Eric Edelson, Chief Executive Officer of Fireclay Tile talks about Fireclay’s shift from a wholesale distribution model to a direct-to-consumer business model and how taking a very calculated approach to brand strategy helped set the foundation for building enriched customer experiences that set Fireclay apart in the market and helped grow the company to nearly 20 times the size of where they were before the shift.
Episode Links
Find Eric on LinkedIn
Visit Fireclay Tile Online
Episode Transcript
Tim
Welcome Building Brands listeners. For our 22nd episode, I’m joined by Eric Edelson, Chief Executive Officer at Fireclay Tile. Fireclay does tile differently. By tapping into California’s rich ceramic tradition, they’ve been finding creative solutions for tile that lasts a lifetime. But like the many makers that have come before them, they’ve never forgotten their profound connection to the earth and strive to honor that legacy and all that they do. In this episode, Eric talks about fireclay shift from a wholesale distribution model to a direct to consumer business model and how taking a very calculated approach to brand strategy helps set the foundation for building enriched customer experiences that set fireclay apart in the market, and help grow the company to nearly 20 times the size of where they were before the shift. Enjoy the episode.
Tim
If you’re an owner and marketer in the building materials, manufacturing, distribution, or contracting spaces, looking to set up your brand for success now and in the future, this is the podcast for you. on this show, we talk about brand and market strategies used in the real world that grow companies and truly connect with consumer audiences. So sit back, listen in, and let’s get to it. Okay, welcome Eric Adelson, Chief Executive Officer at fireclay. tile. Thanks for coming on. It’s good to have you,
Eric
Tim. Great. Great to be here. Thanks so much for having me on your show.
Tim
Yeah, I’d like to start with the super easy question. So why don’t you tell us a little bit about your background, maybe how you got into building materials, and of course, how you got involved with fireclay tile and will will kind of stem into the company. And from that aspect?
Eric
Absolutely. I am one of those people who never thought I would end up in this space. My mom was actually in the textile business for a period of time, and I had no interest in it whatsoever. So now that I’m running a manufacturing businesses is a surprise to many people, my friends and family. But uh, but I’ve been here for 12 years and really love it. My background was really in healthcare, I studied neuroscience in college, I ended up working in Wall Street doing venture capital, investing in the med tech space for a number of years, I went back and got my MBA, the kind of core theme of all that is I ended up just really love at small business, I loved kind of the early stage entrepreneurial endeavors and really want to try to find something that I could be a part of, and leadership and ownership role. And it eventually led me to meeting the founder of fireclay in 2009. I’ve been here for 11 or 12 years ever since. But, but I’d say small business entrepreneurship. And then healthcare is kind of like a really interesting thing, because I was all about helping people. And as we dive more into fireclay, and go, you’ll see this theme around taking care of people and very personal approach and a holistic approach that that I’ve really tried to bring to this company.
Tim
Yeah, I didn’t plan on working in the building materials industry either. So I kind of relate to that. We just you fall into it. And you’re like, Oh, these people are great. And the companies are super cool. And yeah, I totally know that. So tell us a little bit more about fireclay, what drew you to it and dive in a little bit of the history and like, where it’s came from, because we’re going to talk a lot about the transformative stuff that you did after coming on board and trying some things out and seeing where you could go with it. So give us the foundation of where it started and how you What drew you to it, and then we’ll kind of switch into talking about like where it is now and going into that pivot story.
Eric
Yeah, very simply fireclay we make make and sell the most beautiful tile in the world. The company’s history goes back to the 1930s and this rich tradition of tile making in California. So tile is you know, has been made for centuries millennia. I like to think that Someone once told me that ceramics is the second oldest profession after prostitution. Because you know, it was just clay and he and all of a sudden you had bowls and dishes and so you know, ceramics is it’s just been part of history. And even as you know people like we play with dirt as young kids and in school we do arts and crafts and clay and glaze and so it’s just like everyone has this familiarity with with earth. And so in Northern California, there’s this rich heritage of tile making. We have a great climate, very indoor outdoor and we had great great clay around here. So the history of it goes back to the 1920s 1930s and in the 1950s coming on stone like tile was created kind of absorbed in the assets from this company going back to the 20s and the founder of fireclay it was his uncle who started stealing my palette so what Paul is the founder of fireclay. was young he ended up with his mom moving in with his uncle. He started working in the in the factory learning tile learning firing, believes and chemistry and and then in his 20s ended up starting fireclay in San Jose California. And for most of the time that fireclay was around from 1986 to to let’s say 2009 2010 you know best described as a small artists in the studio had a tight during the kind of big buildup of housing boom in 2006 2007 few million dollars in sales 30 3035 people and what it did Was there was a store as in Jose, but the craft was really this artist in tile making handmade tile manufacturer and it’s sold through the store in San Jose. It’s sold through a number of tile stores across the country, mostly small, independent kind of mom and pop high end tile stores. And that was really the the history of Firefly really beautiful products. There is a history, Paul was really kind of a futurist in some ways in terms of thinking about materials differently. He used a lot of recycled in waste materials and the tile that was different from a lot of other people. But I was at a very small company, when when I first met,
Tim
who is the general customer type that you’re trying to work with? Is it homeowners and individuals, contractors, architects, designers a mix of both? I mean, maybe that’s changed since the beginning of the company, but where do you sort of stand now who you’re trying to put this tile in front of so they can use it on their great projects?
