Amazon is one of the biggest marketplaces online with 183 million shoppers frequenting it every month.
On this episode of Shopify Masters, you’ll catch the lessons learned from an entrepreneur duo that launched a $2 million business selling on Amazon.
Meet Lindsay Windham and Nate Justiss: the founders of Distil Union, a micro-collective creating clever products for your everyday life.
We'll discuss:
What goes into a feasibility analysis to determine if a product will be profitable or not.
What to focus on to make your listing more discoverable and sell more on Amazon.
How to identify which marketing channels you should focus on.
Listen to Shopify Masters below…
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Show notes:
Store: Distil Union
Social Profiles: Facebook | Twitter
Recommended: Thunderclap, MerchantWords, AMZ Tracker, Loyalty Lion, Yotpo, ShipStation, StitchLabs
Transcript:
Felix: Today, I’m joined by Lindsay Windham and Nate Justiss from distilunion.com. That’s D-I-S-T-I-L-U-N-I-O-N.com. Distil Union is a micro-collective creating clever products for your everyday life and was started in 2011 and based out of Charleston, South Caroline. Welcome, Lindsay and Nate.
Lindsay: Thanks so much.
Nate: Thanks for having us.
Felix: Yeah, excited to have you on. So yeah, tell us a bit more about these products that you guys have been creating.
Nate: Mostly, we have wallets at this point. We sort of started out as a iPhone accessories business. That had been our background before. I was a product designer with Philips Design, and Lindsay a graphic designer there. So that’s sort of, the manufacturing that we knew, the partners … We actually started with a product called Snooze, which was a little alarm dock for iPhone. That’s how we got started. I mean, our name, Distil Union, is all about minimizing. It’s sort of our design philosophy. It’s taking product [inaudible 00:02:16] design down to its essence. That’s what we try to do. So our wallets reflect that. They’re minimal in construction, and we really concentrate on the function and sort of minimizing your carry.
Felix: Very cool. So when you made this transition, or I guess when you guys were working more in the iPhone accessories space, this was based on experience from your previous profession? What were you guys doing prior to creating these, I guess the Snooze, which we’ll talk about a little bit with your success on Kickstarter, because you’ve had a lot of success on there with different campaigns. But when you first launched with the Snooze product, when you first developed it … Maybe tell us first what is the Snooze and then what was your background in creating a product like that?
Lindsay: Yeah, basically, like Nate said, we were with Philips Electronics. We were making a lot of Apple accessories. So when Philips closed our office in Charleston and moved it up to Connecticut, a lot of members stayed here in Charleston because it’s such a great lifestyle, and we didn’t want to leave. So we went our separate ways and did freelance design. Nate and I met there at Philips, and we’d get together and talk about product ideas that were a little too niche, a little too quirky for a larger brand, so maybe … We thought, “We could just start our own brand and do our own thing.” Under the umbrella of solving problems that we have in our daily lives. What’s the first problem that we had? Was waking up with our iPhones. It was accidentally turning off your alarm when you wanted to snooze it, losing your cable behind your bed, just little annoyances that we just wanted to simplify, improve your experience. So that’s why we started with that Snooze dock. Really, the wallets organically came just from a trip up the street to the Apple store to see sort of what people were shopping for, what was popular, and was there an opportunity in the market for us to solve some things? Funny enough, our problem was we carried our iPhones and didn’t want to carry other stuff.
Nate: We all sort of hated putting cases on our phones too. Even though we’d designed them for years, we were all sort of minimalists. It was kind of funny that … I mean, Lindsay actually had just a leather back for her phone that kind of-
Lindsay: Yeah, just the stick-on skin that would just make my phone a little bit nicer to touch. But when we started Distil Union, because we’d done so many cases with Philips, we said we would never do a case. Then we just got this idea that what if you had a wallet that wasn’t a case and it didn’t look like a wallet? Just super secret, super minimal, solves the problem of wanting to carry just a couple cards, and no one sees them. Can we-
Nate: Yeah, it doesn’t look like you’re talking on a wallet.
Lindsay: Right.
Nate: [inaudible 00:05:33]
Lindsay: So that was what, three years ago? Four years ago? And started this amazing journey away from Apple accessories, which is what we wanted, you know, to sort of branch out and try some different things, and the Wally wallet sort of grew into this line of minimal wallets.
Felix: Very cool. So were the learnings from creating an iPhone accessory, you know, in your profession, and then also with the Snooze product, I’ll just read kind of headline here from Kickstarter, “It’s the iPhone alarm dock with a big snooze bar.” That’s really a cool-looking, we’ll link all that in the show notes. Were the learnings from creating a product like that and also from working in Philips also transferrable to creating a product like wallets?
Nate: A lot of it was. I mean, our background is design, so the contacts we made there, the processes we went through, I mean the hundreds of products that we worked on was great for that area. What was really new to us was the business end.
Lindsay: Yeah.
