Audio Of The Week: Going Direct To Consumer
Jeff Raider founded/co-founded two “direct to consumer” businesses in the last ten years, Harry’s and Warby Parker. In this conversation with David and Andy, he lays out how he thinks about the ways that direct to consumer is changing the way brands and retailers do business.
Comments (Archived):
This was fantastic (as was the last one as well).
This is the company that they refer to at the end. It sounded like ‘aubers’ but was actually http://www.allbirds.com
fan of their shoes. just bought some.
Jeff Raider is extremely articulate and has plenty to say. Rapid-fire interjection to demonstrate your own knowledge is not good interviewing.
I feel the opposite. Being impatient, I like Tisch’s questioning style. One of my pet peeves is (hate to say it) people that take a long time to get to the point when I’ve already figured out what they are going to ask me.
LE:that is actually our impatience in being patient in listening to the close when we received it in the opening. Having a gasp of the subject tends to want you to have a conversation verses being told what you already know.Conferences, podcasts, etc. are difficult when you are proficient in the area.Jeff Raider actually shows why the majority can benefit from college. That Wharton School of the University of Pennsylvania produces talent.
with you on this. podcast no no.
Great discussion! 92% of sales offline is surprising.
Yeah I started a competing eyewear company in hopes that number would grow fast, but it didn’t. People just need to see their glasses on their face before buying. I don’t think technology will change that fact for quite some time.
It looks interesting. I think these verticals will have room for multiple competitors (add a new Casper, Warby Parker, we have two D2C razor blades, etc.)Your product seems to be a new twist that would be a barrier to adoption. I think if you replaced the marketing of the replaceable lenses, you would have a better shot, IMO.
Thanks. The eyewear industry is very unique so I’m not sure some simple messaging could have saved us. People don’t need razor blades like they do glasses
Here is a perfect example of why big legacy brands are losing, both in store and online. (If I had a big twitter following this is the type of thing that I’d tweet:)I get a 20% off coupon from Dicks and think “hmm yeah I needed to get a … …”.Then I see that there are exclusions for the 20% off and after following links am directed to this huge page of text:http://www.dickssportinggoo…I mean for real. Forget it. I don’t even know the brand of the item I might want to buy let alone have time to read a page of info to see if it’s excluded (I truncated what is shown here).https://uploads.disquscdn.c……
The other weekend I did a spreadsheet analysis of the best way to procure paper towels. For a single type of paper towel (in this case Bounty select-a-size) they sell over 20 SKUs which is functionally a DoS against anyone trying to compare pricing. I’ve learned that stores that play the coupon game generally just inflate their pricing and so the coupons give you a price comparable to Amazon, but Amazon still is slightly cheaper. If you look at any individual store that does the coupon thing, my sense is you rarely end up winning unless the coupon is an incentive to get you in the door or a rebate for brand loyalty over time.
Ha! I thought I was the only one crazy enough to do this. Funny thing is I didn’t do it to save $, just to see how much i was leaving on the table to walk out with a single roll
The US must be the country with the maximum number of products and product varieties available for sale.
We have a client that goes through 10mm SKU per month.
Amazing. I guess part of the reason may be lots of variations on basic products – each variation being a separate SKU? I know how those can grow huge fast due to permutations growing fast. Did a project for a mfg. co. once where they had products like that – not as many as 10 mil though. Logic we had to develop was somewhat complex, had interesting design issues, sort of normalizing the variations to keep the code to a reasonable size and level of complexity, etc.
Grocery Store. Different SKU’s for different case lots to track recalls.
Oh, got it now, thanks. That would result in a lot of them.
>permutations growing fast.That should be combinations, really.
CONTRIBUTORS:The Riff #1 with Laurie Segall with CNN/Tech was interesting. There appears to be a huge disconnect with those who report news and those who follow it.The attack by Trump wasn’t questioned by media or strongly defended because the credibility was correctly questioned when the biases were apparent.All news sources have earned not being trustworthy. Breitbart and Fox are trustworthy sources for some and for some that is the worse source of any news with a lack of journalism replaced with commentators with opinions/analyst forced as news which examples can be made on MSNBC, CNN, etc.The media should eliminate panels of so called experts to interpret for the listener.There was trust issues before Trump.Dan Rather, Brian Williams, etc.
