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Episode Transcript — Thinking Outside the "Box" w/ Paul Shrater from Minimus
00:00 Speaker 1: You're listening to the Spend $10K a Day Podcast, brought to you by the performance marketing experts at MuteSix. This is your source for cutting-edge insight into the world of online advertising, from the team with more Facebook case studies than any other agency on the planet. Here are your hosts, Steve Weiss and Stewart Anderson.
00:25 Speaker 2: Welcome back everyone, it's Spend $10K a Day Podcast. Today, we have Paul Schrader from Minimus. Paul has many different businesses that he is both an e-commerce solutions provider as well as an e-commerce business owner. He's one of the most interesting guys I've talked to in a long time. And I'm excited to have him on our podcast, should I say, and to share some of his insights about the future of e-commerce, preparing for the holiday season, and obviously, how do you cut down the amount of money it takes to ship a product? [chuckle] Paul, thanks for coming on.
01:04 Paul Shrater: You're welcome. Thank you.
01:05 S2: So Paul, tell our audience a little bit about yourself, how you got into this wide crazy world of e-commerce and some of your various businesses. Obviously, before we started the podcast, you told me a lot about what you guys are currently doing. Well, feel free to share that with our audience 'cause I think that's really interesting of how you're actually helping the full life cycle of an e-commerce site.
01:28 PS: Sure. So it started originally with a direct-to-consumer e-commerce company, Minimus.biz. We're actually ranked in the Internet Retailer's Second 500 guide, of the top 1,000 highest grossing e-commerce businesses in the country but started as a bootstrap startup 13 years ago based on family going on vacation and having to throw away large sizes of products, and said, "Wouldn't it be great if you could buy your favorite brand in a small size?" And it was 2004, people were trusting putting their credit cards online for the first time. And so it made sense to be a first mover into this new world of e-commerce, with a physical product and not sort of the dotcom bubble concept [chuckle] at the time.
02:14 PS: And so that quickly evolved into doing not just direct-to-consumer of travel-size toiletries and single-serving food items, and sort of being the player in that. But we started doing it wholesale to all sorts of market segments: Hospitals, cruise ships, sports teams, government agencies. And then a lot of brands saw us as the players in miniature sizes so they came to us to actually do the manufacturing and the packaging of it, which we didn't do. [chuckle] But we tried to help them, and soon found there was a need in the marketplace for a company that could do the manufacturing. So we put together MinimusProducts.biz, which is a facility that actually has the equipment to put people's food or beauty products into their packaging. So fully licensed and FDA and all that. And then from all that, we had brands wanting to work with us for fulfillments. So we had MinimusFulfillment.biz, where we do...
03:09 S2: Paul. Before you...
03:10 PS: Select apparel, electronics...
03:10 S2: Before you go further, can I ask you a question?
03:15 PS: Sure.
03:15 S2: Do you brush your teeth with a small travel-sized Crest toothpaste? [chuckle]
03:25 PS: [chuckle] I always joke with people, they come into our warehouse and see that it's full of snacks and cookies, [laughter] and they were like, "If there's ever a disaster, I know where I'm coming." [laughter] It's funny I rarely actually use it. I like to quote some of these '80s movies, I don't know, New Jack City or whatever: "You don't get high on your own supply."
03:51 S2: [laughter] That's the best analogy I think I've ever heard on our podcast. That's amazing.
03:56 PS: I'm actually... It's funny. I'll go on a trip and I'll be like, "I'm an idiot, I forgot such and such travel size. Why am I not raiding the warehouse for it?"
04:04 S2: I just think of the warehouse and I think of it as like euphoria. I love samples at Trader Joe's and Whole Foods. I'm just a sample guy. I'll go up for more than one sample, like if they're sampling like apple pie, I'll be like, "Give me three, give me four." You know what I mean? I kind of beat the whole rule of you need one sample. I know there's this unwritten rule with samples, but I just... I go all in, man. I get four, five samples. I don't know, I just think of your warehouse as like cookies, and you name it, just small bite-size samples. And I just think I'll probably gain 30 pounds if I ever visited you, man. [chuckle]
04:37 PS: Yeah. I do a lot of tours with clients coming through that are gonna be working with us on fulfillment or whatever, and when we walk through the aisles, the biggest thing that people take with them is hot sauce. [chuckle] They'll take packets of hot sauce or Tabasco, those little mini bottles of Tabasco sauce for like their purse or whatever, so when they're out eating and they need to spice up their food, they've got something on them.
