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Aliza Polkes
Copywriter & Editor @ Yotpo
January 27th, 2020

Cult of Chubbies, the Long & Short of it [TRANSCRIPT]

Creating experiences that keep customers coming back.

Table Of Contents

At Yotpo’s Desination:D2C Conference on September 12, 2019, 2pm Founder Web Smith sat down with Tom Montgomery, Co-founder, CMO & CTO of Chubbies, to discuss how the brand creates experiences that drive customer loyalty through product, data, marketing, and more.

Video

Transcript

Web Smith: So I want to kick this off with an important fact. Chubbies just began selling lederhosen. Is it leiderhosen or lederhosen?

Tom Montgomery: Lederhosen, I think.

Web Smith: Lederhosen?

Tom Montgomery: The crowd’s got to know that.

Web Smith: So I did a 23andMe and found that I was 10% German, so I’m one of your newest customers. I literally just bought backstage and…

Tom Montgomery: Necessary purchase

Web Smith: …I got the shipping notification within a few minutes, so congratulations.

Tom Montgomery: Good, yeah. That’s fast.

Web Smith: All right, so let’s talk about the origin of Chubbies, the name, how you came about it, and how you use that to build community for your product.

Tom Montgomery: Yeah, yeah, for sure. So, origin of Chubbies. I founded Chubbies a few years out of college. I was working in venture capital, looking at small businesses, and the firm I was working for was really focused on media and eCommerce, so got kind of a good introduction to the eCommerce business that way. My co-founders were all friends of mine from school and were in various different industries, private equity, corporate retail, startup land. And so we would hang out. We were in San Francisco and if you find a sunny day in San Francisco, everyone’s outside, everyone’s throwing on a tank top or whatever, getting to the parks, enjoying the sunshine. So for us, that kind of ultimate embodiment of the weekend was throwing on a pair of tiny shorts and going out and having a good time with friends. The way that we found said tiny shorts was always some random different story. One of these pairs of shorts was this old legendary pair of Lacoste shorts that had been handed down through generations and it was wearing at the seams, but no one would give it up. I found mine through thrift shops, people would gift me short, tropical shorts as birthday presents, things like that. So there was kind of this unifying theme that was like, you couldn’t find these things in the places that you want – in any place where you’re normally shopping.

Web Smith: Thrift only, I’m assuming.

Tom Montgomery: Thrift only, yeah, yeah. And then the release of the weekend for us, particularly in San Francisco, where it’s normally so gray, was really powerful with that product, and that was a product that defined our weekends and it was a product that was just ridiculous enough that we could build a brand that we felt was different, was unique, was a statement and so we started experimenting. We built about 50 pairs of shorts, took them out to the shores of Lake Tahoe for a 4th of July back in 2011, and had this whole plan to set up a booth, and go group to group, selling them on the beach. And what happened was people saw what we were up to, instantly came to our area, we sold out of these products right when we landed on the beach and we were off and running. The thing that we saw was just such a visceral reaction because back in 2011, shorts were a lot longer. They’re kind of – the shorts du jour were very – were down below the knees, were cargo shorts with all sorts of pulley systems on them and stuff like that. So it was very different.

Web Smith: I’m assuming it takes a special person to be a pioneer for Chubbies in 2011, 2012?

Tom Montgomery: Yeah.

Web Smith: So I’m going to ask you about your target market. You have geography, you have income, you have all these lines of demarcation for who your target market is, you have name. So like, what percentage of your target customer base is named Chad?

Tom Montgomery: Don’t know. That’s a piece of data we should get. But I think that’s an important point. It’s kind of perception versus reality of the brand, right? So one of the things that we really, really lean upon is inclusiveness, is not falling into some stereotype.

Web Smith: So I’m actually a customer. Obviously, my name is not Chad.

Tom Montgomery: There you go.

Web Smith: I’m in the other category, but I’m a big fan of what you’ve built so far. It’s really good stuff. So the next line of questioning I have is also about the upstart process. Why did you choose Shopify? Who are your top five or six vendor customers that you like, whether it’s Yotpo, whether it’s Loop, BVA, Optimizely? Which tools have you used to grow the fastest? Which ones are the standout tools?

