Launching a DTC Digitally Native Brand from Scratch – Gekks – Christian and Justin Arquilla Ep76

https://open.spotify.com/episode/5IrlkBe0bvReamCeVRmMSg

Quotes:

“If your product isn’t amazing and doesn’t have a competitive advantage, people aren’t going to come back.”– Christian [39:34]

“In the venture capital world, you get a better evaluation without revenue than you can with revenue.”-Christian [40:43]

“You need to have something unique to sell or a story that is differentiated from your competition.”– Christian [18:40]

The Advantages of a Direct-To-Consumer Marketing and Selling Approach for Small Brands

How can you scale your business with a solely direct-to-consumer approach? Having a unique product that has a competitive advantage coupled with an excellent online and offline marketing strategy is what will help you scale without involving a third party.

In this episode of the Page One Podcast, Luke Peters interviews brothers Justin and Christian Arquilla, the co-founders of Gekks brand. Gekks is a growing brand of patented low profile no smell socks. Justin is an entrepreneur, husband, and father of three with a finance background. Christian has a background in private equity and restructuring consulting, he’s a dad of three under 4-year old’s, and a husband. They talk about the idea of starting Gekks and the strategies they’ve put in place in each of their roles to establish a strong brand that is Gekks.

Listen in to learn why raising capital before scaling a business is a much better strategy than doing it after. You will also learn the power of a direct-to-consumer approach to help engage your customers and potential customers.

Key Takeaways:

  • How selling directly to consumers without third parties helps with direct contact with them and remarketing campaigns.
  • The importance of engaging potential customers to help get your business out there and make sales. 
  • The importance of establishing a direct-to-customer channel where you can track sales.
  • The advantages of using an internal marketing team over an agency.

Episode Timeline:

  • [2:00] They explain what Gekks socks are all about.
  • [3:44] Christian explains his role in sales and Justin’s operational role, plus the team that makes up Gekks.
  • [4:46] How they solely handle their fulfillment and shipment on all their orders saving thousands of dollars a year.
  • [7:59] The inexpensive ERP systems they use to handle the business side of things.
  • [9:11] Why Gekks is currently not relying on Amazon and is still making huge sales online.
  • [11:19] They explain the problem they’re having with the reorder rate and how they’re trying to solve it.
  • [14:37] Where the idea for the no smell Gekks socks came from, plus how their sales shifted from mainly male in 2017 to now making more sales from female customers.
  • [18:32] The three things you need to implement for your business to succeed in this day and age.
  • [21:11] The challenges of getting impressions on social media and Google ads over the last few years.
  • [25:21] How to use engaging branded surveys as a way to attribute sales from the customers.
  • [30:58] They explain how they have built an internal marketing and advertising team that outperforms any of the agencies they have used before. 
  • [33:04] The mix of suppliers nationally and internationally that Gekks uses.
  • [36:03] How to approach direct to consumer and third-party selling in 2021 as a new brand owner.
  • [38:29] Christian explains why not raising money at the beginning of their business was the biggest mistake they made.
  • [40:08] The advantage of raising capital before scaling a business over doing it after you’ve already started scaling it.

Speaker 1: Welcome to the Page 1 Podcast, a podcast featuring a variety of guests and thought leaders on topics ranging from digital marketing, sales channel strategies, influencer marketing, best in class product launches and all the details about how to accelerate sales. Now, here’s your host, Luke Peters.

Luke Peters: Thanks for joining us on the Page 1 Podcast. I’m your host Peters, CEO of newer appliances and retail band digital strategy agency. This episode is sponsored by retail band, where we can give business owners a blueprint on how to grow their digital sales either direct to consumer or via channels like Home Depot, Wayfair, Walmart, and many, many others. To learn more, find me on LinkedIn or email me at luke@retailband.com. In this episode, you’re going to learn from Justin and Christian Aquila on how to grow from scratch and launch a digitally native brand for the long run.

Luke Peters: Justin is an entrepreneur, husband and father of three with a finance background. Prior to starting Gekks and just out there trying to create something that can stand the test of time. Christian has a background of private equity and restructuring consulting. He’s a dad of three kids under four years old, and husband to his beautiful wife, Kate, who also has her own baby business named Bumble Baby. Gekks is a growing brand of patented low profile, no smell socks. Justin and Christian, welcome to the Page 1 Podcast.

