Grape Solar founder Ocean Yuan revolutionizes an industry and grows revenue 700 percent by rethinking target audience and how solar technology is sold
When Ocean Yuan created Grape Solar in 2009, he had a depth of experience in the solar industry and a well-established reputation. He traded his multinational company success to pursue a different goal for solar energy: making the technology accessible and affordable for consumers.
For Yuan, reaching this aim was not just changing customer focus from enterprise-level companies to individuals, it meant changing how to sell the technology. Grape Solar was the first company to make this renewable energy a retail purchase.
In an industry that is already leading edge, Yuan’s model was revolutionary. And yet, logical. If a “green” technology is not accessible to consumers, it will never be economically sustainable no matter what the environmental benefit.
Buying socks, snacks and solar panels in a few clicks
Not long ago, the only way to get solar power at home would be to lease panels from a utility company. This model worked well for businesses that rent office space or don’t have the upfront investment capital. Other than the energy source, this model isn’t significantly different from other utilities.
With Grape Solar, consumers buy their solar systems. Instead of swapping types of power and keeping a monthly bill, Grape Solar purchasers own their systems. Once they have saved their original investment cost, they generate value as well as power. Consumers who own their solar systems are also eligible for a tax break.
Consumers benefit when they purchase Grape Solar systems through retailers like Costco, which offers excellent customer support and warranties.
“The customer has peace of mind. And we get peace of mind of not having to collect all these different accounts. It’s just one retailer,” says Jack Caruso, Project Executive for Grape Solar.
The retail model benefits Grape Solar by providing access to a loyal customer base, which is helpful when your product is a new technology that crosses categories from solar components for RVs to home improvement and even personal devices for backpackers.
“We’re one of the only solar companies that sell through retailers. Sometimes they get confused because we sell through Costco, they pay Costco, but the customer works with us,” says Jack Caruso, Project Executive at Grape Solar.
Grape Solar does have to work directly with most consumers. Home systems, unlike socks, are not one size fits all. But Grape Solar took this into account with their business model.
“We do have some ‘point and clicks’ that are popular, but they are more for off-grid use,” says Caruso of their product line. Grape Solar deliberately designed solar kits for knowledgeable customers to self-install and well-defined products that fit off-grid use including tiny houses, RVs, and hunting cabins.
Caruso refers to these products as “conversation starters” that allow their team to talk to customers and find out more about their needs.
Most home solar installations require a custom approach, says Caruso. “We’re going to look at their roof, determine exactly how many pounds they are going to need, what orientation, and what they would produce, how much materials will cost, and provide a contact for an installer,” he explains.
To succeed with their revolutionary model requires exceptional retail partners; ones that can scale from clear-cut, off-grid product inventory to handing off a customer to Grape Solar for a custom solution.
A different kind of sales model requires a different kind of retail partner
Grape Solar found an ideal retail partner in Costco. Their brick and mortar presence helps build awareness of consumer options for solar with a limited variety of the off-grid products. Costco.com and the retail giant’s commitment to customer service fit Grape Solar’s custom approach. Caruso notes that not many retailers are willing or able to support such a unique model, but Costco does.
Not only does Grape Solar bend purchase models from point-and-click to custom configurations, but Caruso also notes that retailers sometimes have challenges assigning a category to Grape Solar’s products.
“Some retailers are more prepared for solar. Retailers like to categorize things, and a lot of times there are not categories for us. Some fit us with automotive, or lawn and garden, or home improvement. Sometimes retailers are not aware of the market size for solar right now,” Caruso says.
“The most important thing we have, regarding value, is those relationships with big box stores, particularly the .com presence. It is difficult to get into them,” Caruso explains.
To successfully reach retailers, he continues, requires having a good contact and being able to show why your products are a good idea, why they fit the market and fit customer demand, and that demand will grow in the future. Retailers expect a quality product at a good price at the minimum.
Costco understands customer demand for Grape Solar’s products, notes Caruso. Support from their retail partners is key to innovation for Grape Solar.
“It gives you the confidence to develop new items without having to fight to prove why they should be trying to sell these and why their customers ask for these,” says Caruso.
Grape Solar offers high-touch customer service even in a high-tech industry
Another shared value for Costco and Grape Solar is their commitment to customer service.
“It’s sad, but we’re one of the few solar companies that you can call and speak to someone in the office, in the US. We’ll give you a straight answer to ‘is this going to work for me’ or ‘I’m having some issues can you help me,'” says Caruso.
Grape Solar’s team also focuses on customer education and building a community of solar power users.
