There is a reason Sean McGinnis has moved up to President in a very short time at KURU Footwear. With a quick-wit and quicker brain, Sean tells us of KURU's handling of the Pandemic response, supply chain issues, inflation, and even iOS14.5. You'll hear about prepping your own brand for worst case scenarios and more in this valuable bonus episode.

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As a reminder, Sean was interviewed in our last Core episode on the Supply Chain crisis, so if you haven't caught that one yet, make sure to give it a listen first.  The Supply Chain Crisis Explained. Why Did It Break, and How Did It Impact Ecommerce? - PPC Pondering Podcast - Ep 4

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In today's bonus episode, you'll hear the rest of the conversation Sean and I had that we couldn't fit into our full Core episode on attribution as we all ponder digital attribution together.  

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Sean McGinnis is President and Integrator at KURU Footwear a direct-to-consumer shoe brand that makes stylish shoes for foot pain.

Sean has been a digital marketing leader and business executive since 2006 and has led customer acquisition and lead gen for Fortune 50 and Startup companies across a wide breadth of products and services.

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Follow Sean:

• Twitter: @seanmcginnis
• LinkedIn: Sean McGinnis

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Episode Transcript

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Sean McGinnis:

It's really, really tricky. You're trying to predict whatpeople are going to want to buy six months from now, effectively. Yeah, theteam has heard me say a thousand times and they're probably sick of saying it,e-commerce does not have to be hard.

Chris Reeves:

Welcome to the ZATOWorks PPC Ponderings Podcast, where wediscuss the philosophy of PPC and ponder everything related to digitalmarketing. Today's show is a bonus episode of our full interview with thepresident of KURU Footwear, Sean McGinnis. Sean was interviewed for our primaryepisode on the supply chain crisis. He shares how KURU Footwear handled thestress of the last couple of years with insight into best business practicesthat are a must here. If you haven't heard Sean in our fourth official PPCPonderings Podcast episode about the supply chain crisis, go give it a listen.Otherwise, please enjoy our behind the scenes conversation with Sean.

Kirk Williams:

Let's go ahead and get started. Could you give us yourname, your title, where you work?

Sean McGinnis:

Sure. My name is Sean McGinnis. I am the president andintegrator at a company called KURU Footwear. It's K-U-R-U is the name of thebrand. We are a direct to consumer shoe company that focuses on eliminatingfoot pain. Our CEO and founder, Bret Rasmussen, invented and patented sometechnology that we embed in every pair of shoes that we produce. The brand hasbeen around for 13 years, and I have been with the company for the past two andhalf.

Kirk Williams:

Pretty much rate smack in the middle of all of this messthat we'll be discussing. Obviously, we all know, we all lived what hashappened, but especially thinking of it from the e-comm perspective of whatit's hit. At one point, I chatted the team, I'm like, "How have any of ussurvived the last two years?" Just trying to go through a timeline ofeverything. Can you maybe give us a few minutes overview, if you can, if youcan think of it, as to what e-commerce has been like over the past two years,2020, 2021, what it's been like for your brand, the industry?

Sean McGinnis:

Yeah, happy to. So, e-commerce has definitely beenchallenging in a variety of ways. The main ways in which it has beenchallenging, I recall, I'm thinking back to the time in March of 2020 whenCOVID was just starting to get traction in the States. One of the things thatwe did at that point in time was I pulled together our senior leadership groupand we did a scenario planning exercise, frankly. The impetus for that meetingwas, naively from my perspective, but I think it was a good exercise at the endof the day, but my question was, what happens if we can't get anything from ourmanufacturing partners in Asia for some number of months?

Sean McGinnis:

In the back of my head, the proper thing to do would havebeen to shut down all paid channels to try to reduce demand. If you think aboutinventory the way that I do, I think about inventory as the bricks that arelaid out in the road ahead for your e-commerce business. Anytime when you cansee the end of the road, based on how much inventory you have to satisfy thedemand that you are creating, or have been creating, or that naturally existfor the business, there are adjustments that need to be made. That scenarioplan was a really helpful exercise. At the end of the day, the answer was, weneed to go get more inventory as quickly as we can of our top-selling, corestyles to make sure that we have the inventory to weather whatever storm mayhave been coming at the time.