Nate: We thought, “How hard can this be? How hard can the marketing and the finance end of it” … We learned really quickly with the Snooze just how important it is to nail down your cost of goods sold. That … It’s funny, I mean, sometimes, we started spreadsheets now just to make sure the feasibility’s there for a product. Kickstarter, we didn’t really have a great idea as far as what our breakeven was. We thought we had a good idea. We learned a lot through that, and we were basically broke by the end of fulfilling our Kickstarter. I mean, we’d broken even, but the good thing is we had inventory. It just took a while to turn that into cash that we could reinvest into the company or pay ourselves a meager sum.
Lindsay: Yeah. But it really did truly kickstart our company, because we were able to manufacture enough to not just meet the backers’ pledges, but also open our Shopify store, have inventory to build, to take orders and to build our following a little bit more after the Kickstarter.
Felix: Yeah, you definitely raised a pretty sizeable chunk here. Almost $58,000. Again, we’ll get into that in a second, but I want to talk a little about something you mentioned which is that you had to really nail down and learn more about the business end. Especially on the cost side, because a lot of times you might have a great idea but it just is too cost-prohibitive to turn into a reality. So tell us a bit more about this process. What goes into, I guess, a feasibility analysis that you would typically do today, especially after it looks like six successful product launches, at least through Kickstarter. What do you look at today to get a better understanding of whether it will be a profitable product, a product that can actually be added into your business?
Nate: Yeah, there’s still a little bit of sort of nuanced faith there, but we start on a much more solid foundation in that … You know, we’re familiar with what the minimum order quantities are. Developing another wallet, it’s not as much of a mystery as far as what packaging for that’s going to cost or materials. So we have a lot of that nailed down. But when we do a new product concept, it’s working with the manufacturers, getting solid estimates upfront. We’re now a lot more familiar with what, inbound duties, inbound shipping, outbound shipping, what the mailers are going to cost … We have a giant spreadsheet that we … It’s just cost of goods sold, and we’ll start with that with an estimate and a target retail cost, and make sure that the numbers work. That’s an extremely important document. I mean, you could run the business feasibility … You know, you have to find out what your breakeven is on that first order run. That’s your risky number. If it’s risky at all. Knowing what your minimum order quantity is and then what your landed costs are. It’s hard to believe I get excited about that stuff now as a product designer. It’s so different than what I’m used to on the creative side. But it’s a puzzle in itself, and it’s kind of interesting to tool around with.
Lindsay: Yeah, and you had asked what we learned after Snooze, and we did raise $58,000, which was … It seemed like so much money. We were bootstrapping it, definitely. Doing it out of Nate’s apartment, and entirely self-funded and all working, just working on freelance to pay the bills. With Snooze, it was so expensive because we had a cable that had to be certified by Apple, we had an app to develop, we had parts of … The wooden parts were made in Ohio, the aluminum parts were made here in South Carolina, the silicone parts were made overseas, and then we had packaging made overseas and everything came together. We actually spent time ourselves assembling a lot of this.
Nate: It was insane.
Lindsay: It was a horrible idea.
Nate: Not scalable.
Lindsay: It wasn’t sustainable at all. We learned so much from that, and that was to simplify. Keep it [inaudible 00:11:28]. Just staying true to our brand ourselves. What makes sense for us and is going to keep the business able to be sustainable and to grow is for us to not spend all of our time doing things like assembling a box and packaging that up by hand. That wasn’t going to make sense for us.
Felix: I love how your philosophy for creating a business, creating products, and the products itself, is about simplifying things. I think that’s a big … Not sticking point, but a big place that trips up other entrepreneurs, especially first-time entrepreneurs, where they not necessarily go too big right off the bat, but like make it way too complicated. Start with a way too complicated product. It sounds like … I mean, you guys obviously survived this phase because you’ve launched products since then, you have a business today. But nowadays, when you look at a … When you started thinking about designing a product or started thinking about bringing a product to life, how do you determine if it’ll be a complicated project or a complicated product to create or not?
Nate: Well, we have developed a lot of different products. So we have a good bit of experience with what it’ll take. Together, we’ve worked on chargers, and battery packs, and cases, and speakers, and docks, and all sorts of stuff.
Lindsay: But it is different when it’s your brand. Like, it’s for us personally. Yeah, making that decision of, “Is it worth it to go into production?” is very different than the decision at some place like Philips Electronics where … A great example is, you know, the new iPhone 7 came out. For us, we can’t afford to take the risk to go make molds and go to tooling and make this investment in a guess, on rumors of what the new iPhone’s going to be like. Whereas for Philips, they could afford to take that risk and put up that money to go into production before the form factor’s confirmed, even, so that they can have product on the shelf concurrent with the new iPhone launch. For us, it’s been … Yeah, does it make sense for our business from even just conception.
Nate: Yeah, and we have pared things down considerably. We think more universal, less specialized. We like adaptable. Both to the device and your use. So we’ve started thinking a lot more that way. I think when we started, we had 14 different product ideas. We thought, “We’ll crank these out in a couple years.” Here we were two years later, and we had two products. We realized that the development process was going to be really slow given our resources. So we … I mean, last year, we killed two projects that we were pretty deep into. A speaker and a watch we were going on. Developmentally, it just … It wasn’t working out. So we had to sort of refocus on some things that were in our manufacturer’s wheelhouse and our own.
