Site Crashed Day One. Now She Runs One of America's Fastest-Growing Home Brands.

0:00Sara Sugarman:You don't build a brand overnight. My goals for the business were not aligned with investors. Rapid growth at all costs. Like, I always believed in slow, intentional growth.

0:12Online home furnishings is a$230 billion industry. And Sara Sugarman saw an opportunity hiding right inside it. Sara grew up in her family's rug business, but instead of following the traditional path, she took everything she learned to build something totally new.

0:28Sara Sugarman:It's usually not one thing. It's like 100 things. And you've got to do the 100 things, like step by step. In 2012, she launched Lulu and Georgia, a digital first brand that brings curated home decor directly to consumers. Today, the brand is growing 30 % year over year with a repeat customer rate double the industry average, all without taking outside investment. Because every dollar is mine, I'm so intentional about the way we spend it. Sarah is here to talk about what it really takes to build a bootstrap brand from scratch, the chaos, the lessons, and the next chapter. I'm Adam Leventer, and this is Shopify Masters.

1:05Sarah, welcome to the show.

1:07Sara Sugarman:Thank you. Thank you for having me. We're actually sitting on Lulu and Georgia chairs. We are. Yeah. I was watching some videos of Shopify Masters and thought, maybe we should give them our furniture. Yeah, they feel great. I mean, they sort of match my shoes. Yeah. Um, so take me back to 2012. What opportunity did you see and what was the business that your family was in that allowed you to see it? My grandfather started a company called decorative carpets in the 1950s. It was one of the first trade only, uh, carpet showrooms. So before it was kind of lifestyle showrooms where you'd have furniture and rugs and he saw an opportunity and opened up a rug showroom in West Hollywood.

1:46Sara Sugarman:And my father took over the business. And I grew up there. Back then, they would actually hand paint all the rug designs. And so I would spend some time in the art department painting my own designs. Then my dad was begging me to join the family business. He was wanting to retire and he wanted a succession plan and begging me. I was living in New York at the time, begging me to come back to LA and work for the family. And I, at first, was hesitant because it didn't sound, you know, as exciting. I was working in magazines in New York. I was working for Oprah, and that was very exciting. But I thought it was a great opportunity.

2:24Sara Sugarman:And my husband, who was then my boyfriend, wanted to move to Los Angeles as well. And my dad said, okay, first, you're going to learn the carpet business in New York. And he had me train with a sales rep in New York. We went over all of New York selling carpets to the high-end showrooms there. And I learned the business and then came back to Los Angeles. And when I came back, the industry was really changing. It was the recession. Designers were shopping online and it was hard to get people in the door. This closed showroom model that existed started, you know, it was the start of more transparency with the buyer where now the buyer wanted to shop directly and bypass the designer.

3:07Sara Sugarman:And the environment was just, I just really saw that this was shifting and that I, you know, I needed to come up with a pivot. I think that the third generation of a family business usually destroys it. But there is a saying that the third generation sometimes reinvents the wheel. And I hope that I did that. So Lula in Georgia came out of what can we do differently? How can we pivot the business? My dad and I would go on international buying trips and I saw that I could import rugs at a more accessible price point that are still really high end and still high design. And that's really how the idea got started.

3:47And were you watching what was happening in e-commerce? Like what did you notice about online shopping? This is circa 2012, 2013, right? This is 2012.

3:56Sara Sugarman:So I was shopping a ton online and just saw how for, you know, anybody that's working, but especially, you know, a working woman who's a mother, it is very hard to find time to go into the store and shop. And so you're online shopping at night in your bed and, you know, online shopping between meetings at work. And so I thought this would be a great way to bring these accessible price point rugs to the consumer. Do you start with rugs? Is that the first assortment of product that you list on the website? That used to be the first category of product in our navigation. It is not currently anymore.

4:35Sara Sugarman:But rugs were always what we were known for. I love rugs. I think they're the best product to sell. From a business perspective, they're a high AOV product. They're a high margin product. They don't get damaged in transportation. They have a really high perceived value because the rugs that we design and import are all handmade. So it's a great business. And I think the passion for rugs really came out to the customer in our business model. But no, we actually launched with all categories, but rugs were the focus. Low returns rate also, I would imagine. Lower returns rate, right. Yeah. And Lulu in Georgia, going back to the traditions of family and family business, this name, this brand stems from your father and grandfather?

