Interview: Jason Goldberg on Creative Commerce in the time of COVID

Transcript

Peter:

Welcome to unpacking the digital shelf where we explore brand manufacturing in the digital age. Hi everyone. Peter Crosby here from the digital shelf Institute. This episode is virtually a celebrity sighting for us with one of the smartest people in commerce and a podcasting legend, at least in the commerce space. Jason Goldberg, chief strategy, officer publicists, and cohost of the legendary Jason and Scott show joined Robin me to talk what the heck is going on and brazen predictions of the future. It's a mega episode and well worth the listen, even at one XB. Here we go. So, Jason, thank you so much for joining us on our podcast because we are both avid listeners of your podcast. It's just tremendous to have you on. Thank you so much for coming.

Jason:

Oh my gosh. Thanks for having me. And the feelings entirely reciprocal. I've been listening since you launched, so,

Peter:

Oh my gosh. Wow. I just got a, just got a little celebrity fever here, but thank you. So on episode 223, which as a number is amazing, Rob and I, it turns out, I just found out from Matt had done 47 of these and we hardly feel like it's what, like, what does it feel like? Does it every time when you do your podcast, is it still cool? You and Scott get on, just shoot the breeze and sounds just feels good. Or are you,

Jason:

Yeah, mostly. I mean, I'll be honest. A lot of what I do for work is what I would be doing for fun. And certainly the podcast. So, Hey, that makes me sound lame. But the, the podcast is certainly one of those things. It's, it's mostly fun after 223 episodes. Scott kind of feels like my work husband, which is a little weird. No, but Scott's a good friend. And I do like, it is a, it's a forced reason to connect with him every single week, which is, I wish I did that with more of my good friends that I don't live near. So I feel like that's fun and it mostly just for those organically, like if, for no other reason than we're too lazy and disorganized to really like plan it and do a lot of production,

Peter:

I appreciate those things. But on that episode, you both did it, it aired on June 19th for those that haven't listened and want to find it, you did a deep dive on the impact of COVID and I highly recommend it to any of our listeners to just get just a really smart look at what's been happening, but of all the data that you discussed on that, what are a few of the things that most surprised you of this period, or most stood out the most to you?

Jason:

Well, you know, the things where I feel like I, I tend to be at odds with other people's initial impressions is the likely longevity of this semi abnormal situation we're in right now, right? Like lots of us and I I'm in this boat too. Like I desperately want this to be over. I desperately want to return to some semblance of normalcy. But you know, really when you look at the fullness of the picture and you try to be realistic, and I have the luxury of getting to talk to a lot of specialists in the field we're really advising all our retail and Brian clients to, to plan on this current environment through to the end of 2021. And, and when I say that to friends and family, they both shocked them and and usually depresses them.

Rob:

Yeah. Yeah. I feel that I had, I moved out to the Berkshire's from downtown Boston and didn't renew my lease and, and I told my parents that, you know, my me and the kids are we're coming out here and for the, at least a year and they, they thought we were crazy. They were like, there's no way that this thing isn't going to be wrapped up in a whole year. And it's like, well, I don't know. Virus says otherwise,

Jason:

No, you're you, you probably made a smart call. My employer like super nice. They came out really early and said, Hey, no matter what, we're not making anyone come back to work in, in 2020. So if you want to make a decision like Rob, like you don't, you don't have to worry about us suddenly recalling you to the office. Huh.

Rob:

Yeah. Our, our employer Rob is the co founder of did exactly the same thing, which just help families plan and figure out what they're.

Jason:

Yeah, yeah. It's no fun being, being in limbo. And somewhat similar to Rob's situation. I, I have several brother-in-laws that all live in luxuriously, spacious homes and lots in the suburbs. And I live in a what at the moment feels like a way to small condo in downtown Chicago and ordinarily you there's this social tradeoff, right, right. Space and comfort versus like the amenities of the restaurants and the bars in the city center. Of course now all the amenities are gone and all we have is the lack of space and my four and a half year old on top of me all the time. So I'm super bitter about and my brother in laws that made, made better decisions.

Rob:

One thing, one thing that's, I'm wondering if you're seeing any data on this one thing that's so interesting about this shift for so many people being out of the city, I was just on a call with one of my employees that just, isn't still Vermont for the foreseeable future, which is, I mean, that's far away from a lot of things. And out here in the Berkshire's, we don't have Instacart delivery. Instacart is claiming over 50% of grocery digital sales in the United States. Their growth is obviously crushing it, they, they, they were profitable for the first time sort of unexpectedly. But like the way that we do click and collect out here, can't rely on Instacart it's it's through local grocers that are sort of hacking it together and, and employees that are carrying stuff out to your trunk. And it just is some of them, you have to call up on the phone and place your order verbally

Jason:

And then drive up, but they're all figuring it out. And I just wonder, one of the things that, that you mentioned in the podcast is there's this trend towards consolidation of the large groceries. So after COVID the top three groceries are going to be like 63% market share in grocery, which is what people are talking about, but you know what I'm experiencing out here in the countries that it's sort of the opposite. There's the local groceries, you're getting a ton of business. So how has this, how do you square those two points of view? Is it the groceries in the middle? That'll get crushed now? It is more that you may live in an anomaly and I certainly hope you do. Mmm. The, I talk a lot about, you know, Kobe isn't dramatically changing things. It's accelerating things that were already happening. So one of the sad trends in the U S was this evolution of what they call food deserts, right?

