Ep 618: Inside Tumble – Scaling a Nine-Figure Rug Brand

20:26Zach Dannett:But that's really what they're best at. I feel like we're in an age of like the empowered individual contributor. And so that idea of like really focusing on hiring really great people who can be autonomous, who can run. And it's like, you know, the new paradigms, you no longer need to insulate them into management roles and have these maybe big teams under them. You just need a really empowered individual contributor with like very clear things that they're running on. Right. Are there any other aspects of the business you guys have been able to sort of like, there was a note here about your CX being largely automated?

20:58Zach Dannett:Are there like, what are the key areas you say you've been able to compress costs on in the business?

21:02Justin Soleimani:Well, I mean, I do think that we just get a lot of leverage out of our existing team, especially nowadays with AI, right? I think AI has definitely like paired very well with our business model that we had prior to like the AI tools becoming broadly available. um i think you're referring to are able to like yeah we've been able to automate what 60 plus percent of our cs tickets um leveraging ai as well um but we just we've run like a really asset light model right there's no corporate office we use 3pls we use contract manufacturers so we just try to keep things like pretty lean from that perspective and nimble because again, it's out of necessity in a sense that we never raise outside capital and we don't have any debt.

21:47Justin Soleimani:But also, we just want to build a resilient business. And when tariffs hit last year, for example, that completely rocked our industry and we were very, very severely impacted, we didn't lay a single person off. Everybody got their full bonus, for example. We didn't even slash anyone's compensation, nothing whatsoever, because we had built ourselves to weather a storm like that.

22:09Zach Dannett:Talk to me about that storm because I can imagine you saw the storm clouds aligning, but the day that the news actually hit, what were some of the key actions you took? Did you have to raise your prices? It was crazy. We did a few specific things to get through that time. We did raise our prices, but very modestly. I think we raised our prices on average one to two percent, which is nothing. And then some of the price points have actually come back down to where they were before. One of the things we had to do, well, I'll talk with the most obvious one, was shift your business out of China. We saw the writing on the wall earlier than April.

23:00Zach Dannett:Trump would talk about, it was his favorite thing to talk about, said tariffs are the most beautiful word in the English language. So we knew that that was happening and had an engling or thought at least 50-50 he was going to get elected. And so we started to put the pieces in place to move out of China and we've subsequently moved to Thailand. So that was fully in the works before April. However, within 30 days of the tariffs going from like 25 % to 175%, we had completely shut down China to zero and had scaled up to 30 ,000, 40 ,000 rugs per month. Another thing we had to do is we had all this inventory that was in Mexico.

23:49Zach Dannett:We were historically using section 321. So you have millions of dollars of inventory that's sitting in Mexico, untariffed, waiting for you to cross the border into the United States. Well, when that tariff goes to 175 % and you have all that inventory sitting in Mexico, you're in trouble. So we said, okay, well, what could we do with that inventory? Well, there's your favorite country of Canada, and they don't have the same tariffs that we have in the United States. So we did two things within 30 days. We completely shifted to Thailand and we opened up the Canadian market. And that's everything from labeling, relabeling certain products, understanding compliance, setting up our website, building our marketing engine, importing the rugs.

24:40Zach Dannett:And so by like, I don't know, maybe mid-May or early June, we were up and selling in Canada. I think our team handled it really well. We had nightly calls every single night for three months because we have people in Asia. We have team in the West Coast and the East Coast. So every morning and every night for three months, we had a one hour call just to align on exactly what we had to do in order to get to get through that time. But yeah, so it was it was crazy. And I feel like we're a much stronger company as a result of what we had to go through last year. I'm on your website right now. You're Canadian, you're.ca, and you even have a Victoria Day sale, which is a Canadian-specific holiday.

25:22Zach Dannett:So you're localized. You might have some – do you spell color the British? You do. I'm just looking. Color is spelled the British way.

25:29Justin Soleimani:We spell color the right way. You're fully localized.

25:31Zach Dannett:I feel right at home on here. How has Canada been as a market for your products?

