Richie: [00:00:03] Hi It’s Richie Siegel, the founder of Loose Threads. I hope you, your family and your team are hanging in there during these challenging times. 

Richie: [00:00:09] We haven’t published a podcast for about six weeks since COVID-19 turned everyone’s lives upside down. We weren’t sure what the purpose of our talk show was in this new environment and decided to sit on the sidelines. But as the crisis continued, we wanted to get back to our roots, talking to leaders across the consumer economy about how they are managing their business. 

Richie: Our specific focus is how they’re striking the balance between playing offense and playing defense. Defense is about cutting back as much as possible to preserve cash. Offense means making calculated investments and taking risks to put your company in a stronger position. Just like in sports, a team can’t win by only playing defense and companies that can weather this storm and make opportunistic investments will emerge in a stronger position than where they entered. 

Richie: Our first episode of Offense vs. Defense is with Sarah Paiji Yoo, the co-founder of Blueland. A brand re-imagining cleaning products to eliminate single use packaging Blueland has seen a huge spike in demand in the last two months, but it comes with all the challenges every brand is facing—deciding when to cut back and when to invest. Here’s how she’s approached and managed the crisis so far. 

Sarah: [00:01:09] Looking back, I think myself, as well as the whole team was in denial and we were on top of coronavirus pretty early, just because part of our supply chain is out in China. And so for those reasons, we were getting sort of a day earlier, multiple times a day update on the situation over there. And for those reasons, we were very concerned about our business, but, you know, for probably too long, we just didn’t fathom that it would actually hit the United States, as well, in the way that it has. I mean, even, I feel like the week prior to, you know, even New York moving to stay-at-home or safer-at-home. 

Sarah: Every team meeting we actually go around and make projections to when we’ll be back in the office and when I think back on my guesses that we were making, we were just way off, right initially, even though, you know, we’ll be back in a couple weeks. And then we thought, like, you know, surely, May 6th was the new consensus on the team. But I think that definitely took us by surprise how much information was readily available to us. And yet, you know, many of us were kind of holding onto the notion that this wasn’t really going to be that bad. 

Richie: [00:02:15] Yeah, it felt like every week it slipped a month. Every time you learn more. Right, which is crazy. 

Sarah: [00:02:20] Now, I just wonder if we’re kind of overcompensating a bit, at least from our perspective as co-founders as well as the full team. Now, I think we’re assuming the worst case scenario now we’re talking pretty frequently about like the second wave and will we even go back this year. We’re talking about companies that have already called like we’re gonna be working from home till fall or till the end of the year. Then we’re already talking about what happens if this continues in 2021? I think that is definitely on the table. 

Richie: [00:02:48] So I’m curious, you mentioned a bit of the supply chain piece before, like you started to kind of feel it in the beginning of the year. How would you describe how you started to feel the impact of this, via the business and what those different kinds of milestones were as time progressed? 

Sarah: [00:03:01] So like I mentioned, the first-wave came to us and it was a supply chain risk. Now, we do manufacture our bottles out in China and they are longer lead time. We do intentionally ship them by boat versus air. So even once they’re available at our factories, it’s still another six weeks that they need to travel to get here. 

Sarah: [00:03:21] And so those timelines definitely introduce, you know, an increased set of risks around our supply chain. And so, you know, when we first heard that parts of China were shutting down. You know, that was absolutely our first priority, trying to one, just expedite as much product out of there as we could as fast as we could. We weren’t the only ones that had the idea and certainly Amazon was doing a ton of that. 

Sarah: [00:03:44] So definitely a lot of difficult decisions that we face there. Obviously, one, we were scared to be out of inventory to sell. But the alternative of, you know, typically like air freighting, for example, airfreighting will cost us a couple dollars per bottle, which is still much too high. But during that period, the cost of air freighting increased six times and actually remains at those levels. And it almost made some of these decisions easier. 

Sarah: [00:04:13] Right. I think already questionable whether it was the financially responsible thing to do to air freight those bottles in the first place. But when the costs of some of those activities increase so dramatically, you kind of have to accept the situation. And so, you know, we were already drawing up from a marketing perspective, like what alternative routes we would then go with the business if we did run out of certain parts of our supply chain.

