LoveSac: The Billion-Dollar Beanbag Controversy | Shawn Nelson DSH #825

Summary

Digital Social Hour: LoveSac — The Billion-Dollar Beanbag Controversy | Shawn Nelson DSH #825

Release Date: October 24, 2024

In episode #825 of "Digital Social Hour," host Sean Kelly engages in an in-depth conversation with Shawn Nelson, CEO of LoveSac, delving into the company's remarkable journey from humble beginnings to a billion-dollar enterprise. This episode uncovers the triumphs, challenges, and visionary strategies that have positioned LoveSac as a leader in the home furnishings industry.

---

1. The Origin and Growth of LoveSac

Shawn Nelson reflects on the inception of LoveSac, highlighting the enduring passion that has fueled the company's growth over 26 years. At [00:30], Nelson shares,

"A lot of times investors will meet me and they'll be like, how are you so passionate about LoveSac? 26 now, years in. And what's wild is I think I'm like more excited today than I've ever been."

From a modest start in a garage, LoveSac has expanded to over 2,000 employees, demonstrating significant scalability while maintaining its core values and dedication to innovation.

2. Company Culture and the Annual Manager Fest

Nelson emphasizes the importance of company culture, which began with a simple desire to celebrate success. Initially, annual parties were casual gatherings, but they have evolved into large-scale events that foster community and camaraderie among employees. At [02:14], he mentions:

"We started... always wanted to party. And so the minute we had, we were making any money, it's like... we threw a party."

The annual Manager Fest now attracts around 700 attendees, including showroom managers and employees from headquarters, underscoring the company's commitment to a vibrant and inclusive workplace.

3. Product Evolution: Stealth Tech and Sactionals

A significant pivot in LoveSac's product line has been the introduction of "Stealth Tech," seamlessly integrating technology into their modular furniture. Nelson proudly states at [03:05]:

"Stealth tech is what we call it, and really proud of that product."

From the iconic beanbags to the innovative sactionals, LoveSac has continuously expanded its offerings to meet evolving consumer needs, ensuring longevity and adaptability in their designs.

4. Navigating Challenges: Public Company and COVID-19

As a publicly traded company on NASDAQ, LoveSac faces skepticism and short-selling challenges. Nelson candidly addresses these hurdles, saying at [04:06]:

"There’s always a huge short position. I think there's a lot of, you know, like, investors are like, what, like these clowns? But we're not joking around."

The COVID-19 pandemic posed additional challenges with fluctuations in consumer behavior. Despite a slowdown post-pandemic, LoveSac maintained growth, exemplifying resilience and strategic foresight in navigating market shifts.

5. Long-Term Vision and Strategy

Nelson articulates a steadfast commitment to long-term success, aiming to build LoveSac into a brand that endures for 50 years. At [04:38], he shares:

"I think we'll grow it past a billion. No problem the next few years. But small enough still. We can have fun. We can, you know, still build a strong culture."

This long-game approach allows the company to weather economic downturns and avoid the pitfalls of chasing immediate profits, fostering sustainable growth and innovation.

6. Personal Development and Podcast Endeavors

Beyond LoveSac, Nelson discusses his podcast, "Let Me Save You 25 Years," which distills invaluable lessons from his entrepreneurial journey. At [09:43], he explains:

"My podcast, Let Me Save You 25 Years, is all about these... 25 lessons... unpacked one each with some very successful people."

The podcast serves as a platform for sharing insights and fostering personal development, aligning with Nelson’s dedication to growth and learning.

7. AI Integration and Future Differentiators

Addressing the role of artificial intelligence, Nelson shares LoveSac's cautious yet forward-thinking stance. At [13:21], he remarks:

"We're dabbling. We're trying to figure out where it fits."

Despite exploring AI applications, LoveSac emphasizes maintaining a human-centric approach, believing that personalized relationships will remain a key differentiator in a increasingly virtual marketplace.

