Episode #328: Startup Series – Katie Echevarria Rosen Kitchens, FabFitFun, “Paying $50 And Getting Over $300 In Full-Size Products Is A Pretty Cool Thing” | Meb Faber Research



Episode #328: Startup Series – Katie Echevarria Rosen Kitchens, FabFitFun, “Paying $50 And Getting Over $300 In Full-Size Products Is A Pretty Cool Thing”

 

 

 

 

 

 

 

Guest: Katie Echevarria Rosen Kitchens is the Co-Founder & Editor-in-Chief of FabFitFun, a lifestyle membership that provides a curated selection of full-size products each season.

Date Recorded: 6/16/2021     |     Run-Time: 51:39

Summary: In today’s episode, we hear about one of the most successful startups to come out of L.A.! Katie shares the origin story of how this media company transformed into a subscription service that now has 2 million members. She walks through the process of curating boxes for women of all ages throughout the entire country and what led them to use influencers before influencers were a thing.

As we wind down, we hear what’s in store for the future of the company as they build out an e-commerce offering.

As a special offer for listeners of the show, visit fabfitfun.com and use the code “MEB” to get $10 off your first box.


Sponsor: AcreTrader – AcreTrader is an investment platform that makes it simple to own shares of farmland and earn passive income, and you can start investing in just minutes online. AcreTrader provides access, transparency, and liquidity to investors, while handling all aspects of administration and property management so that you can sit back and watch your investment grow.  If you’re interested in a deeper understanding, and for more information on how to become a farmland investor through their platform, please visit acretrader.com/meb.


Comments or suggestions? Email us [email protected] or call us to leave a voicemail at 323 834 9159

Interested in sponsoring an episode? Email Justin at [email protected]

Links from the Episode:

  • 0:39 – Sponsor: AcreTrader
  • 1:29 – Intro
  • 3:25 – Welcome to our guest, Katie Echevarria Rosen Kitchens
  • 5:28 – Early days of FabFitFun
  • 9:15 – What led FabFitFun to building a box subscription program
  • 13:37 – FabFitFun’s business model
  • 17:57 – Inbox partnerships and their purchase order size
  • 23:05 – Ways the product has evolved over time
  • 30:18 – Katie’s thoughts on community building
  • 34:20 – How FabFitFun reduces churn rates and grow their customer base over time
  • 37:30 – Hall of fame products that have been a total hit
    39:32 – Embarrassing moments as Katie looks back on some of their launches
    42:57 – Do they have plans to make any men boxes or products in the future?
  • 44:43 – Plans for the future as Katie looks to the horizon
  • 46:49 – Katie’s most memorable moment as she looks back on the history of FabFitFun
  • 48:27 – Learn more about Katie; FabFitFun.com 

 

Transcript of Episode 328:  

Sponsor Message: Today’s episode is sponsored by AcreTrader. I personally invested on AcreTrader and can say it is a very easy way to access one of my favorite investment asset classes, farmland. AcreTrader is an investment platform that makes it simple to own shares as a farmland and earn passive income. And you can start investing in just minutes online. AcreTrader provides access, transparency, and liquidity to investors while handling all aspects of administration and property management so you can sit back and watch your investment grow. We recently had the founder of the company, Carter Malloy, back on the podcast for a second time in episode 312. Make sure you check out that great conversation. And if you’re interested in deeper understanding and for more information on how to become a farmland investor through their platform, please visit acretrader.com/meb. And now back to our great episode.

Welcome Message: Welcome to “The Meb Faber Show,” where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.

Disclaimer: Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria’s funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.

Meb: Welcome, podcast listeners. Today we have another episode on our podcast founder series where we invite kick-ass entrepreneurs to chat about their experiences from the front lines of starting a company. We cover everything from newly minted startups still struggling to make it out of their garage, all the way to the elusive unicorns that are either transforming traditional business sectors with innovative ideas or creating entirely new ones through cutting-edge technologies. Either way, result will be total catastrophic failure and bankruptcy or hundreds of millions of dollars of revenue and a valuation worth north of $1 billion. Listen in to hear the tales of blood, sweat, and tears as these founders tried to change the world. As a disclosure reminder, I’ve invested in most, if not all of these startups, and will look to invest more as they continue their startup journey. Please enjoy the next episode in our founder series.

What’s up everybody? We have a great episode for you today. Our guest is the co-founder of the rocket ship unicorn, FabFitFun, a lifestyle membership that provides a curated selection of products each season. In today’s show we hear about one of the most successful startups to come out of LA. FabFitFun touches on so many of the big trends right now, D2C, curation, community building, and we cover it all. Our guest shares the origin story of how this media company transformed into a subscription service that now has 2 million members. We walk through the process of curating boxes for women of all ages throughout the entire country, and what led them to use influencers before influencers were a thing. As we wind down, we hear what’s in store for the future of the company as they build out an e-commerce offering. As a special offer for listeners of the show, visit fabfitfun.com and use the code “MEB” to get $10 off your first box. Again, that’s fabfitfun.com and use the code “MEB”. Please enjoy this episode with FabFitFun, Katie Echevarria Rosen Kitchens. Katie, welcome to the show.

