In this episode of Shopify Masters, we catch up with three previous guests on how they are growing through the impacts of COVID-19. We chat with Chris Meade from CROSSNET on how they experienced a 500% increase in sales, Jess Ekstrom from Headbands of Hope on their masks donation program, and Gamal Codner from Fresh Heritage on tripling their marketing budget.
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Responding to a spike in sales despite the economic downturn
Felix: First, we’re chatting with Chris Meade from CROSSNET, the world's first four square volleyball game. So what was the original effect of COVID-19 on your business?
Chris Meade: When COVID-19 had started, we really, in that first week, we saw an increase in site visitors and which led to an increase in conversion and sales. And since, it's been about, we're roughly two months into this thing, we've seen sales go up over 500% on a daily basis over the last two months. So it's been a really crazy impact on our business.
Felix: What do you attribute the cause for that kind of spike in traffic and revenue?
Chris: It's twofold. So obviously, more people on their phones and on their computer looking to kill time and engaging with ads. On the opposite end of the spectrum, there are fewer people running advertisements, so the Facebook Marketplace has been a little bit more cost-effective for our business, so we've been able to ramp up our ads as we've seen our cost per acquisition drop, so just makes sense from a business perspective there. Then, for the actual game, the four-way volleyball net, right, it's a perfect recreational tool for anybody who's stuck at home. I live in Miami, so I don't have that backyard or the front yard, but the majority of the United States has some patch of grass that they go out and stretch their legs and burn some calories and play with their family if they're stuck home and everybody is safe. So it's been a really cool game and we've seen customers absolutely love it.
Felix: Were there any things that you did purposefully since then to position the business that helps you thrive during this time?
Chris: I think we've definitely taken a more empathetic approach. I know on the customer service side we have staffed up tremendously. We made five different new hires over this time just to be responding to everybody's customer service inquiries, phone calls. I know financial situations are changing every second, so if somebody needs to cancel, somebody needs to expedite our billing as much as we can to just make everybody heard and listened to. On the advertisement side, we've taken a less approach to buy now to better days are ahead. We're looking forward to the summer, we're looking forward to going back to the beach and having fun with our friends and family, and if you are quarantined and you're safe with a family and you have four people that could play, perfect. CROSSNET is for you right now if you're not in a situation with four people, maybe CROSSNET is for you in a few months and just buy this now and stash it away because good times are coming, so it's less of buy now and more of good days are ahead.
Felix: Did you have the operations setup for additional customer service or anything else along the supply chain?
Chris: We've hired a few more fulfillment people just to help out with the order production, printing labels, actually moving the inventory on a daily basis, and then on the supply side, we were well-stocked for a situation like this, but nobody is fully prepared to see a 500% growth out of nowhere, so our inventory did take a hit. We've been fortunate that our supply chain was able to rush deliver a lot of stuff to our warehouse so we've been able to crank orders out and keep things going and we've doubled down just to prepare for a situation if this goes on any longer, so we've over-made inventory just to prepare.
Felix: How are you guys anticipating any changes or even a lack of changes between now and the end of the year?
Chris: We definitely do thrive in the summer because we are a beach product, so our best seasons are supposed to be June, July, August, so we were expecting it to ramp up but never to this degree. So we're preparing for things to stay the same if scale even higher this summer because people are more eager than ever to go back. I can't wait to go to the beach. So I know all of our customers are feeling the same way, so I think our business is going to continue to thrive over the next few months and the only thing I can do is just prepare for it and keep advertisements good. And the great thing about it is we've been getting a lot of user-generated content, and ones just saying, "Hey, my kids have been outside for five hours today and they love this thing." Or, "I haven't seen my kids since Tuesday. They're sitting in the backyard all day playing." So we've been getting a lot of testimonials which is awesome.
Felix: Did you expect this to happen or did you expect the opposite to happen?
