E137: Wholesale has the potential to ruin your business

25:49I wonder, do you guys have like a rubric for what makes for a good... Like when would a person not want to be on Amazon? And when is it like, this is a no-brainer? Like immediately for me, and Mike, I'm curious, it's like the more commoditized your category, the more likely you should be on Amazon. And the larger you are getting as a brand in terms of brand search, there's probably more likely that you should be on Amazon because there is like some amount of capture that you're just missing by not being there. But is there, have you seen clear examples of you should not be on Amazon, it's gonna make your life difficult or whatever, like just not worth it?

26:26Well, I've seen a lot of brands who are very young. So like there's this new cohort of brands, like you can call them Zoomers, but they are consumable first. They are great digital marketers. They have very simple SKUs and they're not going on Amazon off the rip just because they think they have too much runway on meta ads or TikTok shop. But I think the perfect rollout for that brand would be TikTok shop first because you get so much top of funnel immediately the next day be available on Amazon. Then try to be on walmart.com, target.com and then your DTC. The future is, I mean, Harley spoke about this at Beanstalk.

27:02He's like, the future is everything's a sales channel. He's like, Shopify will be the payment processor and the product feed. And we're going to put your products wherever any human is. If they want to check out on tablets, in restrooms, we'll get you there. You know what I mean? If it's shop app, it's whatever. So I think that is just more and more of the future. It's not even omni-channel, it's channel agnostic. I think that's where we're going, but that wasn't really your question. Jason, you want to answer what brands shouldn't be on Amazon? I think there's an excuse to not be on Amazon when you're some kind of super elevated, super elevated high-end brand.

27:41okay so like the luxury guys you know they're not there yeah i mean like even asap soap is there yeah anywhere where counterfeiting is going to be common because you are going to deal with counterfeiting you're going to deal with people selling non-authentic stuff and that's a real headache on amazon one kind of principle that's similar to that is that basically if you think about what the generic market in your item looks like how far above the generic market are you If you're, say, 50 % above the generic market, like let's say the average water bottle costs you$20 and our water bottles are$30, then it makes a lot of sense to be on Amazon because somebody might search water bottle and Amazon might still show them your water bottle.

28:22They might bring incremental customers to the table. But if I'm selling a$200 water bottle, I'm going to get exactly zero sales from Amazon that aren't people looking for my exact water bottle, my luxury water bottle. and there might be some of those people, but if they search for my luxury water bottle and they don't find anything, they don't find it, then they probably do come to my website. So I think Jason's point that the further upstream you go, the higher you go on your price point, the less Amazon becomes a necessity. I got one more thing to add. Anything that's seasonal or fashion driven, you need throughput per skew.

28:58Like, you know, cuts, t-shirts can be there because black t-shirts, whatever, you sell those through. Baseball lifestyle, another friend of the brand, should not be there because the sell-through per skew is going to be too small. If you're changing out, if you're a kith, kith shouldn't be there because they only make 50 of this shirt in large or whatever, and it's never going back. It's not worth setting up Amazon listings for. Yeah, we've had a hard time making Amazon work for Pila because we're so drop design driven. And I was going to bring that up. I'm like, you guys just have a personalization aspect to it, like print on demand aspect to it.

29:33So it's like, yeah, you're out of all of us, the hardest brand to have on Amazon. Yeah. I mean, we're fixing that with an American factory where we can actually just be an Amazon warehouse and basically sell one beat Amazon and any SKU they want and then just fulfill on demand in their SLA. But until we can do that, it's really, it's very difficult for us to make it work because we're so design driven. Cool. All right, guys. So at Beanstalk, people still 30 % of people think Amazon's hard. I think we just ran through the reason to be there. 60 % of all commerce is happening there. It's most sales.

30:07So it has to be a pretty big challenge to put up with not getting all that revenue. But then the downsides are channel conflict. You need to have a lot of throughput. They're not the most gracious of all partners. It will change the way you run your business. Some businesses can't be there if you're luxury or customization heavy or regulated good. Maybe if you're chocolate, you can't be there either. All right, operators, quick break. This episode is brought to you by Northbeam, the marketing attribution platform that we use every day. Now, we all know there's a ton of attribution solutions out there, but I want to talk about what makes Northbeam different and why everyone across the operators trust their data.

