- Today on the Unofficial Shopify podcast,
we're talking about my corona anxiety.
That's one word, coronanxiety.
So we're gonna break
down, we can't not talk
about coronavirus.
I wanna talk about some
merchant revenue numbers
we pulled to see, is there any effect yet?
How is this affecting, directly,
our Shopify merchants, year to date?
We'll discuss a phenomenal article
about the direct-to-consumer apocalypse
that's occurred with
these VC-backed brands.
And of course, a couple Q and A questions
from our Facebook group.
(slow electronic music)
So, Mister Reda, currently
I'm at DEFCON two.
Should I be freaking out?
- You know that the
DEFCONs go lower, right?
- DEFCON two, DEFCON
one is maximum freakout.
- [Paul] Yes, DEFCON one-
- DEFCON one is wartime.
DEFCON five is peace.
I'm one step below hiding in a bunker.
- That's psychotic.
- Okay.
- You're fine.
- So what should I be doing?
How worried should I be?
I think, I've canceled my travel.
- Okay.
- I wash my hands a lot.
- Okay.
- Use hand sanitizer.
- Uh huh.
- I'm avoiding crowds.
- Okay.
- And that's it.
- Okay, you're done.
- Yeah.
- You've done everything.
We work in an office of two people.
- Everybody else is remote.
- You and I sit 30 feet apart.
So I'm not breathing on you.
You do come over and give
me huddles sometimes.
- Not right now.
- I wanna talk about that.
I don't like it.
But I think we're doing
everything we need to do.
And that's what everyone else should do.
- Okay.
- You could say avoid sporting events,
but there's no sporting events to go to.
- Yeah, they went ahead
and canceled those for us.
(Paul laughs)
Which was the right decision to make.
- So I don't know.
Freaking out doesn't solve anything.
You need to do the appropriate things
that we've been told to do
by medical professionals.
Listen to, if someone works, is a doctor
that works for the CDC or the WHO
or a fancy university or whatever,
just listen to those people
and do what they tell you to do.
And that is the appropriate response.
Whatever Donald Trump says to do,
don't do that, 'cause he's a moron.
- What if he says to wash his hands?
- All right, fine, then
you should wash your hands.
- So work from home, self-quarantine,
wash those hands.
- Yeah.
- Avoid crowds.
- Avoid crowds, there you go.
And then we just gotta flatten the curve.
This is all about flattening the curve.
You still might get it.
But we want-
- We don't want everyone
getting it all at once
and then overrunning hospitals.
- Exactly, and then, 'cause it's like 5%
of people need to put on ventilators,
but there isn't enough ventilators
for 5% of the entire population at once.
So just, let's just ride this out
so everyone gets it slowly over a span
of like four months instead of
everyone getting it in April.
- Right, I think the other thing that,
mentally, the mindset
people need to take with it
is this is, we're looking
at a winter, not a blizzard.
Like, this isn't gonna be over in a week.
But it's going to be several
weeks to several months
of, all right, just use common sense.
Avoid crowds, don't cough
on people, wash your hands.
- Yes, that's it.
- Okay.
And if, honestly,
if I got it today, a part
of me would be relieved.
It's like, well, I can't
get it twice, I don't think.
- Are you sure about that,
'cause I think you can.
- Well, it could rebound.
- Maybe, I don't know.
- There were some,
I read there were some cases in China
where they declared
themselves recovered too soon.
I don't know, maybe you can get it twice.
Don't tell me that.
- Yeah, I don't know.
(Kurt laughs)
- I mean, we just gotta-
- Oh no.
- All right, my wife is a nurse.
They're dealing with
the leading edge of it.
There was a case at
her hospital last week.
You can attest that my,
and she's already getting
a little frazzled.
And you can attest that
my wife is a sweetheart
and like, one of the
nicest women of all time.
- She's extremely pleasant, very nice.
- Yeah, and so, but-
- She's who you want as a nurse.
- Yeah, and yesterday she was ranting,
because the ER's getting overrun
with people who were
like, I was in Walmart,
and this guy next to
me, he looked Chinese,
and he coughed, so you've gotta test me.
Those people are filling up the ERs.
Don't be those people.
- That's not a made-up story.
That actually happened.
- That's not a made-up story.
It's not like, a thing like this happened.
That literally happened.
So, and the rant cumulated
in her yelling at me,
"the way to handle this is
to stay in your apartment
"and sit on your goddamn
couch and shut the fuck up."
So-
- So for her to say this is quite unusual.
- So follow my wife's advice,
and sit on your goddamn
couch and shut the fuck up.
- Uh oh, we're not doing
either of those things.
(Paul laughs)
Well, the last thing I wanna touch on here
is how do I market during these times?
- Please don't.
Or like, just do your normal marketing.
Don't be like, oh, we're
having a COVID sale.
Like, we don't need the brands on 9/11,
so like Garfield is sad
about the anniversary of 9/11
or any of that crap.
- That's so gross.
- It's so gross.
Do not be gross.
Continue your regularly
scheduled, non-gross advertising.
People are gonna be on the internet a lot
if they're sitting in their houses.
