The Jason & Scot Show - E-Commerce And Retail News
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The Jason & Scot Show. Podcast about e-commerce and digital shopper marketing.
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In this episode of the Jason and Scot show, our special guest is Sean D. Nelson, the CEO and founder of Lovesac. He shares his inspiring journey of starting the company as a beanbag business in his basement and growing it into a successful public company. Sean highlights the key moments of his entrepreneurial journey, including winning a million dollars on Richard Branson's reality TV show and navigating the ups and downs of the business. Sean has upcoming book and podcast, both entitled "Let Me Save You 25 Years: Mistakes, Miracles, and Lessons from the Lovesac Story."
Sean emphasizes the importance of being a direct-to-consumer brand and how Lovesac has found sustained success by focusing on customer acquisition costs and offering a high-quality product. He discusses the concept of direct-to-consumer and shares his thoughts on its significance. Sean believes that having a differentiated product that provides value to customers is crucial, rather than simply relying on an online sales strategy.
The conversation also touches on the topic of innovation and how Lovesac has been able to push the boundaries of what a furniture company can offer. Sean discusses their Stealth Tech innovation, which incorporates surround sound into their couches, as well as their commitment to creating products that are built to last and designed to evolve.
Sean acknowledges the challenges of operating in physical retail and highlights the importance of their showrooms in reducing customer acquisition costs and providing a hands-on experience for customers. He also mentions their partnerships with Best Buy and Costco to expand their reach.
The discussion expands to the future of retail and e-commerce, with Sean mentioning the transformative role of AI but cautioning that it takes time for movements to fully evolve. He emphasizes the importance of being patient and keeping an eye on developments in the industry.
The conversation concludes with Sean expressing his long-term commitment to Lovesac and his desire to build something meaningful rather than focusing solely on personal gain. Listeners are invited to check out Sean's podcast and website, as well as his upcoming book, which will be released in January.
Overall, this episode provides insights into the journey and philosophy behind Lovesac's success and offers valuable perspectives on entrepreneurship, innovation, and the future of retail.
Chapters
0:00:46 Introduction and Welcome to the Show
0:08:36 The Journey of Love Sack: From Highs to Lows
0:12:05 Love Sack's Traditional IPO and Company Performance
0:15:49 The Importance of Having a Differentiated Product
0:19:49 The Value and Overhype of Market Movements
0:23:18 Sactionals: Built to Last, Designed to Evolve
0:25:56 Driving a Movement for Sustainable Consumerism
0:31:36 Innovation and the Evolution of Lovesac's Product Line
0:37:07 The Strength of Lovesac's Physical Showrooms in the DTC Landscape
0:40:03 Testing and Learning: Mobile Concierge and Shop and Shop
0:41:52 AI's transformative role in the future of technology
0:50:08 Long-Term Vision vs Quick Profit
Episode 313 of the Jason & Scot show was recorded on Thursday, November 9th, 2023.
TranscriptJason:
[0:23] Welcome to the Jason and Scot show. This episode is being recorded on Thursday, November 9th, 2023. I'm your host, Jason "RetailGeek" Goldberg, and as usual, I'm here with your co-host, Scot Wingo.
Scot:
[0:37] Hey, Jason, and welcome back. Jason and Scot show listeners.
Jason, we're very fortunate to have a entrepreneur on the show.
I'm the entrepreneur side of our partnership. So I always really enjoy these.
[0:49] We have on the show, Sean D. Nelson. He is the CEO and founder of Lovesack.
And a little birdie told me that he recently started a podcast himself.
He started Love Sack as a beanbag company in his basement when he was around 18.
And now it's a public company and doing relatively large revenues over 600 kind of run rate.
If I look at the last quarter, I took a little glance at that.
Sean, welcome to the show.
Shawn :
[1:13] Thank you. Thanks for having me. Great to be with you.
Jason:
[1:16] We are thrilled to have you, Sean. Listeners always like to kind of get the background. I'm imagining you don't have a deep background before you started Love Sack because you started it so young.
But can you, like where were you in life when that brought you to start build your own product?
Shawn :
[1:34] Yeah, strangely, 25 years in and still running the same company I founded as my side hustle in college, which is exactly what Love Sack was.
So 95, all the way back then, I made a giant not bean bag because I thought it would be funny.
