Jeremy Horowitz is one of my favorite follows on LinkedIn. 

He recently dropped some brilliant (and terrifying) posts about the economy, the impending debt crisis, and what DTC brands should focus on now.

Jeremy and I go way back. In fact, this is our 4th podcast together over the years (he used to host a show too). Jeremy has been in the DTC SaaS space for years, having previously managed marketing for a large DTC brand. Jeremy is now the Sr. Partner Manager at Gorgias, and he and his team run the DTCX events, which have become some of my favorites to speak at and attend. 

Here's a look at what we cover. Some of it's heavy, but it also speaks to the amount of opportunity on the horizon: 

• What keeps Jeremy up at night? A potential consumer debt crisis? More at this link.
• 64% of Americans live paycheck to paycheck. Those making over $100k per year are in the same boat.
• What you can learn from Liquid Death. 
• Understanding how and where your customers want to buy.
• Avoiding the discount doom loop.
• Getting your inventory as close to "just-in-time" as possible.
• A different way to look at your marketing budget and performance. 

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Mentioned In This Episode:

• U.S. Personal Savings Rate Chart
• Jeremy Horowitz (LinkedIn)
• Brett Curry (LinkedIn)
• Brett Curry (Twitter)

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Transcript:

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Brett:

Well, hello and welcome to another edition of the E-Commerce Evolution Podcast. I'm your host, Brett Curry, CEO of OMG Commerce. And today we are going to talk big picture. We're going to provide some information that I think will be helpful, maybe a little bit scary as well, but I think overall positive. So we're going to be talking about state of the economy, state of the eCommerce, and what you should be doing right now and for the rest of the year to ensure success and growth for your D2C brand. I've got the man, the myth, the legend Jeremy Horowitz on the podcast today. And Jeremy is a guy that I've known for a long time now. He used to run a podcast. I was on that podcast and he was on this podcast ages ago as well, but now he's a senior partner marketing manager at Gorgias. Gorgias is a much beloved partner of OMG Commerce. And we'll talk more about Gorgias as we go. But Jeremy, I've, I've recently discovered is an amazing follow on LinkedIn. He's writing some really thought provoking items and so as I was reading his stuff I was like, Jeremy, you got to get on the podcast and talk about this stuff. And so here he is. So Jeremy, welcome to the show man. How you doing? And thanks for taking the time.

Jeremy:

Thank you. Thank you. I am doing awesome. I think it's our fourth podcast we've done over the years, so we're excited to dive that in. I have no idea, I'm going to live up to that intro, so I hope I can really deliver on all the key points. But yeah, I'm really excited to dive in. It really just came out of at Gorgias, we were analyzing data across 11,000 merchants past couple years. I've just been scratching my head of like everybody's saying all these crazy things and shouldn't be happening looking at a bunch of brands that I work with, both through Gorgias and personally, it was like, is this actually happening? And most of the time it's almost never matching up. So I just started studying a lot of the data across all of our merchants and then I started studying the public filings of your and Meadows just to see what's going on.

Cause essentially when you aggregate all e-commerce up into hundreds of thousands, millions of brands we're essentially the digital economy we that's reflected in those earnings. And so I've just been trying to try to just read the TVs and figure out are we in a recession? Are we not in a recession? How bad is inflation? How good is inflation? How has that impacted, where is e-commerce on its growth trend? And I'm sure we'll dive into all of those things. But yeah, I'm basically just like everybody else, just trying to just combine as many and try and get as many points as possible to figure out what is actually going and what can we tactically do to just keep moving through all these just unprecedented times that candidly have been enough ready for some from normal times and some non unprecedented times for a couple years.

Brett:

Yeah, it's so true. And I love the way you unpack that. And then that's exactly what we're going to dive into on this show, making sense of some of the broader macroeconomic issues that are taking place. And just a quick caveat, I'm not an economist. Jeremy's not an economist, but Jeremy's a really smart dude. And so we're going to be diving into this because we want to get a pretty good picture of what's actually happening, where are things headed so that we know what to do and we know how to grow our business, we know how to keep pushing forward and take care of our teams and our clients and our customers and all of those things. So yeah, because I pay attention to the news a lot as well, and we're talking about this before we record. Sometimes I hear things like, Hey, something worse than a depression is on the way.

And I'm like, oh no, that sounds terrible. And then I listen, I read something else and they're like, it's going to be a soft landing. Nothing to see here, nothing to worry about. Economy is up until the right, everything is great. Inflation is not bad, don't worry about it. We're in a recession, we're not in a recession. Just all this stuff. And to your point as well, we've had unprecedented year after unprecedented year, right? Pandemic, totally unprecedented. Then we had supply chain issues caused by the pandemic and now inflation, it's just one year after another. It's stuff we haven't dealt with before. So yeah, I would take some normalcy if you would dial that up, Jeremy. I would totally take that.

Jeremy:

What does that even mean anymore? That's a good point.