05:03 S2: You never know when you'll need that Tabasco. You never know. [chuckle]
05:09 PS: We've actually shipped it to space. We supply NASA, with the astronauts in the space station, with a lot of their condiment packets.
05:16 S2: Wow, so you're doing a lot of cool stuff. I'm just picturing... And I think when you have a client that you're pitching and you're like, "Come into to our warehouse." I mean, snacks sells. [chuckle] If you have good snacks, that goes a long way. I know... Even my team, I'm thinking of, like there's a rebellion in the office if I don't have snacks. There's like an organized rebellion, "We're not working until we get our snacks." So I'm just always fascinated by how all the little things in life push success, and I think having great snacks and just having a warehouse where people are very open, I'm just picturing that experience. But I'm sorry, man, go on. I love... I'm fascinated with your story.
06:00 PS: Oh no. So it evolved into doing fulfillment for other folks because we were doing it for ourselves and we ended up doing people's packaging in our food and toiletry facility. And they needed the service of fulfillment and just didn't like... Either they didn't have one yet or they didn't like how they were being treated with traditional fulfillment companies that are more sort of cookie-cutter in what they do. And we're able to really work with them as partners and help them really on their customer experience. From what the shipper box looks like, what goes in it, is it custom printed, are there handwritten thank you cards? And then...
06:40 S2: Wow.
06:41 PS: We also do their complete customer service. Our team here has actually won some third-party customer service awards. So for folks that need it, we can do their email and their phone customer service for their fulfillment as well.
06:57 S2: Can I ask you a question? I think this is... You touched on something really interesting just now. I just told one of our partners that we work with, obviously, Paul, we're on the acquisition side. So a lot of our brands, our partners, rely on us to drive profitable customer acquisition on Facebook. How important is it to have an amazing strategy around brand inserts inside of a box? Whether you're a subscription box, whether you're a clothing company. I always think that there's just not enough people talking about that experience of really understanding, how do you get the most value out of that little piece of real estate that you're sending to someone?
07:36 PS: Really good question, and I'm a big advocate of the customer experience in terms of the physical product. People who know the Apple brand, Steve Jobs was obsessive about the packaging experience, for a good reason. And especially even more so now, everybody does a lot of their or all their communications digitally. And when people get something physical in the mail... In fact, I think there's gonna be a whole return to direct mail. But...
08:06 S2: [chuckle] Totally.
08:07 PS: When you get your package in the mail, it's an exciting feeling. I've spoken to people who are addicted to getting packages, whether it be Amazon or different subscription boxes. They just love the feeling of arriving home every day and there's packages outside their door. So that's a moment where you can really connect to a customer with your brand, with what does the box looks like, what's inside, how nicely was it packed. I think people have experienced... There was an article put out actually by the post office in their magazine about how... Was actually primarily women in their study, would get really upset if the brand did not accurately put the right size box with the product. If you get a giant box with a tiny product in it, people were getting really upset. And it was actually ruining the experience of the receipt of this package. So it's an opportunity that... It's your last touch point unless you do follow-up emails and all that, but it's your last touch point in the sale where you can really blow people away and go above and beyond with what that experience is like.
09:16 S2: That's really interesting, 'cause I always talk about getting that first-time buy from a customer acquisition campaign is the hardest thing in the world. Now, once you have a buyer, a person who's turned from prospect to buyer, now it becomes a lot easier. Now you have this person who's previously bought your product. Wouldn't say easier, should I say. But now you have the ability to really sell them on the experience. They're more likely to buy your product once they bought your product than previously. And I think if you can get your product in as many people's hands as possible, you're gonna have a much better shot at scaling your brand.
09:57 PS: Yeah, I agree. You guys have the toughest job, getting eyeballs to see the product. And like you mentioned, Facebook right now is amazing in terms of being able to hyper-target your customer base down to the very specifics. So your dollars that you spend can really go a longer way to reaching the customer. But then once you have the customer, now you want them to be a lifetime customer or at least as long as you can. And that's where having obviously a good product, but in a lot of cases, a good experience. I know my wife has bought from certain brands just because of the experience that the brand has created in terms of how it connects to the consumer. And a lot of it has to do with their packaging, with their messaging that comes in with the packaging. Or if there's other promotions and things that come in the package that help incentivize a repeat purchase. We did something... We have a website called TheTalkingShipper.com.
11:01 S2: [chuckle] Nice.
11:01 PS: And the Talking Shipper is actually, it's a similar technology that's used in greeting cards with a light sensor. So when you actually open your box that you get, it talks or sings to you.
