Ridge CEO Sean Frank on trying to build a $1B accessory brand

0:07Hello, everyone, and welcome to the Modern Retail Podcast. I'm your host, Cale Guthrie-Weissman, the editor-in-chief here at Modern Retail. This week we have Sean Frank. He's the CEO of Ridge, which makes a lot of accessories. It's most well-known for its wallets, but it also has a bunch of other really interesting things. I know a few years ago it bought a well-known media property in the space of accessories that I want to talk about why it bought that. It also just got a really interesting investment from the YouTube celebrity Marcus Brownlee, who in my way, way, way back days, I interviewed him when I worked at Business Insider over a decade ago.

0:43But really, I want to talk just about the state of being a brand like Ridge today. Sean has gone on the record, I think maybe a year or two ago, saying that he wanted to do a billion dollar exit. So I'd love to check in on how that's going. And I just want to talk about how growth is going. It's an interesting time to be a brand. And so I want to get into all that. But Sean, how are you doing? I'm good, man. Thanks for having me. I'm excited to be here. I've listened to several episodes of the podcast, so I'm ready to make my mark on it. All right. Well, thank you for listening. And it's always nice when people say they listen.

1:15So thanks for that. So let's start with Ridge. So it launched in 2013. Is that correct? Yep. That was when our first Kickstarter went live. So give the story of the Kickstarter. It was one of those, I bet you, 2013, there were a bunch of stories where they asked for some amount of money and they got a lot more. And I believe you're one of them. Yeah, yeah. Yeah, and that can be a disaster. Like you saw a lot of companies raise way, way too much money and then they can't keep up with orders or demand. And it was a really golden era of like launching a physical product company. That era is totally gone that like you could have no idea what you were doing and just have an idea for a product.

1:58And I think we ended up raising like$200 ,000. So it was father, son, best friend. That was the original founder of the company. So Daniel and his dad and his best friend Austin made the product. They had some physical product experience. The dad was a special education teacher in Southern California for like 35 years. But Daniel got like his start in e-commerce like modding rock band kits. And this was before Shopify was a thing. Like he would just like have people PayPal him money and then he'd ship them like modded parts. So he had like a little bit of manufacturing experience, but he was an accounting student and he had an offer from PWC to go, you know, and do a soul crushing job.

2:40And he's like, if I can make this wallet thing work, I don't have to go to that job. So he just went all in on it. You know, really interesting family, working class, Southern California roots. They did not want to manage anybody. So I joined the business in 2016. I had like an agency. So like we did paid media when it was really easy to do paid media, running Facebook ads. I had 10 clients. You haven't heard of nine of them. Ridge was one of them. And the unique thing was that like absolutely no egos, like super outside of like the traditional system. Like we couldn't raise money even if we wanted to, because nobody would have given us any money.

3:18Like we were, we were scraggly little kids, but they had a great product that really worked on digital acquisition. I had an agency business that was cash flowing and good, but originally ended up being 50 % of our take rate. And at a certain point, it just made sense to merge. We were doing website builds for him and customer service and ops. And Daniel and his dad and his best friend really just wanted to do product. And that's what they exceeded at. So in 2018, we merged. We spun off the agency business to some people who were actually operating it. and 90 % of the staff came in-house at Ridge and we've been growing the thing ever since.

3:58So I think that year we did like$20 million in top line revenue at Ridge and we'll do over 200 million this year. So still privately held, never raised any money. I always say that there's five of us that own it. There's six now with Marquez. So there's the six of us who run this thing. Wow, yeah. I want to get into all of that. I guess my question for you is coming from the agency world. Did you expect to go into the brand world? Or was this just a sort of fortuitous opportunity that came and you said, oh, I can grow this company? It definitely wasn't planned. I don't think any of this was planned.

4:35You know, I thought I was really good at the agency world. I was like, oh, it's so easy right now. We're running Facebook ads. And there was a skill gap, right? I was 22 when I made my agency and Facebook ads were around for three years, I think, when I made my agency. So there was this layer of legacy media conglomerates in LA that just didn't know how to run Facebook ads. And it was just really easy to like, you know, we work with Butterfinger for like, you know, before Gen Z was a thing, but like their millennial campaigns, like it was very easy to like get those type of deals. I was like, oh, we're going to do this forever.

