Afterpay & Ragtrader Present
Roundtable: The Next Generation
Afterpay and Ragtrader brought together a select group of fashion and beauty leaders to unpack insights into all things Gen Z, technology and the future of retail.
Chaired by Ragtrader publisher Assia Benmedjdoub, the session included Adore Beauty CEO Sacha Laing, Modibodi executive director Kerry Cusack, The Iconic director of insights and customer engagement Krista Wright, Oroton CGO Jane Villeneuve, Aje COO Beth Glancey, Afterpay director of trade and partner marketing Kevin Azzopardi and Afterpay senior relationship manager for enterprise Kerry-Ann Kane.
Assia: Generation Z and millennial shoppers are close to accounting for half of all retail spending by the end of this decade. Beth, how are designer-led business like Aje navigating generational shifts in fashion spending?
Beth: It helps a little bit to understand the history of Aje, our core brand which has been around for 18 years. The business has grown and the customer has grown with us. About two years ago, we did some market research and saw we had a gap in attracting new customers across Gen Z. Our design cycle was meeting the needs of the original customer and the younger, more trend-driven component of the business was getting smaller and smaller. When the COVID-19 pandemic happened, we launched Aje Athletica which boomed and then softened after lockdown like other athleisure brands. But that launch allowed us to see what Gen Z wanted. There was a price sensitivity, there was a value consideration and there was a desire for trends.
Assia: So what did that piece of research and insight lead to?
Beth: We realised there was a lot we weren't able to offer Gen Z in the Aje core range. The price had been pushed up through the brand’s signature details - the embellishments, the buttons, the belts, the gold, the puffy sleeves. We sat around a table and tried to understand how we could attract this new customer. From there, Aje Studio was born. We stayed true to the DNA of Aje through fabrications - the linens and the toiles - but had to de-spec it to align with the price sensitivity. Price was a big piece and then trend. We spoke about that brand in January and launched it in September last year so it was fast and furious.
Assia: How did you take Aje Studio to market?
Beth: We learned a lot along the way actually. We realised we were talking to the same database about this new brand - was she even following us? We made Aje Studio and then we had to go find her. The way we took it to market, even the way that we did the events, had to change. We found that we couldn’t use the same talent for example, because Gen Z don't really follow big influencers. So we built the community of influencers. The way that we launched the event had to be way less staged, way less contrived.
The last thing I will say on that, was this sense of community. Taking brand activations into a physical space is way more important to Gen Z than other generations, along with engaging in channels like TikTok. I would say the older Aje customer, that 35 to 45 year old, doesn't really care for anything other than it looking beautiful and being made well.
Assia: So what percentage of the Aje database is now in Studio?
Beth: For Aje, the database is quite mixed, it is quite balanced. Gen Z represented I think about 45%. From a sales point of view however, that was not reflective. I would say this skews towards the fact that she's following us on Instagram and she's just on all the channels. While she sat in the data, she was less active. We've grown her now by I think up to 47%. Studio represents 20% of the sales and it'll probably get to about 30%.
Assia: Is there a target to continue to grow this?
Beth: While the original strategy was to attract Gen Z, it was also about making our existing Aje Athletica leases as productive as possible. As anyone knows who's got leases, you're locked in for a certain amount of time. We looked at productivity analysis and sales targets less than percentage. We believe there's lots of legs in Studio. We think it's big. It's faster transaction because it's much lower price point, less service oriented – everything you would expect for that lower price point and much more trend driven, so she comes in more often.
Assia: Brilliant example of a solid strategy having multiple benefits. Looking over at The Iconic, what does Gen Z represent to your overall share of consumers?
Krista: We've got just under two million active customers. That’s a customer that's shopped with us at least once in the last 12 months. Gen Z is 25% of our active customers but similar to other retailers in the space, it only represents about 20% of sales. Like Aje, we've done a lot of work in the last 18 months on our brand. The Iconic has been around for 13 years and we rode a wave and grew. But then we didn't really talk a lot about our brand, relying a lot on performance marketing. Over the last year, we've had a lot of changes within our team and have really put the focus back on building our proposition. Hopefully you've seen our latest campaign. It's live at the moment. It's quite bold and colourful and we do believe that this has been key to growing in these younger demographics. Our core shopper would be about 34 to 35, has grown up with the business and she spends a good amount with our shops, eight-ish times a year. What we see is that our new and reactivated customers in the Gen Z age group are growing at a faster rate than the others and we need to nurture them too.