8. Book Release and Lessons Learned

Nelson's book, "Let Me Save You 25 Years," has garnered acclaim as a bestseller on Amazon. At [15:54], he discusses its purpose:

"It's like, man, I wish that I had something. I tried to be really honest... I talk about LoveSac's been through every up and down."

The book encapsulates Nelson's experiences, offering candid reflections on successes and setbacks, and serves as a guide for aspiring entrepreneurs seeking to navigate the complexities of building a business.

9. Community Engagement and Future Opportunities

The conversation also touches on community-building efforts and future opportunities, including collaborations and networking events. Nelson invites Sean Kelly to partake in ventures like the Principal Business Summit, underscoring the importance of community and collaboration in sustaining business momentum.

10. Conclusion and Connectivity

As the episode concludes, Nelson provides avenues for listeners to connect and engage with LoveSac, further reinforcing the company's commitment to transparency and community involvement.

"Connect with me. I'm Shawn Nelson on every social media channel. Let Me Save You 25 Years of the book, the podcast of course LoveSac.com. Check it out." ([18:00])

---

Key Takeaways:

• Passion and Perseverance: Shawn Nelson's unwavering enthusiasm and commitment have been pivotal in LoveSac's sustained growth and innovation.

• Adaptability: Transitioning from beanbags to technologically integrated sactionals showcases LoveSac's ability to evolve with market demands.

• Long-Term Vision: Emphasizing a 50-year brand legacy allows LoveSac to make strategic decisions that prioritize sustainable growth over short-term gains.

• Human-Centric Approach: Balancing technological advancements with personal relationships ensures LoveSac remains a differentiated and customer-focused brand.

• Knowledge Sharing: Through his podcast and book, Nelson contributes valuable insights, fostering a community of learning and development among entrepreneurs.

This episode offers a comprehensive look into the strategic mindset and operational excellence that drive LoveSac's success, providing valuable lessons for business leaders and enthusiasts alike.

Transcript

[A]

Hey, music fans, there are some great concerts headed this way. Don't miss out on all the shows in your favorite venues, like Deftones at Madison Square Garden, Eagles at the Sphere, and Foster, the people at the Ryman Auditorium. Tickets are going fast, so don't wait. Head to livenation.com to get your tickets. Now that's livenation.com.

[B]

A lot of times investors will meet me and they'll be like, how are you so passionate about love sack? 26 now, years in. And what's wild is I think I'm like more excited today than I've ever been. Thousand times where, you know, thought of quitting, thought of getting out, thought of exiting, but now that we're big enough to matter, I think we can grow this thing to be a brand that's here for 50 years.

[C]

All right, guys, Sean Nelson, part two. And we're on his love sacks. This is where it all started, right? This is it.

[B]

This is it. The sack. It was dumb idea.

[C]

And here we are 25 years ago, man, in your garage. And now your event has what, 700 people?

[B]

Yeah, that's. I mean, we're over 2,000 employees. Just down the street, we have our big annual manager fest. So we'll have 400 from our headquarters, another 300 or so showroom managers, and flow rider. Tomorrow night, big party, a few days of training, you know, all that stuff and then big party. Hopefully you guys can make it out.

[C]

Yeah, it's gonna be fun. What made you want to put this on for your employees?

[B]

You know, we, I mean, look, we started, I mean, we were kids, we were in our 20s, so we always wanted to party. And so the minute we had, we were making any money, it's like, you know, the. We actually had in our, I think our first year, I think every year we've been in business, man, we threw a party. It was originally a New Year's party. So this is like way back, early 2000s, just a bunch of 20 year olds building the retail chain and, and you know, I mean, you got corporate money, like, let's throw a party. And, and now today, I mean, we're doing it right. We, you know, we're. We're finally able to afford real head. I want to turn it into a music festival. Yeah, that like, you can't get in unless you're in, you know, like, you'll come. You're a friend. We got all these friends of Love Sack. We got a lot of celebrity friends that rock our product. We invite them all. A few of them will show Up. I've got a few dozen friends, you know, that are unrelated to the company showing up this year. A few hundred ultimately. And it will just keep growing it like that, organically.

