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Robbie Deeks has observed the evolution of DTC brands from his time at Shopify Plus and VaynerCommerce. In this conversation, he discusses the new wave of DTC brands, how they can grow sustainably, and how retailers and brands can work together to deliver value for customers.
Legends of Retail features leadership and strategy insights from veterans of the retail and ecommerce industry. In each episode, Convictional co-founder Chris Grouchy drills deep into how retail leaders are transforming their businesses with innovations in virtual inventory, omnichannel, dropship and marketplaces that keep them ahead of the competition, while also keeping their teams motivated and balanced.
Chris Grouchy:
Hey everyone. Welcome to another episode of the Legends of Retail podcast, brought to you by Convictional. We talk to leaders in retail and e-commerce so you can learn from them about retail strategy, leadership and team management and take their insights back to your company. I'm your host, Chris Grouchy, co-founder and president of Convictional. Convictional is the supplier enablement platform that helps retailers onboard drop ship vendors in minutes so they can curate product assortments faster.
We started season one with my conversation with my co-founder, Roger Kirkness. He's someone I've known for a very long time since we worked together at Shopify. This next guest is someone who both of us had the pleasure of working with back then as well, it was the third of a trio I would say. And since his time at Shopify Plus, he's gone on to launch VaynerCommerce with Gary Vaynerchuk and is now working on his own company. I'm talking about Robbie Deeks. Robbie is someone whose point of view is, one, I really respect and I think you'll see why after listening to this conversation. We discussed how he's recruited top talent in e-commerce when he started VaynerCommerce, how retailers and DTC brands can work together to drive value for customers, and how Eight Sleep is thriving in today's e-commerce market, and so much more. Here's my conversation with Robbie Deeks, former chief commercial officer at VaynerCommerce. Robbie Deeks, welcome to the show.
Robbie Deeks:
Thanks for having me. Good to be here.
Chris Grouchy:
Well, let's jump into it. Your first exposure to e-commerce was in university at a startup incubator that you worked for called Propel. Why did you join Propel?
Robbie Deeks:
At that time, I was getting much more into the tech space and Propel was a more formal evolution of an incubator that Western, I guess, had set up to try to encourage entrepreneurship, especially leaning more towards the tech space. And I had, at that point, made a few trips out to San Francisco and started to build networks out there and it seemed like a natural great place to spend the summer. And the opportunity there was to work with a series of startups from virtuality to, as you mentioned, e-commerce in different marketplaces. And so, it seemed like a natural unique summer job to be able to work across a bunch of companies and get a bunch of exposure in a very short period of time.
Chris Grouchy:
That's awesome. And what were some of the lessons that you learned working at Propel personally? I remember at one point I think you wanted to do some stuff in VR, which didn't happen, but how did you take some of the lessons there forward and what were those lessons?
Robbie Deeks:
So we were the first cohort of Propel, that was the first year it launched. And it was me and essentially the sales and business development reps for all the different startups. So our job was to essentially help go-to-market some phone sales, e-commerce marketing across all these different companies. And the first thing that I learned was context switching and trying to build a pipeline for one company itself is hard enough. Doing it for seven is pretty damn near impossible and no matter how many hours you work, it's just not enough. And so, the benefit of that in hindsight was I had to not be the best at understanding the actual product, but be really good at starting to generalize business patterns and be able to have those conversations across several different types of markets. So whether I was going into a virtuality meeting, trying to sell a video game or I was going into pitching a product on e-commerce side, I had to be able to, in a very short period of time, have that business conversation and I was doing that daily for four months.
And so, I got good at understanding business patterns versus just thinking about selling a product. So, that was the first thing. The second was understanding how difficult it's to find product market fit and not really having learning that summer about what that is. And at the end of the day, it's really hard to sell something that isn't have that yet. And so, our job ended up becoming much more about tweaking the products and understanding the value props and the offering more than actually selling to try to get traction. And we had success in some areas and failed in many others.
Chris Grouchy:
And I think it was after this summer that you left school, is that right? You dropped out 2015?
Robbie Deeks:
Yes. In Propel I had worked on different startups and I had set the goal that I wanted to go and work in a technology company. And so, even though I had exposure to some of the startups in Propel that were focused more on e-commerce and were leveraging tools like Shopify, my mind was thinking building a platform, going to Silicon Valley and just putting myself on a rocket ship somewhere there to get a bunch of learning and pattern recognition. What ended up happening was one of the co-founders of Shopify, Daniel Weinand came into one of our classes, an entrepreneurship class, the one only classes I actually attended at university and he spoke for the hour and I was just blown away. I had used Shopify bit over the summer but wasn't really paying attention to it and was just amazed at the thinking and just the overall level of detail shop, I thought about the market, the products, how they're building their own culture.
And so, I originally after looking at the company saw already IPOed, it's super big. I'm not going to get the exposure that I want. I really wanted fast growing team in a small company because that's how you get a lot of jobs and a lot of responsibility and ultimately get to learn quicker. But what happened was I had a mutual friends who had joined Shopify Plus, which as you know coming from there was a startup. Within Shopify at that time, focused on the enterprise market and it was based in Waterloo and it was roughly around 30 to 40 people in the fall when I had found it about it. And so, I was able to get a job via referral or an interview, I guess, to start via our mutual friend Arsh and I thought the interview went incredible, thought I nailed it with our good friend Jamie Oliver who's the senior recruiter there at the time.
