High-growth DTC brands encounter roadblocks and questions on a regular basis. That’s because technology is often moving quickly, but different platforms and DTC support systems don’t always talk to one another. Patrick Johnson is an engineer with a background working for Red Antler and the CEO of Progress Labs. His work has attracted clients like Haus, Soma Water, Andie Swim, and many more. He’s found that the key to navigating the DTC landscape lies in educating clients on their options, so that they can make choices that will empower their brand in both the short term and the long haul.
- Differentiate on more than price
- The caveats of going headless
- The role of pre-optimization
- Engineers should educate and guide brands
- Care about more than conversions
- "In Manhattan Pizza War, Price of Slice Keeps Dropping"
- Connect with Patrick Johnson on LinkedIn or Twitter
- Check out 1-Click Pony
- Connect with Ben Fisher on LinkedIn or Twitter
- Connect with Joel Van Horn on LinkedIn or Twitter
- "In Manhattan Pizza War, Price of Slice Keeps Dropping"
7:22 - The benefits of an engineering/design studio
When you control all aspects of a project under one roof like Progress Labs often does, the process is infinitely smoother and the final product is higher quality.
“If we were to use a car analogy, design is the experience of the car of the interior. It's a wood grain steering wheel. It's beautiful Italian. But if you don't have a transmission and wheels, none of that matters. You've got nothing. When we started seeing that happen a lot more that's when we built up the design practice. The design practice consists of myself, Nathan, our creative director. Him and I met when we were at Red Antler, and then a few other designers who came from a bunch of DTC backgrounds. We still work with brands in an engineering capacity only. We work with some brands design-only, and then we work with other brands doing both. And what we found is what any studio will tell you: it's way easier when you control that whole design to development process, because you can control the quality. You will understand everything from a design position, what could go wrong, things you need to prepare for, et cetera. And then you can carry that into the engineering phase.”
11:08 - When subscriptions make sense
Patrick says that subscriptions are logical when it’s something that you use continuously and/or they change your habits for the better.
“I think products that tend to be subscription-first aren't bad necessarily, but I think it's hard to assume consumers’ intent. Now the separate side of that is, if the product is meant to be used continuously, I see why subscription makes sense. So for instance, I use a WHOOP band. They just announced their 4.0 today. I literally just bought it. I'm fine with this being a subscription, because this is actually like one, it has to be used over time. Two, it's legitimately changed habits that I have in my life. I didn't drink a ton of alcohol before, and now I'm incredibly conscious when I do and I try to minimize it as much as possible. Whereas—I'm totally making this up and I don't know that this is accurate or not—but do I need a Bomba’s subscription? I don't even know if they have one, bear with me. But they claim their socks are so good that you're never going to need another pair again, as an example. I don't know if any of that's true about the brand, but if your socks are so good and I'll never need another pair, why do I need a subscription?”
18:29 - Differentiate on more than price
With recurring purchase models gaining traction, the market is getting saturated. It can quickly be a race to the bottom in terms of who can offer it the cheapest.
“One of my tricks to get out of subscriptions, as I'm telling us on a subscription podcast, is I'll request new credit card numbers from my bank. Because it'll cancel all subscriptions. And I guess you can do virtual carts now, but it allows me to say, I know I'm going to get that email at some point in that month, I'm going to see what all my subscriptions are. And it's an opportunity for me to reassess. And I think subscription is interesting. I think the current implementation of it is getting stale. I have some thoughts on that in a minute. And if brands are just like, let's drop a widget on the page, get that recurring revenue. Let’s increase AOV, let’s increase whatever. I think it's going to bite them in the ass soon. Because if we aren't already there, we're seeing a space in which there's absolutely no way that there's 14 different plant-based cookie dough brands that are all substantially different. More than likely it's all coming from the same supplier. And I don't know that, I'm making this up. And if they all have subscription, it's literally who's the cheapest.”
36:13 - The caveats of going headless
Almost 100% of Patrick’s customers end up on Shopify versus headless implementation. That’s because headless requires a clear roadmap and dedicated hires to keep it going.