Lindsay: It’s also the moment where you realize, “Okay, well if this isn’t going to work, I’m not sad. I’m relieved. We don’t have to do this product if it doesn’t make sense.” Yeah, we went really far down the development path for the speaker, and it kind of feels good now in retrospect that we didn’t force it.
Nate: Yeah, and one of the things that killed that project is there was another speaker that came on the market and we liked it so much, we thought, “You know what?”
Lindsay: “That’s a great speaker.”
Nate: “They did great.”
Lindsay: “They did a great job.”
Nate: “They did great.”
Lindsay: “We don’t need to make this.”
Felix: Yeah, it’s interesting, because I’m sure the idea of scrapping a product, scrapping a product that’s so far into development is never something that becomes easy, but because you’ve had so many streams of success, maybe it is something that you can say, “You know what? This isn’t going to work, but we at least feel confident we can come up with something again because of our track record.” But for folks out there that maybe are figuring out their first product for their entire business, their very first introductory product, what goes into a decision like that that you guys had to go through to decide to essentially scrap a product when it was so deep into its development process?
Nate: Good question. I think if it had been our only product, we probably would have launched it. I mean, there’s a market out there for all sorts of different ideas, even if they’re not the best. So you can keep that in mind. Don’t get too discouraged there, but-
Lindsay: I think you came across this a lot with your freelance clients.
Nate: Mm-hmm (affirmative).
Lindsay: Walking through the feasibility of a product. What market research has been done on this? Have you vetted this idea? Is there demand?
Nate: Yeah, the dream-crusher meetings? It can be really tough. One of the things we learned about was competitive product analysis and looking for holes in the market and needs unmet or needs poorly met. Doing your homework and really getting feedback … That’s why we actually like Kickstarter a lot because you get a lot of really good feedback, and there’s not … I mean, you’re able to test the market, you’re able to get great feedback, and you’re able to have your first production run paid for. You’ve got to set up your goal so that you’re covering that minimum order quantity so that you’re not going to go bankrupt off of this. But you know, if you don’t meet your goal, that’s a pretty good indication that either the timing was off, your product wasn’t good, your video’s bad … I mean, it could be a few different things, but it’s a good test.
Lindsay: Or your price point. Maybe your price point’s way off.
Felix: Yeah, I definitely want to talk about the feedback aspect of Kickstarter, because I think that because, again, you’ve launched so many campaigns, I’m sure you’ve had to evolve all of your products as you’re going through. So I want to touch on that in a second. But you mentioned, I think … You were saying that there’s a market out there for all types of products and you don’t have to be, I guess, first place to run a successful business. To launch a successful product. Can you guys say more about that? Do you find that … Especially, again, if it’s your very first product and you’re trying to just get your feet wet and trying to launch a business for the first time. What are your thoughts on launching into a marketplace that has competitors in there already that you maybe don’t think that you could become the number one competitor in that space?
Nate: I think you’ve always got to offer an advantage. Some hook. There’s some people, and their hook is only price. You might do really well on Amazon selling thousands of these things at low margin.
Lindsay: Like cheaper than anybody else, and that’s your thing.
Nate: Cheaper than anybody else. To some people, that’s innovation. But I think you’ve always got to have a convincing factor, whether it is just doing something a little differently … There’s got to be a niche out there, you’ve got to meet a need whether it’s function, form, material, or price. I think those three things, you’ve got to find your hook.
Felix: Again, for first-time entrepreneurs, is there one of those factors that you would recommend someone to focus on when they are thinking about launching a product that is not completely new but is maybe a redesign or a different perspective or approach on an existing product? Is there one of those factors that you think is much easier for a first-time entrepreneur to tackle?
Nate: I do know price is the easy one. I hate to encourage that, because we’ve had folks come after us and compete only on price. That’s … I mean, personally, that’s not the way to go. I’d encourage people more on the function side, but it really depends on what your strengths are. If you don’t have a product design background and that’s not your strength-
Lindsay: Yeah, maybe it’s sticking with what you know and letting your message come across clearly to your consumer. If you really strongly believe that you’ve made a product that has this improvement, it’s up to you to communicate what that is, why this functionality or why this material is better, what it is that your product is going to do for them and turn it into your marketing challenge to differentiate with your brand. Give people something to get behind and believe in.
Nate: Yeah. It does sort of turn into a commodity and you’re sort of stuck with a race to the bottom on the pricing. I think that’s really, that would be actually pretty tough for someone starting out. That does take a good bit of capital to … Because then you’re dealing with low margin.
Felix: Yeah, it definitely requires a lot more scale, and then also just experience on getting those costs down, I think, is not something easy to tackle when it’s your first time through. So I want to talk now about the first successful Kickstarter campaign, which again is the Snooze. You had a goal of $50,000, raised $58,000 from 650 backers. So you mentioned earlier that you guys just broke even on this project and were essentially broke after it. So tell us about that. Did the cost of producing all of these products become greater than you expected? What was the reason that you guys came so close to, I guess down to the wire?