Assia: It's a fantastic campaign. Jane, what does the customer look like for you?
Jane: Very different. At Oroton, we have a very multi-generational customer. It's very hard for us to actually segment what percentage of customers are in certain age groups because one of the things that Oroton is really renowned for is gifting. Handbags and accessories are gifted in rite-of-passage moments through life. And a lot of those people fall into the Gen Z demographic. There's a desire to pass this legacy, this heritage of this brand down and that's one of the ways that we engage first with Gen Z. It's really interesting. It's a very different dynamic. It's not necessarily people first coming to shop for themselves, it's actually that they are experiencing it through gifts.
Assia: Who would you say is your core market outside of gifting?
Jane: The core demographic of who purchases would be around 45 to 60. Again, we have a very long heritage. We are trying to really expand and understand how we can broaden our appeal to a younger audience as well. So, we're looking at how we can use that handing down from generation to generation to bring them through.
Assia: How does that mix look at Adore Beauty? We know Gen Z are engaged in the beauty category.
Sacha: Our target market is a bit older and broader, 25 to 65, particularly because we're so heavily skewed into skin and hair products. Typically those skin products are concern-focused which tends to lean into an older audience. Our fastest growing segment is definitely the 18 to 25 category, and we're looking at that cohort in a different way. So, in the same way that we provide solutions for women and men in the 25 to 65 bracket, we're educating that younger audience.
Assia: What are the key differences?
Sacha: I'll use SPF as an example. We're the strongest advocates of sunscreen use as a daily application. For that younger audience, we focus on this type of education as opposed to trend-driven brands or products. There was a recent trend on TikTok around the popularisation of the tan line. We came out the other way on our channels. Our message was this is dangerous and we informed viewers on the dangers of sun exposure. We use our platform to educate more so than anything else. Looking at the Adore Beauty business, it's 25 years old this year and deeply trusted by its cohort.
Assia: Does that extend to all channels?
Sacha: Yes and the fundamentals stay the same. Take Beauty IQ, our podcast. It's all educational content. You should be able to go to our platform and find advice on how to deal with that concern.
Assia: What about the customer at Modibodi, Kerry?
Kerry: I would say over the last two years, it's been a very interesting journey. When we looked under the hood of our business, we found our average customer age was 35. I found that very surprising and thought it would be younger women who used the product. As a brand, we're 12 years old this year and we've still retained a lot of the customers who shopped with us from day one. Many of those women use Modibodi because of the sustainability aspect, not trends or things beyond functionality. I'm hearing some similarities from other retailers on the table, because I guess we weren't targeting that younger girl and new customer acquisition had slowed. Last year we engaged Fabric, who are part of TBWA, to work on a brand repositioning project. Basically the focus was: How do we acquire new customers? How do we acquire Gen Z and Gen Alpha who are coming into the market? Our belief is once you make a choice around the product you use, you stick to it for the rest of your life.
Assia: Especially for a technical product like Modibodi. How did it work?
Kerry: From a tenure perspective, it was really important for us to focus on sub-29 and that point of market entry. So we rolled out the new brand positioning which was much more mass and a lot less niche. All of a sudden, we were talking to a younger demographic. It wasn't just a brand repositioning exercise either. We had to rethink the entire product roadmap. We can still service that core customer with functional product but bring in some discreet trends, a little sexier underwear. For us, it's a belief that it shouldn't feel like you're having to wear a different type of underwear: it's beautiful, comfortable and functional. So the product roadmap changed, then who we partnered with from a wholesale perspective. We are an 80% D2C business. From that perspective, it's easy to represent who we are ourselves. But third-party channels like ASOS are also really important for us to reach that Gen Z customer, alongside platforms on social media.
Assia: Before I hand to our partners at Afterpay for Gen Z insights, I would love to delve more into social media strategy. Beth?
