Scaling: How to Allocate Resources, Find Bottlenecks, and Enter New Markets with UrbanStems’ CEO, Seth Goldman

In recent years, UrbanStems has grown from operating its online flower ordering and delivery business in a few markets to processing and delivering orders from coast to coast. It’s a DTC success story, but it was by no means an easy road to get to where the company is now. 

Scaling is one of the most challenging parts of running a business. Where do you allocate your resources? How do you enter new markets? And what do you do when disaster strikes in a way that could topple your business?

Seth Goldman had to answer those questions and more when he took over as the CEO of UrbanStems in 2017. On this episode of Up Next in Commerce, he spilled the tea on everything he learned along the way. Seth explains how to navigate through the process of scaling, finding bottlenecks in your operations, and breaks down the ways to look at ROI when trying to break into a new market. Plus, he gives some insight into best practices when adding headcount. 

Main Takeaways:

• Finding the Bottleneck: There is a tendency for everyone to think everything is the problem, so it’s important to use data to prove that you have an actual bottleneck rather than anecdotal experiences. With the data as a guide, you can zero in on the actual bottlenecks and fix them at the source.
• Tipping The Scale: There are various hurdles to scaling. Doing it successfully is about finding the right level of balance when it comes to allocating resources. Are the current processes failing? Is there new technology that can create efficiencies? Or maybe you should be allocating headcount in a different way. Answering those questions is the best way to determine how to stimulate sustainable growth.
• Welcome To [Enter City Here]: When expanding your business into new markets, understanding the ROI of moving into those cities is the first step. It’s not enough to figure out if there are potential customers. Other factors such as supply chain, cultural considerations, and non-financial benefits also need to be taken into account.

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

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Transcript:

Stephanie:

Hey everyone. Welcome back to another episode of Up Next In Commerce. This is your host, Stephanie Postles, co-Founder at mission.org. Today, on the show, we have Seth Goldman, the CEO of UrbanStems. Seth, welcome.

Seth:

Thank you, Stephanie. Great to be here.

Stephanie:

Yeah, I'm excited to have you. For anyone who does not know UrbanStems, can you tell me a bit about it?

Seth:

Sure. UrbanStems is a six-year-old old company that is the premier provider of direct to consumer florals.

Stephanie:

That's awesome, and how long have you been with the company?

Seth:

I've been at the company for about three and a half years.

Stephanie:

Cool. What brought you to UrbanStems and what was your background before?

Seth:

Yeah, so it was a person actually that brought me, the founder, Ajay Kori is a dear friend of mine, and we both worked at a company called Quidsi together, which was acquired by Amazon back in 2011, and we remained very close friends from that point on. I went off to a company called HelloFresh. He went off to found UrbanStems, and we reunited in 2017.

Stephanie:

That's great. What did you do at HelloFresh?

Seth:

Yeah, I was the CEO of the US business, helping to grow HelloFresh from its near infancy in the US to a much larger business, and it was a wild ride and I had a lot of fun doing it.

Stephanie:

That's great. It seems like a good company to get a lot of lessons from, to bring to UrbanStems, like similar problems maybe, or things to tackle.

Seth:

Absolutely, both in terms of the apps, specific product, a perishable product, and a complicated supply chain, as well as I'd say the softer skills in terms of scaling a business, scaling a team and the challenges that come along with that.

Stephanie:

Very cool. When you came into UrbanStems, what was going on back in 2017, and how has it changed since?

Seth:

Yeah. When I came on board, it was great. Ajay brought me in and asked me to help beef up the operations of the company. I'd say, as a consumer, the biggest difference between now and then is that you could only get UrbanStems in a few select cities across the US at that point, and we made a big decision to go nationwide in early 2018, and that's really helped us scale the business since then. Although, we really still love our city delivery method that we still have in New York and DC. It creates that really intimate relationship with the customer and their recipient. We hope to be able to do more of that going forward.

Stephanie:

Tell me a bit about how do you pick cities? Of course, if it's started in a certain city, you're probably going to launch there, but how would you go about picking which cities to start in and having that city method that you're talking about, is developing a good relationship in that city?