Chris: We really didn't know, to be fully transparent with you. The game is $150 so it's not the most affordable product and it's not a necessary product, but I think as time has gone on, people have become really desperate for something fun to do, and different. How many times can you sit there and watch Netflix? I remember just, even myself, I'm shopping on Facebook Marketplace for the first time trying to find dumbbells to purchase, so people are really looking for something fun to do and get outside and stretch your legs and have fun and CROSSNET's been perfect for them. So we weren't fully prepared. I would be lying to you if we were, but fortunately, we did have, even After Pay, which is something that allows for our customers to do payment plans, so maybe they don't have the 150 bucks, but they have 30 bucks to throw to it, we can get them the net and as long as they're making the payments, everything is good.
Felix: What do you foresee yourself focusing your resources on?
Chris: My biggest thing is to get the customers who are playing to actually keep going out and having fun and driving the sport forward. I think we talked about this last time, it's just, on one hand, we're selling a product, but on the other hand, we're growing a sport, and the sport needs to last longer than the product does, so we need to keep getting people outside, keep playing, keep pushing the sport forward and the best way we do that is just by driving competition, driving tournaments when the world is able to go back to some sort of normalcy. Having tournaments and events, and then from the social media side, we're running competitions almost daily.
The logistics of launching a new donation program
Felix: In this next update, I'm joined by Jess Ekstrom from Headbands of Hope. Headbands of Hope offers a wide range of beautiful headbands and hair accessories for all ages. For every item purchased, one headband is donated to a child with cancer. You'll learn how they shifted their model and were able to donate over 100,000 masks to over 200 hospitals in a few weeks. Can you describe your business and what you sold before the pandemic happened?
Jess: So at Headbands of Hope, we sell headbands, and for every headband sold, we donate one to a child with cancer. It was something I started when I was a junior in college, had no idea what I was doing, but realized that a lot of kids who were losing their hair to chemotherapy loved to wear a headband.
Felix: What was your immediate reaction after the pandemic hit?
Jess: We had a conference that we were planning on March 21st, and so if I could pick the worst date to host a conference, that would have been it because everything really started to unfold the week before. And I remember when I started hearing buzz about COVID, it was something that you didn't know if it was real, how serious it was, is it going to affect me? It was just this big cloud of uncertainty so you just kept moving as if things were just going to go back to normal. It was like a hurricane that was just going to come through one day and be gone. When I realized that this was something that was going to be much bigger than that, you reach this crossroads where you have to make a decision, and one of the things I say in my book, Chasing the Bright Side, is that hard times actually give us a choice. They can be the excuse as to why we do less, or they can be the reason as to why we do more. At that moment, we decided to pivot. We realized that there were a lot of hospitals that needed masks. There weren't enough masks to go around with everything that was needed at hospitals around the country. So we shifted our model to pause the donation of headband and instead donate masks. And in just a few weeks since this all started, we've donated over 100,000 masks to over 200 hospitals around the country.
Felix: Did you find that the customers that you have rallied behind this new mission?
Jess: Absolutely. And I think that we had this moment as a team when we were going into all this, almost putting our armor on. This is going to be a rough few months, or however long it's going to take for us to get through this, and it actually has been huge growth for Headbands of Hope and there are so many people that bought from us, so many first time customers in the past month that maybe never would have discovered us had it not been for this. I've been really proud of my team, the way that they've been handling the pivot as well and just committing to it because I think that sometimes when you pivot, the degree of the pivot matters. Sometimes you're like, "Well, we can try this, get our toes into it," but for Headbands of Hope, we just went all in. We just went all into donating masks, we got a partnership with Zappos to donate more masks, and it just really caught fire from there. I think throughout all this, it's also shown us that new problems also mean new solutions. So especially in business, things that you've never experienced before can also be breeding grounds for innovation. One of the things we do at Headbands of Hope that's a big part of our business is wholesale, stores, and a lot of those stores are shut down and struggling. So we dropped our minimums, we were supposed to go to this trade show in April that ended up not happening and it was a trade show for wholesalers to pick out products and it's a pretty big part of our business that we do almost eight times a year. My wholesale director got the idea to do a virtual trade show so we went in the warehouse and she set up a booth, we would at a trade show, and went on YouTube Live at one o'clock on Friday, sent it out to all of our retailers and our email list, and people tuned in as she was going through our new products, our headbands that serve as facial protection, and got more orders than she would have when we go to the trade shows without the overhead of traveling and booth costs. There have definitely been some new things that have been created as a result of this that we'll definitely keep doing as a result.