Beth: Everyone knows how hard it is to acquire customers and grow, particularly through Instagram and TikTok. The way our business is structured at the moment is we have an Aje Instagram account which has 800,000 followers. That's no small feat for a single brand in Australia. During the Covid-19 pandemic, we started Aje Athletica and that was because we couldn't put a pair of tights on the Aje Instagram without it standing out like the proverbial. Now, the Aje Athletica Instagram account has 69,000 followers. It's doing pretty well but we didn't want to go and invest all this money into a third Instagram account. You end up doing business with yourself a little bit. The team invests all this time and your key goal is just trying to get this product in front of new people.
Krista: We had that too. Instagram accounts for beauty, sports. It’s too much!
Beth: It's madness. So, in the end, we agreed that it would live under Aje and that we needed to lead with the main brand. The same with TikTok. It is all on the same account. But the approach is much more lo-fi. We would never really do looks of the day in the office. But we do that for Studio. We don't really film in store for Aje. We do with Studio. When you're using platforms like TikTok, that have a viral effect way more than Instagram does now, that's where we've seen the growth. TikTok has been massively successful and so has out-of-home (OOH). OOH has been effective for us for two reasons. One, the cost of acquisition digitally is just so high at the moment. Two, it feels retro and customers have really responded to that. We've created content off the back of OOH which then goes on to TikTok and worked really successfully.
Assia: Was there any other marketing that had cut through?
Beth: The last thing we did very differently was the type of event we held when we launched Studio. Typically with Aje, it has to be the best venue with the biggest influencers and the best champagne. With Aje Studio, we did the opposite. We went to a super chic and relatively unknown venue, with lots of incredible micro influencers and let people invite friends. You would never do that at an Aje event. What we learned is a need to feel authentic, more community based. There was a conversation about whether Studio would impact the Aje brand. How is an Aje Studio jacket that's $225 going to sit against a jacket that's $600? It just didn't happen. It is a fundamentally different customer.
Assia: How has The Iconic addressed this dichotomy?
Krista: A key part of The Iconic is our owned-brand business. We have 11 brands that we design and produce ourselves. One of the brands, Dazie, is targeted specifically at that Gen Z cohort and I think that has been key for us. It's very low price point; $20, $40, $50 items. This year, we've made a strategic decision to put more marketing investment against our owned brands. We have appointed an organic social agency to help support this and the internal team have quite a role in how we shoot content too.
Assia: Does this compete with the core customer?
Krista: The core shopper for The Iconic overall is a slightly older customer. What we found is that she's not trading down for that cheaper product. Like Beth mentioned, it is fundamentally a different person. We do have some broad personas in terms of the types of behaviours and shoppers we try to attract. There are two distinct profiles. One is Performer: a cohort of customers who are professionals, a little bit more aspirational and want premium brands. The loyalty work that we're doing is targeting their desire for status and exclusivity. That segmentation is not limited to people who are 40 or 50 or more; you can still target 20-year-olds who have that mindset. Again, it's not revolutionary, but TikTok is where they are. So that's where we put a lot of focus. This segment is our highest spending customer. The other core segment for us is Harmoniser. That's the cohort that wants to be told what to wear. We find content like ‘Style three looks for under $200 by our head of style' and 'Get Ready With me' effective.
Jane: We’re also doing a lot of brand work and looking at that attitudinal thread, because otherwise you get stuck. All 18-year-olds are not the same, all 25-year-olds are not the same, but what are the consistent and cohesive attitudes that customers have that we can tap into? We use different channels and some slightly different formats to address this. High-end OOH and then other more lo-fi content. We do a lot of experimenting with how you can sequence and coordinate OOH campaigns, then influencer-led work showing 'what's in my bag'. It's just about the constant drip feed of different elements in the right channel, but most of them we try and thread together with the right consistent attitude and message.
Assia: Are there other channels you're exploring?
Jane: We're starting to dabble in a bit more TV. Not necessarily traditional free-to-air, but BVOD. We recently created a campaign where we had assets to use in those channels. Previously, a lot of our video content was beautiful vignettes, which don't really translate in those spaces. We created a campaign with Australian sailor Jessica Watson and we had a great response from all ages. It was around a sustainable tote bag that we produced with recycled plastic bottles. We put Jess on the Oroton Drumfire boat and she sailed in the Sydney to Hobart race. We made a documentary and even extended that into PR as she spoke to different media channels.
