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Roundtable

Roundtable: Since Everyone's Going Direct, Let's Get Better at It

When marketplace platform Mirakl gets $300m in funding, you know brands selling direct is no longer a fad. Inspired by a D2C trends report from Common Thread Collective, Rob and Peter dig into the omni-fication of D2C. 

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TRANSCRIPT

Peter:

Hey everyone, Peter Crosby coming to you from the digital shelf institutes Cape Cod office. And Rob is from Maine. Hey Rob.

Rob:

Hello there.

Peter:

So before we dig in, I want to remind everyone the DTC strategy playbook series finishes. I think it will be 11 episodes on Tuesday, September 29th at 11:00 AM Eastern with Bob LAN. Now, Bob is the VP of customer experience at a baby brand around juvenile, and he monetized their contact center, their customer support center, and created a million dollar plus assisted sales channel customer post-sale support driving long term customer value, like who knew there's a way of doing it. If you want to know how he pulls it off, please join the link annual, put the link in the show notes. Um, all the recordings for all of these will be available continuously on the videos tab at digitalshelfinstitute.org. So if you want to catch up on any of the series, please go there.

Peter:

Okay. Onto today's deep dive. Um, so Rob, you saw a miracle, the marketplace platform got 300 million in funding this past week.

Rob:

That's right. You get a marketplace, and you get a marketplace.

Peter:

The Oprah-fication of marketplaces. but what that, I mean, obviously that's a crap ton of money, but it does suggest there's a convergence happening, right? I mean, we've talked about in the show before digitally native brands going, going sort of wholesale distributor, et cetera. And then wholesalers going direct. It's like, everyone's going omni-channel there is no division anymore. Everyone is trying to use the best approaches to be anywhere that consumers are and that's just going to keep happening. So what I came across was, um, you know, uh, uh, an article called 10 e-commerce trends for 2020, the future of direct to consumer retail from 17 liters in a post acquisition world. It's by Aaron Orndorff. Uh, who's the VP of marketing at common thread collective of consumer marketing agencies. Um, and I don't have time to cover 10, but there were a few that really stood out at me that resonate with, you know, with what we think about on this podcast. So I wanted to kick it off and then have you, have you chime in Rob? So are you ready? I'm ready. All right. So I mean, Aaron starts off by saying, you know, there's been this playbook for DTC for now, really coming on 15 years, believe it or not, you know, your launch with one or, or a couple of flagship products. And then you expand within your category two, you evangelize through early adopters and prioritize brand as that scale versus paid media purchase on the cheap and with low competition, leaving lower ad costs early converts carved a path through performance and emerged triumphant, right? And, and the question is, is that playbook dead? Is it faltering what's going on there, but, even more importantly, you know, does DTC or direct even matter as a separate thing anymore? And so trend number one that really caught my eye was a direct to consumer marketing over digitally native vertical brand operations. And the point that really stood out at me is that direct the term will increasingly become an ethos that that's marketing and retention steeped in the value of that one to one relationship of, of, of really investing in the relationship with individual consumers and really will stop having all that much having to do with manufacturing and distribution ownership. And that everyone's going to have to move that way from, from D to C going wholesale and legacy to D to C. And he talked about Nike being the Supreme example of that.

Peter:

You know, we've certainly covered Nike on this before, but then also talked about a brand group called win brand groups. They have 70 to see companies with a compounded annual growth rate of over 800%. And they are super particular about which partners can sell online. If it's a strategic opportunity at Grant's limited rights, it would most only allow brick and mortar stores, but you see this movement towards the center. And so you have to think about what direct means in a different way. Did that, did that resonate with you as well? Rob is kind of a starting like, let's get this straight.

Rob:

Yeah. We've talked about this before, but I think in five years, anybody who's serious about being relevant in the 21st century has got to have a direct line to the consumer brands. Talk about it from a bunch of different perspectives. The least interesting to me is the sales perspective. I think for most manufacturers, ultimately the direct to consumer sales relationship is going to be a minority of their sales, even if that's where they started from. At some point you've got to grow up and you've got to go through channels and you're not going to stay direct to consumers forever. So I think that direct for most manufacturers, except for maybe early, you know, direct to consumer brands is going to be a minority of sales. It's the least important reason to do it. The most important reasons to do it are to have a direct relationship with your biggest fans. This allows you to do really interesting market testing, launching new products in small batches, and getting feedback on what's working. What's not working. Of course. My favorite example there is McCormick's watching old Bay hot sauce direct to consumers back, right, right before COVID hit and sold out in 30 minutes. And now they used that as a way to get on shelf everywhere in the country and every single grocer, even, even between planogram resets because they had the data.

