Claus Lauter [00:00:00]:
Welcome to episode 296 of the ecommerce Coffee Break podcast. Today we share a powerful selling strategy for Shopify stores that will help you increase your conversion rates. Joining me on the show today is Diana Birsan, co founder of Hypehound IO. So let's get started.
Voice over [00:00:18]:
This is the e commerce Coffee Break, a top rated Shopify growth podcast dedicated to Shopify merchants and business owners looking to grow their online stores. Learn how to survive in the fast changing e commerce world with your host, Klaus Lauter, and get marketing advice you can't find on Google. Welcome. Welcome to the show.
Claus Lauter [00:00:44]:
Hello and welcome to another episode of the ecommerce Coffee Break podcast. Today we want to talk about something that we have never talked about in 300 episodes. We want to talk about deposits down pays, partial payments, and how you can put that into your Shopify store. With me on the show to dive deeper into this topic, I have Diana Birsan. She is a co founder of hypehound Shopify partner building company that's building downpay that enables Shopify merchants to offer deposits and deferred payments on their products. Before becoming a founder, Diana worked in product management at Shopify itself, in the headquarters, in the orders and merchandising team, focusing on building new primitives for subscriptions, as well as pitching and designing the primitives for enabling partial payments on the Shopify platform. So we have somebody who really was at the core of Shopify and was working on challenging solutions there. So let's welcome her to the show.
Claus Lauter [00:01:33]:
Hi, Diana. How are you today?
Diana Birsan [00:01:35]:
Hey, thank you so much for having me. It's a great sunny day here in Ottawa, so it makes me happy.
Claus Lauter [00:01:42]:
Then what's the story behind finding a solution to simplify pre orders partial payments for Shopify merchants? Tell me a little bit about it.
Diana Birsan [00:01:50]:
Yeah, absolutely. Happy to share. So, yeah, you mentioned I started my whole ecom journey working at Shopify, and it was the pandemic when we first started focusing on a lot of this selling strategy space. I was on the subscriptions team at the time. So the whole big rework, building primitives that support subscriptions, my team and I worked on that and huge demand for it, and it boomed during the pandemic. But there was a piece that I think was still a need and was exacerbated during the pandemic, which was this concept of how do I collect partial payment. I think it was shocking to see, but it was exacerbated by the fact that there were supply chain issues. Merchants couldn't get products in time.
Diana Birsan [00:02:37]:
It wasn't even about build times at the time. It was about the fact that the shipments wouldn't come in for weeks upon weeks. And we kept hearing that there were a ton of cancellations, like order cancellations. They couldn't really help people. And at the time, there was no way to say, listen, I'll buy it from you, but can you just charge me later? And that was kind of the pitch that I made back in the day to try to solve this problem, right? Keep everything in one order, not have duplicate orders, which was what was happening at the time. And really push forward into this concept of, I want to leave you, like, I believe in your product, I want to leave you some money now, but I don't think it's fair to collect everything upfront when I'm waiting months to get the product right. So that was kind of like the big story. And we built out the first prototype at the Shopify hack days.
Diana Birsan [00:03:32]:
So we did like quarterly hack days. Um, I rallied a team around me of like, I think it was 25 people or so to try to pump out a prototype in three days. And so we did this full run through and ended up being one of the top ten projects, uh, that was picked during that hack days. And I was able to convince leadership to get me a team and, you know, let's build this primitive, right, and solve the problem. Um, and so the rest was history. We, you know, worked on that for, for several years. And, uh, it just released, uh, last year in, no, sorry, two years ago, um, in the summer. So I was no longer at shopify at that time.
Diana Birsan [00:04:12]:
And, uh, I saw the release of my old tech engineer, um, sent it to me and I'm like, this is out now. Like, I'm not working at Shopify. Maybe I should just tackle solving this because I know it so well and I know it's still a problem. So, yeah, it was kind of a roller coaster going through it, but that's kind of like a bit of the, the steps to getting there.
Claus Lauter [00:04:33]:
Now, the pandemic is long behind us, but obviously it's a very powerful selling strategy, even nowadays. Tell me about the challenges or the learning curve that you had when you were building the solution.
