Your #1 Marketing Opportunity Is Sitting Right in Your Warehouse

0:00Build it and they will come is kind of BS, but you should also build it and invite people. Hey everyone, welcome to Shopify Masters. I'm Shuang Yastarshan and this is your companion for starting and building a business. What if I told you right now millions of businesses are literally throwing away their best marketing opportunity every single day. Here's the truth, your packaging is the only thing you send your customers with a 100 % open rate, yet most companies treat it like an afterthought. Today, we're diving deep into the world of custom packaging with Philip Aksar, the founder and CEO of Arca.

0:41He's helped over 2 ,000 entrepreneurs turn a unsexy industry into a billion-dollar opportunity with sustainable materials and processes. Philip, welcome to the show. Thank you, Shwani. Appreciate it. Very glad to be here. Well, so glad to have you here. We often hear that opportunity is something that everyone else can't spot, but you can. And I feel like your attention to detail is unmatched. You've noticed that packaging is a very sleepy, maybe unsexy industry. And you notice this gap where you can make it more sustainable and also make it personalized. What brought you to this idea? Yeah, great question.

1:22So coming from the customer's perspective, brought about the idea to maybe put a tech layer on something that's fairly old school, very old school, actually. Even the process of checking packaging inventory goes back further than the fax machine. In many cases, warehouses have someone walk the floors, count with their eyeballs, here's how many boxes we have, and then order more. And most packaging still gets ordered through catalogs, right? So being in the shoes of two different types of companies. One, I worked at a massive defense contractor like Boeing. Packaging was an issue there. And I figured, okay, things just move slowly because I work at a massive defense contractor.

2:07On the other end, I had a small startup that I worked for. They went through YC, a company called iCracked. They eventually got acquired by Allstate. I had my own department there, and there was no red tape. I'm still best friends with the founder. He actually married us, me and my wife, which is great. So we go way back. Letting you know that he's clearly not going to block me from trying to get work done, whereas at a big company, there's bureaucracy, and you need to get certain permissions. So it wasn't a matter of speed on the red tape side. It wasn't a matter of war chests with all the money that a company like Boeing has.

2:40It came down to technology and automation. That was the part that was missing. And that's what we built at ARCA to make it so simple for someone to go to our website, select a package, brand it with their logo, and just check out, right? Creating that kind of automation in a world where we're getting more and more used to having things in just a few clicks. Now, with the rise of AI, the next evolution of the company is going to be conversational. Like you go to a website and you can just kind of chat with something and self-identify as a beauty brand. You can come in and say, I ship makeup. What should I use?

3:11And then there'll be a series of questions. This is actually an exclusive drop, by the way. We haven't even talked about this yet. Not even that much internally. But there are companies that come out on the B2B side, on the B2C side, or the B2B2C side, which is what we are, to be able to have somebody come in and just talk to the website and say, here's what I need. And then, you know, we can make a series of suggestions based on what you ship. If you're an apparel company, you know, we'll push you to poly mailers. If you're, you know, shipping mugs, we'll ship you to boxes with inserts. Well, it sounds like there's so many exciting integrations with AI.

3:44But before we get to the present day, I do want to chat about, you know, you notice this gap from working at Boeing as well as the startup. How do you then evaluate to say, you know what, I think this is a good idea and other people will also see the potential in this? totally well unsexy categories are like gold mines and the key is seeing the utility where others only see dust and i've arc has been around for a while now and we've had investors in the space have both moods cold and hot towards what we're doing at the beginning it was a little bit cold and now it's getting a little bit hotter because they might have thrown a bunch of money at like you know tinder for dogs bs businesses and now they're recognizing businesses that actually make money are a good idea.

4:31And that's the thing. Every physical product you buy needs packaging. And to be able to create a marketplace, a platform on top of an industry that is utilized by every sub-industry that ships products underneath it is common sense almost. But it's not as sexy as other types of businesses that might be out there where people are innovating, where it might to be pure AI or pure defense or pure SaaS finance for a very niche segment of the market. But we're having a good time. And honestly, speaking of VCs, I feel like one in the sense that all these companies that come and work with us, we're basically seeding them.

