How to Implement a Limited Drop Model Without Losing Money

0:00The biggest learning for me over the years has been the way in which we communicate with our customers. You have to meet them where they're at based on their knowledge and their experience. Hey, how's it going? I'm Shuang Esther Shan, and welcome to Shopify Masters, your companion for starting and building a business. Imagine a company that only opens up its store four times a year. Meet Fluff, the Australian beauty brand releasing refillable products through quarterly drops while selling refills year round. Founder Erica Juratz is intentionally building a business model that challenges customers to think before buying.

0:41As a serial founder, Erica ran a marketing agency and co-founded the successful skincare brand, Frank Body. She is here to chat about balancing sustainability with profitability and how she's brought more awareness to fluff with storytelling. Erica, welcome to the show. Thanks for having me. I'm excited to chat. Very excited to learn more about your business journey, which you are a serial founder, you ran an agency, you founded a skincare company, which eventually led you to Fluff. Tell us what drove you to create this new brand. Yeah, being called a serial founder is such a funny one because it doesn't immediately land with me, but then I can totally relate.

1:27Like as a fact, I have had several businesses and it's just been my journey. Like I still say that I'm a writer and it just happens that writing has taken me down several different paths. And right now I am working on Fluff, which is a beauty brand or we like to call it a casual cosmetics company. And our whole vibe or our whole, I guess, statement is that makeup is fun, but it's not necessary. And that beauty is actually so much more than makeup. So while we have a product, like we're really about a message and about communicating to customers, this idea that beauty is so much makeup, that it could be so much more than just a makeup product.

2:06And that's what we're excited to explore over the years. And there's so many different components you have, especially with your social media content. That's how we've discovered fluff. And also in addition, you're really building up this community and having those conversations around beauty. And I think what's unique is that it sounds counterintuitive, right? The typical beauty brand is asking consumers to purchase as often as possible. And it's mostly brand or product focus, but you're having this wider discussion and you're limiting the amount of times that new customers have access to Fluff.

2:46So talk to us about this drop model. Talk about this whole philosophy and how it caught on with this community. Yeah. So Fluff is online. We originally had a store, but shifted to being online after COVID or solely online. What we also did was move to a drop model, which isn't necessarily anything new. We definitely didn't invent this concept and a lot of fashion brands use a drop model and some makeup brands or beauty brands use drops specifically for certain products. But it's how we run our entire business. So our website is only open four times a year for seven days. And really, it is a marketing strategy.

3:27It allows us to, I guess, generate demand for the product. And in that time that we're not on, it really allows us to focus on messaging that we really care about that isn't product related, that helps build our brand and helps build our community. It's something that we've been doing for almost three years now. And it was an experiment for me. It was something that I wasn't sure would land or continue to land with our customers. But with each drop, we see our audience base growing with the help of social media and platforms, particularly like TikTok. So it's been a really interesting journey.

4:03I think launching a beauty brand now is very different to launching a brand five or 10 years ago or for the brand that I originally created. And as a founder or as a small business, you're constantly having to innovate or to ideate about different ways to connect with the consumer on these platforms and through these mediums that are moving so quickly. Yeah, and I think it's so unique because you feel like you're building this community and also all of these different people are also talking about fluff. For myself in particular, I actually heard about fluff through a curator who's talking about different brands.

4:44And then that's how I went in and discovered the brand. Was it scary to kind of go away from the traditional model? And how did you confirm that this new idea and this new business model is something that is viable, that you can make work year round? I mean, there's always an element of risk in starting a new brand or a business. Usually a founder might have a hunch or an idea or a need for the product themselves, and then they believe that there'll be more people like them. Obviously, we did a lot of research into our customer base and into the industry and the market to know what our potential was.

5:24But I also had this emotional driver really to create a different narrative in the beauty industry, which we sort of talk about as an antidote to the current beauty industry messaging, which is very much still about more products, about your worth being assigned to what you wear, both in clothes or in makeup. And I really felt like that wasn't right. and I think there was a big, and there still is this growing resistance to that kind of messaging. And we wanted to be a beauty brand that stood for the opposite of that, that told people that yes, makeup is fun and it can be about self-expression, but it really should never make you feel less.

