Ep 576: How Silk & Snow Scaled to 10 Retail Stores by Focusing on Profitable CAC

0:00One of the things that was kind of unique about Silk and Snow, and it was by accident, is that we grew organically. 2019 was kind of like the DTC apocalypse. A lot of our competitors at that time, they were acquiring customers at a more expensive pace than they were getting back from the acquisition. We learned a lot in that time frame and how to do things right and how to grow a sustainable and organic business. 2017, 2018, a lot of the digitally native businesses, they started with just one category and being very much focused on a digital channel. What all of us found over time is that we're actually just retailers and it's a multi-channel approach.

0:38It's likely not one category that you can be successful in. It's an aggregate of a lot of categories.

0:51Eric Dick:This episode is brought to you by Contentful. Marketers, you know that feeling when your creative clicks, when that social post sends engagement through the roof, when your outside-of-the-box campaign hits ROI positive, when a personalized homepage turns prospects into customers? It's utter marketing bliss. Contentful helps you create tailored omni-channel experiences without working overtime. No stress, no limits, only possibilities. Get the feels at contentful.com. Albert, I want to welcome you to the DTC podcast. I've been a longtime fan of what you built with Silk and Snow. I am an owner of actually two Silk and Snow beds.

1:30Eric Dick:My daughter has a queen and I've got a California king. Welcome to the DTC podcast. Awesome. Thanks for having me, Eric. I've always been a fan of the DTC podcast And I love hearing about the journey of other founders. So I'm excited to be here today. So mattresses kind of started this D2C revolution. When you go back to Casper and the mattress wars back in the day, and it kind of feels like Silk & Snow is a bit of the second generation of the D2C mattress company. Can you maybe give me a little background on why you built Silk & Snow? Yeah, it was very much that. But it's funny because not many people know this part about DTC history is that I would say when we started in 2017, we were a few years into the transition of the mattress category going online and going full DTC.

2:23And it was pretty ugly back then. I think there was like a count at one point of how many people or how many brands were out there that were DTC mattress brands. And it was upwards of the upper 100s. hundreds and it was pretty competitive environment. We were late to the game and it was slow in the early days when we were purely just a mattress brand. And I think it kind of taught us a lot of things about being a little bit different as a brand and really carving out your niche in the market.

2:54Eric Dick:What were some of those things you kind of learned about how to tackle the category differently than some of the giants before? Yeah, so I think because we were really, really late to the game. You know, we, we didn't have like first mover advantage or, or that kind of disruptor moniker that a lot of the other brands had. You mentioned one of them like Casper. That was kind of one of the challenges we dealt with as a brand. We were probably the hundredth brand in the market. So the first couple of years, we actually didn't grow very, very quickly. And what that made us realize is that we really had to reorient the brand to kind of stand for something.

3:35One aspect of our business that I found was really developing in the early days was the aesthetic of the brand. I think we did it a lot better in terms of the accessories we sold than a lot of other brands. But one of our origins too is that my co-founder and I, we came from a deep retail background and we had a closeness to manufacturing. I would say we're like factory geeks where we loved visiting factories and just understanding the supply chain. And that's kind of how it started in our journey. We probably went across North America to meet a lot of different manufacturers. And one of the things we kind of learned in that journey was that a lot of the businesses that still exist in manufacturing mattresses in North America, they're typically family run multi-generational businesses.

4:23And these are the type of businesses that are typically more focused on quality and just obsessed about the details similar to what we do. And that kind of formed the DNA of our business. We started pivoting towards applying kind of those principles of being close to the manufacturer and working with multi-generational family-owned businesses and really started expanding into different categories like bedding, furniture, and products that go right across the home and not just focus on a specialty category like mattresses. And I think that's kind of what gave us room to grow over time is that we really tried to sell the entire space of a bedroom and also the entire home over time.

5:09And it made us very, very different as a brand, as our brand evolved over the years.

5:15Eric Dick:More of a homewares brand than just specifically like a raw mattress company. Right. Yeah. And I think that made, I think even the purchasing journey for a lot of the customers a lot more interesting. Like a lot of people consider buying a mattress, like very much like a grudge purchase where it's very functional in nature. You're solving a pain point. But I think when you look at buying products for your home, like if you're looking at home decor or any type of home goods, it's usually more of an aesthetic purchase or one that's more personalized. So we found that to be something that we can lean into a lot more than sticking to the typical approach of selling within the mattress category.