Tom Montgomery: I think Shopify is something that from day one, has been just – the ease of doing business was phenomenal. We were one of the first groups on Shopify Plus. We were the people who were, in the early days, asking for more functionality, asking for more of a feature set.

Web Smith: That was Poma’s team, right? Jonathan Poma?

Tom Montgomery: So we were working with Poma at the time. Poma had been at Homage, and then he founded Rocket Code, which eventually got sold to BVA, and he was the first person who kind of developed our site along with me in the early days. And so, yeah, it was rubbing elbows with Poma to get things up and running. But so Shopify from day one was a crazy tool that allowed us to scale, still today. So it’s been eight years on the platform and we haven’t felt the need to switch. Yotpo is one that, for sure, like we’re here. I’m speaking. It’s an amazing product. One of the things that we really rely on as we talk about community is getting feedback from our customers. It’s extremely important to us. It’s instantly actionable. And so Yotpo gives us that access.
And so, one of the things that we’ve been really leaning into since we’ve been on Yotpo is combing through customer reviews to understand what are people liking about our products as well as disliking because what people enjoy and what people like, you can turn around and use in your marketing and what people dislike, obviously, you very much target and go fix. So definitely a powerful tool for us. And I’d say anything that gives us data and feedback, we crave. And so, Yotpo does that. There’s the recent acquisition of Swell. We’re Swell customers and we basically have this kind of infrastructure that gives us a relationship and data about our customers. It’s really, really cool.

Web Smith: Speaking of data, obviously, you have a great feedback loop with those reviews and with the feedback you get privately and publicly from your customers, what does your ad spend look like? If you don’t mind me – what percentage, rather, of your traffic is devoted to paid advertising?

Tom Montgomery: We work to have it not be very much. I think one of the things that is constantly on our minds, as well as a lot of D2C companies’ minds, is what happens when prices inflate on Facebook, what happens if channels stop working as well?And so, one of the ways that we really, really, really work hard to alleviate that issue is building towards brand and building towards our own traffic sources. And so, if we look at revenue, the vast, vast, vast majority of it comes from own channels.

Web Smith: Okay.

Tom Montgomery: We’re building towards organic search, direct traffic, email traffic, things that we can control a little bit more. That being said, advertising is a tremendous tool that helps us do that.

Web Smith: What’s your best channel right now?

Tom Montgomery: Our best channel is always organic but we lean the most into Facebook, for sure.

Web Smith: Okay.

Tom Montgomery: But we experiment a lot. Like the moment we become convinced that one channel’s working the best is the moment we’re starting to, kind of, miss. We’re constantly iterating through different places where we can build community and build resonance. If we can’t do it there, then we typically shy away from it.

Web Smith: On that note, I think there was an article today from Business of Fashion about your approach to Snapchat.

Tom Montgomery: Yeah.

Web Smith: So let’s talk about Snapchat, TikTok, and where you see the potential for Generation Z?

Tom Montgomery: Yeah, Snapchat’s amazing. I mean, I think audience-wise, obviously Generation Z uses a little bit more of Snapchat. It’s an interesting platform for us, because we’re still trying to understand the metrics side of it. We thrive on data, and Snapchat is a little bit less open about data. And so, understanding success of content, understanding how your community’s growing, what are the things that you’re doing to grow community are still formational there. But what’s been awesome is to see their advertising product grow. And so that’s been something we’ve been leaning into and testing through recently. And it’s also a platform where we can test with a smaller audience and kind of explore things that might work. We, a couple of years ago, tried to build a full episodic piece of content just through Snapchat. There was, like, a four episode series. Each episode was something like 15 minutes. And we were filming them in, like, 15 second snaps, live. And so, it’s a platform where we can be a little bit more experimental without having to showcase something to the entire audience that we have on Instagram. But it’s growing. It’s interesting, their ads product is really, really good so far.

Web Smith: How do you balance – talking about brand, how do you balance the masculinity of your brand with also – you have a tinge of comedy, humor, you don’t take your brand too seriously. How do you achieve that balance between who you feel your target market is, and how you appeal to the greater community above and beyond that target audience?

