On this episode of Payments Dialog, we are joined by Guillermo Villegas, co-founder of Zebrands. Watch the video below to hear more about how the organization is building an omnichannel payments experience for its customers across multiple brands as well as leveraging Payments Orchestration to help decrease false declines from 40% down to 5%.
Want to learn more about how Spreedly can help your organization adapt and grow your payments? Reach out to us here.
Rough transcript of this Payments Dialog:
Peter Mollins:
Hi everybody. This is Peter Mollins with Spreedly, super excited to have you here for another terrific discussion. Today I'm joined by, Guillermo Villegas, who is the co-founder of Zebrands. Guillermo, welcome to this Payments Dialog.
Guillermo Villegas:
Thanks a lot, Peter. Thanks for inviting me, super happy to be here and sharing my experience.
Peter Mollins:
Absolutely. Well, terrific. Well, if you... Just speaking of your experience, would you mind telling a little bit about your background first and then love to jump into Zebrands' background and history, but love to hear about your story first, if you don't mind.
Guillermo Villegas:
Okay, great. Yeah, well, actually I have more than 10 years of experience in retail. Started my career in one of the big CPG companies in Mexico at P&G and I was always very fond into entrepreneurship, doing things on my own. I even ran a couple of companies on high school and university, which didn't go really well. And I think also a lot about my juniority at the moment. And then I happen to have the opportunity to jump into a big entrepreneurship project in Mexico called Luuna, part of the Rocket Internet Ventures. So a big e-commerce platform that was in Mexico, also expanding into LATAM as a huge marketplace and retail company. And there, I got to really be immerse in a really strong entrepreneurial setup and I found it very fun. I actually met my fellow co-founders there at Luuna and we were wondering, Peter, what else could we do?
Guillermo Villegas:
We were young people, very competitive. It was a very competitive setup within Luuna and we started talking about what were the projects that we could accomplish, what we... What could we do? And then we saw an opportunity. We saw an opportunity on the direct to consumer space. Actually at that moment it was 2015, D2C wasn't probably even a term. It was something that was just beginning, something that was recently born, companies at the U.S. were just being born, racing, huge examples, such as Harry's, Warby Parker, Dollar Shave Club were in their... I would say, first couple of years.
Peter Mollins:
Right.
Guillermo Villegas:
So it was very interesting for us that, and we decided to launch a mattress brand in Mexico with that same spirit, leveraging e-commerce, leveraging direct to consumer and having a value proposition that would offer really good mattresses and really good sleep products at a fair price in Mexico. And so that's bit of the story in short, Peter, and it has evolved a lot right now. Yep.
Peter Mollins:
That's terrific. Now you mentioned Luuna as being one of the brands under Zebrands. Now there's a whole family of direct to consumer brands, is that right?
Guillermo Villegas:
Yeah, that's right. Exactly. We started with Luuna. We started with these very specific problem that we wanted to target, which was delivering high quality sleep products at a fair price and leveraging the D2C space. What happened, Peter, is that Mexico and Latin America is very different to what you can find elsewhere. And we started developing other channels as we grew, and we understood that the consumers still wanted some interaction in other different channels and they wanted the physical experience. At that moment when we funded the company, the e-commerce space in Mexico was still very little, it was just representing less than 2% of the whole sales of the retail industry. So it was still very little, growing a lot, impressive double digit, even triple digit growth each year, however, still very small.
Guillermo Villegas:
So we started entering to different channels, department stores and also developing our own retail experience, our own stores, and then everything started evolving. But with something that I think was very distinguishing of... distinctive of us, that was that we were developing a lot of in-house capabilities that none of the other brands were doing. We were focusing mainly on three different things, Peter. First, technology. We had to develop in-house technology that was really good to put us in a place where we could scale very fast and keep this interaction that was keeping us very close to the consumers, and gathering this feedback from them. Second one, data. Data is super important for us. In order to keep this feedback loops agile and making sure that we make the best decisions towards our consumers, we needed to have a strong data team and data set of infrastructure in order to leverage that.
