In this episode, Nathan discusses 10 brutal truths of e-commerce for DTC brand owners. The first truth is that reducing ad spend is not the solution to higher operating expenses. Understanding how the P&L works and the flow of revenue is crucial. The second truth is that most accounts are either overspending or underspending, and finding the right balance is key. Attribution tends to overattribute bottom-of-funnel actions and underattribute top-of-funnel efforts. Customer repeat rates are largely influenced by merchandising and operations, not just marketing. Site intent is a better measure of success than click attribution. Buying the right products is more important than marketing for online retailers. Only a small percentage of creatives will scale. Strategies used by nine-figure e-commerce brands in the US can be applied to eight-figure brands in other geographies. Keeping operating expenses lean is essential for success. Focusing solely on cost of goods minimisation may not be the best solution, as cash conversion cycle also matters.

Takeaways

• Reducing ad spend is not the solution to high operating expenses in e-commerce.
• Finding the right balance between overspending and underspending is crucial for success.
• Attribution tends to overattribute bottom-of-funnel actions and underattribute top-of-funnel efforts.
• Customer repeat rates are influenced by merchandising and operations, not just marketing.
• Site intent is a better measure of success than click attribution.
• Buying the right products is more important than marketing for online retailers.
• Only a small percentage of creatives will scale in e-commerce.
• Strategies used by nine-figure e-commerce brands in the US can be applied to eight-figure brands in other geographies.
• Keeping operating expenses lean is essential for success in the DTC business model.
• Focusing solely on cost of goods minimization may not be the best solution, as cash conversion cycle also matters.

Chapters

00:00 The Misunderstanding of Reducing Ad Spend
05:21 The Balancing Act of Spending
07:18 The Attribution Challenge
10:01 The Influence of Merchandising and Operations on Customer Repeat Rates
11:56 The Importance of Site Intent
14:50 Buying vs. Marketing for Online Retailers
17:14 The Scaling Challenge of Creatives
19:10 Applying Strategies from Nine-Figure Brands to Eight-Figure Brands
22:05 The Significance of Lean Operating Expenses
24:09 The Complexity of Cost of Goods and Cash Conversion Cycle