The Unofficial Shopify Podcast

(What to do) When Inventory Runs Out

Episode Summary

or "How to save Christmas"

Episode Notes

In this episode, Rhian Beutler and Kelly Vaughn join us to discuss the state of the supply chain and the economy in Q4, what that means for your store, and what you can do to avoid "dead ends" on your site and "save Christmas for your customers."

Show Links

Sponsors

Never miss an episode

Help the show

What's Kurt up to?

Episode Transcription

The Unofficial Shopify Podcast
11/9/2021

Kurt Elster: Today, on The Unofficial Shopify Podcast, we are discussing the economy, supply chain, and why gift cards matter, as well as some other solutions. Actually, I have two really smart folks joining me to dive deeper on it, to break it down. We talked about supply chain issues about a month ago, and things have evolved since then, and I want to go deeper on the topic, so consider this… This is like a CNBC panel, right? We actually… We got some folks smarter than myself to explain what’s going on to me.

But listen to this. This is an article from Bloomberg that I really like. The title was Gift Cards Expected to Surge Amid Shortages. “This year, the amount spent on gift cards is expected to rise 27% this holiday season to $270 per person, with gift cards accounting for 40% of total gift purchases.” 40%? Whoa! That is quite a lot. I’m your host, Kurt Elster, AKA:

Ezra Firestone Sound Board Clip: Tech Nasty!

Kurt Elster: And I am joined by Kelly Vaughn and Rhian Beutler, both who have coincidentally started a gift card app called Govalo and have been hosting a podcast called Commerce Tea that’s very good. And so, we’ve got quite the exciting discussion ahead of us. Welcome. How you guys doing?

Rhian Beutler: We’re doing awesome.

Kelly Vaughn: Doing great.

Rhian Beutler: Sorry, I’m talking for Kelly. I’m like, “We are great.” What about you?

Kelly Vaughn: How dare you? We, whenever Rhian and I get together now, and Rhian and I have been building this company on opposite coasts. She’s just outside of L.A., I’m in Atlanta, but we’ve been trying to find opportunities to get together, and every single time, at least by day three, when people ask us a question, we answer with the exact same thing at the exact same moment, so things seem to be working out building this company together, it seems.

Rhian Beutler: Or is it creepy?

Kurt Elster: Basically, you’re twinsies, is what I just heard.

Kelly Vaughn: We are twinsies. We are twinsies.

Kurt Elster: There are some things going on with the economy. That’s what I want to talk about first is okay, what is different about the U.S. economy, like that has a larger effect on North America, but I apologize for my international listeners. We’re largely a U.S. audience and show. So, is there anything going on in the news that I should be worried about? Anything I should be concerned about? I know we just… There was a pandemic last year that was quite… That was an adventure. Now, what is this year’s problem? What’s 2021 have to screw with me?

Rhian Beutler: Well, still the pandemic. There’s also that still.

Kurt Elster: Yeah. It just doesn’t go away.

Rhian Beutler: It just doesn’t go away, which kind of colors the rest of everything else, because it adds a level of complexity onto already complex systems. So, one big challenge right now is the supply chain, which I’m sure all y’all are like, “Yes, we’ve been hearing about this. We’ve been reading about this. But what does it mean? I saw a Twitter thread. What’s up with that?”

Kurt Elster: Lester Holt tells me every night on the evening news about… He gives me an update on the supply chain. And it never seems to be getting better. It’s not getting better.

Rhian Beutler: No. It’s getting worse. And okay, this isn’t actually funny, so my husband right now is living in Long Beach with our daughter. She goes to this water polo thing. And he bikes every day down by the water and takes pictures of how many boats, container boats, or container ships are out in the water, and as of last count… This is not him counting, this is me reading an article about it, there’s 80 boats in the water outside of Long Beach. It’s the most there’s ever been.

Kurt Elster: Yeah. They keep setting the record. The previous record is like-

Rhian Beutler: They keep setting the record.

Kurt Elster: 45, right? And it just has been going up steadily.

Rhian Beutler: Yeah. And this is like not a Guinness World Book of Records moment where we’re trying to beat this record, because this is a bad record that nobody wants to have, and we’re seeing it in all sorts of ports, too. It’s not just Long Beach. It’s not just L.A. It’s also Savannah. It’s also global ports. So, I think that’s also important, because we’re seeing a lot of U.S. coverage of like, “Oh, Long Beach, L.A.” Well, yeah, but the ports in other countries too are bummed up, should I say.

But of course, a supply chain, think of a chain, if there’s a weak link, that’s not good. Unfortunately, right now, the entire supply chain is a weak link. Every link is weak. And that is contributing to this challenge.

Kurt Elster: Right. We have the boats pilling up outside the port. Then we need to get… And the product just sits. I have plenty of clients.

Rhian Beutler: The product just sits.

Kelly Vaughn: Yep.

