Sean Frank is a true legend in the DTC space.
He's the CEO of Ridge, a thriving 9-figure DTC brand. They started by selling wallets and have since successfully launched a premium travel line and rings.
Sean is arguably my favorite DTC follow on Twitter, and he's the co-host of a new podcast called The Operators. He co-hosts with other 9-figure Ecomm CEOs, Jason Panzer (Hexclad), Mike Bertulli (Lomi & Pela Case), and Mike Beckham (Simple Modern).
I wanted to get Sean's take on his expectations for Ecomm in 2024 and what it will take to win. As always, he did not disappoint.
Here's a look at what we discuss:
- Why MER is the magic number for measuring your Ecomm growth.
- How AOV is likely where you need to focus to improve MER. You can only do so much with conversion rates, and ad costs will increase over time.
- He expects 2024 to be a normalized year for growth for eComm.
- What to focus on if you're under $10M in annual sales as a brand.
- What channels can you start to focus on when you're over $10M in annual sales?
- How he thinks about selling more new stuff to new people in new places
- How to take advantage of his advice to "be lucky."
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Chapters:
(00:00) Introduction
(01:18) The Operators Podcast
(06:30) Ridge’s Background
(09:38) What To Expect For DTC Brands In 2024
(16:08) What Does It Take To Win In 2024
(25:13) What Channels Is Sean Most Excited For In 2024
(30:15) How To Grow Profitably
(38:52) Expanding Your Product Line
(43:44) Outro
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Show Notes:
- Sean Frank
- Ridge
- Jason Panzer
- Hexclade Cookware
- Matt Bertulli
- Pela Case
- Lomi
- Mike Beckham
- Simple Modern
- The Operators Podcast
- Ryan McKenzie
- Connor MacDonald
- Dan Kennedy
- Jim Collins
- Moiz Ali
- Native
- Tumi
- Coach
- Temu
- PDD Holdings
- Draft King
- ESPN
- TikTok Shop
- YouTube Shopping
- Nordstrom
- Scheels
- BIC
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Connect With Brett:
- LinkedIn: https://www.linkedin.com/in/thebrettcurry/
- YouTube: https://www.youtube.com/@omgcommerce
- Website: https://www.omgcommerce.com/
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Past guests on eCommerce Evolution include Ezra Firestone, Steve Chou, Drew Sanocki, Jacques Spitzer, Jeremy Horowitz, Ryan Moran, Sean Frank, Andrew Youderian, Ryan McKenzie, Joseph Wilkins, Cody Wittick, Miki Agrawal, Justin Brooke, Nish Samantray, Kurt Elster, John Parkes, Chris Mercer, Rabah Rahil, Bear Handlon, Trevor Crump, Frederick Vallaeys, Preston Rutherford, Anthony Mink, Bill D’Allessandro, and more.
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Other episodes you might enjoy:
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Transcript:
Sean:
LTV doesn't matter if you go out of business. You're thinking about future harvest when you could starve this winter.
Brett:
Well, hello and welcome to another edition of the eCommerce Evolution podcast. I'm your host, Brett Curry, CEO of OMG Commerce. And today I have the man, the myth, the legend, Sean Frank. He's the CEO of Ridge. And listen, if you are in the D2C space, if you pay attention, if you care at all about this industry, then you're probably on Twitter. And if you're on D2C Twitter, then you know who Sean Frank is because this guy just owns it on the D2C Twitter sphere. And so he's one of my favorite follows of all time. Got to know this dude several years ago talking influencer marketing and Ridge was very successful then. And now it's just Upper Stratosphere, which is awesome. And one thing I didn't realize until recently, he's also the co-host of the Operators podcast, and I hear this is just news on the street. He's the most handsome member of that four person podcast, the Operators podcast. So with that, Sean Frank, welcome to the show. How's it going man?
Sean:
It's going good, man. I'm sorry I had a bribe you to say that, but it's very funny
Brett:
And truth be told. So you got the best beard of the bunch for sure. But in all honesty, that's not a bad looking group of dudes, right? So break down for folks that haven't heard of the Operators podcast, who are your other co-hosts?
Sean:
Yeah, nobody worth mentioning. No, I'm just joking.
Brett:
It's Sean Frank and some kind of wannabes that are trying to be like Sean Frank riding on his coattails.
Sean:
Yeah, so you have Jason from Hexclade, and if you dunno, Hexclade they are probably the most premier cooking company out there right now.
