How to Sell Premium Products at Scale

0:00Overnight drove sale, we like eliminated all but a small percentage of those card abandonments and our revenue that year tripled. Hey everyone, I'm your host Adam Levinter and welcome to another episode of Shopify Masters, your companion for starting and building a business. A lot of us come from humble beginnings, but not all of us end up revolutionizing seafood distribution for the entire United States. That's why today I'm speaking with Chris Sherman, the CEO of Island Creek Oysters. Since 2009, Chris has transformed a local Duxbury oyster farm into a multi-million dollar operation, supplying world-renowned restaurants like the French Laundry and Per Se.

0:40But on top of all of that, Chris and the team began dominating the direct-to-consumer space in 2009 and never looked back. He's here now to talk about his scalable business systems and how he's democratizing access to premium seafood through e-commerce. Chris, welcome to the show. Hi, Adam. Thanks for having me. Psyched to be here. How come you don't have that Boston Northeast accent? It's a good question. My parents are from Connecticut, so they never really had it. My grandparents had it. But somehow, I don't know, skips a generation. I'm not sure. Right. I've been spared. So parents are from Connecticut.

1:18The accent skips a generation. You've been growing up on the water for some time though, right? Take me back. Yeah, yeah. So I grew up here. I was a water rat from an early age. So I used to work at a boatyard across the bay in Plymouth, Mass. And I take my boat to work every morning as like a 13-year-old, 14-year-old and go work the fuel dock. And I just got hooked at that point. I got really enamored with these boats, these big yachts and things would come in or tuna fishing boats and fuel up and go off into the ocean. And I was like, I need, that needs to be me someday. So here I am. I've never really been able to get a job that didn't involve being on the ocean.

2:01Yeah, and I read something. You've been working since you were, what, 13 years old or something like that? Well, yeah, I think my first job was at, ironically, at Skip, the founder of Violent Creek. His family had a general store, and that was my first job. I worked in the beer cooler. I was a 12-year-old stacking cases of beer. Um, so yeah, full boomerang came all the way back to my roots. What's the, um, the, the seasonality or the seasonal nature of these businesses, at least in the, in the area of the U S where you are. Yeah, it's a wild ride. Honestly, I often fantasize about being in a business that's like consistent or even semi-consistent, uh, 12 months a year.

2:45There's the farming cycle, which is obviously very seasonal based around the life cycle of the oyster. where we have periods of high supply and really high quality, and then periods of lower supply, periods of lower quality. And then there's the consumer rhythm to it, which obviously a lot of people want to eat seafood in the summer. We have an outdoor restaurant here. A lot of our restaurants have patios and things like that. So they really pop in summer. January is pretty sleepy. So it's intensely seasonal, I guess is the short answer. But you've been on Shopify since 2010. So I guess in some respects, you could look at D2C and e-commerce as a bit of a hedge to the seasonality.

3:27Is that how you see it? It is. Not in so much as it's not seasonal, but it kind of marches to the beat of its own drum. So we have our week-to-week business kind of ticks along. Largely our business online, it's caviar and oysters and kind of high-end fish. So it's event-driven. So my assumption and some of the data we've collected over the years suggests that our week-to-week businesses, birthdays and dinner parties and things like that. But then we have these massive spikes around holidays, like Christmas is obviously huge, 4th of July, you know, so it's not a steady business online, but it kind of runs on its own, its own seasonality, if that makes sense.

4:08Mm-hmm. Okay. So Island Creek has been around since something like 1995. And before you took over the business. You mentioned Skip. So this was Skip's business. How do you guys connect? How'd you guys meet? Yeah, great question. So in my water rat, young buck days, I ended up partnering with a good friend of mine through high school and college. And we had our own little wood refinishing business. And we would do power washing and we'd do boats and we'd do people's decks on their homes and things like that. It was called partners in grime power washing. Dirty decks done dirt cheap was our slogan.

4:46So it was pretty great. But in the beginning, it didn't really do that well. So we both had other jobs too. And my buddy, my partner, Alex Bezdek, he was one of Skip's first employees on the oyster farm. So we got to know Skip and I frankly used to steal, they had to beat a big ice machine. And so we would steal ice from their ice machine to like chill our beer on the weekends. So that's how I got to know. Okay. But fast forward, I mean, you develop this sort of more intense business relationship. Do you start working for Skip before you begin to discuss, I guess, partnership opportunities or things of that nature?

