In September 2018, Sam Lewkowict co-founded a men’s skincare company, Black Wolf, and promptly invested in paid ads. The holiday season was coming up, and he wanted to kickstart growth.
But of course, he wasn’t alone. Every brand in town wanted the same thing — which meant sky-high CPMs and customer acquisition costs.
In hindsight, it was a mistake, Lewkowict told Marketerhire. An expensive mistake.
This winter, he’s doing things differently. He’s focusing more on ROI than “crazy growth,” and he’s supplementing paid ads with earned referrals from co-op commerce, a network of like-minded niche brands that cross-promote each other.
It’s already attracted members like Cadence, which makes modern, honeycomb-like travel kits; olive oil company Brightland; and Haus, a DTC liquor brand recommended by the editors of the New York Times’ T Magazine.
The network helps its brands get “more bang for their buck” when it comes to paid advertising budgets, co-op CEO Conner Sherline told Marketerhire, because the brands essentially pool their paid acquisitions.
It works like this: co-op members install a post-checkout widget on their website. Post-purchase, it shows customers a grid of four product recommendations from fellow co-op brands.
It’s a “give to get” model, Sherline explained — recommending other brands in the co-op network earns you product recommendations.
The co-op interface is “visually appealing” Cadence founder and CEO Stephanie Hon told Marketerhire — “it [doesn’t] look spammy” — and, more importantly, it’s effective.
“You have to understand I've been pitched by maybe 10 of these platforms or extensions or marketplaces,” Lewkowict said.
Most feel “contrived,” but co-op stood out to him. It’s value proposition was clear, and when he tested it, he found its recommendations drove incremental sales.
It’s no surprise that recommendations are powerful in e-commerce. Amazon, which leads the e-commerce space, makes 35% of its sales through its recommendation algorithm, McKinsey reported in 2013. It’s likely grown since then, as Amazon data scientists amassed more training data.
But Amazon’s algorithm has an Achille’s heel: quality control. The “everything store” sells premium brands like Carhartt alongside products from hit-and-miss retailers like BSTOEM, and the algorithm can’t always differentiate great deals from cheap products, especially when retailers use black hat tactics.
That creates an opportunity for niche, quality-obsessed brands, and networks like co-op, which Sherline and his wife, co-op COO Kirsten Sherline, curate by hand. So as a small retailer, how can you make the most of it this holiday season — without breaking the bank?
Create your own version of Prime shipping.
Free, fast shipping isn’t a patented Amazon feature. Hon will soon offer her customers Prime-caliber shipping at Cadence, through a partnership with FedEx: free, two-day shipping on orders of twenty dollars or more.
Lewkowict, too, ships through FedEx, which offers flat rates to companies that hit a certain volume threshold. (Other companies, like Passport Shipping, offer similar services too, Sherline noted.)
“We try and ship everything as fast as possible,” he said. He finds that when customers have to wait more than three days for their order, their excitement about it wanes.
Make a splash with creative brand partnerships…
With co-op commerce, brand partnerships are automatic, to an extent — but Sherline recommends that co-op brands dream bigger than the widget, and use co-op as a networking hub to forge deeper, multi-faceted partnerships.
Think McDonald’s recent partnership with rapper Travis Scott — a meal so popular many franchises ran out of key ingredients.
The key to a mutually beneficial partnership, Sherline said, is shared values, a shared audience, and complementary products. How do busy founders find that?
… rooted in data, not desperation.
It starts with data, which big retailers don’t always make readily available. Founders selling through Amazon can add their own product to a cart, and see what the company’s algorithm recommends they buy with it — but they can’t see the underlying sales numbers.
At co-op, Sherline recently launched a client-facing data dashboard that’s more transparent. “We're giving [our clients] actual insights of what brands are selling best together,” he explained. “We're giving them those cross-selling trends.”
Go above and beyond on customer service.
