_(Today, we’re starting with a bit of a detour. I promise we’re still going to talk about commerce eventually. I just need to set the scene before getting there.)_

In my freelancing days, the best Engagement Manager I’ve ever worked with was called Dave.

Chronically unkempt hair, colorful bandanas, and the tiniest backpack humanity has ever designed always over his right shoulder, Dave was the kind of guy you wanted in your corner on a messy engagement. Together, we’ve worked on what remains the most incredible project turnaround of my career, which eventually led to me being poached by our client as their CTO.

Despite having the authority to do so, Dave didn’t micromanage, didn’t push for deadlines, and didn’t point fingers—no matter how stressful things got.

**Instead, Dave always had our backs.** He did this in very conventional ways—by supporting us during difficult client conversations, advocating for our team to get the best designers and developers, and making sure projects were well-scoped—but also in very unconventional ways.

Dave will remain known for things such as:

*   Buying lifetime Calm subscriptions for everyone on his team and asking them to meditate daily in the weeks leading up to a stressful launch.
*   Making sure everyone stayed hydrated and didn’t get too drunk during a client party at now-defunct [Electric Pickle](%EF%BF%BC).
*   Allowing me to take a much-needed shower and have breakfast at his place in Hollywood, FL at 5am before a big demo.

I was not surprised when Dave went on to do [amazing things.](https://www.forbes.com/profile/dave-fontenot/) He was good, and cool, and completely crazy, and we all loved him.

**Most importantly, Dave had an unwavering ability to _hold the space._** By that, I mean he could systematically identify and create the conditions for people to be their best selves, which in turn allowed them to do their best work. It felt good. It felt empowering. And it led people to accomplish the impossible.

And this is where Dave’s story and the story of commerce converge.

---

In 2021, $5B of VC money flowed into DTC. In 2023, [that figure fell to $130M](https://news.crunchbase.com/fintech-ecommerce/direct-to-consumer-vc-funding-falls-2023/)—a 97% decrease. When oxygen is sucked out of a room in such dramatic fashion, those left standing experience increased pressure to deliver results, and to do so more quickly and with fewer resources than they were ever prepared for.

**As external pressure increases, a company’s ability to hold the space decreases.** At a strategic level, that means there’s less room for intentional decision-making, investments with a longer time horizon, or experiments that eschew existing best practices. At a tactical level, it often means increased expectations, longer hours, and shorter tempers.

Service and technology vendors understand this dance very well, and they all line up to reposition themselves as the partner that unlocks quick impact and unparalleled efficiency. A shrinking market consolidates power in the hands of a select few. A shrinking market also generates rigid blueprints: you either play by our rules or don’t play at all.

**However, blueprints are always the lowest common denominator of an industry.** They’re not recipes for innovation—which, by definition, do not exist—and they often gloss over the complexities of the real world—which, it turns out, cannot simply be willed out of existence.

I recently wrote [a LinkedIn post](https://www.linkedin.com/posts/alessandro-desantis_shopify-shopify-enterprise-activity-7185622708963917825-bhCq?utm_source=share&utm_medium=member_desktop) about failed Shopify replatforms that exemplifies this concept well. Right now, it is common knowledge in e-commerce that Shopify is THE platform to be on. At a time when everyone is trying to do more with less, Shopify’s promise is that it allows brands to cut costs while also offering the best partner ecosystem and highest-performing shopping experience in the industry. What’s not to love?

**Unfortunately, while the underlying proposition is solid, many brands shoot themselves in their big corporate foot by attempting to artificially accelerate adoption.** Their burning desire for something better leads to a quasi-religious suspension of disbelief, which manifests in unrealistic expectations, hasty planning, and subpar execution.

In the short term, this trend hurts the brands that see their replatforms turn from beautiful fairytales into unspeakable nightmares. In the long term, it may also hurt Shopify: once we realize that there’s no such thing as a free lunch, I wouldn’t be surprised if we started looking for the next witch to burn.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/b9989d4e-6ad4-5922-5dfd-b66e0365d9a4.png)

I appreciate that this might all sound a bit reactionary, so let me be clear: Shopify is an amazing piece of technology, and [we’re proud and happy partners.](https://nebulab.com/services/shopify-development) In fact, we’re involved in at least three large-scale Shopify replatforms at the moment that we think will have a dramatically positive impact on the brands that commissioned them.

But like all technology, Shopify is not magical. It has strengths and weaknesses, it affords freedoms and creates limitations, it simplifies certain aspects and complicates others. If most small brands can afford to ignore the downsides, that’s not the case for larger merchants. **The more you have to lose, the more you need to hold the space**—not just when it comes to technology, but across all areas of the business.

As for what “holding the space” looks like in practice, I’ll be honest: it’s easier said than done. It’s highly dependent on your financial posture, corporate governance, and board composition. There’s only so much you can do to hold the space when doing a certain thing by a certain date will determine whether you get your next round of funding.

With that said, there is some space-holding advice that I think can be applied even under intense stress and scrutiny:

*   **Beware of blanket recommendations.** When someone says you HAVE to do X, you should be skeptical by default. Why is X important _for you_? What are the upsides? What are the downsides? (Corollary: Don’t do something just because it has worked for you at previous companies or in previous situations.)
*   **Don’t be afraid to sound stupid.** Sometimes, executives don’t want to question basic assumptions for fear of sounding incompetent, ignorant, or out of touch with the zeitgeist. As it turns out, “the zeigeist” is often the collective artifact of a bunch of people with your exact same fears and aspirations.
*   **Hire good leaders.** Good leaders act as buffers: when pressure is high, they hold the space _just long enough_ for the company to still make the right decision. (Lately, I’ve started to think this is also what makes good agencies so valuable: by being removed from the daily grind, they have the luxury of pushing back on bad choices.)

To some, this might all sound very touchy-feely and disconnected from the harsh reality of doing business. However, I’ve been at this for some time now and I’ve seen tens of companies go through their journey—some were wildly successful, others not as much.

The ones that made it had one thing in common: **during stressful times, they did everything they could to continue to hold the space**, stay intentional, and allow people to bring their best selves to work.

And if nothing else, it might help to know that I still use Dave’s Calm subscription every day.

A story of DTC, venture funding and Electric Pickle concerts.

Holding the space

I am sending this to you on the fifth day of a hayfever case that's not serious enough to keep me in bed, and yet serious enough to annoy me beyond measure. In any case, it _did_ put me in a very reflective mood. So much so, in fact, that the _thought_ I want to dissect today is more of a meta-analysis than a thing in and of itself.

**From where I'm standing, it seems like a handful of isolated trends are all slowly but inevitably leading our industry to the same conclusion, which is a collapse of the commerce experience as we know it today.** It will not happen for everyone, and it will not happen for everyone at the same time, but I still believe it _will_ become a reality for most brands.

In particular, I think there are three major trends driving this transition.

---

**The first trend is the evolution of the consumer's role,** which I covered not too long ago in this very newsletter (see thought no. 23, [The curation opportunity](https://nebulab.com/newsletter/the-curation-opportunity)). Rather than passively experiencing a brand, the modern consumer is constantly remixing and imprinting themselves onto the brands they love. This can happen organically on TikTok (or not-so-organically on TikTok Shop), via a dedicated platform such as [Sourcerie](https://sourcerie.co/), or through a brand-provided channel such as [KIKI's co-creation campaigns.](https://nebulab.com/newsletter/the-web3-rightshifting)

Our friends at Future Commerce have been talking about the Multiplayer Brand for a while now (if you don't have the zine, [buy the zine](https://visions.futurecommerce.com/product/the-multiplayer-brand)), and that's exactly what this is: brands are turning into artifacts of our collective sensitivity, which also means that they are much more pervasive in our lives than they used to be—something that can only accelerate.

Speaking of pervasiveness, **the second trend is the convergence of media and commerce.** Again, this is nothing new: 2PM has theorized Linear Commerce [back in 2019.](https://2pml.com/2019/04/22/on-linear-commerce/) I have also written about it in thought no. 15, [Media x commerce](https://nebulab.com/newsletter/media-x-commerce), where I used Liquid Death as an example of a brand that's really blurred the lines: is it a CPG brand leaning into media for brand marketing, or is it a media company that monetizes its content by selling things?

Of course, Liquid Death is just one case, but in the last three months alone we've seen abundant proof that consumer brands are more interested than ever in media—and the other way around:

*   [Walmart produced a shoppable romcom](https://www.youtube.com/playlist?list=PLy0qPy6uqD2HhlwbyhDeYhK35pGT3qZiS) just in time for the holidays. Pinterest has done the same, launching [Deliciously Entertaining](https://variety.com/2024/digital/news/pinterest-tastemade-show-lance-bass-trixie-mattel-joy-cho-1235911061/).
*   [Walmart (again) acquired TV manufacturer VIZIO](https://corporate.walmart.com/news/2024/02/20/walmart-agrees-to-acquire-vizio-holding-corp-to-facilitate-accelerated-growth-of-walmart-connect-through-vizio-s-smartcast-operating-system), which will likely become a part of Walmart's growing retail media network business.
*   [Complex was bought by NTWRK](https://www.buzzfeed.com/buzzfeedpress/buzzfeed-inc-announces-sale-of-complex-to-ntwrk-in-all-cash), which _then_ [folded into Complex.](https://www.axios.com/2024/03/05/ntwrk-folds-into-complex-original-execs-return) The company will produce content, commerce, and experiences.
*   [LVMH launched 22 Montaigne Entertainment](https://deadline.com/2024/02/lvmh-enters-hollywood-22-montaigne-entertainment-superconnector-studios-launch-movies-tv-documentary-produce-co-finance-luxury-brands-1235831690/), which will _help_ the media industry produce content about LVMH's _maisons._

**Finally, the third trend is the emergence of spatial computing.** At $3,499, the Apple Vision Pro is, unfortunately, well above my threshold for discretionary purchases, which means I haven't had a chance to try it yet. That said, I do think commerce operators who scoff at the idea of consumers shopping through a Vision-Pro-powered Safari tab are missing the point.

The eventual beauty of spatial computing does not lie in giving consumers a new way to interact with your existing channels; it lies in creating a completely new channel altogether.

Imagine a future where you're walking down the street with your Vision Pro (which will hopefully not look as ridiculous anymore), you see a pair of shoes that you like in a shop window (or on someone's feet!), and you purchase them right there, right then—no browsers, no apps, no store associates. If this is a crazy proposition now, I have a feeling it will become a much closer reality over the next five years, especially as Apple continues to invest in its AI capabilities.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/78b406c5-ae3b-abdb-380b-1cc96d4eebe3.jpg)

So where does this leave us? On the surface, brands are just leveraging new technologies and experimenting with new marketing channels, as they've always done—and I'd say that's an absolutely valid interpretation. But when you look more closely, and if you're willing to suspend disbelief for a second, there's an argument that these trends will bring about two fairly seismic shifts.

**First of all, I expect commerce to turn from something a brand _is_ to something a brand _does._** Rather than building its identity and organizational structure around selling things, the brand of the future will be at the center of a much richer and more sophisticated universe—one where the physical product is just one of many touchpoints, and might not necessarily be the best way to monetize the brand's IP.

**At the same time, I expect commerce to be everywhere.** We are already seeing brands that are born and scaled on TikTok. In the future, many more transactions to be completed at the point of customer acquisition, whether that's social media, a shoppable TV show, or a physical shop window augmented by AR. For someone like me, who believes that commerce is a form of art, this is the ultimate fourth wall break.