Brett:
So Good
Sean:
Ridge is doing good. Hexclade is doing three or four times as good as Ridge. Those guys are just fucking crushing it. I mean, they have eight figure days, they're just on top of the world. It's insanity. So there's Hexclade, there's Matt, he has two companies. So he has Pela Case, which is Tech Accessories, and he has Lomi, which is like, I don't know how you would describe it, but I call it like a new age composter. It is a dirt making machine, basically you buy and put it in your house. So he's on the Green Tech front. And then you have Mike from Simple Modern, who is by unit sold the most popular water bottle on Earth. So he's crushing it. So it's just all of us chopping it
Brett:
Up. And I love each of those brands and Simple Modern, so cool. Actually, they're going to be on the podcast, spoiler alert here in a few weeks, but really a brand that launched on Amazon, but it's a real brand. It's not just a product that people are hawking on Amazon. It's like a real brand and they're doing it. And yeah, Hexclade, what a story. And then, yeah, I got to meet him when Pela was young in its infancy and it's doing so well. And then of course our mutual friend, I hate to give him any airtime, but Ryan McKenzie told me about the appliance business that TUI has and sounds like that's doing some good work and it's really taken off. So yeah.
Sean:
Yeah, it's a good mix because you have a retail focused brand, like Simple Modern, very big. And Target, Walmart, whatever else, you have a subscription business, which is Matt and Lomi, right? So it's Hard Tech with subscription tied to it. You have a rocket ship in Hex Cloud and then you have Ridge, which is the greatest e-commerce brand of all time. So good combo guys. Dude,
Brett:
I love it. I love it. It's hard to argue that for sure. And so yeah, check it out. And really before we dive in, there's so many things I want to pick your brain on related to e-comm and the growth that Ridge has experienced. But you guys decide to do this podcast, and by the way, it's crushing. I'm watching your viewership on YouTube and other places. People are loving the pod, but why do it?
Sean:
Well, I used to do a newsletter and the newsletter would just be like me on Sundays just typing whatever thoughts, and it took about an hour and I'm like, oh, well the podcasts will take an hour. So I just stopped doing the newsletter, started doing the podcast, and it is more three dimensional, not just me sitting alone with whatever I want to talk about. I get feedback, I got to learn from people who are smarter than me. And being a CEO is like, I mean, it's obviously a prestigious jobs. Lots of people want it. It's incredibly lonely. It
Brett:
Is for sure.
Sean:
You have problems that nobody cares or wants to hear about,
Brett:
Right? Can't tell your family. Probably can't tell a lot of your closer friends. They wouldn't understand and they don't care. I mean they care, but not really. Yeah,
Sean:
I'm from a blue collar background, same. My best friend's from high school, one works in a warehouse, one does, if there's disasters, he cleans up. If there's a suicide, he'll clean up the houses or whatever, just like the gnarliest job ever. And then one of 'em installs garage doors. So they have real problems, wife, kids working hard. And I have to be like, well, my ROAS is down this week and I'm pretty upset
Brett:
About it. What's wrong with you?
Sean:
They're like, shut the fuck up, get some real problems. So it's just good to have other people who I can bounce off issues, even if things, I mean, this is what everyone talks about, how great their brand's doing all the time. Anybody ever raising money tells you how they're changing the world and everything's going great, dude. The reality in every brand is I got two things that are going good and I got 50 things that are breaking any point. So it's hundred,
Brett:
It
Sean:
Have people to synthesize with
Brett:
Skeletons in everybody's closets. There are issues in every business. And if you say they're not, then they're probably bigger issues than in other businesses. Yeah, man, really great insight there. So for those that don't know Ridge, give us a 62nd version of what is Ridge and what's, what's your background? You got kind of this unique trajectory to get in becoming the CEO of Ridge?
Sean:
Yeah, so we are a modern men's accessories brand. We're trying just to be a modern accessories brand, drop the men's part of it. But we mostly sell, we have a travel line that's doing really well. We have a men's wedding band and engagement line that's doing really well. And think about the products that a Tomi would make or a coach would make. And we're making the updated modern premium version of those. So the men's accessories business is probably like a 25 billion a year tam. The wallet business is a 10 billion a year tam. We have over 1% of the global wallet market and we're growing really fast. So our biggest competitors are whatever your parents got you when you were 18, whatever wallet from Walmart or LVMH. We're just trying to be the new age accessories brand. How did I get here? I had an ad agency. One of my clients, the only client that was actually crushing it was a company called Ridge Father-son, best friend started it. They didn't want to run it anymore, they just wanted to do product. They didn't want to do marketing or customer service or ops or logistics or whatever. So we merged, me and my CMO Connor took a big chunk of the business and we've been running it ever since. And we started working together in 2016 and it's 2024. So a big part of the company history. It's been us working together,
Brett:
It's so awesome. And Connor's the man love talking marketing with that dude as well. So yeah, the wallet is primo. You guys, I dunno if you invented the category, but you certainly dominate the category if you don't have the George Costanza fat wallet, right? The reference from the nineties or a money clip or something else. You need a rich, right? So the RFID wallet basically indestructible. Did you guys invent the category or just the ones that dominated it?
