#93. Tecovas is taking Westerns online with direct-to-consumer cowboy boots. We talk with founder Paul Hedrick about the innovations and challenges behind crafting and selling high-quality, timeless and affordable leather goods in the digital age. The Loose Threads Podcast features in-depth discussions with leaders across the rapidly changing consumer economy.

Check out the full transcript below.

Richie: [00:00:07] Welcome to the 93rd episode of the Loose Threads Podcast a show about the rapidly changing consumer economy. This episode is brought to you by Loose Threads Membership, which gives you actionable analysis, insights and events that drive growth, and Loose Threads Espresso, your energizing and high-pressure filter for consumer news—in context. We also have a newsletter that features the latest analysis of the consumer economy from Loose Threads. Check it all out at LooseThreads.com.

Richie: [00:00:34] Joining me today is Paul Hedrick, the founder of Tecovas, one of the first and biggest direct-to-consumer Western footwear, accessories and apparel brands. Paul started the brand after a career as a consumer investor where he observed the opportunity to sell cowboy boots direct-to-consumer and deliver high quality at a more attainable price.

Paul: [00:00:52] The major gap was affordable, classic, timeless styling, but really high quality.

Richie: [00:00:59] Paul has since grown the brand into one that is covert but powerful—the exact qualities you want in your cowboy boots. Here is my talk with Paul Hedrick.

Richie: [00:01:12] So why don’t we start. Just talk a bit about your background and then we can work our way up to Tecovas existing.

Paul: [00:01:17] So I’m born and raised in Texas. I took the non-traditional route to being a cowboy boots salesman.

Richie: [00:01:22] Is there a traditional route?

Paul: [00:01:25] I guess maybe your grandfather owning a sack and tackle shop. I went to Harvard for college, lived in the Northeast for a little while. I moved to Texas, was a management consultant for a while, actually ended up working in private equity. I moved back to New York for that and I was there when I realized that my desire to run a company—that itch—was growing stronger. I started to look at more concepts, started to think more deeply about consumers and brands and that’s when the light bulb moment happened, so to speak.

Richie: [00:01:53] And what was it?

Paul: [00:01:54] Well, actually it’s funny. I bought some really nice cowboy boots—what I thought were some really nice cowboy boots at the time. Turns out I had a little sticker shock, unsurprisingly. Like a lot of other successful companies, Tecovas started with a moment of clarity and a product or a brand that was missing from the market. I like cowboy boots. I like, especially, wearing cowboy boots in places that maybe they’re not worn as often, like New York, Manhattan, Greenwich, Connecticut, which is where I was working.

Richie: [00:02:21] You were at Catterton?

Paul: [00:02:22] Yeah. I was at Catterton. At the time, it was Catterton Partners. I was lucky to be able to look at a lot of really cool companies when I was there. We had the pulse on how retail was changing and it was clear to me that direct-to-consumer was a wave that was really starting to peak. Maybe it was the first wave. I put two and two together. There was a category out there that I was surprised, even as a consumer, to learn how big it was. The cowboy boot market in the U.S. is almost $4 billion dollars for men and women, just cowboy boots. That’s not including Western apparel, accessories, etc. That was kind of all I needed, an opportunity that was big enough, a major gap in the market. The major gap was affordable, classic, timeless styling, but really high quality. There hadn’t been the right mix of quality and affordability in the category yet. Very big range between low end and high end. I’m talking like $50 to $5,000. But really with the meat of it being in the $100, $200, $300, $400 range with the high-end brands coming in $500 to $1,000. I wanted those $500-$1,000 brands. The quality is apparent. They’ve got the best construction, the best leathers, they’re comfortable, they look good. And I wanted to cut the price in half.

Richie: [00:03:36] I’m curious to talk a bit about—because I’m sure very few people have any familiarity with the quality side of it—but what makes a good boot in terms of quality, material, craftsmanship, all of that?

Paul: [00:03:47] Two things really. The construction. High-quality footwear construction—as people who are into this know, if you wear shoes that are $200, $300, $400 dress shoes, they typically have what’s called welted construction—Goodyear welt, which is a way of attaching the outsole to the shoe itself that makes it resoleable indefinitely when you wear through the leather. So that’s one thing. It’s pretty much impossible to find a Goodyear-welted shoe in the market for under $300. Same thing applies to Western. Western also uses welted construction. So that’s marker number one.

Paul: [00:04:20] Marker number two is the quality of the leather. Western boots—maybe sort of a myth buster—a lot of people think that cowboy boots look uncomfortable and therefore are uncomfortable. The truth is good cowboy boots are more comfortable than most any other shoe because they tend to use, actually, suppler, more broken-in-from-day-one leathers as opposed to the really hardened calfskin that a lot of high-end dress shoe brands use. You put a nice pair of cowboy boots on and it feels like a slipper.

Richie: [00:04:46] Because people live in them. Or they used to and still do.

