E126: Black Friday 2025

26:33So we just heard from Mike that he had to raise prices for wholesalers. They responded accordingly. They bought a bunch of cheap inventory. And now his Q4 is going to come late, right? And that's very hard for him to manage his business. How are you dealing with a 30 % increase in COGS? How are you upsetting that? Do you know, okay, so like this is the, again, back to Mike's comment on like, this year has been good in some ways and then like hard in others. So we've been working on Lummy 3 for three years. The thing with device, any kind of like hardware, firmware, software, product, product development cycles are super long.

27:11So like I strongly advise against going into anything hardware, unless you've got cash to do it, which is why we raise money. Because you're kind of always developing multiple products at the same time to plan out the years, right? Like Apple's already working on the iPhone 21. Like that's happening. It's iPhone 17 this year. If not further, honestly. If not further, yeah. Like probably further for them. So Lomi3, we did a ton of work re-engineering the product and getting the cost of manufacture down. So like really first principles work, like let's go in and get every part that we can lower it in cost.

27:47Team did a good job there. We kind of gave up half of those wins with the tariffs, right? So we're still coming out with this product at a much better contribution margin than Lomi 2 or Lomi 1. But I thought I would have an extra 30%, and now I don't. So that sort of changes allowable CAC. It's still like a device plus subscription play. We discount the day one price of the device to get people onto subscription. And that's the real business, is just subscription. so I just I just have less cac to play with we're not going to raise price and that's partly to do to channel mix with what we're doing with Costco DTC Amazon and kind of how we're thinking about Q4 so we've done a lot of price testing and we kind of know what has to happen with price to make units move in Q4 so I just have less to play with man like I think that's the I saw you you know put a tweet out this morning I don't know if we're supposed to call those things a post anyway this morning about like, you just have less margin to work with and you should probably have less people in your last year.

28:53And I think that's just a theme in the industry right now is like, there's less margin going around, um, tariffs, ads, whatever it is, right. There's like, people are always coming for margin from consumer goods. And I think we're just planning the business that way, at least the Lomi business, um, which is our, like, as far as Q4 goes, that's our Q4 brand is Lomi. Beely Case has a good Q4, but it's not like a banger. I don't see like 10X normal days in Peelit Case in Q4. It's just not giftable. But Lomi, we do like 25X normal days in Q4. It's that big of a swing. It's no different than a Roomba or any of those types of like very giftable home tech items.

29:37Yeah. I'm glad you brought up, you know, like what to do with the margin, right? And, you know, Mike alluded to this. it's a tax, right? So let's say the tax was 0 % and it went to 20%. It's 20 % on your COGS value, right? And if your COGS are, if you have 80 % margins or whatever, so you have a 20 % tax on 20 % of all of the money in your business, which is probably like the same as, I mean, it's probably half of what income tax is because income tax is like 35 % on profit or whatever. Anyway, there's some math you can do there. And what it looks out to is like, yeah, it's a pretty sizable tax.

30:13And it's a weird tax because it's not on profit, right? If you run a break even, you don't pay any taxes, but you're going to pay tariffs and duties anyway. So it's weird where it's landing. And what does it take away from? Does it take away from your profit? Does it take away from your CAC? Does it take away from top line? Or do you raise prices and just force inflation? So yeah, Matt, what are your thoughts? You're going to see a lot of that in durables, like big stuff. Cause the, I think this is like also where scale and, and price point matters. So like on a low me 30 % on my cogs is probably 30 bucks.

30:49Right. Somewhere around that. Um, maybe 30, $40, 30 % on a Ridge wallet is likely 45 cents. Right. Or like a dollar. A dollar. Okay. Wow. Shots fired. Whatever. Okay. So like the same one appeal, like case, like I wouldn't even, I would barely sneeze at it. Because in order to raise prices to cover that, I'd have to raise it by a dollar. Right. But if you're a fridge or something like a Roomba, a Dyson vacuum, something that's in the hundreds of dollars or approaching a thousand, all of a sudden the price increases are going to be pretty dramatic to consumers. They're triple digit. Yeah. You're like, these are going up 100, 200, 300, 500.

31:32And those things matter, obviously. Is going to be massive. Like these are big categories that we tend to not really pay attention to. And I think that's where we're going to see some pretty, I mean, we've already like durables, consumer durables, like large durables has been for three years, four years. Like it's really been bad. I don't, I think this just makes it even worse. Well, one of the things that this inevitably does is it pushes people like the kind of share of wallet from durables to consumables slash services. and like, and that's not great for people like us. No, I think another one that I'm sort of like, that's causing me, and this is the thing, like my caution with Q4 has a little less to do with tariffs and a little more to do with the housing market, right?

32:22Like, so like we're, our business, you guys definitely don't deal with this, but like if you sell furniture and the US housing market isn't turning over, that sucks, right? If you sell fridges and stove. Because that's when you buy furniture. That's when you buy a fridge. It's when you move into a new home. Totally. So all the house stuff, all home goods, really gets tied up as a downstream effect of how many houses are selling. And the U.S. housing market's not been awesome. It's not terrible. But people aren't selling houses. They're not moving because interest rates are high. Why would you give up these 30-year mortgages?

32:57So I think that is causing me more pause for Lomi than impact of tariffs, even though Prime Day didn't look super awesome for everybody. Yeah. Sorry, Matt. I'm glad you brought that up. It's like, look, if there's a lot of smoke, you don't know if it's a house fire or forest fire, right? HB Buttercup is a furniture brand in LA. They're going bankrupt for the fourth time. It's like, it's, uh, and it's, it's just because furniture is a hard market. I know somebody in the, but like, there's a lot of hard markets happening at the same time, right? Consumables like health and wellness, having a massive moment, a massive heater.