Katie: Thank you. How are you doing?

Meb: Where in the world do we find you today? The audio-only listeners can’t see your beautiful kitchen background. Where are you?

Katie: Oh, thank you. We are based in Los Angeles. We’ve been working from home since last March. So, I am in Sherman Oaks. And we have sort of pivoted our beautiful West Hollywood studio to my kitchen coined “Katie Kitchens from Her Kitchen” because our marketing team is hilarious. But excited to join. You’re in Manhattan Beach, right?

Meb: I am. I’m waving to you. You can’t see me from here, but next time, pretty soon we’ll be able to do this in person. Today we’re going to talk about all things startup. I don’t know if I can say you are a startup anymore. I just saw some recent news that you guys now have millions of subscribers. And we’re going to be talking about all things subscription boxes and beauty and entrepreneurship, one of the best LA and just success stories in general. But we got to start at the beginning. You were a blogger. I was a blogger at one point. I think I might have predated you. I was pre-financial crisis. Let’s hear the origin story. There are some stints at “Sunny in Philadelphia” and “Jackass” involved too. I want to hear the origin.

Katie: My background is in content. I was a writer for about 10 years before starting FabFitFun with my co-founders, Mike and Dan. And I also, as you said, did a few different sorts of TV stints. I worked on “Jackass.” That was my first job out of college. I’ve worked on “It’s Always Sunny in Philadelphia.” And I loved TV. My dad is a TV writer. But it wasn’t exactly my jam and I ended up taking a few journalism classes and ended up, you know, selling articles pretty quickly and fell in love with blogging and writing. And we actually started FabFitFun as a media company. So, it’s been very much an evolution.

Meb: Talk to me about the early days because there’s an interesting parallels that we had, I wouldn’t say started this company with a writing component and it certainly wasn’t, in many ways, intentional where we are now looking back on it, it was sort of a happy accident. But we’d love to hear the beginnings on kind of how you guys went about the approach. Was it just kind of, A, “Let’s start writing,” or was it a paid newsletter, or was it more of a subscription site in the beginning? What were the… Tell me the early days.

Katie: It’s interesting. I think our evolution has been a little bit of a happy accident as well. So, our mission is really to deliver happiness and well-being to everyone everywhere. And while that has been true from the very beginning, I would say, you know, the way that we deliver happiness has really changed dramatically over the past 10 years. So, we started as a blog and newsletter. And at the time, and I’m obviously dating myself a little bit, but the world of media was very much ruled by glossy magazines that were, you know, a little bit of a directive of how women were supposed to look and how they were supposed to act in order to… It’s still a very narrow definition of beauty. And as a chubby, Jewish, Puerto Rican girl from the valley who didn’t necessarily fit those stereotypes, we wanted to create something that was, you know, a little different, you know, not your high-fashion classy, but more like your best friend that just happened to know everything about beauty and fashion and fitness. And we were able to cultivate a pretty strong following, but media was definitely a little tough back then.

Every magazine was shutting down. Newsletters were closing every second. We had and wanted to evolve the business into something bigger. And we were writing about all of these amazing products and sort of realized that we didn’t just want to write about them, we actually wanted to put them into people’s hands, you know, and actually give them the experience of discovery that we were doing while we were testing and writing about all of these amazing products. And part of it was also, you know, as an editor, I’m not sure if you experienced this, you know, we were invited to countless events where you would get these amazing goodie bags afterwards. And it was just this feeling of joy and surprise when you went through the bags of stuff. And those two pieces were really the reason why we launched the boxes. And at the time, you know, we liked the idea of subscription.

There were a couple of beauty boxes that were really popular and they were focused on sample products. And for me, as an editor, I’d love to try new things. I did love getting packages in the mail, but I’m also really cheap. So, the idea of, you know, paying for more samples when you could go get them for free at Sephora just seemed, like, very bizarre, you know, not to mention that we really had established ourselves as a lifestyle brand. We believed that women were interested in categories outside of beauty and wanted to approach the boxes a little bit more holistically. So, we launched the boxes in the spring of 2013. And that really became the rebirth of the business. But even today, we’ve continued to evolve. We really don’t think of ourselves as a subscription box company. It really is a shopping membership based around discovery, value, and, you know, still that happiness piece.

Meb: We actually just got a box yesterday or two days ago. We’ll get into that in a little bit. But I want to hear about the first box or the decision to move in this direction, because it’s one thing to be a writer, to be doing newsletters, and that very much, I think, you know, has a business model and certainly is possible, but it’s hard, whether it’s affiliate revenue or advertising revenue or even paid subscriptions to a newsletter. Actually deciding the massive logistical effort in partnership with all of these various brands is an entirely different ballgame. So, talk to me about kind of that decision of the first one. Were you guys literally, like, filling these up in your kitchen? Or how did you go about saying, “Okay. This is what we’re going to do”? And how do you kind of cannonball into the pool at that point?

