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Show 141 – The Future Of Retail And Direct To Consumer

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For latest D2C trends and insight, go to SAP’s Direct to Consumer: The Future is Now for Consumer Brands


Marketing Futures is a new series of the csuite podcast, produced in partnership with SAP.

We discuss the changing face of the retail landscape and bring you the latest news and insights from leading brand and industry experts.

In this first episode, we focus on the future of retail and direct to consumer. The pandemic has brought about and accelerated change in so many aspects of our lives and today’s retail and consumer industries are being transformed before our eyes. According to the latest eMarketer’s round up of D2C marketing trends, sponsored by SAP, US D2C e-commerce sales grew 45.4% last year. Brands are putting greater emphasis on their owned and operated online channels, the competitive advantage data creates and the importance of customer experience.

Graham Barrett was joined online by Fiona Walter, Director of Marketing and Product UK, at Stitch Fix, Julie Austin, Marketing and Digital Director at Bravissimo and Robin Barrett Wilson, Industry Executive Advisor, Fashion at SAP.

Fiona began by giving a quick background to Stitch Fix. She said that the company was founded more than 10 years ago, in the US originally, and they now have a presence in the UK and globally. They have 4.2m active customers and an annual revenue of two billion. In their core they are an online personal styling service that blends data science with human stylists. How it works is a customer would go online, fill in a quick style quiz, tell them about their preferences in terms of their style, their budget, their size and so on. And then they can also include a request note as well and then for £10 or $20, depending on which market you’re in, they match them with a personal stylist who handpicks five items of clothing and sends it to the customer’s house, where they can try everything on before they buy. They only keep what they love and pay for what they love, and then just send back the rest. It’s essentially democratized personal stylists and made them a lot more accessible and affordable.

She explained that they have noticed a few trends that arose during the pandemic. The first is that overall, they saw an acceleration of pre-existing trends. And so as with many other digital industries, they’ve seen a growth of e-commerce penetration. So, people have just started to make the shift online and what Stitch Fix have seen as we’re coming out of that is that they’re not going back. By virtue of being a 100% digital business, they have benefited from that shift and a lot more people have tried Stitch Fix who otherwise wouldn’t have potentially considered them before. The second trend that Fiona said they have seen, particularly from a marketing perspective, is a growing appetite for more authentic marketing content. So, what they have done in response to that is really lean into more homespun photography created not only by their stylists, but also their customers. She said they found that not only were the production costs lower, but actually those kinds of assets are resonating a lot more with customers. Whether that’s inorganic, social, or even in emails and what they’ve seen as a by-product to that is it encourages more customers in an organic social space to generate and share their own head to toe looks. That perpetuates a natural virality and word of mouth. The third piece that they have seen really accelerated during the pandemic, is this idea that they have a more conscious consumption out there and consumers are making much more considered purchase decisions regardless of what it is they’re purchasing. So, for Stitch Fix, that’s actually been quite beneficial because their business model naturally aligns with a more considered way of buying clothes. So, because their customers receive all their items at home and they can try before they buy, they can try on these individual items with their whole wardrobe and make sure that things actually will mix and match and they’re actually are going to get a lot of wears out of the new piece of clothing, rather than it being that item that we all have in our wardrobes, which just seems too discounted to pass up or too flashy and wonderful that we bought on an impulse and that is still living in the back of our wardrobe with the tags still on. When they survey their customers about sustainability, how important it is to them and what it actually means to them when it comes to buying clothes, this is actually one of the top things that they say that for them it’s about buying smarter, so buying fewer things, but that are going to give them a lot more wears.

