Welcome to the e-commerce podcast with me, your host, Matt Edmundson, the e-commerce podcast is all about helping you deliver e-commerce. Wow. Now I am stoked with today's guest, who is Evan Padgett from Stealth Venture Labs. We are chatting about everything you need to know to take over. Yes, with subscription. E-commerce Evan. Uh, legend.
Let me tell you, you going to love this conversation, but before we jump into it, let me give a quick shout out to some of our past guests and past guests and episodes. Uh, given that we are talking about everything you need to know to take home with subscription e-commerce. So today I thought it would be good to mention my conversation with Richard Schnitzel. If you ever saw the video, Richard was the guy with the bow tie. It's his signature look, and we got into all things automation.
How do you use automation to help your business? And the second episode, let me give a shout out. And actually this is not yet released. So you need to be subscribed to, to get access to this one. Right. You'll be notified when it comes out. It's a conversation I'm having with Cody Bramlett who built a subscription business in supplements. And so we're going to get into all of that. So you're not gonna want to miss that either.
So do check that one out and to, to listen to that one day to that one subscribe, it's going to be awesome. So this episode is brought to you by the E-commerce Cohort, a which helps you to deliver e-commerce well to your customers. Now you may well have got stuck in your e-commerce business, or like me, you may have got siloed into working on just one or two areas. You know, the areas that you kind of. You enjoy and you kind of forget all the other stuff.
Like we liked email marketing over here, and we liked this bit over here, but we forgot about all the other stuff. And let me tell you that was a big problem for us. And this is why I'm super passionate about e-commerce cohort. It's solves this problem. It's a lightweight membership group with guided monthly sprints to cycle through all the key areas of e-commerce. The sole purpose of cohort is to provide you with clear, actionable jobs to be done.
So you'll know what to work on and get the support you need to get it done. So whether you are just starting out here. Or if like me, you are a well established e-commerce. I encourage you to definitely check out ecommercecohorts.com. That's ecommercecohort.com. It is gearing up for its founding member launch. It is almost there and you are definitely going to want to check it out because of the offers on it are incredible for the founding members.
Uh, if you've got any questions, email me directly at Matt at ecommercepodcast.net with your questions, because let me tell you, I've said this before on the podcast. I'm super proud of it. I'm super proud of what's going to be happen happening with cohort. I wish I had it 10 years ago. Let me tell you, I really do so Evan Padgett is a 20 year e-commerce veteran with a experience in subscription commerce. He's also got a phenomenal sense of humor.
He's the COO of Stealth Venture Labs and e-commerce marketing firm. He works with brands like Crocs, hello Fresh Factor 75 and the list just goes on and on and on. He is awesome. He's a legend. When he's not taking over the world with subscription commerce, you'll find him hanging out with his kids playing video games. But his true love is American football. Don't hold it against him, but he's a die hard Denver Broncos fan. Someone has to be right. Sorry.
I have a notion that was said that that's just me poking fun. I'm not a Denver Broncos fan. I actually have a neighbor who was a really big Broncos fan actually here in the UK. Uh, but. I lived in Carolina. So I'm a Panthers fan, but there you go. We all have our cross to bear. Don't we? Anyway, this is not about American football. This is about subscription e-commerce uh, grab your notebooks, grab your pens, grab your cup of coffee. Uh, here is my conversation with Evan.
I am here with our very special guests all the way from Colorado in the USA. Evan, who is a 20 year old e-commerce veteran with experience in subscription commerce. Oh yes. As the COO of stealth venture labs and e-commerce marketing firm, he gets to work with some incredible brands like Crocs for example, and Hello, Fresh. So. Really keen to dig into this and pick his brains about this whole subscription thing.
When he's not taking over the world of subscription, e-commerce, you'll find him hanging out with his kids or playing video games. Uh, but his true love apparently is, uh, is, is the Denver Broncos. Is that right? Uh, Evan, you're a bit of a diehard. The Denver Broncos fan. I see diehard Denver Broncos fan diehard, kid at heart, still playing video games at 39 years old this year where you do the math in the industry for 20 years. So boom, half my life on the internet. So go. Yeah, absolutely.
So no wonder you're playing a computer. Yeah, exactly is very understanding spousal. Yeah, very, you know what? Um, the other day I was on a trip to the states. I was in your wonderful country with my 15 year old daughter and we were doing a bit of a road trip and we ended up in San Francisco and in San Francisco, there was this place called, um, I can't remember the name of it. Something like Antique Arcade or something like that.
And I said to Zoe, my daughter, I said, let's go in and have a look and maybe we'll see some of the, you know, some of the old sort of games and sure enough, you walked in and there were games like from the twenties, you know, some old pinball machines and it was incredible. And we were walking around and I heard, um, the star wars theme playing and I, I just grabbed my daughter's arm. And I was like, no, no, it can't be, it can't be. And she's like, what are you talking about?
I said, it can't be because when I was a kid, when I was a teenager, They used to be the shop in the village where I grew up. And in that shop, you would rent your videos a bit like, you know, our own version of blockbuster. And, uh, they had a few arcade machines in the back. One of which was the star wars Atari game, which was all sort of vector graphics. And I spent many, many a year playing that game and that's the only game I've ever been good at.
I mean, the only game I've ever been good at. And so when I heard the star wars. Uh, in this place. And lo and behold, there is the machine. I was like, I was like, Zoe c'mon, I've got, I spent hours in, he amusement a antique amusement arcade, and that was better than my 15 year old daughter has obviously grown up with computer games. So I still felt pretty good about myself, but that's as much as I can help with that whole, well, it sounds like you did the right thing.
Get some playtime in, be perfect for subscription models and you one of those, uh, to your house and. Therefore look at the value for our plate. I mean, it's amazing. Oh, it's just incredible. Do you know what? I went onto Google and I thought, I wonder how much it costs to buy one of these and you don't want to do that 15,000 pounds. Uh, thank you very much. Uh, and I was like, yeah, I can't justify spending 15 grand on a computer game if I want to stay married, if I'm honest.
Right, right, right. You have choices to make. Everyone's got their big choices. I think this is just to make him like, um, so what, why Denver Broncos, did you grow up in that? Because Denver, Colorado, I suppose, is that where you are or, yeah, so I'm in Colorado now, but it's funny. I grew up in a state called Oregon, which is north of California, about seven hours north of where you were in San Fran, but they didn't have a professional of football, American football team.
