Pro tips you need to know for retail expansion into stores like Target, with Three Ships' Connie Lo

Today’s episode is brought to you by Klaviyo and today I’m joined by Connie Lo, Co-Founder of Three Ships.

Three Ships is an all-natural, vegan skincare brand on a mission to make clean beauty accessible for all women. The products are 100% plant-derived, certified cruelty-free, and, best of all, forever under $40. Founded in 2017, Three Ships was founded by chemical engineer Laura and business grad Connie after the two wondered why clean, vegan skincare cost so much. With only $3300 in their bank accounts, these female founders started making their own formulations in Connie’s apartment kitchen with the goal to create effective and affordable natural skincare products.

This is a ridiculously insightful episode and you’re going to come away with plenty of actionable tips for your business. We talk about pro tips for retail expansion and how to make a partnership successful, we talk about key moments of growth and how to be scrappy in the beginning and some of the key trade shows you might want to invest in.

Please note, this transcript has been copy pasted without the lovely touch of a human editor. Please expect some typos!

Speaker3: Yeah, so for those who don't know me, I'm Connie. I'm one of the co-founders of Three Ships. We're an all natural vegan skincare company, really on a mission to be the most transparent natural beauty brand in the world. We started the brand four years ago with the equivalent of like thirty three hundred US dollars. So I can share lots of tips about how to bootstrap your business. Literally started by hand making products in my apartment kitchen. Today you can find her skin care products at stores like Target and Whole Foods and Urban Outfitters.

Speaker1: What a journey that's so cool and such an accomplishment in four years. I feel like that's a really, you know, type tote around there. I want to go to where your entrepreneurial story starts and what kind of gave you that light bulb moment to jump into making products in your kitchen?

Speaker3: Yeah, it's been a long journey. So starting from the beginning, my dad is an entrepreneur and I remember when I was young, I would always watch him at work, like working from home. He would bring me on business trips. And I'm so in love with the idea of starting my own company. But at the same time, you know, being a kid, you're like, I have no idea what to do with my life. Like, should I go to business school? Should I go into sciences? So I was inspired by my dad, followed his footsteps, went into business. When I was at university, I started to compare myself a lot to what my peers were doing. So for any of your listeners who are a little younger, maybe even in school, still, what I recommend is just really listen to your gut and trust your intuition, because that is what I did not do and I regretted it. So I remember really comparing myself and being like, oh, wait, marketing and sales and entrepreneurship, like, that's not where all the smart kids are going. You know, it's all about finance and accounting and banking. So I'm going to go down that route, too. And even though my heart didn't lie in accounting, that's what I went into full time after I graduated. And I absolutely hated it, like every day after work. And it was long hours, like working until midnight or longer than that.

Speaker3: And I would just come home and I would cry and I'd be like, what am I doing with my life? Like, I felt like I could be doing so much more. And at the same time, like when I was in high school, I ran my own small businesses. And when I was at Queen's University, where I went for business school, I did partake in entrepreneurial extracurriculars too. But it was just like I completely ignored that side of me. Now it's like it's not what smart people do. So I worked in accounting for eight months. I absolutely hated it. So I decided to quit actually before writing my accounting exams to be a full time chartered accountant. And I remember the time were like, oh my gosh, what are you doing? Like, you're so close to getting those letters behind your name. And for me, what I thought was I don't see myself going to a career where having an accounting degree is going to help me. So why am I continue to punish myself day over day for this? So what I do is I look back at my time at university and I looked at which classes I really enjoy. And those were always like marketing, sales, entrepreneurship, negotiation. And so I was like, you know what? Let me just trust myself here and decide to go into this. So I decide to switch completely and go into marketing and sales.

Speaker3: And I love my job there. It was also during that time that I met my co-founder, Laura. And so Laura was the one who had the initial idea for this natural makeup remover company, and she was looking for someone to just bounce ideas off of. And she was speaking with one of our mutual friends. And he was like, you know what? I went to elementary school with this girl, Connie. And I remember back then she loved making her own natural skincare products. So you should probably just talk to her and get some ideas. So we met and it was meant to be like a thirty minute dinner. It turned into this like. Or our business meeting of the minds where we just like we're vibing off of each other, we realize we're complete opposites in terms of personality types and skill sets, but completely aligned in terms of values. And at the end of that, for our business meeting, Laura just asked me, like, hey, you want to be my co founder on this? And there is so this is such a crazy story. And that was when we were twenty three and we got started on the product literally the next day. And so for that first year and a half period, we would work our 9:00 to 5:00 and then meet up in the evenings and on weekends to work on our skincare company.