Sean McGinnis:

We go down that path and have those scenario plans nowabout every quarter, but e-comm in general has been, in part, really difficultfrom a planning perspective, in part because of COVID. When March 1st hit, theworld demand retracted and slowed down because everyone was uncertain. Whenthat became clear that, here's the go forward path as a society, what happenedwas e-comm demand spiked. It came at the expense of other categories where we,as a society in America, were used to spending. We weren't spending in restaurants.We weren't spending on travel and leisure. We were spending in other areas, andso what you saw was this dramatic shift in demand curve across differentindustries and across different categories.

Sean McGinnis:

The other major component of that, obviously, was thestimulus checks that the government issued back a year ago, December-Januaryand then again in March-April. That kind of broke our system. When you thinkabout running ... I love the way you used the word operator, Kirk, becausethat's what I think of myself as on a regular basis. We're constantly lookingat every dial, and all the dashboards across the business, and trying to makesure that we're planning ahead in a proper way. When you put that muchliquidity into the market and cash into people's hands, it changes behaviorpretty dramatically. As you know, a number of e-commerce players saw a verydramatic spike in demand last Q1, Q2, and as we headed into spring.

Sean McGinnis:

What you really want, as an e-comm operator, is a steadyincrease in demand. The perfect thing is a low, sloping, growing curve. Orregardless of how deep the slope is, a consistent curve. What we've had insteadis these spikes and valleys. We've had spikes due to incentive checks andstimulus checks. We've had spikes due to increase in overall generalizede-commerce demand as a percentage of total retail spend. Then we've had otherchallenges, operationally, because the spikes in demand have created thesepressures from a logistics and supply chain perspective.

Sean McGinnis:

We all know there's a 100-plus ships sitting off the coastof California, and what used to take us 35 days to get product from ourmanufacturing partners in Asia to our warehouse in Kentucky now takes anywherefrom 90 to 105 days, so it's just difficult to plan. It's difficult to knowwith consistency that this is what to expect. Thankfully, we had the businessmodel, the customer base, and the operational wherewithal to weather all ofthose storms and to come out the other side looking healthier than ever andyet, it was very challenging.

Kirk Williams:

When things first started happening, and kudos to you, youwere already basically then immediately thinking of supply chain issues. Wasthat before really much had happened in the U.S. even? Was that just youthinking about, "Hey, this is over with our Asia partners"?

Sean McGinnis:

Yeah. Honestly, it was like March 1st. It was the firstfull week of March. I recall that the spark of everything was when the NBA madethat they ... I believe it was right around March 15th.

Kirk Williams:

Mm-hmm.

Sean McGinnis:

About a week before that, we had come together as a groupand said, "Hey, let's talk this through. Let's figure out what ..."The way you do a scenario planner, at least the way we've been doing it, is youeffectively get in front of a white board and create a 2x2 grid, and you firststart by brainstorming all the various things that could happen in the nextthree to 12 months that could affect the business. We did one with theelection. "Here's what could happen if Trump wins. Here's what couldhappen if Biden wins." We did one with this, "Here's what happens ifCOVID really crushes the country. Here's what happens if it's a fizzle out anda dud." Like, "How could consumer behavior change? How could supplychains change? How do all those things start to happen?

Sean McGinnis:

" Then you figure out the two big vectors that youwant to think about. Is it consumer spending expands? Consumer spendingshrinks, from a demand perspective? Those were two of the variables that welooked at. I forget what the other two were. Then you start thinking about thethings that you would do to remedy those things, and you bucket them into thesequadrants. The things that are consistent in every quadrant, you go do becausethose are the things that will remedy, air quote, whatever the variable thing,as you're thinking down the line looks and feels like.

Sean McGinnis:

We did that process and the answer at the time was,"We need to go get more inventory as quickly as we can." It wasn'tquick enough. We have been inventory constrained in both of the last twosummers for different reasons. One of which was the spike in demand, and wecouldn't get things here quick enough for July, at the time. The other one, lastyear, was the stimulus check. The stimulus check and the delays in supply chainand logistics meant that we were a little bit under-inventoried coming intoJune, July, August last year.

Sean McGinnis:

This is my second year in the business. Our third year now,we've lived through the same cycle, which is we come into January feeling likewe're over inventoried. Sales pick up, and then we head to the summer monthsand we feel like we're under-inventoried. This is the first year where we'regoing to be not in that situation, so I'm frankly really excited to see whatthe demand curve looks like in the summer months when we are fully inventoriedand capable of delivering on every piece of demand we can actually create.

