Few eComm and wholesale businesses reach the heights that VHC Brands has reached under the leadership of Ken Kline. You’ve maybe seen their home decor products in big retailers like Home Depot, Bed Bath and Beyond or online at Wayfair, Amazon and many more.
Also, few eComm businesses have faced the setbacks that Ken and team have faced. From a fire that completely destroyed their inventory in the mid 2000s to COVID wrecking their in-store retail plans in 2020 - they’ve faced some crazy times and come out stronger.
Here’s a look at what we cover:
- Why over communicating is the secret to vendor, investor and employee relationships.
- How they overcame a warehouse fire that likely would have destroyed most businesses (Plus the story of Ken’s Winston Churchill painting that miraculously survived the fire).
- How to relay your road map to your team, make adjustments and celebrate along the way (even when things are bleak).
- How to take initiative to help your retail partners in selling more of your stuff.
- How to inspire and empower your team when challenging times hit.
Mentioned in this interview:
Extreme Ownership by Jocko Willink and Leif Babin
Ken Kline - Chief Dreamer, Founding Co-Owner and CEO at VHC Brands
Episode Transcript
Brett:
Well, hello and welcome to another edition of the E-Commerce Evolution podcast. I'm your host, Brett Curry, CEO of OMG Commerce. I am super excited about today's episode and my guest today. I don't know about you, but I learn best from stories. I like to hear how people did things, why they did things. I love biographies. I love biopics, I think that's the word. Biopics, whatever. I love movies that are about people who have done amazing things. Today, you're going to get the inside scoop from a very successful e-commerce entrepreneur, entrepreneur in general.
Brett:
I'm delighted to welcome and introduce my guest today, Mr. Ken Kline. I love this title, Ken is the Chief Dreamer. He's also a founding co-owner of VHC Brands. Full disclosure, he is a client of OMG Commerce. We get to work together, which is fun, and that allows us to see the inner workings and to chat with him on a regular basis. Really, he and his parents started this company in the early to mid-90s and it has exploded. You're going to get to hear some of that success. A couple of really interesting things about Ken that I want to share before we dive in and before I let him actually contribute here too is, one, he did graduate from Pepperdine University which is in Malibu, California, one of my favorite spots to visit. I love Southern California. I'm a wannabe surfer, so Malibu is a great spot.
Brett:
He was an English major. So, we found that Ken's style of communication is very creative, and interesting, and fun. Maybe the most fun client to exchange emails with because it's like reading beautiful prose when you read Ken's emails. He is also a brilliant chef, and has taught me a thing or two about fine wine and about good quality food and plating, and things like that. So with that intro, Ken, man welcome to the show and thanks for taking the time.
Ken:
Well, thank you. That was quite an intro, Brett. Are we done now? That was awesome?
Brett:
Yeah
Ken:
I love it.
Brett:
..inspired.
Ken:
I feel great. Thanks.
Brett:
That's beautiful. In all seriousness, you're a creative guy and I think that plays into your ability to run an awesome company. Just really quickly, I think this will give people the flavor, and no real pun intended, although I guess so, you like to cook. So, talk to me quickly about what you like to cook, because I think is fascinating. You taught me this. We had dinner at your house not long ago, and you taught me about plating. Plating the food for your guests. What is that, and why is that important?
Ken:
It's a great question, thank you. I do cook to relax, and I do cook because in the back of my mind I'm thinking on CEO things or entrepreneurial things, but I'm not thinking them on the front plate. I'm thinking them on the back plate. It's like people that mow the lawn or go for walks, which I go for long walks also, it's just a way for me to kind of unwind and to exercise a completely different part of my brain, but I also have a passion for it so I just really enjoy it. It seriously allows me to turn off that part of my head that wants to think about e-commerce or think about logistics, or think about management or HR. It just totally allows me to switch gears.
Brett:
Probably some of your best ideas come to the surface when you're cooking, or at least gives you the release for those good ideas to come later.
Ken:
Yeah, I think that's true. I think it gives me, I can only speak for myself, it gives me a buffer where I've rested that part of my brain and things bubble up and I feel refreshed. Which, my wife would say, "I feel like you just worked a lot." I say, "No, I feel completely energized," which is kind of cool. I can stand in the kitchen eight to 10 hours at a time and not even realize it.
Brett:
Wow.
Ken:
Which that's kind of ridiculous, but I do that.
Brett:
Yeah, but the end result of that is a magnificent thing. Talk to us about this idea of plating and why you think it's so important. I think there's a couple of business lessons, and also it's just a fun way to start too.
Ken:
Yeah. Yeah. I'm really big on the presentation. I think that the presentation... First of all, people start with saying "Wow, this looks really good." When they say that, you've already opened them up for a really engaging experience. The idea there is to say, "Look, it's visually very appealing." For most normal people, that ends up being a function of the overall enjoyment. It's not something to your point that people think about. They didn't necessarily articulate that on their agenda of a great meal.
Ken:
If you go to any great restaurant and you watch any vlogs on cooking or whatever, any great chef, and I'm not supposing that I am, but any great chef is going to present the product extremely well. That's part of the review. I think of it as I am having people over for dinner. They may be close friends. They may be business associates. They may be family. But I'm going to treat them the same in terms of the experience that way. I like to do that for people. I like to see the expressions on their face. I like to see how they react. I like the questions that they ask.
