243 | Business Idea and Product Validation in a Festival | with Michael Hodgen

Michael Hodgen  

You gotta have a good product. You can't cheat out customers or fake them into buying from you more than once, usually. It's just not going to work.

Chase Clymer  

Welcome to Honest Ecommerce, a podcast dedicated to cutting through the BS and finding actionable advice for online store owners. I'm your host, Chase Clymer. And I believe running a direct-to-consumer brand does not have to be complicated or a guessing game. 

On this podcast, we interview founders and experts who are putting in the work and creating  real results. 

I also share my own insights from running our top Shopify consultancy, Electric Eye. We cut the fluff in favor of facts to help you grow your Ecommerce business.

Let's get on with the show.

Hey everybody, welcome back to another episode of Honest Ecommerce. I'm your host, Chase Clymer. 

And today I'm welcoming the show the CEO of Freedom Rave Wear, a company revolutionizing the festival clothing scene with unique, sustainable, and expressive designs. 

Welcome to the show, Michael Hodgen.

Michael Hodgen  

Hey, thanks for having me. Yeah, really excited to chat [about] all things rave.

Chase Clymer  

Yeah. So for those that are unaware of Freedom Rave Wear, quickly, can we talk about the types of products you guys are actually bringing to market and selling these days?

Michael Hodgen  

Yeah, so we're a direct-to-consumer festival fashion brand and manufacturer. We produce about 6000 SKUs currently, and that is growing quickly. 

So by the end of the year, we'll have 12,000 SKUs that we're producing/manufacturing in San Diego, California. And it's totally switching the stereotypical fast fashion route for direct-to-consumer apparel. 

And we're regionalizing the production process and leveraging as much cool AI tech on the manufacturing/forecasting side to deliver awesome products to our customers. 

And it's just been really fun.

Chase Clymer  

Awesome. So where did the idea to start a rave fashion brand come from? 

Michael Hodgen  

Well, it came from going to a rave and having a deep passion for... 

Chase Clymer  

(laughs)

Michael Hodgen  

...EDM music. So that goes back as early as junior high - high school, DJing for parties and hauling my parents' audio sets to different and new friends' houses for house parties and falling in love with it. It was early EDM. In college, I started... 

I went to school in New York and that's where I met my girlfriend, and now wife and co-founder, Alyssa. I played college soccer, she played volleyball. 

But the New York party scene is pretty cool and exciting. And that's why I really started to have this in-person experience with music festivals and/or the clubs. 

After college, I went to move to California and that's why I went to my first large music festival. And it was there in a crowd of 50,000 people with some fresh threads that Alyssa had put together where I looked at her and she looked at me and I said, "Do you want to make a company? 

And she's like, "What?" 

I was like,"I want to start making clothes for these festivals." 

And she said, "Yeah." 

And so it was pretty much as organic as it gets: Just sitting around a bunch of other people at the festival, and really loving the experience, and thinking that it was a place we wanted to spend more of our time. 

And yeah, it's been 10 years. Now this will be our 10th year in business. So I look back at that moment, and pretty fondly, but that's a pretty organic start.

Chase Clymer  

Awesome. Alright, so you have this idea. Everyone has an idea. I know there's a listener out there right now that has an awesome idea. 

What was the next step? How did you validate this idea? What did you do?

Michael Hodgen  

So that festival that we went to, Alyssa had made some outfits just for us just to... She dove deep into the culture of rave stuff. And she made some pieces that by today's standards weren't anything special. 

But at the festival, a ton of people have complimented us. And so it wasn't like we had intended for that to be sort of a market test. But all of these people at the festival had come out and said, "Ah, that's really cool. That looks really cool. "

And it was after maybe like the 10th person that I had looked at her and said, "Hey, do you want to start this business?" 

So it was more like in real-time validated at the festival by so many people saying "Hey, where did you get that? Hey, I want that." 

And that's not uncommon for festivals. It's a really open and expressive environment. So I think we benefited from that as far as a proof of concept and figuring out if it's a good place to start. 

But as far as the actionable steps as soon as we decided to start the company was "Well, what was the name?" 

I asked Alyssa "Well, how does it make you feel?" 

She said "Free.”