And on the back of that initial interview, I then went and dropped out or they gave me a three year, because it was my fourth year and I qualified for a three year bachelor of arts instead of my business degree, which I've learned later that no one on planet Earth values that degree. I left because I intuitively thought like, okay, this is exactly what I'm looking for, new company, high growth markets and I really believe in how the founders are thinking and what they're trying to build. Went home for Christmas. Jamie took holidays pretty seriously, didn't hear from Shopify all through the break, so I was basically without a job and also without a degree.
And I remember thinking that probably wasn't the smartest sequence of events that I took, but luckily enough, I think it was the second week of January the recruiter gets back from vacation, calls me, I go in and after a series of interviews, was starting by the last week of January of that year or so. It all worked out, but I think the big thing that I was looking for was fast grow company and the ability to be able to wear multiple hats and learn a lot in a very short period of time.
Chris Grouchy:
So joining Shopify, I think, it was a spark for a lot of things that will come later and we'll get to. I want to ask a question about some of the key learnings that you gained from working at Shopify, Shopify Plus. But I think it would be best to bucket the learnings into two different categories. So the first one would be deal making, and the second one would be e-commerce. And so, e-commerce we can get to, but deal making specifically, I've come to respect you as being the chief deal maker in my network and someone who I respect as someone who can always get a deal done. I know that when you started at Shopify, you were basically looking at, "Okay, I need to make 100 cold calls in order to create X number of deals to make my number." But I think your approach later shifted in your time at Shopify and you focused on really great companies that would be an excellent fit and your goal was to get deals done with them.
So coming up with a lens or for a frame that you can then use to position the product or the service to the prospective buyer, requires sitting still in thinking and meditating on the account and what their needs are, and not getting caught up in busy work. So, how do you think about carving thinking time into your work schedule? Is that a key resource that you frequently come back to in order to slow things down and be more methodical about whatever it is you're doing, whether it's a position you should hire for, the business challenge in front of you, the strategy of the company? How do you think about using thinking time as a resource?
Robbie Deeks:
I like to be almost intentionally incredibly inefficient to then find the right efficiency. Because you can be efficient day one and we've seen and you've seen reps start and, wow, these people are organized and they're chipping away, whether they're chipping away in the completely wrong direction or at something that's not going to give them any leverage. Where I think it was in our second year, I don't think I had a deal for three or four months and was getting a lot of heat because I took a big game. But what we were doing in those first three or four months was we were setting the groundwork of the framing, of the thinking, of the value prop and starting to understand the customers and understand where is there a whole subset of customers that we can own and completely dominate that market. And then I think quarter two rolled around and we set a record amount of deals, I think it went from zero to 18 deals in one month. And we hit an entire year quota in six months.
So we took the first three months off to figure out efficiency, hit an entire year quota that a lot of people didn't hit. And then the last three months pivoted more to other product stuff. And to me, it's a balance of feeling incredibly not productive and trying to strike that balance of like it's really easy to just go and hit the phones all the time. But if you can zoom out and it's really hard for people to zoom out when they're operating quarter to quarter, but if you can zoom out and you start to think about your pipeline, especially if your salesperson as a two, three year job to be done, you start to think differently about the seeds, you're going to plant what I call shaking trees. So it's one thing to try to directly go at people, it's another thing to shake trees of almost like a node in a network where they're incredibly influential.
How am I going to meet add value to them over the next 12 months? And eventually that comes back. It's not a science, it's more of forced serendipity. If you put all that energy that you're putting into sending emails that no one wants and you put it into these things that actually can create value and create forced serendipity, all of a sudden you get these waterfalls of deal flows where all of a sudden it's like, how did you just hit all those deals a month? Well, people didn't see, but that was 12 months of effort that was leading up to it. And those same people were chipping while grinding for a year and they can't even hit their basic quota.
Chris Grouchy:
I think there's definitely some lessons around thinking time and shaking trees that business executives and other verticals could appreciate. And it's, for me, I look at my calendar very frequently and look at all of the recurring meetings and if I see that my calendar is basically complacent, it's calcified into the same old, it sometimes it's good just to shake things up and to carve out thinking time that enables you to reset. And so, I think it's the lesson you're describing around shaking trees and thinking time is applicable to anyone regardless of what role you're in or your seniority in a company.
Robbie Deeks:
Yeah. I think it's hard to say this for everyone as a recommendation, but for the individual that wants to take it seriously, redefining what your role means to yourself and to the organization. Because the reason why people think it's not productive to take thinking time is they think, "Oh, I'm a sales rep and here's what a sales rep would do." Then they go read books. Everyone reads the same four or six books and then they go right into action mode and they don't take a step back and say, okay, if you've redefined your roles being the top impact, that can mean revenue, it can mean a lot of things generator in the organization, it's going to force you to make different moves. Because at the end of the day, I don't care if you're the top salesperson, you're creating on the phone, if you're doing the same thing everyone else is doing, you're going to get the same results or at least within the same level, you're not going to be able to run away at all.
And so, to get that step function growth, you actually have to completely rethink what you're doing. And this part about self-belief that you're going to make that time useful, but that comes down I think to talent and hard work.
Chris Grouchy:
And setting yourself up for serendipity, to your point. Your career exploded in early 2018, I see it that way. You started working for Gary Vaynerchuk as the director of e-commerce revenue for VaynerMedia and within three years you're basically chief commercial officer of VaynerCommerce. And so, this rapid progression of leading a commerce-oriented company from Shopify sales rep is nothing short of impressive. And so, what's the story behind getting the job at VaynerMedia as the director of e-commerce revenue? How did that happen?