**These shifts, in turn, will have consequences both on technology vendors and service providers:** for the former, the prominence of digital commerce might finally give birth to a unified commerce protocol (something I discussed in thought no. 24, [Apology of the regulator](https://nebulab.com/newsletter/apology-of-the-regulator)); for the latter, a more nimble, more responsive structure will be needed that can adapt to the different places, times, and structures of the new commerce opportunity (thought no. 25, [Agency, deconstruct thyself](https://nebulab.com/newsletter/agency-deconstruct-thyself)).

And yet, as excited as I am to see this unfold, I can't help but think we're losing something in this transition. Labels are how we make sense of the world. **Are we embellished or impoverished in a world where consumers are curators, media is commerce, and physical is digital?**

If you don't have an answer yet, I wouldn't worry too much—give or take, I'd say you still have a decade to figure it out

In the future, commerce does not exist. Also in the future, commerce is everywhere.

The collapse of commerce

[The last time I wrote about retail x Web3](https://nebulab.com/newsletter/intangible-retail) in this newsletter was almost a year ago. Back then, my thesis was that there are only two types of retail brands that can successfully build in Web3:

*   The behemoths that lean into Web3 to sustain the legacy consumer’s attention and, in doing so, bring new audiences to the ecosystem.
*   The challengers that live and breathe Web3. For these brands, Web3 is not an “activation,” but a core piece of their CX and acquisition strategy.

Anyone who sits in the middle either does not have the gravitational pull to attract a meaningful audience to their Web3 experience or is not sophisticated enough to leverage Web3 in a way that feels authentic to its native population.

As often happens with theories, this, too, is an oversimplification—exceptions can and do exist.

In the spirit of keeping myself accountable, today’s newsletter is dedicated entirely to one such exception—[KIKI World](https://kikiworld.io/). Launched last year, KIKI caught my attention for two reasons.

First of all, they have an incredibly thoughtful way of integrating elements of the Web3 cultural and technological landscape into what’s otherwise a very Web2 experience. I (and many others) define these outlier brands as Web2.5.

Secondly, they lean heavily into consumer co-creation, a topic I touched upon briefly in [The curation opportunity](https://nebulab.com/newsletter/the-curation-opportunity). Back then, I was covering [Sourcerie](https://sourcerie.co/) and the way they used consumer reviews to power personalization at scale across tens of different retail brands. KIKI is a similar concept but applied to product development, which makes it even more appealing.

I believe brands like KIKI are doing God’s work when it comes to making Web3 available to the general population, and I’m very excited today to have Brendon Garner, Co-Founder and Chief Product Officer at KIKI, to tell you about KIKI’s story, their vision for the future of retail and Web3, and how they will enable other brands to build experiences in this space.

---

**Brendon, why don't you start by telling us a bit about the birth of KIKI World and your journey so far?**

Sure! KIKI World was cofounded by three people—Jana Bobosikova, Ricky Chan, and myself—all coming from different backgrounds: I come from enterprise e-commerce, then went into startups, and finally into strategic consulting, Ricky worked on the creative side for a number of really well-known brands, from Violet Gray to consulting for the likes of Google, and Jana has worked in product innovation in the beauty space for over a decade.

We started exploring ideas, and we came to the realization that if we were going to start a brand today, we’d want to do it in a completely different way than how brands have traditionally been germinated: rather than adopting a traditional top-down model, where you do prototyping, market research, build a product, and hope that influencers and customers will do free marketing for you, we wanted to to go community-first. For us, that meant finding a niche of like-minded people and asking, “Okay, what do you actually want? Please let us know, and we’ll reward you for your contributions and make you part of our journey.” We basically wanted to turn our customers into creators.

So we spent the next year just figuring out how to actually make that happen. It took us until May 2023 to release our identity to the public and launch our first product, [Pretty Nail Graffiti™](https://www.kiki.world/products/pretty-nail-graffiti-pearl-by-you). This first launch was a traditionally prototyped product because we wanted to have something to show with the brand launch, but then just about two months later, we had our first co-created product.

**What does that co-creation process look like exactly, and how do you reward those who participate in it?**

We have this concept of “campaigns,” where we enlist the help of our consumers to create a product together.

Most of them are vote campaigns, where members can vote from a set of options we give them. When you vote, you get rewarded with loyalty points that can be redeemed for discounts, but you also get collectibles that represent your campaign action. For example, anybody who voted for Pearl, the eventual winner of our first campaign, received a collectible. That was basically an NFT tied to a specific Shopify discount script, so if you held that NFT, you could actually redeem it for a discount on our site.

Since that first launch in 2023, we’ve had over 25 of these campaigns, and we’ve grown our membership base to more than 10,000 people.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/24c2f1fa-d129-62a4-6d08-b7957502190c.jpg)

**That’s quite the traction! Can you walk us through the decision to lean into Web3 and NFTs to facilitate this model and how that played out for you?**

I’ve been involved in Web3 on the consumer side since 2016, so I was quite fluent in terms of the mechanics, the trends, and the way the space was evolving. Ricky had also done some work with a couple of Web3 teams from a brand and strategy perspective, and Jana was just beginning to get into it. So it was our first Web3 project we built from scratch together, but we all had varying degrees of experience already.

To be honest, we really struggled early on to figure out which path to go down and decide if we should talk to the beauty community or the Web3 community. Web3 communities are very insular in that if you’re passionate about Web3, you are, and if you’re not, you’re not—there’s a very hard divide between the two. It was challenging at first, but we ended up adopting a strategy where we leveraged the channels that were most applicable to each space.

Since our launch, I would say the lines have blended more and more, but when it comes to how we talk about the brand, there’s still bifurcation in terms of the channels, the language we use, and what aspects we focus on.

When you talk to the beauty audience, there are natural channels that you speak to from a social media and digital marketing perspective, and we use those channels to talk about the KIKI business model and the benefits it has for the consumer, abstracting away a lot of the technical complexity.

But then we also dialed in on channels like Twitter, where the Web3 community is much more active and where we had already built a lot of connections. When we speak to that more technical audience, we can definitely talk a bit more about what’s going under the hood and the kind of impact it has. What we’ve experienced is that the Web3 community has a desire to be seen as more approachable and applicable to a wider audience, so we’ve been seeing a lot of success with that messaging.

The one challenge there is that Web3 is still a new and evolving space: the peaks and valleys are very real, and so is the general perception of it, and so we do our best to focus on the value we’re creating.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/d74e247e-ea0b-42c3-1736-ffa935abb074.jpg)

**What brands do you think have done a great job of integrating Web3 and retail, and what did they get right?**

I would say there are two types of brands operating in Web3 right now: on one hand, you have brands leaning into Web3 for individual activations. [Ralph Lauren recently did a collab](https://ralphlauren.poolsuite.net/) with a Web3 membership community called Poolsuite, for instance—if you had a Poolsuite NFT, you had access to exclusive merchandise at this Ralph Lauren event in Miami. You also have Kith, which produced [a collection for Invisible Friends](https://kith.com/collections/kith-for-invisible-friends-collection). [NARS](https://nftnow.com/news/nars-cosmetics-superrare-orgasm-nft-collection/) and [e.l.f.](https://medium.com/@steph3.eth/e-l-f-cosmetics-is-preparing-to-venture-deeper-into-web3-351f53cd11cd) have also worked on some interesting activations over the years.

On the other hand, you have brands that are leaning much more heavily into the space through permanent initiatives. As an example, [Louis Vuitton has VIA](https://eu.louisvuitton.com/eng-e1/faq/products/digital-collectibles-int), an on-chain membership program that allows members to unlock exclusive perks through digital collectibles. [Jeff Staple has the STAPLEVERSE](https://www.stapleverse.xyz/), which focuses much more on community and product co-creation.

There's a lot of building going on right now, but there's also a lot of, okay, what's the right path to actually make this a part of our core offering?

In that sense, I think Starbucks did a great job with their [rewards program.](https://odyssey.starbucks.com/) They’ve had challenges, but they have managed to really abstract away the complexity of Web3 and provide value in a way that’s familiar to their audience: you do something, you earn something. They didn't overcomplicate the process, and it doesn't require you to be technically sophisticated.

In general, for retail brands trying to integrate anything that's blockchain-related, I think the goal is still to make it feel like a very familiar experience to your customers, make it something that you can commit to executing, and show results over time. You don't have to do everything at once, and I think that's probably why some of the earlier Web3 programs had challenges: they were just trying to do too much.

Hopefully, we can help these brands with some of the tools we'll be announcing later this year.

**Tell us about that! What can we expect from KIKI this year?**

There’s a heavy investment in infrastructure right now. Obviously, the physical product is very important to us, not only because of the value it creates for the consumer, but also because of the experience we’re accumulating and the opportunity to bring that experience to other brands and other creators.

So if you go to our website today, we just launched a co-created product called Chipped. We’ll be doing more campaigns with other creators to create customized versions of their products just for our audience, but we’re also taking a lot of the tools we’ve developed for our own KIKI brand, plus some new ones we’re creating, and turning them into software that can be leveraged by other parties to engage with their audience and reward them in new ways.

The other thing we're working on is community. Right now, everything is pretty much abstracted away, but we'd like to offer KIKI members the ability to interact with each other and engage more, so stay tuned!

An interview with Brendon Garner, Co-Founder and Chief Product Officer at KIKI World.

The Web3 rightshifting

Those among you who’ve been following this newsletter for a while know it’s more of a brainstorming exercise than a “grownup” marketing initiative. I often use these emails to chip away at rough concepts until they start to make sense—or until they fade away in the endless void of things that sound very exciting in my head but utterly idiotic when I spell them out loud.

So, when Phillip at Future Commerce told me he wanted to [talk about cultural brands](https://www.futurecommerce.com/posts/nebulab-guide-the-cultural-footprint-of-brands-from-ingredients-to-icons), something in my head went _‘click.’_ Inspired by Liquid Death’s shenanigans, I had written about the concept before—and used very similar vocabulary to how Phillip ultimately approached the guide (see issue #15, [Media x commerce](https://nebulab.com/newsletter/media-x-commerce), and issue #20, [Rise of the cultural brand](https://nebulab.com/newsletter/rise-of-the-cultural-brand)).

In [The Cultural Footprint of Brands](https://www.futurecommerce.com/posts/nebulab-guide-the-cultural-footprint-of-brands-from-ingredients-to-icons) (if you missed it, now’s your chance to catch up!), Phillip further elaborated on some of these thoughts, establishing a more detailed taxonomy and offering some real-world case studies that validated my early thinking.

But like all good pieces, the guide also gave rise to a bunch of new questions, most of which I'm still thinking about. **One question is, what does it look like to lean too heavily into one of the four brand archetypes it identifies? What are the consequences of doing that, and how quickly do they materialize?**

Frankly, I don’t know if I have the perfect answer yet. But in the spirit of this newsletter, let’s try to answer that together—shall we?

First, let’s recap and expand on Future Commerce’s original piece.

The guide outlines four types of brands: Ingredient, Modernist, Generational, and Cultural. You can refer to the guide for their definitions. Below, I’m including some notes on how _I_ have been thinking about them:

*   **_Ingredient_ brands lean into _product_**: they build and sell the best possible thing and care little about anything else. That’s why they are invisible to the consumer, even though they are often essential. See: [Gore-Tex](https://www.gore-tex.com/it).
*   **_Modernist_ brands lean into _distribution_:** they find and exploit the best arbitrage opportunities. They don’t make money by making things but rather by _moving things._ See: most “pure-play” DTC brands.
*   **_Generational_ brands lean into _relevance_:** they capture and build their universe (product, communication, culture) around the _zeitgeist_. They are hip, cool, hot, “of the moment,” however you want to call them. See: [Estrid](https://estrid.com/).
*   **_Cultural_ brands lean into _purpose_:** they are not just influenced by the culture—they _are_ the culture. They have large legacies to capitalize on, and yet they are constantly shifting and evolving with the times. They exist as a function of themselves. See: Nike (no link needed, I hope?).