I literally, 10 days out of high school, got off the couch at my parents' house, having this dumb idea, like, how about a beanbag, like, me to the TV, like, the whole floor, like, huge.
Drove down to the fabric store, bought some fabric, brought it home, cut it out, and then began sewing it up, broke my mom's sewing machine, neighbor finished it, took three or four weeks to try and stuff it, originally with beads, but couldn't possibly find enough, so looked around the house, I just found out my parents' camping mattresses chopped up yellow foam, you know, like those yellow slabs of foam you take camping, on a paper cutter in the basement.
And eventually, I mean, foam, packing peanuts, old blankets, had this thing stuffed and started using it out and about through university, taking it camping, back of the truck, driving movies.
Ended up putting it away for a couple years. And by the way, everywhere I took it, everybody wants one. Like everyone's always like, Oh my gosh, what is that thing? Where'd you get it?
I was like, I'll never make another one. It was such a pain in the butt and put it away for a couple of years to go be a missionary for my church.
[2:58] And came back to finish up university in 1998.
And that's when I founded the company. Cause people kept bugging me to make them one.
And it became my side hustle in college.
And we tried to sell these things eventually beyond our friends and family and beer fest, May fest, October fest, car shows, boat shows, 10 by 10 booths, how we got started.
Tried to sell them to furniture stores and they laughed at us and told us it was a dumb idea.
[3:34] Eventually, at a trade show got discovered by the limited to this is like, you would not today as justice like in the malls, like little girls pink and purple fuzzy stuff for their bedrooms and, and clothing.
Anyway, they ordered 12,000 little love sacks, not knowing it was me and a buddy and like a woodchipper shredding foam in the back of this furniture place.
And, and that forced us to source over in Asia, which is, you know, where I had served my mission.
So I speak Mandarin Chinese. There's a whole story there I won't get into it it was just kind of one thing led to another led to another week we built a factory to support that 12,000 sack order we then went out to the furniture stores who again laughed at us didn't want our $500,000.
[4:19] Beanbags having completed that order wanting to keep the factory going so we finally opened our own store in a mall that didn't even want us there but finally capitulated let us in because they We had a space to fill for the holiday season, in Salt Lake City, Utah, and it just exploded.
We did a good job, carpet paint, neon sign, made it look like a proper mall chain store selling giant beanbags, and it just took off. Like, it worked.
People came in, flopped down, music bumpin', big screen TV, playin' movies, had a great time.
There was a couch in the corner to look pretty, be part of the decor.
People kept asking about the couch, And that led us to eventually, many stores later, many states later, invent Saxionals, which is our modular sofa solution, which now drives almost 90% of our sales today.
So we're more a couch company by far today than we are a beanbag company.
And there was a whole, listen, I'm skipping over decades of time really, but there was a whole transition where we...
We went through after we invented the sectionals and solved all these problems people have with couches not only can you ship it to your house via FedEx which was hyper relevant you know for.
[5:32] E-commerce and digital marketing obviously but it's watchable and changeable, and movable and it can be with you the rest of your life that that led us to a whole design philosophy that now.
[5:42] Drives are innovation we think is a really cool secret sauce called design for life but. 10, 20, 50, 100, 250 locations now.
We came public in 2018 on about 100 million in sales.
Right around the time there was just tons of fervor in this direct consumer movement.
We had farted around, we'll call it as a furniture store, selling rugs and lamps and bowls and baskets and all the obvious things along the way.
And it was really when we purged all that stuff around 2015, seeing the Caspers of the world emerge and Warby Parker's and even Tesla with their showrooms.
Could we adopt a more e-commerce-led model with showrooms for people to kick the tires, so to speak?
And that transition is really what unlocked the lovesack that you see today and where most of our growth has come since about 2015, 16, when we made that pivot, took the company public, wrapped around that direct consumer story.
So we're not a digitally native brand originally, we were actually a retailer that pivoted and became digitally led.
And now we don't even operate stores in the traditional sense.
We don't, we don't stock things there. You know, you don't walk out of there with your product.
They're all really online sales and those showrooms are extremely powerful mechanisms for helping people make up their mind around a five or 10, $15,000.
[7:06] Purchase where they want to see the thing and sit on it and, and, and see if it's everything it's cracked, it's cracked up to be online.
And so we, we, we believe that we really, uh, through that arc.
