Struggle Bus with Sarah McVittie

moment. Um, okay, so let me grab my notes. Okay, so I'm gonna kick off in 5. Welcome to the Struggle Bus VSpot Show, the home of the e-com nerdy news. I'm your host Vinny O Brien, or as my friends like to call me, hey you in the bushes. As an aging man, journeyman in e-commerce, I wanted to create the Struggle Bus for us to find a space to create empathy through shared experience. With me today is one of the best commentators, most interesting speakers, and biggest intellects in our world, Sarah McVitty, VP of Marketing at MAP. MAP helps marketers build personalized experience through their SaaS platform MAP Marketing Cloud, amongst many other things. Sarah, Welcome to the Struggle Bus.

Thank you so much for having me, Vinny. It's lovely to be here. It's great.

It's a pleasure. Where are you calling in from today?

I am in the office in London, um, just in— but just, just by the Bank of England, actually. So it's all very festive and sort of down around St.

Paul's, right?

Yes, exactly.

Yeah, I worked there once, and it was pre-social media, and it just reminds me there's a place called Fuzzy's Kitchen, and I haven't come across that. Every Friday they used to do— they used to do a roast dinner in a sandwich on a Friday. It was probably the limit of what I could afford. And if you could find Fuzzy the duck dressed around St. Paul and take a picture with them and send it in, they give you a free lunch. There you go.

Guess where I'm going for lunch today then? I'm going to go try and find Fuzzy. Was it called Fuzzy?

Fuzzy Duck, I think was his name. Heady times. Sarah, look, you're an amazing commentator, and I always try and start with one question and build out from there. It was actually more of a statement that I want to recall, something that you've said. You said that volume growth is gone. We're no longer in a growth market, we're in a share gain market. Can you talk me through that?

Yeah, so, so I mean, I, I particularly focus on the fashion retail space, I suppose, more than the fuller piece. And, you know, we— I was co-founder and co-CEO of Dressipi, which we sold to MAP last year. And so that is where a lot of my research is. And what is interesting now, we did a piece of work with OC&C and looking at particularly in the UK market, yeah, we have reached saturation point in terms of volumes of first-hand goods sold. So I think the volume of goods sold in fashion retail in the UK in 2028 will be the same as what we sold in 2019. So, but actually there is still growth, but interestingly a lot of that's coming from secondhand markets. So 1 in 4 1 in 4 items in the UK now is secondhand. So it's just a very different— so you've got this— so really for brands to— it's no longer— and the, you know, the e-com bit has plateaued. So really understanding how you grow in this market, and it's no longer you can just sit and the rising tide isn't rising anymore, so it's not lifting all boats. You've got to have a real point of differentiation. And I think you've got this kind of dangerous middle that you're finding in both the luxury space and also in the kind of the middle space. So every brand— I think Uniqlo have done an amazing job with the technical fabrication, or Zara have got their kind of style in there, um, and the really good value price point. But otherwise, you have to have a point of difference. You have to be a brand that stands for something that allows you to take yourself out of that dangerous middle, I think. But yeah, no, it's a tough time, and it's something which is really important to focus on, on the kind of key margin piece as well.

You talked about it there a little bit from the brand perspective, which I do want to jump into, but is this at its core a consumer-driven problem for retailers?

Well, obviously there are lots of challenges for the consumer, particularly here in the UK. You know, you've got, you know, cost of living. It is not, it's not a comfortable place to be as a consumer. We all feel it. So yes, that there is that, but Yeah, there is only so many clothes that we can buy, you know what I mean? So if you carry on with the growth piece, so then it's— you've got new brands coming in, and so they have a slightly different proposition. So yes, I think it is customer-driven. I think you look at— I mean, Vinted, I think, is an amazing case study. I think that their revenue, not their GMV, their revenue is something like, I know, somewhere around $900 million. And their EBIT margin is just— is someone like $100 million. So it is an extraordinary business. But actually, if you look at what makes it compelling as a secondhand market, is it's a wealth creator, right? So if you've got a bunch of stuff sitting at home in your wardrobe and you can go on and you can sell it, but then people then end up— it stays in the system. So then you go back and you buy more stuff. So I think 36% of all money stays in and gets repurposed. So it's just a great business model. My kids are at it, like everyone I know is at it, you know. So, and if I'm buying stuff for my kids, I'm just gonna go— it's that kind of thing that I think is, you know, because there's different ways of purchasing products, there's different ways of purchasing goods that I think are very interesting and good models that are— I think, you know, how you take advantage of that as a brand, I think is interesting as well.

