Optimizing for High-Velocity Growth: A Chat with Direct-to-Consumer Products
10/10/18 @ Glossier
Speakers
- Beth Ferreira: Managing Director, FirstMark Capital (moderator)
- Arielle Silverman: Senior Director, Subscription, Rent the Runway
- Eleanor Morgan: Chief Experience Officer, Casper
- Fiona O’Donnell McCarthy: VP of Product, Daily Harvest
- Melinda Chao: Director of Product, Glossier
Description
Direct to consumer brands have exploded in our landscape. Glossier parlayed their successful blog into selling their own cult beauty line. Rent the Runway took their classic product and moved into unlimited rentals. Casper expanded its iconic mattress product to bedding, furniture, and nap shops. Along the way, they’ve created winning digital experiences while developing a huge following of passionate, loyal customers. How did PMs in these companies think about growth once product-market fit was achieved? What strategies did they employ to leverage the strength of their brands and massive interest of their communities? Hear from these amazing product leaders on how they’ve optimized for growth and built digital products that support business expansion beyond the physical hero product.
Panel Discussion
How does the Sharing Economy of today impact your product?
Rent the Runway: Our product evolved from the idea of helping women avoid paying too much for a dress they may wear once to a special occasion, by introducing the idea of renting that outfit. This exploded into an optimization of renting vs shopping, thereby saving time and money, as well as selling consumers on the designer experience and that there really is a difference between fast fashion and a designer dress.
Being part of the sharing economy has been integral to Rent the Runway’s success and continued growth. Also, photo reviews have been key. Initially we didn’t even have reviews, but found that customers were emailing customer service agents with photos and saying things like, “This is the best dress ever!”, and, “I got engaged in this dress! I want to keep it forever!” We suddenly realized there was something to that, and from that came photo reviews. Next we’re thinking about what it would look like to have a community of fellow renters, and finding ways to encourage subscribers to talk to each other. They’re already doing this is Slack groups and Facebook groups, but we’re looking at how we can create a product around that.
Casper: How do we get people to care more about sleep than they do today? Sleep is one of the easiest things we can do for ourselves, but sleep is currently a “guilt-ridden” conversation about getting more sleep; we try to create ways to normalize the need for sleep, thereby making it more acceptable to pay specific attention to the kind of mattress or pillows you buy, or how much sleep you get. We’ve tested this out with public nap pods where you can rent a space to nap and we’re now seeing requests for membership to some of these. We’re not a mattress company, we’re a sleep company.
Daily Harvest: We’re trying to reinvent the $52B frozen food industry. There’s a cultural change of “wellness in the face of having a really busy and really full life”, and balancing that with how people think about the frozen food isle. For us this means lots of user education, and trying to reinvent this category of food. Micro-influencers normalized taking pride in what you eat, and talking about it, and taking beautiful photos of food. On our website when you sign up you see beautiful photos of our products and a lot of users see the page and say, “Wow, I feel healthier already just looking at these products!” We photograph key ingredients and that’s our lead image for our product pages. Simple ingredients are key to the problem we’re trying to solve.
Glossier: We believe that “you are your own beauty editor.” In fact, the mirrors at Glossier tell you you look good. We’ve grown by listening to our customers and reflecting demands and knowing what they want (even before they do sometimes). Early on, we were called a millennial brand, but we’re working to transform that now with new campaigns, like “This is Glossier”, to showcase diversity of customer base. We believe in listening and reflecting who our customers are and what their beliefs and values are.
Can you talk about the evolution of your product in terms of brand voice, customer base, or the product itself?
Casper: We started as a company for 30-something guys in Williamsburg, but eventually we needed to grow past that, while trying to stay true to our brand value, “Zing”, which means “being refreshingly human in a category that is not.” Clarity around the mission can help unite everyone around a singular cause, so we dedicated three months to redefining what we stand for, and how to articulate that in a really clear way. Out of this came a desire to deliberately grow in an omni-channel way; to keep growing in the face of competition, we had to “meet customers where they are”. Now we’re focused on expanding retail locations, wholesale partnerships, and engaging with totally new audiences other than just those who are coming online.
Rent the Runway: Initially, our product replaced “going to a department store, buying a dress, wearing it, returning it.” So our first challenge was, “Are people going to rent clothing? And if they do, will they talk about it?” We found that customers would rent clothing and receive great compliments, and loved talking about the great deal they scored by renting instead of buying, and felt smart for renting instead of buying. Our customers were our brand ambassadors. But we realized we had stunted growth due to the limited number of events that necessitate dressing up; for most women, only a few per year. So we developed a wider array of outfits, and had to transition from event-based renting, to a new behavior of renting whatever you want, on subscription. We found that users love subscriptions because if changes their behavior; our users shop less, and so that monthly subscription becomes a replacements for another behavior in their life. Now we’re figuring out how we put that story front and center, that you can save money and space.