Tom Montgomery: Feedback is huge. Feedback is huge for us. And our community is extremely diverse. And so one of the things that we’ve done is we’ve heard certain bits of feedback around certain elements of our brand that people find maybe stereotypical or potentially alienating, and –

Web Smith: Give me examples.

Tom Montgomery: So I think your comment, right, like Chad – I think that’s an idea that we’re sensitive to because it’s exclusive and our brand is more diverse than boiling it down to something like that. And so we began a campaign, maybe four years ago, that’s a man-model search. Basically, we scour our customer base and go find the people that are representative of our brand from our customer base. So each year we’ll basically select 20 potential male models and then our community will vote on the top 10, and they will become kind of the faces of Chubbies for the next couple of years.

Web Smith: For what it’s worth, I think you have some of the most diverse marketing that I’ve seen in the direct-to-consumer space. I think you guys should be applauded for that. When it comes to the male modeling, you take a different approach than most brands. There are men of different body shapes and sizes. Let’s talk about that.

Tom Montgomery: No, so our name is Chubbies. Spoiler alert, we started to be different and we started – we were born in the era of 2011, Abercrombie & Fitch was what I grew up with, and it was shirtless dudes spraying cologne on you as you’re walking by. That was not something my group of friends related to. And so Chubbies was, in a name, immediately the opposite of that.
And the product was an elastic waistband product because we didn’t want it to be too tailored. We wanted it to be able to gain some weight. And we wanted it to be that kind of more ridiculous side of “fashion,” and we thought of men’s fashion as taking itself way too seriously and being way too exclusive. And so we wanted to make sure that we were building something that was more inclusive. I think we’ve learned more, and more, and more each year about how to do that well, but from the start, we wanted to make sure that everyone felt welcome as part of the brand.

Web Smith: So you’ve been around for six, seven years now?

Tom Montgomery: Eight years.

Web Smith: Eight years, wow, okay. So in that time, you’ve raised 11 million in equity, 5 million in debt.

Tom Montgomery: Yeah.

Web Smith: Let’s talk about capital efficiency. How you’ve gone about choosing your brick and mortar retail locations, your wholesale partners, your approach to marketing. These days, that’s a relatively small amount of money for a company of your scale?

Tom Montgomery: Yeah.

Web Smith: How have you made that happen?

Tom Montgomery: Well, so first, I think culture, right? Culture in the company is scrappy to say the least. And so the team is really oriented towards what’s the return on what we’re working on. And so when we think about our advertising spend, we’re constantly thinking about incremental ROAS within different customer groups and making sure that we have profitability on first purchase.

Web Smith: Explain ROAS for the audience.

Tom Montgomery: Oh, sorry. Return on Ad Spends. So basically we spend a dollar, we return $2 in revenue. And so that would be like a 2x return on ad spend. And so for us –

Web Smith: You’re doing that in-house? Or have you outsourced that to an agency?

Tom Montgomery: We do pretty much all of it in-house. SEM, search engine marketing, we have an agency.

Web Smith: Okay.

Tom Montgomery: We work with Tinuiti, Elite SEM. And they’ve been great. But for all of our social content developments, all of our social media planning, we do in-house.

Web Smith: Is there a reason for that?

Tom Montgomery: We were early on in Facebook ads, and I’d say we’ve learned a lot about how to build content towards the things that work on that platform. One of the really cool things about Facebook and other social platforms is that your audience becomes advertising if you can do it well, if you can create a conversation. And so from day one, we’ve been focused on content that drives shareability. And it grows community as well as delivers more impressions for the same dollar amount. And so we know a lot about that, that’s expertise in-house, we are constantly pushing the envelope for that and so we’ve never felt the need to outsource. SEM is something that was different for us.

Web Smith: True.

Tom Montgomery: Where we didn’t know a ton about it. We were coming late to the game and that’s why we’re comfortable outsourcing it.

Web Smith: If I’m not mistaken, you have five stores now? Four, five?

Tom Montgomery: Oh, we have 12.

Web Smith: Geez.

Tom Montgomery: Twelve stores. But it’s been like an accordion, we’ve both gone up and down and up and down. We actually had a store here in New York, closed it as quickly as we could, so.