Paul: [00:04:49] Oh, that’s right. Yeah. Cowboy boots—the origin is late 1800s, former cavalry men went out and took the horses and did cattle runs. So the boots evolved from there. Has had its peaks and troughs of popularity due to mostly pop culture, spaghetti Westerns, the 40s, 50s, cin the 80s. These are actually meaningful trends that popped up, which is interesting. But the classic cowboy boot has been around for a hundred years in the U.S. People work in them, people live in them but, more so, they’ve really evolved as a lifestyle category a lot in the last 30, 40 years especially. That’s really when they started being worn every day by people not just for trade, so to speak, not just on horses, not just on ranches, but every day in the office. You walk into an oil and gas firm in Houston and probably 90% of the people are wearing boots.

Richie: [00:05:40] It is the dress shoe, in a sense.

Paul: [00:05:40] It Is. Yeah. What most people don’t realize is just how big the market is and it’s a combination of work, lifestyle, as well as dress. Tecovas is here to solve the problem that more people have, I think, which is just they want a pair of cowboy boots. They want a couple. They may not be riding horses, but we wanted to make a boot that was good enough for the people that were discerning buyers. I had never made a product before and thought a lot about where on the spectrum to land when you’re creating a new product. Do you want it to be a bargain product? Do you want it to be the most artisan quality? You-can-only-make-ten-of-them-a-week sort of product? The answer is usually in between. But it was easier for us to land on the highest quality that could be produced, call it, to serve thousands of customers. It turns out we can serve hundreds of thousands of customers, which is great, because we’ve been able to scale fairly effectively. But the construction technique that we decided to use was the highest. It’s the brands that typically do, again, cost hundreds of dollars. It’s a lot easier to sell something when you know it’s the best. When customers ask you questions, you don’t have to compromise. You can just tell them it’s the best. Our team asks all the time, “What should we tell customers when they’re giving us brand comparisons and they want to know just how good we are?” The answer is actually pretty easy. We made it from the best stuff.

Richie: [00:06:59] So when was this? When did that idea happen from a timeline perspective?

Paul: [00:07:03] I lived in New York until 2014, quit my last job [in] summer 2014, July, moved to Austin and the brand launched in October 2015. So it was 15 months of full-time work, drained a couple 401ks, spent all my money, had more credit card debt than I care to admit and finally sold our first boot.

Richie: [00:07:25] So you move to Austin, Texas. Where do you begin [in] that first year or so?

Richie: [00:07:30] Like most people, I had no idea. But, luckily, my business training had been very much from the consulting, company operations, quickly getting up to speed, becoming an expert in either a category or a function. A skill that I did have, which was one of few, was listing out all the tasks I needed to complete, call it over the course of six, 12, 18 months and I just broke it up by function. I broke it down into brand, broke it down into product—sourcing and design as the two aspects of that. There’s some legal work. There’s some launch, go to market work. Those are the main things you tackle. It was a very long list. Luckily, my consulting skills turned out to come in handy. I made probably too many decks. Turns out you don’t need as much PowerPoint when you’re starting a company.

Richie: [00:08:15] Yeah.

Paul: [00:08:16] First things first, you’ve got to figure out where to make it. What is the opportunity? Have you confirmed it? Is this possible to do? I felt that there was a gap in the category, again, in terms of quality and supply chain, and selling directly to customers would be the business solution to solve that gap. But, fundamentally, you need the product first.

Richie: [00:08:36] Right.

Paul: [00:08:36] What I actually did was I looked up a list of custom boot makers in Texas and I found a 20-year-old list on the internet. So most of these people had, unfortunately, passed away at that point because most custom boot makers—it’s sort of a dying art. But I knew that we weren’t going to be competing with this really artisan, one-boot-at-a-time, really cool industry, frankly. So I felt maybe I could find a kindred spirit or two to lend me some advice as a 26-year-old who was trying to figure out how to make cowboy boots. Luckily, a few of them pointed me in the right direction. They said, “Oh, man. There’s only one place in the world that makes great, quality Western boots at any sort of scale.” And that was in León, Mexico. León is the, aptly called, “shoe and leather capital of the world.” There’s more leather produced there than any other city in the Western Hemisphere. It’s a city founded by shoe makers. Actually, they’ve got pretty much one street that has about ten–you’d call them factories, but really they’re just buildings with bunch of craftsmen.

Richie: [00:09:35] They’re more like workshops, no?

Paul: [00:09:36] This industry is very handcrafted-focused and there [are] actually over 200 steps in the Western boot-making process and there’s an expert, almost, for every handful of steps. It takes years of training, really, to get it right. Tough to scale, if you’re starting from scratch, but luckily there’s an industry already in place and, like many other brands, my gut was, “Let’s go to the experts. Let’s trust the process and understand that, if we’re going to go somewhere where the best brands in the world trust their production to be made, then we should probably trust it too.” It’s a chicken-and-the-egg problem though because you’ve gotta convince someone to work with you when you haven’t made anything. I was one guy with a PowerPoint deck that I didn’t end up opening. Literally, I flew to León, had two factory visits scheduled, one of which luckily said yes. I had to negotiate minimums. I tried to extend it out as much as I could and hit the ground running at that point.

Richie: [00:10:29] You found a factory then.

Paul: [00:10:31] Mhm.

