The Truth About E-Commerce Rollups - Ghassan Halazon of EMERGE

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I think in retrospect, I was probably having too much fun in university to get serious about ranking high and making real money.
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But at least the aspiration was there.
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I did some years on Wall Street with Citigroup or Citibank.
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So I was even in training at banking thinking about, you know, how do I get out of here?
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How do I go into the quote unquote real world?
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And the first venture of my own was in 2010.
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It was the reason I left New York.
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And it was at the time Canada's first and ultimately largest daily deals business.
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So if you're familiar with Groupon and that wave of deal sites, we left
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That first sort of startup experience, which is about a four-year ebb and flow, walking away thinking there's got to be a smarter way to scale e-commerce companies.
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Because at the time, that business, our first venture was...
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backed by some big capital, big expectations, the space fizzled, and therefore the expectation from the venture crowd was very different.
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No more money coming in to support it, clean it up, exit it at any cost, and let's get it over with.
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And so the idea came along for Emerge with this notion that with the rise of Shopify and other e-commerce enablement software companies and technology companies, there was starting to be this new world of bootstrap.
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little profitable e-commerce businesses all over the place.
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And so it was that idea that instead of going and throwing a boatload of capital at a bunch of losses to maybe make it one day, why not go buy stuff that's already working through day?
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And that was the essence of Emerge as it started.
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Consumers are fickle and they leave you if you don't do a great job.
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And so you can't possibly just buy up 10, 20, 50 of these things and sit back and raise prices.
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You actually got to fight for each of these things.
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What can you say to people that are looking to launch new e-commerce brands?
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E-commerce is about hands-on combat.
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It's a brand-driven model.
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E-commerce is one of the most difficult cutthroat sectors of all.
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It's a really low-margin business.
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It is extremely demanding.
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It takes a crazy amount of grit.
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to get to a certain level of scale.
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And from what I've seen, even if you do it in a bootstrap way, and say you make a million dollars in profit one day, you've got to take that money and pour it back into inventory.
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And so the amount of money you can take out of the business as a bootstrapper is really low.
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Hi, my name is Ghassan Halazon and I'm the CEO and founder of Emerge Commerce.
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We are an acquirer and operator of e-commerce brands across North America.
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Today on the Start Well podcast, I'll be sharing a little bit about my journey over the past 15 years of buying, building, selling and restructuring e-commerce brands.
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All of our learnings and mistakes and giving you an unfiltered view of all we've been through.
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So Ghassan, second time at StartWell, welcome back.
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I think the last time you were here, you were on in our other studio recording podcast as a guest with one of our clients, right?
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Right.
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And now that you've seen a little bit more on the walk up to the fourth floor, you know, we were talking off camera a little bit.
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What's your take on StartWell, by the way?
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What's your lens on what we have here going on?
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Yeah, you know, as I shared with you walking in, I was like, you know, there's definitely sort of a vibe that I resonate with.
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It's a boutique-y sort of vibe.
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And, you know, it feels like a place with soul.
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That's what I sort of...
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I thought the minute I walked in, you know, the lighting is perfect, the high ceilings, the, you know, all white lobby, the coffee, the whole experience, you know, is something I, you know, I've had a pretty crazy day today.
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If you haven't noticed and walking in was pretty relaxing, I will say.
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Honestly, and this is the thing that we kind of strive towards, right?
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Is that like creating a place for people, the third place.
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It's not an office.
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It's not the home.
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But for the most part, you know, everyone professionally can like relax and be themselves here, right?
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Which I think in business is very needed.
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Yeah.
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They can get combative and crazy.
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Um, and some of that we'll dig into just now.
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So, okay.
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I want to get the backstory on career wise.
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Uh, what brought you to running a public company, but let's start like, I mean, what was the first thing you did for money?
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The first thing I did for money was back in university.
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I studied at McGill University.
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Hey, my alma mater.
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That's where I went.
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I didn't know that.
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Yeah.
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I signed up to one of those student painting franchise companies.
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It was the Quebec-based company sort of franchising for students to run around and paint paintings.
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And that was my first experience.
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I think, you know, obviously I didn't know what the hell I was doing.
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I was eager, if you want to extrapolate, I was eager at a very early age to run my own business, to be entrepreneurial.
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I think in retrospect, I was probably having too much fun.
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in university to get serious about ranking high and making real money but but at least the the aspiration was there the idea of running a business and knocking on doors and i did some of that and we painted a few houses or apartments you know along the way and what were you studying at miguel uh bachelor of commerce it was like sort of and what year was this
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It was 2002 to 2006.
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Okay.
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So you were right when I left.
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So I went to McGill in 98 to 2002.
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And I started in a B-Com.
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And my story is that like within five minutes, I was like, get me the hell out of here.
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I didn't want to be in the Bronfman building for every class.
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Right.
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And it took me two years because of my grades, you know, because I, in the first semester, first year, I just didn't go to any management classes.
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Like as soon as I looked at a T account, I was like, this is not for me.
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You know, this is all book stuff.
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I can learn book stuff outside of university.
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Yeah.
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So I jetted out of there and I went into arts and I did a double major in religious studies, comparative religion.
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No one.
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Yeah, Hinduism, Buddhism.
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And then the other thing was a multidisciplinary study, which at McGill is like as avant-garde as you can go.
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I don't know how I got a degree in this, but in looking at the evolution of electronic music in urban context.
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Come on.
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Pretty crazy, jazzy stuff, you know.
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Credit to them for offering such.
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Honestly, yeah.
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But yeah, I get your point.
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I mean, Montreal was the place.
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It wasn't so much about McGill.
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It was about the city, right?
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100%.
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Yeah.
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We had, I always say we had, some of my best friends were studying in, you know, Miami and LA and some of these like really cool places to be.
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And I just remember spring break in the US was, you know, sometime in Feb, I guess similar to...
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where we had it.
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I don't know if it was the exact time, but they would all leave Miami and LA to come party in Montreal in February when it was freezing.
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That's how good it is.
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That's how good life was in Montreal.
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So true, man.
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Amazing.
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But yeah, what a place to get inspired and get started.
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Uh, and so post that, like, as you got a job, what did you, did you do the traditional management thing and like, were you a consultant?
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Yeah, no, I, you know, I did some, I did some years on wall street, uh, with Citigroup or Citibank.
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Um, I always remember that during the early part of it, during training, there was a kind of a two month training program and we would sit in a...
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sort of a classroom, if you will.
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And, you know, I would always sit in the back and I had my little notebook and I would often be drawing and writing different ideas
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So I was even in training at banking thinking about, you know, how do I get out of here?
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How do I go into the quote unquote real world and do my own thing?
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And I know you and I were talking a bit about, you know, the Startwell world and different directions you can take it out.
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But interestingly, early days, I really had some aspirations in the boutique hotel world and had some family members.
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in that business back in the Middle East.
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And so I was always intrigued and interested in hotels.
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And, but anyway, I was even as early as, you know, in my early days in training and banking, I was thinking about, okay, how do I get started?
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And what was it?
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What was the first kind of venture of your own?
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The first venture of my own was in 2010.
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It was the reason I left New York and left Wall Street.
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And it was at the time Canada's first and ultimately largest daily deals business.
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So if you're familiar with Groupon and that wave of deal sites that popped up back in the day.
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um we were the largest um player in Canada for some years and I I basically the way it started was I met a couple of um I met a couple of uh young guns that were taking a stab at it here in Toronto and not red flag deals no actually not red flag deals we have some history with them it's
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A couple of guys, young, early 20s.
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I wasn't even mid-20s back then.
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And I flew in.
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We had great chemistry.
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And before you know it, we all quit our jobs and we partnered on this venture.
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And we saw very, very quick and aggressive traction in this model.
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I think the allure back then was that the deal space didn't really require much...
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like tech.
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It was us running around sourcing local deals from restaurants and spas.
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So it was very sales driven, which is something we and I had strength in and natural tendencies.
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And then it was sort of who would get the word out faster and build out a database.
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So things were simple back then.
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And that's the exact reason why that model was cloned hundreds of times.
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But I think we're fortunate enough to kind of separate ourselves from the pack.
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We went on Dragons then before it was kind of a thing.
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And we did all sorts of guerrilla marketing tactics to get the word out.
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And then we ultimately ended up being a venture-backed company and we scaled that business
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120 employees, maybe it was 50, 60 million in top line at the peak.
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Unfortunately though, the Groupon model fizzled and Groupon itself was a victim of its own success.
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The deal space was very high churn.
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It didn't really work well long-term for merchants.
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And it was sort of attracting sort of a deal hunting audience.
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And there were some tough lessons learned and many worse stories along the way.
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But we ultimately kind of
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merged with our largest competitor, kind of cleaned that business up to the best that we could and packaged it up for a sale.