But do not have special COVID sales,
for the love of god.
- Yeah, be sensitive.
People are, if you have a family member
who's at risk, that's worrisome.
If you have a family member
who's on a ventilator
or, god forbid, dies from this
and you're the one who's like, oh, ha ha,
our underwear doesn't prevent coronavirus,
despite what, like, just don't do it.
Don't do the coronavirus
marketing or jokes.
It's probably not appreciated.
What people want is stability.
They want normal.
That's how you help people feel better.
So be sensitive to it, and be smart.
Use common sense.
And I think the fear is that, well,
this is gonna impact sales.
And I wondered about this.
So we pulled, you pulled revenue numbers
for our top performing
client stores by revenue
for January, February, and March,
and then compared them to
year-to-date last year.
And what did you find?
- I'm not the person you
should throw this to,
because once I pulled the numbers,
I realized there is no positive
test on this hypothesis.
You thought the numbers would be altered
in a significant way, and they're not.
And also, we only have 11 days in March.
So that's not a big enough sample size.
And I don't think anyone in America
was truly freaking out about it
until at least this week,
and probably not until last night.
- They weren't, yeah.
- We're recording this on Thursday.
- March 12th.
- March 12th.
Within about a two-hour span last night,
Tom Hanks got it.
The NBA shut itself down.
And Trump gave an
interesting speech about it.
(Kurt laughs)
So I think that's what,
if anyone got set off,
they're truly starting to
get set off last night.
- But, yeah, so those numbers though,
year-to-date, people had, it rose?
- Everyone's up.
Everyone's doing fine.
- Yeah, in January,
stores were up 20 to 50%,
was the median range.
In February, it got even stronger,
where there were a few that
jumped more than 50% in revenue.
- Someone doubled, yeah.
- Over the previous year.
So that was more like
20 to 60 is the range.
Really wild.
And then March, we only
have 12 days of data.
But depending on the store, it's up
33%, 10%, 86%, 22%,
and then we had, there's only two in here
that dropped, about, averaged 15%.
So okay, this is not
the greatest data set.
But over, like January and February appear
to be entirely unaffected,
if you're an ecommerce brand.
In February, the start
of February was okay.
But at this point, now, I
think the rest of February,
the next two weeks, we're gonna see.
- Yeah, and then, I mean,
April we're gonna see.
Like we said, it's gonna be a blizzard.
Things are gonna be screwed through April.
- I think so.
- Things are gonna be screwed through May.
I think that's the reason
the market's cratering.
There's currently an argument going on
about whether the market
cratering is like,
we're in a new recession,
and things have changed,
or I perhaps naively,
I am on the opposite end of it,
is no, the market's
cratering because there's
essentially a guarantee that
for the next two quarters,
growth is gonna be down.
- Or stagnant.
- Or, it's gonna be down.
I mean, there's no way
it's gonna be stagnant.
It's gonna be down.
And people are freaking out,
'cause they don't know what's going on.
It's just kind of a panic.
So it's like, but once this all clears up
and goes away, which it will,
it's not gonna be "The Stand."
The economy hasn't
functionally been altered.
It's not like we all found out
that all the houses aren't
worth anything anymore.
- Yeah, it's not-
- Or an entire sector of the economy
that people invented the last five years,
turns out, was built on a house of cards.
Like, it's not any of that stuff.
- So yeah, to say what you're describing,
the dot com bubble.
(Paul laughs)
And the first one, the mortgage crisis.
This is not that.
But that's what's in recent memory.
And that's what spooks people.
- I mean, I think, I mean,
I was going over this.
My brothers and I all talk
about the stock market.
I mean, October of 87,
the worst percentage day
in the stock market
history was October 87.
It lost like 20% in one day.
- Whoa!
- And it's like, that didn't lead
to a recession or anything.
It was just like, everyone
took a giant 20% haircut
in one day, and then a month later,
they were like, it's fine.
So I get the feeling, I feel like
there's just gonna be a six-month haircut,
and then the election'll happen,
and things'll change,
and it'll be a new year.
And everyone'll kinda be
like, all right, whatever.
Like, we'll just go back.
- So we'll get through it.
It's just a matter of waiting it out.
- And again, in January of 2021,
I'll be wearing like a potato sack,
and we'll be like, oh man.
- (laughs) I hope not.
(Paul laughs)
Like, six months ago,
everything was hunky dory,
and I'm pre-ordering cybertrucks.
And now-
- Dude, I bought a house
a week and a half ago.
- Oh.
- I went from having $90,000 in cash
to being, like, over $300,000 in debt.
- [Kurt] Cool.
- So how do you think I feel?
- Well, we talked about this off air.
I would not be worried about that,
especially when people are pulling money
out of the market.
It's probably gonna go somewhere.
Real estate's not a bad investment.
I bet real estate goes up, if anything,
especially if they cut interest rates
and mortgage rates go down.
I would have confidence
in your home purchase.
And it is a lovely home.
- All right, fine, well.
- In lovely suburban Chicago.
- I'm not moved into it yet, because
they don't trust self-employment income
as like, real income.
- Yeah, getting a mortgage
when you own your own business,
the mortgage process
was not set up for that.
