What does a best run 21st century business look like? Ask Chagrin Valley Soap and Salve
- Chagrin Valley Soap and Salve is a great example of growth that has been supported by iterative changes in technology that makes sense to buyers.
Chagrin Valley Soap and Salve Company provided me with an opportunity to enjoy one of the great pleasures I get from talking to today's best run businesses. That pleasure comes from hearing how non-technical people take what's new and, with a little help, make it work well for their business.
Chagrin ValleySoap and Salve's story starts in 2001, when Ida Friedman used her knowledge of biology, chemistry and physics from teaching in middle school to develop an organic soap product that alleviated her husband's eczema. Following that success, she continued making soap products and lotions for use by friends and family, eventually realizing that her efforts have commercial value.
With little more than word of mouth from appearing at local farmer's markets, Chagrin Valley Soap and Salve quickly went from a science experiment to a part time business. The business's first foray onto the internet took the form of an informational website built on FrontPage (anyone remember that?) and lasted several years before needing a refresh in 2010. That second site was a bespoke design which, at the time, was the only way the business could get what was needed for an ever expanding product line accompanied by substantial growth.
A growth timeline
Sam Friedman, son of the founder and self-confessed polymath explains the timeline:
Over a period of two years, we had designed, developed and built what was our last website that we just replaced less than eight weeks ago. We had that site for a little over five years, and it really helped to propel us onto the next level. But it was wholly bespoke.
During that time, we increased our staff. We increased our product line. We moved to a warehouse space, which was about 8,000 square feet. We had a staff of six. Three years later we moved to our current building, which is 35,000 square feet, which we now own. It was a former Nestle facility, and now we've increased our staff to 13.
The bespoke nature of the last site meant that it could not take advantage of developments in the wider CMS world. That changed in 2015 when the company iterated again, this time to the current site that uses Umbraco, an open source CMS along with Shopify for the main buyer experience. Once again, the process took two years which Friedman explained as:
The biggest piece of this is that we have 330 products, but we have 400 pages of information. It's a 700 plus page website. It was the integration and culling of all of that information, to properly display it and have it accessible to the customer, that just took a very long time. Hopefully we've done it right.
Small batch production
Talking about such a large range of products, I was curious to understand how the company manages production in an environment where e-commerce features so heavily.
It turns out that many of the products can be made in small batches, almost kitchen style, while soaps take a lot longer and need to be warehoused.
When people come and tour here, they're very surprised at what they see. We have a 9000 square foot room where we make 75 different varieties of soap and shampoo, and there's one person who does that. Then we have a product kitchen where we make over 250 products by hand every day, and there's two people who do that. We're a very small team of close family and friends who make an awful lot of products but very efficiently.
We don't have any manufacturing equipment. Our biggest piece of equipment is a Kitchen Aid mixer that you would have in your kitchen. We do everything like a small bakery would. It's all done by hand. It's all done with raw foods. Our creams are dished out of a pastry bag, not out of a machine with a belt and a line. Very different than most people would ever expect.
Chagrin Valley Soap and Salve is USDA organic certified. That's a differentiator for the company and supports its all natural approach to ingredient selection. Given that everything is hand made, how does the company manage for consistency? Isn't that the manufacturer's mantra? Turns out that's the wrong question for an artisanal business.
I think there's a concept out there of consistency that's different from quality. Because the question you're asking, to me is almost a confusing one. If you go into a high end, chef driven, farm to table restaurant. You've got four guys, five guys back in that kitchen, who are just so skilled at what they do. Where really does the consistency come in? Are they consistent?
McDonalds is going to be consistent, but does that mean McDonalds is producing a quality product? No. You can eat the same burger in Hong Kong as you can in California. In that chef driven restaurant, every burger is being made from scratch, by hand, so there will not be that type of consistency, but are you going to doubt that over the one that is consistent by a McDonald's standard?
