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Mike Stevens is the author of The Direct To Consumer Playbook, consultant and entrepreneur.
In this episode we discuss:
- Mike’s career that ended up with him writing the book about DTC
- How DTC is evolving
- Products and if DTC has to be better than the alternatives
- Managing the rising customer acquisition costs that are hitting DTC margins
- Picking up the phone and why you never lose money talking to customers
- The over-reliance on data
- The impact of lowering barriers to entry on DTC brands
- When DTC should become retail and multichannel
- What role does community play in DTC brands and if they can exist without it?
- The importance of vertical integration and why some companies stay away from it
Mike Stevens has played key roles in two of the most iconic start-up challenger brands in recent years: innocent smoothies and Peppersmith confectionery.
At innocent, he built and ran their supply chain for six years before becoming a country manager. In 2009 he co-founded Peppersmith. Peppersmith was set up to kick the confectionery industry into the 21st century. Mike was CEO and scaled the business before selling the company in 2018.
In addition to writing The Direct To Consumer Playbook, Mike advises, mentors and consults for start-up and scale-up businesses. He is based in Poole, Dorset, UK
Find Mike on LinkedIn
The Direct to Consumer Playbook: The Stories and Strategies of the Brands that Wrote the DTC Rules
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Andi Jarvis, Eximo Marketing.
This transcript has been done automagically using Happy Scribe and hasn’t been checked by a real person, so there may be some hilarious mistakes where the AI can’t work out our accents – I’m sure they’re trained on just the American accent.
Eyup and welcome to the Strategy Sessions. My name is Andi Jarvis. I am the host of the show. My full time job, the one that pays all the bills and means I can do this and put this podcast together, is the Strategy Director of Eximo Marketing. We’re a consultancy that works with manufacturers who want to start selling direct to consumer. So we help companies that really don’t have that infrastructure, don’t quite know how to get out into Ecommerce World, build all that, put that resilience in, get better margins from the product, and build a data relationship with their customers that can help them grow over a long period of time. Why do I tell you this? Well, firstly, I don’t really talk about that too much on the show. I’m not here to sell you. And secondly, it’s because I’m here talking today to Mike Stevens. Mike is the author of the direct to consumer playbook. If you’re lucky enough to be watching me on YouTube, you can see that on screen. And if you’re not, well, just click on the link in the show notes. It says the director. Consumer Playbook by Mike Stevens.
Mike is the he was an early employee, innocent, the smoothie company. He worked at Peppersmith, which was an early DTC confection company and has since spoken to maybe 12, 15, 20 great director consumer brands for the book. He calls this the book he wish he had when he started Peppersmith. So he’s putting case studies. He’s picked the brains of some of the leading people in the industry and brought them into a book to shortcut some learning. So I read the book and loved it. Reached out to Mike, I was like, Mike, you seem like a great guest for the podcast. Let’s put it together. And we did. So the conversation is coming up. With us doing so much DTC work these days, it just made sense to get him on. Some of these stories are stories that wouldn’t necessarily fall within what we do at XML Marketing. Kind of native director consumer brands who just go andi there’s a bundle of funds and set off in DTC world. As I said, we work with manufacturers who are kind of moving into that DTC world. So slightly different. But a lot of the lessons in this book, and it is a good book that is definitely worth reading, a lot of the lessons are great for all sorts of companies.
So if this is your thing, have a listen. And Mike’s got some great insights. And do click the link below andi buy a copy of the book because you’ll get he gives you the headlines and then you can drill into the detail and it’s a really easy read as well. So enjoy the book. If you read it, and if not, just have a listen to Mike. He’s going to give you some great insight. Here we go. Mike, mike, welcome to the podcast. How are you doing?
Yeah, I’m all right. Thanks. Yeah, thanks for having me on.
Well, listen, let’s get straight into your story. Tell us a little bit about you and your background and why you’re here. Talking to us today about your book, the Direct to Consumer Playbook, which, if you’re listening, you can’t see me holding it up to the camera.
Yeah, well, great. Well, yeah, I guess the best way to describe myself as a consumer goods expert, I’ve been into the food drink consumer goods for the last 20 years or so. Yeah. Probably the best place to start for me is that when I left university back in the end of the 1919 or 2000 andi that was in the days of first dot.com bubble boom and all the stuff going on andi really loved all that and I wanted to set up my own business I’m going to do my own thing. So sort of looks at different things and then obviously we knew in 2001 it all went bang and it was like oh, this is not going to be as easy as I thought. But I was really lucky in the start of 2000 andi one that one of my good buddies from school had started working for this weird little smoothie startup in southwest London and that happened to be innocent drinks. So I got in right early, early days, when it was just still a very, very scrappy little startup. And the reason I joined, I mean, it would be quite a fun business to get involved with andi you know, some fun people there, but the reason I joined is because it was a startup and I thought, let’s see what it actually startups all about.
What does it mean to start a business from nothing? How do you grow it what you need to learn, what you need to do. So that’s why I joined and I guess I was just really lucky because it also turned out to be one of the most successful, fun stuff for the last 30 years or so. That was a break bag. It was no accident I ended up working for a start up because that’s what I wanted to do and I do recommend that to anyone. Now, anyone who thinks they want to start their own business, go and find a startup to work for because not only do you see what it’s all about, but you also just work out actually, is it you startups and being entrepreneurs, everyone likes the sound of it, like the idea, but the reality is it’s really hard. Things don’t really go to plan, there’s nothing set up for you. You have to do everything yourself and you have to get involved with absolutely everything. And that’s not for some people, but for those it is, it’s like, wow, it’s a great place to learn and then you can take all those lessons and then do it for yourself.
