The Startup Ideas Podcast - Breaking Down Top DTC Brands with Legend Nik Sharma

Episode Date: April 20, 2023

Today Greg is joined by DTC marketing legend Nik Sharma. In this episode, Nik and I look at the best and worst DTC brands on the internet. ►►Subscribe to Greg's weekly newsletter for insights on community,creators and commerce.You'll also find out when new and exclusiveepisodes come out from Where it Happens. And it's totally free.https://latecheckout.substack.comFIND ME ON SOCIAL:Twitter: https://twitter.com/gregisenbergInstagram: https://instagram.com/gregisenberg/TikTok: https://tiktok.com/@gregisenbergLINKS FOR THIS EPISODE:Production Team:https://www.bigoceanpodcasting.comNik Sharma:https://www.nik.co/https://twitter.com/mrsharmaSHOW NOTES:0:00 - Intro6:17 - What The Honest Company is getting wrong10:25 - A DTC brand that is getting it right (Cadence)29:37 - Nik's favorite creator-led DTC brand (Rare Beauty)

All right, welcoming Nick Sharma to the show. Pretty excited to have you here. Dude, I can't believe it's taken this long. It's all your fault. For the record, it is not my fault. You are a busy, busy guy, but I'm happy you're here. Whenever I want a perspective on anything D to C related, Nick is my boy. I look forward to his Sunday emails where he sheds a lot of knowledge.

and I just wanted to spend an hour talking about D to C. There's two ways to come up with an idea for a D to C product. One is like you walk into the grocery store and you're like, wow, I wish this product would exist. Oh, it doesn't. I'm going to go and create it. And then there's another way which is I'm going to like look at trends and competitive analysis and a bunch of other ways to figure out if there's a market

need. Which way do you recommend going? and yeah, just share some light on that. Somebody who has mass distribution can take the first route of walking into the grocery store and saying, damn, I wish I had a chocolate bar with four ingredients in it, six ingredients in it. And then, you know, you're competing with the biggest companies in the world. You know, you're basically neck and neck against Hershey's and Mondelez and all these other companies. That would not work for the average person whose boots.

strapped and starting, but it does work for somebody who has a ton of distribution already built in. On the flip side, something like Jolie, which is a showerhead, filtered showerhead, the value prop is not really in the distribution, but it's in the innovation of the product itself. And so somebody who is more focused around branding or marketing or even like, you know, sourcing can win at that game better than maybe somebody who just has a, a bunch of followers and is coming to bring something. One thing I've learned, too, is working with brands at a very early stage, you have to have some sort of a moat, something that will get you from zero to 10 very clearly,

whether that is a very good understanding of the market. You know, you see a clear open space, whether that's the ability to go launch into retail off the bat, whether that is the fact that, you know, Black Wolf Nation is a men's skincare brand. They own their own fulfillment center from the get-go. They saved tons of money there, and they were able to do tons of things around merchandising and upselling products because they could. And so I think a lot of people arrive to it in different conclusions or in different ways. Sometimes it's frustrations that somebody has on their own.

Sometimes it's something that they're just passionate about. And then sometimes, like, a lot of the earlier e-commerce businesses were started by, like, finance guys who just said, oh, there's a clear market hole right here. I'm going to go build a product. It's going to cost this much. We're going to sell it for three times that. There's a clear market opportunity. There's demand for it.

And we're going to run Facebook ads. Are the first examples of all these big D to C companies, like the Casper's of the world, like are they not failures? Like they're failures in the sense they became billion-dollar companies. They raise a ton of money. And now when you look at them on public comps, either they're, you know, become private in the case of Casper. I think Casper was privatized.

or a lot of these D to C companies have like market caps in like the 50 to 200 million dollar range where they've raised like half a billion or more. Yeah, I mean, Wall Street hates e-commerce and they hate a lot of the new brands. Like Albirds is down 95% in the public markets. You know, honest company, I think trades at less than half of their revenue. But, you know, I don't think that Wall Street's judgment of a lot of these companies is an accurate representation of how these businesses could be run. A lot of the businesses were also run operationally.