Daily Harvest: We think about, “What percentage of ‘mouth-voice’ do we have?”, or how much are we part of the conversation. We also believe that tasting is believing, so we do tasting events in NYC for example and try to create shareable moments and in-person touch points, and are still solving towards “How do we get people to buy food online that’s not Seamless”.
Glossier: We believe our strongest marketing is human-connection based, growing physical product education and product marketing. One of the first questions we get from new customers is, “Why Glossier? What’s different with them?”, so we have to focus on how to differentiate ourselves to consumers. Competition is high, so we’re continuing to grow there. Retail expansion has been interesting; we’re evolving this strategy and currently have a temporary retail presence in Chicago for brand activation and customer activation. This has been interesting versus our other stores in NYC and LA, since Glossier has less recognition in Chicago, vs NYC and LA where the brand is well-known already.
Everyone mentioned physical location as a key brand strategy. How do you think about an omni-channel strategy?
Daily Harvest: Our product has to be able to work in both physical and digital spaces, so we’ve evolved our teams to work in decoupled environments. For example, our catalogs and designs are created to work in both mediums. We think of this as “future-proofing the whole platform”. We have ways to implicitly listen to our customers, but we’re still in process of creating external feedback loops with our audience. Now we’re working on how to create an explicit feedback loop, and physical location is a big part of that.
Casper: For us this is about how we can organize in an omni-channel way. We created an omni-channel experience team, where the in-store team and the digital team sit in the same space and work together on a daily basis. They have a shared incentive of, “Create an awesome customer experience”, which means thinking about what the customer needs to know at any point in their journey. Physical retail has been helpful because we’ve found that customers browse the physical store in a similar way to how they’d browse the website…so the physical world has actually given us many insights into how our customer browse the website.
Rent the Runway: We realized a long time ago that our customers needed to feel it to believe it, to really see the difference between a designer dress and a Zara dress, for example. Our subscribers are wearing us 120 days a year, but they want to wear us 360 days a year. They visit the store every day to drop things off and pick things up. Rent the Runway has become more of a service for busy women who want to optimize. This involved shifting from “future reservations” to “on demand world”, to pick up on trends. Looking forward, we’re thinking about how we can make this even more convenient, e.g. maybe you could one day drop off dresses and be able to pick up a new outfit instantly.
Casper: It comes down to how social your product is. Sleep just isn’t that social, so how do we make sleep more of a norm to talk about? We’re starting to do this with Nap Bars, where you can go book a nap during the day. This creates a provocation, and then people talk to each other and this gets the conversation going around sleep and why it’s important. We’re even seeing people request memberships fo the Nap Bars, wanting to embrace this as a regular thing. We think of it as “Being a tugboat in creating a broader culture shift.”
Glossier: We just really excel at Community. Ultimately, we want to facilitate all of the conversations around Beauty online.
Audience Q&A
For a lot of CPG brands, Amazon is thought of as part of the DTC business. But they’ve created an environment of being successful by relying on your biggest competition. How do you position yourself in that kind of environment?
Glossier: Amazon has enabled buying and purchasing, but killed shopping. We believe in DTC, and therefore do not believe in wholesale. We would not go into Amazon willingly, but we do have partners that do this, but we are against this policy-wise.
Casper: We’re on Amazon. We look at it as meeting customers where they are. Amazon brings speed, reliability. The experience in our physical stores, and on our digital sites differs on being able to touch the product, seeing the whole product ecosystem (vs a transaction around just the mattress), and being able to talk to a consultant about sleep needs and how products work together. We gain with the market-share of customers Amazon presents.
Rent the Runway: Our competition is fast-fashion, not other rental or subscription programs. We want to educate consumers about the benefits of going through a luxury experience. Our biggest competitive advantage is our relationship with the designers, we buy everything through our designer partners.
How do you manage outgrowing your current org structure? How do you do that transition?
Casper: Working with each team to figure out how they need to evolve; the head of People is a really important role at any start up. We solicit input from everyone on how to build their team, merge their team, and start thinking 6 and 12 months out, working creatively. It’s a never-ending process, at least every 6 months. We try to treat it as a fun and creative exercise that makes us more productive and gives us shared ownership of what our team looks like.
Daily Harvest: Put on your PM hat and treat it like a problem to be solved. What are we optimizing for? (e.g. employee engagement, more rigorous approval processes, etc). Then optimize for those in Retrospective exercises.
Glossier: Less retrospective, but more ‘test and learn’. We organize our teams around outcomes, as strategic goals change, etc. But this changes over time as you grow. Continue to learn and iterate. Note: It can be hard for the rest of the company to know who to talk to as you shift orgs around, so that’s something to be mindful of.
What are you looking for when you’re evaluating a company for funding?
FirstMark Capital: Strong product, strong relationship with customers, particularly for DTC brands. That there’s something they’re thinking about in the next few years that’s going to accelerate that…a big market, a big problem that needs to be solved. But first: Who’s leading the team and do they have the ability to recruit the team?