Brett:

That's a good point. We wouldn't know what to do with ourselves if things were normal, but here we are and no sense in wishing for something other than what is right, let's just get after it and try to make things work as best as we can. But you had a recent post, and this was the post that really triggered me to say, okay, Jeremy, I got to get on the podcast. It was what is keeping me awake at night right now? And I'm a really positive person, by the way. I can always see the positive things, but I'm also a realist and I want to look at the hard stuff too. So unpack that a little bit. Jeremy, what is keeping you up at night right now?

Jeremy:

So this was a chart that was done. It was a research firm and a private equity company paired together to look at from basically late 2019 to release this in q4. So it was basically through q3, Q4 of 2022, how much consumer credit card debt was the average US consumer taking out and what was their savings rate as a percentage of their income. And I'll share this in, and I can send this so we can throw this in the show notes, but yeah, I'll

Brett:

Link your to your, it's basically a post or whatever. I'll link to that in the show notes. But yeah, there there's this graph that shows savings rate versus credit card debt. Yeah, but you're good.

Jeremy:

And so as you soon go, we go into the lockdowns and early part of 2020, saving rates go through the roof. So the normal average float somewhere around five to 7% during the covid lockdowns, they go spike around 30, 33% in 2020. And that kind of, depending on where you see stimulus, it also goes into a little bit of 2021. And that makes crazy high rate probably, well, I don't know, you can ever have too high of a savings rate, but it just in way past the average. And then you see the amount in hundreds of millions of dollars of credit card debt just plummet from about 850 to 750. And so right from a traditional finance, personal finance, that's great things to see. People are paying down their credit card debt really actively managing their finances and then saving a lot of money. So they have good cash reserves.

So that for us in the consumer economy, they're in a good place to spend. They've got savings that they can tap into, they've got credit card debt that they can tap into. Then the really thing that what keeps me up at night is as you see in 2021, and then what really flexes into 2022 is essentially just a hard reversal of those two graphs and just, you see it's skyrocket in either direction. So by the end of 2022, you see that the personal savings rate had basically it fell back down to somewhat normal levels and that five to 10% and then plummeted down to 3%. And then you just see the credit card rate, the amount of the credit card volume skyrocket from that seven 50 area to north of 950 million, no, nine 50 billion, 909, a big number, a really way too big number that you can't wrap your mind around.

I think it's 9 billion, but that sounds insane to me. So I'm going to say nine 50 million and then we can fact check me afterwards, but it just essentially goes skyrockets. And it was pre pandemic, it was about 850, so a meaningful step up north of 10, 15%. And so what really keeps me up at night is it billion, right? It's 50. So nine 50 billion, really, really bigger than the GDP of probably a lot of other economies in the world. And so right, credit card debt isn't bad, savings should be good, but there's everybody's decision on what they should be doing. But really what more concerns me is knowing that I don't know about everybody else, but every credit card on their mother has offered me a credit card in the past three years. And if I had actually taken all of them out, I think my credit limit would've been something like three x my actual income, which is just bubbly. That's just scary. Those are not good. And just knowing that not all consumers are that disciplined, my guess is reading the middle ground of that data that people are overextended. And so some other data point has really come out that 64% of Americans live paycheck to paycheck.

When you just think about that means over half of every consumer that you could possibly touch is literally on paycheck to paycheck to pay for everything that they're working on. And then the second piece of that that really is like, oh boy is a group, there's a sliver segment of that that makes six figures a year. They're making over a hundred thousand dollars in gross income on an annual basis and still live paycheck to paycheck. And so what really concerns me is when we take a step back, lockdowns tons of stimulus and inflation, and I don't want to spend too much time on monetary theory, but when the government pumps even more money than what people are already making and the only place that they can pump

Brett:

Amounts of money that have never been pumped into the system before.

Jeremy:

So

Brett:

Yeah, it never happened before to that level.

Jeremy:

Sure, right. Unprecedented scale, unprecedented frequency. Cause it happened multiple times and at those points in time, all consumers could really push at a meaningful volume into maybe their homes was consumer goods. So we had this artificial one-time massive growth that's just really, really jacked up. Then on this back of that, consumers are like, well, I don't really want to change my spending habits now, and I actually, and now I want to go and travel and do all these other things that are going to require me to spend money. And unless something else happens and maybe there's plenty more brilliant people out there than me, maybe there's some simple solve to this that we just haven't figured out yet. But at a certain point this has to stop. People have to either go back to savings or default on their credit card or stop spending money.

I mean, maybe I'm blatantly missing something, but to me it's like it has to be one of those three camps. And so just knowing that having your financial capital tied up in inventory is the kiss of death for any e-commerce or retail business. To me, this is, I think I'm really focusing on this year and every brand that I taught you and advise, it's like how are you really, really optimizing your inventory? How are you being really, really thoughtful about your timelines to inventory when you're placing pos, how much inventory you're carrying? Because at a previous company, and this is a super extreme just to prove a point, but when I was audacity, be calculated to weeks of term, which is essentially how many weeks will it take you based on your current sales velocity to completely sell out? Some brands we were seeing had hundreds of weeks, thousands of weeks of inventory.

