How We've Sold Over $2m of Mystery Products 🎁

Happy Monday,

And welcome to the first (but late) edition of Building Wide! My goal with this newsletter is to discuss the topics I’ve learned in my 8 years of eCommerce, logistics, marketing, and management - as transparently as possible.

Today I’ll be deep diving into Mystery Products, and a breakdown of how we’ve sold over $2,000,000 worth of them for my brand.

A couple things to note before we start:

• I believe there is a right and a wrong way to sell mystery products. Mystery products cannot be your catch-all for the junk that isn’t moving on your site. It has to, at the very least, contain 75% mid-velocity products from your catalog. If you’re treating this as a junk removal service for bad inventory planning… you’re hurting yourself more than helping.

• Do not “force” mystery products if they do not make sense for your brand. If you sell $1,500 coffee tables, this doesn’t apply to you. The sweet spot is a high-sku, sub $100 AOV brands, where many of the products are similar. The more “fun” and “giftable” the better. Apparel and jewelry particularly.

1) Types of Mystery Products to try

Mystery products are like the Rubix Cube of ecommerce - offering countless combinations, and selling positions with little to no logistical work on the brand’s end. Different products in different stages of the purchasing journey can yield asymmetrically high results, at very little marginal cost. A couple tweaks to an existing mystery product can spin off an entirely new product, with a brand new sales cycle. A couple examples that have worked for us:

• Bundle - We treat the mystery bundle as a hero product for our brand. We drive a majority of ad traffic to the bundle PDP due to its high AOV, social proof (1,600 reviews), and most importantly… the offer. Customers can get $240 worth of product for $134 (or one of the lower tiers for similar % discounts). The more value you can pack into the bundle, the more enticing the offer becomes. A couple things to try with your bundles:

  • Structure vs. No Structure - will customers generally know what they’ll be getting?“Our ultimate bag contains 3 shirts, 3 accessories, 1 tote, and 1 hoodie: $240 value”“Our ultimate bag contains $240 worth of goodies for $134”

  • Tiers - we’ve all heard “The 3 Price Strategy”, and now you can put it into play for your DTC brand (we BY FAR sell the most ultimate bags, and I believe this is why)- Basic: $90 value for $50- Classic (most popular): $140 value for $74- Ultimate (best value): $240 value for $134

  • Seasonal Bundles - each season, change up the name of the bundle and roughly what goes inside. Whether it’s seasonal colors, or seasonal products… having a new name gives past customers a new reason to buy. We see a HUGE retention lift from seasonal switches from past customers coming back.

• Single Upsell - This one is the easiest to create and implement. Categorize your products, and create a mystery upsell for each major category. Prioritize high-velocity, high margin categories first. Here’s ours that show up across the purchasing journey… feel free to steal:

• Mystery Short Sleeve - $17

• Mystery Long Sleeve - $19

• Mystery Accessory - $8

• Mystery Sticker 2 Pack - $4

Sure, a $17 mystery short sleeve by itself isn’t anything to get excited over… after pick/pack, shipping, credit card fees, COGS… you might as well have not made the sale.

But, adding a $17 short sleeve to a $60 order, where my marginal cost is $6 for the tee, I added $11 to my gross margin. For upsell positioning like a cart drawer or post purchase, your take rate can be insanely high - like 20% or more, effectively adding $2.20/profit to every order (20% take rate on your $11 gross).

• Limited Edition - Make a unique bundle with intense scarcity. This is your chance to add something intimate like handwritten notes, printed off Polaroids, etc. For our anniversary sale, we released 100 Limited Edition Anniversary Mystery boxes. Generally… these were curated the same way as our normal mystery bundle (with a couple little bonuses like a signed card and fancy gift box). But faced with scarcity, we sold all 100 at $125 within a couple hours. Sure… it’s not scalable. But not everything has to be.

2) The Finances - your CCC will thank you

Let’s get into why mystery products are an absolute inventory cheat code. Obviously… turning inventory into cash as fast as possible is how a business survives, and your goal should be selling a product before you have to pay for it (thanks, N45 terms). The time it takes to do this is called your cash conversion cycle (CCC).

• Normal scenario: You launch a product. Weeks pass, and it is either going out of season, or does not sell at your required cash conversion velocity. You must put it on sale, and aggressively lower the price over time until it is completely sold out. Which could be months… or even years (ouch). You slowly and painfully watch the inventory number creep down until the final handful eventually get sold at a 75% discount.

• Mystery Product Scenario: You launch a product, and the sell-through rate is 25%/month. Your CCC goals are 50%/month to meet your financing requirements. To adjust for this, you no longer have to aggressively mark down the product. You instead allocate half the inventory to mystery bundles, and the other half you keep on the website. Making your new sell-through rate 50%/mo on standalone, and your CFO won’t chew you out at the next all-hands.

Another scenario… you mis-judge your size run ordering, and are stuck with tons of XXL sizes in your soon-to-be out of season products. Do you want to keep them on your website where the remaining inventory only applies to a small % of your audience who can wear them? This is a perfect time to add them to mystery products, and clean up your website listings to only showcase full-size-run products.

A singular product (especially a low-velocity product) acts as an “appeal to few” point on your website. A small % of people visiting your site might be interested in purchasing.

A mystery product (given you have the right demographic) acts as an “appeal to many” point of attention on your site. It has the ability to turn your "mid-grade" products into A-tier cash machines faster than a %-off sale.

3) Inventory Management

I wish there was an easier way to handle inventory for mystery products, but there’s ultimately too many ways to dice up the structure for an app to handle it without breaking something crucial. The best way to handle it, is what makes the most sense for you. For now, we simply make dedicated inventory for Mystery Bags/Upsells and pull from that separate inventory. It’s almost like its own product with its own counts.

If you’re not sure how a mystery product will perform on your store, take a small sampling of several products and dedicate them towards mystery products until you see the sales velocity needed to create dedicated inventory.

Conclusion:

Maybe I overhype how awesome mystery products are, but I think I have good reason to. Ultimately, you must approach mystery products like any other product… provide a good customer experience, and your customers will be happy.

It can be easy to say “sorry you got this 2018 Journal in your mystery box… it says MYSTERY right in the title. Thanks for the $50.”. Sure, that’s true. But that’s not how you retain customers. And I think we’re all better than that.

P.S.: My good buddy Chad from Dorsal Bracelets just created a newsletter too. He's a smart guy, so you should definitely give it a read

👉 https://chad.beehiiv.com/ 👈