Web Smith: Explain why, because I know that we’ve talked in the past about who that target market is, what parts of the country are most receptive to your brand, how you need to sell products year-round.

Tom Montgomery: Right, right. So a piece of what is vital to run a retail location is that it works year-round. Despite our best efforts, we haven’t – and despite lederhosen, we haven’t found a product category that really activates in the winter time. And so for that reason, a market like New York is really, really tough, particularly given the prices that you’re paying. And so our top stores are typically in places where you have year-around – at least quasi-warmth. And so we see a lot of success out of places like Charleston, Santa Monica, Florida, places where you’re comfortable wearing shorts a lot of the time. And where maybe it’s a couple of months out of the year, our stores will kind of have a little bit of drag. I think the other piece is just New York is expensive. And so the way we entered the market was we did a sight unseen lease in a place where we knew it didn’t have foot traffic. It was over in Nolita, and it was just outside of a park next to a weird bar. And we got into the store and there were holes in the ceiling, holes in the floor, there was actually a backyard, it was a really cool space, but the ceilings were maybe like eight-feet high. It was just a weird, weird spot. And we realized why we did a sight unseen lease and why they were giving us a hot deal.
But anyways, good learning, and it kind of shows you how we approach any sort of retail location. We find flexible lease arrangements, relatively low cost, and we invest small amounts in them to kind of test and see if we can build profitability, and then we slowly add more to them.

Web Smith: How many of those are short-term leases?

Tom Montgomery: So we have a few long-term leases and stores that we’ve tested and vetted.

Web Smith: Okay.

Tom Montgomery: Pretty much everything else is a short-term lease with an option to go longer.

Web Smith: So that’s six months, 12 months?

Tom Montgomery: It depends. It depends on the place.

Web Smith: So you go in, you build something out, you build out the – you start with your team and –

Tom Montgomery: Go in and build something out. We’ve since been able to invest a little bit more in the build outs. I think our first build out was probably a few thousand bucks.

Web Smith: Okay.

Tom Montgomery: And it wasn’t the prettiest store, but it displayed products.

Web Smith: Were the ceilings at least taller than eight-feet?

Tom Montgomery: They were. They were, yeah, yeah. But it was up a stairwell and they’re kind of around the corner, so you still had some hair on it, but it was fun. That was a store in San Francisco.

Web Smith: Okay.

Tom Montgomery: It was also kind of our place where we could experiment and then kind of learn a little bit about the process.
Since we’re able to invest a little bit more, we just opened up the store in Sarasota, Florida that looks incredible, the team has done an awesome job there. So we’re starting to get a little bit more familiar with kind of the ins and outs, but we’ve certainly had an experience getting there.

Web Smith: So let’s talk knock-offs really quickly. One of my last questions, you had mentioned earlier that when you launched, J.Crew tried their approach within a few years.

Tom Montgomery: Yeah. There – I mean everybody tried it, right? I think we launched and the next year we saw Abercrombie with an exact replica of our products, kind of to a tee. Forever 21’s men’s business had one –

Web Smith: I didn’t know that they had a men’s business.

Tom Montgomery: Yeah. They had a men’s business.

Web Smith: Okay.

Tom Montgomery: J.Crew. So I think everybody tried the inseam. I think what’s interesting is that – and this is one of the interesting things about focus and trying to come in and disrupt is that – what we’ve heard since, since we’ve spoken to some of these brands, is that that length of short and that style of short just didn’t sell very well for them. And so there was something interesting about that in terms of just like who their demographic was. But I think more than that, we had been building community and building brand around the short – around and above the knee short. And so we have a little bit more credibility than people who had been, prior, hocking very, very long shorts. And so I think there’s a piece of it that’s that, and there’s a piece of it that is just building brand. And so from day one, we were really intent on, like I said, building back into these own channels, building community, building your email list, your Facebook following, understanding your customers. And fortunately, we’ve been able to build a lifestyle brand now, which is awesome.

Web Smith: Speaking of brand, which other brands are doing it right in your opinion?

