Building Direct-to-Consumer Brands: Founders' Insights

[00:00:00]we're now going to move to the world of direct to consumer businesses the word on everyone's lips in the world of consumer entrepreneurship is direct to consumer these kinds of businesses have changed the way customers spend their money and forced traditional players to rethink their business models and practices social media and off-the-shelf e-commerce tools mean it's easier to start a business than ever before and this has given rise to a whole bunch of companies that design market sell and ship their products themselves by bypassing middlemen but building a dtc business is no easy feat and so today we will explore the entrepreneurial journey from ideating the business model and finding the target customer through to scaling and fundraising with three amazing entrepreneurs first tim brown the co-founder and co-ceo of all birds the sneaker that has taken over silicon valley second emma greed co-founder and ceo of denim and label good american and third co-founder of wellness brand hims and hers hillary coles please welcome tim emma hillary and our chief commercial officer nick blunden [Applause] well good afternoon everybody it's such a pleasure to be up on this stage posting this conversation about creating disruptive direct-to-consumer businesses as many of you will know the fashion industry has always been about entrepreneurial activity but it seems to me that we are at an extraordinary point in the development of the industry where the level of entrepreneurial activity has reached its zenith driven by direct-to-consumer business models funded increasingly by venture capital so i'm absolutely thrilled to have three really successful entrepreneurs leading direct to consumer businesses so emma tim and hillary first of all thank you so much for joining us great to have you here um the first thing i'm going to ask you to do i've got a lot of questions to ask so um this is going to be fun but the first thing i'd like to ask each of you is just to talk a little bit about the market opportunity that each of your businesses is focused on so emily if i could start with you for good america what's the market opportunity that you're looking at so um i've spent the first or the last 15 years in the fashion business and i think what was really apparent to me is that the large majority of women that happen to be at the larger end of the size spectrum were really ignored by the mainstream fashion business and when i decided to start good american i was actually pregnant with my second child and for any women that have had babies you know things start to change when you have a you know your second child and it made me think a lot about the way the fashion media has such a huge um you know has a huge impact on the way you feel as a woman and so as i was founding good american and when i started to think about the brand it was really rooted in this idea of you know shouldn't there be more options for women and i think that what i started to see was that the fashion industry was really at this odd kind of point where what was happening in social media with the body kind of positivity movement was really not being reflected in fashion you'd see you know a little bit of diversity in some campaigns you know that odd thicker woman would be kind of thrown in but it really was done as tokenism it wasn't reflected in the collection so i really set about creating a range where you know it was based on an entirely different body shape and i like to call it the body shape of popular culture this idea that you can have curves and still be beautiful and so good american was really done on that or created on that basis and it was incredible because we had such an amazing reception right from the beginning you know most of the people would have heard me say before because i love it you know we sold a million dollars worth of denim on our first day but it really taught me something that there was a huge need for a different type of product and a different type of image and so um we just haven't looked back since amazing tim what about you for for all birds different market opportunity but nevertheless a very big one yeah sure i i so i'd come out of about a decade-long professional sporting career uh and stumbled into the footwear industry uh and and found uh this enormous category that defaulted to making shoes out of not very nice materials ensure an opportunity saw an opportunity to use sustainable materials uh and a direct-to-consumer business model to to make shoes in a different way and my co-founder joey and i launched all birds on the the 1st of march 2016 in san francisco we now have a team of about 250 people uh officers in the uk and recently launched in china and have had three uh fun years building a business uh that believes that that the fashion industry broadly and more specifically the foreign industry needs to find better ways to make things and that is in some ways the problem of our generation uh and that uh we need to you know we need to do that now so uh it's it's an exciting journey we've been on and uh started to share more about it great fantastic and hillary over to you the market opportunity for him and now hers of course and there are two brands yes so we were looking at the health and wellness space and the wellness space is a four trillion dollar industry and quickly growing and when we looked at it we saw virtually nothing in the men's space there were two it seemed like there were two different stereotypes one was this affluent guy on a beach in linen pants and the other was this hyper masculine stereotype and everything's red and neither of those stereotypes fit the people that we knew in our lives and then compounded onto this society has told men that it's weird to want to take care of yourself and in fact there are these incredibly common conditions and you can take care of yourself so we're all about teaching guys that actually