5:16Sara Sugarman:Yeah, my grandfather's name was Lou and my dad's name's George. And so the name really was an ode to them. And they're so much a part of Lulu in Georgia. And our trajectory, our journey, so much of the business model is actually the same. We design and import rugs and products and bring beauty into the home. Those things are the same as what my grandfather had started. Just the mode of selling is what's different. It feels like this is a brand that's so much more than just home decor. It's really this sort of design experience. I was on your site earlier and it feels very aspirational in a way.

6:03What do you make of that? And was that part of your idea to build a brand in this way?

6:07Sara Sugarman:For sure. We're selling a lifestyle and people have to trust us as the expert in order to make that purchase. They're trusting that what we say and what we're putting out there and that what we're designing and curating is the best. And it is. That is our mission. So for sure, we're selling a lifestyle more than individual products. And I can reserve a home decor consultation. Yes, you can. So is this an entry point? Like, how does this all work? We have an in-house design team. So what I was realizing is that my friends would ask me, how do I put this together? Will you help me? I don't know where to start.

6:45Sara Sugarman:And it is overwhelming. It's not the same as clothing where you've been dressing yourself your whole life. You know, people that are now buying their first home or wanting to invest in, you know, furniture or rugs for the first time, they don't know how to put the room together. Even I struggle with putting the room together. I hire designers from my own home because it's hard, scale's hard. And it's decision, you know, paralysis. You know, you don't know where to go first. So I realized that they needed help. And so that's why we created the design team. It's completely free. And it's to help the customer, you know, aid in their journey of designing their home.

7:22You know, I was looking at your social media earlier and it's fantastic. So well done there.

7:28Sara Sugarman:Thank you. Instagram alone has something like 1.2 million followers. I mean, that's huge. Sounds right. When does social media take off for you? and how did you generate so much engagement there? So it started from the very beginning and we were lucky because that was really the start of Instagram. And so social media also allowed an opportunity for all these influencers and regular people to post about their home. And so you could see it and say, oh, I want this and be inspired by it. So social media was such a powerful tool and we're such a visual brand. So tools like Instagram and Pinterest were huge for the start of our business.

8:10Sara Sugarman:And we just started, I mean, I think, you know, me and an intern were posting photos and they got a lot of traction and we had a lot of influencer engagement in the beginning. And that's really how we grew the brand. Are you still active with influencers today? Oh yeah, it's a big part of our strategy. So what does that look like exactly? So, I mean, we pay influencers to post about us. We give them a lot of product. We form a lot of relationships with them. We shoot content with influencers. We also have a whole program of licensee collaboration. So we have influencers and designers that actually design products for us.

8:48Sara Sugarman:And that's hugely successful. And we started that in the very beginning of Lulu in Georgia and has been a really big part of the company growth. They're very sought after products that have a unique perspective. And it's also a brand marketing channel because they're posting about it. And they obviously, it has their stamp of approval. They designed it. What is the role of TikTok today? You've got 400 ,000 followers there. How do you treat TikTok and what is the role of that channel versus some of these other top of funnel drivers? I think, you know, TikTok's just as important to us as the other social media channels.

9:22Sara Sugarman:TikTok's more organic. So we're posting different types of content there. It's a little more loose and less refined than I think we're posting on Instagram. But in the beginning of TikTok, it was like, oh, no, you don't want to be you can't be an elevated, sophisticated brand on TikTok. But I think our customer is definitely there, and that's proven not to be true. Where does direct mail and catalog fit into the equation? So I started my career, my very first job out of college, was working in direct mail for Hearst Magazines. I worked for Esquire, Smart Money, and Popular Mechanics, and we would do the insert cards that, you know, kind of fall out of magazines.