“With every brand that we work with, if it's a brand new brand, if they prelaunch or if they're looking to redesign, we’ll present a headless option and a standard Shopify option. We don't turn away things that are not Shopify, but we've yet to be introduced to a brand that's not on Shopify. Every We have a 0% rate of selling through headless. Not because we can't do it, because we have done it. We have a few of our own headless implementations. We try to stay up on the technologies. But the list of caveats that comes with headless for most of these brands is too big. To put it very bluntly, we tell them: you are now a technology company, whether it's 10% technology or 50%. But if you go headless, you are now a tech company. And you need to either hire somebody, it needs to be on your roadmap, or you need to expect to keep us or somebody else around long-term. With custom Shopify implementation, there's a version of that but it's less saturated, it's less abrasive. We can build some stuff into Shopify native as a platform, that can keep them running for a while.”
39:50 - The disconnect between tech tools and reality
Often there are changes on one platform, such as Shopify, that outpace the ability of subscription service tools to operate effectively. This landscape requires constant big-picture thinking.
“Shopify recently came out with native checkout for subscription. At the time when we were told about it, this was months ago, you couldn't use Recharge’s pro-level custom subscription management with Shopify’s native checkout. But what brands hear from Shopify and from is ‘you can do native checkouts with subscription now.’ And we're like, no you can't. It's a massive disconnect. And in my opinion, the disconnect happens because like commerce platforms, if they can upsell, they'll do it. Subscription platforms, if they can upsell, they'll do it. But usually the people doing the upsell don't realize that there's sometimes a massive disconnect between the technical roadmap coming up and what's available now. And so a lot of our job I realize at this point is acting almost as a technical solutions rep for our client and the subscription service that we work with.”
42:15 - The role of pre-optimization
Navigating the tech needs for current and future subscription business is tricky for engineers. It all comes down to the importance of pre-optimization and taking it one 6-month chunk at a time.
“We tell brands straight up, all right, you don't want to do headless, that's fine from a technical perspective. But you want to do this crazy stuff in subscription, you're going to have a totally separate tech stack for that. And if you want us to build a UI on top of it that allows you to manage it, that's fine. But this idea of you not being a tech company keeps going away, and your tech stack keeps growing. So how do we navigate this in a way that is fruitful for you to get you where you want to go, but then allows you to scale over time. And that's the really hard part. And Ben, I think you're both you guys come from an engineering background. It's this pre-optimization and naming things, those two hardest things in engineering. And this is literally pre-optimization. So it's like, how can we get you into six months? And then we'll revisit. How can we get you to the next six months?”
45:04 - Engineers should educate and guide brands
Patrick sees a large portion of his company’s role as acting as an educator for brands, giving them the basic insight they need to make informed decisions.
“The way we look at it oftentimes is, our studio acts as more of a sherpa through this product development process to say, what do you want? What's your ultimate goal? And we'll help you figure out how to get there. It might not have everything intact, but we'll get you as close as possible. And the separate side of that whole shipper journey is education, for us. So if we were working on a brand that sold nectarines online as a subscription, and you guys knew nothing about how to set up a subscription, our job is to educate you. And my personal belief with education is I don't need to know how to change the oil in my car...but if you could give me a primer, and if that primer helps me understand what's good and bad in that process, then it'll help me to make better decisions in the future.”
48:02 - Refine solutions over time
Patrick’s team regularly refines their best practices so they immediately know how to best advise new clients. A big part of this process is going back to former clients and getting updates on what’s working well and what’s not.
“We keep tabs on solutions that have worked well for clients internally. We're not necessarily copy-pasting code. But as an example, if you have to be an active subscriber in order to purchase the refill as a standalone product, we know how to do that internally. We know what works well with Recharge and with Shopify, with Customer Council, that kind of stuff. So we know, all right, this is how we should do it. Do your needs meet that? Boom. And then the other side of it is, because we tend to work with Recharge a lot, we understand what's capable there. So we don't necessarily say ‘this is model A, get solution A.’ It's more like we've done a lot of things. We know how it's gonna work. So we have our opinion. But ultimately, again, it's up to the client. The client gets to decide how challenging they're going to make it. We just tell them what their options are...Every client that we use, we think of it as a network. So we'll go back to Hamsaun, we'll go back to Haus, we'll go back to Huron, we'll go back to Andie Swim, whomever and say, Hey, how does this work for you guys? Is it working out well on the management side? What about engineering, has the upkeeping been okay? Like all right, cool. And we'll continuously refine what our solutions are as we build them out for each client.”
