Secrets To Off-Price Going Online: Gaming Meets Shopping with Yaysay

Speaker 1:

Welcome to TD Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us as we converse with the top minds who are influencing our global sectors.

Oliver Chen:

It's luxury at up to 70% off who doesn't like a treasure hunt at your fingertips on your mobile phone? Thanks for joining us today for our Retail Visionary series where we feature people and premier brands and companies changing the world of retail through new ideas, inclusivity, and technology. We're really excited to host Lindsay Ferstandig, the co-founder and CEO of Yaysay. This is Oliver Chen. I'm TD Cowen's, retail new platforms and luxury analyst. Yaysay makes shopping fun again with an innovative approach to mobile app shopping, something we all love. Before starting Yaysay, Lindsay was chief marketing officer at Athleta, and also previously at Stitch Fix as the VP of shop, strategy, and corporate development, as well as marketing. Lindsay, thanks for joining us today.

Lindsay Ferstandig:

Thank you for having me, Oliver. I'm thrilled to be here.

Oliver Chen:

I view Yaysay as shopping meets gaming, off-price meets online treasure hunt. For starters, what is it? Why should people download the app?

Lindsay Ferstandig:

Yeah, so Yaysay is a new shopping app and we're really focused on bringing the magic of an off-price treasure hunt to your phone through what we think of as a totally new mobile shopping paradigm. And the app combines an AI-fueled personalized shopping feed with elements of gamification to create what we hope is a totally novel shopping experience. So each day, you get a personalized feed of deals up to 70% off from your favorite fashion and beauty brands, so think ALC, Rag and Bone, [inaudible 00:02:02], Diptyque, and so many more. You only have one day to rate and shop those items. And we have ultra limited inventory, so things move really fast. As you go, you yay and nay each item, so we learn what you love and you shop your nays, grab those items you can't resist, and your feed gets smarter each day. So the more you rate, the more you play, the better your deals get. So basically if you like shopping, if you like winning, if you like scoring huge deals on great brands, then we think the Yaysay app is for you.

Oliver Chen:

Gamification is a really exciting angle, and we see this as so important. What does gamification mean to you? How is it integrated in this app? Is it working?

Lindsay Ferstandig:

Yeah. So for us, gamification effectively means how do we bring in chance, serendipity, and just those hits of dopamine into the equation, and we think it's a really important part of the app experience. We think it's working so far, but we've also got a lot more that we're planning to bring into the app. But our goal really is to make it fun, make it feel like a game, don't make it feel like a chore. And if you're having fun exploring things and stumbling upon killer deals on items you love, we think that's an experience that's going to bring people back again and again.

Oliver Chen:

Lindsay, also, this is a completely new way of shopping. What inspired you to start this venture? What experiences from your career to this point helped equip you with the tools to do this?

Lindsay Ferstandig:

So really our North Star and why we started this, we think that shopping needs to be fun again. And if you take a step back, there's just this huge consumer shift towards mobile shopping, but mobile shopping tends to be pretty uninspiring for brands and consumers alike. It's great in so many ways, but it's pretty functional and it's just not fun. And in my eyes, if you think about where do you actually have fun when you're shopping. One of the most fun and delightful shopping experiences is going to an off-price store and just having that thrill of the treasure hunt moment where you walk around, you find things, and you uncover items you love at prices that you just can't believe. And our focus and why we're building Yaysay is we think that it's possible to replicate that thrilling hunt that you get in a real life experience off-price in an online offering.

And so for us, everything we're doing is, how do you make it fun? How do you make it a highly engaging experience? And again, online shopping is great for so many things, but it's not the most fun. And so to develop Yaysay, we looked outside of the e-commerce sector, we threw aside the traditional e-commerce structures, and drew inspiration from social media and dating apps and games, and really looked at, where do consumers use apps on their phone? Where do they go frequently? Where do they just get drawn back in? And we really think it's those verticals that have done such a good job of creating something that's just really fun and engaging. And with Yaysay, our goal is to create a daily habit, something that's just this bite-size, little fun, addictive shopping experience that shoppers will want to come back and play with day in, day out.