I went through it.
And that was a real headache.
- Yeah, they just keep
asking me for more documents.
They're like, are you sure you make money?
You sure there's real
money here somewhere?
- For me, I was like, here is the cash.
I have the cash.
What more do you want from me?
(Paul laughs)
And turned out quite
a lot of documentation
was the answer.
On to another good discussion topic.
I don't know how many
people have seen this.
It's been making the rounds.
It's great, really interesting.
There was a Medium
article from Maya Kosoff
called "Why All the Warby
Parker Clones Are Now Imploding:
How venture capital became
the most dangerous thing
to happen to now troubled
DTCs like Outdoor Voices,
Harry's, and Casper."
Right, so first I think
we need to define DTC
and what kicked this mess off.
- I have feelings about all of this.
- Oh, that's why we're talking about it.
- So get ready.
Well, DTC means direct to consumer,
which is like, it means it's a company
that makes a product and sells it
directly to consumers, I
guess instead of putting it
in like, Best Buy or Macy's.
They just sell it directly to people.
They don't put it in stores, really.
- It feels strange to me
that one would fetishize
a single sales channel in exclusivity.
Like, our clients are just not
VC-backed giant DTC brands,
but many just regular
people will sell online,
will sell on other sales channels,
will sell wholesale, will sell in-store.
We got a couple clients
who have stuff at Target.
How cool is that?
But they're not like, no,
I won't sell at Target,
'cause I'm a DTC brand.
Like, just, I've always found DTC
became like, the definition, the niche,
the cool kid thing on Twitter, especially,
if you're in ecommerce.
And it's a little weird.
Isn't it?
- It's, yes.
It's just turning it
into like, a cool acronym
that you can now brand yourself.
I mean, the joke of it is, you look
at all these companies,
and they talk about like Warby Parker,
Harry's, Casper Mattresses, all they do
is that they're like,
well, we're tech companies.
It's like, you're not a tech company.
You make glasses, and
you sell them to people.
But the fact that you do it online
somehow makes you a tech company?
Like, everyone sells things online now.
It's not a new, special tech.
But no, no, we're a tech company.
We're different than like,
another mattress store.
And the reason they do
that is 'cause you can get
insane valuations.
- Tech company valuations,
software company valuations
are outrageous.
- Yeah, it's like-
- Way better than retail.
- Yeah, it's like Tesla.
Is Tesla a car company?
No, no, no.
They're a tech company.
- Well, specifically, I think
they are most frequently
called a software company.
- Oh, yeah.
- Yeah, which, that's even crazier.
(Paul laughs)
The thing they're selling
is not just hardware,
a vehicle licensed by the government
to be on the road.
And you're gonna pass yourself
off as a software company?
It seems atypical.
- Yeah, I mean, it just
makes me think of like,
what if Henry Ford was
just like, oh, cars, no.
We're a tech company.
The assembly line is our
new patented technology.
So we should be considered a tech company.
It's like, tech is only,
tech is a thing that just
means it was invented
since you turned like 15.
Like, is fire tech?
I mean, fire is tech, technically, but-
- It's just been around so long,
we don't think of it that way.
- We don't think of it like,
oh, the wheel, that's tech.
I mean, cars themselves,
how come Ford today isn't a tech company?
Are cars not technology?
I mean-
- There's a lot of tech in cars.
- [Paul] Yeah.
- I mean, I don't know if
anyone's had the privilege
of driving a car from,
say, the 60s versus today.
60s muscle cars are awful.
You quickly realize,
wow, a lot of technology
went into this since then.
All right, so Warby
Parker was the first one.
They describe this as
the godfather of DTCs.
Warby Parker, they sell glasses.
They disrupted the industry,
they love that word,
disruption, 10 years ago.
And it inspired a whole
bunch of other brands
into existence but also
a whole lot of VC money.
And that's what they were after, right?
- Yeah, and so that's the thing.
That's why we're a tech company.
Dollar Shave Club, Glossier, like,
if I'm trying to start, like, I'm Paul.
I wanna start Crazy Paul's Mattresses.
Well, that's not a tech company.
Is someone gonna give me 40
million dollars for that?
No.
But if I can slap some sort
of online paradigm-shifting
subscription model onto it,
oh, it's a tech company now.
Now it's worth 100X revenue.
- If you say, I've got a singular product
that's gonna be incrementally better,
and I'm gonna sell it direct to consumer,
purely via the internet,
and disrupt an industry
in the process, then SoftBank will show up
and drop 250 million
dollars at your doorstep.
- (laughs) And it's like,
the hot thing, what,
three or four years ago
is like, all the boxes, like Birchbox,
then BarkBox, and then-
- What about all the food subscriptions.
- Food subscriptions, it's like,
isn't this all just the of the month club?
It's the food of the month club.
That's all it is.
Oh, no, no, it's Hello Fresh.
It's very different.
It's not the food of the month club.
- [Kurt] It's disruptive.
- It's disruptive.
- And what happened to all of those?
- Yeah, they all cratered,
because their acquisition costs
were through the roof,
and they didn't make
enough profit margin on every monthly
recurring subscription.