Justin: Thanks for having us.

Christian: Thank you for having us, appreciate it.

Luke Peters: All right, cool. So anyways, I’m going to ask you guys if you can describe the brand. I took a look at the website and saw what you guys were doing, and I don’t think I took your tagline. So I just went with you guys have a patent on this. They’re like anti-microbial socks, and they’re low profile. Did I get all that right?

Justin: Yeah, I think that’s a good start. What Gekks are, are basically a replacement for no show socks, or for going barefoot. So probably the biggest clarifying point is that, they actually don’t go on your foot, you don’t put them on your foot. They go inside your shoe. So it’s a thin, breathable, no show socks with an adhesive that is fused on the outside of it. So you put it in your shoe, you apply pressure to the adhesive, and it essentially suction to the inside of your shoe. Then you slip in and out of that shoe barefoot like you always would if you were wearing high heels, or ballet flats, or men’s boots, shoes or loafers.

Justin: When you’re in the shoe, you feel like you’re wearing a thin, breathable, no show sock that is knit with anti-microbial odor killing yard. So as you’re walking around and sweating, all of that, basically, odor causing bacteria is being killed. And so you can wear the sock over and over again without having to wash it. So it’s basically a souped up replacement to no-show stocks, which many people find just don’t work.

Luke Peters: Yeah, that’s awesome. And it’s such a … Anyways, for the listeners out there, I was excited about what you guys have created, because it’s a really specific problem you’re solving, but you’re creating an awesome business in a really awesome brand around it. And I think now the world is like niche down, niche down, keep niching down until you find that audience and that specificity of your product. You guys have definitely done that, but still big enough to grow substantial business. So I think it’s going to be a great story, looking forward to it. And Christian, why don’t you talk about working with your brother? How do you guys make it work? What roles do each of you guys take on?

Justin: Sure. So I would say we both, obviously with a startup and a small business we both have multiple responsibilities, but I would say I take on more of the sales and marketing role. Whereas, Justin take down more of the operating side of the business right now. But obviously with a small team, there’s a lot of stuff going on and ping ponging back and forth every single day on different things.

Luke Peters: And Christian, how many team members at the company? How big are you guys?

Justin: Right now including both of us, we have about five or six salaried employees, and about 14 to 16 hourly employees depending on the season.

Luke Peters: Okay, awesome. And, Justin, let me ask you a few more questions about the company. And this is just to give the audience a little bit of scale. Are you guys handling your own fulfillment? If so, how large is the warehouse? Or do you guys work with the three PL?

Justin: We currently do all of our own fulfillment, and we’ve actually done all of our own fulfillment since day one. We bid fulfillment out maybe five times over the last four or five years with different groups and looked at it, and it’s an interesting business when you look at how fulfillment works with low weight small products like ours. And I think the reason I bring that up is what we just basically found is, you can save a lot of money with a low weight, small item like ours, where you don’t need a big warehouse. You can do your own fulfillment, and in our particular case, save literally hundreds of thousands of dollars a year doing our own fulfillment, and years.

Justin: There’s so much of the software advances have come so far where it can get a ship station account and integrated with Shopify and within a day or two learn how to use it and really be your own fulfilled, and do, like we do, we’re fulfilling 500, 600 orders a day on our own. With the team we have here with really no major background and fulfillment. Also chime in there is something that we’re pretty proud of on our end is, we have about a 0.5% error rate in shipping those orders out compared to the industry average in fulfillment warehouses of about 2% to 3%.

Luke Peters: 2% to 3%? Wow, that’s awful. We do the fulfillment ourselves as well. I always assumed smaller products like yours would be a lot easier to just use a 3PL with newer products are pretty big and heavy. But you bring up a good point. I mean, you’re probably at a 3PL or fulfillment place. You’re getting charged a standard pick and pack fee. And then if you guys are selling multiple pieces, they’re probably adding additional fees per each piece. And you guys can pull these things so quickly. You’re basically just saying you’re just way more efficient at 500 units a day. You’re just able to do it a lot quicker. And is that mainly where the savings is? Is it like the pick and pack and the additional fees? Or do you even find savings elsewhere?

Justin: I think that’s where it is on the pick and pack. When you just think about, we can keep 30,000 pairs of Gekks in 500 square feet. Right. And so, the way we actually have it built out with a team, it’s about 500 square feet. And all of this use around the border. And so, someone’s that walking around a warehouse with every pick. It’s just back and forth within 500 square feet. Or maybe it’s a little bigger than if you measured it.

