Felix: Today, I'm joined by Riley Stricklin from Lume Cube. Lume Cube offers high-end portable lighting for traders and communicators, and their products help their customers capture better content and look better on video, and was started in 2014 and based at San Diego, California. Welcome, Riley.


Riley: Great to be here.


Felix: Yeah. So, you started this business to offer a solution to a problem that you saw in the marketplace. What was the problem that you were seeing?


Riley: Yeah, the founding group of the company kicked off in 2014, the original concept was around creating portable lighting for primarily GoPro and iPhone users. We were really seeing those two devices lead the market in terms of content creation, GoPro, of course, being all the rage back then around their IPO and iPhone finally really getting great cameras built into their devices. And we saw an accessory market around GoPro, as well as around the iPhone in that photography realm, things like little clip on lenses for your iPhone. And so, the founding group, we had a history in the photography and video space, knew how important lighting was, and that currently on the market, there wasn't an offering of lighting for iPhone or GoPro to capture better footage, and so, that was the original concept of Lume Cube, which came to life on Kickstarter.


Felix: Awesome. So, you knew that, in your background, the importance of lighting. Was it the Kickstarter campaign? Or how did you guys know that there were people out there that also understood the value or the importance of lighting enough for them to purchase a product like this?


Riley: That's really where Kickstarter became our proof of concept. We knew that in the core market of the high-end photographers, videographers, they vastly knew the majority or the value of light. Traditionally at that time though, lighting was a fairly expensive item. So, you would go to the B&Hs of the world, the high-end places and spend hundreds of dollars on lighting, which ultimately was, you'd carry it around in a big case, you'd have long cables, big batteries, and there wasn't a portable solution like ours. And so, that was kind of the theory around it internally amongst the founding group, and Kickstarter, we felt, rather than going all in raising capital, was a great platform to test that concept.


And we ended up throwing it out on Kickstarter with a couple of prototypes, a marketing video, and a goal of 56,000. And 30 days later, we had $229,000 raised, thousands of orders pre-sold, and that really proved to us, "Wow, people understand this value and there is a demand out there for a product of this nature."


Felix: That's amazing. So, at the time that you were launched on Kickstarter, what was reality at that point? Did you already have a working prototype? What did you have in place when you launched this campaign?


Riley: A working prototype would be a very generous way to put it. We had about six units that at the time, they were very expensive to make. The challenge with light overall is that it generates a lot of heat. So, these very rough prototypes would not last for more than a couple of minutes at a time. Ultimately, we got quite creative in the marketing side of things in the video and showing proof of concept, but ultimately at scale, we knew we needed to solve a lot of those problems. But, yeah, we had about six prototypes, we were manufacturing them in Australia at the time, quite an expensive place to do it. And there certainly were many, many changes between the item that we advertised on Kickstarter and the final product that was delivered.


Through that manufacturing experience, we found a lot of challenges with our original design and had to modify a number of times to really come out with a product that met the specs that we promised to our Kickstarter customers.


Felix: Yeah. And the other way that I've seen or I've heard of other Kickstarter creators running into is that they'll discover more about how they should just talk about or how they should market their product, or even the product features itself through a Kickstarter campaign just to the community. Did you uncover any of those things? Or what are some changes that came into play through the course of a Kickstarter campaign?


Riley: Yeah, absolutely. We certainly learned a lot about what features we were advertising that the customer base value most, and ultimately, we knew that when people were buying into the Kickstarter campaign, it wasn't necessarily like many other Kickstarters, the exact product that you see, it's more of the concept of saying, "Okay, for us, whatever the product looks like in the Kickstarter video, ultimately, what's going to come out is high quality photo and video light that is not only Bluetooth compatible, but also waterproof down to a hundred feet." And so, promising these lists of specs.


Now, like many first time entrepreneurs, which is what we were, we didn't have a background in manufacturing at scale, so, that's where, for us, one of the biggest learnings through that Kickstarter was really the cost analysis of understanding, "What is this going to cost per unit at scale to achieve these specs?" And we had a couple of prototypes that were simple, but to give some scale, we were probably about 80% underestimated the costs of the actual final production unit, comparatively to where we were early on in the Kickstarter.


Felix: Got it. So, what kind of issues this caused? Once the campaign ended, you raised over $229,000. What were the next steps in terms of turning this product, this promise of a product into reality?


Riley: Well, we promised about a three-month delivery timeline. So, we ran the Kickstarter between November and December, in that holiday period, and promised to deliver by March. It ended up taking us 12 months to deliver. So, as we went into mass production, what the challenge ended up being in particular around the unit was the first unit, it was primarily that GoPro application light, so, we knew we needed to match the specs of GoPro, which was, "Hey, allow our customers to surf with this, go diving and snorkeling with this." So, it had to be waterproof.