11:13 S2: Wow. That's really cool.
11:15 PS: So we actually demoed it with about 1,000 of our customers, and there was a great video sent in about someone's dog reacting to it, tilting its head in puzzlement and barking at the box. It was thanking them for being a customer of Minimus. But that's a great one for celebrities or bands or people who have a recognizable voice, or even just somebody who wants to make a fun message that can put in a package. And again, have an opportunity to just blow people away when they receive their package. And so that's the kind of thing that we like to do, is really work with brands on what is their personality? To try and match that experience on the fulfillment side with their brand. That kind of messaging isn't right for everybody. Some people are more glamorous, some people are more edgy. Everybody's got their own brand personality and it's really finding that right experience.
12:12 S2: Couldn't agree more. I feel like where everything's going is people are gonna continuously buy from brands where they have a positive experience post-purchase. And I always tell everyone we work with to really focus on managing the expectation from the ad to purchase to actually picking up the box. And I think more and more companies are really honing in on that. I'll give you an example, MeUndies had a... They send the underwear of the month and they sent... One of the months they had the pizza, it was a pizza underwear. And they sent the pizza underwear in a pizza box, and I just thought that was just so creative. And just so, yeah. Every month now, I'm really excited to get my MeUndies just because, "What are they gonna come out with next? Are they gonna send me like underwear in a space box, or what are they gonna do?" It's just really interesting. I think really honing in on that emotion of getting something in the mail, I think is really, really... I think as a marketer, something that is so important to the lifecycle and keeps those consumers coming back.
13:21 S2: Cool. So you have three businesses, Paul, right? You have your fulfillment. You have your website, which sells small toiletries. And then you have your private equity site, where you actually invest in e-commerce brands. Tell us what you're most excited about. Like what... Q4 is coming up, as far as on the e-commerce, you have a pulse on everything going on. What are you most excited about? I'll leave it kind of open-ended here.
13:48 PS: That's a really good question. [chuckle] Yeah. There's a million things I'm excited about. We have... I would say the most exciting is seeing what entrepreneurs are doing. We get to meet with them almost every day. We have different folks coming through here working on all sorts of interesting ventures. And getting to see the entrepreneur after having done it for so many years, you really get to see who's got it, who doesn't, who you just know is gonna be a rock star with what they're doing, or who has a clever product and a clever idea. And it's exciting to really help them execute on that vision. So that's the thing that's exciting to me. If I had to pick a category of product, or whatever, that I think is most interesting right now, I would say plant-based foods...
14:45 S2: Interesting.
14:45 PS: Is really trending right now. So I think brands that are in that space who can market well, have a real opportunity to do well.
14:58 S2: So, let's say... Are a lot of your customers, are they people who are drop shippers? Are they people who have established brands? 'Cause we work with some drop shippers, and there's a lot of drop shippers who listen to this podcast. Very opportunistic entrepreneurs who see an opportunity. They're like, "Alright, there's plant-based foods. Well, I'm gonna go source the best plant-based foods. I'm gonna put up a website. I'm gonna run some Facebook ads." If you're dealing with a drop shipper, what type of advice do you have as far as sourcing these products? So obviously a lot of what goes into... There's the marketing side and then there's the sourcing side. What advice would you give to the entrepreneur who's really trying to get in there and really make a huge dent from a sourcing perspective?
15:46 PS: I think from the sourcing perspective, and this is where really defining what you mean when you say "drop shipper," if someone really is finding a unique product, let's say you're importing it from some foreign manufacturer, so you're the first one to bring it to the US, or you've developed some different take on a product, a different flavor, a different mix, blend, variety. Like you've somehow branded it your own way and you are purchasing inventory and you have the capital to do that. That to me, and being the manufacturer essentially, you don't have to physically manufacture it yourself but you've arranged for your own unique product, that is a lot more powerful these days than the traditional drop shipper model where you're basically purely marketing somebody else's product in a very competitive environment. Especially with some of these very large website marketplaces that have the ability to just crush you because they go to the manufacturers themselves, and there's no way to compete.
16:51 PS: So that old-school drop shipper mentality where you're not really investing in inventory and you're buying product essentially after you've sold it, that somebody else is warehousing and fulfilling for you, in an open market competitive environment, is very difficult. So my advice would be to find a take on that product and find a way to get it to be unique and different and then market that as a differentiator. And that's where our clients are coming from. That's where I'm seeing success with people is...
17:27 S2: Interesting.