Justin: But I think that’s really where the savings is solved the fulfillment houses that we’ve gone to try and offload the fulfillment to. You always just seems like you’re paying whatever it ends up being a five cents or $1, or 1.20 a pic, plus 15 cents every extra skew, and most of our customers are ordering four pairs. So it’s always in the $1 to $1.50 range. And like I said, we’re saving hundreds of thousands of dollars a year by doing it ourselves and managing our own team.

Luke Peters: Super interesting. Most people don’t have the luxury to be able to fit that in that tight of a space, but yeah, that makes a lot of sense. You talked about Shopify, so I’m assuming you guys are using Shopify. Are you using any other type of VRP? Or how are you handling the financial side of the business? What’s tying into Shopify on that end?

Justin: I would say that the major systems that we use are, Shopify is collecting orders, all of those orders are being pushed through to ship station, which also connected with Zendesk on our customer service side. And then on the financial side, all that Shopify data, ultimately, we can get pushed through and all the banking data to QuickBooks. So it’s a pretty easy ERP system for us, really, and it’s Shopify plus is a pretty expensive service. But besides that, most of these systems and services are relatively inexpensive on a monthly basis until you keep scaling. I forgot to mention email and text software too, which is also integrating with our website as well. So those are the main earpiece system [inaudible 00:08:49] we’re using.

Luke Peters: Yeah, it is amazing how inexpensive it is, and QuickBooks online platform is really nice. Took them a lot to get to the game, but yeah, they have a good offering there. Talk about channel mix. So you guys are selling direct to consumer. Like you said, totally, you do about 500 a day or so. What percentage of your orders are through your website versus on Amazon?

Justin: So we are 100% on our own website at this point. And pretty much all of our spend is on paid social Facebook and Instagram with about 10% or 15% of that spend going to Google pretty much for branded search campaigns. So all of our sales are on our website. We haven’t even touched Amazon yet at this point.

Luke Peters: Wow. And would you mind getting into that? Or how come you guys haven’t touched Amazon? You obviously could set up a third party, control the brand a little bit. What went into that decision process?

Justin: Yeah, I think that’s right. We do want to control the brand. We want you to have the customer’s information, their email, their address, their phone number so that we can re-market to them appropriately. We were on Amazon a long time ago, maybe in 2014, or 2015, for about one month. And what we saw was, we were pretty much spending on paid social. People were getting to our website, and then they were just jumping off to purchase on Amazon. And we were obviously, incurring all those extra 15 or 20% fee on Amazon, and absolutely having to abide by the rigorous shipping rules and regulations, which when we were … That small of a company, when we were just starting off, it was pretty tough to get orders out same day, if not next day.

Justin: So we’re taking a look at it right now. We’re thinking about potentially getting back on it. We had talked to a few different third parties that are pretty excited about us trying to get back on there, but we’ll see what the future holds with regards to [inaudible 00:11:00].

Luke Peters: Well, listen, good for you, guys. You’re living the digital dream by not having to rely on Amazon. So that’s actually a huge compliment that you’re able to do that. Would you mind sharing what your reorder rate is? I want to get into CAC, and acquiring your customers. How does the reorder rate look or percentage?

Justin: It’s interesting. One of the things that we’ve been fortunate to be able to do since day one is, is basically, we’ve always had almost every day, a positive return on ad spend, and really even positive contribution margin. So the CAC has come up over the last three or four years, as we’ve scaled and as the channel that we focus on with social and Google has gotten more and more competitive. I would say it’s come up maybe 20% to 30% than we’ve been able to fight that off with website optimization, basically to get our website conversion rate up.

Justin: The reorder rate is, it sits right around the two-year cohort, sits right around 20% to 25%, which is something that is low for the industry, which is actually one of the things that has us looking so hard at that channel and Amazon, and brick and mortar as well, because our customer satisfaction scores and Net Promoter scores and scores like that, they don’t match up with the reorder rate. And so, we’ve been studying that very closely over the last six to 12 months trying to understand more and more from our customers. Whey we’re essentially missing them when they’re buying shoes.