Seth:

It's a pretty simple exercise of figuring out which cities are likely to have enough revenue and an ROI on that city to get in there. We believe there probably around 30 cities that we could identify today that likely makes sense. In terms of which cities we'd prioritize next, we would really rely on data. That data would help us understand what would be the revenue opportunity, how quickly we might get there. From there, we would also layer on supply chain and we would try to figure out if that city was easier or more complex from a supply chain standpoint. Finally, we'd overlay brand. We'd try to understand if there were any idiosyncrasies of that city that made it more or less attractive. Then finally, we might say, does that city have any sort of non-financial strategic importance to our business?

Stephanie:

Oh, great. Okay. This is a very interesting topic that I actually have not talked to many people on the show, so I want to double click into all of those, if you're happy to go there with me.

Seth:

Sure, let's go.

Stephanie:

All right. When you're picking your cities, you're talking about developing which ones have an ROI, and then of course, looking into a bunch of data for rolling out to the next cities. How do you go about developing which cities will have a good ROI?

Seth:

Yeah. The great news is that we have data to show what revenue we have in those cities currently. We would have to do a deep dive analysis of what zip codes we thought we could actually deliver to, depending on the city, if it's a city that we could get in with bike messengers, as we currently do in New York and DC, or if it's a city that would force us to rely exclusively on cars, which is not a major concern although we really love our brand promise of delivering via bike where we can.

Stephanie:

That's fun.

Seth:

Yeah, we would then use analytics to understand where we stand in each city revenue versus where we think we might be able to get to, where we start to have to look at some proxy data. For example, Google can help us understand what we believe our penetration in that city is versus a benchmark say of New York or DC, where we currently have our strongest brand recognition. That could give us some guidance as to whether, if we're doing X dollars of revenue, do we think if we jump in, we can increase that by 25%, 50% or more than 100%? Then we have to partner with the marketing team to understand what sort of a marketing effort would be required to get us there within a year or 18 months to break even, which is sort of, not a hard rule, but it's sort of a general proxy of what we're going to be looking for.

Stephanie:

Okay. When it comes to that marketing effort, what kind of channels do you look for, especially when you're launching in a new city where maybe you're not well-known and it's like, this seems like a city maybe similar to DC, but we've never been there before? What kind of things do you explore to get those new customers and brand awareness?

Seth:

We have to probably devote certain on the ground marketing campaigns. It could be as simple as going to street fairs, it could be that we would take some sort of local radio or other sort of top of funnel awareness advertising out. Each city though, is really going to be unique. I think that's something that we've learned, even just having New York and DC, we see small differences in the average order value. We see small differences even between, say Manhattan and Brooklyn, in terms of the percentage of flowers versus plants that the consumers purchase. So, we'll have to do some research that helps us understand the consumer and then that would help us figure out which marketing channels would make sense. But we almost certainly would be more comfortable getting aggressive in awareness marketing when we jump into a new city, because the return on that investment should be pretty strong, given that when we get into a city, the conversion rate, we would expect to be higher on our ecommerce platform.

Stephanie:

Yeah. That's cool. I can also imagine if you have bike deliveries, like if they had the backpack with your logo and beautiful flowers sticking out of it. That in and of itself could be a great marketing tactic to spread word of mouth.

Seth:

Absolutely. That is an entire romantic vision is true, except hopefully for the flowers sticking out the back, because they should be in contained packaging.

Stephanie:

Oh yeah. I guess I would just buy all over the place if they're just sticking out. Huh.

Seth:

But we do have branded everything for our couriers, t-shirts and vests, the coveted sweatshirts and hoodies. In fact, one of the downfalls of our sort of head of delivery was that he designed a hoodie that was too well loved that, not to accuse our corporate team, but they started taking them in numbers that they shouldn't have so we had to place an extra order. It really is the most comfortable hoodie.

Seth:

But it accomplishes two goals. The first, as we discussed is, it's really nice branding and advertising for the company. The second is it helps make these employees in these remote locations feel more part of our broader and greater team and brand.

Stephanie:

Yeah. I love that. Are there any other on the ground methods like that, that you're experimenting with or that you are hopeful of to promote word of mouth in maybe a new and different way?

Seth:

It's interesting in, especially the last nine months, we probably pulled back on a lot of that for obvious reasons. I think that it's an area where we would experiment, but I think you also have to be careful because it's hard to measure the effectiveness of that spend it takes, not just monetary resources, but really time. One of the things that I noted when I came on board in 2017 is that my city managers were being asked to do a lot of these in-person events. We hadn't really thought through how much of their time was being taken and how to think about them as an operations manager versus a marketing manager when we had a lot of work to do to scale the operations of the business. I think people just have to be thoughtful and careful about the KPIs that they're going to measure people against.