9:57Sara Sugarman:It was a really boring job, and it was seen as very antiquated at the time. And like, this is a dying feel, get out quick, go to e-commerce, like do something else. So I did get out quick, but it is, it has come full circle and it was not antiquated at all. When we, when we launched our catalogs, that was a very pivotal moment for us because now people are experiencing the brand in real life in their house. And really, you know, you talked about the lifestyle being what really we're leading with. And that's such an easy way to, you know, lead with lifestyle imagery and to show somebody a beautiful catalog that's representative of your brand.

10:39Sara Sugarman:So that's a huge part of our strategy today. And not only with the catalogs, but also with, you know, direct mail to new movers or other types of pieces that are targeted at different types of users. How do you measure the effectiveness of direct mail? Like, what are you tracking? We can tell if they've received a catalog and if they have purchased. And then we are using a holdout group to figure out if there's a lift in sales. Where do you think, I mean, do you think direct mail can still play a role in big ticket industries beyond home? I'm just curious, like where it seems to me that this is a particular category fit.

11:21But do you think a lot of brands are missing this opportunity based on how beneficial it's been for you guys?

11:28Sara Sugarman:I think that it works well for any aspirational brand. I'm not sure. And big ticket. I mean, look at Amazon. My kids will go through that Amazon catalog at Christmas and start picking out what they want. The physical catalog. The physical catalog. It's crazy. And they'll just pick it out. I won't even—it was supposed to go in the trash. And they're picking it out and being like, oh, I want this. I want that. So for sure, it can work for others as well. And that's not aspirational. Yeah. Lulu in Georgia has a 52 % repeat purchase rate. That is two times the industry average. That's fantastic. Thank you.

12:03How do you generate these repeat purchases? What's your strategy here?

12:06Sara Sugarman:Well, one way is we have a very loyal customer base of interior designers and trade professionals. So those people naturally are repeat purchasing, right? Those are very high value customers to us because they have many projects. But I think more than that, for the customer that is not an interior designer, we are doing a good job of selling them the whole house. We have all of the components to make a home for them. And so if they have the rug and then they're saying, oh, I now see how they styled this rug with this coffee table and maybe I should get the coffee table as well. And through systems like design services where we do have a direct relationship with the customer, they're able to really help, obviously, incentivize them to come back and make that other purchases.

12:53Sarah, let's go back to those early days. So I read somewhere that your first version of the online site was on Drupal.

13:01Sara Sugarman:It was. So very scrappy. Yes. And you were putting together purchase orders on your own manually. And the first day that the site is up, you crash? Yes, we crashed the very first day. Okay. Tell me the story, please. So I knew what I was doing with making product, with importing product. And I really knew what I was doing with brand marketing, but I had no idea what I was doing with technology. And we clearly had set up a system that did not work for not only the demand, but didn't work for any type of infrastructure. So I kind of had this belief in the beginning, like, you know, let's just build it.

13:43Sara Sugarman:Let's just get the customer. And this was not a mistake. I don't regret this because I think I was trying to also figure out proof of concept. Like, I didn't want to spend all this infrastructure and technology. I wanted to see, like, are people resonating with our products? Do they even like them? So we didn't invest in technology at all. And we had created through influencers and through social media, a very big buildup to the company launch. We had put up a page that was like collecting email addresses before we were ready for launch. And yeah, on the day that - That strategy still works, by the way.

14:16Sara Sugarman:That strategy works. It's so good for you. You're way ahead of the curve. And then the site crashed on day one. And that was, you know, such a good wake up call. and it was really a metaphor for everything to come because that kind of stuff still happens, you know? The site doesn't crash, but it, you know, the other things crash. I mean, absolutely. It's sort of terrifying, but also validating. Right. In a way. Yeah. You've got something. Yeah, yeah, for sure. It was validating for sure. And I realized I was all alone and had to figure it out myself. And that was powerful as well. Who was on the team back then?

14:54No one.

14:55Sara Sugarman:There was no one on the team. It was me. And I was still running our showroom, my family business's showroom. And this was very much, you know, my father had been grooming me to take over the family business. And while he was very supportive of me doing this on the side, it was like, oh, this is like a little side thing. Like this was something I did at night. You know, people were coming in the door and I had to service them and I was managing salespeople. So this was like, this was a side gig for sure. When does it feel like it goes from a side hustle to a legitimate business? A couple of years in, it had surpassed my family business in terms of revenue.