Speaker1: Oh my gosh. And so what were those initial products like? Like what were you coming up with in the kitchen?

Speaker3: So it was pretty rudimentary products initially because we weren't able to use complex natural preservatives. So everything was done literally and like no stainless steel cooking bowls and stuff. So what we're making our products that didn't require any natural preservatives. So these would be products that were oil based. So our first product was a natural makeup remover using fractionated coconut oil. And it works so well, removing even the toughest waterproof makeup so you can give it a try. And then our second product line where our oil based serums and those are still some of our best selling products. And then eventually we started to outsource manufacturing still within Canada. And that's when we started to use water based formulas where you can use preservatives like white Wilsbach extract. And that works really well for things like cleansers or water based. But initially it was all like fairly simple products.

Speaker1: Wow, that's incredible. I want to talk about what you used that initial thirty three hundred dollars and how you kind of were able to bootstrap that in that early year, maybe the second year in that kind of thing to bring the brand to life.

Speaker3: Yeah, having a small budget like three hundred dollars really makes you think carefully about where you're spending your money. So one of the first things that we spend on, which was like maybe six hundred US dollars, was applying for a trademark, but then also incorporating so we didn't have a lawyer on our team. So we decided to write our application to incorporate ourselves and we're filling out the forms. And I was just like, I have no idea what this means. And I and I'm not sure, not sure sign at the bottom. So how that got through. So we incorporated the company that way. And that was really important for us because we didn't want to be personally liable for anything that our company would be responsible for. So by incorporating you're making your company a separate entity. So that way, say someone sues your company, they're not able to go after your personal assets, which let's be real. At the time, Laura and I had very little personal assets, but still we just want to set ourselves up for success. And then initially we also spent on trademarking so applying for the trademark process, which can take like two years to carry back from the Canadian US government's regarding your trademark. So I highly recommend to your listeners, if they are starting a new business, first thing you should do is check out the trademarks for your name, see if there's any other companies that are similar in terms of naming. Because if that's the case, you might want to start with a different brand name and then also look into incorporating another thing that we spent on was the initial ingredients for our products.

Speaker3: So we went to Whole Foods and got a couple of different ingredients to play around with just for the first batch of like minimum viable products or MBP. And then eventually we started to look for larger distributors of the ingredients. And then one final thing that I remember spending on was a six hundred dollar laser printer. And the reason that we spent on that is because we didn't want to buy custom labels for our product packaging because those require larger minimum order quantities or no queues. And so most the label printers were requiring at least a minimum order quantity of a thousand labels, and we just could not spend on that at the moment. So what we did was buy a laser printer and then we bought the label sheets and we print off our own labels at home. And this was great because when we would go and talk to customers at farmer's markets or at trade shows and they would look at our packaging, oftentimes they would be like, oh, you know, be really cool. If you guys put like a Made in Canada symbol on our label, we'd be like a great point. And then that night we would edit the label at home and print off the new round for the next batch. And so we were able to iterate on our product packaging really quickly. So again, I recommend that for your listeners, don't spend on things like labels and custom packaging at the beginning unless you're absolutely sure that that's going to be your final product for at least six months to a year.

Speaker1: Yeah, Tertullian, that customer feedback loop is so important to be able to implement what people actually want and get to that final label of final product. I'm interested to know about your efforts in the beginning to market and find the first customers who are going to become your loyal, true fans of the brand.

Speaker3: Yeah, so what I did back then, I managed marketing and sales at three ships is I would spend hours per day on Instagram because that was one of the easiest and cheapest platforms for us to find new customers. So what I did is when I created Instagram account actually created even before our first product was available, because I just want to start building a presence. And I would look at our competitors like within a skin care industry, within the natural makeup industry, and I would see who was following them and follow all of those accounts and engage with them. But the level of engagement was pretty detailed. So it wasn't as simple as just like giving them a following, just leaving like that. What I would do is I would check out some of the recent post and I would comment on their recent posts. And if they had their skin type in their Instagram bio, which a lot of skin care accounts do, then when a product launch, I would deem them and be like, hey, looks like a combination skin. This is our new makeup remover that's specifically made for a combo skin. And here's a 10 percent code for you to use and extremely manual in the beginning days like not going to lie, spending probably three plus hours per day on Instagram.

