Unless you have been living under a rock, you’ve heard that “laughter is the best medicine” at least once in your life. But did you know it’s also the cure-all for a prosperous business? In the world where a majority of entrepreneurs are constantly fearful of offending their customers, Matt Rutledge, founder of Woot.com, showed everyone that potential buyers like it when you’re funny.
Matt shares how he successfully blended humorous copy with incredible deals on Woot! Find out how his company became so successful that Amazon courted him for four years before they finally agreed on the price of $110 million.
Listen in as Matt Rutledge explains the incredible journey he took from launch to sale, and why Meh.com, while built from a similar model, is so different from its predecessor. With Matt’s expertise and advice, you too can take that giant step forward into the world of eCommerce with humor and integrity.
The Full Conversation
Andrew: Today on the show I’ve a special guest, Matt Rutledge, the founder of Woot.com and more recently, meh.com. I’m sure a lot of people are going to be familiar with Woot. Woot is kind of the original Daily Deal…well not kind of, it is the original Daily Deal site. Matt founded it back in the mid 2000s and became really successful based one on the model but two on the very funny, cheeky entertaining copy that really it became well known for. Matt ultimately sold Woot to Amazon for $110 million and worked with Amazon for a couple of years but most recently left to start meh.com which is by his own admission very similar to Woot. He saw what happened to Woot after the sale. It got cluttered with a lot of ancillary deals and categories and it just really didn’t stay true to the original model of a single straight forward Daily Deal.
Starting it more recently in meh.com, I think they kick-started it last year and it’s a little bit under a year old. We’re going to talk about that. We talk about some of his comedic influences, chatting about the sales process to Amazon, and also meh, of course, we talk about meh.com. I keep pronouncing it wrong. You’ve got to pronounce it right with some indifference. And finally, Matt’s take on retailers today about why frankly, he doesn’t really respect a lot of retailers out there. Looks at a lot of them as middle men and what he thinks the future holds if you’re not adding a lot of value as either adding a lot of really tangible value in some kind of service capacity or creating your own products. So we get to that as well. Enough of me talking. Let’s go ahead and get into today’s discussion with Matt Rutledge from meh.com.
Comedic Influences Behind Woot
Andrew: Matt, humor has been such an enormous part of your success and Woot’s success and meh.com’s success as we’ll talk about. At the top I just want to ask you a few completely non-eCommerce related questions to kind of dive into that background. Favorite comedian or biggest comedic influence, who would that be?
Matt: Interesting. I’m pretty out of touch having been entrepreneur and sort of focused in on my business for the past 20 years but so I would say George Carlin, that kind of sarcastic style. Louis C.K., sort has the same sarcasm and realism and let’s lay it straight. That’s more stylistically what I go for in comedy I would say.
Andrew: And what about the most over-rated comedian or talk show host? Not even straight up comedian but anyone who’s humor you just can’t stand.
Matt: You know I stay pretty open-minded on humor so there might be some kind of grating delivery that I might not like but I don’t tend to criticize humor. I don’t have a least favorite comedian, I would say.
Andrew: Fair enough. What about the best practical joke you’ve ever played on someone? Are you much of a prankster?
Matt: That’s funny. So it’s sort of entwined with my company endeavors. We had a fellow who returned a product, and I forget the exact reason that they sort of rubbed us the wrong way, but derided us for having ever ever thought of shipping him a, I think it was a Robosapien robot, that was not entirely operational or he thought was not operational. Some series of events where we sort of got rubbed the wrong way and we proceeded to send him out replacements and we actually had a lot of these in stock and some of them were kind of damaged boxes but the units inside were good. We had a lot of stock we couldn’t sell in a normal way.
So we shipped him via different carrier, you know FedExing, DHL was in play, UPS, postal service, everyday a different Robosapien would arrive to his house. We thought of it as torture by Robosapien. It was really, really funny around the office and we just imagined in our heads how hilarious, every day this knock on the door and here’s this other Robosapien and this is what the guy wanted and how could we not come through for him and now we’re coming through in such a way that maybe he’ll be annoyed what turned out to be probably a 1000 dollars or more of these Robosapiens. But it was worth the joke. We were going to do this for 30 days and I think maybe 20 days in I got a call or I got a note, internally, from our customer service and apparently this was a teenager, we didn’t know and we were sending them to his house. His mom called. So we were like “Oh shit!” We felt horrible. She’s like “Please stop sending Robosapiens to us.” So anyways that was a bit of a practical joke that went maybe a little bad for us.