And then by the way, since coming public, I don't know, six, seven X, the company this year, you know, we'll, we'll be on a run rate to the analysts were a public company.
So the analysts show us around, you know, it's called 700 plus in revenue and profitable, very profitable and cash generative.
So we think, you know, the direct consumer game, in a lot of respects, Love Sack is one of the unlikely winners of that entire movement.
Because I think at that scale, there are very, very few, what I call successful direct to consumer brands. And so we're really proud of that.
And it's been a long saga, and we continue to grow and change and adapt and evolve.
Jason:
[8:01] It's an amazing story. And we definitely want to unpack it. But I want to go all the way back to the beginning for one second. Did that neighbor who helped finish sewing the first prototype get any equity?
Shawn :
[8:13] No, it was my ex-girlfriend's, mom, so about the time she exited, you know. No, it was just a friendly favor, but the truth is a lot of people helped out along the way, and a lot of people had equity or have equity in Love Sack from along the way, but look, we've been through every high, every low.
Somewhere in the middle there, I skipped over it just because of brevity.
Not only did I win a million dollars on TV with Richard Branson,
[8:38] his reality TV show on Fox Network back in 2005, if you can believe that, the rebel billionaire.
But I also guided the company through a complete chapter 11 reorganization back in 2006, spearheaded by Venture Capital, which was painful and ugly and embarrassing and humiliating.
So we've been through every kind of thing over these better than two decades.
Scot:
[9:01] Yeah, my deep dive question is, when you rented or bought the wood chipper, did you tell them you'd be throwing foam in there, or did they think you were clearing up a tree?
Shawn :
[9:09] Oh, that's so the original story. Yeah, the original woodchipper actually, you know, if you've ever used one in your backyard or, you know, you shove sticks into these things, that's basically what the original shredder was.
And it was in the back room of this furniture factory already.
They had used it back in the seventies to shred foam, but it had an electric motor, right? Instead of like, okay.
Scot:
[9:30] So it's okay to be inside here.
Shawn :
[9:32] Well, yeah, but I had to rehab it because it hadn't been used in like a decade or two because shredded foam had fallen out of favor in furniture.
And then later to do that bigger order, we couldn't afford like a proper German, shredder, so we ended up driving out to farm country to find more of those same kind of shredders and actually found a hay grinder called a hay buster can shred 2000 pounds at a whack.
Scot:
[9:57] And that's a lot of power.
Shawn :
[9:59] Yeah, it's powered by a tractor. So we, you know, agricultural loan for tractor and hay grinder. I mean, crazy, crazy story in the beginning.
Scot:
[10:07] Yeah, as a family, you gotta figure out how to get it done, right?
Whatever it takes.
Shawn :
[10:12] Whatever it takes.
Scot:
[10:13] I didn't know the Richard Branson thing, so that was interesting.
Did he like, was he an active investor, or that's like one of those things where his people kind of take over and you never hear from him again?
Shawn :
[10:22] No, I mean, it was a weird situation. He had a reality TV show, 2004-5, The Rebel Billionaire, you know, whatever, 16 contestants.
It was like The Apprentice, but not for apprentices, for entrepreneurs.
So my runner-up on the show was Sarah Blakely of Spanx, gives you an idea.
Scot:
[10:38] Oh, okay, cool, neat.
Shawn :
[10:39] Yeah, yeah, so we became great friends, she and I, Richard and I.
I ended up also being named President of Virgin Worldwide for a minute as part of the prize, believe it or not.
So, worked with Richard, worked with all of his CEOs.
Totally weird outcome. And, you know, but huge, huge blessing and a huge piece of story.
And he was involved in sort of our VC round that ensued on the tail of that.
Scot:
[11:06] Okay, and then I think I saw that you guys were on Shark Tank, right? You were like one of those that you know, kind of one of the big success stories.
Was that the OG Shark Tank or?
Shawn :
[11:16] No, we weren't on Shark Tank. A lot of people thought that. There was a Love Sack copycat that's on Shark Tank. Okay, and so they got...
Scot:
[11:23] I was confused because like Google says you were and then I was like, but then I couldn't find the episode.
Jason:
[11:28] There's a whole TikTok channel dedicated to Love Sack and Shark Tank and it's super weird.
Shawn :
[11:36] That's super, yeah, people get confused.
