Interview: A 21st Century House of Brands with 1.8 Billion to Spend, with Carlos Cashman, Co-Founder and Co-CEO at Thrasio

TRANSCRIPT

Peter:

Welcome to unpacking the digital shelf where we explore brand manufacturing in the digital age. Hey, Peter Crosby here from the digital shelf Institute, the digital upending of almost every dimension of commerce has created the opportunity for a new kind of P&G for the digital age, Howard, by the acquisition and constant performance optimization of thousands of small challenger. Amazon marketplace brands [inaudible] is the leading example of this business model and Carlos Cashman co-founder and CEO sat down with Rob Gonzales and me to discuss the innovations in branding performance, marketing, supply chain, and most importantly company culture that are creating a 21st century house of brands. So, Carlos, thank you so much for joining us on unpacking the digital shelf. And first of all, I just have to congratulate you on another $750 million in funding closed just a few days ago. First of all, how much money is that to date? And do you keep it all in like a pool to swim around in it, like Scrooge McDuck or something like that on Bitcoin, you and Elon Musk, right.

Carlos:

It turned into, well, you know, it was my fraternity brother, Mike Saylor who kicked that whole thing off a little while ago. So it was really happening. No, it is funny. I mean, look, it's, it's fantastic. It's unbelievable. I'm, I'm really happy that there's such great investors and have such confidence in what we're doing, you know, and that we're able to do that. So, um, yeah. I mean, look, the total raise now is around 1.8 billion, which is just, you know, it's really weird for me to say this cause I'm sitting here in sweat pants in my bedroom, you know, I'm like, and I have been for the last year and when we've done most of that and it's just, it's just amazing to see, you know, it's what this digital world as brought to us and that that's a part of our whole story too. Right?

Peter:

Yeah. Growing, growing up. Did you ever think people would write, you checks for $1.8 billion?

Carlos:

No. I mean, no, not really. I had some pretty big fantasies trust me. Like [inaudible] super exciting.

Rob:

And so I am, I am thrilled to be able to have this conversation today. This is a, I remember going back three or four years, I was at Kroger and having a coffee with, with one of their VPs. And we were talking about what a Procter and gamble like a house of brands for the 21st century would look like. And would it look like another P and G or would it look like something like radically different and uh, something that's more appropriate to the internet age, right? Like you look at the New York times versus Twitter and all the blogs and everything like that. What's like the Twitter and all the blogs version of the New York times for e-commerce mean for house of brands. And we just kept expecting something to emerge. And you saw a little private equity, you know, movement trying to acquire a couple of brands here and there, but you guys are just taking this model all the way to infinity. You guys are basically taking that $1.8 billion and acquiring a ton of companies. So, so do you mind like just for the audience, just giving the high, high level overview for IZO and, and uh, the business model and the thesis and then, then we can dive in more.

Carlos:

Yeah, sure. I mean, you know, it is fascinating and a lot of people have, you know, I've been laying claim to the same title or you're the CPG for the new millennium P and G flooded millennium. I mean, Harry's razors guys, you know, say it and they're doing some interesting stuff there too. Even know what I think it all is. It comes, that comes from a recognition of the change that we're all in going both the digital, uh, change and then, and the supply chain ecosystem. But let me, let me step back a second. Talk about the SEO. So for those have been, I know we did a so, um, like what we it's, it's really interesting. This idea has stayed mostly the same at the heart, which doesn't always happen with startups. Certainly not when you scale like this, but you know, we started thinking about doing a roll up of e-commerce, you know, the, the starting in the 2013, 14, all these DTC commerce sites were all blown up on Shopify and stuff.

Carlos:

And I was getting, seeing a lot of these. Then we, we started with that idea, actually, we were going to roll up D to C sites and we said, well, you know, well, how could we improve their sales? And we said, well, we'd sell an Amazon because most of them aren't doing that. So we started looking at an Amazon and the rest is history. We said, after a little while, we said, why don't we just do this on Amazon instead? So we buy third party sellers on Amazon, which account for over 60% of the sales now, right? With all the growth sales on Amazon, you know, you're buying product from what's called a third party seller, which is usually an entrepreneur solopreneur who's sourcing product from somewhere around the world, shipping it into Amazon and letting Amazon ship it out to its customers. Right. And you know, what we did is create liquidity for these people, right?

Carlos:

In terms of, you know, being able to come in and say, you actually have an asset here that is worth something to someone else, and we can buy it, we can improve upon it. Right. So, you know, the idea was at the start was fairly straightforward in that if there's enough of these out here, we can buy them. We can certainly bring more expertise to bear on running, you know, that business, right? So these are businesses that again are largely run by individuals or like a couple of people. And, you know, it's over time, it gets hard to, to do everything, right. You can't be an expert in PPC, you know, and advertise, and you can't be an expert in indirect advertising performance advertising. You can't be an expert in supply chain and creative and the legal aspects of all this stuff. Like there's more and more to think about as those businesses grow.

Carlos:

So, you know, we saw the opportunity to really, to bring that expertise into one place and that'd be able to share it, you know, across the board with, uh, you know, also the interesting thing about the Amazon ecosystem is it's gotten harder to run these right over the last few years, as Amazon makes more tools available to third party sellers, which is great. Yeah. It actually adds complexity like a few years ago. They didn't have to have an IPI score. The inventory store. I didn't need that. You just shipped your stuff that was out or whatever. Now Amazon says, okay, you need to manage your inventory better. And if you do well, I'm going to give you a higher score and you'll pay less for everything and you'll get a better service. And if you do a bad job, we're going to ding you for it.