Richie: [00:10:31] So now the question is: What does it look like aesthetically and so forth? How do you approach that? Because some value propositions are, “Take the same thing out there, let me just deliver to you at a lower price.” Others are, “Let me totally reinvent and reimagine what it is and others are some intermix of those as well.” How did you approach [this, especially] to an uneducated person, [that] there’s “the look”? But I’m sure there are so many looks within the Western boot also.

Paul: [00:10:58] Yeah, and that brings up a good point. If you go to a traditional Western retailer right now, there’s one or two types. They’re either the small shop or a big-box, Western retailer in a suburb. They all pretty much lay their inventory on the floor, homeless grocery aisle-style, by size. You’ll have a “size ten” aisle. And it is packed with hundreds, if not thousands of styles, and, frankly, it’s a little overwhelming, especially if you’re a first-time boot buyer. But even if you’re not. This category doesn’t have just one type of boot. There’s many. There [are] many types of leathers used, there [are] many shapes, there [are] many toes, there [are] many heel heights and shapes. My strategy was: I want this brand to appeal to as many people as possible because my suspicion is the boot that I want to wear, which is a very simple, high-end, still classically Western—we weren’t trying to modernize anything about the style or the quality itself—but also fits in a lot of situations which, generally, means simple. Simple and timeless. So that was my hypothesis.

Paul: [00:11:59] I went to a bunch of Western retail stores. I went and asked the sales associates of these stores, “Point me to your best selling boot.” Time and time again, they pointed me towards, usually, one of two brands and they were the most classic, a pretty high-end brand. Just a bovine or a smooth leather, goat, calfskin, brown, minimal styling but classic shapes. That was it. I took all of the ideas in my head and designed the boot. I literally drew the first on paper. I actually used, at one point, used Microsoft Paint to finesse some of the final lines because I am not a designer, but I didn’t hire a designer which was probably a mistake, but it worked out okay.

Richie: [00:12:37] I assume the factory helped in that regard a little bit.

Paul: [00:12:40] Yeah, they helped translate my design into patterns and to real life, which was very helpful. I didn’t need to actually sketch out every single component of the boot. I could sketch out the shape and we could refine from there and there’s a lot of refining making any physical product. Just get a sample out there.

Richie: [00:12:57] How many iterations did you do before you were—

Paul: [00:13:00] Oh man. Honestly, it probably took eight months of iterations. Maybe there’s a couple every couple weeks. There [were] a lot.

Richie: [00:13:11] Dozens.

Paul: [00:13:11] You’re doing two things. You’re getting the shape right, but you’re also picking every component. The hard part about leather is that you pretty much have to custom develop everything that you do. Unlike if you’re making a shirt, maybe the factories and mills will generally have a bunch of options that they’ll lay out for you. You can custom-make stuff as well, but there’s a lot of great stuff out there already. Leather is a little different. There are some stock leathers out there, but there’s just not that many. We had to custom-develop our colors, how they felt, how thick they were. It took a lot longer than I thought, honestly. I thought I would be launching in early 2015 and didn’t launch until October.

Richie: [00:13:46] How did you know you were ready to launch?

Paul: [00:13:48] Well, the product had been ready for a couple months. I was ready to launch because I really desperately wanted to launch in 2015 and, hopefully, before the holidays and I had run out of money. Basically, everything was ready except I needed to press “go” on the website. It was all fully designed. I had hired boutique, scrappy agency to help with the branding and also design the website. We used Shopify which made a world of difference in how easy it was to get off the ground.

Richie: [00:14:15] And then you ran out of money.

Paul: [00:14:17] I ran out of money and, luckily, was able to raise a small amount of angel capital at the beginning which, essentially, I used to pay off the inventory, the second half of the inventory. I had already paid part of the bill. My goal was to bootstrap it and pretty much got there, but it turns out inventory is a lot more expensive than I ever imagined.

Richie: [00:14:38] So how many styles did you have to launch with?

Paul: [00:14:41] Four.

Richie: [00:14:42] Okay.

Paul: [00:14:42] There were two for men, two for women. For Western boots, there [are] two shapes if you had to distill the entire category into two. Really, there’s thousands. One is a more traditional taller heel, probably what looks like a more stereotypical cowboy boot, which we just call our cowboy style. And there’s a shorter heel with fewer design elements on it, a style called a roper. Roper tends to be the gateway boot, so to speak. A lot of first-timers will buy that one. You put jeans over, it almost just looks like a Chelsea boot. It’s got a dress shoe heel. It doesn’t have the pitch, which is what you call the angle of the heel. Typically, ours doesn’t have any toe stitching or anything. It’s just a smooth vamp, really clean looking boot. And then for women, we did a bootie and a cowgirl.

Richie: [00:15:26] Talk about the decision to launch with both genders.

Paul: [00:15:30] Honestly, I wish I could say there was a lot of strategy behind it. The truth is it was a little bit of throwing spaghetti on the wall. I assumed that most Western brands made both men’s and women’s boots. That’s where the market is. I didn’t have a really specific idea of how big each market was. I learned later, it’s probably two-thirds, three-quarters men, one-quarter, one-third women. But I wanted as many people to be able to buy them as possible, to be honest. The idea was that the styles that I was making, that I was designing were meant to be as universally appealing as possible. They were meant to be simple, timeless and, hopefully, appealing to all walks of life: young, old, urban rural, men, women. They end up looking really similar. Our women’s cowgirl style and the men’s cowboy style are basically identical except for the sizing and width and such.

