🛒 LOUISE FRITJOFSSON // MARTIE CO-FOUNDER & CEO

0:00Louise Fritjofsson:I'm Sam Rose, and this is Commerce is Chaos, the podcast for consumer brand founders who know that building a business is messier than the highlight reel shows. Your supplier just missed their deadline, your top product is out of stock, and your competitors somehow just launched the same thing at half the price. Sound familiar? Every week, we dive into the real problems that keep founders up at night, from inventory disasters to supply chain nightmares, because surviving the chaos is what separates brands that fail from brands that scale. louise thank you so much for joining me today you are the co-founder and ceo of marty which is well known to me but exciting and um just breaking onto the scene discount grocery marketplace and what i loved about hearing your story from the very very early days was your approach to just like revolutionizing food waste um and taking these like really rest i'm a rescue ranger too So like your recipe, pantry staples and selling to consumers nationwide and really kind of creating what is effectively like kind of a new model around this.

1:03Louise Fritjofsson:And this season on Commerce is Chaos, I've been talking to a lot of folks that are like building a new model or opening up a brand new market. You have a very lucky advantage in all of this. You're a four-time founder. Right. That's a question mark in a statement. No, like what's wrong with me? Do I like to suffer or what? So actually, we're going to roll out a couch and this will be a psychology session. Right, right, right. Probably needed. And Marty's your most recent. You launched in 2021, right? Yeah, we're just four years in market now, which is crazy. I feel like time has warped in so many ways, but four, four solid years, uh, in marketing.

1:53Louise Fritjofsson:That's so exciting. What did you have us a little taste of what you did before? Uh, yes. So, um, I started my journey building an e-commerce company at this point. I, I, that was 20 years ago. And it's hard to say, cause I mean, Jesus Christ, I'm getting old, I guess, but I built an e-commerce in a world that was very different. Like we did not have Shopify and Facebook and Google to the extent that we have today. So, So built that, had it acquired, built an ad network, which also dates me. But that was, you know, a period in time where, again, we didn't have the type of advertisement solutions that we have today.

2:29So lots of ad tech and ad network companies were being built. And I was on that journey. And I built it for a period of like six years and then had that acquired. And then I built a peer-to-peer marketplace for a few years. I'm from Sweden. That's the company that took me from Sweden to the U.S. uh and after a few years of doing that uh i came out of that and was on this journey of wanting to

2:55Louise Fritjofsson:build companies that make people healthier i'm very passionate about like what are the systems in which we build for every the everyday everyday man to just have healthier habits and i started looking at the market of food and tried to figure out is there a gap in the market specifically for food. So the initial idea of Marty started with shelf-to-be grocery. And we said, wow, there's so much great food that goes to waste. 30 to 40 % of products that are being produced go to banfill. And here's the thing, organic, better for you, healthy, cool, up-and-coming brands all have this issue. Food waste does not discriminate.

3:35But you never really got access to these products at a better price because guess what? They don't want to be associated with the five below five or the dollar store, which is, you know, these are the type of players in my market that is excess and liquidation and overstock. So me and my co-founder, Kari, we went into this space saying, let's build a better brand. Let's build a brand vendors and brands want to be associated with. So we can get access not only to the conventional everyday items. We sell those as well, but let's make sure that we also get, you know, whatever Whole food sprouts credo is stocking and let's make that accessible for more more people not only the people that can afford whole foods basically so that's where this idea started and today uh we have more than 1400 skews on the side at any given point of time and we've we do we do more the chefs of a grocery we do beta skincare we do home goods we do households and pet and home goods and I'm so proud.

4:34We definitely get the best brands in each category to work with us, regardless if that's kind of like Pantry with Fish Wife and Momofuku and Olipop or if it's Beauty with Ilya and Merit and Goop. And you get these products at 40 % to 80 % off. So it's been a really exciting couple of years building this company and building these relationships with these brands and making quality products more accessible, basically.