[C]

Nice.

[B]

You can't come unless you're on the list.

[C]

I mean, that just speaks to the quality of the product. If these people are flying out to go to something like this, you know, it's wild.

[B]

It's wild.

[C]

I mean, I love it, man. I got the sectional in the movie theater.

[B]

Yeah.

[C]

Oh, my gosh. Good, dude.

[B]

So working out. You're a tall dude.

[C]

So I'm a tall dude.

[B]

You arranged it deep, I presume.

[C]

Yeah, we did the deep setup. We got the speakers built in.

[B]

Yeah.

[C]

Projector.

[B]

That's game changing, right, dude?

[C]

Game changing.

[B]

Like, have you ever heard something in a. In a soundtrack yet that you didn't know was there before? You know what I mean?

[C]

Like. Yeah, you feel it too.

[B]

You feel it? Yeah. It's. Stealth tech is what we call it, and really proud of that product. And, you know, it's the tip of the iceberg. We're going to. So we've gone from sax, big bags full of foam made us famous, to the sactionals, the modular, you know, furniture. And stealth tech has really changed the, you know, the whole perception of the company. And ultimately, we'll do a ton with technology, and no one else is doing that in our world.

[C]

And what a pivot, right? Because a lot of people rely on that one product, and it's very rare to have that success again in another product.

[B]

Yeah, well, we've got more. I mean. But, yeah, stealth tech has grown, you know, into a very meaningful business for us, which was hard coming out of, like, beanbags and couches into real technology. But, Yeah, I think LoveSac will prove a lot of. A lot of people wrong. I mean, we've been doubted the whole. We're still doubted. We're a public company traded on nasdaq. There's always a huge short position. I think there's a lot of, you know, like, investors are like, what, like these clowns? But we're not joking around. We'll do some very big things.

[C]

Do you still feel like you got that chip on your shoulder?

[B]

Oh, you have no idea.

[C]

Wow.

[B]

Yeah. Like, I'm. It's funny because a lot of times investors will meet me and, you know, we'll. We'll talk. Because as a public company CEO, I spend a lot of time with investors that own pieces of the company, that want to know more about the company, where we're going Et cetera. And they'll be like, how are you so passionate about love? Sack? 26 now, years in. And what's wild is I think I'm like more excited today than I've ever been.

[C]

Wow.

[B]

And it wasn't always the case. Like, I've had a thousand times where, you know, I've thought of quitting, thought of getting out, thought of exiting, you know, different times where maybe I should have. But now that we're big enough to matter, right. We did 700 million last year. I think we'll grow it past a billion. No problem the next few years. But small enough still. We can have fun. We can, you know, still build a strong culture. And with some really cool products on the way that, you know, we can't talk about, I think we can grow this thing to be a brand that's here for 50 years, you know, like a Nike that's like, that's like what I want to do. And no one's ever done that out of home furnishings.

[C]

Yeah.

[B]

Let alone Giant beanbags. But I, I really think It'll take another 25.

[C]

You're playing long game out here, Playing long game.

[B]

And it's actually really liberating. It's wild. Like, you know, it was always like chasing an exit, chasing an exit, thinking about it that way. And when I switched and I'm like, I'll just go as long as it takes. It's, it's really, it's really kind of cool because then like, you have a couple bad years, like right now, terrible for home furnishings, really.

[C]

What happened post Covid?

[B]

So Covid, everyone went out and bought couches, bought couches with speakers in them, bought Giant, you know, bought all the stuff for the home. And then post Covid, everyone goes back to travel, everyone's got their stuff, you know, grills were blown, everything for the home was blown up. And big hangover for the home category. LoveSac's thankfully grown through it. Slower growth than ever. But we've grown through it and we're more like the only one. But my point was, when you have a couple of bad years for us, slow growth is bad years. So what? Like, if you're playing like a 20 year game, you can weather anything. You know what I mean? You're not impatient, you're not making bad decisions, you're not, you're not settling. You're just gonna slow down, run a good business, wait for the economy to be better for this category, and then we'll rip again.