Ken:
I really enjoy picking fresh herbs and placing them around the plate, or dusting it with a little bit of something maybe that's not in the dish but kind of compliments it really well. The plating part is... I actually, for example, you can take something like a risotto, but instead of just plopping it there where it looks like kind of a puck of goo or whatever, if you take a cup that holds a cup of water or a cup of flour, I tend to use those kinds of instruments quite a bit as well as melon ballers, the ice cream scoops.
Ken:
I use all kinds of things that give me nice shapes. So, just take the example of the risotto. You have a risotto that's relatively sticky, and then I spray the inside of the cup with olive oil spray and then I put the risotto in there, and then I put the plate on top of it and then turn it... It's upside down and then I turn it right side up, so the risotto would be like, for example, in the middle, but it would have a very nice shape. Then very simply, you just put a sprig of rosemary or a sprig or parsley, or I chop up some fresh chives or whatever.
Ken:
You've already elevated it. You haven't really done anything differently. I think the fun part, Brett, the consistent thing would be I will put something like that in the middle, not what we call the entrée/main course which is the meat in Western... In Western cooking,..
Brett:
Yeah.
Ken:
I tend to come at that a little bit differently, and it's really more about the artistry of it and the presentation. It's just fun. It's just something I've done over the past 25 years plus, really the past 20 years. That's just how I do it for that effect. Like I said, it's just a lot of fun. It's fun to me.
Brett:
I love it. What I think it does, and I think the lesson that the tie in this has... Well one, I think you're probably making people hungry so people are hitting pause and going to their favorite restaurant or whatever, or turning on The Cooking Channel or something. Or, this is like The Cooking Channel right this second. I think what's really applicable to e-commerce and the business is you care about the details and you understand that presentation, both the look of the food, but also the way it's delivered to the guests in the way they're going to consume it, all plays a big part in their enjoyment and their satisfaction.
Brett:
The same is true for e-commerce businesses, right? Packaging, the landing page experience, the checkout experience. All these little things that we may think of just being functional, utilitarian, that leads to the experience. If you put a little care, a little attention into it, you can make that a "wow" experience as well, which makes... I think you could argue it makes the food taste better. In this case, maybe it makes the experience up front will make someone enjoy the product better once they actually get it and things like that.
Brett:
It was fascinating to watch you in action on that. I appreciate you letting us take that little detour. Let's do this, tell people what VHC Brands is, what kind of products you offer. Tell us kind of the quick origin story of the business.
Ken:
Sure. We're an import distribution company for home textiles. We design all of our own product. It's all our own private label: VHC Brands, and then some sub-brands that we have depending on the look and lifestyle of the product. It's all home textiles, so think in terms of bedding, pillows, Christmas décor, Trim-A-Home, a lot of window treatment, a lot of rugs. It's all tactile, and it's all fabric, and it's all fiber or fabric. That's the business we've been in for 25 years. We started in 1995, as you said, so our 25th anniversary was this past July 9th.
Brett:
Congrats.
Ken:
Yeah, thank you. It's a family business. I founded it with my parents proverbially on their kitchen table. My dad retired very young from a Fortune 500 job that he had had his entire career at one company. He started low and ended very high, and then retired kind of young. He was pretty bored, so they had this idea for a business and they didn't want to grow it, and they didn't know what they wanted to do. None of us knew anything about textiles, and certainly nothing about importing. None of us had actually run a business. My dad worked at a large company, and I was out of college.
Ken:
We put our heads together and I said, "Lets kind of do this business," and they supported me wanting to kind of start a business. That's kind of how it started. We did that, and we started buying liquidations and cancellations from large textile importers that were getting left hanging by mass retailers. So, like JC Penny or another mass retailer would order several containers of a product and then cancel the last two. We developed a business model around soaking those up and then reselling those to smaller retailers as a kind of a go-between.
Ken:
It was an interesting model, kind of a strange model, this arbitrage kind of model. It was really strange. It was scalable up to a point, but then we found that we couldn't continue to scale it because the unpredictability of the supply chain.
Brett:
Yeah, yeah and inventory is so unpredictable in that arbitrage environment, right?
Ken:
Yeah. If it's a good year, everyone had a great Christmas, there's not that much inventory to buy that got canceled or whatever. That was the other problem. Then we switched over to designing product with importers, mostly China, then we switched over to just going to China and doing it ourselves with the factories. Then we established an office in China. Along the way, we also established an office in India, which now is the office we have. We don't have the China office anymore.
Ken:
So, we morphed over from being a liquidator and re-marketer to designing our own product, to working as a direct importer, and then we shift kind of upscale. There's a whole ecosystem in India for home textiles on the level of say a Pottery Barn or a Ralph Lauren that's kind of our niche, which is very different than say something that's $12.99at TJ Maxx or whatever. It's a very different deal. We kind of evolved the company, or changed the company over time to the current model as far as product and then we switched over from being a wholesaler to selling to small retailers.
Ken:
Then we started adding mass retailers. Then we started adding private label for retailers, which is still a big part of our business. Then we added e-commerce, and now we're switching over to a direct-to-consumer centric model on major marketplaces, along with having major business with some of the two rated closed loop marketplaces like the Wayfairs, and the Overstocks, Houzz.com. These are not opensource marketplaces in the way that Amazon is kind of uploaded in fee. Kind of. That's an over-simplification.