I said "Cool. Freedom. Done." 

And I said okay, "SEO. I need something that's gonna rank well organically [so] that we don't have to try and compete and fight for a lot." 

And so it was rave wear. And it was like Freedom Rave Wear. 

And that was basically the way the name was done. Within 7 days, the LegalZoom paperwork and all that had been filed. 

And we were, the following weekend, at Mad Decent Block Party, Diplo’s Mad Decent Block Party, with business cards that I had printed from Staples. 

And that said "We'll make an outfit for you. If you don't love it, we'll give you your money back". 

And anyone who would come up to us Mad Decent Block Party --with us dressed even crazier at that next event-- and said something about the outfit, I'd give them the card. And then that's how we started to grow organically. We went to... 

We went to --certainly Thursday, Friday, Saturday for 6 months-- in every show, club, event party, that we possibly could get to, dressing more and more ridiculous, all the while this is learning how to sew and put products together. 

And I was learning how to talk to people and figure out what it was that people wanted. So that's how we got started. There was no long... 

There was no business plan put in place. There was no "Hey, this is how we're going to do this thing." And it was just... It felt like "Okay, the next thing you need to do is find people. Hey, we need a name. Hey, we should probably make this legal." So those are the initial steps.

Chase Clymer  

Alright, so you are going to the events where you know your ideal customer is and you're putting in their hands your offer to sell them this product. 

Were you then just on email back and forth, sending them like a PayPal invoice? How did it become like an online business?

Michael Hodgen  

Yeah. So the in-person stuff originally started with PayPal and Etsy, and Instagram DMs, just hustling in the DMs, making sales. There was a period... 

So the first 6 months [were] a lot of guerrilla tactics. just going out there and figuring out how to connect with people. 

After about 6 months, we had the first opportunity to go and set up a vendor booth at a music festival in Arizona. 

And it was at that event, where we piled everything into Alyssa's small Toyota Corolla and drove out to set up this vendor booth that we really saw how much demand and potential there was at an event specifically. 

And looking back, we maybe only made a net $800 bucks. It wasn't a lot. But we were broke, fresh out of college back then, so that felt like a ton of money. And we're doing what we were really passionate about. So taking... 

Looking at that and feeling the excitement and enthusiasm, we were just like all-in on festivals. So we went to every festival that we could possibly go to. 

We did over 50 music festivals across the United States over the next 2 years, we went from the small Toyota Corolla to a Dodge Ram 2500, a flatbed where we would pack up everything we needed for these shows. 

And we would go from Dallas to Salt Lake to Florida, just weekend after weekend after weekend traveling. And then saved up, bought a trailer, stuff that thing full, and really just understood how to market and connect with people in person at these events. 

So there was no real strong Ecommerce play in that other than we had an Etsy and it was a good place to get some custom orders. We were doing a lot of in-person stuff. 

By the time, at the end of that festival tour, we had built up so much demand that creating an online presence and having a website seemed like the next logical step for us, but we didn't have the manufacturing capacity to meet the demand that we had created from that really intense festival tour. 

So it wasn't until 2017 where we really went full Ecommerce. The first... 

From 2014 to 2017, it was this mixed bag of in person and having fun and testing things out. And I didn't know it back then but it was the best way for us to learn about our industry. It was... 

We went into more shows than [the average person] unless you're a DJ. So we really know how to connect with our audience.

Chase Clymer  

That's fantastic. So let's talk about the next phase of Freedom Rave Wear. You guys are going online, you're building a store. How did you evolve the manufacturing capacity?

Michael Hodgen  

Yeah, so the manufacturing, like I said, now that's the thing that differentiates us the most from any competitors in the festival space in particular, [and] fashion in general, the way that we are directly connected to the production. It didn't start out as that being the goal where we have a vertically integrated micro factory, but it became the obvious thing to invest in as early as the end of 2017. 

We went to Magic Expo --I'm some of the listeners have been there-- in Vegas and they had a display where you could go from the digital design into the digital printing on the dye sublimation printers, into a heat press, into the... 

It wasn't a laser cutter. It was just a rotary cutter. But into cutting the fabric, and  the sewing machines all within a, let's call it, 1500 square foot space. 