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33:27Join the club. the next thing about being on the channel or i'm going to call it channel agnostic you have to be everywhere is what wholesalers to go through so you guys know that i think if you're not in the big three it's really hard to make wholesale pencil the big three are costco target walmart they they all if they want to can cut you a 10 million dollar po right we have some great wholesale partners best buy shields um you know we have a long list uh we're in nordstrom's we're in a bunch of great retailers who I love and respect. But as soon as you move away from the big three, you just run into a lot of risk.

34:04I'm going to bring up some of those risks today. Essence is a luxury fashion retailer that went bankrupt last month. When they go bankrupt, they don't pay you for the AR that they're holding. You know what I mean? You just get screwed. We are friends with a brand who I really, really love and respect. They were the largest holder of debt for Joanne Fabrics. So they had over, I think it was close to$10 million worth of product Joanne's Fabrics basically stole from them. And when they went bankrupt, they just started liquidating it. You lose the Amazon buy box. They're selling your stuff under cost of goods because they just need capital and you're never getting paid that money.

34:42So there's a lot of risk with going into wholesale. Mike, you're the wholesale expert. And then we'll go to Jason. What are your thoughts on the future of wholesale? Yeah, I think that wholesale is hard, first of all. Physical retail is hard. And what we've seen is that, especially as digital has grown, is that it's just difficult for very many retailers to really make it work. The ones that are making it work, like Costco, for example, trades at like a 50 PE. Basically, the market is saying it would take a nuclear war for Costco to not exist or the death of humanity for Costco to not exist. And so I do think that you have to start with who are the, but even between Walmart and Target, for example, like look at their stock prices.

35:23The market really thinks one of them is doing way better than the other. So even among the big three, I think there's differences. but overall I think the real guiding principle for us has been how much work effort brain damage capital are we going to have to commit and what's the reward and we're kind of looking at that ratio and as you move out of the big three what you see is that the ratio starts to get less and less favorable that it starts to be more and more difficult just to accept POS and send people stuff Just as an example here, another great brand, Whole Foods. Great brand. I think there's some cachet in being in Whole Foods, but actually getting Whole Foods product is kind of a nightmare.

36:07It's like you have to do individualized shipments to every store or something crazy like that. I don't know all the specifics. I just know that it took us months to kind of get to the point. They were so specific, the way that shipments had to be done. There were two people that they recommended us work with. And basically, it was kind of a nightmare. And then we had to do it ourselves. And so like, you know, has Whole Foods even been a positive return on investment for us? Yes, but not a huge one, just because the complexity of getting them product is really, really high and our throughput is not super high.

36:38Then there's all these other risks. So we'll talk about like liquidity risk and what happens when somebody buys product and sell and all this stuff. So the guiding principles that we have are number one, how much work complexity are you taking on and what's the potential reward? What's the financial risk? And then third, that principle I said earlier in the episode, what's the incrementality? Like, yes, you want to be where customers are, but you don't have to be everywhere customers are. Like, I'm sure our customers are at the state fair. I'm sure our customers are in convenience stores, but those are just not channels that really make sense for us.

37:14So we're trying to get the best combination of being in front of customers fairly consistently, but in the places where we can do it the most effectively and efficiently. Yeah. And I just want to highlight that wholesale has the potential to ruin your business, right? So like if you are our friend's brand who got a$7 million piece from Joanne's Fabric, you probably were like, oh my God, this is amazing. All this EBIT is tied up to it, all these sales, and then they don't pay you. They steal your inventory. They go bankrupt. I mean, they're going to be totally fine, but that can kill so many brands.

37:51So a lot of people look at wholesale as a savior. It's like, oh, Solosoft did this. Oh, we're going to go to Costco. It's going to save our year, right? It did not save their year. They're going to get delisted. So it's like that is a challenge people have to go through. But Jason, out of everyone in the pod, you're the second best wholesaler. How do you think about it? Again, I go back to go where the customer is. and I like how you guys are talking about throughput because if the customer is there, you have throughput, right? And then it's worth it. Otherwise, it's like, you know, what's the point?