- So in these DTC consumer brands,
the same thing has occurred
to basically everybody but Warby Parker.
So this article, they say
there's more than 400 DTC brands.
And since 2012, they
have collectively raised
more than three billion dollars.
Whoa.
That is quite a lot.
With supposedly half of that just in 2018.
So there was a sudden
rush in, influx of cash,
big cash infusion from these big VCs.
- Well, what happened is their
customer acquisition costs
went up, 'cause everyone's
flush with cash.
So everyone's bidding
up all the Facebook ads
and trying to compete for the same like,
under 40, Gen X, millennial eyeballs
that they think is the target market
for all of these products.
- I think that was the
other critical thing.
- It's like, upper middle class, white,
under 40 millennials.
That's the target for all of them, yeah.
- They all targeted the same audience.
Which is wild.
And so there's a great quote in here.
They said, "the investors
bankrolling these companies
"are discovering one thing in common.
"Most of their money is going to expensive
"and ever-rising customer
acquisition costs
"via Google, Facebook, and Instagram.
"As one investor put it starkly,
"CAC, customer acquisition
cost, is the new rent."
Ouch.
And then at the same time, we have,
now that these companies
have had time to scale,
have had this investor money
for years, at this point,
investors want their returns.
They're like, look, we
gave you a bunch of money.
This was the promise.
You built your incredible
tech direct-to-consumer brand.
All right, payback time.
What'd you do with it?
- Well, it turns out the
losses keep mounting.
I think one of the guys
said, with the Casper IPO,
the economics of Casper,
so they filed their S1.
The S1 is a sort of pre-financial document
you need to file in order to do your IPO.
So like, so the day the IPO launches,
people aren't blind.
They know your company's financials.
So Casper published their IPO.
And people went over it.
And someone at NYU Stern
School of Business declared,
"the economics work
better if Casper sent you
"a mattress for free, stuffed with $300,"
because they were losing $400 a mattress.
For every mattress they sold,
they ended up losing $400
because of all their admin costs,
customer acquisition costs.
- Returns.
- Returns, it's just, it's a joke.
I mean, and then, so the investors,
'cause now they can't score on the IPO,
'cause people have sniffed them out.
So what these companies
do is that they're now
lurching around and trying
to expand the base product.
- So, well, some of
them jumped on a product
that doesn't have a lot of upsell
or customer lifetime value opportunity.
How long, you buy one mattress,
and then you own it for years.
You buy one piece of, one suitcase,
you own it for years.
- Yeah, one Away suitcase.
You're not buying two Away suitcases
every single year.
You're buying one Away suitcase
every five years, maybe, at best.
- And a lot of the stuff
had really extraordinary
warranties and, like a lifetime warranty.
- Oh, concierge.
- And extraordinary
returns, all this stuff.
- Concierge service that
we're gonna be providing you.
- 'Cause, like this was,
a lot of it felt like,
listen, building the
audience is the hard part.
And it is, and they found that
through these customer acquisition costs.
I think there was a mentality
of hey, we'll build the brand.
We'll build the audience.
We'll sell them the thing.
It just has to be a little better
than the existing solutions.
And then we'll just
dominate that category.
And the money will come.
- Well, but then they'll be
super into us, as a brand.
And then we can sell
them other things, too,
'cause they're gonna keep coming back.
- So if I'm Casper and
I only sell a mattress,
now they start selling, like,
they start selling
sleep-related accessories.
- It's like, I don't know, nightlights,
white noise machines.
- Yes.
Well, yeah, one was like,
a warm light, so it
doesn't mess up your sleep,
and that sort of thing.
- Dog beds.
- Dog beds.
- They're the Nike of sleep.
- The Nike of sleep.
Well, Nike has quite a few
more products and customers.
- And they make good margins on them.
- Oh yeah.
Sure those margins on a pair
of $200 limited edition
sneakers are utterly wild.
- So yeah, what happened here is
they took a boring business
model, I make luggage
and sell it to people, slapped a bunch
of tech buzzwords on it,
then got a ton of unnecessary VC money.
- Like, an insane sum of money.
- An insane sum of money,
tens of millions of dollars
for a suitcase company.
Then they couldn't hit the amount of money
and growth projections that
that valuation demanded.
And so now they're just kind of like,
trying to find something that will help.
- They're flailing.
- They're not a business.
They're not a business that
sells things to people.
It's a giant, sentient wad of money
that is lurching around,
trying to find a business
for the wad of money that
has assembled itself.
- I love this analogy.
(Paul laughs)
It's because people knew
that this investor money
was out there, and they
knew what it was hot for.
And a lot of this stuff is
really, is driven by PR.
Like, a lot of the spend, for
Casper especially, was on PR.
- Podcast ads, you're listening to us,
you're listening to a podcast.
We don't have Casper ads.
But everyone who has listened to a podcast
has heard a damn Casper ad.
- Yes, and it's, well, to your point,
it was because they're targeting
that millennial age group.
- And they had a shit-ton of cash.
- Well, to give you an
idea of how much cash
was going on here, one of these brands,
Brandless, launched.
