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James Thomson 6:23
So, your company Bulu group offers yet another channel beyond the Amazon issue. And for companies that may not be ready necessarily to make that step to Amazon or may have already made that step to Amazon. Talk to me a little bit about what your firm does. And in what situations do consumers prefer subscription box offerings to potentially going on and buying something directly from the brand?

Paul Jarrett 6:48
Yeah, so the way that we work is we historically and this is changing, you know, due to the pandemic, but historically we’ve gotten to large brands and we said, Look, we’ve been at this subscription Box thing for eight years, we bought our own box, we grew in less than two years, I think is about 18 months, we grew to 500 k monthly recurring revenue. We raised about 5 million in capital. Our plan was that, you know, never be profitable and to just keep growing. And I think, you know, after about three or four years that really freaked out some of the investors, right? They’re like, Whoa, like, what do you mean you want to buy a warehouse and buy all this stuff? And that’s, you know, I feel like our fault is that we actually did what we said that we were going to do and so you know, what happened in our industry was that subscription box customer acquisition costs I mean, when we started it was literally like eight cents. We could just go post on a message board and ad sales. I mean, there really was, you know, right time, right place, you know, all that stuff. But being the six subscription box of six versus the six subscription box of 10,000 is a very different story. Yeah. And we’ve looked at our business, we did a few things we, you know, in our spare time, we built a software and sold it. You know, we’re really probably year three or four, we were just kind of getting by I mean, we were struggling. And, you know, I just kept coming back to this thought of like, we have everything figured out. The challenge is just we don’t have enough money for customer acquisition costs. And so we said, well, let’s go to these big brands, let’s plug in their inventory. Let’s pull in the weights, let’s come up with some box concepts for them, and just show them like, hey, if we execute this, this is what you can make. And I think our very first model that we did, we were within, I think, six months, we were still within 3% correct of projections, which was just mind blowing for a lot of folks. I think now we’re hovering within just under 10% of projections, assuming that the company gives us the correct inventory, correct? Yes, sir. You know, whatever. And so we came in And we say, you know, look, we’ll do this model, we’ll tell you what it is you can take it, go do it yourself, you can take it give us we’ve, we’ve identified about eight different services like customer service, website creation, etc. We can do all eight services, we can do one of them, we can do none of them. But if you just kind of let us at it, here’s what we can make for your company. And so we started off doing that our first customer was GNC, I think, you know, within a couple of months, they were selling 80,000 boxes.

And then our next customer, we said, you know, it’s really make a list and go after him. You know, we put Disney on the board is number one. Number two is crale. And, you know, we just relentlessly picked up the phone call them, you know, I had to get on a plane to Disney and pretty much fake my way on the campus and, you know, tell them who I was and what I was doing. We landed all those clients. We built out those programs. And that is, you know, really what Our focus is in in the pandemic, though a lot of companies have really tightened up, buttoned up, etc. We’ve done 15 different subscription box programs total, ranging from brand new starting off dog tree company to well established, you know, Lulu, lemon apparel, etc, etc. And what we find is, you know, generally the mechanics are all the same, right? The formula we actually have and this isn’t a shameless promotion, but actually have a bulugroup.com website, you can literally pay 1000 bucks, download an Excel file, and plug in your numbers and see how your own subscription box will do. It is something that we charge large brands $25,000 to do. But you know, I think anybody with a little bit of a background in excel in accounting can pretty easily go on download that file, you know, figure it out themselves. And I would say that’s really kind of our proprietary magic is that, you know, we’re not gonna, you know, start something in three months. Go, oh my gosh, we forgot about tape or oh my gosh, we forgot about this. We have everything in that model. And to go in to share that with people. You know, in the say, here’s a new business line, let us manage it, that’s really been kind of the secret sauce. And now we’re doing that with smaller companies. And then frankly, in the pandemic, a lot of the like I said, a lot of the big brands have kind of decided to just hit the pause button and see how the world is going. And a lot of the small to midsize brands are doing the opposite. They’re going full throttle, right? And so, we come in and we say, okay, you know, what, really are we doing as a company? We’re taking multiple varied items with a long shelf life. We are rearranging them. Yes, we are finding audiences that this kind of you know, what’s their headache? What’s the solution to the headache? Let’s rearrange that box brand, etc. for them right? And let’s ship it on a recurring basis can be annual, it can be monthly, whatever makes the most sense for that audience. And we’ve been doing that. And a lot of people have been coming to us and saying, Hey, we just need fulfillment on the plans, because we’re tired of, you know, doing that. And so that’s really been the model over the last four years. And I’d say, over the past two months, we’ve been very open with you know, there’s some real estate companies that are sending one off boxes to a bunch of their clients. And so you know, we’re taking that on, but the mechanics are all the same. Our warehouse, our software, the business model is all built around multiple various items packed together shipped on a recurring basis. And really what you find long term and I wish somebody would have told me this out of the gate is that we’re a cash flow management company and a logistics company. And that’s where you see a lot of people kind of get stuck at about 2000 boxes a month, is because you have to start making some pretty big decisions. And the way that we look at our company, when it comes to bigger brands, we say, look, this is just another tool in your toolbox. This is great for SEO. This is great for marketing. It’s great for research and development, all the while, you know, making a profit off not even to mention social media and unboxings. But we do not go in and say, you know, this is the next big thing. We simply say, you know, this is a wrench in your toolbox. Now for some of the smaller brands that are just starting. It’s a similar conversation, but it can be more like, hey, this can support the salary of a couple of people in your company, but like this is not the end game. I do. I’m under the firm belief that you cannot run an entire profitable growing company of just a subscription box. You’re going to need to do things like sell excess inventory on Amazon. Things like sell the box on Amazon. We have a friendship I can say with Amazon And we’ve assisted in their subscription box website.

And so, you know, that’s, that’s really kind of the, the quote unquote, pitch to folks. And I think when they see it, and when they concentrate on it, and when they put the proper resources, it is that thing that can just grow a couple percentage points. And the beauty of it is that you can start going like, Oh, hey, we’re gonna sell these subscriptions, and we’re gonna have the money on hand. You know, hopefully, before we ever, you know, go buy the product or whatever. And once, once that light bulb goes off, and the financial person said, especially CFO of a multi billion dollar company, you know, it’s kind of it’s kind of game over and all sudden you get really important.

James Thomson 14:45
So let me ask you this, Paul, you’ve explained why the subscription box makes sense for brands. Why does it make sense for consumers? What What is it about getting a subscription box? Great question.

Paul Jarrett 14:58
Tell me about that. Yes. So this is this is something that I feel like I have. I’ve spent way too many hours of my life trying to define that I’m a very non emotional, black and white, you know, architecturally minded, you know, what is what is the headache? What is the aspirin? Yeah. And as we actually helped start the subscription box trade association, shout out to us.

And that was one of the things we wanted to find out, right. And what we found out in our research, is that, you know, when we started everybody just call them sample boxes. Well, it’s really not quite correct between something and McKinsey, you know, they’re now labeled as subscription boxes. And within that world, there’s kind of seven major categories and seven sub categories and you know, I think Amazon has done a great job of listing those out but there’s lifestyle products, health and beauty, etc, etc, right? And within those, there’s kind of So let’s just take men’s grooming, for example. men’s group actually what’s take vitamins and supplements and I’ll explain why blue box was not a success and why we shut it down. Eventually, blue box was our original product. And for 10 bucks a month, customers could try four to five premium vitamin supplement healthy set samples, come back and purchase what they wanted from us. Right. Okay. And what we found the problem is that people didn’t know what to take. So they love to get blue box for about three, four months, right? But the problem was after they were done, they had all these random samples, right? And they’re like, well, I kind of like this and I take this thing like what is that? Well, I’m not even sure if that fish oil is working, etc, etc. Right? Now, that’s what we would call a vitamin and supplement sample box right? That is great for new customer acquisition in the business model. That is Eventually was, we created our own private label products. And we would see, oh, this customer really wants protein. Let’s sell them our own protein, right. And nice little business model. But it was a slog. And it was like just not growing when you have venture capitalists, you know, you got to grow pretty fast, just wasn’t growing at the rate that they were interested in. Now, on the flip side, had we been a replenishment box. So a subscription box that says, hey, every month, you’re going to get the same protein, you’re going to get your multivitamin, you’re going to get your fish oil, it’s going to be super cheap, because we’re able to buy in bulk that is a much more advantageous model. And you know, there’s probably 10 vitamin and supplement companies doing that. And you see people like Harry’s come in or Dollar Shave Club, right? They’re not giving you new stuff to try all the time. They’re saying, you know, take our quiz. We’re just going to replenish it. So I think that’s the the big difference that people need to consider when it comes to in the mind of the consumer. I would say this, there is the different boxes that solve different headaches. The mistake that we’ve made is trying to define what it is before they get it. We one of our most successful boxes is called lunarly, L-U-N-A-R-L-Y lunarly.com which was fascinating because BuzzFeed actually came to us with the data. We worked with Scott’s Miracle Gro on the products etc. and BuzzFeed said, hey, look, there’s these 36 year old females, conservative, highly religious, mostly down south and in the Midwest. They want this box based on self care and the moon and crystals and all this stuff that had nothing to do with the type of person that they were. And I remember just saying like, What do you mean? Wake up Like the, like the witchcraft type stuff, and no, no, no, don’t say that. That is appropriation. I was like, I’m sorry. I’m just failing to understand. Yeah, there it is religious and you know, like yoga Wicca moon phases, right. But what they were trying to explain is like, you know, their problem is self care, they’re at home all day. You know, they have these different things that they do prayer, etc. But you know, having a plan to take care of having a journal having all this stuff that really solves a problem because they don’t really have a network or a group to talk to. And so, reluctantly, we went with it, they were dead, right, right. And on the flip side, you have stuff like Disney, we launched the Disney Princess box. We really even with Disney in their hundred plus data scientists, we really had it narrowed down to parents, trying to empower their little girls, etc, etc. Well guess what happens we flip it on and grandma and grandpa are by in seventh grands worth of Princess boxes for all their kids, right? Where we made the adjustment really quickly. And, you know, we found out that the problem was grandparents had a guilt of not living or being around their grandkids. And so how could they remind them every month? Okay. Yes. Right. And so, and I would also say that a lot of the, I would say, at the risk of, you know, giving too much information or kind of like, you know, coming off as inappropriate as a company, our customer is not the person receiving the box. And I know that people are a company hate it when I say that. Our customer is usually somebody at a large company that is tasked with innovation. And what’s the ironic thing is they usually tend to be risk adverse because they’re working on a large company. So I’d say that our customer, we are actually solving the problem of reducing the risk for people and innovation, and we put our neck on the chopping block. If this thing doesn’t go, Well, that’s really our customer. Now in that process, we’re going to help them identify their customer. And so, but by no means necessary, are we coming in and saying, you know, hey, here’s exactly this box, we’ll target. We come in, and we say, here’s who we think it is, to the best of our knowledge. All right, it will change once we get the data back.

James Thomson 21:29
So let’s talk about big brands, big companies. Talk to me about the differences that you see. Working with big well known brands, versus much less well known brands. How does it how does that play out typically?