Diana Birsan [00:04:45]:
It's interesting because inside Shopify, the world is very different. You're focused on solving problems a specific way, where it's solving them in the UI for merchants or building APIs and making it possible for partners to use them. And so now I switched over to being a partner and using the tools that I helped build and getting frustrated by the limitations I set upon myself after the fact. And so that was a huge learning curve when we first started getting into it, obviously trying to refresh my memory on everything that is payments that we built out. And then on top of that, it was just the process of getting approved, process of starting from zero and thinking through the best way to build the app and the best way to build it quality. And I really didn't want to cut corners, build hacks, didn't want it to just really evolve it organically and build it to make it feel like Shopify. But it was challenging getting approved, making sure that everything we dotted the I's, crossed the t's. It was a very different experience than just having everyone to talk to inside Shopify, and easy ways to get help and get unblocked.
Diana Birsan [00:06:03]:
But the journey was absolutely worth it. It's been, I think, a year and a half now since we started working on it and we only launched last July. So yeah, it's quite a long path.
Claus Lauter [00:06:16]:
I think the area that your solution works very well in is for customized products. I think you told me before that you found out that deposits and partial payments are actually a huge part of the business outside there in the world and there was not really a solution for it. Tell me who's using it and what did you learn about the usage itself?
Diana Birsan [00:06:37]:
I'm sure you've purchased furniture. You know, you go into a store and you not only have financing options, but you have the option of leaving a deposit and waiting for the product, especially when you pick your fabric type and color and all these things. And it's no different shopping online. You know, Shopify has a ton of homeware stores, lots of furniture stores, and a lot of them want to offer this option of customization. Like, of course I want it to be in a fabric type that I like. I don't want to just pick something and, you know, commit to it. You know, personalization is the name of the game when it comes to furniture, when it comes to like bespoke jewelry, you know, think engagement rings, think, you know, really customized things. We first thought that it was going to be all about preorders engaging demand, and of course we do support that and we do work with customers that are launching products all the time.
Diana Birsan [00:07:30]:
But the big impact was these merchants coming to us and saying, I have an eight to twelve week build time and I charge three $4,000 on this couch or these products. I have no way to partially collect without ruining my accounting because the only way was to kind of duplicate orders, create draft orders, 50% discounts. All these crazy hacks were available, and so you had that. And these merchants were super frustrated that there was no way to do a simple selling strategy that's existed for decades in brick and mortar. So it was a huge, you know, very like, logical thing that once we enabled it, it was like, well, it was a no brainer that they got more sales, they got people who didn't have to overextend themselves to try to pay for these things or take on financing and pay a really high interest rate on those products. So that was a shock to us. And that's kind of like the niche that we really want to focus on and just make sure that we're available for those kinds of purchases. Especially as purse strings get tighter, things are more expensive, and people struggle to pay things off.
Diana Birsan [00:08:46]:
So yeah, it's been really cool seeing a bunch of different furniture across the world come on and use deposits for it.
Claus Lauter [00:08:55]:
That's absolutely amazing. And I think also it commits the buyer to sign up with the supplier. And it's like, okay, just pay a down payment here and the rest comes when it gets delivered. Now, can you give me some examples? You don't need to say the brand name or customer's name of industries besides furnitures who are using the principle and what kind of results they see.
Diana Birsan [00:09:16]:
Another no brainer I find is appointments. So services that require appointments, a lot of customers pick an event date they want to book, aesthetic treatments, all that kind of stuff, and massage therapy, you name it. It's very uncommon in the services industry to charge somebody before services are rendered. So that's a huge area where we're seeing a lot of traction and seeing a lot of partnership opportunities with appointment booking apps that really need this functionality. And it's complex enough to make it very difficult to build it into appointment booking apps as well. So that one is seeing a lot of great traction, and then pre sales are crazy as well. You are a new merchant or an entrepreneur that is testing the waters and wanting to see if people are willing to commit. And we did a big launch with a company in Denmark called Uno earlier this year, I believe it was.