Felix: When you, as a team, decide on this new mission, what did you find was easier than expected?
Jess: I think the marketing aspect. When you make pivots in your business you sometimes have this fear of, how do I explain this, how will people know, where can we reach them? And people were so in tune with what was happening in hospitals and the shortage of masks that it was easier to explain this shift and the rally of support behind it was incredible right out of the gate. Our engagement on social media went up. We had different influencers and celebrities sharing this, and so I feel like that initial spark of the marketing campaign was easier than what we had expected it to be.
Felix: Was there a lot of planning involved? How did you find ways to breakthrough?
Jess: We went where the fire was. With everyone talking that there was a shortage of masks, we were there to be that solution for people. So yes, it can be hard to cut through the noise but I think if what you're doing is relevant and it's also providing something positive, I think a lot of people were, and still now, getting really down in the doom and gloom of the news, and if you're there to, not just be relevant, but also show the upside of all of this, it really perked up a lot of attention. And there are so many companies doing that right now that it's cool to see the ability to pivot business and how business can truly be that vehicle for change.
Felix: And what about what was harder? What were surprising, or unexpected challenges that came up from this shift?
Jess: We had one of the biggest influx of orders that we've ever seen at Headbands of Hope. And so, on the operations side, we weren't prepared for that. And we have our own warehouse, we have staff in that warehouse, and they were spending 12 hours a day getting orders out and a lot of the orders that we were going to ship ended up being late, past the date that we typically promise that customers will get their orders. One of the things that we decided a long time ago in our business is we were just going to be totally transparent. Transparent about our mistakes, transparent about our mission, transparent about where our headbands go after each purchase. And so, we ended up having to send thousands of emails to people that their order was going to be late. And I think it was 2% of those people asked for refunds. And it was really cool to see that the camaraderie of our customers and that community was also really forgiving of small businesses trying to just keep juggling balls in the air and make ends meet. I remember one of our customer service representatives, she sent this email to everyone and she copied and pasted all of the really positive responses from people after we sent out those late delivery emails, and the subject line was, People Are Good. Because it was this major source of anxiety for all of us. We want to make a good first impression as a business, and for that order to be late is typically not our character, but I think we gained more trust and more appreciation through being transparent about it and addressing it and not just blaming the postal service, and one of the things said, "Because of how you handled this, I'm now going to be a lifelong customer." So that was a challenge that ended up being just a really cool pillar of Headbands of Hope now.
Felix: How did you set up the logistics of donating these masks?
Jess: We got connected with someone at US Acute Hospitals who oversee 200 hospitals around the country. So it was great from a logistics side because we could just send the masks directly to them, and then they dispersed it to the hospitals that needed it most at that time. It was really great to have that partnership and it was an amazing moment for our business when we called them and said, "Hey, we have 100,000 masks that we want to donate.", because we wanted to donate them in bulk instead of shipping a lot of boxes. We wanted to ship one shipment, and it was very tearful on the other end of the phone, which made us tearful, and I think this experience has also just shown the humanity of everyone, whether you're a business, whether you're a healthcare worker, just even the social distancing is a thing more than ever. I think the connection is too.
Felix: How are you planning to adapt the business over time to withstand if this takes longer than expected?
Jess: I think like everyone, we're staying loose. I think that that's something that is hard to do in business because you want to have things set in stone, you want to have a six-month plan and a one year plan, and we're taking things more loosely than we have before. We're staying on the mask donation now, we're staying flexible with our retailers in terms of minimum orders. But more than ever, we're creating more products that serve multi-purpose headbands and facial protection. So that's the one thing that we're sure of that we don't think is going to go away for a while that we think we can do really well. But just like everyone, I think that this idea of uncertainty can either be really fearful, like this impending doom, or it can be just endless possibilities. And so, we're trying to choose the endless possibility side of the uncertainty spectrum.
