Taking Home E-Commerce Giant One Kings Lane to Mobile

Doug Mack, CEO, One Kings Lane

If there was one thing to take from One Kings Lane CEO Doug Mack’s recent soapbox, it was that you have to learn about your product. Oh, and mobile matters … a lot.

We had a lot of fun at Doug’s soapbox, the last in our current digs. What impressed us the most was how in-depth he went into the importance of mobile in the E-commerce space. He even brought two of his chief designers along with him to really dissect how the home furnishing retailer is going mobile.

He gave great insight into why it's important to have a device-based strategy when it comes to mobile. Feel free to listen to the podcast as you read through the summary of the event below.

Feel free to listen to the podcast as you read through the summary of the event below.

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Know Your Product

When Doug Mack was 12 years old, he worked for free at a local computer store in his home town. About the experience he joked:

I had to work for free because you weren’t allowed to be paid. I would’ve gladly been paid.

What actually happened was that Doug and his father went to the shop and couldn’t get help for about 15 minutes. After awhile, Doug’s dad said, "This is for the birds." His dad then went up to the shopkeeper, telling him that Doug knows a lot about computers and would be happy to work there.

Doug learned the ins and outs of salesmanship. Because customers had many questions about the products, Doug went about studying the features. He even took them out of the packaging to do so, then carefully shrink wrapped them again.

No BS. You had to learn about the product.

He carried that tenacity throughout his career. As he put it:

[I] always wanted to work for companies where I love the products.

In other words, you have to be your own ultimate consumer.

Before he was hired as CEO of One Kings Lane, Doug used the online retailer as a shopper. He thought it was a cool concept, and saw the opportunity that help build a better product, better company.


A Soul to the Company

While that early experience helped shape Doug’s approach to One Kings Lane, what also impressed him was that there was more to the company than just selling furniture.

Something that he discovered after meeting the founders, Susan Feldman and Alison Pincus.

There’s a soul to this company.

Doug said every brand needs a soul. And here was a company that not only had a soul, but a strong mission on which great things could be built upon.


A Forum for Connectivity

When you think about it, Doug said, there hasn’t been a lot of new concepts introduced and achieved scale when it comes to E-commerce. It’s the same original players, such as Amazon, which took the offline catalog and put it online.

Doug said there's a front-end opportunity — to use the internet as a forum for connectivity. A place where you can connect directly to customers and get feedback. Something he saw with One Kings Lane.

In a mobile-future where everyone might try to access you from five different devices during the day, to have a universal profile of your customers was interesting.

Doug first felt the oncoming storm of mobile when the iPad was released. He sensed that single device was going to revolutionize commerce.


Best of Breed

When it comes to E-commerce, mobile is helping change the way in which we shop. Companies with a vertical focus will win out, such as One Kings Lane, which is serving the underserved home consumer. A customer base that Amazon can’t serve too well.

We’re seeing that now, as Doug pointed out. We’re seeing more best of breeds, such as eyeglass-only retailer Warby Parker, rather than one-stop shops like Amazon.

Rise of a vertical commerce is interesting. I don’t think it’s a challenge. I think it’s the only way to win the next generation.

To survive, however, companies need to constantly innovate. Take TIVO, for example, which built this great product with a great UI and spectacular customer service. But it had no follow up.

No act two. They rested on their laurels of their first really good thing.

One Kings Lane has constantly added new features to stay ahead, even putting customers in touch with such top-notch decorators like Michael Smith, who's outfitted the White House.

The only thing that matters is to stay ahead is continious innovation.

Your Business Strategy Includes Mobile or It Doesn't

Doug also believes to stay ahead is hiring top talent. He's managed to snag talent from Intuit, Skype and Amazon. As we began talking more about mobile, Doug brought in some of that top talent to join our conversation.

Jonathan Liberman, Director of User Experience, was the lead product designer at Mint. And Sarah Oppelt, Design Director, comes from Benefit.

Doug said that sales on mobile have shot up in the past year. It went from 0% to 25% in 2012. During the Thanksgiving holiday, they saw a 40% spike from the usual holiday traffic. A spike that carried them through the Christmas season.

He even had a mobile moment during the Black Friday, typically the cornerstone sales day of Brick-and-Mortar shops. He saw a huge spike, someone even bought a $25,000 clutch. Which Doug imagined the shopper sitting in a cafe with her friends and subcumbing to peer encouragment to buy it.

With that, One Kings Lane is fast working on its iPad app and retrofitting its iPhone app. When it comes to mobile, Doug said:

Your business model either leans mobile or it doesn't on some levels.

Reduce Friction

There are still challenges with mobile. As Doug put it:

Great design is even harder on mobile.

Storytelling is an important component of One Kings Lane, which is why they use high-quality photography. There's even suggestions for how a product can be used as well as videos. But on mobile, pictures become deadly important. That's because you may have five minutes to capture someone's attention.

Make sure those five minutes are the most interesting five minutes.

In other words, you have to reduce friction, remove barriers for the customer. Jonathan said you have to design with clarity, context and confidence in mind.

It forces you to think of storytelling in different ways, said Doug. Nevertheless, you have to still have that additional text or videos available. That content, however, has to be hidden and readily available should a user want to see it.

Our conversation with Doug, Jonathan and Sara continued as they took questions from the audience. We want to thank them for stopping by and sharing their insights into how mobile is shaping E-commerce.

Don't Miss Out on Our Next Soapbox

Soapbox transcript

Ryan: All right. I want to thank everyone for coming to ZURB Soapbox. This is likely to be our last one in this building. We are moving down the street. So it will be really exciting, and I want to thank you all for being here. If you guys are live tweeting, we do have a #zurbsoapbox. So feel free to tweet any quotable quotes you hear today.

