Live recording: The importance of profitability and how brands can get started with Kyle Hency

In this live recording from DTCX Retain, Kyle Hency, CEO and Co-Founder of Loop and Co-Founder and former CEO of Chubbies, shares some key insights from his experience seeing 15 years of evolution in the ecommerce market, and where he believes brands should focus if they want to thrive.

“More than ever, I think profitability needs to be the core thrust of effort in these brands,” he says.

Hency says that capital is more difficult to obtain now than in the past, and so it’s critical that brands make a plan to grow sustainably, without waiting for a VC round to save them. Rather than prioritize driving more revenue, brands should look more closely at their bottom line, and identify ways to optimize their expenses to increase their profit margins. 

Here are some of the key takeaways from his presentation:

The ecommerce landscape has changed – in both good and bad ways

Hency says that three key areas have seen a lot of evolution in the time since launching his shorts brand, Chubby’s: the ecommerce tech stack, ad efficacy, and sources of capital.

“When Bonobos and Everlane and Warby were being built, back in the ‘07 to ‘09 timeframe, they were building custom e-commerce sites. That’s how immature the tech stack was at the time.”

“And over time, it has just gotten more and more mature. And there’s so many cool tools out there today. I think it’s really cool to see the ecosystem mature, and that’s huge for brand building and it’s also huge for starting a new brand.”

“I think we’re in a really cool time period where if you’re just getting off the ground, there are more tools to get that thing launched and in the public than there ever have been.”

When it comes to ad efficacy, online advertising when Chubby’s started out was “the wild West. You could scale infinitely. That is not true today if you’re starting a business. It is hard and it’s expensive to really scale advertising.”

Finally, with sources of capital, “there was an abundance of capital, and that has also changed.” Brands today have less opportunities to seek out outside financing than they did 10 or 15 years ago.

That’s why, says Hency, “I want brands to start to take profitability seriously. There isn’t gonna be an escape hatch in my opinion. Brands are going to have to be built sustainably. They’re going to have to make the hard decisions to protect themselves and protect the longevity of what they’re building.”

Shift the focus to profitability over revenue

“People who’ve been building for five years, 10 years, et cetera, we have to take a moment, take a pause, have an operational mindset shift to profitability,” says Hency. “And the biggest and hardest one to do is to say, ‘Hey, we’re gonna do this at the expense of revenue.’ So much of what you do when you’re building a brand is going and finding new people and getting them involved in what you’re doing, but you also have to be cognizant of moments in time where revenue at all costs no longer makes sense.”

“The thing that’s really expensive right now is driving new traffic. What if we just really zero in on existing traffic or really zero in on owned channels and email, right? Like, we fundamentally took our time, top to bottom from the executive team to the most junior people and moved it into things that were just more profitable for us as a business. So it really does need to happen top to bottom.” 

Use tech solutions to get the data to help you optimize your profit margins

“With tech partners, you can build new ways to get visibility into deeper parts of your business. You have to start using new tool sets for all the tech partners out there. I would encourage you to be thinking beyond, ‘Hey, we’re gonna generate a little bit more incremental revenue for you.’”

“What’s the storyline around how you’re gonna be generating more profit for these businesses to make sure they’re around in 10 and 20 years? “

Mindful consumerism is the way of the future

“I think we’re gonna have a big kick in mindful consumerism. I think customers are starting to say, ‘You know what? I don’t really need it in two days actually, four’s good. Like, what if that’s better for the planet? That would be great, right? I think we’re gonna have a big unlock there.”

To find out the rest of Hency’s insights, check out the session recording.