Up Next In Commerce

By Mission

Listen to a podcast, please open Podcast Republic app. Available on Google Play Store.


Category: Marketing

Open in Apple Podcasts


Open RSS feed


Open Website


Rate for this podcast

Subscribers: 14
Reviews: 0

Description

Welcome to the #1 podcast for eCommerce teams, executives, and entrepreneurs. Join host Stephanie Postles as she sits down with eCommerce leaders on the front lines of digital innovation. With guests from established enterprise companies to D2C start-ups barely out of infancy to everyone in between - you’ll get the inside scoop on what’s Up Next in Commerce. New episodes come out every Tuesday and Thursday. Up Next in Commerce is created by Mission.org and brought to you by Salesforce Commerce Cloud.

Episode Date
Catalogs Are Not Dead
49:07

In this digitally-native world, it might be surprising to learn that an old-school marketing tool is actually one of the most effective customer acquisition and retention tools. 

On this episode of Up Next in Commerce, Renee Lopes Halvorsen, the VP of Marketing & Ecommerce at Marine Layer, joined us to dive deep into the merits of catalog marketing. Renee cut her teeth in the marketing, eCommerce and omnichannel world at the Gap and Athleta. Now she is guiding the team at Marine Layer using a data-driven and blended approach to marketing that has led to profitable customer acquisition, high lifetime customer value and retention, and a fully engaged customer base that is coming to stores with more buying intent than ever. How is she doing it? Find out on this episode.

3 Takeaways:

  • Long-term vision is key: You can spend a lot of time and money on the “cheap thrills” of marketing promotions, but those customers will never repeat buy. Instead, focus on retention and getting those high-value customers. 
  • Catalog Crazy: There are certain page and product count requirements that will determine whether or not a catalog is the right tool for a company. When those numbers are met, though, there are few better avenues to tell your brand story and drive conversions… and it may even perform in ways that an Instagram ad never could
  • The cost to acquire customers: There is a high amount of risk involved when you acquire customers at a loss. You can predict customer behavior pretty accurately in the short term, but predicting long-term trends and purchasing is much more difficult. Therefore, it may not benefit you to model out a one-or two-year strategy toward profitability when it comes to customer acquisition.

 

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Welcome everybody to Up Next in Commerce, the number one show for all things eCommerce. This is your host, Stephanie Postles. And today, we're chatting with Renee Lopes Halvorsen, the VP of Marketing and Ecommerce at Marine Layer. Renee, welcome to the show.

Renee:

Hey, Stephanie, how's it going?

Stephanie:

It's going well. Yeah, excited to have you on.

Renee:

Yeah. I'm excited to be here too. This is my first podcast, but I'm an avid podcast consumer. So, I'm excited about this.

Stephanie:

Oh, we are very eager to have your first. So, I saw that you have a very interesting background of working at some good name brands, and I was hoping we could start there where you tell me a little bit about some of the previous work that you've done, and what brought you to Marine Layer?

Renee:

So, I've been at Marine Layer now for about five years. But about before that, I spent eight years at Gap Inc. I graduated college and like a lot of my peers, thought it would be a good idea to get into investment banking. But then about a year and a half of that, I was like, "What am I doing with my life? This is exhausting, and I'm not particularly interested."

Renee:

I think I was working on a petrochemical deal at one point. So, I wanted to join a company I was excited about and I found Gap. They were hiring in San Francisco. And Gap is amazing because I think they give you a lot of opportunity at the entry level to move around in the organization. So, I feel like I really got a rad retail background experience in all things.

Renee:

I started in real estate finance, and then I was able to join a corporate strategy team, where we were really looking at international expansion opportunities for Gap Inc and acquisition opportunities. And then, after about a year and a half of that, Gap Inc had just acquired Athleta brand. And I was a female athlete in college, always a huge advocate of women in sports.

Renee:

So, really wanted to join their team in whatever capacity I could get my way into the organization. And they were hiring in marketing strategy, which was ended up being perfect for me. Because I think I have a real passion for business analytics. But then, I also love just consumer trends, and consumer behavior, and just how those things roll up on a macro level.

Renee:

So, I joined the marketing strategy team. It was initially brought in to really look at a lot of the ways that Athleta was spending their marketing spend, and inform if they were overspending. I think Gap was particularly concerned about how much I thought it was spending on their catalog. So, they wanted more of an objective strategy team to look at that investment, and prove out that it was really driving incremental demand.

Renee:

And it ended up just being like the most incredible experience. I spent close to five years there, and started looking at the efficiency of catalogs to drive incremental demand. It ended up being when digital marketing was really taking off as an acquisition channel, and retention channel. So, spent a lot of time also weigh out what's a stronger growth tool catalog, or digital marketing.

Renee:

I was there and they're opening up a lot of their stores. So, I was thinking a lot about omni channel, customer health. So, love that job. And I think after spending a little while, it's like, "Gosh, I want to take all this newfound knowledge, and apply it to somewhere that's in a younger growth stage." And ended up meeting the CEO of Marine Layer, we hit off.

Renee:

He told me that he really wanted to start a catalog, and I was like, "Gosh, I think I'm probably one of the youngest people in our industry that knows a lot about catalog."

Stephanie:

Yeah. I haven't actually heard that term in any of the interviews referencing at catalog.

Renee:

Oh, yeah, it's funny. It's like an offline way to really do customer look alike modeling. I think people think of it as super old school. But when I look at what's happening, like on Facebook, or within digital marketing generally, it's the same things that the catalog industry has been doing for 30 years.

Stephanie:

How interesting.

Renee:

Yeah. It's just like using customer LTV assumptions to inform how much you're willing to spend to acquire a buyer. That's the core principle that I think has been a part of catalog investing for 30 years. And I think now, that's a huge part, that's the biggest part of a digital marketing acquisition too.

Stephanie:

Okay, cool. So, what learnings did you take from Gap, especially around the catalog versus digital marketing, and bring to Marine Layer?

Renee:

I think my biggest takeaway was actually the importance of not being promotional. And the importance of being really focused on long-term customer health.

Renee:

It was like a stark contrast for me, I think working in the Gap, Banana Republic world, and then shifting over to the Athleta world where they had super, super high percentage of their transactions happening at full price. But I just think getting into a discount space, it's a super slippery slope.

Renee:

And I think it was so exciting to watch within the Athleta environment that you might have to spend a little bit more on marketing, spend more on brand, but what you end up driving is really high rates of retention. I think it makes your business a lot more predictable, and healthy in the long term. So, it's super high level, it's focusing on long term brand health versus finding those cheap thrills with little promotions here or there.

Stephanie:

Yeah. When you joined Marine Layer, did you have to shift your thinking because I'm thinking the people who are at Gap or the consumers of Gap are maybe different than Athleta versus Marine Layer? Have you seen different buying profiles, and ways to connect with that audience, and get people to buy full price?

Renee:

So, Athleta and Marine Layer actually were more similar, but definitely Athleta and the other brands, I think are super different. The AOVs are pretty similar for Athleta and Marine Layer. I think the other category tends to be a really big driver of retention. So, it's known in our industry that if you are a bottoms-focused purveyor that you generally have a higher retention rate.

Renee:

I think that's what it benefits from being a bottoms-focused activewear brand. So, the retention rate is a little higher than what I was expecting coming into Marine Layer.

Stephanie:

How did you shift, yeah, when the consumer is may be different. Marine Layer and Athleta, you're saying are similar. Versus Gap, maybe they are used to sales and things like that. How do you shift your strategies and your learnings that you took from those two brands to Marine Layer?

Renee:

Yeah, okay. Absolutely. So, I think it's really around how you focus on measurement of your marketing channels. I think when you're focusing on discounting, it's pretty easy to focus on what was the comp over last week, or how many units have been moved through? But I think when you're focusing on long-term premium brands, you're really focusing on was it incremental?

Renee:

Could I have gotten more in the long term if I'd done it differently? What was the impact to customer LTV? What's the quality of customer that I'm bringing into my brand? I guess a big difference is that for Marine Layer, we won't do a lot of promotions in the acquisition stage. Because it's been proven for us that if you bring in a customer, or a lower price point item, or a lower overall transaction, or just a bigger discount.

Renee:

Those buyers won't repeat buy from you. So, basically, you've wasted that unit in selling to them on their first transaction on a buyer that's not going to be a big part of our brand a year from now. So, it definitely changes the marketing channels that you're looking at, and also changes the way that you measure them.

Stephanie:

That's a really good point about not showcasing maybe, like here's our discount $3 item, and then wondering like, "Oh, hey, why didn't they come back and repeat buyer, or where'd they go?" That's a really good point.

Renee:

Yeah. And even more recently, we've been having a lot of internal conversations on whether or not we should be selling our cloth face coverings in digital acquisition tools. So, you're probably seeing there had been a lot of brands out there that are including them in the way that they're trying to bring in customers to their brand. Our face coverings as a company are very reasonably priced.

Renee:

We're doing them more as a service than a real growth driver for our business. So, I think if we put them on our paid social channels, and use them to acquire buyers, I'm sure it would get a lot of acquisitions. But I just don't know how healthy those acquisitions are a year from now. I don't know if they're going to be buying from us in 2021 and 2022.

Stephanie:

Yeah. That long term vision. So, well, maybe before I keep having you dive deeper and deeper, it'd be good to have you tell people who don't know what is Marine Layer and what is your role? What is your day-to-day at Marine Layer?

Renee:

Yeah, absolutely. I get so excited talking about marketing. It's easy to forget the high-level stuff.

Stephanie:

Oh, me too. I was great after 1,000 more questions in the week. I'm like, "Oh, wait, we probably should talk about the brand first so everyone knows what you do."

Renee:

Totally. So, I'm the VP of Marketing and Ecommerce for Marine Layer. I joined the company five years ago as our Director of Ecommerce because Marine Layer was actually, it's a DTC emerging DTC brand, but grew at store base faster than it grew its Ecommerce business. When I joined in 2015, we had 10 stores. Now, we have 45.

Renee:

And really, our online channel was considered something to help with replenishment for people that were acquired in store, and then they wanted to buy it again online. So, I think that's where my role started. Over time, we just started building out these new marketing channels to drive online growth separate from the retail channel.

Renee:

So, my responsibility started to include more and more marketing functions. And then, more recently, I've started also leading our creative and brand teams, which I really, really loved doing because I think there's so much value in finding good tension between big brand ideas, and then long-term health of brand, and near-term sales goals.

Renee:

I guess zooming out again, Marine Layer is a casual clothing apparel brand. We are based in San Francisco. Our company was founded in 2010 because our CEO, his girlfriend threw out his favorite shirt, and he set out to recreate that incredibly soft, broken in shirt. And he did that. So, it was really founded on the best ever men's t shirts. Our shirts are just absolutely absurdly soft when you touch them. They make a wreath-

Stephanie:

Yes. I can vouch for that.

Renee:

That's awesome. And then, he started expanding the assortment for men's beyond t-shirts. And then, I want to say a few years later than that, he started expanding into women's shirts. It's definitely more of a tops focused business than bottoms. Although now, we have some really strong business in women's bottoms in particular.

Renee:

But now, it's a full assortment of California casual. We really focus on making everything comfortable, soft. We want it to be your favorite. We talked about the importance of it being like a top of the stack t-shirt, the go-to item that you go for. You're looking for it when it's coming out of the dryer because you want to wear it even though you have other ones in your closet.

Renee:

So, there's a lot of intention, and love, and care that goes into every single item of clothing that we make, whether it's a dress, or a t-shirt, or outerwear. It's really just around creating timeless, emotional, comfortable pieces.

Stephanie:

That's great. So, how do you convey that messaging on your website about how soft the fabric is? What techniques do you use? Especially, since you just got into helping tell the brand story, and the product stories, and all that. What are you finding works when it comes to talking about something that ultimately, it'd be nice to touch before you buy it? But if you can't do that, how are you conveying that message?

Renee:

So, lots of little ways. I'd also just definitely say that this is something we're always working on improving as the technology changes a little bit online. I think for us, it's communicating that our stuff is special, and that it has a fun, emotional connection to your stuff. It's not just any old t-shirt. We want you to feel like our brand is maybe an old friend of yours, or it's a comfortable place to be.

Renee:

So, it's in every single tiny touch point. The models that we use, how we style them, the copy that we write for our shirts, it's not going to be just like a bunch of bullet points with the fiber makeup of the shirt. It's going to be describing what you could put in the pocket, or where we used to wear this shirt, or what it was inspired by. Our model notes I think will be like so and so is a size medium, and 5'10", but he also plays in a band on the weekends. It's really. I think-

Stephanie:

That's right.

Renee:

And bringing the product to life in a way that feels unexpected, but then at the same time, just familiar and fun.

Stephanie:

I love that.

Renee:

Yeah. I think we'd like to play with more ways to test video on our site to really convey softness. And then, the other thing I would just say is that I think our store experience is a really big part of our brand experience. And I do think it's what makes our site so successful. Our best customers, this is true everywhere, but are the customers that shop online, and in store.

Renee:

And I think it's because those customers have the benefit of touching our stuff, interacting with like, are extremely friendly, and mellow store associates, and they understand what's special about it, even without the context of the site. And yeah, and then I'd also just add that it's another reason why I love catalog marketing.

Renee:

Because it just gives us more space to express the fun of our brand, and show off our lifestyle beyond just what you see in a flatter online experience. We love just shooting and fun inspirational locations. Our copy, I think is so funny and on point. I always love when I read the first draft of catalogs coming through that they can just make me smile. So, yeah, it's a multitouch approach to really bring that softness to life, even if you're not in store.

Stephanie:

That's great. Yeah. I definitely am in the same camp that if copy makes me smile.

Renee:

Yeah. Shopping should be fun. I think that's a big part of what guides our store experience and our site experience. We don't want to over iterate on it. We don't need to be the most innovative provider out there. We just want it to be fun, and make you smile where we can, just bring a little bit more joy into your life. Not in a cheesy way, but just an honest, approachable, fun way.

Stephanie:

Yep. Yeah. I think Trader Joe's does a really good job too with the pamphlets they send out.

Renee:

Totally.

Stephanie:

And I've either read them, but they have really good copy in them. And you also learn something, and you're smiling throughout it, and you're like, "Oh, I want to buy that bag of plantain chips also."

Renee:

Yeah. And I think it makes a lasting impression. When you're thinking about where you're going to go shopping, you're like, "Gosh, I guess I'll go to Trader Joe's." We think really intentionally about our promotions that way too. We don't want to do a sale and have it just be a sale. The lead story can't just be 70% off, although we would never go that deep, or even 20% off.

Renee:

There has to be a story behind it. Is it a funny story about a dad joke if it's a father's day story, or is it like, "Oh my gosh, my favorite promotions we ever did was when there was a blackout in San Francisco." Probably like, I think we all woke up that day, and nobody had any power. And we all came into the office, terrible shower situations, looking terrible.

Renee:

And we're like, "Let's just do a blackout sale, a sale until the lights come back on." And I think there's a shared experience that you have with your customer. And it makes your content just more memorable and honestly, I think people are more likely to participate with a smile on their face.

Stephanie:

Yeah, yeah, I completely agree. So, we mentioned catalogs earlier, but I want to dive a little bit deeper, because like I said, you're the first one who's come on the show who's really mentioned it, and talked about this. And I'd love to hear about how you think about brands, should they or should they not have a catalog? How do you measure performance, and how do you think about that as one of your acquisition or marketing channels?

Renee:

Yeah. Great, I love talking about catalog, so we can do this all day. I think it's a real great way to drive the story of a brand lifestyle. So, I feel like that lets you know right off the bat. It's not just a product, if we're just talking about a couple of skews that we're building on top of, then I think it's hard to pull together a catalog.

Renee:

But if you have an assortment of over 100 items, and there's a lifestyle component that you're trying to celebrate, then I feel like there might be good space for you to test into a catalog. I think it can also seem super intimidating from a cost standpoint, but there's ways to pull together photoshoots in a super scrappy way.

Renee:

Gosh, I think the first catalog Marine Layer I ever sent out, we use models that were good friends of the brand, and we shot locally, I think in the woods outside of Calistoga. So, it doesn't-

Stephanie:

Great.

Renee:

Yeah. When I was at Athleta, the budgets that we had for catalog content were much, much bigger than the type of stuff that we do for Marine Layer. Although, we have definitely professionalized our setup a little bit more. So, I don't think the creative cost needs to be super big. It's more about making sure that you have the breadth of assortment to support a catalog.

Renee:

And I think in order to send something meaty out there that's really going to drive results, you want to send out at least a 44-page catalog. So, that's where I'm getting to, like you probably want about 100 different styles that you want to market in there. So, yeah, we started mailing catalogs in 2015. And our books are about 44 pages.

Renee:

And now, our assortment has grown, and so as our catalog page counts, and also our catalog meal frequency, and I think what's really powerful about them is, again, just making that lasting impression on a customer about who you are, and what you stand for, and the breadth of assortment that you make. I think people really knew Marine Layer as a t-shirt brand and the catalog, especially for online buyers.

Renee:

And even now, people that maybe buy their first product off of Instagram or something like that, and it's just one item. It just shows them how much more we do, and what we're excited about. I think-

Stephanie:

That's great.

Renee:

They're also very easy to overlook, as I'm sure once people start sniffing around at the cost per piece, and the CPAs associated with catalogs, they're not cheap. But what I found at Athleta, and definitely at Marine Layer is that people that you bring into the brand on catalog tend to be a lot more productive in the long run. So, they're much, much healthier buyers than somebody that we may be acquire through an Instagram ad.

Stephanie:

Very cool. So, what is the average CPA to expect if someone were to start a catalog, and how do you track that incrementality, and ROI on that?

Renee:

It's going to vary for so many different reasons, but gosh, I feel like anywhere between a $70 CPA to $100 CPA would make a lot of sense. I feel like people are always so fascinated by how you do catalog tracking. I always get questions like do you just track all the orders that come in through the phone?

Stephanie:

Oh, my gosh, I wasn't going to ask that. I'm interested in tracking, but I wasn't like, "Are you talking to people on the phone?"

Renee:

No, no, no. No one is calling in to place orders. A couple of people do per season, but it's not like you're getting tons and tons of people calling in to place orders. It's more about like you're in the catalog match back process. So, you will know who you mailed your catalog to. And then, you can use third party providers to help you understand with all of the orders that were placed in the last two to four weeks when the catalog got in home.

Renee:

How many of them matched back to somebody who received a catalog? And then, I think beyond that, once you start mailing a little bit, people can start to ask, well did these people place an order because they received a catalog, or because I launched this new collection? And then, I think you can start to holdout testing to see for the folks that mailed a catalog versus didn't mail a catalog, how powerful was the catalog for driving new demand?

Renee:

So, all those things are things that you can do to measure performance. But in my experience, I think and in talking to other industry professionals, usually the first time you mail a catalog, you feel it. Your business was operating at a certain level for the last four weeks, and then all of a sudden, it's operating a different level for the next couple of weeks. So, that's good.

Stephanie:

Are you mailing catalogs to only current customers, or are you also doing people who've never bought before?

Renee:

So, we do a mix, and we do to new customers, and to existing buyers. As an existing buyer, I think it's a really good retention tool. And it was exciting, we've been measuring CLV for a while now. It's like you see the CLV of our brand for the average customers brought into our company. And then, when that catalog started getting mailed in June 2015, it just moves up, and then it starts at a new baseline.

Renee:

So, I definitely feel like it shifts our retention of our buyers. And then, we also do it for customer acquisition. So, we work with data co-ops, where we can rent names. So, we never actually take possession of those names. I don't know who I'm mailing, but I just know that I'm mailing customers that look like my customers.

Stephanie:

Very cool. Yeah, that's great. When it comes to performance, if a lot of people come in, and they have their digital marketing hat on, and you're talking about catalogs, how should someone level set expectations for here's the type of performance and ROI you can expect with catalogs versus digital marketing? How do you level set that?

Renee:

Yeah. I think we look at the CPA-LTV ratio. So, over a three-month time period, or a six-month time period, or a year. So, even though your CPAs are going to be higher for your catalog and for your digital acquisition business, I would expect that your LTVs will be a lot higher too. So, for us, the ratio ends up working out the same, or in a lot of years, sometimes even the ratio is a little higher for catalog.

Stephanie:

Got it.

Renee:

The complexity of catalog too that I just want to throw out there is definitely less nimble, which is, I think, frustrating for a lot of new age DTC folks. You have to send your catalog, create it about a month in advance, and you can't always control exactly when it gets in home. If there's a tornado, then the post office is going to mail it to certain post offices across the country.

Renee:

And so, I think what can be frustrating is that you can try to get it right in the catalog creative, and then when the catalog gets in home, maybe you're sold out of a certain item, or you didn't get something, you have to presell something because it's not actually available when you thought it was going to be available.

Renee:

All those little things that are hard, like those bigger moving pieces, they can really impact catalog performance. And I think with digital marketing, you can be just like super nimble. If the item is not in stock, you just don't market that item. Pros and cons to both.

Stephanie:

Yeah. That makes sense. So, in our research, I saw that customer lifetime value is your number one metric. And I was wondering, are you willing to acquire customers at a lost? And if so, how much are you willing to take on?

Renee:

So, we don't acquire customers at a loss. We focus on being profitable upon acquisition, or I'm sorry, being profitable upon acquisition, or zero to positive dollars coming in on the first transaction. That's changed over the last couple of years. I think in some years, we've let it get up to about a zero to six-month profitability time window.

Renee:

So, we expect to be back in black, six months after customers are acquired, I'm not an advocate for one year to two-year time periods. I just think there's too much risk involved. I have a pretty good idea what's going to happen in the next six months, and customers can be pretty predictable. But to focus on those longer time horizons, I don't know.

Renee:

That's just never really been my appetite for risk, or my company's appetite for risk. But I really feel like that decision is just a super specific decision made for every company based on where they are in their growth stage, and what access to capital they have. I think it's changed For Marine Layer.

Renee:

And I think it's fun for me now that we're focusing on being profitable on acquisition or better because I can take those dollars that we're getting at the first acquisition, and I can invest them in new tools, or I can invest them in improving our brand. And so, it feels like a healthier ecosystem for us to operate in.

Stephanie:

Yep. Yeah. I completely agree. It seems like a better approach, especially with everything that's going on right now.

Renee:

Oh, my gosh, I know.

Stephanie:

It's hard to predict going to happen next month, which makes me want to ask the question, how are you guys moving forward in this COVID environment? You were mentioning retail locations before, what's changing, and what are some things that you're doing differently going forward?

Renee:

Yeah, gosh. It's so funny because recently as a leadership team, we were looking back at our goals for the beginning of the year, and asked to rethink those, given that everything's changed. And the one that stood out to me that makes me laugh now is I had some goals around doing bigger campaign marketing planning. We're a really scrappy organization.

Renee:

And sometimes in January of this year, I thought we were almost too good at whipping things into shape last minute, and reworking copy, or reworking direction of campaign really close to the finish line, to the point where it inhibited our ability to tell bigger stories across more marketing channels. But now, I'm like, "Oh, my goodness, it's an awesome value and strength to have to be really, really nimble."

Renee:

Our big change for us during COVID is that we're really reviewing all of our emails, really close to when they get sent. We're not trying to create content on a Monday and send it on a Thursday. We might create a first draft or something on a Monday, but we'll keep reviewing it and make sure that the voice, and tone, and products that we're featuring all mix in up until a few hours before final send time.

Renee:

So, we're definitely just reviewing content, and we're also talking to our customers more frequently. I think in March, when everything was changing so quickly, and also our business was seeing a lot more softness, as I think COVID was becoming a huge, huge, huge reality. And the change was we were experiencing it personally, and our customers were experiencing it.

Renee:

There were moments when it just felt like you were paralyzed into not wanting to do anything, not wanting to send an email because you weren't sure what to say, or not wanting to post on social because you didn't know what to say.

Stephanie:

Yeah. I saw so many articles about that too, like how should your brand discuss COVID, and it's tricky because you can get in trouble for anything these days, and it feels hard to take a risk on any messaging, or yeah, move forward at all.

Renee:

Oh, totally. And I feel like I even had conversations with my CEO about pulling entire catalog mailings, and just like these very, very huge changes that weren't just about the next couple of weeks, but longer-term stuff too. And what I think worked for my company is to just not stop, to keep moving in the dark room. There's that metaphor when the lights go off, and you just stop.

Renee:

And we just didn't do that. We forced ourselves to write the really hard email copy. And I think we used to have like me and my copywriter, and my CEO review copy. And instead, we invited the larger group to really help us think through what felt right. And that really helped. We started emailing more frequently.

Renee:

So, rather than sending emails two to three times a week, we started emailing four to five times a week. Just because it felt like rather than sending these huge, big, long stories, we could just tell these smaller-point-in-time stories, and just keep our finger on the pulse more often. And that seemed to really work for our customer.

Renee:

And then, I also think we just force ourselves to try new ideas that we've never tried before, and make them work. We ended up shooting a catalog entirely in studio because we couldn't get outside. And it actually is one of my favorite catalogs we've ever created. So, it got-

Stephanie:

Oh, that's great.

Renee:

... May of this year. And I feel like it just forced our creative team to just think differently about everything we were doing. And it was really raw and vulnerable. But it's really awesome, and you see that it yields great content. And then, I'm also really proud for my company to speak up around Black Lives Matter. I think, as a company, we've definitely made it known that we're more of a progressive organization.

Renee:

But I think never made such a bold statement around an issue that we are passionate about. And I honestly think that going through March, and just learning how to be honest, and real with each other, and connecting with our customers in the way that we did, it really made us feel more empowered that we should be making bold statements across our platform about things that we believe in.

Renee:

Especially, when it has to do with human rights. And so, it really helped us guide how we responded to the Black Lives Matter movement in organic, social, and email, and just what we've been doing as a brand.

Stephanie:

Yeah. That's great. I like the idea of leaning into it not being scared to publish things. And just that we agree with that method of doing thing. So, are there any brands that you watched? Oh, go ahead.

Renee:

Oh, as I said, the other thing that I think we do now that we weren't doing beforehand is, well, one, we use Slack all the time, which I love Slack. It's funny to me that we are late to the game on that one. But the other thing I was going to say is that we actually have team meetings every single morning, and I feel like we over invite.

Renee:

When you're in the office, I feel like we have a tendency to try to limit meeting attendance because sometimes meetings just explode. And then, you feel like they are becoming unproductive. And I feel like we've been taking the opposite approach during COVID. We have a 30-minute meeting with my entire team. And that includes customer service, to eCommerce channel managers, to somebody on our brand creative team, and our copywriter.

Renee:

And it just helps to just connect really quickly in the beginning of the day, and make sure that everybody has the same information starting point for what's happening. I'm sure that there's a lot of people that don't need to be there, but I think it's replicating that like water cooler environment, or that you're walking, and making eye contact with somebody, or catching somebody in the bathroom. That's made a big difference too.

Stephanie:

Do you think that you all will continue doing larger meetings like that? Because I agree, having people onboard so you're not having to retell things, or having one person tell another person, tell another person, and the message is completely off. Do you think you're going to continue doing things like that even after when we can return to offices?

Renee:

I hope so. I'm going to force them to have a meeting every morning when we get in. I think there is something really nice. I think we've actually come together. We support each other more. I also think like role clarity has solidified itself in a really strong way. And I think there's not land grabbing around projects.

Renee:

Everyone is just super clear around who's doing what, and there is no like, "Oh, I wish I was working on that, or I wish I could contribute to that." It feels like there's more support across team members to get projects done.

Stephanie:

Yeah, very cool. So, earlier, we were talking about acquiring customers, and you mentioned that you had a scrappy marketing team, or your marketing efforts are scrappy. And I wanted to dive into that a bit about how you're acquiring your customers, and what channels you're finding the most success in, and what that looks like behind the scenes?

Renee:

Sure. So, like team structure, or more just channels that we're using or both?

Stephanie:

Yeah. I'd say channels, or marketing campaigns that are doing well, or how you think about setting that up to drive conversions, and new customers, and all that.

Renee:

Yeah. The last couple of months have been a weird time for everything. But I actually think for us, it's actually meant not really focusing on new channels. I'm starting to do that a little bit more now. Poke my head up, and think about what I want to test, and do in 2021. But for us, it's really been just focusing on things that we're already good at, and just being really, really thoughtful about brand creative.

Renee:

So, the channels that have been most successful are paid social, Facebook, and Instagram, and catalog continues to be really successful for us. Usually, retail is an awesome channel for us to introduce ourselves to a lot of people. But our stores were closed for three months. So, obviously, that had a big impact on our business. But yeah, so those channels have been working for us.

Renee:

And then, we have a pretty scrappy team. We do all of our own in-house creative, which again, I think has been really helpful, and iterative, and making sure that we feel all of our content is on brand. Yeah.

Stephanie:

All right, cool. For the retail stores closing, are all of them opening back up, or is it making you rethink your retail strategy at all, or what's your plans going forward with that?

Renee:

Yeah. I think, gosh, it changes every couple of days. I want to say 90% of our stores are opened. I think some of the stores in New York might still be closed, and I'm not sure when this air, so that might be different then. But for the most part, our stores are back open. We've been seeing that buyers are coming in, and even though our traffic is down, that buyers are coming in with a lot of intent.

Renee:

And we're seeing much higher basket sizes, and much higher conversion. So, overall, I think positively encouraged by what we're seeing in our retail channel around customer engagement through the pandemic. But I think what's been really exciting, and maybe that's the wrong word. I feel like nothing is really exciting. But when stores closed, I was nervous about how much we would lose the engagement from those buyers.

Renee:

Buyers that tend to participate in your retail channel, they do that for a reason. They're people that really like to touch the stuff before they buy it. And so, I wasn't really sure what to expect from those buyers in shifting their purchases to online, and how much, I call it retail migration, we would see. But for the most part, it's been a lot higher than what I was expecting.

Renee:

So, I feel good that our higher contact strategy that we've had in the web channel, or the web marketing tools has helped us engage with all of our buyers, even if they're traditionally retail buyers.

Stephanie:

Got it. Did you have different marketing strategies to keep those retail buyers engaged, and reaching out to them more, maybe not through email offerings, but direct mail or something like that?

Renee:

Not really. We talked about it a few times. But then I feel like, it's hard to create so many different creative iterations. I think we just came from like, "Hey, it's one customer out there. So, who are we talking to? We're talking to all these people." And I think what we've been talking about hasn't really been channel specific. It's more like Zeitgeist specific to everything that's happening in the world. So, I think that's worked for us.

Stephanie:

Cool. So, the one thing I was reading a bit about was something called the Re-Spun program. I was hoping you could talk a little bit about that because I was trying to think about how that model works, and the operating cost behind it, and all of that, and I was hoping you could touch on that a bit?

Renee:

Sure, I would love to. Re-Spun is a program that Marine Layer launched in November 2018, where we actually recycle old customer t-shirts into new tees and sweatshirts. And what's cool about it is that we take any old shirt that our customers had, does not need to be a Marine Layer shirt. We give customers $5 per shirt of Marine Layer credit.

Renee:

And then, we'd take their old shirts, we'd break them down to pulpy fiber, and re-spin them into upcycled cotton. And we also blend that upcycled cotton with a little bit of recycled poly, and then use that new thread to make new shirts, and new sweatshirts that are still absurdly soft Marine Layer caliber product. But it's actually being made from 100% either upcycled or recycled materials.

Renee:

It's a cool program because I think it does a lot of things. One, it defers shirts from landfills. So, we've actually collected, this number is probably a little old Knox. It's from January of this year, but over 170,000 shirts from our customers.

Stephanie:

Oh, wow.

Renee:

I think it's fun that we get to reward them, and give them Marine Layer credit. But I also think it really solves a problem for a lot of people out there. If you go back to why Marine Layer was founded, it was because our CEO did not want to get rid of his old favorite shirt. He wanted to keep wearing it, and he loved it so much. And I think there really is an emotional attachment to your clothing.

Renee:

That's what we try to do in every single piece that we create. And when you have an emotional attachment to something, it feels very sad to throw it away, or give it to Goodwill, and not really know what's happening to it. So, I think when we introduced this program, we were honestly blown away by the interest in donating old shirts.

Renee:

And we've actually had a lot of fun even going through them because we processed them at our headquarters. But some of them are old sorority fun run shirts, but some of them are like, there's really incredible stories behind the shirt.

Renee:

We've even reached out to some customers and shared that on our Instagram. We also did a contest just sharing the funniest shirt that we've received through this program. So, it's a nice way to connect with our customers, and understand more about what their stories are behind their clothes. And then-

Stephanie:

That's really fun.

Renee:

Yeah. And then, lastly, because I know this is an ecommerce-driven podcast. In some ways, we think about Re-Spun like our loyalty program. So, it's our way of rewarding customers for sharing our values, and creating clothing in a more responsible way.

Renee:

I think overall, just the response to the program, that's been just so awesome.

Renee:

We're just trying to expand it in a much bigger way. So, I'm looking for ways to include recycled materials, not just in this small assortment of Re-Spun tees, and sweatshirts, but how do we include recycled materials in everything that we're making. So, it's been fun to focus on this value of making clothing more sustainably, and using more recycled materials, and applying it to our whole brand.

Stephanie:

Yeah. That's amazing. So, to take a little step back into the world of eCommerce a bit more, and building actual websites, and all that stuff. What tools do you love using right now, or are you testing out, and you see them really working well with either not just customer acquisition, but conversions, or website performance? Anything in the nitty gritty that you're like, "This is really working well for us?"

Renee:

I feel like it's nothing.

Stephanie:

Feel free to go into the weeds.

Renee:

Yeah, I know. I'm trying to think. I feel like it's nothing particularly new. Well, if we've been having more fun with email flows lately, and looking at the frequency at which we're sending those, because it does seem that there's just an overall appetite to hear from Marine Layer more often. So, we were not sending our abandoned cart emails until two days after.

Renee:

But now I think we've moved that up to a few hours later, trying to monitor and see what happens there. I think because we are sending emails more frequently too, looking for more ways to segment our email file so that we can tell, again, more specific messages to certain audiences. And yeah, I think it's not really been not a lot of new in the last couple of months, it's mostly been focused on looking what we're doing, and seeing what we can make better.

Stephanie:

Yeah. What content are you sending if you're sending emails more frequently? I'm guessing it can't just be more product emails, or just the abandoned cart ones. I'm sure you're sending some content that's keeping the subscriber happy and engaged. How do you think about that when you're sending more emails?

Renee:

Yeah. Some of it is just as simple as segmenting by product gender. So, focusing on sending men's focused emails to people that tend to buy men's product, and women's focus emails to women's product buyers. But then, I also think a lot of branded messages. I think one thing that I love that Marine Layer does, that I didn't see happening as much out there is sometimes, we just send emails with no performance expectations against them.

Renee:

We send a really fun email, fun might be the funny adjective for it, but in March, where we just profiled what our employees were wearing while they were working from home, and-

Stephanie:

That's fun.

Renee:

Yeah. It wasn't even product that we are currently selling. We tried to focus on Marine Layer products, but our employees tend to have stuff from two or three years ago. So, we more just wanted to tell a story of being comfortable, and trying to find ease, and optimism wherever you are. Yeah. We also send that email usually around Father's Day or Mother's Day where we just like, "Oh, I love the Mother's Day on this year actually." We all sent in images of Facetiming with our moms.

Stephanie:

Oh, that's cute.

Renee:

And just talked about like, "We miss you, mom, we love you." And then, I think the Father's Day when we did this year was just around taking vintage images of all of our super cool dad styles, and sharing them on our email, and through our Instagram. So, yeah, I think we've had more creative license, just send emails that are just fun, and emotional, and make us feel happy rather than feeling like they're performance driven.

Stephanie:

Yeah, I love that. That's really fun, and I will be signing up just to see those emails [inaudible 00:47:30].

Stephanie:

All right, cool. So, the lightning round is where I'll ask a question, and you have a minute or less to answer, tan-tan-tan.

Renee:

Yes, I'm ready.

Stephanie:

So, this one I'm asking for our producer [Hilary] because she put it on the list. We heard you're a Bachelor fan. So, who's favorite bachelor or bachelorette?

Renee:

Oh, my God, that's so funny. I love Kaitlyn Bristowe. I just love Kaitlyn Bristowe.

Stephanie:

She is the best.

Renee:

Yeah. I feel like she ushered in a new era of Bachelor viewers, and I love The Bachelor. But then I also really love this funny podcast called Here To Make Friends. And it's like a feminist take on The Bachelor, and they rank episodes of things where feminist fails, and it's fun. I used to have a lot of roommates, and we would all watch it together. And then I got married, and I didn't have anyone else that would watch the show with me. So, now, I got to resort to podcasts.

Stephanie:

I love that. Well, then that's a good transition to what's your favorite podcast that you're listening to?

Renee:

Ooh, that's a really hard question. So, top of my head, I would say Radiolab and Fresh Air. Those are easy answers. But Fresh Air in particular, I love Terry Gross. I just think she asks such thoughtful questions. And I'm always surprised by the content that comes out of her interviews. And some of my favorite ones are with unexpected guests. If anyone hasn't listened to the Jay-Z interview with Terry Gross, go and find it. I think it's from 2013. It's so funny. It's so good.

Stephanie:

Oh, that sounds good. I have to check that one out.

Renee:

Yeah.

Stephanie:

What is your favorite learning tool or resource that you leverage along the way when it comes to running either marketing, or eCommerce, or something like that, where you're like, I constantly think about this book, or this article, or this person? Who do you look to, or what do you look to?

Renee:

Definitely my time Athleta. I would say it's more just the incredible coaches that I had at Athleta, and leaders that I had there that were just incredibly passionate about customer analytics, and customer health as a driver of long-term business health. I could list off folks, but Scott Key was our CEO. He's incredible.

Renee:

Mike O'Reilly was our leadership for marketing and eCommerce. And Irene Wong, my boss at the time, just a really, really powerful, thoughtful team that cared so much about the success of Athleta, and wanted to just try looking at a new way. They still inspire me all the time.

Stephanie:

That's amazing. What's up next on your Netflix queue?

Renee:

Ooh, this is embarrassing, but I'm going to say it anyways. How adorable is Baby-Sitters Club? Is anybody else watching that?

Stephanie:

I have not watched that yet, but I will have to check it out. I'm down to watch that. Not embarrassing at all.

Renee:

Okay, good. I have a three-year-old little girl, and I watched Baby-Sitters Club, and it just gave me a little spark of optimism that maybe the world is going to be okay if there's more 13-year-olds in the world that act like the Baby-Sitters Club. So, I'll throw that out there, and then also, Expecting Amy. We're two episodes in, and that's pretty good.

Stephanie:

Yep. Yeah. That's funny, too. What app do you have in your phone that you enjoy the most?

Renee:

This is going to be boring, but probably Google Analytics and Instagram.

Stephanie:

That's all right. Hey, those are not boring. I love Google Analytics and Instagram. Of course, is great.

Renee:

Yeah. I have to hand it to Google Analytics. Their app is very functional. I like that you can do different comparison periods real time stuff, it's helpful.

Stephanie:

Yeah. No, I completely agree. And then, the last one, if you were to create a Netflix original, what would it be about?

Renee:

Fun question. I have thought about this.

Stephanie:

Oh, wow. Okay.

Renee:

Well, I guess I feel I would like for there to be more stories about female professionals, and especially about female professionals that are comfortable being feminine and vulnerable, like Brene Brown take on what it's like to be in a workforce now. And I feel like there're podcasts that I think have done that really well that inspire me a lot.

Renee:

But I'd like to see that story told more. And I'm sick of stories about working mothers that are balancing their work life and their home. That's too complicated and too much to unpack there. But there is a lot to tell about just this new era of vulnerable women in the workforce. And I think a lot of them are moms, and I am very inspired by that.

Stephanie:

Yeah. I would definitely watch that. Renee, it's been such a fun interview. I loved how deep we get into a lot of things. And we will definitely have to have you back for round two. Where can people find out more about you and Marine Layer?

Renee:

marinelayer.com. So, that's a pretty straightforward one, and then definitely come and visit our stores. And for me, I don't know, send me a DM on Instagram. I'm @renielo, or you can send me an email at renee@marinelayer.com.

Stephanie:

Cool. It's been a blast. Yeah. Thanks for coming on the show.

Renee:

Okay. Thanks. It was great talking to you, too.

 

Aug 11, 2020
Landing a Million-Dollar Shark Tank Deal (And The Lessons Learned From Facing a Sudden Surge in Demand)
50:59

There are a lot of twists and turns in Joe Demin’s journey to founding Yellow Leaf Hammocks. It opens with a childhood refugee turned successful real estate developer, then twists into a story of entrepreneurship and an appearance on Shark Tank, and then turns again when a request for $400,000 became a $1 million investment. Through it all, though, Joe was guided by a singular idea to build a business that could actually have a measurable, sustainable positive impact on people. 

On this episode of Up Next in Commerce, Joe guides us through his quest to make Yellow Leaf a success. Tucked within this incredible story are some critical bits of knowledge about running a successful eCommerce shop, including the challenges of selling on Amazon and the ways to optimize your Amazon strategy, plus some of the pitfalls to watch out for if you decide to pursue a path into retail. 

3 Takeaways:

  • There are challenges to selling on Amazon, and it all comes down to whether you choose the seller-central or vendor-central route. If you choose seller-central, you have more control, but have to provide the inventory and warehouse the product on your own. With vendor-central, Amazon purchases directly from you, but then they resell on the Amazon site and the algorithm sets the price, so you have to constantly monitor that aspect to make sure you are not cannibalizing your own business 
  • Today, there are many companies that have a social good aspect to what they do. However, very few take the steps toward setting up an actual sustainable enterprise that truly benefits the people you are trying to help. By providing jobs and then programs that teach financial literacy and other skills, you create an impact that lasts longer 
  • There are certain pitfalls that small businesses encounter when pursuing the retail path. Whether that is claiming shelf space, creating market-ready packaging or understanding inventory needs and retail term agreements, there are headaches involved, so you need to be prepared to deal with them or find a different strategy

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey everyone, and welcome back to Up Next in Commerce. This is Stephanie Postles from mission.org. And today we have Joe Demin on the show, the founder and chief relaxation officer of Yellow Leaf Hammocks. Joe, how's it going?

Joe:

Going really well

Stephanie:

So, your title, I don't think I've ever had anyone on the show with a title of chief relaxation officer. I was very excited when I saw that.

Joe:

Yeah, we're laid back, so we can't take our titles too seriously.

Stephanie:

Yeah, completely agree.

Joe:

It's a fun job.

Stephanie:

So, when I was looking over a little bit about you, you have a very interesting background and I was hoping you could start from the beginning actually, which I don't ask from a lot of my guests. But I mean, I want you to go way back, like age five.

Joe:

Yeah, wow.

Stephanie:

Tell me a little bit about your journey to where you're at now.

Joe:

Yeah. I mean, I appreciate the question and definitely I think a lot of what I'm doing now is sprouted from my background. So, I came to the U.S when I was five as a Jewish refugee from the former Soviet Union and had, I guess, natural hustle built in just from my experience growing up in a kind of a rougher part of Boston and just worked my way up through into college. And was, I would say, on a track to do something entrepreneurial.

Joe:

And early on in college, I fell in love with real estate development for various reasons. We can probably have a whole separate podcast on that, but ended up getting a really amazing job, like a dream job and where I got to lead a lot of high profile development projects. And through that experience, that was my first foray into fusing positive impact with making money in business.

Joe:

And this is around the time where green building was just starting to become a more of a mainstream topic. And as one of the younger people at the firm, I spearheaded efforts to reposition the firm as a leader in green building and sustainable development. And part of that philosophy that I had early on was this realization that we can actually increase profitability by building things that were better, more sustainable, that had a better health impact, creating healthier communities and so forth.

Joe:

It was definitely driven by wanting to do good but also realizing that you can do good and have a profitable enterprise. And as 2006 came around, the recession started and real estate was really the first. I graduated in 2006 and so I lasted a couple of years through the recession and ended up taking a job, more of an institutional finance position, but focusing on affordable housing. And a similar philosophy there where if you roll up your sleeves, you can actually take on a part of the sector that wasn't necessarily as sexy, but also had real impact on people, and again, keeping on profitability.

Joe:

And around this whole time of being in real estate, I was starting to get exposed to other entrepreneurs more in the consumer product space who were some of the early pioneers in sustainable agriculture and fashion, those types of areas and they were doing it in ways that were really impactful.

Joe:

And so, I caught that bug and had no idea what I was going to do next, but real estate was not the place to be at the time. And I was basically planning to go to business school. And right before going and applying for business school, I saved up all my vacation days and ended up going to visit a good friend in Thailand who was living abroad with four of my other close friends from growing up.

Joe:

And it was on that trip where the idea for Yellow Leaf came to be, but it all transpired on that trip, but driven by this experience that I had and exposure that I had to other social entrepreneurs.

Stephanie:

Okay, cool. So what happened in Thailand where you were like, "Uh-huh, I need to start Yellow Leaf." What did that look like? How did you find the hammock? What was the story behind that?

Joe:

So, I was originally on a remote island and reading a local guide book trying to figure out what to do with my day. We're sitting on the beach one morning and in this book, there was a story, it was a basically said, there's a little shop on the other end of the island in the old part of the island.

Joe:

And in the shop, there's a map that they give out for free that's a locals' only knowledge type of thing where it'll tell you the secret waterfall and the secret beach. And I was like, "Okay, I got to go check this out." So, I hopped on my motorbike, zipped through to the other end of the island and ended up getting to the shop and it was closed. So I was pretty exhausted by the time I got there. I sat down, someone came and opened the shop and I asked for the map.

Joe:

And then I also noticed that there was just a plethora of hammocks that were beautiful. And I immediately jumped in. I had loved hammocks before this never thinking that I would be in the hammock business. But I jumped in and was immediately struck by how soft the yarn was, the intricate weave. And I started asking questions about this hammock thinking that I would buy some and bring them home.

Joe:

And I was told the story of the Mlabri tribe and an aid worker who was working with this tribe and how literally through hammock weaving they had gone from being on the brink of extinction as a culture and they were trapped in indentured servitude. And through hammock weaving, they were able to provide enough income in their community where they were able to self-sustain themselves and build a path out of poverty or were on track to do that.

Joe:

The impact that they were creating for themselves that was driven by themselves and not an outside aid organization was really interesting to me. I had been familiar with the Toms Shoes model, the handout approach to creating impact. And so, this struck me as something really different. And I learned that these hammocks were not sold really anywhere else outside of a few places in Thailand.

Joe:

And so, a week later, that story of this community and what they were doing and the hammocks really stuck with me and I contacted the shop and I asked if I can go visit. And they connected me with the village. And long story short, I convinced the cab driver to drive me 600 miles to the village.

Stephanie:

Gosh.

Joe:

And I went there and I got to meet the women making the hammocks and spent a whole day in the community. And I learned that people would hike as far away as the Laotian border to this village because they heard how much money they could earn, how well they could be treated. And they were being turned away because there just weren't enough sales.

Joe:

And immediately I was like, "Well, this is a great product." Naively I was like, "Oh, I can sell some hammocks. We can provide work in this community. And I came home with a backpack stuffed full of hammocks and all this energy and excitement, threw them down on the bed when I got home and with my now wife was who was my girlfriend at the time we were living together. And told her about my experience and it all just snowballed from there. And I basically decided not to go to business school and start doing this on the side and diving into it and slowly getting to where we are today.

Stephanie:

Okay, cool. Yeah, that's such an amazing story. Where are you guys today? How many hammocks are you selling?

Joe:

Oh, God. Well, we have over 200 trained weavers. We started with about eight women when we first decided to do this full time. So, we've grown quite a bit in terms of annual units. I mean, tens of thousands that we've sold. And we're actually growing a ton right now. But yeah, it's definitely a very sustainable business. We're past the ideation stage and more into growth right now, so.

Stephanie:

For sure. Yeah. And I love that idea of giving jobs and actually, like you said, developing a market, a bigger market and providing an opportunity instead of just giving things to someone. Because I do think that's a much more sustainable path and one that I'm always very interested in. How has it changed though from when just a few women making these hammocks? What does it look like now with all these weavers? Are you ingrained in the training process? How do you keep up product quality? It seems like there's so many questions when you're working with a village in Thailand.

Joe:

Oh my God. Yeah. I don't even know where to start. There's a lot that we've learned and I think we've built a really, hopefully, a model that others can replicate for the artisan sector. But basically, when we started, we were, well, one of the first things we did was update the designs and we learned early on that...

Joe:

I guess to just step back even a little bit. When I first came back from Thailand, my co-founder Rachel's idea was that we needed to test the market and see if other people thought these hammocks were as great as I thought and that I wasn't just crazy. And that proved to be a really valuable process that we went through where we started selling hammocks at local markets and different fairs around New England, where we were at the time. And we didn't share the impact story. We just tried to sell the product and we led with product first.

Joe:

And through that experience, we gained a lot of feedback around design and being really design-focused. And so, one of the first things we did as we were starting to really grow was update a lot of the aesthetic to be more on trend with color and pattern and things like that. Upgraded materials so they were really built for the outdoor use and using performance materials.

Joe:

And so, as we were introducing these things, our weavers were really receptive to that. And we really engaged them in the process. But some of the things we've done as we've continued to grow and looking at how do we create more impact? Layering in like we built a financial literacy program, we have this amazing partnership with kiva.org where we're able to provide zero interest flexible loans to our weavers.

Joe:

And thinking about how do we provide additional support or bring in partners that can provide additional support in the communities to make it truly sustainable because the first step is giving somebody an opportunity to earn a great living wage and helping people evolve to the middle class. But then it's taking that next step. And so, we've done some work around that and really focusing on quality control from the beginning as well has been super important for us.

Stephanie:

That's amazing. So, how do you manage inventory levels? I saw you were on Shark Tank, which I'd love to hear the story behind that, but it also made me be like, "Oh my gosh, when you're on Shark Tank, I'm sure you got a million orders." How did these weavers keep up? So maybe first, if I can hear a bit about the Shark Tank story and what that is like, and then move on to how you manage inventory from that surplus of sales I'm sure you have.

Joe:

Yeah. Yeah, Shark Tank was quite the experience for us. I think we have an ideal product to showcase on Shark Tank, especially during today's times where people are spending more time at home. But for us going on Shark Tank was really, it's catapulted us truly. First off, we've had our first infusion of capital. I guess I can give away what happened.

Joe:

We received a million dollar investment from one of the guest sharks, Daniel Lubetzky, who's the founder of KIND Snacks. So, he's a very mission-driven investor who has a similar track record as us in terms of rolling up his sleeves and taking 10 years to build what he's built. And so, he's been through the trenches, but our experience in Shark Tank was, I mean, since Shark Tank, we've definitely seen a huge uptick in sales and we've been able to put some systems in place to really shift our business towards more of a direct-to-consumer model.

Joe:

And it's only been a month and a half since we were on the show. So, we're still living through a lot of the chaos that comes after you're on the show.

Stephanie:

Mm-hmm (affirmative). So what kind of unexpected chaos came? Because I'm sure you're like, "Oh, we're for sure going to get more sales," but what things happened or what surprising things happened after you were on the show or maybe during the show?

Joe:

Well, we honestly had no idea what to expect. We talked to some other entrepreneurs that have been on the show and have learned that it's different for everyone. It depends on what's going on in the world at the time that your episode airs. I talked to one person who was on the show during a massive snow storm and people were at home watching and he had a product that really fit the times. And so he did really well.

Joe:

And I talked to other people who were like, "Oh, it was okay." So, we just had no idea. And then going into this also, we're going through such a crazy time where we just didn't know if people are, how bad people are impacted economically. And so, we didn't know how to prepare inventory-wise, we didn't want to overinvest in inventory. That's been something we've really tried to hone in on and not hold inventory too long, have some of those kind of basic business principles baked in.

Joe:

But we've seen sales have far exceeded our expectations and it's broke a lot of the systems that we've had and created a lot of inefficiency now as we're trying to catch up. And going back to your question around the supply chain, on the one hand it's been a challenge, but we've also been able to catch up pretty quickly. And I think having a vertically integrated supply chain like we do and really great relationships with our weavers is what's allowed us to not lose out on, we're not leaving too many sales on the table and trying to take advantage of everything that's going on, keeping our foot on the gas.

Joe:

But it's been just the uptick in order volume within a short amount of time and sustained order volume has been something that's new to us. And so, it's been a fun challenge to work on.

Stephanie:

Yeah, that's amazing. Congratulations. Getting a million dollars from Shark Tank is awesome. And you went in only asking for 400,000, right?

Joe:

400,000, yeah.

Stephanie:

That's crazy.

Joe:

Yeah, they have a great clip at the end where Kevin O'Leary goes, "It's never happened before in Shark Tank where someone comes in for 400,000 and comes out with a million." And honestly, we had no intention of raising a million dollars on Shark Tank. I think, yeah, we're still like, "Did that just happen?"

Stephanie:

Did it hit your bank account pretty instantly or was there a whole process behind it?

Joe:

There was definitely a whole process. You go through due diligence after, it's more of a handshake agreement on the show. And so, we ended up closing and then went to work afterwards just preparing to be on the show, making sure that everything was in place for us to have a successful airing.

Joe:

And this was before COVID existed, so we did not anticipate what the world would look like when the episode actually aired. But it's great to see some money in our account for the first time and actually be able to think a little more strategically, so-

Stephanie:

That's always a good feeling.

Joe:

... definitely a different business today than, yeah. Yeah.

Stephanie:

So, what was the first thing that you invested in after that cash hit? Did you have a plan for it or what did that look like?

Joe:

So, we knew we needed to build our marketing engine. Prior to getting investment, we were very bootstrapped, we would reinvest all our profit and we were always getting pulled in a lot of different directions. And for once we can actually focus in on updating our website and really making sure we're telling our story and being a little more deliberate in the communications through our website. And so that was several months of a project and also focusing more on product development. We've got this new product called the hammock throne, which is a new category of its own.

Stephanie:

I need the throne because I consider myself a queen, so I like that.

Joe:

So, putting money towards that and making sure that we're positioned for this next phase of growth with product development and a really good Ecommerce experience was the first two things. And we're continuing to reinvest into those areas right now.

Stephanie:

Very cool. Do you ever test with the messaging on your website? And if so, what kind of testing do you do and what do you see works best to tell the story?

Joe:

Yeah, we've done some light testing. And the one thing we've tested the most, I would say, is how we message the product and the impact. And it's always odd to us if we ever lead with impact and the artisan story, it doesn't resonate as well as telling the product story. And so, we continue to test and we continue to iterate how we're communicating that because obviously impact is super important to us. It's baked into our business model, it's why we started, but the product is what makes it sustainable.

Joe:

And so, we're trying to really weave that into the storytelling more, but that's one thing we've, every time we test it, product story always wins. But we're starting to really get that striking a chord with more about how we tell the impact and how the impact story really contributes to making the product superior and what the benefit is to our customers.

Stephanie:

Yeah, that makes sense. I did go on your about page and I was watching more of the story of the weavers and I couldn't stop watching. It was like one of those addicting memes or videos where you're watching someone knit something and I'm like, "Oh, I can't look away." That's a really good video.

Joe:

Thank you. Yeah, and that's how we're now figuring out how to really tell that impact story of showing how it's made, showing the people that are making it. Every hammock is also signed on the label by the woman who made it.

Stephanie:

Oh, cool.

Joe:

And so, we really want to connect customers to, there are real people that are so enthusiastic about every single sale that we get. It's awesome. And we want to connect our customers with our weavers. And so, that video is something that it took us a while to get. Again, just not having raised money up until recently, everything came naturally and organically and over time, but those are things that we've tested out and seen how once we're able to show how it's made, that's one of our advantages. A lot of products are just made in I guess more of a boring way. I'm not sure, but just not in the same environment. And so, there's this beautiful craftsmanship that we want to showcase.

Stephanie:

Yep. Yeah, I probably would not watch how my office chair was made, but yeah, that I could not look away from.

Joe:

I did just get back from an office chair factory as we were figuring out the hammock [inaudible] that's was... I do think...

Stephanie:

What were you doing there?

Joe:

We were sourcing components for the hammock [inaudible] because we're getting into furniture. And I think that just showing how things are made should be done more. I think it creates more transparency and connects people to where things are coming from, which is important for sustainability and just awareness around that's important stuff. I would challenge that and say, even the way office chairs are made, at least maybe I'm just a geek around manufacturing and production, but I think there's some, I don't know, I saw some cool things that I thought other people would be interested in.

Stephanie:

Well, if you take a good video, I will be open to watching it and-

Joe:

Absolutely.

Stephanie:

... seeing if it's as enticing as watching someone weave a hammock together.

Joe:

Yeah.

Stephanie:

So, when it comes to new products, you just mentioned that you guys are looking into getting into new products. But one thing I saw on your site was that you could actually build a custom hammock and it made me just think about, how did you decide that you would allow consumers to build a custom hammock and how does that get to the weavers? Because it seems like it would be easier just to have like, "Here's our three products, and this is what the weavers know how to do, and this is all you can order." What was that thought process like allowing a customer to create their own?

Joe:

Yeah. We had a lot of debate around whether or not we wanted to pursue that because it does add extra work for us. We figured out what would be the premium cost. I think it's a $50 premium to make a custom hammock. The process has evolved over time and we're getting more towards a tech-oriented solution in this next iteration. But there's a design guide that we share out with customers.

Joe:

Right now it's pretty manual. You order the custom hammock, we then email you a design guide, a PDF that you fill out. So you can't actually see the hammock, but we have a lot of examples in that design guide and you can see the different colors. And it's worked really well, but what inspired us to do that was more around just realizing we have the ability.

Joe:

We have a very design-oriented customer, or at least one segment of our customers are very, in that interior design world. We also were previously, we did a lot of collaborations with companies like Anthropologie — we made all the hammocks for Tommy Bahama and other brands and realizing that they wanted something unique to them and limited edition collections and things like that and that we have the ability to do that. We realized maybe individual customers also have that preference and to make something that really fits their space as they're designing that area in their home or backyard.

Joe:

And so, we tested it out and we got a pretty good response and realized it was something we can do. And it's allowed us to differentiate as well, but also just another way to add value to people. And I think there's this broader trend around customization and less mass market products and things that really represent your personality and your style and things like that. So, we really lean towards that and wanted to empower our customers to be able to do that.

Stephanie:

Yeah. That's awesome. So, are you guys in retail or are you only doing direct-to-consumer?

Joe:

When we first started the business, we basically were trying to get any sale we can get. There's that bootstrap approach, just hit profitability as quickly as possible. We weren't really deliberate about where our sales were coming from, didn't have the resources for one strategy or the other. And as we grew and started reinvesting and we became a little more strategic and we focused on, our business was at, a year ago, it was probably 50/50 between retail partnerships and Ecommerce.

Joe:

And we've obviously started shifting heavily towards direct-to-consumer with stores being shut down, but other reasons as well, I think we were going in that direction anyway of being more direct-to-consumer. And the other thing that we're focusing on, thinking about more longterm is, I don't think we're going to not sell into retail. We're just going to be more strategic around who we work with and making sure that our story is really told well, the product showcased well, it's definitely a hard product to merchandise. And it's an easier story to tell on the internet with video like you mentioned and being able to really focus more on storytelling, which is a big part of our brand.

Stephanie:

Yeah. That makes sense. What kind of issues did you run into when you were going into retail, outside of COVID and everything, but what problems did you encounter?

Joe:

Well, taking up space on store shelves, packaging, we didn't really have retail ready packaging. And so, going through a couple of iterations of different displays, things like that, it took so much time to develop. Also, payment terms aren't flexible with most retailers, things like that. We pay our weavers immediately upon completion of the hammocks and some in advance.

Joe:

And so, just the whole retail business model wasn't really friendly for our art model. And we constantly were up against having to negotiate for better terms, having to figure out how to display the product in a store. And it's always just been so much easier to do it online.

Stephanie:

Yep. So, earlier you mentioned that when you started getting more orders, a bunch of things broke. What kind of things started breaking first and how did you go about fixing them? Or are there any best practices where you're like, "Well, when you have this happen, we saw this work, then this didn't?"

Joe:

So, I would say on the supply chain side, a lot of the efficiency that we had created just broke in the sense of... So, when we first were working with eight women, we were able to really go to someone's house and collect hammocks. And it was very manual and individual. As we grew to 200 weavers, we created a little bit more of a schedule around when we would drop off yarn, created a central location and standardized some of the things around collecting hammocks and payments.

Joe:

And after the Shark Tank appearance, our sales, we far exceeded what we expected to sell. And so, we ended up going on back order and still working through a lot of that right now as we speak and ended up having to go door to door again, completely lost all the efficiencies that we had, just trying to get the hammocks to the customers as quickly as possible.

Joe:

We started drop shipping directly from the communities where they're made in Thailand direct to customers homes. And so, a lot of the efficiencies just broke down and those things are compounded as you continue to stand back order. And so, that's one thing. The other is that when we relaunched our website in the beginning right before we went on Shark Tank, we had all these plans to continue innovating testing and a lot of those plans just fell by the wayside because we were putting out so many fires around being on back order, trying to get more yarn.

Joe:

There are so many challenges right now with global logistics. So, getting hit from a lot of angles.

Stephanie:

Yep. Do you see the industry evolving around logistics in the future? Because it seems like so many brands were maybe dependent on one location or these couple of factories or something. And if they're down for the count, you're in a pinch, how do you see things evolving in that part of the business going forward?

Joe:

Yeah, that's a really interesting thought to try to predict what will happen. But I definitely think a lot of brands are reliant on just one manufacturer and there's reasons to maybe figure out other backup solutions. I think we'll definitely start seeing that it's definitely wise to not just be fully dependent on one supplier. But it's going to be really tricky because in the U.S we're just not set up to manufacture a lot of things that people buy here. And so, it's not like it's going to be a sudden shift to bring manufacturing back.

Joe:

And globalization, personally, I feel like has had a positive impact on prices of products for people and accessibility to different things, but we're retracting a little bit, so I don't know. I'm definitely closely watching it and thinking about how do we look at different yarn suppliers and raw materials and maybe have more options just in case.

Joe:

But I think we're also inclined to not create a problem and just stick with the status quo. I think a lot of businesses are that way, so it's a little bit of a balance of putting some resources towards planning for worst case and also keeping your foot on the gas and keeping up with what's actually working now, but things will certainly be changing in the coming year.

Stephanie:

Yeah. Completely agree. So, with everything going on and all the chaos that you just mentioned, have you been able to focus on your content and marketing strategy? And if so, what does that look like for you all?

Joe:

Yeah, we've been definitely trying to scale up our content strategy. It's a little too early for us to report anything significant, but one of our, an area that I think we've done it really well in is having a lot of user-generated content. And if you look at our website, most of the photos on there are actually taken by our customers and this might have been a benefit of being bootstrapped and that we didn't have the resources to do a lot of these full-on photo shoots that bigger brands have been able to do.

Joe:

And that's allowed us to have real people in our products and to be able to show that to our customers, creating that relate-ability. And we're definitely wanting to continue that, and we're hiring now, trying to build out the content arm of Yellow Leaf more and focusing more around what a hammock represents in your life and relaxation and really shifting our mission a little bit more towards making relaxation a daily ritual in your life. And so, focusing our content strategy more towards that.

Joe:

And so, being a little bit more deliberate around our photography too and really showing the product in different places and how to use it. It's a little bit of a technical product in terms of how do you set it up? Where do you place it? And so, going forward, we're really focusing on being able to create content that showcases and answers a lot of those questions.

Stephanie:

Yeah. Yeah. That's definitely a good move. I also saw on the reviews, people were able to select where they place their hammock, and I thought that was so important because then you can be like, "Oh, she's like me and she put it in her backyard," or they put it in their kid's room. And it just helped you visualize, "Okay, it must not be that hard if a bunch of people are able to do it."

Joe:

Yeah, exactly. And that's where the user-generated photos that we have come into play. We also included a 12 page hammocking 101 guide book with every purchase.

Stephanie:

That's good.

Joe:

So, it has a lot of resources on how to hang it, where to hang it. Everybody sets it up a little bit differently. And so, as we look ahead, developing products that allow you to really be able to hang a hammock anywhere, there's more of our focus going forward. I think we've done really well with perfecting the woven hammock and now making sure that we can increase the amount of hammocks we can sell and the way people can use hammocks and making it a more integral part of our culture in the U.S. And so, that's the biggest focus for us in this next phase with solving that how to hang problem.

Stephanie:

So, when it comes to, you were mentioning UGC earlier, how do you encourage your customers to post those images?

Joe:

Well, I think for us, we're fortunate in that it's the type of product that people like to brag about. So, we definitely see a lot of people who are excited to use it. And so they're like, "Hey, take a photo of me," and they share it. And we try to really monitor social channels. I wouldn't say we have a massive audience compared to others yet. It's growing right now, but we try to really connect with people individually and have them share those photos with us directly so we can reuse them and just engaging with people one-on-one has helped.

Joe:

And then, more people see others sharing and they share. And so, it just builds on itself. Obviously, we send out the post-purchase review requests and anytime we communicate with customers we're always like, "Oh, we'd love to see your photos." And it makes our day to see that. And I think they're excited to share. And so, we try to keep that momentum going post-purchase.

Stephanie:

That's great. So, for a product that's pretty durable, probably going to last many years, what's your idea around increasing the lifetime value of a customer? How do you bring them back? How are you trying to get them to buy more than one product? What does that strategy look like?

Joe:

Yeah. With hammocks, it's obviously you would think a onetime purchase, and we were really surprised with our findings once we started really looking at the numbers behind our sales. And for us, it's about just under 20% repurchase rate within first year of purchase. And so, we were just shocked that for a hammock that we were seeing that.

Joe:

And what we learned was that this was such a great gift for people. And we started communicating that more once we discovered that so many people were gifting hammocks to a new, if someone, a friend buys a new home, get them a hammock. That's a great wedding gift. It's unique, it's different. And so, we've started really showcasing a lot of that gift giving more. And so, that's helped with the repeat sale.

Joe:

But that aside, we're also looking at how do we add more products? How do we build out, there's that space in your backyard that compliments the hammock? So, you buy a hammock, but there's other things. What else are you buying to create that space? And thinking about building more of a robust home and backyard brand centered around the idea of creating that relaxation space. And so, what can we do to add more value there? That's the product philosophy is more around hammock-inspired products, I guess.

Stephanie:

So, earlier you were talking about creating different messaging around relaxation or gift giving and things like that. What kind of marketing channels are you seeing success with?

Joe:

I would say right now, definitely the basics of being on Facebook and Instagram, especially for a very visual product like ours is great. We see a lot of success there and we've really tried to focus in on those. In the earlier days when we were starting to really focus more on digital marketing, we cast a little bit of a wider net. We found Google to be really expensive, really competitive and narrowed it down to, let's really figure out Facebook and Instagram before we start branching out elsewhere.

Joe:

And so, that's what our key focus right now. And we're also seeing with a lot of bigger brands moving off of Facebook right now with things happening politically, we're seeing prices come down a little bit. So, it's a smaller brand, it's honestly benefiting us. And so, we're trying to take advantage of that to be totally transparent.

Stephanie:

Oh, yeah. We've had a lot of brands, smaller brands say that as well, so you're not the only one.

Joe:

Okay. Yeah, and it's great. I mean, I think things are always shifting. The more people jump on a particular marketing channel, the cost increase, so you have to be really nimble. And for us, this is also new. We're also focusing more on Amazon these days. And so, I would say that's another really, it's been a great sales channel for us too.

Stephanie:

What was that process or what does it look like selling on Amazon versus B2C? What kind of things do you encounter while selling through their platform?

Joe:

Definitely very different. You lose a lot of control. Amazon's broken up between seller central and vendor central. And seller central you warehouse the product on your own either in your warehouse or put it in Amazon's warehouse so that you can offer prime shipping if you do that. But you have more control on that end. And on vendor central, they purchase direct from you and on the inventory and therefore their algorithm prices your product.

Joe:

And so, if you have a minimum asking price map pricing like we do, we never really discount our products. And so, you're constantly having to monitor and make sure that the product is represented the way you want it, which is really challenging. But at the same time, so many people are shopping on Amazon.

Joe:

And I think when we were first starting to shift more towards direct to consumer, we had a little bit of pride around thinking, "Oh, we're just going to be on our own website and some select retail channels." And really again, I don't think that's wise, I think you want to be where your customers are, particularly for your category. And for hammocks, we had an opportunity to really stand out on Amazon because it's such a commoditized category.

Joe:

And so, we definitely, yeah, we made this decision and it's worked out well for us, but there's definitely challenges around being in control of how your product is showcased and there's less customization and so forth, but a lot of people [crosstalk 00:43:39].

Stephanie:

How do you stand out on Amazon?

Joe:

You can pay a little bit of money to be able to create your page. I think it's called A+ pages. And really you're still working with their templated sections, but really focusing in on like, what are the core things you want to showcase? And you have to stick within those walls. But trying to make that section mirror our website as much as possible and just having good customer service on Amazon as well is important.

Joe:

You do lose a lot of that control when you're selling on Amazon, especially if you have such a, you're trying to build a brand and not just another kind of a trinket type product. But again, if people are especially already aware of your brand, like for us, we saw after Shark Tank, people would go to our website, but also people would check Amazon just because Amazon has such a strong reputation for quick delivery, easy returns. And so, why compete against Amazon when you could be on there and increase your sales to reach more customers?

Stephanie:

Yup. That makes sense. So, how do you build, I mean, we've had a lot of our, we do a survey for some of our listeners and many people ask about selling on Amazon. So, what kind of optimizations do you do to your page, or are you experimenting with where you're like, "This is working really well or make sure you pay attention to this part." What kind of things are you looking at when it comes to creating a different page that gets found and it's enticing and still tells your product story and the background and all that?

Joe:

I would say we're still learning a lot, but one thing that's worked for us was to move all of our products under a single page so you can click through the different views all in one page. And for a while, we thought that would be a bad thing to do because if you're searching for a particular product and you only see one design, you might not click on it. We found that to not be true.

Joe:

Once you click on, you actually land on the product page, you can click through the different designs. And so, keeping people all on one page. And I guess you can apply this to your website as well. And Amazon obviously tests these things and we started just following whatever their best practices are. And it also allows you to have all the reviews for all of the products on all in that one page versus broken out across 30 plus views.

Joe:

So yeah, I mean, generally we're just trying to follow their best practices and take their advice on how to set your page up and just stick to the basics and good photography obviously is a given too, so that's been important.

Stephanie:

Yeah. A previous guest also mentioned that, let the algorithm do its job, or like you said, let Amazon tell you best practices, because he was just saying that a lot of people will try and just do something different because they think they know more and instead it's like stick with what works and what the brand is telling you what works and see how that goes first. So, yeah.

Joe:

Yeah. Yeah.

Stephanie:

That's good. So, earlier you were mentioning your website, is there any new tools or technologies that you're playing around with right now that you're seeing help conversions or maybe before you were seeing cart abandonment and now you're not, or you were dropping off traffic from the homepage and now you're not anymore? Anything that you've had success with on your website?

Joe:

For us having the live chat functionality is really great. And rather than having something that pops up and is in your face right away, just having a subtle message in a corner that you can click on and you can ask questions and if we're on, you can chat with somebody right away. Oftentimes it's been turned off lately just because we still have a pretty small team.

Joe:

But you can, instead of going to a contact us page, having that there, we learned that for our customers, that was really important. A lot of people have questions before purchasing. And so, making that readily available without a way that's super intrusive to their site browse-ability. And then having a popup with really good messaging around. What's the value to you to sign up to our newsletter and not just trying to throw another discount in your face, because again, for us we're not able to really discount heavily.

Joe:

And so, those two things have been probably the greatest for us. But we're continuing to develop our site more and add a little more functionality and features. And so, but yeah, we're just, again, sticking to what works and following... We oftentimes look at maybe what other brands are doing and get inspiration from them.

Joe:

If you're small like us, what we've learned is that there's no point in reinventing the wheel. And bigger companies like Amazon and other Ecommerce companies that have huge markets that are testing things constantly, you can really learn a lot by looking at what they're doing. And so, yeah, we're testing on our own, but also taking cue from others.

Stephanie:

Well, that's a good question then. What kind of other brands are you looking at? What Ecommerce companies do you keep an eye on?

Joe:

Definitely some of the big marketplaces like Amazon and Wayfair, very different from our website and they're more of a marketplace but just what their experience is like for customers is great. Actually, another company that we look at our category specifically, The Inside, who I think was on your podcast. They do an amazing job. We were looking at a lot of furniture and direct-to-consumer brands who are also selling products that require a lot of thought before purchase and how they're communicating some of the questions that people have when they're shopping for their home like Parachute Home, Floyd, or another furniture company.

Joe:

And also I would say some of the early pioneers and direct-to-consumer brands like Warby Parker, Away travel, who's done a really great job. And so, yeah, looking at the companies that have been able to raise a ton of money, grow super fast, build those departments out, what are they doing and how can we tailor some of those best practices towards our own business has helped.

Stephanie:

Cool. Yeah, I love that. So, before I move into a quick lightning round, is there anything that I missed that you were like, "Man, I really wish we had talked about this?"

Joe:

I mean, no, I think we covered so much.

Stephanie:

We did. All encompassing. Well, cool. Then we can move right into lightning round brought to you by Salesforce Commerce Cloud. So, this is where I ask you a question and you have one minute or less to answer. Are you ready to go?

Joe:

Ooh, great. Let's do it.

Stephanie:

All right. What's up next on your reading list?

Joe:

Ooh. I am really looking forward to reading something that is non-fiction. Honestly, I've had my head down for so long that I have not had a chance to actually kick back in one of our own hammocks. And maybe I have to do a little staycation. So, I'm looking for a book that can take me away from all the work stress and everything else. I can't say I have one right now. But I would encourage people to... I'm sure a lot of your listeners are always looking for ways to improve, innovate like I am. And I think I've always found value in trying to step away from that. And so, I would say I don't have a book on my list, but I would recommend A Gentleman in Moscow, which totally takes you to a whole different world.

Stephanie:

I like it.

Joe:

And that requires all sorts of great creativity when you do that.

Stephanie:

Yep, completely agree. What is your number one recommended spot when you go to Thailand that you would tell other people, "You have to go here?"

Joe:

I would say if you're going to Southern Thailand and doing more of the beach thing, take the extra step to go further from, a lot of people go to Phuket, which is great, but get on a boat, travel a couple hours further. And there's hundreds of islands to choose from. Honestly, pick any one of those. I would say Ko Lanta is great. It has a little bit of everything, but just, yeah. Go a little bit further, a little bit further away from the people and allow yourself to have that experience of truly being remote.

Stephanie:

Yeah. That's awesome. What is the favorite piece of tech that makes you more efficient?

Joe:

I would say, I mean, I love my MacBook Pro.

Stephanie:

Same.

Joe:

Yeah, thing is great, I take it everywhere. But everyone's got a computer these days. I would say, I don't know. Lately it's been just my computer because I've been staring at it for so long lately.

Stephanie:

Makes sense. Yeah. As is all of us. If you were to have a podcast, what would it be about and who would your first guest be?

Joe:

It would be around relaxation and how to live a more values-oriented life. And my first guest would probably be, I would say, Wim Hof, maybe.

Stephanie:

Ooh, that's a good one.

Joe:

Yeah.

Stephanie:

I was just watching a series about Iceland. It reminded me of him doing his cold plunges and yeah, he's great.

Joe:

Yeah. He's figured some things up.

Stephanie:

All right. Well, this was a great lightning round. Where can people find out more about you and Yellow Leaf Hammocks?

Joe:

So, our website would be the first place we recommend yellowleafhammocks.com and also our Instagram which is Yellow Leaf Hammocks. So yeah, looking forward to, yeah, seeing where things take us after this, but thank you so much for having me on. It's always a pleasure to share our story and hopefully add value to others.

Stephanie:

Yep. Yeah, it was awesome. Thanks so much for coming on Joe, and we will have to bring you back after all the Shark Tank craziness dies down and see how you're doing in six months to a year. So, that'd be fun.

Joe:

Yeah, that would be amazing, Stephanie.

Stephanie:

All right. Thanks Joe, have a great day.

Joe:

You too, bye.

Aug 06, 2020
Competing Against Fast Fashion
41:15

If you really stop to think about your clothing and the prices you pay for it, you might find that you’re left with a few questions. For example, how can a t-shirt cost less than your morning cup of coffee? Surely the materials and labor involved in designing, making, and shipping a t-shirt are more costly than a few coffee beans and some milk. 

That low-cost t-shirt is the result of the fast-fashion business model which has swept through the fashion industry. The result is that we may have more access to cheap clothes, but the quality is poor and the environmental and humanitarian cost could potentially be catastrophic. Zana Nanic is the Founder and CEO of Reclaim, a slow-fashion Ecommerce brand, and she is on a mission to change the way people buy clothes. 

On this episode of Up Next in Commerce, Zana explains how she started Reclaim after becoming fed up with the business casual, fast-fashion norms of Silicon Valley. Plus, she dives into what you have to learn from your customers during the initial launch of your business, and why she believes that an omnichannel approach is the best way to find success in the future.

3 Takeaways:

 

  • First impressions matter. You have very little time to make a lasting impression when someone visits your page. Relaying the information that will get them to convert must be delivered in the first few seconds a potential customer visits your page.
  • Returning customers is the holy grail metric for a small or start-up company, especially as it relates to the slow-fashion industry. When customers return to buy more, it tells you that they value you and your products and you can build a stronger relationship with them.
  • Invest in pop-up shops and omnichannel strategies to help convey the quality of the clothing. These tactics yield a more valuable and loyal customer.

 

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey, everyone, and welcome back to up next in commerce. This is your host Stephanie Postles and today, we have... Let me get the name right. Today, we have Zana Nanic on the show, the CEO and founder of Reclaim. Zana, welcome to the show.

Zana:

Thank you so much for having me.

Stephanie:

Yeah, I'm really excited. I'd love to hear a little bit about Reclaim.

Zana:

My story is not the typical story of she liked fashion and therefore she's super creative and wanted to do fashion. I am originally Croatian and I moved to Italy because Croatia was in the middle of a civil war. I grew up in Italy as a refugee and my parents, I remember, they were trying to get a job and they couldn't get any job because they didn't speak fluent Italian. Somehow, it was the early '90s them and fashion was the thing to do in Italy. Somehow, they started working in the fashion industry, very, very small and they were lucky enough to have a pretty successful run with it.

Zana:

But to me growing up, fashion was this amazing tool for empowerment. It was something that you could wear and forget a little bit of your identity. I had this very heavy label I was carrying with me, I'm a refugee, a foreigner, an immigrant, and as a child, sometime, it was pretty heavy. But when you had the right outfit and you look really nice, people just assume different things and admired you and were inspired by you.

Zana:

Fashion became a little bit my armor and then going into my adult life, it really became a tool I would leverage and use to present myself in a certain way. Giving you an example, when I was at Uber, I was one of the youngest people there and I was already managing. Having the appropriate dress code that made me look a little bit older than my age was essential for my confidence. Very much today as well.

Zana:

Reclaim really is this testament to how do I help women connect to themselves more and just open up opportunities so they don't have to worry about their outfit, but worry about much bigger and much more important things in their life.

Zana:

Reclaim is a fashion brand we started eight months ago and we focus on a very limited collection, all the wardrobe staples that every woman needs. But what we try to do is combine Italian craftsmanship and artisans. I'm Italian and my family is in Italian manufacturing. I literally grew up and made in Italy fashion. We tried to combine that aspect of fashion where beautiful aesthetic and a beautiful detail with love for practicality and function.

Zana:

I currently live in San Francisco, very Silicon Valley. Everybody's superefficient, super go getter. We try to incorporate those to [inaudible] and the clothes, and we have a very limited collection of things that are practical, functional but also extremely beautiful.

Stephanie:

Very cool. I was reading a little bit about your story of how you were in pencil skirts and heels and then you came to Silicon Valley and everyone was wearing hoodies and jeans and you're like, "I want something a little better."

Zana:

Yeah, that was a bit of a shocker because I grew up in Italy, where fashion is part of your identity, such a country that has a sensibility for beauty and art and culture, and fashion is a form of art. I was coming from a very corporate world. I wear pencil skirt, high heels, very formal wear was the day today.

Zana:

And then my first job at Silicon Valley was working for Google. I remember showing up there and everybody was wearing jeans and sneakers and T-shirts. I adapted to that lifestyle in the work outfit. But I also felt super underdressed. I'm like, "Ah, last time I wore this outfit, I was 15 and in high school." Is there anything a little bit more elevated? I feel like an adult and a woman with a career but still appropriate for business casual, and this is a little bit where Reclaim came from was how can we define a business casual aesthetic that is elevated but still very approachable and affordable

Stephanie:

Yeah, I love that. It's funny. I also worked at Google and if you would even get what would be considered maybe dressed up, they'd be like, "Oh, where are you going today? Do you have a date afterwards?" You're like, "No, I just want to wear a dress today. I just want to wear something cute."

Zana:

100%. It will be, "Are you interviewing for a different job?"

Stephanie:

Yes, I would get that too. You're working at Google, what did your career look like before Reclaim at Google or some of the other corporations? Were you in eCommerce or was that a big shift for you?

Zana:

It was a little bit of a shift. I mentioned before my family's in fashion so they have boutiques on the Italian coast stuff but very old school. They barely have a website and they do a lot of manufacturing and older clientele hasn't been the same for 30 years. I grew up in commerce but not eCommerce, a different generation.

Zana:

When I graduated college, I didn't think about fashion as a career option to be honest. I was like, "I want to do something that is different." Everybody I knew was in fashion. I was like, "I want to do something completely different and break the path with what my family is doing." I ended up in consulting. I ended up in management consulting and I didn't work for some fashion clients, but mostly I did a lot of projects and hardcore heavy industry, and after that I worked at Uber.

Zana:

I was managing Uber Eats in Italy which is different than fashion but is related to commerce and how to get conversion and how to get people to purchase your products. Some of the themes were similar and then the Google role was a mix of the two. It's a little bit of strategy and a little bit of execution and was focused on growing this smart home business.

Zana:

I would say that the career path I took was not a fashion career path and then this shift happened in business school. When I went to business school, I realized actually I do want to embrace my roots and there is a lot I know and I can offer and I spotted this niche in the market and this gap that was really needed. Honestly, it was my pain point. I was like, "I really don't know where to shop and I want to wear beautiful clothes but I also don't ever want to go dry clean them." That was the perfect solution.

Stephanie:

Yeah, that's super important. I remember one time I had dresses to dry clean only I'm like, "I'm going to throw that dress away. I'm not going to do that. I don't do dry clean."

Zana:

I also have a lot of beautiful cashmere sweaters and I wear them once per season because they end up in my pile of stuff I need to bring to dry cleaning and it takes me months to go.

Stephanie:

When you're shifting into creating Reclaim, did you tap into your family say, "Hey, here's what I'm doing," and start brainstorming with them since they are the experts but not in eCommerce but maybe in the industry when it comes to high end retail?

Zana:

100%. They were my first consultants, advisors, investors. They heard it all. My family business was a little bit like the sounding board for Reclaim and I spend a lot of time with the people in my family business and my family contacts. Like our pattern maker, for example, that we use in Reclaim she's a person that I met through my family. She's based in Florence. She's super, super talented and I designed with her most of the clothes that you see in the Reclaim collection because I would bring in the creative perspective and the vision, but then the nitty gritty manufacturing specs, somebody who's an expert has to do them. A lot of the concepts come from my family background.

