As content captured by smartphones and GoPros took over the internet, Riley Stricklin noticed how poor lighting could really impact the quality of photos and videos. Riley and the founding team launched Lume Cube to solve the problem by creating lighting attachments for cameras and computers. In this episode of Shopify Masters, we chat with Riley about launching on Kickstarter, searching for manufacturing partners, and increasing margins by transitioning from wholesale to direct to consumer.
For the full transcript of this episode, click here.
- Store: Lumecube
- Social Profiles: Facebook, Twitter, Instagram
- Recommendations: Klaviyo (Shopify app), In Cart Upsell (Shopify app)
Validating a product idea before launch
Felix: You started this business to address a problem that you saw in the marketplace. What was the problem that you were seeing?
Riley: The founding group of the company kicked off in 2014, the original concept was around creating portable lighting, primarily for GoPro and iPhone users. We were seeing those two devices lead the market in terms of content creation, with GoPro and all the rage back then around their IPO, and iPhone finally getting great cameras built into their devices. We saw an accessory market around GoPro and iPhone in that photography realm. Things like little clip-on lenses for your iPhone. The founding group had a history in the photography and video space and knew how important lighting was. They also knew there wasn't an offering of lighting for iPhone or GoPro on the market to capture better footage. That was the original concept of Lume Cube, which came to life on Kickstarter.
Felix: You were aware of the importance of lighting from your background. How did you validate the product you were trying to create to fill this gap?
Riley: That's really where Kickstarter became our proof of concept. We knew that in the core market of high-end photographers and videographers, the majority knew the value of light. Traditionally though, lighting was a fairly expensive item. You would go to the B&Hs of the world, the high-end places, and spend hundreds of dollars on lighting. You'd carry it around in a big case, you'd have long cables, big batteries, and there wasn't a portable solution like ours. That was the theory around it internally amongst the founding group. Kickstarter was a great platform to test that concept, rather than going all-in raising capital.
"Kickstarter was a great platform to test that concept, rather than going all-in raising capital."
We ended up throwing it out on Kickstarter with a couple of prototypes, a marketing video, and a goal of $56,000. Thirty days later, we had $229,000 raised, with thousands of orders pre-sold. That really proved to us, "Wow, people understand this value and there is a demand out there for a product of this nature."
Felix: At the time of launching the Kickstarter, had you already developed a working prototype? Where were you at as a business, when you launched?
Riley: A working prototype would be a very generous way to put it. We had about six units that at the time, were very expensive to make. The challenge with lighting overall is that it generates a lot of heat. These prototypes would not last for more than a couple of minutes at a time. We got quite creative in the marketing side of things in the video in order to show proof of concept. At scale, we knew we needed to solve a lot of those problems. We had about six prototypes, we were manufacturing them in Australia at the time, which is quite an expensive place to do it. There certainly were many, many changes between the item that we advertised on Kickstarter and the final product that was delivered.
Through that manufacturing experience, we found a lot of challenges with our original design and had to modify a number of times to really come out with a product that met the specs that we had promised to our Kickstarter customers.
Using the manufacturing stage to optimize your product
Felix: A lot of businesses can use Kickstarter campaigns to inform their product development, marketing strategy, etc. What changes did you note and try to implement along the way?
Riley: We certainly learned a lot about which features we were advertising that the customer base valued the most. We knew that when people were buying into the Kickstarter campaign, like many other Kickstarters it wasn't necessarily the exact product that you see, it's more of the concept of saying, "Okay, whatever the product looks like in the Kickstarter video, what's going to come out is a high-quality photo and video light that is not only Bluetooth compatible, but also waterproof down to a hundred feet." You’re promising this list of specs.
Like many first-time entrepreneurs, we didn't have a background in manufacturing at scale, so that's one of the biggest learnings that came through Kickstarter. It was really the cost analysis of understanding, "What is this going to cost per unit at scale to achieve these specs?" We had a couple of prototypes that were simple, but to give some scale, we were underestimating the costs of about 80% of the actual final production unit, compared to where we were early on in the Kickstarter.
"Like many first-time entrepreneurs, we didn't have a background in manufacturing at scale, so that's one of the biggest learnings that came through Kickstarter."
Felix: What were the next steps in terms of turning this product into reality?