it's weird not to take care of yourself and conversely on the women's side there's an over saturation of messages around wellness and how you should be taking care of yourself and all the expectations and assumptions about your journey through there and so we noticed a real lack of proactive productive tools that addressed and legitimized and supported women's health care and similarly to the opportunity that emma saw there are these people who are getting overlooked in the retail and fashion space there are these people that are getting overlooked in the healthcare space and being told that they have all these options and really they're just being given scraps until this is what you get and and too bad and so now we've been able to create a platform over the past year and a half we've become one of the best the fastest growing d2c businesses of all time where we have hundreds of thousands of men and women who are able to access fda-backed medical grade products access to a doctor who's licensed in your state from your phone from our network of over 140 doctors and products and packages that are delivered to your door you're not going to the pharmacy and they look good and they feel good they smell good and it's totally changing it's really changing your relationship with the healthcare system great do you know it's really interesting you're all in very different businesses yes the director consumer business model is the same but the thing that strikes me that links the three businesses together is this sense of purpose beyond just making money and the panel before talked about values being really really important i'm just interested i know you all reference this i just want to drill down those tim i believe all birds is a big certified b corporation how critical is the sustainability angle to the success of your business oh it's the reason we founded the company um and i think joey and i imagine the business that we would tell our grandkids about we saw a problem that no one was was actively genuinely really trying to solve and we believed that there was the possibility to do things differently in this enormous category uh and it's actually a big week for for us this week we we announced that as a business we've gone completely carbon neutral we've launched a carbon fund to offset uh every single one of every single aspect of our supply chain from uh the you know every single trip that our employees take to the office all the way down to the farms where we source our materials and you know i i think that there's this the sense too that there's this this big change coming a revolution in the way that things are being made and i'd like to think we're we're a small part of that so for us that that purpose was was was an absolute non-negotiable and i think it's fueled our brand i think it's fueled the people that we've attracted and hired uh and i think it's fueled you know some of the success we've had because i think there's this demand now from a new generation of consumer that's starting to say business needs to be a force for good it's not something you tack on at the end the real reason your business can make a real impact and and customers are demanding that and that's been our vision from the beginning and hillary there seems to be an element of that in what certainly with hymns was doing there's a certain stigma stigma attached to some of the issues that you you face that's it that was a deliberate decision to say we want to put that purpose in the business at the end of the day our whole goal is to provide you with options to help you take care of yourself whatever you choose and so we heard from so many men specifically who had this terrible moment where they were in the shower and a little bit too much hair was coming off and they didn't know what to do the next the only available step was to go in a google deep dark deep dark hole or a reddit thread and by the way if you've ever looked up your symptoms online the answer is only death and destruction and everything terrible spoiler alert and there are people who just didn't know that they had options they didn't know that their sexual wellness could be improved they didn't know that if they're worried about hair loss that was an option for them and on the women's space it's more about systemic barriers that have existed so 19 million women from ages 19 to 45 in this country don't have access to a public health clinic healthcare clinic in their county that will give them contraceptives that's massive women on average are more likely to wait longer in the er they're more likely to have their pain levels discounted and so from that mission it was about exploring those options and making it as painless as possible because the healthcare system to date hadn't served it properly hadn't addressed and legitimized and supported all of these really important and valid conditions and the you know the benefit of the gdc channel and we were joking about this at dinner is your customers will tell you very loudly when you are doing a good job and when you are not doing a good job of hitting your mission and so it's an incredibly motivating feedback loop to have and emma it seems that the message of body positivity that's central the cornerstone of the brand you've taken through every aspect of it including the open casting that you do tell me a little bit about that yeah you know it's it's such an important part of our brand but i do think it's important to say that you know our purpose is very simple we want to make beautifully fitting clothes that you know never sacrifice style for the sake of inclusivity but the purpose is nothing without the principles that we set down in our business i think right from the beginning we said to ourselves what does this actually mean for our business every day as we're making decisions so we would never sell to a wholesaler who wasn't willing to take the full and entire size range we'll never ever sacrifice our