Stu French: In Australia alone, there's like a thousand kids born every day. More, actually. So, I mean, we were really looking at that. Like, it's just a constantly replenished market. There are fart book authors who are multimillionaires, quite literally. You get an email like a day later like, oh, where's my parcel? My parcel's lost. We're like, holy shit. Your parcel hasn't even left the warehouse yet. Calm down. Check your tracking number. Whoa.
[Voiceover]: Welcome to Add to Cart, the podcast that Express delivers all you need to know in the fast moving world of E commerce. Every month, Nathan Bush from 12 Hearts and an E commerce industry expert will share the news, research and insights that you need to know to keep you at the top of your game and of course, keep your customers adding to Cart.
Nathan Bush: Hello and welcome to Add to Cart. My name is Nathan Bush, host of Add to Cart and director at E commerce talent agency E Suite. Have you ever read a kid's book and thought, yeah, I reckon I could probably write a better one than that? Well, that's exactly what today's guest did. Stu French is a digital transformation executive who consults to corporates and has previously worked at organizations such as Telstra, Vocus and agl. Last year, however, he and his wife Tegan took what seems to be a left hand turn and started a kids book business called Ethical. They're beautifully designed books with stories which help kids make the world a better place. In this chat, Stu discusses the link between his corporate life and his career as a kids author and publisher. There is a link, trust me. He also tells us about the fulfillment model he set up to help distribute into the US and he shares why he doesn't see Amazon as a competitor, but a partner to his book business. So let's get into it. Thanks to our partners, Shopify plus and Signet. Here's our conversation with Stu French from Ethical. Stu French, welcome to Add to Card.
Stu French: Thank you, Nathan. Good to be here. I appreciate the opportunity.
Nathan Bush: Thank you. I love your story and I can't wait to get into it today. Now imagine that we are hiking somewhere in the Tasmanian wilderness and you know, we, we were hiking along together and I turned to you and I go, stu, what do you do? How do you explain what you do?
Stu French: Yeah, I normally have an elevator pitch for most things, but when I get asked what I do at a family barbecue, I probably don't have an elevator pitch. I just tend to say it's not very interesting. And that normally shuts the conversation down. But I mean, of course That's a bit of a lie. I mean, I probably have a pretty interesting and unique career. So look, I have probably like three core components to what I do, obviously. I have a startup publishing children's books pure online, although we are expanding into physical distribution, which I can talk to a little bit today. So that's kind of one large part of it. I also have, I guess a corporate career, you would say, which also is actually my own business. I consult into a lot of enterprise in Australia currently to Versant, the big cloud and digital transformation organization, mainly around digital transformation, commercial strategy, product strategy. That's an area of a lot of domain expertise of mine. So that's kind of another part of my role. And then also I write children's books to and then publish them through the ethical brand in my own startup. So kind of three trenches, they're all interconnected, they're all about kind of content and technology and customer experience. So there is a level of overlap, but I kind of tend to run them as very separate entities ultimately.
Nathan Bush: You know what, I love that you were able to form a link between being a digital transformation executive to a children's author.
Stu French: Yes, it's a little bit random. I mean, probably the only level of sort of continuity, I guess, to my career journey. I did study writing at uni, I studied creative writing and journalism. I intended to originally to be a publicist actually, and I did start in the communications domain, but frankly I decided I wasn't going to make enough money, I wouldn't be able to travel much and a big part of my life is travel. So I sort of diverged across into the technology space as that was ramping up. And so began a career doing more technically led stuff. Even though as a technologist I'm not formally trained, I guess I've developed a lot of technology skills over the last 15 years, so I've become quite technically adept, even though it's not really my area of formal training.
Nathan Bush: Yeah, great. And it's been fascinating because I came across yourself and ethical when I was doing some research around the Amazon programs and some of those startup programs and came across your story. Came across the ethical story, but which is ethicol for anyone listening along. And I kind of worked backwards here and I was like, oh, cool, she was a children's author. Ah, they're going to publishing, working back all the way back to seeing that you've been a digital digital executive at places like Telstra, which has been. Which was just blew my mind. So for those of us who are in Corporate jobs and have always dreamed about writing children's books. And I've read enough of them in my life. And you always have that little thought and you go, how hard can it be to write a children's book? How hard is it to write a children's book?
Stu French: This is probably where I think a lot of people listening might laugh. And it's actually very easy. I mean, I literally and this not to kind of do a disservice to a lot of authors around the world, but I think literally most books I have written, I've done them in under an hour. I've had a first draft out in under an hour. And obviously you can spend a lot of time refining them actively thereafter, but really it's not very hard. You're talking about a 500 to 1,000 word piece of text. If you have kind of a basic head for how to package information to your audience, which I think comes from having kids, frankly, or working in a UX domain or a CX domain where you need to understand your audience. I mean, it's fairly easy to enter and just do it and to do it quite convincingly, frankly. To be blunt too, I think the bar of most children's literature is relatively low. I mean, some of the best selling books, like if you think about them, I won't name names because that would be harsh, but a lot of the books that have sold the tens of millions of copies are really not very special. I mean, they have like a catchy jingle that they use or like they might explore a theme that is very engaging or endearing for children, or they might focus on something that's topical or timely, but really like the recipe is not particularly hard to access. It's just a matter of pulling together all of these elements. And obviously the illustrative component and the creative side from a visual standpoint is more challenging and more time consuming. But most people aren't doing author illustrator anyway. And that's probably a segue into the part of children's book production that is hard. Once you've written something, actually getting it to market and turning it into a book, let alone kind of finding a publisher that will do those things for you. That's where there are barriers to entry. And it's also one of the gaps we were looking to close with launching ethical to make that process more accessible to people, particularly emerging artists who didn't really have a platform to get what they do to market.