Ryan: Let me just start with a brief introduction. At age 12, Doug Mack was working at a local computer shop for free. What he learned was to study the products he was selling, a lesson in tenacity that he carried throughout his career. When he founded Scene 7, working at Adobe, and now is CEO of One Kings Lane, the popular eCommerce site for the home. Before taking the job as CEO of One Kings Lane, he studied it closely as a customer. Knowledge that served him well in taking the company from $25 million in yearly sales to $200 million. Now he is taking the company mobile. I want to get into all of that, but please first let's give a warm welcome to Doug Mack.

Doug Mack: Thank you! Where do you guys dig this stuff up?

Ryan: You know, I was once a reporter, so I am able to do a little digging.

Doug Mack: Bringing back some memories. I had to work for free because we weren't allowed to be paid. I would have gladly been paid.

Ryan: Well, that takes care of the first question. But you know, before we get into all of the mobile, I do actually want to go into your background and I really found that story of you working for free and learning about selling and salesmanship fascinating. I was kind of wondering if you could just tell us kind of what you actually learned through that experience and how that shaped your career going forward.

Doug Mack: Yeah. Can everyone hear me okay? The genesis of the story was it was a holiday. I was twelve years old. I went into a local family computer store with my dad. We couldn't get help in the store for about ten or fifteen minutes and my dad was like, "This is for the birds. We are not going to buy anything here." We went up to the shopkeeper and basically said, "My son knows a lot about computers. He'd be happy to work here." And what I begin to learned from that experience is customers were coming in with lots of detailed questions about the products, different software products at the time. There was the Commodore 64 and a few other things like that. And my big learning there was no BS. You've got to really know the product.

What we had in the back was a shrink wrap machine. So we'd go in. We'd crack open Quicken or whatever there was at the time. We'd use it a lot. We'd get to know it and then we'd shrink wrap it back and then we'd put it on the shelf again. And when customers came in, I was really, really prepared to answer their questions and that is definitely a lesson that carried with me through my entire career and every choice I've made. I've always wanted to work for companies that I love the product. I can't connect with the notion of going to a company that I think is like a big, successful, interesting company, but I'm not passionate about what they do as a company because you have to be ultimately your own consumer.

And you alluded to the One Kings Lane experience of I heard about One Kings Lane. I thought it was cool. I started buying stuff from the site and it showed up at my house and I was like, "This is amazing stuff. I could build a great company around this. You know better product for less money. This is interesting," and got really informed. So that early experience carried through all the way for me.

Ryan: I want to talk about, you kind of touched on that briefly, of using One Kings Lane as a customer, but using it as a customer before you even took the job as CEO. What were the opportunities you started identifying and saying, "How can I really build a company around this?"

Doug Mack: Yeah. First thing first, though it was important to me even to step away from the product, was that I met the founders of the company and I thought they were amazing. So first I was like, "There is a soul to this company of two founders who passionately believe in the mission of the company that we can build on." So that was foundational. And then in terms of opportunities, I've always felt eCommerce is interesting, very much dominated by Amazon, EBay, Netflix, and a few other major stalwarts of eCommerce. But there haven't been a lot of new interesting concepts introduced and gotten to scale over the last five or ten years. You know, it is the same original players. If you look across the internet and say, "What was the original community social site?" It was GeoCities. They are long dead. Now it has been replaced by Facebook. I see somebody laughing. He remembered GeoCities. You can go through this game of AOL back in the day, Twitter now, and the list goes on and on.

It was Amazon 1999, Amazon 2013. And so I definitely felt that there was an opportunity for more innovation off the following thesis which is what Amazon has basically done is taken the offline model of the print catalog. Taken that and put it online and made it really big and searchable and worked like hell to make it cheap and fast. But I felt there is a whole front end opportunity to say, "Hey, the internet as an interactive forum where you can much better feedback and information from your customers." There is a whole front end innovation experience that I felt was interesting.

I thought the site was interesting because everyone was logged in all of the time and in a mobile future where people might access you from five different devices during the day to have a universal profile of your customer I thought was interesting. And back then One Kings Lane was zero percent mobile but I could feel the rumblings of the mobile wave coming. I mean, I remember the day at Adobe I was sitting at my desk and watching the debut of the iPad. I was just like, "Holy Crap! This is amazing! This is going to be really big!" And that is when my mind really got going around how will things like the iPad impact the future of commerce and One Kings Lane as a platform to play into that. Too long of an answer for you?

Ryan: No. No. Perfect. Go as long as you want. There are only short questions and long answers.

Doug Mack: All right. All right.

Ryan: But that kinda also touches on something we were talking about before this and is that whole idea of best of breed because you have Amazon which has become more generalized. You can get everything through Amazon now where it started out it was just books. Now you can get everything. And you have One Kings Lane and other avenues to go to for specific items.

Doug Mack: Yes.

Ryan: And what are the challenges in bringing that to mobile?

Doug Mack: Yeah. You know, and actually I'll even step back from mobile on a general thesis which is I do think there is only one Amazon. In this day and age, there is too much capital, too much talent, too much competition to try to be all things to all people. Amazon's advantage is they started in the mid-90s. You know, pretty soon it will be twenty years ago that they got up and going. And when I look at new commerce, I think the winners are going to be those who are incredibly deep at a vertical focus. I look at ourselves where there is an underserved home consumer that an Amazon won't serve well, but a new interesting concept can come online and really captivate that consumer. I look at a company, anyone know the company Zulilly?