Andrew: That’s great. You can imagine maybe an awkward conversation the mom had with the teenager. “Are you stealing credit cards?” They keep coming and coming and coming. That’s great.
Matt: Who knows. But once the Mom called us it was like okay this feels wrong. We shouldn’t have done it. It was much better thinking some 30 year old that was annoyed with us.
Andrew: I love it. The last one before we get quasi-serious especially coming off April Fool’s Day here relatively recently. The best practical joke you’ve ever had played on you?
Matt: My employees at Woot and here at Meh or Mediocre are always in for various…in fact just today the bottom of my mouse is taped up and it’s some Nicholas Cage picture and I’m like “Why isn’t my mouse working? Oh that’s Nicholas Cage. Of course.” So every couple of weeks or so. The recent ones come to mind. My office still has cardboard all around it. I had cardboard versions, everything in my office was replaced with cardboard versions. So table, chairs, computer, phone. In fact I still have all my pictures have cardboard over the top of them with renditions. Maybe some of the common variety but we do a lot of them around so they all run together.
Andrew: I should have asked what was the best practical joke ever played on you this week is probably more fitting?
Matt: Yes. Maybe more appropriate.
The Story of Woot
Andrew: For listeners who may be living under a rock for the last few years, really young, for whatever reason might not know the story, what’s the quick and dirty story of how your original venture, Woot, got off the ground?
Matt: I’ll try to keep it quick here. This is 10 years ago. In fact, both Woot, the original venture that people know about that has some fame about and Meh are basically 10 years apart from each other. What they don’t know the proceeding company, Synapse Micro, which name is irrelevant, computer parts distributor, preceded Woot by 10 years as well. Woot evolved from a distributor company then that I had started in the 90s that was basically a non-internet company. This was get on the phone and sell computer parts to stores both locally in the Dallas area and then nationwide as we started to pick up more and more sort of closeouts from manufacturers. We persisted in that model for a lot longer than our peers and then before Woot was launched our customer base was down to the big box retailers, the CompUSA’s and Computer City’s and Circuit City’s and all these places that are now out of business themselves. But basically Best Buy type stores. Huge, multi-location, sometimes hundreds of locations stores that would buy big batches of inventory to move through.
When we’d get stuck with an item, when we had something that those customers didn’t want because that customer base had become so focused in only a few accounts we realized that we were up side down or stuck with a product more quickly than we had in the past. So we looked for outlets to blow that product out as quickly as we could because it was controversial that we needed to do that. So Woot was actually a solution for the wholesale companies’ problem of making mistakes and having run out and bought a bunch of either computer related or consumer electronics related items that we were sort of stuck with. It wasn’t really designed as a “Let’s have fun on the internet and be snarky and invent this daily deal model” which we did but we didn’t invent those things for the glory of inventing them. We invented them to solve the very real problems of our business. They achieved that and then I think what leaked through and maybe added to people’s enjoyment that was more our personality coming through.
Andrew: And the writing on Woot was fantastic. So entertaining to read and a huge part of why it was successful. Did you do all that writing at the beginning? Was that your personality and your hand coming through? Did you have a team that was helping you out with that?
Matt: So as incubated inside our wholesale company there were a few of us that were tasked with putting those sales together. Early on it was…so I can take some credit for some writing but we were only changing a speck here or there or adding some personality and flare in a very limited way to what was otherwise a similar sales description as you would see on another store. While I was writing those, they certainly weren’t a great effort. I can’t pat myself on the back too much. They were occasionally funny but they led people to look for those as Easter eggs and then that lead to us hiring legitimate good writers that came in after and sort of really took that to a new level that you’re probably referencing where the entire write up is a story or a joke or any number of directions.
Woot’s $110 Million Sale to Amazon
Andrew: Amazon has a history as you know of being fairly notoriously aggressive with their acquisitions. For example, Zappos, they under cut them on shoe sales for a long time to really try to make profitability outside of an acquisition unfeasible. With Diapers.com, they kind of had similar aggressive tactics. You obviously were purchased by Amazon. Were you open to a sale from the get go? Was it something where it was they really tried to play hard ball? Was it more of a soft approach? And how did you decide to ultimately sell to them? That’s a tough decision for any entrepreneur especially you’ve got so much invested in the company. How did that transpire?