38:28The ROI is just not there. The time invested is not there. There are a couple of retailers in the home space and the kitchen space who it would think are like natural for us to go to. You just do the math and the juice isn't worth the squeeze, right? And obviously, once you determine that you can actually sell enough volume, then it's a really great call out that everyone's making to look at risk. It's really easy to get excited about stuff in our world. why Jason why do you think it's not worth it I'm so curious about this because you obviously have the brand and you have like all the ingredients to make pretty much any of these channels work do you guys when you guys look at your channel mix do you just look at it and say they are not going to get me in any more incremental reach that I currently get from Costco DTC and Amazon so like what's the point of the brain damage because like there is just no incrementality in these places?

39:31They just don't move enough volume to justify the time invested to get it done properly. And then when you look at it, you know, retailers, wholesalers, they need to make money. So they need to take their share of the sale. It's just the numbers are just tiny at some of these places. So it's that simple. With respect to our category, everyone's different. Every category is different. Our product's different. And so like if we're... Some people are selling other products and it makes complete sense to run it through every retailer. And that's also maybe that's sort of the... Like that's where they're good.

40:20You know, that's where they're good. So it's like that's... You go where you can sell and go where you can make money. But, you know, I just look at everything. Every product's different. And for us, it just has never... We've been around long enough to look at other options. We do look at other options. I am interested in talking about owned retail at some point on the pod because I think that's interesting for different brands. But, yeah, that's kind of the way we look at it. I think you said it, Jason. There is a bound to how many places it makes sense for your brand to be. It isn't as simple as just like be everywhere because there are plenty of places that just don't make sense for Hexclad.

40:57You know, I'm trying to even think like what are the brands that I see in the most places? And even with those, there's just stores that they wouldn't want to be in. So I think there's bounds for every brand and you have to define for your brand or for your offering, like what are the wholesale channels that can really make sense? And maybe some of the way you find that is that you experiment and you test. Like we've definitely gone into some channels, like we tried Kroger and it was like, no, this just doesn't work for us. It doesn't make sense. And maybe that's what every brand has to do by trial and error.

41:28You have to try some of the channels to find those places where you really do have the fit. Hopefully you could get the retailer to give you a sense of what they'll sell. That's basically why we walked away from some of these that we had good discussions with. Because we just we talk about it. It's like if you're going to if you're going to get me a million or two a year. And take half of it, you know, it just doesn't sell worth it. If you're going to get me 100 million. Well, OK. Exactly. That's kind of the point I was making is like, is the juice worth the squeeze? Because definitely one thing that's true is every time you add a channel, you're growing the complexity of your organization, which is going to lead to more people.

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43:20More opt-ins, more list building. Make sure you don't look like an amateur, this BFCM. Use PostScript. Tell them Sean sent you. Tell 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. Yeah. Okay. So let's go back to, Mike said the word cache. He's like, oh, there's some cache being in Whole Foods, right?

43:52It's good for the brand. And a lot of brands justify stuff because it's good for the brand. And we had this debate at one of the Beanstalk dinners where I'm like, look, I'm the best selling wallet at Nordstrom's. I'm like, it's a million dollars a year. And they're like, yeah, but don't you think it's good for the brand to be in Nordstrom's? And here's my pushback. I'm like, when was the last time we went to Nordstrom's? And the person was like, I haven't been in eight years. And I'm like, yeah. So like, you're not going. You think it's cool, but you don't actually shop there, right? So that's, I think, a big challenge with a lot of retailers.

44:22There are some very core image accounts. Mike, you were in Irwan. That's a core image account for almost every CPG brand. But if you talk to them, they'll do the same thing. Yeah, it basically does no volume. There's 10 stores, right? Right. Well, and that's the tough part is like, it really is as a founder, there are some points where some SEO, like there's some things where you're like, oh, this is kind of symbolic of us making it. And I don't really know how to think about this. I'd love to hear you guys thoughts of like, I'm getting more and more where it's like, you got to prove it to me with numbers.