Guillermo Villegas:
And finally, branding. In the space that we were developing all of this, brand is something that's super important for us, the experience, how it is curated. And what we found out, Peter, is that these set of capabilities was something that could not be only leveraged by one brand. We were actually developing a set of skills that could be potentially serving much more brands than just Luuna. And that's when we created the new vision of Zebrands. That's when we evolved from Luuna to Zebrands. It was in 2018 when we decided to launch our second brand called NOOZ, which offers also sleep and home and living products to a different set of customers and with different types of pricing strategies. And we realized that NOOZ was doing really well. As a matter of fact, right now, NOOZ, in some of our e-commerce channels already sells more than Luuna, that was our first brand. So it was something super interesting.
Guillermo Villegas:
And then we started to hit the accelerator, Peter, and we said, "Okay, from this, we need to create a holding that is a real group of brands." And actually by this year, we launched eight new brands and we are planning to launch between 20 to 30 more next year on certain verticals where we think that we can make a real difference, a real disruption, taking innovation closer to consumers, giving them this first mission that we had when we created Luuna. We want to give really good quality products, we want to leverage our D2C channels to make that affordable for our customers with high quality and very fair prices.
Peter Mollins:
That's an incredible story. Now, you had mentioned about the importance of the customer experience and data. I definitely want to talk about data in a second, but like I'd mentioned before we started recording, I've taken a look at some of the retail locations, just beautiful. They look like they're an incredible experience. So when you think about that direct to consumer plus the retail, so that omnichannel experience, what kind of challenges do you see there in helping to ensure that there is a great customer experience for those coming to your stores or coming to your digital properties?
Guillermo Villegas:
Yeah. There are certainly a lot of different challenges that we have faced, and we have learned a lot in the process as well, Peter. I would say that the first one was communication. So how do you ensure that what consumers are perceiving and the messages that they are getting from digital and physical channels are really integrated, are coherent, are something that's really set up to make a very powerful statement, and that's not a minor challenge, it's something that has taken a lot into consideration, into our branding, how our e-commerce looks then how that translates into the retail space, but not only into our own physical stores, because that's probably the easiest channel to control because we own the stores.
Peter Mollins:
Right.
Guillermo Villegas:
But then on department stores, when you go to Costco, when you go to other wholesalers, controlling that is way harder.
Guillermo Villegas:
So you have to play a lot with the product, with the packaging, and also with your sales force, really ensuring that the pitch that they have is something that's really coherent in the whole space and that we are giving the same message. Then the second thing will probably relate with your next question is data.
Peter Mollins:
Right.
Guillermo Villegas:
And definitely data and technology and integrating that, it's something that's super important for us. We really want our consumers to feel that they are within a family. Our brands need to create that kind of experience. So if I am at luuna.mx and I am browsing and shopping around, and then I go to the store, we really want the store managers and the people in the sales floor knowing that somebody was shopping there that was browsing there and what they want and what they need to give them in order for them to have the best experience possible, and that's also quite a challenge. [crosstalk 00:10:21] Integrating all of that, I think it has been the major learning that we've had over these years facing a real omnichannel experience, which is very difficult.
Peter Mollins:
Right. Now, you're obviously obsessed with having a great customer experience. How do you think about payments as part of that customer experience? So when the consumer has selected their products, perhaps selected a mattress and then moving into the payments part of the transaction, do you consider that to be a core part of the experience as well?
Guillermo Villegas:
It's super important. I mean, Peter, especially on the e-commerce platform. You can do really well in all of the process, but then you have a moment, and especially in Latin America where there are a lot of taboo surrounding e-commerce, around fraud, around the security of the information of the people that are trusting to put $1,000 on their credit card into a e-commerce platform. It's definitely a moment of truth when they go through the payment platform. It has to be seamless, it has to be something super easy, it has to be transparent, it has to give them different options, so definitely for us payments is something key.
