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Team,
I think it would be useful for me to share our recent performance and outlook for 2021.
We had a good 2020 in general and a good Q4 in particular.
I am attaching a screenshot of our sales breakdown in US$ for the gift-giving season 2020 following black Friday.
1. Sales
Amazon US
Amazon US year-on-year growth was only ~15%. That may seem ok but is somewhat disappointing when considering the massive growth Amazon experienced during the pandemic. I ascribe the lackluster Amazon performance to a lack of senior Amazon expertise and changes to the way Amazon indexes our Amazon-related accessories (I.e. Ring and Blink products). The team around German and Derek is doing a good job with Amazon, but we lack a more senior co-worker with best-in-class Amazon expertise. I have started interviewing candidates, but this process will likely not conclude before the end of Q1 2021. With the help of a new Amazon manager and all of the exciting Wasserstein and Lectron product launches in 2021 - I would be disappointed if we don't at least double or triple sales on Amazon US within the next 12 months.
Target+
Target has been the positive surprise of the year. We only started selling on Target in early 2020 and the channel became our 2nd largest channel within only a few months. We will continue to invest heavily in our Target-exclusive brand 'Dartwood'. A word of caution: While Dartwood is working well right now, it is an anomaly in the 2020 e-commerce landscape and my prediction is that a LOT of the product opportunities that we currently spot on Target will disappear. Once selection on targte.com has caught up with Amazon and Walmart, we will likely see price erosion, followed by a push from Target to further monetize the platform by giving preferential placement to ads. Until then, we need to take advantage of this anomaly and launch as many high-quality Dartwood products as we can.
Wasserstein & Lectron website
The Wasserstein and Lectron websites - which together sold around 350k/month during the peak month, are another positive surprise this year.
Sales increases on Wasserstein are driven by the partial success of our accessory + device bundling strategy. This was only possible due to the warehouse transition to OAS and the implementation of Channeladvisor. I use the word 'partial success' because we have not even started to scratch the surface of what is possible with this model. Thanks to our bundling strategy with our own-manufactured accessories we can beat every other major retailer (Amazon, BestBuy, Home Depot, Target) on price while being profitable. I cannot think of any small company that can do that in a large and competitive hardware market such as a smart home!
https://www.tink.de - is doing a bundling approach in Europe but without manufacturing its own products. Despite having an inferior business model and being deeply unprofitable they have attracted US$17.5m, in previous funding rounds (link). That gives you an idea that US$300k in monthly sales does not start to capture the true size of the opportunity. The Wasserstein website sales in its own right can and should exceed 15m in annual sales in the next two-three years.
We will achieve that by:
- Launching our Made for Google product line bundled with the next-gen of Nest camera (Google confirmed the launch publicly a few days ago - link)
- Continuing to develop more thoughtful smart home accessories by Wasserstein (some of the most promising projects are: Arlo Wire-Free Doorbell Accessories, Extension battery packs for Ring, Blink, and possibly others, updated Floodlights with remote, power bank accessories for wireless headphones, AquaPal, and others)
- Sourcing other major smart home brands for bundling initiative: mainly Blink, Arlo and Wzye
- Continuing to invest heavily in Google Ads while delighting our customers (during the time period in question we spent ~US$63k on Google Ads for Wasserstein). This roughly equates to a 20% Advertising Cost of Sales. This only makes sense if we ensure that we delight our customers!!! Only if we make our customers happy with their first purchase, do they come back and buy from us again. And when they shop with us for the second, third, or fourth time, we won't have to spend advertising dollars to get them onto the site.
Every customer who has to wait weeks for their first order - will never come back ( @German Chan @Snow Wong, @Graciela Chang @Sanjog Timsina ) - that's why we need to stay in stock!
Every customer who receives a defective product will never buy from us again ( @Terence Chan , @German Chan , @Jacky Cheung @Timothy Wong ).
Every customer receives unhelpful and unattentive customer service, will not return ( @Veronica Concepcion , @JESSIELYN BALONZO , @Reman Medina ).
Every product purchased by accident due to the listing not being clear ( @Clavin Chau , @Derek Share ) - will cause the customer to be a one-off, unhappy and unprofitable customer.
Our current returning customer rate is 7.73% (on Wasserstein) . This is a key metric I will continue to monitor. If this number increases, we are making customers happy. If the number falls, we're failing our customers.
Sales increases on Lectron will be driven by similar factors as the Wasserstein website.
BestBuy
BestBuy sales more than doubled versus last year, but BestBuy fell from being our 2nd biggest to our 4th biggest retail channel. BestBuy.com continues to be a challenging platform for us. @Derek Share and @German Chan have done a great job listing more products and experimenting with ads and @German Chan, @Snow Wong, and @Graciela Chang have done a good job making sure that OAS/BestBuy stay in stock, but structural problems (listing restrictions, bad product search, ineffective online ads) have hampered our growth. However, we have confirmation that at least 2 of our Made for Google products will be in-store in July 2021 and we are working hard to also get Lectron, Google Chromecast accessories and other products into BestBuy as well. Especially with our Made for Google launch in July, I am confident that BestBuy will be a 5m+ USD/year business by the end of 2021.
Home Depot
Home Depot is another pleasant surprise of the Year. Sales on the platform grew from zero to annualized ~700k USD per year with just shy over 100k USD in the busy season alone. This is largely thanks to the better in-stock rate of our inventory in OAS - thanks to @German Chan, @Snow Wong, and @Graciela Chang. A large thanks also go to @Jarred Chan Co who has taken ownership of ensuring listing synchronization on Home Depot, eBay and Lowe's. Another reason for the big increase in sales has been the successful implementation of Bazaarvoice by @Clavin Chau and @Derek Share.
