With Scott Orn

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Scott Orn

Scott Orn, CFA

Chelsea Shukov, Sugar Paper founder, on building a massive offline business

Posted on: 09/17/2019

Chelsea Shukov

Chelsea Shukov

Founder and Creative Director - Sugar Paper

Chelsea Shukov of Sugar Paper - Podcast Summary

Chelsea Shukov, the founder of Sugar Paper, talks about focusing on quality and distribution to build a successful, offline consumer business.

Chelsea Shukov of Sugar Paper - Podcast Transcript

Scott: Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting. Before an excellent podcast, quick shout out to our sponsor, Brex. Brex is a credit card for startups, the first one ever. It’s fantastic. They don’t require a personal guarantee by the founder. That is a huge, huge deal. Also, has great integration with QuickBooks, which makes life easy for your accountant. Finally, they have really good rewards. They do startup-centric rewards, so like, bonuses on ride sharing and travel and eating out and things like that. All things that appeal to the whole team at a startup. Check out Brex. If you go through their signup and type in Kruze, you get a discount. Hopefully you enjoy Brex and thanks so much guys for sponsoring the podcast. Thanks. Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting. Today, my very special guest is Chelsea Shukov of Sugar Paper. Welcome, Chelsea.
Chelsea: Thank you. Hi, Scott.
Scott: Hey, so we have been friends for a very long time. Like 12 years I think.
Chelsea: I know.
Scott: Maybe longer.
Chelsea: Maybe. Probably.
Scott: Ananda Barron-Schaufler put us in touch with many, many years ago. I have always loved your business. I identified with you a lot because my mom… You feel like the reincarnation of my mom.
Chelsea: Thank you. I know how much you…
Scott: Mom, I love you. Owned a really incredible small business that had an incredible brand and spoke to a lot of people. It’s not so small anymore, which is really awesome. Maybe just start the audience off just by retracing your career and how you had the idea for Sugar Paper.
Chelsea: Sure. I was working in entertainment in LA and I had a really incredible position where I was an assistant to a studio head. I would sit kind of in the background of phone calls and listen to powerhouse people do Hollywood business. I hated my job. I realized sitting in that position that if I didn’t want this job, I shouldn’t be in the industry at all. It’s kind of started the path of like, what am I doing? Why am I here? If I don’t want to be involved with these power players, what should I be doing?
Scott: Yeah, because everyone works up to it, right? You actually got like a great entry point.
Chelsea: Yeah, I know. My entry point was really watching deals happen in real time and I had access to very powerful people. I say now when people ask me business advice, the advice is if you don’t want the person’s job above you, you’re in the wrong place. I knew immediately I was in the wrong place. Fast forward to… he liked me, I liked him. He was starting a company to kind of merging the internet and television, which was way ahead of its time. We all still had dial up modems, so that wasn’t going to work, but I moved over to that company. During my tenure there, I met the art director who… It was the first person’s job that I found extremely exciting. When that company folded, because everything folded around that time-
Scott: Early. Yeah. A little early.
Chelsea: Yeah. I called the art director and I just said, “Listen, you’re the only person I’ve ever seen do something that seems appealing to me. Can I come shadow you,” and so I did. She thought I was going to do web design, or like something with design that was current and like of our age. But when I left, I said, “You know, I bought a letterpress and I think I’m going to start this printing business using this antique letterpress.” Of course, most people at the time were like, “No. Bad idea. This is the digital age and you’ve decided to go back to a printing press.”
Scott: Weren’t you like going home at night doing the letterpress and teaching yourself to letterpress? As like almost like therapy, or like…
Chelsea: Yeah, it was like-
Scott: Of love, like loving what you do.
Chelsea: Totally. So, it was a creative outlet. I didn’t really understand that I was starting a business. I just needed something that felt like a passion project. And so ultimately what happened, and this is true of my business, even today, women know women who know women. And people found out I had this letterpress. And so, people who were getting married, or having babies… There had a sister who was having a bridal shower would call and say, “Will you print something for me?” And so, by the time I was really just doing it, I was having income from doing instead of having a business plan and business school and all the cool things you did and I’m super jealous of now. But I started like…