[C]

Love it.

[B]

And that's what's really freeing.

[C]

Yeah. A lot of people want that fast money, that instant gratification. Right. And they see a bad year, bad month, and they start freaking out.

[B]

Yeah. Or they. Or it wrecks their plans, and then what do you do? And then you're scrambling, and then you start making bad decisions. And, you know, I. I mean, you and I have both been around, first of all. Like, I can't believe it's only been a year and a half, man.

[C]

I mean, crazy. You were one of the first episodes.

[B]

I didn't even realize that.

[C]

Yeah, I think you came on a few months in, maybe five months.

[B]

I mean, you have crushed it.

[C]

It's been a lot of filming. Yeah, you too, though. I want to talk about your podcast.

[B]

All right, well. Well, you know, my.

[C]

Thank you, though.

[B]

No, but, like, it's really amazing to see what you built so fast. I. I mean, I can't avoid your social media. You guys are just so good at it. And that's the game. I mean, I'm playing the game because, you know, in this day and age of branding, you got to be there. But. But, you know, you and I have both met plenty of hundred millionaires, billionaires, or just, you know, very successful people. And if you're around it enough, you realize, like, you know, you don't. You don't need that much money to have a great life, a great time, have a lot of freedom. And so, for me, the chance to build this culture. I'm so glad you get to come to the party tomorrow night. Like, you'll see it. You'll understand. What else would I want to do? I got 700 of my best friends. They love what they do. We love what we're building. Like, why do. What do I want in Exit? And I don't mean that, like, in a unambitious way, but what I mean is, like, how about instead, I take this amazing group of people and we build something that's here in 50. We build. It's like. It's almost like a sculpture. It can outlive me, maybe. And to me, that. That's now really satisfying. And so my whole mental framework shifted.

[C]

That's incredible, man. Yeah. Maybe you could pass it on to your kids one day.

[B]

Yeah, I mean, I don't even. And I mean, on that subject, I don't even necessarily want that for my kids. I want them to be what they want to be. If one of them really wants that, that could be cool.

[C]

Yeah.

[B]

But. But I just am really intrigued because I think building a business is actually one of the Hardest things. I mean, you know, you guys are building business. I mean, you guys grind like people, they see you as celebrities, they see you. And now you're in Dallas, now you're in Vegas, now you're in, you know, but it's a grind. You, it never sleeps. But on the other hand, it's also a multifaceted grind. Right? Like you learn finance, you learn relationships, you learn human psychology, let alone social media and the other tactics. That's pretty cool, right? Like you're getting smarter and smarter and smarter every day. You're working with more and more capable people every week and you're building a complex thing that's more than just one hustle.

[C]

Yeah.

[B]

So to me, that's like, that's the satisfaction.

[C]

Agreed. A lot of personal development in business I've been able to find myself through business.

[B]

Yeah, I'm sure.

[C]

Percent like you can't hide in business. You know, your true colors are going to come out.

[B]

Oh yeah. I mean, that's, that's. So my podcast, let Me save you 25 years is all about these. Well, the first season was just the 25 lessons, as it were, in my book called let me save you 25 years. And I unpack him one each with some very successful people. Right. And so like with you. Right. On my podcast we'll talk about this topic, see who shows up. Because as you've seen, I don't even know these guys. But I guarantee you've had people that show up and other people who kind of like say they'll show up. Yeah, and we'll talk about that. But, but what's cool is when I go deep on these one topics with very successful people, I get some really cool content out of them that I don't hear from them on their regular stuff, like Gary Vee, Mark Cuban, like I'm, you know, because we go deep on one idea. And what's cool though is that we all learn the same things. Like you and I will learn the same lessons if we put ourselves through this meat grinder.