Julie then continued to say that at Bravissimo, even though they’ve come at a really different springboard in terms of background to Stitch Fix, they have seen really similar trends. Bravissimo is twenty-six years old, they have twenty-six physical shops in the U.K., one in Soho and then we have the twenty eighth, which is their online shop. Bravissimo started off as mail order, then navigated to retail and has become online in the last 10 years. But those trends are really similar, even though the business model, the B2B, B2C and completely online is very different. She explained that they have seen in the last 12 months in particular that e-commerce has now become a good 50% of their retail sales, outside the fact when their shops were shut. The biggest challenge for Bravissimo has really been that they build an entire business on shared experience and that really comes from a service perspective in terms of fitting. So, they don’t just sell bras, they fit and support their customers to feel amazing and it’s really about how they feel and trying to think about how to do that in a world where they couldn’t actually physically be with their customers was really quite challenging in terms of where they pivoted. But ultimately, the experience that the customers want is still the same, they want interaction, they want contact, they want expertise, they want the ninety-six sizes that Bravissimo provide. Julie explained that all they had to change was the medium that they did it through. So, their biggest pivot has been virtual fitting and finding a way to service the same things, really staying true to their purpose, but just doing it in a virtual world. She said there’s been a benefit of some of the ways that the landscape has changed in the last 12 months. No one ever thought QR codes would be something that we’d all be using again. They had tried in the past to do things virtually and the understanding of it as a tech or the interaction with virtual was something that people didn’t have an appetite for. It’s a forced pivot but one actually their customers have really responded to, Bravissimo don’t use tape measures when they fit their customers, they do it by, questions and intuitive expertise. They’ve gone from only being at in-store fitting, to having a customer services team who can do it over the phone, to now, a virtual fitting experience that’s done through Zoom or Teams. They have done over thirty thousand of those in the last 12 months, they’ve fitted women in 20 countries. Really responding to what their customers were telling them.

Robin added that the interesting thing about fashion, is that the government decided who was essential and who wasn’t when it came to retail during the pandemic. Fashion brands are questioning, ‘what were we going to do? Cancel orders, cancel production?’ And then all of a sudden, after a couple of months, people were saying ‘Hey, let’s shop! We don’t have much to do. We’ve played all the board games, let’s go back to shopping’. And then there’s this whole idea of convenience. Robin said her mother is even shopping online and very comfortable with it, that very much came into play. Taking a look at what was going online and saying, ‘OK, I still have these physical stores and as they start to open up, how do I bring these two together?’ They don’t necessarily work all by themselves, although like a Stitch Fix, that’s the model. However, as Fiona already pointed out, the stylists are on the phone or they’re having Zoom calls. That pivot, that idea of, let’s think outside the box, let’s really get to a point where we are thinking about convenience and transparency and really giving that service and a different experience that truly can go from here to in the future, Robin explained. There are also some other great brands, for example, Ralph Lauren during Christmas time, you could sit on your sofa and go through the Beverly Hills store. There was a lot of brands out there who said, let’s bring our customers in and get their ideas and put them on social media, which has typically been very much a lockdown space. Brands have locked that down to represent themselves, and they really created a community. By that transparency and having that community, the brand awareness and the brand commitment came through with the customer.

Robin continued saying that looking at data from a year ago is no longer relevant. So, that understanding of what happened last week now becomes what’s relevant this week. What brands have done has done a great job of pulling the lens back and saying, ‘OK, how am I acquiring a customer? How am I retaining a customer? How am I getting them to re-engage with me?’ And then looking at the technology to support that which, of course, is great, but then putting the customer at the centre of everything. So really asking questions. A lot of surveys. Understanding that they need to give transparency to the customer. They really need to give control to the customer. The customer wants control when things are being delivered and then really being consistent with the message. It was an opportunity to reintroduce a brand to somebody who maybe had been buying for a while and for them to tell more and more people. And then the other piece of the puzzle is being sure that you have the product where it needs to be, when it needs to be bought, because that really does support the customer experience. If that’s not in place, then the customer is not happy, and the experience falls out.