Seth:

But the people who are responsible for budget, but also the people whose time is going to be taken during these events. The good news is that the people love doing the events. These small scale events were very popular for the staff that, even after I told them that they should pull back, I found out months later, they were still doing them because they enjoyed them, but then they would complain that they didn't have time for other things. It did have to lead to some alignment meetings.

Stephanie:

Yeah. That's a really good point. So, thinking about the next piece that you mentioned was layering on supply chain when rolling out into new cities. It seems really difficult of course, with fresh items. So, how do you all go about thinking about that in a new city and building out a good supply chain that makes sure the flowers don't just die in a warehouse or something?

Seth:

A very sort of blocking and tackling for our goods is that you have to have a refrigerator. It has to be something that you have confidence is going to maintain temperature at around 35 degrees. And you, say very simple things like just like you're developing any real estate, make sure you give enough time to build it out, so you're not under pressure, because it's hard to come back from that if you're forcing yourself to open up on January 1, but you just can't have the refrigerator installed before then, you're going to fail. Making sure you understand your lead times. But for our business, I'd say the most important thing is understanding the notes in our networks. We have a larger facility in the Greater DC Area that helps service our New York and DC same day delivery locations.

Seth:

We have to think through as we branch out to more cities, if so for example, Philadelphia, we could certainly service from the same Maryland facility with limited additional CapEx, with limited additional complexity added to our supply chain. As we think to the West Coast, or as we think to, say the big populations in Texas or in the upper Midwest, if we have a facility nearby, there may be synergies where we can pull product from there and deliver it to a local facility. I would say that the farther we get from our home base, in terms of miles, in terms of being three hours and three time zones behind, you have to just ... it's hard to model it out on paper, but you have to start to acknowledge that the difficulties, things that could get lost in translation. You go from having everyone on the same eight hour, 9:00 to 5:00, to only overlapping for five hours, that can just sort of add strain to the systems.

Seth:

If you're going to go to the West coast, have you hired someone, did you decide that you're going to spend three months having them on the East Coast, training up, learning your culture before you send them to the West Coast, or you're going to take a gamble and just hire them on the West Coast and through more Zoom calls and maybe someone flying to California, try to build them into the culture and the brand of the company? I think those are really important decisions that don't sound like supply chain decisions, but ultimately, really help you down the line when someone is going to have to make a lot of executive calls that will impact your supply chain and will impact your ability to be successful or not on a day-to-day and week-to-week basis.

Stephanie:

Yeah. I think that's so important around building culture and a team. I mean, especially right now, where everything is digital and companies are still having to hire and find the right people, and it's kind of hard over Zoom. I've interviewed some people over zoom and it's like, you don't really know if you know them or how many notes they have in front of them, or what's really going on. How do you guys go about building a relationship and hiring? I think earlier you mentioned having this connection economy, where everyone's on digital tools, but people still want to connect in the real world, but maybe you can't right now. How do you think about that with teams and cultures and hiring new people?

Seth:

Yeah, that's a great question. We actually have hired probably about half a dozen people since the lockdowns were initiated and since our corporate staff for the vast majority of folks have not gone into the office. I'd say that we had one key advantage, which was that, before March, we did have a team that was split between New York and DC, so it was not uncommon for us to be on video conferencing. That transition was, to some degree, at least natural. In terms of the hiring process, I'd say the hardest part, and one that we definitely still have not right, and I'll be honest, for some small company, we didn't have it right necessarily before the pandemic was the onboarding. That the team though has started to make headway, we've gotten our swag. We've actually pulled it from the various physical locations and people are getting a care package now when they are in their first week at the company.

Seth:

I make sure to reach out to new hires during their first week to just welcome them with a warm email and then tell them when they're feeling no longer overwhelmed that we'll have a 30 or 45 minute call with no specific agenda other than really getting to know each other. I can try to sprinkle a few of my thoughts around company mission and values into those calls. 

Seth:

I think for hiring managers and/or senior executives out there, I would also say, it's not just you making sure you know them. If you have someone that you really like, how are they getting to know you and feeling it on both sides? That you have an easier time convincing them to come on board.