So for us, hearing the word "consistent" is not a positive word. High quality is the positive word. Hand made, artisanal, the ingredients, those are things that are important. If there's a small differentiation in color, or in appearance from one batch to another, that doesn't affect the quality or the product itself.
The Amazon effect
But then there are other forces at play. Back in the day, the company had successfully sold into some Whole Foods branches but with Whole Foods acquisition by Amazon, the game has suddenly changed.
David Braun, who again prefers not to offer a title said that while the company sells on Amazon already, Amazon has changed the customer perception about service.
Customer service level expectations have skyrocketed. People expect everything and more. They want free returns. They want two day shipping. They want constant access to customer service. I would say it's those things that have had the biggest impact on us.
That combination of Amazon style expectations alongside increased demand coupled to a long lead time to manufactured soap product, meant that soaps inventory was difficult to manage, even though there was the counterbalancing effect of relatively stable overall demand.
That's where VersAccounts came in. The basic problem came down to QuickBooks not being able to tell us about inventory so while we could see sales figures, we really didn't know what was being sold or what was in stock by line item. VersAccounts was recommended to us by a couple of agencies and when we spoke with Sunil (Pande - CEO) and his team it was clear we needed a custom report. Once that was in place we then needed to build some history so could get visibility into how inventory works.
Today, Chagrin Valley Soap and Salve knows what its regular top selling products are, knows how to manage seasonal variation and can, therefore, predict production requirements relatively easily. That still leaves open the question of new product introduction.
Market channels - email still wins
Here the company relies on its email marketing system and high quality imagery tied to an Instagram account alongside some Facebook and Twitter activity. But it is the company's monthly newsletter that reaps the greatest reward for the effort expended.
Discussing the use of these different media, Friedman believes that Facebook's efforts to throttle organic traffic in favor of ad-driven content makes it a lot less useful, while at the same time overloading readers with too much content.
If we have say 15,000 people who have said, "Listen, I'm interested in this company's content." We put content out, and then we see that it's reached 800 people, or 1,200 people out of the 15,000 on Facebook, it becomes not a very useful tool.
Instagram is much more open and flowing at the moment, because there isn't that interaction. We can post simple things, like photos of a new product, or a flyer for an event, and it does seem to gain a little more traction.
Our monthly newsletter is where it's at. There's nothing we do on a social media platform that cannot be achieved by the great communication in the once a month newsletter that goes right into someone's email box.
We're able to talk about our business, highlight employees, highlight products. Talk about things we're doing in the community. Announce sales. It's just once a month, it's one email, but every time it goes out, we have a large bump in traffic for a few days, and it seems to be the most effective tool that we have for communication.
We get anywhere between 16 and 20% open rates with 8% clickthrough. That's much higher than I'd expect in our industry and much more effective than any other channel.
As our conversation came to a close I couldn't help but think that small though the company may be, Chagrin Valley Soap and Salve faces the same (or very similar) issues to those of their larger brethren.
The internet, e-commerce technology and the ability to relatively easily reach a significant size of market creates tremendous opportunity to build a sustainable business. You still need a great and differentiated product but that's not enough. With a little success come unexpected complications.
And then there is the impact of changes in the business model of those they supply and some of the networks upon which they have relied to both stimulate demand and reach fresh audiences.
The technology clearly matters in this context and I was pleasantly surprised to discover that technology as an enabler can be readily put into the hands of non-technical people and still deliver a solid return on the investment.
But, like the people with whom I spoke, there are concerns from the amount of power that the likes of Facebook and Amazon wield. It was left open just what that means in the context of a fresh set of conversations between Chagrin Valley Soap and Salve and the new owners of Whole Foods. The company would dearly like to expand that relationship but are keenly aware of the new demands that could place on the business.
The good news is that Chagrin Valley Soap and Salve got into the organic products business long before it became a fashionable 'thing,' established a loyal market footprint with a good sized fan base that allows it to stay true to its roots and focus upon quality. Maintaining that degree of integrity is never easy but from my perspective, it represents the real differentiation that matters in what is otherwise a strongly contested market.