There is a reason Sean McGinnis has moved up to President in a short time at KURU Footwear! Enjoy listening him talk about their handling of the Pandemic response, supply chain issues, inflation, and iOS14.5. You'll hear about scenario prepping and more in this valuable bonus episode.
As a reminder, Sean was interviewed in our last Core episode on the Supply Chain crisis, so if you haven't caught that one yet, make sure to give it a listen first.
Want to be a guest on the PPC Ponderings Podcast? Apply here!
Interested in PPC help for your business?
There is a reason Sean McGinnis has moved up to President in a short time at KURU Footwear! Enjoy listening him talk about their handling of the Pandemic response, supply chain issues, inflation, and iOS14.5. You'll hear about scenario prepping and more in this valuable bonus episode.
As a reminder, Sean was interviewed in our last Core episode on the Supply Chain crisis, so if you haven't caught that one yet, make sure to give it a listen first.
Want to be a guest on the PPC Ponderings Podcast? Apply here!
Interested in PPC help for your business?
Sean McGinnis:
It's really, really tricky. You're trying to predict what people are going to want to buy six months from now, effectively. Yeah, the team has heard me say a thousand times and they're probably sick of saying it, e-commerce does not have to be hard.
Chris Reeves:
Welcome to the ZATOWorks PPC Ponderings Podcast, where we discuss the philosophy of PPC and ponder everything related to digital marketing. Today's show is a bonus episode of our full interview with the president of KURU Footwear, Sean McGinnis. Sean was interviewed for our primary episode on the supply chain crisis. He shares how KURU Footwear handled the stress of the last couple of years with insight into best business practices that are a must here. If you haven't heard Sean in our fourth official PPC Ponderings Podcast episode about the supply chain crisis, go give it a listen. Otherwise, please enjoy our behind the scenes conversation with Sean.
Kirk Williams:
Let's go ahead and get started. Could you give us your name, your title, where you work?
Sean McGinnis:
Sure. My name is Sean McGinnis. I am the president and integrator at a company called KURU Footwear. It's K-U-R-U is the name of the brand. We are a direct to consumer shoe company that focuses on eliminating foot pain. Our CEO and founder, Bret Rasmussen, invented and patented some technology that we embed in every pair of shoes that we produce. The brand has been around for 13 years, and I have been with the company for the past two and half.
Kirk Williams:
Pretty much rate smack in the middle of all of this mess that we'll be discussing. Obviously, we all know, we all lived what has happened, but especially thinking of it from the e-comm perspective of what it's hit. At one point, I chatted the team, I'm like, "How have any of us survived the last two years?" Just trying to go through a timeline of everything. Can you maybe give us a few minutes overview, if you can, if you can think of it, as to what e-commerce has been like over the past two years, 2020, 2021, what it's been like for your brand, the industry?
Sean McGinnis:
Yeah, happy to. So, e-commerce has definitely been challenging in a variety of ways. The main ways in which it has been challenging, I recall, I'm thinking back to the time in March of 2020 when COVID was just starting to get traction in the States. One of the things that we did at that point in time was I pulled together our senior leadership group and we did a scenario planning exercise, frankly. The impetus for that meeting was, naively from my perspective, but I think it was a good exercise at the end of the day, but my question was, what happens if we can't get anything from our manufacturing partners in Asia for some number of months?
Sean McGinnis:
In the back of my head, the proper thing to do would have been to shut down all paid channels to try to reduce demand. If you think about inventory the way that I do, I think about inventory as the bricks that are laid out in the road ahead for your e-commerce business. Anytime when you can see the end of the road, based on how much inventory you have to satisfy the demand that you are creating, or have been creating, or that naturally exist for the business, there are adjustments that need to be made. That scenario plan was a really helpful exercise. At the end of the day, the answer was, we need to go get more inventory as quickly as we can of our top-selling, core styles to make sure that we have the inventory to weather whatever storm may have been coming at the time.
Sean McGinnis:
We go down that path and have those scenario plans now about every quarter, but e-comm in general has been, in part, really difficult from a planning perspective, in part because of COVID. When March 1st hit, the world demand retracted and slowed down because everyone was uncertain. When that became clear that, here's the go forward path as a society, what happened was e-comm demand spiked. It came at the expense of other categories where we, as a society in America, were used to spending. We weren't spending in restaurants. We weren't spending on travel and leisure. We were spending in other areas, and so what you saw was this dramatic shift in demand curve across different industries and across different categories.