Matt: Yes, interesting. When you’ve gone through a large acquisition you become rather enthralled with the proceedings. First off, I would say, yes Amazon is aggressive. But if you found them not to be aggressive I think it would be really confusing and it would appear to be somewhat of a lack of interest. I find it fairly transparent what’s out there. I think there’s a large amount of credibility in them trying to duplicate and compete with efforts that they may be interested in acquiring to inform themselves of what’s the market size of this, how is it run, how do they think about it, how are they thinking about it differently than we are, are there capabilities they have that we don’t have?
I imagine that in each of these acquisitions at Quidsi, the Diapers.com group, at Zappos, when they’re reported in the media as having ruthlessly competed, I don’t think that’s overly aggressive at all. I think that’s appropriate. In a similar vein, with Woot I appreciated, certainly as an entrepreneur having built the business essentially trying to out think and compete in an e-commerce space that they were the big giant in, I certainly appreciated learning that they had tried to emulate the model and tried to effectively compete internally at Amazon with us.
That gave me an appreciation and it made it a little more compatible, certainly if they were then having tried that, still interested in an acquisition that meant they saw value. That meant freedom and potential enjoyment from my staff of being valued as an acquisition. That’s what you’re looking for if you’re going to be acquired. And certainly Amazon, from a consumer model is very popular and not a controversial acquirer. The other thing is that there were a lot of conversations and certainly I didn’t just run readily to the first offer. There was actually a preceding investment from Amazon in 2006 or really just a couple years after Woot had launched it’s site. There was already interest and dialogue and investment from Amazon and then many years after that that dialogue continued.
It’s a long drawn out process in which you’re going to be communicating and learning so much and there’s a lot of communication both ways where both parties are going to be very informed by really probably a year or more, in our case, four years of dialogue. But even in a quicker acquisition you’re going to have a lot of time for the reality to set in. There’s not any tricks to it. There’s really not an approach to it that you would want to know from the outset. If you’re in that situation you know why and you know your leverage and you know your lack of leverage and you know your goals. You probably didn’t build a business because you had dollar signs in your eyes. You probably built a business because you had ideals and a better way to do something that you felt strongly about and you made a lot of decisions that were not economically driven to get there and they felt rewarding. You certainly would not want to just exchange those idealistic decisions you made for a dollar amount without considering it over some time and very thoughtfully.
But again if you are thinking I want to build a business so that I can sell it to Amazon it’s really easy for me to just tell you you’re not going to get there. If you’re already thinking like that’s your goal you’re not going to get there. You’re going to get there if you build a business that people value and that is completely opposite from trying to build a business with dollar signs in your eyes.
Andrew: You sold, went to work with Amazon for couple years, and then you left to start meh.com. Great domain name. What is meh.com? How did you come up with the name? And why did you start it?
Matt: First off, it’s Meh, so you really have to get that intonation. It’s more of an expression. You can say it any way you want. I’m just joking. In the same way as Woot was an expression or not necessarily a word particularly in 2004 but more of an expression of excitement and hooray and “hey look what I found,” Meh is the opposite. I have complete indifference about what I found and I will express it in this non-word way and maybe shrug my shoulders. There’s a lot of fun reasons why we picked that.
First off, the parent company and actually the coming out of the acquisition and learning from within Amazon how retail is viewed and what type of individual is rising up through the ranks of Amazon. Having been a wholesaler myself for 10 years prior to Woot, so really a fairly 10-year industry veteran, you get a lot of this is not as consumer friendly and exciting once you see how the sausage is made. There’s a little less excitement about being a retailer and in fact, in my case, there’s a lot of disdain for retail just in making and the retail industry at large which may be why I do so few of these podcasts.
Why Matt Doesn’t Like Retail
Andrew: Matt, if you don’t mind, what is it, just really quickly, what is that you really dislike about the retail industry that you eluded to?
