This Owner Acquires DTC Brands. Here's His Outlook on Ecommerce Right Now.

0:00The industry, the vertical, the space that you're in, is having a tough time. That's clear. There's macro trends, you're facing headwinds. However, as tough as any market may be, there will always be winners. And so you can be that. Hey, everyone. Welcome to Shopify Masters, your companion for starting and building a business. I'm your host, Adam Levinter. Our guest today, Kyle Widrick of holding group Win Brands, has had a fascinating career in e-commerce as an investor and founder. His first company, Brand Value Accelerator is an agency that helped brands move into e-commerce and actually was one of the first Shopify Plus customers.

0:37Now, Kyle buys, owns, and operates brands like Homesick Candles and Gravity Blankets. He's here to talk about all of it as well as what he's looking for as an investor and operator. Kyle, thanks for being here. Great to meet you, Adam. So you started back in 2013, was it? So Brand Value Accelerator, I started in 2013. That was after having spent about six and a half years at a family office. This guy, Chris Birch, behind Birch Creative Capital, known mostly now for the Tory Birch business. And so I spent six and a half years with him traveling to China, going to the factories, being in the US, opening stores, board meetings.

1:17It was like a super MBA and consumer, decided I wanted to leave. And at that point, 2013, a good friend of mine, Dylan Whitman, really convinced me at the time that Shopify was the next big thing. And so spent a lot of time in that process of deciding if this was the right time, decided it was the right time, stood up a business, that business was Brand Value Accelerator. We really did two things. We built websites and then we did strategy customer acquisition for a lot of the early known Shopify D2C brands, Kylie Cosmetics, Mizzen and Main, Untucket, all the way up to P &G and Red Bull. MVMT Watches was a big client of ours.

2:01And so we would build the website or typically rebuild the website and then did a lot of retainer work. And so right team, right place, right time, built that business up over five years. We actually sold it to a group who sold it to The Stable, who sold it to Accenture. And so, you know, had a really good run there, ended up with north of 100 employees. That was my first major business that I co-founded and scaled and ultimately sold. When does Wynn Brands get incubated? So this is, you know, post-sale, obviously. You're beyond Tory Burch. You're doing all these things. your buddies telling you how great Shopify is, what happens next?

2:44Yeah, so we did the Shopify run with my partner, Dylan. Then if you're looking at it from a macro perspective, I was doing the investing. I didn't talk a lot about it, but we invested in over 200 companies while I was with Chris. Tori Birch was one of them. Voss Water was one of them. Tons of consumer product success and investment experience. Then I said, well, what's the next logical step, the next logical step is actually to own and operate the businesses, right? And there's always, I think, an interest from the agency side to say, hey, we're working with all these great brands, but we're actually not seeing the full upside.

3:22If we just own the brands, we know how to do it. Maybe we know how to do it better. And so that was literally my mentality. I went out to a small group of investors, including Chris Birch and some other prominent angels, and I raised a little bit of money on the thesis that we would roll up a multi-brand portfolio of Shopify businesses and we would be able to drive synergy by having a centralized team. And so it literally was as simple as that. And then the first business that I focused on and ultimately bought was a business called Homesick. And so homesick.com I bought from a guy named Ben Kaufman.

4:00He had sold it to BuzzFeed, which is where he was. And so he and I sat down over lunch. He understood what I was doing. He's like, look, this asset got sold to BuzzFeed. I actually think you'd be a great owner of it. And so negotiated a couple of weeks, got the deal done. And we were off and running. So Homestick was the first. And then our second was a business, Kalo, the silicone bands business, leader in replacement wedding rings on the silicone side, and met the founders there. All the founder stories are interesting. In that case, two guys working in the restaurant industry wanted a way to show their commitment while at work without wearing the metal.

4:38And so they conceptualized and launched this product, got picked up on HBO Hard Knocks with Andy Dalton. Things spiraled. All of a sudden, they had a$25 million plus business. Enter Kyle. I would have a conversation with the founders. I'd be like, look, you've gotten the business to a place. You've done an incredible job. I think, like my opinion is, you can take things much further on an omni-channel basis if you partner with someone like us. And so most of these businesses that we ended up acquiring had seen really good success on the Shopify business, but they were then trying to tackle Amazon and trying to tackle wholesale.