Luke Peters: Yeah. And what I will say, though is, Listen, for everybody tuning in listening to this, you guys are you know, let’s say, 20% reorder rate. And you’re saying it’s low, and maybe it is, but the point is, you’re still able to profitably … You’re profitable on that first order before reorder rate, which is hard to do. And I think a lot of companies and brands out there think that the only companies that can be successful on paid ad nowadays are the ones that are breaking even or losing money, but they got 50% reorder rate or 70% reorder rate.

Luke Peters: So you guys are able to solve this problem, so congrats on that. And to build with a lower average order value probably, and do you guys, you have free shipping on the website? You having to factor that into the cost?

Justin: We offer free shipping over $60. So under $60 we charge shipping.

Luke Peters: Well, listen, I mean, that just means you guys have built a strong brand. As I’m putting those, I’m sure all that stuff makes sense to you guys, because you guys know your numbers, but everybody listening to this not always a direct consumer expert. A lot of the audience is selling just through channels or the omni channel and they’re in store. And it’s probably a testament to how solid you guys are on the branding, and just creating value and call-to actions and be able to convert those paid ads. So channel makes your … Are you literally 100% direct consumer? Or are there any other channels besides Amazon that you’re on?

Justin: We are 100% direct to consumer on our website. Luke Peters: That’s great. Thanks for sharing that information. And then, Christian, why don’t you bring us up to speed on how you guys came up with the idea of Gekks. I mean, obviously, fast-growing brand. It sounds like you guys started around somewhere between 2012, ’13 or ’14, would love to hear the quick story on that.

Christian: Sure. well, I’ll pass that over to Justin, because that’s his story to tell.

Luke Peters: You got it.

Justin: Basically, how we came up with this concept was, I was living in Manhattan. Christian was living in Chicago when we started this company. And I was recently married and basically transitioning our of, I guess wearing loafers in both shoes without socks. And I was coming home and my wife was saying, “Your feet smell. You have to wear no-show socks.” If we’re going be living together. You can’t come home with feet smelling like that if you’re not going to wear socks.”

Luke Peters: That’s so funny.

Justin: Shorts and a nice pair of loafers that you come home and your feet smell. So I started using no-show socks, and I just found basically all of them to be subpar. In one way or another, either they would slip down, or they would not wash well, and they wouldn’t size right then. Or they would show. The point of a no-show sock is to not show, and then a lot of them end up showing depending on how the shoe is cut. So that was really the impetus to start this company. Before I even talked to Christian about it, I think I looked on the internet and I Googled for almost a week at night trying to find anything like this out there, meeting a Google patents, trying to find a patent or a product like this out there.

Justin: And I couldn’t find it. And I called Christian, and we were both working in finance at the time, and decided to go for it. And I guess, before I end the story, I will say that, from 2015 to 2017 94% of our revenue was from men. And then in 2000, basically selling these men’s loafer sock that would go in your shoe. 2017, because we get so much inbound traffic from email traffic from female customers asking for the product for female shoes, they’re high heels, or they’re ballet flats, or they’re slip on. We started launching female products in 2017. To the point now we’re in 2020, 92% of our revenue is from our female customers.

Justin: So it’s basically completely turned upside down from being an entirely male skew company to almost an entirely female skew company. And I would say now we’re in the, when we talk to people about this, I don’t actually consider yet to be in the hosiery or soft space. I consider it to be more in the footwear space, because it’s more of something that aligns with, and is an accessory to a shoe. Or that it is a stock that goes on your foot. So we went from the men’s bow shoe space to the women’s footwear space.

Luke Peters: That’s all. Well, it makes a lot of sense. They’re buying a lot more stuff than us guys are. I’m sure the business has has done really well. And just thinking about that, you have a trademark, obviously something you guys will figure out on your own. But either since Amazon’s the wild, wild west, having having that relationship there and having a … Gosh, what’s that’s called? I forget what the brand partnership is called where you … You’ll have a little bit more sway on the trademark and design patent or whatever type of patent you end up having. I forget what it’s called. But anyways-

Justin: I think it’s called a Brand Registry.

Luke Peters: Yeah, sorry, the Brand Registry, exactly, yeah. For what it’s worth, it’s hard Amazon to love West. You found the need personally, you went to market, you expanded to men and women. And for you, Christian, how do you think about brand building? Obviously, that’s been a big focus. I can tell by looking at the website and just researching you guys. You tell a great family and personal story on the website? What are, say … Let me ask this in a different way, though, Christian. What are three things that you see brands not doing that they could be doing better? Maybe stuff that you guys have found has worked for you?

