This episode we welcome Joe Kudla, CEO and Founder of Vuori, the fast-growing Southern California-inspired activewear brand. Joe's journey is a fascinating one that anyone in retail and branding will enjoy and can learn from. We discuss the origin story of the company and discover how two big pivots allowed Vuori to find its unique positioning and set it on its path to its recent $4 billion valuation.
This episode we welcome Joe Kudla, CEO and Founder of Vuori, the fast-growing Southern California-inspired activewear brand. Joe's journey is a fascinating one that anyone in retail and branding will enjoy and can learn from. We discuss the origin story of the company and discover how two big pivots allowed Vuori to find its unique positioning and set it on its path to its recent $4 billion valuation. We also unpack how Vuori plans to stay remarkable in a crowded activewear space and why physical retail will be key to its next stage of growth. Lastly we learn about the importance of "word of mouth"--to be literally remarkable--in propelling Vuori forward.
But first we take on the news of the week, including Kohl's coming under pressure from activists to pursue a sale, Amazon going deeper into physical retail with Amazon Style and a suburban iteration of Amazon Go to the suburbs, cutbacks at Glossier, and ever mounting issue of product returns.
Steve predicts the returns debacle back in 2017.
About
Joe Kudla is the founder and CEO of Vuori, a rapidly growing performance apparel brand inspired by the aspirational active
Southern California lifestyle. A student of life and various active pursuits, he drew upon his personal interests to bring a new
perspective to the activewear market, prioritizing versatility, comfort and sustainability. Prior to Vuori, he started Vaco San
Diego, a professional accounting and IT consulting firm and he started his career as a CPA at Ernst & Young. Joe earned
his accounting degree from the University of San Diego where he was acknowledged as an all American Lacrosse player.
About Us
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks , The Food Professor with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext! You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:05
Welcome to The Remarkable Retail podcast, season 4, episode 3. I'm Michael LeBlanc.
Steve Dennis 00:10
And I'm Steve Dennis.
Michael LeBlanc 00:12
Well Steve, we're back after an adventurous episode, your fearless predictions for retail and 2022. Great response to that episode from our listeners. Now you also, it was the companion piece so to speak to an article you wrote in Forbes, how's your overall response in response to your, your adventurous predictions?
Steve Dennis 00:30
Well, it's been good on in one sense in that the traffic for it was really good and I got a lot of likes and people saying they agreed. I was, I was kind of hoping for a little bit more pushback or a little bit more dialogue. So, if you're listening in to this episode and you want to come at me, feel free to reach out on social media and maybe further down the road we'll debate some of them a little bit more as the, the year unfolds.
Michael LeBlanc 00:51
All right. And on this episode, we got a very special guest Joe Kudlow, founder and CEO of active wear retailer Vuori. It's a pretty remarkable story and Remarkable Retail, I was not aware of the brand. They don't do business up here in Canada. How did you become aware of it?
Steve Dennis 01:07
I heard about it through a guy named Jim Gold. Jim used to be the oh, I worked with him at Neiman Marcus, and he was the President of Bergdorf Goodman, a division we owned. And then he was elevated. And I know he had a couple of big jobs President and Merchandising, President of Stores or something at Neiman Marcus. he has now moved on to be the CEO of its modus operandi. And he mentioned it to me in a conversation like 18 months or so ago when he joined the Board and he said Joe is a guy should, I should get to know at some point. And so, this was our opportunity.
Michael LeBlanc 01:39
Well, it's a great discussion. You know, it's a very active category, very busy category. But you know, a couple of big dominant players and, and you would think: ‘A’ they got it, the categories had a huge tailwind thanks to COVID. ‘B’, It's a very contested category, a lot of people in it. So, it's a really interesting story of how they're finding their way in a unique proposition. So, we'll get to that in a few minutes.
But first and foremost, we wanted to hit the high notes, so to speak about retail news. Lots going on, actually. And I guess let's start with what's going on with, with Kohl's. There seems to be both activist pressure and bids coming in and they seem to be in play from what I'm reading. What do you, what are you hearing?