And that faces a reaction I need of knowing that all of these factors are at play. You just have to be so nimble in these times. And I know that that's for every operator out there. I'm sure you all just turn off the podcast and hate me because it's the past two years from the supply chain have been a nightmare and everybody's been telling me to load up on inventory and get ahead of this. Exactly. But to me, this is where we're in a little bit of a pickle on our side of the just economy and sphere of yes, the proper thing to do was to load up on inventory, but now you might get stuck with too much if your consumer demand falls off. And so I think the one piece of helpful advice, and I hope what everybody takes away from this is really start studying your customer's purchasing behavior.

And I'm going to misuse in an economic term, but I like the way it sounds of really start to understand your consumer demand curve. So if I'm to study economics, I know it's the price and quantity, but really understand what's, how often do people buy, how much do they spend when they buy? And are my customers the type of customers that literally wait for a paycheck to afford my product or do they need to put it on buy now and pay later? All of those components. And I know you can probably buy some third party data to understand more of the financial habits of your customers, but I think that's going to be really, really important because the key has always been to tie your inventory buying to that as much as possible. And I don't think it's a skill a lot of people developed as you could just blow out sales recently, but it's kind of a little bit more of, I don't kind of the old days when we used to really have to manage merchandising and the e-com manager side of the store, but I feel like that's really going to be the key for everybody this year.

Brett:

Yeah, I'm so glad you pointed that out. And I want to just k kind of key in on a couple of things. One, I think this all does go back to really understanding the consumer, understanding what they're experiencing right now and how that might predicting or thinking how that might impact behavior going forward. But knowing that 64% of consumers live paycheck to paycheck and it's not the lower income folks only, it's people that are making over six figures. So even if you feel like you're reaching a higher income earner, probably most of them are living paycheck to paycheck as well. So just knowing any little blip, if we start to see unemployment rates really go up, that could cause demand to shift dramatically. Right now we've got all these weird things happening, but unemployment is really low. Everybody's working, a lot of people are working.

So cash is still flowing, but a lot of it is credit based and saving rates are going down to your point and that you can look at the graph for yourself to see how scary it is. But yeah, and now this is a complete, those things inverted, the savings rate and the credit card spending those inverted recently. So did your approach to inventory that got flipped upside down too, right? Because a couple years ago was all about just get in whatever we can get in because we'll sell it. And now you got to think about it. And so one of the things we did, and I actually wrote this article at the beginning of the pandemic, it was about understanding consumer behavior in a downturn because if you remember, this is actually hard to turn back the clock and remember, but March and April of 2020 looked like things were going to be a disaster.

Those were the first losing months that OMG commerce ever had where we didn't plan on it. There was other CapEx times and whatnot. We'd spent a lot of money what we meant to. And so we lost money for that month. It was the first two months we ever lost money. But then we're like, oh wait a minute. Yeah, everybody's stuck at home. They can't spend money on anything else other than stuff online. And then things exploded. But I wrote this article on how are consumers going to respond to a recession? And it's interesting, you kind of got these different buckets and we got this pulled up. So we kind of talk about it. There's some people that just slam on the brakes, bad stuff happens, they slam on the brakes. There are other people that are like, they're pained, but they're patient so they're feeling the pain, but they don't want to really give up what they're doing.

You get the comfortably well off folks and then you've got the people that are kind of live for today that are like, Hey, caution the wind, whatever, we'll just keep spending money. I think to your point, there's a lot of people that are live, live for today or where they're feeling comfortably well off where they start those spending habits and they don't want to adjust them. They start those spending habits and just because inflation's there, they're not spending less, they're going on trips, they're doing some of those things. So I think just understanding that it doesn't take a lot to shift things off a cliff, so to speak, in terms of demand and being ready for that. So time is back to inventory. I think that's a really important piece. What are you recommending to merchants now? How should they be thinking about inventory? How many weeks worth of sell through? What are some practical tips you you'd give there?

Jeremy:

Yeah, so I would say that just in time inventory should be taken to probably as close as you can take it to the extreme. And I know it's very different for every business because you have your PO timelines, you have your sell through and wholesale retail,

Brett:

Running out of inventory is bad too. Really. We manage brands on Amazon and you know, run out inventory on Amazon and you got to start some of your flywheel over again. So running out is bad too. But yeah, close to just in time is probably a really good idea.

Jeremy:

And I think, right, cause you really have to thread the needle. You can't go too far in either direction, but I think you really have to lean more towards is this sellout existentially bad for our business and start more on that side. But I think it's really more of just speed. If I was running a brand, I would probably be checking myself through on my best products every day. And then I'd probably be checking myself through my products once a week, if not multiple times a week. Just because assuming that you have the right terms with your manufacturers, I probably would be placing pos more frequently. I know that's not as cost effective and everybody's going to like, well, you'd be more profitable and you're telling me to do something less profitable. But I think this is actually where you need to push your margins on every other part of your business so you can afford to spend a little bit more here just to give yourself the runway.

