Steph Smith, Sr. Analyst for Trends dives into how Heidi Zak founded ThirdLove and the insights she has gained along the way.
Steph: All right, so now I’m super excited to introduce Heidi Zak. She is the co-founder and co CEO of ThirdLove. If you haven’t heard of ThirdLove, it’s one of the most innovative disruptive bra and underwear companies in America. They’re a direct to consumer brand mostly. But they recently opened a store, and in seven years of, since inception, they’ve actually had over 14 million women use their Fit Finder quiz, which was a proprietary quiz that a woman can take online to find the right size. Interestingly enough, over 80%, or around 80%, of women actually are wearing the wrong bra size. And ThirdLove is there to help. So, help me please welcome
Heidi Zak. Hi.
Steph: Hi, Heidi. How are you?
Heidi Zak: Good, how are you?
Steph: Great. So I want to talk about ThirdLove and the amazing growth that you guys have. But before that, let’s talk about the early days. You had an experience, I think with Victoria’s Secret, that really spearheaded your reasoning for starting the brand. Can you tell us a bit more about that?
Heidi Zak: Sure. So I was at the time at Google, working at Google, and went on a last-minute bra shopping trip and made my way to a Victoria’s Secret store in a mall, and this is back in 2012, a long time ago. And how many people out there have been in a Victoria’s Secret store and bought a bra? There we go. There’s a lot of guys in the audience. So, you probably haven’t bought a bra there. But how it goes is you basically walk in and there’s the feathers and the pink and the smells and then you wander around looking for a bra. And then generally someone either fits you or not, but you end up with 15, 20 bras in a fitting room and you generally settle for something, because you don’t want to have to go back. And I did that and I grabbed a bra and I made the purchase and I walked out, and I took the pink Stripe bag and I stuffed it in my backpack that I was carrying. And for me that was a real aha moment. I’d spent money at a store where nothing about the product was great, the shopping experience or the brand. And so I went home, I did a lot of research that night, like where can I buy a bra online, what other brands are there? And there was basically Victoria’s Secret and department stores and that was the landscape. And again, this is before D to C existed. Direct to consumer wasn’t a term in 2012. So, the world’s changed dramatically obviously in seven years. But that was sort of how the ThirdLove idea came to be.
Steph: Amazing. And so you had this idea you wanted to disrupt this industry. How did you actually go from having this idea, all of us have ideas, and then actually creating a product and getting it out to people?
Heidi Zak: Yeah, I mean the first few years were really hard. So we started the company with an app that let a woman size herself using a smartphone and computer vision technology that we built in house. And then we were developing our own product, including half-cup sizes. And so literally you just start hiring people and you start trying to do things and half the stuff you do doesn’t work. And it’s really all about getting through those failures to make something happen. We actually in the early days at ThirdLove thought that it’d be really to produce bras on demand. So our first manufacturing line in Mexico, we made one bra at a time on a line. And one of the things that a lot of people don’t know is that bras have 30 components. So the complexity of producing a bra on demand is really difficult. So we had these bras coming off the line that were Frankenstein bras. They literally had different wires and cups and they were terrible and the line didn’t work.
Steph: Yeah, of course. And I mean early on, actually, I know you actually spoke at Hustle Con a couple of years ago, and you talked a lot about how PR was really, really helping you guys early on. Now it seems like you guys have diversified a bit. Can you tell us a bit about how that has actually evolved over the years?
Heidi Zak: Yeah, I mean I think PR is always important. I mean it helps you build your brand, whether it’s consumer or the business press. But certainly in the early days of the company, we weren’t spending money on paid marketing, and today we spend a lot of money on paid marketing. And so I think that mix evolves over time. And then it depends on the landscape that you’re working within.
Steph: For sure. And I know early on you actually said Facebook, the big D to C channel, was not working for you. You said it was like $500 cost per acquisition at some point at least.
Heidi Zak: Yep, you’ve done your research
Steph: Has it changed or?
