x
READY TO BECOME A MEMBER?
Stay up to date on the digital shelf.
x
THANK YOU!
READY TO BECOME A MEMBER?
THANK YOU!
Peter:
Welcome to unpacking the digital shelf, where we explore brand manufacturing in the digital age. It's doing that via Crosby here, executive director of the digital self Institute with our first ever virtually live unpacking the digital shelf podcast as always my cohost Rob Gonzales. Who's a founding member of the DSI and cofounder of Salsify is here. Hey Rob. Hello, Peter. I certainly helped us huge virtual audiences and making you too nervous. You got to stay on your game terrified. Yes, isn't it. Cause you gotta be on your game because we have a killer guest today on the podcast cause he's renowned expert in DDC strategy and which is particularly vital right now for brand manufacturers. So Brent Bellm CEO of big commerce, welcome to unpacking the digital show. Thanks Peter. Appreciate it. Delighted to have you here. And I don't want to waste any time that we have with you. So I'm going to dig right in, you know, can you tell obviously big commerce, a huge player in helping, helping retailers and brands stand up their own, their own DTC sites. And I'm sure you've been busy during this time. Tell me, tell me a little bit about what you're seeing and does it vary by category among your customers.
Brent:
Great. and let me start by saying, I'm very excited to be here passionate about this topic, partly because it was one of my introductions to e-commerce. So I began my career in the early nineties as a consultant serving store-based retailers, trying to help them against the challenges of the era, which were the big box retailers, Walmart home Depot, but when the internet came along and e-commerce started to begin in, let's call it 97, 1998. My first actual project in e-commerce was for McKinsey creating their first ever thought leadership piece on brand manufacturers. Should they be going direct and manage channel conflict? What are the economics, et cetera. And at the time there were relatively few examples, Nike being one of those. And we were trying to hypothesize, so I'm not gonna tell you what the recommendations were back then. That's irrelevant, but I'm really excited to share best practices and success stories on how brands are doing it well today. So now Peter, to your question here is what we're observing before the pandemic began or was it declared a pandemic on March 11th, globally commerce consumer e-commerce was growing at 15 to 20%.
Brent:
That's an acceleration and a big acceleration over the growth rate from just a few years earlier. So if you go to the first, every commerce site, 1994 to 2017, that's 23 years during that 23 years, e-commerce went from 0% of global consumer retail spending to 10%. So I'm 23 years to get the first 10%.
Brent:
The pace radically increased starting in 2017. And we were on a pace to go from 10 to 20% in five years by 2022. And probably go from 20 to 30 in another five years, probably 30 to 40 and another five years as if that weren't fast enough, the pandemic came along and probably advanced us somewhere between two to four years on that time frame. So here's, what's happened since the pandemic started looking at big Commerce's numbers, which I think are ahead of the global numbers, but same ballpark. If our global online sellers were going, let's call it 20% on average pre pandemic. As soon as the pandemic was declared, the 20% doubled to 40% and it was, you know, plus or minus 40% for several weeks. And then it went to 60%. The month of April was 80%. Wow. The month of may was almost a hundred percent. Now the weeks where we just kept shattering a hundred percent, it dropped down to 80 and we're like, okay, maybe we've hit our peak. But last week it was still well above 80% and equal or better than the week before that in terms of year on year growth rate. So that's where we are right now. We're growing North of 80% year on year. Having come down only slightly from the high of over a hundred percent as stores reopen,
Brent:
We can't predict what will happen. I anticipate the numbers will come down, but I don't think they're going to come back down to the 15 to 20% on average or the 20% our merchants we're seeing. I think that'll come back down to maybe 40% and we will exit this whole
Peter:
Yeah.
Brent:
A thing in a new normal where far more consumers are buying far more products from far more retailers or brands than they have ever had before. And far more businesses will have either launched e-commerce or doubled and tripled down on what they do online. And Brenda had, did you see maybe their stores have some of their stores have sold or their store channels have sold, but because they've been forced to embrace us. And now this is what both they and their end consumers want. Sorry, Peter. No, no. That's okay. I was wondering, did you see any differences among categories where there sort of radical differences among categories? There were select categories that skyrocketed out of the gate and you can guess which ones those are average, right? Sporting goods. People who used to go to the gym suddenly are home confined. Like I need new equipment to do stuff from home. So sporting goods, health and beauty.
Peter:
Yeah.