25:36Justin Soleimani:It's been pretty strong. I mean, at the end of the day, it's a much smaller market, right? It's less than 10 % of the U.S. but we're punching above our weight in Canada, I'd say. The marketing efficiency is pretty much apples to apples with that of the US. And we've been able to scale it from zero a year ago to now the point where it's like approaching double digit percentage of the overall business. So that's just been a, yeah, it's been like a fun test case for, we kind of accidentally almost fell into that market. It was very much on our radar prior to the tariffs, but the tariffs massively accelerated that timeline.

26:12Justin Soleimani:And then now we have plans of expanding into other markets as well. And the good news is that we have like a really solid playbook that we can basically leverage going forward.

26:20Zach Dannett:Thailand is near and dear to my heart. I used to live in Bangkok. I lived in Bangkok for a year and a half and I've visited back in Thailand multiple times. I just love it as a place. What was the hardest thing about switching from China to Thailand or the biggest difference that you faced in working with a Thai manufacturer versus a Chinese manufacturer? I think every country has its own nuance. We work with a manufacturer in Mexico, in Thailand, Taiwan, China, Turkey, now Turkey. We're starting to dabble a little bit in India as well. And they're all different. They all have their different working ways.

27:03Zach Dannett:I've come to realize that there's pros and cons to all of them. An example of a Thai factory would be the cost of labor is cheaper in Thailand, but they're less efficient in Thailand. So the price nets out. And you have to learn all these different things. Also working with factories, the bosses, the leaders of those different factories, they're different. And so there's always a learning curve. You know, we do some play mats out of Taiwan and in Vietnam, for example, you just have to learn your new manufacturers, but it's no different than than anything else that you have to learn along the way.

27:46Zach Dannett:It's just it's always a challenge to move from one country to another. And it's always a challenge to start working with a new with a new factory. But within six months to a year, you kind of iron out those kinks. And then it's really not that different from one country to the next. I would say, yeah, then you have, obviously, there's real things that it's slower to get your goods from Thailand to the United States. But in terms of working, we've been, we're in a pretty good position within AIR. Super cool. When it comes to other global expansion, I think global expansion is gonna be a huge factor in e-commerce, even more so than it already has been.

28:25Zach Dannett:And I don't know if it's gonna play into it, But like it's, you know, the the genius act or whatever Trump is doing with stable coins. If we're if we do get into that more sort of like digital currency environment, I see like cross border payments become becoming easier. And so I see like in terms of being ahead of the curve, like getting the idea of expanding globally for brands like you guys is going to become even more attractive. Where where on your like, where are you guys thinking about expanding outside of North America?

28:52Justin Soleimani:I see your points. I guess the one thing I would say, though, in our case is like we do deal with a pretty heavy, bulky, physical world product. So getting the product overseas, whether or not the payments are an issue, whether or not like the, you know, Shopify has made these things quite easy, right? To like spin up new markets and things. But what a lot of brands will do is they'll be like, OK, I'll just start running ads in Europe and I'll drop ship from the US. Like I will just ship from my US 3PL. and yeah, it'll make less sense economically, but I'll still like make, you know, eke out a profit.

29:25Justin Soleimani:And then if I prove the European market, then I'll open a European warehouse. We unfortunately can't do that. Like it would absolutely make no sense to drop ship a 50 pound box to Europe from our American 3PL. So we basically have to commit and have local domestic inventory on day one. So in Canada, we spun up a warehouse, like just outside of Toronto. And then to answer your question. The next market we're looking at is the UK and we're going to have a domestic warehouse there as well, like on day one. So we have that constraint. And then the other kind of obviously major constraint is like language, right?

30:01Justin Soleimani:And culture. And so for us, we think it makes the most sense to start with English speaking countries that have similar culture, similar design sense. So Canada made a lot of sense. UK would be next. Australia would likely follow. and then we can start looking at like broader European EU opportunities. But for example, you know, something like Japan, as much as like Zach and I would love to launch in that market and, you know, a time will come where we'll look at it closely. The way we approach it would probably be quite different. Maybe we have a local operator, like a joint venture type thing.

30:34Justin Soleimani:Like, you know, we haven't really explored it closely, but I think you have to really think about each market and like in a different way and how you're going to approach it. The other piece is, by the way, is customer service, right? We can do customer service in the UK from a same centralized CS team, whereas we might need a dedicated team for another country. Although with AI nowadays, maybe you can do Japanese CS. I'm not sure.