Because what we never talk about, and I know people are probably on two thousands to say cash conversion cycle, but really how long does it take me to put dollars out of my business? How long does it take me to bring dollars back in And inventory, especially if you're shipping from overseas, you're automatically on probably a month to two month timeframe as just the fastest baseline. And so really being intelligent about that. I think the other piece is just if you like more of a tactical thing. One of the best things we did when I was at a brand back at my time at Lumi is every week I'd standing e with my ops team and our head of supply chain and logistics. And I would literally go through our inventory and it would mostly be prioritized by our best sellers, but I would let them know, hey, these are the changes we're making to our paid media budget.

These are the things that are going on promo, these are the things that we're going to feature on the site and email blah blah, blah blah blah. And then they would start adjusting. And if you don't have that already add, it's the calendar this week. If it's something you're already doing maybe once a month, I'd probably pull that into biweekly weekly. Really have that down. It's really a muscle that you have to learn. There's no perfect science. There's tons of tools that will tell you that they have this perfect algorithm and they help but consumer, consumer demands consumer demand. And so you really just have to get really dialed in there so that when you do have the shakes and when do things do change, you can really adjust as quickly as possible. And I mean, Lululemon is already running away. We made too much sale.

And I think it's actually a brilliant tactic of they're just ripping the bandaid off. It's going to be painful. People are talking about it a lot. What concerns me about what they're doing is they're running it at such a scale that they might actually get into a discount death spiral where they might pull in so much consumer demand cause they're making such a big deal out of it that then they're not going to hit their sales targets in Q2 34. So that actually there's ways that you have to be very careful about it, but I think we're just going to see a lot more people less aggressively discount top of funnel and less disagree acquisition and more strategically discount. How do we move stuff? How do we clean stuff out? And I actually drew Sn one of our close friends really had a meaningful posts about this on Twitter or about the past week of we really shouldn't be discounting the super loyal people that are with you and are going to buy. And there's very strategic points at when to introduce those promos, how to introduce those promos. And you can do it fairly automated now. And I think we're just going to see way more adoption of that with the couple of how oil companies have their burnoff or we're pump, we're pumping too much oil so we burn oil off so we don't ruin everything. I think we're going to see more of those clearance sale type of just move out of the system when need be. That's

Brett:

A good analogy. A little oil burnoff. You got to get rid of some of that inventory and you got to rip the bandaid off and the Lululemon, the example. And I do want to talk about some other DDC brands that are doing really well right now. Cause I think we've learned great from examples. But let's talk about Lemon really quickly. Obviously phenomenal brand, they crushed it during the pandemic. Everybody's wearing yoga pants, staying at home and whatnot. But talk a little bit about that. So now they're discounting everything. What are your thoughts on that discount death loop and any more thoughts about Lululemon, but then also specifically how do we avoid that discount death loop?

Jeremy:

Yeah, so plenty of thoughts on Lululemon, but the good sound bite is actually Ezra Firestone has, I think one of the most intelligent promotion cadences where he's just like, I really don't discount much on the top of funnel and every six, eight weeks I'm running a shallow discount to just get people over the line and clear out some inventory. And so without knowing anybody's business or the intimate inner workings, I would just generally, I would say that that's a pretty good philosophy to have. Obviously tons of nuances and cadences to everybody's business as far as Lululemon, the, it's kind of like a contagion outbreak I think is what I'm concerned by is if this is small scale and it's a small percentage of their inventory specifics products, that classic fashion model where stuff goes out of season and we cut

Brett:

Last year's stuff, buying a sweater and it's June and it, it's fine. That doesn't hurt the brand. You're just, you're getting rid of stuff.

Jeremy:

Right? Exactly. Versus hey, we just launched a bunch of new stuff, we're putting a bunch out, end of stuff's only six months old and we still think we have too much. The problem is that although I know that everybody loves to think that you're going to promote a sale and a ton of new customers are going to come in and buy, at least in my experience, it's your loyal customers and the people who are going to come back and buy anyway who just run through it and take as much inventory as possible, which is great for that short term cash injection. The problem is that if you promote it too heavily to them, you're removing your buyers in three to six to 12 months. And so yes, it solves your short term problem and survival. You can only play in the game if you survive.

It's like, I want to be very practical here, but then when you're like, oh, we produce all this inventory and we're trying to hit our sales numbers for q2, Q3 leading up into holiday, yeah, you're probably not, you're probably going to have a lot softer sales then. And you're back to the same problem where we've produced too much, we don't have enough new customers to offload all of this inventory and we've got to go back to the same customers and it just compounds over and over and over again versus, I know nobody really likes to do this, but the strategy we've run at a couple brands is you move it in a retailer that's one of those offloading retailers, and I know that sounds bad and we need better branding for it. We should call 'em something better than liquidation partners, but move it in a channel where it is maybe a net new introduction. I personally, when I was in college and had that machining, I shot to TJ Max and we're introduced to products, it's super cheap prices and five, 10 years later I ended up buying them. But it was a way to raise it's cash out, get the cash back in your business.