Audience: Yep.

Doug Mack: You know, kids clothing, not the best experience. It costs too much. You have to replace it too often. They came and they said, "We're gonna fundamentally solve kids clothing." Do you know Warby Parker?

Audience: Yeah.

Doug Mack: They are going after a monopolistic eye wear industry where basically all the eyeglasses you buy are too expensive because they all trace back to the same company who sells them to you under different brands. And so I think this rise of vertical commerce is interesting. I don't think it is a challenge. I think it is the only way to win in the next generation of commerce is to be the very best at what you do because everything is one click away.

Ryan: All right. Right. And you bring up an interesting point because when you took over for the company Tales of Ten, there has been such amazing growth with that. You have gone from a staff of 29 to 200. You are in Beverly Hills.

Doug Mack: 350.

Ryan: 350 now? Okay. My numbers are a little off today. I guess I didn't do as good a digging as I thought I did.

Doug Mack: That is what I'm here for.

Ryan: All right. Awesome! And you snagged some talk time from Intuit, Skype, Amazon, got a gentleman here from Mint. And you also said in "Fast Company", and I want to quote this directly, "When you have a big opportunity, you should be aggressive. You need to invest in talent, technology, infrastructure to stay ahead of that conveyor belt of chocolate," obviously referencing "I Love Lucy." So with that vertical path and all that good stuff, how do you stay in the lead and how do you keep growing while still being the best at that particular niche?

Doug Mack: You touched on a couple of things of talent and technology. One that I'll add to the stack is the notion of continuous innovation. One of my favorite companies of all time, Tivo. Anybody here used to work for Tivo before I get on this thing? Have you? Okay, so I won't offend you too badly on this. So Tivo best one ever. Consumers loved it, addicted to it, great new eye, great design, great consumer experience, fundamentally changed the ability to view television. They were launched in [inaudible 00:09:36] no act too. They just kinda rested on their laurels of their first really good thing. And it's really sad to me because of what they might have become if way back when they had that lead they did something more interesting. We were the first company to launch the flash sales business model for the home in 2009 and that was really interesting. A lot of skepticism, it worked. But one of the immediate things that I challenged us to do as the CEO was, "okay, what's our Act II? What's our Act III? How do we always have something in the pipeline that is the next wave that is building upon this healthy core?"

So what we did in 2010 is we launched designer tag sales and celebrity tag sales that we allowed the everyday consumer to get access to a product that they would never be able to get to on their own. Michael Smith who decorates the White House for the Obama's runs sales on One Kings Lane. You know that is your only way to get to Michael Smith is through us. That was innovation. Last year, we launched a vintage marketplace where there is great thirst in our customer base for vintage products but we couldn't keep up with it because it is all one-of-a-kind one-off products. So we launched a marketplace but with the One Kings Lane promise to put experts in to curate the sellers, curate the submission to keep it consistent. So the only thing that matters to stay ahead is continued innovation. You have to build on your Act I. There is too much talent. There's too many clones to just try to kinda keep breaking your pick on your 1.0.

Number 2 is talent. I spend more than 50% of my time on talent. In the early days I came in, there wasn't an executive in between. There was me and the founders. I went out to some of the greatest companies that have built great companies and a lot of eBay executives. We have gone into Amazon. We have gone into retail like Ralph, like J Crew, and we put together codominance in the media space. Put together this melting pot of talent throughout the organization. The person that does our photography on our site everyday, "Architectural Digest" was their last job. So talent becomes the moat around the innovation strategy.

And then technology. Technology changes fast. To do what we do every day has to be supported by something that can scale, has to be automated, has to be dynamic, has to be data-rich, all of those things put huge barriers against the competition.

Ryan: And you guys are working on technology right now addressing mobile, and we're fortunate enough to have two of your user experienced people here, Jon Lieberman and Sara, with us to help to kind out flesh out this conversation a little bit further and I kinda want to talk because mobile is fast overtaking desktop traffic. I mean that is just a fact of the world we live in now. And for instance, on Black Friday, there was a 25% increase in just retail sales alone on mobile. What were some of the trends you guys saw over the holiday season particularly Christmas, and how is that kind of influencing you guys' design decisions today and what are you guys working on in terms of that?

Doug Mack: So a couple of thoughts, mobile for us in terms of revenue has gone in two years from 0% of revenue, and people talk traffic a lot on the web because it's sometimes hard to monetize, I just talk about mobile revenue when it comes to what are we really focused on. Zero percent revenue two years ago, 25% of revenue as our exit rate for 2012. It happened much faster than I expected. Not all of that is within our control of things we've done. Most of that is consumers' intimacy with the devices, whether they are iPhones, iPads, Android, or otherwise, so that has been a huge trend. What we saw during the holiday is in the past, there is a dirty little secret. Anybody in the commerce industry here? Just a few. Okay so a little secret of the commerce industry, people love to shop at work.

Audience: Yes.

Ryan: Not here at ZURB.

Doug Mack: No, not at all. And so typically Monday through Friday, you know 8:00 a.m. to 6:00 p.m., is a really great shopping window and things outside that window are distraught. Mobile has really changed that, because in the past, we would go into Thanksgiving week that we're like, "Okay, people are basically at work Monday, Tuesday, traveling to where they want to get to Wednesday, family on Thursday, out at retail stores on Friday, home for the weekend." That is kind of four tough days because they are not working where they can shop. And what would happen on Thanksgiving is basically we saw like 40% of revenue come from mobile. So a huge spike that people no longer were leaving eCommerce behind. They were taking it with them whenever they went out. People talk about Black Friday retail. Traditionally Black Friday is actually a store-based retail phenomenon.