I am convinced there are three ways consumers buy things:Supplying: I.e. Gas, Groceries: Bulk stuffBuying: I.e. I need this iPone cable: Individual thingsShopping: Yes people do this that is why 92% is offline: things you don’t have to haveFor Supplying the bottom line is that it is always going to be cheaper for the consumer to come to the supply rather than the supply to come to the consumer. Now of course you can pay for convenience and depending how you value your time it might make sense. Economically though most people (not in the wealthy urban areas) will choose to be their own delivery person and warehouse. Think about it, if time was so precious TV wouldn’t exist.For Buying, Amazon wins the lions share. Other stores will continue to compete. Google and eBay provide some alternatives. Manufacturers will have to protect their channels or become complete commodity providers. I think you will start to see some refuse to sell to those stores. Think of Stihl equipment (if you don’t know what that is, well that tells you something about your ability to relate to certain types of people)Shopping. This will continue. Pricing pressure will be severe but people honestly shop for the same reason they watch TV. Entertainment. Look at this mall in my state of Delaware that has 800k people. 20mm visitors a year. https://www.ggp.com/propert… I’d rather get a root canal than go there but my daughter absolutely loves going there.
Sorry I hit post before I meant to. What direct to consumer is doing is replacing high value, high margin items that can be easily shipped to consumers. I love Harry’s. Gillette managed to get a lock on the market and really spends so much on advertising and huge overhead which does not help the consumer.
Their ad spending is huge? Any guess what there customer aqusition costs are ?
Gillette number two in the world. $8.3B. Yup that is a B: http://www.businessrevieweu…
One thing that is rarely discussed is the impact of online shopping on impulse purchases.If I go into a store with effective point of purchase marketing I will often buy something that I either hadn’t thought of or didn’t think I needed before being lured by display, setup, packaging etc. When I used to go to Staples this happened many times ‘oh that plastic box looks helpful let me get one’. Now some of this loss is made up online by buying things that you wouldn’t have bought in a store that you find out about and are lured into there. But I would question (especially in the case of Walmart) how much of that can be madeup online by certain merchants.Plus even though people can pull out a cell phone to check pricing when on a retail floor it is really much easier if you are at a desktop (some of us still use those) and can quickly do a web search and see if the price you see is the best if you have the time.Delaware is unique the secret sauce the lure of not paying taxes combined with the size which is because of the lure of people not paying taxes. Malls around here are dying where I am and I think in most places. There will always be venues in dying business models that can hang on.Kids don’t need the entertainment of shopping like they did 20 years ago just like they don’t need the arcades that were in malls 30 years ago.
You should see my arcade machine at the office 148 games from your youth. The younger guys love it. Other offices beg me to give them one.I agree but not sure on your Walmart comment you mean they make a ton of money on impulse buys (especially when they put something on the end-cap) If that is what you mean you are right.I really do not believe you can effectively supply bulk items direct to consumer for the price that you can having the customer pick it up. When the subsidizes from cheap capital end I think that will end as well.Now for the I just need X like Staples or Best Buy. That is so tough.As for Mall’s I think it is a tale of two cities. You go big or go home. Mall of America in MN is absolutely huge. High sales tax, etc, Same for King of Prussia in PA 22mm visitors: https://en.wikipedia.org/wi…
you mean they make a ton of money on impulse buys (especially when they put something on the end-cap) If that is what you mean you are right.Exactly. Especially with the low impulse control types that often shop there. (Good thing not many people are around reading my comment)I really do not believe you can effectively supply bulk items direct to consumer for the price that you can having the customer pick it up.I agree by napkin. Why? For one thing people don’t value their time like they should. If they did they might not drive to Delaware to save tax on a purchase. To save $60 (PA tax) they would have to spend $1000. The tax savings is in part ‘the thrill of the hunt’. You also see people doing this while wasting time to try to get a bit cheaper of a price on a car. I had to stop myself from driving to delaware to get a laptop at the Apple store. Do I really want to spend 2.5 hours to save $100 or just have it at my office (and not cheat on use tax). Plus if I go to the mall I will probably buy something that I don’t need just because I am there.As yes it makes no sense other ways. You have a bulk amount of goods being shipped to a ‘pickup point’ (the store). They you have people who don’t value their time going to that ‘pickup point’ to get the goods. Makes even less sense with groceries. No impulse extras for the store either. If my wife buys something for us both that we split the cost she says ‘you owe me $x 1/2 of $y’. But she would never say ‘I just spent 1 hour shopping for food give me $x’. And she makes a good salary.Also see this with respect to Amazon pricing:https://www.wsj.com/article…Note also that Amazon has pickup points already (and I have used it when I wasn’t around for the driver) so that will be another direction they will be going in.I think if delivery was as cheap as Amazon wants us to believe it is they would also offer a tool or object rental service. Of course this would cannibalize purchases. But they could do a great job with that much cheaper than the bit players doing it now.KofP is a fun place last time (several years ago) that I was there. Even if you aren’t buying fun to walk around.