Kurt Elster: Where like, “Yeah, it’s in the U.S. technically. I don’t have access to it.” And a lot of people it’s like, “Well, they got it off the ship. Now it’s stuck in customs.” I have several clients where they’re like, “Yeah, we thought we were good. Now it’s just sitting in customs, and it’s been that way for a month.” And so, all right, sits in the water outside Long Beach, or L.A., or Savannah, and we pick on Long Beach just because they have the largest line waiting.

Rhian Beutler: They do.

Kurt Elster: And so, all right, then we gotta get the containers off the boat into the port, then we have to get them on a truck, and then the containers have to come back at some point, because we don’t just like trade containers, right? And then, so along the way, we don’t have enough dockhands, we don’t have enough time and labor, we don’t have enough truck drivers, because this is quite the amazing thing I learned, the truck drivers are owner operators, meaning they’re 1099 contractors.

Rhian Beutler: Yes.

Kelly Vaughn: Yep.

Kurt Elster: And so, they sit in line for hours waiting to pick up the load. They’ve got the empty chassis, they call it, the truck. They don’t get paid until they pick up the container.

Rhian Beutler: Isn’t that brutal? I feel like they should be getting paid.

Kelly Vaughn: It’s awful.

Kurt Elster: Brutal. And so, a lot of these guys are like, “Look, I’m not dealing with it. I’ll go do runs for Amazon.”

Rhian Beutler: Well, wouldn’t you?

Kurt Elster: Oh, I don’t blame them at all.

Rhian Beutler: I don’t blame them at all. I feel really empathetic for them. And then let’s say they do finally get the product, right? And that they bring it out. Then they’re trying to deliver to a warehouse that is understaffed, doesn’t have space, and they need to get all of the stuff out of the shipping containers, and one thing that’s interesting about that is typically when we bring a shipping container from let’s say China to California, to a warehouse in California. Typically, that warehouse, or another warehouse, or a group of warehouses fill the shipping container back up before sending it to China. Import and export.

Right now, we are unloading shipping containers and just sending them back empty because that’s how badly our… That’s just how high our demand is in the United States right now. Not just for holiday, but in general. Our demand is going up, and up, and up, and up, and that’s pre-holiday, so when holiday hits and it hockey sticks, the logic here, which I don’t think is gonna happen, is, “Well, if we just send back all of these empty containers, they’ll come back full of stuff.”

But I would posit that if your stuff as a merchant isn’t already in the water, I’m not certain it’s gonna get here in time.

Kurt Elster: Oh, I sincerely doubt it. It’s funny, I asked Ezra, we were doing a pre… Ezra Firestone. We were doing a pre-interview before I recorded with him recently, and I said, “You know, it’s 2021. With the supply chain, what’s your advice there?” He goes, “Well, if you don’t have your stuff already, you’re fucked.”

Rhian Beutler: Yeah.

Kurt Elster: Holy crap.

Kelly Vaughn: Yeah.

Kurt Elster: Like, he’s right.

Kelly Vaughn: He’s right. It’s a hard truth but that’s the reality of where we are right now.

Rhian Beutler: Yeah. It’s not good. No part of it is good. And then, you know, you go to like last mile delivery too, right? And we don’t have enough drivers there. I mean, there’s every single part is broken, and it’s really unfortunate, and what makes me the most bummed out is it impacts small businesses at a disproportionate rate. Because Walmart, and Target, and Home Depot, they are literally just buying charter planes, and buying charter boats, and they’re buying the entire supply chain, which they’ve never done before, so they can control the entire… Which, I get it. They’re huge. They’ve got the dollars. They can just casually buy a charter jet.

And your average small business just can’t do that. And before, small businesses were relying on being on these jets with other companies, right? Other small businesses. Well, you can’t do that if Target owns the jet. There’s no space for you. And they were already 10Xing price before this even started, and so now all these charter boats and charter jets are gone, because now they’re privately owned by…

Kurt Elster: When we talk about the system being broken, part of the brokenness is just the sheer expense, like just the ballooning costs here. Okay, so in regard to the supply chain itself, excellent recap, excellent job terrifying me all over again. Truly. It scares the hell out of me. Anything else on the supply chain itself? Because I want to move into… That is the practical reality of today. What is the effect of that on the United States, on our economy? What is the macro impact there?

Rhian Beutler: The macro impact is our consumer price index is through the roof, which is why we’re seeing Social Security recipients are getting… I believe it’s like a 4.8 or 5.8% raise. It’s the highest one ever.

Kurt Elster: What’s wrong with… That sounds good. A raise? I like that.

Rhian Beutler: Well, no, it normally is pegged on inflation, right? So, normally it’s like a 2%. Every year. It’s a fixed income situation. However, this year 2% doesn’t do anything against our inflation, so therefore, like Bank of America is offering 5%, period, like regardless of performance review, you are definitely getting a 5% increase just to keep up with cost of living. So, we have just an inflation event. What I’m trying to say is things are going to cost a lot more money and it’s going to take a while longer to get your products than what you’re used to and buy a while I mean potentially like a month or so.