Heidi Zak: Back in the day when I placed all our Facebook ads in 2014 there was a time when, yes, we were seeing these crazy CPAs and then we launched this program called Try Before You Buy. And so for us that was really a hack to find product-market fit. So we had an amazing product. We didn’t have people buying them. I remember in 2014 there would be days when we didn’t have any orders. I mean today we have thousands and thousands of orders a day. And so we came up with this crazy idea where how about we just ship a bra to women for free? Because then they’ll try it on and they’ll realize how great the ThirdLove bra is. And so we did that and that really, that changed our business, and it allowed Facebook and other platforms to be successful because we had the right marketing technique to attract our customer.
Steph: Right. So how does that actually work from an economic perspective? How many returns do you get? Is it profitable, the program on its own, or is it just profitable amongst the rest of your business?
Heidi Zak: Great question. So, we just phased out our Try Before You Buy program, literally last month. So it’s a coming of age for ThirdLove because people actually know the brand, and so we’re in a different position. But I’m in the early days of Try Before You Buy, it was incredibly risky. So, we had about 10 months of runway left and we got our whole team together. There was about 10 or 15 of us, and we sat around the table and we came up with this idea and we’re like, either this idea is going to be amazing and everything we’ve dreamed about, or it’s going to bankrupt the company because it’s all about the return rate. Right? And so we were like, screw it, we’re going to do it because we don’t have any other options right now. And so that’s why we did it. But what ended up working was the keep rate, so to speak was really high. It was 75 to 80% and so we were basically profitable on first order. This was, we didn’t have as much scale, but yeah, that program always was profitable from the very early days.
Steph: Nice. And now you have kind of like a referral program that is pretty newly introduced or…
Heidi Zak: Yeah.
Steph: How long has it been around for?
Heidi Zak: A few years, but reasonably new.
Steph: Right, and so something I find really interesting is this Try Before You Buy or this referral program, they’re kind of the types of growth techniques that tech companies would traditionally use. I know you guys also kind of refer to yourself as a technology company in the way that you use your Fit Finder data. Can you tell us a little more about that?
Heidi Zak: Yeah, so the Fit Finder was the transition from the app that I was talking about to a web-based platform that was a lot easier. So the app was really awesome in that it was actually, I think a little bit ahead of its time, but a lot of women loved it. A lot of women couldn’t even get through the instructions, because it was a little complex to use. So the user experience wasn’t great. So we said, “How do we take all this data we’ve already captured and put it in a way that a woman can find her bra size in under 60 seconds?” And that was the goal. And so we took all that data, we designed the Fit Finder and then we hired a big data science team obviously to leverage that data to build an algorithm to really effectively recommend a bra size. And so, the Fit Finder for us is a customer acquisition tool, right? It helps us gather emails, gather data, and the data we can use for inventory planning, product development, marketing, personalization, everything we do. The Fit Finder really allows us to capture a lot of customer data upfront.
Steph: Yeah. And one of the things you guys did is actually build a product based on the data you’re getting from the Fit Finder. So you guys did the extended line, right? And you were able to basically sell over $1 million worth of product in five days by using this information that you had. Maybe tell us a little more about what that thought process was and how you actually utilize that data.
Heidi Zak: Yeah, I think what’s really important, if you’re thinking about kind of trying to capture data from your customers, like how are you going to use it obviously, because if it’s not valuable to you or you’re not helping them make better decisions, then what are you doing with it? So for us, obviously really understanding size distribution and then fit issues was really important as we thought about what product lines to roll out and then also what sizes to add. So when we added 30 new sizes about a year ago, we leveraged the data from the Fit Finder to design those products as well as those sizes.
Steph: And you also talk about how the algorithm actually improves as you get more data, 14 million data points now. How does that actually work? What info are you using? Are you using return rates? Are you using… Is the actual Fit Finder evolving over time as well?