Yes the she does not ask me for $X per hour is right.Now some of this is really just for the enjoyment. Do I want to sit at my computer literally all day and night?No.So when I put up a greenhouse this weekend did I go get the clean fill to backfill it? Yes.Do I have an old pickup truck called the mule just so I can get stuff??? Yes.
“Manufacturers will have to protect their channels or become complete commodity providers.”The problem is today’s manufacturers are reluctant to forego online rev, even if it creates channel conflict and wacky price disparities at retail. Too much pressure to drive short-term revenue without an appreciation or understanding that they’re potentially killing both their brand equity and margins. Case in point: I use a badger brush and shave cream from Art of Shaving. My original shave cream purchase at retail was $28 plus tax. When I needed a re-purchase I explored avails online and bought a new jar for $20 (with no tax and free shipping). Including the tax free benefit, that’s a 35% discount. That’s no way to build a healthy brand. I would have gladly re-purchased full price at retail if unavailable online, but why would I ever again??
I agree. I found slotting fees so offensive. But in some sense they do what they should do. If you want my product on your shelf pay me money because it costs me money.I think your example is very typical for high value small repeat purchases. I find what I like at a store and then buy online.I should probably put a fourth category in my list. High value small things that you repeat buy. That is supplying but it is not bulk supplying.
Simply listening to this podcast is a sharp reminder of people who design and create value around customers. JR clearly understands retail contrasts that connect customers through multiple brand dimensions.Thumbs up!
I actually think (and know) that they are missing out on the following markets:a) People that aren’t price sensitive. I want to pay more and get a better blade.b) Women (who buy their blades now, like my wife).Edit to add: The brands should be separate and not under ‘Harrys’.
I also had a bad razor (not blade) experience w/ Harry’s, but I know they recently went to a redesign, prob based on feedback like yours and mine. Warby is awesome, though.With falling sales, brick and mortar retail is even more of a challenge today than ever. Securing AND maintaining distribution is crazy difficult, as you well know firsthand. Have you aggressively explored building a DTC biz w/ your bread products? It’s got to beat paying slotting allowances and associated merchandising expenses.
I’m not a style/fashion person at all but went to Warby in Boston for my glasses because when I was on fellowship I didn’t have vision insurance. It worked out very well and I was impressed with the quality of the glasses. I think there are probably styles that look good on you, but you just have to let someone else be the expert.
i never understood why, absent a need to save $, one would switch from a Gillete Blade. The probability that a Harry’s blade would be better seem so low. Why invest to time?
Perhaps you should explore co-packing DTC w/ complementary product(s)? Maybe organic peanut butter or jams. Win-win. i can see the challenges as a standalone (e.g., demand, feasibility).
Shipping logistics? (And delivery). Tough love for you here Charlie but you can’t even imagine the amount of times that I have seen the shelf at WF barren and devoid of your bread. The bakery boy told me ‘the small brands don’t get here everyday so…’.You are dealing with the bane of the small businessman that is not funded by OPM money. [1] That’s a guess I obviously don’t know who works for you. Not sure I had mentioned this in another comment already or not.[1] That money and ability to lose money until you get it right buys a great deal of brains, enthusiasm and the ability to make errors until you get it right. You don’t have the same luxury.