Stephanie:

Yeah. Are there any best tips that you recommend to make sure that the candidates get to know you because, especially over Zoom, it seems like people are always talking over each other, even with ... I was talking earlier about internet, the video's not on, I had to turn it off. Is there anything that you guys practice to make sure that, not only are you getting to know the candidates, but also that they feel comfort with you and can ask questions and feel confident about that?

Seth:

Yeah, so we do as much as possible try to do video rather than just phone call interviews. I guess you could make arguments that that's better or worse, but it certainly allows people to respond to facial expressions, queues when it looks like someone is about to speak so you can try not to talk over them. I do reserve the last 15 minutes of every interview to allow the interviewee to ask me questions. That's both for them, and also, I secretly am looking to see how prepared someone is by the quality and thoughtfulness of the questions that they ask. If anyone is local, I will try to meet with them in person. We have to be thoughtful about that. Let's say we have two candidates and one is in New York and one is in DC, and we haven't crossed this bridge yet, but how do we make sure there's no implicit bias that we're pushing for the person that we met in person? But we try to have a variety of interviewers for each role. I think we've done a pretty good job with that.

Stephanie:

Okay, cool. Thinking through bringing on new employees, the first thing that's coming to my mind is scaling companies, something you've had quite a bit of success with around HelloFresh and now UrbanStems. I wanted to hear a little bit about how you think about scaling companies, whether it's at UrbanStems or HelloFresh or anything in the past that you've worked on.

Seth:

Yeah. I think what I try to do is, when I do have a moment to step back, is look at each function within the business, or I look what our plan is, where are we expected to get to over the next year? Whether that's our revenue mark, whether that's improvement along other KPIs or important metrics, and I try to pair that against each function. Is each function at a point where they can make that leap without any additional people? Are they at a point where they can make that leap but they'll need to improve just process? Do they need technology investments in their function in order to be more successful? We are nowhere near perfect on this, but each year we've gotten better. Our planning process is in the sort of June/July timeframe, of talking through what that plan is, and each team trying to think through what they will need to be successful there.

Seth:

I would say that stepping back where you run into problems, and it's sort of dual-edged sword, is if you put cash out and investments ahead of growth, you can get yourself in trouble. But you can also get yourself in trouble if you put growth ahead of investment. It is a dangerous game. I think, when it comes to hiring people we try to be thoughtful. It's also, what level are you hiring at? That's something you'll often hear me say to the team if they ask for another resource. To me, it's most important that we get that right level right. Very different to hire an associate versus even someone with two or three years of experience where you're saying, we just could not be successful, we hired someone just out of college. My next question will almost assuredly be, why?

Seth:

And managing the specific work that someone needs to do against the experience that you're saying is required. You don't want to hire someone too senior to do junior level work. They won't find it satisfying. There is such a thing as overqualified. Then on the flip side, you have to be careful what you can expect of someone more junior and what level of accountability and ownership you can place on them. I think, to me, that's the most important thing, is making sure you're hiring it to the right level, that everyone is aligned, that this role is needed. The reality is, in almost any startup, you're going to have a whole slew of resources that are not yet hired that people think are necessary, and trying to at least agree on alignment on when those might get prioritized.

Seth:

If something comes up that accelerates something, that happens too. That can throw a wrench in plans and you have to walk people through that that's happening and have conversations, well, hey, how did this new role cut in line ahead of the others? That can be hard, but you have to do it.

Stephanie:

I've definitely seen that in the past. At previous companies I've been at, I worked in finance, and every team always wanted headcount. Everyone always had a reason and were pretty good at justifying why they need those people. How do you go about spotting those opportunities of like, this is an area that obviously needs investment and I see growth coming after that? How do you actually think through finding the opportunities when they seem like they're pretty hard to spot? What's holding what up to create growth or to create exponential growth in the future?

Seth:

Yeah. I would say that you're sort of hiring for two reasons. One is growth, like you said, we're truly, there's a revenue or a profit or a customer experience opportunity that's not yet ... We can't go after because we don't have someone on the team. The other is that we're, I don't want to say things are crumbling, but sort of this more fixing the foundational type hires that you have a critical process that's not being executed the way you want. That's where you have to start to lean in and understand, is that a process technology or a resource issue? Once you get comfort that that's a resource issue, from my standpoint, typically that's a pretty easy hire, because, unless you have invested in something that's causing friction, that itself is not worth investing in, that hire will pay for themselves financially, because they're going to unblock something that, that is important to be unblocked.

