Ten conversations everyone’s having
By Sam d’Amato
How long? | 2 mins per conversation
Over the last six months, we have been working with a number of interesting and inspiring companies: from hush, the women’s fashion and lifestyle brand, to Netflix, the BBC and BBC Studios, Sneak Energy, Virgin, the Cotswold Company, True (a BCorp investment and innovation firm with over forty tech and consumer brands in their portfolio), and the John Lewis ‘Circular Future Fund’ backed team at Dame who make award winning reusable and plastic free period products. Add in all the industry dialogue out there, and there are consistent conversation themes. With this in mind we thought we’d share the ten we are all having - along with some implications for the future. Feel free to skip and jump between the ones that catch your interest - and please do get in touch and share your own.
1) Overstock Challenges
Driven by first quarter and general rising return rates (Boohoo is at 33.7% and Resolve at 54% according to the Business of Fashion), previous supply chain issues delaying stock, the inconsistency of post-Covid consumer behaviour, rising inflation and the cost-of-living crisis, True recently shared that half of UK retailers are struggling to find a solution to the problem of unsold goods. So what will companies do about it?
Firstly, we are seeing a rise in focus on brand and sales forecasting tools. On top of that, it is no surprise that companies like Net-a-Porter have been offering a 70% discount - flash sales are common at present. Others are ‘deep storing’ - saving the goods for next winter. And then there’s the rise in ‘off price’ retail.
Outlets like Bicester Village are growing at ten times the rate of high street retail, and as McKinsey have reported, off-price is set to grow five-times faster than full-price retail between 2025 and 2030. You could call it the Aldi or Lidl effect, whereby consumer stigma around off-price goods has dropped, but we expect to see ‘off-price’ retail become a common strategy to bring in new customers, shift stock, and - they hope - elevate the full-price offering. Brands like The Outnet and Secret Sales will benefit, and more and more will start to develop bespoke product lines for ‘off price’ retail. The intent will be to reduce the discounts they offer on their main lines.
Then there’s the new companies that will form too. The growing trend around ‘mystery boxes’ that Charlotte Tilbury and YSL are jumping on is a case in point. More and more will set up to buy overstock, then curate and distribute them via ‘drops’.
2) Web 3 excitement and fear
Next there’s the talk around the third phase of the internet. Web 3.0 (or Web3) is characterised by decentralisation (more power to us users vs. the likes of Google, Meta etc), ubiquity (more interconnected devices - the ‘internet of things`), blockchain (the ability to guarantee the fidelity and security of data, and generate trust without the need for a third party ie. the basis of Bitcoin), AI (computers leveraging natural language processing in a similar fashion to humans) and machine learning (using data and algorithms to imitate how humans learn).
Clearly Web3 has crazy potential to evolve user interaction in the future. No doubt you have heard a lot around AI driven content too. We used AI to help create parts of the teaser films for a Sneak energy drop for example. AI’s potential is immense, and far broader than this however. Take the rise of the fashion retailer Shein. Growing at over 100% per year for eight straight years, Shein is now above Amazon as the No. 1 shopping app on IOS and Android. How have they done it - AI is a major factor. While the previous darling of fast fashion, Zara, could respond to trends and turn around fashion within seven days, Shein leverages AI to trawl competitor sites and web trends. It then anticipates what you will want and brings products to market within three. Shein is now bigger than H&M and Zara combined.
Web 3.0’s will offer better control over data for users, and curb exploitation of that data by big companies. However there are challenges and fears around it too. From a challenge perspective, the regulation and enforcement of decentralised data will be difficult. For example, whose laws apply to a website whose content is hosted in numerous countries around the world? From a fear perspective, most will have seen the open letter Elon Musk, Steve Wozniak and 1800 others signed recently, calling for companies to pause the development of the most advanced AI tech, on the grounds that "AI systems with human-competitive intelligence can pose profound risks to society and humanity." The letter went on to state that "recent months have seen AI labs locked in an out-of-control race to develop and deploy ever more powerful digital minds that no-one - not even their creators - can understand, predict, or reliably control.” They warn that AIs could flood information channels with misinformation, and do us out of not just mundane, but highly rewarding creative jobs.