Justin: Sure. I think from the start, I would say you need to have something, especially in this day and age, you have to have something unique to sell, or a story that is differentiated from your competition. I would say another thing is, is to try to get personal and have a personal approach as much as possible, whether that be through hand-written letter that’s sent along with your order, or really great customer service. But I think having a unique product and being able to communicate it online in a visual way where it’s super engaging, and you get people to engage with the brand, we do that in a certain way, mobile, at least, with something called a mobile flow.

Justin: And stepping back for a second, I think if we would have listened to all the e-commerce experts, in the early days, I think we probably wouldn’t be in business right now. And I say that because a lot of people told us from the very beginning that we should be sending traffic directly to product pages, and try to get as low down in the funnel as possible. We did that for a while and we looked at the numbers and realized that, really, people weren’t understanding what gets worse. So we created this whole mobile flow, and had people engage with backless style problems, whether they be sweaty feet, or smelly feet, or stinky feet, or no shows, fell down or couldn’t find their no-shows in their sock drawer, or whatever that may be. We put that out there when they first visit the website so that they’re interacting with the brand from that standpoint.

Justin: So we were able to get our website conversion rate up from low to 2%, up to about five and a half to 6%, where it sits right now, just trying to step back and think about what the customer would ideally want, and to really tell that story.

Luke Peters: Yeah. Well, thanks for that. And Justin, why don’t we dive more into your paid advertising and getting traffic to the website? I mean, the machine learning on Facebook and Instagram and Google, it’s made it, and for some companies impossible to make money. The ROI has generally drifted down over the last couple of years. But you guys are still successful. Walk us through how you found that success and what tweaks you’ve had to make to your paid out accounts.

Justin: Sure. It has changed dramatically over just in a short three-year period, I would say. I was shortly, maybe an hour or so ago before we started talking, looking at our CPM for the ads that are running right now. And our CPMS right now are sitting at about $30, where CPM is a metric of cost to show 1000 impressions? It’s sitting at $30 right now, and in 2018, I think it was $11. So the ad costs have gone up.

Christian: And in 2015 when we started, it was probably $4 or $5, which is crazy.

Luke Peters: Aint that crazy?

Justin: Right? It’s gotten very competitive. And you have to combat that with … There’s really only a few ways to combat those higher CPM. It’s higher click through rate by basically having a great piece of content or creative that you can put in front of people that can get those thousand people that have chose to click, or higher conversion rate on your site, or a combination of all of those things. What we found over the last few years, really, is that, it’s making it very challenging right now for a lot of brands, and just jumping back to what you had said about how many people believe right now that the only way to be successful on Facebook, Instagram, or digital consumer, digitally native brand, or direct to consumer brand is to have that 50% to 75% reorder rate. And I actually do think that that’s becoming the harsh reality is that unless you have that really high reorder rate, it’s very hard to start now.

Justin: Jack doesn’t have that higher reorder rate, but we have the benefit of having delivered hundreds of millions of impressions over the last five years. So people are seeing our ads, and they’re not clicking on them. They’re not being tracked, but they’re still coming by. But to start now, the cost of being on those platforms have gotten so high that it is very challenging. And I think it’s really throwing the retail environment here into … Throwing everyone for a loop, if you will, because it is, when you start to think about old retail Keystone margins of, it’s going to sit on a peg for $100, and the store is going to buy it from the brand for $45 to $47, depending on what you’re selling.

Justin: And the brand is going to make it for $25 or $20. So that was the way it was for a long time. And I think what ended up happening was, instead of being on a peg, it was being sold direct to consumer for $100. But Facebook and Instagram, Google, we’re only taking at the beginning, let’s just say 30 of those $100. And I think they’ve realized what we should take, what the stores you should to take. So they’ve just raised prices to the point where they’re now taking that 50, which, if you’re a brand is, I guess no different than being in a store except you have to ship the product to the customer. You have to fulfill it and you have to pay credit card fees and those get expensive.

Luke Peters: That’s such an interesting way you break that down. I actually love that, and hopefully people can maybe rewind and listen if they didn’t totally get it. But yeah, it’s a great explanation for how things used to be, and sometimes still are in some stores with the Keystone margin, and then how the Google and Facebook mainly have just become that middle … They’ve basically sucked up all that middle margin, and honestly, even more sometimes for some brands. I mean, how do you guys … so you alluded a little bit to attribution and how you’re thinking of attribution, because not everybody that clicks, Or you’re going to have more buyers than everybody, simply the ones that click on your ads?