Riley: We promised about a three-month delivery timeline. We ran the Kickstarter between November and December, in that holiday period, and promised to deliver by March. It ended up taking us 12 months to deliver. As we went into mass production, what the challenge ended up being particularly around in that first unit, was primarily that GoPro application light. So, we knew we needed to match the specs of GoPro, which was, "Hey, allow our customers to surf with this, go diving and snorkeling with this." It had to be waterproof.
Now, the difference between a GoPro and a light? GoPro as a camera, you can put it in the waterproof GoPro case, which back then, the GoPro Hero 4 was that way. Light, which was the original concept around what we would do, right? We wanted to have this light, and have a little GoPro case, but through testing, we realized that light emits such a high amount of heat that when you do put it in an airtight environment that's very small like that, it ends up burning out immediately. It would actually burn a lot of the internal components, and melt because of the lack of airflow in there. That major challenge took months to figure out. How can we waterproof this thing from top to bottom?
We ended up working with a watch manufacturer who made waterproof watches, to help seal it and basically build the actual unit out of aluminum, which acted as its heat dissipation. A lot of those little things that came up were not quite expected in the Kickstarter. It was more of a concept marketing, but then when we got down to the manufacturing specs, that's what started driving up the cost in terms of, "Okay, we have to meet these specs, we can't let the customer down here, but if it's going to bring the cost from $14 a unit up to $22 a unit, so be it." That was something that we had challenges with along the way.
Not only manufacturing issues, but at the time we were working out of a garage. We had the Kickstarter revenue that was certainly funding the project, but we ended up having to go out and raise a little bit of seed capital as well during that time to make sure that we could fund that first run because so much cost was incurred in figuring out how to finalize the product.
The key to keeping your customers happy? Communication
Felix: You mentioned it took 12 months to deliver the final product, but you had promised three months wait. How did your customers take that?
Riley: We were forced to be very proactive. What we learned is, as in any project, if things aren't going to be matching the timeline that you promised, over-communication and proactive communication is the only thing that can help. That was probably the most painful part of that process. Kickstarter, at that time, was kind of an earlier platform. It was quite big, but it's a very outspoken crowd. They do adopt early, which we're grateful for. But unfortunately, through that timeline, as much as we tried to share the information, there are certainly people who assume that you just pocketed $230,000, and you each bought a Porsche, and you're hanging around San Diego surfing every day.
You have to battle that, and that's a tough one on the heart, knowing how much you're putting in–90-hour weeks, long nights. We were very proud that by Christmas the following year, 2015, we were able to deliver in full and deliver a much, much higher quality product than they even originally purchased. We were thrilled about that.
Felix: You mentioned having to raise some seed capital. After having seen so much success with Kickstarter, how easy was that to do?
Riley: It made all the difference. By no means was raising capital an easy thing to do, especially in the early stage, but had we not had the proof of concept that showed essentially a quarter-million dollars in a month, which projected on a 12-month run rate, showed, "Hey, we've got a two and a half to $3 million a year business here." We just showed we can do a quarter-million dollars in 30 days. That allowed a lot of proof of concept and validation in the idea for people to invest. We did get a seed round from about nine people that came in, and that was what truly allowed us to bring the product to market, and then not only fulfill the Kickstarter, but place those additional orders in China–which has some pretty large minimum order quantities–and then turn that into a recurring revenue business.
Felix: Once you realized that the cost of manufacturing was going to be greater than you anticipated, did you come up with any ways to offset that? Or was it simply an adjustment to the price point fix?
Riley: We originally hoped to hit around the $50 or $60 mark, we ended up coming to retail at the $79 mark. We did have to build that in. It was the right thing to do. The product was so advanced from what we had pre-sold on Kickstarter, it did two really great things. The people who bought it on Kickstarter around the $35 price point saw it as, "Wow, I really got such a great deal on this." The product ended up being much better. When we did come to market, there were a lot of retail partners and vendors who said, "You should come out at $99.99. That this is a $99 product with the value you've packed in." We found that middle ground at the $79 price point, which we believed allowed for a lower barrier to entry and more of a mass market opportunity to allow a larger group of people to come in. Right out of the gate we saw some pretty wild success in that first 12 months.
The pros and cons of distributing wholesale to large retailers
Felix: You mentioned that you had started as a wholesaler distributing to Best Buy, Apple etc. How was that possible as a new business? Was it easy to get into those retailers?
