In this episode, we’re joined by Mike Lackman, CEO of Trade Coffee, a coffee company that unites over fifty of the best roasters in the country with 400+ coffees that are rich in variety and taste.
Trade Coffee helps people discover better coffee and craft roasters reach the audience they want. Using data and various researchers, the company creates a delightful experience where people get fresh-made coffee and access to roasters from all over the country. As a customer, you can complete a survey on the website, the team processes it and then recommends products you can subscribe to.
Mike details how they started the company, why they want to help roasters reach a larger audience, and how they support them in going to the market. The final goal is to go out to a world of consumers who care a lot about coffee, give them the ability to get something exceptional at an accessible but fair to the supply chain price, and then help roasters access that.
Mike also explains why Trade Coffee’s business model focuses on the uniqueness and quality of the roaster rather than the quantity of the roasters. The most significant thing is earning trust from every party the company connects with.
Listen on Apple Podcasts here or Spotify here.
Ken: All right, Mike. Thanks for joining me. How are you doing, man?
Mike: I’m doing great. Thanks for having me.
Ken: Hey, you’re based in New Jersey, is that what you’re calling it from?
Mike: Just outside of New York.
Ken: Okay Cool. How long have you guys been out there?
Mike: Well, the company has been in New York now since our founding, three or four years ago. And we’re now scattered. A number of us are still in New York centric and, week to week deciding just how often we’re coming in. And then, we’ve increasingly hired, further afield. So I think where we are is a pretty fluid answer.
Mike: But we’ve been in New York since our inception in 2018.
Ken: Yeah, I think location’s pretty fluid for a lot of companies right now, you know, post COVID and, you know, and just people being way more open to remote work. So I think that’s a trend we’re going to see just increase.
Ken: Yeah. So we generally like to kick this off with a quote, you know, and after that we can dig into trade coffee, you know, what you guys do and the founding and everything, but yeah, let’s go into the quote. What phone do you have that maybe inspires you, gets you out of bed? Something that you like.
Mike: So, yeah, I was excited to think about this one. When you mentioned we went and talked about it, I actually majored in ancient Greek, which is sort of a weird thing to do. And, there’s a very famous ancient Greek saying which in Greek is a Northeast south town, but in, in English it’s know thyself and it was written on the, at the steps that the Oracle at Delphi, meaning before you hear them tell you what the future is going to look like for, you know, yourself.
Mike: Cause it’s very much gonna color the way you interpret this. And I think from a work perspective, I think about that a lot, because you included a hammer, everything. You really have to know your biases, the way that you’ll try to use the things you think you’re good at to solve a problem, the way that certain things will prompt a fear or concern or anxiety in you differently than other people, you’ll probably respond to them differently.
Mike: And I think you really have to take that notion of knowing yourself seriously, in order to know whether you’re adequately empathizing with the team that you’re trying to inspire, whether you. Evaluating things adequately, to be able to get it to disagree and commit kind of decisions as a team effectively, why you need to do that really well.
Mike: And you need to be helpfully critical of yourself to make sure that you’re being objective and that you’re helping the teams solve the problems they need to make the company.
Ken: Yeah. Yeah. That is a great quote. And very deep, very much applicable to entrepreneurship. You know, I just think of knowing your blind spots, you know, that what you said there, I know your strengths and weaknesses, you know, and then you augment the team, you know, based on those things.
Ken: That’s pretty cool.
Mike: Yeah. You have to be so careful of the places where your brain or your gut is telling you. This situation needs the thing that you think you’re awesome at, you may just be telling yourself that it very well might not require that at all. And what it might require is a skill that you’re not great at, and you need to step back.
Mike: And I think it’s, I only learned that by being wrong and that pretty often. So it’s a good thing to keep.
Ken: Nice. Nice. So it sounds like you came to Trade Coffee, through operations. I wanted to get just a little bit about your background, you know, where you grew up, what you studied in school and maybe your career track that led to Trey coffee.
Ken: And then I’d love to hear a little bit about the founding of Trade Coffee.
Mike: Sure. My name is Mike. I grew up outside of Philadelphia. I went to college and studied ancient Greek, and none of the ancient Greek companies were hiring when I graduated. So I could find something else to do. And sort of, by mistake became a, ops manager, kind of amateur industrial engineer, and did that for a while, before finally getting into the startup scene and, in New York, What now?
Mike: 12, 14 years ago. And, and so it started out, on the e-commerce side from the operations side of things. Mid 2010s, worked through the pet industry, with a company that’s been a lot of time at, moving beyond the ops into web merchandising and marketing and product. And through that experience I just took really seriously the prospect of under.
Mike: What it takes to be a great web merchant, what it takes to build a really solid company and to serve customers really effectively. And so did that for a while. Exit a business that I, my team and I actually owned for awhile and then, had his opportunity to come to trade in 2018.
Mike: Right around the beginning of the business, where we were trying to solve this really meaty problem of helping people discover much better coffee and helping the people who make great coffee, who are these unbelievable craft roasters around the country reached this amazing audience of people that really want.
Mike: Finding their product all that effectively. And so take a step back. We sell coffee to consumers. Our coffee is all made on demand by the country’s best roasters and then delivered, fresh, straight to home with free shipping and the problem we’re solving. And especially when you talk about why we found it, the business is.
Mike: Consumers are buying outstanding high quality coffee products. They put a lot of value on their coffee, but where they go to high-end specialty shops, where they look for craft, or this is an unbelievable part of the way they made the decisions in almost every other part of their lives. When it comes to the coffee they make at home, they only buy high quality products about 10% of the time.