Um, so I. I'm going to pick a team. And I happen to like this team when I was a kid growing up and then lo and behold, I ended up here and I was just kind of all a happy set of coincidences. I wasn't like, oh, now I can move to Colorado and be closer to the sports in my life. It was like, this is where I live. Now. I moved here from Los Angeles and I was like, okay, this is, uh, this is much better for my state of mind for family situation. I have three kids, um, ages two through eight.
So now ages two through eight. It was just a much better move. And lo and behold, the Broncos play an hour away from here. So, uh, that works out well for me. Um, and then they, the kids and everything, or living it up and having a great time. But now it's weird. Cause I forgot about what it's like when you live in Los Angeles. I forgot about what it's like living in a place with seasons.
Um, you know, like Los Angeles just kind of have varying degrees of spring and summer, um, with a couple of rainy weeks here and there. Um, but you know, we just actually no joke it's about today. Uh, well last week, this time it was about 24, 25 Celsius. Pretty toasty. Yeah. It's snow. Saturday. Well, it sounds a lot like England, I'm not going to lie. Okay. That's what that is.
That's just what that's like, because like, it is May 20th and we had 21st, we had snow hitting the ground after it was 80 something degrees Fahrenheit in the, in the mid 20 Celsius there a few days before. So things are weird here. Yeah. Yeah. That's rough. You know what kind of say, uh, we, we also have our own quirky weather, but you know, it, it, it is what it is.
I've only been, I've been to the UK once and it was just, it seemed like an awesome place, but I had just a cliche seemingly normal. The sky is gray and everything's a little bit. Yeah, everything's done. It's just, it's great. And, uh, no, I mean, there are a few days when it's not as great and there's a bit of blue in the sky, but green becomes rapidly your favorite color.
It's why every house in England, let's say every house, a lot of houses have this sort of gray or white paint as sometimes beige, but it's usually that kind of paint and everybody accents stuff with color. So, you know, it'd be like the cushions bring the color into the room because that's how England is. It's like, this is great. But there's a lot of green, which sort of accents, you know, the sky. Uh, and there's just kind of how we get corrupt.
So if I were to go build a subscription there, then it would need to be a colorful box and colorful product. And it would probably be well. Yeah, and it should contain an umbrella. Um, exactly. Exactly. So let's get onto the whole subscription thing. Uh, you are, I said in the intro there, you're the COO the chief operating officer in England. I assume it means the same thing. Um, I've stilled venture labs.
Um, now, before obviously you're in stealth venture labs, you, you seem to have this, this world history. Sort of how you got there. Um, but what, what is stealth venture labs? Um, we call it an e-commerce marketing firm, but is that what you guys specialize in?
Yeah, so we are a performance marketing agency managing media dollars to the millions of millions per month for all of our clients, um, ranging from the HelloFresh of the world to small brands, just trying to spend their first 10 25, $30,000 in advertising. Um, on any platform you can manage behind the screen. So all things Metta, I'm still gonna, I'm still gonna call it Facebook. I still call it Facebook, but you know, everything Facebook instead of.
Um, snap, Tik, TOK, Pinterest, Google being, you know, anything we can manage from here. I got a team to do it. Um, you know, performance marketing experts, focus on all things, funnel optimization as well, creative development, which has changed quite a bit in the past few years, especially.
Um, and then we also have an incubator arm here at Stealth, which we call our Founder Lab, which is basically a place where we work with brands looking to expand their product line or launch a new brand and want to know what the market is going to think about that brand.
So, um, about a half dozen times a year, we get these experiments where brands big and small, but usually they're either big privately held like family brands or brands you all know of that are like, Hey, we want to expand into this. We, you guys make an experience, a brand and do some marketing and let us know what that looks like. Um, and we do that in our founder lab side.
So if you have an idea or if you're part of a big brand that has an idea, instead of buying the inventory, hiring the team, singing a million dollars into it before you even get it off the ground, we have brands that will come to us and say, tell us what that looks like first, tell us, like, what does our pricing need to be? What is this? A promotionality? And we spend real advertising dollars to get customers to sign up. And then when they sign up, we say, Hey, you're part of a beta.
You're not going to be charged. We'll give you a deal when it goes, live, yada yada. So then we can actually say, Hey, here's the customer acquisition costs. Here's the pricing and the promotion and the positioning that we know works that backs into what should be a good model run with it. We'll build it for you fully. Yeah. And go on from there. So that's the other side of the house, but we're primarily the agency.
Yeah. Yeah. Well, that's why actually that sounds a lot of fun to me, that whole incubation thing. That's great. And we do it for our own products, our own in-house products as well. Like we have an idea it's like, okay, take a few weeks to launch it and see what it looks like. Yep. See what people think. There's a lot to be said for that actually. And throwing some money into things like that, rather than trying to figure it all out from day one, the brand that you mentioned, um, hello, fresh.
Uh, I am familiar with here in the UK. This is a subscription service, which you sign up to and they deliver fresh produce to your house every week or every month or whatever timeframe you, um, you sign up for. Um, so when we talk about subscription commerce, Oh subscription. E-commerce in my head and this is what I'm thinking. I'm thinking things like, hello, fresh, you know? And it's you kind of sign up and you get a box or a, there's a beauty one. I can't remember what it's called now.
The beauty box or something like that. Um, and yeah, Birchbox, that's someone I'm thinking of, um, where you, you sign it, you pay your 10 bucks a month and they send you a few bits and bobs. Is that what you're referring to? When you talk subscription? So to me, I look at subscription commerce as another way. I like to say it is a recurring revenue models, right?
So, uh, these are models that guarantee you for better lack of better words, downstream revenue from your consumers at the expense of either product or service. So, um, now that's broadly subscription, but every business loves to have predictable forward looking revenue. Right? So, um, when I look at subscription commerce, there is what you mentioned, the food in the box. There's stuff in a box that shows up, but then there's also services. There's also memberships that give you access.