Brent:
Right. I can't go to the convenience store or the grocery store as comfortably. And so they start ordering that to their homes, consumer electronics people suddenly realize, man, I'm working from home. I need new, whatever it is, wifi equipment, new desk stands new screens. And when I say skyrocketed out of the gate, what I mean for each of those categories I just mentioned is let's say their starting point was the same for all categories of that 15 to 20%, instead of going to 40%, they went to 60% out of the Gates or maybe even 80% and then skyrocket in many of these cases up to a you're on your growth rates in the one 20 to one 60 range, right? These were the most successful categories. Then there were other categories that got hammered for several weeks
Brent:
Before consumers realized, okay, I can't go forever without buying these things. And then they came roaring back. So great example is apparel apparel was down. It was negative at first, even online, right? So you're, you can't go to your department store. You're not going to your specialty retail store to buy apparel. People just stay home, stayed casual. And then they realized, wow, I do need some new X or Y or Z. Maybe my lifestyle has changed. And they came back and started buying that took about four or five weeks. And there were a number of other categories that were like that at first delight. So even business and industrial business and industrial wasn't radically down, but it was down for about four or five weeks Until people figured out well, if our supply chain is disrupted, our warehouses are disrupted. It took them four to five weeks and business and industrial
Brent:
To, to, to get into a new operating mode. And then it came back. Now it didn't come back to the a hundred percent growth rates, but it came to 60% to 80% growth rates in business and industrial. And of course there are certain categories that have been decimated and not come back yet. Anything that is, you know, wedding related party related, travel related those categories are still way down. Although travel is starting to boom back. It's just, it's, it's very different kind of travel. It's not international travel. You know, you're seeing vacation rentals within driving distance suddenly within the last couple of weeks start to explode. Not that that goes through us. It goes through my prior company HomeAway among others. So, so that's kind of some of the category flavor. It has impacted various categories at very different rates.
Brent:
Oh, two other categories that were slow at first and then came booming back. One is home and garden and another is automotive. Both of those categories, their growth rates dipped at first. And it's like, all right, people are figuring out how to work from home. And then they realize, Oh, being confined from home. Hmm. There's work I can do on my car. Oh, there's work I can do on my garden. Oh, there's this or that in my home that I want to, like, I'm spending more time here. I want to make it nice. Right. And so the story is very positive for almost all categories. At this point, they may not all be at the, at the average or the upper end. You can't all be average or better. Right. but almost every category right now, online is booming. Only a few are not. And they're the obvious ones.
Rob:
So quality. I mean, what you're talking about here is not incremental growth. It's a step function. So incremental growth. If you're, if you're a manufacturer, you're adding a couple team members on the eCommerce team every once in a while, maybe you'll do a reorg every 12 or 18 months as, as digital has more and more of your general sales. But now we're talking about a total shutdown of some, some channels. And just the, I mean the numbers, your talking numbers you're giving out are just insane growth online for almost almost every category, including business industrial. What strategies do you seen folks taking right now? Do you know new people that are signing, signing up to go direct to consumer? How are they looking at this differently than they did six, six or 12 months ago?
Brent:
Yeah. So the single, there are two fundamental changes. The single biggest one is that
Peter:
Yeah,
Brent:
We're observing new store creation on our platform at let's call it an account more than double the rate that it was pre pandemic, but there's been a real, the growth has concentrated in a particular type of plant. So big commerce serves both enterprise, large brands and retailers think a site's doing more than a million in sales up to hundreds of millions in sales, as well as small medium businesses. And we have plans that are designed for each type of company or a Central's plans that cost $30 a month, $80 a month, $300 a month are designed for SMBs. And then our enterprise plan. It's all one, it's all one product, one platform, but we just have different plans. The enterprise plans are outselling. What are, what our internal targets with are they've gone up in sales, but what's booming are the retail plants. And, and surprisingly for us, it's not the $30 a month plan.