Brett:

And that's only cheapen the brand. We all expect to go to Marshalls or T or TJ Max or Ross, whatever, and there's just a little one off things here and there and it doesn't hurt the brand. We're knowing we're getting it at a discount for a particular reason. And yet maybe you do attract a net new customer, which is kind of interesting. And they kind of key in on the point you're just making. It doesn't take very many of those cycles of discounting deeply and hitting your existing customers for them to be fully trained to just wait for the discount like couple cycles. And I, why would I ever pay full price for your goods at that point? And so then it's really hard to back to back away from that drug of discounting

Jeremy:

Because that tough piece, what we were talking about earlier, cash in cash out, now you're having last cash in for the same cash out from your inventory, you're a advised and it just becomes a gnarly cycle where it's very hard to get out of once you're in that kind of vicious cycle downward.

Brett:

Cool. Makes sense. Totally makes sense. Well, who else are you following? Who are some of the brands that you feel like are just crushing? And I know you may not have insights into their cash conversion cycle or how they're managing inventory, but from what you can see, what D two C brands are just crushing it right now?

Jeremy:

So from the brands that they've publicly disclosed or there's some information there, I think the first one always comes to mind is Liquid Death. We had a great time with them at Retain last Q4 last year, and it's just such an interesting brand, but they really have taken off, wait a minute, were they at Retain? Oh yeah, they spoke the day that you weren't there. They spoke the next day.

Brett:

Oh my gosh. Gosh. Yeah. So I spoke so LA Event last year. I had a blast. I loved it. I had no idea they were there. I mean, I couldn't have shifted my schedule, I couldn't have made it, but I'm so, so bummed now that I missed those guys.

Jeremy:

Yeah, I'll send you the recording of who meets speech, their SAP at retail. But I think what they've done really, really well is, and I, the reason I like them is I think it's a good representation of the opportunity here of if you think we're in no session, if you think that tough times are coming, it makes business so much more difficult. But the winners not only win then they dominate the next decade. Yes, multi-decade of their category industry, the market in general. And I think that they're already in that mode and they're just doubling, tripling down and it doesn't seem like they're slowing down at all. So if anyone doesn't know what Liquid Death is, I don't just don't know if you're under a rocker or something, but they basically sell

Brett:

Jeremy really quickly cause I don't want to lose this thought. And I think it's important right here because we started a little doomsday with a couple things. But here, here's the beauty of this conversation of what we're doing. If you make the right decisions now and get your inventory in a good spot and you get your marketing dialed in which Liquid Death does and we're going to talk about in a second, then you could be successful now. And then if things do go south, you are primed to win. And I've read a more millionaires are created during a recession than any other time. And even during the Great Depression, tons of millionaires were created. So there's opportunity there, you just got to be ready for it. So I love that mindset. We're making the right decisions now to give us the best chance of success now and for whatever may be ahead back to Liquid Death for those that are living under a rock, what is it?

Jeremy:

Yeah, and just to pile onto that point, cause I think it's really important of it also, if you just survive to be the number two, three player in your space, that's also a great business to run. You don't have to be number one if you're in the right market, it could be millions, tens, hundreds of millions, billions of dollars even in the number 2, 3, 4 slot. There will be 17 providers in a space anymore. But survival also is a big win here. But yes, yes. Liquid death, the super tltr is super fresh water in a metal can and everything is branded as super punk metal, hardcore, I don't call it aggressive advertising, but it's insane where one of their stunts was like you could sign your soul away to the company or they infused Tony Hawk's blood into skateboards and all their ads are just these really crazy far out there.

But fun. Cool. Well I guess it's very subjective. People either hate them, they're playing polarizing very well, hate it, but they're just absolutely blown up. They launched on D two C very quickly moved into Amazon now they have a massive hotel wholesale expansion, they're in Whole Foods, they're in a ton of different providers all over the country. And I think while everybody else that I know who's been expanding has been having this channel debate and it's really tough time of do I spend here, do I spend there? How do I just budget my marketing spend? And this is their speech from the conference last year is we just invest in stuff that we like and if it makes us laugh and we think it's going to be a good time, we just put a bunch of money behind it. And obviously they have all the data in the back end on society, know what to invest in.