Scott: You’re ahead of me. Don’t worry.
Chelsea: Well, I don’t know about that. I’ve always tried to recruit you to come be part of Sugar Paper. I feel like it was really in the doing that the business was created. And then it started to get awkward that I was printing out of my living room and meeting people at Starbucks to sell wedding invitations. And so, I needed to legitimize the business and I was having lunch one day at a bakery that’s very popular in Los Angeles and the space next door had a for rent sign on it. And I just sat there watching like, what we call well-heeled women with beautiful handbags walking in and out of this bakery. And I realized that my customer was already on that block. And so, I just got stuck on this idea that I was going to open this paper store. I really had no business opening a store. I didn’t have much retail experience. I just knew that it was something that was possible and I was going to do that. And so, I have a business partner who is a best friend from college and I invited her to coffee the following day at…
Scott: At the bakery.
Chelsea: Clementine, at the bakery and I said, “Hey, you see these women, they’re totally my customer.” And at the time, she was helping me print because she was kind of part of the business without officially being part of the business. And I said, “I think that these are our customers.” And she was thinking, “Great, what are you going to do? Walk up to these ladies and try to sell them stationary?” And I was like, “No, there is a space next door. I think we should open a store.” And, she looked at me and said, “I think you’re absolutely insane, but I’m totally in. Let’s do it.”
Scott: That’s awesome.
Chelsea: So, we did, so we opened a store and we painted the walls, we built the shelves, my husband installed the tech, we chose a POS just by Googling it. Really it was a labor of love. And, immediately when women who are waiting for their lunch at Clementine would walk in, they just got it and they, I think they felt sorry for us a little bit. It was pretty… They saw it…
Scott: Your first customers are often… They feel the same way about us sometimes, don’t they?
Chelsea: Yeah, there’s a little bit of pity. Yeah. Yeah. There’s some kind of leap on their part thinking, “I think she knows what she’s doing. Maybe we’ll see about this.” But then a month into business, Reese Witherspoon walked into the store. And so that was like a game changing moment.
Scott: That was on my notes to ask you about. Okay. I don’t know how long, when did you start the business?
Chelsea: Started in 2003 in August. Yeah.
Scott: So, we met like probably four years in. I remember you telling this amazing story about Reese Witherspoon. It was amazing for you, but actually every time I see her on TV now, I just have positive thoughts about her. Tell everyone what she did for you.
Chelsea: Yeah. So, she came in the store and she kind of looked around and then grabbed a business card off of the counter and said, “I’m going to call y’all,” because she’s Southern. And, she left and it was kind of that moment of like, “Oh, we didn’t turn her into a customer. We blew it.” And, but she did. She called and she asked us if we would print stationary for her and her office and letterhead and kind of several different suites of stationary and it was a very fast turnaround. And she said, “I’m having a story shot for InStyle magazine and if you’re able to do this, I will have it published in the magazine.” And she did. And it just put our brand instantly on the map. So, timing, luck, preparation, all of those things.
Scott: I want to continue the story in a second, but I think there’s, because we kind of just got into the timeline, but… I’m like a guy, but I appreciate nice things. And, your letterpress stationery is incredible. It’s as premium as premium can get. The designs are as beautiful as you can possibly be. So, I feel like there’s a little lesson to be drawn from this and that if you do really amazing work, you actually help create your own luck. Do you feel that way? You can, and don’t be modest, people need to go to and check out your stuff, but is that part of your rationale, or how you do business?
Chelsea: Yeah, so I can geek out on this stuff all day, so I won’t be modest.
Scott: I think it’s important for people to know.
Chelsea: A turning point in my career was a girlfriend sent me the book Purple Cow by [crosstalk 00:08:57]. Yeah. And so, when I read that book, it was a turning point for me to understand that I wasn’t just going to print stationary, I was going to print the best stationary in the world and whether or not I have accomplished that, that’s still to be determined.
