Interview: Marcus Startzel on COVID and the Future of Product Fulfillment
The CEO discusses the eCommerce boom and the systems that get goods from warehouse to doorstep in warp speed.
Welcome to Direct-to-Conversation, a recurring interview feature from DTC Magazine. These conversations will highlight insights, advice, and innovation strategies from leading thinkers in the DTC, eCommerce, and retail space. Our most recent interview was with Kristen LaFrance, who is a Senior Content Marketer at Shopify Retail and the unofficial Mayor of DTC Twitter.
In this Direct-to-Conversation, we catch up with Marcus Startzel, who is the CEO of Whitebox, a DTC and eCommerce fulfillment company, and a former naval submarine officer. We talked to him about how the pandemic has challenged the ways that companies send products as well as changed the ways that consumers order and receive goods.
DTC Magazine: eCommerce, at least compared to, say, Western Union, is a relatively new phenomenon. Can you tell me a little bit about how you got started in this space? What drew you to it?
Marcus Startzel: I’ve always had the fortunate experience of working for companies that pioneered business models for a rapidly changing consumer behavior market. My first foray into internet-based technologies was in the early years working with ad-supported publishing models. At Advertising.com, we were doing performance-based online advertising, delivering guaranteed performance for brands, and while at Millennial Media, I helped brands understand how to shift their messaging and ad dollars to mobile, where consumer browsing and buying trends were beginning to take off.
eCommerce has changed how the world transacts. The technology available to consumers today is still evolving with every single transaction, and I am lucky to have witnessed this evolution firsthand. As 2020 unfolded and new challenges presented themselves, I knew we were witnessing a sea change in regards to how consumers would first come into contact with brands.
Through several busts and booms, I’ve been in awe of how brands have been able to adapt, create and solidify deep relationships with their consumers. My past experiences have always been focused on working with brands in new spaces to find innovative ways to evolve, and I am drawing from several similar experiences now at Whitebox to help brands navigate the challenges 2020 brings, which undoubtedly will continue to change the scope of eCommerce even more.
"Done right, consumers simply see a box arrive at their door in the specified timeframe. Behind the scenes however, there is an entire, complex system in place managing the order and delivery of necessities..."
DTC: We're obviously in a surreal moment where consumers are buying online like never before, but also in very strange cadences. If you were telling a stranger at a bar (an outdoor one, of course) about your work over the last five months, how would you describe it?
MS: First, I would try to describe just how much stuff is being bought online today. There are few words that describe the shifts we’ve seen in just a few short months in regards to changing consumer shopping habits. It’s been eye-opening for sure. Although, it hasn’t been just the volume of products driving changes in eCommerce, it has also been the “who” and the “what” driving those changes. Starting in April, as isolation in the U.S. set in, millions of people jumped online to purchase household necessities like toilet paper and toothpaste, but they also relied on eCommerce to help fill their homes with other goods that either occupied them in their downtime or helped spur a new hobby. In fact, new customer acquisition between March and May 2020 increased 53% on Amazon.
COVID-19 may have been a step change in terms of attracting new online shoppers, but the data also shows that the rate of year-over-year growth in eCommerce has been outpacing traditional physical store sales for some time. I’ve seen big changes in audience analytics for some time now. Our internal insights found that adults 65+ showed a 195% increase in eCommerce activity from January to March 2020, and during the same period, purchases made by men increased 152%. Additionally, purchases from married households increased by about 168%, while purchases from single households grew at 132%, so online shopping has grown across the board.
Getting back to this conversation I’d be having with a stranger on an outdoor patio, I would also try to describe how the growth in eCommerce has changed the complexity of merchandise management as these challenges have never been more top of mind for brands. Done right, consumers simply see a box arrive at their door in the specified timeframe. Behind the scenes however, there is an entire, complex system in place managing the order and delivery of necessities like toilet paper and hand sanitizer, and other non-essential items such as home decor and clothing.
What happens across our fulfillment centers on a normal day is amazing. Coupled with the arrival of a quarantine and the significant increase in customer appetite for faster, more convenient shopping services, our fulfillment centers have been moving at lightning speed to adjust to the new modern retail landscape.
"Consumers expect to be able to purchase the products they want anywhere they shop, fracturing the notion of brand loyalty while giving heightened visibility to DTC brands both large and small."
DTC: One big upshot of all of this upheaval is the embrace of the DTC model by everyone from enormous conglomerates and mom-and-pop shops. What are some of the most common challenges that businesses have to navigate in this climate?
MS: With the growth of eCommerce, consumer choice has exploded and along with that, expectations have changed. The introduction of two-day shipping has forever altered how consumers expect to receive purchases. They are no longer patient about delays or as willing to pay for expedited shipping.
Additionally, there’s a new reliance among consumers when it comes to peer reviews and price comparisons, driving demand for everything across the consumer product spectrum. Consumers expect to be able to purchase the products they want anywhere they shop, fracturing the notion of brand loyalty while giving heightened visibility to DTC brands both large and small. Although this has created new opportunities for rising DTC brands, it does not come without its challenges. Larger brick-and-mortar stores now have to face the complexities of managing these relationships from top to bottom, while also managing their own expectations for customer growth and acquisition.
Amazon and other growing marketplaces prioritize the consumer, not the brands. For many brands there has been a divide in focus and processes between what is sold on store shelves and their eCommerce strategy. More than ever, brands are being forced to manage the complexity and costs of direct-to-consumer sales and fulfillment efforts, and of meeting these new customer expectations.
DTC: Relatedly, fraud is one aspect of product fulfillment that's always been interesting to me. Without giving away any trade secrets, how do you help brands understand the threat of fraud without overreacting to it?
MS: We have seen that each brand we work with has a different risk tolerance when it comes to finding the right balance between the chance for fraud, and creating a seamless consumer return experience that earns trust and keeps the customer coming back. Our role is to help brands navigate toward that balance—to understand the risks and benefits of various aspects of fraud and consumer returns, and create policies and practices that work for their brand. We have systems and tools in place that allow our team to adhere to each brand’s preferred policies. And we work to ensure our brands’ business rules are implemented throughout our software, and clearly communicated within our customer service teams.
"I expect brands will look to broaden their product offering across marketplaces to sell where consumers are. Determining the marketplaces that make sense will be a key component of a brand’s future eCommerce and omnichannel strategy."
DTC: Even with so much uncertainty, there seems to be some trends emerging that become permanent features of the retail landscape. What do you think will carry over from 2020 into, say, 2025?
MS: Retailers and brands were already under pressure even before COVID to adapt to a growing digital consumer space, and post-COVID, those struggles may present other challenges that are just now being unearthed.
Will more DTC brands look for other ways to grow their customer acquisition without having to rely on a big retail brand? With the continued expansion of online purchasing, are we looking at an accelerated time frame for automated delivery methods?
One technical need I do see becoming more prevalent for brands in the future is their need to invest in vertical integration processes, which as we have seen through the quarantine has really helped brands capture the value of the entire supply chain, and create redundancies in their processes that prevent any business interruptions based on new consumer demand.
Additionally, I expect brands will look to broaden their product offering across marketplaces to sell where consumers are. Determining the marketplaces that make sense will be a key component of a brand’s future eCommerce and omnichannel strategy.
I also believe we will see more brands change how they think of their physical locations and the consumer experience within these locations. With more purchases happening online, some of brand to consumer relationship building will still occur in physical locations, while purchases will increasingly move to online branded eCommerce sites.