on Jul 21 2015
We noticed a pretty interesting dichotomy in our customers. When we first started, we launched specifically for events and that is a big core of our customers group so you could say that is costuming use case. Although when people think of costuming, they think of Halloween Express or Party City that sell those cheap naughty nurse costumes in plastic bags and that’s definitely not what we’re about. We want all the clothing that we sell to be very unique. So the stuff that people are like wow that is actually cool. I can wear that for an event but I can keep it around and I can bust it out for different specific things beyond just the holiday that I buy it for.
As we’ve grown we’ve noticed a pretty interesting trend which is that our younger customers in the high school and college range are buying not just for a specific event but specifically because they’re just like wow, I never seen anything this crazy and this weird and I have to have it now. So that’s pretty interesting, we interview a lot of our customers and we’ve found that the people who are a little older are buying specifically for events. The more I think about it, it makes sense. Young professionals have money, they can spend 100 bucks for an event, no big deal. I have seen blog posts about people spending thousands of dollars for their costumes for Burning Man and Coachella. So there’s a little bit of both going on there.
We’ve seen really interesting events that we didn’t actually see coming. We kind of expected April to be a flat month because there aren’t really any big holidays. Colleges were winding down, finals, less parties. But we totally overlooked prom. Prom blew up and it was massive. Our customer service phone started blowing up with all these prom moms calling because their sons ordered a suit for prom two days before prom. The same thing happened with the Kentucky Derby and other and things like that. There are many more events than we initially thought.
I went to a small liberal arts college called DePauw in a pretty rural area of Indiana. It’s an hour to the west of Indianapolis and the town has a population of 10,000 people. As you can imagine there’s really not much to do, so we partied a lot. Eventually regular partying gets boring, so you have to innovate. We had theme parties, ridiculous amounts of theme parties with crazy costumes and weird events. By the end of college I had a massive closet of these elaborate costumes and crazy retro clothing. I graduated and went to grad school in Colorado. I thought “I’m going to give away all my stuff, It’s time for me to get real, get professional, to become a real adult.” When I got to Colorado I realized that the partying and the events were even more extreme. Now my friends and I had jobs. We could afford to go to New Orleans for Mardi Gras, we could go to Burning Man, we could afford to get on all these events all over the country. We would spend 200 bucks on outfits to look awesome and be weird, and it was really hard though for me to find that kind of clothing. You can go to Goodwill, you can go to eBay, or you can scour the internet for hours, but as a young adult I didn’t have time for that. I was in grad school and I had a job.
I got a really good piece of advice during grad school, if you want to start a business, your chance of being successful is highest when you do something you are really good at and that crosses over with something that you really love. Whether it be a hobby, or a sport. I always loved this crazy, weird clothing, and I had gotten really good at design and branding for the people that buy it because I actually paid my way through college doing graphic design for T-shirts and that sort of thing for fraternities and sororities. I really developed this ability to start branding and creating slogans and ridiculous things and it worked really well. It really resonated with the crowd that wanted something funny and wanted something to stand out and that is kind of how I decided to do Shinesty. To create Shinesty was like, you know it is really hard to find this, lets create a place that is totally irreverent and weird and hilarious and makes it really easy for people to find this super unique fun clothing for all these events.
When we first started we were just using dead stock products which are basically what you see on that show Storage Wars. Essentially there are bunch of bankrupt retail stores that have been taken by creditors and they have all this inventory they need to get rid of. We hired buyers in different cities that went out and sourced the stuff for us, they worked on commission and paid them once the items sold which is cool because we were able to offer really weird unique stuff that people hadn’t seen.
We would get 25 really awesome starter jackets from the Salt Lake Winter Olympics and put them on our site, but they would sell out after a couple of hours. We would get 100’s of emails asking us when the item would be back in stock.So we were like, okay, the next step for us is to find some unique designers. We went out and found designers who only sell in their own retail store, didn’t have the type of exposure and the marketing that we had. We added their products to our site. And that was awesome because it allowed us to prove that we could sell items at a scale. Where we would sell out of the deadstock after 50 items, we could go through thousands of pieces of a designer’s product.