Robbie Deeks:
Yeah. So in the final year of us at Shopify, before I started, I knew I wanted to do myself two years before I did the next thing because I think a company like Shopify does a very impressive job of providing the golden handcuffs where it's really easy to stay and justify and keep working on interesting projects. And at the end of the day, I knew I wanted to be able to eventually build my own thing, so two years was the timeline. And so, in the midway through the second year of being at Shopify, I started to open up and look at different possibilities of what's next. And I didn't feel mature enough at that point to operate my own company and team. And I wanted to also be able to, I collect sort of the sun, which is directly observed from one of the best business operators.
And I had been fortunate enough to at least have a loose connection to Gary at that time. And I was sitting at dinner one day with a mentor and I was talking to him about my ambitions to eventually go into private equity and all these things and saying how I built this machine and I have all these ideas. And he kind of was like, "Why wouldn't you go do this for Gary if you had that connection, and whatnot." And so, the light bulb kind of clicked. I then saw this opportunity to build this new type of firm, which we'll get into, but I ultimately was able to get a connection via a relationship that was one of Gary's right hand men and got a 10-minute meeting with Gary in New York September 2017. And within four minutes of that 10-minute meeting, Gary hired me on the spot, his ambition ultimately, if you know Gary's story, is to build by operators own companies.
And I showed up on this random meeting that Gary had no idea what it was about and was basically talking about how do we take over the world and how do we build this platform for launching, growing, exiting DTC companies. And thought that I had a unique way of approaching it based on everything I had just seen in the market, working with all the agencies, working with the consulting agencies, working with the investors. And I thought I would not have taken this to anyone else, I wouldn't have done it on my own. I thought the only way this is going to be possible pull off was to have someone at the scale and resources Gary had, but also with the level of craziness and open-mindedness that he had.
And so, that was how it all happened. We did a handshake deal at the end of the meeting, and then we met one or two times before I started in January. No one knew who I was when I showed up in January. I kind of showed up, people thought I was a developer from Canada, so the title was just given to me. People were confused, but eventually we figured out like, oh, this guy is here to help build this new type of capability and offering.
Chris Grouchy:
So what then led to the creation of VaynerCommerce? Because you had this vision to start VaynerCommerce, which was as you described, a platform and then you were hired under the VaynerMedia banner. So, how did you then create something from nothing which ended up becoming VaynerCommerce?
Robbie Deeks:
Yeah, I think it was a combination of things. So one, the VaynerCommerce was a hypothesis and there was a debate very early on, one that I lost early on, which was that it needed to be its own company. And the reason for that was we really believe that at the time VaynerCommerce needed to be a management firm, not seeing as much as an agency for the pure sole reason of being able to acquire different types of talent and to be able to get access to the C-suite and strategic level decision-making of organizations from venture backed ones all the way through to Fortune 1000. And so eventually over time, I got us to be able to get to a place where it made sense to spin out, we were doing acquisitions and talent acquisitions so it made more sense even from a financial legal perspective.
But I think in the beginning, there's a hypothesis and I spent really the first two years running around trying to understand who's the top talent in commerce in DTC, and that takes time because there's a lot of people that look successful on paper because they were at a brand that grew, but most of these brands grew because Facebook ads were cheap, not because these people were growing in sustainable ways.
And so, after endless amounts of conversations, I finally started to, one, identify who the people were that I thought were top talent. But then the second thing I had to do is actually convince them that you should stop that thing over there and come do client services, which a lot of top talent just isn't interested in doing. They want to go into venture or PE and launch their own thing. And so, once I got over that hurdle and we started to put points in the board for clients, it became a bit of a snowball effect, and that momentum, I think, landed credibility to the thesis and the hypothesis to be able to spin out as its own company and it's going to be its strong enough to stand on its own.
Chris Grouchy:
So I want to come back to something you mentioned, which is this obsession around talent. I think it's incredibly rare for a business executive to have an eye for talent or to force themselves to learn how to develop an eye for talent and take scouting talent seriously to the degree that you do. And so, how did you develop an obsession around talent when it came to building VaynerCommerce? Were there any moments that led to you carrying enough about talent to go all in on that being a key ingredient to making this successful?
Robbie Deeks:
Yeah, I think there's two. One was conscious and one wasn't. So I think a pattern I had since I was very young was recruiting and building teams, whether that was literally on the playground at recess to win the soccer match all the way to formal sports teams and trying to think about what does the structure of this team need to be recruiting people to be like, hey, you need to join this team through to actually coaching the high school basketball team while I was in high school. So I always had this obsession. It usually started out with sports and I was quite good on it, but consciously I was never thinking about it as like, oh, I have this thing where I spot talent or under-priced talent or people that I think I have something and then I'd like to think about how to put them in a position to succeed on a broader team.
But the conscious part, when we were at Shopify, we grew from 50 to 400 people in a very short period of time. And one of the benefits and patterns was how much impact one individual could have and I could reduce a lot of the success that we had to very specific individuals that are probably on one hand account. And I always thought to myself, wow, what would've happened if that individual didn't show up, would've we got to the next stage, or would've we all quit and been exhausted or would've we been able to think about that product offering. And so, to me, it was insane just how important it was these individual humans. And at the same time, as you're growing fast, we start outsourcing a lot of this recruiting function and we just continuously make these wrong hires because they're disconnected from that. I was always amazed we were exceeding goals and stuff like that and never once got asked about, hey, should we hire this person or how should we think about talent or how should we codify it?