Carlos:

That wasn't a thing a few years ago, right? The PPC advertising was super simple. Now they've had the fastest growing advertising ecosystem in history, right. Way faster than Google and Facebook, which were both crazy. And now they have multiple, just at least three different ways to buy ads on Amazon. You know, are they a DSP to get the PPC, right? So like that's getting very complicated. And so those are all great for the third party seller as a business, if you know how to use them, take advantage of them. But it's very hard to know all this stuff. So, you know, we started off by again, recognizing this was happening. I'd seen it in other ecosystems, right. A similar kind of thing, play out and saying, we can, we can build this expertise in one place and probably leverage it really well and buy a few of these and put them together.

Carlos:

And frankly, honestly, like I'd love to claim like some pressure on some looking ahead, but I would really looking at it like, you know, this could be a great lifestyle business. If we just buy four or five of these, we've got a $30 million business, you know, if it doesn't work, if there's not a lot of, [inaudible] it making 6 million bucks, I'd be pretty happy share with my partner, you know? And then I can find that next big thing, but we thought, but I always knew the upside was if there's a lot of these that we can really do it. Well, maybe this can be a much bigger business, but I was thinking, you know, max out a couple hundred million in value or something, and it's really just gone way faster and bigger than that.

Peter:

Um, give us, uh, uh, sort of a case study, if you would, of, of what that journey is like to, to find that brand, what are the, what are the elements of it? And then, and then what have been some of your successes where your Mo you've seen your model kind of play out? Yeah.

Carlos:

I mean, look, we see the success. It's, it's incredible. We've got, I mean, a huge list. I mean, we have the average business, we acquire and improves 156% and EBITDA after 12 months. So, you know, we're seeing successes across the board, but I'll share a couple with you. I mean, you know, look, we've talked a lot about this and what we look for, you know, we're not, um, we're not trying to find, it's easier to say we don't look for them when we do. So we don't want the things with primary demand risk, right? We don't want fashion. We don't want fads. Right. Those things. And that can be a great business. Don't get me wrong. There's people that do that, but they're dependent on certain things, right? Your timing or the dependent on a founder, which again, we just made these people a millionaire.

Carlos:

They don't want to take a job at a big company. So we don't know if they're designing handbags. Like I can't work without them. I don't want that business. Right. Um, so over time we, as our capabilities get better and better, we're able to expand what we're looking at, but let's say for simplicity sake, right. Certainly as we started, we looked at, um, you know, a business that had good, solid demand. And you can look on Google for the search terms that they're, you know, for that kind of product, they're either stable is going up, not going down right now. Same thing on Amazon. And then it means the same thing today, but it will mean tomorrow. I meant last week. Right. There's a lot of things that change in that, right. You wouldn't believe, like if I ask you for a spatula in 1850 and I asked you for a spatula today, it means the same thing you recognize it.

Carlos:

Right. Um, that's not the case with a lot of things. Um, and then, you know, like, there's, we don't want obsolescence risk. Like, you know, if you're making iPhone covers and Apple changes the shape of a phone every 12 months like that, then that's a great business for some people who are good at it and know how to do that. That was more challenging for us. So, so outside of that, we just looked at, you know, looking at a great business, but you want to understand is it's, it's Mo basically it's on Amazon right now. We're doing much, we're moving off of Amazon and doing more. And obviously the bigger picture view for us talking about CPG is a, you know, we were talking about earlier is to be much larger than just Amazon. Um, but let's start there because that's where we're getting, you know, it's the heart of the system right now.

Carlos:

Um, you know, you want let's face it what passes for brand today on Amazon reviews and ratings, right? Yeah. Yep. Yeah. So that's, and that's a fascinating thing to think about. Right. Um, because most products they're like 77% of searches on Amazon are unbranded, right? So people are going in there saying, I need an umbrella and not going in and saying, I need Rob's great umbrella or something like that. Right. So understanding that and like, you know, I even, I see my kids do this and I heard them run around really like my five when he was five he's a six year old now, but it still doesn't read, but, but he would look at the screen, we were buying something for him and he'd say, buy that one, not that one. And I'd say why? I said, well, it's got more stars, you know?

Carlos:

And he even just knew that at that age. It's interesting. So, you know, that's so understanding what that, like what our advantage in star reviews and ratings is, and that can mean many different things. And look, let's face it. There's a lot of people who buy reviews out there and stuff like that. So, you know, but you can, you can think kind of logically about it. If a product's got 25,000 reviews, you know, at 4.8 stars, you know, and it's really expensive, no one bought that many reviews. We can buy a few, but you know, those are real right. You can trust it when it's, or even a couple thousand, right. Generally there's a lot of real reviews and you can start to understand that, but we've built up an expertise, both technologically and, um, and just analysis wise on understanding, you know, what is real, what isn't there and what represents real advantage.

Carlos:

Right. So you've got to look at things like the price history of the product search space, the how far ahead in reviews or ratings it is and what the rest of the competitors on the page you're doing, then you understand all of that stuff. And we built up our own model over time. It just gets smarter and smarter, right? Um, about what, you know, what constitutes a good mix we actually have. Um, now machine learning models that have been trained on everything we've at and everything we'd bought that are now getting smarter and smarter at rating, what's a good business. So, um, it evolves, but it's, you know, at the high level, it's pretty simple to look at it that way.

Rob:

Yeah. What I love about this is this is, this is, um, a product portfolio build that I real internet age product portfolio build like a bottoms up long tail, um, almost index fund, like model in it and the way that it's designed. And you contrast that with, with P and G's model where P and G model, uh, there's only so many inches of shelf space in a physical store per category, right? So they, they've got, they've got to the way that you get that physical shelf space is you're operating at scale. You've got great retail sales teams and trade execution. You've got, um, enough scale that you can actually have the branded presence in the market, through television advertising and things like that that are unaffordable to smaller businesses. And it creates this lock-in effect and, and category by category on the physical shelf in grocery and CPG and drug and club, the leading brands have 70, 88, 80 points of share between the number one and number two brand, right?