Peter:

I have to plug it. So James Sydell, who's the VP of, of, uh, direct at, um, at McCormick did a session with us on the DTC strategy playbook series. So he tells that whole story and sort of what that impact is. So it's, it's amazing.

Rob:

And then, and then there's a lot of, you know, in the weeds reasons to have a direct to consumer shipping capability, um, including providing a really excellent three-peat backstop, if there's, there's a sudden surge of demand for, for one piece sales on an Amazon or a Walmart, um, getting greater brand control and being able to protect map and so on and so forth. Right? So I think that's just the tip of the iceberg on reasons to have a direct capability, but everyone's going to need it. And brains that are slow to adopt it, I think are going to see a market share erosion. And, um, they're also not going to have the capabilities in house and the experience in house to be good at it, uh, when it becomes really, really essential. So I, I absolutely agree directly, is just part of the mix. Um, I don't think it's dead. I think looking at it purely from a sales perspective is wrong and always has been wrong. Um, I, and I think that the real trend here is that VC backed consumer leisure startups that sell pastel leggings and have an Instagram following and burn $50 million of capital into the ground. Those are, those are dogs that no one's going to do that anymore, but you know, those startups aside, I mean, there's, there's a lot to like about it.

Peter:

Yeah. And one of the things that stood out to me, you know, there was the mention in there of ethos. And I think we've talked a lot about how these digitally native brands have been very mission driven, um, and, and make that a huge part of their relationship with the consumer. And so this they're, they're, e-commerce trend three in this, um, which talked about, uh, the, the combination that you shouldn't have brand versus performance. You've got to think about them together because a brand is often experienced only through these sort of transactional moments that the consumer has, that they plan in their journey. So you, you don't have the, the TV ads are not doing your work for you anymore. It's gotta be wherever the consumer is engaging with you. And what I really liked about what Aaron talked about was a new way of thinking about measuring the performance of content used in the funnel and that they measure it.

Peter:

Um, you know, they use sort of the attention, interest, desire, and action sort of that model, but they say that all of those need to happen within every piece of content, or it's not a successful piece of content that will work in the funnel. And I really liked that. And so they actually have a model for measuring how it delivers so that they talk about at the top of it, does that content deliver attention? Does it stop the prospect? And they mentioned, you know, they measure sort of the benchmark of the percentage of people that engage like 25 to 30% is solid. The next stage interest, you know, the content must hold the prospect, you know, are they watching the average watch time on YouTube or something like that? Does that let's take, keep on the video thing, does that content make the prospect explore further desire? What are the click through rates from that piece? And then ultimately the content must effectively set up the final desired result that at the essentially Roaz the return on ad spend. And I love this idea that the best performing content is, is all the way from brand through performance marketing, if you're designing it correctly. Um, uh, what do you think about that?

Rob:

I, you know, Ben Thompson has a similar perspective where the whole funnel collapses on the digital shelf. So the Amazon product detail page is your number one branding opportunity. It's the first place that a lot of consumers are going to experience your brand anywhere, especially younger consumers who don't, you know, it's not that they cut cable, so they never had cable to begin with. Right. And so, you've got to do everything from explaining your brand, your value proposition. If you're, if you've got a socially conscious perspective, what's, what's that perspective and talk about the product that's on the page, the feature functions, the ability it's like, you got to do all that sort of stuff all in the one page. So I there's a lot to like about the sentiment that the content has got to do a lot of work up and down the funnel and a lot of different instances. I don't, I don't agree with him that it's, that it's all like that though. Um, I think that

Peter:

You're overstating that, but yeah, I may be using hyperbole there, so I don't want to misrepresent what Erin said, but yeah.

Rob:

Right. Peter, then I don't agree with you exactly. You're wrong!

Peter:

We'll see. Maybe we'll get Aaron at some point and talk to him about it.