And I thought might be a good idea to get in a room and talk about what's making us successful versus all the other reps or you could replicate that across the entire organization that was happening. And so, we started making bad hires and I was like, all right, maybe that was a mistake and we'll learn. And then we was like, okay, we do it again and we do it again. And this isn't a company that I think is one of the best at appreciating talent in North America and I think has won awards for it. But at the end of the day, I just realized, okay, even the company that is on the front lines of thinking about it, there still seems to be a disconnect on how important it is and how rare some of these top talented it is and why aren't we doing everything in our power to win that game.
And that was where I started to take it to a whole other level and try to ask, okay, well, one of the reasons is they're busy and one of the reasons is the current operating structure that we operate in doesn't seem scalable. And so, this isn't a new problem, it's been discussed and everyone talks about how to solve it, but I do think to the degree that I take it seriously and probably going to be obsessed with it for life on solving it. I do believe on the other side of solving it, even if it's 1% better than the other companies, it is a huge upside in outcome that you get.
Chris Grouchy:
So many gems there. One question on finding and specifically convincing talent to join, so VaynerCommerce is now a thing, you have to go recruit the best team, you're approaching people who basically have better options. How do you convince them that your option is the best one?
Robbie Deeks:
Yeah. One thing that's funny, we were at an offsite dinner last week and we were talking about how many people in this company have actually applied for a role, I think it was less than five, the majority we ended up taking out of their existing companies, which I love that stat, how aggressive we've been at being able to convince people to join. And it does tell me one thing that we have to definitely improve our inbound recruiting process and we're working on that. But I think it does validate how aggressive and how serious we've taken talents. But, look, I think this is part of what took some time to figure out, but I knew I was onto something and I try to reverse engineer how I thought I was thinking when I was at Shopify and how you were thinking and Raj and others that were with us as we wanted on to start our own companies or do the next thing because it's not, I mean, partially my ego, but we were at least I think top talents, at least with them and plus at the stage that I was at.
And I always remember HR leadership, they didn't have a good pitch. It was really hard for them to reverse engineer what I actually cared about or incentivized, what would've incentivized me that early on in my career and being that hungry and motivated. And so, understanding that, I kind of thought, it's not that we wouldn't take a job somewhere, it's that what we're optimizing for is our long-term market value and learning. And so, if you take that insight and you say, okay, well maybe I don't need to... Shopify always talk about people's life work and I thought that, great, you're going to get a lot of people committed to that one and they'll set up shop and they'll feel very comfortable, but you're also going to miss a whole batch of people that don't want to do their life work there and they actually want to literally learn as much as possible and then go create their own thing or be the next Toby or whatever.
And so, with that insight, what I started thinking about was, okay, if you have a pool of talent here and you tracked, okay, where is this talent trying to get to? I drew a bunch of circles and it was like okay, they're going to venture capital, they're going to private equity, they're starting their own company, they're going into technology, there's not actually that many pools of where top talent was going. And then I drew a circle in between those which was vCom and the question I asked myself was, what makes them more valuable in those end points and companies and allows them to actually leapfrog their peers because everyone loves to leapfrog their peers if they join vCom even for 12 to 18, 24 months. So I started to focus on that and what I got to was, you know what, you could go and join private equity or you can join venture, you can join these technology companies, but you're showing up with the same skill and experience that the next person is.
And even if you're impressive, yeah, you'll be successful, but what if you can actually develop the skill sets, the perspectives, the exposure that a lot of other people don't have and go in there and maybe skip six years. And so, all of a sudden I started to realize that what vCom was about was not trying to immediately solve the market problems, which obviously pissed off our CFO and other things because I wasn't selling anything, we're just like cost and just breaking even doing Amazon work.
But what we were really doing was trying to reverse engineer, how do you solve the talent problem? And when you solve the talent problem and you win that, the talent shows up and they solve the market problem better than anyone else because they're actually talented once. And so, I started to figure out, okay, I can give these people actually a ton of exposure and the way I'll do that is I'm going to get the brand side, which at the time was basically working with agencies or independent consultants but wasn't giving anyone keys to the castle. In the DTC world, the McKinseys don't really exist there yet because they don't get DTC and the agencies are junior talent executing cookie cuuter playbooks, they're not driving the ship.
And so, we eventually got a few founders to let us look under the hood, work cross-functionally, work holistically. And that is what talent wasn't getting in their own companies. If you're ahead of growth at a brand, you weren't getting the operational perspective or the financial perspective or all the different skill sets. And that is the thing that when you go into being a venture portfolio or you want to be a founder, that's the skillset that you value. And so, it was almost like this two-sided market where the top talent wasn't getting the exposure they wanted and the brands weren't getting the talent that was capable of looking holistically and I just connected those dots.
And so, once we had that, we were able to get the first few key hires and then it's like no different than the Brooklyn Nets where once Durant is there, yeah, I want to go and win a championship too. And so, talent attracts talent and I had that insight early on just based on how me, you, Raj and several others wanted to join together inside Shopify. And so, it kind of took care of itself and it's been a snowball since.