33:35And if you're in that category, fucking, wow, you're killing it, dude. It's consumable. Uh, you know, there's wholesale accounts, all the people want to take care of themselves, but like, I know people in the furniture space and it could be tariffs. tariffs are just like not the thing they needed because home purchases are at you know 2008 to 2009 levels right people aren't buying houses and it's interest rates and it's people nervous and it's all those things happening right um so yeah furniture is incredibly challenged for a couple reasons right a lot of furniture production was happening in southeast asia happening in china and if if it's a hundred bucks and it goes to 150 bucks it just who's going to eat it is it going to go on MSRP or is it going to come out of tax or does it come out of profit?

34:18You know, to your point, I guess my question was, who's going to eat that burden? Is it going to go to the American consumer and higher prices? I think it's all got to go to the consumer. I think Mike's right. I think companies, even if you're not a public company, Sean, you're still not going to want to give up margin. Right? Like it just, this is capitalism. That's not the point of the game. Jason, what do you like about Saris? You were gone for the past week in Italy. Were you checking Saris dashboards? I wasn't checking anything in Italy, but I will say this, like whenever anyone on my team, like growth team or anywhere else, like sends me data anymore, it's likely coming out of Saris.

34:58And every once in a while, I'll get something from them and it looks really slick. And I'm like, where'd you get? Is that Saris? Like, yeah. And I always feel really good about our investment. I do get a daily email of some metrics out of Saris that comes through. But one of the things that I've been thinking about a lot lately is AI. I mean, duh, right? Everyone is. Duh. But like, I finally woke up a few weeks ago. I finally woke up a few weeks ago. I was like, I got to get serious about this. And I was actually talking to the Saris guys. And they launched a next generation AI powered stuff in their platform, which I'm excited about.

35:33It's Saris IQ. It's invite only right now. If you mentioned Operator's Podcast, you can probably get access, hopefully. But the next level of all of this is, first, with AI, you need to have all of your data somewhere. I mean, it's going to be really messy to just drop stuff into different AI platforms. If you have your data in one place, then you can leverage. You can really leverage AI. So the way I've thought about our investment in SaaS analytics was getting all of our data in one place, understanding our customers better, understanding our marketing metrics better. But then being able to lay your AI on top of that is, I think, the really exciting next level here.

36:14You brought up bringing in Costco, Amazon, and Shopify. The ability to have all sales channels with the same data is so important. If you're listening to this and you sell on Amazon, you know how painful that platform is. You have to wait a couple extra days to pull your reports. like the SKUs aren't the same as the rest of your SKUs, like the titles are different. So like to get actually like clean data to compare, it's very manual. Using Xeris Analytics, they matched all that up for us. So like they cleaned all that data. So I could actually look at what is the true margin profile of an Amazon sale?

36:46What's Amazon return rate? What's Amazon customer frequency? Like all the type of data, compare it to our.com and have like a comprehensive overview. And now with their new AI tool, I don't have to look at it. I could just ask it. It could just tell me cool questions. So doing that across our five Shopify stores as well. We have an EU Shopify store. So now I can compare EU ring customer cohorts versus Canadian ring customer cohorts versus Amazon ring customer cohorts. So now we're getting to different functions of my business across different channels, different categories, and actually looking at the margin, the repeat rate, and like, is it worth investing in these different things?

37:20So if your business starts to feel like a spider web and just like keeps going and going and It's just like this nonstop proliferation of different channels. Maybe it's time to check something out like Sarah's Analytics. I remember, Sean, at the very beginning. This is a very typical Sean thing. Sean was like, what is this? Why do I need this? Right. And I'm actually really happy that you've come to understand like how important having a data warehouse is and what it does for managing your business. because you were not like a true believer from the beginning. No, I was angry when you told me I needed to pay for something new.

37:59But Jason was right. He convinced me. He got me on board. I'm using it. So a rare Jason W. So thank you, Jason. Very rare. I'm on Saris Analytics. He's on Saris Analytics. Proud sponsor of the Operators Podcast. So if you want a data warehouse and you want an AI-powered data warehouse, Tell Saris about the Saris IQ feature and then you crave it. You're demanding you get access to it. So, all right, guys. Talk to you later. The point I was making earlier is each of the parties in the supply chain has a punchback. And the consumer's punchback is, I'm going to buy less furniture. You know what? That's fine.

38:38You try and charge me another 30 % on my furniture. I'm just going to buy less. I'm going to get by with three pieces of furniture instead of five. And that's the concern I have. it's interesting now because I do have exposure in consumables and I would totally, I mean, like the prime day thing was really like interesting. I mean, it was kind of the canary in the coal mine of like, Hey, this isn't great. Right. Like, I don't think in, I'm in a bunch of group chats with you guys and other ones, you know, people are posting data online. My brother sells a lot on Amazon. I, we actually had what I consider to be a really good prime day, but the way that we got there was very different than last year.

39:21And like Trevi, for example, I think was, geez, I don't know, 10X or something on Prime Day. But that is an outlier and that's a consumable. And our drinkware year over year was probably an abomination of a comp. And, you know, I've heard stories about Amazon wanting to run deals again next week with some of the things that work, because their numbers obviously are terrible. So I think that the biggest concern for everybody is the prices are going to go up. Everybody's going to try and pass it on the consumer. The consumer is going to say, you know what I can do with five water bottles instead of eight.

