Over the years I’ve purchased from a lot of direct to consumer (DTC) brands. Always rooting for the underdog, they appealed to me on multiple levels.
As a contrarian, the fact that these brands weren’t the default choice, made them interesting. Intriguing. They weren’t the big mainstream, me too brands. They were quirky. They were interesting and had soul.
That said, more often than not they were unable to get me back a second time. I’d be one and done, and as such they paid more for my business than I did for their products. Did I like the products? Yes, mostly. The idea that DTC brands deliver more value has been my experience. So if it was better, then what was the problem? I realized long ago that most of my purchases were in, what I’ve come to call, default mode. At Storyhub we’ve analyzed millions of purchases, so my default mode pattern is anything but unique. For most DTC brands the one and done customer is a large majority of buyers, representing 70% or more. Let me explain the default mode.
It first dawned on me about ten years ago, with a local Italian butcher. I loved this butcher. The products, the vibe of the store, the authentic connection with the owner and their love for their work. Everything worked for me. It spoke to me, with a single exception. Shopping there was one extra step. Was it a big step? No, it was under two miles from my home. I loved it, passed it all the time and yet they probably got 1 out of 10 purchases of meat from me. Most of my money still went to our local mega grocery store. Why was this the case? The answer is that it required me to break my default mode. I’d find myself inside the grocery store and have to decide between a less desirable product right now, check it off the list, or a better one with a small extra step. This is very similar to the challenge DTC brands face. DTC brands want to build businesses with their own unique identities, so they will always represent that additional step. By definition, they’re a step away from Amazon, Walmart or Target.
For my butcher, if I defaulted only 8 out of ten times, their LTV from me would have doubled. 7 out of 10, tripled. Unlike modern DTC brands with drip campaigns, win backs and all the other tools at their disposal, my butcher did exactly nothing to try and pull me into a relationship. Humans love relationships and there are certainly local stores that pull me in far more frequently because of them. The trick is that relationships take time and exposure to build, and new DTC brands have to win them in the most competitive markets in human history, against a default mode that looks like Amazon.
If DTC brands are going to become great businesses, they need to master that initial moment to create an experience. They need to turn the curiosity of the initial purchase into a relationship that’s lasting, valuable and memorable to their customer. While it might be my age, I like to think of these moments in physical terms, because they evoke experiences through the senses, to connect more emotionally.
Let’s imagine about what a better experience might feel like. You’d walk into a wonderful Italian market and be struck by the sights, sounds and wonderful smells all around you, you’re transported. This isn’t Costco! You weren’t in a store, but something more. It literally transports you to another place and time. Greeted with a smile, the older Italian man behind the counter offered you a slice of salami, like you were an old friend. The chewy salty treat crowds out the thoughts running through your head. You are pulled into the here, and now. It’s delicious. It was so good, you ordered a half pound, your family had to try this. They gave you ¾ of a pound but charged you for half. They were smarter than many markets like this, and got your email address on the way out. “Sometimes we get special meats and cheeses, and thought you might want to know when they’re in?” Of course, you shared happily.
The next day you received a very simple message of thanks. They appreciated the business and look forward to helping make your meals with friends and family tastier in the future. The next few days came and went, and your inbox wasn’t assaulted by abusive marketing. You went about your life with a wonderful memory. A few weeks before Easter, they reached out to let you know that they had some special items for the holiday, and if you wanted lamb, it was best to get the order in advance. They also noted some of their favorite wines and cheeses, even though they didn’t sell them. They weren’t acting like mercenaries or even merchants, but like missionaries.
The above vignette is a factual account right up until the ask for my email. As a DTC brand, you have the email, so please don’t get hung up on that point. It’s a mechanical aspect and not the bigger point. The point is that they didn’t, in this narrative, treat ME LIKE MEAT. They didn’t come on too strong, and they didn’t abuse me and my inbox. There is a natural relationship that I’m going to have with a specialty retailer, which most DTC brands clearly are. As a specialty retailer, there is a ‘natural relationship’ that makes sense, and they simply honored that relationship. Specialty food is probably for special occasions, so the question is, what occasions and how many can I, as that retailer, help you with. If it’s fashion, it’s likely seasonal or an event. If it’s a daily routine, say shaving, then how do you become part of that moment? Dollar Shave Club did a great job of this with their reading material. Depending on your brand, there are probably a handful of reasonable relationships your customers would like to have with you.
As the key takeaway for DTC brands, had the butcher done even some of these things, they likely would have doubled or quadrupled their revenue from my family. It’s not like we weren’t spending the money, we were. The store’s experience would definitely have been memorable, and would have gotten great word of mouth as well. In the end, I suspect they’d still be in business, which they sadly aren’t. They didn’t fail because of their products, or the service they provided at the moments created in the store. They failed because they didn’t account for their competition being my, and others, default mode. As a specialty shop, they didn’t create a relationship with me to get a few more purchases a year. All purchases? Nope, just a few. What our fictional Italian butcher did wasn’t a crazy creepy data thing. It wasn’t targeted, it was simply tailored for how an actual person lives an actual life. It was an experience knowingly crafted to the relationship I’d like to have with them.
Default mode e-commerce, Amazon plus the other big players, is nearly a trillion dollars a year, while all of the millions of stores on Shopify are about 15% of that. To earn more of that default mode business, we need to create experiences that fit the relationships our customers want to have with our brands. We need to craft experiences that they can love and connect with. While it’s certainly easier to engage all the senses with fine foods, smiles and warmth, that’s basically what DTC brands need to figure out to grow more committed fans willing to turn away from their default modes, because they care.