31:00Zach Dannett:I'm sure. I'm sure Claude can do it all. Yeah. Talk to me about how things have changed for you on Meta over the years. You guys have the luxury of having a high AOV product. it does it's expensive to ship but it probably has some fairly long consideration cycles for people looking to buy it i see people on twitter just this week there's a there's a resurgence of people talking about this this really being the golden age for e-commerce for meta still meta like the andromeda appears to be working pretty well people are talking about the changes that they're making to how they build their creative flywheels to satisfy the the avatar life cycle that you're aiming to talk to in Meta.

31:41Zach Dannett:Has your strategy had to change at all in the past year for how you guys handle Meta?

31:46Justin Soleimani:So I think our strategy is always changing within the advertising space broadly, but Meta has always been the bulk of our spend. When we launched the company, it was probably 70 % Meta, 30 % Google. Meta is still 60 % to 65 % of all our ad spend. I think Google has actually shrunk a little bit. And that budget has gone to things like app loving is a new channel that we're actually spending like double digit percentage on TikTok, Pinterest, things like that. And then I'd say the biggest shift for us personally has been shifting more to like top of funnel channels in the last couple of years. Like we reached kind of a level of scale where only coming at it with like direct response, mid to bottom funnel ads, you kind of reach a point where like that stops working and stops being as effective and you need to build the top of funnel awareness and just get comfortable with channels like youtube we're on podcasting uh now and we're looking into like linear and connected tv as well the issues with those channels is that you can't measure them quite as effectively there's not clicks there's not pixels um but you can get a directional sense for how they're performing and you just have to get comfortable with that like i that's actually even a huge adjustment for our team is just like getting comfortable spending six figures a month or something on a channel that you're just like, I think it's kind of working, but I don't have like the hard data to prove it.

33:09Justin Soleimani:The other thing we've been doing a lot of is incrementality, like lift studies, right. To try to, to, to get at that as well. But even, even incrementality, you know, it's, it's difficult. You'll run the same test three times and get three different answers. And then you'll have to try to just read between the lines and get comfortable with a little bit of uncertainty.

33:28Zach Dannett:Did you have to rethink your creative with this push to top of funnel? Did you have to invest more in in-depth explainers? Or how did you think about content as you're trying to build the top of funnel?

33:39Justin Soleimani:Our top of funnel content is a bit more like high production. So we used to rely, and we still do, really heavily on UGC type content. we send you a free rug, you give us content back, and we have perpetual usage rights to that. Now we're kind of moving more into the like, A, working with bigger tier creators who we have to pay up front and like license their content, or making the content ourselves through like third party agencies and stuff that we partner with. So basically, our content budget has had to grow quite a bit rather than relying on just like, you know, freebie, you know, rugs in exchange for UGC that's shot on an iPhone.

34:16Justin Soleimani:But yeah, I mean, our content strategy is always kind of evolving as things change.

34:21Zach Dannett:Anything you'd point to that's where I know it's attribution is a little foggy. It's working, you're creating a halo effect. Any observations about which of your endeavors top of funnel have have paid the most dividends or created the best halo for your other activities?

34:36Justin Soleimani:Yeah, I'd say YouTube right now seems to be pretty promising, although it took us like nine months to kind of get it to a point where we felt like it was actually working. We experimented with like reach campaigns, demand gen campaigns, different types of creative, different audience targeting. We brought in a couple like agencies at some point to help us figure things out. But our kind of North star for something like YouTube, it would be a house incrementality lift study because you really can't rely on like in platform reporting. and the last study we did, we actually put YouTube head-to-head with Meta.

35:10Justin Soleimani:So we put the same fixed dollar amount into each channel. Third of the country gets nothing. Third of the country gets Meta. Third of the country gets YouTube. And we measured the lift of YouTube versus Meta and it was actually like on par with Meta and that gave us quite a bit of confidence to scale the channel.

35:27Zach Dannett:That's awesome. Have you had to invest in the organic presence on YouTube more or has it been enough to run ads on it?

35:34Justin Soleimani:We haven't. But that's actually something we're talking about right now. Like, how can we do that at scale is kind of the question, right? How can we get enough of an organic presence at scale that it's worth our time and energy? But there are tools I'm hearing about that help with that. But to date, our presence on YouTube is like 99 % paid.

