COFOUNDER, RICHER POORER
Tim discusses building an omnichannel DTC brand and how to grow in a saturated market. Bralettes FTW!
In this episode you will learn from Tim:
- How a high-growth apparel brand successfully expanded from wholesale to direct-to-consumer
- Creative retail problem solving in the era of COVID
- Transitioning from niche product categories to cross-category assortment and promotion
- Transitioning from a 3PL warehouse to owned distribution center
- Key DTC KPIs including contribution margin ROI analysis of marketing campaigns and decisioning on customer lifetime value (CLV)
- Using ecommerce and DTC as demand signals for your wholesale buyers for omnichannel success
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Eric Best 0:00
SoundCommerce is a real time and predictive data platform for retailers and consumer brands. Our thesis at SoundCommerce is simple. We believe that consumer brands have the power to make the world a better place and direct to consumer is the model to make it happen. This podcast is about the people behind the brands we love and the moves they made to turn those great brands into great customer centric businesses.
I’m your host Eric Best, founder and CEO at SoundCommerce.
My guest today is Tim Morse. He’s a 10 year veteran of Silicon Valley technology companies, including a stint at Unicorn Media sold to Bright Cove. He was a Co-founder of Circular Technologies where he led revenue and growth, and he’s now Co-founder and President at Richer Poorer in San Juan Capistrano, California. Which seems like a perfect fit, given his passion for fashion, surfing and SoCal lifestyle. And I should mention Tim is a longtime friend and associate. How are you Tim?
Tim Morse 1:01
I’m doing fantastic, Eric. Thanks for having me.
Well, I know it’s a crazy time to be working in the consumer brand and retail space given COVID and everything that’s happening globally with that. But maybe before we touch on the impact that’s had on your business, we can step back and you can tell us a little bit about your founding story and your journey to Richer Poorer, how you met your Co-founder, Iva, and how you guys started the company.
I was born and raised in Laguna beach, California, you know, love skateboarding and everything that came with it. So I always loved fashion. I loved working in retail. I loved bringing product to market. And I was around a lot of these guys that were, you know, innovating the time. And so fast forward as I graduated through college I ended up in the Valley, as you mentioned earlier. I spent about 10 years up there working for some of the best startups and I learned a tremendous amount around having to be incredibly nimble at a time in rapid growth.
And as I kind of looked at what my next move was going to be after Web1.O and dotcom meltdown then, I moved back to Southern California and worked for a friend of mine who started a company called Unicorn Media and Unicorn Media had developed an amazing advertising mobile application. We worked with some of the largest media companies in the world, like ESPN, ABC, Fox, and so on. And we ended up selling that company to a company out of Cambridge Massachusetts called Bright Cove.
It was at that time, I met my now co-founder and great friend, Iva Pawling, her brother-in-law and I went to high school together. And her sister owns a fantastic company called Gorjana, who you may have heard of, beautiful jewelry, they have about 17 stores around the U.S. and you know, Iva has very entrepreneurial spirit, as do I, I have no lack of ideas. I understand where my limitations are and that you need somebody to execute on those ideas. So I had pitched Iva, who was then working for her sister at the time running all marketing and operations, I pitched her on a few different ideas.
One of the ideas that she really leaned into was this idea that I’d had since I was living in the Bay area, which was starting a sock brand. We were just coming out of the economic downturn of 2007, so this is 2009 when I presented the idea to her. First thing, you had a very different propensity for people’s spending habits the pendulum had swung from this period of excess to maybe a bit more minimalism. And so I thought that socks were a good article of clothing that you could add into an assortment for you know $12 you could roll up a pair of jeans you get throw on a pair of converse and a white tee shirt, and you could really look fresh.
I was always wearing cool pairs of socks as a way to show off some personality, without having to pair a tie. So, it was something that was of interest to me. And so when I presented the idea to Iva , she looked at it from the business perspective and said, hey listen, I understand margins and jewelry really well and it seems like we have some similar opportunities here with socks.
And so we just jumped in. I mean, this was in May of 2010 when we decided to move forward, and we were in market in November of 2010 so it happened pretty quickly once we decided to move forward.