[C]

That's interesting. Yeah, I can't wait to dive into that. That's a very unique discussion topic.

[B]

Yeah, yeah, it's fun. So, so that's been pretty successful and, and I've enjoyed that and I've learned a lot and I continue to learn a lot. So yeah, man, we're playing the long game. But Lovesac is cool too because we make long term products. Like here we are right at the Witch. Witch headquarters.

[C]

Yeah.

[B]

And just got to meet the founder and he pulls Out a lovesack pillow from like 2004. We make like these sactionals you bought. Here's the coolest thing, Sean, like, you're way younger than me. I have sectionals older than my daughter. She's 16.

[C]

Wow.

[B]

Those same sectionals that are in your basement, if you choose, you'll have them like the rest of your life.

[C]

Crazy.

[B]

You can change the fabrics, you can rearrange them, you can. Right. Get new components, new cushions, whatever. And that's designed for life. We didn't have that in the beginning. We have this whole philosophy now around that and it separates us from our competition. It's the reason we'll be successful. It's the reason we can invent other products. And it's just really fun now.

[C]

I love it because I've gone through so many couches. Three thousand, two thousand, like four thousand dollar couches.

[B]

Yeah.

[C]

I could just buy one for like. Yeah, like you said, 20 years plus.

[B]

Isn't it crazy you could spend that much on a couch, even from a nice place? And they're actually not that well built.

[C]

They're not. I've actually gone to like Chinese suppliers to see what they're paying for some of them and they're marking them up like crazy.

[B]

Yeah, it's gross. We won't even use those factories. Like, but you'll see like the way we build sectionals because we don't make very many things. Right. We make the sacks, even the sactionals. You know, you buy a bunch of seats, buy a bunch of sides, but they're uniform. Therefore we can put a lot of care into like the design. Every joint, every seam, etc. And so we try to make things that are built to last a lifetime and designed to evolve. That's the harder part. Like designing that couch. So it'll even work for a dude as tall as you. Right. Or a woman as short as my wife. The same couch. Because the way you can turn them deep or long. The same pieces even.

[C]

Yeah.

[B]

And someday when you, you know, you grow your family and you like, you. It'll. It'll blow your mind. Like if you choose, those pieces will be in your life.

[C]

Like, that's why I love the couch. Because I could buy on additional pieces when we have kids.

[B]

That's right.

[C]

And fit them in like.

[B]

Yeah. So that's not an accident. I mean, that's literally how now we think about all the products. So then you'll say, well, oh, what's. What's next from Love Sack? Sean? It'll look, it's simple. Look around your life and think, man, what would be cool if it could be built to last a lifetime, but could evolve with me as my life changes? And that's what we'll do.

[C]

That's so cool, man.

[B]

Yeah.

[C]

Are you guys using AI at all within the company?

[B]

We're dabbling. We're trying to figure out where it fits. In fact, I just gave a speech on it today.

[C]

Oh, yeah.

[B]

Well, not a speech on AI, but I mentioned it. Like, we're a very human centric company. Right. Like, we have these physical showrooms, and it's because we make these products that they look pretty simple, but actually they're fairly complex. Like, as you saw with your sacks. I mean, you know, I probably took a whole Saturday of your life.

[C]

Oh, it was a process.

[B]

I know. I'm sorry. I apologize.

[C]

No, I hired someone on. What was that app? The person told me to use this app. It was some app where you could hire contractors.

[B]

Yeah, TaskRabbit.

[C]

Yeah, TaskRabbit.