They weren't that efficient. And to their credit, they were the first ones doing it. Casper was the first company to put a mattress in a box and figure out how to sell it online and build that behavior. If Casper didn't exist, like whoever the next company was that did it, they would have had the hardest time and ended up in the same position. I remember sitting in New York City at a restaurant, the co-founder of Casper in maybe 2011 or 2012.

And he told me that he had just graduated basically like mattress science. And I was like, that's actually a thing. Like I didn't know. Like, I'm from Canada. I don't know. Like, we don't have that up there, you know? Yeah. That was the first.

And then he was like, my idea is like, I'm going to, you know, and I create a prototype, I created a mattress in a box. And I just remember thinking to myself like, this guy's crazy. A mattress in a box, it's impossible. That's not how this works. And so you're right. We've got to give them credit in the sense of like they took big leaps. Yeah, big leaps.

And, you know, Casper walked so everybody else could run. Like Casper figured out everything that didn't work. So the following companies could. You know, I think most mattress companies now that exist on the market, they don't actually have inventory that they own. They're all drop shipping on demand. And so right away. way. It's like, you know, that was something that Casper didn't figure out early enough that they did. You know,

Casper had the beautiful big office in New York City and Soho. Turns out you don't need fucking a big office with 75 people to sell, you know, e-commerce products. So I think even though like a lot of people would say that they're failures, and I do think to some extent there were messups like, you know, there's definitely founders who took tons of secondary or, you know, took a ton of money off the table. And And then, you know, when layoffs come around, they're sitting high and pretty with millions of dollars in their account and their employees have to go figure out how they're going to pay rent the next month. I think that's pretty messed up. But I do think a lot of these early companies don't get enough credit for like paving the way for the behavior of e-commerce that they created and instilled in consumers that exist today. So if you were running Casper or the honest company, like pick a company, what would Nick

charm I do. So if I was running the honest company, I think right away, I would figure out what products to cut. I think some of these brands that exist, they sell way too many things and they don't focus on something. So they're not known for one thing. Honest company is like known for what? Good, honest ingredients. But do they really need to have a beauty line and wipes and cleaning products and bath and body and baby products? Like probably not. In fact, I would imagine that, you know, two of these categories do really well for them, and the other six just completely, you know, they just exist. So I would probably do that.

I think from a tech standpoint, there's a ton of these early brands, honest included, which operate on a technology infrastructure that was great 10 years ago, but is not modernized and up to speed with what consumers are looking for today. And then, of course, like, you know, going into their customer acquisition and their customer retention and understanding their lifetime value of customers, there's probably so many little things you could tweak that would turn the business and go up into the right. But like, whoever runs the honest company site, like they should be fired and unemployable, in my opinion. Okay. So if you were bringing, you know, it doesn't look like honest companies on Shopify,

like if you were bringing them on Shopify, let's say, what sort of D to C, Nick Sharma approve stack would you propose? I mean, I'd bring them to Shopify Plus almost immediately. I would probably swap their subscription system to a company called stay, which is really like a retention tool that also does subscription. You know, they use things like hot jar, which is, you know, expensive and old. It looks like they've got clavio, which looks good. Explain what that is to, like, what's clavio? for people to know. So Clavio is an ESP, email service provider.

Think like MailChimp. You know, MailChimp is probably the easiest comp for it. But it's like an email platform for e-commerce businesses. You know, I think like right away, just moving them to Shopify would actually probably bump up their bottom line a good amount just because of the inefficiencies that come with using Salesforce Commerce Cloud, which is what they currently use. I would probably install a ton of apps from subscription to analytics. to proper upsells, to, you know, a proper review system, a referral program, making things easy,