Now, the difference between a GoPro and a light, GoPro as a camera, you can put it in the waterproof GoPro case, which back then, the GoPro Hero 4 was that way. Light, that was kind of the original concept around what we would do, have this light, and have a little GoPro case, but through testing, light emits such a high amount of heat that when you do put it in an airtight environment that's very small like that, it was just burning out immediately, and would actually burn a lot of the internal components, melt because of the no air flow in there. And so, that was the major, major challenge that took months to figure out how can we waterproof this thing top to bottom?


So, we ended up working with a watch manufacturer, who made waterproof watches, to help seal it, and basically build the actual unit out of aluminum, which acted as its heat dissipation. And so, a lot of those little things came up were not quite expected in the Kickstarter, it was more of a concept marketing, but then when you get down to the manufacturing specs, that's what started driving up the cost in terms of, "Okay, we have to meet these specs, we can't let the customer down here, but ultimately, if it's going to bring the cost from $14 a unit up to $22 a unit, so be it." And that was something that we had challenges with along the way.


So, not only manufacturing issues, but we were at the time, working out of a garage, we had the Kickstarter revenue that was certainly funding the project, but we ended up having to go out and raise a little bit of seed capital as well during that time to make sure that we could fund that first run because so much cost was incurred in figuring out how to finalize the product.


Felix: So, 12 months, you mentioned there, originally, the promise was three months to deliver. Well, how did the customers on there handle? How did you make sure that you're communicating in a right way so that you wouldn't have a uprising on your hands?


Riley: Forced to be very proactive, and that's what we learned is ultimately, as in any project, if things aren't going to be matching the timeline that you promised, over-communication and proactive communication, I'll tell you, that was probably the most painful part of that process. Kickstarter, at that time, was kind of an earlier platform. It was quite big, but it's a very outspoken crowd. So, they do adopt early, which we're grateful for. And unfortunately, through that timeline, as much as information we tried to share, they're certainly the element of people who assume that you just pocketed $230,000, and you each bought a Porsche, and you're hanging around San Diego surfing every day.


So, you have to battle that, and that's a tough one on the heart, knowing how much you're putting in 90-hour weeks, long nights. And ultimately, we were very proud that by Christmas, the following year, 2015, we were able to deliver in full and deliver a much, much higher quality, better product than they even originally purchased. So, we were thrilled about that.


Felix: And you had mentioned that in order for you to be able to deliver on this, it wasn't enough just to have that, again, the $229,000 raised, you had to go out and raise seed capital well after the campaign. How easy was this to do now that you had the Kickstarter kind of success and demand to show for your business and your product?


Riley: It made all the difference. By no means was raising capital an easy thing to do, especially in the early stage, but had we not had the proof of concept that showed essentially two and a quarter million dollars in a month, which allowed us to peel that out from a 12-month run rate, to show, "Hey, we've got a two and a half to $3 million a year business here." We just showed we can do a quarter million dollars in 30 days. That allowed a lot of proof of concept and validation in the idea for people to invest. So, we did get a seed round from about nine people that came in, and ultimately, that was what truly allowed us to bring the product to market, and then not only fulfill the Kickstarter, but place those additional orders in China, which carries some pretty large minimum order quantities, and then turn that into a recurring revenue business.


Felix: Awesome. Now, the manufacturing, that was the kind of surprise right there that changed everything in terms of the dynamics of the profit potential of the business. So, once you had recognized that there were underestimates on the cost to manufacture at scale, did you just have to adjust a price point from there? Or were there ways to find ways to drive down the cost of manufacturing?


Riley: Yeah, the original product was really, we hoped to hit around the 50 or $60 mark, we ended up coming to retail at the $79 mark. So, we did have to build that in. And it was the right thing to do. Because the product was so advanced from what we had pre-sold on Kickstarter, it did two really great things. The people who bought it on Kickstarter around the $35 price point, saw it as, "Wow, I really got such a great deal on this." The product ended up being much better. And then when we did come to market, there were a lot of our retail partners and vendors and partners who really said, "You should come out at 99.99. That this is a $99 product all day with the value you've packed in."


And so, we found that middle ground at the $79 price point, which we believed allowed for a little bit more low barrier to entry and a little bit of mass market opportunity to allow a larger group of people to come in. And so, right out of the gate, we saw some pretty wild success in that first 12 months.


Felix: Got it. And just do to touch on this a little more, you had mentioned to us that the way that you got into the marketplace was through a wholesale business at first, selling into retailers like Best Buy, Apple stores, and you had mentioned that 50% of the wholesale revenue, or 50% of the revenue came from wholesale in the first year. Now, tell us more about this, how was that, I guess, possible from a business that just started from scratch and just had a crowdfunding campaign? Was it easy to get into these retailers?


Riley: No, I wouldn't say easy. I mean, we had a history of some relationships from this category with where the founding team was previously in their careers, we had relationships with some of these retailers previously on other products. And then being able to show up at their doorstep with not only a quality product, but then this Kickstarter campaign and the success and the PR that showed, "Hey, this isn't building and growing a market, this is a product that is needed. It's different from anything else out there." It did allow us to really gain some early traction and early success. And as you mentioned, actually, looking back on it, it was about over 70% of our revenue in year one came through the wholesale channel.


