Podcast

Lauren Stiebing 13 July 2020

How to Integrate DTC in a Traditional Business Model with Tom Pickford

After COVID 19, most retail businesses have started reflecting on their e-commerce strategy, and some of them, as very traditional, have found themselves lost in the e-commerce world.

Today we have invited Tom Pickford, who after almost 20 years at P&G, is now SVP E-Commerce at The Hut Group, a company that provides DTC services to leading brands and retailers.

As an expert in this field, Tom will explain why he believes DTC is for everyone, even for companies with traditional go-to-market models.

As Tom says, this revolution starts: “with first understanding consumers, knowing what your brand offers and then decided which e-commerce platform you want”

  • Which are the e-commerce trends across FMCG and Retail?
  • Is DTC for every company?
  • How to integrate DTC in your business model?
  • Where is the starting point for your DTC’s integration?

Tom:

I think it all starts with first understanding consumers, knowing what your brand offers, and then trying to match the two together. And if you’re clear on that, then you can have and get into all the fun of actually deciding what e-commerce platforms you want and how to set up the end-to-end technology and capability in payments, logistics and so on. But really having that deep consumer understanding is the start of it and understanding what you’re trying to achieve is the most important thing.

Lauren:

Hi, I’m Lauren Stiebing and welcome to this episode of the Career Success Podcast. COVID-19 has made most retail businesses take a closer look at their e-commerce strategy. And many traditional businesses have found themselves lost in the digital world. Today we’ve invited Tom Pickford to the podcast to discuss with us how large consumer goods companies, with a traditional go-to-market model can integrate DTC to create value across their enterprise. Tom Pickford SBP e-commerce at The Hut Group, a British-based e-commerce technology company that owns its own brands and sells them direct to consumer, as well as providing direct to consumer e-commerce services for partner brands. Tom joined The Hut Group earlier this year to help partner brands use their intuit globally commerce platform to launch and expand their direct to consumer e-commerce business. Previously Tom had worked for 20 years at Procter & Gamble. The last 10 of which were leading e-commerce for P&G across all channels pure-play, omnichannel and direct-to-customer. Thank you for joining me today Tom.

Tom:

Thank you Lauren, nice to be here.

Lauren:

So with everything that’s changed since the COVID-19 pandemic has hit everyone globally or every market almost around the world, you specifically what trends have you seen across consumer goods and retail?

Tom:

I think probably like everybody we’ve seen a huge shift in consumer behavior and obviously it’s been a very exciting and interesting time to work in e-commerce. Everybody very obviously has seen a significant increase in e-commerce penetration. Many of us have had grocery home deliveries disrupted a little bit but also just some of the traditional ways of receiving and getting goods into your houses. People are just using those routes an awful lot more than they were before.

Tom:

When I have a look at some of the responses that we’re getting from some of the clients and partners that are coming and talking to us about group, really what we see as a big acceleration in terms of prioritization and just stepping this up in terms of the importance and the agenda with these different companies. We see people open to experimenting a lot more, looking to develop that packaging solutions which might have been a choice that they weren’t quite ready to do before to optimize in pre-commerce, starting to think about direct-to-consumer specifically as a different route to market which might’ve been something they must have been wary about experimenting with before. So really people just stepping up as you see the consumers themselves doing a lot more e-commerce online shopping.

Lauren:

And speaking of DTC I think it’s been a question across consumer goods industry of should we do it? Shouldn’t we do it. What’s your opinion on that? Do you think DTC is for everyone?

Tom:

Personally, I do, yes. I come from a background in Procter & Gamble where we always talked about winning in every single sales channel and having top of mind mental awareness through all the different brand-building capabilities. When you think about direct-to-consumer I think it’s a nice intersection between brand building and selling. I think on the one hand it’s important that there is a profitable, sustainable, standalone sales channel. I can talk a bit more about that but I will say as well you’ve got to recognize the brand-building capability is the voice and online of your brand. You have the full capability of complete control in that consumer experience, the content, the user journey, what features and functionalities you put out there. Which you don’t have when you’re working through other online retailers where you might have lots a templated, product detail page approach. So I think it really creates that opportunity to add something different into your go-to-market mix.