design principles and those are the things that and again going back into this feedback loop of customers good american is all about you know the community and what does that community mean to us and they hold us absolutely accountable for every decision we make and that's the most interesting part it's like we don't just you know take their opinion we are actively asking them every day what do you think tell us what should we do next and then we make business decisions based on that because it's all very well taking the feedback but it's like what do you do with that at the end of the day and that's the biggest difference in good american that we actually take that information from our customers and we invite them in to be part of the brand and i guess the open casting which for those that don't know we actually have our customers that are part of our bigger campaigns i think we had 60 000 women um entered into the last open casting but that's really about us saying you know we are you you are us come and be part of what we're doing and we find that because we're so honest and we're so open with the decisions that we're making our customers are our best spokespeople they come into the brand they speak as you know eloquently as i would about the product and it's incredible to see that happening and i think that's what really gives us um you know an amazing kind of this you know we talk about this feedback loop but it really is what makes all the difference in our decision making every every step of the way and it's when one thinks about direct consumer businesses i think it's tempting to look at all of the success and say look you know this is this is so obvious this is easy why are more people not doing this but of course it's getting it's getting more competitive one of the challenges and i think it's always been a challenge for fashion and retail businesses how do you acquire customers but as more people come into the direct to consumer space the costs of acquiring customers go up there have been challenges thrown at businesses now saying well they're just taking venture capital money and spending it on increasingly expensive customer acquisition i'm interested each of your businesses is scaling and scaling very fast is this a challenge that you recognize or are there ways around this increasing cost of acquisition hillary i'm interested because you have two brands that you're having to build simultaneously yeah talk to me about how you think about the job of acquiring customers directly so andrew and i had worked together at a consumer app before and the problem with the problem but one of the dynamics of a consumer app is if apple sneezes you are going to get the flu and you are entirely beholden to things outside of your control and we said we never let that happen to us again so we did that in three ways so the first way was from the beginning we locked up several channels you can't do that with every channel mind you but a few channels where we'd say we are the only ones in the healthcare and wellness space who are going to be talking to our demographic and that was super important for mind sharing for trust building which when it comes to your health and that's everything the second thing we did was we test all the time on any given day we're testing at least two dozen different channels and that means we have a very high degree of confidence that we are reaching people that other d2c companies might not be because we're testing offline channels we're looking at people who might not be on their smartphone all day and how that manifests itself is you know we've done takeovers of urinals in a sports auditorium where we'd say our incredible marketing team went in and said can we make this into a billboard in space and they were like nobody has ever asked us that question before but sure and so we're popping up in these unique places and then that contributes to our third piece which is organic growth and people are just have delighted and surprised to be interacting with us in these new ways and so they're sharing it and i think a few years ago i don't know that any of us would have been able to predict that we'd see so many men publicly sharing their hair loss kits like unveiling them on instagram and sharing them with their friends and and having it be so public and i think that's um part and parcel of how we're interacting with them on these different channels speaking of instagram emma you forgive me if i ask this question but you have a very high profile a little kicker a little kicker yeah i mean it would be unfair not to say you know khloe kardashian is my business partner and so in terms of acceleration in terms of you know customer acquisition if you've got 170 million followers across your social platforms it does something for a business absolutely but i can't take away from that community piece and how important that is for us because you know it's it's what we all want to hear right you want a peer-to-peer reference and when girls try on our jeans and they share not just how they look which they all do we get a lot of great butt shots you know good american come and look at our instagram but it really is about the way it makes them feel and that's what the stories that are shared when we get somebody that goes on to youtube and spend 16 minutes talking about how she hasn't wore jeans for the last you know six years and now she is that's invaluable and that's what really travels and so again it's like how do you nurture that community how do you encourage that type of behavior and we've been particularly good at mobilizing that community to just be our best advocates and tim if i understand correctly all about started or the idea started on kickstarter so you know you've gone from you know the the real beginning of this journey is it getting harder to acquire customers you know in some ways it's the the barriers to entry for starting a brand have never been lower and it's never