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Learning from an Early Flop
The BagPack, sold at HandsFreeGroceries.com, has been on sale for just about a year this month. It’s time to take stock, figuratively speaking, but also literally. I just withdrew BagPack inventory from Amazon’s distribution center. It’s not that I want to stop selling it, it’s just that I need to avoid Amazon’s long-term inventory charge. I’m getting charged because my inventory isn’t moving. So here at the one-year mark is the story of the BagPack and my analysis of it, seen through my increasingly seasoned lens.
The BagPack started as a serious endeavor. It’s a useful product with a potentially big impact. Ask yourself, how much carbon dioxide would we stop producing if we could carry our food from store to kitchen without a car, up stairs, with both hands free? It’s also a fun product. You’ve never carried 50 lbs of food with so little effort, enjoying the sunshine, holding an umbrella, talking on your phone. It’s really very good. As a matter of fact, I use mine every time I shop.
Enough of the sales pitch. From May through August 2013 it took about a quarter of my time, or 200 hours. I got it “patent pending”, with inventor Oliver Chadwick listed rightly as the primary inventor, built a website on SquareSpace, manufactured some inventory, learned how to ship from Amazon’s warehouses, and started digital marketing.
The manufacturing and shipping was the least problematic piece because it was the one with which I was most familiar. I was fortunate to get help from Jerry DeChristoforo. Jerry may be an accidental entrepreneur, but the truth is his hands have played a key role in three different startups over the last three years: Terrafugia, the BagPack, and now Global Flight Systems. Jerry produced far more, far better than I could have.
Alas, my marketing skills and split attention let us down. My work at ArtistBomb was at that time ramping up sharply. There I learned from Brian Bahia the power of WordPress for search engine optimization. While working on ArtistBomb we traded services, and my end of the bargain was HandsFreeGroceries.com remade in WordPress. It looks identical to the old SquareSpace, but it works far differently behind the scenes. When I switched to WordPress, many of the mechanisms Google uses to index and rank a site became more obvious and accessible. But it was too late. All my content marketing and search engine efforts were by then being directed into ArtistBomb.
In retrospect, the BagPack business model – sell online as a stand-alone product – is critically flawed. Manufacturing BagPacks at low volume in the US drives up the cost of goods sold (COGS, as they say) to the point where profit is too little to sustain the needed marketing. Our best source of referral traffic remains a blog we posted on, but it took posting on a dozen blogs and getting a couple of bloggers to review the BagPack before we happened across that one source of traffic.
In retrospect, I suspect this would have worked better:
- Use the prototype to create a compelling Kickstarter video;
- If the Kickstarter were successful, use the funds to open a BagPack supplier at much lower COGS; and
- Distribute through existing channels.
Existing channels means Whole Foods and other urban grocers. Internet marketing had sex appeal for me (it still does), but it’s too expensive for this product. Think about this: lots of tech startups have a hard time making ends meet when their gross margin is 97% (the only thing it costs to sell another website subscription is the 3% credit card fee). So selling a BagPack with a gross margin of 3% is completely hopeless.
I tell you, though, it sure is fun when I get that email from Amazon saying they’ve shipped another BagPack.
If all this hindsight really is 20-20, then my marketing effort from this point on should go into a minimally acceptable website, a compelling Kickstarter video, and really nice consumer packaging. That traction and packaging could then be offered together to retailers.
Well, I don’t have the bandwidth to get this Kickstarted right now, but I may come back to it. I would also be ready to hand over the keys. So if you’re interested in picking up a hand-me-down startup, contact me, we can figure it out.