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But we came out of that, you know, learned a lot and much stronger for what was to come next.
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Which was?
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Which was Emerge, which is where we are today, right?
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Oh, this is interesting.
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Okay, I thought there'd be some more, I mean, not that there aren't enough lumps and battle scars out of that experience because it sounds pretty drama to have to see something, you know, go...
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Right.
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Up and down again.
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Right.
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But then what's the...
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Okay, so let's talk about Emerge because what was your setting out to create it?
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Like what was the vision for what it was going to be?
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Because this is also... Am I right that this is...
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During pandemic, pre-pandemic?
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Right, pre-pandemic is when we launched.
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I think, just kind of backtracking a second, we left that first sort of startup experience, which was about a four year ebb and flow, walking away thinking there's gotta be a smarter way to scale e-commerce companies.
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Because at the time that business, our first venture was,
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backed by some big capital, big expectations, the space fizzled, and therefore the expectation from the venture crowd was very different.
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No more money coming in to support it, clean it up, exit it at any cost, and let's get it over with.
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And what year is that?
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This was around 2013.
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Okay.
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2014, yeah, something like that.
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So I kind of walked away thinking...
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wait a minute, like this idea of just raising boatloads of venture capital and maybe being one out of 10 startups that fly high.
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And if you're not, you're doomed.
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That's a broken model.
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It may not be for the VCs, but it's a broken model for startups to think, you know, yeah, you want to be opportunistic and adventurous.
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But if you think you're going to be that one out of 10,
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you know, X that flies high, then, you know, probably the probability isn't on your side.
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No, it's not.
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So I said, you know, how can we reverse engineer a more sustainable, profitable model in e-commerce, which is notorious for low margins and a lot of losses along the way, which is typical for Silicon Valley-backed companies, right?
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And so the idea came along for Emerge with this notion that with the rise of Shopify and other e-commerce enablement software companies and technology companies, there was starting to be this new world of bootstrap.
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little profitable e-commerce businesses all over the place, right?
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So whereas back in the day, you couldn't find a four, seven, nine-person shop with a million dollars in EBITDA,
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doing their own thing, never having raised capital, and primed for a potential acquisition where we can buy rather than build from the ground up because it was a more cost-effective way to acquire proven platforms, even if they were relatively small.
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And so it was that idea that instead of going and throwing a boatload of capital at a bunch of losses to maybe make it one day,
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why not go buy stuff that's already working through day?
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And that was the essence of Emerge as it started.
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And this is what, sorry, is it as early as 2013, 2014?
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Right, no, it's probably a couple of years out.
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You know, by 2016 is really when we made our first acquisition at Emerge.
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This is still before revenue-backed, you know, finance for that sector was a thing, right?
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Right, it was well before that, yeah.
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Okay.
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So this was sort of my early vision to roll up in e-commerce profitable, you know, businesses.
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This is also probably a couple of years, I don't know, you tell me, before Shopify had that Shopify store marketplace.
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You know, Shopify was a thing.
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We knew of it.
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May have not been anywhere near where it was by the time it, you know.
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No, but I mean the marketplace that they have for stores.
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Oh, right.
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Yeah, well before.
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Yeah.
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Okay.
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So this idea of like asset roll-ups in the e-com space was almost like hypothetical at this time.
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Yeah.
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It was basically non-existent.
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And listen, I think there was a fair amount.
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There was probably like, as far as I was able to find, about $20 billion poured into e-commerce consolidation and roll-ups.
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And even that in and of itself has taken many turns because not all models are equal.
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But I will consider, and I will say that we certainly were...
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founding members of the e-commerce roll-up space, if that's what you're getting to.
215
00:17:02.467 --> 00:17:03.028
Yeah, yeah.
216
00:17:03.148 --> 00:17:04.288
Yeah, we certainly were.
217
00:17:04.388 --> 00:17:17.135
And I don't know anyone who started buying, I'm sure there were some, but I don't know of any that started with this idea of buying up e-commerce businesses sooner than emerging.
218
00:17:17.295 --> 00:17:25.220
Okay, so then the initial formula for the company, I mean, the mandate was there, but how did you raise the capital to go out and try and buy things?
219
00:17:25.852 --> 00:17:31.335
Yeah, so initially we started in our early DNA, which was the deal space.
220
00:17:31.355 --> 00:17:37.398
We went and picked up an asset from Torstar, the parent company of the Toronto Star.
221
00:17:38.018 --> 00:17:43.881
And we acquired a company called shop.ca out of a CCAA process, out of a bankruptcy essentially.
222
00:17:44.422 --> 00:17:49.744
So we were kind of piecing together de-stressed assets, I would say, in our early iteration.
223
00:17:50.064 --> 00:17:51.525
And the reason for that's very simple.
224
00:17:53.406 --> 00:18:03.474
Those were the cheapest assets to pick up to get us started because it was really hard to raise capital, to get going, to buy a bunch of businesses because no one understood it.
225
00:18:03.534 --> 00:18:04.395
No one was doing it.
226
00:18:05.436 --> 00:18:08.999
And we came out of a really difficult situation in my earlier startup.
227
00:18:09.759 --> 00:18:20.023
So the best we could do was go after nitpicking or sort of hunting for de-stressed businesses that we felt could be worth more than we could find.
228
00:18:20.624 --> 00:18:23.365
De-stressed is a really difficult place to be.
229
00:18:23.405 --> 00:18:24.325
I would not advise it.
230
00:18:24.485 --> 00:18:26.526
It's a lot of work.
231
00:18:26.886 --> 00:18:32.689
And whether it's a $500,000 acquisition or a $50 million acquisition, it's just too much work.
232
00:18:32.709 --> 00:18:34.890
You might as well buy stuff that's bigger and more meaningful.
233
00:18:35.170 --> 00:18:37.631
So what was that early experience with Shop Dosier?
234
00:18:38.073 --> 00:18:43.294
You know, we picked little pieces up and- But was it just a website or was there a company?
235
00:18:43.314 --> 00:18:57.698
It was a small marketplace that was much larger a while back prior to it going through a restructuring, but it was a, you know, shop.ca had raised $70 million or so and was supposed to be the Amazon of Canada.
236
00:18:58.598 --> 00:19:02.463
Which in and of itself is a really tricky proposition.
237
00:19:02.743 --> 00:19:03.384
Yeah.
238
00:19:03.704 --> 00:19:04.806
Geo-specific.
239
00:19:05.246 --> 00:19:05.466
Right.
240
00:19:06.087 --> 00:19:07.469
Marketplace website.
241
00:19:07.709 --> 00:19:07.909
Right.
242
00:19:08.290 --> 00:19:11.353
How do you own the geo on the internet?
243
00:19:11.373 --> 00:19:11.674
You know?
244
00:19:11.854 --> 00:19:12.695
It's a big problem.
245
00:19:12.855 --> 00:19:16.539
And anything against Amazon, like head-to-head, is tricky to begin with.
246
00:19:16.559 --> 00:19:18.642
Right, because they'll just burn as much money as they want to.
247
00:19:18.850 --> 00:19:23.131
It was an audacious vision, but I think at the end of the day, obviously, it didn't pan out.
248
00:19:23.171 --> 00:19:25.332
And, you know, we were fortunate to pick up those assets.
249
00:19:25.432 --> 00:19:37.175
I don't even think those early years were rounding errors in our world today because, you know, we were like, as I said, just grabbing on to few pieces of businesses that we could get a hold of and raise money.
250
00:19:38.155 --> 00:19:39.616
capital on a per deal basis.
251
00:19:39.636 --> 00:19:43.819
So we'd go sign an LOI, run back to investors, say, hey, we think we should buy this.
252
00:19:43.839 --> 00:19:45.080
And then we think we should buy that.
253
00:19:45.100 --> 00:19:46.661
We just landed, this thing landed on our lap.
254
00:19:47.181 --> 00:19:50.323
And so those first few years were just a lot of scraping things together.
255
00:19:50.343 --> 00:19:53.926
Yeah, running around to try and just- Tough, a lot of work, tough.
256
00:19:54.026 --> 00:19:56.227
And underfunded, even worse, right?
257
00:19:56.267 --> 00:19:59.569
So extremely hectic and stressful years.
258
00:20:00.450 --> 00:20:00.730
But-
259
00:20:02.171 --> 00:20:08.777
We managed to do quite a bit with very little early and gain trust.
260
00:20:09.077 --> 00:20:19.666
And by taking some of these distressed businesses and turning them around, for example, WagJag, which was a business owned by Tourstar, it's kind of like the Groupon of Ontario kind of thing.
261
00:20:20.227 --> 00:20:21.788
So kind of similar to my old business.