Seth:

That's how I get comfortable with those kinds of hires. On the revenue side, if it's creating something new, you can run ROI models. Sometimes you can do those in your head. Sometimes you put them down on paper. Then for other functions, sometimes it is a little bit of taking a risk. For example, it was about a year or 18 months ago that we decided we needed a stronger social presence. We weren't sure exactly what that meant financially, but we brought someone on board on our brand director, Megan's team. After a few months, we started to really see results. We were really impressed. We managed to, in the last 18 months, five X on our Instagram following, not that that's the be all and end all of KPIs. Then for the sort of CFO in me, we started to see revenue, directly attributable revenue follow that.

Seth:

I think the other thing that, this is where managers have to do, is they have to sometimes take a risk. They say, there's a resource I'm really asking for, this is what I think it will return, and when they have something pan out, they are able to probably come to that next meeting with an ask with a little more confidence themselves, and with the, me again wearing my CFO hat, and me having more confidence to say yes to that opportunity.

Stephanie:

That's cool. I like you wearing your CFO hat. I appreciate that with a background in finance. You just mentioned, which I'm now I'm sure a lot of people are like, well, tell me how you grew your social, because that is an avenue that obviously a lot of brands are relying on and it's becoming even more important with the ability to click and buy on social, or at least it's headed in that direction. What did you guys do to grow your social presence?

Seth:

Yeah, so the very first thing we did is, like I mentioned, hire a dedicated resource, someone who spends probably 75% plus of her time thinking through our social channels and how we can become more influential there. Second is, once we started to see some results there, we added a SaaS software platform that helped us assess which visuals were going to be more engaging for our customer base. We did, though still have conversations, interestingly enough, the photos that I'd say I prefer from a brand perspective, those with people in them significantly underperform those of just flowers.

Stephanie:

Oh, interesting. This is a piece of tech that you guys were utilizing to figure out which ones like, which images would you best?

Seth:

Yeah. I actually don't know how precise it is, but it certainly helped us. We didn't need that to tell us that people underperformed flowers, but even just different variants of a similar image, they were able to pretty convincingly predict which one was going to outperform. Obviously we are betting on engagement, at least these measurable engagement statistics mattering. I think one of the hardest things in social is understanding what matters and what doesn't. Like I said, having our Instagram following at 150,000 versus at 30,000, where it was, we think that is directionally very good, is that, can I quantify what that means for our company? No. Will we continue to push to increase our reach. Absolutely. Are we seeing that increased reach is translating into direct revenue? Yes. Is that our only goal? No.

Seth:

Do we know the relationship between directly attributable revenue and non-attributable revenue? No, we have no idea if that even is the same month over month. But these investments that we made in a resource, training her, we actually had some, at one point also gave a green light to bring on an intern so that our full-time hire could manage up and start to add strategy to how she was thinking through, not just executing every day, and that's been great. We talked about that. How much is this going to cost? What is this person going to do? It was a pretty quick decision. But because it wasn't a ton of money, but even there, what I think is still critical is that someone comes to the table with that analysis done that's thoughtful, and that they seek to justify any investment, whether it's $100,000 or $1 million or $1,000.

Seth:

It just gets people in the discipline habit of understanding that money is going to be invested or not across teams, and it's not ... there's not an infinite amount of it. 

Stephanie:

That's very cool. Now that your social person is able to start managing up, what kind of tactics or strategies are they hoping to implement over the next couple of years? What are they saying they believe in, or they want to try or test out?

Seth:

Yeah. I think a big buzz word in social is influencer. One of the things I've said is, if Oprah came out and endorsed UrbanStems, I don't know if that would even help us because our website would probably crash. We'd be out of stock on inventory in the next 20 minutes, and we'd enrage all of our good customers who came back and sold out. So, we have to think through how we would even execute that, but the team is bullish that, that matters. So, we're trying to think through that. I certainly also believe in content. The team believes in that. So, expect the we'll invest more in content. It's no secret that video content outperforms static photo content. So, looking at that, but it's also no surprise to anyone that videos are a lot more expensive to make than taking photos.