Sean:
So we have a lot of patents and technology around our particular wallet. And I would say we definitely invented our style of wallet, but wallets have been trending minimalists for 10 years or whatever billfolds that the old classic dad wallet has been losing market shares like card holders. We've made an updated card holder that can fit as many cards as you need, as much cash as you need. So it's the expandability of the storage capacity of a billfold, but in the profile of a card holder. And I'll tell you, we invented it, but people have been buying wallet for a long time. It's a big stale category. Yeah,
Brett:
Yeah. Hats off to you guys for so much success there. I want to get into travel and rings in a little bit. We'll circle back to that here as we go, but want to get your take as we're still in the early stages of 2024. What are your expectations for this year and what do you think it's going to take to win for a D two C brand in 2024?
Sean:
Okay, so first my expectations, I think it's going to be the best year for e-comm since 2019. Nice. So everyone had at least one good year in 20 20, 20 21 or 2022, depending on your category, depending on your supply chain. You had at least one really good year, but then you had one okay year and one really bad year. So it just depends on your business and your profile. And if you zoom out and look at that, the collection of three or four years as a cohort, it's a pretty blended flat line. But when you zoom in, you see these spikes, you see these troughs. So this is going to be the first year of 2019 levels of normal like normalcy. And the number I always point to is E-commerce penetration. So e-commerce penetration since 2010 has been a straight steady line up until 2020 when it spikes. But then there's a pullback because people are traveling and shopping in person or whatever. And at the end of 2022, we were in a worse place than if the trend has continued. So if the trend has continued the whole time covid never happened, we would have more higher e-commerce penetration. So there's some charts we could post 'em either in show notes or maybe right here on screen. I don't know how much editing we're going to do, but
Brett:
Show notes for sure. Let's see what Nick is up for if you want to throw some graphics in there. Nice. And part of that too is what really made that difficult. I love the way you frame that, right? In that three-year period, you probably had a great year, you probably had a year, and then you probably had a bad year. And we saw that with our clients or companies we invested in or people we talked to. But the issue with 2022, especially in 2021 potentially, is we all thought we were going to ride that rocket ship forever and we were staffing up and we were buying inventory, we were doing all kinds of stuff, and then things pulled back maybe even below trendline. And so that compounded issues for sure.
Sean:
Yeah. Yeah. So we talk about the global economy, or specifically the US economy did not have a recession, but there was an e-commerce recession for sure. Right? E-commerce growth wasn't existent in some of those quarters depending on the category. So this is the first year where I think we're back to where the trend would be if covid never happened. So we have solid steady e-commerce penetration growth. That trend isn't going anywhere and the world is kind of normalized VC dollars civil out. So there's, people aren't just dumping money into Facebook ads, there's more ad space. And I think by the end of the year, temu stops being a thing in America or it stops being a big spender. So
Brett:
I think interesting. You mean because of regulation or why is Temu exiting?
Sean:
Well, this has to do with the Chinese stock market, but I think is, so Temu is owned by a very large worth, hundreds of billions of dollars, big Chinese conglomerate. And I think the entire thing is actually a fraud and
Brett:
Interesting.
Sean:
It wouldn't be the first time, but there's been a massive fraud on the, I mean, go to their website and go to their investor relations. I think their company's PDD check out their investor relations. It looks like an Enron style scam. So that's my,
Brett:
But consumers want their $9 trendy hoodies or other gear that we might want for our midlife crisis or something. But yeah, it's taken off for sure. Timo has taken off, but watch out. It may be on the decline. Oh
Sean:
Man, I don't know how much time we have to talk about this, but without going full tinfoil hat. So every day Amazon does, I think it's like 4 billion in GMV across the Amazon's total ecosystem. And teos goal this year is like 15 billion in GMV. So it's like a week's worth of Amazon sales is what team is shooting for all year. And TikTok shop's like 10 billion. So they're literally just drops in the bucket of what Amazon is doing on a day by day basis. And then the other thing is they're paying for all this customer acquisition in a time when you can't do that, right? The arbitrage is gone. Amazon gives you all this value, it gives you not only movies and TV shows, not only music and audio books, it gives you all of these things. And they acquired those customers back in 2008, 2010, 2012. So DMU has none of the premium features. It is literally just like buy shit for cheap, the lowest common denominator.
Brett:
Yes, that's exactly what it's,
Sean:
And they're dumping money into it and all of that is propped up by this large conglomerate who's down to lose money. But the Chinese stock market in the past two weeks, they've restricted short selling. They know that there's a big correction coming. So
Brett:
Interesting. Well tune in. You heard it here first, folks. Sean calls that this is not going to be a good year for stay tuned. Yeah.
Sean:
But anyway, what was the question? Oh
Brett:
Yeah, so what else are you expecting? So in 2024, we're going to get back to normal style, normal pace growth for e-commerce. What else are you expecting for this year and or what is it going to take to win? Yeah,
Sean:
Okay. I think it's going to be a very, it's going to be the first normalized year for a long time. We're going to see m and a come back. So we've already started to see, I've started gotten a lot more emails from PE groups who basically shut down in 2023.
Brett:
Yeah, we're seeing that tick up as well in the agency space.