And I remember it initially
and then disappearing.
I didn't see it again.
But Brandless sold, they said,
we're never gonna sell in Target.
But they were in Minneapolis with Target.
We're never gonna sell retail.
They sold, everything
they sold was for $3.
And it was like, Brandless was unbranded.
So it was cool.
First they raised 52 million from Google,
then 240 million from SoftBank.
That's an insane sum of money to give
to an ecommerce business.
- I mean, what they're
essentially saying is that-
- A fledgling ecommerce-
- I mean, I'm trying to think,
I mean, they're essentially like,
we're gonna be Revlon.
Let's think of it, I'm thinking of someone
that has a wide range
of home goods products
that's like, their branding.
And it's like, like
Revlon isn't home goods.
They're makeup.
But it's like, we're gonna be Revlon.
And it's just like, oh, well,
Revlon's worth this amount of money.
So we're just gonna give
you 50 million dollars,
and when you're worth five
billion, we'll have scored.
What are the chances that's
gonna be worth five billion?
Also, I shouldn't have said Revlon,
'cause makeup actually has
giant profit margins, again.
Not selling the thing for $3.
- When you're a brand like
Brandless, selling home goods,
and everything's three bucks,
and they couldn't keep that going.
So after the CEO left, they switched to $7
and started selling CBD,
which is a little crazy.
But no.
If you're giving this
fledgling ecommerce brand
292 million dollars,
it's because you think
you're gonna build the next Target.
Like, thinking long term,
that's where they thought
this was going.
And, but if you think about it,
if that bizarre scale, I sell items
for three bucks, shipped,
that's not gonna,
all right, so what's
the profit margin there?
Probably negative or nonexistent.
I gotta acquire a customer.
Customer acquisition costs now are nuts.
You could spend, I've seen brands spend
up to 40 bucks now to acquire a customer.
And then, all right, so we're spending-
- Well, they talk about it here.
- An insane sum to acquire.
- Marketing software company AdStage
analyzed its Facebook impressions data
and found that the median cost per click
for Facebook newsfeed ads
had risen from 43 cents
during the second quarter of 2018
to 64 cents during the
second quarter of 2019.
- It goes up 50%.
- Yeah, those numbers are small.
It's only 21 cents.
That's 50%.
If your ad costs go up
50%, that's killing you.
- And it's not like these sites were bad.
I mean, this was really like,
they were spending the cash
to be on the leading edge
of design and user
experience and branding.
Every one of these sites
had kind of a similar look,
a lot of white space.
- All white, lot of light
colors, bright colors.
- And very cool.
- Yeah, lot of things
sliding, lot of animation.
- Yeah, and it didn't
matter what the brand was.
Like, whether I was on
Warby Parker buying glasses
or I was on Hims getting
erectile dysfunction drugs,
they all had kinda the same look, right?
But it looked professional.
It looked good.
- That's why I have, first of all,
you need to know that those
erectile dysfunction drugs
were for fun purposes only.
You didn't actually need them.
- (laughs) That was
consumer research, sir.
(Paul laughs)
I don't even know what you're
talking about, I'm leaving.
- (laughs) I hate Allbirds.
I don't even know what Allbirds sells.
- [Kurt] They sell shoes.
- Okay.
- [Kurt] All shoes.
- I didn't know that.
I hate them, because every,
so many potential clients
have approached us
and literally all they have to say
about their brand or their needs is,
we want it to look like Allbirds.
- So part of our design process, well,
a lot of people would volunteer that.
But part of the design
process that we found is like,
hey, give us your brand style guide.
And then let's help create a vision board.
So give me just two websites
you wish yours was more like.
And there was, if I had
to bet money on just one,
not knowing what they were gonna pick,
Allbirds is the one I would pick.
- And they all wanted Allbirds.
And I was like, cool.
Are you gonna be spending
Allbirds money with us?
No?
Oh, then you don't get Allbirds.
Like, get your act together.
- Right, yeah.
Albert's, as far as that
design movement went,
a lot of that, they were
definitely on the leading edge.
A lot of people were just
really into that Allbirds look.
But part of what happened here was
all these brands and
the VCs that back them
want to show what a
great investment this was
and how smart I am.
There's a lot of just reputation
and authority staked on this.
So both the firm and the
VC hires great PR firms.
And then they go out
and get these interviews
and these fluff pieces and
these stories out there
that drive the idea that like,
this is what great business is.
This is what you need to be like.
And then other people, from
the outside looking in,
go, yeah, wow, they're
doing tremendous revenue,
and they're raising all this money.
To be like them, we should emulate
that business model and
that design aesthetic.
So it has kinda weird,
there's a weird ripple effect
that occurs when you're just spending
this kind of money.
- Well, yeah.
Well, 'cause you're just
like, the new cool kid.
- Yes, you could buy your
way to being the cool kid.
- No one listening to
this can buy their way
to being the cool kid. (laughs)
- I, no, of course they can't.
The better way is to do it via content.
You could spend a lot less
than 250 million dollars
just developing content in your niche
and putting that out there and building
an audience of millions with a small,
a small but competent team
doing content marketing.