And that's really been our North Star as we've thought about what can we build here and how can we create something new, novel and different in terms of my own experience. And as I reflect back on how I've picked up different tools that have given me the confidence and the skills to start something new in this space, as you mentioned, before starting Yaysay, I had the incredibly good fortune to spend nearly a decade at Stitch Fix from the super early days, and I had the opportunity to learn from some incredible visionary leaders there, like Katrina Lake and Mike Smith. And I learned a lot of lessons in my time at Stitch Fix that I've carried forward with me and have really informed how I'm thinking about building Yaysay. And so I've got a deep appreciation for a few things.

One is just candidly, there is a need for new and better ways to shop, especially as you think about discovery and helping people find things that they love, not just helping them to get the thing they know they need fast and cheap, but I also have a really big appreciation for the power of data and personalization and how that can unlock a better shopping experience. And really thinking through, how can you only bring consumers things that are relevant to them versus asking them to sift through the endless scroll of standard e-comm. And so those lessons and learnings from Stitch Fix have really informed a lot of the core tenants as we think about building Yaysay, of why should we do this, and how can we actually create something that's new and better for consumers?

And then the off-price industry and just the white space to bring something that really brings that magic of off-price online, it's always really piqued my interest. It's been kind of an unscratched itch for me for many years, and I'm really excited about the opportunity to take a lot of the learnings and lessons from my past and think through, how can we bring that power of personalization and create a new and novel customer experience to really unlock this opportunity to successfully bring off-price online?

Oliver Chen:

One of the harder parts of off-price can be acquiring inventory. Why should brands work with Yaysay, and what are your thoughts on the types of brands that are most attractive for your offering, as well as alternative inventory models? We're doing a lot of analysis on marketplaces, for example.

Lindsay Ferstandig:

One of the things I love about Yaysay is that we are breathing new life into excess inventory. And the reality of off-price is there is just so much excess inventory out there. The fashion industry overproduces billions of dollars worth of inventory every year. So much of it ends up in landfills or incinerators as brands try to get rid of their excess goods, and it's just this persistent problem of there isn't a great solution, there's not a great solution that brands like that feels brand right to them to deal with the inevitable issue that there is overstock left at the end of the season. And with Yaysay, a big part of our goal as we think about the experience is how do we create a fun elevated experience where that excess inventory is presented in a fresh and exciting way so that we actually become the partner of choice for brands that need to liquidate their excess inventory.

Honestly, we talk to brands, they don't love the options they have to handle their excess inventory issues right now. They tend to be pretty brand diluted for the brands. And one of our big goals is to create an experience that the brands are proud to be a part of and they don't feel like they need to just look the other way and close their eyes to be on our platform. And that's really been a core part of our principle of how can we make this not just something that consumers will love, but something that the brands will be excited and willing to be a part of this business because that is critical to a compelling offering for the consumer? And out of the gates, we're carrying a broad range of brands for fashion. You'll see brands like Bottega Veneta, Chloe, Isabel Moran, Cult Gaia, Acne, but then also more accessible price points like [inaudible 00:09:05], Free People, and Levi's.

In beauty, you'll see things like Diptyque and Peter Thomas Roth and Oribe and more. And we've really gone after those known loved brand names that consumers are just thrilled when they see a great deal on those goods. And in terms of how we're sourcing, we believe that there's excess inventory in so many pockets in the market, and our ultimate goal, is how do we give that inventory a new home? And how do we do it in a way that ultimately delivers great value to the consumer? So we work directly with brands. We also work with third-party or multi-brand retailers where they've got excess inventory at the end of the season too. And we're willing to give inventory that sits all over the place, a new life and a new home in the app. And in terms of the model, you touch on a great point. We are really big believers that there are new ways to think about models.

We launched this business as a fully wholesale business, but have rapidly shifted into a mixed model where we both own an inventory and have a significant catalog via marketplace that we're offering up to our customers. And ultimately, our goal with Yaysay is to have access to the broadest catalog of excess inventory possible so that we can curate and pull forward the most relevant pieces for any given user. And leveraging a marketplace model is absolutely the best way to get that catalog breadth and make sure that we've got the broadest range of options from which we can pull from. And so our aspiration is, let's work across both models. Let's partner with brands to expose everything they've got. And there are certain parts of that inventory that it'll be a win-win for us to move out into a wholesale relationship. But by exposing everything, we can serve our customers the best. We can give the brands the most opportunity to have their product moving and showing up to new consumers and really have a great win-win solution across that.