Nathan Bush: Yeah, absolutely. I also find that if you write a book about farts, is that every auntie uncle, nephew, they gift them to your kids and you end up with a bookshelf of like 10 books that
Stu French: are just about farts. There are a lot of fart books and to go back to my point before perhaps, sadly, they do sell really well. There are fart book authors who are multimillionaires, quite literally, so hence the recipe is not that hard.
Nathan Bush: I see what you're up against. How do you know when you've hit something good? Do you test it on your kids first and see if they respond or do you just enable them?
Stu French: Yeah, yeah, we do. I mean, I think now, having kind of been around it in a lot of detail, albeit in a fairly compressed time frame, but I think I've built a pretty good head for what will and won't work. I mean, there's always some exceptions of stuff that you read it. You're like, yeah, I think that's very good. But then you might test it with a different audience and they love it. I mean, there's a lot of kind of subjectivity, I think, to writing and to consuming texts, but yeah, generally you get a pretty good head for it straight away. I think, like, we're also, in terms of ethical, we're also trying to break out of that standard mould. I mean, whilst the books need to have sort of that time honoured appeal and resonance with children, we're also trying to explore themes that are perhaps a little more progressive and in some cases even contentious, because we think it's important to explore that stuff with kids and that's sort of where the play on words, ethical comes from. We're trying to make these kind of ethical themes accessible and cool for kids and that's been quite well received actually by customers, which has been really, really nice.
Nathan Bush: Yeah, brilliant. If you go into your website, you can definitely see the point of difference for ethical books. Can you tell us about the moment and that you've started this with your wife? Tegan, can you tell us about the moment that you went, I think this is a really good idea, we can start ethical. How did it come about?
Stu French: We've been. Yeah, that's an interesting topic. I mean, we've been playing around with, doing some sort of E comm startup for like years and I'd even kind of done a few proof of concepts for various different platforms alongside kind of working with a bunch of friends who've now also developed successful channels with various different kind of products online. So I'd sort of been across it and always wanted to do something myself. I guess I'D not focused on it sufficiently because I was looking at my kind of own day job in years past. But also I didn't necessarily think I had found a product that was quite the right fit. The reason we landed on kids books was there's not actually a huge presence for kids books online outside of like obviously you've got Amazon and you've got Booktopia and there's kind of the big kind of monoliths that have really dominated the space. They don't focus so aggressively on children's books. They typically do kind of novels and nonfiction. There's a bit of a room and opportunity in the market there. But also, I mean all the other things you need to think about with starting an E commerce business around warehousing and pick and pack and postage. I mean, books are very easy to store, they're very easy to ship, they're non perishable. So you can sit them in a warehouse for quite literally decades and provided it is dry and dust free, they will last. The product has a very long lifespan. It's also an evergreen market. I mean kids are being born all the time, so you don't need to worry about things like seasonality and that sort of stuff. So these are all the things that kind of fit into picking this as a vertical. And then compounding that we looked at and when I really kind of dug into the commercial profile of something like this, looking at other publishers, they're not vertically integrated. So I mean they might deal with authors and they might produce the work. But then to actually get that work to market is a value chain where there are kind of three to four different parties involved. And obviously that's eroding the margin. So we looked at kind of a few mock P&LS for this and we really ascertained that if we go direct to market, both B2B and B2C, and that is a vertically integrated business model where we handle everything on the value chain is really high gross margin, like kind of 90, 95% if not more in some cases because the production cost is relatively low. So that's left us a lot of room to focus on marketing and branding investments early, which is kind of the phase we're in at the moment, that really early awareness and growth phase.
Nathan Bush: What's that? You've had all summer to read Shopify's Future of E Commerce report and you haven't yet.
Stu French: And what's that?
Nathan Bush: You missed the webinar with Shopify plus head of marketing Robin Marchant and product marketing lead Anthony Kentris. Well, don't worry, we've got you covered. The webinar and the report is available on demand now, so you can access both at any time that you want. Head over to Shopify +Foc APAC, that's ShopifyPlus Live, foc-apac to get Shopify's Future of E Commerce report and webinar today or, you know, before next summer at least. We'll put the link in the show notes for you as well. How did you determine that Amazon wasn't a huge barrier to entry there? Because if most people would look at and go, I'm going to start a book company that's going to be online. You go, oh shit, there's this player called Amazon that we might need to be careful of. What made you determine that there was a gap in the market that Amazon hadn't touched?