So that’s what I did. So I was innocent for eight years. Six of those, I was running their operations, and then for the last two, I went up to Scandinavia to launch the brand up there. And that was all thinking about. Again, it’s more I was doing quite a lot for the business, of course, but I was taken, I was learning a lot from that because I wanted to do my own thing. So it was in 2000 andi nine that I finally left after eight years and set up Peppersmith, the natural, healthy confection company, with a good friend of mine, Dan We, co founded that business in 2009, and then I spent another eight or nine years running and growing that business. So I was CEO, so I guess it was my responsibility to grow the business. And again, from nothing to a brand that you could find lots of different places. It was mainly a retail brand. So in the UK, you can find it in Waitrose and Boots and W Smith and Holland, Barrett, Whole Foods Market and a whole host of other places. And then, because we were doing it in sort of the 2010s, this other thing was starting to happen, and that was Ecommerce and Directory consumer.
So we started doing more and more direct consumer at Peppersmith, and it was going quite well. And what was amazing about Direct to consumer is that direct to consumer was growing and we weren’t really doing much for it. It seemed to just happen organically, and retail was actually really bloody hard. I mean, retailers, you hear all the stories about the supermarkets, they’re absolutely true. In fact, it’s probably even worse than you can imagine. It’s tough working with the retailers, but DTC seems to be a great thing because, you know, people just want to buy products from us. We could get to know them. We were in control of pricing, we’re in control of promotions. We could do whatever we wanted with the products. We could do all the things that we wanted to do and give our customers a great experience. So we love DTC. The one thing that happened so this was probably we decided to do more and more DTC about 2014 2015. One of the things that amazed me is that while, I guess direct to consumer was quite new, it wasn’t that new, and everybody seemed to be trying to figure it out.
However, there was very little best Practise out there. There were no books you could buy to tell you how to do it. So what I ended up doing was talking to the rest of my sort of founder peer group or anyone else knew how to consume a business. What are you doing with DTC? And pretty much the same answer was from everyone was, well, we’re doing it, but we’re learning on the job. We’re just trying to figure this out. It’s like, yeah. So we and it really did surprise me that there wasn’t more Best Practise Knowledge Out There. So I really wanted to buy the book which told you, as a brand, this is the best way to do Ecommerce andi D to C. But in the years we were doing it from Peppersmith, right? Until I ended up selling the business in 2018, the book still wasn’t written. So what happened was after I sold, I ended up selling Peppersmith in 2018. After eight years of growing it and making it a success, I worked for the Company for another year and this took me to 2019. And yet, lo and behold, I stepped away from the business.
And this book still hadn’t been written. So the book for brand owners and founders who wanted to do BTC properly. That book wasn’t there. So after selling the business, I had some time on my hands, andi honestly, I needed a bit of a break from running a business. I decided that if no one else is going to write this book, I’ll do it. So then I spent the next two years interviewing all the best founders of the best DTC companies I can find. From Huel, Graze, Bloom & Wild, Casper. Newer brands like Lick and Hiut. I just reached out to all these people.
I mean, there’s some tremendous name dropping going on there, right? Who’s who of the DTC glitterati you’ve just kind of named dropped in there.
Yeah, I tried to get the best some that I didn’t get.
Name some names. Who turned you down?
I never liked Jim. Terrible Guy.
Yeah. Jim from GymShark I really want to get but I didn’t get them. Who Else? All Birds in the US. I wanted to hear their story. They were just doing their IPO at the time, so they said they couldn’t do it. And a few others. But let’s not talk about the ones we didn’t get. Or were the ones we did get. I was really lucky that I was introduced to some just brilliant people who had been running really successful digital brands. I mean, I was lucky because I knew some of them already from being a founder. But, yeah, some of them, it was like one or two links away. And I managed to get introduced. And, yeah, what I wanted to do in the book and anyone who reads the book, it’s a set of business case studies, which really is It’s the story of the founders and the business in terms of where they come from, what their big idea was and how they sort of built their business. But also from that anyone who’s really interested in DTC strategy. What I try to pull out from each of the case studies is what they did to become a success.
Because, as we all know, BTC is actually quite hard. It’s really hard to be a successful DTC business. It’s hard to get scale. It’s hard to get profit competition. There’s lots of it out there. Lots of naysayers. I know you had Mark Ritsen on this podcast. Just hates DTC.
If you’ve got this on without earphones and you’ve got children or grandparents listening, just you might want to put some earphones in quite quickly.
I think Ritson’s turn of phrase was direct to consumer. Load of fucking bollocks, Andi. Direct to consumer, my arse. What a lord of bollocks. I think that’s an exact quote. It’s something like that, anyway.
Yeah, I mean, I don’t really get it. I mean, Mark is like he’s a brilliant marketer and strategist, so I don’t quite understand why he doesn’t see what DTC is. I think he focuses on the fact that it’s hard to lots of businesses sell andi he focuses on what it isn’t, but what DTC enables you to do. It enables you to connect directly with your own customer and find great ways to communicate what your product and service can bring to them. That’s like a marketer’s dream. I don’t know why I say down.