It was interesting to listen to Richard Lim earlier this year at a conference. He said that the Gen Z consumer is now going in to buy a product from like Uniqlo, a first-hand product, but they're going in with its resale value in mind, understanding what they're going to be able to recoup from it in about 3 months, which is an incredibly difficult place to be as, as a brand or a retailer, because we've been trained on LTV as well for such a long time. And it feels like if your first order is not there and it's not profitable, and now all of a sudden your ability to generate LTV is now becoming more and more squeezed, where do you operate?

Well, that is, that is the question, right? So firstly, I think, I think that understanding that resale value, but then also understanding as a brand, how do you, how do you have a part of that? How do you play a part in that secondhand piece where you get to have some share in that? If you look at me, Dr. Martens do quite a good job. There are, there are brands where I think the heritage or the fabrication is such that it lends itself quite nice to owning some of that resale secondhand pocket. Um, but I think again, this is where, you know, you take Uniqlo, they, they do such a good job because they are really well known, that they, they go deep on the fabrication and they go long on that. So I think, you know, they're— I'm sure their LTV is actually quite good because you know what you go there for and you get— they do, you know, good quality Cashmere at the right prices. So I think understanding what they stand for and where you go, then you do go better, but also you get good resale value. And interestingly, if you look at the top brands searched for on the secondhand, it's, it's not your luxury brands, it's Next and M&S. So it's— there is value in that piece. I think understanding as a brand how you start to move into that, I think, I think it's a debate we need to have, right? I think the industry needs to understand how how brands start to own some of that and start to embrace some of that, because I think it's only going to get bigger in my mind as well.

And was it that kind of thinking that motivated you to develop— let me make sure I get the name right, I've written here— the Fashion Operating Quality Health Index. And you've questioned not even just the performance, but the business model itself, which I think nobody else is doing. Like, you're actually holding to account the fact that the model does not work fundamentally anymore. How— one, well, the first part of that is why did you decide to come up with this index?

So I think, I think my observation over the years I've worked in the fashion space is that often retailers are chasing growth at any cost, and as a result it has cost a lot of businesses. Yeah, you know, businesses no longer exist and And I think so what I wanted to do, I wanted to look at the not just growth in revenue, obviously growth and profit, but I wanted to look at some health guardrails around free cash flow, around, uh, inventory turnover time. So I put in place, I think, I think 12 different health metrics. And then I, I took, um, it's 130 quoted fashion stocks across kind of key Western markets only because those are the best those are the best of each example and, you know, the data is there and it's easy to analyze. And it was really interesting what came out of it and you can see the winners and the losers. I mean, when you apply those guardrails, you can see just like that operate the focus and the attention to that operating excellence. Then you look at, I mean, so there's Dekkers, there's some really good examples of people who are really thinking very differently about how they're using their data. So you're having dual supply chain lanes. Or there's a really good example, Dillard's, which is a department store in the US, and they've gone from their working capital days, they went from like 27 to 13. So they've— I mean, it's just really impressive, but just the way they've bought, their edit, the discipline and the data that goes into how they buy, how they allocate, it was— is exceptional. So I think you can see the winners, and then when you dig into their business models, you can see why they're winning and why they've got so much more cash and profit back in the business. And then you can see others are just chasing that growth, but that growth isn't coming anymore. So if you're chasing growth at any cost and you don't have a point of difference, then you end up massively overstocked, and then you've got to shift it. So it's just this kind of very vicious cycle that just kills the business. So yes, there is a— yeah, sorry.

No, no, I just kind of a follow-on. I'm just wondering, in, in your research, are you noticing different approaches in how these brands behave from a marketing perspective? Like, we, we've seen just through Black Friday and Cyber Monday just how aggressively discounting has become. But take some of the brands that you've discussed, it's— it doesn't feel like, you know, knowing a little bit about Doc Martens, they don't go down that road. They, they market in a very different way. Have you noticed those fundamental differences as part of that model makeup?