Stu French: Yeah, I think. I mean, geography was a bit of a part of that. So definitely Amazon doesn't have as strong a presence in Australia as obviously they would like to. I mean, you've got players like Kogan who've really kind of dominated that online retail space and growing very quickly. I mean, they're obviously not really in books, but Amazon, like, I mean, it will progressively grow more and more here and obviously there's a huge amount of capital behind that business to facilitate that. But certainly in Australia and New Zealand, Amazon isn't what it is in the us so that was definitely a thing saying that we have recently launched into the us we're getting pretty good traction in that market and actually we'll probably also parallel sell our books on Amazon in the US in the near future as well. And I guess we also looked at this to that end around. I mean, if you can't beat them, join them. We're completely not advanced to having our product on that channel and certainly we have that in Australia already. It's only kind of a minority channel to market for us, but it's one that if it's scaled, it's still commercially viable. And that's kind of what it came down to. I mean, if we ended up having Amazon as a main channel to market, even supplemented by distribution and our own Shopify platform, then that would be fine. And all of those were viable options. I think if you launch a business and you don't explore all of these scenarios and do your due diligence, that's when you potentially kind of run into issues. And we were pretty hygienic around how we went through that process and even continue to now we really kind of focused on the commercial detail behind everything.
Nathan Bush: Was there any particular commercial metric that you looked at more than others that would really influence the viability of this business?
Stu French: Yeah, probably the big one was just like opportunity size and size and market. So I mean, even in Australia alone, there's like a thousand kids born every day. More actually. I mean, we were really looking at that like it's just a constantly replenished market. I mean, probably one of the other things we looked at was return business as a key indicator. I think the cost of selling online, particularly on Facebook and Google, is really high now. So if you have a low average order value like we do with relatively cheap products, often there's a barrier to entry with that acquisition cost using like your traditional kind of social and search marketing channels. So that was definitely something we looked at. And that sort of forms part of our thinking the whole time. I mean, actually one of the problems to kind of take it down a different angle that we have because that average order value is so low, we kind of forced into running this vertically integrated model anyway. The minute we introduce like other people into our value chain, instantly we have a business that wouldn't be making much of any money actually. So the way we've shaped the business is taking into account the that fact. Fact that it's a cheap product and it is absolutely a volume game.
Nathan Bush: Yeah, absolutely. Now that's a really great rational explanation of how you've set up the business. And I think you've given us some great insights there in your thinking and how your previous in your current career as a consultant kind of shapes what's been formed into ethical. Ethical also has some really strong positions around helping kids create a better place or create a better world, whether that be environmental, whether it be ethically. Can you tell us about that side of the business as well?
Stu French: Yeah, sure. I mean, we definitely in setting out to kind of establish this, I mean, obviously we had a focus on building like a sustainable business that would scale and something that we could kind of focus on and even kind of keep as a sideline that wouldn't need a lot of focus in the long term. I mean, we wanted to an extent a passive revenue stream, but at the same time, we didn't always kind of want something that was just all about making money, I think. And certainly one of the things I've had a lot of exposure to in my corporate life is like businesses that just make money and make money and make money and they all through their marketing teams are trying to project to customers that they're giving back and that they care, but they absolutely do not care. I mean, frankly, the minute a company goes public in particular, and it's all about delivering value to the shareholder, that overrides so many ethically based or sustainably based decisions that that organization would probably make differently if they weren't in the position they were in. So, I mean, being exposed to that day in, day out definitely kind of created a view in my own mind that like, if I were to create something and if it were to become big, I would always want to give back. So we started looking at doing that or are doing that in two ways. One, through kind of instilling the right values in children. And that's kind of really important to us in all the products insofar as we literally even interview our authors before they get to publish with us. If there's not a values alignment, even if the book is absolutely fantastic, we are just not interested. So that's one of the key ones. And then I think outside of that, like financially too, I mean, we partnered with 1% for the planet, which means even if we're losing money, we're still giving 1% of our top line revenue. And that's something we committed to doing. And we'll do more of that, I think, in the future. I mean, if similar initiatives like 1% launch, I mean, they're things that would interest us and things we would pursue in light of the fact that we're talking about being values oriented in the business. And it's really important to leave that, I think otherwise we're just like most corporates that say they are, when in reality they're not.
Nathan Bush: Yep, absolutely. And I think for anyone who hasn't seen it, we've got titles like some of your best sellers that you got on the website here. Remembering Mother Nature, My Rainforest Classroom, Tom's Tears. I love Tom's Tears because it's all about a guy who. Or a boy who didn't want to cry and then finally works out that it's okay for boy boys to cry.
Stu French: There's some really cool messages for kids
Nathan Bush: coming through there, right?
Stu French: Yeah, they're cool. And look, I mean, we probably anticipated actually a level of pushback on some of the themes. I mean, and there's been a bit of that, but nowhere near like we expected. I mean, we have a very, very low return rate. I mean, under 0.1% of our product is returned, which is pretty unusual for Ecom, actually. And that's to go back to some of the kind of KPIs we live by, that's another one. I mean, the fact that people are keeping the product is a really good sign that it fits. And yeah, it's exactly kind of living the way it's positioned on the website, which is important. Right.
Nathan Bush: And how do you pick what you write about? Do you think of a theme and then write, or do you just write and then a theme comes out of it?