Scot:
[11:42] Yeah, yeah, super weird. Yeah. And then when you did your IPO, was it a traditional IPO or did you guys get caught up in the SPAC craziness?
Shawn :
[11:51] No, we did a traditional IPO back in 2018 and you know, our stock has been really volatile for lots of different reasons that, you know, COVID was crazy, but the company performance has been really solid.
So we're just trucking.
Scot:
[12:06] He, I think, was at Graham that said in the short-term it's an emotional machine, in the long-term it weighs your financials.
So you got to, it's very hard, you know, I took a company public, not to the level you have.
And yeah, it is, I was like, I'm not going to look at the stock, it's not going to influence me. And then suddenly everyone's like, are we making the quarter? And it's like, okay.
And then suddenly it's very hard to get out of that, that short-term mindset.
So congrats to you for sticking to it for so long.
Shawn :
[12:29] Yeah, look, I'm actually a big advocate of it, having lived inside of it now for almost six years.
Scot:
[12:36] Yeah, the transparency is good, you know, and I like that part of it, I think that's good for, you know, to kind of have to put out everything that you're doing, you know, it's a, the ultimate, yeah, it's like, yeah, transparency tends to be a good thing.
Shawn :
[12:48] I think it's the right way for companies to be governed and ran.
Anyway, we could get into that if you want.
Scot:
[12:56] Yeah, I like the, you know, and you talked about all the other, we call them digitally native vertical brands, like the Warby's and Bonobos and all that.
And yeah, a lot of them have not made it past kind of like that hundred million dollar level.
And you guys have obviously, you know, six, seven X that, which is awesome.
And then, you know, the big knock on Casper for a long time was as we've actually had this guy, Dan on the show, people were able to pick apart the CAC LTV and they found the average selling price was like, Jason will know these numbers, but it was like 350 and their cost to acquire a customer was 400.
And they were like, you know, that obviously wasn't sustainable.
So it's pretty neat that you guys have figured that out.
Shawn :
[13:36] Yeah. I mean, that's at the root of why obviously we've had some sustained success.
And I think it's also at the root of why there are almost no other direct consumer brands making any money. End of story, full stop.
And it's pretty fascinating to watch the whole thing unfold, because it really has been a movement for almost a decade.
Scot:
[14:01] Yeah, and I don't want to dig into the information you don't divulge publicly, so this is not a trap or anything but is it because the selection or your products, you've kind of cracked the code on Kakao TV, like what do you, and I don't want to know any methods or anything. and what do you attribute it to?
Shawn :
[14:18] Look, I think, let's start at the root. I think that many companies, product companies, let's start there, overlook the fact that you need a really good product.
I think they pick a category and they say, oh, it could be a direct consumer brand.
And the truth is, what does that even mean? Do you mean, because here's the funny thing.
When I hear analysts and industry people talk about direct consumer, it has become synonymous over the last decade as it's unfolded today with e-comm.
Oh, you mean you're an e-comm company and in many cases you do half of your sales through wholesale.
So what does it even mean? I mean, if you want to talk about a direct consumer brand, LoveSack may be the most direct.
We don't have any wholesale. I'm talking zero, and we only sell through our own channels, whether it's our website or our showrooms.
And we have these partnerships, for instance, where we operate our own showrooms inside of a Best Buy or a Costco.
[15:26] But you know, so this whole phrase even, direct-to-consumer, I think is really kind of silly.
You mean you're a company that sells stuff online and maybe in showrooms and maybe in wholesale?
So you're a company that sells stuff. So let's start with stuff.
And you have to make, I think, if you want to be successful in the world, it's not a new concept. You have to have...
A great product or or you have to have some other really. Hiller efficiency
[15:52] and i think what most have discovered it was a list again over this long decade of direction sumer evolution is that without a really differentiated product.
You're just another company with a clever name lots of funding and if you throw lots of money at anything it's gonna grow.
But you need to be differentiated. So Love Sack, you know, start with the giant beanbags.
They were unique, especially in their day. There's tons of copycats out there now.
[16:24] Sactionals are extremely unique. The problem is they photograph just like any other sectional sofa.
Like if you took an image of Sactionals and an image of one of, you know, out of any competitor that sells couches, ours looks a lot like theirs.
But the difference, the differences are myriad in terms of their washability, changeability, quality, and modularity, and many of those aspects, especially on the modular side, are patented at LoveSac.