Rob:

Um, you look online there's I, you know, Sam Gagliardi from IRI always says, this there's six brands of coffee and CVS. There's 36 brands of coffee on the first page of search results on Amazon. And so the, the, the search results in the search world allows for a greater variety and greater variety means market fragmentation. And so basically what you guys have done is you've, you're buying just a crap ton of these companies. And if you could take them from, I dunno, whatever, not on Amazon to Amazon or the 10th search spot on Amazon to the fifth search spot on Amazon, you don't have to win the market on any of them. You don't have to gain 50 points of share on any of those spaces that you're in. You just have to be a little better than last year. And if you do that a ton of times, that's the incredible business. Like you, you start pretty quickly reaching the scale that you're talking about here. Um, and then the upside is that maybe one of them becomes a Harry's or an anchor or something that like, you might get a breakout by accident, but it's like, you don't even need to be there for the business to succeed. So

Carlos:

Drop the mic. I mean, I knew I need to hire Rob, just explaining our business and pitching it because that's exactly it.

Rob:

I'm just, just so excited about this business. It's a hell of a business. So I mean, the, the, the question that I've got here is, um, sorry, this is like, I know I've just been ranting and not even asking you a question here, but that was great. That was part of it. I would've just said exactly what I needed to say.

Carlos:

Thank you. We pay you to rant, Rob. So you go ahead.

Rob:

Yeah. So here's the big question in my mind here is that like, you're doing this now and you just said it, like you're in sweat pants, 1.8 billion in a short period of time, tiny period of time. Why now? And not in 20, 2010 or 2015, like you, you know what, like what makes it now than to do this?

Carlos:

Yeah. You know, so that's, I mean, look, I think, you know the answer to this, but I'll tell, I mean, what's amazing. I mean, it's, it's, if you think about what the, the, the so mobile, digital internet connected world is broad, right on, let's just talk on an electronic version. Like you can, this is an unprecedented time, right? The digital transformation, what it's done is, you know, you can go create a product. If you're a coder, you know, a digital product in your bedroom, and you can get it into 3 billion. People's hands in 24 hours, potentially they have access to your product. If you get, you know, once you get it approved in the Android store, on the app store, there you go. Now, if you need to obviously market and have a way of people getting to know, but let's say you created the most viral thing in the world.

Carlos:

It could be in a billion people's hands in a matter of months that's never ever happened before. And that is a massive change. You think about what's going on now, people are talking about valuations of SAS companies, all this stuff, and you know, the world of value and growth in terms of investing, it's really come together. If you understand what's going on here, and it's a massive change, right? So the physical world is undergoing a similar change, which is obviously underpinned by all these digital connections, right. Supply chain and all this kind of stuff. But Amazon in particular accelerated this. So they're almost like a physical version of that, of iOS and Android and whatever, right? So when in the history of the world, has it been possible for you to sit in your bedroom, say, Hey, I really like coffee mugs and travel coffee mugs, and you know what?

Carlos:

I want to sell a coffee mug and call it, Carlos, you can go on any number of websites. Alibaba's the one everyone knows where you can find manufacturers all over the world, mostly in China right now. But, you know, and you can find a product and then you can ask them to tweak it, say, make it red and change the lid or whatever, for almost for nothing. You can order a handful of them to see how they are. And then you can order a hundred shipping. Amazon starts selling them. And Amazon has, you know, 120 million prime customers in America alone. Right? I mean, you know, half a billion customers, your product can really be in front of those people in 90 days. Like that is unprecedented, right? Yeah. So, and that's happening because of the Chinese manufacturing miracle, let's face it, that's powering a lot of this, right.

Carlos:

And they've commoditized manufacturing to a degree that people talk about, but don't realize unless you're in the beer and not just that, because what they did is followed all around the world, you know, Mexico, Eastern Europe, Southeast Asia, India, there's all sorts of fantastic manufacturing now. And the care the capacity's available to anybody, if you know how to, you know, reach it and finding it is easier now. Right? And then the shipping whole shipping layer has been dramatically simplified the same way you've got, whether it's DHL, FedEx ups, or Amazon itself Flexport. So, you know, you never even have to touch this stuff. Like you literally just, you see it, you think of the product idea, do some design. And it gets picked up from the factory, taken to the port, shipped to Amazon and Amazon puts it up and then you do the marketing work around it to sell it.

Carlos:

And that is just never been the case. Like even, you know, even 10, 10 years ago, you couldn't do that as easily. Right. It just wasn't available. Well, you could, but it was tough. It wasn't simple to make happen. Right. And I think this has gotten easier and easier because of all these different layers of automation that have been dropped in. And that's why I think it's, I mean, you know, could this have happened in a year or two before we started doing this? Probably except there were fewer Amazon third-party sellers of stars. Right. You know, and, but they've been growing, they're already 24,020 18 are 2019 that work a million a year and up, I mean, that's pretty significant. Right. And it's at least doubled since there. Um, but I really think that's, you know, all that stuff is, is, is what it did is enabled this to happen. Right. And it's, it's pretty incredible.

Rob:

So I had an, I had an argument with somebody internally about like, why isn't Amazon doing this for private label. It just seems just the way that they operate with the two pizza teams and the de-centralization and the experimental model, like why isn't this a thing that's happening with Amazon and private label. And I've got my own theories as to why that's not happening and why it's not a threat to you. But, uh, you know, one of them being that Amazon is under increasing regulatory pressure, not to quote, compete with their, with their marketplace sellers or whatever on their own platform. But what's the, what's why isn't an Amazon doing this and why isn't like a Procter and gamble doing this.

Carlos:

Well. So Amazon is interesting question. They do have their Amazon basics, but we see them on 2.5% of our list, right?