44:53Just like, it seems cool. It seems like people think it's impressive. It's just not good enough for me anymore. Yeah. Look, I think that's a good way to live your life. But speaking of things that are cool. We're going to get off this topic and we're going to debate stores. So we have Matt, who is team store. We have Mike, who's team anti-store. Me and Jason were the swing votes. So a big topic of discussion was, hey, look, wholesale is not really working for a lot of people. They don't want to be on Amazon, but physical stores are where it's at. Now, some facts for everybody. Simon Property Group is the largest mall holder in America.

45:25For 30 years, they wouldn't sign a lease. That was under three years, right? Now, every single mall they have, they have flex space that'll go as low as three months at a time. Spirit of Halloween, baby. Yeah. So if you want to be in a mall, it is cheaper, easier than ever before. And a lot of people are taking advantage of this, right? Ben, true classic, amazing brand. We'll love those guys to death, but they have a big store rollout. More and more people are pushing into physical stores. Are they doing kiosks or are they doing real store? They have 25 full stores. Buck Mason, another friend of the brand, about 35 stores.

46:01Well, they all have in common that their physical locations have dressing rooms because you've got to try on clothes. But Aritzia, Lululemon, you know, the best at doing stores. So, Matt, you are looking at rolling out stores. Mike, you looked at it. I would love to hear the defense of stores from Matt, and then we'll go to counterpoints. Okay. I want to provide some context. We are looking at owned stores in specific markets, in like A, AAA type malls, and just for Pila case. So I'm not doing this with Lomi. I think in our category, if you look at like, we've done the work to go through, and in particular market wise, like I am looking at Canada because Canada malls, we don't have as many as you guys, but they're very, very high quality.

46:46Like they are always busy. They just work. um so for us we look at the category that we're in and how we compete tam all that stuff and we just don't see anybody really playing the game how we want to like to provide the customer experience the shopping experience that we think we can with our customer like we're going to basically bring our like online endless aisle like design experience into a store and be able to print in store and have a custom case ready within 15 minutes. You come and you make it, you make your order, you can buy anything you want, it'll be ready in 15 minutes. And we're going to do the online offline thing.

47:26So if you order online and you're near one of our stores, you can pick up within the hour, any product you want. I think this works for us, for all the market dynamics I described, but also because I have a supply chain that's entirely domestic. So I don't tie up inventory in these stores the same way that a lot of categories might have to. So our overall balance sheet risk here is really small. It's just, it's least risk is, is what we're staring at. And when we model it all out, it, it works like it works at very low numbers. Like it's kind of Sean, I think of it like your MER death clock thing that you have, like you can run really low to the ground.

48:04We can make retail work really low to the ground just with margin profile and everything else. So that's how we're looking at it. Yeah. And look, we know David's Tea, right? They made that work because every store did like$175 ,000. And they're like, yeah, the stores were small. And he's like, I just was selling tea to tea. Much too. These are like 600 square foot stores, guys. They're very efficient. The math just works when you actually pencil it all out. Totally works. And I also know people in our category around the world doing this and doing it very well and very profitably. So I'm not I'm not going in totally blind, but man, it's a lot of work picking locations and great locations aren't available.

48:45I think that's like the other thing that was really shocking to me. It's like, if I wanted to open up a lot of stores, this is going to take a long time because the best locations do not have space. Yeah. Look, and you know, I'm trying to, I'm trying to take all of the collective knowledge of all the episodes and put it together into this one to make sure it's the best episode that you'd like and subscribe on. Cody talks about that, leases are everything. On a lot of retailers, it's an asset, but also it's a liability, right? You have to pay these. And so it's an asset when it works. It's a liability when it doesn't.

49:14And he said that being two streets over from the main street is a death for these stores, right? You have to be exactly where the people are. But Mike, you looked at this and you couldn't get the math to work. Yeah. So I'll give a preface of they did this development in Oklahoma City. I think it's called Grove. Super cool. Like it'll be like the cool place in Oklahoma City. The developer did a great job with it, brought in restoration hardware, a bunch of places like that. Right. And we looked at it really hard and we ended up walking away because when we really started to write down numbers, it was like, man, you just got to believe we're doing insane volume for this to make sense.

