EP236 - DNVBs w/ Nate Poulin
Episode 236 is an interview with Nate Poulin aka @digitallynativ about Digitally Native Verticle Brands (DNVBs)..
Nate Poulin (@digitalnativ) cut his teeth with DNVBs including Bonobos and Outdoor Voices and is currently the Chief Merchant for Monica + Andy. In this episode, we discuss a range of topics around the current state and future of digitally native brands.
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Episode 236 of the Jason & Scot show was recorded live on Monday, September 14th, 2020.
Join your hosts Jason "Retailgeek" Goldberg, Chief Commerce Strategy Officer at Publicis, and Scot Wingo, CEO of GetSpiffy and Co-Founder of ChannelAdvisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:24] Welcome to the Jason and Scott show this is episode 2 36 being recorded on Monday September 14th 2020 I’m your host Jason retailgeek Goldberg and as usual I’m here with your co-host Scot Wingo.
[0:39] Hey Jason and welcome back Jason and Scot show listeners
today on the show we are going to do a deep dive into one of our favorite topics in retail and e-commerce Brands going direct to help us navigate through this we have a really exciting guest on the show he goes by digitally native without Annie and we’re going to have to get the story on that so digitally Naik negative
on Twitter and then outside of the twittersphere he goes by Nate Poulin Nate is based out of Austin and he cut his digitally native vertical brand T that Brands such as bonobos outdoor voices and more he’s also the founder of digitally native Consulting Nate welcome to the show.
[1:21] Hey guys thanks for having me excited.
[1:23] We are excited to chat with you Nate and I know you’ve listened to the show we always like to start things off by kind of getting a little bit of background about how you came to the industry so can you tell us how you found yourself in the,
the digitally native Commerce base.
[1:40] Totally so I spent the last 15 years and retailgeek,
I started the early part of my career working for startups and this really sort of predated the proper e-commerce era.
And worked my way through retailers work for FAO Schwarz and Toys R Us and ultimately landed,
about 11 years ago in the brand sphere specifically in apparel so I work for Michael Kors for four years through their IPO and then I was sort of in my late 20s in New York City.
[2:10] Andy and the team had bonobos had been at it since 2007 this was 2009 and I decided to join bonobos
and really take a stab at this sort of whole building brands on the internet phase I felt like that was a future that and I still feel that way,
and so I spent four years of but no of us and also two years at outdoor voices and then most recently a stint at the black tux,
and then between some of those students also consulted with a number of direct consumer and digitally native Brands and really.
Through that whole journey just got exposed to the business the customer centricity,
and you know the opportunity that exists and really quite frankly have just kind of nerd it out,
um on the business and it’s something that I’m passionate about both in terms of what you know my day-to-day is,
but also you know when I click When I close the books each day I’m still thinking about it so crunching on these issues and still very much sort of part of the community so it’s been a big part of the last I would say decade of my life.
[3:13] That’s awesome we’re eager to dive into a bunch of those topics but I have to tell you I feel like we’ve already been duped I feel like you you started your retail career pre-digital and yet you call yourself digitally native.
[3:26] I know it’s it’s a little bit of a misnomer,
and that’s kind of my secret weapon I think that I actually have a pretty rich background in wholesale and Retail and so you know a lot of what I serve published from a Content perspective also folds in some of that perspective but.
You know my true love is is e-commerce and direct-to-consumer for sure.
[3:48] I’m excited to learn you get your start and toys and I’ll try not to derail the whole show talking about Star Wars choices Jason knows that I like to do.
[3:56] Well it’s so funny that you mentioned that Jason because I when I first went to New York City I grew up in Maine originally and I made a trip to New York City and one of the stops this was like sort of a 8th grade trip one of the stops was FAO Schwarz,
and they were they had built an entire floor of Star Wars toys and Lego because it was I think it was around the time of yes was episode 4.
And it was just the coolest thing that I’ve ever seen in my entire life and so I ended up working at FAO because of was my dream job I was like I need to come back here,
you know 10 years later 15 years later and work for this brand and his business so I have I do have sort of a Star Wars origin story there.
[4:37] Very cool awesome and me are you a Star Wars fan or you just just like the display.
[4:42] You know what I’m a fan of the original series.
I sort of to be honest I stopped I think on episode 5 I haven’t seen the most recent ones but I do have a 5 and a half year old son,
and so I feel like we’re going to go back through the entire involve the entire film series and I’m excited about that for him.
[5:03] Awesome yeah we can talk about the right order later in the show Jason just went through this so we have a lot of experience I’ve been Uncle Scott Uncle Star Wars Scott has been trying to help with this whole thing.
[5:16] Yes God has been a big help the only problem is my son now likes got way better than me.
[5:20] All right let’s jump into Brands so.
One of the things I wanted to talk about at the top is Jason and I have present about these topics all the time and we’ve kind of because we do it
we present together most times we kind of use a common vocabulary
that I noticed you and web have kind of a different vocabulary so we were talking about it on Twitter and I honestly forget the Genesis of this but you started this really cool you just kind of started saying well let’s build a little taxonomy so you started this taxonomy project which I have found super helpful and then we a couple other people glommed on and had some interesting insights
talk us through that and what kind of inspired.
[6:06] Yeah I mean I’ve actually sort of been in the on the back burner trying to sort of like,
organizing notes and really create some sort of knowledge base around direct-to-consumer and it really started with the desire of writing a book but then it quickly dismissed that sort of concept just because,
this industry is moving so fast that a book quickly becomes at least in my opinion becomes sort of like an artifact and not a resource.
And so I was looking for ways to kind of like.