5:14And to make it a truly three-channel focused business requires more investment, requires more resources. and in a lot of those cases, you know, it makes sense to partner with someone for that next phase and that's been the approach. What has changed on a macro level with respect to the overall strategy? So 2013 is certainly a different time for e-commerce. CPC, CPM rates, effectively your cost of acquisition across the board, I would assume, was a lot lower then in 2013 than it would be now. What's changed? Everything's changed. I think even from 2018 to now, everything's changed. From 2013 to 2018, everything changed, mainly going in the wrong direction for the business owners and operators.

6:00So what I mean by that is Shopify has gotten more difficult and more expensive. Amazon's gotten more difficult and more expensive. More people now are looking at wholesale because wholesale can actually be your best net contributing revenue channel, which by default then has made it more competitive because everyone's seeking that same contribution margin on the wholesale side. And so it does, to me, feed into the theory that in some cases, these brands can be a lot more efficient being part of a multi-brand portfolio. I think we got that right. We had the right concept at the right time with mainly the right team.

6:39The thing that you need to make sure that you manage is something that I learned really well with my time at Birch Creative Capital. Each brand has its own kind of lifeline and momentum. And momentum is up, momentum is down. And so when you're looking to acquire a brand or when you're owning and operating a business, once you start to lose momentum and steam, it takes an entirely different set of skills to kind of rein that back in and get it going back in the right direction, right? And so as e-com gets more difficult, as Amazon gets more difficult, you have to be constantly releasing great new product that excites the customer to maintain that brand momentum.

7:22If you can do that, there is still a great market to grow these businesses and grow them profitably, but it's gotten incredibly more challenging. From a platform and marketing standpoint, if you've got, say,$100 of ad spend and you are diversifying your marketing dollars or media spend across meta and paid search, et cetera, et cetera, back in 2014, 2015. What was the breakdown then versus the breakdown today related to customer acquisition? I think back then you just pour it all into Facebook ads because you're getting a 5 to 10x ROAS. It was easy. And by the way, we looked like geniuses because we were running strategy at the agency level to support that.

8:11And rightfully so. I mean, a lot of the folks didn't have the teams built out internally, so they did need someone like us to do that. But times were good. times were easy. Today, what we're seeing is a piece of your overall spend can be spent on Facebook meta, can be spent on Instagram, can be spent across the platforms. We look at that to say, we want to be first order profitable. And so that ultimately reduces the spend to the level, depending on the brand and how known it is to get to that first level order profitability. the rest of it then is allocated more and i have friends in the space who allocate 100 to this to things like influencers right where you're getting direct social validation whether that's tiktok whether that's instagram other platforms and people are making a lot more buying decisions on that direct approach you can wrap around that things like loyalty programs etc which we've leaned in on.

9:11But ultimately, driving brand loyalty via them seeing people that they aspire to be using and consuming the brand is where it's at. And it's nowhere near as simple as it was back in the early 2013, 2014, 2015. You mentioned Amazon. What about Amazon today? So five years ago, the position, at least with respect to premium brands, was no, we're not going to go onto Amazon. That's just not the play for the brand. And now you see a lot of these brands sort of acquiescing and saying, okay, we've got to be on Amazon. That's where all the eyeballs are. What's your take? Yeah, I think there's a subset of brands that took that exact position that kind of were, I don't want to say too good for that or were above that, but some version of we don't want to sell on Amazon, which I totally understand.

10:05My position has not changed in the last six years, which is Amazon is the largest shopping mall in the world. And so whether you want to be there, don't want to be there, you have to be there. You could be playing defense. You could be playing offense, maybe a mix of the two. But you have to be selling on Amazon. It's just too big to ignore at this point. The other thing that's affected me a lot in this space has been, you know, when I started of in 2018 with this concept of multi-brand portfolio focused on Shopify brands. The reason I focused on Shopify is that means you have a product and a brand that people know that they're going directly to the website to buy your product.