And so once you dig into it, you find that that's the number one driving factor, is we have a product that's truly differentiated, truly gives more value to the customer, and therefore, we can extract more from the market.
It's really that simple, right? And that's at the root of why our CLV to CAC ratio it was so high and sustainable and cash-generative and profitable.
And then we could go down all kinds of other paths. We could talk about our website, execution and stuff like that.
And all of it needs to be there. Look, running a business is multifaceted and difficult. But at the root of it is that.
Jason:
[17:27] For sure. One of the things I sort of admire about your company is the original premise was not to have a particular go-to-market strategy.
It was to have this great product that people wanted to have in their lives, right?
And it feels to me like that, the whole quote unquote D to C movement, like this notion that before you solve any other problem, you're just gonna put a flag in the ground, like this is how you're gonna go to market, that just, it just seems silly because that may not be how the customer wants to acquire your product.
Shawn :
[18:00] Yeah, I think you're right. And I think that, so I think that whole movement that we're a part of, so I don't mean to like bag on the movement.
I'm just an observer as well. Like I've been living in it, right?
And we put, and I'm being really transparent, we put on those clothes very intentionally.
[18:16] Because people that planted those flags were getting funded.
People that planted those flags were being understood at the time.
And these movements come. Right now, I could hold up a flag that said AI on it and go out there and raise a bunch of money and do something.
And in the end, 99 out of 100 of those, flags are going to fall by the wayside after having tons of money thrown at them and Probably 1% of them will go on to you know be the next Googlers or who knows what right?
But these movements come and go and and and I'm and this is what I'm saying You gotta be careful.
I'm not bagging on the movement because these movements are useful these movements drive economic activity these movements drive innovation But they're often way overhyped, not as, I think, not as, so, you know, I mean, we could get into AI, you guys are, I'm sure, tracking it just like I am.
What does that even mean? Oh, you mean like software? You mean like software that, that does stuff in an automated fashion?
Like is that, is that, is it really that new?
But it doesn't matter. It's a story that's being heard.
It's a story that's being understood and it's where the momentum is.
And so if you're able to wield, take advantage of these movements in the marketplace to your end, that's what, and that's exactly what LoveSack did.
We put on those clothes, we took a concept that had been around for a long time, our concept.
[19:42] And look, in the end, the thinking and the development and even like, let's say the web services and all the things available to that movement that
[19:49] were spun up because of that movement, we benefited from.
The money raising pricing aside, momentum, going public, whatever, all these things aside.
So that's why I'm saying I think that there is value in these movements, but fundamentally, you still need to have a great business, a great product, something that's truly differentiated, because anyone with some funding can go out, buy a logo, buy a name, and look like they know what they're doing.
Jason:
[20:20] And yeah, for sure. And to your point, there's a, there's a funny data by going around in, in our industry this week that like over a hundred million dollars or I'm sorry, Amazon's GMV is, I'm sorry, a hundred billion dollars of Amazon's GMV is from AI.
And you hear that and you're like, oh my God, that's huge. And then you find out it's product recommendation tiles that they launched in 1997.
Shawn :
[20:45] Yeah. Yeah. Yeah.
Jason:
[20:47] Which, yeah. Yeah, so I do just want to like kind of wrap up this section, but put it in context.
When you open that first store in a mall, like the mall competition for furniture stores was like Expressions Furniture, right?
Which no one on this call would even remember probably.
And then like by the time you really, after your IPO and really caught fire, you were competing directly against all these D to C companies that were expanding in malls. You were probably competing for leases.
Shawn :
[21:18] Yeah.
Jason:
[21:19] It's quite the, quite the journey. Now, Scot mentioned at the beginning of the show that you had recently started a podcast and I'm two part question.
How the heck did you have time to start a podcast and tell us what the premise behind the podcast is and what you're talking about?
Shawn :
[21:36] Sure. Yeah. Just to comment first on what you pointed out, there is this whole strip in the malls now out there right now.
But by the way, in these shopping malls that I was told were dead, you know, I could read the headlines of shopping malls are dead back in 2001 when I was opening my first shopping mall and I was forwarded those kind of emails by friends and family who were concerned.
And here we are in 2023 and while these things change, they take decades to change.
Meanwhile, they've evolved and you have all of these direct consumer players now and it It just cycles through, you know?