Brent:
It's the 80 and the 300, the $300 a month plan for us. It's what we call pro is basically that mix that gets you the maximum amount of functionality and flexibility in a fast to market self-serve cause you can just go on the website and sign up for it without ever talking to anybody and have a store up and running with 95% of the functionality that we offer within hours or days. And, and that is what everybody is gravitating to. They know that they're behind, but they don't have the time. If they're established complex brands or businesses to go through a requirements, documentation requests for proposal proposal process, extensive evaluation sales process. They're like, I've got to, I've got to start selling online like tomorrow. And so the, the rush and the skyrocketing have been into the, for us in particular, the pro plan. And we think there are an awful lot of enterprise brands or merchants going there. But they just want to get live first and they're going to come back and keep investing in that same site that they're building or set of sites and add, you know, better applications, better integration into legacy systems, maybe more into the design and user experience. So that's observation number one
Rob:
Actually, before we get started jumping in. But before we move away from that, I mean, you look at like on the large scale of things, you've got a Pepsi making headlines by launching snacks.com and talking about how it only took six weeks from wanting to do it, to having the thing live and, and all that. And it's just hard to imagine having any chance of doing that at all with the big iron heavy industrial eCommerce platforms of the last generation. You think of like a Hybris install going from Euro to live in a Hybris install in six weeks, if your Pepsi just feels impossible. So if they're skipping the RFP, though, right
Brent:
There, it takes, it takes six months. If you're fast, yeah. Implementing SAP or Salesforce or magenta, right. That's a fast implementation on those platforms. You know, on, on, on something like us, if your needs are simple, you can get it live in six hours, right? Six days is not hard depending on your complexity. If you have systems integration, six weeks is still par for the course for us.
Rob:
So this is, this is not meant to be a leading question, but I suppose it is it's. If you look at the folks that are prioritizing speed, and they're going to skip the RFP process and they're in crisis mode and they pick big commerce and they get, get live on it and they like, what are they, what are they giving up? If anything like, are they going to be like if, if you go through the RFP, are you going through the RFP? Just because you're a big company and that's how you're used to doing things and you're going to go to Forrester and Gartner and you're going to figure out what the checkbox is, should all be in, you're going through it. And the reality is you would have been better off going fast anyway, and now people are learning.
Brent:
No, there are only two things you potentially give up. One is if you go really, really fast, there is some risk that whatever platform you pick is missing a capability or an integration, either in product functionality or integration capabilities that you really need. So there is that risk. And if you're going with a SAS platform, I think the lowest risk is ours because we have more enterprise functionality and more APIs built into big commerce you know, relative to a Shopify by far. And so you minimize that risk, but there is no one platform that does everything every business wants or needs. So that's, that's a risk, but it's relatively small for most companies. I mean, we've got 60,000 merchants, including many of the biggest in the world. And so the coverage of our product functionality and flexibility in terms of API APIs is really good.
Brent:
And the best of, I think, any SAS platform, the second thing is not a risk. It's just something to come back to later. And that is, if you if you start up with a self serve plan, the economics of the self-serve plan are very good and they'll scale with your online growth, but you then come back to us and say, okay, I signed up for a plan whose economics were designed for a business doing, let's call it half a million in sales, a year online, and now I'm doing 5 million and they need to come back and renegotiate and get an enterprise plan. Once you're doing 5 million or 10 million, which not only will help you get better cost per order or cost per, you know, size of your business, but also entitle you to additional service from us, like a dedicated enterprise account manager. And there's no disadvantage to coming back and doing that later. Although the advantage of doing it upfront, negotiating that enterprise contract upfront is that then you get that service from the beginning. And we're part of helping you to both implement your site and grow it from day one.
Peter:
Hey, Brian, I can imagine that, that in some ways the, the standing up of the site simply because you and others have made it much easier than it has been in the past is actually for a lot of our listeners, this is the first time they will go direct. And so, as you know, and I'd love to hear your perspective on, you know, is the next is the, really the, the big blocker, the physical fulfillment side, is it the finances? You know, there's such a big array of business changes that need to be made in some ways they may be the longer tail of getting yourself live. Have you found that
Brent:
There's there aren't good reasons not to go direct anymore. You know, the heart of the argument are the many good reasons you should. And I know we will get into that. I'm going to give case studies and examples. And there's no one reason that applies to every single business, but there are usually two or three or four that are appropriate to a given brand and why you should go direct. Yes, you're going to have to figure out how to fulfill. And if individual fulfillment is new to you you know, small orders, then that's just something we got to learn how to do or use a three PL to do that for you. But that's hardly rocket science. I mean, the vast majority of brands globally have now already made that leap. And you just got to know that there's no reason if they can do it. You can't.
Peter:
Yeah, I think it might actually be a good, a good thing to just jump into some of those business reasons, because at the end of the day, you're driving for business outcome, right. And you're trying to make sure that an upheaval, like say, I don't know a pandemic or say, I don't know, a recession might be a good time to, to to spread your risk. Not to mention some of the other values that you get by being direct. So I'd love for you to just start digging into some of those business outcomes that, that people could be using as a way to justify to their organizations. We got to go do this, and here's why so dive in.