Stephanie:

That network that seems a great way to start a company when you have different connections that you can tap into like that and different lessons that you can bring with you. That's awesome. What did the early days of Reclaim look like? Tell me a little bit about starting it up and building the website presence and how you were thinking about attracting your first few customers.

Zana:

The early days... We launched last summer. That was our first collection launch. I'd say the early day was a little bit like still discovery. I want to say that that lasted for the first few months. From launch to beginning of January was a discovery moment. You come in and you've done a lot... At least, when I launched the website, I talked with more than 2000 women at that point. I thought I know it all. I've talked to them. I understood what they want.

Zana:

I have a crystal clear picture what is needed, but then, when you have a website is when you start learning for real because one thing is the people that you have face to face what are they telling you and another thing is, "Oh, how are people interacting on my website? What products are they looking at? What are they purchasing? Which ones are asking questions? Which product are getting returned?"

Zana:

I would say the real learning starts when you are putting something in front of people's faces and you're asking them, "Put your credit card information and buy." That's when you're learning. Do you have product market fit? Or is there something you need to change?

Zana:

The early days were very, very busy. A lot of documentation and a lot of learning. We really cared about nailing it. Our first 300 to 400 customers, I would personally give them a call and just ask them, "How come you purchased? What convinced you? What did you like?" And just spend a lot of time learning and writing all that knowledge down and taking that feedback in. At the end of the day, we'd be like, "What did we learn today?" And just the bad thing and improving what you're doing.

Zana:

I wouldn't say that commerce is you have an idea, you put it out there and build it and they'll come. It doesn't really work like that. It's literally like take a lot of pride into changing things every day and iterating as fast as possible.

Stephanie:

I love that. You had a good point of a lot of people sometimes think build it and they'll come. But oftentimes, that's not the case even if you have an epic product or website or whatever it may be. How did you find your first couple of customers? How did they find your website? How did you get in front of people? Did you do some marketing?

Zana:

Marketing is a great way to attract people. Our first customers came from the Stanford network. I went to Stanford Business School. The first purchaser were people within my network. People that graduated from Stanford, Stanford alumni, or people that were affiliated with the university because we market it in the university network. And then following that, we had a lot of word of mouth. People who were wearing our products will tell their friends. We had a lot of referral. Our first batch of people that started using the product were referral, learned about us through referral, and then paid marketing.

Zana:

We did paid marketing on Instagram and Facebook. That is a channel that you use to raise awareness about your brand and your product. Our second wave was through paid marketing.

Stephanie:

Very cool. How often are you all launching products or new lines?

Zana:

We are a slow fashion company. Let's say, Zara. Zara would launch 20 collections a year, something that is not like fast fashion but still a high fashion. They would launch 14 collections a year which is a huge number. We're a slow fashion company so what we do we launch very, very few products, but we spent an enormous amount of time making sure that those products are amazing and they're done with the best material and the construction and fit are very well done.

Zana:

In total so far, we have launched one collection last summer and then we're coming up with our second one this coming August and it's a fall and winter collection and we're having just four products, four basic products, but they're done so much better than what's out in the market.

Stephanie:

Very cool. When you say four basic products, am I thinking like a T-shirt, a black dress like that kind of product?

Zana:

Yeah, I can tell you more. We're going to have white button down and the special thing about this white button down is that the front layer is actually made out of two different layers of fabric. You can 100% be sure that your white button down is not going to be see through which is a common problem every woman faces. And then material is the tencel material which is only produced in Germany, is highly sustainable, and it's one of the most ethically conscious materials.

Zana:

Another thing we're launching is two-piece jumpsuit and it's also made in tencel, so super nice fabric. We made it two-piece because, I don't know if that happens to you but it always happens to me, when you're wearing a jumpsuit and you're feeling amazing and then you go to the bathroom and you have this humbling moment where you're completely naked in your office bathroom. We're like, "No, it has to be practical." We made it look like it's only one piece but it's actually two pieces.

Stephanie:

That's awesome. I think every woman who's either tried on a jumpsuit or worn one you're like, "Oh, this is kind of awkward."

Zana:

Yeah, you look great and then the first moment where you actually have to live your life, you're like, "Oh, this is going to be difficult."

Zana:

And then the third product we're launching are... Those were our bestsellers in our first collection so we made some tweaks to them, but it's a pair of pants. They're made out of a super stretchy fabric but basically you're wearing a pair of black pants that look very nice and professional, but they're absurdly comfortable because the fabric is a 4-way stretch. You're feeling like you're wearing yoga pants but you look like you're wearing a really nice pair of black jeans.

Stephanie:

That's good. I need that.

Zana:

Our customers love them. We've got the most responses on those because they're such a good cheat. You're super comfortable but not inappropriate.

Zana:

And then the fourth product we're producing is going to be a camel coat. This one, the fabric is amazing. It's 30% cashmere and the rest is merino wool. It's super nice and soft. You literally want to sleep with the fabric, just the fabric price is $250 worth of fabric. It's super expensive but going direct to consumer, we will be able to price this product at a 350. It's one of the most affordable best quality materials that you'll be able to find.

Stephanie:

That's great. How are you conveying this quality and value to consumers or new customers when they're coming on your website? It's hard if you can't feel the fabric or try something on or know the backstory behind it that it's coming from Germany or Italy. How are you conveying that message on your website?

Zana:

That's a great question. Honestly, that is one of the hardest things to do because in a store, it's very easy. Somebody walks in, you touch it, you try it on, you talk with a store associate and you understand the message. In e commerce, you have roughly 10 seconds to make an impression. That's how much time people spend on one page before they decide. "Will I shop here?" Or they'll just bounce and go somewhere else.

Zana:

I think here is one of the areas where we did the most learning. Initially, we would have a lot of marketing language to be honest. The highlight or have some bullet points. Now, our learning is actually, no, like the women are coming on our website they really want to learn. We do exactly how I described them to you. We have lengthy copy, we go into the details, we give people the story. You don't have to read it.

Zana:

But if you're interested, there are pages into story of the material, what is the German fabric that is making this material. We provide all of that information out there and then we do big visual. Visuals and images is what converse the best and what people are resonating the most. We combine the text and the rich information with images, beautiful lifestyle images that people can see a zoomed in image of the fabric and reviews.

Zana:

We have also a lot of product reviews where every single customer that purchased with us we've reached back and asked them if they want to review the product if they loved it and oftentimes they do, which is great.

Stephanie:

That's awesome. How are you encouraging those reviews when a customer buys?

Zana:

We have an entire review post purchase encouragement system. The first attempt is always just to ask and usually... We have an email where I just introduce myself and tell them the story of our brand and how valuable their reviews are and that's where most of the people do their reviews. And then our second or third interaction is we provide them with a discount to a future purchase in exchange for a review.

Stephanie:

That's cool. Is there any split testing you do there that you've seen that worked better? I know we were speaking, I think, a couple weeks ago to the founder of Hous and she was talking about how she puts an image of her and her husband on a pamphlet every time they send a box or a thank you or something like that and that helps convert. Have you seen any best practices around that?

Zana:

The reason why we use my personal email for the reviews and I introduced myself is because people do like the personal touch. I'm sure that the founder of Hous was putting an image of her and her husband... People form a connection. My customers have the feeling that they know me and they're purchasing from an actual person. That is a real bond.

Zana:

I had one customer who bought a pair of pants from us and then she wore those pants on her family photo shoot with her newborn baby. She emailed me afterwards and she was like, "Oh, I want you to have the photos of our family photo shoot because I wore your pants and I look so great and the photos are beautiful." And I was just shocked. I was like, "This is so nice. This is amazing."

Zana:

I don't think I've ever emailed a brand to share like, "Oh, I wore this for an important moment of my life." I felt so attached. I remembered that made my day. The fact that something that I came up with and I designed and produced and spent time thinking up on, it's something that made her photo shoot more special and she felt prettier and more confident was very meaningful to me.

Stephanie:

That's really cool. That is a good customer to have. Hopefully, you can keep her long term.

Zana:

We have the craziest customer. We had one customer who purchased our perfect pants, the pants that are super comfy but they look professional. She purchased one pair. She loved them so much that she purchased 12 of the same size, the same... I remember seeing this order and I was like, "There must be a mistake."

Zana:

We email her because we thought there was a mistake or a glitch in the system and she was like, "No, I really love your pants. I want to have one for everyday of the week and I always want to have one ready because those are the pants I wore the most, so I just purchased 12." And I was just like, "I love you. You're amazing. Where do I find more customers like you?"

Stephanie:

Yeah, really. If you know, you know. That's great. Are you trying to also cross sell to a customer? I'm guessing when someone comes on your website and there's not a huge product catalog, it's probably beneficial to be able to say, "You're looking at this sweater. You should try this pair of pants with it too." How are you thinking about showing other products and are you personalizing at all?

Zana:

Yeah. The collection that we're launching is only four pieces and you're meant to have them all and they work as a capsule. All the colors are in the same color palette and they're all made to be mixed and matched. The idea is that you do purchase the entire catalog, and we're very mindful.

Zana:

The collection that we're coming up now is very much in line with the one we had before just a different cuts and different styles, but all the ones we are going to do in the future we're going to keep the same color palette and consistent materials so that people that decide to be Reclaim customers will have a trusted brand where they can have the entire wardrobe being a Reclaim wardrobe and it will always work for them because we're not going to have crazy fashion forward pieces that you buy once and they don't go with anything that you own. All the colors that we pick are very much neutral, creams, beige, black, and white. But it's a palette made to be mixed and matched and to do cross selling.

Stephanie:

Got it. Do you see people normally do buy multiple products at once? Or is there a little bit of convincing afterwards? If someone's like, "Oh, I'm just going to buy the button up and pants," are you then saying, "You forgot the sweater. You forgot the jumpsuit."

Zana:

Both. On average, people buy two products. That's our website average. But oftentimes people who bought and liked the products come back to the website and either buy more or just like fill their carts to try new products. Both things are true. Average first order is at least two items and then we have a lot of returning customers.

Stephanie:

Cool. Is there analytics that you're checking out to either see did they add something to their cart and removed it or were they hovering over something for a long time? Or is there any metrics that you look at behind the scenes to target those customers?

Zana:

100%. We have an abandoned cart flow. We call them flow. When we see somebody put something in their cart and then they ended up not checking out, basically an email follows them and ad follows them for a few days just to remind them that they still have this product in their cart and if they want to purchase it, then people who do purchase get an introduction to every product of the collection. They will receive emails to learn about the different products. If somebody, for example, bought the camel coat and then the following weekend then email about the pants. They can go back and purchase the pants.

Zana:

But there are some Holy Grail metrics that we look at as a startup. For us, returning customer is super important, even more than customer acquisition, even more than value of the basket size. Returning customer is what we really care about because that's the metric that shows how do people like you and how do people trust you and how well do they like your product.

Stephanie:

How do you reengage a customer if you have your... I think you mentioned slow fashion is the industry that you're in. How do you reengage someone when you might not have another product launch for six months or a year?

Zana:

You don't. That is a little bit the tradeoff. You can either have customers who are going to buy lots of pieces with you and you're going to have a high lifetime value of that customer, but they might not like you that much. They might consider you as us. "I bought it because it was cheap and it was on sale and I keep it in my wardrobe." But then the first Marie Kondo moment you have and you go through your wardrobe that is the first item that doesn't give you joy.

Zana:

Our model is very different. Our model is we're going to do fewer much better pieces and a customer will wait for our collection to come because they know it's going to be superior quality and it's going to be a piece that they will buy and keep for years.

Stephanie:

That's a good idea. Is there any education that you give your customers around why they should move away from the idea of the fast fashion industry or how to think about that? Any education behind the scenes that you're also doing?

Zana:

We are vocal about it in our Instagram but we're also considering starting a blog just to educate about what is this little fashion movement. But I would say that in 2020, a lot of the people that we interact with are extremely conscious consumers especially the younger generation. They know if a product is sustainable. They care if a product has an impact on the environment.

Zana:

I would say that it's the age of information. If somebody wants to know how ethical a company is and how much they honored your commitment, it's very easy to learn that. I don't know. I remember 15 years ago when fashion companies were like, "Oh, everybody's telling us we're not green." And they all started doing marketing campaigns in the middle of the forest. Get away with that. Literally, it's a practice called greenwashing.

Stephanie:

I had never heard about that but I do remember seeing images of people in new outfits and whatnot marketing them while they were sitting on a tree branch or standing in a field.

Zana:

Yeah, literally. That is called greenwashing where you basically show some images that could make your customers think that you're greener or more ethical than you actually are. I despise that. I don't want to be that kind of company ever.

Zana:

For us, it's very important just the customer that we have care and we do too. I'm okay if somebody who is not our ideal customer doesn't want to shop with us. I'm okay with that. If our price point is too high or if being sustainable is too expensive, I'm happy to have a smaller market but be company that is worth having in this world, than compromising on my morals and having great profitability.

Stephanie:

Yeah, that makes sense. It seems like your consumers would be interested in the community aspect of... You have a great personal story. You have a good story behind your company, a fun process, probably if they wanted to see behind the scenes of who's making what and how you're thinking about your designs and coming up with ideas and balancing all that out. How do you think about building a community around your brand?

Zana:

Our social media is our most powerful channel to share. We always post stories of behind the scenes and what's happening and what are we going through. That is the channel where the community is starting to mobilize. But in general, we do a lot of in person events. Not now because COVID changed that. But before COVID we would do brunch and browse, shop and sit. We would do events like this or and we target professional women in San Francisco because this is where we're based. We were very active on Facebook groups for professional women.

Zana:

We would have events where women can just come together and talk about their challenges and how they're advancing their career and simultaneously try on new great clothes. That is something that we help foster a lot.

Stephanie:

That's fun. I want to do one of the brunch and browses. That sounds awesome. Were you doing popup shops? Or how were people were they browsing? Online while in person or how do you think about the in person experience and retail locations?

Zana:

We have a partnership with a company like... We have multiple partnerships with companies that only have stores. We were in a Re:store in downtown San Francisco. They had our products on for six months. Now, they're close but they're reopening soon. And then we're opening our location in L.A. and one in New York with [inaudible 00:28:27]. We have partnerships with companies that basically bring URL brands and products in real life events.

Stephanie:

That's cool. How do you think about creating those partnerships and finding the right person, the right store? How would if someone was brand new go about finding a partnership like that?

Zana:

You have to make sure that is the right path you want to go on. I say that because retail distribution at this moment is not something that we could afford because we are a direct to consumer brand. We use premium materials and we make sure that our materials are done in an ethical and sustainable way. Our product cost is pretty high. We still keep prices as affordable as we can. Therefore, we don't have enough margin to pay a store or retailer and have a big distribution. Therefore, the partnership that we use we see them more as an opportunity to have a marketing presence in L.A. or New York.

Zana:

If somebody wants to touch our products and learn more about them, they can actually go and have a physical retail presence but it's more an exercise and a way to discover products rather than a sales channel for us. Our direct to consumer website is our number one channel for sure. It's the place that we use because that is the only way we can pass on as much price saving to the customer as we can.

Stephanie:

Yep. That makes sense. How have you seen conversions when it comes to people seeing something in person and then buying it online? Were you tracking that? Have you seen success in that model?

Zana:

What we noticed is that people who discover us in person are very loyal. The people who have had the chance to try on pieces and have had the chance to touch all the materials, they are the ones who end up buying. Most of the products have the highest basket size and they're the ones coming back just because they had the opportunity to discover everything and literally touch it with their own hands rather than seeing it on a website. There was definitely a benefit to that.

Zana:

But as I said, we are thinking about a model where in the future you can have a store where you discovered a product and touch and feel it but the growth will still come from eCommerce rather than opening stores across America. That's not something that we're thinking about at all.

Stephanie:

Got it. Maybe having like guide shops style where people can go in and look at it and then still go online and order to keep your margins down where you guys have now or close to it, I guess, not where they're at. Exactly. Very cool. To shift into more general eCommerce questions, what kind of trends are you most excited about over the next year or two around e commerce? Because a lot of things are shaking up right now, so I'm sure there's a lot on your mind.

Zana:

Yeah. Oh my God. eCommerce has been exploding. COVID definitely helped the eCommerce grow, but we're seeing multiple trends. One trend was definitely... Apparel did suffer a little bit.

Zana:

When COVID started in March, we saw an impact on our sales because everybody was scared. Most people are working from home. Our pieces are investment pieces to make you look great when you go to work or when you're out and about. It's not at leisure. And suddenly, the world is shopping for pajamas. We saw there was an impact to our sales. But the trend is quickly changing. Already in April, we saw a bump in sales and we think it's stimulus check giving an impetus to, "Let's buy nice beautiful clothes." We're seeing different trends.

Zana:

In terms of things I'm excited about, I'm very excited about sustainability. I'm very excited about slow fashion, the fact that consumers really care and want to purchase companies that our ethical.

Zana:

I'm most excited that customers are seeing that fast fashion and buying on sale and buying seasonal pieces is not something that they want to keep on doing. It's something that it's okay for your early 20s when you're broke and you want to be on trend, but the moment you're in your 30s or 40s, you want to have a more of a... They call it like a French lady aesthetic. Few pieces, very well done, super high quality, but not always make you look very chic rather than a bunch of things that do not make sense together.

Stephanie:

There's this one company that always targets me on Instagram and they drop new products, I think, it's every week and it got to a point where it's like, "Is this even quality? How can you drop new product lines every single week?" I started looking into it and you're like, "The reviews are pretty bad." "Oh, it's not..." Like you said there's no good ethical practices that are happening behind the scenes, but they're just very good at marketing.

Zana:

Ask yourself. If you see a T-shirt that is being priced six, $7, think about it. If the cost of Starbucks coffee is four or $5 and making your coffee is much easier than making a T-shirt that requires fabric, people sewing it, machines, transportation, it just makes you think. Somewhere in the supply chain, they must be taking some shortcuts.

Stephanie:

Yeah, I completely agree. It definitely is a good time too around apparel for a lot of people to rethink, like you said, what they're wearing, what's important because right now everyone's been in workout clothes and now even myself, it's like, "What do I really want to invest in going forward?" Because up until now, I've only had to worry about my top half and just have a nice looking shirt on maybe.

Stephanie:

But once it starts going back to work and going out into the world, I do think there will be a big shift in the consumers mind around, "What do I actually want to wear going forward and not just, like you said, for a season or a few weeks and then be done with it and clog up your closet space?"

Zana:

Exactly. That's definitely a trend that we want to participate in where if you already have a limited disposable income because the world is an uncertain place right now rather than spending it on things that are not going to last or that are questionable, spend a little bit more on fewer things which ends up being the same amount of money at the end of the day. But you're 100% happier with the premium pieces.

Stephanie:

All right. Let's move on to the lightning round brought to you by Salesforce Commerce Cloud. It's where I send a question your way and you have one minute or less to answer. Are you ready?

Zana:

Yeah.

Stephanie:

What's up next on your reading list?

Zana:

The Wheel of Time. It's a fantasy book.

Stephanie:

I haven't heard of it. I have to check it out. What's up next on your Netflix or Hulu queue?

Zana:

Oh my God, don't judge me for this but I think it's going to be The Bold Type or Selling Sunset. Don't hate me for this. I watch everything that was watchable on Netflix. Now I'm starting to trash watching.

Stephanie:

I actually can't judge you. It's funny because I was just watching Selling Sunset last night. I'm like, "This is so embarrassing but I'm going to keep watching it because it's really funny and I ran out of things to watch." No judgment coming from my side.

Stephanie:

Next on your travel destinations when you're able to travel again?

Zana:

I want to go to Italy. I know it's cheating but because I'm international in America, the recent visa immigration policies have been really difficult. I haven't seen my family in a year now and the moment this is all over, I'm going to Italy. I'm going to vacation for a month and I'm going to make all my friends jealous on Instagram. I don't care but I deserve it.

Stephanie:

I think I'm just going to come with you. You don't even have to worry about me. I'll just get behind the scenes. I'll be like, "Hey, mom and dad, where's my pasta?"

Zana:

We can go to Italy and watch Selling Sunset. I think we have a plan.

Stephanie:

Yeah, there we go. It'll be a perfect girls' trip.

Stephanie:

What's up next on your shopping list?

Zana:

I actually want to buy a nice desk. I'm eyeing this beautiful wood desk on AllModern. I think that's going to be my next purchase.

Stephanie:

Oh, that sounds great. If you were able to pick anyone to go to brunch with, other than me because that'd be a blast, who would you pick? It can be a celebrity or whoever you want.

Zana:

Oprah. I'll definitely go to brunch with Oprah or AOC, one of the two. I have a big girl crush on both of them so I should decide which one.

Stephanie:

You can bring them both. That sounds fun. And the last harder one, what one thing do you think will have the biggest impact on eCommerce in the next year?

Zana:

Next year?

Stephanie:

In the next year, yep.

Zana:

This one is a hard one. I don't know if under one minute it's answerable, but I think different forms of creative so Tik Tok is exploding. How to leverage different platforms like Tik Tok or just different forms of creating than the usual that we've been accustomed to see.

Stephanie:

Cool, great answer. It's been super fun having you on here. Where can people find out more about you and Reclaim?

Zana:

They can always shop and this is reclaim.com and follow us on our Instagram @thisisreclaim.

Stephanie:

Awesome. Thanks so much for coming on the show. It was really fun and we'll have to have you back in the future.

Zana:

Awesome. Thank you so much for having me.

 

Aug 04, 2020
How Thrive Market is Building an Online Grocery Shopping Experience that is Here to Stay
01:04:25

The shift toward online grocery shopping has been happening for years, but the events of 2020 have accelerated the process beyond what anyone could have predicted. But will it continue in the post-COVID-19 world? Nick Green, believes so. Nick is the co-founder and CEO of Thrive Market, an online health food market that has been at the forefront of the online grocery trend from the beginning. Since Thrive first launched in 2015, the company has steadily grown to more than 900,000 members and hundreds of millions in sales, and they did it in an untraditional way. On this episode of Up Next in Commerce, Nick explains how receiving “nos” from more than 50 VCs nearly crushed the company before they found a unique new investment strategy. Plus he explains why Costco has been one of the most influential companies to learn from in terms of structuring the membership experience and how to hack the supply chain so that you can provide a truly curated and personalized experience for your customers. He also divulges what the No. 1 metric you need to look at is if you hope to build success for both your own private label as well as all the partner brands you work with. 

3 Takeaways:

  • Learnings from Costco: Not only does Costco have a membership model that can be replicated, as Thrive has done, they also were instrumental in leveling up the private label model and building trust with customers. Thrive has leaned into the private label model, but has taken it even further by working with the other brands in the marketplace to ensure there are no “us-vs.-them” situations. By building trust in their private brand and with their partners, both have been able to prosper.
  • Hacking the Supply Chain: The biggest barriers to achieving the mission of making healthy food affordable and accessible was pricing and availability. To solve that, it all came down to streamlining the supply chain and leaning into the membership model.
  • Incrementality is the No. 1 Metric: Anyone can judge whether or not a promotion led to a jump in sales, but the incrementality of that jump is the most important metric to look at. Knowing who clicked on what exact promo, who then went on to purchase form that click or where they dropped off, is important information that brands need but can’t get in most places, particularly brick and mortar shops.

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Welcome, everyone, to Up Next in Commerce. This is your host, Stephanie Postles, co-founder of mission.org. On the show today, we have the co-founder and CEO of Thrive Market, Nick Green. Nick, welcome to the show.

Nick:

Thanks for having me.

Stephanie:

I'm so excited to have you on here, because I've been a member of Thrive Market for a long time, but I didn't always understand how it operated. So yeah, I'm excited to dive into Thrive Market and your background a bit. And yeah, would love to hear what brought you to starting Thrive Market.

Nick:

Well, first I'm excited to be talking to you today as a Thrive Market member and customer, and as someone who I think exemplifies our typical members with a growing family and entrepreneur, and with a lot going on and wanting to be healthy for you and your family. So, that is our mission, it's to help people get healthy, stay healthy and to make that lifestyle accessible to anybody. And it's been a crazy ride over the last five years and we're really just getting started.

Stephanie:

Yeah. Yeah. I love it. For anyone who hasn't checked it out, I highly recommend, especially for the niche things where you're like, "I really, I'm looking for this kind of essential oil." And it's also good prices too. So, what did you do before Thrive Market? How did you come about founding that and getting into the world of Ecommerce and developing a marketplace of all things? Probably, one of the hardest things to start.

Nick:

Yeah. So, I'm a serial entrepreneur, and actually a serial social entrepreneur. So, Thrive is a mission based business as I alluded to before. And really both the companies that I've started, the first one was an education company, and then Thrive obviously focused on healthy living, really came from my experiences growing up in the Midwest. I grew up in Minnesota. I had a mom who was laser focused on two things, which was education for her kids and health for her family.

Stephanie:

That's a good mom.

Nick:

And I mean, the basics, right? The foundational pillars. And I saw how hard she worked for both, right? Figuring out the right public school. We actually open and enrolled to go to a Spanish immersion school, when I was in elementary school. So, really making deliberate decisions there, when we wouldn't have been able to afford to go to a private school.

Nick:

And then around health, in a place at a time when there weren't a ton of options to find organic food, certainly to find organic, healthy food at an affordable price, my mom did all of that legwork, all of that research. And mind you, this is back in the nineties, pre-internet.

Stephanie:

Yeah, that's hard.

Nick:

Pre widespread internet. It was tough. She was reading books and doing her own research. So, I didn't think about it, this at the time when I started my first company, Ivy Insiders. But it was really her focus and education that caused me to see the opportunity to basically help other kids like me who had gone to public school, weren't from the East or West coast. And didn't necessarily see the college admission process back when they were in ninth and 10th grade. And I saw the SAT for the first time when I took it, and got to Harvard as an undergrad. And found out there were lots of my peers who had basically been prepping for not only the SAT, but college admissions in general, since they were early in high school.

Nick:

So, in my first business was actually, is called Ivy Insiders, and we were hiring Ivy League undergrads to go back to their home towns all over the country to help other kids get ready for college, get inspired around college, and then help with those all important standardized tests. And so, that business grew very fast. It was a summer business where we'd send these undergrads home during the summer. And we had, ultimately about 900 of them, so 900 branches around the country. And then that would seed an online business during the school year where these folks would continue to tutor and work with their students. So, I started that as an undergrad. I was 18 years old. Ran it for seven years, so three years after school. I think I described it, I basically didn't leave a seven block radius of Harvard Square for seven years.

Stephanie:

Gosh. I know logistics behind that, sounds insane.

Nick:

It was insane. But it was my first foray into mission-driven entrepreneurship, where I related personally to that problem so acutely, and the impact that we were able to have on students, to just give them, to motivate them, to inspire them. And then of course, to give them tools and strategies to get over the hump. If you're, again, a kid who grew up on the East or West coast in a major metro area, going to a good private school with parents, who had all gone to college to, you probably, this stuff it's taken for granted.

Nick:

But I think for a lot of people all over the country, understanding how the game works for college admissions is a total mystery. And so, that business was really fun. It was really powerful and inspiring for me to realize how personally meaningful it was. It set pretty early for me the template of entrepreneurship, not just as a way to build a business or make money or something like that, but also to do something I cared about.

Nick:

And then, the only thing more fundamental than education really is health. And like I said, that went back for me to my childhood as well. So, I sold Ivy Insiders in 2011, came out to LA to work on an earn-out. I spent a year and a half doing that and had a great experience as the acquiring company revolution prep. I got to see an education business that was at greater scale, but also very entrepreneurial and also interestingly mission-driven themselves. So, that was really cool.

Nick:

And then, I was actually the startup accelerator as an entrepreneur resident on the investment committee doing a bunch of angel investing myself, and thinking through what my next thing was going to be, when I met my co founder. And he, Gunnar, actually pitched me initially on investing in a concept he was calling Shop Drive, which was going to be Groupon for healthy food. And the business model was very different than where we ultimately landed, but the vision and the mission was exactly the same.

Nick:

And he actually grew up, couldn't have been more different than my upbringing, but he grew up on a communal farm, basically a hippie commune in Ohio, California. But also with a mom who really was focused on healthy living, and actually a community that was very focused on healthy living. So, they were doing group buying of organic wholesale groceries back in the seventies, the eighties, the early nineties. And he always had this idea, and he was a serial entrepreneur too, but he'd always had this idea in the back of his head, "How can we bring the commune to the masses?" And so, he pitched me on this idea to do groupon buying for organic food. By the end of the meeting, I was pitching him on doing something together. And the rest is history. That mission, which I remember crystal clear him saying, "We're going to make healthy living easy and affordable for everyone," in that meeting. That is still, that is the line that's in our office. It's what we talk to every new hire about. And it's the mission that inspires us as the business.

Stephanie:

That's amazing. I also think, I just want to hear his story of growing up, like he did on a commune.

Nick:

He's got a way more interesting story than I do. I grew up in middle American suburbia. He was doing... Just totally, totally different experience. And really, really cool to see the way that they were able to solve problems like health, food access in a creative and communal way. And it's been the template for so much of what we've done at Thrive, not just in terms of the business model and the mission, but the way we've thought about community, and the way we've thought about our membership is more than just utility. A lot of the values and the ethos actually comes straight from that upbringing that he had.

Stephanie:

Yeah, that's really cool. So, how did you start Thrive? You guys landed on the business idea? What were the first steps with, even thinking through like, "Okay, how are we going to buy things in bulk or get partners," or what were the early days like?

Nick:

Yeah. So, I mean, like I said, it started with the end in mind and how do we solve this problem of making healthy living easy and affordable for everybody? So, we knew that was the mission. Initially, we saw the primary barrier, which I think I would still say is a primary barrier to buying organic and natural products, basically being price. Typical markup is 25% to 50%. And for 95% of American families that just literally prices them out of the market. So, Whole Foods was our touchstone in terms of what they had done with quality and with trust, and with sustainability and sourcing. But yet, half of Americans don't live within driving distance of a whole foods. And as I said, 95% can't afford the price premiums. So, we really wanted to solve both the geography question, which inherently we did, because we were going to be online, shipping anywhere in the country, but more importantly, we wanted to solve that price problem.

Nick:

So, the early days of the business were really around how can we figure out some way to get organic products to people at, or below the price of conventional equivalents. And intuitively when you think about, it is crazy that highly processed food, that is a combination of more ingredients, more complexity in the supply chain et cetera, costs less. And it's easier to get then simple organic products that should be, in theory, easier to create. And it all comes down to scale. And it all comes down to what those supply chains look like.

Nick:

So, what we did basically was first say, how can we cut out as many steps in the supply chain as possible? So, work directly with brands, sometimes work directly with manufacturers or even with producers. And then initially we said, we will take the commune model and pool everyone as a group to get a wholesale account with these brands. And then that'll enable us to basically, by cutting out the distributor, get to below the price of conventional equivalents.

Nick:

Now, the challenge with that model was nobody wants to wait two or three weeks while your wholesale order comes on every single item of grocery that you buy. So, and we should've thought about that immediately. It took us a few iterations of actually doing these group buying events to see that it wasn't really a longterm sustainable way for people to buy their groceries. So, we were basically back at the drawing board a few months into the business and looking at other models and looking at Costco.

Nick:

And Costco is the wholesale buying club. They also cut out steps in their supply chain, go direct as much as possible. But then the key thing is they make their money from membership, which allows them to also pass along really significant savings to members on the product sales. So, that's where we landed. We were fortunate that both of us had started and sold businesses before. So, we were able to sell fund the business during that initial iteration process.

Nick:

The interesting thing is we landed on that business model, knew it could work. We of course, had utter conviction in our thesis around people in middle America, middle-class people, working class people wanting to get healthy. And we were like, "Okay, we're off to the races." And then, we actually ended up having a hell of a time raising funds when we actually went out to pitch VCs.

Nick:

And so, we in our pitch just fell flat, and we were actually rejected by over 150 different VCs.

Stephanie:

Oh, my gosh.

Nick:

We continued to sell from the business. And I'll tell you, there were points in that period where, Gunnar and I were like, "We can do this for a while, but we don't have millions of dollars to pour into this business." And there was existential risk. So, that was a pretty dark, dark time, especially given that we still had total conviction in what the business could be.

Nick:

We ended up stumbling our way into a fundraising strategy by partnering with the influencers who we're already going to work with to promote the business. And we actually brought them on as investors. And in $25 to $50,000 chunks, we brought in this coalition of the willing, people that were thought leaders in health and wellness, who understood the mission, who saw the opportunity and bet on us. In many cases who had never made an investment in a private company before, bet on us pre-launch. And we raised about $8.5 million that way and got off to the races.

Stephanie:

I was very interested when I saw some of your celebrity investors. And you can tell me if any of these names are wrong. I saw Demi Moore, John legend, Tony Robbins. How did you get in front of these people to make them even consider investing?

Nick:

Yeah, that's a great question. I wish I could say, I just pulled them up on speed dial.

Stephanie:

DM action.

Nick:

Or take some credit for some master strategy. Honestly, it was a snowball effect. And we started out with influencers who were people, most people haven't ever heard of, but have major audiences online, and major credibility and authenticity because of their thought leadership. And so, these were on channels like Instagram and YouTube, bloggers who were connected to other influencers, who were in turn connected to other influencers. And it spiraled up and out until all of a sudden we were actually talking to celebrities. So, it was really amazing, again, to see the power of the mission, where once we got in front of people that understood what we were trying to do, who cared about it as more than just an investment that was going to drive financial return, and who were committed to the mission themselves. It was like just a night and day difference, right? There wasn't like the skepticism we saw with the VCs, instead it was, "How can I get involved? How can I help? Who else can I tell about this?"

Stephanie:

All of them.

Nick:

And it foreshadowed too what we ended up finding with our members, right? Where when people find out that they can get healthy organic food at, or below the price of conventional equivalents, that they have a platform that is purpose built for making that process easy, they want to share it. And that's been a huge, I guess, has been the part of our success on the membership side. And it was, essentially, our accidental fundraising strategy.

Stephanie:

I love that. So, earlier you were mentioning Costco and it reminded me, I was just reading a really good newsletter thread about Costco and how they convince brands to essentially cannibalize themselves. So, for instance, if they are selling Starbucks, they will also sell coffee right next to Starbucks, and it'll actually be Starbucks, maybe making it. And when they partner with these brands like that, to create their own Kirkland signature line, it's oftentimes the same company, like a Starbucks or something who's making that product. And then, Costco will also ask them to make the product 1% better.

Stephanie:

Is there anything that, like you said earlier, you were looking at Costco when it came to building up the strategy, at least on the membership side, is there anything else around their business model like that, where you are watching what they do and learning from them and then maybe, going to your brands and saying, "Okay, make a Thrive Market version as well. You can still sell your name brand on here, but also make one for us too."

Nick:

Yeah. I mean, that's a really, really good question. And honestly, I could spend the rest of this conversation just talking about Costco.

Stephanie:

Yeah. I'll put the slink up of this thread. It was really good and also very interesting like, "Oh, I should choose Kirkland brand more often because it's the same exact product and everything. And oftentimes a little bit better."

Nick:

Yeah. I mean, any entrepreneur who is interested in retail, Ecommerce, membership models, customer centric business models, employee centric business models, values, they are the touchstone. Costco truly is an incredible, incredible business with a very powerful business model, the core of which is membership. But there's so many other dimensions to it. And so we, again, stumbled into understanding and studying Costco because of membership, but we've actually used them as a touchstone in a bunch of different ways. And the private label program is definitely one of them. And we call it private label turned on its head, because when people typically think of private label, they think of the compare to product that's going to be from a slightly crappier manufacturer with worst packaging, a little bit lower quality, but a slightly lower price tag. And Costco really changed that. I think the other retailer that's really changed that is Trader Joe's.

Nick:

So, we look at both of them as those examples of real innovators on private label, where their brand is actually trusted as much, if not more than the third party brands that are in the site or that are in the store. And to your point, they oftentimes actually work with their third party brands as the partners to develop these products to uplevel quality, to do customized case packs and sizing and packaging for their stores. And they get a bunch of efficiencies for the business that way. And then they're also able to really be responsive to the specific needs that they're, in the case of Costco, that their membership base has or in Trader Joe's, their shoppers.

Nick:

And so, yes, that's exactly the model that we take on our Thrive Market brand. That has been the fastest growing portion of our catalog. It's the best reviewed set of products on the site. It's the highest reordered set of products on the site. And we've now started to really blur the line between being even a retailer, we're a retailer still obviously, but also being a brand because a third of our sales are coming off of, basically the 10% of our catalog, that is our own brand. And that's because our members have invested in membership. They trust the Thrive Market platform. We do just act right and pursue our values and raise quality standards, so that trust continues to build.

Nick:

And then to your point earlier, we work with the third party brands in many cases or whatever co-packer, co-manufacturer we're working with, to be really, really responsive to what our members need in this product and how do we go above and beyond what their expectations would ever be. And because we're a retailer, we have so much more data than a typical brand would have in terms of number of feedback, in terms of purchase patterns, in terms of what products are selling in that category? What are the gaps in that category? What are the dietary trends? And so, we basically are batting a thousand on our private label products.

Nick:

And then, I think you're alluding to this too, because we're working with our brands, instead of it being an us versus them, where our private labels undermining the brands, we actually see the brand sales in many cases go up when we launch our Thrive Market branded product. And in many cases, it also allows us to curate the catalog further. So, we'll cut out some of the products that maybe weren't doing as well. And for those that are remaining, even if we're not using them as a co-manufacturers, they'll actually see their sales go up. So that's, it's been a core part of our strategy.

Nick:

The other part that we really followed Costco's lead on, which I just mentioned, is curation. You think about the Amazon model of the everything store. They're trying to always expand the skews to have as much choice as possible. If you go on Amazon and you search for almond butter, you'll literally find 40,000 results. How are you going to go through them?

Stephanie:

Yeah. Spend two hours going through reviews like, "Which one is the best almond?"

Nick:

Exactly. Trying to figure out what's right. And so, we've taken the opposite approach, which is exactly the same as Costco, right? Where they say, "We're going to have 5,000 products and it's going to make our backend operations really efficient. It's going to allow us to really focus on our purchasing power with a select number of high quality brands or vendors. And it's going to allow us to build trust with our members that they don't have to sort out which of these 40,000 options is best, rather we've done the work for you."

Nick:

And I think in healthy living that is especially important because the trends are changing so fast, people are intimidated. Oftentimes they don't know where to start. And to be able to come on to Thrive, after you just found out that you have a gluten sensitivity, or you have a child with a nut allergy, and click one filter and the entire catalog personalizes to you. The number of the feedback that we get from members is like, "This is, it's a dream, you're saving me hours and hours of time that I would have spent reading labels and doing my own research and having to do all this hard work that you guys had done for me."

Stephanie:

Yeah. I love that. I was just thinking two days ago, I probably spent an hour going through blog posts, because I have twins and the feeding schedule is getting a little bit crazy. So, I'm like, "Oh, maybe I should supplement a little bit of formula." And I went through probably 10 blogs trying to figure out a healthy formula for them. And it seems like there actually are none in the US, and all the good ones are in Europe and Switzerland and yeah, overseas. How do you think about finding some of those brands? Because it does often it seems like the US does not have as high of standards when it comes to FDA approvals and what's actually good. And I appreciate that you guys can step in and say, "Here's what's good. Here's what's not." But how do you find those products on your own?

Nick:

We've really taken it upon ourselves to first say, what are the right standards to have? So, for example, on GMO, we've simply taken the stance that we will not bring on any food products that have genetically modified ingredients. And it's not because we have some inherent opposition to genetic modification, that's a whole different debate, but it's the fact that 95% of GMO, genetic modification in the US is to basically make crops resistant to glyphosate, which is a carcinogenic chemical. So, we start by saying, "All right, let's put a line in the sand on our quality standards, things that are non negotiable, like non-GMO. Then we do the same kind of research that you're doing. But we have teams of experts who are dedicated to it. We're looking at each category and saying, "All right, what are the specific standards that we have to look to in this category for baby formula? What are the things that matter? What are the ingredients that it shouldn't have? What are the things that it should have? What are the best practices from a sourcing and supply chain?"

Stephanie:

I can be your expert now.

Nick:

Seriously, and you've spent the time, you're probably more of an expert than 99.9% of the population. And our goal is for that other 99.9%, "All right. Let's have the options on there that are really good, if people don't have the bandwidth or the experience or background to do the research themselves." So, it's been really, really interesting to see that trust where people can outsource the research to us. And the standards really do end up being different in each vertical or each category or subcategory, or a product type. Some of them are really, really hard like baby formula, because you're balancing, how can we make it affordable? How can you get, find something that's going to be shelf stable? How can you find something that's going to be scalable? So, have a supply chain that can actually scale. And then, of course I still hit the quality standards.

Nick:

But we've been pretty successful at it so far in a lot of different categories. And then we also allow people to, within each of those categories, as I said, we have 150 different metadata categories that we tag every product on. They can actually search by the things that matter most to them. So, if they have a specific allergy or they're specifically focused on fair trade, or they're specifically want to support women owned businesses or whatever it might be, you literally click a filter and then, basically empowers the user or the member to shop by their values.

Stephanie:

Got it. That's great. I think the idea of curation is only going to get more important as more products come online, more D to C companies are launching, you need that trusted source to be able to say, "We've already looked into it for you, and you don't need to spend five hours on a blog looking into that." So, that's amazing.

Stephanie:

Earlier you mentioned you have a lot of data, of course, that you're collecting all the time. Do you ever share that data with your brands? And if so, how do you go about that to keep the privacy aspect, but then also give your brands something to work with to maybe improve their own products where you're like, "Every time you sell this one kind of espresso bean, you always get a three-star review, versus this other one, you get a five star." Maybe you should look into that.

Nick:

Yeah. That's a really, really great question. And it's one that we're super, super focused on. I mean, we basically, our approach is be totally transparent with the brands on all of their data and then find ways to anonymize data, to give them insights more broadly on what's happening across the platform. I think one challenge that a lot of Ecommerce platforms have, but especially a marketplace like ours, is you can end up drowning in data. And so, it's how do you not just provide those data to the brands, but couple it with insights and make it distilled and digestible.

Nick:

So, one of the areas that we really focus is marketing and the kind of marketing dollars that brands put into promoting their products on site. If you think about that in a brick and mortar environment, it's a black box. You don't know whether that promo actually worked. You can do different lift tests and sometimes there's going to be some feedback provided, but it's much more art than science. And I think, that capacity makes it really hard to lean into the spend. We have a lot of brands that over allocate marketing dollars towards Thrive because they can see exactly what that impact is. And we have the ability to track that digitally. And then we share it with pretty, a high degree of specificity and controlling for incrementality what's actually happening, so that they can know their ROI, down to the dollar. And that kind of visibility is really powerful.

Nick:

Now, what you were asking about in terms of insights on what products are working, we're doing that all the time. And that's our category managers because they don't have 60,000 non-perishable skews, having an order of magnitude fewer skews, an order of magnitude fewer brands that we have to serve, means we can spend more attention with them. Which again, means we can not only provide the data, but we can help them interpret that data, analyze that data and then draw real insights from it.

Nick:

And I think that's part of the reason that the brands work with us. When I look at why we've become the go to launch platform for the most innovative new brands, why the leaders in the natural products industry are launching new products on Thrive first and giving us exclusives. Part of it is they align with the mission. They like what we're doing. And they know that we have almost a million members who are all really passionate about the lifestyle. But I think part of it is that we can do things on our platform that you just can't do in a brick and mortar environment. And some of that comes down to storytelling and just the way we position and present the brand. But a lot of it, back to your point, it comes down to being able to read them data and insights, and real transparency and visibility where they feel like they can control their destiny.

Stephanie:

Yeah. That's great. So, for the marketing campaigns, I didn't even think about you guys setting up your own marketing channel, what kind of metrics and insights are you giving these brands that they aren't getting elsewhere? And maybe, what should they be looking to get from other platforms? I mean, I'm sure they can't go on demand like, "I want to see this metric because Thrive Market gives it to us." But what are you showing that they normally can't get elsewhere, that's giving them that peace of mind and transparency?

Nick:

Yeah. I mean, the biggest thing is incrementality, right? At any given time, there's going to be so many different factors that can affect what's happening with the sales of a brand or a product. And those factors can be things like seasonality. They can be things like growth in our membership base. They can be things like COVID-19. And so, when you have all these different layers of volatility and a brand's sales on site, it's hard to know whether that promotion that you did actually had an impact. And this is the same issue that they have if they are selling in Whole Foods or any other retailer, it's like, I can run a promo. I can look at the lift pre-imposed promo in the overall brand sales. But there's all these other factors that happen. How do I actually adjust for those?

Nick:

And so, incrementality, as when we think about acquisition marketing for new members, incrementality is everything, right? And when these brands are spending incremental dollars, they want to think about incrementality too. So, that's the number one metric. And the way that we're able to do it is by having good attribution. So, when we send out an email, we can see every person that clicked on that email. We can know whether that click then drove to the purchase. And we can say definitively, right? Not just that this person purchased after the promo was sent, that this person purchased after clicking on that exact promo. So, that's one example. And then what we're able to do is then tease out and actually tell them, this is your return on ad spend in a way that is actually credible, versus attributing everything that happened during that period to the promo.

Stephanie:

Got it. And how do you control for more like environmental factors or larger things, like you mentioned COVID, how would you control for that when it comes to showing incrementality?

Nick:

I mean, part of it is you can, if you're looking at the overall sales lift, you can adjust, you can look at sales lift above and beyond what was happening in the category. And that's one easy way to do it. But more than that for us, we actually look at the power of an actual, the email that drove the promotion or click throughs on the banner or the ads themselves. If a person walks into a grocery store and sees an end cap, you don't have any way to know whether they actually saw that in end cap and influenced their purchase. If someone comes and clicks on the banner on our site or clicks through on an email that we sent on a promotion, we have that tracked, they've got a pixel and we will know and be able to attribute that.

Nick:

And look, you can say maybe that still is an incremental, they would've purchased anyway, but it gets you a lot closer to true incrementality. So, that allows you to not have to focus on just adjusting out all those other factors, which the truth is, we can't know for certain, right? We have an idea of what kind of lift we've seen from COVID-19. But even to think about that one, there's so many other factors at play.

Nick:

There's all the things we're doing internally to drive the business up. There's seasonal fluctuations that happen. So, we have to, some of it ends up being a judgment call, but the more we can provide the specific data and the... It's almost like a worst case analysis. We know these people that actually clicked are incremental, and if the ROI come back out on that basis alone, then everything else is gravy. And it just, it gives them a level of certainty to lean into the spend. And it gives us the power to really speak with conviction, to say, "Hey, these promotions really work for you." And we don't have to feel like we're just selling them on something. We can feel like, "Hey, we're partnering with you to drive massive value for your business in a way that no other retail platform really can."

Stephanie:

Got it. Yeah. Very cool. So, when it comes to building out your website, I'm sure you guys have had a ton of iterations over the past couple of years. What have you seen works when, I mean, because you're a membership site, when you're scrolling through, you can still see things which is nice. So, it's not like a complete, behind the curtain is the only way that you can see what will be actually have. But then after maybe right now, at least you click on it and then it'll say, "Okay, maybe you should think about a membership." And how did you think about building your website to get people to sign up for a membership, but also giving them enough products and things to see behind the scenes so they know it's actually worth it?

Nick:

Yeah, that's a really good question. And it's a balancing act. And to your point, it's been super iterative. We've tested all different variations of that initial first user onboarding experience. And we've done everything from an open site to a hard red wall to where we're at right now. We actually have an onboarding, we call it guided shopping quiz. So, you don't actually, most people that hit into site are not actually landing into the full unbridled Ecommerce experience, where they can browse through all the skews. Instead, they come into an experience where they get a landing page that shares the value proposition and features of Thrive. They then click through and actually go through a quiz that takes five minutes to do, that gives us the information to give them a curated, personalized set of recommendations to start.

Nick:

And I think the general thing that we found is, if you drop people right into an open marketplace it can be overwhelming, especially because Thrive is a different kind of shopping experience. And for many of the folks coming in they're new on this health journey. They may have just decided they want to pursue a keto diet, but they've never been on this site that allows them to search by, to filter by keto, or they don't know which categories of snacks are more likely to have keto products in them. So, giving a more guided experience where we get some data, again, do something that would be physically impossible in a grocery store. Well, you couldn't go in a grocery store and have the whole thing suddenly reorganize to put your stuff at the front.

Stephanie:

All vegan.

Nick:

Exactly. But that's effectively what we're able to do. And it's a five minute quiz, drives into a full data science model and uses millions of data points on purchase behavior in the past from people that had similar answers on the quiz to give, basically help you build your box yourself. So, from an Ecommerce as best practice standpoint, we've historically found that more open is good if people have high intent and they know exactly what they're purchasing. More open is detrimental to conversion in a world where people can be easily overwhelmed or there's real complexity, or they're new to the experience, or they need to get some education. So, we have really biased towards a funnel that is more educational and guided in nature.

Nick:

The cool thing about the quiz that not only actually gives us data, but it also in the questions that we ask and the things that we share in the categories that we move through, it shares with the would be member more about what Thrive does. And so, they get educated in the process too.

Nick:

So, and actually, if this really answered your question, but I'd say our funnel has tended towards being more closed and more guided, but always in a way that is giving value to the member in exchange for value that they return. So, one of the things we don't want to do is be that place that like says, "We're a walled garden and we're not going to tell you anything about what we are and just sign up and trust us." Because you will get some people that will do that, especially if you give them a strong incentive, but those won't end up being high quality members.

Nick:

So, we also think a lot about, what's the funnel that's going to not just drive that initial conversion to membership, but is going to create numbers who are going to be longterm engaged because that's what we're building and we want to have a business for the longterm. We're not just looking at clipping one year of membership fees.

Stephanie:

Yeah. That's so important. So, how did you think about building the quiz? Because I'm thinking, I could see quite a few people, I mean, I think you mentioned it was maybe around five minutes, I could see quite a few people maybe with lower intent dropping off. How did you think about building it in a way that would encourage people to finish it and what kind of conversions do you see when it comes to, or completions do you see around that quiz?

Nick:

Yeah. I mean the first thing I'll say there is your intuition is exactly what mine, and I think most people's would be on that kind of quiz where it's like, you just don't believe that people would actually go through the whole thing, especially as it gets longer. I remember I read a case study at one point on, I think it was match.com or one of these dating sites that has an onboarding survey or questionnaire that takes, it's like 80 questions or something, right? To find your perfect soulmate.

Stephanie:

Gosh. I'd give up. I'm single forever.

Nick:

Yeah. But and you would think that that's the way it is, but actually like 97% of people finish it. And I think part of it is people have to have an incentive, if there has to be a pot of gold at the end of the rainbow kind of thing. And so, obviously someone who's looking for the love of their life has a very strong incentive. Someone that comes to Thrive sees a lot of things they like on the landing page, really wants to get healthy, has a real incentive to finish it. We see about 85% completion once someone starts the quiz. And it's 18 questions. So, it's not a super short quiz. It goes by pretty quickly, but it's a lot of clicking, some real thinking, a little bit of cognitive load.

Nick:

And to be honest, we were totally surprised. We thought the drop off would be significantly higher. And what we found is it actually, to my point earlier, it builds more trust and credibility. There's a little bit of a sunk cost phenomenon where people are, they've invested now in getting through. And so, then they are really determined to actually get some value, see their results, like et cetera.

Nick:

But there's also this factor of they're getting educated about the platform as they move through the questions that we ask implicitly, tell them something about Thrive, what we're asking. Like, what are the causes that you care about? What are the values you want to live? What are the diets that you want to search by? As they go through those answers, they can see, "Wow. Thrive allows me to shop by diet. Wow. Thrive empowers me to shop my values. Wow. Thrive has beauty products too." So, we find it to be killing a lot of... Wrong analogy, but it kills a lot of birds with a single stone.

Nick:

And we found that our intuition on many dimensions of the quiz was totally wrong. So, it really has been just an iterative process of trying different things, prompting the membership at different points in the quiz, prompting the registration at different points in the quiz. And just like standard growth hacking 101 to iterate our way to something that converts.

Nick:

But then always, like for us, one of the big things we talk a lot about internally is always having our human hat on. So, if you're testing and iterating, it's very easy to look at the numbers, but not be thinking about the path that human beings are going through the experience. And we find that the greatest antidote to doing something that will be short term conversion driving, but longterm detrimental to the business is to put ourselves in the seat of the member and say, "Okay, is this actually a good experience? Will this feel good? Will I feel good, if I was going through this experience?" Because it is easy to test your way into something that will somehow squeeze more conversion out of the funnel, but you're squeezing out the wrong people. You're squeezing in, maybe the wrong people too, and you're leaving a bad taste in new users mouth that affects their longterm interaction with the brand.

Stephanie:

Yeah. Yeah. I completely agree. So, I think you have a 30 day trial, how did you think about having a free trial period? And then what does that pretension look like and how do you go about improving that number?

Nick:

Yeah. So, it's interesting that you mentioned the 30 day trial. For the first five years of the business, we did have a 30 day trial.

Stephanie:

That's what I did.

Nick:

And a hundred people came through the 30 day trial. Over the last nine months, and this coupled with moving towards this quiz, this guided shopping model, we actually ended up testing into removing the trial, having people sign up directly for membership. And we found that once they had gotten to see more of the catalog, see the values of Thrive and go through that quiz there was actually a willingness to sign up directly for membership. So, we now have an option to go through a trial for people that want to, but like 90% plus of our members are actually coming through what we call our direct to member funnel.

Nick:

We still do 30 day risk-free on that. So, you sign up for your membership, but for whatever reason, you don't use the membership, you don't like it. You have a bad experience, whatever. Well, people can get their $60 back. But our typical member takes back their membership fee in two purchases in terms of savings. So, it's about $30 average savings per order. And so, we find really high conversion. And we found that on the trial as well. We would have historically in our legacy funnels, 60% to 75% trial to paid conversion, which is unheard of for trials, which should have been an indication to us, we may not need the trial. And now we see similar actually higher. It looks like 75% of the people that will start the membership, three out of four of them we'll stick with it and have that great experience. And basically everybody that places an order we'll stick with it. So, the only people that are dropping out are, they signed up for the membership, they took the risk free. And then for whatever reason, they didn't actually place an order at all.

Stephanie:

Yeah. Yeah. It's another not to gush all over Costco, but another thing that reminds me of Costco a bit was the guarantee savings. So, I think it's not the normal Costco membership, but I think the business one that I have says, if you don't make a certain amount of savings or something, then you'll get your membership fee back. I can't remember what exactly it is. I just said, "Oh, that sounds like a good deal or a good deal." Don't you guys have something like that as well, where if you don't make your savings back, we'll give you the membership fee back or something along those lines?

Nick:

Yeah. So, we have two promises that we make to our members. The first we call it our low price promise, which is that if you find a product that we sell on Thrive, anywhere else at a lower price we will beat it. So, that just gives you that assurance that you don't have to be price shopping because we're doing all the price comparisons ourselves and making sure that we're always lower on every individual product. And if you happen to find one it's not, well, we'll go ahead and beat it on that price. So, that's one.

Nick:

And then the second, which I think, you're pointing to is our savings guarantee, which just says, if at the end of the year, you haven't made back your membership fee in savings, if you renew, we will actually give you whatever that gap was in store credit. So, if you only got $20 of savings during the year, that means that we'll give you, that's a $40 gap to your $60 membership fee. We'll actually give you $40 of shopping credit when you renew as a second year member.

Nick:

And we think that guarantee is really important, not because very many people take it, they actually don't. Because again, you only need two purchases to make back the membership fee. Almost everybody does. But the reason that we do it is for trust and for confidence, to put our money where our mouth is and say, "Hey, we're not looking to build a business that extracts value from you. We want to build a business that is non zero sum, that delivers value to members. And that the reason that you're renewing is because you've got real value from Thrive Market." And it's the reason why we have best-in-class renewal rates and every year, every cohort is renewing at an even higher rate. And I think it has helped drive our conversion too, because people can trust that, "Hey, it's risk free for the first 30 days. And even if I go through the whole year, if I don't make that money in my savings, I'll be able to make up the difference."

Stephanie:

Yeah. Yeah. There's so many ways that make it easy to want to stay with you guys.

Stephanie:

So, with everything that's happening with COVID-19 going on and a lot of changes in the world of Ecommerce, where do you see online grocery going in the future?

Nick:

That is a big question. And obviously, it is the question that we're thinking about so much right now. I think the first thing that's really important to understand about what's happening with COVID, and I would say specifically as it relates to online grocery, is that COVID has not created a departure from the trend. It's really just accelerated a trend that was already happening. If you look at the actual compounding growth rates of shifting to online grocery, it's like insane, right? It's double digit growth every single year. But it's early on in that growth period compounding. What has basically happened with COVID is you've packed five years into four or five months, and you've gone from 10% of people purchasing groceries online to 40% of people doing some of their grocery shopping online and many doing all of it.

Nick:

So, I think the billion dollar question as it were is, how much of that will remain and how much will go back? And I think that, if we had had two weeks of lockdowns, I think a lot of people might have done an order online, and then they're going to go back. But when you have several months, you now have a window, I think for people to bake a new habit. And the reality is that online experience, if it's good, people will have no reason to go back.

Nick:

One of the challenges is these retailers are dealing with out of stock. So, how do you do substitutes? I think there will be some fallout just because that first experience may not be ideal.

Nick:

But if you look at our categories, we focus on nonperishable products, which are easy to ship. We have a less than one 10th or 1% error rate on the picks that come through. So, you're always going to get exactly what you want. We now have a huge frozen selection of meat and seafood. We have a wine selection. We now have frozen meals. All these categories that you can get, that aren't the complicated, like fresh products that might not be ripe or whatever like that. People have a great experience. And when they have a great experience, they feel good about what they've done because they're shipping with carbon neutral shipping and everything comes in one box. So, you're not piling up a bunch of plastic to throw out like you do with an Amazon order. Then you retain those people.

Nick:

And so, we found with our cohorts during COVID is that they're actually engaging at a higher level, they're retaining at a higher level. And we expect them to basically behave at or above what previous cohorts have. And then we've also been seeing that our existing members that were using Thrive as one of four or five solutions to buy their other groceries, now they're using Thrive as one of one or two, which is driving up engagement there. And I think that those patterns given how long the quarantine period has been, or the stay at home period has been, are going to be longstanding.

Nick:

I also think that the shift of grocery online is only one of the trends. Everyone is focused right now on all the things that are moving online, all the things that are moving remote. Work is moving from the office to remote. Grocery shopping and other shopping is moving from a brick and mortar to remote.

Nick:

But I think there's another trend which is really relevant to us, that's actually maybe even more profound and that is, what I would describe as basically people becoming more conscious consumers. And I feel like the moment that COVID hit, everybody at some level became a conscious consumer. Everybody is focused on their safety. Everybody is focused on staying healthy. And everyone is thinking about trust and where do their products come from, "And is this product safe? And is this product going to keep me and my family healthy?" And so, that actually is the trend that makes me most excited because that's people wanting to get empowered about staying healthy, not just doing this purchase online, but buying more from retailers that they really trust, like Thrive Market.

Nick:

And then I think one of the really interesting side trends of this rise of the conscious consumer during COVID, has been people also thinking about not just their own health, but more broadly the health of our country and the health of our planet. And really seeing this incredible moment of people opening up their hearts and wanting to be part of the solution. We always have done donate at checkout, where we let our members donate a portion of their savings if they choose to the shopping budgets, for our gift members. And when COVID-19 started, when the pandemic started, we actually flipped the switch, so that all of that would go to our COVID-19 relief fund, basically providing grocery stipends for families directly affected. And we saw our donated checkouts go up 9X. So, just the generosity of our membership base. I mean, one that it's inspiring. It actually inspired me to, I decided to donate my entire salary for the remainder of the year to the relief fund.

Nick:

But it's also just so indicative of the way people, at this moment where I think people are at home, they're isolated, they in some ways feel helpless. They're looking at political polarization, all this stuff happening across the country. And they're saying, "What can I do to not only keep my family safe and healthy, but also help make this situation better, more broadly." And so, I'm really hopeful that that's something that will also continue. And that it will be extended beyond just helping those people affected by COVID to bigger topics, more longterm, like climate change and environmental stewardship. So, that's the trend we're betting on even more than online grocery, it's the rise of the conscious consumer.

Stephanie:

Yeah. Yeah. I love that. Everyone just had time to sit back and read on the internet and watch some Netflix series and things like that. And I think that it actually gave people a chance to dive into things that maybe they just didn't have a chance to do before all of this, where they could actually, like I did go into a thread about formula and watching Netflix series all about water and-

Nick:

Yeah, it's like getting educated and then also having that time to reflect, right? And say, "How do I want to show up in this? And how can I vote with my dollars?" And I think it's really, to me it's very heartening that when people have that moment, they come out saying, "I want to make a difference. I want to be on the side of change."

Stephanie:

Yeah. Yeah. I completely agree. I wanted to ask how you set up your backend infrastructure to keep your brands happy? How did you make it easy for them to, you to place orders from them or them to see sales, or how does it look behind the scenes? Because we focus a lot on the consumer piece. And that was the one part I was thinking was like, what are your backend systems look like for all your brands?

Nick:

And the approach that we took, which I think was pretty differentiated with our membership base was just to be hyper transparent on what was going on, what were the challenges we were having in our supply chain? Why was it taking longer to fulfill orders? And how were we scaling up our fulfillment capacity while still keeping our fulfillment workers safe and ensuring that the products arrived to our members safely? And so, that was a whole exercise for us and community building radical transparency. I got out there and did an Instagram TV. I'm not even an Instagram user, but managed to get up there and spend 15 minutes talking directly to our members about the different challenges that we were having and giving them a window in.

Nick:

And the same kind of communication was necessary, basically with each of our stakeholders. So, internally with our employees, it was a huge exercise. And how do you, during a time when everyone is work from home and isolated and scared, how do you keep people together? How do you create community? How do you be transparent with what you know, and also what you don't know in terms of where things are headed?

Nick:

And then with our brands, the exact same thing. We have good systems for brands to self serve on what's happening with their sales, with their performance of different skews. We also do a lot of just custom reporting, like I said, with every promotion that goes out. But the biggest benefit that we have, the biggest strength we have there is not so much the light bells and whistles on the backend reporting, as much as it is the fact that we have fewer brands, we can actually give them personal attention. And so, our category managers were basically on the phone all day during COVID and even pre-COVID they're on the phone all day talking to our brands, finding out how we can be helping them, giving them feedback and giving them insight.

Nick:

And so, I think we have, because of the curated model had the opportunity to, despite getting some significant scale, maintain that closeness of interaction and that personalization, and just like we're doing for our members, doing it with the brands. And I'll tell you that was especially important during COVID, because you can have a great backend reporting infrastructure and self service platform, but brands are trying to figure out what the heck is going on, that's not going to get you answers.

Stephanie:

They better be able to reach you.

Nick:

They better be able to reach you and they better reel up the conversation. And look, our brands had challenges too. They were struggling to scale their supply chains. We had major out of stock issues. We're still dealing with that. Honestly, there's been an elevated sustained demand. And the ability to have a relationship with each brand where they're keeping us apprised to being transparent with what's going on for them, and we're doing the same to them, I mean, it just, it removes that friction and that barrier, that I think can often happen when you've got brands and retailers that don't talk.

Stephanie:

Is there anything that you learned from all of this that you're, or maybe best practices that you saw happen with one brand that you're sharing with another to prevent out of stock issues or being able to help forecast demand better? Because I'm sure this won't be the first time this happens. What kind of best practices are you maybe sharing amongst your brands, if at all?

Nick:

That's a really good question. I think every brand has a unique situation right now. Each category is unique. There are some categories that have been affected 5% or 10% in either direction. And you've got others that have been affected 5000%. So, I don't know that there's universals. Probably, the only universal is that, if things are... There is no universal, essentially, right? That things are unpredictable, volatility can happen. And we have to build our business and they have to build their businesses in a way to be resilient and ideally be anti-fragile, is the term I like to use. It's being able to actually lean into a really challenging moment and step up and be a better version oof what you normally do.

Nick:

And so, for us as a business that was on the mission dimension of like, "Hey, for us and being anti-fragile, is we already, we do a great job building a community. We do a great job with communication. We do a great job living by our values. Now, we're going to do that. And we're just going to triple down on it to make sure that is our source of strength during this trying time."

Nick:

For our brands, the challenge that they have is, they're dependent on their own supply chains. They have limited manufacturing capability. And, again, if you have a 5% or even 50% spike in demand that might be able to be handled. But if you're a brand that creates hand sanitizer or can beans or flour or you do diced tomatoes, that have a year long lead time from the harvest, there just isn't much you can do. So, we have tried to work hand in hand with our brands for sure. We tried to be patient with them for sure. And then it's been a good exercise for us to think about redundancy in our supply chain and making sure that we have partners that can scale and are going to be resilient. We're still obviously hitting our quality standards.

Stephanie:

Yeah. That's a great answer. I'm pretty sure I could talk to you all day long, set a thousand questions, but I also want to respect your time. So, is there anything we missed before we jump into a quick lightning round?

Nick:

No, this is great. I feel like you asked a lot of good questions and gave me a chance to pontificate at length. So, thank you.

Stephanie:

I love pontification. Okay, great. So, the lightning round is brought to you by Salesforce Commerce Cloud. It's where I'm going to ask you one question and you have a minute or less to answer.

Nick:

Okay.

Stephanie:

Are you ready?

Nick:

I'm ready.

Stephanie:

All right. I thought of a hard question for you. If you were to create a Netflix Original, what would it be about?

Nick:

It would be about regenerative agriculture.

Stephanie:

Mm-hmm (affirmative). Tell me more.

Nick:

That is to me, that is the future of food. And it is the way that food can be part of the solution on climate change. And just so that for your listenership to understand, organic farming procreates a less of a carbon footprint than traditional farming, but it's not necessarily actually regenerating and sequestering carbon and having a net negative impact. And bringing up for those people that don't know, basically carbon emissions is what creates global warming or the primary thing that creates global warming. Regenerative agriculture is agricultural systems and models that actually sequester carbon, regenerate top soil, and in doing so have a positive impact. And there are negative, depending on how you want to talk about it, impact on climate change.

Nick:

And I think we are past the point, at this point where we just need to slow it down. We actually need to reverse it. And food as you know, is a massive, massive culprit, our food system. And I think people don't realize how innovative, how scalable and how impactful regenerative ag could be if we were willing to accelerate it. And there's so much cool stuff happening. I think if we could do a Netflix series that shows more and more conscious viewers in this case, be conscious consumers. What's possible, you'd have a groundswell of interest and support for regenerative ag.

Stephanie:

Oh, that's good. If anyone from Netflix is out there, hit up, Nick. Sounds like a [crosstalk 01:01:24].

Nick:

That's my pitch. That's my pitch.

Stephanie:

Yeah. There you go. What kind of music do you listen to, to get in the zone?

Nick:

Oh gosh. I'm actually an ear plugs and noise canceling headphones kind of guy when I'm working, utter, utter silence. And I like to walk a lot. My form of meditation is going out for a walk. I know I sound like I'm like 80 years old.

Stephanie:

Me too.

Nick:

It's for me, it's like super, super therapeutic. And then I will listen to music. And it depends so much on my mood. It can be everything from house electronic, if I wanted to really let off steam and move fast, to classical, to sometimes I just go silent too. So, I'm classic ADD where, if there's any distraction around, it's kryptonite to my work. So, I've got a big thing of earplugs sitting right next to me right now. And I go through about 10 pairs of disposable earplugs every day.

Stephanie:

That's great. What health fact do you drop on people that surprises them?

Nick:

That's where I could have spent the whole hour talking about. I think there are some... This isn't an answer to the question, but there are so many health facts that surprised people because so much of what we historically thought of as healthy has been total misinformation. And I think more and more people now understand that fat's not bad. Fat doesn't make you fat. That's an obvious one. But I think the one that I'm actually most interested right now, is the fact that what is healthy for humans is really also tends to be what's healthy for the planet and vice versa.

Nick:

And I've mentioned this earlier, but I think people are connecting that more and more, that if you look at products and food products, especially that are produced sustainably, those products will tend to be simple. They will tend to have low numbers of ingredients. They will tend not to have chemicals. And those same things tend to make them healthy for our people.

Nick:

And there's a lot of different debate and diets about, "What's the right macros. Should you be keto? Should you be vegan?" But if you generally just stick with, if this product was produced in a way that was healthy for our planet, you will probably get to a place that is also healthy for you as a human.

Stephanie:

I like that motto. It makes it a lot easier. What tool or technology are you most excited about either trying out or that you're currently trying out right now and it can be at Thrive or it can be personally?

Nick:

That's a good one, tool or technology. Honestly, I'm a minimalist, so I'm actually always trying to reduce, clear out and take away technology. I don't use any social media. I had a brief flirtatious relationship with Twitter early in the pandemic and got sucked in, literally I've never used. I don't use Twitter. I don't use Facebook. I don't use Instagram. And-

Stephanie:

I'm going to tag you, Nick. Oh, it makes me so sad.

Nick:

I know, but the truth is, I would be a total addict on all those platforms, I'm now convinced. So, I actually, I try to reduce tools and technology to the maximum. I think, if you're trying to do something, what matters in your life and your ability to achieve those things will basically be a function of how much of the things that don't matter, you can eliminate.

Stephanie:

I like that. That's a great answer. All right. The last hard one, what one thing will have the biggest impact on Ecommerce in the next year?

Nick:

Oh, I mean, I think that's obvious, it's what's happening with the pandemic and COVID. And as I said, I think there's like, it's the thing that people miss is that this is not a departure. It's not some orthogonal trend. It really is the acceleration of all these mega secular trends that were already happening. And I think what's fascinating about it is you are concentrating already rapid trends, like the shift of grocery online, or the shift to conscious consumer attitudes. And you're concentrating years of evolution into a few months. And I think the ramifications of that, what the new normal looks like, what the different vectors are beyond just online grocery and conscious consumers, I think it's going to weigh out last the virus itself. And in particular with Ecommerce, we're getting to see the future now. We are going to see 2030 in 2021.

Stephanie:

That's great. That's a good quote too. Well, Nick, thank you so much for joining the show. It's been such a fun conversation, so many good insights. Where can people find out more, not about you apparently on social media, where can people find out more about Thrive Market?

Nick:

Yeah, you can find more about me anywhere, but Thrive Market is thrivemarket.com. Again, first month is risk-free, if you want to sign up for a membership. If you're in financial straits or you're a teacher, a veteran, a student, a low income family, you can actually get a free membership, just apply through our gifts program. If you have anyone else that's affected by COVID directly, they can also get free membership and a grocery stipend. And yeah, check us out, we're also, obviously, on all the social media platforms.

Stephanie:

Cool. Thanks so much, Nick.

 

Jul 30, 2020
A Formula For Ecommerce Success
56:19

What is the right percent profit margin you should target for your products? How do you get the most out of your Facebook ad buys? How much should you really pay attention to conversion rate? These are just a few of the questions that every small business and Ecommerce shop wants the answers to. On this episode of Up Next in Commerce, we picked the brain of Andrew Faris, the CEO of 4x400, a company that has helped grow numerous Ecommerce companies from less than 500,000 into the tens of millions. Today, Andrew spills some of his advertising secrets, including how to make Facebook your core driver for customer acquisition. Here’s a mini spoiler: human bias is leading you astray, but there is a simple way to correct course. Find out that, and more, on this episode!

Main Takeaways:

  • Conversion rate is so context-specific that it's not that helpful of a metric. Instead, analyze conversion rate relative to average order value and relative to the traffic sources the customer came from.
  • Before you invest in anything else, you need to drive traffic to the top of the funnel. Currently, Facebook ads are the core driver of customer acquisition for online shopping. Andrew suggests that most Ecommerce brands should invest in the platform and then trust the algorithm to put you in front of the right audiences.
  • You have to take big swings with your experiments. Don’t get hung up on micro-details like the color of your buttons or rewriting your copy. Instead, find big ways to make changes and then see how the outcomes stack up.
  • Because we are all riddled with our own biases, we often cannot predict accurate models of the future on our own. Instead, use data as your guide as you peer into the future.

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey everyone. This is Stephanie Postles, co-founder of Mission.org and your host of Up Next in Commerce. Today on the show, we have the CEO of 4x400, Andrew Faris. Andrew, thanks for taking the time.

Andrew:

Stephanie, I am very glad to be able to do this. I have never been accused of not liking to talk about Ecommerce in particular, but just in general. So this is fun.

Stephanie:

Well, you're my perfect guest then. I was creeping as one does on your LinkedIn. I saw an interesting thing that you have a background in religion and theology. I was wondering how you transitioned into the world of business from that background.

Andrew:

Yeah. I can always tell when somebody has looked at my LinkedIn or not because that's maybe the only place where that's found anymore.

Stephanie:

You're welcome.

Andrew:

Yeah, yeah. No, I went to school for biblical studies, and then got a master's degree in New Testament. So that was my whole pathway, was to go into that and actually was a pastor for a while. Did that, and then about ... gosh, how long ago? Five and a half years ago stepped out of that not because anything in my faith changed per se, but just because I was just rethinking a bunch of stuff in my life and reworking a bunch of stuff in my life. So it's just total life change in all kinds of crazy ways. I didn't have a clue what I was going to do actually.

Andrew:

That educational pathway doesn't have a direct connection to almost anything that's not work in a church or academic setting or something like that in theology. So, I really loved that education a lot, but I was figuring it out. So I called a friend of mine named Taylor Holiday, who ... and I was talking to him about if there's any available work in his world of work. Just basically as an in between thing while I figured it out. I just thought I'll just go do something for a couple months to figure out what I want to do. He said, sure, and brought me to a company called QALO, Q-A-L-O. If you've seen the silicon wedding rings that are for-

Stephanie:

Oh, yeah.

Andrew:

.. on the internet a lot, QALO was the first big company of those. QALO went zero to 20 million in a year and a half and was not funded. So, I was bootstrapped. I went there and it was just growing super, super fast. Also, being not funded and being a bunch of people like that, it just meant that they just were, in those worlds probably some of your listeners probably know this story a little bit, which is like, you just find people who can do stuff in that setting. I literally started in the warehouse. At one point, I sat down with Taylor, who's now one of my partners. Taylor was running marketing for QALO at the time. His brother was one of the founders. Taylor said, "Hey, you've got a mind for numbers," which he knew because we were in a Fantasy Baseball League together and knew that I was a big baseball stat nerd.

Andrew:

May not be interesting to many of your listeners I'm sure, but I have a lot to say about the interplay of thinking about sports through statistical lens and thinking about Ecommerce. Anyway, so that was the origin. We had been in this fantasy baseball for a while, "I know you have a mind for numbers, why don't you learn Facebook ads and Google ads and learn digital marketing?" I said, sure, but still I was not really sure what I wanted to do in the longer term. But I was like, "All right, that sounds fun." So, did that and loved it.

Andrew:

I mean, I was so totally unaware of what was happening, but I still remember the first conversation I had with Taylor in a bank where he told me what I'd be doing. He's explaining to me how Facebook ads, Google ads worked and said, "Is it okay? Well, here's the deal. You get customers into the funnel with your ads and then you drive ..." and I stopped him in the middle of that sentence and said, "What's the funnel?" That was where my digital marketing knowledge was at. From there, that ended up being the pathway to the digital marketing and Ecommerce career growth. So I was at QALO for a while, went to CTC, the agency that owns our company, owns the majority of it and became the head of strategy there. And then now I run 4x400.

Andrew:

Yeah, it was a crazy set of circumstances with Taylor. We actually went to junior high together, but had not reconnected because of that. We reconnected outside of that. So, just weird circumstances.

Stephanie:

That's interesting.

Andrew:

This gets into my life philosophy a little bit. I'm a believer in divine providence and think there was some of that happening around.

Stephanie:

For sure. Yeah, that's awesome. Always good to be in business with someone who's willing to bet on you because you have that beginner's mindset and it's probably why you're doing so well. But I'd love for you to detail a little bit about the structure of CTC and 4x400 in the holding company structure because we haven't had anyone on the show quite like this. So, any details around what 4x400 is and how it's connected to CTC would be great.

Andrew:

Yeah, sure. Common Thread Collective, it grew out of ... Taylor was building the agency alongside the growth of QALO. Started really focusing on Facebook ads. CTC does a lot more in that now, but CTC is now a full service digital sales agency. We said digital sales sell digital marketing because what we're doing is selling things on the internet, it's consumer goods, really focusing on Ecommerce entrepreneurs. The mission of CTC is to help entrepreneurs achieve their dreams. So that's really what we're about. We're specifically really good taking people in somewhere in the journey from zero to 30 million.

Andrew:

I was a strategist there and then became the head of strategy there. CTC continues to grow and do well. Taylor Holiday, as I mentioned is the managing partner of CTC.

Andrew:

In the midst of that, we also were like ... I mean, we came from this background of starting QALO. Taylor also was early on with another one of our partners named Josh Rodarmel who founded Power Balance. If you don't know Power Balance, Power Balance was the really popular silicon bracelets that were worn by athletes for a long time, still are worn by some.

Andrew:

That company was another super crazy fast growth company. I think they were zero to 50 in a year and a half. Yeah, I think that was the number. But anyway, I did on the brand side selling consumer goods in those worlds. We're like, why don't we launch our own brands as well? So, that's how 4x400 started. Eventually I went over to that side of the business. We started with building our own brand from scratch. It totally saw giant failure called [inaudible] company, just a huge waste of money. It doesn't exist anymore. It was sports themed baby goods and it just ... there are a lot of reasons that didn't work

Stephanie:

Wait, sports themed baby goods, so-

Andrew:

Yeah, yeah.

Stephanie:

... like onesies.

Andrew:

Yeah. Like onesies that look like football uniforms. They're adorable. I don't know why nobody bought them.

Stephanie:

Okay, that's super cute. I'll buy one from you.

Andrew:

Yeah. I think that you'd have to go find a flea market in Northern California somewhere. I had to go get it every day.

Stephanie:

I will find one, I actually need to for my twin. So, it'll be a long journey, but I'm going to do it.

Andrew:

Okay. You're in Northern California, right?

Stephanie:

Yeah.

Andrew:

Yeah, I think that's who we sold to, so [inaudible] don't worry. We did that, and then realized actually most of our skill at this point ... most last couple years that we have really been spent after we'd gotten out of the brand side so much growing brands, not so much building brands. So we thought, why don't we just do that? Now our model is, at 4x400, we work with entrepreneurs who are in early stages and feel a little stalled out. We provide them with a team around them that can help them grow it. 4x400 mission is also to help entrepreneurs achieve their dreams. We just do it in a different way than CTC.

Andrew:

CTC does that the traditional client relationship 4x400, takes the majority share of the brand. And then our goal is to make it so that by bringing us on as a partner and all of the expertise and resources we have around finance operations, marketing, growth customer service, even just really thinking through the whole system of what it means to be a great Ecommerce brand, we can help brands grow. We just closed actually our fifth brand that is currently in our portfolio. We're hoping to close another one soon. Who knows by the time it comes out, if that will happen? We're trying to work with brands who are doing less than half a million in revenue and saying like "We can try to grow you from there." CTC is the majority owner 4x400. 4x400 is the majority owner of these brands. So there's this giant web of relationships there.

Stephanie:

Yeah, okay. That helps me understand the landscape a bit more. How do you think about acquiring brands, how do you find brands that are willing to say, "Okay, we'll give you a majority share and come under your company"?

Andrew:

Yeah. Well, there's a few ways. CTC is a magnet for some of them. Sometimes brands will come to CTC and CTC will say, we're not the right partner for you. You're not a place where you can afford us. One piece of advice I have for a lot of it was like, if you are paying an agency not very much money you should really think about whether the agency is good because agency economics just require, for you to get great service, they typically require a pretty good investment. Just think about it. Agencies exist by marking up people's time. So, an agency works well if they are able to attract and train great talent by nature of access to large amounts of information.

Andrew:

The value of an agency is that they are spending millions and millions of dollars of other people's money on stuff. So, it's information arbitrage in that respect. You can come to an agency and get that information applied to your brand in a way that maybe an in house resource can't always do because they just are not going to have the visibility to as much of what's going on. For that to work, then you have to mark up that time of high quality, talented people who are probably not cheap. And then also for something like Facebook ads, Google ads, and then oftentimes there's a creative element of that and a writing element of that, and a strap gentleman have that, so that means you got to pay designers and other people like that too. And then there's web dev parts of it. You start to put that all together and if it's too cheap, then you have to be going like, wait a minute, what am I actually getting here?

Andrew:

Some brands in the early days, will come to ... they'll be stalled out or come to CTC for resources. CTC will say to them, actually you can't really afford this. What we actually think is a better solution for you is to talk about a deeper investment where we can really surround you with more stuff. What we find is a lot of entrepreneurs love product building and customer communication in certain ways. They love their customer, they love their product idea people, but they don't necessarily have all of the skills around everything else it takes to grow a brand. In fact, they don't want to do those things.

Andrew:

Most entrepreneurs don't start brands because they love finance, they don't. They don't even necessarily love tactical marketing. A lot of times what we can say to them is, "Let us take all that stuff that you hate doing anyway from you, you feel overwhelmed and stalled all the time anyway. You come with us, we'll pay you a consistent salary," which is also a big help to some people who are going like, I just don't even know if I can perform this anymore. We'll help you grow. Some entrepreneurs want to stay on, some don't, some just wants to take it. So it really depends on each entrepreneur, but that's basically a lot of how we think about it.

Andrew:

And then for us, we evaluate the brand by saying like, "Does it have basic product market fit and basic fundamentals to where we think as we bring in all of our tactical expertise and all of our specific expertise in various disciplines that we can then apply that to the brand and grow it?" A brand who comes to us who hasn't really invested much in paid media, but has done 100 to $300,000 in revenue, we look at that and say, "That's ..." Actually, we have a really high amount of respect for that. It's really hard to do that, it's hard to do $100,000 without being good at Facebook ads. It's not easy. So we look at that and say like, "Good job. We don't think you're a failure. If you come to us and want our help, we think we get it." We look at that and say, "That's very impressive. Let us surround you now with resources that we can scale this to 10, $20 million in revenue."

Stephanie:

Very cool. How are your brands performing now?

Andrew:

Yeah, good. They're doing good.

Andrew:

I think COVID really helped Ecommerce brands massively. Two things happen at the same time. One of them is that large corporations who have diversity of sales channels, but were spending lots of money on advertising, pulled their advertising budgets the way the heck back. Of course, lots of other companies couldn't produce products. So they couldn't sell products in retail settings, so they pulled a lot of the budget back. They couldn't produce products because of supply chain problems. And then at the same time ... So that meant that in large auction based advertising work universes like Facebook ads and Google ads, ads got suddenly way cheaper really fast.

Andrew:

The way that works is that because those are built on an auction, if a lot of people leave the auction everybody's prices get cheaper. We've looked at this data across CTC accounts. There was a giant plummeting of advertising CPMs in those worlds. And then at the same time in the last couple months, conversion rate on websites went up because the only place to capture demand was online. You couldn't go buy stuff in the store. So if you're selling things on the internet, that's where people are buying things from. And then of course, the stimulus checks it. As people have noted, that actually ended up being one of the largest increases in revenue to the average American family in history. So, all of a sudden, people have money to spend. Whether or not they should have spent it on consumer goods is a different question, I don't really know. But they had money to spend.

Andrew:

The less places for that demand to be captured mostly on Ecommerce stores. And then also, it got a lot cheaper to reach those people with ads. You put that all together and Ecommerce did really, really, really well for a couple months. So that really helped us. There's no question about it. We're still feeling some of the positive effects of that. It feels weird to be a winner in COVID, but there's no question that Ecommerce brands were .. To varying degrees depending on the category you're in, for sure.