5:58Eric Dick:And I want to dive into that more because your purchase experience is sort of the gamified nature of hitting different thresholds. You know, often when people are furnishing homes, they're not just thinking about a mattress. I like to use the term grudge purchase, where it's just like, I know this is something I have to spend on. I'm going to spend, you know, so many hours for the rest of my life on this thing. So I might as well make sure like I bite the bullet, buy something good now. But before we dive into that, I want to go back into your background a little bit because I read a little bit that you grew up in this, in sort of the garment world with your mom being a seamstress.

6:30Eric Dick:Is that kind of what informed you being a factory addict? Yeah, actually, I kind of flew past that question. But when we started our business, we were looking at a lot of different possibilities of what we would start. And like personally, I kind of grew up in the 80s. So my mom worked in the garment industry when it was thriving in Toronto. and when we started looking at different models, there was a lot of things we could have done, but one of the ones we fell in love with was just the mattress industry and it was kind of by accident because when we visited factories, we had to kind of understand the entire supply chain.

7:09So that included foam pourers, people that made coil springs, but also the textile industry. So we found a pocket of a thriving textile industry that still existed within Toronto. And that really reminded me of the days of when the garment industry was thriving and was kind of a cool bit of history that still survived in Toronto. And when we saw it, we kind of fell in love with the concept of local manufacturing and still having access to heritage manufacturers

7:42Eric Dick:that made really well-built products. He talked a little bit about the supply chain, like what goes into the making of a mattress? And is it actually mostly a local supply chain that you built up? It is. It's obviously nothing that you would, like it's a much smaller scale than you would find in Asia. But I think the supply chain here, they have all the components to make 100 % Canadian-made product. So I think typically within the mattress category, you need fabric, you need foam, and you need coils. And all three are made locally in Toronto, but they also have quite a healthy supply chain across North America.

8:22And that's one of the things that I found because it's such a large product, it's been difficult for a lot of manufacturers to really diversify offshores because so much of it has to be close to the end assembler. But that's also kind of worked in our benefit because we've been able to start from those origins of making a domestic product. And it's really helped us to kind of navigate all the political movements that have happened over the years, especially around tariffs.

8:53Eric Dick:So talk to me about the growth trajectory. What year did you start it? We started in 2017. And I would say it was a bit of a slow start. Like we were really just dipping our toe into starting the business because we started a Kickstarter program for about a month in, I believe it was March 2017. We sold a modest amount. It wasn't phenomenal, but it at least showed us that this was a viable model. And about four months later, we started launching the business of Silk & Snow fully. Okay, and so then that's the kind of heat of the D2C mattress worse, I guess, right? What was it like kind of coming to market and trying to get customer acquisition at scale at that time?

9:37Eric Dick:I guess you had the benefit of pre-iOS 14, you know, meta environment. But talk to me about bringing the product to market at that time and what that was like. Yeah, that was tough. Like I remember it was still like the early days of Google marketing where there's a lot more. It was less algorithmic. So there was a lot more you could do to kind of personalize the approach of acquiring customers. but it was still a very expensive endeavor to acquire a mattress purchase. The typical AOV is about$1 ,000. And if you could imagine, it's probably half of that those days were spent on marketing. One of the things that was kind of unique about Silk and Snow, and it was by accident, is that we grew organically.

10:26So we didn't have the benefit of spending a whole lot of money and acquiring customers. And I think 20, like within the first two years of our business, I think 2019 was kind of like the DTC apocalypse where a lot of businesses in our space were trying to IPO and they kind of realized that the economics of marketing a mattress was not exactly what people thought. So a lot of our competitors at that time, they were acquiring customers at a more expensive pace than they were getting back from the actual transaction of the acquisition. And that made it really difficult for us. But it also, we learned a lot in that time frame and how to do things right and how to grow a sustainable and organic business.

11:11Eric Dick:It's such a tempting category, I guess, because the AOB is so high. But I guess that gets negated when you're going against so many other high AOB competitors. And I guess that's probably what pushed you guys into this sort of like broader category approach where you're moving away from the transactional purchase of a mattress towards the lifestyle that you can build with Silk and Snow's whole lineup of products. What was your first category that you went into outside of mattresses? You're right, Eric, because I find all of us in the mattress category started in the same place of offering one product within the category and trying to drive growth through the high AOV.