Katie: Great question. It definitely is a very different skill set. And someone, at least for me, with a content background, it was a sort of big leap into the unknown. The reason why my specific job has shifted was because, you know, when we launched the boxes, you know, we weren’t really sure if it was going to be a success. We actually had several tests going on. We thought about doing flash sales. We thought about launching a fitness line. My co-founder and I went downtown to try and make fitness apparel, which was not super successful. But this idea of the box was, you know, sort of one of many potential ideas. We hadn’t hired any additional people on the team. It was still really small, all of whom were really focused on content. And so obviously, we needed, you know, products for the box. And because I had been a writer for a while, I had relatively good connections in PR, in beauty and fashion and fitness. And we really leveraged those to curate that first box. It wasn’t a huge quantity by any means. And so it wasn’t crazy to say to a publicist, “Hey, I need a few thousand units. It’s going to be this really amazing marketing opportunity. We’re going to do tons of content about this, tons of social promotion. Take the chance.” And it wasn’t all yeses by any means, but that was really how we curated the boxes. We did it at a 3PL and, you know, we thought, “Look, we’re going to test small, see how it works, and go from there.”

And I think my co-founders were actually incredibly confident that it was going to work. I thought maybe we would sell a few boxes and try the next sort of crazy idea on the roster. But thankfully, they were right. We sold out of those few thousand boxes in 24 hours. And I think, for me, it was a very quick realization that we had created something that was actually pretty interesting. And I think, you know, we benefited from the fact that we had established ourselves as authorities in beauty and fashion and fitness because of the blog, because of the newsletter. So, it wasn’t all that crazy to say, “Hey, guys, we’re not just going to tell you about them, we’re actually going to pick the best products and deliver them to your doorstep.” And I think there was a built-in trust that allowed us to sell out so quickly. And the 3PL peace wasn’t always easy. We didn’t have full control over what those curations looked like.

And the second box, we had to put together a list of all the products that went into the box. And I was super excited because we had scored this really great partnership with Bliss, which is an amazing beauty brand that I had loved for a while. Or fortunately for the brands, you know, we would allow brands to put in bounce-back offers or coupons or cards in addition to the products. The card was included in the box. The actual product stayed at the 3PL because it wasn’t included on the list. And we then had to ship out all of those products separately. And it was a real moment where we thought, “Oh, God, this is it. We’re not going to make it.” The cost of… I mean, it sounds crazy now, but the cost of shipping out those 5000 units separately was huge for the size of the company that we were. But like, I think, any startup, it’s the mistakes that really allow you to learn and grow, and you’re never going to be perfect on the getting sort of days. And I think we were lucky to be really open-minded and we learned a lot, and then thankfully, we were able to still get to that next box.

Meb: You guys have hit on a few trends, one being curation and trust, which I think in a world of increasing noise, is extremely important. And we’ve seen some content sites like Wirecutter do it, but also on actual physical products, obviously, the direct to consumer. But for the cheap bastards like me, the ability to get value, you know, you guys, I think, famous to say it’s 50 bucks a quarter and you’re shipping $200 or plus worth of value in each box, which is awesome. But most importantly, and this is kind of we’ve talked about this a lot on the podcast for the past five years, seven years, is this concept of delight and happiness in a world of a lot of news flow negativity, this is one of the reasons, in my opinion, you guys have been so successful is because of this unboxing anticipation and all things packed into one. So, you had this moment. Okay. You send out your first box, you’re like, “Oh, crap, this is actually like a thing. We have to now deal with this and scale up.” So, walk me through sort of the…because the point you guys, are you bootstrapping this? Was this all just self-funded? Because you didn’t, I don’t think, raised any money until, say, 2015.

Katie: Yeah. It was all self-funded, and for the team and I’ll just talk about myself, but who was wildly unqualified for everything that, you know, I was doing. I was overseeing all of the curation, all of the partnerships. I didn’t understand any of the sort of technicalities of sourcing, what it meant to get, you know, thousands of products from overseas and negotiate terms. I will say, I do think there was some weird opportunity or success in my lack of experience, you know, because I didn’t know how things were supposed to be done. I also wasn’t limited by the way things were supposed to be done. I was trying and testing everything that I could to create the most sort of value and excitement within the box. And some things worked and some things didn’t, but we really did invest in what worked and then we were very okay throwing away everything that did it. And I think you can only do that, you know, when you have a little bit of a lack of experience. Things have certainly changed these days and we have an amazingly talented team who is far, far better at everything that they do. But there was, I think, a few weird wins in the early days just because we were just so behind to try and see what kind of works.