Luke Peters: Are you guys using any specific software to target attribution? And, I don’t know, if you know offhand, does it add another 30% of sales or does it double sales? How big of a boost does your attribution model add your total paid out sales?

Justin: Sure, I guess the way that we have attacked that has been to not use outside software to track it, and really handle that internally. And so, the way we’ve handled it is post-purchase customer survey that is a branded survey, meaning it looks like it’s coming from Gekks. It doesn’t look like it’s coming from a third party. And it pops up in between the purchase and the confirmation page. Now, customers can still act out of it, but it’s nice looking, it’s branded, it’s scrambled. The question is, how did you hear about us? And there are things on there that we don’t even advertise. So we will put, let’s just say radio on there, when we’re not [inaudible 00:26:09] radio as a way of really checking the data to say is this worthwhile data?

Justin: And when we put radio on there, when we’re not running radio, you get a couple of people tapping here and there, but generally speaking, it just goes away. And so, what we’ve found over time, is that, if you scramble those surveys, and you think about it from data science standpoint, but you do it in a branded banner, that for us has been the best way to attribute sales. And I think what’s important there is just the aesthetic, and the making it very easy for the customer to engage with it, the buttons and want to engage with it.

Luke Peters: Yeah, no, that’s super interesting. How do you though decipher if it was a Google paid ad, or a Google ad? Or, I’m sorry, or an organic listing on Google? That one must be pretty tough, then, because the customers, they usually don’t know what they’re clicking on, right?

Justin: Yeah, that’s a little tough, but you can always jump back into the Google account and see what’s your metrics look like there on the back end. But we use it just to say, “Was it Facebook? Was it Instagram? Was it serious? Was it the mailer? Was it regular radio?” And it’s been the best way for us to … We have tested several channels of the last year and a half besides Facebook and Instagram, and we haven’t really, I would say, significantly scaled those channels, but we’ve spent a decent amount of money on some of those channels. And having that framework in place, really helped us understand which of those channels we want to keep going at, and which of those channels were pretty big, but basically, there’s no ROI.

Luke Peters: Yeah, no, it makes a lot of sense. The reason I ask is because … and so, the next question I want to ask is … I’ll tell you this, and I’ll give you time to think about it. It’s like, what percentage your orders are paid versus all other channels, which would be like email, organic, and everything else. But the reason I asked is because, and I have a question this late about agencies, but if you work with an agency, and everybody … Let’s say you work with three agencies, one’s running affiliate, one’s running, I’m just making this up, email, the other ones running both paid, Facebook and Google. And then you add up what they say with attribution, their sales are going be higher than your actual sales.

Luke Peters: They’re always like … It’s like attribute. Your verifiable paid sales, or let’s say, 100,000, but we attributed 250,000. And then you do the same thing with …. And then you’re like, “Wait a minute, guys, where did the $1,000,000 go? That’s not what the sales worth. That’s why I’m asking about attribution. It’s such an animal to know what it is. But anyways, that is an ingenious way that you guys are handling that, but what is your roundabout breakdown of paid versus non-paid? And I will loop everything basically into the non-paid like even email, even though there’s some acquisition costs of those emails.

Justin: I would say that number is probably around 85% of the of our customers are getting their via a paid ad from some point in the past, whether it be that day or 30 days before or 60 days before, I would say. Because we’ve done that post-purchase survey, and friends and family and word of mouth has always been around that 10% to 20% range.

Luke Peters: Yeah, that’s great.

Justin: And just sit back for a second, generally speaking, best five years, we’ve really only done paid social right, so we know where those impressions are and where those people are coming from. 2019 was a little bit different. We did do a few things and that’s when it got a little bit trickier, or more tricky, but again, that post purchase survey showed word of mouth and family and friends with for around 10% or 20% of the overall conversion. So I think that you can extrapolate from there that maybe 80% to 85% of our customers are coming from paid.