Nate: Yeah, I can remember a few of the things that were a surprise. We knew what the inbound duties would be. I don’t think we had the numbers nailed down for inbound shipping. And we were late. Did we have to air ship? We air shipped it.
Lindsay: I think so.
Nate: Yeah. So that was a considerable difference. Then our outbound shipping, that was off.
Lindsay: We really underestimated how much it was going to cost for us to get a Snooze to the person who bought it.
Nate: Especially overseas.
Lindsay: Yeah, so to complete the packaging so that the product itself was nice, that packaging actually had to be approved by Apple, since our goal was for it to be in an Apple store. So the cable was certified and approved by Apple, and that took a lot of time. Not money, but time. Then once you have that final thing, you don’t want that to get messed up in the mail. So what rate are you going to ship this at? What kind of mailer are you going to put it in? Are you going to spend a lot of your time wrapping things in bubble wrap, and how do you print your labels out? What does it look like to fulfill the products and to get them out into the world? I think we just … We thought it’d be, I don’t know, 2 dollars. “Yep, that sounds good.” Just totally underestimated the effort and cost to get the products out.
Nate: Yeah, [inaudible 00:23:33] a few thousand dollars here and there on the shipping. Then I think our packaging costs were more expensive than we thought.
Lindsay: The app, that was an interesting one.
Nate: Yeah. We developed an app for that too.
Lindsay: Yeah, I mean, that was four years ago. An app that … Apps could be $5000 if your buddy makes apps, or it can be $50,000 if you want something slick. We ended up having to sort of rebuild the app after getting started and I think that was a surprise.
Felix: Yeah, I mean, you guys were basically launching two products at the same time with the software and the hardware, especially for your first launch cannot be easy. I definitely don’t envy that experience that you guys had to go through. So since then, I’m assuming you guys have had a better approach towards figuring out your expenses. What have you done, what kind of numbers do you look at today to make sure that you are better at nailing down the expenses and don’t underestimate how much it’s going to cost to get the end product to the customer?
Lindsay: Well, we’re not doing any more apps. Done. Decision made.
Nate: Yeah, but it was a lot clearer sort of looking back at the project. Looking at all the surprises. I mean, every cost then became a column in that spreadsheet. So you know, there’s the initial cost of goods. Then there’s inbound shipping. We always calculate for air because frankly, we’ve never shipped anything by sea. We’re always crunched for time.
Lindsay: I mean, even if you’re having things shipped within the states, accounting for that shipping cost.
Nate: Yeah, so you’ve got outbound shipping, you’ve got advertising costs, you’ve got … There’s a cost of money, packaging costs if that’s separate, there’s pick pack warehouse costs. There’s warehouse storage costs. Advertising was one of the big surprises and unknowns and continues to be an unknown. We have a better idea of what, on average, it costs to get someone to buy something from our website, but you have different costs for different channels where you move it, so you sort of have to have a blended average. But based on Snooze and some of our other projects, our spreadsheets are getting more and more accurate. I mean, you definitely learn to sort of be conservative with it.
Felix: So once you had the funding to get the initial run, to get that inventory in, do you remember how … You obviously had to fulfill how many, like 600 or 650, all 650 orders, or how many did you actually have to send, how many of the Snoozes did you actually have to send out?
Nate: We had 650 backers, and I think we had close to 800 Snoozes that we actually sold. So some of those were multiples. Our minimum order quantity was 1500 units. So that’s what we had to order. After Kickstarter, there we were. There were three of us who started the company, and there we were selling maybe three or four a day.
Lindsay: Like max.
Nate: So there wasn’t a lot left over.
Felix: This was all coming just from selling online, you guys weren’t selling in any other channels at that point?
Nate: That’s right, yeah that was all … At that point, our Shopify. We hadn’t opened a Amazon channel or anything like that, and really hadn’t pursued wholesale.
Felix: Yeah, I’d imagine with over 600 backers, $58,000 in capital raised through Kickstarter that there would be a lot of buzz still that would carry over once you had that inventory in place. But it sounds like only a few at a time, which didn’t meet the expectations that you guys maybe had and it probably took forever to sell off that other half of the minimum order quantity that you purchased. Did you guys do anything else in that time to boost up the numbers? What helped you push through and sell the remaining half of the inventory that you had bought?
Lindsay: Well, I mean I think it was a very unique product. It was simple, and quirky, and a good gift. So we did get some great coverage in like USA Today and Esquire. People picked it up because it was interesting and different. So we did get press, and that helped-
Nate: It didn’t take too long to sell through … I mean, things did pick up. But the bumps were, I guess, smaller than we expected. I think we got in USA Today and sold, what was it, maybe a bump of 200 units?
Lindsay: Oh yeah, the New York Times, that was great. But it’s so fleeting. It didn’t … Any sort of press that we got didn’t sustain itself. It went away.
