Product bundling can be a mystery to direct-to-consumer (DTC) brands. It can be difficult and perplexing. So, how do some brands make it seem so effortless? (A-hem, Caraway.)
In this episode of The Checkout, Caraway’s VP of operations, Mark Riskowitz, delves into the intricacies of creating a sustainable product bundling strategy and shares the hyper-successful bundling playbook behind the phenomenal growth of Caraway. Tune in and learn:
- The easiest way to start your bundling strategy
- The operational considerations of virtual vs. pre-kitted bundling
- How product packaging can affect your bundling strategy
- How to manage bundles from an inventory perspective
““The dangling carrot effect happens when you see an opportunity for a virtual bundle because all of the data points to it. You want to test it out and the moment you do, you get that taste of upsell, that taste of increase in AOV."Mark Riskowitz, VP of operations at Caraway
Meet Mark Riskowitz
Mark is the vice president of operations at Caraway. He is responsible for leading all components of the end-to-end operation functions, including supply chain, customer experience, accounting, finance, and internal platforms.
Before Caraway, he led operations and logistics for several ecommerce brands under the Mohawk Group, a global consumer product platform. There, he established himself as a supply chain expert by focusing on marrying end-to-end operations planning with the customer experience.
Connect with Mark on: LinkedIn
About Caraway
Caraway is most popular for its high-quality non-toxic cookware. It launched in November 2019 after its founder, Jordan Nathan, searched (without success) for non-PTFE or Teflon-coated products. As a result, Jordan decided to create his own. Now, Caraway is thoughtfully raising the standards of cookware.
As one of the fastest-growing DTC brands today, they have expanded to selling high-quality home goods, including pots, pans, table linens, food containers, and bakeware.
Learn more about Caraway on: Twitter | Website
The Checkout episode 12 unpacks:
In this episode, Mark outlines the important factors and complexities to account for as you develop a bundling strategy — and how to work around them. Here are the highlights:
Virtual vs. pre-knitted bundles
- Most people often misunderstand product bundles as either being virtual or physical bundles, but then it could also mean pre-kitted (pre-assembled)
- From an operational standpoint, the easiest thing to do is pre-kit your bundle or create different individual SKUs and combine them to create one new SKU
- “Our cookware and bakeware sets are all pre-packaged and pre-bundled at our factories. And we bring those into our distribution centers as a single product. So, they aren’t really bundles, but a single SKU that is actually a collection of products.”
The challenges Caraway faced when packaging bundles
- Where do you pack everything? What are the different moments in the unboxing experience? Translating the idea set into a physical result was very challenging for Caraway
- Factories are used to packaging individual pieces, so asking them to take on four products and putting them into a box required innovation and creativity
- “It became a mission with our factories to share the rationale and justification for why a box set is so complicated. And the more complicated it gets, the more challenging it is to assemble.”
Starting with the complicated, then simplify
- Most companies start planning around individual packaging, but Caraway sorted out the complicated boxing and assembly process of bundles right before it launched
- Starting with the most complex packaging and then adding the easy stuff, it became smooth sailing afterward
- “So we were fortunate in the fact that we started with the most complex and actually became smoother and easier and optimized from there.”
Choosing the right bundling strategy
- Bundling products depends on consumer behavior, so use virtual bundles to test bundles for profitability; then, only pre-kit it if there’s customer demand for the bundled offering
- “The nice part about doing virtual is the A/B testing that you get, and then if they perform extremely well, the next consideration is: should we actually launch this as a pre-kitted solution?”
- The moment you pre-kit something at a factory, you save a ton of cost
Forecasting virtual bundles is... messy
- Sets and singles are completely separate SKUs, and you can sell those stocks until they hit zero, but virtual bundles can add complexity to your warehouse management, fulfillment center, and inventory planning
- You have to factor in a lot of qualitative aspects on top of an additional data set when you think about forecasting bundles
- “If you have a virtual bundle that has 3 variations and you get mixed results on those compared to the singles, it’s actually more challenging from a planning and forecasting standpoint when things are virtual.”
The sky is the limit when you have a solid system for bundling
- There’s a limit to what modern 3PLs can do in terms of how much you can customize
- Caraway is fortunate to have a strong automated management system that makes it easy to spin up a virtual bundle quick and easy
- “Some companies disregard the additional lift and challenge that is required on the operations and performance side. However, if you have those systems in place, it makes things much smoother.”
Is there a shortcut to virtual bundling forecasting?
- When virtual bundles become a staple in your product offering, you can overlay the bundle on top of the individual pieces
- “For example, [when forecasting for bundles,] you’re projecting out each different item within that bundle: how they’re performing on their own and then overlay on top of that is how they perform in a set.”
Solving the stockout problem in virtual bundles
- If one of the items from the virtual bundle is out of stock, the challenge is not holding the entire order until the next batch of units comes in. Nope – it’s communicating it to the customers
- “If you’re not communicating that to the customer, all hell’s gonna break loose. And that’s when you start getting a flood of complaints and inquiries.”
- Whether you choose to partially fulfill the order or hold the shipping of the bundle entirely, make sure to convey the absolute nitty-gritty to customers
Make the bundling process smoother sooner
- Virtual bundles can put you on a reactive measure when there are tools that can help you be proactive
- “I would’ve liked to have done more research into the tools we’re using, how they can work with virtual bundles, how they work with allocation, and what rules you could set up to better inform how we’re gonna launch a bundle.”
Caraway's “bundles on bundles” Christmas promotion
- Caraway did a Christmas promotion on the cookware and bakeware pre-kits without the complication of creating a whole new set of virtual SKUs
- The products and engineering team structured the promo smoothly in the funnel from the landing page to the checkout that Caraway was able to successfully sell 2 different bundles at the same time
- “What seemed like to the customers, I’m gonna buy the cookware and bakeware bundle set, in essence, they were actually just buying into each different product that had a combined promotion.”
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