How Ridge Used AI to Double Revenue & Surpass $100M Revenue

0:00If you're good at marketing, it's the difference between doubling or tripling your business. We have days we do$5 million.

0:10No VC funding, multiple product categories, and a lifetime warranty. Ridge is literally breaking every single rule in the e-commerce playbook. Yet the team broke the$100 million revenue mark, making them one of the largest accessory brands on the planet, capturing 1 % of the entire wallet market with just one of their product lines. Content's everything. Today, I'll spend over$200 ,000 on Facebook ads. I'm only able to do that because my content is so good. That's the X factor. Sean Frank, their CEO, is here to talk to us today, breaking down localized fulfillment that allows for global expansion and how content distribution can bring in loyal customers.

0:46People buy from people. It is the unfair advantage anyone can have. If you just get on there and just write stuff or film videos, there's free impressions to be had. I'm Adam Levinter, and you're watching Shopify Masters, your companion for starting and scaling a business. Sean, welcome to the show. Thanks, man. You killed it. Great intro. Thank you. To start, one of the elements that makes Ridge so unique is the fact that you guys bootstrapped for so long. You were incubated, let's say, 2014. You didn't take$1 of outside investment until 2023, which is incredible. And you hit that$100 million revenue mark.

1:23This is unheard of. How'd you do it? Shopify and Facebook ads, man. And even in 2023, we did a very small round just to let Marques Brownlee into the business. So famous YouTuber. We really wanted to have a creator officially employed inside of Ridge. We wanted him on the board. So we made a small exception. But we could still consider ourselves a bootstrap to this day. And we'll do a couple hundred million dollars this year in revenue. It's incredible. So a lot of Facebook ads. E-commerce has certainly changed over the last decade. In 2014, the cost per click, CPM, just general cost of acquisition was way lower.

1:58So how have you managed to pivot given the fact that the cost of traffic, frankly, has gone up 30%, 40 %? Oh, yeah, man. I wish I had a time machine. I always say I wish I could spend more money every single year because Facebook isn't God. It's a publicly traded company that has to show revenue growth. And they've already added every user on earth. So if they have to show revenue growth and they have all of the users, there's only two ways to grow that. They can have you spend more time on their platforms, which they're really good at. Reels is incredibly addictive. and it's like six hours per day people are spending on reels or something crazy, or they can charge more for those impressions, right?

2:33And you said 30 to 40%. I think CPMs have gone up 500%. In 2014, it was like$2 to reach 1 ,000 people. And the average account on Facebook was running a 10x ROAS, right? Now, most brands are happy to get to a 3x, right? And that's probably best in class. That means one third of all your revenue going to marketing. And that's just the reality, right? Like the cost of attention is going up. You either have to get better at generating your own attention. That's why we wanted to bring Marques in to be like a creator-led brand. Or you have to find better, quicker ways to monetize. So we've always had to be first purchase profitable.

3:08All the brands that raised VC funding didn't have to be first purchase profitable. And that's why they went out of business, right? That muscle to like, we're only going to spend money if we can actually see direct return and profitability kept us in business this whole time and let us invest in all these new product lines. We'll come back to marketing in a little bit, but taking back to the origin story of Rich, how does this idea come about? Yeah. So father, son, best friend. Daniel was a college student. He bought what he thought was a wallet on Kickstarter. It showed up. It was like a key holder.

3:37And he's like, oh, well, I should just make the product that I really want. He thinks about it for a while. He goes home. His dad starts making fun of him for just using a rubber band. And he actually puts it in action. Him and his dad ended up making that first wallet, that prototype. They put it on Kickstarter. There is like$300 ,000. I don't join until like three years later. In 2016, I had an ad agency. I was just a young guy running Facebook ads for everybody. It's really hard to sell an ad agency. It was a booming time for e-commerce businesses, right? So I decided to get rid of my ad agency and merge it into Ridge.