Guillermo Villegas:
And on the omnichannel experience, this even translates into our retail stores, doing the payment in the stores and have them... having that integrated, it's something super important. And something that happens is, when you have different set of campaigns, let's say one thing which is the black Friday in Mexico, you can have different set out of bag promotions on different spaces and channels. And if you want a true omnichannel experience, I wouldn't want that for my customers. I would want them to choose wherever they want, on the convenience of their home, on their laptops, on their mobile phone or in the store, wherever they want. So having an integrated payment platforms is something key and was from the very beginning super important for us.
Peter Mollins:
That's great. So, you said from the very beginning. One thing I was curious about is, we see a lot of leading e-commerce businesses in Latin America, looking at an orchestrated or payment orchestration approach. How do you think about payment orchestration? How has that been a part of your payment strategy?
Guillermo Villegas:
Yeah, it's super interesting because we had a very specific problem at the beginning, Peter, and as I told you before, we were born in an era where e-commerce was still a baby in Mexico. We were at the very beginning so a lot of things weren't really developed and we were a high ticket store. And something that happened a lot is, we were having a lot of rejections. A lot of rejections on... When we were processing the payments, just to give you some rough numbers, about 40% of the transactions were being declined. So-
Peter Mollins:
Wow.
Guillermo Villegas:
It was creating a very messy experience for the customers because they had to call our customer service, we had to really research what could we do, even for you to know what we were dealing with, we had to create a whole operating process and capability to deliver, pay on delivery.
Guillermo Villegas:
So you could go and, as you order the pizza and then paid with your credit card on your home, we would do something very similar, but with the mattress, because the transactions wouldn't go through. So something that we found out is that we were trying different gateways, different processors, and we were having different results, but something that we came up with and was a great insight, is that each of them had different integrations that were good at different levels in acceptance with different banks. So we came up to... with this insight, with a problem that was, "Hey, we need something to help us integrate these different processors and create a cascading process that is seamless for the consumer and helps us really increase our acceptance rates."
Guillermo Villegas:
And then Spreedly came along. It was something super good for us to find you guys and we implemented Spreedly as this orchestration system that will allow us to create these connections to these different payment gateways and processors. And by now our acceptance rates increased and we are just rejecting between 5% to 8% of the transaction. So it was a jump that definitely was impressive for the business.
Peter Mollins:
That's incredible. So somewhere around 30%, 32% were... Or 35% maybe, were false declines.
Guillermo Villegas:
Yes, it is.
Peter Mollins:
Yeah. And I imagine in your multi-brand environment where there's a... I may buy a mattress once every couple years, depending on number of rooms I have, but then as you have Zebrands with many brands, I imagine that eliminating the frustration of the false decline for a customer, means they're a better, they're more inclined to go to one of your other brands, I imagine.
Guillermo Villegas:
No, definitely. And something also super important and I think that payments and Spreedly will play an important role for our vision for the next years, is that we really want to create an ecosystem of brands, very curated brands, but having people recognizing, "Hey, that's a Zebrands brand. So in that sense, something super important is for us to leverage that and making sure that other brands, for instance, NOOZ, Mapa, all the other brands of our ecosystem can leverage that, and then creating this set of brands where you can go and have loyalty programs, where Zebrands is the one that's creating the contact with you as a consumer.
Peter Mollins:
Right.
Guillermo Villegas:
In that sense, storing the information of the card, making sure that we make the customers able to have flexible payment options, even considering that we are entering in verticals that would potentially need subscriptions. Something super important is for us to develop a very robust technology around the payments that we will offer.
Peter Mollins:
And that data that you were mentioning, that-
Guillermo Villegas:
Definitely.
Peter Mollins:
Also helps, not only for providing a great customer experience for their browsing and recommendations, but also on the processing too, because I imagine now you can use that data to then say for this bank, for this type of transaction, I'm going to just go ahead and route it to this particular gateway from the get go, from the very first transaction.
Guillermo Villegas:
Yeah, definitely.
Peter Mollins:
So now you had... You'd mentioned some of your future vision. I'd love to hear about some of your growth. Are you... You've obviously had tremendous success in Mexico. What's the future look like for Zebrands across Latin America and the world?