like build your own bundle. Right now they have it, but it's very clunky and the U.S. is really bad. And, you know, then I would start like tweaking and optimizing. You know, I'd figure out what does it take to get a new customer in the door, a new subscriber in the door, and I'd build landing pages around that. I'd try to figure out, you know, I have this acronym called the Trace System, which is like, you know, how do you align technology, reporting, audiences, creative, and the site experience that somebody goes to, to try to build customer funnels that you can rely on X number of customers coming in every day, new customers for the brand at a sustainable pace. So yeah, I think, you know, once you make like the big tweaks, like moving them to Shopify,

making the UX a lot simpler, you know, for example, like their diapers cost $13. and it doesn't even tell you how many diapers come in the pack. Once you make all these obvious things that they should be doing or whoever is in charge should be fired for, then I would focus on the 1% improvements across the board. So how do you increase the email capture rate by 1%? How do you increase the cart click-through rate by 1%? How do you increase the UPT and the AOV? UPT is units per transaction or items in your basket and AOV's average order value?

How do you increase that by 1%? every day. And then it just becomes a game of like chipping at it until, you know, it gets to a point where it makes a lot of sense. Okay. Let's continue on this thread of Nick Sharma's honest reviews of D to C companies. This is going to get me in trouble. Okay. We'll, we'll take the other side of the spectrum. What's a what's a D to C company that's doing a really good job and why are they doing a good job? All right. Here's one that I think is doing a really good job. Simple, straight to the point. It's a brand called Cadence. They're basically these beautiful little travel capsules made of recycled plastic. And these guys, they haven't raised an

absorbent amount of money, very little cash. They're profitable on every purchase. They have a healthy margin baked into their product. They produce their own product, which also helps with that. They fulfill their own product, which also helps with that. And they're very good at showing you the light at the end of the tunnel from a marketing standpoint and how you're going to get to the light at the end of the tunnel. And then, you know, tactically, if you go to their site, their photography is next level beautiful. Their use of product renders, also very beautiful. the way that they incorporate existing customers into their sales process to sell new customers.

Fantastic. Their site experience in terms of understanding what you're getting, how many you're getting, why you're paying what you're paying, what the benefit of having these are, and what the alternative is for not using this product. also very on point. This is, I think, going to be a very clear $100 million brand very soon. So the photography is, I'm just noticing this. The photography is drop dead gorgeous. It's like absolutely stunning. The other thing I'm noticing is there's actually probably about 20 to 30% of video on screen.

Yeah. That's being auto played. but it's it's really helping me understand like what this product is and why I should want it. Like sometimes I'll go on some e-commerce sites and I'll see video and it feels just like, it feels like they listen to a podcast and someone was like, put video on your e-commerce page and they did. Yeah. Versus this is like really integrated into the experience. Yeah, you'll also notice too like with all this video, there's no lag and load time or

or slow down insight speed as a result. They also have this cool feature called text for $25. I assume that they're getting people's phone number capture there, which is pretty smart. I haven't seen that, like creating an SMS relationship. Are you seeing more of that nowadays? Yeah, definitely more on SMS. It's generally a very hard thing to get.

The conversion rate of grabbing somebody's phone number is, you know, probably half, if not lower for most brands than what it is to grab email. And also then, you know, the follow up to that is how good is a brand at actually using that channel and sending things that are, you know, not coming off as spammy. But yeah, SMS is definitely something that, you know, every brand wants to have somebody's phone number, you know, because your open rate's nearly 100%, maybe 99%, and your click-through rates way higher, your revenue per send in general, your revenue per recipient that you send to for SMS is usually significantly higher than if you were to comp the same revenue per recipient

on email. But a lot of people don't know how to use that channel in a way where it's not annoying or, you know, like a lot of people don't know how to bring value through SMS as their brand. And so that, you know, then it separates the ones that are good. I can't think of any brand that brings value through SMS to me. Like, to me, it's always annoying. Give me an example of how you can integrate SMS in a way that is respectful to the channel, i.e., it's a very intimate channel. It's reserved for friends and family.