Stu French: Yeah, I mean, historically, I've sort of just sat down and I've done stuff now that we've got a handful of books on the site and, like, a lot of the kind of core themes are really sort of already addressed. Now it's a matter of being a bit more systematic and thinking, hey, what haven't we written about? What's the thing that there might be some interest in? And typically, we'll kind of do some light polling with some of our customers through social media and just gauge some kind of responses around, hey, if we wrote a book about this, would there be interest? So we're becoming perhaps a little more scientific around that. And certainly as we publish more and more, I mean, that will become especially scientific where we'll do a lot more upfront research. But really, still, I mean, there's so much we haven't yet written about that we will write about. I mean, to give a couple of examples, we're really keen to write a book about money. I mean, there's some kids books that are written about kind of money and how to save and what that means. But again, we don't really think they appeal to kids. They're very sort of dry and financial, and that's not cool for kids. We want to write something that's actually going to have a level of resonance with them. That's one thing. Religion is another one. I mean, exploring, like, theology with children is important. I mean, I'm an atheist. I respect people that are religious, but I think often there's this tension that comes with people that are atheists or people that follow a religion and that shouldn't exist. Right. I mean, you should be able to pursue whichever kind of channel you do or don't want. And we would like to explore that in a children's book. And that would be highly contentious, but we need to find a way to do it.
Nathan Bush: It's almost, it feels to me like it's almost like feeding kids. You need to sometimes hide the veggies within, like a really interesting design.
Stu French: Perfect analogy. Perfect analogy. Yeah, yeah. And then that's kind of what it Is, I mean the themes in the books are not overt. They're generally within the subtext. They're not very, very deeply buried, but they're. They're buried enough that like if you just read the book to a child, and this is part of the secret sauce of what we do, I think if you read any of our books to children and you didn't really stress the themes, they would be a story that would stand up on their own without kind of the thematic value. I mean they kind of have a really deeper value to them. If you get into that subtext and you explore it. They kind of have this sort of dual play where it's a bit of a double edged sword. I mean, you don't need to get into the theme that the book is special in its own right. And that's also part of ensuring they have a level of appeal. I mean, not everyone wants to read a book to their kids that expect explores like gender politics and that sort of stuff. They might just want to read a story about a kid getting lost. And to use the Tom Stears example, it's just a bit of a fun narrative but you can make it kind of a bit more serious if you so choose. And that's really important in the way we've positioned the products.
Nathan Bush: And let's be honest, sometimes at 7:30 at night, it's the book that's keeping us between us and a bottle and a glass or a bottle of red wine.
Stu French: Totally. Yeah, totally. Sometimes books need to serve a purpose of putting children to sleep. Cool.
Nathan Bush: So tell us a little bit about the growth. How many books have you published so much so far and how many authors have you got on board?
Stu French: So we've got about 14 books out to market now and that's come from. We've got about 5, 6 authors on the books now and a few more in the pipeline. This year is probably less about publishing for us. I mean, the first year we wanted to get a level of critical mass. We kind of want to have like about 20 to 30 products on the site just to try and boost that average order value and give people a bit of a browsing experience. I mean we're never going to have hundreds upon hundreds of books. But also, I mean, the other part of this was obviously the more authors we bring in, the more there is to talk about and the more diversity we bring into the mix, both in terms of the people themselves, but the way they write and the topics they explore. And again, that has parallels with the principles behind the business.
Nathan Bush: Yeah, you do a great job on the website with the limited SKUs that you got a limited titles by bundling and giving people other avenues to buy together. So it looks like you've got a lot more than what you actually do.
Stu French: Yeah, yeah, there's definitely some smoke and mirrors there. And again, yeah, that's, that's key as I've sort of touched on. Definitely. Our big challenge is that aod, particularly with Facebook, yes, is a challenging channel for us, but it is a majority channel to market where we get really high engagement. So when we sell on Facebook, that acquisition cost is really high, but our conversion rate is strong. So, I mean, it's a channel we'll be in for the long term. But yeah, having bundles there has allowed us to make it a bit more commercially viable.
Nathan Bush: Yep, makes sense. Now I see you. We touched on before that you are expanding into the US and you see the US as a viable market. I can see on your website that you have warehouses in Melbourne, Sydney, Auckland, Dallas and London.
Stu French: London's coming. But yeah, that's, that's due about May of this year. We're just setting up at the moment.
Nathan Bush: That's a pretty incredible coverage for still a relatively young company. Is distribution at the heart of your business? Would you say that's the core driver?