262
00:20:22.128 --> 00:20:27.893
So we started there, we proved ourselves, we gained some trust, and then the deals started getting bigger.
263
00:20:28.694 --> 00:20:34.781
So eventually we got to Underpar, which is the leader in golf experiences and tee times.
264
00:20:35.662 --> 00:20:39.266
And that, for example, was a $9 million acquisition.
265
00:20:39.326 --> 00:20:46.954
And so we would start raising capital and matching it with debt and going out and acquiring these bigger and bigger businesses.
266
00:20:47.335 --> 00:20:49.597
And I think things really took a turn.
267
00:20:50.798 --> 00:20:57.823
around the time the pandemic happened, because for a moment, e-commerce became the hottest thing on earth.
268
00:20:58.563 --> 00:20:59.604
Everyone was locked down.
269
00:21:00.305 --> 00:21:01.625
Everyone was shopping online.
270
00:21:02.386 --> 00:21:08.030
And businesses in e-commerce and parallel industries like Zoom and Netflix,
271
00:21:08.550 --> 00:21:13.713
you know, kind of Peloton, all the big- I heard it was like infinite scale opportunity.
272
00:21:13.773 --> 00:21:14.653
Right, right, right.
273
00:21:15.154 --> 00:21:17.075
Infinite time, exactly.
274
00:21:17.295 --> 00:21:22.778
And we were at the heart of it and money started getting thrown at us because we'd done a few deals and things were working in our favor.
275
00:21:23.618 --> 00:21:35.025
And that's where the allure and the temptation of going public, especially in Toronto, you know, the Toronto Venture Exchange and sort of that whole ecosystem that exists to take companies public via reverse mergers.
276
00:21:35.866 --> 00:21:38.650
So it was presented to us and we had some investors.
277
00:21:38.710 --> 00:21:40.272
Yeah, yeah, exactly.
278
00:21:40.913 --> 00:21:41.574
And we said...
279
00:21:43.151 --> 00:21:46.852
We're here to buy and buy bigger businesses.
280
00:21:46.892 --> 00:21:49.353
And if we really want to do this, this is it.
281
00:21:49.413 --> 00:21:50.333
This is our chance.
282
00:21:50.393 --> 00:21:59.536
So, you know, it was very much a sense that, you know, we were going to get top valuation, you know, premiums.
283
00:21:59.596 --> 00:22:01.196
We were going to raise capital easily.
284
00:22:01.236 --> 00:22:04.597
We were going to go out and acquire big and growing companies.
285
00:22:04.617 --> 00:22:07.178
So there was a lot to be excited about.
286
00:22:07.198 --> 00:22:07.658
Sure, yeah.
287
00:22:08.158 --> 00:22:20.048
And I want to say we went public, TSXV Ecom, on the venture in late 2020, so at the peak of the pandemic.
288
00:22:20.688 --> 00:22:32.538
So at the time of going public, I think we had $30 million in gross sales, what we call gross merchandise sales, and about $10 million in net revenue revenue.
289
00:22:34.638 --> 00:22:39.820
So by venture standards, somewhat small or medium sized.
290
00:22:40.120 --> 00:22:40.360
Sure.
291
00:22:40.860 --> 00:22:53.103
Within the course of that first year, we scaled the business up from 30 million to 120 million in gross sales and about 55 to 60 million in revenue at the peak.
292
00:22:53.903 --> 00:23:00.187
And we went out and we bought bigger and bigger businesses in the pet space, in the outdoor gear space.
293
00:23:00.867 --> 00:23:03.969
Obviously, we were in experiences, travel, golf, grocery.
294
00:23:04.830 --> 00:23:08.412
And so we kind of built this eclectic brand portfolio.
295
00:23:08.792 --> 00:23:11.074
And the idea was all of them are profitable.
296
00:23:11.254 --> 00:23:13.155
All of them are growing very fast.
297
00:23:13.835 --> 00:23:16.097
You know, what could possibly go wrong?
298
00:23:17.417 --> 00:23:17.638
And...
299
00:23:18.627 --> 00:23:21.391
And wait, so we'll come back to this because that's a good cliffhanger.
300
00:23:22.273 --> 00:23:26.359
The capitalization, how did that work when you went public?
301
00:23:26.419 --> 00:23:29.864
Like how much capital came back into the company to be able to buy these assets?
302
00:23:29.884 --> 00:23:30.025
Right.
303
00:23:30.554 --> 00:23:30.914
Yeah.
304
00:23:30.974 --> 00:23:32.957
How much did you raise from the public market?
305
00:23:33.197 --> 00:23:38.863
So through a few rounds around the time of the go public and shortly thereafter, we raised about 20 million bucks.
306
00:23:38.923 --> 00:23:43.647
We matched them with another, I want to say 20 to 25 million in debt.
307
00:23:43.888 --> 00:23:44.588
Okay.
308
00:23:44.608 --> 00:23:46.230
So we had a decent amount of capital.
309
00:23:46.470 --> 00:23:50.895
And the way we were structuring these acquisitions and payouts was-
310
00:23:51.435 --> 00:23:53.877
you know, let's say 50% or so upfront.
311
00:23:54.498 --> 00:23:55.179
Okay.
312
00:23:55.319 --> 00:24:06.128
You know, another 25 or 30% over three to five years in terms of, you know, consideration and earn out and deferred consideration and performance earn out and stuff like that.
313
00:24:06.669 --> 00:24:10.252
And maybe a sliver of equity, like a sweetener of some sort, 10 to 20%.
314
00:24:11.073 --> 00:24:14.596
So that didn't mean we had to pay all of it upfront, right?
315
00:24:14.696 --> 00:24:16.417
And so the 45 would even go further.
316
00:24:17.138 --> 00:24:19.239
in terms of our ability to go out and buy.
317
00:24:19.499 --> 00:24:19.960
Scrappy.
318
00:24:20.140 --> 00:24:21.721
Yeah, it was scrappy.
319
00:24:21.841 --> 00:24:24.242
And actually the structuring piece, I think we got right.
320
00:24:24.342 --> 00:24:30.366
And it actually protected us in downside scenarios we talk about soon, as we'll talk about.
321
00:24:30.466 --> 00:24:34.308
But I think what didn't go in our favor was the macro.
322
00:24:34.929 --> 00:24:45.635
So suddenly you find ourselves as, yeah, we were the largest e-commerce aggregator in Canada and one of the largest in North America.
323
00:24:46.375 --> 00:24:52.338
But the timing was tough because everything that we bought turned out to be at the peak of the pandemic.
324
00:24:52.379 --> 00:25:05.446
And as you know, the cycle completely reversed and all these artificial highs across all of e-commerce and parallel industries, everyone sort of came down from that high.
325
00:25:05.466 --> 00:25:07.206
It was a really difficult hangover.
326
00:25:08.247 --> 00:25:13.252
And the issue is when you finance these acquisitions with debt like we did.
327
00:25:13.372 --> 00:25:14.794
Right, and the cash flow dries up.
328
00:25:15.014 --> 00:25:21.641
Right, but at the same exact time, interest rates went up to astronomical levels too, right, globally.
329
00:25:22.501 --> 00:25:25.544
So the combination of...
330
00:25:26.225 --> 00:25:33.651
of declining revenues and profits with rising interest rates on a debt-fueled roll-up were catastrophic, right?
331
00:25:34.031 --> 00:25:45.900
And so suddenly it didn't matter that our profits or our EBITDA was four or five million when our interest payments needed to be six or seven million, right?
332
00:25:46.020 --> 00:25:47.181
So that's the conundrum.
333
00:25:47.361 --> 00:25:47.661
Yeah.
334
00:25:47.841 --> 00:25:55.527
And then added to that, from a people's perspective, imagine, you know, I'm the CEO and founder of Emerge, so I'm sitting at the holding company level
335
00:25:56.427 --> 00:26:02.953
And I have all these disgruntled CEOs of the portfolio companies that aren't going to reach their earnouts anymore.
336
00:26:03.133 --> 00:26:03.353
Right.
337
00:26:03.914 --> 00:26:10.640
And so, and now they have to tell their teams that whatever they promised them in turn wasn't going to happen.
338
00:26:10.720 --> 00:26:12.922
So it's essentially a Titanic.
339
00:26:13.102 --> 00:26:13.663
Yeah.
340
00:26:13.803 --> 00:26:17.546
That needed some major, major shifts and adjustments.
341
00:26:18.987 --> 00:26:19.968
How'd you keep it afloat?
342
00:26:20.889 --> 00:26:22.530
Or you had to call some stuff.
343
00:26:23.779 --> 00:26:43.051
Well, I think the first piece of the equation in what was ultimately a successful multi-year turnaround that we're finally coming out with, the first piece of the equation was to 100% be sure that I was up for the challenge, right?