10:43You can then expand that to be a branded business on Amazon, and then you can expand that to wholesale. And so we've seen that consistently across our brands. There are known brands that people go to buy that brand. It's very difficult, if not impossible, to take an Amazon product-based brand and try to launch a Shopify site. Customers don't show up. They don't know the brand. They're not looking for it. They're not seeking it. So that's a very difficult transition. And so there was a lot of noise in the overall consumer multi-brand space over the last five years. Today, a lot of that noise has gone away and a lot of those businesses suffered from that single channel risk for a whole host of reasons.

11:25but the opportunity remains. Great products, great brands drive some efficiency. Our version of that is through this multi-brand portfolio with a centralized team. But that consumer opportunity, even in the facing the headwinds that we have today in generally in e-commerce is not going away. I'm chatting with Kyle Widrick, founder of Win Brands Group. I want to take a quick moment to thank you, our listeners, for tuning into the show today. Did you actually know that we have a YouTube channel where you can watch some of our favorite in-person interviews? Yes, go check it out. And thanks so much again for supporting us here at Shopify Masters.

12:05Let's get your take on some of these acquisition criteria of sorts. So back when you acquired Homesick Candles, for those that aren't familiar, what was it about that business that you found attractive? What was the playbook that made you successful? And do you think that would be a business that you would be interested in today? So Homesick is a great story in the sense that when you break it down, Homesick is about nostalgia. It's about memories. And so it's a very unique case where you're selling a candle primarily that you're selling typically at retail with a scent. People want to pick up the candle, they want to smell it.

12:43because the sense of nostalgia is so strong with homesick, it allows you to sell that product online having never smelt it. And so it's a very unique case of being able to leverage that deep nostalgia and that connection to being from New York or being from New York city or being from Florida or being from Miami. And so for that reason, I got really excited. Like this is a home run online candle business. Right. And I had never seen that to be the case. It proved to be true. I mean, we've been able to grow that business many, many multiples from, you know, where we bought it both online, but also on Amazon and now in store at retail.

13:26And so, you know, that's a good example of a business that I would buy again today for the same reasons, omni-channel potential, uniqueness to the brand and the product itself. I could not have predicted COVID. COVID for the home product category was actually a huge boost for us, which is fantastic. And so things like that, you can never predict. But from an underwriting to what it ended up being perspective, Homesick has been a great case study for us. I know right now you're also focused on outdoor and also home. These products, I would assume, have good gross margins. What else is attractive about these sectors?

14:05So outdoor, people have gotten more active. I speak with people that are thinking that the world in the US will go closer to a four-day workweek as opposed to a five-day workweek. And those folks are investing in live entertainment and golf and different categories that would benefit from that shift. For that and for all the reasons, outdoor and outdoor activity has been a great category. And so when we look at that, you try to assess where do you want to play in that market? We bought a business called My High a few years ago now. My High at its core, at the time we purchased it, is a infrared sauna blanket business.

14:48And so people who want to have the effect of a sauna and do the sauna session that maybe don't have the investment capital to spend on a full-size sauna or don't have the space for a full-size sauna or want to do it when they're traveling. This is a fantastic product that's sub$300 that they're able to take with them, that they can get that same sauna sweat effect. And we took that business, we've since expanded to a whole suite of products, including massage guns, knee wraps, eye massagers, our new big product that we're launching to drop in January is a revised version of our cold tub plunge, which is fantastic.

15:31And that's something where for me personally, being busy, being probably overstimulated, the ability to reset and use these products for your own personal wellness is definitely a growing category. And the cold plunge specifically, I was watching this comedy bit the other night with my wife and the guy said, how do you know someone cold plunges? He's like, they tell you. You don't have to ask anyone that gets into it. Loves cold plunging, but I'll tell you, being someone that does, once you start doing it and doing it consistently, it's a total game changer. It is the most difficult thing that you'll do all day.

16:10It's super painful, but when you get out of it, the feeling that you get for me is unmatched on anything else that I've tried. And so our job then is to take that incredible feeling in that product and really expand it into the market. And so I'm chatting with major retailers to say, great, we sell this product online. How do we work a partnership with you all to take this nationwide, whether that's Walmart or Dick's Sporting Goods or Academy or Shields or some of our great outdoor accounts? Just as an acquirer, if we look at the last decade or so of e-commerce, big boom 2013 through whatever, certainly just a solid, healthy trajectory, a bit of a bumpy entry into COVID, a huge boom in COVID.

