How bedding brand Coyuchi has updated its marketing playbook

0:03Hello, everyone, and welcome to the Modern Retail Podcast.

0:30in a bunch of different sales channels. They also did something really interesting last year in terms of fundraising. And I want to get into just all of that because I love talking about business. But Eileen, how are you doing? Thanks for joining. Thanks for having me, Kale. And yeah, great to be here. Absolutely. So first, let's start with you. So you joined Koyuchi in 2011. Is that right? That's right. What were you doing before? So I had spent about the previous 10 years with the Pottery Barn brands. I was in both both Pottery Barn Kids and PB Teen as those brands launched and, you know, had their kind of growth and impact on what the home industry looked like.

1:09And then prior to that, I had worked in the outdoor industry, background in technical fabrics, performance materials, worked for Patagonia in the North Face, and really learned a lot about sustainability as well as just the ability to combine how something feels, how something performs with how something looks. So this seems like a marriage of both of your backgrounds pretty good together, right? Absolutely. And that was sort of the beauty of coming to Koyuchi was just this opportunity to combine passion, business, and certainly a love for what I do. What has your trajectory been there? Because when you joined, you were VP of product, is that correct?

1:59That's right. And it was physical product, not the digital product. Yeah, when you talk to people like me, I'm always like, oh, you mean Facebook. Yeah, a little bit different. So I came to Cuyucci to help them work through some supply chain opportunities. Additionally, the company was in a mode of expanding what was offered. The original business was very focused on just bringing organic cotton into the textile supply chain. And what I was coming in to help with was creating designed product, a full assortment as opposed to just white and undyed sheets and towels, which was probably what the assortment looked like back in 2010.

2:51Two years later, they were like, we want you to be CEO. Yeah, sounds a little aggressive, right? So, really, what was happening as well, it was not something that I had initially been part of, but the direct-to-customer website was kicked off in 2011. And while the business had been focused on B2B, that was how the customer found us, that was the company's start. Once that consumer-facing website was available, that started to really kind of shift what the business needed to look like. And so that was really my coming in as CEO was part of just an overall change in the focus and direction of the company.

3:44Got it. Yeah, because I was doing some research and correct me if I'm wrong, but at least as of me reading a story from a year ago, most of your sales come from e-commerce. Is that right? That's right. Yeah. So that's quite a shift. It's a big shift. And, you know, I think there's definitely plenty of brands that had that focus on their wholesale channel that, you know, had a very different, the past 10 years were a little different for them. So we were fortunate to kind of recognize that just launching that website, it sped up the cycle of how you're able to communicate with your customer. And I think that was, you know, 10 years ago, if I think back to the learnings, that was really what we tapped into, the ability to talk directly to the customer as opposed to, you know, there's a lot of benefits to wholesale.

4:39We still have wholesale, but it's a slower cycle and you're having to speak to your customer through a different group. I also think that you're in a category that more people have come to expect to buy directly from the source. Like people still do go to stores to buy, you know, sheets and towels. But I think a lot more people are like, I would like to know the exact brand that this is, which I'm sure we'll go into that. But can we I want to back up a little bit because you've hit on a few things. But I always like to ask people just to give kind of a truncated history. We have three decades to cover.

5:12So but how did Koyuchi start? you've offered a great explanation of the last 10 years, but just give me a brief history, I guess. Sure. So Christine Nielsen was the company's founder. She launched Koyuchi as a way of combining one of her passions, which was she was involved in hand weaving and then was part of sort of a Marin County organic movement that was happening in food and recognizing that, you know, cotton is grown on the same land that our food is grown on. And this concept of organic farming, you know, it was being talked about. There was no standard. There was no Whole Foods selling all of our organic produce.

6:04So that was her goal, was to bring organic cotton into home textiles. It was alongside Patagonia working on it in apparel, Esprit de Corp, which was another San Francisco-based company at the time. They were also working on organic. And so she chose home as the area that Coyucci would show up. And we were the first home goods brand to bring organic cotton to the market. And when you say that the focus for the first, you know, I guess two decades was B2B, was that predominantly wholesale retail or like what were the channels you were strongest in before you joined? Yeah, it was definitely B2B. It was a lot of small retailers.

6:50Think about, you know, organic mattress stores, a little more on the kind of less home fashion. It was more kind of functional is where I would say the company had gained traction. And look, some of those retailers we still work with today, which I think is just a great trajectory for the business that we can develop other parts to our business, but we've kept some of those original partners as well. Got it. And so I wanted to ask you, and I think you're in a really interesting position just because the brand has been around for so long and you've been, you have so many learnings about what shoppers are looking for, specifically when it comes to like sustainability.

