EP.154/ HEAROS
Navigating the Financial and Operational Realities of CPG Brands with HEAROS Founder Doug Pick
Doug Pick, Founder and CEO of DAP Ventures and former CEO of Heroes Earplugs, discussed his journey from starting a $15,000 earplug brand to selling it to a private equity group. He emphasized the importance of branding, product quality, and financial planning in retail. Doug highlighted the challenges of working with big box retailers, including setup costs, promotional expenses, and the impact of store brands. He shared insights on the financial game of retail, the significance of execution, and the concept of "charge backs." Doug also discussed the transition from retail to e-commerce and the role of branding in both channels. He covers all of these topics & more in his book, Stop or Go.
EP. 154
DOUG PICK
Episode Timestamps:
0:00 Introduction and Background of Doug Pick
Mariah Parsons introduces the podcast, Retention Chronicles, and welcomes Doug Pick, founder and CEO of DAP Ventures and Heroes Earplugs.
Doug Pick shares his background, starting Heroes Earplugs at 24 with $15,000, aiming to create a high-quality, branded earplug.
He discusses the success of his first earplug specifically marketed towards women, "Sleep Pretty in Pink," which became a national bestseller.
Doug sold the company to a multi-billion dollar private equity group a few years ago.
3:11 Doug's Book "Stop or Go"
Mariah Parsons mentions Doug's book, "Stop or Go," and asks him to define it.
Doug explains he wrote the book for his children, Brandon and Ellie, and for himself in 1992, pre-internet, with no CPG experience.
The book is a 60-minute read, designed to guide founders through the steps needed to launch a brand.
Doug emphasizes the importance of doing homework and making prudent decisions to avoid financial pitfalls.
8:24 The Game of Retail
Doug explains the concept of "The Game of Retail," where founders need to understand the financial aspects of working with big box retailers.
He shares specific examples, such as the $50,000 setup cost for Target and the $25,000 promotional event cost for Walgreens.
Doug highlights the importance of having a financial plan and understanding the costs associated with retail.
He discusses the need for founders to create a promotional calendar and fund promotional events themselves.
17:38 Transition from Retail to E-commerce
Mariah Parsons asks about the pros and cons of retail versus e-commerce.
Doug explains his journey from big box retail to embracing the internet and e-commerce, starting with Amazon in 2007.
He discusses the impact of the 2008-2010 economic correction, where retailers shifted focus to store brands.
Doug shares how his Amazon business grew significantly during this time, generating $2 million in sales and $1 million in profit.
21:29 Store Brand Strategy
Doug explains the rise of store brands and their impact on national brands.
He shares an example of transitioning Rite Aid from a hybrid strategy to a complete store brand strategy.
Doug highlights the financial advantages for retailers in maintaining store brands.
He discusses the importance of understanding the retailer's strategy and being prepared for the financial implications.
29:30 Challenges in Retail Relationships
Doug shares a story about a grocery chain where he was kicked out after a shipment arrived a day late.
He emphasizes the importance of execution and understanding retailer expectations.
Doug discusses the concept of "charge backs," where retailers can throw financial challenges at vendors.
He shares a personal experience with a retailer's accounting issue that cost his company over $100,000.
38:27 Branding and Packaging for Retail and E-commerce
Mariah Parsons asks about the role of branding in retail versus e-commerce.
Doug explains his approach to packaging and branding, inspired by studying big brands in retail stores.
He emphasizes the importance of standing out on shelves and creating a compelling first impression.
Doug discusses the need for thoughtful packaging and branding in both retail and e-commerce, even if packaging is less critical in e-commerce.
45:05 Final Thoughts and Advice for Founders
Doug advises founders to focus on product market fit before scaling to big box retail.
He emphasizes the importance of having a financial plan and understanding the costs associated with retail.
Doug shares his philosophy of prudence in making business decisions.
Mariah Parsons thanks Doug for sharing his insights and experiences, and they conclude the episode.
TRANSCRIPT
This transcript was completed by an automated system, please forgive any grammatical errors.
SUMMARY KEYWORDS
Customer retention, e-commerce marketers, DAP Ventures, Heroes Earplugs, branding, retail strategy, financial game, product market fit, store brand, Amazon business, packaging design, consumer behavior, promotional events, charge backs, entrepreneurial journey.