Uh, one of the companies that I was a chief marketing officer for before joining stealth is a company in the states called thrive market, uh, which is. Online grocery company that worked off an annual membership model for like $60 a year, you get access to the best prices you're going to get on these organic and non GMO foods, um, that, you know, is quote unquote healthier for you and better for you. It's sometimes necessary if you have things like gluten intolerance and stuff like that.
Um, so that's an annual membership model, but there's still a recurring revenue model there. Uh, so I look at subscription that's broadly, anything that provides recurring revenue, where customers, uh, are basically engaged in a relationship with you opt in or opt out, um, that creates a predictable forward-looking. Okay. And so, like you say, that can be products, it can be services, it can be a membership and it can have all kinds of different, uh, things attached to it.
I guess if I'm the backup, uh, just a little bit. So if it's this sort of recurring revenue model, a predictable recurring revenue model, I suppose the clue is in that definition as to why maybe as an e-commerce entrepreneur, I should think about having some kind of subscription if I don't currently have one, right? Yeah. I always encourage people to find a recurring revenue model because look, e-commerce.
Economics you want recurring revenue anyway, you're, you're not building an e-commerce sort of saying like, oh, I'm just going to sell one of these to everybody and that's it. Perfect. That's all I ever need to do. Right. So you're already thinking recurring revenue. Anyway, all I'm saying is fine.
The, the way to expand your service, that creates a recurring revenue model that provides a mutual benefit, not just to you as a, as a company, uh, but to the customer as well, um, and creates a longer standing ongoing relationship with. Is the best way forward. Uh, so, um, again, brands and, and entrepreneurs are already thinking like this. You do not build an e-commerce site to sell one of one thing to every person.
You, you are trying to get three to four purchases a year, well, subscription models kind of guarantee you that at what expense, maybe some more attrition, maybe subscriptions, not for everybody, but the predictability that you get, your ability to grow and scale and advertise because your LTVs will be higher. You'll make more money candidly, over the longterm in nine out of 10 situations or 99 out of a hundred probably.
Um, that's why I encourage brands to sit there and sort out what would be something I can offer as a recurring revenue. And it may not be as obvious as you think, right? Yeah. Um, but that's, I always drive for that in all of our clients that come to us. I'm like, all right, what have you guys thought about recurring revenue? If they have it, like, let's just talk about that. We're going to still do what you needed to do, but how can we create a recurring revenue model for your brand?
And you can almost always have. Yeah, absolutely. Well, that's interesting. Isn't it? I mean, you, when you were talking about no one wants to sell one, one product, just everybody. The only thing that I can think of, uh, I was talking to a chap called Adam Pierce, who is also coming on the show. We were, we were having a con, we recorded his interview actually earlier today.
Um, he was saying he's got into, uh, one of the things he's getting into was, um, coffins, uh, which is probably the only product that I think of that you could sell one time to one person. But if I, if I can be slightly flippant here, uh, is there space, let's say I do. So, you know, nice wooden caskets. And, um, is there a space, do you think for me to also think about recurring revenue, even though it's obviously a one-time sale, this is a unique one.
Let's see what referring revenue for that coffin. Um, well, let's see. You could. We typically confidence got to go somewhere. So you could have a recurring revenue model on the plot of land that it's going on. Instead of buying the land itself, you could create a lease for it. There's a little bit of recurring revenue. Um, there's other services, so, wow. This is going places.
Didn't think you're going to go to competence, but, uh, uh, you know, you could offer things like, um, other things you're dealing with at a, if it's your coffin, you're shopping for, um, our, uh, of service that could provide, um, support and relief to people around you. Cause it'll consultative services. Um, being able to, it sounds really schlocky. So don't, uh, you know, this is going to be on the internet forever on this podcast.
Could you sell or potentially critter recurring revenue model on the grief counseling needed where Yuto to pass and be placed inside coffin, um, to support the ones around you.
Yeah. Maybe there's a recurring revenue model there taking advantage of the bereaved, but not in a bad way, but just from, uh, the fact that that is generally needed or other ends of, um, if, again, if you're the one going in that coffin, other things to wind down your affairs, um, that could be a once said coffin is filled, what would be some draws from an estate, for example, that would be a recurring revenue model to handle.
Um, so you might hear a siren in the background, um, but to handle, uh, the end of life affairs, uh, that could be reasonable as well. That's a unique one. I mean, to be a flipper notice, I mean, Hey, we're all going to go through that journey at some point. That's just like, I have not been challenged with COVID it's on a recurring revenue model.
Yeah. Like it's just top of mind when you, you know, from the earlier conversation, but I, I like you, I'm sitting here thinking, well, what could I do? So there's the managed services, for example, you've got to maintain the plot of land haven't you could I create some kind of membership so that, um, maybe I'm in my fifties, my sixties, I'm starting to think about it.
And so I'm, you know, I can use your services not only to pick out my casket, but also to plan my funeral to also host my well, you know, and you can help me with whatever, but the legal services side of things, what if you are on a plan to pay out and handle, have your affairs covered, and that is something similar to another policy in that, you know, that could be actually. When you start modeling that out, that could be a really relatively low expense, depending on people's life expectancy.
This is like really weird, but, um, but like depending on their life expectancy, so say you're a 60 year old person, but generally in good health. And you're just planning ahead and getting this stuff squared away, put them on some plan and be like, Hey, any basic legal or end of life type, um, services you need are included in this package and you're paying for it. So you just, you know, somebody, you or somebody on your behalf picks up the phone and gets things handled.
So if you're creating a will and testament, if you're creating, uh, establishing your estate, if you're somebody that has the ability or need to do that, or your, um, your finances, getting them in order and how that's going to look like, I suppose it would be a recurring revenue model that would at least come from that. Now does the coffin company selling that or.
Creating a relationship with somebody else here nor there, but there's a recurring revenue model involved that could, they could exist. Yeah, absolutely. I think what I, I guess the point from this is it doesn't matter what you sell. Uh, there is with a little bit of thinking something that you can do to create a recurring revenue model out of it.
Yeah. As long as both sides are winning, that's the part that like, like you don't want like love sided recurring revenue models are I think, um, well, one they're not great. That's just the easiest way to put it, but I also think that they are not, they, they put a bad name on the recurring revenue model industry. And I'll give you one example.