Steve Dennis 02:16
Yeah, this has been bumping around for a little while, a couple of different investor groups, I think have taken a run at them over the last maybe year or so. And now they're, they're kind of back at it, pressuring them to sell themselves off, spin off their eCommerce business, a lot of different things have, have been going on. And I, you know I'm getting kind of tired of these, these activist plays. I, I still, you know, this is I guess, a matter of, of research, which I haven't done, I will admit, perhaps one of our listeners will do it. But you know there has been a lot of these retail activists, retailer activist investor groups that have gone after some companies, you know, going back to you know, Sears with Eddie Lambert, and Bill Ackman at Penney’s and on, and on, and on. And it's not clear to me that many of these have actually ever worked out it seems like the investors make out because they push the price up a little bit, and then they bail. But it's not clear to me that there are many examples of them actually being super helpful to improving retailers.
But I think because of the stagnant performance on these retailers stuck, as I like to call it in the boring middle. I think we're going to see more and more pressure for something to happen because the returns just have not been good at, at many of these retailers for quite some time.
Michael LeBlanc 03:30
Now speaking of returns, and we're actually going to get to some pretty interesting numbers on returns as published from the NRF. You know, Kohl's is remarkable for it taking Amazon returns, which has been a very hotly debated, hotly debated tactic. But, speaking of Amazon, that's my segue into talking about Amazon, the Amazon Style, Amazon Go moves to the burbs. Like, what's going on with, with that? It seems that Amazon is kind of keen on trying something in physical retail, more experimentation. I'm not sure what, what or how they plan to measure this, but it's pretty interesting, yeah.
Steve Dennis 04:07
Yeah, a couple pieces of news. So, you may recall, one of my predictions was that Amazon was going to really double down double click on more, more physical moves. And pretty much right after that got written, they announced their Amazon Style store, which I think is a bit of an oxymoron for the name of their, their format. But this is the rumored department store that they will be opening the first of two I believe they've announced, in California, I believe in Glendale outside of LA later this year.
And it's really not quite a department store, from at least the video they put out there, which maybe we'll put a link to in the show notes. It's really more of an apparel showroom, because they're not going to have merchandise on the floor. They're going to have a lot of technology involved. It sounds like they're going to be showcasing many of their private brands.
So, I think this is, you know, it's absolutely a test, it seems like they're testing technology, they're testing their ability to market their own apparel brands more. And it sounds like they're also going to have some more upscale, you know, fashion luxury sort of brands, which they've, you know, been at for many, many years and haven't had a ton of success. So, I think it'll be very interesting to see that when it opens.
And then the other thing that got announced is they're going to open a new version of their Amazon Go store, this time taking it to the suburbs. People may know that the Amazon Go stores pretty much have been designed for office workers. There, they're typically kind of grab and go snacks, typically in the lobby of, of an office building. So, this is going to be a much bigger store in the suburbs of Seattle. And, you know, it's interesting, just to see how that format is evolving. Again, like we always say, with Amazon, you know, they try so many different things.
Michael LeBlanc 05:56
Yeah.
Steve Dennis 05:56
That I would not assume that the Amazon Style store, or this new Amazon Go store, is going to be the format that they’re going to roll out 1000s of it. But I think they’re continuing to up play around the edges with different sort of physical formats. And I think in particular, you know, they need to figure out apparel. And I think they need more physical presence also, to which we’ll get to a store we’ll talk about in a second, we will deal with a high rate of returns that they’re experiencing.
Michael LeBlanc 06:21
Let’s talk about Glossier, I’m a big fan of Glossier. I made the pilgrimage there a couple years ago to their store, just on the fringes of SoHo. I love the format. I literally sat in the store, and just watched and kind of soaked it all in. And people were so you know, they're all dressed in pink, you know, onesies basically, and, and it was a very different format. And people were so excited about it, they were excited to be there. But they've run into a bit of chop, talk about, talk about that.