40:00I can do with, you know, whatever. I can go longer with Lomi 2 instead of buying Lomi 3. And that I guess the term I would say is internally sellouts are sexy. And I don't think we thought about it that way for a long time. But now I think we're starting to think about it like that. Like you buy conservatively on inventory and you blow through it. Good on you. You don't look at that and say, man, should have bought more. Like, because it's just not a period of optimizing for growth and optimizing for top line. I think to your point, Sean, the more you try and optimize for top line and growth, the more you compromise on margins and CAC and all these other things.

40:42And you just can't in this environment. You have to kind of say, no, you know what? If we sell half as many bottles, but we hit the kind of contribution profit per bottle we want to hit, then we'd rather do that than the opposite. Go big and, you know, have double the inventory we want to have with this new tariff cost. I like to read comments on Instagram posts. So like when I see ads or whatever, right? I just like to read. I don't know. It's like a weird thing. It's, it's a, But I don't know. It's entertaining. Anyway, one of the things I noticed with Prime was I was looking at a bunch of brands, scrolling my feed, and just looking at like Prime ads and Prime promotions and Prime anything.

41:20Very strong amount of, like a large amount of people have this comment on like, it's Amazon's annual raise prices before you drop them event. right so like i think that the like the whole the you know msrps have to go up so that we allow for more room for promotion i i don't i don't want brands and brand operators to think that this is like dude the consumer knows you know this is not like you're not you're not winning here this is just the game that's being played and you either opt into it or you don't and amazon is just like forcing everybody to opt into this you know like you want you want to run a 30 or 30 plus plus whatever Black Friday deal, which is going to be the expectation because every year it's higher.

42:04And I see influencers post about this all the time. It's like, if you don't do at least 25%, I'm not even paying attention to you. Like that's the content that's on the internet. Right, well, dude, Amazon built a business cutting off your tail and selling it back to you, right? Where they're like, you have to discount because that's when people want to shop, right? And like, if you just ran discounts, you would also have a sales bump, right? Amazon created this new area where it gives you permission to discount or whatever, but you could always discount. And it's this cycle where more people discount, so more people show up.

42:37But now we've reached the peak where they've had to double the days to get a little bit of growth, right? And it's kind of amazing that they've been able to expand it to so much of the calendar. Like I said, they call it Turkey 11 now. You've got how many prime days? I've lost count. Are there three different prime events that are now four days long? I don't know. But I mean, there's just so much stuff. It's like eventually it's going to be like, hey, there's three days where things are regular price and then everything else is some kind of sales event. Yeah, totally. So going back to like I have two points.

43:09The first is I try to be the contrarian with this. I was telling people to raise prices for like four years. I'm like, raise your prices, raise your prices. But none of us raise our prices fast enough. But now we're in a world where tariffs, I think don't if you if you cannot raise your prices, don't raise your prices. just because everyone else is doing it and you should wait to see what actually shakes out. But the second point is, who's actually going to eat the tariffs as Q4, right? What Ridge is going to try to do is spend less on marketing, right? I want to keep profit the same. Matt graciously called out that my wallets don't cost that much to make, right?

43:49So I have, it's not going to, it's not, and basically it just kind of reverts all the changes I did last year, right? So like we have a better supply chain and we have better, we've already lowered COGS, like we're always doing that. And this kind of brings us back to 2023 or 2024 levels of prices. So the margin hit isn't too crazy, but I'm going to try to have marketing dollars absorb that, right? Like typically we run this business at like a 2.5 XMER, like, you know, and then we end the year at three because Q4 is going to be so good. Can I end the you're at 3.3 or 3.5, right? And then who's paying for it?

44:23It's meta, right? So it's taking dollars out of the growth ecosystem, sacrificing top line to make sure I'm hitting the contribution margin I want. That's probably the game on the field when it comes to Q4. But Matt, this all started to ask you about value engineering, okay? How can you get away with not increasing prices, but keeping your margin the same when there's a 30 % tax? Mike, you're the king of value engineering. We are actively engaged in this and like, obviously, value engineering sucks internally because you are intentionally taking things away from the product. And so that I'll just go ahead and say this at the beginning.

45:02The game when you're value engineering is to say, where are the good trades? Where I remove 20 cents in cost and a dollar in retail, but it only was worth 50 cents to the customer. Does that make sense? Like you need to not have the mindset that I'm going to take this away and nobody's going to notice. I mean, if you can do that, then you should have done it yesterday. But like if you're looking at things that you can kind of remove. So a good example for us, we have awesome boxes. Awesome. They've got foil on them. They're white. They are great. But they're expensive, you know. And there is a kind of version of that that does not have foil.

45:39It still looks sharp, but it's not as nice. But we can save 20 cents a bottle. Well, when you sell 14 million bottles, like, you know what that is? That's$2.8 million a year for the extra shiny foil or whatever. And so you're taking a little bit of a step down in the unboxing experience, but also like the savings is really significant. There are things like there are several different types of powder coating. And the big thing around powder coating has been, can you get dishwasher safe, dishwasher safe, you know, in quotes, powder coating. And we're now paying as opposed to like whatever, 15 cents a bottle we've been paying, 30 cents a bottle.