Sean McGinnis:
The other major component of that, obviously, was the stimulus checks that the government issued back a year ago, December-January and then again in March-April. That kind of broke our system. When you think about running ... I love the way you used the word operator, Kirk, because that's what I think of myself as on a regular basis. We're constantly looking at every dial, and all the dashboards across the business, and trying to make sure that we're planning ahead in a proper way. When you put that much liquidity into the market and cash into people's hands, it changes behavior pretty dramatically. As you know, a number of e-commerce players saw a very dramatic spike in demand last Q1, Q2, and as we headed into spring.
Sean McGinnis:
What you really want, as an e-comm operator, is a steady increase in demand. The perfect thing is a low, sloping, growing curve. Or regardless of how deep the slope is, a consistent curve. What we've had instead is these spikes and valleys. We've had spikes due to incentive checks and stimulus checks. We've had spikes due to increase in overall generalized e-commerce demand as a percentage of total retail spend. Then we've had other challenges, operationally, because the spikes in demand have created these pressures from a logistics and supply chain perspective.
Sean McGinnis:
We all know there's a 100-plus ships sitting off the coast of California, and what used to take us 35 days to get product from our manufacturing partners in Asia to our warehouse in Kentucky now takes anywhere from 90 to 105 days, so it's just difficult to plan. It's difficult to know with consistency that this is what to expect. Thankfully, we had the business model, the customer base, and the operational wherewithal to weather all of those storms and to come out the other side looking healthier than ever and yet, it was very challenging.
Kirk Williams:
When things first started happening, and kudos to you, you were already basically then immediately thinking of supply chain issues. Was that before really much had happened in the U.S. even? Was that just you thinking about, "Hey, this is over with our Asia partners"?
Sean McGinnis:
Yeah. Honestly, it was like March 1st. It was the first full week of March. I recall that the spark of everything was when the NBA made that they ... I believe it was right around March 15th.
Kirk Williams:
Mm-hmm.
Sean McGinnis:
About a week before that, we had come together as a group and said, "Hey, let's talk this through. Let's figure out what ..." The way you do a scenario planner, at least the way we've been doing it, is you effectively get in front of a white board and create a 2x2 grid, and you first start by brainstorming all the various things that could happen in the next three to 12 months that could affect the business. We did one with the election. "Here's what could happen if Trump wins. Here's what could happen if Biden wins." We did one with this, "Here's what happens if COVID really crushes the country. Here's what happens if it's a fizzle out and a dud." Like, "How could consumer behavior change? How could supply chains change? How do all those things start to happen?
Sean McGinnis:
" Then you figure out the two big vectors that you want to think about. Is it consumer spending expands? Consumer spending shrinks, from a demand perspective? Those were two of the variables that we looked at. I forget what the other two were. Then you start thinking about the things that you would do to remedy those things, and you bucket them into these quadrants. The things that are consistent in every quadrant, you go do because those are the things that will remedy, air quote, whatever the variable thing, as you're thinking down the line looks and feels like.
Sean McGinnis:
We did that process and the answer at the time was, "We need to go get more inventory as quickly as we can." It wasn't quick enough. We have been inventory constrained in both of the last two summers for different reasons. One of which was the spike in demand, and we couldn't get things here quick enough for July, at the time. The other one, last year, was the stimulus check. The stimulus check and the delays in supply chain and logistics meant that we were a little bit under-inventoried coming into June, July, August last year.
Sean McGinnis:
This is my second year in the business. Our third year now, we've lived through the same cycle, which is we come into January feeling like we're over inventoried. Sales pick up, and then we head to the summer months and we feel like we're under-inventoried. This is the first year where we're going to be not in that situation, so I'm frankly really excited to see what the demand curve looks like in the summer months when we are fully inventoried and capable of delivering on every piece of demand we can actually create.
Kirk Williams:
Yeah, you reference that chaos, which can be so hard. Someone listening to our episode would probably think, they think of things like the stimulus, the various government help and that sort of thing as, wouldn't that be, overall, have been a great thing for everyone, the e-commerce providers? On one hand, sure. On the other hand, as you noted, you start throwing that together with the supply chain, as it sounds like, and that's part of actually, in some ways, the problem. Because there would be that surge demand and that one always mix with, actually, what you had in stock and the ability to get things in stock.