Sarah: The nice thing with us being a tablet based business, if we ran out of bottles, you know, we definitely could shift to a campaign that really encouraged people to use what they have at home, which we’ve always been very supportive of and encouraging of. But, you know, trying to think one step ahead of some of these pretty worst-case scenarios. But we spent probably a week’s worth of, you know, over the course of a month, like just hours in meetings talking about this. And ultimately, China ended up holding really steady and we really had no disruption from a volume perspective. Our factories did shut down, Chinese New Year was extended by a couple weeks. Our factories, from an employee perspective, came back at 30 percent capacity, but they were able to keep the efficiencies incredibly at the same levels. And so we were lucky that we didn’t see the disruptions on the Chinese supply chain side. 

Sarah: [00:05:25] So that was certainly one stage of it. And then, you know, obviously our supply chain concerns, then shifted to the U.S. So we do produce all of our tablets here, which are formulations here, as well as all of our warehouses are here as well. And that became a bigger concern just because, you know, we just felt like as a country, we had it sort of less under control, so that quickly became a cause for concern. 

Richie: [00:05:54] A lot of brands arguably would have gone to the opposite situation where they are worried, but having too much inventory already, they’re worried about not enough demand. It seems pretty implicit in your planning that you had a sense of how quickly there was going to be a lot of demand. It was now a question of can we fulfill? Was that implicit? Did you realize that quickly or a little bit later? Because it seems like you spent a lot of your time trying to figure out everything after that assumption, if that makes sense. 

Sarah: [00:06:22] Yeah, we do feel like that was pretty implicit for us. I think we’re in the fortunate position with the data it came pretty fast and it was very clear, like our marketing costs. Our costs to acquire a customer dropped in half almost overnight and the volume started surging as well overnight. 

Sarah: [00:06:38] And we think had it been a little more gradual, it would’ve been harder. I think there definitely was a lot of cognitive dissonance on our parts as founders to the extent that it was weird because we do have a lot of institutional investors on our cap tables. They were sending out their typical email to their entire portfolio company of here are the five things you need to be doing and what to cut back on any spend that’s not fundamental to your business. Everything was all about that. Conserve cash, reduce.

Richie: Right defense. 

Sarah: Exactly. And so I think that part was a little hard to reconcile. Everyone’s saying be very, very conservative and don’t spend what you don’t absolutely need to. But on the flip side for us, like we’re seeing more demand than ever. You know, we were getting revenues that we didn’t even think we’d be hitting in like a year. 

Sarah: And so, you know, what does that mean? And I think that’s definitely something that took a little more time to work through. But we knew that at a minimum, inventory was something that was worth investing in, because at least in the shorter term we thought that there would be a surge in demand in terms of predicting the future. And that’s the part that also scares us a little more. I mean, to the extent that this goes on long enough, right, even for an industry like ours with cleaning products, at some point as the population is losing their jobs. Right. And is becoming a lot more price sensitive, we certainly aren’t the lowest price-point player in the market. And so we definitely didn’t assume that we’re being immune to it either. But we did feel confident, at least in the next few months, that we would continue to see that demand. 

Richie: [00:08:15] Was it hard to have those investor conversations where their whole portfolio basically is swinging in one way and you’re saying we’re gonna make X,Y, Z investment? And what some of those investments were beyond the inventory you mentioned? 

Sarah: [00:08:28] They were hard conversations. I mean, so many of our investors came to us wanting to know. And generally that our investor base is pretty hands-off. But you know, that period they’re trying to get a sense of where their portfolios are at. And so people were asking questions about like, where are you from a burn perspective, you know, where you know, X, Y, Z. And when we share those numbers a handful of people came back saying, I think there’s an opportunity for you to cut. And it’s hard because I did have a lot of conviction. Like, no, I actually think we’re okay. But I’m sure that wasn’t taken in the best way by everyone. But truly, I think even before all of this, we kicked off the year with though we do have VC backing. 

