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Running a B2B Business with D2C Principles with Gilmar Arellano - Honest Ecommerce Ep. 178

Gilmar Arellano, who co-founded HAY! Straws and serves as its CEO, pursued the plastic straw alternative due to his unconditional love for nature. 

“I wanted to protect the environment from the horrors of plastic waste,” he says, “and my experience in hospitality led me to identify one of the most egregious culprits: straws made from oil-based plastic.” 

Hand- selecting straw from small farms, cutting it, washing it, and packaging it in eco-friendly boxes revealed a natural solution to a dire modern problem. 

As he embraces the HAY! brand and its mission of reducing plastic pollution, Arellano also builds a strong, devoted team. Banking on their individual commitments to the cause, Arellano harnesses the powerful energy that comes with making a difference. 

“Rather than micro-manage, I choose to empower people,” he explains. While growing up in Lima, Peru, Arellano longed to start his own business after observing his father, who owned a clothing factory. 

Arellano spent plenty of time around his father’s business before they relocated to California when he was 14. There, he worked with hospitality, beverage, and tech brands. 

Arellano received his education from the University of California, Santa Barbara in the form of an international studies B.A. 

He also studied abroad at Delhi University and, in 2014, earned his Advanced Level Three certification from the Wine & Spirit Education Trust, which aided him later on when he served as a sommelier. 

While pursuing his WSET certification, Arellano worked for Jardesca California Aperitiva, a Northern California-based producer. 

As market manager, he led the growth of the drink throughout the region, promoting it as an alternative to traditional European aperitifs. 

He then brought his expertise in expanding brand footprints to Allset, a pre-order and prepay restaurant reservation portal, at which he worked with now- business partner Alexey Savin. 

Arellano’s first advent into the sustainable product space—alongside Savin—came in 2015 in the form of a toothbrush, one that stands up on its own and sources only eco-friendly, biodegradable materials. 

MABLE’s commitment to supporting children’s education through toothbrush profits also became a core tenet of Arellano’s business practices. 

Arellano brought on Emma Grose, who he met while traveling through Vietnam, as the head of social media, photography, and website design. 

A strong thread of eco-friendliness began to take root in Arellano’s career as he lived out his appreciation for the Earth and its fruits through his work with wine and in sustainable product design. 

He soon learned just how much he could contribute to the planet by combining and applying his skill sets strategically. 

A few years after MABLE’s launch, Arellano continued to innovate by taking on the hospitality industry with his and Savin’s alternative to plastic straws, the HAY! Straw. 

With the help of Grose and Savin, Arellano brought the straw-made-from-straw to market in 2018 and started a revolution in earth-friendly products. 

To date, the team has helped replace more than 50 million plastic straws with HAY! straws. Arellano recently moved to Austin and can be found cycling, playing soccer, reading and traveling the world. 

In This Conversation We Discuss: 

  • [00:00] Intro
  • [01:03] Where Gil got the idea of alternative straws
  • [02:48] How Gil got into sustainability
  • [05:03] Timing is really important
  • [05:58] The avenues that HAY! Straws targeted
  • [07:32] Cold emails as a strategy
  • [09:11] The difference in approaching cold emails
  • [10:03] HAY! Straws’ email strat may not work for everyone
  • [11:18] How to stand out in cold emails
  • [12:25] Focusing on B2B for now
  • [14:20] Sponsor: Electric Eye electriceye.io
  • [14:40] Sponsor: Mesa apps.shopify.com/mesa
  • [15:24] Sponsor: Gorgias gorgias.grsm.io/honest
  • [16:51] Sponsor: Rewind rewind.com/honestecommerce
  • [17:21] Sponsor: Klaviyo klaviyo.com/honest
  • [18:08] Most challenging parts of a straw business
  • [20:32] D2C approach for a B2B audience
  • [23:34] Did HAY! Straws get pushback from going online?
  • [24:48] What platform does HAY! Straws use?
  • [26:39] Diversify your customer base
  • [27:37] Things will go wrong so be prepared
  • [28:46] Where to find HAY! Straws

Resources:

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 Transcript:

Chase Clymer  

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Gilmar Arellano  

The most challenging part without a doubt was keeping up with the demand.

Chase Clymer  

Welcome to Honest Ecommerce, a podcast dedicated to cutting through the BS and finding actionable advice for online store owners. I'm your host, Chase Clymer. And I believe running a direct-to-consumer brand does not have to be complicated or a guessing game. 

