The Unofficial Shopify Podcast: Entrepreneur Tales

Differentiate or Die

Episode Summary

Ecom Legend Drew Sanocki on Differentiating Your Brand

Episode Notes

Today's guest has twenty years of ecommerce experience and believes that "You can't survive as a commodity dropship retailer. You have to differentiate or Amazon will eat your lunch. If not today, then tomorrow."

In this episode, he'll tell us how he differentiated Karmaloop and more.

You'll hear:

In 2013, Drew founded his first company,, with $500 cash. Today he's the CEO of nine-figure vertically integrated brand AutoAnything. In between, he's saved Karmaloop, got Teamwork to eight figures, and built a variety of software and retail businesses.

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Episode Transcription

Kurt Elster: Hello, and welcome back to The Unofficial Shopify Podcast. I’m your host, Kurt Elster, and I want to tell you about a friend of mine, a guy I have run into, over and over again our paths have crossed, and most recently our paths crossed when we were both in Vegas for the SEMA show. The big, the gigantic, ludicrous, 200,000-person automotive aftermarket show. Basically, a gigantic Vegas show about car parts, and I ran into Drew Sanocki there, and Drew and I had breakfast, and then went to the Hoonigan VIP event. We basically spent most of the day together catching up, and this guy has done so much.

I met him years ago, when we were both in the info product space, with the Brennan Dunn types, the Rob Walling types, and now our paths have crossed in automotive ecommerce, and so I could not possibly tell you Drew’s storied 20-year career properly. I’m gonna let Drew do that. Mr. Sanocki, tell us, in 90 seconds or less, what have you been up to for the last 20 years?

Drew Sanocki: Hi.

Kurt Elster: Hello!

Drew Sanocki: Yeah, 20 years in ecommerce. I started my first ecommerce retailer, dropship furniture retailer, in 99, sold that in 2010, and [inaudible] I sold, I started getting into… call it ecommerce private equity, so helping buy and sell ecommerce brands, and so in that capacity, I helped run Karmaloop, a retailer called Karmaloop, streetwear retailer. Worked on probably 20 other deals with ecommerce brands, and today I am the CEO of AutoAnything, which is a 100-plus million dollar revenue aftermarket automotive retailer.

Kurt Elster: How did that happen?

Drew Sanocki: So, okay, we bought this company from AutoZone. AutoZone owned it. It was a corporate carve out. I don’t think they fully understood ecommerce or knew what they wanted to do with this company, and so we swooped in and bought it out from them.

Kurt Elster: What platform is AutoAnything on? It’s not Shopify.

Drew Sanocki: No, it’s .net, circa 1999.

Kurt Elster: Oh, boy.

Drew Sanocki: Yeah, this is the bane of my existence is this platform that predates anything off the shelf.

Kurt Elster: And you would desperately love for it to be on Shopify, I understand.

Drew Sanocki: I would. You know, we’ve tried to get it on Shopify every which way. Part of the challenge is we’ve got five million SKUs, and man, the 100-option variant limit in Shopify keeps bonking, and so it’s hard to jam our SKU count into Shopify. But I’m gonna keep trying.

Kurt Elster: So that, and the… I’ve mentioned before on this podcast, the big struggle with automotive as a space is the year, make, model vehicle selector, and then-

Drew Sanocki: Yes.

Kurt Elster: … trying to manage that database. You’ve got product information management problems. If you’re not the manufacturer, trying to get, like in your case, you’re a reseller, so trying to get clean, sensible data that’s consistent for everything across half a million SKUs, I mean you quickly run into… Somebody told me, “Oh, well you could just tag it.”

You can’t even just tag it, because there’s a limit to the number of tags, and then let’s say we’ve got a search with a large quantity of items in it, I mean it’ll just… The thing will time out when you’re trying to run through, loop through that many tags, on that many products, to do what you want to do.

Drew Sanocki: Correct.

Kurt Elster: I mean, it’s absolutely… at a small scale, it’ll work. At a large scale, suddenly it becomes this management nightmare.

Drew Sanocki: Right. Yeah. I mean, if somebody had told us this before we bought the company, that would have helped, because I think part of the investment thesis-

Kurt Elster: Listen, you just had to text me. I would have told you.

Drew Sanocki: Yeah, I know. I know. I wish I knew somebody who knew both Shopify and automotive, and I did, I just didn’t talk to that person. But you know, part of the investment thesis was like, “Wow, this company’s spending six million a year on IT, on maintaining this legacy platform. We’ve got like 40 databases, and it’s just… It’s kind of insane what we inherited. Let’s just buy this company and put it on Shopify, and we save millions of dollars right there.

