Co-Founder and CEO at Y Scouts, a purpose-based leadership search firm.
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The direct-to-consumer (D2C) space represents a major growth opportunity across many industries. However, in my experience, most leaders at these kinds of organizations fail to sustain rapid expansion. Having helped source top-tier candidates for multimillion-dollar D2C companies in the health and wellness space, I've witnessed firsthand why these leaders struggle to successfully grow their companies.
The D2C landscape is challenging to navigate, and it’s becoming clear that, as an HR leader, your role extends far beyond traditional hiring expectations. You must recognize how strategic leadership recruitment directly influences the growth trajectory of the company. For successful decision-making around hiring new executives, there are several critical issues to keep in mind.
1. Can't Distinguish Between Catalog And Solution Companies
There are two main categories of direct-to-consumer businesses: catalog companies and solution companies. Catalog companies, like Nike, sell assorted products and face constant pressure to add and/or develop new selections. Meanwhile, solution companies, like Peleton, offer products, services and/or programs to guide consumers through a journey with a specific outcome.
An executive's ability to understand the needs of a catalog versus a solution company is critical for ensuring successful growth. For example, because catalog companies must continually refresh their offerings, they need leaders who possess strong skills in market, product and customer trend analysis and product development. With solution companies, their leaders need expertise in customer experience and service design to positively impact the customer journey.
To discover these skill sets when interviewing for executive positions, your team can use behavioral interview questions that focus on proven past experiences where candidates have driven results in these key areas.
2. Unable To Make Decisions With Limited Data
The fast-paced nature of D2C companies often means making major decisions with only partial information. But I've found that many traditional executives insist on waiting for 100% of the data before acting. This doesn't work because, in D2C, speed is critical when launching new products or services. For example, health and fitness brand VShred has launched more than 11 physical products and 12 digital projects since its creation in 2016, which averages to about one new product launch every four months.
While that's just a single example, it illustrates that successful leaders must move quickly. Oftentimes, that means pivoting and making decisions based on limited customer feedback, as well as avoiding overanalysis and perfectionism. This doesn't mean being reckless. The best D2C leadership teams still prioritize data-driven decisions. But, crucially, they’ve also mastered the ability to collect and analyze whatever data they have available, then take rapid action. This balance between data and action is the key to effectively scaling companies in this space.
As an HR leader, you must become an expert at identifying leaders who are capable of guiding successful product launches with limited data. During interviews, prompt potential candidates with questions to get them to share a specific situation (or multiple situations) where they excelled at this skill. Bonus points if you can then follow up and fact-check these answers with their references.
3. Neglect The Existing Customer Life Cycle
Existing customers are the lifeblood of D2C brands; a study by Zippia found that 65% of sales are derived from repeat customers. But many founders obsess over acquiring new customers rather than maximizing the lifetime value of existing ones. Once someone makes an initial purchase, you must continually nurture the relationship by solving new needs that arise. For example, in the health and wellness space, you might guide them from their initial weight loss journey to a weight maintenance program or graduate them from foundation products to premium supplements.
Whether it's a catalog or solution company model, leaders must be able to keep their finger on the pulse of existing customers' constantly evolving needs and demands. This means addressing challenges head-on, listening to customers and using data-backed insights on what customers truly want to drive decision-making.
During the hiring process for leaders in the D2C space, you can vet candidates by diving deep into their experience with customer life cycle management. Ask for examples of times when they catered to their existing customer base, decreased churn and increased the customer lifetime value.
D2C Companies Need The Right Leaders
I want to really drive home that D2C companies' success goes far beyond the quality of their products and services. Of course, you need amazing offerings, but who comes up with those innovations, develops effective go-to-market strategies and evaluates customer success rates? It’s the leaders of the company. So I would argue that outstanding leaders are the foundation for any D2C company's success.
As an HR professional within this sector, it’s your job to know the exact skill sets and traits that your organization's leaders must possess. This helps ensure you can attract and properly vet candidates during the hiring process. Hiring decisions at this level can make or break your company, and now you now have three key indicators to help level up your recruitment decision-making.
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