In this conversation, Chris and Jonathan delve into Heliotrope, Jonathan's business specializing in natural and fragrance-free skincare products. Jonathan reveals the origins of the venture and emphasizes the significance of kindness and respect in relationship building. They explore Heliotrope's product lineup, which includes the unique feature of customizable scents using essential oils. Jonathan discusses the challenges of pricing and marketing, emphasizing the role of social media, email campaigns, and SEO. He also explains the transition from physical retail to online sales and wholesale distribution, driven by changes in the retail landscape.
Chris: How are you doing?
Jonathan: I'm doing alright, and you?
Chris: Good, great! It's nice to meet you.
Jonathan: Likewise, sorry for being a bit late.
Chris: No worries. By the way, I was checking out your website, and I must say it looks fantastic!
Jonathan: Thank you, I'm glad you like it.
Chris: The images and overall design give it an elegant feel, which I really appreciate.
Jonathan: Thank you for your kind words. I really appreciate it.
Chris: Yeah, so I'm Chris, the editor of Articles, a newsletter specifically for entrepreneurs. We currently have around 10,000 subscribers, mostly consisting of entrepreneurs in various industries such as D2C and Ecommerce, as well as some investors. Our focus is on sharing founders' stories, company strategies, and industry news. We send out a daily email newsletter to keep our subscribers informed.
Jonathan: That's interesting. Let me tell you why I started this venture, as it highlights its necessity at the time. Back in 2009, when I left my previous job, I was searching for fragrance-free shower gel. Surprisingly, the concept of fragrance-free products wasn't prevalent back then, and it took me a while to find what I needed. Eventually, I reached out to a chemist I had worked with during my time at Bare Escentuals, a skincare company that is now known as Bare Minerals. They remembered me and were happy to collaborate. This experience not only led to the creation of the shower gel I desired but also reminded me of the importance of kindness and respect in building relationships.
Years later, when I sought collaborators for this project, I turned to familiar faces from my past. By leveraging existing relationships, I was able to find a chemist and a graphic designer who were willing to work together on this endeavor. They agreed to collaborate in exchange for barter or minimal expenses. It was a mutually beneficial arrangement.
Since then, we have expanded our product range to nearly 100 items, all of which are free from artificial perfumes and synthetic colors. We strive to maintain a natural approach and, although being fully organic is challenging in our industry, we indicate organic ingredients in our product descriptions. Rather than heavily emphasizing the term "organic," we focus on our commitment to being natural. What initially began as a personal need due to my sensitive skin has now become one of the core principles of our brand—to avoid synthetic additives like colors and perfumes.
Chris: That's excellent.
Jonathan: What this has led to is the recognition that many people appreciate scents and desire options beyond just fragrance-free products. As a result, we maintain a wide selection of essential oils, allowing customers to customize their purchases according to their preferences. If you desire a particular scent, you can take my fragrance-free formula and we can incorporate your chosen essential oils at no additional cost. This approach offers multiple benefits—you avoid artificial laboratory-made perfumes while enjoying the use of all-natural essential oils and the freedom to smell exactly the way you desire.
Chris: I see. That's great that you provide such options to your customers. Speaking of which, did you conduct extensive pricing tests for your products?
Jonathan: We didn't conduct formal testing per se. As a small local company operating on a small scale, we didn't have extensive resources for large-scale market testing. Instead, we started small and experimented in real time. We assigned prices that we believed were fair and aligned with what the market could support. Naturally, we made some miscalculations and had to adjust our prices along the way.
Our understanding of customer spending habits came from real interactions—people visiting our shop, exploring our initial website, and participating in various pop-up trade shows and crafts fairs. These first-hand experiences provided insights into what customers were willing to spend. If someone expressed surprise at how inexpensive our products were, it may have signaled that we had priced them too low, prompting us to consider raising the prices. We rarely encountered customers objecting to our prices, as we were committed to offering affordable options. Our products are of exceptional quality, and I guarantee that they can rival or even surpass department store brands while being significantly more affordable.
Chris: Understood. Yeah, I've been browsing your website for about 15 minutes, and I must say it looks fantastic. That's my initial impression. Now, since 2009, what would you say has been the most significant challenge you've faced?
Jonathan: The biggest challenge I encountered back then remains the same challenge I face today, and that is marketing. We have always operated as a small company, handling everything internally and wearing multiple hats. While I gained expertise in various aspects like merchandising, products, customer service, and operations through my experience at prominent retailers like Pottery Barn and Restoration Hardware, marketing has always been an area where I lacked familiarity. It continues to be the most difficult aspect for us. How do we increase awareness and reach a wider audience? Once people discover us, they tend to love our products, as evidenced by the majority of visitors and purchasers on our website being repeat customers.