Mike: And what we found was that in most cases, consumers think about the things they put in their coffee or the machines they use to make their coffee as premium. But the coffee beans are very poorly understood. And so we saw this opportunity to use the stuff that a lot of us were. Like web merchandising, data-driven personalization, UX, products, the kind of things that we think the next generation of e-commerce companies, they do them, it be amazing to build an experience that was really rich and gave customers the things that they needed without making them have to jump through hoops for the things they didn’t know.
Mike: And the end result is that we’re able to take an ecosystem of roasters. We have data on exactly what they’re making. We have a lot of data that’s proprietary to us because we taste and run some processes on our end. To be able to understand exactly what makes each one of those coffees tick. And then we personalize collections of coffees that are really rich and variety and really outstanding content, connecting our consumers to those small roasters and the communities they serve and their local communities.
Mike: And we created this really delightful experience where you’re getting coffee exactly. When you need it, it’s made fresh just for you and you get this rich variety of roasters from all over the country, because once you decide that you like it, and once you feel like it. What better coffee really tastes like.
Mike: You want to keep discovering new roasters and reaching different parts of the country. You’ll get something from Austin this week. And then in a couple of weeks you’ll get something from San Diego. And then you aren’t from Wisconsin. And it is kind of the closest thing that we think just duration comes to flipping through album covers.
Mike: We think it’s a really delightful experience and we think it’s a way to help, this small group of roasters become a bigger part in the coffee.
Ken: Huh no. That’s awesome. So the lines between a retailer and marketplace, I think get a little bit blurry. Where do you guys, you know, consider yourself? Are you guys in the marketplace?
Mike: It’s funny, we’re actually more of a retailer than we are a marketplace in a lot of ways. Overall, we sell an experience. So in some ways we’re a software company, but when you think about the real value we create for consumers, it’s more about curating. A set of products and a set of brands we understand really well than it is about having a sort of infinitely dynamic set of, self service supply that marries people, to, to access to that supply network.
Mike: So when I think about a marketplace, number of suppliers or gross amount of supply, tends to make the marketplace a lot richer, whereas for us, we don’t have nearly that kind of linear growth in the supply scale in order to serve a. So we had 50 roasters when we started, we have a little over 60 today.
Mike: But now in about three years, we’ll be close to shipping our 4 million bag of coffee. We enjoy a lot of scalability and in fact, we can invest very strategically with our roasters by keeping the number of it. Right. Where we’re able to give them data and help them really think about how to roast the kinds of coffees that have the best product market fit.
Mike: And from our perspective, helping them do that really well helps us disproportionately or an outstanding retention. And we only get that data and those insights because we have very, very clear indications of whether people. Trust us to ship them out of the back of coffee, based on how great the experience was with the last one.
Mike: And closing that loop and making that spend really quickly is a way to build a great business and failing to do so is a very effective way to go out of business.
Ken: Sure. Of course. So just zooming out, you know, I’m just thinking of the listener. You know, it doesn’t really know what the experience is like on your website.
Ken: So a customer would come to your website, and it looks like you have a subscription offering, right? You don’t have the typical, you know, Shopify site where you just list out the products on there, you launch them right into some sort of survey to collect information about them, to then be able to recommend products for them to subscribe to.
Ken: Is that how it works?
Mike: Exactly. Right. Imagine in human terms. We’re not going to ask you, Hey, flip through 72 options. We’re going to say, tell me a little bit about yourself. We’re going to set you up. It’s going to be great. And to call it like business or retail terms, that’s where it is a bit more like a Netflix or a shop or a Spotify experience, but a Shopify experience.
Mike: It’s more about saying here’s what we have to offer. This is what we think of you. Here’s a really compelling reason to try it up to and including getting a bag on us when you start. And we just need a couple pieces of information. And when we skew our experiences toward those kinds of interactions, we think that we’re in a great place to meet someone and start a relationship which can be really durable and create a lot of value.
Mike: And so we’ll go to very great lengths to make sure that we skew what we do toward that, as opposed to trying to just get one sale, because we certainly can not create a great business. Some people won’t buy a coffee and unless we learn a little bit about who we’re talking to the chances of selling them a lot of bags of coffee, by which we define more than 18, 20 a year on a per customer basis.
Mike: Unless we can do that really, really well, we just don’t feel like we’re adding a lot of value to either our customers or our.
Ken: Okay. So maybe you could describe some of the questions that you ask and how that informs what you end up recommending them.
Mike: Yeah, it’s interesting. Right? Like it’s a tension between getting as much information as possible to help us serve customers better with making it as simple and accessible as possible.
Mike: And we’ve learned a lot about what really matters. So, like I mentioned, at the beginning, we’re trying to help people discover this world of specialty coffee. That’s kind of been alienating for them for a number of reasons. And so we started with a question that’s still on the quiz today, which is how much do you know about specialty coffee?
Mike: Are you a nerd? Are you kind of new to this? A lot of things when we talk to people in qualitative research at the beginning, a lot of people, when we started talking about what we wanted to do as a company, people said, well, listen, I’m not a coffee. Or people will cut you off and say, I’m not an efficient model.
Mike: I’m not sure if I need really fancy coffee. And so we wanted to make sure we understood who we were talking to. Partly as a way of saying, Hey, don’t worry. This is not just for snaps. Two thirds of our customers, for example, are shopping for these kinds of coffee for the first time. And that’s a big part of what we promise our roasters is that we’re bringing them in access to a new audience.