Richie: [00:16:18] It’s interesting that two-thirds of the market is men, but I wonder if the one-third that is women actually drives a lot more of the style and the fashion and the trend.

Paul: [00:16:27] If you look at the brands that do focus more on women than men—because it tends to be, in this category, one or the other—there aren’t that many 50-50 brands—the ones that focus on women do tend to be more trend-driven. They release more SKUs more often. Whereas our merchandising strategy, which we’ve held actually from the beginning, is evergreen. We have not discontinued a single boot we’ve ever made. We’ve never redesigned a boot. Those first two men’s styles are still our best-selling two boots today. They haven’t changed. We’ve added a fourth color.

Richie: [00:16:59] So how’d the launch go?

Paul: [00:17:00] The launch went pretty well actually.

Richie: [00:17:02] What was the plan for it?

Paul: [00:17:03] So, first of all, it was late in my book. It was about six months after I thought it was going to happen. I had looked at some other brands and what they did for pre-launch. I did hire a PR agency. I also gathered emails on the website so I had a landing page up for six, eight months. I forget. I did a contest. If you shared the landing page link with more people and you got more people to sign up—and I think we ran it for maybe ten or 14 days ahead of launch—you got credit off your first order. So it wasn’t much. I think my launch list was in the single digit thousands. Maybe 3,000, 4,000 or 5,000.

Richie: [00:17:40] That’s a list.

Paul: [00:17:40] A heck of a lot more than just my Gmail contacts, thankfully. So we were five figures weekly from the start, which was cool. I think, looking back on it, it was lucky a little. But I think the thing that we did achieve at the beginning was product-market fit. We never had to go back and do a major rehaul of the product itself. Because I’d spent over a year on it, by the time that I pressed go on the website, we were probably more prepared than the average consumer product company launching, thankfully. Because having early product-market fit turned out to be one of the biggest blessings that we had in our favor.

Richie: [00:18:15] So who did you start to see buy the product?

Paul: [00:18:17] Friends and family first, which are great and they are loyal customers. Thankfully, I actually made something that they want to buy. But, at first, it was a lot of Texans. I think it was like 50-60% Texans at first. A lot of people close to my social circle in terms of age, demographic. We kind of had a bit of the “millennial cowboy boot brand” perception. And then what really happened over the next couple of years was we more and more gravitated toward where the market is, more toward people [who] understood the value proposition of cowboy boots and less so just millennials who are used to shopping online. We actually have a very diverse customer base from 18 to 98 in every major city, in every state. Our core customer, so to speak, is the guy who understands high-quality cowboy boots already, who is, likely, already a purchaser of the brands that we are marked against, so to speak. We’ve also been able to get a lot because we’ve expanded the market. Our average price point is about $300, but our entry level boots that we sell the most of are $225 to $235 for men. That’s a price that, when people enter the market, they’re willing to pay generally. And, for us, they’re buying because they know they’re getting the best.

Richie: [00:19:33] Right, like a premium price.

Paul: [00:19:34] Yeah. Consumers are smarter these days. They’ve got all the research tools at their fingertips. They’ve got ratings sites. They’ve got Amazon. We don’t sell on Amazon but we needed it to be price competitive—but it never was going to be the cheapest one. But we wanted to attract, again, both the first-timers and the hundredth-timers.

Richie: [00:19:51] How did the fit situation work? Because some people have a very hard time buying and/or selling shoes online. What did you think would happen there in the beginning and how did it actually turn out?

Paul: [00:20:01] So, first of all, built in a return rate assumption, of course. First thing’s first was [to] make sure that we could afford to do free shipping returns and exchanges with a return rate assumption built in. And I had talked to enough brands out there to make an assumption there. But the other thing was, on the upfront side, we made as many sizes as we could. I actually launched with two widths for men, 28 sizes; there were 14 number sizes and an average and a wide width for men on day one. Frankly, we were a little overburdened with inventory at first and it was difficult to manage, but I’m glad we did from the beginning because it meant that, from day one, you could likely find your size. And we made them true-to-size. That was the other thing. The category has—there’s a myth in this category, as well, that boots only fit in person. You need to be in person because every boot is different, every foot is different. Truth is, if every boot is different, then that manufacturer is not very good at making boots because you should be able to make consistent sizing. And we worked really hard on that. We custom made our molds.

Paul: [00:21:02] But, no, we didn’t do a home try-on program. A lot of people asked me about that when I was first pitching the company. The product is really heavy when it’s fully loaded and in a big box. Even with really great carrier rates, we were just going to have to charge too much to the consumer and the goal was to charge as little as we could, honestly. It turns out, free shipping returns, exchanges, true sizes, we put the return label in the box—it’s a no-questions-asked sort of thing, which seems like par for the course today in ecommerce but, honestly, for this category it was a game changer. For most of our clients and customers, that was a huge boon.

Richie: [00:21:37] Because the alternative to you is in a retail store somewhere, most likely.