On it, but he is going to take I mean, Mark Ritson is a man who needs no defending. And I’ll put a link in the show notes. If you didn’t hear that episode, there’s a link in the show notes. Go and have a listen. We’ll talk about all sorts of stuff direct to consumers on there. I think to also criticise and at the same time defend Mark. So, in terms of his criticism of Mark, I would say that Richardson spends his life working with monster goliath companies, right. Who are huge global businesses. Mainly. He talks about his work he’s done with LVMH andi all sorts of brands that we’ve probably all heard of. We all see the world through the vantage point that we’re looking at it from. And when Mark talks about direct to consumer, I’m pretty certain he only really talks about the top 2% of DTC brands, the ones whose names just roll off your tongue. Warby parkers, Allbirds, Caspers and people like that. And what he’d seen with those businesses is that they’d raised a lot of money, they’d made a lot of noise, they made a lot of customers, but actually hadn’t made any money.
It’s like if you’re not making any money, at some point you’re going to go bust, selling stuff, selling tennis for a fiverr isn’t as difficult as people tell you it is. So I think that’s his point. But I think as a criticism, he’s looking at it from a very myopic view of, look, these are the kind of top couple of percent. There’s a lot of case studies in your book of businesses that have started DTC and grown to 210, 20, 5100 million in recurring revenue. They’re doing really well andi making money. So you look at that little bit of people have raised Series ABCD funding but are still losing, then yeah, you might criticise it in Mark’s defence. I think one of the things he talks about a little bit is that we’re giving a name to something that already exists. And there are many brands as the DTC is evolving, and this is something I want to touch on over time. Like Nike are getting into Directtoconsumer andi he’s like, It’s not Directtoconsumer, it’s just omnichannel. It’s always been there. You’re just reaching customers a different way. You’ve got retail stores, you’ve got wholesalers, you’ve got whatever.
It’s not different. So I think he’s looking at a small subset, is what I would say. But he’s a man who needs no defence and you could probably have that argument with him yourself on LinkedIn.
Yeah, I remember when we first got on his soapbox about it. This was actually prepandemic in Marketing Week. He wrote a big piece andi was just starting the book, actually, andi was like, this doesn’t make sense to me. So I wrote a rap andi you find it on my website andi a blog if you want to read it. But I’d say a couple of things, which I think is important. I guess the reason that maybe Mark doesn’t get as excited as I do, if he’s focused on working with those sort of humongous brands who have really built all that, they built their business around retail. DTC is probably a distraction for him. But for me, I come from the startup world. I surround myself with founders and entrepreneurs. People are trying to do new things and set things up for nothing andi find DTC so exciting. I mean, not only now, there’s the technology and the infrastructure available, where anyone can start any brand from anywhere. That didn’t always used to be the case. That is just brilliant. But what also DTC enables you to do is because you’re selling Direct to your end consumer, you haven’t got any wholesalers and retailers in the way, you’ve got that Direct connection, and you’ve also got lots of data andi the ability to talk directly with your andi consumers.
You can just find out so much about them and what they need and then you can make better products for them. Andi as you know andi see this world, I live in the world again, I’ve been to the founders and entrepreneurs. We’re here just to make better revolutionary products and services. That’s why we’re here. We’re not just about just trying to make a slightly better mouse trap or just trying to set up a new line, because we’re a massive company and when we need to get a bit more revenue in general, we’re trying to do new things in new ways. And in the last ten years, the technology has become available where more people can try more things. And I’m always going to celebrate that.
So there’s lots of stuff that you’ve said in the last couple of minutes I want to kind of pick up on andi dive deeper on. I’m going to come back to the negativity side of it in a minute. We’ll cross that bridge but you use the phrase there that you used in the book about we’re just trying to build a better mousetrap. Are we trying to innovate and disrupt sectors and things like that? And is this about the journey that DTC has gone on, where the initial companies, like genuinely having bought a mattress about two years before I’d even heard of Casper, and that experience of delivery charges, strapping it to the top of the car, trying to kick it into the back, and for the whole thing was a disaster. It was an awful experience from beginning to end. And then you start to see these people delivering mattresses on bikes in New York and you’re like, my brain can’t even compute how you deliver a mattress on a bike. And there they were doing it. So this sort of approach of DTC isn’t just about building a better mouse trap, it’s about complete innovation and doing things hugely differently.
Has that kind of waned a little bit now as the industry is maturing, really, and we’re talking about just people launching maybe just slightly derivative products, but it’s more the business model that’s different.
Yeah. Andi think this is part of the problem. If you’ve just got a slightly derivative product, especially for a new brand, the chance of you are succeeding are so, so small. I mean, you’ve got to as a new brand, you’ve got to have all this sort of marketing education and awareness and excitement to actually get people to come to you. And if you’re new and your product looks, you know, it’s only slightly better, it might be a bit more expensive because you’re going to be a smaller why should anyone make that switch? Even if you’ve done the work and spent the money, where they come to you, it’s like, actually, this only looks a little bit better, or I don’t see the difference. And why should I buy from you? Because I don’t really know you. I can’t trust you. I don’t know if the product is going to be do what it said it was going to do. I don’t know if you’re going to behave in the way that I expect you to behave, so I’m just going to go to someone I trust. So that is the problem of just doing something slightly better.
One of the case studies in the book was a guy called Oliver Bridge, who set up Cornerstone. He was one of the first real big DTC successes in the UK. And early on he saw what Dollar, Shave Club are doing in the US and thought, that’s a really good opportunity for UK and Europe. So he was the first one to do it here. But what brands like Dollar, Shade Club, Cornerstone and even Casper, what they’ve seen is if they can show that they can demonstrate a successful business, they’re going to get competitors, right? And so the competitors come into the market and it makes it marketing becomes more expensive and it’s just a bit harder to actually get people to buy your product because there’s lots of chances out there. Mattresses is a good example where what happens. Casper really started the revolution, but then loads of other companies came into it and then they tried to land grab and then everyone was cheaper than Chat. Casper doing the same thing. It’s like, wow, this is really tricky. So Oliver from Cornerstone said to me, like, mike, if you’re going to launch BBC brand today, you’ve got to be ten times better than what’s already out there.