Stu French: Yeah, we've, we've kind of. And we're actually interrogating this in a lot of detail right now. I mean, when we step this up, we were like, we are just going to go B2C. We completely want to pollute the traditional model of going through distributors and wholesalers and all of the noise that comes with that. But the problem is, and this is actually flying in the face of some of the early research we did, most people like my age, our age, that are kind of playing in this space aren't actually really buying books online. Not kids books anyway. The majority buyer is grandparents overwhelmingly and even like when I kind of did some initial polling around this in my own friendship groups, everyone is obviously a huge consumer of E commerce, but they're not really buying books. They're usually gifted by their parents or the kids grandparents or great grandparents or whatever. So this is one of the things, in fact, like prior to setting up this business, I might have bought a couple of books in a store for my kids. They are either gifted by other people or they just kind of materialized from somewhere and I wasn't quite sure where. It might have been a Christmas thing from some random auntie or something. So where I'm kind of getting to is the opportunity size, selling pure online to that demographic is sizable, but it is not massive. So in terms of getting the scale we need and want or aspire to have with this business, distribution is something we are definitely. I mean we've opened a distribution channel now, so we are actively doing it. And it's. It's probably the only way we are going to get like massive scale, at least in the relatively near term. I mean, the way we see it is it's an awareness driver too. I mean, the more books we get to market, kind of the more people will be in different houses and see these books when they're visiting a friend and they might go and buy them online. The way we've set up the model, as I touched on before, even if we are eroding some margin to sell at a heavily reduced price through wholesalers or distributors, it is still viable for us particularly because there's basically no acquisition cost to doing that. We're not paying high advertising bills to Facebook or Google or whatever. We will probably end up, I think, I mean, if I give my gut feel, we'll probably end up having a business that's probably 60 to 70% distribution and the balance being B2C e. Com. If you'd asked me that like two years ago when I was originally preparing for this, I would have totally not given you that answer. And I think this talks to the way kind of things happen with businesses and you've got to be willing to accept when you were wrong. And that's something like I'm kind of not good at. I'm pretty kind of bullish and I do a lot of research and planning into stuff. So when like I've done that research and I've been proven wrong, I probably take about a month to accept it. And once I've accepted it, I'll do something about it. And the distribution thing is something I've been monitoring and it was starting to eat away at the end. And then through the. The kind of break in inverted commas over Christmas, I was like, stuff that we're going to do, distribution, let's go hard. And we've done that. And that's the way I like to work. I take a bit of convincing, but once I've done it, it's all in. So we're now all in on both channels.
Nathan Bush: Was there a particular moment that made you make that call over that Christmas break?
Stu French: Yeah, probably. I think this goes back to like the time at which we launched this business too. So we launched just as Covid started to Kick off. So there was obviously a natural shift to E commerce anyway. And some of that elder kind of grandparent demographic that I referenced earlier, who probably weren't even thinking about buying this stuff online, began to have to buy it online because bookstores literally weren't open. So we kind of rode a bit of a wave in kind of that period of time, which was fantastic for us. It launched the business, it launched it really well. But certainly, like as Covid, at least in Australia, began to taper off through like that December period and certainly into January, we saw some of those people were less likely to convert online. Our ad performance was tailing off and that firmed it up for me. I mean, we're still exploring what that necessarily means. I mean, there's definitely a period where grandparents are actively buying presents through October and November. And I think E Comm in this channel kind of tails off seasonally through this period right now. But definitely, I do think we rode away in Covid and we'll continue to write it and the business is still strong. B2C. But definitely I see there is a real opportunity to do distribution as a supporting channel and potentially even in the long term, the majority channel.
Nathan Bush: That's really interesting and like, it is a beautiful wave, that incredible timing.
Stu French: Right.
Nathan Bush: But I can imagine that makes it very hard for you from a customer perspective in that you're not only once removed from your users by parents buying it, but you're twice removed by having grandparents. How do you get a view on what your customer or what your users, the kids? How do you get a view over habits and lifetime value when it's so far removed from your end user?
Stu French: Yeah, that's a good question because that was actually one of the. That was one of the things we were looking to address by like being really particular about B2C. So to kind of go down a slightly different angle, another problem we were looking to solve was like, in traditional publishing, there is no connection to the customer. And that's so important in particularly selling online. You've got to have that level of understanding. So we thought, right, if we're effectively selling direct to readers, we're really going to be in tune with them and we're going to know what they want. We'll publish books that really align to that. So obviously to your question, I mean, some of that is eroded away by adding a kind of layer in the chain. What we have sort of found, though, we get sufficient engagement both through social and through reviews and people just randomly emailing us to talk about the Books, which happens so often that we actually get enough feedback through anyway that's allowing us to refine what we do. Definitely it's not going to be as strong as going pure B2C, but I think there's enough there so that we can continue to refine things effectively going forward.
Nathan Bush: Yeah, that makes sense. So you use a lot of your social media and one to one communication to kind of understand what the pulse check is around.
Stu French: Yeah, exactly. And definitely the good old kind of nonna down the road is not adverse to giving her opinion. Let me tell you, usually it's good, but when it's not, you definitely hear about it. So the feedback is unfiltered and they've certainly got time to share it. So I mean, I respect that. Right. It's good. I mean they tell us what they think and we act on that feedback. It's really important.
Nathan Bush: How do you like your cocktail gift boxes? Shaken, maybe stirred perhaps Broken, Definitely not. Cocktail gifting company Cheers Sweetie were finding that they were regularly coming up against broken items when mailing their gift boxes all over Australia. Not only was it costing them money, but it was a horrible customer experience. Working with our packaging supplier partners, Signet, Cheers Sweetie added an outer protective layer and internal cushioning, all while remaining environmentally friendly. They're now saving over $6,000 a year in broken items. Cheers to that. Visit signet.net aublog to find out more. I want to loop back to what we were talking about around international distribution, particularly tell us about how the moment that you decided to expand into America, I'm assuming based on what you've told us so far, that was always the plan to make this an international business.
Stu French: Yeah.
Nathan Bush: What was some of the first moves that you had to do to take this from Australia and into the American market?