Now, since the letter was released many have criticised it, with some even sharing that their signature is on the letter without their permission. What is undeniable however, is that AI’s potential is (wide) eye opening. Take music alone - there’s already an annual ‘AI Song Contest’, a Eurovision-style competition in which all songs must be created with the help of artificial intelligence. Musicians such as Francois Pachet have created entire albums co-written by AI, and Guitar World ran a story titled An artificial intelligence algorithm has created “new” Jimi Hendrix, Nirvana songs. I, for one, worry about the day when all the trending songs on Spotify, and the headline act at Glastonbury, is a Chat Bot. Next there’s the sales conversion conversations…
3) DTC Demise
Related to the decentralisation of data, everyone is talking about rising Costs Per Acquisition (CPA) or Customer Acquisition Costs (CAC), increasingly crowded social environments, privacy and retargeting constraints. Research by SimplicityDX revealed that merchants pay $29 for every new customer acquired today, while in 2013 they paid $9 - indicating a 222% CAC rise in the last eight years. The major factors being privacy, tracking and retargeting restrictions put on brands across sites and devices. Eric Seufert covered the impact on the likes of Meta, Amazon, Google, Snap and more brilliantly. Clearly the challenges around DR advertising are major, with every company out there - big and small - feeling the pain.
What does this mean for the future? Well, in a world where ad retargeting is restricted and the standard route to market is no longer cost effective, we expect to see Marketing teams shift to community building, influencer endorsement, solid customer retention programmes, brave and more innovative brand campaign approaches. Ultimately companies need to evolve the way they attract customers, and deliver an enhanced content and user experience online to engage and convert people in more efficient ways.
Source: The App Tracking Transparency recession, Eric Benjamin Seufert
4) Power to the people
Building on the last point, universal awareness around data rights, combined with our growing intolerance for the ‘dark patterns’ companies use to try and get us to do things we don’t want to do, are leading to a rise in more customer centric businesses. Take Amazon, for example. While they are often held up as the pioneers of frictionless commerce, how many times have you got to checkout and then found yourself trying to circumvent their ‘subscribe & save’ payment choice.
And how many times have you found a site trying to mislead and misguide you through their language, colour and button use. Or more prevalent still, just how difficult some companies make it to cancel versus subscribe to their service!
It is more than a little irritating, and customers will always reward companies that have their interests at heart instead. A simple example is the classic loyalty programme. Starbucks now has over 30m users of it’s app in the US (one in eight Amercians), meaning it is the number two payment app in the US (behind Apple Pay). Similarly, Nike’s loyalty members account for 70% of new store sales. Reward people and they reward you back. Another interesting example of being customer and even societal first is Beam. The company allows you to donate a percentage of your shopping cart to a cause of your choice at checkout. Importantly too, the percentage comes out of their profit, not your cost.
Be it loyalty or new forms of value add, we all appreciate it when the focus is on us, not the bank balance of those we buy from. The positive for the company is loyalty, word of mouth, better conversion rates and more - a win win. The next point builds on this, taking customer interest into the broader planet space too.
5) People, planet, product....profit
Matt Truman, Co-Founder and Chairman of True, one of the first BCorp investment firms out there, recently highlighted that the cost of living crisis has driven a 34.5% drop in sustainability related e-commerce searches. A point that would very much suggest that the cost of living crisis has shifted priorities from future to immediate needs. That said, it is interesting that the majority of students who completed the latest IPA Excellence Diploma course, chose to focus on the subject of sustainability. According to Morgan Stanley too, the potential transformation of the global economy towards a more sustainable future ‘is one of the biggest investment opportunities in generations, with some estimates showing annual average spending on physical assets alone will require more than $9 trillion to reach 2050 targets.’
Despite the changes in short term search traffic, like True I am sure, we believe that the brands that focus on delivering a ‘greater good,’ versus ‘shareholder value’ alone, are going to be the norm, not the exception in the future. It’s why secondhand marketplaces are flying. In fact, by 2030 it is predicted that second hand fashion, as highlighted by the growth of Depop, Vinted and True’s portfolio brand, By Rotation, will be twice the size of the fast fashion industry. These companies are not just saving our planet, they are saving us money too.
It’s also why companies like Klarna allow you to estimate the carbon footprint of your purchases. And why Eric Minn, the founder of Zwift, recently shared with Friendly Giants that “The new generation are demanding that employers stand for something beyond money. If you want the best talent in the world, you need to stand for something.” To succeed in the future, the majority of brands we speak to seem to recognise the need to think about People, Planet and Product first. Profit is the output.
It’s a point with proven historical business merit too - one that builds on the classic 2010 article by Roger Martin of the Harvard Business Review, titled ‘The age of customer capitalism.’ In the article he highlighted that the companies that have made their focus the delivery of shareholder value through time, have delivered lower shareholder returns than brands that have focused on the customer. His evidence based insight is simple - putting the customer first leads to higher financial returns, then focusing on profit. Now given we are all becoming more and more conscious of what constitutes ‘good' brand behaviour when it comes to the future of our home planet, we should add the planet to that now too.