been more competitive you know i think uh at the end of the day i you know i think unless you've created a product or an experience that people want to share as hillary and emma have done so well and tell their friends about that fills a gap that feels you know fills some sort of white space it's not going to work i think there might have been a small window of time when you could have used facebook or instagram to cheaply acquire customers and build a build a business or a brand by spending into it and i think that's gone um so i mean i think at all birds there was a six or seven year journey hundreds of prototypes to cultivate you know to cultivate and create our version of the one sneaker and and and to invest in the sustainable materials that were going to underpin that creation and uh and then word of mouth drove an explosive uh adoption of the product uh in australia in in america and new zealand and around the world um driven largely by word of mouth and at the end of the day making those products is really really hard but that's the best thing that you can do i think to build a brand okay um i wanted to come on to something else we are sitting in this beautiful shopping shopping mall and direct-to-consumer brands are often thought of as being just e-commerce-based businesses right but actually that sometimes does it disservice and tim you and i were talking i think you opened your fifth or sixth retail outlet yesterday seventh seventh in beijing yeah so we we uh very early on uh we always knew that people wanted to try on shoes the i think the the story that retail was dead it was dying had been greatly exaggerated and um so retail was always a big part of our plans and continues to be so i think people want to touch feel understand have an experience and the retail channel and then the integration of the online and offline experience for a brand i think is an enormous opportunity and i you know i think for too long maybe retail had drifted the experience had degraded and wholesale uh brands have got in between the customer and and and and and the cup and and the brand of business and so i think that's all changed with this direct consumer revolution and i think retail for us is a big big part of it okay and emma you've you've experimented with different channels you have agreements i think with nordstrom and selfridges you've done pop-ups as well what role does retail play for you plays a huge role i'm right from the beginning when we launched we launched with nordstrom and we were straight into 30 doors and very quickly into all 126 but for good american it's especially important of course women want to be able to try on jeans i mean that's just very straightforward but you know for me it's much more about this idea of inclusivity and how you bring that into a retail environment and what's so interesting to me when we've run the pop-ups i mean i i started my career on the shop floor so i love a little stint in a pop-up but you know you really start to understand what's important to customers and how difficult it is for some women to have access to great fashion and from really really simple things like the way things are displayed or certain sizes not being available in stores my mission with good american retail and what we're trying to do in our pop-ups is to create a truly inclusive experience in bricks and mortar so i can show you product on three different sizes on our website and now in fact on 15 different sizes so when you go on goodamerican.com you can be a size 8 and see the denim on size 8. but how you do that in bricks and mortar is going to be really interesting so for us it's a huge part of our strategy going forward how we're actually going to operate those stores and you know it's a mixture of that customer experience coupled with great technology and then really really thinking about that from our customers point of view and how you make it really comfortable for her to come in regardless of her size and hillary i'm interested because of course part of your business model the tele medicine part is the efficiency of not necessarily having right to have an appointment and go and see somebody so physical retail plays a role for you guys or not yeah we've been starting to test with other brands and collaborate on different pop-ups and it's been really exciting to see people interact with the the brand and i think um and then tim are 100 right it's that it takes that ddc stuff one one step further and that you're able to connect and control the experience just a little bit more and build that trust and that relationship with the customer and that's ultimately all that matters and one of the things that comes up a lot is about customer centricity and it's been talked about for a long long time but of course one of the benefits of the direct to consumer business model is this ownership of the customer end to end and i mean you talked a little bit about this but i love this example that you and i talked about about getting the feedback from customers and inventing i think a whole new size as a result of that feedback can you just talk a little bit more about that um feedback loop that you get yeah i mean it's one of the things that i've learned and you learn the hard way right because if you ask for customer feedback my god you're going to get it good good or bad and ugly and you know what i tend to do on a sunday afternoon is like read through the reviews right and you kind of start to see these patterns and you know we have of course amazing people that look at the data in details but i'm a sucker for reviews and what we started to understand is that we were seeing this huge disproportionate returns between a size 14 and 16. and no one could understand we looked at the fabrications we looked at the styles we did all the things that you would do and it just no pattern was emerging and so of course i go to speak to design and i speak to tech and they say oh that's really simple