Sarah: Our intention is not to raise more capital, the goal for the year is really to get to break-even, have a break even month by the end, like we’ve been in this business already, extremely lean. We do very little on the brainwork paper and marketing side. And so we had no plans and because we have no plans to grow the team and there definitely wasn’t a reason to cut the team given where we were. And so that one was harder because I definitely didn’t want to be difficult. I just truly believe that. I did think we were in a good place, and especially given now that revenues were at least twice, most times more than we expected them to be in the current month. 

Richie: [00:09:40] Is that like an investment list or part of it is maybe a preservation list, part of its an investment list. What does that start to look like and  How did that come together for you? 

Sarah: [00:09:48] You know, a big one was making sure that we were doing all the appropriate investments to make sure that at least for us, there was an opportunity that we’re taking advantage of the current climate and the opportunity, I think, in the context of our space. You know, historically, eco-non toxic cleaners are just about 4 to 5 percent of the overall cleaning products market. But right now, about half of consumers are trying new brands. And that’s largely actually driven by, you know, they can’t find their conventional brands on store shelves. 

Sarah: They can’t find Lysol or Clorox or they don’t want to go to the stores. But the interesting thing that we’re finding and we’ve seen studies on it, is that more than half of the people are planning on sticking now with the new brands. And so this is an incredible opportunity for us to have penetration with a set of customers that otherwise would have been very difficult for us to penetrate. And so that’s definitely one, you know, being mindful that we have this opportunity with this customer that historically hasn’t been our target customer at all. 

Sarah: But given that we have this opportunity or that we’re getting these customers, whether we want them or not, whether they’re our priority or not, how do we then make sure that, you know, from a retention and lifetime value perspective, we’re keeping those customers because we’re just a year into our business. And so the core of our customer-base has been mostly people that are already very eco-conscious. 

Sarah: [00:11:15] And so there was a certain level of education that you didn’t have to do because the intention was already there versus I think with this new set of customers, we need to make sure that we’re easing them in to that journey as well as hitting points that for our non-talks consumer would be a no brainer. But for these consumers, really, the education around like why not antibacterial cleaners are just as effective as antibacterial cleaners. You know, the harms that we see in a traditional toxic cleaner, etc. 

Sarah: So definitely a lot of investment on the marketing side to re-jigger  our messaging or e-mail welcome flows or ads, etc., which, you know, those things always cost money as well as time. But I think it’s well worth it in this environment, even things like photo and video shoots. It’s been interesting as a brand to continue to do those because a typical shoot and we do shoots on the scrappier side. A shoot will have like 10 people between like the art director and the digital tech and the photographer and the prop stylist. And this assistant stylist etc. And obviously in this environment, we’ve had to move these photo shoots, figure out a way to make them a one man or woman show, which we have. 

Sarah: [00:12:26] What should have been two-day shoots have become very slow two-week shoots where our creative team is on video with a photographer that’s now become a jack-of-all-trades. But you know, another area that, you know, instead of pausing down, we’ve decided like, look, you know, we have momentum. Let’s continue to invest in the brand. Let’s continue to support new products we have that will be coming out, as well as existing ones. 

Richie: [00:12:51] I want to talk about channel a little bit in terms of I assume the business is primarily online driven. Obviously, right now you have people flooding on to Amazon, Target, Whole Foods, kind of the grocery distributors and so forth. What was the channel setup kind of going in? I’m curious, has the whole situation caused you to relook at how you think about where products are sold and what makes sense versus getting someone to come to the site, going to where people are, ect.? 

Sarah: [00:13:18] Your guess is right. We have been mostly all direct-to-consumer, online to date. And that positioning certainly has benefited us unexpectedly during this period. We have had a handful of wholesale accounts like a Nordstrom, West Elm, Goop. Those are our primary ones and I think our intention long term has always been to go into traditional retail distribution. I think especially from a mission perspective, I think there’s a subset of consumers that we thought would have been very difficult to reach. Our guess pre-COVID was about 80% of consumers don’t want to buy this category online at a separate destination. I think those numbers will shift. I think a lot of that has accelerated more online and will remain more online than expected.