Kurt Elster: And so, what is driving… What’s the driver here for consumer price index? Is it literally like the econ 101-

Rhian Beutler: Demand. Yeah.

Kurt Elster: Demand outstrips supply?

Rhian Beutler: Demand outstrips supply.

Kurt Elster: I’m just some guy in my house and I’m doing my regular shopping, but I can’t get the stuff. We can’t get it in fast enough. Or is it I’m… As the end consumer, I hate that word, consumer. As the end purchaser, I’m panic shopping? Or are the merchants panic buying inventory and then it’s just escalating the problem? Or all of the above?

Rhian Beutler: I think it’s all of the above, and also, we have seen since the beginning of the pandemic demand in general going up. Okay, so once we reached that first part of the pandemic, and then everyone was like, “Okay, we’re gonna be fine, we’re just gonna have to be inside for a while.” We hit that part. Then demand started going up in general. Demand started going up. Initially, it was like house plants, and remember flour, like remember when everyone was making bread, and then flour was out, and then toilet paper was out everywhere, but people we’re noticing are making on average more money, and a lot of it has to do with because they’re working from home, they aren’t having the typical expenditures, so they have more disposable income, therefore they are spending it, which is then increasing demand.

Kurt Elster: Okay. That part sounds good.

Rhian Beutler: Yeah. Their demand increases, so does merchants’ demand, and like you were saying, and right now in China there’s rolling blackouts and the factories aren’t able to work at the pace that they traditionally work at. Not to mention China has a zero COVID approach, so like if one person gets sick in a factory, they shut the entire factory down. So, there’s also that, so not only is there rolling blackouts, there’s also the COVID zero approach impacting, and it’s easier to get sick when you work in a factory, because you’re in very close proximity to everybody.

So, yeah, it’s a lot of a lot of things, and I would recommend everybody, if you casually feel like reading a supply chain book, it’s called The New (Ab)Normal: Reshaping Business and Supply Chain Strategy Beyond Covid-19, by Yossi Sheffi. He is an MIT professor, but I found this book… A, it’s really weird to read about the time you’re living in, but it’s written as history, so that’s kind of interesting, but also it really breaks it down into a manageable, you don’t need an MBA to read this book way, which is a skill. So, I digress.

Kurt Elster: There’s some scary specters here. I think the idea of more disposable income, all right, that’s positive, I like that. On the other side, facing these challenges ideally creates a better, stronger supply chain after it’s been broken, so that’s positive.

Rhian Beutler: That is positive. No, that is positive. We have to reimagine the way the supply chain works and reevaluate where we operate from, and build from, and how we treat our truck drivers, and our factory workers, and everybody along the supply chain. I think it’s a very good time to reevaluate.

Kurt Elster: And our longshoremen, as well.

Rhian Beutler: And our longshoremen. There’s just so many people a part of this, and a lot of it has to do with stagnant wages for them.

Kurt Elster: Absolutely. The other looming specter that we have not… I don’t know that we’ve experienced yet, is Shipageddon. Is there… Last year, we had stuff, we had those terrifying pictures of just like overflowing to the rafters distribution centers, and stuff not showing up on time in Christmas, and delayed packages, and just general craziness around shipping. Why do you think it’s gonna be exponentially bad?

Rhian Beutler: Because of the supply chain disruption and because of the way demand is increasing. It’s unheard of almost to have these two things happen at one time.

Kurt Elster: So, demand has hockey sticked while supply-

Rhian Beutler: Has plateaued. If not gone down.

Kurt Elster: Yeah. I was gonna say just got like either hit a ceiling or got cut off at the kneecaps.

Rhian Beutler: Yeah. And this also impacts for those economic nerds out there, this also impacts luxury brands, when typically, luxury brands are sort of exempt from normal economic laws. This is impacting luxury brands, as well.

Kurt Elster: How so? That’s interesting.

Rhian Beutler: Yeah. It is interesting, right? Because people have more money, they are buying more luxury goods, and again, it’s a demand thing. There’s just way more demand for luxury goods than we’ve ever seen before. So, and it is important to note, and I wanted to just quote, there’s an article right now in The Economist. The Economist is something that I love to read. Very interesting. There’s an article called America Inc. and the Shortage Economy, and it quotes the… Jerome Powell, who’s the chair of the Federal Reserve, and he said on October 22nd that supply chain problems may last, “well into next year and it’s feeding through industry, railways, traffic volume, semiconductor, car production,” the whole… I mean, it’s a thing.

Kurt Elster: What was the name of the article? Oh, America Inc. and the Shortage Economy.

Rhian Beutler: Yeah. America Inc. and the Shortage Economy.

Kurt Elster: Got it. Okay. I will include that in our show notes as you have given me so much reading material today. Aren’t you writing a research paper on this?

Rhian Beutler: I am. Yeah, so I launched… There was one that came out last week that was just like a really light version of it. Right now, I’m writing an article called Just in Time is Too Late, because we’ve worked on a just in time supply chain for so long, so that is… That means basically, like let’s say you’re Nestle, and you’re used to ordering Cheez-Its. I don’t know if Cheez-Its is even… I think that’s a Nabisco product. Whatever. Cheez-Its, but only with like a one-week lead time, and you’re used to just getting the product, getting the product, getting the product, and that’s called just in case. And it especially pertains to like phones, and Oculus devices, and things like that.