Andrew:

We have three brands that are in the established stage and not in the start it up stage.

Stephanie:

What account is established, is it a revenue metric or-

Andrew:

Yeah, a good question. I'd say a million dollars during 12 months, or a million dollar run rate. We would look at and say, "Okay, we're growing at the pace that we want." I can just give you some numbers. We're projected this year to go to have one of our brains go to 8 million, that brand did 100,000 in 2017. Last year, we really took it over halfway through the year. I think we ended at 750 for the year. So, that's definitely our fastest growing brand right now.

Stephanie:

That's [crosstalk 00:16:47].

Andrew:

Another one-

Stephanie:

... some good growth right there.

Andrew:

Yeah. We feel good about that. That's profitable too, which is definitely in our model. We took on a little bit of funding early, but not a ton of funding. We function more like a bootstrapped company. And then another one went from ... just a little over two years ago, we acquired it. It was basically doing no revenue, it'll do 3 million this year. Yeah, that's a different story. And then another one went from 250 to a million to just under two, this year, we'll do four to four and a half probably. So those ones are all we feel established growing at the pace we want, we feel really good about.

Stephanie:

Yeah. That's some impressive number. How do you grow these brands? What are some of your tactics and strategies that you rely on those, what do you see success with? How can someone else learn from what y'all are doing to grow their Ecommerce companies?

Andrew:

Yeah. Facebook ads is the core driver of customer acquisition for us. I mean, selling consumer goods direct to consumer online, Facebook ads is still the most powerful tool in the world for reaching people. I'm hearing chatter about other things, YouTube, Snap, even Tik Tok, Google ads, product's changing. I just think still at this point, at scale, depending on what you mean by scale, people define that word differently. But for us, that's the core, top of the funnel way that we get traffic to our website.

Andrew:

I mean, you think about what Facebook ads is, it's not buying ads so much as buying traffic. I guess it's both really. But we look at that and say, "If we can make the traffic worth more than we're paying for it, worth enough more that we're paying for it to cover the cost of goods and things like that," I should say, "Then we can win." That's how we drive top of funnel traffic for us. And then after that, we try to do everything that we think great brands should do, which is like create a beautiful website that treats their customers great, has generous returns and shipping policies as much as we can afford to do it basically, which varies from brand to brand, depending on a number of factors. Do a great job with your retention email and other automated flow stuff. Constantly testing conversion rate optimization on our site in various ways. There's just a whole bunch of that kind of stuff that we're doing on the backend of that.

Andrew:

We are also certainly looking to invest in other top of the funnel type metrics, our traffic drivers as well. I would think of Google search as mid funnel and Google shopping as mid funnel. So, we're definitely investing there as well. I think we'll keep doing other stuff. That won't work forever. There's going to be a cap to how much Facebook ads does the driver work and we fully intend to add to our customer acquisition approach when we can. But our goal has been to grow profitably and we think that's one of the best ways to do it right now.

Andrew:

The other thing is it's not just one of the best ways to do it, it's just that we also have deep expertise in it. So, I'm just a believer that do the thing you do well as much as you can. I think it works for leadership and working with teams. Just as much as we can set up our team members to be doing the things that they love doing and they're good at. As long as the things that people love doing and are good at create value for the company, then you should pay them to do it. So that's the way we look at it too.

Andrew:

Just coming from the agency side, I personally have managed, I don't know, 25 ad accounts, that's probably more than that. Seen a lot more of that when I was the head of strategy and working with other strategists. I don't mean that to brag. It means that now I have some intellectual capital built up on what works. So, that's what we use from there.

Stephanie:

Cool. To drill in a little bit deeper then for the Facebook ads because I think a lot of companies probably have looked at Facebook ads, maybe they're using it. I haven't heard of anyone growing liked you guys are growing your brands consistently. So what tactics are you using specifically, or what do you see works well?

Andrew:

Yeah, there's a lot I can say about that. I think this is going to sound so fishy, but if you're getting serious about that, there's a couple of things ... The thing I would actually tell you to do, if you don't know where to start and you're getting serious about it, is to go visit your admission.co. I don't know, maybe I can give you a slink to this, Stephanie, at some-

Stephanie:

Yeah, we can slink it up.

Andrew:

Cool, yeah. So that is CTC's education program. It's not a course, it's different than every other education thing I know of in this world. It's actually a moderated community with access to ... Taylor, the CEO of CTC is in there doing webinars like our team members, our brand managers and people like that. Also, might jump in there and do webinars exclusively for that community. What we're doing is teaching all of the things that are ... what we believe are really the best practices for Facebook ads from the perspective of creative, from the perspective of targeting, bidding, all that kind of stuff. Bringing people through all of those things and then giving them continued support with access to the actual CTC teams who are doing that same thing that I was describing, which is spending millions of dollars of other people's money, so you can have access to that knowledge set. I think it's 500 bucks a month right now.

Andrew:

I even say sometimes there's even executive level people who will take their whole team through it. It's not like you're going to be in it for forever. The point is that you can do that and get access to what we believe works best. We're always evaluating that. There are certainly other things to do there, but that'll give you what we ... We try to be really honest and transparent where we can about what we're seeing. So that will give you mental ways to think about that problem.

Andrew:

I think one of the things that can go wrong is you could listen to me talk about this, and maybe you're an entrepreneur and you hear my numbers and you go like, I'm going to go do that. You just blow money because you make simple mistakes that somebody could help you not make, if you've just got some support. There is no way to learn besides doing it really. You're going to make mistakes, it's okay. In my view, creative needs to be really product focused in the sense that it's on Facebook ads and Instagram ads. You are driving high quality traffic by giving people a clear sense of what your product is right away. Clear wins over everything else first as a baseline.

Andrew:

Clear doesn't make you give you the best out in the world. They're clear plus some other things do that, but clear establishes a baseline of what you can expect and at least drives what I consider high quality traffic to your side. People who are interested in you because of your product. So that's probably the first basic principle I would say is focus on being clear in your creative before you focus on being clever or funny, or any of those kinds of things. You can drive a lot of very cheap traffic to your website with Clickbait tactics, but they won't buy anything. Ultimately, it won't matter how cheap the traffic is if they don't buy anything. So that's the kind of thing I would say.

Andrew:

And then the other big thing I'm a huge believer in is trust the algorithm. There was a world where people talk about Facebook ads as the value of micro-targeting that was one of the phrases people would talk about. This idea that you'd go find exactly your customer really specifically target them without everybody else. I think there was a time when that was part of how you did it. Those times are gone. What I would say is what you want to do is give Facebook as much information as possible and let Facebook's algorithm predict the future for you because humans are terrible at predicting the future. Algorithms are pretty good at it. So, algorithms do a really good job of looking at the data set of who's responding to your advertising. And then going and saying, here's some more people like that to put you out in front of. So, we believe in really broad targeting.

Andrew:

Let Facebook have as much freedom as you can to go and find the next person to put you out in front of. Over time, not even over that much time, Facebook's amazing in this regard much quicker than Google is at this. Facebook will find who those people are. So that's the broad principles I would say is trust the algorithm, be clear with your creative. There you go. There's just so much more I could say about the Stephanie, but I'm going to stop there. So I don't take up the entire rest of the podcast.

Stephanie:

Okay, cool. Yeah, we will definitely slink that up. I think it's a really important point too to segment a piece of your ad budget for testing. I know we do that internally as I'll tell. Our team members are like, "Hey, you have this much money. If you spend it and you just learn from it, that's okay. Versus this amount let's actually protected and make sure we drive results with it." So I think it's good to go into a mindset being okay with using a portion of ads for an R&D type testing project. So, you feel like you can learn from it, but not blow your entire budget on it.

Andrew:

Okay, no question. Constantly testing is super crucial. What I'd say about that is, when I want to test on Facebook ads, the place I want to test most is take big swings with your tests. The common thing you hear people say with testing, you'll hear people like, I've seen so many articles trumpeting like, oh, we changed our CTC button color or we changed it from [inaudible] now and it was a 15% lift.

Andrew:

First of all, I just don't believe those studies anymore. Secondly, the reason you're writing about it is because it's exceptional. It doesn't happen all the time. I just think that's a waste of people's time. But most people need to do, if they're looking to go from not successful to successful, the larger the difference in outcome you want, the bigger the change you need to make. You can't just change the background color of your ad and expect that it give you wildly different results. That's once you have results you like and now you're just dialing in and trying to grab an extra 2% of value here and there. I just rarely see that thing work.

Andrew:

What I would say is much better to think to test is something like, what's the offer that you're giving people? What's the product you're starting with and leading with? That can create wildly different results. We just ran something for our jewelry company that we ... 31 Bits, which is our other most recent acquisition, our fourth brand. We started with a batch of ads focusing on one set of products were necklaces and bracelets and things like that. We were getting a dollar of 50 clicks, low click through rates, et cetera, and very poor conversion rate.

Andrew:

We changed the product set, same exact brand, similar styles of photography, but just different products to a whole different category of product and saw triple or more the performance suddenly CTC went way down. Click through rate, went way up, conversion went way up. The reason why is really obvious, it's jewelry, some people like some bracelets better than others. If you just use the same stuff all the time, people are going to respond to it the same way over time. There's no magic to that. That's how people shop for something that you wear. It's about what it looks like. So, by changing the products that we led with that made a huge difference. So that's what I'd say is for Ecommerce consumer good people, that's the kind of test you want to be running.

Andrew:

Give it a whole different products out, a whole different offer, a whole different way of framing the offer, don't just change little bits of the creative and copy if you want to change your outcome in a big way.

Stephanie:

Yeah. I love that. People I talk to sometimes are focused on those micro adjustments that you're talking about or just the minimal incremental pieces that they could change, whether it's button colors or all that. That's a good point too. Yeah. Focus on the higher level things. But how did you decide on what new products to show?

Andrew:

In that case, part of it was what new products ... there's a change in our product development, that's going to make it so, or in our manufacturing that was going to make it to that, we're phasing out some products anyway. We always start by looking at most products over various periods of time. This is a simple way to start. I mean, there's not a lot of science to it in that respect. I think we're just looking around-

Stephanie:

Just seeing what it's doing well in the market.

Andrew:

Yeah. And what's done well on our side. Honestly, part of it is for a place to start your testing just like make a hypothesis and test it. I mean, it's not-

Stephanie:

Yeah. What timeframe are you looking at? When you do the test, are you looking at 30 days? Let's see how it does and try something new, or is it like after a couple of days you'll know and try something different?

Andrew:

Yeah. I'd say budget is probably a bigger factor than time. So if you're spending thousands of dollars a day, it doesn't take very long good answers. If you're spending a couple $100 a day, it takes a little longer. It also changes relative to your average order value. What you need is a statistically significant number of responses and really a statistically significant number of conversions. You can think of conversions as micro conversions as well. For example, a click on an ad is a conversion in a sense. Clicks as a percentage of impressions is a conversion. Because it's pretty cheap to run Facebook ads, you can actually figure out a reliable statistically significant performance in a click through rate pretty fast without having to see how those clicks convert.

Andrew:

In that case, it took us, I mean, I think we're got 100 bucks, when we knew that this new round of ads was way, way better performing because the gap and click through rate was so significant between the two. That's another core principle here. The larger the gap and the outcome, or the larger the disparity in the outcome, the more likely it is that it's a reliable result, if that makes sense. In that case, I think we spent between the two products, that's a total of 1,500 bucks. The whole goal of that was to test those while we went and ordered new products to try and start scaling a little bit for a larger test in the future. I didn't really care what the actual result was. The goal is a bigger goal to win bigger over time.

Stephanie:

Yeah, that makes sense. When talking about growing, I saw that you guys live by a central Ecommerce growth formula. I was hoping you could go into that a bit.

Andrew:

Yeah. This is changing a little bit in some ways. I'll give you the baseline version of it, which is visitors tasks conversion rate times average order value. This is actually really simple. Every business in the world only actually has three factors that make up the value that you get from a purchase, or that make up your revenue actually. The first factor is how many people come to your business. This could be people walk into your store, it doesn't have to be a website. But just never people who show up. And then you multiply that by the conversion rate. So, what percentage of those people buy something from you? And then you multiply that by how much they spend.

Andrew:

When you look at that, that will equal your revenue. If you just say, how many people get there, how many of those people buy and how much they spend when they do? That's the entirety that makes up the revenue. That's incredibly simple and intuitive in a lot of ways. But what I find is that in the fog of war, people lose sight of that very simple concept. So, they start making tests and changes without a really clear idea of which one or multiple of those variables they're actually trying to affect. Of course, those all relate to each other. For example, your average order value goes up, your conversion rate goes down, that's a general rule of thumb, it's true across everything. It's intuitive when you think about it.

Andrew:

A smaller percentage of people are going to buy a $1,000 item than a $10 item. As you drive more traffic, it's highly likely that you're driving lower and lower quality traffic. Everybody exists along in the world, exists along a continuum of people likely to buy your product and unlikely to buy your product from your mother, who's the most likely person in the world to buy your product to-

Stephanie:

That is number one.

Andrew:

Yes. To a subsistence farmer who doesn't have the internet is the least likely person. The farther you go from your mom to the subsistence farmer, the more expensive it is to acquire that customer. So as traffic grows, then your conversion rate is likely to go down. That's just another helpful concept, I think. These are rules of thumb to heuristics they're not always true, but that's a basic way of thinking about it. We think about those three levers in what we do and really try to understand when we test something at any point in our funnel, whether it's on the website or ad level or whatever, which one of those am I actually trying to affect? Where's the problem in my business?

Andrew:

I've talked with friends of mine who own CrossFit gyms, and I've said to them like ... I'm thinking of a friend in particular whose gym was struggling. I was trying to help him think this way, which of these is the problem for you? Are not enough people showing up to your gym? Or when they show up, do they not buy a membership? Or do they buy a cheap membership or you give them a month free and then they don't spend any money after that? Which one of these is the problem? That probably gets towards LTV as well, or CLV, Customer lifetime Value as something to think about in the midst of all this as well. This is where you can make it a little more complicated, but that basic principle is true. Across the gym, just like on my consumer goods websites, it's the same problem. You just have to figure out which one of those things has the highest upside at the lowest cost to fix next. That's where you should put your energy.

Stephanie:

Yeah, I love that. Have you ever pitched a brand to be taken over by a 4x400 that you believed in where everyone else on your team didn't believe in it?

Andrew:

Oh yeah. This is where it helps to be coldly rational. Gosh, I don't mean rational like smart, I'm always right. I just mean my approach is unemotional to a lot of this stuff. To the probably emotional dysfunction in other ways in my life or something like that, I'm not saying you should emulate this necessarily. But that's why there's therap, so it's fine. So, sorry? I know there's some noise there. A lot of times, if we're tweeting about a new brand acquisition. People will say privately like, "I do believe in this," or "I don't believe in this." I just started think that's like ... I think without having the view that I have in the acquisition process, I just don't even know what somebody is judging that on. People just go by their general sense of what they believe about if it's a good brand or not.

Andrew:

First of all, other people are not like you. Your subjective sense of that may not reflect at all what I brought population to potential customers is. Secondly, to me, you can validate this pretty clearly by looking at simple product market fit, things like margin is a huge question, which makes businesses work and it makes other businesses fail, is one of the problems of opening day. We made a huge mistake by just giving ourselves away too little margin on the products.

Stephanie:

What's the little margin, what do you consider small?

Andrew:

Yeah. Well, I think if you're going to try and grow a brand with ... I'll just tell you, we target 70 points plus of margin for brands that we are trying to grow with our method of growth. And then that's really important. If you have other growth mechanisms that might not matter as much. But for us, we want 70 points plus landed margin. We can deal with a little less than that, but if you're going to try and grow a brand with Facebook ads, you're going to need to be able to exist at a two to one return on your money on ads probably. It's hard to really beat that number, if not withstanding something like coronavirus throwing those small. So we target that. That becomes a big question for us, if we think we can do that.

Andrew:

Sometimes actually it's part of the first thing we have to fix for a brand is, we see supply chain processes that are in our view broken and we would say like, "We love everything about this brand. It's convergent on site, is great relative to its average order value, relative to its traffic sources." We dig into all that stuff, and say, "But your margin is not good enough, but we think we can solve that. W can help with getting your shipping cost down by repackaging it differently, or thinking about what products to focus on or not, or changing your manufacturer or something like that." We don't want to ever do that at the expense of giving people a good product. We haven't compromised on that at this point, which I'm happy about. But yeah, those are all the things that we can look at as potentially something to fix. But in our view, 70 points plus, makes the game a lot easier for sure.

Stephanie:

Got it. I like that point too about, what would someone know when they're doubting a brand? Because that is definitely a human flaw thinking about ... even when I'm thinking about those rubber bracelets from a while back, for me to say, "Oh, that's dumb," I don't need to be balanced or anything, or I need help with that. It's funny because it's like, well, apparently a lot of other people did because look how many people bought it. Yeah, I think that's also a good lesson for anyone starting something up. If they hear someone say like, "Oh, that's dumb, you shouldn't do that." Probably good to take a step back and be like, well, that's just one person's opinion and not let it deter you from trying at least.

Andrew:

Yes, especially relative to the set of metrics I have in front of me, which are going to tell me something a little bit different. This is one of the things that's so great about data is that I'm just wrong, Stephanie, about so many things in life, I just know I am. So having some source outside of my own brain that I can look at. When my own eyes are lying to me, humans are just biased machines. We're just machines of bad thinking about stuff. So, finding ways to be aware of my priors going into something and my bias going into something, check those against some sorts of truths that exist outside myself. Of course, people can lie with data and data can be poorly collected. There's all kinds of ways that can go wrong too. But in light of all those things, I just think that it becomes really helpful to do that, to go and have a source like that to go check in. So that's what we do in our process.

Andrew:

There's various levels of excitement about brands even internally. But there's no question that ... We sincerely believe it can work based on the data set in front of us and a few other old principals. So that's what we do.

Stephanie:

That's cool. We're mentioning data, stick with the data when it comes to it and don't just listen to unfounded opinions. What kind of metrics do you look at that you think a lot of other brands aren't utilizing enough? There's obvious ones like conversions and click-through rates and all that kind of stuff and revenue obviously, but is there anything that you look at that you think enough people aren't paying attention to?

Andrew:

There's no magic here. After we acquired 31 Bits, this jewelry company ... really super cool brand. This brand was started by women who were anthropology majors in college and wanted to provide good quality jobs to people who could not access them by nature of where they lived in the world. So they started in Uganda after a trip there and had these women making these really cool beads. This started in 2009. These women were out to change the world with this brand. It's just totally authentic, beautiful brand story around all of this stuff. When we acquired that, I on my podcast, it's called-

Stephanie:

What is your podcast?

Andrew:

Yeah, yeah. I feel so lame doing this right now, but-

Stephanie:

Oh, sorry, Andrew.

Andrew:

I know. There's a tangent there. But anyway, if somebody really wants to hear how I think about this question, I spent about 45 minutes with Taylor, the head of our agency, talking about exactly why we acquired 31 Bits. We did an episode about that. I'll find it and send it to you for the show notes as well. And then we interviewed the ladies from the brand for the next episode after that, so people could kinda hear why they chose us as well. We tried to be really honest about why we think it'll work and why we think it could fail. I would say the metrics related to that, that I care about, it's not just conversion rate it's conversion rate relative to average order value and relative to traffic sources. That's a huge one for us.

Andrew:

Conversion rate itself is actually so context specific that it's not that helpful of a metric. I mean, think about the conversion rate of a direct click. Somebody comes to the website, types in 31bits.com, presses enter. Let's take a 45 year old female on a desktop computer direct versus a 25 year old male on their cellphone through a display ad on the internet, saying conversion rates to describe what both of those people are doing and getting a baseline is not going to be helpful at all because the baseline for those two different customers of what you'd expect, they're so different. I mean, just the device issue you're twice as likely to convert on desktop than you are as mobile before you talk about any of the rest of the demographic's software or anything like that.

Andrew:

We try to really give some specificity of the context of something like conversion rate. Even one thing you'll see there is like, sometimes the brand's conversion rate will look low, but it's actually not low. The reason it looks low is because they're getting a ton of blog traffic via organic search SEO essentially. That blog traffic is technically on their URL, but it's not at all related to their product and it's not people looking for their product. Therefore, that blog traffic will have an incredibly low conversion rate and will therefore negatively influenced the total conversion rate. If you bucket that blog traffic out, it turns out the conversion and the brand is fine and their website works great and you just didn't realize that. I don't know if that example made sense. But there's-

Stephanie:

It does make sense.

Andrew:

... there's just all of these kinds of contexts, things like that, that I think are really crucial to look at all the way around. We look at some other stuff like we've looked at entire funnel on our site, so we'll look at not just the conversion rate thing. If somebody doesn't buy something on your website, there's a question of why did they not buy? Because they made it to your website, so what happened next? Did they never add anything to cart or did they add to cart and then drop off once they got to checkout or did they never even make it to checkout or what? We look at each of those things and try to understand what's going on.

Andrew:

If somebody adds to cart and makes them check out and then drops off, why? The answer to that question is probably because you're shipping cost is too much a lot of times, or it's going to get shipped slowly, or they're not confident in return policy or whatever. So we'll look at some of that stuff too. We have a value of 4x400, which is understanding before you act and paired with that is hard problems require deep focus, or require deep work. The basic concept is like, before I go and throw out a million solutions, I want to really understand as clear of terms as possible exactly what's wrong.

Andrew:

When I hear somebody say my Facebook ads are broken, the thing I want to say is, "What do you mean? What's happening? What broken-

Stephanie:

What are you doing?

Andrew:

Right, yeah. "Is the conversion rate broken? Are the clicks too expensive? Where is the problem? Are you not getting a high enough AOV? When you say it's broken, what do you mean?" To try to help people answer that question because then it can guide where to think about the next problem.

Stephanie:

Cool. I love that. Yeah, that was a really good example.

Stephanie:

Are there any things, technology or otherwise tools that you're using right now that are maybe new that you're excited about?

Andrew:

Well, I'll tell you what I think that is, it's not the answer you're looking for, but I think it's the answer that I get.

Stephanie:

Go for it.

Andrew:

My answer is no I don't. We will get there to where we'll need to do that, but I just think this is a massive distraction for a lot of people. I think people love to go chase the next new thing. They'll even say things like, "well, my customer is on Tik Tok." I don't really know what that means. Yes-

Stephanie:

I don't really know who's on Tik Tok right now.

Andrew:

I'm 36. First all, I'm 36, I'm too old and I don't get Tik Tok. I've never had Facebook on my phone, so I'm just the worst social media marketer ever in that respect. I do not understand what's happening in the world. I just don't always know what that kind of thing means. I think your customers probably also want Instagram because there's a lot of people on Instagram. So I could be wrong about that, I guess. I'd be so happy for somebody to correct me if that's the case and reach out and tell me, "You're not looking at this right." Anyway, I just think it becomes a huge distraction for people to go and try and find another new thing to go do instead of to get really good in one or two areas.

Andrew:

We will expand channels over time. I think we're really trying to build out more search and shopping as a next step for us, that is not a new channel at all. It's actually the oldest digital marketing channel, search in particular,. I'm playing around with some ideas from SEO, but really I'm just trying to make my customer more valuable at this point. So, just trying to really get better via email, post-purchase, via my unboxing experience, trying to think about how unboxing and product experience creates retention in word of mouth. I'm trying to dig deeper and get better at the things I'm already doing rather than adding a whole lot, I think.

Stephanie:

With everything happening in the world right now, it does seem like there, like you mentioned early on the show, there're a lot of changes happening, especially around Ecommerce. I know you're talking about focusing on what's working and all that, but is there anything you're preparing for over the next three to five years that you're anticipating around Ecommerce trends?

Andrew:

Yeah, all right. This is my coronavirus beat right non. This is a really fun question and is a great podcast fodder. I do not fault you for asking it and I don't want you to hear my answer to this as condescending. But there's no possible way in the world that I could predict the future that far out. Here's what I believe about predicting the future. The more complex the system you're project predicting with the more inputs that there are there, over the longer the timeline, the harder it is to project. So, I might be able to give you some sense of what's happening next week, but then also last week, all these companies started saying they're going to pull their Facebook ad spend.

Stephanie:

Yeah. I didn't why I mention that, but I'm like well, that seems like it's a good opportunity then, like you're mentioning to get on Facebook.

Andrew:

Yeah, yeah.

Stephanie:

I think Zuckerberg even said they'll be back or something like that, which is just funny.

Andrew:

First of all, who could have predicted over that timeline, that kind of thing would happen? Before you even talk about Zuckerberg, who ... There's just so many elements. The system of macroeconomics in the U.S., before you even talk to the world, is so big with so many inputs and so complex that I just don't believe in anybody's ability to really predict that. So what I think is that it's not helpful generally to do that. I'll say three to five years, the one thing I feel broadly, fairly comfortable with though, I think even this has, there's some basic questions is that Ecommerce, as an industry, Ecommerce is a share of U.S. retail spending, will continue to grow.

Andrew:

I mean, I just have no possible way of predicting that. So I feel like it's a good place to be if you're in Ecom, I think you should be investing in Ecom broadly. I just don't think otherwise it's very possible to do that. I mean, just look at what we were all saying about coronavirus two months ago and the models that we were all looking at about what this thing could be. It's been devastating. I don't want to underplay that, but it has not been in the U.S. the millions of deaths at this point, at least. Who knows that people were predicting? I just look at that and go like, that's because predicting that many things for something with that much unknown is really, really hard.

Andrew:

My take on this is to go read Nate Silver's book, The Signal and the Noise and to hone your skills thinking about what kinds of things you can and can't project, and even how to think about projecting things. And then to go from there, which means the way you win is not by predicting the future, but by honing your fundamentals and carving really good thought processes. This is what I really believe in the most. To think about this all like poker, which is that good poker players don't win by winning a hand, they win by playing lots of hands really well and by making the right move over and over. Understanding the game that there are going to be times when they're going to be in a big spot with a lot of money in the pot and the card will come up and go the wrong way. But if they play enough big pots and enough money in it, the law of large numbers says that they'll win over time. I think that's the way to think about it.

Andrew:

Get really good at understanding something like visitors and conversion rate times average order value and asking the right questions about that. Get really good at following your profit margins everywhere you can . Get as much clarity about them as you possibly can that way you know where your money is going and where you're making money and where you're not. If you can do those things over a long period of time and just get good at finding good people to work with and get good at those sorts of things, you will win. So ultimately, I bought into the partnership at CTC with my own money, I'm not rich.

Andrew:

The reason I put my money into that is because I believe in the humans that are the partner group there, and I believe that those people overall given enough chances will win. That's the way I think you should think about your brand and your business is find partners and find brands and businesses that you believe will play the right hand the most times and are people of high character. That is part of the right hand of what you're play, you're going to have a relationship with these people. Every part of your business, if you can do those things, then I think over the aggregate, you're going to win.

Stephanie:

That's great. That actually took a very nice spin because at first I'm like, okay, no one's going to disagree with you that Ecommerce is going to grow. But I like the spin that you just took on it about what you should focus on instead. So, good answer.

Andrew:

Thanks. Yeah, I know. It's a compound answer in some ways, but it's really what I believe is true about the world. It's so sexy to say, okay, over the next month, this is going to happen and this is going to happen. Next time somebody on the show gives you that answer, bring them back on in six months and ask them what happened and-

Stephanie:

I was just going to say that. I think the world is still missing a little bit of the accountability piece because I see people still on Twitter, even the people who are talking about the end of the world, no one's following up with these people, how come this guy has had a billboard out around California for a long time saying the end of the world was going to happen, I guess, a few weeks ago, and it didn't? What now, are we going to follow up with him and be like, "Hey, what happened?"

Andrew:

Yeah, that's a very California story. I like that.

Stephanie:

All right. We're going to shift now into something called the lightning round brought to you by our friends at Salesforce Commerce Cloud. This is where I'm going to ask you a quick question and you have a minute or less to answer. Are you ready, Andrew?

Andrew:

I am. But this is the ultimate challenge for me.

Stephanie:

This will be the hardest part of the interview.

Andrew:

Yeah, it probably are. All right, I'll do my best.

Stephanie:

I actually feel like you're going to have some great answers, that's why I've been excited to get to this. All right. If you were to have a podcast, who would your first guest be and what would the show be about? Other than the podcast that you're running now, you can't say that one.

Andrew:

Okay. I think it would be about exploring. Does it my guess have to be a live or can I pick anybody?

Stephanie:

No.

Andrew:

Okay. I think it would be about exploring big ideas about the world like theology, philosophy kind of stuff, but for the every man or woman. So, it would try not to be too much in the clouds, my guess would be C. S. Lewis, not because he's the most interesting thinker in the history of the world, although he's a really interesting thinker, but because he says things in really interesting ways. So, I think he would be a fascinating guy to just sit and talk with. When I think of a historical person I'd want to talk with most, would be that. Either that or a baseball ball guest.

Stephanie:

All right. Well, that's cool. That's a good answer. What's up next on your reading list?

Andrew:

Books I'm in the middle of or after?

Stephanie:

I'd say, you can do both, middle of and ones that you're looking back on like, that was a good book.

Andrew:

Okay. The Color of Law is the book I'm in the middle of right now. Richard Rothstein going through the history of government and forced racism in the U.S. incredibly helpful book for me so far. I'm three quarters away through. Highly recommended to try and get your head on straight about what's going on with race in the U.S. just pure history. It's really good. And then I am reading a Christian book called Money, Possessions and Eternity about how to use your money for compassion and care for people instead of for yourself. So, that's what I'm in the middle of right now. And a baseball book called Ball Four, which is a famous book.

Stephanie:

That's cool. If you were to pick a country to focus on to maybe buy a new brand from, what country would you look into?

Andrew:

A country?

Stephanie:

Yeah. If you were to bet big, I'm going to go for something in India, that's top of mind right now because I just read the whole thing between India and China and turning off Tik Tok in India. So, it's very interesting to me thinking about, if you were to bet on brands from a certain country or are you looking to go international, where would you go?

Andrew:

I think the answer is India. I think that's probably the right answer. The cost of reaching people in India is very cheap and India's economy seems to be growing very fast. But I'm just bullish on global economy in general. So, I think you could probably broadly pick out. In the last 50 years, massive amounts of extreme poverty have been alleviated in the world thanks to globalization and technology and all kinds of things like that. The world is a much better place than people make it sound. That's another book record recommendation, Factfulness by Hans Rosling. Go read that book-

Stephanie:

Factfulness.

Andrew:

... it will help you look at the world totally different. Factfulness. Forget my other book my other book and finish reading that one.

Stephanie:

I'll slink of that one. Yeah, no, I think that's where I would bet too because I think I just read that, it's a billion and a half people there only a third of them, I think have cell phones right now. They're coming online at a very quick rate. So, I think-

Andrew:

Yeah. I mean, it's incredible how much better life has gotten in the world for so many people. There's very hard life in the world for a lot of people, so to not to underplay that. But it's just crazy and it's going to keep happening.

Stephanie:

Yeah, I agree. What's up next in your travel destinations?

Andrew:

Anywhere-

Stephanie:

When you can travel. I think, just outside my neighborhood.

Andrew:

Yeah. I like Austin, Minnesota where my family is, hopefully in a couple of weeks, but we'll see. As far as other places, I love Boston. Would like to go with my wife there. I have a seven month old though, so the actual answer to this question is probably nowhere for a while.

Stephanie:

Yeah. That's my life too. I have four month old twin boys and a two year old. Someone asked me like, "Oh, where are you going to go on vacation?" I'm like, "Nowhere outside of 10 miles away." It's a mess to get into the car that would be-

Andrew:

Four-year-old twin boys?

Stephanie:

Yeah, yeah.

Andrew:

I think it's awesome. Congratulations. That's beautiful.

Stephanie:

Thanks. Yeah, it's a wild ride. All right, the last one ... Yeah, you know. What's up next on your Netflix queue?

Andrew:

I just watch the same shows over and over again with my wife.

Stephanie:

Does she get to choose?

Andrew:

She does most times, yeah.

Stephanie:

So you guys are watching Selling Sunset and things like that?

Andrew:

No. We watched Parks and Rec, 30 Rock and The Good Place-

Stephanie:

Okay, those are very ones.

Andrew:

... over and over and over again. That's probably all we watch. I don't know. The decision fatigue I have on this particular issues, we just created a Slack channel that worked for media recommendations because I just don't know even what to do anymore about where to look next. So, I wish I had a better answer than that. It would-

Stephanie:

Let us know if you find something from your Slack channel.

Andrew:

Yeah. It's probably another episode of The Good place. My team is really hot on Yellowstone right now, so there you go.

Stephanie:

Okay. I don't know what that is, that just shows I am not with it either. So I'll have to check that out.

Andrew:

Kevin Costner intense ranching family season three.

Stephanie:

Okay. I'll have to dive into that one. All right, that was a good lightning round. Is there anything that you were hoping to cover, are there any last words of advice before we hop off?

Andrew:

I think just that in situations like this, I always just want to say that when somebody asks you for answers on a podcast, it's super easy to make it sound easy in some ways. But it's really hard actually to do these things and to grow business and to work in a team and all these things. So, I think the parting word for me is always just to say, it's not actually as easy as it maybe. I hope I didn't make it sound like that. It's just challenging at times. So, keep at it and surround herself with good people. Yeah, I think that's it. I think I just properly took all the wind out of the point that I was making by monitoring it at the end there. Maybe out of [inaudible 01:02:52]. That's the big piece for me, is just you can do it, it is harder than it sounds a lot of times.

Stephanie:

Yeah, I like it. Well, Andrew, thanks so much for coming on the show. It was a lot of fun and ... Yeah, thanks for taking the time.

Andrew:

Thanks, Stephanie, for having me. It's super fun.

Jul 28, 2020
From Mission to Millions: How Bombas Leveraged its Company Mission to Find Success
50:30

As Randy Goldberg says, ‘no one dreams of going into the sock business.’ But if there is one sock company you can name off the top of your head, it’s probably the one Randy built with co-founder Dave Heath. Bombas Socks has grown from a small Ecommerce company with a mission into a $100-million dollar enterprise, and the success they’ve had all boils down to remembering the fundamentals. 

On this episode of Up Next in Commerce, Randy takes us through his journey to Bombas. He details why founders need to avoid ‘shiny object syndrome’ and focus their sights on the basics if they want to succeed. Plus, he talks about Bombas’ culture of transparency and how to decide between leading with the company mission or the merits of the product when trying to attract customers.

Key Takeaways:

  • Bring in the Right People. Scaling requires people — employees, execs, investors, and mentors. Lean on your network, ask questions, hire carefully, and create a dialog with other D2C companies to learn from them. Pro tip: It’s time to bring someone else in when you start to ask questions that neither you nor anyone on your team can answer
  • Ask Yourself, “What Matters More?” When it comes to getting better conversions, don’t let shiny objects distract you. For example, changing the copy or placement of a video matters a lot less than the speed of the site. The faster your site speed, the more conversions you will have. Stay focused on what investments really convert
  • Transparency Impacts the Bottom Line. When employees feel invested in the company and comfortable in the environment you create, they begin to ask more questions, buy-in to the company mission, and work harder to achieve success for themselves and the company

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey, everyone. Welcome back to Up Next In Commerce. This is your host, Stephanie Postles, co-founder of mission.org. Today, I'm really excited to have Randy Goldberg on the show, the co-founder and Chief Brand Officer at Bombas. Randy, welcome.

Randy:

Thank you for having me. Happy to be here.

Stephanie:

Really excited to have you. Thanks for taking the time. I'd love to dive into your background a little bit before we get into Bombas, a little bit about what brought you into the world of Ecommerce and starting Bombas.

Randy:

Yeah, I guess, we have a sock company, an Ecommerce sock company. I say this a lot, but I don't think anybody ever really grows up dreaming of being in the sock business. It was kind of a winding path for me to arrive at Bombas and to think about this company. My background is in branding, so I was a copywriter and a strategist, and I worked for digital agencies and I worked for a lot of brands through the years. Writing brand books, trying to find out where they had gone astray, brands that were sort of struggling a little bit. I think through that work, I gained a perspective on what I thought a good company looked like, talked like, acted like. At some point, I moved from the agency side to the media side and I was working at a digital media company, and that's where I met Dave Heath, my co-founder in Bombas, and we sort of cooked up the idea when we were working together way back then in 2011.

Stephanie:

Cool. Why did you guys think, I want to start a sock company? Did you both want to start this or did one have to pitch to the other?

Randy:

Yeah. Well, I don't think we thought of it as a pitch. We were friends and we were both very entrepreneurial in our outlook. Our families were entrepreneurs. We just, I think, had that same point of view on the world, and we liked the idea of maybe starting a business one day. We weren't actively writing things on a whiteboard and crossing off a list, but we would just talk about things and the business landscape at the time. It wasn't, we need to get this done this year, we were just having a regular day, and Dave was on Facebook, and he saw a campaign that the Salvation Army had been doing with Hanes.

Randy:

The Salvation Army, they had a quote in there that said socks are the most requested clothing item in homeless shelters. We were having lunch, and Dave said, "I saw this quote, did you have any idea about socks and homeless shelters?" And I said, "No, and I don't even understand why." We started to call around to some shelters in New York, and we were talking to people and we just realized that there was a real problem here. If you're living on the streets, a fresh pair of socks, foot hygiene means a lot. You might be walking more and have less frequent opportunities to wash your clothing. And then, shelters don't accept used socks for donations. So they were always having a shortage and it was always a big need and people would have to buy new socks and then donate them.

Randy:

People just tended to donate the things that they had worn or gently used. We really just wanted to help solve the problem. So, we started thinking about that, we started buying socks and donating them. Then, I guess just the way our minds work, we started to think there's probably an opportunity here. We looked at the success that Toms had been having and saw their one-for-one business model, and Warby Parker had just launched at the time and they had a charitably inclined business. We thought, maybe this business model really works for this product. It really maps well to it. Just because this is a product that people really aren't allowed to donate on their own.

Randy:

Then we started to think about socks and we just got obsessed with socks. We were like, socks just haven't changed in 50 years. Athletic socks look the same. They're cardboard, they're white or they're black. Even if you're somebody who cares tremendously about the things that you wear, where they come from, what you're putting on your body, the last thing you get to generally is socks. We thought there was an opportunity to make something really great, to really improve on a product that people take for granted, and that are afterthought in the consumer market, to help solve a problem that's an afterthought sort of for shelters and organization.

Randy:

Just like, if we can make something really great, we'll sell a lot, and if we sell a lot, we can donate a lot, and if we donate a lot, we can help solve a problem in the community where we work and live. It's easy to look back and say that, but at the time, it just took a while for us to wrap our head around this and think about it as a business idea.

Stephanie:

Very cool. I will say that I'm definitely someone who had socks as an afterthought, but I will say when I tried on Bombas, I was like, this is a whole different level of socks. I didn't realize I cared about them at all. I would normally just get black ones and just be like, whatever, as long as they're short, I don't care. Then I tried them on, I'm like, oh, these are game changing. They're amazing.

Randy:

Thank you. I think that's what we're going for. We want to change the way people think about socks, and make it hard for you to go back once you put on a pair of Bombas.

Stephanie:

Oh yeah. You can't. In the early days, when you were starting out, how did you think through the economics of developing the one to one program?

Randy:

The early days for us, that meant making sure that we could, from the start, bake into the unit economics, the donation pair, so that no matter what anyone said along the path, if we were raising money, if we were building the business, that there's nothing anybody could do because we were ironclad around the donation model. We built it into the covenant of the business. We've codified it. It's just something no one could ever really take away, but just focusing on it from the beginning and making sure that we could afford to do it, as a for profit enterprise, was a big early step. We've grown and we've gotten smarter about it and we've built a big network of giving inside of the company. It's all gotten bigger and better, but it really started with that idea.

Randy:

I think that's the right question. Did you think about it from the beginning? Yes, or else we wouldn't have been able to do it and maybe somewhere along the road, we would have compromised, but it's been a big part of how we've talked about the business and the brand and a big part of the success of the company, and having a great product on the side for the consumer allows us to afford the development costs of the donation product, which is an important thing to make sure we're making a product for people who are experiencing homelessness or living on the street. All of these things have been really thought out from the start.

Stephanie:

It's amazing. I think I saw that you reached profitability by year three. What does your revenue look like now, annually?

Randy:

Well, we don't typically share exact revenues like numbers, but it's a multiple hundred million dollar a year company at this point and profitable.

Stephanie:

Very cool. Yeah, I think that's what I saw, but I wanted it to come from you instead of me saying what I think that I read.

Randy:

Yeah. You read correctly. Yeah, so profitability, I think you're seeing a lot of direct to consumer companies and Ecommerce companies now really starting to think about profitability in this moment. The way that people are raising money and what companies who are handing out money have been looking for, it's forcing a lot of companies who've raised a lot of money and had profitability as a down the road kind of goal, shift how they're operating and shift how they're thinking. I see that, and I've talked to founders who were dealing with this and it seems really painful. I think for us, it was a goal from the beginning. We wanted to have a really solid conservative financial outlook, get to profitability quickly, build a business for the long-term, for the long haul.

Randy:

We want our grandkids to be wearing Bombas. That's one of our core values. I think that plays into the way that we built the business from the unit economics and financial side of things as well, and the way that we approach marketing, which obviously as you know, as a direct to consumer company, is the hot topic, of course.

Stephanie:

Yep. Were there any issues that you ran into along the way? Because scaling to over a hundred million revenue is probably pretty tough. Is there any lessons you learned along the way or things that you're like, ooh, we did this great, or we maybe should have done this a bit different?

Randy:

I think the number one lesson is about focus. Know what you do really well, know why your company exists, why your product deserves to exist in the world, and then focus on doing that well, focus on telling the same story over and over and over again. Whenever we've been able to really focus on that product on the donation, on the sort of foundational elements of the business, that's when we've done the best, and that's when the company has grown really well. When we've gotten distracted by, hey, let's try this pop-up retail idea, or let's advertise in this new place that is unproven, but seems good for this one specific reason, and it's taken our focus away from the things that we do best, that's where we've had the most trouble. I think that's been the big theme for us in the early years, is just focus has really led to growth, and it's where we've had the most success as a company.

Stephanie:

Very cool. When thinking about the first conversion or a brand new customer, do you think the social good aspect of the business sells the product initially? Because it's pretty hard to convey how good the socks are on the website.

Randy:

Yeah, it is. It's hard until you, I guess, you try them on, and we just want to get as many socks on feet as possible. But yeah, there has been a constant debate at Bombas since day one about what comes first and the way we talk about the company. The quality of the product comfort or the mission, our commitment to give back to the community. Some people come for the product and stay for the mission, and some people will come for the mission and stay for the product. I don't think we've solved that debate. We poll our customers and we're surveying people and we're thinking about this a lot, but I think the thing that works the most in marketing for prospects, people who haven't heard about our company, is talking about comfort, is talking about the quality of the product.

Randy:

The mission definitely helps complete a sale, helps with the follow on sales, and our customers, people who've already made purchases, expect us to close the loop, report back on how we're doing with the donations that we promise we would do on their behalf. That storytelling element helps us with both sides of it. It's just about where we show up with the mission and where we show up with the product marketing, at what time in the life cycle. It's an ongoing debate and we stay nimble around it, but those are still the two elements, and they have been since the beginning that show up the most in our communication.

Stephanie:

Cool. The other thing I saw that you all had was the happiness guarantee, which I was like, how do they remain profitable? Because one of the things I think I saw in there was, if your kid outgrows a sock in a year, which I have three kids, so I'm like, that could happen quick, or if your dog chews up a sock, which our dog, [Tossy 00:11:14], does that every day, how do you make sure that people aren't abusing those rules? How did you come up with that happiness guarantee?

Randy:

I think for us, we think about the great companies that we all like to work with, or shop at, or interact with. A common theme is that they have great customer service and they stand by their products. We wanted to make that a hallmark of Bombas. In the early days, Dave would take all of the calls that would come in to our phone number on his cell phone. So we would be out talking about the business or in a bar, back when there were bars. He would get a phone call and go outside, and an hour later, he'd come back and he'd just talk to a customer. I think that idea of just making sure that we're taking care of the people who are spending money with us, that led to the idea of the happiness guarantee.

Randy:

We have our internal customer service team, they're called the customer happiness team, and we've also, just sort of connecting it back to the business, to get back to your question, people who interact with our customer service team have two times the lifetime value of customers who don't. We're trying to turn issues that people have into positive experiences, and that turns people into bigger longterm customers, because then they trust us, they trust that we take care of them. Sure, there are people who try and abuse the policy, but that's far outweighed by the number of people who are just trying to solve a problem, or get to the bottom of something and want things to be right and don't want to have to jump through a lot of hoops to get there.

Randy:

For us, the good of having that really strong internal team to deal with our customers and to respond to problems, and yes, to make sure that if your kid outgrows the sock that's expensive or that ... We'll be there to grow along with you. All those things are ... we just want peace of mind as people go through the process and think about, should I be making this purchase right now?

Stephanie:

That's great. How do you train your customer happiness team? Because I feel like it takes a certain kind of person to be peppy and to, like you said, have a higher lifetime value with the people who interact with that team. What kind of training process do they go through?

Randy:

It's pretty rigorous. I think Dave passed on the mentality of our customer happiness team to the person who originally ran the program, and he's still running that team. I think, like almost everything at Bombas, when we have something that we want to do and we feel like we've reached the limit of how we can handle it ourselves, we try and bring in people who are way smarter than we are and have the right skillset, and really focused on hiring great people. It also helps that, people who come to work at Bombas, tend to want to give back to the community and are inclined to support and work for a company that cares about that as well. Then, we in turn, care tremendously about our company and the company culture, and all of those things lead us to find, I think, the people who are right for the roles and write for the company and speak to those core values, and that's how it works with the happiness team.

Randy:

They're trained, not only on what to say in the situations that come up most often, but how to deal with Bombas customers, how to put the extra spin on it. It's about, I guess, just that level of care. Our whole team really appreciates that customer service team, and we make sure that they know how appreciated and important they are as the first line of defense for our customers internally as a team. I think giving them the support and love that they need as the team that has to deal with a lot, and has to clean up mistakes when they happen and make sure that everybody's happy, and then understanding how we want them to communicate with the world as a brand. The way that we talk in an ad versus a video, versus on the phone with the customer, versus internally, none of that should really be different, right? We're trying to be really consistent as a brand.

Stephanie:

How do you create that consistency? Because I can see as a company grows, and I've seen this happen before, where you start developing silos and the teams are kind of off doing their own thing, maybe trying their own marketing campaigns, and it starts getting a little bit chaotic. How have you kept a consistent culture and feel at Bombas?

Randy:

Yeah. We're not immune to some of the issues that you just brought up. But just recognizing it, being honest about it, trying to get ahead of those things, and focusing on that core messaging and communicating well internally. We're also at the stage where we're really thinking about planning and processes as a company as we've grown to 150 employees and being remote, how we interact and how we work cross departmentally. Those types of things are at the front of mind right now. We're hearing it from our team, we listen to ideas, we bring in people to help us. I think we're laser focused on making sure that some of those breakdowns and that siloed work doesn't get the best of us. We have seen that and we're working on it.

Randy:

I think any company that starts off operating like that, when you have five or 10 people, that would be overbearing, and I don't think the type of people who end up coming to a company that small would appreciate that, but as you grow, you have to adjust and you have to get ahead of it so that people keep that same feeling of freedom in terms of thought, in terms of how they can innovate in their work and get things done, and expectations around their jobs, all that stuff becomes really important to be more documented, to have tighter processes so that people feel freer to do the things that they love to do. That's what we're trying to work on, but it's not an easy thing.

Stephanie:

Yeah. It's definitely a tough juggle. If someone were to join and they're employee number five, and then all of a sudden, there's 150 employees, it's like, okay, well, I used to be able to do everything at the company, and now you want me to shrink my role. A tough thing to work through with employees.

Randy:

Yeah. It's a challenge. You want to retain the people who made Bombas, Bombas, but you also want to make sure that people are growing in the right way, and there are opportunities, and the new people who come in at certain levels understand what they're supposed to do and what everybody else is supposed to do. You just start to get into these things that maybe you thought you would never have to deal with if you started a company, but as it grows, this is what it looks like.

Stephanie:

Yup. Were there any resources that you leveraged along the way when you were growing quickly, when you were like, I need to learn this or I need to figure this out, or companies that you were watching to learn from?

Randy:

Yeah. I think that's been our mindset since the beginning. Just from our early advisory board, just to fill in the gaps, to hires that we've made, the things that we tend to lean on are people. Dave and I are like, we don't know the first thing about performance marketing, when we started this business. We need to bring in somebody who's an expert in that, or at least, have somebody on our advisory board who can help answer questions for us as we grow that until we have that right person, or to help us find the right person. That's been a big part of how we've grown this business, is leaning on our network to reach out to people, to ask questions, to make good hires, and then watching other D2C companies and having a good dialogue with the other D2C companies who have grown to our size and larger. That's been really helpful as well.

Randy:

Then you also think about companies like Toms. They've been really helpful to us, in terms of watching out for certain mistakes that they've made along the way with their donation aspects of their business. They've been really open with us about those things and helping us avoid them. We try and do the same with other companies who reach out and want advice from us as well.

Stephanie:

Very cool. How did you think about building out the website? What kind of things did you want to have on there to make sure that you kept with the brand story, but also, sold enough to be able to be profitable to keep the model working?

Randy:

It's a great question. The idea of what a website looks like when it's your only store is so important. You want to have that right blend of storytelling, but you want people to be able to breeze through the checkout process the right way. That's been a journey for us. I don't think it's anywhere near where we want it to be, but I would think that you would ask any direct to consumer company and they have a lot they want to do, and their technology roadmap is pretty long, and that's part of it. You're always building, you're always tweaking, you're always improving. You're looking at the data and you're making changes to just make it better.

Randy:

In the beginning, at some point we have to replatform. But just the processes along the way to get us from where we started to where we are now, to where we're heading, it takes a lot of care and attention. Like I said, when it's your only store, I think it's your job and your duty to make sure that it works and operates really well.

Stephanie:

Yeah, I completely agree. How did you know it was time to replatform and what was that experience like?

Randy:

I knew it was time when we just had so many issues with managing traffic or the backend or uploading content. It was wrong. We launched the business and the website in 2013. Since 2013, there've been a lot of changes in technology and the way that Ecommerce works and looks. If you went back to a site from 2013, as a 2020 consumer, you wouldn't last a minute. You'd be out.

Stephanie:

You'd bounce right away.

Randy:

You'd bounce. There was a lot more tolerance then, but less people using Ecommerce because the experience just wasn't great. I think, if you go back even further, and I think about this a lot, if you were starting a direct to consumer company in 2009 and you didn't have a lot of money that you would raise, building the website itself would have been prohibitively expensive for most brands, for most companies. But if you managed to get it up, the marketing was basically free. There was no algorithm that was holding your content back. If you had a Facebook page, whatever you posted, everyone who followed you with anyone who shared it, and anyone who got added to your page, not some of these early companies, resources to build a site were able to build huge businesses.

Randy:

But then, as it shifted, now, if you want to launch a direct to consumer company, the technology is basically free, getting that website up, but the marketing is prohibitively expensive. It's totally flipped. We just happened to launch, I think, in a sweet spot where the technology had gotten more affordable and the marketing was still affordable, but it was not free like it had been in 2009, and it wasn't very hard or challenging environment like it is now. We sort of had time to figure out both pieces, and we had runway to figure out the marketing and we could afford the technology. Then that got a lot better, and just have to stay on top of and ahead of all those things.

Stephanie:

That makes sense. To focus on the website piece first, and then we can jump into the marketing aspect, so the website, was there any like big fundamental changes that you made where you're like, this made the biggest difference when it came to sales and conversions and even getting traffic in the first place? Anything that you remember that you change where you're like this had the biggest improvement for us or a couple of things?

Randy:

Site speed, I think is the number one thing. As a person who comes from the creative side of the business, a copywriter or strategist, there's nothing that I could do from my previous job or as a brand person that would make the improvement of one second of site speed in terms of how something loads or how it acts. Just sort of getting over some of the sort of shiny objects into saying, oh, if we change the copy here, or what if we put this video here, or had this type of look on our site? If you make your site faster, it will convert better. Things like that, just understanding the fundamental way things move and what people want from you, layering the other stuff on top then becomes just sauce and becomes fun. Then you can start to have incremental changes and things that work. But I think, just looking at site speed, if you want one good thing, that's where I would start, as dry as that might be.

Stephanie:

Yeah. No, that's a great one. Was there anything affecting the site speed that you were surprised by?

Randy:

I think the way that you manage and load images, obviously has a big effect on that. Your product architecture and understanding

Randy:

I think some of these things you don't realize when you're starting out, but the way things are organized, hosted, served, there's sort of best in class ways of doing that now. But if you want to have your variants of your products perform a certain way, or if you want to create bundles in a different way than most companies do it, then all of a sudden, you're creating ... you could be creating extra things that are weighing your site down, even though you think ... it helps you organize the things that you want to sell the way that you see them in your mind. It doesn't always benefit you because maybe you're slowing things down. If people are bouncing before they're even seeing it, then what's the point? Again, this isn't my area of expertise, but these are the things that you learn along the road when you're doing everything in a business when there's five people.

Stephanie:

Yeah, I think that backend infrastructure piece is hard to focus on in the beginning because you're so excited about the product and the marketing, and like you said, getting good copywriting and telling your friends that you don't really think about how to set up, maybe the data and the backend piece to actually create a good performing website.

Randy:

Totally. Listen, like I said, my background was in branding. I was a copywriter. I think we built this business around the brand because it's, in many ways, a commodity that you turn into a brand. You do that by being really consistent and having good storytelling and build a moat through brand. But none of that exists if you don't get the infrastructure piece right, and you can't get to that. I talked to founders who were starting companies, and they're so focused on hiring the right creative agency or branding agency, they'll put together the right logo, and it's just not the right place to start in my mind, even though I love that work and I love thinking about that for companies and thinking about how you communicate to the world and understanding why your product exists, but without that fundamental infrastructure piece, no one's going to care about that other piece. It's just maybe a little bit of a sad truth for creative side of business people.

Stephanie:

That's okay. Got to hear it sometimes.

Randy:

That's right.

Stephanie:

One thing I saw that you guys were doing was that you were investing in a data science team and embedding more data elements into the customer journey. Can you tell me a little bit more about that and how you knew it was the right time to bring on a team like that?

Randy:

How will you know it's the right time is that when you start to ask questions that you can't answer, and nobody internally can answer it. That's the truth, and when one person ...

Randy:

You also know when you're having a debate about something in the business and somebody is able to pull out data or a statistic related to what you're talking about, and the conversation ends because it's hard to argue with the data. When you see that and you've thought about it the other way, and you're not trying ... You can't convince data, right? I know [crosstalk] manipulated.

Stephanie:

There's no argument there.

Randy:

That's right. Then you sort of think, this is really valuable, and rather than trying to think about something from the perspective of, I think it should work this way, you want something to show you how it should work, and you want to be able to interpret data the right way and be able to use it to your advantage to build out a strategy, rather than just making assumptions and going off of somebody who has the most experience or who has the most seniority. I think companies get in trouble when they just rely on the loudest voice in the room or somebody who's the most persuasive at arguing rather than bring data as a voice into the room for decision making.

Randy:

I think it started to creep in when we would understand a little bit what we don't know, and then have debates that were a little bit out of our depth and we didn't have the right people. We didn't really have that skill in the beginning. We knew that it would be a big part of this business, even back in 2013. We just knew that it wasn't the first thing we were going to invest in. It just sort of came naturally to the time. We were always excited about the idea of what a data science team could bring to the table for a sock company. There was a point where you almost can't operate without it anymore.

Stephanie:

Yeah. That's awesome. What does it look like now having that team, and what kind of metrics are you guys paying most attention to?

Randy:

A lot of the metrics are the same. You'll see a lot of Ecommerce companies paying attention to, but what the team looks like, and what's interesting is, now that we have the team in place, getting other teams to work with that team the right way is the key, and getting our directors and decision makers accustom to partnering with the data team, to help surface solutions to problems and present them and work, it goes back to some of the work that we're doing, trying to figure out the processes and cross departmental work and to avoid some of the siloed behavior that you brought up earlier. A big part of that is the data team and how they can help support. There's support teams within an organization, there's execution teams, and that's very much a support team, and they love answering questions for teams, and some teams use the data and analytics team more than others.

Randy:

We just try and be really loud about it at our all hands meetings and present back case studies so that people understand how they could better use that team. It's a process and something that was getting better all the time, but you just sort of have to make it central to how you operate as a company. That doesn't happen overnight. It's a big change. We've been working on that for the last six months to a year in a major way. I think it's really paying off for us.

Stephanie:

Very cool. Yeah, I definitely have seen business intelligence teams in the past struggle with being able to create a partnership with the product team or the engineers. I like the idea of showing a case study. So instead of pushing it on a team member, it's like, well, here's what another team did. Look how great this turned out, and encourage them to want to partner with that team even more.

Randy:

Yeah. You're making decisions, how many times a year should we ... We're not a promotional company. But if you wanted to ask a question, like how often should we do a sale? There's logical times of the year when you think that should happen, and the merchandising team might have a different perspective than the marketing team, and using the data team to think about the effect on customers or prospects. There's so much information that could help steer a decision like that, that is major to the business. Those are the types of things where you start to see a lot of power in the team like that.

Stephanie:

Yeah. We're talking about data. I want to also shift into the aspect of transparency. I read that you and your co-founder both had subpar experiences with transparency at previous companies you were at. I wanted to hear, how do you think about being ... Well, first tell me the story. I want to know all the nitty gritty details, and also how did that influence your culture now?

Randy:

Sure. I don't know, the cliff notes is that was a major influence on our culture now, but we had the experience together. Like I mentioned, we worked together at a previous company, and at that company, the person who ran the company brought amazing people together, and there was a great team, and the work was fulfilling and we learned a lot, but it was really hard to have conversations around career growth or compensation, or how well is the company doing? Or data. One person tended to hold on to decisions for so long that it was counterproductive and it was demotivating for people. You felt nervous to even ask a question, and nobody understood their stock options. You would ask questions about it and you'd get them response months later.

Randy:

That sort of fogginess around the things that people really care about when they're going to work at a smaller company, it was really hard for us. We knew no matter what company we started together, building a culture of transparency, where people really understood the why behind the business, the core values, the financial performance, what their ownership meant, and a culture of being able to ask questions, that was hallmark from the beginning. We just wanted to create the company that we would have loved to have worked at and centering our employees in the business, and thinking about them just as much as we do our bottom line. Our theory was that it would make the bottom line better. People would be more inclined to give something beyond their capacity or to continue to learn or to grow if they felt safe and supported at the company.

Stephanie:

Cool. Yeah, that definitely is a good way to build a company from the ground up, and maybe not fun to have that experience, but hey, you learn from the best people you work for and the worst people you work for.

Randy:

Absolutely. I wouldn't trade that experience because that's what led to the culture that we've built at Bombas. I think, if you talk to our employees and the way they think about it, we're maybe more proud of that than anything else that we built in this company. Did I give you enough nitty gritty details? Is that good enough?

Stephanie:

Yeah, I was hoping for a little more drama, but I'll take it. That was good.

Randy:

There was plenty of drama. We can talk about that offline. Yeah.

Stephanie:

That sounds good. Earlier, I mentioned, I also wanted to hit on your marketing a little bit. What kind of channels do you focus on? What are you seeing success in right now in any new channels that you're excited about?

Randy:

Yeah, for us, listen, we're a direct to consumer company that started in 2013. Can you guess what our number one marketing channel is?

Stephanie:

Facebook?

Randy:

Bingo. Right. Okay. I think we still see a lot of success there, and while it might've been a way larger percentage of our marketing mix in the early days, and we've diversified away from that a fair amount, it's still an important driver for us. In the beginning, in the early days, we would create a video that we didn't even intend to be an ad, just a thank you to our customers, and then eventually it gets turned into an ad on Facebook that's seen a hundred million times. Leaning into the trends and trying to see around the corner at Facebook. now working closely with that team. has really helped grow our business.

Randy:

One of the things that we have had since the beginning is ROI positive or breakeven on first purchase. We're not over our skis on Facebook spend, while lot of companies are to just to try and build up their customer base. For us, it was important to really be disciplined. We knew that if we were going to grow our budget and grow our company, and we were a really marketing led company, we'd have to diversify away. So, Hello Podcasts, radio, direct mail, TV. Those are all big parts of the business now, and they're all growing probably at a faster rate as a percentage at least of the business than our online ads on Facebook. But search has grown for us tremendously in the last year and a half as our brand has grown and recognition has grown.

Randy:

Some of that comes from broader marketing, like on TV, and then people are searching Bombas by name, and we can lean into search advertising and that works better. Some of these things are just about timing. Yeah, we still have a tremendous success sort of trialing things out online. We've never used a creative agency. Everything is internal at Bombas, so all of our creative direction and the marketing team and the partnership between the creative team and the brand teams and the marketing team operates as an internal agency. We like places where we can test things, test creative, test lines, test different cuts of videos, see what works, preview it, and then build it out into bigger campaigns that could work across all those different places that we talked about earlier that I mentioned.

Randy:

I don't know, that's sort of more of an overview than what's working now. But if I think about the last few months, when everyone's at home with COVID, people who were still able to afford to be buying things right now online are looking for comfort, and socks have done well in this moment. On the other side of things, we talk a lot about our efforts in the community and how we've adopted and been able to help out in this moment above and beyond how we normally do. That's also something that people want to hear about. For us, it's the combination of the product and the storytelling and the marketing mix, and making sure that we're nimble enough in all three of those places to make adjustments as we build and grow.

Stephanie:

That's awesome. Do you find that you have a community also, because it seems like with your story and your brand, you would have this community of people who want to lift you up and talk about you and spread the word organically without you really having to push too hard?

Randy:

Yeah, absolutely. Community is a big word at Bombas. Something that has been since the beginning. I think about the community of giving partners that we have. In the beginning, when we wanted to donate the socks, you buy a pair and we donate a pair on your behalf. We didn't know how to do that. We started with one giving partner that would accept socks from us, and we learned a lot from them. Then we built a specific sock that we donate, that's more tailored to the needs of the homeless community. Since then, now we have 3,500 giving partners across all 50 States. These are the people who are working really hard on the front lines helping out that community and doing what they can to serve their communities, and our job is to support them.

Randy:

That is a big community. We get a lot of feedback from them. Then you have our customers who really care tremendously about the product and the donation aspect of it, and they're telling our story on their behalf. You mentioned earlier about one of the keys, I think for us is consistency. The more you're telling the same story in different nuanced ways, the easier you make it for other people to tell your story on your behalf, and that word of mouth marketing, or letting people explain to somebody else when they're having dinner that, hey, they just got these socks and they're really excited about them.

Randy:

They donate for every pair they sell, and they also just happen to change the way they feel about putting on a pair of socks in the morning, and they feel more supported and comfortable in their daily life. That's a pretty amazing thing that you can get somebody talking about socks at dinner. I think all of this stuff is related, making sure the messaging is tight, keeping that internal, having a marketing team that's nimble and always trying new to new and different areas, and then having that product that's really high quality to support all of that, to give you the confidence to go out and sell something.

Stephanie:

That's great. How do you keep things organized? Because I'm thinking about, you have all these community organizations that you're mentioning to do the one to one program, then you've got your own product that you need to focus on. How do you make sure that you're spending the right amount of time with each area?

Randy:

You don't want to be playing whack-a-mole, I guess. You want to be seeing ahead of things a little bit. There's a certain element of making sure ... You start to see when some friction comes into a certain side of the business and you need to spend a little bit more effort getting your go-to-market process ironed out, or on the technology side, if we don't install an ERP process in the next X amount of time, we could see a lot of trouble. I think that starts with a leadership team that communicates really effectively, often open, and is really humble, and then syncing up on our company roadmap, and making sure that when something does seem like it needs a little bit more attention, that people spend their time on it.

Randy:

That's the idea. I guess some of that is also thinking about, and talking to companies that are a year or two ahead of us, and have been through some of these sort of growing pains at the same times, and looking for the pitfalls that they went through and trying to get ahead of it rather than to have to be reactionary.

Stephanie:

The D2C community, it seems like they're very helpful with each other, and you just mentioned, looking to someone who's maybe two to three years ahead of you, how have you utilized that community and leaned into it to get advice or build friendships or mentorship?

Randy:

Yeah, it's a great community. For us, we're a pretty open group. We talked about transparency and communication as pillars of Bombas from the beginning. We want to help out other companies who are coming up behind us, and then we've looked to other direct to consumer companies, and other, generally, just good companies to try and help us out. You ask the question and you find that people are generally willing to say like, yeah, this is how we did this, or connect with this person on our team. They know that at some point they'll have a question for you. We've always been just asking questions outside of the organization. It's the same approach with hiring. We want to bring in people who are smarter than we are.

Randy:

We want to ask the questions to the companies who are ahead of us. You don't get the answer if you don't ask the question. It's just an important thing, and I'm not sure why this group of companies especially is more open or collaborative, seeming than other groups that you've been in, but maybe it's this generation of founders and the way that we grew up and the interest in community, and the expectation from customers that our company just can't look the way it used to look or act the way it used to act, and it has to have more of a purpose. Maybe that just drives us all to be a little bit more open and a little bit more flexible and a little bit less guarded about some of the things that we're doing.

Stephanie:

Yeah, I agree. It also just seems like there's so many opportunities. It's not like you're going to be talking to someone who's doing exactly what you're doing. There's just so many opportunities and so many things to start and try that I'm sure that also helps with people wanting to share and show how they did things.

Randy:

Yeah. I don't really feel competitive with anyone in that space. In some ways, those companies, you could see them as more of our competition than another sock company, because we're competing for the attention of people online. It doesn't matter what you're selling. If somebody else is taking away time that somebody might spend thinking about Bombas, then I guess that's competition, but approaching it, from a lens of collaboration and like, if they can help us know we can help somebody else, it's just the way we've done it. I'm not sure it's right, or it does feel like it's helped us. It is nice to feel like there is a community around this. I like to think about these companies, I like the community of the businesses.

Randy:

I'd rather be lumped in with these companies, as a community of people that can help each other with the business side of things, than on the brand side of things. I'm wary of being one of the direct to consumer brands out there, because I don't feel like that set of companies always looks the best or the type of press that is out there is always positive. For me, it's just about the people running it and the people at these companies, and making sure that people in our teams are connecting to people who've done something that they maybe don't know how to do perfectly.

Stephanie:

All right. Before we jump into a few higher level Ecommerce themes, I wanted to hear what is the best day in the office look like for you?

Randy:

Oh, the office.

Stephanie:

How do you walk home when you're like snapped in and you're like, that was a good day.

Randy:

Remind me of what an office is.

Stephanie:

Okay. What's the best day from your bedroom look like?

Randy:

Well, okay. It is interesting to think about at home versus at the office. The office is a big part of who we were as a company and getting everybody together and that spirit of community that comes into it, and being able to sit down with someone face to face. We do miss that. Although the teams are really productive and risen to the challenge of working remotely. The best day feels like when something goes well beyond what you expected and teams are celebrating each other and recognizing each other. Also, when we have a speaker from one of our giving partners to give us perspective on what's happening in our work life and why maybe it's not the most important thing in our life and in our world.

Randy:

When all of those things are kind of clicking together, I think people remember why they work at this company, what's truly important, how they can impact it, and then the collaboration and the spirit that comes along with it. Those are the best days for me, when you're reminded of what's important and how that impacts the company.

Stephanie:

I think it's good to document those days too. I really like, there's a coffee shop, Philz, right up the street, and they have all these pictures of their employees and just having fun and team meetings they have. It's on the way when you're headed to the bathroom, but it's really fun. I would think as an employee, but also as a customer to see and remember like what it felt like that day and how excited this person looks when they're receiving this award. Because it seems like it could be easy to forget when something's moving so quick.

Randy:

Totally. I love that idea. I also think about the times when we all got to volunteer together. Now we tend to volunteer in smaller groups which is obviously still great. We have sign up sheets for all of our volunteer opportunities and you have to pounce on them to get the spots that you want. I think that speaks a lot about the culture of the company, but some of the photos you look back on from those moments, or those days when the team feels really connected, those are really exciting days.

Stephanie:

Yep. All right. A higher level Ecommerce question. What do you think the future of online shopping looks like, like in 2025?

Randy:

Ah, like when we're all driving around in flying cars, what does Ecommerce look like?

Stephanie:

Yup. I'm on Mars. Where are you?

Randy:

I might be on Mars too. Do you want to have a rival colony? I'm down or maybe we have a collaborative colony.

Stephanie:

Okay. Oh, I'm down. Maybe, we'll see.

Randy:

We'll see. Okay. All right. We'll see. We'll figure it out then.

Stephanie:

It depends if you accept my LinkedIn request, I guess, then I'll know. I'll be like, is it any cooler now?

Randy:

Wait, that's how we judge if you're cool, is if you accept our LinkedIn request?

Stephanie:

I just made it up, but we'll see. I might have higher criteria afterwards.

Randy:

Okay. All right. We'll put a pin in that. I don't know what the future of Ecommerce looks like, I got to tell you, I know the percentage of people who get comfortable shopping online, that's only going to go up. I know that companies are going to invent new ways to make it easier for people to buy their product, to review their product, to look at it. I think ease is the name of the game. In a world that's going to be more and more competitive, the way to stand out is going to change. All I know is it's not going to look like it looks right now, and having the attitude that, even if you're doing something right, that the way to succeed in a few years, it's going to be a different version of right, then you'll be okay.

Stephanie:

Yep. I love that. All right. Before I move into the lightning round, anything that you wanted to share that we missed, where you're like, I really wish you asked this, Stephanie, and you just didn't?

Randy:

No, like I said, I'm here for you guys. You want to talk about Mars and infrastructure, then great. Whatever you want to talk about.

Stephanie:

Mars and the moon, that'll be the next podcast. Anyone who wants to sponsor it, hit us up. I don't know what we're going to talk about, but we're going to need help to figure it out. All right. Lightning round brought to you by Salesforce Commerce Cloud. This is where I ask you a question and you have a minute or less to answer, Randy. Are you ready?

Randy:

I'm ready.

Stephanie:

All right. What's up next on your reading list?

Randy:

Can we just start that over? Sorry.

Stephanie:

Yep. What's next on your reading list?

Randy:

Up next on my reading list is the Mike Nichols book. I'm not sure what it's called, but I'm excited to read it.

Stephanie:

What's it about?

Randy:

Its about the director, Mike Nichols, and his life.

Stephanie:

Cool. We'll have our producer, Hillary, will find the slink to that and everyone can go explore it there.

Randy:

I don't tend to read business books. I know that they could be helpful, but I'm more interested in people, humanity, fiction, novels.

Stephanie:

Yep. Cool. Any podcasts you listen to?

Randy:

Yeah. There's a great podcast I listened to about words called The Allusionist, Allusionist with an A. Love that podcast. I have a whole list, but let's just do one.

Stephanie:

Yeah. We'll check that out. Any hobbies that you're really getting into these days?

Randy:

Hobbies that I'm really getting into. I really like this sport called paddle tennis. It's not pickleball, it's not ping pong. It's called paddle tennis. If you look it up, it's like a fast version of tennis. You play with a paddle and a tennis ball, but you poke a hole in it. There's like a really small, but passionate community around the sport. It's really fun.

Stephanie:

Do you play on a tennis court?

Randy:

You play on a small tennis court. It's basically the service boxes and two-ish foot baseline, and a net. You serve under hand, and you can't serve [inaudible 00:52:55], and you poke a hole on the tennis ball so it doesn't fly everywhere, but it still bounces. It acts and feels like tennis, but like a faster version. It's really cool. You can play in New York. There's courts in New York in StuyTown and Peter Cooper Village, and there's courts in Venice Beach in California. Those are kind of the two centers in the US. It's not a very big popular sport.

Stephanie:

We will have to bring it up to Palo Alto. I will be the one do that. That would be my initiative over the next year.

Randy:

Do it.

Stephanie:

All right. If you were to have a podcast, what would it be about, and who would your first guest be?

Randy:

Oh man. If I was going to have a podcast, wow, I don't know. Do we need another podcast? Do we need a podcast from me?

Stephanie:

Yes, we do.

Randy:

Maybe it would just be rants. Just do like a short rant every week. I don't know.

Stephanie:

I like that. Hey, that seem to do well sometimes.

Stephanie:

That's okay. All right, this one's slightly harder so you might have to think. What one thing will have the biggest impact on Ecommerce in the next year?

Randy:

I think the thing that will have the biggest impact on Ecommerce in the next year is the timing on reopening the economy and stores and retail. If people can't go to stores or don't feel comfortable going to stores, they're going to, inevitably, accelerate their comfort level with shopping online. We already see that happening. I think it's just going to push that trend line even further forward. I'm for one, excited about it. I think the biggest, biggest test for this will be this Q4 and the holiday season, and to see what percentage of shoppers are shopping on Ecommerce and what they're demanding of Ecommerce retailers that they weren't a year ago when the percentages were smaller.

Stephanie:

Yeah, I completely agree. Great answer. Randy, it's been a blast having you on the show. Where can people find out about you and Bombas?

Randy:

You can find out about Bombas at bombas.com, and everywhere else you would expect, B-O-M-B-A-S. That's it. Thank you for listening and thanks for having me.

Stephanie:

Yeah. Thanks so much. It's been fun. See you next time.

Randy:

All right. See you next time.

 

Jul 23, 2020
Gamifying the Ecommerce Experience with Tophatter COO, Sree Menon
49:15

Auctions are dead. At least, that’s what the press seems to think about auction platforms. But Tophatter is experiencing something different. The platform that started as an auction platform for homemade goods is now expanding to include a variety of products and is looking more like a third-party marketplace. Sree Menon is the COO of Tophatter, a discovery and auction platform that is gamifying the Ecommerce experience. On this episode of Up Next in Commerce, Sree explains the way Tophatter has differentiated itself through gamification, fast, real-time auctions, and a customer engagement experience that users have embraced. She also provides insight any founder or CEO would need to know about the fundamentals of setting up an online marketplace — or any start-up for that matter — and she discusses the importance of unit economics and A/B testing. 

3 Takeaways:

  • The gamification of the buying process and the gamification of internal innovation are proven ways to create more engagement with your customers and your employees. Both will keep coming back if they are enjoying their experience, and creating a game-like environment helps build fun into everything
  • It is impossible to build a marketplace or create a successful business without first understanding unit economics. It is good to have a story behind your business and a plan for where you want to go, but you need to have data points that prove that your story is true and that your plan will work out
  • Retail consolidation is going to be a major factor in the coming years. There will be much more emphasis on creating omnichannel experiences that will completely change how we shop

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey everyone, and welcome back to Up Next in Commerce. This is your host, Stephanie Postles from mission.org. Today we're joined by the COO at Tophatter, Sree Menon. Sree, welcome to the show.

Sree:

Oh hi, Stephanie. Thank you so much for having me. I'm excited to be on the show.

Stephanie:

We are very excited to have you here. So I was looking at your background a bit, and it's very interesting. I would love it if we could start there, maybe telling us how you got into your role you are in now, and yeah, how you got there.

Sree:

Yeah. It's a very long, long career. I started in the online world, which I think is more relevant in this podcast at Dell. I used to lead the commercial online sales for Americas, Latin America, and North America. I was there for several years, perhaps nine years overall at Dell, six years in online, and then I moved to eBay, was the general manager for the motors group. It was an amazing journey. But I did know that I wanted to go and work at a smaller startup using the skills that I have, and that's what brought me to Tophatter. We are a discovery based shopping marketplace, and it's been an amazing journey, and I'm happy to talk more about that in this podcast.

Stephanie:

Cool. Yeah. I'm sure the shift from Dell and eBay was pretty immense from going to a smaller company. What was that like, and what kind of learnings did you take with you from Dell and eBay?

Sree:

So it's a great question. So the things that you take for granted at a big company are generally that, look, you're not worried about the fact that the startup may fail. There isn't that. There's a tremendous sense of security because you're working in a big company. There's of course a lot more pressure in terms of being able to communicate a lot about what you're doing, working with many, many different teams cross-functionally, and also, the time to market or the time to execute an idea is very long. It takes a lot of cycles. So when you go to a startup, it's absolutely the other way around. I hardly have any scheduled meetings every week kind of thing. It's mostly just, you need to solve a problem, and so you're meaning to kind of solve it or brainstorming on something.

Sree:

So the pace of innovation, the pace of executing is so much faster when you're in a small company. But of course, that kind of freedom also comes with a lot of responsibility, with a lot of pressure to meet numbers, to be able to understand the intricacies of the entire business and not just to function, and it's thrilling and exciting.

Stephanie:

Yep. Yeah. That's awesome. So for Tophatter, it kind of reminds me a little of eBay. But I would like to know, how is it different? Because eBay's auction business seems like it's kind of declining, but Tophatter seems like it's thriving. So how would someone think about what Tophatter is and how is it different?

Sree:

That's right. So eBay's auction, the way I think about it is, yes, as compared to the overall business, in terms of just eBay or how e-commerce has evolved as an industry, auction is probably a smaller portion. The way eBay was designed originally, let's go back to the historical context, it was largely a C2C business, right? Auctions work well in a C2C background or in any background or in any context where there isn't a fixed price or value of an item. It is what the buyer is willing to give you. So for instance, I have a Louis Vuitton which is five years old. I price it a lot in my mind. I think it's very precious to me. But that value may not be the same. It may not be perceived the same by a buyer. That's where an auction really fits in really well.

Sree:

Now, that's one use case. So from that perspective, I think eBay's still doing well in terms of that format when it comes to C2C, when it comes to very high word items, high value items like cars and stuff like that, used cars, again, things that don't have an MSRP. Now, in our context, the auction model helps because it's more of a gamification element versus here's the value of that item in terms of the emotion that I have of it. Because we largely know we're not a C2C platform at all. We are a B2C platform. But they are discovery shopping items. So it would be for instance, if you're working on Embarcadero road, which is here in San Francisco, and you had a nice lunch, and now you're just kind of browsing on the streets, looking at the vendors, and you see a bracelet which is made of shells, and you want to pay the pricing at $20.

Sree:

Maybe it's a little too expensive which you're already feeling happy, and you're ready to pay for that. Or you find something for $5. It's basically some just overall discovery and emotional connection with that item. Those kinds of products, and that kind of platform works very well with an auction format.

Stephanie:

Very cool. So give me a little more details on how you gamified the process. I saw it's a 92nd auction, which I had never heard of, and I thought it was very fun and definitely would convince buyers to buy quickly. But in what ways did you gamify the platform, and has it been successful with short auctions?

Sree:

No. I do believe so. I think even the auction, we call that as a gamification technique per se. So think about what a game does for us. It makes us competitive. We compete. So just competing on an item is gamification in itself. Because you shorten it, it's basically shorten the timeframe, the adrenal that you boost to get of competing is much more extreme. So I think the core of that platform uses that gamification technology, and then now we've added on things like badges. We've added on things like, you can collect if you shopped in certain categories, you collect a badge. You could collect it and then cash it in as chips to get some credits. So there's a bunch of other techniques we've added on, and we're continuing to do that, right? I think that's what makes our platform unique and different. We're literally trying to take an offline shopping, browsing, hunting experience and putting it online and having fun in it. So whether you call it games or just an absolute fun experience, that's what we do.

Stephanie:

Yeah. I could definitely see that being a big team because there are many 90-second auctions. That sounds fun. I'm going to have to try that out. Is there certain incentives that you've seen be more successful, whether, like you said, it's badges or certain things showing up on the user's profiles? What things have you seen work well, and which ones were kind of duds?

Sree:

No. This is the badges have been really useful for us last year that we launched it. We also launched a few other things. We tried to kind of add a community angle to it. But those experiments didn't do very well. You could poke, or you could give some... Even the gamification element, having a name there, that was very helpful to us. So I think what has been working well is having pictures. At one point, we even had pictures of individuals that they will upload, adding profiles of themselves. These are all things that were very successful, apart from the badges that I said. We continue to iterate. We experiment a bunch every quarter, every month, every week, and we try to see what works.

Sree:

But the big wins for us last year was badges, the names, and the profiles per se. We didn't think that people would want to add profiles and talk about themselves, but you'd be surprised they do. This is where I think the convergence of a little bit of the community and gamification and shopping is all occurring, and everyone's discovering their own comfort level in terms of that convergence.

Stephanie:

Yeah. Very cool. Is there any metrics that you look at when it comes to adding these different features, or you said you're running tons of experiments all the time. What are your go-to metrics to be able to tell you if something is successful or not?

Sree:

That's right. So if we look at the typical funnel metrics, we try to look at the engagement metrics, which are, are people bidding. More bids that we have, then obviously, it means that people are engaged, and it also drives up the ASP of the item, which is very helpful from the sell site. So that's definitely what we look at and eventually conversion. So if you're bidding, that is conversion.

Stephanie:

So I could also see it being interesting with... You're essentially getting, like you said, multiple conversions just by someone bidding on it to where I'm guessing you could retarget those people, and you have consumers earlier than a lot of other brands might experience. Is that what you've seen, and how do you go about reengaging those people?

Sree:

It's a great question. So I mean, what you're seeing is basically, even people are engaging on an item. Only one person is winning it. Let's say there were 10 bidders. There's nine of them who were interested in that item. Maybe they were not interested in that item beyond a certain price point, but they were. So what we do is if you bid on an item, we do consider that as a saved or aligned item. So we save it as an aligned item in the backend.

Sree:

So we use various notification methodologies for when that item comes back. So let's say I bid on the... I'm looking at the platform right now, on a CBD cream, pain relief item.

Stephanie:

Very popular these days.

Sree:

Very popular. No. I didn't mean it because it's gone up, like somebody is out to get me, and I don't want to pay $15 for this. So I kind of stop at 14. So now, the system will automatically capture that. If you look at the platform, there's a little heart-shaped on lot, which basically is our version of we like it. So the next time the CBD cream is coming up for auction, I will receive a notification that says it's coming up for auction. Come back to the platform. So we drive up a bunch of engagement with those kind of notifications.

Stephanie:

Yeah. That's very cool. What kind of investments have you done into personalization?

Sree:

Right. That's a very interesting question, actually. Stephanie, for us, the traditional definition of personalization is to be able to give you that item at the price that you want. That doesn't really work well in our auction platform. So for us, there's a broader meaning of personalization. For us, it's about personalizing to a group of people with similar tastes and similar needs and shopping behaviors versus tailoring it to an individual. So I would suggest that we use terms like targeting. So there are males if there are electronic items, shaving items. We know they generally appeal to men. So our feed optimizes knowing that this is a male. Their feed will optimize depending on the fact that are they male or female.

Stephanie:

Very cool. So the other thing that I was thinking about is it seems like it could be a little bit difficult to bring a seller to a platform and say, "Hey, you have there's 90 seconds for your product to get sold. I was curious how you convince sellers to come to the platform. One interesting thing I saw was your guys' blog, which seems to focus a lot on education that isn't really about Tophatter per se, but it's things like how to optimize your e-commerce warehouse strategy or how to sell more products. It seems like it's just an educational tool that could be possibly convert sellers to come on the platform. What does that process look like to get them to list their first product?

Sree:

That's great. You have multiple questions, and they're all very interesting. So [crosstalk 00:15:02]-

Stephanie:

I seem to be that.