Sean:
Yeah, I think most of the bankruptcies have worked their way through their system. Obviously razzi will be in the big one, but I mean two days ago there's another Amazon aggregator that just went bankrupt. So I think those will be out of the system by the end of Q1 and we'll be back to an m and a and potentially an IPO and merger mark. So I think we're going to see that come back up. That always breathes life and excitement into the industry. That's kind of been dead for a little bit. Brett just asked me, Hey, what events are you going to, what talks are you going to? And dude, there hasn't been any good ones. Most of
Brett:
2023. It's so true. It's so
Sean:
True. People have just been in hibernation mode, right? Nobody feels good. No one wants to brag, no one wants to talk. I think a lot of that kind of just starts to reverse towards the second half of 2024 and what does it take to win? This kind of ties into the marketing conversation. So if we're ready to have that conversation, let's
Brett:
Do it.
Sean:
I talk about MERA lot. I think MER is the gold standard you should be measuring your business on, and that is for how much dollars are going into sales and marketing and how much revenue is generated and there's a ratio there. So you want a three XMER for every dollar in sales and marketing, I get $3 in total revenue.
Brett:
So not to say, just to clarify, and all our marketing junkies out there are totally tracking, but this isn't in platform ROAS per se, or what you're seeing in Google or Facebook, anything else. This is total money in and total money out. So I'm investing every dollar I invest in ads, my total revenue, total enterprise revenue should be $3 as an example.
Sean:
And I think that's best in class. So if a lot of small e-commerce brands listening to this, they're like, no, well, I need an eight XMER. I want to spend $1 on Facebook and get a total revenue of $8. They are living in 2015. Well, I don't know how they got a time machine, but that's where they're living
Brett:
Not happening. And that time's not coming back. It's not coming back
Sean:
Ever. Yeah, there's nothing the indication that the next time will come back. So the cost of marketing will go up forever because Facebook's a publicly traded company who needs to show revenue growth. Google's a publicly traded company needs to show revenue growth. They're not adding any more users. Facebook is adding more ad space, which is very interesting that they're able to do that. But outside of ad load increasing, which is the percentage of posts that are ads on a platform, where would they generate more impressions to lower CPMs? So the cost of advertising will go forever. Now going back to MER, another way to say MER is a OV over cac. Right? Now I'm leaving out the LTV part of this equation, right? Because there's no CAC associated with return of customer revenue. But what I'm really saying is CACs will increase over time. So one way to increase MER is to increase a OV. So a big focus, and this is just something people should think about. Clicks are going to cost what they're going to cost. So if your CPCs used to be 50 cents, now they're a dollar, they're always going to be a dollar or above. There's nothing and there's nothing you can really do.
Brett:
It's a new floor not going to change it.
Sean:
There's nothing you can really do to lower the cost per click. We've all seen in Facebook, you have an amazing click-through rate. Well, for some reason that ad has a higher CPM and you have a horrible click-through rate. Well, that ad gets a lower CCP M, and it's because Facebook wants to make a certain amount of revenue for everyone leaving their platform. That's what I think another tinfoil hat theory you're going to be hit. But all of that to say is if your business needs to operate on a, you have a $50 A OV, what happens if clicks go to $3, people are going to convert the exact same that they're always going to convert at your business that was soluble. And making money is now insoluble and losing. So the only way to combat that on a business level is to get higher. So you have to increase prices or launch new products with higher AOVs to that can thrive in this new ecosystem. Going back to, I'm going to tie everything together. Okay,
Brett:
Love it, man. Love it. I'm totally tracking. This is awesome.
Sean:
So what to expect in 2024, how to win in 2024? I think it's going to be the best year for e-commerce. So we avoided a recession back. So you have tailwinds going out of your business, but inflation did happen. So the cost to operate is going to be higher and the cost per clicks is going to be higher. So why did Ridge launch rings and why did ridge launch travel? It's because both of those categories have higher AOVs. So rings have high margins. So the perfect business, you could sell something for a thousand dollars that costs $1 to make. So you could put as much dollars into marketing as possible. That is gambling apps and that is who you're competing against. You're competing with Sports King and Draft Bookie and ESPN just bought all these different, because
Brett:
Driving up to CPMs, right? They're driving up to CPMs on these ad platforms,
Sean:
Insurance companies, gambling companies, and VPNs can spend as much money as possible to acquire customers because they're selling vaporware. You're selling a widget, so you don't have that headwind. So you have to look for higher, a higher AOVs with higher margins. So you can just put more money into ad dollars to get the same level of performance. That pressure is coming regardless if you do this or not. And if you do nothing, you eventually go out of business. So you have to be looking at higher A OB categories and higher margin categories. So that's rings for us, that's travel for us. So we have a travel line, we're going to sell $600 travel kits, the wallets cost 150 bucks. So I immediately can Forex an A OV on this new product line and assuming the same margin profile, I can have a CAC that is Forex higher. So that is what we're doing to survive and win in this environment.