[6:35] Build out this you know whatever note or whatnot and I stumbled upon our own research which I think is actually another one of those Twitter Darlings but it’s really just sort of a networks note-taking tool and I started to build out you know kind of my own knowledge base,
and when I pick up on some of these types of conversations whether it be Twitter or sort of back channels or what not.
It’s it’s sort of like drives me to like get to the bottom of how would we actually organize this I built another,
similar sort of exercise but crowdsourced like a library of you know but what would what would your UTC library and look like.
And so each time I go through this I’m gathering information from people who are really much smarter than I am.
And trying to like harmonize it into a way that’s actually meaningful and useful.
Since I’ve been doing this now for about 90 days and you know I I sort of think about the future and how long and the runway for this industry and I just think,
creating that value like incrementally every single day at some point will either be very valuable to me or valuable in general and so that’s sort of the Genesis of that that idea and I’ve also sort of like subscribe.
[7:46] The concept of digitally guard digital gardening and you know building a second brain and so I sort of dubbed this thing that I’m creating d2c brain,
and it’s you know like I said it’s pretty robust it’s wonderful for me because I you know I’m immersed in this every single day and the way in which we can sort of like harmonize this information is nonlinear it’s networked and so I can add
little bits to little parts of this broader network of information each day,
and sort of come back to it and reference it so that’s sort of the Genesis of the project and I think the convention I’m just going to continue to do it and hopefully in the case,
taxonomy of Brands they had some degree of value to someone out there who’s interested in this kind of stuff outside of just myself which I do find it valuable.
[8:34] Yeah I thought it would be helpful to talk through it and I don’t know who wants a tech I’m happy to take a shot at it or Jason if you want to ornate if you want to so well,
anyone want to take a shot at just kind of describing this taxonomy.
[8:50] I don’t have it up on my screen so if you guys have reference to it then I’m happy to let you guys drive.
[8:55] Yeah just you want to or.
[8:58] Sure I’ve memorized it so I’m happy.
[9:01] All right Jason you run out of it.
[9:02] Yeah so the.
It’s a taxonomy or a sort of a hierarchy in the the notion is that the highest level.
Um in the taxonomy is the primary distribution method so do you own your own distribution do you rely on third parties to distribute your product.
Um underneath the own distribution there’s a couple of different models there’s d2c brand so Marky example of that would be like Casper.
There’s private label brands that would be like while bupropion from Walgreens,
and there’s owned Brands which would be you know an exclusive brand that a retailer owns that’s differentiated and not commodity like the private label so that would be like,
cat and Jack are all as well home or something like that.
So you’ve got you own the distribution you’re either a deed to see a private label or a known brand and then under D to see there would be a couple of other potential attributes.
You could be a vertically integrated brand which I think gets you all the way too.
[10:19] You know you you menu design and manufacture your own product that you sell through your own distribution,
but this first version of vertical brand is I’ll call it old school vertical brand so it would be like the gaps and Abercrombie and Fitch has and sort of,
[10:39] Vertical fully integrated Brands the next category would be the indeed unofficial digital native vertical Brands so I,
I think when you wrote the taxonomy use glossy a as a an example I feel like you have to use bonobos since it’s Andy.
The the next category was linear brands,
and this was sort of audience first.
Based Commerce and so I feel like I’ll be totally candid I didn’t completely get this one I think this was a.
An argument from will he was using Barstool Sports as an example in.
[11:27] Yeah I think this one was like sort of the intersection between between media and commerce and that sort of.
Media brands with a Holter ultimately going to become e-commerce Brands and e-commerce Brands would become media Brands over the course of time and so that.
The future sort of looks like that Barstool model where they build like a very light.
Passionate and loyal audience and then they just speak for whatever different ways they can monetize that audience audience over time and one of the certainly one of those ways is to sell them physical products.
[12:00] Cool that toy makes sense and it’s better when you explained it right and then a specific subset of the linear brand would be the celebrity brand and like.
[12:09] Kylie Jenner Cosmetics would come to mind is that example so then if you jump over to the third party distribution you have,
big first big category is your sort of Legacy brand that’s the you know traditional brand that’s manufacturing products that they sell through wholesale that would be like Ralph Lauren,
and you’ve got kind of two distinct versions of that you’ve got a brand that was born wholesale and still is wholesale like,
Coca-Cola for example and then you have brands that were born wholesale and have made a pretty extreme pivot.
2D to see and I feel like the poster child there is Nike but there are others the Under Armour is like significantly moved to D to C VF Brands which is like North Face and vans has moved significantly to do the C so that’s a,
a subset of the.
[13:04] Of the sort of hybrid Legacy Brands and then you have these Marketplace native Brands so these are guys that were,
born assuming they would use a third-party distribution but the primary third-party distribution they had in mind was a Marketplace like Amazon or Ali Baba,
a great example there is an anchor the cables and charging accessory company that’s done so well on Amazon and.
So well in terms of my personal wallet share for some reason I have some weird fetish with anchor cables.
[13:40] And so if I’m remembering right because obviously I don’t have this in front of me as a reference that I think those those that’s the main taxonomy.
[13:51] Yeah so I think they like the impetus behind this front of taxonomy it really explores the tension between distribution obviously like owned and third-party and the relationship with the customer,
so if we think about in the purest sense you’ve got a digitally native vertical brand that’s both producing you know all the way Upstream from a supply chain perspective.
All and then delivering you know through their own Channel all the way down stream to the consumer and in my opinion that’s sort of like that that happiest path for,
you know bro long-term gross margin creation.
Because you own all those sort of like elements and you control the elements of production and distribution and you also own the first party data with your customer.
So I think I think of like the industry as swinging towards this model and the what’s hitting us and then what sort of like.