Sarah: But I still believe once you return to sort of the next normal that the majority of consumers will still want to purchase this on their weekly or biweekly trips to a Target or Walmart or Costco. I don’t think we no longer term our strategy has changed. And so, you know, we continue to work on our channel goals there. I think at this point we did not plan on anything this year anyway. So it doesn’t really derail, I think, to the extent of this to 2021, it will there. I think some of the more brand marketing sort of driven channels has become sort of lower priority. I think with the department stores are going through, I think, you know, previously have loved our products from brand marketing perspective in some of these doors. But I think obviously right now that’s all on pause.

Richie: We’re like six to seven weeks kind of into the whole crisis. Now, what do you wish you knew in week one and two for sure? 

Sarah: [00:14:55] I Wish we had known how long and big this impact would be. We would have definitely planned differently. I think, you know, we still continue to feel a bit behind on the ops-side and certainly the customer service side as well. And I think we definitely could have been better equipped had we know what the magnitude of this impact would be. I think the first few weeks, definitely my head wasn’t on straight as it could have been and I think for many of us in the first few weeks was pretty jarring in transition to work from home and I also have a toddler with no child care. That’s sort of my husband and myself.  

Sarah: And so I think it was a lot to process all at once and think at that same time, there was this pressure from our investors as pressure as putting on myself to be decisive and you know, have a reaction like do the sharp right turn or left turn that was needed. But I think in retrospect, a lot of conversations were certainly had on the team, but I do think corners were cut and I think there are more conversations that happen in silos that could have happened cross-functionally that could have led to better outcomes, and I think it’s just always a result in playing the long game. 

Richie: [00:16:12] I’m curious from the customer side in terms of how you approached communication at a high level. And I’m also curious, like, are there things that you wish your customers knew or that you want to communicate but maybe didn’t yet? That would either encourage more empathy or them to spend more or less or just think about what’s happening differently, because the role of buying stuff is really interesting right now. There’s a range of different opinions about whether we should be consuming, whether we can consume, etc.

Sarah: [00:16:40] Definitely. I think we’ve been changing how we communicate to the consumer quite a bit, and that’s another one where I think our reaction was a little bit like lagged, right? Like social. You know, that’s another one where, you know, being a small startup, being a year in. Our goal has always been to get ahead with the content calendar. I think before, like, right as this is hitting, we’re finally like a few weeks ahead in terms of like we had like next week’s content lined up, like we knew it was going up on social and on stories and we’d it reviewed and approved and then this hit and I think we definitely wanted to hold on a little bit to that structure and keep going as it was usual. 

Sarah: But I think probably a week-in when things weren’t performing, we didn’t feel right talking about what we were, it just all felt very tone-deaf. And so, you know, we then just made a decision just to pause, rethink everything, we said it was okay to go dark for a week. And then also just took the pressure off our team to be like showing up every day, posting every day and I think we set a new bar for ourselves. Like if we weren’t proud of something we didn’t have to post. And now, you know, we’re kind of in this area where we’re kind of like back on the hamster wheel, we’re a little bit behind, but it’s OK. I think it’s just again, understanding that like we’re in a new world and we need to sort of flex appropriately. Definitely with our customer base as well catering our message to concerns that they have, you know—antibacterials, a big one. Questions around are these products effective? And we have so much to say there. So I think it’s been a good opportunity to engage on those topics on non-social. I think there’s only a subset of customers that are a little bit more impatient and we understand that these are very uncomfortable situations. 

Sarah: So, you know, whether it’s on, you know, shipping delays which are beyond our control USPS, you have U.P.S., FedEx, everyone’s saying it. Even Amazon, you know, it’s taken you two weeks to get something from Amazon. So there are definitely times where we would want to ask people to be a little more patient and kind given the circumstances and just the fact that even with our warehouses, you know, we’re slowing things down intentionally, but also get people are stressed. And, you know, these are products that for some people, they do need to feel like they can safely function. I think we’re also seeing, unfortunately, some amount of xenophobia. You know, we’ve never hid behind the fact that our bottles are manufactured in China and it’s very interesting to see just the negative comments that I think, you know, are being driven by a broader climate that we’re in and sort of the origins of Corona. You know, the irony of people being like, you know, I’m never going to buy anything that’s manufactured in China as a type it’s like sent from my iPhone. 