17:27 PS: Is people who are doing something new and clever and interesting. They may just be marketers, so they literally could be a one or two-person operation working out of their house or in a little office space, or they're a five-person company in an office space. They have no warehouse. They have no manufacturing facility. They have service companies to do all that work for them, where they barely ever need to touch the product. But they know how to market. They know how to put together a website. They know how to hire firms like yours.
17:56 S2: Yep. [chuckle]
17:57 PS: And that is, right now, the strongest model for success that I'm seeing is people who focus their time and energy on the marketing, and the sales, and the website, and the promotions. Get your unique product, but then let somebody else make it, let somebody else fulfill it, let somebody else do customer service, worry about all the operational headaches that are a distraction, to what a lot of, especially younger folks, are really good at these days, which is knowing how to market things online.
18:31 S2: So, there's two questions, which I think are really interesting, I get these questions a lot, and they kind of go together. So, number one, how do you build a model where you're continuously testing out new products and figuring out your supply chain at the same time? Obviously, a lot of these drop shippers are evolving into the exact model you're talking about. Being innovative with products, and ordering the products, fulfilling them from a warehouse. How do you be very tactical with your money? Each drop shipper has a specific amount of money for... Or each entrepreneur, should I say, has a specific amount of money that they use for ads, and a specific amount of money that they're gonna use for testing out products. Have you seen anyone build a model for testing? Which is... Which scales? Number one. And actually, the other question's kinda deep too, so let's start there. Alright. Tell me, have you seen anything innovative on that side of... People have models around testing products before they actually make that giant purchasing purchase of the product?
19:32 PS: I don't know that there's a specific model for it; I've seen people who do it well and people who don't. And I think it's really, a lot of it's about timing. And when you've got a product that, let's say the brand is paying you guys to market it and it's doing really well. Well, at a certain point, you really wanna leverage that audience into buying more product from you.
19:55 S2: Yep.
19:56 PS: And so whatever the next thing is has to be something complementary and not out of left field for why the audience was buying that first product. So the timing of when you release that is really key. Sometimes I've seen people that will develop a whole line or lots of different varieties and choose not to launch them all at once. So that way, in their back pocket, they've got the other flavors or scents. And when they really make that first marketing push on their first either one or set of ones, they already have the next ones ready to go. So when the timing is right, they can... If all of a sudden, they have strong marketing heat on them, they can drop the next collection, if you will.
20:40 S2: Yeah.
20:41 PS: And that's the key, I think, is having that R&D process always in motion and always having a finished product next in the line ready to go so that way when you have some marketing heat, you've got the right timing to launch the next one. So I think it's a good point and probably an amendment to my comment about what an entrepreneur should be focusing on: It's not just the website and the marketing, it's the R&D on which your next products are. And again, sometimes you can do that all yourself. Sometimes you can actually work with your contract manufacturer, your contract packager, or your ingredients supplier or factory or whatever it might be. They can even help you come up with innovations and ideas on ways you can come up with a second generation or a new flavor, whatever it is.
21:34 S2: You bring up a really good point, Paul, about thinking of the brand of... Maybe what you do is, a model that we've seen work time and time, is develop a line of products and start selling your products under one brand, start running traffic to that brand, get a lot of brand recognition, get a lot of... And then maybe you just start rotating products, in and out, underneath that line or that brand. And I think that that's been a model we've seen work, time and time again, for a way to launch businesses and have a great customer experience.
22:07 PS: Yeah. I think a lot of different models I've seen come and go. There's a new one I just saw somebody using where it's a subscription box company and there's a limited number of available seats or available customers who can get it, so you have to sign up for a waiting list. [chuckle] And it's obviously, I shouldn't say obviously. To somebody who knows marketing, it's an obvious ploy. To the average consumer, it may not be. And then a week later... "You've been accepted into the list." In the meantime, they've marketed to you one or two times to hype you about, "Hey, your spot might be coming up."
22:46 S2: [chuckle] So you don't...
22:47 PS: And then you get your spot, and now you're like you don't wanna miss out before your spot's given away, and so you better order now. So that was a new one I had seen. I actually kinda liked it, the emotional connection that they make I think is really powerful.
23:04 S2: Or better...
23:05 S2: You could send them something... You could take that to the next level and you could send them something in the mail verifying their spot. I think that's really interesting, is if you could actually pay to have your spot and then you send them a little package and just, "Here, your spot's verified." Now you're mixing that experience of, "Oh my god, I got a product," with now scarcity, "I'm on the list. Great." And I always think that's...