SPEAKERS
Mariah Parsons, Doug Pick
Mariah Parsons 00:00
Music. Welcome to retention Chronicles, the retention podcast for E commerce marketers. I'm your host and fellow e commerce marketer, Mariah Parsons, tune in as I chat with E comm founders and operators all about customer retention. Think marketing ops, customer success and customer experience, we cover it all and more. So get ready to get real with retention. Here is our newest episode. Hello everyone, and welcome back to retention Chronicles. I'm psyched to be sitting here with Doug pick. He's the founder and CEO of DAP ventures, and you have done a lot of things in your life Doug, so we are going to get all into it. It's going to be great. But I always like to start with how we got introduced to each other, and it was through Shop Talk fall. Our listeners will know if they've listened to some of our recent episodes. I met a lot of great people there. I'm sure you did as well, and you were one for me. So had to have you come on the podcast and talk about, you know, how you started heroes earplugs, and how it has led up to this point where you are helping other people start their dreams, their entrepreneurial dreams. And I'm, yeah, I'm just so excited to have you here today. So we're gonna have you say hi to everyone and then dive into your background. A little bit more
Doug Pick 01:23
fantastic. Well, hello Mariah, good to see you again. And hello to everyone on the podcast. I'm Doug pick. I'm the founder and CEO of DAP ventures, and going back over three decades, I also am the founder and CEO of the heroes earplug enterprise. That was a company I started when I was 24 I had $15,000 in savings, and I had this crazy dream because I was a disgruntled, unhappy user of retail earplugs that he used for sleeping and concerts and studying, that I could bring a high quality, electrically marketed and promoted brand of retail your ear plugs. And really that was about branding a commodity, which is not the easiest thing to do. My ultimate goal at that when I first started, was to create the Kleenex or the Coca Cola of earplugs, so that when people refer to my earplugs, they didn't say, Oh, we like these earplugs. They would say, Oh, I love heroes. And just for everybody that's out there, we spelled heroes very uniquely, which was H, E, A, R, like I hear you and then OS, so I took a different and unique take on that. I would also say that we had a lot of success in the founding of the first ear plug specifically marketed towards women, which was sleep pretty in pink, that came out in 2005 which also became a national best seller. So I have a lot of history in that small niche, and ultimately grew the company for 26 years and and sold it to a multi billion dollar private equity group a few years
Mariah Parsons 03:14
ago. Yeah, so much like I said that we're going to dive into and you also have written stop or go, which is your book that, and I want to hear you like, define it yourself, but after reading it myself, it was, it's like a how to guide, basically, is like what? What I would equate it to, right of like, these steps. Run through these and see, like, does your product or does your idea kind of match? Or, like, can you validate it, right? Like, what is the, what are the, the essentials for launching a brand and like, Have you thought through this positioning or this, you know, how are you going to financially back all these different decisions that founders, if they haven't already considered, they should consider, and, um, all, all of that fun stuff. So we're gonna use this podcast to kind of walk through, I think, some of the highlights of what I know our audience will love to hear. And parallel that with your own story, which is exactly what you do in the book. You kind of give a, you know, like, this is this tip around how to launch a brand, and then this is what my experience was with it, which I think is a nice, nice way to give both as you and as an author, say, like, Okay, this is my credential, right? Like, I did the thing. I did this thing that I'm talking about. I learned, I learned my lessons from it. So you kind of, you serve that, but then you also give the more, I guess, strategy or the tactical to do's for, for someone to start. So I want to make sure we get that in there, because you have, you have, obviously, a lot of experience in the brand side, and then all. Also kind of pulling back and thinking about, Okay, what did I learn through this crazy roller coaster of 26 years? And you know, how? How could it be helpful to someone else?
Doug Pick 05:09
Yeah, well, you know, I'd say just from a high level, why did I write stop or go number one, I wrote it for my kids. Really, okay, yeah. I wrote it for my Brandon and Ellie. They're 17 and 19, and I wrote it because my father was a doctor, but yet I really knew nothing about what he did, and he has subsequently passed away. So I wanted a document, something that my kids could read in time that they go, Wow, that's really cool. And I'll tell you how it's come full circle towards the end, if you'd like. But secondarily, I wrote it for Doug pick in 1992 pre internet. No experience with CPG. Didn't even know what CPG stood for. For that matter, all I knew was I was a graduate of USC entrepreneur program. I was unhappy with the earplugs that were available to me, and I really just started to research, but I had no blueprint. So after I've gone through this incredible journey, which which people can read about on simply Doug pick.com there's a lot of collateral for people to read about my journey. I was like, wow, I would love to put together the blueprint. And the interesting thing is, you know, Mariah, the the book is, like, it's not even a book. It's a book lit,
Mariah Parsons 06:35
yeah, yeah, exactly, yeah. It's super, super digestible, yeah, yeah.