Seth:

You have to figure out what your budget is. You have to still be able to test very scrappily. I still will always believe in that, some of the best content is always going to be UGC. Some of the best content is going to be filmed in an iPhone, or for suckers like me, Samsung Galaxies. It's about mixing that with the more professionally created content, figuring out where and when to spend bigger, both from a photography standpoint and from a video. For example, the team did a wonderful job. This Thanksgiving, we have a dedicated lining page, which features video for the first time on the site.

Stephanie:

Oh nice.

Seth:

I'm really excited about that, testing it and testing more of that. With everything digital, the best thing is that you can always AB test that. Even if you spent a ton of money on something, I still encourage you to AB test it, to ensure that it's working. If you want to AB tested at 80% with the video and 20% control without so that you get more out there, that's fine. It'll just take a little longer to get the results of that test.

Stephanie:

Yeah, that's great. I appreciate you letting us look into the future with you and your team. I'm sure that you're probably like, ah, I don't want people bringing this up anymore. That's so three years ago. However, it came to my mind when you were talking about Oprah and if she were to endorse you guys and you could sell out, and their website will crash. It brings me back to, of course what happened in 2017 that I think a lot of people could learn from, who are listening, around, I think there was like a Valentine's day snafu where you had too many orders and the website maybe crashed or something. Tell me a little bit about that and what you guys have ... what actually happened, what are the details on it? I know you weren't there, but what are the details? What have you learned from it? And what do things look like today?

Seth:

Yeah. No, I wasn't, but I don't think that's the sort of important part of the story. I think, in three short words, we messed up. We did not fully understand how we were going to execute the holiday. It was unfortunate that it was on Valentine's day, which is one of these two days a year that everyone looks to flower companies to sort of solve their buying need, which is to get flowers delivered. We were better at marketing than we were at executing that year. We learned a lot. I think that that's the most important thing, which is we learned that we needed a more sophisticated plan. That plan needed to be backed by data. To be honest, this is why I came in. This is why Ajay asked me to come into the business, which was to help figure it out for the next year.

Seth:

The first thing I did was I talked to people. I got the stories. I started sharing those stories around to make sure that they matched with what people thought went wrong. I started to look at data, and data helped me craft a plan. One thing that I actually think I did really well is that we had the data and we had the plan, and we just kept going over the plan. I think that is one of those things that, for people who would like to move quickly, can infuriate you. It's infuriated me at times. The number of times that I think we had to go over the plan or that we went over it was well into the double digits, just reviewing and reviewing, but we were successful and it wasn't just that we fixed everything from the previous year.

Seth:

In fact, we had to make changes that had nothing to do with people making mistakes. We had just pushed too many orders into certain physical facilities than we could handle. Our tech had not been robustly tested to meet the peak needs by a combination of looking at data and incorporating feedback from people who had gone through it. We were able to create a plan that was, again, based in numbers and efficiency metrics, and a realistic execution, still stretched by all means. We did not pull back. But to the credit of Ajay, he brought me in, and he gave me the green light to bring in some additional resources, which I did. We did some new things. We delivered for the first time in the company's history via a third party parcel carrier that allowed us to take orders that we otherwise wouldn't have been able to take.

Seth:

We had an on-time rate of about 98% to 99%. So, it was a nice reversal from the previous year. The way we phrase it with the team is, it's three and a half years ago, so it's, we don't dwell on it. But we do remember it, and we remember it as a way of motivating ourselves to make sure that our plans have been vetted, thought through, are based in data and have been shared with the team well enough in advance so they feel confident in their ability to execute them.

Stephanie:

Yep. What are some of the biggest data points that you looked at? When you were coming in or when you reviewed what actually happened, what were some of the biggest things that stood out where you were like, oh, was it the website crashing because it was the tech stack? Was it the supply chain? What specific things were the biggest contributors that maybe any new company can learn from of like, oh, if I'm setting up a similar type business, I need to look for this, this and this. If Oprah decides to come out and give me a shout out.

Seth:

Yeah. And Oprah, if you're listening, we will still take the shout out.

Stephanie:

Yeah, send it our way.

Seth:

But I think the challenge was, when I got ... everyone thought it was everything. It was really important to help people compartmentalize. It actually brought me back to a course in business school. I feel like, in many respects, I was one of the only people, one of the only ones of my friends who actually learned something in business. I remember taking an operations course and it talked about a factory that made, I forget if it was chocolates or chairs, it almost doesn't matter, and they said it was an assembly line and it took a minute to make the first chocolate. The chocolate had to go through, it doesn't even matter, let's call it six steps that each took 10 seconds, and it said, how many chocolates can you make in an hour? I got it wrong.