[14:44] Taking oxygen out of the bubble where out of the room is you know all of the like all of the costs of doing business with respect to e-commerce.
Instead you’ve got you know customer acquisition cost which you guys have talked at length about you’ve got variable cost of fulfillment you’ve got subscription cost of Technology.
And you’ve got this sort of like horde of data that you have to sift through to be able to make good decisions where as you know the Legacy brand model was.
Produced an overseas move it through a facility out two points of distribution and sell it to the customer and we don’t we’re agnostic to who that customer is that we just want them to walk by our store and come in and purchase something.
And so that’s just you know that’s sort of the distance that the industry is traveled.
And I think exploring each one of those sort of like elements underneath the distribution channels.
[15:35] Starts to give us like a more robust you of like how brands are competing and what the options are that exists because these brands are rational and they’re going to find that oxygen they’re going to find the happy path relative to their business.
And so breaking these big pieces down into this this sort of like component parts is so valuable because I think a lot of the.
Serve a lot of the tension that’s drawn in a lot of maybe The Angst around you to see or the forecasting around me to see,
is the conversation is really guided as though these all of these things are one big,
moving object but the reality is there’s a tremendous amount of nuance in each one of these models in each one of these businesses and so to understand them we actually have to get to that level of detail so at least that for me that’s part of that what we’re trying to connect,
tease out when we’re talking about this taxonomy and talking about different ways that Brands can grow.
[16:28] Yeah and it’s helpful to have a common vocabulary because Jason I use own brand a lot and then people like you mean private label and we’re like no it’s a little different in that you know this isn’t the Old Roy dog food we’re talking about here these are
these are Brands and to themselves like like Echo is a Kendall or like owned Brands right so
those are not the same thing as I’m going to knock off some dog food or or you know a can of beans or something like that.
[16:55] Side note for our most advanced Wesner listeners scotches dropped and awesome Legacy Walmart reference right there.
That was Sam Walton’s dog.
[17:04] Yeah yeah well Roy cool and then Chase anything else on the taxonomy.
[17:13] No I again I think it’s super useful to think about the structure and it got kind of crowdsourced and there were some good like dialogue about like you know what.
What’s the order of Precedence like what what is you know what are more important and should be higher on the on the hierarchy and I thought like that was it was a helpful exercise for my own thinking
one thing that did occur to me and I don’t feel like it should change the taxonomy in any way but Justin.
To me an interesting observation this is mostly focused on.
The primary business model that the these various entities would use to make money.
But the I feel like it is true that there are a bunch of.
Um primarily third party distribution companies I’ll pick Legacy brands for a second that are.
Doing d2c right now but probably not for the purpose of.
[18:16] Take governing significant share or making money they’re probably doing it for a test and learn customer intimacy data collection project so I like for example,
PepsiCo has launched a few direct-to-consumer sites for like snacks.com and Shop pantry.com.
Like I don’t think they’ll ever have meaningful share of the individual bags of Frito-Lay chips on that site they probably launched it as some kind of learning environment and conversely.
I would argue Casper has dabbled in some.
Retail distribution deals but usually not with the intent of wholesaling their product or having a traditional wholesale relationship but you know more as a marketing vehicle for their D to C so it is.
[19:04] Yeah I would totally agree with that and I think when you had reference glossy a versus bonobos that’s sort of where my mind went was even in the early days of bonobos we went offline you know I think in
maybe 2009 so it’s pretty early in the whole d2c Evolution and we went offline with Nordstrom as a partner and that was a really fruitful relationship
but I always in terms of classification of these Brands and I totally agree it’s like really a spectrum that moves but I typically Define these Brands by their dominant sales Channel,
so they’re dominant sales channel is pure play direct consumer even if they have a wholesale distribution business or you know they’re selling through Affiliates or whatever they’re sort of secondary tertiary model is,
I think that that tells us something about the business but doesn’t necessarily mean we have to shift their classification because otherwise there would be a gazillion of these right.
[20:04] Yeah and I like the path to the consumer as the defining Factor because it’s kind of the most interesting part of the discussion right so where you Source your stuff is as you know,
it’s it’s a factor but it’s not as important in my mind as your path of the customer.
[20:22] Totally I totally agree I mean I think it’s that conversation that like level of Sir conversation meeting with the customer.
The way that you service the demand and what the way you service the customers needs is it is it such a big differentiator and I think in doing that well that the best of the DMV BRD to see brands,
have carved out sort of better.
You know path for growth than what we’ve seen traditionally because in doing that and doing that well you get to uphold all of the values of your brand and all the tents of your brand,
as soon as you turn even if you’re a personal you have a personal brand if you start to turn over elements of your personal brand to somebody else,
you’re immediately losing control of that element you know and you can trust someone to do something or or execute something to the highest degree but it’s never really going to quite meet your own standards and I think a lot of ways,
and so and I won’t feel as authentic and that is coming from a first party,
and so I think that’s also something like hitting on that point of the relationship and path to the customer that’s just become so important in this business.
[21:29] Yeah and then as a software guy I noticed I wasn’t involved in this one but you put together a little bit of a tech stack and you called it DT C 3.0 Tech stack so you know what,
what are some of the elements so here we are it’s 2020 and let’s pretend I guess you are starting your own dnvbs
modern marketers going to need in that text act that you think about.
[21:57] Totally it’s become sort of acronym soup.