Doug Pick 06:39
It only takes 60 minutes to read, and I'm a slow reader. The audio book is 87 minutes that that I had a lot of fun narrating, and it, as you said, it takes perspective founders through the steps that if I knew then what I know now, I would take. And so it was a lot of fun to actually write the book, because it forced me to think about those initial moves and what were the key ingredients that I needed to go through to reach what I call a prudent an emphasis on prudent stop or go decision, because what I've seen so many times over the years of being in the space, and quite honestly, I'll be honest, because I didn't have the internet when I started to do some of the steps that are now available to anyone who's interested to create a product or really start a business. For that matter, the amount of information that's available today is just night and day. I really, I really just felt this was something that I needed to do for prospective founders to make sure that if they did embark on investing their time, their energy, and most importantly, their resources, and most likely, the resources of those that they care about, family and friends, because that's generally how people get started, with help from their family and friends that they know that they have done their homework, as opposed to, oh, I've got this great idea. I'm going to get started, but I'm not going to do the research to verify and validate that what I have thought of makes any sense and makes financial sense, because at the end of the day, what I learned about my business, CPG, in working with every major retailer from coast to coast, Walmart Target, Walgreens, Rite, aid, CVS, Kroger, Albertsons, Whole Foods, we had distribution of over 30,000 stores. What I realized is that CPG is really just a financial game, game that's right, game and and I call it, I literally call it when I help others in the space that want to scale. I call it the game of retail. You have to understand how to play the game. You have to understand how the game works and and be prepared for the financial aspects of what retailers are going to throw at you, because every retailer has a different game that they require you to play if you want to sell your products through their distribution. Yeah,
Mariah Parsons 09:19
I would love to focus our majority of our episode there, honestly, because when I was reading right, I've, I've been in this, this space for a while, um, and talk to a lot of founders, and usually the, you know, marketing and operations and like, how do you we've covered, we've covered a lot of topics on this podcast, basically, and I don't think we've had a deep dive into retail and all the costs associated with it, and, like, playing that financial game, yeah, and that's what I was really taking away of this will be so helpful for our listeners, because even, forgive me, if I forget the word, it's like, the case you're talking about. Like. What is it like? The cases that you're selling something in, right? It's like eight of your product, or whatever X amount of your product. It's like the case mold or something, I forget, yes, yes. So like even little details like that, because I think a lot of, obviously, a lot of our audiences, e commerce, they're selling directly to a consumer, which is just different from retail or wholesale. And I think that's where for brands in the future, the this episode could be really helpful for them, just to learn about like, okay, what are the, what's the overhead? Like, all the different, like, different like, shipping containers. How do you, how do you think through that and like, basically play that financial game of, okay, this is this retailer makes sense, because they'll have this margin, right? They want this price because of that. So, yeah, I know it'll be, it'll I would love to focus there and but I didn't know that you made it for, you know, in light of thinking about your kids and thinking about, you know, this is what I would impart for them to to leave. And I think that's a really cool, really cool aspect,
Doug Pick 11:10
yeah, yeah. And, and what I'll say, and we can get back to the point of the financials, but it's, it's really neat, and it's a lot of fun, because my dream is to be in business with my children. That's the greatest gift that I think I could have, because I love business, I love my kids, and I have nothing but respect for them, and I would love to be partners with them. And part of that is happening right now because my son, who's 17, has his own Amazon business, and he is buying products, and he's selling them, and he's making profit. And what's it's so cool that I wrote the book and as his partner, because I told him, you're my partner now, and you're also my son. It would be really great if you read my book, because you can probably imagine a 17 year old is not really interested to, number one, read his dad's book or listen to his dad. He's like, Dad, I can't even hear your voice.
Mariah Parsons 12:06
Yeah, right. He's like, do you have someone else reading it or but
Doug Pick 12:10
he he, um, he actually has listened to it, and it's great to be able to talk CPG and strategy with him. So we're in process of building brands together, building wholesale distribution, and it's just very rewarding getting back to the expenses of working with big box retailers, and I had multi decade relationships with all of them. Again, it comes back to the game. Every retailer has their different game we can speak specifically to what I would do in preparation before meeting with any big box retailer. And this is what I write about in stop or go, which is, before you sit down with any what's called Category Manager or buyer, you already should know what the outcome is going to be for doing business with that retailer for the next 12 months. And I'll be more specific in that assume that so I would create spreadsheets for the possibility of working with, let's say target, for example, and I'll walk you through what target looks like. So Target has about 2000 stores, and if you meet with the Category Manager of Target and Target says, Mariah, I love Mariah lipstick. It's the greatest lipstick, and I know our guests are going to love it. We want to bring in three of your products. You're like, Yes, I landed targets, the greatest thing ever. Well, now let's talk the financials around it. The Category Manager is going to say, in order to set you up as a vendor, that's $50,000 now for each of the three items, for us to set up those three items, it's $15,000 per item now, so you add that up, you got 45 so here's where my here's my where my financial cap comes on. You're 95,000 in the hole before you ship your first item. Then what you'll need to do is design a promotional calendar so that Mariah lipsticks actually get attention from the target guests in the form of percentages off whether