For us or for me, rather, one of the challenges that we faced early on was, you know, as you were trying to onboard great brands, this business model just didn’t truly exist in the way that we were doing it. And I think, you know, we were trying to convince people to take a chance on something that they really didn’t understand. And that’s pretty scary for brands. But I think, you know, we were able to create such a unique marketing platform for the brands, that while it took a lot of cold calls, it took a lot of meetings, it took a lot of sort of trips to various conferences and trade shows, you know, we finally did get some yeses. And I think part of that was driven by the fact that we really still think of ourselves as storytellers. And that marketing platform was built on this idea that we wanted to bring the brands and the products to life. It wasn’t just about sending stuff to people in the box. It really was bringing founders on for founder chats, you know, talking about ingredients, talking about materials and sourcing, doing tutorials, and just the overall inspiration behind the brand and why these were the must-have products.

Obviously, that creates a huge amount of value for the members to understand why they’re great, but it also was fantastic for the brands because they get their story told, they get now, you know, hundreds and hundreds of millions of impressions because of the content, because of the social. And that really becomes a win-win. Not to mention… I mean, this has obviously gotten better over the years as we’ve been able to scale, you know, but we put in pretty massive P.O.’s. And even for the biggest brands that we are working with, our PO size is just pretty massive.

Meb: What’s PO, for the listeners?

Katie: Purchase order. And our average purchase order is about 0.5 million units these days for our inbox partnerships, which is pretty unique. But it does allow us to get products pretty close to COGs, or cost of goods, and then all of that value goes back into the hands of our members, right? It’s that combination of bundling and then the marketing for the brands that then gets sort of driven through the box and straight into the hands of the members who get the content, who get the value because these products are at great prices. And we think that’s sort of the secret sauce to it all.

Meb: You definitely have, at scale, a certain ability to chat with brands now. But I imagine the early days, what was the pitch? “Hey, look, we’re just going to get you in these households. It’s going to be sort of brand recognition.” You’re trying to expand the eyeballs on your products and just get people to try it? What was their early discussion? Because you mentioned, there wasn’t that many similar business models. Birchbox famously has had its ups and downs over the years. And now you can look back to all these major successes like y’all and Stitch Fix on and on and on. But at the time, like, were the conversations hard, you know, when you were talking to them and saying, “Hey, look”? What was the pitch? “We’re just going to get you in front of thousands of people”?

Katie: They were very hard because, one, it was a new business model and, two, because, in part, I didn’t know what I was doing. And I’ve since had conversations with many founders and CEOs who jokingly make fun of me about riding around trade shows and trying to explain what this concept was with clearly no idea of what I was doing. But that’s okay. We grow, we get better. But the idea was sort of exactly that. The idea that sampling is such an amazingly powerful tool. Getting your product into the hands of, in the beginning, thousands of women or today, you know, hundreds and hundreds of thousands of women. That, in and of itself, is pretty amazing. Now, the categories are a little bit different. Beauty is a much sort of easier sell and that it’s a replenishable, right? You try moisturizer, you run out of the moisturizer, you’re going to go buy it again. And I do think, you know, including those bounce-back offers early on, really trying to get those repeat shoppers was very crucial to our success. And they did. They saw lifts in sales pretty immediately.

I think for brands outside of beauty, like fashion and fitness and home, that was a little bit more challenging and that was, you know, more driven around brand awareness. And I think early on, we saw a lot of success with influencer marketing. That really wasn’t a term, to be honest, when I think we started to do it. And for us, I think, you know, we saw a lot of success in really casting a wide net when it came to the influencers that we were working with. Obviously, we were working with the beauty YouTubers and the fashion Instagrammers. But we really wanted, you know, our members to see themselves in the people that we were working with. So, mom entrepreneurs, Olympic athletes, comedians, you know, reality stars. And they would then do unboxing’s across their social channels. And they weren’t talking about FabFitFun in general, they really were looking at every product, tagging every brand in the post. And that just automatically created a huge number of impressions for the brands in the box, which was a huge, huge selling point.

And what was funny was it very much became then a trend for our members to do the same thing where, you know, they saw influencers doing the unboxing’s, they then wanted to be, you know, the first person on their blog to tell their friends about all the cool stuff that they found within the FabFitFun box. While they may not have had massive followings, the combination of all of the members just created a huge sort of supernova of user-generated content. And that was obviously great for the brands within the box, and then also it was great for acquisition for the FabFitFun membership. So, that was really exciting. I think the other thing that I will say that was really beneficial for us in the early days with influencer marketing was that we also promoted the influencer posts. So, it wasn’t just organic reach on their part. We put our own spend behind it, which was, again, great for impressions in general, but it also made the influencers really happy because it helped to grow their following at the same time. So, again, it’s always trying to find these sort of win-wins that really help FabFitFun grow, but also help the people and the brands that we work with grow at the same time.