Kirk Williams:

Yeah, you reference that chaos, which can be so hard.Someone listening to our episode would probably think, they think of thingslike the stimulus, the various government help and that sort of thing as,wouldn't that be, overall, have been a great thing for everyone, the e-commerceproviders? On one hand, sure. On the other hand, as you noted, you startthrowing that together with the supply chain, as it sounds like, and that'spart of actually, in some ways, the problem. Because there would be that surgedemand and that one always mix with, actually, what you had in stock and theability to get things in stock.

Kirk Williams:

Let's see. How did you think through the way the supplychain was treating inventory-specific products? Did that change which productsyou were pushing at the time or bringing on, or which SKUs you're focusing on?Yeah. Maybe talk through that a little bit.

Sean McGinnis:

I think a lot of the inventory and SKU breadth decisionswere made almost irrespective of COVID, and the impact of the ups and downsfrom logistics and supply chain. The two big areas that I focused on fromcoming into the business, so the first was to further classify all of ourproducts at the style and colorway combination level. We have three ways thatwe classify each style and colorway combination. The first and most importantto the business is what we call core. These are things that generate more thana certain percentage in the trailing 12 months from a revenue perspective ofthe business. The byproduct of that designation of being a core SKU is we wantto manage that inventory so it's never out of stock. That's the goal. We don'talways get there.

Sean McGinnis:

For example, our top two selling SKUs, women's ATOM inblack. There's two different black styles. One is black with a white midsole.One is an all black variant. Those are the top two selling SKUs across ourbusiness right now. We want to manage those so that they're never stocking outin any size, if at all possible. Because we want anyone who comes to the siteto always be able to, in theory, buy one of our best sellers. As a worst-casescenario, you might come in off of a click from a really hot, fancy color likea bright purple version of that shoe. Even if that's not available, becauseit's one of the other designations I'll get to in a second, we want you to atleast be able to buy one of our best sellers, in theory.

Sean McGinnis:

The second is to probably define the other end of thespectrum, which we call limited edition. Before I arrived, we weren't reallyflagging those and communicating to customers that these are a limited product,so they're a one-time buy only. We buy one purchase order at what we believe tobe about six months worth of inventory based on that current knowledge of whatwe have in terms of the overall demand of the business and maybe similarperforming colorways and other shoes or what have you. They tend to be thebrighter colors. Right now, for example, we have a very bright, hot pinkvariant of the women's ATOM. It's a limited edition that comes to mind calledpink berry. That was something we bought, in theory, with about six monthsworth of inventory.

Sean McGinnis:

Sometimes those things are slow movers and they take morethan six months to clear out, but we're okay with those having a long tail andliving on the site for a longer period of time. Eventually when they get reallybroken, we might move them to our clearance center and offer a small discountto try and move them more quickly. We use that clearance center primarily justas an inventory management tool.

Sean McGinnis:

Then, the ones that live in the middle we callprovisional. They're not great. They're not limited, one-time buys. They'rethings that we intend to repurchase, but we introduce them because everythinggets introduced in that category. If you think about Pareto, it's the 80/20,the core SKUs are the 20% of the SKUs that probably drive 80% of our revenue.It's probably not entirely accurate. The provisionals are the ones that aregood sellers, and we expect them to be pretty solid, but they're not in ourtop, top, top performers. They can earn their way there, but sometimes we willeliminate even a core SKU or a provisional SKU in favor of a new colorwaytrend, something that is happening.

Sean McGinnis:

The other way I think about that from your question isthat we have been pruning the line pretty aggressively since I arrived. Welooked at styles that were either slow sellers, had a high return rate, werenot really effective from a margin perspective so they weren't a real driver ofprofit across the business, and so we've consolidated. We've probablydiscontinued close to a dozen styles since I arrived. Some were easy decisions,some were harder decisions.

Sean McGinnis:

The one that we made coincidental with the COVID impact,we made the decision to leave our dress shoe line behind. In part, because ofvery high return rate and they were very expensive shoes to make. They were allleather versions of kind of like a wing tip for men and flats for women. Eventhough we built our technology into those, they were not as effective ateliminating foot pain as some of our other core styles, and so we made thatdecision actually right as COVID was hitting. We made it in the absence of datathat later on proved to be very lucky for us and prescient.

Sean McGinnis:

If you follow the trends, you know that dress shoes ingeneral, in late 2020 or early 2021, demand was down 70%. Most people wouldhear that and go, "Of course, that makes perfect sense." We were allstuck in our houses. We were attending church via Zoom, if you did that. Wedidn't go anywhere for the better part of a year and a half, so why would youneed fancy dress shoes to look smart and spiffy? The push became very much thiscasual comfort, which was another driver of increased demand for our footwearbrand, because we're a casual comfort, good looking, foot health-orientedbrand. When I think about your question, those are the big vectors that I thinkabout it in.