it's on target.com or on shelf, you're going to have to fund those so those cost in order To set those promotional events up, they will cost your company money, and then you will have to pay for the redemption. So the the AHA that many people have when I when I tell them about the game of retail, is they think that when they go to any of their favorite stores and they see $2 off or 50 cents off. Like, Oh, that's so great. But guess what? The vendor funds that, not the retailer. Yeah, and fund for the right to be able to promote that. And I talk about a specific example with Walgreens, where it would cost us about $25,000 to do a single promotional event in their stores. We did that because, number one, we needed to create Lyft. And Lyft is an industry term for what percentage up your products are able to generate when they're on promotion, specifically with Walgreens, when we were on promotion, which would last about a month, our sales would lift 50% and that was big because we needed to show to the category manager that our brand was growing and their sales and profits were growing. So 25 grand. The the example I use in the book is that we would sell the equivalent amount of what would be about $9,600 in promotional charges. And so my cost as the vendor would be $34,000 per year for one promotional event. But you needed to do that. And then that comes back to the prudent analysis of how much margin do you have in your product, and can you afford to even do any of these activities that I've just outlined. And so whether it's Walgreens or target or CVS or what see all of them? Yeah, it really doesn't matter. All of them. There are costs. Some are more or less. And it really just depends on your financial analysis of, does this make sense? And so it's important for a a prospective CPG entrepreneur, to understand, Boy, I've got my product cost, but now I've got my cost of doing business with these retailers. So I would say, also from a high level, whether you're going whether you're selling through Shopify or Amazon or walmart.com target.com or the big box retailers, there is no friction free path to creating a success in CPG, it's all going to cost a lot of money, and that's why you really need to do your homework and make sure that you have key points of difference that are going to stand out because the consumer is wearing Four words on their head. Why do I care? Yeah, so, so you have, you have to, in an instant, explain to that consumer, sometimes without words, sometimes it's by packaging, some, sometimes it's through packaging and experience and branding and social media. It's very complicated, so there's a lot to it,
Mariah Parsons 18:00
yeah, yeah, it's so interesting. And I, I want to get your opinion on, obviously, there's a huge rise of E commerce, just through, you know, the internet and COVID and all these different macro in, you know, players, all these macro simulators and so obviously, when you're looking at the retail relationship years ago, you kind of have to go into retail more than you have to go right, like you don't really have the E commerce arm, versus today, a lot of brands are starting ecom and then move into retail. So I'd be curious to hear, like, how you kind of the pros and cons of both? Yeah, that's a
Doug Pick 18:43
great question. So because I started my business before the internet existed, as the internet started to percolate, we a few things. Number one, we embraced this new medium, and that was again, for me, what my grandfather taught me is, sell the sizzle, not the steak.
Mariah Parsons 19:06
I like reading that, by the way.
Doug Pick 19:10
And on top of that, what I brought to his saying is, but you better make damn sure you have a great steak. Because for me, as a seasoned CPG entrepreneur, I really don't care initially about any of the packaging, social media, any of the sizzle, the product has got to be amazing, because you only get one chance to make a great first impression. That's it. And so the product must be must be great. So when we started, our whole focus was big box retail, and we had a lot of distribution with Walgreens and Walmart and CVS. And actually, I would also encourage your listeners and those on this podcast to visit my. Website, because I put a chart that shows the pathway by which I landed all of the retailers, and I hope they're not surprised to see that my journey took 15 years to create full blown national distribution. It took four years to get Walgreens, eight years for Walmart, nine years for target, 12 years for Rite Aid, 15 years for CVS. So think about that, 15 years of traveling from California to Rhode Island, Woonsocket, Rhode Island, to meet with category managers, to hear, no, no, no, no, no, no, no, no, no. And then finally, yes. So to your point, the we had a big box retail business. We embraced the new technology and it the internet and E commerce wasn't really a factor for us until it became a factor for us. And I'll explain the transition of what happened, which was with Amazon, we were among the first brands to sell earplugs on Amazon. Going back to, I believe it was 2007 was when we we officially launched with them. And then what occurred was in the economic correction of 2008 2009 2010 retailers shifted their focus from national brand for those categories that they could shift to store brand. So Mariah, you've probably seen if you shop at Walgreens or CVS, store brand is extremely important. Why is it important? Because it gives the retailer the opportunity to properly monetize and maximize their relationship with the consumer. And really, what does that mean? That means eliminating national brands, which then equates to additional profit margin because now they own the brand, they have the direct relationship with the manufacturers. And oh, by the way, if a certain manufacturer is not performing to their liking, they can sub out the manufacturer for another without changing really, the brand, provided that the quality is the same. So, so we went on this journey, and as of 2010 things shifted because store brand became important. That's when I started building a manufacturing company to build support for our national retailers for store brand, because margin was getting squeezed. And on top of it at that same time, what we saw was our Amazon business hockey stick up because the retailers were going TO to store brand, but what they didn't really realize is that we had 20 years of loyal shoppers that only wanted our heroes and sleep Pretty in Pink products. So that led to the growth of our online business and and for a small business like mine, at that time, we had a $2 million business on Amazon that was generating a million dollars in profit. So that's really that a 50% to the bottom line was, was the axon? So lot of things to unpack on that one. I hope, I hope I was able to address what you needed from that.