Rob:

Yeah. I think for a lot of considered purchases, uh, there's, there's a lot of touches that happen up the funnel that are, you really don't need to include a purchase capability. So for example, my, my, my laptop died. I bought a new laptop recently and it's a Dell XPS. I'm extremely happy with it. I went to YouTube to watch reviews of the Dell XPS versus other brands that were on there that I would consider. And I did a bunch of different content oriented research, engagement experiences as part of the whole funnel process. I really wanted to make sure that this laptop was going to be a really good laptop. And it was a combination of blog articles. I spent a lot of time on dell.com learning about the different options that were available, getting a sense for how the Dell brand has evolved in the last 20 years since I personally interacted with them. And so there was a lot of experience that wasn't just the PDP giving me the Dell brand. Right. And so, I don't, I don't think that it's like the whole funnel is collapsed all the way all the time. I'll give you another example of a purchase that I actually made today. So Tim Ferris, his podcast was sponsored by dry farm wines. And I like a lot of dry farm wines. And I like a lot of the things that Tim Ferriss likes, and these are wines that are lower ABV, uh, they're, they're natural. And I said, Oh, I'm going to give this a shot. You know, let me, let me take advantage of his podcast promotion. Let me, let me order a six pack, I guess, I guess in the wine world, that's not a six pack it's half the case. Well, let me, let me go, let me let you know, let me get a mixed half case and see if I think about this stuff.

Rob:

And, um, they sent over an ebook afterwards about dry farm wine production. That was really actually quite informative. And, and I, I, I like blind, but I'm not an expert. And I learned quite a bit about, uh, not just their production, but the entire wine industry that I didn't know. And, and I, I thought the content was really well done and it was engaging and I liked it. And so this is a whole other, a whole other take on when, when and where and how to deploy content. And so I think that the view that you need to measure every single piece, you know, using the attention, interest, desire, action, whole funnel for every single piece of content. I don't agree with that. I think there's still a lot of room and a lot of categories for content that either is educational upfront, or like you said, Bob Land, Bob Land is going to talk about what he did at draw juvenile, which is to then back load a bunch of content post-purchase to ensure that consumers are really happy with their purchase are successful with it. Their net promoter score is very, very high. The re repurchase behavior is much higher than you would expect. And so, I don't know. I agree that content is more important than ever, but how you deploy it, I think depends a lot on your overall strategy. And just looking at every single piece as the whole funnel is, is not, not exactly correct. Yeah. And Bob actually stole the money from ad spending to invest in the post-purchase stuff. I stole his third word. I love a picture of abandoned going over to the media folks and just running, running off, but they're over there. Oh God, we have, we have to create a caricature of Baidu.

Peter:

I'm on it. I'm on it. We'll get somebody from design to do that. Um, one of the things I liked before we close out this trend, um, Aaron mentioned, uh, sort of a mayor Kulpa that Adidas did like a, they sort of announced to the world that they had focused too much on efficiency of, of, um, ad and content spend over effectiveness. So they were looking at specific KTI KPIs and how to reduce their costs rather than what was in the best interest of their brands. And it's a really cool article cause it, you know, it does talk about this. You can sort of over index on these KPIs and lose that, have something to do with the one purpose that that thing was for rather than then looking at the broader potential impact of, that campaign or piece of content

Rob:

Yeah. I mean, you know, just take, I think that's a great point. I hats off to Adidas for making that point. And I know, I know Nike, for example, one of the things that you and I have talked about that we admire about Nike's execution is Nike says no to dollars in the short term, like Nike shuts down distribution channels that are profitable. I mean, they've done it three times now. I think in the last two, three years where there's actually a small number of channels that can actually sell official Nike products now.

Peter:

Yeah. They just pulled out of Google, Google shopping, I think this week, or yeah,

Rob:

It just keeps going. And so Nike, Nike, um, is really, really good at making these hard, short term decisions. I'm not going to sell here. I'm not going to sell there. It's not about this quarter's revenue. It's about the brand, um, in service of their big strategic North star. And I think in this whole transition of the retail world, from the mostly physical shelf world to a purely digital shelf world where every single purchase we're good, regardless of where the transaction happens is digitally influenced in that world. Companies have to take step function, changes on how they operate. It's simple. It's not a matter of optimization. It's not a matter of chasing the same KPI you've been chasing for a long time. It's a matter of actually defining a new mix of KPIs with new targets and being willing to walk away from your old means of operating.