Brent:
Yes. Great. So the first thing I'm going to say is that 22 years ago, when I wrote that report at McKinsey at the time, the single biggest reason not to go direct was channel conflict and fear of what that would do with your primary distribution channels, retailers, et cetera. We are so far past that. I mean, Walmart can't stop you from going direct anymore. I'll give examples of, you know, the fact that Procter and gamble is going direct with all their big brands, you know, se Johnson, Unilever GlaxoSmithKline Pfizer. I mean all the big industrial, sorry, the big consumer packaged goods, companies, health and beauty companies, sporting good companies, virtually all of them are now going direct. And so they have already broken that class for everybody else. So stop worrying about that reason. Number one, to go direct, and I've got like nine good reasons, some of which will apply to some and some, not others.
Brent:
There's one that applies to absolutely everybody. And that is creating a direct relationship often for the first time with your end consumer, which then gives you unbelievable benefits and insights and including better merchandising and marketing. Cause now you're going direct. Now you can test things. You can test them so much faster than you ever could when you're dependent on third party retailers or brand campaigns on behalf of them. And you're building passion, loyalty, following community feedback, all of the things that build enthusiasm on the web and that quite frankly, the digital native brands on average have done from the get, go and done a lot better than legacy brands. This is your time to fight back because if you're a legacy brand, you already have the following, you just haven't fully probably tapped into it yet, unless you're really good at online marketing. And some of you are, so if you are world class at online marketing but a lot aren't and when you, when you dive in head first with direct sales to consumer, and then you can build your community content marketing following around that, that's great. So I've heard I've heard the DTC is the depth of the focus group. Yes.
Brent:
Now, now what I'm about to do is mentioned a number of brands, probably all of which you have heard of that. If you want to know what their sites look like, you can go straight to their sites and see what they're doing. Or you can go to big commerce.com. And in the top row of our homepage, you'll see something that says customers go into client examples, and there are links to most of the sites. I'm about to reference there. If you want to see their actions live, I'm not a hundred percent of what I mentioned will be there because some brands will allow us the rights to actually link to their sites from our, from our site. So on this examples of companies who are going direct to consumer, and that's making them a lot better, I'm going to give you a cup, a bunch of names, but then highlight one or two of them.
Brent:
Skullcandy is one of my favorites are the hipster headphones for skateboarders and snowboarders and all this kind of stuff. What they're finding is that they're able to now roll out new marketing and merchandising campaigns multiple times a month. And by being able to keep their content fresh, the spokespeople fresh, the themes looks fresh. They're able to sell far more and test far more than they ever could when they're reliant on the annual purchasing cycles of third party retailers. So that's helping both their direct sales, but it also helps them to introduce and test new products and marketing positioning that they can work through the channel on behalf of, of their independent retailers will rich. You know, everybody knows that brand they've been around for more than a hundred years by going direct. Right now they're able to test brand positioning and selling into new segments of customers.
Brent:
You know, one of the things I love is I haven't checked their site within recent weeks, but when they launched, they had a really, really strong positioning for you know, the African American community, black community, their branding. And it's great. They're, they're able, like we really want to sell into this group and we want to position our product for this consumer. And so that expansion in your own target customer set and you're cultivating relationship with them, they they've done that very, very well. The Tori, which is intimate and lingerie, they're doing it. Great. Go check out their site. A couple other brands, Kohler, which is bathroom supplies, sinks, and toilets, and all that. Buschnell binoculars. One of my favorite examples is Gildan Gildan owns gold toe. These are just like, this is the biggest maker in the world of just classic cotton t-shirts and socks and basics. And you would think interesting, they're finally going direct. Why? Because they are so used to being very distant from their end consumer and selling very low price points. And they're like, let's start testing it. Let's try sizes and colors and things that we haven't before.
Peter:
So often Brent, we, we hear that that D to C can be an opportunity to recover your margins, right? That you can either test a different product aimed at a niche that might provide more value than it might through the sort of commodity chain of a, of a big mass retailer or something. And so there's a way to test, it sounds like both audience and message and probably some other things as you're, as you're using this new channel. Right.