Assia: What made you think about shifting into BVOD as a change?
Jane: Trying to reach a new audience. We started playing with YouTube pre-rolls as well. It's a really nice brand piece because we're actually not selling anything in it. We're telling you to come watch the documentary, which is eight and a half minutes on YouTube. It is a different way to invite people into a story, rather than doing something traditional that is just about selling a bag.
Assia: Kerry, how have you shaken up Modibodi messaging?
Kerry: When I was hearing the story about Sydney to Hobart, I was reflecting on the campaign we did around shark diving. It debunked the myth that if you have your period and go swimming in the sea, you're going to get chomped by a shark! We worked with Brinkley Davis on that campaign, who is a free-diving shark diver. We gifted her a Modibodi one-piece and she did a deep dive with a camera attached. She was right there with sharks. It was next level. The production value of it was magical. Jane, your story reminded me of it. A strong woman who's out there empowering other women. I think it's fantastic. I would say we are a big OOH fan at the minute as well. Last year, we optimised opportunities with distressed media. I think it definitely reignited the brand in front of people.
Jane: It feels a bit disruptive, doesn't it? All of a sudden, you start seeing it in unexpected places and it gives you that salience.
Kerry: Yes, totally.
Beth: And if you time it with your message, it amplifies what you're doing. Sometimes you can sit in the digital space in a bubble.
Assia: Is it harder as a DTC brand to reach that customer?
Kerry: Yes and no. I say yes, because you can control the narrative. You can control how you show up on your website. But then on the flip side, because we're only just now growing our physical bricks and mortar wholesale presence, it's really important for us to use third-party channels. It's a way to reposition us, tell our brand story and educate the market. A lot of people still think, ‘I don't get it, I don't understand, how does this work?'
Assia: You mentioned 80% is DTC and 20% is partners. What is your global reach?
Kerry: We are number one in the category in Australia, the UK and Israel. We operate in 72 markets in total. I can't really speak to why that split has happened historically, but moving forward, we have identified specific regions that have an accelerated growth profile. And that's definitely the UK. The UK is investing in the category and it's seen as a long-term solution for women because it is sustainable. While it's more in its infancy than Australia, we're definitely contributing to that growth trajectory. We work with a government organisation to supply products into 21,000 schools.
Assia: Sacha, have you tried any unique marketing activations to tell the Adore Beauty story?
Sacha: Customers love our goody bags, so we recently did a scavenger hunt around Melbourne and Brisbane. We'll do one in Sydney at some point in time too. Similar to Aje and their Gen Z strategy, it leans heavily into TikTok-friendly content and that consumer loving brand engagement and community. I think for the younger girl particularly, and talking from previous businesses I've been in, it's all about the power of UGC. In that business, we had a thousand followers - not influencers, not even micro influencers - that loved to get seeded product and genuinely creating content. The authenticity of it was what resonated. It was rough and it was uncut. I think Jane, you touched on it before, that customer doesn't want to be sold to or spoken to. They want to make their own decisions.
Assia: Afterpay did a big research piece around how Gen Z is shopping. Would you find the insights shared today quite consistent with that?
Kevin: Yes, definitely. I think a key theme in our research is also around algorithmic overload. The idea that you search for one thing online and suddenly it's chasing you forever until either you switch off or you finally buy it. And even if you do buy it, you still get served the ad for another three months for the exact same product. What we found with Gen Z in particular is that this algorithmic overload is forcing them to want to switch off. A study done by Gartner found that 50% of Gen Z's are looking to decrease their social media activity because they're getting overloaded and bombarded. 73% are overloaded with just the content that's coming through and having to stay up to date with everything. They're looking for more genuine connection and engagement with brands. For Afterpay, in terms of how we've looked at that in the work that we do, we've also started leaning into activations as well, as you were saying, and finding really genuine ways to connect with audiences.
Assia: Can you give me an example?
