How Direct Shipping and Supply Chains can Massively Increase Cash Flow and Profit Margin with Izzy Rosenzweig

0:01Boom! Shake the room, Fire Nation. JLD here and welcome to Entrepreneurs on Fire. I am brought to you by the HubSpot Podcast Network, the audio destination for business professionals with great shows like Success Story Podcast. Today, we'll be breaking down how direct shipping and supply chain can massively increase cashflow and profit margin. To drop these value bombs, I brought Izzy Rosenzweig into EO Fire Studios. Izzy is a veteran of the DTC industry for over 10 years, that's direct to consumer. As CEO of Portless, Izzy aims to revolutionize the industry by massively improving DTC's cashflow and profit margins through direct fulfillment.

0:41Fire Nation, we will talk about packages being delivered within six days with USPS tracking. We're talking international. We're talking about cross-border fulfillment. We're talking about the huge problems with shipping containers and so much more. And a big thank you for sponsoring today's episode goes to Izzy and our sponsors. The Hustle Daily Show, hosted by Juliet Bennett-Ryla, Rob Litters, Ben Berkeley, and Mark Dent is brought to you by the HubSpot Podcast Network, the ideal destination for business professionals. The Hustle Daily Show brings you a healthy dose of irreverent, offbeat, informative takes on business and tech news, like a recent episode on Hackers vs.

1:19Casinos, where the hosts talk about MGM Resorts and Caesars Entertainment and the devastating potential of cyber attacks. Listen to The Hustle Daily wherever you get your podcasts. Don't be the bottleneck to your organization's growth. Accomplish more with Belay. To get started, schedule a free delegation consultation with Belay in just 30 minutes. See how their flexible staffing solutions can grow your business and free you up to lead. Text FIRE to 55123 to schedule your delegation consultation today. Izzy, say what's up to FIRE Nation and share something that you believe about becoming successful that most people disagree with.

1:59Thank you. First of all, thank you for having the podcast. Super excited to be here. That's a great and difficult question, but I'll give my perspective. I've been in the startup scene for about 10 years at this point, and a lot of people around me, they have taken the approach that every part of their success or failure is 100 % of their control. And I think taking that mindset could be actually really hard on your mental health and as a byproduct on your success itself. Personally, I'm Jewish, and I strongly believe in divine providence, meaning you still need to give 100 % effort towards everything you do.

2:36But I believe that will only take you so far. At some point, that's out of your hands, and whatever is meant to be will happen. Quick example, when I was fundraising, I spent months knocking on every single door, San Francisco, New York, got told no across the board. I went back to work. Six months later, one of my angel investors happened to be watching a hockey game on the plane, sat next to the partner at a large venture firm in Chicago. Three weeks later, we raised$7 million. So I strongly believe that you got to give all your effort, but if it doesn't work, maybe it's not meant to be, and maybe there's a bigger door down the road.

3:14We all have an origin story, but what exactly brought you to launching Portless? Yeah, I always like to give a little context to that, how I got into the business. So my family has been in manufacturing for over 50 years. It actually started with my grandfather surviving the Holocaust, came to Canada on his own, and started this factory a few years after. It came really from nothing. And in the 1950s, 60s, and 70s, there were actually hundreds of factories in Canada and obviously thousands in the States that did all really well. Then what happened was 1980s came and containers became industrialized.

3:57It became very efficient to move product from other countries around the world to the US and other markets. When that happened over the next 10 to 15 years, most factories went bankrupt. Either you went bankrupt and you started other companies or companies or some factories saw the opportunity, saw where logistics was going and opened up or partnered with factories overseas. or they went very niche. That was majority of those factories. My grandfather went very niche, but when I was growing up, I saw how supply chain totally disrupted that market that was so stable for so long. So for me, when I got started in my business, I got very lucky.

4:36I met ex-executives at Alibaba, and they were introducing me to cross-border logistics by airmail. And essentially now what you have is the ability to ship something from near a factory to the end customer within six days to the United States, all with local tracking. And when I saw that, I'm like, this is 1980s all over again. So for me, when I saw this evolution of cross-border logistics, to me it was, this is going to disrupt another industry. And this time I believe it's going to be e-commerce and direct-to-consumer businesses. Well, I want to dive a little deeper into some problems that you're looking to solve, because you believe that there's not a small problem, but a huge problem with shipping containers.

5:24Yet, it just seems like direct-to-consumer companies are using them without even investigating other options. So first off, let's have a little conversation about what the problem is and why they're still being used. Great question. So containers, which again, started mainly in the 80s was the new modern supply chain to do business across the world. And even till today, you need containers if you have a physical retail store. If you have a physical retail store or you need FBA or next day delivery, you need to bring your products physically to the local market to give that customer the ability to pull off a shelf.

6:01Now, that has been consistent, I would say, until about 10 years ago. 10 years ago is when cross-bore logistics, AirMail just started. And in those times, it wasn't very efficient. It took two, three weeks for delivery. There was a lot of Mandarin. It wasn't a great experience for the customer. But over the last two years, because of the incredible volume that's in this space, that efficiency has gotten incredible. So you have a within six business day delivery to anywhere in the US, five days to the UK, and all local experiences. If somebody makes an order within one day, they get a USPS tracking number delivered by a USPS driver within six days.