46:19I don't know. Those are just numbers I'm throwing out. But like there's there was a premium you're paying for that. And so how do you want to pay for the quote unquote dishwasher safe powder coating that maybe isn't even dishwasher safe? And so maybe you can say 15 cents a bottle. But oh, by the way, the 15 cent one might have chemicals that may become targeted by California. And so you might have to switch back. And so legal has one opinion. Manufacturing has one opinion. Marketing has one opinion. And when you do value engineering, this, at least in my experience, Sean, this is kind of what you're doing is you're educating between these different groups because there's always some group that's like, I don't want to lose that.

47:01Right. You're taking away something from me and you're having to make tougher decisions. I mean, one of the most interesting ones in our particular industry is in every bottle, this became kind of a new story, but in every bottle, there is something to cover a hole and vacuum insulate it, basically. And for a long time, that was a little dot that was made of solder, basically. So, you turn them upside down. You put this little solder dot. You put it in the oven. The solder dot melts, and it creates the vacuum as it melts. and but the soldered soldered dots had little bits of lead in them but it didn't matter because they were kind of basically on the inside of the cup and so like uh there i won't cap anybody there were a lot of people almost everybody was using these soldered dots that had little pieces of lead but it didn't matter because there was no way you could be exposed to that lead and then this kind of became an issue uh there was a kind of a big news story with stanley and it was like oh they They use lead.

48:01And so then the industry has kind of moved towards this. There's an alternative, which is totally glass based. But that little glass bead is another 20 cents. And so like this is another good example of like, hey, do you want to have the cheaper solder or do you want to pay 20 cents more for the glass solder? But in reality, it probably doesn't matter which you have. They're equally safe to people. So where do you choose to be? So that's that's kind of like been our experience is you're going through every piece of the product and you're saying, how could you get cheaper? How could you be? And remember, in a tariff environment, you get that extra kicker.

48:40So if it was going to save you a dollar, it's really saving you a dollar thirty five or something like that, which at retail, a dollar thirty five in savings and cogs is probably at least a five dollar retail savings, which is obviously pretty dramatic in terms of how much people are willing to spend. And that's, that's what we did over the last few months is we went through our products and you're, you're going back and forth. There's other things where it's like, we will, we will throw in extras. So like, I actually don't have the unit here, but this is a cool example. We, we have our new product that's coming out.

49:16It's, it's a, there's kind of a his and hers version. It's my favorite bottle we've ever made by, by quite a bit, But one of them has kind of a flex handle. And so one of the cool ideas I had that started before the trade war is like the way that that flex handles attached, we can actually send you three of them in your initial purchase and they're different colors. And so you can kind of customize your bottle because these little handles are not that much. They're like 10 cents. But if you're putting three handles in there, 20 cents, and then you've got the tariff or whatever, like we we had to kind of consider, do you want to back off of that stuff?

49:52even though it's cool. The trade-off here, in my opinion, is that when people make hard goods purchases, it's not even, for most people, an explicitly value-based decision or a nominal price point decision. It's like, do I feel like I'm getting good value for what I'm paying? And so sometimes if you take this stuff out, it's like the customer feels like, hey, those little 20 cent of extra handles, that's super cool. I'd pay$2 for that. And other things, they wouldn't pay it for. So that's what you're, that's, that's what we've been trying to do internally. We have found some savings, I think between working with our factory and kind of savings that we found in product, we probably can get back to like the levels that we were at before.

50:36I don't know. We'll see. The other thing with China that I found here is that when you kind of say, okay, we're going to, you know, use the dishwasher safe powder coating and they're like, okay, that'll be 20 cents more. If you come back a year later and you're like, we want to go back, They're like, yeah, you can't get that 20 cents back. They'll have lots of reasons, but they don't want to all of a sudden just reduce your cost by 20 cents. So clawing that back is never a one-to-one exercise. Yeah, look, and this goes to an earlier episode. We're talking about negotiating with factors and suppliers.

51:10You always bring up who wants the banana, who wants the peel. If you go to them and be like, dude, I'll give you an extra dollar a unit, but can I pay you in 365 days? They'll be like, oh, awesome. Yeah, because they want to see what they're manufacturing go up in price, right? That brings them way more margin. And it might make your life way easier. I know it sucks to have cogs go up even more. But if you go there and be like, we'll eat all the tariffs, plus we'll give you a dollar. I just need better terms. It makes your life so much easier on the cash flow side. Because, Mike, you probably have$10 million in billables out at a different point.

51:42That's hard. It's crazy, Sean. So I was actually talking to our CFO about this. we have a$50 million facility. And right now we have zero on it, I believe. So we are basically a debt-free business, which is awesome. We've been conservative. It helped during the trade war and stuff. But there is a period where just because of the timing of receivables, I think that swells to 25 million. So we'll have 25 million on our facility simply because the receivable stack is so big. Okay, it's no secret that margins are getting squeezed and profitability is a challenge for brands in 2025. Not a secret. That is where Northbeam's profitability benchmarks come.

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53:29So stop leaving money on the table, fuel your creative performance, make every ad dollar count in every channel, hold them all to the same standard. If you want to reach out to Northbeam, just let them know the operator sent you and they will take good care of you. Okay, so value engineering. Matt, you've done it for the past 24 months, right? And it's baked, the cake's showing up. So fantastic. You have to give half back because of the Terra4. Mike's actively in it. And we talked about balance sheet. We talked about what's happening in wholesale and watching wholesalers try to navigate this. Big public companies, there's a reason why it's so good to be private.