344
00:26:43.071 --> 00:26:43.431
Of course.
345
00:26:43.451 --> 00:26:48.895
Because when you're sitting, to give you a sense, when you're sitting against a mountain
346
00:26:49.775 --> 00:26:53.837
of 32 million in debt, which is where we were.
347
00:26:54.137 --> 00:26:55.738
Yep.
348
00:26:55.758 --> 00:27:00.601
And with plummeting revenues and profits across the portfolio.
349
00:27:01.662 --> 00:27:07.565
And the share price that was once, you know, 150, 200 million dollar market cap at the peaks,
350
00:27:08.345 --> 00:27:11.228
coming all the way down to borderline bankrupt.
351
00:27:11.428 --> 00:27:13.690
Yes, you couldn't recap or raise from the market.
352
00:27:13.930 --> 00:27:15.751
Right, not at those levels, right?
353
00:27:16.052 --> 00:27:16.592
Yeah.
354
00:27:17.473 --> 00:27:19.535
And so look at all of that.
355
00:27:19.735 --> 00:27:23.218
The first step of the equation is to say, okay, am I up for this?
356
00:27:23.938 --> 00:27:26.961
Am I ready to really roll my sleeves up and fight?
357
00:27:27.641 --> 00:27:27.881
Right.
358
00:27:28.001 --> 00:27:33.383
Because if I didn't have the heart or the drive to do it, no one else around me would do it.
359
00:27:33.863 --> 00:27:35.183
Everyone around me wrote it off.
360
00:27:35.723 --> 00:27:42.785
Everyone, even even, you know, sort of close mentors, friends of mine saying, look, you're an entrepreneur.
361
00:27:42.805 --> 00:27:45.226
You're going to get back up and do something else.
362
00:27:45.286 --> 00:27:47.166
And everyone will understand.
363
00:27:47.427 --> 00:27:47.667
Right.
364
00:27:49.247 --> 00:27:59.654
I don't know what it was about the challenge and almost the sense of responsibility to wake up in the morning and say, no, that's it.
365
00:27:59.754 --> 00:28:01.115
We're going to dig our way out of this.
366
00:28:01.375 --> 00:28:02.415
Yeah.
367
00:28:02.435 --> 00:28:04.397
And I think the minute I made that decision,
368
00:28:05.137 --> 00:28:19.224
And the minute I made sure that my top lieutenants and partners were on the same page about what we needed to do and why we were doing it, I think somehow magically everything started to fall into place.
369
00:28:19.884 --> 00:28:20.865
But a lot had to happen.
370
00:28:20.885 --> 00:28:23.346
It wasn't like an overnight, we're going to do it and we just did it.
371
00:28:23.966 --> 00:28:33.210
And just to fast track to where we are today, we took 32 million in net debt down to about 4 million.
372
00:28:33.511 --> 00:28:33.671
Wow.
373
00:28:33.691 --> 00:28:33.811
Wow.
374
00:28:34.691 --> 00:28:39.675
We did so by selling off a bunch of non-core businesses and doubling down where we were winning.
375
00:28:39.916 --> 00:28:41.357
Okay.
376
00:28:41.777 --> 00:28:51.446
And then in those focused areas, we had to rethink how we incentivize staff, you know, the core group that remained, and how to reignite growth.
377
00:28:51.466 --> 00:28:55.189
Because we couldn't live in a world where we couldn't continuously decline forever.
378
00:28:55.209 --> 00:28:56.730
We had to kind of start coming back up.
379
00:28:56.750 --> 00:28:57.030
Right.
380
00:28:57.050 --> 00:28:57.231
Right.
381
00:28:57.911 --> 00:29:06.118
And I always say the hardest thing in business is not only reversing a negative growth trend, but doing so while you're also becoming profitable.
382
00:29:06.278 --> 00:29:06.978
And we did both.
383
00:29:08.199 --> 00:29:10.221
And that didn't happen by accident.
384
00:29:10.441 --> 00:29:14.284
That was methodical and it took a lot out of us to get there.
385
00:29:15.385 --> 00:29:16.606
Yeah, and it's a continuum, right?
386
00:29:16.706 --> 00:29:18.007
So there's no there.
387
00:29:18.748 --> 00:29:18.968
Right.
388
00:29:20.789 --> 00:29:21.029
Right.
389
00:29:21.130 --> 00:29:21.810
But you know what?
390
00:29:23.031 --> 00:29:23.972
Where we are today...
391
00:29:26.102 --> 00:29:31.164
is 100% in offense mode finally, right?
392
00:29:31.204 --> 00:29:35.686
Like I can say it because we're not, I'll never say we're out of the woods.
393
00:29:35.866 --> 00:29:38.807
Because I don't want to look like an idiot if anything goes wrong that we didn't expect.
394
00:29:38.827 --> 00:29:40.027
Well, you can't control the market.
395
00:29:40.047 --> 00:29:41.108
You can't control the market.
396
00:29:41.608 --> 00:29:50.071
So the trickiest thing is like, I guess, okay, so I got to ask this, at this point though, like, so how many brands are you operating?
397
00:29:50.911 --> 00:29:51.171
Yeah.
398
00:29:51.211 --> 00:29:57.072
So by going back on the offense, we made an acquisition last week and last year.
399
00:29:57.113 --> 00:29:59.553
I was about to say last year, but then I said, there's also another one last week.
400
00:30:00.313 --> 00:30:02.194
So we're back on offense, fact.
401
00:30:02.534 --> 00:30:03.434
Okay.
402
00:30:03.934 --> 00:30:05.314
Which means you're growing your portfolio.
403
00:30:05.334 --> 00:30:08.295
We're acquiring companies, we're growing the portfolio.
404
00:30:08.315 --> 00:30:12.276
We have two full years of growth.
405
00:30:12.476 --> 00:30:19.898
And 2025 was our first profitable cashflow positive year, which is something every startup aspires to, but many never reach.
406
00:30:20.798 --> 00:30:21.038
Right.
407
00:30:22.239 --> 00:30:23.460
And so we're back.
408
00:30:23.720 --> 00:30:23.940
Yeah.
409
00:30:23.960 --> 00:30:24.881
We're definitely back.
410
00:30:25.141 --> 00:30:26.882
We're excited about this new vision.
411
00:30:27.002 --> 00:30:28.103
We're building up again.
412
00:30:29.904 --> 00:30:35.828
But, you know, to give you a sense of the portfolio, we had nine brands at the peak.
413
00:30:36.288 --> 00:30:37.929
We now have about five brands.
414
00:30:38.189 --> 00:30:38.329
Okay.
415
00:30:38.349 --> 00:30:38.450
Okay.
416
00:30:40.131 --> 00:30:45.095
I can tell you, at our peak, even when we were 100 something million, we weren't cashflow positive, right?
417
00:30:45.295 --> 00:30:46.676
We are now cashflow positive.
418
00:30:47.417 --> 00:30:50.039
I would take the cashflow positive over the 100 million.
419
00:30:50.059 --> 00:30:51.780
100%, especially with this debt reduction.
420
00:30:52.020 --> 00:30:53.441
Right.
421
00:30:53.461 --> 00:30:57.965
And magically, interest rates are coming down now.
422
00:30:57.985 --> 00:30:59.006
We have a tighter, leaner team.
423
00:30:59.026 --> 00:31:07.773
We have about a million bucks of revenue per employee, which is extremely lean and kind of best in class, at least in e-commerce.
424
00:31:09.394 --> 00:31:14.797
And so I think things have really come together, but not without a lot of pain and mistakes and learnings along the way.
425
00:31:15.318 --> 00:31:18.560
It sounds like also your operating model now has become kind of refined.
426
00:31:18.580 --> 00:31:31.808
So rather than just like going out, getting some cash to buy some stuff to build around it and maybe have operating teams with each brand, maybe you've centralized your kind of controls on how to operate multi-brand from one team.
427
00:31:32.028 --> 00:31:32.609
Yeah.
428
00:31:32.929 --> 00:31:33.389
You know what?
429
00:31:34.290 --> 00:31:48.644
It was by necessity, but I think the conclusion was that what we call Emerge 1.0, which was the original iteration of buying a diversified, eclectic group of brands that had nothing to do with each other.
430
00:31:48.664 --> 00:31:49.145
Right.
431
00:31:50.462 --> 00:31:59.868
was a flawed experiment in the sense that there are other businesses, so the most famous of which is Berkshire Hathaway with Warren Buffett.
432
00:32:00.968 --> 00:32:06.231
And of course in Canada, Constellation Software, buying up a bunch of niche software companies.
433
00:32:06.712 --> 00:32:10.374
So there were models of this diversified holdco
434
00:32:11.354 --> 00:32:14.077
And the reason it didn't work in e-commerce is very simple.