Brett:
That's amazing, man. And that's exactly the right way to think about it. We of course, we're looking to optimize all of our ad channels, better copy, better structure, let's get increased click-through rates and increased view rates because there are some rewards there, but costs aren't coming down. You can make little improvements, little adjustments, and they do make a difference, but over time, costs are going to keep going up. And so really the only way you win is if you can sell customers more stuff. And ideally, and when you're looking at customer acquisition costs, what can you sell them immediately? And LTV is a thing. I know it's a little bit different for when you guys were primarily just wallets. LTV is pretty different there, but now it definitely has expanded. But yeah, how can you sell them more on that first purchase? Because that totally changes the game.
And I love the, I believe this is old Dan Kennedy wisdom, but he said the company that can afford to spend the most to acquire a customer, they win because all things being equal, ad costs are just going to go up. There's an upper limit, like you said, to conversion rate. You can only get so many people per hundred to convert. You're going to hit a ceiling. And so what are you doing to be able to afford higher CACs? And one of those is more expensive items, but then better margins. Love that. And so as you guys launched rings and travel, that's primarily for new customer acquisition and changing the math there, or was that also a play to say, Hey, we've got all of these wallet customers, what else do they want to buy? Let's sell them these things too.
Sean:
Yeah, the first point on L-T-V-L-T-V doesn't matter if you go out of business. So you're plotting out, it's true,
Brett:
A 12, you could die waiting for that LTV to kick in, right?
Sean:
Yeah, it is. You're thinking about future harvest when you could starve this winter. So let's just make sure this harvest goes great. Let's make sure your first customer acquisition is profitable and paying for everything. And if they happen to come back in the future, fantastic. I would love to have them back. And so what happens when we launch rings? Well, we launch rings, we email it to 5 million customers on our database and we sell some rings without a doubt, we're going to sell rings. Same thing with luggage. We sold out a luggage in like 45 days. We sell it into this big customer base. Awesome. That is not repeatable. You launch a new thing into your customer base one time and then I'm going to acquire customers, I'll have upsells, I'll have, I'll have all that stuff. No, you're looking for new product lines to acquire new types of business.
Got it. What we've seen is that there's some amount of people who need to buy luggage today. So we now have luggage and we can acquire a new customer who has a new need and a new pain point we've never been able to serve before because the amount of people who need a wallet today is zero. But if somebody's traveling in two weeks, they don't have luggage, they need it. So it's a brand new customer, it's a new entry point to the brand, and that person is very likely to buy a wallet from us in the future. So that is the real unlock is that we have these new flagship product lines that bring people in and then at some point we'll sell 'em a wallet or we'll sell 'em a ring or we'll sell 'em a luggage or whatever.
Brett:
But that's a secondary aim. That's a secondary benefit. The real benefit is this is a product that it's going to allow me, it's going to change the economics for me to go out and get more new customers. Love that. Love that a lot. So I want to talk in a minute about profitability and how you do all of this because I know you're a master at how do we maintain ebitda and while we're still innovating, launching process. So I want to get to that in a minute, but since we're talking marketing, what channels are you most excited about for this year and beyond? So as you guys are growing, speak specifically to Ridge, then also talk to the general D two C brand as well.
Sean:
So if I was a sub $10 million brand, I'd be very excited about TikTok shops, YouTube shopping meta shops, that's like the current white space. All three of those things. YouTube shopping isn't fully live yet. I think it's still a beta program you have to get accepted into, but it has more potential than TikTok shops does, right? It's
Brett:
Coming. Yeah, it's coming. It's big.
Sean:
And then meta shops, 10% of our sales in Q4 came through Metas shops. So I mean they're putting billions of dollars of volume through that. They're learning purchase conversion behavior and tying it to people. And I think that could be a massive, massive driver of business. So if you're sub 10 million, those are the three areas that'd be focused on and really unlocking those Amazon's harder than it's ever been. People talk about wholesale, don't go into wholesale until you're ready. But if you're a bigger brand, if you're doing above 10 million a year, the fastest growing lines of our business and our strategy year sums up in it through things. We're going to make more stuff. We're going to sell it to more people, we're going to sell it more places. So that is as simple as the company can get. We're making new stuff for new people and we're going to sell it in new places. So the fastest growing lines of our business are the new product categories because last year was the first year we had rings, it did eight figures. So that's pretty fast growing. It's insane. The second biggest product line for us, or the product expansion for us is actually going into wholesale. And I talk a lot of shit about going into wholesale, but we just got an eight figure PO from Best Buy.
Brett:
Dang, dude.
Sean:
Yeah, so wholesale is growing hundreds of percent year over year for us. So that is a big unlock for us. So if you're ready, if you can bite off and deal with payment terms and chargebacks and get displays wholesale, there's a lot of value to be unlocked there. The third one's international. The UK is in a recession, so it's a harder market, but Australia is an underserved e-commerce market. There's 27 million people basically in California just sitting down there and they love to buy stuff online. It's a big ass country, but it has pretty good infrastructure. So international has been a big unlock for us. So that's where we're currently winning.