5:11Seeding them in the sense that they start with us, they grow with us, we can see them scale. And that's fun. I mean, when your job is to speak to other founders and help them succeed for something that's a must have, not a nice to have, you can't help but have a good time. Yeah. I mean, I could totally relate to that. I love chatting with founders and you get to do that in a very special way because you get to literally impact their business. But how were those early conversations, right? Getting the initial business owners, the initial founders on board and getting them excited. Very door to door, very word of mouth.

5:48trying to bend. I mean, we still go out of our way, bend over backwards. My team will attest to that because they'll get annoyed when an intro comes in. I'm like, it's fine, just waive this fee or just work around this issue or this minimum order quantity that this company has because they're a friend of a friend or a friend. But talking to your users is the one piece of advice that pretty much anyone will tell any founder in any space. And so having those discussions is a big deal versus just throwing up a website and expecting people to join the whole old adage of like build it and they will come is kind of bs but you should also build it and invite people to come check out what you can do and have those conversations and put yourself out there don't wait too long to build and release just build release get feedback by again talking to users and then iterate and make improvements from there so we've come a long way in that in that respect.

6:46A lot of changes. I think it's unique to your case. And also, I think you notice this need that your business needs to make it work for other businesses, because I think your business model has such a rich lifetime value. Like if you do help businesses get great packaging and they succeed, that means that's more revenue for you down the road. Yeah. So that's super exciting. Totally. The whole, you know, the your success is our success thing. It's so real. It's so real for us. I mean, it should be real for any business and any symbiotic relationship between vendor and client, right? That needs to exist in general.

7:28Like everyone's incentives needs to be aligned. And in this case, especially if they ship more product, they will quite literally need to ship more packaging, which means that we will also benefit. So we very much so want our customers to do well to the point where at the beginning, if they're just getting started, we'll say don't over-optimize, just go to USPS and get free boxes. And if you want to use stickers or branded tape with us, cool. There's no benefit in squeezing our clients for every dollar and then have them fail. Like that long-term benefit doesn't exist. So, you know, there's nothing altruistic about what we do.

8:08We want them to grow because they will quite literally give us more money and they'll be able to make more money themselves, right? So very much so aligned on the incentive side. And then on the flip side, you also have to develop relationships with producers to make sure that the packaging is sustainable and it's customizable. What were some of those conversations like? Yeah. So. There's been a lot of greenwashing, and I still have these conversations. I actually had a conversation with someone yesterday who focused on sustainability, where compostable packaging, biodegradable packaging, these are all wonderful concepts.

8:46The thing that you need to recognize as a brand, and maybe you're just doing it so that you get the clicks, so people check out and they buy your product, fine. I mean, people can run businesses how they want to run them, especially here. This is America. It's a capitalist society. Do what you got to do. But you're not really buying into the ecosystem of eco-friendliness when there isn't a proper way to, let's say, dispose of a biodegradable package or dispose of a compostable package. Whereas if you have a brown corrugated box, brown base rather, that has branding on it, you can throw that away for it to get recycled.

9:25It's very easy to do. You just throw it in the recycling. You can't just throw a compostable bag in the recycling. You can't just throw a biodegradable back into recycling. Certain communities in, at least I can speak for the United States, have places that you would need to go and dispose of a compostable product for it to go back into the life cycle of being composted. Like there's a destination for different types of packaging materials. And sometimes going simpler is the proper route because it's going to reach the appropriate destination that gives you that pat on the back for making a eco-friendly choice.

10:03And in this case, paper, you can just recycle paper. No need to get all fancy. Just opt for that and opt for that material. Yeah. Crazy that the simplest format existed all along. Yeah, totally. Yeah, there's probably also a piece of like educating the businesses you work with and also helping them educate their customers. How does that weave into the business? I was going to say, sometimes they don't care. Going back to my point of they just want to have people check out because meaning check out on their business and their product because they can claim compostable or biodegradable. We're still living in a competitive landscape where you want to the first goal of any business is to make money.