7:36Can you talk just about the trajectory in terms of what people have come to expect, what they're actually looking for? Like how have you changed the storytelling of Koyuchi's products over the years? Because I feel like now people are a little bit more educated, probably not as educated as we would like them to be about their sourcing, but it's very different than it was 10 years ago, right? Oh, that's very true. And, you know, we had packaging from, it was well before I joined, but it was sort of a bit of a almost scare tactic. You know, it was about, you know, there's so many pesticides used on cotton and organic is an opportunity to remove those pesticides.

8:14And while all of that is true, it doesn't resonate with the customer the same way. And so I think over the years, it's really shifted. We're using GOTS certified organic cotton. That GOTS certification is how you're allowed to call it an organic sheet set, as opposed to just sheets made of organic cotton would be the alternative. And that is, you know, similar to, say, a loaf of bread that you would buy that's organic. It has to cover how it's being made. And so for us, that's, you know, low impact dye stuffs. And there are requirements against around what you're able to put on your finished product.

9:02And, you know, we've turned that into a way to differentiate our product. We think it gives a certain feel to the product. Cotton is just perfect for home furnished, for home textiles, bedding and towels in particular. And so we were really able to shift the conversation from the scare tactic to why does this add value to your home? And I think that's what we tap into today as well. And we've just gotten better at what that storytelling incorporates around. Here's how it's made our relationship with the farmer, what it means to process your textiles differently, that those low impact dye stuffs are good for the end user, but they're actually better for that worker that's making your product as well.

10:00So it just gives this holistic view of it's interesting how things are made. We're not used to talking, even being able to see how is fabric woven? How is a sheet set made? We get a little bit of that, but really what you have to bring it back to is what's the value add for the customer? and at this point, we can definitively convey that it's a safer product. It's more comfortable next to your skin. It's going to wear well because we've got 30 years of history that we know how to make a sheet set that you're going to love. You're going to grab that towel out of the shower and it's going to dry you off.

10:44It's not just going to look great out of the package. So really what we have tapped into the last few years is this sense that comfort and design, they're still number one, but if we can tap into the values of our customers, that's what's going to keep them coming back, as well as that great product. We also refer to it as luxury, sustainable products without compromise, because sometimes there is still a sense that it is a compromise to buy with your values. And we're really able to prove that that doesn't have to be the case. I'm still going to focus a little on the past just because I want to know, but we'll get to the present soon.

11:32Don't worry. Can you talk about how you implemented the digital shift when you took the reins? Just because it's such a behemoth task for a decades-old company to suddenly be like, all right, we're going to launch e-com and then for it to actually become the lion's share of your business. Was that just being in the right place at the right time, figuring out the right marketing? Walk me through how you did that. Yeah. And look, it's a little bit of both, right? You can recognize what's going on around you, but then how do you tap into it as well? And it was a noticeable shift in how the company was oriented.

12:10So we started basically using our e-com metrics as the decision points for anything that we were looking at. So if we wanted to understand sort of color selling or which fabric was doing better than, say, another collection, we would go back to what the e-com results looked like as opposed to what we were seeing in the other channels. Now, realistically, they're not that dramatically different, but it gave us focus and it allowed us to kind of recognize that that was going to be where the future would be for the business. And so that's the part of the business that we should pay closest attention to.

12:58We had some shifts in how we were using headcount across the organization. So certainly had to pare back some of the headcount that was supporting B2B and acknowledge of like, we'll keep that business, but we're not going to keep adding and building it out. We're going to shift that headcount over to marketing and creative that was going to support the website. How much focus on branding or I don't know if rebranding is the right word, but it seems like when you're in a store, you only have so much storytelling you are able to do. But when you have a site, it's a lot more and people are specifically seeking you out.

13:37So walk me through what the strategy behind that was. Yeah. So the marketing shift was significant. When I think back to, you know, we were supporting trade shows and we were doing things like, you know, we still will do a wholesale lookbook that we print, but it was a much bigger endeavor in those days. and dropped all of those in favor of what we could do on the website, recognizing that our buyers will also visit our website because that's a source of what the brand is about for them as well. So building out the brand pages on the website, we invested pretty heavily in blog content as well.

14:30that gave us that format to tell a deeper story about what we were doing and why it mattered. It also helps kind of surface in SEO, which we've always tried to have that balance between where are we paying to get in front of our customer and what are the other initiatives that are allowing us to show up where the customer is at without having to pay for it. I actually wanted to ask about that because in the years that you've focused so heavily on digital, it's become really crowded in specifically the betting space. There are so many DTC betting brands. Did you find that you had to compete head to head with these other newer companies or were you operating in a space with different customers?