If your cadence, like, what would you do? I think the one thing that I think about with email and SMS and really anything, tied back to retention marketing is if you think of your outcome as like a two or three step approach or like a bus ride let's do a bus ride it's got three stops on the bus you get on the bus the first stop is actually just excitement and good content it's something that gets somebody thinking that as they're running out of their cases of hint water you know they get something fun, exciting, cute, quirky, funny, interesting, insightful from the brand. And it's not selling them on anything. It's just good content. And they see, oh, this is from Hint. Oh, shit. Actually,

I think I'm running low on Hint. I should reorder. And it's just about getting Mindshare to be the top five or a top 10 thought in somebody's head at any given point. That's like stop one on the retention bus. Then I think stop two is understanding. okay, does this person actually need to re-up or do they need to know at this point? Do they need to see our brand again from a sales standpoint? You know, this is where a lot of companies that sell consumables don't properly segment their list. And so let's say you sell deodorant and somebody's on a deodorant subscription. Well, if they're on a deodorant subscription, they actually don't need to see that you're running a sale

because you don't want them to unsubscribe and now buy from the sale. and now you've lost somebody who would have stayed another eight months or, you know, three quarters. And then the third part, the third stop, I think, is actually sending that message. And when you send that message, it has to be sent in a way where it feels like it was written just for you. So a lot of people, they fill out the SMS piece as they're doing the email piece. They're generally grouped together in a media plan or in a promotional plan. And that's where I think it goes wrong. It's written from this promotional POV.

If somebody's writing a 15% off email, they write the 15% off text. Whereas if I were writing a text, I would say, okay, who is a friend that I have that embodies the customer that we're going after? So we have this girl in our office named Carly. She is like the customer for every client we work with. And so, you know, if I were writing a text, I would say, okay, now how would I text Carly that we're running a sale for 15%? percent off. And that's exactly what I would then, you know, I'd remove her name Carly and replace it with bracket first name and put that in and let it blast off. But the real, like, I think sauce comes in. One, there's a lot of retention marketers that don't rely on good content or it's like, it's too

focused on sales. It's not focused on like, you know, it's like, hey, let's go, let's go to my bedroom instead of, yeah, let's go to dinner first and grab a couple drinks. And then the second one is the miss of segmentation. You know, it's like, you know, I'm. know, like almost every SMS or email tool you use today has the ability to segment customers based on products they bought, when they bought, what type of even like shade of the color they bought, but it's obviously just easier to ignore that and send the text out to everybody. I'm wondering if there's an opportunity to create like a Carly AI bot where... 100%.

Right? How do we do that? I'm curious if you thought much about how to... use AI to personalize communication. But it feels like that's kind of where things are going. Like if you're able to upload data about someone's habits, how they talk, where they live, demographic data, and then basically speak to them in a way that they really want to be spoken to, I'd pay for that service.

So for something like that, actually, you're the perfect person to ask. I've had this question on my mind for so long. So let's say I wanted to build Carly Bot. And it was like, you know, in theory, I train this bot on who the customer is, what we're selling, why they're buying, you know, the common objections or pain points they have before making a purchase. Like, where do I even start to do that? So the key question is, do you actually have that data? Let's just assume that you have that data, right? Okay.

Which isn't necessarily going to be true, right? So I think there's, that's actually where I think some of the bigger retailers and e-commerce players, like the Amazon's of the world, have so much more data that they actually have an unfair advantage if they want to go down this route. Because you could get into a situation where, you know, your Carly Bot operates at 50%, but Amazon's Carly Bot operates at 100% or 97%. And that's actually, we can talk about that later, but that's where it gets kind of scary that as we enter this AI age, there's an unfair advantage for the large players, not the small startups. Whereas as we've grown up, it's always been in the startups that have been more agile. But yeah, so you have this data. And well, I just actually just tweeted about this today.