Brent:
That is for sure. I mean, if you, if you actually pick a very low cost and flexible eCommerce platform like ours, you don't have any of the same big startup costs you would, if you were opening stores or going to the physical world, you can keep it variable. I mean, like I said, we started at 30 bucks a month. It's pretty low cost to get going. And then start this and you get the full economics without intermediaries. When I wrote the report I did in 98 from McKinsey, the economics of going direct was a significant component of that nowadays, that wasn't even on the nine reasons that I thought of why companies should go direct. That's not even on that list. It's kind of obvious, but I'm far more interested, not in the economics of going direct, but the ways, these other ways that it benefits your business strategy.
Brent:
And so I, I, I think the other examples I'm going to get some of them go into economics. You know, actually, let me give you another example which, which in some ways is fundamentally about economics it's long tail product presentation. Do I mean by that any given brand has a big skew set that no one of your third party retailers or distribution channels can sell all of, and by having a direct presence, you have the ability to present the whole, the whole range of what you sell in one place without having to force it through a single store or a single retailer. You know, let me give you a couple of examples from different categories, GE appliances, okay. You get to go into GE appliances, gorgeous site and see the full range of what they have. All the different makes and models of refrigerators and dishwashers and other things, and pick the specific one you want, because the odds that it's on the showroom floor aren't high, and they do this actually in support of the retail channel in many cases, so that you can then say, Hey, I saw this model on their site.
Brent:
That's the one I want. And then you go to your retailer, they may have to order it for you, but you got to see it on their site. Similarly, if you think about the apparel retailers, like notori, they can't cover every size and color in every department store outlet, right? And so if you are an unusual size or color or design that you're looking for, and, you know, I'll raise my hand cause I'm a very small person, right? My son has never in any store, but I can find it that extra small, apparently no longer a small man has made in my size. I'm an extra small, and nobody carries that, but I can find those on the brand websites like a camera's selling, you know, the obscure lenses, the long tail lenses that people are hunting for, or even, you know, big green egg is a good example.
Brent:
So then green neg doesn't have a lot of of their, of their egg barbecuer skews. But what they do want to do is add a bunch of logo wear and merchandising and accessories, and you can't expect the local barbecue outlet to sell the big green egg logo where, you know, the, the scrapers and the cleaners and the tee shirts and the accessories, the rubs, they add those to the website. So it's long tail stuff. That's, that's useful both for selling a lot more product, but it does that economically because it's now the brand doing that out of one single consolidated brand owned inventory source, rather than having to an economically push the long tail through retailers, which you can't do, they can't stock at all. So this is a one specific
Rob:
Example here is testing product launches much faster than you could in market. Like, you know, Peter's, Peter's comment on the death of the panel. I remember John Denny from buy brands and those guys did flavor testing using Amazon as their DTC site. Cause they didn't have their own DTC presence. And so the economics on low on creating small batches of flavors to launch, to test, to see what works to then negotiate with CVS was economical. Now you fast forward five, six years since they did that. And McCormick this year launched the old Bay hot sauce direct to consumer on, on mccormick.com sold out within 30 minutes, the CEO went on cnn.com talking about it before the pandemic. And they just, I just got an email yesterday. They, they it's now live, but it's live in like every single grocery store in America. So you gotta imagine that the sales reps from McCormick take the product launch for this new T test product. And they can go to every single buyer for the category everywhere in America. And all of a sudden they've got data and they've got leverage. And if you've got that long tail that you're talking about, and you've got your own data and you've got you and you own the customer relationships and you can do this testing, it actually there's this I'm sort of knocked down, knock on effect on the rest of your channels. Where were you all of a sudden have, have leveraged by, by having data? Right.
Brent:
Sure. I was going to say for me that rapid test and learn is a third reason to do it. And I want to give an example of a company that has had a, an exemplary, in my opinion, digital turnaround and that's Proctor and gamble, the world's largest consumer packaged goods company. It was only about three years ago. I remember seeing a whole bunch of statistics that said 2017, all the major consumer packaged goods and health and beauty categories that they competed in were growing in the United States. And yet all the growth more than a hundred percent of the growth was being taken by digital native startups and the legacy brands like P and G were actually declining in sales. Here we are three years later and I think it was two earnings releases ago, P and G was talking about the fact that their global sales were up 5%.