6) The big reset
Another consistent conversation relates to brand story telling. For some, Covid led to major stock and business issues, hence, they are trying to fight back. As a result, they have been forced to rethink or re-establish who they are, how they operate and what they stand for.
For others, Covid led to rapid growth - as the world moved online, they rode a wave. The flip side of that wave is that when Covid restrictions lifted and consumer behaviour shifted - yet growth targets remained heightened - they found themselves questioning their story too.
Then there’s another challenge, related to person to person interactions during Covid. For many, work life balance has improved, and who hasn’t been gripped by the four day work week pilot that 60 UK companies took part in recently.
If you missed it, the companies that participated in the trial include everything from marketing agencies to financial firms, education services and a fish and chip shop. As recently reported by the BBC, ‘92% of employers said they would continue with a shorter work week following the programme – with 30% making the change permanent. Among nearly 3,000 employees, 71% reported feeling reduced levels of burnout; there were also improvements in physical health and wellbeing.’ More interestingly still, the year on year productivity of the companies tended to rise too. Whether it sticks in the long term is another question, as naturally it hasn’t worked for all, but let's see. Anyway, back to the subject of person to person interaction during Covid.
What many founders and business leaders also seem to be saying, is that it is now more challenging to communicate their brand story - and that those who were in their business pre Covid, have a better appreciation of the brand and culture, than those who joined during it. In short, these companies are also rethinking and trying to reaffirm their brand stories.
Finally, there is a much broader trend that Orlando Wood, System1’s Chief Innovation Officer and author of Look Out has put forward. Wood argues that creativity is cyclical: that we have periods of great creativity, which are followed by imagination lows. These lows are often linked to technological change, which cause society to look ‘inwards’; narrowing attention, and resulting in less creative work. It’s a theory that brings to mind the fear around AI driven creativity, the heightened focus on performance marketing over the last decade, all those countless Binet & Field based meetings agencies and marketers have had, arguing the case for brand, not just performance based marketing etc (thank you Tom Roach for a summary of the best slides here). In short, many we speak to believe that their storytelling has suffered at the expense of a rising performance focus . They want to rebalance.
To conclude this point, I very much believe that technology has given us all new ways to create and be creative, and that data and analytics can one hundred percent drive awesome creative work. However, Wood’s argument has emotional appeal too. Having worked on both sides of the media and creative industry I have witnessed a rise in focus on the medium over the message. A point that reminds me of a recent World Federation of Advertisers Report (WFA) titled ‘Clients and Creativity’. In their research they found that 82% of Marketers out of the 640 surveyed agreed that creativity is marketing’s super-power. However only 28% said they saw creativity as ‘business critical.’
It would seem that over time, Marketers have become more risk averse. They intrinsically know it is their biggest asset, but fear putting it into practice. As a result, the focus is on what has been done before, the safe and the performance measurable. The long and short of it is that a lot of brands are thus trying to revisit and re-establish who they are, what they care about and what they want to communicate to their teams and customers.
Now, it would seem, is the time for a big brand and creative reset. The question is, who will be brave enough to see it through.
7) The rise of Gen Z marketing teams
Sneak energy, a client of ours, is a case in point for this one. The Manchester-based company makes zero sugar, full flavour, caffeinated energy drinks aimed squarely at the intersection of gaming and street culture. Having built a cult following over the past three years with a combination of full-on flavours filled with nutrients and brain sharpeners to help anyone stay in the game, their marketing is born for the social age.
And with that comes an interesting trend - the need for more people within organisations who understand and live in the new social world. For Sneak that lands in the hands of their mischief-fueled young social team, constantly looking to latch on to social, misfit and gaming trends. It is also evident in the films we have been making for them to support their new flavour drops - such as this breakfast orange launch last year that tapped into the trend around 80’s and 90’s nostalgia. More on that in point 10 later!
There’s loads of great examples of this though. In a recent NY Times article titled ‘Wanted: Interns Who Can Make TikTok Hits’, Sapna Maheshwari talks about 20-year-old Mary Clare Lacke who interned at Claire’s. Tasked with trying to make their Tik Tok feed more appealing to their young target, Lacke jumped on a TikTok trend called “krissing”—a bait-and-switch video format that misleads people and then reveals the fake-out. Lacke used #krissing to reveal that Claire’s did indeed still sell gummy bear earrings.
The video generated 1.5 million views and 20,000 new followers for the company’s TikTok account, and Mary Claire Lacke is now one of many TikTok “college creators” that work for Claire’s. Do a google search for social media interns too, and you will see how many companies are doing the same.