Matt: Well number one, if you consider retail in a generic sense, retail by definition a middle-man. There’s very few people that if you just boil it down and say, “Hey do you like middle men? Do you like somebody in between you and the guy that you might buy the product from for cheaper?” Universally everybody will agree they don’t. So then you’re saying, “Okay, when is a middle man acceptable?” Well a middle man is acceptable when they’re adding value. If you’re some place in Texas, as I am, and I need a new set of headphones and I’ve been potentially value propositioned to me that might be able to go to a store or use, if Amazon has a quick delivery whatever, and get a headphone to me and that may add value that I would find better than even if I know the manufacturer of this headphone, they don’t have one here for me right now. So that’s value. That’s fair middle-man value.
They might also be able provide reviews. They might be able provide selection for me to pick some. Maybe I can try them before I buy them. Any number of ways that retail can add value and be then an acceptable middle man. I still continue with the premise that I’m very skeptical in that value. Once you get rolling and have momentum in providing some value, what I would say is usually not enough, some value is provided by you as a retailer middleman to consumers you inevitably expand your pricing to take as much advantage of that value as you can which means you’re no longer providing a fair exchange for that value and in my mind you’re just essentially a middleman again that is exchanging and optimizing your margin for the sake of my potential as a consumer now, my potential costs in that product.
In my mind, this is probably controversial for some people, but in my mind retail becomes inherently evil as a position of power because you’re sort of establishing these conditions in which you may or may not have competition or you may or may not have a captive audience and you wish to expand to your margin to their detriment.
Andrew: So do you see a future then where Amazon’s become such a trusted player and not always the low cost provider but pretty darn close, do you see a future where Amazon takes the….I’m they’re already heading in that direction anyway, they’re the only guys pretty much in town that sells existing goods and then everything else is going to be direct manufacture, the original maker value adder of the good to consumer and you have a huge hauling out of independent merchants?
Matt: There are other value points that can be legitimately brought to the table. If you are offering services that a manufacturer does not offer, obviously installation would be a great one but even training or potentially value add in any number of ways expertise driven, I think that those retail/service organizations have every reason to exist. I think that if you’re job is to convey goods in aggregate and offer selection from manufacturers and you think that you’re going to provide margin lift that investors and yourself as a business owner are going to appreciate then I think you have a very tough road ahead of you. I don’t think there’s any…number one, it’s almost impossible to compete and have any leverage with a manufacturer or logistics operation that’s going to get you anywhere close to what Amazon or Walmart on the online side can offer or on the brick-and-mortar side can offer. I think conventional retail, where you’re not offering any differentiation in product or any differentiation in service, has no reason to exist. They just don’t need that many of them to exist before they’re successfully competing and efficient.
The Differences Between Meh and Woot
Andrew: I got us off on a rabbit trail, I apologize, from meh.com. Bringing us back to the main point of discussion here. So Meh, you launched it…Meh, excuse me. I’ve got to work on that. It’s very similar to Woot in the sense…even in the Kickstarter campaign that you did. You pretty much said, “We created Woot. It was wonderful. We sold it. It pretty much got completely over run with all of this unessential stuff and what made it wonderful died away. So we’re relaunching it, so to speak.” It’s great. I’ve loved the humor. The videos you guys do with the trolls are really entertaining. So much is similar. But are there some things different? What’s different from Meh.com versus Woot in terms of maybe things you’re trying out, experimentation, social aspects, any big differentiators even though they’re fairly similar?
Matt: What’s funny…this is an experiment. The parent company is Mediocre Corp and so the company I work for, that we all work for, is A Mediocre Corporation, which is funny to have on a business card because then people ask, “Well, where do you work?” and then “Well, that’s it.”
Andrew: That’s awesome.
Matt: We tend to, particularly coming out of a company called Woot, which you can’t just say “Well, I work at Woot. So that’s my day job.”
Andrew: You gotta be enthusiastic.
Matt: Maybe you do that for eight, ten years and you get a little tired of it and so there’s an enjoyment pawn in the downplaying aspect and lack of hype. And really Woot and the brand we built was originally a lack of hype, a complete lack of hype, and a lot of transparency. And so in some ways there is a number of perspectives to look at this from. One, is our enjoyment like I just said. But the other is that Woot was not properly named for its sort of connotation as we did marketing and as we had a product or brand voice, I guess you’d call it, we weren’t about hype.