435
00:32:15.358 --> 00:32:18.380
E-commerce is about hands-on combat.
436
00:32:18.520 --> 00:32:20.982
It's a brand-driven model.
437
00:32:21.343 --> 00:32:22.964
It's a community, right?
438
00:32:23.324 --> 00:32:26.727
It means you have to fight daily for their attention.
439
00:32:27.368 --> 00:32:36.315
You don't have the benefit of a subscription model where you sit back, raise prices on a government contract, and they don't even notice that the price is up, right?
440
00:32:36.355 --> 00:32:39.398
Because it's such a small line item on their huge bill somewhere.
441
00:32:40.198 --> 00:32:42.099
This is e-commerce.
442
00:32:42.139 --> 00:32:46.622
These are consumers that are vouching with their wallets that you are the brand for them.
443
00:32:46.642 --> 00:32:51.785
You're the kind of service or product for them exactly at that moment in time.
444
00:32:51.805 --> 00:32:56.247
And you got to still be there every single time through the subscription or through the marketplace.
445
00:32:56.828 --> 00:32:58.629
And so for that reason,
446
00:32:59.709 --> 00:33:03.132
consumers are fickle and they leave you if you don't do a great job.
447
00:33:03.413 --> 00:33:09.217
And so you can't possibly just buy up 10, 20, 50 of these things and sit back and raise prices.
448
00:33:09.558 --> 00:33:11.159
You actually got to fight for each of these things.
449
00:33:11.539 --> 00:33:12.120
This is it.
450
00:33:12.160 --> 00:33:12.420
Yeah.
451
00:33:12.520 --> 00:33:26.672
Like pre-pandemic, I think the assumption in North America, it's interesting because it's like, I don't know if you've drawn a corollary with the like 1999 situation, the boom bust of the end of the 90s, where you had all those early first stage e-com companies
452
00:33:27.693 --> 00:33:29.314
Was pets.com one of them, right?
453
00:33:29.414 --> 00:33:29.554
Right.
454
00:33:29.855 --> 00:33:36.058
All these guys, like we're going to, I think Amazon's the only one that like duked it out of that downturn and they continue to grow.
455
00:33:36.078 --> 00:33:46.745
But like, I think everyone has been always kind of enamored with the opportunity to like win repeat business because you're the best and the easiest and the cheapest.
456
00:33:46.845 --> 00:33:47.005
Right.
457
00:33:47.806 --> 00:33:50.828
But being the best, the easiest and the cheapest is incredibly difficult.
458
00:33:50.848 --> 00:33:50.968
Right.
459
00:33:50.988 --> 00:33:51.108
Right.
460
00:33:51.608 --> 00:33:54.472
And there's always going to be a competition in the race to the bottom.
461
00:33:54.692 --> 00:33:54.853
Yeah.
462
00:33:55.373 --> 00:33:55.894
So you're right.
463
00:33:55.914 --> 00:34:05.087
The brand is, is, is really everything that you can kind of rely on in order to like ensure that customers know who you are and trust you and stay with you for some reason.
464
00:34:05.107 --> 00:34:05.247
Yeah.
465
00:34:05.355 --> 00:34:06.755
And that's the analysis we ran.
466
00:34:06.796 --> 00:34:16.339
I mean, when we looked at all of our businesses and brands to decide where are we going to double down on because we wanted fewer, more compelling opportunities that we can win big at over time.
467
00:34:16.539 --> 00:34:17.219
Yeah.
468
00:34:17.259 --> 00:34:17.979
I'll give you an example.
469
00:34:17.999 --> 00:34:24.241
With True Local, our meat and seafood subscription from local farmers, we have a customer lifetime value of $2,000.
470
00:34:24.261 --> 00:34:24.421
Yeah.
471
00:34:26.002 --> 00:34:38.615
compared to a customer acquisition cost of $125, which for those who don't fully follow is an extremely lucrative lifetime value relative to the cost of acquiring these customers.
472
00:34:38.635 --> 00:34:40.857
Why is it only two grand though?
473
00:34:40.917 --> 00:34:42.559
Is that because it's a young brand?
474
00:34:42.819 --> 00:34:46.640
Yeah, I mean, listen, A, it's a young brand, but B, we're growing fast.
475
00:34:46.660 --> 00:34:49.741
So a lot of the customers coming in are some of the newer ones.
476
00:34:49.762 --> 00:34:52.663
$2,000 CLTV is... That's like a year's meet.
477
00:34:53.023 --> 00:34:53.383
Is that it?
478
00:34:53.463 --> 00:34:53.983
Right, right.
479
00:34:54.063 --> 00:34:58.004
Yeah, but a lot of our customers are, you know, sort of in their first year as well because we're growing so fast.
480
00:34:58.044 --> 00:34:58.825
Right, exactly.
481
00:34:59.585 --> 00:35:02.326
But, you know, if you look at longer cohorts, of course, it's way higher.
482
00:35:02.366 --> 00:35:05.007
This is sort of the... Foster of user acquisition is your point.
483
00:35:05.087 --> 00:35:05.327
Yeah.
484
00:35:05.387 --> 00:35:10.969
Like, it's a good business because you can bring people in the door at an affordable rate and they're going to stay with you.
485
00:35:11.069 --> 00:35:12.730
Now you're going to make way more money.
486
00:35:12.790 --> 00:35:19.073
If you buy someone, if you bring someone in for $125 and they spend $2,000, that's extremely lucrative, right?
487
00:35:19.514 --> 00:35:23.176
Now, obviously, $2,000 hopefully grows to $4,000, $6,000 over the years, of course.
488
00:35:24.356 --> 00:35:26.978
So I think, you know, that is a very...
489
00:35:27.898 --> 00:35:29.879
favorable ratio.
490
00:35:30.319 --> 00:35:36.922
And it's really like, and I'm not trying to get mathematical here, but it really embodies what true local is about.
491
00:35:36.982 --> 00:35:41.244
Sticking with local, obviously at a time like this, buy Canadian, support local is a huge theme.
492
00:35:41.724 --> 00:35:43.344
Those are tailwinds.
493
00:35:43.485 --> 00:35:45.405
That's the icing on the cake.
494
00:35:45.465 --> 00:35:49.247
We were very serious about making sure our suppliers, our local farmers,
495
00:35:49.807 --> 00:36:00.634
got the technology, got the distribution that they were so desperate to get, and giving customers a healthy, local, convenient way to get their meat and seafood.
496
00:36:00.654 --> 00:36:10.520
And so all of this is to say, when we bet on true local, we bet on the community, we bet on the mission we're on, right, to connect people to the source, to these local farmers.
497
00:36:11.200 --> 00:36:20.049
And, you know, it's a mission-driven brand and business, and therefore it has legs beyond, and therefore also has pricing power from a business perspective.
498
00:36:20.069 --> 00:36:21.490
It has great customer experience.
499
00:36:22.051 --> 00:36:28.057
So there are many things as to why we chose that to be our flagship brand for grocery, which is one of our two main verticals.
500
00:36:28.737 --> 00:36:36.265
On the other side, we now have a three brand, 400,000 member portfolio under our golf vertical.
501
00:36:37.366 --> 00:36:44.013
And this is a business we had very early DNA and we had some amazing leadership on the team running this vertical.
502
00:36:44.453 --> 00:36:45.534
And now we have synergy.
503
00:36:45.594 --> 00:36:51.200
So to give you an idea, when we were buying a pet business and an outdoor gear business, there's very little in common.
504
00:36:51.220 --> 00:36:51.961
There's no synergy.
505
00:36:52.541 --> 00:37:01.486
But now when we're buying an experiences business, then a marketplace, then an offline business, we're leveraging this captive audience and upselling them and cross-selling them.
506
00:37:02.107 --> 00:37:03.868
And that's been beautiful, right?
507
00:37:04.088 --> 00:37:06.689
So I think we're all about focus and about real synergy.
508
00:37:06.709 --> 00:37:09.951
So if we buy something, it has to relate to what we're doing.
509
00:37:10.371 --> 00:37:11.272
But we have two...
510
00:37:12.258 --> 00:37:13.639
amazing opportunities.
511
00:37:13.659 --> 00:37:14.819
So food and golf, is that what it is?
512
00:37:14.839 --> 00:37:15.859
Food and golf, right?
513
00:37:16.000 --> 00:37:17.520
And with their own leadership teams.
514
00:37:18.240 --> 00:37:23.883
And just last week, we made our first kind of enablement acquisition.
515
00:37:24.343 --> 00:37:26.344
At least we signed the definitive agreement.
516
00:37:26.364 --> 00:37:28.685
Hopefully by the time this is out, the deal is closed.
517
00:37:28.765 --> 00:37:33.827
But we acquired a company called Viral Loops, which is a customer acquisition referral technology.