And when we saw that, we were like "Oh, that's it. (laughs) How do we get that?" And it took us 2 years to save up enough money from the way we were doing things to be able to make the first initial investment into the laser cutter. 

And to put things in perspective, up until that point, it had been myself and Alyssa. And she was sewing just nonstop. 

I would help with what I could, as far as you know, cutting things, but I did [also] sew. Melissa's mom would jump in and help. We made our first sewing machine... 

Our first hire is somebody who's still with us today as a sewing machine operator. And we just learned the process of manufacturing through going from being in a one bedroom apartment to now our facility in San Diego that produces thousands and thousands of garments a week. 

But it was identifying, "Hey, that's the solution to the problem that we have, which is..." 

We tried to get some manufacturing done by third parties, I should say that. It just never really worked very well for us. 

You have certain MOQs that you need to hit, weren't flexible enough for our needs, we didn't have a lot of money, and there's a quality control issue that is fully normal when you're working with other manufacturers. It makes sense. 

If they're not used to making your product, it's going to be some back and forth. And I guess we just weren't really patient with that. I'm sure we could have optimized that process. 

But by identifying the real long-term solution, which was vertically integrated, we were able to first get the laser cutter because we identified that that could be what we would bring in-house first. And then we really scaled the business up to a decent amount, I'd say. 

By that point, we weren't going to music festivals anymore, we were just purely online and figuring out how to market and sell on Shopify. 

And, it was, I think a combination of this frustration of not... 

We've always wanted to be different. and try new fabrics. and get new things. But we didn't have... 

We weren't making our own fabrics. So we would go into a store, we would find the cool new stuff, buy it, go out, take it to market. 

But then competitors would have that same fabric 4 months, 6 months, a year later. It didn't matter how early we could be picking or setting a trend, there was always going to be that person to come in and replicate it. 

And that was frustrating and it just irritated us. And then that really drove home the idea of “Well, we just have our own printers, we can make our own graphics, and no one can copy anything that we do.”

And identifying the opportunity of differentiating ourselves through the technology and being like, "Alright, well we can make our own designs. We can create our own vibe that can't be duplicated." That was fundamental [to] helping our business  grow. 

And this is still pretty COVID. So there's a big hammer to hit our growth there. So we haven't talked about that yet. 

But at that point, I was like, "This is the recipe for success. We know that we can deliver products that people are going to enjoy. And we're not going to be copied or knocked off by competitors really easily." 

So there was a light at the end of this business development tunnel that we were just starting to think about, now. We were like years into this and really not thinking anything long term. It was all just like passion, fun, excitement. 

And there wasn't a thought of exiting the business or anything. So the manufacturing ideas developed from the way that we produce our products now develop from what our customers really wanted. 

So now we produce new collections every single week. We have anywhere from 250 to 300 SKUs coming out every single week. And we respond to the demand in real-time, we never have a ton of leftover inventory because we know what people want based on... 

We use Inventory Planner for our forecasting. Highly recommended. Very nice. 

And with that flexibility, we're able to deliver a product that people are always excited about. And as a business, we never have to make a bet that we're going to get hosed on and have all this overhead, all this inventory that doesn't sell because we're still buying the raw material. 

We'll have the big rolls of fabric, but that big roll of fabric can be turned into whatever we want it to be turned into, as far as like the graphics that are being printed onto it or through the sublimation process. 

So that manufacturing technique developed from us just seeing what our customers wanted. 

Chase Clymer  

Yeah. And you talked a little bit earlier about minimums and the fact that you guys invested in yourself and you bought into the ability to say "Minimums don't matter because we own the production capacity." 

It unlocked so much for you.

Michael Hodgen  

Yeah, it's interesting because you don't realize how restrictive minimums can be until you're not using them. But they also... 

Minimums force you to invest in dead stock, especially with optimizing different cut files in. I don't want to get too much in the weeds on this stuff. 

But in apparel production, if you have a range of sizes, and that certain sizes are gonna sell better than others, we still have to hit these ratios in order to optimize the cuts. 

And that sometimes means that when you want to have more of a certain size, you still have to have enough of another stuff to buy another size, even though you know that it's not going to sell as well. Interesting things. 