Steve Dennis 06:48
Well, for sure Glossier has been one of the buzziest brands of the, of this new era. And they were, as we've seen with so many of these digitally native brands, they were into a big physical store rollout. They ended up closing those stores during COVID, which I guess, wasn't terribly surprising. But now, they've announced they're cutting about a third of their staff. So, again, this ties a little bit to one of my predictions, which is some of these brands, which have, you know, seemed quite prosperous, at least from the PR standpoint and from a revenue standpoint, and in a consumer interest standpoint, many of them are really struggling with profitability. So, we don't know the whole story here. But I think this certainly suggests that they are trying to figure out how to make their business considerably more profitable. They are moving back into physical retail. So, you know, a lot, a lot to come there. But I think we're just going to continue to see many of these high-profile brands just need to show that they can demonstrate profitability.
Michael LeBlanc 07:53
There was a good article in the Wall Street Journal with their CEO, Emily Weiss, and she was very upfront said, listen, we got distracted, I, I have to think COVID really, you know, was really a barrier to their success. Who knows what, what we'd be talking about today If COVID hadn't gotten away. But she's certainly taken accountability and making (crossover talk) decisions so, you know, I wish them the best of luck. She looks very competent, a very competent leader in a, a very interesting space.
Let's talk about this for the last thing, let's talk about this returns data that came out. NRF published this returns data that I found fairly shocking in one way, by the percentage. Now, you and I, we've been talking about this for years, literally that you know, as the percentage of online sales go up, returns is just going to go up as part of the mix. Returns just happen, and they happen more so in online. But I was shocked when I saw the, the average industry average for retail.
Steve Dennis 08:44
I was, I was, I don't know that I was shocked. But you know, returns have just become this, this massive issue. And as we've talked about before, it is, it is not surprising because of the just the mix issue of online. But I think because the, the numbers are getting to be so big, it just can't be ignored. But you know, this is a problem the industry is created, right? By making returns super easy. You know free shipping, returns and exchanges for online orders. It just, it just kind of creates kind of this consumer dynamic of maybe buying three, you know, keeping one.
So, I, I just feel like this is an issue that just keeps getting, getting elevated and it was great to see more, more tangible data but it’s hard to look at the, the high rate of returns and how I feel like something’s got to give here at some point.
Michael LeBlanc 09:34
Yeah, we’ll put a link in, in the notes to the survey. Basically, they said on average it went from, again industry average, from 10% to 16%. That's a huge jump. Online returns were about 20%. That's not a bad average you know, taking something online. That's, that doesn't shock me. But the 16%, wow, that's, that's those are big dollars. And, and anyway, it's a great report, it gets into you know, friendly fraud or fraud. That's all you know, fraudulent returns all big component of that as well.
So, so, why don't we now get to our great interview with Joe Kudla from Vuori.
Steve Dennis 10:09
We are delighted to welcome Joe Kudla to The Remarkable Retail podcast to talk about the exciting brand that he founded and is developing.
So, welcome Joe. How are you today?
Joe Kudla 10:21
I'm doing great, guys. Thanks so much for having me on.
Steve Dennis 10:23
Well, we're delighted to have you, you and I have a I believe a mutual connection with Jim Gold. Who he's, is he on your Board, is that right?
Joe Kudla 10:30
He is. He also happens to be one of my favorite people in the world. But yes, yes, I am fortunate to have Jim on the Board.
Steve Dennis 10:38
Well, he's a great guy. Jim and I, as some folks will know, worked together at the Neiman Marcus Group way back when. And we both have spent some time in Dallas.
But in any event, let's talk about you. One of the things we love to do at the outset of these episodes is just ask our guests to talk a little bit about who they are, their professional journey, and then we'll, we'll dig into the Vuori story in just a second.
Joe Kudla 11:01
Yeah, happy to. You know, I think I'm a bit of an anomaly, being the founder of an apparel brand. You know, I studied accounting in college and my first job coming out of school was supposed to be joining the audit practice at Ernst & Young. So, I don't think you see a lot of those types ending up in such a creative field. But you know, before I went to work for Ernst & Young, I got this really unique opportunity, a slight detour. And I went to work as a model in Europe, I grew up and got my degree, and, -
Steve Dennis 11:30
(crossover talk) We've all been there, we've all been there.