4:10Me and my partner, my CMO, my best friend, Connor, we take a pretty big chunk of Ridge and they didn't really want to run it anymore, right? So father, son, best friend, they're like super Buddhist. They didn't really want to have to do like the extreme hiring and firing and scaling up this business. So I'm like, cool, I'll do all of that. You guys made the product. I'll just scale this business. When I met them, they were doing$5 million a year. And we have days we do$5 million, right? So that was like 10 years ago. It's been crazy. That is crazy. Talking about that. So as an agency owner, you have visibility into various clients that you're running ads for.

4:46and from a bird's eye view, you can sort of, I would imagine, handpick what business you would likely invest in or get more involved with. Was this the case with Ridge? Like you were looking at in the context of your total portfolio and saying to yourself, like if I was going to jump into some business or one of our clients' businesses, this would be it. Yeah, I wish I had a broader scope, but I had like 10 clients. Eight of them were horrible. Eight of them were not going to work. They were not worth investing any more time. they were barely holding on, like even in 2016 with all the cheap CPMs.

5:20There was a couple winners in that group. Mudwater was an early client and they've gone on to crush it. But yeah, Ridge is just like perfect team. There was no egos. They were willing to get out of the way. They tell the story that when they hit$5 ,000 a day, they would have traded the whole business just for a guaranteed$5 ,000 a day. They were like, this is way bigger than we ever thought possible. And now it just blows their mind, right? So it was just like a very good founding team who was willing to accept us to run the whole thing. And yeah, the thing had legs. Like every dollar we put into Facebook, it just kept working and working and working.

5:52And it was really just limited by inventory, right? So yeah, we got super lucky. Okay, so that transition from agency owner to now operator CEO, you were obviously well-versed in marketing and customer acquisition. That seemed to be your forte, but you've got to learn fulfillment. You've got to learn distribution. You've got to learn manufacturing. you start in the U S you've opened up, I don't know, five or six markets since then. What were the challenges along the way? Well, I think everyone actually, in those early days, marketing was everything. Like I always said, like Ridge was a marketing company.

6:26It was just all about getting attention. Right. I think people focus on those other things way too much, like getting really good at fulfillment or really good at manufacturing. The thing is, if you're bad at fulfillment, it goes from being, you know, 9 % of revenue to 13 % of revenue, which is substantial. You want to see that savings. But if you're good at marketing, it's the difference between doubling or tripling your business. Marketing is exponential and really worth understanding and investing everything into in those early days. So we thought marketing was the most important. Now, as we're a mature business, yeah, fulfillment, that 3 % savings you can have really, really matters.

7:04But we just had a long time to learn that stuff. Any of those commodity businesses, a manufacturer only has 10 % margins. And if you're horrible at manufacturing, as long as you don't make something that doesn't fit an iPhone case or something, you're going to be pretty okay. Marketing is where companies lose all their money. Talk to me about the problem that Ridge solves. I don't think a lot of the audience that's watching or listening today will be totally familiar with exactly what the problem is in the market. They'll just say, how do you, Ridge, carve out 1 % of market share, which by the way is incredible.

7:35Why is this wallet company so big? How did it reach$100 million in revenue? Why is this problem such a big deal? The global wallet market, it sounds so stupid to say, it's$10 billion. It's just massive, right? Like, you know, it's bigger than the global luggage market. Just a lot of people are buying wallets all over the world. Now, the luxury market of that is like really, really heavy, right? So LVMH and Curing, which owns Gucci, like has probably half that market share because they just sell a lot of small other goods. It was a really big market that had no innovation, was super stuffy, and nobody cared about, right?

8:05Like if you're an LVMH, what you really care about is women's handbags. you really care about the runway line. The men's leather wallet market is the bottom of the checklist. People just buy it because it's the cheapest thing with a logo on it. So really large market, nobody cared about. And at the end of the day, we really consider ourselves a gift-giving company. If you're going to Christmas and you have to get your uncle a gift, you have no idea what size he is, right? But credit cards all fit the same thing. And we'll have his favorite NFL team on there, or we'll have a cool pattern or carbon fiber.