Paul: [00:21:42] Yeah. Some of the big box retailers have started to push ecommerce a little bit, but one of the things that appealed to me about this category in general was that it was so under-indexed online. I believe footwear is somewhere in the high-teens percentage sold online which is almost double the national retail average. Cowboy boots, specifically, are way behind. They were in the mid-single digits online penetration.

Richie: [00:22:05] Is that because it’s an older customer base? It’s less digital?

Paul: [00:22:09] Customers want to buy online. It’s more the category itself. The retailers had not pushed it as much. It’s a pretty fragmented category and there aren’t that many big companies. Big companies are making their money on physical retail. They hadn’t invested quite as much in online. Luckily, as well, most big-box Western retailers are only concentrated in the South, Southeast, Texas Southwest and California. Pretty major gaps in the Midwest and Northeast and Northwest which, for them, is a big opportunity to build stores, but—

Richie: [00:22:38] You’re everywhere.

Paul: [00:22:38] Well, why don’t we just sell it online there? That seems easier.

Richie: [00:22:42] Costs you nothing to go there. Okay, so you launch October 2015. Where are you into 2016, past [the] holidays? First full year, now, out, having the brand. What are the priorities going into that year?

Paul: [00:22:55] Yeah. So I had made my first hire at the end of 2015. Our priorities were sales. We want to be lean. There’s a lot of brands out there that are raising a lot of money and that may be the right answer, but we’re going to play it safe. We’re not sure how big this company can be. Let’s just make sure that we’re giving the customers what they want and focus on sales.

Richie: [00:23:15] How did your investment experience inform that decision?

Paul: [00:23:18] Most entrepreneurs [whom] I’ve talked to who come from the consulting or finance background tend to be a bit more conservative with the capital that they raise.

Richie: [00:23:28] That’s interesting when it’s their company versus not their own money.

Paul: [00:23:31] Well, yeah. They’ve seen the other side. There’s nothing wrong with investors, but it doesn’t always go well. Sometimes incentives can get misaligned if an investor is trying to get a return on their money. Honestly, this was a lesson in humility. I went from having a pretty prestigious job to I sold my BMW, bought a $7,000 SUV and spent two or three days a week hauling buckets around. It was part learning and part actually getting sales. These were events that were driving sale revenue to the website. We were using a little Shopify.

Richie: [00:24:05] Oh, so you started doing offline events?

Paul: [00:24:07] Oh, yeah. We started doing that.

Richie: [00:24:07] Like little trunk shows?

Paul: [00:24:08] We would say yes to everything. We would go to conferences. We would go to farmers markets. We would go to Christmas markets which were great because people are in shopping mode. I remember a few [times saying], “Oh, we sold 20 pairs! That’s amazing! That’s $4,500.”

Richie: [00:24:23] Would you try them on in person and then you ship them or they could walk away?

Paul: [00:24:25] Yeah. We would come, typically, with as much of a size run as I could fit in my car. Call it 50 or 60 pairs was about the max that could fit.

Richie: [00:24:34] Pretty good.

Paul: [00:24:34] It was more of a cushion. If we can go out and sell $20,000, $30,000 of boots at events, we can pay our salaries and live and then focus on growing the brand otherwise. We know that, if we’re going to grow a big, direct-to-consumer brand, we needed to get good at online. We needed to get good at digital acquisition, customer acquisition, which is what we started focusing [on], really, call it early, mid-2016 on. That’s when we first started putting a little money into Facebook. It’s when we first started committing to becoming experts in that as much as we were in boots themselves.

Richie: [00:25:09] What [does] the paradox of you starting online but then going offline tell you generally about how to grow these brands?

Paul: [00:25:18] Yeah. I think that, in general, when no one knows about you, no one cares about you. There is a justifiable skepticism for most customers and you’re going to find the people [who] are willing, sight unseen, having not heard a single person ever buy something, not read a single review, just commit based on pure photography and some marketing copy alone. But that number of people is relatively small and I think that’s what a lot of people don’t realize when they start an online-focused business. Just to get that first bit of traction, if you have a great product as well—and that was the other thing. I was proud to show the product in person. It was one of those things that was like, man, if you see this and you touch it and you put your foot in it, our conversion rate was insane offline. But we knew that wasn’t scalable at the time so we saw that as a de-risk, as a way to, again, pay the bills, as a way to learn from our customer as well because we were asking questions.

Paul: [00:26:15] That’s kind of the downside when you’re in the business of driving thousands of people to your website every day, is you don’t get to talk to 10,000 people. Maybe a hundred of them will to chat you or email you.

Richie: [00:26:26] If you’re lucky. If they’ll leave any feedback.

Paul: [00:26:28] Yeah. But there’s thousands of thoughts going through those people’s heads that you don’t hear and, when you’re in person, you’re getting everyone. You ask whatever question you want. You ask where they heard about you. How long ago did they hear about you? What advertising is working? What do they like about the product? What do they think is weird about the product? It’s an incredibly valuable feedback tool which is why we always justified doing it.

Richie: [00:26:47] Yeah.

Paul: [00:26:47] I don’t regret a single event even if we only sold a pair. There were some that we didn’t sell any.

Richie: [00:26:55] Yeah.