15:16How did you think about the entire landscape given that there were so many new entrants? Yeah, and you're right. It has definitely been a crowded space. in the betting market. We have always had a view to who our customer was. I think the benefit that we had is we did have that B2B business. We also had one retail store up in Point Reyes Station, California, which is in the original space that the company was founded. Wow. Yeah, an unusual way to get started in retail. And so we had a little more indication of who the customer was and what would resonate with them. And so we're sort of using kind of the multi-channel opportunity from a much earlier stage because it's what we had to work with.

16:15But if I think about, you know, sort of as other brands came into the market, I don't want to say we didn't see the overlap. We certainly could tell where we would overlap with another brand. But at the same time, always knew that if we continued to focus on who we saw as the customer, which was a little bit different from who our competitors were targeting, that we would also be able to see continued growth. I think there was another shift that has, and it's still playing out in home, is there is the shift in how the customer is shopping for home. I think you also mentioned earlier that, you know, the customer is getting more comfortable shopping for bedding online.

17:08And that's been a shift that's happened over the last 10 years, that it's just the number of categories that we're all interested in shopping online continues to grow. And that also allows us to continue to grow. Competitors come in and they may be growing as well. But that's part of the trend that I think we were able to tap into. We're going to take a quick break and we'll be right back. what would you say your target shopper is and how is it different from these other brands yeah so um we view our customer as we refer to her as the conscious curator um so it's definitely a she um we we certainly see that um it's a little more on the um i think it's a customer that really loves their home.

18:03So they're like a home decor enthusiast is sort of the kind of definition that they might be given by some of the kind of marketing associations. But we see what she's really doing is she's caring for her household. And so, you know, sort of that's where the values come in. She's looking for things that are safe for her family, that are going to be durable, that are going to feel great. And it is very much like it may be only her and, you know, a partner and maybe a couple of pets or it's a full household, but they really care about their home. And so from an age standpoint, look, sometimes that's as low as, you know, a 25 year old.

18:47But I would say our sweet spot is going to be, you know, on the older end, look, home buying, whether you're buying a larger home, a different home, most of that activity is happening, say, 40 to 50, 40 to 55. And that's another driver for us. So that's the area that we're going to focus on. But it's got to be that customer that really cares about the space that they're living in. Got it. Got it. That makes sense. This is a very broad question, but there's an intention, which is just to sort of talk about the focuses of the last few years. But what does growth mean and the focuses of growth for a 30-year-old company, specifically in the last year?

19:30Yeah. So one of the things that Koyuchi's always focused on is profitability, which I think is a little bit different than some of the other brands that just came in from a DTC standpoint. We were always encouraged to focus on profitability. And so that's been a component of what we've always looked at as part of our growth trajectory. Got it. Got it. And so I wanted to ask you this just because this is something I've talked with other home goods brands, especially betting brands about. But for a company like yours that A, has been around for so long and definitely has staunch customers who have been there for the long haul, with something like, say, product reviews, is that as important for a brand like yours as it is for, say, a startup?

20:17It's still important. Yeah. Yeah. So like, yeah. So walk me through like what, like I always, you know, I go to a website like the strategist and I see best bed, like, like, is that something that is like something you are always aiming to get, to get in on and focusing on as part of your digital marketing strategy? Those are still really important. You know, in order to continue to grow, we still need to bring in new customers. And then our existing customers, getting them to try something different, say, than what they've already been buying. So I think the comfort level with reviews and the importance of reviews, it still exists for all customers.

20:59And I look to things like the strategists So then a lot of those lists that pull out sort of what are the top products in any given category, I think those are a way for us to make sure we continue to show up that we're part of that consideration set for a customer base. And then you come onto the site, you see the reviews. We all need more external cues. were not, it's just a little bit harder to kind of be with your friend and find out what they've been buying or be at your neighbor's house and be looking at sort of what they've got in their house, right? It's anything that we can do to help expedite that decision-making process.

21:47I want to go back to your talk about profitability because this is something I'm talking with everyone about. Every company is at least trying to be profitable right now because it's a weird state we're in. How does that manifest this focus of profitability for a company like yours? Especially like if you, like have you done product expansion? How does that fit into the overall, you know, the overall margin structure? Or even like marketing, like what are you thinking about, especially when you're doing new tests and new experiments? How are you considering profitability as part of that? So we're looking at, I guess one of the differences, let me start there.

22:25One of the differences for Koyuchi is that, you know, we weren't just sheets or towels, right? We didn't start in one category. So even 10 years ago, you know, we already had, you could make a complete bed. It wasn't, oh, I can just get my sheets from this brand. Oh, great. Now they've added the towels. We already had the ability to help you purchase a full bed. We used certain products as kind of acquisition vehicles. I think that's kind of very typical of how all DTC brands are able to bring customers in and continue to grow with them. But we, I would say, had kind of a deeper bench to pull from of how we were going to be able to do that.