Why tripling marketing spend was the right decision
Felix: In this final update for this episode, I'm joined by Gamal Codner from Fresh Heritage, specialty grooming products for men. We chat about why he tripled their marketing budget and how it affected the business. Hi Gamal. So tell us more about your business.
Felix: When COVID-19 hit, the pandemic hit, what was your immediate reaction?
Gamal: I was freaking out. I wasn't sure how bad or how long this thing would go and I spoke with some of my advisors and they essentially said, "Three things may or may not happen. You've got to be mindful of your cash flow, and prepare if half your revenue just dropped. You want to make sure that you guys are in a position to not have to shut your doors down." Two, how long it was going to take for you to receive products from your vendors, especially for other stores that buy from China or overseas. That was problematic for us because we source some of our packaging, labels, and boxes from overseas. And then also, how it's going to impact our ability to deliver our products to our customers because the postal service and stuff like that were severely impacted. I ultimately decided that if we were going to go out, I wanted to go out swinging, so instead of scaling back, I actually tripled our ad budget and just really ramped up production on stuff and came up with a plan to launch additional products because I was like, "If I'm going to go out, I'm going to go out swinging."
Felix: So you mentioned that you have advisors that you consulted when the COVID-19 first hit. Tell us more about how you built a relationship with those advisors.
Gamal: I really believe that it's important to learn from others who've been where you want to go so you don't have to make those same mistakes, and so I did some research and found some people who sold to my same demographic because it's almost difficult to sell to our demographic, and so I saw someone who had built an eight-figure company. Their company does north of 20 million a year, and I just reached out. But outside of that, specifically, I'm always in Masterminds, I'm always investing in new courses just to be in an ecosystem of people who are doing what I'm doing and who I can learn from. And at the same time, I'm also making sure that I'm doing my part to give back for others who want to be in a position to grow their brands to where my brand is.
Felix: How did you come to the decision of spending more on advertising, which typically people pull back on during uncertainty?
Gamal: A large part, I checked cashflow-wise and I would categorize myself as a frugal person, so I was comfortable there. I create all my products in the US, it's US-made for the most part except for boxes and packaging is outside the US, but all our core ingredients were in-house. I did go through some issues there with our products in our supplement and vitamins, but I ultimately realized that I assessed myself and I assessed others where my competitors could buy from and I realized that they were probably going to scale back. A lot of them were heavily invested in retail and selling through retail channels, and I know a lot of them had a lower cost of goods because they outsourced from overseas which usually is a disadvantage for me because I have more premium products. But I just recognized an opportunity that the other options for my consumers to buy from were probably going to have to scale back, and so that was a great opportunity for me to be a voice and to build a real stronger bond with my community.
Felix: How did you approach growing your marketing budget?
Gamal: Funny enough, I actually just tripled it overnight. So I wouldn't recommend everyone do that, but for me, it was just a simple... When people talk about ads, they think ads are going to fix their business. Ads just amplify what's already there. And so, I knew I had to find my audience. I knew the sales funnel that converted, and I knew what our conversion rates were. I just literally went in, launched some campaigns, and tripled the budget I had the day before. And they performed well out of the gate, and in the meantime, I worked on increasing our store's conversion rate so that I could maximize the number of conversions I was getting for the ad spend. I ended up scaling ad spend back down while keeping the same amount of revenue coming through but it's because I focused on converting more of the customers that my ads were bringing to the store.
Felix: Did you have to make any other changes like bringing more creatives, or more angles for your ads?
Gamal: They can get fatigued really quickly, and so as a support to this initiative of really growing our revenue, we hired an ad creative agency which all they were responsible for is helping us create creatives, and I also worked with some folks locally and really reached out to our influencers to get some more user-generated content because even during this pandemic, quote-unquote, I've seen a lot of the creatives that work well still be just simple user-generated content. The good thing about having a bigger budget is I was able to test up things a lot faster and get back results on my hypotheses and tests a lot sooner, so it's been that way since the start of the pandemic. User-generated content is still outperforming professionally high type production videos and photography, which is a good thing for me because they cut down on my time, my turnaround time, for dropping new creatives in with some of my ads.