Creating meaning relationships with customers

Fiona said that at its core, Stitch Fix has been built as a service. They really think about providing a service to customers. Inherently, Stitch Fix is a relationship founded business, not a transaction-based business in the sense that with every request, customers can write a note to their stylists. Customers will share things which are personal and sometimes so intimate and the kinds of things that you would never offer up to a shop assistant in the store. Everything from the basics of, ‘Oh, I need some clothes to go on my honeymoon with my husband to be,’ all the way to, ‘I’m just coming out of a divorce, and I’ve not been dating for two decades and I don’t know where to start and what to wear and can you please help me?’ Or, ‘I’ve just given birth to a baby and I don’t recognize my body. Please help me feel confident again.’ The stylists are there to help their customers look and feel their best selves and go about their daily lives with confidence. It really is one to one stylist to customer relationship at the core of the service. She said that they see that customers that stay with them for years actually can end up developing almost friendships with stylists who might be working with them and styling them over the course of several years in this lovely, old fashioned pen pal relationship form. Building a community around a brand can encourage an outsized loyalty and affiliation with that brand. Stitch Fix have been looking to create spaces for their really engaged customers to share. Something they have done recently in the UK is a forum that allows customers to connect with customers, the intention was that it was meant to be a positive space, which was about style inspiration. The people who signed up to it are so lovely and engaged and enthusiastic, they’ll post their own style outfits, or they’ll post items that they’ve received and say, ‘Oh, I like this orange top, but I wouldn’t know of how to style it.’ and people will pile on and give each other advice. Even though it’s an indirect association with the brand, if you like, they’re actually not super involved and it’s not overly engineered from their standpoint, it does help to build that emotional tie with the brand. They have seen lots of people who were in the pilot asking, ‘Oh, can I invite my friends to join, this is so value added for me.’ So, it does spur more of that organic word of mouth as well.

Robin said that this model reminds her of on Saturday, going shopping with your girlfriends, still having that same interaction just online instead of in person. Julie added that she thinks that’s so key, in terms of customers trust other customers more than they trust brands. She said at Bravissimo, they always see it as if their position is almost to mediate that, just to be there to make the space for that conversation. They’re not an active participant in that conversation. They want their customers to find their place and their community. And actually, Bravissimo’s voice in that is very quiet when it’s one to many in terms of channels. Julie said that they talk a lot at Bravissimo that they want all their people to be themselves and they don’t give their customer service teams SLA’s about hours. They give them SLA’s that are about customer compliments and experience level, like how did your customer feel at the end of that call? Did they feel amazing? Or was it just service level and it was fine? She added that they have had babies named after their sales teams in their shops before. Sometimes, people have preferences, for example, they really love one of the fitters in in the Oxford Circus store because she fits a certain way versus someone else. So, it does require an element of brand letting go. Julie thinks that has been a really good, positive turn of the last 18 months. They have all had to let go a bit because this climate has made sure that they have had to.

It creates that inclusivity, Robin added, that customers are really looking for. They’re not looking for just a transaction anymore, they’re really looking for inclusivity and really being able to be transparent and have a little fun at the same time. So, it makes a lot of sense.

What does the customer expect from the brand?

They want to be with the brand that they would be friends with, they want to be with a brand that has the same values as them and believes in the same things. And why wouldn’t they? That’s what we all want, Julie explained. Anyone can buy a sale. That’s not difficult to do. But actually, being a brand that’s focused on your long-term customer relationship means that you have to have a purpose and be really true to that purpose. Julie then quoted Dolly Parton, ‘Storms make trees, take deeper roots.’ She said she really believes that in terms of your approach with your customer and especially your marketing.  They are purpose driven at Bravissimo. They have always been about their shared experience, their power to choose and their emotional connection. That means being really, truthfully there for what their community needs and also what they believe in. So, they have always had really strong sustainability focus, they’ve bra recycled since well before Julie started. 50% of their swimwear range next year will be made from recycled fabrics. They are a brand that’s 94% identified as women and they support women within their community. But what they have always been in the past is quite shy, almost British about it, they don’t want to talk about things that they do because actually, that’s probably not their place to do that. What they do realize now is that their customers demand that they actually say what they’re doing and be really clear and have intent and also be OK with the fact that you’re on a journey to get there too and be really honest and authentic and transparent about that. You don’t have to have the end result, but you have to have the commitment you’re getting to the place that’s really important for them to be.