Brent:
They had gone from declining to growing and the single biggest driver of that was digital. They kept saying digital. And when they said digital, the thing that they do the most and the best at is what they call test and learn for almost all of their category, leading brands, they have one or more sites up that are testing and learning new products and vast majority are using us. So Pampers tide, Olay, Gillette, oral B, a new just keep going through the list of their brands. And some of these are not test and learn. I mean, Gillette, no layer just, that's a main that they have that they're doing different things that I will talk about later. But a lot of these are testing new product concepts, new ways of selling new ways of buying new ways of customizing. And if they don't work, they shut them down. If they do work, they double down on that. Maybe they share that learning with other brands who then test it. Maybe they try to introduce that through retail channels, it's it's rapid test and learn. And so think about that of a digital transformation that is working with test and learn being the single most important strategic concept.
Peter:
So Brian does the, as the official traffic cop here, we probably have about 10 minutes left and I want to make sure I want to remind our, our attendees, please hop in with any questions you have. There's a Q and a Q and a option down below. And then there's also the option to raise your hand and speak, live on the podcast. So throw them in and and let's, let's keep going. I think you would actually mention the, the sort of what Gillette is doing and what they, what their new business model is that they're testing. I'd love to hear about that.
Brent:
Yeah. So a fourth strategy that works really well for certain businesses is subscription your, a company like Gillette. I mean, think about Gillette. They are in this very, very important and high visibility battle online against the digital native startups Harry's and dollar shave club. They need to fight back against them and they need to fight back directly. They need to do things that they, that are different from what their third party retailers are doing. And the most important thing that they're doing is, is anchoring on subscriptions, trying to get the Gillette user, to adopt a relationship with Gillette with, with nice economics for the user. If you get a recurring, let's call it every six months, supply of new razorblades, maybe some new shave cream, et cetera, that really is the anchor behind their strategy, but that's true of quite a few other CPG and home and garden brands. So we have key Unilever brands like Murad and crest, which is also P and G, where they're anchoring on subscriptions as a new way of serving their consumer repeatedly. And being able to give the consumer discounts by virtue of buying on subscription that they otherwise couldn't get if they bought through third party retailers.
Peter:
When you go back to the idea of sort of achieving your margin, I think another thing that comes to mind is, is making things you can't get anywhere else. And, and even down to, I mean, talk about sort of, we have this, th the theory that we talk about that the digital shelf is sort of the change from mass markets to masses of markets, where can all the, all the, be all the way down to one person. And so it seems like there's an opportunity to create something for an individual and make out of money.
Brent:
So there's a fifth example. And one great version of that is customization. A site worth looking@ismaroochy.com. So for those who don't know, Maroochy, Mar you CCI is the number one bat in major league baseball, wood bats. It's more popular these days than Louisville Slugger, which was the old one. If you go to maroochy.com, the coolest thing about it is your ability to customize the bat. So not only do you, let's say you're, you know, you've got a little league kid as I do. And you're trying to get a bat, but you can go in there and customize it. You can add, you can pick the colors, you can kit pick, you know, the color of the bat, the length, the weight, that's all standard, but then you add the color of the grip that you want. You can add your name to it, or a phrase. This stuff has really, really cool. So customization is something that is super and P and G has tried that with a bunch of their test and learn sites as well.
Peter:
You know, one of the things I'm kind of putting myself in the place of, of the folks in the, in the audience and thinking about the, you know, there's risk and reward. And there's, I was wondering, you know, Rob, you've talked a lot about sort of you know, VC investment in D to C and is that business model working. And, and there's a lot of people that are kind of beating up on that model right now and thinking, you know, you, you can't make money there, you, it spends too much, too much cost of acquisition. I'd love your point of view on whether you feel like this is a business that, that actually turns out to be viable in the long run.
Brent:
I, you can't make a generalized statement because it is true that let's call it venture backed digital native direct to consumer startups. Some are going to succeed. Some are going to fail just like they do offline, and some will succeed at first and then flame out rather quickly if they can't sustain the, the buzz. And then, you know, the problem with a digital native startup is that you don't have the continuity or potential continuity of shelf space. If the buzz dies
Brent:
Right, and a suffer, you can, you can suffer very, very quickly, which doesn't happen as much when you also have store-based retail, because your local customers go to that store. They're looking for the type of product you offer. If you've got the shelf space, maybe only one other brand does they're going to buy you or that other brand, right. It's, there's more continuity and stability. But there are two other things that I think are potential real needle movers in the battle of traditional and offline brands against the digital natives. One is what we were emailing each other about it, your idea, not mine. And that is the, the fact that page what channels that used to be free like Facebook and Instagram and heavily used by the digital natives are now becoming expensive and pay. Do either of you want to comment on that before I get to the second trend, that's changing, Rob your view,
Rob:
Sorry that this was the story of the rise of a bunch of the Instagram famous companies, the outdoor voices and whatnot of the world, where they, they, they all took advantage of this relatively cheap customer acquisition channel that has become very much not cheap anymore. And so the unit economics, which might've worked out when Instagram was cheap, do not work out when Instagram is not cheap. And so there's a bunch of folks that use Instagram savvy. And I want to say like, like millennial design aesthetic as the core of their business differentiation. And they're all just, they're all hitting the wall at 80 miles an hour right now. And so, so there's a lot of talk on that. And that's what a lot of people in their mind, they think of DDC. And they think of like, you know, Instagram, native millennial pastels and, and, and solid color marketing. Right?