Yeah, and one of the things that I'm— we've been looking at is paid media, so paid versus branded marketing. And so I think where historically it was all kind of branded marketing, and then obviously with Google it's a bit of a sugar rush because it was an ROI and there's a ROAS, but so everyone's chased this drug. But actually, so now we— where we were like 20% paid and 80%, we're now 80% paid and 20% brand. And actually, the more you put in your paid, the more you see the brands decline. The, the, you know, the, the— so I think it's— yeah, if all your— and obviously before ChatGPT, I think things are moving. I think LLMs will change it back to being more about the brand again. But where we had trained ourselves to search for red dress wedding, or, you know, so you don't really care about the brand, you just see things and it's the price and that's fine. So I think it ended up devaluing the brand and not creating that loyalty that, that you— or that emotional connection you need as a consumer with the brand. Um, so, but then, so I think when you look at— so that's one piece I think brands need to take care about. But then if you look at— so again, Deckers, if you look at Hocker and some of them, they don't do discounts. They are really smart about how they bring out new launches, new releases. And same thing actually with TK Maxx. So how they launch it, it's, it's, it's about scarcity, and it's really well timed in terms of the colorways and the different the different launches and different products they get. So there's so much demand that their sell-through rate is amazing. Same thing with Sézane, um, they're an amazing business where their intake margin is, I mean, 57%, whatever it is, but they're outtake— so they have a 97% full price sell-through rate. And their marketing and their, uh, operations, their trading are completely intertwined. So it's just this— they have 12 seasons, 12 drops, and it's just this beautiful, lovely operating model. It's all around the brand marketing and hardly any in the paid marketing. So I think there's some really interesting models around how you segment, how you talk to your audiences that really enable the brand to come to life and to stand for what you're— that emotional connection that we need as consumers with a brand to come back and buy from you again.

Suzanne is one of those brands that my wife puts through Vinted all the time and it retains such a high value.

But you know what they do? They are so— I love them, but they focus on quality. So they have gone in, so right, we're going to go for a— so they've gone in for a lower intake margin because they want the quality to be excellent. So you go in and you're paying a kind of you know, premium high street price, but you're getting the same quality as some of the kind of luxury pieces. So you'll get into, you know, in London here, um, there's Keys Around the Block, right? So because it's really good quality, it's— and it's that quality perception, that price perception that I think they do so well. And that's why their sell-through rate is at 97%, because, you know, and they don't— they don't— they don't buy— they don't— it's not stacking high, yeah, but they're doing half a billion of revenue. It's an amazing story.

It's incredible. There's so many questions kind of flowing through my head, and one of the kind of general comments I'd say is when I was working at eBay, we were having these sorts of discussions with brands nearly 20 years ago, that brands were still being presented with data that they would not listen to, and now they're still not listening to it. However, they're starting to respond to the chance to say that they need to get their data ready for LLMs. You mentioned during that last point that you think LLMs can help change the shift back from the reliance on paid media to more being about the brand. Can you elaborate for me a little bit about why you feel that is so? Because not many people talk about it in that way. We talk about discovery and I get that, but why do you think—

from a discovery point of view, I think So I think that none of us know, right? We're all learning, we're all just trying to figure it all out. But what the LLMs— if you look at your own behavior and my own behavior, I no longer look for black dress wedding. I say, I'm going to a wedding, it's on a rooftop in here, and I want to feel glamorous, but you know, I want to cover my neck because I'm springy or whatever, like all the things that kind of I find. But so I'm asking in this much more natural way, like I might have done you know, going into a store, speaking to a store assistant. And so I think by the very nature of that, uh, it means that the way the brands have to respond is to put some of that, some of that brand essence back into some of that text. And some of the way that the images are shown, the way that the text is written, is much more around what the brand stands for and what it's relevant for. So I think just the very fact that they're doing that should make it— it should allow the brand essence to come through. So whether it's whatever you stand for, if you're specifically looking for that, I think the long tail becomes better. You know, every brand that we speak to, or clients, I mean, the direct referral traffic from LLMs is tiny, it's less than 1%, but in most cases it's converting much higher than— but the growth rate obviously is phenomenal. But in most cases, organic traffic is down, so it's the delta between the two where people are obviously searching and having a look, and they're doing their research on some of these LLMs, and they're probably going to stores. So it's that, that bit that, that you need to try and capture, right? And so what is it that you're missing out on in the delta between the declining organic traffic and then the, the rise, but not quite enough rise in the referral? But that's, that's sort of research we're doing at the moment for next year as well. But just looking at that whole discovery process and what that means.