Fiona said that consumers in general are becoming a lot more demanding of the brands that they’re buying from, they would prefer to be buying from brands that share values that they hold themselves, and they’re looking for brands that have a purpose beyond pure profit. At Stitch Fix, their internal culture is something they’re very proud of, they’re all very versed in their own internal values, one of which is integrity. In 2020, in the wake of the swell of energy around the Black Lives Matter movement, it prompted Stitch Fix to look at themselves, they came up short in their own estimation in terms of the brands that they were carrying and the representation of the makers. But what they found was that when they wanted to go and bring on more brands that were founded by founders of colour or from marginalized segments, there weren’t actually as many as they would have liked to have found in the market. So, what they have done in response to that is they have developed a program called Elevate, which just launched into the market about a month ago, which set out with the intention to find really talented but undiscovered emerging designers and basically cultivate them and give them the platform to sell at scale. Fiona believes that they are fortunate to be in a position that they can do that now. 10 years ago, they were just a fledgling start-up, struggling for their own survival. But now that Stitch Fix is established and very sizable, they have that scale and ability to effect change for others. It’s been really well-received, and it’s been hugely important to them as a business, to their employees and to these amazing new brands and designers that they’re now carrying. It’s something that they plan to continue year in and year out going forward.

Sustainability Historically it has been the younger generation to drive the change in regard to sustainability. But, according to Robin, since the pandemic, health, and wellbeing, not just for yourself, but everyone is really something that people have brought to the forefront of their thoughts. And so not only is it important to say, ‘I want to be healthy, I want to be sure that what I’m putting in my mouth is organic. I want to be sure that the cotton that’s being sourced is being sourced in the proper way. I want to be sure that the people who are making the clothing are being treated well. We don’t really want any repeats of horrific things that have happened in the past.’ And so, we’re seeing that other generations are starting to really think about those things and think about the shift of, ‘Should I be buying as many things as I’m buying? And when I buy them, where are they coming from and who’s making them and what are they made from?’ So, this whole idea of sustainability is very important. Fashion has a big challenge, it’s the largest culprit of pollution on the Earth behind oil and gas. So, it’s a big shift and it means that they have to educate their consumers because their consumers are accustomed to buying things at a lower price because of the way they’ve been made. To really make this shift, it’s not only the brands and the retailers making the change as to where they’re sourcing, but it’s also about educating the consumer and being very transparent about where things are coming from. How are they being done? Where are they? Where is the brand within their goals? How are they reporting? All of those things are very much top of mind. Every executive Robin has spoken to is without a doubt thinking about it. It is a very big challenge. But lots of brands have really good plans and have a way that they’re going to get there.

Julie agreed with Robin and said that her point that it’s an all-age focus is really important. She said that Bravissimo ran Zoom groups with customers while in lockdown, they did about 15 in total. They found that it was who you would class as more baby boomer demographics that were the ones that were really challenging them on their sustainability. Julie said it’s quite a challenge, especially as we head into November, that she is sure will once again be one of the most fiercely competitive commercial November’s. Black Friday is now November and pretty much October, it feels, and staying true to your principles across all the elements of what you do, not just with a sustainability committee is really key and going to be quite a challenge as we look across the retail landscape about being really truthful. Julie explained that they talked an awful lot about Black Friday and trading proposition and eventually made the decision this year that to stay true to their sustainability goals and the goals that they want to make. So, instead, Bravissimo are actually focusing on bra recycling and asking their customers to recycle and helping them to swap it for something that’s going to last – buy one and make it last and bring your old bras in at the same time. Julie believes that it’s not about paying lip service, it’s about joining all the dots up because customers now see through it.

