Interview: Nik Sharma on Old Assumptions and New Normals
The brand advisor and operator discusses how companies are optimizing their operations during the pandemic.
Welcome to Direct-to-Conversation, a recurring interview feature from DTC Magazine. These conversations highlight insights, advice, and innovation strategies from leading thinkers in the DTC, eCommerce, and retail space. Our most recent interview was with Brendan Bannister, who is the Creative Director at William Painter, the California sunglasses and apparel DTC company.
In this Direct-to-Conversation, we catch up with Nik Sharma, who heads up Sharma Brands and helps DTCs navigate the ever-choppy waters of the eCommerce ocean. We talked to him about the best strategies to stay lean and build loyalty during a pandemic.
DTC Magazine: You had an unconventional beginning to a career in the DTC and tech space, to say the least. You began working for brands in high school, got recruited by VaynerMedia, and developed social and launch strategies for companies as wild and varied as Hint Water and DUDE Wipes to Roc Nation, Cha Cha Match, and The Pill Club. What made you decide to go out on your own?
Nik Sharma: One thing I realized looking back on last year was that I can work with a brand's team, but the biggest problem was that I was a single consultant, and so I was always reliant on their team to get me things. Whether it's their developer to finish a landing page or their creative team to finish assets, basically, I was always waiting on them regardless of how fast I wanted to move myself.
At the beginning of this year, I decided to build my own team so that we didn't have to wait on, I don't have to wait on other teams' resources. And so now, Sharma Brands is technically a growth equity firm, but we're almost like a direct-to-consumer SWAT team, where we can come in and own everything from creative technology, strategy, media. Basically, we either work with brands like JUDY, where we'll just launch brands, we'll work with brands that are doing really well, but need to do incrementally better, or we'll work with brands that are massive retail brands and they need to get their direct-to-consumer game more on point. And that's where we're at today.
DTC: I once interviewed the head honcho of Maker's Mark Whiskey, which is obviously a family brand, passed down from generation to generation. The OG of it is a guy named Bill Samuels Jr. This is before the whiskey boom. Something he said to me and has stuck with me, "You can't connect the dots forward", but everything he did made sense looking back. I imagine that must resonate.
NS: There's a really cool quote I like, which is basically... I forget it exactly, but it's something along the lines of 'Compounding work is really slow, but then it's really fast.'
DTC: So what would you say is one of the biggest lessons you've learned over the years? What kind of sticks out as, in your experience, which developed in such a unique way?
NS: I think there's a couple of things. One is I always have tried to help other people wherever I could, and it's not necessarily that I think of myself as a thought leader. It's more like if I've launched a really successful product or a Black Friday campaign or somebody else's too, and they're asking for advice, can I take 20 minutes to just share that advice? And just jumping on the phone with other operators and doing things like that has come back and helped me 10 times over. And so I think one is just helping others. It has dramatically helped my career personally.
And I think another thing that I've learned probably more since the end of 2018 to now is, the more I take the things that I learn on a day-to-day basis—and it's not, again, it's not being thought leader-y—but it's literally coming out of a meeting or coming out of a really successful campaign and taking those learnings and just writing them and putting them out on the internet. That has also done wonders for me because it attracts other people, either in the industry or people who are maybe at the top of the industry to want to connect. And then those connections ended up building a ton of other things. For example, I wrote this article with a friend of mine, David Perell, at the end of 2018 called "The Customer Acquisition Pricing Parade." And within two days of that article being up, which was just something we talked about while eating burritos in San Francisco, we had a note from Gin Lane's founder that he wanted to grab coffee with us and just chat.
So you build a network by first putting up things that are useful to others or things that other people find relatable. Even my own personal Twitter following, for example, really grows when I put out things that I've personally experienced versus things that I think or theorize about.
DTC: That definitely resonates. There are a lot of platitudes out there, but I really find people react to and engage more with what is personal and authentic and honest in those ways. It's meaningful.
So taking a look at the DTC world and the last few months have obviously been fascinating in that we've seen this huge eCommerce boom, and we've also seen all kinds of logistical delays and general upheaval. Are there any temporary changes that you see happening right now that you think will be sort of permanent features of the eCommerce or DTC ecosystem in the future?
NS: For sure. There are a couple of them that really stick out. One is sustainable growth.
I think a lot of brands were really forced to focus on things that they've never had to focus on before, whether it's optimizing costs, whether that means things like optimizing payment terms from your manufacturer to where you might be selling the product and then paying for it after it's sold, just because you've worked out better payment terms.