Kurt Elster: When you say 40 databases, is that an exaggeration, or you literally have to manage 40 databases?

Drew Sanocki: We literally have 40 databases is the number I keep hearing around the office of things we… Yeah. We’ve got this service called Pythian, which is like outsourced DBAs, who manage 40 databases.

Kurt Elster: Oh, man.

Drew Sanocki: But, I mean there’s a time, there’s an expiration date on that. We’ve been working on getting these things into the cloud. We’ve been working on migrating to a PIM, which is gonna solve a lot of our problems. We just installed this thing called Pimcore. It’s been a yearlong project. It’s an opensource database that allows us to put all that automotive data in there, map fields to the fields of our brands, and it should make managing the product data a lot easier.

Kurt Elster: It is wonderful to hear you pull the curtain back and share with us like, “Hey, you could grow a giant business, but at the same time, there are new challenges that come with it, that when you’re looking at these other business, and thinking the grass is greener, maybe, but there’s also new challenges that come with it.” So, it’s refreshing to hear someone say like, “All right, well here’s the nonsense we gotta deal with.”

Drew Sanocki: Yeah. I mean, my challenges are legacy tech. People and culture, that’s always a big challenge, like we had to recruit a whole new management team at this company. I didn’t anticipate that coming in, too. I thought, much like you, my job would be geeking out, opening Google Analytics, starting to do some lifecycle campaigns, and mining the customer data, because we knew we bought a significant audience here, right? I’ve got like five million people on the email list.

Kurt Elster: Oh my God.

Drew Sanocki: This business has been in business for 40 years, so we’ve got this huge customer database. All I gotta do is mine that, and really, I haven’t had a whole lot of time to do that, because the business is so big, much of my time has been spent recruiting and finding people to do that stuff.

Kurt Elster: Okay, so in this episode, I want to talk to you about a few things. I want to hear… Well, you told us about AutoAnything. I want to hear a little bit more about that. I want to hear about your Karmaloop experience, because I think that… I’ve heard you tell me that story before. It’s very interesting, and it… specifically around that approach, where you said, “Yeah, I want to just be… I just want to geek out on it and increase customer lifetime value.” And I know that’s kind of how Karmaloop went, so I want to hear about that today.

And you’ve got… I love your approach, and mentality, and mindset that it’s taken you 20 years to develop, but I want to talk about that, on how you’re executing these strategies, because you call your model digital private equity, and value-added leadership. I think that’s interesting. I want to touch on that. And the finally, on top of all this, you even have a SaaS business, right?

Drew Sanocki: I do. I do.

Kurt Elster: Plug it. What’s the name of that?

Drew Sanocki: PostPilot.

Kurt Elster: Oh my gosh. Okay.

Drew Sanocki: It’s direct mail for Shopify, so call it programmatic direct mail, or customer-driven direct mail, but it’s an app that plugs into Shopify, pulls your customer data, much like Klaviyo or Drip, and allows you to automate the sending of physical postcards to your customers.

Kurt Elster: Is there-

Drew Sanocki: Where do we begin? Where do we begin, Kurt?

Kurt Elster: Is there any… I feel like I missed something, some value nugget in your AutoAnything experience, but I can’t come up with anything concrete. Is there anything valuable you want to share with us about your AutoAnything experience?

Drew Sanocki: The big learnings here have been really much more about team and culture, so things like this book, Traction. If you’re running a business that is I would say over five million in revenue, all of a sudden it goes from being something that, where everything has to go through you as the solo founder, to, “I gotta run a team.” I would say five million and up as an ecommerce brand, now you’ve got some margin to start building out a team, and doing things through people, and the number one book that I recommend on how to operationalize good management is called Traction, by this guy Wickman.

It takes the concepts of setting three and one-year goals, and distills them down to quarterly goals, and then you take those quarterly goals and essentially build an organization to execute on them, and hold it accountable, so that’s been… That’s a summary of my past year, has really been implementing that program.

Kurt Elster: It’s interesting to hear you say that. I have heard… You’re not the first person to recommend Traction to me. It definitely speaks to it to hear someone who is running this big, big organization with new challenges jumping in and implementing Traction. You mentioned as you moved into that leadership role, cultural issues with running a new team like that. Tell me about that. How has that been challenging for you?

Drew Sanocki: Well, the company was owned by AutoZone, so whatever AutoZone is, an $8 billion company, and they ran it much like a brick and mortar store, because I think that was their culture, that was their mentality. For example, we bought a company where we came in and all the employees wore the AutoZone uniform, for an ecommerce brand, which is just sort of not the culture of an ecommerce brand, right? They did the AutoZone cheer before every meeting, and there were a lot of meetings.

Kurt Elster: There’s an AutoZone cheer?