Kevin: During the Laneway Festival this year, we had front row access for Afterpay customers so they could get to the front of the stage and see all their favourite artists. Last year, we did a great collaboration with Spotify where we enabled listeners to blend their listening data with a few questions that they answered. It created a personalised Christmas product list that they could share with their friends so people knew what to give them. It’s about finding different ways to connect with them, cut through and build that engagement. We've also got a huge social content influencer strategy that's a great avenue for us as well, predominantly through TikTok and Instagram but also Snapchat. We find that the reach that we're getting there has far greater CPM's than most other channels, and then recall and salience is really strong through that channel as well.
Assia: That's amazing, Kevin. How are we making it easier for customers to shop?
Beth: We recently rebuilt our eCommerce back-end and that has fundamentally shifted our checkout process. It's right back to being a one-page checkout. Once again, we were doing business with ourselves. We also went from having three different checkouts for three different brands to bringing it back into one website. It's about getting her through as fast as possible and removing all of the upsell and friction points. It's a balance. Of course you want to show that you've got Reloop and all of the things, but we found that getting her through faster seamlessly offset any of the benefits of the other bits and bobs. From a business perspective, we've also built the website in a way that we can test and change things quickly instead of going through an agency. There are so many tools that pop up in that entrepreneurial digital space and the ability to plug and test them quickly is essential. That way, you're not putting it in a roadmap for six months and paying $25,000 just to trial a new refund tool, for example. We also implemented Kepler, which is effectively foot traffic counting in-store, about 18 months ago and that has been a powerful tool for us to benchmark retail data. Particularly when you've had a centre that's been firing and then all of a sudden it's not. Is it my team? Is it the product? What's happened? So that's been really, really powerful.
Krista: There are two things in particular that we've done for the on-site experience: one is multimodal search. About five per cent of our searches were null searches. Now we use large language models to help understand how people engage conversationally. For example, previously the result was zero for “Beach themed party dress”. Now you can use multimodal search to see some results. Search and discovery is one of the areas that our customers tell us is a big focus. People are overwhelmed and I get it. We've got 180,000 items on site. Another enhancement that has been rolled out is metadata search optimisation. Effectively, it's using AI to tag a product with more of the elements than is listed on a CMS. The quality of search results that I get when I use the search function on The Iconic is much better than it was. I could now do short sleeve linen dress with pockets, and I'd get better results than what I would have before, because it's tagging more attributes.
Sacha: The key focus for me has been AI, particularly in the last six months. There are three examples of where we've deployed AI and had different, interesting outcomes. We recently deployed AI to rewrite all of our product pages and improve our SEO. We've got about 18,000 SKUs online: 10,000 are active, 315 brands. Krista, the example you gave around more attributes in the search is great, we saw a conversion improvement too. We then took a similar group of products and got them manually written by a human. While we saw improvement on conversion on all 15,000 SKU's through the AI model, we had a fourfold improvement in the same result from a human doing it. That was really interesting because we looked at AI as a total solution. Now we're doing a combination of both, but it was an interesting example of AI being a tool, not an end.
Jane: It can be like 70%.
Sacha: Yes, let's do all of that for 15,000 SKUs and then take the top.
Beth: It's only as good as what you put in. We've been on this journey too.
Sacha: Exactly, take the top 20 that make 80% of revenue and do those manually. That was a really interesting journey.
Kerry: What was the key difference between what AI was taking out?
Sacha: Tone of voice.
Beth: Yes and just the flavour, feeling into it and having the romance.
Sacha: And we have our tone of voice. Over time, no doubt capability will improve. The second example is we introduced our AI chatbot about four months ago. It is now handling about 62% of all customer contacts, which is phenomenal. That just blew me away. Of course, my first response to that was fantastic. We've got a CX team of about 40 odd people and my immediate response was great, we can see some real efficiencies in our labour costs in servicing customers through our call centres. But actually, the opposite happened. What it enabled our call centre teams to do was spend a lot more time talking to customers about products. They were answering a lot more calls that we previously weren't getting to and driving deeper engagement with our customers.
Assia: What was the final case study?
Sacha: We've just partnered with a company in Melbourne called 'Black AI' for our new store in Southland. The site is completely digitally enabled and the technology covers store traffic, outside traffic, counters and conversion. All our pricing is digital through tablets on every shelf - and all of the screens that are located at the front of the store, through the store and brand-specific locations have all got identifiers.