It’s a point that prompted an interesting conversation with the Founders at hush - one of our fashion clients. We were talking about their social media strategy and one of the questions they asked themselves was: ‘what would our teenage daughter do?’
8) Influencer commerce
With the crazy rises in CAC, it is no surprise, given their established audience potential, that the other massive area of discussion relates to influencer marketing. Having spent a few days last week filming the funny, passionate and wonderful Hayley Morris for an upcoming film for Dame, the value of leveraging their personality, talent and audience is clear. However, what is less talked about, is the way this trend is already starting to play out.
Prime energy drinks is a case in point. If, like me, you have an eleven year old son, then my bet is that at some point over the last few months, you have found yourself hunting for an elusive Prime bottle. Find one, and you might have then found yourself contemplating paying up to £12 for one. Utter madness, but hats off to Logan Paul and KSI for the craze they have created. What will be interesting to see is how long it lasts. It appears to me that prices are already falling, and my son for one has stopped pestering me about Prime - he has moved onto Mr Beast burgers instead!
What it points out however, is the remarkable sales and brand power influencers have. True, Ivy Park, Beyonce’s dwindling brand with Adidas, highlights that people can tell when an influencer isn’t living a brand, but what can’t be denied is the $3.6bn unicorn scale growth of companies like LTK who have over 200,000 influencers selling on the platform.
Influencer commerce is only going to grow. We are going to see more and more companies form around them - and not just influencers own brands, but companies that seek to leverage their fame and endorsement.
9) Immersive shopping
Building on the above again, another common conversation thread relates to the allure of immersive shopping. We recently met with a super interesting company called brandlab360 who describe themselves as the world leading enablers of web3. Their technology and what they can deliver in the form of virtual showrooms, stores and metaverse experiences is remarkable.
Truth is, it’s hard to have avoided a conversation around this space. Drawing on a Qustodio study, TechCrunch recently highlighted how ‘Tik Tok is crushing Youtube’ when it comes to app usage and engagement amongst kids and young adults (113 minutes per day vs. 77). Roblox however smashes them both with 190 minutes.
What is clear to us is that more and more brands are going to be looking at the ways they can better recreate the real life immersive experience in the digital world. Especially given 47% of US consumers who made livestream purchases last year were Gen Z - according to an article by Digiday.
10) A rising notalgia
Finally, we thought we would end with the rising nostalgia that we mentioned in reference to our client Sneak previously. Whilst working with the BBC and Netflix, we have recently been discussing the enduring appeal of shows like Friends. One conversation began when I mentioned that my eleven year old son and his friends were now into the show. Our BBC iPlayer client proceeded to share that Friends is the No.3 VOD show for kids 10-12, and the No.2 for kids 13-15 in the UK. What’s No. 1 you may well be asking - it’s Netflix’s Stranger Things, ofcourse. The common theme is nostalgia - one is set in the 80s, the other the 90’s. Then there’s the constant stream of remakes like the Ghostbusters, the fact that so many ads at the superbowl embraced 80’s and 90’s stars and nostalgia - such as the Clueless ad from Rakuten, and Michelob Ultra’s star-studded reference to Caddyshack. And last, there’s the 90’s nostalgia on display in the fashion world of late too.
So what is the appeal? A super smart past colleague or mine called Simon Carr recently pointed out in a WARC article, that seventy-three percent of us enjoy things that remind us of the past. It is no surprise that brands are looking to tap into that. Then there’s the fact that web 3.0 and AI are actively remixing our past and present. A year or so ago my son came home from school telling me all about Rick Rolling, like it was something new. It was, for him and his friends, who had just discovered it. And then there’s the remarkable resurgence of the brilliant Kate Bush, when ‘Running up that hill’ featured in Stranger Things and was subsequently remixed and edited into countless Tik Toks.
Clearly nostalgia can be powerful, but there are watch outs, as Simon Carr highlights. Firstly, while the ads in the superbowl that harked back to the past, over indexed on likeability in a study by Zappi, they under performed when it came to brand linkage by 5%. And secondly, we can’t forget that even our recent past was filled with social division, racism, sexism and homophobia. With this in mind, Carr suggests we tread lightly when building on the past - as any Roald Dahl and Fawlty Towers fan who has been reading recent criticism of the two will tell you.
Summary
It will always be the next generation, the cultural, economic, technological and social context that will shape the future. Covid and the cost of living crisis have sparked a flurry of behavioural changes, new business and brand evolutions. Web 3.0 will most certainly supercharge change, but the one thing that will remain true, is that the brands that put customer interest at heart (and that includes looking after our planet), know who they are and what they stand for, and then deliver their brands in a consistently original way, will always stand out more than those that follow the crowd.