23:14And in terms of how we're looking at that from a profitability standpoint, we're looking at what are the ways that we can continue to help the customer build out their, whether it's their Koyuchi bed, their Koyuchi bathroom, how are we going to help them build the whole space? and that's what we're looking at as you look at the mix of products and say that customer acquisition product and then the second, third, fourth purchase. Got to get that mix right and that's what allows us to get to that profitability metric. Got it. And has retention been more of a focus these days than before? Or like what are you thinking about when you're thinking about profitability specifically?

24:01Yeah, you know, retention has always been something that we were focused on because we have had this history that a lot of other brands don't have that benefit. I think what's shifted today is that like all the home brands, we also saw just a surge in new customer growth over the pandemic. And so retention really matters because we want to be able to retain as many of those customers as possible. Got it. And so like, was that, you know, can you go a little bit deeper into that? Just for like two years, a lot of my podcast was just talking about how crazy 2020 and 2021 was. And now I feel like the podcast is now, well, what are you doing after that?

24:43So like, what are you doing after that? Yeah. So, you know, if I think about what we're able to do with retention today, it's looking at, you know, sort of the cohorts of different groups that we've brought in. What are the ways that product assortment helps us to then target different customers? So if you came into the brand buying sheets, what's the next product that we want to market to you? If you come into the brand buying towels, what does that customer's behavior look like? And then really having, I think the other area that Koyuchi does a great job with is having engaging content. We know that for customers that buy home goods, it may not be an every 12-month purchase, right?

25:36We might not always get the customer to come back within that 12-month cycle. And so how do we make sure that we're always staying connected, staying relevant? Because if they're on more of a two-year cycle or an even three-year cycle for how they want to replace their home goods, we want to play into that mindset that they're already thinking about. And then the last thing I would say is part of our storytelling involves bringing in our second home and circular initiatives, where we also invite our customers to send their product back to us because we're creating a mechanism where we're able to renew and recycle that product.

26:21And so I think it's just recognizing that, look, that's something that's unique to Koyuchi, that we have a customer that is interested in that sort of conscious consumerism side to how they want to live their lives. And a second home program that's unique to the home industry gives us an ability to engage a little bit differently. Can you go a little bit more into that? What's the background of that? And what do you see in terms of, does it require a lot of customer instruction or explanation about how that works? Just walk me through that entire program. Sure. So Second Home is both a take back and a renewal program for Koyuchi.

27:04So we're asking our customers when they are finished with their product to go ahead and send it back to us. And that is the ability to just send it back and they'll get 15 % on their next purchase. and what we're doing with that product we had originally partnered with the renewal workshop they're now blackman and they renew the product for us so it goes through a you know cleaning cycle they inspect the product it's got a little bit of that like you know from the automobile industry how that you've got this kind of certified renewed and then we're offering that for sale to our customers at roughly a 30 % off of the original retail price.

27:52And that has, honestly, like it's probably 80 % of the product that comes back is able to be renewed and resold, which is a pretty high percentage. I will say one of the things that drives that percentage is that But another unique thing about Koyuchi is we allow the customer to send product back to us for a store credit up to 365 days. So a little bit from my outdoor industry days, you know, you got a lot of lifetime value products in outdoor. that policy was already in place when I got to Koyuchi, but I really understood it because it's not just a 30-day or a 60-day trial, right? It's like, really, no, you're going to love this.

28:44Sleep on it. Keep washing it. Keep using it. And you're going to love it. But if stuff does come back through that channel, we are able to renew it. Got it. A couple of follow-up questions. One, about how many customers or percentage of customers even or just any sort of sense participate in the program? Oh, from a customer standpoint, I don't know that I could give you a good number on that. Okay. Yeah. That's fine. But then my next question is how many customers – I mean, I love the idea of 365-day returns. How often do you see a customer 200 days returning a product? Is that an issue that you deal with?

29:25Or do you find that after the two-month moment, they're not going to return it? Oh, yeah. It trickles. It's got a long tail. But yeah, the volume is certainly going to be within the first, I would say, probably 60 to 90 days. And then it starts to taper off after that. One thing I wanted to ask you just from messaging, and this goes to my earlier question just about the evolution of a customer and messaging seeking out sustainability. is a company like yours, you have a lot of certifications, you participate in a lot of different programs. How important is that to the customer? Or is that just something that you need to do as a company?

30:05Like, if you get a certified organic certification about your cotton, or you're part of, say, a coalition, does that actually resonate with customers, I guess is my question? I think that the certifications are the third party verification of what we do. And, you know, for organic, I think it's very important because I think there's a lot of opportunity for us to make sure that we're following the guidelines that exist for a reason. because organic commands a premium, right? And so anytime you have that element of the cotton is actually more expensive, how are you making sure that you're getting what you paid for?