Unknown Speaker 21:44
Yeah, so

Paul Jarrett 21:47
big brands are going to be very slow. There’s going to be unnecessary approvals up and down. You know, there’s always committees as well. As we tried to drive it down, you know, everybody’s there to shoulder the blame. You know, the the smallest copy point that is frankly, like the shit, that doesn’t matter, right? Yes. It just gets examined. And it just, it just drags on and on and on and you’re going like, it just doesn’t matter. Like we’ll fix it if it’s broken, right? every tweet, every social media part of this just gets 100 eyeballs on it. And it’s kind of like the strongest voice on the client side wins. Right? And so that’s, you know, they have all the assets, they have a lot of stuff, but they’re just so

Unknown Speaker 22:37
timid, you know,

Paul Jarrett 22:40
which is, you know, super frustrating when you know what sales can be in a model, but, you know, you’re having conversations about changing the color of the tissue paper, you know, you’re like, what are we talking about? Yeah,

you can feel me starting in your browser that

James Thomson 22:58
I’m guessing the smaller companies are are willing to take risks and fewer people need to make the decision for you to move forward,

Paul Jarrett 23:05
you would think that, I would say that that’s largely true. The challenges, they’re going to nickel and dime everything they’re gonna call you every hour on the hour. You know, they’re gonna do what you know me as entrepreneur, they’re gonna do what I do. Sure, sure. So, you know, there, I always tell people, you know, I think that our ideal client is a multi billion dollar brand that everybody perceives as super boring, right? Like, go find those companies, you know, Scott’s Miracle Gro right? Go find them because they have a lot of the assets a lot of everything but they don’t have the you know, like, Hey, I’m Nike, or Hey, I’m Adidas, you know, and those even when I you know, I came from the ad agency world for about a decade or so. Those are what we would call like the pay the bills, clients. Or, you know, there that we always would bucket people in. You know, Disney is like a flagship client for us that we want to brag about, right? Yes. Scott’s Miracle Gro is like, they’re, they’re helping pay the bills, and then kind of like a bucket of them that you’re trying to, you know, get up and coming. So I really encourage people to, you know, look for partners that are very big, very quiet, and, you know, have the 10 cubicles when you walk in, right.

James Thomson 24:29
So in my world of Amazon, I work with a lot of private label brand owners who use only the Amazon channel to distribute their products online. What sorts of brands at what stages of development should be thinking about potentially using a subscription box as a viable alternative distribution channel?

Paul Jarrett 24:45
Yeah, so I think as soon as you I would say that’s First of all, it doesn’t have to be a subscription. That’s really important, right? Kids, right, like I can put stuff together. Okay. I’ve worked in retail long enough, I helped a company go from 3 million to 83 million in about two years. And everybody asked me how I did it. And I said, I did two things. I took all the leftover proteins, vitamins, etc. And I put a little shrink wrap gun on it and keep it up. And then the other thing I did was just increase the radio advertising. That’s, you know, I just did those two things. And that was it. So I think that anytime that you’re going to have excess inventory, you need to look and think really creatively about like, how can I rearrange this stuff? How can I put it together? How can I sell you know, maybe it’s a mystery box, right? You have things that are going to expire. You have to be very honest and upfront on that but you know, you can what’s better sitting in your warehouse getting it thrown away? Or you know, are you going to create a one of the boxes that always seems to come up is like a wedding day or like a bride to be box Okay, okay. And you can kind of come up with these things holidays coming up, right? different gifts, that sort of thing. So I think anybody that’s sitting on excess inventory, you can rearrange those things into kits, one off boxes, if you’re always going to have overages in excess inventory. Think about grouping that up. And you know, putting a theme to it. Also, you can call subscription box companies and say, you know, look, you just pay to get this to you, or, you know, cost plus whatever or some companies it’s like, well, we’re going to throw this away, we might as well put it in a subscription box and advertise right.

James Thomson 26:42
What’s fascinating is on Amazon, you typically see brands trying to experiment with excess inventory and they’ll sell a three pack where they’ve never had a three pack, or they’ll take the blue and the red and the green color and wrap them together and have a skew that’s only available on Amazon. How much of what you’re doing is excess in Inventory versus what I’ll call you know, first rate inventory that’s otherwise selling by itself.

Paul Jarrett 27:06
I, when we first started and when we were, you know, kind of scraping by but when we’re figuring it out, there was a lot of mystery excess inventory. Now, as we’ve grown, you know, there’s a lot of premium inventory, but I will say that after, you know, a year or so, more of growth, we meet with our partners quarterly and we’re always pushing them like look, you know, we got 90 of these, we got 200 of these, like, what’s we can we can create a whole separate brand and just try to sell these things. And I think a lot of it is it’s nice money for us, but it’s just not you know, enough for them. But I will say that, you know, at the end of the year when everybody is test to make some more money, all of a sudden those ideas you know, kind of come back around. I would

James Thomson 27:57
change in the couch, you can turn into cash. Get

Paul Jarrett 28:00
Yeah. Really, you know, it’s like, you have the option to pay us to store it or you know, we’ll cut you a check. And Yep, eventually they all come around, but it takes a while.

James Thomson 28:11
So on Amazon, it’s very hard to calculate the cost to acquire a new customer. Because in fact, brands don’t own the customer relationship with Amazon. How do you think about acquisition costs in the subscription? box business?

Paul Jarrett 28:26
Yeah, well, the rough, you know, we take the aggregated data of almost 1000 paying members for the max Trade Association. We have a third party, put everything together and give a report. Yeah. Which customer acquisition cost is about? I think it’s like 3799. So we’ll do we’ll just call it 38 bucks.

James Thomson 28:49
And how do you how do you look at repeat purchase because the customer isn’t necessarily coming back to buy another subscription box from the same brand, but maybe going elsewhere to buy bits and pieces of the parts. They liked.

Paul Jarrett 29:00
Yeah, so in the subscription box and I think this holds true for this subscription kind of world in general. We have the CAC LTV payback formula. Yeah. Yeah. So some people are familiar not and that’s, you know what I always tell people and I’ve given a lot of presentations on that. The key to the CAC LTV payback ratio is that you have to define what CAC actually means, right? I’ve seen folks define CAC, as well, it’s when we get an email, you know, I tend to work in a little bit of a, you know, it’s when we get paid like what’s real money. And when you start to unfold that, you know, CAC LTV, you really start to realize the customer acquisition cost doesn’t matter. We have one brand that I think is a $78 customer acquisition costs. The box was selling I believe for about $40. And over time, the churn rate it just wasn’t working out and so You know, everybody was focused on getting the customer acquisition costs down. And somebody said, Well, what if we just raised the price to like, $58? And I was like, That’s crazy. Like, why would we do that? You know, they said, well hear me out, you know, this, this, this and I didn’t really pay attention because I thought it was a terrible idea. But what we ended up doing was we did flip the switch, we made the product more expensive. And ironically, sales went through the roof. There’s more demand. You know, I think a lot of it was being sold out and people having to wait to come back next month to sign up for it. had a lot to do with it. But again, it just, it all comes down to the formula, you know, the CAC LTV payments, yes. And that’s, that’s a big part of that

Excel document business model that I was talking about.

James Thomson 30:53
So let me ask you, Paul during the COVID crisis, consumers initially were focusing their disposable income On what I call needs versus wants, I suspect a lot of subscription box services would be considered a lot rather than a need. How have you had to adjust in order to continue to be relevant? So people are spending money buying subscription boxes.

Paul Jarrett 31:15
I have checked our numbers religiously, like every hour on the Yes. This has an impacted sales like wasn’t really, you know, if anything, it’s probably given them a little bit of I think the longer that we’re in it, you know, people are really interested in plants. They’re interested in keeping their kids busy. But we haven’t seen you know, I don’t I think what happened was when this thing went down, people scramble to go buy stuff, but they didn’t scramble to go cancel stuff, right. I mean, like I did, my wife and I did. Yes. How we were raised, you know, you grow up poor, you’re like, ooh, economy’s bad, better, you know, just kind of whatever we don’t we don’t need the Hulu Plus, no commercials. But I would say, you know, for the most part, our subscriptions are trending, I think about five or 6% more than what we thought that they would be at this time. And kind of the COVID thing is the only thing that we can really put on it. So I think, definitely, there’s a mentality of a little bit more like treat yourself. Okay, a lot of the boxes that we’re launching, it’s like, you know, companies want to treat their employees they want to make home a little bit more relaxed, okay?

James Thomson 32:34
They’re still there, they’re affordable luxuries, so to speak, you get a $40 box. You’re not breaking the bank, but there is still some mystery in terms of what you’re going to be surprised to find.

Paul Jarrett 32:45
The sweet spot for a box is 3599, which was the CAC but you know, if you’re looking at, you know, the best market right now, for a subscription box, what you want to be looking at is female males in the mid 30s range, they’re probably already subscribing to one or two boxes, they for sure have some sort of magazine, they for sure have some sort of Netflix, they’re not scared of subscriptions and tapping into that audience, what they usually have is two to three subscription boxes that they’re receiving, but they’re kind of like exchanging them, right. So I kind of think of it as they’re probably spending, you know, 120 bucks a month, 100 bucks a month on various subscription boxes, but they’re, you know, they get bored with one and they kind of replace it with Okay, okay. Guys, on the other hand, are like they get one box and they never cancel it. And if they cancel it, they’re just not coming back. Wow.

James Thomson 33:48
So let’s let’s talk for a minute again about Amazon. When brands do bundles of their own products on Amazon, we often see consumers buying up a whole Bunch of units that that bundle unbundling it and then turning off and selling off or selling off the parts for profit. Yeah. Do you run into a situation where in subscription boxes somebody has five subscriptions to the same box? Or is it really all excess inventory that really doesn’t have a high street value individually?

Paul Jarrett 34:20
I’m always shocked at the things that I see. And

I think we just kind of have this attitude of like, you know, nothing we’ve seen yet kind of competes with us. You know, we’re we’re not going to go after people unless the client you know, asks us Okay, that was there is like a Disney box that we do that is Collector’s Edition items. And you know, they have a team that gets after those pretty pretty well, but, you know, I think it’s a good luck trend. Randall the internet, right?

James Thomson 34:51
Yes. So how do brands Intro 0:09
Welcome to the Buy Box Experts podcast we bring to light the unique opportunities brands face in today’s e commerce world.

James Thomson 0:18
Hi, I’m James Thomson, one of the hosts of the Buy Box Experts podcast. I’m a partner with Buy Box Experts and the former business head the selling on Amazon team at Amazon, as well as the first account manager for the Fulfillment by Amazon program. I am the co author of the book controlling your brand in the age of Amazon, and co founder of the prosper show one of the largest continuing education conferences for sellers in North America. Today’s episode is brought to you by buy box experts. buy box experts takes ambitious brands and makes them unbeatable when you hire Buy Box Experts you receive the strategy optimization and marketing performance to succeed on Amazon go to buyboxexperts.com to learn more. Today I’m excited to introduce our guests Paul Jarrett, CEO and Co-founder of Bulu Group, a subscription service for private label brands. He’s worked with brands like Disney and GNC, as well as dozens of smaller brands that have used the service to expand distribution and create higher customer awareness. Paul has more than 15 years of online experience doing everything from working at ad agencies, renting textbooks online, and building his own brands online. Recently, Paul’s Bulu group was featured on PBS as a startup program. And Paul today shares his experiences as a keynote speaker, talking about the power of changing your perspective on life, and overcoming major life hurdles to become kinder to yourself. Paul brings his expertise to us today, sharing best practices on how brands can leverage the power of online channels to become more relevant in the lives of consumers. So welcome, Paul. And thank you for joining us today on the Buy Box Experts podcast.