Michael LeBlanc 11:34
Okay, we don't hear that very often. So, you got to unpack that one a little bit for us.
Joe Kudla 11:37
Yeah, my friends still give me a hard time. It's like the, the, the joke that never, never goes away. But it was, it was that that was the moment that I kind of got a little bit of a peek behind the curtain at the, at the fashion industry and It definitely did not resonate with being a model. I loved meeting people and traveling and being a young man, you know, seeing the world was, was very cool. But definitely did not resonate with being a model.
But I loved watching designers create incredible products and seeing how they use textiles and color and all these things to build, bring these collections to life. That, that was very inspiring to me. And it was kind of the moment that I was like, man, maybe there's a creative inside me because I all, all that I'd done my, to my, in my life to date, it was really to play sports, you know, and, and study accounting. You know, I was like I was a very active guy, but, but never had nurtured a creative bone in my body.
But after a few years doing that, I went back to Ernst & Young I was ready to kind of start my quote unquote, professional career. And so, I begged for my job back. They had me back and I did a couple years, got my CPA license. And during that time, I met a girl who was a designer, she was going to FIDM; graduated from design school, and I encouraged her to start her own contemporary line with me.
And so, we, we that was our first kind of go at an apparel brand. And it was never really set up for success. I mean, I didn't know that at the time, obviously. But you know, we were young kids and I learned how to make clothing and how to bring it to life. How to go out on the road, sell it to specialty boutiques. And while the business never really went anywhere, you know, we got some we got the brand in some really good stores, it was the first time that I kind of told myself like, man, maybe I could, maybe I could do this. But I was working 60 plus hours a week at Ernst &Young and there wasn't a lot of free time.
Joe Kudla 13:32
And then, I decided to leave EY and I started a, a, an accounting and technology recruiting and consulting company called Vaco with a couple of my really good friends at the time. And we built this really great business. And I, I did that for a long time. You know, I was, I was in this position where I wasn't raised with a lot of money in the household. Rich in love and experiences but, but material wealth was not something that, that my family had.
And, and so I think I spent the first kind of half of my career chasing material wealth. Like I wanted to prove to myself that I could go out and, you know, create something and, and, and you know, acquire things and do all those things, because it was new to me.
But after running that business with them for about eight years, I started kind of getting that, that, that creative itch. And that was about the time that I was getting into yoga. I, I really started to see the opportunity for Vuori before me, and, and I decided to leave. And instead of kind of having one foot in, in two different worlds, you know, trying to do the startup while you're, you're pursuing something else during the day, I, I really felt like it was important for me and my personality to jump in with two feet. And so, I resigned from a company that I built. A lot of people thought I was nuts including my parents. But I, but I decided it was time for me to pursue something that was truly in alignment with my heart, my passions, my interests. And, and that's when we, we launched Vuori.
Steve Dennis 15:07
So, tell us a little bit about the beginnings of the brand. Like what that, I know you haven't been around that long, but maybe what the first year or two was like, and then how it's evolved over the last several years?
Joe Kudla 15:20
Yeah, the beginning of the brand was, was brutal, to be honest. It wasn't an overnight success. We had a real hard time raising money. I likened it to, you know, starting a rock band and telling your friends, you're going to be the next Rolling Stones. Like it was, it was very hard to get people to believe that I was the guy who was going to go out and disrupt this massive active wear market.
I didn't really have a track record, record of success in the space, I wasn't a designer, really had no experience at, at any si-, any sort of scale. I had some success in business through a completely different industry, but, but hard to draw the, connect the dots. And so, raising money was very challenging.
And when we launched, you know, our whole premise of starting the brand was, you know, I, I, I've, the seed was planted for Vuori in a yoga studio. Yeah, I had hurt my back playing lacrosse in college. And I wanted to heal, and a friend suggested I try yoga. And so, I was in the studio a lot. I was wearing a lot of different active wear.
