E059: Meta, Consumer Sentiment & Be a Cockroach!

[00:00:00] What's up everybody? Welcome to episode 59 of the OPERATORS Podcast. We talk about meta,

[00:00:05] we talk about consumer sentiment, we talk about what's going on and how products will save the

[00:00:10] day. The tagline of the episode is be a cockroach. So maybe that is the episode title. Thanks for

[00:00:16] being here. Thank you, Fulfill, for being our flagship sponsor. I'll talk to you guys later.

[00:00:32] What's up everybody? I use Fulfill. Fulfill is my ERP, my order management software.

[00:00:38] It does EDI for me. So what do all those things mean? If you are a small Shopify merchant,

[00:00:44] you probably hook your Shopify up to a 3PL or a warehouse or maybe you're running fulfillment

[00:00:49] yourself out of your garage. We did that at one point. Orders come in, orders go out pretty

[00:00:55] easy. Where it gets difficult is when you're tracking multiple inventory sources. So like

[00:01:02] different factories making the same stuff, different costs, different components coming in.

[00:01:07] That ends up being a pain for accounting. And then also different inventory sources

[00:01:11] going to customers. So if you have three warehouses and it's not just going to Shopify,

[00:01:15] it's going to Amazon, it's going to wholesale, it just ends up being a lot of different

[00:01:18] information to pass around. And how do you make sure that runs smoothly without just throwing

[00:01:22] bodies at the problem? That's what Fulfill solves. So it's an ERP. There's a couple ERPs in

[00:01:29] the industry. NetSuite is the big one. And ask anyone who's ever used NetSuite if they're

[00:01:33] happy and they will say no. I am happy with Fulfill. We are using it. ERPs are a hard,

[00:01:39] messy business because it's so many different parties passing a lot of information. But it

[00:01:43] ends up being the nervous system of your entire company. If something fucks up on Amazon,

[00:01:49] I feel it because of Fulfill. So it's the ERP uniting everything. It also does EDI. So

[00:01:56] this is a little more technical, but Best Buy, Nordstrom, all of these people,

[00:02:01] when they place orders, it's coming into your system via EDI. And nobody knows how that works.

[00:02:07] No three PLs have it figured out. It is just an old archaic system that I naively thought

[00:02:12] would take a week to set up, but now it can take months to set up and actually test

[00:02:16] that it's working perfectly. Fulfill does all that. It sets up EDI integrations and then

[00:02:21] it stays with Fulfill so you can switch warehouses, you can switch inventory sources

[00:02:25] without having to redo EDI integrations, which is the death of a lot of companies.

[00:02:30] So if you're shipping stuff to people from multiple locations, eventually you'll need an ERP.

[00:02:36] I use Fulfill and I've been happy with it. They're a sponsor of the podcast.

[00:02:40] All three sponsors I personally use. So interact with Ridge and you will see how we're using these

[00:02:44] sponsors. So thank you for Fulfill. Talk to you later. Jason, are you bringing Memorial

[00:02:52] Day with you to home? Is that what happened? Is that why you've got a golf club on your desk?

[00:02:56] Wait, say again? You've got a golf club on your desk? Are you bringing Memorial

[00:03:00] Day with you here until Friday? Dude, the golf club goes everywhere with me if possible.

[00:03:06] If possible. Sometimes I have to leave it home. It gets upset.

[00:03:10] Are you back from Hawaii? I am. I'm sitting at Hexclad HQ at the moment.

[00:03:17] Oh nice. So you're spending your one day a month in office. I'd love to see that.

[00:03:22] It's true. I'm flying up to Villa Lucia tonight, although I will say

[00:03:27] Monterey County is really trying to make me suicidal because I'm six months late with my

[00:03:34] renovation breaking ground and I got feedback from the county planning department that,

[00:03:40] check this out, we need to do an archaeological study of our property.

[00:03:47] On the top of the mountain in Monterey County where the house already exists,

[00:03:53] I'm just basically keeping the footprint of the house and maybe expanding the footprint by like

[00:03:58] 10 feet on one side of the house. I think they're looking for, I'm not even going to say it

[00:04:03] because I want to get in trouble, but we just want to throw my hands out to it. I'm a Florida

[00:04:11] resident. I've been a Florida resident. Spent a lot of time in Florida. People don't really

[00:04:16] know that, but I do and I'm really considering just going there. It's just unbelievable.

[00:04:25] How long does an archaeological study take? That sounds like an adventure.

[00:04:30] Two or three hundred years.

[00:04:33] The planning department sat on our permit application for five months and didn't even

[00:04:38] respond. Then they responded to say that, oh yeah, we changed all the rules the way you have

[00:04:44] to submit your plans and this planning package you sent is all wrong. My architect has been

[00:04:50] working in Monterey County for like 30 years. The guy knows the rules. For five months we didn't

[00:04:56] even get a response and now the response is yeah, you got to redo everything and you need to do

[00:05:01] archaeological and some kind of fuel management study too because apparently the construction

[00:05:09] workers will be driving past a school. If the construction workers drive past a school,

[00:05:16] they need to look at the fuel management of the project.

[00:05:22] Yeah, this is a funny thing. I saw on Twitter that in April two houses were built in San

[00:05:29] Francisco, the entire city of San Francisco. It had houses built year to date and I think

[00:05:38] they built 16 houses year to date in all of San Francisco. They said there's one builder

[00:05:45] in Houston who personally built 16 houses this year like himself out there just grinding

[00:05:51] and that's the world you're living in. If they want real estate to stay expensive,

[00:05:56] they make it really hard to build real estate so I'm sorry you deal with that Jason.

[00:06:01] It's called a high class problem but Jason have you done any business? I feel like

[00:06:08] you've done everything in your career so far. Have you ever been in real estate

[00:06:13] in any form? I've been involved in a couple of hotel projects in Florida

[00:06:20] so that's real estate. I'm actually looking at real estate investments from time to time.

[00:06:23] Actually Cole, one of the co-founders of Hexclad started a real estate development company,

[00:06:28] Hunt developers because he just loves that stuff. It's interesting. I know a bunch of

[00:06:35] developers because we deal with them with Lomi because we take over the organics waste contracts

[00:06:41] and I don't have any of them. I honestly think like I know when consumer can feel hard sometimes

[00:06:47] but dude the amount of regulatory that they deal with. It's like every little city,

[00:06:53] every little nook and cranny there's some bureaucrat or piece of red tape

[00:06:58] and every time I talk to somebody in that space that's what they are talking about

[00:07:04] is navigating regulatory capture. Sounds awful. Big government, big money. So what Governor Mike?

[00:07:13] No Governor today? No Governor Mike today. I know we lost our politician and we're going

[00:07:18] to get heated today. We're talking about consumer. Well the state of consumer is what you

[00:07:23] called Jason yesterday in chat. What's the state of consumer? I don't know man who wants

[00:07:29] to start? Jason where did that come from? Why do you want to talk about this?

[00:07:34] I'll tee it up for everyone. I'm sure you two will have much more interesting

[00:07:38] insightful comments but we had a guy who runs retail investment banking for

[00:07:46] a big kind of upper middle market investment banking here just sort of chatting.

[00:07:50] They come through every couple months and give us the state of the market.

[00:07:54] I'm very grateful actually that people want to come in and talk to us because we learn a

[00:07:58] little something from every one of those and I will PDF the deck and send it to you.