Kurt Elster: What… All right. Our issues are we can’t get inventory into the country, so even if you’ve got the cash, you want to pay for it, as a merchant, you can’t necessarily get it here. And inventory you were counting on and that you were like, “I’m a good boy. I ordered my inventory in July.” It’s not showing up yet. So, we’ve got… That’s issue one. Consumer Price Index, we have higher prices. Inflation’s going up. Things are getting more expensive. And demand is increasing, which only compounds this problem.

Rhian Beutler: Yes.

Kurt Elster: And then potentially, we’re also dealing with Shipageddon on top of it, where it’s like even if you have the stuff, we may have issues getting it out the door and to the customer in time for Christmas. So, what then… What are the impacts? We talk about our issues, our macroeconomic impacts. What are our microeconomic impacts? What are issues… If I’m an individual merchant, what else am I seeing here?

Rhian Beutler: You’ll have a hard time probably getting packaging, like if you sell coffee beans, it’s gonna be hard to get the bag that the coffee bean goes in. So, we’re noticing that a lot is packaging. And also, a lot of your products are gonna go out of stock, and you need to have a game plan for that.

Kelly Vaughn: You’re going to have increased support debt because you’re going to have a lot more questions coming in. Where is my order? Why hasn’t it arrived? And when is this going to be back in stock?

Kurt Elster: Okay, so we have… It’s not just I can’t get my inventory. It’s I can’t get everything. Potentially, it’s I can’t get packaging supplies, I can’t get the packaging itself. There’s just any one individual component disappears, and I have a problem.

Rhian Beutler: Yes. Yes.

Kurt Elster: So, I need to be aware of that as it’s holistic. Anything that you’re buying potentially just disappears on you.

Rhian Beutler: Correct.

Kurt Elster: So, you gotta be prepared for that, but then how do I state that and give that advice without ultimately encouraging people to panic buy and exacerbate the problem?

Kelly Vaughn: So, I think it’s how you approach the issue. First off, your customers are… I mean, you’re in the same boat as your customers. You are a customer yourself, as well, so what would you want to hear from other merchants that you would be purchasing from? I would take it from that perspective when you go to talk to them. There are a couple things that you can do. I’d say first, just to be real with them. If you’re not going to have something in stock, tell them, but maybe suggest something alternative that they can hold over time. Gift cards are a great option as one of those things, or alternative products, but also just keep that line of communication open. If something is in stock or something’s delayed, make sure you’re updating the customers over time to make sure that they have the latest update.

Even if you don’t have an answer of when it’s going to arrive, just acknowledge their frustration, the fact that they have not received that item. If you can, if you want to incentivize them in some way, like I just mentioned a merchant who gave me a $50 off my next order because my furniture is not arriving until December, you can do that. But I also understand that if you’re struggling to get product in, your revenue is probably taking a hit, as well, so it’s totally understandable. You could take a delayed gift approach, so offer them a gift card that will be good starting in January or something like that.

And I think you may have talked about that on a previous episode, didn’t you, Kurt?

Kurt Elster: I did. I saw Web Smith tweeted this, and… very bright guy. And I had suggested… I like this idea that if you’re entirely out of stock on inventory, you offer people as a promotion gift cards at a discount, and then you delay it to the following year. So, it’s like, “Hey, you could buy and give gift cards right now at 10, 15% off, but the catch is it doesn’t work until January.”

Kelly Vaughn: I will say just to caveat that one point, talk to your accountant before you do that, because you’re going to run into… When you’re discounting gift cards, how does that affect your bottom line, and also when you’re passing over to the new year, if you’re doing… If you have an… I’m blanking on the-

Rhian Beutler: Deferred.

Kelly Vaughn: What? No, not deferred revenue-

Kurt Elster: Oh, I’m not a CPA.

Kelly Vaughn: I mean the type of cash-based accounting or accrual-based accounting. That’s what I was looking for. How it gets attributed to your cash statements is going to change based on how you’re doing your accounting, as well, so talk to your accountant before you actually pursue that avenue.

Rhian Beutler: And I’d like to give the disclaimer that none of us are able to give accounting advice. Take all of that with a bucket of salt and please reach out to your professional.

Kelly Vaughn: A bucket of salt.

Kurt Elster: No matter what I ask my CPA, he’s like, “Well, you could try that, but I’ll tell you how it didn’t work when you get out of jail in seven years.” I’m like, “Yeah, it’s good. You’re no fun. I want a more creative accountant.”

Kelly Vaughn: I did want to touch on one thing you mentioned about panic buying. So, I would flip the script a little bit. Instead of saying, yeah, like we saw what happened with the petrol situation in the U.K. where they were panic buying gas. I live in the Southeast, when they had the pipeline issue, same thing, people were lined up out the door to get gas when they didn’t need it. That’s a whole thing.