And we saw this opportunity to build active wear differently that, that drew inspiration from, from where we lived here in Southern California, the beach. You know, we identified as beach people. And out here on the West Coast, there's kind of this casual, effortless, sophisticated way of dressing and we felt like active wear brands were really following the lead of, of the big kind of brands that defined the space that have been owning it for a very long time. And as beach people, we saw an opportunity to build something with a unique point of view, and then the aesthetics were centered around versatility. And so that, that was, that was the vision for the brand, it was to come in here and do something really different.
But, but you know, we, we entered it through yoga participation. And we quickly found out that guys don’t necessarily identify as Yogis. That was the first flaw in our, in our premise. And the second one, was that we could sell product through like yoga studios and gyms and then that would provide us enough capital and, and a working capital model that can fund the growth of the business into the D2 C space. That was another flaw.
And, and after kind of a lot of contemplation and, and talking to our customers, we, we, we decided that we needed to pivot. That was right before we were literally out of money. We changed the brand premise. We change the messaging, what we found out from our customers is that they loved the product. But they weren't using the product for yoga. They were literally doing everything else you could imagine before they were doing yoga. They were chasing their kids around the house. They were running. They were going to the gym. They loved it as lifestyle apparel. What we heard from our customers is that they loved the versatility of the brand. They loved how wearable it was. and that was always our intention. But we kind of took a yo-, we, we, we used the yoga lens towards building the brand.
So, when we shifted to speaking more about the way that the customer was actually using the product, and we went all in on a direct consumer strategy, meaning like we needed to go out and build our audience direct via the web, via social media. And as soon as we shifted and made those two pivots, after kind of an arduous first year in business, we really started to see the engines turn and we defined that engine of growth, we were able to go back out to our friends and family and raise a little bit more capital and, you know, find our groove. And, and, and you know, that really set us on our trajectory towards where we’re at today.
Michael LeBlanc 18:59
It’s so interesting. I mean, as you describe it, it’s a real intersection of the personal and the professional, right, coming together and to weaving its way through your story. I mean, your life and your lifestyle is like a central character and in the narrative. So, it, it, it’s interesting again, as you talk about what it took to start spinning this flywheel.
So, let's, let's cast our mind for it a little bit. You know, the part the category apparel active wear has been just been on fire and, and to some degree, thanks to the COVID era. And hopefully, as we look forward to the post COVID era, how are you thinking about the, the brand, the apparel, the growth in a post COVID era, and it is a very crowded category, it attracts a lot of attention what do you think that, you know, what's that secret sauce that you that, that makes that, your brand stand out and spin that flywheel even faster?
Joe Kudla 19:47
It's such a great question. And you know, people oftentimes want to understand, or they want to, they want to know if there's a, you know, some kind of a customer acquisition kind of, not gimmick or, but some kind of a hook or some kind of a unique strategy. But at the end of the day, in the business of, of clothing, it all comes down to the product. You know, you you've got to make great product.
We are a group of product obsessed people. And we spend so much time making unique differentiated product that feels great, that fits great. And ultimately that is the flywheel. It's, it's making really great product.
But to your point, you know, we do benefit from a lot of trends right now, right? Like performance, apparel, active wear, it's, it's a growth market. And I think it was it was growing considerably prior to COVID. I think COVID was a bit of an accelerant of that trend. You know, the casualization of our country it was happening, but definitely COVID poured gasoline on, on that fire.
And, and now as we come out, we're finding that the brand that we really set out to build pre-COVID is just resonating really deeply with how people are living their lives. You know, the, the casualization of the workplace. You know, people the, the movement towards an active healthy lifestyle, I think coming out of COVID people are recognizing they've got to take care of themselves. They want to be active. They want to invest in their health and well-being. And I think our brand really speaks to that lifestyle very effortlessly. And that wasn't a pivot during COVID. That was, that was something that the brand has always spoken to really, from its inception.
So, you know, we feel really blessed. It, it's funny, and you know, it's a big space, obviously, it's a crowded space. But when we launched, you know, we saw this opportunity to carve out this niche very, very clearly. And, and we felt like it was just a wide-open space.