15:30Sara Sugarman:And then it was like, okay, I got to do this instead. So what does the hiring process look like and how does the team grow as the business grows? We had taken a few people from my family business. I had hired interns or people that were right out of college that I just found could be, like I saw that spark in them and that kind of desire to grow and be uncomfortable and want the challenge and kind of hired these people fresh out of college that honestly, one of them still works for us today. She's our head of creative. So I didn't have any money though. I didn't have any money to start the business.

16:07Sara Sugarman:So it was like hiring people who could work. I mean, literally college kids who could work, you know, part-time and just help me get some spreadsheets so I could load product into the site. That kind of scrappy model lasted us a couple of years until I had my first child. And then I realized that was actually the hardest point in my business where I realized, oh, I can't. This can't do this alone anymore. I really got to hire people. But speaking of scrappy, I mean, you've been able to bootstrap this business the entire way through. This is completely self-funded and you've remained profitable year over year.

16:43Sara Sugarman:Well, I think you have to be if you're going to. There are other creative ways to finance the business, right? Well, we have no debt either. Right. I was going to say. We have no debt. You could have taken these operating lines of credit or these other debt vehicles to help you grow. Right. You didn't do that. Right. I mean, it's an unbelievable testament to how not only scrappy, but I would say smartly you're running the business. Thank you. Where does the credit go for that? Is that just your mindset and the way that you've approached things from day one? Well, in the beginning, the goal was not to become some big company that we were going to sell.

17:22Sara Sugarman:So I approached it from such a different mindset, right? It was how do I keep the family business alive and thriving for me and my future? You know, so I knew this was going to be how I support my family. So how was I going to keep it thriving? So it was really just to create a profitable business. And one thing I had learned from my family business was how to run a profitable business. So that was really the goal in the beginning. I had some mentors, consultants around the time that had said, you really need to raise money and you need to go on kind of the roadshow to the VCs and raise money.

17:55Sara Sugarman:And I had started that process and realized pretty quickly this isn't for me. I really, truly believe that brands take time to build, right? You don't build a brand overnight. Right. And so my goals for the business were not aligned with investors of, you know, let's just rapid growth at all costs. Like I always believed in slow intentional growth. And by the way, I mean, it's double, triple digits year over year, but still like not in the way that I think some of the brands are maybe forced to grow when they take investor money sometimes. Have you thought about it recently? And what would you do with outside investment, do you think?

18:35Sara Sugarman:So that is why I haven't done it, because I don't know what I would do with that money that I feel is in the best interest of the business. Because I believe that growing in a slower, more intentional way is best for the company. And because every dollar is mine, I'm so intentional about the way we spend it in a way that I don't think I would be if somebody just handed me, you know,$20,$30 million or whatever. I don't think, you know, you're not as intentional about how you're spending the money. So yes, we are profitable. We've always been cash flow positive. And I'm very in tune with those metrics to make sure that, you know, that we only have ourselves.

19:18Sara Sugarman:But I have complete control. And that's amazing. So how does the inventory side of the business work? Are you committing to product upfront and storing that product, that inventory before you sell it? Yeah. So 50 % of our revenue comes from products that we design and import ourselves. That's the products that we inventory. The other 50 % is split between products that we carry from other wholesale partners on a dropship model. And then a portion of that is made to order. So those are items that is specifically in upholstery where the customer is picking out their fabric and their legs and we are making it to order.

19:57Sara Sugarman:And those usually take like four to six weeks. So those are not inventory. But half of the product is inventoried. And yes, we are committing to it way ahead of time. It takes two years, our development cycle. How does the predictive analytics side work? So if 50 % is committed inventory, how long has it taken to understand like cycle times before you're going to move that product? Like what systems, what analytics have you perfected to understand the risk side? I mean, we have a whole planning department that is planning every SKU, you know, from a bottoms up perspective, and they're using tools to also help them.