Eric
Yeah, so that’s a you know, to your point, it’s, it’s really evolved. So so back when I met Paul, I’d say that, you know, our primary customer was that they’re a walk in homeowner, we’re a wholesale customer. So that was the wholesale gotcha store that we we would get orders from, we would you know, we’d give them concept boards or whatever was at the time samples, and we would take an order from them, we would make it and they would sell it that’s evolved to today, where you know, we are completely vertically integrated, we have no wholesale business. So our customers are residential and commercial customers, the residential are homeowners or residential designers, or architects. And then on the commercial front, it’s everything from kind of high end architectural and design firms. Again, there’s a showcase, or brands, Salesforce, Google, Starbucks, or commercial tile contractors who are looking for, you know, more reliable, reliable products or do more locally sourced products, whatever it might be, where we’re, we’re, we’re coming in and supporting them on that project.
Tim
Now, I know this, because we’ve talked before this recording, but you did shift from moving, you said you moved away from that wholesale model, and you started actually trying to just go straight to these customer types and interact with them a little bit more, it seems like that was a huge move, I believe you’ve had some major growth gains out of that, and as well as customer interactions and experiences too. Can you talk about like, at a high level, like what’s sort of what you saw in the market that made you kind of want to make that shift in that pivot? And then we can talk about, yeah, maybe a couple of steps that you went through to make sure the company was like, positioned properly for that to actually have success?
Eric
Yeah, well, so and I think this is a really applicable to your audience mean, so to kind of bring you back 10 years or so 2009, I partnered with Paul and this company was pretty much on the brink of insolvency, it was the recession was kicking in Melbourne was declining, declining sales, you know, cash. And then we had this very distributed model and a just a, frankly, a business model, which was really financially unstable. So really low gross margins, like, you know, almost zero profitability. And it wasn’t just us, I mean, I saw that from a lot of our other pure pure tile company. So, over the next few years, I saw a lot of our friends and colleagues and peers, like just disappear, close up shop, go out of business. And what was always quite shocking is, as the market started to rebound, you know, here, here, these peer manufacturers were going out of business, and then these retailers would be opening more stores. And that just was like, really unsettling for me. Because, you know, here, we were making the product, you know, like, bending over backwards and no discredit from retailers. But, you know, it just, it felt like we were not having the success that we could be having, and, you know, the financials are very straightforward, right, we would we would make tile, we would sell it to a wholesale partner for like, set, you know, $10, and it would cost us like, $8, to make that new mentor on sell for 20, you know, and then they pay us 30 days later. So we took all the material that, you know, effort upfront, we’d have to, like, you have the supply and the machines and being factoring in the labor, we make it we’d make like two or three bucks, they’d make 10. And they pass 30 days later. And so, you know, it just it just really bothered me. And as I talked to more manufacturers, and, and I desperately tried so hard to take this beautiful product that we sold, and do everything we could to build our business in the wholesale channel. And, you know, that was everything. I mean, I had that philosophy of, you know, a rising tide lifts all ships, if like, if I can help them improve their business, our business would improve. And so whether it was webinars, whether it was I mean, I did crazy stuff back in the day, this is, you know, 2010 2011 you know, I was like really fanatic about SEO and just like Google, and so we did a bunch to improve our website, I would like go and grade all of our, I used to grade our retailers websites, and I would give them this grade, I would educate them on how they can make their website better. I would travel the country, I would do trainings, webinars, or zoom webinars in 2009 2010 where this industry wasn’t doing that anything to help them grow their business and it just wasn’t working. And and then we had this like other part of our business that was just more successful and that was the direct business. There is this funny story in 2011 2012 my wife was very senior at Pottery Barn. She’s a merchant, you know, big dollars really successful. And I said it was my birthday. And I was like, she said, What do you want for your birthday? And I said, you know, just, I just want your time to help me with fireclay. I want you to look our catalog, so that you can help me create a better catalogs probably burn exceptional catalog. We went out to Crissy Field in San Francisco, and I had this whole like renderings in this graphic designer of our catalog. And she opens it and you know, she just clearly upon it looks like, you know, and she’s like, there’s all this stuff in here. There’s all these like, decoratives and these weird tiled shapes and stuff. And she’s like, What is? Who is this for? And I was like, Oh, it’s for our customers. And she’s like, well, who, you know, like, who doesn’t last the dealers. And these dealers? Like, we got to grow our dealer business. And she goes, uh, what percent of like, your sales? Are the dealers? Like, oh, that’s like 30 40%. And her responses? Why are we talking about the dealers? I was like, Well, what do you mean? Like, like, why would what’s the 70%? Like, what’s, oh, they’re the walk in people like those are the homeowners and like the people call us. But like, it’s really about growing the dealers. And she was just like, Can we not have this conversation we get like, goes something fun, because this just sounds like a waste of time. Like, let’s not talk about the dealers. And it was just like this whole wake up around, like the whole mindset was focusing on this wholesale customers and trying to grow that business. And then there was this direct business,
Tim
I will say, there’s a very valuable point in that little mini story that you just told to, you brought in an objective view to look at something that you had tunnel vision on, that you thought was the right thing in the moment. But that’s just because you were surrounded by other people. I thought that was the right thing to do had her take that second Look, you’re like, Oh, crap, man. Like, how did we miss this? Yes, so obvious once you see it too.