Luke Peters: That makes a lot of sense for everybody listening, and those who are not … Because there’s a lot of strong brands that are not direct to consumer yet, and I think everybody should have a direct to consumer channel, everybody should. But yeah, that’s the challenge. You got to be profitable. Most of the ads are coming in from paid traffic, and unless you got a super high reorder rate, you got to be profitable from order one, and you guys have found out how to do that. Justine, let’s talk about agency. Look quickly in your site, some of the leadership is on the website. You talked about the size of the team earlier, I think you said something like five or six, and then salaried, and then about 14, 15 hourly. How do you guys think about using agency? What do you guys do internal? And what do you end up outsourcing?

Justin: Right now we actually do everything internally. We have gone in and out of using agencies over the last few years. And I think what we found is that, there’s many great agencies out there. But at the end of the day, if you can build a great team internally, you’re going to get a better ROI by having those people internal. And so, we have a full time web developer. They can manage the website, and also manages all of the logistical portals between Facebook and Google, and all that. And we have a full time graphic designer, marketing person that’s constantly doing photos, and taking photos, doing ads, and doing those sorts of things.

Justin: And we all work together as a team to decide what type of content are we going to put out there? Where are we going to put it, what’s the budget going to be. Agencies have helped with that in the past, but I would say that we haven’t found an agency yet to outperform the internal team at such a pace that it makes sense to pay the agencies, and frankly, on a lot of occasions, they underperform the internal team. So if you can’t get find an agency that can outperform you, then there’s really no purpose to it, if you will. So that’s how we think about it.

Luke Peters: Makes a lot of sense, and it keeps you guys lean.

Justin: And I would encourage anyone to think, like I said, agencies can be great. The last one that we worked with, frankly, was great. We really loved working with them. They did a great job for us. It’ll communicated very well, super smart. But the performance just wasn’t different than what it was before we hired him. So when you have that dynamic there in your smaller growing brand, it’s hard to pay the agency fees if they’re not going to outperform.

Luke Peters: That makes a lot of sense. And Christian, why don’t we just pivot to the supply chain on this one? I’m sure folks that are listening are wondering, maybe where is the product sourced from? What are the lead times? What are couple things that you guys have done to streamline your supply chain?

Christian: Well, we have a few different hosiery mills down in North Carolina that we work with, and have worked with over the past few years. We have a few different origin mills down in North Carolina that we have worked with in the past, and are currently working with. They actually supplied the socks to us. The socks are shipped to our facility in Chicago, where we actually apply the pieces ourselves here. The adhesive right now, we’ve changed the adhesive over the past four or five years, and we’ve used both domestic and international suppliers for the adhesive. Right now we’re using a supplier from China, and they send the adhesive enrolls row format to another supplier, or I should say a converter in Ohio, who then converts another film or laminates onto the backside of that adhesive roll, and sends cut sheets to us here in Chicago as well.

Christian: In the past we have outsourced the cutting of the pieces, and keep in mind we have tons of different skews, and each skew has three different size shapes on them for men and women in three different sizes. So we have a whole host of different shapes of each of them and the cuts of the adhesives, so we decided to bring the cutting of that adhesive internal, and we bought a big dual laser cutter, where we have someone work on that intermittently throughout the day. A mix of suppliers across the country and internationally, and we also do some light assembly here.

Luke Peters: Yeah, no, it’s great to hear that. And totally different than a lot of folks that are just simply buying a finished product elsewhere and bringing it in. You guys have a couple different steps in the supply chain, but it sounds like a lot of it is stateside.

Christian: Yeah, I will say that we have tried to outsource this entire process a few different times in the past, and that ended up just being a nightmare. And the people that tried to do it on our behalf ended up being 10, 15, 20,000 units short over six weeks to six to eight week, a long period. So, we’ve tried to do that a few different times in the past. And hopefully, we’ll be able to do it again in the future. But right now, as it sits, it’s just better for us to be in control of our own destiny with that.

Luke Peters: Makes sense. And I can see you guys know the product, and probably you guys are losing units during the adhesive process or something like that. So finishing this up, Justin, what are the next big marketing concepts to help retailers grow? And what’s next for Gekks and the brand?

Justin: It’s a great question. I think what’s next as far as marketing concepts is really a tough one, I think. Because in the very short term environment, or here, you have many retailers that have been forced to close doors over the last year with the pandemic. So all of those retailers have to make a sale somewhere, and all those sales are coming direct to consumer. So the direct to consumer world right now is really … It’s a very competitive space. I think some of that competition will subside as the pandemic hopefully ends next year. But I think that the way that we’re thinking about this and looking at it is that, I think you have a very large subset of brands that have, or older brands that have been around for 10 or 20 years that are still very heavily brick and mortar.

