Founding a company creates tremendous learning and growth opportunities for those involved. Jason Shuman, a VC at Corigin Ventures, looks back on his experience co-founding Category Five, a casual men’s footwear brand. Enter Jason:
When I was asked to write about the sales process at Category Five and how it evolved over the growth of the business, I thought back to 2012 and couldn’t believe how drastically the company changed in its approach to sales. I’ve crafted this post to share the story of Category Five, the pivots we made, why we made them, and what we learned along the way.
The Early Days: Senior Year of College
As a quick overview, I launched Category Five in July of 2012 after nearly 2 years of development, along with my four best friends. At the time, our aim was to create the most comfortable and durable men’s boat shoes on the market. Instead of launching and battling with the big players in the space, including Sperry and Sebago, we focused on empowering our customers to display their personality or affiliation via a custom embossing/heat stamp on the shoe.
Prior to the launch of the company, we spent an entire month recruiting campus reps across the country. That meant 12+ hour days locating the contact information for nearly every fraternity president at the top 100 colleges that we had identified. This process, which included emailing each one of them personally and having them forward that email onto the entire chapter, was meant to drive awareness to the brand, as well as garner applications.
In a matter of weeks, we generated over 500 campus rep applications, hired 120 campus reps, and were ready for launch.
Very quickly we learned two things from our sales and conversations with the reps:
- College students are better at collecting data for your company (e.g. email addresses) than generating sales
- We were onto something as sales were strong
During our “MVP” stage, orders took 4–6 weeks to receive — we would send the bulk orders to our Chinese manufacturer to make the shoes, on demand, and stamp before sending them to the States. However, we learned from customer service data that this needed to change.
Soon thereafter, we made the choice to move our manufacturing to the Dominican Republic. With our raw materials on a boat to the DR and a new manufacturer that refused to stamp the shoes at the factory and send them on demand, we invented a way to emboss the shoes in the United States post-production.
Truth be told, this was a turning point in our business; this meant that we would now be carrying inventory and could turn eCommerce orders around the next day.
Entering Retail: Spring 2013
After making the manufacturing change and graduating from college in the Spring, we realized that by shipping shoes the next day we were able to shorten the feedback loop from customers, drastically improve the customer experience and increase word of mouth marketing.
Right before graduation we reached out to the founders and CEOs of complementary brands including, Jim Twining at Southern Tide, Peter and Austin at Smathers & Branson and Matt and Andrew at Castaway. Those conversations helped us realize that the specialty retail market/independent stores had a need for a new casual men’s footwear brand.
Similar to how I imagine Vineyard Vines was able to find a home, we found that independent stores didn’t like how large brands like Sperry had a presence at Nordstrom, and also T.J. Maxx. Or in other words, these retailers needed a new brand to help them differentiate, and we felt that brand could be Category Five. Times were about to change.
How to Wholesale: The Tricks of The Trade
Retail is a completely different beast from eCommerce and it was something that we had to learn. This included figuring out things like what a line sheet was to what tradeshows we needed to be at; the learning curve was steep. To accelerate your own understanding, here’s a few pieces of advice to getting started:
- Reach Out To Other Founders In Your Space — Chances are that they won’t only give you advice, but they’ll also introduce you to retail partners and perhaps even save you time by providing you with forms that you’d otherwise have to create (e.g. a credit card authorization form).
- A Warm Intro Is Key — Identify the retail partners that you want to work with and find an introduction. Whether it’s from the 10–20 founders that you hopefully spoke with, or a friend that lives in the same town as that store, find any intro that you can. One strategy that we may or may not have used was reaching out to retail partners of the Founders that we spoke to and mentioned that they “recommended” that we reach out and meet at the tradeshows.
- Road Trip! — Prior to attending any tradeshows we drove up and down the East Coast to meet with the retailers face-to-face. This showed that we not only cared about our relationship, but we also cared about if the store was a good fit and how we would want to be merchandised there. This may not be the most time efficient method, but it’s something that I think every Founder should experience.
- Retail Requires Resources — Just like an eCommerce strategy, retail requires a lot of time, effort and resources. Founders need to think strategically as to how they’re going to structure their team on the retail side to handle all necessary functions. These include creating line sheets and catalogs, account management, setting up tradeshow sales meetings, designing a point of purchase display, implementing a SKU system and finally, booth design. These are all functions of the wholesale channel that require time and attention, so make sure you plan for them.
- Tradeshows — Tradeshows are going to be what helps you scale. Identify which tradeshows your target clients will be at and then sign up for them. They’re not cheap, so make sure you put sufficient effort into the design of the booth and setting up meetings ahead of time.