54:06it. If you guys want to not grow for a year, nobody cares. I was talking to a young founder, they grew super fast. They had a year that was 65 million and now they're doing half that. He's like, I feel like a failure. I'm like, well, do you own the business? He's like, yeah, I own half of it. I'm like, do you have investors? He's like, yeah, no, it's just me and my buddy. We own the whole thing. I'm like, brother, you're a multimillionaire. I'm like, okay, sorry. Sorry, didn't keep going up and to the right, but things are going to be fine. Just keep playing the game and survive. Even if you have investors, man, I'm going to say this, like I talked to a lot of investors.

54:42We have investors, we've a bunch of them. In this sort of environment, there's a lot of grace given. Like I don't really have, I don't, I don't know the last time I had a conversation where an investor was like, why aren't you growing? You know, like they're not dummies. You know, that I think like last year, particularly we had a down year and I remember going into my first board meeting knowing that it was going to be a down year, which was at the beginning of the year. I'm like, there's no way we're going to have an up year. Like we're transitioning product. I'm just not spending as much on marketing.

55:11Like, sorry guys. It's just not always up into the right. I mean, I think Sean, you guys have been on a pretty much continuous up into the right. Eventually you'll have a year where it's not. I mean, Hexclad has been up into the right. Eventually you get to a scale where it's not. This is the thing about the game is even if you're awesome, even if your product is awesome and your team is awesome, then eventually you get to a size where, you know, like the game difficulty adjusts to the business. So like Sean, you might hit your, you're not up into the right year when you're at a billion in sales or at half a billion in sales, but everybody hits it.

55:46If you're listening to this, like everybody hits it. And really this is a game. It's, I'm listening to a book about investing the best money managers. It's not always positive comps to the index. It's not always positive returns. It's about what kind of returns can you put up over a 10 or 15 or 20 year period that matter? Right. But guys, this must be the positive Q4 podcast. Yes. The positive. Okay. Up into the right starts this Q4, Sean. Yeah. Yeah. Well, hang on. Hang on. I'm actually quite bullish on Pila Case this Q4. Like that, that actually I'm, I'm feeling really good. Talk about why, Matt.

56:22We've had, so, I mean, we, we exist in relation to everybody else in our industry, right? Like We all have competition, you guys and us. And Pila has a lot of competition. Case category Sean's talked about. It's huge. A lot of our competition has been slapped around quite a bit this year. And we haven't. We've, just from a supply chain perspective, we've been in a good place. So we've managed to, when people were pulling back, we leaned in. And we were able to spend, I would say, pretty efficient demand dollars on that brand so far this year. the last month's been a little harder but like it's been a pretty good year in that brand so that's part one part two is um retail expansion so we've never had that before we've never been an omni-channel brand not seriously this is the year where we're taking it seriously we've got a bunch of stuff lined up i don't want to say where but like it's meaningful um we're even venturing into our own stores i think by the end of this year so like there's just a lot happening in that brand that I'm quite bullish on.

57:26And most signals seem pretty good. And I know that that's not normal right now, especially in like durables, because there's a lot of share of wallet being eaten away. But yeah, in that brand, I mean, a lot of signals that are external to us just seem to be lining up. Okay, Matt. So are you planning growth for PILA case in Q4? Oh yeah. Yeah. PILA case this year so far is up like high double digits. and what do you attribute that success to is it all just category you're just getting better or like did you get ads to work like you know we got we got ads to work so our creative investment we've been investing a lot in creative um last 12 months has been like i've kind of i took this view that if you want to grow your media spend then like we should start spending 10 of our desired spend on creative that's helpful matt we we talk about that all the time especially even with social content, because Instagram is just increasingly becoming pay to play.

58:23Like I'm constantly trying to talk to the team about how much are we spending on the creation of content versus the actually amplifying it. And I think at our worst, sometimes we're, we're just not thinking about that ratio. So we make a really cool video on Instagram, but we don't pay to get it kind of blasted out there. It's return on invested capital, Mike. And that's kind of, I started looking at creative investment as an ROIC thing. So like, cause I would do that with pretty much every other part of the business, why would I not do a creative? And so there's, and there's two schools of thought and creative.

58:53It's like, one is you shouldn't be spending a lot on creative and two is you should probably spend way more. I sort of looked at it and like, okay, well, if I want to spend$2 million a month on ads, I should probably be spending somewhere around$200 ,000 on creative somewhere. And at some point that will detach, right? Like maybe it is too, maybe at 2 million, I'm only spending a hundred grand a month, but the creative is the investment ahead of the ability to amplify it, if that makes sense. So we started doing that about 12 months ago. And it's just like, the nice thing is it's kind of a compounding thing.

59:27We seem to be getting better at it. We've built up the team a bit more. We tested a bunch of new angles. So like one of the ones for Pele case that's nice that nobody else can really claim is the whole microplastics thing. Like we're the only non-plastic case out there. So there's no nasty. So like a whole health part of this product now that we didn't have before. I think Will needs to actually talked about this, like trend hopping with your brand. I like, I love that concept. So we just sort of went out and said like, well, where are all the trends and how do we, are there trends that we can fit into with brand positioning?

59:59And I think we've found that there's quite a few of them that we just weren't really tapping before. I would say the biggest one, Sean, is that like, we just broke out of what we call eco jail. like eco first as a positioning isn't a huge tam buyer uh and we sort of last 12 months has been like chipping away as like that's not the reason you're going to buy this product that's sort of a oh by the way at the bottom and that has been if you cater to that crowd you can actively turn off the the non-eco buyer oh man you know what we discovered too is like when we lean too hard into the eco thing with the mass market, people associate sustainable with paper straws.