The, the one thing that strikes me as being slightly different now versus my eBay days is that brands seem more prepared to take action. And that comes down to noise and lots of other things. But from your perspective and looking at this holistically, because it feels like you've got this much broader view than, say, the MAP platform, which is, you know, it's a marketing cloud, let's say, but you have this holistic view. It's a slightly different question, but Shein and Temu don't fit neatly into that box yet. They have paved the way in terms of business model for maybe how we can think about it differently. Do you think that they have shed light on supply chain challenge that we should be giving to ourselves, or do you think they've shown us how not to do things? What's your perspective?

So I, I mean, I think Shein is an amazing example. You know, the guy that they— there's no rag trade background at all. He was an SEO guy. I think there's lots of things I don't like about them, but I think the, the data model is phenomenal. So I think there are so many things. Again, I've got a whole bit of research on their model, but how they design, you know, rather than paying in 90 days after the fact, they just bought up all the factories in Shenzhen and they pay upfront. So they just got full capacity. And so not only they add the data at the point of design, and then the product data they add as they're trading through, they're taking the the trends and the micro trends of TikTok. And then they're— so they're, they're adding that additional data as they're trading the pieces through. So I mean, their full price sell-through rate is— I mean, it does still end up in landfill because the quality is not so good. But that, you know, but there is, from a data perspective, in terms of how they are responding to, listening to, building on what the customer actually wants, I think there are so many learnings. I mean, again, I can— I've got lots of research on that. I think it's so important, so important to do that.

Yeah, there's a lot in this around your, your own mindset, and it's all back to data. And it, it also feels like there's frustration there when you speak to brands that they're not responding, or do they respond well when you present them with data that, that tells a story they can't ignore?

The brands, you mean? Yeah, yeah, um, yeah, I think, I think, um, I think for brand— yeah, brands need to— I think, I think that, yeah, they— the problem is if you're still on a kind of old school model where you're buying 6 to 9 months out, obviously you're never going to get it right. So then being able to respond in real time to how your customers are interacting today, so I think using the data to then respond to that and that's what we can— then they're quite good at, because ultimately all they're trying to do is shift as much stock at full price as possible, and that's what we're trying to— that's— so you're trying to take the data, but you need the data in a format that reflects how the customer is shopping, and then you need to be able to respond to that as quickly as possible. So you need to be the conductor of your orchestra to say, actually, we've got— you know, we overbought on these sizes, don't worry, we've got the audience who are that size who will buy those products, or this is trending, we didn't think, okay, these are the products that fit that trend. So it's about being reactive and responsive in real time to those things. And then I think, you know, brands are, yeah, I think everybody's keen to move forward in that way, for sure.

And there's something which gives me a lot of hope that I didn't have really before we started talking, which is the way that you talk about metrics and accountability. You talk about business health, you've mentioned sell-through, you've just you give us a set of ways that we can measure the health of our business quite differently. And I think that's the way we should be looking at it because we've dealt in performance marketing metrics for so long and efficiency metrics that we've forgotten some of the, maybe the retail disciplines that we need in order to become really, really efficient at what we do. How or why at the end of the index not more readily available, or is that planned for 2026? Like, this to me feels like it should be in the Times every Friday that we can go and have a look at that health index, such as its importance. Because for 20 years we've delivered nonprofits into our market, and we still think that that model is going to move us forward. Yet you've given us a whole different way to think about the industry.

Yeah, so I'm going to do it every year now, but I did it— I mean, I did it because I felt, yeah, I think it was, it was so bad last year. Yeah, I think, I think, I think of those brands, I think it went from 10% with a negative net margin to 20%, right? From 1 in 10 to 1 in 5, uh, of those products with those brands with a negative net margin in from 2019 to 2025. So I'm going to do it every year from now on, or you could do it every quarter, I think. Some of the US, some, some brands only release every 6 months. It's probably a 6-month thing really. But then I've also got all the Companies House data for the UK and Italy, but that's always a year behind. So, but still, I think it's an interesting view and there's enough in those bigger ones kind of bigger than 100 million that you can really look at that health piece. Yes, we're going to do that every year, possibly twice a year. Depending on how much changes, what changes. But I think for me, um, I, I think to understand, businesses need to invest and retail really needs to innovate. Am I— so you need cash in the business, right? You need to make sure that you are— so even if you do a little bit less growth or a bit less on the sales, if your gross margin, your sell-through is high, you suddenly got money to reinvest. This is what M&S did so brilliantly post-COVID. They said, let's just stop So they went back to their core basics, sold through, and then they built on that and they built hero pieces and they just, it was a really, really good strategy to build out a really cool fashion offering. And I think it's just kind of being okay to shrink sales if that's what's needed to allow yourself to have the cash and the profit to then reinvest in building the things that are meaningful to your customers so you can build your share, you can grow your share of the market. As a kind of firsthand retailer business.