Brett:
Nice. And so wholesale that, how recently has that become a focus for you guys? Because playing well into that nine figure space as a brand, when did you start really considering a wholesale? Yeah,
Sean:
It depends on category if get in earlier, but we got into wholesale in 2019 with Nordstrom's. That was our first big one. And then Shields, but it's always been single percentage points of our business, two percentage points of our business. It really didn't start to be more than that until 2023. So our wholesale engine took four or five years to really turn on. So in 2023 it was probably 7% of our business was in wholesale, and I think this year it'll be 10, something like that. So
Brett:
That is nice. I mean that's material and that also when you've got the wholesale component that does allow some of the marketing efforts that they multiply at least to a certain degree, a group of people that still really want to touch, hold, feel a product before they buy it. And we talked a little bit about e-commerce penetration numbers, and I believe the latest stat is like, it's like 15, 15.6%, something like that of total retail is e-comm, right? So I leaves 85%. I know, and there's different ways to dissect the numbers. Are you including auto and gas and some of those things or restaurants or not? So different ways to measure it, but is that the number you kind of work with as well? About 15% is,
Sean:
Yeah, I think this year it's 16 and a half. But like you said, do you include cars or not? That's the big one, right? Auto is a huge part of it, but what I'll say is wholesale is mostly demand capture. You build all this awareness on these great platforms, these big megaphones that are YouTube and Facebook and everything else. And then Christmas Eve we did seven figures in Best Buy because people are walking in looking for gifts and it's like, it's insane. They see the Facebook ad, they know it's in Best Buy, they walk in to capture it. So it's demand capture, but it's demand capture you can't get anywhere else. I'm not going to have stores, I'm not going to have 600 stores. Best Buy is
Brett:
Yeah, super, super cool. Love it man. So then as you look at, you're doing all these things and I know recently on the operator's pod, they talked about inventory management. You guys talked just all the big things that you got to manage to make sure you're growing profitably. But how do you approach this? So you're launching new products in new categories, you're launching in new places like wholesale and some of these other things. You are actively investing in new customer acquisition through all the meaningful channels. How do you do that and protect EBITDA at the same time? Well,
Sean:
We're very lucky. So our brands listening should try to be lucky, I guess
Brett:
If you can do anything, be lucky. Yeah,
Sean:
So we have never raised money, so no investors tell me to do anything. There's no debt on the business. So no, I don't have any loan payments or anything. I got to pay back. And everyone who is on the cap table at Ridge was super fucking broke at some point. So a father son, best friend who started it, he was a special ed teacher for like 35 years. So that's awesome. We talking about people who had no money. I mean me and Connor, when we started our agency business, I didn't own a car. So we would take Connor's 1997 Honda Civic with no paint, the paint was chipping off and we would drive back to client meetings, try to sell 'em. We lived in a one bedroom apartment.
Brett:
Dude, quick funny story. When I started my first agency, I had a 2002 Honda Civic and I would go into meetings and I would park a few blocks away because I wanted to not be seen in that thing. And what's also funny is that hit a certain age where I started getting pulled over more where it looked suspect dude's driving that he's probably up to no good, right? I was fine. But anyway, just interesting. Yeah, humble beginnings for short.
Sean:
So why does that matter? Us being broke? Well, because we can have a business that pays everybody decent salaries and distributions every once in a while and nobody's breathing down anybody's neck being like, I need a Lamborghini, I need this, I need this. Right? It's awesome. It's awesome. A lot of people who have a business, and this is my big
Brett:
Problem, it gives you optionality, right? You've got options now when you don't have to pay for the Lambo or for your 12th house or something like that.
Sean:
And this is one of my biggest problems with e-comm operators is that they have a $10 million business, so they think they're worth 10 million bucks. And it's like, dude, a 10 million business means you probably can make a salary of $500,000 a year. And it's like people hate hearing that You're better off working as a Facebook project manager, you'll make more money than owning your 10 million e-com business. So obviously there's enterprise value, but you're not fucking tapping into that dude. It could all go away tomorrow. So it's a huge disconnect in perceived net worth and income of e-comm operators and what's actually feasible living in the moment. So anyway, just throwing that out there, it's like, guys, it is really fucking hard to run these businesses, but so we bought a factory in Arizona this year. We bought two JVs for Chinese suppliers to get stuff made better, cheaper, faster, whatever. So we're investing all this money in this business so we can actually improve it over time and that's how we can do stuff, launch all these new product categories.