Paul Jarrett 1:59
Thanks for having me on James. Appreciate it.

James Thomson 2:01
Paul, I want to start with a very broad discussion point around. What do you see, having changed over the last 20 years in terms of how brands have thought of the online channel?

Paul Jarrett 2:13
Yeah. I’m, it’s, it’s fascinating because I’m both it’s the most exciting thing and probably the most frustrating thing. And I would say, you know, my first website was built, I think about 2003. Okay, and sorry, I have kids and dogs and I’ve

Unknown Speaker 2:37
got those two bagger.

Paul Jarrett 2:40
So, you know, it was fascinating when we’re at a time where you know, we’re all figuring out credit card payments and all that other stuff and you know, Amazon just kind of crept in like a really slow rolling dark fog right. And I guess, you know, not necessarily dark, but you know, for people that saw it, I think it was really intimidating for them. And I feel like you know, there’s really just two camps of folks, right there are the folks that are going to let the metrics, the sales channels, the margins, the black and white facts, drive a lot of sales. And there’s folks that are still stuck in, you know, what’s the story, what’s the feeling what’s all about? They all matter, but you know, when you have a tool like Amazon, or you have tools online

Unknown Speaker 3:39
more time, all right.

Unknown Speaker 3:42
I feel that way at the end of many days.

Unknown Speaker 3:45
It’s getting close and

Paul Jarrett 3:48
you know, it’s it’s really a matter to me of who is in charge of the company and what are their kind of like thoughts, feelings and beliefs. And frankly, I think it’s it’s a shame scamming, working with who we work with, you know, we’ll still have these multibillion dollar companies and they’re like, we don’t want to go on Amazon because it’s gonna steal sales. And you just, you know, sometimes I stop and I say, Wait, you know, is that serious? Or is that you know, are you being sarcastic? Right? And usually what I do in a room is I say, okay, can everybody just raise your hands if you’ve received a package from Amazon in the last three days? And you’re like, Okay, so like, this is what you’re missing out on? 80% I believe it’s 80%. All online sales happen on Amazon. And I think it’s just, you know, maybe the most fascinating thing that I’ve noticed over the past 20 years is the level of denial bad folks walk out you know, and even now, when it is happening, and the speed of e commerce and development is happening faster than probably it ever has, overall before. We’re working with clients and you know, trying to schedule like a quick conversation on Okay, you know, you want to start selling your old our excess inventory on Amazon let’s, you know, go find a third party for you and they’re like, No, we don’t want to do that they you know, rather have it sit around in the warehouse and collect dust and yes. So it’s just I think that has been really mind blowing is the rate at which technology is progressing is not the rate at which the folks at the top are progressing and there are a lot of them are stuck in their their beliefs, a lot of feeling a lot of denial and and you know, it’s unfortunate but also it’s evolution, right like i don’t i don’t think retail is dying. I don’t think things are going to go extinct. It’s going to do what it’s always done. Business is going to evolve. You know, when TV came around, you know, probably online, you know, television ads were wild, right when people deciding to send catalogs is just an evolution and it’s where and that evolution Do you want to live, there’s no right or wrong. But if you have goals, the right thing to do is to use utilize channels and tactics and metrics that support your goals. And that’s that’s probably over the last 20 years just been fascinating to watch, you know, companies can literally save themselves, but for some reason or another, they’re just in denial about using new channels.

James Thomson 6:23
So, your company Bulu group offers yet another channel beyond the Amazon issue. And for companies that may not be ready necessarily to make that step to Amazon or may have already made that step to Amazon. Talk to me a little bit about what your firm does. And in what situations do consumers prefer subscription box offerings to potentially going on and buying something directly from the brand?

Paul Jarrett 6:48
Yeah, so the way that we work is we historically and this is changing, you know, due to the pandemic, but historically we’ve gotten to large brands and we said, Look, we’ve been at this subscription Box thing for eight years, we bought our own box, we grew in less than two years, I think is about 18 months, we grew to 500 k monthly recurring revenue. We raised about 5 million in capital. Our plan was that, you know, never be profitable and to just keep growing. And I think, you know, after about three or four years that really freaked out some of the investors, right? They’re like, Whoa, like, what do you mean you want to buy a warehouse and buy all this stuff? And that’s, you know, I feel like our fault is that we actually did what we said that we were going to do and so you know, what happened in our industry was that subscription box customer acquisition costs I mean, when we started it was literally like eight cents. We could just go post on a message board and ad sales. I mean, there really was, you know, right time, right place, you know, all that stuff. But being the six subscription box of six versus the six subscription box of 10,000 is a very different story. Yeah. And we’ve looked at our business, we did a few things we, you know, in our spare time, we built a software and sold it. You know, we’re really probably year three or four, we were just kind of getting by I mean, we were struggling. And, you know, I just kept coming back to this thought of like, we have everything figured out. The challenge is just we don’t have enough money for customer acquisition costs. And so we said, well, let’s go to these big brands, let’s plug in their inventory. Let’s pull in the weights, let’s come up with some box concepts for them, and just show them like, hey, if we execute this, this is what you can make. And I think our very first model that we did, we were within, I think, six months, we were still within 3% correct of projections, which was just mind blowing for a lot of folks. I think now we’re hovering within just under 10% of projections, assuming that the company gives us the correct inventory, correct? Yes, sir. You know, whatever. And so we came in And we say, you know, look, we’ll do this model, we’ll tell you what it is you can take it, go do it yourself, you can take it give us we’ve, we’ve identified about eight different services like customer service, website creation, etc. We can do all eight services, we can do one of them, we can do none of them. But if you just kind of let us at it, here’s what we can make for your company. And so we started off doing that our first customer was GNC, I think, you know, within a couple of months, they were selling 80,000 boxes.

And then our next customer, we said, you know, it’s really make a list and go after him. You know, we put Disney on the board is number one. Number two is crale. And, you know, we just relentlessly picked up the phone call them, you know, I had to get on a plane to Disney and pretty much fake my way on the campus and, you know, tell them who I was and what I was doing. We landed all those clients. We built out those programs. And that is, you know, really what Our focus is in in the pandemic, though a lot of companies have really tightened up, buttoned up, etc. We’ve done 15 different subscription box programs total, ranging from brand new starting off dog tree company to well established, you know, Lulu, lemon apparel, etc, etc. And what we find is, you know, generally the mechanics are all the same, right? The formula we actually have and this isn’t a shameless promotion, but actually have a bulugroup.com website, you can literally pay 1000 bucks, download an Excel file, and plug in your numbers and see how your own subscription box will do. It is something that we charge large brands $25,000 to do. But you know, I think anybody with a little bit of a background in excel in accounting can pretty easily go on download that file, you know, figure it out themselves. And I would say that’s really kind of our proprietary magic is that, you know, we’re not gonna, you know, start something in three months. Go, oh my gosh, we forgot about tape or oh my gosh, we forgot about this. We have everything in that model. And to go in to share that with people. You know, in the say, here’s a new business line, let us manage it, that’s really been kind of the secret sauce. And now we’re doing that with smaller companies. And then frankly, in the pandemic, a lot of the like I said, a lot of the big brands have kind of decided to just hit the pause button and see how the world is going. And a lot of the small to midsize brands are doing the opposite. They’re going full throttle, right? And so, we come in and we say, okay, you know, what, really are we doing as a company? We’re taking multiple varied items with a long shelf life. We are rearranging them. Yes, we are finding audiences that this kind of you know, what’s their headache? What’s the solution to the headache? Let’s rearrange that box brand, etc. for them right? And let’s ship it on a recurring basis can be annual, it can be monthly, whatever makes the most sense for that audience. And we’ve been doing that. And a lot of people have been coming to us and saying, Hey, we just need fulfillment on the plans, because we’re tired of, you know, doing that. And so that’s really been the model over the last four years. And I’d say, over the past two months, we’ve been very open with you know, there’s some real estate companies that are sending one off boxes to a bunch of their clients. And so you know, we’re taking that on, but the mechanics are all the same. Our warehouse, our software, the business model is all built around multiple various items packed together shipped on a recurring basis. And really what you find long term and I wish somebody would have told me this out of the gate is that we’re a cash flow management company and a logistics company. And that’s where you see a lot of people kind of get stuck at about 2000 boxes a month, is because you have to start making some pretty big decisions. And the way that we look at our company, when it comes to bigger brands, we say, look, this is just another tool in your toolbox. This is great for SEO. This is great for marketing. It’s great for research and development, all the while, you know, making a profit off not even to mention social media and unboxings. But we do not go in and say, you know, this is the next big thing. We simply say, you know, this is a wrench in your toolbox. Now for some of the smaller brands that are just starting. It’s a similar conversation, but it can be more like, hey, this can support the salary of a couple of people in your company, but like this is not the end game. I do. I’m under the firm belief that you cannot run an entire profitable growing company of just a subscription box. You’re going to need to do things like sell excess inventory on Amazon. Things like sell the box on Amazon. We have a friendship I can say with Amazon And we’ve assisted in their subscription box website.

And so, you know, that’s, that’s really kind of the, the quote unquote, pitch to folks. And I think when they see it, and when they concentrate on it, and when they put the proper resources, it is that thing that can just grow a couple percentage points. And the beauty of it is that you can start going like, Oh, hey, we’re gonna sell these subscriptions, and we’re gonna have the money on hand. You know, hopefully, before we ever, you know, go buy the product or whatever. And once, once that light bulb goes off, and the financial person said, especially CFO of a multi billion dollar company, you know, it’s kind of it’s kind of game over and all sudden you get really important.

James Thomson 14:45
So let me ask you this, Paul, you’ve explained why the subscription box makes sense for brands. Why does it make sense for consumers? What What is it about getting a subscription box? Great question.

Paul Jarrett 14:58
Tell me about that. Yes. So this is this is something that I feel like I have. I’ve spent way too many hours of my life trying to define that I’m a very non emotional, black and white, you know, architecturally minded, you know, what is what is the headache? What is the aspirin? Yeah. And as we actually helped start the subscription box trade association, shout out to us.