Chris Grouchy:
What you just said I feel like is one of the most valuable insights that's been shared so far on this podcast around connecting the dots for talent. I want to shift gears to talk a little bit more about commerce specifically. So you've assembled this great team and you had a lot of ideas or philosophical tenants that you want the VaynerCommerce to actually go and manifest inside of your client's businesses, and one of the core elements of your thesis was on frameworks for sustainable growth for DTC brands specifically you called it enduring commerce. Can you talk more about the elements of enduring commerce?
Robbie Deeks:
Yeah, I think the simple version of it is if you just reduce the math down to LTV/CAC ratio with a payback period, at the end of the day, you're trying to manipulate those different levers to have the right in economics. And then there's the question of, okay, how far can you take this? How big can you scale one of these companies? I think what drove the need or us talking about enduring commerce was the lack there of it in the 2010s. And so, because of how cheap things like Facebook ads were and the ability to launch sites and the ability to create products overnight, you had this endless wave of competition coming to the market. And then the mechanics was not to necessarily optimize for LTV, it was all about how do you reduce CAC, how do you keep CAC down and acquire as many customers as possible. And when you do that, yes, you can have a good top line looking business and convince some poor sucker to buy it or invest in the following rounds.
What happens though is eventually the market catches up, that arbitrage goes away, the financial markets people come in, alpha goes away and eventually people start to think, oh, okay, well, what's next? And the reaction in the market was one that was much more of an incremental mentality than a step function one, it wasn't, okay, how do we step back and think about how is this going to play out over the next 10 to 20 years? It was one of, all right, let's fire that agency and go to this one and ask for an even better ROAAs and we'll just pump out more creative, and how do we just optimize the same metrics ROAAs yada, yada over and over again. And we'll just churn and burn and we'll try to get into these new channels and find enterprise customers, etc., etc.
So the problem with that is run into a local maximum problem. Eventually, all these companies incrementally trying to optimize the same ways, they're just hitting this wall and that wall is getting lower and lower as there's more competition because there's no barriers to entry on this market. And so, all of a sudden what used to be the wall at $50 million is then $30 million, then it's $20 million, then it's $10 million and everyone's kind of competing for the same customer. And so, what we did was took a step back and said, okay, look, if we're building this for ourselves to eventually own companies and scale them to have venture type returns, we need to think about this very differently. This can't be a game of just optimizing the funnel. We need to understand what problems actually have the legs to drive to solve a market that's underserved enough that you can drive it to $1 billion, and then how do you build these repeatable relationships?
So there was a few books that influence a lot of our thinking. One I think was written in the 80s about a PCG exec, the loyalty effect and really just talking about instead of solving for this acquisition problem, how do we think about building value throughout the entire life cycle? And what happens when you look at the constraints is these brands only have so much capital and they're ultimately making resource allocation decisions. And early on, it's very hard for these founders to think about allocating resources towards the relationship with the customer on an ongoing basis. And so, what happens is everyone can create this initial great add to landing page to product and checkout and then there's nothing that differentiates them post that initial product experience to then give the customer a reason to come back. And so, what we wanted to do was think about how do you build capabilities that create what we call enduring value for the customer.
And that evolved into membership models and product innovation cycles that are much faster all the way through to new sources of value that are much more intangible assets such as community and education and learning. And you can see in the zeitgeist now, the market is catching up and at least it's becoming buzzwords or people are talking about it, but they still don't have the skill sets, the operating models, the frameworks and they still know how to make those resource allocation decisions to be able to support that new evolution of enduring businesses. And so, we're filling in that gap and helping companies figure out what that looks like for them.
Chris Grouchy:
So how do you think about adding innovation into a company then? It seems like adding more innovation into a culture, a team is something that brands and particularly retailers want. So what are the ingredients you need to put in place in order to drive that kind of thinking inside of your organization?
Robbie Deeks:
So we work across venture capital through high growth equity clients to private family office, private equity, and all the way into the Fortune 100, Fortune 500. That's a different reality each one of those stages. So innovation, a new incubation or venture company that has no competitive advantage from a distribution perspective from that nature. So all these companies are incredibly dependent on the creativities of the founder because it's extremely expensive to outsource that type of obsession with a problem or obsession with the customer and be able to iterate on product fast enough.
And so, where we come in there is much more, hey, what tools do you need and where should your allocation of capital be happening at this stage to get you that product market fit and get you to that next stage? What roles do you need? And oftentimes people over bloat their teams or they're focusing on the wrong things that don't actually matter based on our experience of growing companies at that stage, and they don't invest enough in the founder or whoever the creative person is of thinking about what's the value of the customer we can constantly deliver to start to get that LTV to climb and get that retention to be strong.
On the complete other side of the spectrum, in the large companies it's like, okay, they're already at a stage where they have distribution, they have all these assets and innovation looks much more like removing constraints than it does of adding any level of genius or creativity, it's how do you get these untapped assets? It could be IP, it could be R&D, it could be literally teams not connecting the dots and working together. And so, that's much more of thinking about operating models and how do you get the right working cadence to get everything from the creative and the messaging that's going to inform the customer all the way through to the delivery, which is a pretty table stakes thing, but the delivery in a reasonable way that the customer can experience that product and you can bring them back.
And so, innovation on a high level looks much more of a people in-person and operating function and how do you connect these dots in the long assets. At the startup level, it's really how do we help them find product market fit. In the mid-level, when you're a high growth equity client, I would say it tends to be much more about, okay, how do you navigate these different stages of growth without losing the traction? And that's usually a combination of like, okay, these people got you here but they're not going to get you there. And also the same is true for systems and technology, and so, while the planes in the air and you're growing probably fast, you're trying to change in systems and set yourself up to that next stage of growth, which tends to be a combination of things from systems to people management.