5:01Louise Fritjofsson:That's such a great and ambitious, but really like genuinely good mission. And it, it like so many good stories, because I know a little bit of the backdrop, it starts with like this kind of really hard moment that you have to pivot out. So tell us the story that I know about the just holiday pancake mix and like what happens on December 26. And how do you see an opportunity on the other side of that? Yeah. So again, I started, I started when I was done with my third business, I was like, let's build something in food. And again, like trying to figure out like, where's the gap in the market. That's a really fun period.

5:38You start MVP and testing different ideas, trying to, you know, test, test, test a few different things in the market to see, is it a big opportunity? Does it, does it hit basically throw in spaghetti on the wall to see what sticks is my process of trying to figure out like, what's my next step. In that process, me and Kari, over a period of time, we started pressure testing a concept of building a brand house. And we were building multiple different CPG brands with the help of influencers or big personalities. One of them was kind of like a healthier, better for you staple kind of brand, pancake mixes, cookie mixes, all that.

6:21and we did a seasonal product for a gingerbread mix and of course it is really hard for a new brand to try to figure out like how many how many units do we do we produce and to your point December 26 came and we had way too many gingerbread mixes in our inventory and when we started looking around and and I think the pressure was even higher because we had a personality tied to this brand we're trying to figure out where do we where do we go with it it's perfectly fine product we just produce it it has two years health life uh and again like the the locations we could go many of them we just felt like we actually if we're going to build a big brand we don't want to be associated with these shopping experiences um so we really were like in the thick of this issue and we said wow so many other brands will have this issue and what could a better experience be for everyone involved.

7:14And that's kind of like how this initial idea of Marty hatched.

7:19Louise Fritjofsson:And when you kind of take that opportunity to adjust the whole model, you at that moment said, okay, like, we're going to go, we're going to fundraise, we're going to kind of make a really big deal out of this, we're going to swallow the pill of consumer education. for like a better phrase yeah we had a really interesting journey post this kind of like revelation there's many things that goes into a decision to pivot right so there was like grandiose learnings from our business model there was you know learnings from working with these these personalities and such and then there was this opportunity of what we thought marty could be.

8:01So like there's, I'm just saying there's so many more data points that goes into decisions to say, actually, we shouldn't do this. We should do that. But in looking at everything that we had in front of us, we were very clear that like, oh, we should, we should run on this idea instead for the business that we had started. We had raised a small pre-seed round. So what we started doing was going back to our investor and saying, here's the data. Here's what we think is the best option for us to do. Here's the new path that we should go on. In this period of time, I was pregnant with my second child and Kari was also pregnant with her second child.

8:40They're kind of like the same age. So we were halfway through this pregnancy. It was very clear that we wanted to do this pivot. We went to our investor and we laid it all out, making it very clear that this is a big opportunity we should go on building instead. And that conversation basically ended up being the investor saying oh well i i know that you're pregnant maybe you don't know what you want to do and maybe you just want to take some time and be in being a mom instead which in my our world had nothing to do with they're very separated as kind of like experiences so we ended up giving the money back to that investor and saying this is probably not a good fit if that's if that's the approach this is not a good fit so interesting you still wanted to build but

9:24Louise Fritjofsson:now not with their money because it's missing. Oh, no, that was very clear that that's that is not a good partnership to keep building on when that's a response when you're a woman building a company and someone gets into your personal shit like that, to be honest, right? So we gave the money back and we said, let's part ways. We took six months to just like really build the experience from a brand perspective. We set up our website, we started talking to some initial important vendors we set up a warehouse all the things from like a bootstrap perspective um i have my baby and then we closed our seat round when she was four weeks old and at that time kari had her baby and we were kind of like off to the races wow what a moment yeah in all of yeah giving birth to a human being at a company simultaneously yeah we had three babies in a year, two human ones and one business one.

10:22Yeah, it was a big year.