Still I’m going to try to not step on that too many times but you know really when building a brand you know whether it’s from 0 to 10 or 10 to 20 or Beyond,
I think it’s helpful to like identify and organize around the heart of your business so depending on how you’re going to compete,
or go to market you know you’re going to want to
set the roots of your text a core the core of your Tech stock around a specific Solution that’s going to be you know able to scale for years and years and it’s going to help you out compete
you know the Challengers that are out there and so whether that’s you know typically for young brand that’s either,
an Erp system obviously there’s a platform conversation around Shopify or Bigcommerce or if you’re going to build your own there’s a CRM customer resource.
Management system and there’s these pieces can be oriented in a number of different ways and also have you know
other Tech opportunities to sort of like plug into and so there’s just this almost an unlimited number of configurations that a brand can elect.
In 2020 and I think it’s interesting to dig into these different nuances and it’s interesting to understand.
[23:22] Um how about brand selects their Tech stack says a lot about how they intend on competing and creating value and orienting their value chain,
and so there’s no there’s no right answer and I think it’s another one of those cases that’s just a very nuanced discussion but one that’s changing you know and evolving quickly.
[23:41] Yeah didn’t know bonobos seamlessly weren’t a Magento and I fell over on them is it and I remember that right.
[23:47] That is exactly right so the year before I started I think it was 2010 the bonobos crashed on Black Friday and Cyber Monday and I think that’s a great example,
of you know how far we’ve come
right like bonobos had two distinct offices so have one office in New York and one office in Palo Alto so there’s an entire tech office that was building
proprietary front end technology for bonobos and some other data science projects and then you get an entire organization built around building a retail brand.
And you know those were that’s how we sort of like built a Brandon’s in 2007 through 13 and ultimately.
Bonobos even their solution Beyond Magento was to build on a spree Commerce.
And so in Shopify existed during that timeframe but there was a sort of notion that if you wanted to build an Enterprise scale you know massive brand that ultimately Shopify wasn’t going to be able to scale with those brands,
and of course now we look at that and say that was terrible decision and Consul these Brands a lot of money and a lot of time and resources but that’s,
that’s the distance that we traveled in terms of Technology one thing I will say you know now that we’ve outsourced all of this technology and where there’s all these plug-and-play Solutions but.
[25:07] You’re still spending a lot on technology is their options are great but I think that in the industry there’s they’re sort of like.
We need the fog of War a sort of like meeting all of the best pieces to wear into Tech stack but ultimately Brands would probably be better served you know just focusing again on what they need to do to compete uniquely in the world.
[25:28] Yeah so I want to jump in on a couple questions here but before I do one of the things you call that in the text a queue called a PLM and Scott and I were debating a little bit what you meant by that.
[25:43] For at least in my terms that’s product life cycle management.
[25:47] Okay we were both wrong for the record.
[25:49] Everything that had brand develops and creates a designs he sort of would go into the PLM system in that helps link
your vendors to your sort of like main staff here at Erp and one inspect the conduit of information and capturing all of that creativity and putting it into a system.
I’m curious to know what you guys thought of that.
[26:12] Well Scott assumed you made a typo and meant product information management him because you you have an icon for each thing and it was like three
three t-shirts for the the product life cycle cycle management and I was guessing potentially you meant product listing management so I could pin that could send the cake content to multiple.
Destinations or marketplaces.
[26:36] No that was the sort of like Upstream orientation there and then I did have the product information management system which I didn’t originally but someone brought it up to me so glad that was added for sure.
It’s funny because you at you you kind of highlighted that hey even though there are a lot of.
More accessible plug-and-play pools in all of these categories today you you know you you go out and acquire and Implement a full stack of these things and,
there’s a lot of complication there frankly are a lot of potential data silos and integration projects and,
and pretty quickly you you rack up pretty high cost of ownership and Technical debt the the,
the in the Enterprise world the debate we used to always have was Best in Class versus pre-integrated sweet right and it feels like that’s still playing out for these relatively young companies.
I mean do you go out and buy the trendy version of each one of these points Solutions and then you have to
hire a technical team to integrate all of them or can you live with the OMS that Shopify gives you or the payment that Shopify gives you or,
you know you know there are some other like pretty heavily integrated Stacks like netsuite or something like that.
[28:00] Totally I think it’s like I mentioned it it’s sort of is
it’s a decision that’s based on where you where you’re at and where you want to go in terms of the scale of the business but I have been seeing more and more that you know Brands can travel a lot further than they used to on a much lighter
Tech stack and a lot of these other elements don’t necessarily need to be integrated in so much further down the line but again it’s it’s such a difficult,
needle to thread because.
Like we just spent a good amount of time talking about how important the path to the customer is and owning that first party data and being able to synthesize it and owning it in really capturing Rich data throughout
you’re the tech stack exist to sort of organize and be a tool to harmonize all of that data and actually operationalize it and you know.
When you start to say well we’re not going to do this or not going to do that it’s a conscious decision that you’re not going to have that functionality and someone,
another brand or another business may have that may have better visibility into what is happening in their business and that’s just you know challenge that brand brands have to live with,
Doesn’t matter who you are you’re operating on a salary cap not a salary cap but like a spend cap a budget and you know you have to make those trade-offs and decisions because money runs out before opportunity does.
[29:21] The others are probably a life cycle here where you kind of have you know you’re born and you’re kind of in that
yeah that infant kind under 5 million run rate and then you know there’s a certain Tech stack and then you get to 10 to 20 and then you have to add some other stuff and then you know hundred 200 400 there’s there’s a lot more.
Part 2 the stack you have to kind of throw in there.
[29:43] Yeah there’s a I think there’s a couple of like critical elements before brand start to like it too heavy weight with technology and what one of those being foundations of data so structured data and making sure you know you have an understanding of how,
your data is coming together and then two is really a lot of these companies are so figuring out how they’re going to build their business and figuring out what channels to play in how they’re you know what products to build etcetera
and you know as that Journey from adolescence and to score like teenager and adult stage happens
you really have to nail down the process of how you operate your business end-to-end and I think.