Kirk Williams:

Yeah. Has this impacted any decisions or at least thoughtprocess in bringing manufacturing more to the U.S.? Some of this could be, goahead and answer KURU specifically, or even industry wide, even your opinions.Or do you see some of this settling down and things remaining as they are?

Sean McGinnis:

I will say, being the idiot in the room who had nofootwear experience, one of my first questions is, can we get these things madeany closer? Can we get them made at home?

Kirk Williams:

Sure.

Sean McGinnis:

The answer, every time I ask it is, "Absolutelynot." The capability to make sneakers is all overseas in Asia. It'sprimarily in China and has been primarily in China for years, and years, andyears. There's definitely other places you can go get them made in terms of Vietnamor Indonesia, a few other places, but it's all over there. There are otherstyles of shoes you can make in South America, and Mexico, and other places.

Sean McGinnis:

There's a few things that get made here in the UnitedStates like Allen Edmonds dress shoes, and some of the stuff over with KEEN,and work boots and other styles that get made stateside, but either thecapability, the manufacturing capacity, and even if you did move it here, allthe raw materials are still coming from overseas, and so it begs the questionof all the chemicals, all the fabrics, all the performance materials, all thatneeds to come over here anyway, and so now you're just shifting the supplychain demands to the front-end of the system. That said, I still would love tofind a way to get our sneakers made closer to home, just as a means to betterbalance our ability to connect supply and demand. What used to be, as I said, a35-day window is now 100-plus days, and so planning that effectively when it'sa four-month lead time instead of a one-month lead time is just really tricky.

Sean McGinnis:

It's really, really tricky. You're trying to predict whatpeople are going to want to buy six months from now, effectively. That's theway footwear had always been when you were selling through a retail experience.You had to get with your buyers at these retailers, and the buyers became thecustomer sentiment engine. One of the major values of being a direct toconsumer brand is we've got that. We're closer to the customer. We can hearthose things more quickly. That I view as being a business model advantage fordirect to consumer, is really being closer to the customer, understanding whatthey want and why they want, what they're using the product for. If you stretchthat back out, you're no better. You lose that advantage. You lose thatbusiness model advantage completely.

Kirk Williams:

Mm-hmm. Yeah, that's great. There's a quote in there Ilove that you had noted, which I think would be really helpful to include in aconversation about. Because that's probably a lot of people, especially overhere, "Well, hey, let's just build in U.S.," U.S. jobs, things likethat. As you had just said, well, okay. What if that just means we're shiftingthe supply chain issues to materials? The finished goods, we're actually stilldealing with that, so that's super cool.

Sean McGinnis:

It's tricky.

Kirk Williams:

Yeah, yeah. Let's talk iOS14, since that is a bigconversation right now, obviously, in e-comm world. Obviously, iOS14.5 hits,all of a sudden, the privacy thing shifts hard-core, and Facebook especially isthe one that gets hit. A lot of media buyers struggle with Facebook. Can youtalk through a little bit if and how iOS14 impacted KURU?

Sean McGinnis:

Because of where we're at in our maturity stage, orbecause of what's just been working for us, it wasn't a massive impact, andI'll explain. There's a bunch of hypotheses that I've had for a while aroundwhere we're spending money and what works for us. We have leaned into thethings that are efficient and effective, and that has meant paid social has,frankly, been a smaller part of our marketing mix than you'd normally see froma D2C brand. We joke inside of our team that we feel like the anti-D2C D2Ccompany, in many respects. That applies to channels where we're spending money.It applies to the tech stack.

Sean McGinnis:

Most D2C companies are on Shopify and Klaviyo, and there'sa list of four to five major technical tools that get used by direct toconsumer business. We're usually burdened with a different approach. We're onMagenta. We're using a different email service provider than Klaviyo, as anexample. It also applies in the marketing mix, and my hypothesis is that when Ithink of what's working for KURU and the places where we're at now, and in partbecause of the turnaround that we've engineered since I've been here ... 2019was a very difficult year for the business, and so we've been dramaticallyfocused on profit, and growing the business top-line, but doing so in a veryresponsible and methodical way. That means that we have focused almost all ourattention on things that we know are working from a marketing perspective.