Eric
Well, it was it was just how it was just how it was done. Right. And, you know, that’s, you know, the manufacturers stayed in their lane and the retailer stayed in their lane, and the distributors in its lane. And so, so you know, what ended up happening was, you know, had this ended up having this epiphany around, you know, we have a good business, we just have a bad business model. And we were not ever gonna win in the wholesale channel, there was no disrespect for the wholesale channel, it just was there were so much competition. There were other good handmade tile companies who frankly had more market share than we did. And it was just an uphill battle that we were never going to win. And so I looked around, I said, I can either spend another four years trying to build that business more, or I can go into the separate thing. So it wasn’t like that was the conversation like, it took another year for me to really see it. but ended up having this epiphany of just we’ve got to build our brand. So in 2013, we recognized and made this pivot to build a direct customer focus company and to get out of the wholesale channel, and we still didn’t have very much money, I think, instead of having no money in the bank, or a few thousand dollars in the bank, like we did last night, I think we had, you know, maybe $50,000 in the bank, but not nearly enough money to build a website and, and it’s a build the brand that we needed. So we raised about $2 million from outside investors, with this idea of really going up going direct and getting to the end customer, whether that was a homeowner, or whether that was Google, it was like we want to service that customer. And we think we could do it better than anyone else. And so we pivoted the business, we ended up writing a letter and firing all of our wholesale customers and in January 6 2014 relaunching in this direct way. And so that was the pivot, that was the bet. And, yes, it’s led to significant growth for us ever since.
Tim
And there’s an interesting aspect of that to where when you take out and this might not work for everyone, but for the situation that you’re in, this was very real, you’re trying to shift from kind of operating through a third party with your end users. And when you’re talking about doing brand and brand strategy and relaunching things into the world, that better suit the end user, you’re kind of separated by one or two levels from them. And it’s hard to actually develop a relationship that way. So they afforded you the opportunity to actually tackle the brand strategy, and the creative assets and the experience tools that you’re developing online and in your sales and customer account processes. And that kind of gives you that more close connection between the organization slash brand and the end user, which you would fight to find the time to connect with them with when there’s always distribution and wholesale involved.
Eric
Yes, everything you just said makes a lot of sense and is right. And and I think that we also had we had fear, though, you know, I think that there was this fear that all of a sudden, you know, we felt like we were worried that these dealers were protecting us in some way. And then we then went and tried to sell to all these customers around the country. You know, oh my god, they could all get upset at us and they could, you know, come after us and you know, what color variation, all these different nuances of our business, you know, we wouldn’t be there. We weren’t physically next to them. You know, we were really worried that we were gonna end up having more, even though we had a bunch of customer complaints with the wholesale customers, we were worried it was gonna be even more Because all of a sudden a consumer would say, Well, now I know exactly where it’s coming from, I’m gonna get more upset. And you know what it was like the complete opposite happened, because we understood our product better than anyone else. Because we’re able to navigate that sale and have that conversation and explain so many things up front that we tried to do before, but just never really happened. Our reject or error rate went down massively. And so all of a sudden, we were making customers happier, instead of our salespeople just getting yelled at by wholesale customers who didn’t really value us, or what we did, or how we did it, you know, we had consumers who are now you know, praising us and thanking us and appreciating us. And so all sudden, like, honestly, it just made business way more fun, that actually like, and then it became this like, kind of flywheel and all of a sudden, you know, imagery was such a mean, imagery is easier now, but it had been impossible for us to ever see like an end product. And, you know, fast forward today, where I mean, I probably have four unique projects coming into my inbox every single day from different salespeople, Instagram, wherever I’ve just like, here’s our product, here’s a product, here’s our product, and we can now share that with our makers, and so isn’t you know, now it’s like, it’s so much more fun. And when we do make a mistake, because we make mistakes, one to 3% of the time, where it just doesn’t great, like, we can just do incredible things to make people happy, we can just do stuff that like we never would have been able to do or certainly would have never gotten credit for. And all of a sudden, like turn a negative situation into a completely positive situation. So removing the barriers, you talked about getting closer to the customer, you know, has had such a positive impact. And and then like, you know, our margins have literally doubled in not from like $1 perspective, I’m talking about going from like 25% gross margins to 55% gross margins. So yes, we spend a lot more money on sales and marketing, and other investments on technology. But, you know, we’re able to now get all of that retail margin and, and invest in better experiences for customers, better support for customers, making it much, much more successful customer experience.