Too often Brands don’t have those two boxes check before they you know start to like invest in some of this heavier weight technology and I think you guys are probably seen it if you try to stand some of those things up on really shoddy data is just,
it’s not a successful cocktail that you’re building so it’s definitely one where.
The onus should really be on strong foundations before Brands gets you over their heads I would say.
[30:52] Yeah and let me ask the converse so you’ve been at tons of these Brands and and advised a bunch what what’s what do people get wrong is it that
they don’t get attribution they’re not,
they don’t have Rich enough product data is it customer data is it mobile was wrong where do you where do you find people kind of miss the mark as they’re building these brands.
[31:15] I think the biggest you know evolution in the industry and the biggest opportunity has been linking
customer like actual property like order level Transaction what are we actually selling and who are we selling it to you it sounds really simple but
in a lot of ways you know at some of these Brands practice has been has been more Silo than it needs to so a lot of what I’ve sort of like worked on is how do we bridge the gap between marketing creative,
merchandising supply chain operations like how do we bring that group together operate in a way that you know.
Doesn’t levies that this data sort of like operate in silos or accumulate in silos we need to be able to like.
Build the view of the entire customer journey and then and the product that supports it so I think that’s sort of been the biggest you know
opportunity for direct to Consumer Brands is really tightening that link between marketing and operations /
[32:18] Product and I drop on like back in the Michael Kors days when you were in a legacy brand the
to Mark the marketing team in the merchandising team we’re on different floors of the building and you know rarely interacted at sort of anything below a leadership level and so it’s
really that’s a fundamental swing that we’ve seen in the retail business is that you bring those Bridging the Gap between those two functions.
[32:49] That that totally makes sense I wanted to Pivot off of the tech stack a little bit right.
Obviously you’re a good advocate for for sort of digitally native Brands and you’ve worked for a number of them it feels like the,
the public narrative on them has shifted a lot lately like it used to be like oh they’re the future they’re the up-and-comers like this is you know the next wave of everything and more recently if you know you’re starting to hear like.
Yeah you know maybe that trend has kind of petered out like maybe it’s run its course and so I’m I I don’t know like I have on the mixed feelings but like where do you stand do you feel like.
Dnvbs is mostly played out and you know just wasn’t able to achieve scale and and you know was interesting but but not a game-changer or is it still early Innings and there’s a,
a significant chance for dnvbs to change the world.
[33:52] I think we’re still very much in the early innings,
I think the like I mentioned before I think brands are seeking gross margin and seeking oxygen to continue to grow,
and I think there’s from a pure play perspective it’s challenging it’s a challenging environment for digitally native Brands but I do think that,
the shift in consumer Behavior towards e-commerce is is loosening some of that and creating some you know competitive advantages for brands that are that are really communicating digitally as their main platform with customers,
so I think you know and then you also have technology like Shopify and some other elements that are enabling these businesses to start up with a lot less capital and really like reach a certain level of success,
taking less investment so I think we’re still in the early Innings and I also think that there’s going to be continued innovation in the way in which you know Brands reach customers like right now.
We’ve got a couple of very congested channels those being Facebook Instagram.
In terms of like creating that spark and that you know interest in the awareness of a brand and discovery of a product
and I do foresee there’s just by force of like the size of the digital prize I think some of those things are going to become unstuck for a direct to Consumer Brands and then I also think that you know.
[35:20] Branding is going to evolve or is evolving creative is evolving,
and product will continue to elevate and iterate in physical product I mean and innovate,
and I think if we can bring those elements together dnvbs d-des he’s going to have a really great future
um in what I love about it is you know everyone’s trying to move to this mom like not everyone but the large share of brands are at least interested or testing like we talked about earlier
and so there’s there’s definitely smoke there we just have to figure out the right formula bring it together and bring it together in a way that.
Is efficient and allows these Branch to thrive and continue to grow profitably and reach a certain scale.
[36:04] Hmm yeah I could totally see that do you happen to be familiar there’s a construct that Gardner invented called the Gartner hype cycle.
[36:12] I’m not familiar.
[36:13] Yeah so it’s really cool and it’s shocking how many things tend to fit this curve but essentially,
what what Gardner hypothesized by mainly around technology Innovations a long time ago was new stuff is always getting invented.
And when it’s new it almost always gets overhyped and the like the utility of it.
That is Promised wildly exceeds what it could actually deliver.
And so gardeners premise was eventually every new trend or technology reaches what they call.
Peak of inflated expectations so they draw this curve and it has this initial like huge Spike and at the top of it you’re at the peak of inflated expectations.
Part of the reason I like the Gartner hype cycle is because of these funny names so then what happens is.
[37:04] The technology you know it becomes apparent the technology isn’t going to deliver.
[37:09] The those over those inflated expectations and so the technology starts to drop down the slope and they call this downslope the trough of disillusionment.
[37:21] And so you know sent you know so pick anything artificial intelligence right like I would argue it’s probably right at the peak of inflated expectations right now and.
Two years from like there was a time when QR codes were super overhyped and everyone’s talking about them and like they’re going to cure cancer,
so then QR codes fall into the trough of disillusionment hey they didn’t cure cancer people were totally wrong they were overhyped this is lame,
but eventually these products mature and they climb out of the trough of disillusionment into this area that.
Gardner and calls the slope of Enlightenment where they eventually achieve this plateau of productivity where they kind of.