Kirk Williams:
Let's see. How did you think through the way the supply chain was treating inventory-specific products? Did that change which products you were pushing at the time or bringing on, or which SKUs you're focusing on? Yeah. Maybe talk through that a little bit.
Sean McGinnis:
I think a lot of the inventory and SKU breadth decisions were made almost irrespective of COVID, and the impact of the ups and downs from logistics and supply chain. The two big areas that I focused on from coming into the business, so the first was to further classify all of our products at the style and colorway combination level. We have three ways that we classify each style and colorway combination. The first and most important to the business is what we call core. These are things that generate more than a certain percentage in the trailing 12 months from a revenue perspective of the business. The byproduct of that designation of being a core SKU is we want to manage that inventory so it's never out of stock. That's the goal. We don't always get there.
Sean McGinnis:
For example, our top two selling SKUs, women's ATOM in black. There's two different black styles. One is black with a white midsole. One is an all black variant. Those are the top two selling SKUs across our business right now. We want to manage those so that they're never stocking out in any size, if at all possible. Because we want anyone who comes to the site to always be able to, in theory, buy one of our best sellers. As a worst-case scenario, you might come in off of a click from a really hot, fancy color like a bright purple version of that shoe. Even if that's not available, because it's one of the other designations I'll get to in a second, we want you to at least be able to buy one of our best sellers, in theory.
Sean McGinnis:
The second is to probably define the other end of the spectrum, which we call limited edition. Before I arrived, we weren't really flagging those and communicating to customers that these are a limited product, so they're a one-time buy only. We buy one purchase order at what we believe to be about six months worth of inventory based on that current knowledge of what we have in terms of the overall demand of the business and maybe similar performing colorways and other shoes or what have you. They tend to be the brighter colors. Right now, for example, we have a very bright, hot pink variant of the women's ATOM. It's a limited edition that comes to mind called pink berry. That was something we bought, in theory, with about six months worth of inventory.
Sean McGinnis:
Sometimes those things are slow movers and they take more than six months to clear out, but we're okay with those having a long tail and living on the site for a longer period of time. Eventually when they get really broken, we might move them to our clearance center and offer a small discount to try and move them more quickly. We use that clearance center primarily just as an inventory management tool.
Sean McGinnis:
Then, the ones that live in the middle we call provisional. They're not great. They're not limited, one-time buys. They're things that we intend to repurchase, but we introduce them because everything gets introduced in that category. If you think about Pareto, it's the 80/20, the core SKUs are the 20% of the SKUs that probably drive 80% of our revenue. It's probably not entirely accurate. The provisionals are the ones that are good sellers, and we expect them to be pretty solid, but they're not in our top, top, top performers. They can earn their way there, but sometimes we will eliminate even a core SKU or a provisional SKU in favor of a new colorway trend, something that is happening.
Sean McGinnis:
The other way I think about that from your question is that we have been pruning the line pretty aggressively since I arrived. We looked at styles that were either slow sellers, had a high return rate, were not really effective from a margin perspective so they weren't a real driver of profit across the business, and so we've consolidated. We've probably discontinued close to a dozen styles since I arrived. Some were easy decisions, some were harder decisions.
Sean McGinnis:
The one that we made coincidental with the COVID impact, we made the decision to leave our dress shoe line behind. In part, because of very high return rate and they were very expensive shoes to make. They were all leather versions of kind of like a wing tip for men and flats for women. Even though we built our technology into those, they were not as effective at eliminating foot pain as some of our other core styles, and so we made that decision actually right as COVID was hitting. We made it in the absence of data that later on proved to be very lucky for us and prescient.
Sean McGinnis:
If you follow the trends, you know that dress shoes in general, in late 2020 or early 2021, demand was down 70%. Most people would hear that and go, "Of course, that makes perfect sense." We were all stuck in our houses. We were attending church via Zoom, if you did that. We didn't go anywhere for the better part of a year and a half, so why would you need fancy dress shoes to look smart and spiffy? The push became very much this casual comfort, which was another driver of increased demand for our footwear brand, because we're a casual comfort, good looking, foot health-oriented brand. When I think about your question, those are the big vectors that I think about it in.
