Happy Sunday. Hope you've had a great weekend. I'm down in Florida for the weekend and enjoying some warm weather.
It's clear it's going to be a pretty tough year. Consumer spending is down, many retailers are reporting YoY sales declines, who knows what is happening with tariffs, and Meta's best days seem beyond it.
We've had a bunch of hard years the past few, with iOS, crazy freight prices, and more. I think this year will be harder, with less or zero growth and more.
But I think there is some good news. First, it does have to get better at some point. I think we're taking some necessary corrections now, but I am more optimistic than most that it will get better sooner. But at the least, it's gonna be a rocky 6 months until it gets way better.
Some brands won't make it, and that sucks. Some brands will shrink, and many will be flat. If you're growing, you're crushing it. I do think our industry is so much better as a whole as a result of challenging years which forced us to all get a lot better.
Contribution margin was not the main KPI when profit didn’t matter. (It always mattered). Incrementality was reserved for only legacy brands. Now all of these are best practices. I don’t know what will come out of this year for DTC as a whole.
But I know the brands that get out of this alive will be so much better as a result. It's the concept of anti-fragile.
I can share what I am focused on and what I am telling other leaders and founders I've been talking to. A lot of it gets down to focusing on what you can control, and aiming to get better at the basics.
- Ad creative - Before iOS, almost any ad creative would do. Now every brand has a creative strategist on staff. Ads will need to continue to get better, and brands will need more ads and better ads.
- Product expansion - Acquisition is very, very challenging right now. The only way to continue acquiring new customers profitably is by expanding your TAM. There are multiple ways to do this, but product expansion is going to be your biggest lever here.
- Brand partnerships - When Meta is harder, and worse at finding new people, brands will turn to new ways to find new audiences. Brand partnerships are a great way if done correctly.
- Lean opex - In uncertain times, high fixed overheads are a recipe for disaster. Consumer brands need to either grow, grow profitably, or be profitable. If you're not growing, well you need to be profitable then. You think you need everyone until you're forced to operate without them. It's a lot easier to
- AI implementation - AI is progressing fast. We all know that. I think this is the first year it's going to make a huge difference for consumer brands. CX, data analysis, and creative are the first few areas that are going to be impacted in a positive way. I don't see it replacing and humans right now, but your team can be 4 times more productive if they begin using it fully.
I am sure there are 10 ways brands are going to be forced to uplevel that I haven't even mentioned here. Cash flow, new channels, and operating excellence are going to improve for the brands that do the work, and they will be more resilient and better once we get to the other side of this.
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Have a great rest of your night and enjoy White Lotus if you watch!
-Cody