So, at the time, we were on Magento 1.0, we had a very basic website, maybe a couple hundred dollars a day at most. And so, most of the focus was around going into the retail channel and making a splash, and without question at the time, because GoPro was the talk of the town, IPO, 25, $30 million, or 30 million cameras being sold every year. We were modeling a lot of our direction being a GoPro accessory, off of the path that they were taking. And most of their business early on too, we saw going into that retail channel, strategic retail partnerships in retail displays, paying to those retailers like Best Buy to build out displays.


And so, ultimately, that was the early portion of our business, which although had a lot of traction and gained some validation for us, it causes a lot of issues of course, because many of those, the larger the retail partner you get, the longer the payment terms are, the lower the margin is. And so, it's certainly a given trade there.


Felix: Yeah. I mean, that sounds like a pretty hefty investment to get that kind of, I guess, positioning inside those stores. Well, how was that? Well, did you start off smaller with just a couple of retailers within a big box store? Or how did you roll into some of these relationships?


Riley: Yeah, 2016 was our first year in business. A lot of that revenue came from opening some strategic online retailers at the time, and having small in-store placements. And then we spent a lot of focus building the international side of the business. So, personally, in 2016, I just think I spent about 200 days, give or take, traveling, whether it was going to trade shows, going internationally, setting up distribution. So, that's where a lot of that revenue came, as well as the opening orders from our distribution channel, which ultimately is very, very low margin, but setting up Germany, Australia, South Africa, England, Japan, and having large distribution orders for representatives there, trying to really build a global brand and have placements on the retail shelves there.


So, those partners of ours, people who were distributing the DJI drones, the GoPros, the Sony cameras, they had relationships with a lot of retailers, so, we would leverage that, align with that distributor or sign a contract, and then they would help take us into that territory. So, that was a lot of the first year's plan to build a couple of strategic retail partnerships in the U.S., build the global business, and then in 2017 was when we went more towards the big box retailers and signed on both Apple stores and Best Buy.


Felix: Yeah, that's interesting that your approach is really to go as wide as possible, almost like to the finish line for where a lot of businesses go, you started there, almost worked your way backwards by going international first. What was the purpose of that? Why focusing on international so early in the business?


Riley: If I was looking back on it, I would have done it the reverse way. And I think we did it the opposite, as you mentioned. Most businesses build an online business, and then slowly bolt on a few retailers, and then scale internationally. For us at the time, this was all we knew. Shopify was far from our vision at that point, it wasn't what it was today for sure at that point. And so, for us as a couple individuals who came from that industry and had a lot of connections and knew how to play the retail game, it was the fastest way for us to get the word out there. And in that first 12 months, believe it or not, it sounds crazy considering what the world is today, but in 2016, we spent $0 on any paid media advertising. No Google search, no Facebook advertising.


We didn't come from an e-commerce space or know much about that, we came from retail and wholesale. So, once we got our hands on what our own product was, this Lume Cube, and a number of the accessories, we took it to kind of, for us, what was the low hanging fruit. Get these 10,000, 20,000, $50,000 orders from retailers or distributors, and push the business through those channels. Looking back on it now, there are products that fit that model, and there are products that fit the direct-to-consumer model.


Would have been thrilled to have taken a different approach back then because it did lead us into some real tight cash flow situations when you're scaling that quickly, and you have to front the cash to build all the product, but then you've got to wait 30, 60, 90 days to get paid once you sell it to a retailer, you get put in a very tight cash flow position, versus obviously what most people love about Shopify in that you get the daily deposits to at least cashflow the business.


Felix: Yeah, definitely, I want to talk about managing cash flow in a second. Now, you had mentioned that you were able to go after this low-hanging fruit with your connections and your experience in the retail space, and you had relationships, and you mentioned that there was this huge GoPro wave at that time. Besides that, what do you find retailers and distributors care about when it comes to taking on a product, maybe specifically like an electronics product?


Riley: The first thing, of course, is margin. A retailer has very high costs. They've got to keep the lights on, they've got to pay the employees. So, anything that is below their required margin, they're not even going to speak to you. And so, that was something we learned early. When we chose that $79 price point versus 99, that's where out of the gate seemed right, when you start getting into retail, and you have to give 50% of your margin to a retailer or a distributor. 50% of 80 is different than 50% of 100. So, we would have loved to have that additional cash when you go to the retail side.


So, building in that margin is the main thing because even if you have the world's best next greatest product, if you can't meet their margin requirements, they can't work off of only a couple bucks per unit, or a couple of percentage points per unit. And the second thing for us really was, they were riding the trend. And so, at the time, with every retailer just drooling to get their hands on a GoPro display so that they could bring people into their store, who everybody wanted to buy GoPro and was going into retail, the fact that they had now an accessory that they could upsell to all of those GoPro users, a different story to tell, we basically, in essence, rode the coattail of GoPro on a lot of that wave that first year.