Now, these are all powerful levers, but they must be balanced exceptionally well. Bad things happen when only one of them is executed, or when brands take them to an extreme and build their whole identity around them.

In fact, each lever corresponds to a very particular type of dysfunction, one that throws brands off balance and makes them much more vulnerable to external threats—or, in the worst-case scenario, completely negates their competitive advantage. Let’s take a look at each of them.

---

**First of all, you can over-index on _product._** This is the “build a great product, and customers will come” strategy. It’s most often seen in tech startups, because technical founders would rather create things than sell them, but it’s not unheard of in the realm of retail and consumer brands.

[AeroPress](https://aeropress.com/), born from the genius of serial inventor Alan Adler, is one such example: before being [acquired by Tiny](https://aeropress.com/pages/aeropress-and-tiny), the brand mostly relied on word-of-mouth. Tiny infused AeroPress (pun possibly intended) with a much-needed dose of thoughtfulness around marketing and distribution.

The danger in over-indexing on product is, hopefully, pretty obvious: despite what founders like to think, very few brands today can gain any meaningful traction through product quality alone. The reason is that most modern brands are just a fresh spin on an existing concept. It takes a significant marketing push to get consumers to discover, understand, and buy into the brand’s narrative and value proposition.

**Secondly, you can over-index on _distribution._** If you’ve been in the DTC space for a while, you’ll be familiar with [Casper’s debacle](https://www.notion.so/Thought-26-Maslow-and-Brand-Dysfunctions-4e8a70ac9f5548e8a496f93ea9083d7c?pvs=21). Once one of the hottest startups in the space, Casper became a shell of itself once the industry realized that they were selling the same mattresses as everyone else, just with a much more profitable distribution model (back then, that is).

Unfortunately, this only works as long as your arbitrage game keeps you afloat. Once it goes away—which it inevitably does as the space gets saturated—you’re left with a pretty website and some less-than-flattering media coverage.

For Casper, as for most DTC brands of the first generation, the arbitrage strategy consisted of SEO-optimized landing pages, a heavy reliance on performance marketing, and free product returns. When BOFU-centric performance marketing became unsustainable, DTC became one of many sales channels, and consumers woke up to the reality of the product’s quality, Casper’s competitive advantage vanished.

**Thirdly, you can over-index on _relevance._** By their very nature, certain brands are born and designed to capture a social, cultural, or political moment. They certainly find strength in their relevance, but at the same time, they could not (and should not) exist out of that context.

If relevance is all you have, chances are you’re building a brand that will crumble, or at the very least squeak, under the pressure of time. Similar to what happens with arbitrage opportunities, you will be at the constant mercy of category dynamics and consumer taste.

Victoria’s Secret might be a prime case study here. Their pivot from sexiness to inclusivity was a [spectacular failure](https://www.independent.co.uk/life-style/fashion/victorias-secret-lingerie-sexy-image-b2432374.html)—one that alienated their established customers without doing anything to redefine the brand’s image. Ultimately, it resulted in a swift and embarrassing 180°.

**Finally, you can over-index on _purpose._** There’s a fine line between standing for something and being out of touch with the laws of the Consumerverse, and every once in a while, a brand will fall on the wrong side of it.

Sometimes, this is the result of various _washings_ gone wrong (see the previous point for an example). More often, though, these are genuine yet exaggerated attempts at infusing a consumer brand with a greater mission. This is how the purpose of Hellmann’s Mayonnaise became “fighting food waste,” or how Danone deprioritized growth for sustainability. Both strategies led to the ousting of the brands’ respective CEOs.

Purpose (which does not need to be related to ESG matters, necessarily) provides brands with a North Star, helps them stay relevant as the surrounding context evolves, and creates a long-lasting legacy. But for purpose to work, it needs to be activated in a way that resonates with the consumer—it can’t just be _willed_ into existence.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/1d687c25-f584-7ae6-6a6f-aa704c9f5fd6.jpg)

To recap: to build a successful, long-lasting consumer brand, founders and executives need to work on all four levers—product, distribution, relevance, and purpose—and in this exact order, with few exceptions.

That’s why I’m referring to this as Maslow’s hierarchy of brand needs: just like self-fulfillment means very little if you’re not putting food on the table, the noblest brand purpose in the world is useless if it’s not relevant for the consumer, or if it’s not sustained by a thoughtful distribution strategy, or if the brand's products are crap.

Orchestrating this dance requires an immense amount of attention, and it should be the CEO’s #1 priority at any respectable consumer company.

In the short term, a misstep translates into a loss of brand equity and shareholder interest.

In the long term, it may very well mean oblivion.

Maslow and brands

I’m not usually one for predictions, but here’s something I’m bullish on: **over the next four to five years, the e-commerce agency blueprint as we know it today will become obsolete,** at least for the majority of small-to-midsized brands—let’s say anyone doing less than $150M/year.

It’s a trend started by Shopify, with the core platform evolutions and the app ecosystem, and was further accelerated by generative AI. It will only get faster in the coming years as Shopify products like the Theme Editor become even more powerful, and AI models become better at accomplishing their goals.

In a little over a decade, we went from brands having to spend hundreds of thousands on custom technology to those same brands making eight figures with a free Shopify theme, Meta Advantage+ campaigns, and a few scrappy operators. I don’t see any reason why this trend would stop: **as the cost of building foundational e-commerce experiences goes down, brands will internalize many of the responsibilities that they used to outsource.**

Given we run one of the agencies this model is supposedly primed to disrupt, we’ve been thinking a lot about this shift and whether there’s anything we can do to prepare, or if we should all start hoarding those Scrum Master certifications on LinkedIn.

My thesis—_our thesis,_ I should say—is that many agencies will go away in the not-too-distant future, not because there won’t be a place for agencies anymore, but because **the place of agencies in a brand’s value chain will change, and most agencies will be unable to transform themselves and meaningfully engage with their clients under the new _regime_.**

Today, we’ll talk about what we believe that transformation will look like and how brands and agencies can get there together.

---

First, we must look at why most brands work with an e-commerce agency today: because they _need_ them.

As self-service as Shopify and other e-commerce platforms might be, there are still a number of things you cannot do without a designer or a developer. As a result, most brands will choose to outsource technology, which in turn means that **most brand-agency relationships are rooted in frustration:** I want to make a thing, but I can’t do it myself (yet), so now I have to put up with these people who can make the thing I want to make.

The agencies know this perfectly well and have structured themselves to be very good at thing-making and very bad at… everything else. Give them a list of requirements, and they’ll implement them to the letter; ask them to challenge the requirements, and they’ll throw their hands up: that’s _your_ job, not theirs.

Here's a story we hear often when we start working with a brand that had a previous agency: they’re not proactive, they miss deadlines, or the quality is too low. Talk to the agency, and they will tell you that the priorities are unclear, the requirements change every day, or the expectations are unreasonable.

These are all symptoms of the underlying problem: **there's a fundamental disconnect between the people _wanting_ the work and the people _doing_ the work.** The brand wants to create something but does not have the means of creation; the agency has the means of creation but is not part of the broader context in which the act of creation takes place.

The typical response is for the agency and the brand to establish even _more_ processes to try and bring things back under control. As it turns out, no amount of process can single-handedly tame the complexity of a business or the humans working on it—process hits the point of diminishing returns much earlier than most industry practitioners like to admit.

So, with that depressing introduction out of the way, is there a better way to work together?

In our experience, yes, but only if both parties are willing to radically rethink their relationship. **Brands and agencies need to move from co-dependence to co-creation.**

Co-creation happens when the brand and the agency are both actively involved in defining the work that needs to be done and doing the work. You blur the lines between “wanting the thing” and “making the thing” by giving everyone the context and freedom to do both.

Historically, most agencies have been afraid of co-creation: they fear that their contribution will be diluted, that they will not be able to control the outcomes of the engagement, and that their margins will take a hit. While this might all be true to an extent, it’s a natural shift we can’t stop. The increasing commoditization of e-commerce technology means agencies cannot live under the cover of technical complexity anymore.

It would take an entire newsletter issue to explain what a collaborative relationship looks like, so we won’t do it here. However, Marco recently published [a blog post](https://nebulab.com/blog/ecommerce-agency-productivity) about this exact topic. The bottom line is that, **in a collaborative relationship, it’s hard to distinguish the agency’s employees from the brand’s employees.** If you need to squint, you're doing it right.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/868c753c-449b-e9b9-45ef-a08a997a0867.png)

To be clear, I’m not suggesting that agencies shouldn’t bring any original value to the table, but they do need to redefine what “value” means to them.

**Most e-commerce agencies today are arbitrage businesses:** you buy the best talent your money can afford and re-sell it at a premium. It’s the quintessential monopolistic market: there’s an infinite number of firms, all pretty much indistinguishable from one another and primarily competing on price.

This model works today because brands pay agencies for technical expertise that they do not have internally—the so-called “hard skills.” But in a world where that expertise is made largely irrelevant by the commoditization of e-commerce technology, and brands can satisfy most of their requirements in-house, where’s the value of agencies?

The way forward is to invert the value pyramid. Rather than leading with their technical skills—which will soon be a dime a dozen—agencies will lead with more intangible offerings: content, curation, community, and coaching. These assets are, almost by definition, unique to each agency. **Moving forward, an agency’s value will be measured by how relevant its intangibles are for its industry, clients, and broader network.**

We’ve been experimenting with this at Nebulab for a while now: this very newsletter, for example, is part of the incremental value we generate. In 2024, we plan to do much more, and many of these initiatives will only be accessible to our clients.

We envision a future where every billable hour, every client interaction, and every completed engagement creates an evergreen secondary output, which will define Nebulab’s value proposition much more strongly than our mere design and development skills. The jury’s still out on whether we will get there, but we’re giving it our best shot.

**In a world where brands don’t _need_ an agency, the only alternative is for brands to _want_ an agency because they appreciate the unique ways in which an agency can accelerate—rather than enable—their business goals.**

But to make that happen, agency operators need to shift from co-dependency to co-creation, start building their intangibles, and position themselves as an ongoing business partner rather than a turnkey delivery solution.

The time has come for e-commerce agencies to deconstruct themselves—and as painful as that process might be, it is necessary, because the alternative might well be irrelevance.

How can e-commerce agencies stay relevant in the next decade?

Agency, deconstruct thyself

Three things that I love, in no particular order: countries that are both very cold and very sunny, Donald Duck impressions ([especially if there’s a puppet involved](https://www.instagram.com/ssanpitopato/)), and e-commerce regulation.

But since this is not a travel newsletter, and it’s most definitely not a Donald Duck newsletter (let me know if one exists), today we’re talking about e-commerce regulation. More specifically, **we’re talking about the hidden opportunities that are sometimes created through regulatory initiatives.**

We’ll start with a personal story.

When the GDPR was initially passed in 2016, I was not at Nebulab yet. Instead, I worked as a fractional CTO, and some of my clients were based in Europe. I remember the sheer disgust on their faces as I explained to them the technical, operational, and financial implications of this new law that no one really understood. Back then, we all felt like no consumer in their right mind would spend their time writing angry emails asking you to delete their data.

