Breaking Down Top DTC Brands with Legend Nik Sharma

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. 

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LINKS FOR THIS EPISODE:
Production Team:
https://www.bigoceanpodcasting.com
Nik Sharma:
https://www.nik.co/
https://twitter.com/mrsharma

SHOW NOTES:
0:00 - Intro
6:17 - What The Honest Company is getting wrong
10:25 - A DTC brand that is getting it right (Cadence)
29:37 - Nik's favorite creator-led DTC brand (Rare Beauty)

Creators & Guests

Host

GREG ISENBERG

I build internet communities and products for them. CEO: @latecheckoutplz, we're behind companies like @youneedarobot @boringmarketer @dispatchdesign etc.

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This is the startup ideas podcast. Hosted by Greg Isenberg (CEO Late Checkout, ex-advisor of Reddit, TikTok etc).

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Greg: All right. Welcoming Nik Sharma to the show. Pretty excited to have you here.

Nik: Dude, I can't believe it's taken this long. It's all your fault.

Greg: 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. Uh, I look forward to his Sunday emails where he, he sheds a lot of knowledge and I just wanted to spend an hour talking about D two C.

There's two ways to come. With an idea for a D two 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 gonna go and create it. And then there's another way which is I'm gonna 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.

Nik: Somebody who has mass distribution can take the first route of walking into the grocery store and. Damn, I wish I had a chocolate bar with four ingredients in it. Six ingredients in it. And then, you know, you're, 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.

Uh, that would not work for the average person who's bootstrapped and starting. But it does work for somebody who has a ton of distribution already built in on the flip. Something like Jolie, which is a shower head, filtered shower head, 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, uh, sourcing can win at that game better than maybe somebody who just has a bunch of followers, uh, and is coming to bring something. one thing I've learned too is working with brands at, 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. A, 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 owned their own fulfillment center from the get-go. They saved tons of money there and they were able to, you know, 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, you know, 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 gonna go build a product. It's gonna cost this much. We're gonna sell it for three times. That there's a clear market opportunity. And for it. And, um, you know, we're gonna run Facebook ads.

Greg: Are the first, uh, examples of all these big D two C companies, like the Caspers of the world? Like are they not failures? Like they're

failures in the sense they became billion dollar companies. They raised a ton of money and now when you look at them on public comps, either they're. You know, become private in the, in the case of Casper, I think Casper was privatized, or a lot of these DDC companies have like market caps in like the 50 to $200 million range where they've raised like half a billion or more.

Nik: Yeah, I mean, uh, wall. Uh, hates e-commerce and, they hate a lot of the new brands. Like Allbirds 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 you know, to their credit, like they were the first ones doing it, you know, 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've had the hardest time and, you know, ended up in the same position.

Greg: I remember sitting in New York City at a restaurant with co-founder of Casper in maybe 2011 or 2012, and he had 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, I don't know. Like we don't have that up there, you know,

like I, that was the first, and then he was like, my idea is like I'm gonna, you know, when I create a prototype, I created a mattress in a box.

And I just remember thinking to myself like, this guy's crazy. I mattress in a box. It's impossible. that's not how this works. And so you're right, like we gotta give them credit in the sense of like, they took big leaps.

Nik: 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 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. It 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 there are failures, and I do think to some extent there were mess-ups. Like, you know, there's definitely founders who took. Tons of secondary, or, you know, took a ton of money off the table. 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 gonna 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.

Greg: So if you were running Casper or the Honest company, like pick a company, what would Nick Sharma do?

Nik: so if I was running the Honest Company, I think right away I would, figure out what products to cut. I think some, some of these brands that exist, they sell way too many things. They don't focus on something so they're not known for one. Honest companies, 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're just, they just exist. so I would probably do that I think from a tech stand. There's a ton of these early brands, honest included, which operate on a, 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, uh, that would turn the business and go up into the right.

like, you know, per, whoever runs the honest company site, like they should be fired and unemployable, in my opinion.

Greg: 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 two C Nick Sharma prove stack, would you?

Nik: 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. Um, you know, they use things like Hot Jar, which is, you know, expensive and old. Um, it looks like they've got Clavio, which looks good.

Greg: Explain what that is to like, what's clavio to,

you know,

Nik: so, so Clavio is a E S P email service provider. Think like MailChimp. you know, uh, MailChimp's 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, um, just because of the inefficiencies that come with using Salesforce Commerce Cloud, which is what they currently use.