Ken:
You can't just go out to Wayfair and upload your product and hope somebody notices it. We've operated in that sphere for a while in terms of wholesale because it was a natural extension of selling at wholesale to retailers. That's the business that we've been in longer, but then we jumped into the direct-to-consumer, and we had a three year game plan that we accelerated approximately 18/19 months into the current year as opposed to 2021 because of COVID.
Ken:
So it's really been this transformation, but the common thread has been the product and kind of scaling the product, and scaling the ..
Brett:
Yeah, and I love how you took that progression. You did the arbitrage thing to figure how the business, I'm going to simplify a little bit, but you did that to kind of figure out the game and figure out how do we find other retailers to sell this product too. Then you realized, we need something predictable. We want to build a real brand here. And so you started developing your own goods. I love that you are multichannel, and you do that so well. I think this speaks to kind of your superpower, which we'll talk about in a little bit and talk about how you've adjusted to the pandemic and this other crisis that I think people would be really interested to hear about which we'll dive into in a minute.
Brett:
You've been very good at wholesale distribution to retail, and e-commerce, and now marketplaces and a variety of things. I want to key in on something for just a minute, because I think this will be either new to people listening, or people listening are considering doing this. So, your insights will be useful. You were telling me as we were kind of chatting offline, thinking about if you're selling to a big box retailer or any retailer for that matter, thinking how as a vendor, how do we support the retailer? How do we make this successful?
Brett:
Can you share just any tips, any insights on hey, as a wholesaler selling to retailers, how do we make the retailer's life easier and how do we position things for success?
Ken:
I know it'll sound self-serving, but in terms of e-commerce there's a lot of things you can do to manage a retail partnership with a mass retailer at the top of your game for your particular product or industry that frankly a lot of that got blown out of the water with COVID that's just different now. Like doing a great job at trade shows, or really engaging with the buyer team, or trying to present a nice roster of product in an environment that the buyer feels comfortable with. A lot of this is just-
Brett:
Yeah, it is gone now. Yeah.
Ken:
Yeah, it's just gone. I know with regard to selling on an e-commerce curated marketplace, you really have to really focus a lot on content and that is something that a lot of wholesalers, the challenge for them mentally has been, "Hey, I'm not the retailer, so that's not my job. That's your job. My job is to get it to you." We used to sell to Dillard's in physical stores. They had a home department, and we used to sell top of that to Dillard's under their private label. You think of Dillard's as a big mass retailer, and they are still, and so our job was basically design the product and get it physically to their giant distribution center. Then we'd wipe our hands and our job's done. That's how you think of it.
Ken:
In this new environment, that's not where it stops. You're almost completely responsible for the end user experience in terms of content and the level of content, and the amount of content whether it's the video, the imagery, the written content, the SEO-driven content, that's an extension of your product. You don't have a physical product and then somebody else does all that work. Now, you do all that work. A lot of wholesalers, they've had a hard time... I think in COVID, a lot of them are waking up to this that, "Oh my gosh, my content is terrible and I've got to actually write content, and I got to get up to speed on this."
Ken:
The best suppliers for say an Overstock or a Wayfair figured this out years ago, that it's not Wayfair's problem, it's -
Brett:
Wayfair's just the platform, right? Wayfair is just the platform-
Ken:
Right. Right.
Brett:
And the source of traffic, but you have to be in charge of the selling, and the positioning, and the content, and all that.
Ken:
Yeah, and you also have to responsible for refreshing it, because algorithms across the landscape, it doesn't matter if we're selling wholesale to Home Depot or wholesale to Wayfair, or we're selling direct-to-consumer on Amazon, it doesn't matter. All algorithms... In my experience, I'm going to get out of my .. I'll just say this one thing, all these algorithms appear to recognize newness as good. They all recognize that, which is really cool. So, if you're constantly tweaking it, it may not move the dial for that specific skew or product ensemble, but more often than not you'd be surprised that the Wayfair handler, I call our handler, our account manager or whatever, say "Hey, we really appreciate that you guys do that."
Ken:
So, when you guys have something to say, we're going to listen. I think just managing... As much as you can contemplate to manage and take control of, to position yourself the best on the digital shelf, you need to have that accountability in your mind that that's on you. It's not on them as the "mass retailer". Effectively, you're the mass retailer on the mass retailer, if that makes sense.
Brett:
Yeah, I love it. This reminds me of a book that I just absolutely love. It's called Extreme Ownership by a guy named Jocko Willink, and he was the leader of the Special Forces, the Navy SEAL team in Iraq back in 2006/2005. He talks about how really think about that everything depends on you. You're responsible for all of it. Of course, because pulling your team, and you end up maybe not doing all the work, but it's all... You're responsible. Extreme Ownership. I'm not going to leave my success in the hands of the platform, whatever retail buyer or something like that. I'm going to do everything I can to make their job easier, to make my product discoverable, to give the algorithm what it wants, to give my customer what they want. Take extreme ownership in this, because if you don't you're going to get beat by people that are willing to do that.
Ken:
Yes. Yes, 100% agree.
Brett:
Yep, awesome. Let's do a couple of things. I know you kind of laid out your product line and you also talked about just how things are changing rapidly. Now that we're in the midst of COVID, the holiday season is going to be interesting, and who knows what the future holds. I think the current environment and likely what we should expect for the next several years, is just more uncertainty. So, the ability to navigate uncertainty.