Guillermo Villegas:
No, thanks for asking, Peter. And we have a very ambitious goal that we have set towards 2025, and we want to sell more than a billion dollars towards 2025. So that's our main goal. This implies several things, but basically there are three different ways that we're going to achieve that. The first of our first pillar is developing these multi-brand house that we've been talking about. We really need to create strong brands within certain verticals, especially sports goods, travel goods, also we are exploring the health and wellness environment where we can create a difference in this disruption. That's going to be an important pillar for us to keep on growing and from that perspective, still in Mexico for the next couple of years, we still want to target triple digit growth. So each of the next years, we need to still be doubling the business each year.
Guillermo Villegas:
Then the second pillar will be making sure that we really make a streamline process on the supply chain. So important things that we are doing is vertical integration, not only in the set of capabilities that I was talking about in the beginning, but also now on some other core processes, including manufacturing, the whole operating and supply chain process.
Guillermo Villegas:
And finally, international expansion. This is something that's going to be super important. We want to become the largest online retailer in Latin America. In that sense, our first step is going to be going to Brazil. We're going to launch Luuna in Brazil on February of next year. So it's going to be an important step for us, huge market, but still huge opportunity and we see also an important space into disruption. And afterwards, we would like to launch more of the Zebrands brands into Brazil in the upcoming months, so that's going to be the plan. And afterwards we would like to go to more Latin American countries. So for instance, Colombia, Chile, Peru, Argentina are super interesting markets. And we think that there is a lot of potential there. So definitely something that we are looking forward into the next years, is just going to be an important challenge in terms of expanding to other borders and also within Mexico, still growing the core.
Peter Mollins:
That's great. Well, Guillermo, this has been a fantastic conversation. I've really enjoyed hearing about your growth that you've had to date and your growth plans. Perhaps I can ask just one more question which is, for other individuals that are looking to launch their own e-commerce brands, what kind of advice do you have for them? What would you suggest if you were to... If you were having a coffee with them, what kind of advice would you give them?
Guillermo Villegas:
Well, super good question, Peter. And when they ask me this question, because it has happened before, the best advice that I think I can give is, think about the customer. I wouldn't have ever be tired of saying, "The customer is the center of vote. And especially at e-commerce, because for online shopping you have some pros, but you also have some cons in terms of how immediate is the purchase. If I go to a store, then I can take the goods and take them home with me, at the moment.
Peter Mollins:
Right.
Guillermo Villegas:
We are dealing with that at e-commerce. You are dealing also with a storefront that's limited because you don't have the physical experience, and then you have some other challenges. And then something that's super interesting that we found out, Peter, and I think it's one of the most powerful insights that I like to share is, we often run customer journey mapping studies in order to figure out how the consumers are feeling and how's their experience, and every single one of the mappings that we run, there's an insight that pops out and it's something that's very hard. And it's a, from the moment that you place an order until you get your goods delivered, there's like a blank space where the consumers are always wondering, especially if it's about new brands. "Are they going to fulfill my expectations? Are they going to be on time? Is it going to be what I expect or not?" And even we see it right now on social media, a lot of people posting these online shopping fails.
Peter Mollins:
Right.
Guillermo Villegas:
And I think that's important that we need to take into consideration. How do we deal with that? How do we deal with that anxiety? And how do we create an impulse on the pros that the online shopping gives you and how we can compensate for the other creatives. So definitely that would be my advice, take care of that and don't underestimate it because I think that's the most common mistake, underestimating those cons that are the nature of the channel. So-
Peter Mollins:
That's great advice. And it's great to see how that focus on the customer is really allowed for Zebrands to continue to expand and add more brands and more products to those brands. So congratulations on the success to date, and I'm looking forward to seeing where you take Zebrands in the future, it's going to be very exciting.
Guillermo Villegas:
Thanks a lot, Peter. And thanks for the invitation and considering me here, super happy to share the little that we know.
Peter Mollins:
Absolutely. No, thank you so much. It was fantastic.
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