On this podcast, we interview founders and experts who are putting in the work and creating real results. 

I also share my own insights from running our top Shopify consultancy, Electric Eye. We cut the fluff in favor of facts to help you grow your Ecommerce business.

Let's get on with the show.

Hey, everybody, welcome back to another episode of Honest Ecommerce. I'm your host, Chase Clymer. 

And today, welcome to the show, the founder of HAY! Straws, a company that manufactures and sells plant-based straws. 

Gil from Hay! Straws, how're you doing today?

Gilmar Arellano  

I'm great. How are you?

Chase Clymer  

I'm doing fantastic. So let's just dive in. This is such a unique product. So where did you get the idea from? 

I know a lot of our listeners out there, they want to start a business and the ideation of "What should that business be?" is always an interesting challenge in the entrepreneurial journey. 

So where did you come up with this one?

Gilmar Arellano  

Yeah, so it was during one of our trips to China. My business partners and I, we had... We started a toothbrush company, [the toothbrush made] out of bamboo

So when I visited the factory in China, we were searching for new products and we came across stems of wheat and rye and different plants that they were using for hats and chairs or whatnot. And they were neatly packed. 

And I thought, "You know what? Why don't I bring some back to the states in my luggage and see if I can sell it?" So I brought about 3... 5000 straws in my luggage. 

And one day, I saw posts of a friend of mine who owns a restaurant in Palo Alto, in the Bay Area and he was complaining. 

He was like, "Paper straws suck. I can't find an alternative." And this is on Instagram

So I replied, "Hey dude, I have some pretty cool straws I want to test out." So I shipped them some. 

And a week later, he's like, "Send me a case". And I was like, "Sure." So I kept 2000 straws for more samples. 

And I made a case of 3000 and shipped it to him. And he's like, "I'm gonna need more in a month." So from there, we just started scrambling and now off to the races, trying to get as many straws as we could.

Chase Clymer  

Absolutely. So, once you validated that there was a market for the straws... I guess maybe we should take a step back and let people know that this wasn't your first business and not your first foray into this world. 

So do you want to touch upon the previous company a bit more to let people know the background?

Gilmar Arellano  

Yeah. So I was working for a startup. A tech startup. And I was sent to New York to open an office there. And that's where I met my co-founder. 

And he had developed this, designed this beautiful toothbrush made out of bamboo, self-standing, still in business. And I liked it so much. And at the time, it was really about... 

I think my goal was like, I want to do something sustainable for the environment. Being from California being from the Bay Area, sustainability is really present in everyone's daily lives. So, I thought it was a great looking toothbrush. 

And I partnered up with him to see if we can take it to market. So we did that. And we ordered a couple. We placed an order from China and then we just started selling them on Instagram. 

We built the site, but we were marketing the toothbrushes through Instagram. So we would reach out to influencers. At the time, Instagram was completely different. 

We're talking about 7 - 8 years ago, where you an influencer would post something and you would get that ton of traffic on your site. And it would convert into sales. Obviously, you'd have to find the right influencer. 

But nonetheless, that's how we got into the sustainability retail E-commerce business. And from there was just about finding other products that we could introduce to the market in the US. And HAY! Straws, really, I think it happened because our timing was perfect. 

So 3 years ago, I'm sorry... 4 years ago when everybody hated plastic straws, the video of the turtle was very mainstream. 

So that's really when we started HAY! Straws and it was wild. The timing was perfect. So we were doubling in sales every month, consistently for a whole year. And our challenge was, how do we make these things faster at the time? 

So I would say, it's a bit cliche. So a lot of people say, "Oh well, the right time. The right timing for the right product." But it's actually true. 

When we started the toothbrush business, we couldn't really put a time into the product and vice versa. It was a toothbrush. No one was... 

No one hated plastic toothbrushes. 

Chase Clymer  

Mm-hmm.

Gilmar Arellano  

But when HAY! Straws launched, everybody hated plastic straws. And not only hated plastic straws, but they weren't really fond of the paper straws either. So yeah, cliche as it is, but it's timing.

Chase Clymer  

You got a product. You are hitting it in what couldn't be the best time that you could launch. What kind of avenues were you taking to sell these straws? Was it just direct-to-consumer through your own website? Were you on other marketplaces? Were you doing wholesale? 