518
00:37:34.307 --> 00:37:37.208
So think of it as a layer sitting below grocery and golf.
519
00:37:37.828 --> 00:37:38.869
And this technology,
520
00:37:39.749 --> 00:37:40.970
A is recurring revenue.
521
00:37:42.271 --> 00:37:45.714
B is B2B, so it comes with like 500 clients who use it.
522
00:37:46.475 --> 00:37:49.777
But we get to use this technology and apply it to our own brands.
523
00:37:49.998 --> 00:37:50.838
Referral marketing.
524
00:37:51.099 --> 00:37:52.179
Right, so it's part of the stuff.
525
00:37:52.239 --> 00:37:59.365
Contests, giveaways, like leveraging those templates to run stuff cost-effectively and bring lead gens in.
526
00:37:59.666 --> 00:38:05.530
So to your point about lowering the CPA or lowering the CAC of the customer, we bring through the door.
527
00:38:05.791 --> 00:38:08.112
So the idea is that we're building an enablement layer
528
00:38:08.913 --> 00:38:10.834
that both comes with cash flow today.
529
00:38:11.134 --> 00:38:11.915
Okay.
530
00:38:11.955 --> 00:38:14.936
So it's like an $800,000 EBITDA business.
531
00:38:15.296 --> 00:38:18.218
But not only that, it's not just a financial gain.
532
00:38:18.298 --> 00:38:24.901
It's also something we can leverage in our portfolio, in our toolkit to drive better CLTV and lower CAC.
533
00:38:25.462 --> 00:38:26.042
Interesting.
534
00:38:27.162 --> 00:38:37.708
I think we're going to see a lot more of this sort of stuff, hey, like, I mean, outside of your business, but in general, companies buying kind of early stage software companies to save them from like,
535
00:38:38.865 --> 00:38:43.488
the difficulty of scaling without the possibility of venture capital.
536
00:38:44.329 --> 00:38:46.511
You see a lot of that vibe coding, right?
537
00:38:47.051 --> 00:38:53.075
Pushing kind of conventional software companies into this like affordable M&A zone.
538
00:38:53.215 --> 00:38:53.536
Yeah.
539
00:38:54.036 --> 00:38:54.676
It's interesting.
540
00:38:54.696 --> 00:38:55.497
Yeah.
541
00:38:56.137 --> 00:38:57.338
It's really interesting.
542
00:38:57.878 --> 00:38:58.658
But that's interesting.
543
00:38:58.738 --> 00:39:11.144
Why did you double down on this as an acquisition target specifically when you could just go out and get any referral engine software off the shelf and be a customer of someone else?
544
00:39:11.244 --> 00:39:12.984
Yeah, that's a great question.
545
00:39:13.765 --> 00:39:15.946
First of all, this isn't like a very early stage startup.
546
00:39:15.966 --> 00:39:17.106
It's a 10-year business.
547
00:39:17.806 --> 00:39:18.647
Only earning $800,000 a year?
548
00:39:19.615 --> 00:39:21.999
Yeah, but listen, it's a bootstrap style business.
549
00:39:22.880 --> 00:39:23.861
It's very stable.
550
00:39:24.903 --> 00:39:25.824
It cash flows.
551
00:39:26.766 --> 00:39:30.872
It comes with 500 clients that are loyal and growing.
552
00:39:31.913 --> 00:39:34.016
And so for us, it was really just an opportunity to,
553
00:39:34.657 --> 00:39:35.938
To hit two birds with one stone.
554
00:39:35.958 --> 00:39:40.019
You know, A, we get the technology for a team and our brands.
555
00:39:40.139 --> 00:39:40.319
Yeah.
556
00:39:40.679 --> 00:39:46.042
B, it comes with the financial advantages, the cash flow and the client base and all of that.
557
00:39:46.622 --> 00:39:51.544
And C, you know, I didn't mention this, but it was a very opportunistically priced.
558
00:39:51.624 --> 00:39:53.425
So it was a deal that landed on our lap.
559
00:39:54.665 --> 00:40:10.076
and there's only so much I can say, but let's just say the price that we got for it was very attractive relative to building from the ground up or going and taking years to get to 500 clients.
560
00:40:10.136 --> 00:40:12.257
And this comes with a team.
561
00:40:12.577 --> 00:40:18.921
It comes with a business that cash flows and it comes with technology that's been years in the making.
562
00:40:19.202 --> 00:40:20.623
And by the way, they too,
563
00:40:22.103 --> 00:40:24.525
leverage the latest and greatest in AI.
564
00:40:24.545 --> 00:40:24.745
Sure.
565
00:40:25.065 --> 00:40:27.586
You know, so they're at the forefront of this stuff, right?
566
00:40:27.626 --> 00:40:28.547
And we love that about them.
567
00:40:29.047 --> 00:40:34.810
How have you found in your two verticals that you've drilled down on, right?
568
00:40:34.910 --> 00:40:36.151
In your golf and meat.
569
00:40:37.652 --> 00:40:38.732
I know.
570
00:40:39.072 --> 00:40:40.573
So you're not Australian, what?
571
00:40:40.593 --> 00:40:41.934
Yeah.
572
00:40:42.074 --> 00:40:42.954
In golf and meat,
573
00:40:44.595 --> 00:40:53.324
How have you guys found in operating those referrals playing into your channel growth, like leading up to this point?
574
00:40:53.364 --> 00:41:02.493
Has it been something that has been a handicap where you see opportunity or has it been something that is organic and you want to put tools into to accelerate?
575
00:41:02.513 --> 00:41:02.613
Okay.
576
00:41:02.977 --> 00:41:09.344
Yeah, you know, as we were diligencing Viral Loops, we used their application on True Local.
577
00:41:09.364 --> 00:41:15.951
So True Local was celebrating 10 years in business and we did a sort of a 10-year anniversary contest.
578
00:41:16.572 --> 00:41:20.196
And you can design, the cool thing about it is you can design the referral program that you want.
579
00:41:20.256 --> 00:41:20.917
It's kind of like a...
580
00:41:21.437 --> 00:41:23.499
Let's think of it as a GPT for referrals.
581
00:41:23.519 --> 00:41:31.104
You tell it, hey, I want to create a contest that allows my members to refer others.
582
00:41:31.164 --> 00:41:35.247
And if those guys join, you get extra points, blah, blah, blah, right?
583
00:41:35.507 --> 00:41:37.148
That's the idea behind Viral Loops.
584
00:41:37.188 --> 00:41:38.730
And so we tested it on True Local.
585
00:41:39.570 --> 00:41:41.191
You can gamify the referral.
586
00:41:41.251 --> 00:41:41.772
Right.
587
00:41:41.952 --> 00:41:44.133
It's exactly what it is.
588
00:41:44.433 --> 00:41:50.398
And we got thousands and thousands of signups and then referrals, shares, and ultimately new customers.
589
00:41:50.418 --> 00:41:51.298
That's the goal here, right?
590
00:41:51.418 --> 00:41:51.678
Cool.
591
00:41:51.718 --> 00:41:56.582
Like we're going to give away a year of True Local, which is a thousand or two thousand bucks.
592
00:41:56.722 --> 00:41:56.922
Yeah.
593
00:41:57.222 --> 00:41:59.163
But, you know, we're going to get...
594
00:42:00.024 --> 00:42:02.046
you know, 50 new customers, right?
595
00:42:02.286 --> 00:42:04.628
And the CLTV on each of those is 200, right?
596
00:42:04.688 --> 00:42:08.291
So the math really checks out, just to use an example.
597
00:42:08.552 --> 00:42:22.744
In terms of like referrals, I think we in general take a very keen interest in word of mouth because finding the right customer is way more important than finding more customers.
598
00:42:22.784 --> 00:42:22.905
Yeah.
599
00:42:22.945 --> 00:42:23.045
Yeah.
600
00:42:23.685 --> 00:42:25.225
And especially with something like True Local.
601
00:42:25.285 --> 00:42:31.487
So the CLTV of customers tends to go way up when they actually do care about local.
602
00:42:31.767 --> 00:42:32.868
They're not just coming for a deal.
603
00:42:32.948 --> 00:42:34.208
They care about local farmers.
604
00:42:34.248 --> 00:42:35.188
They care about the mission.
605
00:42:35.508 --> 00:42:37.229
They care about Canada, right?
606
00:42:37.469 --> 00:42:43.050
These are very important embodiments of a great True Local customer that endures.
607
00:42:43.871 --> 00:42:52.513
And to endure, you know, for us, there's no better way than for someone who already has bought into that to tell someone like them about it.
608
00:42:53.093 --> 00:42:53.453
Totally.
609
00:42:53.513 --> 00:42:57.275
And that's kind of general, but even more so when it's a mission-driven company.