Um, I would probably install a ton of apps from subscription to analytics to proper upsells to, uh, 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 UX 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 subs new, uh, customer in the door, a new subscriber in the door, and I'd build landing pages around that. I'd try to figure out, um, you know, I have this acronym called the Trace. Uh, system, which is like, you know, how do you align technology reporting audiences creative and the site experience that somebody goes to, um, 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, 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 very, it doesn't even tell you how many diapers come in the in the pack. Uh, once you make all these like 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 U P T and the A O V U P T is units per transaction or items in your basket and AOV is average order value. How do you increase that by 1% every day. Um, and then it just becomes a game of like chipping at it until, you know, it gets to a point where, um, it makes a lot of sense.

Greg: Okay, let's, continue on this thread of Nick Sharma's honest reviews of D two C companies. What's.

Nik: This is gonna get me in trouble.

Greg: Okay, well, we'll take the other side of the spectrum. What's a, what's a d TOC company that's doing a really good job and why are they doing a good job?

Nik: Um, all right. Here's one that I think is doing a really good job. Um, simple, straight to the point. it's a brand called Cadence. they're basically these beautiful little travel capsules made of recycled plastic. And, um, you know, 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 um, they're very good at showing you the light at the end of the tunnel from a marketing standpoint and how you're gonna get to the light at the end of the.

Um, 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. Um, their site experience in terms of understanding what you're getting, how many you're getting, why you're paying, what you're paying, um, 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 a hundred million dollar brand,

very.

Greg: So the, the photography is, I'm just noticing this, the photography is drop dead gorgeous. It's like absolutely stunning. Uh, the other thing I'm noticing is there's actually probably about 20 to 30% of video on, on screen.

Nik: Yeah.

Greg: that's up being auto played, but it's, it's really helping me understand like wh what this product is and , why I should want it.

Like sometimes I'll, you know, 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.

Versus this is like really integrated into the experie.

Nik: Yeah. You'll also notice too, like with all this video, There's no lag in load time or, or slow down insight speed as a result.

Greg: They also have this cool feature called text for $25. I assume that they're getting people's phone number capture there, uh, which is pretty smart. I haven't seen that, like creating an s m s relationship. Are you seeing more, more of that nowadays?

Nik: Yeah, definitely more on sms. it's, 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.

You know, not coming off as spammy. Um, but yeah, s m s is definitely something that, you know, every brand wants to have somebody's phone number. You know, because your open rate's nearly a hundred percent, maybe 99%, and your clickthrough rate's way higher, your revenue percent 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, per recipient on email.

But a lot of people don't know how to use that channel in a way where it's like not annoying or it you know, like a a a lot of people don't know how to bring value through s m s as their brand. and so that, you know, then it separates the ones that are good.

Greg: I can't think of any brand that brings value through s m s 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. Uh, it's reserved for friends and family. if you are, uh, cadence, like what would you do

Nik: I think the o one thing that I think about with, uh, email and SMS and really anything tied back to retention marketing is if you think of your outcome as like a, a two or three step approach or, 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. You know, 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, 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, um, 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've stayed another eight months, or you know, three quarter. 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, um, that's where I think it goes wrong.

It's written from this promotional p o v, like, you know, somebody's writing a 15% off email. They write the 15% off text. Whereas, uh, 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% 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, um, put that in and, and let it blast off. But the, 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, yo, let's go to dinner first and grab a couple drinks. Um, and then the second one is the, the myth of segmentation. You know, like every, 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 color they.

but it's obviously just easier to ignore that and send the text out to everybody.

Greg: I am wondering if, uh, there's, there's an. Need to create like a Carly AI bot where,

right. I, I'm curious if you've 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.

Nik: So for something like that, actually you're the perfect person to ask. I've been, 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, uh, 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?

Greg: so the key question is, do you actually have that data? let's just assume that you have that data.

Right. which isn't necessarily gonna be true, right? So I think there's, that's actually where I think, some of the bigger retailers and, and e-commerce players, like the Amazons 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 a hundred percent 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, I just actually just tweeted about this today. There's something, have you heard of auto G P T?

auto G P T is new so you don't, don't feel like you're behind or anything

Nik: I already feel like I'm behind.

Greg: Um, you know, one of the. The big problems right now with chat, G P T 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 G P T type playground, the problem is, what if you responded to it, right?

