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Under The Hood: Matt from Spacegoods

Serial entrepreneur Matt Kelly of Spacegoods shares how he got here + what's working

Hey Matt, first question: Where did you learn all that you know about D2C before starting Spacegoods

I've been doing eCommerce since I was 16. I must have had 15 brands before Spacegoods. And when I say brands, I mean it loosely: A logo + a product at minimum. 

I got my first taste of real business learning in Uni, when a friend and I started a clothing business from our bedrooms. I discovered Facebook Ads around then (in 2016), scaled up the business a bit, and ultimately dropped out of Uni to pursue it. That business ended quickly with a disagreement with my friend and a lawsuit. 

I went back to the drawing board and got into drop-shipping. I just wanted to make money online. I’ve covered almost all the learnings on that in my Youtube channel in 50 episodes - so check that out. Eventually, I spent my time on 2 big businesses which I started in 2018: Midnight City, selling Jewelry & Neon Beach, selling custom neon signs. 
Midnight City (jewelry business) was my first 7-figure brand. I grew that well, but I was never super passionate about it. I built that up to a £3m business in 2 years.

And then during COVID is when I started Neon Beach. That grew way too quickly. The brand still exists, but I got screwed over by a supplier who couldn’t fulfill demand. It was an absolute nightmare, and I eventually got bought out in a very distressed state by a fund.

To put it lightly, it was a horrendously shit situation. I was doing £1m a month really profitably alongside the jewelry business. I closed out 2020 with over £10m in revenue and I was only 24 at the time, building these brands from a laptop. But my supply issues forced me to sell and that series of events destroyed my personal life. Looking back, I learnt so many lessons and also got to experience the darker side of eCommerce. 

A few months later is when I picked myself back and started a podcast to share my experiences. I knew I had a good vantage point to speak from, I had made lots of money, lost a ton of money - and built up so much real knowledge in eCommerce, so I found a captive audience quite quickly on Youtube. 

Eventually - I decided to take another stab at the D2C thing. Building a real brand that I have real conviction on: ‘Spacegoods’. I officially launched it 4 months ago, in April 2022.  

With all your experience, did you know which boxes you needed to tick for a Spacegoods to be setup for success? 

I wanted the product to be high margin: +85% margin. My jewelry business always had that. 

Next, I wanted it to be consumable. I had never done this before, but that usually comes with repeat purchases - which was one of the missing pieces in the neon business. 

Beyond that, I wanted to be in a market that I was convinced was going to explode. 

And that’s why I picked mushrooms. I want to build a consumer psychedelics brand for a market that isn't yet legal. I saw an opportunity in the mushroom category where the US was already making headway with brands like Mud/Wtr, Everyday Dose etc. But no brand in the UK stood out - so I decided to dive in myself. 

That narrative is of course risky in terms of being allowed to exist on the internet, especially as I branded my products to be a legal psychedelic microdose imitation. But I’ve paired that back today in terms of the language, highlighting the benefits that come with the product: Focus, energy & calm. 

Let’s get into the details: How’s the growth been since you launched Spacegoods? 

It’s been a roller coaster. Ultimately when you start something new, you never know how it will work until the market tells you.  

We've done over £300k in revenue in the first 3 months. We've just hit 1,000 subscribers last week. So it’s been a very strong start. 

Any setbacks along those first 3 months? 

Acquisition was 99% focused on Instagram. And my account got disabled the first month, which is not ideal. I've dealt with that in the past and it's never cheap because you basically have to know certain people at Facebook to get stuff like that resolved.

I removed all the “psychedelic” language - and got reactivated for a bit, only to get shut down again a few weeks later. Turns out I hadn’t removed that language from ALL pages. So now the website is much more “vanilla” in terms of language, leveraging more of a “coffee replacement” angle. 

Let’s talk conversion rate optimization: Any tricks up your sleeve? 

I built the entire website myself and this week is the first time I started working with a conversion optimization agency, which I never did in the past. 
To be honest, I don't think conversion optimization is relevant at all. You have to have a product that people want and then market it well. CRO only becomes relevant at the mid-high six figure range per month; when you start to scale and have a bunch of data (which I'm doing now). 

Let’s chat about the operations side of the business: Any learnings there over the years? 

My operations are very simple and they work very well. 

Firstly, everything's made in the UK, which is intentional because I've dealt with a lot of suppliers typically overseas (in China). However, for the first time, because I’m in the consumables space, I didn't like the idea of getting something wrong with an overseas factory and potentially poisoning thousands of people. 

So for that, I was very selective in finding a product development and manufacturing partner in the UK. 

In terms of fulfillment, I do exactly the same as I did before with my jewelry business. I use a 3rd Party warehouse in Northampton. I did at one point switch to a slightly cheaper 3PL and immediately regretted it and went back. It’s totally worth the money to work with a reliable 3PL. 

Have you considered selling internationally? 

I’m completely focused on the UK, however I do offer the ability to ship worldwide.  I’ve recently tested ads in the US and the EU, and the EU looks pretty good from a ROAS standpoint - outperforming the UK. 

I am however finding a lot of issues with people getting import fees that are way higher than they should be and having to figure out how to prepay that + stuff gets stuck at customs when I ship to America because it gets stopped by the FDA or whatever.

If I do feel enough pull in those markets, I’ll definitely work with a local 3PL. But until then, I’m letting the organic international orders guide my thinking on which markets to enter.

Let’s talk about the tech stack: Any tools you like? 

Klaviyo for email, Gorgias for CS. Videowise for on-site videos. And I’m using Skio on subscription.

I don’t necessarily endorse them, it’s just that the twitter D2C world convinced me to switch from Recharge to them & honestly there’s not a huge difference. Some stuff is better in Recharge, other stuff is better with Skio - they’re not all that fundamentally different

Spacegoods stack
Spacegoods stack

Last question then: What's been the one key to success for you on Spacegoods so far?

I mentioned this in a recent YouTube video. But people only ever talk about ads in D2C.
And while that does have some importance, no one ever talks about product, custom service, cash flow, all this stuff. 

I’m especially proud of my product with Spacegoods, and I do think that’s one of the keys to my success so far on it: The packaging feels really good in the hand, it looks good (it took me over 2 months to get it just right) and the product tastes great. That’s ultimately how I’ve received so much positive reviews. 

Matt, thank you so much for sharing your wisdom with the community. Wishing you the very best in the next few months, can’t wait to keep up with the growth.