Where did the first sales come from? And what did the channel mix look like when you guys launched?
When we launched, we launched directly into wholesale and, and we did that for a couple of reasons. One is we felt if we were wanting to build a brand that really stood the test of time. Again, this is back in 2010, and so we hired a showroom and we were fortunate to get into some really great accounts right out of the gates, including Nordstrom and American Rag and Steve & Allen and others. And so for about the first year and a half, we didn’t even have a website. We only focused on wholesale retailers. We worked with the best wholesale retailers in the U.S. We felt if we started at the top you could always move down and so yeah, it was for about a year and a half we didn’t even have a website.
Yeah that’s amazing. So was there a pivotal moment where you knew that the brand was taking off and, and gaining traction?
You know, we were really surprised to see the success we saw right out of the gates. I think a lot of it had to do with timing, where we were within the economy, the shift in fashion. So when we started to see really good sell through at some of those accounts I mentioned earlier. We knew that we were on to something and we knew that we had struck a cord with the customer and we were just focused on the male customer at the time. That’s maybe worth noting is we were just a men’s sock brand. So, you know, when we started to see some really strong sell through it at these retailers, we thought, oh wow, this is, you know, an interesting category that we’re in.
And then we also saw some other players come into the market. There was a company by the name of Stance that entered into the sock market. They raised about $120 or $130 million from some of the most esteemed VCs in the country. So them along with some others really validated the space.
Yeah. Well, for folks that may not be familiar with the brand, do you want to talk a little bit about Richer Poorer today?
Tell us a little bit about the product assortment and especially the brand narrative.
So Richer Poorer today is a lot different than it was 10 years ago. And I think that that’s been a testament to both, really to Iva and myself and the rest of the team, and the fact that we are never complacent in the type of business that we wanted to build.
If you look at the mix of the brand now, we’re about 80% women’s, 20% men’s. Socks only makeup maybe even a single digit of that revenue. We focus on selling comfort. We have a tagline that we sell confidence and comfort, and if you look at our product assortment now it’s all around this casual California lifestyle. It’s high quality product at an attainable price point, hence the name Richer Poorer and the juxtaposition of those words. And that’s always kind of been our brand that we focus on. Wanting to provide high quality product, well designed. We use really great factories that we vet all over the world. And so we are constantly looking at new categories, new opportunities in the market around this California lifestyle and comfort.
And you said that you started predominantly in wholesale. I can imagine that this whole COVID thing has changed the outlook in terms of traditional retailing. But, what did the channel mix look like coming into 2020 and then how has that changed in the last month or so?
So, we started investing about 24 months ago into our online business. Up until then we had a resource or about a resource and a half, really focuse d on e-commerce. Coming into 2020 we were about a 70/30 mix – 70%. Wholesale, 30% a DTC. and as we started to move into 2020, we were trying to get maybe closer to a 60/40 mix – 60% wholesale, 40% DTC. And, as has happened with the COVID situation, I was just looking at the numbers prior to jumping on with you, Eric, and we’re up about 200% year over year on our DTC business. Our DTC business is gonna make up probably closer to 70%, 80% of our revenue for 2020. And we would expect about 20% from wholesale.
So it’s, you know, we’ve seen a massive shift in our online business. I think a lot of it has to do with the fact that lounge wear and what we sell has become the new work wear . People want to be comfortable. It’s the type of product we sell. And so we’ve seen a huge spike in our online, a surge in our online business.
And another factor is, is that we own and operate our own warehouse. So we’re getting product in the hands of customers very quickly, delivering product to our customers within two days. So usually if an order gets in by 12 o’clock it’ll ship same day and it’ll get to New York in two days.
Yeah. I want to ask you a little bit about how you’re thinking about digital marketing and also, just the distinction between DTC operations and the wholesale operations that kind of characterize the business prior. But first, I just know that apparel is such a competitive category. Consumers are fickle, building a brand is hard, tell us just a little bit about how you have been able to carve out this niche in the market and sustain that, or maybe stated differently. How do you think about disrupting the industry?
Sure, You’re right, it is. Incredibly competitive. And I think that one thing that Iva I have been focused on since day one is, is building a brand and building a community that will stand the test of time.