Stu French: So the first thing was just figuring out like how we were going to ship orders, the whole pick pack and warehousing process. We did look at establishing our own physical presence over there, but there was just no point. I mean it also massively increased the risk profile. I mean we were going in unknown. So if we'd spent like an absolute fortune setting up our own facility and hiring staff and had it not worked, I mean that was just not something we wanted to carry. So third party logistics or 3 PL was the only option for us. We did our legwork and looked at the few players that were in the us. It is quite a mature way to operate over there. Now there are several really strong 3pls. Obviously there's some issues there around cost I mean, you're paying for warehousing space, you're paying for all of the pick pack. And those costs actually do kind of ramp up. I mean, particularly if you're paying like on a per pick basis, which most three PLs do. Literally every time they put something into a package, you're paying extra to kind of pull that apart a little bit more for the interest sake. We used to put like a little insert in every one of our packages that went out and it was just talking a little bit about who we are. It had a coupon code on it. We were having really good traction with that campaign. It gave people 15% off. But actually like the additional pit cost to put that in the envelope once we modeled it out actually outweighed the benefit we were getting in terms of those return transactions. Because the PIC costs really do spiral, particularly once you're at scale. So that's probably an example of like, I think how forensic you need to be when you're kind of planning this stuff out. But certainly, I mean the 3PL model was vastly simpler and cheaper than setting our own warehouse up. It was also low risk to that end. We also thought, hey, if we launch in the U.S. our product is the same, right? I mean, if the US doesn't go well, we'll stick it in a container and we'll ship it down to Australia and we'll keep selling here. We will have lost a bit of money, but we'll have tested something and the learnings coming out of that testing are worth far more than the money we would lose. So I mean, we kind of just went all in and did it. The US is a massively different market to Australia. I had known that just from kind of having some exposure to E Comm stores that played their through various kind of other points in my career, I knew it was very different. It was a lot more mature, it was a lot more kind of aggressive and competitive. All of those things have proven true. But you can't escape the scale. I mean, 350 million odd people, it is a massive market to get into. It's going to be a slow burn for us, I think, because we are capitally constrained. I don't have millions of dollars to spend on an awareness campaign and in a market of that size you would need tens of millions to make it work. I mean, we are exploring getting investment to support that. But I'm also particular about kind of diluting my equity and having other people on board telling me what to do. I'm not very good at that that's
Nathan Bush: why we become consultants, right?
Stu French: Exactly. I like telling other people what to do. Precisely. So, yeah, we're going through that at the moment. I mean, if I found a partner that had really strong expertise in that market. Awesome. We would sign them up. And yeah, we're starting conversations now. I mean, I do think there is a lot to be said for people that have native experience in a market. There is a lot of value in it. I know about the US in principle, in kind of practice. I know very little beyond what I've sort of learned with my own business really over the last year. And that is not enough. So I think if people are listening and they're looking to do a US expansion, don't think it's going to be kind of this big ticket thing overnight. It is absolutely not. Yes, we all read about some kind of random stories where that does happen, but it's pretty rare. It is a very hard slog even getting product in there when you don't have a physical presence. I mean, I kind of won't labor the point of all the challenges. But another quick example, customs in the US is truly painful. So if you don't have a physical office there and you're not a corporate entity in the US it's close to impossible to get your stock in. It took us six months to get our product into the country because we were using a 3 PL. We have a manufacturing facility in Shanghai. So I mean there's all the kind of paranoia about stuff coming from Asia. And this was in the midst of all the political turmoil as well. So it was just a country that was in a bit of a state. And as I say, it took us six months and a lot of money to get the product in and really delayed our launch. And these are the things you just don't know until you start. But at the same time, I mean if you sit back and wait, then you're never going to do it. So I mean we just like to kind of move and get it done and we deal with shit on the fly as and when it happens.
Nathan Bush: Absolutely. And I love that approach. So tell us about how did you select your 3 PL in the US how did you uncover that?
Stu French: Yeah, with a few challenges, I think, because they're. They're all very different in the way they're set up. So I mean, I could talk at length about this, but in a nutshell, some three PLs will pay a lot for warehousing space, but then they will have very low kind of pick pack and dispatch costs. So for example, if you have really large products that take up a lot of floor space, you probably wouldn't pick one of those three PLs because you have a massive monthly warehousing bill even if the dispatch of your products were cheap. So that's kind of one example. Another example is they have really low warehousing costs, but then the pick pack is really high. And that links back to the example I was going back to before around like the per pick price. So if you have a lot of orders that come through that are a conglomeration of like four or five products, which is common for us with the book bundles that can also spiral. We had to do a fair bit of kind of modeling to figure out which one was the most viable for us. Actually. I don't know that we've nailed that. I think it's definitely something we need to refine a little bit further. But what I would definitely caution people against is just finding a good 3 PL that is convincing and you have good rapport with. And that's everyone in the US that they nail the customer service far better than Australia. They all sound like they're going to be amazing to work with. And look, they probably are, but that doesn't mean they are the right fit for your business. You've got to actually find one that aligns to your business model. I mean, if you have a small product that you're shipping in single volumes, then there'll be a partner for you. If you have a really large product that is heavy, encompassing the ship, it might be road freight only or whatever. These are all the things you need to factor in as you're starting a conversation with them. And look, we probably only did 50% of that. So it sort of got down to the point where we had 2,3 pls that we were kind of weighing off against each other and we decided just to pick the one that gave us the fastest timeframes they could get our product in as very quickly. The setup effort was relatively low and what we wanted was speed to market. We're both Tegan and I really time poor and kind of going back and forth trying to get stuff done is not something we want. So we ended up picking one that we're like, right, they'll be fast. That ended up becoming irrelevant because our stock was stuck in customs for six months. But you just don't know this at the time. Right? And that's life.