The waking nightmare of food entrepreneurs with shelf unstable products is the’best buy xxx” date.It’s the ice cube in the sun–days to get on shelf, 72 hour prior to pull from shelf date and days good at home. There is never enough.DTC with perishable product where returns are not really possible models itself into a large hole quickly.
Isn’t tolerance for storage–which is the core for backstock if you have a guaranteed sales contract–is margin per facing space on the shelf?High margin/volume breeds new rules.
There are no truths, retail included, that don’t require a contextual level set.Different retailer by retailer.
See Harry & David’s model (excellent product quality there, btw). I think there’d be demand for holiday co-packing (e.g., Christmas, Mother’s Day, Valentine’s Day). You could do a DTC and/or a brick and mortar test run. I’d see what kind of complementary organic products already have distribution at wf and explore developing holiday baskets w/ them (for subsequent sale at wf). Perhaps a good way to secure desirable end aisle displays, too.
I agree that being liked by the store staff matters.I don’t have operational input or participation with Luli any longer but I personally opened TriBeCa WF and built it by delivering and merchandising it for the first while. Years ago.I still once a month or so take a bag of expiring drinks and give them to the people on the docks to the team leaders.It matters.
I see your head and spreadsheet spinning ;)Lianna is educating herself with a furry to understand and design as a side project shelf stable natural products from liposomes to beverages btw.
Multi-loaf as a trial generator may work economically for you, but it may be a buzz kill for consumers. I’d consider a co-packed bundle (enhanced sampling) w/ the primary objective of generating trial w/ each manufacturer subsequently allowed to pursue DTC multi-pack orders on repeat biz.
Focus on a niche where freshness is not critical. French Toast comes to mind, your bread, organic eggs, grass fed butter, maple syrup. Start with the the Blue Apron Market. Baked Monday, Shipped Wednesday, Delivered Friday, Cooked up over the weekend.
I worked in marketing for a food broker (both perishable and non-perishable goods) in college, and then for years managed national adv/promo for a bunch of leading CPG brands. A long time ago. Was competitive (and costly) then, today much, much worse (e.g., margin pressures, thousands of SKU’s). Can’t imagine the challenges for small, regional packers. To your comment, curious to know what the shelf life is on Charlie’s products?
Thanks for the share.I’ve built some really massive channel orgs in the tech world but Luli is the first food company I’ve every even touched in any way.Distribution is the friend of no one but themselves regardless of the business.And in a food world where one player makes the rules, and is struggling margin wise, its a touch.Then as Suga showed those who can win can win big. Few do.
It’s a singles biz, and occasionally one gets caught stealing 2nd (figurative speaking, there are set backs). Hey, it’s late March and I’ve got baseball on my mind 🙂
They changed the packaging for the razors from the fancy cardboard/plastic boxes to some smaller utilitarian fold out models. The Fusion blades from Gillette are definitely superior but with a nearly 50% cost differential the Harry’s blades were good enough for me to switch. I am interested in seeing how much better the new five blade model is, but basically bought a year supply of the four blades. Overall been quite happy with it (along with the shaving cream). Though generally buy “Cremo Cream” from CVS. Besides working well it costs $8 for a tube that lasts 4 months, very economical.
u can but it is very difficult to built a business that isn’t structured to be go big or go home.with food unless you dtc you don’t and can’t own the channel and there are almost no examples of dtc doing this successfully.took fresh direct forever to.
See my comment above.
Maybe I’m losing it but this is the only comment of yours I saw pertaining to this.
I don’t know where my comment went. But I am right there with you. If you don’t shave every day or maybe once a week at most and have a heavy beard, those blades just suck. Even the two blade was good enough.The five blade gums up so much I must have to take five passes at least on each part of my face.
No somehow my comment didn’t post. Charlie said the exact same thing. If you have a heavy beard and don’t shave but once a week the Gillette’s really aren’t good.Harry’s quality did improve. I tried then quit then tried again and now use. Now Dollar shave club? Not so good. But man the $5 per blade Gillette charges seems ridiculous for us old guys that remember buying blades for less than a buck.