Gilmar Arellano  

Yeah, so our approach was a bit unique, because we knew that our primary customers were going to be businesses. Off the get go. 

We just knew that restaurants, hotels, bars, needed straws, and needed a replacement for plastic straws. So my business partner and I come from a restaurant background, specifically in tech. 

So we decided to reach out to restaurants, hotels and bars, through email marketing campaigns. And that's really what drove probably 80% of the business in the first 6 months.

But the unique thing about the whole initial campaigns that we did was that we were just getting a lot of referrals. So I believe the restaurant community is very close. And once they like something they'll share with their peers. So a lot of our businesses were referrals. And I think...

Chase Clymer  

Absolutely.

Gilmar Arellano  

 ...that was our secret sauce, email, email marketing campaigns and referrals.

Chase Clymer  

For those that are a little greener to this style of outreach, could you dive in a little bit more there and explain how you were approaching it with the cold email as a tactic. It's a really... 

Get those opens and get the conversation started, at least.

Gilmar Arellano  

Yeah. It's a lot of testing. So in the beginning, you got to start with a list. Whether you buy that list or whether you build that list, there's different ways to get out the database. But when it comes to email marketing, it really comes down to testing it. 

So you may have your opening email, your first email, and we would send out 4 different variants of that first email. 

And alongside that, you just funnel the people that open it, and you keep emailing them until they reply. So it just comes down to a little drip campaign, basically. 

And there's definitely challenges, especially when you go from zero to 10,000 emails. Some emails may get sent to spam. So there's different ways to work around it, where you have... 

You create different domains or different emails attached to that domain. But they all funnel to the same website.

Chase Clymer  

And for the listeners out there. This is a completely different tactic than like buying a list or building a list for your typical email marketing newsletter. This is a completely different tactic. 

This is more for cold outreach and for getting relationships started. And there are different tools to use in this industry. If you tried to do the same style of outreach with your Mailchimps or Klaviyos, it wouldn't work and you possibly would get kicked off the platforms because they're not built to do it. 

So this style of outreach though, do you think that people could use it in a similar way for trying to get a wholesale relationship because that's what I kind of see. 

These are more mass bulk orders where the relationship that you're getting started to build the company. 

Gilmar Arellano  

Yeah, I think it worked for us. I'm not necessarily sure if it's gonna work for everybody. It definitely works for us.

And I want to say it's also the fact that people were looking for us and we just reached. We were able to meet their demand or whatever they're looking for via email. It just clicked. 

But yeah, it's a business email. I'm a business, you're a business. You need something, I have it. So the conversation is a bit more open, rather than spammy, I guess. But yeah. I think you can use it in various different industries. 

Actually, it's interesting, because I get hit with emails like this all the time now from companies that are trying to sell us [things] like freight services, right? Or freight line, 3PL, logistics, or even... What's the other one that I see [a lot recently]? Marketing consulting? 

Chase Clymer  

Do you get a lot of service... Yeah. Consulting. 

Gilmar Arellano  

Yeah. 

Chase Clymer  

I think that cold email has its place. And there's one way to stand out and it's very easy: And it’s lead with value. Because if you're not actually making my life easier, instantly you are getting deleted.

Gilmar Arellano  

Right. And I'm not... It wasn't all rosy, there were definitely times where we would get hit spam or whatever. 

And I mean, at the end of the day, it's a numbers game. So you just... If it's not for us, it's not for you, move on to the next one.

And we try to avoid that --the spammy part-- because it's really annoying. But we just did it, because we knew that they needed our product. 

And that was the most effective way we could get in front of them. And [it's] quite affordable, too. It's not super expensive. 

Chase Clymer  

Yeah, you're definitely solving a problem that all these people had. So they almost were welcoming that conversation to get started. And then like you said, earlier, they had... 

Once you got those deals done, they had a million referrals because of how tight knit the industry actually is. 

Gilmar Arellano  

Right.

Chase Clymer  

And that got the flywheel started to really ramp things up. Now, is the business the same today? Majority wholesale? Are you guys now experimenting with direct-to-consumer and marketplaces?

Gilmar Arellano  

It's primarily business related. I would say 70% of our business, it's B2B. And that B2b gets broken down between distributors

So now we work with distributors, because the industry that we're in distribution is a huge part of it. 

So for example, --I don't know-- a restaurant would rather have like 1 or 2 vendors, where they buy everything from rather than having like 100 vendors. And straws are such an insignificant part of their purchasing activity. 