Brett:
I want to back up the clock a little bit and let you tell the story that I think will one, be fascinating and inspiring. Then we can also kind of tie this into COVID as well. One thing about your product, and this will seem like an odd segue, but your products are flammable. Do you want to talk about the event that really probably would have crippled and/or ruined lots of other businesses? Talk about that event, and then we'll kind of unpack how you came out of it.
Ken:
Sure. Sure. We've been in business 25 years, which statistically is longer than most businesses.
Brett:
Absolutely.
Ken:
That's a milestone, and that's been a lot of fun. It's not been all fun, but it's been a lot of fun.
Brett:
.. to put it, it's not all fun, but it's a lot of fun. Yeah.
Ken:
It's not all fun. Definitely, you wake up and look in the mirror and it's either successful because of you or it's a disaster because of you. I enjoy that kind of accountability at that level. There's been four major disruptions and/or pivots in the life of the company. I'm not going to deep dive, but the first one... We were founded in 1995. We were really hitting our stride in 2000 when 9/11 happened.
Brett:
Yeah. Yeah.
Ken:
Yeah, and I know that sounds like ancient history because I listen to a lot of podcasts be like, "I've been doing this forever." "How long?" "Half a decade." I'm like, wow, half a decade is like... You've been doing it as long as I've had rescue dog..
Brett:
Exactly, yeah.
Ken:
My dog is not that old. 2000 was like a major disruption where it felt like the world stopped.
Brett:
It did. It did. It did blew up the advertising world and I was selling radio at the time. It changed everything there for a little while.
Ken:
Yeah, so there was that short deep recession because everyone was like... To your point, there's a paradigm shift now. Okay, there's evil in the world that specifically is going to rough us up pretty bad. Okay, we really didn't know that. No. No. Next one was the fourth quarter of 2008 through 2009 was brutal. I mean, the beginning of The Great Recession, I remember the day, and it ended up being the same day that the Federal Reserve said the recession started, November 14th.
Ken:
I was walking around in the warehouse in the distribution center because our offices were attached to that. I go out there for a little mental break and walk around and see how everyone's doing. I came back in, I told my dad, I said, "You know, does this just not feel like fourth quarter to you for some strange reason?" He goes, "Yeah, it feels white." I'm not kidding, between November 14th and April 2009, six months later, the bottom had dropped out of everything. It was like retailers canceling orders, buyers being fired because the revenue had dropped so much. I mean, I had people tell me -
Brett:
It was nuts.
Ken:
It was totally nuts. There was this scary... It was like just dropping. So, addressing that new reality of this is the new level of where we are, our business dropped about 25 or 27% over a six month period, and it just dropped. You're not prepared for that. You're prepared to go the other way as an entrepreneur. You get up every day and you're optimistic, or you wouldn't be in this business.
Brett:
Absolutely.
Ken:
So, there was that. That was that. Then dealing around that and kind of pivoting through that, that changed the wholesale marketplace, how wholesale worked. That changed trade shows. That was the beginning of the consolidation that now I think COVID has really put some stuff on it's last leg. The next big one, obviously the one you want to drill down on is, we had a massive fire in October 2016. Massive on the scale of I had to deal with a State Fire Marshal in Missouri because it was a huge fire. We had a 36,000 square foot building that had two levels, so it was more like 42,000 square feet.
Ken:
We had offices. We had just completed a massive new corporate national show room literally 30 days earlier. We had tons of inventory heading into fourth quarter, and we had a big building. So yes, all of our product is textile, wrapped in plastic. And it's cotton, and has a lot of cotton batting. That destroyed 75% of our inventory, our brand new showroom, all of our corporate offices, everything we had, our server room was melted. The fire started on the afternoon of the 13th right when we closed that day, and it didn't stop burning for 10 days. It's intensity that evening was 1,800 degrees.
Brett:
That's hard to fathom.
Ken:
Yeah.
Brett:
That starts to melt steel and stuff, right?
Ken:
It literally did melt the giant steel building. What was happening was the steel garters and all these racks that you put product on, the forklifts blew up, and all the servers melted. It was a war zone. It looked terrible. But the building literally melted in on itself and there was so much concentrated activity in the product itself that they couldn't put the fire out. They just had to let it burn. They put a bunch of water on it, but there's only so much you can do. It really was this thing that, if I could show you pictures I'll send you some, but it was this thing that where you look at it, you're not just looking at a fire. You're looking at... It looked like a bomb went off.
Brett:
Yeah. Yeah.
Ken:
It was this crazy thing. I was out having sushi and just kind of celebrating the kickoff to a really strong fall wholesale season. We were running and gunning. We were having a fantastic year with Wayfair. That was our first big Christmas season, and fourth quarter with Wayfair we were gearing up for. At the time, we also had Groupon. We had some other things we were doing. So, we were totally gearing up for this massive great fall. The economy was growing, things were good. I was out at sushi with some good friends of mine in the economic development realm, regionally here, and I got a phone call. "Hey Ken, your building's on fire." I thought-
Brett:
What?
Ken:
"What? I have a fire alarm." Well, that didn't mean anything, unfortunately. By the time I got there, the building was blazing. It was already like 1,200 degrees. You're talking about a 42,000 square foot building that you're watching being obliterated in front of you.
Brett:
That would have had to been a totally surreal moment, right? It is business and not your home with people. God forbid, that would be a mess. That'd be unspeakable. But still, this is your business. You poured your heart and soul into this, and you're cranking, and you've gone through other problems. It's just things are happening and now you literally see it in flames. That would have had to have been totally surreal.