Paul: [00:26:55] But the mindset needed to be instilled from the beginning and it was a cultural thing too. Gosh, by the end of 2016, I think we only had three people still. We were really slow to hire on the people side. And, when we had five, six, seven, we would have events and there was a sign-up sheet in the office like, “We’re going to this place on Saturday,” or, “We’re opening up our own little pop-up space. We need you to be there. This is part of our culture.” We’re a retail company that sells stuff. Everyone needs to know how to sell. Everyone needs to talk to customers. I don’t care if you’re in accounting or creative or customer service. We’re a retail company.

Richie: [00:27:30] So mid-2016, you start to spend on the digital side. What was the learning curve like there, if any? What was the goal and what were the results?

Paul: [00:27:39] The goal was to see if we could profitably acquire customers at our price point. Some of the learnings were interesting for us. Turns out, I would say, part luck and part skill. The luck learning was we priced our product at a pretty nice price to sell stuff online because the curve of customer acquisition, so to speak, is not linear with price. It tends to start in the $30, $40, $50 range and go up to $100, $200 range. You’re kind of in that sweet spot if you’re selling something for hundreds of dollars, $200, $300, as opposed to $2,000 or $20. So that was maybe the lucky part is that it was possible to find customers profitably.

Paul: [00:28:18] And then maybe the skill part was just, honestly, we were so ruthlessly efficient with our budget. We were so scared of losing money. We didn’t want to pay $200 to get someone to buy $200 product that cost $100 to make. So we probably scaled more slowly than most brands that saw the results that we were seeing which were pretty positive, frankly. But I’m glad we didn’t overspend because we haven’t had to raise too much money. We were able to turn a profit in 2017 which was really our second full year.

Richie: [00:28:46] That’s great.

Paul: [00:28:46] And we’re still profitable today. Those are only true because we instilled that efficient mindset, didn’t rest on our laurels, but the fact that we had a business model that was working. Our goal was to find audiences, generally that worked—work them, spend money on them if it was working and then find our next one. It was methodical. Let’s only increase our budget when something else is working. We’re not going to just double our budget and then pull back. We’re going to be very step-by-step in this whole process.

Richie: [00:29:13] At the end of 2016, where are you when you end the year and head into next year in terms of focus and priorities?

Paul: [00:29:16] We hit seven figures in our first year which was awesome. So the focus, going into really our second full year—2017—was how much can we scale this business this year without sacrificing any production quality, without sacrificing customer experience? What are the one, two or three people [whom] I needed on the team to get that done? Made a few key hires, started to fill out our customer experience function, hired a great guy to help me run finance which was growing to be a pain point for me. I think we ended 2017 with eight to ten people.

Richie: [00:29:50] Tripled.

Paul: [00:29:50] Yeah. Tripled from three to eight, three to nine. The priorities were our channels. How are we going to grow? That year, we actually had moved out of our second office, which was a small house on the east side of Austin, which we still had a lease for, of course. We ended up turning it into a showroom. I wouldn’t call it an experiment, but really it was more [thinking], “Our customers are asking us a lot to see us in person. My team has Saturdays free. I’m sure they don’t mind coming in.” That was actually a big focus of us, was to continue the physical learning. We actually ended up opening our showroom for the whole year, every Saturday from 12 to 5pm, which was fun and we learned a lot. It ended up getting a little overwhelming for the space. By the end of 2017, we had started to take off a little bit and the demand was too high to run a good experience there.

Paul: [00:30:43] It was all about introducing new products as well. We still had a very simple product line, early 2017. We had just released our first exotic boot which, for the uninitiated, when you’re in the high-end Western boot world, boots can come in a range of leather hides. On the lower end, it’s really just your cow, your goat, maybe even calfskin, which was a very high-end Bovine leather. But then there’s also ostrich and lizard and alligator. It’s an interesting world. It’s just how the categories happens to be merchandised.

Richie: [00:31:15] I always think of the two twins in Breaking Bad [who] just kill everyone.

Paul: [00:31:18] Oh, yeah.

Richie: [00:31:19] They’re very distinct. Really pointed toe.

Paul: [00:31:21] Oh, they have the pointy toe.

Richie: [00:31:23] It’s something like that—exotic.

Paul: [00:31:25] I would love to go back and watch. I bet it’s probably ostrich. Ostrich is the most popular exotic boot. Well, it’s an interesting thing and, for us, it turned out to be a big problem to solve for our customer because that’s when the prices really get exorbitant in other brands. That’s when our competitive brands are selling ostrich for $800, $900-plus. We could sell for $350.

Richie: [00:31:43] Right. So your gap basically increases.

Paul: [00:31:46] Yeah, the dollar gap ended up increasing. The percentage gap’s about the same, but the dollar gap starts to increase and the value becomes a lot more apparent. In fact, I learned that our value—we had made our entry-level boots so nice that we had to charge a little over $200 dollars for it that it wasn’t actually that obvious that it was half the price of retail, so to speak. But it became a lot more obvious when we started selling ostrich boots for $350, when we started selling caiman belly, which is this really cool mini alligator looking thing. We sold that for $450 when that would be a $1,000, $12,000-plus at retail. So that’s when, on the product side, we started to solve more consumer problems. Started to think a little bit more about how we were going to grow merchandising. Ended the year on a strong note. It was great. We also realized that were way behind in hiring, which is how I’ve felt every year since.