That is when you are getting the door busters and people are trampling each other at Wal-Mart. ECommerce as big of a deal mobile carried all the way through the holiday season. The other thing we've seen in mobile that I think is staggering is the willingness of people to buy really expensive things over devices. That's one thing I did not see coming. I did a story with Sara Lacey on this topic at Pando where basically my mobile moment was, it was on a Friday night. I was looking at our sales. We saw a huge leap in sale on Friday night, which is unusual because no one is at work on Friday night, and I drilled into it and it ended up being somebody bought a $20,000 Hermes clutch. And then drilled deeper and it was on an iPhone. And I am just envisioning this customer at a cafe with friends in LA on an iPhone passing it around saying, "I gotta have this." And they are like, "Buy it, buy it!"

Ryan: Do it. Come on.

Doug Mack: And when I say cafe, probably more like a wine bar, and go ahead and push buy. So I think that's big on mobile. In terms of where next introduction, Jonathan and Sara are leaders in our design organization. If you have visited One Kings Lane, you can see we're a design and inspiration led company. Jonathan comes from Mint. Sara comes from Benefit. So a really great mash up of retail and frankly mobile. Mint more mobile than it is web. And if we want to take a second for you guys to share some thoughts where you see now that these trends are kicking in some of the things next in mobile that are interesting to us in terms of where we may take things in the future a little bit. All right. And Jonathan has a broken leg, so if he falls over...

Jonathan Lieberman: The direction we're actually moving in is obviously one area you guys are fans, users of One Kings Lane, you've probably noticed we don't have a native iPad app. So we've been hard at work over the past few months sort of fleshing out what those features and that experience will be leveraging some of the learnings we've had from the iPhone and understanding the capabilities of the device. So something you'll have the opportunity to look forward to in the coming months will be native iPad application. One of the opportunities we've had too is that in re-factoring the code for that we'll be building a universal application. So not only will we have a fresh iPad app, but we'll also have a refreshed iPhone application as well.

Doug Mack: And also for Q&A if we want to dig any deeper, we'll pull both of these two in with us.

Man: Ask more specific questions.

Ryan: You guys can borrow my mic at any time.

Doug Mack: In the sake of total transparency, I asked them to join today because we're hiring UX designers, visual designers, interaction designers. So afterwards, if you think what we do is cool and you believe in some of the vision we talk about, mingle with Jonathan and Sara and ask more about our team.

Ryan: We'll start the line right here. Okay, we'll just wrap it around.

Doug Mack: And if you have friends, let them know who your friends are who are very good.

Ryan: I think you touched on this a little bit, but I kinda want to know what makes mobile really difficult for retail because in the past, a lot of retail has kind of hand waved mobile and it is hard to get how the sales function and all that stuff in terms of responsive sides and debate over whether they should go native, and all that. What are those difficulties and how are you guys trying to meet those challenges?

Doug Mack: Yeah. I think the core of the difficulty is your business model leans mobile or doesn't on some levels. When you see the company is having success in commerce, any eBayers in the room? EBay, huge success in mobile. Ourselves, some of the folks like Zulilly, and I think what's at the core of it is if, I have a bad habit of picking on companies. I need to stop this. I am going to get in trouble. You know if you're restoration hardware and your updating your home furnishing assortment once a quarter, basically seasonally, spring, summer, winter/holiday, is there a reason why when someone is standing in line at Starbucks with their phone they need to see the latest and greatest thing going on? It's a little tough, right? When you have companies like One Kings Lane, eBay, or others where there is a daily story, there is something fresh.

In the case of an eBay, you maybe have active listings. You want to see how they're doing. You're interacting with customers. In our case multiple times a day there may be new interesting products on the site you want to see. Your model may have an intrinsic mobile advantage. What we do is we fuel that advantage. In our case, we are in image central company and that goes back to my background at seeing some at Adobe. I spent a lot of years in imaging and seeing the power. The old picture is a thousand words has never been so true. And if it was pretty true on web. It's a game changing factor on mobile. People don't really read the web. They surf the web. People definitely aren't reading as much on mobile. That's just my opinion. I have no empirical evidence on that. And what we've invested a lot in is great photography so that when people are going through and paging through images, it's getting their shopping temperature up. They are more likely to act. So the intrinsic of our business model, the investment in photography is big. If you are a traditional retailer, you are not updating your assortment.

You don't have a big investment in things like imaging. You may actually be on the wrong end of the mobile shakeout, where people may walk into your stores with a mobile device. You get some inspiration at the point of purchase but you see something you like even more on a phone, so it could be really bad. Last, but not least, and this is something, Jonathan, and I think about is we really like minimal, simple design. How do you get people? How do you make sure that the interface doesn't become a chrome, you know the chrome that's in between them and the mission they are looking to accomplish?

And on mobile the bar goes up. Great design is even harder on mobile. We, for example, someone once asked me, "Why don't you have social sharing features on your iPhone?" And the answer was, "We basically had to pick the fewest, most important things to put on our iPhone app and we would love for people to share but it's even more important for people to shop." So when it comes to mobile choices, we are even more ruthless, and Sara and Jonathan showed me the first rev of our iPad app and my first reaction was this is awesomely simple and so I think that is really, really important.

Jonathan Lieberman: I think just to augment what Doug was saying is that, you know simplifying, we know people want the most important information first so simplifying the application. Photography for us is huge. Unlike any of the other actual commerce sites in our space, we are actually delivering the largest photos on what we call the PDP or Product Detail Page and only servicing the most important information initially. So that impact when they see the photo, hopefully the product will resonate with them and encourage them to buy.