Tim
Yeah, and that’s not to say that distribution doesn’t have its place for people still, there’s a lot of companies that need that logistical support nationwide. And, and, you know, to even get your start in that arenas can still be useful for people but they’re all those things you talked about direct to consumer are definite benefits. If you have the foundational processes in history that you can make a shift like that you can see huge gains from going direct to consumer. What I don’t want to ever under appreciate or have anyone else ever underestimate how much work it took.
Eric
Yeah, because I think sometimes people can say, oh, I’ll throw up a website, or I just need to get online.
Tim
Yeah. Now I can do e commerce on my website. So I don’t need the distributors. It’s not quite like a flip of a switch.
Eric
Yeah. So while we have a 34 year history going back 26 when we relaunched this business in 2014. Yeah, I would say no one knew who we were. And to be frank, if they did, I can’t even say our brand had an incredible reputation. Yes, we did some cool things. But because we had all these third party retailers, you know, it’s always funny with retailers, when it’s successful, they take the credit. And when it’s unsuccessful, they blame the manufacturer. So we weren’t necessarily getting the praise, we were definitely getting the blame. But that building, the brand was really hard. It took like a lot of effort. And I think people fail to appreciate the technical and effort on the like, just the website and the content generation photography, it’s easier today. But back then, I mean, you know, like tremendous investment in photography, and digital assets, a lot of investment in the sampling and the sampling experience. And we still, it’s funny, like we still Secret Shop all of our competitors, and yet, they still aren’t as good at us on the sampling, we still it’s hasn’t changed that much. It’s not that hard to copy. But like the personalization, making sure that like when something gets a sample it’s personally signed, that the email that follows up is personal in nature that they get a phone call back, the marketing automation that follows the packaging and the packaging experience that feels personal, the like checkout experience and the commerce experience, the manufacturing experience, the follow up the shipping, logistics, you know, all of that stuff to really create a consumer experience with Amazon makes looks so easy. You know, I think people fail to appreciate like that. It’s not just the technology, it’s it’s technology, yes, but it’s all the people and supporting processes to make that work incredibly well. And so I think, I think for us, like there was so much intention and so much effort and and again that desire to like, yeah, we’re gonna bet the business if this doesn’t work, like we don’t we can’t go back to wholesale, like it’s over like this is a make or break thing. You know that that was a big risk and, and we made mistakes all over the place in that process and wasted a ton of money, learned a lot, but it was a really strong concerted effort to reinvent ourselves. And and I just think that like, you know, we didn’t have a history, no one knew who we were. We had to create this out of thin air. But that that investment in time and effort was was really significant and and the money that we spent, not that we had a lot of it, but we we tried like and we put dollars to work, you can’t underestimate how, like what the consumer company that you love, like what they do that is so good and easy, is it takes work. And it’s not, it’s not like tons and millions and 10s of millions of dollars. It’s just like concerted effort and focus around the customer and the customer experience.
Tim
Yeah, and you mentioned that that takes time to you didn’t just spend eight months on a logo, and then you know, four months on a website and then spend money on that you were looking at what the customer needs, we’re trying to match these experiences that you’re developing up with those needs, because you were shifting what your value prop was in the market, which was we’re going to treat you differently when you work with us. And here’s the ways that we’re doing it, we’re creating these experiences, but you have to know the customer in order to do that. That gives you the inspiration to build the right sample experience and have the right, I mean, unboxing is a huge thing we see it in, I just talked about this on the last episode in unboxing. Like Jordans is like a huge YouTube phenomenon. And you can develop the same experience for opening tile or hardwood samples or whatever it might be hardware, and it makes the person especially if you personalize it, like you’re talking about, it’s just, that’s just an insane way of really connecting with someone and when they’re comparing for products that are basically the same, but they see extra customer experience value and care taken by one person. That’s how you win people, not just in that one sale. But for the rest. If it’s a contractor or designer, that’s sale after sale after sale, you’re actually building a relationship. If it’s a homeowner, you’re hoping that that’s a cool enough experience and that their project is sick enough that their neighbors like, man, like I need to know that action too. And it’s a little bit different, but it still makes an impact.