Chris Grouchy:
So, why is owning the customer important in all of this?
Robbie Deeks:
So the traditional retail, you sell to the retailer, that's your customer and then they have the distribution. What's happened as things have moving online, to internet, is the opportunity has opened up to be able to own the customer, but you also have pressure coming from two sides. One is the pressure of Amazon, which is doing a incredibly strong efficient job of owning the customer itself and being able to create private label and own that distribution and charge a lot for it. But it's successful because it's driving convenience, it's driving pricing, it's driving value for that end customer. So that puts a lot of pressure on brands because you have to play there but you know you're losing your customer to that Amazon experience.
And on the other side, the traditional retailers that have an ginormous footprint across the US and is where customers are living, they also have leverage and they're forced themselves to increase slotting fees and different things because they're just in their own battle with Amazon. And so, what happens is the brand gets squeezed and the only way that you can show up to these conversations and have some leverage within them is if you own the customer. And we've seen this where there's brands that purely DTC or at least it's a giant part of their business and they're interacting with the customers, and where they go, the customer goes. And because of that, it gives leverage back to the brands that they haven't had before. I see that continuing to be the case as we've worked with many brands that don't own the customer and they only go through retailers and they don't really have a lot of leverage to pull to be able to create that relationship and maintain that market share.
Chris Grouchy:
So I just want to talk about tactics for now for companies that are interested in owning more customers. Where are they under investing? If a large retailer is looking to invest significantly into their e-commerce operations and they see the DTC way of passing them by, what are some specific tactics or areas that they can invest in in order to capture more leverage from customers?
Robbie Deeks:
I think at the end of the day, it's about what does the customer want and then where are you serving them? And sometimes I forget where this influence came from, but thinking about all you're trying to do is reduce the friction for the customer. So reducing one that's physical friction, so literally just consumers and that where sometimes you can get a ship to home, sometimes it's like it's more convenient to pick up a product at the store because you go grocery shopping every week. And then there's also emotional friction, which is education, it's content, it's community, these other things. And at the end of the day, I think what the DTC brands are just brands in general have done a really good job of is the emotional friction aspect and being able to create that relationship and add value educate.
And the retailers have done a good job of owning a certain type of physical distribution and I think you saw post-COVID being able to do things like order online, pick up. All that stuff is a source of friction that the better you are with that, the more you're going to have a customer that's happy and going to come back and do it again because you're reducing more friction than maybe another retailer is.
I think because the problem of leverage isn't going to go away, the DTC brands and everything that they own emotionally with the customer won't go away either. And the way that I think a lot of retailers can capture the value of that is rethink how they're engaging with the brands that own that customer and thinking about, hey, how are we reducing the friction even of doing business with these DTC brands? And I think from an infrastructure perspective, that's one of the things that you guys are doing at Convictional is, hey, there's literally a physical barrier from allowing us to embrace these brands that actually own the customer even though the upside is completely for us if we're able to actually unlock that. And so that's how I would see where there's a lot of friction right now that can be removed.
Chris Grouchy:
Appreciate that. And it seems like if retailers with market power viewed the brands almost as a customer and look at their job to be done as reducing friction for the brands to work with them, they might be able to participate in the market growth that's happening in DTC right now.
Robbie Deeks:
Exactly. And everything, they're embedded in existing ways of thinking and structures, but we've seen, I think, Target do a good job of this with some of the modern brands like Native and Harry's. But yeah, it's no different than me previously talking about how do I reverse engineer what talent wants and giving to them sooner and better than the market. I think the retailers can do the same thing for these brands and capture the upside of that.
Chris Grouchy:
That makes sense. Companies always chasing new customers seems to be the root of all evil for you and the philosophy that you've built at VaynerCommerce, and the goal as you've identified is retention and customer LTV. If we have this group of customers, it makes more sense for us to bring them back for repeat purchases rather than going out and acquiring new customers. Why is it so attractive for brands and inappropriately so to go out and acquire new customers rather than to bring the existing ones back for repeat purchases?
Robbie Deeks:
Yeah. I think it's expensive. There's kind of a fallacy early on that DTC was like this cheap efficient thing and that's why you should do it. But DTC is incredibly expensive. If you think about all the energy and resources that go into a retailer being successful, I don't know why people didn't think the same thing once they can have to be true on the drift consumer side. It's like, yeah, sure, we've been given the tools to do this and to have a much faster go-to-market, but when you look at the unit economics of these businesses, what you're actually needing to do is have an entire business that's great at generating that customer come back and constantly reengage. And so, part of it is the life cycle of so many of these brands is they're going from zero to whatever, so they build an engine around how do you go from $0 to $5 million, which is, that is heavily customer acquisition.
And in the 2010s the math worked for this to look good, you could raise capital on it, a bunch of venture capital poured into the market and you could actually scale company to $100 million and the unit economics, the CAC force LTV ratio would be there. Now, that's gone away and there's no barriers to entry preventing companies from doing this, it's very hard to see how any company can actually reach scale without solving bringing our current customer back. And so, to do that, I think it requires a lot more innovation and it requires true value creation. I don't believe in the egalitarianism of DTC, I don't think every brand is a flower. I think nine out of 10 brands, sure, someone will buy your product but it's not a good business and it's not something that's going to create value for that customer over the next 10 years.
