How We Quickly Validated An Idea And Sold Millions Of Product
Hello! Who are you and what business did you start?
Hello there, my name is Jack Bramhall and I am the co-founder of Mugpods - Nespresso compatible pods.
Mugpods began back in September 2015 to bring the World’s First hot chocolate pods and coffee range for use in Nespresso machines to the UK market.
Initially starting with $6500 capital, we sold out in a matter of weeks following launch, fast forward to today we now average around $21,000 USD per month in revenue with millions of pods sold.
What's your backstory and how did you come up with the idea?
Throughout my teenage years I had a few small ecommerce businesses and loved the idea of being an entrepreneur.
I am a self-taught web designer, and have quite a lot of experience with digital marketing and search engine optimisation. That being said, my previous websites/businesses never really succeeded due to lack of funds and/or operating in highly saturated markets.
The samples arrived and Mike and I (very excitedly) spent an evening trying each and every flavour, they tasted fantastic and worked perfectly across multiple machine models. We then invited friends and family to give them a try and had 100% positive feedback.
In 2015, both myself and my co-founder (Mike) owned a Nespresso machine, and the company I was working for (IT/Telecoms) had one on every floor! Colleagues would “club together” to place giant orders direct from the Nespresso website and we were both spending a small fortune a month on these little colourful pods.
Quite simply the original idea came from asking the question “Why can’t I get hot chocolate for my Nespresso machine?”, combined with “Surely I can get cheaper Nespresso pods?”.
Using Google’s own tools such as the keyword planner and trends, we were able to quickly identify that there were thousands of people asking the same question that I was - but nobody providing the product! The Nespresso and coffee pod market was also quite clearly growing exponentially across the whole of Europe.
To be clear, there were other companies making “compatible” pods for these machines, but coffee only and from my own research there were a lot of issues with compatibility and quality.
After further research we found only one manufacturer in the World that had managed to crack hot chocolate and so we got in touch about samples and whether they would be open to us buying and selling their products. Initially, I think they possibly doubted if anything would come of it - asking us whether we had relationships we retailers etc which we did not. To prove how serious we were I built the mugpods website in a weekend.
The samples arrived and Mike and I (very excitedly) spent an evening trying each and every flavour, they tasted fantastic and worked perfectly across multiple machine models. We then invited friends and family to give them a try and had 100% positive feedback. We immediately got back in touch to formalise everything, and decided to take the risk and committed to a minimum order.
Take us through the process of designing, prototyping, and manufacturing your first product.
We were quite fortunate enough that the “range” of products already existed from our manufacturer - we simply needed to decide which products we wanted to launch with and then agree on terms (such as exclusivity) which, until we proved ourselves was not on the cards.
If you have an idea - research it as fast as possible, work out your costs and commit.
That being said there were so many “hurdles” that we did not have any prior experience of such as importing, for example learning about commodity codes (codes that are applied to different products when importing) - these codes link to tariffs/taxes which you pay on import.
Obviously, one of the first things we had to do was decide on our name, we came up with around 60 different words - the majority contained “pod” or “mug”, each one we checked whether the name already existed and whether the relevant domain names were available - eventually leading us to mugpods! The logo took far longer, we used a website called zillion designs where basically designers submit proposals and you vote/provide feedback on each one. It took 74 revisions for us to finally get to our logo (that we then trademarked).
We also perhaps naively thought that if something is organic in one country that means it is organic in ours - how wrong we were! On importing an organic coffee one of our products got quarantined (at a cost per day) for lack of UK certification, then we were told by customs that we could not sell the product AND had to have an inspection to ensure they were not being sold. This mistake cost us thousands so our learning was to ensure any certificates must be valid in your own country and double and triple check your own countries laws around packaging prior to order/manufacture.
Describe the process of launching the business.
As previously mentioned, we built the website in a weekend using the Prestashop platform and accepted Paypal.
Our initial capital came completely from a personal loan of $6500, which was spent almost entirely on our stock (and freight/import costs) right at the beginning, we opted for air freight to get it to us quickly and be able to launch within two weeks.
Our official launch was only via social media. The fact we had World’s 1st products made it very easy for us to quickly get our message out via facebook, immediately getting hundreds of comments (and most importantly traffic). We quite simply used images of the chocolate “pod” with the product and text to show it was the World’s 1st. Following that we ran a continuous “boosted” post targeting anyone who liked or had an interest in “Nespresso” and “Hot Chocolate”.
Following launch, we were immediately getting daily orders, but at the time both Mike and I were working full time - with all of our stock sat in Mike's parents garage we would get up early every morning, go to Mike's parents house to pack orders, then take them to a local drop off point before going to our day jobs. Within a few months Mikes Mum Lisa started helping during the day as the volume continued to increase.
One of the biggest issues right from the beginning was that we had no spare cash, demand was always higher than supply causing us to go out of stock regularly. Almost all funds were going straight back to buy ever increasing amounts of stock. To help fund our growth we sold shares to Mike's parents and a family friend.
Mike and I were also regularly paying for things personally or loaning money to the business just to keep things running/actually having stock. This was both exciting and very scary, the business was growing which is surely a good thing - but we never had any cash! All cash was being tied up in the stock which we were roughly doubling in size every time we ordered, we were paying in our own money, Paypal working capital and even Amazon lending just to find funds.
A turning point was when we were able to purchase much larger quantities of stock by sea freight which massively improved margin by >30% (this is known as Less than Container Load LCL). When you finally get to a Full Container Load (FCL) is when you are getting the best pricing in terms of freight which ultimately improves your profit per unit once sold.