Speaker3: But because we had no marketing budget, that was where I would spend my time. It's like sweat equity versus spending money on an agency. So that was how we got a lot of our first customers. Then attending local flea markets was a big one, too. So we would spend like one hundred bucks to get a booth at a local flea market. And then we would spend all day like eight and six, seven p.m. per day standing on our feet, just selling products to customers. But like you mentioned earlier, the customer feedback loop was so important and we learned so much about our products and our customers and product market fit just by going to these markets. So we would go to one, at least one per weekend. And during the holidays, from like October to December, we'd go to several per week. So some days would book off work from our nine to five and go GhostTown and yeah, and we were moonlighting during this time, so our companies had no idea what was going on and we would show up to work exhausted on Mondays and we just had to push through. But that's bootstrapping life. So if you choose to go down this route like you know what you're getting yourself do,

Speaker1: Oh my gosh, they're all like, did you party last night? You're like, yeah, yeah. Big. Stayed up late. What point did you realize, oh, my gosh, we're on to something and kind of make the decision to actually quit the 9:00 to 5:00?

Speaker3: Yeah, that's a really good question. And I know that's something that a lot of people ask because, like, how do you know when you're ready to make the leap? So there's different ways you can go about this. Some people choose to go full time with their startup from day one. We didn't go down that route because we didn't have savings after we graduated to be able to live and sustain that lifestyle. So we decided to save up enough money where we would have six months runway. So what this means is we're like, OK, once we get to a point in our bank accounts where we can live for six months, going full time with three ships without paying ourselves, that's when we'll quit our jobs and go full time. So at that point, that was a year and a half into side hustling the business. And then it got to a point where we're like, OK, we definitely have enough savings and also got to a point where we were so busy. So what do it look like is I would be struggling to find time to get on calls with buyers that small retailers or like call to talk about different marketing opportunities. Because I was working my nine to five, which is more like an eight and like six thirty PM job, and I couldn't find time during the workday to talk to people for three shifts related work. And so that was a struggle. And then also got to a point where we were still hand making products. So we were starting to make more and more products at home and that was eating into time where we could be working on the business strategy wise versus working in the business of like just manufacturing. So it was a really good time for us to quit because we've saved up enough money and we just could not continue working at that pace. And so that's really when we decided, like, OK, let's just go full force with this.

Speaker1: Hmm, amazing, I have to share in that time where you were kind of really hustling, you're doing the balancing act, you're a year and a half in. What kind of revenue were you pulling in from all those organic efforts in that early phase of the business?

Speaker3: Definitely so. For the first year or so, our first year was twenty seventeen and we started merch. So it's like partial year also hustling. We did forty thousand dollars in revenue that year and then the next year, which was twenty eighteen, we did one hundred and one thousand dollars. That extra one thousand. Still remember that in my head. I remember that was the year they went full time but a lot of that was like from markets, from subscription boxes which are another great acquisition tool, especially if you're able to partner with subscription boxes, save for like for example, five or IPSI, but that have a very specific target market that you're going after. That was really great for revenue and acquisition and also working with small retailers because you get initial cash flow upfront and then you can use that to fund your business.

Speaker1: When you say the subscription boxes, how does it actually work? Like, do you have to pay for placement or do they just take the products? What's the kind of business model behind it?

Speaker3: It depends on which box you're working with. So some boxes will not pay for product because they are just that well known and they have so many brands want to work with them. So we had to turn down those opportunities in the beginning because we just couldn't justify and we were still making the products by hand. So like so many hours of work for zero dollars and then some boxes, but they do something called cost share. So it's usually a percent of the retail price of your product. So say it's like a ten dollar product that you have and they do a 20 percent share. They will pay you two dollars per unit for you to give them that product. And then that is your revenue that comes in from the subscription box. So many boxes work on this cost sharing model. Cochaired usually ranges from like five percent on the low end for reputable boxes that will purchase hundreds of thousands or millions of units from you up to maybe like 20 percent if it's a smaller subscription box. So that was really how we funded our initial days of our business. What we did was we partnered with subscription boxes that were within different areas of our target demographic. So one of our first subscription box partners was with a vegan subscription box called Petit Bois, and they ordered six thousand seven hundred units of our initial product. And I still remember that number. So we made every single unit by hand for three weeks after work here, nine to five. So I will never forget during that time, I think I still feel it. But they did help pay for those six thousand seven hundred units and then use that money to fund the business. And we also gave them a discount code so that their subscribers convert in shopper site after. So that was a really good acquisition strategy. But that's in general how subscription boxes work and they can order anything from like one hundred units all the way up to millions of units.