Deliver commensurate value for what they are and so Gardner pick all these different categories and they map all the trends in this category on the on these hype Cycles,
um and when you see some of them like it totally makes sense like you know QR codes got wildly overhype they dropped in the trough of disillusionment guess what’s happening right now
like QR codes are you know reasonably productive for a variety of use cases,
and that was maybe way too much work to explain it but to me dnvbs like are perfectly following the hype cycle as well like.
[38:41] There was.
Peak when they were over-promising and they may be starting to drop into a trough of disillusionment but that by no means means that there’s not a plateau of productivity in their future.
[38:53] Yeah I mean I think that’s totally right I think when we look back at some of the brands that maybe have driven some of the like the collective disillusionment and dnvbs one,
we’re judging a brand that’s still very young right and we look at a Michael Kors I’ll drop him now and again you know they we went through the IPO and 2011.
[39:15] Of course was bankrupt you know in the in the 80s and had this tremendous run of success.
And there’s other stories that are out there right as like businesses and types of business models that have gone through you know,
gross and contraction etcetera and so we’re one we’re judging the business the opportunity that exists in the NAD,
in a very early inning of its development not the terminal point and to you know there’s just a tremendous amount of learning and being on the Leading Edge that has happened over the last,
years or so with respect to you how to you know how to do this you know how to build the railroads and infrastructure and all this kind of stuff to access customers to be able to.
Grow and scale and I think particularly on that end.
On the side of Technology on the side of supply chain on the side of infrastructure we’re still in it on the side of Technology we’re still very very young and those those types of,
you know Innovation with that in terms of,
picks and shovels Etc is really going to drive electric Menace amount of growth and opportunity for digitally native Brands and on a much more efficient scale so I think that’s absolutely right.
[40:31] Yeah this is a good time to make a big announcement Jason because he’s a big believer in in where we are on the hype cycle he is going to release a mattress and it’s going to be the retail retailgeek dnvbs because we don’t have enough dnvbs companies right Jason.
[40:49] Absolutely and what’s going to be unique about this mattress is actually going to fit in a box and I can ship it right to your house.
[40:55] But what if you don’t like it can you return it.
[40:57] You totally can there’s a no-questions-asked 30-second guarantee money-back guarantee.
[41:03] Awesome you’re innovating again.
The I work with a lot of startups and one of the things that comes up a lot is what’s the address bull market of all these Brands going Direct,
and I went through this with cello visor where you know the early days people would say well what’s the addressable Market I was like
retail and then would laugh at me the so then I had to kind of like show well here’s this
magazine called internet retailer and they have the IR 500 then they did the hire 1,000 and there’s a thousand companies and here’s their sales and and you know then we can extrapolate from there this many number of companies Etc
have you ever thought like what is the addressable Market of all these these brands that are coming up.
[41:49] Yeah I mean I think.
I think emarketer put out a survey or study this year that was suggested that direct to Consumer Brands we’re going to do about 18 billion in Revenue now this was released early in the year so my assumption is that that’s going to get
except Blown Away
in terms of the the expectations for the industry this year and then we think about as you mentioned total retail for exclude automotive and we exclude restaurants that’s about 3.8 billion,
and so direct-to-consumer right now as a penetration to retail is less than half a percent percentage point and.
[42:23] Three point eight trillion.
[42:25] Three point eight trillion science thank you for crafting and so when I think about the opportunity.
Over the next ten years I don’t think it’s unreasonable to expect that we get to 10% direct-to-consumer.
And you know I 10% obviously you’re doing for you know 400 billion dollars in Revenue
and I think you know the path to get there is everything that I just mentioned around unlocking the efficiencies at scale,
and I think the only guard rail that I would meaningfully put against the ultimate growth of direct consumer as share of Market is just the the fundamental economics of selling e-commerce when you
include cost of goods sold and you include all of the variable costs of doing business and fulfilling each order you know it gets you squeeze out a lot of the prophet and opportunity,
and so I have started this thesis around you know.
Average order value and how that impacts the viability of pure play e-commerce obviously the higher you go the respect to average order value the more margin you’re creating even if the rate is lower,
and so I think there’s going to be a tension or a ceiling with low aov products
metal that will continue to be dominated by that the Amazons and the Walmarts of the world that really have already built a lot of this efficiency that I’m that I’m talking about that’s really inaccessible for,
each individual brand as we think about that brand growing in some business.
[43:52] Okay yep so.
So how about this thought experiment so so if we were on a whiteboard I draw a big circle that that would be retail and that’s three point eight trillion and then I would draw a circle inside of there and that’s that’s
DTC today and I put it inside because
everything sold at retail is effectively what we’re calling a brand and I should have said this at the top of show we we Loosely used the word brand to being you know a manufacturer of goods sometimes people get confused like in our Twitter conversation someone’s like well where does Macy’s fit in this and we’re like well that’s that’s a retailer not a Brandon
they didn’t kind of get the manufacturer versus retailer kind of differential there maybe hopefully people were falling along with that,
do you agree with that and in that bubble inside is going to get bigger and hit some terminal velocity to your point is that kind of how you think about it.
[44:42] Yeah absolutely and that’s totally right I think there’s it’s easy to get tripped up on that terminology but I think that divided between retailer and marketplaces is accurate,
and I just think you know at some point when you think about the.
Most efficient Avenue for growth for some Brands it’s going to be scaling offline versus continuing to scale online,
and that we’ve already seen that right we’ve seen it with Harry’s going to Target and many many others bonobos going to Nordstrom back in the day and so we’ll continue to see that you know just as
oxygen air gets a little bit thin as you continue to grow
and you find a password that you can find more oxygen and more scale more distribution brands will continue to do that and the question becomes one do we do we still call them direct to Consumer as we talked about but that’s where I see that the ceiling and the cutoff taking place,
but I think if you’re if you’re selling over a certain price point let’s just call it $75,
from a Navy perspective I do think that there’s a lot of Runway
with pure play e-commerce and continuing to scale Brands and it’s good again I do believe just based on where the world is going and where Commerce is going I it should get easier rather than more difficult.
