• by Steve Smith , Staff Writer @popeyesm, July 7, 2023

What do portable stoves and kayaks have in common with weekend men's shorts and aloha shirts? Solo Brands thinks that a similar consumer set buys across its portfolio of brands like Chubbies apparel, portable Solo Stove firepits, foldable Oru kayaks and in its latest acquisition TerraFlame indoor flame cookers. As the company moves into wholesale at retailers like Costco and Dick’s it is also determined to maintain both a direct and intimate relationship with a customer base that is remarkably loyal and willing to spread the word. CEO John Merris explains what they consider a healthy D2C/retail “balance,” and the strategy for keeping direct access to customers despite more attenuated wholesale distribution. You can listed on the entire podcast at this ink.

MediaPost: What’s the through line for baggie shorts, outdoor firepits, indoor s’mores cookers and kayaks? 

Merris: They were all digitally native brands first. But most importantly, all of these brands were experiential. They were all creating experiences that help people to build good moments and lasting memories, putting smiles on their faces. 

All of these products have different moments in people's lives, but they aren't necessarily different consumers. We're finding a lot of crossover between, for instance, a customer that is buying a pair of shorts, or a nice Hawaiian shirt and also paddle boarding and things like that. So really cool synergies across our customer base to cross-market products and brands.

MP: Has there been a consistency in the media channels that you've used to drive that growth? Has there been a common playbook to growing these diverse brands digitally? 

Merris: I'd say, yes, but the overarching playbook has been iteration; it's been testing. Social media has been a phenomenal channel. Facebook remains, along with Instagram, a strong player for us. Obviously, Google, both on the search and shopping side, has been consistent. So, I'd say, Facebook, Instagram, Google are probably the longest standing digital channels. And then over the last couple of years, you start layering in some of the newer ones like TikTok, OTT, television or digital TV, linear TV, podcasts. 

A big portion of our business, about 40% or so of our new business, actually comes from word of mouth. A lot of people talk about our brands and refer us to their friends and family members and having them come back and participate.

MP: What do you do to encourage word of mouth? 

Merris: We've tried to create a brand that creates experiences, not just with the products, but also just with the product brand in general, that gets people talking about your brand, loving your brand. We've tried to create several years ago around taking care of customers even when it wasn't our fault. We always say it is not our fault, but our problem. And we had a customer reach out a few years ago, and he had backed his truck over his Solo Stove fire pit. Clearly, not a Solo Stove issue, right? He sent a picture of it into customer services like, look at this thing. Basically, he was reaching out because he was looking for a coupon code so he could replace the product. And he was like, hey, this is a boneheaded move on my part. He had no expectations except hey, maybe you guys will give me a discount since I screwed up.

And we huddled. And now this happens without even huddling. But at the time we were smaller. We thought we should just send this guy a free fire pit. We should just send it with a note and bust his chops a little bit for running over his fire pit but just send him a new one. And now I could go over fifty of those types of experiences right now. That guy called in, ended up getting a hold of me having a conversation with me, and probably sold 30 or 40 units for us to people all over the country, up and down his street in his neighborhood, because he was just so blown away with what we had done. Well, our customer acquisition cost is a certain dollar amount. The cost of sending that guy a free fire pit was like a tenth of what it would have cost us to go and acquire 30 new customers. 

So, we just unlock this mechanism. This is as much marketing as is releasing a Facebook ad or showing somebody a shopping ad out on Google. And so, we found ways to just surprise and delight customers and make them fall in love with us. In addition to that, in a more practical sense, we've launched since the rewards program where you can give your friends and family members referral code or a link where you almost become an affiliate, where you're getting points back anytime somebody clicks your link. And then you can redeem those points.

MP: A lot of DTCs are finding growth is moving into the wholesale market. What is your retail footprint now? 

Merris: When we [did an] IPO 2021, we were 92% digital direct-to-consumer. Last year we ended the year 2022 at 80% digital DTC and 20% wholesale retail. We've indicated this year that you could see it go to 75%/25%. And we feel like it's a healthy mix. Our kind of rally cry around channels internally here is balance. We want to be where consumers want to see us, where it's most convenient for them to shop in the moment. If they want to walk out of Dick’s Sporting Goods or Costco or Ace Hardware with our products, we want them to be able to do that. And so, we've built some partnerships there that have been awesome for us. 

As we look to the future and we think about this balance between digital direct to consumer and retail, we think that there are some real ways to coordinate these efforts even more. Allowing people to buy, for instance, on our website and go pick it up at Dick’s Sporting Goods because we've identified that they're a half a mile from where we have that same piece of inventory rather than having to ship it to them. So, there's some really cool things that I think that are unlockable here. 

MP: So why is balance important? 

Merris: It's just flexibility, it’s what consumers require in this day and age. 

We don't treat it as a channel. Direct-to-consumer for us is a relationship. It's building direct relationships with customers. We can do that via a customer that purchases at Dick’s Sporting Goods, we can do it via a customer that purchases on Amazon.com or a customer that purchases on our website. They just look different. And so, our focus is around direct to consumer in terms of a relationship. But from a channel perspective, we want to be where our customers want to shop.

MP: Well, but as a lot of DTCs have found, there is a difference. You don't have the same direct relationship, you don't have the data that suddenly becomes opaque at retail, and the margins are a lot different.

Merris: The gross margins are a lot different. The contribution margins for us are actually the same. If you go and buy the product from Dick’s Sporting Goods or buy it on my website, I make the same profit. The difference is, I didn't pay free shipping to get it to your house, and I didn't have a customer acquisition cost. I just sold it to Dick’s Sporting Goods. So, I make less gross margin, selling it for wholesale to Dick’s before they sell it for retail. I end up with a similar profit margin. 

But I think the most important is that direct relationship to the customer. You mentioned not owning the data. And this is a big one for us. We were super weary of navigating away from or welcoming in these other channels because we similarly had this mindset, this belief that we were going to lose that connection to the customer if we sold the product through another channel. We found that technology actually makes it easier and easier now. And if you're selective and intentional about your skew mix and other decisions you make, you actually can build those relationships with your consumers, even when purchased through a retailer. As an example, with our partnership with Costco, we're able to do some marketing inside of our products that drive customers back to our website for additional purposes like accessories that Costco doesn't have the floor space or the interest in selling: smaller ticket items that don't give them a dollar per square foot that meets their threshold. So, they might go to Costco to buy the mainstream fire pit, but then end up back on the Solo Stove website to purchase the small stand or the roasting sticks that go along with that product. And when they make that purchase on the site now, we do have that connection. So again, because we didn't have to pay for that customer acquisition the first time, offering them a coupon code so that they come back to our site, in our minds it’s the same thing as a customer acquisition cost. It's actually slightly less expensive than what it would have been to acquire that customer online.