And that was one of the things we wanted to find out, right. And what we found out in our research, is that, you know, when we started everybody just call them sample boxes. Well, it’s really not quite correct between something and McKinsey, you know, they’re now labeled as subscription boxes. And within that world, there’s kind of seven major categories and seven sub categories and you know, I think Amazon has done a great job of listing those out but there’s lifestyle products, health and beauty, etc, etc, right? And within those, there’s kind of So let’s just take men’s grooming, for example. men’s group actually what’s take vitamins and supplements and I’ll explain why blue box was not a success and why we shut it down. Eventually, blue box was our original product. And for 10 bucks a month, customers could try four to five premium vitamin supplement healthy set samples, come back and purchase what they wanted from us. Right. Okay. And what we found the problem is that people didn’t know what to take. So they love to get blue box for about three, four months, right? But the problem was after they were done, they had all these random samples, right? And they’re like, well, I kind of like this and I take this thing like what is that? Well, I’m not even sure if that fish oil is working, etc, etc. Right? Now, that’s what we would call a vitamin and supplement sample box right? That is great for new customer acquisition in the business model. That is Eventually was, we created our own private label products. And we would see, oh, this customer really wants protein. Let’s sell them our own protein, right. And nice little business model. But it was a slog. And it was like just not growing when you have venture capitalists, you know, you got to grow pretty fast, just wasn’t growing at the rate that they were interested in. Now, on the flip side, had we been a replenishment box. So a subscription box that says, hey, every month, you’re going to get the same protein, you’re going to get your multivitamin, you’re going to get your fish oil, it’s going to be super cheap, because we’re able to buy in bulk that is a much more advantageous model. And you know, there’s probably 10 vitamin and supplement companies doing that. And you see people like Harry’s come in or Dollar Shave Club, right? They’re not giving you new stuff to try all the time. They’re saying, you know, take our quiz. We’re just going to replenish it. So I think that’s the the big difference that people need to consider when it comes to in the mind of the consumer. I would say this, there is the different boxes that solve different headaches. The mistake that we’ve made is trying to define what it is before they get it. We one of our most successful boxes is called lunarly, L-U-N-A-R-L-Y lunarly.com which was fascinating because BuzzFeed actually came to us with the data. We worked with Scott’s Miracle Gro on the products etc. and BuzzFeed said, hey, look, there’s these 36 year old females, conservative, highly religious, mostly down south and in the Midwest. They want this box based on self care and the moon and crystals and all this stuff that had nothing to do with the type of person that they were. And I remember just saying like, What do you mean? Wake up Like the, like the witchcraft type stuff, and no, no, no, don’t say that. That is appropriation. I was like, I’m sorry. I’m just failing to understand. Yeah, there it is religious and you know, like yoga Wicca moon phases, right. But what they were trying to explain is like, you know, their problem is self care, they’re at home all day. You know, they have these different things that they do prayer, etc. But you know, having a plan to take care of having a journal having all this stuff that really solves a problem because they don’t really have a network or a group to talk to. And so, reluctantly, we went with it, they were dead, right, right. And on the flip side, you have stuff like Disney, we launched the Disney Princess box. We really even with Disney in their hundred plus data scientists, we really had it narrowed down to parents, trying to empower their little girls, etc, etc. Well guess what happens we flip it on and grandma and grandpa are by in seventh grands worth of Princess boxes for all their kids, right? Where we made the adjustment really quickly. And, you know, we found out that the problem was grandparents had a guilt of not living or being around their grandkids. And so how could they remind them every month? Okay. Yes. Right. And so, and I would also say that a lot of the, I would say, at the risk of, you know, giving too much information or kind of like, you know, coming off as inappropriate as a company, our customer is not the person receiving the box. And I know that people are a company hate it when I say that. Our customer is usually somebody at a large company that is tasked with innovation. And what’s the ironic thing is they usually tend to be risk adverse because they’re working on a large company. So I’d say that our customer, we are actually solving the problem of reducing the risk for people and innovation, and we put our neck on the chopping block. If this thing doesn’t go, Well, that’s really our customer. Now in that process, we’re going to help them identify their customer. And so, but by no means necessary, are we coming in and saying, you know, hey, here’s exactly this box, we’ll target. We come in, and we say, here’s who we think it is, to the best of our knowledge. All right, it will change once we get the data back.

James Thomson 21:29
So let’s talk about big brands, big companies. Talk to me about the differences that you see. Working with big well known brands, versus much less well known brands. How does it how does that play out typically?

Unknown Speaker 21:44
Yeah, so

Paul Jarrett 21:47
big brands are going to be very slow. There’s going to be unnecessary approvals up and down. You know, there’s always committees as well. As we tried to drive it down, you know, everybody’s there to shoulder the blame. You know, the the smallest copy point that is frankly, like the shit, that doesn’t matter, right? Yes. It just gets examined. And it just, it just drags on and on and on and you’re going like, it just doesn’t matter. Like we’ll fix it if it’s broken, right? every tweet, every social media part of this just gets 100 eyeballs on it. And it’s kind of like the strongest voice on the client side wins. Right? And so that’s, you know, they have all the assets, they have a lot of stuff, but they’re just so

Unknown Speaker 22:37
timid, you know,

Paul Jarrett 22:40
which is, you know, super frustrating when you know what sales can be in a model, but, you know, you’re having conversations about changing the color of the tissue paper, you know, you’re like, what are we talking about? Yeah,

you can feel me starting in your browser that

James Thomson 22:58
I’m guessing the smaller companies are are willing to take risks and fewer people need to make the decision for you to move forward,

Paul Jarrett 23:05
you would think that, I would say that that’s largely true. The challenges, they’re going to nickel and dime everything they’re gonna call you every hour on the hour. You know, they’re gonna do what you know me as entrepreneur, they’re gonna do what I do. Sure, sure. So, you know, there, I always tell people, you know, I think that our ideal client is a multi billion dollar brand that everybody perceives as super boring, right? Like, go find those companies, you know, Scott’s Miracle Gro right? Go find them because they have a lot of the assets a lot of everything but they don’t have the you know, like, Hey, I’m Nike, or Hey, I’m Adidas, you know, and those even when I you know, I came from the ad agency world for about a decade or so. Those are what we would call like the pay the bills, clients. Or, you know, there that we always would bucket people in. You know, Disney is like a flagship client for us that we want to brag about, right? Yes. Scott’s Miracle Gro is like, they’re, they’re helping pay the bills, and then kind of like a bucket of them that you’re trying to, you know, get up and coming. So I really encourage people to, you know, look for partners that are very big, very quiet, and, you know, have the 10 cubicles when you walk in, right.

James Thomson 24:29
So in my world of Amazon, I work with a lot of private label brand owners who use only the Amazon channel to distribute their products online. What sorts of brands at what stages of development should be thinking about potentially using a subscription box as a viable alternative distribution channel?

Paul Jarrett 24:45
Yeah, so I think as soon as you I would say that’s First of all, it doesn’t have to be a subscription. That’s really important, right? Kids, right, like I can put stuff together. Okay. I’ve worked in retail long enough, I helped a company go from 3 million to 83 million in about two years. And everybody asked me how I did it. And I said, I did two things. I took all the leftover proteins, vitamins, etc. And I put a little shrink wrap gun on it and keep it up. And then the other thing I did was just increase the radio advertising. That’s, you know, I just did those two things. And that was it. So I think that anytime that you’re going to have excess inventory, you need to look and think really creatively about like, how can I rearrange this stuff? How can I put it together? How can I sell you know, maybe it’s a mystery box, right? You have things that are going to expire. You have to be very honest and upfront on that but you know, you can what’s better sitting in your warehouse getting it thrown away? Or you know, are you going to create a one of the boxes that always seems to come up is like a wedding day or like a bride to be box Okay, okay. And you can kind of come up with these things holidays coming up, right? different gifts, that sort of thing. So I think anybody that’s sitting on excess inventory, you can rearrange those things into kits, one off boxes, if you’re always going to have overages in excess inventory. Think about grouping that up. And you know, putting a theme to it. Also, you can call subscription box companies and say, you know, look, you just pay to get this to you, or, you know, cost plus whatever or some companies it’s like, well, we’re going to throw this away, we might as well put it in a subscription box and advertise right.

James Thomson 26:42
What’s fascinating is on Amazon, you typically see brands trying to experiment with excess inventory and they’ll sell a three pack where they’ve never had a three pack, or they’ll take the blue and the red and the green color and wrap them together and have a skew that’s only available on Amazon. How much of what you’re doing is excess in Inventory versus what I’ll call you know, first rate inventory that’s otherwise selling by itself.

Paul Jarrett 27:06
I, when we first started and when we were, you know, kind of scraping by but when we’re figuring it out, there was a lot of mystery excess inventory. Now, as we’ve grown, you know, there’s a lot of premium inventory, but I will say that after, you know, a year or so, more of growth, we meet with our partners quarterly and we’re always pushing them like look, you know, we got 90 of these, we got 200 of these, like, what’s we can we can create a whole separate brand and just try to sell these things. And I think a lot of it is it’s nice money for us, but it’s just not you know, enough for them. But I will say that, you know, at the end of the year when everybody is test to make some more money, all of a sudden those ideas you know, kind of come back around. I would

James Thomson 27:57
change in the couch, you can turn into cash. Get

Paul Jarrett 28:00
Yeah. Really, you know, it’s like, you have the option to pay us to store it or you know, we’ll cut you a check. And Yep, eventually they all come around, but it takes a while.

James Thomson 28:11
So on Amazon, it’s very hard to calculate the cost to acquire a new customer. Because in fact, brands don’t own the customer relationship with Amazon. How do you think about acquisition costs in the subscription? box business?

Paul Jarrett 28:26
Yeah, well, the rough, you know, we take the aggregated data of almost 1000 paying members for the max Trade Association. We have a third party, put everything together and give a report. Yeah. Which customer acquisition cost is about? I think it’s like 3799. So we’ll do we’ll just call it 38 bucks.

James Thomson 28:49
And how do you how do you look at repeat purchase because the customer isn’t necessarily coming back to buy another subscription box from the same brand, but maybe going elsewhere to buy bits and pieces of the parts. They liked.

Paul Jarrett 29:00
Yeah, so in the subscription box and I think this holds true for this subscription kind of world in general. We have the CAC LTV payback formula. Yeah. Yeah. So some people are familiar not and that’s, you know what I always tell people and I’ve given a lot of presentations on that. The key to the CAC LTV payback ratio is that you have to define what CAC actually means, right? I’ve seen folks define CAC, as well, it’s when we get an email, you know, I tend to work in a little bit of a, you know, it’s when we get paid like what’s real money. And when you start to unfold that, you know, CAC LTV, you really start to realize the customer acquisition cost doesn’t matter. We have one brand that I think is a $78 customer acquisition costs. The box was selling I believe for about $40. And over time, the churn rate it just wasn’t working out and so You know, everybody was focused on getting the customer acquisition costs down. And somebody said, Well, what if we just raised the price to like, $58? And I was like, That’s crazy. Like, why would we do that? You know, they said, well hear me out, you know, this, this, this and I didn’t really pay attention because I thought it was a terrible idea. But what we ended up doing was we did flip the switch, we made the product more expensive. And ironically, sales went through the roof. There’s more demand. You know, I think a lot of it was being sold out and people having to wait to come back next month to sign up for it. had a lot to do with it. But again, it just, it all comes down to the formula, you know, the CAC LTV payments, yes. And that’s, that’s a big part of that

Excel document business model that I was talking about.