The Changes in Sales and Marketing: An Inflection Point
As our wholesale channel grew to nearly 60 stores, we aimed to add independent sales reps to the team. I managed that side of the business and had high hopes for the reps, but soon found that unless you were in the “A” or “B” bag, then these people wouldn’t produce.
Essentially, the “A” and “B” bags are the ones that the sales rep shows first and second. These bags carry the products that he or she believes will provide them with the greatest income (sales revenue X commission %). When hiring independent reps, make sure you understand where your product will sit with the lines that they carry. This is critical.
With sales reps struggling, and independent stores not moving large volumes, we were lucky to stumble upon our best channel yet… eCommerce.
With Jeff and Billy managing the site, they really started to get some traction. Starting with a focus on content marketing and customer service, we soon began to test other customer acquisition methods. Turns out that Facebook Ads worked pretty damn well for us and it increased our revenue drastically.
With a product that strongly resonated with affinity groups we began testing the following (in large part thanks to an awesome meeting with Andrew Krebs-Smith and his team at Social Fulcrum):
- Affinity groups (e.g. fraternities, golfers, boat owners, etc)
We quickly found that we could hyper-target various audiences and keep our costs of acquiring a customer low. Even with a CPA in the $8–25 range, we were making more profit than wholesale and had the ability to allocate fewer resources to it. At the end of the day, this is what truly pivoted our strategy and took our company in a different direction. A strategy driven by eCommerce.
What I Wish I Considered
In any startup you have a learning curve, but that’s part of the fun. To reduce that curve you should aim to surround yourself with talented and experienced individuals that are as driven as you. But more specific to Category Five, I wish I considered the following:
- Brand is much more than a logo — While I knew that a brand required much more thought and attention than just creating a logo, I didn’t truly think about the impact of a strong aspirational brand. From the tone of voice to the content you push out, think about every minor detail and make sure it’s on brand. Moreover, focus on your “Why” and come up with a differentiated brand that people can get behind. If you’re able to create a community around your brand than you will grow without even having to pay for advertising. Your customers will be your advertisers. Word of Mouth is Key to Success.
- Strength of Value Proposition — Take a step back for a second and evaluate your value proposition. Think about how your product and brand truly sit in the competitive landscape and try to figure out if it is differentiated enough (pending awesome execution, of course). At Category Five we understood that creating a more comfortable and durable shoe than Sperry was a tough sell, so we initially introduced the customization. However, that was never going to create a $100 million dollar company.
As a result, we started to really hone in on and tweak what our value prop was. We started working on a proprietary foot bed that would blow other brands out of the water — the goal being to make each style of shoe feel the same from one to the next (e.g. a boat shoe, wingtip, moc, etc). It was a foot bed that felt like tempurpedic out of the box, but a Nike shoe when you’re on a long walk in the city. Our belief was that the combination of the product features, our direct to consumer pricing and a stronger brand experience could help differentiate us from the competition.
- Growing Sales Requires Focus — Between being a VC and starting Category Five I’ve seen A LOT of consumer companies. The ones that have experienced exponential growth have all done an incredible job of focusing on one sales channel at a time. And owning it. They’ve mastered the sales channel that they either started with or pivoted to, and have worked tirelessly to build a passionate community around the brand.
- The Customer Experience. Details, Details, Details — The customer experience will make or break you in the social media age. VCs look at Net Promoter Score as an indicator of how much people love your brand and are willing to recommend it to someone. It’s hard to have a high NPS without an incredible customer experience and that requires a lot of attention. Some of these details include how the box looks and feels, what’s inside the packing, how quickly did the customer receive the order, was the shipping and return process transparent, how did the customer service person speak to me, was it easy to checkout, and so much more. I recommend you make an ongoing list of things that will make the customer experience better and implement them right away.
Some Good ‘Ol Resources
Hands down, speaking to other Founders is the most useful resource in my opinion. However, reading is a great getaway from your day to day and it’ll also help you with your business.
Some of my go-to resources for learning about sales, new tools, or methodologies include StartupStash.com, Tech Blogs (TechCrunch, Re/Code, Entrepreneur and Business Insider) and blogs or podcasts including View from the Seed, Mattermark Daily, The First Round Review and many others. While you could probably spend all day reading, I would really try to focus on what you’d like to learn about and then find articles on those blogs around that.
The fact is that starting a company and selling a consumer product is one of the hardest things to do in the world. Your plans will change over time and you’ll experience plenty of ups and downs along the way. Keep fighting through them and be resourceful. Focus on your brand and your product first. Distribution will come next. If you nail the first two, the latter should come naturally.
This post was originally published on Building Consumer Goods. Are you a consumer goods entrepreneur? Check out the site!