Nate: Yeah, you’d see a bump for two days and then it’d go away. We would see that consistently. There were very few blog posts that had staying power.
Lindsay: So we were definitely working on new product ideas, what we were going to do next, just to keep the momentum going.
Nate: We did reorder Snoozes. I think our next order was 2000 pieces.
Lindsay: Luckily, at that point, we had designed the Snooze for the iPhone 4. It was made to perfectly fit the iPhone 4. The iPhone 5 came out, and it was a different form factor. But it still worked, and we were very relieved. Then the iPhone 6 came out, and it just absolutely didn’t fit and-
Nate: No way we’re going through this again.
Lindsay: We didn’t want to make it a bigger Snooze for the 6. So we end-of-lifed that product, and that’s the most recent Kickstarter that we did was Stanley, and that was obviously the result of our education on Snooze. You know, it’s a universal product. It’s not made to a form factor. You can use it with any phone, it’s a stand that’s flexible. Literally, you can bend it. Use it with any phone. Use it with any cable that you already own.
Nate: Or case.
Lindsay: Or case, yeah. Simplified that product.
Felix: So you mentioned before that one of the biggest benefits of launching a Kickstarter is the feedback that you got. How much did the feedback change the products? Were there any products that you guys released that had significant changes due to feedback from the Kickstarter community?
Nate: A lot of preferences, colorways. It’s a good way to test that. We saw with releasing the cases, we thought we came out with some really cool colorways, and they were like white cases. We were like … What was the … The stormtrooper, I thought, would do really well.
Lindsay: I know, the black and white one.
Nate: We sold 20 of them. Had to kill the colorway.
Lindsay: At the same time, a lot of people were asking for colors. You think, “Wow, so many people want a green one.” Then you realize, “Oh, it’s like four people.” Definitely taking feedback into consideration and considering your own plan to launch. We know to give ourselves a little bit of room as far as, “What color is Wally’s pull tab going to be?” That’s something that we can change. Feedback-
Nate: Yeah, feedback … The reason feedback is so good from Kickstarter is because you’re much more connected with Kickstarter backers than you are your average consumer, because there’s sort of this … I mean, there’s this platform for that interaction, and it’s a very open interaction. So-
Lindsay: Everyone’s very honest.
Nate: Yeah, yeah. You’ll see it posted on the boards, on the project board, and you’re able to respond to everyone. I think there’s just a feeling of more accessibility amongst the Kickstarter backers. So we hear a lot from them. Product feedback, or if there are quality issues. It’s a great way to work things out. Make things right with them, improve the product on the next round. It’s been great to have that feedback. We’ll go and change the product on the next round. One of the first things we did on our Wally Bifold, we changed the color tabs because it was kind of confusing as far as organization. On the front side, we had them both the same color as the back. You would kind of forget where you put your business cards or your personal cards. So we changed the pull tab color and a lot of people really appreciated that change.
Lindsay: I will say one thing that’s interesting about Kickstarter is that it’s a different market. You are marketing to people who, they like to have the latest and greatest, they are early adopters, they love being involved. That’s not necessarily true of the rest of the retail market. So after we did the stick-on, the Wally stick-on wallet, that did really well on Kickstarter.
Nate: 2000 backers.
Lindsay: When we tried to take that stick-on product to retailers, they were not interested. Because that’s a scary thing, to sell something that sticks to [inaudible 00:33:20]. So they said, “Please do a case.” So we thought, “Oh gosh, we said we’d never do a case but if somebody’s going to do it, it’s going to be us. So let’s make the Wally case.” We did it, and it wasn’t very successful on Kickstarter. Because it’s boring. Everybody knows about cases. There wasn’t that perception of innovation that I think people on Kickstarter sort of expect. But the case sells much better on our website, and to stores.
Nate: Yeah, I’ve heard this time and time again about the difference in the product offering on Kickstarter versus on retail. Even things like the packaging come into play when the people that on Kickstarter expect something different than what retailers would expect. You hear this all the time, right, about listening to your customers, getting their feedback, but of course, you can’t get everybody’s feedback. A lot of times, you just kind of have to extrapolate what six people might say and hopefully assume that that’s what the majority of your customers, potential customers, also think. But in the cases where you did listen to them and it worked really well in one case, in one market but didn’t work on others, today how do you take that kind of feedback and, I guess, decide what you should run with and what you shouldn’t run with? Especially when you have, essentially, limited data. You don’t have data on everybody out there. How do you decide what you should be listening to and what you should ignore?
Lindsay: Yeah, that’s a great question. We love sending out surveys, just doing a SurveyMonkey to ask about experiences. I don’t know, usually we’re on the same page with people. It’s rare that we’re shocked at a request.
Felix: What are you usually asking in these surveys?
Nate: Well, either, you know, importance of features or like ranking … We did one recently on the Wally Micro, which is our credit card-sized wallet. We manufacture some things in the US as well. We all assumed that that was a major factor.