What the players inside of these shopping centers happen to rotate, and I've watched it all evolve, and by the way, they're rotating again, because a lot of those players are not viable. Some of the best ones, biggest ones, you know?
Like, concepts like Peloton, who I think is amazing as a concept, you know?
They have their struggles, and so we watch these things evolve.
In terms of, the podcast is relevant to this. Let me explain why.
We had the chicken, I'm going to go, given the nature of what your podcast is, I'll give you a much broader picture than just, hey, why am I recording a podcast on my own and writing a book?
[22:55] It works like this. We had the chicken before the egg.
Sactionals being the chicken, we discovered, as we observed and had success with it, we believe are so successful because they are are built to last a lifetime and designed to evolve.
Like those two attributes in our product are quite unique.
And those two attributes underpin what we call our designed for life philosophy.
[23:21] I did not found Love Sack to make products that are super sustainable, sustain hyphenable. In other words, things that actually sustain.
Who's talking about that? I was just trying to survive. I made a big beanbag, people liked it.
Made a couch because people were asking about couches. who has solved all these problems, observed the success, and that success was rooted in the fact that things were built to last, designed to evolve.
Now that's led us to this whole philosophy that will inform our innovation on every product going forward, and it's why I'm so confident that we can continue to succeed, is because of this design philosophy that I'm sharing with you openly.
Because it's one thing to say it, it's another thing to execute to it.
That's the hard part. It's the execution that's the hard part, you know? Now, that said...
[24:08] I'm trying to drive a movement. I believe that there are many people that are sort of aware now that we have been conned into buying too much crap.
New season, new collection, the merchandising hamster wheel, new iPhone, now it's got a titanium band. Really?
Everyone knows. No, it's not even hidden. It's not even like a secret. it.
This whole hamster wheel called planned obsolescence that was not an accident, it's absolutely an economic strategy to lift us out of the Great Depression and onward.
And it has roots all the way back to Louis XIV.
What's my point? The world has just, I guess, accidentally, not so accidentally, fallen into all kinds of rhythms that are unhealthy, unsustainable, and not good for anyone, not good for the environment, not good for people, you know, we're frenetically chasing out.
Now my jeans are too tight, now they're too loose, now they're too long, now they're short, now I got, now they got to show my ankles, now they got to drape over my, like, this is not an accident.
This is a self-propelling machine that we have created.
What's my point? I believe we can drive a movement amongst people to reject that.
And I believe factionals is one of the embodiments of that.
Things built to last a lifetime are designed to evolve. So that movement is actually my long-term strategy.
[25:33] In the near term, I need to... One of the ways that we will reach people besides buying advertising and using it to drive a strong CLV to CAC ratio is through...
I don't know, even podcasts like this is through people finding our brand, finding out about me, finding out about the company through...
Whether it be me, whether it be through the goodwill of our customers, sharing this or that, the other.
And so I wrote a book called Let Me Save You 25 Years. It's our clever story
[25:59] at Love Sack. It's really great. I think it launches in January.
I spun up a podcast called Let Me Save You 25 Years where I share my own entrepreneurial mistakes, miracles, and lessons of the Love Sack story. That's the subtitle of the book.
That's the spirit of the podcast. I talk to successful people, some of the world's most successful entrepreneurs and successful people about these concepts.
And it's not an interview podcast. We go really deep into some of these concepts.
So my long-term goal ultimately, is to write another book that can help drive this consumer movement that I'm describing because I think if we can get a little bit of luck and get people thinking about these things and then eventually seeking out.
Products that can do this, and just a lifestyle that is supported in the way that I'm describing.
Buy better to buy less. Buy better stuff so you can buy less stuff.
Well, obviously, LoveSack will benefit from that as a company that makes better stuff.
And so, look, it's a long, long, long, long way around, but you asked the question, and I'm totally serious about that.
Scot:
[26:58] Yeah. So I'm gonna guess you're not a fan of fast fashion.
Shawn :
[27:03] No, I mean, that's obviously gonna be I made the topic of the book, you know?
Scot:
[27:06] And I'm not. Jason's a huge Xi'an fan, so you just really hurt his feelings. No, I'm just kidding.
Jason:
[27:11] Hey, I wore a Patagonia, a used Patagonia jacket in honor of tonight's show.
What are you talking about?
Shawn :
[27:18] You are speaking my language, man. And look, it's not even about being a tree hugger.
