Insights with Jeremy Schwartz

The global crisis has in many ways fast-tracked the adoption of the direct-to-consumer (DTC) approach, which allows businesses to have increased control over their brand and product while gaining valuable customer insights.

Mike Thornhill, Director at Assured Talent, recently spoke to Jeremy Schwartz, a Senior Advisor at McKinsey’s Business Transformation Practice. Jeremy is also the former CEO of L’Oreal, Pandora, and currently sits on the board at Kantar. In this fascinating interview, they discussed the important presence of eCommerce during the pandemic and post, how manufacturers can win online, and the future of the consumer industry. 

The online marketplace can at times be overcrowded, making it difficult to stand out. So, how can manufacturers and retailers overcome this?

The two roles that companies have with their eCommerce sites:

1. i) Attract the right people effectively to visit a site
2. ii) Drive conversion to sales once they have arrived

The biggest thing eCommerce teams and their leaders can do is to drive eCommerce conversions and focus on the product landing page (PLP). Also, add as much information as possible to help customers make a choice. This should include a video of the product in action as it would answer the huge variety of questions customers have, but might be afraid to ask. Amazon is the best-in-class example of what brilliance looks like and is the most successful eCommerce company in the world. Also, the payment system is the biggest reason to lose conversion, which is why customers stick to consolidators like Amazon, eBay, Next, etc.

People should not have to enter lots of personal data, but rather leverage third-party systems like Paypal, etc. However, there is a balance to be struck. Using Google and Facebook, between re-engaging bottom-of-the-funnel existing buyers to return, with new customers at the top of the funnel. At every point, and every week of every month, teams need to be adding services and adjustments to make it simpler, and more compelling in a bid to attract new consumers.

What infrastructure is needed to be effective, efficient, and make a profit from the direct-to-consumer approach?

This is a whole new business model, although very effective to build brands and sales. Retail space can allow a brand to be present, to complete a brand range, and bring to life a total brand immersion experience. However, in this present retail environment where footfall is declining, it cannot be entered into lightly. Covid has driven consumers to engage even more in eCommerce, further suppressing retail sales. It has also forced property owners to reduce rent and embrace a sell-out linked rent model, which can make a DTC retail model more viable. There are too many elements connected to succeeding in retail to cover here, but know-how is the most important starting point, and not signing a (tenancy) contract that is longer than five years. Resist the temptation to open in a particular location that may lead to a rent premium being paid, which the bricks and mortar store sales will never pay back.

What importance would you place on consumer data and marketing when establishing a successful DTC or online platform?

Consumer data is now the number one asset companies can generate and leverage. The appeal of eCommerce and DTC is that it allows companies to both ask for consumer data directly, and to track consumer behaviour in order to generate data. Data allows targeting, engagement, and segmentation of customers by their value to the company amongst other attributes. For me, consumer data is as valuable as the products themselves. In some ways, the biggest challenge is to have people in the company who are smart enough to use, interpret, and act on the data.

What has been your biggest lesson from overseeing DTC or an online platform from your previous organisations?

There are so many, and they differ by channel, but first and foremost it is to know the profitability of every store and eCommerce platform-both owned and operated by a third party. It is vital to both allocate costs in a very systematic and proper way, and to pursue cost reductions line by line to optimise profitability. It is very easy to lose money in both channels by making decisions that become very hard to get out of.

For DTC, this can be taking a lease that locks you into a low-profit situation.

For eCommerce, it is about offering customers discounts, free delivery, and high returns, all of which dilute profitability and are hard to reverse once offered.

For more information please contact Mike Thornhill, of Assured Talent. Email: mike@assuredtalent.com