Rob:

Yeah. It it's, it's, it's like it's a private label business. It's way worse than like Kirkland at Costco,

Carlos:

Very different business from what they do now. So while they may be large, it's different now they make less money. They make more money off of the third party sellers paying the visa, doing selling stuff that they do off their own products for one thing, a lot more. So they are a marketplace. You read Jeff's letters going back 20 years. He's always said, we're building a marketplace. Right. And that's where the real money and advantage comes. Right. Um, now why did they launch products? So I have, we obviously have some pretty high level, um, you know, Amazon connections, you know, I don't know, you know, Tom scoots tack is on our board. I, I I've had many discussion with him about this cause he was there helping develop this approach and stuff. And, you know, from the point of inside of Amazon, the reason they launched products initially was because they didn't have enough products in the market.

Carlos:

Right. They wanted to be the everything store and they would look at a category like batteries or one says, and they're like, there's nothing either the, the prices were bad. Cause they, they are, they're, you know, passionate about serving the customer and getting a valuable price out there. Right? They're not trying to squeeze out zero profit for people, but if it should be a good price, battery space was over that. It only had a couple of players. So they said, let's go make batteries so that we can encourage a better solution for customers. They have ended up being the biggest battery, still in the world now, but they go into a space. So initially, what was, you know, w when you do a search, you know, search terms that had a lot of searches and not many results, they start, okay, we better put something there.

Carlos:

Right. That's how they went out. Now they've got zillions. I mean, they have, you know, 3 million active accounts around the world, let's say, but it's a, it's a, it's more than a million, less than 3 million people who are out there at least. But those are accounts. Like that might be 10 people at each company trying to create products for them and launching them at a loss quite often. Right. Cause you're paying a launch, you paid and get new traffic and all that stuff you give discounts. So how can you beat that? And then when you think of the old model, right. When you had to go to, no, you create a great product product, the Squatty potty, and now you've got to go to Walmart's buyer, Target's buyer and convince them, Hey, you've got to buy this thing. It's really great. And mean like, the person just might not get it.

Carlos:

And it's dependent on this person's opinion, that's it? The algorithm. Yeah. So Amazon said, we'll take all the products and put them in the marketplace if they sell. Great. And, and so, you know, you, you have this massive, like constriction of potential in the traditional retail model, where people are making decisions on what to buy. And they're also making a decision on whether you're capable of delivering enough of it, you know, can you do it? Cause you know, you get an order from target. It's a million units. It can put you out of business if you don't know what you're doing. Right. So that, that old model was more difficult. Amazon looked at this and said, we can do it better. We can do it differently in the marketplace is what gives them all their power. They love the third party sellers. Right? That is, that is what is driven in enormous amount of value in that company.

Carlos:

Right? So, so back like, you know, the, the reeds that they went into, the product spaces for a different reason, for one thing. And then beyond that, look, I, the way I look at it, I made it look, you understand SEO, it's a search engine ecosystem. We're doing search engine optimization. I have to look at a page. Let's say there's 20 results when you search for an umbrella, okay. Here's mine just black out the other ones. There's 19 other ones. I have to compete against those other 19, whatever they are. One of them could be called Amazon. It could not, it just doesn't matter to me. I'm still competing because 19 other spots, I have to do my thing. If one of them was called Amazon basics or happened to be a brand that I started. So what, it doesn't change what I'm doing. And frankly, even if they gave themselves the top spot in every search, there's still a ton of money to be made on spots two, three, 19. Right. If you said, you know, moving from 10 to five makes you a lot of money, right? So understanding that position being in the right place, you can still do really well. So, you know, Amazon is both not incentivized to really make a ton off of this things and do it. And, um, and also for the other reasons you mentioned like the regulatory issues, stuff like that, you know, it it's, it becomes, it could become a problem for them. I mean, so anyway, I, I, it's not something that really figures into what we're doing.

Peter:

When you think about the brands that you have, they could as easily be working on the Walmart marketplace, they could potentially be omni-channel. You could be putting them into stores. Like, do you ha you know, to the degree you care to share your strategy, like, how do you think about omni-channel and the business you're building is this,

Carlos:

That's the heart of what we're doing. So I look running any company, building a company is about focus, right? When you guys have done it, you understand this, you know, you gotta be really focused. Now focus can increase as you grow and you get more capability and more people. Right. But so for us starting, it was just all Amazon. We, we even looked at stuff and it had a Shopify site and said, Hey, Nope, we won't take it. Right. We're not going to pay you for that because it took a lot more effort for a lot less revenue. Right. I mean, we, you know, we looked at a business doing 4 million in revenue, 3 million from Amazon with two part-time founders doing that. And then a million from Shopify with eight people full-time on that plus a bunch of contractors. And we were like, yeah, we're just not going to pay for that.

Carlos:

Right. So, you know, um, but now as we're larger, we can do that. Right. It's to we're in Walmart, we've got, I don't know, 500 products in Walmart. Right. Um, and we're starting to produce meaningful revenue there. I mean, Walmart is just a fraction, the size of Amazon right now. Let's face it. Um, but we are there, we look at this as it, like, so we're discovering great consumer products and we're able to, to, to get them into our fold with whatever IP is there, whether it's design or a brand on Amazon, whatever. And then the ones that have really a potential it's our job to get them into consumers' hands, wherever they want to shut up. So, you know, and if it's got real potential in Amazon, it could probably work on Mercado Libra, right. If it's the right type of thing, right. It'll work on auto it'll work on, you know, whatever other there's, there's a smattering of other e-commerce sites a little bit like Europe has a real fractionation of these.

Carlos:

Um, but you know, we, we've always looked at this as we will have our products wherever they need to be. If you're a redefining consumer products company for this century. Right. It means it's, omni-channel digital first from the start, you're thinking about those things, right. You're thinking about how they'll interact. Right. I mean, what does it mean? You know, how does it, how does it work when I'm advertising a product on Instagram and I've got it available in a store at a certain zip code and it's on Amazon and it's on Walmart and the pricing might be slightly different. And the proximity to between, like, what happens? Like how do you optimize conversion? How do you optimize sales? You know, doing that kind of stuff. Right.