1:00:41Paper straws in their mind is like, oh, it's like that. I'm like, no, it's like it's better than the other. That's funny. We were in California a couple of weeks ago and, you know, it's all paper straws. And then we got to Vegas and it's like plastic's back, baby. And it's like, that's so on character for those two different places. Well, yeah, I think like the what we found is when we got out of our own way, started working with people outside of the brand. So I brought in somebody like Sarah Levenger to say, okay, can you just look at us? One of our downsides is being mostly Canadian teams. I think we get stuck in our own crap.

1:01:16Most teams do this. It doesn't matter if you're Canadian or not. But we started bringing other eyeballs and other brains into the company just to help us out. Positioning, copy, what do you think? How would you sell this? Just asking simple questions like that. And we started to discover that the product and the material has properties and characteristics that people love that have nothing to do with it being sustainable. Oh, dude, yeah. Plastic-free would sell way more than sustainable right now. Totally. Yeah, because the health angle is so much more of a... I agree, totally. Yes. Yeah. So I think there's a bunch of moves that we just made that are starting to compound.

1:01:54and in a large TAM category like cases, it's not hard to gobble up share. Yeah, and that's why we have two case sellers on this podcast and we're super friendly. Yeah, I don't care. So you're investing upwards of 10 % of marketing dollars back into creative? Of desired marketing. Okay, yeah. So if I want, like right now, if I'm spending a million a month and I want to go to 1.5, I look at creative as the lead investment I don't just start spending another half a million dollars a month. Yeah, yeah. That's super interesting. Creative is definitely one of the tools to get your ceiling higher in terms of spend.

1:02:34We probably spend three to five percent and that's across all creative. That kind of makes sense to me, Sean, at your level of spend across channels. Like I do think that that comes down with more scale. And I'm really talking about meta spend right now, like not total media spend. After a certain nominal point, you probably aren't moving the ball with creative. And that's kind of what you were saying. Like you probably need to be spending a certain amount to really be getting a good enough creative. And then once you get to that, as your spin scales, like you don't need to continue to scale creative.

1:03:07Dude, also in-house studio teams. So like a big cost of creative is just like studio photography and like, you know, brand videos. We're doing that all in-house now. So massive savings there. Yeah, I think we've always had most of our creative in-house. This year, we've started to use some outside agencies just to help us with diversity. And again, that's just like we've had an in-house creative team for seven years, eight years. Stuff starts to look the same and sound the same and, you know, I bring in outside people just to challenge the status quo. So I think like all that put together is just I'm fairly optimistic about Q4 for that brand, but still cautiously optimistic.

1:03:48You're right. I was too negative earlier, Sean. I'll give you some optimism. Our optimism has been we've really had a lot of success with our non-drink wear lines. And we've really had a lot of success with kids. And I think my takeaway has been when you have exceptional product market fit, people are just a lot less price sensitive. And so I love that business. That business is less trend based. It's more do you have the right licenses? Do you have the kind of brand positioning? And so it's interesting because in the midst of some numbers I don't like, there's other numbers which are amazing.

1:04:24On our website sales for the first 16 days of June, we're up 28%. And that's about the same on both new and returning customers and our contribution profits up 100%. So it's like we're really making back to school work and that's in the middle of some pretty significant price increases. We've taken our textiles to Target. Those are working well and shields. And so like I think one thing for us is finding with Q4, we're going to take some products that typically we've advertised at different parts of the year. And we're probably going to try and promote those more heavily during Q4. We make a bag out of EVA material and we have a great other competitor in that space.

1:05:12They ran a Q4 deal on Amazon last year that got to the very top of the deals page. I remember that one. Yeah, that was a killer deal. My team was like, we need to make that bag. Yeah. So it's just a good example that that's way out of season for that bag. But during Q4, when people are gift buying, you can do that. So we definitely see some opportunities. It's, you know, I think what happens, I've said this before, is just as your portfolio gets bigger of things that you're doing, you just always have things that are going good and bad, you know, because you just have more surface area. And so and then the electrolytes is another example of an area that like, you know, our month over month growth looks awesome.

1:05:53And so we really think that's just going to continue. We've got the trend is our friend there. Yeah. Yeah. And look, we talked about how awesome Ridge is, keep growing, whatever. And that's why people think I'm an arrogant a**. But almost all of that growth since whatever, 2021 or 2022 has been non-wallet categories, net new things that I've done. I'll do$30 million in wedding pants that didn't exist 24 months ago. So it's like, of course my business is growing. I have these crazy new things I'm adding to it. And we're just probably reaching the end of the cycle. we're doing the same thing for 10 years and getting growth out of it, you can't do it anymore.

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1:07:11PostScript has the best opt-in of all time. It is single, sign in, password out of fill right on your phone, and we're going to get probably another 100 ,000 people to sign up between now at the end of the year. We're going to use those people. We're going to use SMS to nurture them through the funnel. It's an amazing tool. I love it. Make sure you're ready for Black Friday, Cyber Monday. Postscript is here to help guide you through everything that you need when it comes to SMS. More opt-ins, more list building. Make sure you don't look like an amateur, this BFCM. Use Postscript. Tell them Sean sent you.