Rob:

Uh, even, even if it hurts you a little bit in the short term, because you know what the future looks like, and you know, you, and I've talked to you, brand manufacturing executives where the digital team is hamstrung by margin expectations where, you know, they've got they've, you know, different brands are used to 30 points or more or margin they've been getting that for decades and they don't ever want to do less than that from a margin perspective. And it's a little bit like cutting off your nose to spite your face, some of these new digital experiences you're going to have to take a margin hit in the short term to figure out how they work into your overall mix. You've got it. You've got to be experimental. Um, you've got it. You've got to invest in what the future might look like and chase KPIs. Isn't always going to get you there. Uh, so yeah,

Peter:

Yeah. One of the things we're working on at the, at the digital shelf Institute through our executive forum is what is the new P and L for, for being able to make those investments in a way that you can rationalize and, and, uh, and you know, draw support for the fact that there's a, there's a longer road to be thought about here, if you're going to drive growth in your business. Yeah.

Rob:

Generally speaking, chasing a KPI is awesome. If you've got very high confidence that they keep that the KPI is the right performance indicator to chase for overall business success in the short and long term, and for companies that are in, we figured it out, like we've already figured out what the motion is. Mode. We have a plan, we got to execute the plan and we got to get better every day on this plan, having a set of KPIs where the game is an optimization game, that's awesome in a world where you're not really sure what the plan is, and you're not really sure what the future looks like. An overt fixation on KPIs is almost always gonna lead you in the wrong direction because you're doing a local optimization, not a global optimization. And that's the major point here is that it does to say, look, we were, we were too focused on the local optimization of the content and we did it at the expense of strategic changes to the market that we needed to make how we go to market. And I think, I think it's, I don't know, hats off to them for being able to, uh, to be public about that. I mean, you don't, you don't see brands, um, that transparently open that often. And I think, I think it's great for them.

Peter:

Yeah. And, and, and speaking of, sort of core KPIs, e-commerce trend number five, this is sort of a, uh, you know, some of the language in this, in this thing is, uh, you know, it's very hip. Uh, so I have trouble saying it, but cause I'm not, but LTV is everything. LTV is nothing to meet your cash multiplier. So I mean, the, the issue is w what is the, what is the place of long term value in figuring out, um, you know, your, you know, your value as an organization. And, uh, one of the things that stood out to me was, uh, the CEO of four by 400 Andrew Ferris said metrics that first indicated monthly losses from paid media were actually profitable over a longer timeframe. We just need to track what our customers did after they'd made their first purchase. What we discovered is that they were doubling and tripling their value to us within 90 to 120 days. But at the same time in a, you know, in a business where getting to, uh, showing that you have a viable business model, there's a lot of pressure on that. What is lifetime? And, how should you think about that? And, uh, the, uh, what, what Aaron talked about from CTC was that cash multiplier serves as a better sort of LTV model, 60 to 90 or 120 day payback windows, depending on your products, reorder repurchase or upsell cycles, make sense. Is there anything new in here? What's your point of view on that?

Rob:

I personally don't think there's much to do in here though, like a good LTV and CAC ratio T takes into account upsell and repurchase. So I think, I think that the call here is more, um, maybe they're calling out that a lot of young entrepreneurs are doing this calculation wrong and, or are too shortsighted in the window that they're looking at for the value of the customer. But, you know, the Allen LTV is lifetime. So not much changing their lifetime, and it should include how much repurchase there is over 60 or 90 days. I know that this one is, this one is a little bit like a, I feel they're trying to spruce up the old, like, eat your vegetables discussion, you know, instead of eating your vegetables, they're calling it paleo, you know? So, so that's,

Peter:

And also it may be, you know, certainly when I think about from the agency perspective, they're probably under a high bit of pressure to not show losses from their paid media where, you know, they're spending more than they're getting in and sort of reminding, Hey, have at least 60, 90 or 120 days of patients on the media we've done for you before you fire us.