35:54Zach Dannett:I have an idea for you. The Tumble concert series, like the Tiny Desk series, because you see rugs all the time underneath bands, like garage bands and stuff. you guys should you could do music videos where they're performing on your rugs tumble concerts i like it i like it what are you guys most excited for this because i think in the pre-interview you said you guys are closing in on nine figures of revenue this year is that accurate yeah we're in that range what are you most excited about for this year there's a lot that we're excited about um i was just talking to justin a couple hours ago i haven't been this excited since we started to tumble since we launched on Shopify just over five years ago.

36:31Zach Dannett:We have so many things in the hopper. I'll tell you about a couple of them. In addition to going to the UK, we're in both early and late stages with a couple of different in-store retailers. I'm not going to share more about that, but a few of them are in the hopper. And then maybe what I'm personally most excited about, also something within my part of the business is the product side. We probably underinvested in the product side for the first three to four years. We spent a lot of time on product improvements, but we had one core product and it served us well. It got us to where we are today, but you don't go from a hundred million dollars, let's say a half a billion dollars in revenue with just that one product.

37:19You were talking before about there was the 1000 milligram sodium

37:24Zach Dannett:and the 100 milligram sodium. You're talking about product differentiation. Something for one person might be a different thing for another person. And so we're doubling down on washable rugs where we're coming to market with different types of washable rugs that we're extremely excited about that have different features that are maybe suitable for different parts of your home. And we've spent close to a year developing those products. They'll probably be in the market in the next, I would say, six months. And I think within 12 months, our business will look very different as a result of a few of those different things.

38:06Zach Dannett:And right now you're in zero retail? 100 % Shopify today. 100 % DTC Shopify going into retail. And again, most people probably buy their rugs at stores where they can look and touch and feel them. We're not even on Amazon. Yeah. Why not? We will be soon. We're asking ourselves that question. Yeah.

38:25Justin Soleimani:No, we're very much exploring that as well. I think, why not? I mean, the answer previously was like, you know, Amazon's not really the go-to place for like home furnishings or big and bulky products, right? With like higher AOV. So it wasn't like the perfect fit, but I very much do think it makes sense. And that's why we're looking into it currently.

38:44Zach Dannett:We just, we had so much demand on D2C that we didn't even have a time to think about another channel. And then what Justin's saying about big and bulky, if you want to be successful on Amazon, you need to have a prime badge. If you wanted the prime badge, there's a couple of ways, but the most obvious way is you sell through FBA. And if you sell through FBA and your product is bulky, they're going to kill you on fees. So that's what we're trying to solve for now is how do we, in a cost-effective way, get the Prime Badge? Closing question. What would you say is the operational lesson that you guys have learned, maybe each of you, that has compounded the most to create value over time?

39:24Zach Dannett:The operational lesson. You're pretty instructional, I think, in just how you've thought about bootstrapping and cost control and staff, which sort of stands out as a lesson you really learned that works. I think for me, it's all about the product. So it's not an operational lesson, but it's the time that we took before we launched to think really hard about an opportunity in the market, spending the time investing in product development to have a differentiated product from the market. so that when it comes to all those questions you're asking about marketing, Justin and his team, they actually have things to market about.

40:05Zach Dannett:You're not just marketing a Me Too product, but you get to talk about all the different value props that you have. So we talk a lot about value props within our organization. Oh, you want to launch this product? What are the three value props that you have? So to me, that was probably the biggest takeaway is being extremely thoughtful about the product and making sure that it has those key differentiating points?

40:29Justin Soleimani:I think for me, it's like basically the importance of staying nimble. You know, you talk a lot about like startups and why they can disrupt these larger companies. It's usually just because they can like move fast and they're nimble and they can adapt quickly. That was very much the case for us when we started. But I think even though we're a nine-figure brand now, like that's still very much the case. And Zach and I like to run the business that way because it allows us to stay nimble. You know, like we've touched on this, but we don't have a factory. We don't have a warehouse. We don't have an office.

