The future of direct-to-consumer and e-commerce

Web Smith has a long history working in direct-to-consumer and e-commerce. He managed marketing spend for Rogue, a leading sports goods manufacturer back in 2011 before co-founding Mizzen + Main and later joining Gear Patrol. In 2015 he founded 2PM, a B2B media company for the commerce industry and advises leading executives in the space. Through 2PM Web also invests in early-stage DTC brands and platforms that support the consumer ecosystem.

If you've ever thought about starting your own DTC brand or online shop, you'll want to heed Web's advice.

In this episode Ryan and Web talk about...

The state of direct-to-consumer today

“It’s going to become a battle to discern which companies have sticking power and what a possible exit will look like. Casper’s potential IPO will set a standard for other brands looking to exit. We’re also looking at a lot of companies developing holding companies for these types of brands.”

Web points out that only 12% of transactions are e-commerce today — the remaining 88% comes via physical retail.

Trends in the industry and how it has evolved over the years

“The industry’s filling up pretty quickly. It’s a really dense area for people who want to become founders. They’re highly educated, from great schools, and funding is easy to come by in the DTC space for the time being. So they’re coming out of the gates from Wharton or wherever with millions of dollars in the bank and they’re probably going to get to the next milestone because they have the right founders, the right teams, and the right money. That’s the story of tens if not hundreds of consumer brands in the last two years.”

Direct-to-consumer has for several years been a hot area for founders and investors. He talks about some of the trends he's seen in the space, including which growth strategies have been effective and how companies will need to evolve in the coming years as the landscape shifts. They also discuss companies like Casper and Warby Parker getting into brick-and-mortar sales, even as they are the poster children for the disruption of brick-and-mortar.

What Web would do if he was creating a direct-to-consumer brand today

“If I was starting a DTC brand today, I would actually start with a media company. I would launch a newsletter or blog a year or two before. It’s worth your while to develop an organic base of people that are interested in the product that they have. I know that sounds counterintuitive but you’re seeing a premium on the brands that have that type of organic acquisition”

He says that paid acquisition is a commonly used strategy by DTC CMOs but that it is quickly becoming cost-prohibitive. He predicts that companies will need to adapt to different models in the future.

How to think about defensibility for direct-to-consumer companies

“[Ask yourself] Who are the people defending their purchases? How are they talking about their purchases to their friends and loved ones? How loyal are they? Will they come back to buy the next thing that you sell? That’s an element of defensibility that goes a bit unconsidered.”

Web points out that there are plenty of informal brand ambassadors for companies with strong brands. He says that the word-of-mouth spread of brand affinities is an underrated aspect of defensibility.

How direct-to-consumer companies can create a community around their brand

“When Nike released the ad with Colin Kaepernick, Nike knew what it was doing. It was going to polarize the customer base and the folks that were on their side would spend a lot of time and energy defending Nike’s decision and that would amplify the brand for those defenders.”

He says that companies need to think about their consumers in terms of one-to-many relationships instead of the one-to-one model that has been the primary model to date. Web talks about some of the communities that are forming around certain brands and how companies can encourage the creation of those communities.

They also discuss some of their favorite e-commerce or direct-to-consumer brands and companies, and Web breaks down why those companies have been successful.

We’ll be back next week so be sure to subscribe on Apple Podcasts, Google Podcasts, Spotify, Breaker, Overcast, or wherever you listen to your favorite podcasts. Big thanks to Pil...