But they're thinking about it of just how do we grow the overall sales? How do we grow the overall brand? And it's just very funny of Omnichannel was the huge thing a decade ago, then it became all of you to see the past five years. Now everybody's back to omnichannel. And it's like we get so wrapped up in all of our and so guilty of this, all the specifics, your job is just to get your customers to buy your product in any channel possible from anywhere possible and not from your competitor. And I think they're one of the best examples of they hit most of those typical growth paths of Scaled Up, got into Amazon, really, really scaled up. And then their CPG brand so aggressively went into Burry in wholesale. So I think they're a big one. I think Dr. Qua is another big one. You

Brett:

Actually came on Liquid Death really, really quickly. Newer to Liquid Death. I did not know their story until, I don't know less than a year ago for sure. But one of the things, I can't remember if you wrote about this or if I read about it somewhere else, but they did a taste test, but it was a

Jeremy:

A

Brett:

Taser taste test. And I love this angle. They took some really negative reviews online. So some people were saying it was literally the worst water they'd ever tasted. Way overpriced. People were saying it was literally the worst. And so if I remember right, liquid Death challenged these folks to a taser taste test where they gave liquid death plus other brands and if they could pick out Liquid Death as the worst in that bunch, then they would win something. But if they didn't

Jeremy:

A thousand dollars,

Brett:

Yeah, a thousand bucks, they would get tasered, right or tased and they got tad, which was pretty awesome and little risky, I think most marketing departments and most legal departments with Brown on a taser taste test but fits their brand. And I love that they did that,

Jeremy:

A ski mountain in a ski resort in Utah did that also. And it was a incredibly successful iPhone, but they took a one star review, put it on top of their mountain, all the things, if you have a great product, it's actually playing into the negative can work on a very tactical level.

Brett:

Yes, because it shows that you're confident, it shows that you're really confident in your brand and you can't do that if you've got a mediocre brand obviously. But yeah, that's a super fun, super fun tactic. So liquid death, sorry, let's talk squash. And I love Dr. Squash. I'm connected through their creative agency, a little bit raindrop, but yeah, love those guys.

Jeremy:

Yeah, another brand doing a lot of creative work. So for anybody who isn't familiar, it's all natural men's products of soaps, deodorants, bunch of other personal care products like that same model launch on ddc, got into marketplaces and now they're really, really ramping and scaling through Walmart and all those other channels. And I think what they've done really brilliantly is they just really leverage tech well and they're not leveraging tech just to have everything in their tech stack. And I've been guilty of that, of playing with all the new tools but really dialing in their data so that I was talking with their head of E-com there we're like they are testing and constantly know when to send people to their e-com store versus a partner or versus another website. And really dialing in that customer buying behavior because I think that that's, especially if you come out of that DDC mindset or just the Amazon mindset when Amazon's a little bit different cause people will buy from Amazon no matter what.

But definitely a mistake I made when I was managing Amazon and DTC that were both seven eight figure channels was certain people are only going to buy from those other retailers or those other places no matter what. It's such a waste of time to get Amazon buyers to buy from your site or Amazon buyers to buy from wherever new store you're launching it in. And then the same respect they're going to just go back and buy. And I think really just knowing the consumer behavior by channel and then doubling down and using their marketing, using their site to amplify those things that isn't to say aren't driving a ton of revenue through their site and it's not a meaningful sales channel for them. But really leveraging all of those points and that is a little bit of an eight nine figure play that is, it's more expensive.

You need to have a team to facilitate all of that. But I think you can do it at the earlier stages also of your one channel. It just really goes back to so intimately knowing how your customers buy from you that when to pick which way to go. To me, I mean their numbers have just exploded. Disclaimer, they are a Gorgias customer, but the way they're just publicly seeing that company take off, I think that they're another one where they're going to go after the p and g Unilever in their space. They're really going to meaningfully scale up. And they've also running theme here have navigated the one channel. Yeah, add in retail wholesale. And you really need to balance that because caps are going to get too expensive once you hit those 30, 40, 50 million a year thresholds where you just need to balance these things out and you're probably starting to tap into audiences that are so big that you're selling to name your retailer here. Product like buyers and customers.

Brett:

A couple things that kind of key in on there. Love the Dr Swatch brand. A little bit connected there. Spoke at a YouTube ballet event in early 2020, so pre pandemic and some of the Doctor Squa guys attended that. Do you know the guys at Raindrop Creative? Jacque Spitzer?

Jeremy:

Yeah. So

Brett:

They created the original Doctor Qua add that went viral and it was YouTube out of the year and stuff. Funny now Jacque is a friend, we're connected but they, they'd taken a YouTube course I'd taught back in 2017

Jeremy:

18. That's so cool. That's so cool. Everything is so connected

Brett:

Connection, but love what Squa is doing and yeah, it is interesting how omnichannel is all the rage again when it wasn't for a while. But I think it ultimately just comes down to what you said, we're trying to remove friction and we just want customers to buy the way they want to buy. And we typically buy in patterns. Those that buy only on Amazon usually only buy on Amazon those. And it seems like with our family, we've got stuff we buy on Amazon and stuff we buy in store and then you rarely break out of that. And so yeah, I think just understanding how do our customers want to buy this and we've got to give them that option and it's becoming more and more clear to me. And I'm sure it is to you, pure D TOC is likely not the playbook that that's not the playbook typically for the success that most people want. You need to think about marketplace, you need to think about in-store distribution really. I don't think that we have any of our largest clients, those that are doing 50, a couple hundred million that are just pure d TOC at this point.