Diana Birsan [00:10:18]:
They sold 50,000 units in 24 hours, and all through partial, like using deposits. But the interesting thing about a lot of the EU is there is a rule where you can't sell a pre order and collect payment, even partial payment, if you don't have a date when you're going to ship the product. And because they didn't, they were able to just do a $0 deposit and then collect the balance automatically after the fact. So really helped them out. Um, kind of, you know, not worry about setting accurate dates and then dealing with customer frustrations on, you know, when is it going to come in? Um, they use that strategy and I think sold, yeah, I think 50,000 units. And then they did another batch, like another drop, um, as well as they, you know, helped kind of understand the, the demand. Um, and then in the end, I think they fully sold out with that pre order campaign. So it's a pretty impactful journey and also just kind of unblocked legal regulations that are coming up now.
Claus Lauter [00:11:22]:
Hey, Klaus, here, just a quick one. If you like the content of this episode, subscribe to the weekly newsletter at newsletter Dot e commercecoffeebreak.com dot I score and create 50 news sources so you don't have to saving your hours of research. Grow your revenue with ecommerce news, marketing strategies, tools, podcast interviews and more, all in a quick three minute read. So head over to newsletter Dot e commercecoffeebreak.com to subscribe as said, 100% free. Also you will find the link in the show notes. And now back to the show. Yeah, just listening to you, there are so many ideas popping up. Obviously pre order that helps the seller or the supplier obviously was financing the production.
Claus Lauter [00:11:57]:
So if you take a deposit in so you're not starting from zero, and that might help small and medium enterprises actually go into prototyping or thinking about launching a new product. So everyone wins at the end of the day and obviously having a deposit when it comes to events or other kind of bookings, I just made a deposit for an accommodation that I'm going to move to in a few weeks. So same principle. So I think it's all over the place. Now, from an implementation standpoint, from the Shopify merchant, what kind of dashboard or what kind of process do they need to follow to make a product available for a deposit for a down payment?
Diana Birsan [00:12:34]:
It's pretty straightforward. We create what's called a purchase option, right, the option to pick a deposit on the product. So all that needs to happen is the merchant needs to create this purchase option within the app and then just assign the products that they want to see the deposit option on. So that is, they can do it manually. We've just enabled tag based purchase options where you can set a product tag and then it'll just assign and unassign as the products move in and out of that tag or multiple tags. So that's kind of the easy, you know, way to set up the purchase option. And then there are, um, two blocks that we have on the theme, the first one being on the product page showing the option of deposit or pay full payment, and then on the cart as well, we have a nice block that kind of breaks down how much you're going to pay today for your whole cart and how much you're going to pay later. So those two, along with just creating that purchase option, is like the, you know, like the very quick way to get started.
Diana Birsan [00:13:36]:
But recently, well, we're exploring the new customer extension, extensibility on customer accounts. So we have plans for that. But we do have a customer portal right now available where you can change your payment method. So let's say it's been months, your card is expired, you have a new one, you're able to just go in, change it so that you don't have your order held up later on when it's ready to go. So that's also available. It's in extensibility for Shopify plus. And so we have that extension, but it's also available for non Shopify plus stores just with a standard order status script. And so all of that and custom workflows and stuff, all available as well through our API, which we just publicly launched.
Diana Birsan [00:14:21]:
So pretty straightforward. But if you're looking for complex workflows, there are lots of things we're working on as well.
Claus Lauter [00:14:28]:
You touched on a very interesting topic. The credit card has expired. Are there any other areas or other tools that help the buyer and the seller was managing the payment flow.
Diana Birsan [00:14:39]:
Yeah, so there's a lot of notification systems now, like, they're built into Shopify for payment reminders as well. So they're, you know, a huge thing that people need is like an understanding of, you know, if our app enables you to collect payment anytime you want as a merchant, which the card stays on file and you can do, as a customer, I kind of want to know what the, you know, when you're going to do it or be given the choice of just doing it myself. Right. The payment reminder kind of system works with our app, and it's a way to just send an invoice at the right time just to make sure people are aware that their card's about to get dinged. So those are kind of the ways you manage it. And we've seen a lot of people kind of looking for that. The biggest thing that actually surprised me about everything was that merchants, like, a lot of the merchants that we work with didn't want automatic payment collection. They felt uncomfortable with the fact that the card was on file and they could charge it at any time.
Diana Birsan [00:15:43]:
They would have rather give the customer the benefit of the doubt and say, hey, just a heads up, we won't be sending your order unless you pay the bill. And then as a last resort, they are able to use that as a way to collect payment. But that was a surprise to me. I expected it to just be like, ah, you know, everything's automatic, just let it do its thing. And I'm like, that shows how mindful the merchants are on Shopify. So that was really cool.