A good friend of mine always says, "Every time you do another million in revenue, you should go back to all your companies, whether they're credit-card processing companies, whether it's your web hosting, whether it's your fulfillment center and go back and renegotiate your rates. So I think that's one thing is basically optimizing costs.
Another big one that I think that I've scanned through the pandemic is that people are becoming a lot more smart with how they spend their money. So the products or the brands that have really survived during the pandemic are brands that people want in the first place. It's not the seventh or the 27th adaptogen beverage brand that gets launched. They're products that like people genuinely, functionally want versus just the next white-labeled brand.
And then within that too, I think brands that have a moat either within the product itself, the distribution mechanism, or the operation side are also ones. To launch a brand now you have to have a moat in hopefully two out of those three. A product example could be: You own a formula that nobody else has, or you have a patent that nobody else can go over. A distribution moat might be that you have a celebrity founder or you have access to ad inventory that nobody else can get. And then an operations moat is something like I mentioned earlier, you pay for the product after you sell it or you might own your own fulfillment center. And so avoid a lot of those costs. But I think for a brand to really thrive during this pandemic, and also next year, you have to have two out of those three.
Then the other main one that I've seen, which has been really fascinating is lean and really smart teams. Team sizes have definitely gotten smaller for the brands that have either launched the back half of last year or even this year. And I think that's just a trend that'll continue because you don't need 10 people to do something that two people could probably do if they added an extra hour to their day, maybe.
DTC: Right. Right. The scrappiness is returning...
NS: The scrappiness. Exactly.
DTC: We're obviously in a strange vacuum right now, but zooming out a little bit, what are some of the common mistakes or perhaps assumptions that you've seen that almost apply to any situation of companies in the early stages entering and not necessarily having the right mindset? Without naming names, are there any examples that stick out like tactical errors or mindsets that have really been costly?
NS: I think there's still a lot of brands that are overly reliant on building revenue from just paid media channels and that still just throw too much money at paid media in the hopes that one day it'll work. I think that's one problem that still persists, even though it's pretty widely talked about now.
One trend I've seen lately too is that brands will launch with fewer products or fewer collections and then expand once they start to see traction, but [still] focus on a flagship or hero product. And the ones that do launch with a variety of products don't really know where to start or don't really know how to build it.
Another thing I personally think is a huge mistake is that a lot of brands build beautiful sites, but they just never convert or they're not ever really built for conversion. I think that's more tactical, but it's something that's so common. And then I think just mindlessly blowing money at things that could be done for a lot better costs, whether it's a photo shoot, a video shoot, anything of that sort.
DTC: Some of that just seems performative. And this gets at the assumption that this is what a digital-first company does or this is what a startup is like. It builds into the image and the reality is, obviously, much more complicated and not necessarily quite as glamorous.
My last question gets back to the arc here—building on what's becoming permanent in this strange moment and also what mistakes and old assumptions still exist. How would you advise a DTC company that's hoping to have better retention programs in a time where a lot more people are online and a lot of consumers are changing their habits and shredding old loyalties. What would you tell them, of course, without giving away any trade secrets?
NS: One thing we're doing with a lot of our brands is like just very basic surveys for customers just to understand where their mind is at during this time and what they value. In a lot of cases, customers are valuing things differently than what they did maybe a year ago. And so that's one big thing. And then, you using that information to cater your messaging, the way that you merchandise for Q4, and the way that you run promotions.
Another thing that I have seen a couple of brands doing, and we're definitely doing it with a lot of our companies, is really building partnerships around consumer personas. So, for example, if you're a men's skincare company, can you pair up with a premium men's clothing brand and almost leverage each other's audiences to find the exact same customer that you're both going to spend money on?
Let's say you were to just run a promotion where if you buy these sweatpants from Brand A, you get a $30 gift card to this men's skincare brand. This, for the customer, brings them value for Brand A (the clothing brand), and it also helps their conversion rate. And for the skincare brand, it makes sure that their CAC [customer acquisition cost] is essentially $30 because or it's actually really the COGS [Cost of Goods Sold] that they pay on a $30 retail order, because that's might just be cheaper than what they were paying on Facebook, for example. I think a lot of partnership stuff is hopefully going to emerge in Q4 this year.
Then, the last thing I think, which I think a lot of brands are starting to catch on to is creating content, genuinely good content, whether it's through email or SMS. It's so that you have better open rates, you have better share or screenshot and share rates, which you can't really quantify, but it definitely exists. And then, when it rolls around to your Black Friday sale, you have a much larger addressable user base because they love you for the content that you put out and now you have access to them for when you promote a sale.