23:26 PS: Yeah, I know. You're actually... There's an example I like to use, the Centurion card, the American Express Black card, shows up in the mail as a surprise. And I don't know if they still do it but with this purple velvet box, and you're like, "Oh my god. What is this?" We do the same thing with a couple of different brands, that you're doing like a VIP club when you've reached a certain level and you wanna give them access to either limited edition products or other types of offers. You send them a surprise little thing that sort of brings them into the VIP club. So the idea of getting a package you didn't even order.
24:09 S2: [chuckle] That's really cool. And so it segues into a couple more questions that I think you'd be... Have a really interesting take on. A lot of these products have celebrities, or influencers per se, who are putting their name on it and promoting it to their audience. I have this debate a lot. How... What is the future of celebrity-focused brands? Obviously, a celebrity is not gonna just make a brand profitable. There needs to be both the celebrity, as well as a really, really compelling marketing angle and obviously a great product. But what do you think the future of celebrity-backed brands is?
24:50 PS: I think it's a mix. If it's truly a celebrity-backed brand, that's a lot different than what you're talking about, about an influencer, where a celebrity's acting as an influencer and doing it as an advertiser. That, I actually think, can either do really well or really poorly. And it really depends on how well the product organically connects to the celebrity and what the celebrity is all about. So if you have something, again, that is completely unrelated to the celebrity's lifestyle and what they're about, it's so obvious that it's an advertisement. Most consumers aren't gonna care and you're not gonna get your return on investment for what you had to pay the celebrity. However, if the product is really in line with the celebrity's persona and what they're about, and feels more... Even though everybody knows it's an advertisement, but it feels like something the celebrity could be connected to, that, I think, can perform really well. And I've seen a lot of brands do that and do a lot of re-buys because they've gotten a positive ROI on that. And it even goes down to not just celebrities but any level of influencer, from the large ones down to the micro-influencers...
26:06 S2: Yeah.
26:07 PS: Who have actually a stronger engagement percentage than a lot of the larger celebrities because their smaller audience tends to be people who care more and aren't just sort of window shopping followers.
26:20 S2: [chuckle] And I think that's a differentiator between the two. There's A, there's the influencer brand where influencers are promoting a brand. And then there's the celebrity-backed brand where the brand is the celebrity and the celebrity is the brand. And I'm always curious as to the strategy around how to feature the celebrity with the brand. Because obviously, if the celebrity makes a mistake or does something in the public eye, that has a negative impact on the brand. And it's just really interesting from a public relations perspective and a direct response perspective. I'm one of the few people who read comments on ads. Like I might be creepy in a way, but I love when I launch an ad on Facebook, I love reading the comments. 'Cause that's when you'll get the literal sense of how people feel about both your product, the brand, and the experience. So I just love really understanding that and figure... Do you have a lot of celebrity-backed brands that you currently work with?
27:23 PS: We do, and we have all types from squeaky clean to in the tabloids every day. [chuckle] And I think the celebrity-backed brand gives folks a leg up because they already have a built-in brand awareness that they're launching with. They have a built-in audience. So the need to market is... They've already sort of jumped the gun and they've gotten a critical mass to start with. There's always a lot more you can do. And I think the places... I come from a background, I actually was a film and television producer before starting the company...
28:03 S2: Oh, cool.
28:03 PS: And had offices on one of the studio lots and all that so... Connected to the entertainment industry and knowledge of it, so the things were true then for people who are artistic and have artistic talent, just as it is with celebrities who are getting involved with brands. And the whole reason they have agents and managers and attorneys is because oftentimes by the nature of them being creative, they're not necessarily into or strong at running a business. And they may be great at the vision part of the business, but the nuts and bolts of it, not as much. So the celebrities who've gone on to be producers, generally have been successful because they found a producing partner who could handle those nuts and bolts business aspects of being a producer. Same thing in the world of products. When a celebrity has a really strong partner or people on their team that can do the business work, they succeed a lot more than celebrities who try and do it completely on their own, based on their own vision because they just don't have the disciplined business skills, in general. I'm making generalities but...
29:16 S2: [chuckle] We won't get you in trouble, man. There's very few celebrities who listen to this podcast. Nah, I'm just joking. [laughter]
29:21 PS: Yeah, no, I think... It's advice for celebrities to do a self-assessment, to say, "Are you strong in business, or are you really more about your vision, your product?" And if that's where you're stronger and you're not as much into the other side, find somebody you can partner with who can do that other part for you because that will take you from being a hobby into being a real business.