You know, you have the big kind of brands that defined what active wear looked like. But as men we wanted product that would carry that, that we could wear throughout all of these different aspects of our life. We didn't feel like we needed to buy active wear that identified us as a guy who was going to compete in a sport, or a guy who was on his way to the gym. Like we wanted to blur those lines. A lot of guys in Southern California were wearing board shorts to the gym because they didn't identify as a jock, you know. They didn't want to wear that shiny, synthetic polyester. They wanted fabrications that looked in performance felt a little bit more like cotton. They wanted it stripped down of all of those, like unnecessary design features that don't really ultimately change your workout.
And so, that's what we did, we built product that was effortless, it was sophisticated, it was wearable, and you could wear it across every aspect of your life. And we prioritize fabrications that were incredibly soft. And we prioritized, a great modern fit. And so, it's just easy to wear, and I guess (crossover talk), -
Michael LeBlanc 22:56
I guess so would, would a, would a word like versatility be on kind of the vision board, right? So, you know that (crossover talk) that big idea that this is a versatile you can, you could bike to work, bike to the office and, and wear what you bought from your organization and, and get off the bike and go to work kind of thing is that, is that part of your vision?
Joe Kudla 23:13
100% versatility is a huge part of it, and you know, it's funny, because now a lot of brands, you, you'll hear versatility being a key word in a lot of marketing campaigns, especially in our space. But Vuori is really proud to have been a pioneer. When back when we launched the business back in 2015, nobody was talking about versatility for men. You know, and I grew up in a time where you were either a skater or you were a jock, you know, people wanted to be put in these boxes and surfing was counterculture.
You know, now executives in San Diego, at least, you know, are having you know, board meetings out in the lineup. And, you know, I think that the internet has really democratized activity and we don't necessarily put ourselves in these boxes. People today want to do at all,they're running, they're going to yoga, they're skiing, they're surfing, they're training. And it's more about living an active healthy lifestyle. I think Vuori's product not only transitions from activity in your everyday life, but it works for a lot of different activities. So yeah, versatility is really a key word that drives us.
Michael LeBlanc 24:19
Well, I got a much better understanding of the product.
Let's talk about and you and I we were talking off mic about your recent raise, was it like in the 400 million area, and you were explaining off mic that there's, there's more behind it than the headlines that perhaps the headlines that folks have been reading haven't got the story quite right. So, take us a little bit of, you know drawing on your, on your accounting background, take us for a minute or two into the what I guess we call the capital structure. You've already chronicled how, how you grew the business, but how does this money factor in? How does this raise factor in? And then we can talk about how you, you know how you expect to grow based on all that.
Joe Kudla 24:56
Yeah, absolutely. You know, we Vuori is this, it's a unique business model, you know, in the sense that where we were started in a garage, we bootstrapped the business, we raised two and a half million dollars of friends and family money, and we had to focus on profitability. I didn't have a big background in apparel, people were not overly willing to give us money in the early days. And so, I had to build a working capital model that could fund its own growth.
And so, we did that. And we did it by working with incredible factories and building incredible partnerships with them so, that they could be our Series A and our Series B and Series C, instead of going back to institutional investors. And so, we built a business that didn't need more capital. And even with the dynamic growth that we're experiencing, we've always focused on profitability. And therefore, we, we've built the model that didn't need capital.
So, when, when, when we talked about, you know, people potentially getting it wrong, or not necessarily just understanding this round, it was essentially, it, it kind of comes down to the fact that the business didn't need capital. So, this was really a secondary offering, meaning it was an opportunity to reward our early shareholders.
And honestly, probably one of my most proud moments of my professional career was being able to, you know, provide money back to those early friends and family and those people who believed in the business when, when not a lot of people did. So, it was a, it was a really big moment for, for everybody in kind of the extended Vuori family, all of our investors in our management team. But yeah, we were in this unique position where we, we didn't need the capital to grow. And so, we're doing (crossover talk) that on our balance sheet.