Fast forward a few years, and people will now eat you alive if they get a whiff that you’re doing something even remotely sketchy with their personal information. As a result, (most) companies treat data security and portability as must-haves, not something to add when you need to pass an audit.

In retrospect, there were a few elements that contributed to the success of the GDPR (besides the hefty fines for non-compliance):

*   **It rode an existing cultural shift.** The GDPR wasn’t born in a vacuum. It resulted from increasing consumer pressure to have more visibility and ownership over their data. It gave dignity to the idea that a person’s information is theirs to manage, however and whenever they want.
*   **It was detailed enough to become a standard.** The GDPR outlines a clear set of rights, standards, and timelines that companies must respect when dealing with consumer data. The fine framework is also straightforward, making it easy to enforce the regulation and run a cost-benefit analysis on (non-)compliance.
*   **It was flexible enough to accommodate reality.** Despite that, the GDPR is still generic enough to play nice with a wide range of scenarios and use cases. While GDPR compliance doesn’t come for free, it’s a regulatory framework created for real businesses working with real consumers, with all its nuances and edge cases.

However, there’s one thing that the GPDR _didn’t_ have but that would have made it absolutely perfect. It’s the one element that transforms compliance from something you _have_ to do into something you _want_ to do.

**It’s the ability to create economic opportunity.**

---

India might be the most successful country in the world in creating economic opportunity through regulation. They first did it with the [Unified Payments Interface](https://www.npci.org.in/what-we-do/upi/product-overview), an open-source protocol for instant money transfers between bank accounts. **UPI has become the de facto standard for domestic electronic payments, handling roughly 15% of India’s GDP.**

Their current project, however, is much more ambitious: the [Open Network for Digital Commerce](https://ondc.org/) is (again) an open-source protocol to power the country’s entire e-commerce infrastructure in a standardized, interoperable, and decentralized way. The ONDC aims to give e-commerce infrastructure operators (carriers, warehouses, brands, platforms, etc.) a single communication protocol, allowing even the smallest players to natively integrate with the entire ONDC network.

**McKinsey estimates that, once it’s fully operational, the ONDC could increase digital consumption in India by $340 _billion_—how’s that for value creation?**

The ONDC reminds me of a concept recently outlined by Filippo Conforti, CEO of Commerce Layer. In a blog post entitled “[The commerce layer](https://commercefordevs.org/the-commerce-layer/)” (duh!), he describes commerce as a latent component of Internet infrastructure, a plane of consumer interaction that merits its own place in the [OSI model](https://en.wikipedia.org/wiki/OSI_model).

I wholeheartedly agree with Filippo, and [I entertained similar thoughts in the past](https://nebulab.com/newsletter/rise-of-the-cultural-brand): **commerce in all its forms is core to the fabric of our society, and it’s screaming for standardization.**

In Europe, we’re finally making some timid steps in that direction. The European Commission [is discussing design and implementation proposals](https://hadea.ec.europa.eu/calls-proposals/digital-product-passport_en) for a Digital Product Passport (DPP). The idea is to require every product manufactured in the EU (or imported into the EU) to embed a data carrier (an NFC chip, a QR code, or a barcode) that provides consumers, manufacturers, and regulators with data about the product’s supply chain, materials, impact, ownership, and anything else that might be useful as the product changes hands.

The DPP ticks all three checkboxes we’d like to see in regulatory initiatives:

*   **It rides an existing cultural shift**—consumers becoming more interested in supply chain transparency and circular economy.
*   **It’s detailed enough to become a standard**—the spirit of the proposal and the regulatory requirements are clearly outlined.
*   **It’s flexible enough to accommodate reality**—DPPs will support different vendors, deployment architectures, and customer experiences.

In the last point also lies the economic value of DPPs: **for virtuous brands, product passports can be an opportunity to turn a tedious compliance burden into a source of consumer delight and first-party data.**

Imagine this: you’re buying a secondhand watch online. Rather than going through a third-party authenticator, you can just inspect the product’s DPP to verify its authenticity, which will also provide you with information about the brand, their supply chain, and their manufacturing practices. Perhaps you can subscribe to their newsletter or follow them on social media.

When you finally buy the watch, ownership of the DPP is automatically transferred to you, which in turn gives the brand valuable data about the resale market for their products. While these interactions are not a native part of the DPP standard, they’re not impossible either, and they are the kind of possibility that would make more brands excited to adopt the standard.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/2386b079-7964-397c-ee61-2bfca67ca67c.png)

At this point, you might be thinking: so what? I can already slap a QR code on a pair of trousers, point it to my website, and call it a day, and it’s going to be much cheaper and easier to do it on my own than to follow the EU’s regulatory requirements.

To which I say: of course you can, and given enough brand equity, you _might_ be able to get a few people to scan it. But for the average brand, there’s no chance whatsoever that a consumer will take the time to go through that process—it’s just not ingrained in their thought pattern.

**Thoughtful regulation is a forcing function for cultural imprinting**, and therein lies its beauty**.** By changing how we see ourselves and the world, it enables unique experiences, creates novel opportunities, and increases the wealth (however you want to define it) of all the actors it touches.

Just like the GDPR ushered in a new era of intentionality and awareness around consumer data rights, and the ONDC allowed small e-commerce infrastructure providers to compete with industry giants, **DPPs have the potential to enrich and augment consumer interactions, creating more depth in our economy.**

But for that to happen, we need to recognize regulatory opportunities and capitalize on them when the time comes. Regulators should take it upon themselves to advertise those opportunities as a first-class feature rather than treating them as an afterthought.

With every useful protocol, with every well-designed regulation, we get one step closer to having an actual, tangible commerce layer, and that's something I, for one, can get behind.

When regulatory requirements become business opportunities.

Apology of the regulator

In systems theory, a balancing feedback loop can be found wherever two mechanisms compensate each other. The classic example is a thermostat: when the temperature in the room drops below or above a certain level, your thermostat kicks in and brings the temperature back to your desired target.

Balancing feedback loops can be found everywhere, and retail is no exception.

Curation is a simple form of balancing loop: as the number of options increases in a given category, a new role emerges—the Curator. **The Curator’s job is to act as a tastemaker, helping the best brands rise to the surface while everyone else falls to the bottom**—at least in theory. They are the not-so-unsung heroes of this economy of overabundance, endless choice, and monopolistic competition.

The first generation of curators were macro-influencers—the [Chiara Ferragni](https://www.instagram.com/chiaraferragni/) and [Huda Kattan](https://www.instagram.com/huda/) of the world, who more often than not ended up launching their own brands. With their glamorous lifestyles, millions of followers, and executive assistants, they were uniquely positioned to capitalize on the arbitrage era of DTC. For brands, this was just another marketing channel. For consumers, a mono-directional consumption opportunity.

Then came the micro-influencers. With a much smaller audience, micro-influencers can afford a more unique, authentic perspective. The net result is that while they have a smaller reach, many have much higher engagement. **It turns out people would rather engage with people than semi-gods.**

Brands quickly caught up to this shift: any respectable influencer marketing practitioner today will tell you not to bother with the behemoths—that is unless you’re a behemoth yourself. Instead, focus on influencers that are… well, _influential_, among your target audience.

What I’d like to theorize today is this: **technology is enabling a new type of curator to slowly but surely enter the scene, one that didn’t even want to be a curator to begin with.**

Here’s another interesting concept from systems theory: no matter how accurately you try to represent a system, your model will always remain just that—a model. It will never be an entirely accurate depiction of reality. For curators, this means that no matter how deeply connected you are to the consumer, you will never be able to account for the diversity in backgrounds, opinions, body shapes, skin conditions, and ESG stances.

But you know who can? **The consumers themselves.**

---

**What if we inverted the pyramid?** What if, rather than a single influencer broadcasting their opinions and recommendations to millions of consumers, a single consumer could tap into the collective brain of millions of others just like them? Combining so many data points would make for a formidable curation experience, one that can be almost perfectly tailored to every individual.

This might seem outlandish, but it’s nothing new: user reviews have been part of every e-commerce experience since the beginning of time. But reviews, especially in the DTC world, present a few challenges:

*   When given the opportunity, **many brands will choose to remove overly critical reviews,** or at least make them very hard to find. This might improve conversion rates but makes for a subpar customer experience.
*   **Most reviews are unstructured,** which makes it hard to find the reviews that are relevant for me and compare multiple brands across standardized criteria.
*   Reviews typically live on a brand’s website—unless I’m buying from a marketplace, in which case they still only live on the PDP. **There’s no way to tap into consumer knowledge as a standalone data source**—it’s always restricted to a very narrow context.

**As a byproduct of the above, reviews can’t be used as a curation engine.** They’re a good way to evaluate a brand or product I’ve already stumbled upon but not a good way to discover that brand or product in the first place.

[Thingtesting](https://thingtesting.com) was the first company that tried to solve this problem, essentially by creating the Yelp of DTC. The problem with Thingtesting is that it only leverages its own dataset, and because the average consumer doesn’t know or care about Thingtesting, the platform turned into a niche discovery experience for DTC-aholics.

What’s more, Thingtesting does a poor job of surfacing meaningful from their reviews. A glance at [Away’s Thingtesting page](https://thingtesting.com/brands/away/reviews) tells me that the brand has 962 reviews—an abysmal amount considering their popularity—most of which are positive. It tells me nothing about what people like about their luggage or which suitcase is best for frequent intercontinental travel. This isn’t curation—it’s glorified data entry.

[Sourcerie](https://sourcerie.co), a recent discovery that we have featured in the [latest issue](https://mailchi.mp/nebulab/the-outsights-2) of The Outsights, is a different beast. When I sign up, I go through an onboarding flow that asks me about my ethnicity, age, gender, and skin conditions. After completing the process, I get a list of products curated specifically for me, along with a handy compatibility percentage for each. I open the top recommendation—a 100% match—and it tells me _why_ it’s been selected and highlights the reviews that are most relevant to me.

**The whole experience feels like I’ve asked Deep Thought\* to be my personal shopping assistant.** I wonder what the average conversion rate is on Sourcerie—you can buy from within the platform—but I suspect it’s nothing to scoff at.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/0438fd1d-535d-933c-2aa6-3540b1febe83.png)

Of course, Sourcerie can afford to be so sophisticated because it’s focused on a specific category—beauty and wellness—and they’ve spent an extraordinary amount of time optimizing the shopping experience for that audience. But it’s not so wild to imagine Sourcerie expanding into other verticals and becoming the ultimate brand and product discovery experience. I also expect other similar platforms to emerge very soon—if they haven’t already.

So what’s the next step in this journey?

**Wherever new interactions are enabled, economic opportunity soon follows.** Platforms like Sourcerie are bound to create immense value. With the brands, Sourcerie is already positioning itself as a source of invaluable consumer intelligence. At some point, some of this value will have to start flowing into the pockets of the consumer-curators—after all, they’re the ones doing the actual heavy lifting.

**Modern attribution technology makes it feasible to draw a line between curator activity and brand performance** (impressions, conversions, you name it) and to split it fairly among all participants in the ecosystem, especially in a closed-loop engine such as Sourcerie. Anonymity would be the added benefit in this scenario—something impossible with influencers today.

**Economic, social, and technical advancements could soon lead to an entirely new layer in the DTC economy**—one that’s made of consumer-curators, the brands they’re discovering and talking about, and tech-enabled platforms that enable that value exchange.