That's where I would've
invested my millions, but.
- It's just VC money.
- I'm not a VC investor.
- VC money ruins everything.
- So what are, (laughs)
our lessons here are-
- What's our takeaway?
VC money ruins everything.
- Yeah, yes.
Don't believe the headlines.
Like, from the outside looking in,
you have no idea how
healthy a business is.
Many of these businesses are flailing.
Many have closed and
just gone entirely now,
when in 2018, just two years ago,
that was like, the thing
to be and the place to be.
So not everything's what it seems.
Be wary about investor money,
'cause you gotta pay it back.
It's not free money.
- Yeah, it's not like-
- They're gonna wanna see that return.
- Yeah, they weren't giving, I mean,
I do think SoftBank actually hates money.
I think they just have
a giant pile of money,
and they hate it.
They just have like a shovel.
They're like, get it out of here.
- (laughs) Can't get it out fast enough.
This darn money.
- (laughs) It's like, oh,
that Uber really worked out for us.
Uber's cratering.
Got rid of that money. (laughs)
- At this point, if SoftBank came to me
and said, we wanna
invest in your business,
I would immediately be like, shut it down.
Clearly we did something wrong
if SoftBank's ready to invest.
- No, I'd take the
money and then run away.
- Well, yeah, we could
make our best effort.
No, 'cause then someone writes a hit piece
like this Medium article.
It makes you look like an idiot.
- I don't care, I'm-
- Like, they'll take my quotes about,
when I'm really proud of it,
and make me sound really stupid.
- Oh, I'll be wiping
my face with $100 bills
in the Cayman Islands, oh no.
(Kurt laughs)
Oh no, someone wrote a
blog post that was mean.
- Okay, you're right.
There are worse things that could happen.
I don't know, we've always been,
we have been bootstrapped.
We've been debt free for
eight years and proud of it.
And we have a small, independent,
modest profitable business.
And I think that's a thing to be proud of.
These other business, they're high risk.
They were potentially high reward.
Obviously it didn't work out.
But I'm sure all these people will go on
to do cool stuff.
- I mean, yeah, it really hit me home
when I'm like, explaining
my financial situation
to my mortgage guy.
And I'm just like, well,
and he's like, well, I need your W2s.
And I'm like, actually, I don't have a W2.
The company just makes money.
- It's a pass-through entity.
- Every Friday, Kurt and I
look at the bank account,
and if it's over X amount,
we write ourselves checks
for that amount of money.
And we just get the money.
But then, and we also keep a nest egg
in case we need backup money.
And everyone I've explained that to
looks at me like I have
like a chicken head.
They're just like, what
are you talking about?
- A W2.
Just, all right, you just
want them to go away,
you go, we have a limited
liability partnership.
(Paul laughs)
If they ask an additional question, go,
it's a pass-through entity.
Then hide, run.
- (laughs) But it's just like, well,
if the company makes
money, I get to keep it.
And if it didn't make any money,
I don't get any money that week.
But it's okay.
- (laughs) You make it sound so sad.
It's like, strictly it's
a profit-driven business.
- No, I love it.
No, it's wonderful.
It just, it sounds extremely
silly to most people.
So if you want, if you
wanna run your business
in a way that is the polar opposite
of these high risk VC-backed startups,
read the book "Profit First."
That will give you an extremely sane,
positive, conservative
way to do your bookkeeping
and structure your financials.
I follow my own loose
interpretation of "Profit First."
It has worked out for us for a decade
in our modest, independent business.
- We own houses and cars now.
- It's true. (Paul laughs)
So if your goal is just, I wanna provide
for myself and my family,
read the book "Profit First."
And try to stick to bootstrapping.
It is the safe and sane
thing to do at the moment.
- It unfortunately is not
the gateway to TED Talks.
- You know, I'm sure-
- To you giving TED, you
could give a TED Talk.
- I bet I could work my way there.
If I put my mind to it,
I think I could get a TED Talk going.
- There was a tweet going around
that was like, you wake
up, and you are on stage,
and you have 15 minutes.
You literally have to
give a TED Talk right now.
What is your TED Talk about?
And like, people were answering.
- I'd be the first guy
to do a website teardown
as a TED Talk.
- Mine was Lee Harvey Oswald did it.
Here are the reasons why.
- Oh.
- [Paul] (laughs) I'm ready to go.
- That's pretty good.
I could do website teardowns
of VC-backed startups.
- (laughs) Oh, you did one yesterday.
- I did.
- Speaking of hitting audio on a thing,
tell how many times it
took you do that teardown.
- Oh man.
So if you watch the Discovery Channel,
there's this reality TV
show's been running six years,
"Diesel Brothers."
"Diesel Brothers" is about some yahoos
who build and modify diesel trucks.
And what I didn't know
is kinda interesting
about their marketing,
I don't know, I've not
actually watched the show.
I've seen the promos.
They build a truck, I think in the show,
and then they give it away
at the end of the show.
But the way you get
entries for the giveaway
is you go on their Shopify store,
DieselPowerGear.com, free plug there.
You go on their Shopify store and like,
let's say you buy a
flannel shirt for 50 bucks.