6:02Beauty should be empowering, but I think a lot of people are experiencing it as actually quite disempowering. So that's where fluff comes in. The model is interesting because it's also allowing you to be sustainable from the business aspect and the viability aspect because you're only producing what is demanded by the customer. Talk to us about how that was a concept that got validated by customers and also it helps you with the operational side of the business as well. Yeah, we had a really interesting content piece on TikTok about this where a user had actually commented on one of our previous post that we were creating artificial scarcity.

6:45And our response was that it's very much twofold. A drop model, yes, is a marketing tactic in which we are trying to drive demand by restricting, I guess, the availability of our products or limiting the time of which a customer can buy. But we are limited ourselves by our minimum order quantities with our manufacturer. So with each drop, we only have a certain amount of our cloud compacts and our refills to sell and our products take around 12 weeks to produce each time. So we are trying to forecast and budget out over that year an allocation of drops along with growth on social media, which in some way we can control, but as a lot of businesses know, some of it is out of our control and all it takes is either working with an influencer or having someone influential on their own accord buy your product and post about your product, that your forecasting can be blown out the window.

7:41So it's an interesting one where I could say that, yes, this is a marketing tactic of ours, but it's also very much like relying on our stock levels and our negotiations with our manufacturer due to cost of goods and our minimum orders. Yeah. In a sense of being sustainable, it's also making you financially viable and making it help you to be profitable as well, which is something that people feel like the two often don't usually go hand in hand. The other aspect is you created this compact and this refillable format. It's also something you had to work and negotiate with manufacturers to create and iterate on.

8:24Talk to us through that process of finding someone that was able to partner with to bring this vision to life? Product manufacturing is sort of, it's one of my favorite things and then also one of my most dreaded things. And when I first started this brand and we were talking about the product we wanted to create, we were looking at very stock standard plastic packaging or componentry. I didn't know what was available at the time. And the material that our compact is made out of is called Zamac and it's a mix of metal alloys. and it was only because I went to Cosmoprof in Hong Kong and was walking the aisles for I think it was two days and hours on end and actually came across on the last day this one specific manufacturer that used this material and because it's a mix of metals it's actually quite weighted it feels really like cool to the touch it's a beautiful material and it lasts for a long time so with any traditional sort of plastic clamshell compact packaging you know if you were to draw that, that would break.

9:25It scratches really easily when the product falls out and it looks really dirty. It's just not a very pretty item in itself, which feels counterintuitive to the beauty industry in general. So when we found this Zamac, like it's such a beautiful piece and it really reminded me of some Art Deco references or the time at which makeup or women's cigarette cases or their lipstick cases or their powder cases were also made of metal and looked like jewelry and it was something that women really coveted and wanted to display. But somewhere along the way with industrialization, we lost that desire. We went for the easy option.

10:03We went for the cheaper option. So fluff for me was a chance to do something differently, to create a product that we weren't just proud of the formula, but the packaging too, that was an art form in itself that people wanted to display. And again, for me, it was this sort of confirmation that we could do something different in the industry. And I very much talk to other founders about understanding why they're creating a product and what their point of difference is, because we are in a very saturated marketplace. There are so many brands. There are so many celebrities now creating brands. We're competing on so many different levels.

10:38So if you don't have that product differentiation, it is really hard to cut through. Yeah. And Fluff's packaging is so eye-catching and it is so unique. And I feel like that's kind of comes from the work that you put into to find that manufacturer and also work with them to create the end product. For fellow founders going through that process, what's your advice for negotiating and building up that relationship where you can actually convince someone to take a chance on you and create something new together? It is a very difficult one. And being completely honest, I was fortunate for several reasons.