29:43 S2: So what about if you're on the other side? Have you seen like... I get a lot of brands I talk to who are actively recruiting celebrities to go into business with, and I'm always like... I guess I always question like, how do you quantify the value that a celebrity will have on your brand? How do you quantify with dollar signs? And I know how important it is, it brings a form of social proof. We work with a lot of amazing celebrities, people who like... Besides just being a celebrity they are super smart. They get business deeper than anyone else. It's just... They happen to be a celebrity. But I'm always curious as to how do you... When you're a smaller brand and you wanna get to the next level, how do you quantify what either a celebrity or an influencer will bring to the table in bringing that social proof to your brand?
30:35 PS: [chuckle] That's the crystal ball question.
30:36 S2: [chuckle] I know, man.
30:38 PS: And that's what I was saying is that you can hit or miss on that. You can spend a lot of money and really just flush it down the toilet because it just doesn't connect to the celebrity's audience. Or it can be a gold mine. We all know the stories of some of these billion dollar brands where a business person and a celebrity, they've gotten together and they've built a little business and sold it for a billion dollars. So there's a handful of those I could name right now. [chuckle] So it certainly can work well the other way, but it's really, again, about making sure that what the celebrity is known for or what their audience is looking to them for, makes sense with the product. I'm a big fan, if at all possible, and it oftentimes is not the case with celebrities usually because of their management team, is of testing something small...
31:38 S2: Yup.
31:38 PS: And ramping it up from that. Because that helps figure it out. If you can try something on a test basis and see what happens, and try and gauge what it might be if you really put more into it, then you get a sense without having to spend a ton of money and perhaps... I've even seen a couple of companies go out of business, just thinking they've hit the mother-lode with a situation with a celebrity and then it just doesn't connect. So it's really about finding something... And I think that some of that gets to your point of, if the celebrity is smart and business-savvy and really sits down and works something that makes everybody happy, and making sure that it's a good fit. That is gonna be stronger in the long run, and I think a lot of those billion dollar examples have come from a celebrity who's approached it that way as opposed to really a celebrity who's just given equity or whatever to be connected to a username, go out, promote it. That's not as powerful as really getting them engaged in the business.
32:50 S2: Couldn't agree more. Now the next question, I'm gonna take the conversation to a different place. The next question I ask is a question I get a lot. Being a service provider, I'm a marketer, I've been running internet marketing companies since I was 16 years old. I'm an old man now, I'm almost double that. I'm 32 years old. So, I get this question a lot from running an agency, and I have one way of putting it. And I'm sure everyone who runs... My fellow colleagues who also run great agencies, they all have a different angle that they talk about. You run a fulfillment and manufacturing business. When does it make sense to hire a fulfillment company and when does it not make sense? It's a question I get, "Should we fulfill it in-house? Well, the pick and pack rate is $1, $2." From your vantage point when does it make sense to hire a Minimus? How many products? How big? Just tell me that for... Because I think a lot of our audience really would love to learn about that.
33:54 PS: I get asked that question a lot. In fact, we meet with folks sometimes that are too early in that stage or that have come to it too late. [chuckle]
34:01 S2: Yup, exactly.
34:04 PS: The... My answer 99% of the time is the moment you've grown it out of your garage or your kitchen, you should be in a fulfillment house. Strictly because your biggest asset and your biggest stumbling block to success in your business is your time that you have to spend on something, and operations is a huge time suck in things you don't even realize you have to worry about, from OSHA compliance to Workers Comp, to setting rules and procedures, and safety meetings, and negotiating shipping rates, and boxes and supplies; the list is endless. And if you have to develop all that yourself, that's time away from what we just talked about before. Doing your sales, doing your marketing, doing your website, doing your R&D on what your next products are gonna be, doing promotions. All of the things that could be driving business. There are plenty of other people who have become experts in fulfillment that could do that for you. It's the same reason why you don't host your own website...
35:16 S2: Yup.
35:16 PS: With servers in your kitchen; you hire a professional company to do that because you don't need to build up that capability. And sometimes I think that companies erroneously believe they need to do it all themselves, or they need to be in control, or they need to be right there where the product is, and that's really where picking the right fulfillment company makes sense. If you are sort of really large scale, old-school, then you go to a large fulfillment house, like if you're Nike or something like that...
35:49 S2: Yeah.
35:49 PS: You're not gonna be bobbing and weaving and being like, "Oh, this week I'm gonna do a buy one get one free," or, "Oh, I just had this idea," or, "Oh, this... One of my influencer partners just posted about this and I wanna put a sticker on my product." But if you want to be able to be more nimble that's where we've come in and where we've found success in the fulfillment game is really being that kind of partner with brands to be able to be more of a partner and not just a vendor for hire.