That's 11 entries in the giveaway.
So really kind of a very
unusual thing they're doing.
But they're in the news.
And I saw it because they
were just fined $858,000,
I think it was, for air
pollution violations,
for just utterly flaunting
the emissions systems
on these diesel trucks.
And so I checked out their website,
saw it said Shopify, recorded a teardown.
But Paul's making fun of me,
'cause it's a 20-minute teardown.
I do the first one, and
I click the wrong button.
Instead of hitting finish, I hit cancel.
I lose my video.
I'm like, aw man.
I'm like, that's okay, that one
was practice, I tell myself.
I do it again and discover
I didn't hit record.
20 minutes gone again.
So the third one's really solid,
because I'd already practiced it twice.
And that's the one that's on YouTube.
- Yeah, they got busted.
Part of it was that they
were selling the devices
to beat emissions testing.
- Yes.
- And, which is like, a federal crime.
And they didn't show up
to any of the court dates,
'cause they wanted to go to SEMA.
- SEMA's very important.
I was at SEMA at the same
time these guys were.
- There was like a federal trial
in the District Court of Utah,
where the court was like, you need to come
to this federal trial.
And they just didn't show.
- Yeah, if a federal judge
tells you to do something,
do it.
(Paul laughs)
Document yourself doing it,
with a smile on your face.
And then present it to
the judge with a bow.
Don't be like, oh, I had to go to SEMA.
The judge does not
appreciate how cool SEMA is.
It's not gonna work out well.
- Oh, god.
- All right, so I wanna cover two quick
listener Q and A questions that I liked.
They popped up, Q and A questions?
Two listener questions that popped up
on our Facebook group this week.
The first comes from Craig, who asks,
"what are your favorite cart
abandonment subject lines?"
And actually, he wrote
favorite with a U, O-U.
Can you do a British or Australia
accent for this question?
- I embarrass myself in
many ways on this show,
and I'm not gonna do that.
- Should I do it with a really
embarrassing Cockney accent
that I'll regret?
- No.
- No?
- Just read it, we're gonna go.
- "What are your favorite cart
abandonment subject lines?"
And so mine is, can I help?
I have found shorter subject
lines are more likely
to get it opened.
And I want my first,
ideally you're sending
like three or four emails in
your abandoned cart sequence.
But I really want that first
one not to be a discount.
I want it to be customer service-related,
'cause clearly if they added to cart,
they were interested,
and something happened.
Maybe the phone rang or the
baby woke up from a nap.
Something where they just had to leave.
So I just wanna remind them.
But maybe they had a question,
where they're like, mm,
and it stopped the process.
So I just lead with, can I help?
And then in that abandoned cart email,
I just ask, hey, if you had any questions,
just hit reply.
I'm happy to help.
So I like that one.
But then in the comments, there were,
other people posted theirs.
And there were a couple goods
ones I wanted to call out.
So Adam Watson suggested,
your incomplete order,
oh, I think that one's diabolical,
'cause you're used to seeing
your order is complete.
So he's kinda got a play on that.
And it's only three words.
Your incomplete order.
He says that's got a 55% open rate.
Whoa, that's really good.
Now, I don't know if, that might,
if you annoy people with this or not.
But I would start testing,
split testing some subject lines
in your abandoned cart emails.
Klaviyo could do that.
You can A/B test subject lines.
- Oh, that's a good idea.
That's one of, like, the famous stories
from the Obama campaign,
was that the Obama campaign
ruthlessly split tested all
of their fundraising emails.
- It was Harper Reed.
- Yeah, back in 2008.
And it was like, it's 2008.
So the idea of, well, we split
test email subject lines,
people were like, what?
Like, their heads exploded.
- What, are you from the future?
- Yeah. (laughs)
But that's one of the
famous things that they did.
And they just relentlessly
evolved them over time.
And I remember the biggest one was like,
the email looked as though it was coming
from Michelle Obama, and
the subject line was,
"I need your help."
And they were like,
that one fucking made millions of dollars.
- But now if you're on any
political candidate's newsletter,
you will get an email, like,
it'll look like from them,
personally, now.
They all do that.
- Yeah.
- And you will get one that's like,
a variation on, I need
your help, guaranteed.
- Mm hm.
- Another variation on
your incomplete order,
Mitch Barrum suggested, your
order is not on the way.
And he has not in all caps.
So I like that one 'cause
it's a little tongue-in-cheek.
But he said it gets lots of engagement,
like, where people reply to it,
and they like the joke, the oh,
your order's not on the way.
So that one's like a
much less subtle version
of your incomplete order
that Adam Watson suggested.
And then the last one I
wanted to call out was,
one of our favorite guests on
the show was Rivky Itzkowitz
from Impact Fashion.
She sells modest dresses for Jewish women.
I love this as a niche.
- They're for all people
that just wanna have
their shoulders covered.
- Yes, collarbone, shoulders, elbows.
I learned.
And she, because she sells
one category of product,
she uses a subject line,
do you have any questions
about, and then whatever
the product title is,
to try and give it some
more personalization.