Amazon has a great checkout UX — but if you have an issue with your order, you have to go through “a really terrible process” to sort it out, Sherline said. It’s long and complicated enough that it’s gotten the explainer treatment.
Smaller retailers can set themselves apart here. Simple, customer-friendly touches, like Cadence’s free returns, can turn dissatisfied customers into loyal clients, Sherline said.
Engage your email list...
After his first, most difficult holiday season, Lewkowict has a working theory that the holidays aren’t about attracting brand new customers.
Instead, it’s about reaching existing customers, who want to shop with “brands they already trust.”
The best channels for that? Email and SMS marketing.
“Communicating with your customers through socially private groups... that's the strategy,” he said. “What you do all year is, you prep all those [contact lists] and get them super strong... and that's how you have a really good holiday season.”
...with new product launches and discounts.
What sorts of messages resonate with people who’ve already bought from you? Lewkowict recommends highlighting product launches in holiday email messaging.
Black Wolf, for instance, is launching a body scrub and a specialty gift box this season. Hon, meanwhile, is launching a holiday “gift experience.” Instead of a gift card, it’s a gift flipbook and “movement experience” that walks recipients through the benefits of Cadence, and ends with a redemption code.
New product launches shouldn’t necessarily replace discount codes, according to Lewkowict, but they do create an aura of festivity that a flash sale can’t on its own.
“There's nothing special, around the holidays, about a discount,” he said.
Swap out product photography for lifestyle photography.
For co-op’s brands, Sherline’s found that lifestyle photography — imagery that shows a product in use or in a scene, rather than isolated against an all-white studio background — performs better across channels. It helps people understand how a product might fit into their life, and it helps build trust in DTC products, which people often haven’t seen in stores before.
It’s “low-hanging fruit” to upgrade to lifestyle photography, Sherline said. Current co-op brands, like Haus and Cadence, already lean into it on Instagram.
When you invest in paid ads, optimize for conversions.
The fewer clicks it takes to convert from a paid ad, Sherline said, the higher your likely ROI. One way to reduce friction: link from ads to custom, one-stop-shop landing pages. The conventional checkout flow — browse around, add to cart, review cart, checkout — is a hassle.
“People are on mobile,” Sherline explained. “They're clicking through and they want to learn about your brand in one fell swoop.“
Advisor Nik Sharma agrees. “Don’t drive paid media dollars to your website,” he tweeted earlier this year.
Another way to make conversion easy, Sherline said: Facebook and Instagram shops. Launched in May, these socially-native storefronts allow customers to make purchases without leaving their social apps. If they have their payment info saved with Facebook, they can check out in one click.
You can even use Amazon as a sales channel…
Black Wolf recently began selling through Amazon Prime. People were searching the retail site for Black Wolf products, and “other brands were converting on our searches,” Lewkowict said. “We had to go just to defend our brand.”
Black Wolf has gained traction on the platform, and so far, it’s been a win for the company; if you search Amazon for “men’s body wash,” Black Wolf appears organically on the first page of results.
...but use it strategically.
Lewkowict doesn’t want to sell exclusively through Amazon, though. “What freaks me out about Amazon is that you live by the algorithm,” he said. “You can get dropped… onto page three if they change it.”
As the second biggest publicly-traded company in the U.S., Amazon tends towards unilateral, aggressive business decisions. In fact, the company faces antitrust charges in the EU for allegedly launching knockoffs of its vendors’ popular products.
“Amazon now has all of the bargaining power,” Sherline said.
That’s exactly why Hon doesn’t sell through Amazon. She was especially turned off by the company’s inflexible packaging practices. Cadence prioritizes sustainability, and Hon and her team have created space-efficient, plastic-free packaging.
“The thought of putting our small box inside of a large Amazon box, with plastic wrap and whatever else… it totally goes against our brand values,” she said.
Luckily, Amazon is just one of many sales channels for small retailers. Those that want a customizable, conversational experience can turn to co-op this holiday season.