Kirk Williams:
Yeah. Has this impacted any decisions or at least thought process in bringing manufacturing more to the U.S.? Some of this could be, go ahead and answer KURU specifically, or even industry wide, even your opinions. Or do you see some of this settling down and things remaining as they are?
Sean McGinnis:
I will say, being the idiot in the room who had no footwear experience, one of my first questions is, can we get these things made any closer? Can we get them made at home?
Kirk Williams:
Sure.
Sean McGinnis:
The answer, every time I ask it is, "Absolutely not." The capability to make sneakers is all overseas in Asia. It's primarily in China and has been primarily in China for years, and years, and years. There's definitely other places you can go get them made in terms of Vietnam or Indonesia, a few other places, but it's all over there. There are other styles of shoes you can make in South America, and Mexico, and other places.
Sean McGinnis:
There's a few things that get made here in the United States like Allen Edmonds dress shoes, and some of the stuff over with KEEN, and work boots and other styles that get made stateside, but either the capability, the manufacturing capacity, and even if you did move it here, all the raw materials are still coming from overseas, and so it begs the question of all the chemicals, all the fabrics, all the performance materials, all that needs to come over here anyway, and so now you're just shifting the supply chain demands to the front-end of the system. That said, I still would love to find a way to get our sneakers made closer to home, just as a means to better balance our ability to connect supply and demand. What used to be, as I said, a 35-day window is now 100-plus days, and so planning that effectively when it's a four-month lead time instead of a one-month lead time is just really tricky.
Sean McGinnis:
It's really, really tricky. You're trying to predict what people are going to want to buy six months from now, effectively. That's the way footwear had always been when you were selling through a retail experience. You had to get with your buyers at these retailers, and the buyers became the customer sentiment engine. One of the major values of being a direct to consumer brand is we've got that. We're closer to the customer. We can hear those things more quickly. That I view as being a business model advantage for direct to consumer, is really being closer to the customer, understanding what they want and why they want, what they're using the product for. If you stretch that back out, you're no better. You lose that advantage. You lose that business model advantage completely.
Kirk Williams:
Mm-hmm. Yeah, that's great. There's a quote in there I love that you had noted, which I think would be really helpful to include in a conversation about. Because that's probably a lot of people, especially over here, "Well, hey, let's just build in U.S.," U.S. jobs, things like that. As you had just said, well, okay. What if that just means we're shifting the supply chain issues to materials? The finished goods, we're actually still dealing with that, so that's super cool.
Sean McGinnis:
It's tricky.
Kirk Williams:
Yeah, yeah. Let's talk iOS14, since that is a big conversation right now, obviously, in e-comm world. Obviously, iOS14.5 hits, all of a sudden, the privacy thing shifts hard-core, and Facebook especially is the one that gets hit. A lot of media buyers struggle with Facebook. Can you talk through a little bit if and how iOS14 impacted KURU?
Sean McGinnis:
Because of where we're at in our maturity stage, or because of what's just been working for us, it wasn't a massive impact, and I'll explain. There's a bunch of hypotheses that I've had for a while around where we're spending money and what works for us. We have leaned into the things that are efficient and effective, and that has meant paid social has, frankly, been a smaller part of our marketing mix than you'd normally see from a D2C brand. We joke inside of our team that we feel like the anti-D2C D2C company, in many respects. That applies to channels where we're spending money. It applies to the tech stack.
Sean McGinnis:
Most D2C companies are on Shopify and Klaviyo, and there's a list of four to five major technical tools that get used by direct to consumer business. We're usually burdened with a different approach. We're on Magenta. We're using a different email service provider than Klaviyo, as an example. It also applies in the marketing mix, and my hypothesis is that when I think of what's working for KURU and the places where we're at now, and in part because of the turnaround that we've engineered since I've been here ... 2019 was a very difficult year for the business, and so we've been dramatically focused on profit, and growing the business top-line, but doing so in a very responsible and methodical way. That means that we have focused almost all our attention on things that we know are working from a marketing perspective.
Sean McGinnis:
We're a little bit less willing to gamble and/or try things that are a little bit further removed from that last click attribution model. We spend 90% or more of our marketing mix and media dollars with Google and Microsoft in paid search and shopping engine because at the last click level, that backs into a really strong ROI for us. Writ large, that means that we're spending a lot of our time and attention in the demand capture mode. We haven't really nailed the demand generation step, I want to call it. At some point in the next 12 months, we will pivot hard and that starts with a really firm understanding of our customers, and a good definition of the personas that they inhabit, the reasons that they buy our shoes. We've got, again, some hypotheses there.