James Thomson 30:53
So let me ask you, Paul during the COVID crisis, consumers initially were focusing their disposable income On what I call needs versus wants, I suspect a lot of subscription box services would be considered a lot rather than a need. How have you had to adjust in order to continue to be relevant? So people are spending money buying subscription boxes.

Paul Jarrett 31:15
I have checked our numbers religiously, like every hour on the Yes. This has an impacted sales like wasn’t really, you know, if anything, it’s probably given them a little bit of I think the longer that we’re in it, you know, people are really interested in plants. They’re interested in keeping their kids busy. But we haven’t seen you know, I don’t I think what happened was when this thing went down, people scramble to go buy stuff, but they didn’t scramble to go cancel stuff, right. I mean, like I did, my wife and I did. Yes. How we were raised, you know, you grow up poor, you’re like, ooh, economy’s bad, better, you know, just kind of whatever we don’t we don’t need the Hulu Plus, no commercials. But I would say, you know, for the most part, our subscriptions are trending, I think about five or 6% more than what we thought that they would be at this time. And kind of the COVID thing is the only thing that we can really put on it. So I think, definitely, there’s a mentality of a little bit more like treat yourself. Okay, a lot of the boxes that we’re launching, it’s like, you know, companies want to treat their employees they want to make home a little bit more relaxed, okay?

James Thomson 32:34
They’re still there, they’re affordable luxuries, so to speak, you get a $40 box. You’re not breaking the bank, but there is still some mystery in terms of what you’re going to be surprised to find.

Paul Jarrett 32:45
The sweet spot for a box is 3599, which was the CAC but you know, if you’re looking at, you know, the best market right now, for a subscription box, what you want to be looking at is female males in the mid 30s range, they’re probably already subscribing to one or two boxes, they for sure have some sort of magazine, they for sure have some sort of Netflix, they’re not scared of subscriptions and tapping into that audience, what they usually have is two to three subscription boxes that they’re receiving, but they’re kind of like exchanging them, right. So I kind of think of it as they’re probably spending, you know, 120 bucks a month, 100 bucks a month on various subscription boxes, but they’re, you know, they get bored with one and they kind of replace it with Okay, okay. Guys, on the other hand, are like they get one box and they never cancel it. And if they cancel it, they’re just not coming back. Wow.

James Thomson 33:48
So let’s let’s talk for a minute again about Amazon. When brands do bundles of their own products on Amazon, we often see consumers buying up a whole Bunch of units that that bundle unbundling it and then turning off and selling off or selling off the parts for profit. Yeah. Do you run into a situation where in subscription boxes somebody has five subscriptions to the same box? Or is it really all excess inventory that really doesn’t have a high street value individually?

Paul Jarrett 34:20
I’m always shocked at the things that I see. And

I think we just kind of have this attitude of like, you know, nothing we’ve seen yet kind of competes with us. You know, we’re we’re not going to go after people unless the client you know, asks us Okay, that was there is like a Disney box that we do that is Collector’s Edition items. And you know, they have a team that gets after those pretty pretty well, but, you know, I think it’s a good luck trend. Randall the internet, right?

James Thomson 34:51
Yes. So how do brands Intro 0:09
Welcome to the Buy Box Experts podcast we bring to light the unique opportunities brands face in today’s e commerce world.

James Thomson 0:18
Hi, I’m James Thomson, one of the hosts of the Buy Box Experts podcast. I’m a partner with Buy Box Experts and the former business head the selling on Amazon team at Amazon, as well as the first account manager for the Fulfillment by Amazon program. I am the co author of the book controlling your brand in the age of Amazon, and co founder of the prosper show one of the largest continuing education conferences for sellers in North America. Today’s episode is brought to you by buy box experts. buy box experts takes ambitious brands and makes them unbeatable when you hire Buy Box Experts you receive the strategy optimization and marketing performance to succeed on Amazon go to buyboxexperts.com to learn more. Today I’m excited to introduce our guests Paul Jarrett, CEO and Co-founder of Bulu Group, a subscription service for private label brands. He’s worked with brands like Disney and GNC, as well as dozens of smaller brands that have used the service to expand distribution and create higher customer awareness. Paul has more than 15 years of online experience doing everything from working at ad agencies, renting textbooks online, and building his own brands online. Recently, Paul’s Bulu group was featured on PBS as a startup program. And Paul today shares his experiences as a keynote speaker, talking about the power of changing your perspective on life, and overcoming major life hurdles to become kinder to yourself. Paul brings his expertise to us today, sharing best practices on how brands can leverage the power of online channels to become more relevant in the lives of consumers. So welcome, Paul. And thank you for joining us today on the Buy Box Experts podcast.

Paul Jarrett 1:59
Thanks for having me on James. Appreciate it.

James Thomson 2:01
Paul, I want to start with a very broad discussion point around. What do you see, having changed over the last 20 years in terms of how brands have thought of the online channel?

Paul Jarrett 2:13
Yeah. I’m, it’s, it’s fascinating because I’m both it’s the most exciting thing and probably the most frustrating thing. And I would say, you know, my first website was built, I think about 2003. Okay, and sorry, I have kids and dogs and I’ve

Unknown Speaker 2:37
got those two bagger.

Paul Jarrett 2:40
So, you know, it was fascinating when we’re at a time where you know, we’re all figuring out credit card payments and all that other stuff and you know, Amazon just kind of crept in like a really slow rolling dark fog right. And I guess, you know, not necessarily dark, but you know, for people that saw it, I think it was really intimidating for them. And I feel like you know, there’s really just two camps of folks, right there are the folks that are going to let the metrics, the sales channels, the margins, the black and white facts, drive a lot of sales. And there’s folks that are still stuck in, you know, what’s the story, what’s the feeling what’s all about? They all matter, but you know, when you have a tool like Amazon, or you have tools online

Unknown Speaker 3:39
more time, all right.

Unknown Speaker 3:42
I feel that way at the end of many days.

Unknown Speaker 3:45
It’s getting close and

Paul Jarrett 3:48
you know, it’s it’s really a matter to me of who is in charge of the company and what are their kind of like thoughts, feelings and beliefs. And frankly, I think it’s it’s a shame scamming, working with who we work with, you know, we’ll still have these multibillion dollar companies and they’re like, we don’t want to go on Amazon because it’s gonna steal sales. And you just, you know, sometimes I stop and I say, Wait, you know, is that serious? Or is that you know, are you being sarcastic? Right? And usually what I do in a room is I say, okay, can everybody just raise your hands if you’ve received a package from Amazon in the last three days? And you’re like, Okay, so like, this is what you’re missing out on? 80% I believe it’s 80%. All online sales happen on Amazon. And I think it’s just, you know, maybe the most fascinating thing that I’ve noticed over the past 20 years is the level of denial bad folks walk out you know, and even now, when it is happening, and the speed of e commerce and development is happening faster than probably it ever has, overall before. We’re working with clients and you know, trying to schedule like a quick conversation on Okay, you know, you want to start selling your old our excess inventory on Amazon let’s, you know, go find a third party for you and they’re like, No, we don’t want to do that they you know, rather have it sit around in the warehouse and collect dust and yes. So it’s just I think that has been really mind blowing is the rate at which technology is progressing is not the rate at which the folks at the top are progressing and there are a lot of them are stuck in their their beliefs, a lot of feeling a lot of denial and and you know, it’s unfortunate but also it’s evolution, right like i don’t i don’t think retail is dying. I don’t think things are going to go extinct. It’s going to do what it’s always done. Business is going to evolve. You know, when TV came around, you know, probably online, you know, television ads were wild, right when people deciding to send catalogs is just an evolution and it’s where and that evolution Do you want to live, there’s no right or wrong. But if you have goals, the right thing to do is to use utilize channels and tactics and metrics that support your goals. And that’s that’s probably over the last 20 years just been fascinating to watch, you know, companies can literally save themselves, but for some reason or another, they’re just in denial about using new channels.

James Thomson 6:23
So, your company Bulu group offers yet another channel beyond the Amazon issue. And for companies that may not be ready necessarily to make that step to Amazon or may have already made that step to Amazon. Talk to me a little bit about what your firm does. And in what situations do consumers prefer subscription box offerings to potentially going on and buying something directly from the brand?

Paul Jarrett 6:48
Yeah, so the way that we work is we historically and this is changing, you know, due to the pandemic, but historically we’ve gotten to large brands and we said, Look, we’ve been at this subscription Box thing for eight years, we bought our own box, we grew in less than two years, I think is about 18 months, we grew to 500 k monthly recurring revenue. We raised about 5 million in capital. Our plan was that, you know, never be profitable and to just keep growing. And I think, you know, after about three or four years that really freaked out some of the investors, right? They’re like, Whoa, like, what do you mean you want to buy a warehouse and buy all this stuff? And that’s, you know, I feel like our fault is that we actually did what we said that we were going to do and so you know, what happened in our industry was that subscription box customer acquisition costs I mean, when we started it was literally like eight cents. We could just go post on a message board and ad sales. I mean, there really was, you know, right time, right place, you know, all that stuff. But being the six subscription box of six versus the six subscription box of 10,000 is a very different story. Yeah. And we’ve looked at our business, we did a few things we, you know, in our spare time, we built a software and sold it. You know, we’re really probably year three or four, we were just kind of getting by I mean, we were struggling. And, you know, I just kept coming back to this thought of like, we have everything figured out. The challenge is just we don’t have enough money for customer acquisition costs. And so we said, well, let’s go to these big brands, let’s plug in their inventory. Let’s pull in the weights, let’s come up with some box concepts for them, and just show them like, hey, if we execute this, this is what you can make. And I think our very first model that we did, we were within, I think, six months, we were still within 3% correct of projections, which was just mind blowing for a lot of folks. I think now we’re hovering within just under 10% of projections, assuming that the company gives us the correct inventory, correct? Yes, sir. You know, whatever. And so we came in And we say, you know, look, we’ll do this model, we’ll tell you what it is you can take it, go do it yourself, you can take it give us we’ve, we’ve identified about eight different services like customer service, website creation, etc. We can do all eight services, we can do one of them, we can do none of them. But if you just kind of let us at it, here’s what we can make for your company. And so we started off doing that our first customer was GNC, I think, you know, within a couple of months, they were selling 80,000 boxes.