Sree:

They are interesting. Your brain works very fast. I can tell. So I think the first question is, how can they? What happens in 90 seconds? I think you're trying to say, can they realize the price in 90 seconds? Well, that is the interesting part is you would find that there are certain items on our platform that can go up $100 in 19 seconds or a little bit more than 90 seconds. I'll talk about that in a little bit. But some popular items, we keep them on block longer because we know that there's a lot of excitement. So if I'm listing, for example, an iPhone, which is a refurb iPhone, but still not very old, you will see that will generate a ton of interest.

Sree:

What does that mean? So what does that show to the seller is that if you have an item that a lot of people will like and converge, you will be able to realize the price and probably more than what you wanted in a short period of time. So to sellers who understand the audience and understand what would appeal to the audience do really well on the platform. So that's the number one question on price realization. The second point I think you're making about educating and teaching them a lot on what can sell and how to optimize the platform, what your warehousing strategy should be. Well, because we are a discovery based platform, it's like people get bored quickly, right? Because suddenly, everybody likes this CBD cream. We've got a ton of inventory there on. We've got a ton of buyers.

Sree:

But after that point, it's like that song that has been at the top of your charts, and you've heard it so much. You're bored of it now. So then that very quickly goes out of fashion, and that makes it harder for a traditional seller to do warehousing strategies and what have you. Then they're like, "I had a great product, was selling really well. I was making a lot of money, and now I'm not. Now, what do we do?" So sellers have to be really smart about how they test. So they kind of have a marquee product that they know that they make most money in velocity. It keeps selling that, knowing that this is going to not be the case in a few weeks or a few months, but then continue to test on the others in parallel in anticipation of creating leads and nurturing more products that can fill in the gap when this one runs its time.

Stephanie:

Got it. Yeah. That seems like it's a lot of moving pieces to make sure that you're putting the right product out with their right amount of inventory level. Are these sellers also selling on their own websites traditionally? Or are they pretty focused on you guys and maybe Amazon?

Sree:

Yeah. So are we the primary platform, or do they sell on other platforms and their own-

Stephanie:

Yeah, or their own. Yeah.

Sree:

Or their own. Yeah. So some of them, we do find a mix of all of that. So if you think about the pyramid structure almost as the very top of the big players who sell on every platform, did themselves have their own big e-commerce companies, sorry, websites, and they're selling on those platforms themselves. They don't do a lot of GTV. Those are the ones that have found a marquee product and probably have a ton of inventory on the platform, and they kind of probably also want to do testing and channel optimization in their own companies. So we probably are one of them. So they don't do a lot of GTV. But they are good players. They provide great experience, and they're also happy to use our platform also probably because it gives them a ton of velocity as compared to the other platforms. So those are the very top.

Sree:

Then you have the ones in the center who are actually small, medium businesses. They are mostly for whom Tophatter is the primary channel. So what they do is they will do a ton of testing on the platform, figure out what's working, like I said, find successes. They'll build their entire business around it. Then if it doesn't sell after a point in time and they're stuck with inventory, then they liquidate it on other platforms. So the other way around. So different use case in this case.

Sree:

Then the bottom of the ones are just people who come in and go. It could be even a buyer like you and me who think, "Oh yeah, I have a purse in my closet. Let me try and sell it." So you'll have a bunch of people who come in and go.

Stephanie:

Gotcha. So as a COO, you probably have a very good bird's eye view, like you said, into the entire company. What advice would you give to someone if they were talking about starting a marketplace, which is probably one of the hardest, I would think, e-commerce businesses to start. What kind of things would you advise them to do or not do?

Sree:

Oh, that's a great, great question. So hard, so hard. You're exactly right. It's very hard. I think the first thing is you have to kind of figure out is your customer acquisition and your unit economics. You have to get a sense of, am I able to bring in the customer with the certain level of advertising costs? Again, do I have a platform that they are engaged enough that the unit economics will work out. I think that's the primary question. Sometimes the indications are that they will, and over time, they don't. Right? And that's where it all changes.

Sree:

So after having built the initial base for that, then the idea is to be able to understand the startup or whoever's starting the company has to constantly look at, how do I drive that engagement? How do I drive with LTV? What are the changes they could make? And really experiment a lot. Experiment a lot. Be open to walking away from... Be open to learning from the results of those experiments and being brave enough to not feeling so personal about those experiments and the business model that you have to hold onto it. Right? So you should know when a particular thing is not going to work or has hit a ceiling, and then you continue to innovate and continue to iterate and experiment.

Stephanie:

Yep. That makes sense. Are there any metrics, maybe financial ones or not financial that you look at to understand if you guys are growing the way that you want? How do you think about success when it comes to the growth of the business and the platform?

Sree:

Oh, absolutely. So those are the three big metrics for any company, no matter what, is always the three, right? The big ones. GTV in our case, right? Are you growing your top line. Then you want to look at, what's your margin or revenue in other cases? What's your margin? Is it healthy enough? How much liquidity do you have? Basically, that's the healthy part. How much of operating income do you have? You may have negative operating income because you're a startup. But the idea is you want to know whether your unit economics are going to be scalable.

Sree:

There has to be a story. So let's say your unit economics are not working on right now. That is because of X, Y, Z reasons. You are investing in logistics or investing in international growth. You're investing in something. But there has to be an IP that you'll build up that will allow you to be able to monetize this in the long term where unit economics will work out. There has to be that formula, and there has to be that clarity. There has to be proof points when you're building the business that that story or that narrative that you build is going to come true.

Stephanie:

Yup. Is that something that you all have been able to keep track of from the start? Because I could see a lot of startups maybe getting pretty far in and being like, "Oh, oh, I probably should've started measuring this." But you don't really think about that when you're starting a company. You're just trying to be scrappy and get it out. Is that something that you've paid attention to since the beginning or at least since you've been at the company?

Sree:

Well, actually, a lot of it right from the beginning. So even I've been here only for three years, but the founding team, they were very, very diligent about unit economics. So I think the fact that we have been staying standing for eight years now and as big as we are is a Testament to the fact that the founding team was so focused on unit economics. So we know our formula. We know really well what for our formula, how sensitive that is, and what are the factors that causes it to be sensitive. So we've got guard rails around that. We might make investments in my opinion, bold moves. But we also know based on the guard rail that we have established is when that is shaky and when we need to pull back.

Stephanie:

Are you A/B testing or running multiple tests on kind of what user interface works best or what users enjoy the most? I'm guessing you could have a bunch of different interfaces and see how they more eagerly interact with the platform.

Sree:

Well, totally. So A/B testing is just what we do, right? That's all we do. Even in operations, we kind of try to do A/B testing. But even retail sellers, why do you do A/B testing? Have a listing with these words? Have a picture with these words?

Stephanie:

Oh, that's great.

Sree:

Right? So that is such a core part of our DNA is A/B testing, being able to have population groups, hold out groups. Actually, that is so much in our DNA that even in terms of our OKRs, we actually call it games. Our OKRs are called games now. We want to know whether what we're doing even in an operational sense makes a difference to the company. So we have a holdout group that does not receive any of the things that the operational team is doing, and then we try to compare the effectiveness of the population, the holdout. So we've really taken this whole A/B testing to a whole new level.

Stephanie:

How do you get your employees to engage in that way and thinking that way of like, everything's going to be tested and measured? How did you get them to put that hat on?

Sree:

No, it's very interesting. It is a little bit of a struggle initially for us because in a marketplace environment, it's like an economy, right? There's so many things that are happening is really hard to measure the impact of one activity. So you bring in a big seller and you say, "Wow, this seller's GTV has grown by X%." Well, that's probably because he has replaced the GTV off another person. Right? So how do we know that this is incremental to the platform?

Sree:

Right. It's a very hard question to ask, and even at eBay, we used to struggle with it. But of course, eBay was at scale. So there are established ways of measuring things. So in our context, to answer your question more specifically in terms of employee engagement, what we showed was we actually did want to experiment with the marketing team, where it was about giving credits to our buyers and seeing how they engage, so lifecycle marketing activity. That was very easy to do. You just have a group that you don't send credits and see how they perform and give another group credits. It was very clear the impact of the team and how they were managing the spends in driving engagement very clear.

Sree:

So we use that as an example of how we could leverage that. But the key is how you set up the measurements, what kind of tactics you're measuring. You can't measure every single thing. You also want to measure things that are important. Also, you want to make sure that you have a business strategy and the measurement follows that versus the other way around that you define a measurement system and then say, "Okay. Now, let's only do things that we can measure."

Sree:

So there is a fine balance there. So just to kind of summarize then how we did this was we said, "Okay, what's the business strategy? What are the things we should do? Now, having said that, which activities are most amenable to A/B testing into measurements? Let's go ahead and play games around that." So on a daily basis, you will have SQL reports that are set up that speaks out based on those games how you've done. That actually really helped the teams understand and refine the tactics and levers. Once you found a tactic that worked or a lever that worked, then the teams could go and scale it into a big process, which is the dashboard and what have you. But if you didn't know what those tactics say, you're not sure, and you want to test it, this was a very good way for even the teams to understand and measure and refine.

Stephanie:

Yeah. That seems like a really fun way to engage employees and get them excited about data. Because I could see a lot of people being like, "Ah, I don't feel like looking at these metrics. I don't really know what they mean, and I don't know how to take an action from it." But putting it into a game format just your platform seems like the perfect culture fit as well.

Sree:

That's right. That's right. You have to understand also that as an organization, who's comfortable with data, and who's not, and find ways to support it. So all of these games are set up by our team in growth, the analytics team who basically worked very closely with all of the other teams, whether they are product and engineers or operations. They understand what the teams are trying to do, and then they suggest the measurement system. So it's a collaborative effort. So that gives the people who are not very comfortable with data to know that they are supported, and it's simple interpretation of the data. They don't have to define a whole lot of other things which could be perceived as pressure driving.

Stephanie:

Yeah. That's so important, having that team mentality, because I think in the past, engineers were kind of left out of coming up with the metrics or KPIs or helping influence product decisions, and I'm seeing this movement now where everyone's starting to work together and develop those KPIs and metrics to think about, and they're not kind of leaving the engineers out and just saying, "Hey, we'll come up with everything, and we'll let you know how to make it for us, or we'll give you all the specs." It seems like there's a unifying process happening right now when it comes to the different teams.

Sree:

Absolutely. I'm a big believer that we should have the collective intelligence of everybody. Just because you're writing code or you're making a sales call doesn't mean that you may not be able to contribute to the bigger picture. In fact, because you're in the trenches, you probably have a different perspective on that problem, and it's important to be able to harness all of that energy and all of that input to then step back and see what it's offering us.

Stephanie:

Yeah. Completely agree. Are there any marketing channels that you all are experimenting with? Because the world's moving so quick, and there's all these new platforms popping up. Is there anything that you're trying out right now or somewhere that you're finding success that maybe others aren't looking?

Sree:

I think it's just the usual TikTok and Instagram and Snapchat, what do you call, other channels besides the big two Facebook and Google. What has been interesting for us, we are largely a site for older people and women, majority. But TikTok is for young people. They're literally Gen Z or so. We're seeing some success there. I don't know how much that can scale to see it. But that's why it's so important to continue to experiment. You'd have some surprises. So TikTok is definitely a surprise for us.

Stephanie:

Yeah. We've actually had quite a few guests on the show mention TikTok. So what kind of ads are you putting on there? If a brand right now is thinking about utilizing TikTok, what are some ways that you're utilizing that platform right now? How are you engaging the younger generation on there, which I heard is actually aging a bit. So how are you using it?

Sree:

It's a short video format with the product and just making... I think we all know that video is very engaging and lot more content on video. It's just our ability to scale, I think, is the key here. We have so many products. We have so many items to be able to continuously find the right level of engagement in terms of... If it's a video, it has to have a product. It has to be able to do all of that messaging because we are not leaving it to the consumer to be able to browse and find that information on their own. So that's the only challenge in terms of the scaling, but yeah, generally, it's just very short. We work with partners who create all those creators for us.

Stephanie:

Got it. I'm wondering if you have to definitely probably have different messaging on that platform, where I wonder if it can't be... You can't have the brand up in front maybe. It has to be more like, "Here's the fun behind it and go find out what's behind this," I'm thinking, to market to that. There's different users maybe on an Instagram or Facebook where it can be more obvious. Is that how you guys have kind of approached that?

Sree:

That's right. That's right. Also, what is it that people are engaging with? So for example, on Facebook, it's value. Those are the things we use a lot because we feel like those are the campaigns that do well for us, right? Where we see deals and fun and value. Whereas I think more from a TikTok kind of a customer, it's more the experience, the gamification element and probably a lot more products that are skewing different to that audience. So that's the kind of experimentation we can doing and testing and coming up with the best optimization for that channel.

Stephanie:

Yeah. That's very cool. We'll definitely have to check that out. I was reading a very pretty funny article about how some of the younger generation is using TikTok, and they're... I don't know if you've heard about this. They're putting faces on different storefronts. So whether it's Nordstrom or Target, they're putting eyeballs and a mouth on it, and then they're creating personas for these brands. So then you're dating each other and having drama. They're like, Target and Home Depot are having a tiff today or whatever. They're breaking up. I was reading this whole article about how TikTok is being used for that, and I'm like, "Oh my gosh, is this really a platform?" Everyone on the show keeps talking about like, "TikTok's the way to go." And I read this silly article about the drama between brands that these kids are making up. I mean, it was pretty funny. I wanted to go check it out, but it made me question it a little bit.

Sree:

It is definitely engaging. Oh my, I have a 12, 13-year-old son. That's all he does all day long. It's so hard. We have to literally snatch his phone and hide it. TikTok is very addictive.

Stephanie:

Oh, man. Yeah, I believe it. But I'm sure there's a lot you could learn from him too of, "Hey, what do you think would be a fun ad? What would you like to see on here?"

Sree:

You're right. I do film them sometimes when he and his friends are bidding on Tophatter. It's interesting to see how they engage, what they do. It's fascinating, kids these days.

Stephanie:

Yeah. Hey, that seems like a good way to kind of learn and test product and test marketing if you have a 12-year-old. Now you know, everyone. That's what you can use for your product testing. So you've been in the e-commerce industry for a while. What's one thing that you wish online sellers would start or stop doing?

Sree:

Would start or stop doing. It's fairly mature now. So let me think about that.

Stephanie:

It could be D2C sellers, who they're all starting up on their own, where you're like, "You probably should do this, or shouldn't do that. Or I've seen success around this, or this is really annoying when people do this."

Sree:

No. I mean, as a consumer, I think the more connection that I have to the seller and being able to... So I'll give you my first experience to explain. When I was a consumer at eBay long before I joined eBay, I had a situation where I hadn't got the item that I wanted. So the seller simply just shipped me another item as a replacement, asked me to refund, send everything back and just kind of begged that I don't give him a bad review. So I mean, keeping that aside, but the whole idea of the way that seller actually engaged with me and took care of me made me feel very trusted as a consumer. So I think that is the big challenge for e-commerce, as all players, whether they are a retailer e-commerce arm of a retailer or you are a pure marketplace like us.

Sree:

I think the challenge is the element of trust. Because the end of it, I can't touch the item. I don't know who you are. I haven't seen you. I haven't gone in your store. That's I think the critical aspect. I don't know, Stephanie, if you realize this, that even though we think e-commerce is a very mature market from an online perspective, the penetration rate for certain categories is still fairly small. Books and CDs are probably 55% of online sales, penetration. But apparel and beauty, for instance, apparel is less than 30%. I don't know what happens after COVID-19. So I don't know the numbers, but the expectation for 2020 or apparel was 29% and beauty 11.

Sree:

So I mean, this is another angle to what I said. But it's also the emotional element of when I'm wearing this outfit, how do I look? Does it fit me? Am I getting the community feedback off? Yeah. It's great if I go shopping with my friends. They'll be, "Yeah. That looks very cute." How do they replicate that part? Or if it's beauty, how does it look it with my skin color. Those are some challenges that I think we still need to address.

Stephanie:

Yeah. I completely agree, especially the trust piece. I mean, on Instagram, every single day, there's probably five new apparel companies advertising to me. You go to their website, and you're like, "Did you just start yesterday?" It seems like there needs to be some kind of mechanism to show.

Sree:

That's right.

Stephanie:

I know there are people that are trying to show this is a trustworthy website, and they've been around for five years. But it definitely seems hard from a consumer perspective if things are moving more online and people do start getting more comfortable shopping online, if you get burned once, it's going to be pretty hard to want to try out a new company. I think that'd be something that'd be difficult but necessary to figure out.

Sree:

Yeah. To add to that, Stephanie, is also like... I don't know. What is the agency? If you're buying something, like you said, I click a lot of the ads on Facebook, and I have a similar reaction, and being also on the other side of a partner of Facebook, it's very interesting to me to see both sides of the aisle is, how does Facebook become an arbitrator here, right? How do they make sure that the buyer is taken care of and folks like us, Tophatter as a company who are sellers or advertising in the platform how to hold us accountable and managing our internal metrics of how we considered customer satisfaction and marrying that with Facebook's definition?

Sree:

So it's a very interesting challenge because you're talking about distribution across so many... There was a time when you knew eBay, right? It's organic search. So you didn't have to go through an intermediary like Facebook. Now we've added that on. Facebook has become one of the biggest ad pair. So when you add that on, what is their responsibility in all of this?

Stephanie:

Have you seen these platforms-

Sree:

I don't have the answers.

Stephanie:

... shifting? Have you see these platforms since you've been on them kind of shifting their viewpoint on responsibility and of upping their standards when it comes to new brands joining? It seems like it's starting to get better when it comes to that.

Sree:

No. It's a very good question. Actually, they have. But I don't think that they are very mature in terms of how to think about it. So let me explain this a little bit. So let me use eBay as examples. So when eBay went through that question of how responsible are we, how can we make sure that the seller's performance matched that customer's expectation? I think if you had like 25 years of experience building that out, seller performance management system. Facebook is fairly immature there, right? I think they're still very early in the process. They've just figured that out. People are asking them questions, not only on the news content. They're being held accountable, but they're also being held accountable for the advertisers on the platform from a commerce perspective.

Sree:

So they're not mature. They're figuring it out. They have some rudimentary measures. But I think the gap for me as a consumer of Facebook's advertising... not consumer, sorry, as somebody who advertises on Facebook, for me, the biggest challenge is that I cannot connect the dots as to what I think my customers need and how Facebook thinks my customers need. I may have great customer satisfaction on my platform, but Facebook may not think that I do and vice versa. So I think they have some maturity maturing to do.

Stephanie:

Yeah. It definitely seems like it's a tough pole between these platforms. Do you want more revenue, or do you want to cut down on your revenue to also have better brands come on and not let just anyone come on the platform and potentially hurt the end user?

Sree:

Exactly. That's the kind of challenge we have at eBay too, right, and we have [inaudible] right? All marketplaces have the exact same thing. Because anybody who has, generally speaking, sensationalism, whether it is news content or products, also, the bad sellers do things in such a way that they might get more volume, and they may be even willing to pay for it because they don't have the overhead costs. So that is the same challenge that we have as marketplaces. But then what you do is you create a performance management system where you reward good behaviors, and you improve the baseline for the entire platform. You move the goalpost for the entire platform consistently, continuously. That of course took 25 years for eBay to get there, and still, I think you need to continue to refine it. So I think it's a question of time before Facebook figures it out.

Stephanie:

Yeah. Well, hopefully, with everything going on with COVID, it's been speeding everything else up. So hopefully it'll kind encourage speed around that area and it doesn't take 25 years to develop, hopefully.

Sree:

I agree.

Stephanie:

So we mentioned COVID. That brings me to the question of, what do you think the future of online commerce looks like, especially after the pandemic's over?

Sree:

Great, great question. I think that the last I saw, there was like 120% increase in online shopping in Q1, I think. You're in the US, something crazy like that. That of course won't be as crazy. The growth rate will probably come down. But then some of the shift is significant, and they'll stay there. So we all know that grocery shopping penetration went up. It's probably going to not be as high. But people who have never done grocery shopping online will be like, "This is kind of cool. I need to stick with it." So there will be some shift that stays permanent.

Sree:

I think the more interesting thing for me is what I'm seeing with retailers. The retailers who do not have an online presence at all are kind of coming to terms with the fact that they can't ignore it. All of the industry is designed around physical location. The processes are designed around physical location. Their marketing is designed around that. Pricing strategy, procurement strategy, returns, everything. So that's why they have been very resistant in terms of... Generally speaking, there are some who do better than the others. Generally speaking, they're a little more old school when it comes to e-commerce. Can you believe that Ross does not have an online-

Stephanie:

Oh, yeah. I know. [crosstalk 00:45:37]-

Sree:

Or Marshalls. I love Marshalls. I'm like, it's too hard. I want to shop, and I can't shop because they don't have a website.

Stephanie:

I actually just brought this up in another interview about TJ Maxx. There was a whole article that they will not be going online. I mean, they have a very minimal e-commerce experience right now. But I think they put their foot in the sand, and they were like, "No. We're not doing it." Right.

Sree:

We won't do. That's fascinating. That's fascinating. So maybe they can get away with it because they are only a discount retailer, right? They have major investments, and maybe they've realized that this is the niche, and they don't want to divert the resources somewhere else. That's okay. But now, the other retailers that were on the brink of bankruptcy have been kind of pushed to facing it at the moment. I think, what, 25 retailers probably have already filed for bankruptcy thus far. I hear that in the next five years, there'd be a hundred thousand stores that may be closing now. Well, what that means is there will be a tremendous amount of retail consolidation, and we'll have to take it seriously. People will have to redo the processes.

Sree:

Some good example I think I've heard is Zara. Zara is very serious about this, and they're like, "We will close art stores, and we will have a few channel strategy. We are going to use COVID-19 as a way to accelerate that, that we were going there anyway. Let's do that." I think that's the right way to go.

Stephanie:

Yeah, that's great. I wonder what will happen with all the stores. It seems like there could also be an opportunity for different retail models to pop up, like pop-up stores and [crosstalk] shops.

Sree:

[crosstalk 00:47:13].

Sree:

It seems like that-

Stephanie:

Absolutely. I think that stores will never go out of fashion. But how you use stores, initially it was stores as a central point of a strategy. Instead, it will be a strategic lever. I mean, there's a reason why Amazon bought Whole Foods. The fact that there are retail locations is a strategic lever for Amazon. Best Buy turned around. They used the stores as a very strategic lever, same thing with Walmart. So people will always want to socialize. People will want to hang out. So the stores could be an experience. It could be a place where you pick up things quickly. It could be a place where actually, there are things that you don't want to try on. You can't figure it out. You go there. Maybe it's a place where you drink wine and hang out and-

Sree:

Cool.

Stephanie:

... do other things.

Sree:

That kind of store.

Stephanie:

That kind of [inaudible 00:48:11]. Stores could be an experience. It doesn't have to be a transactional place where you just buy and sell things.

Sree:

Yeah. I completely agree. Or even the stores are known for having the newest items, where some people who care about that, they can go into the store then-

Stephanie:

To the store.

Sree:

... for the people like me who maybe are like, "Yeah. It's been out a few months, I don't mind. I can just shop online." So yeah. I completely agree about the experiential aspect of it. So before we move into the lightning round, is there anything around the e-commerce industry that you wanted to highlight or talk about that I just missed?

Stephanie:

No. I think I didn't want to talk about the retail, which we covered. So thank you for asking me that question.

Sree:

Oh, yeah. Yeah, that was great. All right. Cool. We can move on to the lightning round, brought to you by our friends at Salesforce Commerce Cloud. This is where I'm going to ask you a question tree, and in a minute or less, you can give me a wonderful answer. Are you ready?

Stephanie:

No pressure. No, I'm not ready. Let's go for it.

Sree:

No pressure. Just take a deep breath. It'll be fun. All right. So what app are you enjoying most on your phone?

Stephanie:

Should I admit it is TikTok.

Sree:

Yes, you can admit that. I actually have just started getting into TikTok. So there's no judgment coming from my end. Are you doing dancing videos or what are you doing?

Stephanie:

No. I don't know. I just watch. It's hilarious.

Sree:

You're slashing from the sidelines. Yeah, that's me too. I'm like, "I'm not creative enough to make something per se, but I'll watch everyone else." What is the newest e-commerce tool that you're trying out right now?

Stephanie:

Newest e-commerce tool. [inaudible 00:49:45].

Sree:

So any kind of tool that you're working on for the platform right now at Tophatter?

Stephanie:

Yeah. So Got it. So React Native. I'll pick that.

Sree:

Okay. If you were to have a podcast, what would it be about, and who would your first guest be?

Stephanie:

I think it would be about managing stress and how to live a balanced life, a happy life. I would love to get Dalai Lama.

Sree:

Ooh, that's a good one. We'll have to email him. I'm sure he'll say yes.

Stephanie:

All right. What's up next on your reading list.

Sree:

On my reading list. I have a history book that I just ordered, and I have Ben Franklin's biography that somebody had written that is on my reading list now. I've done a lot of business readings, so I need a break now.

Stephanie:

Yeah. Cool. Yeah, it's always good to get a break and read something fun. All right. The last one, what one thing will have the biggest impact on e-commerce in the next year?

Sree:

I think the retail consolidation to me is the most interesting phenomenon that I'm seeing. So that forces a lot more innovation in the industry. I really think that the omnichannel strategies are going to be the new thing, taken at a different level. It already is a thing. But then taking it to a different level, that's what I foresee, and I'm very excited to see in the next few years.

Stephanie:

Yeah. Completely agree. Well, Sree, it's been such a blast having you on the show. Where can people find out more about Tophatter and yourself?

Sree:

Well, you can find out about me going to LinkedIn. Go ahead and download Tophatter on your app. Or if you are more comfortable in desktop, go to tophatter.com. You'll find us all there.

Stephanie:

Awesome. Well, thanks so much for coming on Up Next in Commerce. We'll have to have you back. This was a blast.

Sree:

Awesome. Thank you, Stephanie. Had a great time myself. Have a great day. Stay safe out there.

 

Jul 21, 2020
Building an A.I.-first organization
52:39

Everyone is excited about A.I. and the idea of using technology to improve business. But that excitement has also led to confusion. There are many definitions and applications of A.I., and few have been able to truly optimize their A.I. strategy. That’s where Ashwin Mittal comes in. Ashwin is the CEO of Course5, a transformative intelligence company helping companies improve their businesses using technology like A.I. and machine learning. On this episode of Up Next in Commerce, Ashwin explains where and how people have gone wrong with A.I. in the past, and the steps an Ecommerce company needs to take in order to be able to get the most out of A.I. It all starts with understanding and controlling your data, and includes retraining your employees to rely less on their guts, and more on the analysis A.I. provides. He reveals how to do exactly that on this podcast.

 

3 Takeaways:

  • It’s important to build a structured data foundation from the start so you can move to a place of making decisions with data
  • You must teach your employees how to interpret and analyze data and make sure they are comfortable using the data to make decisions. Individuals must be taught to lead with data and then let their gut take them the final 20% of the way toward a business decision
  • Understanding the entire customer journey and where there are points of failure will help you create a strategy on optimizing your data and building an Ecommerce experience that is successful from start to finish

 

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey everyone, and welcome back to Up Next in Commerce. This is your host Stephanie Postles, and today we're joined by Ashwin Mittal, the CEO of Course5 Intelligence. Ashwin, thanks for coming on the show.

Ashwin:

Thanks for having me, Stephanie. It's a pleasure to be here.

Stephanie:

Yeah, I'm really excited to have you on today because throughout a lot of our previous interviews that we've had so far, everyone has mentioned AI in some form or fashion, and when I saw that you were coming on the show and we were going to have a deep dive conversation into AI, I was very excited.

Ashwin:

It's a deep subject to talk about, so yeah, it should be fun, hopefully.

Stephanie:

It will be. So, what brought you into the world of AI? What got you excited about that and building a company around AI and analytics and all that?

Ashwin:

So, we've always been in the business of delivering insights for sales and marketing to customers from data and information. But about five or six years back, I realized that we're in this perhaps future technology wave of transformation because of the onset of artificial intelligence technology, and from a big picture perspective, if you look back the last 30 years, 40 years, we've perhaps seen two or three waves of substantial change value creation through technology. We've seen the PC wave, and we've seen the internet wave. You can say, okay, maybe there's a separate mobile internet and social media wave, but it's part of that. Both of these have completely changed our personal and professional lives, and one was built on the other. Because we had PCs, so the internet was [inaudible 00:02:03].

Ashwin:

So, my belief is that with AI it's going to be pretty much the same. It will take 15-20 years to play out, but its impact is going to be as deep and profound as the internet. And it's going to be built on top of the fact that we all have computers, that we're all connected, all devices are connected, and for us being in the data business of driving insights from data, we're really in the eye of the storm. Because the root of AI comes from data science. So, on the one hand while this presents a challenge to our business, and possibilities of us getting disrupted, but at the same time, it presents even larger opportunities.

Ashwin:

So, at that time, I decided that we needed to really double down on the AI wave, and started to completely reorient the business and the company towards riding this wave. So, that's really how [inaudible 00:03:12].

Stephanie:

That's great. So, how would you explain Course5 Intelligence? What do you all do? What kind of clients do you help? What problems do they come to you with?

Ashwin:

So, we help our clients make the best decisions from data and information for sales marketing customer-related problems. And within that, one of our largest focus areas is digital and Ecommerce. We typically work with large corporates, Fortune 500, Fortune 1,000 companies, and in some cases, we might be working with the Ecommerce group, their digital group, with the CMO's office, sometimes with IT or some combination of all of these.

Stephanie:

Very cool, and you guys have over 1,000 people that you employ, right?

Ashwin:

Yes, we have 1,200 people.

Stephanie:

Wow, that's crazy. When did you all start, and how long did it take to get to that 1,000-person mark, and what was the change like within your company? That's a lot of people to manage.

Ashwin:

Sure, sure. Yes. So, we've been in business for, what? 16, 17 years, and we've also changed and evolved along the way. The way you run a company that is 50 people doesn't really work when you're running a company that's 200 people, and you need to run a company differently when it's 500 people, and certainly when it's 1,000. So, we've also had to learn, change, evolve along the way. How we run the company, what kind of talent we bring in. How we set the organization structure, and today we're pretty much a global business. We're present in seven, eight different countries, have customers all over the world, so we're sort of a micro multinational on our own.

Stephanie:

That's great. Is there any struggles that you face when it comes to working with your teams around the world that you had to learn along the way?

Ashwin:

Sure. Yes, yes. No, absolutely. Absolutely. So, there's one challenge, which is a more difficult challenge, which is culture. There's a second challenge, which is also important, but perhaps not that difficult, which is regulation. Culture is a really tough one. It's not as tough today as it used to be maybe seven, eight years back. Today because of just the globalization and easy access to information everywhere, people are a lot more aware of different cultures, different people, and a lot more sensitive and things like that.

Ashwin:

But in our early years when we were globalizing ourselves, we had to learn about different approaches, different cultures. We had to be very open minded, and I think we managed okay. We're still learning, it's important to be sensitive. Culture is an important issue. In terms of regulation, that's somewhat easier. You just have to follow certain processes, protocols and make sure that they're completely compliant in every job that you're offering. And especially in a business like ours where you're dealing with data and information, and there's a lot of regulation around that, around data privacy and sensitivity around that and things like that. So, we need to just ensure that we are compliant in every geography that we operate.

Stephanie:

That makes sense. So, everyone talks about AI. Like I mentioned, a lot of people mentioned in our previous interviews, and oftentimes I think people if they're using AI or they're referring to something like it's AI and it's actually not. So, how would you describe AI? And specifically, how does AI help Ecommerce, or could it help Ecommerce if people aren't already looking into it?

Ashwin:

So, first point you made is spot on, right? What is AI?

Stephanie:

Yeah.

Ashwin:

So, this really means different things to different people, and honestly, there is no one perfect watertight definition. So, AI is essentially an umbrella term that covers a bunch of different technologies, which are all meant to convey computers getting intelligence, which is not typically expected from computers, and which is more human-like. Which is the common sense definition, which we would all accept. But then what falls in that bucket, and what doesn't fall in that bucket is different for different people, and I'll give you a simple example. Take a very old technology, something like OCR, optical character recognition. Nobody would call that AI today, but when it first came out, maybe some people thought it was actually computers becoming intelligent, and it was kind of AI.

Ashwin:

So, the definition is also keeping on evolving as our expectations from technology keep changing. But I would say that amongst the different technologies that encompass AI, the core one, the most important one, at least to me, is what you call learning or machine learning. And machine learning is essentially the ability of computers to learn, and that is really a game-changing technology. And then that supports all the other technologies that are typically and the umbrella term of AI. Where a computer can run a certain process or program and get better at it every time it runs, which is what humans are good at doing.

Ashwin:

So, that for me is one of the most important technologies. And sorry, you had a second question you asked about AI and Ecommerce?

Stephanie:

Yes. Yeah, how it impacts Ecommerce right now. Do you think people are using AI efficiently or what do you think the future could look like if they do start implementing this in a better way?

Ashwin:

So, it's already here. It is being used extensively, more by some companies, less so by some. Companies like Amazon are, of course, using it in a very, very mature and sophisticated manner. But various types of companies are using it, many of our clients are using it, and its footprint is increasing. It's used in automating various tasks, in virtualization, in campaigns, even at the back end in supply chain, inventory management. We all know that chat bots are used for customer support in A.I. In Ecommerce. Physical robots are used in warehouses, which also could have AI technology. If it helps, I can give you a couple of examples-

Stephanie:

Yeah, I think exactly. That'd be great.

Ashwin:

... of a couple of our platforms-

Stephanie:

Yes, please.

Ashwin:

... which truly you would consider as AI. So, we have this one platform called Compete. Now what Compete does is it enables our customers, our clients to gather competitive intelligence in the market, and respond in quick time. So, it has technologies and a bunch of bots that go out and search all competitive websites of a brand to collect and synthesize all the information on what the competitors are doing in terms of the five Ps. So, you traditionally have four Ps, product, placement, promotion and price, and we have a fifth, people reviews.

Ashwin:

And so, this keeps collecting this information in rapid time, and on different product SKUs and different combinations, how competitors are doing, what they're placing, how they're pricing. And then this is updated in a dashboard along with analytics to help the Ecommerce players monitor competitive moves and respond quickly so they can optimize their revenue, their profits. This platform's also used extensively during these major selling seasons, like Black Friday, Cyber Monday, and brands expect to make substantial sales in a very short period of time.

Ashwin:

So, they have to be very responsive to what the competitors are doing and what's happening in the market. So, this is one example, one platform that we have. Another one, which we call Adomate, this is really taking it to the next level where we're using AI to optimize creativity?

Stephanie:

What?

Ashwin:

Creativity, exactly. So, AI is not getting creative, just to be clear, and I'll explain to you how it works.

Stephanie:

It's not going to take over the world, do all the artwork in the future, write all the books.

Ashwin:

No, no, no. Well, there's some of that talk going on, but I think that you'll always want to read the book written by the author, you'll always want to know about the author. You'll want to see the artwork, which you want to know the painter's story. While those things might happen, but I don't think that's going to... Robots can play sports, right? But you want to watch humans play a football match. You don't want to watch robots play, they might play better than the humans. So, it's the same thing with art.

Ashwin:

But in terms of this platform called Adomate, so what we're doing is we're actually optimizing the process of content creation for either campaigns or advertising. So, when companies typically do campaigns online for Ecommerce, they will create, let's say, 100 different creatives, 100 different images, and put them into a system. And then the system will do live optimization depending on who's responding to what. Change which creative is being shown to whom. But you might have missed something fundamental, right? You don't know why something is working, why something is not working. Maybe you missed something in those creatives. Maybe there's some combination of both that you didn't know about.

Ashwin:

So, what our AI system does is using computer vision it actually reads every creative. So, it actually looks at the creative and then distills it into structured data. Who are the protagonists in the creative or what's their ethnicity? What's their emotion? What the background colors? Is the brand shown? Is the logo shown? Where is it shown? If it's a video, then it will break it into frames and read each frame. And so, you've got now structured data against each creative, and then you have the data of how people responded to that. Who clicked, who bought which segment, and you can combine all of that and actually then get prescriptive.

Ashwin:

So, depending on what kind of campaign you want to run, what segment you want to target, you can actually advise, "Okay, use a dog in this or use a Latino woman or bring the brand in or use red color instead of purple or whatever."

Stephanie:

Wow, that's interesting. Are a lot of companies using that today where they're actually personalizing the image for the product based on who comes in using AI behind the scenes to come up with that in real time?

Ashwin:

So, this is an early stage platform. It doesn't change the image in real time, though that's also possible. And my AI head tells me that we should be doing that next. But it doesn't change the image right now, what it does is it prescribes. So, for the next campaign, when you want to create something, then you would enter into the system what you're trying to achieve and the system might advise you what to do. Or if you have a creative you can submit it to the system and it will give you a score of how successful it's likely to be.

Ashwin:

But even that is an early stage platform. This is one of our exciting newer products, and we have maybe three or four customers using it right now, but it's certainly something that we're betting on.

Stephanie:

Got it. So, when these customers come to you, one thing I think about is when you have a problem. Back in my old days at prior companies, the teams I worked with who were focused on machine learning always told you like, "Well, you can apply machine learning to a lot of things, you just have to know the problem and if it's worth solving with AI and machine learning." How would a company know if the problem that they're maybe encountering is something that could be tackled with AI? Or how do they start thinking about that, especially if they're a smaller company, maybe a B2C company right now, and they are feeling certain pinches in areas, but they're not really sure how to handle that? How do you tell someone to start thinking about this or how do you have a conversation with someone so they can get this on their radar?

Ashwin:

Sure, sure. No, great question. So, it has to go step by step. That's what we always tell them, and first, honestly, a data foundation needs to be in place before you should even be thinking and talking AI. In terms of technology, what data you're collecting, how your metadata is defined, what data sources you're using, what are the connections between all of those, and are you able to establish a single source of truth. You can't put the cart before the horse. You need to make sure you're collecting the right data and it's reliable data.

Ashwin:

Then the other, I would say, even more important piece than that is organization culture. So, technology is all available, and getting your people aligned to data and technology to drive their actions and decisions is very good. If you're not able to achieve that, then all else will fail. So, we tell people that even before you think about advanced analytics or you think about AI, first get your teams into the culture of making decisions through data. We've all made decisions through gut, and gut is nothing but some kind of big data swirling in our heads. How do we move from there to letting data take us 80% of the way, and then still the top 20% can come through our gut? Because there are things we know that we may not have put that data into that system. We may not have been able to capture everything which is in our heads.

Ashwin:

So, we need to first get that culture in place, otherwise the entire analytics and the agenda won't [inaudible 00:18:12]. Once we have that in place then we can start driving different types of analytics programs and business outcome led programs for higher sales, higher profits for customer. Getting better customer experience, and it's not necessary that every problem, as you said, needs AI. Depending on the size of the company, the complexity of the problem, sometimes you might just be able to use a prepackaged solution. And there are prepackaged solutions out there, which maybe can solve your problem instead of developing something custom.

Ashwin:

But yes, if your problem is complex, your data size is large, then yes, you can have substantial rewards by deploying an AI solution, which we've seen with many of our [inaudible] customers.

Stephanie:

Cool. Yeah, great answer. So, when it comes to the companies that are coming to you, there has to be a core theme that many companies are struggling with, where you keep hearing the same recurring problems or the same thing that they want help with. What is that theme or problem if you could kind of group it together, and what did it look like after they implemented some of your analytics and AI got assistance from you guys? Kind of like a case study if you have one.

Ashwin:

Sure, sure. So, yeah, it depends on the company and what stage of the data and analytics maturity they're at, and what their business objectives are. So, sometimes we're asked to help with foundational data issues of assessing data quality of living data infrastructure. We sometimes work with our customers to create access to data and to create across sources, and just provide them with reports they can consume to run their business.

Ashwin:

So, in these cases we might start with a discussion of their business, and what data and metrics they need to make decisions and on what frequency. Sometimes we might get asked to choose or implement a specific data technology. And then for customers who achieve data maturity around data and metrics, then we get asked to drive business outcomes, which in the Ecommerce world it could be conversion rate optimization, it could be upsell, cross-sell, customer churn reduction, personalization.

Ashwin:

Essentially for many clients, we work with them through this life cycle, and this typically takes years. We first build their data foundation, we provide them with key metrics and intelligence to run the business, and then start driving sophisticated analytics programs, and then start leveraging AI in a more sophisticated way. So, it's really a journey, and it keeps evolving. So, it's not something that you come in, you do and you finish.

Stephanie:

Mm-hmm (affirmative), makes sense. So, what are some of the metrics that you provide them. You said you provide metrics around the business. Is there a core set of metrics that you think are really important for every company to look at or how do you think about that?

Ashwin:

Sure. So, again, it depends on the way they view the business and their needs, and typically, this will start with a conversation between us and them of how they run their business, what are key metrics they want to look at? Maybe we might have a point of view what metrics they should look at. But on the tactical side, we might help people optimize metrics or measure metrics like basic things like nuclear revenue, margin, campaign incrementality, lift. So, lift is the extent to which a campaign drove sales over and above the regular run rate of the business.

Ashwin:

These high-level metrics could be broken down to... Within these metrics you might have some metrics like average order value, units per transaction and others like that. Conversion rate typically tends to be a metric of focus, and then these could be compared to past periods, could be segmented by channel, by device, by geo, by transaction

Stephanie:

When it comes to the metrics, have they ever led a company the wrong way where you saw someone look at a certain metric or data point and they were making decisions off that where it was actually giving them bad information? Or you had to advise them like, "You guys shouldn't be looking at this because this isn't helpful. Maybe you should be looking at this instead."

Ashwin:

No, absolutely. So, that happens all the time, and honestly, data if it's garbage in, it's garbage out. It's actually a great question because so often we've seen companies and very large sophisticated companies where different business units, geographies and departments have built their own data systems and their own infrastructure. And then in that process they've gone about defining their own data and their own way. They define a certain metric. Every metric needs to be defined what that metric essentially means, how it's calculated.

Ashwin:

And then if you have different geos, different views defining metrics in different ways and then when you put it all together and you're trying to look at it, it makes no sense. So, we've often seen that happen. It's very important for companies to really have a very clear data foundation and a data strategy, and to have a metadata layer, right? Define the data beforehand. And often sometimes we have to come in and just do that. Sometimes we'll end up just doing their house cleaning with our customers.

Stephanie:

So, if you were to start an Ecommerce company today, would you tell them getting the data aspect right from the start is a priority? Should they make sure they have their data dictionary, and they're talking about how they're actually putting their metrics and collecting the right data? How should someone think about this if they're brand new, and set themselves up for success?

Ashwin:

Absolutely. Absolutely spot on. So, what we call it is a data strategy. So, they need to have a clear data strategy in place as in what data they need to collect, how they're going to define that data, what technology they'll use to collect that data, and what business outcomes they'll drive from that data. How they'll use that data to drive certain business outcomes. And of course, that will evolve because business is dynamic, the business changes, the market changes, and what you track, how you think about things, it has already changed a lot in last few, and it will continue to change further.

Ashwin:

But it's very important to have a data strategy, and it's important to keep reviewing it and enhancing it as you go.

Stephanie:

Are there any data points that you recommend people to collect that maybe they're not already, because I'm sure a lot of platforms that especially newer brands are on probably collect some level of data, but I don't know if it's the right kind of data or what they really need to help them with that longer term data strategy. Are there any key data points where you're like, "Make sure you get this, this and this from the start to really be able to help build towards the future"?

Ashwin:

I mean, it's all these ones that I've mentioned like conversion rate. Obviously, traffic and obviously conversion rate. Different points of failure where drop-off has taken place. Campaign effectiveness, campaign effectiveness by segment. All of these definitely would recommend that people collect. One thing we've discovered is even in today's day and age, one of the biggest failure points which we've talked about for a long time in Ecommerce, but it still holds true even today, is just the checkout process. So, just the customer is willing to give the brand his or her money, but somewhere something doesn't work, something doesn't render, some option doesn't come up and there's drop-off.

Ashwin:

So, definitely collect data around the entire journey and where the drop-off and all of that happens if it does. We found that it's remarkable that even today that seems to be an area of [inaudible 00:27:17].

Stephanie:

Gotcha. So, with all this data that you get access to when you're helping them build their data strategies and all that kind of stuff, is there any surprises that you've seen when going through some of the customers data and helping them organize it and build systems around it. Anything that you saw that you weren't expecting?

Ashwin:

Yeah, so actually we covered a couple of those challenges that we've seen, but the two main sort of surprises that we've seen are the two that we just covered. One is, just like we said, the checkout process. The page takes too long to load or it doesn't render on a particular device or particular browser. And then just the entire confusion around the data asset that the company has and how it's being measured, the metadata, and also there are opportunities for data sharing with partners and with vendors. These are really under leveraged, and if it's done in a thoughtful way it can yield real dividends.

Ashwin:

So, to give you an example, we have this major CPG customer, and we were helping them with their Ecommerce business and with their Ecommerce analytics. And then they said, "For our Ecommerce business we actually have a different supply chain because we have to compete with the needs of Ecommerce customers, which is very different. We need to have quicker deliver times and whatnot." So, they asked us to help them with their supply chain analytics. So, we started doing that, and then we realized these guys were buying their raw material product from farms, from various farms. And the farms actually have a wealth of data that can be combined by our customer across various farms to give them back valuable inputs to improve their efficiency, and also to improve product quality.

Ashwin:

Perhaps there wasn't enough advantage being taken of this opportunity, so I think there are opportunities that businesses just don't realize that they're sitting on, which they're able to leverage.

Stephanie:

Yeah, that's a really good example. We had a similar example when talking to Grubhub where they would share their data back with the restaurants to help them improve. Like hey, this person.... You'd get maybe a bad review whenever someone orders the nachos versus... Or they order at 5:00 PM, like what kind of chef do you have at 5:00 PM versus 9:00 PM when you get better reviews. Again, it's a really interesting point about how companies can partner with each other to share data to help each other.

Stephanie:

Do you think there's any hesitancy around that, because I could also see companies viewing even the farmer as maybe a potential competitor? If they were, I guess, worried about that, or worried about sharing data that could somehow come back and bite them later. Have you seen that hesitancy because I do see this as the way of the future, but I just don't know if I've seen enough people doing it yet?

Ashwin:

Sure. No, you're right. You're absolutely right, and that hesitancy is there, and it's fair concern that there could be competitive issues. So, for example, so many brands sell direct and sell to marketplaces. What information does the marketplace share with the brand, and what information does the brand share with the marketplace? There is a symbiotic benefit because when the brand has its own property that provides a certain richness of information about the product. And while they may still be doing a larger share of their revenue in the marketplace. But these kinds of concerns are there, competitive concerns are there.

Ashwin:

Then there are also concerns about data privacy because data privacy is a big issue and it can be done ensuring compliance, but one has to be careful of how one shares the data. What data is shared? Is it masked? Is it personally identifiable or not? And then the other issue is what we spoke about earlier is that they may be defining data in different ways. So, different entities that are defining their data in different ways, again, if it's shared, it may not lead to the right analysis because it may actually provide different perspective than what it's meant to provide if it's defined in different ways with [inaudible 00:34:10].

Stephanie:

That makes sense. Is there any way that you think it would be best to set up a data sharing program that would also make sure that the company doesn't lose focus? Because like you said, it could be a pretty big process to make sure that you're putting the right data points in there, masking it, actually giving your supplier or whoever it might be insights. Then I could also see that turning into 50% of your day job. So, how do you advise a company to think about that if they are thinking about sharing data with a partner so that they also don't lose focus on their own product?

Ashwin:

Sure, sure. So, and some retailers are doing it today already. Amazon does it, Amazon has Amazon Marketing Services where it shares a fair amount of data with its brand partners. It has certain definitions and certain ways in which it makes it available, which is pretty standard. So, then it's up to the branch to take advantage of it and use it in the way that it makes sense for them. And then they might have the other marketplaces that may be sharing this data in a different way.

Ashwin:

So, that's where we really come in is that we know how the different formats work and the different definitions work, and we bring it together in, let's say a dashboard that makes sense for a brand to consume and process different sources.

Stephanie:

Yeah, that makes sense. So, we keep talking about data definitions and how companies, oftentimes different teams will have different definitions for the data. I have personally experienced this in some of my old roles. And oftentimes, it's because maybe a team is very entrepreneurial where they're trying to start their own project and they're trying to create their own dashboards, and you just all of a sudden have funny different organizations using a different metric for, like you said, the conversions. Have you seen any best practices for large companies to be able to create a global spot for people to go and look into that dictionary to find what this data metric, if it already exists, what it means? Have you ever seen anything like that, that actually works well?

Ashwin:

Yeah, I think it's great question, and honestly there's no real silver bullet. Different companies are using different approaches and strategies, and the entire data and analytics journey is really evolving across companies. Different companies have different organization structures to [inaudible 00:36:45]. One thing that works, which has worked for some companies is having a chief data officer. Somebody who's really part of the CEO's office and who's empowered to drive that agenda throughout the entire business.

Ashwin:

But for certain other types of companies it doesn't work because they're so fairly diversified, they have different business units that have different needs, and they want that dynamism. So, in those cases there is a compromise where every business then goes ahead and sets up its own system and approach and uses that. So, then you typically have, on the one hand you have, let's say the core operation systems like your accounting and things, which work as a single source of truth. And then every business uses what we would call then multiple versions of the truth, which sit on top of a single source of truth and then they create their own logic and versions on top.

Ashwin:

So, we've seen both approaches, and both have their pros and cons. I don't think there's a definite answer.

Stephanie:

So, when it comes to having some versions of the truth in dashboards, I always get hesitant about dashboards because people can interpret them however they want. One person might be like, "Things look great." And the other one might be like... They might expand the time horizon and be like, "Things look horrible." It just depends on who's looking at it and what they want to see or what they think they see. So, how do you... You said that you are providing data a lot of times for these brands to make decisions, business decisions off of the data. How do you, or if you do this at all, guide them on maybe like, "Here's how you should think about this decision"? Or how do you make sure that dashboards are being read correctly?

Stephanie:

And this is not just for your company, but I'm thinking a lot of companies have dashboards that could potentially be advising people the wrong way. Well, not even advising. Providing data and people are reading it the wrong way.

Ashwin:

Sure, sure. No, absolutely. So, there, again, there's one very important is the people aspect and training aspect is very important. How to use that information, what it means, what it doesn't mean. As you said, you can look at something and interpret it in five different ways, and one person can say it's great and one person can say it's terrible. So, that training is very important, and along with that what we do is that we will set a baseline for expected performance for most key metrics. And then we have certain tools where we can actually append insights into those dashboards.

Ashwin:

So, we have this platform called Discovery, where along with dashboards, the system actually generates contextual insights. So, along with a number, it will explain what that number means, and why that number has moved from one point in time to another. So, then that helps people contextualize that information, and as they see that... And they can actually double click on that, so this allows people to interact with that information as well in a natural way. You can actually chat and receive information back on chat, or you can ask a question and the system will... A basic question, it doesn't do very, very deep questions, but basic or an analytical question and the system will understand your question and the calculation can come back and answer. So, things like this-

Stephanie:

That sounds helpful.

Ashwin:

Exactly, and then just on a very basic level, as we work with the business and we understand what they consider as good, not good, average, certain metrics, we can do things like color coding, highlighting into dashboards. Basic things like that can also help to just contextualize.

Stephanie:

Very cool. So, a couple times we've mentioned needing to train employees to have that data mindset and to actually know how to think about data and organize it. Is there any training tools that you recommend or courses or things that you've seen companies have success with by having employees go through them?

Ashwin:

Yeah, courses there are lots, and there are enough courses and there are lots of great trainers out there. But what is very important is you need to have a couple of internal evangelists within the company. There's this new term actually in the industry actually, which has become very popular, citizen data scientists. You have data scientists, which is like the kind of people they have. Technically people who can go deep in the data and who can drive the statistics modeling and all that. But citizen data scientists are essentially the translators. They're the guys who sit in between the executives who are making the decisions and the data scientists at our end.

Ashwin:

In some cases, the citizen data scientist may even sit in our organization, but mostly they sit in the client's organization. These people play a very important role of driving that awareness and culture within the company. It's highly recommended that every company either converts some of their existing resources into that or otherwise they hire some people [inaudible 00:42:20].

Stephanie:

I like that chief data scientists, and I have heard that quite a bit. I think it'd be interesting to have a course depending on if you're in Ecommerce, it'd be nice if there was a certain path that employees could go down to then be well versed and know how to operate within their industry. Because it does seem like there's just so many courses, I don't even know where to begin sometimes with them. And oftentimes you don't know what you need to learn either. Seems like there needs to start being some tracks that you can go down.

Ashwin:

That's true. That's true, and because of AI technology and because of all this transformation, there are lots of new opportunities also, new roles that people can take up. And I do believe that going forward we should all plan to spend some percent of our time learning.

Stephanie:

Yeah, so when it comes to skills, do you see people headed in a direction where everyone's becoming a polymath where they're a jack of all trades with many things, or do you see people really focusing in on a specific skill like, "I am an expert in AI for retail, that's my lane that I swim in"? How do you see the future shaping up for skills?

Ashwin:

Sure. So, I think that there is always an increasing need of course right now for specialists. But there will also always be a need for good generalists because you need specialists who can be deep in a certain function or technology, especially disciplines like AI, but at the same time we need generalists who can make sense of all these different pieces and put them together. So, I think that both career tracks... Therefore, you should just be clear which one of the two you want to be. Trying to be both then you're setting yourself up for failure.

Stephanie:

So, for everyone listening you're good either way. Whatever one you are, you just have to choose. So, to zoom out a little bit into the general Ecommerce industry, what trends or patterns are you most excited about for digital commerce?

Ashwin:

So, well, now we are in the midst of a human crisis, right? So, a humanitarian crisis with the COVID pandemic, and of course, we are all very mindful of the human tragedy, the hardship, the economic hardship it's put on people all over the world. It is exciting that this crisis has presented to really accelerate digital transformation and the use of digital channels. So, we have seen companies that have had digital transformation plans that have been one year, two years, three years long. And then, now they're talking, "Okay, we're going to accelerate and do this in two weeks, in three weeks." And it's actually becoming possible.

Ashwin:

So, what was thought to be impossible is actually becoming possible. We're seeing that if people really want to get these things done, they can. So, that adoption is exciting. It has potential to be... Digital has a potential to be much more personalized, more predictive than brick and mortar commerce. So, it offers a better experience for the customer, and it is good in other ways. It is good for social good as well because you can argue that it will reduce to some extent the impact of climate change. Less traffic, less congestion, less travel. And people get more family time for exercise or hobbies or what have you. So, digital commerce brings with it a lot of benefits as well, which I'm quite excited about.

Stephanie:

Yeah. Yeah, completely agree. It definitely seems like a lot of things have set up very quickly, and it's interesting watching the companies, there's a couple that I've been following, who just aren't moving to Ecommerce. How do you view companies like that who are taking a strong stance not to go online?

Ashwin:

It's interesting. While I do think that the industry at large is moving towards Ecommerce, and not just digital commerce, but digital everything, right? Digital entertainment, digital customer experience or digital communication. Most brands will need to do that to be successful. But sometimes there is always a market for those few contra players, right? Because there may be some consumers who may just want... Not want that new approach and new technology and who make the stand. They might have a spice boutique customer base who works with them. It won't last forever, but maybe it might help them for maybe the next seven, eight years, I don't know.

Stephanie:

Okay, so when it comes to everything that's been happening with the pandemic, how do you lead in times of change at your company or personally?

Ashwin:

So, a leader that has inspired me from his book was Satya Nadella at Microsoft. In his book, one quote that really stood out for me was he wrote that the C in CEO stands for culture. And he also talked about the importance of empathy in leadership. And so, I have taken it upon myself to foster the organization culture that we want to have. The culture that ties us together, and that is really helping us in these times. That culture that we fostered, which is bringing us all together.

Ashwin:

Along with that empathy, understanding of the challenges people are going through. It's not just being work from home, but anxiety about the disease, anxiety about the economic future, and along with that regular communication, transparency in communications. These are some of my key priorities, which are driving some of my actions in this crisis.

Stephanie:

That's great. Are there any challenges that you face when it comes to working remotely?

Ashwin:

So, it's actually been quite a surprise that when the pandemic hit and when we have to transition to work from home across all our different geographies, and 1,200 people moving to work from home, and I'm really surprised at how effective it's been. The work that we do is iterative, it requires collaboration and things like that, and it's working fine. And it seems like thankfully this happened at a time where all these technologies had evolved like Microsoft Teams and Zoom and others where it's still become very much possible. So, now I wonder why we used to be in offices all the time-

Stephanie:

Mm-hmm (affirmative

Ashwin:

Exactly. And so, it's not just us. It's the whole industry just thinking these things. We still need offices for bonding for having certain hard conversations, for inducting new employees, for fostering our organization culture, but we don't need them all the time. We can have 60, 70, 80% work from home. I don't know what the right balance is, we'll discover. But more than-

Stephanie:

Are you changing that at your company? When you can go back, are you only having a certain portion of your employees go back? Or how are you thinking about that?

Ashwin:

So, we've not taken a clear decision yet, but it will be definitely at least 50% work from home, maybe more. Could be 60, 70%. And we'll just have to experiment and find the right answer. We also want to see how things change when the pandemic isn't there and then how that changes people's orientation. But at least 50% work from home, and maybe much more is very much doable. And it will give hopefully people a good balance of engagement in office, and at the same time better quality of life because of [inaudible] and things like that.

Stephanie:

Yeah. Yeah, completely agree.

Ashwin:

But in terms of the pandemic, while work is not suffering, but the bigger issue is the emotional challenge. As I said earlier, people are not meeting their colleagues, not meeting their friends, so they have anxiety. Here we've tried to do a lot of things. We've tried to engage people through various activities like talent [inaudible] or talent contests and things like that. Yeah, so I'm amazed at the kind of talent we have in the company. People are singing and drawing and cooking.

Ashwin:

We've had different types of training. I rolled out a new skill learning challenge, where I challenged every employee to learn a new skill to enhance their career over the next 60 days. I said that I'll-

Stephanie:

How are you tracking that?

Ashwin:

So, it's not mandated. It's just a challenge, which is free for everyone to sign up for or not. But at the end of 60 days, if you have done it, you can report, and there'll be a prize for person or people who have enhanced their career prospects the most, and prizes for leaders who have helped their team members enhance their career prospects. Just to set an example, I said I'll learn how to program and write code in Python.

Stephanie:

Oh, man.

Ashwin:

It's been fun. I'm doing it with my daughter and it's been fun. And we also are providing some resources for things like mental health counseling and things like that if people are feeling anxiety and depression.

Stephanie:

That's great. Really good examples of things that other companies could take and implement on their own too. Especially the talent thing, that's really fun.

Ashwin:

Yeah.

Stephanie:

All right, you probably get this question a lot, but I have to end the interview. So, I'm sure a lot of people have asked you this or want to know this. Do you think that AI will replace jobs or will it just augment jobs and maybe some will not be around anymore, but it will also create new opportunities? What's your take on that?

Ashwin:

Sure, that's a great question, and that's a question that so many books have been written on it, and there's so much discussion in the industry. I'll just give you my point of view, and there are some people who think quite differently as well. But AI, what AI does is AI doesn't really automate jobs, it automates tasks. When you think of a job, any person's job is made up of a bunch of different tasks. Typically, what we've seen is the AI systems will automate some of those tasks, so that person is not becoming redundant, but some of their tasks are freed up.

Ashwin:

And so, then that gives the opportunity to use that individual to then do other things. To drive more personalized experiences, to take the businesses to the next level and things like that. But then that requires that right orientation in that individual, and then requires training. The company to provide that training to those people, or for the people to also take interest and train themselves through resources available. So, like I said, I think that now everybody in this new environment will have to consistently be training and upgrading their skills.

Ashwin:

But do I think that AI is going to come and replace other jobs? No, I don't think so. I think it will free us up from certain tasks and will enable us to widen the scope of [inaudible 00:57:19].

Stephanie:

Well, that is a good positive way to end the interview. Before we move into the lightning round, are you ready Ashwin?

Stephanie:

So, the lightning round is where I ask a question, and you have one minute or less to answer. And we will start with some easier ones. Once you can travel again, what's up next in your travel destinations?

Ashwin:

Oh, wow. Okay, well, I'd love to go to the Maldives.

Stephanie:

Great.

Ashwin:

Yeah, I'd like to go and do some scuba diving.

Stephanie:

Sounds amazing. What's up next on your Netflix or Hulu or wherever you watch TV shows? What are you watching?

Ashwin:

So, I'm currently watching Money Heist on Netflix. I don't know if you've watched Money Heist-

Stephanie:

I haven't.

Ashwin:

... know Money Heist on Netflix.

Stephanie:

No.

Ashwin:

That Spanish adapted English show, pretty cool. And I also like the historical genre, so I'm watching some shows like Last Kingdom and Vikings.

Stephanie:

Mm-hmm (affirmative), sounds good. I'll have to check those out. What's up next on your reading list, other than Python 101 manuals?

Ashwin:

So, that is taking up some of my reading time right now, and I'm trying to be disciplined about not wasting time consuming just unlimited amounts of coronavirus news and doing more productive things. So, right now I'm reading The Alliance by Reid Hoffman, and I'm also reading Why Should Anyone Be Led by You? Robert Goffee.

Stephanie:

Oh, I will have to check out that second one, I've heard of the first one. All right, the last harder question, what one thing will have the biggest impact on Ecommerce in the next year?

Ashwin:

Well, what's already had the biggest impact is the COVID crisis, but in the next one to two to three years, I think it's going to be AI.

Stephanie:

Well, that's a perfect way to sum up the interview. Ashwin, thank you so much for coming on the show. It's been a blast, and we'd love to talk again soon.

Ashwin:

Thank you so much Stephanie, it's been a pleasure. I look forward to talk to you soon.

 

Jul 16, 2020
How Kellogg's is Leveraging Emerging Technologies and Strategic Partnerships to Build a Scalable B2B2C Platform
57:02

You may only know Kellogg’s as the company that makes your favorite cereal. But there is so much more to the company than just delicious treats. Robert Birse is the Head of Global B2B Ecommerce at Kellogg’s, and he has been leading the charge to position Kellogg’s as one of the leaders in creating scalable B2B Ecommerce strategies. On this episode of Up Next in Commerce, Robert explains all the ways that Kellogg’s is upending traditional Ecommerce strategies in order to help customers find greater success. Using technology like A.I. and machine learning, and by developing a platform that all of their customers and partners can use, Kellogg’s has been pushing the ball forward on bringing small and large businesses into the world of Ecommerce and helping them get the most out of their Ecommerce strategies. 

3 Takeaways:

  • A brand like Kellogg’s has the power to up-end the typical Ecommerce strategy. Instead of asking how to get customers to buy more, they ask how they can help their customers sell more. In doing so, their customers and partners become more successful, and it’s a win-win for all parties
  • Change management is important because many of the small businesses Kellogg’s works with have to fundamentally change the way they think about doing business.hey have to rely much more on technology than ever before. But the appetite is there because A.I. and predictive analytics are proving to be critical tools in helping businesses determine what to stock and how to look at consumer behavior
  • B2B Ecommerce is still in its infancy, but there is an appetite for innovation across the board from brands to retailers to distributors. They’re eager to test, iterate and experiment with new technologies in order to create better one-to-one engagement at scale

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Stephanie:

Welcome to Up Next in Commerce. This is Stephanie Postles, your host from Mission.org. Today I'm very excited, we have Robert Birse on the show, the head of Global B2B & B2B2C E-commerce at Kellogg. Rob, how's it going?

Robert:

It's going great. Thank you very much, from captivity.

Stephanie:

Yes, yes. How is life in captivity?

Robert:

Well, I'm thinking about calling Amnesty International, see if they can get me out of here.

Stephanie:

Well, we were just talking about what life looks like right now, just us eating lots of Cheese-Its on our bed at home, calling into Zoom calls, or maybe that's just me. Maybe that's not you.

Robert:

No, I think that's a typical picture across the world right now.

Stephanie:

Yeah, which is okay. Temporarily, it's okay. So, I saw you have a very long history in E-commerce. I think I saw dating back to even early 2000s, right?

Robert:

I'm afraid it was in the '90s.

Stephanie:

Oh nice, okay perfect. Well, I would love to hear a bit about your background and what led you into E-commerce.

Robert:

Sure. Well, I was working for a catalog distributor, so not a distributor of catalog. We use the catalog as our medium to communicate with our customers who were predominantly engineers in factories across Europe. The business that I was responsible for at the time was a small specialist distributor, and we were struggling a little bit to find our position as E-commerce was starting to take more of a role in the consumer engagement or the customer engagement in our case. So we were on the tube and this was the late '90s, and we took a digital transformation, even though digital still wasn't really a bonafide strategy because it was only emerging. The first task we undertook was to create a digital asset library from all the bromides and things that we'd cumulated to support the catalog production.

Robert:

So we partnered with a startup in London, a bunch of basically college graduates who were trying to create the first digital content management system. And that was more than 20 years ago. So we did that and we started to work to create a digital presence online, starting with static content and then moving into transactional capabilities. It helped transform that little business into something that had a much greater future. So that was my first introduction to digital and then never looked back since to be honest.

Stephanie:

Oh, that's great. What kind of transformations has your career seen since the starting point in the '90s to now? And what does your role look like now at Kellogg?

Robert:

Yeah, I mean, I've used digital disruption and innovation in all the roles I've had since that position in the UK to varying degrees of impact. When I joined Allied, and I moved to Texas, we transformed that business collectively from a couple of hundred million to 600 million in a very short period of time. Just really ensuring that we unified the sales channels with the digital channel. In the early '90s, or early 2000s was very popular to Ring-fence E-com as a separate channel, and I felt that was wrong. So when we moved to the US I tried to ensure that the unification happens, so it was the best one to punch we could possibly give our customers, we're always on capability with the human interaction. I have used that principle throughout my career to build success.

Robert:

Ultimately all the way to Kelloggs where now, I'm using technology to create value for our customers, changing the paradigm that was always traditional in sales engagement of how do I get my customers to buy more? Now the principle behind our E-commerce strategy from a B2B perspective, is how do we enable our customers to sell more? And then we will be the recipients of the downstream benefit in due course, and that's a big change in the approach.

Stephanie:

So what did your first, maybe like 90 days look like? When you came to Kellogg's and you saw the lay of the land, what were some of the initial things that you were like, we have to do this, or have to shift this? What did you do?

Robert:

Well, the train was leaving the station when I joined Kellogg and I decided to embark on a pilot, a B2B pilot, in Brazil of all markets, one of the hardest B2B markets in the world. So it was an interesting challenge to ramp up very quickly. Now, thankfully that we're using Salesforce Commerce Cloud as the technology platform, which I was very familiar with. So that was okay, but getting familiar with our business model in Brazil, which was a direct store delivery model was a different beast for me. And then obviously with Portuguese language challenges, it was an interesting 90 days, but it was certainly a massive. You know the saying, jump in the deep end and [inaudible] and that's where I found myself.

Stephanie:

Thankfully you're still swimming today, which we all are glad about. So what does your day to day look like now? And how would I think about B2B when it comes to Kellogg's? Because from a consumer perspective, I don't really think about what goes on behind the scenes. I just go to my local whole foods. I find my cereals and my RXbars, and I don't think about how it gets there or how maybe it gets to a smaller Mom-and-pop stops. So how do I think about Kellogg's B2B experience and B2B2C experience?

Robert:

Well, I hope the consumer will start to see how B2B is impacting the shopper experience, not directly but indirectly. So as part of our mission, we're trying to use technology B2B platforms to create a conduit where we can influence, educate, and inform and enable our retail, especially our independent small retailers. Not a frequency store or space in particular, to be better store owners and to create a better in store experience. As well as use some of the modern engagement tactics, such as social media engagement to bring more food traffic to their store from within their community. Therefore, strengthen their business and providing a jumping off point for them to become more successful in the future.

Robert:

So the consumer should recognize that when they go to the store, the store has always got the product they're expecting to find in the store, and if that product is displayed in a fashion that's compelling and it's positioned next to other products, they well, that would be the perfect combination. Then B2B commerce, modern B2B commerce is starting to have an impact on the buying experience. So that's what goes on behind the scenes, and that's what our vision is built around.

Stephanie:

Yeah. That is something I never think about, is this product positioned next to another one to make a better, maybe make me buy more. How do you figure out what products should be next to each other? And how do you work with the store owners to ensure that they abide by those rules? To make sure that, maybe not rules, but it'll also help them sell more as well. So how do you work with the store owners to creating a partnership?

Robert:

Well, in the past, it was always through traditional sales engagement. The Lucas success has always been a principle behind how we've engaged our retailers in using planograms and driving compliance around these planograms and the science behind them has been well understood, and the discipline has been in place for a long time. However, the cost of serving and maintain that relationship at a cadence that we need to continue has become ever more challenging. So digital is helping to change that paradigm and allowing us to go back to the long tail and really start to help our smaller retailers to really become stronger and more effective in their day to day life. So we see things like AI driving the intelligence around product recommendations for a store type, for instance.

Robert:

So if you are an independent store owner and you are in a rural environment where you are a 1,000 square feet and two the cash registers, that we would like to be able to cluster you with other retailers just like you, do the analysis and determine what you must stock, what you could stock and what you shouldn't stock. And then ensure that we're talking to the owner operator on a cadence that would allow us to then do more of that and offer and recommend as consumers trends change. So we're always ahead of demand, not buying demand in the long tail.

Stephanie:

How do you stay ahead of demand? What kind of tools and technologies are you using to ensure that you're able to quickly react to consumer buying behaviors or inventory levels for the store owner? How do you stay ahead of those things?

Robert:

Well, you're giving me way too much credit to say that we're actually ahead of those things, we're aiming to be ahead of these things. So let's make sure that's completely clear and we're being transparent, there's a lot of work to do here. So what we see is the ability to take all that historic purchasing information, and then combine it with social listening to see what consumers are talking about, then plugging in triggers like weather and other influences on buying patterns and then continue to feed machine learning and AI logic to build a picture that is constantly dynamic and changing so that we can then say to the customer, the retailer, "Hey, this product is starting to decline its popularity so we're recommending you start to reduce the inventory you carry. And by the way, this product is gaining popularity and we're going to drive a marketing campaign in your market to promote it. So now it'll become a hot commodity, please accept this recommendation and capitalize on that demand and it will happen in the coming weeks." That's what we're aiming for.

Stephanie:

Do you see the partners being ready to accept that and wanting to stock the products that you're recommending? Are they trusting your guidance or has it been an uphill battle when it comes to those recommendations?

Robert:

Well, first of all, the primary segment we're focused on is that high frequency store, independent retailer, a C-store, a convenience store that kind of customer segment, and they've been incredibly underserved for many years now. So any insight that we've given them so far, and the questions we've asked them about would it just be of interest, they've all unanimously said, this is what we've been asking for years, please help me grow my business. So I think the appetite is definitely there.

Stephanie:

Yeah, that's amazing. How do you set up platforms and systems for these different businesses? Because I could see each one needing something a little bit different. So how do you scale that model to provide the data to each company in a different way, or each, like you said, store in a different way?

Robert:

Right. It has to be done without human intervention to start with, we cannot be responsible for building an army to support such endeavor. So at Kellogg we're really focused on a single global platform, one ecosystem of applications that will scale globally across markets and channels and the customer segments within these channels, with a lower cost of ownership as we scale it out. So that's the first guiding principle. The second end is, if a machine can do it, we probably shouldn't do it. So everything is going to be machine driven. And then by rewarding the owner operators to complete their profiles, that allows us to capture information like, is your store rural, suburban, or urban, gives us another great data point to then create more effective costuming.

Robert:

And then in these clusters, the analytics can be very powerful and the machine can then start to communicate through marketing automation on a cadence that we could never possibly imagine before, and then touch them with relevant content that is absolutely pertinent to their business. So I would make a recommendation to you and your store that you're missing these two products, you should this and if you do stock these, we predict that you will make X number of dollars incrementally every year thereafter. And that's very powerful for comparison.

Stephanie:

Yeah, no, that's great. Are there any pitfalls or learnings when going about this partnership model and helping the retail stores that you saw along the way that you would find maybe other companies or brands will need to do this, where you're like, "Hey, we ran into this problem along the way, or this was a big hiccup that other people could probably avoid if you listen to this podcast." Any advice around that?

Robert:

Well, I think it's going to be the same answer that everybody gives, and that's really focused on education, change management. You're asking people to change their habits. So in emerging markets like Brazil, for us high growth markets, there's a full service that the reps provide to date. And so the store owners are accustomed to doing a particular style of business with us, we're asking them to change that and be more responsive from a digital perspective. Now corporate, for all the bad and sadness that's come with corporate, it has been the catalyst for changing the perspective of many retailers to how they should interact with their brands. So that's been that the silver lining of corporate is it's elevated the position of why B2B could be a very important tool in their growth strategy going forward. And that's changed the perspective of consumers considerably.

Stephanie:

Yeah, that's a good silver lining. So I saw that you also created a mobile app to reach some of the smaller retail clients. Can you tell me a bit about what problem you were facing and why you thought mobile was the best way to solve that problem?

Robert:

Well, that's a really easy one is the business tool of choice for small business owners. The internet and the mobile device and companies like Kellogg's are now developing solutions, online solutions that years ago would have been financially out of reach. Now they have all these tools that they can run their business, and that's why mobile is so important to us.

Stephanie:

Got it. Do you ever feel like you're encumbered by trying to meet your partner obligations or that the experiences maybe can't be what you want them to be because of certain obligations you have with partners?

Robert:

No, I feel more enabled to be honest, because it's a difficult market. The times are always challenging. So anything that might add value to a relationship, I think it goes a long way to creating a winning business scenario. So don't feel there's any barriers, maybe some adoption challenges that those would have been there regardless. So I feel that there's such a large opportunity to use Ecommerce to change our engagement model, that there're enough partners that have put their hand up and will put their hand up to say, "Yeah, I would love to be part of that because I can see that could create competitive advantage for me and alone I can't do it but in partnership with you, I feel that you could guide us and help us aspire to our own digital endeavors going forward."

Stephanie:

Yeah, completely agree. How do these retail partners keep track of all their other brands? So I'm thinking, if Kellogg's has their website that you would log into and you would look at the recommendations and get your orders and your inventory and all that kind of stuff. How would a retailer keep track of everything else they have in their store too? Is there like a single source that they can rely on or how do they think about that?

Robert:

So that's a great question, and it's greatly misunderstood. There is no real lifespan for a single application to serve a single brand in a retail environment. Who in their right mind would manage 50 different applications from different brands? So for two different models, I foresee. So in a mature, disciplined distribution based market, such as North America where most of our distribution wholesale partners have a web presence to date with E-commerce capabilities, we will be looking to integrate into that, to improve the experience in that environment. So think about a store within a store concept, and that would be where I would see brands like Kellogg's and others prospering and allowing the retailer to buy across a broad selection of products available from the distributor, but also to technically punch out to reach my Kellogg experience, where they can see their performance plus with their peer group to get the recommendations that we're offering, being informed about trends and product demand and so forth.

Robert:

And then if they're inclined to confer upon a recommendation we've given them that product order will go back into the distributor environment to be processed in a normal fashion, thereby allowing them to continue to go about buying other products for the store. Now in markets where distribution isn't as well evolved from a digital perspective, then marketplaces become the answer to ensuring that a retailer can go to a marketplace designed for their customer segment, with brands that represent at least 40% of their shelf. So that there's enough for them to do in one execution to not create administration, but to reduce administration in the procurement of product.

Stephanie:

I got it, that makes sense. How do you think about working with different platforms? You just mentioned marketplaces and I saw when you go on Kellogg's website, you direct people to go on platforms like Amazon and then also CVS and Target. How do you balance working with bigger stores and retail partners, and then also platforms like Amazon within your Kellogg strategy for E-commerce?

Robert:

Well, there's a lot of room for improvement on both ends, so in the end you're referring to where the large platforms are in play, there's a ton of up side to improve content, to improved recommendations, to really get deeper integration, that we can take all that learning and insight and present it as a more refined offer list dynamic. Obviously the price part architecture element of ensuring that what we're presenting is something that's scalable and profitable for us, as well is a key factor in these relationships at both ends, of course. I would say that they're not mutually exclusive in the sense that, we can operate in two spectrums here. So in the large platform, but also taking that technology and applying it to enable the long tail to prosper.

Robert:

Monetizing the long tail is actually, a very worthy prize worth unlocking for every CPG company in the world. And I think that's where the glue on your food is to be honest, we do a great job in most cases with our Walmart's, and our Target's and our Amazon's. We don't do a tremendous job today with a smaller, high-frequency stores as an example.

Stephanie:

Yeah. That long tail does seem really important. How would you advise other CPG brands to engage with those? Like you said, the long tail?

Robert:

Do you know, I think partnerships are key. The synergistic product from more than one brand that you could curate into a collective offer, there is a lot of power in that. So strengthen in numbers has always been the case. So I think we could really team up better in the industry to make a more powerful proposition to our retailers, that creates greater value, greater economies of scale, and it's easier to adopt. And I think that's what's missing today because everybody is a little nervous about working together, trade secrets and what if the competition find out. But honestly in my entire career, I've always had a hard time just getting our innovation execution done, nevermind, stealing somebody else's in time. So in reality, it will never happen, but there's an insecurity, that's common to human nature, I guess.

Stephanie:

Yeah, I see the same thing in startup world where people don't want to share their ideas and you're like, "Trust me, I've got my own stuff to work on, I'm not trying to steal your idea and build a whole nother startup on top of the stuff that I'm working on. Don't worry."

Robert:

So true.

Stephanie:

Have you seen any successes when it comes to those partnerships that you would advise others to think about it this way, when it comes to letting people lower down their guards and allowing them to see this could have benefit for everyone, any successful case studies there?

Robert:

No, nothing is mature as a case study yet. We're still very much in the embryonic stage of developing this strategy. You can see it though in play from time to time when we do joint ventures with other brands targeting the consumer, to be honest. We did last year, we did a very exciting campaign with cheeses and house wine, that was the box wine company.

Stephanie:

Oh, tell me more about that?

Robert:

Well, this one is very interesting and very simple, it was a box wine. The box had to be extended to contain cheeses. Cheese and wine, as you know, is a perfect combination. I personally was just eager to get my hands on a box and, yeah, that morning it went live at nine o'clock and we sold everything in about 40 seconds, I believe. So none of us got any, so the power-

Stephanie:

You're still on the wait list.

Robert:

It's never coming back, I don't think.

Stephanie:

Oh, no.

Robert:

We have to recover from the demand. Yeah, cheeses doesn't need much help [inaudible] as I said, we can't make enough to meet consumer demand. That's a great example of when you can join forces and just make the proposition more compelling. So I see that playing out in the B2B space as well, as I said before, together we're stronger.

Stephanie:

Yeah. How do you think about what partnerships are advantageous to have? It seems like it'd be hard, and I could see a lot of brands maybe partnering randomly, and you're like, "Ah, that's not really even helpful to the consumer." So how would you think about striking up new partnerships in a way that's mutually beneficial to both brands and is good for a longer term strategy?

Robert:

Well, it depends what your ambition is, of course. So there'll be different solutions for different approaches. I mean, obviously, we wouldn't partner with a Benjamin Moore Paint brand, there's no correlation. So within the food industry taking snacks as an example, the beverage industry is the perfect partner, beer, wine, alcohol, Cheez-It and Pringles, it's a perfect combination. So the same as for cereal, milk and yogurt, it's a perfect combination. So there's definitely groupings of product where you can see which brands aspire to the same vision, it would be critically important as well. So just because the product has synergy doesn't mean that the strategy is there, you can't force a round peg into a square hole.

Robert:

So my first checkbox criteria would be, is the digital ambition the same? Do both companies, or do three or four companies aspire to own breakfast across all hospitality in the world? Well, if we do, then we've got a common objective. Now, how do we go about it together is the next step.

Stephanie:

That's great. It seems like the larger brands too, might have to give a little bit more, or provide a little bit more help to the smaller brands, if they're picking someone like ... If you were partnering with a smaller wine company or something, it seems like you might have to be ready to do maybe the 80% of the heavy lifting, because maybe they don't have the resources or the budget. Is that kind of how you're seeing things play out when you pick partners, that sometimes Kellogg's has to do the heavier lifting to create a partnership?

Robert:

Yeah. Even with partners with some of the bigger brands we're actually willing to do the heavy lifting. We made a decision with our leadership to own our destiny in this space. So it's from top to bottom, and I do see that small startups in an incubator fashion, we would be a great big brother to get products launched. And we have our own startup business within Kellogg's where we're giving grants to products like Leaf Jerky and so forth, which is a different plant-based product that challenges the status quo of what we felt like Jerky was in the past. So yeah, I could see that there could be a market verticals that we would go after, there might be health club awaited before we joined the Kohler, we were talking about RXbars and examples.

Robert:

So predominantly through health clubs and so forth, why not probiotic yogurts? Why not non-alcohol based beer? So why not the combination? All plays well to the health industry, so there might be some small companies in there that are pioneering excellent alternatives that we would be, I think, more than delighted to partner with them.

Stephanie:

Yeah. No, that's great. So Kellogg's is over, they've been around for over a 100 years, right? Since 1906, is that correct?

Robert:

Yeah, it's correct.

Stephanie:

Okay. Oh, good memory, Stephanie. So with a company that's been around for that long, how do you think about making sure that the company continues to innovate? Like you said, you have a startup within Kellogg's, what do you see within that startup? What kind of products do you see coming out of that? And would you advise a lot of other large companies to also put on their startup hat to compete with these B2C companies that are all popping up everywhere?

Robert:

Well, change has become the new norm. I mean, taking COVID aside, people want to taste new things, that is my impression, anyway. I think, there's an appetite for new and more challenging flavors and so forth. So in the food industry, I can see that the innovation around our product offers is actually critical for success. But the innovation doesn't stop there though, we have to be more innovative in how we present these products, how we ensure these products create value other than just in flavor, but in health and wellbeing as well. So Kellogg has always been a very health driven business right from its inception, that continues to be an underpinning philosophy of our company. I see a great deal of passion in our business and investment for innovation. It's not just digital, it's all down to food, not innovation kitchens and the chefs we have, they're inspired to really go find new products.

Robert:

We do a great job of creating an incubator within our business by constantly searching for ideas within our employee base around what we could do with Kellogg products. So I think you look inwards and outwards there's no stone not worth turning over to find out an idea about a new product.

Stephanie:

Yeah, that makes sense. When you mentioned marketing earlier, it seems like you would have to market to two different audiences. You have to market to your retail partners and then also to the consumers, how do you go about, maybe within your platform where you're selling to retailers, do you market differently than how you do to consumers? Or how do you think about that?

Robert:

Well, so now you bring up an interesting subject in the sense that direct to consumer, which could in sense be side by side be B2B, does provide you with an awesome channel to test the appeal of new product, and affordable cost if you engineered it appropriately so that you've got something you can stand up and tear it down quite quickly without major investment. So I don't know if you would really want to continually be knocking on the door of your retailers with new products without having some good market data behind it, to say that this will sell. And so testing that product in market that becomes a critical part of the evolution of the go to market strategy. So I see traffic consumer testing being interesting proposition for companies like Kellogg's going forward.

Stephanie:

Got it. So you test the product with a market first, and then you go to your partners and say, "Hey, a lot of people like this, you should also put this in your store?"