Assia: What has that allowed you to do?
Sacha: As you walk through the store, it is identifying your form as a unique person. You're a digital fingerprint essentially, and the AI is connecting your store experience. For instance, if we had a L'oreal ad that was on screen when you entered, did that prompt you to that brand area and result in a conversion? What was your journey? It's understanding the customer, as we do so well online. One of the things we want to do in our store is it has to represent our online experience.
Assia: How else are you doing that?
Sacha: At the moment, we're using our online content in the store. Will we get a different response if we start to provide different content? Are customers looking for motion? The AI brain is analysing that, watching people in store and how they're interacting with products. It's looking at how they're engaging with the screens and over time, learning. Did it change their shopping behaviour? Ultimately, we'll then be able to sell retail media from it.
Assia: So you’re looking at a retail media play further down the track?
Sacha: We've got a great retail media platform online and we have a productive outcome for our partners because we're able to provide deep data. I want to be able to do the same thing in store. One OOH vendor could say they had 10,000 people walk past a billboard today. I want to be able to say 10,000 people walked past our store and we also had a 4% conversion. That is tracked directly to customers that walk past the store, how many went into the store and then transacted.
Assia: Quick side question, how did you find out about Black AI? As Beth mentioned, there's a new digital magic tool every second.
Sacha: Well, much like you guys, we've got really smart people in the business, much smarter than me. Surround yourself with people that are smarter than yourself. We've got a couple of data scientists that work in our business. This was a project that they hooked up and worked with a local AI company to develop the concept.
Assia: Very cool. How is that tech play looking at other ends of the table?
Jane: I'll be honest, we're at the beginning of our journey in rebuilding a significant amount of our technology. I started around a year ago at Oroton and our new CTO started at a similar time. We are in lockstep, we're doing a lot of website rebuilding alongside our partners at AKQA. We're looking at all our basic technology at the moment and making sure that we get the most out of it. Often you'll have an existing tool and not even be using 50% of it. For example, our CRM system. One of the first things I found is that we had a great database of customers that are active - and some inactive as well. With active customers, we didn't even have all of their mobile numbers. So if we were building SMS campaigns in order to sequence it with different emails, we weren't even targeting half of the audience. Literally it was like 10%. So little things like that. Making sure you're actually using the tools you have first, then layering on top. Otherwise what happens is that people just add and add. Then you end up with this spaghetti junction of tools and pieces, but you're not using any of them to their best ability. So we're building at the moment to maximise what we have and optimise for the future.
Assia: This is such a common theme in every roundtable and one that Beth mentioned earlier. There's a new tool every second. It's about utilising what works. What is that for you Kerry?
Kerry: We actually have several websites because they're all unique. One for Australia/New Zealand, one for the UK, one for France, one for Germany, one for the US. Everything has to be really curated. We've gone down the translations path. This is our second time. The first time, they didn't quite get the translations.
Beth: You can't trust Google Translate.
Kerry: No. So we've integrated into customer care, we've integrated into the website. I'm a little tentative about it as well. I think that it has its place and where we've seen real benefit is cross sell, upsell, understanding just the customer journey. But I think the standout for us was we use a media attribution tool now. In the past it was like: oh, let's look at GA and let's look at Shopify. Every single channel was telling us a completely different story.
Beth: They all have different attributions.
Kerry: Yes. Can we just have one source of truth? And I actually think it fundamentally changed our DTC business. Because the biggest problem we have as a predominantly D2C business, is that we're spending an extraordinary amount on performance media. It's eye watering. And it's even more eye watering if you don't know what's working.
Beth: And how do they work together? Because often, a lot of the tools are very much just multi-touch attribution.
Kerry: A hundred percent. I'd say having more data and insights led people in our eCommerce team has been such a game changer. That knowledge, when it's transferred into performance media strategy has been a game changer for us.
Assia: There are so many tools at your disposal and as Jane mentioned, it's about maximising new and existing strategies to drive effectiveness. I'd like to thank you all for sharing those tools and an insight into how they're helping you capture the next generation of consumers. Thank you also to our friends at Afterpay for making this gathering possible.
(This roundtable has been edited for brevity)
This transcript has been edited down for brevity.
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