And so, we start to try to identify who's solving more important meaningful value creation problems for the customer. And sometimes that requires an aspect of technology or an aspect of leveraging data where we call commerce IP where you're actually taking data and actioning it in a way that creates value for that customer. You're not just using it to send another email to upsell them and then even business models. So I think a great example of that I love is Eight Sleep where everyone praised Casper for their early on growth and it's kind of hard to not early on because they captured a lot of early traction in that market. But when you think about it, it's like what is the barrier or the malt to building mattresses, and then how are you going to add value to that customer over a lifetime or that customer? And it's hard in the way they set themselves up to answer that.
But if you look at Eight Sleep, which had a much lower start, but we're solving a more meaningful problem, which was, okay, how do we actually make this sleep better? It's not just a convenience play where Amazon can also ship you a mattress, but how do we make this better and how do we help use the data to inform product or inform basically driving better sleep and ultimately better health. And so, what took a longer upfront period of time actually created a much larger barrier to entry and it also created a natural retention within the business model because once you start to collect the data on your sleep, you don't want to lose that. And so you almost have this reason to engage with them daily on what was my sleep score? And they're able to take that data and over time thinking about new products and new evolutions that benefit the customer.
And so completely two different models, same category, but you can see how one answers the question of, okay, I can see this being an enduring relationship with the customer over a lifetime, frankly, if they do a good job with the data and making that customer sleep better, whereas Casper, the moment that mattress arrived, Casper started sending emails saying you should buy a pillow, but in no way was actually adding value to that customer and pillow is a commodity.
Chris Grouchy:
And I think you know have this concept on the VaynerCommerce website which we'll link to called the Shopify Growth Paradox. And I want to connect that idea to what you're just describing. So maybe just for the audience, if you can describe the Shopify Growth Paradox and then we'll connect it to what true value creation actually means for customers.
Robbie Deeks:
I guess all this is somewhat connected with the Shopify Growth Paradox is essentially the mandate at Shopify and when we work there, still is today, is how do we arm the rebels, which is how do we help the entrepreneur, the individual business owner, the small guys be able to have access to the same tools, ultimately democratize the technology to be enabled entrepreneurs and new brands to compete and grow their brands. The problem with this is, yes, it has been successful and it's grown the overall pie of the direct-to-consumer market and I think it's a net benefit, but at the same time, it makes it harder for any individual brand to stick out. By definition of democratizing technology, you're actually reducing and commoditizing what were previously barriers to entry. So it used to be a competitive advantage literally to be able to have servers withstand Black Friday or Cyber Monday, Shopify wipe that out now everyone from Fortune 100 to our ants could launch a brand and maintain that technology.
And so, what happens is it gets so hard to scale and you need scale to be able to create unique value and you need scale to be able to build these businesses that investors are looking for in terms of returns. And that's just become harder and harder. And so the natural consequence of that when we thought about VaynerCommerce was you're going to need to solve more difficult problems like Eight Sleep did versus a Casper. And that requires talent and top talent that can deal with nebulosity. It's not about just creating an ad, it's about doing a series of things that together might be straightforward or simple or you can figure out, but all together, it becomes much more complex. And there wasn't a lot of talent on the market that was doing that, a lot of them were buying ads on Facebook and calling themselves heads of growth.
Chris Grouchy:
Got to create real value for your customer in order to differentiate and stand out among what is essentially zero friction in commerce and the ability to source products anywhere. It's just about being able to think through, what does my customer actually want and how am I going to innovate along the way. I want to move into a rapid fire round of questions. I'll give you a question and you just give me your quick thoughts. How does that sound?
Robbie Deeks:
Let's do it.
Chris Grouchy:
All right. So what is the most exciting opportunity in retail post-COVID?
Robbie Deeks:
It's probably one answer, but I'll give you two. They're in direct conflict with each other. One is things just, I don't pay a ton of attention to culture despite working for Gary, but I think he does a good enough job with that. But one thing I definitely observed was decide guy's culture, it feels like a really weird period and I comment on that because I think the weirdness of what consumers are willing to accept, we just went through a pandemic, no one has the precedent of this or has lived through it. And so, it opens up the ability to test and trial novel ideas and things. And I think people are more open to engaging with that. And I think we're seeing that in things like TikTok and a bunch of other things, but the weirdness I think is one opportunity that presents itself, the thing that's in direct conflict of that is while people are embracing the weirdness or a bunch of people on testing, there's also the ability to heads down, just execute on what's in front of you, sell what's on the truck and get the fundamentals right.
And I think the worst part is if you're playing in the middle and there's a lot of people playing in the middle, they don't want to get weird and invest in new ideas, but they also aren't even executing and getting the fundamentals right. But I think there's an opportunity for both right now where maybe people are too excited about TikTok. Gary will trust me out for saying that, but maybe they are too excited or they're not letting in and it's like, hey, if you just optimize your funnel, your checkout doesn't work, and Facebook would actually work for you at scale. Everyone is complaining about these rising CPAs, but when you look at their value prop, you look at the product, you look at the path to purchase, it's like they have none of those down. And so, pick what one you want to go after. But I think both are interesting.
Chris Grouchy:
Reminds me of a Gary quote or Gary philosophy, which is around clouds and dirt. Get the high level vision right, you can iterate on that, but do not overlook the low level fundamentals.