16:54Coming out of COVID, things have been really, really challenging. And it sort of feels like now might be a good time to start acquiring e-commerce brands again at a pretty low multiple. So is that the perspective that you guys have now? Yes. I think the opportunity and one of my board members at Win Brands, who's become a mentor of mine, he's like, look, the industry, the vertical, the space that you're in is having a tough time. That's clear. There's macro trends. You're facing headwinds. However, as tough as any market may be, there will always be winners. and so you can be that. I was like, that makes a lot of sense.

17:38I appreciate that. And so for us, the challenge is twofold. Number one, make sure that your house is in order in the sense that your brands are working and your business is working. That's something we've spent a lot of time on over the last six, 12, 18 months, just to make sure as things change in the market, we're changing with them and we're ahead of the curve. And so I would put a checkbox on that for us. then you say based on everything that you've learned m &a wise momentum wise and otherwise what types of businesses do you like and you want to acquire and so we have a very specific lens on that within the home and the outdoor category and so for us right now the reality is the multiples have come down that creates a buying opportunity for us and the multiples are literally cut in half from where they were two years ago.

18:32When you look at the timing of selling something, so selling a brand, let's use just D2C Shopify brand as an example. I think there's probably a ton of founders listening to this saying, okay, I run a Shopify business, maybe more than one, been thinking of selling. When is the right time to sell? It's a great question. I think my answer might be unconventional, but you always, if you want to sell, in my opinion, you should always sell when people are telling you it's too early to sell. By the time people are of the opinion you should sell, it's too late. And so when I look at my agency sale, and we built a business from 2013 to 2018 in Brand Value Accelerator, BBA, we sold too early.

19:23There's no question. We sold to a sponsor who sold to a strategic who sold to a strategic. Could we have taken it the stretch and sold it to Accenture ourselves? Yes, we could have. Would we have made a lot more money doing that? Yes. Do I regret for a second selling when we sold to who we sold to? I don't. And so as long as you believe that you will do another business and you have another one of these in you and you're able to kind of move on to the next, which I always do. That's something that I have deep conviction on. You always want to sell before folks think that you should sell for the simple reason that again, on that momentum curve, you haven't peaked.

20:09I also believe uniquely from a karmic level, imagine you're able to time the market and your business is exactly where you would ever want to be to top tick the valuation and extract the most value. If you sell to someone at that exact moment and you put all of that cash in your pocket and your partner's pockets, what that really means is that the investor who took the other side of that trade is taking the ride all the way down, right? They're getting a tremendously bad return on their investment. And so I believe in leaving a little bit of upside on the table. I think that's the right time to sell.

20:48And I think that's always when you're able to get a deal done. I'll give you another example. When we were selling BVA, in a lot of chats with the bankers, we hired a great banker who's become a good friend. He's like, look, during this deal sales process, if you have one down quarter, if you can't show that the business is just going up and to the right, we're going to have to reset and it's going to take another two years to sell this business. and so you have to sell when you have positive momentum you know behind your business and typically that's earlier than most would want to or get to that place and so for me now when I'm meeting with entrepreneurs it's almost always that they don't want to sell because it's going to be bigger bigger things are coming that's all great and so what it really means how much conviction do you have in that and then do you plan on doing more things most entrepreneurs that I meet and get on with really well, have another four ideas that they're either working on or want to work on.

21:43So sell the business, get a great number, put the cash in your pocket and move on to the next. We've been hanging around YPO too long. Let's talk about platforms for a moment. So it's funny, you were one of the first 10 Shopify Plus users, as I understand. Why? I guess the reason related to my question, which is why Shopify Plus is going to be different now than it was then. But when is the right time for a business to consider migrating from Shopify to Shopify Plus? What is the right type of business that should be on that platform? Yeah, quickly, Shopify has been a beast of a business. You know, Harley's become a friend of the president of Shopify.

22:24I mean, And the business has been an absolute smashing home run. All respect to Harley, Toby, and the team. As a Canadian firm dominating the commerce market in the US, it is an unbelievable story. And so we were one of the first 10 Shopify Plus agencies, which really meant all of that momentum that was coming into that Shopify funnel was funneling back to mainly those first 10 partners because people wanted a validated partner to build their website on. So when Jake and Kramer from MVMT Watches came and wanted to work with someone, they looked down that list and that's how you build a relationship.