That's off the top of my head right now that I I've said this on different podcasts before, but I'm also like, I hope that this stops as quickly is vehicles becoming smarter now, as they are, you start having features that are going to be subscription. Now everyone's got like a lot of new cars. Uh, you know, Sirius XM radio, right.
Or they have like satellite radio, that's one subscription, but like subscriptions for features that are electronically blocked that could just be added on for like, Hey, $10 a month. And you want a better braking system, or you want like when autonomous driving comes out, if that is more of a subscription, instead of a one-time theory feature, those sorts of things are going to start bothering me a little bit if I'm being honest.
Cause they're just like the things that you truly want are only available on only on a recurring revenue model. And we're starting to see that now I've seen more and more cars come out with like pay walled features. Um, like, I don't know I'm going to name the brand. Cause I wouldn't know it off the top of my head, but there was one car coming out that has like climate control settings that are not as advanced. Unless you pay for a subscription to their service. And I'm like, that's horrible.
I am sorry, but that is not great because that is a lopsided, uh, one side is winning in this, um, subscription, but you find a mutual when you provide a service that they need that a normal person, what do they want? They want something relieved from their life. They need a little less gravity in their world. They want to not have to go to the grocery store. So they get food delivered. They want to save them time and money.
They want something convenient that they normally have to deal with that they don't want to showing up, ready to go. And knowing that if they don't want it, they can call up and get support that they need or email up and make that happen. All you're trying to do is make people's lives better. And when you've got a subscription or recurring revenue model that does that, then you have an excellent business.
Um, so that's, uh, not trying to crap on the car industry, but that's one of those things that bothers me or when the necessary things are put on recurring revenue model. That's fair enough. I'd be hacked off with that as well. And I think you are right. Every man and his dog is jumping on the subscription model system in some respects and in, and I like what you say, can't be lopsided. It has to be a win-win. Um, otherwise people just aren't interested.
I mean, one of the mistakes, I think we made with a subscription model in one of our own business, Um, was we didn't we sort of went, right. Well, if you subscribe to this, um, these particular products, you'll, you know, you get them at a lower price. That's the whole reason we want you. You can buy them straight off the website, but if you want them at a low price, we'll send them to you every two months.
And there was just like a box we're going to ship out every two months or every three months. Have you guys, nobody really does a subscribe and save, or they ask why can't I get it for this price instead of subscribing? Well, the issue was not so much that the issue was more, I've not taken into account. The customers that we were serving who were very, um, sustain sustainability savvy. So they're like, well, hang on a minute.
Um, I, what you're basically did I, why can't I buy more and have it shipped one time, maybe twice a year, as opposed to buy less and have it shipped, you know, just like. Every month, it's the same product. It's the same discount. I still want to buy the products. I just want to ship it less because. I want to offset my carbon footprint. And that was something that I, I personally was not expecting to what I mean. I was, I was a bit shocked. I was shocked is the wrong word.
But Jimmy was like, oh, okay. Surprise. Well, that is a more and more common thing actually. So you hit on something around sustainability and, um, the biggest rub that has now turned into sustainability once for subscriptions for awhile is the amount of corrugate. And especially if you partake in a meal at home company, you get a box that is lined with insulation. That usually also has a couple of different, um, frozen ice packs in it.
Like there's a reasonability with the ice packs, but I mean, who needs more than a few ice packs in their life. Um, and then you have just so much core gets so many insulated boxes that Insulet is usually a recyclable, but it is still being produced and there's still a big footprint there. Um, so. Uh, you know, one of the ways that I work on I'm really proud of the former company I was at called thrive market.
Like they've actually become, you know, a certified B Corp and reduce their footprint down to more neutral. They just officially their fulfillment center or warehouse actually got its certification to be carbon neutral, which is amazing. Um, but that is something that is coming up more and more.
And actually, um, you have to be, if you're coming up with a new brand right now, or you're, you're creating a new market, which is certainly happening as well, you have to be a lot more conscious about that because otherwise, um, people will say like, yeah, your product's good, but I, what am I going to do with 30 boxes? Um, and why am I getting a box with boxes and boxes and stuff in it, depending on what you're selling.
Um, that's a real problem that I think is going to be kind of coming to pass right now. And we'll either start getting confronted with more challenging shipping rates. And guess what, if shipping goes up, that cost goes to the consumer.
Yeah. Or a, you know, I was thinking that there's, I don't know how to do it because the economics I've struggled with this one for a while, but like, there's gotta be some way to create a business that reclaims Oregon as well, because everybody suffers from this, that orders off of the internet. Um, well you say that there's a company that we subscribe to called Riverside, which is a bit like, hello, fresh they're they're, um, a fun organic, organic and organic farmer, uh, here in the UK.
Um, and my wife subscribes to them. I, I, I have to be honest with you and I have nothing to do with it. It's it's all my wife. I just go to it. Yeah. And I just go to every now and again, bloody hell, babe, this is expensive, but she's like, no, no, it was good because of X, Y, and Z. But what happens is every Tuesday morning they drop off the, the latest order, but they pick up all the cardboard boxes.
They've designed them in such a way that they fold down and they pick them up and they just reuse them until they really are. And we're like, that's. So I don't have so whenever they drop the stuff off, they pick up all that, all their cardboard from before. And I think fantastic. You know, I can, I can see that they've thought this through they, and it's one of the things that my wife loves about it is actually they've gone oh yeah.
That's really, you could do that in, um, smaller markets, right? So like, if a company is trying to be here in the U S nationwide, they would need agents in regional areas to handle that. Um, but I've seen that actually in a similar space of meal at home where there's, um, Not exact seems to be it's more like the last mile of delivery services, say like the door dashes or whatever, um, uh, of the world grub hub, et cetera.
Um, in some area, like there'll be localized versions of those that will actually, um, you could buy for example, um, uh, like stay hot, like bags, like tote bags, and they'll like swap them out. So like, they'll deliver your stuff hot in a tote bag. So it's like you pick it up. So they're not, so they are not having to give you, um, the, the, the restaurants packaging other than like the container, but they don't have to use their bags. They don't have to use it. It's stuff like that.
And then you'll just switch out bags and then they'll, they'll take the one that you leave. You'll get a new one. Um, and that stuff works on like local regional markets where you, where you basically are in control of the last mile delivery. It starts.
