‍Nik Sharma is the CEO of Sharma Brands, a strategic initiatives firm working with a wide range of brands to help grow and scale revenue across digital platforms. Nik is one of AdWeek’s Young & Influential, Forbes 30 under 30, Business Insider's up and coming Investors to Watch, and an investor and advisor to some of the fastest-growing brands in commerce.

REPOST: 2.11.24 | Nik Sharma's DTC Branding Newsletter

Happy Sunday!

I hope you’re sitting back, relaxed, and enjoying the Super Bowl! I was going to write a joke about how it’s crazy that Taylor Swift absolutely blew up this guy Travis Kelce’s career, but I don’t want to get cancelled.

Today’s newsletter is going to go deep on the concept of Try Before You Buy (TBYB). The first time I remember really seeing this work in DTC was when Buffy, the comfiest comforter, came out with their program to try the product for 7 days and a $0 fee on your credit card. I’m excited to go deeper into that with you shortly.

A few weeks ago, I put together a research report that Tatari funded, and we learned a lot from CMOs who plan to spend over $500,000 this year on advertising. Inside the report, you can expect initiatives that brands are doubling down on, the top ad strategies to achieve 2024 goals (hint, it includes leveraging TV), the biggest challenges brands are facing, how TV fits into a holistic, omnichannel strategy, and more. You can read the full report on this link (no email opt-in required)!

Lastly, did you listen to our last episode of Limited Supply? We actually went deep on things like TV, podcast, Gmail updates, Apple’s ad platform, and 2024 plans. If you haven’t heard it yet, give it a listen wherever you listen to podcasts by searching, “Limited Supply” and look for the blue cover.

Ok, let’s get into today’s newsletter!

Imagine it’s 1868 and you want to sell homemade medicines, cleaning supplies, and perfumes to the people in your town. You’re traveling door to door on your horse and buggy trying to sell your products to members of your community.

There’s only one problem. The consumer’s don’t trust your mysterious concoctions and so therefore they don’t buy them. You, as the founder, deeply believe in your products and if only they would give you a chance, you know they would love it.

To solve this problem, you invent the concept of a “risk-free trial” and a money-back guarantee.

You etch your bottles with a “trial mark” near the top which indicates that if a customer uses less than the “trial amount” and doesn’t like your product, they get a free return with a money back guarantee, no questions asked.

Well, this is exactly what J.R. Watkins did when he was starting his company more than 150 years ago. Also, fun fact, the J.R Watkins brand still exists today (of course, they’re on Shopify)! Now, of course, there may have been other cases of entrepreneurs offering risk free returns but this concept (which is credited to J.R.) essentially changed marketing and sales forever.

Today this is widely known as offering a “risk reversal” for your offer so that customers feel more comfortable and compelled to buy.

There are a bunch of different examples of popular risk reversals like money back guarantees, performance guarantees, refundable deposits, getting credit towards a replacement product, multi-year or lifetime warranties, extended return periods, and more, but the one I wanted to talk about today is the famous concept J.R. invented 150 years ago which is the concept of “Try Before You Buy.”

IMO, the lever of Try Before You Buy is one that combines the use of fintech and consumer psychology, and has great potential for categories like apparel and luxury fashion, footwear, home goods, and accessories.

So in today’s newsletter, I’m going to break down what the tech looks like, how it works, why it matters, when to use it, why not to use it, and some of the results I’ve seen after both clients and friends have added it to their stores.

So what is the tech like?

When we looked at the market of technology solutions that help you employ TBYB as a brand, there aren’t many players that do it at a scale which I consider “Battle Tested.” If a software hasn’t been battle tested, I can’t recommend it to our clients, or to you. The only option I saw was TryNow, and coincidentally, they also were the software of choice when Snif, one of my portfolio companies, was just launching. Their first round of funding was entirely on the back of a new model for fragrance — the TBYB model.

At its core, TryNow is a software app that integrates with any Shopify store in 10 minutes or less to allow that brand to implement a try before you buy program on some or all of your products.

From a merchant’s perspective, you just have to:

• Install the app and enable it on your store.
• Select and tag the products that you want to enable the try before you buy program on
• Integrate it directly with your preferred return software (TryNow works with Loop, Happy Returns, Returnly, and more)
• Choose your trial length (This is fully customizable but most brands set it to between 7-30 days)
• Set your maximum cart size or item limit (i.e shoppers can only try 6 items at once vs 60 etc)
• And then decide which visitors can see the TryNow button on your store. You can also create custom “entry points” on your store or landing page so that not everyone sees the button/program as well.

Then you go live!

And from a shopper’s perspective here’s what it looks like:

With TryNow enabled, shoppers will see a button beneath the add to cart or buy now on an eligible product that says “Try before you buy.”

It’s typically a double opt-in flow so that customers fully understand what they are agreeing to.

Once you click to enable try now, a pop-up appears that explains the brand’s program to you.

