Under The Hood: Jameson From CBDfx

Jameson, It’s great to be chatting with you today. Tell us a bit about your background and the backstory of CBDfx.

Jameson: In 2011, my two childhood friends and I founded our brand, which is basically now our parent company. Our goal was to create a product that would help people quit smoking. 

We noticed there were a few competitors in this space, but we were inspired by seeing my mom successfully quit smoking with these types of products that I’d buy for her at random convenience stores. We saw a gap in the market for a product that could cater to our younger generation while also not looking like a traditional cigarette. Everything else on the market seemed dull and practical, so we wanted to design something that would appeal to a younger audience or even someone in their 30s who was trying to quit smoking.

In an effort to quit smoking, my friend and I hastily drew up a logo on a napkin and began calling suppliers every night. We had no experience in the industry, so we relied on trial and error to find reliable manufacturers. After visiting factories in China, we narrowed down our options and placed our first large order out of my friend's garage. We drove around trying to persuade retailers to sell our products, convincing them that they wouldn't have to take any risks by stocking our merchandise. In just three years, we managed to get our goods into 9,000-10,000 stores and were gaining valuable business knowledge along the way.

While attending a trade show, a buyer for one of our largest clients mentioned being approached by someone selling hemp products. With the recent legalization of hemp under the 2014 Farm Bill, she saw potential for us to expand into this new market. I immediately dove into research with my team and within 48 hours, we presented her with a plan. This led us to start a new sister company specifically for this customer's needs.

Initially, the products we created had poor branding, but the customer still tested them in their stores. Despite the lackluster packaging, this beginning marked the start of our journey into the CBD and hemp industry. While it was only a small portion of our revenue at first, it eventually grew over time. Looking back now, it's like a keepsake in a shadow box that serves as a reminder of how far we've come. However, it was an important stepping stone in our road to success.

We currently have two well-known brands in the hemp industry and also operate a hemp marketplace, cbd.co, where customers can purchase not only our products but also other popular and reputable brands. Initially, we didn't consider online sales as a major aspect of our business; our website, cbdfx.com, was simply a showcase for our company when discussing it with friends or acquaintances over dinner. However, in 2017, we began to see significant revenue from online sales, which now make up about 70% of our overall sales with one brand and about 640% with another. Our marketplace operates exclusively through wholesale partnerships, making up the remaining 30%. Through this experience, we have learned a great deal about what it takes to be a top-performing business in the direct-to-consumer space. We continuously strive to improve and strengthen our team of 80 employees as we aim for ongoing growth year after year.

What were some of the unlocks that helped you acquire your first 10,000 D2C customers?

Jameson: At the time, there were not many CBD brands online so we didn't take their websites too seriously. We started by calling websites that appeared on the first page of Google, thinking they had high value keywords. We weren't even monitoring keyword volumes back then; we simply Googled what we thought customers would search for and reached out to publishers who had review sites or relevant categories for our products.

Our goal was to build relationships with these affiliates and see how we could help them achieve their goals. Ultimately, this benefited us all in the long run.

We were successful in this approach because we treated it like meeting a retailer for the first time - trying to establish trust and confidence that we would follow through on our promises. Selling to affiliates is similar to selling to wholesale customers, so we applied the same principles.

Where do you see CBDfx in 10 years? What’s the ultimate vision?

Jameson: A few years ago, we were invited to join Amazon UK's pilot program for CBD. The UK has clearer rules and regulations surrounding hemp and CBD products, especially in terms of compliance. We went through all the necessary steps and set up a new entity in the UK to fulfill orders and support the market there. Being part of this pilot program was important to us because the UK is the second largest Amazon market. Since then, we have become the number one brand for sales and market share within Amazon's CBD offerings. Our goal is to continue growing and widening the gap between us and our competitors.

Through this experience, we have learned a lot about what it takes to be an excellent partner for Amazon. We are excited to apply these learnings to our presence on US Amazon when the opportunity arises. We hope that the passing of a new farm bill will provide more clarity on regulatory issues that currently prevent brands from utilizing platforms like Google AdWords on Amazon.

In 10 years, we see ourselves running multiple brands within the hemp industry as well as branching out into other areas unrelated to hemp. This year, we plan to launch at least two new brands without any restrictions, allowing us to further test our skills in the US Amazon market and paid advertising opportunities.

Even though it may be more expensive, if we are paying our affiliates an average of $52 per customer acquisition, it may make sense to apply those same metrics to acquiring customers through paid ads. So far, our main levers for customer acquisition have been organic growth, affiliate marketing, and email engagement. We are excited to explore new avenues and expand our reach even further.

How do you operate the business on a day-to-day basis? What metrics do you work on the most?

Jameson: I'm a big fan of setting small, achievable goals. 

Of course, in terms of business, the correct answer is customer acquisition costs and lifetime value. But personally, I get excited when our daily revenue hits $500 and it would be even better to reach $1000. We have multiple dashboards that we constantly monitor to track our top affiliates and ensure their growth. 

One recent addition is a customer churn and net growth dashboard that displays data for all of our brands, including the number of new customers acquired versus those we've lost. This helps us identify areas for improvement and ask questions about why certain brands are performing better than others.

 On a micro level, our current goal is to reach $2500 per day and eventually $10,000 per day. Our next milestone is to hit $10,000 in an hour, which would be huge for us. It's amazing to see how this translates into overall monthly growth in new customers and revenue. 

While there are numerous key performance indicators (KPIs) to consider, two that are particularly important for us are conversion rate and average order value. Our marketing team works tirelessly to maintain a high AOV through creative upsells and cross-sells at checkout.