Drew Sanocki: There is an AutoZone cheer. You can Google it. I’m not gonna do it for you, because I actually don’t know it, but AutoZone cheer. There was… When you’re owned by a big company, you have things like 10 people in HR, and a massive accounting team, because it’s all about managing… This big company is used to sharing resources across a massive group of people, and so you need to staff up on HR, you need to staff up on finance. And conversely, they had taken a once great marketing team and really decreased that down to maybe a couple people.

So, the challenge for us was how do you get this company to think more entrepreneurially, like a much smaller company? Like you’re no longer part of a billion-dollar company. You need to take more risks, and we need people here, we need to create a culture where that’s acceptable.

Kurt Elster: And what’s been the big challenge for you there?

Drew Sanocki: It’s the culture. Changing the culture and the people. I mean, we-

Kurt Elster: I’ve never done this, so this is… I 100% accept that this is difficult, but I don’t know what is difficult about it, or how you go about changing it.

Drew Sanocki: I think we bought a company where they had no sense of how big the company was, or what the goals were, or what the priorities were. I think they had all that stuff from AutoZone. They knew what was going on with AutoZone, but as far as like what this ecommerce brand stands for, or what we need to execute on, there wasn’t a sense of that, so we had to overcommunicate, like, “Okay, here’s what we’re trying to do with this business. Here’s what we’re trying to do this quarter. And here’s what your team needs to do this week to be a part of that.”

So, that was part of it. Nobody, like people got their hands slapped under AutoZone. I think there was a little bit of a culture of like, “Okay, I’m gonna stay in my lane. I’m gonna do what I need to do. And I’m not gonna rethink something.” So, when we bought the business it was losing money, and that’s not gonna last long, right? So, it was losing a lot of money every month, so we had to start doing more with less. We took the company from about 200 people to 100 in a year, and in that environment, you’re just not gonna have the bodies to throw at every problem, right?

One example is our data team that is responsible for managing this product data went from something like 35 down to 5 people, so there was a lot of concern when this happened, like, “How are we gonna do as much with fewer people?” But it is one of the tenets of sort of private equity investing is like you want to starve things for resources in order to create design thinking, right? The only way you’re gonna create innovation is by giving people fewer resources than they need to get something done. Only when you do that do people start to rethink things like a process or look at technological solutions to get something done. There’s no physical way we could manage 600 vendors with the five-person team, so we’ve gotta rethink how we do things, we gotta do a lot of 80/20 throughout the business, but it was the first step in kind of changing the culture a little bit.

Kurt Elster: I love the concept of 80/20, Pareto’s Principle. For people who don’t know, give us the crash course in 80/20.

Drew Sanocki: 80/20, and there’s a great book by Perry Marshall.

Kurt Elster: Perry Marshall.

Drew Sanocki: Yeah, the 80/20 Rule. You know, the general idea is like, “Hey, for any business, 20% of your customers drive 80% of the revenue. 20% of the products are the ones that drive 80% of the revenue. 20% of our vendors are the ones that drive 80% of the revenue.” So, you know, you can imagine, this is a very long tail business, and there are 80/20s throughout the business, so with a smaller team to execute on the business, you better be sure we’re focused on that top 20%.

Kurt Elster: Yeah, so we got 80/20 Sales and Marketing: The Guide to Working Less and Making More with Perry Marshall. That’s the one I read, but when I searched 80/20 Rule, there’s another one called The 80/20 Principle by Richard Koch.

Drew Sanocki: I think he wrote the forward to Perry Marshall’s book.

Kurt Elster: Okay, so I’m going with Perry Marshall is like… I know that’s the one we’ve both read.

Drew Sanocki: Yeah, he operationalizes it a little bit better for the typical entrepreneur.

Kurt Elster: All right. I’m including that one, because I have found… I read that.

Drew Sanocki: Where are you including this?

Kurt Elster: Oh, in my show notes, sorry.

Drew Sanocki: Oh, nice. All right.

Kurt Elster: It’ll go in the show notes. Anytime you-

Drew Sanocki: Include it.

Kurt Elster: Yeah, so we’ve got AutoAnything in here, then Traction, then 80/20 Rule. Any time you mention something that people may want to reference, or make a recommendation, I throw a link in there for the like.

Drew Sanocki: PostPilot, for example.

Kurt Elster: PostPilot will get a backlink in there. Yes. Good SEO.

Drew Sanocki:

Kurt Elster: You’re just gonna start throwing out links?

Drew Sanocki: Yeah.

Kurt Elster: I guess I’ll… The last question will be, “Where do we find out more about you?” You’ll say Nerd Marketing and it’ll go in there. Quit. You’re wrecking up my process. I’ve 80/20’d this already.

