The publicly traded Grapevine, TX company, which owns four businesses led by its Solo Stove unit, has a Direct-To-Consumer to Wholesale ratio of 85 to 15, a percentage that is likely to persist given Solo’s extreme focus on its relationship with customers. But Solo has a new partnership with warehouse giant Costco. On that, CEO John Merris told ICR Conference attendees that “we’re going to be careful here.”
But growing brand awareness for the Solo Stove (an estimated 70 to 75 percent of revenues) and other businesses – Aru Kayak, apparel brand Chubbies, and inflatable paddleboard maker Isle – is crucial and a huge opportunity for the company that went public in 2021 and currently generates a gross margin of approximately 63 percent.
“We’re so in love with DTC and the consumer,” commented Merris. “We are leveraging the learnings from the four brands to leverage our customer acquisition costs.”
Due to privacy issues, current acquisition costs have risen about 20 percent over the past year. That is one reason Solo likes the customer referral market, where about half of sales are generated by word-of-mouth, keeping customer acquisition costs at nearly zero.
As for growing the global presence of its four brands, Solo thinks international markets have the potential to account for half of its topline over the next 5 to 10 years. The company entered the Canadian market in Aug./Sep. 2021 followed by Europe a month later. After some initial volatility, the European business recovered in H2/22, and there is excitement about additional growth opportunities on the continent.