Heidi Zak: Yeah, absolutely. So when we started with the Fit Finder, one of the main metrics we did use was return rate. Now because so many women have done Fit Finder and we do have millions of customers, we found it’s actually more accurate to use repeat customer data, because it’s a better indicator of predicting success through the algorithm. But it’s constantly evolving, and what we’ve managed to do is collect over 2 billion data points. And so unlike any other bra companies, a startup in the space or Victoria’s Secret, the data’s really something where it sets us apart from other companies.
Steph: Yeah. And have you seen like Vic Secret or I know Target recently launched a bra brand. Are they looking to do something similar with this data or are you guys really just like miles ahead of the competition?
Heidi Zak: Well, I think they’ve started to kind of… A lot of brands have copied Fit Finder and a lot of all kinds of companies have it today, but ours is kind of ahead because of the data we’ve collected and the algorithm that’s been in place for a few years, so.
Steph: Right. And talking about acquisition, I know early on and maybe still true today, you guys use podcasting a lot or podcast partnerships. Is that still a big part of your strategy?
Heidi Zak: We love podcasts at ThirdLove. No, podcasts have been really amazing for us. I remember we started on podcasts in early 2015. I remember telling one of our investors, “Oh yeah, we’re doing, this is going out on Facebook and then here’s what we’re doing on podcasts.” And one of them was like, “What’s a podcast?” Seriously, so, but podcasts I found are really effective for us because there’s that connection with the host, right. So the women, whom it’s always women who are the hosts, they wear the product, they can speak about it. There’s really an authenticity in that that’s really important today in marketing and is actually kind of hard to find on digital platforms.
Steph: Yeah, and I’m guessing in general, you guys are a D to C brand and most D to C brands stick to Facebook, they stick to digital advertising. You guys have really ventured outside of that and I think you’re actually like quite a bit of an advocate for D to C brands or digital brands. Looking outside of that, what’s your advice for someone who really does have a direct to consumer brand that’s looking to expand past that?
Heidi Zak: Well, I think today it’s very different. So again, going back to 2014, 2015 when we started, you couldn’t advertise on Instagram, right? So Instagram wasn’t a platform. Obviously the world’s evolved. But Instagram’s become really crowded and really expensive as we all know, as well as Facebook. And if you think about what Facebook has done, they’ve really built their business on the backs of D to C companies. I mean, in essence, that’s kind of what’s happened over the past few years. And so for us, I think there’s a certain amount of scale Facebook can provide and it’s still really effective. But it’s how do you reach other women? Where are they? What media are they consuming? How do they shop? For us, brick and mortar, that’s one of the reasons we opened a store, right, was thinking about not everyone’s going to buy a bra online. So, sort of the basics of that. But certainly for us, another avenue that we’ve been leveraging a lot more is TV. So this idea that we’re going into more mainstream, what I would call mainstream or traditional media. Yeah.
Steph: Yeah. And so, speaking of the store, when did you finally realize, you know what, we need to expand past this digital presence and go in-house or in person? What was the magic moment where you knew we got to get there, we got to open this store up?
Heidi Zak: I always said we would never open a store and I had to eat my words this year. So, our customers were always asking for a store, but part of the reason why I wanted to create ThirdLove is I really believe that women don’t want a bra shop in a store. I mean, I do think that’s true, but I think for some women, that hurdle of finding your fit and trusting that we can send you something through the mail is not everyone’s going to get there. So we just said, why not just try this out, and look at the end of the day I consider it, it’s not a channel so to speak, it’s a marketing investment. So, what are we spending on digital marketing versus what’s the investment in the store? How can we acquire customers, grow brand awareness? It’s all one and the same. And at the scale of spend that we’re at on media, starting a store isn’t that much of a capital investment at this point, so.
Steph: Right, that makes sense. And I have to ask you about inventory, because you guys have 78? Is that the right number?
Heidi Zak: 84 now.
Steph: 84 now, 84 different sizes. And then I think online you have maybe 20 or so different bras, different colors. We’re talking like thousands of skews. And I’m assuming the reason that most traditional brands have 30 is because economically that’s what makes sense or operationally. So how do you manage, especially now that you’ve opened an in-person store, it actually accounts for all of those skews?