Doug Mack: And one thing you kind of alluded to is native versus app. I think you have to have a device specific strategy. So in our view two and a half years ago, if you went on the iPhone and you opened up the browser and you tried to shop One Kings Lane it was a disaster. So we said, "All hands on deck. This is an unshoppable experience. Let's put all of our effort into iPhone and getting great on iPhone and getting a 5-star app that our customers love and converts really well." By contrast on iPad, people pop open the Safari browser and have that screen size, they get a pretty good shopping experience.

They kind of get [inaudible 00:22:24] One Kings Lane. So we basically said, "We can take our time to get the iPad app right because frankly that is something they get a pretty good experience today natives." So I think not everybody in the room is in commerce but I think about staging your strategy very differently from mobile and tablet based off of what devices are people using and is the native experience above the bar or below the bar and that's basic how you stage your app strategy.

Ryan: Right, right. And what about in terms of, you kind of alluded to, opening the Safari browser and using that. Have you guys thought about maybe making your site more responsive for various devices or are you guys sticking with that kind of side load strategy there?

Doug Mack: Already done.

Jonathan Lieberman: That is something that actually we are doing as we are looking to not only create the universal applications for native, we are going to be going back and re-factoring the web experience, phone experience and tablet to be a fully responsive site. So right now as we are in parallel with it the iPad application, we are building a fully responsive application that will mirror the iPad application as well.

Doug Mack: And that is iPad specific for every other device. So for example we have a very female, very affluent, very idevice audience. And so we have a small number of android buyers in terms of folks who really spend. That is where we say, "Okay, mobile optimize because we are not going to make a specific app for an Android device, but we need mobile optimize." So if you actually go on to shop One Kings Lane on an Android now, it is a pretty good experience because it is optimized for the device, but it is not an app strategy. So that is what I think about this matrix. It just kind of goes on and on.

Ryan: It is almost as if you've got to have multiple strategies there. One thing, and you guys have also touched upon it a little bit, but there is this interesting quote from Jean Sini, and I hope I'm pronouncing that right.

Doug Mack: It's Jean Sini.

Ryan: Oh, like Jean Luc. I should have known that, your Chief Product and Technology Officer, and he said it's about taking advantage of interstitial time with mobile shoppers and you need to grab five minutes and make the most of it. And how do you guys exactly do that in your design aesthetic and what is your strategy to kind of grab that five minutes and get that as you say, get that person to buy that clutch purse?

Doug Mack: Yeah, so it's actually interesting. I'll give a couple of examples of this and ask Jonathan and Sara to weigh in as well. So Jean is our Chief Product and Technology Officer. His background is Mint. We hired him last spring overtly with the notion of we're moving towards a mobile first world so Mint's business is actually when you think of Mint usage... Everyone know Mint Personal Finance app, one of the more successful new Web 2.0 companies out there bought by Intuit and after they bought by Intuit, that's a really time to recruit new talent. And we brought him in and basically with this mobile first mentality for the long haul. And when I think about how to take advantage of the five minutes of interstitial time, first things first is removing friction and barriers. We have a membership wall that you have to login to get through.

When we do mobile marketing or if you are an existing member that has logged in on another platform, we try very hard to make sure you don't do things like run into members walls because you are on that small screen in the moment trying to type. You can fat finger things, not get logged in, that's friction along the way. And then once you get in, it's sometimes making really hard choices. So a lot of what we do on One Kings Lane is story telling. We help consumers think about a product and maybe about five different ways to use the product. Here's how you could use the bench at the end of your master bedroom, bed as an interesting accent to the way you are designing your room.

When you are dealing with a four inch screen some of those stories can get a little lost. We do things on video, you know, how to make the perfect bed. So basically you go unplugged on a lot of these experiences and you come back to us. Somebody has five minutes of interstitial time and they are coming to One Kings Lane, they are probably coming to shop. So we go into shop centric mode. We go into remove friction mode and make sure that those five minutes are the most interesting five minutes. Notification strategies are great too in terms of the phone as a place where we have another way to notify people and do stuff so.

Jonathan Lieberman: Just real quickly when Doug talks about reducing friction, sort of the three defining principles for us are about providing clarity, context and confidence. Doug made the reference to the Hermes clutch that was purchased. I think... Am I allowed to share what you shared during the All Hands as far as our record purchase?

Doug Mack: Yeah, go.

Jonathan Lieberman: So yesterday while Doug was showing us a necklace that was purchased. I think the record we have is $39,990. We joke were it $40,000 would have stopped the person from actually making the purchase. I don't know whether that was made on a device or not, but clarity, context and confidence to get the buyer to buy products like this are sort of the defining principles we use. But Sara comes from the editorial background and actually has a lot of experience with this so I'll let her talk more about conveying that story via the device.

Sara: Can you guys hear me? I think one of the things that also, this is one of the first times I've ever worked designing an iPad app so it's been a really good lesson for me to sort of learn the tension between the two. And I think one of the things I've found is that people want to, especially in the iPad, people don't spend as much time reading. So the imagery becomes so important to these huge images, and beautiful images, and conveying these images, you know and sort of the text and the descriptions probably come second. So if we can get these beautiful images out there then people are going to buy much quicker.