I would say falling apart more, even though I would say Amazon could do this, uh, Amazon being arguably one of the biggest corrugate providers here in the U S for sure to customers, um, you know, if they're doing their own Amazon delivery, which I see plenty of Amazon delivery trucks, not just the USBs and everything like that. I, you know, you think at some point they would try to reclaim the corrugate if you were able to leave it out there, but not existing yet.
No, I think until consumer demand demands, that is going to leave it on there. They'll talk a good game, Amazon, but I think you're right. I think how complex would it be if they just made the packaging that I just gave back all the time? It can't be that difficult, but I appreciate England is a very different place to them in terms of sites. Uh, and so, you know, it's a lot easier, I think, to do some of these things in, in the UK. Um, so. Well, I mean, that's some of the problems, I suppose.
So what are some of the other problems that you see in terms of not creating a win-win scenario? So we've talked a little bit about the packaging. Sustainability you've mentioned pine street. Is there anything else that sort of winds you up there?
There's plenty of that, but when it comes to subscription commerce, um, I would say just the, I feel like there's a entrepreneurs think about subscription commerce as something they're trying to push to consumers, but it's actually the other way around your consumers will tell you what part of your product should be subscription. Um, and you just got to listen.
So like what irks me is when I see subscription models, where I would say I'm fairly certain at this point was not backed by a data-driven decision. More, just like a want to be like, I want to ship you this every month. Nobody's going to need that much stuff every month. They're not going to need that much of your product. They aren't. I just, I know they're not, not enough people now, the other, some of every product. Sure. Right. But not enough.
People are going to need your stuff every single month to do that. So that's one thing that irks me when I see brands doing that, where it's a, uh, somebody that was of the mindset of just like, I need to create a recurring revenue. So I'm just going to put two of my stuff in a box and ship it every month. And I'm like, either you're just going about the wrong way. Like you're not listening to your consumers. Um, so that's one thing that bothers me. The other one, this is like a complicated one.
So bear with me in the sense of like, it brings out visceral emotion. I might cry, I don't know is subscribing safe. And, um, here's, it's a private save slash uh, related, I guess, is also people that. Amazon dependent and wind to own their own brand. They're like, there's a lot of similarities between the two.
Um, but I'm going to talk about them independently, subscribe and save, um, subscribe and save is the one thing that a lot of e-commerce brands do to try to then invalidate their need or ability to create a subscription model, because they'll say, well, we did subscribe and save and I'm giving people 5% off and nobody's taking it. So subscription is not for our product. I'm like, oh my gosh, you didn't, you didn't create an experience. Like subscription is meant to be an experience.
It's not enough these days to just say my stuff's in a box and you're going to get it every month, whether you like it or not. Th th that was like subscription 10, 12, 15 years ago. And I trust me, I was there for that, like that, that's really what that was now. About creating a service and an experience for the consumer that makes them feel special. Like it was curated for them that addresses their problems more directly.
Um, and that, you know, is now effectively a monthly or quarterly or whatever frequency bill on their, you know, bank statement. You can't just say, like, I'm just gonna put two of my stuff in a box and call it a subscription now. Or I'm just going to do subscribe and save and say, oh, that's my subscription model because people want people there there's enough data that shows that people want flexibility and they'll pay a lot more for flexibility.
Therefore you're working against yourself there, but if you curate that same experience, if you say we're going to send you my skincare product, but because of that, tell me a little bit more about your skin type. Tell me a little bit more about. Other skin problems or health and wellness problems you're having. And then what we're going to do is send you our, our hero product, which is what we are known for.
But we're also going to send you two or three other products that are either experimental or curated for you. Um, and now, now that makes me feel like, oh, you're thinking about like my skincare regimen or my dietary preferences. So you got to make it special. Um, and that is one thing that bothers me is like people that just try to go off of like the subscribe and you get 5% off or 10% off or what, like, that's not, you're not winning people with that. That's what Amazon does though. Isn't it?
That's what everyone sort of copied it is. So now talking about Amazon, you have, this'll make a deal with several times a year at stealth. I get, I had run these conversations not more than a week ago. A brand comes to me saying, Hey, we do X on Amazon, you know, hundreds of thousands of dollars in monthly sales and this.
You know, they want to do, they want to own their site now they want us, they can't, they don't want to say, oh, we're still an Amazon business, but now we're going to make blah, blah, blah.com. And we want to run some advertising there and we want to sign up our own customers. And we have our own warehouse for other, for, you know, for our main product and other products, it's subscription or not.
It's just not going to work how you think it's going to, because every dollar you spend on advertising, people are going to look you up and then boom, they're going to buy on Amazon because you have a history. There you have four-star five-star reviews, right? You're on prime. Uh, Amazon's got that clout, whether you like it or not. So brands, brands and brand owners will be like, I want my cake and I want it. I want to have my cake and eat it too.
So to speak, they want to say, I want to keep my massive growing Amazon store, but I also want to send people directly to my website and they expect to what beat Amazon. No, it doesn't matter. What kind of subscription or deal you offer. The security to know that they buy an Amazon, they're going to be taking care of it. That's all people are going to need. Now. I'm not saying it's the right decision to, for you to kill, kill your Amazon store.
But out of all, my 20 years doing this, I have not seen that work perfectly. That any, how anyone wants it to work ever now doesn't mean you can't have your own store. Sure. You can get repurchasing there and everything. But if you, if you maintain a strong Amazon presence, you're going to pay advertising to feed and improve your Amazon presence. That's the one that bothers me. Maybe a slightly controversial that yeah, my might not, I don't think it is at all. And I think you're right.
I think if people say to me all the time, you know, what platform should I use to do my business on? I'm like, you want to go where your customers are going to. Right. And you, it's not rocket science. If your customers are on Amazon, go to Amazon. If they're on Etsy, go to Etsy. If they're on the web, build your own website. Now yes, you should have your own website and yes, you should build your own email list. And there's a lot of reasons why that's a good idea.
And we've had guests on in the past talking about that. Um, but fundamentally you go where your customers are buying, right? Like when you're fishing, you put the hook where the Fisher. No, but it, so that's a really great point. Like I am not, I have known several people that have made awesome businesses on Amazon.