Robert:

Absolutely, because that's where we get the scale, and then we can then turn on all of our abilities to cross sale and use some of the capabilities we talked to earlier about in the B2B platform, ensuring that our retailers know how to create success with new product. There's another interesting aspect of that too, so if you'd go back to the conversation around the long tail of retail, these companies, these business owners don't have sophisticated inventory management tool. So one of the biggest challenges we're solving for is ensuring that new products, our products we've recommended for that retail when they're placed that they stay. Because we see a lot of occasions where a new product is being placed or our product from the portfolio that they should be adopting, has been taken.

Robert:

And then a week later has been sold and never replaced because somebody in the evening has just redistributed product on the shelf to complete the look and that position be lost. And so making sure that these products are reordered and reordered again, until they become habitual, their presence is habitual on the shelf is a massive opportunity so it's not about just new product and innovation, it's also about ensuring the stickiness of product they are placing on a shelf.

Stephanie:

What ways do you engage with your partners to make sure that they, like you say, keep reordering, have you seen any best practices to stay top of mind with these people even if they do excellent and lose a spot in the shelf. They're like, "Oh, hey, this product actually belongs there." How do you go about building those patterns?

Robert:

Well, there's also technology becoming available from scanning to just constant recognition. So there are solutions coming, they're not particularly affordable today for the segment we've been addressing, which is the high frequency stores segment. So the challenge has been resolved by manpower up until now, and of course, that's not very affordable. It's interesting when you go to markets like India, if you don't show up something else will steal your space.

Stephanie:

[inaudible 00:32:09].

Robert:

I know, so there's a whole bunch of, I must run ... Making sure that you hold onto the shelf space that you've worked so hard to attain. So we're looking at tools like, asking our retailers to take shelfies using the robot cameras and uploading-

Stephanie:

Shelfie? Tell me more about a shelfie.

Robert:

So a shelfie is just, the shelf equivalent of your selfie, in the sense that, we're to set challenges for our retailers and say, "Listen, take a shelf of your cereal display." And then we'll match that image to the planet ground that the AI has in its memory, and then give them a score, and that score will then be translated into points, Kellogg points that they can use for purchasing everything from a discount to cleaning services, say for instance, in the future. So one thing happens in this process, is we ask them to do a challenge, before the actually did their pictures there is a pretty good chance they're going to address any gaps on their shelf. So we see it being a little self serving and helping us get a better position in the store, but also then just educating the retail around best practice and reinforcing that practice. So the look of success is getting closer and closer in the package stores within their reach. So that's just one example, I guess.

Stephanie:

Yeah, no, that's awesome. That's a really fun example. Have you seen the rewards program that you have actually really incentivize these retailers to, like you said, take these shelfies and engage with your brand more?

Robert:

No, again, you gave far too much justice. I talk with authority, but we're still very much in the theory and the testing, the technology is still catching up, but we see rewards and we have a rewards engine built into our platform to date. We haven't really turned it on to its full force yet, but it will be a cornerstone of our strategy. We're looking at gamification rewards and recognition as being a key driver of behavior going forward, and creating the path to best practice. So it will be a constant in our engagement strategy, so at eight o'clock, nine o'clock at night, we'll be connecting with an owner operator of a store through WhatsApp or email or text to say, listen, we have a challenge for you, and this challenge is worth a 1,000 Kellogg points. If you go and take that shelfie or if you can tell us, answer this question about the new product you recently stocked, did it sell out, did customers come back and repurchase? Did you get any feedback in any shape or fashion about the flavor? What did they think, and reward them for that first party data insight.

Robert:

Now, all of a sudden you've got this incredible ability to harvest information that could be invaluable to your R and D teams. At the same time, you've got the opportunity to influence best practice and take the customer on a journey, the customer being the retail owner operator on a journey to become better at their craft, which is super exciting to us.

Stephanie:

No, that's really awesome. It seems like there'd be room to build a community among these store owners, to all do the challenges together and to talk about best practices. Have you all explored that?

Robert:

We're exploring it. We're definitely exploring it. So it came from, when we looked at one of our customer's segments being a K through 12 schools starting here in North America, there's a lot of schools that are rural. They're isolated, they don't have large school communities to support them, and there's so many challenges that they face from allergies and health and nutrition, taking food and making education subject matter. All of these things we're looking into to say, okay, so our community together would be again stronger. So connect schools that are similar together and then connect schools that are not similar and let them use our product as a teaching aid. So we aspire, this is long away from happening.

Robert:

So please don't take this as something that's been executed today, but we can see that sometime in the future, we'll create a syllabus around corn and our cornflakes and how it changes the flavor of patterns in Japan compared to Idaho, and then to schools when their kids are having their breakfast, they can share the differences in the sweetness and so forth because the [inaudible 00:36:46], the climate is different so that the plant takes on a different flavor. So that's a subject that you could turn into a syllabus and education and bring kids together. Yeah, it is a very exciting proposition for us and different from anything we've ever done before.

Stephanie:

Yeah, that's awesome. And I did not know that flavors around the world would be different. So you definitely taught me something brand new here.

Robert:

Yeah. We've done a few things at Kellogg's in the office in Chicago where they've taken five or six or seven different sources of cornflakes and put them all in independent bowls unmarked, and then tasted them and people were convinced that sugar had been applied and so forth. And it actually hadn't, it was just that the different produce, produce different flavors and it was quite an epiphany for many of the folks tasting them.

Stephanie:

Yeah, no, that's really interesting. So when it comes to your B2B platform, what are some of the best capabilities that you're using today that maybe you weren't using a year or two ago?

Robert:

Again, cornerstone of what I'm trying to do with the B2B platform is create efficiency, and so to create efficiency, the first thing I'm trying to tackle is preventing any waste of time as it pertains to identifying a product. So we are integrating scan into the mobile device, using the mobile device camera, quickly scan that barcode it will take you straight to the product in our platform. So no need to key in, no need to type in the barcode or any keywords that are associated, just quick scan within less than a second you're on the product detail page, and you got a path to purchase with one click. You've got a path to understand your performance versus your peer group with one click. And you've got a path to understand how to sell more by accessing the tools that give you the toolkits that will help you do that. So that's, that's one aspect.

Robert:

The second aspect is to create value around ensuring that big data is conferred into some form of exportable logic that says that, hey, you are not creating the optimal product assortment. Companies, businesses, stores, like you sell these products successfully, and you're missing revenue as a result of not taking them. So here's a recommendation for these products. Here's the stocking quantity that we believe you should take. And here's a revenue projection based on MSRP from the class that you belong to that. That to me is transformational in so many ways.

Stephanie:

So are you using AI behind the scenes to create a lot of these recommendations? And do you think a lot of brands are also doing this or is there a lot of room for them to adopt to this technology?

Robert:

Yeah. AI is the key to success. So we've talked about AI for several years now, and it has really not delivered what it says in the box as of yet, but I am a 100% confident we're getting closer and closer all the time. Anybody that's been getting with AI knows that a lot of teaching into the logic that supports the output, but we're definitely getting closer to being able to use it at scale. What I see in the next year to 24 months will be the ability to then turn on that dynamic, self-sustaining logic that continues to morph as it reads more data and continue to present very tailored recommendations to all of our retailers worldwide, simultaneously because the computing power, obviously, continues to scale at an exponential rate. So it doesn't do necessarily what it needs to do today, but the path is now clear, and I think it's just around the corner, to be honest.

Stephanie:

Yeah, no, I completely agree. Are you all training your own models for AI? Are you relying on a platform to help you with that? How would you recommend another brand or a larger or smaller brands to start adopting this technology or start experimenting with it?

Robert:

Well, there's a lot of data scientists that they're all better actor than I am for sure.

Stephanie:

Sure?

Robert:

Yeah, I'm absolutely positive. So we've been looking outward to smaller businesses, as well as some of our larger partners to use their experience. Because clearly they see the opportunity too, so I would continue to just make sure that you're using a blend of traditional partnerships and innovative new businesses that come up with some left-field idea about how to resolve one of the challenges. Constantly looking for new ideas from the marketplace, from the periphery where there's new startups starting and looking for an agent, they might have a great concept that we can use. I often equate it to something you might see in a Paris fashion show where coming in the the runway is a presentation that could be quite outrageous, but some form of it we'll get to the high street that will be very popular with the consumer. So a really wild idea can really translate and be boiled down to something that can be a game changer in reality. So never assume that it has to be something that's already in place, but to be open to suggestion and I try and work on a daily basis to be that way.

Stephanie:

Yeah. I think that's a really good lesson too, to look at tangental markets and industries that could also help influence not only new products, but also E-commerce strategies and just like keeping tabs on what other people are doing, especially startups who are moving quickly and experimenting quickly. How do you keep tabs on companies like that stay up to date with what other people are trying?

Robert:

Well in prior lives, working for brands that were less recognized, it was on me to continue to search and find, and encourage my team to continue to look for these innovations. Working for a brand like Kellogg's, there's a lot of people come calling. So I'm obviously in a fortunate position to be exposed to a lot of these ideas on a day by day basis from various entrepreneurs. I feel that Kellogg's could prosper from taking on the idea so that role has changed. So I'm very fortunate in that regard to be exposed to great ideas across the industry and not just from within the food and beverage industry as an example but from sending an upturn to, you name it aerospace, there's a lot of innovation going on.

Stephanie:

What is definition of success for E-commerce? What kind of metrics do you look at? What do you think is successful?

Robert:

Yes. Okay, so none of the traditional metrics are really going to be of any interest. So for me, the success has moved upstream. So when I think about what does success look like from a digital perspective in B2B, it's very much around ensuring that the retailer is selling more products more effectively and more efficiently, and putting more money in their pocket. So if I can look back and say that all the retailers that we supply our products are prospering as a result of our E-commerce engagement, because we're delivering not just the fundamentals of E-commerce, which is about auto management and everything else that comes with it. That's just table stakes, whatever else comes with it, where we create the value through AI recommendations, access to toolkits, marketing campaigns, guidance on how to create the perfect store. If that's translating into more dollars at the point of sale, then that's what success looks like to B2B commerce going forward, in my opinion.

Stephanie:

Yeah. It seems like that partnership and education is really important in B2B, have you guys seen success with doing that?

Robert:

Well, again, I wish I had something much more tangible to give you in terms of the successful metrics. This is still ground zero, we're still very much in day one of our B2B engagement. I think you will find that modern B2B is still in day one globally across both industries. So there's still a lot of learning, a lot of testing, a lot of refinement to do, but the appetite is there. When I talk to other brands, they feel the same way about how we can harness technology to create value. The retailers I've talked to they are hungry, and so is our distributor and wholesaler partners too, to participate in this new era of one-on-one engagement at a scale that's affordable and on a cadence that has never been achievable before. Just that combination of menu items is really driving the hunger to get to that point quicker.

Robert:

I wish I had to go quicker, we're definitely trying to get there quicker, but it just takes time to build. And so ask me again in six or 12 months, and I'll be in a far stronger position to give you a better answer.

Stephanie:

Oh, you've just invited yourself around two. So with things changing so quickly, are there any new or emerging digital channels that you all are focused on or trying out?

Robert:

Again, comes back to just watching and keeping an eye on how things are changing, an example would be, for instance, say WhatsApp for instance. So WhatsApp starts life as a messaging tool, becomes incredibly popular worldwide, supplanting email, phone, texting everything. Now WhatsApp is developing your online ordering capability that will potentially change the trajectory of B2B commerce. So we're watching it very, very carefully, but there's a caveat, there's so much low hanging fruit in just doing what we already know, we can do better in B2B commerce. The WhatsApp example would be a very shiny object while we still need to continue to look to shop opportunities, we need to temper our enthusiasm to be distracted, it can be a distraction. We know that there's enough revenue potential just executing our primary mission without chasing rabbits down holes.

Robert:

I don't want to be the anti-innovator, but there's got to be a balance. So I use three words to caution myself, stop, better and clever. Stop doing things that create no value. Identify what you do well, but do it better. And say Friday afternoon is for the clever things. So Friday afternoons are dedicated to it, but don't let it become all consuming and that's how I approach this.

Stephanie:

That's great. That's a really good lesson, Friday afternoons with a beer maybe then you're even more creative, right?

Robert:

Why not? Yeah, certainly, my wine consumption during COVID is gone up tremendously.

Stephanie:

I think everyone else. So are there any B2B commerce trends that you're excited about that are coming down over the next couple, well, maybe even in the next year?

Robert:

Well, I just think the fact that the chatter around B2B has climbed exponentially in the last three or four months, is exciting. I'm super excited about what machine learning can do for scale in just enabling us to do the value added services that we've aspire to do, but couldn't execute because of the cost. So these two elements that B2B is becoming a cornerstone of business strategy, and it's not seeming to be as a poor cousin of B2C, B2B can be sexy. We're taking all of the goodness from the user experience and applying it, but then with this logic, that's data driven it's hard to turn down when we recommend products to a particular owner operator that I've got a revenue projection associated with them, that's a hard proposition. Plus we're giving them an award for accepting the recommendation. If that recommendation comes and was close to our prediction, then I think conversion could be a 100% going forward.

Robert:

Now in digital, we usually have 2% conversion and an action was great, a 100% conversion, wow, that's perfect execution. What does that do to the industry? Truly transformational.

Stephanie:

Yeah, I completely agree. So when it comes to implementing technology and stuff, because I think, like you said, a lot of people and a lot of platforms are focusing on B2B now, it is a new player to look at where B2C was maybe the sexier area before. How would you advise other companies to think about onboarding new tech technologies and tools in a way that sets them up for longterm success?

Robert:

Well, first of all, think scrappy. You can't innovate with the mindset of perfection. Large companies, I think suffer more than small companies, of course, there's a procedure and there's an ROI calculation, and there's a certain set of expectations. Especially when you're dealing with technology that can't quite deliver on the initial promise, but you have a fairly competent perspective on it, we'll get there. So you have to be a little ashamed of what you take into market, because quite frankly, in my experience, you see the flaws, whereas the target audience does not. They see something different, something value added, they know it's a work in progress, and they can see it resolves a pain point. It removes all of the inadequacies of what you didn't do as a result of getting to market quicker and testing a reaction. So that would be my recommendation. Feel a little ashamed, to be a little ashamed about what you go to market with initially.

Stephanie:

So is there anything that we didn't cover that you want to cover before we move on to the lightning round?

Robert:

Oh, no, I didn't know there was going to be a lightning round.

Stephanie:

Yes. There's a lightening round.

Robert:

That's a little scary.

Stephanie:

Yeah, anything high level, E-commerce trends, the industry that you're like, "Man, I really wish Stephanie asked this question and she just didn't."

Robert:

No, I don't think so. I think we've covered off the fact that, I think the biggest thing that's missing in the industry is that more collaboration. I think collaboration is going to be a game changer in terms of driving success. So that's what I'm seeking to build through networking and working with other brands to try and find some common ground we can explore in. So if anybody is interested, please reach out to me and I'll be happy to partner.

Stephanie:

Yeah. I completely agree. That's great. All right. So the lightning round brought to you by Salesforce Commerce Cloud is where I ask a question and you have one minute or less to answer. Are you ready, Rob?

Robert:

No. Okay, I am.

Stephanie:

All right. You're ready. What's up next in your cereal bowl?

Robert:

Oh my God. No, Scott's, it should be porridge, but it isn't. I like porridge, I'm a diehard Frosties guy. I don't know, there's not a bad time in a day to consume Frosties, so that's what's always in my cereal bowl.

Stephanie:

I agree. It's a delicious choice. What's up next on your Netflix queue?

Robert:

Netflix, I just finished watching Altered Carbon and it was a book that I'd read, three books I'd read many, many years ago. And it was actually a really good rendition of the novel. So I thought it's Sci-fi is very forward looking, it's probably what you'd expect me to watch, but I thought I enjoyed that series.

Stephanie:

Yeah, that sounds great. What's up next on your podcast list or audible?

Robert:

Yeah, so podcast, during COVID, I mean, I listen to a lot of podcasts, especially at nighttime and I've started to rediscover Vinyl. So I've become a bit of a pseudo audio file or want to be, at least I fought the big stuff, but I'm working my way into. So I started to listen to Vinyl's audio file podcasts, which have been fantastically interesting, but suddenly they're talking about technology I can't afford or justify. My wife keeps a very close eye on me, so sorry-

Stephanie:

Oh, man, so rude of her.

Robert:

I know terrible, isn't? But logical, she saves me from myself.

Stephanie:

That's good. Yeah, that's really fun. Well, if you were to have a guest on a podcast of your own, so if you were to have The Robert's podcast and you want to bring on your first guest, who would you bring and why?

Robert:

Oh, that's easy. That's easy. I am a big soccer fan from the UK. And one of my idols is Alex Ferguson. I would love him to be my first case on a podcast. He has such great insight into leadership, management, the stories he has. He would be, there's an entire encyclopedia of subjects we could discuss, and he's an idol of mine.

Stephanie:

That'd be a fun one. I would listen to your podcast. All right. The last hard question. What one thing will have the biggest impact on E-commerce in the next year?

Robert:

One thing, I think, changing the culture within companies to really embrace innovation, not to necessarily wipe the investment and make a net positive operating gain in the short term but to be more risk orientated. I see a lot of challenges around investment strategies and payback periods and so forth, and it really does slow down our ability to go to market. So if we can get to a point where there's an acceptable investment tolerance, and that will obviously vary by company size and profitability, then I'd like to see more about an entrepreneurial approach to taking that startup fund internally, and going to market with it, improving success or a failure. In Kellogg's we've done a tremendous job recently of celebrating failures.

Robert:

We've even have an award, for the peace of the award for failure. So it's a transformation that's underway, but we still have to get more comfortable with capital investment that can be used to experiment rather than the business case that supports it longterm, which will come, that will come when we determine what the metrics are or what the levers that work that can be expanded upon and so forth. So that's what I'm looking for.

Stephanie:

I love it. You are a lightning round expert, so nice job. Well, it's been a blast having you on the show, where can people learn more about you and Kellogg's?

Robert:

Well, they can see my profile on LinkedIn, obviously, I'm not a big social media user today. So reach out to me through LinkedIn and I'll be happy to engage.

Stephanie:

Awesome. Thanks for coming on the show, Rob, it's been a blast and we will have to bring you back since we have an invitation now for round two, we'll have to bring you back in the future.

Robert:

That was a mistake, wasn't it?

Stephanie:

No mistake, we'll have even more fun then.

Robert:

I look forward to it. Thank you very much for having me on. It's a great pleasure.

Stephanie:

Thanks.

Jul 14, 2020
SEO, Reviews, and Partnerships: How To Make Your Product Searchable
50:18

You may not know exactly what Soft-Tex is, but chances are you’ve seen or even own a Soft-Tex product. That’s because Soft-Tex is a B2B2C company that provides products to retailers like Walmart, Amazon, Bed Bath & Beyond, Macy’s, and many more. The company specializes in sleep products, like pillows, mattress toppers, mattresses, mattress pads, or anything else you might need in your bedroom to help you get a good night’s sleep. But Soft-Tex doesn’t only ship to their retail partners. In recent years the company has upped its Ecommerce and drop-shipping capabilities in an effort to get even more in the lives of consumers. On this episode of Up Next in Commerce, Taylor Jones, the Vice President of Marketing for Soft-Tex explains how the company is creating a collaborative partnership with retailers while also exploring and consulting in the world of Ecommerce. He explains the ways in which Soft-Tex goes about ensuring successful product launches — including the exact number of reviews he thinks is the sweet spot — why SEO and product-usage videos are the ultimate keys to success, and the need for an Amazon strategy and what that looks like.  

3 Takeaways:

  • There is a delicate balance you have to strike when working with retail partners and also selling products D2C. You have to work collaboratively and across multiple channels to ensure that you have the products selling where you want them and not competing against themselves 
  • Amazon is a price-leader, and in order to get any market share, you need to have an Amazon strategy that allows you to live there, while also ensuring that other partners have exclusive access to other products
  • Product reviews and product-usage videos are absolutely essential to achieving a high conversion rate. Generating about 15 reviews and placing a usage video front and center are two strategies to implement to help grow conversions

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey everyone. And welcome back to your number one show on all things eCommerce, I'm your host, Stephanie Postles. And today we have Taylor Jones on the show, the VP of marketing and eCommerce at Soft-Tex International. Taylor. Welcome.

Taylor:

Hey Stephanie, thanks so much for having me.

Stephanie:

I'm excited to have you here. I'm feeling a little bit sleepy now, thinking about all the nice products you guys have, that are centered around sleep. I'd love for you to dive a bit into what is Soft-Tex International and how did you come to the company?

Taylor:

We'd love to hook you up first off.

Stephanie:

Yes, please.

Taylor:

So at Soft-Tex, we're really serious about sleep and home comfort products. I think for a long time, the company has been a leader in memory foam and cooling technologies and just everything to help you get a better night's sleep and live a comfortable and better life. I came to the company about three years ago. I have deep digital experience, worked for a company called Red Ventures here in Charlotte. Maybe you've heard of them. Then for another company in the call center space, Arise Virtual Solutions, and from some mutual connections found this role at Soft-Tex and started, really owning the eCommerce business for them. And it's blossomed into a larger marketing role, including e-commerce still.

Stephanie:

That's great. So how do I think about Soft-Tex? Because maybe a normal consumer, maybe hasn't heard of them. So how do I think about, how big the company is, who their partners are, how you guys sell? Tell me a bit about that.

Taylor:

Soft-Tex is really a B2B, to C company, and Soft-Tex is the entity that would be known to our retail partners. So think about Macy's, Bed Bath & Beyond, J.C. Penney, Walmart, Amazon, the whole gamut of retail, we supply with bedding, pillows, toppers, mattresses, mattress pads, protection, anything that is in the bedroom that you'd sleep on, it would probably make it.

Taylor:

We have a direct to consumer presence that we work with, bedpillows.com. We also have a robust, drop ship capability. So it's not just, we sell in bulk to a retailer. We do that absolutely, but we do, as a core capability, have drop ship to over 50 partners.

Stephanie:

Wow. So it seems like there's an interesting mix where, you're trying to market for yourself, you're doing direct to consumer, you have your retail partners. How do you think about managing these relationships and also not cannibalizing yourself at the same time?

Taylor:

Right. So I would say, our partnership with bedpillows.com, is emerging. It's a delicate balance for folks in our position, because we supply, our retail partners, we absolutely don't want to compete with them. Ultimately those relationships are very important to us and we build custom products. It's a very collaborative process with our brick and mortar retail partners and the branding that that goes into all of our different channels. Soft-Tex we have about five or six national or licensed brands that we supply product under or, or we'll develop product under a private label, to mitigate some of the brand conflicts or sales channel conflicts that may arise with selling our products.

Stephanie:

Very cool. And are you helping your partners when it comes to digitally marketing, the mattresses, pillows, are you helping improve their eCommerce strategy? Because I could see you having a lot of insights into different brands and their strategies and what they're doing to maybe share that knowledge and help each other out.

Taylor:

Absolutely. So the role we play on with the eCommerce team is a consultative role in that aspect, in that, we're able to see over the wall, we supply our products to the 50 different partners that I mentioned. So we can see some really interesting things that, maybe somebody over here is doing, in merchandising, assortment, with features, attributes, something cool on the product description page. And we can make that suggestion to someone else who maybe has not done that yet.

Stephanie:

That's great. So what are some learnings or key things that you see happening on these eCommerce sites where your like, here's some good best practices that anyone could implement or I see this working really well right now, or maybe it wasn't working six months ago. What lessons are you seeing through all these brands that you work with?

Taylor:

I think the concept of reviews syndication and review seeding is very important. Obviously, authenticity is critical and you don't want to see fake reviews, but when you have a new product, accelerating the process through which consumers can experience the product and write a review and leave a review, such that it exists is social proof, for other customers who see that product, is so important to getting a product off on the good foot. We've seen, in the home comfort space, 10 to 15 reviews, seems to be a sweet spot for a new product introduction to really help accelerate its growth.

Stephanie:

Completely agree on there. How do you encourage reviews?

Taylor:

There are review seeding partners out there, those companies that you can do seeding programs with, Bazaarvoice is a big one in our space. They have a really interesting service where you can collect reviews if you have a direct to consumer presence and syndicate those reviews. And they also have a network of folks that exists to, you can nominate your products and folks order it to sample your product. And those reviews can get syndicated out to retailers that, on the flip side are members of the Bazaarvoice syndication network. So we've seen retailers who participate in that, really scale up quickly on our products.

Stephanie:

Very cool. So they're not really having to do as much of the heavy lifting because essentially a consumer would review a product and that review can be used multiple times. Is that how to think about it?

Taylor:

Through a seeded review, say we did 10 reviews, those same 10 reviews would appear on Macy's, on J.C. Penney, on Kohl's, all at the same time, versus, if someone visited Macy's and bought the product and reviewed it, obviously that review would be owned by Macy's, and it will show there. So, as much as we can do to help reviews go as many places as possible, that's been very helpful.

Stephanie:

That makes sense. So when it comes to, I'm thinking about mattresses and buying mattresses, for a while, everyone wanted to lay on them and sit on them and see how they feel. And now with the market evolving, especially with the pandemic and everyone being a little bit more comfortable with ordering online, what shifts have you seen? Do you see consumer expectations increasing, consumer demands increasing on the sellers? What are you seeing happening behind the scenes right now?

Taylor:

For our products, from basic bedding, so everything non-mattress and the mattress, it's been through the roof. I think, folks want a fresh and clean sleeping environment, especially cleanliness is top of mind. With COVID in fact, Soft-Tex, my company announced a deeper partnership with Thomson Research Associates. They make an anti-microbial technology called Ultra-Fresh, the market is hot right now for all bedding products. And I think, from the customer experience point that you're hitting at, do you need to touch and feel the product in order to feel confident in purchasing it? Certainly bedding is a very tactile and personal experience and the same pillow or mattress that's great for me may not, may not work for you. Right.

Taylor:

I think we've seen folks through warranties and trial periods that the industry has, particularly on the mattresses, pretty much a hundred nights sleep trial guarantee, in some form or the other is a standard now. But from a pillow or top or other product standpoint, maybe there's not that trial period, but being as descriptive as possible, the images, the copy, using enhanced content and the importance of video is so important. Batched attributes, iconography, to really recreate that story and experience, doing everything you can without the consumer touching the product, and that way, I joke with folks at my company that I have the hardest job, right. I have to convince people to buy something that's highly personal and tactile, that they have never touched prior to receiving it.

Stephanie:

That's pretty tough. What best practices have you seen around creating videos? Because that's something that a lot of companies are leaning into right now, but especially for, a mattress or something, what are you seeing work when it comes to videos for the products?

Taylor:

I think the concept of video can take a number of forms. YouTube is the second largest search engine. So, you can do a ton of explainer videos or keyword optimized videos, to try and drum up search traffic to your products. But you can also leverage video, in particular the 30-second to a minute product video, to help drive conversion. And I think, that's been a huge thing that we've seen. The addition of video to product pages has scaled our conversion rate by an incremental 10 or 20%. It's hard to fathom, because typically most retailers merchandise video is the last piece in an image carousel, right? People don't like to read, they want to be told, and be surprised and delighted.

Taylor:

And so, leveraging that video format in a short, condensing it to 30 seconds, has been really big for us. And I think, stylistically, it's very on brand for us, the videos that we've done. As I mentioned at the top of the podcast, Soft-Tex is a very innovative company with emphasizing technology, cooling, I mentioned antimicrobial. So our videos come off as very techie, with graphics, lower thirds that pop up. So I think, making sure your videos are on brand and authentic to your brand voice, clearly and concisely conveying the product value proposition. In our space, it's really, how are we different than everybody else selling a mattress or a pillow? There's thousands of options.

Stephanie:

Yep. Are you making the videos for your brand partners, or are they all are using the same one, or are you customizing them where you're like Bed Bath & Beyond, this video works better versus Macy's they have a different clientele and we're going to make a different video for them or are they making their own?

Taylor:

Absolutely great question, Stephanie. For private label products, or we have some national brands that we offer exclusively to certain retailers, obviously those are customized, and we work with retail partners like Bed Bath & Beyond, and Macy's, on art direction, model considerations, we work with them on developing a storyboard and get it approved by them before we film it.

Stephanie:

Got it. That makes sense. So the one thing I was thinking about when we were mentioning direct to consumer, how you guys were going about that route right now. I was thinking about a very large mattress brand who I think recently IPOed and a lot of people are talking about their negative unit costs. And I was wondering, how are you guys thinking about that with your direct to consumer strategy? Are you willing to have negative margins to add a new customer, or how do you think about the digital growth around them?

Taylor:

I think the way we've thought about it in a lot of ways, is in the concept of, getting reviews on Amazon is so critical to helping ramp up. If you're giving a discount or something, that you may be selling your product at a loss initially to help gain those reviews, gain some initial sales traction initially. I think it has to be for a finite period of time, right? That you turn the corner and have a clear path to profitability. You can't just do it indefinitely. Right. But I think that there are definitely values to doing it, in that, you get your brand out there, you get some exposure, user generated content is so powerful right now. I think if the world is telling us anything, the power of social media and viral media, the same can be true for user generated content and reviews. If you get a really good review or a really bad one, people can upload them, they're always going to be there. Right. It's so important.

Stephanie:

That makes sense. Is there any model that you developed around we're going to, we're okay with going in the negative for this amount of time with this campaign, or is there any models that you build to influences these decisions, around adding new customers?

Taylor:

In terms of the review thing, it's still an algorithm that we're working out, what's the right quantity of review that moves the needle towards a product being successful. That's mostly in our space, right? When you're syndicating in a retail environment, so products sold across many retailers, because really the review is a key way to optimize, each retailer has its own search engine, right? Now, if you're your own brand, right? Selling direct to the consumer. I think it's a different calculus, you have your own tolerance with whoever's providing your investment.

Taylor:

If you're going to go negative for a time. What is the strategy? How do you become cashflow positive? In the industry, a lot of these, just e-commerce mattress in a box guys, is really, they're marketing companies if you think about it. There's a lot of articles, a lot of them are made by the same folks in terms of manufacturers and who pours the foam, et cetera. So it's interesting.

Stephanie:

That's really interesting to think about. I think I have three different brands of mattresses in our house, but I'm pretty sure they're probably all the same or made from the same people.

Taylor:

Or from the same cloth.

Stephanie:

I think so. They all feel pretty similar. How do you think about returns, for something as large as a mattress or, I'm thinking about furniture companies and stuff, how have you seen some brands lower their return rates? What are some best practices around them?

Taylor:

I think for the industry, for the mattress in a box, we've seen return rates average out between 10 and 15%. I would include basically everything in that, including the comfort trials and everything. Right. So, when you're a direct to consumer mattress in a box guy, that has to be factored into your pricing. Some other things that we've seen creative ways to save the sale, a lot of, one of the big complaints with sleep products is, maybe the bed is too firm. Maybe you'd send a topper or something to make the mattress more plush, as a method to save recouping, returning the mattress. Because ultimately, right, wrong or indifferent, in the mattress industry once somebody slept on a bed, you can't resell it. It's just one of those things. People don't don't buy used mattress.

Stephanie:

Good. All the things I'd never really thought about. So you were just mentioning how... I'm glad that you have to deal with that and not me. So we were talking about how a lot of the brands that maybe we think are unique, maybe are utilizing the same types of underlying materials and things like that. So they're kind similar. I saw that you guys sell on Amazon. Are you ever worried that Amazon could just knock you off and just make a mattress that's so similar, that it's maybe not beneficial to be on there, or what's your reason for selling products on there?

Taylor:

Well, I think, so many things nowadays, if you're searching for a product, folks don't just begin on Google anymore. There's a large contingent of the population that are Prime subscribers and really begin the product search phase on Amazon. I think you pretty much have to be there to have the share of voice, whether you like it or not. I think, for us, Amazon's a growing partner. Certainly it's hard, we have a lot of rebates and allowances with them, from a margin standpoint and I'm sure you've heard this from many folks. It's hard to find products that, you can be profitable. But, I think brands have to make a decision to have an Amazon strategy.

Taylor:

It is delicate. Obviously, retailers are very sensitive to being comped on Amazon. So it's a very nuanced delicate road that we walk. We have an assortment that we have on Amazon, but we also offer exclusive products to other channels, that we don't offer to Amazon.

Stephanie:

Got it. Is there any other advice that you would give when it comes to selling on Amazon, but making sure that it's beneficial, like you said, one idea is keeping exclusive content to where not everything you offer is all on Amazon, but is there anything else that you all do, where you're like, this works well?

Taylor:

I think, really it's ensuring that you're being thoughtful about your assortment, if you're selling on multiple outlets. We've learned in our experience that Amazon is a price follower. Well, we're a first party vendor. Obviously many of your listeners, maybe third party sellers were there. They set the retail price, but as a first party vendor, we have a wholesale price that we give to Amazon and there are, like I mentioned, rebates and allowances. But ultimately, they then retail it to make a profit or not, in some cases.

Taylor:

They're pretty aggressive in price scraping and seeing what others are doing and commanding the market share to come to them, if they see a lower price out in the market, they will likely try and beat it. So I think, you just have to be prepared, before you open that flood gate, if that's your strategy, making sure that you're ready to enforce, map or, D inventory Amazon as needed. I think, certainly if you're a third party seller on Amazon, you're in much more control of your destiny in that respect, as you can, you set the retail yourself.

Stephanie:

That completely make sense. In terms of SEO, I'm thinking it's pretty tricky for you guys to, you want your brands to be seen as leaders, but then you also want yourself to be seen as leaders. What SEO tactics do you all use for yourself and your brands?

Taylor:

Great question. I totally think, in our space in particular, features and attributes are more important than the brand overall, in terms of the search volume. Obviously, if you build a brand, which obviously we all are in the business of doing, you can build search volume that way, but, most of our SEO strategy exists around, trying to optimize and rank for generic keywords, based on the features and benefits of each product. For us, the brand story and value proposition is more of a conversion factor rather than a volume driver, if you will. We as a company have invested more in building a robust e-commerce interface, to target that non-branded search term versus building, paying money for our brands to be the most searched today.

Taylor:

That's not to say that, our brands don't have an impressive story and value proposition, but I think, part of that comes into cost, right. A brand that spends a lot in marketing, a direct to consumer mattress that may retail for $1000, queen size, roughly, you have a very similar product that we offer under one of our brands, through Macy's or J.C. Penney, or Walmart, Amazon, that retails for 350 to $400. Is there much difference in the product? I would say they're very similar in terms of features and attributes, but it comes down to advertising and price point, right?

Stephanie:

So what have you seen works? How do you win?

Taylor:

I think, again, each retailer is its own search engine and each retailer's algorithm for the sort that they show, when somebody types in a pillow, I'm searching for memory foam pillows or pillows or mattresses, is a little different. They take into effect or into account different factors, all of them leverage the trailing sales history, review quality. So, is your product good? Four stars or better? Are you getting reviews recently? So review count and frequency and recency. And then how does it relate to the query that was searched?

Taylor:

So, for example, there's a lot of backend keywords that we look to put with our products and we've really gone through and looked to optimize those to make sure that we're calling out things like, if a product is antimicrobial, it is tagged appropriately, or if it's got some certifications or whatever it is, such that, when you're searching on a retailer, if you're typing in the keyword or leveraging a checkbox menu, faceted navigation, that we're optimized to show as much as we can.

Stephanie:

Got it. So how are you finding new brands who would be willing to work with you on selling your product? Are you marketing to them? Are you approaching them directly, cold email? How do you find new partners in your space?

Taylor:

It's a great question. A lot of our business is, if you put it into two buckets, hunting and farming, it is farming. You bring new ideas and new product and new concepts to the same folks you've been dealing with. But we absolutely have hunting strategies as well. Honestly, I think Soft-Tex has taken a position as an industry leader of research. We've undertaken bedding industry research initiative, both of bedding buyer trends. We work with, many, many retail partners, and especially during COVID times, we've been able to survey our partners on what they're seeing and aggregate the results and provide that as a free service, that I think has been really valuable to folks in the industry. And then also not just industry or retailer, B2C information, but what the consumer is looking for in bedding today. We've actually just completed a large scale research initiative for bedding consumer tastes and preferences in 2020.

Stephanie:

Very cool. And are you plugging in some of your products, because consumers are very interested in cleanliness going forward and what do you know? We have an antimicrobial, I'm saying that wrong, but you know what I mean, product?

Taylor:

It's absolutely the type of a feedback loop that fuels our product development cycle. So in our bedding buyer survey, we just got the results back on that. As you might imagine, anything with fresh and clean attributes has been on a positive sales trend and we've for a long time had anti-microbial infusions and treatments in our products, but obviously we're ramping that up now, given the favorable sales trend that it's seeing. We're looking forward to, seeing the full landscape of what consumers are shopping for, how they shop, as that's in constant flux, especially with COVID and beyond. I think, consumers are more comfortable shopping online, increasingly daily, more and more orders, for all of eCommerce, not just bedding are taking place digitally.

Stephanie:

Do you think this is a longer term trend? And if so, how have you guys shifted your strategy? What things are you planning on doing differently or changing going forward?

Taylor:

I think, like I mentioned, we've done a great job at Soft-Tex in optimizing our product pages and the end retailer optimization. We are making the investment now, in that top of funnel or off of retailers sites discoverability. So we want people to have our brands, enter the consideration phase earlier in the process versus, just see them on a retailer site and click on them. So we're definitely investing there, because we do see the shift towards e-commerce, increasingly as a longterm trend, just rough numbers that I had looked at before this podcast. When I started at Soft-Tex, e-commerce was, just under 10% of the total business.

Stephanie:

That's four years ago, right?

Taylor:

That was in 2017. And I think, ultimately even then we were under-indexed as a company. This year, I think, just given how the trends are going and how we're pacing, it's looking, 35 to 40%. And that's not to say that the brick and mortar piece or other channels of business have shrunk terribly either. It's just grown that much, just organically as well.

Stephanie:

The pie has increased.

Taylor:

Exactly.

Stephanie:

With that much growth, I'm thinking about your tech stack now. And I saw a quote on some article, where you said, our approach is working, and we believe that the tech stack we've built is well positioned for continued growth. So what does your tech stack look like? What are you guys investing in? What platform are you using? What does it look behind the scenes?

Taylor:

I think, product information management and taxonomy, and really taking control of your data as the expert of whatever product you make, is so critical. Before I started, all of our product data was in, 50 million Excel sheets, right. Now it's much more systematized. And also, not to mention, different retail partners require different fields and everybody's set up processes a little different, whereas, before that, was institutional knowledge and it lived with a person, now that lives with platform. So that's a huge process improvement that we've made.

Taylor:

Digital asset management is so critical, particularly from being able to rapidly get new images out to different syndication platforms, but also tests. We've done a lot in push the envelope on image standards. We talked about how we can play a consultative role with retail partners. We'd seen some really nice boosts when we added some batches to images, as trust symbols, like if something was featured on, Better Homes & Gardens, sticking that, in the bottom right hand corner. Sometimes that's been a little tough, because certainly main images get picked up in Google shopping and there's some rules against how much text can be in the image.

Taylor:

That worked well for a time, when we were able to get it approved. From a text tech standpoint, email marketing, that's super important, leveraging, and also of course social, being able to leverage all of our digital assets and brand voice and value, getting it out there consistently to the customer as well, has been really important.

Stephanie:

What metrics do you look at for success around, whether it's your B2B type of backend or your eCommerce platform, what metrics are you reviewing to see if things are going well?

Taylor:

An early indication, skew count. So how many skews do we have in our assortment and how many places are they set up? Obviously if we have a thousand skews, they should all be 50 places, ideally, right? For full skew syndication. Certainly not every retailer is going to take every skew that we have. A lot of retailers still have more of a curated assortment versus an endless aisle. Certainly I think, we see a value in an endless aisle, because of how we differentiate our products. Literally we try to create every product to be a little different, to have a little bit of unique feature and value proposition. So that concept that, there's something for everyone, right.

Taylor:

So skew count, a very important metric, ultimately total sales obviously, unit sales and how are retailers trending, particularly ramping up impression volume, how many people are getting to a product page and certainly for folks listening, they're probably like, well, how do you get that? Not every retailer provides that information. But you certainly can leverage tools out there, on Amazon, there's intelligence tools to look at, how many views your products are getting and other things of that nature. I think that, being able to just check that and see the demand for your product over time is very important.

Taylor:

Other metrics that we really look at, sale, when we give discounts, how things perform, because ultimately a lot of things come back to the law of supply and demand, right. We might have a price in our mind where we think something should be, but that's not the price that the consumer wants to pay for a product. Finding that right price that moves the volume, through discounts, just finding that equilibrium is interesting. And then obviously we talked about reviews a lot, review count and quality. The quality is a big feedback loop that we take very seriously, in terms of work with our quality assurance and customer service teams, to make sure that, we don't have an issue. And we're very proud, that our products have about a 4.7, 4.8 aggregate rating.

Stephanie:

That's great.

Taylor:

It's huge. I said at the top of the call, what works for one person doesn't for another. So you might think that a pillow, if left long enough to its own devices might net out around a three. So the fact that, we're at a 4.8 overall, is really encouraging.

Stephanie:

That's awesome. Do any of your partners right now, not having an eCommerce platform? I'm thinking there must be some people who don't, how do you work differently with them if they only have a retail location versus your eCommerce partners?

Taylor:

There are, sometimes e-commerce is challenging to jump into. It can seem daunting for folks that aren't doing it, because you're talking about things at the each level versus, big old fat POS, the way you retail used to run, right. You order a bunch to a warehouse and it gets distributed. There's a lot of implications to that, especially when you're talking about commitments for product, with e-commerce and drop ship the risk is inherently on the supplier or the vendor. There's no risk for the retailer, right. The retailers is like, Oh, sure, I'll put it up on my website, but you're inventorying it. Right. You're going to ship it for me, just when I sell it.

Taylor:

A lot of companies, that's their biggest objection, I think, is, without a hard commitment or a retailer to commit to bulk units upfront, if they don't have that, they won't offer it for e-commerce. They won't bring it in, because they don't have that driver to pull them into it. Because it's very easy, if a retailer's ordering 10,000 units of something, pepper and a few thousand more free commerce while we're at it. But if e-commerce is the first channel you're thinking about, it can be a riskier equation.

Stephanie:

Do you see that changing going forward? Do you see a lot of these brands thinking about now going online?

Taylor:

Yeah. I mean, even within Soft-Tex it's changing, right. We have now for, within the past couple of years, now digital first product, whereas, not saying that my e-commerce department was a recycling bin before, but pulling off of the success of things in brick and mortar initially, was really what drove eCommerce previously, which is not necessarily a bad strategy. But I think today, for innovation and new product, more and more stuff, if you're confident in it, you have to commit and leverage on e-commerce.

Stephanie:

I completely agree. So I saw you guys had some showrooms, I think, for your product. How are you all thinking about that?

Taylor:

We have permanent showrooms in New York and Las Vegas, and participate in market events where we host, the buyers from many different retail partners, so much of that. The importance of an in person event, has been blown up now through COVID. We went through a virtual market in March, which, obviously is hard to convey everything through a video, but, we had fun doing it and a lot of people really enjoyed it. That whole concept has been a challenge. Right? Being able to find that dedicated time to get in front of your customers and have them, if anything, particularly for stores, it's all about creating an experience to surprise and delight.

Taylor:

Those buyers really want to feel the product and experience it, to ensure that it's worth, that it will monetize that floor space, that it will take up. With the first touch point being a virtual video, that can be a challenge sometimes, but, we're adapting through virtual markets, mailing samples for, Zoom calls to review them. But it certainly has been different, it looks like, the Las Vegas market furniture show was pushed back.It's likely that, at least for us, it's virtual still, just given everything that's going on. And many of our customers are, you've seen probably the announcements, a lot of travel moratoriums. Some through the end of the year, they've already come out and said so. It's been interesting from that standpoint. I guess from that point-

Stephanie:

I can imagine.

Taylor:

I think home products, more folks will spend money, through e-commerce on home and other products, that they're not spending on travel. So, positives for us and for many others.

Stephanie:

That could be a good opportunity. I'm thinking of, these virtual events right now to sell to buyers. I think, I would just run and jump on the mattress and then just go to sleep and then people would just be interested to see if I'd wake up, that might pull people in. That's how I would sell it.

Taylor:

That's a very attention grabbing headline, for sure.

Stephanie:

It'd be like, is she asleep or is she dead, what happened or is she frozen? I don't know.

Taylor:

That's all right. Maybe we'll use that in our next market video.

Stephanie:

Great. I can be the star of it, I'm pretty good at sleeping and internet freezing, all of the above I'm good at. Are you thinking about incorporating these virtual strategies going forward? Is it something even when the pandemics over, that you're like, this is working well, we might try this out in the future and use it for, our initial targeting effort to then retarget them to an in person event afterwards. Or how are you thinking about that marketing strategy going forward?

Taylor:

I think it's something that, we're definitely going to do. It's something that we had been doing, I guess, even before. We would do video walk throughs of our showroom and our virtual experience with an industry publication called, Home Textiles Today. But for the most recent market, we produced the virtual market video ourselves. So, leveraging, either internal or partner capabilities, we still think it's very important to address that. There's always going to be people that can't come to an event, even forget COVID times. So it's always good to have that digital touch point to be able to send to them. And also, to your point, it absolutely can sit on our website and exist as a lead generation tool as well, for people to sign up, to see our latest innovation and then fill out a lead form and then go watch the video.

Stephanie:

There is definitely a lot of opportunity there, for content that is being created now that maybe wouldn't have been thought of before everything that was going on.

Taylor:

Right. It's a delicate situation, because a lot of what we produce for a trade show like that, and our competitors, is very future looking and conceptual. There is a level of security. Most of what we sell at a trade show is not yet fully commercialized. Sometimes it is, but in many cases it's like, this is new brand new technology and we're introducing it here. So, there's also a dimension of, yes, we want people to see it, but no, we don't want everyone to see it.

Stephanie:

That's got to be a little bit, get a little FOMO there and make it a secret.

Taylor:

That's right.

Stephanie:

So you have an interesting intersection between B2B and B2C. Is there anything that you wish existed right now in the eCommerce space or technology wise, or you're like, we're struggling with this right now, that you could see getting better in the future or that you hope to get better?

Taylor:

We have some partners now that help us provide really high quality CGI imagery. Obviously that's been around, but, making that process easier, it takes a lot of work to stage a live photo and video shoot, especially for our product class. That's something that we're looking to get better at, such that we can, as we commercialize new products, we don't have to have crazy processes to stage a photo and video shoot. Certainly there's value to that, and we will continue to use it. We have to use live folks for a lot of things, and models and videos, but for the static, just e-commerce imagery, getting those images up front can really increase our speed to market.

Taylor:

I would think the other thing, that perhaps we're missing today, is really seeing an aggregation of reviews across platforms. So obviously we see reviews that are syndicated. But we don't always see every review out there. So getting notified when there's a negative review in particular, such that we can see, is it just a one off? Somebody just didn't like it, or, is it the start of a trend of some sort. That happens very seldom with us fortunately, but it's always good to be on the forefront.

Taylor:

If you think about it, I'm sure we're not alone. A company like Kraft, they have millions of skews probably, having that feedback loop automated is so important. You can't have a person, tracking every review manually, right? So the more automation that's out there, the better. And we've done a really good job, I think, building out partners with the scraping capability to monitor our product pages and also, with advertising as well.

Stephanie:

Very cool. That's two very useful things. I'm sure a lot of people will be looking for, going forward as well. So we have a couple of minutes left and I do not want to let you get out of the lightning round. So let me know if you're ready and we can start that, Taylor.

Taylor:

Let's do it.

Stephanie:

All right. The lightning round is brought to you by Salesforce Commerce Cloud. It's where I'm going to ask you a question and you have a minute or less to answer. Are you ready?

Taylor:

Yes.

Stephanie:

All right. First one. What's the next sleep product that you're excited about buying or what are you most excited about right now?

Taylor:

CBD pillows.

Stephanie:

Tell me more about that.

Taylor:

Our CBD, we're really proud of the chemistry. It's microencapsulated into the cover. So with body pressure and as you toss and turn, as you sleep, the capsules break open and release the CBD up through the fabric and it's absorbed in the CBD receptors in the skin.

Stephanie:

Oh my gosh. That sounds very interesting. I have to check that out.

Taylor:

Coming, next quarter.

Stephanie:

Cool. I'll be on the lookout for that. What's up next on your reading list or audible?

Taylor:

That's a really great question. I don't read as much as I should. Mostly, I'm reader of the news. I would love a good mystery. I don't read enough fiction, sometimes it's good for diversion, especially during COVID times, right?

Stephanie:

Yep. We'll have to find one for you then. I'll source one and let you know.

Taylor:

Yes, please.

Stephanie:

What's up next on your Netflix queue?

Taylor:

Ozark. We just started, it's been really intense. So my wife as a mental health counselor, and I have some stressful days at work, so we both agreed, it's pretty much a weekend thing, because it's so intense, we can't watch it.

Stephanie:

Yes. I agree. You got to balance that out, put on a Disney movie or something.

Taylor:

Exactly.

Stephanie:

And the last one, what one thing, will have the biggest impact on e-commerce in the next year?

Taylor:

I am going to say, voice search, I think more and more people will leverage, Siri or Alexa or the Google voice piece, for searching on stuff. I think, particularly, so much of our population is aging. For whatever reason, when I see somebody have a question, I see them using the voice search the most, like my grandparents, that demographic. As it gets better, we'll see it used more and more.

Stephanie:

I completely agree [inaudible 00:57:15]. To take anymore, too much work.

Taylor:

I know. That's all right.

Stephanie:

I like that. Well, Taylor, it's been a blast having you on. Thanks so much for coming on the show. Where can people find out more about you and Soft-Tex International?

Taylor:

You can check us out on the web at, soft-tex.com. We're also on Facebook and Instagram. You can also check out any of our brands, like SensorPedic, SensorGel or BioPEDIC. For me personally, I'm on LinkedIn and Twitter, Taylor Jones. There's a lot of Taylor Jones's, but I'm out there.

Stephanie:

We'll slink you up. We will find you, don't worry. All right. Thanks so much, Taylor. And we will talk to you soon.

Taylor:

Okay. Thanks so much, Stephanie. This is great.

 

Jul 09, 2020
Growing From Ecommerce Toward Omnichannel Using a Data-Driven Product Strategy
42:56

You never know when inspiration will strike. For Jordan Nathan, the idea for his company came after an unfortunate incident. Jordan got Teflon poisoning after burning one of his pans while cooking. After researching the dangers of Teflon, which is one of the most prevalent materials in all of cookware, Jordan knew there was a chance to carve a niche for himself in the market with a non-toxic and eco-friendly product. Thus, Caraway Home was born and it launched with a waiting list of more than 150,000 customers. Jordan has been building on that initial buzz by focusing on his Ecommerce platform and selling a vision of a company that can go far beyond just non-toxic pots and pans. On this episode of Up Next in Commerce, Jordan explains how he builds a pipeline to drive customer reviews, which he uses to organically grow the business. Plus, he reveals the growth strategy for Caraway Home and why he believes that if you want to truly take on the big brands in an industry, you need to use an omnichannel approach to take market share and shelf space away from them in all areas. 

3 Takeaways:

  • Reviews are key to showing the value of a product when you are selling online. Building and maintaining a review pipeline is critical and means following up and offering products to everyone from influencers, to editors to ordinary people
  • Taking a data-driven approach to product development allows you to lean into introducing products that have a strong chance of flourishing online
  • In order to achieve true saturation of the market, you need to have an omnichannel approach. It’s smart to build up your Ecommerce platform and product offerings at the start, but to compete with the bigger brands, you need to eventually replace them on the shelves of brick and mortar stores

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Welcome back everyone to Up Next in Commerce. This is your host, Stephanie Postles from Mission.org, and today, we have Jordan Nathan on the show, the founder and CEO at Caraway Home. Jordan, thanks for coming on.

Jordan:

Yeah, thanks for having me.

Stephanie:

I feel like we have to start with the story of you poisoning yourself which brought you to your company. Can you please tell me about that because I read that in the notes and I'm like, I didn't know you could poison yourself from pans, like pots and pans, so I wanted to start the episode that way if that's okay. A great way to start, on a high note.

Jordan:

Definitely. Yeah, back in, I think it was late 2017, I was cooking just like any other night and unfortunately left a fry pan on my burner for about 45 minutes. I think I ended up getting a call right when I was starting to cook and forgot the pan was there. Call ended, ended up feeling kind of nauseous and light headed and the apartment was feeling super fumy and soon realized that I had forgot the fry pan on the burner. Yeah, ended up getting sick. I was nervous based on having inhaled a bunch of fumes, live in a really small couple hundred square feet apartment in New York City and ended up calling poison control. They basically had told me that I was likely exposed to Teflon poisoning which occurs either from overheating a fry pan with Teflon in it or scratching it and it getting into your food, and really just was really surprised that something that I was cooking off of and touching my food could potentially get you sick. Also, further research showed that there were definitely some longer-term consequences that have been proven through a number of studies related to Teflon and felt there was a big opportunity to build a brand in the kitchen space around launching non-toxic products and eco-friendly products in the category.

Stephanie:

That is a very good reason to launch non-toxic products. Before deciding that you wanted to start Caraway Home and build non-toxic pots and pans and things like that, let's hear a little bit about your background and what brought you to moving to the world of Ecommerce.

Jordan:

Sure. Well, grew up in New Jersey, went to school at Colby College, up in Maine. Studied consumer psychology there. I tried launching my first startup out of school, which was a Ecommerce marketplace built for direct to consumer brands. This was back in 2015. Really got it as far as I could, but unfortunately, really struggled with that fundraising process and coming right out of school, didn't have much experience, but it was really a great kind of launchpad to testing and learning and trying to do my own thing.

Jordan:

I then joined a company in New York in early 2016 called Mohawk Group. They're a consumer product holding company owning about four brands and I joined them to lead Vremi, which was their kitchen brand and ended up basically working there for about two and a half years. Launched close to 200 different kitchen products. The brand itself was really focused on a post-college consumer. Average price point was $10 to $20, so definitely someone looking for something that was lower cost, colorful, and was my kind of first really great experience at obviously working in the kitchen category launching a number of products and really fortunate to have done more or less the exact same thing prior to Caraway.

Stephanie:

That's awesome. What were some of the lessons you learned, especially at Vremi when you were launching all of these products that you brought into Caraway?

Jordan:

Yeah, I think biggest lesson was don't launch 200 products in 18 months.

Stephanie:

Sounds intense, but why? Why not?

Jordan:

Yeah. Well, it's definitely a lot of fun and learned about a lot of different materials and categories, but definitely caused a lot of issues with inventory forecasting and quality. I think through that experience really got to see the power of selling through digital mediums. At Vremi, we really did focus on Amazon, which is quite different than what we're doing at Caraway, but a lot of the same kind of growth principles that carry over that we now implement at Caraway. It's really a good opportunity to leverage data, use that to inform product decisions and the beauty of online, obviously, is the ability to test. Really taking a lot of those same principles into what we're building at Caraway.

Stephanie:

That's great. Were you any bit nervous when you were moving from a large company that had resources and infrastructure and more funding and all that, to then start your own company where you had to do everything on your own?

Jordan:

Definitely. I think when you take that first leap, it's super scary and you leave a comfortable job. You end up initially pitching investors and getting rejected a lot, you're not getting paid anything, and really, you are the only person in the world who actually believes in what you're building. It's definitely scary, but I had enough conviction in Caraway and having sold all these products before and had experience, felt really there was no better person to go do this. The supply chain and the manufacturing were really easy for me just because I had done a lot of this. It was more of the fundraising that was kind of a challenging and new process for me.

Stephanie:

You had some recent success around fundraising. Right?

Jordan:

Yes, that's correct.

Stephanie:

It was a seed round?

Jordan:

Yes. We just closed and announced a $5.3 million seed round.

Stephanie:

That is awesome. How did that feel closing that when I think earlier on you said it was a bit of struggle trying to attract the investors. How did you find the right investors and get them to believe in your vision?

Jordan:

Yeah. Well, we're really excited. It's a big step in our journey and I think validation for what we're building. We took a little bit of a different route than most brands and I think something that's maybe becoming a little bit more common in consumer, but we raised from over a hundred investors in the round, a lot of founders and execs a number of funds and a lot of consumer-focused investors and really took the approach to building a large network, which we felt would be much more valuable in the long-term. As you can imagine, getting a hundred investors means I probably pitched a thousand investors and it took a long time, but I think in the long run it will net out much better because we're more or less one introduction away from any company, given the large pool of investors we have.

Stephanie:

Were some of the key differentiators that either excited the investors or that they saw about your company?

Jordan:

I think there have been a lot of news and some companies out there over the past number of years who've really focused on growth at all costs and really prioritizing top-line growth and thinking about things like profitability at a much later stage. Coming out of my prior experience, I had a really great grasp on economics and how to manage cashflow. I think since day one, our pitch has always been really growing a sustainable business in a category that's super-exciting and stale and hasn't seen much innovation. As a brand, we call ourselves Caraway Home for a reason in that cookware is our hero product, it's where we've launched and felt there was the biggest opportunity, but we really see taking those same product principles and applying it across the whole home. I think what's really exciting, that investors have really been attracted to is basically the breadth of how big the home is and how many products there are within the general category. Really, an opportunity to build a lot of products and a pretty large brand across a variety of categories.

Stephanie:

Got it. Yeah, that's great. When it comes to organic and non-toxic cookware and things like that, how do you convey those type of unique differences on your website because when I was looking at it, it's like, I wouldn't automatically maybe know that Teflon can poison you. I mean, I kind of have heard it before, but it's not something I think about every day, maybe when I grab out my pans. Especially if I'm on a Ecommerce site where I'm looking and shopping, how do you show people this is why we're better than all the other brands out there?

Jordan:

Yeah. I think for us, storytelling's a really big piece of DNA. Most places where people are coming to from the site, whether it's press or a Facebook ad or Google, we do our best to tell that non-toxic story through those mediums, so they're coming into the site with an idea. We're not here to use any scare tactics; we're here to educate consumers. We try not to push it too hard on our site. We've got sections on materials that you can go deeper, we have a lot of blog posts, so we really provide those educational resources in case you're interested to read more and educate yourself on the subject, but the site's really meant to emphasize all the points of differentiation, whether it's design or color or the storage components that come with our sets. We really want people to get the full picture there, but in those kind of advertising mediums and press, the nontoxic is really who we are and what we stand for. Hopefully, before coming to the site, you get some type of idea of that product feature.

Stephanie:

Got it. The one thing that I liked when I was browsing through your site was it had this very risk-free feeling to it because it has that free returns and 30-day trial and it had a ton of reviews. I mean, all over the page and it had a whole tab, like a tab for just reviews. Was this something you did from the start or is this a more recent implementation?

Jordan:

Reviews have been a really big piece of the brand since we first launched and this was a big learning from my prior experience, especially on Amazon, which is so driven by reviews. It's one thing to just show a product on a website, but you can't touch and feel it and reviews are really the only way to create validation for the quality. Really, since day one, we've been focused on our review funnels, we also want to get feedback to improve our products. Yeah, we continue to improve that pipeline, but we're excited to really continue building that out. As a brand, again, with no brick and mortar presence at the moment, it's really the best place customers can go, especially for a brand that's six, seven months old and they've never heard it before.

Stephanie:

Mm-hmm (affirmative). How did you go about getting those reviews because that, to me, seems like one of the hardest things to do, especially with a new product or podcast? For anyone that hasn't reviewed this podcast yet, please help us and share the word and review it. How did you go about getting those reviews because some of the places that you were getting them from where pretty big media brands? What was the strategy there to bring people in to actually review the product?

Jordan:

Yeah. I mean, on the site, we've run post-purchase email funnels, SMS funnels, we hit each customer with it a number of times to get their feedback and then, when it comes to press, we did a lot of gifting at the early stages and really tried to create a culture amongst editors of getting the products into their homes and actually using them at home. Not really pushing them to write stories on us, but getting them to experience the product and if they love it, have them come back and write their honest opinion.

Stephanie:

Mm-hmm (affirmative). That's great, yeah. I think if you get something in someone's house, even if they didn't originally maybe even ask for it, you kind of feel obligated to give a review. I know on Amazon, I left a two-star review on something for a baby product, and they sent me a new and different product just saying like, "Hey, we're sorry that the first product didn't work out, but if you could please reconsider your review because here's three new things we're sending you to try out." Even though I didn't ask for it, and I didn't expect it, I kind of felt obligated to get on there and test out the product and re-review it if I did end up liking it. I think that's good to get it in their house to get people to start thinking about it.

Jordan:

Definitely. We see the same things with influencers as well. We want to be working with people who organically love the brand and product. We're very confident in the product that we've created and the quality. We've seen just a lot of success of once we can get it into people's hands and they cook with it a few times, it's really a great bridge to starting a bigger partnership conversation.

Stephanie:

Yeah, that's great. The one thing that I saw that was interesting was, it was on a blog post where you mentioned that when you were launching, you had a wait list of I think it said 150,000 people who joined pre-launch to get the product when it was ready to go. Is that the right number and, if so, how did you garner that excitement for people to get on a wait list?

Jordan:

Yeah. That is the right number and that wait list was a really incredible kind of launch platform for us. I think early days, it really started with me pitching just a lot of investors and talking to as many people as possible. Created a lot of word of mouth, which drove to our landing page and then, prelaunch, one of the things we did was partner with other brands on things like sweepstakes and giveaways and start building our brand rep through a lot of those partnership campaigns. Then, towards the end of the funnel, we started building, not dissimilar from what Harry's did to build their prelaunch, I think hundred-thousand wait list, ended up doing a referral campaign within that existing list we built and that referral was super-successful. We got a lot of word-of-mouth and people sharing out of it. By the time we launched, we had a nice grouping of customers who were really excited to test and be our early adopters.

Stephanie:

That's really fun. How do you keep them coming back and engaged because I think of cookware, I mean, I got mine, I think, at my wedding and I haven't really thought about it unless it breaks, which has happened a few times when we've dropped it and it's gotten all bent up. It's not something that comes top of mind or would bring me back maybe to a site easily. How do you keep those customers, especially the really engaged and excited ones, coming back to the site and checking out your new products?

Jordan:

Yeah, it's really through content. We're pretty active and it becoming building a much stronger content platform, both on the site and social. For us, we obviously want people to buy the product, but we also want to provide education outside the physical pots and pans, so we see a lot of activity from consumers coming to us. Actually, less about food and cooking and recipes, but more about design and colors and seeing Caraway kind of inspired them to redo their whole kitchen or rethink the products that they have in their homes, so whether it's our blog or social or writing in through chat or email, we work to really provide these pieces of education to the consumers.

Jordan:

As we grow, we have aspirations to build a pretty large portfolio of products, so what's fantastic about cookware is it's a larger purchase item, we're not waiting for revenue to come in through a subscription. We get that first purchase and then, really have opportunities as we launch more products to focus on those for upselling and reengaging customers.

Stephanie:

That's great. How are you thinking about retail locations or like your omnichannel strategy?

Jordan:

Yeah. Right now, we are solely focused on our website, we are on a few marketplaces like Zola and Goop and Huckberry and a few others. Omnichannel is super exciting to us. I think going back to our mission, if our goal is to really get non-toxic cookware into as many people's houses as possible instead of Teflon, really the only way to truly embrace that and do that is to replace the products that are on shelves and currently saturate the market. Online right now is really our main focus, but we see big opportunities with partnerships in retail, with our own brick and mortar. Still, today, we're a young brand, so we're focused online, but have some exciting new plans coming up in the next 18 to 24 months.

Stephanie:

Fun. What's the experience been like selling on marketplaces versus just if you just CBA your website?

Jordan:

Yeah. I think for us, we see it as opportunities to reach different demographics than what we've... are currently seeing on our site. We've gone into it with a really open approach and have seen a lot of success. Obviously, being in the kitchen and home category, a lot of these items are purchased through a registry process, so that's always been really important to us at the beginning, but also someone like Huckberry, who we're working with, it's an all men's marketplace, they do a really amazing job with curating and they really know how to talk to their customers. It's one of those marketplaces where we've just seen great success. It's a totally different demographic from what we see on the site. It's really a good opportunity to just test and reach new markets that otherwise we'd have no access to.

Stephanie:

That's great about the registry idea. I mean, it seems obvious when you say it now, but making sure that you're in on all the websites, I don't even know how they slink up because I think when I built my registry, they were already slinked to different marketplaces already set up. Do you have to go to the marketplace to get that relationship or is it a brand who controls the marketplaces all in one place? How does that work?

Jordan:

Well, most of them are marketplace controlled, but they're all standard kind of retail relationships and a lot of the major registry players are all digitally driven. Some of them allow you to add any product from any site onto their platforms. They're all a little bit different, but we want to be at the top of every registry platform and also, encourage users who come to our site, who are getting married, to go to those platforms as well to add us.

Stephanie:

Yeah. I think just your colors and I saw some of your videos, that should be enticing enough for people to want to add it to a cart because it does look very different than the typical black or light gray items and I haven't really seen many videos of cooking where I'm like, "That's a nice pot or pan or whatever it is," and I'm not even looking at the food. I'm looking at how they're cooking in this nice, colorful, bright product.

Jordan:

Yeah. Color's a big part of our brand and this was actually a big learning from my prior experience, but there's just a big lack of color in the category and the colors that do exist are typically like bright reds or really de-saturated baby blues and I think there's definitely a place for those. Also, we just saw a big, kind of wide-open space of colors like navies and sages and creams that exist in the rest of your home, but for some reason don't exist in the kitchen. I wanted the brand to have a little bit of playfulness, yet sophistication through colors and also give people the opportunity where you can really create a kitchen that I think represents your personality in the rest of your home.

Stephanie:

Yeah, that's really fun. Why weren't there colors before? Is there something about creating that that makes it harder to incorporate colors?

Jordan:

The creation of colors certainly is challenging. It's a lot of back and forth, a lot of sampling. For larger brands, who I think are cranking out products and not really investing the time into innovation, it's much easier to just choose something like black or stainless steel. Quite frankly, that's been what's popular on the market for decades, so Le Creuset is really one of the first players to come in and introduce colors. KitchenAid has done and awesome job, but I think a lot of the legacy brands who dominate the category, they've been selling neutrals for such a long time that for them to even test colors, could actually potentially cannibalize their existing business. It kind of opens that door for us to try something new.

Stephanie:

Yeah. That is good. How do you go about creating new products? Is there a data element that you use to maybe get like customer input to know what they're looking for or what new products you're going to be exploring?

Jordan:

A lot of our product process is super data driven. There's definitely an element of asking consumers what they want and what's bothering them across certain product categories and what they like. We do that qualitative research, but a lot of how we think about products is looking at things like Google Trends, Google AdWords, what's trending on social. We have a number of internal tools that we used to model out what we find to be interesting. Obviously, there are things like market size and competitor mix, so we really like to take a data-driven approach and we were the same way at my prior company as well and where I learned this. Yeah, I think we would really like to lean into products where we've got a strong conviction that will sell well online. We typically like to avoid things that purely exist for potentially a brand marketing reason, which I think a lot of companies get caught up into in many cases.

Stephanie:

Yep. What metrics do you think are most important when it comes to, like you said, you take a very data-driven approach, which ones have been the most important and how should a company think about implementing that type of data and research into their product development?

Jordan:

I think it really comes from the channels that you're in and kind of working backwards from the core metrics that you track as a business. If you're on Facebook and Google, really understanding if there might be an opportunity at the micro level across the category, but you really want to make sure that where you're going to be spending your marketing dollars and efforts, there's an opportunity as well. I think that's even the more important piece is we found niches in certain places where we feel even at the macro level, it's very competitive and saturated, but we feel there's a big opportunity within the digital landscape. I think it's really focusing on where your marketing dollars are.

Stephanie:

Got it. Are there any website metrics that you pay most attention to like how many tests are you doing every single day to see what helps with conversions or what helps with your customer acquisition strategies? Anything that you look at there on a weekly basis or a day to day?

Jordan:

I think for us a lot of the focus right now is definitely on top line growth, but working back from that conversion rate, return on ad spend is incredibly important. We place a big emphasis as a brand on being first purchase profitable and making sure that we're growing sustainably and not burning cash on each purchase. A lot of the emphasis is really on that. As we grow, things like LTV and repeat purchase rate will become much more important. Within each specific ad platform, we've certainly got different goals and metrics we try to hit, but as a brand, the focus at the moment is really on metrics that lead to top line growth.

Stephanie:

Yep. Are there any platforms that you're finding your most success in or new platforms you're exploring right now?

Jordan:

Sure. We, similar to most D2C brands, focus a lot on Facebook and Google, but I think one thing we've really put a big focus on since the beginning is growing our influence or ambassador network. We currently work with a group of a hundred to 200 influencers and this is a group that's growing really fast, too. Similar to what we were chatting with before, we've gifted, they've experienced the product, there's really an organic relationship there built and really working with fantastic creators who I think are the best voices for the brand and they've got trusted communities who watch them every day and listen to them. Having those groups really tell the story for us has been tremendously success. As a brand, we've actually avoided the food and recipe market, which I think a lot of this category goes after, and focused a lot more on things like wellness and design and tried some new categories that I don't think kitchenware has really entered into until point.

Stephanie:

Well, that's smart. I'm thinking of utilizing Pinterest and places like that where people are, like you said, designing their kitchens or their homes-

Jordan:

Definitely.

Stephanie:

... and just thinking about things differently. That definitely seems like your kind of ideal customer.

Jordan:

Definitely, and we see Caraway as almost... and we hear this from a lot of consumers, that almost being that first kind of inspiration or purchase that they make, that then kind of put them on a path to redoing their full kitchen or wanting to create a safer and healthier home. We love being in platforms and working with creators who kind of align with that strategy.

Stephanie:

I think it's really important that you're moving in that other aspect of the home because that reminds me, when I got a... it was like a pastel green tea kettle, it was super cute and I liked it a lot and I put it in my kitchen. Then, I'm looking around and I'm like, "Oh, man. I don't have anything else that matches this tea kettle." I started trying to go around and search for that color and I couldn't find a match. Yeah, it did start making me rethink about how to redesign my kitchen and then, incorporate into my living room because they're so close. I think having multiple products, kind of help create that experience all throughout the house and that nice design principles could be very beneficial.

Jordan:

Definitely. Pulling that back to new products as well and color, it creates a really exciting opportunity where you make that first navy or sage or cream and having a bigger portfolio of products to really seed that throughout the rest of the home is really where we want to get to.

Stephanie:

Mm-hmm (affirmative). Do you pick colors that can't really be matched with other brands?

Jordan:

That's certainly part of it. All of our colors are custom made. A lot of brands typically lean towards choosing a Pantone color. Colors are very difficult to replicate. Just going through the experience, they do take a lot of time to get right. There's definitely some data that we look at when it comes to what people are looking for and searching. It's asking customers, but at the end of the day, we wanted to create something that was uniquely different in this category. I think in the initial research stages was really surprised that something as simple as navy, which you're wearing in your clothes every day and is such a prominent color in people's homes just didn't exist in the category. As a young brand, it's fun to have a website and be able to test into colors that just don't exist today.

Stephanie:

Yeah. Have you tested anything that you didn't actually have on-hand yet?

Jordan:

Nothing publicly, but we certainly do some stuff privately or in small tests across Facebook or Google.

Stephanie:

Mm-hmm (affirmative). Got it. Is there any time data's led you down the wrong path where I'm over here googling fluorescent pink pan and, then you make a product? You're like, "Eww, a lot of people were googling that or searching for that keyword and it was because of this and we probably shouldn't have made maybe a product around that or no one's actually buying that color." Any time when data's led you down the wrong path?

Jordan:

Yeah. Nothing specifically with Caraway, but my prior role with Mohawk Group and Vremi, we launched a lot of products, there were many that we had strong conviction on based off data. Sometimes, it doesn't work for whatever reason. It could be the product design, it could be the colors, it could be the price point. There are so many variables to it, but I think understanding all the variables that can impact the success of a product is super important and as long as you're really trying to make something different and really try to make it a compelling offer, I think, across all the categories you have a pretty good chance of success.

Jordan:

Really, I think this is a universal truth, but the product quality needs to be there. It can look pretty and the price could be great, but as long as that product's a really great product and people love it, that in and of itself should generate its own word of mouth.

Stephanie:

Mm-hmm (affirmative). Is there any way that you encourage that word of mouth with your customers?

Jordan:

Definitely. I mean, we encourage consumers to continually post on social showing us what the pans look like in their home, showing us how they organize their kitchens with the pan racks that we sent over, showing us what they cooked. As we roll out new products and expand the brands, I think there's definitely some areas we can improve in, in word of mouth, but so far, it does make up a large percentage of our sales and having reviews built into the brands I believe also encourages that.

Stephanie:

How are you measuring the organic growth right now? Like you said, referrals make up a large part of the sales. If you don't have a referral program yet, how are you tracking that to see where the customers are coming from.

Jordan:

It's definitely tough. We run a post-purchase survey after people purchase. Obviously, not everyone fills it out, but we get a lot of data through there in terms of asking consumers where they came from. That's really the best indication, but we're also very... in a position where we really understand how many sales are coming from Facebook and Google and a lot of other channels, so we're able to kind of parse out between those two methods what we think the word of mouth effect is.

Stephanie:

Got it, got it. It seems like it would be kind of hard to keep people, not only just customers, but also even like the influencers engaged because I think about when someone sends you something or you buy something new, you're really excited for maybe a week and then you're kind of, like a lot of people, at least myself, maybe not everyone else, it's on to the next thing and excited about the new thing. How do you keep, not only your customers, but also those influencers that you were sending products to, engaged for the long haul?

Jordan:

I think a big, important piece of our influencer program is that most of these relationships are tremendously organic and we work with people who truly love the product. Just like anything, there's always more excitement at the beginning when something's new, but we like to work with people who are sharing content around cooking and sharing content around storage and design and our products are always in those content pieces. It's really been a pretty organic relationship and we haven't seen a massive drop-off in sharing amongst that group. In terms of customers, we put a lot of emphasis into email and SMS and new blog posts and social and really try to get people into those funnels and onto the social page, so they're staying up to date with everything that's going on with the brand.

Stephanie:

Mm-hmm (affirmative). Do you have any events or things like that where you bring together your influencers or maybe even customers to build that camaraderie feeling? Something that I think back to, when I was at Google, we had this local guides' program and they would do big events where all the local guides could come and meet and get some swag and really feel like a community. Is there anything like that that you guys are planning for in the future?

Jordan:

Definitely. I think community is tremendously important. We, obviously, really focus on that with our consumers, but for our ambassador base, it's still really early days and early stages. Looking at companies like Glossier and I think they've done such a great job at creating that community amongst ambassadors and the people they work with are tremendously proud to represent Glossier. Events and dinners and opportunities to gather are certainly among top interests for us. With COVID going on, it creates some more challenges, but-

Stephanie:

Yeah. A Zoom happy hour.

Jordan:

Yep. Yeah, we're looking to roll out a community base whether it's on Slack or Facebook groups in the coming months for all of our influencers to connect. It's also a good opportunity for them to share best tips on what's working for them and what's not on their social posts or maximizing engagement.

Stephanie:

Mm-hmm (affirmative). Yeah, that definitely seems like it could be really beneficial because you have this group of people working for you behind the scenes, teaching each other best practices, that you're not having to employ-

Jordan:

Exactly.

Stephanie:

... which is great. Circling back a little bit to your background, I saw or I think you mentioned that you studied consumer psychology. Is that right?

Jordan:

Correct.

Stephanie:

Okay, cool. How did that background help you with building your company, if it did, or what kind of principles did you take away or remember from your studies?

Jordan:

Yeah. Back in school, I was really interested in understanding why people chose the products that they did, why they align with certain brands, and I think at Caraway, we take a pretty granular focus when it comes to that. A lot of that's reflected through the messaging that we put out. We're, at any given point, running dozens and dozens of tests across our ads and our website and there's obviously demographic information on people, which we try to segment based on, in terms of our consumer, but there's also personality traits and more of a psychology of further breakdowns of certain demographic categories. We do our best to collect this information from consumers to really understand who the customer is, what they're thinking about, who they are as people and that, in turn, really informs the macro messaging, what's on the website, and branching out to the brand principles.

Stephanie:

Mm-hmm (affirmative). Yeah, very cool. Is there any element of personalization right now when you come to Caraway based on the data that you just mentioned, whether it's demographics or anything else?

Jordan:

At the moment, not onsite. We're really focused, and this was highly intentional at the beginning of launching the brand that is we really want to create a product and brand that are really accessible to the most people possible and also, kind of narrow down the decision making that they have to do.

Stephanie:

Yeah, super important.

Jordan:

Right now, we've got one set, it's really simple, really the core decision is the color that you have to choose. As we grow and we start launching more products, I think that's where we'll start to see a lot more personalization and trying to help people, once you buy the cookware set or you buy another product, like what's that next piece that you should add into your kitchen and why do you need that product. I think that really comes with expanding the brand into those new categories and then creating sub-segments based on what their initial purchases were, where they come from, who they are as people, and how we can help them better merchandise and support them in their home.

Stephanie:

Mm-hmm (affirmative). Very cool. You've been in the world of Ecommerce for a while. What's one thing that you wish online sellers would either start doing or stop doing?

Jordan:

Great question. I think for me there's become this really big mentality of consumer products of growth at all costs. I think a lot of venture-backed companies have really, really pushed into achieving most of their sales through buying ads and buying customers. That's certainly a piece of growth, but I'd also encourage to really, especially in your early days, like growth's not that challenging to come by, you're starting with a smaller number and really putting the emphasis on word of mouth and expanding your return on ad spend. I think it's easy to get caught up in high growth, but you want to make sure those founding principles are there from day one.

Jordan:

I think generally as a piece of advice, that's one thing I think we've done well at Caraway and I learned from my prior experience. I just see a lot of sellers and vendors I think focusing on top-line growth a little too much in sacrificing something that's going to be more beneficial in the long-term.

Stephanie:

Mm-hmm (affirmative). Yeah, that does seem like something that a lot of companies, especially over the last couple years, have lost sight of. Because, like you said, I mean, when you have these VCs who are telling you that you need to hit these crazy growth numbers, it is kind of like, well, we just have to do whatever it takes to do it and to hit those numbers. It seems like in the process, a business wasn't actually built behind the scenes. Kind of like a fake business where there's only ads, buying customers, but then not having a good product and I think we're seeing a lot of the problems from that right now.

Jordan:

Absolutely. I think a big piece of it, too, is it's really building that mentality internal with your team and building a culture where it's just as much exciting to lower the cost on something as it is to increase growth or launch a new, fun marketing initiative. For me, I'd love to see more founders and teams focusing on that sustainable growth.

Stephanie:

Mm-hmm (affirmative), completely agree. Is there anything top of mind that we missed in this interview before we jump into a quick lightening round?

Jordan:

Nothing off the top of my head.

Stephanie:

All right. The lightening round, which is brought to you by our amazing sponsors, Salesforce Commerce Cloud, is where I send a question your way, Jordan, and you have a minute or less to answer or 30 seconds, whatever you want to do.

Jordan:

Perfect.

Stephanie:

Are you ready?

Jordan:

I am ready.

Stephanie:

All right. What's up next on your Netflix or Hulu queue?

Jordan:

Oh, tough question. I'm excited to watch Ozark, season three, have yet to get to it, but I've heard it's a good one, so that's been at the top of my list to get to.

Stephanie:

Nice. Yeah, that is definitely a good series. If you were to have a podcast, who would your first guest be or what would the podcast be about?

Jordan:

Would love to focus a podcast on brands that really focus on doing good for the world and, whether it's non-toxic products or eco-friendly products, really hear more about their journeys to creating those items and hearing about the larger impact that they have on the world.

Stephanie:

Oh, that's a good one. If there's any sponsors out there, hit Jordan up. We can help you out with that. All right. A slightly more difficult one where you might have to think for a bit. What's one thing that will have the biggest impact on Ecommerce the next year?

Jordan:

I think the short answer to this and tying it into, obviously, what's going on in the world is I think people staying more in their homes and what that means in terms of general macro online sales, brick and mortar. I think we'll come out of this with really a different world and excited to see how the retail landscapes starts merging with the digital landscape.

Stephanie:

That is a great answer. All right, Jordan, it's been such a fun interview. Thanks for coming on the show. Where can people find out more about you and Caraway?

Jordan:

You can check us out at www.CarawayHome.com and thanks for having me. This was super fun.

Stephanie:

Yeah. See you next time.

 

Jul 07, 2020
Diversifying To Become Future-Proof with Chad Ledford, Co-Founder of AddShoppers
47:49

Chad Ledford likes to say that his Ecommerce journey started with a van and a fax machine. And it’s true. Chad has gone from selling socks out of a van to building one of the first and only online sock-sellers in the early 2000s, to his gig now, as the co-founder of AddShoppers, a company that was named one of the fastest-growing startups in Charlotte for two consecutive years, and an application installed on thousands of eCommerce websites  There were obviously many twists and turns on his journey, and he explains them all on this episode of Up Next in Commerce. But the main idea that drove Chad throughout his winding road was the idea of diversification. Long-lasting success only comes through diversifying marketing platforms, acquisition tactics, and communication channels where you can build those coveted one-to-one relationships with customers. He explains it all here. 

3 Takeaways: 

 

  • Anything that allows you to build a one-to-one relationship should be valued above others. Be willing to experiment here to maintain customer relationships 
  • Be open to new and emerging channels and be ready to quickly experiment with those platforms so that you can be a first-mover and gain market share
  • More and more publishers will soon invest in creating their own platforms, thus lessening the reliance of major consumer channels like Facebook and Google

 

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey, everyone, welcome back to Up Next in Commerce. This is Stephanie Postles, your host, and today we have Chad Ledford, co-founder of AddShoppers. Chad, welcome to the show.

Chad:

Thanks for having me.

Stephanie:

I would love to dive into your background a bit, because it seems like you've had a really interesting background, and getting into ecommerce, I want to hear all the stories around that, and how you got to where you are today, if possible?

Chad:

Yeah, you got it. I like to say that it started with a van and a fax machine. So, to give you a little background, my grandfather who raised me has been in the hosiery industry for the past 25 years, so he kind of introduced me to just entrepreneurship in general, but whenever I turned 16 I took one of his vans and loaded it up with socks and went door-to-door to small businesses to sell the socks. So, I did that pretty much throughout high school, saved up enough for college, and then whenever I went to college, my freshman year I didn't do a whole lot, played probably too many video games, but it really introduced me to the internet.

Chad:

So, my sophomore year I started to get the itch around trying to make money again, and that's when I basically took the socks that my grandfather had, and then put up my first ecommerce store. It was built on Microsoft's ecommerce platform, I don't even remember what it's called today, but it was back in the early 2000s. We just put up a couple SKU's, I gave my grandfather a fax machine, put a fax machine in my dorm room, and then as I would get orders I would fax it over to him, and it would print the labels off for it.

Stephanie:

Oh, my gosh, that's amazing. So, what kind of socks were they to be selling like hotcakes like that?

Chad:

Yeah, it was pretty much every type of sock. So, I think Bombas has probably made it cool, but at the time we didn't really have a brand, it was just socks. It was like ankle socks, or crew socks, but nobody else was selling them online at the time, so we got really good at the search marketing side of it. If you bought socks in the early 2000s, you probably bought them from us, because we were number one on Google for the keyword socks, and-

Stephanie:

Wow.

Chad:

Yeah, it was kind of a fun adventure at the time.

Stephanie:

So, was your grandfather any bit hesitant to go online, or work with his grandson? What was that like working together? That sounds, yeah, just really fun.

