Physical Stores Should be for Perishables, Not Products: The Ecommerce Strategy Making Millions for The Honest Company

In any industry, there are companies that are admired for the way they’ve built their business. When it comes to ecommerce, The Honest Company is one such enterprise from which entrepreneurs and business owners alike can learn valuable best business practices for scaling and building a loyal customer base.

At this year’s SXSW Interactive Conference, audiences heard directly from co-founders Jessica Alba and Brian Lee on how The Honest Company established itself online, the two executives sharing the inspiration behind the company, its ecommerce strategy and some of the lessons they’ve learned along the way.

Launched three years ago, The Honest Company is already well on its way to IPO.

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Although the company has only been in business for three years, it has amassed $150 million in revenue, earned a $70 million investment in 2014, is currently valued at $1 billion and is well on its way to IPO. With such a short launch to success, this is a model online retail success story, and one to learn from in a quite few ways.

Solve a Real Problem

Many companies can sell a unique product and create a loyal customer base, but what Alba and Lee set out to do was solve a real-world problem. As parents, they could not find effective, safe and affordable cleaning products and child care items.

Asthma and allergies are common in households with harsh cleaners and neither founder wanted to experience those issues in their own homes. When asked about why he started the company, Brian Lee said, “It’s not that I wanted to, I needed to.”

The Honest Company is on a mission to help create a non-toxic world.

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The Honest Company is on a mission to help create a non-toxic world that benefits the next generation.

“Honest is in our name and everything we do,” said Alba when speaking about the company’s overall goal.

Know Where, When and Why to Sell

The idea to start The Honest Company online struck Alba when she was grocery shopping with her children. Her cart was full of organic cleaning products and household items, her children were demanding attention and there was no room for food. She left the grocery store without anything to make meals for the week.

With so many demands on mothers while they’re shopping, Alba knew that adding another item to in-store shopping carts wasn’t where The Honest Company’s products would be best suited.

[Brick-and-mortar] stores should be for perishables, not products.

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“[Brick-and-mortar] stores should be for perishables, not products,” Alba said as she recounted the a-ha moment that prompted her to sell online.

Always Listen to Your Customers

During the early stages, The Honest Company was able to act on customer feedback immediately and move quickly to fix mistakes largely because it started online. The first baby wipe created by The Honest Company didn’t hold up, and customers complained that the plant-based wipe wasn’t able to properly function when cleaning messy children. Once feedback reached Lee and Alba, the wipes were removed from the store and production stopped immediately. They revisited the product’s materials and manufacturing, found new sources and within a matter of weeks, the new product was in and online. Today, it is one of the site’s top-selling products.

In all, The Honest Company’s product development is customer-driven.

“We don’t make products that we want to make, we make the ones our customers demand,” said Lee.

We don’t make products that we want to make, we make the ones our customers demand.

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At the end of the day, the company’s customers –– i.e. parents –– want high-quality products that work well and are aesthetically pleasing. The company uses its online store and social channels to foster the community the brand has created.

In addition, The Honest Company does not sell in marketplaces because the brand wants to keep their community sheltered, and believes it would lose some of what it stands for if they sold through a marketplace such as Amazon or eBay.

The Honest Entrepreneur

During The Honest Company’s first 30 days, the site was up and running and the company was processing orders. The only problem? Customers weren’t being charged. Recounting the experience, Lee and Alba both laughed it off. Even some of the most sophisticated online retailers run into mistakes, but this co-founding pair just looked at it as a bonus for their first, loyal customers.

“An entrepreneur is the person who can take the most pain, and still keep hustling,” said Lee.

An entrepreneur is the person who can take the most pain, and still keep hustling.

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A great entrepreneur needs to never give up and focus on working with the best people. Lee had 50 doors close before anyone believed in the business idea. He also noted that The Honest Company was able to raise capital based primarily off of the company’s strong team, and secondarily because of the overall idea. Investors knew the team wouldn’t quit until they accomplished the mission –– to create a better, non-toxic world.

Finally, when you focus on building a strong team that you take care of, your overall business will be stronger as a result. Encourage your team members to realize and acknowledge where they add value to the business and where they bring strength. Work to your strengths and allow others to bring their expertise to the table to benefit the whole.

Want more advice from powerhouse businesses winning the web with their innovations? Check out these 33 ecommerce strategies from 12 $1M+ brands.

Photo: Flickr, TechCrunch