But yeah, totally avoidable when you have and control your own manufacturing. And I think what's awesome about it for other Ecommerce apparel businesses, you don't need to go full micro factory vertically integrated. 

You can do something where you have, essentially your design house, and then the things that really hit, you can send to your offshore manufacturers or to your manufacturing partners and have them handle the scale production, but you are just really fast and nimble in-house. 

I think that's a huge opportunity that people are aware of post-COVID, the value of having a flexible supply chain. 

But it's also just a really wise business investment in terms of the speed at which you can A/B test your customers with products. And in the attention economy it seems volume is the differentiator of success. You still need to have a good product. 

But having a great product and having lots of volume in terms of your ability to market "Hey, we have this new item. Hey, we have this new product .Hey, check this thing out." 

It gives you an ability to stay relevant that is much easier than if you have a quarterly product release. 

I don't know how we would drum up excitement for that when the attention spans are at 0.2 seconds.

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Chase Clymer  

We haven't even talked about the advantage from a cash flow perspective of not having dead stock and investing in all of those new designs when you can see what works. 

You alluded to this earlier, it's like "We'll see what works and then print to demand."

Michael Hodgen  

Yeah, it's huge. It's... 

From some of the analysis that we've done over the last 2 years, we've been able to save roughly  $600,000 of inventory spend and reallocate it towards customer acquisition. 

And when you have $17 customer acquisition cost and you deploy $600,000 towards it, you grow your business a lot faster, rather than trying to hope that that inventory is going to sell over some period in the future. You don't need to be tied up on that stuff. 

So it's a massive benefit for businesses that can start to think about bringing in-house certain developments or certain parts of the product development. There's also a part of me that's sort of envious of the idea of a solopreneur setup, where it's just business development. 

You're only controlling it yourself and everything else is outsourced, and automated, and functional. But there's security and being in producing and being a manufacturer. There are people who need things made. And it helped us a lot through a sticky time. 

COVID was not just challenging for us. If you are a restaurant and you went through COVID, it was tough, because your sales went down 50% - 80%. Festival business, it went down... 

It was zero. There were no festivals. So we had to figure out what we could do to leverage the asset, which was our production capacity. And that... 

We spun up a second business, it's called Fabric Punch. We produce sublimated fabrics for about 2000 other Shopify brands now. So we use the machines that we invested in to help other businesses grow and scale their apparel business. And I think that was... 

Again, it wasn't like that was our plan, it was just a wise investment to have your own capacity because if for whatever reason your business starts to go down, then you can pivot and help other people because you own the thing that is of value. 

And yeah.

Chase Clymer  

That is such an amazing story. What do they call it? Selling your saw dust. 

It's finding ways to be profitable in areas that you already own. 

And your machines aren't running 24/7 They could be and they could be making other people's products. That's just a fantastic pivot.

Michael Hodgen  

Yeah, and it was born of circumstance, but happy that we did it. And obviously, that was during COVID. But post COVID, that business still remains that is thriving. 

So I think it's fun and exciting to help get other apparel businesses onto this more regional or micro factory setup and to talk and consult them in the business development that we weren't really aware of as we were doing it. 

But now as we look back, like, "Oh, hey, that was actually a pretty smart thing that we did. And let's hop out to one of these other clients." So it's cool. And it's obviously helped Freedom because we get... 

We just get to practice a lot and see what works. As far as the ability to respond to demand, I think something that sets our business apart is the feedback loop that we have with our customers, especially our loyal and VIP customers and ambassadors. 

We use Flare, the community app to just quickly message back and forth. We'll drop in "What's the new graphic? Hey, here's some new styles. What do you guys think about this?" 

So we're just getting that feedback before we start to move our production machinery into place to scale up something. So before it even goes out to get released, it's already been stress tested a few times. And we'll know if it's... 

We have our designers who are good at choosing what's going to do well, but sometimes they miss. We want to help them. So we talk to our loyal customers, they give feedback. 

And between the designers and the customers and the loyal customers, we don't usually miss at that point, but it is possible. So we'll put stuff and then we'll do a collection release. 

Well, we'll know within 4or 5 hours of a collection drop, which products need to have new purchase orders that day and which products we can just not make any more of, and then move on to the next thing. So develop... 