I think that people have a brain.
And people, I think, are waking up to the idea after the iPhone 15, that holy crap, Apple probably should have been forced to innovate a long, long time ago.
Biggest company on planet Earth because they sell us the same thing every year or two.
Had we not allowed them to do that, they would have had to use their enormous treasure and enormous skill base to innovate into other categories and and change the world.
Instead, we've allowed them to sell us the same thing every year.
Scot:
[28:06] That's an interesting ethos. Having built a company, about how many people are in your company at this point?
Shawn :
[28:12] Total about 1,500. It's about 400 at the headquarters and another 1,000 out in the field-ish.
Scot:
[28:19] Yeah, you're at that phase where there's people at the company that you've never really met before. And it's awkward because they always expect you to know their name and they all know your name.
Yeah. Yeah. Yeah. So when you get a company to that scale, how do you keep innovating?
And, you know, one of the ones that I really love that you guys have done is the Stealth Tech.
I think that's genius because I love AV and like having a really immersive experience.
And I'll let you explain what it is, but, you know, my wife hates the big black speakers that I try to put all over the house.
So I think it kind of solves like six problems in one.
So A, maybe let listeners know a little bit more about what we're talking about.
And then be I'd love to hear like how do you guys you know it's really hard to kind of you know ideas are easy and execution is hard on execution.
It's really hard to like you know nail what you're doing and you have a lot going on and then like keep innovating.
How do you how do you like get the org functional that way?
Shawn :
[29:16] Yeah.
I mean, I think number one is you have to, you have to really want it, you know, not, not just like, Hey, I want to, I want to get, I want to get more business.
I want to sell more stuff. Obviously there's that.
But this ethos that I just kind of unpacked for you that, that we tripped stumbled into does the design for life ethos animates this organization.
Like, it is a lot of, it is very motivating to think about, holy cow, now that we know our purpose, and it's been identified, right?
Inspiring humankind to buy better so they can buy, you know, everyone's like, it was purpose, purpose, purpose, and hire some consultant, you know what I mean?
But for real, if you have something that's truly unique, and it's meaningful, it's not just like words on the wall, it really is motivating, it's exciting.
Scot:
[30:11] And you bake baked in the products have to get better too, right?
Like you, that's not well, so you have to support it.
Shawn :
[30:17] That's exactly right. Like, yeah, like we have to make stuff that's built to last a lifetime and design to evolve, which is really hard because if it was easy, everyone would do that.
And here I am telling you openly about it. Like that's what we're going to do.
And I'm not afraid to tell you because most companies won't do it because it's just freaking hard. Like it's a lot easier.
Like why doesn't love sack? You know, you brought up stealth tech.
So Stealth Tech is full Harman Kardon surround sound, no quality sound loss audio.
Perfect audio emanating from your couch through the phone through the next layer of fabric and through the decorative layer of fabric that's washable, changeable, removable, tuned down to the color of that fabric so that the audio is perfect rear, front, center, subwoofer, invisible, beautiful, because you don't see it, it looks just like a couch, and it has all that packed in there, it's radically successful.
It's been, it's now a huge piece of our business.
And nobody saw that coming, because what would they expect a couch company to do next? A couch beanbag company.
An end table, a coffee table, a rug, a lamp, you know, decorative accessories, get into the bedroom, who knows, right? Like the obvious stuff.
Scot:
[31:32] Meatballs.
Shawn :
[31:32] And what, yeah, right? Why did we do that?
We anyway, we saw the opportunity and we also invented it. So one is,
[31:40] to answer your question, a lot of play.
We are constantly at our innovation lab playing.
So it's not just consumer-led insights, which is a big piece of what we do, but it's also a lot of inventions. You gotta have teams to invent.
You gotta have engineers.
You gotta have, so you gotta support that. So there's a cost structure there.
And that's why LoveSack is quite profitable, but not as profitable as it could be in the future, because we are investing in innovation.
And there's a lot of heads. there's a lot of engineers, there's a lot of designers doing things.
Now they're not just all running around playing, they also have a very disciplined approach to executing on innovation, like launching Stealth Tech a couple years ago, and bringing that to market, which is a heavy lift because it's our invention, it's our patents, and it was not easy for this beanbag company to get into home electronics in a real way.
