Advice Line with Ronnen Harary of Spin Master/PAW Patrol

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3:18Hello, and welcome to the advice line on how I built this lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week, I'm joined by a legendary founder, a former guest on the show, who will help me try to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433 - 31298. Leave us a one minute message that tells us about your business and the issues or questions that you'd like help with. All right, let's get to it. Joining me this week is Ronan Harari, co-founder of Spin Master, which started out as a toy company back in 1994 and has since gone on to become a multinational, multimedia entertainment empire.

4:01Spin Master is the company behind the mega hit franchise, Paw Patrol, as well as Air Hogs, Bakugan, and so many more toys, including Rubik's Cubes now. Renan, it's so great to have you back on the show. Oh, great to be here, Guy. Thanks for having me on. So you were first on the show back in 2021. When, of course, you told me the story of Spin Master, which we will put a link to in the show notes. And I know I always say this, but it is a phenomenal episode. You've got to listen to this one. Thank you. Renan, before we get to our callers, I'd just love to get an update from you since since you were last on.

4:34You were, at that time, I think you'd recently transitioned from being co-CEO of SpinMaster, which you've done for like 25 years, to becoming chairman of the board. So what is your involvement with SpinMaster these days? You know, I'd say I've spent about 30 % of my time in the business. So managing the board and the board of directors and working on special projects. One of the special projects I worked on was getting our worldwide AI studio going. So we built that up. So I've been busy doing that. I just finished writing a book. So I got to tell you, it's one thing to write a book. It's another thing to sell a book.

5:12It's like starting a business. So I almost feel like I'm back in startup mode again, which is kind of nice. Tell me about the book, Full Disclosure. I've read the manuscript. It's not a traditional memoir. It's sort of a how-to guide, but directed toward a very specific audience. Tell us about it. Yeah, it's called No Experience Necessary. Why betting on yourself in your 20s is the best decision you'll ever make. And it's really a manifesto based on my lived experience about why I think that your 20s is the best time to start a business if you're so inclined to. And I write about certain things that in your 20s that accrue to you, things like everybody's rooting for you, the power of not knowing.

5:50And then I try to help people reframe their thoughts around risk and luck and equity and control so that all the benefits from that time can accrue to them. Yeah, it's a great message. And again, not to say that if you're beyond your 20s, this won't have relevance. But I think the key argument of the book is a lot of young people, they sort of they feel like they don't have any advantages, right? Because they're young, they don't they're not taken seriously. They see older people succeeding and doing all these things. But in actual fact, when you're in your 20s, you've got this insatiable hunger and energy.

6:23And and you can learn very quickly can learn new things very quickly or exposed to things that people in their 50s aren't exposed to. So there are massive advantages to being young and starting something young. Yeah, no, exactly. It's all about the ability to start and being brave enough to take that step. And then all the things that will come your way once you've actually started on that journey. And you can't map that out until you actually start. Awesome. Well, congrats on that. I'm sure it's a relief to have that out in the world. I want to switch gears for a second because I remember when you were on the show, one of the things we talked about was how fickle the toy business is because you're dealing with kids.

6:59They like something for a few months and then they move on. And the key is trying to come up with a multi-generational brand, which is like the holy grail, really hard. You guys tried to do it and finally you did succeed with Paw Patrol. A lot of the things that you guys built were innovated inside Spin Master. You created these ideas inside of the company. But over time, as you've grown, you've acquired some legacy brands, Etch-a-Sketch, Rubik's Cube, Melissa & Doug, a brand we actually did on the show many, many years ago. We had Melissa & Doug on the show. So when you think about a company like Spin Master, what's the balance between acquiring existing brands and really innovating from inside, coming up with the ideas from within?

7:46I would say you want at least a 50-50 balance. One of the things we did was we took a lot of the earnings that we made from Paw Patrol and we bought Melissa and Doug. And the reason for that was to have, to even out the ups and downs of the toy industry. And Melissa and Doug is a very stable, you know, open-ended play traditional toy line. Yeah, right. It's like wooden kitchens and, yeah. Kitchens and ice cream makers. Yeah. That gives us a stable reoccurring revenue and an incredible brand of which to innovate around. And I think that's the thing that you want in the toy industry is you want those timeless brands that have high awareness among consumers, and then you want to infuse it with innovation.

8:25And that's always been our model. And I would say that we probably over-rotated in the last few years since I, I like to say, stepped up from being CEO of the company or co-CEO, where we became too rigid. And so our culture was actually starting to shift, which wasn't a good thing for us. and now we've leaned heavily back into innovation, ideation, and then stuff that I was talking about at the beginning. What can we do around AI to make sure that we're staying current? Because I would say that the rate of innovation is very high now and the barriers to entry for people to enter into the toy business or children's entertainment has gone down a lot.

9:03So we have to be very, very quick as a company. Yeah, you've got to be right on top of these things because, I mean, And it's basically a business around building hits. Yeah. And keeping things going. Like, for example, with Paw Patrol, we have our third movie coming out this August. You know, we bring out a new season every year. And within the season, there's specials and there's new characters. And then with the toy line, we make sure that we keep the toy line super innovative. So we're constantly refreshing everything within the franchise. You know, our goal is Paw Forever. We started with Paw for 5, Paw for 10, and now we're Paw Forever.