Really salient points there, and we're coming close to the end of this time. I tried to keep it short, even though I'd love to talk to you for days, not hours, about all of this. I'm going to ask you shortly about your outlook for 2026. It's not predictions, more your outlook. What are those things you'd like to see happen? But before I do, there's one question I always ask people, which is, if you could describe your career as a song right now, what would it be?

Probably something like we are family, because yes, it's just— exactly, because I've done two startups. I love, you know, I've built two businesses and I've always worked with— I started my career in banking, which didn't— wasn't for me. But then I've loved the two businesses that I've started and I've loved the teams and, you know, they're still all great friends of mine now. So probably, and I've learned from them, I've always worked with people who 10 times better than me at everything. And so I— that probably is good for me.

There's a wonderful passion that shines through, and not just what you say, the way you say it, and the way you deliver it as well. I think, um, I can fully empathize with what you're— with what you're saying. So as we look into 2026, what are the things you'd like to see happen differently, better, or not happen at all? Uh, give me kind of 3 or 4 things that you're looking to to give you hope for the next 5 years?

So in our industry, um, so I do think if you look at the results coming through now, I think there has been— I think there's had to be— but there's been a much better focus on profits. I think where previously, uh, your Monday morning meetings might have been about like-for-like trade, I think now people are now looking at margin and contributed margin as well. So that, I think you're starting to see a much healthier set of profits, not for 2025, but I think coming into 2026 it's getting better. I think luxury is going to have a bit of a reckoning. I think, I think they've had it too good, and I think they're just— it's— I think you've got those Cézanne, those mid-level kind of premium, top premium guys who I think are really eating into that luxury space. I think that luxury space has got the same dangerous middle ground. So unless, you know, you know, there's just very few people who can spend that amount of money on all these luxury items. And I think they just put the prices up so much and the quality just isn't really where it needs to be. Because I think luxury will see a bit of a reckoning. I do think— I think that's started to happen already, but I think that is coming. I think, um, I mean, there's so many things I would love to see, you know, I think, I think the fact that there's still so many silos in these bigger retailers and that, so, so, you know, you can, you can do an amazing job on your ROAS and you could be doing an amazing job there, but actually it's killing your business because no one's coming back and you're not building the brand. So somehow I think I would love to see more brands pull that marketing and trading piece into one so they are And people— so the technology is cheap now, and data is— get your data house in order. I mean, data is hard to do, but get your data house clean. And then there are so many tools that are relatively easy to build where you can, or you can be the conductor of your orchestra. So you should be— you shouldn't be sending out blanket emails to everyone anymore. You shouldn't be doing segmentation. You should be able to say, I bought this, find me the audience that are most likely to buy these things at full price. You should— it should be a redistribution problem. So I think getting retailers to remove the silos and to be more mindful of how they're using the data and how they can shift their stock in a way that is delightful to the consumer but beneficial to them to drive more profit. And I think being okay with less growth on the revenue side if it means you can double down on your margin so that you can reinvest in your business and actually start to build the brand back up again. I think that would be great to see too.

That's amazing. And something you touched on there that I speak a lot to customers about is the separation between trading and marketing. I think that's where we can win and lose someone that's accountable to lots of the things that you said. But Sarah, look, you've been so good giving me your time, particularly Christmas week where we're all crazy busy. It's sincerely appreciated. And there's just so much in there. I learn every time I get on these, but you've been so generous. So thank you so, so much.

Thank you so much for having me. It's been a pleasure to be here. Here, and hopefully we'll see you in New York.

Yeah, I'll see you in 3 weeks. Amazing. Um, look forward to it. We can share a beer, a glass of wine, and yeah, hello to 2026.

Yeah, brilliant. Thank you so much. Bye.