Eric
Yeah, the I tend to be both. I like numbers. And I’m definitely like one driven. But I also really appreciate anecdotal stories. And so the things for us were like this, you know, we had this one experience where it was like 2012, or 2013, we got a $25,000 residential order. And it was like the biggest order of our year. And I was like, I went downstairs and I went to our salesperson, this one Alex, who’s now has been with us for like 20 years. And I was like Alex, but what happened is like, What do you mean, I was like, What did we do? Like, we just got like, this huge order is amazing. And she asked, What do we do? She goes, I sent them a sample. I was like, awesome, like, and then would you like I nothing? Like No, I like you send them a sample. And then like the follow up and the designs like, she looks me She’s like, didn’t Did I do something wrong? I’m like, Alex, you must have done more. She’s like, No, I think so we sent them a sample, we got a $25,000. And this was across the country, this is in Philadelphia, California. And I just was like Jesus, we need to send more samples. And, and then so like that was like the aha, just like we just got to get product in people’s hands like any way possible. And then to your point about like getting a sample in someone’s hands, like some of it just came down to math around, you know, if you go into a tile store, and you’ve probably been in these, I mean, they’re just like, I can go, it was hard for me to visit them, because there’s just so much stuff. And so you go into them, and we’re lucky enough to be, you know, put on the wall and honored to have that space. You know, we’re one of 100 vendors in there, and probably one of like, 2000 different options. And so, you know, the odds of like getting picked are just incredibly low. But if all of a sudden now sending someone a sample, I’m now maybe one of five other samples in their home. And now the odds are like way stacked in my favor. And I’ve just commanded a sampling experience and a digital experience to go with it. And so like all of a sudden that like probability just completely shifts. And even today, you know, like, as much as we are, like, very digitally enabled, we’re super technology driven, we run our whole company on the salesforce.com platform and, and I would like to go toe to toe with literally any other company in the building material space around, like our data sophistication, and how well we track samples and projects in quotes. It’s still very difficult, you know, we still are in an industry with disparate specifiers and purchasers, you know, a homeowner might be working with a designer, and then the tile contractor makes the purchase and in the commercial space, you know, it’s completely messed up, you’ve got a specifier at a big firm, there’s multiple people involved then gets on to a bid, you now have multiple tile contractors calling us for pricing. And And meanwhile, that sales cycle is like, you know, three years. Yeah, whereas in residential, it’s 60 days. And so the kind of consumer direct to consumer online Shopify, Magento, whatever, kind of like what’s our ecommerce conversion rate, like none of that applies, because like the attribution challenge in our industry is really challenging. It’s really difficult. And so, so we still have a lot to learn and get better at like I can kind of grossly tell you conversion, but like, there’s still so much we don’t know there’s still so much to figure out. So we’re still going a little bit back to that anecdotal story of like, just getting people like product in people’s hands. And trying to make it like great and trying to create a connection back to the maker. And like how we can invite them into the experience of the design process. And and like hoping that it works out, and not knowing and kind of being comfortable with that discomfort of, let’s just get it out there. And then we’ll give people the support and the experience and the understanding and the palate, and it should work. And so we’ve just now, you know, we sent hundreds of thousands of samples out into the world. And you know, it’s a little bit of a hunch that it’s going to work, and it’s certainly working, but like your everyday is a hunch, like I still, you know, we make product and like three or four weeks, I literally don’t know what my company looks like five weeks from now. And that’s like crazy. But that’s that’s the model.
Tim
Yeah, and when you’re dealing with a 60 day to three year sales cycle, depending on who’s in the funnel at any given time, if you don’t have the ecosystem around the sample kit with content and project posts, and inspiration posts and follow ups and bringing them into project update, email is I don’t know, anything could have could be in play there. You know, you have the CRM with automated marketing and everything there too, you could lose their attention across that vast timeframe. But when you’re talking about samples, like everyone always complains about the cost of sending a sample kit, but in building materials, even in residential, we’re not talking about sending a $50 sample kit for $150 order, we’re usually talking four to five digit numbers for one project, you know, get that in the hands of a commercial developer or architect, and you’re talking about that one order times 50 units. So what does the $50 really cost you at that point, if you’re, you know, closing percentage is, I don’t know, whatever, under 50% and say, 20 to 30%, you could, you’re still coming out the other side positive, and you develop that customer experience, too. And it helps them do their jobs.