Chris: So, it's about introducing your products to first-time customers, right?
Jonathan: Exactly. We allocate significant resources to social media marketing and have recently invested more in email marketing. However, we have explored various advertising avenues, and it remains a challenging endeavor. Firstly, the industry itself is highly competitive, with major players backed by substantial financial resources. Secondly, personally, marketing is not my area of expertise, and I haven't had the means to hire a dedicated marketing manager at a high salary. Instead, I've engaged different contractors for specific tasks or collaborated with advertising agencies. We have experimented with Facebook ads and other strategies, but it didn't yield the desired results.
Chris: So, the outcomes didn't align with your expectations?
Jonathan: That's correct. We have discontinued Facebook ads and Google AdWords. Currently, we focus on more subtle approaches, striving to enhance our SEO efforts to boost organic visibility. Encouraging customers to write reviews plays a role in improving our online exposure naturally. We also maintain an active blog, which attracts significant traffic. Essentially, we employ various tactics except for paid advertising, and it's undoubtedly challenging.
Chris: It can be difficult. Interestingly, a couple of weeks ago, we interviewed someone who runs a Shopify store. He adopted an intriguing strategy of ceasing all paid advertising and instead focused on SEO. As a result, he now generates $3 million in annual revenue without spending a dime on paid ads. It might be beneficial for me to connect you with him.
Jonathan: If you don't mind my asking, in which category does he operate? What type of products does he sell?
Chris: Oh, he specializes in electronic bikes, specifically e-bikes.
Jonathan: I see, interesting.
Chris: He has mastered SEO strategies for his business.
Jonathan: SEO can indeed be challenging, expensive, and time-consuming. There are numerous other tasks I'd rather focus on. This week, for instance, my assistant is absent, so I'm also involved in packing orders. I'm very hands-on and willing to dive into various aspects of the business. For instance, we need to produce a new batch of soaps. I'll gladly lend a hand. However, marketing remains the most difficult aspect.
Chris: Absolutely, I can understand the difficulty. Have you found the need to change or expand your product or service offerings since launching your brand? If so, what influenced that decision?
Jonathan: I apologize, but I didn't quite catch what you said. Did you mention the term "pivot"?
Chris: Yes, exactly. I was referring to whether you've had to make significant changes or adjustments to your products or services over time.
Jonathan: In terms of products, not much has changed. The majority of our best-selling items from when I first opened my store in 2010 are still on our shelves. The only time we make significant changes to our product lineup is when we discontinue items that aren't performing well. However, I thoroughly enjoy developing new products—it's my favorite aspect. Initially, I started with a range of three hand lotions and two shower gels, but over the years, I realized that some of these options were unnecessary. So, we have gradually streamlined our product offerings by eliminating items that weren't essential.
However, where we have had to pivot is in terms of our distribution channels. We found ourselves shifting away from a focus on our physical store and redirecting our efforts towards online sales and wholesale partnerships. This shift is primarily driven by changes in the retail landscape, particularly in San Francisco. As one of the popular tourist destinations located in the Mission District, we have noticed a decline in tourist footfall, especially during the recent economic uncertainties. Consequently, the valuable conversations we used to have with customers and the word-of-mouth marketing that came from our physical presence have diminished.
Chris: That's true.
Jonathan: As a result, we have had to adapt by investing more resources into our online presence. Moreover, our most successful pivot has been toward wholesale distribution. Business-to-business sales have become the largest segment of our operations, surpassing both retail and online channels. This strategic shift has allowed us to better navigate the changing dynamics of our industry and customer base.
Chris: So, where do you typically go for wholesale? Do you attend trade shows?
Jonathan: Trade shows have been a mixed experience for me. They were challenging, expensive, and physically exhausting. Even when I tried doing trade shows in New York, thinking it would be easier with family support, it still proved to be extremely difficult and not cost-effective. It became one of the biggest expenses of the year without yielding significant returns. However, I discovered a platform called Faire.com, which has been immensely helpful. There are now several competitors in that space, but Faire.com has not only connected me with numerous companies across the United States, but I have also gained customers in Canada and the UK through their platform. It has allowed me to not only sell my branded products individually but also in bulk. In fact, I currently have stacks of five-gallon pails of shower gel in my office since we have run out of space. Many stores prefer to purchase products in larger quantities.
Chris: That must provide you with a better profit margin, right?