Ken:
It was. The interesting thing about it was, we started triaging in the parking lot with the fire blazing behind us actually. Yeah, that was interesting because like I said, I was at dinner with some close friends and the President of the Chamber of Commerce came out and he said, "Ken, we're starting to help right now," while the fire's happening, "We're going to start thinking about what we're going to do." We worked overnight on things to do. So literally Brett, the fire was October 13th, which is a Thursday evening. We had another small warehouse next door which is not connected. It's 25 feet away, so it didn't get burned. The funny thing is, that was all the inventory that's slower, so we put it the farthest away from the shipping place. So, we still had all of our slowest inventory that we didn't-
Brett:
The stuff nobody wants. We know all that, yeah.
Ken:
The stuff that nobody wants is in warehouse number two, and all the stuff that everybody wants is now gone. But literally, I had a meeting the next morning. I pulled the entire staff together at the... My staff, we met at Branson Chamber of Commerce 8:00 AM the next morning. I'd been up all night because the fire never went out. I said, "Guys, we're down but we're not out. We're beat but we're not broke. We're going to get through this."
Ken:
We literally opened a new office in Branson. The next Monday morning, my team for IT, they just really showed their superpowers because they came to the... We completely set up a whole new office and migrated over the weekend. So, we started taking phone calls and started taking orders on the 25% of inventory we still had. It put it e-blast and said, "Hey, we had a massive fire so that's a problem, but we're open for business and taking orders." Then we immediately started retrofitting the small warehouse for shipping and we were up and shipping 10 days later.
Brett:
That's impressive. So impressive.
Ken:
Yeah, and my whole team, really there's two things here Brett as far as lessons, like corporate life lessons. One is, I've got a pretty deep bench of team members that have been with me a long time. That DNA was there. So, team members that really... Like we're not missing a beat. We feel pretty beat up, but we're not missing a beat. Secondly, all of our systems and everything was already in the cloud. We had migrated everything over to the cloud about a year or two earlier.
Ken:
So literally up to the minute, invoicing financials, whatever records we had. We knew what we shipped that day. We knew what had not shipped and what's still sitting on docks that didn't go. There was that whole deal. One of the big takeaway lessons is, look, this is a part of your life but it does not define you. It's a lesson to be learned. It's a massive lesson to be learned, but it doesn't define you. There're things we can do, but immediately, believe me, this was one of the biggest fires of the month nationally. That's how insurance adjusters talk about this.
Ken:
They didn't just send the guy. They sent the guy from Chicago that's head of giant disasters regionally, talking to this guy, talking to the State Fire Marshal. They've got some pretty serious questions for Ken Kline because-
Brett:
Sure. Sure.
Ken:
What's in your building with all of those textiles that burnt down? What's the deal?
Brett:
Questions related to potential fraud or something. Something of that magnitude, you get all kinds of crazy questions I'm sure.
Ken:
Yeah, exactly. It turns out that we had installed video monitoring throughout the building prior to the fire, not just prior, but as part as security and just employee monitoring because we had a little bit of theft in the warehouse with some employees, unfortunately. So, we started monitoring outflow and workflow and things like that. We could pinpoint where the fire came from. What it was, and this is a very sad story, what it was, was we had hired a guy to do a little bit of remodeling for us. We decided to put new shelves in our conference room to merchandise product when buyers came in for small showings.
Ken:
We picked out a stain. So, we were just staining the wood and then we were going to hang it. A modern look. Well, every day he came in and he did the staining, and he cleaned everything up. He was super, super, super tidy. But one day, the last day, he was tired. He wadded up his stain rag and instead of dipping it in water and taking it out, he absentmindedly threw it in the trash. This is on video. Then that flame, two hours later when we closed, just started coming up out of the trash.
Ken:
It was also coincidentally a day that the warehouse crew didn't dispose of all of the trash, which was SOP. The one day that that trash can was filled up with wipes and stuff and hand towels, was the same day that he absentmindedly, and I accidentally threw that in there, and it literally started flaming up. Then from there, it shot across the roof and the whole thing was like poof.
Brett:
A couple of things I want to mention here. One, we're all going to face situations like that, not to that severity and hopefully not massive fires, but we'll have these potentially business-altering events. COVID is one of them, and we'll talk about in a minute. If you are lucky enough to be in business any length of time, you're going to have situations like this that bring you to your knees, maybe even just mentally or whatever, but that you have to work through.
Brett:
On the other side, you could come out stronger and better, or it could destroy you. A couple of things you said that I thought was really powerful, you mentioned that this mentality was already in your DNA, that you were getting the office put together over the weekend, you were making phone calls or taking phone calls that next Monday. You're back in business. I think that is key. You got to build your culture, and it starts with you as the business leader. You got to build that culture to say "We're going to be ready for anything as much as possible. We're not going down easily." You got to have that in your DNA because you can't wait for a crisis for things like that to come out.
Brett:
It's got to be in your DNA pre-crisis in my opinion.
Ken:
Yeah.
Brett:
Yeah. Do you have something you want to say on that?
Ken:
Yeah, I agree. I think that part of the deal is... One of the points I was going to make is what's the business lesson for the listeners and other business owners and entrepreneurs? One of the big rock, rock business lessons out of this is first of all, be present and over-communicate, and over-communicate that there is a plan and we're moving forward. If that's your choice. That was my choice that we're going to overcome this and we're going to move forward. There's a basket of stakeholders that I had to treat as if they were investors, so to speak.
