Some of the challenges CEO Ryan Babenzien ran into at his last startup, the digitally-native sneaker brand Greats, led to the creation of Jolie. Steve Madden acquired Greats after it grew to about $13 million in revenue.
Babenzien hopes to conquer a new category with the help of what he learned about what works and what doesn't in trying to scale a digitally-native startup. A multi-distribution model and selling a product that people want to talk about the benefits are key to success. The business generated over $4 million in sales in its first full year of operation. The trajectory of the young startup is one that many brands are looking to emulate, as more of them run into the limitations of the DTC model.
Our intent was to make money. Babenzien said that they will continue to run the business that way after achieving that.
Both Babenzien and Arjan Singh were associated with the company. The business took on a small amount of mostly non-institutional capital in the form of Safe notes.
Babenzien told me that he had three principles that he was looking for. He wanted the product to be universal in size. He said that once you build a footwear brand that is mostly online, you learn a lot about the inefficiencies of building a business. He wanted a product that was easy to use.
He was looking for a product that focused on Vanity. He thinks that Vanity is a big driver of consumption decisions.
He decided to go to the shower. The shower heads. The pitch of the company is that beauty begins with clean water, and that it has designed a filter that can provide both pressure and clean water.
We are helping your appearance and well being. That is a really powerful product.
Customers who sign up for a subscription will get replacement filters every 3 months for $33. Customers will be charged $165 if they don't sign up for a subscription.
Close to 80% of the customer base is subscribers, and the rate of Churn is just 3%. Amazon contributes 12% of the company's revenue.
Babenzien said that the paid marketing strategy of the company starts with user-generated content.
Paying becomes difficult if you don't have a big organic conversation already happening.
4,000 pieces of user-generated content have been created by customers of Babenzien in its first year. The product comes from people who have given it to them.
Babenzien said that the company is not in the business of encouraging people to post about things they like.
Customers talk about how they have improved their skin and hair with the help of Jolie. Unboxing videos are among others. Another popular format is for customers to install their showerheads with the help of aesthetically-pleasing tools, like a mint-green wrench and a string of tape that is labeled "the prettiest tape in the world."
People were saying crazy things, like they were noticing differences in their skin, their hair, and I needed to see what was happening.
There is more than one person embracing the concept of UGC. Modern Retail has previously reported that more brands are using User Generated Content to stretch their marketing budgets. With Facebook becoming more difficult to scale profitable in the wake of Apple's privacy related updates, more brands are trying to subtly encourage customers to post photos and videos talking about how much they love that brand's products, and then turn the best performing videos into ads.
According to a marketing consultant who works with consumer tech brands, she usually advises her brands not to pay users to create content. Sun says to experiment with three to four pieces of content a week at a startup to see what works and what doesn't.
Sun says that some types of user generated content might not work for some brands. Some customers are not comfortable showing their face on camera in order to demonstrate how they use a product. She suggested that brands invest in their packaging and product to figure out how they can encourage more customers to post videos of their purchases.
Babenzien wants to grow the brand's distribution as word of mouth grows online. He hopes to eventually develop a product for hair salons that will be specific to their needs. A filter for the tub is on the way.
The company is expecting over 25 million dollars in revenue next year. Babinzen said that he was focused on making sure that the growth still came profitable.
A lot of growth is paid for. He said that Jolie's business model focuses on both profitability and growth.
What I’m reading
- ‘The era of DTC brands is over,’ proclaims Fast Company. But really, the story is about how the model is evolving, as more brands look at DTC as a channel, rather than a business model.
- Inc. magazine interviews founders of startups like Birdy Grey and Dagne Dover about how they are acquiring customers amid the death of the third party cookie.
- Morning Brew has a two part series on the resale outlook for 2023.
What we’ve covered
- How startups like Vigilance and Clean.io see a lucrative business model in helping DTC startups stop digital promo codes from leaking across the web.
- Amazon 1P vendors say they are finding themselves with increasingly thinner margins, as they allege Amazon has been changing the frequency and quantity of POs with little notice, and in other cases discounting products more steeply than brands would like.
- In other Amazon news, the e-commerce giant will roll out its Buy with Prime tool to all sellers at the end of the month. But it’s unclear how quickly e-commerce startups will race to adopt it.