56:27 - Care about more than conversions
Patrick believes that when brands operate solely based on conversions and quick wins, the quality of the brand devolves quickly.
“Outside of subscription, a brand wants to spin up a landing page for a campaign. And they'll call their studio. And because almost every business cannot respond to an immediate request that day—and I hate to phrase it this way, but because most DTC brands are advertising and marketing led, they're like, fuck it, install Shogun. Fuck it, install Builder. And I hate to phrase it this way, but they care more about the conversion than the continuity between brand design, brand aesthetic, brand marketing, brand language, that they'll spin up those landing pages. And it's interesting. I think if things continue to move in that direction, I think it's going to be really hard to manage the expectations of brands. I think we're going to see, I hate to phrase this, but shittier brands. Because again, it's going to be less consistent across the board.”
57:31 - Will subscriptions be connected in the future?
Patrick dreams of a day when subscriptions can be viewed in one place, making it easier for consumers to manage subscriptions and easier for DTC brands to cross-sell.
“Recharge to my knowledge stores customer IDs on individual instances of Recharge app. So if you've got a subscription for Haus, for Bombas, for Huron, for a bathing culture, all using the same email, there's no connection there, right? There's none at all. And what I am hoping for one day is that they will build that connection. So then you can just manage all of your subscriptions in one spot. Who knows if they'll do it. It would make a lot of sense for any subscription platform to build this out. Because then I could think about co-op commerce, and the opportunities that you would have there in a shared subscription management channel, or like portal as Recharge calls it. Cross-selling capabilities, brand partnerships, from a branding perspective I think it's amazing. The technology, for whatever reason, they don't do it. I don't know why, but it's just where we're at. And I'm hoping that one day we get there, or at least they give us the tools to build these kinds of things.”
1:00:21 - DTC engineers need to work together
Right now, the DTC world is a bit of a free-for-all. The problem is that it’s resulting in silos and roadblocks, when more cooperation would solve many of those problems.
“The people at Recharge, the people at Smartrr, the people at SKU(dot)io, or the studios or the engineers are building out these crazy unsustainable applications to manage unique subscriptions. And I wish they would just normalize and unfortunately all agree on a way to do something. Because I think similar to the web and how the web was built over time, is the agreement actually allows us to move faster over a longer period of time together. But right now, it's a cash grab. It's who can build the biggest deepest moat, to then eventually get acquired by Shopify or Amazon or Google.”
1:10:42 - Don’t go headless if you rely on Shopify analytics
Patrick advised that when you go headless, you can find yourself in the dark in terms of clear analytics. Data will no longer appear in your Shopify dashboard.
“One of the first questions we ask a brand when they're like, ‘Hey, we want to go headless.’ And I say, do you make business decisions based off of your Shopify analytics dashboard when you're logged into Shopify? And they're like, yes. You cannot go headless. Because you won't have it. Because nothing exists there anymore. You can do some tracking, you can leverage Segment or Heap or whatever else, Looker, Udacity, et cetera. But I think it's interesting because we had this with a brand recently. So we want to flatten their product structure. Their subscription right now is a multitude of variants. And we have to do it that way for the time being, but we want to flatten it out to where product A has a corresponding product A subscription. Product B has a corresponding product B subscription. And then when you buy a bundle that has both product A and product B, technically what you're getting is two separate subscriptions: one for product A, one for product B. That's how it looks behind the scenes. It creates a direct one-to-one parity with inventory counts, with material counts, with fulfillment. The only place it doesn't match up: analytics.”
1:20:11 - Don’t let marketing drive everything
Successful DTC brands don’t rely on constant sales. You also have to care about what powers the brand: things like design, tech, and/or storytelling.
“If marketing decisions drive the brand forward, the foundation has a crack in it. That's my thinking. It's this idea of if you, oh, let's do a sale, let's do a sale. If you have to do Black Friday in order to be viable, if you need to spin up the sales page tomorrow, if you have to have a referral program in the next two days, I think you're doing yourself a disservice as a brand. And I think what we're seeing in the DTC space, tying a few things back: massive brand competition in any particular category, you could throw it out there and I can probably name you five. A lot of them sometimes might get products from similar sources, and the price points are probably going to be arguably similar. So what that means is you have to care about the engine that powers the brand, whether that's design, whether that's brand narrative and storytelling, whether that's your technology. If you invest the time, if you invest the money, I think that you will come out on top.”