Rob:

Yeah. Yeah. Well, I mean, it's, it's, it's always good to put your cynical hat on and see, okay, well, what, what are they selling? Um, I think that, I agree with that. And, but I'd say that if I, if I were going to look at this and say, what's the interesting nugget that's underneath this it's that measuring the payback on ads is actually really hard in a lot of cases. So, you know, John Denny's full buy brand's talk that he gives on how, um, they showed through a market mix model that Amazon media spin increased CVS in store span and things like that for the beverages that they, that they sold, um, shows that it's pretty hard to do the role as calculation sometimes for some of these things, because the, the touch points all influence each other. So as Amazon knows, do you calculate the ROI of your Amazon program based on simply Amazon sales and return, in which case the Roaz is probably artificially low compared to the true return. You, however, do a market mix model that takes that into account for your sales everywhere. That's really, that's a hard model to build, and it's really expensive. And most, most companies can't do that and they certainly can't do it on a regular basis. They can maybe do it as a one off. And so I dunno that there's, there's a piece of this though, which is some of these numbers are just very hard to get at other than at the very top line of the business. And at that level, they're not that actionable. Um, so yeah, I don't know. I'm, I'm still waiting out there for a omni-channel ROAS model that people can use, um, that, that actually gets to the heart of what, what they're calling out in this article. So I think that this article is maybe it's one, it's either one of two things. It's either being too cute about something that they should be doing correctly anyway, or it's, it's missing the fact that this is, this is really hard to do this, uh, this calculation,

Peter:

Um, e-commerce trend number nine, kiss, social selling goodbye, and embracing intimate personalization, what stood out, uh, but what stood out to me, you know, they had four pieces of great data that essentially say the same thing, but, but really do nail. And I think this will change. I think the percentages here will change because social selling platforms are, you know, Facebook slash Instagram, Google, YouTube, they're all gonna keep investing in, in, you know, low, uh, where people can act in the moment without a lot of friction. But the, the data they had users who have never made a purchase through native social commerce, they ranged from e-marketer to civic science research, but it's essentially a 71% in 20, 19, 82%, um, 92% saying no in December of 2019, all pre COVID. So let's just be clear on that. Um, so I don't want to over index on that, but I do think this idea of, of the, the real story that stood out for me from here was, um, SMS and mobile messaging that getting native and getting intimate. Isn't about social it's about they got tiny keyboards and there was a, um, there was a, have you ever heard of a, I don't know whether it's pronounced this way, Visco girl V S C O. Doctors aren't old enough yet to be doing now.

Peter:

Um, so there's this, I honestly don't even know what it stands for, but it's an, it's a, Oh, I did actually the photo editing app, VSCO that I think, you know, a lot of teens use, which allows users to share photos and make preset filters, keep their images, looking uniform, the latest teen iteration of preppy style with a casual beach inspired flair. But it turns out that on Visco, the, instead of using LOL or haha, what they use is, and maybe you've seen, this is S K S K S K. And it turns out, stay with me, Rob he's. You can't see him people, but he's looking at me with such skepticism, but it turns out that on the phone keyboard, the closest thing at the bottom of the keyboard is S K S K S K right next to each other. So instead of having to go to the trouble of typing haha, or laugh out loud, they just go thumb, smash them, smashed thumb, smash to laugh.

Rob:

I am so not cool enough to even understand what you're talking about. I don't even use emojis!

Peter:

For God's sakes unless they automatically replace it. I know I'm totally old. But what I'm saying is I have seen that, that laugh on social media and I absolutely had no idea where it came from. It turns out it comes from this and it does suggest that there's a, uh, a set of folks that are, that are willing and able and more interested in just shopping through text. Gary Vaynerchuk does have wine text. And so, uh, and he said recently, wine Texas is essentially you sign up and you put your credit card in and everyday you get a tax and all you have to do is reply with a number and, and you get your wine. And he said recently, uh, 9,165 people are on it. You know, that's not a huge channel for him. It's out Cormier outperforming our email service that has 400,000 people on it, 15 times.