Sean McGinnis:
We're spending money, actually, this quarter, embarking on a major study to better understand and formulate, "Here's the brand architecture that we're going to use moving forward that is a living document that will be open to change on a go forward basis. Here's what we know about your customers." We'll come out of this quarter with a much better understanding of those things. Once those things happen, we will start to shift dollars back into paid social in a heavier way to experiment and find ways to change the whole ecosystem.
Sean McGinnis:
In the meantime, our spend in paid social was relatively small last year and is even much smaller this year as we've come into Q1. Part of that that will allow us to do that is to utilize our fractional attribution modeling tool, which we, right now, literally in the next two days, we will finally have a fractional model built out inside of Rockerbox that will have the capability to really tell us and have a better understanding of where these different channels play in our larger marketing ecosystem and what they mean from a conversion rate perspective for our customer base. It's been relatively small. I would say the changes that Apple made affected us much more in email because email's a much bigger channel for us than paid social is, but I really, really, really hope that we've just been doing paid social wrong.
Sean McGinnis:
If we can come out of this in Q1 and Q2 really with a firm understanding that paid social plays a much different role than we thought it did and there's some scale there that we can go and lean into, I'll be happy as a claim, but I'm also dubious. Maybe I'll get into the reason why I'm a little bit dubious. I would encourage everyone who's watching or listening right now to think about the last purchase they made from an Instagram ad. I have mine visualized right now. I was scrolling Instagram, saw an ad for three little golf ball markers for 15 bucks. Select my three, the designs that I want. Shop, pay, buy, done. Three weeks later, because really bad shipping situation, they show up and I'm happy as a clam. They go in my golf bag. Low risk, low price, a want brand, a want product.
Sean McGinnis:
We are, as a shoe company that you've never heard of before, and as a shoe company that is on the expensive side, two to three times a normal pair of cheap running shoes that you can buy on Amazon from any major brand, and as a shoe company that solves a real job to be done for our customers, an actual, literally the definition of a pain point. No air quotes needed. We solve a real pain for customers. We're a very considered purchase. It takes time and effort to research and become comfortable and familiar enough with the brand.
Sean McGinnis:
My working theory is we're the opposite of that swift, quick transaction, click, click, click. I'm not buying a belt. I'm not buying a silicone ring. I'm not buying a $25 tchotchke that's low risk. If I don't like it, it's not even a big thing for me to ... I don't even have to send it back. Who cares? This is $150 pair of shoes. Our best selling sneakers are $150. This is not something, in my opinion, that lends itself well to a discovery, rapid, "I'm going to buy something quickly off of paid social."
Sean McGinnis:
The other major problem for our brand that I think creates difficulty in the paid social world, especially post-iOS, but even before iOS, is targeting. The tricky part about foot pain is every single human can have it. It doesn't matter where you live, how much money you make, your gender, your skin color, your political affiliation, the fact that you're a hunter or ... Demographically, we are all over the board. Our customers live in every single demographic bucket ever invented. I don't care who invented it or how they were defining it, psychographically, demographically, it just doesn't matter. Everyone can have foot pain.
Sean McGinnis:
Where paid social and Facebook in general had all this incredible data ... We used to do pretty well in paid social before they stopped the ability to target by health condition. Oh, look at that. The one main thing that we've got the ability to actually zone in on that we can help customers with, you can no longer do that. Oh, okay. Well, I guess we'll spend less money with Facebook then. There is still a gap in our understanding about how we can build brand awareness and how that brand awareness affects the rest of our marketing ecosystem.
Sean McGinnis:
My big hypothesis is paid social might be a way to build brand awareness, but there might be more efficient ways to build brand awareness. It could be TV. It could be YouTube. It could be radio. It could be podcast sponsorships. It could be any number of things, influencers at scale. There's lots of different ways for our customers to become aware that KURU exists, we're a stylish shoe that helps with foot pain. Those are the three main things that I want everyone in America, eventually, to know about. When you think of foot, I want you to think of Dr. Scholl's and KURU Footwear. It's that simple, and we are years and millions of dollars away from that being a reality. The main question is, what's the best way to do that? Then, how does that level of awareness change the rest of our marketing ecosystem?