Now we are at the point where we even sell out of our designer’s stock. We had something go viral three or four times. A million people would see an item and we would be sold out in a day. That kind of leads us to where we are right now where we are starting to produce some of our own clothing in house so that we can have a better control over the supply. That’s kind of where we are right now. We’ve designed some clothing already. We had a Tommy Jay American Flag Blazer sell out and we are working on a bunch of other stuff that’s going to come forward this fall and this winter.
I think we will always keep the dead stock products. The vintage pieces that we have 10, 20 or 50 of. They will represent a shrinking proportion of our revenue as we grow just because it’s not as easy to scale. We put a lot of time into it like the creative. If you read our product descriptions, they’re pretty hilarious and ridiculous. We knew that would never scale the be a multimillion dollar company, but it’s really cool and keeps the site fresh. There are people that love that stuff. They keep coming back for more. It also inspires us creatively. Design-wise it really helps us come up with new ideas by looking for example at a ski suit from 1983 and remaking it with more technical fabric so that it actually kept you warm, but still give you the ability to look cool and unique and make fun of skiers who take themselves way too seriously.
Our designer partners are a different question, and we will do more and more production in house. It always makes sense that for a company like ours to integrate more and more vertically just because you can control your margins better. You can control your supply better. For the next year I think that we will be focusing on making stuff that isn’t on the market.
We always want to test everything. We’re lean startup nerds. That is another thing which is awesome about the dead stock. We can measure sale velocity,or how fast a product sells when people see the page it’s on. We can see like, holy crap look at this one. This jacket sold out in 5 minutes and 100 people looked at the site. With a 20% conversion rate in five minutes we know that we should definitely remake it.
One of the things that we are building right now is called Shinesty Mad Labs. We don’t want to produce something if the demand isn’t there, so we let people first vote on designs and then if it gets enough votes we will make a pre-production sample and then we will put it up for pre-order. It is basically the Threadless model, just applied to a different type of product in different market segment. When we get enough pre-orders to cover basically half of the production run. Then we will go ahead and produce it. If not, we will just kill the design and no harm.
Like most fashion companies, we live and die by our brand, and In everything we do, we focus first and foremost on the user. If you look at pretty much any other costume or clothing company that’s focused on events like Party City, they are just trying to cut costs as much as possible without thinking about the customer. Our brand is about being totally irreverent and making people laugh and love us and be like these guys are totally ridiculous. I want to be a polarizing brand. I think like being so weird and unique is the way that we talk to people in all of our messaging, it makes people love us ten times more. The people that hate us hate us, and that’s great. You can hate us or love us as long as you are not in the middle. If you love us, you love us ten times more because we are so interesting and all of our messaging is branded. Every interaction we have, even if you talk to customer service agents, they are like snarky and sarcastic and funny and we want them to be like that. We want them to have a personality. For example we had a Facebook ad for some of our skis suits this year that did really well and the line that we used is just “0% Gortex, 100% savage.” It’s just totally ridiculous but we essentially make fun of people that take themselves way too seriously.
It’s been well studied that people my age are way more willing to spend money on events, like travel with their friends and vacations, but less likely to spend money on your everyday stuff. We position ourselves as being part of the event. So you are buying something that is enhancing your event experience. If you’re going to a concert on 4th of July and you’re wearing an American flag suit and people will talk to you. I always wore crazy clothing, but now I take it to a whole new level. I mean, we wear ski onesies every single time we ski. It’s crazy, you don’t really understand until you actually do it just how much more fun you have when you are wearing this stuff. People will ask to take pictures of you and feel like this guy’s having the most fun on the mountain for sure.