Lindsay: That made in the US-
Nate: That made in the USA-
Lindsay: Would be a decision breaker or maker for somebody.
Nate: It ranked very low. Especially when, I guess, compared to just size and price. I mean, I think it was fourth out of five.
Lindsay: The fifth interest was that it was reversible, which was something like … We were really excited that this was like the first leather reversible wallet ever.
Nate: Nobody cared.
Lindsay: That, like nobody really cares about that. But, I mean, good for us to know. So now when I make the packaging and I designed the messaging on the website, I know that that’s not the number one point for me to hit home. There are other things that are more important. The size and the simplicity of it is what people liked.
Nate: Lots of success on Kickstarter. Again, six, I see six campaigns here successfully funded. Your latest one was actually this year. One thing that I’ve been hearing a lot lately is just about the saturation, though, in crowdfunding, specifically with Kickstarter that’s much harder now to compete in and get the attention and get the kind of ball rolling with the organic discovery of new projects. What are your thoughts on that? What do you think? Are there still opportunities in crowdfunding, or maybe are the opportunities different than what they were back when you guys launched your very first Kickstarter campaign in 2012?
Lindsay: I mean, it does seem saturated. I know just me, as someone who likes to shop quote unquote on Kickstarter. I do less shopping, and I’m more interested in seeing what the innovations are. Backing these projects that have raised almost $2 million. Or it’s a familiar brand that I just am excited to support them. I don’t know, doing a product launch on Kickstarter and off Kickstarter, you know we’ve done them both ways, it’s more fun on Kickstarter. It’s a lot of work, but I know for us on the back end, I don’t know … I think our next product which is very different and not a wallet at all or even leather, I think we’d love to do a Kickstarter again.
We’ve definitely considered maybe Indiegogo or another route, another crowdfunding platform. Or just hosting it on our own page and doing a Thunderclap and like raising money as pre-orders. But I don’t know, Kickstarter feels like it’s part of our DNA as Distil Union. So I want to stick with it. But it depends on the product. You know, the time of year. I think that’s fascinating. You know, the Coolest Cooler that it launched around December the first time it was introduced on Kickstarter and it failed and didn’t meet its goal. Then reintroduced it around summertime, and that’s when people are shopping for coolers. It just went crazy. I think that they learned a lot from their first campaign. They improved their marketing and they sold it at a time that was appropriate, when it was on people’s minds.
Felix: Yeah, and like you were saying, it depends on the product. Not every product makes sense to go on Kickstarter. One of the things you mentioned in the pre-interview questions was about how with all the marketing channels out there and methods, it’s easy to feel like you have to do it all. You mentioned that as a small company, to stay sane, you guys only do what’s authentic and you stay true to the brand. You know, Kickstarter is obviously a sales channel. You’re taking money from people and eventually giving them a good in return, but it’s also very much a marketing channel just to bring more attention to your brand, bring more attention to the products itself. Other than Kickstarter, what other channels do you guys focus on today, and how do you identify which ones are true to your brand?
Lindsay: Well, I mean, Amazon is a huge sales channel simply because that’s where so many people shop. I think for us, we just realized, “That’s where I’m getting my toilet paper, that’s where I’m getting a lot of stuff. Maybe we should sell on Amazon.” Getting involved on Amazon and then also being part of the Amazon Prime Fulfilled by Amazon program, that made a huge difference for us as far as opening up a channel and seeing returns. Otherwise, I mean Facebook is [inaudible 00:40:01] for advertising. Remarketing on Facebook, so bringing people back who maybe they’ve landed on our website because of a blog post or a friend recommended them or something, but you know, they’re just curious about Distil Union. They haven’t heard of us. They haven’t heard of Wally wallets, so they look and they don’t buy anything. Then you know, Facebook magically reminds them that there’s this thing that they shopped for. I think that’s been our most effective sort of marketing channel.
Felix: Very cool. So Amazon, you mentioned, was a big win for you guys. When did you roll out the products into Amazon?
Nate: We started in earnest, I think it was in 2013. We were just selling, fulfilling from our warehouse. Then things really picked up when we started going Amazon Prime, which was you know, four or five months later. I mean, it just meant day difference. If you want to be serious about Amazon, ship it to their warehouse and let them ship it Prime. But yeah, it’s a great channel. I mean, 40% of people on the internet shopping in the US start their product search on Amazon. So you can’t … It’s a juggernaut and you can’t ignore it, so yeah, it has been a great channel.
Lindsay: And a huge learning curve.
Nate: Yeah.
Lindsay: You can shop on Amazon all day, but listing yourself on Amazon is very interesting and there’s a huge back end because there are so many sellers and we definitely learned-
Nate: Figuring out how to do it right. Yeah, it’s best … I mean, if you own your brand … One of the difficulties with selling wholesale is you can have as a wholesale customer who buys stuff and they’re going to say that they’re going to sell it in their brick-and-mortar store, but they’ll turn around and sell it against you on Amazon, which then you’re just in a sort of race to either exhaust their inventory or chase them on price down. So we really, we put a lot of effort into controlling our brand on Amazon and making sure that we’re the only ones selling it. It protects our wholesalers, in that we’re able to keep our retail price where it should be to protect our wholesalers and everybody else that we sell to.