Mariah Parsons 23:30
Yes, yeah, it's so interesting to think about how store brand plays into it, because you're exactly right that it's like the power of said retailer to be able to say, like, okay, my margins. I can, you know, most store brand products are a lower price point than, say, a your your typical brand that exists and not in any of these spaces. And they're able to say, you know, this is our store. This is our product. So we are able to mark it down a bit, and then people will go sometimes, if they're looking to be cost effective with said store brand.
Doug Pick 24:07
And by the way, I will say one in regard to that, there is another strategy that retailers have used with store brand, which is very smart, and I respect and I understand, which is, they will look at a category of earplugs, and they will say, I'm just going to give an example. Our number one seller is a 10 pair of earplugs that, under the national brand, sells for 499 and we're making 50% profit on it. Well, what if we were to replace that national brand? Hold that retail of 499, but now increase our profit margin to 65% because the retailer believes, and it is accurate, that they own the relationship with. The shopper. So if, if there is trust and confidence in the store brand, they sometimes can get away with making higher margins even though they're not selling national brand. It's, it's really interesting how that works. Yeah, and actually, that was just another example for your your podcast listeners, to look at is on on my website for Doug pick com, there is a free box set which I wrote and narrated. It's called from zero to hero, and it's my journey to sell 500 million earplugs. There's five stories. One of the stories is, was my journey. When I worked with Rite Aid, it took three years to transition them from a what we call the hybrid strategy, which was a combination of national brand with store brand. And because we had the manufacturing and we had cost advantages, we were able to take away a large chunk of business from one of our number one competitors, because we were able to persuade Rite Aid management that they could make bigger profits without sacrificing quality by moving to a complete store brand strategy. And if you shop at Rite Aid today, you will see the products that I developed for them and and that was a that was a wholesale shift, and it was a big coup for my little, my little business at that time.
Mariah Parsons 26:33
Yeah, yeah. That's, that's really interesting, yeah, all these different dynamics. And this is why I love talking people in the space, just because how would someone know that, unless they've actually been in the room and seen these, you know, these updates roll out. And I think it is so, so interesting, because a lot of the times, consumers sometimes don't even know why they're picking something up, right? Like, sometimes it's just out of habit, or they, you know, someone told them that this is something you need to try, or they saw it on, you know, on the shelf, right? Like, there's all these different reasons why someone decides to actually purchase, yeah, this set of earplugs versus another set. Or, right? Like, there's so many different things that it's that's why it's so fascinating to learn about the behind the scenes of what is say a retailer doing to kind of set up a consumer to make this choice, maybe over another choice, by the way, I'll
Doug Pick 27:29
also share one insight to that which, again, this, this is the game of retail. Part of part of the negotiation was the exit strategy. So, Mariah, you might think, What do you mean exit strategy? Well, if I'm a retailer, and in this case, with Rite Aid, at the time, they had 3500 stores, and they've got all this inventory on this national brand, and we're coming in with store brand, well, they can't exactly. They probably could, but in this case, they they didn't want to, they didn't want to return the product to the national brand. So what I had to build into my financials was the exit strategy. And what that means is that after the sell down period of saying, Okay, this is a final markdown on this national brand. If there was any leftover inventory, my company would have to buy it. Yep. So again, you wonder, like, what? Maybe you wonder, maybe you don't. But that's what happens behind the scenes. Is every retailer is not going to lose any money on somebody else's product, the vendor that is coming in is going to be responsible for their exit strategy. Now it just turned out that how things happened, we didn't end up paying anything, but we were prepared to in the financial analysis so that we knew when we would start to break even on that, on the relationship based upon, literally, with hundreds of 1000s of dollars in merchandise that we would have to take back. But it all worked out great. Yeah,
Mariah Parsons 29:14
I mean, it's great for you. And I know there's definitely brands out there who it hasn't worked out that way, right, who had to buy back inventory. And I think that is something that it's great for us to kind of lower the like the curtain on, because I think a lot of the times consumers would assume, and probably because we're all consumers first, over before founders or business people or anything, right? It's easy to assume that the retailer, that the bigger company, is going to take on that loss, and they're not, because they know the power. They know that they're a channel for you to distribute your products. And so I think it's a really, really good point that you call that out and say, you know, also on the back end, like it's not. Us getting into stores, but it's the whole relationship. And you have to think about, okay, if you don't sell and you don't you have to be ready to fully invest, because it's not just enough to get on the shelves. Then you have to market and make sure people go to those stores to buy them, so that they're off the shelf. The inventory is out, and then the retailer is placing another um order with you, and then, right, like, it keeps it keeps cycling. And I know someone, another founder, who expressed she was just getting started in retail in the Chicago area, and she was saying she's, like, these 12 months, like, I'm red, I'm buckling up. It has to be a super, super effective 12 months because, like, that's basically, you know, that's what she that's the time she has to prove, like, I am worth it to be in your source,