Richie: [00:32:37] Heading into 2017 and working our way up to almost the present in terms of the last year and a half: You’re a bigger team now. You have a little offline space. You’re adding from a merchandising and a style perspective. What do you tend to focus on the next year and a half up to the present? But also how do you stay focused on what’s working?

Paul: [00:32:54] I’m focused on three things, personally. Team. Again, we started this year with about ten, 12 people and we’re about 40 now.

Richie: [00:33:00] So you 4X-ed this year.

Paul: [00:33:02] Yeah. It was a necessary evil, but it’s been a great thing. I’ve got some great people on board, really happy and we need to continue to grow.

Richie: [00:33:08] Where did you assess where the needs were to really expand on the people front?

Paul: [00:33:12] There’s some things that scale with revenue, with volume. Customer service—our customer experience team is what we call them because they really go from end to end. They do pre-, post-purchase, everything. Product and merchandising this year has been a critical one for us because we actually introduced our first new category and we’re working on—

Richie: [00:33:29] Which was what?

Paul: [00:33:30] Leather goods. Bags and accessories. We actually launched a duffle bag earlier this year. I designed it, similar to the boots, because I wanted it. I thought that other people might like it too. It’s a really high-end leather. We knew leather really well. We had a good supply chain for it. Why don’t we make something and apply the same consumer value that we do [for] our boots? Let’s make a bag that would typically sell for $700, $800, $1,200 and sell it for $350. I had 5X-ed my expectations.

Richie: [00:33:59] Really?

Paul: [00:33:59] So as a team, we needed to build out. I don’t think it’s the final piece in the puzzle, but it’s the third major plug in the stool of becoming a Western brand as opposed to just a cowboy boot brand and that’s going to be apparel. Now, we’re not just going to go straight down the lane and come up with a huge assortment of shirts, hats, pants, etc. We’re actually going to start with jeans because jeans turned out to be a huge customer problem. We’re a customer-driven company. People ask us all the time, “What jeans should I wear?”

Richie: [00:34:27] “With my boots?”

Paul: [00:34:28] Yeah. So it’s kind of a two-sided problem. Younger people, so call it, 20s, 30s. Jeans have evolved over the last decade to be a little bit slimmer which is a little tougher for cowboy boots. They need to [have] about [a] 16-inch leg opening to fit over a cowboy boot or more. Most jeans tend to be 14-, 15-[inch]. Younger guys don’t really have jeans that fit over boots and then our older customer, who has been used to wearing Western-style jeans for decades, their options out there are cheap, frankly. They’re $40, $50, $60 jeans and made from really scratchy, cardboard-like material. We’re combining the super-premium denim world, ultra-comfortable stretchy Italian denim with the Western cut. Not boot cut, actually, just straight. What I think people want to wear.

Richie: [00:35:13] Are you wearing them?

Paul: [00:35:14] I am wearing them now, yes. They’re great.

Richie: [00:35:17] Nice.

Paul: [00:35:17] So that’ll be the third category. And then we’re actually opening retail next year. So we’ve got a first store opening early 2019 in Austin, hometown. We’re actually co-locating with our headquarters, which is going to be really cool.

Richie: [00:35:30] That’s what you said you’re were building.

Paul: [00:35:32] That’s right. We’re currently working in a temporary workspace for about six months and then, hopefully, February, March—knock on wood—we’re sitting in a new space next year, which is exciting.

Richie: [00:35:42] As you look, now, into the third category, pillar of the business, what do you expect to drive the business in the next few years among them?

Paul: [00:35:50] When we thought about our other categories, again, we were mostly thinking about solving customer problems and, to put it more specifically, we were trying to make stuff for our current customer. Boots are a relatively infrequent purchase for the average boot buyer.

Richie: [00:36:06] Especially if you make them really good.

Paul: [00:36:07] Exactly.

Richie: [00:36:07] That’s the paradox, right?

Paul: [00:36:09] They don’t wear out. A part of me wishes we had a product that could easily be replaced.

Richie: [00:36:13] It wasn’t THE best.

Paul: [00:36:14] Yeah, exactly. They last a long time. Double-edged sword. But we do have a healthy repeat rate still with our core product because it’s a good price point and people like it a lot. But it wasn’t a few times a year. To make the economics work, we started thinking about product from that standpoint. Then we started thinking about, “Are there products out there that fit in our brand that customers are asking about already?” The answer was yes. What’s interesting is that we’ve been able to make products [like] our duffel bag, which we’ve sold thousands and thousands of already this year, which has been really cool and unexpected. We thought it would be all repeat customers, right? But we kind of forgot about the fact that we’re also pretty good at marketing.

Richie: [00:36:50] Right. And it’s one size. You have a lot more flexibility.

Paul: [00:36:53] That’s right. I think we actually realized that—well, we saw the numbers. Fewer people were actually hesitant to buy it even than boots and boots [are] what we’re good at selling. So that is kind of the combination of why we want to open a store.