Kirk Williams:
Yeah, no, I think that's really insightful. I think that when discovery or prospecting, top of funnel, whatever, which as you had noted, that often tends to be social, Facebook. It's probably, as you said, low barrier to entry, cheap product, or it's probably easy or real clear audience segmentation, so you really can identify, exactly like you said. Or it's cheap auctions, so you can afford to blast out your data.
Sean McGinnis:
Sure.
Kirk Williams:
Your audiences don't have to be quite as defined because it's more affordable and you can work that in. You can-
Sean McGinnis:
On a CPM basis, it backs into a model that makes sense for the brand. Sure, yeah.
Kirk Williams:
Exactly. Part of what I've seen, as an outsider on the Facebook land, has been those things, aside from the quick purchasing, which that has more to do with the product itself being sold, those other two things have been continually stripped away for Facebook advertisers. I think that's one of the biggest problems with Facebook is privacy, and that is just going after the audience segmentation and then the options, literally, are just more expensive. You're just spending more. You just have lower efficiency that do the same thing.
Sean McGinnis:
Right. Well, the big attractions at TikTok right now is the CPCs and CPMs are much lower. Right?
Kirk Williams:
Yeah.
Sean McGinnis:
You keep seeing people talk about how it feels like Facebook five years ago or Instagram five years ago because there's lower competition, there's fewer brands in the space, and just the model backs out in a way that ... And the level of virality. Whatever they're using to get that thing on your page, that algorithm component is just more efficient and better at it.
Kirk Williams:
Mm-hmm.
Sean McGinnis:
It's super fascinating as an ecosystem. Because we don't have the creative to go do, and that muscle isn't built up for us in inside of our brand, we don't have the resources or the creative to even go and test in TikTok yet, it's really, I know it's frustrating for the team.
Kirk Williams:
Sure, yeah. Don't want to take up too much more of your time. Let's see. Worker shortages. That was another big thing, especially as people have left the workplace. You have the people leaving thing, so then more people are trying to hire the same people. Is that something that has impacted KURU? Not necessarily? You noticed that?
Sean McGinnis:
Yeah, not necessarily for us. We've been mostly successful in hiring really high-performing folks, in part because we've got a great network here in Salt Lake City on the marketing side, and the vast majority of hires have been in the organization. We've been able to swiftly hire A-level talent, top-shelf talent across a variety of different disciplines. The place where it's been difficult, for sure, for us is on the product side. It's been, we had two hires that we had planned to hire quickly this year. One has been filled, and that person is in the process of relocating his family back to Salt Lake from Denver, so there's a personal connection in the area here. That's a team where in person is really important.
Sean McGinnis:
You need to be able to feel and hold the product, and evaluate the product. We can overcome that by shipping very ... Compared to everything that shows up to your home, but the one other role that we've definitely had a challenge in finding the right ... The centers of the universe when it comes to shoes are New York and the Pacific Northwest, Portland, Seattle area. The good news is Salt Lake isn't that far from Seattle, but finding that right talent is definitely a challenge. We actually are in the process of engaging with a headhunter firm who knows that space really well. Whereas, on the marketing front, we would never have to do that.
Sean McGinnis:
My network is pretty vast. I'm happy to go out and make a fool myself if it means we're going to find the best possible talent, and be able to hire them either here in Salt Lake ... Salt Lake is a great place for marketing talent too, I will say that as well. There's a lot of really great companies doing incredible, incredible things here in Salt Lake Valley. The business model that gets the most attention is B2B SAS, because that's where a lot of the funding is happening. There's dozens of unicorns that I can look up and down our freeway and think about and find. There's a lot of really cool e-comm businesses that are operating out of Salt Lake as well, and so that part of the hiring journey has been not quite as bad.
Sean McGinnis:
The other piece is, being a former salesperson myself and sales manager, I'm not afraid to go out and do the recruiting on my own. We've worked with the team to not just be reliant on a third-party recruiter or our HR team to source candidates. We're constantly proactively recruiting and telling the KURU story one-on-one through happy hours, and lunches, and breakfasts, and coffees, and whatever it takes to raise awareness of the fact of what we're building here. I think the culture component shouldn't be dismissed either. I think we've got a really great culture that's very strong in a number of different facets.