Now you ride the ebb and flow of Amazon in a vertical and you have to compete for it and everything, but you can no joke make, you know, several, I know people that have made several. Five to 10 hour workweek type businesses, basically just supplying their stuff to Amazon, make a great brand and it'll do well for a little while, and maybe it falls off. But at that point you've made a couple million dollars in gross revenue off that brand.
Or you sell it to another company and make them deal with it. You are you, you have a decision to make when you're launching a brand. And I think a big part of that decision is do you want to build your brand on Amazon or do you want to build your brand yourself and then maybe consider Amazon later?
There are very different cost benefit analysis pieces there because bootstrapping a business is, guess what not cheap capital markets right now, not necessarily lending out money, uh, at this exact point in time in history. Um, but Amazon businesses can be a creative more quickly. You know, you, you still have to buy inventory, but marketing is a lot less, that's all, it comes down a little bit more to brand, uh, compared to acquisition marketing and building your own brand from the ground up.
But, you know, it's sort of like a, you're also, I mean, this isn't necessarily an Amazon podcast, but in this particular case, but you're kind of beholden to how well and your capacity is on Amazon. Because if you want to transcend that and say, I'm going vertical myself, That is a challenging uphill battle, um, at a certain point, depending on your brand and what you own and what you, you know, what could be copied, right?
Um, because the, the rub with an Amazon is they see, oh, this is how skincare is doing right now. Or this is how mixers and alcohol and spirits are working right now. And as soon as like you take your revenue away, somebody is going to come up and take that spot. Or they're going to, you know, Amazon will develop their own products in many cases and do it themselves.
Um, so point being bottom dollar, there is, as you're bringing a product to market, anybody listening to the, to this, bringing a product to market, come in with a plan that, that separates. If you want to build an Amazon product first, or you want to build your own brand and experience first subscription or not candidly. Okay. Yeah. Yeah. No, very good. And very good. Very good. Thanks.
Trying to understand, um, can I just circle back a little bit, like you said, about a subscription service, it's not about subscribe and save. You've got to make it special. Right. Um, I thought that was quite phrase I've double underlined it in my notebook. Uh, Evan is right though. Yeah. Um, why is these principles, which I think we so often miss and they're, they're not rocket science, this is old school marketing. You've got to make the experience special.
So what are some of the things that we can do or should think about, um, in terms of it's a lot here, a lot of that comes down to your CRM. So if it's how you're emailing and how you're doing text or SMS, if that's part of which I think it should be to anyone out there that's not doing SMS. Um, but making sure that you like above all establish a relationship with the consumer, and that is a one, one that talks about your brand, your email presence, your organic social presence.
If people are experiencing you there, that, that, that all lines up, but people sleep on organic social. Some, some brand owners sleep on organic social. That's a place where. There that the free advertising, in the sense of having an awesome organic social presence, we'll get you extra eyeballs with your biggest fans. Um, pretty much free, as long as you're maintaining that, like free as in, you're not having to pay for the ads behind it. Right. Um, so you got to develop a relationship.
That's really what it is. The subscription is, is built upon a relationship and the things that strengthen a relationship are the things that strengthened the relationship and human beings. So if I'm being honest, it's, it's good communication. Um, it's making sure that needs are being met by both parties. You're giving a company money, you're expecting a quality of service. And if that expectation is missed, then you need to address that with the company. Right.
And if the company is going to change the way it's delivering on its expectation, in a way you don't like it, then you, you break off that relationship. Right? So I look at a subscription, like an e-commerce product can just be. Supply and demand. It's the most basic principle of you got a thing I want, I have money. Take my money. Give me the thing. Okay, great. We'll send you a receipt. You want a receipt? Cool, great.
See you later, you know, come back in if there's anything else, but subscription, that is a bill that is an ongoing relationship that doesn't end after that first order. And it only ends when either party namely the consumer, but candidly, when either party decides it's over. Um, and as a consumer, you have an expectation and that you have, it needs to deliver on a few different things. And if it doesn't, um, it's going to fall flat. So some of the tactics, I always recommend engaging.
Non-sales communications, talking about your company, talking about the brand you're building the impact you're trying to make in the world. All those things to the right audience. They're not detractors. No, there's very few people that are going to be like, man. I buy from this company and what they're trying to save whales, like they're a bunch of jerks, like, you know, so like, you know, find a little cause find something about your company that people bring up to you.
Cause like there's a, there's a K factor component here that with the right amount of stuff that brands are sometimes doing anyway, they'll talk about like, Hey, do you buy brand X? And the people would be like, no, like, well, you know, so I get my coffee from them and it turns out that they are giving like some money back to the coffee farmers or the privately owned farms from these families and Columbia or whatever, right. Like, oh, wow.
And then it creates content for you organically with people. Um, so that's really important. So having engaging non sales driven content, organic email, SMS, um, curation. Taking if your, if your product can, if you have variations of it, a meal at home company is the easiest, easiest example. Every meal at home company out there, HelloFresh factor, green chef, anything you name it, they ask you a handful of questions. What's your dietary preference? Do you have allergies?
Okay. So if you're like, I don't eat fish and you open up and you get nothing but fish dishes, you're probably not going to be pretty stoked about that. Right? So the same thing goes with, if I'm a, if I'm ordering clothing and I say, Hey, my, my shirt size is this my, you know, whatever. I wear a size 42 shirt around the shoulders or whatever. And you're giving me stuff that is way too large or way too small, or one size fits all, but it doesn't work for me.
That's not living up to my expectation. That's not curated, but. Give me the product I want. And I know that there's multiple sizes of it also include a little print out in there saying like, Hey, blah, blah, blah. We pick this for you and Evan. We know you're going to like this because you love summer and you love colors and you love the beach. So here's our product for the beach. We think you're a beach going, you know, whatever ocean guy, I'm a marketer, absolutely like say whales.
Um, but like you, you curate that experience. Make it something that feels special makes it feel like, Hey, somebody over there cares about me. Even if it's just an illusion, even if it's just AI and BI making those decisions, whatever. It feels unique and that is, and that's what people want to do too, in a relationship. You know, if me and my wife wouldn't get along, if she was just like, oh, it's you? And I'm like, Hey, yeah, it's you. And then like, we have kids. Yeah. They're over there.
