Four lessons for DTC operators
Carving out your niche as a DTC brand is difficult.
While the growth of marketplace giants like Amazon has been well publicized, DTC is growing as fast as ever. Whether starting out of a basement or brainstorming at a cafe, more people than ever are choosing to build and sell products direct-to-consumer. That path, while exciting and fulfilling, is a difficult one.
Thankfully, there are many who have walked that road before that any seeking to dive into DTC can learn from.
Here are four takeaways from a recent Chalk conversation with four DTC operators.
BUILD IN PUBLIC
Prospective customers want to follow the journey. DTC brands should take advantage of their journey and the ethical foundation beneath their efforts. While it may seem counterintuitive to discuss your strategy and all of your failures publicly, it can actually speed up the iterative process and create a real connection to your brand, or even you as a founder.
Gefen Skolnick, founder of Couplet Coffee, is the epitome of public growth. Leveraging Twitter to build her brand and share her journey allowed her to raise an angel round for her DTC coffee brand, which likely would have been far more difficult had she begun the company behind closed doors.
Getting traction as a DTC brand is difficult, but radical transparency on the process of building a company creates trust and solidifies your status as an expert in your field. It also shortens your feedback loop from customers and attracts talent to your company. Focusing on this transparency helps close the gap to some degree between brands that leverage traditional retail avenues and those that choose to go the DTC route, and Gefen’s coffee brand has and will continue to benefit from trust in Gefen herself. Her emphasis on sticking to her own voice built an extension of trust in her brand.
Many brands, including those in this panel, choose the DTC route as a matter of principle. Whether it be ethical or environmental concerns, there is little desire to stray from the core tenets of the business. Building in public allows potential customers to have a sound understanding of that foundation, which in turn creates a synergistic relationship with the brand.
FOCUS ON MICRO-INFLUENCERS
Every brand wants to partner with creators that have achieved scale. While working with well-known creators isn’t a bad idea, DTC brands don’t often have a lot of cash lying around. That’s why DTC brands should focus on micro-influencers.
Jason Wong, founder of Wonghaus Ventures and Doe Lashes, leveraged the capital they did have to target micro-influencers that were smaller and focused on a niche that their product would resonate in. Focusing on creators with 15 to 30K followers, Wong’s eyelash brand ensured a genuine connection with prospective customers while ensuring cheap user acquisition costs. For a company focused on a sustainable product that has comparatively thin margins, finding this balance was vital to growth while not sacrificing on the bottom line or on their principles.
Creators can be the loudest advocate for a company, but it requires just as much knowledge of your persona as traditional ad spend. That means finding creators that align with your product and have an audience that is likely to buy your specific product. For Wong, differentiation was even more difficult in an industry where customers are sensitive, which was eyelashes. The best way to show that the product lived up to the hype was to ship it to micro-influencers who would actually use the product. Getting a small amount of passionate customers and a loyal brand ambassador while limiting your cash outflow is the ideal scenario for a DTC company, and micro-influencers can and have delivered that.
UNDERSTAND YOUR SUPPLY CHAIN
A large part of building a successful DTC brand is finding inefficiencies in larger scale competitors. Those inefficiencies are typically found by understanding the supply chain of the particular product being sold, and where improvements can be made. This was how Ben Sehl, founder of Kotn, found success selling sustainable basics.
In a brutal industry, Kotn was able to build a sustainable knowing the inner-workings of where their product was sourced, as they took trips to Egypt to get an up-close look at the quality of the cotton they were sourcing. Most companies go to sourcing agents or mills and then move to factories. Sehl chose to vertically integrate their supply chain, which meant full traceability, ensuring quality and meeting the ethical guidelines they had set for themselves, while also allowing for acceptable margins, all because they understood the foundation beneath making their shirts.
Focusing on your supply chain allows you to accomplish a variety of goals with your product. It allows to understand where your inefficiencies are so you can boost your margins, it allows for tracing so you can ensure ethical guidelines are met, and it allows for good relationships with your suppliers and trust from consumers. All are essential for a DTC business to thrive.
STICK TO YOUR PRINCIPLES
For someone to make toothpaste tablets in their living room with their own press, there has to be a compelling reason. For Lindsay McCormick, founder of Bite Toothpaste, there was, and those reasons are at the core of everything her company does.
Bite sells toothpaste tablets, with an emphasis on eliminating plastic waste from our routines. The ethical implications of moving beyond the tube aren’t just a disparate part of what Bite does, it’s at the very center of it. That means that the core ethical foundation of the product shouldn’t be sacrificed to beef up margins or expand the total addressable market. If that choice is made, you risk degrading trust and losing existing customers who buy the product for those very ethical reasons, which in Lindsay’s case would defeat the entire purpose of Bite.
Jason’s story applies here as well.
The lashes they made were ten times the cost of the cheap product made with cheap, North Korean labor. They didn’t want to raise the price, as they were focused on affordability, but that meant thin margins. They could have sacrificed product quality or company integrity to juice up their bottom line, but that would have gone against the core thrust of the company, which would defeat the whole purpose of the product in the first place.
MAKE IT WORK
Fundamentally, the lessons learned are products of grit and of minding the details. Whether it be an efficient supply chain or radical transparency, DTC companies face a variety of challenges that retail-centric companies don’t face. The four speakers on the panel prove, however, that DTC companies can thrive and elevate impactful ideas to scale if done right.
Niche products can succeed due to the rapid decentralization of commerce, which means that a product you concoct in your kitchen as a passion product can become someone’s livelihood and disrupt an industry.
If you’re a DTC brand and you’re ready to step up your creator marketing game, let’s talk.