610
00:42:57.295 --> 00:42:57.936
Oh, yeah, for sure.
611
00:42:58.056 --> 00:43:02.378
And so we really think this sort of technology is the way to go.
612
00:43:02.398 --> 00:43:09.582
And so we want to be doing, you know, maybe not monthly, but like, you know, quarterly like giveaways and contests around pushing gamifying.
613
00:43:10.383 --> 00:43:19.688
The people that are, you know, let's call it the VIP cohort, we want to unlock the next VIPs, you know, their friends, their families, et cetera, because it works for them so well.
614
00:43:19.728 --> 00:43:21.769
And they're most prone to telling people
615
00:43:21.969 --> 00:43:27.373
people about and I'll give you a cool example of how much of a power user base we have.
616
00:43:28.153 --> 00:43:32.596
We were giving out certain dollar amounts for folks to fill out a yearly survey.
617
00:43:33.617 --> 00:43:43.123
And I told the team, I have a feeling if you don't give any money out, they'll still fill it out in the same numbers because it's a very engaged base in terms of the annual survey.
618
00:43:43.143 --> 00:43:44.464
And it's a long one.
619
00:43:45.125 --> 00:43:49.708
And so that's why they would give some, you know, whatever, like, you know, some amount of dollars out to fill it out.
620
00:43:50.248 --> 00:43:54.450
So we did a test and we removed the dollars and we got the same exact number.
621
00:43:54.470 --> 00:43:54.870
Of course.
622
00:43:55.470 --> 00:43:56.031
And they care.
623
00:43:56.451 --> 00:44:04.814
Incenting any passionate consumer with cash will actually tarnish their, you know, trust.
624
00:44:04.934 --> 00:44:05.194
Right.
625
00:44:05.214 --> 00:44:05.494
Brand.
626
00:44:05.715 --> 00:44:06.055
Right.
627
00:44:06.075 --> 00:44:08.816
That's even, you know, the point I hadn't even thought about.
628
00:44:08.836 --> 00:44:13.238
But like, conceptually, I think that's how much of a power user base we have.
629
00:44:13.678 --> 00:44:18.840
When we've raised prices because the price of beef is skyrocketing and chicken to some extent,
630
00:44:19.060 --> 00:44:19.720
It's crazy, man.
631
00:44:19.760 --> 00:44:20.601
Like I just paid.
632
00:44:21.001 --> 00:44:21.902
This is crazy.
633
00:44:22.382 --> 00:44:23.783
I'm ashamed to admit this.
634
00:44:23.883 --> 00:44:24.183
Okay.
635
00:44:24.223 --> 00:44:25.183
My wife will laugh at me.
636
00:44:26.884 --> 00:44:29.045
She was away with her friends on holiday.
637
00:44:29.105 --> 00:44:29.946
Okay.
638
00:44:29.966 --> 00:44:30.786
Or someone's birthday.
639
00:44:31.166 --> 00:44:33.968
So all the ladies go off to like Mexico for the birthday.
640
00:44:34.788 --> 00:44:36.249
And I'm putting my daughter to bed.
641
00:44:36.709 --> 00:44:36.949
Right.
642
00:44:36.989 --> 00:44:37.710
Telling her a story.
643
00:44:37.790 --> 00:44:40.191
And I hear my wife comes in the door after her holiday.
644
00:44:40.211 --> 00:44:40.892
And she screams.
645
00:44:40.932 --> 00:44:41.532
She screams.
646
00:44:43.145 --> 00:44:44.666
The meat's rotting.
647
00:44:44.886 --> 00:44:47.747
And I was like, that's the first thing you're going to say when you come in.
648
00:44:47.787 --> 00:44:48.607
I'm like, what meat?
649
00:44:49.208 --> 00:44:56.891
And then she comes up and she says, there's a $50 ribeye from the butcher sitting in the fridge that expired four days ago.
650
00:44:56.991 --> 00:44:59.032
And you've got to get it in the organics.
651
00:45:00.648 --> 00:45:08.933
And that's literally like so embarrassing to even say out loud to myself, to say I threw $50 in the organics bit.
652
00:45:09.293 --> 00:45:09.493
Right.
653
00:45:09.633 --> 00:45:10.914
That's how expensive it is.
654
00:45:11.274 --> 00:45:11.874
Yeah, it is.
655
00:45:11.894 --> 00:45:12.175
It's nuts.
656
00:45:12.235 --> 00:45:12.455
It is.
657
00:45:13.115 --> 00:45:13.655
It's nuts.
658
00:45:13.815 --> 00:45:19.519
And, you know, when we did have to, you know, we try not to raise prices if we don't have to.
659
00:45:19.539 --> 00:45:24.622
But if we have to and, you know, everyone understands it and it's the world we're in.
660
00:45:25.202 --> 00:45:27.563
Just like when you go to grocery stores, prices go through.
661
00:45:27.583 --> 00:45:28.644
But, you know, some would argue...
662
00:45:29.304 --> 00:45:31.945
Some of that's not with the best intention sometimes.
663
00:45:31.985 --> 00:45:37.727
But when we've raised prices, I pay very close attention to the feedback.
664
00:45:37.747 --> 00:45:40.988
And I ask for specifics from the customer experience.
665
00:45:41.008 --> 00:45:45.069
You might say, send me all the comments we got that day on the price increase message.
666
00:45:46.309 --> 00:45:51.531
And you'd be surprised how many thank yous we get for raising prices because they get it.
667
00:45:52.551 --> 00:45:53.831
We've earned their trust.
668
00:45:54.071 --> 00:45:54.252
Right.
669
00:45:54.552 --> 00:45:55.572
And that's a big deal.
670
00:45:55.912 --> 00:45:57.694
It's an honest raise to the price.
671
00:45:57.834 --> 00:46:00.637
And then the team sees it and they're proud about Walsh.
672
00:46:00.657 --> 00:46:00.897
Sure, too.
673
00:46:01.097 --> 00:46:02.319
And that's exciting for us.
674
00:46:02.899 --> 00:46:12.309
And so that's kind of the conclusion, long-drawn one, but the conclusion here is that if you're in e-commerce or retail or consumer broadly,
675
00:46:13.594 --> 00:46:14.835
Focus is key.
676
00:46:15.075 --> 00:46:15.435
Why?
677
00:46:15.495 --> 00:46:28.820
Because you can't possibly conquer the experience and honor the customer and the merchant and the team all in one without extreme focus and vision and drive.
678
00:46:29.340 --> 00:46:33.582
So diversification, like too broadly, makes that almost impossible.
679
00:46:33.642 --> 00:46:34.562
And that's what we learned.
680
00:46:34.702 --> 00:46:46.275
Especially when you're not capitalized to the point where you can assemble, you know, rock star operational units for each brand to do what you've done, but per brand, right?
681
00:46:46.315 --> 00:46:46.475
Right.
682
00:46:46.495 --> 00:46:47.596
Like, it's too expensive.
683
00:46:48.157 --> 00:46:48.517
Yeah.
684
00:46:48.658 --> 00:46:55.625
I also want to say, like, you know, the businesses we acquired were actually...
685
00:46:56.573 --> 00:47:03.694
pretty damn good businesses that despite them coming down from the peak, were still worth many millions of dollars.
686
00:47:03.754 --> 00:47:06.615
And that's the reason we were able to sell them and pay down a bunch of debt.
687
00:47:07.055 --> 00:47:09.696
So we actually didn't buy a bunch of crap, to be honest with you.
688
00:47:09.776 --> 00:47:11.456
I know that's how people generalize.
689
00:47:12.016 --> 00:47:13.737
And actually that's how I generalize it.
690
00:47:13.757 --> 00:47:20.018
Like I've come to accept, we sold non-core businesses, which means a bunch of crap, to focus on the stuff that was working.
691
00:47:20.038 --> 00:47:21.278
But you were able to sell them.
692
00:47:21.758 --> 00:47:24.859
Yeah, it's just, we thought we could win bigger and better
693
00:47:25.799 --> 00:47:29.163
With True Local as a brand and with our golf business, we have great leadership.
694
00:47:29.283 --> 00:47:30.564
Well, so now I got to ask this question.
695
00:47:30.584 --> 00:47:30.805
Okay.
696
00:47:30.825 --> 00:47:39.835
So if Emerge 2.0 is focused on these two verticals, how does that define the description of what Emerge is?
697
00:47:40.535 --> 00:47:42.377
And what does Emerge 3.0 look like?
698
00:47:43.090 --> 00:47:43.310
Right.
699
00:47:43.751 --> 00:47:50.197
So ironically, the way we actually officially call it is Emerge 1.0 was this diversified beast.
700
00:47:51.258 --> 00:47:52.379
And we just talked about that.