And then our next customer, we said, you know, it’s really make a list and go after him. You know, we put Disney on the board is number one. Number two is crale. And, you know, we just relentlessly picked up the phone call them, you know, I had to get on a plane to Disney and pretty much fake my way on the campus and, you know, tell them who I was and what I was doing. We landed all those clients. We built out those programs. And that is, you know, really what Our focus is in in the pandemic, though a lot of companies have really tightened up, buttoned up, etc. We’ve done 15 different subscription box programs total, ranging from brand new starting off dog tree company to well established, you know, Lulu, lemon apparel, etc, etc. And what we find is, you know, generally the mechanics are all the same, right? The formula we actually have and this isn’t a shameless promotion, but actually have a bulugroup.com website, you can literally pay 1000 bucks, download an Excel file, and plug in your numbers and see how your own subscription box will do. It is something that we charge large brands $25,000 to do. But you know, I think anybody with a little bit of a background in excel in accounting can pretty easily go on download that file, you know, figure it out themselves. And I would say that’s really kind of our proprietary magic is that, you know, we’re not gonna, you know, start something in three months. Go, oh my gosh, we forgot about tape or oh my gosh, we forgot about this. We have everything in that model. And to go in to share that with people. You know, in the say, here’s a new business line, let us manage it, that’s really been kind of the secret sauce. And now we’re doing that with smaller companies. And then frankly, in the pandemic, a lot of the like I said, a lot of the big brands have kind of decided to just hit the pause button and see how the world is going. And a lot of the small to midsize brands are doing the opposite. They’re going full throttle, right? And so, we come in and we say, okay, you know, what, really are we doing as a company? We’re taking multiple varied items with a long shelf life. We are rearranging them. Yes, we are finding audiences that this kind of you know, what’s their headache? What’s the solution to the headache? Let’s rearrange that box brand, etc. for them right? And let’s ship it on a recurring basis can be annual, it can be monthly, whatever makes the most sense for that audience. And we’ve been doing that. And a lot of people have been coming to us and saying, Hey, we just need fulfillment on the plans, because we’re tired of, you know, doing that. And so that’s really been the model over the last four years. And I’d say, over the past two months, we’ve been very open with you know, there’s some real estate companies that are sending one off boxes to a bunch of their clients. And so you know, we’re taking that on, but the mechanics are all the same. Our warehouse, our software, the business model is all built around multiple various items packed together shipped on a recurring basis. And really what you find long term and I wish somebody would have told me this out of the gate is that we’re a cash flow management company and a logistics company. And that’s where you see a lot of people kind of get stuck at about 2000 boxes a month, is because you have to start making some pretty big decisions. And the way that we look at our company, when it comes to bigger brands, we say, look, this is just another tool in your toolbox. This is great for SEO. This is great for marketing. It’s great for research and development, all the while, you know, making a profit off not even to mention social media and unboxings. But we do not go in and say, you know, this is the next big thing. We simply say, you know, this is a wrench in your toolbox. Now for some of the smaller brands that are just starting. It’s a similar conversation, but it can be more like, hey, this can support the salary of a couple of people in your company, but like this is not the end game. I do. I’m under the firm belief that you cannot run an entire profitable growing company of just a subscription box. You’re going to need to do things like sell excess inventory on Amazon. Things like sell the box on Amazon. We have a friendship I can say with Amazon And we’ve assisted in their subscription box website.

And so, you know, that’s, that’s really kind of the, the quote unquote, pitch to folks. And I think when they see it, and when they concentrate on it, and when they put the proper resources, it is that thing that can just grow a couple percentage points. And the beauty of it is that you can start going like, Oh, hey, we’re gonna sell these subscriptions, and we’re gonna have the money on hand. You know, hopefully, before we ever, you know, go buy the product or whatever. And once, once that light bulb goes off, and the financial person said, especially CFO of a multi billion dollar company, you know, it’s kind of it’s kind of game over and all sudden you get really important.

James Thomson 14:45
So let me ask you this, Paul, you’ve explained why the subscription box makes sense for brands. Why does it make sense for consumers? What What is it about getting a subscription box? Great question.

Paul Jarrett 14:58
Tell me about that. Yes. So this is this is something that I feel like I have. I’ve spent way too many hours of my life trying to define that I’m a very non emotional, black and white, you know, architecturally minded, you know, what is what is the headache? What is the aspirin? Yeah. And as we actually helped start the subscription box trade association, shout out to us.

And that was one of the things we wanted to find out, right. And what we found out in our research, is that, you know, when we started everybody just call them sample boxes. Well, it’s really not quite correct between something and McKinsey, you know, they’re now labeled as subscription boxes. And within that world, there’s kind of seven major categories and seven sub categories and you know, I think Amazon has done a great job of listing those out but there’s lifestyle products, health and beauty, etc, etc, right? And within those, there’s kind of So let’s just take men’s grooming, for example. men’s group actually what’s take vitamins and supplements and I’ll explain why blue box was not a success and why we shut it down. Eventually, blue box was our original product. And for 10 bucks a month, customers could try four to five premium vitamin supplement healthy set samples, come back and purchase what they wanted from us. Right. Okay. And what we found the problem is that people didn’t know what to take. So they love to get blue box for about three, four months, right? But the problem was after they were done, they had all these random samples, right? And they’re like, well, I kind of like this and I take this thing like what is that? Well, I’m not even sure if that fish oil is working, etc, etc. Right? Now, that’s what we would call a vitamin and supplement sample box right? That is great for new customer acquisition in the business model. That is Eventually was, we created our own private label products. And we would see, oh, this customer really wants protein. Let’s sell them our own protein, right. And nice little business model. But it was a slog. And it was like just not growing when you have venture capitalists, you know, you got to grow pretty fast, just wasn’t growing at the rate that they were interested in. Now, on the flip side, had we been a replenishment box. So a subscription box that says, hey, every month, you’re going to get the same protein, you’re going to get your multivitamin, you’re going to get your fish oil, it’s going to be super cheap, because we’re able to buy in bulk that is a much more advantageous model. And you know, there’s probably 10 vitamin and supplement companies doing that. And you see people like Harry’s come in or Dollar Shave Club, right? They’re not giving you new stuff to try all the time. They’re saying, you know, take our quiz. We’re just going to replenish it. So I think that’s the the big difference that people need to consider when it comes to in the mind of the consumer. I would say this, there is the different boxes that solve different headaches. The mistake that we’ve made is trying to define what it is before they get it. We one of our most successful boxes is called lunarly, L-U-N-A-R-L-Y lunarly.com which was fascinating because BuzzFeed actually came to us with the data. We worked with Scott’s Miracle Gro on the products etc. and BuzzFeed said, hey, look, there’s these 36 year old females, conservative, highly religious, mostly down south and in the Midwest. They want this box based on self care and the moon and crystals and all this stuff that had nothing to do with the type of person that they were. And I remember just saying like, What do you mean? Wake up Like the, like the witchcraft type stuff, and no, no, no, don’t say that. That is appropriation. I was like, I’m sorry. I’m just failing to understand. Yeah, there it is religious and you know, like yoga Wicca moon phases, right. But what they were trying to explain is like, you know, their problem is self care, they’re at home all day. You know, they have these different things that they do prayer, etc. But you know, having a plan to take care of having a journal having all this stuff that really solves a problem because they don’t really have a network or a group to talk to. And so, reluctantly, we went with it, they were dead, right, right. And on the flip side, you have stuff like Disney, we launched the Disney Princess box. We really even with Disney in their hundred plus data scientists, we really had it narrowed down to parents, trying to empower their little girls, etc, etc. Well guess what happens we flip it on and grandma and grandpa are by in seventh grands worth of Princess boxes for all their kids, right? Where we made the adjustment really quickly. And, you know, we found out that the problem was grandparents had a guilt of not living or being around their grandkids. And so how could they remind them every month? Okay. Yes. Right. And so, and I would also say that a lot of the, I would say, at the risk of, you know, giving too much information or kind of like, you know, coming off as inappropriate as a company, our customer is not the person receiving the box. And I know that people are a company hate it when I say that. Our customer is usually somebody at a large company that is tasked with innovation. And what’s the ironic thing is they usually tend to be risk adverse because they’re working on a large company. So I’d say that our customer, we are actually solving the problem of reducing the risk for people and innovation, and we put our neck on the chopping block. If this thing doesn’t go, Well, that’s really our customer. Now in that process, we’re going to help them identify their customer. And so, but by no means necessary, are we coming in and saying, you know, hey, here’s exactly this box, we’ll target. We come in, and we say, here’s who we think it is, to the best of our knowledge. All right, it will change once we get the data back.

James Thomson 21:29
So let’s talk about big brands, big companies. Talk to me about the differences that you see. Working with big well known brands, versus much less well known brands. How does it how does that play out typically?

Unknown Speaker 21:44
Yeah, so

Paul Jarrett 21:47
big brands are going to be very slow. There’s going to be unnecessary approvals up and down. You know, there’s always committees as well. As we tried to drive it down, you know, everybody’s there to shoulder the blame. You know, the the smallest copy point that is frankly, like the shit, that doesn’t matter, right? Yes. It just gets examined. And it just, it just drags on and on and on and you’re going like, it just doesn’t matter. Like we’ll fix it if it’s broken, right? every tweet, every social media part of this just gets 100 eyeballs on it. And it’s kind of like the strongest voice on the client side wins. Right? And so that’s, you know, they have all the assets, they have a lot of stuff, but they’re just so

Unknown Speaker 22:37
timid, you know,

Paul Jarrett 22:40
which is, you know, super frustrating when you know what sales can be in a model, but, you know, you’re having conversations about changing the color of the tissue paper, you know, you’re like, what are we talking about? Yeah,

you can feel me starting in your browser that

James Thomson 22:58
I’m guessing the smaller companies are are willing to take risks and fewer people need to make the decision for you to move forward,

Paul Jarrett 23:05
you would think that, I would say that that’s largely true. The challenges, they’re going to nickel and dime everything they’re gonna call you every hour on the hour. You know, they’re gonna do what you know me as entrepreneur, they’re gonna do what I do. Sure, sure. So, you know, there, I always tell people, you know, I think that our ideal client is a multi billion dollar brand that everybody perceives as super boring, right? Like, go find those companies, you know, Scott’s Miracle Gro right? Go find them because they have a lot of the assets a lot of everything but they don’t have the you know, like, Hey, I’m Nike, or Hey, I’m Adidas, you know, and those even when I you know, I came from the ad agency world for about a decade or so. Those are what we would call like the pay the bills, clients. Or, you know, there that we always would bucket people in. You know, Disney is like a flagship client for us that we want to brag about, right? Yes. Scott’s Miracle Gro is like, they’re, they’re helping pay the bills, and then kind of like a bucket of them that you’re trying to, you know, get up and coming. So I really encourage people to, you know, look for partners that are very big, very quiet, and, you know, have the 10 cubicles when you walk in, right.

James Thomson 24:29
So in my world of Amazon, I work with a lot of private label brand owners who use only the Amazon channel to distribute their products online. What sorts of brands at what stages of development should be thinking about potentially using a subscription box as a viable alternative distribution channel?

Paul Jarrett 24:45
Yeah, so I think as soon as you I would say that’s First of all, it doesn’t have to be a subscription. That’s really important, right? Kids, right, like I can put stuff together. Okay. I’ve worked in retail long enough, I helped a company go from 3 million to 83 million in about two years. And everybody asked me how I did it. And I said, I did two things. I took all the leftover proteins, vitamins, etc. And I put a little shrink wrap gun on it and keep it up. And then the other thing I did was just increase the radio advertising. That’s, you know, I just did those two things. And that was it. So I think that anytime that you’re going to have excess inventory, you need to look and think really creatively about like, how can I rearrange this stuff? How can I put it together? How can I sell you know, maybe it’s a mystery box, right? You have things that are going to expire. You have to be very honest and upfront on that but you know, you can what’s better sitting in your warehouse getting it thrown away? Or you know, are you going to create a one of the boxes that always seems to come up is like a wedding day or like a bride to be box Okay, okay. And you can kind of come up with these things holidays coming up, right? different gifts, that sort of thing. So I think anybody that’s sitting on excess inventory, you can rearrange those things into kits, one off boxes, if you’re always going to have overages in excess inventory. Think about grouping that up. And you know, putting a theme to it. Also, you can call subscription box companies and say, you know, look, you just pay to get this to you, or, you know, cost plus whatever or some companies it’s like, well, we’re going to throw this away, we might as well put it in a subscription box and advertise right.