5:23Yeah. So what happened was I went to college and then I got into, in the kind of maritime world, I got into, I was a professional sailor and I worked for yacht designers and built boats kind of all over the world. and eventually got to a place where two things happened. One was like 2008 recession, you know, that whole thing went down and the super yacht industry was not in great shape. You know, the market was not doing well. So a lot of those people were pulling back. So it was hard to get those boat building gigs. And the other piece of it is that it got a little tired kind of moving all over the place.

6:03We were in New Zealand and the Caribbean and Maine. and so I was looking for a job that would keep me connected to the water but in one place and Skip had done all the heavy lifting getting the farm off the ground and they were getting some traction they had a good name going for themselves but there was still you know just a I think we had between the farm and the little minute distribution company I think there was maybe five or six employees when I started and yeah so I called Skip one day and I said hey I want to move back and I'm looking for a job. And I took a job working on the farm with an eye to helping out on the kind of sales marketing side of things as well.

6:40Skip's still very involved in the business. He runs all of the production, all of the growing of shellfish and everything like that. And we run everything together. So what was the business model opportunity? Like when you came in and you take a look at the traditional business model that Island Creek was running at the time, did you have a sense of where the potential of this business was or did this sort of evolve organically? No, we had no idea. We sat around every year for a number of years, kind of pinching ourselves and saying, when is this oyster fad going to end? When's the bubble going to burst?

7:19Because the oysters were just a way to, you know, grow something on the bay. And it was really a lifestyle decision for all of us. But then they got really popular. And And partly it was us, you know, we helped drive that with all the marketing that we were doing. And we were on the road for years and years doing events and things like that. So I like to think we helped kind of drive the oyster renaissance, as we call it. But now they've kind of become this ubiquitous product that people love and they're served in. We sell to 46 states now. I mean, they're kind of everywhere. When I started, we just sold direct to a handful of restaurants in Boston, a couple of distributors here and there.

7:58and it was real small potatoes. So yeah, I guess to answer the question, no, I don't think any of us had any idea of how big the business would become or frankly the market and the demand for our core product. So 46 states now, what's the split between B2C revenue versus B2B revenue? We're still like 80 % B2B and 20 % D2C. that used to be more like 90-10 pre-pandemic. And then we grew a lot and we've actually been able to quite remarkably retain almost all of our pandemic-driven growth in direct-to-consumer. So it's a stronger mix now. So back in 2010, you guys stumbled upon Shopify. So how did you come across the platform?

8:47What were you looking at? Or what were you looking for at the time from an e-commerce partner? Yeah, it's a great question. So we got into the direct-to-consumer business on a whim, you know, we were always looking for, you know, not that we had a lot of sophisticated strategy at that point, but we were innovative for sure. And we always looking for the next kind of hustle that we could do. A lot of it driven by diversifying away from just being a farm, because there is some real cyclical pieces of that business. You have good years and bad years. And as we had more staff, you know, became clear to us, if we're going to create a stable business, be able to have people depend on us for a paycheck, we needed to be less volatile than just in the production agriculture business.

9:26So we did a bunch of things, but one of them was to start trying to sell wasters online. And quite frankly, we stood up this janky, I don't remember what the backend was. I think we built it ourselves, um, in the first year that we did it. And I, I think we did like$6 ,500 in revenue the first year online. Um, and that was probably$6 ,000 more than I thought we were going to do. Our, our big, yeah, our big question was, I just didn't think anyone was going want to shuck oysters at home it was i like i love oysters as much as anybody and i'm a pro shucker at this point but if i can get someone else to do it for me i always do so um that was a big bump that we got over so we actually got some traction after a couple years running this janky homespun uh web store with with a weird cart and and all this stuff uh we were looking for like a real solution and we were lucky in that firms like shopify and people like that were starting to to kind of create a solution for people like us.

10:25And those are the two that we were evaluating. And Shopify was much more turnkey at the time. We didn't have developers or web production people or anything. So it had to be easy. And that's how we kind of made the choice. We kind of grew together. Yeah, and Shopify, you know, I know their story very well, as well as a Canadian based here, certainly have watched that company's rise. And they too, I mean, in some respects, they too were just trying to figure it out to try and serve merchants better. But kudos to you for sticking with it. Can you just walk us through your e-commerce journey like those first few years?