[00:08:05] But he made a really good point because he touches all the big consumer brands and also

[00:08:09] brands our size and he's like everyone that I talk to has the party line is that the consumer

[00:08:19] is really focused on getting a deal right now. That's the focus and

[00:08:26] we see all the numbers and I'm sure you guys can talk about them because we've been talking

[00:08:31] about them in chat like all these big retailers just down. But it's interesting because we were

[00:08:37] talking back in September where some data some credit card processing data was coming out

[00:08:42] back in September right? And we're like oh you know we're gonna feel it and then I think

[00:08:48] everyone Q4, BFCM, Holiday I think it went well for most people well enough right? I think our

[00:08:59] numbers were really good we actually expected them to be a little bit higher now it's like

[00:09:03] making sense six months later. But we did crush it just not as much as we thought we would

[00:09:09] and so I think that was like okay well people are going to buy during that period right?

[00:09:14] That's just the time that people buy no doubt they've been waiting for deals

[00:09:19] and they go and it's deal time. And then we saw Q1 was really good but still like you can see

[00:09:29] some cracks and now we are personally seeing like really really good numbers when we're running

[00:09:38] deals. But during like evergreen periods I would say they're a little bit below what I would have

[00:09:46] expected and we're seeing a little bit more of a push toward Amazon during those evergreen

[00:09:53] times which is interesting. But it was just you know these guys like they just kind of came in

[00:09:58] and we went through it looked at a bunch of different brands and like just hit the

[00:10:01] nail on the head about like everyone is just like they're just being consumers being

[00:10:07] more disciplined with their money period. Sean what's your take? The Amazon thing

[00:10:12] I was on a call yesterday with a founder they're doing three times the business on Amazon this

[00:10:18] year than their DTC and they don't like they're like we don't know what happened

[00:10:22] it just it's been ripping. Yeah I was just at a thing called Commerce Summit so I came in

[00:10:29] yesterday and if you get the chance to go I don't know if they're going to do it again

[00:10:33] they said they will but Commerce Summit is fantastic went last year this is the second

[00:10:37] year of it. It is super curated so it's you know eight and nine figure brands there's probably

[00:10:44] a hundred of us two hundred of us get together select vendors select tech providers

[00:10:50] you know Harley from Shopify interviewed Mickey Drexler on stage so he's talking about just

[00:10:54] like a legend legend be legend right and I'll point out two things one you you can you can

[00:11:06] tell how good an industry is doing by how many people are involved and if you go on Twitter or

[00:11:13] you go in forums or you go to meetups or dinners or whatever you'll just see less and less people

[00:11:19] hanging around right and it's the one reason why shout out Northbeam shout out fulfill like

[00:11:24] they have been around for years at this point like still showing up and I can just think about

[00:11:30] how many random credit cards and softwares and shit have been pitched that like they try for

[00:11:36] three months then they go out of business so we are at a low point in terms of just bodies in

[00:11:41] the room like Commerce Summit was packed but new brands versus last year not a lot of people

[00:11:48] re-upping and coming back so this is the thing about it just like there's less people

[00:11:53] around the second point is there was a panel and I won't bring up the names but it was some

[00:12:01] founders who recently exited and one of the founders she said yeah I think I got the last

[00:12:06] boat out right like their deal got done in March and it was actually two founders who

[00:12:14] deals got done in March and they both were like we think we're the last ones it's like

[00:12:21] yep this is it and it kind of just shows that like I think we are at a just a low energy moment

[00:12:33] right like you know what heat is it's like it's just particles getting closer together and

[00:12:38] heating up right because they're just there's more energy tightly packed and I think we're

[00:12:42] at a very low energy moment and I think that comes from consumer a lot of brand like no

[00:12:47] brand was going in there beating their chest like we're on fire we're the fucking best we're

[00:12:52] killing it like there was great brands there think of a nine-figure brand on Shopify they were

[00:12:56] there and like publicly people would be like yeah you know it's a pretty good year like

[00:13:01] we're really just like doing stuff like 20 growth and then there's a lot of quiet

[00:13:04] conversations like yo bro a lot of people go out of business like are you doing okay

[00:13:08] so it's a weird weird time that it has been a weird time for four years right

[00:13:13] um so it's been a bit like for four years it's way up it's way down

[00:13:19] Sean do you think this is just um is this like a reversion to mean so are we actually

[00:13:25] returning to a normal now because like you had covid everybody bought stuff post covid everybody

[00:13:31] bought experiences like travel restaurant everything are we now just like balancing back out and

[00:13:38] re-entering 2019 like is that actually what we should be looking at from a

[00:13:43] patterns in a year and a week in a day as far as consumers concerned well so I would say 2019

[00:13:50] and there's a great chart that somebody posted and I'll try to find it and try to put in the

[00:13:53] show notes but it was uh bull markets versus bear markets at the stock market for the past

[00:13:58] hundred years and like tons of bull markets and 2019 was peak bull market like we go back it's

[00:14:04] like bro that was like uber was getting funded at you know 80 billion dollars or whatever on the

[00:14:09] private market and we work was worth like you know worth 50 billion dollars so I don't I think

[00:14:14] we're actually probably more resetting to 2014 or 2015 in those expectations just looking

[00:14:20] like a macro standpoint and it's the hero's journey it would be a super boring story if

[00:14:27] it was like every year was great and every year got better right so you kind of have to

[00:14:33] dance a little bit and I think in the end it's going to work out and yeah I just think we're

[00:14:39] I think we're currently in a recession I agree like we're doing everything we can to remove

[00:14:46] things at a CPI to make inflation look better we're doing everything we can to make it look

[00:14:50] like things are actually better we're in there's two active war fronts on the globe at least

[00:14:57] and I think we're totally in a recession with that being said I would love to talk about this

[00:15:03] with Jason and I wish Mike was here because because Mike was telling us how great things

[00:15:07] are going for him so I wish he's killing it I wish the guy the best yeah the first

[00:15:12] 15 days of May were phenomenal okay we were up 50 to 100 percent every single day just

[00:15:20] printing money year over year in those first 15 days and Jason was kind enough to send me

[00:15:25] his sales chart and it was the exact same that motherfucker was printing money for the first 15

[00:15:30] days of May on the 18th Metta stopped working and we had a swing from plus 100 percent to

[00:15:38] down 20 percent for four days or five days it was this massive massive swing and it was

[00:15:45] everything was working except for cold traffic for Metta was converting 40 percent last year

[00:15:51] over year now we worked really hard to get it back and we got it back for a couple days

[00:15:56] so we had like you know four days of shit three days of winning and then like two days of shit

[00:16:02] and I think we're like two days of winning so it's like that is that is the the roller

[00:16:07] coaster run right now and it's really the Metta machine and this is now the conversation

[00:16:11] that if is it Metta that's broken or is Metta just a proxy for the U.S. economy Metta's a

[00:16:18] proxy like we spend too much time I think is an indiscreet focused on Metta and like it's Metta's

[00:16:24] fault and look they break shit all the time you can't argue that right but when

[00:16:32] like we have been hearing grumblings of like this since what February like post Q5 people

[00:16:37] are like what's going on right like I remember in February there was a moment in time where

[00:16:43] I think Cody and I were chatting Cody's like look at this shit and it was his Metta traffic

[00:16:47] and how it was converting it was just blah so you've got really big spenders who have had to pull

[00:16:54] budgets way back on platform because of the seesaw and I know the cost cabros are going to

[00:17:01] love this but like just put that shit aside for a second the it's hard to not think like

[00:17:09] with all of the little signal out there like banks are talking about it Jason Jason you're

[00:17:16] that investment bank you were talking to like they're talking about it private equity people

[00:17:20] I spoke to a few venture capitalists and a few PE folks last week their concern is debt's very

[00:17:26] expensive for consumers and that's a good proxy for like how does the consumer feel it's like