Meb: It’s brilliant in retrospect. I feel like it’s kind of table stakes today if people understand a lot of what you’re talking about, but in many ways, doing this five, six, seven, eight years ago, I think is, a lot of ways, pioneering. You hit on a lot of trends. So, well done. Talk to me a little bit about how the product has evolved over time. So, you start out with this box, but, like you mentioned, a big part of it is community. And let’s talk a little bit about how the business model has evolved. I had invested. So, shout out to Draft Ventures. But back in 2015, I saw this come across my desk and I was like, “This is Meb’s perfect wheelhouse, favorite investment.” I subscribe to a fair amount of subscription boxes over the years. And you guys have been one of the few that has remained. And it’s not even for me is the best part, remained in the queue. So, tell me how it’s evolved. I mean, I know the answer to this. I looked back at the original deal memo and talked about you guys getting to a goal of, I think, 50,000 subscribers, which another comma or zeros. Talk to me how it’s evolved since the early days.

Katie: Yeah, it’s definitely changed. With the very first boxes, you know, everybody got the same seven to nine products. It was interesting because in the early days, you know, most of our members came from our website and newsletter. So, they were, you know, more similar, I would say, to my demo than certainly they are today, just given the breadth of the membership. So, in the early days, you know, I picked eight products that I really liked and sort of hoped and prayed that people would like them as well. It made sense in the early days when we were a little bit more similar, but, of course, as you grow to millions of members, that audience just automatically becomes more diverse. And what we know is that a 16-year-old in San Diego probably wants a different product than a 65-year-old in Kansas City. And the reality is today we have both of those women within our membership.

So, for us, you know, we spent the last several years really pushing towards more and more customization so that, you know, we weren’t just picking great products, but we were picking great products and then making sure that it was getting to the right person so they were great products for you specifically. And it’s been a bit of an evolution. And we started really sort of slow, making sure that we got it right. So, for example, we would include a scarf in the box, and then we would do it in a few different colors or patterns that someone might be able to choose from. And it was a great first step forward, but the truth of it is, you know, if I live in Florida, I probably never want a scarf at all. I don’t care what the color is. So, for us, it was pushing for more and more customization until what we actually launched this summer, which is a fully customizable box, where annual members can choose every single product, you know, within the curation. And we very much think of it as a prix fixe menu. We don’t want to be the everything store. We don’t want to be an endless scroll. We don’t want to give anyone a bunch of crap, which I know sometimes subscription boxes can sort of get a bad rap for.

We really want to only highlight the best of the best in all the categories that we work with. But knowing that people’s sort of tastes are different, their tastes evolve, the different things like skin tone, skin type, hair type, etc., can make you want different products, that’s where this sort of prix fixe menu becomes incredibly important. And these days, you know, we have millions of different variations that go out each season. So, that curation becomes, you know, more and more right for you. Well, my taste, I think, is great. We need a little bit more than just that to create a truly successful membership. And these days we really are a data science company. First off, we have an amazing consumer insights team who is constantly serving our members, you know, about who they are, what they like, and what trends they’re interested in. And so, you know, before a brand or a product ever gets into a box, we have a forecast of the grading for the product and a cue score for the brand. And that really arms our merch team to go out and get the best products and brands each season.

Now, we kick it off with basically like a merch strategy session where the team puts together our sort of top gets when it comes to ingredients and trends that we think our members are going to be interested in. We then start to look at maybe what might be thousands of products and whittle it down from there, you know, making sure that products are as effective as we want them to be, that they work on a variety of skin tones and skin types and body types, etc. And then we look at things like dislike overlap. So, when we’re putting together the different choices in the box, we want to make sure that within every sort of cohort of our membership, there’s going to be at least one product that makes our member excited. So, it takes a lot longer than it used to. These days the boxes are curated between 9 to 12 months in advance. Also, just because of the number of units that we’re talking about, it takes the factories a little bit longer to get them over here. It’s definitely been very much of an evolution of what we started from.

I think the other piece that’s really important is that, you know, while the box is a huge part of everything we do, it really is just the entry point to the membership. It’s another way to discover products alongside of, you know, all of the e-com that we’re doing that’s a huge part of our business where we have members-only sales throughout the year and we promise that the products they can find there are going to be the best prices that they can find anywhere online or in real life. Obviously, that’s great because we also get to engage members beyond the sort of big four seasonal box drops. We also have our own social media platform behind our paywall where we hope that members connect. And obviously, they’re in there and they’re talking about products, they’re talking about brands. But beyond that, they really are forming friendships with each other. And then we launched clubs within the community to, you know, connect them on an even deeper level. They’re talking about wellness, they’re sharing pictures of their kids and their pets and ways to ease anxiety.

And then quite frankly, you know, I’m in there all the time. They know they can tag me directly. They’re incredibly engaged. I often call them our sort of fourth co-founder because they really are building this business with us. I mean, they give us tons of feedback. When they like something, they’re excited to share. When they don’t like something, quite frankly, they’re even more excited to share. And while, you know, sometimes the negative feedback isn’t always the most fun, the truth is that we use all of it to create a better and better membership. And so for me, you know, that’s really the fun part. I think, you know, listening to your customer is probably the most important thing any brand can do. And to have this really sort of unique one-on-one direct relationship with our members where, you know, we are constantly getting feedback in real-time, I think that’s been a huge part of the success as well.