Sean McGinnis:

We're a little bit less willing to gamble and/or trythings that are a little bit further removed from that last click attributionmodel. We spend 90% or more of our marketing mix and media dollars with Googleand Microsoft in paid search and shopping engine because at the last clicklevel, that backs into a really strong ROI for us. Writ large, that means thatwe're spending a lot of our time and attention in the demand capture mode. Wehaven't really nailed the demand generation step, I want to call it. At somepoint in the next 12 months, we will pivot hard and that starts with a reallyfirm understanding of our customers, and a good definition of the personas thatthey inhabit, the reasons that they buy our shoes. We've got, again, somehypotheses there.

Sean McGinnis:

We're spending money, actually, this quarter, embarking ona major study to better understand and formulate, "Here's the brandarchitecture that we're going to use moving forward that is a living documentthat will be open to change on a go forward basis. Here's what we know aboutyour customers." We'll come out of this quarter with a much betterunderstanding of those things. Once those things happen, we will start to shiftdollars back into paid social in a heavier way to experiment and find ways tochange the whole ecosystem.

Sean McGinnis:

In the meantime, our spend in paid social was relativelysmall last year and is even much smaller this year as we've come into Q1. Partof that that will allow us to do that is to utilize our fractional attributionmodeling tool, which we, right now, literally in the next two days, we willfinally have a fractional model built out inside of Rockerbox that will havethe capability to really tell us and have a better understanding of where thesedifferent channels play in our larger marketing ecosystem and what they meanfrom a conversion rate perspective for our customer base. It's been relativelysmall. I would say the changes that Apple made affected us much more in emailbecause email's a much bigger channel for us than paid social is, but I really,really, really hope that we've just been doing paid social wrong.

Sean McGinnis:

If we can come out of this in Q1 and Q2 really with a firmunderstanding that paid social plays a much different role than we thought itdid and there's some scale there that we can go and lean into, I'll be happy asa claim, but I'm also dubious. Maybe I'll get into the reason why I'm a littlebit dubious. I would encourage everyone who's watching or listening right nowto think about the last purchase they made from an Instagram ad. I have minevisualized right now. I was scrolling Instagram, saw an ad for three littlegolf ball markers for 15 bucks. Select my three, the designs that I want. Shop,pay, buy, done. Three weeks later, because really bad shipping situation, theyshow up and I'm happy as a clam. They go in my golf bag. Low risk, low price, awant brand, a want product.

Sean McGinnis:

We are, as a shoe company that you've never heard ofbefore, and as a shoe company that is on the expensive side, two to three timesa normal pair of cheap running shoes that you can buy on Amazon from any majorbrand, and as a shoe company that solves a real job to be done for ourcustomers, an actual, literally the definition of a pain point. No air quotesneeded. We solve a real pain for customers. We're a very considered purchase.It takes time and effort to research and become comfortable and familiar enoughwith the brand.

Sean McGinnis:

My working theory is we're the opposite of that swift,quick transaction, click, click, click. I'm not buying a belt. I'm not buying asilicone ring. I'm not buying a $25 tchotchke that's low risk. If I don't likeit, it's not even a big thing for me to ... I don't even have to send it back.Who cares? This is $150 pair of shoes. Our best selling sneakers are $150. Thisis not something, in my opinion, that lends itself well to a discovery, rapid,"I'm going to buy something quickly off of paid social."

Sean McGinnis:

The other major problem for our brand that I think createsdifficulty in the paid social world, especially post-iOS, but even before iOS,is targeting. The tricky part about foot pain is every single human can haveit. It doesn't matter where you live, how much money you make, your gender,your skin color, your political affiliation, the fact that you're a hunter or... Demographically, we are all over the board. Our customers live in everysingle demographic bucket ever invented. I don't care who invented it or howthey were defining it, psychographically, demographically, it just doesn'tmatter. Everyone can have foot pain.

Sean McGinnis:

Where paid social and Facebook in general had all thisincredible data ... We used to do pretty well in paid social before theystopped the ability to target by health condition. Oh, look at that. The onemain thing that we've got the ability to actually zone in on that we can helpcustomers with, you can no longer do that. Oh, okay. Well, I guess we'll spendless money with Facebook then. There is still a gap in our understanding abouthow we can build brand awareness and how that brand awareness affects the restof our marketing ecosystem.

Sean McGinnis:

My big hypothesis is paid social might be a way to buildbrand awareness, but there might be more efficient ways to build brandawareness. It could be TV. It could be YouTube. It could be radio. It could bepodcast sponsorships. It could be any number of things, influencers at scale.There's lots of different ways for our customers to become aware that KURUexists, we're a stylish shoe that helps with foot pain. Those are the threemain things that I want everyone in America, eventually, to know about. Whenyou think of foot, I want you to think of Dr. Scholl's and KURU Footwear. It'sthat simple, and we are years and millions of dollars away from that being areality. The main question is, what's the best way to do that? Then, how doesthat level of awareness change the rest of our marketing ecosystem?