Chad:

Yeah, he was really supportive early on until it got to be too many orders that he didn't want to do it anymore. So, he basically said, "We have to find someone else.", and then that's when we got introduced to the idea of dropshipping. We basically just needed to find somebody that wanted to handle the capacity, and then that's when we learned about dropshipping, and how that fits in ecommerce.

Stephanie:

Wow, so you've definitely seen it all from the very start. What are some of the biggest shifts that you remember where you're like, "Man, dropshipping used to be like this.", or building up a website I remember silly things that would be super hard. What were some of the things that you remember from back in the day that just kind of look silly now looking back on the processes that you were doing, or the things that you were undertaking?

Chad:

Yeah, I think whenever we started doing it we were just thinking about it more from like a tactical execution standpoint. But what I mean by that is we could basically put up a site, put some products on it, and then we could rank for it pretty quickly. We weren't really focused on creating a brand, we weren't really focused on lifetime value, or how do we kind of cross-pollinate between multiple brands and things like that, it was really just how do we rank number one for this thing, and then push as many orders through it as we can? So, I think part of that is just being young and figuring out what business actually means, and how to maximize lifetime value.

Chad:

But at the same time, just the shifts that we saw, search was starting to gain more momentum, and more people were going online to start to look for things, and that's when we started to see the shift from retail dollars going a little bit more online, obviously that's accelerated a lot recently. But yeah, it's just kind of interesting, at the time we just saw it as a way to make money, but now kind of in hindsight it was a bigger shift that was happening with people, and people wanting to get more convenience, and better deals, and things like that.

Stephanie:

So then what brought you to co-founding AddShoppers? At what point were you like, "This is something I want to do."? And could you give us a little background on what AddShoppers is?

Chad:

Yeah so, that first business, 3tailer, was really built around Facebook. Whenever Facebook made a change to their algorithm we had to react as fast as we could to try to keep up. So, whenever we started AddShoppers ... we tried to be a little bit ahead of the market when it came to social media. Again, this was before everybody had a Facebook profile, and Pinterest was just sort of coming online, but we saw that a lot of people were spending time there, and a lot of people were engaging there.

Chad:

So, the first version of AddShoppers was to try to figure out what was happening inside of social, and is it driving sales for people? So, it was mostly an analytics product that a brand could plug in and it would tell them if a social channel was driving sales, and if so kind of break that down and tell you how and why that was happening. But the thing that we were trying to solve is diversification of revenue. We had the 3tailer business, which was really built on SEO, but we saw social kind of up and coming, so we wanted to figure out how to monetize that and drive sales for our own business.

Stephanie:

Wow, that's great. It seems like you guys were definitely very ahead when it came to spotting these trends, and seeing something that could get big, and starting to offer solutions around it to give deeper data insights for that. How did you realize that was a problem for companies back then, when I doubt a lot of companies were like, "We need access to the data, we need to do more with it."? I mean, now it seems obvious, but back then were you getting customers who were looking for help around that?

Chad:

Not really, it's just what we felt through our business, we had felt the revenue impact. We didn't have a wholesale channel set up or a physical in-store, so whenever something changed online we had to be on top of it to figure out what was going to happen next, and as social was kind of coming online we saw it as an opportunity. So, it wasn't a stroke of genius, it was we had to to survive, and that was the main reason that we focused so intently on it.

Stephanie:

Very cool. So, what does AddShoppers look like today? How has it evolved?

Chad:

Yeah so, similar to the early days of search marketing, Google kind of won the market, and then same thing happened with Facebook, Facebook won the market. At the time when we started it there were probably about 20 different social networks that we were kind of tracking, and figuring out how to drive influence on, but once Facebook became the clear winner it was obvious that the same things were going to start happening, Facebook was going to make changes, that was going to impact people the same way that search did for our business. So, we decided to look into other channels, and more specifically we wanted to looking into channels that don't change often.

Chad:

The ones that don't change often are usually kind of the baseline architecture of the internet, it's the open protocols, basically email, or SNTP, being able to send a message to someone has been around since the internet started, and as much as people have tried to kill it, it's still one of the top channels, and it's one of the few things that a brand can really own and be able to have that direct communication with a client without having to ... or with a customer without having to pay some sort of an ad tax, or CPM to really get in front of those people. So, today our solutions are really focused on creating ways for brands to tap into those open protocols a little more of like email, and being able to message a customer directly without having to go through the big guys.

Stephanie:

Got it. So, how do you get those emails? Is it something that a brand could already access, or what does that look like? What problems or pain points do the brands have when they come to you?

Chad:

Yeah so, most digital commerce brands realize the value of email today, especially whenever it comes to retention and lifetime value. So, the conversations are a little bit easier now because they understand that it is a really strong channel, and it's one that they have to defend, but most brands can only tap into what's considered first party data. So, first party data is data that the brand captured themselves. So, a lot of people build up emails from popups, or they capture it during the checkout process or things like that, but that usually ends up being anywhere from like three to 5% of their traffic that they've spent a lot of money to get to their site that they're actually able to capture, and be able to continue creating that relationship with them. So, the problem that we help solve today is tapping into that other 95% of people that are on the website, people that haven't given them their email address yet, but they're still showing a lot of engagement, and they probably still want to try to get those people to be their customers.

Stephanie:

Got it, so the people who are just casually browsing, or maybe added something to the cart and then left, the people like that who didn't directly give the brand their email, but maybe seemed kind of interested.

Chad:

Yep, exactly.

Stephanie:

Very cool. So, one thing I've read a bit about is that you said brands have been over-reliant on Facebook and Google when it comes to customer acquisition. How do you envision sellers getting around those two giants? If that's a main channel like you mentioned, like they're dominating the market, how should a brand find customers if they're not going to rely on those two areas?

Chad:

Yeah, I don't think they should neglect those. I think they need to figure out how they can push as much volume on those as possible profitably, but as a lot of D-to-C companies have seen more recently, as everyone starts to do that, it gets more expensive for everyone, because it's an option. So, it's more about creating diversity in the revenue streams, and it's more about just creating a closer relationship to the customer, and the ways to do that is through one-to-one channels, or really any kind of open protocol. So, if email is an example, another example is SMS, push notifications, direct mail, really anything that can kind of get you one-to-one with that customer and really build the relationship. Those are the things that should be valued a little bit more. There's ways to do it where it's not scary, and you can track the revenue quite easily. So yeah, I would say that diversification of the revenue is really the big thing, it's not just about avoiding working with the big guys, but only using them as much as you need to.

Stephanie:

Got it, that makes sense. So, what are some maybe, not a case study, but an example of a brand who came to you and diversified their channels to start maybe using ... texting is one thing that a lot of people have come on here saying they're thinking about or they are experimenting with sending texts to customers or potential customers, but they're not always really sure how to check that or how to measure the results. What are some maybe examples where you've seen that work well, or other channels that have worked well that maybe a brand normally wouldn't have explored?

Chad:

Yeah, I think the one that comes to mind it's a pretty big omnichannel retailer, they have about 50 locations and they sell sporting goods. I don't know if I can share the name, but basically-

Stephanie:

That's all right.

Chad:

... they did a lot with the traditional advertising, so they ran local TV commercials, they ran local radio ads, and then they did a bit on Facebook and Google mostly around retargeting. They didn't really see those things as kind of top of the funnel activities, and because of that they basically relied on it for retargeting for the most part. So, they were basically spending on these offline channels, and then they were using digital as a way to retarget and try to convert those people, because it was the only way they could tie together the conversion of, "Hey, this person is on the website, and they just bought something.", and they could pretty much always get like a 10 to one return on ad spend.

Chad:

So, for them, they were kind of stuck in this omnichannel box where they couldn't do additional things for branding or impressions, because they didn't have a great way to track it, so whenever they started working with us, we helped them expand out into these other channels where they were still able to get a guaranteed 10 to one return on ad spend, because we were using things where we didn't have to buy media, like email and some onsite personalization things that we did for them. Today we don't have an SMS product, it is on the roadmap, along with push and a few other products, but really the email is still one of the biggest revenue drivers that we found for clients.

Stephanie:

Very cool, and do you help with looking into the data after you start these campaigns for the different brands and whatnot, because I know before we were recording you mentioned that you're really big into data and you love diving into that, so how do you incorporate that into the product, and with your clients?

Chad:

Yeah so, for us, there's two kind of chunks of data. There's the first party data, which you'll see in like Google Analytics, or if they have a CDP they can kind of analyze what their specific customer base is doing. The data that gets us really excited is network data, what's happening across a huge chunk of people. Our network sees about 200 million people each month, and kind of what they do throughout that purchase cycle, and then what they're actually responding to. So, whenever we think about data it's more about the overall trends and how you can change a visitor's behavior by creating a nudge, or creating some sort of incentive or offer to actually get the person to come back and convert.

Stephanie:

Got it, how do you have that big of a network, and how are you able to kind of see what people are doing?

Chad:

Yeah, so there's kind of two data sources that we have. One is a blind co-op, which I would say half of our clients are participating in that, and the blind co-op is the brands submitting data into it in exchange for being able to use the data that comes out of it to activate the campaigns. We don't sync data, we don't actually put data into another system, it's all self-contained within our system, but about half of the volume that we see comes from that co-op of data. And then the other half comes from publisher relationships that we have where we license the data, and again, we don't sell data, or we don't push data out of it so that users can still control all their data, but it gives us additional scale so that we can start to match who these people are.

Stephanie:

That's awesome. Was there any hesitancy with the brands sharing their data initially, or is it a little bit easier once they heard that other brands you were working with were already doing that?

Chad:

Yeah, we offer both. If they want access to the co-op data, they have to be part of it, so they have to submit to get access to it, that's basically what makes it the co-op. So, they can still work with us, and they can still tap into that publisher data, and a lot of the enterprise brands that we work with will never submit any data to any other system including us, and it's just off the table, it's not going to get through legal. We can still work with those brands, we just do it through our licensed publisher data. But the thing that gets us really excited is that idea of the co-op, and the brands being able to work together to do more together.

Stephanie:

Yeah, that's really cool. What's some of the most interesting things that brands have seen when they utilize the co-op data where they're like, "Oh, I never realized this or that."? Have you heard any underlying themes from these brands where they're getting access to something that maybe they never even knew to look into before, or had enough data to see that trend?

Chad:

Yeah so, we're still pretty early on the insight side of this and being able to open up things that they haven't been able to learn on their own. I would say we're a lot further along on the activation side of the data, so being able to actually perform a campaign that drives incremental results. So, just as an example, whenever we send out browse abandon or cart abandon emails, we end up sending about five to 10 times more emails than they're able to send internally. So, if a brand is sending out like 10 cart abandon emails a day right now, we'll probably send 50 to 100 of those by leveraging the data that we're tapped into, and then the benefit of that is revenue and less cart abandonment.

Stephanie:

Yeah, that's really cool. How do you guys identify shoppers that maybe were unknown before? Like if a brand couldn't identify them before, how are you all able to identify that shopper more easily?

Chad:

Yeah, so the core technology that this is built on is called deterministic identity resolution. It's a little bit of a mouthful, but Facebook has the biggest identity graph which uses deterministic identity resolution, and the way that it works is pretty simple. You, as a user, you've signed into Facebook on your phone, tablet, laptop, all of these various sources, and as you've done that, Facebook has given you an identifier, your Facebook ID, and then it's slinked that to the different devices that you've done it on. So, our system works the same way, if you go to a publishers site, and you use an email address, our system encrypts the email and hashes it, and then we slink that to the device that you do it on.

Chad:

As you do that across a network of devices and different publishers, that's how we're able to slink an individual, or a hashed email, back to the actual devices that belong to that person. Once you have that slink, then you're able to perform different types of marketing campaigns. So, what we're doing is actually no different than what Facebook and Google are already doing, except we activate the campaigns differently. Those guys, you can only get access to that identifier if you buy media through them and if you show an ad on Facebook, or across Google's display network. Ours lets you do the same thing, but we're doing it across open protocols like email, and SMS, and other channels.

Stephanie:

Ah, got it, and are you able to create like a shopper profile once you have all that data to then know how to maybe personalize your messaging to them, or really cater to that buyer who left?

Chad:

Yeah so, we don't append a lot of data to the actual identifier currently, mostly it's just the actual product that someone looked at, just so that we can dynamically include that product inside of the email, or anywhere else that we want to kind of push that product data to. So, we don't include anything like gender data, or demographic data, anything like that, right now it's just the email to the identifier. But as we continue to grow the dataset then that starts to get more interesting, and that's what's going to enable opening up insights and things like that. But today, we're really just heavily focused on the use case of kind of winning back those lost people using this unique dataset, and then from there we can start to append additional data to it as we go.

Stephanie:

Got it. It seems like there'd be a lot of new customers coming to you with this new D-to-C movement and a lot of people getting online really quickly now, especially with everything with the pandemic going on, have you seen a surge of customers coming to you and saying like, "Chad, help me. We have a bunch of people now visiting our site, and we actually don't know where they're coming from, and how to bring them back."?

Chad:

Yeah, most of our business is still driven through word of mouth, or through our agency partnerships. So, it's definitely been an influx this year, we're growing probably 20 to 30% month over month right now, just given-

Stephanie:

Wow, nice.

Chad:

... everything that's been going on. So, it's a pretty exciting time, and it's awesome to see people looking outside of just Facebook and Google to figure out other ways to monetize.

Stephanie:

Yeah, that's awesome, congrats, that's great numbers, of course. When these brands are coming to you, are there any blind spots that you're like, "You obviously are missing this.", that a lot of larger brands just haven't looked into before?

Chad:

So, larger brands have a harder time kind of doing the up and coming things. Obviously they have a lot more things like infosec and legal that they have to go through. So, my only criticism of big brands is just that they don't test enough or fast enough, it's more about just speed of iteration. The space that we're in, digital commerce, it changes so fast, and by the time you're doing something that everyone else is doing you have to pay a premium for it. If the bigger brands could just get a little bit earlier in the adoption cycles of things, then they would be able to capture more market share and more of a customer base, and not have to worry so much about the D-to-C guys.

Chad:

But that's really the biggest difference between the big brands and why D-to-C's continue to capture more market shares, because they iterate so much faster and they test so much faster. So, my only feedback to big brands would be to figure out how to do it faster given all the internal constraints, and if you can figure that out it's not about finding one silver bullet, it's just getting through those iterations a lot faster.

Stephanie:

Yep, yeah, I definitely have seen that in practice before with having to go through a million approvals just to get one website, or one bug fix, or whatever the case may be. I'm thinking though right now might be a great time where brands have kind of broken down some of those barriers, because they had to move fast because of everything with the pandemic going on, they had to quickly stop campaigns, start different ones. I mean, so much has gone on over the past couple months, have you seen that on your end where it's shifting needs, and shifting a pace that maybe they weren't ever acting at before?

Chad:

Yeah, there's really kind of three camps that we're seeing play out. One is sort of the travel camp, which is at a halt, nothing's going on, and then at the other end of that is food delivery services, or really any kind of online education, which is just exploding, 400 to 600% over what they were before, and they're just getting hit so hard that they can't take on any additional projects for lack of resources, they're just trying to keep up with what they have. But then there's kind of this sweet spot in the middle of brands that are growing, maybe they're growing like 20 to 100% over where they were last year, and they're starting to hit kind of those Black Friday levels that they were at in Q4. They weren't really ready for it, but after the first couple months of this, I think people have started to realize this is probably going to maintain, and those are the brands that are really kind of what I see is capturing a bulk of the D-to-C movement right now.

Chad:

The guys at the other end of the spectrum where they're just getting hit so hard, yeah, they're winners but all the other competitors are also winners. So, we don't really know who the winner is out of all the winners yet, but in kind of that middle range, those guys that are competing in the middle, and still getting pretty reasonable growth rates, the ones that are getting another 10 or another 50% growth because they are able to iterate a little faster, those are the ones that are going to come out the big winners in their categories.

Stephanie:

Yep, yeah, completely agree. It'll definitely be very interesting to see who sticks around, because it seems like a lot of these trends, and I know it's been debated for the past maybe month of like what's going to stick, what's not going to, I think the data's coming in now that quite a bit of it seems like it's going to be here for the longterm. Do you have any thoughts on what's going to last trends wise, and what's going to maybe revert back to how it was a few months ago?

Chad:

Yeah, I think the ... we've just been kind of playing it out month to month. I think we're assuming that half of all the growth is probably going to stick. So, if you were doing $100 last month, and you're at $200 this month, then your new normal's probably 150. Maybe that's conservative or completely wrong, but I don't know how else you'd model out in this world. I think it's definitely inflated right now, but I don't think it's going to go back to where it was, so we just kind of picked the middle of the road there, and assume that half of it's probably going to stick.

Stephanie:

Yeah, no, that's probably a good initial methodology to use. I think one thing that's always interesting is looking at what's happening in China. I think I was reading about the Starbucks app how maybe it went to 85% usage from maybe 10% or something like that, and then it dropped back to, I think, like 33%. So, it showed that, like you said, it was inflated at a certain point, but now it was a huge channel shift to more people never probably going back to waiting in line, and ordering at the kiosk, or whatever it may be. Same with Philz here, I ordered online, or through the app a few times, and I'm like, "Why have I never done this before? Why do I walk up and stand in line?" It feels silly now. So yeah, I agree, that's probably still a bit inflated, but there would be quite a bit of a large shift that maybe not everyone's anticipating.

Chad:

Yeah, and the lifetime value approach to this, or figuring out how to get retention right is really going to determine the winners out of it. I think a lot of people are doing it now because they have to, so they're getting exposed to different things like an app, or they're buying something online for the first time, but if the experience is better than what they did before, they're going to keep doing it and then you can create the new behavior. But if the experience is worse, then they're going to sour on it, and then if it's not any better than what they were doing, they're going to go back to it.

Chad:

So, part of the onus is on the brand to really own that, and this is definitely a window of opportunity for every brand to get in front of more customers, and to acquire a customer for a little bit less, but the more that they can just focus on creating that great experience the easier it's going to be. A perfect example, we ordered a couch from Costco, like some outdoor furniture, and they shipped the complete wrong set to us, and it's still in our driveway after three weeks, and they haven't replied yet-

Stephanie:

Oh, my gosh.

Chad:

... so it doesn't make me want to buy from Costco online-

Stephanie:

Oh, no.

Chad:

... instead of just going to Costco. But yeah, any time that those kind of scenarios play out to the customer, they sour to that experience from that brand.

Stephanie:

Yeah, I'm trying to think of ways of how brands can rise above the noise, because I think through all the push notifications I'm getting right now, and some of them are helpful to keep them top of mind, I think it's like Uber Eats, and DoorDash, they're sending me coupons, and I'm always seeing notifications pop up that kind of remind me like, "Hey, you did this once, don't forget about us." But then a few other brands it seems like they're silent, and they haven't thought about maybe how to actually keep me engaged and retain me after all this dies down. How do you think about keeping a customer who maybe wasn't on that channel before retained to come back for the long haul?

Chad:

Yeah, I think it comes down to trying to create that personal experience and letting them know that you're always going to have their best interest at heart. I think that's probably where most people are under-investing right now, they're over-investing in supply chain or logistics because they have to have those things, but if they really go above and beyond on the customer support side and try to find those ways to have a conversation, it doesn't always have to be phone, it can be chat, it can just be a really responsive email team, but that's really where you can separate is ... most people kind of understand right now that things are going to be a little bit delayed, and shipments might take a little bit longer, but if you can't get back to a person in time, and if you're not letting them know that you're going to bust down walls to do what's best for them, then you're risking losing that person. And I think that's been proven with Zappos, Amazon, pretty much any one-to-one ecommerce, Chewy, it's all about the customer experience, and customer support is really what drives lifetime value.

Stephanie:

Yeah, completely agree. It seems like right now is a really good time too where you have the customer is a little empathetic to, like you said, things being delayed. I know I ordered something off Etsy, and it's like three weeks delayed. However, the person who is selling it has been constantly keeping me updated of like, "Here it's in San Francisco, here it's ... I see it on the map, I'm so sorry it's delayed." But I feel actually okay with it being delayed because she's been so open about where it is and why it's delayed and all of that. I think that's a good point of if a brand gives a good customer experience, even if something's not going well, that customer could still walk away with feeling good about it and having a good relationship with the brand just because they knew what was happening throughout the whole process.

Stephanie:

So, you've been in the world of ecommerce for a really long time, so I feel like it's good to kind of make sure you answer some high level ecommerce questions since you seem to be a good expert to ask. What's one thing that you wish online sellers would either start or stop doing?

Chad:

Yeah, I think starting's probably going go back to just iterations and testing faster. I think it's ... Most ecommerce teams, and the VP of ecommerce and CMOs, they'll usually set a KPI of like, "Let's hit 200,000 next month in sales.", or whatever it is. What they don't really set is tests, how many tests are we going to run next month, and whether those tests are successful or unsuccessful, being able to really emphasize that, and get through those cycles faster, that's the fastest way to really kind of have a process that lasts a long time in this space, because everything else is going to change. The channels are going to change, the way we market is going to change.

Chad:

So, the thing I would say do less of is kind of trying to squeeze a little more out of the lemons that you've already squeezed. So, if you've already done a lot through Google shopping, and you kind of optimized AdWords, then yes, there's always room for improvement, but if you try to get in front of that next thing that happens, it's going to pay dividends down the road. So, I would say do more testing and more iterations, and a little bit less optimization on all the things that have already worked once you're comfortable with those.

Stephanie:

Ooh, I like that, that's a good answer. It seems like brands right now are pretty hesitant to either do a lot of iterations just because of everything going on, or market in general. Have you also noticed that trend?

Chad:

Yeah, I think that's starting to loosen up a little bit now. I think a lot of brands just didn't know what to think early on, and for better or worse it was a great reason for them to go back and renegotiate a lot of things with a lot of people. So, I think they've kind of gone through that, probably cut some costs, and now they're realizing, "Oh, we might not have had to do that, but that was good to do. So now what are we going to do with all this extra stuff that we have?" So, I think people are starting to be a little more open to it now. Marketing budgets, any time there's a downturn, is always a thing that gets hit pretty hard. But ecommerce is definitely kind of in its own bubble, in its own world right now, so I think it's going to get a lot more attention that it didn't get before, and I think it's going to get a lot more emphasis on growth than it did before.

Stephanie:

Yeah, yeah, I completely agree. Is there anyone that you watch in the field ... not in the field, but I guess in the industry that you're like, "This is a good brand to watch.", where they stay ahead of trends, they're always kind of one step ahead of everyone else?

Chad:

I think wish.com is one that probably doesn't get talked about a whole lot-

Stephanie:

No.

Chad:

... but they do a lot of really interesting things. I think when people think about D-to-C they end up leaning more towards the actual brands like Allbirds and those guys, which do a great job, but I think it's really interesting to watch the guys like wish.com, and even some of the stuff that Pinterest is doing right now is starting to get pretty interesting, more of kind of the marketplace approach. So, if I'm a D-to-C brand and I'm selling shirts, those are the guys that I'm trying to work with a little bit more.

Stephanie:

Got it. So, what is Wish doing, because I haven't kept up with them. I downloaded the app back in the day, and it wasn't the type of things that I would want to maybe buy quality wise, but I heard it has gotten better, so what kind of things are they doing, or Pinterest, that you got your eye on?

Chad:

think they're realizing that discovery is becoming more of a thing, especially on mobile devices and mobile apps. So, Wish does a lot with kind of endgame ads, and driving media buys directly from publishers. They don't do a whole lot on Facebook and Google, because it just gets too expensive, but they've gotten really good at running kind of the remnant ads, and driving downloads, which they can kind of funnel all the way through to a conversion.

Chad:

So, their conversion path is a little more complicated than just like, "Here's a Facebook ad, and did they buy a shirt?" But the way that they're able to monetize that is because they're focused on a little bit higher funnel conversions like an app download, and they know if they can get the app download, let's just say half the people are going to end up buying something for $1, because most of the stuff on Wish is $1, and then after that maybe they'll start to buy more expensive things on there.

Chad:

It kind of goes back to the ... there's a psychology study about a guy that was running as a candidate, and he wanted to get people to put these big signs in front of their yards. So, he went to half the houses and gave them a huge sign and said, "Will you put this in your yard?", and then he went to the other half of houses and asked them if they would put a small sign, but then he went back a week later and said, "Can I replace that small sign with a big sign?"

Stephanie:

That's good.

Chad:

Half the people would let him upgrade to the big sign after they got the small sign in place instead of asking for the big thing upfront. So, I think the brands that are really doing a good job right now are focusing more on those type of tactics where you have a small ask for the consumer, and then you sort of build on that over time instead of just asking them to buy a $1,000 mattress.

Stephanie:

Yeah, I like that story about the signs, I'm going to have to use that one in future episodes. Do you think it's ... Is there any reason to be nervous around relying on marketplaces like Wish, or Pinterest, or even Amazon?

Chad:

When they get too much market share that's when it becomes a problem, because then they can kind of control the ocean. It's best if there's a lot of players, usually five plus players, because then you've got options and you, as a brand, have a little more negotiating ability, and you've got some more leverage. So, this is what happens in the world, everything kind of gets consolidated, and then it starts to break apart again, or it gets unbundled. So, I think we just kind of keep going through those cycles, and then as you can, as a brand, capitalize on those cycles and try to do enough testing where you can figure out what that next shift is going to be, that's when you really start to hit your strides.

Chad:

A lot of the D-to-C brands that we look at today, and we're like, "Hey, these guys are awesome.", it was because they were early on Facebook Ads, and then they diversified outside of that. So, they really got their momentum by finding that market opportunity where there wasn't a lot of competition, and then capitalizing on it as fast and as hard as they could until it became too competitive, and then they expended it out, now they run TV, and they're basically a traditional brand like everyone else. So, if you want to be a successful D-to-C brand you have to find one of those market opportunities where you think that a wave is going to happen, and then you just ride the wave as long as you can.

Stephanie:

I like it. So, are there any platforms that you're paying attention to right now, or that you've heard some of your brands are looking into that are maybe more early?

Chad:

TikTok's probably the biggest one [crosstalk 00:38:46]-

Stephanie:

Yep. A lot of people have brought that up.

Chad:

Yeah.

Stephanie:

But tell me your thoughts on TikTok.

Chad:

So, they still have a lot to figure out with TikTok's ad platform, but this is always how it happens, they have a huge group of customers, and they're getting a ton of impressions, but they don't necessarily have all the data that they need to be able to get the highest CPMs for those impressions. So, right now it's sort of a ... they're just kind of running brands one-off, and you can get CPMs for pennies and just hope that it does something. TikTok doesn't have a very robust attribution system as far as like, "When they saw this did they actually convert?"

Chad:

But that's always how it works. If you can find something that really resonates then it's going to ... you can just maximize it, you can just push it as far as it'll go, and as far as your supply chain can handle it. So, there's no clear, "Do this on TikTok and you get this.", and that's what makes it appealing. If you can get into a platform like that, run a ton of experiments, and figure it out before the next guy figures it out, then you get the cheapest CPMs, and you get a huge growth rate from it.

Stephanie:

Got it, yeah, that's really interesting. It's funny how many people are starting to look into that, but no one's fully explained it how you did about why you want to find a platform, like you said, that it's not a, "Do this, and then you will get this result.", because if it's like that it's probably everyone already knows how to do it, and there's a lot of competition, and it's expensive.

Chad:

Yeah, I think Gary Vee probably said it best, but marketers kill everything. Once you figure out something works, then every other marketer's going to do it, and then it's going to stop working.

Stephanie:

Oh, he is heavy on TikTok, so he's-

Chad:

Yep.

Stephanie:

Yeah, I've gone on there a couple times and seen him all over the place on there. Are there any other platforms like that that you're looking into?

Chad:

I've heard retargeting on Snapchat's pretty good depending on the audience that you have, if they're under about age 40 then you can usually get pretty good results on there, who knows what that's going to keep growing into. There are some D-to-C companies that get pretty good traction on Twitter. I don't know if either one of those are really kind of growth channels anymore, they're more like optimization channels either for retargeting, or just figuring out how to get a little bit lower CPM, maybe it's half the rate of Facebook, but it could still work pretty well.

Chad:

I think what's going to happen next is that a lot of the publishers are going to start creating their own ad systems for this stuff. I think a lot of the publishers are sitting on a lot of data, and being able to target that data with them directly is going to be enabled by CDPs, or customer data platforms. So, a lot of these guys are starting to build those out now so that they're less reliant on Facebook and Google's ad systems for all the ad buys. So, I think that's where the unbundling is probably going to happen, it's probably going to happen with the publishers as they start to pull inventory from those guys, and start to figure out their own ad system. And if they can start to figure out lookalike models that work on the publishers sites, then you can cut out some of the middle guys, and then drive down the rates, which makes it more appealing to the D-to-C guys.

Stephanie:

Yeah, ooh, that's interesting. That'll definitely be fun to watch, because yeah, I've seen a lot of posts right now around people going to the more expensive platforms, maybe like LinkedIn where everyone's like, "It is not efficient budget wise to try and run ads on maybe LinkedIn.", but if you run a small subset on there, and then you retarget on Snapchat, that is way cheaper. That's how a lot of companies seem to be trying to get around the more expensive platforms right now. So, it'll be fun if more open up that aren't like that, or you don't have to go through that many steps to actually find your audience.

Chad:

Yeah, definitely, and I think another one is Tabula, if you haven't tried Tabula, you probably should, they've got lookalike models now and some retargeting, and the CPMs are still pretty low, so they're definitely one to keep an eye on.

Stephanie:

Oh, I haven't heard over time that, I'll have to check that out. So, is there anything that you want to share before I move into the lightning round where I ask a couple questions, and you have to have a quick question answer? Anything around ecommerce, or AddShoppers that's top of mind that we missed?

Chad:

So, we deal a lot in customer data, so sort of the elephant in the room with us is always upcoming regulations, and how do customers actually want to use their data, or how do we create an environment where we can have trust in the marketing world without violating someone's personal data. So, we as a company, we launched a brand called SafeOpt, it's S-A-F-E-O-P-T.com, and SafeOpt is basically the endpoint for shoppers so that they can tap into our data. A lot of companies have created things for CCPA, and GDPR that are limited to just California or just Europe, but we've created the SafeOpt brand to be exposed worldwide to anybody that ever wants to get access to their data, and I think that's how we, as marketers, build trust with consumers is by making everything transparent.

Chad:

I know like my grandparents and in-laws and things like that, they sometimes think if they're near an Alexa and they say something, Alexa's picking up on it, and all of a sudden they're going to start to see ads for those things. As a marketing technologist I know that the amount of data they would have to ingest to do that is pretty much near impossible, and that they're probably not going to do that. But it's little things like that, that create this perception of marketing being a bad thing, or marketing being a thing that is like this black box of it knows everything about me. So, I think that we, as marketers, have to continue to push towards versions that create transparency, and versions that give control to people that want control.

Stephanie:

Yeah, that's great. So, for the brands that are just optimizing for the California or European rules, what could you see happening for people who aren't thinking more holistically? Could they lose access to ... maybe if they had a whole customer subset dataset where maybe if they didn't do things correctly from like a privacy protection area, would they lose that whole entire dataset and couldn't use it in the future, or what do you see happening if they don't get ahead of this?

Chad:

I think a lot of it's more hyped up than what customers actually want to do. We get very few CCPA requests, or GDPR requests. Most people are just curious, they want to know what's in there. They don't necessarily want it to go away as long as there's some sort of benefit for them. Some people do, and you want to purge those people as easily as you can, because you don't want to violate their trust either. If they want to be completely anonymous that's up to them, but I would say that's probably less than one to 5% of all people, and it's probably the group of people that isn't the highest lifetime value. But yeah, I would say just focus on creating a ... It's one thing to just do what the regulation requires you to do, and it's a completely nother thing to do something that creates a good customer experience while accommodating the regulation.

Stephanie:

Yep, yeah, I love that. Cool, all right. Well, with the last couple minutes I was going to move into the lightening round, brought to you by Salesforce Commerce Cloud, are you ready, Chad?

Chad:

Let's do it.

Stephanie:

All right. What's up next on your podcast list?

Chad:

Ooh, I like Joe Rogan.

Stephanie:

Yep.

Chad:

I think he's pretty much just constant.

Stephanie:

But now you got to go to Spotify for him, right?

Chad:

Yeah, pretty much.

Stephanie:

Yeah, I like him, too. What's up next on your reading list?

Chad:

I'm reading Great by Choice from Jim Collins right now.

Stephanie:

Mm-hmm (affirmative), awesome. You'll have to go to our Mission Daily podcast, we are having Jim Collins ... we had him on the show, but we haven't published his episode yet, so I think it's coming out in a couple weeks.

Chad:

That's awesome.

Stephanie:

So, you'll have to go over there afterwards. What's up next on your Netflix queue?

Chad:

I've got a eight-year-old and a four-year-old, so I don't really get a Netflix queue right now. By the time nighttime comes around I'm ready to go to sleep, so I've got nothing.

Stephanie:

All right, I like it. What's up next on your travel destinations when you can travel again?

Chad:

Yeah, we go to Maine every year, this is going to be the first year we missed it in probably like 14 years-

Stephanie:

Oh, no.

Chad:

... so we want to get back to the Maine beach as fast as we can.

Stephanie:

Oh, that sounds fun. Yeah, Maine seems really pretty, I need to check that out. All right, and the last, slightly harder question, what's one thing that will have the biggest impact on ecommerce in the next year?

Chad:

All right, that's a trick question. One thing with the biggest impact ... I think it's probably going to be the unbundling of Facebook.

Stephanie:

Tell me more.

Chad:

I think that ... So, Facebook is ... I would guess that they've hit their prime, and that micro-networks are going to start to grab users away from Facebook and push them over to their platforms, and all the various iterations that that's going to happen in. Mark's done a great job of kind of buying all the scale and everything that Facebook has now, but I think that without them continuing to innovate there, and with all the things that are happening inside of Facebook right now, I think they kind of hit their peak. I could be totally wrong, people said the same thing about Microsoft and a lot of other brands, but I think that's probably what's going to happen next. And then that's going to drive, for ecommerce, new opportunities like we were just talking about where if you're early enough on those you're going to be able to drive huge brand awareness and a lot of sales.

Stephanie:

Cool. Yeah, that's a great answer. All right, Chad, well this has been a blast, where can people find out more about you and AddShoppers?

Chad:

Yeah, so AddShoppers is A-D-D Shoppers.com, and I'm on Twitter @ChadLedford.

Stephanie:

Awesome. Well, thanks for coming on the show, and we'll see you next time.

Chad:

All right, thanks, Stephanie.

 

Jul 02, 2020
How Anomalie is Disrupting Tailored, Personalized, Physical Experiences One Wedding Dress at a Time
53:50

Making the switch to online shopping has been easier in some cases than others. Buying laundry detergent online, sight unseen doesn’t feel quite as high-risk as a larger purchase like say a car or a house. It makes sense, then, that certain industries have been slower to fully embrace the Ecommerce experience. Bridal is one of those industries, but Leslie Voorhees Means thinks that it’s time to shake things up. Leslie is the co-founder and CEO of Anomalie, an online-only custom wedding dress company, and on this episode of Up Next in Commerce, Leslie explains why she thinks her model is going to be the one to disrupt the market. Thanks to a blend of tech and human stylists all focused on customization and personalization as well as taking control of the supply chain, Leslie says that Anomalie has found a way to solve many of the pain points brides run into during a traditional wedding dress shopping experience. Thousands of customers agree so far, and as growth continues, Leslie has her eyes set on new technologies that she believes will lead to a sea of change in the entire Ecommerce world.

3 Takeaways:

  • Understanding and owning your supply chain is becoming more of a focus for D2C brands and it will be a differentiator moving forward. Building a strong supply chain presence allows you to have more flexibility, agility, and ability to scale
  • Transparency and communication is a business advantage when competing against bigger brands
  • When tailoring custom unique experiences, tech can’t completely replace a human element

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey everyone, welcome back to Up Next In Commerce. This is Stephanie Postles, your host. And today we have Leslie Vorhees on the show, co-founder and CEO at Anomalie. Leslie, thanks for coming on.

Leslie:

Thanks for having me. Happy to be here.

Stephanie:

Yeah, we're really excited. So, where are you located at right now? What are you up to?

Leslie:

We are in San Francisco. So, the company was founded and is headquartered here, but we have a couple offices around the U.S and the world. We've got our customer service stylist operations in Scottsdale, Arizona. And then we've got a team that manages our supply chain operations in Hong Kong.

Stephanie:

Oh, very cool. Hong Kong sounds awesome. So, I'd love to hear a little bit about Anomalie then. We're jumping into it quick, but yeah, talking about offices in Hong Kong, it sounds like it's expanded quickly and grown from where you started. So, I'd love to hear a little bit of the background there and what brought you to Anomalie.

Leslie:

Yeah, for sure. So, I never actually expected to be founding a company and was not expecting to be in bridal. This idea for the company came about through my own frustration when I got engaged and shopped around for my perfect wedding dress and had a really, really hard time finding, I had this picture of a dress that I really wanted and couldn't find it in boutiques and was pretty horrified by the prices.

Leslie:

My background is in mechanical engineering and manufacturing. I've always worked for big companies. Started my career at Nike and fell in love with the factory environment and product development and being able to create real physical products. And was working at Apple at the time that I got engaged and was working on the launch of the Apple Watch and was in China quite a bit. Did a little bit of research because I knew co-workers of mine had custom clothing made, mostly men's shirts and suits and things.

Leslie:

And ended up finding Suzhou, China, which is outside of Shanghai, which makes most of the world's wedding dresses. 80% of the world's wedding dresses are made in and around this amazing supply chain hub of expertise and craft. And worked directly with one of the workshops there when I was out in China for work and was just absolutely floored by the price but also the quality and the levels of customization.

Leslie:

I could pick out everything from the lace to have it be custom-tailored to my body. And mentioned it to a couple of friends and almost immediately started getting requests for orders before this was even really a company and realized pretty quickly that other women felt the same frustrations that I was feeling around not quite finding what they want for, arguably, the most important garment that you're ever going to wear.

Leslie:

And then another interesting insight besides just the virality of those original orders was the first couple dozen requests were coming from women that said they wanted something really special, and really different, and really unique. And in reality, the dresses looked very, very similar. People were like almost ordering the same dress because wedding dresses are uniquely low variable. It's white, it's ivory, has lace or no lace, there's limited silhouettes, there's limited styles, has a longer product life cycle than a lot of garments and fashion.

Leslie:

And so, there were the seeds of this idea for mass customization that was really exciting to me as an engineer to think about how we could scale this to give tons and tons of options to brides, but on the operations side be really efficient and be able to have the benefits of scale by thinking about these modules that can be customized. So, the skirt, or the neckline, or the straps, or the sleeves, et cetera.

Leslie:

So, we've thought about that a lot as we've grown in the past. So, that was about three years ago, a little over three years ago that we started and since then have grown to serve thousands and thousands of brides. And are building, from the technology side, a way to be able to visualize the dress in an easy and fun way, given that we don't have brick and mortar shops.

Stephanie:

That's amazing. Yeah. It's very interesting hearing the story of your background of being like, "I need a wedding dress," and actually going to the district in China where they're made. I can't think of many people who would solve their own problem like that. Was there any surprises when you were going and meeting these companies there and just thinking through, "Hey, this could actually be a business," or any findings when you went there that you weren't expecting?

Leslie:

Yeah. I think one thing that was really stark that I noticed right away was I was the only foreigner in this area. It was very apparent that Chinese women knew that this is where you can get really high quality, almost like haute couture type of like custom garments. But I was the only foreigner, the only white person walking around getting a lot of stares.

Leslie:

I think that was really representative that there was a secret that was being uncovered. That was how I was thinking of it was, this is something that can be untapped. And just given my conversations with friends, and then friends of friends, and then friends of friends of friends, as the idea started growing was, women really want to be able to tap into that but need a trusted source.

Leslie:

There's a lot of direct from China websites and horror stories about women ordering a dress and then when it actually shows up it's low quality or not what they were expecting at all. And given, again, this is a very emotional important purchase. Having someone that you know and trust on the ground, I thought was something that was going to be really important and that has remained important the entire history of the company.

Leslie:

And then I think the other thing that was surprising was just the breadth of quality in Suzhou. It was, you could get everything from a very, very, very inexpensive cheap wedding dress for a couple of bucks all the way up to dresses that were almost as much as it would cost in America and wide ranges of quality.

Leslie:

I remember I vetted probably a hundred or so factories when we were first starting up and it was pretty apparent the ones that didn't take quality as seriously. There was one factory that I remember where everyone in the factory was smoking cigarettes-

Stephanie:

Oh my God.

Leslie:

... which is not something that you would want in a high quality [crosstalk 00:07:03].

Stephanie:

What's their reviews on Amazon? People are like, "Hey, it smells smoky. I wonder why. Now we know."

Leslie:

Yeah, exactly. So, that one was an easy one to cross off the list. But then on the flip side, there were a lot of really, really sophisticated entrepreneurial factories that we met with that I think could feel the shift that's happening in bridal, which is that it's one of the, I think, last verticals that hasn't really been disrupted by an online presence. Wedding dresses are still 95% brick and mortar in the U.S.

Leslie:

And a couple of years ago, it would have been crazy to say that you're buying your eyeglasses, or mattresses, or TVs, or books, or whatever on online. And it's still a little bit crazy to say that with wedding dresses, but I think that's exactly why I was so interested in it because it felt new and different. I think that that's the making of a really good startup, a good, crazy idea.

Stephanie:

Yep. Yeah. I completely agree. It seems like there could be a lot of D2C opportunities that go directly to the source like you did. Because a lot of them, people are coming online. They want not go through someone else to sell right now. Is there any other areas that you can see going direct to actually help with the business model, or maybe friends, or mentors in the industry where they realize, hey, there's a lot of opportunity if you go directly to the factories and see how they make it and develop your own relationship, instead of always relying on a wholesaler, or drop-shipping, or whatever it may be?

Leslie:

Yeah. I have to credit my internship when I was in business school. I was really, really lucky enough to be a part of the core founding team of M.Gemi, which is direct to consumer high, high quality Italian footwear. And I was able to go with the founder over to Italy that summer-

Stephanie:

Wow.

Leslie:

... which was the coolest internship ever. Much more glamorous than some of the factories in China.

Stephanie:

Wow. I want that internship now.

Leslie:

Yeah, exactly.

Stephanie:

Can I sign up for that?

Leslie:

It might be the coolest job I've ever had. But it was really, really interesting because they had set up relationships with these Italian craftsmen that make shoes for, I mean, the factories we saw were for Yves Saint Laurent, and Prada, and Valentino. And the same hands that were making those shoes had extra capacity to make high quality shoes that didn't have the designer label and then designer price tag.

Leslie:

And tapping into that direct to the workshop and direct to the craft idea was something that I got to see that M.Gemi was doing and is apparent all over e-commerce with, I know Away luggage, I think, started with making partnerships directly with the workshops and, I'm trying to think of another. Oh, the mattress, a lot of the mattress companies are... There are these pockets of expertise and by being able to sell direct to consumer, it cuts out the middlemen and obviously cuts out a lot of the costs.

Leslie:

And then also for us, especially being able to centralize stylist operations, and tech, and our finances, and all of that allows us to scale nationwide without having those costly retail footprints. And then also we can scale the experience from a customer experience side.

Stephanie:

Very cool. So, if you're looking back now on picking factories and workshops to work with directly, what were some of the lessons that you took away from it where you were like, "I would do this over again," or, "I did it this way and it worked out really well," if someone were to try and start this process from scratch?

Leslie:

Yeah. Well, I'd say definitely no cigarettes present in the factory.

Stephanie:

Step one.

Leslie:

Yep, step one.

Stephanie:

All right everyone, that's all you need to know.

Leslie:

That's the secret. No, I think also the appetite for international partnerships. And we were lucky because we started really small with just a few orders. And a lot of partners, especially in China, require minimum order quantities to be able to produce with them. And we found partners that were aligned with our vision of entrepreneurship and scale, but we really had to sell the vision probably similar to fundraising and selling the ideas to venture capitalists to get funding.

Leslie:

We had to sell the idea to the workshop managers as well to buy into this idea because we did not have massive amounts of orders at beginning. And so, definitely alignment on a strategy of customization and a strategy around scaling through tech and having technology-enabled operations to be able to get bigger and better. That helped a lot to be able to find some partners that were really, really aligned with that vision.

Stephanie:

Yeah. That definitely makes sense. It's like when you're looking for a contracting job or something like that, the people who apply maybe aren't the ones you always want versus going out and actually sourcing the exact person that you want to work on your project, or employee, or whatever it may be.

Leslie:

Exactly.

Stephanie:

Always seems to work a little bit better.

Leslie:

Yeah.

Stephanie:

So, for Anomalie, when I was thinking about, I've had a wedding before, I've bought dresses, and I was thinking, "Oh man, that seems like it could be pretty hard to do direct to consumer online because of the measurements, and making sure it fits, and wanting to feel the fabric and all that. How can technology replace that kind of experience that makes the consumer more comfortable with buying something so important online?

Leslie:

Yeah, it's a great question and a great call out. It is hard. It is a hard hurdle. We have a really, really high bar of trust. This is a really, really important garment. I think what's really exciting to us is that a digital experience solves a lot of the pain points for brides' shopping experience in brick and mortar boutiques by offering, one, a much better price.

Leslie:

So, high quality brick and mortar boutiques you wouldn't balk at a price tag from, the average is in the two to $5,000 ranges where the bulk of the dollars are in the market. And designer dresses can cost $10,000 or more. And by being able to cut out the cost of the shop and then also having a stylist we're able to offer a much better price. So, our average dress right now is right around 1700, which is-

Stephanie:

That's really good for custom.

Leslie:

... [crosstalk] in industry standard. Yeah, we think so too. And then another pain point that we hear over and over from brides is around inclusive sizing. So, the average American bridal boutique doesn't carry the average American woman's size, which is a bridal size 14, normal size 12.

Leslie:

And the inventory is expensive and boutiques have a limited set of gowns. And that gets even smaller when you think about sizes that can include plus size women. And so, by making our dresses made to order, made to measure, we're able to make the pattern to fit the woman's body, regardless of whether you're a sample size or up to a size, I think it was made up for a size 32 before.

Leslie:

So, that I think addressing the inclusive sizing has been a big unlock for us. And then I think the biggest advantage we have is we can offer dramatic advantages with customization of the design because we can bring together any element that a woman wants. So, more often than not, we hear a bride say, "I tried on dresses, I have a Pinterest board with all my dream wedding dresses, and I love this element of this dress and this element of this dress. I love this skirt and I love this top and I wish I could make it long sleeves."

Leslie:

Or, "I wish I could swap out the lace." And so, from a supply chain perspective, that's exactly how we're thinking about building every single dress is with those modular components to be customized. And because we don't have to hold inventory, we can offer literally billions of permutations of designs to bring together all of the parts of different dresses that brides want.

Leslie:

And so, we're really empowering brides to discover and then also create the exact product that they want. And then that tech is supplemented by a human component, which is still really important to have a stylist on the other side of the phone to bounce ideas off of, talk about pros and cons of different design elements, and really reaffirm the decisions. Yeah, because it is hard, because she's not trying it on in a store.

Leslie:

But the question is always the same, which is, I want this dress to fit, I want this dress to look beautiful and flattering on me. And that is a problem that we can solve with tech and with data. We're collecting hundreds of thousands of custom measurements right now, and developing IP around pattern making, and fit, and have a fit guarantee that you're not going to have any more than $499 of alterations. And if so, we'll cover the costs. That's something that we just launched last month.

Leslie:

And so, we feel confident that we can tackle the challenges with not having an in store experience, but actually offer much, much more value through better price and sizing and fit. And then also that customization element.

Stephanie:

Very cool. So, when it comes to entering in data for sizing, do you have the user do that? Do you have the stylist work with them? Because that seems like it could be a process where it could be painful if you're measuring your wrist, measure your shoulder area. I mean, it seems like there's a lot of spots that you'd have to measure to know how to get an exact fit. So how do you work with customers on that to where they don't bail? Like 50% of the way in they're like, "Ooh, there's a lot of work. I'm out."

Leslie:

Yeah. We benefit because women are really committed to getting this garment right.

Stephanie:

Got it.

Leslie:

So, it's shows up in lots of different areas. For example, we have a really long, intense survey and we have a crazy, crazy high completion rate. If it ever drops below 95% completion, we're thinking something's wrong with the website, because this isn't just purchasing a pair of pants or a pair of earrings or something online, this is your wedding dress. So, women are really, really okay with sharing a lot of data.

Leslie:

So, that shows up with measurements too. So, process-wise, we send a little fit box, which includes physical swatches of our fabric, because that's something that we've found is really hard to digitize, the color, and then also being able to touch and feel the quality and what the fabric feels like.

Leslie:

And that includes measuring tape. And then we've got pretty in-depth instructions on how to have someone take your measurements, whether that's your fiance or a friend. We also have a connection with local tailors. So, if women want to go in and get measured by an expert, we cover the cost of that. But what we've seen over time now is actually, we have hundreds and hundreds of thousands of these points of measurement. And so, our system can algorithmically flag if something looks off too.

Leslie:

So, oftentimes, we'll come back to a bride and say, "Hey, this measurement doesn't quite look right and it's a typo that we were able to catch." And so, by just having that back and forth, and then also this foundation of data to ensure that the measurements are accurate helps a lot. And then, in the future, I mean, we've seen a lot of technology pop up around digital measurements. I'm hoping someone else can solve that problem. And then we can fold in the technology through our process because it is for sure a challenge.

Leslie:

What we're thinking more about is once we have measurements that we feel really, really good about, how does that translate to the pattern making and being able to create a 3D physical garment that will fit a 3D object, which is a woman's body? Which is hard, but that's something that I think, in particular, our investors are really excited about. Because once we figure out that part of the problem, that can be applied to other things besides wedding dresses. That can be applied to garments just overall for women. So, thinking a little bit longer term about how we can build some really cool IP around women's fit.

Stephanie:

Yeah, that's awesome. I was just thinking about how nice it would be to have someone take a quick video of you doing a spin, where then it has all your measurements there, so then you can actually virtually try on the dresses and see how they look, because that seems like it'd be hard to know how something would look on your body without actually seeing it on the computer screen or something like that.

Stephanie:

At what point did you realize, like, "Hey, we're getting a bunch of data." We probably should incorporate machine learning or build an algorithm that helps with either recommending styles or like you said, checking the fits or the measurements that the potential bride was putting into the tool? At what point were you like, "This is a lot of data, we need to actually implement some type of technology," and how did you go about that?

Leslie:

Yeah. It's funny. I would say it's probably the way we figure out anything else with the company and probably other startups will empathize with this as well. It's like, once things start breaking, that's where you're like, "Oh, okay, we got to fix this." It's like the leaky faucet or the balancing plate's analogy. It's once things really start to wobble, it's like that's where time and attention and resources need to be applied.

Leslie:

But another part of this is that I've always really, really admired startups and D2C startups in particular that have this differentiation with tech, or data, or supply chain, or operations. So in particular, I really, really admire Stitch Fix and Rent the Runway, which Stitch Fix famously has said they employ more data scientists and engineers than they do merchandisers, and they're a fashion company.

Leslie:

I think they recognized really early how much leaning into that data strategy can help them scale and get really, really good at what their core value proposition is, which is similar to ours in terms of personalization. And so, we've always tried to follow after their ways because they've been so successful. And so, that's been on my mind since day one as like, this is going to be an important part of how we can scale successfully.

Stephanie:

Yeah. Stitch Fix is definitely a good example. It's amazing how much data they use and how they are working to perfect every single fit of clothing and using all the feedback they get every single second to make it better and better.

Leslie:

Yeah. What I love is it's not data just for data's sake or tech just for tech's sake. It's like really core to how they're delivering personalization to their customers. And they see it as a big competitive advantage, which I think is why they've been one of the few successful e-commerce exits. You haven't seen that many in B2C, I think, because it is really hard, but that seems to be a really, really smart way to differentiate your company and your brand.

Stephanie:

Yeah. I completely agree. Do you have a model that you're looking at right now where you're like, "We're going to spend this amount of time thinking through the tech and the future of where our industry is headed to get ahead of it, and then this percent is spent on the product right now?" Or how do you think about balancing those two initiatives?

Leslie:

Yeah, I wish it was that organized. We're probably not quite there strategically yet, but it's always been these three core pillars of our business, which is the tech and the visualization really around solving these frustrations around visualization, and measurements, and fit, and developing a really amazing digital experience through our tech. And then second is our human part of the customer experience. So, our stylists team that is just really smart, and empathetic, and helpful and, I think, necessary to make this big decision, this big purchase online.

Leslie:

And then third is our supply chain operations and being really on the cusp of vertical integration and being super, super involved in our workshops on the ground to make sure that we're maintaining a really high level of quality and that we're covering all the areas of ambiguity that comes from making custom garments.

Stephanie:

Yeah. Awesome. So, right now when I think of the wedding industry, I think of the big brands, the major players. How do you think about building a bigger share of the market or getting a bigger piece of the pie when you're competing with companies like that?

Leslie:

Yeah, it's something that we've thought about since day one. And because bridal is so unique, I think we're really uniquely suited to disrupt the market. So, as I said earlier, bridal is still 95 plus percent in brick and mortar. And then the other funny thing is that it's really fragmented. So, the biggest player in the market is David's Bridal, which is a third of the market. And then the rest, there's no one with more than a 1% market share.

Leslie:

So, it's just super fragmented, independent, usually mom-and-pop boutiques. And the crazy thing about David's Bridal is they're failing, they filed for chapter 11 in November of 2018 and have been repackaged and sold off to a number of different private equity firms and just continues to be-

Stephanie:

That's not good.

Leslie:

Yeah, really I think struggling because of the costs of their retail. They have over 300 stores in the U.S, and salespeople, and I think it's a model that's not going to work long-term. And so, we have our sights set on taking that big of a share of the market similar to David's Bridal. And we think we're really well set up to do that because we're doing it in a direct to consumer way. We're not burdened by the cost of having a retail presence.

Stephanie:

Yeah. Yeah. I read a really interesting report about the David Bridal's of the world, where once retail locations are bought by PE firms, that there's a very high correlation of them going bankrupt because of just how-

Leslie:

It's not a good sign.

Stephanie:

Yeah. Yeah. I think Toys "R" Us was the same way and there was a whole list of them.

Leslie:

That was actually the, I think it was Oak Tree or Oak Hill that took Toys "R" Us into liquidation. And they were the same ones that just purchased David's Bridal in [inaudible 00:27:54]. Yeah, it's not looking great for them, but it's wild that there's still one in every three wedding dresses in America and no one else is really stepping in to take them on.

Leslie:

And we're going big here. The answer I think is not to just open up another boutique or another online boutique, I think the answer to unlocking a big portion of the bridal market is around price, and customization, and fit, which is why we're spending a lot of time and a lot of dollars on building tech to support that. Which is hard and our investors understand that, but I think it's also why we're a great venture opportunity is because there's a lot yet to be discovered, which is what we're working really hard to build right now.

Stephanie:

Yeah. I completely agree. When it comes to your marketing efforts and getting that market share and growing bigger, what kind of tactics do you use right now to either convince the buyer who's maybe very skeptical of buying online to come and try you guys out and making it a easy process for them just to get involved versus the people who you can tell are like, they're in it, they're ready, they've already paid the stylist fee, they're here? How do you think about advertising those two different types of audiences to make sure they convert to hopefully customers?

Leslie:

Yeah. For us, it comes down to transparency, which is very authentically Anomalie, especially in the early days when we were first starting out. It's not trying to make us bigger than what we were, it's acknowledging, "Hey, we're a young upstart, but we're going to work really hard to make your wedding dress perfect." And being really upfront about the challenges and being upfront about the questions that are in bride's minds.

Leslie:

It doesn't help to gloss over the fact that you're not going to be trying on the dress until it arrives, but having an honest conversation with our customers around that has always helped. And what also helps is that we've got a lot going for us in terms of, again, the price and being able to bring together all these design elements that you could never find in a store.

Leslie:

So, yeah, it's addressing concerns around what customers might be thinking of, and then also just education around this new experience. And what's cool is I think our authenticity really shines through our social. So, we have really, really great word-of-mouth viral growth, but more and more finding new customers through Instagram and Facebook. Which we have a pretty cool way of reaching our customers because oftentimes if women become engaged, they change their relationship status on Facebook, and so they're easy to find.

Leslie:

Also, especially newly engaged women love content. They want to read all of the wedding blogs and browse Pinterest for hours. And so, we're working a lot on how we can make our digital experience really fun and easy to browse tons and tons of potential dresses and then also real dresses.

Leslie:

So, our Instagram account is just chock-full of women, real women, not models on the happiest day of their life with our product being the centerpiece on the bride. It's a really cool evergreen content machine too, because every day we get dozens of new wedding photos from women who have professional hair, and professional makeup, and professional photography on this very happy day. And it's just really easy to-

Stephanie:

Perfect.

Leslie:

... feed that back to potential customers to show the breadth and depth of our customers and customer types and body types, and also design. And I think it's a really cool way to communicate our value proposition to potential brides.

Stephanie:

Yeah. That definitely makes it much easier. How do you think about encouraging the brides to share that, not only with you, but also in their socials? Because I could see some people being hesitant to show where they got their dress from, because then everyone knows about it and it's not as special and fancy. I've just seen this hesitancy in brides to tell you like, "Hey, I got this bracelet from here and this dress from here. And here's where I got my veil from." It seems like it's an industry or, at least, a group of people that sometimes don't always want to share that. Have you experienced that?

Leslie:

Yeah, it's funny. And this is another funny thing with bridal. I mean, we've never developed an influencer strategy. We've never had to work hard or twist a bride's arm to post pictures because it's almost always a really, really happy customer experience. Brides are shouting it from the rooftops, especially brides that had frustrations finding a dress that they wanted and then discovered us. They want to tell their friends about it. They want to help future brides know about us, which is just super cool.

Leslie:

And I think it's something that we've worked really hard to develop because, again, this idea of having a lot of trust, but we've earned that by going above and beyond to make sure our original customers were advocates for our brand by delivering a really, really amazing experience and a really, really beautiful, perfect dress.

Leslie:

And so, it still amazes me how much brides love to share about their experience. It's funny also because oftentimes the wedding dress is a secret, especially to the fiance. So, women will go as far as posting on their Instagram stories their sketch for their custom dress, but then we'll scribble out so you can't quite see what the dress looks like, but they still want to post the fact that they are so excited about getting their sketch, even though you can't even see it. It's pretty amazing.

Stephanie:

That's great. Yeah, that's really awesome. I'm sure also having that relationship with them, I mean, by the time they get to the very end, I'm sure they feel very connected with you, and the stylist, and your team, so it probably makes that better.

Leslie:

Oh, we've had stylists invited to so many weddings. It definitely is a relationship that is, I think, pretty unique. I think other companies would kill for this type of loyalty we have. Our stylists, we joke, get presents all the time, cupcakes and flowers and things delivered to the office because the bride was just so delighted with our experience, which is so cool.

Leslie:

It's really empowering, I think, to know that you've had a difference in what should be the most fun, enjoyable time in a woman's life and unfortunately oftentimes it's super stressful. So, I think just having an ally through that and then really wowing her with the delivery of the dress is the experience that we want to deliver every time.

Stephanie:

Yeah. I think a lot of brands would kill for that kind of relationship. And it's just a really good reminder of how important it is as a lot of companies are either coming online or moving more to direct to consumer that keeping those relationships, even if they're virtual, is super important to get that trust and to make sure it's, even after the sale, you have champions who are talking about your brand and wanting to send more people your way. Because, like you said, word of mouth is key.

Leslie:

Absolutely. And that becomes something very defensible as well, more so than a cool brand or, potentially even those tech and operational differentiators. Having customers that are singing your praises and having that community of advocates is something that we really, really want to keep building.

Stephanie:

Are there any digital e-commerce trends or patterns that you're really excited about or that you see coming down the pike?

Leslie:

Yeah, and I'm biased, of course, but I think the idea of personalization and customization is so, so key. And I love other brands that are tackling that as well, like Stitch Fix. I also think the idea of vertical integration and being really involved in your supply chain has popped up. And I'm a supply chain nerd, so I always appreciate other companies taking action there as well.

Leslie:

So some of the razor companies, [inaudible] of them purchased an actual razor factory in Germany. And I was just talking with the founder of Haus, which is a new liquor brand direct to consumer [crosstalk 00:37:29].

Stephanie:

We just had them on the show.

Leslie:

Oh, amazing.

Stephanie:

Yeah, Helena. Yeah, she came on.

Leslie:

Helena is awesome. And I think there is a lot of innovation happening right now in terms of the front end, which the customer's experience, how you're interacting with brands in a digital way versus in a physical store. But I think the innovation from a supply chain side will also be really, really important for brands to differentiate, especially if they're making things in a new way. So, I'm feeling good about our investment in time and resources with developing a really strong supply chain presence. And I'm hoping it'll benefit us long-term.

Stephanie:

That's great. Are there any channels, like digital channels that you guys are looking into to expand to? Whether it's, I know a couple of brands we've talked to have talked about TikTok, which people laugh when I say that. But I mean, they've said that they've had great success on there. Is there any areas where you're seeing success that maybe others aren't trying out right now?

Leslie:

Yeah. It's funny you bring up TikTok, because months ago I would not have even really known what that was. TikTok is going to be very important for brands. We had a woman post just a quick little video around like, "Hey guys, if you are bored in quarantine, check out this website, you can visualize your own dress. I'm not even engaged, but it's pretty cool." It was something literally that simple. Her post went viral. We had over 200,000 people sign up in one day last week.

Stephanie:

Oh my gosh.

Leslie:

Or about a week and a half ago, crashed our website, our engineers were working until four in the morning trying to get our capacity back to where we could actually serve our customers, just bombarded with TikTok traffic. So, it was half the team trying to fix the website issues, and then half the team just trying to figure out what tikTok was. And quickly getting up [crosstalk 00:39:36].

Stephanie:

What is the source?

Leslie:

Yeah. So, it's, I just saw a stat this week that they were the fastest social media company to get to a billion users. It's just amazing what they've built and the speed at which they've built it. And I think it's something for sure that leaders of brands will need to keep an eye on just given how viral it is.

Stephanie:

Yeah. Yeah. I mean, I know people are still questioning how many of the users are real versus not, but I brought this up in a team meeting with my team. I'm like, "We should try out TikTok. One, it looks fun. And two, I've actually heard of quite a few brands saying that it's working well." And my entire team laughed at me and said, "No," so.

Leslie:

Well, they will be eating their words now, I think you were ahead [crosstalk 00:40:23].

Stephanie:

I agree. I agree. So, 200,000 signups, crashed your website, that's a great segue into building platforms for e-commerce. How are you thinking now about, I mean, it sounds like you could be at a place where you're maybe outgrowing the platform or you're experiencing some friction because you guys are growing and you're going to have large spikes in volume coming your way. How are you thinking about developing a platform that fits you where you are now and where you're headed?

Leslie:

Yeah, I mean, it's a balance of building a robust tech foundation and serving up an experience that customers really want. It has to be a balance of both of those for us...

Leslie:

(Silence).

Leslie:

About six months ago. And being able to tie any possible design element and having logic built into it to not show a sketch to a customer of a dress that can't be created. We worked really, really hard to do that. That being said, it's a big load on our tech. And so, we're thinking about ways to, from a technology perspective, how do we continue to have a really cool mind reading type of experience, but also be able to potentially surge to have sketches available for hundreds of thousands of people in one day?

Leslie:

And one thing that we're building right now is, you mentioned earlier, there are a number of different types of brides that come. So, some brides come in and are like me, and they have an idea of exactly what they want and having a very mind reading survey experience works really well for that type of customer. But where we're moving to right now, and the team's building a brand new browsing experience that should be online just hopefully within the next couple of weeks is this idea of being able to filter down based on a couple of different elements and being able to view lots and lots of designs side by side.

Stephanie:

That's great.

Leslie:

Other Ecommerce companies have the same type of experience in terms of filtering down based on different price ranges, or colors, or sizes. And we're thinking a lot about that. And then also building that in a way now with the TikTok viral event fresh in our minds with a way that we can access our amazing data and logic that we've worked really hard to build, but also be able to have an easy load on our servers to be able to show this to hundreds of thousands of people at the same time.

Stephanie:

Yeah, that's great. I was actually just thinking when thinking through your business model of like, I'm probably the consumer that wants to... I don't know what I want until I see it. So, I would probably instead want to come in and be able to see different designs maybe on models that look like me so then I can choose it that way. Yeah, if someone were to say, "Hey Stephanie, design your own wedding dress." I'd be like, "Ah, it's white. It's all I got."

Leslie:

Such a big task. Yeah, for sure. We just created this algorithm within the last couple of months called... it's called a similar dresses algorithm, which takes all of these, I think we have millions of photos now at this point of real women, real weddings, real dresses, real Anomalie dresses. And based on the sketch that you get served up, you can see what that dress would look like on women that look similar to you.

Leslie:

If you've used Rent the Runway, which I'm a big consumer of Rent the Runway, you can see what does this look like on a woman that looks like me, which I think is really helpful in terms of addressing that question around the visualization and like, what is this actually going to look like?

Stephanie:

Yeah. Yeah. That's great. I'm excited to hear how that goes. How are you thinking about measuring performance when you have these two different types of models now? How do you think through, is our website working? Is it converting well? Yeah, what's your process around that?

Leslie:

Yeah. Well, our conversion tank, as you can imagine, just within the last couple of days, it was really exciting to see the site traffic and just the number of sketches being generated and just, I think overall excitement. Which isn't quantitative, but just the qualitative excitement and virality around the promise of what we're building was really, really exciting.

Leslie:

As far as like our KPIs, it's really just around growth. It's like we have a lot of interests. We need to make sure we're converting that interest into real purchases and real dresses being made with Anomalie. So, that takes a little bit more time than that initial visit to our site to get a sketch. And what we really look is the conversion of interactions with stylists. Our process right now is that you pay a small design deposit, so $29 to be able to connect with a stylist, and talk through the design, and talk about pros and cons, and iterate the sketch to be absolutely perfect.

Leslie:

And then the decision to move forward with Anomalie is after that call. And so, that's what we're really, really focused on is just making sure that we're converting the interest from our cool tech and our cool website experience to actual dresses. And that's where we're growing a lot right now, too, which is exciting. The conversion is not looking good right now-

Stephanie:

Temporary.

Leslie:

... in terms of all the TikTokers, but that's where the rubber hits the road in terms of dresses actually going to the factory.

Stephanie:

That's awesome. Have you seen any hesitancy with paying that $29 fee? Have you seen traffic come there and hover a bit and be like, "I'm not so sure." And then people bounce because they don't want to pay something right upfront? And have you thought about maybe a quick freemium model where maybe they have a stylist for a couple minutes or would that ruin the business model of making it super personal and the relationship?

Leslie:

Yeah. We've thought about this a lot. And this actually is something that we're talking about as a team quite a bit right now is, is $29 too high? Is it too low? I think having a posture of confidence in our process that this is a good value is really important and we've adjusted the price and also if it's refundable or not, and then also having the calls be completely free or not it's something that we're looking at really closely and just continue to listen to what our customers like.

Leslie:

And we've got enough of a growth team set up now where we can measure that quantitatively rather than just viewing it qualitatively. So, yeah, it's a great question and something that we're thinking about a lot. What we want to communicate is, speaking with a stylist is important and absolutely necessary before you purchase the dress. This is not a typical e-commerce experience where you drop something into your cart and purchase it. This is your wedding dress. And so, making sure that we're delivering a really positive high quality customer experience and making sure brides are feeling good before they make that final decision is important.

Leslie:

And the exact makeup has changed a little bit over time and probably will continue to change over time, especially as we add more and more features to our website. But yeah, it's an exciting challenge that we're working on every day.

Stephanie:

Yeah. Yeah. I liked the idea too of sticking with your guns to keep that quality high. I know when I was looking through your website and you were mentioning transparency earlier, but you have a whole section where it says, can I get my wedding dress in six months and I still want a custom? And at one point you're like, "No, you can't do this, this, and this. If it's seven months, yes, we can do it for you. Eight months, here's what we can do for you."

Stephanie:

And I thought that was really smart to just show like, "Here's our boundaries and here's what we can and can't do." So, let's just set expectations up front and same with that stylist fee. It's like, "Here's how we work." If you go, "Well, this is the process where we see works best right now."

Leslie:

Yeah. And what's great is we've got a couple years under our belt now and have made thousands and thousands of dresses, so we know what's best. Which in the early days, I think we're a little apologetic and wanted to be super flexible, but now we have a lot of confidence in our process as it stands right now. Another place that shows up is the pricing of the actual dress.

Leslie:

A lot of brides come to us with a tight budget for their wedding, rightfully so. Weddings are really expensive. And so, being able to talk through with the stylist, what are the big price drivers of a dress? So, for us it's, there's hand beading. That takes a really long time and it's really expensive and adds a lot of costs to the dress. And so, being able to talk to a stylist about how to bring in elements of sparkle with less expensive elements is, I think, something that really appeals to brides.

Stephanie:

Yeah, that's great. So, we have a couple minutes left. And I want to jump into the lightning round, brought to you by Salesforce Commerce Cloud. It's where I ask you a quick question and you have a minute or less to answer. Are you ready, Leslie?

Leslie:

I am.

Stephanie:

All right. What is up next for your travel destinations? Any factories you're visiting? Where are you headed?

Leslie:

Yeah. Well, right now everything is still locked down for quarantine, so it is really hard to think too far in the future. I mean, in 2017, when we were starting this company, I was in China pretty much half the year. I think it was like every month I was out there. So, thankfully we've got an amazing team on the ground, so I'm not having to travel out there as much. And it'll be more traveling to our Scottsdale, Arizona office to chat with our stylists and customer experience. So, that's taking much more of my time now versus to China in the old days.

Stephanie:

Yeah, very cool. What kind of hobbies do you have or ones that you have on the map that you want to try out?

Leslie:

Almost none, I would say, which I don't know if-

Stephanie:

Work. Work. Work.

Leslie:

... this is the most healthy answer, but starting a company and building a company is all consuming, which I love. That was exactly what I wanted. And that's what I'm dedicating my life to right now. My husband also is my co-founder, which is crazy.

Stephanie:

Sounds similar.

Leslie:

So, we don't have a personal life, but that's what we want right now. And we love what we're building and it still remains exciting, and cool, and our biggest hobby for sure.

Stephanie:

Yep. Completely agree on this side too. What's up next on your reading list or podcast list?

Leslie:

Oh, I'm just finishing a book called The Upside of Stress, which is super fascinating. It's a Stanford PhD researcher. She had done a ton of research on how stress can impact people's health in a negative way. But what she started uncovering is that it was believing that stress is bad for your health is what was making people unhealthy.

Leslie:

And so, the book is all around how you can... stress isn't going to go away, especially in meaningful lives or meaningful parts of your life that stress represents that you care about something and something is important. So, she has really practical tips for how to hone and manage stress in a way that helps. Which is focus, and energy, and care in what you're stressed about, which I'm really, really enjoying reading that and would highly recommend it.

Stephanie:

That sounds like a good one. I'd love to check that out too. All right. And the last, a little bit harder of a question, what's one thing that will have the biggest impact on e-commerce in the next year?

Leslie:

Oh, I mean, I have to say right now COVID is going to really, really append retail. With retail essentially being completely shut down in the U.S right now, I wonder about if there are decisions being made at both startup companies and large companies about what value they're getting out of their stores. And they are a lot of really expensive components of having a physical presence and we're benefiting from the value of having a digital experience in terms of the data, and the personalization, and delivering value to our customers.

Leslie:

And I wonder if we're just going to see a lot fewer stores. It's probably a pendulum and we'll swing another way in the future. But yeah, I just have to imagine that a lot of stores are going to be closed once the economy opens up and once quarantine is over. That's what I'm thinking about.

Stephanie:

Yeah. That's a great answer. Well Leslie, it's been a blast having you on the show. Yeah. Good luck with everything and we'll see you next time.

Leslie:

Thank you so much for having me.

Jun 30, 2020
The Digital Transformation of Rosetta Stone: How President Matt Hulett Earned Trust Transforming an Analog Business into a Digital First Experience
49:24

Sometimes an opportunity comes along that’s too good to pass up. For Matt Hulett, that happened when a friend approached him about a job at Rosetta Stone. The famous language-learning company was stuck in the analog world and they wanted Matt to be the guy to bring them into the digital future. It was no small feat, but Rosetta Stone has made progress on the digital transformation and Ecommerce journey, including introducing a subscription model and overhauling its tech stack and app. On this episode of Up Next in Commerce, Matt discusses the challenges of transforming a world-famous brand, including how he chose a free-trial subscription model over going freemium, what it was like to achieve buy-in from investors, and the future of Ecommerce and why he thinks social selling still hasn’t reached its full potential.  

3 Takeaways:

  • Even the most well-known brands need to earn their stripes when entering a new space. When a previously offline product starts playing in the digital world, it has to prove to customers that their investment in this new space is worth it
  • AR and VR are tools that Ecommerce platforms will be exploring more in the coming years. If you can provide a more immersive experience, you differentiate yourself from the competition and create more value to your customers
  • Stay true to the brand and don’t try to compete on business models that don’t fit

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Welcome back to Up Next In Commerce, this is Stephanie Postles, co-founder of Mission.org and your host. Today, we're going on a digital transformation journey. Matt, how's it going?

Matt:

Oh, really good. A little cooped up here like we all are, but I'm hanging in there. How are you doing?

Stephanie:

I'm doing well. Yeah, same hot, very hot. It's 92 here and the places in Silicon Valley usually don't have air conditioning so just a little sweaty in the studio.

Stephanie:

So I must admit, I have not checked in on Rosetta Stone in a while and when I started browsing through you guys' website, I was like, "Whoa, you all have come a long way from CD-ROMs and everything that I was used to when I was growing up and thought of Rosetta Stone." So I'd love to hear a little bit about what brought you to Rosetta Stone and your background before you joined.

Matt:

Yeah. It's interesting, just before I dive in, it's rare to join a company where everyone knows your brand and your product like just about everyone in the United States does Rosetta Stone.

Matt:

And so actually, it's an interesting story because there's not many ed tech companies that are a public companies, you could count them on your hand and the company has been a public company for over 10 years.

Matt:

It's been around for 27 years and it's a really interesting backstory on how the company was founded and so some of that came into play with what got me attracted to the business.

Matt:

So a friend of mine who's a recruiter talked to me about this opportunity and I typically do restarts, pivots as they are [crosstalk] for startups.

Matt:

And even the startups that I join are typically pivots. So there's kind of this pivot transformation story that typically is a draw for me for whatever weird reason why I attracted to these things and when he said, "Oh, it's Rosetta Stone."

Matt:

I was like, "Oh, the CD-ROM company, the yellow box." I was like, "Yeah, but they're trying to be digital." I'm like, "They're not digital yet?"

Matt:

And so the draw for me was typically, I take on jobs and assignments that are very difficult where I have to either completely change the strategy or get new financing on a new idea.

Matt:

There's generally something really, really wrong and Rosetta Stone was so intriguing to me on the surface for the intellectual reasons why they brand the product, people love it.

Matt:

It's not one of those iconic brands that people are afraid of. It's not like saying, "Matt, do you want to restart Myspace? I was like, "Oh my God, it's Rosetta Stone, of course."

Stephanie:

That's your next project. Myspace.

Matt:

Yeah.

Stephanie:

Just bring it back.

Matt:

Making it great again. Too soon. But what personally drew me, that's kind of the intellectual business level, what personally drew me into the company was and is the fact that I'm dyslexic, and a third of the revenue for Rosetta Stone is actually one of the fastest growing.

Matt:

We sell software into K-12 schools primarily in United States that help kids learn how to read, better learn how to read which is a problem. I've seen my own youngest son struggle with his dyslexia as well.

Matt:

And so on a personal level, it's very emotional when you can kind of tie that emotional tie to a company to its mission and vision. It's really intriguing. So it's been one of the best career decisions I've ever made.

Stephanie:

Yeah, that's great. Were there any universal truth that you discovered as you are kind of pivoting from different companies and trying out different roles and turning them around? Was there anything like yeah, universal truths that you saw while doing that?

Matt:

Well, that's a great question. Yeah, a couple things. One is it's so crazy to me, when I step into a company how basically from week one, maybe day one, no one really understands how the business works, like truly understands it.

Matt:

The key insight, what makes the business special, what can you do to apply capital or a time or attention to improve your strategy or your outcomes? It's just so, it's so weird when you go to a business that's operating, and maybe these are the only businesses I look at where it's not quite tight inside around the strategy and what makes the kind of the economic engine run. I think that's the biggest one that I see off the top of my head.

Stephanie:

Yeah, that's interesting. I can definitely see a lot of companies struggling there especially as they grow bigger and they have many business units and everyone's kind of chasing a different path, I can see people losing sight of what's important and what's actually driving this business like you're talking about and making it profitable or maybe it's not, but it's the lost leader, something that we still need. So yeah, that's really interesting.

Stephanie:

So when you joined Rosetta Stone, it hadn't been digital. I mean, only a few years, right? I think it stopped, maybe it didn't stop doing CDs, but it went online. Wasn't it in 2013?

Matt:

Yeah, I would say it was like half digital. What that means is we were selling one of the most expensive products in the App Store at the time and we didn't really have the concept of really effective sales funnels, a well thought out pricing and packaging strategy based on the type of customers that we're going after.

Matt:

We didn't have a lot of mobile native features and capability. So I would say it was kind of a port of the CD product in the mobile environment and that was kind of the approach.

Matt:

And also the approach was really not to focus on the consumer business. So not only did we make this kind of business model and digital transformation move, but also when I came into the business, the big focus was for the language side of the business was to focus on enterprise customers.

Stephanie:

Mm-hmm (affirmative).

Matt:

I thought that was actually the wrong move because enterprise is difficult, it's a smaller market, yet consumers where everyone knows Rosetta Stone, everyone likes the product. They actually remember the CD products in many cases and want to use them again, but they want to use them on your phone.

Matt:

So I thought, "Well heck, everyone knows who I am from a brand awareness perspective, I'll have an easier time deploying less capital against the consumer space and enterprise space." So there was not only just a business model shift, but also a strategy shift.

Stephanie:

Did you end up sticking with that business model shift to focus on enterprises or did you kind of make it a mix of 50/50?

Matt:

Oh, good question. So it is about 50/50 today, although consumers now are growing fast. I mean, we're a public company so I can only speak to our public company numbers, but in Q4 of last year, we grew the consumer business about 20% year over year and this is from a business step was growing at single digit.

Matt:

And then our last reporting earnings quarter, we grew the consumer business around 40% year to year and the enterprise business has struggled more primarily because of the C-19 impacts this year because obviously, we're in a never before seen macro economic headwind, but generally, it's the right decision to make and I view the enterprise business as more of an extension of what we want to do for all adult learners versus creating as a separate entity.

Matt:

That's a long answer to say consumer turned out to be the right move. It was not clear when I joined the company that even joining Rosetta Stone was a smart move.

Matt:

I had a lot of folks that I know, acquaintances more so than friends say, "Good luck. There's a lot of error in this company." And I just think it's just a really exciting problem and it's a ... Sorry to keep going because I've had maybe 80 cups of coffee today and just, I don't know.

Stephanie:

No, keep it up.

Matt:

It's like the two big verticals that are the most expensive that increased their prices to consumers over the last 50 years are healthcare and education and they have the lowest penetration of digital, and like, "Well, those are hard problems to solve. Why wouldn't you want to be involved?" So anyways, I think it's really fun.

Stephanie:

Yeah, that's fascinating. So when you came in, what were expectations for your role? What did people want you to do? Did you have a 90-day plan? How did that look?

Matt:

Oh yeah, if anyone thinks these are scripted questions, these are not scripted questions. These are very good questions. So during the interview process and I'm sure you've had this experience before, when you meet with somebody in a company, you're like, "I'm going to do whatever it takes to get this job."

Stephanie:

Yup.

Matt:

And I had one of those experiences with Rosetta Stone. I knew I wanted this job and so I came into maybe the first or second interview with a 90-day plan before I even started, this is the first or second interview.

Matt:

And the 90-day plan did change slightly because then I knew a little something, but I've done enough of these transformation projects, these pivots where I knew there's these basic building blocks in a format, I have a toolbox of things that I do that really didn't change.

Matt:

The inevitable strategy didn't know before I started, I didn't know the team members, were they the right fit or not, I didn't know any of that, but the basic building blocks I definitely put together.

Stephanie:

Got it. So what was on your roadmap, did you have to think about how to re-platform to support your commerce journey and shifting into enterprise and then consumer? What was on that plan that you laid out?

Matt:

Yeah, and I kind of learned some of this years ago when I was ... Sometimes I think my best work, I can't speak for you or anybody else, but my best work is when I'm completely ignorant of the challenges in front of me and so when I was younger, I worked for ... Well, actually, we sold our company to Macromedia and they had a division called Shockwave.

Matt:

And Macromedia at that point was not bought by Adobe, and this is Web 1.0 bubble, so I'm dating myself which is not legal in Washington State and these jokes have all jail time.

Stephanie:

[crosstalk] get us in trouble.

Matt:

I know. And so we step back through that experience and I learned a lot from the Macromedia Adobe kind of M&A folks about how to approach a problem. And that plus some other work experience over time really got me to the point of thinking through things from I call it the insight, the math in the heart.

Matt:

And no one framed it that way to me, but that's kind of how I framed it and so when I think about the insight, I think about the addressable market, the position that we are in the marketplace, so supplier's demand competitors.

Matt:

Then I think about what value we're driving to consumers, what value are you driving to your suppliers if you have them. And then what are the decisions you're going to make based on the strategy that you're laying out for the best outcome?

Matt:

So you want to grow market share, you want to grow revenue share. Do you not have enough capital? Do you actually need to raise capital and buy companies in order to get size and scale that's the outcome?

Matt:

So it's kind of a process that I've done over time and I want you to figure all that out, and it takes a while, maybe 90 days, maybe a little bit more, then it's really like how do you put a process together and dashboard is a little trite, but how do you actually run the business so you understand what things are working, the unit economics, what key layers of the business are you looking at, and then figure out an organization to support that and then you find the right team.

Matt:

And it sounds kind of exhaustive in terms of an answer, but I think too many people come in situations and they say, "Okay, I started this job, I got to restart it. What's my team look like?"

Matt:

And it's always I think the tail wagging the proverbial pivot dog and I typically, you can find startup people that are good at startups and sometimes, you find startup people that are good at later stage.

Matt:

You can find every dynamic possible, but until you do the work on, "I need this type of person for this type of growth stage, it's the right person the right time."

Matt:

If you don't do the work upfront, then you end up having a team that isn't the right team for the outcome that you want.

Stephanie:

Yup. Yeah, I've heard ... I forgot who said that startup advice where a lot of startups especially around here, are looking to hire that VIP level person, you have to pay a bunch of money to and someone was making the point of like, "Well, will they help you right now where you're at?"

Stephanie:

And it's okay to kind of grow out of people, but it's not okay to hire someone who's way above that actually can't get their hands dirty and do the work of what needs to be done right now.

Matt:

That's right. There's lots of people that have different approaches. I actually like to be pretty data driven in terms of how I think about people so I use like employee satisfaction studies and I use different personality profile tests.

Matt:

Obviously, you're not trying to like ... Hopefully, no one is like applying an AI filter looking at my reactions on this live video, but you can go overboard with data, but I do feel like you need to get the right alchemy talent for your team.

Matt:

And I've made mistakes where you have that senior person that doesn't want to get their hands dirty when you're like, "Look, I'm in build mode, I'm painting the fence, and I'm the CEO and I'm painting the fence and then I'm talking to the neighbors and driving Uber ..."