Felix: So we said earlier that the business was started in 2011 and you went into Amazon 2013. Do you feel like you should have gone in earlier, or do you think that a business has to be at a certain stage before launching in Amazon?
Nate: We absolutely could have gone in earlier. Yeah, yeah. If I could go back and change one thing, I would enter that market earlier.
Lindsay: Again, that was based on our experience with Philips. They had a relationship with big box retailers like Target or Walmart or Best Buy, so that was the model that we wanted to try to sell into these larger retailers.
Nate: Yeah, we thought that’s the way it needed to [crosstalk 00:43:16]-
Lindsay: But meanwhile, sort of not taking the time to reflect on, “Well, how do we personally shop? If we are making products that solve problems in our lives and our target market is very similar to Nate and Lindsay, how do Nate and Lindsay shop? They shop on Amazon.” Like, I think that light bulb could have gone off a lot sooner.
Nate: Yeah, we just didn’t realize the potential of it. I mean, we saw the merchant fulfilled orders trickle in, and we thought, “Eh, how much better could Prime be?” It was night and day. 10, 15, 20 times different.
Felix: Can you share some of the big lessons or a big lesson or a change that you guys made to your business on Amazon? Whether it means the product listings itself, or just the way you conducted business on Amazon that did help you sell more through Amazon?
Lindsay: It was, I would say … Like Nate was saying, owning your brand. Owning your product on Amazon. So when you sell into a wholesaler or even to a distributor, it’s totally possible that others can hijack your listing. So at one point, even our brand name was spelled incorrectly because Amazon gained control of the listing and-
Nate: Somebody else did.
Lindsay: Someone, yeah it was very strange. So I think just from the start, being very clear with, if you have wholesalers, to have a solid … Not a non-compete, but just an agreement to not sell on Amazon so that you can manage that listing.
Nate: We’ve had people even break that. So you’ve just got to vet. You’ve got to vet them. If somebody orders 200 wallets and they have one retail store somewhere that’s pretty rural, that’s a good sign that they’re also going to take that and sell that online through Amazon. Because Amazon’s really one of the only channels where you can move that sort of volume.
Felix: Yeah, that’s a good point that the wholesalers you work with can eventually end up competing with you. Obviously, you guys had experienced that. You mentioned before that you guys were already … So you’re fulfilling yourself at first, and then you went into Amazon’s FBA, or Fulfillment by Amazon, and that’s when business really took off for you on Amazon?
Nate: It picked up initially, and that was good business. It made things more comfortable. We were able to sort of step off from freelance.
Lindsay: Yeah, finally.
Nate: I think around then. Yeah, finally.
Lindsay: Yeah, a few years in, we were able to focus on the business and not do jobs on the side to make rent.
Nate: Which was huge.
Lindsay: Then it was because we were a decent-selling wallet on Amazon that someone who happened to be a blogger bought the wallet, was personally impressed with it, and then reached out to us to interview us about it. Honestly, that was the turning point. So it was, you know, the chicken and egg, but we wouldn’t have gotten such great coverage on Slate if it wasn’t for having a decent-performing wallet on Amazon in the first place.
Felix: Yeah, it’s definitely like a snowball effect where once you get it rolling, a lot more attention comes your way. So you know, speaking of the growth of the business, can you give us an idea of the growth or the success of the business today?
Nate: We’re at about $2 million in revenue per year. That’s up considerably from where we were a few years ago.
Lindsay: Yeah, just two years ago.
Nate: Yeah, so.
Felix: Yeah, that’s an amazing number to hit. Obviously, a lot of success comes from Amazon like you guys are giving credit for it. Are there keys that you guys keep in mind when you put together a product listing to make a product more discoverable on Amazon? If someone’s thinking about putting up their product for the first time or launching a business on Amazon, are there specific things that you would recommend they spend a lot of their energy on, a lot of their time on, that would actually result in potentially more sales?
Nate: Yeah, there are a lot of tools to research sort of what keywords are good. The best thing you can do is clear bullet points. Include the valuable keywords. There’s, like it’s MerchantWords where you can kind of do some research on what people are searching for. We’ve got a subscription to that. There’s things like AMZ Tracker that allows you to track your success and [inaudible 00:48:18] keyword ranking. There are a ton of scary tools that allow people to come in and do some great market research. I mean, unfortunately, a lot of people use that to knock you off. That’s sort of an unfortunate side of Amazon. They’re starting to deal with it more and protect some of the original designs that third-party sellers sell there, but it’s a gold rush out there.
Felix: Can you use tools like this, MerchantWords and AMZ Tracker, if you’re just trying to figure out what products to sell?
Nate: Yeah, you absolutely could. A lot of people do it that way. A lot of people sort of reverse engineer. Yeah, absolutely. I mean, that’s competitive product analysis, you see what sells really well. But yeah, that is an interesting world because it is completely hackable.