Steve Dennis 26:40
Joe, you know, it, its, first of all, it's amazing that you've been able to, to provide that kind of return to your early shareholders. One of the things I'm really interested in, and Michael and I have talked a lot about on the podcast, is this idea with a lot of the digitally native brands, they, they experienced what I call profitless prosperity. In other words, they have these phenomenal growth stories, they get a lot of press, but as I suspect, you know, a lot of them have really struggled to get to profitability. And it's not always clear whether they've got the unit economics to get there. What, what is it, can you, can you provide a little bit insight for people that might be listening, that are trying to figure out how do you create a powerful brand from scratch in just a few years, and not fall into this trap of needing to raise so much money and spend so much money on customer acquisition and all the other things that get in the way of profitability?
Joe Kudla 27:37
It’s such a good question. And it’s, it’s a great debate and I’m not saying that we have the best model. It worked out really well for us to focus on first order profitability, first order contribution margin. That was always we, we prioritized profitability over, over growth. But what we found is that by investing ultimately, in making really great product that was resonating with customer with the tailwinds of kind of the broader kind of psyche of the country, we were able to, to achieve both scale and profitability concurrently.
And, and we feel very blessed to be in those shoes that and I know that that's not always the case for every brand. And there's a lot of folks out there, my heart goes out to him, but COVID was a headwind, as opposed to a tailwind.
But you know, for us from the early days, we just we always were focused on acquiring a customer profitably. So, first order is profitability. So, if they never returned, we didn't lose money on that customer. We didn't rely on lifetime value. I think that there's a common misconception in the D2C landscape that, you know, once you acquire a customer, you don't need to pay to acquire them again.
Steve Dennis 28:51
Right. Yeah.
Joe Kudla 28:52
And, and I think that that's, that that's not necessarily true. I think you have to continue marketing to your audience. And I think that there is a cost of, of lifetime value beyond first purchase. So, but you know, for us, it was always about, look, let's control what we can control. let's make incredible product that's differentiated in the marketplace. And if we do that, we will the, the word will get out. And, and that is what happened to Vuori. If you look at like our number one driver of growth today, you know, it's word of mouth, and, and to the tune of close to 5X that of our investments in social advertising, paid search, you know, catalogs, television advertising, you know, we're we pretty much are advertising across the, the spectrum. But number one, our number one driver is word of mouth and I think that ultimately, that this type of virality is what will help a brand propel beyond these kind of ceilings of growth that a lot of typical D2C brands, get, get kind of stuck at. And you see CPAs go through the roof, when you're just relying on you know, your traditional paid search, paid social channels.
Steve Dennis 30:08
Sure, sure. So, now as I understand it, so I guess two, two questions, you've got several physical stores. So, I'm kind of curious where physical stores fit into your growth plans, and, and just in general, how you think about them, but I would also imagine, but correct me if I'm wrong, to the extent you're going to invest more heavily in physical stores, the investment characteristics start to change there. So, can you just kind of unpack that for us?
Joe Kudla 30:35
Yeah, absolutely, you know, we love, we love brick and mortar. Huge fan. You know, I'm definitely not in the camp of, you know, retail is dead. You know, we've always embraced brick and mortar retail. You know, albeit very strategically, both from a wholesale standpoint, you know, we've, we've embraced relationships with very strategic wholesale partners. And we believe that's a big part of our success story.
But, but we've always had retail stores, you know, from, from our inception, we launched with a pop-up shop in our backyard events, (inaudible) and nobody was coming through the door. And so, we had to figure out how to capture the attention of the community. And so, we started partnering with local artists and other brands to bring people together, and host events to, to support emerging artists. And before you know, it, like the community was having these events for the community, it was like we were, we were a catalyst to bring people together.
And then people slowly started wearing our product around town and, and then we could get feedback on how that product was working for them and improve it. And, but it was, it was in that pop up shop that we really learned how to be vertical retailers. And none of us really had any experience. You know, I worked a short stint at Abercrombie & Fitch when I was in college. But I was not a trained retailer. But, but it was a really great experience for us to learn how to connect with the customer. And, and the data that we were able to get from those stores observing the customer try on product, tell us what they like, tell us what they what wasn't working. It was, and then how we engaged with the community at a really grassroots level, it was really palpable.