10:23Louise Fritjofsson:Oh my gosh. And so you start to build this business and there's all sorts, I think, at least my impression is there's all sorts of zero to ones and education things. And again, I'm sort of harping on this consumer education piece, which if I'm overstating it, you'll have to correct me. But it sounds like there's a big job to be done in getting, not only understanding customer behavior, but also sort of like getting them to getting them to roll with this new new model did you feel like I'm feeling that might have been a challenge but did you feel like that was a challenge or is that just I'm still on the learning curve and you figured it out I think I think it's uh I think it's never been a better time to launch a company like Marty because we do see a huge consumer trend in wanting to be environmentally aware and wanting to regardless of kind of like category like thrifting is going up like hand-me-downs are going up people are proud to find a deal so we have like the econ like economic world where we're like we're all struggling a little bit and everyone's like oh my god i found this deal i'm so proud i'm so smart and then we have the environmental factors where people are really really starting to figure out like don't do single serve cups let's let's figure figure out better ways uh and circular economy is like look at like the google searches and everything like these are all things that are like working in our favor um i will say uh just with our inventory it is interesting from the perspective of shopping marty will give you the same type of products as shopping whole foods um we don't sell anything past dates we don't sell anything that is like not good um when we go into the market of re-commerce which is just happening now the items that you sell buy that is open box returns and returns will be a very specific type of inventory that is marked up you know but like generally everything else is at the same you know quality capacity as when you shop anywhere else and every product that we sell has their dates attached to it so again food is just one of our categories uh but everything is like on the same quality as you would shop in other store.

12:33And of course, consumers are like, then why would I get these prices? And that's the hard part of really being transparent and explaining because it is hard to understand if you're not in CPG, consumer packaged goods sort of category, wrapping your head around what it is to produce a product in which months before you need to order your boxes, months before you need to commit to your warehouse and your packaging co-packer on how many units you produce, months before you need to estimate how many POs you're going to have for that product. It is really hard. And most brands want to overproduce rather than underproduce so that you don't have an opportunity to sell this product, but you don't have the product.

13:14So inherently, excess is just a natural part of this industry. And we need multiple different solutions to try and lessen the excess. Marty is one of them. And I think the industry is becoming better, but I think overall we see consumers really latching on and wanting solutions like the ones that we're offering.

13:36Louise Fritjofsson:Yeah, it's really exciting. I mean, the problem of just-in-time inventory, which I am independently obsessed with, is it's really tough. If you produce too little, you're leaving money on the table and you can't, you know, you can't hire new employees or grow without money coming in the door. And if you produce too much, well, then you're like, oh my gosh, I've got all this cash tied up on the shelf and then you're desperate to move it. So helping businesses solve that problem is I think it, you know, and you're not, not solving it with technology. You're, you're solving it with technology too, which, which I love to talk about, but But I think we are similar, have similar ambitions and just sort of recognizing like, wow, this problem of inventory management isn't just a bean counting issue.

14:23Isn't just a like, oh, bummer.

14:25Louise Fritjofsson:Like, whoa, we did the math wrong. We got a B plus on the test. It's like it has everything to do with whether or not the business can make a new product the next year or afford a big purchase order for a new trading partner next quarter or like has to hire and fire people. And those types of problems are like, you know, so existential, like so soulful for an entrepreneur who's like probably core ambition, really like the core coding is I want to take care of people in some way. 100%. Yeah. I'd love to talk to you about the tech piece of what you're building. Give me all of the highlights and then we'll dig into the nitty gritty.

15:06So the market that we operate in is extremely messy. So what we're doing is we're taking problem trials off of brands and vendors' hands. They don't want to see it anymore. They can't make full margin on these products. They just need it out and they want to clear out space in their warehouse. So by the time we get in and we're like, we can help you. Like interest for like really spending time on this inventory is long, which means that we get inventory sent to us in excels and emails and PDFs. They never look the same. It might be, it's very sparse information, you know, titles are abbreviated.

15:44And then you take the other side of what we're doing, which is we can't restock our store. Marty loads up three to 400 new products, i.e. new deals every week, every week. So every day when you go to our store, there's, you know, 20, 50, 60 new products that we uploaded that single, just in a one day. um and why it's because when products sell out they sell out prices are so good they do not last so one any one product on marty.com probably lives for like 45 days and then it's gone so for us as a store we need to figure out what is the imagery that we need to keep in stock and we need to look at it from you know a category uh subcategory and how many bars do we need how many coffees do we how many face moisturizers how many big hitting brands do we need a new like theragun 1999 that was 99 bucks.