49:51But I wanted to just kind of walk through a few of the reflections that I had. We thought about doing it in the Oklahoma City market because, hey, this is our backyard. This is going to be the cool place to be. There's a lot of like social benefits to this, whatever. But here's my qualms, right? The first is that I just haven't seen very many digital companies that have scaled this to a significant percentage of scale. like a percentage as a percentage of their sales like who are the digital companies that have done this really well we know lots of people that have kind of played in this area but very few have done this to the point where it's like it's meaningful on their pnl and to me that's kind of like the number one reason why i'm just super skeptical if it's such a good idea then why aren't more people doing it but the first thing is you have to have really high volume to make it work you just have to have huge throughput.

50:39It's like manufacturing. So it makes sense that somebody like True Classic that's doing something as high velocity as t-shirts could do it. But like, you just can't do it with water bottles. Like we started running numbers and it's like, we got to sell like, you know, we got to have like 600 customers a day for this thing to back out. And you're like, that's just not going to happen. Like how much traffic would that take? Can you sell 600 people apparel in a day? Yeah, probably. Can you sell 600 people water bottles? You can't. And then, And so the second piece, not only do you have to have super high volume, but you actually have to have fairly wide selection because you got to hit that volume.

51:13So like probably what makes it work for True Classic is they're not just selling to men, they're selling to men and women. And they've got things across both. You just can't afford to lose chunks of people. So you either have to have complimentary products or stuff like that. So smaller brands, brands that are doing one or two things, it's hard for them to do it. The complexity risk here is like super high, guys. Like digital businesses are built around a set of competencies and physical retail is like a totally different set of competencies. Let me give a really simple example because we talked to several.

51:44We talked to Cuts. We talked to, you know, we talked to Blenders. We talked to several people when we were looking at this. And for example, Cuts worked with a company to staff their locations because they hadn't staffed retail locations. So, like, we're going to work with a partner. Well, that partner goes out and hires a bunch of people and they were not very good at first. And Cutts is like, hey, we want to get rid of these people. We want to get better people in there. And they're like, sorry, you can't. You can't tell us what to do and we're not going to fire anybody. And it was just like, that was the way it is.

52:14So their advice to us was like, hey, don't go through somebody else to staff your locations. You need to do it yourself. Well, you know, who of us feels like they've got the competencies to staff retail locations in 20 different markets really well? Like, I certainly don't. It's not like I don't think I could learn that, but that's not what my business is good at. And that's just like a microcosm of this idea that you just have to be good at a bunch of different things. Like, for example, managing supply chain. We've got to be really good at managing supply chain in terms of how much inventory is flowing into our main 3PL, how much is flowing into Amazon, making sure we have stuff for Walmart and their POs.

52:51That's a totally different muscle than keeping a bunch of physical retail stores in stock, right? where you're shipping much smaller volumes and there's a bunch of inventory on the floor and things like that. So the more we looked at it, the more I was like, I'm not saying there's no money here, but there's not very much. And for the amount of complexity I have to take on, there's way more complexity than, the juice is not worth the squeeze here for us. It's not that it's wrong for everybody. I just think generally it's something that brands start to do when they're kind of out of ideas for growth and it causes them to reach a little bit and they do about 10 stores and they're like, that wasn't worth it.

53:32And then they retrench. But maybe that's just me being pessimistic. Well, I'm going to hit you guys with just some data and then we'll go back to Matt. I talked to a brand who has a store in one of the best malls in LA, right? LA has probably three really good shopping districts that have a ton of people. And he's like, yeah, on a weekend, we see 2000 people a day. So that's walking into his store, 2000 people a day. You have to think about what does the conversion rate need to be and what's your AOV to make that product work? It's like this is the best mall in LA. This is a very good brand and they're getting 2 ,000 people a day on the weekends.