[00:17:31] inflation matters but it's cost of debt car loans homes all that other stuff that really

[00:17:37] impacts psychology so I think like my sense is the consumer psychologically is not in a good

[00:17:44] place I don't know if the wallet like the actual wallet is I'm not that smart but psychologically

[00:17:52] it's hard to not see it I mean do you guys like I just go just fucking talk to normal people

[00:17:57] man like I got rich ass friends who are bitching about the price of food that's not good

[00:18:03] like that's not a good signal well you know look the Metta thing I'm glad you brought it

[00:18:10] up because I was gonna just put in the chat that we should we should definitely incorporate

[00:18:15] that into this conversation about the consumer or just because we're looking at how everyone's

[00:18:19] performing and you know there's a lot of chatter in our chats and on Twitter and

[00:18:25] it's never one thing right like the consumer is hurting I think we can all agree it's

[00:18:30] that like the data is pretty clear or maybe hurting isn't the word but the consumers being

[00:18:35] more judicious with the spend and then you throw on top of that there have been real issues with

[00:18:41] Metta over the last couple months they just they just are it's never one thing so those two

[00:18:47] plus we have an election year which is always weird and I don't know I'm not I don't know

[00:18:54] what you guys are seeing in terms of like ads political ads yet I don't know that my email

[00:18:59] is absolutely flooded with politics but it's like ridiculous so you add all those things up

[00:19:06] I think we should maybe just click double click down on the Metta bit for just a minute Sean

[00:19:12] we're going up to the Metta performance summit next week you'll be there I'll be there

[00:19:17] do you think they even talk about it? So me and Jason are in a private secret white glove

[00:19:24] Metta experience called the disruptors and they will talk about it so we get an extra day so

[00:19:30] there's on Wednesday there's a big event me and him are gonna go I mean you know thousands of

[00:19:36] people go this is the one they live stream it's their version of like you know an Apple event

[00:19:41] or whatever they just talk about the state of the ad product and like they talk about like the

[00:19:45] five things everyone should be doing and it's going to be like you should test creative you

[00:19:49] should use AI that's going to be the big thing and then there's the next day where you

[00:19:53] get to sit down with last year was the CFO of Metta was there and she's just like hey here's

[00:19:58] what the fuck we're doing right and in that meeting they will be I think way more just in

[00:20:05] depth like because you have to remember Metta advertisers who care about direct return off

[00:20:11] of e-com purchases is probably 25% of their business and like you can do the math it's

[00:20:15] probably 25% of their business right that means you know 50% of their business is people

[00:20:20] selling insurance leads or fucking doing whatever right those people don't really care all that

[00:20:25] much but we're like how do we sell widgets profitably so we'll get like more more

[00:20:29] insight there but it's actually another really good point though Sean which is like when

[00:20:35] you think about you know we're so D to C centric you know paid ads conversion centric

[00:20:42] but there's a ton of people out there spending money on Metta way more than us who aren't

[00:20:48] really like looking at it that way so when all the really when the cognoscenti of Twitter like

[00:20:57] like David Herman who I fucking love are like bitching about Metta like why are they not

[00:21:02] fixing this blah blah blah it's like because they don't have to yeah if you're Samsung

[00:21:12] what do you what do you do like what do you care like what's your

[00:21:15] what's your objective in Metta it's probably reach you're just probably people to watch your Samsung

[00:21:20] video right and like maybe they'll buy a Samsung phone like do they even have an ecom checkout

[00:21:26] I don't even know how that works right and they probably spend a billion dollars

[00:21:31] I mean they're a massive fucking company so yeah that is I think it's it is reported that

[00:21:36] Metta's majority of Metta's revenue comes from small accounts right like as a as an aggregate

[00:21:42] as an aggregate small advertisers it's like seven million advertisers they get a huge amount of the

[00:21:47] revenue comes from small accounts but that small account does not mean e-commerce

[00:21:52] like that that's it's silly to think that it's anything bigger than 25 percent

[00:21:58] yeah there's a guy that has like a golf simulator in Beverly Hills it's like the size

[00:22:02] of my office it's really cool it's like a luxury experience he's running paid ads to have

[00:22:07] you know localized paid ads to have people like sign up for his golf studio and yeah man

[00:22:15] yeah I've got a buddy's local landscaper he's crushing it right now with pest control

[00:22:20] locally like you know if you just go out I'll go out of our little bubble and talk to people

[00:22:25] who spend money on the platform not everybody is in pain it's it's definitely like there's a theme

[00:22:31] in consumer goods that seems to be where it's isolated to at least you know in my limited

[00:22:37] experience and purview once everybody I use send lane for all of my email needs they have SMS they

[00:22:46] have reviews they have all that stuff but the big scary hard thing to do is to switch from

[00:22:51] clavio to send lane and I'm telling you I did it they just rolled out a new feature where

[00:22:57] you do not have to pay for send lane until you're up live sending emails on clavio

[00:23:02] essentially de-risking the change off period right we kept clavio up and live for probably

[00:23:09] three months during that transition and now you can do that you can move at your leisure

[00:23:15] make sure things are set up and working make sure they have the features you want

[00:23:18] and only start paying when you're actually fully live on send lane so if you're sick of

[00:23:24] the clavio monopoly if you're sick of rates going up and bad customer service and everything

[00:23:31] that clavio has been doing for fucking five years check out send lane they are the they are the

[00:23:39] modern fast moving email startup so e-commerce focused hyper focused on winning over shopify

[00:23:48] customers and they know what makes us money on email for shopify so check them out send lane

[00:23:54] i use them if you got an email from me it's coming from send lane so what's the story guys

[00:24:01] are we bemoaning the state of the consumer right now yeah so we we went through a consumer

[00:24:07] we talked about if it's a recession or not we talked about how people are feeling and now

[00:24:12] we're just we were going deep diving on the meta because we're talking about how the meta is

[00:24:16] the cause of all of our issues but i wanted to get you here because mike things are going

[00:24:21] great for you so this is evidence it could be a meta issue because you're having a great

[00:24:28] month great year crushing it i was just telling them that every three weeks my meta account

[00:24:33] totally breaks and i end up just like losing money for seven days while i try to fix it so

[00:24:38] i think maybe jason's feeling the same pain i don't know if matt's feeling the same pain

[00:24:41] but what's the world from your view mike well so generally the business is is doing well

[00:24:48] i mean i think this is the advantage of having a really diverse distribution strategy is that

[00:24:53] the volatility of my business has gone down a ton one of the things that i do is i have

[00:24:59] a report where i'm looking at over different channels and what are my comps on revenue and

[00:25:04] contribution margin you know for the last 28 days and i was updating it daily and then

[00:25:12] i kind of realized i don't need to because things are stable enough that it just it's it's

[00:25:16] kind of a waste of time that as you do start to get spread out the the volatility comes way

[00:25:22] down i will say that we internally are really struggling with something with meta right now

[00:25:28] and i think this might even be somewhat unique to our distribution strategy but it might just

[00:25:33] be an issue with their uh their platform and i want to hear you guys thoughts so meta is

[00:25:40] basically an entire system that's built to go and find people that are likely to buy your stuff

[00:25:45] right and when this system was originally built they could know a lot about the people that

[00:25:53] are looking at the ads they they could track have they been to your website are they a

[00:25:58] purchaser on your website and you could do all kinds of exclusions and targeting i read this

[00:26:05] a few months ago that net has basically lost the ability to do real exclusions because of

[00:26:12] all the changes that apple has made and the workarounds haven't really helped them to

[00:26:17] solve this so we started digging into some of our numbers we work with edge mesh as one

[00:26:23] of our partners and um so they provide you know if google analytics going away edge mesh