Mike: But then that first question, what we found now is when you, we ask you how much, you know, that specialty coffee. It mostly just tells us statistically if we’re talking to men or women, because disproportionately meant, and to tell us that they know a ton about specialty coffee, even if they don’t. And a lot of times women who based on the way that they answered the other questions in the quiz seem to know a tremendous amount about specialty coffee are more hesitant to say that they know a ton.
Mike: And so interesting. That question is still there as a way of kicking things off, but it tells us less and less about the actual coffee as we get bigger. Beyond that, we asked some questions obviously about the, who you’re making coffee for it in the house, just you or other people, whether you take it black or put things in it, when, what you think the roast level you want is although that’s a very relative thing, and we don’t use that as much as you might think.
Mike: And a couple other questions that we’re just always experimenting with that help us understand how to get a piece of data that we can use. To compare to other people like you, based on what you’ve said so that we can make a recommendation that we think is shorter, blow your socks off. And we take that standard.
Mike: Deputy these areas, if you don’t absolutely love the coffee, we will send you, we will replace it with us. And that’s really expensive for us to do. And we are a business that thrives on trust. If we ask all those questions and then we send you this thing and it’s not perfect, we’ve got nothing to show for it.
Mike: And we haven’t done our job. And so we’re always trying to. Rebuild that and make it more dynamic and make it more useful and relevant to people so that we’re adding as much value as possible.
Ken: Yeah. Yeah. And that’s a pretty cool business model. I’m trying to think if, did you guys launch in this way or is this a business model that you’ve kind of arrived at?
Ken: You know, over several years of experimentation,
Mike: little column, a little column B we did launch with a quick. We have lots of different paths to purchase. When we started, we had a lot less focus on subscription when we started and admittedly, a lot more of our focus today is on subscription.
Mike: I could actually see a world in the future where we’re maybe even less focused on subscription depending on which way the business goes. But for today that’s actually been a big focus of ours has been the subscription element of the business. And I also think that. We really enjoy focusing on the quiz, partly because it is very central to our mission, which is about bringing this industry to more people.
Mike: Where, when we get more down the rabbit hole of how do we make it look more like a really exciting Shopify store. You’re kind of disproportionately leaning toward folks who want to browse through things that they are more familiar with, which to us is just a less exciting opportunity. Like we’re obviously happy and very grateful for those customers.
Mike: And we think we serve them tremendously. Well. But there’s just a massive opportunity. And I think there’s a real mission for us in helping these roasters reach a larger audience. And that’s the company we’re really trying to build.
Mike: So maybe you could describe to us. You know the world of, of a roaster, you know?
Mike: So typically how do roasters get found? How do they go to market? And I think that would help, enlightenment how you’re helping them, fulfill that mission.
Mike: I think about a craft roaster effectively. What they do is especially the ones we work with. Because we have a roaster pledge is part of what we do around the way that they.
Mike: Source coffee, the standards, they have the amount that they pay to their partners in origin. Very often with an emphasis on, relationship coffees or direct trade coffees. They’re gonna find a green that they think is really great. They’re gonna source that. And green from all over the world tends to be harvested twice a year.
Mike: They’re gonna then with the green they have under contract, they bring into the country. Make that into skews, which are the roasts that they make. Which one really cool thing about our industry is it’s super ephemeral. You may have green coffee. That was from one of a hundred different farms that go through one wall.
Mike: Washing station Ethiopia, that then makes it to a particular roaster who goes a certain way. And once that particular harvest is gone, you may never see it again. Like there’s some really cool special stuff to this. And then there’s more common stuff that’s really accessible and easy to reproduce, but everywhere in that they make those skews.
Mike: And then the ways that they sell them are through either the shops that they operate, that a lot of us are familiar with selling wholesale to other shops, selling into grocery stores. Trying to open more shops. And so when you look at their path to growth, they’re either very tough from a slotting placement grocery perspective.
Mike: Or really dependent on operating outstanding shops or B2B wholesale businesses, which again, just have really high, cost of sales, upfront, capital costs, those kinds of things, where when we come to them, they actually run the software that we have built, which is a proprietary cloud three PL system.
Mike: We give them all of our packaging materials. We pay for all the postage. We really are the retailer and take flash ownership at the point of sale there. And We know the loss that they’re making in near real time. And so when we know that there’s a customer who would really love a particular coffee, and we know that coffee is being made tomorrow, we’ll be able to go to that roaster and offer them the ability to put another X pounds into that lot.
Mike: They’re already going to make and get paid very quickly for that. And so access to that, no upfront costs growth, incremental to the loss that they’re already making. It’s a way for them to. Sell more against the green they already own, and then reach an audience across the country and geographies.
Mike: They hadn’t reached before with a target audience who was very often new to them. And in particular, the data that we use we, as we’ve gotten bigger, we’re starting to use that to go to these roasters and say, You make these particular skews that we’ve cuffed and tasted, and we’ve added this data to each one and here’s the groups that we would want to sell it to.
Mike: We have these pockets of customers here that actually want coffees that you aren’t even making yet. So if you made coffees that tastes like X, Y, or Z, if you roast the green, who already own a little bit differently to make it taste like this particular profile or to hit this pretty good price point, et cetera, you can actually open up, a significant increase in how much you would be selling to the platform.
Mike: And the most encouraging thing we hear from most is when those coffees that they make start selling really well on their home markets as well.