Nathan Bush: Yeah, absolutely. And was Dallas deliberate choice in terms of geographic location or did that just come with your partner?
Stu French: Yeah, really, really good question. Yeah, so, and that kind of is a good link back to the comment around or a question around, like choosing a 3 PL in the U.S. there are very, very big, or one in particular, very big three PL that basically has a presence in every single state. They are massive. So they can basically do like delivery inside an hour to most metro addresses, like nationwide in the U.S. incredible. And actually quite cost effective in some respects, depending on your business. Or there's some like the one we have chosen, which are centrally located so they can kind of shift to east or west states and even Canada relatively easily. And they're perhaps more cost effective because they don't have that presence. And that's the way we have gone. Certainly if we gain further traction in that market and we see an interest in faster dispatch times, then we would pursue it. And look, that's definitely a thing to think about with the US too, because the E Commerce maturity is so much higher and Amazon is so strong, people often don't want to wait like two days for a parcel. To give another example, one of our most common customer support inquiries is from people who selected a shipping option for standard airmail. And this is spelled out on the site where it'll take you two to five days and you'll get an email a day later like, oh, where's my parcel? My parcel's lost. Like, holy shit. Your parcel hasn't even left the warehouse yet. Calm down. Check your tracking number. Whoa. This is what you're dealing with because the understanding is just so different. I mean, in Australia, if something takes two or three weeks with Australia post, you won't even hear from the customer. They're used to it. Whereas in the US if it's like a day and it hasn't arrived, they're like kicking the door down. So there's so much to think about with that market, even in terms of resourcing customers support and the volume of inquiries you get, which is just exponential. There's so much to think about. I mean, I openly sit here now and I say we were like fundamentally not ready to launch in the U.S. i'm glad we did because we're just kind of making it work. But I mean, we should have waited a year or two, literally, and tapped out this market first. But yeah, why wait? Just get in and do it.
Nathan Bush: But do you think that some of the lessons and some of the pressure that you've been under in the US from a logistics and a customer expectation point of view, will actually make you a better retailer in Australia?
Stu French: Yeah, definitely. That's actually something we've talked about over the last few weeks. I mean, we've had to lift our standard of service, like a lot because it's had to respond to the U.S. and you're right, I mean, translating that level of service back to an Australian market where there is less maturity, that's going to be really well received here. So, I mean, there's, there's definite, there's definite value. You're spot on.
Nathan Bush: Cool. You were one of the original or the early Amazon launchpad recipients here in Australia. I think it was. Was it two years ago. You got the launch pad.
Stu French: So we got the. I think we were the second launch pad round. So, yeah, they, they're obviously trying to ramp up their presence in Australia. So that came through around mid last year. So, yeah, we kind of. Eight, eight months ago now. Seven. Eight months ago ago.
Nathan Bush: They didn't try and buy the business off you straight away?
Stu French: I probably would have been interested, depending on the offer. But no, I mean, and that was funny. Like, I mean, it was sort of interesting because on paper, obviously, I mean, we could be perceived as a competitor, but I mean, now we've sort of partnered with them. We are selling through Amazon channels and as I mentioned earlier, we'll continue to do so. I mean, that program is really good. Like, they structured it really well. It gives you some experience to some really smart and experienced people. And that was sort of more interest to us. I mean, obviously there's a grant component there and that grant is decent, but it vaporizes relative to the cost of setting up a business like this. So that wasn't really part of it. We wanted just more exposure to other people that were doing similar stuff. And we've obviously had that through the other grant winners and also some of the subject matter experts that Amazon bring in, they run a whole kind of training course, the winners of the program. And that was really insightful for us. And of course, I mean, you can't lose having a relationship with like the biggest book retailer in the world. And that's been invaluable for us. It's something. I mean, not that we can win the grant twice, but I would totally win it again if I could.
Nathan Bush: Yeah, brilliant. I think it's a great thing. It's. I found a couple of new businesses through that grant and there's some great stories out there, so it's a good thing to look into. If anyone's starting out. Has there been anything? And obviously someone with your experience, you've seen a lot has there been anything around online retailing of books that's really surprised you as apart from the logistics and the distribution, that's really surprised you about selling books online?