40:58Justin Soleimani:And as a result of that, we were able to pick up and move our supply chain overnight when tariffs hit. We've been able to move 3PL. I think we're on our fifth 3PL at this point because we keep outgrowing them for different optimization reasons. We reprioritize where we want to be fulfilling out of. We can hire nationwide, for example. We don't have to hire in a specific market because we're distributed. So having that like nimbleness is kind of like a superpower that a lot of big companies don't have, but also a lot of startups, they eventually lose as they get bigger, right? Because they become more entrenched.

41:32Justin Soleimani:And I think that we've just done a pretty good job of like maintaining that. And I think that's something that's definitely like served us well. And we want to try to maintain going forward.

41:41Zach Dannett:Last, last question. What part of your tech stack are you currently trying to vibe code on Claude? Any?

41:48Justin Soleimani:We vibe coded in MMM, which was pretty cool. Someone on our team, Jeremy, vibe coded in MMM, which was like, that's not a tool that we had currently, but it was a tool that we had been considering for a long time. And we're like, actually, maybe we could try to build something ourselves. I don't know, Zach, are we like ripping anything out of our stack?

42:07Zach Dannett:Where we're starting to get a lot of leverage is we have people in the Philippines and in China or Asia more broadly, who are contractors for the business, but they spend a lot of time working with Tumble. And they handle a lot of the mundane processes where you could say, do this, then do this, then do this. And that's very cost effective for our business. But we're starting to automate those things. And so we're not bi-coding an app, but we are using, let's say Claude or ChatGPT to help us automate where they might write the JavaScript, for example, and that lives in like Google Apps Scripts.

42:48Zach Dannett:And so we have, let's say, 10 different automations that we wouldn't have been able to do otherwise. And that allows us to take our costs from cost effective to essentially free. And that's just one thing that we're starting to do across all the different departments, whether it's invoice review, creating commercial invoices and packing lists, all those little things were slowly ticking away.

43:13Justin Soleimani:My kind of like hot take on this is that like, at least in our experience, like the AI automation and the cloud code and all that, it's been fantastic for like automating manual tasks and things. But I quite frankly, I'm not at the point where I've found a good use case where I can literally rip out an existing piece of software. and replace it with a vibe coded version of that. Because the reality is like, these things require maintenance. So even if you go and you vibe code, like I'll vibe code like a tool and then one week later it breaks and I have to fix it. You know, if you're ripping out your whole tech stack, that's a lot of maintenance.

43:50Justin Soleimani:Whereas if you're just like automating a manual task that the prior world, you were literally doing it manually and now you've automated it. That's much more worth your time than like, okay, I can save 200 bucks a month by vibe coding it. And then you run into the headache of having to maintain it going forward.

44:07Zach Dannett:Yeah, I think the best uses I'm seeing for it are people building dashboards that allow them to deploy certain things or just to centralize their data to basically have that data layer, that queryable data layer. We launched, it's funny, we're an agency, Pilot House is this agency, but on D2C, we do 20 to 30 grand a month in user acquisition for the newsletter. And this week we fired our lead generation agency and we now have Gary, who is a 24 hour media buyer that we chat to on Slack and he is, he is a bot. So we have a creative analyst as well named Blanche. So we are, uh, we're, we're hurtling into the future here.

44:45Zach Dannett:And so far the results are as good or better than the agency. So we're sort of like dangerous dog food. We're testing. Good name too. Blanche. Gary was actually the guy that taught me how to media buy in 2005, way back in the day. So I'm glad that we're the cycle is complete. Guys, thanks for coming on the podcast. today. This is super cool. Anyone looking for a sweet back drug, Greg, you got to go to tumbleliving.com or.ca if you're in Canada, shop for Victoria Day up to 35 % off. Thanks for thinking of us and our queen. And then guys, if people want to follow you, maybe I'll include your LinkedIn handles here.

45:19Zach Dannett:You should get some nice outreach from some other operators. This is fantastic. Cool. This was a lot of fun. Thanks for having us. Nice. We'll have to have you back. Once you launch your retail and you guys are pushing your next 100 million. We'll have you back on for an update. I'd love to catch up. Sounds great.

45:40Zach Dannett:Thanks so much for listening to today's episode. If you're not a subscriber to our newsletter, you can do that right now at directtoconsumer, all one word, dot co. I'm Eric Dick, and this has been the D2C Podcast. We'll see you next time.