I would actually, if you know that you’re going to be running into supply chain issues as you move through the holiday season, send an email to your customers now letting them know if you’re not… There are two things you could do. If you’re not planning on running a sale during Black Friday Cyber Monday, or you’re starting that sale early, send an email saying that this is the best sale we’re going to be having this season. Don’t worry about waiting. We recommend not waiting. Go ahead and purchase now so you know you’ll get your items.

Or you can send a price guarantee email instead. Be like, “If you purchase now and we happen to… We get inventory in, and we end up discounting, whatever it might be, we’ll honor the new price for your previous purchase if you purchase by this date.”

Kurt Elster: I love both those ideas. Because yeah, you’re saying… You’re busting the objection. The objection to buying in October or November is, “Hey, if I had just waited to Thanksgiving, would I have gotten a better price?” And I saw this great example from AutoAnything, autoanything.com, they sell car parts drop shipping, and they sent out an email that said, “Hey, we’ve got a price match guarantee where if you buy now, and if we offer it at a better price later, we’ll make up the difference.” And I don’t know the details of it, but yeah, it brilliantly kicks that objection out of the way, where you’re like, “Okay, great. I can pull the trigger now.”

And I’m incentivized to do it because… Well, if I wait, I may not be able to get my stuff. This year’s hottest subject line, “In stock and ready to ship.” You don’t want to wait on the stuff.

And I don’t know, anecdotally, just it feels like I am seeing more people out shopping, and more people doing their Christmas shopping earlier than usual.

Kelly Vaughn: Yes, and I hate to call it this, but when you work in eCommerce, we have so much knowledge about supply chain, inventory issues, whatever, so when I see what I call the normals, as in like the normal people in my life who don’t work in eCommerce, talking about buying their holiday-

Kurt Elster: You refer to non-eCommerce professionals as normies? Are you kidding me?

Kelly Vaughn: They’re the normals. That’s what I call them.

Kurt Elster: Normies.

Val Geisler: Oh my gosh.

Kelly Vaughn: Anyway, I see them talking about how they’re going ahead and buying all their gifts now because they’re worried about what’s gonna happen, and they don’t know everything that we know.

Val Geisler: That is true. If there’s non-industry people worried about the supply chain and talking about supply chain, and asking us about the supply chain, that means this news is like wall to wall.

Kurt Elster: It is. It is. Well, no, it’s daily. It’s every evening news, every day. They’re at the port and they’re talking about it. So, certainly it’s out there and realistic. Kelly, I like your idea, so all right, you said we want to be transparent, so number one, we’re gonna lean on communication. And I’ve seen more and more of these like plain text, first person, letter from the founder, CEO, whatever, saying, “Hey, here's what’s going on. This is our availability. This is our inventory. Here's why we don’t think you should wait to buy.” And I like those emails a lot when they’re honest, or at least they appear to me to be honest.

And so, it’s personal, it gives people an incentive to buy. I like that there’s that story there. And then we want to communicate, set expectations, and try and communicate around estimated ship dates and genuine availability. Like you don’t want to be selling stuff that’s sold out. That dreaded allow overselling checkbox in your Shopify product listing might be your enemy here.

Kelly Vaughn: Yes. In this case, yes.

Kurt Elster: Additionally, well, and then the other thing you mentioned was support, like hey, where’s my order? And you talked about increased support debt. That’s interesting. Tell me a little more about that.

Kelly Vaughn: Yeah, so along with the objection busting of when should I go ahead and place my order, should I wait, I probably want to wait because I wait every year, you’re going to be getting more questions. You might be flat out getting questions, being like, “Do I need to order this now?” Or if you have something that’s currently out of stock, but you have it for preorder, but you don’t say when it’s actually gonna be available, you might get emails being like, “When will this come back? Will it arrive in time for whatever holiday I’m celebrating? Because I want to give this as a gift.”

So, when you see this increased support debt, and we’re going to see more, and more, and more of it during the holiday season, now is the time to start training your customer support team on how to answer these questions, but how to identify repeat questions so you can start building up your FAQs. I love talking about a good FAQs page. Build up your FAQs. Answer these questions ahead of time so they don’t actually ask them to you. If you offer live chat on your site, or even if you don’t actually have it turned on live but it’s still an opportunity to send an email to you, the merchant, you’re able to see these questions that are coming in, and often a lot of these tools allow for suggested answers to their question, and you can answer these questions directly in there. So, you’re saving some time with your team.

Kurt Elster: So, assume that the support load will increase. You have a fair idea of what some of those questions are gonna be around. And then preempt it with self-help tools and automation. So, I could use like a live chat with automation, like Gorgeous can help with that, where it’s looking for keywords and will try and answer people with macros. And you’re talking about the FAQ. I think having a strong FAQ page is great. One of my favorite customer support tactics is, “Hey, contact us.” And then on the contact page, top three FAQ questions are right there. It’s like, “Hey, you looking for your order? Here’s your order lookup tool. Hey, you trying to start a return or exchange? Head to Narvar,” or whatever the heck returns manager you’re using.