16:36And that's really hard. It's all data because you need to look at discount off retail price, tier brand, you know, tier category. So we built a system after two years of doing this, we're like, Whoa, this, this is going to be very hard and very costly to build out. If we need humans to sit and look at this and go out and find inventory and buy the right inventory at any given point of time. So we built out our smarty buying tool, which, which is of course, as everything else today, an AI-based buying tool that A goes in and looks at our own inventory to figure out what is the inventory that we need today in two weeks and four weeks, according to all the metrics and how our users behave.

17:16And then it ingests all of the bins that we see. Today, we're established in the market. So we see probably 8 ,000 different SKUs presented to us on a weekly basis that we have access to buying if we want to. And we don't want to buy all those. We want to buy a couple of hundred of those. So the system goes in and it matches it to our own needs. And then it matches it to all of the data that exists within Marvy and in the marketplace to figure out unit count, pricing, sell through predictions, et cetera, et cetera. So instead of having people looking at all different data sources to figure out what is a good buy, our system does it for us and we can keep up pay saving.

17:57An average buyer on my team spends, if you look at traditional buying, like 95 % less time on any one bid to make a complete purchase and move on to the next thing.

18:09Louise Fritjofsson:Wow, that's a lot of data. I'm kind of curious about the other several thousand that you say no to. Like, is there a Marty 2.0? Yeah, I mean, and again, like it's sometimes it's good product, but we're stocked in that category and we don't see, you know, an incremental, like the system is telling us even bringing this in, we will not see incremental sales or we will be overstocked. We're not going to move it in time for our own cashflow metrics and how we want to run our business. And at other times there's other things for like dates is too short. We don't want to take anything that is too short dated.

18:46Like we want our customers to be able to like buy it and enjoy it before that best before date and so forth. So we just see a lot of inventory and we try to send them in other directions if we can't take the inventory to be a helpful partner.

19:00Louise Fritjofsson:Yeah, that makes a lot of sense. And, you know, I think I'm curious then how how that influences like what you're open to buy dollar calculation looks like. And are you paying for all of this up front? like the value, I'm sure that I assume that's part of the value prop to your vendors. But yeah, dig into that a little bit more. We buy most of our inventory still, we do have a drop shipping program, which means that we only act marketplace and we take a take rate, but the consumer lists it or sorry, the vendor lists it and does all the shipping from their warehouse. majority of inventory that lives in that category is e-commerce so that would be returns open box returns for larger kitchen appliances electronics and so forth so and and the other the other inventory that we bring in really needs to hit that cash flow metric of take it in sell it out within a certain time period for us to look at it as a good purchase that makes sense you've I've heard you say before that you are not competing on convenience, like you're competing on price and that's sort of the metric that you care about, that your customers care about.

20:11Louise Fritjofsson:Um, and, and the thing that's brilliant about that is that of course, like the alternative is a race to the online delivery. So you could possibly compete with the largest business in the world on that. Um, and there's a lot of other trending, let's say like, um, you know, convenience brands, um i and i'm thinking of sort of like the instacarts and the door dashes that that the whole method is same day delivery or even same hour delivery um so i'm curious just what the um just to hear your voiceover on like your three to five day delivery model but how that influences retention and what you see as what you see as customer buying behavior like what are they buying as a result of you saying hey come to us for come to us for price don't come to us because we're going to deliver to you one hour later?

21:04Yeah, I, I, there's a future in which we will have bi-coastal warehouses and our delivery time will be shorter. And when that happens, my frequency of purchases will be higher. Uh, and my overall kind of like users that retain to shop will be higher. With that said, um, I think any company in this market needs have a very strong mode. And I'd rather win on one very strong mode than trying to half-ass compete on several. And I think you just need to be very, very clear to your consumers on what the expectations are. So if we believed that actually convenience would be the thing to tip the scale in a dramatic shape or form, we would probably lean into it.