10:47otherwise you can't you can't fight uh be alive to fight another day and put your ethos out into the world where you are eco-friendly where you do have sustainable practices that means nothing if you're dead right if your business is dead at the end of the day we allow businesses to make whatever decision they want whether it's like a brand new plastic material polymeler or a pcr post-consumer recycled content uh polymeler that ends up in landfill but that's exactly where it's supposed to end up because it's been recycled to death and you're paying for that process, then it really just comes down to what a customer wants.

11:25But education is a huge piece of it. We work really hard to mention it on podcasts and discussions like this one we're having with Shopify to just doing blog posts with other sustainably minded companies and putting out in our newsletter. But it's a conversation we'll continue to have. And it's something that we're super excited about to make sure that people know what they're doing when they make that decision. Yeah, so important. I do also think during COVID, when we talked to a lot of founders, they were saying that their packaging or the lack of their packaging because it was produced overseas was actually causing a lot of their delays with fulfilling orders.

12:05How were you working with your suppliers throughout the years to make sure that you have enough to cater to the clients that you have? ARCA started and still is primarily made in the USA. We do have overseas capabilities, especially when it comes to larger businesses doing north of like$10,$50 million a year that we work with who need half a million or a couple million polymailers in one run. That's not going to be done stateside. That's going to be done overseas. However, when you go to ARCA.com, it's very much so a Vistaprint or a Moo.com for packaging, meaning design and order boxes as easy as you could design and order a business card.

12:45Low MOQs, minimum order quantities of one box. You know, we're not going to make one box in China and ship it all the way over here. Up to the thousands of boxes or thousands of polymers or even tens of thousands of polymers, that's all going to be done stateside. And that's the majority of businesses because 90 % of e-com does less than 5 million a year. 70 % of e-com does less than 1 million a year. and Shopify, as you know, it's based on the long tail of e-com. And those folks, it would be in their interest to order stateside. Shipping over boxes from overseas is like freighting lumber. And now with tariffs and shipping costs being through the roof and higher than ever, it all the more makes sense to buy made in the USA.

13:27And that's where ARCA can help. Yeah. I guess because you have a relationship where you are the supplier and you're trying to make it work for all the businesses that you work with. And then you also have your own suppliers. If it's a new founder who's going through, you know, the process of trying to work with suppliers, understanding how to negotiate for themselves, what advice would you have in that category? Negotiation always comes down to leverage. So if you're, look, if you go to like alibaba.com and let's say you have a specific product that you're manufacturing, not even packaging, but the product itself, there's going to be a myriad of different suppliers that can help you.

14:05So it's a matter of just putting your best foot forward, building a vision, not too dissimilar that you would need to do as a founder to fundraise and say, here's our plan to grow. If you're able to provide this cost for the first 10 ,000 units of the SKU that we have, once we hit 25 ,000 units, we'll be able to bring this cost down or just bear with us for the first three months while we're trying to get our product on Shopify, right? As we build an omni-channel presence, it would help us out because we're going to come back and order more. You need to educate everybody in your circle on how you're going to grow your business so that it makes it appealing and there's appetite to actually yield to the type of pricing that you would want to negotiate for versus just the back and forth of, I'll pay a dollar.

14:56Well, the best I can do is$1.25. Yeah, sure, there's a little bit of that in there. But more so, and especially with AI chatbots today, you should be able to... One of the answers is also just ask ChatGPT. Like, hey, I'm trying to negotiate this. What are the steps that you would recommend that I do for this type of supplier, for this type of product being delivered to this location at this stage of my company. There'll be a much better answer there for sure. But I'm just saying, do that. Don't just walk in blind, uneducated, without an understanding, without a vision. You need to build that. Nobody's going to do that for you except for you as the founder of your business.

15:38Yeah. And I think it's rare, right, for us. We talk a lot with founders working directly to their customers. You work directly with businesses. So for that model, do you think there has been surprises or lessons you learned that other people might not think about when they're thinking about B2B? That's a great question. It's still a person on the other side of that business. So although it's B2B, it's still – there's still a consumer. And that consumer is that business of your business. So treating it like there's a human involved, I would say, is super important. And I think we forget that. sometimes when we're selling into other businesses.