Meb: Talk to me a little bit more about the community building. And are there any suggestions or best practices? Because, you know, we live in a world where, obviously, there are many platforms struggle with this, the toxicity of whether it’s the fake news or just people, the negativity, and fighting, and yada, yada. How do you guys approach building this community so that it is beneficial to everyone involved? Any general ideas?

Katie: I would say two pieces. One, you know, we really try and be as transparent as possible. We are certainly not a perfect company. And certainly this last year all brands have found sort of their fair share of challenges. And I do think, you know, being able to just be frank with members, you know, if there is a delay in shipping, if there’s an issue with quality, we then have this really amazing ability to get in there and explain very quickly what happened rather than leave them wondering. And I think that’s often the challenge. When they don’t get answers, when they feel like they’re being left in the dark, that’s when the negativity spreads the most. But if we have the ability to just get in there as quickly as possible, be honest, there’s a lot of forgiveness. There’s a lot more sort of flexibility to what they’re willing to be really cool with and be supportive of.

I think the other piece for us has really been empowering members to really create the majority of the content within our forums. I think if it’s just us talking to them all the time, it feels not the same as, you know, our actual members who are out there representing us, who really do have this sort of love and affinity for the brand. It’s just taken differently when it’s coming from someone who’s in the same situation as you versus, like, “Ugh, it’s the co-founder of the company trying to quiet us down.” And I think we’ve seen a lot of success there. Our members actually run the club. So, for our fitness club, there’s, you know, our fitness ambassadors and our mom ambassadors. And I do think the other piece of it is, you know, we try not to make it a CX forum. We try and take our CX inquiries as much as we can into different channels and really use this as a way to really connect our members on a deeper level.

I think, you know, something that happens as we, you know, get to be adults is it’s actually much harder to find and create friendships. When we’re a kid and we’re forced into these, you know, social constructs of school where everybody is sort of seeing a…you should have your sort of same experiences, it’s really easy to make those connections. And then suddenly, as you grow up, those sort of disappear outside of maybe your work or even still it can be a little weird to find friends. And I think, you know, where we’ve seen success is, you know, these are, you know, women who, at the very least, have this affinity towards FabFitFun, towards discovery, towards value. And we see that, like, just on that little, little piece alone, they’re finding this connectivity and we see crazy things. We’ve seen members travel across state lines when another member is sick. We’ve seen members who are going through a rough patch in their finances, have members send them care packages and gift cards. And that’s not us, right? That’s them doing it themselves. And they also… I mean, obviously, this wasn’t going on in COVID. But pre-quarantine, they were hosting meetups across the U.S. and Canada. And it would be just, you know, basically a lunch, sometimes they would exchange products, but mostly it was just an ability to meet up with these people that they had formed really deep friendships in in this virtual world, and then do it in real life. And one of my favorite things that became a huge trend is they would actually take the box and they would take it to a bakery and they would have a baker make a cake in, like, the design of the box. And this became a thing that people were doing all across the country. And I mean, we are always so thrilled to see that happen.

Meb: I wonder if that is sort of y’all’s secret sauce. And I’d love to hear you just kind of talk about it, if it is or if it isn’t, because a lot of companies with similar business models, to be honest, have struggled over the years and some have gone out of business, some don’t survive. One of the biggest challenges for any business subscription or otherwise is churn. What is the thing that you think, if you could point to, that keeps people engaged in loving the FabFitFun family brand box? How do you guys reduce that sort of churn and grow the business over time?

Katie: I think the number one piece to point to is probably value. And I don’t just mean like a discount, although, obviously, as you said, you know, paying 50 bucks, getting over $300 of full-size products is a pretty cool thing. But I think for us, the box was only sort of the start of it, and I think we are continuing to try and layer on more perks, more value on top of the box that even if, let’s say, you didn’t love every product in your box, you know, you’re still getting so much value from the overall membership that you want to stay a subscriber, and that, you know, may be the friendships and the community, that may be the content on FabFitFun TV, that may be all of the amazing sales. And I think it’s probably the combination of all of it that’s really exciting. I will say the other piece that becomes more and more interesting for us is also this idea of exclusivity. So, oftentimes when we’re working with a brand and they’re launching a new product to the box, they’re launching a exclusive or limited edition product within the box. And I think that becomes a whole fun element to the membership as well where FabFitFun really is the only place where you can get X number of products from X number of brands.