There's something, have you heard of auto GPT? Auto GPT is new, so you don't feel like you're behind or anything like that. I already feel like I'm bothered. You know, one of the big problems. right now with chat GPT is number one, it's not connected to the internet. Number two, it doesn't have much memory in terms of it doesn't remember a lot. And number three, it can't operate in real time. The problem, if you were just to build Carly bot on a chat GPT type playground,

the problem is, what if you responded to it, right? Like, it's very hard for chat GPT to make real-time decisions based on how things are changing. So an auto-GPT does. You know, let's just say the example is a customer service representative. An auto-GPT can understand customer inquiries, provide support, suggest upsells, and it could also speak, literally speak in any language possible, 24-7. So you can actually, you can be texting with it, Carly Bob. and it responds in a voice note.

That's why, you know, not enough people are talking about auto GPD, in my opinion. But like, is that, so like tactically, how would I set that up? Do I just go and start talking to it? Like, hey,

I'm going to feed you information. Yeah, yeah. There's like, you go into GitHub. Like, there's a reason why the number one GitHub repo right now and project right now is AutoGPT over the last week.

Because people are downloading it and playing with it and are trying to figure out, okay, I want to make a customer service bot. I want to make a social media management bot. I want to make whatever bot, but I wanted to act in real time. I want to connect it to the internet and I wanted to have strong memory management. And I also wanted to have text to voice.

Wow. That's insane. I got to play a lot there. So you could like, do I need to know how to code? Yes. Like I think, you know, even downloading a GitHub repo, without really understanding how to code is difficult. Right.

That being said, I think that people actually underestimate how cheap it is to actually prototype some of these use cases. And someone like you, you actually have a lot of data because, you know, through Sharma brands, like your agency,

and through, you know, hooks, you know, your landing page product, you just, you understand a lot of different segments. Right.

So there's a way for, you to basically, like, if I were you, I'd like contact a lot of my clients to be like, hey, I want to create this Carly bot. I'm going to give it to you for free. The catch is I want some of your data. And you can go and create a prototype for probably relatively cheap and see if it works. The cool thing about AI and your space, like an e-com is it's going to do two things. it's going to drastically reduce the costs for just owning and operating it. For example, we have an AI and automation agency called Do You Probably Need a Robot.com. And we were talking to this company that spends $300,000 a month on customer service reps.

And what we modeled out is that using AI, you can actually get that to $25,000 a month. you still have like a, you know, a management layer, but number one, it's a cost savings. And number two, arguably customer service is an example, like the user experience for most people is pretty bad. So arguably, if the AI, if CarlyBot's good enough, it's a better experience because there's no waiting times. Like there's literally no waiting times. Imagine customer service is no waiting times. Man, all this stuff is so fascinating. I feel like the biggest gap I have is what I mentioned here, which is like the process of,

okay, I have this idea to do like an on-site chat bot or a customer service bot or a Carly bot for, you know, writing up SMS messages and then making the actual like application that goes live. That gap in between is the part I don't understand and don't even know where to start outside of downloading some GitHub repo. If I came to you and I was like, hey, I really want to create a D to C product and I wanted to hire Sharma brands to do it, like you would be like very, oh, you got to do these 100 things.

Like you've rattled off 45 products in this 30 minute podcast so far. Right. Like that it's second nature to you, right? Right. But like there's a similar stack that exists in AI that you can leverage, you know. People act like AI is fresh in 2023. People have been building an AI for a decade. Yeah.

It's only like recently that there's been like huge consumer UX new products like chat GPT that have come out. So my point here is that it might seem daunting, but once you actually get into the weeds, it's actually a lot less daunting than you think. Yeah. The customer service application is really interesting. There's a company that exists called Certainly.

Have you heard of this? Yeah. Tell people what certainly is. Certainly is like a chatbot you can train. So, you know, one example here is like when Feastable's launched, we had, I think, 16 customer service agents fully trained up and ready to go. And we came across this company certainly that we wanted to layer in into the customer service stack. It would live on the site as a chat bot, and we could basically train it. It's called FeistyBot on the website.

You could train it to basically understand the brand, speak like the brand, the tone of voice, you know, teach it how to answer questions. And this bot eliminated 96% of customer inbound inquiries. And, you know, the customer service stack went from like 14 to 2 at the time. I think now it's maybe double that. But it was crazy how much money it just saved in human capital, human resources, and also just time. Yeah, and I'm just on their website now. Like, I love their tagline, which is create a digital twin of your best salesperson.