Jason:

Like the increasingly good grocery stores go gravitate to a foolish communities and less affluent communities, grocery stores move away. And so they, the official definition of a food desert, I think is you have more than two miles from a a full service grocer. Ah, so there are increasingly large number of pockets of these places in America, where you have to go more than two miles to get fresh produce. And in many places in the country, that, that the reason it's not a food desert is because it's an independent, a grocery store per you know, per year situation in general, grocery is not a super profitable business. Most of those grocers, it did not have a huge amount of cash on hand, like the average grocer had 19 days of available cash. So if you're in a competitive market where you are competing with a, a Walmart or a target that could sell groceries and shoes and home goods you, you probably lost share in this market and you barely were making it before.

Jason:

So now you're not making it. And you're going to close and Walmart and Kroger are gonna absorb, absorb that business. In your case where you're only served by an independent COVID may be benefiting your independent and keeping them in business. Obviously they were an essential business. Your local shoe store is gone, right? If there was one right. Cause they weren't allowed to stay open. They didn't get any revenue for 60 days. They probably didn't have a website. And so a lot of like specialty retailers will go away. The hardware store, like a bunch of tragic stuff. But even your grocer, I hope they're doing great. Well, they likely had a spike in demand [inaudible] may have had a commensurate or worst spike in costs because the picking costs are just brutal for these guys. Yeah. So both like like many retailers had to pay bonuses to employees to get them to come to work.

Jason:

So their waiver costs went up, they had to do a lot more cleaning. They may have changed their hours. The, they had all these supply chain challenges. And so, you know, did I, then I have like to bring in extra people to receive goods. And in general, like even the retailers that had a nice spike in sales did not have a commensurate spike in earnings, right? Like this has been a real, but it's shifted most people from in store to digital. And that's why it's profitable. And it's shifted people from general merchandise to produce in that. So that's profitable. Yeah. People are buying bigger pack sizes. That's less profitable for your local grocer, right. When you sell a case of, of soup instead of a can of soup. So all those things together it's a brutal environment. Like again, your grocer is better off being the exclusive food provider in your community than some place where they're having to compete with a Kroger or Walmart. But it's, it's a, it's a difficult time to be a retailer. I'd rather be a food retailer than an apparel retailer in a mall though.

Rob:

Yeah, no kidding. It's, you know, what's interesting about that. The, the, the ma major trend one of my favorite books in the retail space is the Walmart effect, which is, I mean, at this point, it's about 15 years old. And it was obviously before Amazon was a Goliath and the book covered a lot about the monopsony or monopoly, monopolistic buying power that, that Walmart had. And the way that it could really put price pressure on suppliers and, and really pushed their margins down. I gotta wonder if there's so much consolidation, grocery with just three change having three 63% of the market, the manufacturers almost regardless of how big the manufacturer is, they've got to expect margin pressure out of this situation, right?

Jason:

Oh, for sure. Both like direct margin pressure, like the, those top grocers that get more share are gonna just extort, you know, a well and margins from there for the wholesalers, but also indirect, like all these other trade terms like they're gonna want more kill op and longer return right. And you know, more, more merchandising, a cruel funds and all these other ways. I mean that, that talking point is not in my, my spiel by accident and it's targeted at all those brands to get them ready for this, this new world, when it's going, going to be less pleasant for them. I think I I'm familiar with that book. There's a, a famous story in there about a Walmart putting a pickle manufacturer out of business by selling like five gallon jars of pickles for like 99 cents. Yeah.

Rob:

God begins with a K is the name of the brand they put out, but yeah. Was that awesome? Maybe? Yeah. Clawson yes. Yes. the, you know, very much related to this is the consolidation of the trade spend, but also the shift in the way that the media dollars are being allocated. I remember the CMO of P and G got on stage a couple of years ago and said advertising is dead. You know, and, and I think what he meant was the, the share of advertising that would go through traditional brand channels. The TVs of the world, the newspapers of the world was losing its effectiveness. And there's this overall mega trend towards performance marketing from, from these traditional harder to measure brand channels. And we're seeing right now for a lot of the folks that we've been talking to the major advertisers in the brand manufacturing space are not signing direct to publisher media deals.