Ken: Right. Right. And then you’re truly becoming sort of like the Netflix of coffee, in that respect, you know, offering what’s already available, which is how Netflix started.
Ken: And then they started actually tailoring the shows that they launch, you know, and they invest in based on what they know about their customers and what their customers like.
Mike: I’m always a little apprehensive to throw that around because I don’t want to be too pitchy with the business. I would say the, if we lived up to that aspiration, when we build a hell of a business, if we’d lived with aspiration, but to the most exciting thing for us in achieving something where somebody would say, faithfully, you guys are like the Netflix of coffee or something along those lines would be, I love that Netflix can go to artists and say, You know what Hollywood says it, unless it’s a comic book movie or a children’s cartoon.
Mike: I don’t have anything to buy from you. Netflix can go to an obscure comedian who puts animations over their comedy, like taking the taro and paying them. Because they know there’s a market for it and they need the product and they’ll pay them a really fair price for it. Or some weird eight episode psychosexual, Spotify thing.
Mike: Like they have a market for it. And when there’s a market for it, they’ll pay top dollar for it. And that’s what we want to do. We want to go out to a world of consumers who care a lot about coffee. Give them the ability to get something truly exceptional at a really accessible, but also really fair to the supply chain price and then help roasters access that.
Mike: And so if a rooster makes something that the market wants to help the market, pay them really fairly for it and push value up the chain up to, and including the growing partners they work with as a way of making them a bigger part of this coffee economy. And so when you say something like Netflix, a coffee.
Mike: We see the ambition to try to say, how do we go from 10% of the time? The coffee that people make at home is really high quality to 40, 50% of the time. That’s how most American homes make their coffee. And how do we take that growth and really move that value into main street businesses, small employers and their growing partners.
Ken: Yeah. So, I guess let’s just talk about the trajectory of the business, you know, what’s changed. I’d also like to get into a little bit of, you know, how COVID affected your business and, so, yeah. I believe you said you have about 65 roasters, is that right?
Mike: We’re at 62 today. We’re in the process of onboarding a couple, so I don’t want to misspeak if they aren’t living on this.
Ken: Okay. And that’s how, about how many are out there. You know, I’m not that familiar with how many roasters, you know, are in the United States. And then is there a reason why you focus on roasters in the U S.
Mike: So there’s a ton of roasters, up to an including one person who can rent time at a co-op.
Mike: And sell, $50 at a time at farmer’s markets. So it is a little bit, it’s actually, in some ways, even a smaller barrier to entry than something like craft ruin. And so there’s a huge number out there. I’d say, we’ve been very fortunate. Because we’ve been able to find some success on the consumer side, we’ve cultivated a lot of relationships beyond the folks we’re currently working with.
Mike: And so when we’re thinking about expanding, which we have done, in particular, trying to expand the geographic proximity, we have. In terms of how close we are to customers on average, with the way that we shipped to them. We’re very often going to someone we’ve been talking to for months and that we have a pretty solid relationship with that.
Mike: We understand their coffee and we understand who they are. We understand frankly, like the ethics behind how they treat their teams domestically. A lot of the things that matter to us and matter to our customers. And so we’re cultivating that list and again, it is just that. A currency of trust for how we run that business and finding folks that we think will enrich that and who will be able to trust us as really outstanding partners and work with us for a long time.
Mike: Yeah. So we went with a smaller portion of the industry, but it’s always growing quickly and the ability to leverage that scalability is a big part of what makes the model sustainable. And I think that’s a good dovetail into your other question, which was then how to COVID effect that. And it was encouraging for us to see, starting with the point of human gratitude, that roasters at a time when they were really stressed and were taxed in ways that none of us understood what was going to happen.
Mike: We’re willing to prioritize working with us and we’re willing to find ways to get creative, to serve our customers well, and by the work that we put in the early years of the business building, what we had conviction had to be a really robust made on demand, supply chain, that nimble nature of what we had created, made what we did very little.
Mike: At a time when things got really complicated and a lot of demand came up from places we hadn’t seen before. And we needed to find ways to statistically figure out which postal service lanes were the most likely to be delayed and then get coffee on the road sooner or respond to. Roasting operations in one particular place having to shut down because of a quarantine and then on the spot, be able to move that volume to a different roaster who could serve the customers equally well and be able to make sure customers didn’t mind a coffee at a time when they were consuming more of it than they ever had, and things were changing.
Mike: So all those kinds of dynamic things that change. If we had a simple Shopify app once a month, this would happen. And here’s our one, three PL sort of a thing. I think we would’ve gotten sort of crushed where the dynamism of some of how we tried to build our business was something that allowed us to serve customers really well, serve roasters really well.
Mike: And that’s where at a time, when a lot of the other paths. We’re seeing a lot of problems. We were able to offer them in very many cases, a couple shops with the revenue through our platform. And so it was a really outstanding partnership.
Ken: Yeah. Yeah. That’s great. On your website, you talk about, you know, say big support, small roasters.
Ken: And it seems like, you know, just based on the business model, the uniqueness of the roaster, the quality of the roaster, you know, that is. It’s actually more important than just the absolute number of roasters. Would you say that’s accurate?
Mike: Oh, there’s no question. From our perspective, we look at the customers for serving and we need a certain number of roasters and a certain number of skewers to create an outstanding experience for each one of those people.
Mike: And if we don’t have enough supply to make them absolutely. I mean, there’s enough variety. They’re not getting back into stuff they already tried before. If they don’t want to, the coffees that we will send them next are outstanding. And we’re in relationships with people who we know will ship with a lot of reliability really effectively.