Ken:
Now, I had the insurance company on the hook for almost $10 million. I really cultivated a strong relationship with the head insurance adjuster from day one. Literally from day one, I was walking him through the building and it was still smoking. I was walking him through the financials. I was walking him through the inventory levels. I was walking him through the basic operations from memory. I'm going to treat you as a partner in this, not as an enemy in this. You're my partner in this.
Ken:
Yeah. Same thing with the Fire Marshal, same thing with the investigators. Listen, we're partnering in this discovery. I'm just as curious as you what happened. So, let's get to the bottom of this. Then I really tried to be a better leader for my team of employees and saying, "Listen, first of all, everyone has a job. Your job-" recognize this, which applies to COVID by the way. Hey, one week after COVID hit there was a roster of employees that had a very different job. I said, "You better check what you thought your job was, because your job just changed."
Brett:
"You'll have a job, and that's great to lead with that, but your job is changing."
Ken:
Yeah. Yeah. There's two things. "Everyone in this room, all of us here gathered post-fire in this conference room in the Chamber of Commerce, you all have a job that's full-time, but it's going to be different. Here is what I'm assigning you. Here's what I'm assigning you. Here's what I'm assigning you. And here's what I'm assigning you. Now let's go. This is what we're going to do." My job as CEO just changed because now I have to over-communicate with the insurance company. I have to over-communicate with my bank. I have to over-communicate with my vendors in India.
Ken:
There is a level of... Part of if you're going to accept the mantle of leadership, you have to accept this idea Brett. I'm a big believer that you better be a communicator. You better be a communicator. That's not an option. You better over-communicate. I don't-
Brett:
Over-communicate, 100%.
Ken:
Yeah. That was really the deal, like how do I make this path very smooth for everyone where... I learned this lesson from my dad, because he went from working a low level desk job all the way to reporting to the Chairman of the Board of a publicly traded company and running the... He ran the stockholder meetings, and he ran the Board of Directors meetings, my dad did. He was not on the Board, but he ran them as one of the Chief of Financials.
Ken:
He told me, "No surprises from major stakeholders. Just remember that as a lesson, you should never surprise anyone. That means early distant warnings on problems. If earnings are going to be off, early distant warning." I've had my bank tell me more than one time, I've got a fantastic bank out of Springfield that's a big regional bank, they said, "Ken, you probably communicate more than the average publicly traded company. Nevermind the fact that you're a family-owned business with just a bank. You really try to give us the full story. We never have a question because it's laid out."
Ken:
I think that's just so, and I don't want to over-emphasize that, but it's just so important to do that because what you're doing is you're filling in a lot of gaps. People are afraid to ask. They don't know what to ask. They don't know how to articulate what to ask. So, you're filling in a lot of that vacuum for people, which to me is a kind of a style of leadership. I don't know if that makes sense, but that ties into being an English major and messing around in Pepperdine.
Brett:
It does, but it's so important. I love that early distant warnings, like if you see rumblings then communicate with your stakeholders, then communicate early and often with employees, and over-communicate. That brings trust and it helps people feel like a partner. They feel vested. Then they want to stand with you and fight through the difficult times. It's so important. It does take work, but I think in the end it makes things smoother and easier. So, it's totally worth the investment to over-communicate.
Brett:
Any other, and I know we could talk much longer on the fire. There's probably questions people have about it like, how did you survive? Because the rebuilding process, just having the right mindset and rebuilding your office that's one thing, but getting vendors, retailers to trust you, getting all that to happen. Major uphill battle. Any other takeaways from that? Then I want to transition to COVID here in just a second.
Ken:
Yeah, I think tied to over-communicate or attempt to over-communicate, is focus on where you're going. I think if you can visualize first of all for yourself, and then give that vision to other people that "Hey, the exciting thing about this guys, is we don't have a warehouse, but we're going to have a brand new warehouse in eight months. The exciting thing is this allows us to rethink some of the things we were doing that we... It's an opportunity to redraw the map. It's an opportunity to layout the warehouse more effectively. It's an opportunity to re-up on some new equipment we probably needed."
Ken:
So, if you try to put a positive spin on things and focus on where you're going, and kind of give that "There's a road map. I have a road map. I'm a communicating road map, and I'm asking you to be part of the road map." That's kind of the idea, which is kind of like the over-communicate but a little bit different because there's an end game here. There's a goal in mind. Like Jack Welch said, who's now discredited but he said a lot of great things, "Look, and celebrate along the way. Hey, the red iron's up. Yay. Hey, we're receiving our first inventory post-fire. Yay. Hey, we're opening our new so and so," whatever, "Our new forklift got delivered. Exciting."
Ken:
Those sound like dumb things, but in business, when you work all day with people and you spend 40+ hours a week with them, you got to kind of talk about that kind of stuff.
Brett:
Yep. Yep. You want to celebrate those milestones, and it feels like progress. I think people can endure a lot if they feel like they're making progress. Celebrating those milestones really allows you to do that, which is super powerful. It's so interesting how well this ties into COVID, but I want to talk about you guys were selling in a lot of brick and mortar stores. You kind of alluded to that. You had started selling in some marketplaces like Wayfair and others, but talk about some of the shifts you guys had to make in the early days of COVID.