And so, ultimately from a reverse engineer perspective, how we found most of our distribution was going on GoPro's website, looking at all of their international distributors, pulling contact information and calling them up. And so, saying, "We've got a product that pairs very well with what is now your hero product, this GoPro, and let's tell a story and let's combine them and bring them to retail shelves." And so, at the time, it did get a lot of interest because we were riding the trend. Fast forward about 18 months when GoPro was more of a lead weight on a lot of these retail shelves, we had to stop even using that term, approaching retail, because anything GoPro-related was a negative. So, margin requirements, and then riding the trends is going to be a really main focus for success in retail.


Felix: Yeah, I was going to ask, that window, because like you're saying, today, no one really talks about GoPro like they did five, six years ago, and it's reflecting the kind of products that you have to display front and center on your website, where you made that kind of transition into other, we'll get a bit about your additional product lines, but when that window was closing, how much lead time did you have on making the kind of adjustments in terms of the product lines and even the marketing behind the business?


Riley: It was an ever-changing strategy. I mean, we always were watching the market and ultimately had to really keep our pulse on what was happening. Fortunately, we had a very small product that its mounting capability was a quarter 20 tripod thread. So, the same thing you find on the end of selfie sticks or any tripod. And so, at the time, we were positioning ourselves as the Swiss Army knife of light. And so, the light itself was very applicable to a lot of different scenarios, what changed was the mounting option. And so, that really was what opened up a lot of our business, to take it and pursue other avenues. And so, primarily, the lights would snap on a mount with a GoPro, and be used to film. And then we had a camera mount as well, so that same GoPro light could be mounted on top of a camera.


And that's where we found a lot of success in that photography, videography realm. And then come towards the end of 2016, the major wave that came in was drones. And so, that was when DJI launched their Phantom 4, which took the market by storm, you can now get great aerial photography. So, we created a line of mounting bars for the drone so you can take, again, that same original GoPro light, snap on some kind of leg mounts on that Phantom 4 drone, twist on your lights, and lo and behold, we've got a new line of products that we would call drone lighting.


And so, ultimately, the light was the same, and so, that was what allowed us to be very nimble, where, looking at it, "Hey, we want to sell, or we want to buy and manufacture 50,000 lights this year," because it was all the same light, we would then just move the volumes of mounts from one aspect to the other. So, it allowed us to stay pretty nimble.


Felix: Got it. Now, you mentioned that you pay close attention to pseudo-market to be able to be nimble like this. Now, have there been bets that haven't panned out? You got the GoPro, you got the kind of smartphone drones, I think lately, more video conferencing, have there been bets that haven't worked out as well as you would have wanted?


Riley: Absolutely, absolutely. We took some swings around more of the outdoor market. Camping, obviously, just the fact that the sun goes down every day and you're out there in the dark, we thought there might be a great option for us to really tackle kind of the new generation of headlamps, did not work out at all in terms of the success that we were hoping to find. There were some limitations around the product, that market in particular, although we made a line of accessories for it. Our runtime was much shorter than your average headlamp. And so, we learned in that market that brightness was much less valued than actual length of runtime. You want your light to be all night long versus very bright for about an hour or two.


And so, a similar situation in the dive light market. We know there's a lot of divers out there, they're very affluent, they spend a lot of money on gear, we tried to make a real big stamp in the dive light market. And although we had some minor successes, ultimately, we learned that all of the dive business really runs through retail channels. And those retail channels in the dive market required about 60% margin, which we just could not afford. And so, purely from a margin basis, we had to clip that entire line and fold that back in. So, there were a couple of them out there and we really just found that the content creator, photographer, videographer at that time was who was embracing us the most. They knew the value of light, and so, we stayed on that path to achieve some early success.


Felix: How do you know when to pull a plug on like an experiment or a bet like that? What are you looking at or how do you determine, "Okay, we tried enough, let's pull back and try something else"?


Riley: At the time earlier, it was a lot of gut check around, "Let's spend a few weeks in the old school saying, dialing for dollars, calling retailers, calling these people and seeing what their reaction is? These kind of really super users of dive lights who are in the dive market or the outdoor camping markets enthusiasts retailers, and really get their feedback." So, we valued that a lot, and doing that for a few weeks, really banging our heads against a wall. It was mainly a gut check then. And that was certainly back then, 2016, 2017.


Boy, do I wish we had the similar type of business now, because for us now, we run top to bottom, 100% of our business off of data, and deep, deep dives on dashboards, and metrics, and success, and financials. And so, it makes it much easier to the beauty of Shopify, that we can put a product out there, we can look at target run rates, our PDP page bounce rates. We can see how customers are engaging with it. We can run sample tests. And so, really for us now in today's market is running data, and just looking at, here's a product that's successful, here's a conversion rate, here's a bounce rate on a page, here's what we look at.


And then if we introduce a new product, and we see that same web traffic with an increased bounce rate and a much lower conversion rate, it tells us that either it's not appealing to our market, or maybe we don't have the right traffic there, and we can make much quicker decisions with that data. So, early on was kind of gut decision on just, "What do we think? And maybe let's pull the plug and focus on where we are seeing success."