[00:26:29] provides a lot of server side look at what's going on it's data you know actually their

[00:26:34] data is even better than some of shopify's reporting for some interesting reasons and we

[00:26:39] started looking at some of our our performance and one of the more interesting things we saw

[00:26:44] was with our meta spend in particular um obviously we know there's people who click on a thing and

[00:26:51] then they purchase and then maybe even more there's people who click on the thing and

[00:26:54] then they leave and they come back organically or some other way and they purchase but

[00:26:58] from people that were clicking on an ad and then purchasing in that that session uh 74 percent

[00:27:08] were returning customers and not new customers and we have a returning customer exclusion on all this

[00:27:16] and it's like wow okay so we're telling them we don't want to pay you to go and get people

[00:27:22] who have already bought on our website and yet 74 percent of the purchasers that we can verify

[00:27:30] that's exactly what's happening and that was a kind of a wow eye-opening moment for us

[00:27:36] because and it makes sense that if if they can't see really clearly you know all the data about

[00:27:43] people that they used to then the system is basically just looking for affinity and it's the

[00:27:49] system is going to naturally gravitate towards people that are already your customers and for

[00:27:54] us there's another element that makes it even more interesting which is we acquire a lot of

[00:28:00] customers through target or amazon or walmart or whatever and so there's a lot of people that

[00:28:06] have affinity that are basically customers already and so even you know quote unquote acquiring

[00:28:12] them isn't really acquiring a new customer and so the internal discussion we're having is like

[00:28:18] what do you do with that is it do you go more top of funnel do you do more like reach based

[00:28:23] and unique user-based campaigns but i don't know if you guys have run into that i've seen other

[00:28:31] people post some stuff dave recook has posted some stuff it does seem like facebook's ability

[00:28:38] to to really eliminate existing customers has degraded and for us that makes it less

[00:28:45] attractive as an advertising option so that's that's probably in from from my world the most

[00:28:50] interesting thing about made it metas that we have customers that we acquire in a bunch of different

[00:28:54] ways and even the ones that we have acquired on the website we're paying meta to go get them again

[00:28:59] which doesn't make any sense but then my my assumption and we're doing some post checkout

[00:29:03] surveying is that almost all of the customers that we think we're quote unquote acquiring on

[00:29:08] the website are people that we've already acquired to the brand through some other channel

[00:29:12] i think mike that's knowing your business a bit and the channel mix you have

[00:29:16] your problem is likely not metas visibility as much as it is how many places you have brand

[00:29:24] impressions and discover ability and where you acquire customers right like you are which means

[00:29:30] you're like meta's likely not a great place for you to spend money because meta's absolutely

[00:29:35] going to go get all those people and be like look at all the new folks we're bringing you

[00:29:39] as is tiktok as is everybody you know like that's not a thing that's actually how they're

[00:29:44] designed that's not a yeah exactly it's a it's a feature not a bug and what we're really seeing

[00:29:49] is like what it does is it makes all the in platform reporting basically completely useless

[00:29:54] to us because what they do is you end up getting google and tiktok and meta all tag

[00:30:02] the same people and then whenever those people purchase which oh by the way they probably would

[00:30:06] have purchased anyway all three of those platforms say that was mine and so we're

[00:30:12] starting to like i said migrate towards looking at more server side stuff but our biggest challenge

[00:30:19] is how do we scale performance marketing in a way where we're not just talking to people who are

[00:30:24] already our customers all the time reach campaigns yeah so i'm just saying i'm curious

[00:30:30] your take on this well i'd love to actually hear your take on that shawn because i that i

[00:30:34] did start thinking is it reach is it putting more money an influencer because uh if it's if

[00:30:40] it's not the the conversion based stuff the one other dynamic and again i'd love to hear you guys

[00:30:45] thoughts on this is that if if all these things that i'm seeing are true then the more we pull

[00:30:52] back on bid caps like the higher uh you know number thresholds we have on roez or whatever

[00:30:58] the more likely the system is to just talk to the people that are already our customers

[00:31:02] yeah you know and it's likely to exacerbate the issue yeah okay so i have a lot of thoughts

[00:31:07] and i'll try it out to monologue meta doesn't work for like like meta as a company like we are

[00:31:16] we are the cash in the system but we're not like the customer right like like they don't want to

[00:31:21] attach like if they wanted to they could make it cheaper to reach as many people as they want

[00:31:25] and we'd all be super happy and right but like it's a it's a it's an auction based system

[00:31:29] where they want to get as much money as possible and keep us around for as long as

[00:31:33] it is it is a digital slot machine right like and you have to win a little bit but like

[00:31:39] it is a give and take relationship the word you're describing right now is like the

[00:31:45] digital marketing word of the year and that's incrementality so like 2021 it was attribution

[00:31:50] 2022 i don't know what it was but this year it's it's incrementality right and is your

[00:31:56] spend on meta truly incremental and the answer is no right like you could use house we use

[00:32:02] house sponsor of the marketing operators pod. And last year we spent more on meta than we're

[00:32:08] going to spend this year because it was more incremental. And now that we're testing it,

[00:32:12] we've cut meta spend. We're going to do probably the same amount of revenue this May that we did

[00:32:18] last May, but we're going to spend way less because it's just not incremental anymore.

[00:32:23] So we're cutting back on spend and we're putting in places that are incremental.

[00:32:28] And what we found is that if you want to reach new people, influence is a great way to do it.

[00:32:34] It's hard to scale, but you're going to hit a bunch of people who have ad blocker.

[00:32:39] Twitter has been really incremental for us, Snapchat slightly incremental, TikTok. And every

[00:32:43] channel has so many people who don't watch ads other places and who've never heard of you

[00:32:47] before. And what you've said, Mike, is that when you try to use bid caps or you get really

[00:32:57] strict with your MER, the system is more likely to go after the people who have already purchased

[00:33:03] from you because that's the only way to hit those objectives. And that's because growing

[00:33:09] net new customers, that true incrementality is really hard to do. And that's when I say

[00:33:15] reach campaigns and it's getting out of the conversion optimized campaigns because if you're

[00:33:20] going to buy a water bottle, you've clicked an ad for water bottles before and you've

[00:33:23] probably already bought a simple modern water bottle and you say, hey, I want to acquire the

[00:33:27] customer for $20. And they're like, okay, great. Well, this customer likes water bottles. So,

[00:33:32] but this is the guy. And like, I already have that guy. They're like, well, there's no other

[00:33:35] guys. So if you want to give me $20, this is the guy you get. But if you're willing to

[00:33:40] spend $80, I will get somebody who likes purses and I'll convince them to like water bottles,

[00:33:46] but it's going to cost you four times as much. And it's as simple as that. It's hard

[00:33:50] to get the incrementality. So you have to look for new ways to get people in those funnels. And

[00:33:54] this is why competitors are your best friends. Unfortunately, in the wallet business, most of

[00:34:00] our competitors have kind of gone bust or have stopped spending money. So we're the only people

[00:34:05] to get people into the wallet business. And anyway, so if, and this is probably a good

[00:34:11] proxy that like I bet Yeti's having a hard year, but when Yeti spends money on ads,

[00:34:15] it helps you just as much. Yeah, I think Mike, that's the key thing. Your category is so damn big

[00:34:23] that you don't have the same problem that Sean does or shit that even I do with Lomi. Like

[00:34:28] I have to show people what it is. I got to educate them. Like it's a long ass consideration

[00:34:33] cycle. Sean's trying to tell people like your wall, that old wallet sucks. He's telling them

[00:34:39] something they've never even thought to replace. You're in a category of people by 30 of them