Doug Pick 30:49
by the way. The the the timeline is somewhat subjective, believe it or not. And, and I'll give you a real world story that happened in my business, which was there was a grocery chain in the Northeast that I had been working on for 12 years. Wonderful retailer. We landed the account. We shipped the first order. We shipped the second order. There was some misunderstanding related to when the product needed to arrive at the retailer's distribution center, and our product landed a day late. The the Category Manager kicked us out of the chain because we were a day late, wow, and we and we didn't get back in. So execution, you know, someone was asked me, What's the one thing you have to get right when you're a CPG founder, and it's one word, everything? Yeah, you have to get everything right all the time, 24 hours a day. Um, you know, there's there, as long as you have a good team and you understand what are the expectations for when products or your shipments are expected into their distribution centers. It can go okay, if, if you are lackadaisical, or you have someone that is a weak link of the chain, it will cost you dearly. And sometimes the relationship, Yep,
Mariah Parsons 32:19
yeah, it's a good it's a good thing to highlight. And I think too, with you know, you have to juggle everything at once to put that into your financial plan as well, right? Like, what? What kind of safety net are you giving? What kind of cash flow do you have to make sure that the inevitable, because you're not you want you have to do everything, and you have to do it well. But things are gonna things are not gonna pan out the way you anticipate them, right? So it's also on the other side, knowing, okay, yes, I'm going to make sure the people around me and myself execute, but also you're gonna have, you're gonna stumble somewhere, and even if it's not even your own fault, right? Like, look at what was happening with shipping and, um, like, shipmageddon, I think, is what people were calling it, right, where it's just, like, Aha, like, such a big haul of products just being held up. And that's what happens. And so it's like, the mitigation of it is a is an interesting game to play, and that's why I will really encourage listeners, either listen or read, to stop or go, just to kind of dive into a little bit more of the financial side of things, and like the things that you just don't even know about. Because, I mean,
Doug Pick 33:33
I'll mention another dirty little secret relative to retailers, that it's really important that CPG founders have on their radar when they get into the space, because it inevitably will come onto their radar. And that is one ugly word, which is called charge back. Charge backs are Wow. They are one of the reasons that I needed space away from CPG after I sold the company and then worked with the company that bought mine, was because chargebacks are like atom bombs being thrown at you and and when it's really important for prospective founders or founders to know that are interested to get into big box retail, that once you ship a product, let's assume, I love to ask founders a question, assume, for a moment that you just shipped a truckload to target. Are you happy? And the answer should be no, the time that you should be happy is when you get payment in full for that shipment, because there's a lot of things that can happen in between. And in particular, I'll give you one example that occurred with a retailer, which was we had a long standing relationship and the way. Purchase Orders are cut as well as paid is through what's called EDI. I don't know if you've heard of the EDI before, but that stands for Electronic Data Interchange. Purchase Orders are not facts. They're all coming over now. It's over the internet, and they're also through EDI over the Internet through companies like SPS commerce that helped to communicate between the vendors and the retailers. Well, what happened somewhere along the way, our cost didn't change for one particular item. The case cost of this one item I'll I'll provide, as the example, was $235.52 $235.20 $235.20 Well, somewhere between the time that the purchase order was cut for 235 20 and when the payment was made, it just so happened that the decimal point moved one over, so that they Were now paying at a 90% discount, which was $23.52 and and the way that this particular retailer had the game set up was their accounts receivable was in another country, in a completely different time zone, where people don't speak great English. Well, that that's great for the retailer, but for the vendors that have issues, it makes it extremely difficult. And this went on for months so and you can't disrupt the flow of product, otherwise it creates problems. The Category Manager wasn't taking responsibility. I was simply told, just deal with accounting. I was working through the protocols. It literally took six months to work out, and they owed us over $100,000 by the time this was all done. And it was for my small company that it was like insane stress. It was like a constant thing I had to monitor. And the only way that I ultimately resolved it was I went to LinkedIn and did a search for the Senior Vice President of Finance the CFO, and I literally called and left messages for these people. And fortunately, I was able to reach someone that was was able to engage and help me solve it. But that was, that was a that was a real Death Punch for a for a period of time. Yeah,
Mariah Parsons 37:27