Richie: right, trying to buy their own PPE. Yeah. 

Sarah: [00:19:21] But again, I think this is another area where, you know, ideally we would say like this is time for more openness and kindness. 

Richie: [00:19:27] What’s been like the cheapest, the most expensive lesson you’ve learned in the last seven weeks. 

Sarah: [00:19:36] Most expensive lesson. We did pursue a new product in response to all of this. And it was mostly driven by our desire to give back because we felt like we were such a beneficiary of everything that was going on. And we saw an opportunity to create a product that was very much so in need. We thought we had the supply chain to do it. We got reassurances every which way. And so we pulled the trigger, placed the PO, we source everything. 

Sarah: You know, I think the team really paused for two weeks and like shifted our resources this way. And then ultimately one ingredient that we were told every which way we were going to get the contracts were lock like they have it for us. All of a sudden we couldn’t get it. All of them. The price of that had gone up.. And there’s like 14 other ingredients you had stores and purchased and ended up being at some point we had to pull the plug on as much as we wanted to do it. I get back on mission and everything perspective like we had so much time to it and a ton of money. So good lessons that hopefully we can take with us to future launches. 

Sarah: The cheapest lesson, I continue to really just value social as a channel. I get every single notification on comment and DM that comes into Blueland, which is overwhelming given we have like 140,000 followers at this point. But it is so valuable that even glancing at those messages that come in, it’s not healthy for me to get that level of interruption, but just being able to feel like I have a direct real-time pulse in to like the tone and concerns of people as well as what they’re excited about. I feel like even just through that alone, I’ve been able to see how our customer has evolved quite a bit since pre-COVID and post-COVID. 

Richie: [00:21:23] Have you felt a need or want as a co-founder to both speak up more publicly and to customers and kind of be more visible? There are a lot of companies that have sent tons of emails from the CEO and so forth, like how have you kind of played out on, I guess, the visibility you want to have at this time? 

Sarah: [00:21:41] We’ve always kind of leaned towards being more visible. I think that was kind of part of the initial plans from a year ago. I think we’ve always viewed that, you know, you can only be a startup once. I think we should celebrate the fact that we have like real people and faces on our team that you can relate to versus you buy something from a large CPG and it’s like you have no idea who is making your products, who’s doing your social posts. And so I think we definitely continue to that, I wanted to certainly do more of that. And it’s been a struggle, just like work-from-home-with-child situation. But I still jump in on a lot of like customer service emails as well as DMs on Instagram that we get in. For my personal, I try to engage on as many of the posts that go up. I think it’s important for the community as it is for me to have an understanding of the customer base.

Richie: Of all of the changes that you and the team have made during this time, what do you think is going to stick after hopefully this starts to wind down in terms of strategy, how you operate, that you landed upon a solution or a cheaper way or scrappier way of doing things that you’re like, well, we actually could keep this. Like, this doesn’t have to only be for when we’re in a crisis situation. 

Sarah: [00:22:47] I think the big win for us to spend just the new tighter partnership between marketing and ops. Previously we were maybe doing the demand forecasting together once a month. But again, given that we can be placing orders every week, every two weeks, I think the better we can get at that, the better we can, you know, inform ops more real time on what we think might happen. That’s real cash saved from an inventory perspective. So I think that part certainly has been exciting for us. I think similarly, I think we’ve had a tighter partnership between customer service and product as well. 

Sarah: I think because again, we’ve attracted a different set of customers with different sets of questions. We feel like we’ve kind of had to come up the curve on a different consumer than we tied for the first nine, ten months of our business. And so I think, you know, those cross-functional conversations that are happening at least weekly, if not every day, are something that are again worth continuing and continue to keep this. I feel like in this environment we need to battle this mindset of like we need to have a better pulse on what’s happening and get that back to a faster. And I think that’s a really good mentality regardless of whether you are in a crisis or not in a crisis, because I think that just enables us to disseminate information to more people faster and enables us to act more nimbly. 

Richie: [00:24:11] Awesome. Thanks so much, Sarah. Talk to you soon. 

Sarah: Thank you.