Felix: Yeah, asking yourself, is it the wrong audience, the wrong traffic, or just not the right product? How do you make that call on whether it's, "Let's stick with the product, let's try to find a customer for it," or deciding, "You know what? This the price is not going to work regardless"?


Riley: Yeah. That's kind of the toughest question you have when you're sitting in this seat of a business, on the owner executive side is, do you bet the house? And do you keep pushing and swinging for the fences and think that you might hit a home run? Or do you pull back and do you go for the bun and say, "Let's wait for the next guy to come up," and in terms of a product example? So, the best analogy for example of that would be our video conference light. We launched that at CES in 2019. We were the first ones to do it, we did a partnership with Apple, and that was probably the biggest flop in company history. We bought in heavy because Apple believed in it. The market in early 2019 did not understand the value of lighting in video conferencing.


And so, we finished that year only selling 7% of the inventory that we bought in in a 12-month period. Fast forward, a year and a half from now, the world understands video conferencing and the importance of lighting, and the other 93% of inventory sold in four weeks. And so, it really is based on the market that you have to make those decisions of, "Do we think the market's going to start to understand this? Or where's the pain point?" And I think you have to trust yourself. Or if you're doing all the right things, you're driving the right traffic, you're telling the right story via video, you're showing the value and the product's priced right, and it's still not selling, I think you've got to take a little bit of a deeper look on, is it going to be successful?


But at the end of the day, I think marketing comes into play majorly there, because if you've got a great product, and you know, when you show somebody, you get their first initial reaction and it's great, then it just becomes, maybe you're not getting the right eyeballs, or you're not driving enough fireballs to it. And that's your limitation, but the product is still a winner.


Felix: Makes sense. Yeah, I think one thing you said here, which is around, will the market understand it? You aren't saying, "Can I convince the market to get it?" So, you aren't pushing or trying to almost convince or educate the market, you're looking for these opportunities where they already get it.


Riley: That's, in the early stages, yeah. I mean, and that term, low-hanging fruit, we had a line of lighting. And so, photographers, videographers, action cam users, they were very used to buying accessories for those devices, whether it's a pole, or a lens, or a big light. So, they understood, "Okay, here's a new accessory that I could buy for my device." When we took this lighting accessory to the mobile worker or the business crowd, I mean, I don't know about you, but at that point, I had never bought any accessories for my laptop. It was, you buy it from Apple, and it comes as is, and it just pretty much does the job. And so, that's where that customer base wasn't, despite the major value that it provided on video calls, that customer base wasn't used to accessorizing that device.


And so, that's where we were able to see much, much higher return rates on kind of the photo, video realm, and trying to really understand, "What is the customer behavior of our target customer? And are they going to get this?" And I think, for me, what I would always flash back to is, you always hear about those stories of people really losing money on early cell phones back in the '80s and '90s, and the markets just weren't ready for it, and of course, everybody's got one today. But it's interesting. So, is it the right time in that market? Does that customer understand it? Because the major thing for us or for any startup, if you are going to bear the burden of educating an entire market on your solution, that's going to be a very expensive road, and it costs a lot of money to educate an entire market. But if you can get into a market where people are already buying a similar solution, and you just happen to have a better one, if you can get in front of those eyeballs, a much higher chance of success.


Felix: Makes sense. I want to talk a little bit more about the wholesale business and the kind of squeeze that you have mentioned around managing cash flow. So, tell us more about that. How did you survive those periods, especially early on in your business, where you are sitting on 90 days out from all this money that you spent on inventory that's already in the hands of the distributors or the retailers, but you haven't been paid yet? How did you manage those times?


Riley: Very challenging times. It put a lot of strain on the business, on the manufacturing lines, of course, on the advertising. You don't have cash to drive the marketing. And so, we had to go back a few times and raise additional capital. And ultimately, as much as a single sale was profitable, when you peel across pay, we have $800,000 in inventory over in China that's being built, and we've got half a million dollars that we've shipped out to our customers, and we're here in the middle, we've put the cash out for the business, we haven't received the cash on the sales, that's where you get real, real tight. And of course, to scale a business, especially quickly, you've got to have people, and you've got to make payroll.


And so, I can share numerous stories around us selling assets to make payroll during those times. We sold a trade show booth that we had bought for about 50 grand for $17,000, just to make payroll on a certain week, before we knew some of our AR was going to come in. So, it put a big strain on the business, and ultimately, in early 2018, led us to bring on a major investor and shareholder and recapitalize the business top to bottom. And that was really when we made the turn to say, "For this type of business to scale, we need to build it in more of a direct-to-consumer model, that's a much more cash friendly business."


Felix: Makes sense. Now, tell us about that transition, once you made that decision to go from a wholesale business to direct to consumer, what was that transition period like?