So I think that having Meh.com is a great way. There’s a curiosity behind that. It’s still an internet term in large degree. So it has a geek element to it that we enjoy. It also sets the bar low and it implies a company that is to be explored. Why would a company pick either Mediocre for that matter or Meh as their name. I must figure out more because they’re either really stupid or really smart. I don’t know where we fall in that category but we enjoy that it sets up that condition that you want to explore and maybe you’ll find it sticky as you explore it.
Andrew: It’s great. It’s fantastic. If you loved Woot, check out Meh.com. That’s M-E-H.com and if you have no idea what Woot is, and that means you’re probably under 17 years of age but if you don’t it’s very similar to the classic, of course, Woot that Matt built up and created the space. I love how you in your Kickstarter video, you say, “What douchey business guys would call the Daily Deal space.” The Kickstarter video was fantastic.
Future Pioneers in eCommerce
Andrew: Last question for you, Matt. You talked about how so many e-commerce companies, especially looking forward it’s going to be really hard to compete if you’re just a middle man, if you’re not having a huge value add. So looking out on the e-commerce landscape today with everything that’s going on with Amazon and so many changes, is there anyone that you look at as a real pioneer in the e-commerce world or someone who’s doing work in the e-commerce space that you really respect?
Matt: The way I view the landscape is everybody’s located on the same corner in an intersection in a town and so there’s no geographic separation obviously on the internet and so it’s not about location. Everybody is at the same location and you can price shop and compare to everybody. I think that certainly a company that doesn’t realize that they need to have an exclusive opportunity and I mean exclusive in either offering that I can’t get somewhere at all or at least a limited time deal or a price that appeals to me that’s exclusive. If you don’t recognize that and you’re just offering something that I can literally go out and find cheaper at the same corner then as an intelligent shopper I cannot respect your business.
There are plenty of businesses that are catering to the non-intelligent shopper and there’s no reason to name them but very simply they’re not known for having good prices and I just think there’s very little value added. I’ll go a bit further. Zappos is a respected company that offers value and service and hand-holding and has a respect level of how they treat their customer and yet doesn’t have the right pricing conditions where they’re going to lead the way in price. I can find every single shoe on Zappos, I would imagine being able to find cheaper. It’s a question of do I want that experience.
So there’s still some times when price is not the only thing to look at but it’s hard when you’re on the same corner with an expectation that I just want that product. It’s hard to get conditions such that I find innovative, stores attempting other ways to do that. There’s simply, as a consumer, if I want some shoes, I’m using the exception to the rule really with Zappos, if I want shoes I either want the shoes as cheap as I can get them or I want this hand-holding experience that a Zappos like company might offer me. And I don’t need any other gimmick or innovation. I really don’t. I just need some shoes.
I don’t find myself looking around with wide eyes and smiles on my face when I see new e-commerce that isn’t differentiating on product supply. On brand and product supply and verticals on things that are subscription model that are curated, there’s a number of companies we’re all aware of that do really good work in exploring those territories. A lot of the companies I respect most are going to be manufacturers that are also doing retail. I mean the largest would be Apple. Still doing conventional retail, but predominately most people like to buy Apple through the Apple store. Obviously you’re not just going go to start Apple but starting a clothing firm or some sort of a full vertical where you own the sourcing and branding, I think that’s the way to go these days. I think that’s where the opportunity is.
I think the subscription-type models where you’re curating and sending somebody something new every month, that’s really pretty interesting and novel. It gives you some leverage that you can use in a different way with a manufacturer and private label some things. Just regular conventional e-commerce, I find really dull and miserable and nothing on the landscape and an aggregator of a selection store is interesting at all right now.
Andrew: Matt, I love what you’ve done with Meh and looking forward to watching it grow and seeing what you do with Mediocre as well. Thanks so much for coming on. It’s been a privilege and it’s been a lot of fun talking to you.
Matt: Yes. Thanks Andrew. I enjoyed it. Appreciate it.
Andrew: That’s going to do it for this week. But if you’re interested in launching your own e-commerce store, download my free 55 page ebook on niche selection and getting started. And if you’re a bit more experienced, look into the eCommerceFuel private forum. It’s a vetted community for store owners with at least $4,000 in monthly sales or industry professionals with at least a year or more experience in the e-commerce space. You can learn more about both the ebook and the forum at eCommerceFuel.com. Thanks so much for listening and I’m looking forward to seeing you again next Friday.
What Was Mentioned
Photo Courtesy of Matt Rutledge