Mike: We’re keeping our average zone down and putting as few things on airplanes as possible, both from a cost and from a sustainability perspective. That’s where we invest, but that’s not costless. Right. And so the other side of that is. The more measured we are with just how many of those relationships we’re sustaining.
Mike: The more we can invest in the content behind our blog posts and Instagram stories that connect consumers to those roasters. The more weekends we can spend really looking at the statistics behind. Exactly. How do your coffees taste and what would it mean to change something? And then when they come to us and say, well, what if we tried this thing and they’ll roast a test batch, it’s no problem for us to then spend more time coupling that with our coffee team and thinking about what that means and where that might sit in the market and saying, let’s tweak it again.
Mike: Whereas. 10 times that many roasters, I think it’d be really harder to have that level of relationship. And again, if you think three or four phases down the road, can we invest much more concertedly in technology that helps us make some of those things really scalable. If we want to expand more quickly, a hundred percent, but from being able to build a business sustainably, We’re looking at what’s most important.
Mike: And the most important thing is earning trust from every party that we connect with that we really do think that we’re in the connections business. We connect people to these communities. We connect them to these really rich discovery experiences, and we connect roasters to a new market that they otherwise would have a really hard time serving.
Mike: And so if you let them. The trust and the quality of those connections degrade. It really just invalidates the entire, the entire perception of the entire value of the platform, where if we feel like every day, we’re making a larger and larger number of connections and the average quality of those connections gets better.
Mike: Everything from the quantifiable stuff to the more emotional side of things, then we’re building a great business and we’re just going to keep iterating on that, to achieve.
Ken: Right. And coffee is obviously a huge niche and a huge opportunity, to run this particular playbook in, do you know other industries where you think that the same playbook could work, you know, that, you know, maybe that’s something that you guys aren’t going to pursue, but you think, Hey, this could actually work well in this other and this other niche.
Mike: It’s funny. We’ve had investors ask us that a lot and we’ve, It’s one of those things where we really don’t spend any time thinking about it. I think there are some things that are sort of singular about coffee. Part of the reason that I chose to do this is that I think there is something singular and special about the coffee category.
Mike: I think there’s very few things that are this important to this many people, but have evaded their notice for this long. So I, I don’t know that there’s a giant hidden gem and an $80 billion industry just hanging out. And it’s pickles or something like that. Like I just, I don’t necessarily know that’s going to be the case.
Mike: I also think there’s some peculiarities that took off that allow us to do some things that are really darn hard. Most of e-commerce, most of e-commerce is pushing itself to make the order values as large as possible. You look. A lot of the subscription players that are raising a lot of capital are growing really quickly.
Mike: And they’re trying to push average order values from $80 to 150 hours to a hundred and a hundred ninety eight, two hundred $50 to get as much leverage of the last mile as possible. Our average order value is between 15 and $20. And because hydro freshness matters and variety matters. So people like getting one at a time from different places and that loyalty is what we’re building toward.
Mike: And luckily, because it’s coffee, we don’t have to. So we can find ways to do that effectively and have a sustainable business model for both ourselves and our partners, but it’s really hard. And we like the fact that it’s hard. We don’t want to do a low-hanging fruit thing because we think that’s really hard to build a moat around, but if we can do something really, really hard really well, there’s something really special about that
Mike: And we can create a lot of value and invest in it and treat people well and build a company that’s consequential and behaves in a way that we’re really. So
Ken: I’m going to ask a question which probably reflects more on me. Then I guess what I’m getting at with the question, but, you know, I’m kind of a boring guy, you know, I like what I like.
Ken: You know, every once in a while I like to experiment, you know, with new things. But, a lot of times, you know, I find what I like and I just wanna rinse and repeat. You know, keep doing that. How much, or I guess how, what, like, what percentage of your customer base do you think are, you know, lean more towards that, right.
Ken: They discover a really good roaster and they just kind of stick with it or, you know, compared to the guys who are constantly trying new coffees, you know, for the variety,
Mike: The short answer is we don’t know. I think it’s very possible that’s something that we will find. Isn’t higher demand than we think.
Mike: And that there’s a field of dreams. If we build it, they will come find your favorite and keep it coming kind of an experience. Right. But we’ve just found a tremendous amount of opportunity. Unlocking variety. The flip side to your question though, is when you say you find your lane on something, does that mean that you like blues or like you like this one song?
Mike: But if we can figure out that station, you really want to listen to, to speak in like a hundred year old person’s terms because there’s no more dials or anything. But if we can find that one station that’s perfect for you and doesn’t have any commercials, you may never change the dial. So that might be, Hey, I found my thing and I’m sticking with it.
Mike: And a lot of the things that people find exhausting about variety, frankly, that’s why we have confidence that we’re solving a problem that is relevant. And that grocery is structurally incapable of solving it. That variety is a grab bag of discretionary random stuff. And that’s a terrible experience. I don’t want to ascribe a lot of value to random haphazard stuff.
Mike: That of your customers works too. Darn hard to ascribe a lot of values. It doesn’t have a lot of value. Conversely, if we can get the profile perfect. If it can be exactly what you want exactly when you want it. If we can deliver this idea of. Exceptionally great coffee, easily, the best coffee you’ve ever made easily every day.
Mike: Can we do that really well then the fact that the bag changes and the story changes, it’s just really cool. It’s a really nice, special thing. And it’s a new connection you make as a community. You had a chance to support and an impact you had a chance to have as part of the thing you’re doing every morning.