Riley: I wouldn't say easy. We had a history of relationships in this category. We had relationships with some of these retailers previously on other products, due to relationships built earlier on in careers. Being able to show up at their doorstep with not only a quality product, but then this Kickstarter campaign, and the success and the PR that showed, "Hey, this is a growing market, this is a product that is needed. It's different from anything else out there." It did allow us to gain some early traction and early success. Looking back on it, over 70% of our revenue in year one came through the wholesale channel.
"The larger the retail partner you get, the longer the payment terms are, the lower the margin is. It's certainly a given trade there."
At the time, we were on Magento 1.0, we had a very basic website, we did maybe a couple of hundred dollars a day at most. Most of the focus was on going into the retail channel and making a splash. GoPro was the talk of the town, IPO, 25-30 million cameras being sold every year. Being a GoPro accessory, we were modeling a lot of our direction off of the path that they were taking. Most of their business early on too, was going into that retail channel. Their strategic retail partnerships in retail displays, paying to those retailers like Best Buy to build out displays. So that was the early portion of our business, which although it had a lot of traction and gained some validation for us, also caused a lot of issues. The larger the retail partner you get, the longer the payment terms are, the lower the margin is. It's certainly a given trade there.
Felix: How did you roll into some of these relationships? Did you do right for the bigger retailers, or did you start small?
Riley: 2016 was our first year in business. A lot of that revenue came from opening with some strategic online retailers at the time and having small in-store placements. We spent a lot of focus building the international side of the business. So in 2016, I spent about 200 days, give or take, traveling. Whether it was going to trade shows, going internationally, setting up distribution, that's where a lot of that revenue came from. That and opening orders from our distribution channel, which is very, very low margin. Setting up Germany, Australia, South Africa, England, Japan, and having large distribution orders for representatives there, trying to build a global brand and have placements on the retail shelves there.
"That was a lot of the first year's plan: to build a couple of strategic retail partnerships in the U.S., build the global business."
Those partners of ours, people who were distributing the DJI drones, the GoPros, the Sony cameras, had relationships with a lot of retailers. We would leverage that, align with that distributor or sign a contract, and then they would help take us into that territory. That was a lot of the first year's plan: to build a couple of strategic retail partnerships in the U.S., build the global business. In 2017 was when we went more towards the big box retailers and signed with both Apple stores and Best Buy.
Taking the road less traveled: a start-up on the international stage
Felix: By starting with international, you almost worked backward from the traditional route that a business would take. Why take this approach?
Riley: If I was looking back on it, I would have done it the reverse way. We did the opposite, as you mentioned. Most businesses build an online business, and then slowly build on a few retailers, and then scale internationally. At the time, this was all we knew. Shopify was far from our vision at that point, it wasn't what it was today for sure. For us, as people who came from that industry and had a lot of connections to it, we knew how to play the retail game. It was the fastest way for us to get the word out there. In that first 12 months, believe it or not, we spent $0 on any paid media advertising. No Google search, no Facebook advertising.
We didn't come from an ecommerce space or know much about that, we came from retail and wholesale. Once we got our hands on what our own product was, we took it to the low-hanging fruit, to us. Get these $10,000, $20,000, $50,000 orders from retailers or distributors, and push the business through those channels. Looking back on it now, there are products that fit that model, and there are products that fit the direct-to-consumer model.
We would have taken a different approach back then because it did lead us into some really tight cash flow situations. When you're scaling that quickly, and you have to front the cash to build all the product, but then you've got to wait for 30, 60, 90 days to get paid once you sell it to a retailer, you get put in a very tight cash flow position, versus obviously what most people love about Shopify, which is the daily deposits to the cashflow the business.
"When you're scaling that quickly, and you have to front the cash to build all the product, but then you've got to wait for 30, 60, 90 days to get paid once you sell it to a retailer, you get put in a very tight cash flow position."
Felix: What do you find retailers care about the most when it comes to taking on a new electronic product in their stores?
Riley: The first thing, of course, is the margin. A retailer has very high costs. They've got to keep the lights on, they've got to pay the employees. Anything that is below their required margin, they're not even going to speak to you. That was something we learned early when we chose that $79 price point versus $99. When you start getting into retail, you have to give 50% of your margin to a retailer or a distributor. 50% of 80 is different from 50% of 100. We would have loved to have that additional cash when you go to the retail side. Building in that margin is the main thing because even if you have the world's best next greatest product if you can't meet their margin requirements, they can't work off of only a couple bucks per unit, or a couple of percentage points per unit.