James Thomson 26:42
What’s fascinating is on Amazon, you typically see brands trying to experiment with excess inventory and they’ll sell a three pack where they’ve never had a three pack, or they’ll take the blue and the red and the green color and wrap them together and have a skew that’s only available on Amazon. How much of what you’re doing is excess in Inventory versus what I’ll call you know, first rate inventory that’s otherwise selling by itself.

Paul Jarrett 27:06
I, when we first started and when we were, you know, kind of scraping by but when we’re figuring it out, there was a lot of mystery excess inventory. Now, as we’ve grown, you know, there’s a lot of premium inventory, but I will say that after, you know, a year or so, more of growth, we meet with our partners quarterly and we’re always pushing them like look, you know, we got 90 of these, we got 200 of these, like, what’s we can we can create a whole separate brand and just try to sell these things. And I think a lot of it is it’s nice money for us, but it’s just not you know, enough for them. But I will say that, you know, at the end of the year when everybody is test to make some more money, all of a sudden those ideas you know, kind of come back around. I would

James Thomson 27:57
change in the couch, you can turn into cash. Get

Paul Jarrett 28:00
Yeah. Really, you know, it’s like, you have the option to pay us to store it or you know, we’ll cut you a check. And Yep, eventually they all come around, but it takes a while.

James Thomson 28:11
So on Amazon, it’s very hard to calculate the cost to acquire a new customer. Because in fact, brands don’t own the customer relationship with Amazon. How do you think about acquisition costs in the subscription? box business?

Paul Jarrett 28:26
Yeah, well, the rough, you know, we take the aggregated data of almost 1000 paying members for the max Trade Association. We have a third party, put everything together and give a report. Yeah. Which customer acquisition cost is about? I think it’s like 3799. So we’ll do we’ll just call it 38 bucks.

James Thomson 28:49
And how do you how do you look at repeat purchase because the customer isn’t necessarily coming back to buy another subscription box from the same brand, but maybe going elsewhere to buy bits and pieces of the parts. They liked.

Paul Jarrett 29:00
Yeah, so in the subscription box and I think this holds true for this subscription kind of world in general. We have the CAC LTV payback formula. Yeah. Yeah. So some people are familiar not and that’s, you know what I always tell people and I’ve given a lot of presentations on that. The key to the CAC LTV payback ratio is that you have to define what CAC actually means, right? I’ve seen folks define CAC, as well, it’s when we get an email, you know, I tend to work in a little bit of a, you know, it’s when we get paid like what’s real money. And when you start to unfold that, you know, CAC LTV, you really start to realize the customer acquisition cost doesn’t matter. We have one brand that I think is a $78 customer acquisition costs. The box was selling I believe for about $40. And over time, the churn rate it just wasn’t working out and so You know, everybody was focused on getting the customer acquisition costs down. And somebody said, Well, what if we just raised the price to like, $58? And I was like, That’s crazy. Like, why would we do that? You know, they said, well hear me out, you know, this, this, this and I didn’t really pay attention because I thought it was a terrible idea. But what we ended up doing was we did flip the switch, we made the product more expensive. And ironically, sales went through the roof. There’s more demand. You know, I think a lot of it was being sold out and people having to wait to come back next month to sign up for it. had a lot to do with it. But again, it just, it all comes down to the formula, you know, the CAC LTV payments, yes. And that’s, that’s a big part of that

Excel document business model that I was talking about.

James Thomson 30:53
So let me ask you, Paul during the COVID crisis, consumers initially were focusing their disposable income On what I call needs versus wants, I suspect a lot of subscription box services would be considered a lot rather than a need. How have you had to adjust in order to continue to be relevant? So people are spending money buying subscription boxes.

Paul Jarrett 31:15
I have checked our numbers religiously, like every hour on the Yes. This has an impacted sales like wasn’t really, you know, if anything, it’s probably given them a little bit of I think the longer that we’re in it, you know, people are really interested in plants. They’re interested in keeping their kids busy. But we haven’t seen you know, I don’t I think what happened was when this thing went down, people scramble to go buy stuff, but they didn’t scramble to go cancel stuff, right. I mean, like I did, my wife and I did. Yes. How we were raised, you know, you grow up poor, you’re like, ooh, economy’s bad, better, you know, just kind of whatever we don’t we don’t need the Hulu Plus, no commercials. But I would say, you know, for the most part, our subscriptions are trending, I think about five or 6% more than what we thought that they would be at this time. And kind of the COVID thing is the only thing that we can really put on it. So I think, definitely, there’s a mentality of a little bit more like treat yourself. Okay, a lot of the boxes that we’re launching, it’s like, you know, companies want to treat their employees they want to make home a little bit more relaxed, okay?

James Thomson 32:34
They’re still there, they’re affordable luxuries, so to speak, you get a $40 box. You’re not breaking the bank, but there is still some mystery in terms of what you’re going to be surprised to find.

Paul Jarrett 32:45
The sweet spot for a box is 3599, which was the CAC but you know, if you’re looking at, you know, the best market right now, for a subscription box, what you want to be looking at is female males in the mid 30s range, they’re probably already subscribing to one or two boxes, they for sure have some sort of magazine, they for sure have some sort of Netflix, they’re not scared of subscriptions and tapping into that audience, what they usually have is two to three subscription boxes that they’re receiving, but they’re kind of like exchanging them, right. So I kind of think of it as they’re probably spending, you know, 120 bucks a month, 100 bucks a month on various subscription boxes, but they’re, you know, they get bored with one and they kind of replace it with Okay, okay. Guys, on the other hand, are like they get one box and they never cancel it. And if they cancel it, they’re just not coming back. Wow.

James Thomson 33:48
So let’s let’s talk for a minute again about Amazon. When brands do bundles of their own products on Amazon, we often see consumers buying up a whole Bunch of units that that bundle unbundling it and then turning off and selling off or selling off the parts for profit. Yeah. Do you run into a situation where in subscription boxes somebody has five subscriptions to the same box? Or is it really all excess inventory that really doesn’t have a high street value individually?

Paul Jarrett 34:20
I’m always shocked at the things that I see. And

I think we just kind of have this attitude of like, you know, nothing we’ve seen yet kind of competes with us. You know, we’re we’re not going to go after people unless the client you know, asks us Okay, that was there is like a Disney box that we do that is Collector’s Edition items. And you know, they have a team that gets after those pretty pretty well, but, you know, I think it’s a good luck trend. Randall the internet, right?

James Thomson 34:51
Yes. So how do brands balance selling in offline channels with selling box products are we Dealing with different products in different channels? Or is it really just different ways to merchandise the same inventory in different places?

Paul Jarrett 35:08
Yeah, I would say the latter. And I would say that, you know, still, you know, a significant amount of, you know, the majority I don’t know what the numbers are now with COVID. But people are paying in physical retail. What we do with some of our companies will help write the software where they can sell a box in the store, and you know, somebody can take that home or it’s going to get delivered to them on a subscription basis, or will sell what outbox and on the inside, it’s like, Hey, here’s a coupon to go get this you know, sold to you monthly. We see a tremendous jump in subscriptions for boxes that get into retail. So you know, it’s kind of that the typical it’s a dogfight online. You know, you’re doing what’s popular now. Facebook ads kind of feels like it’s moving towards podcasting and texting right you know you do that for so long and then you start to in my my previous life I did a lot of physical retail I did a lot of store designs I did you know, I was involved with that. And so I know that you know the power of if I can just get on a placemat at checkout, if I can just get an ad in the email out to retail buyers if I can get an insert into the plastic bag. Somebody’s moving out that those things just absolutely dwarfs anything online that we do. So that’s been a big focus of ours but yeah, it’s uh, you know, like anybody listening you know, don’t worry, it’s a it’s like shooting bees with online advertising. The days of Google SEO are no more and I just call them like honey pots, you know, and I’d say, you know, Facebook ads right now is a nice little honeypot. I know there’s like an Instagram hustle that kind of works. Little well, but it’s just you know, you’re just climbing trying to find the next thing.

James Thomson 37:07
So we talked a little bit about this at the beginning of our discussion at Vioxx experts we are consistently surprised by how many traditional brick and mortar brands haven’t evolved their businesses adequately to account for the pressures of online channels. Issues like unauthorized sellers selling their products at prices lower than expected. Do you run into problems like that with some of the brands you represent? Where they’re selling you products to put in bundles where quite frankly, those products are cheaper elsewhere.

Paul Jarrett 37:37
Literally the the phone call I had right before this, okay. There is a It feels like it comes up daily. There was a company that we were trying to purchase some sort of foot thing for I don’t know if they’re sneaker ball like sense odor, I don’t know some of the new issues. And we found them cheaper online. And it was the Name of the store and everything. And we contacted the store and we said, Hey, you know, these are on Amazon and a few other places and reaction of you’re trying to sell us wholesale, like, What’s stopping us from doing that? And they were literally like, yeah, that’s, that’s not us. And we’re like, they’re using your company name. And by our calculation, they’re doing, you know, probably 15 to 20 k of revenue a month. Just like, you know, whatever. Yeah. And they’re like, Yeah, well, we’ve just never been online company. You know, our focus is this and they’re just like, Okay, let me let me walk you through this again. Alright. And they just don’t care. And I don’t understand what what that is. And, you know, we’ve been successful once or twice, you know, probably the biggest one was GNC, and I want to be careful with what I say. But we were a large part of like, Hey, you know, everybody’s selling your shit online. You can go talk to Amazon and get this under control. You And, like, instantly, you can see their, you know, their the game just changed. If you ask them what it was, it was like the whole, like, we don’t know, e commerce while we’re making, you know, we still make some of that money when they sell it. And I think a lot of folks just don’t realize like how easy it is to manage and run your own. So I mean, is that easy? It’s just it’s not complex. It’s just time consuming. Right?

James Thomson 39:28
I’m gonna ask you a little bit a strange question here. I’m mean, you’ve worked with brands for a long time in different capacities. Tell me about a big turning point for you when you realized you’re good at convincing brands to work with you in whatever capacity that is. You know, I’m sure those early meetings where you went in and were trying to say, Hey, I’m dealing with these great big, huge brands, why are they going to work with me? But you had something to say and they gravitated towards it.

