Hey y’all,
Today I’m going to make the argument that Direct-to-Consumer is taking over more than just retail. It’s seeping into all types of commerce. The latest example is Clubhouse, the newly minted unicorn.
Clubhouse is a new type of social network based on voice—where people around the world come together to talk, listen and learn from each other in real-time.
Quick (related) side note: if this is your first time reading “What I Learned” and you want future posts delivered directly to your inbox every Friday, drop your email here:
Substack is what I use to publish this newsletter. And it is another great example of a technological advance that allows people to go directly to their audience. Substack makes it dead simple for a writer to start an email newsletter, own their list, and charge money (I don’t charge, but many people do).
The ability to cut out the middleman is the topic we’ll be covering today. Specifically, how Clubhouse is leveraging the DTC model to disrupt media, the creator space, and “audio” in general.
Today’s Exploration:
DTC refresher
Where DTC is found outside Retail
How Clubhouse is leveraging DTC
The future of Clubhouse
Social platforms of the future
1/ DTC Refresher
You’ve probably heard the phrase in the context of eCommerce. Direct-to-Consumer, AKA DTC, notoriously proved the model out with mattress companies. So. Many. Mattress. Companies. And it’s genius. There are thousands (16,000 to be exact) of brick-and-mortar mattress stores in the US that have been made obsolete.
Four things enabled the mattress industry to go DTC:
Getting in front of buyers through direct advertising. Platforms like Facebook/Google/Twitter can segment audiences and target buyers, which makes the cost to acquire customers (CAC) much lower.
Try before you buy return policies. The “100-day return policy” displaced the need for brick-and-mortar stores to test different mattress.
Online purchasing. People now have access to the internet and are comfortable buying online.
Logistics improvements make shipping possible. Speed and cost of shipping both decreased, which made it feasible to ship a large item like a mattress.
Where is the largest mattress retailer today?
Before its bankruptcy in 2018, the company operated over 3,600 locations in 48 U.S. states. Mattress Firm has been owned by Steinhoff Holdings since 2016.
On October 5, 2018, Mattress Firm filed for Chapter 11 bankruptcy. The company planned to break 700 lease contracts by closing 200 unprofitable stores as soon as possible and was considering closing the other 500 stores out of the more than 3,300 it operated at that time. In November 2018, Mattress Firm emerged from Chapter 11 bankruptcy.
Dark. I know.
Change is painful in the moment, but (put on your optimism hat!) a good thing in the long-term. If you believe that, think about what you can be doing to go directly to your customers, instead of using antiquated systems that used to be necessary, but are no longer needed to get in front of your customer.
So now that we know the formula, let’s observe where it could be replicated elsewhere.
2/ Where DTC is found outside Retail
Companies are now talking to their customers directly. Even President Trump showed the world that he could talk to Americans (or North Korea) directly, via Twitter.
Where else could this thought-process be applied?
Questions to ask: is there unnecessary overhead? Is there a middle-man or gatekeeper who collects a tax for anyone who passes through? A Toll Collector, if you will.
If so, then: why is the toll collector there? What value do they bring?
The mattress companies no longer needed brick-and-mortar so they cut out those costs (retail space, overhead to staff, required inventory on hand, etc.).
Below is a simple way to visualize the DTC movement.
The Old Way: in order to put products in front of your audience, you had to go through a Toll Collector. And then in order for the Audience to pay you, the payments also had to go through yet another Toll Collector. The New Way makes the Toll Collectors obsolete.
3/ How Clubhouse is leveraging DTC
There is a debate right now around Tech Companies versus the Media. But that is just part of how Clubhouse is proving that DTC is bleeding into every area of commerce.
At the core, it comes down to a couple things.
First, the value media brought to the table was relationships with founders. If they burn those bridges, and lose that access, they lose that value-add to the readers.
Secondly, distribution. Media companies had the ability to build a presence. But now there are tools that exist that make it simple for anyone to put their thoughts into the public.
There are other middlemen that Clubhouse helps circumnavigate. For instance, you no longer have to send a Zoom invite to do a live conversation. You can just start one, and folks who follow you will get notified and you can choose to join the conversation or not. You don’t need a podcast recording studio. Instead, click a button, and you can be live with thousands of listeners.
4/ The future of Clubhouse
There are tons of applications here. Future government debates. Podcast recordings. Quarterly earnings calls. Let your imagination run.
Clubhouse has an opportunity to be the social media platform of audio.
Twitter for words
Instagram for pictures
TikTok for videos.
But Spotify/Apple have not cracked the code on audio, so it’s Clubhouse’s to lose.
I hope Facebook (or Twitter or someone else) does not buy them. The competition is good for everyone, but especially for us, consumers.
5/ Social platforms of the future
I’ll leave you with a wild prediction.
Clubhouse will be the last social media platform we see in the current form.
The future will be decentralized. Including social media. I truly believe this.
This further proves the point that DTC is eating the world.
Cutting out a middleman is yet again the underlying trend here. Specifically, this is how it will apply to the future of social media:
Permanence. You can take your ‘profile’ wherever you want to go. New platform? Take your profile, and followers with you. Remember: DTC means you no longer need a middleman, including even the *platform* itself.
Pseudonymous. Protects against bias and censorship. These are hot topics right now and will be solved through decentralized apps (dApps).
Immutable. You can take a certain app and “fork” it, creating a new world that is improved for the users who choose to go there with you. You don’t need permission, you can just create the new world, and let people decide if they want to visit or not.
Decentralized. Owned and regulated by the people, not by a single entity (Facebook, Twitter, the Government). Reddit is the closest thing we have to this today. Or Wikipedia. They are self-governed. Democracy wins. Or put another way: “the market” wins.
So, if we assume DTC is here to stay, this is my advice on what to do with this new reality—choose your own adventure:
Identify an unnecessary middleman in your industry and create a new way.
Leverage existing DTC platforms to go directly to your customer.
Enjoy the show.
Final note: the title of this post is a play on Marc Andreessen’s famous blog post from 2011, which I recommend you read: Why Software is Eating the World.
How did you feel about this week’s post?
(100% anonymous)
Below are a couple goodies for the legends who made it to the end of this article.
Recipes: My wife has been spoiling me with great cooking lately, and she’s documenting it on Instagram—check it out!
Tunes: My wife and I put together our 2020 playlist. Shout-out my sister, Tierney, and her husband, Johann, for starting the tradition 6 years ago. My favorite album of 2020 was Wild by Tourist.
See you next week!
Cheers,
Brendan J Short