11:16One in that I had my previous experience with my first brand because that was successful and I had the credibility behind it. I was able to start having conversations with manufacturers, which a lot of small businesses or indie brands might struggle to have access to. Secondly, we had capital. We raised just under a million dollars as a seed fund and that allowed us to have conversations with a manufacturer that had high minimum water quantities and as well because our product, it's not a plastic component. So it is a lot more expensive than creating a plastic clamshell packaging. So there's those things that I guess come into play.

11:56But once you are talking to manufacturers, we even have a limited amount of negotiating skills. We're a small business compared to some of the other businesses that this manufacturer is working with. There's only so much we can do and that I have to recognize where we are in terms of their client hierarchy, I guess. But it is all about, I think, telling them what your vision is for the brand and for the product pipeline. So they know, I guess, what sort of future business they have from you. And then trying to be smart about your formulations or particularly your shade range, like how you can divide your minimum water quantities across shades if it's possible, splitting your stock levels across your different regions.

12:39There's little things you can do and ask them to sort of help based on the experience they have with other brands. But one thing we did was sample with a few different manufacturers. And I really do think it's wise to know what is out there and to not be solely relying on one manufacturer because anything could happen. And you don't want your whole business to be relying on that one manufacturer. Yeah, very practical advice. And I think the other aspect is if other founders want to think about being more conscious in consumerism and have the thread of sustainability within their model, regardless of what industry they're in, what kind of exercises would you recommend that they should do or things they should think about so that they have that pillar built into their business model?

13:29I think if you have the opportunity to have these conversations with yourself or your business founders at the start, then that's so worthwhile because it's much harder to implement in the middle of your business operations. So really thinking about the end consumer and also understanding the market and your competitors and the landscape and what they are offering. I think the standard in beauty has risen so much in the last five to 10 years. When we first launched our refillable products, no one was talking about refillable beauty. And now it's sort of commonplace. It's an expectation of brands.

14:06So I think it's really important for founders to understand what consumers expect now of beauty brands, everything from packaging to ingredients to your secondary packaging and how it's received. and to try and make those better decisions from the start because it's so much easier than having to undo or replace say packaging or formulations or componentry down the road and for us we talk about fluff really as a refill model business maybe more than now more than anything because our compacts are designed hopefully to last a lifetime or for a long time at the very least And so you buy that once and that's your entry into the brand.

14:47And then it's about refilling and trying different colors and shades. So I think a founder really has to balance this idea of sustainability with the idea of retaining their customers and keeping and trying to get the most out of them in terms of their lifetime value. You're essentially creating this new lifestyle for the end consumer to be in the fluff life and also adopt this refillable format, which is so fascinating. and I think your brand and storytelling plays a big part of it, which I'm very excited to chat about. Before we jump into that, I would love to just take a moment to thank our listeners for tuning into this episode.

15:29Wherever you're getting your podcasts, make sure to follow Shopify Masters and if you haven't already, give us a review and some thoughts and feedback on the episode. We love reading them and incorporating it into the show. Thank you so much. A big part of Fluff's success is from the brand identity you've built and also the storytelling around the brand. For founders who are going through that exercise of finding a unique voice and standing out amongst the competition, what are some exercises they can do? Yeah, brand building is one of the trickiest things, I think, especially today because of how saturated the market is and how easy it is for other brands to replicate content and even the rate at which consumers consume content.

16:24So I think the expectations of a founder to be constantly producing is quite exhausting. And it is one of the reasons why we moved to a drop model was that I found that I was getting fatigued of talking about our two products day in and day out. It felt wrong to be pushing product on consumers every single day, especially when our message was that makeup wasn't necessary. And yet every day we were telling people that they needed to buy. So I think it's an opportunity or an invitation for founders to really think about the messaging that they want to receive and what feels overwhelming for them, what feels appropriate for them, what is a genuine sort of conversation or how they would like to relate to a brand.