You have to be different to cut through all the noise out there. Most clothing companies are pretty much the same. They all try to be high end with swanky pictures of their clothing on models. Our clothing pictures are with normal people, they’re friends drinking beers. Our photo shoots are like parties. You drink beer and you eat pizza. Being different from other people is such an advantage for us because people remember that. We hand write one sentence notesthanking our customers for the order. It’s usually something snarky and sarcastic, sexual innuendos, who knows. Now we’ll get requests from people like, draw me a picture of Abraham Lincoln riding on an eagle with laser eyes. And our warehouse team will draw it and it is hilarious, people love it and they remember that. They are like, this brand is awesome. I get it, we feel like we are friends.
We have seen tons customers too which is awesome, we use Delighted, which is like a net promoter platform and it just asks you 1 to 10 would you recommend Shinesty to your friends and then it asks you a follow up question can you explain why? The responses that we get from some of our customers, totally X-rated. Like “every time I open my package from Shinesty it feels like a lightening bolt strikes me right in the tip of my penis.” It is just totally ridiculous and I think that just is showing how the brand and the movement is working. Like the brand that we’re creating.
At the startup stage you could say Tipsy Elves. They were on Shark Tank a few years ago, they’ve done really well. They make ugly Christmas sweaters and other stuff. What makes us different at the core is our brand and the fact that we go the extra mile to make everything awesome, unique and hilarious. Again, I keep coming back to that but it really is true if you look at the Tipsy Elves website. Their website is optimized for SEO, our website is optimized to make people laugh. Their website has a ton of content, our website has minimal content that makes people laugh. You can tell by looking at the pictures. They’re much more traditional.
Ultimately you could say that our big competitor would be Halloween Express, or Party City, any of these big packaging companies that are crank out crap products. There’s a huge industry that we are trying to disrupt by killing these crappy naughty nurse costumes that come in plastic bags. It is just such garbage. We actually went to the Halloween trade show last year in New Orleans and we saw all these companies like Smiffys, I don’t know if you heard of them. They’re a huge company from Ireland and make a lot of costumes that are just total garbage. Even their salesmen they don’t care at all about the products or the brand, they just care about, well we are going to move 200,000 units this year because people spend 4 billion dollars on Halloween costumes in America every year. They don’t care about being different, they don’t care about… Which is a shame but also a really big opportunity for us.
As just one example, a lot of our Facebook ads get a ton of engagement which is totally nuts because it’s an ad, we’re paying for it. We had one in April or March that had gotten like 800 shares, 6000 likes, 500 comments. Basically for every dollar we paid, we were getting another dollar and ten cents of free advertising because people were sharing it and commenting so much. I even saw 50, 60 year old grandmas sharing it because they were like, this is hilarious. You should look at this. A bunch of old women were having conversation in comments about how funny it was. It’s gotten to the point where Facebook invites us to beta programs because we are performing in the top 1% of the all advertisers on Facebook in terms of conversion and cost of acquisition
That has been really cool to see. It goes back again, the irreverency and how the brand is just ridiculous. You wouldn’t share a picture of a plain white background with a T-shirt on it right but you would share it if it was a picture of 2 guys doing Stone Cold Steve Austin stunner beer showers on each other. That you would share, because you’d be like, this is a company? That is crazy right? It works.
In general we acquire customers for around $18 to $20 dollars which is cool since our average order is about $96. That is an average. Around events it gets way cheaper. During Christmas we were acquiring customers for $6 which is nuts.