[B]

Okay. Yeah, someday. So someday we'll provide those services and help you and stuff. And we'll even help you, like, change it and upgrade it. Like that's coming. But in the meantime, we have these complex products that require like a. Like you probably interfaced with someone to help you plan it, get all the pieces. Right, right. That's what it takes. And so, yeah, sure, we could train an AI model to do that, but in the end, we actually value our relationship with you, you know, like, whoever helped you and even my relationship with you. Like, we value people. And I think fast forward 10 years, that will also help set us apart from all these companies that will just go totally virtual. And so, look, I respect it. Don't get me wrong. Like, I think there's a place for total virtual. Lean into AI, be super efficient. But I actually, I think it's creating a future where companies that really commit to the human touch.

[C]

Yeah.

[B]

May be even more competitive because they're so rare in the future, you know, so that's kind of where we're heading.

[C]

Yeah. Because more and more companies are getting away from that human feel these days. Right.

[B]

Yeah, But. But humans still exist, and they're going to exist. And. And I think that, you know, if it's done correctly and efficiently. And that's the cool thing about Lovesack, is, like, in the end, we sell, like, the biggest thing in the mall out of the smallest store.

[C]

Wow. I didn't even think about that. But, yeah, you do.

[B]

That's right. So it's good economics you follow?

[C]

Yeah.

[B]

And we. And it's an accident. Like in the. Look, we were just selling beanbags. We were trying to survive. And we.

[C]

We.

[B]

You know, you can read the book, like, the whole story's there, but as we find ourselves today, now, that's. That's a strategy, and the human side of it is a piece of it. We'll leverage AI but ultimately, I think it will be a real differentiator.

[C]

That's cool. How's the reception been on the book so far?

[B]

Good. The book's been a bestseller on Amazon, and, you know, we're really proud of it. Let me save you. 25 years is a book I wrote for me when I was 20. It's like, man, I wish that I had something. Like, I tried to be really honest. I mean, I talk about, you know, love Sack's been through every up and down full. I mean, I won a million dollars on TV with Branson. We had to file bankruptcy and start over in the middle. Humiliating, terrifying, embarrassing. But I learned so much. I think I learned more from that than anything I've done in business. And that was a long time ago, but I try to be really honest about all the mistakes and miracles and lessons that came along the way. And that's what. That's the subtitle for the book. And. And so, yeah, I'm really proud of it. It's short. You can read, like, 90 minutes. And it should be the book that you give to, like, your. Your nephew, who's, like, 18, but he's got ambition, wants to do something or. Or your niece or whatever, and love that, man.

[C]

Shout out to Branson. I just went on my first Virgin cruise.

[B]

Oh, did you?

[C]

Yeah, it was a blast. I can tell he really cares about his customers.

[B]

Yeah. Was he. Was he on the cruise with you?

[C]

He wasn't, but I bought package and he makes you feel like vip.

[B]

You should think about coming to Necker with me in March.

[C]

I'd love to. That's his island, Right?

[B]

There's a really cool opportunity.

[C]

What's he doing out there?

[B]

I have a friend who runs this really cool venture called Principal Business Summit, and a lot of good people gather, so I'll rope you in.

[C]

Thank you, dude. I'm big on community and providing value.

[B]

Yeah, I mean, I love what. I love what you're doing, man. It's crazy to see how active your podcast channel is with all of. All of the guests I've been able to connect with.

[C]

And, yeah, we drop three episodes a day, so by the time this one comes out we might be at a thousand.

[B]

That is insane.

[C]

Got a three month backlog.

[B]

Congratulations.

[C]

Yeah, it's a blast dude. But thanks so much for your time and where can people keep in touch with you?

[B]

Yeah, yeah, connect with me. I'm Shaun of Lovesack on every social media channel. Let me save you 25 years of the book, the podcast of course lovesack.com check it out.

[C]

We'll link it all below. Yeah, thanks for watching guys as always. Check out Lovesack's stuff below in the description and I'll see you next time.

[A]

Hey music fans, there are some great concerts headed this way. Don't miss out on all the shows in your favorite venues like Deftones at Madison Square Garden, Eagles at the Sphere and Foster the people at the Ryman Auditorium. Tickets are going going fast so don't wait. Head to livenation.com to get your tickets. Now that's livenation.com.