[00:34:44] in a year. Yeah, you don't have to explain the benefits or how it works. You know,

[00:34:49] one other kind of interesting concept here guys that Taylor Holiday, our friend wrote a thread

[00:34:55] last week. I think Common Thread Collective does the, they do a lot of the work for Liquid Death

[00:35:01] and for Native, which are two of the bigger success stories. And interestingly, those are

[00:35:07] two companies that map a little bit better to Simple Modern because they're so omnichannel

[00:35:11] in their distribution. And Taylor has traditionally just kind of been contribution margin guy and

[00:35:19] banging the gong of, hey, if you're D2C, you've got to pay attention to this. But he wrote an

[00:35:24] entire thread about how those two companies, they're not even really trying to sell things

[00:35:30] on their website. They're using the website very differently than most D2C. It's more

[00:35:35] of a marketing tool and a brand building tool because they have all of this other

[00:35:39] distribution to soak up demand. And so for me, that's a really interesting question. If

[00:35:46] the goal of any consumer product company is to get to the distribution point where you're

[00:35:50] omnichannel and you're not completely reliant on meta and driving your own traffic,

[00:35:58] is there a point where you ascend or convert to what we're really trying to do with our

[00:36:05] website is tell our story, build the brand and not necessarily harvest conversions?

[00:36:11] I don't know if that's the answer, but it's a discussion we're having internally. That's

[00:36:15] interesting. I think Mike, you're in your category the way, and again, the way I look

[00:36:21] at it because given the category size and the consumer, everything is a demand capture

[00:36:27] point for you. Like everything. It's just put your shit in more places because everybody's

[00:36:34] going to buy one. Summer's coming. People are going to buy drinkware. Sorry, Jason. I'm

[00:36:41] going to throw it to you in one second. Go ahead. Mike's crushing on Amazon. Jason's

[00:36:45] crushing on Amazon. I just want to point out the number one item on Amazon yesterday

[00:36:49] and for the past week has been the Stanley Quencher. So Mike, you benefit from that.

[00:36:53] The number seven item on Amazon the past week has been cookware. Jason, you benefit

[00:36:58] from that. So this multi-point distribution strategy, Amazon's up for you guys. Amazon's

[00:37:04] winning those categories and you're winning inside of them. But what are you going to say, Jason?

[00:37:08] No, just a small point building on what you guys were talking about. One of the things,

[00:37:16] Mike, that I think you should consider it's a small bit. I don't think it really will change

[00:37:20] the way you think too much. But what about reacquiring customers? People think that you

[00:37:25] just acquire a customer and then they're a customer and that's that. But people need

[00:37:29] to be reminded of stuff. I need to be reminded of stuff all the time. So I think there is a

[00:37:32] place for hitting people again. There's so many choices out there. Look at where you are in

[00:37:42] hydration and all the big players who are kicking ass. You still need to be reminded

[00:37:48] from time to time. So I think there is a place for that.

[00:37:54] Okay. So when Warby Parker went public, there's no gap definition of CAC. They were using cost per

[00:38:02] order. They were just like, here's how much we spend on marketing. Here's so much orders

[00:38:06] we have. This is our CAC. But no, that's not true. There's AMER and there's cost per net

[00:38:12] new customer. And I do think what Jason's saying is correct that if you want to sell

[00:38:17] more t-shirts, sometimes you have to remind people who like your t-shirts that they like

[00:38:21] made a new one. Right? And so it's just inside of your metrics and marketing, having a cost per

[00:38:26] order and a cost per net new customer. And they're going to be different. And I think if

[00:38:31] you track those two things over time, what you're going to see is that like they do help and

[00:38:35] influence each other. And those are just proxies to consumer behavior, which is what we've

[00:38:39] been talking about. Like this is a great point, Jason. Mike, in your business,

[00:38:47] the thing we all have to remember is people don't give a shit about us.

[00:38:50] Like people do not care about any of our brands. And they've got short memories.

[00:38:54] Yeah, short memories and they really don't care. Right? Like outside of their own home,

[00:38:58] they just don't care. So if that's true, which I believe it is, then yeah, sometimes

[00:39:04] at some point you guys have to actually just start spending money and reminding people

[00:39:07] that you exist. Well, and here's where it's especially true. I think Jason, what you're

[00:39:10] saying, if Sean has someone that has bought a wallet, it is a little bit of a different

[00:39:17] thing to sell them a carry on. And that maybe technically they're a quote unquote acquired

[00:39:26] customer, but they were an acquired wallet customer. They know what the wallet is.

[00:39:29] They bought into that. They've had experience there, but they're not necessarily like an

[00:39:34] acquired customer in these other categories. We launched kind of a beach bag that really a

[00:39:39] lot of the reason why this year's going so well is we launched a beach bag that's done

[00:39:42] great for us. Sean, similar to how getting into bags has been helpful to you.

[00:39:48] So I think that it's definitely true. And then, you know, and Jason, I know you guys have,

[00:39:53] when you're introducing different pieces of cookware, maybe just because somebody bought

[00:39:58] a pan doesn't mean that it automatically translates to them wanting to buy whatever

[00:40:04] new thing, new knives that you release or whatever. I do think it's also true that

[00:40:10] in our category, because people own multiple, which is maybe different than Sean and Matt

[00:40:17] in your categories, that I think people treat it like shoes are category. And so they fully

[00:40:22] expect to have a cabinet that has four or five brands in it. And so even once you've acquired

[00:40:27] them, you're still, you know, it's not like there's this assumption that they're going to

[00:40:31] just, yeah. I mean, Matt, you're a perfect example. Like right now you've got a hydroflask.

[00:40:34] I know other shows you've had a Yeti, other shows you've had a-

[00:40:36] You didn't even know that.

[00:40:37] Yeah, but it's like, that's actually the normative behavior, right?

[00:40:41] I got a normative behavior. You probably have four or five brands. And so you can't just assume,

[00:40:46] hey, because I acquired you once and I gave you a good product. That means you're just

[00:40:49] my customer from now on. It's such a, you know what? It's funny. My wife is actually

[00:40:54] probably a great example of your customer, Mike. She's probably like, we've bought your

[00:41:00] product, but I don't even know where she bought it. It's that she's out with my kid,

[00:41:05] my kid, they see something they like. They just buy it. I have a giant fucking drawer in my kitchen

[00:41:10] is deep, full of drinkware and there's probably five brands in there.

[00:41:16] Yeah. It's probably the same thing honestly for us with cookware. Like I've started to like all

[00:41:21] the new cookware I buy is hex clad, but I've got two or three other brands that I had stuff

[00:41:27] for over time. And this is in a lot of categories, the way that people behave.

[00:41:33] Like we need to go up to BC and set Mrs. Bertoulli straight. First of all, that needs to happen.

[00:41:41] She's converted. She's a simple modern. We're a simple modern house now, but the stuff lasts

[00:41:46] forever, right? So like, and I'm not, I mean, you guys know this, I can't exactly throw stuff

[00:41:51] out. It's sort of like off brand. I use things as long as I can. I keep my cars for a decade.

[00:41:56] Like I just, I try to keep everything as long as I can. But yeah, I think that's just how

[00:42:03] it is. What's that? Oh, you're rocking the hex clad Pila case. Look at that. Oh, very nice.

[00:42:09] Baby. Jason's you dude. You're such a, you're such a super fan of buying your friend's shit.

[00:42:17] He really is. He's fucking number one customer for Ridge Wallet and that doesn't include all the

[00:42:22] free shit Sean sends me, which has a lot. I love my Ridge Wallet. I actually really do.