Seth:

I said, well, you can make 60. It takes a minute to make each chocolate. It turns out that there were six, like I said, six steps, each were 10 seconds. So, you can actually make six a minute, or 360 an hour. My mind was blown. It was really cool to figure out how an assembly works, what throughput is. I went to a Chipotle just to observe it in action, to find out what the bottleneck was and to figure out actually how a company like Chipotle does an amazing job at lunchtime. It's actually the cashier who typically is the bottleneck. So, you can see they add an extra cashier. Sometimes it's the first person who has to do both your burrito and the meat. So, you'll see they have an extra person who just does the meat. If you ever want to understand operations one-on-one in action, go to a Chipotle at peak time.

Stephanie:

Oh, that's good. I'll be looking at police so differently now.

Seth:

What really I just had to understand, and what was clear to me is they hadn't really done that kind of analysis to look at throughput, how many orders can be packed out. We also have to ... people kept telling you what the bottleneck is. The bottleneck is basically where your business chokes, what's the slowest part of your operation. People kept telling me things that ... and then I would say, well, how long does it take to do this? And I would write down the answer, and the numbers they gave me did not match with it being a bottleneck, which either meant that it wasn't the bottleneck, or that it took a lot longer than what they thought.

Seth:

The key thing was keep digging, keep trying to understand, is it ... because at the end of the day, the math will be the truth that you can use. But if your assumption is based on faulty math, then it's just garbage math. So, you have to look at the operation in action and you have to understand, so for example, with us printing out these custom note cards, whereas it's the note that you wanted for your mother for Mother's Day, right? That's what makes every UrbanStems order unique, besides the fact that you get to pick the bouquet you want and the ad-ons that are specific to your order, which took a lot of technological build hardware and software, to be honest, but it's that note card.

Seth:

I was told, "This is our bottleneck," and I said, "Well, how long does it take to print a note card?" And they said, "Five seconds." I said, well, it takes a lot longer to pack out an order than five seconds. That can't be. But then I started to lean in, and it turns out that they would print 20 of these note cards at a time, and then they would organize these into a folder, and then they would put the folder away, and then they would bring the folder back out when they were ready to pack out. What was five seconds, when I did all the math, ended up being a minute, and you couldn't even do them one by one, like in the chocolate example, because you had to get 20 chocolates assembled at once. You had to wait for 20 of those chocolates to go down to the end of the assembly line before. So, if you ever got behind, the time to catch up was significant.

Stephanie:

Oh, wow. That's really Interesting, about like something where you're like, oh no, that's not the problem. Then being like, oh, actually your process is the biggest part of the problem.

Seth:

Exactly. This is a very cool evolution. People who have not been at the company for at least two years, don't understand. With a bottleneck, you have two solutions. You either make it more effective or you add resources to the bottleneck. The first year that's what we did. We had five of our most analytical people, five very smart people who just on Valentine's day helped us print them. As absurd as that sounds, that's what we did. We just overwhelmed the process with resources. This past year, the tech team and the supply chain team got together and they completely reinvented. Now, every single order is sent to a specific person's queue that ties to their physical desk, and there's a printer at every station and that printer prints out one note card at a time that's tied to that a specific order. Now, it takes five seconds to print an old card, and it is no longer a bottleneck.

Stephanie:

Yeah. That's great. It seems like there'd be a lot less room for things to get lost. I mean, if everything's in a folder and you're trying to sort through it, [crosstalk] maybe picking up the wrong notes and you'd be like, hey grandma, and be like, oh, this is the wrong note that got sent out. It seems a lot more. Yeah. You're not going to have any errors doing it this way now.

Seth:

Yeah. The error rate, both reported and for sure, actual declined. We also saw that our throughput overall went up by 50%, 60%, 70%, and we could train people on this new system much faster. Those five people that I mentioned that had to be in that room on Valentine's day now don't have to be in that room.

Stephanie:

Yep. That was very good reminders about bottlenecks. I think it's very encouraging for every new brand to kind of look into that and really dive deep. So, yeah, I love that example. All right. The couple of minutes left, let's jump over to the lightning round brought to you by Salesforce Commerce Cloud. This I'm going to ask you a question and you have a minute or less to answer. Are you ready, Seth?

Seth:

I am ready.