Claus Lauter [00:16:07]:
Yeah, I think being considerate about your client and rather over communicate and just taking the money and getting chargeback requests because the customer cannot remember what they don't know, then you rather over communicate on that side. Is there anything kind of a homework that a merchant needs to do before they install the app? What's the onboarding process there?
Diana Birsan [00:16:26]:
Not really, no. We have like a little onboarding guide inside the app and everything. We also just offer demos and onboarding if people want to speak to us. The best part of my day is doing that and just like sitting down and hearing, you know, what people want to want to do. And it's pretty unique every time. So it kind of like highlight of my day, why I became a founder. So it's pretty straightforward though, even if you want to get started on your own. Like I said earlier, there are some limitations to using, you know, partial payments on Shopify.
Diana Birsan [00:16:59]:
A couple of the big ones are you need to be on shopify payments or PayPal Express. So that's kind of like the current limitation for payment gateways. And then the other thing is deposits work on the online store, so they don't work on PoS. You can collect payment on Pos with the orders that you place on the online store. That's totally fine. But unfortunately, yeah, there's no way for that to work. And then they also don't work for draft orders. So people come in and say, well, I have a big custom order, I just want to charge 50% on that one and then charge 50% later.
Diana Birsan [00:17:34]:
And that unfortunately just isn't possible. Draft orders don't understand what a deposit is. So a lot of the customers who come to us about that issue, I kind of run them through a workflow where there's a customer we have that sells custom wedding cakes, and you tell them what you want and what it's going to look like and everything. And so the way he needed deposits so bad because you order this thing so far in advance and it's very difficult to manage paying all your wedding expenses and then this cake as well. So it's a really good way for him to get business early. And so he creates a custom product on his Shopify online store, hides it from SEO, does all that magic and makes the page really personalized to the couple that's getting married. And then they can leave a deposit with our app and everything run through the cart and check out. And then he just has everything on for file, the order is there and then he can just delete the product because he doesn't need it anymore.
Diana Birsan [00:18:37]:
So it was like such a cool workflow that we designed together to use it. And I'm seeing that more often now where I tell people it's a limitation. They don't want duplicate orders, they don't want to deal with discount codes and all this stuff. And then I take them through it and they're like, this is worth it because people really need the ability to just partially pay. So it works out really well even despite the limitations.
Claus Lauter [00:19:01]:
So yeah, I think it's a very elegant solution and I think everyone wins there. It's very convenient for the customer and they understand what the down payment or deposit is and happy to do that. And now you bring it online and if you do it manually, obviously, as I said, there's many steps involved to get it right. So rather have a custom product page for a moment so that they can book their wedding cake and pay for it.
Diana Birsan [00:19:24]:
Exactly.
Claus Lauter [00:19:25]:
Who is your perfect customer? We spoke about a couple of different industries and niche. Who's your perfect customer?
Diana Birsan [00:19:32]:
Yeah, I think our perfect customer is. So, you know, I really strongly believe in niching down and really just building something that solves a need and then growing out. So we're highly focused on this custom made to order space, specifically furniture, you know, lighting, homewares, all these things. A lot of them have delays, a lot of them have build times. And the same with jewelry where, you know, I think, I can't even remember how many merchants we have with custom wedding rings, engagement rings, all this kind of stuff. Theres a great customer. We have that all their pieces are made in Greece, handmade in Greece. Bill times are into the several weeks, months they switched to deposits.
Diana Birsan [00:20:17]:
They were trying buy now, pay later solutions. And so you have, I dont know, a 5% interest fee now as a merchant with buy now, pay later because yeah, it's based on like, it's a loan, right. And you know, it's it's, uh, that's the only way to kind of circumvent it. But the thing we found with them was, well, twofold. Their customers, they didn't like being taken to another, you know, login page and another account they had to manage and, you know, figure out, like, when payments are due and all that kind of stuff. So that was a confusing experience. So they were losing people there, and then they didn't like the fact that payments start right away. So there's nothing the customer can do to defer those payments and start them later unless they pay an interest rate of, like, 15%.