[00:42:27] I've had it for 11 years. It's an amazing product. Yeah, yeah. It lasts too long.

[00:42:37] What's up everybody? Welcome to the operators Northbeam ad unit. So 30 seconds, I'm going

[00:42:43] to tell you all about how if you have any problems with Northbeam, you can directly

[00:42:47] message Austin, the CEO. He is there. He will set up your ad account. He will make your bet.

[00:42:53] He'll give you cookies. Really they have a dedicated team of people, probably 30, 40,

[00:42:58] 50 reps at this point who will make sure Northbeam is working correctly and functioning so you can

[00:43:03] get amazing data out of this ecosystem. They will be more hands-on than any meta rep will

[00:43:10] ever be. And they're going to help you understand where your ad dollars are best spent,

[00:43:14] best position in which ads are working. My team works with the Northbeam team literally

[00:43:19] every day. They're in my Slack. Maybe you don't get the same level of support as an operator, but

[00:43:24] they will be there to make sure it's working. And if you're not happy at all,

[00:43:28] just email Austin. He will take care of you. We use Northbeam every day.

[00:43:32] It's a benchmarking tool. It's super helpful for forecasting, daily pacing,

[00:43:37] inter-hour pacing. So we can see like if we just launched an ad in two hours,

[00:43:41] if it's working or not, that's what Northbeam does for us. So thank you Northbeam for the

[00:43:45] support. I'm customer, probably number one. So thank you so much.

[00:43:49] Well, one thing to add regarding Northbeam because we just went through a contract renewal with them

[00:43:54] on their specifically on the MMM and we got a pretty sweetheart deal and I expect them to come

[00:44:01] back to us and raise our price and kind of deserve it. I was like, let me reach out to

[00:44:06] the team and see how it's going, right? Because I'm not in the day-to-day that I get

[00:44:11] feedback. And the team was like, they have improved the MMM so much since we started it

[00:44:19] that they were like, we should definitely pay for this increase. So and my team hates every

[00:44:28] agency and most SAS. The only person that hates SAS, the only more than my team is Sean, Frank.

[00:44:36] But yeah, I mean they came to us. They're like, hey, you guys got the sweetheart deal.

[00:44:41] We wanted the first MMM clients and I was very, very pleased when my team was like,

[00:44:48] it's really working well for us. So that's my little MMM plug.

[00:44:54] Mike, the beach bags though, I want to hear about this. Can you give me like

[00:44:58] 60 seconds on what's going on? Yeah, I mean there's basically like somebody figured out

[00:45:05] like, hey, if you use the same material, this EVA material that you make crocs out of,

[00:45:09] you can make other things out of it. And so there was somebody who popularized using

[00:45:14] it in a bag and we made a version of it. And it's just been gangbusters for us really.

[00:45:21] I mean, I think Sean talked about this in a previous episode but part of, I think evening

[00:45:29] out your brand is getting products that pop at different times in the year. And so this is a

[00:45:35] product that starts to go bonkers right around spring break and kind of now we actually,

[00:45:41] as you get into summer, it starts to kind of descend a little bit. But we had the last two

[00:45:46] or three months that we call it our getaway bag like, and it's at a pretty good price

[00:45:52] point. I think it's at $70 or so has been, it's been amazing. And it's been like we talked about,

[00:45:59] totally incremental. And this is the thing that if you're looking for incrementality,

[00:46:05] gosh, when you get into another product category, because we're really struggling

[00:46:09] with internally, obviously we sell a lot of drinkware and you want to continue to grow your

[00:46:16] drinkware sales but you can't get stagnant. If you're offering the same thing three,

[00:46:20] four years from now that you're offering today, then you could be in trouble. So the question

[00:46:24] that we're wrestling with is how do we disrupt ourselves while still grow? Like if you're going

[00:46:30] to grow, that's by definition, that's pushing a lot more volume through your proven winners.

[00:46:36] But if you're going to be healthy two, three years from now, that means you're

[00:46:39] disrupting your proven winners with some new concept, a new lid, new form factor.

[00:46:44] So we're wrestling with what does that look like in drinkware but the easiest answer

[00:46:48] is when you can find a complimentary product category and we seem to have really found one,

[00:46:53] one kind of interesting data point here. I think in a given day we might be selling,

[00:47:02] I'm just going to throw out I guess $40,000 or $50,000 worth of these on Amazon alone.

[00:47:09] There were two different times where we ran a deal where we ran it I think 15% or 20% off

[00:47:14] and both times we had to kill the deal within eight hours because we sold like 10,000 bags in

[00:47:20] a day. I mean it was just some kind of absurd number the moment that we put it on discount

[00:47:26] and that's probably been one other big learning for us is like man when it comes to customer

[00:47:30] acquisition, Amazon deals where they give you some of the fire hose, some of their

[00:47:34] organic distribution, it's just hard to freaking beat that in terms of getting your

[00:47:39] stuff in front of a lot of new people. Yeah Mike, everyone should go to simplemodern.com

[00:47:46] and just see the amazing job he has done expanding product lines and categories.

[00:47:50] It's unreal.

[00:47:54] And someone in software said this, your second opportunity needs to be bigger than your first

[00:47:58] or else it'll never excite you right? So like I can't think of whatever the software

[00:48:05] brand was but imagine you do something and successful, like this was like Ridge and when

[00:48:09] we launched backpacks like five years ago or whatever and we ended up killing them because

[00:48:12] they're like, and it's like we're only selling maybe a couple hundred thousand a month, the

[00:48:16] wild's doing millions. Like why the fuck would we even waste time with this? Your second

[00:48:20] opportunity needs to be big enough to be exciting and you can just see your brand.

[00:48:24] Like we talked about you selling water bottles like you have a kid section,

[00:48:28] you have a drinkware section, you have a cooler section, you have this bag section.

[00:48:32] Eventually you're going to do kids shoes and you're like oh yeah very clear path

[00:48:36] to you being multi-billion dollar company right? Like you can see this being, I mean

[00:48:42] Walmart actually wanting to buy you because you have all of these things that they fill in a

[00:48:46] very pretty nice package and it just makes sense right? You're a lifestyle brand and that's

[00:48:51] like the real lesson for everyone listening this should learn is like what is my second

[00:48:54] opportunity because it's getting harder to acquire customer for thing off of digital

[00:49:01] channels right? And you have to start being able to acquire customer for multiple things

[00:49:05] and cross all those customers. And that is all of our growth this year is coming from

[00:49:10] new product expansion from categories or making new shit like MLB wallets, NFL wallets, MKBHD

[00:49:17] wallets like this is new entry points to the brand so we could all learn from that man.

[00:49:22] Best in class operator. Thanks if you're listening or watching this Sean this is an

[00:49:26] interesting thing so if for people listening if you want to visually see this go into the

[00:49:31] Wayback Machine go to simplemodern.com 12 months ago and then look at it today.