Felix: Do you find that that's true across the board, that user-generated content will perform better than a professional photoshoot?
Gamal: I coach a couple of dozen entrepreneurs on how to use ads to grow their business and we actually went through that specific scenario. I have someone who is in my program who is very dope creative, has a lot of professional background in that, and we tested that out with more of a user-generated content person product in use and that's been performing really well, and it's in a completely different industry, completely different demographic. I think that's just really true right now with a lot of people online because why this has been working is because the average daily use of Facebook and Instagram has shot through the roof. Now, it has been more than the typical, average daily user through Cyber Monday, Black Friday. That's because everyone's working from home and we all know work from home just means do some work for a little bit, and then jump on Instagram. There are so many more eyes on there, and so I think what's going on is people are aware of being sold to, but they don't want that. But at the same time, they really want to consume shareable viral content, and so TikTok style content where it's quick and funny, and humorous, and something you can share, or any really engaging thing, I see those types of content doing really well for ad creatives and just social posts in general.
Felix: Did you find that it was cheaper to advertise during this time or is it more expensive to reach your customers?
Gamal: Way cheaper, because a lot of big-box advertisers pulled out, and so how the ads work is like an auction. You're all paying to try to get to the same consumer. And so, pretty much all of the travel big brands, all of the hotel, flight, airlines, all those guys pulled back, a lot of big-box retailers, they pulled back. That just created cheaper auctions, and so I saw my CPMs drop to about a third, so I increased my budget by 3X, and then my CPMs dropped by about at least half to a third of what it used to be.
Felix: What were some things you discovered and the changes that you've made to increase conversion rates?
Gamal: This is funny but there's no tried and true thing to do that it's guaranteed to work, but there are some things that you should look at that you could make some adjustments that could work. The very first thing I did was I noticed that my mobile site converted a lot differently than my desktop traffic. And so, I had to make a decision based on my desktop was converting way higher, and the changes I made initially dropped that, but I had to make a decision on which traffic I was going to over-commit to, and since social is mostly mobile, 90% mobile, I made a change to that. Depending on who your customer base is, your age and demographics, how they consume your content, some of these changes that work well for mobile-optimized sites kill conversions on desktop. And so, that was one of the things that I had to learn, that I couldn't just be a general, all-purpose change. I had to be real specific. Simple things like having to get more people to my cart, those are one set of changes, where it's things about placements and just using heatmaps to realize that people weren't even going to a certain point of my website, so there was no use even putting my best selling product there. It was just checking out individual conversion rates of products and added more of that to the part of the websites and rearranging my website to add those hot products in the place that most people visited on my site. And then, there were specific changes that I've made on my actual cart to help conversions as well, just to make it easier for people to reach the checkout page. So removing a lot of the steps and processes, and removing a lot of the required information on the checkout and stuff, so it's just lots more seamless and easy for people to give me their money.
Felix: What were some of the things that you removed from the checkout process?
Gamal: Some of the things were the second address line that was optional. Took that out. The company name, took that out. What else? Having a phone and email took that out. Having middle initial, all that stuff, took all that stuff out. And just giving the real basics. Just name, one type of contact information, one address line and that's it. And a big one that I saw across from one of the students that I coach, they required you to create an account, and they just made it very difficult for people to actually just get the product that they'd been shopping for.
Felix: Do you recall what the change or the increase in the conversion rate was during these changes that you made?
Gamal: I actually saw a 100% increase. So I doubled. So if you're going three, it's six, if you're doing two, now four. So it was a significant increase.
Felix: What changes do you make there to encourage or to increase the repeat purchase behavior of your customers?