Scott: But you’re like, if you’re not, you’re in the top 1% in the world at the very least.
Chelsea: We’re doing beautiful work.
Scott: [inaudible] say you’re there.
Chelsea: Yeah, but there were things like at the time there were a lot of people that did have letterpresses in their garage and everybody had to buy envelopes from the same maker and we made a very strong turn and decided that we were going to source a pallet of paper. We were going to have all of our envelope’s custom converted. All of those envelopes were going to have the Sugar Paper brand name embossed in the envelope. There were choices that were made along the way in keeping with that idea of yes, I could do it this way, but how do we make it better for every step? And so, every single piece of decision making that goes into what we make is in keeping with that idea of we want to be the best piece of paper in the world.
Scott: I agree with that so much because it may sound weird, but we do that in accounting. That’s how we think because I think we’re like you and that a lot of our clients, or at least the big-ticket clients come from word of mouth because someone had a great situation with us and like the Reese Witherspoon thing is an incredible example for you because Reese Witherspoon, didn’t that kind of kickoff a series of celebrities? Do you have like the celebrity…
Chelsea: Totally.
Scott: And then you had the normal well-heeled people using Sugar Paper too?
Chelsea: Yeah, I think it did, she was our first like big name and probably if I could paint the picture of the celebrity, I would want to love our brand, it’s her. So, it was really awesome, but I also think that customer service, like really old-fashioned values came into play in a way that people felt good when they were buying things from us because they mattered to us.
Scott: Well even that story, as you told her story, you said, it’s a very tight turnaround. It was probably something that happened in 24 or 48 hours and that happens to us too. And that’s like that going the extra mile. It’s so cheesy and everyone knows it, but I think the cool thing is you set up the business to enable that kind of stuff. You know, like you were, you went the extra mile on purpose. You knew what you’re doing.
Chelsea: Yeah, and I think that sometimes, and this is unfortunate, but when I have, we have a lot of employees now and so we’ve had maybe hundreds in our tenure, but a lot of the younger people, there’s a very key difference between people who become extremely successful and people who don’t and that is that they say yes to opportunities, even if it doesn’t necessarily serve them in that moment. So, that turnaround was Thanksgiving weekend. We were going to be up all-night printing. We had to ask favors from our vendors to get plates and paper and envelopes that maybe we’re or we’re not in stock. We paid a premium on shipping to do all of that work. But, saying yes to that opportunity opened another door, which opens another door. So, I do think saying yes is a big piece of launching your own success.
Scott: Saying yes to opportunities should be its own Sugar Paper business stationary. That is a really good saying and it’s so true. I totally agree. I couldn’t [inaudible 00:12:25]. Let’s get back to the timeline. So, Reese Witherspoon comes in, you’re in InStyle magazine, which is probably like the biggest, I’d say probably the biggest magazine at that point. It was huge. What happened next? How did you make this happen?
Chelsea: Yeah, so I think women in LA… LA is like the biggest small town in the world. So, I think that once we had that kind of tangible piece of credibility, there were a lot of women that were interested to see like, what is this place and what do they make and maybe I need that. And so really like word of mouth really is how it all happened. But then, Reese Witherspoon’s best friend is a woman named Heather Whitney. Heather Whitney met Jim Rosenfield, who’s the owner of the Brentwood Country Mart. And Jim Rosenfield came into the store and said, “I think you should open up the Brentwood Country Mart.” So again, I said yes to go take a look. And then we ended up opening at like one of the most noteworthy retail locations in Los Angeles because of that yes and that connection and then just things kind of started happening. So, we had a loyal celebrity following and we had women that were referring us. And that was really the piece in the business where the learning curve was steep and for as beautiful as it looked from the outside, internally, it was a hot mess. It was a really hard…