5:14But really what changed my mind is that you can't exit agency businesses or like agency businesses are only worth what the contracts are worth. And Ridge just had so much potential that like, you know, in the boom of D2C, Ecom, Werby Parkers of the world, it's like, oh yeah, this thing has legs and it was growing really fast. So it just made sense to double down. Got it. Got it. And talk about your transition because you, was it COO you joined as in 2018? Is that the correct title? Yeah, I was the COO in 2018. And you became a couple of years later CEO. Sort of what was that evolution into being the top executive?

5:56There wasn't much of an evolution. I was the CEO of the agency business. And the day before the merger, Ridge had three employees. The day after the merger, Ridge had 28 employees. and 25 of them came from the agency business. So it was really just when Daniel felt he was ready to take a step back from the business. He's still fully involved, but he had a kid. And yeah, it just, there was, we had to build the org out a little bit. We just didn't know what we were doing, right? Like we had no outside executives. Most people who've been at Ridge, this is the first job they've had. So we just had to like kind of build up that layer of like, you know, now we have real executives from like a bunch of great different companies.

6:46And then Daniel's just transitioned to like a chief product role. So he spends all his time just thinking about new stuff to sell. Got it. And you're at 75 employees now, is that correct? That's the last, we're probably at like 78, but I don't want to leave anybody out. Something like that. Yeah. Something like that around there. So like, can you talk about, and this is something I try to get from people like you just, if it happened, I guess the professionalization of the org? Because when you have a company that's father, son, three people suddenly becomes 20 people. You said you hired a bunch of people.

7:18It was their first jobs. They were excited about it, but hadn't worked in business. And now you have more or less experienced people. Was that intentional on your part? Where did that come into play? And how did you think about making this into a high growth, potentially exitable business? We didn't really think about it until like 2020, right? And, you know, 2020, the world went really crazy. And people talk about like it being really good for e-com. It wasn't necessarily good for wallet sales. Like if you're stuck in your house, like you don't really need a wallet. So it was pretty average year for us, but you know, there was a three week period where sales went to zero basically, right?

7:57Like basically four years ago, like around like, you know, early to like late March sales just totally fell off because everyone thought the world was going to end. Once like normalcy started, like sales did start to pick back up. And then towards the end of 2021, we started like getting offers, right? There's this e-com boom. People were looking for fast growing e-com brands. And we had an offer from a public company for like$300 million. And they're like, hey, we want to acquire you. And then I started to just realize, oh, we are not in a position to sell, right? Like when you're a family-owned business without any sort of outside guidance, like no board of directors, no investors, you just do things the way you think they're supposed to get done, right?

8:38And they could just be a lot different than the way public companies probably expect things to be done. And that offer didn't end up going anywhere. The stock market crashed afterwards. It was the end of the e-com era, right? So we definitely missed that window. I don't even know if we would have taken it, but the reality is we weren't ready to take it. If the market continued for another eight months or 12 months, even if we wanted to do the deal, it would have fell apart because the way we do accounting, it works for the IRS. It doesn't work for standard gap practices or whatever else. The way we do inventory buying, it just didn't line up with the rest of the world.

9:14Since then, we've been professionalizing the whole org. have a CFO, have a very strong COO we hired from MeUndies. Andres is great. He's been helping professionalize stuff. We've never did merchandising before, which sounds really silly. So we had a chief merchandising officer who just taught us what a line plan was. So there's these basic things in an organization we just didn't have. So we've been hyper-focused on professionalization. And the goal is to get to 100 employees, have an HR department, have managers, have a recruiting system, all that type of stuff. And we're still building it out.