Lauren:

Yeah and how would you suggest businesses to integrate DTC with existing go-to-market channels to really compliment and create value?

Tom:

So it’s interesting at The Hunt Group, so pure-play commerce business. And almost a hundred percent of our sales are direct to consumer. If you take my. protein which is our biggest sports nutrition brand. 96% of the sales are direct to consumer. We just have a handful of sales in sort of independent and specialist gyms. We don’t sell on Amazon, we don’t sell in Brick-and-Mortar Retail. And so that is the sales channel. But obviously when you’re talking and working with client partners, they’ve got big strong bricks-and-mortar businesses, traditional retail relationships, lots of online partnerships with the likes of some of the other pure-plays and bricks-and-clicks, omnichannel retailers. And direct-to-consumer is often a really small percentage of the sales mix. And so I think the way you’ve got to look at it is a bit different.

Tom:

We’ve got to think about how do I create value from this capability across my enterprise? The way we like to think about it is almost in terms of thinking about brands in terms of people, in terms of the life stages that they go through. And it’s a bit like a person when they’re born, when they’re young and then as they grow and mature, it’s very similar with brands. You’ve got to create a brand but then you’ve got to grow it and expand it internationally. And then you’ve got to probably expand into different sales channels and reach different audiences and then you might become more mature. And at that point you’ve got to pivot a little bit but change how your brand comes across and maybe change a few things to really appeal to a younger demographic as they’re coming through.

Tom:

And that’s the same with DTC. A lot of people are starting to use direct-to-consumer to help them create new brands. It almost becomes what we call a transactional learning experience. So you actually pop up a direct consumer website. We might only have a production run of 500 or a thousand units, but you actually then start to see the purchase data through the direct consumer site to actually just iterate and optimize your brand. You can see the different audiences that you’re appealing to. You see the conversion rates that work on different prices and promotions and different products. And you actually start to get an awful lot of insights that help you then actually create a brand and grow a brand. And it’s almost like the digital focus group and a very different approach than traditional innovation methodology of the traditional R&D, huge surveys, and no big focus groups, people giving their feedback on the other side of the two-way mirror, having a cup of coffee in a biscuit. Very, very different to actually see people when they part with their hard-earned cash. You get a much more reliable indicator of future consumer behavior.

Lauren:

Mm-hmm (affirmative).

Tom:

And so we’ve seen a lot of the digital native challenges and the startup companies using this type of approach almost creating as they go. But this is a big challenge for traditional consumer goods companies to integrate this type of approach. It gets quite complicated when you’ve got to think about product registration, EAN codes, setting up the labeling capability, the manufacturing capabilities for these kinds of test events like trial runs all the way through to having the front-end direct to consumer website that you pop up the ability to bring a bit of traffic to that site do all of the payments and logistics.

Tom:

So it’s quite an operation and it’s quite different but if you can crack that code and you can put that platform for agile innovation into your organization, then it becomes a very, very powerful because as we know innovation is the lifeblood of all consumer goods companies. So that’s one way which is exciting and quite a bit of work with a number of clients on creating that kind of learning platform. The next way is really when no brands want to enter new markets. So white space geographic expansion and I had a lot of experience in this in my previous role in P&G launching a new brand into a new country. It has to go through all of the process of working with all the bricks-and-mortar retailers, winning rent space on the planet grounds, waiting for the range of views, setting up your television advertising. When you get into 70% volume way to distribution, et cetera.

Tom:

Nowadays we can roll out a direct-to-consumer website into a new market in just four weeks. We can test and learn directly with that audience and understand how to optimize your specific brand proposition for that market, and then gain a foothold and attraction in the category in that market. And then hopefully you can then take a decision to expand into other channels afterwards. But you go in with momentum. You might then go into other online channels, into offline channels and you really use direct-to-consumer to take a local or a regional brand and make it a global brand. So that’s a very powerful way and that’s certainly something that The Hut Group has had a lot of experience and success with who take my protein again.