Scott: I’ve totally been there. I’ve lived that too. And our team has lived that. It’s hard. It’s hard. It’s hard to also have people at the company who can tolerate that. That’s like a skill.
Chelsea: Yeah. And it’s like I used to work at the store. So, when we started getting bigger, I couldn’t do that anymore and keeping my arms around the customer service, or how emails were being answered, or how questions in the store… Those things started to fall apart. And that was a really hard time, as well as the business was growing in all these different ways, as well as we had one of the most sophisticated customer sets in the world. So, they have a completely different expectation of service. There was a lot going on there.
Scott: I can actually relate to that too because our startup founders, it’s so intense what they’re going through and they need the financials to be right so the VCs can get them, get the money and dah, dah, dah and yours are the exact same. Different pain points, but they need it to be perfect. I can’t imagine if you had a Christmas card completely messed up, or how terrible that would be for your customer. And so, it’s like everything is fixable, but it’s like that delighting them and letting them experience the best of Sugar Paper is so important.
Chelsea: Yeah, no, I mean it’s been a challenge and, luckily, we muscled our way out of it and we’ve done a lot of work in that way. But, the business now, that was the origin story, right? So, there was a retail store, then there were two retail stores. We were making custom things. Then, as it goes, I had a baby. So, that’s like when things shift, right? Mentally of like, do I want to do these one-off orders, work in a retail store every day? So, of course, to make my life easier, I launched a wholesale business… Which, wholesale has its own set of challenges. And then with that wholesale business came licensing opportunities that I didn’t even know the word licensing. I didn’t know what that was. And so, currently we run five models. So, we run…
Scott: Wow, I didn’t know that. That’s crazy.
Chelsea: Yeah. We run retail, wholesale, online, so direct to consumer, bespoke, which is our custom manufacturing printing side of the business, and then licensing. So, there’s a lot going on.
Scott: Is the wholesale the Target stuff, or is that licensing?
Chelsea: No, that’s licensing.
Scott: Okay. Maybe tell the story about, we’re skipping ahead here, but I remember one day, it may have been Instagram, or Twitter, I don’t know what it was, but I was like, “Holy shit, Sugar Paper’s in Target now?” Amazing. Tell everyone how that happened.
Chelsea: Well, it’s so funny because [crosstalk 00:16:31], yeah, no, it happened by accident. So, we had taken Sugar Paper to our very first trade show in 2012. So really the business as it stands started in 2012 even though the company started in 2003. This company approached us and said, “Would you be interested in making a planner?” And I’m thinking like, “Does anyone use a planner anymore? Like a day runner? Is that what you’re asking me?” But at the same time, I had been to… In Staple stores and those things and I remember always thinking when I would look at these things, this is just not okay. They should be designing these things better than this black exterior and these terrible fonts. And so, when they asked us, it was something that I wasn’t able to print on a letterpress. So, letterpress printing is one piece of paper at a time, one ink color at a time. So, printing 365 unique pages is impossible. And so again, we said yes, yes, that sounds interesting. So, we took a meeting and we agreed to design, I think it was like 30 different planner formats for this company.
Scott: Wow. That’s a lot.
Chelsea: It’s a lot. They’re little big wall calendars, all these different things. And it just seemed fun to us at the time because we weren’t making anything like that. Thank god, one of my girlfriends is a licensing agent and I happened to mention this at sushi and she was like, “Whoa, Whoa, Whoa, Whoa. You need a… Contract. Send me that. I need to look at this.” So, she looked at it and said, “Hey, the distribution on this is probably not something you’re going to be comfortable with. If I were you, I would go back and say you will only sell to Target stores,” because there were a lot of big box retailers listed on that.
Scott: Oh, and Target has like an upscale image like that. It’s not as upscale as like a Neiman Marcus, or something like, or Barney’s, but it’s upscale and kind of mass market, I’d say.