6:40Everything English, no Mandarin anywhere. So from a consumer perspective, everything stayed the same. And that is recently the ability to have the same experience the consumer is only two years old. Now, from a factory perspective, in traditional supply chain, and I started as a merchant, I've shipped millions of products as a merchant in traditional supply chain. um you need to if you think about containers a you're buying you're getting great prices on your cost of goods but you're buying months ahead of a time because it takes 60 days to land to the port and then you have cash stuck in inventory it's dead cash and cash nowadays is very expensive then what happens if you have it's you know november 3rd a product is killing it's doing so well well when you run out of stock you miss the season because then you got away another 60 days You bring stuff by bulk, you got to pay import duties.

7:33Anything over$100 value has to hit duties based on your HS code. So the way of doing business by containers, which is a mandatory part of business for, let's call it physical retail, for DTC, it's still relatively new. It's only two years old that you could avoid all that. Instead of waiting 60 days of lead time, the day your factory's done production, you could have it in a warehouse in a fulfillment center. two days later, ready to ship to your customer with a fully local experience. So now in this new model, you could turn inventory to cash in days. You could reduce your risk in inventory. If something does well, you ramp up production.

8:13And container costs don't even exist in this model, while shipping rates is still very competitive if it's on the lighter end. Very often the same, sometimes cheaper if it's very light, but very competitive on the lighter end to the consumer. So it's relatively new. It's not meant for physical retail, but for DTC, it really is hard to imagine another way to do this as this supply chain keeps growing. So for a lot of people listening who have gone the prior route and just are thinking, wow, how is this possible? It sounds like a fairy tale that's become a reality. Can we dive deeper on the how?

8:50How is this now possible? Yeah, great question. So essentially what happens is let's just give it a scenario. You're a Shopify store and you're selling t-shirts. The first thing you would do is you would download our Shopify app, you integrate with us, five-minute integration. And then what happens is we're basically a location inside your Shopify store. So you'll say, okay, instead of bringing in 5 ,000 t-shirts, I'm going to send 500 t-shirt support lists in Shenzhen. Two days after your factory is done, we get it. And now an order comes in the next day. So an order comes into your Shopify store, immediately syncs to us.

9:27What we do is we pick pack within one day. We put into either your branded envelopes that we help you make or a clean envelope. And what we're doing is we're putting thousands and thousands of these packages on planes every single day. And essentially is every day we pick pack, put it on pallets, and they go on planes, but we also sort it in advance. So if you have a customer in San Diego, we put on a plane that's going to LA. So we inject it to LA's USPS distribution center, which means it's only a day or two away from delivery. So we buy the space on the planes and we inject it in the main distribution center hubs as close to your customer as possible.

10:10So we're really cutting out time and areas across the board. Fire Nation, I hope the dots are starting to connect for you like they're starting to connect for me. I mean, this does change the game for certain people with certain businesses that I know right now are just salvatating at the mouth. And we have a lot to talk about around this topic when we get back from thanking our sponsors. The fourth quarter is here. It's time to hit your revenue targets, finish strong and win the quarter. But before you can win Q4, you have to close deals. And before you can close deals, you have to fill your pipeline and nurture prospects, which is oftentimes the hardest part.

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13:15Go to HelloFresh.com slash 50EOF and use code 50EOF for 50 % off plus free shipping. That's 50 % off plus free shipping when you visit HelloFresh.com slash 50EOF. and use code 50EOF. Izzy, we are back. And I want to be honest, I know a little bit about you and you had a lot going on in your life. I mean, you were just doing a number of things. You're doing them very well, but you walked away from everything to go all in on Portless. Tell us that story. Tell us why. Yeah. So as you mentioned, I was actually for the first 10 years building a consumer business. I started as a DTC brand. I personally suffered with every single one of these pain points.

14:07In the early days when I was using containers, the more we sold, the less cash I had. And I constantly had to wait. It was like success, wait three months, success, wait three months, never having cash because the cash was always in the inventory. Then we started to grow the business as a cross-border logistics. We opened up infrastructure in Shenzhen. And over the next tinners, we have shipped millions of packages in our model. And during 2021, when cash started to come tight, see, in the early, in the 2019, 2020 days, cash was free. Nobody had a problem putting money in inventory. Everyone was raising money with burning losses.

14:43Nobody cared about margin. As long as you had sales, nobody cared. But in 2021, money mattered all of a sudden, right? Margins, gross margin, cash flow. You know, who cares how successful you are if you don't have cash to run operations. And what we started happening is our investors start reaching out to us and saying, hey, from all our direct consumer businesses, you have the most incredible cash flow. Like it's almost there's almost no money tied in inventory, almost no inventory risk. So we started talking to the other portfolio companies and we're saying, hey, you know what? We think we could help you.