no, that's, that's another great I like that. You know, dirty little secret of this is what an experience was. And to to kind of watch out for it and make sure that all, you know, all the papers, all the decimal points, all of the all of the different interactions are, are, you know, do everyone's doing good on their part and making sure that, you know, there's nothing that is going on that wasn't agreed upon or is figured out? And it's that, if, for a small business, I mean, 100,000 in six months is a lot, right? Like, some people, that's their runway, right? So I think it's, it's a great point, and this is why I appreciate you coming on and being vulnerable and sharing about these points. Because I think it could also be easy to fall into like, oh, you know, I didn't know this, but, like, I'm just going to let that be water under the bridge or anything else, but no, like, your power is in your experience and your word and sharing with other people. And that's why I really commend people like you who are like, No, this was, this was something I had to learn the hard way, and it sucked to go through it, and I don't wish that upon anyone else. So like, if it helps you to know about my story, even just to watch out for it and know that it's a thing, I think that's one of the most valuable things we can do as as humans for each other. So I really, really appreciate you sharing, and I know we're getting close to wrapping up, which is crazy, because I feel like we're just getting started. But I also wanted to ask you about the role of branding when you are thinking about retail versus e commerce. And I bring this up because, you know, I agree a quality product is that is going to be the most essential thing for someone to, you know, come back and shop with your brand again and really enjoy the first interaction, and I see this with the software company that I work with, Malomo, right? Like we're all about that first impression for the customer experience and order tracking, right? Like these things make a difference. And I would love to hear your opinion on how is branding different when you're in retail, obviously, a lot of people are trying to stand out on shelves. And it's trying to convey, you know, their mission in in as little as possible, words, right? Because you have a couple of seconds to grab that attention. Um, and so I would love to kind of hear like, how do you think about the differences with branding, or are there not, do you not think they're strong enough to. Like all of that would be really interesting, sure,
Doug Pick 40:02
sure. Well, I'll take you back to a memory that I had when I first started investigating heroes. I had zero CPG experience. I was coming from the music business. I worked at A and M Records when I first got out of college, and so I dive into this research project called Heroes. I don't know anything about packaging, branding, market. I had very little money on top of it, so literally, what I did Mariah and I can still see myself doing this. I went to a local Los Angeles based drug store called thrifty drug they were very prevalent in Los Angeles, and I sat on the floor of the retailer staring at packages of Colgate toothpaste, crest Band Aid, Budweiser beer, Coca Cola. I'm trying to think like, what, what do these big brands, what do they do, and how do they do it, and and that just started this kind of I became a student of packaging. And I love packaging, all the packages that anyone might see, or any of the product concepts, or any of the products on heroes.com they came from between my two years. The branding came from between my two ears. And a lot of that was just going to retailers and walking the aisles and being putting myself in the space of a consumer, and that is, you're not really thinking a lot of the times when you're shopping, but what stops you in your tracks. So in regards to branding, if someone is looking at and I'm doing this right now, for a few different categories, one is in the wound care Band Aid category, I'll give you an example. What is the what are the colors, what are the what are the formats by which the packaging is presented to the consumer? Well, whatever the whatever the current guys are doing, I'm going to do something different, because I need to stand out. So when you're on shelf, you must, like you said, a couple of seconds to get someone's attention. No, it is a millisecond. It is a literal glance of the out of the corner of your eye. What stops you? And that's how I designed the hero's packages and sleep pretty in pink. It was all like, how do we do something to stop that consumer, to to compel Mariah to go pick it up off the shelf and say, What is this? Because if I can, if I can prompt Mariah to pick the package up off the shelf, I feel like I'm 50% of the way there to the sale. Mm, hmm, because for her to actually put it back when she's already intrigued, and as long as the price and everything makes sense and she has that need, it's probably going to end up in her basket. So from the retail standpoint, that is, that's the Vantage that I always took and I and I worked, I worked in my in my history of packaging, I've only worked with three different package designers, because package design for for those that have designed packages, it's very much like dancing chemistry. A dancing partner, if you were my partner, Mariah on the dance floor, you would be able to anticipate when my when my right foot is going to move forward, so your left foot can move back. And package designers are very much like that as well. They get in the head of who their client is, and they can anticipate the moves. And sometimes I design packages with with those three individuals, where they came up with something just based upon a white piece of paper, paper Elementary School drawing that I came up with, because I can't draw a straight line to save my life, and they would deliver beautiful three Ds of brands and packages. And I'm like, that's what I'm looking for. So that's for specific, for retail, if we're talking e commerce, my sense is it is a completely different thing. And the beauty of E commerce is that if someone arrives at your site, and I'll use Mariah lipsticks, I don't know, I hope you are, you're going to get into that space.