16:21There is a gatekeeper that might answer to a decision maker. And that gatekeeper in some cases might be that decision maker. And putting yourself in their shoes is critical. That's for any exchange or transaction or partnership or relationship, friendship, doesn't matter. I would say that you always need to do that if you want to succeed and get something that's going to benefit all parties. Yeah. I also think, you know, for business owners, this is something they might think about a little bit later down the line because they feel like, oh, this is like great for bigger brands. Maybe I'm too small or things like that.

17:04How do you get people to think about customizing their packaging, thinking about this piece of the puzzle earlier? Totally. That's a big misconception. I'm glad you brought that up. um categorize your expenses accordingly right for example with custom packaging you totally should see that as marketing spend so if you're spending money on marketing you should be spending money on custom packaging it is one of your highest roi spends that you can make it's also the only thing that you can send that has a 100 open rate our social media is flooded with me saying that our blog posts are flooded with me saying that it's probably one of my favorite phrases that your packaging is the one thing you can send to your customer that has a 100 % open rate.

17:55So make it count. It's replacing the in-store experience. So make it count. It's the first impression. So make it count. And we try to ease the friction of being able to create custom packaging by actually doing free samples. I don't know if I've mentioned this previously, but ARCID has free samples. So you could do one fully branded package inside and out with all the bells and whistles of any type of branding that you want to create. And the first one's on us. And then from there, you can order as few as 10. And look, it doesn't always have to be custom packaging all day long. Maybe your first package is branded and then the generic packaging for the subscription from there on out while you're still building out your business is not and that's okay maybe it's just a brown box with custom tape we always encourage trying to be mindful of your wallet when working with us when working on anything for your business because it goes back to what we were saying earlier our incentives are aligned your success is our success so don't so don't spend money in a manner that's going to be unsustainable all in the name of custom packaging but you should at least do what you can to be able to make that positive impression so that people come back, so that people share your product on, let's say, social media, like any of those unboxing videos that you see.

19:13It's not a brown box. And if it is, that's not good form. Having something that people want to show off that is shareable gets unlocked with custom packaging. Yeah. Are there any like specific like customer cases or client cases that has like really positively impact their business that you can share just so that it will be kind of easier for our listeners to kind of get a gauge of like the impact that ARCA has? Yeah, I mean, honestly, it's a lot of Shopify brands that we work with. And Shopify brands we've noticed because we can see, obviously, thanks to Shopify, but we can see repeat customers within the Shopify dashboard.

19:53And we'll be able to see the jump that customers go from when they were doing just unbranded packaging to custom packaging. And the increase from order to order is significant when they were at custom packaging versus when they were at unbranded packaging. now some people can say that's causation correlation not causation because if they were at a place to do custom packaging maybe it's because they were doing more revenue to begin with but there's a actual jump that keeps going because it's almost like you can you can catch fire um as a brand once people know about you right i mean there's there's virality and then there's everything in between i mean you don't need to go from one to a million shipments a month you can you can have one order turn into 10 orders, turn into 100 orders, turn into 200 orders.

20:44I mean, that's still growing at a very decent and reasonable pace. And that can be attributed to custom packaging because people want to share your product. And if one person shares, someone else will share. And that can compound over time. And we've noticed that especially with Shopify merchants specifically, because Shopify does make it easy for you to start a business. And you guys do initially capture the long tail of e-commerce, those eventually grow and they become, you know, Shopify Plus merchants. And you will be hard pressed to find a Shopify merchant that doesn't have custom packaging, that's for sure.

21:18So you can kind of do the math there in terms of how they got there and how they stayed there in terms of growth. So Marty is one of our favorite customers that we work with. It's also one of the favorite brands that we consume ourselves. We're big Marty users. We've discovered a lot of cool brands through Marty as well because of what they do, being a marketplace of different products that you can purchase online. Best cold brew ever is actually on that platform. And so they've done a great job, not just in terms of like changing their branding, but from an operations perspective, changing the sizing of their packages.

21:52And that can really help on transportation costs. And that's something that ARCA can help you with. So we're not a design house. We're not going to change your logo. We're not going to suggest fonts or anything, but we can help you ship less air. That's actually one of the things that we love to encourage businesses to do, because how many times have you bought something off Amazon and it came in a box that was way too big, right? So similarly, Marty is like this, you know, baby Amazon in the sense that similar to them, they have many different SKUs, many different products of various size, and they have a finite number of boxes that they can ship in, right?