Matt:

The alchemy of that is hard to do, but that's a long winded answer to say there's there's a process and I think it's figuring out what's special about your company, how do you improve it, how do you run it? How did the inputs become the outputs and then what team is required for that?

Stephanie:

Yeah, very cool. So with the company having to shift as they did to go online and create mobile experiences, what kind of challenges did you see come up when you guys were going through that shift?

Matt:

Yeah, so there's multiple. So I always think about kind of the four constituents in most businesses, its investors, its customers, it's your internal employees and society.

Matt:

Not in that order. The order depends on lots of different things and so when I kind of checked down all those boxes, I think the big one, the first one I pick is investors because you're having to explain a model where the CD is purchased up front, it's very expensive versus you don't get all the revenue upfront, you amateurize that revenue and recognize it over 12, 24 whatever terms of the span of the subscription.

Matt:

So it's a change in terms of how you're reporting revenue, explain it in a consistent way, explaining the new metrics of subscription is challenged one I think from an investor perspective explaining why we have a language business, the Lexia business that I mentioned that focused on literacy is a 20 to 25% growth business, it's growing pretty nicely and language was declining.

Matt:

So then explaining to investors why do you still have this business and why are you changing the direction from enterprise to consumer, I think for employees.

Matt:

I always like to think through the employee piece, get the employee piece right, you can do anything and so getting the employees reason to believe, I was the first president to actually run the language business.

Matt:

It had multiple owners of the P&L and I was the first person probably since the CEO, we had one CEO that that started Rosetta Stone and took it public 20 plus years ago.

Matt:

I was the first single leader to ... I also tried creating a reason to believe a compelling vision, mission and culture and then when I think through kind of the customer piece, it wasn't as hard to be honest because there was so much brand equity that was good brand equity that doing little bit of things in a way that was kind of planful and data driven actually generated a lot of great outpouring of support.

Matt:

So the customer side of what we were doing wasn't as difficult as I would have thought and we also had an enterprise business that had already integrated things like digital tutoring with the software and demanding Fortune 500 companies.

Matt:

So there was some DNA in the company where we knew, "Boy, you can earn every interaction with every interaction." So that was that piece and then later, I started building more hooks into society as part of that and so I kind of view it as a self-fulfilling positive effect of you take care of your employees, they take care of your customers, the investors get great outcomes, and society benefits and you keep kind of turning this crank and you start getting much more reflective about it.

Matt:

And it does have, it does pay off. It takes I think, in general, I think people brag about how fast they can turn around companies. I don't know why people brag about that.

Matt:

I don't know, my experience is two years and taking a business from bad to like growing, at least, believing in itself is very hard and so I look at those four factors and I think the society piece is one that's super important that a lot of companies pay lip service to and there's a lot of discussion especially in Silicon Valley about some large companies that are controversial there.

Matt:

But I'll give you a for instance why if you can tie together the vision, mission, culture values to society, how that's self-reinforcing, we had a obviously horrible global pandemic that we're still pulling ourselves out of and everyone's kind of living through this experience at the same time.

Matt:

And we basically took just two days to decide that we're going to give away our software for free for three months for students. And we run a current business and selling software to enterprises and adults and we said, "You know what? We know that parents are actually going through hell because there's kind of a make your own adventure right now and schooling."

Matt:

[crosstalk] and I can feel it myself and we are like, "Oh my God, this is so stressful and the anxiety I heard from our own employees about it was overwhelming and I'm asking them to work harder."

Matt:

And so we said, "You know what? We're going to give away three months subscription and we're going to just do it and you just have to ... The parents have to put their email address in the school and that's it."

Stephanie:

Mm-hmm (affirmative). That's awesome.

Matt:

And we're not a free ... We're a paid subscription product. We're not, there are other competitors that have a freemium model and as you know, changing models or mixed models generally don't have a long history of working and we said, "You know what? We're just going to do it."

Matt:

And so the team decided to do it, I just said, "Yeah, let's do something." They said, "Here's exactly what we're going to do." And it was live, and then the amount of positive benefits, we got that from pure impressions.

Matt:

It actually helped our adult business to ... Adult language learning business. That's just one quick example of when those things all start working together.

Matt:

It's transparent, it's engaged and it's consistent. It becomes kind of operating leverage as well. So it's fun. It's fun to see how that work.

Stephanie:

Yeah, that's great. It's definitely a good reminder of do good things and good things will come back to you. Did you have any struggles with maybe like surges and people logging in and trying to get on the platform that maybe you hadn't experienced in the past? Because it was maybe a bit more predictable since it wasn't free?

Matt:

That's a really good question. Not on the system, the system's basis, but certainly from a support basis because we had a lot of, we outsource most of our customer support, and we debated for a while whether we we're going to continue phone support, we still do and I still debate that one, but a lot of our service providers were in outside United States and they all of a sudden had to work from home and then some facilities shut down and so we are just constantly playing whack-a-mole with our support organizations.

Matt:

And then also, I would say to our frontline heroes were our tutors and we employ a lot of highly educated tutors that have degrees in language learning and they all work from home primarily, they're part-time employees.

Matt:

And they turn out to be like our heroes because they took some support calls in addition to one-on-one digital tutoring. And so there was unique ways in which we had to adapt with the demand, but I would say more on the demand side regarding the support elements and we definitely saw a surge do the work from home trend as well, but that didn't impact kind of service levels and general software.

Stephanie:

Okay, cool. And I could see it being a bit tricky to develop and maintain a platform that has so many different layers to the business. I'm thinking about the enterprises who are going on there and buying seats for employees, and I'm thinking about the school is going on there for students, and then the individual consumer like me who's maybe like, "Hey, I'm going to Italy and I want to learn Italian."

Stephanie:

I don't know, but like it seems like it would be pretty tricky creating a platform that does all of that. How do you think about creating that so everyone gets a good experience and also being able to monitor and measure it in a successful way?

Matt:

Yeah, I've never seen the complexity Rosetta Stone before at the smallest scale, but what I mean by that is we have three businesses and we're a small cap public company. So that's unusual and the business was run on the language side ... Well, let me step back.

Matt:

So the literacy business is a business that was acquired seven, eight years ago and that's a 30-year-old company that was acquired, it's called Lexia and it works as a distinct operating unit from my business and is run by an awesome gentleman.

Matt:

And I use that word loosely and if he's listening, sorry Nick, he's a great guy and so passionate and his team is so good and it's ... I've never seen before a product that's built with like academic research combined with awesome data product engineering that gets results.

Matt:

It's just, I've never seen anything like it and they had the time to build this product over these many years, it was always digital first and so they're run separately.

Matt:

My language business was run on two different tech stacks. Actually, it was like five and when I started, I was like, "Well, wait a minute, why is this product that looks the same running off this underlying architecture? Why don't we move everything to react?"

Matt:

As I kind of went through this morass of tech stacks, it was a lot of M&A that generate a lot of complexity and a lot of tech debt. And so I would say majority of our innovation was not innovation, it was just keeping these old tech stacks up.

Matt:

So from an R&D perspective, in addition to all the other complexities we just talked about in this interview, I was trying to grow the consumer business, trying to change the business model, swapping out new team members for more growth orientation and doing a huge tech migration.

Matt:

And the complexity around that is mind boggling. We finished that late last year like de-flashing like old weird services, moving to a services architecture. All that stuff we end up doing and inevitably, the goal is to have one learner experience, just like you use Google, Google Mail for your enterprise, or personal.

Matt:

There were some admin privileges and other things that are associated in the back end, but in general, the product kind of looks and feels the same and that's, the inevitable goal which we're very close to execute on.

Stephanie:

Got it. Were there any pitfalls that you experienced when going through all those different pieces to the business or anything where you're like, "When we implemented this, or we move to this type of tech stack, this is when we saw a lot of improvements with conversions or anything around the consumer or enterprise business."

Matt:

Yeah, just on conversions, yeah, one thing on that is interesting is the amount of improvement we saw just with like putting different team members with specific goals and this is going to sound kind of crazy because everyone is going to like, "Yeah, he's talking about agile."

Matt:

Just getting very specific about areas in the funnel to improve and how to adjust the trial experience at certain times, and experiencing and showing customers different things at different times.

Matt:

That had like a crazy amount of upside for us. And I would say less architecturally that we see an improvement other than we had just less stuff that wasn't moving the innovation forward, but just these small things have big impacts and get and I must say like if any one of my team members is listening to this and say, "You haven't solved all that yet is."

Matt:

It's very difficult to take a business that is so complex, and then all sudden kind of say, "Look, we're going to reduce all the complexity, networks are innovating again." I think there's still a challenge of like, faster, smaller teams, we use a safe framework which is kind of scrum like.

Matt:

I don't think we figured all that out yet, but it's way different than when I came in and felt very waterfally to me. We're going to issue a press release, what this release is going to look like in one year and we're going to work back from that, I'm like, "Yeah, that's very Amazon."

Stephanie:

Yeah, yup.

Matt:

I'm like, "Well, how do you even know this is the right thing if you don't have any customer?" So there was there's a whole evolution of trying things, validating them, making sure that you're deploying enough capital against that makes sure it gets a fair shake, but not too much where you're, you're in over your head and we've had some public black eyes on some of our tests, and I don't care.

Matt:

We were trying some things internationally with tutoring, it didn't work out, it didn't have the capital honestly to support some of it and I kind of feel like those are good experiences to understand whether you're going to invest more in something or not.

Matt:

And so I think the fact that we can start doing those things now because we simplified the platform or if possible. Yeah, I think it's hard to say no to things and yes to things. And some of that discipline is easier when you're a startup because you just don't have people to outsource to.

Stephanie:

Yup. There's always an excuse. Nope, no one else can help us with that. Can't do it.

Matt:

Yeah. There's never like I'm a product manager by training and I've used every product manager tool under the sun and now I've kind of just resulted in my using Google Sheets again and what I'm trying to triage like epics and themes and stories, and I still like to play around with those types of planning elements, I just always look at all these people in these points available. I'm like, "You guys have no idea the luxury we have."

Stephanie:

I'm sure they like hearing that.

Matt:

Yeah, there's nothing more pure than a startup and it's like five people, five engineers and like a product manager that codes and the seat goes, doing UI, UX and it's ...

Stephanie:

Yeah, that's really fun. So you mentioned earlier a free trial which I actually went on Rosetta's website and I ended up going through the entire trial of learning Spanish. How did you all think about creating that free trial and actually convincing people to do it?

Stephanie:

Because a lot of times, I think I would see something like that and I'd be like, "Oh, that's too much time and I don't want to start that process right now."

Stephanie:

And I eagerly jumped in and started doing the lesson plan because it was engaging and fun, and it kind of felt like the real world with the person walking around and you're stopping and talking to them. How did you think about creating that? So it actually converted users into paying customers?

Matt:

Oh, thanks for saying that. Yeah, I think we have a long ways to go. I think in terms of what we could be doing is we're just, I just feel like we're sprinting to the start line because of the late start, but I think the core piece is for most companies and they think about like what business do you want to be in a lot of people will default to like whatever their venture capitalists said they should do from their other companies they manage or whether they read on TechCrunch or whatever, or listen to on this program is I think you have to be very specific once you figure it out the approach to the product that you're going after.

Matt:

Are you going to be freemium? Are you going to be paid trial? Or are you going to be for lack of a better term I call it force-trial or upfront trial and there's elements of this that change, there's kind of nuances.

Because that's more of a nuanced discussion is the freemium players in the language space for instance would be Duolingo.

Matt:

How do you get the most amount of MAUs, Monthly Active Users and get enough of them to convert? Or the Spotify example, and you're using basically cap ex as cap, you're using your R&D to drive user and usage and that's kind of Slack-like.

Matt:

Slack is slightly different obviously. Then the paid trial is, "Well, I have enough of something that's good that I want a lot of people to use it, but I want the conversion to be pretty good."

Matt:

And so for the first one with freemium, you have to say, "Okay, it's going to be so fun and compelling and I'm going to actually invest in growth that isn't there yet because I think I have scale effects —I can crowd out everyone else."

Matt:

The second one is I actually have a pretty good product, I need enough people to use it and then feel like I use it enough to want to use more of it. And that's what I decided to do and I'll explain why.

Matt:

And then on the upfront paid thing is typical like for low ACV, Annual Contract Value SaaS companies you'd see, please just call my ... Just call us and we'll walk you through it with one of my sales reps.

Matt:

And we'll do a guided tour through the demo or whatever and the decision why we did the second one was it was a good decision and is people knew enough about what the Rosetta Stone brand was like that we knew people would want to try it and that for people that remember what it was like, they definitely would want to use it again and we felt like the pinch was more compelling if we gave everyone a little taste of that.

Stephanie:

Mm-hmm (affirmative).

Matt:

We could have said, "Please pay up front." And we're the gold standard and giddy up, but we felt like we needed to earn our stripes a little bit into proving to people that we weren't just like a port of a CD product.

Matt:

And so that's why we decided to do that and we've played along different roads before. We've never done full freemium and I would argue at this point in the market, we would not be better served to do that because Duolingo has done a really good job of growing their monthly active users and have built some advantages there and we're not trying to play that game.

Matt:

I'm trying to play the game of being a really good, effective language learning product and I'm trying to set the tone in the trial experience that when you're using the product, it's not going to be like a game.

Matt:

It's not going to be like Clash of Clans. I guess Clash of Clans is a bad example, or the jewel or like Candy Crush I guess is what I was thinking of.

Matt:

Every day, I collect coins and I'm collecting coins to benefit my gameplay. It's kind of how I think about Duolingo a little bit and it's ... I think they're masterful of what they do, but I think they're designed to do something different than what I'm trying to do.

Matt:

And if you're serious about learning a language, and you stick to what I'm doing and you do a couple tutor sessions that we offer, you're going to get there.

Matt:

And so the business model and what we're trying to do in terms of posture, not market share, but revenue share really drove kind of the philosophy on the trial experience.

Stephanie:

Yeah, it definitely, it felt more serious especially where you could speak in the language and it would tell you I guess if the tonality was right, and if you were saying it correctly, and it would keep kind of advising you on it, once I saw it had that feature, that to me was when I was like, "Whoa, this is really serious, and I better be ready to learn this language because it's not like a game, it's not just saying random words."

Stephanie:

You're actually kind of conversating and having to hear yourself which I think is really important. That seems like a big first step to getting people to try it.

Matt:

It's an interesting observation because we are very oral first in our pedagogy. We want people to engage with the product and speaking is actually just in general a really good way to learn and then the key outcome of speaking well is not sounding stupid.

Matt:

And so if you're trying to learn a language, you want to sound somewhat authentic. So for Rosetta Stone, I would say, for anyone that really wants to learn a language, we'll get you there, but if you're just kind of trying to build like, it's like counting your calories kind of.

Matt:

If you wanted to do something like that, then I would say, pick a freemium product over ours and yeah, it's not like super intense scary, but it's like, "Yeah, you better do your lessons before you do your group tutoring session."

Stephanie:

Yeah. No, that's, I mean, that's great to incentivize people like you're paying for this, you might as well get the best out of it. Is there, so one thing I was thinking when I was interacting with the free trial was, "Wow, this would be really cool if there was like a virtual world where you could be walking around and talking to other students who are learning."

Stephanie:

Are you all thinking about any technologies like that to implement or is there anything on your radar where you're like, "We're moving in this direction or planning on trying this tech out or this digital platform out?"

Matt:

Yeah, we've played with VR in the past. I've been kind of like bearish every time someone says, "Let's go into VR." I'm like, "This is [crosstalk 00:39:27]."

Stephanie:

It's a hot word for a while. VR everything, it doesn't matter to the problem.

Matt:

Yeah, I know and I have a lot of friends. One really good friend of ours, she has a pretty successful, his definition of success and I think it is honestly successful VR games company, but like I have a lot of other friends that went into VR that gaming or especially verticals that just had a hell of a time just because there's not enough handsets that are available.

Matt:

Well, we have dabbled in in terms of immersive experience. I think what you're saying is is there a way to since we're immersive, use technology to make it even more immersive and what I really want to do is enable more AR in our experience.

Matt:

And we have like a little feature called seek and speak where you can ... It's like an almost a sample app where you can use your phone, we use ARKit to do a treasure hunt for things around your house like fruits, objects around your house and incorporate that in your speech practice.

Matt:

And I always thought that was like a really cool thing for us to expand into and if we ever get the Apple visor, some AR HoloLens or whatever, it'd be cool to start interacting with your world around you, not just with translation, but also to see if you can actually interact with folks that are kind of ambient around that experience.

Matt:

I personally and maybe this we're going too deep here, but I always thought it'd be cool if like I can visit another country and just decide how much of the spoken language am I going to generate myself, how much am I going to have my device do it because I'm not going to spend the time.

Matt:

And then how can I phone a friend? How could I have my tutor or my guide integrated experience where I'm going to sound really authentic if I do this or here's an experience that I could do here.

Matt:

I think the goal for language learning inevitably is different based on where you are in the world, but if you're from the United States or one of ... Maybe some European countries like the UK, it's kind of like this is a cool way to get engaged with a culture.

Matt:

If you're not in those countries, learning English primarily is a necessity and so I think some of these AR ideas that you just mentioned would be really good and speaking more frequently to other folks that are even not native speakers, but just trying to generate language is a very good way to teach.

Matt:

We have a product coming out called Rosetta Stone English this summer, literally like a couple months and it is a version of Rosetta Stone for EL kids or English Learners K through six.

Matt:

And this product is an oral first product and this blew me away. The stat if you're trying to teach a kid English primarily from lots of different countries is written communication.

Matt:

It's like 20% spoken and so our product is like 70, 80% spoken because this ... And so it's just really interesting. What could you do that's more immersive using AR or VR?

Matt:

I think there's, I'm with you. I think there's a lot of cool things you could do and I think you could enhance the travel experience quite a bit. I think you could enhance the young learner experience quite a bit. I think there's so many cool things you could do.

Stephanie:

Yeah, I completely agree and there seems like a lot of opportunities there. So what kind of disruptions do you see coming to the world of ecommerce and online learning?

Matt:

Yeah, it's a weird market and it's weird because like depending on what we're talking about in terms of overall commerce, it's like a $6 trillion education market, 6 trillion.

Matt:

Consumer is probably the largest out of that and then obviously, there's higher ed, there's middle school, high school, there's elementary, and then there's adult education and then where it's coming from, is the consumer paying, is the government paying.

Matt:

And so take all this aside, less than 10% is digital right now and I think there's going to be this massive realization and awakening because of the C-19 pandemic of everything that I do has to be digital.

Matt:

And it's not that we're replacing teachers, it's how do we integrate digital curriculum and conductivity between the teacher and the student, how do I build a data layer that personalized that experience.

Matt:

I think that can happen between, language learning, it can happen in lots of different curriculum like reading and writing. And not having a digital enabled kind of curriculum I think is going to be like if you don't have a solution for that, if you're an education system, if you're a college, if you're whatever, and if you don't offer these types of products in the future, you're going to go the way the dodo bird.

Matt:

I think higher education has a wake up call. J.Crew, I like J.Crew, they're in bankruptcy now. Hertz, I used Hertz. They're in bankruptcy now and I think there's this massive pull forward right now that's happening because the product that we've been using in education hasn't changed in like 40, 50 years.

Stephanie:

Yup.

Matt:

It's the same problem. If I time warp myself from 50 years ago into most classrooms, it would look the same.

Stephanie:

Yup. Yeah, I've always kind of thought that a disruption was definitely coming around higher education, but this seems to have moved everything forward by many years and especially around K through 12 where that felt like it would be much harder to change.

Stephanie:

For colleges, it's like, "Okay, now it's changing pretty quickly with all the boot camps coming out and company's not really always requiring degrees, at least in this area."

Stephanie:

But K through 12 felt hard to change and it feels like this is going to be an interesting forcing function now that like you said, a lot of kids are home and parents are figuring out how to be a part of their education more in the online learning process.

Stephanie:

It just seems like there's going to be a lot of opportunities that come up because of this.

Matt:

Yeah, I agree. And I also think that now I'm sounding like the tech utilitarian, but I would say that ed tech and I'm not from the ed tech space, but I am in it now.

Matt:

I would say that the ed tech providers that ... We're now entering the third wave I guess is how I think about it. The second wave which is typical of most other businesses that you and I have seen before, like ecommerce or sales ops tools, now you can talk about those and go, "Remember Omniture and it was badass?"

Matt:

Yes, it's now part of Adobe Cloud Matt is when you talk about these generational shifts in how we think about things, I think a lot of the ed tech players, people who are selling software to schools or directly to the parents or kids or whomever, they've definitely oversold or oversold the efficacy of some of those products.

Matt:

And when I talk about digital transformation, I'm not talking about the ability to do things self serve, and have the teacher look at some flat experience.

Matt:

Right now and this is not against teachers. Teachers, they're like little mini MacGyvers to me. I mean, they're like doing amazing things streaming together curriculum on the fly.

Stephanie:

Yeah, both my sister and my mom are teachers and I do not know how they're doing it and how they had to pivot so quickly to being in the classroom and my sister is actually a ESL, English as a Second Language teacher. Yeah.

Matt:

Oh my gosh, okay.

Stephanie:

Yup, because I have a twin sister and she always tells me about the difficulties that she's experiencing right now trying to bring her students online and develop curriculums online and a lot of them don't have internet access and it's just very interesting seeing how they kind of develop workarounds to make it work for their students.

Matt:

Yeah, my criticism of education isn't the teacher clearly, a lot of it is kind of the cost basis in the bureaucracy and when I talk about ed tech, it's like I think it comes down to and this is not a Matt Hulett Rosetta Stone specific thing is educating a group of young individuals or even old individuals, it doesn't matter the same way at the same time makes zero sense.

Matt:

And so building in the ability for the student to do some things themselves, having a data layer so that a teacher understands the areas in which that student is struggling, and so that the instruction becomes very personalized.

Matt:

It is generally what I'm talking about and it's right now, I think we have a billion and a half young kids around the world that don't have access to computers.

Matt:

And if they do have access to computers, they're scanning in their Math homework and sending it to a teacher. Well, who knows if I struggle for five minutes on this problem versus long division versus multiplication? The teacher doesn't know.

Matt:

And so I think the ed tech software that I'm more in favor of what I'm speaking about is how do you build curriculum-based, efficacy-based software, not unlike what your mom and your sister think about because they have degrees and know how to actually educate someone, they're not software [inaudible 00:49:10].

Matt:

And if they're wanting to provide very explicit instruction, my guess is they're really swamped. They've got other things they need to do, they're probably paying for materials that are [crosstalk 00:49:22].

Stephanie:

Yup.

Matt:

And so I think about all these stresses and we're asking them to provide excellent education, it's just, it's too much. And so I really feel like this third wave of technology, and I think it's going to happen is it's going to integrate this we call AI and HI, how do you integrate the best of what software can do and integrate that into the lesson planning of the teacher versus let's try to create AI for the sake of AI and disintermediate teachers which I think is ridiculous is and that's what I'm talking about.

Matt:

Because I see a lot of tech companies playing the game of ed tech versus education companies that are actually trying to be technology companies.

Matt:

I think the latter will be the software and the providers that will end up actually being the most successful and the most adopted, but obviously, I'm passionate about this because I've seen this with our Lexia software.

Matt:

And we have like 16 plus academic studies that show that the software works and I'm like, "How is this possible that two-thirds of kids still today by the time they're a third grade or reading below their grade level that continues through eighth grade?"

Matt:

Two-thirds are reading below level. How is this possible? And I'm not here to tell my own software. I'm just like, "Why is this possible?" Well, it turns out we don't train teachers to teach kids how to read.

Matt:

There's an approach to it, and we don't do real time assessments of kids struggling, the teachers swamped, they don't know what's going on.

Matt:

Anyways, I could talk about this for hours, but I do think there's this world where at some point, the $6 trillion business of educating all these kids and adults and young adults will be digitized.

Matt:

And I think that will be an interesting space. Ed tech is that one space where most VCs wouldn't want to touch.

Stephanie:

Yup. Yeah, I know. It's a hard ... I mean, health care and education. It's a hard space. So yeah, I completely agree. I know we're running into time and I want to make sure we can jump into the lightning round.

Matt:

Okay.

Stephanie:

Is there any other high level thoughts that you want to share before we jump into that?

Matt:

Nope. I think I hit the verbose button when I answered that question, but I didn't realize you have some familiar background on education which got me going so I [crosstalk]

Stephanie:

Yeah, no, yeah.

Matt:

I will be [crosstalk] lightning round.

Stephanie:

Yeah, we need a whole other podcasts where we can just talk education stuff and I can have my family be the call-ins and they can give us a little advice and ideas.

Stephanie:

All right, so the lightning round brought to you by our friends at Salesforce Commerce Cloud is where I ask a few questions and you have one minute or less Matt to answer. Are you ready?

Matt:

I'm ready.

Stephanie:

All right. What's up next on your reading list?

Matt:

Words that matter. I don't know the author.

Stephanie:

Cool. What's up next on your podcast list?

Matt:

This podcast of course.

Stephanie:

Hey, good. That's the right answer.

Matt:

And then Masters of Scale. There's a new podcast actually with one of my competitors from Duolingo.

Stephanie:

Oh-oh. Very cool. Yeah, that's a good one. What's up next on your Netflix queue?

Matt:

God, it is embarrassing. Do I have to say it?

Stephanie:

Yes you do.

Matt:

Too Hot to Handle.

Stephanie:

Oh my gosh. I can't believe you're watching that. I'm judging a little bit, but I've also seen a few episodes. So if you were to choose a company right now to turn around, not Rosetta Stone, some brand new company, not a brand new one, but maybe one that's in the industry right now where you're like, "I could jump in and help." What company would you choose?

Matt:

That's a great question. WeWork.

Stephanie:

Woo, that would be an interesting one to try and turn around.

Matt:

Yeah.

Stephanie:

All right, next one. What app are you using on your phone right now that's most helpful?

Matt:

I listen to a lot of podcast, I love Overcast. I don't know if anyone ever mentions that. I just love it because I listen to things 2x.

Stephanie:

Yup, yeah, I know. I agree. I like that app as well. What language are you or your family working on right now to learn?

Matt:

Well, it's funny. I'm kind of barely competent in Spanish. My 16-year-old is actually I would say pretty intermediate level Spanish and my 10-year-old is oddly learning Japanese.

Stephanie:

Oh, go. Go him. A boy, right? Yeah, that's great. All right and our last, a little bit more difficult question. What's up next for ecommerce professionals?

Matt:

Oh boy, ecommerce professionals. I think to me it's a lot of the same topics in ecommerce have been discussed for so many years and I think that the interesting one is how do we actually make social commerce really good.

Matt:

And I think I spend a lot of time just, I'm not serious with it, but playing with like, TikTok and Twitch, and I think there's some elements to the social selling piece that I think are super interesting that no one's really figured out and I buy actually a lot of products off Instagram, and it's still too much friction and it's not quite working right for me.

Matt:

So I think there's some ... How do you integrate ecomm and then TikTok in a way that's native to that audience? I think there's some things there.

Stephanie:

Oh, that's a good answer. Well, Matt, this has been yeah, such a fun interview. Where can people find out more about you and Rosetta Stone?

Matt:

Rosettastone.com for the company and I'm matt_hulett on Twitter and it was a pleasure to talk to you today.

Stephanie:

All right, thanks so much.

Matt:

Thank you.

 

Jun 25, 2020
How Grubhub Utilizes A Culture of Experimentation to Maintain Its Position as a Market Leader
56:45

If you think back to just a few years ago, when someone asked you to name a company that delivered food, you’d probably only be able to name a few pizza joints or the local Chinese food place. But today, the world has shifted and online food delivery is a booming business. Last year alone, Grubhub sold $6 billion worth of food, and the company delivers more than 500,000 meals per day. So how did Grubhub enable this massive shift to digital meal purchasing? On this episode of Up Next in Commerce, we welcomed Alex Weinstein, the SVP of Growth at Grubhub, and he explained to us exactly how the company has been able to become a market mover. From the initial education process to then focusing on customer retention, Alex and his team have been deep in the weeds of it all, and they have built a culture of experimentation, data analytics and a focus on ROI to stay ahead of the curve. Alex explains it all here. 

 

3 Takeaways:

  • Measurement and incrementality are important. You have to understand whether or not where you’re putting your dollars is making a difference, and sometimes the answer will surprise you
  • True experimentation is necessary to create new methods of measurement, marketing strategies and growth opportunities. So the question you have to ask as a leader is how can you create incentives to allow people to take risks and learn?
  • The time is now to learn about the newly-online customers that have trickled into your business due to COVID-19. In understanding their needs, you will be able to ensure retention and set yourself up for the new reality we live in

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Welcome to Up Next in Commerce. I'm your host, Stephanie Postles, co-founder of mission.org. Today, my stomach is rumbling, because we're talking all things Grubhub. Alex, welcome.

Alex:

Thank you for having me.

Stephanie:

Yeah, thanks so much for coming on the show. I just pulled up the app earlier to be like, "What should I have for lunch today?" Because it's 12:00, and it's time to order something.

Alex:

What did you end up ordering?

Stephanie:

I'm looking at pad Thai right now, we have a really good Thai place down the street. That's usually my go-to, but I started to get influenced by sushi, so if you have any advice, let me know.

Alex:

I don't know the restaurants in the area, but look for those that are well-rated, and look for deals. We have a ton of deals going on right now.

Stephanie:

Ooh, nice, that's perfect. You are the SVP of Growth at Grubhub, correct?

Alex:

That's right.

Stephanie:

I'd love to hear a little bit about your role there, and what brought you to Grubhub.

Alex:

Sure, sure, thank you. I've been at Grubhub for a little bit over three years. My responsibility is for the consumer business. That is, how do we get more new customers to try us out for the first time, and how do we get existing ones to order with us a little more often? And hopefully they'll return.

Alex:

This spans all aspects of marketing. We do a whole bunch of stuff in-house. I'd love to explore that a little bit later. But it also involves a lot of work cross-functionally, across the product. When I say product, I don't just mean our apps, but the totality of the experience that the customer has, from our apps to the delivery, to customer care, if that's ever necessary.

Stephanie:

Very cool. Previously, were you at, I think I saw Microsoft and eBay, or what did your past life before Grubhub look like?

Alex:

That's right, that's right. I actually am a very strange Head of Marketing. I'm a software engineer by training.

Stephanie:

Oh, interesting.

Alex:

I've written a bunch of code. I switched over to product management, and then darkness had me, and I somehow ended up in marketing. I indeed was at eBay before this, also for around about three years. Similar role, maybe a slightly more narrow role, focused on customer retention, marketing technologies.

Stephanie:

Very cool. I'm sure that was great help working at a marketplace, albeit not maybe a three-sided one, but still maybe a really helpful to transition to Grubhub with as your background?

Alex:

It very much was. I have to admit, I thought I knew marketplaces after eBay, then when I started Grubhub, I discovered so much complexity. Our business, exactly as you said, is a three side marketplace. Restaurants, food delivery drivers, and consumers. It is a hyper local business. People who live in Palo Alto whole heartedly don't care how many restaurants we have in San Jose, and how good our delivery network is in San Francisco, right?

Alex:

It has to be block by block, and we have to make sure that we have good restaurant selection there, good demand, and good supply of drivers. Otherwise, if the three sides aren't in alignment, bad things happen.

Stephanie:

Yeah, that seems like it would be really tricky to keep all that balanced. How have you found success keeping everything balanced? Like you said, it's so hyper local, I'm thinking there could be a driver over in Sunnyvale, and they're definitely not going to go to my local Thai place to pick up the order that I'm looking at.

Alex:

Yeah, this is where a lot of fun in this business comes from, and a lot of complexity in this business comes from. We have to be really good at predicting things, and predicting demand. And we have to be really good at engaging all sides of our marketplace so that drivers actually want to be online at the time when we want them to be online.

Alex:

Consumers end up placing additional orders if perhaps we have a little bit too much supply. Restaurateurs want to create deals. Basically, being able to influence three sides of the marketplace in a automated, personalized, hyper local way, is really the only way we can survive, right? This, to me, is super joyful, and super complicated, and where a lot of learning, personally, for me, has come from.

Stephanie:

Yeah, I'm sure every day it's adjusting a little bit more, and you keep have to kind of changing things up and experimenting a bit. How do I think about where Grubhub is at right now? To me, it seems like it's the market leader. How many meals are being delivered? How much is that in dollar-wise of food that's being sold? How do I think about that?

Alex:

We're a public company, all of those numbers are public. Quick summary for you. We deliver more than half a million meals a day. Last year, we delivered more than six billion dollars worth of food. Of course, with the arrival of the pandemic, the demand for food delivery has also increased. The expectation of all of our constituents, and of our community, all of us, have risen tremendously. Because, from something that restaurateurs really on for a portion of their revenue, they now rely on delivery as the majority of it.

Alex:

For consumers, where they would perhaps order delivery occasionally, now is the only way for them to order restaurant food. A lot of expectations on us have increased throughout these past couple of months, even though we already started from being quite a large company with high expectations.

Stephanie:

Yeah, have you had to adjust quickly with everything going on with COVID-19? What have you seen, other than increasing orders, and how have you had to pivot to meet the customers and meet the drivers in where they're at today?

Alex:

Yeah, absolutely. Well, most definitely, yes. First and foremost, we began by focusing on safety of all the participants of our marketplace, right? This began with our work on personal protective equipment for our drivers. We distributed hundreds of thousands of PPE sets for free for our drivers. We invested a bunch of work into enabling contactless delivery within our apps. Which, of course, is something that makes the entirety of the marketplace safer.

Alex:

We basically have to take our product roadmap, and, in many ways, revisit it fully, and focus on things our community demanded of us in that moment. Similarly, we had to do something like that with marketing, as well, because we had a certain strategy. You of course know that a lot of our effort is in making sure that consumers can get the best value on Grubhub. If you spend money on food delivery, your dollars will go the furthest on Grubhub. This really is our brand positioning.

Alex:

When COVID came, we had to take a pause, because this rewards positioning, or this value positioning, really had to take a step back, because consumer's interest... Sure, they were looking for deals, but they were looking to be safe, first and foremost. Secondly, they were looking to support their community. So we had to reposition a lot of our marketing work to make it so.

Stephanie:

Yeah, that makes sense. I'm thinking that could be a trend that stays around, even after everything's over, keeping that contactless delivery at least as an option, and thinking about how to actually prove you have the safety measures implemented, and you're tracking that every month. Are you all thinking about how to scale that and keep that for the long term, or is it more just a short term play until the pandemic's over?

Alex:

Couple thoughts for you. One is, I don't think that we're going to be looking at a pandemic being over and everything coming back to normal. I think we need to get used to the new normal, at least until the vaccine is here. Which means that people's lifestyles, their habits, will be fully adjusted by then.

Alex:

As such, it's not like we were developing a set of patches for three months, and then after that, we just turned those patches off. But also, there's meaningful, positives coming from this change, right? Like any crisis, it is both a danger and an opportunity. What we've discovered is this contactless delivery, for example, besides making everyone safe, it is actually making our network a tiny bit more efficient. The delivery driver does not need to engage with the consumer in-person. They can just drop it off, take a photo, and keep going, and keep working. Which shaves off a small amount, but in the grand scheme of more than half a million deliveries a day, this starts adding up. It helps our drivers earn more, and it helps our overall network be more efficient, which means food comes to consumers faster.

Stephanie:

Yep, yeah, that's definitely a good change. There's a lot of food delivery players in the market right now. How do you create an experience that's completely unique to Grubhub? Where people, they're like, "That's where I want to order through."

Alex:

All of this, in our minds, has to do with differentiation. And you're exactly right, maybe two or three years ago, where consumers didn't really know much about the food delivery category. A lot of what we had to do was to educate them about our existence, which is why a lot of our marketing, a lot of our product, was geared towards a first-time experience of someone who's never gotten anything delivered other than a pizza. Because really, that was the state of the world, right? You would ask an average consumer on the street, "Name a couple companies that deliver food," and they would name pizza brands.

Stephanie:

That would've been me a couple years ago, too.

Alex:

Totally.

Stephanie:

I'd be like, "Domino's."

Alex:

Yeah, yeah, absolutely. Maybe Chinese food, if you've ever tried it. An average consumer didn't know that there's hundreds of restaurants that deliver to them, and that they can find them on Grubhub. So that was the focus of our messaging.

Alex:

Three months ago, even before COVID, if you asked an average consumer to name food delivery brands, they would name us, and maybe a handful of our competitors. In that environment, I'm prompted, right? This is unaided awareness. Not, "Have you ever heard of Grubhub?" But, "Name a food delivery brand."

Alex:

Our work switched from creating awareness to driving consideration. Helping consumers understand, what is it that they get if they buy from us versus perhaps one of our competitors? Last year, a lot of our focus has been on stating this extremely clearly and delivering on that experience quite precisely. As I mentioned a little bit earlier, it is all about value for us.

Alex:

Now that we're entering a bit of a new normal with COVID-19, we're beginning to come back to some of this foundational brand positioning. Talking about rewards and value. We have a TV spot that's actually launching today and tomorrow on national TV. We're one of the biggest spenders on TV in both the category.

Stephanie:

Oh, interesting.

Alex:

Generally we're one of top 200 brands advertising on U.S. television that talks about rewards and value. You might be scratching your head and wondering, "Why in the hell is a digital first brand spending so much money on TV?"

Stephanie:

Yes, I was wondering. Tell me.

Alex:

It actually is kind of counterintuitive. We, maybe about three years back, we started scratching our heads and thinking, "Okay, if an average consumer doesn't really know what food delivery options are out there, how do we create that awareness? And how do we do that in a way that can confidently map the efficacy of our spend?" Because creation of awareness, let's face it, is the most expensive thing a company can do.

Stephanie:

Yep. Everyone wants it, but then actually implementing it, tracking it, and seeing how it did, seems a little tricky.

Alex:

It is so very tricky. Most mechanisms for doing this are actually kind of arcane, right? You do media consumption patterns, which, frankly is a large-scale survey that perhaps an agency would run and say, "Okay, New Yorkers, they absolutely do not watch any TV. They spend a bunch of time in the subway, true. And then they're all very much on digital."

Alex:

So, a brand that's trying to advertise in New York then would say, "Okay, television in New York, totally worthless. And our consumers are probably just like the average consumer in New York." That's kind of how the line of thinking typically goes. We, despite having a general applicability product, right? Everybody wants food delivery, right? Everybody from 18 to my mom, most definitely could benefit from food delivery.

Alex:

And yet, what we discover, is that the media consumption patterns of an average New Yorker are not the average media consumption patterns of our consumer. Moreover, what we discovered three years back was even though our intuition was that someone who orders food delivery online is most likely an early adopter of technology, and most likely a cord cutter, right? I mean, if you're about to order food online, you of course are ordering your socks from Amazon. You of course are watching shows on Hulu Plus without any commercials, as opposed to on cable TV, right?

Stephanie:

Yeah.

Alex:

Of course that intuitively made sense, which is why we've been spending a lot of money through digital video channels. That intuitively made sense. We stumbled upon a set of techniques that allowed us to, with confidence, compare the efficacy of our awareness spent between digital video and the digital awareness darlings of Hulu and YouTube and Facebook for some of the dimensions, here. What we've discovered is that the bull drought of digital first is actually not as efficient, not at all as efficient per dollar spent, comparing to the-

Stephanie:

Oh, interesting.

Alex:

... boring, stodgy, nobody watches it, cable television.

Stephanie:

Is it because of the audience that's there, where the digital, like you were talking about, advertising to them, they may already know about you and it's an easier conversion, whereas the people who are keeping the TV running in the background all day, maybe actually need the ad right then and there where it can put a little inception on them and they can hear about it a couple times while they have the news on?

Alex:

Yeah, I think that's one of the reasons. Other reasons are that, just on a per impression basis, your digital video is dramatically more expensive. Even though I'm a nerd of machine learning, and I love personalization, I don't believe that personalization can cover a five X price difference. It can make something 50% better, but not five steps better.

Stephanie:

So how do you think about creating that culture of experimentation like you're talking about, where most companies right now are probably not focusing on TV campaigns? How do you think about putting a budget behind that and actually empowering a team to do that, where when I think about teams who are running with marketing budgets, or just budgets in general, it's very scary to not show a great ROI, because you either aren't going to get that budget again. It's a use it or lose it type of culture, it seems like every company operates that way. Maybe Grubhub doesn't, but how do you think about creating good incentives and a culture of experimentation to come up with some of those projects?

Alex:

I think a culture where you ask for confidence in measurement for your spend is a good culture. Where you ask for feedback loops is a helpful culture. Now, you can take this too far, and you can start trying to map everything to revenue or [inaudible 00:16:56], and that doesn't particularly help with upper funnel marketing campaigns. But, the other extreme isn't particularly better. I see a lot of marketing organizations end up in that spot, where we say, "We demand perfect measurement," from what they call performance marketing.

Alex:

And the brand marketing side, the one where vast majority of dollars actually have to be spent to create awareness, is not working to the same level of rigor, and the same level of intellectual honesty with measurement. To your question about how to actually create those frameworks for the team, a couple things come to mind.

Alex:

The first one is, trying to pursue incentive alignment. If people on your team genuinely believe that learning and optimality of investment for the entire team is how they get promoted, is what the company actually values, they will pursue exactly that. Let me give you-

Stephanie:

Let me hear an example.

Alex:

Yeah, let me give you a counter example. A counter example is what happens if you hire an agency to manage your Facebook spend. Have you ever heard an agency that managers Facebook spend come back to you and say, "Your Facebook spend is terribly inefficient. You should spend less on Facebook."

Stephanie:

Definitely never.

Alex:

Right? That's what their incentives are, they get a portion of your Facebook spend. The same exact thing happens for your TV agency. The same exact thing happens for someone who's managing your Google spend, right? If you have a bunch of outsourced agencies, each of which is responsible for one of your channels, their survival, their ability to feed their children, depends on you being able to spend more money on the channel that they're managing for you.

Alex:

Of course, they don't have an incentive to try to tell you, "Hey, take money from Google and put it into Facebook." They will personally suffer. A setup like this creates a true misalignment of incentives. Let me contrast that with, let's say, an in-source structure, or perhaps a structure where you have a larger performance agency that is able to reallocate dollars between Google and Facebook without personalty suffering.

Alex:

In a structure where you in-source, which is how we operate, you're able to create a shared destiny, and you're able to say, "Hey, person running Facebook. Your incentives are all about learning." So if you have a current level of performance, which is a certain level of incremental CAC, and a certain level of incremental LTV. Your goal is to improve that by this percentage over the course of next quarter.

Alex:

Find some way to do so through whatever experiments that you're able to run. One of the potential outcomes is an improvement in efficiency by reduction in spend. They're able to raise their hand and say, "Hey, I actually want to spend your dollars. Take away some of my budget, and reallocate it over to TV, because they can spend it better. I hear they have a way to spend at a lower incremental CAC than I can."

Stephanie:

Have you seen that in your culture so far, of people actually being like, "Hey, you can have this budget, move it over here"? It seems like a lot of times, people are personally tied to their budgets, and whoever has the bigger budget is the more powerful one, and I haven't often, at least in my previous days at other companies, I haven't seen people say, "Hey, you can have this budget and move it here."

Alex:

You are exactly right. A lot of our, I guess, legacy from many of our previous jobs, associates the size of the budget with the influence in the organization, most definitely. This is where the job of a leader really is to create the right incentives and to catch people doing something right.

Alex:

If you hire somebody off of a company that had that culture, of course, their initial inclination will not be to raise their hand and say, "Hey, my area isn't working so hot." You need to indoctrinate them, if that makes any sense, into a world where it's okay to raise their hand and do it. The way you do it is by upholding folks who do this, and pointing at them and saying, "This person is doing it right," and celebrating their successes. And celebrating their experiments, where, perhaps, they didn't see the immediate success, but they learned something.

Alex:

So, as a leader, I think you have a lot of power to create these incentives. As such, structure what your team actually holds as valuable versus not. If you point to enough examples like this, you'll actually end up transforming the culture, even for someone who comes in from an organization that wasn't like that.

Stephanie:

Yeah, it seems like it would also allow someone to wear multiple hats, and kind of become a polymath when it's like, "I don't just focus on Facebook ads, or I don't just focus on this kind of marketing." They get to experiment with a bunch of different areas. Have you seen that happen in your organization?

Alex:

Oh, most definitely. My paid social folks, just like everyone's, they were super focused on Facebook. What we discovered is them raising their hands and being very creative, and being some of the first folks who ever tried TikTok, for example. This was a little while back now, but we were one of the first handful of brands to invest a lot of money into TikTok, and do large scale experimentation with them. What we've discovered is if you're one of the first ones, there's very meaningful... Effectively, arbitrages to be had, where you're able to not only get a great deal, but shape the product to your liking. As such, get a temporary advantage over the rest of the market.

Stephanie:

That's fun. How did you think about creating your first campaign on TikTok? When your team presented this idea to you, were you like, "Yeah, let's do it," or were you a little hesitant? What was the first campaign you had go out there, versus what does that look like today? Are you still utilizing it?

Alex:

Oh my God, this is quite a story, to be honest with you. The team came to me and said, "So, we're thinking about doing TikTok." My reaction at the time was, "TikWhat?" They explained this to me and I read up a little bit about it. My immediate reaction is, "Okay, you are attempting to sell a luxury product." Let's face it, ordering delivery, you're still buying food from restaurants. It is a luxury product in many of the cases, right? To, "You're trying to sell that to people who have no disposable income of their own. The average customer of TikTok at the time just could not have their own credit card."

Stephanie:

Yeah, they have allowances, maybe.

Alex:

Right? Exactly. "Why in the world could this possibly work, you guys? Our average consumer is fairly affluent, and you're now trying to go into a different demo. How is that even remotely possible?" But, luckily, at that point, I had already observed that my team knows better than me, and that they have much, much better ideas than I do. Essentially, we just did a test. We did a small test, and we experimented in earnest. Surprise, surprise, they came back and they showed me the numbers, and they were meaningfully better than Facebook at the time.

Stephanie:

Wow.

Alex:

We ended up investing more. That was genuine, true learning. Not just for the organization, but frankly, for me. There's multiple possible explanations for why it ended up being so efficient, and I can go into some of them, but the thing that matters to me most is that the crew felt inspired to pursue something new. They felt passionate enough about it to structure a test when there was no framework, really, out there. And they were unafraid enough to basically tell me that I'm wrong, and that my intuition is off.

Alex:

That made me feel like the culture is actually right. The culture is exactly what I want it to be. The opposite of that, where you're going with the highest paid person's opinion, if that makes sense.

Stephanie:

Doesn't work.

Alex:

It doesn't work, because all of our intuitions, no matter how successful we've been previously, we are sometimes wrong. Why hire smart people if you don't trust them to try things?

Stephanie:

I think there's a good mix between trust your gut, but also don't trust it, because you could be wrong. Yeah, go with other people's ideas, as well. How do you think about those efficiencies that you're mentioning when you're exploring new channels like TikTok?

Alex:

Sure. To me, it's indeed about being open-minded and experimenting with new types of media, and being unafraid to try things that aren't immediately, obviously, going to work. A similar type of experiment happened with Snapchat a little bit earlier, where I also was convinced that this can't possibly work for the same reason. Luckily, I, again, was wrong.

Alex:

I guess a pattern of learning is what inspired me to basically create this incentive structure for the team, where they're unafraid to raise their hand and say, "Hey, the way we've been doing this before is really off." If you want, I'll tell you a story of a channel that's not really a channel that I guess formed my opinion on that topic.

Stephanie:

Yeah, let's hear it.

Alex:

This is a story of a couple marketers that were attempting to turn a specific city around.

Alex:

As we talked a little bit earlier, we can be doing super well in one city, and not well at all in another city, or in a corner of a city. A lot of what we do has to do with how do we turn a specific city or neighborhood around? This couple folks, their job was to turn a specific city around, and I was expecting them to come to me and say, "Hey, I'm going to take the budget that you've given me, and I'm going to buy some Google ads, and I'm going to buy some billboards, and maybe I'm going to buy some Facebook ads."

Alex:

What they did instead, these were two marketers. What they did instead was actually really curious. They experienced the product for themselves. They placed a couple of food delivery orders, and they came to me and they said, "Hey, I don't want to buy any ads," they said. "Instead, whenever I was placing the order for food, there really weren't enough food photos. I was ordering from restaurants that I hadn't ordered from before, and I don't really know if their pad thai looks good. I don't really know if their sushi is something that I want to try."

Alex:

They were in your position. They said, "Screw it, I'm not going to buy any ads. I'm instead going to hire some photographers to come into those restaurants and take the photos. Then after that, I'm going to measure the incremental impact of the added photography, and see if the efficacy of that is actually comparable or high enough, comparing to the efficacy of ad spend." Effectively saying, "I'm going to open a brand new marketing channel, and that marketing channel is going to be photos."

Stephanie:

Photography.

Alex:

I'm like, "Okay, let's just do it."

Stephanie:

A whole brand new, the vision, of Grubhub, just photography.

Alex:

Exactly, exactly. These two folks get on the phones, start calling photographers, start calling restaurant owners and scheduling appointments to have the photographers come in there. That becomes basically their job for the next two months.

Alex:

Then they organize a really [inaudible] visitors for these specific menu pages see the photos, and others don't. They do some serious math to try to say, "Hey, here's the incrementality in here, and here's the efficacy of the spend comparing to what Google ads would be, or Facebook ads would be." They discover that those photos are actually a better way to spend marketing dollars, than any actual marketing.

Stephanie:

Yeah.

Alex:

I, at that point, am kind of floored. I come to them, I'm like, "Okay, you guys are on fire, this is amazing. Let's take your thing and give it to operations and scale up this thing." They say, "No, no, you don't understand, you don't understand. This whole project sucked. We spent our entire days on the phone with restaurant owners, trying to schedule appointments. We are going to make it better."

Alex:

I'm like, "Wait, what's going on?" They say, "No, no, instead of scheduling appointments with the restaurant owners to take photos, we are going to rent Airbnbs and photo studios around town, then order food from the restaurants, bring it to those Airbnbs. Our food stylist is going to make it look good, and we're going to take photos."

Stephanie:

Oh my gosh.

Alex:

I'm like, "Wait, wait, what? What?"

Stephanie:

That's another level.

Alex:

Yeah. My immediate reaction from this is, "Have you ever seen delivered food? It does not look good." They obviously told me to go pound sand, as they should have, and they showed me the first photos from these experiments. Oh my God, those first photos look much better than anything taken in a restaurant, because food stylists are really good at their jobs. If you were able to control the lighting, you're able to take much better pictures.

Alex:

When they actually tried it, they discovered that instead of doing two photo shoots a day, the photographer, who's the most scarce and expensive part of the whole operation, is able to do 20 photos shoot a day.

Stephanie:

Wow, that's efficient, that's amazing.

Alex:

As you can imagine, at that point, my mind was completely blown. We indeed operationalized this with folks whose day job was operations, as opposed to marketing. This was the example of really learning what learning means.

Stephanie:

Mm-hmm (affirmative). You kind of picked the markets to do that in, or you kind of see a market not doing so well, and those are the ones that you focus on getting the good imagery for, versus allowing that... UGC content to work well in other markets, or how do you think approaching that? Because it seems like something that would be really hard to scale, ordering a bunch of things all the time from every market in the U.S. How do you think about creating those campaigns?

Alex:

Yeah, yeah, yeah. With hundreds of thousands of restaurants on the platform, we indeed have constrained resources to do these photo shoots when we can. We can't do all of them next month. We had to be somewhat thoughtful on prioritizing things. A few things came to mind for being able to select the right restaurants to do this in sort of the right markets.

Alex:

First is, conversion. If consumers land on the menu, and end up buying stuff anyway. Well, that's cool, I guess they don't need the photos. If on the other hand, conversion isn't amazing, but the number of visitors to the menu page is super high, hey, this might be an opportunity to actually add some photos and improve that conversion.

Alex:

By digging into the data, and looking at where the majority of the incremental impact can be, we develop this framework for allocating this constrained resource, which ended up effectively being an investment of marketing dollars into a channel that's sort of marketing, but sort of not. Is it product? Is it operations? I have no idea.

Stephanie:

It's something, all the above.

Alex:

Right?

Stephanie:

How do you think about, you mentioned incrementality quite a bit. How do you think about that throughout your organization, when developing these experiments and seeing what works and what doesn't work?

Alex:

Sure. First, if you don't mind, allow me to define it as-

Stephanie:

Yes, please.

Alex:

Because I think that's super important. Incrementality, to me, is what would have happened anyway? If you didn't do your glorious marketing campaign, or this amazing product improvement that you just rolled out. This is a difficult question, because it's really attempting to attribute the entirety of this success, or entirety of what's happening during a campaign, to the campaign.

Alex:

Let me give you some intuition behind this, right? Let's say you go to, I don't know, gap.com or something like that. You see a banner in there that says, "10% off." Well, obvious, a lot of people are going to click that banner, and a lot of people are going to use that coupon to get 10% off of their transaction. The key question, though, is, what portion of those people would have transacted anyway?

Stephanie:

Yeah, they went there directly. They probably would have.

Alex:

Exactly, it's clearly not zero, because before you launched that awesome 10% off coupon, some people were buying jeans yesterday. Being able to, with confidence, judge what that incremental behavior is, and what is the incremental CAC, and incremental LTV, is super important. Simple back of the napkin as to how you judge this is, let's say yesterday, a hundred people bought those jeans. Today, 110 people bought those jeans. It's not a real AB test, obviously. But all 110 people used your 10% off coupon. You can wrongly suggest that all 110 converted because of your coupon, or you can look at the truth in the eye and realized 110 used the coupon, but 10 really only needed it.

Stephanie:

Do you think a lot of brands are missing this when they offer these discounts, and maybe unintended consequences that could come from it? I could see a lot of consumers, if they get used to you always having discounts, then they just wait. They're like, "I'm going to wait for that next 10% off coupon," then they don't have a buyer at all.

Alex:

Yeah, it is super dangerous. I do think that in some industries, there's exactly that happening, right? We know of the right times during the year to buy a TV, so we don't buy a TV until then. We know when the right time of the year to buy home improvement equipment, and we don't buy it until then. Exactly what you're describing is a real danger.

Alex:

It's not just a danger of delaying the purchase, it's a danger of create a permanently less profitable business. Imagine is, every Friday, Grubhub was to, let's say, give all our consumers three or five dollars off. Not only are Thursday orders going to be delayed, because our consumers are going to be like, "Hey, I don't really care when I get takeout. I'll cook one night and I'll get takeout the other night." They'll delay it until Friday, but those Friday orders are going to be less profitable.

Alex:

So we permanently teach our consumer base, if we take that route, to not only delay their orders, but to make them less profitable. That is a real issue and something you got to be super careful with, which is why you must measure incrementality.

Stephanie:

Yeah, especially right now. You see so many people discounting everything, it's kind of scary to think. How are you going to come back when your entire, everything on your store online, is 80% off? How do you come back from that?

Alex:

Most definitely. Now, if you have physical inventory, the opportunity cost is not zero. Right? Let's say if you're selling digital goods, for example, right? Let's say you're selling access to, let's say a song, or a book, right? Your fixed costs in that situation, your cost of an action, is terribly low, right? As opposed to if you have goods in the warehouse, and you aren't able to sell them, there's very meaningful fixed costs for you that you need to deal with.

Alex:

It might be, actually, quite reasonable to be running these high promotions, but if you are, you better be running it as a real AB test. You better be able to confidently say that this is the true incrementality of this 80% off coupon, and that's the true value that I'm getting out of it from both not needing to keep these products in the warehouse, but also from just sheer revenue from the consumer.

Stephanie:

Yeah, that makes sense. Do you have a good platform or way that you've set up metrics and things like that to measure that incrementality in a way that's not really manual, and then you can just kind of see how the campaigns and what they're doing is performing against each other?

Alex:

Yeah. In lower funnel channels, it is actually fairly easy to set up a platform for this, and we have. There are tools that you can use for it, right? Google Optimize, for example, or Optimizely, right? We have a combination of in-house and these third party tools to do product experimentation, for example.

Alex:

For things like CRM, couponing in the apps, or issuing emails with coupons, or push notifications, really good experimentation platforms don't exist off the shelf. We had to do some math ourselves. Some of that math turned out to be fairly fine tuned to Grubhub's needs. Here's what I mean by this. We're an LTV business. It's not just about the immediate transaction, it's about what happens after that transaction.

Stephanie:

Yep.

Alex:

For example, if a consumer ends up converting at a higher rate, and then afterwards has a poor experience and doesn't come back, that actually is terrible, terrible, terrible. Your typical, immediate conversion optimization tool, would just look at the first part of this. Oh my God, they converted at a better rate, great, awesome, keep it.

Stephanie:

Yay. Yep.

Alex:

We had to build tools specifically designed to capture these long-term effects. We typically look at the results of these long-term activities over the context of a month, right? So we need to see what happens to consumers for a meaningful amount of time to have high confidence that it indeed is net beneficial or not.

Alex:

Of course, we're able to look at things fairly early, and if something's a terrible idea, we're able to kill it early. But, in order to be able to confidently say what is the impact on the LTVs, we had to build tools. These in-house tools for many CRM things that we do today.

Stephanie:

Got it.

Alex:

Even then, it's just for lower funnel. It's just for CRM and product. How do you judge the incrementality of TV versus billboards? That is a whole other, super complicated story.

Stephanie:

How do you think about the intersection between your CRM and your content management system and your actual commerce platform? How do you create a good environment where they all interact together, and people can see a holistic view of everything that's going on?

Alex:

Great question. I don't think I have a perfect answer for you, other than enabling as many work streams for experimentation as are possible. That is, allowing the CRM team to run experiments on their own, without involving a bunch of product people, without involving a bunch of finance and analytics people. Similarly, allowing the front end or pricing optimization team to run experiments on their own, and do very specific price optimization experiments just by themselves.

Alex:

The more work streams like this you have running in parallel, the more you're going to be able to learn, as an organization, per unit of time.

Stephanie:

That seems like a great answer to me. It also seems like you would get a lot of, you could have a customer with a negative experience, but it would be because of maybe the restaurant. It seems like you guys would have a lot of insights into maybe how to help restaurants improve, where it's like, hey, every time someone orders this thing of sushi, you always forget the wasabi, and man is that making people upset. Do you ever send that data back to restaurants to improve the products as in their food, or the customer experience, or anything like that?

Alex:

Most definitely, you hit the nail on the head. We are in a really unique position of knowing not just who the people were, or when they placed the orders at your restaurant, but knowing exactly what they ordered. We can see exactly that pattern, right? We can tell you that on Tuesday night, the reviews for people ordering sushi, are actually worse than on any other night. We can help you see that, so that you can train the person that's working on Tuesday night.

Stephanie:

[crosstalk 00:43:21].

Alex:

These kind of insights... Yeah, totally. These kind of insights are exactly what we believe is what is something that we can uniquely provide to our restaurant partners, besides demand. Of course they come to us because they're interested in demand, particularly now. But we can do more, and we've been building a lot of systems specifically about that, that are effectively... you can think of this as recommendation systems in the grand scheme of the word of giving recommendations to the restaurants about how they can lend the totality of their business more efficiently. For example-

Stephanie:

It seems like that could be a whole different business for you guys to also operate.

Alex:

It's quite synergistic in our minds, right? If we're able to make our restaurants more successful, it actually makes us more successful, in turn. Because, those consumers who are placing orders and are not getting any wasabi with their sushi, they are ultimately not happy with Grubhub. We want them to have an amazing experience.

Alex:

Whether the restaurant wins just on Grubhub, or throughout the totality of their experience, because, let's face it, that restaurant might be serving other delivery platforms, and soon enough, hopefully, dine-in, as well. That retraining is going to help the restaurant across the board. We actually very much welcome that. That means that we're able to create the value not just for our platform, but for the restaurant, and increase the chance that this restaurant will, ultimately, be successful.

Stephanie:

Mm-hmm (affirmative). I think that's a really good point, especially as a lot of brands right now are shifting quickly to the world of Ecommerce and trying to figure out how to sell online. There's going to be a lot of new touch points that they maybe aren't anticipating that could actually hurt the consumer experience. If you've got the UPS guy throwing your box over the fence, and it's getting crush, there's a lot of things that actually, you maybe wouldn't even think of, as a brand, of, "That's not my job," when really, everything form start to finish to delivery and afterwards, and the follow-up, all of that's your job. And how do you think about controlling that experience with so many touch points?

Alex:

You are so right. The totality of this is their job. From the first ads that they see on TV, to what shows up when they look on SEM or on paid social and discover your brand there, too. The first purchase experience to the interaction with the UPS guy, to the interaction with customer service. All of that, in totality, is what the brand relationship really is, what the product really is.

Alex:

As marketers, we can't just care about that ads. As product people, we can't just care about the bits installed on the phone. They, in their separation, they don't particularly matter. As you saw from my story with the photos, that really was quite profound to me, right? We kept looking for a solve to get more customers and more sales through marketing, and that solve wasn't there at all. The most efficient solve was far outside.

Stephanie:

Mm-hmm (affirmative), yeah, such a good reminder for all brands to think about that, like you said, totality of the process. Because you have a software engineering background, I feel like I'm allowed to ask you tech questions. I saw on your, you guys have a blog on Medium, or your engineering staff does. They were talking about how they were creating discount codes using crypto. It made me wonder, what other kind of technologies are y'all experimenting with, or seeing success, or how did you think about running the platform that Grubhub's built on now?

Alex:

Sure. A few things are super important. One is having a scalable platform that can withstand demand, and that can withstand massive spikes in demand. As luck would have it, most people in Chicago, want to get dinner approximately at the same time.

Stephanie:

Yes, who knew?

Alex:

Right. What a pain in the butt. We've been trying to convince them to maybe come a different... No.

Stephanie:

Come on, 3:00's your time, come on.

Alex:

Exactly, exactly. Your dinner delivery window. Which, of course, creates formidable demand. Not just on the services in the backend of our systems, but a formidable demand on our logistics network. A lot of our work goes into being able to spike in response to customer demand. Let me give you one intuitive example of this. Outside of COVID, before COVID, when rain would start during dinner hours, demand would massively spike.

Alex:

At that moment, we're supposed to magically materialize a lot of drivers on the road doing deliveries. Being able to do so, technically, and when I say magically materialize, I'm of course referring to creating incentives and creating appropriate communication channels with our drivers so that they actually want to get on the road. A lot of our engineering work has to do with how we were talking about in the beginning, balancing the three sites of the network, and being able to respond to either a massive spike in demand, or response to a set of orders that were placed in the specific part of the city on the logistics side.

Alex:

Or, respond to an onboarding of an enormous partner, like Shake Shack, or Sweet Green, or Taco Bell, with their own unique needs. Remember, we work with such a variety of restaurants, right? We do point of sale integrations with a variety of our enterprise customers, which of course means that we have to have nimble systems that are able to onboard those same customers. They have to be resilient, as well. So, a lot of our work has to do with both scale and being able to deal with these spikes.

Stephanie:

Got it. Any favorite pieces of tech that you guys are implementing or trying out right now to help with those large spikes in demand? Or where you guys think the future is headed that you're kind of preparing for?

Alex:

Favorite pieces of tech. Huh. Huh. I'm going to think marketing tech. Braze has been an outstanding tool for our marketing teams. What we've discovered is it effectively enabled a whole work stream of experimentation for our CRM teams. They're able to run pretty sophisticated experiments completely independently from engineering, which increase our velocity of experimentation.

Stephanie:

Hmm, that's awesome. I'll have to check that out. Cool. So to zoom out a little bit, 30,000 foot level, what kind of disruptions do you see coming in the world of Ecommerce? What's on your radar right now? It doesn't have to be for Grubhub, it can just be in general.

Alex:

I think that the disruption is already here, where over these past couple of months, we've seen the portion of online transactions, and portion of consumers who have tried buying things online just catapult through the roof. All of those new consumers, let's face it, my 90 year old grandmother is using Zoom now. All of those consumers are a new opportunity. They have very different expectations. They don't yet know much about your brand.

Alex:

Being able to understand this newly online wave, and heightened expectations of the consumers that already happen online, but perhaps not as active with your service, right? Those, I think, are super important. This to me takes us back to velocity of experimentation, being more important now than ever. That is, truly learning from your customers. Observing them, creating experiments, measuring, and getting a feedback loop from them, so that you're able to focus and find the one thing that you can improve to make the whole story better. Maybe photos. Maybe it's something else.

Stephanie:

Yep. Yeah, I love that. It definitely seems like with these new people coming online, you have to have a bunch of different tactics to meet them wherever they are. The ones that have been working for the past year, might only work for a subset of the people because you have 50% more people that you need to market to, or develop a platform for, and it's going to be very different with how you approach those new consumers than what you've been used to.

Alex:

Exactly.

Stephanie:

All right, so, we're about to jump into the lightning round. Any higher level thoughts, Alex, that you want to share before we do so?

Alex:

If you're able to structure your organizational incentives to focus on learning and feedback loops, I think now you're going to see an even bigger reward for it in the form of market share, in the form of growth, in the form of being able to adapt to the world around you and leapfrogging the competition.

Stephanie:

Yeah, completely agree. All right, so the lightning round, brought to you by our friends at Sales Force Commerce Cloud. It's a fun and easy, quick round of questions where you have a minute or less to answer. Are you excited and ready, Alex?

Alex:

Very scared.

Stephanie:

Dun dun. All right, first one. If you are starting a podcast, what would it be about, and who would be your first guest?

Alex:

Whoa, what a fascinating question. What a fascinating question. I am obsessed with all things culture, and how do you actually create the right incentives for a technology/marketing organization? I love Simon Sinek. He is outright amazing. I learned a ton from reading him. I would probably to get him and if I can't, I'd get one of my former mentors in there, as a consolation prize.

Stephanie:

Oh, that sounds good. I would listen. I would be your first listener, and I would give you a five start review.

Alex:

Oh my gosh, thank you.

Stephanie:

You got me at least. What's up next on your reading list?

Alex:

Hmm, next on my reading list? I am reading Russian sci-fi novels these days, as a means of escaping from a tiny, one bedroom apartment.

Stephanie:

Any good ones that we should check out?

Alex:

I'm actually reading them in Russian, so I don't know-

Stephanie:

I was going to say, unless they're in Russian, then I don't know if I'll be able to read Russian quick enough to read it.

Alex:

Oopsie, oopsie, I do have a few people at my work who've been reading Tolstoy before the whole COVID situation started. I don't know if I'd recommend it now, Tolstoy does darkness extremely well. We have enough darkness around us now.

Stephanie:

That is true. Yeah, maybe not. Alright, well, what thing do you normally buy at a store that now you're just going to buy online after everything with COVID?

Alex:

What a great question. Only online now. Hmm.

Stephanie:

Tricky, tricky.

Alex:

I used to, actually a lot of my electronics. I used to come to the store and look at them and experiment with them. I have a feeling that I'm never doing that again. I used to come to a Best Buy and just try to look at different mice and monitors and all that. I got a new laptop and a new mouse online. I really like them, and I really like the experience. I was unafraid of returning them. That's it, online I go.

Stephanie:

Yeah, completely agree, especially as a lot of these companies are making the return experience a lot more seamless. Yeah, I could completely see the same thing happening. Buy things, test it out, and send it back if you don't like it.

Alex:

I was just chatting with a colleague about this exact same thing with returns around fashion. I think there's a lot of innovation to be had with moving the fear in fashion through that.

Stephanie:

Yep, completely agree, except I could see them having to now to figure out a way to resell those items in a way that proves that they've been quarantined, disinfected, and yeah. I was just thinking about that the other day. Man, that's tricky, especially for second hand market places to try and prove to the customer that these items are clean and good to go, and you can buy them.

Alex:

I agree. Solvable, I think, but I agree.

Stephanie:

It is solvable. All right, so the last final question. What's up next for Ecommerce professionals?

Alex:

I think we're going through a time when from being on the early adopter, early majority demand for most of the brands. We've become the critical source of revenue for every single brand. If you think that your company was going through a digital transformation, and is now trying to make digital just a better channel, hold on to your seats, because it's not the only channel, and the majority channel. So, the demand for expertise in our area is increasing very rapidly, and the demand for learning in our area is also increasing rapidly. I think this is a wonderful time to be in Ecommerce. I think this is a wonderful time to be learning and doubling down on Ecommerce. I'm excited for all of us to be right at the center of this transformation.

Stephanie:

I love that, love the positivity, and yeah, it's definitely an exciting time to be alive and experiment and try new things. This has been a blast Alex, thanks so much for coming on the show. This is your second appearance on a Mission podcast, so yeah, we're so thankful that you came back and joined us again.

Alex:

Stephanie, thank you very much for inviting me.

Stephanie:

All right, talk to you later.

Alex:

Cheers.

 

Jun 23, 2020
The Importance of a Frictionless Ecommerce Experience
53:03

When Christiane Lemieux was looking to sell her first company, she knew she wanted to find a buyer that understood that the future revolved around Ecommerce. She found that buyer in Wayfair and for the next few years, she worked with the company to cultivate as much knowledge about the eComm space as possible before venturing out on her own once more. Today. Christiane is the founder of The Inside and the author of numerous books, including her newest called Frictionless. The idea of her new company and the book revolves around the concept that in order to have success in the world of Ecommerce, you need to give your customers an experience that is so easy and efficient, that they never have a reason not to buy. On this episode of Up Next in Commerce, Christiane explains why that frictionless experience is so important, and how to make it a reality.

Key Takeaways:

  • Thanks to innovators like Bezos and Jobs, the world shops in a different need-it-now way. As a result, the biggest challenge Ecommerce platforms face is creating a frictionless experience
  • By leveraging the design community to be consultants, The Inside is targeting customers who can buy with more frequency and create predictable, repeatable conversions
  • Getting online quickly and the businesses who have a digital-first strategy are successful

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

 

Stephanie:

Christiane, welcome to the show. How's it going?

Christiane:

Hey. It's going really well, Stephanie. How are you doing?

Stephanie:

Doing great. So, for all of our listeners, I want you to pronounce your own name since I did not do it this time.

Christiane:

My name is Christiane Lemieux. It's very French and a huge mouthful, so I completely give you a pass on that.

Stephanie:

Thank you for doing that, so I did not have to. So, you are the founder and CEO of The Inside, a direct-to-consumer home furnishing brand. I love to hear a little bit about that and how you started it?

Christiane:

Well, this is my second foray into the world of home furnishings. I started my first company, it was called DwellStudio, out of college. I went to university at Parsons School of Design here in New York. And I started a home furnishings brand from my New York apartment. 13 years later, I sold it to Wayfair. And speaking of what's up next in commerce and the digital landscape, part of the reason that I did that was that... Oh, you know what, I should cut my nail Hold on. Sorry. Let me just cut this so it doesn't ding on you.

Stephanie:

Okay.

Christiane:

Sorry, I'll go back to Wayfair. So, I sold my first company to Wayfair, and part of the reason that I did that was that I got to be entrepreneurial fork in the road where I had never really raised money before. And I realized that if I was going to continue down, the growth trajectory that I was on, it would involve me opening more than the one store I had in New York. It would involve me raising money for the first time, substantial amounts of money for the first time, to roll out stores.

Christiane:

And at the end of the day, I sat and thought for a very long time about the business model that I was on, that was growing, that I had started, and I realized that it didn't feel right to me. I really believed that all businesses were going to, at some point, in the near term or distant future, transition to eCommerce. And what I wanted to figure out was, who could I either partner with or sell to that would understand that idea and philosophy?

Christiane:

And so, I hired an investment bank in New York and they actually had me meet with a whole bunch of home furnishings companies, most of them, you would probably know. But when I walked into Wayfair's office in Boston with 1,800 people and 800 engineers, I realized that we were really aligned from a conceptual point of view in terms of what the future of DTC look like, direct-to-consumer look like. And so, it wasn't the best offer financially but, to me, it was the best offer intellectually and philosophically. So, I sold my business to Wayfair in 2013.

Christiane:

And then, I went on their executive committee. I mean to say that it was a learning would be doing a disservice. It was like a full immersion into eCommerce with one of the best teams in the country, and by far, the best team in my particular category. And so, I learned so much from them.

Christiane:

And as I was sitting there, I was like, "What would make me start another business? What in the world after building one from the ground up and selling it, what would I do?" And so, I realized that if I could take my first business, which is really design-first and brand-first, and then merge that into what I had learned at Wayfair from a digital commerce-first perspective, that I might be crazy enough to do it again. And that's what I did.

Stephanie:

Yeah, that's amazing. So, what were the key learnings that you took away from Wayfair, and maybe the pitfalls that you saw where you're like, "Oh, I should avoid that."? Because when I was looking into Wayfair, I think they're still very unprofitable. And so, did you see things like that and you're like, "Oh, if you just adjusted this part of the model or this part of logistics, I wouldn't have to worry about that."? Or what kind of things do you take away from that experience?

Christiane:

So, I would say there's almost nothing wrong with Wayfair. And I'm saying that, I mean that honestly. First of all, Niraj, their CEO is one of the smartest digital executives in the country, if not the world. I think that he's very much following the taking market share approach pioneered by Bezos, of course. And so, I think we're just very much on the same path. He will own the furniture category online and he will very quickly, if not even now. I mean, the last quarter was insane for them because now we're all sheltering at home and [inaudible] in a very different way than we did maybe nine weeks ago. But he'll take market share and he will be very profitable, and he'll own furnishings online.

Christiane:

There are other companies that have pursued that line of growth that weren't necessarily as equipped as he is. And he's equipped to do that. So, as relevant as that is in the post-WeWork discussion, I think in his particular case, he's already got the groundwork done to be able to do that and do it fairly flawlessly. I think for me-

Stephanie:

I mean, definitely still... The first company that comes to mind when I do think about buying furniture or looking for anything, even above Amazon and Walmart... I mean, they're the first ones I would go to so I agree.

Christiane:

Also, because they've got the best selection and they've also got the back-end figured out. And so, they taught me things like overpack centers. I was like, "What is an overpack center?" And so, they take-

Christiane:

They have overpack centers where they take in the goods from the manufacturers and they overpack them, so they don't break. And by diminishing the chance of something being damaged, not only do they make the customer experience better, which is really necessary in this day and age, but they also ensure that their margins don't get completely depleted by goods that arrive damaged. And so, it's not a crazy thing to do, but at the end of the day, it's totally crucial.

Christiane:

So, I mean, they taught me so much about, first of all, UX, customer experience, and then the logistics and the profound necessity to really think about delivery in a way that is beyond just parcel delivery or white glove delivery. They really think about it from a 360 perspective all the way from margin protection to a really flawless customer experience. Some of the things that you don't necessarily learn when you're building a design brand, I learned at Wayfair, so I'm forever thankful.

Christiane:

The difference is that they're like Amazon, they're a marketplace. And so largely, they don't design and produce their own SKUs or their own products. And they don't need to because their value prop is that in COVID-19 when every single person in the country, all of a sudden, needed some kind of a home office and/or home school. I mean, you went right to Wayfair and you ordered a desk and they came to you perfectly, right?

Christiane:

I wanted to take the ideas of brand and design but apply the Wayfair rigor of digital thought around how I executed this next brand, some of the things like having no inventory, having exclusive product, having a 3D studio to do the photography, dropship, largely dropship the product. So, instead of sending it through a more expensive white glove delivery, have it lightly assembled so that UPS or FedEx could do the delivery. And so, all of these things add up to really beautiful customer service, exclusive custom product to the customer, and then margin improvements around delivery, around no inventory, around a decreased cost in photo assets.

Christiane:

So, what I wanted to do is I challenged myself to think of all of the substantial problems with a home furnishings business, solve them first, and then start the business. And so, that's how I did it this time.

Stephanie:

That's super smart. So, how long has The Inside been operating and how's it doing today with everything going on?

Christiane:

So, I left Wayfair in 2016 and I called up my favorite supplier. She went into business with me on a B2B beta way. And so, we did that for close to two years. And then, I met the extraordinary, Kirsten Green of Forerunner, and she said to me, "This is really interesting, Christiane. Why don't I write you a pre-seat check and you go figure it out."

Christiane:

And so, we came out of beta in July of 18th. We're a year and a half in, and it's going very well. It's going very well. In this pandemic, I did not have the category breath that Wayfair has which made this a very interesting business time for them, but enough of a product breath that I think that we're helping people improve their homes on a daily basis right now, which is what we set out to do.

Christiane:

And listen, I feel extraordinarily lucky that it's a digital-first company. I don't have stores, I have a very lean staff. We were working from a work kosher, which we closed down at the end of April. So, we are going to be dispersed until, at least, the beginning of 2021, so we won't have an office. We can do all of this virtually. We hold no inventory, so we have no warehouses. Essentially, we had to let go two people just to preserve the business. But we've come through this, I think, as well as you can. My whole MO right now is making sure that nobody loses a job, really, because that's the scariest part of all of this is the unemployment numbers. I mean, that just keeps me up at night.

Stephanie:

I know. Yeah, seeing how high they're trending is definitely that's scary. Was there any big digital pivots you had to make or that you made quickly when COVID-19 started, or right now?

Christiane:

Well, I think that what we did... Apparently, from my digital marketing, either cohort or people that we work with, there are three DTC areas that have done very well in this particular pandemic, I mean, the Starling pandemic, so this pandemic, but it's athleisure, home, and alcohol. So, those three things had extraordinary growth. We happen to be in one of those categories.

Christiane:

I think one of the things that we did, which I think, anybody in a growth category in this particular time, we stayed the course with marketing. So, a lot of people caught their marketing. And what we're seeing is customer acquisition costs have come down, the cost for all of these paid marketing initiatives across all the platforms have come down. And so, we really leaned into that.

Christiane:

The other interesting thing that's sort of trend that's come out of this is not the digital marketing, I don't know if you've noticed this, but a lot of people are doing direct mail. Direct mail a huge resurgence obviously, depending on the category you're in, but people are home, and they're reading their direct mail.

Stephanie:

You shifted into that space of it?

Christiane:

We're looking into it now.

Stephanie:

Cool. Yeah, that's great. When you were first building The Inside, were there certain key technologies that you leaned on to build up the website, or are there any favorites that you utilize? I mean, I saw you have quizzes on the website, which seemed amazing. Is there anything specific where you're like, "This is my favorite piece of tech we use or a plug-in how we build our website." Any details around that?

Christiane:

Well, it's funny, this is our third iteration of our website.

Christiane:

So, we actually had to build our site from the ground up, which has its challenges.

Christiane:

One of the things that happened to us is we were on a really new version of Java, and Google couldn't index our site in the beginning so we had to do all kinds of back-end hacks to fix that. But for like three weeks, we're like, "Why is our traffic so bad?" And then, we realized that we weren't showing up at all.

Stephanie:

That's not great.

Christiane:

No, it's so horrible. So, just all these learnings along the way have been really interesting. So, because of the customizable aspect of our business, we had to build our own site from the bottom up, and that's given us the ability to keep growing our SKU count and keep allowing people to customize each and every one of the pieces.

Christiane:

I think that there's plug-ins. Everybody loves the Affirm or any kind of extended payment plan. There are things that are so unbelievable like Apple Pay and Amazon Wallet and all these things. If you don't have them, I mean, you're putting yourself at a huge disadvantage. I mean, they're not necessarily plug-ins, they're more payment tools.

Christiane:

I think the name of the game now is, it goes right to the core of my book, is making the experience frictionless. I mean, this is philosophical, but I think if frictionless extends even beyond that digital aspect of our lives, people are used to getting what they want, when they want, at the price they want, with the look they want, because of...

Christiane:

And I would say that Bezos might be the grandfather or the father of the frictionless experience. I mean, he changed the way we consume, and buying, shopping, whatever, fundamentally, in the same way that Steve Jobs changed the way we think about media. I mean, Bezos changed the way we shop, and he made it frictionless for us, and he keeps going beyond. Because if you think about Amazon Prime, he made everything accessible to us in two days. I mean, not necessarily right now, but generally speaking, and that just removes the friction from everything.

Christiane:

And philosophically, it's given us time back in our lives, right? Especially, let's think about others, me as a mom, I never have to take two hours of my day to go to the toy store to get the Lego for my son, William's friend, Gray's birthday party ever. It gets delivered to my house and it takes me no time. And that time that I get back, I mean, pre-COVID, I think the digital generation looks at time in a completely different way and the generation that preceded that, right?

Stephanie:

I absolutely agree.

Christiane:

Yeah, because there is all of this found time, and I think the digital generation also understands that it is the only non-renewable resource, right? If you have money, you can throw it on almost anything, right? I mean, you can have a jab for a trainer or whatever, or if you're clever and you have to be resourceful like me, you can find, I don't know, a meal delivery service or the stretch class on Mindbody, or whatever it is you're looking for. There's ways to hack almost anything. The only thing we can't hack is time.

Christiane:

And so, the more frictionless your experiences are across every single thing you need to do every day from like your healthcare all the way down to your grocery shopping, the more of this found time essentially you get back or digital time.

Christiane:

Pre-COVID, the people were applying that to travel, experience, I don't know, wellness, self-care, working out, all these things. Because it's the first generation that doesn't have to wait in line to get their license renewed at the DMV.

Stephanie:

Yeah. I mean, that's definitely a very different generation now who knows nonsense and they're not going to put up with the old way of doing things. How did you think about designing your website and your customer journey to create that frictionless experience? I mean, like I said earlier, I love seeing the quiz. I actually took it to see what kind of bedframe I should buy. How did you think about designing things to make it easy for people to buy? Especially furniture, that's kind of tricky. People are usually used to testing it out.

Christiane:

They're used to testing it out. So, my caveat is the following, that is definitely a work in progress. We look at this every day in every way, I don't think we've made it frictionless yet but we're trying to. And I think that for home furnishings, in some ways, we have to act as your decorating friend, as well as your place to buy the product. And so, to the extent, we can make your choices easier, so the quiz or you can text us or email us or set up an appointment for a design consultation with us. If we can help you be your trusted friend and design advisor, that I think is one of the tools to a frictionless experience.

Christiane:

Like every other eCommerce site, there's table stakes things like, "If you don't like it, you can return it," and you have 30 days to return it. Because you know what, that's just the name of the game today. And also, we have to ship it to you for free because that's also the name of the game today.

Christiane:

So, there are things that have been institutionalized, I'd say, by Amazon first and then adopted by everybody else that are just table stakes. And so, we started out with those and that was, I think, like 1.0 of frictionlessness online. And then the companies that are really forward thinking are the ones that could build on that on a near constant basis. So, yeah, that's very much where we are philosophically and trying to make the UX better every day.

Stephanie:

Got it. What kind of metrics are you focusing on when you're making all these iterations and trying to make the experience even better? Are there certain things you pay attention to or that you sync up with your team every week and go over?

Christiane:

A lot of it is Google Analytics and then we look at the Facebook metrics for the paid marketing, all of these things. But some of the things we look at are, obviously, like the really basic ones like bounce rate. One of the things that people are looking at now is, they call it dwell time, how long people spend on each page and how in-depth they go. So, we look at that.

Christiane:

We look at who designs a piece of furniture, and then transacts, and then who abandons the cart and why. And so, we're trying to finesse the experience all the time so that people feel they're not stuck with paralysis of choice. Because I think the thing about customizing is that, especially if there's 16,000 different iterations you can possibly make, you might get paralyzed by choice.

