The DNA of Successful Direct-to-Consumer Brands with Nik Sharma

NewsInsights

Apr 27

In our latest episode of the Doing it Big podcast, we chat with Nik Sharma, CEO at Sharma Brands on what makes great DTC brands, as well as the trends & challenges he’s observing in the DTC space. Here’s a recap of what we learned.

Below are some transcribed highlights from the interview, lightly edited for length and clarity. Stream the audio version for our full conversation.

Fundamentally, how does the direct-to-consumer (DTC) model differ from the ways of a more traditional consumer brand?

A more traditional consumer brand, I think I would consider as one that you would probably buy in retail stores. There’s companies like Procter and Gamble, Unilever, Johnson and Johnson, Pepsi and Coke. These companies tend to own the majority of the brands that you would find in retailers. And so the model that they played was, let’s build the best manufacturing capabilities, product research, product design — and they used companies like Target, Walmart and retailers essentially, all across the world, to distribute their products.

And with direct-to-consumer, the goal is to do all of that under one umbrella. And so you build the brand — and the goal is that you manufacture, you create the product, you market the product and you actually sell and deliver directly to the consumer. And typically, in the previous example of the bigger companies, right around the marketing and that point forward is usually taken care of by the retailers, not by the companies themselves.

Let’s talk about the DNA of a successful DTC brand or DNVB. Are there any underlying commonalities you can point to across the board?

I think at a very early level there’s some kind of reason this person is starting the company. Whether it’s the relationships they have — they have an advantage somewhere. Whether it’s across the distribution side, the marketing side, the product side, maybe the influencer side, or even just access to a factory. But outside of that, I think just in general, the ones that are consistently listening versus just creating without listening — the ones that are listening tend to do better than the ones that don’t. If you look at a lot of the more successful direct-to-consumer brands, because you have direct communication with the customer, whether it’s looking at comments on Facebook ads or Instagram DM’s or tweets that mentioned your brand name — there’s an element of listening there which can help you dictate improvements on your products or even new product collections/product lines. There’s been many times where you know I’ll work on a product launch and then we immediately start to understand, “oh, this is exactly what the customer wants next from us”, which leads to pretty much just revenue sitting on the table.

Focusing on brands that are already at scale, what are some of the common challenges you discover, or mistakes that you see they’re making?

A lot just don’t do enough testing. A lot will maybe increase their spend on advertising, but they won’t necessarily increase their spend when it comes to capabilities around platforms they use. So whether it’s testing across channels like email or testing new creative vendors, trying out completely different styles of creative, whether it’s building out and testing landing pages, testing new channels as a whole. I think that the ones that stall tend to stall because they stopped testing and they stop learning. And so when you stop testing and unlocking new channels, then you’re potentially missing out on revenue.

With the brands you’re working with or building yourself, what sort of on-site metrics do you guys key in on as you’re trying to drive growth? And do those metrics change at all throughout the different stages of growth?

Initially, we look at things like page views, just to understand how robust a site has been tested. We look at AOV, we look at repeat purchase rate, although a lot of times on Shopify it’s not necessarily accurate. If they have ReCharge in there, we jump in to look at subscription cohorts. And then also trying to understand what are the top products and why? Also if there’s any kind of specific pathways that consumers choose, usually we’ll go in and dissect what that is and why they choose that.

And finally, Nik’s highly-anticipated 1 BIG thing:

Keep testing & learning.

About Swish Goswami

Widely known as “The DTC Guy” on the internet, he’s a Forbes 30 Under 30 member, AdWeek’s Young & Influential and a resource brands and investors turn to for growth. The 23-year old DTC investor, advisor, and operator has both assisted and led revenue growth at multiple organizations, including Hint Water and VaynerMedia. Prior to entering the world of commerce, Nik worked on social media campaigns for A-list celebrities including Pitbull, Priyanka Chopra amongst others. Today, Nik words alongside brands and publishers to execute ROI-positive campaigns through digital strategies using paid, earned, and owned media properties.