You know but that’s sort of where we’re at where I see things many out over time.
[46:06] That and that makes sense side note on the the emarketer stat you you quoted I’m sensitive to this because I’m way over published on the internet.
That that emarketer report on d2c will always stand out to me because there’s a paragraph in it about what a failure Peloton is.
[46:27] So to say that.
[46:32] That hasn’t aged particularly well,
but I’m curious though to talk about the the complete other end of the brand life cycle for a minute because it’s made the news a lot,
there are a bunch of brands that were story Brands you know had huge consumer adoption made made people a ton of money and in recent times.
Have like lost customer interest gone bankrupt and in most cases been acquired by Simon Malls and I’m curious if you’re following that Trend and if you think there’s.
You know anything interesting like do those brands have a second life with Simon or did Simon reconstitute them and spin them off or is that just you know where where you know former glorious Brands go to die.
[47:19] Totally I I’ve been really like sort of digging in on this particular topic because as you mentioned these are you know these are brands that I grew up with you know part of my sort of Journey and story so just I have like an affinity to these
these brands are very curious as to where their final destination will be and so,
you basically and I don’t have any you know knowledge other than what I’ve gathered so this is really more of my perspective on it as an outsider but.
You’ve got authentic Brands Group which has been working with Simon and most cases and sometimes they’ve been working independently,
to roll up these brands in these properties and as you mentioned a lot of them like Aeropostale Nautica Brooks Brothers Forever 21,
Sports Illustrated these are Brands like Brooks Brothers was founded in 1818,
Sports Illustrated has been around since 1954 so these are brands that are have a richness in terms of you know our culture American culture richness in terms of their history and of origin story,
and I think what we’ve seen in kind of ties in with the direct consumer and digitally native movement is that,
it takes a long time to build a meaningful brand you know it really is a Brick by Brick process of building that brand so you don’t knock all those bricks down in one day you sure the business can suffer and in some cases they can go through a bankruptcy and come out on the other side but.
My view of this is that you know Simon and authentic spring break group are buying these properties for.
[48:49] You know seems to some people as like okay you’re just throwing money away but I look at it as in many cases of tremendous value especially if we can gather enough of them you within sort of our brand portfolio.
And then you know you’ve got them all order the largest bottle opener in the country operating a hundred eight malls and 67 Outlets.
And so you’ve got a distribution Network for all that product and so we just kind of went through the taxonomy of Brands and talked about distribution own versus.
Third party and now this isn’t going to be own cuz obviously there’s you know there’s a there’s a relationship here and there’s rent to be paid Etc.
[49:24] And when you look at it at a very high level across those businesses their cert vertical izing and rolling up all of these Brands and what they’re seeking I think is.
You know if we can move some of these Brands through some of our channels we can collectively you know revive these brands,
we can invest in these Brands we can you know generate more revenue and margin off of these Brands and they’re you know they’re fine with I would say I would guess they’re fine with Transit like the,
actual volume that the breads are going to do lowering because you know again they have that sort of like networked relationship where they’re really focused around.
How do we make these the pieces fit and then you know they’re also acquiring if they bought Sports Illustrated as a mention and so they have the license there and they’ve got a media property to distribute some of these contact some of the content and some of these Brands so I think it’s you know.
There’s a lot of talk about malls and being over retailed and over you know square foot and the United States which I don’t disagree with but I do think you know.
Sometimes the opportunity swimming in the other direction is easier to get to then you know going the direct consumer path so certainly at the scale that they’re trying to do it it seems like there’s a big opportunity there.
[50:42] Yeah I hope that a number of these brands do earn a second another act I mean I think we’re all desperate for Toys R Us to come back.
[50:51] Seems super strong at the moment one fun irony though I feel like if Simon acquiring a bunch of these Brands is you know in all the antitrust talks and hearings one of the things that always comes up is
Amazon is the is playing the game and they’re the referee.
And I feel like it’s going to be funny to see the shocked look on a bunch of senators faces when they find out that the Brooks Brothers suit that they’re wearing is also the referee and playing the game at the mall.
[51:20] Absolutely it’s definitely going to be interesting to see how this sort of plays out and it’s you know as someone who’s just you know passionate.
Follower of the retail industry and someone who’s been in the industry for a while these are the types of things that are just so interesting to me because it’s really unique set of circumstances in one I don’t think we necessarily seen at this scale before and so,
how this plays out I actually think it’s going to have a meaningful you know impact on physical retail and Brands opening stores and malls.
So there’s quite a bit at stake for the American Consumer here and for these Brands and Retail in general.
[51:59] Yeah that that’s the kind of brings me to the end game so that you guys have a mall there Jason remember the name of it it’s almost like DTC mom.
[52:07] In Austin yeah.
[52:10] Remain yeah yeah and so we actually went to a show and walk through there and we did a whole episode just kind of walking through.
And you know that’s a really cool experience you get these really deep brand experiences but then online you know if I kind of think through the endgame here,
it’s a really weird customer experience to do we just go to social media and Google and we search for Brands and find them and then we have.
The Casper experience the bonobos experience or do you think at some point there’s an aggregation of these things online that you know makes them have a better,
Discovery mechanism unified check out and that kind of thing and you know we’re do you see that going down the road.
[52:55] Yeah I think it’s it’s a really good question when I spent a lot of time sort of trying to unpack.
