What’s So Important About Vertical Commerce? The Consumer Revolution, Part II
A Q&A with Ben Lerer
Find out what Ben Lerer looks for in a vertical commerce investment, and why Casper and Warby Parker are dominating the market.
Last time, we were talking about the importance of customer experience. It seems pretty key to your deal strategy.
It’s a big part of how I make decisions about who to invest in. We’re investing early, so it’s very rare for us to see a fully built-out business. Still, there are certain qualities that the entrepreneurs have and certain things that they say and do that lead me to believe they’re going to be customer-centric in the way I think modern, millennial customers expect the brands that they love to behave. For example, with Casper, when I said, “Hey guys, I’d love to sleep on a mattress,” they said, “Cool, we’ll have it delivered to your house today.” My wife called me later that day and said, “Those guys who dropped the mattress off were the nicest guys in the whole world. They were amazing! Sweet and funny and nice and thoughtful and awesome.” And I was like, “The delivery guys are nice dudes?” She said, “No. It was the founders. They came and dropped it off and installed it and took the old mattress out.” I saw that behavior in Casper and I thought it was great; brands really need to be scrappy and lose their ego when it comes to their customers.
Then, I slept on the product and thought it was great, and I thought the whole way they carried themselves was amazing. For example, when Casper launched, their chat feature on their site was “Chat with a Founder” and it wasn’t a marketing ploy — it was the founders who were sitting there, actually chatting with and responding to people. Casper showed a certain way of thinking about the customer that I see as a common trait in all of our successful direct-to-consumer (DTC) businesses, and I think it’s fair to say that Casper looks like it’s going to be the next great DTC vertical commerce business.
So the new motto is sort of, “Go customer or go home.”
Definitely. Everlane is another great example of this. Their entire philosophy is radical transparency. It’s telling the customer how much the product cost, where it’s getting made, and giving the customer confidence that they’re not getting ripped off. I think this kind of respect for your customer is a really critical and a big trend, because a brand today is not what the company tells you it is; it’s what your customer decides it is.
How can you tell if founders are going to be customer-centric?
They’re not the most ruthless or aggressive business people and it’s not people who have the most sophisticated handle on margin and market size. They’re people who actually give a shit about customers and who are going to build products to please them. That’s why I love Plated and Ample Hills and Warby Parker and Casper and Chubbies. These brands all please their customers in different ways, but they all do it so effectively.
For example, Chubbies super-serves their customer and represents something really pure and honest. They’re very true to their brand and you see that consistency and that respect for the customer reflected in business metrics. One of the things I love about them is that the founders are totally representative of their brand. They live that life, and they’re not like, “The margins on shorts are really great. The shorts market is ready for disruption.” What they said to me was, “We’re not building a shorts company. We think that there’s something magical about what the weekend represents, and we’re going to build a brand that makes people feel like it’s the weekend — where everything we do is about being carefree and having fun and being comfortable in your own skin and being alive and doing the things that you love, and anything we do and any product we create, when you put it on, you’re empowered to live that kind of life.” That’s such an amazing, customer-first way of thinking about building a business.
And product quality must factor into that “customer-first” mentality a lot.
If you think about any DTC business, how good a company you are is basically directly related to how good your product is. A nice coat of “design paint,” a nice UX, a nice UI, a nice PR effort — all of these things are, on some level, lipstick on a pig. The real substance of these businesses is the actual quality of what you do and create. Very early on, it was clear that Neil [Blumenthal, co-CEO] and Dave [Gilboa, co-CEO] at Warby Parker were really committed to creating a product that was of much higher quality than the price they were planning to sell it for. I’m a big believer in luxury and high-end products at discount prices. You feel like you’re getting a deal without getting suckered, and I think that the internet and DTC have created an opportunity where consumers can now expect to get great products at lower prices because businesses don’t need the overhead or traditional cost structure that leads to traditional cost markups. And it’s all such a win for customers.
A brand today is not what the company tells you it is; it’s what your customer decides it is
This feels like it should go on one of those “what every vertical founder should know” lists.
I’ve been doing this for 10 years now, and it’s obvious to say it, but to actually believe it in how you build your business and to actually not cut corners and to be patient and to focus on quality over quantity is the long-term way to build great businesses. It just takes a certain kind of resolve and a certain kind of founder to do that, and that’s what I look for when I’m investing in people. I want to partner with people who are going to be truly focused on quality over quantity, and who know that the quantity and business and the money will all come if you have a great product.
Read Part I, and stay tuned for Part III, where we’ll hear Ben’s advice for founders and find out what makes him say no to a deal. In the meantime, follow Ben Lerer on Twitter and check out other Lerer Hippeau investments.