Gamal: That's actually a very good point that I was going to bring up. So we also made a mental shift to take our focus away from my customer acquisition and customer acquisition costs, which I originally started off with, and I told you that I lowered my budget and I shifted the focus to customer lifetime value. And because we have a consumable, we made a very diligent effort to increase our subscription program, and over the last 120 days, we've grown our subscription program by 450%, so almost 5X in the number of members on our program. And so, we just made it, one, we really tapped in tune with the issues and problems of our consumer early one, so for a man of color who grooms himself, our customer base is usually really cool professionals who have important jobs. They're now working from home, got their kids running around and playing, making all sorts of noise, you can't do conference calls, and their family is concerned about what's going to happen, and so there's a lot of pressure on them. So we just really got ourselves in the minds of our consumers and communicated with them in a way that built more trust, and then we found the value proposition in our product that would incentivize them to want to commit to having our product in their lives to help them get through this time. We also really hammered our membership program, and so, we didn't call it a subscription program, we called it a membership program for a lot of psychological reasons we probably don't have time to get into, but we saw that helped a lot. And then, we built out email and just messaging and ad campaigns to really incentivize and remind people of the benefit of joining and becoming a member of our program. But that was something I wanted to do because that also took a lot of pressure off of me because I knew if I grew my membership program, then that would take a lot the mystery about what the future hold for our business off if we knew we had some re-occurring, consistent income coming in through the company.
Felix: How can merchants out there try to be on the side of their customers rather than someone that's just looking to take their money during these uncertain times?
Gamal: With my product, it's a niche product, so it's probably a little more difficult to understand so I'll use an example with my students because we went through this exercise for everyone. One of my students sells really high-end makeup. She's a celebrity makeup artist and she launched a makeup line, and it was doing well but it's a premium product, and she thought, "Man, no one wants to spend all this extra money during these times. Who am I to ask people for their money?" But what we realized in going back through their customer profile is that their customers really needed their product at a time like this and they needed some help other ways. And so, a lot of these people, these women, would go to their job and sit in cubicles, and never have to see anyone each day, so having their makeup done and being on point wasn't as important. But now, they're forced to sit one foot away from a camera and sit on zoom calls with their president of the company, or their boss' boss and they're being recorded and there's a lot of anxiety around that. And so, I just changed her perspective and just reminded her of, "Hey, why you started this company is because you wanted to help women look and feel their best each day, and now's your time to shine." We talked through that and hit some of those talking points, and also realized that her brand, in order to succeed and help her customers, it wasn't only about makeup tutorials, it was about quick makeup tutorials for work because you're limited, and it was also providing some advice on how to work from home better, like zoom etiquette, or how to find better lighting, and mics, stuff like that, so how to manage your time better working from home. Her customer profile shifted and I just wanted to make sure that she understood that and was able to meet the customers where their new needs emerged. Does that make sense?
Felix: What kind of new products did you come out with at this time?
Gamal: We just completed our line, and so we sell premium and natural grooming products, to men of color with beards. And a lot of our products are inspired by origin stories. We went to North Africa and spent some time at a local village and just realized, all the grooming traditions there in North Africa can be brought back. And we always wanted to, because I'm Jamaican and from the Caribbean, we always wanted to add additional products that were inspired by the grooming traditions in the Caribbean, because there's many. We launched additional beard oil scents, and we launched a beard in-hair wash and a conditioner, and it's a complete system for men to just have a complete grooming system, all inspired by natural and organic ingredients from all around the world and in different African diaspora spots, so South America, the Caribbean, and different parts of Africa.
Felix: What are the plans that you're putting into place now or you're planning to put into place over the next year or so to make sure that you can sustain long term?
Gamal: What this has really taught me is that we shouldn't really rely on one source, both traffic, because that can change every day, product, and also on the vendor. So definitely having a plan B and C vendor because that vendor could go out of business and you can be screwed. That's happened to some people who are in my circle. So the importance of having multiple vendors and relationships, and then also this was just a reality check for us, with so many people being impacted. We are also launching into wellness, and so that's a really big initiative for us, and just wellness products like supplements and vitamins to specifically help people of color get access to really good, high-quality products that are going to change not only how they look on the outside, which our products do now, but really impact how they feel and change their bodies from the inside out. I'm really, really excited about that because I've just noticed during this time how important it is for self-care and personal care of your bodies.