Mariah Parsons 44:30
Yeah? Now, after this, I feel like I have to,
Doug Pick 44:34
I'll help you. Yeah, there we go. If you get so when you're designing that, you have the time to create video testimonials with others that are using the product. Interesting packaging, although packaging, in some regards, in a fashion brand like lipstick, you need to do something special. But packaging, sometimes with econ. Products isn't as important, but I would default to you always need to be prepared for going to big box. So you might as well put the investment in in advance and do it right, because when consumers get the product, what's their experience like, when when it comes and that includes the shipping box like, if what would what would appeal to Mariah lipsticks customers? More a brown corrugated box with an ugly USPS label, or a pink, purple and yellow box that's got Mariah lipsticks on all corners and all sides of the boxes it it's all about having that first experience. So there's a I think, with E commerce, it's very complicated. Has to be very thought through with. And by the way, I also agree with you that the first way to go did you want to find product market fit with your product, you would be insane, even if you had the opportunity to go into full scale national distribution on any product with a target or a CVS, because unless you have a crystal ball, you don't know what you don't know. And you've got to have product market fit. You've got to know that you've got shoppers that will perhaps buy your product at these retailer doors and or that your your brand is resonating with the shopper, so that, if you take that risk and you go into, you know, 8000 Walgreen doors that You have a high likelihood of that sell through, because, if not, you're going to eat it. Yeah.
Mariah Parsons 46:44
And two, I think, like retails nowadays, retailers now nowadays, I would think they aren't even going to look at you unless you have some type of presence, right. Like, or, or you really are that new of a category where they're like, Oh yeah, like, we know our customers will love this, because it's innovative, right? But, yeah, I think, I think there's, there's a, there's a long term game there for sure, of, how do you prove, in a in a channel, that you can control yourself as a startup founder like E commerce, be part of the, you know, branding and packaging and all that fun stuff, and then ultimately scale to the point of working with retailers, and, by
Doug Pick 47:31
the way, as part of the stop or go philosophy in the spirit of prudence, there are some of your listeners that may have scaling, DTC, Amazon, brands that could do the calculus of, we've got this. We're doing ten million in sales. We're dropping 2.5 million to the bottom line. What's the risk assessment of the fact that target came to us and said, we want to do business with you. But when you start to drill down, you might find that it's not something you want to do. Yeah,
Mariah Parsons 48:10
yeah, exactly. And that's I I've met founders who are like, it is not the right time for us to go into retail, like we're not ready for it and we can't, you know, we don't want to go in too soon and then have it be a disaster, and then either break that relationship or, you know, have it, have it, tank your the rest of your business, that's going well, right? So I think it's a, it's definitely, there's a lot of factors to consider, um, and I think timing is a huge, huge aspect of it. So I know our listeners are going to love this episode. It was exactly what I wanted of, you know, deep dive into retail and kind of behind the scenes that you wouldn't know unless you've been there. And so thank you, Doug for being so willing to share and coming on the podcast, making the time. It's been a joy to have you. So thank you. Oh,
Doug Pick 49:00
my pleasure. And it's been, it's been, it's been a lot of fun to chat with you. Oh, good.
Mariah Parsons 49:03
I'm so glad. Okay, wow. What a good episode. Thank you, Doug, and we'll chat soon. Sounds
Doug Pick 49:08
great. Thank you.
Mariah Parsons 49:16
Hello everyone. It's Mariah, again. I am just popping in to say thank you for listening to today's episode, and I am so so so grateful that I have been able to be on this journey for the past couple of years with this podcast, it's been phenomenal to grow and see our community of 1000s of listeners. See what you guys are up to, what you're learning, what you want to hear about next. So if you haven't already, please like and subscribe to the show so we can continue doing this. Leave us a review. Let us know your thoughts. Follow us on our new social media channels and check out our newly launched website. If you or someone you know would be a great guest for the show, please do not be shy. Fill up the form that we have on there, because those are some of my favorite. Interviews, and I will make sure that our new website is linked in the bio. It's retention Chronicles podcast.com and as always, let's give a warm shout out to our day one sponsor, Malomo. As you already know, Malomo is an order tracking platform that enables Shopify brands to take control of their transactional email and SMS through branded order tracking. What does that mean? That means you ditch those boring carrier tracking pages, the all white pages that have nothing on them but a tracking number, and update on the date of your estimated arrival, and swap those with pages that actually match your brand and can help you convert on some of your goals customers like you and I obsessively check that tracking page when we're looking for our order at our doorstep, an average of 4.6 times. If you can believe it, yes, customers are going to that page 4.6 times. So don't waste out on all that customer engagement and instead, send them to a page that converts in the way that you want it to. I am talking dealing with shipping issues, having cross sells and upsells, having your social media on there, your loyalty programs, anything, anything that you can imagine. So if you want to learn more about how to do that, go to go malomo.com that's G O M, a, l o m, o.com and if you didn't get that, don't worry. That website link for our sponsor, as well as our podcast website are linked in our episode description. So with that, I will sign off and see you all next time you.