36:18 S2: An extension of their brand.
36:20 PS: Yeah. The short answer is, the moment you get it out of your kitchen or out of your garage should be the moment you have somebody else do it.
36:27 S2: Yup, we get that question a lot. Being a marketing agency it's like, "When do I hire a marketing agency?" Or like, "I've scaled it here, do I keep trying to do this business while other areas of my business are not growing?" And even like, "How do I build a growth marketing team? What goes into that?" And from building multiple growth marketing teams to building a company that's a 30 plus people that are really good in one area...
36:53 PS: Yeah.
36:54 S2: I'm always like, "Well, hire the people who are the best and give you the best chance to be successful."
37:00 PS: Yeah, I think you made a good point both for what we do and what you guys do from either the operations side or your side, the marketing side is... There's a lot of things people... I wouldn't say fool themselves into thinking that because they do it themselves it's cheaper but it may also mean you're going down the wrong path or you're doing it the wrong way or you just don't have the large volume deals with, say, a shipping company or whatever it might be. So there's a lot of aspects that people just don't recognize; some people don't recognize that by going to a professional fulfillment company some things may seem more expensive but in the end, it may actually be cheaper and more accurate and more reliable than trying to do stuff yourself. Same thing with you guys in marketing.
37:50 S2: Yup.
37:50 PS: If you're an amateur or even a well-read, well-studied person doing Facebook marketing or whatever it might be, you can get to a certain level of success, but invariably working with people who do these kinds of things day in and day out, they're gonna know things and have their finger on the pulse of what it is that has worked or not worked because they've done it a bazillion times. They're gonna cut right through and save a ton of money on budgets spent by only spending it on the things that have the best shot at success.
38:27 S2: And obviously on the podcast, we discuss this a lot, but there's more to running Facebook ads than just pressing the dials. There's feeling, there's understanding, and then there's the creative. I think that that's just like in fulfillment and the product experience, and I always talk about that a lot in our talks, is that, this Facebook ad whether it's a video, whether it's a dynamic product, animal collections ad, a carousel ad, it has to really be synergistic with the product from initially seeing the ad to clicking it, to making that purchase, to actually getting the product in the mail. And I think that that right there is in my opinion why you need to have a team behind you, you can't have one person. Two people on a scale. You need to have a creative team, a videographer, someone who can shoot product images. A CRO person. And just like on your side, you know, to be great at fulfillment, you need to understand the product psychology, you need to have a customer service team, you need to be working with someone who can provide different types of unique value props inside the box. And this is all really interesting; I think a lot of people really don't put the thought... Just from experience, don't put the thought into the fulfillment side and the products side of their business. They're so worried about getting the CPA, CPE, CPA cost down, but if those people aren't reordering, you know, the product needs to improve.
39:51 PS: And you know that... I think you touched on something in terms of answering the question of what should a brand be focusing on, when should it come to the table to either a professional marketing firm like you guys or a professional fulfillment company like ours. And my advice in that area would be, trying to understand your customer base as best as possible. You guys as a marketing firm can look at data; we can look at things from our end. But the brand is gonna know their customer. They're gonna have heard things, they're gonna have tried things, they're gonna have seen the comments that... They're gonna understand what the customers like and don't like, and how they respond to certain things. And that's a lot of... When we initially meet with a customer doing fulfillment, is trying to understand what their customers are like because then that helps shape what the customer experience should be like to match what their customer base is all about. And it's the same thing I think with you guys, if they understand their customers and can articulate that to you guys, then you'll know how to create the proper marketing creative and go after the right types of people without having to spend as much exploratory money to figure that out from complete scratch. Yeah, can always hone it...
41:14 S2: Yup.
41:15 PS: But... Yeah.
41:16 S2: One other point that I've loved to throw out there, which this'll be the last point, I know Paul you're a lot more interesting and a great person to interview than I anticipated so we went a little over time, but I just really appreciate chatting with you, man. You're a wealth of knowledge and just an awesome person to talk to; but one other point, which I think correlates to both our specific areas in what we call the e-commerce food chain, is you guys do customer service and fulfillment, well, if the customer service is not... If the customer's not... Their expectations aren't being matched, when they call up after receiving the product, that intel needs to be shared with the marketing team. So, I always say, like, maybe understanding what the issues are on the customer service, why are people turning away? This intel from the call center, from the customer service, is a treasure trove of information that needs to be shared with the marketing, and I think that's been the holy grail of really whether you're outsourcing to a marketing agency or you're outsourcing to an expert, like you Paul, with fulfillment and customer service. How do you connect everyone together? The marketing team with the customer service reps? How do you build that support network where everyone's aligned to really help grow your brand and there's intel going back and forth?