Kirk Williams:

Yeah, no, I think that's really insightful. I think thatwhen discovery or prospecting, top of funnel, whatever, which as you had noted,that often tends to be social, Facebook. It's probably, as you said, lowbarrier to entry, cheap product, or it's probably easy or real clear audiencesegmentation, so you really can identify, exactly like you said. Or it's cheapauctions, so you can afford to blast out your data.

Sean McGinnis:

Sure.

Kirk Williams:

Your audiences don't have to be quite as defined becauseit's more affordable and you can work that in. You can-

Sean McGinnis:

On a CPM basis, it backs into a model that makes sense forthe brand. Sure, yeah.

Kirk Williams:

Exactly. Part of what I've seen, as an outsider on theFacebook land, has been those things, aside from the quick purchasing, whichthat has more to do with the product itself being sold, those other two thingshave been continually stripped away for Facebook advertisers. I think that'sone of the biggest problems with Facebook is privacy, and that is just goingafter the audience segmentation and then the options, literally, are just moreexpensive. You're just spending more. You just have lower efficiency that dothe same thing.

Sean McGinnis:

Right. Well, the big attractions at TikTok right now isthe CPCs and CPMs are much lower. Right?

Kirk Williams:

Yeah.

Sean McGinnis:

You keep seeing people talk about how it feels like Facebookfive years ago or Instagram five years ago because there's lower competition,there's fewer brands in the space, and just the model backs out in a way that... And the level of virality. Whatever they're using to get that thing on yourpage, that algorithm component is just more efficient and better at it.

Kirk Williams:

Mm-hmm.

Sean McGinnis:

It's super fascinating as an ecosystem. Because we don'thave the creative to go do, and that muscle isn't built up for us in inside ofour brand, we don't have the resources or the creative to even go and test inTikTok yet, it's really, I know it's frustrating for the team.

Kirk Williams:

Sure, yeah. Don't want to take up too much more of yourtime. Let's see. Worker shortages. That was another big thing, especially aspeople have left the workplace. You have the people leaving thing, so then morepeople are trying to hire the same people. Is that something that has impactedKURU? Not necessarily? You noticed that?

Sean McGinnis:

Yeah, not necessarily for us. We've been mostly successfulin hiring really high-performing folks, in part because we've got a greatnetwork here in Salt Lake City on the marketing side, and the vast majority ofhires have been in the organization. We've been able to swiftly hire A-leveltalent, top-shelf talent across a variety of different disciplines. The placewhere it's been difficult, for sure, for us is on the product side. It's been,we had two hires that we had planned to hire quickly this year. One has beenfilled, and that person is in the process of relocating his family back to SaltLake from Denver, so there's a personal connection in the area here. That's ateam where in person is really important.

Sean McGinnis:

You need to be able to feel and hold the product, and evaluatethe product. We can overcome that by shipping very ... Compared to everythingthat shows up to your home, but the one other role that we've definitely had achallenge in finding the right ... The centers of the universe when it comes toshoes are New York and the Pacific Northwest, Portland, Seattle area. The goodnews is Salt Lake isn't that far from Seattle, but finding that right talent isdefinitely a challenge. We actually are in the process of engaging with aheadhunter firm who knows that space really well. Whereas, on the marketingfront, we would never have to do that.

Sean McGinnis:

My network is pretty vast. I'm happy to go out and make afool myself if it means we're going to find the best possible talent, and beable to hire them either here in Salt Lake ... Salt Lake is a great place formarketing talent too, I will say that as well. There's a lot of really greatcompanies doing incredible, incredible things here in Salt Lake Valley. Thebusiness model that gets the most attention is B2B SAS, because that's where alot of the funding is happening. There's dozens of unicorns that I can look upand down our freeway and think about and find. There's a lot of really coole-comm businesses that are operating out of Salt Lake as well, and so that partof the hiring journey has been not quite as bad.

Sean McGinnis:

The other piece is, being a former salesperson myself andsales manager, I'm not afraid to go out and do the recruiting on my own. We'veworked with the team to not just be reliant on a third-party recruiter or ourHR team to source candidates. We're constantly proactively recruiting andtelling the KURU story one-on-one through happy hours, and lunches, andbreakfasts, and coffees, and whatever it takes to raise awareness of the factof what we're building here. I think the culture component shouldn't bedismissed either. I think we've got a really great culture that's very strongin a number of different facets.