Riley: A little bit bumpy. Coming into 2018, about 70 to 75% of our business was through wholesale channels, the Apple, Best Buys, online retailers' distribution, and only about 30% coming direct. And by the end of the year, we had actually balanced it about 50-50. And just to give some insight, now we're over 90% direct, and 10% of the business is retail. So, we really have been successful in that transition. But at that time, we were coming from Magento. We built an entire Shopify website, which was our first experience with Shopify, obviously made it much, much easier. And that was what enabled us, the switch to Shopify, really made it a more friendly transition to start introducing the paid media side of the fence, the Facebook advertising, Instagram advertising, because Shopify had such a friendly ecosystem for that.


And so, it really was about that time, May of 2018, we made the switch on the platform, and then June of 2018 was when we really issued our first budgets toward, "Let's drive some traffic via some photo and video advertising on those platforms and start bringing in traffic directly, versus relying on Best Buy or Apple customers to see us on their shelves." So, it took a number of months, mainly being that you have to lay out the investment for the website, bill for the advertising. But after about three or four months, we started seeing enough signs of success, that we felt we were moving in the right direction, and decided to keep it.


Felix: What starts to shift that balance from wholesale to direct to consumer? What moves the lever, the needle? Is it the driving of the traffic? Is that where you really started to make that shift from wholesale to direct to consumer?


Riley: Correct. That was exactly it. All of our efforts, rather than going around building the brand, really became focused on driving traffic to the website, and converting that traffic. So, high conversion metrics, really studying on making sure we would drive the right customer bases to the website, and not only the website, but starting to really understand those paths and the funnels that the customers would go to and say, "Okay, are they higher chance of conversion dropping them on the homepage? Or let's drive traffic to the product page itself. Or maybe let's build a very specialty marketing page that has some really cool features and functionality and videos, and how is the traffic going to react when we go there?"


And that was the beauty of Shopify, that we could pair that with our Google Analytics and really start understanding not only how many people were coming, but what was the behavior of those people? And then really start to optimize everything we were doing from a content marketing perspective, to make sure that we put ourselves in the best position to convert an order.


Felix: Got it. Did you find that there were any direct-to-consumer benefits from having spent a couple of years in retail and still having a retail presence?


Riley: I would say, one of the best things is that we did have brand awareness. So, we weren't coming out of nowhere. We would have that traffic come to the website, we were also able to leverage some of those logos as seen in Apple stores, Best Buy stores. So, when that traffic comes to our website, rather than having uncertainty around, "Who is this company? I don't know much about them," immediately, you would drop those walls from the consumer perspective and build a rapport and a little bit of brand credibility. It would validate us. So, right on the homepage, and on a lot of our email marketing and our advertising, we would leverage some of those retail logos. And so, ultimately, if Best Buy is carrying this product, and it's in Apple stores, everybody knows how picky Apple is about their partners, it must be legit.


And so, that really allowed us to generate a lot of conversion. And essentially, looking back at it, probably that was the most valuable thing out of those two partnerships, was not the revenue that those retailers brought us, but the credibility that they brought us for us to leverage that in our direct-to-consumer advertising channels.


Felix: Makes sense. When it came to driving traffic with Facebook and Instagram advertising, what were you doing? What seemed to be working for you guys in terms of the kind of ads that you were placing that led to purchases?


Riley: We were fortunate that we were not selling kind of basic commodities that are tough to advertise, our product was geared towards people who are trying to create better content. And we had hundreds of thousands of users out there who were creating content beyond our wildest dreams, and so, we were leveraging a lot of that content and really just showcasing what was possible with this light. Sometimes it would be before and after type things, where catchy videos, anything in that five to 10-second video mark, and then a number of just really high-end creative imagery. Our customers at the time that we were trying to attract were photographers, videographers, so, they respond well to high-end photography because that's what they do and that's what they enjoy.


So, just really putting some budget behind those with some strategic messaging around the benefit that we could provide them was what led to a lot of our early, early traffic, particularly at that point, because in 2018, that really was the business, we were going towards the content creator crowd.


Felix: Got it. Now, you have mentioned that once they land on the site, one of the benefits of having your own website is being able to see the data on the behavior of your visitors, of your prospective customers. What were some things that you were learning from this data about your customers?


Riley: That was truly where we started to understand the business, and what was succeeding, and what was not. So, really, one of the things that we were focused on, we incur, like most business, would offer free shipping. So, there's a major difference between a $60 order coming in and a $100 order. Both are going to ship for free, that shipping cost is fixed. So, average order value was a major, major focus for us, and Shopify makes it so easy to understand that. So, what we started doing was really watching which products were sold together. It might be this light with this mounting stand and this light accessory.


And so, by understanding, "Wow, there's almost a two-to-one or a one-to-one ratio in a lot of these products, let's start building some soft bundles and start creating some higher average order value products. And maybe all those three products together add up to 130, and let's offer that at 119 and do a little incentive at this higher dollar value." And so, our average order value over those following months skyrocketed, when we started to understand what was being bought together and delivering one-stop bundles to the customer, and really got us from anywhere in that $70 mark, which really was 70 to $80, the price of a light, to pushing our average order value over a hundred dollars, which opened up a lot of business because those particular accessories, that's where a lot of the higher profit margin was, so, that would help us cover shipping costs and generate cash flow to then reinvest in the business and build more product.