42:35 PS: By the way, just have to say brilliant point on your part. I just spoke at a big conference a few weeks ago, and I actually did a whole custom video on this very topic...
42:46 S2: Yup.
42:46 PS: Of how a brand needs to listen to their customer service department because there's a wealth of information coming out of there that you need to respond to, and that is actually... You've actually hit on one of the things we do in every one of our customer meetings when they come in for fulfillment is talk about our customer service team, and that whatever we're hearing or seeing, we will pass back oftentimes with recommendations from best practices and things that we've seen before. And sometimes, it means even modifying the website in the checkout experience. It could be something, something as simple as putting something in a FAQ that nobody reads. [chuckle] Or it could be in several cases, we've actually helped people, right on the checkout screen, put a critical piece of information that cut down on customer frustration, cut down on the number of inquiries that they have with our customer service team. Which ironically, is less business for our customer service team, but the goal is to have a happier client.
43:51 PS: So, we regularly do that and is really feed that back and say, "Maybe you should do this on the checkout page." Or we even did that ourselves with our own company when FedEx launched "Smart Post," which is the combination of both FedEx for the air and then US postal for the last leg, the ground leg, that goes door to door and it's a very economical aspect. It adds a few days to the transit time. And it sometimes, depending on how it's routed can be a little bit weirder with its routing; we were getting some flak from customers for our website from that, and we had people here saying we should dump it and go back to the old way of doing it. And I said, "No! We just need to set the expectations of the customers." So we did a custom video at checkout that shows them what Smart Post is all about. And talks about the transit time actually put that in the checkout.
44:51 PS: It says what your transit time window should be. And then we gave people an option for a $5 surcharge. Otherwise, you get free shipping. But if you wanna force it to go FedEx Ground, so you have a real dialed in day that you're gonna get it and accurate tracking and all that, you pay an extra $5 and then also your order will go out same day as opposed to within three business days. So that program was actually used by FedEx in their western region as a model to help other e-commerce companies combat consumer flack that they were getting from the switch to Smart Post. So again, the idea of either our own experiences and best practices, being able to work with brands, but just having that customer service team communicate whatever the findings are back to the brand and to the marketing firm is absolutely invaluable and has to be done.
45:48 S2: I just think of how it finely tuned your customer service team is. It's almost like the collective intelligence. I talk about that a lot when we talk about our team and our agency. It's like... We have 19, 20 Facebook campaign managers, and they're all sharing. They're all in a big room together, they're all talking at the table. Everyone is kind of sharing their collective intelligence. When you have a Black Friday come up, like, "Black Friday's coming up," customer service is so important. So you're sharing a lot of these amazing best practices that you're learning across multiple brands to really provide an amazing user experience. I think that's the reason why I would always recommend hiring an outsourced customer service team or an outsourced fulfillment team is because there's this collective intelligence. Unless, you're at that size where you just have to grow it in-house, and you have to build it as a core skill set. I just think the work that you guys are doing is amazing because you're sharing all that collective.
46:51 PS: Well I... And by the way, you got to something too, that brands need to play their part in that also. They need to communicate if they are doing a big sale or if they've got something coming up. Because then, we know either what to expect or even in some cases, what to advise them from things that we've seen that in terms of how they word things or how they promoted it or... Sometimes we can be helpful in that regard. But just that it's really all about communication and...
47:19 S2: Yup.
47:19 PS: Like you're saying, having everybody sharing that information back and forth, just helps everything run smoother. There's no reason people should keep things close to the vest. Sharing with your vendors and your partners is only gonna make everything run more smoothly.
47:38 S2: Couldn't agree more man. Well, it's a pleasure to chat with you. I think I've learned a lot just from having this kinda improv-type conversation. I love the organization, the way we organize our podcasts. We don't really plan specific topics. We just love what you're thinking about sharing with our audience in a very concise way, and I really appreciate you taking the time. And Paul, we'll definitely be in touch, I'd love to have you again on our podcast in the future.
48:09 PS: Thank you, I'd be happy to.
48:10 S2: Yep, cool. Thanks, guys, another great episode of "Spend 10K a Day" podcast. Stay tuned to some amazing Black Friday insights on our next podcast.