And that just means, actually, you’ve got to be significantly better in terms of quality, service or price, or then probably revolutionary in what you do. And if you do those things, that’s going to mean that you’ve got well, so long as people want it, you’ve got a chance to succeed. But if you just do the same thing as everyone else, I mean, as an entrepreneur, I just find that really boring. Why bother?
I think the classically trained marketer in me looks at the four PS product, price, place and promotion. And the more of those PS you can be different on, the more it starts to separate your offering. So if your product is different but you’re selling it in the same place, it’s for the same price and promoting it in the same way, it just looks the same, even though it may well be different, if your price is different andi it can be higher or lower, then that helps you. And if you’re selling it in a different place, which was probably a standout for a lot of DTC businesses initially, we’re selling online and direct to you, it’s 2010. This is new. That’s maybe not as unique anymore, but there are ways, in terms of putting that business model together and recurring orders and the promotion of it, can you do that differently? If you can put two, three or four of those differently to everybody else, you start to separate yourself from the market. And some great studies in there of companies that have done that a little bit, I think.
Yeah. Andi think this is where people see different to where it was ten years ago. Andi maybe there’s some of that legacy. Cynicism is still around. Like Dollar Shave Club is a good example. It’s a dollar shave club. They just said, look, we’re going to produce quite good products, but are they any better than Gillette or the other brands that you can buy? Maybe not, I don’t know. That can be quite subjective. But what they said, we’re going to do it cheaper because we’re going to cut out all the middlemen. There’s no wholesale, there’s no resale, we can sell the direction, so it’s be better. But I will give you a subscription so you never have to think about this again. So that was actually more convenient and it was a bit cheaper that’s great. But what has happened again, you know, the last ten years, all of those, I guess that low hanging fruit has gone. So brands now have to be a lot more innovative. They’ve got to have a better product, they’ve got to have a price where customers see real value. And they’ve also got to treat their customers really well.
They’ve got to give them great service. And that’s not just service in terms of just making sure the product gets them once they’ve ordered it, it’s after service. It’s about giving them more information, it’s about helping them use their products. That’s what all the best brands are doing now. Andi DTC, it does give you a platform to do that, because you’ve got your website, you’ve got your newsletters, you’ve got your emails, and some are using SMS. There are different things you can do. You’ve got to do it, but you’ve got to do it well, because if you don’t do it well, you’re going to lose out.
So I think one of the key lessons I took from the book is this focus on customer service. And it’s something that we know anyway, but the kind of a real customer service is a differentiator sort of came through from some of the case studies you told in the book. Now, I don’t mean to be rude, Mike, but you and I are possibly of a similar vintage, which many younger people would just call us really old. And sadly, this is a thing, right? And you talk about customer service and being able to be easily contactable, putting your phone number out there. I put a post on LinkedIn the other day about my top tip to younger marketers is to get comfortable using the phone. Pick it up, talk to people, answer it. It’s a superpower. And the number of people who criticised me for that post, it was unbelievable how it’s only what boomers do. There was one guy who said only boomers and undesirables use the phone these days. Wow. Right?
I love it.
So much hatred and anger for like, just talk to people. But this comes through really strongly from the book about having a direct relationship with your customers, is not just about ones and zeros on reports and Google Analytics and sales figures, it’s actually about talking to them, isn’t it?
This is how you find out your job as a brand is to serve your customers. You’re meant to be solving problems, making their life a little bit better, and that’s your job. Unless you really understand who they are, what their values are, what they want, how you can serve them, you can’t do that properly. And one of the best ways to do that, you can do it via, you can use the data to tell you, like, who clicked on what product, what’s selling well, what’s a good review. You can do customer service, soccer, you can do customer surveys. That’s great. You should all do all these things, but a really, really powerful way of doing it is actually just talking to customers. Andi again, I do this time, all the time in Peppersmith. Andi the way you normally get to do this is some people call up, they’ve got a question, but most people would actually call up because they got a problem if they didn’t understand something or they got more likely it was a problem with their delivery. So your first job is to solve that, whatever it was up, fix that for them.
So once you’ve done that andi you’ve done it in a really quick, efficient, polite way, then you’ve got them on the phone and you’ve got this opportunity to ask them, how did you find how did you find us? What do you think your favourite products? I mean, how often do you buy? Where do you normally buy from all of these things, you can find out, what do you think we should do next? It’s just a brilliant resource and in the book there’s a great one of my favourite stories is tells Ecomm, so tells.com Do Pet Food and they started out in, I think, 2014. So this is when DTC was first kicking off and they got it into their heads when they first started that because they were a tech business, maybe they were they can’t have been boomers because their big idea was like, let’s just do things all electronically. We don’t need to have phone numbers, we don’t need to talk to our customers. It’s just like, you know, we can do it with automated emails and just using great tech. That business nearly failed within six months. It got to the point where they had that meeting with the board andi investors like, shall we carry on?
Because the numbers look really terrific. If we continue, we’re going to run out of runway. And then it came over. What they did instead is like, look, we’ve got a really good set up, we think we’ve got really good products, but our customers don’t seem to be quite getting them. How do we do that? And what they did, they started talking to their customers. So they started they put a phone number on their website, they started proactively calling customers, having those weird boomerang conversations where you talk to someone and you’re asking questions and then they ask you questions and then you find out more and you build rapport and you build a relationship. But from that, what they found, there was a couple of things there a couple of small things that we’re doing wrong that were having big impacts. But also, because they were having those conversations, they discovered what the real passions of their customers were. And because they were also talking to their customers, the customers realised they had a load of shared values. I mean, they primarily they were just really, really cared about dogs. Andi dog owners love their dogs and.