Eric
Yeah, and I mean, we could do an entire podcast on sampling in terms of there’s so much to do there. And I think that that’s right, like there is a big cost, there is a big investment. And part of the benefits of our business model of this direct end customer, you know, is twofold, right? Better sampling experience for the customer, you’re going to you’re getting like a sample that was actually made recently, you know, so it’s like a real legit sample, it’s not like a got a sample, and then you get the order, and that person calls a brand. And they’re not making that anymore, because it’s three years old. So it’s fresh. Not that our product was sales, but it’s fresh. But more importantly, we can track all of that. And so, you know, we have this philosophy internally of no sample left behind kind of mentality that every every sample has a project. And to your point, like that project could be $500, or $500,000. And so the the relationship of sample to project, the understanding of like the project and potential demand for that, that helps really all of a sudden, now give us insight into how much capex we need to spend, how much investment we need to make in production, how we need to figure out scheduling what’s coming down the pipeline. So the ability to forecast and plan, you know, for a business like ours that has historically, you know, impossible, all of a sudden, we have like way more insight, and we can have a much more collaborative relationship with our factory, creating a better kind of production and end user experience. But, but that ability to kind of connect the sample to the project, ultimately to the specifier. So we now all of a sudden have this ability to look at a design for and to say, you know, whereas before, you might have never really gotten a sale from them, because everything went through a contractor, we now actually have a value for that design for them. So we can then thank them, appreciate them, make sure we’re following up on them. So all that data now becomes like really helpful for our sales organization. So that they know like, where to spend their time. And who’s giving us orders and who specifies and who’s not. And that’s okay, if like people aren’t, but for the people who are, we can now really make sure that we’re doing internet marketing and connection and appreciation, which is, which is really exciting.
Tim
Yeah, everyone’s always scared of big data, but it can really actually help and improve business operations and customer relationships, too. And yeah, if you have the data that allows you to make informed decisions on where you’re spending, internal customer relationship dollars, or external targeting dollars, if you don’t have the data, you’re just throwing crap out there and seeing what sticks and crossing your fingers and hoping that it works. Yeah, now, that’s all that’s all very tangible, data driven, pivot and strategy stuff. But I know from our conversations about fireclay, that you actually took an even higher approach to developing the brand, which was to cultivate a culture internally that would then connect with the people that you’re you’re working with from an end user standpoint, because the culture is part of the reason why people like working with you and like working for you. So if you want dive into that, I think that’s a really useful topic too, because a lot of people get wrapped up in the data driven side, which is I can calculate ROI for dollars out in advertising and dollars out in sample kits. But it’s harder to grasp the concept of ROI for having a strong company culture that I’ll use customer relationships and internal team collaboration, and all these other purposes that a company can have that make people want to work with them, versus the slightly cheaper or faster company down the street.
Eric
Yeah, absolutely. I mean, I think, you know, a little bit like yourself, because I, because I got into this a little bit accidentally, you know, I don’t come into this industry with this massive love for design and tile and, and even the building material industry. I mean, it’s like, I would say, My love is really about like, the love for my company and for our customers and for like, the, the ecosystem that we’ve created. And, and my love is this idea of like mass customization and personalization and helping people. And we have incredible talent at fireclay around product and design that really makes sure that like we’re doing what the customer wants. But but because I’m not like this product driven leader, like you might find in a lot of companies in this space, my passion is a little bit more on the the business side, and what we call this stakeholder capitalism side. So instead of just being here to make money or to sell more stuff, it’s really about this stakeholder philosophy of making sure that as we grow, our entire ecosystem around us is super successful. And so for us, that’s, that’s our, that’s our, that’s our employees, our team members. First and foremost, it’s our community and our local community, it’s our environment, and certainly kind of what we what we’re doing harm to the environment and how we’re correcting that. It’s certainly our customers and our inner givebacks. And then just like how we run and operate as a business, so it’s all that’s gone in what we call our B Corp mentality, or benefit Corp, or a certified B Corp. And I think, you know, I would sometimes go to the trade shows, and Tyler it’s called coverings or their services, and, you know, you just end up in this, like, you know, massive Convention Center, and there’s just product everywhere, and everyone’s got so much product, and everyone is just waiting to unload product, and there’s just kilns and factories all over the world that are just like waiting to get that order and turn it on and ship it and, and till, like, build the brand and connect with customers and consumers. You know, to me, it was like, okay, everyone’s got product, I can we can again, we can’t win in the product game. You know,
Tim
For every industry.
Eric
Yeah.
Tim
Everyone’s got a product.
Eric
It’s like, it’s like kind of I mean, sounds like a commodity at the end of the day. So we got to like rise above it. So that’s where brand comes in. That’s where you know, the look, feel the emotion and and certainly, there is this sweeping mentality. And it’s important around, you know, customers and consumers, they want more. So they didn’t want more from a company because there’s so much product, they want corporate responsibility, they want social responsibility. They want a brand that stands for something, they want sustainability. And so having this instead of certifying at a product level, we certified a company level with our with the B Corp certification, it really does hold us to a higher level at oldest to a completely different mindset. And it elevates the conversation with our customers beyond just the product. And all of a sudden now we’re talking about the company and the people and we’re talking to them about their company and like what they’re experiencing, and what does it like to work there? And how are they enjoying it? What are their like values and philosophies? What did they want to do in business. And so for our sales team and our marketing team, it’s like, it’s just a really different kind of conversation. It’s a really powerful conversation. It’s one that’s more about the future, and like this world that we want to help create and live in and and see be successful for us in our children and their children. And that’s really exciting and powerful for us. So, yeah, we love that stakeholder philosophy. It’s an that I get incredibly passionate about. It’s something that we try to push our community and we try to educate them about. And it’s something that I think gives us that higher purpose beyond just making more tile each and every day.