Felix: That's awesome. These bundles, how are those advertised? How do you position them on your website alongside the kind of one-off products?


Riley: We build specific collections. And one of our easiest transitions that changed the game, ultimately, we realized that our customers, and probably most customers, they really come to your brand and they might enjoy your product or your category, but they look to you as a brand for guidance. So, "Hey, I'm going to show up, I'm going to keep this website, what products are the best ones for me?" And they're curious because they know a little bit about light, and so, what we did was create a couple of new collections, and one of which is all time, the highest, is, we created the best-selling collection. So, best-selling products. That became the highest trafficked collection. Everybody's curious about, "Okay, I'm at this new brand, what are the best selling products that gives that market validation where either the brand or every one of their customers is buying these ones? I guess that must be the one for me."


And so, by creating both the best-selling category or a collection, and then putting some of those strategic bundles in that collection, we really built the path of trust for our customers to come to our website, visit the best sellers, then see not only where those bundles, some of the best-selling products, but also, a lot of times, we offered them at that slight bundle discount, "Save $10 by buying these two or three products together," so, it became also a deal and a benefit for the end customer. And so, building that path, we found a very successful strategy for the business.


Felix: Yeah, I think there's something to be said there about how, a lot of times, when your customers are coming, that they're not super informed and that they're not super technical when it comes to the product offerings out there. They just want a solution to their problems.


Riley: Exactly.


Felix: And I think the best seller is a great way to alleviate that kind of anxiety around purchasing. If a bunch of people bought it, I'm seeing right here in over a hundred reviews for some of your sellers, that's enough for me to make a purchase a lot of times. Have there been other testing that you've done on the website besides the best sellers? What kind of experiments have you run that have led to either more time spent on that side or more conversions?


Riley: Yeah, absolutely. A huge part of our paid media strategy ends up in the retargeting funnels. And we use a platform called Klaviyo for our email marketing. And so, we've done a few strategies around obviously tons and tons of testing around driving traffic to different parts of the website, product detail pages, home pages, but we actually started this past year, which has been quite interesting, as we got really into that video conference realm and the lighting for video conference and work from home customers, which obviously a major pain point for hundreds of millions of people, and we provided a really effective and affordable solution.


We also built a line of products, and so, it wasn't one offering for that market, it was a couple of different offerings at different price points. Kind of a good, better, best model, and so, although those products were in a collection, and you could then shop each product individually, we built what internally we call marketing landing pages. So, kind of a hidden page that you can't navigate from the site, that only advertising traffic would drive to. And then we would, through that page, add photos, videos, and really tell the story of that line. So, all of the website and the collection was much cleaner with just the product shots. This marketing landing page had a lot of the before and after shots and lifestyle photos and some embedded videos.


And we actually found, when sending traffic to a marketing landing page, that had kind of a number through the whole page scrolling down, it probably had about seven or eight different Add to Cart buttons, versus just the product detail page, although conversion rates at the end of the day were fairly equal, we had 300% increase on the add to carts on the marketing landing pages, versus just the product detail pages. And so, although the conversion rate was similar, what that allowed us to do, kind of a flow for us in our email marketing, is the cart abandonment flow. So, basically delivering those emails to people who put it in the cart and didn't check out, and so, we had 300% increase on those marketing landing pages.


So, we were able to put so many more people in that post-purchase flow or that cart abandonment flow, and then that flow is one of our highest converting flows in our email marketing. And so, without that marketing landing page, one-to-one, we would have had thousands of people left out of that flow, and so, it allowed us an opportunity to put them in there, and then continue to message them with some upsell offerings. And that was a game changer for us, and is a core part of our strategy now.


Felix: Yeah, once you see the kind of the value and benefit of having these marketing landing pages, what stops you from just making that the product details page? Is there a reason why you want to show a certain kind of information on a product detail page, and certain kind of information on a marketing landing page?


Riley: For us, usually on those marketing landing pages, through that scroll, we would actually show the entire series of products. So, right in the first fold, you might see the $70 offering. And little before and after some details, and as you scroll down, you see then the $100 offering, and then the $150 offerings. So, it's all on one page, versus more of the focus traffic going into the product detail page. And oddly, because the conversion rates were nearly identical, we definitely found that the traditional experience of somebody landing on a product detail page, which then they might be able to shop around on the collections, a more traditional shopping experience, we believe that there's certainly a healthy volume of customers out there who maybe not prefer, but are most comfortable shopping in that experience, versus landing on a page that is splashed with a lot of creative.


So, I think, in the market out there, there's certainly a place for both, because customers do behave differently. And that's one of the things we want to do is, we don't want to completely turn off or cut off any specific customer base from an e-com standpoint, we want to make sure that we have a platform for everyone.