It will typically say these 3 things.

1. Try at home for X number of days after delivery
2. Easily return what you don’t love
3. Only pay for what you do keep

Just having this option on your store is an incredible way to boost AOV as most shoppers are willing to try more than one item before they buy. This is especially true for apparel, footwear and various accessories where you might not know your exact size or want to try a few colorways in person to see which is right for you.

Holding the payment token

From a fintech standpoint, here’s how TryNow works: When you checkout with TryNow, you’re giving a pre-authorization to the payment processor to be charged later, if you don’t return the items. The processors receieve the payment token, which is essentially the “permission”, and they can hold that for how long your trial is.  

It’s very similar to subscription companies… most subscriber’s payment tokens are held inside Stripe, and then companies like Stay, Smartrr, ReCharge all add UI and functionality on top of those payment tokens to help you manage your subscription business. The payment token is why you can switch credit cards (card expires and you get a new number) and your subscriptions will continue to get charged with no issue.

What categories does it make sense for?

When it comes to which categories TBYB makes sense for, I tend to think about anything that heavily relies on sizing or sampling. For sizing (and also just review the aesthetic and how it fits with your taste) I think about:

• Apparel
• Handbags
• Footwear
• Jewelry
• Accessories
• Various home goods (bedding, blankets, etc)

I also think about consumable items that rely on sampling. With Try Before You Buy, as a merchant, you could send a sample item alongside another full size product. Think about doing this with:

• Beauty
• Food & Beverage
• Supplements

It’s also amazing for luxury items and high AOV purchases. If you can let someone try out luxury clothing, they’re more likely to have an in-store-like shopping experience. Their home becomes the new dressing room in the store, and they can bring as much back as they want.

When is TBYB NOT a good fit?

When it comes to categories that this doesn’t work well with, I think about really large and heavy items that are very difficult to return. Think beds, furniture, equipment, etc. Although it can work, it’s just harder to make it a seamless experience when you need to return a 300lb sectional sofa that you just bought.

It’s also not the best fit for low AOV items under $50. If you are selling a $15 SKU that costs you a lot to ship and restock, then it may not be a good fit. Additionally, items under $50 are typically classified as pure discretionary purchases. They are low consideration and therefore a shopper who wants to spend $20-30 dollars on an item doesn’t need or want a trial. It’s cheap enough where they are fine paying full price and likely wouldn’t even bother with a return either way.

How to tactically launch TBY

I think whenever you are introducing a new program to shoppers the best approach is a phased rollout.

When you think about promoting the program here’s a few things that you can do.

1. Start with a dedicated landing page that explains your try before you buy program and send traffic there.
2. Start with key messaging on your site only. You want at least a 5% organic opt-in rate before rolling out additional promo and messaging on other channels.
3. Once you find some initial success on site, you can then start sharing the offer in your emails, SMS campaigns, organic posts and paid social ads. It’s also a great tool for new product launches and influencer campaigns.  

On the influencer front, I love the idea of replacing the traditional swipe up or discount CTAs with try before you buy language. From what I’ve seen, it typically drives higher click-through and conversions since the offer is completely risk free where a simple discount isn’t. Remember, the customer doesn’t actually pay until their trial period is over (shoutout to the payment token). It’s all based on what they keep vs return.

How to manage inventory and damaged goods

One issue that brands are worried about with programs like Try Before You Buy is inventory management and damaged goods.

When I was chatting with someone who sees a lot of the analytics in the TBYB space, he said most brands experience the opposite. When you try multiple items, you have a much larger basket size which creates an incentive to return something in good standing if it’s not a good fit. For example, you likely don’t want to pay for 3 pairs of $250 jeans that weren’t the right fit.

For programs that offer a 14 day trial, brands typically see returns initiated in the first 7-10 days. For brands that offer a 30 day trial, customers typically initiate returns between 14-20 days post delivery. Yes, there is some inventory lag but the potential to double or triple your basket size for various customers typically outweighs those concerns.

Also, if the goods are damaged, then the returns simply don't qualify. The brand is in control of what that exactly means for them.

Solving the broken process for trial and returns

The main point here is that the status quo for trying items before you buy them via DTC is pretty broken.

The traditional process where you pay full price today, get the item, decide to return, follow the process, and then, anywhere from 15 to 45 days after your item is received back to the brand’s warehouse, you get reimbursed. Instead, with Try Before You Buy, your card gets authorized but it doesn’t get charged. You pay as soon as your trial period ends and you only pay for what you keep. Customers love this model.

In general… In conclusion… how did we used to start conclusions in middle school essays? Overall, I’m a big fan of brands running experiments and at least demoing the latest tech to see if it can help them. This is something that only takes a few minutes to stand up and could boost AOVs and net revenue for your store. It’s another lever to pull as a brand. For some, it might add a new audience of customers to their brand. For others it might save their brand completely!

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