11:50Over time, what we realized was the customer isn't coming back. It takes a very long time for them to need a mattress. And so part of our exercise was to kind of give a reason for customers to keep coming back. It also played into you have to ultimately make it interesting and also allow the customer to have an affinity to the brand. And it's very tough to do with just the mattress category. Over time, a logical first step was we started building out our sleep accessories. So things like pillows, comforter duvets, bed sheets. and we started growing all the adjacent categories that revolved around a mattress

12:31Eric Dick:and gradually built out from that. Where did you come up with the brand? I was always curious where Silk and Snow came from. Yeah, I wish I could say something more creative, but we actually, at the time, it was very difficult to see what our brand would grow up to be. So we knew that we loved textiles. we loved that we were building something that was of higher quality and we wanted to have Silk be a part of the name because it lent itself so well to so many of those things and we we knew that we were going to start within Canada so we wanted to call out the kind of our Canadian roots as well and then outside of that it was just tough to find a domain name at that time so Silk and Snow kind of worked out when we were doing the typical domain name search and making sure that all the social media handles existed as well.

13:25Eric Dick:It's good. Snow's got the Canadian vibe, but it also has that restful vibe or something, right? Like a fresh blanket of snow seems very calm and peaceful. I'm glad you think that way. I don't know if that was intentional, but that actually works. I agree with you. I think that's only because I live in Victoria and I don't have to deal with the reality. How do you think about the decision cycle? You mentioned this term, brunch purchase. I never heard that. But how do you think of the sort of intention cycle or buying cycle around mattresses versus something like maybe a sofa, which you guys also do now, right?

13:58Yeah, I think with mattresses, it's very functional as a purchase. So usually the starting point is you're starting from a place of a problem, like either your mattress is worn out or you have back pain or you're sleeping hot. So a lot of it, the purchase journey starts from a problem that you're trying to fix. And we found that that's always a very difficult marketing message to get across is you're trying to address a problem. It's not as nice as some of the products that we've grown into where you're really just trying to improve the aesthetic of your home, where you're trying to make your bedroom look like a Pinterest board.

14:38So we found that it just kind of took place organically where we kind of evolved our marketing message from trying to solve a functional problem into one in which it was more aspirational and inspirational. And that lent itself well to a lot of the content that we were starting to create and some of the platforms that we chose to project our brand on.

15:04Eric Dick:Do you find that most people are coming into the brand through the lens of the mattress and then kind of opening up into your other catalog? Or are people equally coming from your other pieces now and looking at mattresses? I find a lot of DTC businesses are going this way now. Like, I think in the 2017, 2018, a lot of the digitally native businesses, they started with just one category and being very much focused on a digital channel. And then I think what all of us found over time is that we're actually just retailers and it's a multi-channel approach. So it's likely not one category that you can be successful in.

15:41It's an aggregate of a lot of categories. So we are finding that we're getting customers from different types of products, but we're also getting customers from different types of channels. Like they're not just coming in digitally. They're also coming in through some of our retail partnerships. They're coming in through some of our stores. And I find that the more we grow as a business, the more we realize we're becoming a traditional retailer that just happens to be digitally native.

16:09Eric Dick:And then you guys are investing heavily in your own retail presence in this year and beyond. Can you talk a little bit about that? Yeah, that's been really fun. Like it's one of the aspects that we've always talked about where I think we've succeeded as a digitally native business in spite of just being digitally native. Like our products are very tactile. A lot of the times we deal with the customer, even digitally, it usually there's a lot of questions around what the product feels like or what the product, how sturdy the product is. And we always knew that the path for us was to grow a bricks and mortars channel.

16:45It was just a matter of how much that would be a part of the mix. We opened our first store in 2023. So that was about three years ago. and we felt it was a bit of a test and kind of like a low-risk entry into bricks and mortar. That went incredibly well. Our first store was in Ottawa, and that's still one of our best-performing stores today. In the last year, we've kind of gone through this aggressive path of opening more bricks and mortars. We just opened up our Summer Hill location in Toronto as of this weekend, and so it's been our 10th store. So we've opened about nine stores in the last year, and that's been our 10th store today.

17:28Eric Dick:What's your biggest learning about moving that aggressively into your own retail? It's definitely tougher to scale operationally. Like with digital, you could pivot. You could change marketing messages or pricing on the fly. But with bricks and mortar, it's really tough. Like we've found that you've got to get the underlying infrastructure right first. Everything from kind of distribution to warehousing to even just how you manage the experience within the store. It's easy enough to find. It's not easy enough, but it's easier to find real estate. But to open up at a pace where your experience is in keeping with all the other stores that you have and also the online experience is very, very tough.