I think the challenge with like a roll-up or a Marketplace of direct to Consumer Brands is we start to mute what makes them great,
in a lot of cases which is you know like the origin story,
the authentic Mission the purpose you know the energy and the creativity of the brand and the product
and so if you start to build a marketplace around that then inherently the marketplace becomes the conversation and not necessarily the uniqueness of the story of a specific brand and so what I would expect.
[53:34] Is an inventory on the flip side of that you’ve got,
certain the strength in numbers conversation in the economies of scale of actually rolling up some of these Brands if you actually did do that on the certainly on the back end of the operation.
And so I would expect we see sort of like,
smaller either holding companies or smaller conglomerations or smaller Acquisitions that you create these little PODS of direct to Consumer and digitally native brands that are anchored,
around an individual around a customer and they’re sort of a niche their preference that,
and I think we’re starting to see some of that already that were brands are starting to,
buddy up or even you know move together partner together cross-pollinate Etc,
around these particular Lifestyles or preferences I just don’t see like,
unless you know I actually was sort of trumpeting that Shopify should do something like this a while ago but that doesn’t seem to be their game I feel like they’re probably the one that could be that become the DTC Mall,
but they haven’t shown their cards yet with respect to any intent to do that.
[54:43] Yeah the Jason what do you think.
[54:46] So you’re saying this shop app is not a turnkey de Simo.
[54:51] No it is very good at telling me when my packages are going to arrive though so I appreciate that.
[54:56] Yeah and the answer this year by the way is your weight,
is when your bases are going to arrive because it covid ya ya know it I mean who knows how it’s all going to end the.
I don’t personally see that being the in-game for Shopify to become that that much I just think it’s Shopify is amazing at a bunch of things and.
I just think building D to see traffic is not something that they’ve.
Done it all or have any endemic advantage in doing and that’s what you would really like that that’s the hardest thing to get to build a deed to see Bray Mall it’s not the the sellers it’s the consumers.
[55:47] I don’t know.
[55:48] Yeah as a consumer I want a discovery vehicle because I didn’t know about that italic one until I just kind of saw people talking about it on Twitter.
And you know it.
It feels like there’s this huge opportunity to be the discovery engine for people interested in this category and right now people just kind of it’s just Word of Mouth you just really or you know a store or something you don’t it’s really hard to discover these things.
[56:13] Yeah there’s a been at there’s been a couple that have popped up I mean very shop I think is trying to make a move into this sort of space of being like a trusted
you know source for recommendations and then on the characterize it probably unfairly on the more like Consumer Reports
sign of things may be dating myself with that reference but you know you’ve got thing testing
which is really been done a great job of digging into DTC Brands and really doing like unboxing and product reviews and all that kind of stuff so those are those are some of the resources that we’re starting to see
I think it’s just you know it’s still,
the search for breaking up the duopoly or the you know the ownership that Facebook Instagram and Google have over attention and eyeballs you until we get you know meaningful crack in that armor
it’s still going to be really difficult to make.
Direct-to-consumer discoverable outside of those channels and that’s where I think physical retail and that’s where I think you know wholesale and all those other channels
come into play because
there’s still a large portion of individuals like lives you know assuming that we get back to some degree of normalcy where we’re doing things and you know in three dimensions we’re doing things in public we’re doing things socially and you know so I think,
a lot there’s a lot of tension with how we’re going to make direct consumer more discoverable and get in front of more people.
[57:40] Yeah I got to be honest I am sure something is going to come along to disrupt it like I think it’s less likely to look like a.
DDC version of a search engine or a catalog or you know sort of a traditional mall like I you know I don’t think it’s going to
I’m not a big fan of like the neighborhood Goods of the world and the,
those kind of d2c aggregators or Tim Armstrong’s DDX and all those sorts of things
I think it’s going to be something that’s more out-of-the-box right so if I had to bet I have no idea what it’ll be but if I had to BET right now I would be more likely to put money on something like.
And maybe it’s tick tock that you know probably not Oracle Tick-Tock but but some future iteration of tick-tock that that’s more likely to disrupt Amazon as the sort of.
D2c Discovery vehicle.
[58:34] I will hardly agree there I mean I think if you look at the legacy of QVC and HSN,
these are massive businesses that could drive tremendous amount of you know attention and revenue and and you know I think that’s absolutely a place that’s ripe it’s just yeah,
how do you get enough.
Energy and get enough movement behind it to get onto the platform I think that’s the hardest part is just you know acquiring and building enough of a network effect to make that valuable for consumers.
And for brands.
[59:08] Yeah it’s hard to say and even harder to do so I think you’re right but now I think that’s going to be a great place for us to leave it because it’s happen again we’ve used up all our allotted time
as always if you enjoyed this episode we sure would appreciate that five star review on Amazon.
[59:27] Nate thanks for joining us we really appreciate this is a great conversation we could have gone another hour but I know people need to go to sleep and stuff
if folks want to learn more about your thought leadership you put out there and what not work what are some of the best places for them to find you.
[59:43] Yeah really the only sort of social Channel I have is on Twitter you can follow me at at digitally native with no e on the end and thanks guys I appreciate this has been really fun.
[59:55] Yo I know he just run out of characters.
[59:58] No actually there is a digitally native with an E who has no followers and has never tweeted.
And so I’m patiently waiting for Twitter to clean that out and hopefully be able to take over that territory.
[1:00:13] Jack if you’re listening help us out here.
[1:00:16] You say that like there’s a chance he’s not listening.
[1:00:20] Well you know he’s busy could be in Africa are working on Square tonight or something.
[1:00:25] Yeah when I heard he has a couple gigs so good point really enjoyed the conversation thanks very much for the time Nate and until next time happy Commercing.