Oliver Chen:

Lindsay, who are your core customers? Your brands look quite fresh and modern, from ALC to Cult Gaia, and very relevant. What's the pricing look like? And how are you going to drive awareness?

Lindsay Ferstandig:

Our core customer out of the gate is effectively the millennial woman who likes fashion, likes shopping. She's got a lot of things on her plate, so those aren't the only places where she's spending her time, but she also loves getting a deal. And as she looks at what we offer on Yaysay, one of the things that is critically important to her is that we carry the high-quality brand she knows and loves. She values that. She trusts that. But the benefit we give her is we're just making them accessible to her at amazing discounts, and this just feels good when she saves money on an item, and that sense of accomplishment of, I found something. And regardless of the price point, when you save a big portion of it, you feel like a smart shopper, you feel responsible, you feel victorious and having found that deal. And our goal really is to save that customer not just money but also time, and presenting this in a curated experience that also just feels like a little treat.

Our customer tends to be juggling lots of things. And when we talk to her and ask her, "How do you use Yaysay, and how does it fit into your life?" she tends to say like, "Oh, I sit down with a cup of coffee for five minutes and love to just swipe through my daily deals." It's curated, it's controlled, it's contained, but it's a nice little treat for her regardless of where she's squeezing it into her day, and it becomes this little me time moment. And our goal is for it to feel like that, just like a little thing that people love, whether or not they're making a purchase on a given day, but just a little bit of fun for the person who likes shopping, likes browsing, likes looking at things. And when you couple that with great deals, people are not able to resist that urge to grab something and take it into their closet.

And so in terms of building awareness, for the most part to date, a lot of our awareness building has really been through word of mouth. And stepping back, that sense of liking deals, feeling victorious, it's pretty universal. And what we found is that people love the deals they're finding on Yaysay and they kind of can't resist sharing their little shopping secret with friends. And I know myself, you have that experience where you get something on a huge deal and you're like, "I'm not going to tell anyone." And then as soon as someone asks you, "I like that shirt," and you're like, "Oh, I got it for half off." And it's just that thing where people love that sense of accomplishment and tend to share it with friends. We'll hear from our customers that they'll get complimented on something new they're wearing. Someone will be like, "Oh, I love your sneakers."

And they just can't resist telling their friends, "Oh, I got these Golden Goose sneakers for $200 off on Yaysay." And that brand name, the really sharp pricing definitely captures attention, and it's been a great way to fuel awareness and fuel new user growth in the early days. And so we're really thinking for our business of, how can we actually lean into that? How can we build features and elements of the app experience that make it even richer and give people that chance to be sharing with their friends, shopping with their friends? Because as you think about what do people like about shopping, that social component's definitely another piece of it that we think there's a lot of chance to build on. And then beyond that word of mouth and the one-to-one, one-to-few sharing, we've also been focused on working with content creators to share their own experiences on Yaysay. And similar to that personal sharing, we find that creator sharing their shopping hauls, the great brand names, the great prices, it's very shareable content, it's very compelling, and people get excited about it.

And so we really believe that there's significant power in creator led growth as a key pillar off of which we can build a consumer business like this in the current environment.

Oliver Chen:

I teach a class at Columbia Business School called Magic and Logic on Retail. One of the big focus areas is customer lifetime value, and also driving community in a dynamic fashion. How are you thinking about maximization of customer lifetime value? What are some trends you're seeing? And what is next generation community engagement mean to you?

Lindsay Ferstandig:

Yeah, it's something we think a lot about, and it's something that's very fundamental in terms of the app experience we're building and what we're hoping to drive from our customer behavior. And specifically, you look at so much e-comm. It's so challenging because you're fighting for every single visit to the site, you're fighting for every single purchase, and there's so much comparison across every step of the consideration funnel on every single purchase, and it can really feel like you're trying to re-win your customers every single time.