Deploy that in your business, if you can. It's very helpful.

Chase Clymer  

This has been such an amazing conversation, Michael. You've been sharing so much. And you just alluded to this a little bit ago. You were talking about your customer acquisition cost and how you allocated $600k into it. 

Let's talk about that. How are you scaling things through digital means once you guys got out of the festival customer acquisition model? 

Michael Hodgen  

Yeah. Yeah, it's interesting. I like to... 

I feel like there's the products and there's the product development side of things, which I think you really got to be a product person to have a strong business long term. You gotta have a good product. 

You can't cheat out customers or fake them into buying from you more than once, usually. It's just not going to work. 

And at the same time, the marketing and brand awareness development that needs to occur alongside the product is equally as important. If you have a great product [and] no one knows about it, it doesn't doesn't help anything. So I think the real driver... 

I'll be honest. As much as we'd like to think that we're pros at what we do in marketing, but I think that comes to values I can talk about. 

There's also just like a natural synergy between people going to a music festival, the cultural relevance of that in general, social media, and the demographic that we sell to: Gen Z and Millennials. 

They want to share and post on social media. And if they're going to a festival, they're going to share and post them at the festival. It is a highlight of their living experience. 

So the marketing naturally occurs. You just have to make sure that they want to tag you because they're going to post that photo. And as long as you treat them well, give excellent customer service, don't shortcut the product... 

If someone has an issue, address it, resolve it, give them extra store credit to show that you care, and you don't mean to mess up because mistakes happen... 

And live and breathe by delivering an exceptional experience, then it increases the likelihood someone's going to be willing to tag you when they're going out. And it's that organic... 

It's that organic marketing that is going to be the long term success. We all talk about the paid strategies here. But it's making sure you have all your ducks in a row. 

So the product is good. The customer service is great. We keep in touch with the people on product development. 

When they have an issue, we resolve it. All those things are in line. The website looks good, the conversion rate is nice, you've optimized it for whatever experience you're trying to deliver. Okay, now we can talk about paid ads.

 If you don't have all the other stuff. You're really just given Zuckerberg a bunch of money, which is cool. Keep doing it. Do the jiu jitsu. We love it, bro. All good. 

But you're spending money that you didn't really need to spend on what you should have spent on product customer service or the website experience. 

Assuming all of those are done and handled, dusted, the way we do our paid strategy is we take the best performing content that is organically posted on our page. 

And we take the best performing user generated content that is posted through any of TikTok, Pinterest, Snapchat, Instagram. We'll look at it on a 7-day basis. 

We'll take the top 2 or 3, we'll jump in, we'll put that into a testing campaign that battles against each other for that week. 

Then that following week, we'll add new fresh creatives, drop those in, and they just compete. And over time, it gets better and better because it's the best performing content over a 30-day period or a 60-day period. And that seems to work really well for us. 

So, like I said,  we've tried a lot of different things in the ad space. We've worked with different agencies, have had  some things go well, something's not. 

But it's ultimately the strategy of putting forward your best performing piece of content consistently, and making sure that everything else is aligned.

Chase Clymer  

Michael, you've been such just a wealth of knowledge today. If I am listening to this podcast, and I'm curious to check out the products that you have, where should I go?

Michael Hodgen  

For our products, freedomravewear.com. And check out our Instagram, our TikTok… It’s Freedom Rave Wear. 

We have many music festivals [lined up]. If you give us a follow, you’ll see some of our marketing team out there.

Maybe you’ll see me with my signature long, black robe with some rave flair added. 

Yeah. We’re trying to be in as many places as possible for people trying to go into music festivals and have a good time.

Chase Clymer  

Awesome, Michael. Thank you so much for coming on the show.

Michael Hodgen  

Yeah, thanks.

Chase Clymer

We can't thank our guests enough for coming on the show and sharing their knowledge and journey with us. We've got a lot to think about and potentially add into our own business. You can find all the links in the show notes. 

You can subscribe to the newsletter at honestecommerce.co to get each episode delivered right to your inbox. 

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Lastly, if you're a store owner looking for an amazing partner to help get your Shopify store to the next level, reach out to Electric Eye at electriceye.io/connect.

Until next time!