What are they doing? I don't care. Like that one works. It takes a little bit, it takes a little bit more than that. Um, so that's, that's the other thing you, so you curate something. If you make customers feel special and if you engage with them real in a, in an actual, like relationship building manner and let them know about your company, let them know about the challenges you're having. You'll find that. Hey guess what?
You might have to raise your prices someday, but because you've been transparent about them, but with the customer all the way throughout the way, and you give them, Hey, you want to opt in. We don't want to raise the prices without your permission. We could, but we're not going to so stay here. And here's what we'll do. We're going to give you 10 free gift on your first couple of orders.
Once you do that, you'll find that people will trust you and people are looking for reasons not to trust the company. You remove, you create trust. They will stay your customers forever and they will find you 10 more. Yeah, no, that's very, very true. Good point.
Is there, um, is that, I see what you're saying in terms of, you know, the building, the relationship, that's also going to build loyalty and obviously the whole thing about recurring revenue is you want them to pay the subscription on a fairly regular basis, right? You, there's not a one-off transaction, but is there a way, you know, you being the marketing guy, uh, is there other things that I need to think about. Where it comes to acquire and subscription customers.
This may be a little bit different to acquiring normal or non-subscription yeah. One, your first order economics. Um, that's the biggest difference when you're a e-commerce company you're focusing on ROAS and you gotta make, you're never gonna, you're never gonna buy a customer and acquire a customer with paid advertising dollars and lose money of that gate.
Um, but with subscription, if you plan it and you understand what your LTV could, should, might be based off of modeling and things like that, you acquire customers, most subscription companies. In fact, I can't really even recall what I've ever worked on out of hundreds. That entirely makes their customer acquisition costs back in margin dollars on that first order. So you are losing money on that first order. Or break even before your team and salaries and everything at best.
Um, but you know that you're going to get 2, 3, 5 more orders throughout the rest of the year. And every single one of those is margin rich. You're not requiring them. You're not having to spend a dime and they come back. Um, but that's very uncomfortable. That's very counterintuitive to a lot of businesses, even, even subscription businesses that have been around pre-internet the gym, your utilities, things like that.
They don't, they, you don't, you're not expected as a consumer to, you know, lose money out the gate. So why would you think that way as a business owner, the utility company, isn't going to give you, Hey, don't worry. We're just going to let you have free power for like a few weeks until we figure billing out. So don't even worry about like, no, they're billing you the minute you're out there. Um, but you have to be ready for that.
Now with proper planning, proper financial planning and analysis, pro forma modeling, all the things you should do, you know what to expect. Um, because subscription businesses are, um, higher, frequently, higher LTV, more purchasing, more product, moving out the door, more transactions, um, have the ability to grow and continue to keep growing beyond most e-commerce companies in a predictable manner. But what you need to do is invest into it and you gotta have a grip on your numbers.
And when you're a product that's selling, you know, you're like, Hey, I have a hundred dollar t-shirt. I gotta get a four row as on it on an e-commerce perspective, which means I can't buy a customer for less than $25. But if you're a t-shirt of the month club selling t-shirts for $75, but maybe every month or every other month, knowing that that LTV is going. 300 to $400 a year. And your, your margin, maybe it's 50%, which in fashion, if the margin is way better than 50% for easy numbers.
So the LTV is $50 or a 50%, excuse me, LTV is $400 margins, 50%. You're making $200 per customer. You acquire all of a sudden, even if you paid a hundred dollars for that customer seems like it wouldn't make sense, but annualized, it does, you're making 25% profit margins after your advertising. Right.
Um, but it's uncomfortable and you have to have capital to do it, and that's not easy, but that's like probably the, the backside entrepreneurial mistake that I seen made is you just can't be expected to make your money back if you're paying in the advertising game, uh, out the gate with that. Yeah, no, that's a very good point. And I, uh, I like that thinking that actually, which is why, I guess, um, if you do think that way.
You can be a little bit more creative with a slightly more expensive marketing strategy to get the customers in a w like promotions. Like you have a lot more. Promotionality like, I, especially in certain verticals, I won't name which ones, because I have clients in these, but a lot of brands are like, we never do promotions. Yeah. Okay. I hear you. I hear you.
But like, look everybody that's on social that they're taking a chance on you for the first time they need something that shows you as a company have skin in the game. Yes. Does it make my job easier and more doable? Candidly, if you have like a first order of 25% off, instead of first order buy a bunch of stuff and you know, and be happy about it. Sure. Absolutely.
But like it also shows the consumer that you're willing to risk something and say, Hey, my product is normally worth a hundred dollars. Per quarter month, whatever it doesn't matter. But today you can try it for 50, because I want you to be, feel happy about it. I don't want you to pay full price if you don't, if you're not sure, because we're new to you in the future, we're going to be a hundred, but we're going to show you that that's the value every single time.
And that is kind of just table stakes for a lot of advertising. It's not enough. The promo is now marketing is now convincing people. It's not just the discount used to just be who has the bigger discount and I'm going to go with them. It's actually showing a discount is our commitment to saying price is not going to be an issue. We're going to eat a little bit as a company to show you that price is not an issue.
And now we can also get more fun with marketing and say, Hey, your first nine meal, or you have, you know, nine free meals over your first, you know, three shipments or four shipments or whatever. Right. So it's just really important not to be stuck in. The perception that a brand, that discounts is a cheaper brand.
That's not entirely true, but things like fashion sometimes fall into that things like beauty products and things that are, you know, about aesthetics tend to fall into that category, which we just try to say, Hey, at least do something like free shipping on an order of X or more, or, you know, free overnight shipping or free two days. Like give people something that make them make some feel like a deal is coming because everyone also loves a deal on the internet.
And every so many websites just have deals. Like that's just the internet brings deals. I didn't start it that way, I guess. But it is. Yeah, no, that's very good. That's very good. Um, Ryan, lots of notes now. Um, so. What do you, um, what do you see the future of all this? Where's this subscription commerce thing going? I think subscription commerce is going a few different ways.
There's um, If I think what'll come next is the evolution, the continuous evolution of consumer and company communications and flexible subscription models that are triggered by, like, let's say SMS or opt out via SMS or SMS shopping. I'm pretty bullish on long-term. Um, something that's saying like, Hey, by the way, you know your product's coming next week. You're good with that.
