AFTER securing £150,000 to launch Mellow, an on-line CBD market place, experienced e-commerce business partners James Storie-Pugh and Neil Tunbridge are seeking further finance to support its growth.
The London-based duo say three months after its launch Mellow is surpassing expectations and is on-track to hit its projected first-year annual revenue target of £2.2m.
Both James and Neil have extensive experience in online market-places, and this pedigree has attracted leading financial backers such John Drinkwater of Ridgeway Capital and James Greenbury of Parcel2Go.
CBD E-commerce platforms are a growing sweet spot for brands with recent research showing Covid-19 driving some significant shifts in consumer behaviour – Brightfield reports 33% of CBD consumers switching to the virtual world.
Chance Meeting At Event
Speaking to BusinessCann in mid-August James said just over 2,500 visitors had been to the Mellow website site the previous day
James began his business journey with Microsoft going on to work in France and New York and specialising in e-commerce, whilst Neil started at the House of Fraser before moving on to retail consultancy and then e-commerce merchant services, including banking.
The duo teamed up after ‘bumping into each other at a business event’, leading to the creation of the Muloot business venture which combines both of their skill sets to deliver service packages to over a dozen global e-commerce market places, including gaming.
However, the desire to be front, not back of the house, could not be quelled, as Neil explained: “We always wanted to take our operational skill set from our market place clients and merge their USPs to build our own model.
Californian Cannabis Market
“The question for many years was what would that be? Could we compete in multi-category space, say, fashion, footwear? But we couldn’t find a product that would allow us to use our competitive advantages to become a game changer.”
Over the last few years they’ve spent many months doing business in California and witnessed the growth of medical cannabis and CBD.
“We had time to scratch below the surface and saw that in the US the growth in these markets was exponential, and we liked the non-pharma vibe.
“Two years ago it was a nascent market in the UK and Europe, and it still is now, but one that is set to be worth £1.5bn over the next few years and this is the market place in which we decided to deploy our skill set.”
They worked with partner businesses to develop the Mellow e-commerce platform and spent their evenings and weekends refining their vision before securing £150,000 from their existing Muloot shareholding base.
Mellow’s first brand partner was US firm Mile High Labs and its 365 CBD range and there are now over 40 brands including well-know marques such as Dragonfly, Botanic Labs and Reakiro.
As Brightfield points out it’s a competitive market but with no moves from the Amazons of this world, yet, there’s still time for the Mellows to lead the way.
Mellow says its USP is an in-depth understanding of the e-commerce world from both the business and consumer point of view.
Neil elaborated: “From a customers point of view why do people keep using Amazon? It’s because it’s reliant, fairly trustworthy, will deliver products on time and will nearly always have the products you want.
“We are taking these lessons and the ones we have learnt from working with market places, over all the years, to make sure our customer journey is as good as can be and to ensure the site is as trustworthy as it can be.”
They have implemented the Mellow Trust Score and internal algorithm taking about 12 data points across all products and sellers to monitor their service availability, punctuality and delivery.
Learn More About CBD
There is also an educational aspect with a website blog. It was launched before the site was commercialised, as a handy guide to what CBD can be used for.
“Mellow brings together this highly-fragmented brand market in to one cohesive, curated destination, and for the customer it is a trustworthy resource to learn about and buy CBD. We are already seeing it in the stats over the three months – with a 23% repeat customer purchase rate,” says Neil.
James continued. “We are a direct to consumer market place, one that is based on technology. Our ability to bring on-board a curated product offering from a global standpoint allows us to bring to Mellow a loyal customer base that will stay loyal for the foreseeable future.
“We can, on the back of what we have built, at a relatively low cap-ex, scale-up the project.
“We have taken the best of breed of our clients and our market place background has shown us how these projects can scale and build that supply and demand.”
Mellow has a strong focus on overseas brands and supports their UK entry with warehousing solutions, payment processing, banking and company set up at no extra cost, he explained
One of the reasons the main e-commerce platforms such as Amazon and Facebook have avoided the CBD space are the regulatory clouds shadowing the industry which impact on those looking to advertise CBD on their platforms.
No Amazon CBD – Just Yet
Neil believes Amazon’s focus is currently elsewhere: “Amazon tend look at bigger picture, with a more country-specific eye, they’re looking to Sweden at the moment. So it’s more county, than product specific.”
He continued: “One of the most challenging components for CBD companies is that you cannot do paid search, so you have in effect wiped out the number one traffic source.
“Not to give way any trade secrets but we have a cross-section of agencies including technical SEOs which are helping to lead the way in building our reputation across our market place.
“This, along with a highly-credible content offering, working in tandem with agency partners and a strong affiliate programme helps reach a certain customer demographic.
“We have a strong social and influencer strategy to raise brand awareness, and combine these with a strong e-mail strategy which forms the backbone of communications.”
With sales rising on a weekly basis the duo are now seeking additional investment to support their growth.
They are not in a position to disclose what that level of investment will be, but have earmarked how it will be spent, as follows; ’40% Customer acquisition, 30% training 15% tech and 15% other’.
This year’s target is to on-board 85 brands and the additional backing will support their growth into the European market.
With customers shifting buying habits online the CBD e-commerce space is becoming increasingly crowded, including fellow UK companies such as Alphagreen.
Nevertheless, Neil is embracing the challenge and looking forward to the growth of a well-regulated CBD industry, saying: “Competition is a good thing and will provide momentum to drive the market.
“With projected growth to top £1.5bn over the next few years there is enough room for multiple, credible players. We can all help support the growth of a regulated CBD space, one which will push out the brands who undermine consumer confidence.”