Sean McGinnis:
We continue to introduce new benefits to employees. We launched a new sabbatical program that kicks in at three years. Most sabbatical programs I'm familiar with, they're five to 10-year sabbatical programs, but at three years you get an extra week of paid time off and then another $1,000. We tie that into you, hopefully, checking off a life goal. When we hire you on as a new employee, we capture the four biggest bucket list items that you want to go do in your life, but you just lack the time or the resources financially to go do that.
Sean McGinnis:
At three years, we give you a week and $1,000. At six weeks, we give you two weeks and $2,000. At nine years, we give three weeks and $3,000 to go do one of those four things. That alone has been an incredible new program for us. We're getting a ton of really great feedback from our employee base. When we talk about it publicly, it definitely raises an awareness level of the brand. It's a pretty cool benefit.
Kirk Williams:
How are you thinking about inflation and how that's going to hit the business, if it will?
Sean McGinnis:
Yeah, I was ringing the inflation bell or concern bell, I would say, three to six months ago. As we were pumping stimulus money into the economy, there was no doubt in my mind that it was going to be coming. It was just a question of when and how big. We haven't really done a scenario plan around it yet, so we probably should do that here in Q1 so we start thinking about the implications of that. We've definitely had some high-level debates around, do you draw down the line of credit? Do you go out and raise some funds? What's the best way to combat this?
Sean McGinnis:
I think, again, this is going to be one of those situations where we, through a little bit of dumb luck and maybe some tailwinds, are in the right place at the right time. Because we are buying a boatload of inventory, and we didn't buy it because of inflation, but we bought it when we bought it, it's going to be a lot cheaper, potentially, than buying it eight, nine months later. If inflation is affecting us from our relationship with our suppliers perspective and things of that nature, all those things become part of the calculus of what the P&L actually looks like. I think we're in a really strong position to weather the storm throughout the balance of 2022. I'm old enough to have lived through the last time we saw inflation this high and it was not pretty
Kirk Williams:
When was that?
Sean McGinnis:
This is the late '70s, early '80s.
Kirk Williams:
Oh, okay. It's been a while.
Sean McGinnis:
I was a teenager. My mom had to work with a 12.5% note. That's how ugly it was. It was really, really bad, and the Fed had to raise rates aggressively that threw the country into a really bad recession to try to address those inflationary pressures. That's in part where I was ringing the bell. There's a lot of youngsters here inside KURU that are not familiar with it because they haven't lived through it yet.
Sean McGinnis:
It's been a long, long time since we've seen inflation this high. Hopefully, it is transitory, and hopefully, the Fed acts quickly enough to address those things. I'm no expert at this, but are definitely at a position where I think, as a company, we should be scenario planning and trying to figure out what the best ways to address it actually are for us.
Kirk Williams:
Hmm, yep. Let's see. Black Friday, Cyber Monday, holidays. Do you want to talk through that at all? 2020 holidays, 2021 holidays, anything to add to that? Then I think that's pretty much all I got for you.
Sean McGinnis:
Yeah. KURU's a unique business in that we are not a promotion-heavy business. I've spoken with this on previous podcasts with other hosts in the past. The primary lever that we pull when it comes to promotions is our KURU Cash system. We have a system in place where anyone who buys anything from us earns a 5% credit into their KURU Cash account that they can use on future purchases. When we do a promotion around a holiday, we'll typically do a points accelerator for that. Sometimes we'll do double points, or triple points, or 4X points, and so you'll earn 10%, or 15%, or 20% cash back into your account that you can use for a future KURU purchase.
Sean McGinnis:
Black Friday, Cyber Monday, we pull that lever. It's the same lever we've pulled, historically. We did not offer a cash discount on shoes. We did not do a BOGO. We didn't offer a gift with purchase. We just said, "Buy during this period and you get 3X points." We prefer that. We don't like discounting product any more than is necessary. Again, we use our clearance center as really a means to try to move inventory more quickly so that we're keeping a tidy PDP, I think I would call it. We're not sitting on old, stale inventory. We want to move it out while it's still fresh. There was a lot of old SKUs that were still in our system when I joined the business.