Chelsea: Yeah, and I think too, one of our guiding principles is we only work with the best. So, they’re the best in big box and Harrod’s is the best in luxury. So, when we’re looking at an opportunity that is the guiding principle, but, so we did this planner collection, it was just supposed to be like a [blip 00:18:46]. We’re going to sell some planners to Target and that’s fun. What ended up happening is that that plan or collection went live and because it was with another company, not directly through Target, our name was not attached to the product.
Scott: Oh my gosh, I didn’t know that.
Chelsea: It was on the product, but in the Target computer system, it was like the vendor name, not our name. And, people started tweeting at Target and started going to individual locations and saying, “I’ve been to five locations where is my Sugar Paper? I can’t find the Sugar Paper,” so much to the point that someone in Minneapolis ended up saying like, “Who is Sugar Paper and what do they sell for us,” because this is creating a ruckus. And so, we got a phone call from Target corporate that said, “Whatever you’re making for us is creating such a stir that we would like you to come out here.”
Scott: That’s so awesome.
Chelsea: Yeah. So, again, saying yes to an opportunity created a different opportunity. So, we flew out to Minneapolis. That planner collection ended up being one of the bestselling planner collections of all time for Target. And so, then we ended up doing a direct partnership with Target. So, we actually have two different things that we do for them. We do these office products that we have since pulled from Target for several years. We are going back into Target in March. So that’s super exciting.
Scott: Awesome.
Chelsea: But then every year, we’ve been doing this gift wrap program and it’s a co-brand with Target, which is just insane.
Scott: Good for you. That’s just incredible. Incredible. So, out of those five businesses, five business units, what are the pros and cons? Is online awesome because everyone can buy it from you, but then you got the crazy customer service, or like what are some of the things you think about? By the way, we only have a certain amount of time, but you actually run an incredibly sophisticated custom manufacturing. So, there’s a whole dorkiness I want to get into about like how you do that, but I don’t think we have enough time today. So, we’ll talk about, but talking about the business, how do you manage these different things? You have people in charge of them, pros and cons of each unit. How do you think about it?
Chelsea: Yeah, I think retail is our roots. So, a lot of questions we get asked is like why retail? But for us, it’s like, oh no, retail is the business. That’s how we started. So to us that’s the easiest part of our business. Wholesale is just a hot mess in this time and place. So, we like it because we’re stationary makers and we sell to stationary stores in towns that people are insanely loyal to their local stationary. We want to have a presence there, but in terms of the wholesale, just in general, it’s a tricky business. And then licensing, I mean we work with amazing partners so we get to work with J. Crew and Paperless Post and Target and some of the best in class partners. So, we love that business also. We don’t have to make or ship anything. So, we designed it all, they make it, they ship it.
Scott: Does that scratch… Because you’re kind of a designer at heart, you know? Does that scratch that special itch for you, or allow you to be more experimental?
Chelsea: Oh, absolutely. They have parameters, but I do feel like with Sugar Paper because we’re not funded, we have to be very conservative about any product that we’re making and putting in our inventory. With Target, it’s like, “Wee! Let’s try that!” So, we get to go and they’re the best sourcing in the world. It’s amazing.
Scott: That’s amazing. It is, yeah. I know the limitations you’re talking about. You’re almost like a rock band that gets to go in the recording studio for a week on like someone else’s dime.
Chelsea: Yes.
Scott: Another thing that I wanted to cover was this amazing story of an executive calling you out of the blue. You want to tell this one? This is awesome.
Chelsea: So, I didn’t touch on my bespoke business, which is that I get to make beautiful custom things for very influential people. And so, what happened was I had printed a business card for a woman who is the former editor of W magazine and she was in the J. Crew offices with Mickey Drexler, who, in my opinion is like a business Rockstar and a retail rock star. So, she had handed him her business card and he took one look at it and put his fingers over it and was like, “Who makes this? Where did you get this?”
Scott: Oh my god. That’s awesome.