A few years down the road, **there’s a tangible opportunity for consumers to become true co-creators of their universe, pooling their knowledge, experience, and opinions to become the ultimate tastemakers.**

(\*) If you don’t know what Deep Thought is, look it up. Also, I’m sorry for you.

The curation opportunity

If you’ve been following us for a while, you know that we’re not the ones to sing Shopify’s praises when they’re undeserved. In fact, we have been [quite critical](https://mailchi.mp/nebulab/the-playbook-delusion) of Shopify’s strategy in the past—back when that strategy implied the existence of a single, _obviously_ correct way of doing things, and that anyone who ran their business differently didn’t know any better.

Still, after experiencing Shopify’s 45-minute outage this Monday and reading the resulting barrage of snarky LinkedIn posts, we are very conflicted.

There are two sides to this matter that we’d like to explore today:

*   Much of the commentary comes from people who have never operated a complex software system (or have conveniently forgotten about it).
*   The high expectations of Shopify stem from Shopify’s own marketing, but also from their semi-god scale and public perception.

Let’s do this.

---

First of all, for anyone who says Shopify’s engineering team is dumb because how could they get a database migration wrong in 2023 and they should be using more AI in their development process and why were they not already doing a code freeze in the first place and—for all of them, we have four words:

Give  them  a  break. 

Here’s the thing: software is _complex_. Complex, as in “It is _literally_ impossible to enumerate the million small things that need to go perfectly right in exactly the right sequence for this rollercoaster to keep rolling.” As a result, software is also _fallible_: **every piece of software you use is in a constant state of brokenness.** Yes, even Shopify.

The only reason the world’s not on fire yet is that, as technology becomes increasingly important, technologists become increasingly good at containing the surface area of their mistakes. This is done through automated tooling, development workflows, business strategy, and a sane amount of good old common sense.

Some of these practices can seem very counterintuitive to an outsider. For example, code freezes are rarely a good thing: the consensus in modern software development is that the _more_ often you ship software, the _less_ likely you are to break something. That’s because shipping more often requires you to put safeguards in place to eliminate the cost of making a mistake, which makes your software more resilient.

Sometimes, a code freeze is a necessary evil, as the impact of making a mistake is still too high, no matter how much you try to contain it. **But for a technology company, nine times out of ten, the benefits of continuing to ship software far outweigh the dangers of making a mistake.**

In other words, Shopify enacting a code freeze because they’ve screwed up once was an overkill, reactive measure: this was an isolated, one-time incident that was mitigated swiftly, and Shopify’s engineers are putting safeguards in place to ensure it won’t happen again. The only consequence of the code freeze is that merchants will not be able to benefit from any improvements or new features that Shopify was planning to release leading up to BFCM.

Additionally, everyone’s watching Shopify, so we can safely assume that at least some other providers will follow suit in fear of screwing up and being put on public trial. It’s not outlandish to hypothesize that those potential new features and optimizations might have led to millions in incremental revenue for Shopify’s merchant base. That, and not having 45 minutes of downtime, is the real screw-up.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/3ef53c5e-78ee-e5a3-2ab7-7b50c9a7705a.png)

The other interesting question is how we went from having technology-driven e-commerce brands that build their own checkouts and AI models, to having brand founders suggesting that, if only Shopify lifted their ban on group meetings, then these things wouldn’t happen (real LinkedIn post).

We’d love to say that this is all Shopify’s fault since they—along with many service providers—spent a good part of the last 15 years telling e-commerce operators that they don’t need to worry about technology at all, and that their e-commerce infrastructure would be magically taken care of if they only took the Shopify leap of faith. But this delusional overcorrection is something [we have written about in the past](https://mailchi.mp/nebulab/the-playbook-delusion), and it wouldn’t add any value to rehash it now.

Instead, we need to realize that **this kind of scrutiny is what happens when you become part of the economy’s entrepreneurial fabric.** When so many people rely on you to run their business, you should expect a lot of them not to understand much—if anything—about how your product works. For any Shopify detractor in the last two days, there are thousands of supporters who would happily fall on a sword if only it had the Shopify logo on the pommel.

There is one caveat, though, and it has to do with Shopify’s upmarket plans.

Right now, Shopify merchants have pretty limited visibility into the platform’s internals. If you need proof, just put on your Big Company CIO goggles, look at [Shopify’s status page](https://www.shopifystatus.com/), look at [commercetools’ status page](https://status.commercetools.com/) and [Commerce Layer's status page](http://), and see who comes out on top.

If Shopify wants to move into the enterprise segment, it needs to do better and provide context and data that go beyond Shop Pay’s conversion rates—as amazing as they might be. Otherwise, they will have a hard time competing with platforms that rely on and play into their customers’ technical maturity.

And this isn’t limited to their enterprise ambitions: **as it becomes more technical, there’s an opportunity for Shopify to lean into a more balanced narrative and really educate operators on the role of technology**—a crash course in e-commerce tech literacy, if you will. This kind of move might dissipate some of the magic in Shopify’s brand promise, but it would also help reset their average customer’s expectations.

Our hope is that, armed with that new understanding, we won’t spend the days following Shopify’s next outage looking for lambs to sacrifice, but rather for lessons to learn.

The problem with Shopify’s outage is not Shopify’s outage.

Outage outrage

In case you’re not familiar with the term, a superapp is [pretty much what it sounds like](https://www.linkedin.com/pulse/behold-super-app-laurence-dunne/): an app that does it all. The concept of a superapp was theorized a _long_ time ago, when a handful of tech startups started eating the Internet, M&As were abundant, and perhaps we were all more optimistic about the future.

The idea was that a single company would expand into enough categories to cover every facet of consumer demand, or at least a good enough approximation. Imagine a world where Google, Amazon, or Meta run your entire life: from banking to grocery shopping to social media to entrepreneurship, everything you need is one tap away, all in one integrated and irresistibly compelling product.

But because this is an eCommerce newsletter, let’s speculate about what an eCommerce superapp might look like, and who’s best positioned to get there.

---

Let’s start with the basics: when you think about a relationship between any given brand and any given consumer today, it’s always pretty much the same four-phased journey:

1.  **Discovery:** I learn about a brand I didn’t know about before.
2.  **Consideration:** I determine whether I should buy from the brand.
3.  **Purchase:** I buy something from the brand.
4.  **Retention:** I keep engaging with the brand, and hopefully buy more.

(Yes, this is a gross oversimplification. But this newsletter is long enough already, so I’ll let your imagination fill in the blanks.)

What’s more, the relationship is not just between the brand and the consumer anymore. The DTC industry has ushered in a new era of content creators, curators, and influencers—a movement that has been shaping consumer decisions and marketing budgets. _Everyone_ is a curator now.

So how could an eCommerce superapp facilitate the consumer journey while engaging both brands and influencers? Here's an idea:

1.  **Discovery:** The app knows enough about me to act as a discovery engine but also allows me to tap into professional and everyday curators and friends to discover new brands and products.
2.  **Consideration:** A streamlined brand and product model allows the app to facilitate consideration in a way consistent with my values and preferences, and to tap into my network to get their advice and recommendations. There are tons of opportunities here to leverage generative AI in powerful ways.
3.  **Purchase:** The app facilitates a smooth purchase process and suggests cross-sells with other brands I might enjoy (purchase+discovery!). This is almost a commodity nowadays and the piece that would be least challenging to solve.
4.  **Retention:** After the purchase, the app provides both the consumer and the brand with powerful tools to keep engaging with one another. Curators can still play their part here by participating in retention activities, product drop campaigns, etc.

There’s so much more that I’m not talking about here, but you get the idea: a superapp can act as a bridge between different players of the ecosystem, facilitating the exchange of cultural and economic capital and perhaps creating entirely new ways for that exchange to take place. Let's not forget the potential to completely circumvent any marketing attribution issues by keeping all the data in one platform.

It goes without saying that this kind of strategy is, at the same time, incredibly compelling and insanely hard to execute. The potential upside is enormous, but superapps require massive amounts of capital and coordination, not to mention very favorable markets and regulators, and they can fail for a million different reasons in a million different ways.

In fact, when you look at the landscape of eCommerce and marketing technology providers today, they only cover a few phases of this journey:

*   **TikTok** handles discovery and consideration, but the purchase and retention aspects still leave a lot to be desired. Brands are [not ecstatic](https://www.modernretail.co/technology/we-got-thousands-of-new-followers-a-day-but-then-we-started-to-have-issues-brands-report-major-logistics-challenges-with-tiktok-shop/) about TikTok Shop, although it is getting better every day.
*   **Amazon** handles discovery (to an extent) and purchase but still sucks at facilitating consumer consideration and customer retention. They are making a few sluggish attempts— see [Amazon Live](https://www.amazon.com/live/) and [Consult-a-Friend](https://www.notion.so/Thought-21-All-hail-the-superapp-b6d96520bdea4b71aad10d101b760930?pvs=21), but they’re all bolted on top of what’s otherwise widely considered to be a commerce and logistics company, not a social media company.
*   **Shopify** handles purchase and retention but doesn’t bother with discovery and consideration—that is, unless you count their recent experiments with the Shop app (like [Shop Cash](https://techcrunch.com/2023/06/02/shopifys-shop-app-introduces-a-new-shop-cash-rewards-program/) and [Shopify Collective](https://www.businessinsider.com/drake-shopify-collab-virtual-mansion-stocked-with-merch-2023-8)), which are still very much up in the air.

I’m not even listing Meta here since they’re so laser-focused on building the best customer acquisition engine in the industry—and they are pulling it off, so perhaps it’s for the best.

Of the three, I believe TikTok is best positioned to make the jump. It’s far easier for TikTok to develop better eCommerce technology—which is an engineering problem—than for Amazon or Shopify to get into social media—which is a network effects problem. TikTok already owns the consumer’s attention, they “just” need to activate it in the right ways and provide merchants with the tools to succeed. If the appetite is there, it’s well within the realm of feasibility.

With that said, this is a nut that might take TikTok _years_ to crack. You don’t build a superapp overnight, and right now, the tech industry seems more interested in [divesting projects that aren’t their core focus](https://chainstoreage.com/ups-acquires-online-return-provider-happy-returns-paypal) than in verticalizing. TikTok has also been under heavy regulatory scrutiny in the West, and they might have a hard time penetrating even more facets of our economy.

The good news is that TikTok can afford to play the long game. Who knows—if they manage to overcome these headwinds, in a few years from we might all be welcoming our new superapp overlords.

Can one company power brand discovery, consideration, purchase, and retention?

All hail the superapp

Lately, we’ve been chatting with a few current and potential clients about the role and future of DTC in a world that’s increasingly omnichannel and, dare we say, not DTC-centric anymore.

**It wasn’t that long ago that a wholesale partnership was a giant scarlet letter for retail brands,** and everyone was fighting the big bad Middlemen. Nowadays, hardly a week goes by without a CEO or CMO reminding us that wholesale and marketplaces are must-have channels for anyone in retail—that is, provided you don’t hate yourself and would rather pursue profitable growth than vanity metrics that will plunge your company into oblivion.

Now, even though it might not be in our best interest to say so—we are a DTC agency, after all—there’s some truth in those Forbes interviews: while some brands are forced to sell direct-to-consumer, either because of their business model or product category, DTC is not necessarily the most efficient sales channel for most brands.

**But by saying that selling direct-to-consumer is not an efficient acquisition channel, we’re missing the opportunity to dig deeper beneath the surface and think about the contribution it brings.**

And since going deeper is what this newsletter is all about, that’s what we’re going to do. But before talking about DTC, we need to talk about the role of commerce—all forms of commerce—in our society.