The second thing was, they’re riding the trend. At the time, every retailer was drooling to get their hands on a GoPro display so that they could bring people into their store. People wanted to buy GoPro, and now retailers had an accessory that they could upsell to all of those GoPro users, a different story to tell. We basically rode the coattail of the GoPro wave that first year.
"Margin requirements, and then riding the trends is going to be a really main focus for success in retail."
From a reverse engineer perspective, how we found most of our distribution was going on GoPro's website, looking at all of their international distributors, pulling contact information, and calling them up. We’d say, "We've got a product that pairs very well with what is now your hero product, this GoPro, and let's tell a story and let's combine them and bring them to retail shelves." It did get a lot of interest because we were riding the trend. Fast forward about 18 months when GoPro was more of a lead weight on a lot of these retail shelves, we had to stop even using that term, approaching retail, because anything GoPro-related was negative. Margin requirements, and then riding the trends is going to be a really main focus for success in retail.
Stick with the trends and pivot when necessary
Felix: When the GoPro window was closing, how much lead time did you have for pivoting the business to other product lines and marketing initiatives?
Riley: It was an ever-changing strategy. We were always watching the market and had to really keep our pulse on what was happening. Fortunately, we had a very small product that its mounting capability was a quarter 20 tripod thread. So, the same thing you find on the end of selfie sticks or any tripod. We were positioning ourselves as the Swiss Army knife of light. The light itself was very applicable to a lot of different scenarios, what changed was the mounting option. That really was what opened up a lot of our business, to take it and pursue other avenues. Primarily, the lights would snap on a mount with a GoPro, and be used to film. We had a camera mount as well, so that the same GoPro light could be mounted on top of a camera.
"We were always watching the market and had to really keep our pulse on what was happening."
We found a lot of success in that photography, videography realm. Then come towards the end of 2016, the major wave that came in was drones. That was when DJI launched their Phantom 4, which took the market by storm, you can now get great aerial photography. So we created a line of mounting bars for the drone. Now you can take that same original GoPro light, snap on some kind of leg mount to the Phantom 4 drone, twist on your lights, and lo and behold. We've got a new line of products that we would call drone lighting.
The light was the same, that was what allowed us to be very nimble, where, looking at it, "Hey, we want to sell, or we want to buy and manufacture 50,000 lights this year," because it was all the same light. We would then just move the volumes of mounts from one aspect to the other. It allowed us to stay pretty nimble.
Felix: Have there ever been any bets that didn’t pan out, where you thought something would blow up and it didn’t?
Riley: Absolutely, absolutely. We took some swings around more of the outdoor market. Camping, obviously, just the fact that the sun goes down every day and you're out there in the dark. We thought there might be a great option for us to really tackle the new generation of headlamps. It did not work out at all in terms of the success that we were hoping to find. There were some limitations around the product, and that market in particular, although we made a line of accessories for it. Our runtime was much shorter than your average headlamp. We learned in that market that brightness was much less valued than the actual length of runtime. You want your light to be all night long versus very bright for about an hour or two.
A similar situation in the dive light market. We know there's a lot of divers out there, they're very affluent, they spend a lot of money on gear. We tried to make a really big stamp in the dive light market. Although we had some minor successes, we learned that all of the dive business really runs through retail channels. Those retail channels in the dive market required about 60% margin, which we just could not afford. Purely from a margin basis, we had to clip that entire line and fold that back in. There were a couple of them out there and we really just found that the content creator/photographer/videographer at that time was who was embracing us the most. They knew the value of light, and so we stayed on that path to achieve some early success.
Cut your losses or keep going? The entrepreneurs' toughest dilemma
Felix: How do you determine when to pull out of an initiative that’s not panning out?
Riley: It was a lot of gut check around, "Let's spend a few weeks in the old school saying, dialing for dollars, calling retailers, calling these people, and seeing what is their reaction? These super-users of dive lights who are in the dive market or the outdoor camping markets enthusiasts retailers, and really get their feedback." We valued that a lot, and doing that for a few weeks, really banging our heads against a wall. It was mainly a gut check back then in 2016, 2017. Boy, do I wish we had a similar type of business now.
"The beauty of Shopify is that it makes it so much easier, we can put a product out there, look at target run rates, our PDP page bounce rates. We can see how customers are engaging with it. We can run sample tests."