Drew Sanocki: I’m sorry. I apologize.

Kurt Elster: All right, so the other… Prior to AutoAnything, you helped run nine-figure apparel brand Karmaloop, so this is… You’re now in your second nine-figure brand here. Tell me about the Karmaloop experience.

Drew Sanocki: You know, as much as… So, my first business was a dropship retailer of furniture, like a predecessor to Wayfair. It didn’t become Wayfair, but it was much like Wayfair, right?

Kurt Elster: It was similar.

Drew Sanocki: Yeah, and I think a lot of people who have been in ecommerce for about 20 years, they know that there was sort of the golden age of drop shipping, which was probably 2000 to 2010, or 2008, where Google traffic is doing this organic traffic. All you had to do was really put product online, and you’d start to rank, you could build that nice, long tail, and your SEO traffic would do this, and you’d make money, right?

As we all know, those days were numbered. I mean, eventually the brands that you were putting online all went online themselves. They would start selling direct. Every category became more crowded. But as a result, you’ve got a lot of… A lot of retailers achieved a high level of scale by doing that, and then got in trouble, so Karmaloop was one of them. I sold my business right when I kind of saw the writing on the wall, that that was happening to drop shipping.

Karmaloop grew to about $100 million. They were in a huge category, streetwear, but increasingly… Initially, it was about getting these brands online. Today you can get it all the brands directly from the brand, or you get them on Amazon, so Karmaloop is there, $100 million in revenue. Margin’s going down as competition increases, and that’s the challenge with that business. They go bankrupt. We bought them out of bankruptcy.

Much the same with AutoAnything, I mean AutoAnything grew off of that macro trend, too, from 2000 to 2010, and here we are today. Commodity dropship retailer, so how do we grow out of that?

Kurt Elster: So, all right, you have framed the problem that Karmaloop faced, and how you were able to acquire it. What did you do to turn it around? How did you add value to Karmaloop loop at that point? And what year was this?

Drew Sanocki: This was 2015.

Kurt Elster: Okay.

Drew Sanocki: Yeah. I think… So, I went in as CMO. There was a CMO, sorry, a CEO we hired from the streetwear industry, Seth Haber. We did a lot on just operational efficiencies, so standard, this is standard, more private equity stuff. Cutting costs, becoming more efficient with the business. Focusing on your top brands, your top products. On the marketing side, we did a lot of probably what you’re familiar with, like lifecycle marketing. This was a brand that, a retailer that every day would send out a 10 or 20% off coupon, there was really no rhyme or reason, to the whole list.

So, we said we gotta stop that. We gotta get away from the rampant discounting, and go a little bit deeper on customer segmentation and personalization, and if you do that well and execute well with your standard lifecycle email campaigns, you can probably get 10 to 20% lift in the profitability of the business, so we did a lot of that.

The next step was starting to get more exclusives on product, and that’s about when we were able to… We turned a profit and were able to sell the business to another acquirer. So, I think if we were to see that beyond that step, it would probably mean sourcing our own product as probably the last step.

Kurt Elster: So, it seems… Well, in your work with Karmaloop, what was the big revenue, the biggest revenue lever you pulled? I know your goal was you did a lot with extending customer lifetime value. Dive deeper into that.

Drew Sanocki: I think as a channel, it was email, so again, the business had a significant email asset. There were several million people on the list, and they were just blasting that list every day with the same… Everybody gets the same promotion. So, what we had to… The challenge we had to do was, “Okay, that makes no sense. What you’re doing is…” And you’re ending up attracting a lot of customers who just buy on discount, right? It creates a really… You don’t attract the kind of customers you want to attract.

What we started doing was leading more with exclusives, so, “Hey, here’s an exclusive product. You can buy it at full margin.” And only then, if people don’t buy it full margin, do they start to see discounting on the site. You know, and then you can do a lot of related items, and sort of email sequences driven off the initial purchase, so if somebody buys a certain brand, we know they’re more likely to buy other brands. Well, that’s what they see in the email sequence over the next several weeks after that first purchase, right?

So, there’s a lot of… It’s really just drilling down on the personalization, and using that, and using our past data to try to increase customer lifetime value.

Kurt Elster: What do you look for? It sounds like what you’ve done here with Karmaloop and AutoAnything is you looked for a distressed business, where you identified opportunities, and you said, “Look, I see how I could turn this around. I could see how this could run better.” Do you have a mental checklist for, “This is the three things that makes a business look very attractive to Drew?”