Business Growth

Fiona explained that Stitch Fix had different approaches to growing the businesses that have been born out of the two businesses being born at different times. So, the US was launched in February 2011, whereas the UK launched in May 2019. More than an eight-year difference, and in that time, the digital landscape has changed, almost unrecognizably. Back in 2011, the digital landscape in terms of direct-to-consumer brands, online and social media advertising and digital advertisers was just a lot less crowded and a lot less competitive. So effectively, the US business largely grew organically through word of mouth supported by a structured referrals program. But also, they were able to leverage what were essentially influencers, they just weren’t called that, for very reasonable prices. It was at a time when celebrities were very happy if they liked the brand to post about you on their organic social just for the clothes themselves. Whereas these days, she said that a lot of influencers won’t get out of bed for less than £10,000 a post. Fiona added that it also feels like every second girl next door is an influencer, so that space in itself is quite crowded. So, growing the UK, business they just had to invest a lot more in paid acquisition efforts from the beginning and, similar to the US, when the business launched, it was a category innovator. The concept of personal styling online was novel, and so education was very much paramount to those early marketing messages and gaining that brand awareness and understanding consideration before you can then layer on the more emotive branding approach to marketing. So, they have taken quite different approaches, but Fiona thinks that’s really a reflection of the different times and just how rapidly the digital landscape has evolved.

Data Robin added that there’s a lot of differences between the US and the UK around marketing specifically, because of the fact that the GDPR was very much prominent over in Europe and UK, much quicker. What they found really when it comes to marketing, typically going out and pay per click is really big. It’s very much prominent and something that’s done often, especially during the pandemic, there were quite a few brands that had very good luck with that. However, going to influencers doesn’t necessarily bring to bear the rewards that you’re hoping. So really, what she is seeing is a lot of up click on emails. How you introduce somebody to the brand. What’s the cadence that you’re emailing somebody? How are you personalizing the experience and how does that personalization translate to a brick-and-mortar store? She said they find that consumers in the US are raising their hands and they want personalization and if they don’t get it, they’re very quick to unsubscribe and move along. So that’s something to really think about when you think about moving a brand one way or the other. So, there’s definitely a difference when it comes to the overall audience but getting focused on who that person is and really what they want is important.

Julie said that first party data is pretty crucial in retaining your customers. If you can’t speak to them, you can’t really engage with them. The digital landscape now is noisy and actually to have efficient marketing and be in it for the long term, it requires a level of segmentation that wouldn’t have even been a considerable five years ago. She added that she imagines what we look at in five years’ time, we’ll laugh at what we were doing at this point. But first party data is always super key, for example, when they do a paid social campaign, they’re doing seven different variants of the same message based on the demographic, the channel that they’re on. The message is probably the same and that intuitiveness and responsiveness is only going to increase, but without the data there to be able to be agile and pivot, it’s really difficult to do.

Stich Fix is particularly fortunate and lucky in terms of just how much of this data their customers give them, because that style quiz Fiona previously mentioned takes a good 15 minutes. It’s a good cup of tea to fill that in, and it includes really helpful demographic data such as, are you a parent? How many kids do you have? What do you do for work? Part time, full time? What industry are you in? And not only does that information, as well as other pieces, help them to personalize their emails and so on, they also use AI and little quizzes to collect data about style preferences to make sure that those emails are personalized because the personalized ones are significantly more performant. Thinking about who they target is really helpful. So, if they understand their existing customer base and they look at the lifetime value of those different segments and they’re able to pinpoint, ‘OK, this particular segment has a higher lifetime value, clearly this is a service that resonates well with that demographic that we’re able to serve well. So, let’s go and find more people who look like that’. And so, when they think about their acquisition, marketing and how they measure the efficacy of that, it’s not just looking at the cost per acquisition. They look at the return on advertising spend in terms of the lifetime value of those customers relative to the CPA. They want to acquire customers that they’re going to be able to serve well and surprise and delight, rather than the customers who will be disappointed and churn out quickly. So, they marry the two.