Doug Mack: Yeah. I think another concept is as I watched your process from just generically mobile design that we are going to experiment with and we are going to test a lot is the notion of giving the consumer a voice too in what their ultimate experience is. So you can let them into the sharp drawer of knives and give them more controls and more content and more information, or you can have them simplify and turn those things off and keep it back to the stripped down. So I think that is something again we are innovating into and we don't know the ultimate answer, but also different customers are going to have different need states. And if somebody is actually not coming to shop but they want the design stories making sure that those aren't impossible for them to access as well, but not necessarily making that the primary core experience you put in front of everybody.

Ryan: Right. You have to layer that complexity almost. It has to be there yet it has to be hidden as well so that you get the core function on the front.

Doug Mack: Exactly.

Jonathan Lieberman: Something we haven't started yet on the actual devices is second base solutions. We are actually going to start testing that so the experience you might see if you are regular shopper or you like to buy vintage, we are going to try to personalize and create that custom experience for you on the web. Obviously if we are successful there then we will try to bring that functionality onto the devices.

Sara: And I think for V1, we are such a storytelling company, but I think we want to go into it sort of slowly and make sure we do the research, get the response. And then in V2, we move it to there may be a place for more storytelling in another part of the app. So we are sort of tiptoeing into it, but there will be versions and different ways we do things.

Doug Mack: Perfect.

Jonathan Lieberman: I think that is the challenge of the limited view port is how do we convey that story but also present the most important information upfront and finding that delicate balance with the various customers that we have.

Doug Mack: Coolest design team ever, like attached at the brain, finishing each other's sentences, amazing.

Ryan: It's like the right and left hemispheres, right?

Doug Mack: It's phenomenal.

Ryan: Well, Doug, that is all the questions I have. I want to throw it to the audience and make sure that they have plenty of time to ask questions.

Doug Mack: Let's do it.

Ryan: The gentleman back there was the first to raise his hand.

Man 1: Yeah. You're talking about your mobile and it's great information. Do you have some more details on the breakdown between iPad, iPhone, and how the native versus your mobile web [inaudible 00:30:26]

Doug Mack: Yeah, so in thinking like broad strokes, iPad 60%, iPhone 35%, all other 5%. So very, very idevice. When you get into iPhone, majority app over native. Right now, iPad is 100% native obviously. The Safari that we expect to swing dramatically so this will be a self-selecting sample of our most voracious customers who when the app is available will download that and be our high spenders. So I think the surprises when you lump mobile as tablet and smartphone together, there is an intrinsic assumption that is probably a lot more tablet than smartphone. We see a ton of smartphone shopping, so it cannot be left behind or neglected and, as we mentioned earlier, one of our strategies is to piggyback off of our smartphone penetration with a universal app so that as we put our app strategy onto somebody shopping iPhone or iPad, they are one customer to us.

Ryan: Gentleman, your next, yeah the gentleman on this end?

Man 2: Could you please tell us a few words about the logistics and the management and fulfillment? Do you have warehouse or do you outsource, and do you take inventory risk? Do you buy all of the stuff?

Doug Mack: That's more than one question.

Man 2: Also, speaking of native iPad app, how are you going to avoid Apple's 30%?

Doug Mack: So did everyone in the back hear the question? For the most part. Were you raising your hand or did you not hear the question? Yeah, the core of the question is really let's talk a little bit about the logistics of a business like this, do we own inventory, do we have warehouses, how do we get product to customers, etc. Then the second part of the question was how do we avoid with the iPad Apple's ransom, effectively. So the first part is one of or core sources of advantage of scaling and getting to a couple hundred million dollars in revenue in this model. I remember when I first joined the company and spent a little time as I got, anybody can build a $20 million flash sale site, no problem. You can run it on Google docs.

The real trick is scaling it to multi-hundred million dollar eCommerce operation where you are fresh and changing it everyday. Because we're more of a marketplace in fact than we are a retail company. When we look at our business, while we have a couple hundred million dollars in revenue, more at this point, if we were a retailer, we would carry $100 or $200 million of inventory to service that. In our case, we have less than $10 million of inventory on hand. So it's a tiny part of the business, and the way it works is in our part of the industry, we built technology that we are able to work with our vendors who we have worked with for a long time and have them ship directly to customers and do that as a strictly electronic relationship.

One of the benefits of that is we don't have to buy the inventory before we sell it. We basically reserve the inventory. We sell it, and then we transmit the order to the vendor to fulfill to customers. Then in other cases, there are folks that don't ship that well. So we have third-party fulfillment. So we don't own the warehouses, but they basically route their product to our fulfillment provider. They break it up and they split it back out, and then in about 10% of the cases, we have strategic inventory where we feel it has to be something very timely. So for example on the holiday, we will ramp up when we are doing gifting and we will take that inventory on hand. But we are very allergic to inventory risk in general.

We really like more the marketplace model. We have a very successful marketplace in the vintage business being run on our site today. All of that again we are facilitating the transaction and then we are connecting having the seller send it to the buyer. So that's logistics side. If anything I could say: people, process, technology. You have to invest in those as part of the scaling: people, process technology. Those are the three parts to scaling that part of the operation and that's where experience matters. Because we don't collect money on our app, I do not think we are as subject to Apple's costs as other companies are. So basically our app is a free app so therefore Apple gets whatever 30% of free which is a good equation. I am not aware, but if anyone is, let me know, of them trying to reach into apps and then taking then a percent of the app commission. That is not something we've heard or run across, so I think if you are in eCommerce, you are in okay shape. If you are in gaming, clearly they are going to try to take that commission.

Ryan: You had a question here and then I'll get someone in the back afterward.

Woman 1: Sure. Thanks. Since photography is such a large part of your business strategy, I am curious as to, and it may be early on for this kind of question, but I am curious if sites like Pinterest are driving traffic to your site, because there is a lot of visual and commerce.