Now, top to bottom, we run 100% of our business off of data, and deep dives on dashboards, and metrics, and success, and financials. The beauty of Shopify is that it makes it so much easier, we can put a product out there, look at target run rates, our PDP page bounce rates. We can see how customers are engaging with it. We can run sample tests. For us now in today's market, it’s about running data, and looking at, here's a product that's successful, here's a conversion rate, here's a bounce rate on a page, here's what we look at.
If we introduce a new product, and we see that same web traffic with an increased bounce rate and a much lower conversion rate, it tells us that either it's not appealing to our market, or maybe we don't have the right traffic there. We can make much quicker decisions with that data. Early on it was a gut decision on, "What do we think? And maybe let's pull the plug and focus on where we are seeing success."
Felix: How do you make that call on whether it's, "Let's stick with the product, let's try to find a customer for it," or deciding, "You know what? This is not going to work regardless"?
Riley: Yeah. That's the toughest question you have when you're sitting in this seat on the owner executive side is, do you bet the house? Do you keep pushing and swinging for the fences and think that you might hit a home run? Or do you pull back and do you go for the bun and say, "Let's wait for the next guy to come up," and in terms of a product example? The best analogy for example of that would be our video conference light. We launched that at CES in 2019. We were the first ones to do it, we did a partnership with Apple, and that was probably the biggest flop in company history. We invested heavily because Apple believed in it. The market in early 2019 did not understand the value of lighting in video conferencing.
"That's the toughest question you have when you're sitting in this seat on the owner executive side is, do you bet the house?"
We finished that year only selling 7% of the inventory that we had bought in a 12-month period. Fast forward a year and a half from now, the world understands video conferencing and the importance of lighting, and the other 93% of inventory sold in four weeks. It really is based on the market when you make those decisions of, "Do we think the market's going to start to understand this? Or where's the pain point?" You have to trust yourself. If you're doing all the right things, you're driving the right traffic, you're telling the right story via video, you're showing the value and the product's priced right, and it's still not selling, you've got to take a little bit of a deeper look on, is it going to be successful?
At the end of the day, marketing comes into play majorly there. If you've got a great product, and when you show somebody, you get their first initial reaction and it's great, then it just becomes, maybe you're not getting the right eyeballs, or you're not driving enough fireballs to it. That's your limitation, but the product is still a winner.
The benefits of entering a crowded market
Felix: It sounds like you’re not pushing the product on the audience, you’re not trying to convince the audience that they need it, you’re evaluating if they already know they need it.
Riley: In the early stages, yeah. That term, low-hanging fruit? We had a line on lighting. Photographers, videographers, action cam users, were very used to buying accessories for those devices, whether it's a pole, a lens, or a big light. They understood, "Okay, here's a new accessory that I could buy for my device." When we took this lighting accessory to the mobile worker or the business crowd, I mean, I don't know about you, but at that point, I had never bought any accessories for my laptop. You buy it from Apple, it comes as is, and it just pretty much does the job. Despite the major value that it provided on video calls, that customer base wasn't used to accessorizing that device.
That's why we were able to see much, much higher return rates in the photo/video realm, and trying to really understand, "What is the customer behavior of our target customer? And are they going to get this?" What I would always flashback to is, you would always hear those stories of people really losing money on early cell phones back in the '80s and '90s. The markets just weren't ready for it, but now everybody's got one today. It's interesting. Is it the right time in that market? Does that customer understand it? The major thing for us or for any startup, if you are going to bear the burden of educating an entire market on your solution, that's going to be a very expensive road. It costs a lot of money to educate an entire market. If you can get into a market where people are already buying a similar solution, and you just happen to have a better one, if you can get in front of those eyeballs, you’ll have a much higher chance of success.
"It costs a lot of money to educate an entire market. If you can get into a market where people are already buying a similar solution, and you just happen to have a better one, if you can get in front of those eyeballs, you’ll have a much higher chance of success."
Felix: You had mentioned earlier the sticky situation of running low on cash flow. How did you manage those times?
Riley: Very challenging times. It put a lot of strain on the business, on the manufacturing lines, on the advertising. You don't have the cash to drive the marketing. We had to go back a few times and raise additional capital. As much as a single sale was profitable when you peel across pay, we have $800,000 in inventory in China that's being built, and we've got half a million dollars that we've shipped out to our customers, and we're here in the middle. We've put the cash out for the business, we haven't received the cash on the sales, that's where you get real, real tight. Of course, to scale a business, especially quickly, you've got to have people, and you've got to make payroll.