If it’s hard to explain what you do, you’re doing something wrong. And it took us a long time to reach that point. But we sell, as I mentioned earlier, confidence and comfort. And we sell soft product. We’re not selling overly technical product. You know it’s not made of seaweed o r some sort of silver threading it’s just really comfortable cotton based product. And so once we landed there, then we realized, okay, what is our opportunity in the market? And if you look at some of the, especially the women’s contemporary market where we’re having some incredible success, you have a lot of brands that are selling women’s t-shirts for two, three times the amount that we are and the quality is certainly not there.
And we feel like our opportunity is we’re providing a good quality product, at that attainable price point. I think the nice part about where we started in wholesale is we built our margins for wholesale margins and then as you start to scale online it only gets better. So it allows us to get creative when you start to talk about customer acquisition and making sure you’re profitable on and responsible on your first order.
So, the way that we’re looking at it is how do we disrupt a commoditized market. Well we’re disrupting it by communicating with our customers, giving them really, really good product. If you look at getting it to them on time, if you look at our customer retention and our reorder velocity we’re seeing customers ordering things within two to three weeks in the current environment. So it’s obviously what their first purchase after their first purchase. So cool. It’s obviously resonating.
Yeah. Well, that’s a good segue to the marketing discussion. So DTC is now a material component of the business. How are you acquiring customers? How have you seen the marketing channel mix evolve. I know recently for instance costs have come down on channels like Facebook and Instagram. Are you guys experimenting with TikTok yet? Like where are you finding the opportunity?
Where we’re seeing the opportunity is in social selling. You know, if people reach out to us, which they do every day, we’ll certainly gift product, and if you like it, great post on it. If not, that’s okay too. And we’ve been fortunate that we’ve seen a lot of really incredible, interesting people posting about Richer Poorer via Instagram. And I think with that, the word of mouth marketing is, tremendous during this time. So Instagram has been a very profitable channel for us. Facebook continues to be, as you mentioned, costs are coming down.
We’re working with a great agency out of Seattle right now. One of the things we’re is we’re testing this King of the Hill approach to ads and, it’s a really unique proposition.
What’s working? We’re putting more and more money behind it, pouring money on top of it, and then we’re iterating on top of that. But again, it’s that King of the Hill approach, it lets you know the best ad win, so to speak. Some other areas of interest where, you know, we’re kicking around ideas of, of potential catalogs for the back half of the year into the first part of next year .
That’s interesting, you mean print catalogs?
Yeah. I think the type of product that we offer lends itself well to, to catalogs like that.
So, between social selling, Facebook, maybe looking at some billboard at some certain cities, and so I think now’s a really good time to test new distribution channels and new ad channels. So we’re pretty open minded about it.
Hey, let’s switch gears and talk a little bit about post-conversion. So, you know, as you think about customer experience and what drives that repeat engagement with the brand, how do you guys think about that? What are you doing to maximize the experiential commerce as it’s referred to and how has that evolved?
The most important decisions we mad e a year and a half, two years ago was to actually bring our fulfillment in house. So we are working with a 3PL and it was really hard for us to do exactly that ; be nimble to customer demands, being able to prioritize certain customers when you work in more of that FIFO model that 3PLS typically offer. So we spent a lot of money, set up some infrastructure on our own warehouse, and now we actually own and operate our own warehouse, which allows us to then deliver that surprise and delight to customers you know, drop a pair of socks in — handwritten note.
That makes a lot of sense. What about on the retention marketing side?
We have brought in channel managers across the organization. So now we’re really focusing on our email marketing, the email retention, and making sure that we cohort customers properly and are delivering them really great offers or experiences based on their purchase intent or purchase habit.