11:06What were the challenges? What were the different aspects that you're running into that became sort of barriers to building digital? Yeah, there's a couple of kind of watershed moments. One in the early stages, when we first switched to Shopify, we all of a sudden had access to some analytics, which we hadn't had previously. We were just guessing and pulling the strangest data from our cart and things like that. And one of the things we saw right out of the gate, like literally the first week we were using Shopify is that we had a high cart abandonment rate. And our assumption then was, okay, like everyone's willing to pay really whatever to get premium oysters shipped to them in Chicago or Denver or wherever they may be.

11:47but people get to the cart and then they see the shipping is is pretty significant as a percentage of the cost uh even though we had really competitive fedex rates from our direct-to-chef business and we just made the simple decision to say okay we're going to and this was not nearly as standard practice at the time but we just embedded shipping into the cost and kind of worked out a number that hedged against shipping to california versus shipping ground to someone in mass. And, um, and that overnight drove sale, we like eliminated all, but a small percentage of those card abandonments and our revenue that year, um, like tripled.

12:27And so that, that was a big kind of learning experience for us. And we retain that model. Um, today we, we still ship the vast majority of, of SKUs on our website, go out, um, free shipping. So, which is a big thing for people when you're buying fresh seafood. I would assume loyalty is a big aspect of your business, like repeat purchase rate, repeat customers. Is this a segment of the data that you pay attention to? For sure. Yeah, we have an astoundingly high return customer rate. And that obviously blends into looking at the lifetime value of those customers and it informs our kind of marketing strategy around acquisition.

13:05So we know we can spend a fair amount of money to acquire a customer because it is extremely likely that they're going to order again. So we're not just looking at it on that one order basis. And I know that's pretty boilerplate for people in direct-to-consumer, but for us, it's been that learning curve because we're a seafood company first and foremost, and we are obviously majority B2B. So we've always been doing a little bit of wheel reinvention as opposed to somebody who does a startup that's purely online direct-to-consumer. So that was a big revelation for us for sure. So from a marketing strategy standpoint, and for those that are paying attention to these metrics, lifetime value, customer acquisition cost, if you're comfortable sharing, what ratios are healthy for your business?

13:51Is there a threshold with respect to LTV to CAC that you want to hit in terms of deploying marketing dollars? What does the marketing strategy look like behind the scenes? Yeah, it's a good question. And frankly, candidly, I'm not as involved in the day-to-day as I used to be. We have a team now, we have a digital agency that we work with to really optimize that stuff. However, I can tell you that like 60 % of our online business is from repeat customers. So it's a significant share. Our average order is something like$150. dollars. So when we go out and think about acquisition costs, you know, we've got, you know, $20 to play with as far as looking at paid digital specifically to get a new customer into the system.

14:39And there's obviously times of the year where that becomes much easier. We really focus spend around, you know, the holidays and things like that. It's a little harder of a pitch to to to get someone to to kind of click through online on an average week in august or something uh and then there basically we have a lot of organic uh flow through to the site as well because we are out in the world with doing restaurants and brick and mortar retail we do a lot of content marketing for the brand in general um which thankfully we have a really good loyal kind of fan base and so we get some flow through that's not we're not just a strictly kind of digital acquisition strategy, which is really nice.

15:21But the kind of organic boots on the ground, marketing is not cheap either. So it's always a push and pull between those two things. Yeah. And I've heard you talk about this previously, this idea of analog marketing or old school marketing. Events, food festivals, et cetera, probably super important in your world. But is it 50-50 at this point? Like, are you looking at analog marketing as 50 % of the overall marketing strategy? Is it bigger than that? It depends on how you slice it. You can look at the spend and what you're spending on digital as a comparison. I think the temptation for a lot of people as it relates to analog marketing is to try to apply the same metrics to that analog marketing as you would to digital.