Kelly Vaughn: Also put those FAQs directly on the product pages.

Kurt Elster: Oh, yeah. Of course. Like when will I get my stuff? What about tools that can display estimated ship date, like Fenix Commerce?

Kelly Vaughn: Yeah. I mean, as long as they’re accurate, which that’s the big question mark.

Kurt Elster: That’s my fear.

Val Geisler: Yeah.

Kurt Elster: Is like if it promises that, oh man.

Val Geisler: That would be my concern.

Kelly Vaughn: Somebody takes a screenshot of that and is like, “Well, you said on your website it would arrive by December 20th. It is December 24th and it’s not here yet.”

Kurt Elster: Sir, let us refund your free shipping in full. 100%. You know what? 110.

Kelly Vaughn: Oh my gosh.

Kurt Elster: Excuse me. Sir? Okay. But all right, that’s gonna help us get prepared. Let’s move into our worst-case scenario, which may be a good problem to have. I’ve got my inventory, people panic buy, November 15th rolls around or whatever, I’ve sold out. I sold out of all of my stuff, 80% of my stuff, and now people go landing on my website. All my products say sold out. This is a pretty bad scenario. That’s what we’re trying to avoid, but it’s gonna happen for some people.

Kelly Vaughn: Absolutely.

Kurt Elster: What do we do?

Kelly Vaughn: First thing I would do is if you do have a lot of sold-out products, don’t display sold out products on your homepage. If you have a section featuring products, do not include sold out products. If you don’t have available products, don’t show that section, because if I land on a website and I see everything on the homepage is sold out, I’m gonna bounce real fast, like, “Okay, well, there’s nothing to buy here.”

So, step one-

Kurt Elster: Especially now.

Kelly Vaughn: Exactly. Exactly. Step two, on your product page, you should never have any page on your website be a dead end. And what I mean by that is if you are on even like your About Us page, if I’m reading your About Us page, there should be a call to action to continue shopping from there. No page should have a dead end. But on the product page, if I land on a page and that item is sold out, what are you going to offer me? What else can we do here? So, there are two things that I often… Well, one thing I always see. Second one, we recently added with Govalo, which I absolutely love.

The first one is a restock notification. So, if an item is sold out, I can enter in my email address or phone number and get a notification when the item comes back in stock. There are all kinds of apps in the app store that can do this, such as the very cleverly named Back in Stock App. Love it.

Kurt Elster: Yeah. Great name that they were the first mover on that.

Kelly Vaughn: Exactly.

Kurt Elster: And it’s a feature in Klaviyo, but you have to modify your product form to make it work.

Kelly Vaughn: Yes. Exactly.

Kurt Elster: But it is built in.

Kelly Vaughn: It is built in and it’s really helpful, because then you have all the data under one roof and it’s great. I’m a big fan of Klaviyo’s back in stock integration, as well.

The second one is below, what we do on Govalo is if you land on a product and that variant is sold out, we add a button below that sold out button that says, “Send a gift card instead.” And the purpose here is to give you another option to purchase something in its place. You always have that option. And I think it’s okay to have both this and their back in stock notification or the restock signup on the same place, because you’re addressing two different points here.

If I’m buying for myself, back in stock notification sounds great. If I’m buying for somebody else, at least I can get them a gift card.

Kurt Elster: Should we offer preorders? I’m thinking the answer is maybe not.

Val Geisler: I wouldn’t.

Kelly Vaughn: Only offer preorders when you can guarantee a ship date.

Kurt Elster: Yeah. It’s such a risk because it’s like, “Oh, I got the cash.” You can’t use it.

Kelly Vaughn: Exactly.

Kurt Elster: And then on the off chance you have to refund everybody, you’re eating the transaction fee both ways.

Kelly Vaughn: Yeah. And there’s a limit on credit card authorization times, so you have to actually process the order.

Kurt Elster: Yeah. You can’t just let it sit.

Kelly Vaughn: Exactly. And then you’re gonna run into all kinds of issues, so I do not… Unless you absolutely know for a fact 100% when you’re gonna have those items in stock and how much you’re going to have in stock, do not offer preorders. This is not the season to be doing that.

Kurt Elster: So, the thing I want to avoid is this idea of dead ends, which is like a conversion rate optimization truism, and you had that great example that I like, which was hey, on your About page, when you scroll to the bottom, what’s there? Just your footer? You screwed up. It should be like, “Hey, founder’s favorites, here’s a featured collection.” That kind of thing.

All right, great. And so, with our shopping experience, with our merchandising, dead ends are the concept we’re trying to avoid as stuff goes out of stock. And you said, “Hey, you don’t want to land on the homepage and the featured collection is 80% out of stock, because people are gonna go this is probably not worth my time, and they’re gonna bounce, go elsewhere.” And so, in Shopify, the easy way to do this is if it's a smart collection, one of your rules could be like inventory greater than zero.