17:09And sometimes it's that simple. I find a lot of founders often feel like they have to fit a certain model or they have to do what is already out there. There is this very typical sort of D2C formula for comms, but Fluff has really tried to push against that and know what is, I guess like a good aspects of that formula or what boxes you have to tick in terms of just satisfying what consumers know and are familiar with but where there are opportunities for you to do something different and to really have a I guess a point of view or a perspective or an opinion. When we approach our content I mean the brand was initially designed for a younger audience We were really interested in the Gen Z consumer before anyone was really talking about them.

18:00That was just sort of my personal, I think, obsession and connection to my younger cousins at the time we were launching. And I was obsessed with how they were consuming content in particular and brands. And I was actually more emotionally invested in their mental health and the messages that they were receiving around beauty. And so we wanted to change that narrative. I think that intention is still really relevant today because you have a lot of brands still communicating messaging that isn't appropriate or that is very subtly not positive within the beauty space. So for us, we want people to feel like they can see themselves in the fluff brand and then feel like our communications maybe challenge their thinking, but challenge their thinking in a positive way around beauty, around how beauty is connected to identity, around their consumption habits.

18:51And then that plays out in a lot of different ways. I create founder pieces from a newsletter to post on our Instagram and our TikTok, really having these honest conversations. We're very much prepared or welcome constructive criticism or conversation or debate because we think a lot of brands still close their doors to conversations with their customers, even though they say they're listening or they want to have a conversation. So that's a big thing for us too, like actually making sure it's a dialogue. Because a lot of the times, to your point, beauty brands do either talk about a lot with their products or they'll use a strategy where it's very founder focused.

19:32And you've taken this different approach where I think we do use the buzzword of community a lot, but I think fluff is truly having those two-way dialogue and being very different in its way of storytelling, was it ever tempting to like jump on certain trends or seeing something that is a popular type of content to not be swayed by that and actually kind of stay consistent in the approach that you did want it to take? Yeah, look, I'm not going to lie. We are definitely tempted to or have been swayed by what is trending or what the majority does. It's very hard to not be influenced. You almost have to have blinkers on as a founder, as a brand, and to really stay in your lane.

20:19And to know that that sometimes means it's going to be a slower, harder journey, but it is worthwhile in the end because you have something that is really ownable and unique to your brand that customers remember and then actually start, I guess, pushing out in their own way. So for us, an example of that would be our editorial platform, which is called Fluff Issues, and that is contributed solely by our customers or our audience base. And whereas most beauty brands might have typical beauty articles or features like top shelves or what's in your beauty bag or the five latest beauty trends, our issues are all about people's concerns or feelings towards the beauty industry or about themselves and their identity.

21:05So they're almost like journal reflections or pieces. We hardly edit these pieces. They're just posted there for people to view. And again, it's just a different perspective because I really felt like because I had a previous brand, if I was just going to do the same, I may as well have stayed. I've wanted to create something different. And that's really what I think guides us is, is this different and not just different for the sake of being different, but different that aligns with our values and the conversation that we want to have. And at what pace, but also, I guess, what level we want to have with our customers.

21:41Because I think the biggest learning for me over the years has been the way in which we communicate with our customers. You have to meet them where they're at based on their knowledge and their experience around products or around the industry, because no one wants to be shouted at or made to feel like They don't know what they're talking about. So it is really about understanding your customers and I guess all of their motives or their drivers or the context to which they're purchasing from you so that you can really build a loyal community. And to that point, I think you've really put the customer at the forefront versus other brands might be partnering with influencers a lot.

22:22And that's another approach that you've really been able to differentiate where you're not actually collaborating with influencers in that way. Yeah. Like, why was that also an important part of the philosophy of building fluff? I think my relationship to influencer relationships is sort of quite tumultuous. And I think we previously had built a brand based off influencer relationships and they felt very transactional. I also wasn't, something didn't sit right about the way that influencers were talking about our product or the messages that they were putting out there. And I felt this unease that consumers were idolizing these people based on their highlight reels and based on these lifestyles that were very manufactured and it didn't feel real, which I think has just slowly happened over the last sort of 10, 15 years, whereas an influential person is still a very valid idea and concept.