54:08A counter is when I worked at my first job in fashion was at a Theory in Brentwood. They had 50 people a day walk in. Now, the conversion rate was about 40%. If those people walked in, they were buying something. That's the math you have to back out of. It's like, you know, Mike's saying it's still 600 water bottles a day. Yeah, it's not going to happen if you see 600 people. It's like you need to - It's definitely not happening in Oklahoma City. And in LA, you know, the rent's going to, you're going to pay rent commiserate with the fact that there's that many people, right? It's like, yeah, that's going to be super expensive to get access to all those people.

54:42Now, Mike, in Oklahoma City, is there a place to tie up your horse outside or do they have parking lots for cars? The problem is you can only sell till 630 because when the sun goes down, we don't have electricity. So that makes it tough. Okay, I got to take a break and tell you a quick story from a few weeks ago. We were at eCommerce Fuel Live. This is Andrew's live event that he does once a year. It's like 200 brands. They do a great job. And this story is just too good not to share. So like, bear with me while I tell it. And I'm at the opening night party. I'm talking with Ahmet, CEO of Rich Panel, one of the great sponsors of this podcast.

55:18And Ahmet and I are having a good chat. And beside me walks in Katie to say hi to Ahmet. And Amit looks up and I swear to God, this is true. He goes, hey, Matt, is this your EA? And before I could react, Katie absolutely tears him a new one and says, I am not Matt's EA. Matt is my EA. So if you ever wanted a lesson in how to stick your foot firmly in your own mouth, this is it. Amit could not catch a break the rest of this event, deservedly so, right? And by the end of it, I think she actually said, I will never switch to RichPanel unless you give me 100 % discount. Now, I know this is a strange sponsor read, but I just needed to tell the story because I think it's kind of funny.

56:01So I don't think Katie's gonna get 100 % discount, but honestly, I don't think you need it. Switching to RichPanel is gonna pay for itself anyway. They are genuinely one of the best teams to work with. I mean that. We work with them at our brands. They have more than paid for themselves in their software. So if you wanna reduce tickets by like 30 % or more, save on your SaaS bill, go into Black Friday without any chaos, give Rich Panel a shot. Just go to richpanel.com slash demo. And Amit, if you're listening, dude, that's just a terrible, terrible example of what you say to somebody when you meet them the first time.

56:36Oh, and Amit promised me there's actually a super special promo code. If you use SorryKaty, SorryKaty, you'll get 20 % off your subscription. Give it a shot. okay so so so back to matt right because i'm i want to be team store i want to be selling stuff in person to people i think it's cool matt how can you win me over mike just hit a bunch of doomerisms no look i i i actually agree with almost everything mike is saying i just think i think you can solve for it with people so like number one mike's argument that like if it was so good why aren't more digitally native brands doing it it's like i just think digitally native people have no clue what they're doing when it comes to retail.

57:18So if you want to go into retail, you should go get some retail people. And I think my counter to that statement is, well, it is so good. There's a lot of companies that do really well in all these malls. They just didn't start out digital. They built extreme competency in physical retail. And there's lots of them. Again, I think also all the context here is I'm very skewed by the Canadian mall market, which is really, really good guys. So like when I look at it for our brand, like you're 600 bottles a day, Mike, I need to sell like 50 orders a day to make this work. And I'm going to be able to do that with our margin profile and everything.

57:55Phone accessories with big margins. Maybe you can make that work. You just can't make it work in water bottles. So I think it's just like, you're just dead on arrival with like 60 or 70 % of companies just like, no, won't work structurally. can't happen. And then there's obviously some cautions for the other 20 or 30%. Like Sean, you couldn't make it work with just wallets, but now you have four different verticals. Like you've really made yourself an accessory company. And so if you're like, can you make Ridge work as an accessory store that sells all this different stuff? It's like, yeah, maybe that makes sense, but it just doesn't work for most companies.