Kelly Vaughn: Exactly.

Kurt Elster: So, it’ll automatically start pulling that stuff out. And then if they do get to a product page in which my stuff is out of stock, we have… Certainly, we don’t just want to lose them, so we want to capture their email, so a notify me when this is back in stock form. An app, be it Klaviyo or something else could do this. It’s built into some themes, but it doesn’t work well, because it just sends you a message with their email and then you gotta figure out what to do with it. It’s like, “All right, we got half the solution, not the whole thing.”

Kelly Vaughn: Speaking of support debt.

Kurt Elster: Yeah. Seriously. You know, go put those in a text file and hope you can figure it out later. Oh, and then the other option, and this is the very clever one, is gift cards, and this is what you seem to have an app that assists us with this, yes? What is it called?

Val Geisler: We have an app. Govalo.

Kurt Elster: What does it do?

Val Geisler: Long term, we’re reinventing the digital gifting experience. In the short term, we are helping Shopify merchants make a delightful moment, or have a delightful experience for their buyers. So, Kelly, do you want to speak to more about how it functions? But basically, let me say this too. One thing that’s really important about Govalo, especially leading into the holidays, is we’re trying to help merchants utilize gift cards in a way that will delight their customers while other people are disappointing them, and it’s gonna be a competitive advantage that people will remember next year and the year after, and it will really help with recurrent business and folks and loyalty. So, that being said, over to you, Kelly.

Kurt Elster: I like that framing.

Kelly Vaughn: Beautiful. Definitely not on our pitch deck. Okay, so the native Shopify gift card experience, so you can use gift cards on Shopify on any plan. This was changed at the beginning of the pandemic to open up gift cards to everybody.

Kurt Elster: Thanks, Tobi.

Kelly Vaughn: Yes. Thank you, Tobi. So, traditional brick and mortar businesses could at least start something online, being a gift card. So, the way it works is with Shopify, if I were to buy you a gift card, Kurt, from a Shopify store that’s using the native gift card functionality, I purchase the gift card. It gets sent to my email and then I forward you an email or print off the page and be like, “Hey, I got you a gift card. Here you go. Check your email.”

Kurt Elster: I know.

Kelly Vaughn: Really… There’s no gifting as part of that.

Val Geisler: It’s not a gift.

Kelly Vaughn: It’s just purchasing a gift card. It’s not a gift. So, one of the easiest things-

Kurt Elster: What if I use really nice printer paper?

Kelly Vaughn: You know what? There is still a need for physical gift cards, and that’s where the really nice printer paper comes in. So, I’ll give it to you.

So, what we’re solving here with Govalo is a super easy solution. If I’m sending you a gift card, I purchase the gift card, I enter in your name and email address and a gift note, and Govalo delivers the gift card directly to you. Great. Now I’ve actually gifted you something. One thing we’re also doing with this is setting a delivery date, so if I want to purchase something for you for Christmas, for example, I can go ahead and purchase that now, but set the delivery date to Christmas day, and you’ll get the email on Christmas day instead.

So, you can plan ahead, because all of us are planners, of course, so you can plan ahead and prioritize buying early, and just check those names off of your list.

We’re also working-

Kurt Elster: So, I’m on-

Kelly Vaughn: Yeah, go ahead.

Kurt Elster: So, if I’ve got the traditional Shopify gift cards available on all plans, I offer the gift card in my store, and then all right, now I’m changing hats to I’m the customer. I have to go to the gift card product detail page, I buy the gift card, it then emails me a link to my gift card code, and then I print that, I stuff that in an envelope and then hand that to someone as a Christmas gift.

Kelly Vaughn: Exactly.

Kurt Elster: That is the current system. Okay. What Govalo does, I land on a product detail page, the product is sold out. Your app then swaps in a buy a gift card, buy this as a gift card, it adds a button to get a gift card?

Kelly Vaughn: Send a gift card. Yes.

Kurt Elster: Send a gift card. Okay. I click the send a gift card button and then it’s going to do the fancy digital delivery to them, and I get to pick the date it happens on.

Kelly Vaughn: Exactly. And so, we’re sending-

Kurt Elster: Much improved, more flexible presentation.

Kelly Vaughn: Exactly.

Kurt Elster: And it’s like in the right spot at the right time.

Kelly Vaughn: Yes. So, we’re sending the gift card on your behalf as Govalo. We actually have an integration with Klaviyo, and we are also working on an integration with Omnisend which will likely be launched by the time this episode goes out, so if you’re using one of these email platforms, you can keep the very highly branded emails, and that’s one of the nice things about Govalo, as well, is it’s totally what’s called white label. There’s no powered by Govalo or anything like that. It blends in right with your theme. 95% of themes out of the box, you install the app and you’re good to go. For those last 5%, we have additional settings for you to tweak and our team is more than happy to help tweak those settings to make sure the app works as intended on your specific theme.

Kurt Elster: This sounds pretty good. Are there any other tricks up your sleeve? What else can this thing do?