Yeah, that's a great tagline. Right? Because that's like really what they're trying to do. So when you see a company like this, do you think, oh, these guys are screwed as soon as chat GPT gets to, you know, somebody else? else's hands. If I'm like the CEO of certainly, am I getting eight hours asleep? Absolutely not. Am I getting three hours to sleep? No, absolutely not. Am I getting five to six hours of sleep? Yes. So I'm basically like I I'm definitely weary that I could lose to a chat GPT plug-in or shop, you know, maybe even Shopify

competes directly. But if I'm Certainly, the number one thing I'm focusing on is how do I make the UX for the end user, like the most high quality experience possible that I'm light years ahead of whatever anyone's going to create on competing platform? Because Feastables will continue to use certainly if the end consumer is having a good experience. What Feastables doesn't want to do is get like a cheaper solution that even might have better AI models and has been even trained better. But the actual core experience that people are using to have these personalized conversations is worse than my take is that they'll retain with certainly. And I guess if certainly can continue to take their like data exhaust and turn it. back into more proprietary info for them to make the conversations better, more efficient, faster, etc.

Then that is kind of how they'll stay ahead of the curve. Totally. And it's a bit of a land grab for them. Like if I'm them, I'm trying to raise as much money as possible. Right. So I can hire my real salespeople to call up Procter and Gamble and some of these larger companies. Yeah.

And get them to sign up with me, even if it's for 12 months. six months or 18 months and get that data in. I think certainly is a real business. Like I would love to, I would have loved to invest in this company personally. Totally. Quick interruption from me. If you're listening to this on Apple Podcasts or Spotify,

you're getting any value. You need to come to YouTube and subscribe to the Where It Happens podcast YouTube channel. I promise you the experience is richer, more interesting. So if you're getting any value, just stop what you're doing, open up the YouTube app, go to the website,

and press subscribe at where it happens on YouTube. And if you're watching this on YouTube and you haven't subscribed, what are you doing? Go press subscribe. Thank you. Enjoy the rest of the show. All right, let's do another Nick Sharma, honest review,

talk to me about a creator-led D-2-C example that you think is high quality. All right, I'm going to go with rare beauty, which is Selena Gomez's beauty company. I like this company for a few reasons. One, I think Selena Gomez is just badass. Second is the way that she decided to build this company was like how DJ Khalid puts albums together. She basically just found the opportunity and then brought all the pieces together. She brought the CEO together, the CMO, et cetera. The other thing is she innovated around the packaging and the way that they merchandise products.

So they have these like minis that they sell in Sephora. and online, plus the fact that she is Selena Gomez and has this mass audience and distribution that she does not pay for. That allows her to sell products that are super expensive, where she can still make money, which allows her to make these minis, which allows her to drive way more sampling than maybe any other beauty brand in the category. So this is a brand that I think, you know, they mainly sell online. They also sell in Sephora. They do sell online for Sephora as well, which does pretty well for them, from what I could tell. They're very much a come sit with us type of brand versus a you have to try to get into our tree house or whatever. And I think they're very smart about how

they go about building the brand. This is a brand that could be successful even after an acquisition and Selena is no longer involved. Whereas some other celebrity brands that exist in the beauty category, their name is in the product itself. And it makes it very hard to separate post-acquisition or long-term. So rarebeauty.com versus honest.com, the first thing I notice is how different the nav bar is. When I was on honest.com, it was like a thousand.

call to actions on the nav bar. There's just a lot going on. When I go to Rare Beauty, there's literally three tabs. So you can shop. There's a shade finder, which I'd love you to talk about. Actually, I'd like you to talk about shadefinder and Rare Impact, both those tabs, because I find them both quite interesting. Yeah.