Rob:

They're not agreeing to upfronts, they're requiring cancelable contracts. And and, or they're shifting tremendous amount of dollars for at least 2020 over to performance marketing, you know, and Instacart sort of luckily lit up their advertising capabilities this year, just before this stuff happened. And I got a wonder, in addition to you, the large retailers having more market share and therefore being able to demand more from manufacturers, they're also going to be able, they're also going to see a profitability rise with trade spend at a, at a ridiculous rate. I mean, what, what's your prediction on this is this kind of the death knell of TV is as branding or,

Jason:

Or wait, wait, wait, what do you see coming out of this? It's tricky because I feel like very long term, we could see that exact shift, right? Like the, it, my I'm in a weird job. I like I influence a wide variety of agencies that publicists owns. Most of those are advertising agencies, right? So the super common conversation is around media mix, right. And, you know, are those dollars going to NBC CBS or Facebook or Randell, which is targets digital advertising network. And so lots of conversations about the right strategy of a portioning that mix and how budget shift. And I, I do think there's a macro trend that more of those dollars are shifting from well, very difficult to measure media, like broadcast to the th this more transactional media and certainly more measurable media in the digital platforms at the moment.

Jason:

The version of that that's most shifting though, is most of the dollars that are landing in Instacart advertising or Walmart media network, or target Rhonda or Kroger, precision marketing, all of these new retail marketing platforms in emerged those dollars aren't coming from the CMO, and they're not coming from the Superbowl budget. They're actually coming from the other parts of the retailers trade budget. So so P and G was buying 40 cows in Walmart and they were paying for tabs, which is the print circular it Kroger. And now they're like, Hey, Pete West people are walking into Walmart and Kroger. But more people are shopping you digitally. So I'm going to move those dollars from that in store shopper marketing program, that digital marketing program. But the dollars were always earmarked for that retailer. So it's a, a win for the guy that runs the digital advertising network.

Jason:

Mmm. It's a lose for someone else at that retailer that like had that old bucket of money. And most retailers view that as kind of a zero sum game. So what they all want to happen. And I just, haven't seen a lot of evidence that it truly has happened outside of Amazon is CMOs shifting Mmm. Brand building awareness out of home, advertising dollars into those, those networks. I, I don't have trouble believing it will happen adjust. Okay. Because of a lot of siloed budgets and competitive stakeholders and things, we, we haven't seen as much of that yet. Okay.

Rob:

So, so then I want to stick on the marketing and branding theme here in terms of COVID changes for a bit, because I really am interested in trying to tease out exactly the different ways that brands interact with consumers on a go forward basis as compared to in the past one, one thing that I think you, you and Scott talked about was a pantry stuffing, and how, one of the challenges that, you know, if you sell toilet paper, all of a sudden somebody has a year's worth of toilet paper. They're not going to restock. That's a challenge for you or somebody buys a year's worth of craft or yours with the Campbells. They're not going to restock for awhile. So now the problem of a craft or Campbell's becomes to encourage consumption. And it occurred to me in listening to that, that first of all, that's an interesting problem to have, and it's not a place that most brands focus, they don't focus on the consumption. They poke, they focus on the transaction. And I wonder if that's actually a, a lasting trade, like if they focus on consumption and how it can be used and why it's good, why wouldn't that also be a good way to also sell new product beyond just the restocks? And so, so w what do you think there is, is there any evidence that any of these early campaigns are working?

Jason:

Well, so I'm not sure there's a ton of evidence yet, like intuitively I'm with you, right? Like we all go for the path of least resistance, like water always flows to the lowest point, right. And the easiest way to goose your sales is to have, you know, compelling campaigns that, that juice acquisition, then that's where all, all marketers are going to go. But when something like this happens that forces you to think about creating demand from other parts of the tubes, squeezing the tube in the middle, instead of at the end. Mmm. The like, once you're successful at that, like, why wouldn't you keep doing that? Like, of course you would, you would keep doing that. Right. And so, you know, I think there are different that have a better shot, right? Like if you're Campbell soup, lots of things you can do with soup, like, did, you know, you can make Drake dip when you're rewatching last year, super bowl, which just had a, you know, you can have a great dip with that.

Jason:

Right. And if you, if you're trapped, you're like, did you know, your kid can do cool art with the macaroni in our packs of Mac and cheese. Mmm. There are less plays for non traditional uses for toilet paper. Right. Like, I think I did make a joke that man, like the toilet paper company should really be promoting toilet paper in your neighbor's house for this, for this. Definitely. That's a great idea. Yeah. Anyone willing to do that one for free? Yeah. That's a gift from me to you. How about, could you use toilet paper for paper machete? I mean, remember that goop trend teenagers were into a few years ago that were Elmers glue was just selling like hotcakes and they were creating this slime, slime, slime. Yeah. It's so slime is maybe my favorite consumer story of all times. Right. Because we all desperately try to do these things on purpose.