Paul Jarrett 39:57
It’s so funny that you say that because Like, still to this day people are like, you know, you’re you raised 5 million in capital and you know, you pretty much hadn’t sold the thing or, you know, how do you just like walk in and get Disney like whatever um, and you know, a lot of people are like, you know, you you have the the it factor or the X Factor. You know me, I don’t have a lot of charisma. I grew up in a trailer park. If anything, I’m putting my foot in my mouth all the time. I would say my attitude is simply this. I know that if I contact 100 accredited investors, and I present to them nine slides and a financial model, I will get one term sheet for a million dollars. And that’s just the facts, the stats, I know that other entrepreneurs can do it in 10 or 50 calls. So if I want to have three, competing term sheets for a million dollars, I need to go make 300 phone calls, right? That stat has held true since this incident kind of funny. But when I was really little, I really wanted to race RC cars. And my dad said we’re broke. There’s no way it’s gonna happen. What about those cars on TV that have ads on them? Why don’t you just start calling those people and asking you know if they can pay? And so you just kind of you know, he said if you ask enough people, somebody’s dumb enough to say yes, right? given it was the local police department and they gave me a $500 check and I made great card. And then you know, I wanted to play college football. Same thing. I had to get my tape I think to 700 different colleges. I ended up getting 12 scholarship offers. Same thing happened with my intern 350 phone calls, I got four or five internship paid offers in New York. And that’s just the way that I’ve kind of always Like lift by weight. And so, you know, our close rate is crazy high. But, you know, when I go into Disney and I expect that I’m actually going to have to go talk to like 20 Disney’s right? What people don’t see are all of the people that have slammed the door in my face after me. Yep, hold me, I’m wrong, etc. And I would say that my style is I walk in, and I say, what is what are you trying to accomplish? What’s your problem? Tell me about it. Okay, well, I have this thing. And I think that it can solve your problem, or I’ll just find out say, like, Oh, that’s really interesting. I have a friend or I know something, or have you thought about this? And they’ll go like, what about subscription boxes? And I’m like, Oh, yeah, that I don’t think that really makes sense. I’ll tell you what I’m going to do. Or tell you what we would do. But like, it really doesn’t make sense in anything. Hopefully, this was a good experience and just, you know, tell your friends about me, right? And I think that really Most people’s minds, right? When you’re, when you’re, I think the phrase, you know, seek advice not cash or money is really strong. So, you know, I’m contacting people in our sales team as to now. And they’re basically saying, like, hey, what problems? are you dealing with? a subscription box can help solve these five different problems. Does that align? In our sales team? We have a saying of, you’re gonna, you’re gonna f up. I’ll say, you’re gonna put 40 calls until you find one. Yeah, that’s kind of the stat that we’re operating by is that we’re going to get 40 noes. And when Yes, and if you do it enough, you might get lucky and hit a couple yeses. But, man, my style is truly truly just going in there saying, you know, hey, we heard you on your problem. We think this might be able to help take it or leave it when they try to negotiate down it’s like we don’t negotiate with terrorists. This is like this is one of And I would say more times than none, we walk away. And we almost like hit our stopwatch. And it might be a year, it might be a month, it might be an hour, but like they always come back because what we presented them is a problem solver. It just depends if they’re, you know,

if that’s the correct time for them, I will also say that I probably have an unhealthy obsession with personality profiles. You know, that, you know, the Carnegie, How to Win Friends, family, whatever that was, you know, I actually have like a document of notes. And so I’m definitely trying to figure out I’m a real big fan of a website called crystal knows it’s crystal and then K-N-O-WS. It’s a artificial intelligence software, you plug it in, you can go to LinkedIn, look up anybody. It literally tells you got to talk to that person, right. And, you know, you can understand should I be direct or should I ask Whatever. But I would say approaching people based on who they are trying to figure out what problems they’re trying to solve. If it makes sense I share with them what we have. If it doesn’t, I try to help them go solve those problems. I have more people in my inbox that have nothing to do with subscription boxes, that I’m helping solve problems. Yes, yes. And then they always go, Hey, man, like, how can I help you? And I’m like, Oh, well, thanks for asking, you know, if you know anybody that is looking to do a subscription box, just tell them to drop me an email. That’s all I ask. Right. And that strategy has seemed to work pretty well. It’s a slow strategy, but once it starts to get going, that it’s, you know, it’s very word of mouth. Right.

James Thomson 45:45
Paul, I want to make sure before we finish our conversation, I want to pay credence to some of the stuff I’ve heard you talk about in the past. You have a lot to say about mentorship and advice that people have given you. around being good to yourself being good to the world. Talk to me about that and how you came to be in a place where you’re so self aware?

Paul Jarrett 46:08
Yeah. Well, I think when the moment you start to think that you’re self aware, it kind of escapes you, right? I think actually this COVID crisis, I think a lot of people need to re acclimate, readjust, understand who they are in this world versus the world before. I think, you know, you’re going to be a very different person, but I would say, you know, really, I can kind of trace it back to a key moment of, I’ll give you the short version of this. I have a longer, slightly more emotional version on YouTube somewhere, which I did not know somebody was going to post the presentation. But I would say this, about three years in the business, we’re winning awards, we’re growing. Everything is going correctly, according to the world. To me, I’m still there Sunday morning on Monday. Paragon, like, Are you kidding me? What the hell? Like how did they mess that up? You know, just a little thing. I was just so frustrated with my wife comes out and she’s like, what are you talking to yourself? And I remember I thought, I’m not talking to myself. There’s, there’s What do you mean? You know? And she goes, Well, what? What she is actually, let’s, let’s go for a walk, you need to take a break. So we’re on a walk and she goes out. I heard you cussing at your desk. And I’ve noticed when you work out, you know, there’s a lot of like f bombs and there’s literally we walk into the gym and your demeanor just changes to like, kill, kill, kill. And I was like, well, that’s how I was raised. I plays football, you know, like, that’s, that’s, you know, from, you know, in Nebraska. First grade, yeah, you’re tired. And she said, Well, you know what, what you’re saying to yourself, like, what is that? And I really didn’t understand what she was trying to say to me. And she goes, Well, let me say it like this. Would you ever talk to your little sister the way that you’re kind of talking to yourself? internally and I was like, no, no. She goes, Well, would you talk to me like that? And I was like, No, no, no, no way. You’d be gone in a minute. She goes, would you talk to your mother like that? And then, you know, really tight with my mom. I was like, No, absolutely not. I would never. And she goes, and so when you’re doing these things, like you’re running a marathon or whatever your thoughts in your head are, you know, not good enough. Are you effing kidding me? Like? I was like, yeah, we are yours. And she goes, No, she is. So why are you treating the most important person in the world? like shit? Yeah. And it took me a moment and I was like, Oh, and I just I just collapsed. I never cry. I was like, sobbing. I was like, what I literally I go, do I have the flu? am I sick? And she’s like, no, you’re feeling emotion. Like, you’re like realizing that your entire life you’ve just been beating up on yourself for nothing. And I’m like, wait, you don’t do that. Just know I go. Well, what do you say? Because I say Good job, you know, keep going, give it your all. And I remember go eff you people think that and she goes, I think the majority of people say that to themselves, but I think there’s a, there’s a breed and I kind of think it’s about 30% of the population, where you’re, you’ve, for whatever reason, experienced something where it’s just not good enough. And I think that same sort of person tends to be the entrepreneur, the CEO, that sort of a person. And I will just say this to those folks like I was on that side. I get it like I get it. I understand. Now, on the other side of that, the abundance mentality and seeing that my wife’s family, they’re all successful lawyers, doctors. There’s a national championship quarterback in there, there’s a tom Osborne, the great coach in there. There’s a nephew that’s a quarterback Got Nebraska or wherever he’s at now. You know, there are a whole family kind of up and down. They’re all really polite, positive, happy, happy people.

You know, not a lot of them are in like leadership roles, but they’re wired that way. And then as I started thinking about the investors that I had encountered, I was like, Wait a second, there are these investors who have happy family lives. They’re wealthy, they’re successful. They’re not assholes to people. They’re not, you know, whatever. They’re not micromanaging. I want to go over there because that looks way better. Yeah, whatever I’m doing over here. And then I remember you know, to make a long story short, I remember I googled and I think the first thing I googled was like, what you say when you talk to yourself, like how to fix that, you know, whatever. Open this whole world of like, neuroplasticity, but the first book was literally what you say when you talk to yourself. It was written in 1975 that Saturday Night Live Stuart Smalley I’m good enough. I’m smart. Gosh darn it people like me. Yeah. So literally from this book, this book was not intended to be a self help book. It was intended to be basically the, the, the, the whole concept of the book is whatever you input is what is going to come out. So for example, if you’re like, a, I’m bad with names I’m talking about with names, I’m bad with names, you’re gonna mess up names, and your brain is gonna say, Hey, we did what you said that we were supposed to do. Right? And that really, I mean, it just changed everything around. You know, I would say for some of our employees, they struggled a little bit. I think we lost a few of them because they kind of like the micromanager, you know, whatever, but it was, it was almost within probably about a three to six month period, that everything just changed, the business started growing. It’s just that abundance mentality and I still find myself falling victim to you know, some negative interaction dialogue. But you know, there’s a few tricks that you’re like, Okay, is this the truth? Or is this just what I’m telling myself right now? Is this the false narrative that I’ve got locked up and right. And I think sharing that message, and when you find those entrepreneurs, and I’ll tell you when I give this presentation, and it’s much more succinct. I warn the audience, I say, a few of you might break down in here, a few of you might have to get up and go, but about 70 75% of you are going to go What is this guy talking about? And every time without fail, there’s about three people that get up. There’s a couple people afterwards that are sobbing, and they’re like, I, you know, I didn’t know that was me. And so you know, I just really encourage people to like, be careful with what you’re putting in. I also look at some of the Amazon stuff. For sure. A lot of the startup stuff, I think online. You know, I forget who coined the phrase. There’s a professor at MIT that I was working with, but he said stay away from the Business porn. And I was like, Wait, what? What What do you mean? He does the business porn, I’m like, I have no idea what that mean. That means it because that’s that’s when you just read about Angry Birds blowing up but you don’t realize had been around for seven years. That’s the people that are making, you know, a gajillion dollars doing something, but you don’t realize they have three failed businesses there. You know, be really cautious of what press releases you read read in between lines, and I’ll tell you like having removing crunchbase removing a lot of those, you know, Inc 5000 you know, all those like, you know, really shiny saris, removing that from my diet and changing that to just, you know, what are the hardcore evidence or frankly, just like giving time to myself to think freely about the business. That has been a massive change and had I still been locked up in that thought. There’s no way that our business would be able to develop and grow because one of the things that I really came to To understand about myself, as I was absolutely not trusting people to do their jobs, and when you trust somebody to do their job and you truly, truly trust them. magical things happen, right? When you trust yourself to hire people that are way smarter than you want to ask as when you, you know, when you when you do those things, all the things that you might read about or whatever, they’re hard to do, but when you have the abundance mentality, and when you have positive self talk, and you’re just like, we’re gonna figure this out teamwork, you know, etc. It’s absolutely mind blowing the difference in quality of life that you can have, and it’s not easy. And it’s just like anything, you got to work at it. Right.

James Thomson 54:50
Paul, I very much appreciate you being so open with us today. I thank you for joining us. For those of you interested in learning more about Paul’s subscription box service or his Guest guest speaking opportunities, please visit bulugroup.com

Outro 55:06
Thanks for listening to the Buy Box Experts podcast. Be sure to click subscribe, check us out on the web, and we’ll see you next time.