58:29You know, like, I don't know, Jason, have you thought about doing stores? Oh yeah. Jason, where, where, where are you leaning? How are you going to vote. Yeah. I'm actually very interested in some kind of store situation for us. If you look at it, historically, maybe it would be tough. Having a bunch of 20 pound boxes, which are our sets and other big boxes, are people going to really walk out with those boxes out of a mall? Probably not. But I think with the Shopify point of sale system, if you look at what car companies have done in shopping malls. I think that's very interesting. I think if you have a product that people want to touch or try on a physical location, it makes sense.

59:11Now, we've got a great physical setup in Costco, and we know that that works. Volume, foot traffic, et cetera, compare that to rent. It's interesting. I remember when Apple started opening stores, and that was weird at the time. I don't remember when it was. It's a long time ago now. But it was weird. Apple's opening stores and now they're ubiquitous. So I think also opening a physical location for a certain type of brand actually helps just with the perception of the brand. And I think that's like if you go down Rodeo Drive, for example, you got all the big brands there, all the big luxury brands, but Golden Goose has a store.

59:59And you could argue that Golden Goose is like a luxury sneaker brand, but I just sort of felt like Golden Goose investing in a store on Rodeo Drive was like making a statement for their brand, punching a little bit above their weight. So So I think there's a future, potential future for HexGlad. But again, it goes back to go where your customer is, does it work for your product, all those things. But I think it's interesting for us. I don't think it's interesting for Simple Modern. I think Simple Modern has got a great situation with a bunch of wholesale accounts. And that's like Simple Modern, While it does have like a lifestyle-y feel to it, right?

1:00:49Carrying around your drinkware and that's like a thing. I don't know if it's the same as like having a premier position in some upscale mall in LA somewhere. Well, I think the overlap, Jason, is this is similar to D2C that you just have to have a certain amount of product margin and nominal profit dollars to pay the rent and to pay for the staff. And it's the same way with D2C. You have to have a certain number of nominal profit dollars to pay for the customer acquisition. And a lot of brands, it's just difficult to generate those. That's why they have to live in the larger Walmart structure, Costco structure.

1:01:25They have to be on Amazon because Simple Modern would not exist as a brand if we were just trying to do D2C. We would not be able to make it work a lot of the year because we just can't. We don't have the built-in nominal profit dollars. So I think that makes a lot of sense. And it's easy for me to understand why D2C could overlap with physical retail. My understanding of it is it's just it's very complex. And it's a lower yield as far as the different things you can do to grow your business. Yeah, look, and everyone wants to be Apple. Jason, I'm so glad you brought up Apple because I talk to people and they're like, oh, we want our stores to be like the Apple stores.

1:02:01And you have to think about sales per square foot, right? There's a reason why they're number one. You can fit a lot of dollars in an iPhone. You know what I mean? It's like an iPhone's basically the same size as a Ridge Wallet, but it costs like eight to 12 to 15 times as much. It's like, yeah, it's just, it's so hard to beat that. And there's subscription and there's everything else. So you probably should lower your expectations of what's possible with stores. Jason, you brought up Golden Goose too. I looked them up. I thought they IPO'd, but they pulled the IPO. So they were trying to IPO last year.

1:02:30We should check in on that brand. All right, Matt, keep us updated on what you do with stores. Mike, if you ever change your mind, let us know. Oh, Matt, you're smiling. What's up? Yeah, no, I got one coming soon enough. Yeah, when's it open, Matt? In 2026, like in early 2026. All right, will you be able to tell us how it goes? Yeah, yeah, yeah. Yeah, I will, when I get data, I will definitely report back. Good, bad, or ugly. I'll share. Yeah, and I just want to highlight for Jason. I talked to the guy who owns Sur La Table, and stores are so important to that business, right? So I think there is a way to make stores work for everybody.

1:03:08It seems like you're a team store, so hopefully we see a HexCloud store soon. And I think we'll try it too. I think, you know, it's one of those mistakes a brand has to make for themselves. So I'll probably run the numbers and end up like Mike in six to 12 months. But maybe Mac could convince me. I doubt you'll lose money on it, Sean. I'm just, I'm just think there's a good chance that three years from now, you're like, yeah, it wasn't worth all the effort. You know, it was distracting us from doing the thing we do best. That's what I'm saying. Okay, beautiful guys. I'm going to summarize this and then we're going to end the show with everyone saying a brand that they really love right now.