Let’s start with the obvious: **commerce is everywhere you look.** It is the one, inescapable constant of modern society. We all participate in commerce, and the way we participate in commerce defines and is defined by who we are: our possessions are arguably the most honest and reliable manifestation of our personality, fears, and aspirations.

Whether we like it or not, **that makes commerce the most accessible and democratic form of art.** By buying _things_—and we’re using that word in the broadest possible sense—we are simultaneously participating in a communal experience and imprinting ourselves onto the world. And we’re _all_ doing this, _every_ week, _many times a week._

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/c723830c-6c34-bd95-749a-9422718a713f.jpg)

So, how does DTC fit into this picture? 

**For all its problems, DTC remains—pretty much by definition—the best channel to surface the cultural capital your brand is producing, connecting with consumers on a much deeper level than what other channels allow.** This can take many different forms:

*   **Community:** connect customers with your brand. But most importantly, connect customers with one another. If what we buy defines who we are, who’s better positioned than a brand to play matchmaker?
*   **Access:** reward your raving fans by giving them early access to new or limited edition products, or by allowing them to provide feedback on and steer your brand’s roadmap.
*   **Curation:** in the form of content, collabs, or third-party products. The modern brand is an expression of taste—deploying that taste to interpret the world is the best way to further your mission.
*   **Services:** you can get your ears pierced in Studs stores. You can get your pet groomed at PetCo. By integrating products and services, brands can become verticalized destinations for their customers

Obviously, not _all_ customers will want that level of connection with your brand. The casual consumer is perfectly fine grabbing your product from Amazon or their closest Walmart, and that’s okay.

**But for those who can’t seem to get enough of you, providing them with a way to peel back the onion will create levels of engagement you’ve never seen before.** And as fluffy and aspirational as that might sound, that kind of relationship can significantly impact repeat purchase rates, AOVs, brand equity, and organic customer acquisition.

Here’s the irony, and why most of the debate around “DTC vs. the world” is misguided: the original promise of DTC—that brands could increase their margins by removing the middleman—is the least relevant element of this conversation today.

**Instead, we need to redefine our mental model for DTC and recognize the opportunity it creates:** to turn your customers from mere recipients of your marketing campaigns into active participants in your brand’s ecosystem. Only then will we be able not just to take stock of its weaknesses, but also to fully capitalize on its potential.

Where we redefine the debate around DTC vs. the rest.

Rise of the cultural brand

It's time to get weird.

If we asked you to design the perfect purchase flow on the back of a napkin, you would probably—with varying levels of artistic dexterity—draw a landing page with a lifestyle photography hero, which then leads to a product listing page with facet filtering, which then leads to a product detail page with a clever description, stellar reviews, beautiful images and pricing, which then leads to a perfectly optimized one-page checkout flow.

This is the canon of e-commerce design. It's perfect. **And it's the same. For every. Single. Brand.**

When an industry is young, best practices are nonexistent, and variance is high. As the industry matures and develops a shared taste, best practices are established, and variance plummets. That's how we got [Baymard](https://baymard.com/)—or, as we lovingly call it, the _Big Book of eCommerce No-Nos_.

_“So what?”_ you might ask. _“More best practices mean fewer barriers to entry, and less variance means less friction for the consumer.”_

That is true for the average brand and the average consumer. The easier you make it to shop with you, the more customers will do it.

And yet, **certain brands don’t offer convenience.** They don’t really care about refining their product discovery flow or optimizing their post-purchase emails or even—cover your eyes!—reducing the number of steps on their checkout. Instead, they provide quirkiness, exploration, and exclusivity. And customers absolutely love them.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/816a0392-0a56-eda3-b5d9-a0197d9f29df.jpg)

Informally, we refer to these as _experiential brands,_ in contrast with the more traditional _transactional brands._ **With an experiential brand, you’re not spending money for a product—you're spending money for _cultural capital._** The product itself doesn’t really matter. What matters is the experience of discovering the product, buying it, owning it, and benefitting from the social status this experience bestows upon you.

There is an interesting parallel here with the concept of finite and infinite games. Transactional brands are _finite_ games: you're playing to win a prize. Experiential brands, on the other hand, are _infinite_ games: you're playing _for the joy of continuing to play._

As a result of this dynamic, **experiential brands show some attractive traits, such as being able to transcend "value for money" considerations and command organic customer loyalty.**

So, how does that connect to design? Well, **experiential brands thrive on breaking the rules.** The weirder their digital properties, the more valuable the experience of engaging with and buying from the brand. They throw away the best practices in favor of inside jokes, easter eggs, and _kitsch_ visuals. They know how to do things right, and they intentionally go the other way to create a deeper connection with their customers.

Now, let's be clear about something: it would be madness to suggest that all brands should be fully experiential. It's complicated, unreliable, and not always desirable. In fact, **most brands will fall somewhere across the transactional-experiential spectrum,** with only a few pure-play outliers; think the whole dropshipping category on the transactional side, think brands like [MSCHF](https://mschf.com/) on the experiential side.

What we _do_ believe is that many brands that rely on a primarily transactional approach, and only design with the average consumer in mind, are missing out on the opportunity to capitalize on weirdness. **And in a saturated market, weirdness is one more weapon you can use** to stand out from the crowd, attract new customers, and create a community of raving fans.

So, as much as we love our Baymard subscription, here's our plea. The next time you're sitting down with your design team to work on something, pause for a second and ask yourself, _"Shall we get weird?"_

Where we talk about the role of design in e-commerce.

Beauty and the Beast

If you’ve been following e-commerce news lately and your head is spinning, you should know it’s not you—it’s _them._ The stack of press releases keeps growing by the day. So, just like we spent the last newsletter talking about Shopify’s SMB-vs-enterprise strategy, we’re spending today’s newsletter looking at the broader e-commerce technology landscape.

Here’s the thing: there was a simpler time in this industry when everyone stayed in their lane. Shopify _used to_ be an e-commerce platform for SMBs, Amazon _used to_ be a marketplace, and social networks _used to_ be ad-serving machines. **And for a long time, the pie was growing quickly enough for everyone to be content with this single-threaded strategy.**

It’s hard to pinpoint exactly when this changed: post-pandemic headwinds definitely played a part, but we also believe it has to do with the eCommerce industry maturing and brand operators demanding more sophisticated capabilities of their vendors.

This combination led service providers to pursue a different, more aggressive strategy. This usually means one of two things:

*   **Launching new products** for existing customers, helping them succeed, and growing their top line through transaction or service fees.
*   **Using their existing products as a wedge to grow into a new market segment** that offers incremental or more predictable revenue.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/30b1d1df-1fcc-080e-e0d6-411d2b83349d.jpg)

This isn't just about revenue, either: **data has always been gold and is even more valuable with the AI renaissance.** The more pieces of the consumer experience you own, the more data you can gather. That data can be used for performance and operational improvements, allowing you to command a greater market share. 

We’re seeing more and more of these plays unfolding lately: TikTok and Facebook want to become e-commerce platforms, Amazon wants to win Shopify customers with Buy with Prime, Shopify wants to move upmarket with Commerce Components… **Everyone’s simultaneously imposing their products on the market _and_ letting the market pull new products out of them.**

Time will tell which of these strategies will stand the test of time: honestly, we don't really see Facebook becoming the new Shopify any time soon.

Still, for all the headwinds this industry has experienced, it's an exciting time to be in e-commerce. **The constant launches coupled with a pretty fervent M&A landscape mean that the cream is rising to the top**, equipping operators with even more, even better tools to succeed—in most cases, at least.

Where we take a look at the power struggles in ecom-tech.

The eCommerce rat race

Over the past weeks and months, we’ve had many interesting chats with clients and industry practitioners about Shopify’s strategic direction. There seems to be a lot of curiosity on the topic, so we felt this would be a good time to publish our thoughts and try to draw some conclusions together. Lay back and get your coffee, because there’s a lot to say here.

From a product standpoint, **Shopify’s team has been working in two parallel and very distinct tracks.** The first one sees them staying true to their mission of arming the rebels by giving small brands the tools they need to thrive. At the core of this lies the idea of providing for a brand’s every need, with the current focus being on customer acquisition and operational efficiency.

The customer acquisition work started with the Shop app ([which is becoming more and more of an Amazon for Shopify brands](https://techcrunch.com/2023/06/02/shopifys-shop-app-introduces-a-new-shop-cash-rewards-program/?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAE6uXV4eW_JNpFqMjvCl_swFLRFj1bk9LXAxzyRXNTU4DxuOozPH6rsKNBDqXmsS7GUM9hHnodsxEsGL3oKAgClT5vFG7lM9H8dF7XtmiBjbqKcwVggBmF0IWQyTm-uD7Ee4Ww3rQFr_Pi5airfL4E7Zck8uOvSnQQhyCEouKY4y)) and is now continuing with [Shopify Collective](https://www.businessinsider.com/drake-shopify-collab-virtual-mansion-stocked-with-merch-2023-8?r=US&IR=T), which allows brands to easily partner on cross-selling initiatives—dropshipping 2.0, if you will. **Shopify is creating its own little acquisition engine**, enabling small brands to detach themselves (with varying levels of success) from their deadly over-reliance on paid social.

When it comes to helping brands with operational efficiency, **it’s no secret that Shopify is investing heavily in AI** after the Shopify Logistics _debacle_: products such as [Shopify Magic](https://www.shopify.com/magic) streamline the most mundane aspects of running an eCommerce business, helping small teams do more with less.

So far, this all sounds very Shopify-esque, but we’re not quite done.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/0816fb44-ef0e-da21-9d1c-a45a63ebc10a.png)

**Shopify has also been putting a lot of effort into creating a more compelling product for enterprise brands**. Hydrogen, unveiled almost two years ago now, [paved the way for Commerce Components](https://news.shopify.com/shopify-enters-its-next-era-of-growth-redefining-enterprise-retail-introducing-commerce-components-by-shopify). In the meantime, Shopify also released new Shopify Functions and a more customizable checkout, both reserved for Shopify Plus customers.

Larger brands want more flexibility, and Shopify understands that. They bet **that solutions such as Hydrogen and Commerce Components will allow these brands to dip their toes into the Shopify ecosystem without going all-in**, which may lead to deeper adoption down the road.

This might all make sense so far: Shopify offers SMB tools to SMB merchants and enterprise tools to enterprise merchants. The ultimate goal is to become _the_ eCommerce platform for every single retailer in the world, no matter their size, digital roadmap, or tech stack.

And yet, there’s a problem: **it really feels like Shopify is pursuing two distinct strategies here, not one.**

For small-to-medium brands, Shopify is building a vertical SaaS, offering everything a brand might ever need. **Vertical products thrive on closed feedback loops:** they need access to all your data and all your digital properties so that they can constantly improve and offer more and more value. This is the play Shopify has done _for years._

For enterprise brands, Shopify is building a composable commerce stack, allowing brands to mix and match pieces of the Shopify ecosystem however they want. **Composable products, by definition, need open architectures, which hinder verticalization strategies.**

In other words, **by trying to acquire enterprise merchants, Shopify may be playing against itself.**

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/6bcf7891-edf1-1ae4-f113-b6eee52797e8.png)

This isn’t just speculation either: going from a “monolithic” Shopify build to a headless architecture based on Hydrogen is not an incremental change—it’s a categorically different experience. **The moment you go headless, you give up a good 50% of the Shopify ecosystem.** Native functionality you used to take for granted is simply not available anymore, and third-party apps and integrations will often not work anymore—or will not work as well as before.