22:32So they've done a good job understanding the profile of orders that go out the door, and then creating the optimal size packages that we've helped walk them through to ensure that they ship less air, which then brings down costs for everyone, right? So they're not going to pay as much for shipping, which might leave some leeway for their margin and leave some leeway for their pricing that then gets passed on to the consumer. Because as you see right now with tariffs, they're just passing on the cost that they're getting because transportation costs are so high due to tariffs. It's not just these companies aren't necessarily being greedy, at least on the shipping side.

23:09There are plenty of companies out there that are doing 2 ,000 % margins and markups. We've seen some of the luxury brands out there as a result of costs. But for shipping, everyone's hands are tied there. Right. However, there are things that you can do to bring those costs down and reducing the amount of space inside of your package is one of those things that you can do. And they've done a great job of it. Yeah. Well, you're a packaging optimizer. So that's exciting. Absolutely. Yeah. I think the word disruptor gets thrown a lot within direct-to-consumer space. But you are doing that within this very sleepy, unsexy category.

23:45And I do think that often is really hard because you're trying to build something that's different. So for founders who are trying to, you know, do a big change with something that is sleepy, that is different, what would you tell them that they should focus on? I think it was the founder of Netflix that said, I have 10 or 100 people love you versus 1 ,000 or 10 ,000 like you. so pay attention to your early adopters pay attention to your advocates put in effort more than anything it's not about just having the biggest best thing around it's similar to I always tie it back to relationships because I think that's something that everyone can relate to whether you sell product buy product or not relationships matter in terms of effort right It's one thing if you have someone fall in love with you because you have so much money.

24:41That's not necessarily the case for those of us that maybe aren't the most shallow people on the earth. It's really the effort that the other person does and gives to you in that relationship. Similarly, with your product and the packaging and the effort that you put into your packaging, whether it's a handwritten note or a QR code that goes to a video that says, thank you so much for using my product. and it could literally quite, it could quite literally be just writing in marker, thank you so much for using my product. Reaching out and touching whoever is purchasing your product in that way is effort, is something that would be recognized, right?

25:20Similarly in a relationship, if you notice that someone remembered that you like red wine instead of white, that's effort. It's not that they bought you the best bottle of red wine or bought you the best bottle of white wine. That's nice too, but I would like to think that those are nice to haves. versus must-haves. I think paying attention, listening, and being receptive, and the reciprocity of a relationship, of doing good for one another matters. And that's kind of what you can do with your business, right? Like if your users are saying, I really like this product that you've created. I wonder if you'll start releasing X.

25:53That's you listening to your users because you talk to them and you put the effort in to be able to provide what they want, right? So having those conversations matter. That's how you get 10 or 100 people to love you. And some businesses can sustain and thrive off of that. They don't need 1000 people to just like them, who might try them and they drop off and they churn. And that's like the casual, shallow relationships in real life that one has versus the small group of friends that are really meaningful that can be there for you. Not to get overly philosophical, but that is something I actually believe in.

26:27Yeah, no, I mean, we pride ourselves in providing founder therapy. So I feel like I really enjoy that philosophy. And it also sounds like you value feedback and communication with the clients that you have. Are there tools or things that help you with that? Or how do you manage those relationships and bring those feedback into the way that you're building ARCA for the future? Totally. So to just break it down in a non-sexy operational way, there are emails that customers get, whether it's, hey, you just checked out, hey, your design is ready, here's your tracking info, so on and so forth. However, shortly after a product is delivered, an automated message goes out that says, give me your feedback.

27:13But the responses do go to me. They also go to the support team. So the support team knows what the hell is going on. But the response will go to me and I'll be able to see. Hey, it would have been nice if this was done a little bit faster. Hey, it would have been nice if this. Hey, it would have been nice if that. Hey, I actually loved that you exceeded expectations in delivery time. them. Hey, I actually love how this color came out, how this picture came out, how my logo shown on these boxes. Listening to that is important. Making those changes is important. Being open to that feedback is super important as a founder.