8:34So we were able to capture over 1 % of that wallet market just by being the only people spending ad dollars on it and like trying to bring innovation to it. And then since then, the wallets are like less than half of all revenue now. So like we've just gone into like all accessories, right? We have a luggage line. And when we launched that, it was like trying to be the men's Away, right? I think Away does an amazing job, super close with that team. They would tell you that they're more female focused. Probably 60 to 70 % of their customers are women. Nobody's making like the everyday dad version of Away.

9:03So that's kind of what we wanted to go after. Got it. Let's go back to Marcus for a moment. So you partner with Marcus. He comes in in 2023. You've been working with him for a long time. How does he fit into the whole content and distribution strategy that Ridge has? Why is he so important? Well, Marques Brownlee is like an icon when it comes to tech YouTube. 20 million subs. And we have like a big rollout in Best Buy. And if you go to Best Buy, there's like a big photo of him. And so it's like, it's a big photo of him and then all of our products underneath. It just helped legitimize the rest of the line, right?

9:36We've been the number one player in wallets for a long time. There's more Google searches for Ridge Wallet than Men's Wallet. So we're very much bigger than the category. But we want to get into other products. We want to get into phone cases, power banks, cables. We want to get into luggage and backpacks and all these different things. And Marquez, Juan helps us tell the story. So he's really good at filming content. This week, we're going to be in three of his videos. Each video gets 10 million views on YouTube. So he has built-in distribution. He's great at storytelling. And it's just like a stamp of approval.

10:04Like if we're working with them, people were more willing to try our phone case or whatever else because there's tech icon saying it's pretty okay. Speaking of content, you launched your own podcast, The Operator's Podcast, I think it's called, with three other individuals. This is inspired by All In for those folks that know the All In podcast. You said that you've been able to monetize this podcast to the tune of$5 million in revenue? Yeah, the podcast makes a ton of money. Okay. Tell me more. Well, it's a very niche podcast, like the one you're listening to right now. The whole idea behind it was like, there's a lot of podcasts talking like, you know, there's like founders or how I built this.

10:42And they're talking about these like massive companies that have like these huge successes or these like really long, you know, arcs and stories. But running an e-commerce business kind of sucks, like in the day-to-day, right? You're dealing with, you know, a Terrafor, or you're dealing with Facebook ads manager, or you're dealing with hiring employees and COVID and going remote, all these different challenges. And there was just not a lot of niche content focused on that, right? So it's me, the guy from Simple Modern, another$100 million business, the guy from Pila Case and Lomi, which is like a food composter thing, another$100 million business, and then HexCloud, which is like, they'll do a billion dollars this year in revenue.

11:18And we just talk about the days and the ins and outs of running an e-commerce business. Yeah, and people love to sponsor that. So we make a ton of money off that. But people love to sponsor it because you're all, I mean, you're generating X number of listeners or you have this much traffic or impressions from your podcast and therefore they're able to run those numbers and they can see that data and then decide whether or not they want to sponsor, correct? Yeah, look, it's a really audience driven strategy. Yeah, it's incredibly niche, but everyone who listens to it runs a Shopify store, right?

11:52So if you're, you know, an ERP or an ad channel or whatever, like the B2B marketing is really hard. So we're lucky that Facebook built this ad engine where like I can go out there and every single day I find 3 ,000 people who want a Ridge Wallet, right? But if you're in B2B marketing, it just doesn't work like that. If you're trying to sell, you know, Shopify apps, massive ecosystem, how do you actually get the 500 stores that matter to actually download it? Where do you reach them people? It's, you know, conferences or it's the Shopify Masters podcast or it's the operators, right? It's very hard to reach those people.

12:20How do you build an audience or connect with a broader community if you don't have a brand like Ridge or a Hexclad? You don't have that$100 million marker attached to your name. Do you think that you would have still invested so much time or effort in a podcast, for example? Would you recommend that founders do that? Talk to me a little bit about the connection between audience and brand and brand and audience. If you're going to start anything today, I think you have to do it from a content first place, right? The best product doesn't win just because intention is so expensive, right? Every single day you're competing with the funniest videos on TikTok or like the best shows that have ever been created.