Brett:
And so I want to actually double click on something really quickly because this is important. You said be lucky if you can do anything, be lucky. But there's actually this concept that I heard from Jim Collins, which I love as they studied great companies and then comparison companies that weren't as great, but they had a lot of similarities. They found that there wasn't a difference in luck. One, the successful companies didn't have more good luck and less bad luck and the meh companies didn't have more bad luck and less good luck. There was a difference in return on luck. And so this is where you are setting yourself up to succeed, to ride the wave and capture opportunities, but you're also setting yourself up that if stuff gets bad, you are okay and you can weather the storm. You don't have a sixth house mortgage to pay for and that sort of thing. So I think that's really what you guys have done is you are set up to get a great return on luck. So hopefully this, and I would agree with you, I think this year is going to be a little more consistent, a little more normal in terms of growth. You are ready for that. If things get bad though, you're probably ready for that too. So you got this return on luck.
Sean:
Yeah, there was a two month period. Nobody ever wants to fucking talk about this in March of 2020 when the world felt like it was going to implode. It did.
Brett:
It did.
Sean:
I remember being, I was living in Santa Monica or Venice at the time, going to the Ralph's and just seeing people buy everything off the shelves except for medicine. I remember being like, I'm in the medicine aisle, I think people are getting sick. We buy halls or something, but they were buying bread, whatever. Nobody was thinking I should go on Amazon and type in ridge wallet and buy a ridge wallet right now. No doubt. So we watched sales fucking fall off a cliff. Obviously everything we're covered and we're sitting here today and it's awesome. But the first thing we did was every owner made zero money. We just took our salaries to zero because we're like, we got a business to support.
Brett:
You had the option to do that.
Sean:
And nobody DMed me like, Hey dude, I got a gambling debt, I got to pay off or something. It did not work like that. It helps a lot of people in our business at the ownership or executive level are some of the cheapest people I've ever met in my entire life.
Brett:
That's so awesome.
Sean:
We had a big ridge retreat in Vegas last year and that's when we fly everybody in and two of the guys who are on the cap table just assumed that they would be sharing a bedroom, just sharing a hotel room.
Brett:
We'll bunk together. Yeah, we'll take the room with bunk beds.
Sean:
Yeah, we give 'em separate keys. They're like, no, but the room has two beds. We could be saved at a hundred bucks right now. So that's really helped. That's part of our
Brett:
DNAI love that mindset and really once you have it, it never fully goes away. And I remember Moise Ali from native, good friend of mine, we helped native in the early days and still do, but he talked about how even when they were growing like crazy and making millions a month and stuff, he was still looking at the p and l and he's like, Hey, why are we paying $7 a month for this tool and stuff? He wasn't spending all his time doing that, but he was looking at it, right? Just like we can cut that $7 out. And I think part of that is, yeah, you saved seven bucks, that's great. Or you saved a hundred bucks on the hotel room, that's great. But I think the bigger thing is the mindset, right? We're not just going to waste money because we can. We're going to preserve it. I love that. That's awesome guys. You said built a warehouse or you built a factory?
Sean:
I bought a factory in Arizona.
Brett:
Nice, nice. And Matt, what has that done? Has that helped lower cost and speed up production? What does that meant for the business? Well,
Sean:
It, it's still in production, so I'll let you know in 35 or 40 days when we've actually fucking finished the thing. But the goal is to make wallets here. It adds consistency to the supply chain, helps us start buying already. China is essentially just an assembly factory. We're getting carbon fiber from Japan, we're getting titanium from, who knows, right? It's already all these raw parts. So we're mostly looking at changing the supply chain to be final assembly in America. We can start sourcing the parts from wherever makes the best. Whoever makes the best deal, we'll buy that. Whoever makes the best screws, we'll buy that. So it builds redundancy in the supply chain, builds resiliency in the supply chain and it's not that much more expensive. Like labor in China is getting pretty expensive. A lot of it's robots, fuck it. Anyway, so for the same price I can make stuff here, might as well do it. So that's what we're
Brett:
Doing. It's amazing. It's amazing. So really want to hear, and so we're coming up against time just a little bit, but you guys have successfully moved into rings. You had an eight figure launch there. You successfully moved into luggage. That's not that common. I talked to other brands that they have successful launches, but there's usually some misses in there. They launch a product and it's like that built flat on its face, thought everybody wanted it. Turns out none of our customers did. Or we launched a product and it just wasn't good. Our core product is great, everybody loves it. New product, it's getting bad reviews. What do you think the key is as you're launching new products and as you're innovating, how do you create products that both delight customers, so there's some customer satisfaction there and they sell well and they just work to grow the business? Yeah,
Sean:
What I'll say is it's not like we fucking only hit home runs. People are always shocked when they hear about a product expansion. People are like rings. That doesn't make any sense for your business. I have suggested every single product category to our product and occasionally I get one past the goalie. So I mean I was like, yeah, we need to do beef jerky. I literally have a deck written out where I'm like, yeah, we got to sell beef jerky. It's consumable. That's what we got to do. So I've suggested every single product category. Occasionally we make stuff that sucks, we launch watches and we make a great watch. Nobody wants watches. That is the reality. It's a
Brett:
Horrible category. It's a very tough
Sean:
Category. It's a horrible category to be in. So we didn't sell very many watches. I think we ordered 10,000. I sold the story maybe on the operator's, but I think we ordered 10,000. I'm like, we're going to sell out day one. No, it took us a year and a half to sell out those 10,000. Then we launched a second version and it's way more just like a gift for our customers. There's more value in that wash than any watch you're going to buy in the market. But it's a category that sucks. But I'm like, okay, cool. Take my lumps, move on. I did the same thing with deodorant. We did the same thing with T-shirts. We did the same thing with socks. We did razors. It's like you keep launching stuff until you find something that works and then you go back and tell the story that like, no, it actually was a success the whole time.