Rob:

Yeah. I don't know this. It feels like, um, like any new channel, people that are early to the channel and run experiments can see really big, huge returns, really big numbers. And it, and then the SMS in particular, I don't know how sticky this is going to be. So, so I, I'm a huge fan of a shoe brand called Adam's shoes. They do three D printed shoes. I find them, I find them pretty comfortable. Yeah, that's right. And um, like the ma like the nuclear Adams. Yeah. And so they had a shoe, a limited edition launch. And so I signed up for the launch of I'm on their email list and they texted me and said, all right, well, we're going to do this whole launch through SMS. And I said, fine, I guess I'll go with you on the SMS. And so I bought the shoes over SMS and it's the first SMS purchase I've ever made. And all I can do is just, I just can't, I don't want to do it again. I'd rather just do it on my laptop. I don't want to, I don't want brands texting me. I don't want text messages,

Peter:

But you might be a cranky old man.

Rob:

I think there's a lot of cranky old men, but I think this is a lot of people like how in general, people don't want to look at their phones all the time. There's a whole trend right now. And just look at your phone just a little bit less. And so brands are now going to do push notifications on every stupid launch and every day it just seems miserable. So yeah, I think that there's going to be a, there's going to be a subset of people that love getting the SMSs. And because there aren't that many brands doing it these days, the ones that are early to market are gonna see huge returns, but you know, it's fast forward a year. It's just going to be part of the mix. You know, the part, it that's, what's hard about this digital shell thing is like some people you talk to in SMS, some people you talk to on email, some people you talked to one Instagram, some people you talked to on Pinterest, some people you talk to on Amazon, some people you talk to you through consumer reports and you know, that's the it's, it's hard. SMS is just yet another thing that you have to worry about in your marketing mix. And I don't know, I think it's going to work. People are going to make money on it. Please don't text me where I'm at.

Peter:

No, I mean, I'm with you. Um, I'm a com cranky old man. And so for me, like, I want as few texts as possible. Cause it, every one of them, no matter who they're from, starts out with me feeling irritated. And then they were like, all right, now I'll deal with this, but I am not my niece. Like

Rob:

Yeah, I think that's true.

Peter:

Yes. That is the truth of this podcast. If we've learned anything today, it's that I'm not my niece. And so we close now. Um, so I mean, so there's a bunch of other trends in this, in this report. Again, we'll share it in the, in the notes. Um, but sort of closing out, um, uh, Dan Frommer, who founder and editor in chief of the new consumer says this is the most successful modern brand. Aren't just setting themselves apart through the tactic of selling direct to consumers, but through their broader sensibilities. And I think, I think, you know, that's poetic, but there's truth there. And, and that spans across product development, customer experience, storytelling, marketing, values, sales, and distribution strategy. So I think it does all end up at the feet of the new digital first omni-channel. How are brands going to deal with the challenge and opportunity of needing to speak to every individual in their own individual way and showing up wherever that is? And that's a massive challenge that the whole industry is dealing with.

Rob:

That's well said. And let me, let me, let me close with a second thought, which is I really actually, now that I'm thinking about this more, if Gary V is making money on text selling line, I hope he makes so much money on tech selling. Why? Because his lifetime ambition is to buy the New York jets and I've, I've never wanted him to own them as a jets fan more than I do right now, please make a billion dollars on SMS. So you can put the jets out of their misery, take it away from the John man.

Peter:

Many channel marketing is going to do anything in this world over the next couple of years. May it get the jets new ownership? Yes, I'm a Patriots fan. So, uh, I have

Rob:

You probably love what's happening right now.

Peter:

It's fascinating to watch. Uh, I've been able to get a little bit of an emotion removed from it all and just sort of see how it pans out. Uh, it's an it's, it's exciting to see which leadership wins well, Rob, thanks for, um, for this conversation has been, been really cool and, um, and we've got a lot coming up, uh, on all of this stuff, our, our entire Q4 and frankly, maybe even Q1 or maybe the rest of my professional life will be focused on those, um, digital first omni-channel strategies. What are all these challenges, PNL and, and return on ad spend and content and how it gets everywhere. We're just going to be talking about that stuff, uh, for, for the foreseeable. So I'm looking forward to that. Um, but in the meantime, we do have that final DTC session with Bob land. It'll be in the show notes, please do follow us on digital shelf ensues, LinkedIn page, stay on top of things. There's a lot going on there. Thanks Rob. And thanks to everyone out there as always for being part of our community.