Doug Mack: It's not early on for this question.

Woman 1: Yeah. Not at all. Okay. So I'm wondering if you are measuring that and if that is something that they are actually pushing a lot of traffic and more importantly sales are happening as a result.

Doug Mack: The question is basically, because we are an image centered company, is Pinterest meaningful platform for us in terms of traffic generation and revenue? It's actually interesting. Right now, Pinterest is more important to us than Facebook or Twitter. And that doesn't necessarily mean that it's the king maker for our business, but when you think of who is on Pinterest, it's often our target demographic. When you think about we put together a great lifestyle imagery or a great story where something to share, our stuff is very share worthy with other enthusiasts who would want to have information about this and would want to comment on it. It represents still a single digit percent of traffic and revenue. So it's meaningful and it's free, which is great, and growing.

But I would say one of the things that I do get annoyed in this Silicon Valley hype cycle is companies put themselves under the banner of, you know, we are a social commerce company and you know therefore the notion that we don't have to do marketing because our customers will do all of our marketing for us. I think anyone who is saying that is dramatically overstating the power of social on commerce. It's an ingredient in the soup, but you still need a world class internet marketing team, brand marketing team, and it's one piece of a holistic marketing strategy.

Woman 1: I'm so glad you said that because I am so tired of the [inaudible 00:36:56] That marketing is becoming obsolete and that it should be built into the product, and I get that, marketing should be definitely built into the product, but I still think you need killer marketing team.

Doug Mack: I think you still need a killer marketing team and on the social friend, I actually think you need if anything it's as much as a customer service play as anything that if you have a great brand and great service, you get this incredible validation in the ecosystem that builds confidence in your brand. And if you don't have a great product or great service, you get the negative cycle on that. So I actually think it has as much to do with brand trust as it has to do with audience building. You need the market team to build the audience. The social dialogue has more to do with the brand trust you are trying to build. And if you are as a company failing it's much more transparent these days, which for quality companies is exciting because the crappy companies can go away.

Ryan: Great. I want to get someone in the back. There was a young lady who had her hand up earlier.

Woman 2: [inaudible 00:37:53]

Doug Mack: So the question basically trying to do minimalist design for devices, how does conversion stack up across devices as you are making this trade off choices? It's a really hard thing to unpack because there is this notion of self-selection and bias that happens in it that right now, our iPad, we measure RPU (revenue per user) or RPV (revenue per visit). iPad is our highest RPV platform of anything. So iPad, Safari the best. I don't think that's because it's the best experience we are delivering. I think it is because our most avid customers are at home at night and watching T.V. with their iPad or in-bed instead of a book, snuggling up with One Kings Lane and going through the day's selections. We see higher average order value on the iPad than we see on other platform. Again that is me envisioning customers at home, at night with a spouse looking at a phenomenal Stark area rug with a brilliant image in the room going, "I gotta have this, Honey," and he goes, "Okay." Good husband.

Ryan: Right. Happy wife, happy life.

Doug Mack: And so I think there is a bit of self-selection on that. What we see on iPhone is lower average order of value, slightly lower conversion, but not a dramatic difference. The distance between iPad and web is bigger than the difference between web and iPhone. From there we go down to Android and it is major drop off. And again that's how we focused our strategy. And by the way, I carry an Android. I love Android. It is a rocking platform and phone. It's just for different businesses there is a very different consumer adoption curve. Ours happens to be idevice or bust.

Woman 2: [inaudible 00:40:04]

Doug Mack: Actually, iPad, Safari, number 1.

Woman 2: [inaudible 00:40:20]

Doug Mack: Yeah.

Ryan: This gentleman right here.

Man 3: My question is when you look at other companies [inaudible 00:40:34]

Doug Mack: It is overtly not, in fact. Yeah. I think Pinterest is interesting. They are not in our space, but somebody adjacent that's interesting to keep an eye on. There is a company called Houzz, H-O-U-Z-Z. It's really interesting. The bones of the vision are good. It's going to be an incredibly difficult execution. And if they can pull it off, it's going to be great. So Houzz is more of a social site where you go in and it would be like seeing images from interior designers that are really amazing and then they count on those other designers and other people to link up those images to where you can buy them. So it's not this really fluid commerce experience, but it's an inspiration led community social app. The website is terrible. The app is great. They are also mobile first which is actually interesting to me. So there is somebody who I have been spending some time on just thinking I think it would be great for consumers if they can connect the dots.

I have a little history in this. Back in the late 90s, I was at a software company called Broderbund software, if anyone remembers Broderbund. Yeah. Where In The World is Carmen Sandiego? Printshop? Ribbon? Great stuff, back in the days of consumer software. And we had a product called 3D Home Architect, 3D Home Design, and we did try to do the same thing that you could go through, create a design, and then try to buy out of the design. And it is hard to kind of connect those dots, but I think they are interesting. I do not think there is anybody else in home or flash sales that has inspired for a new commerce. When Groupon craze was going on there was Groupony home things coming along and I didn't think they'd be long for the world and I think that is panning out. So I'd say One Kings Lane and Houzz excited about. Not many other businesses. The horizontal flash sale sites like Gilt, I think if they stick their knitting and get back to apparel and just kill it on men and women apparel. They can be a great company. I think if they continue to try to be in food and kids and pets and everything. I think it is hard to be all things to all people in this world.

Woman 3: What about HomeMint?

Doug Mack: HomeMint?