Since launch, what has worked to attract and retain customers?
Once we got to a point where we had enough stock to last (which being honest we still struggle with even today) we began looking at multiple ways to increase our visibility but also to retain customers.
We have always been very confident in our products, knowing they are a great alternative to Nespresso, all customers are asked if they would like to join our newsletter for offers and promotions when they place their orders (we are explicit that their info is only used for this purpose, and following GDPR have a very detailed privacy policy) and we have quite high signup rates >70% of customers. This has meant a continuous increase in our newsletter subscribers which is now in the thousands. In our emails we tend to share a facebook competition (link to facebook), spotlight a single product and then have a voucher code of around 10% off.
We also operate a referral scheme where existing customers can get discount if they invite friends (and the friends make savings too), we have had approx 10% of our customers refer others.
Our marketing includes Google Ads, Bings Ads, Facebook Ads to drive relevant Ad traffic, one learning from this is that they are certainly not a set and forget. You can burn through cash if not optimised so need constant tweaks testing new ad’s. We regularly A/B and even C test ads across different demographics.
We have also spent a lot of time optimising our website for SEO to appear organically, for example we created a blog full of helpful articles and guides like “How to find the best Nespresso compatible pods” or “Which Nespresso compatible capsules are the strongest?”. Originally we posted new content at least monthly, but in keeping up with latest SEO trends, quality content is far better which ultimately leads to longer dwell time and hopefully in our case leads to a purchase.
In addition to the above we have an Affiliate scheme paying commission for any referrals that turn to an order - this has meant we are now on cashback websites and voucher sites.
eBay and Amazon
Our products are also available on Ebay and Amazon as additional sales channels. Ebay is a pretty stable income stream, but at least for us (for some unknown reason) we get more “problems” from the customers of that channel than any other - i.e saying a parcel has arrived damaged, wanting refunds etc.
Amazon, on the other hand, can be a double-edged sword, indeed it creates revenue for us (we even trialled fulfilment by Amazon, which we saw an immediate increase in sales volume) however the fees (of selling but also if you opt for the Ads) tied with marketplace forces create a race to the bottom which ultimately destroyed most of our margin. I have seen with my own eyes that when Amazon sees a product selling quickly - they begin stocking that product or even a competitor's similar product which is not good longer term for any small business solely relying on that channel.
In our particular circumstance - where we need every penny to buy more stock - it seemed stupid to give all of our profit to Amazon, so we made a decision to increase our prices on Amazon to maintain margin - which reduced sales but we are comfortable with.
How are you doing today and what does the future look like?
We are quite positive about the current and future outlook of mugpods, our revenue is still increasing but (as you would expect) now starting to slow its growth - which in turn is having a knock on effect to not needing to increase stock at the levels we were, building up cash for the first time.
With the increased capital we are now beginning to re-invest this in products and are very pleased to be launching biodegradable pods and pouches within the next 6 months. In addition to this we are now looking at creating custom labelling (also known as white label) all of our products to truly position mugpods as its own brand.
We are particularly pleased that September to December 2018 was our biggest on record in terms of visitors to our website, units shipped and revenue - with over 50,000 sessions to our website as shown below.
Through starting the business, have you learned anything particularly helpful or advantageous?
We would definitely recommend tackling “best practice” things early on, and avoid anything manual.
For example at the beginning we did not have an SSL certificate on our website, but moving from http:// to https:// actually caused us quite a lot of problems, the same as originally we manually created labels for our parcels - but months later this was taking us hours whereas now we use API’s to automatically generate them.
As already mentioned, having an understanding of your own countries laws from product import to taxes we would highly recommend you get right from the beginning.
What platform/tools do you use for your business?
Prestashop - open source ecommerce platform. Although there are some frustrations with it around getting support with modules (that you pretty much are guaranteed you have to buy from 3rd parties) I have always liked the fact it is hosted on our website and I can physically change any aspect in the code unlike other cloud based platforms such as Shopify.
Mailchimp - for newsletters and various automated promotions based on past spend/orders.
Reviews.io - for automated review collection and those all important Google stars.
Zenstores - to combine and generate shipping labels (I believe this is UK only).
Facebook, Google, Bing Ads.
What have been the most influential books, podcasts, or other resources?
I enjoy listening to the wired podcast to keep up to date with what's going on in the world of tech.
The four hour work week by Tim Ferris - not because of the idea of not working many hours from a beach, but I enjoyed the insight into driving efficiency and automation.
Shoe Dog by Phil Knight - a really interesting story about the beginning of Nike and how it grew to the multi billion business it is today.
Advice for other entrepreneurs who want to get started or are just starting out?
I think Mugpods has proven that there are still plenty of opportunities that in our case thousands of other people thought about, but we were the first to go and do it, so if you have an idea - research it as fast as possible, work out your costs and commit.
The above being said, the moment we realised we were onto something - we ran out of cash. I would recommend you do everything in your power to make sure you have enough capital to launch - but also make sure you have some capital available for unforeseen problems and growth.
After that, operational efficiency is then your key to scale - remove anything manual/time consuming as fast as possible.
Where can we go to learn more?
- Website - https://mugpods.com
- Facebook - https://www.facebook.com/mugpods/
- Instagram - https://www.instagram.com/mugpods/
- Twitter - https://twitter.com/mugpods/
- LinkedIn - https://www.linkedin.com/company/mugpods-ltd
- Email - [email protected]
If you have any questions or comments, drop a comment below!
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