Tom:

We launched that in just one market in the UK in 2011 and it was doing $29 million of sales when The Hut Group bought it then. And it’s now gone on an international journey. We now have 56 localized websites all around the world. So you’ve got a dot Germany and a dot France and a dot Japan. And if you roll out a localized website rather than just doing one site with global shipping, then you typically see a significant uplift. The day that you localize that site with local [inaudible 00:09:08] and content, and language and likewise for the SEO in that particular market. So that’s a big area that people come to us and look to develop and create a global brand bonds nationalizing.

Lauren:

Sure. Creating a compelling consumer proposition isn’t easy. And I’m sure you’ve seen a lot of successes and failures. Could you give us a couple of examples of how you create a compelling consumer proposition?

Tom:

It’s interesting because between friends there are many, many e-commerce platforms. They’ve all got slightly different features and functionalities but the most important thing always is that consumer value proposition that you actually putting out on your e-commerce site. And you’re right we’ve seen many examples where direct consumer sites have failed, but equally a number of successes, many successes. And that’s one of the things that we help partners with is really understand what the right value propositions are and how to create that unique reason why consumers are going to come back to your website and come and purchase. And it’s very interesting because we were mapping the other day the conversion rates. We have about 220 direct-to-consumer sites running on our platform at the moment.

Lauren:

Mm-hmm (affirmative).

Tom:

And it’s amazing seeing the range in conversion rates from at the top end even North of 16% conversion rates all the way down to literally no 0.1 or 0.2% conversion rates. And typically the ones that are down below no point 5%. They’re probably going to be closed pretty soon and go to DTC heaven just simply because the financial sustainability of the media investment and so on just doesn’t work. And it all comes down to the consumer proposition. The biggest area we see failures as when prime companies launch exactly the same assortment that they’re selling in other retail channels.

Lauren:

okay.

Tom:

But they decide that they’re going to put it in a price premium simply because they are understandably they’re concerned about how DTC would fit into that. So it’s a go-to-market mix and they’ve got obviously existing significant retail relationships with some partners. So they end up putting their standard assortments in at a high price. And consumers aren’t silly they’re going to look at that and they’re just not going to buy on that website.

Tom:

So what we try and do is we help clients understand how to differentiate, how to offer something different, how to use all the digital capabilities of the DTC experience to do something different. So one of the things we do lots of is different types of experiences on the site. So we do lots of things like gift with purchases, it’s matches. We do lots of loyalty schemes with points, lots of different types of rich content experiences for different clients. We obviously have a big experience in subscription. So there are lots of different techniques and depending on what your specific brand and what your specific objective is, then the team would help advise what type of differentiated value proposition might work for your specific brand.

Lauren:

So, yeah. Imagine that someone out there has never considered DTC before and is currently considering it. Where should they start? What would you suggest to do first?

Tom:

So I think the first thing is to really try and understand the consumers that they want to target, and understand what the specific problem is that those consumers face.

Lauren:

Mm-hmm (affirmative).

Tom:

And then ask yourself am I able to solve that? And if you’re not able to solve it then that’s often where direct-to-consumer can really help you. Because that gives you the opportunity to create a very specific and tailored experience for that particular customer, consumer group and consumer problem that you’re trying to solve. So I think it all starts with first understanding consumers, and knowing what your brand offers, and then trying to match the two together. And then if you’re clear on that, then you can have it get into all the fun of actually deciding what e-commerce platforms you want, and how to set up the end-to-end technology and capabilities in payments and logistics and so on. But really having that deep consumer understanding it’s the start of it and understanding what you’re trying to achieve is the most important thing.

Lauren:

Well Tom, thank you so much for all of your insight. I hope that our listeners have had a few take aways to help them with their DTC platforms.

Tom:

My pleasure and thank you very much Lauren, been a pleasure to speak to you this morning. Thank you.