Following up on the post about my new Rickshaw bag, I got to chat with Mark Dwight, the founder of Rickshaw Bags, by email. I had some questions about the LivingSocial deal and Mark very kindly indulged me. This is a longer entry, but for anyone interested in the daily deals space, domestic manufacturing or Rickshaw, I think it’s a necessary read (edited for brevity, bolds and italics mine).
Maiden Lane: What made you decide to do the deal with Living Social? And now that it’s done, what’s the verdict? Did you get the payoff you were expecting?
Mark Dwight: We first starting researching the “daily deal” phenomenon in early 2010 – which seems so long ago. We reached out to both Groupon and LivingSocial to see if there was any interest in doing a deal with our bags. Honestly, we got brushed-off by Groupon in our initial conversation. Our reception at LivingSocial was completely different. The representative was friendly and enthusiastic, and told us they were excited to experiment with product deals. She also explained how their terms were favorable [compared] to some of the other daily deal players, with a 35/65 revenue share versus a 50/50 revenue share, no extra charge for credit card transaction fees, and prompt payment within 10 days versus 30 to 45 days. All in all, the LivingSocial proposition was very compelling.
In the week before the launch, we placed internal bets on how many deals we thought we would sell, and the wagers ranged from 300 to 800. The consensus number was 500. The deal went live on Monday at 6am West Coast time. We hit 1000 at 4:30pm, and 1200 around the 6:30pm dinner hour. I remember thinking, “Who are these people.” Our final tally was 1723 coupons. Wow!
In summary, the deal was absolutely fabulous for us – and was also a success for LivingSocial. We garnered a level of local awareness that we could not have achieved in any other traditional way. And, importantly, the deal was ultimately profitable for us, as many people upgraded their purchases with premium fabrics and accessories at our regular retail prices. Many customers were first-timers who said they had never even heard of us before they received the deal.
On the heels of that success, we were approached by other deal sites, but resisted their overtures. We waited a full year before running our second LivingSocial deal on Thursday, September 15, 2011. In the early afternoon, we received a call from LivingSocial offering to extend the deal in the sidebar for an additional day. We agreed, figuring we might capture a few hundred more orders the second day. We closed the deal at 5am Saturday morning with a total of 2912 coupons. Another smashing success!
Despite our success with both of these deals, we still tread lightly in the online deal arena. We are not inclined to do a “web wide” deal. We specifically use the LivingSocial localized deal to bring locals to our factory store – no online redemption. This gives us the opportunity to interface with every customer personally, tell our story, show them our shop, and up-sell accessories. We’re looking forward to running a third LivingSocial promotion around the same time next year. I think once per year is a good frequency for giving our brand an annual boost without cheapening our value proposition.
ML: I’m a big fan of domestic manufacturing, but for the benefit of my readers - why does Rickshaw choose to make bags in San Francisco? What are the advantages over manufacturing in a low-cost country overseas?
Mark: The main reason we manufacture our own products in our own factory, right here in San Francisco, is because I love making the things I sell – and I love doing it in SF – where I live and ride my bicycle to work. The vibe, history, culture and natural beauty of San Francisco is an important ingredient to our brand story. We celebrate our local roots and “pride of place” as a founding member of SFMade, an organization I personally founded to support, promote and grow our local manufacturing sector.
Manufacturing locally, and manufacturing our own products ourselves, makes us the experts in every aspect of our business. I prefer to operate on a “human scale”, and to “own the process” by which we design, manufacture and deliver our products. In an age when most products are outsourced to nameless, faceless overseas factories, we love making our own stuff – and inviting people to come see how we do what we do.
I do not have a fundamental objection to outsourcing or offshoring. I accept the nature of our modern global economy. In fact, most technology products require broad and diverse supply chains to make all of the pieces come together. That said, I’m a firm believer in the notion that “as manufacturing goes, so goes innovation” – so I support initiatives and policies to promote domestic manufacturing as a matter of national competitiveness and economic security. Meanwhile, I have intentionally chosen a business well suited to local manufacturing – because that’s what I like to do. It’s a personal choice – a celebration, not a protest.
ML: Do you consider yourselves ‘lean’? I checked out your site and didn’t see this term, so I’m just wondering if you think of Rickshaw as a lean manufacturer and, if so, what that means to you.
Mark: Lean manufacturing is an operational methodology. It is best applied to medium to high-volume “continuous flow” manufacturing environments – though lean manufacturing concepts can be applied at any scale. In the simplest terms, lean manufacturing is about eliminating waste – and that’s just smart business at any scale. Rickshaw is still a very small business, and we operate primarily in “batch mode” rather than continuous flow. We are in the process of developing continuous flow processes for our main product lines, and we will be employing more lean manufacturing techniques in the future.
[Ed Note: for more on lean manufacturing, check out Fashion Incubator, a blog and website that specializes in sewn product manufacturing.]
ML: What advice would you give to entrepreneurs who’d like to follow in your footsteps making things locally?
Mark: Learn more about how things are made, and don’t be afraid to explore the possibility of making your own products. And visit the SFMade web site.
I’m delighted this went so well for Rickshaw. As for local manufacturing, that’s a whole ‘nother can of worms and one I’ll leave for another day.