Granted, Shopify is making improvements here and there by opening up more of the core platform and partnering with the most popular third-party providers in their ecosystem, but this isn't a problem that can be solved by simply throwing more money at it.

**To succeed long-term, Shopify needs an overarching strategy that creates a pragmatic, unified narrative across different merchant segments.**

Perhaps that strategy is already here, and we're just not seeing it—but if that's the case, we are in pretty good company.

Where we dissect Shopify’s two-pronged strategy.

The Shopify play

When it comes to customer loyalty, most brands have a very transactional mindset: **whether it’s through cashback loyalty programs or discounts, the default approach is to buy your way out of the problem.** That shouldn’t come as a surprise in an industry where paid social was—for a very, very long time—the one and only channel for customer acquisition.

Unfortunately, short-term incentives are only good at driving short-term behavior (who would have thought?): loyalty acquired this way is ephemeral and—in most cases—unsustainable. **When you give away free money in exchange for "loyalty", you erode not just your margins, but your ability to navigate the brand-consumer relationship.** Do it enough times, and you’ll wake up one day with no leverage left over your brand positioning—the same leverage which likely led you, among other things, to go direct-to-consumer in the first place.\*

So, if money’s not the answer, what is?

The answer lies in membership. And when we say “membership,” we mean **belonging to a group and participating in said group’s network behaviors for reasons that go beyond mere financial utility.** It can be about identity, or it can be about convenience: for the former, look at Patagonia; for the latter, look at Amazon. Apple is one of those rare unicorns doing both.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/aefc9382-8f85-e705-23fc-80054765d245.jpg)

Patagonia, Amazon, and Apple are extreme examples, but that doesn’t mean true loyalty is inaccessible to smaller brands—just look at the brands mentioned in today’s outsights if you don’t believe that. **More and more, founders are building their brands around communities rather than products**, doing their best to capture every last drop of genuine enthusiasm and customer necessity, and getting impressive results.

So, the next time you’re thinking about loyalty, resist the urge to reach for a quick solution and **think about what your customers _really_ need from you: is it free money, or is it connection?** And if it is connection, do you think that 10% coupon will make a difference?

If you look deep enough, the answer might surprise you.

(\*) This isn’t to say that all discounting is bad. Please don’t quote us saying that all discounting is bad.

Is membership the next big thing in DTC loyalty?

Members only

Last week, Liquid Death launched [Greatest Hates, Vol. 3](https://liquiddeath.com/pages/greatesthates), a full-length album produced entirely out of hater comments. The tunes are available on streaming services and vinyl and, for one song in particular, the Liquid Death team went so far as producing a [m](https://www.youtube.com/watch?v=pSXJkWlpQT8)[usic video](https://www.youtube.com/watch?v=pSXJkWlpQT8). Some of our team have been listening to the songs on repeat for a whole week now.

Greatest Hates isn't just a marketing stunt: it doesn't take an audiophile to tell that the music is _actually pretty damn good._ **Greatest Hates is a media operation, and a complex one too.** For a CPG brand to produce this kind of content (and to do it [consistently over time](https://liquiddeath.com/pages/timewaster-5000), as in the case of Liquid Death), it requires a non-negligible amount of effort.

This left us wondering: is Liquid Death a water brand that happens to produce media, or is it a media brand that happens to sell water? One may argue that it depends on how they make revenue, but **it's highly unlikely that Liquid Death would see its current success without the media piece of its marketing machine,** so where does that leave us? Let's try to find out.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/96683388-de57-9eab-64f6-82113807412e.png)

One of the very first and most successful DTC stories to date, Glossier, was born from founder Emily Weiss' [Into the Gloss](https://intothegloss.com/), a blog where Emily interviewed celebrities about their makeup and skincare habits. But the roots of the media x commerce alliance can be traced even further back: the Michelin Guide—yes, _that_ Michelin Guide—was originally designed to generate demand for fine dining, and hence for travel, and hence for cars, and hence for car tires.

For decades, consumer brands have been using media to escape the boundaries of retail, and media brands have been using commerce to make ends meet in what's widely recognized as a cutthroat category to operate in—see Wirecutter or, more recently, [t](https://netflix.shop)[he Netflix Merch](https://netflix.shop) [Shop](https://netflix.shop).

**When you go one step further and offer both media and commerce in a fully integrated machine**—one that doesn't just create demand, but uniquely positions your brand and transcends definition—**you're rewriting your relationship with the customer** to go beyond mere utility, and creating a potent marketing flywheel in the process.

What most of the commenters featured in Liquid Death's lyrics don't realize is that the brand's customers are not paying top dollar for _just_ water: they're paying for the privilege of identifying themselves with LD's mischievous and playful nature. As a result, **Liquid Death only competes with Liquid Death.**

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/fa9f65a5-1185-ea4e-ac67-9b4f44ebe252.png)

_So what,_ you might be wondering at this point—and frankly, we're asking ourselves the same question. Is a media x commerce play something you _do_, or something you _are_? While we're not sure, it's most likely a mix of both: some brands are well-positioned, like Liquid Death and [Mr. Beast's Feastables](https://feastables.com/); others are just great at timing and execution, like Michelin.

What we _do_ know is that **the blending of media and commerce is inevitable as consumers look for brands that offer both convenience and cultural belonging.** Now is a good time to decide whether that's a shift you're willing and able to participate in.

Media x commerce

A few days ago, some of our team had the pleasure of chatting with the CIO of a large European brand—large_,_ as in, a little short of €1B in revenue last year. We ended up talking about technological innovation in retail and how the narrative has changed over the previous years—a change that was most definitely accelerated by the sharp increase in OpEx for most brands. The conclusion was that we're an industry that _loves_ a good playbook.

**In the early days of DTC, it was all about technology and arbitrage:** most brands back then operated like tech startups, producing immense, complicated codebases to power their shopping experiences. At the same time, they were spending millions of dollars on Facebook ads, all while the industry paid lip service to concepts such as community building and omnichannel marketing. This was our playbook—the one true way to launch and operate a DTC brand.

As for the technology, some of it was needed back then to compensate for the lack of flexible, reliable eCommerce platforms: Shopify was not nearly as ubiquitous as it is today, and it was still an immature product in many regards. **Still, many brands ended up overengineering their digital products, often for the sole purpose of fueling the egos of their builders.**

Enter iOS 14.5, the Big Covid Bubble Deflation, and the fairly predictable increase in competition for ad space and customer eyeballs, and our industry has changed dramatically in the span of a couple of years. What was once seen as a strength—custom technology—is now seen as an irresponsible liability, an old artifact from the previous era of online retail. **The new playbook has Shopify and wholesale written all over it.** Anything else is a costly distraction.

**But what if there's a better way to build?** What if we treated our industry's best practices as a floor and not a ceiling? What if we came to terms with the fact that there is no playbook, just challenges and opportunities that need weighing?

You _should not_ build your checkout from scratch, unless you have a very good reason to. But sparkling some custom code here and there might make the difference between a run-of-the-mill shopping experience and one your customers will talk about for weeks.

You s_hould not_ rely on Facebook as the only way to acquire customers. But Facebook might very well be one of your many marketing and distribution channels—along with wholesale, influencers, content marketing, and anywhere else it makes sense for your brand to exist.

Here's a call to action: **every once in a while, dare to try something different—something that doesn't necessarily make sense for the industry but resonates deeply with your customers.** Learn, experiment, and iterate.

That's how the playbooks were written in the first place.

The playbook delusion

Brand partnerships are not exactly a recent trend in retail or DTC, but we expect them to become an even more relevant channel in the coming years. **Partnerships are an incredibly cost-effective way to pursue your goals**, no matter what size or stage you're at:

*   Small brands can use partnerships to **build brand awareness through borrowed channels and authority.**
*   Mid-sized brands can use partnerships to **enrich their channel mix and experiment with brand positioning.**
*   Established brands can use partnerships to **keep customers engaged.**

With customers becoming harder to acquire and retain, brands should consider how partnerships can become an integral part of their marketing strategy—on par with paid social, wholesale, and B2B.

So what does the ideal partnership look like? You want to look for three key factors when researching potential partners:

*   **Audience alignment:** does their audience overlap with yours? If not, is it a desirable audience for you to reach?
*   **Value alignment:** do their brand identity and messaging resonate with yours? Will your respective audiences receive the partnership well?
*   **Non-competitiveness:** is there any room for you to cannibalize each other's business? Are you competing for the same customer dollars?

As always, take these with a grain of salt: rules can be broken, if you know what you're doing—just look at the infamous [Balenciaga x Crocs partnership](https://wwd.com/fashion-news/fashion-scoops/balenciaga-crocs-collaboration-photos-1234838519/), or the Burger King x McDonald's "[A Day Without Whopper](http://)" campaign.

Below, we've included a selection of inspiring, insightful, and actionable reads about brand partnerships. We have more coming about this topic very soon, so stay tuned!

[21 Examples of Successful Co-Branding Partnerships (And Why They're So Effective).](https://blog.hubspot.com/marketing/best-cobranding-partnerships) Hubspot's content on marketing is always spot-on, and this piece is no exception. Not only does it offer a ton of inspiration for brands interested in a co-branded campaign, but it also provides some actionable tips on how to track a partnership's performance over time.

[Inside the viral Heinz x Absolut collab that sent pasta sauce sales soaring.](https://www.thedrum.com/news/2023/05/31/inside-the-viral-heinz-x-absolut-tie-up-sent-pasta-sauces-sales-soaring) What happens when two iconic brands join forces to create a co-branded product? This Heinz x Absolut project is a textbook example of how to plan and execute a messaging-focused partnership.

[Why DTC brands like Lunya are introducing new brands to its customers.](https://www.modernretail.co/marketing/why-dtc-brands-like-lunya-are-introducing-new-brands-to-its-customers) Brand marketplaces are a form of distribution partnership that is becoming more and more popular. It's an interesting way for an established brand to expand into adjacent categories with little risk—as always, just watch out for brand dilution.

Stronger together

Here's an unpopular take: **our industry has some serious control issues.** We were spoiled by decades of performance marketing and dead-simple attribution measurement. Life seemed simple when we could trust our dashboards and track our customers' touchpoints across a virtually infinite time window.

Unfortunately, **we're now having to cope with two forces that are making those dashboards useless:** targeting and attribution becoming more challenging because of privacy-focused technical changes and the surge in popularity of upper-funnel, harder-to-measure marketing channels (e.g., podcasts, influencers, OOH).

Now, to be clear: we're all in favor of using data to inform your marketing mix—we've published [entire articles](https://nebulab.com/blog/ecommerce-ab-testing-mistakes) about how to do proper experimentation. However, it's time to wake up to the fact that **our data obsession is causing collateral damage:** brands are either reluctant to go into "hard-to-measure" marketing channels, even when they're potentially very effective, or they spend a disproportionate amount of time and money in measuring the unmeasurable.

So, here's our call to action: data is gold, but **don't let the absence or uncertainty of data get in the way of your strategy.** Devise proxy metrics, look for correlations, and learn to trust your instincts. The waters are getting muddier, but the fish are still there.

Attribution victims

Here's what we wrote [a few weeks ago](https://mailchi.mp/nebulab/intangible-retail) in our issue about the status of Web3 adoption in retail: _"\[...\] to become widespread, the technology itself needs to step away from the spotlight, develop the interconnectedness typical of all successful infrastructures, and demonstrate the ability to generate incremental value for its users and the companies that invest in it."_

You know what technology today ticks all three boxes? AI. Well, it's still very much in the spotlight, but not without reason: **unlike with Web3, real-world, revenue-driving AI x retail applications are numerous and within the realm of technical/financial possibility for most brands.** Product discovery, personalized marketing, customer service, product co-creation... the opportunities are endless, as are the tools to capitalize on them.