9:37We're going into, I think, our 14th or 15th season. And we're keeping stuff fresh. All right, Ronan, what do you say? Should we take our first caller? Yeah, let's do it. That'd be great. Okay, let's bring in our first caller. Welcome to the advice line. You're on with Ronan Harari, co-founder of Spin Master. Tell us your name, where you're calling from, and a little bit about your business, please. Hi, guys. I am Anne Williams. I'm calling from Nashville, Tennessee. I have a business called Yearly Co., which is a fine jewelry brand, and we specialize in solid 14-karat gold bangles. and these are based on a tradition that was started by my grandparents.

10:12So my grandfather gave my grandmother a gold bangle every year of marriage. Wow, awesome. Well, thanks for calling in. It's your Nashville. And tell me, so you sell gold bangles. These are bracelets and is that your main product? Yes. So bangles that are custom sized, which is kind of really our differentiator. We really say it's to tell your story. So could be one for every year of marriage. It could be to celebrate a health journey, a promotion, you know, really whatever speaks to you about your jewelry. But we do probably about 80 % of our sales are bangles. And then we have expanded to other just everyday pieces like earrings, bracelets, necklaces, and everything tends to be, everything is solid 14 karat gold, natural diamonds.

10:56But we really focus on that wearability factor. We want those special pieces to kind of become a part of everyday life. When did you start the business? I started it in 2016. So about 10 years we're about to celebrate. Congrats. And how did it come about? Were you in the business before? So no, I had no business being in the jewelry business. I was a stay-at-home mom at the time. I had started some other businesses, always had an entrepreneurial spirit. And this is our family tradition. So I decided that I could take a metalsmithing class and learn how to make a bangle in my garage. Didn't think it was that hard.

11:32It's harder than it looks. and then just kind of naturally had this customer base of my family. So started selling them out of my garage, truly just working during nap times, listened to a lot of how I built this in that garage and really had no plans to like start this huge business, but the marketing, the pieces, the fact that you come back every year for another bangle, it just kind of grew from there. Awesome. Tell me a little bit about how the business is doing. Yes, so I'm very proud to say We did about$11 million in sales last year. Wow. So we have grown rapidly and then kind of hit like a stabilization period, I'd say, over the last couple of years.

12:09Wow. Congrats. Okay. Thank you. Before we dive in a little bit further, what's your question for us? Yes. So my question, if you've seen the news, cold prices have surged to historic highs in the last 12 to 18 months. So although our order value is up, we've definitely seen a decrease in our order volume. So I'm just really trying to figure out how we adapt. You know, whether it's through product pricing or marketing, how we continue to serve that customer that I've been serving for 10 years when our material price has just so drastically changed, especially in a short period of time. Yeah, of course.

12:44All right. Ronan, I want to bring you in. You guys also face some challenges with things like tariffs. So you're not, you know, this is not unusual, right? This is going to create some challenges. Thoughts, questions, ideas for Ann? Yeah. Yeah. So first of all, I just want to share that my late grandmother used to wear bangles. Okay. So I just want to say that when I'm looking at your website, it just reminded me of my late grandmother. That's sweet. I love that. And so from a business perspective, I guess what comes to mind for me is like, first of all, your geography, if you can share with us, you know, where do you sell your products?

13:20Is it just in the United States? How are your gross margins? and what are your thoughts around other materials? Because right now you just do everything with gold, but you don't do anything with other materials. That's right. So solid 14 karat gold has kind of always been a big part of our story. It's what the bangles were originally made in. It's kind of a material we trust. We pitched our customers because you can wear it for a lifetime. We do about 80 % of our sales online, about 20 % in person. So we have a retail showroom in Nashville. We do trunk shows across the country as well. And we have seen like higher AOVs, obviously in person when you're buying, we tend to see that.

13:59And our margin, you know, has been interesting because we have had to change things so rapidly. So we do very clear price increases with our customers when the gold market has these bumps. So over, you know, 2020 to 2024, it was like, oh, maybe we have to do one. And then in the past two years, I think we've done four price increases. And we do give our customers a heads up to order. But we're about 2.25 to 2.5 marking up our products. We're not having to mark them up four times, like the traditional jewelry markup, because we're not wholesaling. So it does give a direct-to-consumer price. We're really excited about that, always, and confident in that.

14:40That feels like an integral part of the business, because we should, if we were in that traditional markup, be charging much more for the products we can sell direct. Right. And you've been able to hold your gross margins as the... We have. I mean, some of our pieces, we've compromised a little bit. So I would say our cost of goods on some of them, it's like 40 % to 45%. And our original bangle, which is kind of our bestseller, and it's the piece that we really rely on, I'm constantly kind of pushing back, like, oh man, if we can just push that volume and keep the price a little bit more reasonable, because we're approaching that$700 price point.