Mike: Okay. I think the most audacious thing in our ambition in a lot of ways is that we see this opportunity to do something that builds on something that Howard Schultz did with coffee 30, 40 years ago, which is, takes something really special and exceptional and makes it really accessible to a ton of people.
Mike: I mean, think about in 1980, cafe experience was exclusive to American people who could vacation in places like Paris or Rome or Berlin, or those kinds of places today. If you’re in, I don’t know, Carmel, Indiana, wherever, and you have two or three hours. You can go to a really nice place.
Mike: That’s going to treat you really well and call you by your first name and make something just for you. And you can sit down in a really nice chair and there’s music playing, and you can just have a wonderful place to sit and enjoy your drink or your meal. And that’s, that’s not a thing that existed 30 or 40 years ago.
Mike: Now. I’m not trying to say that’s necessarily the experience we want to build. It’s not the opportunity we’re building, but it’s something that at the time was pretty exceptional and they built an unbelievable business that positively impacted a lot of people by making it available to them.
Mike: People, we see a universe of consumers who really care a lot about Providence, where things come from, they care about supporting local businesses, and they’re looking for ways to do that. And if we can make something exceptional available for a really fair price to a ton of people and delight them in the process, help these small businesses in the process.
Mike: That’s huge. And that’s what it has, is motivation to try to solve a really hard problem.
Ken: Yeah. Yeah, I agree. And I think that you touched on something, you know, the downside of variety or, you know, a lot of choices is the exhaustion that comes from that. And so really nailing your process and trying to make that a delightful experience as opposed to, okay.
Ken: Now I got to do work, right. Which I think is actually, you know, maybe some of the pushback on the Netflix type experience, because a lot of times, you know, and that’s like, it’s work to find something to watch. Right. And that’s the frustrating part about it, you know, it’s nice to be able to discover new things.
Ken: And so, but you got to balance it with, okay. You know, is it half an hour of just flipping through stuff to try to find what I want to watch? And I don’t really feel like that right now. You know, all like if you can nail that algorithm, really get to know your customers. I think that you guys are definitely, you know, obviously onto something and, you know, this could become a really massive business, you know, it’s a huge opportunity.
Mike: And that’s where it’s from. I’ve talked to you about from a mission of the business perspective, why we’re so motivated. But I think a lot of us also come from digital retail and those kinds of backgrounds, and it’s a really interesting consumer problem. It’s hard. And I think it’s really the future of what had been these great consumer experiences that were kind of paper catalog driven.
Mike: Think about the way that paper catalogs are built and how they made it really easy to find the screwdriver you needed or those kinds of consumer problems or shopping problems. It didn’t work. You opened it, the screwdrivers page and everything you needed was there. And you got one from the Sears catalog, or you think about the way that Wayfair and some of these platforms or chewy got built and they made it really easy to find the thing you were looking for.
Mike: And it wasn’t a pain. We’re solving that problem in a different way, which is that curation doesn’t mean that you have to learn how to work our system. It means you can talk to us like a human being and we can just do it perfectly. And when we make that experience possible, you’re creating a lot of opportunity and the litmus test for whether you’re doing it well, is all in return.
Mike: If we’re not driving retention, then the business is just that it has no reason to exist. And I think one of the things I said half jokingly, but deadly serious to our board of directors, right when I started was. If this ever becomes a Joey of the month club, I’d rather just shut the thing down and play ping pong till we run out of money.
Mike: Cause it’s like, we’re not here to do that. We’re here to build a really great way to solve a big problem. We’re not here to send people random, nice stuff in the mail. And I think that’s true. I can’t say every day was always the right side of that line. It’s a chilling and lousy feeling. If you ever feel like you’re building it in a way that doesn’t meet that standard, but it’s also really great to have that sobriety that there’s a Fern line.
Mike: You won’t cross and you know why you’re here, what you’re trying to build. It can inspire you to solve hard things pretty well.
Ken: Yeah. You know, I like your example, you know, the Sears catalog example, have you read the book the long tail Christian. I figured out that one.
Mike: I actually haven’t.
Mike: That’s a great call out.
Ken: Yeah, that book actually talks a lot about this problem. Right. And it talks about what Sirius was able to unlock, you know, through their catalog. But you know, as you look at the progression, you went from, okay, I would buy a bag of flour from the general store.
Ken: You know, and the bag was a white bag with words, flower on it. Right. And that was my option. And then Sears kind of came along and unlocked, you know, this whole new world where you actually had some barracks. And you can just pick and then you’re exactly right. They made it really easy to then pick from a much wider variety of flour.
Ken: And then you fast forward to today and you look at what you’ve got on Amazon. And it’s like, the choice is just massive. It’s like these tails, you know, this long-tail just continues to grow. And so what I think is fascinating is your business. Helps to deal with some of that, that huge choice, you know, that problem of choice.
Ken: And as you get to know the consumer, then you can better recommend and not really necessarily limit, but truly curate and point them in the right direction. And if you do it exactly right, I mean, you’re nailing it every time they open it up, you got the variety. This is the company that knows me, and this is amazing coffee, you know?
Ken: And I’m so glad that they recommended this to me. Right. So anyway,
Mike: Yeah, it’s such a neat reflection on where we sit with the kind of user experience design and material design and the way that consumers choose to spend their money and what matters to them. Like if you follow that same person, And this is getting really, this is a very mustached, quisling sort of a conversation here, but like, I think if you look at, the sort of sixties, seventies, there were only three channels, three, six, and 10 generic kind of only had a couple of choices.