23:19And so I think for a brand, it is about defining what an influential person is for you and how you are going to work with them. And so for us, influential people are those that contribute to our issues page. They are people whose feeds look like the type of person who would buy fluff themselves that isn't manufactured or constructed. We still do gifting. That is something that we have participated in as a brand, and I think it is useful and worthwhile. But we gift on the basis that we just want people to have our product who we think align with our values and our sort of brand representation or aesthetic.

23:55We have no expectation that that will post. We have done, I can probably count on my two hands, the amount of paid actual influencers that we've engaged with. And some of them have been worthwhile and they were people that we spoke to for a long time. Others haven't been as worthwhile, but they were an experiment for me. And that's something that I do suggest for founders is to experiment and try and challenge yourself and your ideas and some of your strong opinions. And that was one of mine that influencers didn't work or that I didn't like them. And I was like, I should challenge myself on this.

24:33And every now and then we should put one out there, see if it works, see if it moves the dial without then shifting our business model to rely on influencers, because it's a very sort of hamster wheel exercise and that you're constantly then having to find more influencers, pay them. And then this is why we have ended up in a place where their rates are so high because brands have just said yes. So I think it's about, again, finding what your definition of an influencer is and different ways to work with them. Yeah. It's interesting because you're building this business model where the company itself is self-sufficient and you're not relying on, like you said, the growth engine that is influencer marketing.

25:15But then you're also kind of having incorporating influence in different ways where for the top of funnel, you are creating a podcast or having these discussions and you're having these articles to really drive awareness for the brand. Chat to us a little bit more about the approach to invest in editorialized content and a podcast. For any brand, you have to really think about your available resources and then the conversations or the content that you want to create. And there are so many platforms and so many mediums that a brand can participate in, but I really don't think that means that you have to be across all of them.

25:55It's just so much to ask, especially for a small business with limited resources or funding. For us, the podcast made sense because we essentially had access to resources production-wise. We knew the types of conversations we wanted to have, and we felt like they would be valid conversations or what our audience wanted to hear. I think podcasts in itself are becoming a very valid platform for many brands and just another form of marketing for them to reach new audiences. And then for us, it's all about repurposing that content, filming all of our podcasts so that we can put them up as reels or on TikTok, taking some of those conversations, perhaps repurposing that into blog content, et cetera, thinking about the reach that we can have with them.

26:42And in a way, our podcast very much is our influential or influencer program in itself because the people that we talk to generally repost that content themselves and that gives us access to their audiences and communities. And I think with all of that content, it has really allowed you to reach new audiences. I think within the states, the customer base has doubled within the last few years. Has there been specific episodes or TikToks or different content pieces that have really moved the needle in terms of growth for you? So our podcast has been really interesting. I also personally wanted to have some different conversations that weren't happening in the beauty industry that I knew might be a little bit topical or perhaps polarizing and would draw people in.

27:31We have done several conversations just like this with international guests where we sacrificed potentially the audio or visual quality because we knew that it was still going to be a valid conversation. And because we also knew that customers, their expectations of content, it's dropped in a good way in that it doesn't have to be some fully staged, high production output anymore. Conversations like this actually feel often more genuine, more real when you can see the guests in their natural environment. They're more comfortable having open conversations. So we have one podcast episode with Jessica Dufino, who's quite a well-known American beauty writer who typically has a really interesting take on the beauty industry and I guess the marketing strategies or the brands that aren't having a positive impact.

28:27And a lot of brands I think wouldn't go on Jessica's podcast or wouldn't have a conversation with her in fear of her confronting them or talking to them about things that they don't want to talk about, whether that's ethics, marketing, production, sustainability, you name it. But I was so keen to talk to her and to have that conversation and knew that if we were a brand that could sort of stand up and hold that space for a difficult conversation, that that would probably resonate with more people than not. And so we have a lot of traction from that episode. Also interviewing men on the podcast, typically like the beauty industry, I'm making a generalization here, but all of the comms are directed to women for a makeup brand.