Christiane:

So, the quiz is very helpful there because you may have learned that you like coastal mid-century, your favorite color is blue, here are three patterns that you like that are foolproof for you. And then, you can go from there. You can iterate from there. So, you can choose a brass leg or wood leg or whatever that works for the rest of your interior. But at least you've narrowed down to the extent you can, algorithmically what you like. And so I think that, I mean, all of those things are super important.

Stephanie:

And I think less choices is definitely key. Especially I've seen a model where they're populating an entire room for you of like, "Here's the whole entire bundle, so you don't even have to think about it. You can swap things in." And like you said, having someone that you can text is so super important, where you feel like you have a friend where you're like, "How would this look? What do you think about this? Show me something that's similar." I think all of those are really strategic.

Stephanie:

But when it comes to some of those metrics, how do you... For dwell time, for instance, I think any of these might lead you down the wrong path based on what's happening right now with the current environment where I heard that, well, times are up, but then conversions aren't maybe up at the same rate. Is there any metrics where you're like, "Oh, they might be reading into that the wrong way, and we shouldn't maybe take a quick action based on that right now."

Christiane:

I think that's right. I think people are... Because we have so much time, and content looks different from one person to the other, the content they like. So, if you're in the middle of decorating your house, you might be on all these sites, and because you have, all of a sudden, more disposable time at your fingertips than you have in the past. So, I think dwell time is important, but add-to-cart is really the thing you want to see, and then the final conversion.

Christiane:

So, we look at where people are hanging out from a GA perspective and then look at the add-to-cart and then look at the conversion on that add-to-cart. Of course, for us, the metrics that we want to focus on are getting from add-to-carts to conversion to the extent we can, and so trying to make the PDP and the the checkout page as flawless as and as inviting as possible to really get people to transact.

Christiane:

I mean, in front of that is as much inspiration as we can possibly allow people to consume, whether it's through Instagram or through Facebook Ads or through whatever means to get them inspired. But really, our job, especially on a site level, is to make it so easy that why wouldn't you buy it? And to the extent we can quell your paralysis of choice. That's really where we're focused right now, is really helping you design the space of your dreams digitally.

Stephanie:

Very cool. So, you just mentioned Instagram. I saw that you launched an Instagram Live series called Go Inside. Can you speak a bit about how you're utilizing that to potentially drive sales and the strategy behind that, and ROI that you've seen on that content or how you measure that?

Christiane:

Well, I think, for us, part of this... The interesting thing about the home furnishings business is that there are two distinct consumers, there is the DTCs, so the consumer you think about who wants to buy an upholstered headboard and goes on and chooses their fabric, and executes on that, but there's also the trade.

Christiane:

And so, our particular category has interior designers, and many of them who, at the end of the day, are a very big part of this business, and a very, very important customer to anybody in the home furnishings business because they are buying on behalf of multiple people. And if you make the whole experience frictionless for them, it's not just one bed every five years, it could be five beds every month.

Christiane:

And so, I think part of our Instagram strategy is really letting the rest of our community meet the interior designers that really work with our product, not only so that they can see what this community does, but also, at the end of the day, we would love our interior designers to get business and to really think about this, not only as a home furnishing company, but as a community that we're growing for people who love design and who want to, as we call it, live beyond the beige. And for us, that's really people who want to personalize their spaces, and think about their spaces as something that is theirs and that is customizable, in a way that's frictionless. And so, by going live with our interior designers, we're introducing the world to this great community of people who can service that.

Christiane:

A little early for ROI right now, but if we circle back in a little bit of time, I can let you know, because data has to have like a decent subset, right? So, we just launched a home design 30-minute consultation, and that's really helpful in terms of conversion. Because if people get you on the on the line and walking through their spaces and really helping them, chances are it's the kind of help that they're looking for. So, we find that useful.

Stephanie:

Well, how do you think about scalability when it comes to having those one-on-one interactions with the customer and consulting them on the products and whatnot?

Christiane:

Well, that's where these two things dovetail together, right? And so, if we build a really beautiful, robust design community that is local... Because every different area has a different design philosophy. In California, you can live indoor or outdoor, in New York, a lot less. And so, if I can introduce you to a design in your area via Instagram Live, and he or she is showing off some of the projects they've done, there's a good chance that you will then reach out to them and let them know that you were introduced to their work on The Inside.

Christiane:

And the rest, I think, is just great for everybody involved. I mean, that's my business philosophy. I love a win-win-win, so the customer wins there, the designer wins there, and we win there not just because of a sale, but because we've made somebody's home and life better.

Stephanie:

Yeah, that's a really good strategy. And this thought that you are partnering with the designers and having them do the consultation, that's super smart, where you don't really have to worry too much about hiring a bunch of people and customer support to do it who don't really have good design principles probably.

Christiane:

Yup. That's how we'll scale. So, we're just at the inception of this, but you get it, right? So, they can meet Maureen Stevens on Thursday night or tomorrow night, and if she's in New Orleans and if they love her design, they can call her up. And when she finds out that they were sent to her via The Inside, then she'll most likely, I mean, hopefully, use one of our upholstered beds in her next project. But even if she doesn't, if somebody gets a better interior because of something we did along the way, then I feel pretty good about that.

Stephanie:

These micro-influencers and designers who are helping with these consultations, are they starting to request metrics and wanting to see data and things that your team will have to start supporting eventually?

Christiane:

I hope so, but not yet. I hope that... Listen, that's part of that frictionless post-COVID change. I think everybody is going to need data, digitally-driven data, so that they understand exactly what the reach is beyond this traditional business models that they've had prior to all this.

Stephanie:

Yup. I think that because of COVID, a lot of people are definitely putting on their entrepreneurial hats and they're going to want to see those metrics. And I think it'd be really interesting to have some type of leaderboard that would show which designer is doing the best and who's helping customers, and just gamify it a bit.

Christiane:

That'd be so much fun. It's almost like you're at, whatever it is, flywheel and who's biking the fastest.

Stephanie:

Yeah, I know. Just implement that tomorrow. Easy. So, are you-

Christiane:

Stephanie, I'm going to take a note right here and actually do that. That's pretty interesting.

Stephanie:

Yeah. I think that's where a lot of the world is going when it comes to gamifying certain purchases and making it more fun. Well, when it comes to gamifying, are there any pieces of tech that you're thinking about? I was just playing around with IKEA's app where they have AR that you can put the product in your room, which was really fun to play with. I was just putting full-on dressers on top of the bed and just being silly with it. But have you thought about doing that since your products are so unique, it seems like it would be really good to get them in the room where people are trying to design it?

Christiane:

Absolutely, yes. And in fact, we were talking to a company in Palo Alto, who was on the forefront of this, probably right around the corner from you.

Stephanie:

Oh, we're neighbors.

Christiane:

Yeah. And they are pioneering this incredible drag and drop. So essentially, you can take a picture of your room, and then you can drag and drop furniture into it. It's so well done. It's so well done that they can tell where your window is and they can have a shadow underneath the furniture so that it looks perfectly real. Interestingly, a lot of the technology that people use for gaming is really applicable here. So, it can create a really unique and kind of true-to-life experience.

Christiane:

So, yes, we're looking to this all the time. I think that as a brand spanking new startup, we're trying to make sure the fundamentals are frictionless before we add all kinds of layers of complexity to the customer experience. So, we want to make sure that it's really easy for you right now to go in and say like, "I love the modern platform bed and I like it in polka dot. I'm going to transact," versus... Because I think that we got to make sure the customers where we are in terms of technology, too. So, I think we're taking baby steps there, but the answer is absolutely yes. And all of that technology is fascinating to me.

Stephanie:

Yeah, completely agree. I'm definitely watching that market closely and it seems like people are leaning heavily in, but agree that until you understand how you want the customer journey to work and the product to work and everything, I think...

Stephanie:

We were just talking with someone from Lenovo who's saying that after years of being in business, you have to just start killing a bunch of things because too many things build up and it starts worsening the customer experience. So, it's probably good to figure everything out first before pulling in a bunch of new trendy tools.

Christiane:

Yeah. We need to have a really beautiful conversion rate indicating to us that the customer journey is frictionless before we can start throwing pretty complex essentially gaming ideas at them.

Stephanie:

Yup. And it would seem like you would need a pretty large catalog as well if you're going to develop an entire AR app for your company. I mean, people probably slip through placing furniture. I mean, at least that's what I was doing. I was like, bang, bang, bang, bang. I was putting in front of everywhere. It seems like I would need a pretty large catalog for that, too.

Christiane:

I think that's right. I think that's absolutely right. And so, somebody like IKEA touches every part of your house. I mean, we're too young to have that kind of SKU count. It has to be in every single category, right? You can't just have the dining room chairs, you have to have the dining room table too. So, we'll get there. We're not there today. And so, I think that you're right. That's a very good point. And so, IKEA is a layup for them. It's a layup for Wayfair as well.

Stephanie:

Yeah. Are there any specific follow ups you do with your customers to keep them coming back, or ways that you're acquiring new customers that is maybe unique?

Christiane:

What's great about our category is that design is a process, right? I mean, even if you hire an interior designer, it usually takes quite a while. And also, people are thinking about their homes in a different way than they used to. It's all these things where it's done, you live in it, and that's it. I think people are constantly upgrading or adding in seasonal elements. And so, once we know you, Stephanie, are coastal mid-century from your quiz, we can keep sending you design ideas that-

Stephanie:

Did you just see my quiz?

Christiane:

No. Is that-

Stephanie:

That's what I was. I'm like, "Did you see me?"

Christiane:

But I have a feeling. Well, first of all, I can see your personal file from our Zoom earlier today, so I-

Stephanie:

You mean, hoodie and sweatshirt? Just kidding.

Christiane:

I also know where you are. I know how old you are. I know where you went to school. But this is all I do all day long, so I can pretty much-

Stephanie:

You're good.

Christiane:

... figure it out. So, since you are coastal mid-century, I would know what to send you as a follow-up. I don't know if you have outdoor space or not, but I might send you some really cool outdoor furniture that would work with the bed you had. I will try and assist you in decorating your space, getting the home of your dreams pretty subtly until one day, you pick up the phone and say, "Hey, Christiane, will you just call me back because I want to do my entire living room?" And I will say, "Of course," and I will call you back and you'll FaceTime me through your living room and we'll decorate it.

Christiane:

But until then, I'm going to show you all the beautiful things you can have at very reasonable prices to make your space exactly the mid-century coastal dream you want it to be.

Stephanie:

That's great. It's a good process. So, to pivot a little bit, you've written a couple books and I'd love to dive into them because they're all around everything eCommerce, it seems. And so, if you want to maybe start with your most recent one or your first one, whatever one you want, I would love to hear about them.

Christiane:

Well, so I've written three books and I'm working on two other ones right now. But the first book I wrote was called Undecorate and it was really, for me, that watershed moment in design when I realized that the way people approach their interiors was no longer going to be like, "I design it. I live in it for 25 years. My kids take a few things when I die and that's the end of it." I realized that people were approaching their interiors the way they were approaching fashion. And that was largely because for the first time ever, things like Pinterest, that was right after Instagram launched... But all these things, all of a sudden, we were surrounded by content and media in a completely different way. So, you didn't have to buy a magazine to look at a beautiful interior, you got to see it all day long on your phone.

Christiane:

And so, what that did was, I believe, it raised the design IQ, not only of our audience in the United States, but globally. And so, all of a sudden, people are interested in interiors, they're interested in design history. They're interested in all these things that they weren't before and they think about their spaces in a less static way. So, I wrote that book.

Christiane:

And then, I followed it up with a book called The Finer Things, which was my first Instagram-generation encyclopedia of the decorative arts on the same day, and I'm writing right now the Instagram-generation encyclopedia of important furniture. This one's take me a long time, I think, four years to write. It's a big project. [inaudible] is the one I'm writing about furniture right now. Will probably take me between two and a half and three.

Christiane:

And then, I wrote Frictionless, which is really my first business book. Because I realized that I had started a business out of college in 2000. I grew it organically for 13 years. And if I hadn't written a book at the end of that journey, it would have been useless. It would have been fire-starting kindling at this point, because everything had changed, every single thing.

Stephanie:

It makes you wonder if you can rely on books these days anymore because, I mean, especially around eCommerce, everything's new and so quick. It's like what sources should I even look at to stay up to date with things? It's definitely probably not a book.

Christiane:

Yeah. I mean, I sat and thought what is the underlying differentiator? What makes something win or something lose here, right, if I look at all the incumbents in my industry. But just generally, what is it? What's the winner or loser? And what I realized was that it was the frictionless experience that allowed somebody to get into a, it could be a crowded category.

Christiane:

But if you can do in the least invasive way, you will win because all people want is as few clicks as possible to get exactly what they want with the commerce table stakes and have it delivered to their home and they don't want somebody calling them up with a delivery time. They don't want 37 phone calls. They don't want a helpline where nobody helps them. When you get into those scenarios, you're like, "I'm not doing this. I'm never coming back."

Stephanie:

Whenever someone wants to call me, I'm like, "Oh, can we not? And don't leave me a voicemail. Can you just text me, please?"

Christiane:

Yeah, just text me. Or my favorite thing is Slack. Just Slack me.

Christiane:

Slack is frictionless. I mean, it's beautiful.

Christiane:

And so, experiences like that, I don't know, equal parts art and science, I think is the big differentiator. We, as human people, now that we've experienced it, that's what we want. We want the Slack experience in every single facet of our life. And if it's not-

Stephanie:

No one's going back after that.

Christiane:

No, no. And if it's not that, then you're like, "Why does this suck so badly?" And then, you find the experience in that, I don't know, that milieu that you need, and you can find it. I mean, if you can't find it today, you'll be able to find it soon. And that's what every business should go after.

Christiane:

Because all the rest of it is table stakes, right, like fast and free delivery, great design. You can do those things, but to do it in a frictionless way is what's going to change your business or give you the competitive advantage you need to take market share. I mean, that's what Wayfair taught me. And when I sold to them and I understood how far ahead of the commerce game they were, it was amazing to me.

Stephanie:

Yeah, that's such a good experience. When you were doing your research for Frictionless, was there any surprises that you found or companies that you're following that were doing something surprising that you hadn't thought of? Or just a good process that you were like, "Oh, that's really neat. I can see why it works for them."?

Christiane:

There's so many nuggets in this book. I mean, I find just talking to the founder of Ixcela, she does a gut biome. You send in your... I'm obsessed with that. You send in your blood sample through the mail. I mean, the idea that we can have MIT science level help digitally is amazing to me. I mean, all of these... That is going to be the outcome of this particular pandemic because what we're realizing is that all of the things we thought we needed to do like endless in-person meetings, we just don't need to. I mean, I will never take 60 subways in a day in New York again to go to in-person meetings unless they're absolutely necessary.

Christiane:

So, I'm thinking about my life through the lens of frictionless experience. Those things, that's a lot of friction, like running around, being late, being stressed, when we don't need to do it. I mean, Zoom has also changed our lives, all of these platforms.

Christiane:

And the interesting thing is that I believe the entire world, regardless of what generation you are, just got schooled in technology, right? We all just got fully immersed in what it means to be a digital citizen.

Christiane:

Even my 75-year-old mom in Ottawa, Canada knows how to use Zoom now and thinks it's the greatest thing ever, and I'm like, "Mom, I told you so." But sometimes it takes being forced into something to realize how extraordinary it is. And now she realizes she can have all of her grandkids all over the world on one Zoom call and everybody can talk to each other. How amazing is that?

Stephanie:

That sounds very similar to my parents as well. They were teaching me how to put backgrounds on Zoom. I'm like, "Mom, I got it. But thank you." Actually, she did send me a pretty funny article that showed how to loop a video on Zoom so it looked like you were moving around and paying attention in a meeting, which I guess her... She's a teacher, so I think some of her students were doing that. They were looping themselves just moving around a few times, and it looked like they were really on board with the whole lesson.

Christiane:

Oh, my God. That is hilarious.

Stephanie:

I'm like, "That's good. Thank you for sharing that wisdom."

Christiane:

One of the partners that we're working with at The Inside, it's a very big home furnishings company and they are pretty sophisticated digitally, and all of them have a constant Zoom competition of who has the coolest background. Apparently, somebody had something like a 1980s workout video. That was fantastic last week. These guys are thinking about this on a near constant basis like your Zoom background now is a reflection of who you are and how creative you are, how digitally savvy you are. I think it's hilarious.

Stephanie:

So to zoom out a little bit, what do you think the future of online commerce looks like after the pandemic's over? Do you think things are going to shift back a bit to how they were? What kind of disruptions do you see coming down the pipe?

Christiane:

People would think "we're going back to normal," I think normal has changed. And I firmly believe that the companies that weren't thinking digitally are thinking digitally very seriously now.

Christiane:

Because as I told you, here I am in SoHo, New York and it turns out when there's a pandemic, nobody lives here. At 7:00 at night is when we all cheer. I mean, there's now six of us on my block who I see every night, and everyone else is gone. And there is one coffee shop that's open, and that coffee shop very early on had a contactless app. So, you could order your coffee in advance and then go and pick it up. Nobody touched anybody with gloves and a face mask on. I've gone there every single morning for the last nine weeks because I want to get out of my apartment and I want to see some of the world, and they have really good coffee.

Christiane:

And across the street from them is the fanciest coffee place in New York that people are die hard lovers of, and you know what, the doors are closed and they never came up with a contactless app and they never figured out how to digitally bring themselves into this particular pandemic and keep their business going. And I think that that's only like a neighborhood version of what the rest of commerce is going to look like, and not only commerce, just like service as well. I think that people are going to have to think about how to pivot their particular businesses digitally as quickly as possible.

Stephanie:

I don't think this will be the first event where businesses have to come online quickly and figure it out. And we'll definitely see the people who did do that this time and the ones who didn't.

Christiane:

Yeah, especially some of the ones that didn't and who are waiting for things to go back to normal might not make it through this. And that breaks my heart because there are fairly... You could probably scrappily do something fairly quickly, but you have to want to. And I think that people that didn't have their head in the sand... Is that what the ostrich does? Stick their head in the ground?

Stephanie:

I think so.

Christiane:

If your head wasn't in the sand, and you were iterating, or at least pivoting during this, it's going to serve you really well on the other side.

Stephanie:

Mm-hmm (affirmative). Yeah, it seems like it'll be, well, it is an environment right now where people have to learn quickly, but they'll probably look back and be like, "Glad I did that." We learned and we moved at the pace that normally would have taken us maybe on a five-year roadmap, we were able to get it done in a week or two weeks. We got pushed into that, but I'm sure they'll look back and be happy they did.

Christiane:

But also, look at the very fast category options. I look at the home furnishings category where, I don't know, it'd be those between 20% and 25% of consumers were willing to buy the category online. I think, in the last ten weeks, it went up to 60% or 70%. I mean, that is massive, world class adoption in a very short period of time. And I would imagine that that is universal across some of these categories. So, it'll be really interesting to see what happens post the pandemic.

Christiane:

But the people that are listening to the CDC won't be rushing out and shopping and going to the beach as quickly as... Some people will and some people want. So, I think that digital adoption is going to be extended, at least for 18 to 24 months, if not, forever.

Stephanie:

Yeah, I completely agree. So, before we move into the lightning round, which I'll explain, is there any other thoughts or ideas you have that you want to share?

Christiane:

No, I think we've covered up everything. I mean, I could go off... You and I are philosophically aligned that this is the way of the future. I mean, I could talk about this for days, but we need a whole Round 2.

Stephanie:

Yeah. It'll be really interesting to see what the landscape looks like in 8 to 10 months, if not, and then again in 24. Because I think you're right, I think that the people that are thinking on their feet and iterating constantly and really pivoting their businesses to be digital-first in whatever, incumbent-second are the people that are going to win here. It'll be a really fun way to look back.

Stephanie:

All right, then the lightning round, which is brought to you by our friends at Salesforce Commerce Cloud, who sponsored this podcast, of course.

Christiane:

Excellent.

Stephanie:

This is where I... Yes, they are great. They're amazing.

Christiane:

They are.

Stephanie:

This is where I ask you a question and you have a minute or less to answer. Does that sound good?

Christiane:

Sure.

Stephanie:

All right, what's up next on your reading list?

Christiane:

What's up next on my reading list? Oh, I have a really good friend in New York City who just wrote a book, Lauren Sandler, and I'm going to read her book next and it is called

Christiane:

Her new book is called This Is All I Got, and it's A New Mother's Search for Home. She is an investigative journalist. She writes for The New Yorker and New York Times. And she actually followed a single mother through the shelter system in New York. But I've just started it, it's pretty amazing.

Stephanie:

I'm going to check that out.

Christiane:

Yeah, it's pretty amazing. I'm trying to think what else? What am I reading that's like business-related? What is it? Harder Things? I just started it.

Stephanie:

The Hard Thing About Hard Things?

Christiane:

The Hard Thing About Hard Things is the business book that I'm reading right now. My editor at Harper who did Frictionless, also was the editor on Ben Horowitz' book.

Stephanie:

Oh, cool. I got to read that.

Christiane:

Yeah. I highly recommend that one.

Stephanie:

Highly recommend?

Christiane:

Yeah. I think that there are probably universal truths. And also, we're going through hard things right now. And I think it's people that are accepting and fluid in the hard things that end up being okay.

Stephanie:

Yeah, I completely agree. What's up next on your podcast list?

Christiane:

On my podcast list? Oh, my God, there's so many on my podcast list, but I'm stuck on the daily right now, if I'm honest, because, first of all, the news is so completely crazy and riveting. And also, I'm obsessed with all the COVID data. You know, I just had the test because my son was exhibiting some symptoms, and all three of us are negative.

Stephanie:

That's good.

Christiane:

Yeah, it's really good. But as a parent, the whole Kawasaki manifestation of this is very scary. Because the first bill of goods we got sold was that, "Oh, if your kids are under 20, you're fine." I was like, "Great." I don't care if I get it, I'll figure it out. But if my kids get it, I don't know what I'm going to do. And now, that's not the truth at all. So, that's generally where you'll find me. It's hard to take your ears away from the news right now.

Stephanie:

I know. Yeah. I have to, every once in a while, take a break because I have three kids under two and a half.

Christiane:

Wow. You're like me. My kids are 21 months apart.

Stephanie:

So, who do you follow in the industry or any newsletters or sources that you go to to stay up-to-date on all things eCommerce?

Christiane:

Wow. I mean, everything, like Crunchbase and TechCrunch. Oh, and I've been watching some of the podcasts, some of the live stuff on Extra Crunch. I'm trying to think eCommerce. I mean, there's just so much of it. I don't know, where else do I follow?

Stephanie:

Or if nothing comes to mind, we can also skip this one.

Christiane:

Okay. I mean, all of the above. And also, all the inbound newsletters and things like that. But just generally, the newspaper.

Stephanie:

Oh, newspaper. Okay. The last harder question is what's up next for eCommerce professionals?

Christiane:

What's up next for eCommerce professionals? Wow.

Stephanie:

Big shift.

Christiane:

Well, I think that everyone is going to have to become somewhat of an eCommerce professional first of all. I don't think digital and analog are going to be two separate things anymore after this particular pandemic, and I think that everybody out there is understanding that in a pretty profound way. I think that digital immersion is not only necessary, I mean, I think it's the only way to actually stay relevant and push your career forward.

Christiane:

Part of the reason that I wrote the book was also to try and understand being the parent of two children, what the future would look like for my kids and what does that mean for college and all these things? Because I wanted to understand 72% of people want to be entrepreneurs, and what does that mean? And so, I think that if they think about that from a digital perspective, it's actually a pretty great place to be, right? It means you're immersing yourself in the digital aspect of things. I think that it's not just eCommerce professionals, it's going to be every single professional.

Christiane:

I do think when I look at the landscape, that the content part of this is really important, right? Because even when I was at Wayfair, I mean, we did content but it wasn't merged the same way. So, your AR question I think is really important. I think that we're going to shift online for a lot of the things that we did in analog ways before this.

Christiane:

So, if I'm an interior designer, I'm not thinking about what my career looks like when I come into your house, I'm thinking about what can I learn online so that I can do it for you from a distance, right? And I would apply that to every single aspect of every single job out there. If I have an analog job, how can I digitize that? And I think everybody's going to have to think about that.

Christiane:

I mean, look at doctors are doing it through telemedicine and designers are doing it through FaceTime. You can go down every single career. I mean, pharmacists are doing it through telemedicine as well. One of the people that I profiled in the book is Eric Kinariwala from Capsule in New York. And I mean, that's a genius business because he's delivering everything from the drugstore, all of your pharmaceutical needs, anything that your doctor has prescribed, you can get delivered to your home. I'm talking to him next week, but I think he probably crushed it in this particular scenario.

Christiane:

So, I think there's no... You're not on one side of the fence or the other, like this silo in the company does eCommerce and this one does regular commerce. I mean, I think that the two now are going to be forever conjoined.

Stephanie:

Yeah, that's such a good point. Completely agree. Well, this has been such a fun interview. We definitely need to be back for Round 2. Where can people find out more about you and The Inside and your upcoming book?

Christiane:

Well, my upcoming book is at frictionless.pub, and you can get a copy of it there. It slinks to Amazon and Barnes and Noble and every other great book place to buy books. The Inside is theinside.com. And the rest, there's an endless breadth of information on Google.

Stephanie:

Yup. Awesome. Yeah. Thanks so much for coming on the show. It's been such a blast.

Christiane:

Thank you. Thanks, Stephanie.

 

Jun 18, 2020
The Brand Is More Than the Product: A Conversation with Beardbrand Co-founder Eric Bandholz
53:10

There is an evolutionary process for every business, and Beardbrand is no different. When Eric Bandholz co-founded Beardbrand back in 2012, all he had was a Tumblr blog with a modest amount of followers and an Ecommerce shop selling other people’s beard products. Today, Beardbrand is a seven-figure business with multiple high selling products of its own and an entire catalog of content that customers gobble up with each new release. On this episode of Up Next in Commerce, Eric tells us how he fortified his brand, and how success in the digital world is all about going beyond offering just a product in a box — it’s about delivering value and the best possible experience to your customers

Key Takeaways:

  • Move away from the strict focus on simply selling as much as you can and instead aim to find the ways you can add value to your customers’ lives. That will lead to more loyalty and, in turn, more lifetime sales
  • When you're cash-strapped, you must think of creative ways to grow the business without capital. One way to do that is word-of-mouth — you can't incentivize word-of-mouth. You have to just focus on creating an amazing experience that your customers want to talk about
  • Site speed is more important than other features. Achieving that  means cutting out pop-up ads and other third-party plugins, which data shows often do not provide consistent or meaningful ROI

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey, everyone. Welcome back to Up Next in Commerce. I'm your host, Stephanie Postles. Today, we have Eric Bandholz on the show, founder of Beardbrand. Eric, welcome.

Eric:

What is going on, Stephanie?

Stephanie:

Hey, hey. Thanks for hopping on here.

Eric:

Yeah. I'm excited for our conversation. It's going to be a lot of fun.

Stephanie:

Me, too. You are a true brand. You're rocking an awesome beard. Just what I expected when I was hoping to see you on video. I'm like, "He better have an epic beard, or this conversation won't go well."

Eric:

Well, it was funny because, actually, I shaved it all off in December, the beginning of December, of last year. That was kind of a big deal for us. That was the first time I shaved my beard completely off.

Stephanie:

Oh, man.

Eric:

She's like, "[crosstalk 00:00:44] your beard," or something like that.

Stephanie:

How many customers did you lose when you did that?

Eric:

Well, I'd like to think that we actually added a lot of customers, because Beardbrand is not about the beard. It's about the man behind the beard. We kind of support a guy's right to grow his beard as much as his right to shave it off. I really wanted to make that point, especially today, with a lot of our competitors challenging people's masculinity by not having facial hair. We want to kind of say facial hair doesn't matter at all. It's just a style.

Stephanie:

Cool.

Eric:

We did some YouTube ads on it as well, which was a lot of fun to do.

Stephanie:

Awesome. I'd love to dive into the background of how you started Beard Brand and the story behind that.

Eric:

We're in business, I think it's got to be, eight years now we launched.

Stephanie:

Wow, congrats.

Eric:

We launched in 2012 after I had grown a beard out for about a year. What happened is, at that time, I was trying to do this graphic design business or design business, and I would go to networking events and everyone would call me Duck Dynasty or ZZ Top or Grizzly Adams. Those are super cool dudes. They've got epic stories as well. As an individual, I don't identify as those kind of guys. I've got the softest hands you could ever imagine. I never touched an axe. I ended up attending this event where I met other dudes like me who are other entrepreneurs and designers and doctors and lawyers and dads. I realized there's this whole community of guys that do not fit the traditional stereotype of a bearded guy. That was the inspiration to kind of call myself an urban beardsman.

Stephanie:

I like it.

Eric:

Beardbrand was going to be the community to unite urban beardsmen and give them the tools they needed to feel confident about rocking a beard. To us, the tools don't mean just the grooming products. They mean, videos. They mean blog posts. They mean style inspiration. They mean community. Over the past eight years, we've been rolling all that out. We've gotten an epic blog and a YouTube channel with over a million and a half subscribers. We've got a private community where we connect with people. We've put on conferences for our customers to be able to connect in person. We've really worked hard to support our audiences, support our customers. I've got two business partners. We're completely bootstrapped. We have no debt. We have no outside funding. We've been able to grow to a nice size seven-figure business.

Stephanie:

That's amazing. Congrats on all those YouTube followers. How do you think about utilizing your content to sell your products? Was that an idea and a strategy from the beginning, or was it more organic, where you started on YouTube, and then you're like, "Well, now, we have all these followers, we should launch a product as well?"

Eric:

Yeah, if we'll hop in our time machine a little bit more. We launched 2012 as a blog, a Tumblr page, which I don't think anyone's ever heard the word, "Tumblr," five years [crosstalk 00:03:53].

Stephanie:

Long time.

Eric:

We had a Tumblr page. Then, we also had our YouTube channel. This time, it was just me, as kind of a side project. I'll make a couple of posts on the blog. Then, I would just re-blog some things on Tumblr to make it look active. I think I did six videos on YouTube. It's not like, in that first year, we really built this thriving community. I think we had 300 subscribers on YouTube and just a couple of thousand visitors to our blog. It was enough that a reporter from the New York Times saw the blog and kind of quoted me as an expert.

Stephanie:

That's awesome.

Eric:

We utilized that opportunity. I convinced two of my friends to go into business with me, and said, "Hey, why don't we turn this blog into an e-commerce store?" We found a product. We started reselling it. We literally launched the website a day before the New York Times article went live-

Stephanie:

Wow, perfect timing.

Eric:

[crosstalk] a couple of days. That was kind of the spark to the business to really give us the energy to continue. Then, I had the vision that Beardbrand, the Urban Beardsman, is going to be like how Lululemon is to people for yoga or Vans shoes is to skaters. Beardbrand and the Urban Beardsman was we're going to serve these urban beardsmen. I always visualize that as apparel or accessories or clothes. I really didn't have the industry knowledge to be able to do that, and the margins are so tight on there, and some seasonality that we found grooming products was going to be that product that united the community.

Eric:

After, I guess, a year or two of failure after failure after failure of trying to get apparel up and accessories up, we finally admitted that we're a grooming company. For us, the content that we've created was more of not to drive sales. The products we have allow us to share our word more. We sell products as a way to kind of expand our voice and to grow our content, not as a way to create content to sell products. I think we're one of the companies that kind of view it a little bit differently.

Stephanie:

Got it. How do you utilize newsletters and reaching your subscribers once you have them or engaging with buyers or prospective buyers? I think I've read about some newsletter strategy that you have from day one, everyone kind of starts out in the same place to go on the journey with you. Is that still accurate?

Eric:

Yeah. We utilize Klaviyo to, I think they call it flows, where you have these series of emails that you send out when people join your email list. We've launched that, I think, in 2015. That's been really good. When you think about building a business, as much as you can automate and build systems and processes, then the more you're going to be able to scale your business and the more traction you're going to be able to gain.

Eric:

This series that we opened up with is really like an education series. I think it's a 5 or 10-part series where we teach them how to care for their beards, teach them how to care for their hair. A lot of guys still don't know how to shampoo and condition your hair. Basics like that where, honestly, they've been doing it wrong, but there's opportunity for them to improve their techniques and, ultimately, get better outcome through their journey. That's been big for us. Then, at the end of the flow, we give them a little thank you product, or free shipping, or something like that for taking the time to invest in themselves.

Stephanie:

Got it? Are there any best practices you would recommend other e-commerce sites when it comes to utilizing that newsletter or where you're like, "Conversions were high when we did this," or, "They were lower when we did this," or, "That thank you product really does help drive future sales," any insights around that?

Eric:

Yeah. A couple of things that we've found that work over the years is we have a product that is not available on our navigation. It's kind of a hidden kit that is only available to people who join our newsletter.

Stephanie:

Interesting.

Eric:

The retail value of that kit is $50. We give them a pretty aggressive price point to be able to get on board. It's kind of like a tester kit, sample kit, so they get exposure to a lot of our products. We found that that works really well because we can say, "Hey, get this tester kit, try all of our products, use these products as you're learning about the things that we're telling you, then, in two weeks or a month or whenever, when you go through the products and look to re-up them." We found that that works really well at getting people into the ecosystem and trying our products.

Stephanie:

Very cool.

Eric:

What other best practices do I have? For us, it's so much about content. I think a lot of people really err towards sales and discounts and buy from us and chest thumping. That's really not our style. I would challenge people out there to think about how you can bring value to your audience's lives. Then, if you bring enough value to their lives, then, kind of the whole Buddhism karma thing, it will come back to you. People will end up buying from you. We kind of have that outlook on the world, that if you do good things, good things will come back to you.

Stephanie:

Love that. How do you think about your buyer experience and making that personalized and unique to all your customers as they come in?

Eric:

We've invested a fair amount into our packaging to our products. The unboxing experience is nice. We use nicer primary packaging, which is going to be your bottles and your labels and your caps and all that. Then, we use nicer secondary packaging as well. When they actually get the boxes and they open it, it's pretty nice. In addition to that, we're working with our own 3PL or a third-party logistics, our own fulfillment center. We make sure that we work really closely with them that they wrap it kind of to our specifications. There's a nice little unboxing experience, a little bit of tissue paper, and a Beardbrand sticker. Then, we have what's called a thank you kit. Within this thank you kit, we have a little booklet. The booklet usually changes every quarter. For instance, one quarter, it was a book of reminders, which are kind of my nine reminders that I tell myself in life as I face adversity.

Stephanie:

That's great.

Eric:

Daily planning. It's all tied around our core message or our tagline, which is keep on growing. We're trying to, again, bring more value. You buy from us and, not only did you get great products, but we brought you a little more value outside of what the products can do. Hopefully, by delivering this experience, we can grow through word-of-mouth and loyalty and customers who want to stick around, rather than kind of going on to the next hot thing.

Stephanie:

I was just going to say I could see that adding to that viral experience by giving people those little presents that are really fun to share, then, just engaging with more customers because of that. It's really interesting to hear about.

Eric:

I'll tell you this. If you're trying to build a bootstrap company, the reality is you've got more time than money. When you're cash-strapped, you've got to think of creative ways to be able to grow the business without capital. One way to do that is word-of-mouth. You can't incentivize word-of-mouth. You have to really just truly focus on such an amazing experience that your customers want to talk about it. When you have that mentality, not only is it healthy for your business, but it's going to be healthy for your growth. It's just kind of a win-win, and the world's a better place because you're bringing that much value to the customers.

Stephanie:

I completely agree. Are there any success stories or big failures that you've had come from trying to generate that word-of-mouth and getting people to spread the word? Any advice around that?

Eric:

It's actually not a metric that we really track or keep an eye on. It's just more of a philosophy internally of just being customer first. I think, to a certain degree, you do have to integrate data. We used to include a little sample of products for people. We found that those samples weren't driving any additional sales of those products in a significant way. When you look at that, you're like, "Well, are you actually bringing value to customers if you're giving them something for free that, maybe, they didn't want or they didn't want need?

Stephanie:

How do you track that, or how did you know that people weren't really using it or that wasn't helping drive sales?

Eric:

We would send a beard wash, a little sample, a one-ounce container. Then, we would look at if there's any increase in sales of beard wash. Your data is always going to be muddy, especially when you're a company that's our size and really small. We fundamentally can't get the data. You do have to go off of a certain gap. You have to also look at, "Well, every sample is costing us," let's say, it's $1. Every order is going out, five orders is $5,000 a month. Then, if we're not seeing a boost of really $10,000 in sales to justify the cost of that, then the margin and the future order, then, you're not building a sustainable practice. Again, as a bootstrap company, you do have to think about your marketing efforts being sustainable and being able to exist on their own for a long time.

Stephanie:

How do you think about creating these marketing campaigns, whether it's YouTube videos? How much do you guys put out per day or per week? To me, that feels like it could be not sustainable if you don't have the right team in place, the right video crew. Especially right now, I'm thinking everything with COVID-19. Has it been hard to keep that content going out and recording the videos and launching them on YouTube and everything? Is it still pretty good, because it's a remote team doing that?

Eric:

It's been a really long, hard journey. To the listeners out there who are hearing our story now, eight years in is like we've had eight years to build these processes and systems and relationships. You're not going to be able to do all the things that we've done on day one. We're still cranking out about six videos a week. We've been able to do that by leveraging multiple personalities, just like you guys have multiple shows. We're kind of the same thing. It's not all on my shoulders, and worrying about me getting burnt out.

Eric:

We have four different regulars on our smaller channel called the Beardbrand Alliance. Then, we have, probably, maybe 4 to 10 barbers who will hit on to do these kind of barbershops style videos. We've been able to really spread the burden of the YouTube channel. Then, we have an in-house video editor who is constantly video editing. He's a machine. Then, in addition to creating these YouTube videos, we do a fair amount of advertising in the video form as well. We do have video editing handled by our ad person as well, our advertising coordinator. She'll be cranking out content that way as well. Video is great, man. I would highly suggest anyone listening that if you invest in video, you could have a pretty good competitive advantage in the marketplace.

Stephanie:

I completely agree. Video is where it's at. How do you make sure that your videos and your content is found? A lot of people create some really awesome stuff and then be like, "Now what? I've only had one view on it," or, "I don't know how to get people to view this video, and then take the action that I want afterwards, which is, probably, buying one of the products that I'm highlighting?"

Eric:

There's two answers to that. One answer is you pay for it. Really expensive, but if the content is truly remarkable, for instance, when I shaved my beard off, we filmed it. We created a 45-second ad on YouTube. To get exposure on YouTube through their advertising system, if the video is engaging, it's extremely cheap. I think we're paying a third of a penny per view.

Stephanie:

Yeah, that's cheap.

Eric:

A million impressions was, I don't have the calculator in front of me, what does that look like?

Stephanie:

Something great.

Eric:

Yeah. It's astronomically inexpensive. At the same time, you may not be targeting the right people. Now, organically, I think YouTube is going to be the platform to go, because of how they recommend videos. It's a little more evergreen than Facebook. There's certainly opportunity on Facebook and Instagram, but I'm not as strong on how to perform there. It comes down to, in the early days, the reality is no one's going to watch your content. You think that sucks, but the reality is it's awesome. Maybe, you'll have one person or two people or 10 people watch it. Then, you'll get a couple of comments. Well, you'll use those comments to get your content better and better and better. Then, by the time you've built a larger audience, you've kind of figured a lot of these things out, so you're not really damaging your audience. You think what you create is great, but the reality is it's not.

Stephanie:

I agree.

Eric:

[crosstalk] will be shared. By creating and by doing, you get the hang of it, you get more natural in front of the camera, or you get more natural on the editing process and telling the story. As you learn, it compounds on itself. If you're thinking about getting into organic video on YouTube, then plan on having, really, 20 or 50 videos that you want to produce before you really even see any kind of traction. I think it took us three years before we got 10,000 subscribers. Then, again, it compounds and you learn and create more content. You create more content faster that's more in line with what people want. Then, all of a sudden, we're able to grow to daily content and getting 10,000 subscribers a month. It takes time and it takes learning. There's a lot of insights in YouTube that you'll need to learn as well.

Stephanie:

I think it's really good as a reminder to kind of detach yourself from the content, because when you put something out there, it's like, "It's my baby. That was my best one yet." I remember when we were starting our company, the first couple of episodes we did on Mission Daily, Chad and myself, it didn't get any downloads. It's a brand new podcast. No one had heard about it. We didn't know how to grow the podcast at that point. I remember thinking, "That was my best episode yet. I'll never be able to do something that good again." Now, I look back on it. I'm like, "I'm very glad no one was listening to those episodes because they were not good and the audio wasn't great." It's just a really good reminder to put stuff out there more in the learning phase. Then, eventually, you can move into the really trying to find those subscribers and followers, once you get to the point where you're a bit more experienced and you've tried a bunch of things out. I love that.

Eric:

Yeah. So much of it is just the process, for a podcast, making sure you can line up those guests and you can post it early. That's hard work. It's easy to get the first one done, or maybe, the first couple and queue it up, but to also record and organize and plan is a very big challenge. Those are the things that you'll be solving when your audience is small. Then, as you solve those, that allows you to grow your audience.

Stephanie:

I agree. When it comes to solving problems when you're small, when you got the visibility from, I think, you said New York Times, and I think I read Shark Tank, when you got that visibility, were you ready? Was your website ready, your product ready, your fulfillment strategy ready? How did that go when you got those bumps in visitors?

Eric:

New York Times drove about $900 of sales.

Stephanie:

That's huge, just kidding.

Eric:

It actually is. I think we had $100 worth of product. It was nine times our inventory. Fortunately, we were able to solve all that. You have a lot of growing pains, I think. This is my first successful business. I had no relationships. We didn't know where to get our wooden boxes made. We always dealt with supply chain issues. Really, the first two years, as we were growing rapidly, it was just always like a fire was being put out. Then, eventually, we moved to quarterly planning, which has helped significantly in managing our inventory.

Stephanie:

What was the Shark Tank experience like? I haven't talked to anyone who's been on there yet.

Eric:

Oh, no. I'm your first breaking your show.

Stephanie:

Yeah, you're my first.

Eric:

That's virginity. This was 2014, I believe. Yeah, it's got to be 2014. Halloween 2014 is when the episode aired. A lot of things may have changed since that time. I know Shark Tank was really popular at that time. A lot of people were watching it. It's a very stressful process, because during the whole campaign, not only 80% of the people who go through the whole process are going to end up on the show. You could end up investing a lot of energy, a lot of time. You could pay a lot of money to build out this fancy display case. You could fly out there, step away from the operational needs of your business in a time where your business really needs this stuff. Then, do all that and not make it there.

Eric:

We always knew there is a good chance that we didn't make it there. Subsequently, we didn't put too many resources into Shark Tank. We kept our display stand, I think, we paid $300 to rent some furniture. Then, we put out some products there. It's just me going on show. It wasn't my business partners, so they could kind of focus on building the business and I just kind of focused on the Shark Tank pitch and stuff like that. Then, you get up there and it's stressful, not just because of pitching to the Sharks, which is how they make the show seem, but also knowing that whatever you do is recorded in front of seven million people. If you make a mistake, you're like, "Seven million people want to know about that."

Stephanie:

It's replayed over and over again, and reruns.

Eric:

Yeah. And, fortunately for us, I feel like Shark Tank, they did a pretty accurate representation of how I felt the conversation was. They're cutting down 45 minutes to seven minutes. They're trying to craft a story in seven minutes. Then, the hard part is all five of those sharks, they talk to you all at once and you don't know that on the show coming in. They all ask you a question right at the same time. When you see the people pitching and they're looking all over the place, it's just because five people are talking at once and they're just trying to figure out who to talk to.

Stephanie:

Wow. Sounds very intimidating. I do love Shark Tank, though. I hope to try and find your episode and see if I can watch it.

Eric:

Yeah, do it. It was a fun experience. It was like how your heart can race and go on through a roller coaster. It was really that. The whole time, it's just like the adrenaline is pumping. I'm not very good with words. I'm kind of dyslexic. I'm just hoping I'm not saying anything too stupid. I think it was a great experience all over. I think what they're doing for entrepreneurs is great, too.

Stephanie:

I completely agree. In early days, were you completely selling on your website? How much of it was selling direct to consumer versus wholesale, versus, maybe, utilizing Amazon would your sales strategy look with your brand?

Eric:

We've done a little bit of everything. We started off direct to consumer. We actually started off, as I said, as a simply an e-commerce retailer. Another people's products in the early days, until we're able to develop our own products. As we were able to get traction, we had passively, companies like barber shops and salons and pharmacists who would want to sell our products. We would kind of sell to these smaller retailers. It was never a core focus of us to bring on wholesale retailers.

Eric:

Then, we would get on the Amazon. This was the early days of Amazon. Hindsight is 2020. We probably missed a fair amount of opportunity on there. We really always focused on selling on Beardbrand.com. Amazon was never more than 10% of our sales. After a couple of years, we ended up pulling off of Amazon completely. You can't get our products on Amazon now. That's been a great decision for us. Then, we also brought in Target as one of our wholesalers. That happened 2018. Today, we're about half the retail and half direct on Amazon, and on any other market.

Stephanie:

Very cool. How do you think about separating yourself from your competitors? Not that I watched the beard space often. I don't have a beard that I know of, but I have seen a lot of beard oils coming on the market and just things focused around that. How do you separate yourself from the competitors, especially since you're an e-commerce site and you don't have a bunch of retail locations or not in a ton of places? How do you show that value on how it's different from other products?

Eric:

The reality is, you're always going to have a competition. If you have no competitors, then your competition is ignorance. We've kind of always embraced competitors and knowing that we're going to have competition in the sense that it's going to force us to elevate our game and provide such an amazing experience to our customers, that they'll have no option other than to go with us because we are the best. With that mentality, we've also come to terms with certain things, like we're not going to be the low price product on the marketplace. If that's the game you want, then we're not going to be a good fit for you.

Eric:

We try to be really clear about the value that we bring and the things that, maybe, we're not great at. There's always going to be trade off. To us, I think we do a great job because we bring all that value to our customers. Like we talked about earlier in the show, the content marketing, the education, the blog articles, the email flows, the YouTube videos, the customer service experience, the unboxing experience, I think, all of those things are what makes Beardbrand a different company and why someone would want to buy from us. If they're just some dude who doesn't really care and they just want whatever's cheap, then Beardbrand probably isn't going to be the best product for them.

Stephanie:

I like that idea of being upfront with, "Here's what we sell. If you don't want quality, then, maybe, go somewhere else to find something different." Do you market differently based on that?

Eric:

To be fair, there's other quality products out there as well. I don't think there's quality products out there that also do the education, that also do the packaging, that also do the customer experience. There's so much more to a business than what's in the package or what's in the box? I think a lot of companies get so focused on their product. Anyone can rip off your product. They can exactly copy your product. They can come down to an exact tee. Then, if that's all you're standing on, what do you have there? Then, it becomes a race to the bottom for the price.

Eric:

When you build a business, you have to think beyond your product. You have to think about, "How can I really bring value to my customers that is beyond the product?" The product alone is not going to do it.

Stephanie:

Got it. I love that. How do you think about building better business models for other e-commerce companies? I was looking at, I think, on Twitter, you had an experience with West Elm. I guess they had marked down a table. You kind of went through how e-commerce companies need to figure out how to develop better business models. What is your advice around that? Maybe, you can highlight that experience a bit, because I didn't read the whole thread.

Eric:

Yeah. A little background story. I bought that table, that table I'm actually using for my podcast studio. 25 days later, they put on a sale where I could get the exact same table, but it cost me 75 days, or excuse me, $75 less. As a consumer, that's kind of frustrating, because you kind of feel like an idiot for not waiting out. I would have waited 25 days to save 75 bucks. Personally, I don't think that's a good experience. I recognize they're doing sales, they're doing weekly sales, and some sales are better than others. To me, I feel like, have some kind of policy in place where, within a certain time frame, whatever you feel is appropriate: two weeks, a month, two months, whatever, that you can guarantee the offer that you're giving to them.

Eric:

It doesn't even have to be a money back guarantee. It could be a store credit guarantee. Then, I think that's going to encourage a lot more confidence in the consumers. Also, consumers will be more likely to buy from them again, because if you have the alternative where you're just like, "I know you screwed; you missed out on this one; you already bought it," then, it's like, "Well, next time, I'm just really going to wait. I'm just going to wait until I know there's an incredible deal," or, "I'm just not going to buy at all because I don't want to feel like I want to be made a fool again."

Eric:

You run the risk if you're running sales all the time and they're not the exact same sale. Not everyone will feel this, but some people will subconsciously be feeling this. There's quick and easy ways to really just guarantee the experience about it. I don't want to tell people how to run their business and their policy. I'm not mad at them. I'm just kind of calling them out that I think they could do better. Then, to be fair, West Elm reached out to me on Twitter and they offered me store credit.

Stephanie:

That's nice.

Eric:

You don't want to have to really fight and argue for that. You just want them to make it right.

Stephanie:

I think that's a good point, though. Also, that big brands are looking to smaller companies and the individual consumer to kind of learn from. That's a really good point of making the consumer feel good after a purchase and not having buyer's remorse. I've definitely had that experience before of buying something and then seeing a discount afterwards, and then waiting the next time, and then there's no more inventory. Then, I just never go back again. Those little moments definitely matter.

Eric:

Well, then you think about, the whole West Elm experience for me is, I couldn't do a live chat or email them about it. I had to call them. Then, I called them and I was on hold for 25 minutes. Then, after 25 minutes, they pretty much told me I could ship the thing back and then buy a new one, but shipping would not be reimbursed. Financially, it wasn't going to make sense. It's like, "Okay, this is how you're going to do it." Then, as a small company, you think that these large companies have all the advantages because they can buy in bulk and get better prices. Well, a lot of people don't buy based on products. They buy because they want to be able to reach out to you and talk with real person, not be on hold for 25 minutes. Those are the things that I want you to think about as you build your business, how you can compete with Amazon and how you can compete with West Elm and Walmart and these giant companies out there.

Stephanie:

I love that. What's one thing that you wish online sellers would start and stop doing? I'm asking you this question because I see you're big in the e-commerce community, always talking and highlighting different e-commerce stores. You've probably seen a lot of best practices that sellers do, and some things are like, "You should just stop. That's not good."

Eric:

Going back, I don't want to tell anyone how to run their business. There's a lot of ways to build a business. It kind of comes down to who your audience is and what they're okay with. A couple of things that we've always avoided is we don't want to do pop-ups. There's no pop-ups. There's no tricks. There's no immediate discounts. One of the things that is a pet peeve of mine is, "Here's a pop-up. Do you want to save 10% on your next order?" Then, they click x or, "Close out of this if you don't want to save money," something kind of condescending like that; or, with the little spin wheel. I think a lot of these has become a little hokey.

Eric:

The people selling those software as a service thing always claim that they work. We've actually cut a significant amount of our third party plugins, just because it made our websites so bloated.

Stephanie:

I was reading about that, how quick were you able to get your website down? I think I saw four seconds.

Eric:

Oh, my god. We were doing a speed test on our old website. The homepage on the desktop, I think it would have been in the 40 range score. Then, I think the mobile side would have been in the 20 to 25 range, the score [crosstalk 00:34:34]. Then, we essentially rolled out a new website template, a new website theme, killed all the third-party plugins. The new speed is now around 77 for the desktop and around 40 or 45 for the mobile.

Stephanie:

That's great.

Eric:

I don't know what that is in actual load times, but in terms of data, according to Google, it's a significant increase. Some of our blog posts would take 10 seconds to load. We really just went and found the stuff. It wasn't just the theme, too. We had some images that we uploaded, which were two megabytes in size, something ridiculous like that. It's just kind of like eight years into having a business and a lot of people putting their hands into the business, it gets a little you lose sight of things. It's always good to circle back every once in a while.

Stephanie:

I think doing that audit is really important, because like you said, after many years, people are implementing their own things without thinking about the long-term strategy of it and how it might impact things. I think, web chat is one thing where a lot of websites have the digital chat, but that increases the website's load time by a ton. Maybe, people don't even fully utilize it. They would rather call or send an email. It's good to just do that audit, I'd say, at least yearly.

Eric:

We had one of those live chats. I think it presented some issues because, sometimes, a little pop-up would block information or block the "Add to Cart" button.

Stephanie:

Oh, man. They're like, "I'm just trying to buy and you're not letting me."

Eric:

Exactly. It's just like as templates get uploaded or themes get updated, things get reverted. We killed it. We no longer have that JavaScript burden of loading. Those chat bots are fundamentally the things that slow down your page load speed the most, I've seen. We haven't seen any drop in conversion rates or sales. Then, in addition to that, the alternative, what we did is we just moved to a phone number that people can text. I think what we're getting is people who are more serious about needing advice rather than just kind of casual looky-loos who see a little pop-up and they're like, "Oh, yeah, da-da-da-da-da."

Stephanie:

I that, looky-loos.

Eric:

That's what my mom calls them.

Stephanie:

That's good. What metrics are you paying attention to most? You've mentioned conversion rates. Now, we've talked about website speed. Are there a certain set of metrics that you pay the most attention to?

Eric:

Yeah. I'm like your typical A.D.D. entrepreneur. Being in the details on a daily basis is really hard for me. Everything I do is kind of on an ad hoc basis. When it comes to YouTube, the things that we really look at are our watch time and our click through rate. They're going to be the big indications if a video is going to be successful or not. Then, on our website, really, I'm the top level kind of guy, so I'm looking at revenue. I'm looking at orders. Then, on the ad hoc level, I look at how our blog is converting, then, how our traffic outside of our blog, two of our stores is converting. Then, our page speed has been something that's been a pretty big metric for me, lately. Then, there's so many other more metrics that I should be looking into that I'm fortunate that we have team members who are looking for [crosstalk 00:38:09]-

Stephanie:

Do that for you.

Eric:

... email performance and how those are doing.

Stephanie:

Is there any themes around either video content that you put out or blog content that you've seen, certain types of videos? Maybe, funny ones convert better or more how-to blog content converts better. Any best practices around releasing content in a strategic way that will actually create a future buyer?

Eric:

Our strategy is to leverage YouTube's organic growth. To do that, you need to have the viewers want to watch more of your content and stay on YouTube. The strategy isn't really so much of, "Hey, buy this," or, "Be aware of this." It's more of get awareness of the brand. We try to integrate a lot of branding on our videos. We put our taglines on every video, to keep on growing and change the way society views beardsmen. All those call outs in the lower thirds. Then, we try to integrate product placements in our videos as well. It's just bringing awareness to it and not driving people off the YouTube.

Eric:

Subsequently, when you do that, you're less concerned with any kind of direct sales that you're getting from videos. One great plugin tool that we've used on our Shopify store is called Grapevine. Grapevine allows you to have a simple one-question survey that you put at the end of after they've purchased. We use that to say, "Hey, how did you first hear about us?" We have about 20 different options, from Shark Tank to our YouTube channel to various YouTube personalities. We found that 40% of our customers have first found out about us from YouTube.

Eric:

Being able to attribute that any particular video, we can kind of segment it a little bit. 18% of it is from our barbershop videos, which was a fair amount. Beyond that, you just kind of have to trust the process.

Stephanie:

Got it? Do you find influencers in the space? When you're talking about having these barbers do these videos, do you find someone who already has a following? Do you kind of create that following organically through under your brand? Maybe, it's someone that no one would have ever known about, but you just know that they're a great personality to do the video?

Eric:

A little of both, I would say. One of our most or one of our longest tenured relations, well, we've got a couple of long tenured relationships with influencers, Carlos Costa. We reached out to him back in 2013. He's been with us kind of since then as an influencer for the brand. Then, he's grown to make videos for us. Then, he reached out to Greg Berzinsky, who at that time, I think he had, maybe, 20,000 or 30,000 followers on Instagram. He's a big believer in the brand.

Eric:

We try to find people who really love your brand, who love the products, who love what we're doing. It's just easier for them to be excited about it. We also try to work with smaller influencers, those who are, maybe, still getting established, or who have a following because they're not influencers. Tobias van Schneider is another one. He's another business owner. He's got other businesses. He's not making money from promoting products. He's more likely to talk about our products and not ask for compensation, which is something that you need as a bootstrap company, to be able to make your dollars go far.

Eric:

It's been a little bit of that. Then, we have had employees at Beardbrand who are like, "Hey, man. Get on camera. Talk about this. You've got a great beard." They've done that. We've done a little both and have had success and challenges and both processes as well.

Stephanie:

That's very cool to experiment with all those different types of models. I like the idea of having the employees be the influencer. I know that a lot of companies in Asia are doing this. I haven't seen a lot of companies in the US fully utilizing that model of creating micro-influencers within the company, and then developing their own followings. That's just a nice organic way to do it. Having someone who is an actual expert on the product without being too salesy, because they're not a salesperson.

Eric:

We try it, too. If you look at our Instagram account, the Beardbrand account is replying to comments, you'll always see Sylvester. He's replying to him. He'll sign his name, or whoever's replying to a comment. On YouTube, they'll sign their name. We're totally in favor of get to know our people, get to know our copywriter, Mike, and get to know our growth marketer, James.

Eric:

Again, we talked about how you compete with Amazon. Amazon doesn't have a James. They don't have a Mike. They don't have a Lindsey. They don't have a Jordan. They don't have Chandler. But, we have those people. The more we can help them get to know the team. Then, the risk is if you just work with one person within your company, then, that person could hold you hostage or quit or leave or getting a DUI or do something like that. If you have 10 or 20 different people on the regular who you integrate into your content, then, in the natural course of business, as people move on and things change, then, you'll still be able to move forward.

Stephanie:

In a world where everything is becoming automated and you always know you're talking to bots, I think it's actually nice how certain business models are kind of flipping that. You're mentioning about developing a relationship with the person at the company where you are used to seeing the same name and you kind of are developing an Internet relationship with someone at the company that you trust and grow to love. I like how that model is kind of reversing a bit over the past year.

Eric:

Sylvester, who I mentioned, that's his full time job, is he runs a community. His responsibility is to build those relationships. He's heading up our private forums. He's putting on these events. He's interacting with people on Twitter and Instagram. As they chat on Twitter, and as they chat on YouTube, and they see the same name over and over again. They start to learn about him.

Eric:

In our emails, we'll have a photograph of him. We'll talk about him. We'll talk about the style. People will start to trust his input because, obviously, me as the founder, a lot of videos or a lot of views to those videos, a lot of people want to come and talk to me, but I can't interact with 40 people a day and still run the company and have sanity, really. Well, to scale up what I bring, and not only that, Sylvester's got way more incredible style than me. He's a lot more empathetic than me. He's able to really provide these people great advice in a way that I cannot. It brings a lot of joy to me to be able to offer that to our audience, and also, that Sylvester is able to do what he loves.

Stephanie:

That's really fun. To zoom out a bit, go a little bit higher level, what kind of digital commerce trends are you most excited about that are coming down the pike right now?

Eric:

Probably, the thing I don't follow too much is the trends. I feel like we just kind of fall into them. SMS is something that a lot of people are talking about, and something that we've actually been doing for a good half a year now. We do it in a way that, I think, most people aren't doing it. Most people see SMS as just another channel to market and throw sales and discounts. That drives consumers crazy. If I see someone marketing to me on SMS, I'm just like, "You're dead to me." How we're using it is as style consulting. You text us, send us a photo.

Stephanie:

That's good.

Eric:

SMS is perfect for that because you got your phone there, take a selfie, send it to us, we can tell you where you're trimming your beard, how your neckline is coming in, what your hairline looks like, and what kind of hairstyle will work for you. I think that's an excellent way to use SMS. It's funny. Once we started using SMS that way, the company we work with, Emotive, they actually changed their whole marketing position to be more about style consultants and beauty consultants, and things like that.

Stephanie:

That's funny.

Eric:

I want to take full credit for that, but I would like to say we had a little bit of influence in the way that they're selling us on this. I think that's better for the consumer as well to be able to connect with them on a one-to-one kind of consultant basis, rather.

Stephanie:

How do you make sure they stick with your brand? I can see them, maybe, not having the expertise, like you're talking about, how you're trimming your beard wrong, or what kind of product you need, because of whatever they see in the photo, how do you make sure that they stick with your brand guidelines and make sure they're speaking in the way that you want and they're recommending things correctly and not giving bad advice?

Eric:

This goes back to our core values, which are freedom, honor, and trust. Part of the hiring process is making sure that we hire people who align with these core values. Then, it's not blind faith with trust, but through experience and interactions. I know Sylvester. I know his style. I see him show up every day in the office and what he's wearing and how he's behaving and how he communicates. It's like, "Dude, man. Go at it. Be yourself." Our brand standard is communicate to our customers in a way that you communicate to your friends. Those no corporate speak, nothing.

Eric:

If you're a goofy guy, talk goofy. If you're a serious guy, talk serious. Be yourself. You are going to have different experiences. Interacting with Sylvester is going to be different than interacting with Matt. They're two different people. That's totally okay.

Stephanie:

That's great. Are there any other channels that you're utilizing or looking to utilize over the next couple of years?

Eric:

For us, our goal has been, again, going back to me being an A.D.D. entrepreneur, you try a little bit of everything. The past two years has been fixing all of my A.D.D. new channels that we've been in. We killed Amazon. We killed selling in the Europe. We've cut marketing channels. It's really how do we get better at the channels we're in? How do we get better at Facebook marketing? How do we get better at Instagram marketing? How do we get better YouTube content?

Eric:

Like I said, we have a newer, smaller YouTube channel that we're trying to grow and build that awareness. In terms of just completely introducing anything that we've never done before, like TV advertising or radio advertising or podcast advertising, we're going to be staying away from that until we feel like we've completely capitalized on the opportunities of the channels we're currently in.

Stephanie:

That makes sense. I think killing projects and platforms is a good first step to making sure that you can focus on what's actually working to, then, move into a new channel around the tryout. It sounds like a good strategy to me.

Eric:

I'll tell you, it sucks, though, when you kill something and then you don't get better at the thing you're supposed to get better at.

Stephanie:

Yeah, that's a big bummer.

Eric:

We've done that.

Stephanie:

That happened a few times?

Eric:

Yeah. When we pulled out of Europe, Europe was about 20% of our business. We did this March 31st of last year. It was about 20% of our business. The intent was with the new focus of not having to deal with multiple fulfillment centers and different time zones and multiple stores and things like that, that we could get really good at serving our customers. Subsequently, 2019 was a terrible year for us. We weren't able to capture the lost sales that I thought we'd be able to by having more focus. We've had to really analyze. It wasn't so much selling into Europe. That was the thing. I think it was more of the internal structure of our team and kind of red tape that got put in place after seven years of business and systems and processes that kind of built up on itself. We should have taken an axe to all of that, rather than, maybe, potentially taking an axe to the UK channel.

Stephanie:

Got it. Is there any big initiatives that you undertook that you were like, you talked about internal processes and structures, is there any one thing that led to kind of riding the business back to where you wanted to go after the whole shutting down Europe?

Eric:

Yeah. Transparently, we had the worst fourth quarter we've ever had. It was a bloodbath. We were just losing a significant amount of cash and just burning through cash. We just had to make hard decisions about the business. When you're hemorrhaging money, you're not profitable, we had to scale back to 15. A leaner team means, "Hey, we're no longer going to have people proofing your work anymore. You're going to have to be responsible for your own work-end. You're no longer going to have someone who's kind of being the quarterback of the marketing team. You have to kind of interact directly with your audience, or your coworkers." By scaling back the team, you were almost, by necessity, forced to cut a lot of that red tape and focus on getting stuff done.

Stephanie:

Super important. All right. At the end of the interview, we'd like to do a lightning round, which is where I ask you a question and you have under a minute to quickly answer whatever comes to mind. Are you ready, Eric?

Eric:

I am electrified.

Stephanie:

Woo-hoo. All right. What's up next on new product launches coming to Beardbrand, if any?

Eric:

Our big thing is killing scent confusion or ending scent confusion. We want to provide head to toe fragrance and matching products. We don't have anything in your midsection. That's a little hint of a product that will be coming.

Stephanie:

Fun. I'll have to stay tuned for that. What's up next content or video-wise that you're excited about producing or creating next?

Eric:

We want to systematize our barbershop and winding in five different barbers and record over the course of a week, which would be a new way for us to perform. I can't wait to do that, but, this whole quarantine has got to end first.

Stephanie:

That sounds really fun. What's up next on your reading list?

Eric:

I hate reading.

Stephanie:

Podcasts, audible, anything?

Eric:

I hate reading. I'll tell you I just finished the book called Rocket Fuel which talks about integrators and visionaries. It was the one book that I've read over the past year. I'm just going to piggyback off of that one.

Stephanie:

I don't like it. What's up next on your Netflix queue?

Eric:

Again, man, I just had a baby five weeks ago.

Stephanie:

Congrats. Me, too.

Eric:

Oh, no way.

Stephanie:

Yeah. I had twins eight weeks ago.

Eric:

Oh, poor you.

Stephanie:

Poor us.

Eric:

It's got to be crazy, right? We're in the quarantine.

Stephanie:

Yeah. No Netflix for us then, huh? I don't know. I watch Tiger Kings in my off time when they're sleeping.

Eric:

My answer is a lot of primitive survival type of videos on YouTube. That's my go-to content that I consume.

Stephanie:

That's great. All right. A little harder one, what's up next for e-commerce pros?

Eric:

I think there's going to be a move away from Amazon from both a consumer perspective and a seller perspective. I think Amazon is really kind of twisting the screw in a lot of people. There's going to be a little bit of blowback from that.

Stephanie:

Completely agree, especially with everything going on right now where Amazon's picking what products are essential. I think they just said that they are going to be optimizing for its margins. Instead of showing people, maybe, what they want to find, they're going to be showing people products that have higher margins. I can see that also happening.

Eric:

They're also neutering a lot of people in the affiliate space where they just literally cut their commissions in half.

Stephanie:

That's not good.

Eric:

[crosstalk 00:54:51].

Stephanie:

Well, it sounds a good prediction, then.

Eric:

Yeah. Less people will be pointing slinks to Amazon, I think.

Stephanie:

All right. Any final words of advice or wisdom, Eric, that you want to share before we hop off?

Eric:

The big thing I always like to tell people is, in life you always have doubts and questions about what you need to do. The reality is you need to just go out there, execute, and do it. Action, a lot of times, is better than no action. Just go out there. You know what you need to do. Go and get it done.

Stephanie:

Yes, do it. All right. Thanks so much for coming on the show, Eric. It was a blast. See you soon.

Eric:

My pleasure.

 

Jun 16, 2020
How Haus Capitalized on Vertical Integration and Organic Growth to Become One of the Hottest Alcohol Sellers in eCommerce
45:23

The alcohol industry is worth more than $250 billion in the United States, but the bulk of that money is being raked in by the biggest corporations and distributors with very little room for independents to break in. But Haus has found a way to be a disruptor. On this episode of Up Next in Commerce, Haus founder Helena Price Hambrecht hopped into her recording studio (AKA her car outside the Haus warehouse) to explain how her small aperitif company has taken advantage of deep industry knowledge, organic growth, and the complete ownership of the supply chain to build an Ecommerce-based alcohol experience that the younger generation is embracing. 

3 Takeaways:

  • Adding educational elements to every touchpoint is key to helping customers get the most out of products 
  • Now is the time to invest heavily in the product because it is only with a good product that you can have truly excellent organic growth
  • There are risks involved with being a fully vertical company, but the reward is the ability to be nimble, have a laser-focus on product development, and allow the ability to adjust to supply chain curveballs with ease

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Stephanie:

Welcome everyone to another episode of Up Next in Commerce. This is Stephanie Postles. And today we're joined by Helena Price Hambrecht founder at Haus. Helena, should we call this a happy hour episode even though it's only 11:00 AM.

Helena:

Every hour it can be a happy hour.

Stephanie:

I think so too. So tell us a little bit about Haus. I was looking into it and it looks like a really fun brand and it already was getting me excited with some of the new products you were launching. I think one of them was called Lemon Lavender that, like I said, I was ready to order at 11:00 AM. So I'd love for you to detail a bit about your company, and your background, and how you started it.

Helena:

Yeah, so Haus is an alcohol company. We launched with me and my husband. We co-founded it together. His name's Woody. We live on a farm in Sonoma County and we joke that it's very much the product of a techie marrying a wine maker. And our goal is to create the next portfolio of alcohol products that reflect how our generation drinks and what they care about in food and beverage.

Stephanie:

Very cool. And how is Haus different from other spirits brands or liquor brands or wine?

Helena:

Oh God, where do I begin? I think it's interesting because most people don't realize that alcohol can be better than it is. Right? I think alcohol has gotten a pass for a long time because it's a vice. And I think people can just assume, "Well, it's bad for me. So doesn't ultimately matter what's in it because it's just bad." And corporate alcohol has kind of run with that for a long time. So a lot of the products that you're drinking are worse than you think. You're feeling bad, you're feeling hung over when you drink and you think it's just because it's alcohol, but alcohol is only a tiny piece of that puzzle.

Helena:

In reality, corporate alcohol is made with things that you just wouldn't believe, take wine for instance. You can intervene in your wine production with milk, and eggs, and clay, and fish bladders, and artificial flavors, and tubs of processed sugar. You can engineer it to taste good, but it's going to make you feel horrible. It can be made with grapes that are full of pesticides. Your favorite whiskey might be full of petroleum-based, caramel coloring. It's kind of a racket. And we're a generation that's cared about where our food comes from, where our beauty products come from, is it organic? Is it locally processed? Is it responsibly made? For some reason, alcohol has gotten a pass and we wanted to raise the bar. So we approach things very, very differently.

Stephanie:

Very cool. So it seems it'd be very difficult getting into the alcohol industry. I was reading a little bit about the three tier system where distributors and bartenders are the gatekeepers and they tell you what to drink. How did you have the courage to get into that industry? And then how were you actually able to become the only direct consumer spirits brand?

Helena:

Yeah, so I mean, it's really Woody, right? I used to work in alcohol industry, but as a bartender. I wasn't really deep in the production side of it until I met Woody. And Woody is a great farmer. He's been running the family's grape farm for the last decade and he also makes wine, and was making aperitifs when I met him before Haus. And he was doing everything right as a independent wine and spirits guy. His products were in the best bars and restaurants in America. They were in the best cocktails in America.

Helena:

But because of the three tier system, which is pretty much controlled by corporations, you don't have a lot of leverage as an independent brand. So you don't really have control over how your product is used and Woody would just find that he was a little sprinkle in a fancy 10 ingredient cocktail. So while he could name drop his full accounts, he wasn't moving any product, the drinker had no idea who he was. I was observing this and thinking, "Man, this is not a great way to build an independent brand." And the more and more I got to know the industry, the more I got to know the three tier system, which it's a hundred year old prohibition era laws.

Helena:

For those who don't know the tiers, which I would assume you don't, it's just distributors, producers, and retailers. So if you're a producer, you have to go through a distributor to get your product into bars and restaurants. And then bars, and restaurants, and retailers then sell to the drinker. Unfortunately, the way the laws have been designed, it's actually allowed corporations to just be in cahoots with distributors. So corporations ultimately decide what you're drinking and it's why you're still drinking Jack Daniels, and Gregger's, and Absolut and you've not really heard of any other brands that are playing in the liquor space.

Helena:

So for us, we didn't know that there was a way to go around the system. And I started doing research because I was curious about just how our generation was drinking, what were we looking for out of alcohol? Because I was certainly looking for a better alcohol experience. And I saw a huge opportunity. Like I said earlier, millennials are looking for better made products. They care about their health, and their image, and authenticity, and transparency, and convenience. And when you looked at what alcohol was doing, it was almost nothing. So I was really complaining to Woody about this, saying, "Gosh, what a shame that you can't build independent brand, like a Glossier or an Everlane of alcohol because of the three tier system and you have to go through the distributors." And that's when I said, "Actually, there's a loophole that I never thought about until this moment."

Stephanie:

Dun, dun, dnn.

Helena:

Yeah. If you're an aperitif, you're typically in the liquor category. You're federally regulated like a liquor. You can't sell direct to consumer. You can't go online, but if you're under 24% alcohol and you're made mostly of grapes, which is a loophole you would only know about if you're a great farmer who makes great base aperitifs, you can go around the loss, you can go direct to consumer, you can sell online. And it just had never occurred to anyone to use that loophole to build a direct to consumer alcohol company.

Stephanie:

So no one else in the industry found that out until you guys did and you're the first ones to actually be able to sell to consumers directly because you leveraged that loophole?

Helena:

Yeah. And you know what? We thought that we'd stumbled upon a treasure and that, "Oh my gosh, when other people find out about this loophole, we're going to have competition, which would be fine." But when we were pitching it to folks in the alcohol industry, they thought it was a stupid idea. They could not understand why we would want to go direct and why we would sell online. People are so used to doing things the way that they've been done forever and they just couldn't process that we thought that we could just go on the internet and create a brand and sell something to the drinker because it had never been done before. Over and over and over again people were just like, "Why would you do that? That's stupid."

Stephanie:

Yeah. That's awesome. And this loophole also lets you guys have a brick and mortar store, right? Whereas you would never see a Jack Daniels store on the streets of New York. But you all could open one if you wanted it to, correct?

Helena:

Exactly. Yeah. We could open two different brick and mortars in California today. It's state by state. Every state has different laws and it's still kind of a nightmare to navigate. But yeah, we can do so many things that other brands and liquor space can't do. We can be sold without a liquor license. We can sell online, we can do a wine club style subscription service. There's just this whole world that opens up to us. And we were the only people that decided to try it.

Stephanie:

That's amazing. So what was the first steps looking like when you started Haus and you were thinking about building the website and the experience, like the buyer experience? How do you think through designing that process for consumers who have never done that before?

Helena:

Yeah, and that was the challenge, right? It's like as a brand, one thing we had going for us was we weren't just two people in class who had an idea and had to create a backstory. The backstory was there, right? We were people trying to solve our own problem and a problem that everyone we knew was having and that was great. And we live on the farm and we make it ourselves, and all of that's hopeful as a brand. But the real challenge that we had was how do we take this type of liquor aperitifs, which has been in Europe for over a century ... it's a style of drinking that's very common in other parts of the world, but is relatively unknown in America. How do we take this type of liquor and make it mainstream? Without having to pitch people in person just through the internet, how do we very quickly educate people on what this is, the problem it's solving, convince them to buy it, get them to get their friends together and drink it together? So that was a challenge.

Helena:

But for us, our goal was to just approach it as education, right? And bake education into as many touch points as possible, not just through copy on the website, but through photography, through editorial, through different touch points post-purchase, in the packaging. It was really about how can we make the most of every single touch point that this customer has with our product so that by the time that they receive it, they deeply understand it and where it lives in their life.

Stephanie:

Yeah. I could definitely see the difference from your photography versus a lot of other e-commerce companies. I could see that you were teaching the buyer how to enjoy Haus. I think one thing I saw was as you went from page to page, you had a couple images flash showing how it's being enjoyed at the table, sitting on the table with a bunch of friends. It was very different than the typical product images with the white background and no one really having a good time with it. How did you know to utilize that imagery to encourage that buyer behavior to then hopefully spread the word about Haus?

Helena:

Yeah, that was a very conscious decision. So my background's in brand. Before Haus, I had a production company that did everything from visual brand strategy to producing commercial campaigns including photography. So when we thought about photography for Haus, first things first, I didn't want to do what every other direct to consumer company at the time was doing, which was product on a plain colored backdrop, very simple, very polished, very digital looking. It didn't feel right for us because there was no context, right? Haus isn't supposed to live on a seamless backdrop in a photo studio, Haus is supposed to live at your dinner table. And it just felt like a missed opportunity to show the customer where Haus belongs.

Helena:

And that type of photography of the product on a plain backdrop, that exists for a reason, right? It performs well in paid. It's very straightforward. People can physically see what they're buying. And, in an era prior to now where paid drove most direct to consumer growth, it makes sense that people use what performs well. But for us wanting to grow organically as much as possible, we didn't care so much about that sort of metric and for us the priority was way more about how can we use this opportunity to just show people exactly what they should be doing with the product. And that's really how we approached it.

Stephanie:

That's awesome. And are there certain metrics or data and analytics that you look at to see what's performing well and what's not or how do you think about success when it comes to utilizing a different kind of buyer experience?

Helena:

Yeah, I mean, in the beginning up until December we were 100% growth. And that's hard to measure, right? There's no real way to examine where those customers are coming from. There's not a whole lot you can do with that data, which makes it very daunting for most companies to pursue. Right?

Stephanie:

And you said a 100% organic growth, right? You cut out there for a second.

Helena:

Yes.

Stephanie:

Okay. Got it.

Helena:

And now we're experimenting with paid and now about 20% of our customers come from paid. But for us, we're still a primarily organic company. So I think for us it was more of a philosophy and some hypothesis around our product and how it could spread, right? Our product is something that is inherently shared, right? If you're having a drink, you're very likely having it with another person, you may be having it with a group of people and that's certainly the customer that we were going before. So for us, we wanted to make sure that the product and the customer experience was so stellar, which sounds common sense, but it's not necessarily, especially when you have limited resources that you have to put into certain buckets. We put everything into product and everything in the customer experience so that when people received that product, they gathered their friends together, they shared it with their friends, they all had an amazing experience together, and then all of those friends went to buy a Haus. So that was this organic flywheel that started taking off. And our growth was through word of mouth.

Helena:

We also prioritized press quite a bit. My first career was in PR, running comms for startups. So I'm a big fan of working with press to tell your story because, you can tell people what to do all day, but people are going to really listen when someone else tells them to go buy your product and that it's great. And press is also hard to quantify, right? A lot of press doesn't actually tie to purchases. It's more of a long game of having this validation and the customer being able to come to your website and see that the New York Times, or GQ, or Vogue said that you were good. So it's one of those things where a lot of what we pursued in the beginning birthwise was really hard to quantify and it was also kind of long game. So I think it rests outside of the comfort zone of a lot of founders and a lot of growth managers because of that. But it worked so well for us and it continues to work well for us.

Stephanie:

Yeah, it definitely sounds like it. How do you think about leveraging press? Because when I think about that, it seems like there's a lot of agencies and companies who are ready to do a PR release and tell you that they're going to get you press. But then afterwards you're like, "Oh, what did it really get me?" And a lot of people maybe can't get on the Vogues and the bigger name brand sites like that. How did you pick out strategic places to be seen and found? And how did you even get those relationships to get that press?

Helena:

Yeah, I mean, it takes time, right? There's plenty of people that I wish were writing about us and they still haven't. But for us, my philosophy since my early '20s when I was doing comms is like you can't expect anything from anybody immediately, right? Because even if the person writes about your beat, even if it's obvious that they would find your product interesting. You just don't know what they're going to be writing about for the next year. And maybe they're not going to be writing about anything where you're particularly relevant and maybe they don't break news, maybe they're writing trend pieces. A lot of the media relationship building that I've done over the last decade and that we continue to do with Haus is about just getting on people's radar and not wanting anything upfront, not being so transactional about it, and just saying hello, sending them some information about Haus or your company, sending them samples of it, any new products as you release them.

Helena:

There's a lot of parallels I think between media relations, and fundraising for those who have fundraised where building relationships with investors is similar, where a lot of times it's just reaching out over and over, being like, "Hey, hope you're well, remember that thing that we said we were going to do, we did it. Check it out. It's pretty cool." And not expecting anyone to immediately do something about it, whether it's write you a check or write a piece about you. If you have news to share, you can always pitch it and formally ask if they're interested in writing about it.

Helena:

But I think approaching it more casually and again, really thinking about the long game, helps forge a more authentic relationship as well, where they are people and if they're interested in your space, you probably actually have a lot in common, you could probably be friends. And if you just treat them as a person who's interested in a space that's similar to you, then it's just going to be a much healthier relationship versus only reaching out last minute when you want them to write about you right now. It's just not going to happen.

Stephanie:

Yeah, that's such great advice. Be persistent, but don't be annoying. So how do you think about selling something on a website that a lot of people want to experience? I know you just mentioned samples. Do you see samples working well to get people to come back and buy? Because I've heard mixed experiences with that from a few of the guests we've had on the show. Some people completely took samples away because it wasn't working. Other people said it worked well. What's your experience with having the buyer be able to try before they go too deep into the buying experience?

Helena:

Yeah, well, we don't actually do samples for our customers. We have a starter kit that are two smaller bottles of two of our flavors that people can buy. And that's definitely a popular first purchase. I think for us there was a risk to selling smaller form factors direct to consumer, right? Like the margin is lower, it's just not a productive purchase from a business standpoint. But we released those smaller sizes because we saw a behavior where when people would buy even one larger bottle of Haus, they would come back and they'd buy more. Their next purchase would be two bottles or six bottles. So for us, there was that confidence because we had the data that showed that people that bought that first smaller size, they would come back and they would buy something bigger. So that's worked for us. I think if we were losing money on it, we wouldn't do it. But we still make a decent margin on our small sizes. So for us, really the challenge was how can we give people the best idea of what they're going to experience?

Helena:

And part of that was us being really thorough on the site, just explaining the kind of flavor components, what they can expect, showing the ingredient list, showing the nutrition facts. And then reviews have also been really useful for us where we work with Yoko. And for that it's been great for someone who's on the fence to go and read from 50 people who tried the product and liked it and talk a little bit about their experience. But ultimately, it's still a challenge for us. We're exclusively an online company. This is kind of a great problem to have. It's a problem that most companies want. But when we last looked at our newsletter, 70% of our newsletter subscribers who open our emails, and read our emails, and love the brand, they haven't bought yet a Haus yet. So it's an interesting phenomenon where people like the brand, and they're interested in it, and they're thinking about trying it one day, but they just haven't pulled the trigger. Though what we've seen with COVID, a lot of those people are starting to pull the trigger.

Stephanie:

Got it. And what are you including in your newsletter because that's unheard of to have a newsletter for a brand where people love the newsletter, but maybe haven't tried it yet. What kind of content are you putting out there that's pulling people in so much and how are you thinking about converting them in the future?

Helena:

Yeah, I mean, it's nothing crazy, right? It's not like we've built some robust editorial platform. But we share recipes, we share behind the scenes, we share occasionally elaborations that we do with other brands or people in the food and beverage space. It's nothing that's too robust. We haven't put a ton of resources into the editorial side of our business yet, but we are very careful to not be too promotional or too self serving and really make it something that people are going to enjoy looking at and enjoy reading even if they aren't actually drinking Haus right now.

Stephanie:

Got it. That's awesome. Are there other brands in the e-commerce space that you look to, to either learn from? I know I read that you've described Haus like the Warby Parker of booze, so are there people that you are inspired by, that you test out maybe different website models or AB tests or what are your content that you're releasing that helps iterate that?

Helena:

Yeah. Oh my gosh, it's so many, right? Like the Warby Parker analogy came from Luxottica outright who Warby ultimately disrupted and Luxottica feels very similar structurally to what you see in the alcohol industry. I mean, Away is one of the kind of OG brand branded did such an incredible job of building a movement and building a community around something that wasn't considered very sexy prior to Away. And they did such a great job with curating content and working with their community on photography and they did such an incredible job. Glossier does an incredible job. I love that they started editorial first and they really focused on building a community that was very, very different than what you saw in the beauty community. And they utilize channels in a very different way than other beauty brands did. And that really came to help them. I think the bottom line is really focusing on creating content that serves the customer and makes them really excited to participate with your brand. And for every brand, that's different. But it's finding that thing that gets your customers really, really energized and engaged.

Stephanie:

Yeah, I completely agree. Are you focused on a certain demographic or are you trying to pull maybe a demographic who's always been used to going after the name brands, are you trying to also pull them away and try something new?

Helena:

Yeah, I mean, our initial demographic was a hunch based on us, on our own personal use case and how we came