The Build Cycle Podcast #055 – How to build a direct-to-consumer brand w/ Fezzari’s Chris Washburn

More and more entrepreneurs, myself included, are launching with a direct to consumer business model, and for good reason. It’s never been easier. But just because you can start easily, doesn’t mean running and scaling that business will be easy. Today, I’m talking with Fezzari Bikes founder Chris Washburn about how they’re selling high ticket items, sight unseen by building trust with customers, how they deal with inventory forecasting, production, and all the other things you might not be thinking about when you’re just focused on launching your company. Chris shares how they set their pricing, which is a tricky subject when you’re competing against established brands with a strong retail presence, and many more of the challenges and lessons he’s learned in 12 years of building a business. If you’re running a direct to consumer company, this episode is for you!

DISCUSSION TIMELINE

01:40 – Why start a direct to consumer bicycle brand?
07:10 – It’s not just about competing on price
10:50 – How did he set his prices?
16:46 – Why you should limit which markets you enter
18:40 – Convincing customers that quality is there even though prices are lower
21:00 – How they interface with their customers remotely
23:40 – What makes people buy a high ticket item sight unseen?
27:50 – What are some of the lessons they’ve learned?
32:14 – Dealing with competition
36:44 – What keeps Chris up at night?
40:00 – Forecasting supplies, production and inventory
50:15 – Parting advice for entrepreneurs

fezzari bikes founder chris washburn tells how he built a multi-million dollar direct to consumer business

POST-GAME ANALYSIS

Chris started with an idea to offer high quality bikes that would be sold to fit each customer, and he wanted to do it through traditional brick-and-mortar bike shops. What he found was that the dealers didn’t want to stock all the different length and width handlebars, stems and seatposts needed to really fit a new bike to the rider. Nor did they want to spend the time required to really get a good fit. So, he had to figure out a way to do that.

The other concern was how he was going to differentiate his bikes from the competition once they were all sitting on the showroom floor.

One way to distinguish their brand was to be able to offer custom fits, and going direct to the end customer allowed them to do that. That also allowed them to offer custom component specs, too, letting a rider create the perfect bike to them. And, because they didn’t have to build in traditional distributor and retail margins, they could offer it for a lower price. These three “features” differentiated them and helped get people to try them.

How to set pricing for a consumer direct product

Chris says companies typically decide their pricing from the bottom up, meaning starting with your base cost then adding margin, which is the wrong way to do it. He suggests going top down by figuring out what people want and what they’re willing to pay for it, then figure out how or what you can offer to match that expectation.

He also says there’s no magic number when it comes to how much of a discount you need to offer. It comes down to competitive research, what the ancillary costs are to support that product, and what the market will bear. Plus, what you need to make to support your business.

One interesting thing Chris added was how they avoid some categories because it would be just different enough from their current catalog that they would require too many support resources

Pricing versus Quality perception

One of the big challenges with offering something at a lower price is convincing customers that it’s of the same high quality as more expensive competing products. It all starts with making a good product, but word will spread very quickly if your product sucks, but from there Chris does a couple of things to convince potential customers that Fezzari’s bikes are on par with other major brands found at retail. They offer lifetime warranties and trial periods with free returns, so customers can feel safe that if they don’t like it or if it doesn’t hold up, they have recourse.

That said, they still can’t price their product too low. Have you ever seen a deal that’s too good to be true and decided to pay more for something else because you thought “surely there must be something wrong with it if they can sell it so cheap.”? Yeah, me too. So be cautious about going too low just to try to get a sale.

fezzari bikes founder chris washburn tells how he built a multi-million dollar direct to consumer brand
Chris, on right, checking over a 3D printed prototype. They use these before creating expensive molds to make sure all the components and parts fit correctly.

Connecting with consumers

Fezzari rarely gets to meet their customers and prospects face to face since their business is built around online sales, but they do find ways to interact with them. First, they actually publish their phone number and will talk to someone before purchase.

They also run demo fleets to let people try the bikes, which is great, but hard to scale. In this case, I recommend looking for events that draw the right crowd (for bikes, it’s things like Outerbike).

Chris also mentions one interesting thing about their product range. They have an entry level bike that makes almost no margin, and some customers take up a lot of time with pre-purchase questions. But those products help get people into the fold, and those people help bring new customers to the brand. So, while they may seem like “expensive” things to do and have, they’re actually a key part of Fezzari’s growth and success. Chris says a lot of their customers buy two, three or even four bikes, for themselves and their family members.

Before and after the sale, Chris trains his employees to treat their customers like they would want to be treated. Every employee gets a “Trail Guide” that runs t

Selling something sight unseen

Beyond the warranty and guarantee, Chris says the tech story behind their products on their website helps convince riders their product is legit because it answers many of the obvious questions in advance. Getting 3rd party product reviews and using them on their website is one of the biggest drivers of getting people all the way through their funnel, too.

Chris still rips around with his team to help test the bikes. Here, we were out riding their 2018 La Sal Peak long travel 29er in Park City, UT.

It comes down to making a great product

While there are always lessons to learn and things to improve, Chris says doubling down on quality and making great products that people want is the secret to their success.

In the bicycle industry, more brands are starting to sell direct, but with a mixed model of buying online and shipping to a local shop for the customer to pick up. But some brands are also shipping direct to customers when no dealer is nearby. But few if any offer the level of customization that Fezzari does, which illustrates a competitive advantage for them.

Challenges with inventory forecasting

One of the challenges facing any company selling a physical good is inventory management. Fezzari has to forecast which models, sizes and colors they sell. And to make those frames, they have to forecast how much carbon fiber they need, how many molds they’ll need to meet demand, how much production time to schedule, how many bolts and small parts, and more. Then they need to forecast which components, drivetrains, wheels, tires, and other small parts that they think people will want.

How do they manage this? It’s hard. And there’s no super secret, but Chris says one of the key things that helps them get through it is building and maintaining good relationships with their suppliers so they’re always in the loop on delays or other issues. And giving them heads up on anticipated demand. Keep the conversation going so the number of surprises are reduced as much as possible.

Chris says they err on the side of being conservative when ordering product, which often leads to being out of stock for short periods, but doesn’t leave them with excess inventory that’s aged out of relevance. They don’t do pre-orders, but that’s one way you can gauge demand on a new product. Crowdfunding has become one of the most popular ways to do this.

Another part of forecasting comes in developing the right product. Are you making something people will want? Are you ahead of the trend and pushing outside a proven category? Or are you following a trend to ensure it has traction?

Ideas for the future

Chris says 3D printing could be one solution to forecasting and inventory. They already build their bikes on demand (meaning, they put the requested parts on the frame, then box and ship it), but getting to the point where they could manufacturer complete frames on demand would not only allow for an unprecedented level of customization, but also reduce inventory gambles dramatically. So there’s a business idea for ya!

Parting advice on launching a direct-to-consumer business

Chris says you need to figure out why you’re starting a business. As in, what’s driving you to do this? What will the business mean to you, and what problem will it solve? How will you do it? These questions aren’t exclusive to DTC companies, they’re the key to building any business that you’ll want to pursue day after day, week after week, year after year. And that’s key, because you’ve got to work hard (and smart) at it to make it a success.

Links & Resources

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