Brent:
Yes. So now the second, and I, and I agree with that was a great insight, Rob. The second thing that I think could be every bit as big of a driver of the future of online commerce is Google's decision in the last month to open up Google shopping, to qualified stores who aren't paying to be in there. So I think Google made a very big strategic mistake 15 years ago when their product search engine called frugal went from including both free and paid listings to only paid because when it included free and paid, you could you as a consumer, it's 20% of all searches on Google are product related. You could count on Google as the best engine in the world to find out who's selling the product you're looking for. Cause I have both paid and free folks in there. And then when they went to paid only
Brent:
90%, 95% of the stores or brands selling the product you're looking for, weren't included there and you couldn't easily find them in organic search because organic search is going to be a mixture of things for sale and, and content sites and references to those products, et cetera. So 15 years Google basically kept itself from being the definitive best source for finding products on the web. And by the way, the alternative was Amazon. Amazon was a better source between Amazon first party sales and all their marketplace sellers. It was for most consumers, a better place to go, to find something for sale to then Google was, I think that was a giant misstep for them for 15 years. However, it's not going away because in those 15 years, it's not like there was another search engine or site that became the definitive way. You find out all the places that are selling what you're looking for on the web.
Brent:
So now that they are opening that back up, that is giant opportunity, especially for the brand owners, because if you're the brand owner and you're selling your product, you want to have an awful lot of authority and relevance that Google in their algorithms recognizes. And Oh, by the way, that consumers recognize consumer consumers going in and seeing, you know, six different retailers and the brand, all selling a specific product, consumers are often going to pick the brand owner out of loyalty and trust. And that's going to reinforce your competitive advantage. And like I said, as long as you're on a platform that has the feed going into Google and Google says, you meet whatever criteria they have for being a legitimate site, which is a brand owner, you know, that ought to be easier for you than anybody you get in there for free. You're going to have a ton of authority.
Brent:
You're probably going to have a lot of good conversion from consumers. And I think this is a monumental win. And it's also going to lead to a consumer shift of some amount of traffic away from Amazon and back to Google because Google is going to be the better and more authoritative and more comprehensive place to find all the folks, maybe in Amazon included eBay included who are selling a given product. You're looking for giant change, take advantage of it. But if you don't have a direct to consumer site, you won't because you get indexed in that.
Rob:
Yeah. It's also, Google is also investing in Google shopping actions where you can check out on YouTube and check out in other, in other Google locations and do the whole transaction again, like, you know, you could power that headlessly out of the out of commerce platform that you've got. I think the, the, the meta point there though is, you know, you had it's MySpace and then Facebook and then Instagram and now tick talk and then Google. I, I have an opinion that there's always going to be an interesting way to acquire consumers and to connect with, with your N and shopper online, but it's going to be volatile. It's going to change. They can't, they're not going to just have to rely on a single channel and a single way of connecting. That's going to be stable over 15 or 20 years and building the muscle to go from, okay,
Peter:
Instagram was cheap five years ago. Now there's this opportunity in Google who, who knows what it's going to be three, four years from now and, and being able to do all of those things, nimbly is a, is a huge skill that most of these folks that are trying to go direct to consumer need to need to build.
Brent:
Yeah. I want to build on that because it reminds me that I missed the second part of my answer to an earlier question. So an earlier question was what are the, what are the, what's the biggest trend you're seeing in eCommerce adoption right now, as a result of the pandemic. And I, and I gave one answer, which is the types of stores and the speed to market. The other answer is what you just said, Rob, the importance of multichannel selling multichannel selling means that when you have your own brand, a direct to consumer website, that same infrastructure, the same catalog, the same order management, the same accounting and consumer recognition is optimized to also sell through other channels. And what other channels are most important. It's actually a lot. So first and foremost, if you also have physical world sales, it's your point of sale and whatever point of sale software you are using, you want your online store integrated with that. So you've got one view into orders and product availability online, though. What are the biggest other channels category? One marketplaces led by eBay and Amazon. That's roughly 50% of all e-commerce. And if you don't have a presence or a strategy for also selling on eBay and or Amazon, you're missing potentially that half of consumers, unless somebody else is doing that really well for you. Yeah. Peter.