When you think about it, they're buying rice, pasta, meats, whatever it is... Straws are very... It's not something that we're thinking about. 

So we started working with certain distributors, so that now they sell our products in a more old fashioned way where their sales rep that goes and talks to them gets the order. 

Or the distribution company has its own website and people just go on board from there. So that's part of our business within that 70%. And then the rest is just the same thing, which is cafes, hotels, restaurant bars. It is pretty... 

It's pretty broad. We have steak houses, we have vegan restaurants, we have juice places, we have coffee shops.... it's not. We have event centers... So it's a broad range of different types of venues and establishments. 

But they'll have one thing in common: they serve drinks, so they need a straw.

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Chase Clymer  

When you were getting this off the ground, what would you say was like one of the most challenging parts of starting this business?

Gilmar Arellano  

The most challenging part, without a doubt, was keeping up with the demand. There was nobody making hay straws, our straws, at scale or that didn't exist, right? 

These were being done manually for craft purposes. There was not necessarily a market for it. So we literally went to China and set up a factory because we had no choice. And... 

Chase Clymer  

Yeah.

Gilmar Arellano  

...that's a different, different, completely different industry. Manufacturing has its own supply chain issues. 

And it's not easy going from 100,000 straws to 5 million straws a month.It's not easy selling that amount, but it's also not easy making that amount in a foreign country with the relayed production being timed on a 30-day freight shipping time. 

So from a business perspective, you have a very cash intensive cycle from production to sale and you're doing 2 things, which is your marketing and sales on one side and then you are manufacturing on the other side. But that was…

I remember we went to China and we were with our investors at the time, and my co-founder. And we'd literally visited 7 Chinese cities in 10 days, figuring out where we're going to make these things. 

And we didn't start from zero, because we had previously worked in China with other products. We were able to leverage those connections and...

Chase Clymer  

Mm-hmm.

Gilmar Arellano  

...build something from that. It was fun. It was just a challenge. 

Chase Clymer  

Yeah.

Gilmar Arellano  

I was a lot younger at the time. So it was easy on the body to travel like that.

Chase Clymer  

Oh, I agree. If that was a previous life, I was in a touring band. I traveled the country  a lot. These days, I was like, "I don't know how I did that. I'm sore from going to one conference this week."

Gilmar Arellano  

(laughs) That's cool though man.

Chase Clymer  

With what you guys are doing here, you've got a product that's very B2B. And you're running it with almost  some of the direct-to-consumer playbook. 

Is there any other parallels that you can draw with how you've tried to scale the company or keep it nimble, that you've kind of borrowed from more of that direct-to- consumer mentality?

Gilmar Arellano  

It's more about just giving... Adding value to your customers. So we started with straws, and then you go back to the drawing board. And you want to ask them for their feedback. 

And it's like, "Oh, we need a wider straw." Or whatever it is that they need. 

And I said, "Okay. So how do we make that for them?" 

So, we'd like the direct-to-consumer approach, because we were able to basically control the journey of our customer from order to delivery to experience, to feedback, and to what else we need to do. And I think the direct-to-consumer model is great. And it's probably... 

We probably are able to do it now compared to  10 or 15 years ago, because now there's a bunch of logistics companies, fulfillment centers, and the websites are capable of handling a lot of website traffic and all. 

So, I think that there comes a point where you are in love with the direct-to-consumer, the DTC type of business. And you realize, "This is great." And the next thing is "What else can I do for my current customer with the same model in order to keep them engaged?” 

But with that said we also ventured out to retail. Some Target locations carry our product, but yeah, back to Ecommerce. 

Yeah, this B2B, I guess, wholesale Ecommerce can be challenging because you're selling to customers, and they have a very old school way of purchasing. 

So, here we come, this young startup, trying to sell things online. And that's the other thing, a lot of these customers love it. Business customers don't pay with a credit card. So they require... 

Because you don't have any outstanding balances with anybody because you're just... 2 days, it clears your account or if you're doing Amazon, it clears in 2 weeks. 

But now you have like a 30-day check coming your way. So you gotta adjust your accounting your books a bit, too, so that money flows in the right way. 

Chase Clymer  

Absolutely. So...

Gilmar Arellano  

Not sure if that answered your question.

Chase Clymer  

Oh, no, it absolutely did. So with being a younger, scrappier, technology-driven startup, in the B2B space, were you... 