Sean McGinnis:
Every now and then, we'll do a warehouse sale where we'll also move some of the older SKUs. That's physical here. We don't do that online. You have to be in Salt Lake or be willing to travel to Salt Lake to come take advantage of that type of program. We had lines around the block when we did one in 2021. I think it was a Friday, Saturday, Sunday sale that we did. Friday, when we opened at 11:00, there were a couple hundred people waiting in line to come and get the cream of the crop in terms of picking through the inventory that was available for that. We haven't planned one again this year, but we probably will do one maybe in the fall.
Sean McGinnis:
From that standpoint, we are unlike most other retailers in that Black Friday, Cyber Monday is not this event where it's ... The reason it's called Black Friday is, for many brands, it's the time period that put them in the black and made them profitable for the year. We're not like that. We're first purchase profitable throughout every month. We've been profitable every month since I joined the business, standalone P&L basis. We don't spend into the lifetime value curve enough to try to put that operating system at risk. One of the reasons why we think that's true is we just don't feel like we have the need to discount.
Sean McGinnis:
We're not training customers to wait for a heavy discount to come back and buy another pair of shoes from KURU. If we work for you, and if we help eliminate that foot pain, by golly, we want you coming back whenever you feel like we've got something new to offer that would fit with your lifestyle or when you've worn out a pair of shoes. That's the approach that we prefer to take. It just simplifies everything. It simplifies the creative, it simplifies the level of effort we're putting into marketing and e-commerce.
Sean McGinnis:
I've mentioned this before. Our e-comm manager has worked at three or four other e-comm brands and it's a constant fight to be, "Oh, a promotion this week, and another promotion that week, and another promotion the next week." It's constantly you're updating and refreshing banners across the site and trying to schedule your cart rolls to make sure that everything is working. For us, there's just none of that. It's just the simplest thing in the world from that perspective, as far as he's concerned. It's an easier way to run the business is to just focus on day-to-day, improving what's working, building out new tests to go and try new things in terms of channels, or in terms of campaigns, in terms of creative. Finding things that work for our customers and finding things that work for KURU is really our primary focus as a team.
Kirk Williams:
I love it. Yep, yeah. Being less obsessed with having to desperately make your 30% of your annual sales on one weekend makes it a lot less dramatic when things like a pandemic and all that other stuff comes in.
Sean McGinnis:
Yep.
Kirk Williams:
Stability. Cool.
Sean McGinnis:
Yeah. The team has heard me say a thousand times and they're probably sick of saying it, e-commerce does not have to be hard. We've invented this world, and this ecosystem, and this thought game where we just, "Oh my gosh. We've got to think of this, and this, and this, and this, and this." It's like, "You can just offer a great product and market it cleanly and efficiently, and people will buy it." Build that brand. I's easy for me to say that because I wasn't here during the lean years. I mean, I only joined in the [inaudible 00:40:32] years. Our CEO probably would disagree with that, but it just doesn't have to be complicated. It's not rocket science.
Kirk Williams:
That's great. You're a golfer. What's your golf ball of choice?
Sean McGinnis:
I have a couple. They're both D2C brands.
Kirk Williams:
Oh, cool.
Sean McGinnis:
I use Vice and Snell, are my two primary golf balls. Tried them both
Kirk Williams:
That is funny. I didn't even know that there were D2C golf balls out there. That's cool.
Sean McGinnis:
Yeah. They're disrupting the industry. You've got these major brands that spend millions and millions in marketing, and there's these other folks that have discovered that you can build a heck of a golf ball and disrupt the space a little bit. It's 30 or 40% cheaper than the premium balls with similar characteristics of performance.
Kirk Williams:
Is this a different material?
Sean McGinnis:
Nope, very similar. Similar construction and quality, yeah. If you go to YouTube, you can find lots of reviews of a variety. There's three to five, probably, and there's new ones coming all the time, different value propositions.
Kirk Williams:
Cool.
Sean McGinnis:
Yeah.
Kirk Williams:
Yeah, that's cool. There you go. Yeah, I think unless you have something else you want to make sure that you hit on, I'm very, very happy with what we got.
Sean McGinnis:
No, happy to do it. Thanks for inviting me. I appreciate the opportunity.
Chris Reeves:
This has been a bonus episode of the PPC Ponderings Podcast. Keep checking back for more interviews and our next full episode. If you like what you hear, please consider sharing this with your network, leaving us a review on Apple Podcasts. Until next time, may the auctions be ever in your favor.