Jason:

Like how could we create some new use case for our product? How could we, you know, juice demand and there's this like, as it, it turns out sweepy family company. Okay. Cells glue called Elmers. Right. And the most common size glue they sell is an eight ounce tube of glue, which lasts most families a lifetime. Right. So, so that, you know, that's, it's like third or fourth generation, I forget the exact story. And, and, you know, these guys have like linear increasing sales, but you know, there's not a lot of new demand for, for glue. And then, you know, some art teacher invents this new thing you could make that suddenly requires not ounces, but gallons of Elmers glue and demand spikes through the roof. And I've sat in on the like IRI and Nielsen presentations where they talk about like this thing bubbling up to the top of the radar.

Jason:

And it, it, it like Elmer had to invent new containers that held way bigger kegs of glue to sell to consumers. And as the father of four and a half year old, I'm assuring you. That trend is not over. There's a lot of slime in the room right next to me. And we have bought a lot of Elmers glue. So that's a, that's an amazing story of guys just waking up one day to new demand. I don't know, there's an old Adobe commercial that's hysterical where there, they show like a sleepy, dusty encyclopedia factory and nothing's happening. And suddenly they start getting all these digital orders and they like spin up the printing presses and they're like, we're back, encyclopedias are in Vogue again. And then they cut and there's some you know, four year old on the, the floor in a living room playing with an iPad, accidentally ordering a bunch of encyclopedias. Oh man. You imagine that would be a fun job though, if

Rob:

I'm just thinking like the Sharman chief scientist or GE or head of R and D CEO walks in the office and says, I need you to figure out new ways for people to have fun with toilet paper.

Jason:

Oh my God. Yeah. That was a great assignment. There's another good CPG company out there called church and Dwight in New Jersey. And so there, they're like, I think Armand hammer and hammer hammer, baking soda. Exactly. And every time I see them, I tease them that I feel like that's the greatest marketing story in the world. And they're like, what are you talking about? I'm like, Oh, go to the store, buy a 16 ounce box of my product, bring it home and immediately throw it down the drain.

Peter:

Okay.

Rob:

I'm like, you, like, that's brilliant. Like I thought the Armand hammer at some point they, they they made the use case of deodorize your fridge and replace the arm and hammer. So frequent. I mean, that was just an absolute killer brand expansion.

Peter:

Well, the other day I was doing a an, a virtual, a digital shelf virtual session. And one of the guests was Scott summer, who is the head of innovation at tech, which is the, the brand that does duct tape. And he was the COO at the time where all of a sudden kids started making, you know, clothing. And so then he, he saw that happening and said, well, now I can sell make all of these different brands and connect up with hello, kitty and all that kind of stuff, and have virtue have problems with duct tape. And so he was able to, to sell for the same price, much smaller rolls of duct tape with a hello kitty on them and make a ton more margin and do it direct. So that, that story, it's a similar story of,

Jason:

There's a lot, a lot of those fun stories out there, right? Like you think you're making work boots for factory workers and a whole urban, you know, a youth population decides it's the hip clothes for musicians.

Peter:

Hello, Brooklyn. Yeah, exactly.

Rob:

So another, another big marketing trend here in the pandemic is there's a lot of categories where some type of trial of the product is part of the purchase. And I, you know, there's obviously the beauty centers and Macy's where they can try on the makeup. They're in clothing stores. You've try on the clothes in grocery stores, they've got the sampling. I got, imagine car dealerships, you drive the car and so on and so forth. A lot of this stuff is obviously dead for now. How much of it's dead forever. I mean, for the next 18 months, these are not going to be viable strategies. And you've got folks like L'Oreal and others that are trying to do it ties it, but, but how much of this is permanent?

Jason:

Yeah. So I mean the real answer one of the things that makes me good at my job is I sound authoritative. And so when I ever I express a completely unfounded opinion, I, I express it with conviction. Mmm. Helpful tray, comma please don't like, invest your personal and they'd be like here getting, getting some backup. I don't think we really know. I think that's one of the things that's really up in the air right now. I think there's a lot of human nature in favor of wanting some version of those experiences. And so, you know, to various degrees, we're seeing reinvention of a lot of those experiences, right? So you, the, the makeup is an interesting one going back to codes, a time machine. Mmm. Virtual triune of cosmetics was slowly overtaking physical trial of cosmetics before covenant. Right?