I think the other thing that will always probably be interesting to us is because we do sit on so much data, because we know our members oftentimes better than they know themselves, we really are finding products that they never even knew they wanted. And so as an example, we had the sofa blanket in a couple of the sales. It was a really small brand. And members just went crazy. They couldn’t get enough of this for a product. And the brand was tiny. They couldn’t really do anything more than, you know, a couple of thousand units. But we were like, “Gosh, this is such a great product. We need to be able to put it into a box because we already see the love.” And so we thought, “You know what? We know they love it. Let’s launch a brand ourselves.” And so we’ve partnered basically with an operator who’s pretty awesome in the space. We actually brought on Ellen DeGeneres as a third co-founder because she had such affinity for animals. And we launched a faux-fur line, and it’s actually the highest rated product of all time. And we’ve since done different colorations of the box, all sorts of crowd source from the community. But I do think it’s the ability to listen to our members to then find and/or develop products that they want, and then give them to them at this crazy price, that makes, you know, a lot of it so exciting and makes you want to stay a member.

Meb: A perfect example is probably our favorite product, which I would have probably not selected had it been a choice, but now everyone loves and half of our friends own them is the yellow and white cooler. It’s perfect for LA, right? You take it down the beach, you can put some snacks, maybe a couple of beers, bottle of wine or something in there. And it’s just a perfect size. And never in 1000 years would I select it, but I absolutely love it. What else is on the Hall of Fame? Mount Rushmore. I know you probably can’t choose from your favorite children, but any products in general that have been like this has been a killer?

Katie: The business and pleasure cooler is definitely up there. I use it all the time. And one of my favorite things, actually, in life is just seeing FabFitFun products out in the wild. I mean, I take all of my products everywhere. I’m a user of everything that goes into a box. But then when I see a bunch of coolers at the beach, it’s always like a real thrill. And I never know whether to say something or not. And this is like an internal struggle that happens all the time. But I will say over the years some of the towels that we have done have been a really big hit just because the patterns have been so beautiful and, for lack of a better word, Instagrammable. There was a huge trend around roundies, like, a few summers ago where everything was these sort of gorgeous Moroccan-inspired towels that people were loving. I do think, you know, the beauty brands tend to drive a tremendous amount of happiness just because, you know, beauty products are expensive. And this is oftentimes the only way some of our members can afford these really prestigious beauty products like a Dr. Brown, like a Kate Somerville. A personal additional favorite, I will say, we worked with the home brand, West Elm, to develop these really beautiful navy and whites full sets. And that’s another product that sits on my counter all the time. I’m obsessed with it. But there’s a lot, really. It’s like picking a favorite child. It’s a hard one.

Meb: You guys have been an amazing success story, not just in LA but in the entire startup scene. But like every company there’s got to be some whiffs, some embarrassing moments. Is there anything you look back where you guys tried and you’re like, “Oh, well, that was a horrible idea or a failure or a total mess”? Anything come to mind?

Katie: First of all, there’s so many and I don’t know what that really says about us. But I do think… I will say the positive side of it, is that we really are very willing to try a lot. And inevitably, that means a lot of things aren’t going to work. But when they do, you know, that’s where the fun really happens. But I will say, you know, the majority of brands that we work with, our premium products, you know, things that retail somewhere between $20 to even a few hundred dollars. And we are paying for this product. And we’re not paying wholesale, we’re paying COGs. And that’s the majority of how we work with brands. There is a second arm to the business where brands can actually become sponsors within the box. And these are typically CPG brands, they’re inserts, they can do sample products because for them, it’s just like a media buy where they are donating the product or the inserts that go in the box and then paying some fee for extra influencer spend, for extra dedicated campaigns, content, etc.

I remember when we first started the concept, you know, we were thinking of it just like as an advertisement in a magazine or a commercial. And we started to think about what this could look like. It was almost like a no-brainer, right? An extra product for members. All of the revenue that we’re going to make goes back into making the membership better, so why not try and make it happen? So, our very first sponsored product was panty liners. There’s not anything particularly sexy or fun about panty liners. But again, it was just an extra product and we’re like, “We’re going to make some money. We’re going to make the membership better. Why not?” So, we threw the panty liners into the box with no real mention of the fact that they were, in fact, a sponsored item. And so when members received the boxes, they were literally like, “What the hell? Did I just get a pack of panty liners instead of an eye shadow palette? Is this a replacement for an electric diffuser?” And there was no real communication on our part to explain what sponsored products meant, that they really were just an advertisement.

That was a big blow to us because we really do think of ourselves as good communicators, but we just totally dropped the ball. And it really did, though, I think, inform the way that we do business now and that we are such over-communicators. We really do love to explain all of the intentions of what we’re doing. And we ask members, you know, “Look, here’s what we’re thinking. You can either get a box with an extra product, with a higher retail value, knowing that that revenue is actually going to make the membership better, or you can get, you know, a box with less products at a lower retail value.” I can guarantee you, everybody chose the former. And now, you know, sponsored products have sort of seen a huge 180. We had these really amazing beauty gummies in a box that was like more loved than half of the premium products that we put in the box. And so now it’s sort of just a win. But I think that communication and that sort of transparency, it was a hard lesson to learn, but certainly a good one.