Felix: Yeah, I think that that's a good point about how the context matters that if someone clicks on a product details page, they probably expect it to look similar to other retailers, other websites that they've gone to.


Riley: Right.


Felix: You mentioned, Klaviyo is the email marketing software that you use. Are there any other apps or tools that you recommend that you guys use to run the website or at the business?


Riley: Yeah, we have a pretty strong tech stack just on the Shopify side, a couple of things, and obviously, we leverage review platforms very strongly. We feel that helps a lot in terms of that kind of credibility, brand credibility, along with PR, to make sure that, okay, this is a product that has four or 500 five star reviews on the website, for a customer willing to take a hundred dollars out of their hard-earned cash, makes it a little bit easier and a little bit more comfortable. But one of the things that for us may not be applicable to all brands, but the actual upsell flow, so, in cart upsell, in the last 18 months, I'd say, has been one of the most effective strategies for us.


We, of course, want somebody to come and buy that large bundle, but without question, the high majority of customers are coming and they're starting with that low barrier to entry, that one product that's kind of your hero product, that they might look at it and say, "I'm not quite sure I need to go big on this one, let me start with just the $70 offering." And then when they put that in the cart, there's a couple of in cart upsell apps that allow you to really map out what upsell accessory or product is going to be sold in that cart with that particular hero product. And so, for us, we saw six figure changes in our e-commerce revenue in the first few months, just through those accessory upsells.


So, we started seeing anywhere between 23 and 35% conversion in the cart, where as that person had made a decision, "I'm only going to spend $70." 30%, give or take of those people, would then, as they were about to check out, decide, "Ooh, you know what? I'll throw that $20 accessory or that $30 accessory." And they're bringing that AOV to a hundred dollars. And so, when we looked at that, I mean, that was a game changer for us because that helped us cover shipping costs, add more revenue to the pocket, and then ultimately, we were very strategic in which offerings would go with which products. So, by all means, it was a high benefit to the customer.


We thought, "If you're buying this product, the experience is going to be much better if one of these two or three accessories are bought along with it." And so, it's a benefit to the end customer as well. And what's nice in those is that, let's say that on your product page, that accessory might sell for 29.95, because it's in that cart upsell, you can customize that price point to only show a discount in the cart. And so, as they're checking out, say, "Hey, buy this little desktop light stand and you can get it for $10 off by adding it into your cart now," and sell it for $19. So, big benefit to the customer, big benefit to the brand, because AOV increasing, revenue's increasing, and it was just a win all around. And that is something we have mapped out on nearly 100% of our products now, and continues to drive a lot of revenue for the business.


Felix: Yeah, I think that the key lesson here is that sometimes the focus should not be on simply getting new customers, but how do you actually increase the cart value of people that already have their credit card out in a way that will also improve their experience with your regular recommending products that you know are good bundles together, that other people have seen success with, and all the while giving them a discount while doing it? So, I think that that's a great lesson in there. So, lumecube.com, L-U-M-E-C-U-B-E.com is the website, and I'll leave you this last question, what do you think has been the biggest lesson that you or you as a business have learned in the past year that you want to make use of moving forward?


Riley: Be open to pivoting and adapting to the market. A year ago, our business was high majority going to the content creator crowd, and of course, COVID happened, a new problem came in the world. We did not have major product line or anticipation around having a line of video conference lighting, and so, the entire business shifted. We saw our Best Buy business, our Apple business fall off a cliff, and knew that we had to pivot and we couldn't quite rely on the single product line. So, we looked in the marketplace, where was a pain point, and where could light, our core commodity, be a solution? And we thought a video conference was the place. And so, within about three weeks, we stepped on the gas with our content creative team, we built a lot of content around showcasing the value of video conference lighting, we re-skinned the website, we started driving a much different audience to the website.


It's more of this business work-from-home customer versus our core creative customer. And ultimately, that allowed the business not only to survive, but to thrive and grow over 400% in the last 12 months, by pivoting, and at the beginning of the year, had no plans for that. And just by the nature of the market, seeing an opportunity and seeing a chance of survival, to make that pivot quickly, which is, I think, the biggest benefit around being a startup or a small company, you can pivot very quickly. Being open to that is something that really, we learned a lot this year, and really opening up to those mass markets.


Because had we written a line in the sand that said, "We only want to be a GoPro accessory company or a content creator company," we would, I don't know where we'd be today, but it would be far, far behind where we currently are, and we had to be open to the idea of rebranding, reestablishing, and using our product in new ways, and that ultimately allowed us to succeed. So, we keep that very close to our heart this year as we watch what's happening in the world, what's happening in different markets that we're moving towards like gaming and streaming, and of course, video conferencing and content creative and TikTok, what are these new things that are happening? And could this brand and this product line have a place in that market? And if so, pivot quickly, test it out, try it out, and then make your decisions.


Felix: Awesome. Thank you so much for coming on and sharing your experience and story, Riley.


Riley: Absolutely, Felix. Happy to be here and thank you so much for the opportunity.