The three topics on my mind today:
- The role of DTC within an omnichannel brand
- Gen Z shopping habits
The role of DTC within an omnichannel brand
Many of the clients we work with at Sharma Brands, or ones I speak with through MentorPass, are typically selling DTC but also in other places: wholesale, marketplaces, restaurants, cafes, etc. The common question that comes up is — what role does DTC play in the long run?
When you're just launching a brand, DTC plays a huge role in testing for product-market fit — does this even work? Once you can prove it does, then it plays a role in growing awareness and driving revenue to get your business going. You might spend 2-3 years in this space before you consider going wholesale, or you might go sooner, but it's important to feel confident in your abilities to sell-through retail inventory before going there.
As wholesale conversations or marketplaces conversations come up and you realize you actually can drive sell-through on the shelves of Target or fulfill orders quickly through a marketplace to retain your position, then comes the question of, What is the point of DTC? It comes up because after a certain point, these channels, in most cases, will overtake what you can do online.
Native deodorant, for example, was doing 8-figures in annual revenue online when it started selling in Target, but in a short amount of time Target was moving 7-figures per week in revenue.
Here's where I stand — DTC isn't something that should be given any fewer resources, but its function changes. As you scale into other sales channels, DTC becomes the lever to drive trial, gifting, product (sometimes also category) education, creating FOMO, and potentially bulk orders for your super customers.
In wholesale, you focus on making it easier for routine customers to put your products into their cart. If they're already going to Target, Costco, Sprouts, or Whole Foods, they'll just add it in. You help fulfill the habitual purchase and become a routine grocery-list item.
The DTC business still needs to be pushing for building awareness amongst new customers, educating people on what you're selling, why you're selling it, and how it'll help them, and building purchase intent. Whether or not they will buy online or in-store, you're still "building FOMO" for them to try it out. When someone sees your product on a retail shelf and they Google it, you should also be there digitally to answer those questions in the format of a great website with clear storytelling and answering the "Why?".
A good DTC business will always operate on its own P&L and make sure the right KPIs are being hit. When you're in wholesale, a beautiful bi-product is an exponential amount of potential customers will also recognize what your product is on the shelf.
Gen Z Shopping Habits
One of the companies I've started to work with is a Gen-Z celebrity/internet celebrity brand that sells a beverage product. I was talking to them about their numbers last year and it was fascinating to hear a few insights given the audience is 85% Gen Z.
- Their subscription rate was ~5%, whereas normally I'd expect that to be 15-25%.
- On the other hand, they had a very high repeat purchase rate.
- They have no desire to go after older demographics, whereas most brands try to get a much larger span of age range.
- They want to quickly get into outside marketplaces, retailers, and IRL events to interact with more customers.
- The best-selling products are on-the-go and single-session products — their audience values convenience the most.
- Each product has a unique story and a contextual reason of why it was launched.
- Merchandise outside of the core product line makeup a large amount of the sales — it’s integrated into the product experience, it's not tote bags and t-shirts.
All these data points I found quite fascinating, but not alarming. They're new behavior patterns of consumers, and as merchants, we have to figure out how to adapt to them. They balance the amount of data they consume with how convenient they can be to their customers. Marketplaces and events have less "feedback" to a brand, but they create a stickier relationship. The goal is that even if someone purchases from a retail store or attends an event, they find their way back into the digital eco-system where we, the merchant, can learn more about who they are.
UGC & Creators
UGC is a hot word that gets thrown around in the DTC and marketing spheres. Similar to the term, "Community", there isn't a universal meaning for it — depending on its context it has different meanings, and each one is important in its own way. In this email, I want to dive into the different ways I've leveraged UGC over the last couple of years, and I hope it inspires you to think about it in a new way if you don't already leverage UGC in these ways.
There are hundreds of millions of dollars put into the commissioning, creation, amplification, and collection of UGC from consumers, creators, technology companies, brands, and more. It's become a hack for companies to get content and external validation from others — both of which end up driving new revenue, so it makes sense it's a big business. It's important to note that UGC doesn't just mean customer-generated, but it can mean creator-generated as well (people whose expertise it is to create content). From the work I've done, I have come across 4 different categories of UGC:
- Earned social media
- Ad creative
- Shoot replacements
Reviews. There's no secret that smart shoppers today look for external validation before making a purchase. If your customer journey has no reviews, don't be surprised when your bounce rate is high and conversion rate is low. Just you telling someone that they should trust you are... well very Big Brother-like, no?
Reviews not only bring validation but also a perspective from different viewpoints. How does a product feel to someone with dry skin? How do the pants fit someone with thighs that squat 275 pounds? How accurate is the bed at detecting movement and matching temperature to counter-act it? How does the shoe size fit compared to Nike? These are all questions that customer reviews answer that you, as a merchant, can't. If you do, most consumers won't believe you!
Earned Social Media. Your customers sharing their favorite purchases to stories is the best form of validation. You can fake reviews (you shouldn't, it's illegal), but you can't fake people sharing their excitement on social media. There's so much value in people seeing what their friends love, but there's, even more, you can get out of it when you repost to your own brand. Whether you build a highlight that encompasses people's favorite products, or you just remind other customers about the excitement from new customers, you must find a way to get customers to share on social.
Ad creative. We've all seen the classic UGC-style ads on social, but that's because they work when they're genuine. Find your customers who truly love the products, reach out to them, and make them an offer or a trade for a video. This video that Cadence got from a customer is still one of my favorite examples to date. Then you can even decide to polish it up and run it as an ad.
Shoot Replacements. If you're in a pinch, or not, and need some assets made, you can always rely on creators. Photographers like Oliver, videographers like Jeremiah, or designers like Lucas. They don't follow a "playbook" like most agencies would when shooting or creating content, and that's what makes it so special — you get a new flair on your creative.
Some Marketing Resources
Here are just some resources I compiled this week and shared with my team that I wanted to share with everyone!
- YouTube Ads
- Landing Pages
- General Marketing
- Design Inspiration
- Website Inspiration
- Marketing Inspiration
That's all for this week — short & sweet. Next week, JT Barnett and I are going to dive in deep on Tik Tok. How to start, what to do to make sure you hit the For You Page, and how to find winning creative to turn into ads.