15:17And that's been the hardest part, I think, is that It's shocking to a customer to be like, wait, 12 months ago, you told me this was$440 and now it's$640. We don't really do a lot of sales discounts, things like that. So I would say that generally we're holding those margins pretty strong. We have repeat customers who understand the price of gold, but we've definitely lost this margin of$300 to$500 price point customer. Are there, I mean, obviously you don't want to compromise on the gold and the craftsmanship and the sizing and all that stuff, right? But you mentioned that your existing repeat customers understand, right?

15:54They know that the price of gold goes up and they understand that. And so you're not going to, I'm assuming, you're not going to get into like gold-plated lines, right? Or like lower quality materials. I don't know. Maybe? I don't know. I mean, it's crossed my mind for sure. My concern is that part of, I think, what makes us so special, you know, a gold bangle is not, we did not invent it. They're sold by so many retailers. I think our custom sizing and our guarantee that these pieces are solid gold is kind of what sets us apart. We're in an interesting part of the jewelry market. We're not Tiffany, nor do I ever plan to be.

16:26But now our price points are getting higher. We're doing this, you know, less volume. And that feels great in some ways. But there's just that part of you that wants to, like, continue to provide that product to everybody. You know, there's certain things we can't control, commodities, we just can't control it. But what I would recommend to you is you have so many incredible things going for you. You have this incredible direct-to-consumer relationship. You don't have to go through retail so you can keep your prices in check, which is so wonderful. Your name doesn't have the word gold in your brand.

16:55So I think you have the permission from your consumer base to do other things that are not necessarily gold and really lean into the creativity of what else that could be. and the price may come down. You know, gold has had a reputation of coming down. It's a commodity. So we don't know, but looks like from what I see, you have the permission to do other things that aren't necessarily gold in the jewelry space that people would really care for. And I would lean into that while the price remains high. You know, that's an interesting idea because I initially was thinking, you don't want to have gold plated stuff, but, you know, actually now that I, and I still think that, But looking at your website, you know, like what else could you – what other materials could you use?

17:39And I think maybe keeping the designs, but you're offering different metals in that design. I mean that could be interesting to see what that does because I don't think that's going to affect the qualitative sort of feel of your product line. Yeah, I think fine silver is kind of another alternative that we've had people ask about before. We do white gold, which kind of gives the look, but it's still 14 karat. But there are things that I consider that we would be able to offer at a lower price point, obviously. And even in our concept yearly co of pieces like silver baby cups or special frames, things that you're going to go to year after year, these special milestones in your life.

18:23I think there's an opportunity there to expand and help our customers, like, meet them at the place they are on those special occasions because we already have that trust and that brand loyalty. You have a strong base of customers. So the question is, what else can you sell those customers? And I would turn lemons into lemonade with this situation where it's like, what brand new product line could you guys bring into the world that's different to what you're doing now that can really expand your revenue base? And so it's not necessarily just rethinking the materials within the existing product line, but it's really bringing forth a whole brand new product line that's made of other materials that maybe could be a little bit more contemporary or can serve a slightly different market.

19:02Or, you know, you're selling fashion at the end of the day. So it's like, you know, what else can people do they want to wear for different occasions that you can provide to them? Yeah, awesome. Anne Williams, the brand is called Yearly Co. Good luck. Thanks for calling in. Thank you for having me. Appreciate it. Yeah, thank you. Stay with us because after the break, we'll talk to another founder working to take their business to the next level. That's after the break. I'm Guy Raz, and you're listening to The Advice Line right here on How I Built This Lab.

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23:29Welcome back to the advice line on how I built this lab. I'm Guy Raz and today I'm taking your calls with Ronan Harari, co-founder of Spin Master and let's bring in our next caller. Hello. Hey, Guy. Hi, Ronan. I'm Felix Colon. I'm calling from Martha's Vineyard, where my family runs Island Bee Company. We're an apiary run by three generations of my family. We produce raw honey, but our most popular product is Hive 5, which is a moisturizer made with five ingredients, all straight from the hive. Wow. Well, thanks for calling in, Felix. So this is a family-run, family-owned bee company. You make honey and skincare products and sell them mainly on Martha's Vineyard?

24:12Yeah. So predominantly on Martha's Vineyard through farmer's markets and local stores. We also recently started selling online, but that's only been in the past three to four years. Great. Okay. So this was started by your parents, you said? Yeah, so it started by my parents in 1999. I work for the business part-time right now. My goal is to take it over and to grow it into something meaningful. I have been seeing this business throughout my childhood, and I've always been thinking of new things to do on this side and that side. And I think that I've wanted to start a company, and then I look, and right there before my eyes is one that's small with a lot of potential, and I think that it feels right.

24:56What are your best sellers? Yeah, so the best sellers are honey, of course. The worry there is that it's not a very scalable product. You know, it's heavy, hard to ship, and our production capacity is limited. Our most popular product is Hive 5, which is a skin moisturizer with five ingredients from the hive. Raw honey, beeswax, propolis, pollen, and royal jelly, which is a proprietary formula that my mom created, and it is patented. and that's our best-selling product right now. And we also sell candles and other kind of gift-oriented things, but the skincare product is kind of our bestseller there.