[00:49:38] Just look at the menu. Yeah well and I would encourage just something to say you guys I think

[00:49:44] being a part of this group has really pushed us to especially on the digital side we've

[00:49:50] just gotten so much better and a lot of it's been advice from this group. One thing I will

[00:49:55] say there's the next product category we're getting into I have been encouraged I mean we

[00:50:00] were already looking at but I've been encouraged by this group to do it and it's a similar thing

[00:50:05] to what you're saying Sean. It's a category where it's hard to come up with something bigger

[00:50:10] than Drinkware but it's a category that's big enough and is hot enough that if we do it and

[00:50:15] we do it right it can add you know tens of millions here's my threshold can it add 10

[00:50:20] million in contribution profit? Yeah. And that if it can then that's that's meaningful and so

[00:50:25] we're going to get into another one which is I think it can be totally incremental and it can

[00:50:31] add another brick in the wall and I keep telling our team internally like listen guys we've got

[00:50:36] to get to where website you know we can pay D2C we can pay 50-60 customer acquisition cost and

[00:50:43] we can't come close to that right now. So our ability to scale on the digital marketing front

[00:50:47] is really hamstrung by the fact that we don't have the user values to support it

[00:50:51] but we're going to try and keep adding pieces so that we can get that LTV up high enough

[00:50:56] that we can really blow it out on the digital side. So it would be a great topic first of

[00:51:03] subsequent pod new product funnels I think we should talk about that in more detail because

[00:51:11] this is something that we struggle with and I actually go back to conversation we had on the

[00:51:17] pod with Sean like your next new category needs to be as big or bigger than because if you come

[00:51:22] up with a new product that you and it's a lower AOV or just lower price point it's just hard to

[00:51:29] acquire the customer profitably and you know it's something that we are thinking about a lot

[00:51:35] because we have other great non-cookware products like our knives, like our pepper mills,

[00:51:40] like we have incredible bags too which no one even knows about. I'm literally about to go

[00:51:46] light people up after this fucking pod about that. People are getting lit just get ready

[00:51:53] and I think the way it sounds you're thinking about a mic is that these are LTV right and

[00:51:59] that's the way I think about it too but and you probably suffer from the same thing it's

[00:52:04] like when you look at your revenue mix by product category you know the water bottles

[00:52:12] have got to be you know the drink where it's got to be like 90 percent right

[00:52:18] whereas and that's fine I mean like take what you can get and you're growing and

[00:52:23] you're making money so it's great but it's like for the long-term vision of a brand you have

[00:52:28] to think about and your positioning in the market and based on like what different products

[00:52:36] product categories you sell. Like nobody wants to be a one trick pony right? Ridge doesn't

[00:52:40] want to just be the wallet company. We don't call them Ridge wallet anymore we call them

[00:52:44] Ridge because they sell rings and bags and watches and that's a I think that's an area

[00:52:52] for a deep dive. Yeah I like that I could see a world where Ridge gets more income from

[00:52:59] something other than wallets five or ten years from now. Sean I think you know some of

[00:53:03] these categories that you've gotten into like they can be bigger than wallets and that's

[00:53:08] a great thing but you know Jason just to touch on what you said here's a counter-intuitive

[00:53:13] thing that from the outside people might not realize where we're at as a brand

[00:53:19] launching coming up with new products that are high quality is easier than ever before. Like

[00:53:25] every factory wants to work with us people are purchased with ideas that are good ideas

[00:53:30] all the time. We have the capital to you know do whatever we want to from a tooling

[00:53:35] and development perspective but just as it's getting easier and easier and easier to have

[00:53:41] a quality product that you could release releasing those products is harder and harder than ever in

[00:53:46] my opinion because of exactly the dynamic we're talking about. Five six years ago if we want

[00:53:51] to launch a new product we could buy like three thousand of them and just say like okay

[00:53:55] we'll throw it up and we'll you know we'll see if it if it pops and if so we can lean

[00:53:58] into it but today for us to launch a new product and for it to have any kind of meaningful

[00:54:03] impact on the business we have to sell hundreds of thousands to millions of them and so even

[00:54:08] though it's you know there's tons of ideas out there we've got to find ideas that we can have

[00:54:13] enough conviction that we can put a half a million dollars or more behind and that we think

[00:54:18] we can sell you know like I said hundreds of thousands of and that makes the bar much higher

[00:54:25] and and it's something that we're we're kind of wrestling with internally. I just wanted to

[00:54:31] point out that Mike you're doing it you're doing product expansion the right way because just from

[00:54:37] a technical digital standpoint like the Sean's golden rules of expansion the second opportunity

[00:54:41] needs to be bigger than the first and the second opportunity has to have a higher AOV

[00:54:46] because you know Jason sells a ton of aprons like that's like the big launch they've been

[00:54:51] working on right and I'm sure it's going great I don't actually have the numbers.

[00:54:55] I was so skeptical talking to Conor R I'm like dude there's no way you're going to be

[00:54:59] able to scale that up because what Facebook's going to want to do is just sell cookware or try

[00:55:04] to trick cookware customers into only buying aprons right and like LTV is great but you

[00:55:09] need that second line of the business and to really scale it up I think it just needs to

[00:55:12] have a higher AOV so we have the advantage Mike of starting lower right Jason's AOV is

[00:55:18] a thousand dollars so I told him like yeah you guys sell fridges.

[00:55:23] Yeah take on Sub-Zero, go after Wolf, Sub-Zero and those guys. Because like just

[00:55:29] it's really easy to move up that AOV bucket without compromising your core business and you

[00:55:35] guys said like oh yeah we're going to make more money off of other categories in a while. That's

[00:55:40] not this year but next year like we're mostly a ring business at this point like the rings are

[00:55:44] the fucking god's gift to earth dude way easier to sell way bigger market way higher AOVs

[00:55:50] better margins so on that note Sean this is something that I've learned and talking to other

[00:55:55] entrepreneurs too often they view things through the lens of what would I like and what would be

[00:56:01] good for me and they don't think about it through what are all the partners and companies

[00:56:05] that I work with what do they want and what's good for them and you nailed it this isn't

[00:56:09] just true of meta this is true of you know physical retailers as well they don't want me

[00:56:15] to come to them with a ten dollar item they want me to come to them with things that raise

[00:56:20] the ASP that they can hit with their physical space and so they love it they love it when

[00:56:26] we can come with innovation or some kind of product advancement that says we can sell things

[00:56:31] for thirty dollars on the shelf where used to be 25 and you can get more yield out of the

[00:56:36] space that you have doesn't matter how great the thing we could bring to them is if it's

[00:56:40] ten dollars it moves them the wrong direction so I think we did have the advantage of our

[00:56:46] average price point was in the 20s or you know 30 and there's a lot of products out there where

[00:56:52] you can move that up whereas Jason's got the you know he's got the opposite gravity working

[00:56:56] against him that he's already kind of at the top of the AOV pyramid but let's not cry too

[00:57:00] much for Jason this is also why HexFight is absolutely crushing it. No one should ever

[00:57:06] feel bad for Jason he's like oh my remodel on my awesome house in the middle of the mountains.

[00:57:13] My gold shoes are too tight guys.

[00:57:19] Mike I got a question for you on the category expansion how much of your

[00:57:23] thinking around all of this because you've added a lot of categories how much of it is

[00:57:29] defensive versus offensive? Defensive being you're a smart guy how long does the drink

[00:57:35] ware craze last? Offensive just grow and add this is what a business does.