That’s what they want to talk about. And when they found out, the company will serve them. Also love dogs and wanted to look after dogs and could talk about dogs all day, it’s like, wow, we’ve got things in common. I trust you, I know what you’re about. And then they built their business from there and it’s gone from strength to strength. In fact, they sold it to Nestle a few years ago and the business is still going from strength to strength. But they could not have succeeded without having those direct conversations with their customers to find out what was up and what their customers need.
I think, as well as being really old, you and I both share an allergic reaction to dogs as something that we have in common. You mentioned that in the book andi can’t think of anything worse than email@example.com because I just meant my whole life. Sneezing but you mentioned that you used to do this Innocent, where I think there’s a lovely line you use about yes, it can be a little bit of a distraction to the day to day, but how important is it just to lift when the phone rings, everyone in the organisation was told to answer it. Yeah. And that sort of approach to doesn’t matter what your job is, your job is talking to the customers. It just puts the customer right at the heart of the organisation, doesn’t it?
Yeah, it’s great. I mean, it’s brilliant to you just talk to customers. I mean, it’s actually it is a distraction because sometimes you get your head down andi you just want to get on my staff, you’ve got deadlines andi all the things you have in every business, but when that phone rings and you talk to the customer, it’s a reminder of what you’re all about. You are all about just making products for these people andi you just have all sorts of conversations. It’s fantastic. It’s something I learned very early on, Innocent, andi guess that goes through all of the businesses that I’ve ever worked with and it does make me cringe now andi think, this is where a lot of DTC and actually brands in general get wrong when they outsource their customer service team.
All is important to us. Please wait for another hour and then.
You get someone on the end of the line who just hasn’t got a clue. They read from a script and they can’t really help you out and they can’t add more than maybe just solving that initial problem, like, where the hell is my delivery? All those brands miss out on that. Such rich interaction. But also, they’re not building relationships andi they’re not building trust, they’re not building credibility. It’s such an angle.
Andi this is where brand is important and misunderstood. People think, well, we’ve got a brand, we have a logo, our branding is strong and we do brand advertising, therefore we’ve got a strong brand. Every touch point of the customer with you is your brand, and those bits start to fall down. I love the Ritz Carlton approach where I think everyone who works for Ritz Carlton has a budget of solving customer problems. If you go with a problem, whether it’s to the dormant, the receptionist or the cleaner, they can solve that problem up to a certain value without having to go and get anyone else’s approval. And they trust their staff to do that. And it’s like, if you don’t trust your staff to do that, why do you trust them to have a job anyway? I just think it’s such a simple way of approaching it, but so complicated for so many companies.
But that’s where you’re there. You’re there to solve problems. That’s the job. Andi what brand? You’ve missed out. You mentioned that people think they’ve got a brand because they’ve got a nice website and a nice logo, and sometimes they put some post up on Instagram. They’ll do whatever. But a brand is all about this is the way you communicate who you are, what you stand for, what you care about, and what you can do for people. And it’s so hard to do those things just by having a nice website. You’ve really got to build a community. You’ve got to build relationships. You’ve got to build conversation. And that’s just not in your own conversation. Andi JP, the founder of All Plants, that he wanted to make sure he’s got a brand, and a brand story where people are talking about it around it in the table. And you can’t do that with an Instagram ad or a nice website.
Definitely. I hope no one listens to the last two minutes because you’ve given away kind of 90% of what I do as a job. So hopefully if you were listening to that, forget about it. You can just employ me to do it. It’s fine. We’re talking. Talking to customers doesn’t make any sense, but let’s stick with it. Which leads us into community. There’s strong stories in the book about how DTC brands build community. Is it possible to have a DTC brand without building that community? Or do you think it’s an essential pillar of success for DTC?
It’s really possible to build a DTC business with no community, but it’s not well, I guess it’s possible to build a brand, but if you want to build a strong brand, you have to have community. And remember what community is. A community is a collection of, likeminded, people who are all focused around one thing. And the thing that the community has in common is what you do, what you stand for, and what you do for them. I mean, good examples in the book, there’s Tribe. They make sort of snack bars and food and drink for primarily for the athletes and runners, although it also makes it healthy snack to anyone, for anyone but their community. There’s people who care about fitness, running, cycling, and that’s the thing they’ve got in common. But I guess what they’ve also got in common is events andi nutrition and a certain way of looking at life. And they’ve built a community around that. And what tribes have done really well is they build a community of likeminded people and they get their community together at mainly running events. They do lots and lots of events and some of them can be like a half an hour sort of jog around the park at dinner, all the way up.
So they do these multi stage, multi country events, which they’re huge, so they have all these events and then those people come to the events, they make products for them, so they end up just being find out what that community needs and they make products to serve that community. And then what they also do is that with their products and their events, it’s all about they give, they raise a lot of charity andi people don’t know about Tribe. Their main reason for existing is for their foundational charity, which is all about eradicating modern slavery. So they have these events which are the primary andi the primary opportunity for them to raise money for the charity. And then all the people come to the events they make products for and then they use the money they make from the products to create more events. So we call it this Flywar effective, just build and build the business. So you’ve got the charity, you’ve got what they’re into, which is running the fitness, and then you’ve got the product.