23:03So we were in the right place at the right time. Our sales strategy had to be to say, look, Shopify as an open ecosystem with what they're offering is the equivalent of living in a New York City apartment, which I do with full internet, full power, full water. everything you need is out of the box versus living on an island where you have to bring all that in and build all that yourself and maintain the cost. That's the difference of having a site on, say, Magento versus Shopify. It was that case then, 10 years ago. It's still that case now to a large extent. Shopify has now, though, however, dominated the small business, dominated the mid-sized business.

23:47And now, year after year, they're picking off the very last enterprise clients that are still left on these other platforms. I remember when the Tory Burch business launched on Demandware back during that time period. And the website bill to get up and running was like north of$2 million to build the site and get moving. It's a big enterprise. That same build on Shopify at that time would have been a fraction of the cost. and people didn't trust it. It didn't make sense. It's like, why would I spend$100 ,000 here when the$2 million has to be better? And the reality is it wasn't, it isn't. It's still the case.

24:28And people finally smartened up to realize, invest in the flexibility and the things that matter as opposed to overspending on the website cost, which for a period of time is what a lot of folks did. Kyle, in the last few minutes, what are you working on? What's the next chapter for you guys? So right now at Wynn, our focus is maintaining the brand momentum in the brands we have. We feel like we've done a great job. Part of that's been luck. And part of that's been strategic point of view going into it. But we still like the home space as much as we did. We still like the outdoor space as much as we did.

25:04We have category leaders within both of those categories. And so the next 24 months will be a little bit of what we talked about, which is strategically, how can you continue to double down and grow in a market where things have become cheaper from a business standpoint? That said, capital's gotten more difficult. Capital's gotten more expensive. Fortunately for us, we're backed by an incredible group of investors. We brought in a private equity group called Orangewood Partners. They've been fantastic. You know, we have folks on our board, including Chris Birch at Birch Creative Capital. And so having that support behind us in retrospect for me, you know, is one of the smartest things that I did in bringing in partners to the business.

25:50But the path forward is continue to put out great products at a great price. And so my focus individually, the last several months has been really pushing on our wholesale business and being at our key accounts of Dick's Sporting Goods, being at our key accounts of Walmart, flying down to Bentonville, understanding with these products, how can we lean in and improve those relationships and do something for them that they're looking for out of brands like us. And so it's definitely an exciting time in the space, but it's not 2015. It's more challenging than it was. And that requires a lot more focus.

26:32I don't know if this puts you in the camp of those older folks that you posted about. I saw you posted something related to the younger generation of entrepreneurs being so focused on marketing, whereas these older folks, let's say, were focused on sourcing and the merchandising aspect of things. So maybe you've gone from one side of the spectrum to the other. It's interesting how that happens. I think money return, let's say, investment was so easy back in the 2015, 2016, 2017 days that if you put out a great product and you put out great marketing, the cost of the product between a bracket of dollars didn't make that much difference.

27:11Now, back when I worked for Chris Birch, we literally would spend months and months and months going from factory to factory. And we're talking like six hours in a van outside of Shanghai with like no restaurants in sight, literally trying to shave like a couple pennies up the price. Like we had an office supplies business called Poppin. So it's like trying to source a pen, a writing pen for like$1.10 or like$1.08. But like in Chris's generation, and a lot of folks that I've met in that generation, they're obsessed with cost of goods because obviously the higher margin you have, the lower your cost of goods, the more money you have to go around generally and the more profit you can make.

27:53So it's interesting reconciling those two worlds. The reality is today, we've leaned into some of our partners on the supply chain side, our costings come down incredibly. And so you need to be able to actually do both sides well to make the business work is where things have gone over the last five years. Appreciate that perspective. Kyle, thanks for being here, man. It's great to talk with you today. Loved it. This was great. We could go on for hours. I appreciate it. Kyle, thanks for being here. That's Kyle Widrick, founder of Win Brands Group. Shopify Masters is produced by Megan Coyle and Gogo Zoger.