16:10Because digital is so measurable, it's so transparent, it's right there, and you just can't. Because we've tried everything over the years. We've tried to do codes that we pass out at events or codes for radio ads and things like that. And people use the codes. Some people don't use the codes. Maybe they come back around, you know, six months later and there's a recognition there. And that's obviously, you know, Meta and Google and the other digital advertising platforms all capitalize on that as well. They know that it's not just a one, you know, you see it once and you click, you buy. But you have to really look at it holistically.

16:43And when we think about the blend, you know, we don't spend a lot at this point on like traditional advertising in comparison to our digital. We don't spend a lot on we spend far less now on doing events and traveling and things like that. However, we do spend a lot on is we have in house creative and marketing. And we do a lot of content marketing that is not necessarily paid, you know, we're just putting organic content out. Whether it's videos online, social, we have a really robust Instagram following. We have a big email database. So we're looking at that really as a funnel. And what I would say is that on the analog marketing, that kind of funnel-based approach is much more applicable because you do kind of start the journey at a much earlier level.

17:29And it's not all about getting, you know, your conversion from day one. You know, it's about kind of drawing them in and getting them to sign up for email. And once they're on email, we know we have such and such likelihood that they'll convert. So that is a lot more of a holistic approach. Whereas with digital, like I said, because we have such strong analog marketing, we don't have a huge funnel. Like when we're doing digital, we're really looking for conversion. Because we feel like we deploy enough resources with our organic content, and people who are visiting our locations and things like that, at that high level funnel.

18:01And that seems to be more effective to kind of start people on that journey than just seeing a display ad that's really more about, oh, like, check us out, here's just some information about our business or sign up for email. We have less traction with that in digital. When you think about your content marketing strategy in the world of oysters, like what types of content are you putting out there that people feel is entertaining? Is it like how to shuck oysters? What wines to pair with oysters? What to eat with oysters? Like talk to me a little bit about that. Yeah, it's a variety. And I think from an early stage, we've always kind of thought of ourselves as a lifestyle brand.

18:37And that again, now, 15 years later is less of a rarity. But even in our business, I think you see lifestyle brands and apparel and homewares and things like that. You don't see a lot of food companies that are producing and marketing food kind of, you know, high up in the value chain, taking that approach. And so that's been most successful for us is, uh, creating a scene and allowing people to kind of put themselves in that moment, which lets them understand how to incorporate the product into their life or their aspirational life. You know, um, that's a big piece of it where like, we go out on the boat, we've got tin and fish, we've got oysters, whatever we do the spread.

19:19You can take a camping, you can go into a high-end restaurant. Um, the brand we've intentionally kept very versatile for that reason is we can kind of reach people where they're at and where they see themselves kind of partaking in our product and in that lifestyle, no matter who they are or what they're doing. So that's been our most successful content over the years. That being said, we have really great engagement on some of the more basic stuff like how to shuck and how to assemble a timboard. The how-tos are great. And then we have other things that are just janky and we're all a little weird here.

19:55So some of that content hits and some of the weird stuff doesn't, but when it hits, it hits, it hits well. When you think about, uh, Island Creek as a lifestyle brand, do you have other brand pillars? Like, is there an overarching brand strategy that you have somewhere, say on a whiteboard at the company? Yeah, absolutely. You know, for us, we're really, it has evolved quite a bit over the years, I would say. But at this point we have a few different product categories. We've got tin fish, we've got caviar, we've got oysters. And we have a few different iterations of our hospitality locations where those things are really brought to life by talented chefs and in beautiful venues.

20:35And what we've arrived at is there is this kind of incredible global coastal lifestyle that we really try to tap into that is about living well, enjoying the ocean, appreciating it, taking care of it, eating responsibly, but eating well and living well. as a result. And that is as much about wine and food as is about, you know, how you're spending your time. It's, it's sailing, it's fishing, it's, it's whatever, but it really seems to resonate people in a way that's far, far bigger than, than us. So for a long time, we were on the hunt to say, all right, what else can we tap into here? That's bigger than us to get some momentum.

21:12That's not just this is Island Creek. And we're appealing for the following reasons. It's like, this is Island Creek and be part of this aspirational lifestyle that you're pursuing. And that's been really effective. What does that mean from a category expansion standpoint? Like you are in a niche category, let's say, but you are into Tinfish, Caviar. There are ancillary sort of venues or spaces where you could bring this lifestyle brand to life, as you mentioned, through these local venues or what have you. But as you think about category expansion, which historically has been somewhat of a challenge for some brands or some product related brands in the past.