Tim
Yeah, if you want to avoid the commodity seaward, you need to be able to make the connections with people you need to have the culture that they believe in. And, and give them reasons to understand why you can do better for them than someone else and not just make the widget give the thing on time for a certain price. And that’s a lot of people forget that that’s where brand strategy comes from. It has to do with market strategy to who you’re working with, from an end user standpoint, but brand gets wrapped up a lot in the presentation, which is very, like vanity based and surface level. But that will draw someone in but it might not make someone stick as a customer and a loyal brand follower. So having to take that deeper dive into why you do work the way you you do work, which is why someone might choose an Apple product over Microsoft product, right? You could tie that to any industry you want. It’s because they believe in the philosophy of the owners. They believe in the people that they’re talking to you over email and phone. And of course they like the product experience at the end of the day to.
Eric
When we had to raise money in 2013 either at a business school professor that I ended up in his house. I mean, this is like huge house looks really expensive house like I mean you could have like sold a door and it would have like, pay for whatever was needed. And you just said to me I just I just don’t get it. Eric like who I don’t really care where my tile comes from, I don’t know what makes it my designer shows me some samples. And I pick one, like, what’s the big deal? Right. And I heard that comment countless times, like there’s no brand style, no one creates a brand and, and, you know, I’m like, super proud of it, I think we’ve created a really amazing brand new when when I look at our Instagram feed and, or like we write emails, and people respond to us, I mean, people are, you know, we score like mid 80s, net promoter score, people really connect with us. And they really feel like in this in this really challenging time of their life, where they are doing a remodel, they’re, they’re over budget, they’re over time, every set disaster, you know, here is here is a company where they like they connect with people, they understand where it’s done, how it’s done, our values, they understand, like, where their money is going to understand or giving programs, they, they were part of the whole design process. It’s it’s like a full experience. And it’s, it’s exciting for them, and they remember it and they want to share it. So I’m really proud of that brand work that you just talked about. And, and that emotional connection that I think is. So I always it’s always about them. There’s so much product, like there’s there’s too much product, but there’s not enough experience in our industry. And so we were trying to like create that customer experience in an industry that is there was so driven just by product. And so if we can create that experience, you know, we think that’s a huge differentiator. And we’re really proud of the brand and how we’ve been able to do that.
Tim
Yeah, that’s why luminess got into this industry, we think there’s tons of opportunity for so many companies and building materials and products industries to not only have superior products, but build superior experiences to and they just, they’ve just been so rightly so focused on making sure their r&d and quality control is top notch. And their executions for their customers are top notch that they’ve put the experience on the back burner, but a lot of them could afford the time and effort to just make it even better now to and that’s that’s sort of why we got involved. And that’s why I have this podcast, so I can share more stories to make them feel like Oh, you know what, we should do this stuff. Like, yeah, and you mentioned that you have since you went direct and did more of a branded approach and developed all these experiences, both internally and externally. With the customers, you have actually seen growth to like, what types of like percent growth Have you seen, since you’ve taken this approach compared to the wholesale distribution, kind of, sort of commoditized model that that fireclay had before?
Eric
You know, it’s funny, when I joined this industry, there was a lot of secrecy and like, you know, not sharing and no one told each other reflect much and my attitude is like the complete opposite one of one of our friends once a came to visit us and he grabbed me because you know, you are man, you’re you guys are bright and open. That’s what you are, you’re bright, open. And so I share like I share everything internally, everyone sees our financials, like monthly and, and I shared externally. And you know, I’m always trying to connect with our competitors and our partners because you know, I think what we’ve built it’s like, I welcome anyone into our factory because it’s, it’s all the micro stuff like you can’t learn anything by seeing the type of kiln that we use, or if I showed you how we use Salesforce like I’m happy to do it. It’s just there’s so much there’s so many micro efforts and processes and systems and people and tools and the way it all connects. That’s the proprietary no so so we’ve seen tremendous growth and egos journey and when I got here, we did a million and a half dollars my first year we have 20 people with zero dollars. Last year we did 21 million in sales. We’re we’re up this year compared to last year, which is which is unique given the COVID environment, right and and we’ve now got like a really nice profitable business where the goal is to be that that specialty retail type company where we are, you know, in the kind of high 50s, low 60s, gross margin, we’re in the 20 to 30% EBIT down margin. And we’re doing that all with a stakeholder philosophy. So one of the cool parts about fireclay is where we just made this huge announcement we’ve been we’ve had employee ownerships, employee ownership since 2013. Coming in share, about 15% of our company was owned by employees. We just made this announcement where I’m through a founder buyout, Paul, Paul has left the business and we’re buying out his stock over a period of years, we’re going to be able to transition to almost 35 to 40%, employee ownership nice. So our employees all hundred 50 have ownership stakes. And so as we grow and have more success and more profitability, they in turn will have a real stake in that outcome. So it’s not just me sitting at the top of this thing and or some investor or someone who’s like, you know, offside, it’s, it’s all of us. And it’s not just like the ownership of the company. It’s like it’s our factory and our facility and the land and, and the building and the whole thing. So, so the growth has been, you know, really good. We’re still very small, right? I mean, there’s a $6 billion industry we’re still making nothing. And so much of this is still like it takes a long time to build a brand in this market. Right I mean, this is not a throw something up getting Facebook ads and like you’re you’re off to the races. I mean, these are highly considered purchases, you have to build trust and loyalty and experience and a designer might love you. But it takes three clients before they actually get to specify you because that they want a stone or they wanted porcelain or whatever it is and You know, you have to like, be in it for the long run, and like, look to the leading indicators of samples and whatever. But the growth, you know, measuring balancing supply and demand getting the brand growth along with the production growth, you know that we had a lot of bumps along the way. So, I say we, we probably could have been a little bit bigger if we had, you know, not had so many challenges on the production front, just making everything to order, trying to get the balance of color and size and volume all correct all the time. Like, that’s been crazy difficult. But but we really made some incredible progress there. So a lot of growth, a lot of success with hopefully a lot more to come.