Chelsea: And she said, “Oh, I have them printed at Sugar Paper in Los Angeles.” And so, I was sitting at my desk and my phone rang and I picked up the phone and I always just say, “This is Chelsea.” And he said, “Chelsea, Mickey Drexler. How are ya?” And thank god I know who Mickey Drexler is because my heart just was in my toes. And he said, “I’m sitting here with you know, your client and I’m holding her business card. I’ve never seen anything more beautiful. And what do you think about maybe sending me some samples and we should work together?” So, I share an office with my business partner and I was across the room snapping my fingers, like… “I’m speaking to Mickey Drexler.”
Scott: So amazing. For people don’t know, he basically was the CEO of Gap, ran every division and made it a super successful company. Then went to J. Crew, where he was calling you from, right?
Chelsea: Yeah. And reinvented J. Crew. Yeah.
Scott: Yeah. And J. Crew is incredible now too. So, did you end up doing something with them, or where did that go?
Chelsea: We did, although we did not after that phone call and that was probably one of the biggest business heartbreaks I’ve ever had. But it helped me kind of go to the next level because I sent the samples and Jenna Lyons called and said, “No, these aren’t quite right for what we’re looking for. And so, in that moment we had to get really serious about product, product packaging, what that looks like in a retail environment. And I definitely was a pain point, but it pushed us to be better.
Scott: How’d you get better on that? Did you hire someone that knew how to do that, or just go to talk to people, or…? That seems like a very discrete skill.
Chelsea: Yeah. I think when you’re immersed in this world, I’m always in retail looking at things. I just think I realized in that moment that the work was beautiful, but the presentation was off and for him, he has to put it in hundreds of stores. It has to be… You can’t have shop wear on a box. You can’t, you know? So, we just pushed our self to be better. So, we did it internally, but it was highlighting something that was wrong.
Scott: That’s incredible. All right, we got to wrap it up. You are, I’m so proud of you. So proud, I’ve seen the growth and you’re amazing. There are two things I really, you said two amazing things, which is to say yes to opportunities. I love that. And also, if you don’t want the job ahead of you, then you’re in the wrong business. I don’t think I’ve ever heard someone articulate that, but it makes so much sense to me. It’s like, I also think there’s an amazing lesson in that you had the strength to leave something you weren’t happy doing. A lot of people have a hard time with that and I just think it’s really cool that you listened to who you were and it went from just something fun to this amazing business.
Chelsea: Yeah. We often say it’s not easy, but it’s worth it.
Scott: Yeah, it’s really cool. Okay. Tell everyone where they can find Sugar Paper and how they can reach out if they want to.
Chelsea: Sure,, which we didn’t talk about that. I do love that business. And then, yeah, we have three stores. We’re in Country Mart, Brentwood Country Mart and Lido Marina down in Newport Beach.
Scott: That’s right. You just came up to San Francisco. I missed the… You know I have a little baby, so it’s hard for me to go out at night. But you opened up in Marin, which is super exciting.
Chelsea: Yeah, you need to go check it out.
Scott: I will check it out. I know exactly where… Because that used to be where [inaudible] and Lily’s office was, right? In that same complex?
Chelsea: I think so.
Scott: Yeah, I think so. So… Okay and so, Marin if you’re NorCal, LA in Brentwood, and where else?
Chelsea: And Newport Beach.
Scott: And then if you’re on the East Coast, or in the U.S. Somewhere, they can find you online,
Chelsea: Thanks.
Scott: All right. I’m going to have you back because we didn’t hear about all the production stuff and there’s probably many more funny stories I haven’t heard. Congratulations on your success.
Chelsea: Thanks, Scott.
Scott: And give [Jamie] my best too.
Chelsea: I will.
Scott: Hope you enjoyed that episode of Founders and Friends Podcast. Quick shout out to Brex. The first startup credit card, Brex is our sponsor and really appreciate their support. Brex has no personal guarantee for founders. That’s a really big deal. It integrates really nicely with QuickBooks. Great rewards that are startup-centric. It’s a really nice little tool and we are seeing it all across the Kruze portfolio of clients. So, check it out. And again, if you go through the signup flow and type in Kruze, you get a discount. So hopefully you’ll check out Brex. Thanks again for the support on the podcast, guys. Take care.

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