15:14And what became clear to us was, yes, we had this great DDC business that we built, but we also knew how difficult it was to set up. It took us two years to set up legals, Hong Kong, in China, bank accounts, getting directors, that have to be local people running these entities. And it took a ton of time and effort. But now that it was running for us, it was life-changing. Unieconomics, gross margins, scalability. All of a sudden, we could do business around the world because we could ship something to UK with Royal Mail and Australia, Australia Post, with one inventory location. So when we saw that, we said, you know what, there's a way bigger opportunity for us to help other DTC brands be way more profitable, have way better cash flow, and really be more successful.

15:59And for us, that's our passion. And we realized that's a bigger opportunity for us and can help the overall industry as well. Fire Nation, that's a huge takeaway is to think back to a time in your life when you just saw something that you knew was what you were meant to do, what you wanted to do. The opportunity was so big that you said, you know what? I have a lot of things going on in my life. Life is busy. I've got family. I got friends. I got this. I got that. But listen, this is an opportunity that's existing in this moment. I'm going to go all in. I'm going to focus on crushing this one thing.

16:32Focus. Follow one course until success to make the best of what I can make, to make the number one solution to a real problem in this world. And I know that through this conversation, you've identified that Izzy figured out a real problem that existed in this world when it came to shipping containers. And now he's created the number one solution to that problem. And it's not just a little bit better of a solution. It is leagues, football fields better of this solution. And you believe, Izzy, that cross-border fulfillment is going to change the future of DTC and e-commerce companies for obviously the reasons we've talked about thus far, but how else is it going to change the future?

17:15Absolutely. So the way, if you look at the DTC in the United States, there's$176 billion of revenue happening with DTC brands. And you have the brands coming to fulfill that demand. And the problem was, it's a very heavy cash flow business. So you're having investors pull away money, public markets. If you think of the big DTC brands, they're all 80, 70 to 90 percent down. And what I believe in this model, as companies realize that they for under$5,$4.50 shipped to anywhere continental US for a quarter pound, half a pound,$5.50, anywhere in continental, even cheaper to the UK, it will change the game for thousands of DTC brands.

17:57and not only allowing them to service their customers in the way they did yesterday, but to run it with way better cash flow, invest that money into hiring, partnerships, take that money out of debt inventory. And I see that not only will help them as their businesses, but the overall industry, more capital coming in, more publicly traded companies around this. And for me, I think DTC and e-commerce is super exciting and super bright in the coming years with this supply chain model. Izzy, I can hear it in your voice. I can hear it in your energy. You are all in, brother. You are fired up about this.

18:30We've talked about a lot of cool things, especially for people that are in this world of DTC and e-commerce. What is the one key takeaway you really want to make sure our listeners get from our conversation today? For me, it's DTC is not going anywhere. You built a brand. Your consumers love you. You have something unique about your brand. I would just say double down in every area of your business. It's not only supply chain. It's marketing. It's expanding international. Do everything you can. Find your edge in this, in your game. You can't compete against Walmart if you're playing their game.

19:03Play different games. Think outside the box. Your consumers love your brand. And I think by keep leaning into these opportunities and these ways to play your game better, you guys will be, everyone running DC Brands or whatever company you want to be extremely successful. Lean in, Fire Nation, lean in. Izzy, if Fire Nation wants to connect with you, wants to learn more from what you're doing, What's the best way for us to do that? What is your call to action for Fire Nation? If you could visit us, portlist.com, you can read up about us, reach out to us there. I'm also on Twitter and LinkedIn. I'm always posting content about supply chain, about e-commerce, DTC, passionate about it, love it.

19:42Reach out to me there. I would love the opportunity to connect to anyone that wants to learn more. Fire Nation, you're the average of the five people you spend the most time with, and you've been hanging out with IR and JLD today, So keep up that heat. Head over to eofire.com and all you need to do is type Izzy in the search bar and the show notes page will pop up with everything we've talked about, links to all that jazz. Izzy, thank you for sharing your truth, your knowledge, your value with Fire Nation. For that, we salute your brother and we'll catch you on the flip side. Thank you so much for having me, John.

20:13Had a great time. Hey, Fire Nation, a huge thank you to our sponsors and Izzy for sponsoring today's episode and Fire Nation, successful entrepreneurs accomplish big goals. That's why I created the Freedom Journal to guide you in accomplishing your number one goal in 100 days. We're talking step by step. Visit thefreedomjournal.com and I'll catch you there or on the flip side. The Hustle Daily Show, hosted by Juliet Bennett-Ryla, Rob Litters, Ben Berkley, and Mark Dent, is brought to you by the HubSpot Podcast Network, the audio destination for business professionals. The Hustle Daily Show brings you a healthy dose of irreverent, offbeat, informative takes on business and tech news, like a recent episode on Hackers vs.

20:53Casinos, where the hosts talk about MGM Resorts and Caesars Entertainment and the devastating potential of cyber attacks. Listen to The Hustle Daily wherever you get your podcasts. Don't be the bottleneck to your organization's growth. Accomplish more with Belay. To get started, schedule a free delegation consultation with Belay in just 30 minutes. See how their flexible staffing solutions can grow your business and free you up to lead. Text FIRE to 55123 to schedule your delegation consultation today.