Sean McGinnis:

We continue to introduce new benefits to employees. Welaunched a new sabbatical program that kicks in at three years. Most sabbaticalprograms I'm familiar with, they're five to 10-year sabbatical programs, but atthree years you get an extra week of paid time off and then another $1,000. Wetie that into you, hopefully, checking off a life goal. When we hire you on asa new employee, we capture the four biggest bucket list items that you want togo do in your life, but you just lack the time or the resources financially togo do that.

Sean McGinnis:

At three years, we give you a week and $1,000. At sixweeks, we give you two weeks and $2,000. At nine years, we give three weeks and$3,000 to go do one of those four things. That alone has been an incredible newprogram for us. We're getting a ton of really great feedback from our employeebase. When we talk about it publicly, it definitely raises an awareness levelof the brand. It's a pretty cool benefit.

Kirk Williams:

How are you thinking about inflation and how that's goingto hit the business, if it will?

Sean McGinnis:

Yeah, I was ringing the inflation bell or concern bell, Iwould say, three to six months ago. As we were pumping stimulus money into theeconomy, there was no doubt in my mind that it was going to be coming. It wasjust a question of when and how big. We haven't really done a scenario planaround it yet, so we probably should do that here in Q1 so we start thinkingabout the implications of that. We've definitely had some high-level debatesaround, do you draw down the line of credit? Do you go out and raise somefunds? What's the best way to combat this?

Sean McGinnis:

I think, again, this is going to be one of thosesituations where we, through a little bit of dumb luck and maybe sometailwinds, are in the right place at the right time. Because we are buying aboatload of inventory, and we didn't buy it because of inflation, but we boughtit when we bought it, it's going to be a lot cheaper, potentially, than buyingit eight, nine months later. If inflation is affecting us from our relationshipwith our suppliers perspective and things of that nature, all those thingsbecome part of the calculus of what the P&L actually looks like. I thinkwe're in a really strong position to weather the storm throughout the balanceof 2022. I'm old enough to have lived through the last time we saw inflationthis high and it was not pretty

Kirk Williams:

When was that?

Sean McGinnis:

This is the late '70s, early '80s.

Kirk Williams:

Oh, okay. It's been a while.

Sean McGinnis:

I was a teenager. My mom had to work with a 12.5% note.That's how ugly it was. It was really, really bad, and the Fed had to raiserates aggressively that threw the country into a really bad recession to try toaddress those inflationary pressures. That's in part where I was ringing thebell. There's a lot of youngsters here inside KURU that are not familiar withit because they haven't lived through it yet.

Sean McGinnis:

It's been a long, long time since we've seen inflationthis high. Hopefully, it is transitory, and hopefully, the Fed acts quicklyenough to address those things. I'm no expert at this, but are definitely at aposition where I think, as a company, we should be scenario planning and tryingto figure out what the best ways to address it actually are for us.

Kirk Williams:

Hmm, yep. Let's see. Black Friday, Cyber Monday, holidays.Do you want to talk through that at all? 2020 holidays, 2021 holidays, anythingto add to that? Then I think that's pretty much all I got for you.

Sean McGinnis:

Yeah. KURU's a unique business in that we are not apromotion-heavy business. I've spoken with this on previous podcasts with otherhosts in the past. The primary lever that we pull when it comes to promotionsis our KURU Cash system. We have a system in place where anyone who buys anythingfrom us earns a 5% credit into their KURU Cash account that they can use onfuture purchases. When we do a promotion around a holiday, we'll typically do apoints accelerator for that. Sometimes we'll do double points, or triplepoints, or 4X points, and so you'll earn 10%, or 15%, or 20% cash back intoyour account that you can use for a future KURU purchase.

Sean McGinnis:

Black Friday, Cyber Monday, we pull that lever. It's thesame lever we've pulled, historically. We did not offer a cash discount on shoes.We did not do a BOGO. We didn't offer a gift with purchase. We just said,"Buy during this period and you get 3X points." We prefer that. Wedon't like discounting product any more than is necessary. Again, we use ourclearance center as really a means to try to move inventory more quickly sothat we're keeping a tidy PDP, I think I would call it. We're not sitting onold, stale inventory. We want to move it out while it's still fresh. There wasa lot of old SKUs that were still in our system when I joined the business.