Diana Birsan [00:21:01]:
Um, and so once they switched over, like, that was a really impactful kind of journey, change for their buyers, where everybody knows what a deposit is, you know, and it's very easy to say, okay, I can see 50% will be charged today, and then I will pay the rest when the product ships. So, um, yeah, it's hearing these stories, I'm like, okay, this is our target, you know, niche, this is. These are the people that really understand the impact of the, you know, of taking a deposit. And I'm very excited to focus on sharing more of those stories and hoping to help other stores.
Claus Lauter [00:21:37]:
No, I hope that will make a lot of listeners and merchants out there very happy that their solution, like yours, is available. How does your pricing structure work?
Diana Birsan [00:21:45]:
So we only have one current pricing that's available on the App Store. It's $9.99 subscription fee per month. And then we do a transaction fee based on just what we helped you sell. So if you sold those particular orders with deposits, we collect a 0.3% fee on those. Not 3%, 0.3. And as you sell more, though, we discount that rate as well. So we go down to 0.25 after five k and so on and so on. And then, of course, there's merchants where that still doesn't make sense because they sell a $100,000 car or something.
Diana Birsan [00:22:24]:
Those merchants, we also offer fixed price plans as well. So if they want to just say, hey, this doesn't logically make sense for the way I do business, or I'm just selling so much that I need to have a stable price that I pay every month. Like, we. We do that all the time for. Especially for furniture stores, where, you know, the fees are. They do accumulate, and if you have pretty stable sales and you know what to expect, they would prefer just having that line item on the, you know, what. What they can expect. So that's kind of like a little overview of our pricing.
Claus Lauter [00:22:58]:
Okay, no, that sounds more than fair. Before we come to the end of our coffee break today, is there anything that you want to share with all listeners that we haven't covered yet?
Diana Birsan [00:23:05]:
A big thing about deposits that I think there's this whole concept of helping personalization and gauging demand for pre orders and stuff. But the thing that gets me going, I guess, is that I'm a huge advocate for making less things that might or might not sell. And so I love the concept of the fact that you can increase sustainability on fashion and even the furniture, even all these things that consume materials that potentially won't ever sell. I love the concept of built on fulfillment or built on purchase, all that stuff. And so that's kind of my big thing that I'd like to change in the world with something like this. I really want to impact businesses and kind of just not introduce more waste into the world and into environments. So I think giving customers this option, like you're. You're able to do that.
Diana Birsan [00:23:58]:
You're able to just know what's going to sell and what's not going to sell before you even produce it. So that's just really, it's an exciting part of what we do.
Claus Lauter [00:24:07]:
Yeah, I think you opened the door for a lot of merchants where Shopify was not an option. And now one of a sudden it is. Where can people find out more about your solution or your team?
Diana Birsan [00:24:16]:
Yeah, so we have a website. It's getdownpay.com, but of course we're on the App Store. It's just one word, downpay. So they can absolutely check us out there. We have chat everywhere on our website, so please feel free because it's probably going to be me saying hi and helping. So kind of like all over the place. You know, you can find me in Shopify community as well. I kind of like poking and help people see if there's a solution that we can help them with.
Diana Birsan [00:24:41]:
So a little bit of everywhere, I guess.
Claus Lauter [00:24:43]:
Excellent. I will put the links in the show notes, then you just want to click away. And I hope you will be very busy with a lot of chats from people reaching out to you.
Diana Birsan [00:24:50]:
Excellent. It'll make my day. I love that part.
Claus Lauter [00:24:53]:
Okay, so to our listeners, reach out to Diana. Cool. Thanks so much for your time today. I think that was a great overview that Shopify can offer much more than just the structured things and can be an option for merchants that are selling custom made products and need to deposit to get started. Thanks so much for your time. Today.
Diana Birsan [00:25:10]:
Yeah, thanks for having me.
Claus Lauter [00:25:12]:
Hey, Klaus here. Thanks for joining me on another episode of the ecommerce Coffee Break podcast. Before you go, I'd like to ask two things from you. First, please help me with the algorithm so I can bring more impactful guests on the show. It will make it also easier for others to discover this the podcast. Simply like comment and subscribe in the app you're using to listen to the podcast. And even better, if you could leave a rating. Thanks again, and I catch you in the next episode.
Claus Lauter [00:25:34]:
Have a good one.