Drew Sanocki: Well, I think there are a lot of businesses that were like Karmaloop, like AutoAnything, that went online around 2000, they were built, they have a couple things in common. They were commodity dropship retailers. They don’t do a lot of customer segmentation. They were in a big category. Both these categories, streetwear and automotive, were huge. You know, they got much better, orders of magnitude better than my first retailer in modern design, right? Just because of the category they were in. And they’re sitting on really big… You know, this business has 70 million uniques a year, and five million people on the email list.

To some extent, we were buying an audience. Same with Karmaloop, so you now own this audience, how do you monetize it better? Right? And so, it’s on the tech side, I mean we’re doing more of this here than we did at Karmaloop, but can we reinvent the legacy platform, which costs a lot of money to maintain? Today, as you know, there are a lot of off-the-shelf solutions like Shopify, that you can plug, you can get a very big retailer that pays a lot of money for tech, that they don’t have to pay for tech, so that’s like a quick win… grow the business, but gets the business more profitable.

Lifecycle emails and other personalization. Implementing something like Klaviyo that allows you to do a lot more personalization has been sort of in the playbook for both businesses, and again, that gets you a lot more profitable. Doesn’t always grow the business, but what you do with those profits is then put them into things that will grow the business, so that’s usually content, it’s usually sourcing more product. Sourcing your own exclusive product.

Kurt Elster: And you’ve done… Well, what’s the… When you source exclusive product, I’ve never done this, how do you pitch that exclusivity, that collaboration to a brand? Do you say, “Hey, we’ve got this tremendous audience, just give us something, we’ll sell it directly to them.” Is that it?

Drew Sanocki: That’s it! I mean, you usually need… It’s usually not me. Usually need a… This is what a merchandiser does, and I’ve had one big learning in ecommerce, I started in marketing, you were in marketing, is that the best marketing you can do is really product, to have a good product. How many clients come to you and say, “I need help growing my business,” and then you look at their product and it’s crap, right? And you’re just like, “Dude, there’s nothing. You can read all you want about optimizing Facebook ads, it’s not gonna grow that business.” Right? But if you had the kill-

Kurt Elster: Spending money on Facebook ads when you have a product no one wants, you’re just gonna find out faster that nobody wants it.

Drew Sanocki: Right. Right!

Kurt Elster: That’s what marketing will do for you.

Drew Sanocki: Right, but if you sell the iPhone, who cares about your… You don’t have to optimize conversion rates. I mean, a little bit, but people are gonna jump through to buy from you. Right? You’ve got the opposite effect, so I think for any of these businesses, negotiating these either exclusive offers initially, which is an intermediary step, and ultimately sourcing your own product and inventorying it is a key growth lever, and that’s what a good merchant will do for you.

Kurt Elster: So, what’s funny is the Karmaloop and AutoAnything, you described them as commodity dropship retailers, but then your big lever to move them is get and warehouse exclusive products, which is antithetical to being a commodity drop shipper.

Drew Sanocki: Oh yeah. Yeah. You can’t survive as a commodity drop shipper I don’t think.

Kurt Elster: Oh my gosh. That’s the key quote. You can’t survive as a commodity drop shipper. Is that what’s happened?

Drew Sanocki: I mean, Amazon will eat your lunch. If it’s not today, it’s eventually, whenever they get into that category. But you gotta differentiate somehow. I mean, some retailers are able to differentiate a little bit on the service side, so you look at Zappos for example, although arguably they never got profitable, right? They just grew. But can you differentiate? In our space, if we were to differentiate on the service side, it would… We’d start exploring things like installs, right? So, you buy the commodity dropship product, but we also offer installation. Right?

So, something like that would differentiate on the service side. You can differentiate on the product side, which is, “We’ve got this in an exclusive color or fit that you can’t get anywhere else.” Right? But you’ve gotta have something that nobody else does.

Kurt Elster: If you had to go back, you had to… You could call back in time. You’ve got a minute at most to tell Drew pre-Karmaloop, “Hey, let me give you some advice.” 30 seconds, what would you tell yourself knowing what you know now?

Drew Sanocki: I think I probably would have gone harder faster on exclusive product at both that company and this company. I’d go vertical.

Kurt Elster: So, if today-

Drew Sanocki: And I probably would have pushed harder on getting on an off-the-shelf ecommerce platform at both companies. We kind of ended up there with both companies, but it took a while.

Kurt Elster: Let’s say you sell AutoAnything today. You are now bored. There is nothing else left to buy. You’ve got to jump into a new niche. You’ve got to start a new ecommerce store. You’re bored. What are the… What niches interest you? Where do you think the action is at for you?

Drew Sanocki: Well, I’m already doing it. I would go into software that services ecommerce companies.

Kurt Elster: Okay.

Drew Sanocki: I would sell shovels on the ecommerce gold rush, right? And that’s what PostPilot is.