And we've really flipped this on its head and asked ourselves, if this is just a fun thing where you want to be in there for five minutes a day regardless of whether or not you're buying or whether you need to buy, but you just like, it's just fun, it's just engaging, this becomes the thing you do while you sip coffee, that's a really great pathway to build LTV over time because you have engaged users and you present them with a lot of shots on goal and compelling offerings, and you're not needing to try to win them back every single time and compete with the entire world of alternatives out there. And so our view is we want this to be fun, we want this to be delightful, we want this to be your little treat. Doesn't matter if you're buying that day or not, but if you're in there every day, when you are ready to buy, when you do see that thing that it's going to really push you over the edge, you'll do it with us.

And that's how we've really thought about how do you maximize LTV, is you just give people something that's fun to be engaged with on an ongoing basis so you can be directly in their line of sight when they are ready to make a purchase. And I think coupling that with great pricing, trust on the pricing side, trust on the quality side, such that customers when they come to you, they know there's not a better place that you can be getting these items, they're all authentic, they're all real, they're in great quality, and the pricing is as sharp as you're going to find, it means that our hope is we can pull people out of the cycle of saying, "Okay, you helped me discover that, but I'm going to go transact elsewhere." But we actually keep the trust in the platform, keep people firmly in belief that the best price will be with us, and so the purchase will happen with us as well.

Oliver Chen:

Coffee is a great one. Should you sell coffee and food? What do you think will happen to physical? And more broadly, why don't players like TJ Maxx and Ross and great off-pricers have this model too?

Lindsay Ferstandig:

We think there's a big opportunity. And candidly, that's why we're going after it. We do think it's white space. And I would say I have so much respect and admiration for the major players in the off-price space. They've got some of the best, most incredible businesses out there, but I do think they found so much success, so much continuous growth in their brick and mortar spaces. And candidly, bringing this online is hard. It's not easy that they've been able to continue to deliver utterly tremendous results focusing on the offline channels. But I do think there's space for both. There's an opportunity for both. And because we're focusing solely on how do we solve this problem and bring that delight online, my hope is that we can be the first to unlock that magic and take the white space that others have prioritized their energy elsewhere and just continuing to build the brick and mortar models.

Oliver Chen:

We're also excited. And I know you're an artificial intelligence expert. We see AI impacting merchandising, labor, inventory, and a lot of the models from reinforcement learning to unsupervised to supervised models impacting both wonderment and creative, as well as supply chain. How is artificial intelligence manifesting in your business? And in part B of this question, what's the technology that makes you special?

Lindsay Ferstandig:

One of the big reasons we've gone after this business now is the advancements in artificial intelligence and what that makes possible, and what it makes possible efficiently, as we all know, changed overnight, and we think they're critical underpinnings of the business that we're building here. The most central and obvious way that we're leveraging AI in our business is it is a personalized feed. No two feeds are the same and everyone is getting an entirely unique experience powered by our understanding of your preferences, grounded in your interaction with the items each day in the app. And so that is something that is possible. It's possible to do well and efficiently out of the gates because of the advancements in AI. And so that core promise of it's relevant, it's personalized, it's your unique feed is the most central way that we thought about how AI can really power this business and make our aspirations possible.

But we're really looking up and down the full stack of our operations to ask ourselves, how can this business be more efficient, and how can we think differently about how we do everything by leveraging AI and what's possible right now? And this comes through in our creative, both our imagery, how we're thinking about marketing assets, how we think about the copy that we use for marketing and on the site. It informs how we think about customer service and all of those things. And I think we're sitting at the place where we have a big benefit of building this business right now where we can start from scratch and ask ourselves with what's possible today, how would you do this differently? And taking advantage of so many of the solutions that are now readily available that look really different than what I am used to from e-comm days past where you had to throw humans and time and energy and dollars at problems. There's more efficient ways of doing things now, which really makes a business like this possible.

Oliver Chen:

Sounds very exciting, and also driving real personalized engagement and dopamine as well. What's been most fun for you? And what's also the most difficult?