Peter:
So, Brent, I'm sorry, we're just, we're up against time for this, for this session. We did get a great question from Don. And I think it goes to the heart of what I was talking about earlier, which is that there, there are a lot of folks here that are still making the pitch that need to convince, you know, their brick and mortar compatriots to board, et cetera. And so Don asks with DTC representing two and a half of eCommerce sales for the U S with growth of, you know, maybe over 25%. What do you feel is the top two reasons to pitch D to C capability investment to boards?
Brent:
Mmm,
Rob:
Yeah.
Brent:
On a state we, we're not, we haven't gone through all nine or 10 of my reasons. I don't think there's a single answer to that. The one that I think is common to all companies is that, that first one I gave, which is a direct relationship with your end consumer and building loyalty, passion, knowledge, familiarity that is something that's universal. And there ought to be a brand specific, compelling argument behalf of that for every company. But then for each brand reason, number two reason. Number three could be any of the long list of others. It could be for long tail product sales. It could be for rapid fire test and learn. It could be because you're trying to sell to new segments or geographies that your existing distribution channels can't reach. It can be because your, your store-based channels are declining or closing down and you have to replace them.
Brent:
It can be you want to have a hybrid BTC and B2B, like a site that can sell B to C and then enable your B2B channel to actually have their own priceless in and, and utilize that in conjunction. I mean, that's what GE appliances is doing. If you go there today, it's not actually selling direct yet. It's actually helping the consumer find the product and then enabling the consumer to buy through the channel, right. That's B to B, B to C. It can be about customization. It could be launching new product lines. It could be about subscriptions. Yeah. And I might suggest that no matter different for each brand, and my point is it's different for each brand. And if you're the advocate for this and whatever your position is, come up with the specific things that you think are most powerful for what your brand, your company is missing today. And then go gain examples of that to build a case around what success can look like.
Peter:
And I would also suggest at the end of the day, that last, whatever, that, the last thing on the list is should be, if we don't do the, build the muscles to be a more agile and responsive and nimble company, particularly in digital, but the way in which digital combines with what will someday be returning brick and mortar revenue, it to come into one sort of shared vision of commerce, then you're done. So in some ways, building that agility, making sure you have that content at its core, that you're creating experiences wherever you're going to go. That to me is, is the capper of whatever other business outcomes you are searching for. Right?
Brent:
Yeah. I've helped. I mean, in my role at the commerce, I've helped a few brands make that sale successfully within the company. You know, one example that I love is duxiania beds. It's this a mattress company out of, I think Sweden, they make, you know, arguably the world's nicest mattresses and they're thinking we're not, we're not a bed in a box company. Why would we ever do that? We've got our retail stores who would ever want to buy a product this expensive without actually lying on it and trying it. And the argument I made is you've got your head in the sand, your stores that sell your product are nowhere near the overwhelming majority of your potential customers. And there are plenty of people who would love to get a really nice bed that live in cities that you will never have retail stores in, or even, you know, resort locations. You will never have them in. And if you don't have a direct channel, Whatever that percentage is, 50, 60, 70% of your potential customers will never have a chance to buy you. So you've got to do it, trust me beyond us. And Oh, by the way, if you're selling a $14,000 mattress, you only have to sell one of those direct to consumer to pay for a year's worth of your eCommerce store. If you sell two mattresses, you're making money. If you sell 20 or 200, you're crushing it.
Peter:
So Brent, and of course, Rob, thank you so much for, for being on the podcast today. We really appreciate it. You know, I think if any of our listeners enjoyed this content where at the DSI we're planning to devote an entire series to D to C strategy components, best practices, it'll start in July, it'll run through September, there'll be an entire summer of virtual content. You can watch it at the beach or whatever this will be doing. We'll keep you posted on that. But in the meantime, Brent, thank you so much for being on the podcast.
Brent:
I enjoyed it. Thank you for having me.
Peter:
Great. And thank you all so much for being part of the audience for our first ever live podcast. You can subscribe and get more of our podcasts or look at prior ones, wherever you get your podcasts. And thanks as always for being part of our community.