Kurt Elster: So, let’s talk about PostPilot. What the hell is PostPilot?

Drew Sanocki: And I would say because as a retailer, you’ve gotta be able to… You’ve gotta be that merchant. You’ve gotta know what the killer product is that you’re gonna build a brand around. I think of guys like the Kettle & Fire guys who do bone broth. I like… I do paleo myself, so I’d probably, if something like that had occurred to me, then yeah, starting a brand is on the table, because that’s a killer product. But I am not… You need that flash of inspiration that tells you what the killer product is, so if you put a gun to my head and said, “Start an ecommerce retailer today,” I don’t know. I’d probably just try to buy another one.

But what I do see is an opportunity is SaaS servicing ecommerce businesses.

Kurt Elster: Have you done it before? Have you had other SaaS businesses in the past?

Drew Sanocki: I was the CMO of a SaaS company for about a year.

Kurt Elster: Which one?

Drew Sanocki: Teamwork.

Kurt Elster: Oh, Teamwork. Oh my gosh. We use Teamwork to manage our projects.

Drew Sanocki: Yeah. That kind of exposed… So, I sold my company. I started working for a fund that buys SaaS, based in the Bay Area, and in that capacity, I got kind of exposed to the whole world of SaaS.

Kurt Elster: And what was your impression?

Drew Sanocki: I love it. I mean, it’s very… It’s different. I think to some extent, the life… Well, if I had to sum it up, the lifetime values tend to be higher, so it’s a little bit easier to run a SaaS business than an ecommerce business.

Kurt Elster: Because you pay-

Drew Sanocki: You know, ecommerce-

Kurt Elster: You could pay more for customer acquisition cost. The customer lifetime value is higher, and it’s more profitable overall, typically.

Drew Sanocki: Yes, typically. You know, it’s generalization. Of course, there are exceptions, like subscription ecommerce businesses, but you know, in ecommerce it’s… Ecommerce is hard, right? Andy Dunn from Bonobos has this article, you can put it in the show notes, called Ecommerce is a Bear, and he basically says ecommerce is hard because you’ve got to work your butt off to acquire a customer, right? And when you acquire that customer, they come, and they buy. They buy the suit from Bonobos. Then you gotta reacquire the customer to buy again. You know?

You gotta go and spend money on a Facebook ad, or AdWords or something, for the second purchase, unless you’re fortunate enough to get them to… They join your email list, right? SaaS is a little bit different, like you work your ass off to acquire that customer, but then they typically come back the next month and the next month for a while before they churn, so it’s just… It’s another way to look at it. I think you take the good ecommerce marketer, and put them into SaaS, and it’s like you’ve taken this gladiator out of the coliseum. You know, and dropped them in here, where he or she is just kicking ass, because it’s just a different beast.

Kurt Elster: Absolutely. So, you’ve got… You’ve done it. You’ve got a SaaS business. It sends direct mail. Everything is like, “Email’s an owned channel. Email’s the future. Social media. Digital marketing.” And here you are sending dead trees in the mail to customers.

Drew Sanocki: Yes.

Kurt Elster: Tell me about it. How did this happen?

Drew Sanocki: Well, I think the genesis of this, of my owning PostPilot, was probably in 1999, where it was one… It’s always been one of my top marketing channels. Postcards. And it’s really just because once you do that work to identify your core customer segments, and figure out the right offer for the right customer, what do all of us do? We put it in our remarketing channels, and we put those offers in email, right? And they work. Those are super-high ROI.

An example might be like a second-purchase campaign. Customer comes in, bought product A, we know they are gonna buy product B, let’s put that in the email sequence that goes to that customer after they buy product A, right? No brainer. And I would say that works for 99% of the people out there who do that. Well, that still, I mean that same logic applies whether the customer is opening an email, or visiting a remarketing audience, or opening their postal mail. And yet that’s one channel that we all forget about, because it’s old school. Right? It’s a little bit hard to do.

In the past, you had to export lists… and go find a postcard application, upload that list dynamically, and maybe do some interesting things around couponing and hit send, right? So, it wasn’t an elegant way to do it, but I always liked the idea of direct mail. It works, and why not just build an app that plugs into Shopify, where it’s as easy as sending an email? So, that’s kind of what we did at PostPilot.

Kurt Elster: All right, so walk me through the setup for PostPilot. I have never played with this thing. My sole experience is you mentioned it to me, I went, “Holy shit, that sounds cool, come on my podcast,” and I looked at the homepage. So, this is all fresh to me. How does PostPilot work? If I’ve got… Let’s say I’m a Shopify store, I want to plug this thing in.