So the simpler the nav bar is, the better it is. generally in e-commerce, you want to make things easier from a UX perspective versus make them harder. You know, when you land and you see this site above the fold, meaning you don't have to scroll, it's just whatever you see in your window, you want this to feel like you just walked into a store in Soho or on Fifth Ave. And then as you go through and see things, for example, you saw the shop, the shadefinder, and the rare impact, you want to almost like limit the options to guide them through the store. So if you go into a store on Fifth Ave, you know, somebody looks at you and says, all right,

I know exactly where to take this person in the store. That's sort of what a nav bar here does. Whereas like in the honest example, you know, there's probably like 100 to 150 options of what you could click as soon as you hit the homepage and look above the fold. There's things that are changing, scrolling side to side. It's kind of hard to know where to look. Whereas here, it's very clear. You land, you've got a hero product right in the middle.

And then if that's not what you want, your best sellers is there above the fold. So you can always just go right there. Or you just hover over shop and you can immediately choose if you want to shop all the products. If you want to see just what's new because maybe you came to the site knowing that there's something new out. If you're new to the brand, you might go to best sellers. And if you're a bit, you know, if you're not new to the brand, but you know what you want, you don't want to go to shop all. You just choose between face or eye or lip. And so I think this is merchandise super well for the type of traffic they get.

You have to remember, too, with celebrity or creator brands, they get a shitload of traffic. Traffic that they didn't pay for, traffic that they didn't send. And so, you know, because of that, you have to really focus on how you merchandise and bring somebody through the store. Now, they probably tested into ShadeFinder and the rare impact being on top. Given who her audience is and what they're interested in, you know, they probably realize that the rare impact fund, which is actually a real fund that they have, that they contribute to, is something that matters to them and something that matters to their audience quite a bit. You know, like what sets apart Selena Gomez's brand from the next product on the Sephora shelf

selling blush or bronzer. Well, it's the fact that, like, I now know that when I buy the lip oil or the bronzer stick, that I'm also contributing to something good. And, you know, that's what separates products from brands is what keeps you coming back and what, and especially in the beauty category where loyalty to a brand is so low. I think only 3% of consumers will stick with a brand forever. And, you know, most people are pretty open to trying different things. And so something like 14% of consumers will stay with a brand.

They'll still try other things. But the brand part comes in when you have things like an impact fund or, you know, it could be as lucrative as an impact fund. It could be as simple as like surprise and delight and really good text messages from the Carly bot. The Shadefinder, too, is something else that does really well in beauty. You know, it's like the concept of personalization is a lot. here and it's working. It's not truly personalized because there's not that many levels of how deep this goes,

but it's a very simple way to add that touch and feel of personalization where somebody feels like they're now being heard or being recognized for, in this case, their color of their skin and making sure that there's products that match that. Also, it just probably helps from a customer service standpoint of making sure that there's less returns because somebody's color that they bought is more, you know, connected to the actual color of their skin. Would you ever start a D to C company, or do you prefer supporting the industry? For sure, start a DTC company.

I think from a standpoint of opportunity, there is no better time to start a D2C company. Think about how easy it is now to use OpenAI's chat GPT and just build a module for something. Like, if we need something and a developer's unavailable, we can just go to OpenAI and it'll write the code for us and we just copy-paste it. So from that standpoint, it's the barrier to entry has gotten lower. From the standpoint of product sourcing and product development, I think the barrier to entry has gotten lower. The thing that has gotten really hard is cutting through the noise and finding something

that actually has legs in today's market. And I think for that, you have to be super in tune with who's doing what and who's finding traction or who is just about to find traction. you also have to just solve something real. There was a huge era of D to C brands that happened during probably like right before COVID and then definitely during COVID brands that didn't deserve to exist. The 48th men's skincare brand, the 37th white labeled supplement for bloating. These things, these are not solving real problems.

They're just trying to be like money grabs. Those don't really last because consumers today are pretty. pretty smart and they will see that from a mile away. Whereas a brand that is actually solving a real problem for the consumer, but also hopefully for something bigger, those tend to stick around and have really no problem growing. Or sometimes it's like cookware. Look at cookware brands over the last four or five years. They've all just exploded. Every cookware brand I know is doing over $100 million in revenue. You know, it's just like when the trend starts to go, if you can jump on that train, you will ride that to the top.