you know there's a big discrepancy and i don't want to bore anyone but you know between missy straight missy sizing and plus sizing you have these things called grades right so you grade up depending on the size and the grade gets bigger when you're in the plus size segment than when you're in the missy size and so right in between this is just huge chasm and so it took a tech design as kind of you know for me i'm very dyslexic they put it down on an excel sheet and spelled it out and i was like oh i get it now let's create this size 15 and everybody immediately in the organization said oh no way like you can't do that it doesn't exist it's ridiculous but you know you suddenly realize that there are millions of women out there that fall in between sizes so they're not quite plus they're not quite missing so we used a group of 60 of our existing customers who had written to us and said i'm not a 14 but i'm not quite a 16 something's not working out i'm sending your jeans back and we use those women and we fit the size around them we made it specifically for their bodies and it's been so interesting because size 15 is now my third best selling size and it didn't exist and that was purely just from like opening your ears and listening and then taking action sure tim i i thanks yeah that definitely deserves a round of applause tim similaria i read and i think this is true but you'll correct me i'm sure if it's not that um the wall runner that you created has had 27 or more different iterations is that customer feedback that's driving that or is something else going on no it's absolutely the customer we designed the whole experience and the business to point towards it and then and then capturing that feedback to improve it whether that be a comfort change or a design change or a sustainable material that we can flow into into the product we don't have to wait for the wholesalers to feed that back to us or wait for you know open to buy windows we can make those changes in real time we've done that really from the beginning and it's something probably closer to software than it is to traditional sort of footwear manufacturing with updates and improvements sort of on the fly and i think that's been a big advantage i think equally with merchandising and color care for what you wish for is emma said there's this flow of feedback and information which i think is is a huge advantage and allows you to move quickly and innovate and and and make new products we're about to launch a big product this week which has been driven entirely by social media comments and suggestions that became such a theme that we picked it up and actually made the product and then uh to my earlier comment about going carbon neutral we're developing a fund where uh we're offsetting our carbon and then our customers will help us uh decide what projects to fund to offset uh to offset our uh climate impact which is a big thing so you know they're they're a part of this journey and i you know i think it's been an enormous business advantage for us now we're running out of time but i'm sensing because you're all so inspiring there are people in the audience thinking i want to go and do this i'm going to go and set up a direct consumer business so before we go i just like to ask each of you with the benefit of hindsight wonderful thing what you do differently about setting up your business hillary is there something that sticks out for you that you think if i knew then what i knew now i'd do something differently i mean it's a great problem to have but we hit a million in recurring revenue in our first week and sold out of everything and we would have had no we broke everything growing so quickly basically we had we went from two doctors to 140 doctors from two customer service agents to 75 customer service agents we just had no idea what it was gonna be like we were totally out of our out of our league so that's just you gotta just keep going that is definitely a good problem to have tim for you look i mean it was six or seven years that we worked on our idea before we took it to market and i mean i think everyone talks about feedback and seeking it but the number of experts that we spoke to particularly in the footer industry that sort of saw our idea and said that it was never ever going to work were numerous and extensive and i i wish i'd ignored them i wish i was i was open to feedback but also open to ignoring it and it took a long time i think to develop the courage that you know to really go and do this and to raise a little bit of money to put this thing out into the world and i you know i sort of think if if your idea's any good the people that know uh probably think it's it's um it's not great and i wish i'd sort of pushed through that a little bit faster than we did and emma how about you something you do differently you know it's really interesting because when i started this business i lived in london and since moving to la i think the great thing especially about being in the director consumer space is that people are so willing to help you you know i've had countless founders reach out and say hey we did something similar i can see some similarities in your business in the beginning i was like they're trying to steal my thing you know and what i've realized is that actually there's this really incredible community in l.a and in san francisco of people that are just willing to share and so since i've started meeting other founders and really taking that um seriously it's been enormously helpful to my business so i'd have been a little bit more open to that and i actually think i now seek it out i go and try to find people that are doing really really well i might have encountered the same problems that i'm just about to walk into and i find it so useful so i would have done that a bit more frequently amazing well listen thank you all so much it's been an absolutely fascinating conversation really appreciate it thank you all