Shopping habits

Julie thinks that our shopping habits have changed, but therein is some of the challenge that we just don’t know what the future holds as it stands at the moment. All that amazing binary modelling and all that customer history data that Bravissimo had has been really thrown in the last 12 months. But therein for her really lies the opportunity too, but the essence of it, about communicating with your customer, about being authentic and honest, about holding a community, that’s still holds really true. It’s just about which medium and whether that’s in a retail shop or whether that’s virtually and whether it’s in their US part of the business or UK. They’re just things that they can play about with on the outskirts. But the purpose still stays the same, and so it should.

Robin said that there are three changes she sees in the retail landscape.

  1. Brick and mortar stores are not going to go away, but they are definitely going to shift and evolve. Being able to bring a really unique experience to the store is going to be key. It’s not going to be about somebody walking in and buying something and leaving because you’re not going to get them in the store. She thinks retailers need to think about what Michelin star chefs do, they present a beautiful product, and they have a great experience. That’s really what retailers and brands are going to have to think about.
  2. Personalization is going to be really key; customers are not going to have a lot of patience for promotions and things that aren’t relevant for them.
  3. Marketing and customer experience doesn’t work without a great supply chain. We’re really seeing a shift of making sure that the supply chain is really stable. Products can be seen everywhere and anywhere, and a customer can have a great experience because the product is available and they’re not let down if it’s not.

Future plans

Fiona said that Stitch Fix are going to continue to expand their business offering in a couple of ways. One is they have just recently launched, in the US, a new service feature, which they’re calling Stitch Fix Freestyle, and this creates a personalized feed of outfits on the website that customers can then shop directly. The intention of that was to expand their total addressable market because some people love the surprise and delight the outsource the shopping, and other people love the hunt. They love the search and they’re very, very picky. They’re hoping to bring that to the UK soon. And then they are also excited about eventually expanding into new countries beyond the UK. She said they came out to the UK with the intention of the it being their base for further international expansion, and they have already done a lot of research which shows that there would be great appetite for this model elsewhere as well.

Julie expressed that she has loved working in marketing over the past 18 months. It’s been really challenging at times and really hard at times too, but this has been pure growth mindset time. It’s been absolutely the chance for us all to get out of our own ways and go back to what’s really important and that’s our customers and engage with them and stay really close to them because we’ve needed to really understand where they are. She said she thinks it’s been the most learning period, the most evolving period for all of her team and she’s really looking forward to what the next 12 months bring.

Robin added that she has the same outlook, she said it’s really exciting to sit with someone like Julie and really hear what the vision is. Where do they want to go? Where does the brand want to go? What do they want to do and start to really think outside the box. So, it’s a super exciting time. She said she loves job and wouldn’t trade it for the world. Working with people who really understand their business and trying to help brainstorm and bring ideas to fruition is just a ball.

Fiona explained that she has loved all her experiences to date, and similarly to what Julie and Robin have said, the last 18 months have been a complete rollercoaster. Stitch Fix launched their first huge out-of-home marketing campaign a week before lockdown hit in London, so all their tube ads were all over the city with no one to see them. But the team that they have in the UK is just incredible. They’re so resilient and they’re so responsive and they’re incredibly creative. Fiona thinks that what she has witnessed over the last 18 months is that all these unprecedented changes have just catalysed new levels of creativity. And in the process, everyone has just banded together in really wonderful ways. So, the team morale and strength of bonds is wonderful, and probably it wouldn’t be as strong as it is without all having gone through this very strange time together.

Julie said that they are so fortunate to have such an amazing team of people at Bravissimo, who are all focused on their purpose. They all know why they’re here, to make women feel amazing. But what it’s enabled everybody to be is really brave and not worry. Progress, not perfect. It’s really just enabled everybody to not worry about what the perfect version of this looks like, because we don’t live in that time and that’s enabled people to really just have fun, actually have a go, try things, be brave because customer behaviour has changed. They have had more new customers this year than they’ve ever had before in the twenty-six years that they’ve been around and that wouldn’t have happened without an amazing team who were really focused on being there to support their customers.