18:11Eric Dick:Just a lot of planning goes into it as to where you can support these. How strategic are you about where each store goes? We're pretty strategic in that we, I think what we have the benefit of is that because we have digitally native roots, everything is data driven. We know exactly where our customer is coming from. And we often let online dictate where our market is and what sells in those markets and what works. And so we've definitely had the benefit of data and opening up markets. And when you layer that in with just real estate opportunities as they come up, it becomes a much more easier exercise.

18:55We've been with other retailers where the starting point was bricks and mortar. And then you don't have the benefit of the amount of data that we have. And I found that that's helped a lot in our journey to grow bricks and mortar.

19:08Eric Dick:Where are you guys in your journey? Because obviously you've got a huge presence in Canada. I assume you're selling in the U.S. as well. What's that mix like right now and how much more of a market do you think you have in the U.S.? Both markets have been good, but I would say it's a very different journey. We typically like to say we're about three to five years behind within the U.S. market than we are in Canada. It's still a very sizable portion of our business, but it's just such a bigger market than what we have in Canada. We've been able to grow our brand in Canada a lot faster. And a lot of it has to do with just competition and closeness to our supply chain because it started in Canada.

19:49But I think it just takes a lot more investment and time to build a brand in the U.S. And we have been taking our time. We've definitely had a much more mature customer base within Canada, where we've been able to test the market and really open up on bricks and mortar. And I think when we look at the U.S., it's where we're happy with where we are. But we would say that we're probably three years behind from where the Canadian side is.

20:16Eric Dick:Brand building is always such an interesting exercise. I come from a performance marketing agency where, at times, the performance world has felt at odds with the branding world. And like, how do you think of brand building? Maybe as you've done it in Canada, is it just really a combination? Like I know bricks and mortar must obviously have a big impact on people's perception of the brand. Obviously, just getting people experienced with the brand, getting more and more of your different kinds of pieces in people's homes helps establish that brand. Anything else like about how you think about brand building for a brand like Silicon Stone in Canada?

20:50Yeah, I don't know if it's a fair question because I think I'm more like you in that I come from performance marketing roots as well. Like I like numbers and probably I lean on the rest of the team for the creative aspects a little bit more in brand building. But one of the unique things about Silk and Snow is because we started in the mattress category, we've been highly focused on just getting that lower funnel right. One thing that we talk about a lot is that once we get a customer into the funnel, we found that our customers are loyal. We typically have a very high conversion rate and a repeat rate, especially as it relates to our category.

21:33And so we kind of went through this journey where we went bottom up, where we focused on once we got the traffic to come to our website, it was a much easier exercise to get them to convert. but then we kind of went through the phase of trying to get traffic into the website and and that is is really a journey of building a brand and brand awareness and so I would say that like in the Canadian side we've been a little bit quicker at that in building a brand awareness but I found that it's always better to build from the bottom funnel up and that's kind of been our approach to growing the Canadian market at least.

22:13Eric Dick:It definitely worked for me. You know, I own two beds and I got bedside tables. I got a couple of lamps. I've got my bed linens. And it is like once you're in that environment, I think the website does such a good job of both like exposing you to all the different kinds of products, but also like not necessarily gamifying, but building it in, building these other products into the purchase process in a, you know, in a dynamic way where you're, you're getting your bedding kind of bundled in for free. Can you talk a little bit about your bundling strategy on the website and how that's worked out?

22:44Yeah, bundling is quirky as it relates to the mattress industry. It's like one of those necessary evils that we have to deal with because I think mattresses are really a special, what I think the industry considers like a specialty retailer. A lot of the competitors we compete with on the mattress side, they only sell mattresses. So they've had the ability to throw in a lot of value in other products as an offering rather than compete on price, which has worked for them. For us, we like to sell everything and then really help our customers really round out their home. And so it's kind of been a mixed bag for us in terms of to sell a mattress, the customers expect bundling.

23:28But at the same time, we've built our entire business on giving our customers optionality to build out their home. And they like mixing and matching products that we have, like other bedding or sleep accessories or furniture. So we've used it in very specific ways. But we also like just giving our customers the ability to pick what they want. And so it's kind of been a mixed bag.

23:54Eric Dick:And then one of the things that customers can pick based on my ChatGPT notes here, so you can correct me if I'm wrong, basically replacing bundles with like a tree planting initiative via Veritree. And according to ChatGPT, it's safe$1.3 million and planted 30 ,000 trees. Is that true, first of all? Yeah, yeah, that's definitely true. It's actually been a fun little journey. I kind of mentioned it was like a necessary evil. So what we found is that giving bundles is sometimes giving a consumer a lack of choice and something that they might not want. So we found that to be a little bit off brand.