Jonathan: In theory, selling in bulk should result in a better profit margin since it requires less labor on our part. However, the significant increase in raw material costs and shipping expenses has impacted the overall equation. For example, Ukraine is the largest exporter of sunflower oil in the world, and due to supply shortages, the price of a barrel of sunflower oil has doubled or tripled compared to two years ago. It's challenging for me to raise the prices on bulk products, considering that I'm aware many of my customers are facing similar cost pressures. My price increases have not kept up with the rising costs. I need to take a harder stance on this issue and find a solution. So, while the margin ideally should be better for bulk sales, we haven't quite reached that point yet.
Chris: That makes sense. I've been hearing about inflation and rising costs from many entrepreneurs lately. It seems to be a significant challenge. I have two more questions for you.
Jonathan: Yeah, opening a second location was the biggest risk I've taken. At that time, I had a small store in San Francisco that I shared with another retailer to reduce expenses and share resources. However, it became overwhelming as I was handling everything myself, from filling bottles to shipping orders. Then, a few years ago, I received a local maker's grant from Whole Foods (before their acquisition by Amazon). I saw it as an opportunity to open a second store in Oakland, where I live, across the bay from San Francisco. I thought it would save me travel time and allow me to have a presence on my side of the bay.
While the second store itself wasn't a massive success, it led me to the larger facility I currently occupy. This space serves as our packaging, shipping, and manufacturing center. Admittedly, it may not have been the most financially prudent decision for a businessman. Opting for a warehouse near the airport would have been more cost-effective in terms of square footage.
However, being in a vibrant co-working space with around 100 other companies, including makers, artists, and non-profits, has provided immense benefits. The building, known as the Artthaus, fosters a creative environment and a supportive community. It's only a ten-minute commute from my house, and I can even bring my dog with me.
This creative space has not only helped me stay inspired and connected with like-minded individuals, but it has also been advantageous for my business. The owner of the building, who needs gifts, often turns to Heliotrope to purchase gift baskets for investors. Recently, we sent out 80 gift baskets of Heliotrope products to financial professionals across the country simply because I was located in the same building. Building strong relationships with people often leads to them wanting to support your business.
While I may be paying more for this space than I should, I value the lifestyle choice it represents. If I had to work in a warehouse near the airport every day, I wouldn't be as happy or able to have this conversation with you.
Chris: Understood. Great. So, it's been around 13 to 14 years since you launched your brand, right? What do you find most enjoyable about your job? What keeps you motivated? That's the final question.
Jonathan: What I love most is closely connected to what I mentioned earlier about being in the Artthaus. I cherish the freedom to shape my job according to my preferences. I can enter this creative space, settle into my office, and crank up the music, and today I'm focused on packing orders because my assistant is away. Tomorrow, I might choose to work from home, crafting a report, developing a new product, or conducting a Zoom meeting with one of my chemists. There's a significant amount of flexibility and creativity involved.
Every day, when I go to work, I have the freedom to decide what I want to focus on. The downside is that it's just me, and there are countless tasks that require attention. I end up taking out the garbage because there's no one else here today. This is the reality for any entrepreneur or business owner — you end up doing many things that fall outside your job description. However, the enjoyable aspect is that I can unleash my creativity and collaborate with people I genuinely enjoy working with. Since we still have the store in San Francisco, I can also interact with other employees and engage with customers about my product. I get to talk about my product all day long, which is incredibly fulfilling.
So, is retail the path to riches? I don't believe so, but it has certainly been an immensely enjoyable experience.
Chris: Understood. One last question, if you could summarize in a sentence, what advice would you give to someone starting their own business?
Jonathan: I would advise them to go through their list of contacts, identify individuals they would like to collaborate with, and explore ways to work together. For me, it involved reconnecting with chemists I had previously worked with and partnering with friends who were seeking employment. Collaboration has always been a crucial factor in my journey, so I recommend leveraging existing relationships to foster collaboration.
Chris: Great advice. By the way, that wraps up our conversation for today.
Jonathan: Thank you, Chris. Goodbye.
Chris: Thank you, Jonathan. Talk soon.
In conclusion, Jonathan's insights into Heliotrope, a business specializing in fragrance-free and natural skin care products, highlight the importance of kindness, respect, and customization options for customers. The challenges of pricing, marketing, and adapting to the evolving retail landscape are acknowledged, with a focus on leveraging social media, email campaigns, and SEO techniques. Jonathan's experiences offer valuable lessons for entrepreneurs in the skincare industry, showcasing the determination required to thrive in a competitive market.