13:04Like all content is in front of you at all times. And when you have a physical product or a service or whatever, you have to get there and find customers and you're fighting through all that noise. So if you're going to launch anything, I think it has to be content first. The reason why we brought Marquez is the reason why I have a podcast is because I think it is the unfair advantage anyone can have is that if you just get on there and just write stuff or film videos, there's free impressions to be had. And you just have to get really, really good at that. And then once you get really good at that, then you can monetize it through.

13:33You can do a podcast or a service or a physical product, right? I think content's everything. Today, I'll spend over$200 ,000 on Facebook ads. I'm only able to do that because my content is so good, right? actual ad creative that my team actually goes out there and shoots and creates. I think that's the X factor. So if you're an entrepreneur and you want to launch something, you have to have some sort of content component. And it's going to be cringe and it's going to suck and it's going to be hard to do at first. But just shots on goal reps because content's everything. People are spending like 12 hours a day just consuming content and you have to stand out versus the funniest AI TikTok videos now, right?

14:08You're active on X. You're active on LinkedIn. Do the podcast. it's safe to say you've attached your name and your face to the brand. Are you saying that there has to be, if it's not the founder, there has to be someone that's going to be that face of the brand that is putting out that content on these platforms? Yeah, look, people buy from people, right? And I've only sold a couple million dollars worth of wallets myself via my face. But the reason why I brought Marques in is because Marques is that person, right? He can be the avatar that stands in for the brand in so many places in Best Buy, in our ads on YouTube.

14:43And he's helped us sell tens of millions of dollars with the wallets, right? You're competing against nameless corporations on Amazon and Timu and TikTok shop that will always beat you on price. And you're competing against behemoths like Lululemon or any of these giant companies, right? So how do you stand out between people who have a billion dollar marketing budget and people who are beating your own price? It's storytelling. That's what wins that middle market that we're competing in. If you're a founder, I think you have to be doing that, right? You have to be creating content. And if it's not going to be you, somebody on your team has to do it, but you probably don't have the money to pay for somebody.

15:17I always tell, because part of the operator's thing is like, lots of$5 million a year Shopify stores ask us for advice all the time. And my number one piece of advice is just film TikToks. Just film short form content of yourself telling your story and do that for four hours a day. It's probably the best use of your time because if one of those videos pops off, you can get$100 ,000 in sales, right? That's way more than optimizing your supply chain or anything else. It's just the modern day version of Facebook ads in 2014. So going back to Facebook ads in 2014, that I would imagine is your primary source of traffic, your primary source of revenue.

15:52How much were you spending as a balance of your total marketing budget back in 2014 on meta and related properties versus what you spend on meta today? What does that balance look like and where else are the marketing dollars going? Well, yeah. In 2014, I spent every single dollar I had. So 100 % of all of my money was going to Meta. It was the greatest return ever. It's like, you know, people talk about the glory days, but it was like Facebook was the first people to like bring a money printing machine into like the modern era, right? You could really put a dollar in and get$5 out. And the money printing machine still works today.

16:26It's just gotten harder and worse over time. So I put every single dollar I've ever had into that up until like probably 2017. In 2017, we got more into influencer advertising. So we were really early to podcasting YouTubers and that type of stuff. I mean, obviously, you're always running Google-branded search. I think YouTube has been a really under-monetized asset. I think they're starting to monetize it more aggressively. I think YouTube Shorts has been great. We've spent money on TikTok and Snapchat. Our new strategy is if there's any digital ad space on the internet, we're going to try spending money there.

16:54So from Pinterest and Reddit to new channels like AppLovin, any digital ad space I can spend on, I will, just because the more people we reach with Ridge, the better. What do you think some of those new channels will return? Like if you were going to bet on a horse, let's say outside of Meta, Pinterest, TikTok, Reddit, YouTube, whatever, where would you bet those marketing dollars in terms of projected return on ad spend going forward? Yeah. Until you're spending like at least$100 ,000 a month, I wouldn't get off of Meta, right? So once you're over$100 ,000 a month in marketing spend, I would really look at the whole Google suite, right?