9:58We're doing it on our own schedule, but probably by the end of this year, we'll have all that stuff figured out. Got it, got it. The merchandising part's interesting because you guys do have, I feel like people generally describe Ridge as a DTC company, but you guys very much are in stores. How did that come about? Was that part of this professionalization effort? Or is that just something that as people liked the wallets, you got inbounds from wholesale clients and you just had to sell there? Yeah, so we've never touted a D2C flag. We were never like, we're not going to sell on Amazon. We're not going to sell on wholesale.

10:33We were just like, yeah, we should be where people are. We were very early to that. So we were on Amazon in 2018. We were in Nordstrom's in 2019.

10:44And the professionalization, like the merchandising came out because we kept being frustrated with retail partners and they were frustrated with us. And I would be like, yeah, we have a new wallet coming out next month. They're like, well, we can't buy that. I'm like, why? They're like, well, we're supposed to buy stuff seven months ago. I'm like, well, I didn't know I was going to make it seven months ago. Why is it such a big deal? So like, and getting our business to operate at the speed that wholesale expects, like has strained out a lot of frustrations. And that's like what Brian, our chief merchandising officer has done such a great job as is like, you know, we're in Best Buy.

11:21So we're in all the Best Buys and they want to buy things eight months before, you know, they actually receive them. And just getting us to able to function on those type of timelines to have a wholesale sales book. We never did that before. We're like, hey, just go on the website. That's the stuff we sell. They're like, no, no, they need a printed thing and you have to have a trade show booth. There's just all that inherited knowledge that legacy retailers have that I think the DTC generation didn't. And we for sure did it. So it's been 24 months of us learning that stuff and changing our organization to operate on those timelines.

11:56And how much are you able to say, is wholesale 50-50 with DTC? Or how does it work? Where do you get most of your sales from now? dude, I wish it was 50-50. I mean, I think last year it was 5%. I think this year it'll be 8%. Yeah. So maybe it'll be a little bit more this year, but Best Buy has been a great partner, but we were the number one selling wallet at Nordstrom's and it's still a small business. I mean, they don't sell that many wallets. That's the reality. They're a fashion retailer. They have cut and so they have all these other things and the wallets are kind of just put on a desk. So it's been hard to grow those categories there.

12:34But I mean, in Best Buy, we'll do tens of millions of dollars this year. So they've been a great partner. How much do you, I don't know if it's, do you care or do you think about wholesale in terms of branding? Like I talk with brands who are like, we're very intentional. We'll only go into X retailer because of fits. But like Nordstrom is quite different from Best Buy, just in terms of, But are you just thinking about it, if there's demand, if the shopper wants it, I'll send it there? Or are you trying to be a little bit more, I guess, really think about who you expand to on the wholesale front?

13:11yeah so the reason why ridge was so successful is because of the ubiquity of the category right it's a category i mean the the wallet tam the men's wallet tam globally is 10 billion dollars right and it's a category nobody cares about like it's as big as luggage but like you know i've i worked in traditional retail i worked at ralph lauren and like there's a hierarchy there right We're like the men's buyer, the men's designer, that's number one. Then it's women's, right? Then it's kids. Then it's accessories. And at the very bottom, it's men's small leather goods. And they basically just let interns run that whole program.

13:50It's just a category everyone ignores, right? So because of that, we're able to go into a lot of different places because of the ubiquity and because it's not really an established program for anybody. We're never going to be in a target. where just like the MSRPs don't make sense. But the thing about Best Buy is they have a huge cart size. So like us being$100, us being$200, it totally makes sense because people are spending a thousand bucks on TVs. We also try to be wherever our customer is. Our core customers, we call them Ed. So it's just Everyday Dad. And Everyday Dad buys his clothes at Nordstrom's and he buys his outdoor stuff from Dick's Sporting Goods or REI or something like that.

14:30We're really big in Shields. I love Shields as a partner. They're like an employee-owned REI competitor in the Midwest. And he goes to Best Buy on the weekend to check out new gadgets, or he'll go to the Apple store to buy an iPhone. These are places we're going to be. Wherever Ed's shopping, we want to show up there and be represented. Talk about the product expansion over the past few years, because the wallet, you can correct me if I'm wrong, but it's clearly your bread and butter. It's what people, what I've always known Ridge for. And if you type in Ridge in Google, I feel like the wall is the first thing that's going to come up.