Jeremy:

And even all the companies that we idolized back in the day that this whole model was built off of all have retail almost totally abers, Warby, Casper, Yeti, Casper, well Casper's just over its own fucking now. But that is

Brett:

A good a point. That is a good point.

Jeremy:

Well all of them, they went to DC then they went retail. Most of 'em are selling on Amazon. Most of them are trying to either are in or are working on wholesale, they're all in the model where it's just like, okay, we just need to go back to selling a product and focusing on that. And DDC is a avenue and a channel. And so I do think kind of tying it back to what we started with, wholesale adds a level of complication. Cause you do remove that piece, you got to buy longer inventory times, you got to ship it to them and they've got us all through then they pay you back and all those components. But then just I think to me just double triple down on the same principles if you know have longer times really get as much data as quickly as possible, really dive in, really start to go a little bit looser.

I know especially those retailers, the fees and things of stockouts and not fulfilling their inventory is a little bit tougher to handle. So you always have to keep that in mind when you make those decisions. But you also just have to be mindful of maybe we shouldn't be selling in 25 retail partners, maybe we should be selling in 10 or 20 or those other numbers. And I think now it's just a great time to shake things up, what actually rattles and falls off the trees versus what stays strong and you can really meaningfully streamline your business. I know that probably feels painful after two years to streamline your business, but just I really keep moving and keep doubling down because the players that survive this are going to be able to pick up a lot of amazing opportunities between talent and share, potentially acquire other brands, launch new products, so many different components once all of this passes that yeah, it's probably going to be a rough 1224, who knows how long runs. But once you're on the other side of that, as soon as the fed drops rates, debt will become cheaper again. And then we're just back to growth mode. And so it's really just about making it through this period so that we can get back to the side where we can just really aggressively get after it.

Brett:

Love it man. Love it. So aside from really getting control of your inventory and doubling and tripling down on things that are working, and I do love the idea of yeah, you want to go but just focus on what the things that are moving the needle and that are really working and kind of drop some of the other things. So focus, even though you're diversifying, you're still focusing, what other practical advice should you give? What should DDC brands be doing going forward?

Jeremy:

Yeah, so someone who on the marketing side will love this one is stop worrying about your aimer acquisition costs. Stop ring's not the right word. Stop having that be your North Star. Look at MER and just what is from a financial, you are a cfo, how much do we spend on marketing advertising costs, how much do we sell period. And then just have an understanding of what your margins are for wherever you sell. So you can have your numbers match up, your marketing spend as a percentage of sales needs to make sense from a p and l perspective, but everybody's doing these super complicated things of DTC and channel modeling and Amazon. And then how do we impact that against this, that and the other. From every time I've dug into this and from every time we've analyzed the data, the more you can just blow out one marketing channel, the more every other marketing channel does well and sells more.

And it's nothing new. It's called the halo effect. It's been around probably for a hundred years, but really go back to that and I know it's really nice to have those immediate feedback loops and that kind of dopamine hit when you know that a channel crushes and it's like that immediate feel, but you are sacrificing something by not looking at the bigger picture. So that's definitely one thing. And I think the part two of that of why it's so important is because of all of this big economic picture and if it plays out the way that I think it advertisers will have to pull out their budget either voluntarily or involuntarily. And while that's a tough thing to realize and you never want to be that advertiser for everybody else who's there, CPMs go down, it becomes less competitive. Customers buy Yes, yes. And it's easier.

It's easier from a cost perspective and from an advert number of touches advertising perspective to get people to buy. And that's, to me, that's that magic unlock where you dominate because then you can spend more money. And it goes back to the kind of three or four years ago when we weren't going crazy trying to figure out how to get cack into a reasonable place. I'm not saying we'll ever go back to that specifically, that was a very magical moment in time, but I think it will get better and things will loosen up and then you can really more aggressively put your foot on the gas even if everything else isn't really great, just because that will be less competitive. And so I think that's why having that just ready to go moment, ready to go prep is so important because if you're looking at everything holistically and you see that crack and that opening, take it and it's going to be great and it's a tough thing and there's no way anybody's going to be right all of the time. But if you can and you're in that top one 10% of brands, you're just going to set yourself up for a special moment in the company's history.

Brett:

And actually I did a podcast with from Triple Whale and we talked about how you know, should stop dispensing over your ROAS and you are not your roaz. I think it was one of the lines that you use, which was pretty great. But obviously got to pay attention to RO as we do. We look at ACO on the Amazon side, we're we're looking at those numbers regularly, but those aren't the real numbers. The real numbers are your financial numbers that that's your real businesses, the financial metrics that are there. And if you can dig into some of the minutia, some of the complexities of your numbers to unlock decisions and understand a little bit more where you lean into and what you lean out of, that's great. But you can overdo it for sure. And I think this is one of those things too that a lot of people do, and I was just thought this analogy the other day.