Peter:

I'm so I'm so interested in the possibilities for the cross-brand, you know, kidding, you know, creating sort of bundles on Amazon, across your brands that, uh, is that, is that maybe you're already doing that, but I think there's much

Carlos:

That is so, so like, I mean, you guys get retail that, that something that would be a huge opportunity right now it's difficult because FBA, we filled, we do mostly fulfilled through Amazon. It's tough to do, right. You can't, you can't do that and you can do a soul together. And we've done that. We use that quite often to bring up another product, right. So we've got a pet product and we want to launch something ancillary and we have a great seller that we just say, Hey, you know, buy these two and get a discount. Right. And so you can sudden you can get a lot of reviews and ratings and lift up a new product really quickly. Right. But doing bundles across, um, that's, that's the only way you can do it now, rather than having a separate list. I mean, we could create a separate listing, put the products together at a three PL and then ship them in.

Carlos:

Right. And that might be something we do in the future, right. With a bundle of art products or something, but we're also working our own warehousing solution. Right. Um, so we already have to do that for some things. Right. And it was on can't handle, everything cost effectively. Right. So we've got a national warehouse solution and we'll be global ultimately, but that we can send out our own stuff as well, because we need to be able to do that for our D to C sites too. Right. Or if you're selling a Walmart, they are not going to let you send it to an Amazon box. I think that might be true. I think eBay doesn't care. I think you can actually ship to eBay sales through with an Amazon box. We're not doing that yet, but, um, but you, so we'll have our own place to do the, do stuff like that as well. I mean, these are all the opportunities. I mean, it's, there's so many opportunities in front of us to do this and everybody who's coming after this. Um, but it's just, it's, it's hard to do. It's way harder than most people think it is to do this.

Peter:

Yeah. I think I saw somewhere that you have a manual of, and I might, I'm sure this number's wrong, but it wasn't something like 15,000 different things I'm sure. Is that number 503

Carlos:

Steps, 503.

Peter:

I knew that was a five involved.

Carlos:

Right. It's actually probably 15 that, like I asked those. So Josh has been using this 500, three step process. It's our integration process. We call it a conveyor belt right. For awhile. Cause it was at one point we, we that's how we defined it on a spreadsheet. But as soon as it went into our, our systems and tech and the way people use it, it's harder to find like, is this one task? Right. You know, so there, there are literally I asked the person who runs it the other day. Um, Jen, and I said, you know, how many steps are there? Is it 503 cent? Like, can't really answer that attraction. Thousands of things we do. But like, you know, some go into a whole bucket that may look like a step, but there's a lot of stuff under it. But yeah, look, we have a standard it's, it's, it's an order to standardize things onto our platforms when we buy something, you know, there's a list of things you gotta do there, basically think of it as best practices, right.

Carlos:

To get the most out of the marketplace ecosystem. Right. Um, and this is the Amazon marketplace today. It will be, you know, it's Walmart also, we have a different set of steps there for D to C there's additional steps there. So we're products in both, but what they do is they squeeze out that initial level of efficiency where people are just frankly, like doing a few basic things wrong. Right. And if you get these right, you know, I mean, you can do a checkbox on your seller central account to say, you know, make this a B2B sale, a lot of B2B sales and the business discount, you know, it's a standard temperature discount, but you know, for a lot of products, if you don't check that you're losing a bunch of sales potentially cause a lot of people, businesses are shopping on there. Now it's just a ton of little things.

Carlos:

It's just hard to do all of them. And we make sure that it's all standardized and understood and we've, we track it all online and a trader project tracking system. And you know, it begins at frankly at LOI and in diligence because we're starting to check off that we, you know, these things, we understand supplier relationship, all this stuff. And then it continues into that integration and that gets us a basic level of improvement. But then the real improvement comes after that. Right. I mean that just lets us know that there's a baseline, we've done everything, approved everything, but then, you know, how do you take something and make, take it from one to 10 X? And you guys asked me for an example earlier about that. So I can give you a couple of fun ones that grew like that. But the, the, the things we do to get, there are a combination of all the supply chain, creative, um, you know, which is photography and, you know, multiple images, the, uh, you know, the secondary images and stuff, video, you know, the proper advertising and the right targeting, all those things we do can dramatically improve something.

Carlos:

So, you know, one on one visits we talk about a lot is angry orange, which is this pet deodorizer spray, which is become a 25 to $50 million brand. But honest, you know, and we bought it doing about a million. I think something like that, right. Um, founder was a great guy in Florida. Um, and, uh, but so we, you know, we did, we did all of these things to it and we've grown it. We've seen it grow, you know, over the last couple of years, I mean 10 X, more than that, right. There's probably 12, 12, 15 acts, and it's still going from there and we're moving into other channels. Right. Um, one of the things you can do nowadays too, is move international, right? International on Amazon. I mean, even just staying in an ecosystem, that's, it's not easy. Everyone just thinks like all the business plans I've seen lot of these competitors, like, Oh, we're just going to take the product and go international, no fricking high.

Carlos:

We've been waiting around for stuff like this for every country. I had to like sign away, sign in blood, some document for Hungary, you know, and I've had to get, I mean, the issues we've had with notaries and banks and all this stuff, you cannot imagine there's a lot of complexity even do that. But now Amazon has simplified that process. Right. They allow you to actually keep the reviews and ratings, which they didn't use to. Oh yeah. It was crazy like a year ago. If you had a product that 5,000 reviews and a 4.8 stars here and you'll want you to, in Germany, it starts at zero zero. You know, they would do a launch thing where they showed the reviews and ratings for the first like 20 or 30 ratings you got, but then they would disappear and you'd have to just dump it on your own. Yeah. You're on your own now they don't. And that's crazy because if I've got a great corkscrew that Americans love, those 5,000 reviews are still relevant and the ratings are still relevant to a German or a Spaniard or someone in Japan. Right. The French though. I mean the, of the French, definitely.