Meb: I loved doing my wife’s box, but you’re leaving out half the demographic. What was the thoughts there? Did you guys try it briefly? What’s the thought on the male side of the chromosome?

Katie: We definitely think it’s a really interesting place to play. I mean, certainly Mike and Dan, my co-founders, trying to steal all the products from my desk. My own husband who’s like the least sort of metrosexual guy, like, from Georgia, like, didn’t know what moisturizer or SPF was before we got married, now, like, slathers, my very expensive moisturizer all over his body, which is very frustrating. But no. We think the world is changing. Men are just becoming much more sort of aware of, you know, how beauty products and grooming products and fashion products should make you feel really good. And once you start to do, it’s really hard to go back. And so it’s a little hard with the FabFitFun brands because we are so female-focused and that’s been a big part of who we are from the very beginning, but we realized why not start to include men’s products or men’s bundles, you know, with our e-com, knowing that oftentimes that’s how men get their products is with their wives or girlfriends shopping for them. So, we did introduce some men’s box. We did several iterations of them. We paused for a little bit just to focus on some other sort of more thematic creations that we wanted to test and try, but, by all means, we think we were going to, like, bring that back. We think it’s a no-brainer just the way that men’s sort of shopping habits are quickly evolving.

Meb: From someone who’s subscribed to dozens of boxes over the years, most of the men’s boxes do a really poor job. So, I would love to see you all tackle it because I will be your first subscriber, for sure, and look forward to it. As we look out to the future, you guys, Katie, you’ve been a force of nature. This company has grown just exponentially over the years. Talk to me about as you look out to the horizon. We just went through a pretty weird last 12 months. What’s the future look like for you guys? What’s on your brain? What are you thinking about? Where do you go from here? And by the way, do you guys ship globally or just in the U.S.? We got a lot of international listeners here.

Katie: Right now we are U.S., Canada, and UK. Very strategically thinking about what CX looks like, given that our model is just sort of unique. Look, I think there have been a lot of lessons learned over the past 12 months, and, thankfully, some silver linings and some innovations that just happened because they just had to. And I will say, you know, one of our sort of big areas of growth was really around e-com, just seeing an enormously growing appetite from members on, you know, how, when they want to spend with us very much beyond just the box itself. So, really moving into what feels like, you know, more of an always on more traditional e-com retailer, you know, still focused on, you know, very sort of thematic, curated drops, but just allowing members to engage with us when they want to engage with us versus us saying, “Okay. These are the 10 days during the year that we allow you to shop with us.”

And so I think there’s a lot of really sort of exciting momentum on that front and I look forward to seeing how that continues to evolve over the next year. It’s really fun and it’s a little bit different than, you know, how we sort of originally thought of the business model. But the reality is, whether it’s through the box, whether it’s through e-com, whether it’s through refills, which is our new sort of subscription model where we basically white-label subscriptions for our most favorite brands because, honestly, if you find a product that you really like in the box, maybe you just want that one forever and we want to be able to give members exactly what they want. The reality is no matter which way they’re sort of shopping with us, it’s just a different way to discover products, a different way to find value. And that’s what we want to continue to deliver.

Meb: I forgot about this, but I had realized our membership was quarterly instead of annual, so I upgraded this past week. And on the checkout screen, the face staring back at me, one of the models is the family friend. So, shout out, Jarod. I was like, “Wait a minute. This is weird.” Anyway, as you look back on this venture, on this journey, is there any most memorable moment that stands out? It could be good, it could be bad, it could be embarrassing, it could be proud. But anything over the years that really is seared into your brain as probably the most memorable?

Katie: I remember for a very long time thinking, you know, if we could just get to 100,000 members, you know, my life would change, the business would change, everything would be different. And so then when we passed a million members in 2018, that was certainly a good moment. I think that was just one that we all sort of took a step back and said, “Wow, this feels big.” I think second to that, you know, there’s been brands along the way that have made a huge impact. I remember very clearly closing the deal with a beauty brand called Dermalogica. It was a hard road to close, but, you know, when we did, not only did it, you know, create a huge amount of member satisfaction, but I can point to that as a moment that really unlocked all of the other beauty brands. Right? These are small industries. People talk, if the campaign worked, it made a huge difference. And I remember the woman who got the deal done. I will always be grateful for her. I think about her probably more than she would like. These are just weird things that really made a difference in the overall business.

Meb: Katie, this has been a lot of fun. Where do people go? What’s the best places if they’re looking to sign up, if they want to check out what you guys are up to? What’s the best spot?

Katie: It’s really easy, fabfitfun.com. It’s a bit of a tongue twister, but it is all things fun. So, hopefully, you guys will check it out.

Meb: Awesome. Thanks so much for joining us today.

Katie: Thank you. That was a lot of fun.

Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at [email protected] We love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.

 



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