And I point to Bick as the best example, I brought this up in the last week's episode, but B makes the number one pen in the world, the number one razor in the world and the number one lighter in the world. Those things have nothing in common with each other. Now they have tattoo products. These things have nothing in common with each other except they made out of plastic. So what happened was a guy had a plastic factory in France and he is like, well, what else can I make? And he just made whatever the fuck he wanted until it worked. And now we talk about how it's a great business. There's billions of dollars a year in revenue, so don't be pressured with your product expansion. Try stuff, it's going to fail. Just make sure you buy in small enough quantities, it doesn't bankrupt you. And Ridge is a big enough paycheck or has a big enough checkbook that I can do things like waste 300 grand on watches and try 500 grand on luggage or whatever else I'm going to do.
Brett:
Yeah, it's a really great example. Bick. I hadn't thought about that, but yeah, it's not like you buy the razor and then you're like, man, I really wish I could just get a pin from this company too. Or dang, I wish I had a matching lighter. Not that they even match, but yeah, so there's some relationship and manufacturing, but not in anything else. And so I really love that and also love that. And I've noticed this trend and I get to fortunate enough to hang out with lots of successful entrepreneurs and just good quarterbacks or great athletes. You've got a short memory on the mistakes. Of course you take lessons from mistakes, but hey, we launched deodorant, it didn't work well, we better just take a little time away from launching products. Not good at it, apparently. Let's sit and stew on this for a little while now. You learn from it and you launch the next thing and you launch the next thing and you're going to be able to double, triple, quadruple down on the winners. And so yeah, how do you bake that ethos into your company? Or is it just kind of happening where you're like, Hey, we're going to try the next thing and we're going to be thinking ahead and we're not going to fear a failure on the next thing we launch?
Sean:
Yeah, really great companies, this is something we all have in common, create space for failure, and this is, it typically falls in the executive or the co-founder or something like that. What I always say is, I'm the CEO O, so I have to be reckless. I'm the only person who can be a rebel. I'm the only person who can't get fired. So I have to be pushing the boundaries of this business because I can't task a junior marketing person to do that. I can't task a junior product person to do that because they don't want to lose their job. So they're going to play inside the lines. And it is your job to be pushing the company forward and trying new things and failing because you're the only person who can do that. I go back to the ownership team and I'm like, yep, I tried all this shit, but I'm trying new stuff and I hope it works. And there's a high tolerance for me to do that because they trust me and they know that I'm not going to fuck anybody over or I'm doing things in the best interest of the business. But the first thing you do when a junior employee loses money is you're like, well, I got to fire. Like yeah, it's not creating space for failure
Brett:
And they know that. And so they're going to be risk averse. They're, it's just human nature. They're going to protect themselves. And so you've got to be the one taking the risk and being willing to make those mistakes and those losses really, really good. Man, this has been fantastic. I could talk to you for another hour or two at least, but what else should we be watching for? I mean, I recommend everybody go to ridge.com, get on the email list, go to twitter slash x, follow Sean, which by the way, what is your Twitter handle? It's
Sean:
Sean eCom.
Brett:
Sean eCom, so check that out. But what's coming down the pike for Ridge, or what should we be watching for here in 2024?
Sean:
We have a really big announcement in the next 30 days, so I can't spoil it. I'm under NDA, but it'll be the coolest thing we've ever done as the business. So that's be, if you aren't following me on Twitter in 30 days, you're going to get something really fucking cool coming across your timeline. So be on look after for
Brett:
That. That's awesome. And then, yeah, what's next for the Operators podcast? I just feel like you guys, you're in your groove. Everybody's cranking. Sounds like that's just beginning to take off and it's doing very well,
Sean:
Dude. I appreciate you saying that. I'm just trying to get 10 episodes in a row where everybody shows up on time, audio works, and we have all four of us there, so
Brett:
Everybody's so busy running nine figure businesses and stuff. So I'm sure that is a nightmare to try to get everybody there. So keep with the good work. I'm going to keep tuning in there as well. So Sean, thanks for your time, brother. Super fun as always.
Sean:
Thank you Brett. Talk to you
Brett:
Later. Alright man, and thank you for tuning in. We really appreciate it. Hey, let us know what you'd like to hear more of on the pod and if you've not done it, we'd love to get that review on iTunes, helps other people discover the show. And with that, until next time, thank you for listening.
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