Richie: [00:37:06] Yeah.

Paul: [00:37:06] Because, at the end of the day, we were able to solve a pretty big problem for a lot of customers, which was a quality, a style and approachability in terms of both price, but also just the customer experience. Those aren’t the only problems they have. It turns out a lot of people still want to touch, feel. A lot of people want to be able to talk to you in person. They want to get real-time advice. They don’t want the email feedback loop. Even though we have chat and phone, they still want to be able to catch us on a Saturday when we’re not in the office. So that’s the idea. Everything we’re doing on the product and the channel side is all for the customer. We’re not considering wholesale. That is not a focus. I can say that much. Almost everything else is a possibility, but wholesale, for us, is not a focus because it would fundamentally change the customer value proposition. That’s my focus for the next year and a half. It’s a lot of hiring. It’s a lot of product work. It’s a lot of channel work. But all really exciting stuff. We’re taking it one step at a time which is the right way to do it, I think.

Richie: [00:38:04] So, as this all really comes together, how do you think about scale and how big you think it can get—but also how big do you want it to get, which are sometimes different answers. Is this like a “life’s work” thing? Is this a foreseeable future [thing]? How do you think about all that?

Paul: [00:38:20] So I get asked that question every now and then and I think that the right way to think about it is it needs to be whatever the market will do with it, our market being a customer market. We want to be as big as they want us to be, as they will let us be. And if there are a million customers out there who want to buy our boots each year, then great. We’ll figure out a way to do it. We’ll have to scale, obviously, to get to that point and we’re not going to scale unless we think we can do it without sacrificing product quality, quality control, quality assurance, supply chain, everything. But the truth is we’re kind of going where the road takes us. What we’re not doing is we’re not trying to force fit a size to the market. We’re not trying to force-fit a size for the company or an outcome for that matter. I’m not building this company to flip it. Hopefully, this is a brand that’s around when I do have grandkids. Now, are my grandkids going to be running the brand? That’s a really hard question to answer because life is long and lots of things happen. But I would say it’s a balance. If people keep buying our stuff and we think we can keep up with the demand then we’ll grow along with them. If they don’t, we’re not going to force it.

Richie: [00:39:26] What’s been the cheapest and most expensive lesson you’ve learned building the company?

Paul: [00:39:30] I think maybe the cheapest lesson I learned was going to free events. Man, we would show up and we would be surprised that people would let us show up. Nowadays I’m not so surprised. We were sometimes doing people a favor. It was adding some spice to an otherwise boring conference by selling cowboy boots in the lobby. But talking to customers is free. You learn so much. I’m excited to get our retail store open because it’s something that we’re going to have as part of our team training and culture annually. We’re going to have people work in the store.

Paul: [00:39:59] Most expensive lesson: Me starting a shoe company was pretty expensive as it turns out. I was hoping to get by with my savings account and not have to ruin my credit score and not have to buy $200,000 worth of inventory to start the company, but turns out that’s—

Richie: [00:40:17] It’s what you’ve got to do.

Paul: [00:40:19] You kind of need all that stuff.

Richie: [00:40:20] Yeah.

Paul: [00:40:20] So expensive in that I had to raise a little angel money. But, no, I’ve not regretted a single decision we’ve made in that department and could have… Obviously, starting the company has been a great life experience for me so far.

Richie: [00:40:33] Where’s the name from? And then how much was the domain?

Paul: [00:40:37] We didn’t have the domain at first, actually. So the word “tecovas” is the name of a rock formation in the Palo Duro Canyon, which is actually the second biggest canyon in the U.S. after the Grand Canyon. Beautiful. It looks really similar to the Grand Canyon. The Tecovas Formation is one of the geological layers. So it was obscure enough to be available trademark-wise but also, honestly, I love the name. It’s unique. It wasn’t gonna be confused with anything else. It could be used for both men’s and women’s product. It could be used in singular and plural. It works for Western as well. I finally bought the Tecovas.com domain, I believe, in early 2017. It was more affordable than you may think and it included a $1,000-boot certificate, which I was happy to give.

Richie: [00:41:22] To the seller?

Paul: [00:41:22] To the owner, yeah.

Richie: [00:41:23] What was it before?

Paul: [00:41:24] The only other organization that I know of, really, named Tecovas, is a charitable foundation called The Tecovas Foundation.

Richie: [00:41:29] Gotcha.

Paul: [00:41:30] And they owned both Tecovas.com and Tecovas.org. So it wasn’t that hard of a negotiation. I wasn’t trying to buy CowboyBoots.com or anything. Although, maybe we should look into that.

Richie: [00:41:41] Nice. Thanks so much for coming.

Paul: [00:41:43] Yeah, thanks.

Richie: [00:41:48] Thanks for listening to the Loose Threads Podcast. You can read full transcripts of the podcast and join the newsletter at LooseThreads.com. Feel free to leave a review on iTunes—we always appreciate it. And thanks to George Drake, Jr. for editing this episode. We have a great roster of upcoming guests including Carmen Tal of Moroccanoil, Zak Normandin of Dirty Lemon and Tze Chun of Uprise Art. Thanks for listening and talk to you soon.