Like, it's very hard for chat g p T to make real-time decisions based on how things are changing. So a auto G P T does you know, let's just say the examples. A customer service representative, an auto G P T can understand customer inquiries, provide support, suggests upsell. And it could also speak, literally speak in any language possible 24 7. So you can actually you can be texting with it, Carly bot, and it responds in a voice note. that's why you know not enough people are talking about auto G P T, in my opinion.

Nik: 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 gonna feed you information.

Greg: yeah, yeah. There's like, you go onto GitHub, like there's a reason why the number one GitHub repo right now and project right now is auto G P T over the last week. It's cuz people are downloading it and playing with it and they're trying to figure out, okay, I wanna make a customer service bot, I wanna make a social media management bot. I wanna make whatever. 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.

Nik: Wow. That's insane. I gotta

play around with that.

Greg: you could, like,

my

point is,

Nik: how to code

Greg: yes. Like I think, you know, even downloading a GitHub repo without really understanding how to code is difficult.

Um, that being said, like I think that people actually underestimate how cheap it is to actually prototype some of these use cases. And someone like you, like you actually have a lot of data because. You know, through Sharma, brands like your agency, uh, and through, you know, hooks, you know, your landing page product, you, you just, you understand a lot of, different segments.

So there's a way for you to basically, like if I were you, I had like contact a lot of my clients to be like, Hey, I wanna create this. Carly bought, I'm gonna give it to you for free.

Um, 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 gonna drastically reduce the costs for just owning and operating it, for example. , you know, we have a, an AI and automation agency called do 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. you still have like a, you know, a management layer, but, number one, it's a cost savings. And number two, arguably customer service as an example, like the user experience for most people is pretty bad. So arguably, if the ai, if Carly bot's good enough, it's a better experience cuz there's no waiting times. Like, there's literally no waiting times. Imagine

customer service with no waiting.

Nik: 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 onsite chat bot or a customer service bot, or, um, a Carly bot for, you know, writing up SMS messages and then making the actual like applic.

That goes live. That gap in between is the part I don't understand and don't even know where to start

Greg: I mean,

Nik: downloading some GitHub repo.

Greg: if I came to you and I was like, Hey, I really want to create a D two C product and I wanted to hire Sharma Brands to do it, like you would be like, very, oh, you gotta do these a hundred things. Like you've rattled off 45 products in this 30 minute podcast so far

like that. It's second nature to you, right? But. there's a similar stack that exists in AI that you can leverage. You know, people act like AI is like fresh in 2023. Like people have been building an AI for a decade.

Nik: Yeah,

Greg: It's only like recently that there's been like huge consumer UX new products like chat, G P T that have come out.

So my point here is that it might seem daunting, but once you actually get into the weed, It's actually a lot less daunting than you think.

Nik: yeah, the, the customer service application's really interesting. There's a company that exists called, certainly. Have you heard of this?

Greg: Yeah. Tell people what turn Lee is.

Nik: Certainly is like a chatbot you can train. So, uh, you know, one example here is like when Feast Balls launched, we had I think, um, 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 chatbot, and we could basically train it, it's called feas Bot on uh, 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 inquiry. and you know, the customer service stack went from like 14 to two 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.

Greg: Yeah, and I, I, I'm just on their website now, like I love their, their, tagline, which is Create a digital twin of your best salesperson,

Nik: Yeah, that's a great tag.

Greg: right? Because that's like really what they're trying to do.

Nik: So when you see a company like this, do you think, oh, these guys are screwed as soon as chat g p t gets to you know, somebody else's hands

Greg: if I'm like the c e o of certainly, am I getting eight hours of sleep? Absolutely not. Am I getting three hours of 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 g p t plugin, uh, or shop, you know, maybe even Shopify. Competes directly. But if I am, 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 gonna create on you know, competing platform. Cuz festivals will continue to use certainly if, uh, the end consumer is having a good.

You know what fe, what Febles doesn't wanna do is like, 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 what certainly.

Nik: 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, et cetera, that is kind of how they'll stay ahead of the curve.

Greg: 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

so I can hire my real, my real salespeople to call up. Proctor and Gamble and some of these larger companies

and, get them to sign up with me even if it's for 12 months or six months or 18 months and get that data in. I think certainly is a real business. Like I would love to, I would've loved to invest in this company

personally.

Nik: totally.

Greg: all right. Let's do another Nick Sharma honest review. Talk to me about a creator led D two C example that you think is high quality.

Nik: all right, I'm gonna go with, I'm gonna 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 Khaled puts albums together. She basically just found the opportunity and then brought all the pieces together.