Mike: My dad talks about growing up and when they had vegetables, they had succotash and all this canned stuff. It was terrible. And you only eat tomatoes for three weeks and they are in season. And then nineties maximalism, which is you have every choice. And so when you sit on someone’s coffee, tea, and that’s someone’s coffee table, they have five remotes.
Mike: Each remote control has 74 buttons on it. The CD changer has 147 CDs. There’s the CD changer in your trunk that has all these little moving pieces and there’s buttons everywhere. And now. 10 times that many options and one piece of glass, right? It’s just, it’s so different. You go from three choices to 47 discrete choices to an infinite number of continuously variable choices.
Mike: Where now as all, just how can I simplify the UX to make you have zero choices, but always the one best option. It’s a really hard problem to solve. It’s a really bad thing to get wrong. If you take too much editorial authority and you kind of make it all about the technology, I actually think the biggest mistakes we made in building and running this business in our first couple of years were that we made almost everything about the matching.
Mike: Like, frankly, that’s a huge place where we didn’t take our medicine on knowing that I sell. We were so hung up on doing the matching, right. That we made the whole experience about the mashing. And a lot of what customers cared about was more of the rooster story or some of these other elements of the experience.
Mike: Or even just asking them more questions about how they consume coffee, or how does that change over time? Do they want decaf? We were so focused on, are we getting the flavor right? Hugely important, but it’s so far from the only thing that when we took a step back, it had become 80% of what we were talking about.
Mike: And it was really only 20 or 30% of the equation. And so I think that’s where it’s really humbling when you get it wrong, but you kind of have to be okay with saying it’s fun and exciting to know that getting it right. It’s kind of hard. And it’s a really important problem.
Ken: Yeah. And just to follow up on that, how did you know that you were over-indexing on the matching?
Ken: You know, what were some of the signs that, Hey, we need to recalibrate here.
Mike: It wasn’t a linear kind of discreet. No one filled out a survey that said, I think you should focus less on matching. It was a judgment thing that we started to see points of performance plateau, and we were asking ourselves what it was, and you need to look at things rationally and say, if we connect with our customers more authentically and just talk to them, like people and hear what matters to them, look at the site.
Mike: And what percentage of what they’re talking about is in column a and how much of column may actually show up on the site. Well, our site doesn’t at all reflect authenticity. What our customers are saying is most important to them. And so it’s not performing as well as it needs to. Okay. W we need to communicate empathetically to customers.
Mike: We need to connect to customers. And the way you do that is by speaking the language that’s authentic and that meets them where they are. And so it was a form of selfishness. That’s how I judge it. And it’s exciting to learn from it because you can make it better, but it’s also humbling. I think if you’re competitive, you kick yourself on those things, but you also, if you have a great team that you have confidence and know that you’re learning from those things together and you’re that much more prepared to deal with them.
Ken: Yeah, that’s awesome. Well, Hey Mike, I think I could talk to you all day. But I want to be respectful of your time. Want to get close to wrapping up here? You guys are running a promotion right now, a free back promotion. You want to tell us just a little bit about that?
Mike: Come to the site, drinktrade.com.
Mike: Answer a couple of questions about how you drink coffee, what you think you might like. And We’ll give you the ability to buy one of our subscription bundles. You’ll get a free bag. If you commit to three bags, you can pay as you go and get free shipping and 15% off the normal price every single time. It’s a very fair, but also a very affordable way to, to enjoy a really exceptional product and every bag to be made on demand and shipped from a craft roaster everywhere from Appalachian.
Mike: Like in the town of Floyd, Virginia, where one of our roasters is located in places like the mission or Bushwick. And we’d really love to have you. We’ll work our tails off to make sure that we’d let you with.
Ken: Awesome. And we’ll make sure to drop a link in the show notes. So just tell us just a little bit about what you’re excited about.
Ken: What’s, you know, what’s coming up the rest of this year and into next year, you know, what does the future hold for you guys?
Mike: Yeah, I think we’re getting better and better at segmentation and personalization. And I, I would say if you saw the inside of our. Yeah, you’d see a bunch of user stories where we’re just so giddy about the places where we can solve the problems that they have, that we can do a great job for them.
Mike: And we’re just trying to be really methodical about tests and learn and MVP and doing it the right way. We’re onboarding a lot of talent. We. We brought in some really outstanding new people. In the last six months, we have had a bunch of great new people starting in August and September. And so I would say we’re also really excited about developing our team and taking onboarding that much more seriously, codifying our values more effectively and just trying to build a really outstanding organization to keep up with the growth that we’re building from a business.
Ken: Awesome. All right, so just for four quick questions, that’s the quickfire round. Just tell me what comes, comes to your head? What’s one tool or resource that has helped you a lot that you can recommend?
Mike: We love using Looker. It’s been an outstanding tool for us. The investment that’s paid off and it’s really democratized internal access to data.
Mike: So everyone can come informed and then speak passionately about things that matter to them. So I would say investing in data tools is a really important part for a young business, and it’s never been more accessible than it is now.
Ken: Yeah. And nso, for those who don’t know, Looker’s a business intelligence tool, and it just helps you to uncover insights in all your data.
Ken: Is that right?
Mike: A hundred percent.
Ken: What about a book that you like, that you could recommend to people
Mike: I’m reading the upswing right now? It’s outstanding. I don’t know if you’ve ever read any of Robert Putnam’s stuff, but he wrote a pretty foundational book a long time ago called Poland. With this thesis that advances in technology were inversely related to social capital, example being, when the air conditioners come out, few people sit on stoops, they all go inside, they start socializing.
