A Product Market Fit Show | Startup Podcast for Founders
00:03:20 · Alex Back, Pablo Srugo
Two days later there was five orders. 10 days later there was 20 orders, every single day going to different parts of the country one at a time. This is a company that was used to selling a hundred at a time in a shipping container coming over from Asia. Now they're selling from their domestic inventory one here, one there, one there. They grew so fast. My friend made a lot of money and so much so that they took the account away from him and made it a house account because he was just literally making too much money off of this. [00:04:39] S1: Was this dropshipping in terms of how that worked at that point? [00:04:43] S0: Yeah, it was early dropshipping. This company had never even done that before. They were going through the process of figuring out how do we even palletize single shipments to go to one place like that? That's something they had to adapt to as well. The retailer that was buying all this furniture was called CSN Stores at that time, and eventually they became Wayfair. [00:05:05] S1: That's crazy. [00:05:06] S0: That's how we got into the furniture business figuring out that, oh, there's somebody who's doing this and doing a really good job. There's a ton of opportunity.Yeah, it was early dropshipping. This company had never even done that before. They were going through the process of figuring out how do we even palletize single shipments to go to one place like that? That's something they had to adapt to as well. The retailer that was buying all this furniture was called CSN Stores at that time, and eventually they became Wayfair.
00:05:06 · Alex Back, Pablo Srugo
[00:05:06] S0: That's how we got into the furniture business figuring out that, oh, there's somebody who's doing this and doing a really good job. There's a ton of opportunity.Yeah, it was early dropshipping. This company had never even done that before. They were going through the process of figuring out how do we even palletize single shipments to go to one place like that? That's something they had to adapt to as well. The retailer that was buying all this furniture was called CSN Stores at that time, and eventually they became Wayfair. [00:05:15] S1: Was he supplying then one of the first pieces of furniture that Wayfair would've sold? [00:05:19] S0: Wayfair got out this early, early 2000s. They started as CSN stores. Even before that, there's just these two guys. They were not in the furniture business. Their story's really interesting. They have a great, like how I built this with Guy Raz, if anybody's interested. It's just a good business story. They started with just a very robust SEO driven e-commerce strategy where they had bartos.com or awesomemediastands.com. They bought up these URLs and then worked backwards and found the product to fit those. Essentially used keyword research to back their way into the furniture industry to figure out what were people interested in buying online. Then as I said, they worked backwards from there. Very, very interesting story. [00:06:09] S1: Your buddy sees this, let's say market pulse is this new model of selling furniture. Where are you in the picture? Are you all also working with him or how do you enter?
00:06:18 · Alex Back
[00:06:18] S0: I was an actor living in Hollywood. I used to sing and dance. I was singing on cruise ships when I wrote the business plan for Apartment 2B, our former company. That's a whole other story. I was always a very entrepreneurial person. I didn't want to wait tables. My friend was selling furniture. I was like, "Hey, let me sell some furniture with you." My side job was, we had this deal with Costco where we do all these special events and we basically sell our couches at Costco next to the guy sampling hummus or whatever. I was the sales manager for our Southern California operation. I just did this on my off days. If I had an audition, I would go do that, or if I had a show, I would take a couple weeks off. All that to say I was doing that, he was doing this, and I started working more in that direction. At some point it was like, hey, I have a good concept for making an online store where we're just bridging the gap between IKEA, which at the time was seen as much more lower end quality, as promotional as you can get, and Crate & Barrel, which at the time was seen as a little bit more high end. There was nowhere where people in their 20s who could go to buy furniture and feel confident knowing that they got a good piece of furniture that's actually good looking. That's where we started. I was like, that seems like a pretty good idea. I moved back to LA from New York at that time with my wife and we started the business in his apartment and hence Apartment 2B was born.
00:07:47 · Pablo Srugo, Alex Back
[00:07:47] S1: What was the first iteration of the business? What were you selling? Where were you getting it from? [00:07:53] S0: We basically ran Apartment 2B like a retail store. My friend had run a retail store. I had worked with him too. We understood the basic ins and outs of running a mom and pop furniture store. We just did it online. We didn't have this grand scope or scale to the concept. It was just first let's see if we can support ourselves with this lifestyle business of just selling furniture online and let's see where it goes. Initially we just got connected with a number of different suppliers. We used his prior connections in the industry to literally just get people to sell to us because nobody in the furniture industry wants to sell to online businesses. They saw it as a threat to their brick and mortar businesses, which still, by the way, 20 years later drive the majority of the business in the furniture industry. They're very protective of these players. A few people allowed us to put their products online for sale. We put together a catalog. We spent a number of months building a website and we basically just flipped the switch and did all these alternative methods of advertising and marketing that were – we advertised on TV before. This was before Google ads was even really a thing. [00:09:11] S1: Where did you get the money to do TV ads?
00:09:11 · Pablo Srugo, Alex Back
[00:09:11] S1: Where did you get the money to do TV ads? [00:09:13] S0: There was a lot of hustle here. He knew the TV guy for – wasn't spectrum, but what was it? Time warner at the time. He was like, "Hey, Dennis, we have this new business. What can we do? How can we get this going?" He's like, well. He's like, I know this guy. You can do a little commercial and we'll put you in. We'll just choose one demographic like West Hollywood. In that place it's actually affordable to have a few ads. Let's see how they perform. The key was the hustle was in that. He's like, yeah, I got something good for you though. There's something called Autofill where there's a time slot that wasn't filled yet. We'll slot your commercial in. My best anecdote about this is we got into the Super Bowl pre-game, the pre-game show leading up to the Super Bowl. We're like, what? We had our crappy commercial that we made in my buddy's apartment showing on this. [00:10:07] S1: Oh my God! They still charge you but just some reduced rate or how does that work? [00:10:11] S0: Each play paid our normal rate of 80 cents a spot or something. I don't remember what it was, but we didn't spend a lot of money on marketing. I'm not saying it was successful, it's just more of a good story of how we found these weird ways of growing that were not the conventional like advertising ROI focused route. [00:10:33] S1: By the way, what did you use to build? I mean we're talking 2010. This is when Toby from Shopify was selling snowboards on online? What did you use to build that website?
00:10:33 · Pablo Srugo, Alex Back
[00:10:33] S1: By the way, what did you use to build? I mean we're talking 2010. This is when Toby from Shopify was selling snowboards on online? What did you use to build that website? [00:10:43] S0: We ended up being a major early adopter of Shopify. That was a huge part of us being able to grow our business with all the players that emerged around that ecosystem. Prior to that, we first started on a Magento website and we had a local LA house build it for us. Probably spend, I don't know, 30 or 40 grand just getting it going. We had some bells and whistles to it that we really were proud of. We had this package builder application where you could bundle products together and it was like a living room package and choose your sofa, we give you four couches and you can choose which one you want and then you go to the rugs. This is something you see on websites every day but back in 2011, this is not a big thing. We got a lot of attention for that. [00:11:31] S1: Do you remember your first sale? [00:11:34] S0: Yeah, I do. I remember when we went live. We pressed a button and went live and then we didn't get a sale for a day or two. Then our first sale I think it was a friend of a friend, someone we knew. It wasn't like a random at first. That would've been unbelievable. Yeah, somebody bought a bed and then we're like, okay, this is us. Oh wait, oh, we have to get the bed now to give to the person. Okay, who's doing that? It wasn't that ragtag. [00:12:02] S1: Did you do dropshipping or were you actually in charge of the logistics?