15:05But you have a bunch of other products. So was that just based on the founders because they like making products and they thought they would join that? Or do you do market research and say, Ed wants this? Yeah, this is why I think we've been so successful. We're still posting 50 % plus growth year over year. Never raised any money, profitable the whole time, doing nine figures in revenue. and the reason we've been so successful is because of the product expansion, right? Like, I don't want to pick on anybody, but if you look at like an away, they still sell luggage and they've sold luggage for 15 years at this point, right?

15:41Like it's more or less the same piece of luggage and their entire business is optimized around, you know, selling that luggage. And that's great. What we realized is the wallet business in 2021 ended up getting 1 % of Global TAM, right? So GlobalTemps,$10 billion. The wallet business had like$100 million that year. And we have all of these wallet customers, millions, like literally probably six or seven million people have bought in these wallets at this point. And it's a very low LTV business. The average person buys a wallet every seven years. And even then, they probably don't buy it. It gets gifted to them by somebody in their life, right?

16:19So we have these cohorts that more, they're like, yeah, I love the product. it's great, but I don't need another wallet. There's nothing we can do to get them to buy another wallet. So we were like, okay, let's figure out what other people want. So we tested phone cases and cables and razors. And I was really driving the charge there to like, you know, we have an amazing product team, but I'm like, I don't care what you make, just shots on goal. We're going to waste$2 million this year, take as many shots on goal as possible. And then we really unlocked something in late 2022 with rings, so like men's wedding bands.

16:54That is growing 300 % year over year, and it did eight figures its first year. So it's like a massive growth channel for us. And it's why we're still up to post growth, right? Like even if our wallet business is growing 5%, we have this brand new category. Another category nobody cares about or thinks about is men's wedding bands. And I got engaged over the pandemic. And my wife just sent me a link to her wedding band. She's like, here, just buy this for me. I'm like, easy, right? But jewelry stores make almost all of their profit off the men's wedding band category because you're going to spend five grand on a women's engagement ring.

17:33It's very easy to trick a guy into spending$800 on just something that's worth 10 bucks or 20 bucks or whatever. That business kind of fell apart post-pandemic. People aren't buying female engagement rings in store anymore. Because of that, there's just been a boom of men's wedding bands online. We're able to really ride that wave. Yeah, that's been a huge growth unlock. And then getting into travel is the same thing. We always want to do physical retail, like eventually open stores or whatever, but it doesn't make sense to do that with wallets. Each store would have to have$20 million worth of retail because the wallets are so small.

18:09But we get into bags, we get into luggage. Not only are there established big players in the space like Samsonite and Toomey, the AOVs are better. Everything works about it. And now we can just go to our wallet customers and be like, hey, if you're not getting married, you don't need a ring. Are you traveling at all? Do you need a bag? And it's just an amazing upsell. Well, that was my next question. With these expansions, is it mostly just reacquisition of existing customers? Are you finding it is expanding the pool a little bit? Or is it pretty much when you launch a new product, you email everyone who bought a wallet and said, hey, we have this too.

18:43And then that brings in these sales? Yeah, so it does both. So we ended up selling out of our travel line. We launched in November of 2023, so just a couple of months ago. And it sold out just off the email, right? So we've been playing catch up this whole time. The past five months, we've just been trying to get as much of these as possible. the challenge is we're not used to selling stuff so big so like if we sell it a while it's we just air freight them right you can't do that with luggage like it it would cost a hundred dollars per import or whatever so we're having to like once again switch our timelines and like the going back to the professionalization piece figuring out how to actually scale up large products with new manufacturers but anyway yeah the the first launch was all customer reactivation and now we're at a point where about 30 percent of all customers entering the brand enter through non-wallet categories.

19:37So, you know, this month there'll be tens of thousands of people who probably don't even know we sell wallets, but are just buying carry-ons or rings because they need them. We're going to take a quick break and we'll be right back. I want to switch gears and talk a little bit about Marcus Brownlee. Correct me if I'm wrong, but did this all start because you tweeted that you wanted to bring in a high profile, you know, new owner into the, into the biz? Yeah. Yeah. You know, I didn't like lay out, uh, we're looking to bring on a new owner, but I love YouTube. I've been watching YouTube since I was like 10 years old.