Jason:

Like the technology was kind of just getting over that threshold where it was actually better. Like the first makeup try-on systems were silly, right? Like it just kind of put a patch of color somewhere in the vicinity of your lips. And you you'd turn or whatever, and it would stay on your cheek. The newest technology, they're like, they're, you know, three D mapping your face and and texture mapping their products onto it. And they're hyper accurate color rendering. And increasingly women were saying, you know what? I would rather use the far virtual try and experience than trying on real lipsticks in the store, because trying on real lipsticks was arduous. And now that trying on really what real lipsticks could potentially kill you. Yeah. The physical trial's gone and they're all doubling down. So, you know, L'Oreal bought this company ModiFace which looked like a good investment at the time.

Jason:

Now it looks like a way better investment, a novel thing for me, at least I haven't heard of anyone else doing this. Mmm L'Oreal is, is a deploying ModiFace on Amazon in Canada right now. So I, part of the Amazon product detail page in Canada is not Amazon tech, but L'Oreal tech running on that product detail page in the old days, every manufacturer was super frustrated because they all had to live in exactly the same product detail page that was ill suited for a lot of product categories. Now you have at least one example of like there, the brands code living on that, that product detail page, which is an interesting pivot, but then so cosmetics, it seems like a no brainer we're PR you know, physical sampling is probably never going to be as big of a deal after COVID is it was before because the other technologies are getting better and we're winning anyway sampling of food in store, right?

Jason:

Like that's principle part of Costco's shopping experience, the major part of trader Joe's experience. Right. For sure. We're not going to see open trays of food for people to, you know, grab and, and graze on as they walk through the Isles. We're not going to have the self service trays, but at the moment, we don't want to encourage people to pull down their mask and put the food in their mouth, in the store. Right. And so, Oh we're, we're all waiting. Costco said, they're going to deploy some new sampling experiences. We don't know exactly what they are, my guess is it's going to be sealed samples that you take home and try it at home. And so maybe that's just the way

Rob:

Sampling goes is from an in store occasion to you know, an ad home between shopping occasion. Yeah. So we've got so far, we've got major channel consolidation, which is gonna put margin pressure and financial pressure on manufacturers. We've got a bunch of changes in how they reach the end shopper in terms of the marketing mix. The one of the, one of the reactions to this that we've seen is manufacturers of all kinds investing in direct to consumer capabilities for, for the first time, or at least at the first time at the scale, you know, Pepsi famously launched snacks.com. Shopify is now a 90 billion or so valuation company up from 40 billion pro pre COVID. I shouldn't have sold my stock in Shopify or a while ago. And you've got big commerce that you're breaking, that you had a chance to sell Salsify to Shopify, but then by the way that saying those two company names is different, the same sentence is so difficult.

Rob:

So, so the, the interesting thing is that a lot of people are down on this. You know, you have the failure of the, of the place it's like outdoor voices and brand lists, but we had a sushi Rita from Forester on, at the digital shelf Institute virtual summit. And she was saying economically, it makes no sense for most manufacturers that, you know, pick a pack and ship each is direct to consumer. This is ridiculous. On the other hand, you've got, you know, Pepsi launching big and all these other things. So like, what's, where's the truth. Yeah.

Jason:

I think it's somewhere in between. So Susie and I are great friends and part of the fun is we don't always agree. She certainly, right. Like the unit economics around selling a $3 bags of chips as eaches makes no sense and consumers don't want it. Right. They don't want to individually placing orders for all those products and get them separately. So it's, it's easy to say like, yeah, w you know, there should not be a, a website for Oreo cookies. If your mom always so, and I, and to that, I would say a couple of things true, but you shouldn't sell $3 cookies direct to consumer, but you probably have something that you should be selling direct to consumer in the case of mandolins and Oreos, [inaudible] custom Oreos and custom packaging for the Oreos.

Jason:

M&Ms another perfect example. The personalized M&Ms the Coke have personalized bottles. Mmm. There are lots of examples where like even if you're, if you're bounty paper towels, you, like, you probably need the world, probably doesn't need a direct to consumer site for bounty paper towels, a comma, they license all the NFL football teams logos and print those. And the stores only carry any of them at the beginning of football season. If you're a die hard fan, and maybe you're having a party off season, you might want to buy that remaindered Tampa Bay, Buccaneers paper towel pack that no store wants to inventory. Right. So you could imagine like deep catalog, personalized products, a special gift packs. The there are probably products in your echo system. I way before the, this wait is PepsiCo freeway is owned by PepsiCo.

Jason:

So the, the shop pantry side and the snack side are both, both PepsiCo. Pepsico's first direct to consumer was Gatorade, and they weren't selling $3 bottles of Gatorade. They were selling custom team packs of Gatorade, right? Like, here's like the, your exact mix and the quantity you want, like in bulk for an entire team. And so it was really a B2B site. And that first B2B experience was so successful that PepsiCo launched a direct to consumer product called Drinkfinity, which was essentially like sport. It was like a Nespresso for sports drinks. Right. And you could order your own flavors and they, they didn't ship the water. And they, they watched this direct to consumer only product called Drinkfinity. There are lots of plays like that. That makes sense. And for a bunch of brands, they might make money. Like they might, as a standalone business, it might make sense to do that.