Lindsay Ferstandig:

Yeah, I would say I have the most fun really thinking through the product experience and how we can create something that is just fun and different and novel. And so I love to spend time on what that actual product experience is, getting feedback from both our existing users and prospective users to understand what makes them tick, what's missing from their current solution set and how we can create something that is simple enough to be useful, but also just really fun. And I think that's where you say we're going to do things differently. It gives you a lot of degrees of freedom to just try totally different things. And so I think it's super fun to ideate on what looks nothing like anything out there, but be delightful and meaningfully valuable for our consumers. I love spending time there.

What I think has been most challenging is a business like this has so many moving pieces where there's the interaction of your assortment, the pricing, the customers, the product experience, and all of those things have so much interplay that really figuring out how much does moving one lever change the game versus this one versus the intersection of the two is something that we spend a lot of time really thinking about. But I do think that's also where the magic comes from, is all of these things coming together can create something that's really special and different, and our team is just focused on trying to move all of the balls forward simultaneously to create something that is even better, even more exciting, even more useful for our customers every day.

Oliver Chen:

One question, Lindsay, we ask all CEOs is, what about the health of the consumer? What are you seeing now in terms of consumer shopping? And how would you rate the health of what you're seeing on a scale of one to 10?

Lindsay Ferstandig:

Yeah. I think I'd say maybe a five. It's definitely a tough environment for the consumer these days. And I think to state the obvious, people are feeling really pushed, really pinched from so many different direction, but I do think there's still appetite for discretionary purchases, and consumers are really seeking solutions that let them still make those purchases. And I think as you look at the market, there has been such an increase in people offering goods at very low prices that let consumers still make purchases without it actually putting so much pressure on their wallet, so the success of Shein and Temu. But the honest thing there is there's definitely a trade-off in terms of the quality. And I think as we talk to shoppers, the reality is they value what they can get, they value the price point, but they definitely still have this desire for higher quality goods and brand names, and they aren't willing to trade down across the board into these fast fashion or fast cheaper components.

And so I think as we think about how do we play into the reality of the environment that we're working in, we think there is still this desire we can tap into for, "I'm feeling pressure, but I still want high quality goods, I still like brand names, I still value what that means in terms of my trust in the quality." But how can we just make that more accessible and more affordable for the customer so that even in more trying times, they can make those branded purchases and they have that value? And that's really where we're trying to play. And I think the beauty of off-price is that it tends to do well when times are tough and when times are better. It's kind of the old saying. When times are good, people love a deal. When times are bad, they need a deal. And there's a place to play in both environments, and our goal is to help people get those deals on the items that otherwise might just feel inaccessible in an environment like this.

Oliver Chen:

Yeah, we agree with you where we are seeing what we call customized moderation and/or value hacking where customers are both looking to scrimp and save, and splurge too. So it's really manifesting in this kind of behavior. Last question, Lindsay, what's your vision for the next three to five years? And also, any closing remarks you may have?

Lindsay Ferstandig:

Our vision is that Yaysay has the potential to be really big. Going back to this notion that finding a great deal, finding things you love and that sense of victory that comes with saving a ton of money, it's pretty universal, it's across categories. And we think that over the coming few years, there's a big, big opportunity for us to expand to broader audiences across broader verticals and really think about what has a TJ Maxx done so tremendously offline. There's space for that to be done online. And the mechanics that bring that excitement and that treasure hunt can play across broad audiences, broad verticals and will let us unlock a really big business. And so that is where we're hoping to take this business over the coming years. And in the very near term, our focus is really, how do we just continue to make the experience even more fun, even more delightful, even more?

And underneath the water level of that, just bring in broader assortment, broader catalog, more categories so that those opportunities to have that delightful win where you find something you love and you're so proud of the savings, let's just give customers more space and more ground on which they can do that. And I think it's totally possible. And right now, we're just scratching the surface of that and excited to keep building this and bringing Yaysay to more users and across more of the areas that they like to shop because we think that the opportunity is there and we're excited to go get after it.

Oliver Chen:

Lindsay, it's quite a unique product, bringing treasure hunt online and digital first, and also these appealing great brands in a brand appropriate way coming all together in this idea. Been great to learn a lot from you about this. And the app's tons of fun. I downloaded. I just wish you had men's.

Lindsay Ferstandig:

It'll come. Part of the plan.

Oliver Chen:

Thank you for your time today.

Lindsay Ferstandig:

Thank you so much.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of TD Cowen Insights.

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