Did you get a lot of pushback from potential customers on trying to funnel them into a more modern "order online" type of approach?

Gilmar Arellano  

Yeah, replacement immediately. So they were willing to just pay with the card or whatever. I don't think there was too much of a pushback. 

And I want to say, because I think people just wanted the product. They needed something fast. They wanted... 

Well, that's the other thing. A lot of the customers, a lot of the cities were banning plastic straws so the customers needed... 

I can actually break it down. So a mom and pops run a cafe or a restaurant, they'll pay with a card. Not a problem. But once you're talking with  bigger hotel chains, it's just different. Different business structure. 

So I don't necessarily think there's a lot of pushback. I think it's just... 

The difference was primarily who your customer was, whether it was a big hotel chain or a restaurant group, or was it independently owned?

Chase Clymer  

No, that makes complete sense. And from a technology perspective, I'm sure there's some listeners out there where they might be leaning more into the B2B type play. Are you guys... 

How are you running the business? Are you guys building this on the back of a say like a Shopify? Or is there another solution out there that really helps tie all these pieces together?

Gilmar Arellano  

Yeah, we built. We worked with Shopify. I think... We think Shopify has got the most... It's just a shopping/selling machine. Right? 

Chase Clymer  

Yeah. 

Gilmar Arellano  

And I think it's easy to build things on top of it. We've.... And then there's also a bunch of apps that we use, I believe, Bold for recurring purchases. So if a customer just leaves their credit card there and just every... 

Whatever amount of months or days or weeks they get a new shipment. It's pretty intuitive. 

And I personally don't do too much work on the tech side of the website or the design or anything. But from what I hear it is not that difficult to work with. If you want to implement a new template or modify things, it's pretty unique.

And Shopify has also improved dramatically since when I was working with them. 10 years ago. Shipping was not as easy as it is now.

Chase Clymer  

Mm-hmm.

Gilmar Arellano  

Right? Fulfilling products. It's not as easy as it is now. So they're constantly improving things. 

I guess, yeah. I tried to work with other ones but I ended up deleting them and just going back to Shopify. 

Maybe I'm being biased, but I just like them.

Chase Clymer  

If it's not broke, don't fix it. 

Gilmar Arellano  

There you go. 

Chase Clymer  

Now, is there anything I forgot to ask you about today that you think would resonate with our listeners?

Gilmar Arellano  

Now, I guess we can talk a little bit about COVID. (laughs) COVID was definitely a challenging part moment in our business. Because basically, our whole business got wiped out. All restaurants, bars... Whoever... 

Each one of our customers had to close. So we were shut for...

Chase Clymer  

Mm-hmm.

Gilmar Arellano  

...5 months, I think. So the take there is to try to diversify your customer base. Because, yeah. 

We just focused on people that sold straws or used straws. And so yeah, it was challenging, I guess. But we made it through.

Chase Clymer  

Yeah, that's definitely... I think you can draw parallels between that and almost everything in business.

If you're putting all of your eggs in one basket, when it comes to how you're generating leads, or how you're fulfilling orders, and you don't have redundancies in place, you're putting a lot of faith in things not going wrong. 

And we live in reality and not a fantasy world and things will and do go wrong.

Gilmar Arellano  

No, you can't predict the future. And no one thought a virus was gonna just stop the world and keep everyone inside. But it happened. (laughs) So yeah. So yeah, I agree with you, don't put your eggs in one basket, especially for businesses. 

And you can apply the same concept to anything, whether it's your marketing efforts, there's gonna be some marketing efforts that are... They work better than others. 

But you should always explore different types of marketing efforts. Because sales channels or whatever it is, because, yeah, you just never know.

Chase Clymer  

Absolutely, but you guys made it through and you're still here, selling awesome straws. So if people are curious about the straws, where should they go?

Gilmar Arellano  

They can just go to haystraws.com

Chase Clymer  

Chat about straws. Gil, thank you so much for coming on the show today. 

Alright. I can't thank our guests enough for coming on the show and sharing their knowledge and journey with us. 

We've got a lot to think about and potentially add into our own business. You can find all the links in the show notes. 

Make sure you head over to honestecommerce.co to check out all the other amazing content that we have.
Make sure you subscribe, leave a review. And obviously if you're thinking about growing your business, check out our agency at electriceye.io. Until next time.