1:03:43We did this maybe 90 episodes ago. We're going to bring it back. People can shout out a brand they really like, but to summarize it for everybody, I think the common wisdom now is to be omni-channel, right? And I'm really trying to coin the term channel agnostic. You want to be where customers are. So TikTok shop is great top of funnel that will drive sales to Amazon. If you're number one on Amazon, you'll get placement in retailers. And then if you do really well in physical retailers, eventually you're going to want to open your own stores. Obviously,.com has a place in that, your own DTC business.

1:04:15Most of us got built on that and it's going to be the core to our business until the day we die. But you just want to be wherever customers are because the world is going more and more distributed, right? You want to be able to capture those sales. So that's some advice for us. And then the only thing to watch out for when you go into these physical retailers, is it worth it? Do you have the throughput? Can you make enough money off it? And are they going to go out of business and f*** you over? Going back to throughput, Isaac, good friend of ours with a candy brand, he told me that Target expects one package per store per week.

1:04:48not per day. So it's like he might sell, you know, like that's good sell through or whatever. Right. So if he's hitting five packages a week in this, it's like, does that, will that throughput change your business? Think about that. But all right, guys, are you guys ready to do your, your shout outs? Matt, you want to go first? What's your favorite brand right now? Okay. So I had a, my wife bought me a bag from a brand called Serapian. S-E-R-A-P-I-A-N. This is an Italian history, like I think from the 90s brand. The product is freaking unreal. Like Jason, dude, it's a 10 out of 10 product. And it's just a, it's a duffel bag.

1:05:29It is nothing. Like, it's just the assembly is so damn good. It blew me away. And I've actually been like nerding out on the history of this brand. So I don't know. It's obscure. It's not a sexy DTC brand, but the product is bad. So shout out to them. Beautiful. You're going to return that. You're going to buy a Ridge bag. I love to hear that. I like Jason. Not when you see this thing. Jason, your favorite brand right now. What are you shopping? What are you buying? What do you love? Boji Milano is an Italian, like mid-level Italian, really good style clothing. I don't even know if it's in the US.

1:06:06So you got to go to Europe for it. They're all over Italy and they have really great clothes. And they have an online presence as well. I just think their styling and quality is great. I mean, I wasn't at Beanstalk meeting everyone on the planet. So, Sean, you got to have like a bunch of brands that you want to talk about. Oh, yeah. Tons of great people there. But we'll check out another Italian recommendation. Mike, your favorite brand right now. What do you shop and what do you buy in? I don't know if this is favorite, but I just first thing that came to mind, this shirt, it's company Collars & Co.

1:06:37And they basically make it where your collar stays stiff. which I don't know what it is about my neck, but like collars look really funky over time and they just start looking not very good. So I took, I got some of them. I got them with Simple Modern embroidered on them. Love it. So it's easy. It solves a problem. I think they were a Shark Tank company that's done pretty well in the DTC space. So yeah, dude, I mean, I talked to 50 brands a week or whatever. I want to give a big shout out to Mack Weldon. So Mack Weldon is a DTC darling, one of the OGs, raised some money. but they have battled it through and have made it to be like a scrappy best in class C to C brand right now.

1:07:15So they've learned from the all birds of the world and I think have gotten stronger, better, faster. So I think that team's doing great. And then shout out to Shinesy, keeping in the underwear family. The Shinesy team is sharp as hell. Those guys are awesome. So this goes to next week's episode is going to be how you can be friendly with your competitors, right? It's way better to know who you're competing against than some random guy who's going to flag your shit as pesticides. So hopefully Mack Weldon and Shinysteak can high five. And I'll high five all of you. Thank you for making it to the end of the Operators episode.

1:07:45Sean is the best moderator on earth. Like, comment, subscribe. Thank you, Matt, Mike, Jason. Any parting words? Love you guys. That was fun. Thank you for Phil, NorthBeam, PostScript, Saris Analytics, Rich Panel, all the sponsors. All right, bye.

1:08:07you