21:49We're not seeing that today. As any company, of course, there's never going to be enough retention for you to be satisfied and happy. But we are not unhappy with the retention and frequency that we're getting for our users. If you see what I mean, you know, like, like, I couldn't say as a as a CEO of this company that like, oh, like, don't shop more often, of course, you should always shop more often. But I think we're doing a good, good enough job to like, very, very much convey that we will make sure that you get the best prices. I mean, you get the best assortment. And it seems to be, it is clearly enough for people to come back on a regular basis to shop at this moment in time.

22:29Louise Fritjofsson:I love what you just said. And I'm just going to like wildly extrappily, you said not unhappy. And like, right. Because like, this journey, we're not happy. It's just, of course, I'm not going to be satisfied, that would be absurd, but, um, it's not, you know, I'm not unhappy about it. Yeah. Actually. Yeah. Being satisfied is like a failure mode for a founder. Oh yeah. Yeah. Yeah. Yeah. No, like can't be that. Can't be that. No, God forbid. Um, let's talk, let's talk about, uh, the many people you're Swedish. Uh, and I've heard, I've heard you share that you're inspired by Ikea's philosophy of serving the many people.

23:16Louise Fritjofsson:And I love that. It sounds ridiculous when you say the two things, one after the other, but okay. Like it's not because I'm Swedish, but yeah. It's funny. Fair. We can all be inspired by Ikea, but we can't all pronounce it correctly. Right. Fair.

23:36Louise Fritjofsson:Your average customer is sort of like suburban America, like mid forties. Um, and you know, I think that there's, there's another, um, I don't know, like phenotype that most CPG brands are chasing. It's like the 21 to 29, 35 set, uh, where like CPGs and startup land are sort of like really trying to get this like younger set and trend. So you're building a really cool brand for what is a, an older, definitively older demographic. and sort of a part of that, what I would bucket is kind of like the many people. And I'm curious how you frame that for yourself for this startup versus like the three others in your past.

24:20Louise Fritjofsson:Are you chasing a different customer? Do you feel like you found a customer and now you found another product that is even kind of even more of a touch for them? It's interesting because when we started this company, again, like the vision of like, let's build somebody that makes people healthier. Let's build a company that changes the idea of cheap equals less quality. Like how can we effectively move the needle? We have 40 million Americans that are food insecure. We have more people than that struggling to just get staples to their home. And again, if you look at the quality of products that they can afford, it's not good.

24:58And it's just like this terrible effect of getting poor quality products and getting sick and all the things. So that's where this started. And I think it's a really exciting adventure to be on to build a household brand name that is for the every people. And like what that really means is like, if you really extrapolate what I mean with Ikea is Ikea is for everyone. Everyone knows that it's affordable, but it's also looked at as modern and cool and family friendly and no one's ashamed to shop it. And when we think of our brand, that's what we want to be. We want to be accessible. We don't want to be bougie.

25:38We want to be accessible. We want you to be proud to have a Marty box on your doorstep, even though you know that it's affordable because it's also kind of like modern and cool and fun. And we want to be fun to interact with, and we don't want to take ourselves too seriously. So we like, we want to live and breathe that personality. Then with that said, what started happening in the last few is pretty amazing and cool and fun. This is still where we are going. We're building a household brand name. It's for the many people. And today, more than 50 % of users that shop us are affluent. They live in the big cities.

26:15They live in New York. They live in Los Angeles. They have high household income. When they don't shop Marty, they shop Whole Foods and Sprouts and Credo. And when we talk to them and we try to figure out like, why are you coming to shop us? you don't necessarily need to. It is because everyone loves a deal and they're starting to trust Marty as a platform to bring them the best brands, the hippest brands, the coolest brand as the best prices. 60 % of our users in these cohorts come specifically to discover new brands and products with us. Because they don't, even though they could, they don't want to pay$12.99 for Momofuku noodles unless they know that they like them.