Kelly Vaughn: Yeah, so one really thing about the setup of this gift card product is it is a true Shopify product, so you can add it to an upsell app, for example, to incentivize people directly from within the cart to, “Hey, you should also buy a gift card because you might want to use this or give it in the future.” You can also… We understand that not everybody wants to send a gift card to somebody else. They might be purchasing it for themselves, or they might actually be printing it off to give to somebody else physically. So, we allow you to toggle off the this goes to a gift recipient, and you can just add it to the cart as usual, and it gets sent right to you immediately.

So, we give you that flexibility so your customers can purchase gift cards how they want to purchase gift cards. We also have a handy tool that allows you to look up a gift card balance, so your customer has their gift card, and this is customer facing, so any customer can actually access this page. Customer enters in their gift card code, they can see what the original balance of the gift card was and how much is remaining on it, so it’s really easy to see that, and as Shopify releases some additional features that we’re very excited for, we’ll be able to surface that information right at checkout. We’ll be able to make it really easy to automatically apply a gift card balance to your order.

Kurt Elster: Oh, sweet.

Kelly Vaughn: And the reason why we’re doing this is because just in the U.S. alone, there’s $15.3 billion sitting in unused gift cards. And every single time… Rhian, actually tell me the statistic here. How much… What’s the average AOV when somebody’s using a gift card? Average order value.

Rhian Beutler: It’s $59 more than the gift card amount.

Kelly Vaughn: That’s a lot of money.

Rhian Beutler: It’s a lot of money.

Kurt Elster: That is the strange brilliance of gift cards, is when you sell those gift cards, and that’s why they work great as like a rebate. It’s like, “Buy X, get a gift card as free gift with purchase,” kind of thing, or in store credit, is yeah, a majority of the time the person will spend significantly more than the value of the gift card.

Rhian Beutler: Absolutely.

Kelly Vaughn: Exactly.

Rhian Beutler: It is a thing. And while we’re talking about statistics, I just want to say one cool statistic. 67% of all millennials prefer receiving gift cards over everything else, and there is some work to be done around destigmatizing gift cards. It’s not just your just last-minute gift. It can be this well thought out present to a small business that this person likes, and removing some of that stigma, and then also… I feel like we’ve spoken to a lot of merchants who don’t view gift cards as a potential acquisition and loyalty channel, and it absolutely is.

Kelly Vaughn: It’s acquisition. It’s retention. It’s loyalty. It is all of the above.

Kurt Elster: How so?

Kelly Vaughn: Acquisition, make it easy, as you said. Purchase a gift card. Purchase a $100 gift card for $80. So, this is my first try-

Kurt Elster: It’s word of mouth, but you’re shooting fish in a barrel, because you know that you’re acquiring a new customer who is compelled to go spend that gift card. Okay, I’m with you.

Kelly Vaughn: Loyalty, customers will purchase gift cards for other people, and it’s directly for your store instead of buying like a Visa gift card. And retention, again, same example, I’m still waiting for my furniture that’s gonna be arriving in December. You gave me a $50 gift card to use to get me to come back and place another order despite the long wait.

Kurt Elster: I was gonna say like retention and customer service tool.

Kelly Vaughn: Yeah.

Rhian Beutler: Yeah. Because another thing that I think is really cool, like I know right now it’s very popular to give discount codes in emails, to be like, “Hey, it’s your birthday. You get what is equivalent of a $10 discount code,” right? Here’s a gift, but it’s a discount code. But as you know, you can’t stack discount codes in the checkout. So, you can… A, you can stack gift cards. But B, I think it’s a better experience to be like, “Hey, it’s your birthday. Here’s a gift card.”

Kurt Elster: Right. You’re right.

Rhian Beutler: It just hits differently than, “Here’s a discount code.” It’s like, “Here is a gift card for you. $25.”

Kurt Elster: Yeah. We’re giving you a $10 gift to use in our store versus we’re giving you the opportunity to buy for your birthday in our store but save 10 bucks. You’re welcome.

Rhian Beutler: Exactly. It’s a different narrative.

Kurt Elster: No, you’re absolutely right.

Rhian Beutler: I’m very passionate about this.

Kurt Elster: Now I’m excited. Okay, I want it. How do I get it?

Kelly Vaughn: We’re in the Shopify app store. You can search for Govalo, G-O-V-A-L-O. You can also go to govalo.com and you can check out our demos that we have on there. They’re super fun. Definitely check out the sold-out integration. I think one of our most requested or biggest request we get is actually for the shirt that we have on the sold-out integration, which is not a real product, but we might need to make it a real product.

Rhian Beutler: Yeah, we’ve been getting a lot of-

Kurt Elster: Well, you’re not getting it till February even if it is. February 2023. Kelly, Rhian, this has been fabulous. Thank you so much.

Rhian Beutler: Thank you.

Kelly Vaughn: Thank you. Always a pleasure talking to you.

Kurt Elster: I have to go buy some gift cards.

Kelly Vaughn: Go. Happy gifting.