DTC Daily’s inaugural DTC London event took place at Techspace Shoreditch last Thursday (18 July). Our final panel saw Alex Tait (pictured below), founder, Entropy, chair a session which looked to dive into what DTC brands can learn from the established competitors they are trying to disrupt. Here, Alex summarises the key points from the discussion, from controlling growth rates, to perfecting the media mix. 

Putting together a panel of experts who can give insights into both the intricacies of DTC brands, and the expertise of traditional powerhouses is no mean feat, but we were fortunate enough to welcome these experts onto our panel: 

- Janis Thomas – B2C Marketing Director, Deltatre  (ex-Marketing Director, Birchbox)

- Rachael Jones – Head of eCommerce, Seedlip

- Mark Little – ex-DTC Director at Unilever

- Jean Phillippe Nier – Head of eCommerce, Kraft Heinz

Nailing DTC for large corporates

We first looked at how bigger brands approach DTC, with the panel identifying three avenues: 

- Incubation, i.e. growing a DTC proposition from scratch;

- Acceleration of existing business units;

- Acquisition of external businesses.

The panel outlined how organically growing DTC propositions can be hard to execute correctly.  One case study mentioned was Unilever, which a few years ago set up what they called ‘Hatchhouse’, a centre of excellence for DTC, with talent brought in externally to the business although it has since been disbanded. Unilever have been since also investing through external DTC businesses.

With so much hype around DTC, the first thing corporates must do is evaluate whether it is right for your brand. You may not have a product which gives itself to direct-to-consumer selling, for example, do customers really want to buy a bottle of ketchup via DTC?

If you decide DTC is for you, how you integrate this into your business is key. External acquisition is an approach many larger businesses are pursuing, with either pure plays or omnichannel organisations. Once the company has been acquired, however, a sensible approach is for the parent business to keep it at arm’s length, helping the acquired organisation maintain its culture. It can also help prevent the acquired company being swamped by requests for meetings and expertise from the larger business. 

Alex Tait, founder, Entropy

Some businesses call these acquisitions ‘speedboat’ companies, as the idea is that they’ll maintain accelerated growth. However, this can have cons as well as pros. Historically, acquiring companies often means buying a smaller company and rolling it out across the world. These days it can be harder to scale them out across other markets, as the conditions in a secondary market can be very different. Challenges may range from existing local players, to the parent company not having the right talent and capability in other markets to support such a roll-out.

It may seem pretty basic, but a key change is shifting the mindset of the organisation. An approach being explored at the moment by many of the larger corporates is the Lean principles of learning fast and failing fast and, as part of this, embracing more risk. For anyone working in a start-up, it is the quickest way to learn, but for large corporates it can be harder to fully adopt the approach. 

Bigger brands have, however, little option other than to adapt how they do everything, from launching products to putting together their planning cycles. A rigid 12- to 24-month cycle which, believe it or not, many brands still have, doesn’t allow much flexibility.

Recruiting talent is another imperative for adapting, but these days there is significant competition out there for talent, and larger brands are not always as appealing as they used to be. How many graduates want to work for large, cumbersome businesses rather than go for the other opportunities there are on the market? 

What advice would the panel give to DTC brands on scaling?

It starts with skills and capabilities. Often in a start-up there are a greater number of generalist roles across multiple disciplines because there is more of an “all hands to the pump” mentality. As you get bigger, however, you need to consider whether functions like acquisition, UX and CX might benefit from specialist roles.

“Grow properly but at pace” was a mantra one of the panellists’ organisations had adopted. While it certainly is crucial to be agile and to grow quickly, you need to do so with the right tools and processes in place. An example given was how, when one of the panellists joined their company, analytics wasn’t set up correctly and was double counting sales. Upgrading their ESP (email service provider) from Mailchimp to enable them to do automated emails felt as if it was ahead of where they needed to be at the time. It nevertheless paid dividends later, when the company was able to grow quickly and efficiently.

As you scale, migrating from DTC to a wider set of distribution channels will get you more volume and, potentially, profit, but you need to balance that carefully with managing the customer conversation and relationship. Managing the shift in perception from your consumer and retailer relationships is vital, especially when you are no longer the little company both these sets of stakeholders were working with a few months ago.

Assessing and reassessing your media mix also has a key part to play. When you are small and growing, there is a temptation just to stick to Google and Facebook for performance media, with some PR thrown in. At some point, however, you need to evolve from using only performance media to embracing brand and a wider mix of channels. With this, DTCs also need to look at measurement. Attribution is important for digital media but, depending on your size, consider marketing-mix modelling to measure ROI and profit across all your channels. 

Another pivotal decision when DTCs are scaling is that of when you do in-house and when you outsource. The panel discussed distribution as one example. If you are shipping 50 boxes, you will naturally do that in-house. Get to 50,000 and you’ll want to box them up at an external warehouse. Get to 50 million and you’ll need to think about the reduction in cost you’d get from in-housing again. Janis discussed how Birchbox did all their creative in-house and had no desire to change: it meant they could be highly reactive but also integrated for a consistent experience of who they are.

As the business scales, issues such as diversity also come to the fore. The biggest issue in the discussion of diversity was the representation of non-white employees. All the panellists felt this was an issue in most organisations they’d come across.

In putting this panel together, I put a post out on Linkedin for female participants and was rather swamped with over 90 comments and suggestions, and 15k views. Taking this to indicate that there is a greater need to provide platforms for female speakers I’ve subsequently put together a basic site for female eCommerce speakers at eCommerce-speakers.com that can be used by future event organisers. If you’d like to be included on the list of speakers get in touch via the site. 

Alex Tait is Founder of Entropy that provides digital commerce consultancy and training for organisations.