Drew Sanocki: It’s very easy, so you add it as an app, and to your Shopify install, and what it does, it tells you, “Okay, give us some time to pull in your customer data.” It pulls all the customer data into the app. And by customer data, I mean the postal… Obviously the postal addresses of your customers, what they purchase, their purchase history, so what they purchased, when they purchased, and then that allows you to build segments in the app.

For example, I want to send a postcard to everybody who… an MVP customer. They’ve ordered over a $1,000 from my store, or a second purchase campaign to everybody who bought this thing, I want to market this other thing. You know, so it pulls in the customer data, you go into the app, you design a postcard, or you use one of our templates. You can customize it, you can personalize it. I want to say, “Hey, Kurt,” instead of, “Hey, person.”

And then you tee it up to send, and it sends in the background. The app works much like AdWords, where you buy a set number of credits, postcard credits, and when they deplete, it replenishes.

Kurt Elster: And what do these credits cost? Because obviously, so far what you described sounds exactly like email, right? And assuming email-

Drew Sanocki: It’s a great way to look at it.

Kurt Elster: … is meant to be… I mean, mail is in the title. It is meant to be the electronic version of mail. So, you describing this thing, if I didn’t know any better, it would sound exactly like a newsletter, an email automation software, so it’s the same thing.

Drew Sanocki: I mean, that’s the best way to think about it. I think going forward on our roadmap, we want to turn it into a bit of a prospecting tool, too, where you could choose audiences that don’t… You know, “Give me a list of names I can send a postcard to where I can prospect.”

But today, it’s the same as remarketing, it’s the same as email, right? I’ve got my existing customers, and I jus want to repeat this, really repeat the same offers I’m sending in email, and just get more juice from those offers. So, as you know, what’s the typical open rate for an email for ecommerce?

Kurt Elster: All right, if you’re doing well, you get 25%. But-

Drew Sanocki: 20. Yeah, 20%.

Kurt Elster: But it might be 15% if you’re no great at it.

Drew Sanocki: Yeah, so… Right. 80% of people… all their mail. Their postal mail, including junk mail.

Kurt Elster: Damn, homey.

Drew Sanocki: So, you’ve got this phenomenon where yeah, people open it more, whereas like 70, 80% of your list is not gonna open your email, they may not be on Facebook, and yet they engage with a physical postcard, and you know, it’s just if you do two in sync, you see that conversion rates go up 4%, sorry, 4 times. AOVs go up. It’s just like… I think people perceive of a postcard as a gift from the sender. They don’t always perceive an ad like that, right?

I get something in the mail, even if it’s a piece of junk, I still open it. I still sort of… There’s that sense that it’s a gift from somebody. And so, it’s just a great opportunity to have another on-brand touchpoint with your customer. Another thing that we’re seeing now is that every other channel has become more expensive, so you want to run a Facebook ad, because it’s more competitive, the cost of running an ad keeps going up over time, whereas postal mail is capped, right? It’s capped at… because postage is capped.

So, it’s become competitive from a cost of acquisition point of view with a Facebook ad.

Kurt Elster: So, it seems to me that there may be some advantages here to direct mail. We’re adding another touchpoint. An 80% open rate is extraordinary. The only thing better would be SMS. People are probably less… It sounds like, your description of it’s a gift from the sender, that feels like people are less protective of their post box, like, “My inbox I expect spam, and there’s this terrible signal to noise ratio, so I’m just blowing through a lot of stuff and not looking at it,” hence the low open rates. My mailbox doesn’t have that issue, but my phone, with SMS, people are super protective of it, so I’ve got an issue there.

It seems like direct mail’s living in this sweet spot, where you’re not offending people by sending the direct mail, and you’re not… But you’re still getting the reward. You’re getting this high open rate. The downside, I would have thought, was the cost, but you’re right, it’s capped, and everything else is getting more expensive. Okay, great. So, with sending out… Well, and then the other advantage is I don’t have the same regulatory worries, do I? Do people have to opt in for me to send them a postcard? I don’t think so.

Drew Sanocki: No. No.

Kurt Elster: So you could just send anybody a postcard.

Drew Sanocki: Yes.

Kurt Elster: Okay. There’s an advantage there. So yeah, all right, this is starting to sound… Well, like a wildly missed opportunity for people, that they’re really overlooking postcards.

Drew Sanocki: I think so. I mean, it’s worked at every retailer I’ve been a part of. And if you look at the big guys now, like Warby, Casper, excuse me, Harry’s Razors, everybody’s using direct mail. And it may not be a postcard, it may be a catalog, but it’s in the tool kit for any ecommerce brand now. You’ve gotta be sending direct mail.

Kurt Elster: I love Stance socks. I know everybody’s on board with cool socks now. I love Stance socks. Ordered some Stance socks recently, and a couple weeks later got a nice, folded-in-half postcard in the mail, telling me about the Stance socks subscription program I should sign up for.