We’ve invested in everything from the warehouse side and fulfillment, ,, we’re getting product to customers within two days. And the experience, when the customer gets our product, they’re in some beautifully branded Richer Poorer bags. They’re made from non Virgin plastic, they’re compostable , our hang tags , and the experience when they actually open the product, know, have, have really leveled up. So, we’re looking at all aspects, not just the product itself, but what is that experience? And I think that, what’s important for us is we’re using data to inform all of those decisions
Yeah. It’s near and dear to our hearts at SoundCommerce. Two questions related to that, actually, as we segue into data and this final topic area for today. I know that in the past you’ve spoken about using your direct to consumer insights to inform how you approach the wholesale channel. I’d be curious to get your thoughts on that. And then I’d love to talk about kind of the KPIs, the core metrics that you think are most important to measure today.
Yeah, it’s interesting as you start to look at the evolution of wholesale and where it’s headed. I think we’re going to probably lose 30 to 40% of the retailers that were working with I think even post COVID things are going to look a lot different whether that’s them asking brands like us to drop ship for them. whether that’s just being more responsive and nimble to their inventory, getting access to their POS systems so that we can just be proactive and ship them product. If we see that there’s, you know, they’re running below a minimum of five units of a particular sku. So the nice part about DTC is that you have immediate access to that data. And so we’re taking that information and then we’re actually trying to really be transparent across our wholesale organization and say, hey, listen, like, you know, if you have a retail store in Chicago and we see that a lot of people in Chicago are buying black Richer Poorer long-sleeve t-shirts, we want to make sure that those retailers understand that and know that and, and buy, right. Because I think that part of the challenge in the past with a lot of these retailers is they buy blindly and just based on gut and emotion and not necessarily on what the data is telling them.
And so if we can help make their businesses more profitable and more sustainable, then we feel like we’re doing our job in the whole ecosystem of being a true omnichannel partner.
And then on the KPI front I don’t know if you guys are tracking to metrics like customer lifetime value or how you think about areas like contribution margin, variable costs of the business. But maybe you could talk just a little bit about some of the KPIs that matter the most today.
Yeah, I mean, I think the big one for us is making sure that we are running a profitable, responsible model and that’s being profitable on the first order that’s building a sustainable business. So that’s, I think our number one KPI.
The second one that we’re really focused on is that customer retention and that reorder velocity. If you think about somebody going to a grocery store every couple of weeks or every week, right? We’re starting to see that anywhere from 15 to 30 days, we’re seeing reorders. And somebody may come back for one tee shirt, somebody who may come back for one pair of boxer briefs. It’s becoming that essentials brand for a lot of these customers. if you can create that flywheel and have these customers constantly coming back and we’re doing a job of delivering newness and really good product in the market, that that’s where we’re building a lot of brand value.
We’re heavily focused on using the customer information to inform what our product roadmap’s going to look like. We’re constantly using customer service and that customer feedback loop to help inform our design and marketing decisions.
Yeah. if you’re speaking to other brand founders or brand operators about these things is there one particular piece of advice that you might offer up that you learned the hard way over the course of the Richer Poorer history?
What I think is germane and relevant now is, you have to move fast and you have to master this moment of chaos. I mean, I think for us, we get on as an executive team every single day to say, Hey, like we’ve got to continue to innovate. We’ve got to continue to move fast. We’ve got to continue to be nimble because the environment is so dynamic right now. And just when you think we’re up 200% year over year, things could really change on us. And so we’re, we’re never complacent, I think it’s just being kind of comfortable in this chaos right now and moving fast.
Well, Tim, really appreciate your time today. I’ve got one last question for ya.
And that is how’s the surf? And can you socially distance on a surf board? Have you been out in the water?
I have. I actually surfed yesterday. The surf’s been incredible. We’ve been getting some good weather. You know, they’ve closed down a lot of the beaches, it’s interesting, some of the state beaches are closed. The County beaches are open so there are a couple spots we can still get in the water and you know, summer’s right around the corner the water’s warming up the surf is good. So things will loosen up here soon and we can all get outside and enjoy it.
And the URL for Richer Poorer?
Yes, please go to Richer-Poorer.com.
Well, Tim, thanks again for being a guest today. Really awesome to catch up with you and hear the story and I appreciate the time.
Thank you, Eric and keep up all that great work over at SoundCommerce.
Thanks for listening to SoundCommerce with Eric Best. If you like our show and want to know more, check out www.soundcommerce.com or call 1-888-41-SOUND