We are able to get the price so low from a combination of things. We get a ton of customers organically through our social profiles or through Twitter, if you look at our Instagram you can see, we get tons of people that don’t just comment, but tag their friends which drives a lot of organic traffic. This has all helped us have great SEO without having to write some bullshit SEO optimized content, because our stuff is actually engaging. We’re the number one search result on google for American flag clothing, number one for American flag jacket, number one for 80’s ski wear. The last thing that we have done has worked out really well has been our college campus rep program. We launched it a little bit earlier this spring and we have 100 or so reps right now. They have been doing a really good job, generating content for us and just generating brand awareness and actual conversion that we can measure. We give them all a code and say hey, anyone can try out to be a rep but you’re gonna have to get three people to buy something first. If you get three of your friends to buy something then we will invite you to a full rep program where we will give you some swag but we’re not going to give you anything until you prove yourself to us and that has worked really well for us. As soon as we capture that customer that 19 year old new on campus, once we get that first order and get that hand written note, they get the whole interaction with the brand, they’re hooked.
We are sitting on 26% of customers that have bought more than once after normalizing for our growth which is pretty good for an early stage company. Since we are growing 100% a month you need to look at cohorts separately to get the most meaningful number. So 26% of customers that bought something in December and January customers have repeated over the last three months.
Its still too early to have great number right now, but for all of our ad spend, we’re trying to keep it at least at a minimum of 3x return for a one time purchase. Assuming they only make a one time purchase, $96, we only want to spend $32. That’s been pretty easy for us. Obviously, we haven’t had the cash to really blow it out and see. To be like, how much can we get at, if we push it to a $50, a $50 customer acquisition cost or whatever it is. It’s been interesting to see that our biggest constraint is really just inventory. If we spend $100,000 on ads, we wouldn’t have the inventory to support that. That’s the reason why we decided to even raise money from the first place. Because our margins are pretty good and we could run it as a profitable business right now.
On the dead stock stuff which is the most outrageous, margins are like 90%. On the retail stuff that we buy from the designers, it is 50% then on the stuff that we were designing, we will get 75% margins on stuff made in China, and around 50% for the stuff we make stuff in the US. Supply chain is really one of the big issues that we’re working on right now. We’re kind of leaning towards making the USA stuff in the USA because it seems more authentic stuff. We also want to develop some supply chain relationships in LA and in Brooklyn because it lets us to be a little more flexible in terms of minimums. So if we have a really funny idea and it is going to be really be like some marketing play, like something totally irreverent like if we want to make, whatever it is. The ridiculous with LeBron Jame’s face on it saying LeBron James is a bitch, whatever it is, I figure people in the Bay Area are into this right now. If we want to do that and we probably can’t sell 600 of them or like whatever the minimum in China but if we make it in the US, we get less margins but we can sell 100 of them or we can sell 200 of them and it might go viral. It might expose a lot more people to our brand. That is one of the big things that we are kind of playing with right now.
Average order size is a big one for us. Making sure that we have the products to support a $100 average order gives you so much flexibility. When we first started taking it seriously last June. Average order was like $30 or $40. As we have gotten better and refined it to add products as high as $250, we’ve been able to stay in the $100 range. Second is repeat customers. Third is your ad spend, what the cost of acquisition is. If I know that if I have 500 suits available for 4th of July, I know I can sell them at 10x return. I am happy with that all day.
In January we did $33,000, in February we did $66,000, in March we did $105,000, in April we did $186,000 and ran out of inventory. Once we cross the $150,000 mark per month we basically run out of supply from any vendors, especially when the stuff goes viral. Which meant that there were 6 days in May when we had nothing on our website. Even so, In May we did $115,000. For June, we’re projecting to do like $200,000. We will obviously see spikes around holidays, that is always going to happen to the nature of our business. For the whole year, our goal at the beginning year was 1.5 million but I think we are going to bump it up to 2 million now.