Yes, no. Uh, if no, then when, um, because you want it to be, people want a little bit more on demand, a little bit more flexibility there. So I think that'll continue to evolve a subscription commerce. Um, I think advertising and like, I mean, um, not just in the vein of subscription commerce, but there's a major shakeup. If anybody who's running advertising right now knows that like the past two years have been a wild ride.
Pandemic driven success and, uh, privacy changes with good old apples and Facebook. And I'm now a real struggle to find scalable growth advertising, which I've been refocusing in. Yeah, you gotta be a lot more data literate than you needed to be because in platform metrics are unreliable at best, but you also gotta be more creative with your brand.
This is like, and I think that there's a really fun stage of 10 years ago, 15 years ago, you could have a still image with a little Starburst that says today only 25% off and be like, I'm crushing it. This ad's crushing it. What'd you do? I changed the Starburst from a, a light orange to a darker orange like, Aw man, like that was crushing it. Now you gotta be storytelling with your creative. You have to be creative production, more native for the platform.
It's the ads don't work the same as Facebook ads don't work the same as snap tick-tock or Pinterest. Um, so using the platforms and what people are interested in on these platforms to speak to them, um, you know, on the platform that they're on. So don't, you don't talk to somebody that you're trying to acquire on Facebook, the same way you talk to them on Tik TOK, you will not get scale on, on the platform. You're making creative for it, or you're not making creative for.
So creative is now shifted to much more of a storytelling mechanism. Your brand's got to stand for more. Um, you gotta be focused on creating a valuable relationship for the consumer a lot more, um, and then be smart about your marketing. So there it's harder to get data these days. You're never going to get the same data picture we used to get two years ago, three years ago at this point, but. You can still understand your total business economics.
You could still understand the influence a channel has from advertising, um, by running structured incrementality tests saying, Hey, we're on Facebook, IG and Google right now. Common trio for most right. I want to add Tik TOK. Okay. So here's what I do is I run tick-tock at this budget for this period of time. Look at what that does to my overall traffic. Look at what that does to my CAC.
Look at what that does to my order volume and say, okay, when I run on Tik TOK with these ratios, don't take away budget from the other two, but running out these ratios, this is the kind of lift I get. Now I optimize the whole. I optimize same. Now I take some Facebook budget, move it to Tik TOK. And does my cat get better or worse? You have to do things a little. You have to slow down a little bit because the instant gratification isn't there anymore. I can't do anything about it.
I wish I could, but that's, that's what it is. But where you can do is still understand the influence because, um, you know, I always tell people that like, yes, your Facebook has, has, and will always continue to drive people to Google. You will see, somebody will see your ad and then Google you and then purchase on your Google ad. Does that mean you don't want to pay for that Google app? You probably still want to pay for that. Does that mean you're mad that you paid for that Facebook ad?
No. You're happy to pay for it, even if it led to them searching on Google. Right? So get ahold of your numbers as best you can, um, do not make mistakes. Brilliant. Listen, ever know. There's so many questions I have and so much I could get into, but I want to be respectful of your time. Uh, and, um, I, if such, like I say, lots of notes, the balloons, the, and everything, squares stars. Do you know? I mean, we've got it. Yeah. Boxes and boxes are the critical ones. Uh, so thank you so much.
If people want to know more, right. They're going to have questions. Can they reach out to you? How do they talk to you? Uh, go ahead. All right. First place. Find me on LinkedIn. Evan Padgett, not too many of us, uh, especially ones that have big beards and stuff like this. You'll find me there. Uh, you can email me evan@stealthventurelabs.com or evanpadgett@gmail.com. I'll throw out my personal one that I check most frequently, because why not? I love talking about this stuff.
Um, and then also just check out our company@stealthventurelabs.com. See what we're up to. There's a form there. I see every form that goes through. So if you're trying to get to me, that's another good way. Um, and just see what we're up to. We also have a really fun thing that I like talking about too, which is our impact lab. Uh, the last part of our three labs is one where we, um, actually run a 501 C3, a nonprofit organization, uh, enabling inner city kids, young entrepreneurs.
We built an academy for them to actually learn how to build a brand, launch it, uh, set up the advertising for it. And then we actually fund them, uh, the first five to $10,000 in advertising to, to bring their product to market. So, um, because we believe in building out this next layer of entrepreneurs and starting it at a young age with, um, kids, I may not have that opportunity. I'm looking for ways to help there.
We're always looking for more thought leaders or people that want to donate or donate their time or just help out. That's also really awesome. So find me anywhere there. I'm happy to talk about this ad at all times, because this industry is fun. And again, it's been half of my life at this point, so here we are. And that would probably be the next top of your life. Yeah. I mean, now we're starting to get to the two thirds of it.
You know, I'm working on that one third, two thirds, which is scary, I guess, but, you know, 80 20 rule. Go for that one. There we go. 80% of my life on the internet to get 20% of what. Oh, anyway, we'll figure that out later. Yeah, yeah, yeah. You can work it out. That'd be a spreadsheet which will help. Absolutely. Listen, Evan. Uh, seriously, huge. Thanks to you for coming on the show. We will, of course link to.
Uh, links that you gave in the show notes and people can get ahold of you that way, uh, do reach out to Evan. Uh, it'd be great to hear from you. I have no doubt, but Evan, uh, love to get you back on the show at some point, such a lot of good stuff there really appreciate it, man. Thank you so much, Matt. Thanks for having me. And any time I'm going to get more boxes. This is my goal. Now, now that I know there's a hierarchy boxes, so there you have it. What a fantastic conversation.
Another fantastic conversation here on the e-commerce podcast, a special, huge thanks to Evan for joining me today. No doubt. Evan will be back on the show in the future. Look out for future episodes with Evan by subscribing. And if you are new to the show and you haven't gone through the back catalog yet, you can find it all on our newly revamped website at www.ecommercepodcast.net. There's even a little search feature. So you can go and look through some of the past episodes.
Uh, don't forget to subscribe wherever you get your podcasts from. As I always say, we've got some great conversations lined up and you're not going to want to miss any of them. And just in case, no one has told you today, you my friend. are awesome.