My son, my oldest is 21 and he's selling solar systems door to door. So he, that's cool. He got a bit of my entrepreneurial bug and he doesn't want to have a normal job and he wants to make unlimited money and stuff, which is totally cool. And he's out there knocking on doors, which is awesome because it's really, really difficult. And I'm like, hey, if you can sell that, you can sell anything. Which is true, but they've got stutters and they've got closers and he actually has a little bit of both. But you can imagine someone that didn't know the business looking at it and saying, we're paying Sutters an awful lot of money, but the closers, closers are the ones bringing all the money in, so let's just pay the closers. And I think that's what we're tempted to do. People be like, let's just run bottom of funnel search and that's it, right?

And obviously you would never look at a direct sales organization and say, stop the Sutters. That's where the leads come from. But it's the same concept with marketing. It's just sometimes a little bit harder to see. You can see who's setting the appointments in a direct sales organization. You can't always see it in a D two C brand, but it's the same concept. You unplug that business dries up and your toast. So understanding how do we make the most of what we have? And maybe that's really strict marketing budgets and we're trying to get the most out of that budget as we can, but knowing that you can't just shift bottom of funnel or things will dry up before long and then wait for those CPMs to go down. Because that was one of the beautiful things about the early part of the pandemic. Viewership went up so people on YouTube skyrocketed on Facebook skyrocket and people pulled out of the auction. So it was like a heyday man for, we had had several brands scaling then with unprecedented CPMs for the time.

Jeremy:

Yeah, exactly. And I think the coolest thing, well honestly the coolest thing pandemic was awful. But I think the interesting lesson from that time period is that was a flash episode of what happened is all those brands that were ready just hit the gas while everybody kind of just like, what's going to happen? What's waiting? We're not sure where our finances are. And I'm sure today and over the past couple years they've been in a significantly better positioned because they were able to really take advantage of that moment.

Brett:

Yeah, totally. Awesome man. Well this has been super fun. I could talk for hours with you about these topics. We are running up against time a little bit though before we sign off though, tell us a little bit about Gorgias, for those that don't know, I mean Gorgias is such an awesome success story. You guys have exploded in recent years, but what is Gorgias and then what do you specifically do at Gorgias?

Jeremy:

Yeah, thank you. Always happy to talk about Gorgias. So Gorgias is the number one help desk in the e-commerce ecosystem really. And we're the number one most solid help desk on Shopify. And so basically any customer support interaction, any customer experience interaction with your customer, we're the technology that connects you. So commenting on social emails, SMS voice, all those different platforms, WhatsApp will have just launched that platform that your CS team uses to not only really drive efficient great moments, but now innovative brands like Dr. Squad, princess Poly, are actually driving revenue through us. So using us to essentially be kind of the closers for an e-commerce company to our analogy earlier where live chat people email in with questions and all those components, how do we answer them? How do we get them the right answer? And then how do we actually turn that potential problem question into a sales opportunity? Yeah, because

Brett:

Really every touchpoint with a customer, every interaction with a customer is an opportunity to grow that relationship and an opportunity to close another sale.

Jeremy:

Yeah, exactly. And maybe it's down the road, maybe you're investing for that retention play. But yeah, and so really having a great time there. I run partner marketing, so all things with all of our partners, like amazing partners like you and omg, we're doing events, we're doing, we're working with a lot of ambassadors and affiliates in this space as well as as all the other technology and agency providers where we're just looking for fun things to do to just help people figure out how to grow their store and navigate all the craziness that has gone on. And I'm sure we'll continue to go on over the next couple of years,

Brett:

No doubt. But you guys do an amazing job. One you put on great events, we've done some events together and just a lot of smart people at Gorgias Man, a lot of brilliant, brilliant people at Gorgias, most of our biggest, fastest growing clients are using Gorgias. And so we give it the full OMG stamp of approval for what that's worth. So yeah, man. Hey, I strongly recommend people follow you on the socials. Where are you most active? I see you on LinkedIn, but where are people or where should people follow you if they want more Jeremy Horowitz in their life?

Jeremy:

Yeah, so on LinkedIn I try to post one helpful thing every day. So Jeremy Horowitz, H o r o W I t Z, and then I've got everything else that I'm working on linked, like linked from there. So yeah, that would be the easiest place to find me.

Brett:

Sweet. That's awesome, man. All right, good stuff. Well, hey, hopefully people are prepared. They're, they're going to be mindful of what can happen, but they're also not fearful but inspired, right? Because that would be the messenger. Don't be afraid. Yes, be aware and be prepared and then you can crush it no matter what. No matter what happens. So any other asks, any other call outs, any other resources, anything else you want to mention before we sign off?

Jeremy:

Everybody have an amazing 2023. If there's anything can help with, let me know.

Brett:

Awesome. Thanks buddy. Appreciate the time.

Jeremy:

Thanks. Have a good,

Brett:

Awesome. And as always, thank you for tuning in. I would love to hear from you, what would you like to hear more of on the show, guest ideas if you have them. I'm open to that as well. And if you haven't done it, I would love that review on iTunes, helps other people find a show. And with that, until next time, thank you for listening.

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