Robbie Deeks:
Yeah, exactly.
Chris Grouchy:
All right. A brand you love and why?
Robbie Deeks:
I already talk about it Eight Sleep. I have an Eight Sleep and I love that product, but I always talk about Gymshark too, so I'll go of them. Mostly an eagle thing because I called out pretty early that I thought they were going to be impressive company, but more importantly the reason I called them out early and why I still talk about them today is just their decision-making around resource allocation going towards what creates LTV and what owns attention. Gymshark and I won't go into the data, but they could've spent so much more money on paid media over the past five years like many of their peers and counterparts did. And they instead put those dollars towards things that would build community or build unique value, whether it was the app through to popups, through to all these different things, but they just did it to an extreme level that their peers didn't.
And we're seeing the fruits of that now and we're seeing an entirely different LTV retention relationship a customer has with the Gymshark than a lot of the brands that were darling's in the 2010s that now are trying to squeeze a little more out of Facebook or now trying to all of a sudden add a community for LTV purposes. But you can't fake a community.
Chris Grouchy:
Most important lesson from being an athlete.
Robbie Deeks:
So I was a long distance runner and I thought about this very recently and reflected on it. I think there were two things that I probably ignored a lot over recent years, but now I've come to understand like this is probably part of my story and part of what gives me an advantage day in, day out. The first is when you're a long distance runner, it's not fun at any point. The races aren't fun. It's not like you're a basketball athlete and you're training and when you play that game, you're enjoying it. It's like no one really enjoys the race, maybe the after fact, but you're ultimately training a year in advance, I think I got up to 16 kilometers a day, sometimes in long run, sometimes even more than that. And it's just boring. And that boredom, I think, was a really great training ground of just having to truck through long runs and pain and sitting with your own thoughts.
And I think that transfers over to business building and entrepreneurship really well and just being able to brute force through long periods of stuff that's not interesting, it's not fun and people ask, why do you do that? But I think I actually have the experience of doing it just in another form of when I was a runner and seeing the benefits, the net benefits on the other side of being willing to go through those long, boring, painful events. The other thing quickly I'll comment on is I was a naturally gifted runner, and so, I was used to winning without putting in a lot of work, from probably grade five, grade six middle school timeline, and then that went away around mid-high school I started to lose to these people that I thought weren't nearly as talented but they were putting insane amounts of work.
And so, in my senior year I finally actually did a lot of those long runs. I'm talking about, I put in the work and the mindset of just going for a long run versus I'm going to train harder, I'm going to run longer. My final year, I was doing 36 hills back to back where I wouldn't have done one hill in three months before. So it's how having that mentality of complete dominance and it would transfer over into races where all the seasons leading up to it, there was this kind of confidence and weakness and you could feel yourself fading away and you knew mentally who put in the work because they were mentally a more dominant runner. And in that final year, I had that dominance where I knew maybe a clammer to go in a race.
These people, they didn't put in the work I just put in, and I'm about to show that and mentally defeat them. And I think in business, it doesn't transfer completely over from sports, but I think there's a level of how do I dominate everyone on the field and I'm going to go read more books, I'm going to go work those weekends, I'm going to take those meetings, and that's kind of compounded. And I don't know if my family thinks it's healthy, but I've definitely benefited from understanding. It's like it's black and white to a degree of, hey, you're in it, or hey, yeah, I'll do those runs, I'll do those things but you're not putting in the full amount of energy and effort you could.
Chris Grouchy:
All right. Well, we're going to end on one question. Obviously you've put in the work, you've put in the hours, you have the mindset of mentally defeating your opponents, but sometimes you have to rely on others. And so, what is the kindest thing someone has done for you?
Robbie Deeks:
Yeah. It's hard for me to name one thing. I would say the thing that is very true for me specifically, is just the amount of people at different stages of my life that have been incredibly generous. I mean, working with me, I can be very difficult to work with, I think. So everyone from like my parents to supporting me to colleagues, to different mentors, coaches I've had, I think the patience of my personality and people being incredibly generous with their time and allowing me to go through different stages of growth, I'll always be grateful for and I continue to be fortunate enough to always fall into great people and mentors and people that are incredibly gracious with their time and allow me to learn from them. And so, that's the macro thing that I'm thankful for and I hope I continue to get to meet and work with those type of people.
Chris Grouchy:
Well, thank you so much, Robbie, for joining us on the podcast. You've been very generous with your time here and the insights that you've shared with the audience. And I think that folks are going to walk away with a few pages of notes as a result of some of the insights you shared specifically around talent, commerce strategy and how to make deals and outwork and outplay the competition. So thank you so much. It's been a pleasure.
Robbie Deeks:
Thanks for having me. Thanks, Chris.
Chris Grouchy:
Thanks again to Robbie for coming on the show. And thank you for listening to the Legends of Retail podcast. If you want to get notified about future episodes of the show, subscribe on Apple Podcasts, Spotify, or wherever you listen to your podcast. You can also stay updated by following Convictional on LinkedIn and Twitter. If you've been enjoying the show so far, thank you. Please consider rating and reviewing the show on Apple Podcast or Spotify. It really helps us get the show in front of more listeners. Finally, if you want to share feedback on the show or if you have a potential guest to suggest for season 2, you can follow me and DM me on Twitter at Chris Grouchy, or you can email me at chrisconvictional.com. Thanks again for listening.