Carlos:

So, you know, those are there's things that, you know, there's so th th th that's, so those are some of the things we do, but it's, it's, again, it's way more complicated than most people think, you know, to feel comfortable. It's just an operational heavy load.

Rob:

Yeah, man. There's so big picture here. How, how much of the, if you look at the 1.8 billion, we said this earlier, but I just want to confirm it's it, um, angry orange or, uh, like, uh, you know, anchor isn't yours, but anchor is that, you know, Amazon three piece seller company that, that IPO last year, which is almost crazy to think about, um, those, the blockbusters are just pure upside, right? Like your business model works with zero blockbusters over any of time. That's, that's, what's so amazing to me. It's like, you know, you mentioned, you mentioned Harry's, um, earlier as a great business, another possible P and G of the future I see as Harry's is, is still very, almost classical P and G it's using different channels to do its branding, but, you know, ultimately it's still one brand, relatively small, small number of skews within the brand, looking for mass market appeal and distribution. Uh, and you know, maybe it's taking an internet first, uh, connect.

Carlos:

Well, it was bought by Unilever, right? It doesn't do that. They own it. Or no. Then it fell through didn't there. Yeah.

Rob:

It wasn't, it wasn't Unilever. It was, um, uh, geez. Yeah, no, w but yeah, it wasn't, I, it did, it did fall through Unilever owns dollar shave club.

Carlos:

Oh, that's right. I got the shave club. I knew it was one of those. Yeah.

Rob:

Um, and so the, but, but, but even so it's like, it looks like that, or dollar shave club kind of, it may be, is using subscription. And it's online first and using video tape to get consumer engagement with dollar shave club still was, you know, you could be acquired by Unilever and still kind of look like Unilever. It would be totally weird for Unilever or Procter and gamble, or any of these companies to pick up, to be competing with you on an emanation.

Carlos:

It just wouldn't happen. Oh, no, it wouldn't happen. Never wouldn't happen.

Rob:

And so, like, it's so interesting to me about that though, is like, if you accept that the world is more of a long tail world and, and that's, that's the future. Maybe they just haven't accepted it. You would think that you'd be taking more bets like you're taking, like the way in the next billion dollar brand is by taking a lot of bets. This is like Sam Gagliardi, again, not to quote him a second time in a podcast, but he has this line where he says, um, target has created $6 billion brands in the last, what three, four, five years. And the top a hundred CPG companies among them have, have created zero new billion dollar brands in that same time period. And it's like, if you're going to create a new billion dollar banner brand from scratch, I would do it your way. That feels like the right way to do it. How much of the investment thesis is there?

Carlos:

No, it's just interesting because, um, I mean, investment thesis is not dependent on Korea.

Rob:

Whoop, can you guys hear me? Yep. I unplugged the editor, sorry.

Peter:

Oh, now we lost you. Oh, there we go. Oh, there we go.

Carlos:

So that's a, that's a great point. But like our business, as you said, is not dependent on billion dollar brands and hits, but they will come out of this. There's no question, but you have to structure a company completely differently. I mean, we are already running 15 to 20,000 products. Right. I want to Amazon and a couple of other places

Peter:

I know. I'm sorry. Can we just stop there for a second? You're already in, you're running 20,000 products.

Carlos:

Well, it's probably less, it's probably more than that listings. Let's say maybe like 12,000 to 40,000 products, but like, you know, you've got a listing for color and size variations and then marketplaces. So it's probably like 50,000 listings that have to be managed, but, um, you know, a P and G like I, and we can run a product that makes a hundred grand a year and do it profitably. Right. I mean, if we can just, they're not structured to do there and how they sell. Right. They've been designed right. To sell to their they're pruning stuff. That's under 50 million, right. Or under a hundred billion like that brand. No good. We can't use it. We're going to focus. It's just different. But you know, it's, it's interesting. You bring up about how they haven't created these brands. It's more about like, you know, every forward thinking company, I hear people talk know, I love listening to invest like the best podcasts, even interviews, great entrepreneurs.

Carlos:

You should be on there. And then, and you guys and stuff like your company, the today, like companies we've, we've learned these lessons. We've seen the digital equipment corpse of the world, just, you know, say, Oh no, one's going to want a home computer. And then just get crushed because they can't get out of it. They, they, they don't let go of their old business and they just try to fight the wave that's coming. I think the smart businesses today all recognize the directional arrow of change and where it's going. And then you gotta be on the right side of that. Like, there's things that just start changing. We're not going back from cloud. There's not going to be, you know, um, there's not going to be people installing, you know, big iron in the office and, you know, to, to host an email server, the old change. Yeah. They just have a resistance to change and it's built into their DNA to defend the moat. Right. So you go to regulators, you go to all these lengths to, to defend a business model. Right. And, but we're see, we all have grown up in the time. We're seeing Uber's in the world, go out there and just go screw it. Now we've got a better solution of people want it. And now you could, again, as we talked about earlier, you can reach those people with overnight or wait a matter of months. Right.

Peter:

I think too, to your point at the beginning, Carlos, what is the fundamental change is the fundamental change in the consumer that they are identifying more and more with, with niche niches themselves. Like they are micro identifying what they care about, what matters to them. And they're forming into these tribes that buy depending on sort of that. And so the massive brand one, they're not paying attention to the channels that are sending out a massive message. They're paying attention to the tribes that they belong to and they get exposed. You know, like if you're looking for the, the agent orange thing, it's because you care about, yeah, I'm sorry, that's the wrong thing. Sorry. I totally different. If you care about, you know, if you care about angry orange, it's because that's the, that's the, the, the problem that you're trying to solve and you're not having those push messages don't work anymore.