21:53How do you think about it? I'd start by saying it's a challenge for us, for sure. Both from a adoption standpoint of getting our existing customers to, you know, adopt new product categories at a critical mass. And then it's also a challenge just from a core value standpoint for the business. We're all here because we're passionate about oysters. Because oysters have a lot of these intrinsic qualities where they're traceable, they're good for the environment, they're generally grown by small mom-and-pop farms. There's a lot going for them. And from a seafood standpoint, it's kind of a fraught industry, right?

22:29It's like there's a lot of fraud, there's traceability issues, there's slave labor, there's environmental concerns. And we've always kind of been very luckily and by happenstance in this ivory tower of our core product has these intrinsic values that kind of hacks around a lot of those concerns that people rightly have with seafood. So as we look to expand, we're trying to find products that not only appeal to our customers and fit into that vision of the Island Creek kind of coastal lifestyle, but also ones that can kind of measure up in the face of the values that we and our team feel really strongly about when we go to source product.

23:05And one of the ways we've gotten around that is we've really tried to, with the new categories, we're going to vertically integrate as much as we possibly can. That way we get around these kind of globe-spanning supply chains where you don't know what's happening or who's doing what. If we own as much of the production as we possibly can, then we know because we're doing it ourselves. So that's why we've built a cannery down in New Bedford to do the tin fish. We do all of our own caviar packing in-house. We touch, hold, and own the product as much as we possibly can, which is pretty rare these days.

23:35So those are the kind of core fundamental elements. And then beyond that, from a kind of more traditional consumer marketing perspective, we're looking for products that complement that lifestyle. They're flavorful and abundant and it's a rich experience for one. And then two, there are things that you can take with you in a number of different contexts. It's not just something you're eating at a dinner party or at a high-end restaurant or something. They're versatile. So we've gone more and more towards things that are shelf stable, like the tinfish. The caviar has got a much longer shelf life than the oysters do.

24:11And then there's sustainability is a big component of it too in the consumer context. So we look for things that have intrinsic qualities, like the tinfish can be shipped, you know, not air freight. It can go ground, which is huge for seafood. And it's still this incredible high quality seafood that you're getting. So those are things we're looking for. And we've gotten a lot of great traction with the two kind of bolt-on categories that we've got. It's taken years. We've been in the caviar business for, I think, seven years now. And it's becoming a really significant share of our overall business, and particularly so online for direct-to-consumer.

24:47And then TINs are coming right up behind it. Let's double-click on the direct-to-consumer for a moment, but on the logistics side of things. So you mentioned the idea of shelf-stable being a critical piece here. So correct me if I'm wrong, but you guys now do overnight delivery anywhere in the United States. And that model, I think you've described it as sort of the flower delivery model, if you will, where it's analogous to that. I would imagine that if we were running back to 2010, 2011, 2012, you probably weren't doing overnight, anywhere in the country at least. So just talk to me about the evolution of the supply chain and the D2C logistics of this whole business.

25:30Yeah, so that's still evolving for us, for sure. It's a constant, you know, where logistics is a major core competency of what we do. And for any seafood company, it's a big piece of it. So it's an ever evolving component. it. We benefit from the fact that because we took a little bit of an innovative approach to our distribution, whereas traditionally a producer in the B2B channel would sell to distributor who then probably sells to another distributor who then hits a hotel or a restaurant. And that's a chain that works. It's mostly done via trucks and it has a lot going for it. But because our demand outstripped our supply for so long, we chose to, after we had gotten traction going direct in cities like Boston and New York, we chose to start trying to do overnight delivery via Airfreight or FedEx for our B2B customers.

26:28And we got a lot of traction with it. And that gave us the critical mass on FedEx to have a reasonable discount that we could apply also to the direct-to-consumer channel. And so that was the major stepping stone to getting into that overnight delivery schema that has really paid spades. So that's really the crux of it right now. There's some corollaries to that. There's different markets we serve a little bit differently. But for the most part, we're hitting overnight on FedEx. Has there been an evolution on the FedEx side with their comfort level with a product like this? Like oysters, you know, I would assume have an incredibly short shelf life and you've got to ship fresh.