Yeah. Brilliant story. It’s a brilliant story. So as we’re going through and ticking off some of the great brands in the book, I talk maybe about some of the others now into maybe some of the nuts, some Boltsy background stuff of running a DTC, vertical integration. Running everything from production through to arriving with a customer is an important part for a lot of the stories in the book. It’s a difficult thing to do, though. There’s a reason why for years and even now, lots of companies just specialise in doing one bit of that value chain. How important is it entity to see businesses to be in control of everything from sort of cradle to grave for one of a better phrase? And how difficult does that make it for new businesses?
Like all things, it depends. I mean, what virtually integrated businesses, it just gives them complete control. And this is really important if you’re doing something brand new, so if you’re doing something way different from everyone else, you cannot just go and find a factory to do it for you because it just doesn’t exist. I mean, the very first example I saw of this was actually Gray’s grace.com back in sort of 22,000 andi ten. So Grace started a very similar time to Tab Smith and they were down the road and I knew some of the people there. And it was just such an eye opener to me that they were doing things in such a different way to how we were approaching things at Peppersmith and the things we were doing at Peppermint, very similar to the things we did at Innocent. So, yeah, I guess that was an older business model. So we were finding suppliers to make products and we’re putting in our efforts into making products and then selling them to retailers. Whereas Grace was like, no, we’re going to build our own factory, we’re going to make our own products, and we’re going to ship them directly to the end.
Consumer. Wow. Okay. I saw a git lid direct to consumer a bit, because that seems like a good way to get products made to be but why aren’t you using a factory? I said, well, we can’t use the factory because no one does things in the way we want to do it. So they had to do it all from scratch. And it was like, only we know two years later when that business had hit 50 million, I think I don’t know if we’d even got to our first million at that stage. It’s like, wow, maybe that was the right way to do it. But what it means for any businesses who are looking to have the strategy where they’re doing everything, it takes a lot of infrastructure. You need big funding to do it. I mean, all plants are a great example. They’re making all their food from scratch and it’s just knowing sort of their story. They’ve gone through so many kitchens and warehouses over the years, it’s been really difficult for them because they can’t just buy, we’re going to build a factory that’s going to serve for the next ten years because they don’t quite know what the demand is.
Andi they certainly can’t afford their infrastructure. They’ve got to do it bit by bit by bit andi guess their infrastructure has to grow with their demand and their business. Whereas if you’re outsourcing the great bit about outsourcing is that you’ve got full flexibility. If you need more, you can ask them more. And if you need less, you just ask them less andi that’s it. And you don’t get that if you’re versatile integrated. But what versatile integrated gives you is complete control. And for a lot of offers, that.
Is absolutely essential andi think there’s a huge capital investment, isn’t there? You mentioned gray’s in there. One of the founders had just exited somewhere and love Film.
Yeah. Love film. They had a huge success with Love Film. And then the idea of they were delivering it was that sort of pre Netflix age where you were delivering DVDs through the post.
Great service, no late fees ever. I still remember the start line, as.
Opposed to going to Blockbusters, which was good and bad. There was that. And then they thought, Why don’t we use that model, but do it with snacks instead. That was pretty radical. Andi one of the things, one of the real lessons from that was actually it’s the sort of thing if they were food and drink experts, they would have thought that’s a stupid idea, but because there are outsiders, they were just able to apply what they did with DVDs for food and it completely worked. So this is one of the things, if you’re starting a new product or service, you’re absolutely going to get incumbent saying, that is the most stupid idea I’ve ever heard and it’s not going to work. And you know what? They might be right, but the ones that are not right, yeah, they’re the ones who are kicking themselves two years later going, bloody hell. Yeah, that was a really good idea of the right way to do things.
Talk to me then a little bit about the personalities behind the business, because in the book you focus on the things they did, but there was something that was kind of weaving through the book that I didn’t really land on right until the end. I think it was Bloom and Wild, the flower company their founder had been at bain JP from All Plants had been at, McKinsey greys.com had come out of the Lovefilm founder. There was the type of company that I forget she was a business consultant andi the guy who founded the jeans company hype Jeans in Wales andi kind of worked in ad agency backgrounds. What it kind of spoke to me about when I finally got to work it out was that a lot of these found. This isn’t the entrepreneur that you see in the films, which is Zuckerberg coming out of college and coding something in his bedroom or the Steve Jobs garage. Sort of Steve Jobs Microsoft founding story of building a new garage and then off you go. These are people with kind of sterling business credentials who could probably go and get a job in any high street bank in a fairly senior position, who have decided to do something different.
Is that just have I misrepresented some of the interviews you’ve done andi maybe just found the evidence to fit my hypothesis, or is that the sort of personality you found behind the businesses?
No, I mean, there are a couple of founders in the book that have really I guess they were young and experienced and their passion took them to where they want to be. I mean, the best example actually was Jane, the founder of Sugar. She was an art student who came across this she invented this amazing product which if you don’t know Sugar, it’s like a moulded plasticine that sets overnight. It’s really handy for making and repairing. Andi she invented this thing at art school and then she spent the next six years actually trying to refine it so she could commercialise it and sell it. She was a great example of someone without a business background who made a success. But you’re right, for most of the founders, they have done stuff before either. They’ve had their own businesses before. You mentioned David Hyatt from Hype Denim. He was the founder of how. He’s out, and he did that out coming out of that agency. There was Graham at.
Kaspar team as well. Ugly drinks. Who’d worked at Coco Vita.