Heidi Zak: Very good question. By not carrying most of them in the store. Yeah, I mean, I think for us really we consider our store to be a fit lab. And so it’s in Soho, and what’s super interesting is it’s about 1500 square feet. So it’s very, very small. We have 11 fitting rooms, and on the weekends there’s lines waiting to get in the fitting rooms. So it’s really an essence of place to go to try on a bra. So we stock every style of every size and every style for try on but not for selling. And then we had two to three core bras in one color that we stock in-store. So a woman could walk out with a bra or she may order from online. And usually the customers that are placing orders, it’s a blend of both. She’s usually walking away with one bra and then ordering two from our online catalog.
Steph: Got it. And what’s the repeat customer rate? Are you guys getting most women ordering from you once they’ve bought one or is it…
Heidi Zak: Yes. The vast majority of women are then going to order online.
Steph: Right. That makes sense. So let’s talk about, you actually, you’ve raised another round earlier this year, why did you raise another round? Because you’re actually profitable, right? Or at least I think it was January 2018 you guys turned profitable. What did you actually want to do from the money? Why did you actually need that extra round?
Heidi Zak: Well, I think given, you never know and everyone always says this, but it’s always better to have I think a little more money than less, not that you need $1 billion, but having a bit more money is probably a safe way to go. And we’re making a lot of investments in our future. So as we think about building the brand, as we think about international expansion, category expansion, continuing to add more sizes. All of those things take upfront capital, and so having more money to invest in brick and mortar and all those things, that was really what the round was for.
Steph: Nice. And you’ve actually, you managed to raise that round and have a really impressive board behind you. Any advice for people in the audience who are looking to do something like that to really get people who are experienced in the space, well known in the space, to really get behind them?
Heidi Zak: Yeah, it’s interesting. So Lori Greeley, who’s one of our independents on our board, joined us when we were under $1 million in revenue and she’s the former CEO of Victoria’s Secret. And we actually cold emailed her or cold connected with her on LinkedIn. And obviously she had been at Victoria’s Secret. She was aware of ThirdLove, my co-founder and I…She was living in Charleston at the time taking, this is a funny story. She was living in Charleston, had just left Victoria’s Secret and she had a noncompete. So she was like hanging out and she was like, “Oh yeah, I’d love to chat with you guys.” And we’re like, “Oh, we’re going to be, happened to be in Charleston, South Carolina ,for some reason. And well, maybe we can meet up.” And she actually drove and we met her and Durham actually, and we met her for dinner and we convinced her we were going to be the next Victoria’s Secret, and we really wanted her involved. So I think my advice would be don’t think that somebody… Shoot for the stars, I guess. The worst that can happen is somebody doesn’t respond, but like they might respond, you might get a meeting and you might close somebody who you thought you never would be able to get even when you’re smaller. And I think a lot, I think the other thing as it relates to a board is that you have to keep in mind, this is also with anything you’re doing with the company, is that you’re offering value as well. I think as a founder in the early days, you do a lot of like, oh my gosh, we’re so small and we don’t know what we’re doing. And there’s a lot of that that goes on, which is true. But when somebody joins your board, especially if they’re from a bigger company and you’re scaling, they’re going to learn a ton of things. They’re going to learn like growth hacks that they would’ve never thought of. They’re going to learn totally new things about an industry that they may or may not know that well. And so they’re getting incredible amount of value out of joining your board. So it’s not just a one way opportunity. And I think that’s really important when you’re pitching somebody to join your board. It’s mutual.
Steph: Got it. And now you actually angel invest as well in a couple of companies. So if someone’s looking to pitch you, what are you looking for in a future investment or what spaces really excite you?
Heidi Zak: I’ve only invested in female founders. I just made that decision because I feel like we need it. And so I’ve made I think 10 angel investments in the past five years. It really is about the founder. I mean I don’t have time to do a massive amount of diligence in running my own companies. So it’s really about just the tenacity of a founder and the energy and the passion. Because at the end of the day, if there’s going to be so many roadblocks, it’s like somebody’s got to persevere. So that’s usually what I’m looking for.