Our suggestion? Jump on the opportunity while it's hot, but do it in a way that resonates with your brand's values and will have a long-lasting impact. Ask yourself two questions:

*   **What are things you're already doing that AI just made easier?**
*   **What are the things you've wanted to do that AI just made possible?**

Finally, let's all be mindful that we're all climbing the Peak of Inflated Expectations right now. The tumble down the Trough of Disillusionment will be long and hard as we learn that AI is not a magic wand: **no amount of ChatGPT prompts can turn a terrible idea into the next big thing,** especially when AI tech is just a few keystrokes away for all of us.

![](https://mcusercontent.com/679f4835b2683d59bc5762ec3/images/b68bad55-2c3c-1bf1-ed4a-9689604f9745.png)

I, deep neural network

When thinking about DTC, _sustainable_ is not really the first adjective that comes to mind. Historically, true sustainability has been a luxury many brands couldn't (or didn't want to) afford, sacrificed at the altar of free returns, cheap manufacturing, and aggressive growth agendas. As a result, **we've witnessed an embarrassing amount of badly-executed greenwashing.**

What we've seen over the last year is that **when marketing budgets get tighter and push comes to shove, even the greenwashing becomes too expensive**, and only a few players remain standing—those that were genuinely trying to have a positive impact on their industry.

**Building a brand that is both financially and ecologically sustainable is not impossible,** but the playbook definitely looks a bit different from what we've seen so far. In today's edition, we're paying homage to the upcoming Earth Day and offering a glimpse into the world of sustainable eCommerce.

[Member Brief: Circular Fashion and DTC](https://2pml.com/2023/03/10/resale/). Circular commerce is an enormous business opportunity for brands that can adequately capture it. The trick is carefully curating the resale experience to bolster the brand promise rather than diluting the brand promise. Enterprise brands have the first-mover advantage and learned to do this well—will everyone else?

[On, The $1 Billion Swiss Running-Shoe Company, Declares Cyclon Its Sustainability Incubator](https://www.forbes.com/sites/pamdanziger/2023/04/04/on-the-1-billion-swiss-running-shoe-company-declares-cyclon-its-sustainability-incubator/). We feature On often in this newsletter, and for a good reason: they're the kind of company that consistently takes wild yet carefully calculated bets. The Cyclon is an unbelievably bold idea, perfectly executed to align with On's KPIs and company values.

[How Wolf & Badger is winning the sustainable retailer race](https://www.glossy.co/fashion/how-wolf-badger-is-winning-the-sustainable-retailer-race/). We're bullish on vertical marketplaces as the perfect DTC 4.0 customer acquisition channel: they're more founder-friendly than Amazon and less expensive to operate than paid social. It can only be good when those marketplaces push brands to become the best version of themselves.

Where we talk about the difficulty and opportunities of building a sustainable eCommerce brand.

Sustainable eCommerce

The first (and second, and third) generation of DTC brands was a game of arbitrage: brands were betting they could acquire customers more cheaply than the LTV they could squeeze out of them. And for a long time, this strategy worked: **many early movers built their empires on top of low-cost and highly accurate third-party data.**

This strategy is now facing severe headwinds: systemic technological changes drove down data resolution, which in turn caused customer acquisition costs to soar to unsustainable levels. As a result, **the numbers simply don't add up for many brands anymore.**

What we see in response is a "direct-to-consumerization" of sorts in the advertising industry: rather than relying on third-party pixels to collect data across a myriad of retailers, **advertisers are cutting the middlemen and purchasing data and ad space right from the retailers themselves.**

Second-party data seems to be a promising path toward mitigating the downfall of initiatives such as Apple's infamous ATT or Google's upcoming [Privacy Sandbox](https://privacysandbox.com/). Still, it doesn't come without challenges: **the ecosystem is fragmented, and accurate cross-partner performance measurement is very hard.** In this scenario, it's hard for small brands with lean teams and tight budgets to stay on top of their advertising game.

While most of these issues will resolve themselves as the industry matures, make no mistake: **by and large, this is _still_ a game of arbitrage.** We just moved one step higher in the food chain.

Where we talk about the opportunities and challenges of retail media and second-party data.

Second-party arbitrage

We've talked about retail and Web3 before, but we've seen enough brands launch metaverse shops and NFT-based loyalty programs now to believe the topic deserves a deeper analysis.

First things first: **in its current form, Web3 is still incredibly niche.** When you look at the brands launching Web3-based touchpoints, most are either Web3-first or fall in the $100M+/year revenue bracket. At first glance, this might seem like a matter of resources: it's hard to do Web3 when you're busy staying alive—_unless_ your staying alive depends on doing Web3.

However, there's something else at play here: **when you look at the way most brands are using Web3, they're trying to abstract away as much of the underlying complexity as possible**— this is especially true for smaller operators, but even the behemoths often go down this path of simplification.

We can only speculate about the why, but we suspect it's because **Web3 by itself just doesn't have enough gravitational pull**: it's an ecosystem of isolated islands, and customers use it to do a very specific thing, not wander around—even though some players are trying to change this. **Today's Web3 can drive engagement through in small customer segments, but it can hardly be a means of brand awareness or customer acquisition.**

So, where does that leave us? Big brands with large creative budgets can afford to experiment with Web3 and see what they squeeze out of it. For small operators that don't have a compelling reason to be in the Web3 ecosystem, it's better to wait and see how things play out.

Ultimately, for Web3 to become widespread, the technology itself needs to step away from the spotlight, develop the interconnectedness typical of all successful infrastructures, and **demonstrate the ability to generate incremental value for its users and the companies that invest in it.**

Where we talk about the intersection between retail and Web3.

Intangible retail

In case you didn’t notice, physical stores are kind of a big thing now. What strikes me as interesting is how this industry is only now coming to the collective realization that (1) DTC doesn’t mean “digital only,” and (2) **you can’t escape the need for an advertising channel.**

To be clear, it’s nothing to be ashamed of: **when no one knows you, you need to get in front of people, and the only way to do it is to ride on the shoulders of someone who already has an audience.** Whether that happens through a Meta ad, a Target partnership, or an owned store placed on a busy street is, at the end of the day, an implementation detail.

**Today’s reads are about the resurgence of the physical store** in all its forms and shapes. They’re a reminder, if it wasn’t clear enough, that we all need to put the digital-only-at-all-costs craze behind us—for good.

[The rise of DTC 4.0.](https://2pml.com/2023/01/24/dtc4/) As always, 2PM is spot on. The key to DTC 4.0 (maybe let's not call it DTC at all?) will be channel diversification: wholesale offers scale at an accessible cost, while DTC offers zero-party and first-party data. Brands need both if they want to succeed.

[How DTC brands are navigating big-box distribution.](https://www.modernretail.co/retailers/dtc-briefing-how-brands-are-navigating-big-box-distribution/) Wholesale partnerships come with unique marketing and logistics considerations—it's a space that's still hard for DTC operators to navigate successfully, and the ecosystem as a whole could use some ambitious problem solvers.

[Welcome to the Shoppy Shop. Why does every store suddenly look the same?](https://www.grubstreet.com/2023/01/why-every-shoppy-shop-looks-exactly-the-same.html) On that note, Faire is one such bunch of problem solvers. Take from this story what you will, but keep in mind that wholesale doesn't necessarily mean going the Walmart route: there's plenty of shoppy shops out there.

[Swiss brand On is profitable and growing. It also has a deep wholesale presence.](https://www.retaildive.com/news/direct-to-consumer-brand-on-profitable-growth-wholesale/640230/) The author of this newsletter is an On customer, so take this with a grain of salt, _but._ On has always focused on product quality, omnichannel distribution, and profitability. We could all steal a page from their playbook.

Where we talk about the resurgence of the physical store.

Let’s get physical

We're somewhat obsessed with the power of platforms, defined as the terminal destination for running certain aspects of our lives. **Great platforms live at the intersection of community and technology:** they provide both transactional convenience—through assortment, experience, or both—_and_ a sense of identity, making for uncrossable competitive moats.

You can make a platform out of virtually any brand, if you try hard enough, **but platformization often leads to brand dilution**—or, at the very least, to a radical transformation of how the brand engages with its audience. Still, it's often the right move for established brands looking to command a greater share of customer attention, or smaller brands competing in a crowded space.

That's why today's reads are about brands that have managed to build successful platforms. As you read about them, consider whether this might be a path worth exploring.

[Peloton’s Next Move: Become a Platform](https://every.to/divinations/peloton-s-next-move-become-a-platform). Peloton's CEO Barry McCarthy seems to be (mostly) making the right moves to get the company back on track, and is laser-focused on the revenue generated by the Peloton app. Opening up Peloton's technology and ecosystem could be just the wedge Peloton needs, assuming they can make the unit economics work.

[Nike's membership program is the 'engine' of its DTC strategy](https://thecurrent.media/nike-membership-dtc). Speaking of wedges! For years now, Nike has been building experiences across web and mobile that go way beyond shopping, and using the data they collect to fuel their retail operations. Honestly, we can't wait to see what's next.

[How Care/of uses its app to retain customers](https://www.modernretail.co/technology/how-care-of-uses-its-app-to-retain-customers/). On a smaller scale, Care/of is not only using their mobile app to engage and help existing customers, but they've opened it up to a wider audience. By doing this, they're putting the Care/of brand in front of thousands of potential customers and collecting invaluable zero-party and first-party data. Lots of useful takeaways here.

[Amazon Is Now a 'Para-State' Governing Global Commerce, Researcher Says](https://www.vice.com/en/article/qjkygb/amazon-is-now-a-para-state-governing-global-commerce-researcher-says). Or: when platforms go a tad bit too far. Amazon acting like a monopoly is not exactly breaking news. Amazon being a state, on the other hand, is an interesting perspective. The question is how much of this is company strategy vs. the result of trying to tame the beast that is Amazon.com, but that's for another time and place.

Browse past issues

Holding the space

The collapse of commerce

The Web3 rightshifting

Maslow and brands

Agency, deconstruct thyself

Apology of the regulator

The curation opportunity

Outage outrage

All hail the superapp

Rise of the cultural brand

Beauty and the Beast

The eCommerce rat race

The Shopify play

Members only

Media x commerce

The playbook delusion

Stronger together

Attribution victims

I, deep neural network

Sustainable eCommerce

Second-party arbitrage

Intangible retail

Let’s get physical

Make platforms, not brands

The things brands do for love

The new place of DTC

Building relationships

Old and new tricks

New paths to success

Let’s redefine
eCommerce together.

Commerce is changing. Are you keeping up?

Browse past issues

Holding the space

The collapse of commerce

The Web3 rightshifting

Maslow and brands

Agency, deconstruct thyself

Apology of the regulator

The curation opportunity

Outage outrage

All hail the superapp

Rise of the cultural brand

Beauty and the Beast

The eCommerce rat race

The Shopify play

Members only

Media x commerce

The playbook delusion

Stronger together

Attribution victims

I, deep neural network

Sustainable eCommerce

Second-party arbitrage

Intangible retail

Let’s get physical

Make platforms, not brands

The things brands do for love

The new place of DTC

Building relationships

Old and new tricks

New paths to success

Let’s redefine eCommerce together.

Commerce is changing.
Are you keeping up?

Let’s redefine
eCommerce together.