“Part of what we’re trying to do — and pride ourselves on — is being able to teach people. We instill that knowledge into our customer base so when people review our products online or ask questions on boards, there’s a knowledgeable customer base to answer and to help each other out. It kind of feeds on itself,” Caruso explains.
Grape Solar has done a great job of connecting to the solar community, including niche sub-groups such as passionate RVers, and owners who are “off-grid” with hunting cabins or tiny houses.
The relationship with customers benefits Grape Solar as well. Recently, the company increased their US-assembled products based on customer input.
“Sometimes people call, and they are more knowledgeable than us in certain areas and aspects. It helps us out in adapting and getting ahead of something before it happens. Sometimes they introduce product ideas that are not financially feasible or don’t make business sense, but it’s a cool idea coming from consumers,” says Caruso.
“Other times they bring products to our attention that are really interesting, and we’re kind of ashamed we weren’t aware of before. It is a two-way street,” he says.
Agility, innovation and staying lean help Grape Solar thrive where others fail
Listening to customers and applying that insight to product development keeps Grape Solar at the lead in a fast-moving industry. The pace and growth of the solar industry have challenges, though.
“New people are coming in, regarding manufacturers and distributors, and retailers. New technology is coming out, and the prices are getting more competitive month-to-month,” says Caruso.
“The point is to stay vigilant. To try and figure out what makes it interesting, newer and better than an old model before putting in the time, effort, and money to bring it to market.”
Staying ahead of the market also means understanding which new things to avoid.
“We’re a lean company, we can move quicker and adapt faster than some of the large companies that have failed,” says Caruso. He cited one instance in the industry when lower-priced products from Asia were flooding the market.
Large, vertically-integrated companies were not able to adjust to the rapid market shift.
“There were a lot of companies that went out of business. We’re a company that did not. We carried smaller inventory than they did, and we could minimize our risk,” Caruso says. Grape Solar also survived because of their unique partnership with retail.
Small size means solving big challenges with supply chain
While agility and innovation keep Grape Solar at the forefront, they compete daily with large solar companies when it comes to a shared set of suppliers.
Even though the cost of silicon is continually decreasing, Grape Solar only works with a finite set of Tier 1 suppliers who can sustain quality and capacity in manufacturing. There are maybe a dozen or so Tier 1 suppliers in the world, Caruso explains.
“They all know each other and its always kind of a game in pitting these companies against each other to get the best price. The goal is getting something that’s cheap, but still a good product, then passing a good price along to the customer. We can make more money, sell more panels and get more solar out in the world,” he says.
The challenges of a limited set of suppliers and the dropping cost of silicon require a balancing act between the need to maintain a reliable source, but not purchase too much inventory at once.
“Terms are huge for us. Sometimes solar companies and manufacturers of the system components don’t understand that we sell to retailers and most retailers have a net 30,” Caruso explains. “A lot of times, when you are developing a new relationship with manufacturers, it requires upfront money before it ships, so at best you get 30-day terms.”
“You have to develop pipelines to get terms that help you with your cash flow, and to make sure you are getting paid for your goods either before, or at the same time, as you pay your suppliers,” he says.
Powering the supply chain with cash flow
“Cash flow and inventory are pretty much the number one and two for most important things. C2FO is a dependable way you can leverage current sales — what we currently have out there to retailers — to get an advance,” Caruso says.
“When we get a good price on inventory — and it’s a quality product, and we want to move on it — C2FO is a good way for us to move some cash. It’s more competitive than getting a loan from a bank. It’s just another tool you can use to diversify the options you have,” he says.
Caruso adds that C2FO is a valuable tool to bridge cash flow. It allows Grape Solar to take advantage of lower cost inventory and then pass those savings along to retailers and customers.
A bright future ahead
By its third year in business Grape Solar had grown revenue by 700 percent, outperforming larger peers in the solar industry. The growth merited company founder Ocean Yuan recognition as a finalist in the Ernst & Young Entrepreneur of The Year 2012.
Grape Solar’s success is noteworthy even in an industry growing as quickly as solar energy.
“A lot of people are shocked to find out there are twice as many employees in solar as there are in coal. It’s a growing industry; new technology is continually more affordable and efficient. Every quarter is different,” observes Caruso.
“The goal of solar is to achieve grid parity, where it is no longer a political issue, it’s an economic issue. Where it just makes sense to do it. The real goal is to keep driving down pricing so that solar can outprice everything else,” says Caruso.
Renewable energy is moving fast toward that parity, too. In the last decade, energy generation from solar increased 5,000 percent. With companies like Grape Solar leading the charge, parity looks not only possible but inevitable. The future is bright indeed.