Tom Montgomery: So I think Lululemon is kind of a gold standard for me. They have a brand that hits and they have a product that hits and that’s great. And I look to them as a model, you can see publicly they have, I think 20% EBITDA margins and they’re selling $120 products that everyone is buying many of. And they’re maintaining an awesome sense of brand throughout.

Web Smith: Right.

Tom Montgomery: Which has been great. They’re a great model and they’re one of the models that’s more recent that has achieved massive scale and gone public and has seen that sort of success. So I think they’re obviously the gold standard.

Web Smith: In the D2C space?

Tom Montgomery: In the D2C space? I think, Mizzen is one. That’s –

Web Smith: Oh, that’s really nice of you.

Tom Montgomery: Yeah. Yeah, yeah. I think Mizzen is one.

Web Smith: Thank you.

Tom Montgomery: I think, again, like great product combined with really cool branding and getting people on board who represent your community, right? Like getting Phil Mickelson involved, I think is a really, really cool angle. So I think there are a lot of people taking shots at it. I think the interesting thing about D2C is how it evolves – because it’s evolved so much over the last eight years. Four years ago, you’d be talking to people in the market or investors and they’d be talking about how it’s eComm, eComm, eComm, nowadays, people are looking at a more well-rounded portfolio. And because they’re starting to realize there are some limits to eComm growth. You’re starting to see if you are buying traffic four years ago, it’s really, really expensive now. You can’t lean on that anymore. You’re either going to have to go extremely unprofitable or raise a ton of money and maybe achieve an exit, or you’re going to have to become self-sustainable. And not to mention, but still for us, even 70% to 80% of our market is still offline and transactions for our product are still happening offline.

Web Smith: So you mentioned exits, what does the long term look like for Chubbies? Is that something that you’re seeking out? Is it something that you’re not thinking about right now?

Tom Montgomery: We’re not really thinking about it right now. We want to build something that has huge positive impact on our community. For us, we are building towards a feeling and a moment that is the Friday at 5:00 PM feeling, that is the moment a person releases from their workweek and takes time for their mental health, physical health, relaxes, has some fun. So that moment is something that we’re wrapping the entire brand around. And for us, we wanted that to hit, right? We want that to be resonant, we want it to not just be resonant with a certain demographic. We want it to be resonant as broadly as we possibly can. That’s the goal for us and that’s what we’re hacking our way toward and that’s what the team is rallying around. And it’s a really, really cool mission. We don’t need it to be an exit for now because at the end of the day, what we’re trying to do is make people happy with the products that we sell and the concept we put out. So that’s it for now and we’ll see how everything shakes out.

Web Smith: Just circling back to brand message. Obviously, you have a very strong conviction when it comes to how you perceive your own brand, how you want others to perceive it. Is there a value to that? Here’s the context. We see a lot of brands pursue a very sizable other strategy, going to Facebook marketing or Google Ads spend. Can you put a price tag on your brand equity right now? And if so, throw that out there. Like what would that be?

Tom Montgomery: Can we put a price tag on it? Yes, we can but it’s nuanced, right? So I think one of the pieces that is interesting is what do you do when you have to cut Facebook spend? What do you do if you see your economics go upside down on a certain channel that maybe you’ve been reliant on for a really long time? And so, we’ve seen that now a handful of times. And throughout, we’ve been able to grow. I think what’s measurable there is are your own channels growing and producing? And so that is a testament to brand in some way, shape, or form. Now, is that circling back to what’s the value of an Instagram follower versus a Facebook follower versus an email follower? Yes, we have those numbers, but the fundamental piece is that your business is growing because the community is growing it instead of your businesses growing, because you have a ton of cash you can throw into a channel. And so that’s the measurable, that’s the KPI for us and we have a bunch of different ways of getting there but ultimately, we want to see our marketing spend as a percentage of our total overall revenue going down overtime. We want to see our organic channels growing over time and that’s the guiding light for us.

Web Smith: Well, I don’t think there’s a company right now that’s doing a better job of that than your company.

Tom Montgomery: I appreciate it.

Web Smith: You’re certainly one of the 10 or 20 that I would point out. So I think that’s a good place to stop of our discussion.

Tom Montgomery: Sweet.

Web Smith: But I think it’s been wonderful.

Tom Montgomery: Thanks.

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