Ken:
Okay, so it's very similar to the fire. It's very interesting because first of all, for just broad philosophical comparisons, one was a disaster on a very personal level that could have taken our business out. The COVID is similar, but millions of people are kind of experiencing... Millions of businesses experiencing all this unknown and turbulence together. What's interesting is the idea that "Hey, this is a very turbulent fluid environment, and we probably are going to have to pivot and do some things differently. So, let's just be mindful that we're going to have to be open-minded about this, guys."
Ken:
I can tell you what we did post-fire was, we sold to a lot of retailers that couldn't toggle on and off, or just run with it on autopilot like Wayfair, or Overstock, or whoever. So, we leaned heavily into e-commerce post-fire because it was up to us to have the listing correct as opposed to talk to a buyer that "Hey, I don't know if you're stable because you went through a big fire. I don't know if I feel good about a vendor that-" I mean, there was those conversations that we had to say, "Wait a minute, the Wayfairs and the Overstocks, and the Zuillillies are really agnostic as to what inventory we don't have. They just care about the inventory we do have."
Brett:
Exactly. Exactly.
Ken:
We pivoted heavy into wholesale e-commerce. We were leaning into it, but we pivoted very heavily post-fire. The parallel here with COVID is, now we've built up those relationships over the past five years on a wholesale level. We're doing a lot of that, and we're very happy with that channel of business. It's quite large between the Wayfairs, and the Overstocks and all that. But then COVID, we pivoted immediately. Starting in March, I took a bunch of staffers, probably 25% of our staff, and I said, "Look guys, you're going to have a new job starting in April. March was an absolute disaster. Revenue dropped 55%-"
Brett:
Crazy.
Ken:
Oh, it was like a jumbo jet. It was just... I said, "Guys, we're going to completely pivot to our plan for direct-to-consumer. We're going to completely overhaul our eBay and Amazon stores. We're going to upgrade our stores. Plus, I'm assigning 12 staffers full-time to this job now. Your job is now direct-to-consumer retail support: content, images, videos, scrubbing the deck, whatever. This is what we're doing starting now. Starting this week. That's what we're starting to do right now. Heavy pivot, guys. So, forget what you thought you were going to do this month. Forget what you thought you were going to do this quarter. It's a heavy pivot. The ship is pivoting." That was a very similar talk. By the way, the cool thing Brett, the cool thing is how many employees I have that remember that same talk.
Brett:
Yeah. Yeah, and I'm sure they love it. That's something they will remember forever: you giving that talk, and then the way they responded to it. They'll remember that forever.
Ken:
The other thing is kind of cool. It was kind of like a Marvel cinematic moment where we're like, "We've been here before, guys. It sucks that we've been here before. It sucks that there is a giant fire-breathing dragon in front of us, but we're going to win."
Brett:
Yep. Yep, and it just pulls something out of you that just normal everyday activity doesn't. Yeah, you guys have done so well. I think what's interesting, this ties to both The Great Recession back 2008 and '09, '10, and then the fire, and then COVID is, you were starting to lay the groundwork for things. You were looking ahead, visionary, thinking about what's coming in the future. You've been laying some groundwork for things. You also had this DNA built into the company. They will do whatever. "We're never going to quit. Never going to give up," which reminds me of the Winston Churchill story.
Brett:
We'll maybe wrap up with that, that'll be kind of fun. You've got this DNA and you're laying the groundwork. Then when the stuff hits the fan, you're ready. You're ready to do a hard and fast pivot and just go much, much quicker on that groundwork you were already laying. I think there's a lesson there too of be looking ahead and begin planning. You had already transitioned to retail or to e-commerce quite a bit, and I'm sure that made it way easier than to go full speed into e-commerce post-COVID.
Ken:
Yeah, absolutely. No, exactly. That's the thing. I think here's the deal, I think sometimes people, maybe a lower level of business, I know I talk to people that don't have businesses as large as ours and I talk to a lot of CEOs that are kind of mentors to me that have businesses at much greater scale that they have been direct-to-consumer or have been exclusively direct-to-consumer for a much longer time. I know talking to people with smaller businesses, there's a lot of confusion around having a plan and that plan may not go perfectly. That doesn't mean you just sit it out in reality.
Ken:
The point is, you had a plan. You didn't have to adjust. We already had a plan. We just had to pivot and move some of the parts around and the timing, but we had a plan. Here is the deal. This is, I'm going to give you one quick example. My go-to who's on the calls weekly with OMG, Lindsay, for our product development, she's the head of our product development under myself and my wife, Julie. We book ended content management last year onto if we were going to launch a product two years ago, part of the product development cycle is the end of that..
Ken:
Physically, once we go into production, the final phase of your job is to make sure we're drafting the content and getting the imagery , right? So, we just added that to the product development cycle. I told Lindsay, I said, "Lindsay, COVID's going to be bad for at least six months. We're not developing a bunch of new product. We don't need a spring launch based on how things are going. Your entire job is content overhaul now until further notice. And, I'm assigning all these people under you. So, we don't need to worry about launching a bunch of new product in this wacky retail environment, but we need to worry about a complete overhaul of all of our content. So, that's really kind of your job."
Ken:
I took other people and gave them their job that, "Look, your job's adjusting. I don't know if it's three months, six months or nine months, but your job's adjusting. Here's what we're doing." Those are kind of the big takeaways. I think you guys have a big enough organization at OMG where I'm sure you've had things where you said, "Look, I know that we hired you for this, but this is your job now. Or, I'm changing your job."