Yeah, that’s industry experience. But one of the points a lot of the founders have actually started, they’ve had more than one business and those who hadn’t, they’ve been quite successful in whatever field they are in. And the reason that comes through the book is because, again, running businesses is really hard. Having successful brands, really hard. Having the networks to solve all the problems that you need to solve to make things a success, that takes a lot. And it’s very hard to do that with no industry expertise. So most of the founders, they’ve learnt their lessons and all the founders, they’re still learning andi guess they get better and better at the job each day they do it. It really helps. Andi this is why I go back to start this interview. I knew when I wanted to start my own company, it’s probably a really good idea to work for another startup so I could learn. Yeah. Andi my plan, actually, when I joined Innocent, I wanted to be there for two or three years, get that experience and then go off and do your own thing. I ended up being there for eight because it was just such a brilliant company to work for and I was learning so much.
So, I mean, I think that’s what you got. So all these founders, they’ve got a real thirst for knowledge. They want to learn and they want to be better. But one thing that really came through the book andi talk about this in the summary is they have a real passion to make products and to serve. They’re not entrepreneurs who just see a gap in the market and they’re like, oh, we’re going to exploit that gap. There are actually people who really care about their crafts, what they do and what it means to their own customer. And that’s probably why they also so good at customer service, because it just.
Comes naturally to them. So let’s get miserable about this for a minute, okay? There are challenges out there at the minute. We’re coming into a recession, but everyone is facing that recession. But there are a couple of things that are happening in the market at the minute which are making DTC look like a bigger hill to climb than maybe some other industries are facing. So you talk about this in the book, the rising ad costs on digital. It used to be you’d throw some money at digital, customer acquisition costs were all great for various reasons. Declining use on Facebook products and more advertisers coming in. Digital prices are skyrocketing there. You talked about the technology used to be a huge barrier, but you had to work out when you started Peppersmith, how to cobble different bits of systems together. Now, by the time you’ve listened to this podcast, you could build your website, have most of everything built while you’re listening to us talking and launching an hour. What that also means is that barriers to entry for this have just fallen ridiculously. Everything that makes it attractive for you to just start up your own business looks that way for everyone else as well.
So you’ve got rising competition, rising cost of customer acquisition, and all the big companies are looking at direct to consumer and thinking, why don’t we do this? We can make better margins and have a data relationship. I mentioned Nike. I think they make something like 40% better margin by selling direct andi selling through a retailer. So you’ve now got the biggest companies in the world moving into a direct to consumer, selling people. Is this not just a huge mountain to climb that is going to see direct to consumer confined to a footnote in history of like, the second combo?
This is just how it’s always been. I mean, there was anyone who wants to make a product and set up a brand, build a business, they have to fight for their space. There was a brief moment in time about ten years ago when Facebook ads were cheap and there wasn’t so much competition out there. You could be a Dollar Shave Club and do something not that radical, but you can make a real success out of it. Those days have gone, let’s get over that. But let’s just focus on all the things that people have been focused in, focus on ever since. They’ve been making products and services, which is making sure that you’ve got a better product that solves a real problem and you can deliver that to your customers at a price that they find acceptable. That’s your job. And that is no different now than it was ten years ago, 50 years ago, 100 years ago. So it is really hard to build brands and build businesses. There are advantages of DC, as we said, the low barrier of entries. You can get a product out there, you can test it, you can see what people think of it, you can do that’s easier than ever.
But if you want to build a big sustainable business where you’re turning over, you need to be in the millions to make it really viable. Yes, there’s lots of competition out there, but if you’ve got a product that serves a need that no one else is, and you care more about it than anyone else, there’s a good chance that you can still succeed.
I don’t want to just make this a written podcast, but I’m going to ask the question anyway, because when you said Dollar Shave Club, that’s one of the things, the examples I think he gives is that Dollar Shave Club, we talked about being a success and they exited having sold a unilever for a frighteningly big number. But I’m already thinking they never made any profit throughout the whole time. And when unilever bought them, still haven’t made a profit since then.
Yeah, and you know what? I don’t know all the numbers for Dollar Show Club. The numbers I do know that is for Casper, who, you know, similar vintage and similar size and similar renown. Yeah, they made profit at the beginning of their journey, and that’s because they just had such a great business model and a great brand and they were making profit. And then all of a sudden, all the competition piled in. Some of them were under, cutting them on prices and there was just a lot more to choose from. And it meant all of a sudden, they were having to spend all of their money and marketing just to stay alive. And that meant that they didn’t make any profit. And this is why, when they launched them, they did their IPO andi launched on Wall Street. Stock market didn’t like them very much. And people like Mart Rinse andi could definitely say this is a load of crap, because they hear the a business that thinks is big and successful and they never make any money. So there is a bit of that. And I think what the problem is, is that the DTC landscape changed so quickly, it was very hard for lots of businesses to react.
I remember I don’t know if you remember them, but there was a great business where they still around now, but in a different class called Mahabis, who made slippers, and they sold lots of them by doing Facebook ads. And they were a real success for a really brief period of time. And then they lost money and they went into administration and it got really ugly. But all of that story, that timeline from start to this is absolutely amazing and brilliant. So actually, this is a disaster and we’re dead. That was over about two or three years. So I guess the rules of the game have changed. So, yes, it is hard to make money. But again, it’s about if you think about it from first principles there’s build products, it’s built great brands. And if you can do that, you can build up a business. But what you can’t do, and this is where, again the criticism came into DTC, is there was a lot of hype and a lot of businesses were overvalued. Like Allbirds, for instance, when All Birds, they launched their stock offering that went down 60%, I think, in a month or so.
Does that mean Allbirds is a bad business? No, it doesn’t. But what it does mean does it mean it was overvalued? Hell yeah.