Justin: And COVID has essentially forced them to figure out direct to consumer. And now that they’re in the game and figure it out, I don’t think very many of them are just going to go away once they open their stores up with no restrictions. So I think from that standpoint, and all the things we talked about, how it can be very challenging right now to make money, D to C, I think omni channel approach is really important for some of the thinking about starting today, and in trying to figure out if you’re going to need some direct to consumer, you’re going to want to run your own ads on Facebook, and Instagram.

Justin: But it might not be a bad thing to offer some skews on Amazon as well. And if you can have a small multi skew brand, so you have some views on Amazon, some things, you’re driving traffic to your own website and Facebook and Instagram. I think brick and mortar is going to be important over the next 12 to 24 months to figure out how you can deliver impressions brick and mortar, even if it’s not super profitable, it’s an impression, and it could be a way to acquire customers, and then they can come back and buy some direct [inaudible 00:38:06].

Luke Peters: Makes a lot of sense, and you got to be diversified. And that’s what that message is. And I think it goes both ways. For the companies that are listening, that are only selling on marketplaces or in store and not controlling their destiny and direct consumer, it goes back to that direction as well. But yeah, no, that’s great. And I’ll give this one to Christian, and let’s just you got a bigger story. But Christian, what’s been your biggest mistake or failure? And then what did you end up learning?

Justin: That’s a good question. I would say the biggest mistake I feel like we made is probably not swallowing our pride and raising money from the very beginning, and that comes down to just our product. It was a very, very tricky product to not only try to make and try to invent, but also to try to get right, get perfect. And we’re still having customer feedback loops, try to make it right for every size, and feel for every different shoe type. So I would say one of the bigger mistakes is not sucking up our pride and trying from the very beginning and doing it ourselves. We probably should have raised a significant amount of money, not launched as quickly as we did, and not scaled as quickly as we did, and tried to really work on the product and make the product as perfect as we possibly could.

Justin: Because getting back to what you said earlier, your long term value is really the most important thing with direct to consumer businesses. And if your product isn’t amazing, and doesn’t have a competitive advantage, people aren’t going to come back. And so, I would say that’s probably the biggest thing that I’ve learned, and if we had to do it all over again, I would say we probably needed a serious amount of cash from the beginning to get the product right.

Luke Peters: And Let me ask if you don’t mind, have you guys had to raise capital later on? And if so, why was it a mistake? Because either way your equity is going to be more valuable later on in the game, right?

Justin: That depends. I think we did end up raising money earlier last year from students [inaudible 00:40:21] venture capital firm. But I think that having data can be good and bad, because as soon as you start selling something, people are going to be looking at repeat cohorts, especially those guys to see how many people are coming back and what does that cashflow look like going to the future.

Luke Peters: That makes sense. So you’re saying at the beginning maybe you could have even got a better valuation? That’s the …

Justin: Yeah.[crosstalk 00:40:41] in a venture capital you can get a better valuation with a no revenue [inaudible 00:40:52] revenue. It sounds a little upside down, but it is 100% true.

Luke Peters: How come I haven’t learned that one yet? Everybody listening, we better all take advantage of this once in a life before this is over. I have a sense that’s going to end soon. That’s so funny. Well, listen, that’s a cool note to finish this interview up on. I really enjoyed talking to you guys, and getting to know you a little bit. How can listeners find more about you, a little more about Gekks?

Justin: Sure, they can find us at our website, which is www.mygekks.com.

Luke Peters: Awesome. And we’ll that in the show notes, and Gekks is with two ks, gus. Everybody listening can go check out the site. It is a really cool idea that definitely solves a need. And I just thank everybody who’s listened to this episode. I hope you all enjoyed the interview today. I totally appreciate your reviews on iTunes, and I hope you can join us for the next interview. Take care, everybody.

Speaker 1: Thanks for listening to the Page 1 Podcast with Luke Peters. If you enjoyed this episode, please help us out by leaving us a rating on iTunes. Want to double your online sales? check out www.retailband.com. And don’t forget to join us next week with our next amazing guest.


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Episode References:

Contact Christian and Justin Arquilla: LinkedIn

Contact Luke: luke@retailband.comLinkedIn 

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