[00:57:43] I think that I've originally was really scared about drink ware like just you said it like

[00:57:49] these things last forever and it was just kind of like how are these many selling is this

[00:57:54] going to just like all of a sudden start to drop off and there's just no end in sight

[00:58:01] I think the growth is going to slow down like last year the industry grew at 20% maybe

[00:58:08] which is like everything else in housewares was basically flat to down so

[00:58:15] I'm very comfortable saying a lot of this is not me being smart it's running with a 50 mile

[00:58:20] wind 50 mile per hour wind at my back but I think the category is really secure because

[00:58:25] I think if you look at like longer term you know secular growth trends like drinking more water

[00:58:33] staying away from plastics being more healthy more active like these are good trends the

[00:58:39] thing that I think I actually see category expansion as a way to fortify your drink ware

[00:58:47] business and that like brand equity is just basically everything like the only we went to

[00:58:52] a trade show I think I've told this story before we went to a trade show a couple years into the

[00:58:55] business and international home houseware show the theme of the show is drink ware there were

[00:59:00] 50 something drink ware exhibitors and after about four hours of walking around that show

[00:59:07] with my team I pulled them all together I had one of our bottles and I just said listen guys

[00:59:11] listen either we are selling this or we you know our logo our simple modern our brand

[00:59:19] identity or we're selling that or we're selling water bottles and if we're selling water bottles

[00:59:22] we are screwed and so a lot of the expansion we've done has just been around making sure

[00:59:31] that you're building brand equity and that that's where the safety is not even so much in a

[00:59:36] particular category it's just that like simple modern meaning something it this is the most

[00:59:41] fascinating thing about consumer to me is like that that these little squiggles means somebody

[00:59:47] will pay twice as much for this as a different set of squiggles right and then there's another

[00:59:52] set of squiggles where people will pay 40% more than for my set of squiggles you know like it's

[00:59:56] just it doesn't really make a lot of sense humans are funny the way that we signal and we

[01:00:02] we kind of grope for status and but that's where safety is that's where the the brand

[01:00:07] equity is and so I actually think when we get into other categories like we get into this

[01:00:13] beach bag for example the more that we successfully get in other categories the

[01:00:17] more that we successfully get into kids and different things the more that that makes the

[01:00:22] brand mean something and as long as the brand has a lot of equity I'm going to be in great

[01:00:27] shape my team's going to be in great shape if at any point the brand equity starts to slip

[01:00:31] even if drink or stay strong we're in real trouble well that's and that's where Sean your

[01:00:36] apron comment we launched aprons because you know look they're not a high AOV product we're

[01:00:43] apron business is never going to be a big business for us but it's kind of a strategic

[01:00:49] thing for us it's a brand awareness thing too it's almost like merch and it just kind of goes

[01:00:58] along with with what we're doing but it's it it's got to be an LTV play right it's it's

[01:01:04] like we're not going to acquire new customers with aprons as much as we want and I like that

[01:01:10] you were talking with Connor about it because I sent the same message to my team it's like

[01:01:15] you want to run some funnels and test it and like prove me wrong I'm going to let you

[01:01:20] but it just seems like really hard but I do think we will sell millions and millions of

[01:01:26] dollars of of aprons this year and next year Jason you're thinking about it totally correct

[01:01:31] right you're like hey look this is great because people on TikTok will be cooking with

[01:01:35] my aprons they'll be proud to wear them they're a great product yeah the brand is so

[01:01:38] good I just think Connor Connor got fucking too cocky he's sitting there like yeah dude we're

[01:01:44] gonna fucking scale this up like there's no way those operators man Connor the the

[01:01:49] mop operators I love that the mop heads because hairs on deaf mop top heads well

[01:01:54] Cody doesn't Cody's the only one that's got his balls I'll say this like I've been in

[01:02:00] this game long enough to know that hubris is a real thing that can that can get you and

[01:02:05] when you know all you've done is have offers work and succeed it really it doesn't take long

[01:02:13] for you to just think like hey everything I do works and touch and everything I touch will turn

[01:02:18] to gold my brother and I ran into this you know some of the people I've mentioned the

[01:02:24] venture I had with him it was like an auction website but scaled it to a million dollars in

[01:02:30] daily revenue in about 13 months it was crazy like the way that we scaled that thing but we

[01:02:36] really did start to believe like oh just whatever we we do and we touch it's going to work and

[01:02:41] then we had a couple of ventures directly after that where we you know they went to zero

[01:02:47] and probably I would have had more funny if I more fun if I'd just withdrawn a bunch of

[01:02:52] cash and made a big bonfire and invited all my friends to it and so I don't know it's

[01:02:59] it's hard it's e-commerce is crazy in that when it's not working it feels so impossibly hard

[01:03:05] and when it is working you feel like it just feels like magic and you feel like a genius

[01:03:10] and I don't know how to like manage myself in between those two I mean I'm sure your team

[01:03:16] Jason it's like how do you not think you're just the smartest guy in the room when you're

[01:03:20] putting up numbers that are so absurd right? Yeah I mean luckily Danny and I are not kids

[01:03:28] and we've been through a lot and so we remain vigilant against the hubris

[01:03:36] in human nature is such that you can't avoid it completely but we try to be diligent

[01:03:43] and disciplined. Yeah so I think we could end on this I gave a talk at commerce summit which

[01:03:49] everyone should go to and it was really great we had like a little dinner and there was like

[01:03:53] a Q&A or whatever and I was talking about how fucking awesome I am like dude we've never

[01:03:57] raised any money we're privately held like profitable like I'm never gonna sell I get to

[01:04:02] run this business with just like my best friends and no bosses and they're like well Sean what

[01:04:07] like what can kill you like it sounds like you're on top of the world I'm like oh hubris

[01:04:10] I'm like I've wasted like that was like the word for word quote got a big laugh just like

[01:04:16] this and I was like yeah like I've wasted more money than anybody else on earth man like not

[01:04:21] really but I bought a fucking factory I've spent five million dollars on legal fees I

[01:04:26] lost like 10 product categories last year and then I picked just to do travel like I've wasted so

[01:04:32] much goddamn money and I'm like yeah at some point I might take a swing that throws my back

[01:04:37] out so that's that's the challenge. I have a really simple principle that I just basically

[01:04:44] don't want to hear business advice from anybody who hasn't been through at least one

[01:04:48] big up cycle and one big down cycle and we have a culture that's just like what's the big

[01:04:53] up cycle right now and what can we learn from you know whoever is at the forefront of killing it in

[01:04:59] that big up cycle and Jason what you said the humility and the perspective that comes from

[01:05:07] really getting your butt kicked for a period and going through a tough period it's it's invaluable.

[01:05:13] Well people are getting their butt kicked now that's for sure focus on profit people reach out

[01:05:18] they're like what should we do I'm like figure out how to be profitable batten down

[01:05:22] the hatches yeah I've cut head count probably it's like it's probably a good time if you're

[01:05:31] not profitable you should definitely cut the profitability and econ brands need like six people to run them.

[01:05:38] We don't talk about that enough like you can't control a consumer you know it's a lot easier

[01:05:43] to control your expenses than your revenue you know or like and I think I think people

[01:05:48] forget that that like the easiest way to be a cockroach and to survive through a bunch of

[01:05:54] different situations is to be really great on managing your own costs. That's it be a cockroach.

[01:06:02] There's the thing that we're finishing on be a cockroach I think it's good advice I mean look

[01:06:06] Mike you nailed it the people who've never had a down year and never lost are two things

[01:06:11] either lucky or not been doing this long enough. Well there's a somebody told me this once it

[01:06:16] was a guy who just bought a motorcycle and he said there's a saying in the motorcycle community

[01:06:23] there's those that have laid down their bike and those who haven't laid down their bike yet

[01:06:28] and I thought like very similarly you know like in ecom there are those that have been through

[01:06:35] really tough periods and there's those who have not been through really tough periods yet

[01:06:40] and that's just the way it works. Yeah let's say that's got to be the bod let's end it there.

[01:06:46] I've also got a call I got to get to. All right boys. Keep talking guys.

[01:06:50] That was episode 59 thanks for listening thanks for being here hit subscribe send it to your

[01:06:56] friends we're still the number one podcast on earth but I want to increase our lead.

[01:07:01] Look it's a weird time for e-commerce weird time for the economy but the hero's journey

[01:07:06] you've got to go through some some challenges and I think it's mostly meta driven but

[01:07:10] maybe we're in a recession who knows. Thanks for being here thanks for listening we will

[01:07:14] guide you through to the end of the day episode 59.