17:33So I would try to spend as little money as possible on Google branded, but then YouTube Shorts is probably the most under monetized asset. There's a ton of attention there. They have really good targeting because it's backed by Google. So I'd go there and then I'd probably go Snapchat and then I would go TikTok, then I'd go AppLovin. And then it's just like a long tail where today, probably half of my money goes into meta. And then there's another 10 other things that equal up the other half, right? Influencer is great, but it's really hit or miss. We've really honed that muscle. We have a deal with Marquez and everybody else.

18:04So like I can spend efficiently on influencer marketing, but it's really easy to get excited and blow your whole budget. Let's talk fulfillment and manufacturing. You start in the US, you have a local fulfillment center. How does this grow overall from a fulfillment infrastructure standpoint? What was the second market? What was the third market? it, how were you pick packing and shipping? Well, yeah. Like most Shopify stores, we started in a garage. So we were doing it, the founders were doing it themselves, a hundred orders a day, maybe, right? And that was a big day. And then we found a local 3PL in Southern California, but they just ended up not being as mature as we needed, right?

18:42So we ended up going with one of the big players. There's ShipBob, ShipMonk, ShipHero. We've used all the ship people. We ended up going to one node in the US and then two nodes in the US. So we can be bi-coastal, right? This works if you're not in apparel. If you're in apparel, it's too hard. There's not enough throughput per SKU. You have too many SKUs. You probably need one node. But we're in accessories. So we can have two nodes. The Ridgewell is like designed for e-commerce, right? It's very small, fits in a flat pack. Lightweight, ship friendly. Exactly. So we're able to have two nodes ship across the whole country.

19:14And then you start doing cross-border shipments, right? So you open up the whole world. Shopify markets makes that easy. And then you ship from one of your nodes to Canada or the UK or Germany or wherever. But then at a certain point, you want to take that market more seriously. So you open up a new node in those markets. So we went to Canada first. So we have a Canadian node. And the beauty of Canada is you can ship into the US with that inventory or across Canada. So we have local inventory in Canada. It's pretty easy to get into America when we need. So the Northeast is taken care of. It ships out of Toronto.

19:44And then you go to the UK. Once again, this works with accessories because not a lot of skew, right? So we end up having a UK node that serves that market locally. Then we have an EU node in the Netherlands that serves that market locally. And then we have one in Australia. So we ended up going to probably eight nodes. We have three in the US right now. We have one in Mexico. So we just ship everywhere. How do you evaluate the quality of these fulfillment centers? How do you know that they're the right center for rich? Well, dude, I mean, we've gone through a lot of fulfillment centers, right?

20:13So - Trial and error. Yeah, yeah. And it really depends on who's working on the account is what we found. Because I've had good experiences with people that people have had horrible experiences with, right? You can go with any of the big names, right? Chipmunk, Shapiro, ShipBob, Seco. They'll give you seven out of 10 service probably all the time. They have really good infrastructure. And then if you want to go for a more niche name, you have to actually probably fly there and invest the time and energy. Fulfillment's hard. It's a really hard business. A lot of ways for it to go wrong. Is returns a factor in your world?

20:45We have a really low return rate. I would imagine. Like, why are people returning Ridge wallets? See, the thing is the size of always fits. That's why it's a great uncle gift, right? That was like our big unlock is like these gift giving periods, like a 4 % return rate. And that really also helps with the localized fulfillment centers. Because if you shipped from the US to the UK, getting that unit back to you from the UK is probably$50. So you don't really want to do that. Getting it back to the UK warehouse, four bucks, very easy. Talk to me about the analytics and the metrics side of the business.

21:14So when you think about customer lifetime value, in the context of something that has a lifetime warranty attached to it, how are you measuring LTV in this case? Like I said, we had to be first purchase profitable because there was no LTV in the business. So the average guy never buys a wallet in his life, right? Almost every wallet they get is just a gift given to him. So it's very hard to sell them. And once we do sell them, they never buy another one, right? We have like a small group of super fans who might buy two to four to 10, but like 99 % of people are never buying another wallet. So we have this problem where we have, at this point it was millions of customers, all incredibly happy, all love the brand, never coming back to buy another thing.