Stephanie:

All right. We'll start with the hardest one first. What one thing will have the biggest impact on ecommerce in the next year?

Seth:

The one thing that'll have the biggest impact on ecommerce is FedEx and UPS.

Stephanie:

Okay. Tell me a bit more.

Seth:

Yeah. Their ability to grow and sustain their supply chains and deliver on time is going to be critical to, in the next 13 months, they're going to have two holiday seasons, and either a lot of happy customers or a lot of unhappy customers. It'll be really interesting, your 800 pound gorilla. Amazon is highly confident because they've largely disintermediated their over-reliance on UPS. In fact, FedEx and Amazon, they're divorced for the most part. I think that their ability to continue to shift to ecommerce to add Saturday and Sunday delivery nationwide to do FedEx, and UPS delivery to do ground deliveries next day, seven days a week, based on a previous day pickup, all of these things are going to either allow ecommerce to continue to blossom or hold it back. Also, what's very unclear is how much they're going to raise rates in January. Typical years call it 3% to 6%. There is a lot of concern that they could be above, and potentially well above that 6%, and what does that do to demand?

Stephanie:

Yep. Yeah, that's a really good answer. What one topic or thing do you wish you knew more about?

Seth:

One topic or a thing.

Stephanie:

[crosstalk] technology or ...

Seth:

I've been in and around physical product ecommerce businesses. I think getting more in the data and technology side is always the right ... that is always the future. I love being in consumer businesses. I love the ability to ask almost anyone about the product or service that I'm working with and trying to lead forward and getting their opinion and having that opinion matter. That's the joy and the challenge of ecommerce, but certainly getting deeper into data, getting deeper in technology is something I'm going to encourage anyone, especially anyone young, certainly what I'm going to get my kids into.

Stephanie:

Yep. I love that. If you were to have a podcast, what would it be about, and who would your first guest be?

Seth:

I think it would be about brands that do it right. I think that I so admire people who build iconic brands, and it goes back to this consumer side of things, but to me, it's looking at these revered brands and whether they are the Phil Knights, Nikes of the world, Reed Hastings and Netflix, or some lesser known smaller brands. I'm always so impressed with people who take the leap to do it. Those, especially who do it without raising significant amounts of capital and create something that just clicks and resonates with consumers, because I think we can all learn that. I find that I've been around companies that have done a nice mix of brand and execution, that have focused so much on execution. I think it's something that I'm good at, and I've been around other people that have been good at it. Maybe it's because of that, that I so admire the folks, those creative, just truly creative visionaries on the branding side.

Stephanie:

I love that. And who would you pick to bring on as your first guest?

Seth:

Who would I pick to bring on as my first guest? I guess, not that Reed Hastings would agree, but Netflix ...

Stephanie:

He might.

Seth:

Netflix so transformed and based on an industry that could have gotten there, had they seen it coming. In fact, I think at some point he had discussed with them with blockbuster buying out the business, and they dismissed him. I'm sure he has fabulous stories. I'm not so interested in actually the last three years where they've been a powerhouse. I'm really interested in those first years when he struggled, when he kept the faith when things were not going well, how he saw the future when others didn't, how he pivoted from CDs delivered, when he knew it was the time to digital and build something big and special, how he hired people in those early years and got them convinced it was going to be big and special. Those are the questions that are ... and/or now getting the best and the brightest is easy, given the company that they've built. But it's those early years that I'd be really excited to learn about.

Stephanie:

Yep. Yeah, I love that. I think we have the same kind of passion, and you would probably like one of our other podcasts called the story, because it's about people like that. We did retastings Phil Knight, We do Elon Musk, and it talks about the early days, how they got started and then you guess their identity at the end, because you wouldn't actually all the things they went through to build the companies that they did. You have to check that out.

Seth:

Very good. I will.

Stephanie:

All right, Seth. Well, this has been a great interview. Where can people find out more about you and UrbanStems?

Seth:

Yeah, UrbanStems is the company name and it's also our website, so urbanstems.com will get you there. If you want, you can also reach out to me, seth.goldman@urbanstems. I'd be happy to chat with you. I'd be happy to provide you with a promo code on your first order. We love people enjoying flowers, and more importantly, we love people sending gratitude to people that they care about.

Stephanie:

Awesome. Love that. Thanks so much, Seth.

Seth:

Thank you so much, Stephanie. Bye.