3 Obstacles All Digital-First Brands Encounter During Their First Year (And How To Turn Them Into Opportunities)
Many entrepreneurs think founding a digital-first brand is a shortcut to the top.
And it’s easy to see why. A slew of brands in recent years—from Casper Mattress, to Glossier, to Soylent—have found major success by selling to customers directly via e-commerce as opposed to going through department stores or other established retailers. In fact, my own superfood company, Four Sigmatic, gained traction early on by focusing on our online sales.
And BI Intelligence projects that by 2022, worldwide e-commerce will make up 17% of total retail.
I predict that even sooner, every successful consumer brand will need to be omnichannel. This will result in major carnage on the digital-first front. Once the shine wears off, many of these companies will struggle as the cost-per-acquisition continues to rise and go bankrupt with scale and time.
There are unique challenges that come with having a digital-first company. To make it, you’ll need to find a cost-effective way to drive awareness, interact with your customers in person, and set realistic expectations.
When you start a digital-first brand, you may find it’s not the entrepreneurial playground you hoped it would be, and it’s far from an easy road. Here’s how to tackle the most common obstacles head-on:
1. Generate brand awareness—without going broke in the process.
The main appeal of launching a digital-first brand is that there’s basically zero barriers to entry.
But just because you can build a website in a day doesn’t mean you’ll have customers waiting in the wings.
Even if a consumer is looking for exactly what you’re selling, first they’ll be bombarded with competitor sites, products, articles, reviews—you name it. Ultimately, the success of your brand hinges on whether or not you can generate traffic in a credible and cost-efficient way.
Of course, that’s much easier said than done. There are tools you can use to get around it, but they often cost an arm and a leg.
One of the best tried-and-true ways to increase traffic without breaking the bank is to focus on product seeding. That means if you’re selling a physical product, send it to influencers and would-be customers. If you’re a software company, offer free demos. You can also generate valuable press by offering a first look at your products.
Direct referrals are another key way to get your product out there. So once you find a customer, make sure they’re happy. This means investing in customer service and education. Make sure you listen to and address their pain points and offer resources about your product or service when you can. Word of mouth doesn’t need to come just from “influencers.”
Finally, there’s nothing wrong with some good, old-fashioned conversation. Email consumers directly and ask how they found you and what they think of your product. Once you’ve established a dialogue, encourage them to pass the word on to their friends, and ask for testimonials.
These methods might not be the sexiest, but don’t fall into the trap of thinking you’re above them. I personally drafted every single customer email for several years, and I now have loyal, lifelong customers to show for it.
2. Don’t set unrealistic expectations for success.
If you’re looking to make a quick buck, starting a company is just about the worst way to do it. Building a stable company takes time, whether it’s digital-first or traditional retail.
And while certain aspects of building a company—like scaling—are faster online, other aspects—like hiring, HR, operations, and inventory—don’t come with any convenient shortcuts.
Digital cost margins can also be deceiving. Say a product costs you $3 to make, retails for $5 wholesale, and sells for $10 dollars on your website. If you sell it online, in theory, you’d make $7, whereas if you sell it at Target, you’d only make $2. It doesn’t take a math whiz to see which makes you more money—or does it?
It may seem like selling online is the obvious choice, but there are many other factors that you might not be accounting for, like the cost of building the platform, customer service, and online fulfillment. Shipping even small quantities at a time can cost a lot of money, whereas with wholesale, the cost per unit of shipping is much cheaper.
In other words, you may think you have a sustainable model, but then the cost structure catches you by surprise and you have to continue to raise money.
Before you dive headfirst into the digital-first world, know what you’re getting into. It can be the difference between sinking or swimming.
3. Find the right in-person channels to connect with your customers.
We didn’t open our own brick-and-mortar store until five years into the business.
Now, at that point, we weren’t only selling online—we had already sold our superfood products to major retailers like Whole Foods. But we wanted to build a community and allow people to interact with our products in person on our terms. And the timing felt right. We had enough traction and money to afford a store in the heart of Venice Beach, California, where we’re headquartered. Thus, the Shroom Room was born.
A physical storefront isn’t necessary for all businesses, but you do need some sort of in-person strategy for customers to interact with you and your product.
You can shell out a lot of cash on a mattress or glasses online, but you’ll feel much better about your purchase if you have the opportunity to lay on the mattress or try on the glasses first. When you interact with a product in person, it’s a more memorable and emotional experience.
Every consumer brand today will eventually become an omnichannel brand anyway, so you have to find ways to connect with your customers—whether it’s at events, pop-ups, trunk shows, or conferences. In the past few years, we’ve seen a number of digital-first brands experiment with in-person experiences. For example, Amazon opened its first actual bookstore in 2016. Online brands Warby Parker, Bonobos, Birchbox, Glossier, and Casper have opened brick-and-mortar stores as well.
Obviously, online shopping isn’t going anywhere, but to be successful, you have to know how to navigate that world. And at the end of the day, the same principles that apply to selling products in person work online: Authenticity. Operational excellence. Fiscal discipline. Empathy.
When you care for your customers and provide quality products and services at a fair price, business will come to you—wherever you are.