Jason:

Right? Like the M&M site probably makes money. Mmm. On top of that, what else is happening? Those companies are building a direct relationship with their a hundred thousand best customers. Right. Which, which may or may not be economically meaningful. But it's a huge, like the relationship Proctor and gamble used to have with their consumer is they paid 12 consumers to come to a focus group. Right. And so having a hundred thousand people that actually shop and buy from you, I always tell this story, there's a, a famous cookware company from France locker say cookware. Right. and their yeah. Yeah. And so, you know, it's this legacy enameled cast iron cookware and it's mostly sold through Macy's Williamson Alma in the U S a number of years ago, they launched a direct to consumer side. Right.

Jason:

And, you know, it's a much more expensive purpose purchase. It's, it's harder to ship. They carry a ton of colors and stuff that Macy's and Williamson omen in stock. Also, there's some argument for the fact that there might be enough demand to, to have a economic value for that site. Mmm. But they're never going to sell anything close to the volume that Williamson Alma is going to sell their cookware. Right. And at first blush, you'd be like, Oh man, Williamson, Sonoma is going to be really mad. That locker say selling direct. Right. And in reality, Williamson, almost like, Oh, it's totally cute that you guys are launching this little side business where you sell direct. We're not very threatened, but a couple of things happened lockers say, learn through selling themselves that there's the, and this will come as a total shock to you.

Jason:

Two guys, it turns out good product attributes are really important to having a good customer experience. Sorry, could you say that again? Louder turns out having great product content helps, helps you, you, your, you improve your digital shelf and sell more stuff and launching their own site caused them to learn a lot more about what it took to create good product content. Okay. And they improve the content that they created and syndicated to Williamson, Noma and Macy's. And my favorite example of this is they were seeing a bunch of searches on their website for a product they didn't sell. And it's called a Dutch oven and you go, wait, a Dutch ovens, a super pop you're a piece of cookware. Why wouldn't lock your, say, sell a Dutch oven, because [inaudible] say is a French company. And it's a French of it.

Jason:

Yeah. And, and we invented it in France and the Dutch stole that, and we would never call it a Dutch oven. Right. So laugher say has this whole, like catalog of French ovens. And they were totally oblivious to the fact that the rest of the world that doesn't work for them call it a Dutch oven. Right. and so all the searches on locker say where no results found what they did, which any smart manufacturer do, they traded a page. This is why a French oven is better than a Dutch oven. Right. And now all those searches for Dutch oven land on that page. And then it links to all their French ovens and they learn to create content like that for Williamson omen Macy's as well. They would have never gotten the insight from Williams Sonoma. And Macy's that there were a bunch of searches for Dutch ovens that were going on fulfilled. Yeah. I feel like that was the answer to that, that French ovens are still a little bit snobbier and smoke more totally possible. And yet still are good at soccer, despite the fact that their lifestyle is totally unfit. I don't get it, but yeah.

Rob:

So I'm, I'm a huge, huge fan of their products. Have a whole bunch of them. There's, there's a couple of, I mean, there's a couple of things that are so interesting about that. First is there's two kinds of data that they're getting out of that experience. One is the, the testing and buying data direct from consumer, which is really hard to get out of the retailers, especially most of the retailers won't break out in store versus online. And, you know, you just, you get very little from them. The second is the search and SEO data. I remember at P and G there was it was hard for them to call the bounce fabric, softener sheets, dryer sheets on Amazon, because nobody searches for fabric software. They all searched for dryer sheets. I want to get, I want to get back to the data for a minute.

Rob:

There's also an element of test and learn. If you, if you own the consumer experience that you're able to do yourself, that a retailer in general, isn't going to allow you to do, or it's going to make harder, or it's going to make the, data's not going to be a billable or the cycles are going to be longer. And the testing and learning can give you leverage in negotiation. So McCormick, for example, famously right before COVID launched the old Bay hot sauce direct to consumer online. So that within 30 minutes, and now you can't buy it from McCormick, but you know, they say where to buy it. And it's like every single grocery in America. Cause they could use the data from that as, as negotiating leverage. I'm sure. In, in, in getting getting distribution contracts gone.

Jason:

Oh, absolutely. And I mean, there's, you know, there's a ton of examples. I, I tell this scared, straight story to brands, like, you know, I'll, I'll remind them like, do you know how many, like I'll and this is why I'm not very popular, I'll go to Proctor and gamble and say, do you know how many billion dollar brands you guys have launched in the last five years? And spoiler alert, the answer is zero, right? Or, but pick any CPG, nobody, none of them have, have like have any huge new product successes. They're most derivative successes on stuff they invented 30 or 40 years ago. And then you go, well, who gets all the buzz? It's all the direct to consumer companies, right? It's all these young hip hip companies. Do you know how many of them sell a billion dollars a year?

