCustomer acquisition attracts new customers to a business. For e-commerce, this means driving the right traffic to the website.
- IncrementalityIncrementality is the part of an outcome, such as orders or revenue, that a marketing activity caused: the extra results compared with what would have happened without it. It is a causal effect, not the number of conversions credited to a channel.