We figured out that we should spend money on advertisements and more inventory. Up until that point we were still just doing the dead stock stuff. We would get 50 products in and then we sell them out and then our site would be empty for ten days and then we get fifty more products in. It was slow and it was an inventory issues. We were like okay, let’s take a risk and spend half of the cash that we have on inventory and see what happens. That kind of started happening at the very tail of October. In November, we started to advertise. That took off because every time we posted a Facebook ad or a Facebook post that we promoted, we were getting not only the engagement with that post but people were sharing it, blogs were seeing it. We were featured on Product Hunt and BoingBoing. These were just getting more attention and more PR and more people were seeing it. I think that was kind of the tipping point for us and we realized that wow, there is a lot of demand. We can spend some money, we can invest in the inventory and we will move it. At that point we were buying inventory as much as we could at the time and then we were moving it, at the time also it was like a brand new company. It is impossible to pretty much get terms from suppliers because they’re like who the fuck are you? You are working at a… We didn’t tell them this, we had a nice website but we were really working out of a 300 square foot garage that we’d have to move all the inventory out of there every time we would take pictures. That was essentially the tipping point for us to say alright lets invest half of our cash that we have left in inventory and see how fast we are moving like two days, like a two day cycle.
We are going to bring more production in house to be able to control the inventory, like if I’m ordering from a designer and who is from Europe and doesn’t exactly take the same business approach the American’s take and doesn’t work on Fridays. We can’t contact him on Fridays or after 5 PM they are out. If I want to take that approach, we don’t know how much inventory they have. So around Christmas we sold out, we got 100,000, 88,000 hits on December first and we cancelled 250 orders because we couldn’t communicate fast enough with the supplier to be able to say we actually sold out our inventory. We are still taking orders and we are sold out at 1 PM. That stuff really sucks, you put 250 people down. They only thought you have a really cool product but actually you’re not, really sorry. We get to see them next June. So we already sold out all the pre-orders for June deliveries for Christmas and then we are not taking pre-orders for September and we are still getting them every day. If we can have more control over our inventory then we control our destiny. We don’t have to be at the whim of the supplier.
I am the CEO. I kind of started the company actually by myself until my friend Jens, he is my co-founder joined on because he’s like, your business is totally right up my ally. We’ve been friends since I moved to Boulder, he also has a very interesting love for weird clothing but a lot of people share it now, we’ve noticed. Jens spent a few years after college as a brand consultant so he worked for a company called Ape Strategy and he has done branding for consumer companies like New Belgium in Colorado, Jameson, lots of liquor companies were also trying to target a similar demographic of people our age essentially. Then we hired Michelle who we considered our co-founder as well in October of last year. So it was really just the three of us up until this January and Michelle was like the director and she is an MBA, she is the Director of Ops for a box of the month startup company here in Boulder, and she has been amazing because me and Jens just go on our creative crazy streaks and she makes sure we actually get shit done, she makes sure like shipments go out and we have enough materials and inventory gets ordered. She has like been a godsend, from that perspective, the quant perspective in terms of inventory management and setting up all of our system and that sort of thing. Jens and I have strengths both combined and overlap in terms of the branding and the marketing stuff and then Jens focuses on our advertising and some of our campus rep program and I focus on a lot of web design and a lot of product design. I did most of the graphic design stuff because I knew how to do that since I was working in college doing t-shirts and hoodies and stuff for college students and then we hired a designer who basically is like a technical designer, she runs all the selling and building the stuff and building essentially the blueprints. You could think about it the same way you can think about an architect would for house. She architects the garment. Then we work together to do actually print on them and the aesthetics. Since then we have grown the team to ten people. We hired someone for our warehouse in January and then we hired this kid who graduated from college who wrote us the most insulting cover letter I have ever seen in February. He’s hilarious and he just graduated from the University of Florida and he actually emailed is smooches at Shinesty.com. He writes a lot of product description and captures the voice so beautifully and so funny. We made hires as we’ve needed them throughout but it’s been cool because we’ve been able to hire really young hungry people. Everyone we hired in our first merchandising person would be hired someone from Nordstrom’s, but she’s super young, super hungry, and wants to get behind this brand. Our most important thing so far is making sure that people love the brand. I think if they love the brand, everyone on our team is so down to work until 10 PM every night, working their asses off, not getting paid a lot but we have such a blast. It is just so fun what we are doing.
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