1:07:44Tell them the operator sent you. Postscript will audit your SMS program for free and show you how to scale fast before Black Friday, Cyber Monday hits. When we talk about list growth, that's what you have to use before, during, and after Black Friday. You want serious gains. You want PostScript. Thank you for supporting the podcast. Thank you for being here. We have a list of tips, okay? So Matt, you want to go first? You got some tips for everybody. Oh, yeah, totally. Look, I think I got three. Well, let me give you two. The first is pre-build demand. September and October suck from a sales perspective for most brands, but they're actually not bad from a media cost of media cost of impressions um so i like to lean into those months and run it down to the wire so like run it close to break even if i can um just to pre-build and soak the sponge it's like that's number one the second one can i give the second one right away sean go ahead dude just just run through dude this is such a mike will know this but a lot of brands are going omni channel um they're trying to get into retail they're going into Amazon 1P, whatever it is, shipping cutoff times are a real thing in Q4.

1:08:56These warehouses bulge, right? They're like they're bursting at the seams with product. And those cutoff times are probably earlier than you think they are. If you're new to retail, they're far earlier than you think they are. And I think this year we've been seeing and hearing just some strange conversations around like earlier cutoff times where we have to get product in even earlier than we have in the past. And I think some of that might be that bull up effect from tariffs and overbuying when things were cheaper and having a little more on hand. So those are my two. Okay. I have start the sale earlier.

1:09:32You should probably be on sale as early as November 10th, basically. Prime Day 2 will be in October to echo Matt's last point. You have to plan to have your inventory set up now. You should probably start trying to ship inventory. By the time you're listening to this, try to overstock Amazon as much as possible because you don't know when it's going to be and you don't know how long it's going to be. Like Mike just said, it could be 17 days if they choose Prime Fortnite. And then extend the sale, right? Your sale period should probably be November 10th to December 10th. Take advantage when people want to shop, just have a bigger sale.

1:10:10And then TikTok ads are going to crush. it'll be sold and bought by American company who has no interest in running TikTok shop. So I think the ads platform gets turned back on. Those are the tips. We have some Q &A we're going to get into. Rapid fire. I'm going to read the questions. You guys answer them in your operator knowledge. Okay. How do you figure out as a business, whether the work people are doing in different divisions is the best possible thing you could be doing to move the needle? Oh my God. Yeah, yeah. Dude, in revenue generating areas, this may be simple, but often harder in others, especially asking how you spot efficiency gaps to be able to scale quickly.

1:10:47How do you know if people are doing the right thing at the right times? Okay. Can I start, Mike? Can I start? Please. For the love of God. Okay. What? I don't understand why people have gotten away from this idea of quarterly planning or just planning in general. It's become, I talked to enough operators. They think it's like this boomer concept. You know, it's like this, you know, you shouldn't do it. It's not required. I talk to my business partner every day. It doesn't matter. Like, you know, my leadership team is super tight. We talk every day. Holy you're missing planning cycles, quarterly planning.

1:11:19Like we do a quarterly planning. It's consistent. It's the rhythm in the business. It's one and a half to two days. It's me and my entire leadership team. We decide everything that we're going to do for the next 90 days in that one and a half days. And then that ladders down in the organization. If you don't, like if you're in this bucket where you don't know if everybody's working on the right thing, you have a planning problem. That's it. Like you're just not doing a part of running a business that's really freaking important. That's my rant. Mike, what's your take? Well, I think the idea would stack on top of that because obviously like the larger objectives, but there's a lot of, you don't want to micromanage people and you don't want to need to tell somebody what to work on all the time.

1:12:00And so there's a lot of kind of in between, you know, the major objectives. There's a lot of kind of discretionary time to work on projects. And this is why I think what you're hiring for as much as anything else is judgment. And to the extent that you can, obviously, the lower the level, the position, the harder that is. But what we try and spend in addition to the planning, what we try to spend time doing is training people to have good judgment, to be able to. And the way that I think about it is just what is the highest leverage way that you can use your time right now? And that I want to hire and retain and promote people based on having that ability.

1:12:44Partially because I think you get a way more effective business and also partially because it's a heck of a lot more enjoyable to run that business. I mean, any of us who's experienced it where you have lower level people that are like super compliant, but constantly need you to tell them what to do. Like that's a nightmare as a manager. So I'm looking for that actually is one of the key characteristics I'm hiring for is does this person have the ability to kind of look at a buffet of 10 different things they could be doing and give kind of a good decision about which one they think is the highest leverage?

1:13:18The other point I'd make here is that I will have a different opinion than some of my leaders often about what's the highest leverage thing to do. Because often it's just not obvious until afterwards what the highest leverage thing you could be investing in was. So you have corporate goals so that everybody has some agreement about, hey, here are the two or three most important things that we're working on, for example, right now. but then you also really want to cultivate a team that has judgment and empower them to use that judgment for the rest of their time and that they're working on stuff hopefully that's really meaningful to the business okay thank you guys for the q a we got a second question what's the hardest thing about finding talent how do you find amazing talent uh you know can i give people a tip on this one because there's so it's like it's such a big answer like there's so many ways to go with that question.

1:14:13Here's my tip. It's going to take you longer to find really great talent than you think it will. It's just, it's, it's time intense. That's all. You're going hunting for people. They're not coming to you. Mike, do you have anything on finding talent? I would just say like most people, I think you got to be able to define what great talent is. Like that it's like saying, I want a great spouse. Okay. But what does that mean to you? Because like, there's a lot of different characteristics that you could imply by that. And if you take 10 different people, they might have 10 very different lists of what a quote unquote great spouse is.

1:14:45So for your organization, what would make someone a great fit? And a great talent for Ridge would probably not be a great talent for Simple Modern because we have different cultures and we work on different products and we have different sales strategies or whatever. So actually, like it's just a first principles thing. first, you're not going to be able to recruit and hire and retain great talent unless you have a really clear definition of what that is. Work with your leadership group to have a clear understanding of like, in our organization, what is a great fit? What does a great producer look like?