[32:29] We've done, I think, more than 100 million in home electronic sales and making us a pretty, a pretty big player in that space, believe it or not.
Already, and I don't think most people even, you know, would think that.
But we're, you know, totally serious about it. So, innovation, wrapped around an inspiring path to innovation, I think is the key.
Do you have an inspiring path, or are you just trying to make more stuff?
Because if I wanted all those things I mentioned, like I'm over here in Asia right now, I'm in Hong Kong.
And if I wanted a whole line of living room furniture with our logo on it to make myself feel good, I could have it in four weeks.
The suppliers will do it for me. They've been doing it for 30 years over here for all the biggest brands you can think of, you know?
And we could give them some designs and give them some ideas and let our, I mean, it's so easy to just source stuff.
I'm talking about, you know, product land. Now we're talking fashion, talking furniture, talk any category you want, the same is true.
But to truly invent stuff's a lot harder.
And that's why I think we've had success, that's why I think we will continue to have success.
Jason:
[33:35] Yeah, you know, so I am interested, I mean, obviously the product has to be the lead in solving that real problem for a customer.
But I do think another helpful aspect to your business is that in order for those products to be successful, like, they have to be demonstrated somehow.
Like, per your point, the catalog for the StealthTech sectional looks just like the catalog for a generic sectional.
And so I'm thinking you having your own showrooms was a big advantage for being able to tell the story.
And ironically, I'm not sure you opened that first showroom because you recognize that problem. It sounds like you opened that first showroom because you had no other way to get distribution.
Shawn :
[34:21] Oh yeah, yeah. And that's why I'm not taking any claim as some kind of marketing genius.
We just kind of tried to survive in the beginning.
And opening a showroom was actually a reaction to being rejected by the big furniture guys, because they didn't, you know, want our product, they didn't believe in us, whatever. They couldn't see it.
And so thankfully, it went that way. And by the way, they weren't showrooms, they were stores.
We were a furniture store for a decade and a half.
And we did all the furniture store things. And we sold merchandise, and you pulled your car around and we loaded you up, believe it or not, or we shipped to you.
And it took us a long, long time to, after copycatting all those furniture stores and hiring merchandisers and window dressers and all those kinds of things from our competition to do that stuff in our stores.
[35:14] To make that pivot to the direct consumer model that we operate on today that obviously looks very prescient in today's model.
Now, the reason I think we've been so successful at it is because we had those 15, 20 years to get really good at operating now 250 locations across every state, almost in the United States of America, where people are fighting and bickering and hiring and firing and touching each other, whatever it takes.
The point is operating physical showrooms is not something you get good at in a day or a week or a year just because that seems like the next thing to do.
We have a website, now people need to see our stuff, to your point.
And that's the approach I think a lot of the direct consumer brands have taken.
And I don't think that they realize how hard it is to be profitable at retail and how many pitfalls there are.
Where if I want to get a little better at digital marketing, which I think we're pretty good at now, but I can hire that.
I can agency that, I can platform that.
And so I think that the physical side of things is really underestimated.
And so thankfully, our very long haphazard history has played out in our favor in that realm.
And I think it's a huge strength of ours, because by the way, now that the economy's pulling back and this and that, we're 250 locations ahead of most that are just really coming around to the marriage of physical with digital and not realizing that, You know, it's not something you can just turn on and be good at.
Jason:
[36:44] Yeah. And I think it's you, you rightly pointed out that like the whole landscape of DTC hasn't been particularly successful.
There's not a lot of wins, but the, the people that are outperforming the average, even one thing they all have in common is they all have some kind of physical footprint to, to reduce CAC, right?
So they're either have their own stores or they, they are white selling through wholesale, or they're, they're in front of customers in some way,
[37:09] other than, than Facebook ads.
Yeah, I, I did. I think there's a super interesting new evolution.
I thought I read about though.
So like Amen stores and showrooms are super complicated. People wildly underestimate how many mistakes you can, you can make owning and operating a retail store.
And now, now that you seem to have that clicking, you guys are bringing the retail store to the customer's driveways.
Is that true? Like talk to us about the mobile concierge.
Shawn :
[37:37] Yeah, so just like we're innovating in product, we're also always innovating go to market.
So whether it's mobile concierge, which is a lovesack trucks, where you can, you know, from the comfort of your home, have us pull up in the driveway and show you our products, which we've which we've da
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