Carlos:

Yeah. Well, and you don't have the same medium for it. I mean, right. I mean, they, they, they perfected the ability to use television advertising in a broad way to drive top of funnel interest in large brands, example, walk into the store. I want, you know, time or I want angry work. Right. Whereas you don't know, you go online and say, I want, you know, a pet deodorizer product or I want, you know, something else now what's interesting to see is just that, like the search based like shopping and it look, it's a foundation of, of shopping all over, but there's other mediums discovery-based shopping is becoming very large, right. As you look at China, right. And even on Instagram, Instagram kind of knows what you want before, you know it, you know, and I've, I've found myself buying more and more than over time.

Carlos:

Right. So again, it's understanding all of these new mediums and rather than fighting it and defending a position, you know, and saying, it's, Oh, it's gonna, I can hold on. We just roll with it. We say, okay, you know what, if Amazon's not the big thing in five years, for whatever reason we'll be on whatever it is, whatever is the big thing, then we'll still be selling a ton of products. Right? Like that's how, like, for, to me, the most important thing we're doing is building a resilience in a culture of people that are just better for us. And Amazon says, it's always day one. I say, we're always the underdog. We're always starting. Right. Like, you know, it's people who are want to succeed and are always trying things out, and we're not afraid to cannibalize our own business, but I think most smart businesses nowadays are doing that in their own niche. Right. I'm sure you guys think that way inside of Salsify. Right. Um, you know, and you need to, but that's one of the things that creates this opportunity, right. Is that the other companies just aren't seeing it and then look, it's a big space and it's a big opportunity. There will likely be other people who succeed in other fashions in some form of this, but certainly, you know, it's, it's certainly a lot more complex to do than, than it looks like. Um, you know,

Peter

Is that your moat that, you know, when you look at the people that are running to be the next thrust CEO yeah, yeah. Is, is that, is that yeah, there are, there's tons of them have happening. What is your mode?

Carlos:

Um, you know, people ask me all the time, like I've started a lot of freaking companies, you know, and you guys could send me on this here too, but just getting a company to 35 to 50 people is a feat in itself. Let's just be honest. It really is like working and getting beyond that to a couple hundred, like building, getting a group of people that were disparate interest in whatever job align and go after something together and make it work. That is a feat. It's very hard. Most companies don't make it through that crucible. What's the failure rate of VC backed businesses, non VC, backed, resolve this kind of stuff where I'd say it's at least path, right. And it's, you know, generally look five years out it's way, way smaller than make it. So I'm a very basic level, you know, there there's complexity, just getting that done, just getting there now, learning and executing in this ecosystem is incredibly complicated, man.

Carlos:

And it's gotten harder and harder all the time. So you know, what, what we've built and it's kind of, I hate to like, you know, just go back to a standard trope that everyone talks about. Nowadays data is no small part, you know, part of the picture, right. We buy by getting to where we have at the pace we have. We have learned a lot more about these markets, what, and we've gathered a lot more data about what works, what doesn't and how they interact. And we're always going to be doing that. I think as long as we keep pressing our lead and stay ahead. Right. So, you know, we have, we have, we've spent a lot of time developing these processes and systems in the way of working frankly, and building what I think. And, and I, you know, it was a fantastic culture. Honestly, my teams and people have built this, um, that make the whole thing work and that like, don't underestimate that as a Mo I mean, yeah, it is huge. Yep.

Rob:

Hey man, I'm preaching to the choir here. This is, uh, Derek Sivers has this model where he says a good idea is worth $1, a good idea. And okay. Execution is worth $10. The good idea and good execution is worth $100. A good idea. And amazing executions were $10 million. Right?

Carlos:

Who was that? Again? I love that quote. I read that recently, Derek Sivers. Oh, brilliant. It's awesome.

Rob:

And it's exactly, it's like once you get to a point where if, if you're executing at scale better than the other guys, they could, they could copy you all day long, but it's like, it's not easy to run a big business. It's just not, you just do it better than others. You're going to win.

Carlos:

There, there there's a lot to be said right now we are building more and more advantage in our, like I said, tech and data and things we're doing, but at the same time, like I talk people, you know, what's your secret sauce? How do you do it? I'm like, there's not really a secret sauce. You can go take a class, amazing.com or whatever. They teach you how to operate an Amazon business. And most of the info probably there, but try to do that with 15,000 products and 800 people. Right. And you know, and, and to keep doing it at the pace we are. And then also look, there's a things you gotta know there. You know, I think that's the reason you've seen so many competitors in particular is that M and a constant part of this is easy to conceptualize, right? It's an arbitrage show.

Carlos:

I can buy fairly cheaply. That's great, but it's not like you're buying Bitcoin and waiting for it to go up. You buy a yoga ball business. Now you're selling yoga balls. Dude, you gotta sell a lot of them and you have to do better. You've got to ship them. And what happens when, you know, we had eight containers go overboard and stormy seas, we lost, you know, upteen, you know, thousands of products, you know, what do you do in that situation? Are you prepared for that? Right? Like how do you do all this stuff? And, you know, anybody can put together five or six of these problems, right. But that's the, you know, the wheels start coming off. When you go, you know, depending on size relate 10 20, you start getting hundreds of ACEs and, you know, 10, 20, 30 million in revenue, it's going to be real difficult. I think I see a lot of people have a lot of growing pains. The interesting thing is, you know, I think a lot of people there, there are different levels of success, right? So, you know, people can, you can do that and probably hold it together. And, you know, eat got a 2% margin. And, but you're not going to continue to garner investment and interest in the business doing that. Right. Right. It's doing it with high margins, profitability prove that you can really build a business that that's a moat. That's tough. Yeah.