1:15:21What are the characteristics they have? Then you at least know, okay, here's what we're looking for. And that makes it a lot easier. Yeah. And this kind of goes to the first point where it's like, if you don't know what people are doing, are you hiring soldiers or generals, right? Like a great talent at Ridge is generals where they can, they can lead teams. They can get stuff done. They have autonomy. Right. And I don't know what people are doing, but I hope it's high value because I'm setting those goals. Hey, this is where we want the business to go. And this is how you measure to success. The last question.

1:15:50Okay. Every week come to the operators podcast. We're going to do three Q and A's. If you want your Q and A in, you can join e-commerce fuel and you can post it in there or you can comment below. The last question is what What are some of the areas of margin expansion that most eight figure brands have yet to fully tap into? How can you guys get margins up? I'll give you a good one on Lomi that was like pretty meaningful for us. Please. Box engineering is specifically optimizing to containers out of China. So like how do you get more product on a single container? For us, the product is large.

1:16:24so like really designing the packaging and going after like small and light and how do we get the most on a container that actually had like i think at one point we dropped cost per unit by like 13 13 50 or something like that um just by going after the package but you're doing that right now removing all the cool foil well i mean it's i think it's both like as an example i don't know at what point we started doing this but it's like amazon had shipping thresholds they had these kind of, you know, dimensions that if you were under it, I remember there was a point where it's like, if we were under this dimension, it was 368.

1:17:01If you were over it, it was 415 in shipping. And so sometimes we started saying like, well, we're going to be under that. And so like we can save whatever 50 cents a unit on fulfillment. And then I think there's some, there's some strategies. There's some strategies of supply chain and logistics that are other places. Like there's a lot of things that scale affords that you can take on. And like, for example, with Walmart right now, with our fulfillment, we are at a scale and we're doing our own fulfillment where we're part of what they call a pallet program where we literally just usually the way it works.

1:17:33They send you a PO and you have to kind of build this this elaborate PO and then they come and pick it up. The pallet program is kind of like they're just like we want these things. You're like, OK, here's a bunch of pallets. And then they just throw them on a truck and they take care of everything. And our efficiency goes way up and you will unlock efficiency in logistics. but like the kind of the general principle I've learned is that almost all of the money, all of the money saving things, like all the tactics, strategies you can do here, they all make sense at some scale. And probably the key is understanding at what scale do different tactics start to make sense?

1:18:07Like at some scale, it probably makes sense to have a general counsel that helps you to like minimize tariffs and to keep down your legal costs that expands margin. At what point is that, that you're big enough that it makes sense to have that versus just paying, you know, the ambulance chasers that sue you because, you know, somebody couldn't use a part of your website because of ADA, you know, in whatever Hawaii. I, so like, I think that that's probably like what I've learned is there's, there's a lot of pieces of the business and that you gradually get good return on investment. But the key is understanding like what scale do we have to be to make that investment?

1:18:46So they're not particularly mysterious, but I do think we said several of them here. I think the value engineering and logistics piece is one of the places where there's, there's dimes and quarters to be saved, but they only make sense if you're selling a lot of stuff. Yeah. I mean, look, if you donate figures, don't confuse margin with cash, right? So this is one of those things where you can beat up your supplier, but better terms probably make your life way easier, right? Like wouldn't you rather get free money from your supplier as loans in exchange for a dollar per unit? And then if you really want to cut costs, multiple nodes really helps.

1:19:19Negotiating your own USPS costs, the cost to ship a box, if there's one thing in it or two things in it, the cost to ship, it doesn't go up that much. So really trying to get people to add any other thing to their order, right? Like do not ship single orders. Do not ship split shipments. Like probably worth the investment of customer service to be like, hey, we're going to wait an extra five days to ship your thing because we're going to receive it and we're not going to do a split shipment. Like also turning off international shipments. Like people always are like, no, I want to serve every country.

1:19:49They click that in Shopify. Yeah, that's a disaster. Do not that. Do you want to spend$85 to ship to Mozambique? Like, yeah, you don't want to do that. So anyway, guys. Another one, Sean, that we didn't say is just making your business bankable is one of the easiest ways to like actually increase your margins. Like when you're working with JP Morgan or whatever and you're factoring receivables at like 3 % or whatever we're factoring at, that's like a heck of a lot better than the other options in market. But you have to do some real work to make your business attractive to banks. And there have been a couple of really quickly growing brands that I've been working with recently.

1:20:25And this has been one of my biggest pieces of advice to them is like, hey, get with one of the big partners and make your business really attractive to them from how it's presented, balance sheet, everything else. So I think when you get to eight figures, you can start to at least think about being a bankable business. Undoubtedly. All right, guys. Action packed over an hour of e-commerce content punching you in the face. We want to thank Fulfill, Northbeam, Saris Analytics, RichPanel, and PostScript. Five softwares we're all going to be using this Q4. we hope you have a great Q4. I know it's August or late July when you listen to this, but listen to it again in October.

1:21:02Listen to it again in November, right? Get the listeners up. We have cool content coming out every single week. We have a e-commerce fuel forum. You can comment below. You can like, subscribe, share. You can hang out with me and Matt IRL next year at the Calgary Stampede. So thank you so much for hanging out. Thanks for being here. I'll talk to you guys later. Goodbye.

1:21:27Alla