Yeah, but those companies that are doing 100 million in revenue, let's say, like what's a bottom line, an average bottom line? Probably like 20%, 15 to 20%. It's not bad. Yeah.

Yeah, not terrible for like, you know, cash in the bank at the end of the day, all things paid. Yeah. I'm interested, Nick. Like, if you ever want to collab on a... Let's do it. Let's make the Carly bot.

What we should do is, is you handle like the D2C concept fulfillment marketing and then I'll handle the tech stack like AI Carly Bot and some cool fun AI stuff and community stuff that just like makes the experience unique yeah I'm totally game for that all right Nick thanks for coming on like I think everyone should sign up to your newsletter. Where could people find your newsletter? The easiest place is just nick.co slash email, nik.k.co slash email. I think if you just Google Nick email, it comes up as well. Yeah. And this is like this email, I subscribe to it and I'm not huge in the D to C space. I think I told you this, Nick. My dad, who has like a Shopify store as like a side hustle.

was telling me about you, not knowing that we knew each other. And he loves your emails. He loves your emails. Shout out to Mr. Eisenberg. Exactly. Shout out, Mr. Eisenberg. And, you know, what I like about it is it gets me thinking. And you give good examples of other brands doing cool stuff.

Yeah, I think a lot of the things I talk about too. I try to be super tactical and explain it as if I'm talking to a five-year-old. And I think a lot of those things can be applied in other industries or other verticals. Exactly. And then you do have a podcast, which is also awesome. Can you give a quick shout out to that? Yeah. I'm a co-host of a podcast called Limited Supply.

It's myself and this guy, Moise Ali, who founded and sold native deodorant to Procter and Gamble. Think of us as like the Bloomberg business for e-commerce, retail, and D to C. We try to take things that are interesting to us or happening or sort of like current events in the industry, break them down, talk about them, and try to find takeaways for our listeners. And people can go ahead, watch that on YouTube, I guess, and Spotify. Yeah, YouTube, Spotify, Apple Podcasts. Basically, wherever you get your podcast, just look up limited supply. I've been finding it hard to get YouTube subscribers.

So recently I've been, yeah, like we've been trying to like double down on YouTube. So like people who are listening to this, like there's visuals. If you go to YouTube, so go to YouTube where it happens and subscribe. You know, we'll put like the images. of some of the websites that Nick was talking about. And it's a way better educational experience. But Nick, tell the people to subscribe. Go subscribe to YouTube.

If you're not subscribed to where it happens on YouTube, your business is going to fail. And it's not going to be anybody's fault except yours for not subscribing to where it happens on YouTube. It's not like we want your business to fail, right? In fact, we're trying to help you. It's your fault for not going. hitting subscribe. And while you're there, go find this episode right now on YouTube and click

the like button. Yeah, and tweet out us if you enjoyed this episode. We will respond. Later, dude. Thanks for coming. See you. Like, okay, peer pressure is a mother might ruin your day. See, I say no dose so much to get there, though. And the people will judge it by those photos. I know who you are, and they just don't. Don't let them see a joy because they just want you in that same on predicament.

Misery level company, ding on it, prey on it. Sip a cup of tea. Never let the world smoke it in the borders, and I'm going to tell you like I would tell my daughter, who that's the new you. Well, I shantay. Got to sort of self out, find your phone sway. I'm still trying to get it like every day.

Humbleness is hard when you start receiving praise guards here, but some words can never be taken away. Gotta do what's best for you to make life okay. Peer pressure is a mother might ruin your day. See, I say no ghost. So much to get there, though, and the people will judge it by those four toes. I know who you are, and they just don't.

Don't let them see a joy, because they just want you in that same old predicament. Misery level of company, think on it, pray on it. Sip a cup of tea. Never let the world be broken. in the borders and I'm gonna tell you like I would tell my daughter.