Rob:

This is, this is what I think the larger brands, I think, understand how disruptive this is to have. It's, it's different to have all the marketplace sellers that have been operating on Amazon, like have been operating on Amazon versus having, um, a really, really potent well-funded operator at scale that's growing quickly. Um, it, all of a sudden enter the space. It feels like that's, that's a major shift in the ecosystem. And it's a major shift in, in a particular way that I, I think should be threatening to larger, to larger, more established older companies, which is that you're just going to fragment their market share way more aggressively than, than would have happened. Otherwise, you know, a point here, a point there for you, um, a point of market share might be like 300% growth in a particular product line, you know, for, for one of them, for one of these established companies losing one point of market share is not something you ever want to say in a Mar in a 10 K. Right. And so, um, if you've got 20,000 skews or 40,000 or 80,000 or a hundred thousand or whatever, the, the end game here is on skews over the next one, two, three, four years, um, having a, a well-executed business on that set of products is, is gonna, it's going to hurt some of the incumbents.

Carlos:

So, you know what, so I count five, six, seven, eight, nine, 10, 11, 12. Twenty-five 35 years. That's how I'm thinking about this. Right. I think in 40 years, like we are not building something just to, Hey, it's cool. And let's go, that's it. Um, so, you know, I, it's been interesting because I've been counseling my teams since the start, like, you know, literally when we were, when we had our first few businesses and we had probably 48 since I said, guys, I know we're building a process. I said, guys, build this process for a hundred thousand ACEs. I was like, what? And I said, no, think about a hundred thousand. Yeah. How are you going to do what you're doing is not scalable. So think about it that way we've had that's, that's that scaling challenge. We, one things allowed us to do it quickly.

Carlos:

Can you get here slowly? Sure. Mean there's, there's lots of room, but like, you know, so I'm thinking about the time when we're running millions of products, right. Literally millions and selling them in a hundred different places, right. Multiple marketplaces around the world, you know, direct, even retail outlets, whatever. And that's a massive complex machine and beast, but that's what we're going towards. Right. And, you know, then you start to really understand movements and consumer demand, you know, um, you know, you start to see trends happening before people know they're happening. It feeds into your product launch process, right. We're going to launch a hundreds of products this year. Right. So, you know, because we're learning from what we have and what works, right. And now we're building a huge launch capacity and we've already started doing that. And it's, you know, been extremely successful. But you know, you start to see that again, you get this data, you get this learning, you get this knowledge and now, you know, what we're doing is it's, it's R and D and understanding what people want, what they're looking for, as you said, bottoms up brand building and brought up bottoms of product building and building. And that's, that's really like, it is revolutionary change in the space, right.

Peter:

To the war game scenario where you're thinking through all right, 20 years from now, when we're the new P and G, maybe you're the new P and G now, but I mean, 20 years from now, when you're at that scale, you're talking about showing up everywhere across the globe. Um, do you ever think about, wow, what will our Achilles heel be? What will our, you know, like what do you do to keep, to keep this?

Carlos:

No, you know what, that's a great question, Peter. And it's like the, it's what I was just talking about a minute ago, it's building into the culture, a fearlessness about experimentation, innovation and cannibalization of our own business. Like looking at what's out there and not being, you know, being willing to walk away from stuff. Right. And we've had to do this from the start being diligent about those things. But I think, I don't know what it'll be, you know, I don't even know what is going to be the big, you know, e-commerce thing in 12 months. I'm crazy to say I do. Right. Um, but, uh, but we have some ideas we're trying to look around those corners and see, but you know, there's always this, this hard of this and this why we keep going, but we need to build that all comes from culture.

Carlos:

That is the company that is the people. I mean, a company is only a group of people executing on something to go after an idea together, whether it's Tesla or Amgen or us, like, that's what it is. And it's all about that. So I spent a whole, you know, a good part of my time thinking about our, the, the, our people, our culture, how we can do more for them, how we can make them more successful, give them more tools to be more successful and incentivize them in ways that make them really want to do that and want to be here. Right. Um, and the best, you know, the best, uh, I mean, we, we were one of the top 20 Glassdoor companies to work at. Right. Which is great. I was very happy and proud to get that, but, you know, our recruiter told us someone else, and they were one of our recruiters or our friend of, one of our recruiters recently.

Carlos:

They said, you know, all of these companies come out of, they tried to hire for three ICO's and the recruiter said, Oh yeah, I don't even call there anymore. They're all way too fricking happy dark people get called constantly. Right. I loved hearing that. And that's, and that's our job right. Is to do that. Right. And that's, what's going to protect us and make us successful. And it gets hard, the bigger you get. I mean, yeah. I mean, but it's, you gotta keep fighting that fight. I mean, Amazon has done a pretty amazing job of this. Right. And, you know, they're just finding ancillary, you know, businesses they're even orthogonal in cases you would think, I mean, how has AWS makes sense and Amazon, but when you understand Amazon, the machine, it is, it makes sense. Right. Um, you know, that I strive to do something similar to that.

Peter:

Well, Carlos, I, we can't thank you enough for, you know, we stocked you for months trying to get to talk to you and, and both Rob and I are. So just delighted to have the chance to talk about, you know, like you said, the, the, the PNG of the next century and what it, of this century and what it takes to do that, it's really inspiring. And thank you so much for, for just sharing some of this with us. We're really grateful.

Carlos:

Thank you so much for having me on you guys. And again, I really, you guys have been the most insightful, um, commentators and, uh, people analyzing what we're doing and really understand it. So intimately, as I said, I'm just going to have Rob start, come give you the pitches. It was perfect, but I really enjoyed it. I really appreciate it. And this was fun.

Peter:

Thanks to Carlos for joining us. If you enjoyed this episode, please share it with a colleague or leave us a review wherever you get your podcast. Thanks for being part of our community.