Jason:

Zero? Like not, not any you don't have any brands targets launched in the last two years that sell over a billion dollars, five new brands in the last two years in the last two years. Wow. That's, that's incredible. So, so if you go, who's killing it, it product innovation and launching new products that consumers want. The answer is target, right? And to a lesser extent, it's other retailers, it's, it's a Kroger, a simple truth is the best selling organic food brand in America. Kroger's global expansion strategy is not to open Kroger stores. They sell simple truth on all on T mall in China to Chinese consumers that are brand there. And you go, wait, why is it that brand lists and a Bonobos can't create a billion dollar brand and PNG and Smuckers can't create a billion dollar brand, but target Kroger and Walmart can create billion dollar brands left and right.

Jason:

Oh, the consumer. Yeah. They, they have this thing called the relationship with a consumer. Exactly. And they, they get to, you know, they get better feedback. They get to test and learn. And so like increasingly you go to any retailer and say, what's your big strategy against Amazon. We're going to make more products than Amazon can't sell. We're going to make exclusive products. They're not compared to national brand products that are exclusive products with our own value prop. And so if you're a brand, you go, Oh, those guys are going to compete with me and they have this huge intrinsic advantage in this customer intimacy. And so my argument going back to your D to C point is almost every brand needs to find a reason to have a D to C component, not to generate a net income dollars. Although that would certainly be nice, but because they need that source of data, they need that customer intimacy. I've seen brands. I mean under armor bought consumer apps like for customer intimacy things like my fitness pal, like to me, that's right. If you're a pet food brand you're, you're buying Rover to have a direct relationship with a bunch of dog walkers, like the, you know I think those things are more and more common because I think increasingly, you know, the, the, the business closest to the consumer is going to be the best position to win.

Peter:

It's so many new muscles, Jason, for the brand manufacturers to build though. It's really, you know, in, in talking to so many of these people. So to some of them, it's like, you want me to do what with who,

Jason:

You know, the huge challenge, a hundred percent agree. And it's, you know, it's, innovator's dilemma. They got very successful doing what they're doing. So it's hard, right? Like, and by the way, dirty secret, they're all called con consumers in their name. None of them are consumer companies, they're B2B companies, right? Like they're in the business of selling to Walmart, right? Like that the most successful job there is the guy that can build the best relationship with a Walmart merchant. It's not, that knows the customer the best. Right. so, so those are entirely new skills and they need a moral imperative to develop those skills. And what usually works is a crisis, right? Like for the toy industry, that crisis was toys R us going out of business. Yeah. Right. And now for a bunch of other CPG industries, it's COVID.

Peter:

And so when you think about, cause a lot of people are getting those skills and getting those products by acquiring these you know, D to C darlings, do you feel like that trend is going to continue or some just going to sort of you know, put their big, big women's boots on or whatever it might be and, and really start building it in house.

Jason:

Yeah. I think all of the above, I think we will continue to see acquisitions and more of them not necessarily because they've been hugely successful, but because number one, a lot more of those independent companies are going to be economically distressed. Like almost all of them have like negative customer acquisition costs, two, two I've, 10 values. And so they're, they're mostly living off of venture capital and, you know, as a result of the recession and COVID that capital is going to be harder to get. So a bunch of brands will ultimately get sold at a, a great value to a lot of these, these incumbent companies. It also is a quick answer for the public markets when you don't look digital enough, right. You're Unilever and you buy dollar shave club, and now you have a good story. I haven't seen so many examples of dollar shave club turning Unilever into an awesome digital company.

Jason:

Right. Like, I, I hope there are more examples, but like, I know Unilever's hired two new chief digital officers since they bought dollar shave club. And neither one of them was Mike Rubin who found a dark shave club and is awesome. Right? Like it feels more like Unilever happens to dollar shave club. Then dollar shave club happens to Unilever. Like there are exceptions, there's the, the mattress guys that and I like, there's so many mattress companies, I'm going to forget which one, but the needle acquisition, Tuft and needle. Yeah. That felt a little bit like a reverse acquisition. They're running COE now. Right. and so there's, there are some, but I I think it works better. Like I have more optimism in like the organic initiatives at Procter and gamble to, to, to launch, you know incubated companies out of the Proctor and gamble.