Steph: Cool. We have a couple more minutes. So, I want to ask you a couple really tactical questions. Why $68? That’s the price point of basically all your bras. It’s higher than most bra, but it’s also not an extremely high price point. So how did you get there?
Heidi Zak: I wish I could tell. There was a very detailed analysis, but actually in the early days our price point was in the high fifties and we raised it a little and we didn’t see any price sensitivity, and so we kept it at the $68 price point. Our quality is much higher than a Victoria’s Secret. And before VS was really promotional, they were sort of at that 40 to mid 50 price point. So, we just decided that price point indicated the quality that we’re providing.
Steph: Got it. And now you guys are profitable. And so how did you… Was that always, obviously it’s always the goal for any company, but in going into 2018, were you like, “This is the year we’re going to be profitable,” and how did you actually achieve that?
Heidi Zak: Well, I think, so for us, it depends on the month. Sometimes we’re profitable, sometimes we’re not. And at the end of the day, for us it’s all about marketing, efficiency and how much we’re investing. And so we choose basically a path. And so I think you, like any company out there, and I’m sure there’s a lot of founders here, you can choose to grow slightly more slowly likely and more profitably or you can choose to like really go for it. I think obviously given today’s climate, there’s a lot more emphasis put on creating something of value. And I mean at the end of the day, a business needs to make money. So I think even if you’re not profitable, that’s fine. You’re making that decision and you’re investing in your future, but you need to understand what your business does look like at scale to make sure it has legs.
Steph: Yeah, for sure. And one final question. So you guys have done an incredible job organically actually with your acquisition. If you go on to [inaudible 00:19:27], you have hundreds of thousands worth of traffic and there’s hundreds of thousands of searches just for ThirdLove, the brand. How did you guys actually get there? Was it a very long haul over the seven years or is that one of the channels that has always been very strong for you guys?
Heidi Zak: It’s grown over time for sure. I mean, again, brand searches are really around knowing the brand, caring about the brand. For us, the open letter that we did last year with Victoria’s Secret when we took out a full page ad in the New York Times, I think really helped also increased brand awareness and in a way that was different than what we had done in the past, so that-
Steph: Yeah, maybe that just for the audience, tell them a little bit about what that was, what actually got you to write that letter.
Heidi Zak: If there’s like a minute left. So it’s like a longer story than a minute, but at the end of the day, it was… No, it was November. It was a year ago. The former CMO, chief marketing officer of Victoria’s Secret, did an interview with Vogue. The title of the article was, “We’re Nobody’s ThirdLove, we’re women’s first love.” And so when I woke up that morning there was like all these texts and emails coming through. Anyway, if you need some reading at some point it’s a 20 minute articles. It’s quite interesting, all the things he said. But he said so many things that were just totally offensive, and just really frustrating to read. And so we decided to respond, take out an open letter to Victoria’s Secret and basically let the world know there’s another option. And there’s also companies who totally don’t believe anything that this guy was saying. And so, eventually they just announced they’re no longer doing their fashion show. And so things are slowly changing there, but I really believe as a company, we have helped change an industry that needed dramatic, a dramatic push to become anything different. They would have just been doing what they were doing today if we weren’t around, I think.
Steph: Well, I think that’s great and we’re just at time, so thank you so much.
Heidi Zak: Yeah.
Steph: We’ll do a couple of questions on Slido. All right, so did you leave Google immediately or was ThirdLove ever a side hustle?
Heidi Zak: It was a side hustle for maybe a month or two as we did some of the initial market research and kind of the initial business plan. But I mean I was working down south and living in SoMa and so I wasn’t getting home till like nine o’clock every night and so it just wasn’t reasonable. My job wasn’t like a nine to five. I think if you have a more reasonable job, you can probably do a little more on the side, but at some point you have to commit, you have to go all in. It’s kind of like Shark Tank when they say you’re doing this like on the side, then they don’t believe in you, because they don’t think you believe in your business.