Woman 3: [inaudible 00:42:32]

Doug Mack: I'll look at this one by one. This will be fun. And we are tweeting. How great this will be.

Ryan: #zurbsoapbox.

Doug Mack: Yeah. So, HomeMint to me, and I know the founders, so with totally due respect, I think a brand has to have a soul to it. And I think one of the best things our founders did and we've all built around is the One Kings Lane brand soul is really bringing this democratization of home decor to consumers. If you are getting access to a world that you've always been locked out of and now you getting into it and finding really great stuff. HomeMint to me feels like your leading with, "Hey. We're gonna get really great celebrities, whether they are interested in home design or not, to get people excited about this product. And I don't think that's the unmet need in the market. Anyone here a HomeMint fan, or anyone know HomeMint? So not even, so the celebrities aren't reaching you yet.

And then Fad is interesting to me. I'll call it high beta. I'm a survivor of the dot com movement bust which was a really fun experience and Fab is going for it. And they are spending and they are raising money, and they are not a home company. They are really a mishmash. You know, they have the stuff that you could find at DWR and Spencer's Gifts, all different types of stuff, you know, lava lamps, and t-shirts and great end-tables, and it is going to be interesting to see to me. They are growing like crazy. Will they hit a wall? Will they make it profitable? All the questions around the business model. So like the website and the product is interesting. They just have to prove the business model. I think they've got a demographic which is interesting, like young, urban, male hipster, like core. I like businesses that kind of know who their core is. So I think Fab has got a shot from that perspective.

Ryan: We have time for one more question.

Doug Mack: Is that it? We're already over.

Ryan: Yeah. We're getting there.

Doug Mack: How about this? Let's do two more.

Ryan: All right. Let's do two more, two more questions. Let's go with someone in the back and then right over there and then we'll get someone upfront.

Man 4: You mentioned that simplicity is very important, but do you see virtual reality coming into play down the road where like you mentioned you have a lady or if you've got a rug [inaudible 00:44:49] pick up the iPad?

Doug Mack: I do. I think that's a really good idea and it's really, really hard, and back when I talked about opportunity for innovation how you always keep innovating, my last company was a web visualization company. And so I spent a lot of years, and actually... Have you ever used Nike ID where you get to design your own sneaker custom? You like it. Forest has used it. My last company helped invent that with Nike basically. So I've been in the world of augmented reality and visualization. What is really hard about it is the content preparation.

You know, how do you have, we launch several thousand new products a day and how do you prepare that content to look really good in a virtual environment. If it looked like second life, it's not good enough for the consumers. You know, if it looks like 3D rendering and it's kind of cartoony, it actually takes away from the brand experience and the likelihood to convert. So my sense is that it is further out than we would like it to be, but it's an insanely disruptive opportunity that companies will crack and we'll be one of them.

Ryan: You, sir. You were waiting.

Doug Mack: You following up a really big picture question, by the way, no pressure.

Man 5: I'm going to try to get the big picture, you talked at the beginning about the need for continuous innovation and you listed off some of the things you've done: designer tag sales, vintage sales, obviously now mobile. What's next on the path [inaudible 00:46:16] for you?

Doug Mack: I can't answer that question. It's company proprietary. We have a bunch of things in the hopper in terms of how we are going to grow the business, but frankly it really is. We've got things that are staged out, that it is a competitive world and you're just going to have to wait and see on that one. So let's do one more question.

Ryan: All right. One more question. One more question.

Doug Mack: I didn't want to lay it out on that one.

Ryan: You were practically waving over there, so...

Woman 4: [inaudible 00:46:42] and now are downloading apps, mobile and [inaudible 00:46:56]

Doug Mack: Yeah. Question is in terms of our mobile traffic breakdown between existing customers versus an acquisition source for new customers. We're finding right now, and I think this is a here and now thing and will evolve is the vast, vast majority of traffic our existing customers who have fallen in love with the franchise and the brand and the service wanting to have a tighter connection to the company, not wanting to miss out on a day. We have done mobile marketing. We have done app marketing. We are still predominantly finding the vast majority of people's first experience is they heard about us from a friend. They saw about us on Facebook. They saw one of our Internet marketing.

They searched and that brings them into a web experience where they tend to sign up, so you know at the dominant level it is existing customers versus currently a source of new acquisition. I think as mobile a formats get better, there is more opportunity for that to get better. I am a huge skeptic. I am friends with the CTO of Pandora. And I give him a hard time. I'm like Pandora's my favorite web service ever. You could take away any web service from me, but you can't take away Pandora. But when I use it on mobile I feel like their ads are designed when I'm trying to thumbs up or thumbs down a song, they try to make me click on a video game ad, and then all of this stuff starts popping up. It drives me crazy. So I think right now we are in this kind of interim state on mobile advertising where people are using old metaphors and bringing the mobile and degrading the customer experience. I think once that mobile ad, you're with me on that?

Woman 4: I'm with you on that. [inaudible 00:48:21] I work at PayPal now and [inaudible 00:48:26] just says no to mobile advertising.

Doug Mack: Mobile advertising. Yeah. Once the ad industry, and people will figure this stuff out, I think that will be a bigger opportunity for companies like ours that are trying to get acquisition to being mobile. So there you go. Off my soapbox now, right.

Ryan: Yes off your soapbox. That's it. Thank you very much. Please thank Doug and Jonathan and Sara for coming down. You guys made this a great live soapbox in this space and we'll see you at the next one next month in the new space. So look out for that.

Doug Mack: Thanks for coming.

Ryan: Thank you for coming.

Doug Mack: If you guys are here, if you have any more design questions, resumes, I'm right here.

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