Sean McGinnis:

Every now and then, we'll do a warehouse sale where we'llalso move some of the older SKUs. That's physical here. We don't do thatonline. You have to be in Salt Lake or be willing to travel to Salt Lake tocome take advantage of that type of program. We had lines around the block whenwe did one in 2021. I think it was a Friday, Saturday, Sunday sale that we did.Friday, when we opened at 11:00, there were a couple hundred people waiting inline to come and get the cream of the crop in terms of picking through theinventory that was available for that. We haven't planned one again this year,but we probably will do one maybe in the fall.

Sean McGinnis:

From that standpoint, we are unlike most other retailersin that Black Friday, Cyber Monday is not this event where it's ... The reasonit's called Black Friday is, for many brands, it's the time period that putthem in the black and made them profitable for the year. We're not like that.We're first purchase profitable throughout every month. We've been profitableevery month since I joined the business, standalone P&L basis. We don'tspend into the lifetime value curve enough to try to put that operating systemat risk. One of the reasons why we think that's true is we just don't feel likewe have the need to discount.

Sean McGinnis:

We're not training customers to wait for a heavy discountto come back and buy another pair of shoes from KURU. If we work for you, andif we help eliminate that foot pain, by golly, we want you coming back wheneveryou feel like we've got something new to offer that would fit with yourlifestyle or when you've worn out a pair of shoes. That's the approach that weprefer to take. It just simplifies everything. It simplifies the creative, itsimplifies the level of effort we're putting into marketing and e-commerce.

Sean McGinnis:

I've mentioned this before. Our e-comm manager has workedat three or four other e-comm brands and it's a constant fight to be, "Oh,a promotion this week, and another promotion that week, and another promotionthe next week." It's constantly you're updating and refreshing bannersacross the site and trying to schedule your cart rolls to make sure thateverything is working. For us, there's just none of that. It's just thesimplest thing in the world from that perspective, as far as he's concerned.It's an easier way to run the business is to just focus on day-to-day,improving what's working, building out new tests to go and try new things interms of channels, or in terms of campaigns, in terms of creative. Findingthings that work for our customers and finding things that work for KURU isreally our primary focus as a team.

Kirk Williams:

I love it. Yep, yeah. Being less obsessed with having todesperately make your 30% of your annual sales on one weekend makes it a lotless dramatic when things like a pandemic and all that other stuff comes in.

Sean McGinnis:

Yep.

Kirk Williams:

Stability. Cool.

Sean McGinnis:

Yeah. The team has heard me say a thousand times andthey're probably sick of saying it, e-commerce does not have to be hard. We'veinvented this world, and this ecosystem, and this thought game where we just,"Oh my gosh. We've got to think of this, and this, and this, and this, andthis." It's like, "You can just offer a great product and market itcleanly and efficiently, and people will buy it." Build that brand. I'seasy for me to say that because I wasn't here during the lean years. I mean, Ionly joined in the [inaudible 00:40:32] years. Our CEO probably would disagreewith that, but it just doesn't have to be complicated. It's not rocket science.

Kirk Williams:

That's great. You're a golfer. What's your golf ball ofchoice?

Sean McGinnis:

I have a couple. They're both D2C brands.

Kirk Williams:

Oh, cool.

Sean McGinnis:

I use Vice and Snell, are my two primary golf balls. Triedthem both

Kirk Williams:

That is funny. I didn't even know that there were D2C golfballs out there. That's cool.

Sean McGinnis:

Yeah. They're disrupting the industry. You've got thesemajor brands that spend millions and millions in marketing, and there's theseother folks that have discovered that you can build a heck of a golf ball anddisrupt the space a little bit. It's 30 or 40% cheaper than the premium ballswith similar characteristics of performance.

Kirk Williams:

Is this a different material?

Sean McGinnis:

Nope, very similar. Similar construction and quality,yeah. If you go to YouTube, you can find lots of reviews of a variety. There'sthree to five, probably, and there's new ones coming all the time, differentvalue propositions.

Kirk Williams:

Cool.

Sean McGinnis:

Yeah.

Kirk Williams:

Yeah, that's cool. There you go. Yeah, I think unless youhave something else you want to make sure that you hit on, I'm very, very happywith what we got.

Sean McGinnis:

No, happy to do it. Thanks for inviting me. I appreciatethe opportunity.

Chris Reeves:

This has been a bonus episode of the PPC PonderingsPodcast. Keep checking back for more interviews and our next full episode. Ifyou like what you hear, please consider sharing this with your network, leavingus a review on Apple Podcasts. Until next time, may the auctions be ever inyour favor.

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