So, when, when our when the landlord told us they were tearing down the building, and we had to move out, you know, we were like, we have to have a store. So, we signed our first long term lease in our backyard events (inaudible). And then, you know, we moved up to Manhattan Beach in Los Angeles, and we opened a store there and kind of did the same thing; focused on community. How can we be in service to the community? And that's been the ethos that we've brought to all of our stores. And, and we love our stores.
I there, we can talk a lot about, you know, the data as to why stores are a great kind of, you know, part of a holistic strategy, but, but we just, our stores have been very profitable it, it they do require investment. And, you know, we're seven years in now. And so, we've, we've got a balance sheet that can support the, the vertical retail expansion. It would have been harder to do right out of the gates. But now that there's awareness, you know, it's just so fun to see Vuori come to new markets and see our customers showing up and supporting us.
Michael LeBlanc 33:19
Well, your last point Joe, about new markets, it gives us a nice segue into kind of our last question. And that's what's next? I mean, it's a funny question for such a fast-moving innovative brand. Are you looking at international expansion? I'm up here in Toronto, maybe one day might be able to buy your product, one way shape or another? What's, what's next? How do you, how do you imagine taking that business forward? And, and give us, give us a quick insight on that.
Joe Kudla 33:44
Yeah, I mean, we're going to continue to be focused on the number one thing that drives us that's making great products. So, you know, we're launching an innovation office in Taipei. It's being pioneered by a legend in the space that we're so fortunate to be partnering with. He's developed some of the best fabrics in our space. And so, we're, we're excited to be working with true material scientists to bring some, some first to market innovation to our customers.
But yeah, we're, we're very bullish on vertical retail. We're going to, you know, open 100 stores in the next five years. We're, we're excited to bring Vuoir retail stores to the east coast. Our first store will open in Boston in, in March, and then we're looking to get open in New York in, in June. So, I'm very thrilled about the expansion to the east coast and, and then we're working on our first store abroad, which will be in London. And so, look out for that store opening hopefully this summer as we launch our dotcom business so, so much stuff going on but we're just having a lot of fun managing the business.
Michael LeBlanc 34:49
Well (inaudible) such a great, such a great conversation, just great listening to you and that, that anchoring in the financials that is mixed with your creativity and your kind of zest for this business is really, really fun to listen to. So, you know, by all means, you know, when you get around to it pop up a store in Vancouver and poke, poke the bear a little bit. All right, you know, it's just, it's just, you know, it's just due north of you there, Joe. So, you know, but anyway, listen, thanks, thanks so much for joining us on Remarkable Retail. So, it's really, really a great conversation clearly fits within our brand of talking to remarkable retailers and a great story. So, thanks so much for making the time. I am sure it's a, it's a busy time for us and, and once again, thanks for joining us on The Remarkable Retail podcast.
John Kudla 34:51
Thank you, Steve. Thank you, Michael. It was fun being with you guys.
Michael LeBlanc 35:42
If you liked what you heard, please follow us on Apple, Spotify or your favorite podcast platform so you can catch up with all our great interviews and insights and new episodes will show up each and every week. Be sure to check out our YouTube channel. And last but not least, tell your friends and colleagues in the retail industry all about us.
Steve Dennis 35:58
And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at Stevenpdennis.com.
Michael LeBlanc 36:11
And I'm Michael LeBlanc, producer and co-host of the Conversations with CommerceNext podcast, The Voice of Retail podcast, keynote speaker and host of the all-new, Last Request Barbecue cooking show on YouTube. And you can learn even more about me on LinkedIn, or meleblanc.co. Have a safe week everyone.
SUMMARY KEYWORDS
brand, people, business, retail, profitability, returns, customer, active wear, store, product, bit, Amazon, stores, big, growth, apparel, wear, moved, build, format