But that’s not a DTC problem, that’s a stock market problem. The stock market is atrocious of value in businesses andi it’s supposed to be the thing that’s great. You only have to look at the WeWork fiasco andi you’re like, yeah, value of the business this way. Look, there’s nothing rational about the stock market. There’s all sorts of studies done about how irrational people buying and selling motivation is on the stock market. So, anyway, that’s podcast for another, it’s.
The same with, like, BC and investors. A few years ago, B season, investors were throwing money at DTC, thinking it was the next big thing. Actually, now there are a lot more circumstance, like, oh, show me your products, show me your route to market, show me your growth plan, show me your business model. And then if you’re really lucky, I might take a small pun. I guess it’s changed, but again, there’s still lots of opportunities out there. Just know going into it, it’s not going to be easy, but DTC just go back to why DTC is important. DTC is a really important platform for learning about what your customer needs and making better and better products. So you are crazy as a brand not to embrace it.
Absolutely. Now, I have a quick question I want to ask about advertising. We talked briefly on the rising digital ad cost and there’s two different views of traditional ads. In the book, hewell the founder, there was a bit like, we tried some traditional ads and it was a complete waste of time. Casper found it a really great way to kind of protect their brand and their price point when they launched, when they were getting hammered by competitors, by using some more traditional ads. I’m sure the answer is a little bit, it depends. But do you have a view from your experience or when brands should sort of move into more traditional advertising space?
Again, it depends. Traditional advertising generally is more expensive, so you can’t do that until you reach a certain size. But it’s just again, it’s just another way to communicate to your customers. So, I mean, the differences in terms of digital ads and traditional ads is digital ads, you just get access to more data, so it’s easier to see, is this particular campaign, is this particular activity, is it working? Is it not? What do we need to change? You can do a B test andi all that sort of stuff, and you can’t do that on where it’s a lot harder to do it in terms of original ads. But once you get used to that, to refine your messages, and once you get your messages right, then you can, again, your products are right and your messages are right. Why don’t you take that to a wider audience?
Yeah, brilliant. Look, I’m aware of the time, so I’m going to throw a couple of quick questions at you. Firstly, retail, you started off mentioning retailers. How difficult is it working with a high street retailer? It’s often seen as like the future for a lot of businesses. But it’s really challenging, isn’t it?
Yeah, it is really challenging. Andi again, because there’s such a high barrier, you’ve got to make sure you can serve their customers really well. You’ve got to have a product that is really fit for purpose. You’ve got to have a supply chain you can deliver in, you got to have your packaging right, you’ve got to have your customer service right, and you’ve also got to be able to deal with the demand of the reseller itself. And that is really hard. So, yes, it is difficult. And also retailers, because of competition from the likes of Amazon, they’re not making the same margins, they’re not making the same profits as they used to be. So they’re going to try and squeeze you as much as they possibly can because they have to. And that means if you’re not well set up to be able to absorb that pressure or know what to do, you’re going to struggle. So retailers, they still serve a purpose, right? And again, your job as a brand to make sure your customers get your products, some of them do, it d to see. For some, it’s actually going to be really important to be in the shop.
A lot of people still don’t want to buy a product that they can’t feel, they can’t look at it, they can’t see the packaging, or do they know the reseller? Because the resellers also done their vetting. They’ve sort of said that you’re a product that you’re suitable to be sold to my customers. So they’ve done a lot of the legwork so that customer knows that things go wrong and what the less likely to go wrong in the first place. But if they do, the retailers can’t help me out andi fix the problem as well. So they’ve got all that.
We have a great brand powered on the retailers.
Retailing is still really important, but again, it’s different set of rules. And there are some great examples in the book as well, DTC brands who want to make that leap into multichannel and they didn’t really understand what the retailers needed for them or what the retailer, the retailer infrastructure was going to mean to their brand andi their business and things got very, very hard. So anyone who’s interested in sort of how to get multichannel, that’s covered in the book as well. I’ve got some really great stories. Subaru and Casper are two good examples.
Brilliant. Listen, Mike Stevens, the direct to consumer playbook, there’s a link in the show notes. If you want to click on it, you can go and buy the book. I recommend it so much. I left a review on Amazon I mentioned about case studies, but it’s not a case study book. Don’t think back to university days and think, oh, case study after case study plough through. There’s a lot of micro experience in there and. Some great storytelling, which kind of brings it all to life. So I definitely recommend it. Where else would you recommend that people can go to keep in touch with either direct to consumer or just business generally? Where do you read or listen to or what would you recommend?
Yeah, I mean, there’s loads of great resources. I mean, there’s loads of good podcasts on just direct consumer, but in general but I would say find out what you’re into. This great thing about the Internet, there are so many resources out there. Find out what into. I read a lot of books, which is why I wrote books. The book wasn’t there. So if you’re into marketing, I would recommend Steph godin, his books are fantastic. If you’re into brand building, again, there’s loads of good resources. One thing, actually, you might want to cheque out. It’s a resource that I really believe in. I mentioned David Hyatt, who owns Site Denim. He also owns the Do Lectures, who do a whole set of resources about entrepreneurial brand building. Really good resources. Cheque them out. So I think that’s a good place to start.
Brilliant stuff. We shall drop links to those in the show notes. So, Mike, thank you very much for coming on the podcast. It’s been great to have a dance through direct to consumer and learning and great. Let me try that again. Mike, thank you for coming on the podcast. It’s been great having to have a dance through the book and find out more about the great stories that are in there. Definitely recommend the book. I’m not just saying that because Mike’s out there. I’ve already told about three or four people to buy it and send a copy to a client. So I’m definitely a fan. Mike, thank you very much for your time.
It’s a pleasure. Thanks so much for having me on.