We are in a remarkable period of renewal for the retail business, according to YOTPO Founder Tomer Tagrin, and far from being witnesses to the retail apocalypse, we are living in an era of powerful brand renaissance. Tagrin made these bold statements as he shared opening remarks with the large crowd gathered for Destination D2C, held in NYC September 12, 2019. The one day conference was hosted by YOTPO and sold out weeks before, quite an accomplishment for a first year event held during New York's Fashion Week.
If you're not familiar, YOTPO has become a defacto standard for enabling DTC brands to host, manage, and leverage customer reviews to drive customer engagement and sales. YOTPO understands the challenges unique to online retailers and Tagrin cited small teams, complicated technology stacks, siloed data, and multiple delivery channels as the 4 key characteristics that define the e-retail environment. YOTPO designed its platform with these considerations in mind and announced the release of its Atlas platform, a unifying technology that will add speed and efficiency to the integration of YOTPO products with core client systems and retail backbones like Magento, Shopify, and others.
Tagrin went on to describe the transformation taking place in this time of brand renaissance. While the early focus of almost every DTC retailer has been customer acquisition, the time is now, according to Tagrin, to balance investments in acquisition with customer retention. Tagrin cited that longer tenured "retained" customers spend 39.4% more across the DTC retailers studied by YOTPO, so the reasons for investing in retention of high value customers are clear. So many DTC retailers have reached a relative position of maturity in a very short time when compared to traditional retailers, that customer retention and loyalty are quickly coming into focus. Those trends are evidence of why YOTPO acquired loyalty platform provider Swell during 2018.
Listening to Tagrin and other speakers throughout the day, I gained new insights into the essence of online retail today. The most experienced voices in the room explained that the nomenclature for the industry has evolved from "e-commerce" to Direct to Consumer (DTC). What's the difference?
Shopify Plus General Manager Loren Padelford explained that the early wave of e-commerce brands were often technology companies that sold products. Today's DTC retailers, the dozens of household brands name introduced over the past 8 years, are brand builders that leverage the technology available from external partners to get to market fast and manage the business for profitability. Chubbies Co-Founder Tom Montgomery added that this approach allows DTC retailers to invest more dollars in building their brands, keeping a focus on the areas they know best, and enabling them to carve a path to profitability more quickly.
Not just fresh DTC brands were in the room, but many "traditional" retailers, defined here as brands we've become familiar with principally through brick and mortar outlets. Steve Madden’s Steve Silverman, CEO Global eCommerce, brought to light the journey that one well-known brand took to transition successfully into this new world. Mr. Silverman let the crowd know the journey has not been an easy one, but also that the foresight of leadership had paid off.
He cited 3 key reasons behind the growth and profitability of Steve Madden's online business over the most recent year:
- Improvements that added ease of use and improved customer experience on SteveMadden.com
- Introducing free 2 day shipping to customers
- Tacking on features like Afterpay, the service that lets customers pay for purchases through short term installments
In consideration of the excellent results posted by the company during the past year, Silverman was asked by Bloomberg Editor Matt Townsend if he had anything that kept him up at night. His first response was a practical one, as he questioned how the company could top the stellar year just experienced. That’s a tough challenge for anyone and what do you do? Maybe call Bill Belichick or Steve Kerr for advice? After all, they've both faced the question of "what have you done for me lately" even after leading the Patriots and Warriors to multiple championship titles. It’s an idea.
More to retail-specific worries, Silverman wondered aloud if the success of influencers posed any brand risk over the long term. We've all seen how influencers can raise the fortunes of a brand but also throw it into disarray with no less than a post on a social channel. Remember when Kylie Jenner nearly torpedoed Snapchat with a tweet? Determining whether customers are buying more to support the influencer or in admiration of the brand can become a fuzzy issue, and DTC retailers can’t afford to dilute brand equity over the long term.
Silverman also cited the always-on nature of DTC retailing as a cause for concern. When a product or web manager notices something awry on the website late in the evening or when an unplanned customer issue occurs in another time zone, should the issue be addressed immediately, or can it wait till the next morning? Not all employees sign on for 24-hour support and Silverman rightly questioned how the corporate culture of online retail might be transformed in the future.
Maybe the elephant in the room, at least in the morning, was the “what do we do with Amazon” question. A quick and available path to wide product distribution for DTC retailers is to post inventory in the massive marketplace. Going at it alone without any Amazon affiliation could seem intimidating. Peter Boyce II of General Catalyst cautioned retailers to understand that relying on Amazon is equivalent to “renting customers”. Mr. Boyce encouraged DTC retailers to “rent” customers as they must in the short term, but to develop a portfolio of “owned” customers to drive more sustainable shareholder value in the long run.
There is much more to share from Destination D2C. As we go through our notes, we’ll share thoughts on how the technology business is adapting to meet the needs of DTC retailers and talk about the difference between “Branding” and “Building a Brand”. Look for a few related articles shortly and, don’t miss this event the next time it comes around!