Mike: And he has a book called the upswing all about how we went from being a very polarized and contentious and high inequality society at the beginning of the 20th century. Changed for the better into the sixties and then have, they’ll always regressed since then. And it’s actually an optimistic take on how we can go through the same positive progression.
Mike: Again, if we look 50 years in the future.
Ken: Alright, that sounds very interesting. I’ve actually heard of the other book bowling alone. I can’t remember if it was through a Ted talk or something, but it’s been recommended a couple of times. Sounds great. More questions. What’s one piece of advice that you would give to your 21 year old self?
Mike: Definitely be patient.
Mike: And I’m not sure if my 21 year-old self would have taken it. But I was probably too anxious to make the things I wanted to happen too quickly. And, ultimately doing that, doesn’t get you the things you want. So, addicts and patients to the equation is advice that I should have taken and probably still need to take from time to time.
Ken: Yeah. And who’s one person in your field of work. You know, maybe another entrepreneur, another CEO, somebody else in the physical products space, that you’d love to take to lunch. Maybe somebody that you admire or somebody that you watch.
Mike: Well, that’s a great question. I mean, I can tell you that I’ve been really fortunate to have gotten to know the founder and CEO Joe Megibow , who runs.
Mike: I’m a startup founder, CEO of a, of purple innovation, the mattress company, out near the neck of the woods out in Utah. And he became the CEO of that business, probably two or three years ago. And he is just such an outstanding, such an outstanding operator. A great manager and a great people leader he’s strategically brilliant.
Mike: And he’s just also so good at the human side of real character in leadership. When I think about trying to solve tough situations, I very much try to model his behavior, whether it’s as a parent or just as a human being, or trying to solve hard business problems. And I’ve never spent an hour with him writing.
Mike: Feeling inspired and more knowledgeable. And so I would bring an hour. Is there any chance I have yet?
Ken: That’s awesome. All right. Well, Hey, I appreciate it. And I think this has been a very interesting, and really kind of eye-opening, interview, you know, I always liked unique business models, you know, and how to look at, getting people even more unique products and better products, higher quality.
Ken: I think that you guys are right on track with that. Is there any sort of concluding piece of advice that you’d give to other people that are in the physical product space? You know, any, anything that you could tell them that it could help them as they’re kind of in the grind.
Mike: The tactical one pricing with the most important thing that gets the least attention.
Mike: You can change the button colors. You can change packaging, you can change ingredient panels. Pricing is so. Important. And it’s really hard to test. It has tremendous opportunity costs if you get it wrong and it’s just a huge deal. And no matter how hard we try to do it, right, no matter how hard I’ve tried in past lives to get it right.
Mike: It’s because it’s hard to control and hard to visualize. It’s really hard to put enough energy toward it, but it’s very often the single most important thing that you can be strategically decisive about. And so. If there’s anything haphazard about the way that you’re pricing, what you’re selling, then I think it’s worthy of a lot more attention to an opportunity.
Ken: So what’s the advice then? Focus more on it, test it more. The more question,
Mike: Question, everything. When it comes to that, I mean, maybe you asked me to open with a quote. I’ll close with a quote that I’ve been thinking about a lot, but I actually read in that book by Bob Putnam, it was, from the Tempest in Shakespeare.
Mike: I’m sure I’m going to paraphrase and get some of it wrong, but I think it’s all past prologue. What’s yet to come as an art discharge, right. It’s kind of like a way of saying day zero. Your pricing is your pricing. The fact that you’ve got this far on this pricing can very often give you this sequential.
Mike: Okay. We’ll just have to keep going because that’s how we’re priced. That’s not true. And think about how many businesses there are. Well, we got from zero to 10 million, so I guess we just have to keep pricing it this way. That could be a really dumb way to get to. Right. Think about where you’re going. Think about, like I said, we’re close to selling our four millions bags of coffee.
Mike: I can tell you that we felt beholden to certain things when we were growing from 200 to 280,000. Because that felt like a big job at the time. Thinking about going from 300,000 to 4 million, you better feel really great about what you’re doing. And as hard as it is to change, if you’re going from 200 to two 80, it’s really hard to change.
Mike: And so I think, it’s easy to kind of just stick it on a cell on the spreadsheet and call it fixed and say, that’s the way we’re priced. And so now we just kind of optimize everything else where if you create the Liberty and the creativity to question those things, that’s really where a lot of the creative merchandising lies and it forces you to be very well attuned to your customer internal.
Mike: If you want to charge more, are they willing to, where do they see the value? The flip side is that undercharging is just not sustainable and you have to find the right way to capture the right amount of value for the value you’re really creating.
Ken: Right. All right. Well, Mike, I think that’s a great note to end on, Hey, I appreciate you taking the time today. This has been awesome. Thank you.
Mike: Thank you.
Ken: All right. Have a good weekend. We’ll see you.
Ken: The Physical Product Movement podcast is brought to you by Fiddle to find out more about Fiddle and how our industry leading inventory ops platform is giving modern brands and manufacturers all visibility into their inventory and operations. Visit fiddle.io, and then make sure to search for Physical Product Movement and Apple Podcasts, Spotify, Google Podcasts, or anywhere else Podcasts are found. Make sure to click Subscribe. So you don’t miss any future episodes on behalf of the team here at Fiddle. Thanks for listening.