We will continue to expand our selection of Wasserstein, Lectron, and Dartwood products on Homedepot.com while we are also working directly with the merchants to get our floodlights and Made for Google products into stores.
eBay and Lowe's
eBay and Lowe's sales also grew to a substantial figure thanks to our in-stock rate in OAS and improved listing processes.
2. Major initiatives for 2021
Made for Google (Mfg)
After multiple delays, the new launch date for our Made for Google line has been moved to July 2021. Mfg will be the initiative that transforms our company from a niche seller on Amazon to an internationally recognized electronics brand. We will be making major accessories for new Google Nest products that will be used by millions of people worldwide! The groundwork for this was laid with our first meeting with Google more than 2 years ago. @German Chan and @Terence Chan have been working with the Google product teams for around one year and @Jacky Cheung and @Timothy Wong have joined the Mfg work streams recently.
The Made for Google launch will be:
a) a major source of revenue,
b) our entry ticket to the stores of major retailers worldwide (Best Buy already said yes) and
c) the greatest marketing campaign we could design: Google will launch two new devices which together will sell around 8-10 million units over 4 years. We will be making 6 accessories with attach rates between 5%-20% - that means millions of people will see our work and start associating our brand with premium smart home accessories. This is not guaranteed yet and there is still a long way to go before the launch. I would urge everybody involved in any Made for Google-related workstream to work your butt off!!! It will be worthwhile.
In-store worldwide
The Made for Google launch in July will also open the door for in-store programs in the US, Canada, Germany, UK Australia, and other countries where the new Google devices will launch. Once we start offering 1 or 2 MfG SKUs more products will follow. This will help turn Wasserstein from an online-only brand in the US into a truly international, omnichannel brand.
Building Wasserstein Home into a recognized smart home shopping destination
We will continue introducing more thoughtful products for Ring, Blink Arlo, and Wyze. New product introductions bundled with more smart home devices AND extreme customer focus will ensure that customers will start thinking of our website as the shopping destination for all their smart home needs. In terms of look-and-feel, the website needs to improve a LOT and get a lot closer to the likes of https://www.tink.de / https://www.tink.us/ or https://www.adorama.com this is especially important for @Clavin Chau @Derek Share @Cedrix Guevarra and @Kirstie Faith Pantas.
Lectron will become the supplier to emerging electric vehicle brands
After becoming the OEM supplier for Karma Automotive last year, we will continue to work with EV startups such as Lordstown Motors and Bollinger Motors to ensure that our products come with each of their vehicles rolling off the production line.
Hiring experienced managers in key roles while also continuing to attract fresh graduates
We need to maintain a healthy balance of hiring young adaptable new-joiners while also making sure that we get senior co-workers that add outside expertise to the company. In the next few months, I will aim to hire more senior Amazon managers and a more senior Logistics & Shipping Manager and possibly also extend our website team. Additionally, we will aim to hire 2-4 more fresh graduates in the course of the next 6-9 months.
Building a robust financial reporting system
We recently welcomed @Michael Wang to help build a reliable financial reporting system. This will help us in deciding which channels, product lines, and initiatives to allocate more resources to. It will also be instrumental in preparing the business for a major corporate transaction (private or public) a few years down the line. On this note:
In mid-December 2020 Vesync went public in Hong Kong (link). Vesync sells small home appliances on Amazon (link 1, link 2). In 2019 they generated ~170m USD in revenue only via seller central and vendor central. Despite the fact that their business is 100% reliant on Amazon and has no other retail channels. The company is now worth almost US$200m (link). Opposed to Vsync, we have a more robust product strategy, a more diversified retail channel, and generally a more defensible market position. Yes - they are 6x bigger than us (measured by revenue), but I am confident that in 3-5 years, we can hit similar sales numbers. When we have a liquidity event such as a trade sale or an IPO - top-performing team members will be rewarded handsomely.
3. Conclusion
I hope this letter gives everybody in the company an understanding that we are working on something meaningful. I can understand that while everybody is focused on their daily work, we sometimes lose sight of how everything fits together and I hope this letter helps contextualize that.
I would like to part with 3 suggestions for the next year:
1. Work your butt off! Now that you understand what's at stake, I expect everybody to commit and work your butt off.
2. Take initiative: If you see mistakes, bad executions, unoptimized listings, campaigns, or sloppy work of any kind. Flag them to the team and we will fix them.
3. Most of you know the saying: 'dress for the job you want, not for the job you have'. I don't care how we dress, but I do care how we work. So let's rephrase this to Don't work like the job you have, work like the job we will have in 3-5 years. That means concretely: If you are a product development manager - work like the head of product development of a US$200m business. If you are an e-Commerce Manager - work like the head of e-Commerce of a US$ 200m company. If you are a finance manager- act and work like a CFO of a 200m dollar company. If you are a Logistics Manager - act and work like a head of Logistics who ships products to 10 million people every year. If you are a Customer Service Manager - act and work like the helpful face of an international brand whose products are being delivered to millions of households every year. If you are creating packaging, manuals, listings, or pictures - be aware that your work is the 'actual business card' of our company. Your material will be read and reviewed by millions of people. Try to emulate the thoughtfulness, customer obsession, and attention to detail of your favorite brands (Apple, Google, Amazon, and Samsung) and have high standards for your own work.
I am very much looking forward to 2021 and beyond. Call me or come talk to me if you have questions.
Thank you and Best regards,