Speaker1: Wow. Goodness. Definitely not making a million by hand. No, no, no, no, no. Over the years from those kind of moments of doing the hands on high touch, Instagram outraged the markets, the subscription boxes that you were making, the products, how did you start to scale your marketing and find what was really working for you and driving significant traffic and significant sales?

Speaker3: Yeah, that is a really good question. I think that it was a lot of testing, so what I did initially so I could talk about some of the mistakes that we made along the way, too, so something that I thought was, you know, I'm not a PR expert, maybe we should have been on a period initially because we're getting so many inbounds from agencies asking if we needed help. And so I was like, yes, sure. But I only had enough budget to spend a couple thousand per month initially. And even then that was like a lot of our budget. But I was like, oh, I don't know. EDS like this should be something that next expert handles. So we just signed on with the Canadian PR agency and I immediately regretted it because the PR pitch that they were learning us were not high quality because again, we weren't paying a lot. And what I realized is I could just do it myself. So I started doing editors on Instagram and commenting on Twitter and reaching out on LinkedIn, and I would start sending them emails and products. And that was actually how we learned some of our best PR coverage initially. And what I realized from that is that was really great for raising awareness. So that was really good for scaling our marketing efforts initially, just like getting editors and all that. I know that it is very manual, but I think sometimes some of the best things for your business are actually some of the non scalable elements.

Speaker3: So that was really great for us. And then I let go of our agency initially and then we signed on with another agency years into the business after we were able to afford a higher quality PR agency. So that's something that I would recommend. It was a big mistake that we learn from is try doing most things yourself. Another thing that we learned was we were not experts on Facebook and Instagram advertising, so we tried to do that ourselves as well. So Laura and I remember one night we sat down, we're like, OK, let's set up an ad. And then we're like target audience. Like probably someone who's into yoga and like is vegan and lives in these cities. And then Facebook spit out our target audience. It was like five people or something like it. And we did this wrong or something isn't doing here. So we decided to hire an agency and that was scalable because they were able to get three XPrize on our ads. So I recommend to your audience, like find a good agency for trying to do Facebook and Instagram ads unless you're willing to put in hours of research into understanding how to optimize your own ads. So those are some of the things that we did initially for marketing. I'm trying to think what else is really scalable? Well, one last thing I'll say in terms of marketing to retailers that was scalable is actually attending trade shows.

Speaker3: So going to beauty trade shows for us was really big. So Beauty Expo is one that was a really big one that we want to attend. Another mistake that we learned was trying to attend smaller trade shows that weren't as reputable. We tested that out for us. So we're like, you know what, we want to go to Indie Beauty Expo, but it's like ten thousand dollars all in including like fly accommodation and getting the booth printing stuff to hand out giving out samples. So we're like given the fact that we're only like forty thousand in revenue, let's go for a smaller trade show that's going to cost like five grand at the quality of retailers. Editors like press influencers that are attending the trade show where so much lower that we didn't make any are alive from the smaller trade show. So what we did instead was the next year we spent more than the beauty expo. And that's where you can meet really high quality retailers. And that's where we met Wholefoods Target like a bunch of large retailers. And I think that's scalable because you're only going to a few trade shows per year. But at each trade show, you're meeting so many buyers and editors and you only get better each time. So if your listeners, especially if they have like a physical goods company, I recommend that they look into the best trade shows for their industry and try to save up to go to those.

Speaker1: Mm. That sounds like a really good one. Indie beauty. So how do you actually get on the radar of those buyers that you wanted to see at the trade show and how do you attract them.

Speaker3: Yes, so I think one mistake that some doctors make is they think like I'm going to go to the trade show and all of the business is going to roll in, and that's definitely not the way to do it. And I know, like sometimes when Laura and I would go to trade shows, we'd see people sitting down at their booths looking on their phones. And we're like, it looks like you don't want to be here. Like we were on our feet standing in front of the booths, like talking to people, bringing them in. Even I would chase down people who walk past us if they walked past our booth and just try to bring them back. Like that's how you're going to get the high quality relationships. So some buyers, they just like to talk with you at trade shows and they will really entertain you outside of teachers. But some even if you do see them at a trade show, it doesn't really mean like they're going to want to work with you. So one example I have is a target. It was a rea