Lindsay: I mean, design [inaudible 00:49:23] is something that you try not to let it break your spirit as a designer to see things straight just copied. Yes, I’m sure that imitation is the sincerest form of flattery, but really it is a crummy sort of business model for some on Amazon, especially. To see what’s selling well and to reverse engineer it and take that market share.
Felix: Cool, so I want to talk now about your site now, not so much just about Amazon, but one cool thing that I noticed on your site was this pop-up in the corner called Distil Perks. I clicked on it, and it’s essentially a gamification, I guess, of your entire store where you can gain points for referring friends, creating an account, making purchases, and then you can trade these points in, I’m assuming for like a … It’s like a gift card or something to spend on the store itself. Tell us a bit more about this. How is this particular program going for you guys?
Lindsay: It’s going really well. We actually, that program is LoyaltyLion. We had before used another, a similar sort of loyalty app on Shopify. The idea was to just encourage people to share. That was ultimately what brought us to the app, to share purchases with friends. The offer, “You get $5 back if your friend orders something.” We weren’t able to execute that offer, but what we found was with something like LoyaltyLion, we can incentivize people to earn points or perks or credits by doing things like following on Facebook or writing a review. We use Yotpo to write reviews, to gain reviews from customers so they can earn points that way. Sharing their birthdays so we can send them a birthday present. Anything like that, and they can at any point cash in their rewards for $5, $10, $20, free shipping, different levels of perks. So that’s been really fun, actually, over Black Friday and Cyber Monday. This whole weekend, we’ve been rewarding everybody with double perks. So yeah.
Felix: Very cool.
Lindsay: It’s great, it just brings … Keeps people engaged and hopefully brings them back to come [inaudible 00:52:01].
Felix: Yeah, it definitely makes your store a lot stickier. It makes people want to come back because they’ve accumulated all of these points and they’d rather spend it with you guys because they have all these points to redeem, all of these rewards to redeem, rather than you know, maybe going on a channel that has a lower profit margin for you, like on Amazon for example. So any other apps or tools? You mentioned LoyaltyLion, Yotpo for your reviews, any other tools or apps that you use to help run the business?
Lindsay: We definitely, from the beginning, I think ShipStation is our number one recommendation. They’ve just been so … They were so easy to set up, such a great price, and took all that fulfillment and just bundled it up so neatly and nicely. So ShipStation, something we can’t recommend enough. Using Stitch Labs for our inventory. So going in-between Shopify and ShipStation is Stitch Labs.
Nate: Yeah, just knitting all our channels. I mean, even Amazon and eBay. All our channels on Amazon. I mean, we sell EU, Japan, yeah. Every country in Europe. So-
Lindsay: So yeah, Stitch Labs-
Nate: Stitch Labs has been a lifesaver.
Felix: Nice. So where do you guys want to see the brand be this time next year? Any, a lot of product launches coming up? Like what do you guys want to focus on in the next year?
Lindsay: Yeah, we have what, at least two products next year that have nothing to do with wallets? We’re so excited. I mean, we’ve been doing wallets for four years now and honestly, like Nate said, when we started we had 14 different product ideas and we thought it would be a much more diverse sort of product assortment. So next year is going to see us finally getting that diversification, which is so much more fun for us too. I get to write the packaging for something totally different.
Nate: Give you some variety, yeah.
Lindsay: No pull tabs, something different. And yeah, so having a website that’s a little bit more diverse, a more fun experience. Something that you could start to see Distil Union making a difference in your life, not just in your pocket. Not just in a wallet or a stand, but some other things that could make Distil Union a problem-solver. The go-to problem-solver for-
Felix: Awesome. Cool, yeah, excited to see what you guys put out. So thanks again so much for your time, Lindsay and Nate. Distilunion.com, again, is the website. Anywhere else you recommend our listeners go and check out if they want to follow along with the products that you guys have out now and the products that you guys are going to be releasing soon?
Lindsay: We’ve been using the stories on Instagram. That’s been really fun, just to do like sneak peeks. Because they disappear. So we don’t have to be quite so careful with what we’re sharing. So definitely some sneak peeks on Instagram. And maybe, I’m curious about Facebook Live. I’m very nervous about it.
Nate: Yeah, we need to get more into that next year.
Lindsay: That would be really fun, and I know that Kickstarter’s starting a live sort of interaction with creators. So I feel like we can do that. We did that with a lot of our updates within campaigns, so might as well try that.
Felix: Well next year, once you guys launch a bunch of other products and try all these live platforms, we’d love to have you back on to talk about the success with all of that. So again, thanks so much Lindsay and Nate. Distilunion.com. We’ll link all of the social channels up in the show notes as well. Again, thanks so much for coming on.
Lindsay: Absolutely, thanks.
Nate: Thanks, Felix.
Felix: Thanks for listening to Shopify Masters, the e-commerce marketing podcast for ambitious entrepreneurs. To start your store today, visit shopify.com/masters to claim your extended 30-day free trial.
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