So you'd say, like, do you
have any questions about
our dresses, might be how she phrases it.
- Well, it would probably be like,
about the gray tube dress, or whatever,
although it wouldn't be a
tube dress (laughs) for her.
- I like that idea.
I don't even know how
you would implement that.
I wonder if, kind of like, if you had-
- Can't you just read
the first thing in the,
can you read what's in the abandoned cart?
Obviously you can.
- So if I could put liquid
in the subject line,
then I need,
an if, else if statement in which I say,
if it's one product, product title,
and then if it's multiple, else if,
so if it's multiple
products, then your order.
- Well, if you wanna get real crazy,
you build an array of
all the product titles
inside the cart, and then just pull-
- And jam that into the subject line
in a liquid statement.
- And then pull the first product title
out of the array.
- My subject line is 20,000 characters.
- Well, the liquid renders it out.
- Got it, great work.
(Paul laughs)
Probably overthinking that one.
But the point is,
customer service focused,
unexpected works, et cetera.
All right, and our second
and final question,
Joel asks, "I recently purchased
"the out of the sandbox flex theme
"and wanna redo our Our Story page
"in the same style you've done
"for recycled firefighter.
"How did you customize the theme
"to set it up like that?"
So it's actually a lot
easier than you'd think.
That's just using, and most
of the About pages I set up
in the out of the sandbox theme
used the alternate page template.details.
So they've got a page template you can use
called .details.
And that gives you a cool hero
and whole bunch of different sections,
very similar to what you
would have on your homepage.
So you can make these very elaborate,
nicely laid out About pages.
So you wanna tell your story,
but you don't want it to
be a giant wall of text.
So you can use, like,
alternating text and images
to break it up, put a video, banner,
and then of course you want
a call to action in there.
You don't just want your About
page, and then you're done.
At the bottom of the About page,
like, let's say it's from,
this guy's name is Joel.
So let's say, the bottom of the page,
we say, Joel's favorite picks,
and then he's got a featured collection
with the stuff that he likes best in there
at the bottom of the About page.
So it's not just a dead end.
And then the page.details template,
you could do that very easily, no coding,
no messing around.
- Yeah, you can do that all by yourselves.
You don't have to like,
hire someone to do it.
- Yes, so,
the short answer is, a lot
easier than you'd think
to do that.
- And they're great.
- [Kurt] And totally worth it.
- The one stumbling block of those is,
so there's like one, out of the box,
you get one page details template.
And if you apply that
template to other pages,
it's going to look exactly the same.
Like, you get one page detail template,
no matter how many pages you apply it to,
you only get one.
And so it shows up in all those places,
because of kinda Shopify limitations
of how the template section system works.
So if you wanna do more
of those, people can,
you can do more of those.
But you probably need someone
who knows what they're doing,
or you can read it up online.
You just copy the details template
and make more of them in your backend,
like number one, number
two, the about us details,
the contact us details,
and then do all those,
and then if you do that,
you have multiple ones
you can apply across.
This is something that should be solved
by Sections Anywhere, fingers crossed.
- A feature announced at
Shopify Unite 2019 in June.
Off the record, back
channel stuff I've heard,
they're going forward,
they're working on it.
They're getting info to theme developers
on how it's gonna work.
So but no ETA, no deadline
in when we can expect
to see this thing.
But Sections Everywhere will just make
all of these sections work much nicer.
It's the sections you know
and love on the front end,
but they will be much more powerful,
won't have that limitation,
and apps will be able
to inject sections in.
So if you add an app,
instead of having to like,
launch them, they can be-
- Jam snippet in there, yeah.
- It could just be like, well,
now there's a section that this app,
let's say you use our Crowdfunder app.
Like, there's a widget,
it can inject a widget that's like,
all right, put the Crowdfunder widget in.
And then that way you could jam that,
your campaign on any page
without having to email support,
and I have to go do it, right?
So
cool things in the pipeline,
as far as theme features
and theme editing go.
Okay, I think this wraps up today's show.
I liked it.
This was like, classic Paul-Kurt banter.
Very proud of this.
- See, you've turned it around.
40 minutes ago, you were
like, we're all gonna die.
- Now I feel much better.
- [Paul] And now you're fine.
- You've talked me off the ledge.
- I don't know what, I mean,
there's nothing to worry about.
I mean, I don't wanna say
there's nothing to worry about,
'cause you should worry.
You should worry and
take appropriate steps.
But if we all take appropriate steps,
there's nothing to worry about.
- (sighs) Well, I'm glad to hear it.
You've calmed me down,
feeling the ulcers healing,
I'm feeling less sweaty.
- Note that it's if we all
take appropriate steps.
So, you're dead.
- No.
- 'Cause you can't
trust everyone. (laughs)
- I think I'm gonna build a hidey hole
and a tent in our basement, hide in that.
All right, in closing, please leave
your positive reviews for us.
We'd love to have those.
And of course, we wanna hear from you
in our Facebook group.
Search Unofficial
Shopify Podcast Insiders.
Join our Facebook group.
And perhaps I will quote
you in a future episode.
But either way, we would
love to hear from you,
no matter what the method.
Thank you.