Rob:

Sure. You know what, you know, what's interesting. I think one of my big theses, and you've said this, as it comes to apparel like apparel, the big change was going for major national trends that were, you know, often seasonal, but a lot of people got behind too. Now there's no such thing as a major national trend. And there's just like thousands of these little trends that are happening to, like, you really did listen to the podcast. That's good. I took notes. But, but I think that, you know, we've been using the, the phrase that we're going from one mass market to two masses of markets, you know, where there's the market segmentation of the future. It's just going to be way more specific and granular. And I'm a, I'm a PNG customer for, for a bunch of their products. I know tide on their tide product.

Rob:

There's a lot of different varieties of tide that can serve as basically whatever environmental or social or chemical restriction that you care about. You can buy a tide product base, that's going to hit it. I kind of wonder if the future, if you were trying to build P and G today, you know, a conglomerate that has a bunch of brands and massive scale, whether the future P and G isn't like a thousand brands that each sell 300 million each rather than many dozens of brands that sell a billion, do you know what I mean? There there's, it feels to me like there's some, there's some truth in the matter that the brands haven't launched billion dollar brands, but maybe they don't have to, maybe they just need to get better at niching down and, and targeting consumers, like more specifically at higher margin with better products.

Jason:

No, I think you're a hundred percent. Right. the thing that has to happen for that to happen though, is there has to be an economically successful model for them to be able to do that. Right. And I can think of two, and I feel like we're moving towards both of them, a a house of brands like Proctor and gamble could have a robust portfolio of those, you know, a hundred million dollar brands, their KPIs and unit economics aren't set up like that right now. Right. So that would be there, there would need to be a cultural shift to celebrate those brands. I have, for many years done a bunch of work with VF Corp, which is a house of brands of apparel. And they mostly, you are looking for, you know, brands to grow over a billion dollars. And they kept coming to me and saying like, help us find some of these innovative, you know, young brands to acquire and I'd bring a bunch to them and they'd be like, yeah, none of these meet our criteria.

Jason:

They're all too small. And I'm like, like, that is like, that's the conundrum, right? Like all the cool hip brands are going to be too for your old criteria, you need to change your criteria or to be standalone companies that could successfully be hundreds of millions of dollars. You need to have financed yourself for that outcome. Right. And at the moment, the reason I'm kind of all these DTCs are going to fail and get sold for cheap to Walmart is because they're all funded by venture capitalists that are looking for unicorns, right? Like, and that's, that's the model, like get over a billion dollars or fail. That's what the VC wants. And so that's what they have to do. I have a feeling that after the dust settles from this crop of those, the next crop, they're always going to be great entrepreneurs. And I'm super excited to see, you know, new startups I'll bet you anything they're funded differently. Like I'll bet you they're funded by more angel investors and more crowd sourcing and more alternative funding means where they, they potentially could be a very successful a hundred million dollar a year company, or like a $300 million a year company can employ a bunch of people, make a bunch of consumers happy, make a bunch of money. Like it can be a win for everyone except a venture capitalist that needs a 20 X return on their money.

Rob:

Like peak, peak design is my favorite example of the kicks in the gutter. And they're fabulous, but I, you know, one of the things I've been seeing is in the private equity space, there's a bunch of PE firms that are backing the direct to consumer brands, but, but need a different kind of return. So if you look at like mid-ocean in New York, for example they're backing they're backing companies that are sort of like small cap manufacturing. You're looking at the, you know, 50 million to 500 million range and looking for growth in there. And then there's other PE sites that look much smaller than that, that, that take a one or five or $10 million D to C brand, give them some money. They're not expecting the billion dollar exit. They're just expecting, you know, reasonable growth. And, and I think, I think there's a lot there. I mean, to get to your point though, on the cultural change the, the NA the great Clayton Christianson who passed away re fairly recent piece wrote the innovator's dilemma. And what you're talking about is nothing less than the innovators to level for brand manufacturers, right?

Jason:

Yeah, absolutely. And, and again, you know, these, these kind of like scary you know, existential threats are the kind of things that tend to drive people out of the innovator's dilemma conundrum. Right.

Rob:

Well, I think you know, when we're looking to angels as our saviors and, and the, the beginning of, of another new era in brand manufacturing, that feels like a great time for us to stop talking and just watch it all happen and be part of it. So, Jason, just thank you so much for, for coming on the show and, and this, this we're going to post a mega episode so that everybody can get to hear everything we talked about. Cause it's, it's really been a great conversation.

Peter:

Thank you so much. It was entirely my pleasure. Really enjoyed talking to you guys. Thanks very much for the time. You bet. Thanks for hanging in with our mega episode. If Jason's called the D to C arms inspired, you sign up for the sessions in our new DTC strategy, playbook series, all the experts talking about all things D to C more info@wwwdotdigitalshelfinstitute.org. In the meantime, follow us on the institutes. Linkedin page tweeted us, please at wind digital shelf. If our content is useful, please leave a review wherever you get your podcast. That's all the requests I have for now. And thanks for being part of our community.