I can share numerous stories around us selling assets to make payroll during those times. We sold a trade show booth that we had bought for about $50,000, for $17,000 just to make payroll on a certain week, before we knew some of our AR was going to come in. It put a big strain on the business, and in early 2018 led us to bring on a major investor and shareholder and recapitalize the business top to bottom. That was really when we made the turn to say, "For this type of business to scale, we need to build it in more of a direct-to-consumer model, that's a much more cash-friendly business."
Transitioning from wholesale to direct-to-consumer
Felix: Tell us about the transition from wholesale to direct-to-consumer. What did that look like?
Riley: A little bit bumpy. Coming into 2018, about 70% to 75% of our business was through wholesale channels–the Apples, Best Buys, online retailers' distribution–and only about 30% coming direct. By the end of the year, we had actually balanced it about 50-50. To give some insight, now we're over 90% direct, and 10% of the business is retail. We really have been successful in that transition. But at that time, we were coming from Magento. We built an entire Shopify website, which was our first experience with Shopify, obviously made it much, much easier. That was what enabled us, the switch to Shopify really made it a more friendly transition to start introducing the paid media side of the fence, the Facebook advertising, Instagram advertising. Shopify had such a friendly ecosystem for that.
May 2018 is when we made the switch on the platform, and then June 2018 was when we really issued our first budgets toward, "Let's drive some traffic via some photo and video advertising on those platforms and start bringing in traffic directly, versus relying on Best Buy or Apple customers to see us on their shelves." It took a number of months, mainly because you have to lay out the investment for the website, and bill for the advertising. After about three or four months, we started seeing enough signs of success that we felt we were moving in the right direction, and decided to keep it.
Felix: Was it the driving of the traffic that really started that shift from wholesale to direct-to-consumer?
Riley: Correct. That was exactly it. Rather than going around building the brand, all of our efforts were focused on driving traffic to the website, and converting that traffic. High conversion metrics, really studying on making sure we would drive the right customer bases to the website, and not only the website but starting to really understand those paths and the funnels that the customers would go down and say, "Okay, is there a higher chance of conversion by dropping them on the homepage? Or let's drive traffic to the product page itself. Or maybe let's build a very specialty marketing page that has some really cool features and functionality and videos, and how is the traffic going to react when we go there?"
That was the beauty of Shopify. We could pair that with our Google Analytics and really start understanding not only how many people were coming, but what was the behavior of those people? And then really start to optimize everything we were doing from a content marketing perspective, to make sure that we put ourselves in the best position to convert an order.
Felix: Did you find that there were any direct-to-consumer benefits from having spent a couple of years in retail and still having a retail presence?
Riley: One of the best things is that we did have brand awareness. We weren't coming out of nowhere. We would have that traffic come to the website, we were also able to leverage some of those logos like, “as seen in Apple stores, Best Buy stores.” When that traffic comes to our website, rather than having uncertainty around, "Who is this company? I don't know much about them," immediately, you would drop those walls from the consumer perspective and build a rapport and a little bit of brand credibility. It would validate us. Right on the homepage, and on a lot of our email marketing and our advertising, we would leverage some of those retail logos. If Best Buy is carrying this product, and it's in Apple stores, everybody knows how picky Apple is about their partners, it must be legit.
"It was not the revenue that those retailers brought us, but the credibility that they brought us for us to leverage that in our direct-to-consumer advertising channels."
That really allowed us to generate a lot of conversions. Looking back at it, that was probably the most valuable thing out of those two partnerships. It was not the revenue that those retailers brought us, but the credibility that they brought us for us to leverage that in our direct-to-consumer advertising channels.
Felix: When it came to driving that traffic to the website, what did you find worked best in terms of marketing strategies on specific platforms?
Riley: We were fortunate that we were not selling basic commodities that are tough to advertise. Our product was geared towards people who are trying to create better content. We had hundreds of thousands of users out there who were creating content beyond our wildest dreams. We were leveraging a lot of that content and showcasing what was possible with this light. Sometimes it would be before and after type things, where catchy videos, anything in that five to 10-second video mark, and then a number of just really high-end creative imagery. At the time we were trying to attract photographers, videographers, and they respond well to high-end photography because that's what they do and that's what they enjoy.
We put some budget behind those with some strategic messaging around the benefit that we could provide them was what led to a lot of our early traffic–particularly at that point, because in 2018 we were going towards the content-creator crowd.