She brought the c e o together, the c m O, 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.

that allows her to sell products that aren't, you know, super expensive and sh where she can still make money, which allows her to make these minis, which allows her to drive way more sampling than, you know, 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. Um, they're very much a come sit with us type of brand versus a, you have to try to get into our, our, uh, you know, treehouse or whatever. and I think they're very smart about how they go about building the brand.

You know, this is a brand that. Could be successful, even after an acquisition and Selena's no longer involved. Whereas, some other celebrity brands that exist in the beauty category, you know, their name is in the product itself and it makes it very hard to separate post-acquisition or, you know, long term.

Greg: So rare beauty.com versus honest.com. The first thing I notice is how different the nav bar is. When, when I was on honest.com, it was like a thousand call to actions on the nav bar. Like there's just like 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 Shade Finder and Rare Impact, both those tabs. Cause I, I find them both quite interest.

Nik: Yeah. So, the simpler the nav bar is, the better it is, uh, 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 in on Fifth Ave. And then as you go through and see things, for example, you saw the shop, the shade finder, and the rare impact, you wanna 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 a hundred to 150 options of what you could. 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 wanna shop all the products, if you wanna 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 wanna go to shop ball, you just choose between face or eye, uh, 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. Um, now they probably tested into shade Finder 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, um, 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, 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 you know, the brand part comes in when you have things like an impact fund or, uh, 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.

Um, the shade finder too is something else that does really well in beauty. you know, it's, it's like the, the concept of personalization. Alive here and it's, uh, working. It's not truly personalized cuz 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.

Greg: Would you ever start a D two C company or do you prefer supporting the industry?

Nik: Uh, for sure start a d d C company. you know, I think from a, a standpoint of opportunity, there's no better time to start a D d C company. Think about how easy it is now to use Open AI's chat, G P T, and just build a module for something. Like if we need something and a developer's unavailable, we can just go to open AI and it'll write the code for us and we just copy paste it.

Um, 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, like there was a huge era of D two 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. Um, you know, these things, the, 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 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, you know, 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 a hundred million dollars 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.

Greg: Yeah, but those companies that are doing a hundred million in revenue, let's say like what's a bottom line? An average bottom line

per,

Nik: like 20%, 15 to 20%.

Greg: it's not bad.

Nik: Yeah. Yeah. Not terrible for

Greg: Yeah.

Nik: cash in the bank. At the end of the day, all things paid.

Greg: Yeah. I'm interested Nick, like if you ever want to collab on a,

on a, on a DC thing,

Nik: bot.

Greg: what we should do is you, you handle like the D two C concept, fulfillment marketing, and then I'll handle the tech stack like ai, Carly Bot and some cool fun ai.

Nik: I'm down.

Greg: And, and community stuff that just like makes the experience unique.

Nik: Yeah, I'm totally game for that.

Greg: all right, Nick, thanks for coming on. Like, I think everyone should sign up to your newsletter. Where could people find your newsletter?

Nik: The easiest place is just nick.co/email ni k.co/email. I think if you just google Nick email, it comes up as well.

Greg: Yeah, and this is like this email. I subscribe to it and I'm not huge in the D two C space. I think I told you this, Nick, my dad who has like a, has a Shopify store, has 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,

and.

Exactly. Shout out Mr. Isenberg. And, uh, You know what I like about it is it gets me thinking and you, you give good examples of other brands doing cool stuff. So,

Nik: 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, other industries or other verticals.

Greg: exactly. And then, uh, you do have a podcast, which is also awesome. Can you give a quick shout out to that?

Nik: Yeah. Uh, 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, uh, the Bloomberg business for e-commerce, retail and D two 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 'em, and try to find takeaways for our listen.

Greg: And people can go watch that on YouTube, I guess, and Spotify

Nik: Yeah. YouTube. Spotify, apple Podcast. Basically wherever you get your podcast, just look up limited supply.

Greg: 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 and Nick was talking about, and it's just, it's a way better educational experience. But, uh, Nick tell, tell the people to subscribe. They, they're

Nik: 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 gonna be anybody's fault except yours for not subscribing to where it happens on YouTube.

Greg: It, it's, it's not like we want your business to fail. Right. It's, we,

We,

don't

Nik: fact, we're trying to help you.

It's your fault for not going and hitting subscribe. And while you're there, go find this episode right now on YouTube and click the like button.

Greg: Yeah. And, and tweet at, tweet at us. if you enjoyed this episode, we will respond

later. Dude, thanks

for coming.

Nik: See ya.