Tim
Well, let’s let’s wrap up with this type of question. What’s one thing that you think everyone should be doing for their brand in the building materials industry right now?
Eric
Pricing. Yeah. Pricing. Everyone’s like, we didn’t know how much it cost? How much does it cost? How much does it cost. And I ended up listening to this Harvard Business Review, podcast, just like randomly I listen up a lot of podcasts while I run. And they had this pricing guy, his name’s Rafi, Mohammed, and he was talking about pricing. And I was just like, God, when was the last time I thought about our pricing. And here we are, you know, we are we we can change, I can go into our system site and change all of our prices, and no one will probably think twice about it, which is very different than a wholesale situation, right? Like, but you know, and all of a sudden, you know, I was like, we got to get like, we got to be talking about this. And so we created the called the Craftsman of coin, we created a pricing committee. And we really started going back and looking at pricing and not just like, how much is our product costs? It’s like, what are the services and benefits that we can offer? So I’ll share a really quick story. I’ve been obsessed with time. And so last year, we actually made several hundred thousand dollars selling time. So like, you know, Uber and Lyft, they can do surge pricing, why can’t fireclay so you know, adding a little button at checkout, where a customer could rush in order. And so it allowed us to prioritize that order, we move it up into the queue. We’re now like, I mean, it’s crazy how successful we are at selling time, and allowing customers to prioritize where they want to be in the queue and how fast they want their product. And you know, that’s just like one small example, one of the things we’re about to unveil in the next week or two is a warranty program. So you talked about Apple, Apple has Apple care. Yeah, can’t fireclay have fireclay care. And it’s we have a makers guarantee decision makers guarantee premium. But this idea of like really making sure that people have like the full faith and will take care of people no matter what. But like there’s installers and installers make mistakes. And if an installer makes a mistake, we’re gonna have your back. So we’re going to sell a warranty program and an makers guaranteed premium program. So so there’s a lot of different ideas of how we price how we think about pricing the services that we offer, allowing people to opt into things that they want, or that they might not want, or thinking differently about, you know, right now. It’s like all the colors are sold the same, but like some colors are like really premium and others are white. And it’s like why do we do that? So, so pricing is just like one of those things where as much as I think we had thought about it, we hadn’t thought about it. And it’s all of a sudden creating a lot of opportunity for profitability that we didn’t know about, that’s actually going to open up a lot more value for our customers and a lot more market share that we went in hide otherwise. So yes, I’d say pricing.
Tim
And that keeps moving away from the commoditization, too. Yeah. Before we wrap up, why don’t you tell people where they can find out more about you? And also where they can find out more about fireclay tile too. Yeah, so
Eric
I mean, fireplace Instagram is awesome. So fireclay tile, we do this thing every Friday might might have just gone live, because it’s Friday, we do factory Fridays, where it’s like a huge sneak peek into our factory every Friday, real time what we’re doing, and that’s super cool. But we have incredible inspiration. It’s beautiful. It’s really well done. Our team does an amazing job with it. Myself. I’d say LinkedIn. I’m a I love LinkedIn. And I like to write and I like to share and I like to connect. That’d be the best place to find me.
Tim
Very cool. Well, thanks for being on. This was super awesome episode. You got a lot of good stories. I hope people take something from and I’m sure I’ll see you around mine because I’m also very active on LinkedIn too.
Eric
Yes, you are.
Tim
Alright, thanks.
Eric
Cool. Thanks, Tim.
Tim
If you’re interested in hearing more stories and strategic insights from industry experts, please subscribe to the building brands podcast on Apple, Spotify, or Google. If you’ve enjoyed this episode, please post a review and share with others who may be interested as well. Thanks for listening.