Creating bundles to double average order value
Felix: You mentioned one of the benefits of the transition with the website was being able to gather a lot of behavioral data from your customers. What did you learn from this data?
Riley: That was truly where we started to understand the business, what was succeeding, and what was not. So, we would offer free shipping. There's a major difference between a $60 order coming in and a $100 order. Both are going to ship for free, that shipping cost is fixed. Average order value was a major focus for us, and Shopify makes it so easy to understand that. What we started doing was watching which products were sold together. It might be this light with this mounting stand and this light accessory.
By understanding, "Wow, there's almost a two-to-one or a one-to-one ratio in a lot of these products, let's start building some soft bundles and start creating some higher average order value products. Maybe all those three products together add up to 130, and let's offer that at 119 and do a little incentive at this higher dollar value." Our average order value over the following months skyrocketed when we started to understand what was being bought together and delivering one-stop bundles to the customer. It got us from anywhere in that $70 mark, which really was $70 to $80, to an average order value of over $100, which opened up a lot of business because those particular accessories were where a lot of the higher profit margin was, so that would help us cover shipping costs and generate cash flow to then reinvest in the business and build more product.
Felix: These bundles, how are those advertised? How do you position them on your website alongside the one-off products?
Riley: We build specific collections. One of our easiest transitions that changed the game was we realized that our customers–and probably most customers–they really look to you as a brand for guidance. So, "Hey, I'm going to show up, I'm going to keep this website, what products are the best ones for me?" They're curious because they know a little bit about light, and so, what we did was create a couple of new collections, the highest of which was the “best-selling” collection. So, the best-selling products. That became the highest-trafficked collection. Everybody's curious about, "Okay, I'm at this new brand, what are the best selling products that give market validation where either the brand or every one of their customers is buying these ones? I guess that must be the one for me."
By creating both the best-selling collection and then putting some of those strategic bundles in that collection, we really built the path of trust for our customers to come to our website, visit the best sellers, then see not only where those bundles but also, we’d offered them at that slight bundle discount, "Save $10 by buying these two or three products together." It also became a deal and a benefit for the end customer. In building that path, we found a very successful strategy for the business.
Marketing experiments that drove a 3X increase in cart size
Felix: What other experiments have you run on the website that has led to greater conversions or time spent on-site?
Riley: A huge part of our paid media strategy ends up in the retargeting funnels. We use a platform called Klaviyo for our email marketing. We've done a few strategies around driving traffic to different parts of the website, product detail pages, home pages, but we actually started this past year with a line of products. As we got really into that video conference realm, the lighting for video conferences, and work from home customers, which obviously a major pain point for hundreds of millions of people, and we wanted to provide a really effective and affordable solution.
We built a line of products, not just one offering for that market. It was a couple of different offerings at different price points. A good, better, best model. So, although those products were in a collection, and you could shop each product individually, we built what internally we call marketing landing pages. A hidden page that you can't navigate from the site, that only advertising traffic would drive to. Through that page, we’d add photos, videos, and really tell the story of that line. All of the website and the collection was much cleaner with just the product shots. This marketing landing page had a lot of before and after shots and lifestyle photos and some embedded videos.
When sending traffic to a marketing landing page that had seven or eight different Add to Cart buttons, versus just the product detail page, although conversion rates at the end of the day were fairly equal, we found we had a 300% increase on the add to carts on the marketing landing pages, versus just the product detail pages. Although the conversion rate was similar, what that allowed us to do, was create a flow in our email marketing. The cart abandonment flow. Basically delivering those emails to people who put it in the cart and didn't check out.
We were able to put so many more people in that cart abandonment flow, and when that flow is one of the highest converting flows in our email marketing campaigns. Without that marketing landing page, one-to-one, we would have had thousands of people left out of that flow. It allowed us an opportunity to put them in there, and then continue to message them with some upsell offerings. That was a game-changer for us and is a core part of our strategy now.
Felix: Is there a reason why you would show different information on a marketing landing page versus a product page?
Riley: Usually on those marketing landing pages, we would actually show the entire series of products. Right in the first fold, you might see the $70 offering. As you scroll down, you see then the $100 offering, and then the $150 offerings. It's all on one page, versus more of the focused traffic going into the product detail page. Oddly, because the conversion rates were nearly identical, we definitely found that the traditional experience of somebody landing on a product detail page offering them a more traditional shopping experience, we believe that there's certainly a healthy volume of customers out there who are most comfortable shopping in that experience, versus landing on a page that is splashed with a lot of creative.