Drew Sanocki: Interesting.

Kurt Elster: It got my attention. I was like, “Oh, look at that.” I opened it, I read it, and I have not signed up yet, but it’s in the back of my mind every time I open my sock drawer, and I’m like, “I love fresh…” What’s better than putting on a fresh pair of socks? Nothing. There is nothing better than that.

Drew Sanocki: Nothing. Nothing. Nothing better.

Kurt Elster: And that’s what that subscription should say. What’s better than putting on fresh socks? Now we’re gonna put that on autopilot. You know what?

Drew Sanocki: Does anybody not put on a fresh pair of socks?

Kurt Elster: Well, I meant like new socks. All right?

Drew Sanocki: Okay. New socks. Got it. Yeah.

Kurt Elster: No, I’m not re-wearing my socks. I’m not a monster, Drew. God. That’s disgusting. All right. It sounds like you got some experience here. What is a good versus bad postcard?

Drew Sanocki: I think it’s just like an ad. You know, you need a solid call to action on the postcard. Obviously, they need to know who it’s from, so some product photography, or brand photography, very important. And then I’d say personalization, just like email. Address it to me. You know my name. Put the name on the postcard. Give me a custom coupon. Make it related to what I bought before. If you know I’m a man, because I bought men’s clothing from your apparel brand, don’t send me an offer for a dress, send me an offer for something related to what I purchased before.

Kurt Elster: If I can only run… It sounds like these are like email flows. If I can only run one postcard flow.

Drew Sanocki: Postcard. Where to start?

Kurt Elster: What would it be?

Drew Sanocki: Where to start. I think, think like email. Abandoned cart almost always works, right? You could do an abandoned cart postcard. Obviously, you need the customer’s address, but for a lot of your customers, they’re abandoning their carts, you got the address already. And then I would say like a second purchase campaign, so somebody bought X, sell them Y in the postcard.

You don’t have to offer… You could put a coupon in that, but just the simple, “Hey, we still exist. This product is related to the first product you bought,” does really well, too.

Kurt Elster: I like this. All right. If I want to sign up today, where do I go? What does it cost me?

Drew Sanocki: Thank you, Kurt. You can sign up there. It’s in the Shopify app store. And again, the cost really depends on the volume you send, so you-

Kurt Elster: Well, give me an idea.

Drew Sanocki: If you buy more… I think the highest tier, or the lowest tier, is somewhere around 60, 70 cents per postcard, but that goes up and down. We do have an offer. Am I allowed to do offers on your podcast?

Kurt Elster: Please do.

Drew Sanocki: Okay. 15% off your first purchase, so go there, use… Let’s come up with a coupon. Kurt15.

Kurt Elster: All right, let’s do it. Get 15% off your first-

Drew Sanocki: Kurt15. K-E-R-T. Is that how you spell your name?

Kurt Elster: K-U-R-T.

Drew Sanocki: I’m joking. I’m joking. K-U-R-T. Yeah.

Kurt Elster: Yeah, but some of these people don’t know. There’s someone who’s gonna be typing K-E-R-T15, and like, “What the hell?”

Drew Sanocki: Now there’s gonna be a zillion. Yeah. There’s gonna be a zillion, and they’re gonna spell out 15. It’s gonna be like the longest coupon code.

Kurt Elster: It’s in the show notes.

Drew Sanocki: K-U-R-T-1-5.

Kurt Elster: There we go.

Drew Sanocki: There you go, show notes.

Kurt Elster: Okay, and it’s in the show notes.

Drew Sanocki: But yeah, take that, which further decreases the cost of your mailing, and then set up a second purchase campaign.

Kurt Elster: I like it. We’ve got… We have a call to action here. Where could I go to learn more about you?

Drew Sanocki: is my blog, and I talk about ecommerce on the blog. Lessons learned, case studies.

Kurt Elster: All right. We’ll put nerd marketing in the show notes.

Drew Sanocki: Musings.

Kurt Elster: Musings. No one wants to read your musings.

Drew Sanocki: Sure, musings.

Kurt Elster: Lessons learned, sure, but no musings.

Drew Sanocki: Yeah, I try to make it like evidence-based approaches to running a direct to consumer brand.

Kurt Elster: All right. Any last words or parting thoughts before we wrap it up?

Drew Sanocki: No. This has been a lot of fun. If you have any questions, reach out to me. Reach out on Nerd. Say hi. Yeah. I love talking to your audience.

Kurt Elster: I appreciate it. Thank you, Drew. We’ll wrap it up there.

Drew Sanocki: Thanks, Kurt.