20:15Right. And if I, if I could share my screen right now, you'd see like four different YouTube tabs open. So like I am a huge, uh, multitasking watching this a ton of content. Um, and it's been like that forever. That's why we sponsor a ton of YouTubers. And I've been just watching the rise of creator brands, right? And you can talk about Prime or Feastables or Ember Chamberlain Coffee. Like, those are the three greatest examples. Those are, like, top-tier creators who are, like, making and forging their own path there. But I definitely think the future is people buying from people, right? Like, you know, as successful as we are, like, how long are people going to want to buy the faceless wallet company brand?

20:55Like it's so much better for our storytelling, for our creative, if we could have, you know, a relatable personality people like, like integrated in the brand and legacy retailers do this with celebrities, right? Like if you walk through an airport, you're going to see some famous person rocking some product. This is not who we are. We've had a lot of conversations with the celebrities, the UTA, the CAs, and you end up just getting people who are pretty disinterested in the brand overall. all. And like the actual integration is pretty low. Like you get four hours, one time a year with this person.

21:28And it's like, all right, well, they're not, they don't really like us. With Marques, we've had a relationship for a long time. We've sponsored him for the past couple of years. And, you know, I tweeted out like, Hey, we want to bring a creator in house. We're not just looking for a face of the brand. We want, you know, integrations across the videos and we want them to like teach us how to make content going back to us owning a media company. And I I said, the dream get is Marquez. If Marquez wants this role, he can have it, right? You know, we were getting close to signing somebody else, but I'm like, hey, I should just make sure Marquez sees this and put it across his desk.

22:02And we sent it over to him. And he's like, look, this deal, how it's laid out doesn't work for me, but we can make something work. And so we started doing that in like September of last year, and we just announced it a couple of weeks ago. It makes a lot of sense. And it's definitely where things are going. You're seeing more, you know, more personalities making investments, launching their own brands. You mentioned Chamberlain, et cetera. But like when you are an existing brand and you bring someone in who is now, you know, a real top tier player in the brand and has a stake in it. How worried are you that it'll like, are you worried it will become just the Marques brand and not Ridge itself?

22:40Like, how are you able to sort of think about this so that the two can grow or, you know, have differing paths but still working in tandem? Yeah. I mean, I'm not worried at all about him overshadowing the brand. I think that'd be super sick. But we haven't done anything to put safeguards in there. If I had to play the counter case why it wouldn't happen, it's that we're going to spend like$100 million on marketing this year. So it's a really big marketing budget that is going to be TV ads and Facebook ads and new product launches and us in retail displays. I would love to pull Marquez through as much of that as possible.

23:22Yeah. So that's definitely something I'm not worried about. And look, you can look at Chamberlain Coffee or Feastables, two super successful brands with the namesake creator very tightly tied to it. Now, we were a brand before Marquez. And so it's not going to be that tight of an integration. I don't think we can get there, but I'm not worried that if it does, that'd be awesome if it happens. You mentioned you're spending$100 million on marketing this year? Yes. And you're expecting to do$200 million this year in revenue, so you're spending about half on marketing? We'll do a little bit more than$200, but the business can run if we hit a 2X MER, yeah.

24:04All right. And you said TV, Like, is it all going to be top of funnel, major brand awareness plays? Or like, what are you thinking? What do you think is going to work this coming year?

24:17Well, our bread and butter is always going to be meta. I think meta has like the best tools, the best audience, the most amount of reach. And, you know, they've had a really bad eight weeks. I mean, I don't know how topical you want to get like in the weeds on meta buying. amazing January about midway through February. It seems like there was like a, some breakage and outage across the platform. I think they're rolling out new AI tools and it's just been, it sucked for like eight weeks, but I mean, all things considered, like it's a duopoly for a reason. Like my money will go to meta or Google, or I have to stop spending money.