AcumatiCares
Challenges
Social media and e-commerce have changed the way many people shop. Products are no longer announced through a press release or a press conference. Instead, they are “dropped” online.
New product drops are marquee events with count-down clocks, limited editions of customized goods, bonuses, collaborations between influencers and brands, and an addictive cycle of continuous new releases. Drops aren’t new but technology has elevated the concept. Influencers deploy suspense and exclusivity, inducing a mad rush to buy, with most fans using smartphones to make purchases.
Popular YouTube influencer Jeffree Star, with his Jeffree Star Cosmetics brand, is arguably one of the sales strategy pioneers. A sister company, Killer Merch, is the backbone that makes the back-end magic happen for more than 80 other influencers, bands, MMA fighters, and comedians as it spins up and supports online pop-up sales and stores.
While those stores can process tens of thousands of orders today, the picture was bleak before the two firms implemented Acumatica Cloud ERP’s Retail and Distribution Editions.
In 2014, Jeffree Star, Mark Bubb (who came from the music industry), Jeff Cohen, and team began Killer Merch using tools many startups adopt: QuickBooks for accounting, Shopify as its e-commerce store, and ShipStation for distribution.
Ran on QuickBooks
Jeffree Star recognized he could offer his millions of followers more than just advice and had begun making and selling cosmetics. He sourced products from overseas and assembled them in the company’s CA office, which included a 3,200-square-foot warehouse filled with folding tables.
Recognizing that other influencers would need similar merchandising, production, and distribution support, Killer Merch, began offering its back-office services to brands and bands wanting to offer fans branded apparel and other merchandise from the same office. Killer Merch creates and runs online stores, supplies retail stores, and handles tour merchandise for concerts as well as live and virtual events, among a whole host of other brand management and promotional services.
While the disconnected software trio worked in the beginning, they cratered just eight months later when Jeffree Star’s meteoric rise led to tens of thousands of orders within hours and crashed the systems. That’s because when orders came in, Killer Merch had to manually move the information from Shopify to ShipStation. When items were shipped, information from ShipStation was then typed back into QuickBooks.
The disconnected systems couldn’t provide visibility into inventory (which they had to keep on multiple spreadsheets), operations, or key data, which hampered decision-making, caused delays and was error-prone. The companies operated on a cash basis. Revenues and cost of goods sold (COGS), were not booked in the same period, says Jenni Arant, Chief Strategy Officer of JSC and Executive Vice President of Killer Merch.
Initially, Killer Merch simply sold merchandise for all influencers from one Shopify store. It took at least a week for someone to manually acquire the data to sort out various royalty payments, which made it difficult to predict cash flow or update its influencer clientele in a timely manner.
When Jeffree Star launched his first products, 30,000 customers sold out his three lipsticks within minutes. A later drop saw 300,000 orders within a few days, which overloaded the system and started key executives on a path for a better platform, better processes, and more efficient operations.
“We were doing a couple of hundred orders a day that turned into a couple of thousand orders a day that turned into tens of thousands of orders a day—in an eight-month period,” says Bubb, Co-Owner, and Chief Operating Officer. “All of a sudden, we needed a bigger warehouse, we needed more people, and we had to move fast. In tandem, Killer Merch was also gaining more clients.”
Tens of Thousands of Orders in Minutes
Flooded with orders, it took six to 10 days just to ship out the product, which was unacceptable for customers used to Amazon’s speedy delivery and instant gratification. Even worse, the disconnected systems led to numerous errors.
“One of the biggest problems was we were still a DIY kind of punk rock mindset shipping facility,” Bubb says. “We were shipping 18 hours a day and it was tough to make sure things were going out right. Even Jeffree would spend 10 hours a day out on the line shipping in those early days, as well as myself and our whole team.”
When huge orders came in, we “had to shut everything down, import all the orders into the system, stop customer service, and stop everything they were doing,” says Taylor Dunlop, Senior Business Analyst.
Shipping Delays Led to Customer Satisfaction Issues
Everything halted because after importing Shopify order data into ShipStation, it took 12 hours to manually print orders so they could be picked, packed, and shipped, Dunlop says. They didn’t use bar codes. No changes could be made once the orders were printed, so customer service could not change orders or update addresses. Without the ability to make real-time changes to orders, returns quickly piled up.
Calls from unhappy customers came in, and influencers wanting updates on their “drops” were frustrated with a lack of information, even days after their events. “Nothing was working,” Bubb says.
The large volumes were “a problem for Shopify, a problem for PayPal, and a problem for almost any program we used in any aspect of the business because they just couldn’t handle the volume. Keep in mind, that these sales weren’t just products you stuffed into a manila envelope,” he adds.
“Everything is individually wrapped,” Bubb continues. “There’s special paper and packaging and boxes and postcards and free gifts. It’s something where we want everyone to have an experience, a premium product. There’s a lot of labor, a lot of man hours on all fronts.”