Steph: So how long were you actually working on the business before you got funding and went all in?
Heidi Zak: We bootstrapped for probably like eight or nine months. Yeah.
Steph: Nice. All right. So next question. Why did you choose a co-CEO model?
Heidi Zak: In our minds, two brains is better than one. I mean, I think that we have a lot of alignment on key strategic initiatives, but there’s big decisions you make all the time and it’s lonely. It anyone here who’s, if you’re a single co-founder, that’s a tough gig. I think it’s really important, whether you have a co-founder or co-CEO to have that person that you can lean on and that you can talk to with real honesty, and someone who can be there for you.
Steph: And your co-CEO’s actually your husband, right?
Heidi Zak: Yes. So we know each other really well for good or for bad, and we’re not divorced yet, so that’s also good.
Steph: Perfect. All right. So we talked about this a little bit. You do a lot of offline marketing. What are the channels that are working for ThirdLove?
Heidi Zak: So TV is showing good promise and I mean, I would consider a podcast to be offline. So podcast is one of our best performing channels.
Steph: Great. And how do you actually find the podcast that you partner with?
Heidi Zak: We have a partner that we use, but in essence there’s certain types of shows we found that are really successful for us. So we look for shows with similar dynamics.
Steph: Got you.
Heidi Zak: So, but we’re always testing and measuring and using vanity URLs and all kinds of metrics.
Steph: Right. All right. So how did you eventually get the user experience right on your app/customer journey? What research did your team do for those insights?
Heidi Zak: So, well, I won’t talk about the app since the app doesn’t exist, but for the Fit Finder, a lot of it was really just looking through the journey and the falloff. So really understanding the order of questions matter. So an example for this for our Fit Finder, if you go to it, we show breast shapes and so if the breast shape is too far at the beginning, women fall off, because stresses them out and they feel like they can’t make the decision and so it has to be further along. And so I think it’s really understanding the order of things and what you’re collecting and constantly testing that.
Steph: So, how long did it take for you to get really a version that wasn’t dropping off and was converting pretty well?
Heidi Zak: Probably six months. I mean today it’s constantly evolving and we’re always testing things, that doesn’t stop. But I would say within six months we had a good version.
Steph: And what’s the conversion rate from someone who starts the survey or the quiz to actually finishing it?
Heidi Zak: 70%.
Steph: That’s pretty good. Nice. Okay. So why isn’t Victoria’s Secret copying your every move? Sounds like they are a little bit.
Heidi Zak: I think they think, what have they said? They think it would be “pandering” if they had a plus-size model or if they did this or that. But yeah, I don’t know the answer to this. I don’t know.
Steph: All right, we’ll move on to the next one. ThirdLove, How did you go about finding the right manufacturer? This is a good question. Where did you find them? We have so many people on trends who want to create a product, but that seems to be a huge friction point for people and getting started.
Heidi Zak: It’s the worst. It’s so hard with a physical product anyone who’s doing it. Nobody wants to work with you when you’re little because you’re little. And that’s really hard. I mean it gets better over time, but I think we just pitched a lot of people, I mean it’s kind of like pitching investors. You need your game face on. Especially when we went to China the first time we didn’t have a website. So imagine pitching investors and you’re like, “This is ThirdLove.” They’re like, “Where’s your website?” We’re like, “We don’t have one.” So you really have to sell them like you would an investor on your vision and what you’re building and how you’re going to change the world and get them really excited about it. For us, we did a lot of like VS is not going to be here forever, so who’s going to be the next Victoria’s Secret? And manufacturers got excited about that.
Steph: Got it. All right, we’ll do one more quickly. How did you do your market research? Any resources that you used?
Heidi Zak: We did qualitative interviews with a lot of women, about bra shopping, brands they liked, and then quantitative as well. And then the usual sources but nothing… I don’t have a great answer for this.
Steph: All right, well, we’re at time. Thank you so much, Heidi.
Heidi Zak: You’re welcome.