"We don't want to completely turn off or cut off any specific customer base from an ecommerce standpoint, we want to make sure that we have a platform for everyone."
In the market out there, there's certainly a place for both, because customers do behave differently. That's one of the things we want to do is, we don't want to completely turn off or cut off any specific customer base from an ecommerce standpoint, we want to make sure that we have a platform for everyone.
Felix: Klaviyo is the email marketing software that you use. Are there any other apps or tools that you recommend to run the website or at the business?
Riley: We have a pretty strong tech stack on the Shopify side. Obviously, we leverage review platforms very strongly. We feel that helps a lot in terms of brand credibility, along with PR, to make sure that they know this is a product that has four or 500 five star reviews on the website. For a customer willing to take a hundred dollars out of their hard-earned cash, it makes it a little bit easier and a little bit more comfortable. One of the things that may not be applicable to all brands, but works for us, is the actual upsell flow. Cart upsell in the last 18 months has been one of the most effective strategies for us.
We want somebody to come and buy that large bundle, but without question, the high majority of customers are coming and they're starting with that low barrier to entry. That one product that's your hero product, that they might look at it and say, "I'm not quite sure I need to go big on this one, let me start with just the $70 offering." Then when they put that in the cart, there's a couple of in-cart upsell apps that allow you to really map out what upsell accessory or product is going to be sold in that cart with that particular hero product. We saw six-figure changes in our ecommerce revenue in the first few months, just through those accessory upsells.
We started seeing anywhere between 23% and 35% conversions in the cart. That person had made a decision, "I'm only going to spend $70." But 30% of those people, as they were about to check out, would decide, "Ooh, you know what? I'll throw that $20 accessory or that $30 accessory." They're bringing that average order value to a hundred dollars. When we looked at that, it was a game-changer for us because it helped us cover shipping costs, add more revenue to the pocket, and then we were very strategic in which offerings would go with which products.
We thought, "If you're buying this product, the experience is going to be much better if one of these two or three accessories are bought along with it." It's a benefit to the end customer as well. What's nice in those is that, let's say on your product page that accessory might sell for $29.95, because it's in that in-cart upsell, you can customize that price point to only show a discount in the cart. As they're checking out, they say, "Hey, buy this little desktop light stand and you can get it for $10 off by adding it into your cart now," and sell it for $19. Big benefit to the customer, big benefit to the brand, because AOV is increasing, revenue's increasing, and it was just a win all around. That is something we have mapped out on nearly 100% of our products now, and continues to drive a lot of revenue for the business.
Leaning on first principles during the pandemic
Felix: What was the biggest lesson from the last few years that you’re going to implement moving forward?
Riley: Be open to pivoting and adapting to the market. A year ago, our business was high majority going to the content creator crowd. Of course, COVID happened, and a new problem came to the world. We did not have major product line or anticipation around having a line of video conference lighting, and so, the entire business shifted. We saw our Best Buy business, our Apple business fall off a cliff, and knew that we had to pivot and we couldn't rely on the single product line. We looked in the marketplace: where was a pain point, and where could light, our core commodity, be a solution? We thought video conferences were the place. Within three weeks, we stepped on the gas with our content creative team, we built a lot of content around showcasing the value of video conference lighting, we re-skinned the website, we started driving a much different audience to the website.
It's more of this work-from-home customer versus our core creative customer. That allowed the business not only to survive, but to thrive and grow over 400% in the last 12 months, by pivoting, and at the beginning of the year, we had no plans for that. By the nature of the market, seeing an opportunity and seeing a chance of survival, to make that pivot quickly is the biggest benefit around being a startup or a small company. You can pivot very quickly. Being open to that is something that we learned a lot this year, and are really opening up to those mass markets.
Had we written a line in the sand that said, "We only want to be a GoPro accessory company or a content creator company," I don't know where we'd be today, but it would be far, far behind where we currently are. We had to be open to the idea of rebranding, reestablishing, and using our product in new ways, and that allowed us to succeed. We keep that very close to our heart this year as we watch what's happening in the world, what's happening in different markets that we're moving towards like gaming and streaming, and of course, video conferencing and content creative and TikTok. What are these new things that are happening? Could this brand and this product line have a place in that market? And if so, pivot quickly, test it out, try it out, and then make your decisions.