Brett:
Yeah, absolutely. Re-deploying people and re-deploying assets based on what the marketplace gives you, based on what's needed. Yeah, we kind of did something similar in COVID when a lot of our Amazon clients, Amazon stopped delivering their product or stopped receiving their product into the warehouses. So, Chris Tyler, who you guys work very closely with, he and I were chatting and then he rallied the Amazon team. They're like, "Well, we've never done fulfilled by merchant, but let's coach our clients through that. Let's make calls to a bunch of our network and figure out how to guide our clients through this."
Brett:
So, we started doing things that were outside of our norm to help clients succeed. In some ways, it was kind of a fun time. It was also painful, and I wish we could have avoided it, but in some ways there was also this element of "Wow, I'm proud of the team. I'm proud of what they accomplished."
Ken:
Sure.
Brett:
We're kind of up against the time, although I'd love to chat for another 30 minutes or an hour here, but we're kind of up against it. I mentioned the Winston Churchill quote, "Never give up." I love Winston Churchill. That guy is so inspiring. We could talk at length about him as well. Talk about the Winston Churchill painting, and how that kind of relates to the fire, and we'll kind of wrap up with this.
Ken:
Yeah, and hopefully what I shared with you, I sent you a -
Brett:
Yeah, I'll put the picture in the show notes. So, check it out at OMGCommerce.com under Podcasts, or you can Google Ken Kline, Episode E-Commerce Evolution. You'll find it. I'll put a picture of that in the show notes.
Ken:
Yeah, so the cool thing is, I attended the Ramsey Solutions, which is Dave Ramsey, which has a very successful business where Dave Ramsey is the product and then his product is also expertise and managing personal finances, and trying to be successful. I attended Entrée Leadership, which is a week-long deep dive that... I think one of the last classes was the one where he talked personally was the one I attended, which it was like 2015. So, like a year before the fire.
Ken:
Part of the deal is, when you go through these five day intensive discussions with Dave Ramsey about not only running a successful business, but running a very profitable business. Then he's an extremist. I don't mean that in a bad way. He's a purist, I should say, that not only does he have a massive business at scale with 600+ employees, $200 million, he doesn't have any bank debt. He doesn't use banking for that. The only thing he does with the bank is park all his money. So, he runs it totally on cashflow and it's very inspiring.
Ken:
The Entrée Leadership thing, part of the deal is at the end they have a ceremony. They kind of say, "Hey you guys are part of this graduating class," and then Dave Ramsey personally gave each of us a signed lithograph from that artist that says... It's Winston Churchill, "Never give in."
Brett:
I just found it, so watching the video, you should be able to see it now. I'm sharing it on the screen.
Ken:
Cool. Thanks for putting that up. It's actually framed in a really nice frame, but I did the cam scanner and it cut the frame out and gave you Winston, which is fine. The funny thing is, or the interesting thing Brett, is I was very inspired by this. I have a whole notebook of notes from Dave Ramsey, and all the talks, and the dinners and everything. I took this, and I had it framed in a very nice frame, and I hung it at the front entrance of our office. It's just really interesting Brett, that that was the only wall that didn't get destroyed, and this painting, this lithograph framed had a little bit of smoke damage but it was one of the only things that didn't get destroyed.
Brett:
That's so crazy. So cool. It's so symbolic. It's just really adds to the story. I love Winston Churchill. Never give up. Never give in. It's such a powerful way to live life and your business. As we all try to conquer unchartered territories and either compete with Amazon or partner with Amazon, or once the pandemic is over and we face the next set of challenges, we need that mindset. We need that never give in, never give up attitude. So, I'm really glad to tie that into the story. It's such a great way to end that discussion, and also kind of wrap up the podcast.
Brett:
Ken, for people to check you out more, because I always recommend, "Hey follow good marketers. Pay attention to what other good e-commerce brands are doing," how can people kind of discover VHC Brands, and then how can people connect with you either on social or elsewhere?
Ken:
Yeah, the funny thing is Brett, that's where I'm anti-social. I actually don't participate in any of that.
Brett:
Awesome. I love that.
Ken:
It's KKline@VHCBrands. Because I write 1,000 word emails that probably make everybody roll their eyes because I'm an English major, I like -
Brett:
Your team shares them in the office. "Check this out. This is amazing."
Ken:
Yeah, I like getting and receiving emails, which is really old school at this point. I appreciate that my team is like, "Please be on Teams and just chat." So like, no I want to write a long email and you have to read it. KKline@VHCBrands.com. I don't know of other good ways to reach me. Maybe-
Brett:
Yeah, that's fine. People can reach -
Ken:
Yeah, reach out to OMG and then OMG will find me.
Brett:
Exactly.
Ken:
Maybe that...
Brett:
OMG will... Yeah, we'll track Ken down for you, but you have VHCBrands.com. Also, you can check him out on Amazon doing some great things there as well. Ken, hey this has been a blast. This has been inspiring to me, and educational. I really appreciate you taking the time and opening up for us.
Ken:
Yeah, thank you. I appreciate the hour, Brett. It was really wonderful.
Brett:
Yep, absolutely. Absolutely. As always, you can find all the details in the show notes. Reach out to Ken and give him a thank you for this episode. As always, we'd love to hear your feedback. What would like to hear more of on this podcast? And, if you haven't done it, we would love that review on iTunes. That helps other people discover the show. It makes my day as well. With that, until next time, thank you for listening.
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