Stu French: Yeah, there are several things in fact, I could probably write a thesis on them definitely. The first one is the point I mentioned before around how weak the penetration is, like in the kind of 30 to 40 year old demographic where I sit. I mean the young parents, they're just not doing it. I mean and if you looked on face value you would just assume that would be a huge market, but it is just not. So to put that in meaningful numbers, 96, 97% of our customer base is grandparents. It is that big. The tiny balance left over is made up of kind of parents or, or uncles or aunts that are younger. So that has been a real surprise for us. It's not really a problem, but it's just changed the way we talk about the product because we need to appeal to a different audience. So I think that's item one. The second one, and this is a little bit random, is finding packaging to sell picture books is really bloody hard. So you actually can't get anything. You have your traditional plastic mailing satchels that you can't use because I mean if you drop them, the book gets bent or like the postman folds the book. And we had that early on whilst testing packaging. Customers don't like it when their book is bent inside out. That's probably pretty obvious but we learned that as well. So yeah, we ended up actually we've had our production partner in Shanghai. They've actually made custom packaging for us. We did a design and we've set that up. I mean that was very expensive and I didn't really have the money but it's sort of something we just had to do. My experience with other stores has been selling things that are pretty much close to impossible to damage in transit. So this is like surprisingly a fragile product actually. I mean if you drop it in the corner it gets buckled and it's like someone's first grandchild, they'll close to kill you if the product isn't like pretty imperfect. So yeah, I have, I have certainly been, I've certainly been surprised by that. Packaging is a massively important part of the experience. They want to open it easily. It needs to look cool. The product needs to be safe and needs to be weatherproof for inevitably when a postman leaves it on the doormat even though it's raining and all of these things happen and yeah, many of them Most of them. Right. We were not prepared for. I mean, I tout myself as having been in this space for like nigh on two decades and I probably only knew about 5% of what I needed to, which is good. There's always stuff to learn. Right now, they're great lessons.
Nathan Bush: Thank you so much for sharing them. We've got to finish up, but has there been any particular customer story that has resonated to you around the impact that your books have made?
Stu French: Yeah, several, actually. And that's probably been one of the sort of most rewarding parts of the business. I mean, we've connected with some really cool people. I mean, one that really resonates with me, there was a customer, customer who's in a nursing home here in Regional Victoria, and she is a great grandmother and has like 20 something great. 20 something great grandchildren and grandchildren collectively like massive cohorts. Like a bit of an E commerce aficionado was actually like giving us feedback on the website and the experience and the product. It was awesome. I mean, it's. Yeah, these people are hard to find. And we ended up like, there's a blog about her on the website, actually, which if people go through the blog and have a look, they'll be able to find that. Connecting with these people is wonderful and also hilarious. It's amazing when you find someone that's really passionate about your product, how much they'll sort of give and engage with you as a brand. And that's the sort of stuff that's kind of worth its weight in gold, both emotionally as the business owner, but also opportunistically in terms of how you can kind of market that and talk about it. So that was a really cool experience and we certainly anticipate more of those in the future.
Nathan Bush: Brilliant. Stu, thank you so much for sharing your story. As a fellow consultant, it's very inspiring to go out there and actually create something rather than tell people how to
Stu French: do things
Nathan Bush: and love what you're doing around shaking up the children's books industry as well. So congratulations. I'm sure there's huge things ahead. How can people get in touch with you or learn more about ethical.
Stu French: So you can go straight onto the website, which, I mean, if you Google ethical, E, T, H, I C, double O l, you'll find us. Or it's just ethical.com that will take you to the US store. I mean, or feel free to hunt me down on LinkedIn and connect. Always happy to chat to people and, yeah. Hear your ideas or thoughts. I mean, to that end Also welcome feedback on the website. Particularly bad if something looks bad or you don't like it, hey, we want to hear about it all the time, so by all means shoot all your thoughts through. Love that stuff.
Nathan Bush: That's a very dangerous proposition to our listeners. I'm sure there's plenty of plenty of
Stu French: good thoughts out there, but no, that's
Nathan Bush: awesome. Thank you Stu. We'll look forward to seeing this expand even further.
Stu French: Awesome. Keep in touch. Thank you.
Nathan Bush: As a corporate escapee and a consultant these days, I love how Stu was able to use his skills to create a business that seems a million miles away from where he's traditionally been operating, but you can see how the thinking actually connects to his real world. One piece that really caught me was that they modeled up multiple P Ls in the early days to focus on variable scenarios and different operating models, while the end result 12 months later doesn't actually represent the original model chosen. I'm sure that doing this work up front allowed Stu and the team to change direction quickly because they'd already modeled the assumptions and the flow on impacts. It's a great exercise to do from the outset. All right, I'm off to pen 500 words to see what kind of kids book I can come up with. No doubt it's going to be another fart book that's not really needed by anyone to finish up. I have three resources for you. Firstly, if you're a first time listener of Add to CART and you want to stay up to date with new episodes, head over to add to cart.com and you can sign up for our weekly newsletter. We'll let you know every time a new episode drops as well as giving you my three takeaways from each episode and a link to the transcripts so you can know that this is an episode that you want to dive straight into. Secondly, if you want a weekly review roundup of the best e commerce case studies tools and research, sign up to the High Five Friday newsletter which is delivered to inboxes at 8am every Friday morning. I read all the e commerce news and send you the bits that I think you can take action from. Sign up at 12high12h I g h.com au forward/high5 and the last thing if you are looking looking to explore your next e commerce opportunity, head over to esweettalent.com we are a dedicated e commerce talent agency connecting the best e commerce talent with the fastest growing brands. Check it out. Sign up to the email and get in touch with me if you want to discuss your next move. Until next time. Thanks for listening and keep those customers adding to car.