701
00:47:52.620 --> 00:47:57.985
We call Emerge 2.0, which was the last few years of turnaround mode and focus inwards.
702
00:47:59.086 --> 00:48:07.212
And 3.0, which is where we are today, is sort of back on the offensive, acquiring again, but only strategically.
703
00:48:07.412 --> 00:48:08.793
Meaning within those two versions?
704
00:48:08.813 --> 00:48:11.134
Within grocery or golf or anything that enables them.
705
00:48:11.295 --> 00:48:11.635
Correct.
706
00:48:11.655 --> 00:48:12.395
You got it.
707
00:48:12.415 --> 00:48:13.636
Which we call Emerge B2B.
708
00:48:15.257 --> 00:48:17.339
So that's the 3.0 vision we're on.
709
00:48:18.079 --> 00:48:19.981
And I don't think it's a 4.0.
710
00:48:20.061 --> 00:48:22.963
It's more like a 3B and 3C from here because it's more like...
711
00:48:23.563 --> 00:48:28.827
Okay, True Local might go out and acquire five to seven competitors over the next three years.
712
00:48:30.208 --> 00:48:38.455
We might acquire another B2B business, for example, corporate gifting to leverage True Local as a beautiful corporate gift.
713
00:48:38.615 --> 00:48:38.795
Sure.
714
00:48:39.115 --> 00:48:40.116
We'll sell a million bucks.
715
00:48:40.636 --> 00:48:42.318
On the 70s, that was a big thing, you know?
716
00:48:42.578 --> 00:48:43.078
Right, right.
717
00:48:43.338 --> 00:48:47.241
Have you done the analysis on the history of the Canadian meat market?
718
00:48:48.102 --> 00:48:48.502
I have not.
719
00:48:48.743 --> 00:48:48.963
No?
720
00:48:49.243 --> 00:48:49.623
I have not.
721
00:48:49.803 --> 00:48:50.924
Oh, it's worth looking at.
722
00:48:51.004 --> 00:49:04.734
And I only know this because we have family history in it, where my dad had this brand called Connoisseur Meats in Calgary, I think, in the 70s, that him and like seven and eight uncles and aunties all chipped in.
723
00:49:05.175 --> 00:49:11.439
This was their escape from Africa into the 70s to Canada to be entrepreneurs to then fail miserably thing.
724
00:49:11.659 --> 00:49:12.200
Yeah.
725
00:49:12.520 --> 00:49:13.141
But it was like that.
726
00:49:13.301 --> 00:49:19.207
This is the time when like M&M meat markets were like pretty big because people would buy frozen for convenience.
727
00:49:19.287 --> 00:49:19.488
Right.
728
00:49:19.868 --> 00:49:24.092
Because also like distribution logistics that we have today for delivery weren't there.
729
00:49:24.132 --> 00:49:24.513
Of course.
730
00:49:25.214 --> 00:49:26.235
And so people would...
731
00:49:28.497 --> 00:49:34.779
wouldn't be able to discern, I suppose, also the quality concerns of having a frozen product.
732
00:49:34.819 --> 00:49:46.103
It's not exciting to defrost a ribeye, lose all of that wonderful, natural, let's call it liquid in the meat, in the process, right?
733
00:49:46.123 --> 00:49:46.303
Right.
734
00:49:47.263 --> 00:49:48.764
Um, so it's interesting.
735
00:49:48.784 --> 00:49:55.287
The times have changed, but it looks like, yeah, the, the buying habits have always sided with affordability and convenience.
736
00:49:55.667 --> 00:49:55.907
Yeah.
737
00:49:56.147 --> 00:49:56.407
Right.
738
00:49:56.947 --> 00:50:00.209
It's just how that's manifested over the last few decades has changed.
739
00:50:00.765 --> 00:50:10.769
And the addition of the passion towards local and local farmers and local supply with everything going on, especially in the last few years.
740
00:50:10.929 --> 00:50:14.611
I mean, support local has been a bigger and bigger theme as time goes by.
741
00:50:14.731 --> 00:50:18.072
Certainly think in five years, 10 years, 20 years, supporting local is going to be...
742
00:50:18.880 --> 00:50:22.401
bigger and bigger, and it's always going to be the underdog story, right?
743
00:50:23.042 --> 00:50:26.263
And we like ourselves a good underdog story, especially if we're part of it.
744
00:50:26.523 --> 00:50:28.924
And, you know, that's where True Local really shines.
745
00:50:28.984 --> 00:50:41.068
And we did have choices a few years back where, you know, we could have gone Australian Wagyu or, you know, a lot of these other cuts and places.
746
00:50:41.628 --> 00:50:46.332
And we chose because, again, from our surveys and speaking to customers, they really did care.
747
00:50:46.752 --> 00:50:47.853
It's not for everyone, right?
748
00:50:47.993 --> 00:50:49.154
And we don't need it to be for everyone.
749
00:50:49.174 --> 00:50:49.774
That's the point.
750
00:50:50.975 --> 00:50:53.697
But we stuck with local and we stuck with Canadian farmers.
751
00:50:53.797 --> 00:50:55.879
And now we're getting the benefit of it.
752
00:50:55.979 --> 00:51:00.182
That's why when we raise prices or we do things like this, they really understand and appreciate.
753
00:51:01.963 --> 00:51:03.585
Drilling down into these verticals for a second.
754
00:51:03.685 --> 00:51:07.688
So on the meat thing, what about B2B?
755
00:51:08.389 --> 00:51:08.649
Yeah.
756
00:51:08.809 --> 00:51:09.990
Because you are B2C, right?
757
00:51:10.170 --> 00:51:10.691
Yeah, and we do.
758
00:51:10.731 --> 00:51:13.553
As I said, corporate gifting is a growing vertical.
759
00:51:13.613 --> 00:51:14.734
But even supplying restaurants.
760
00:51:15.215 --> 00:51:15.435
Right.
761
00:51:15.535 --> 00:51:19.799
I mean, I think we see that as certainly somewhere on the roadmap.
762
00:51:20.980 --> 00:51:25.804
But I would say to this, we're number one in Canada for direct-to-consumer meat subscription.
763
00:51:25.824 --> 00:51:26.024
Okay.
764
00:51:26.104 --> 00:51:26.365
Okay.
765
00:51:26.945 --> 00:51:31.648
And yet, yet, our peer in the US is a company called ButcherBox.
766
00:51:32.288 --> 00:51:34.329
Right.
767
00:51:34.970 --> 00:51:38.892
They should be 10 times our size, but there might be like 20 or 30 times our size.
768
00:51:39.993 --> 00:51:42.594
And so that tells me there's a lot more to go in Canada.
769
00:51:42.614 --> 00:51:43.495
We're focused on Canada.
770
00:51:43.515 --> 00:51:43.615
Yeah.
771
00:51:44.115 --> 00:51:50.601
Now we can acquire our competitors, we can grow organically, which we are for a couple of years in a row now, we've been growing really nicely.
772
00:51:51.561 --> 00:51:55.204
So there's a multi-hundred million dollar opportunity in just doing what we do.
773
00:51:55.445 --> 00:51:55.705
Okay.
774
00:51:56.125 --> 00:52:00.949
And sometimes as boring as that is, it's the right way to go, right?
775
00:52:00.989 --> 00:52:02.090
And I always say like,
776
00:52:02.931 --> 00:52:27.377
boredom is one of the reasons people fall astray and make mistakes because they it's just the urge to do something new or buy something new into a new like that's kind of um something i always remind the team like i know it's boring but it's working right let's hang tight because it's good yeah like it's working yeah uh and then the golf thing it's what's your lens on that industry in canada
777
00:52:28.358 --> 00:52:28.618
Yeah.
778
00:52:28.678 --> 00:52:33.563
So, so by the way, we operate both in Canada and the U S golf is a very interesting one.
779
00:52:34.183 --> 00:52:44.992
We chose, and this was the right choice a few years back when we entered the space to focus exclusively on discounted golf products and experiences.
780
00:52:45.092 --> 00:52:46.634
So we don't do anything full price.
781
00:52:47.475 --> 00:52:49.777
And what that means is we play in the clearance world.
782
00:52:50.477 --> 00:52:58.445
And when you play in the clearance world in an economy like this one that's cooling slash weakening, consumers are generally very deal-centric.
783
00:52:58.665 --> 00:52:58.845
Right.
784
00:52:59.746 --> 00:53:06.352
And by the way, Underpar, the foundational asset that we acquired, was founded in the Great Recession in 2008-9.
785
00:53:06.372 --> 00:53:06.532
Okay.
786
00:53:08.434 --> 00:53:09.535
Is that what we're calling it?
787
00:53:09.555 --> 00:53:10.795
The Great Recession?
788
00:53:10.875 --> 00:53:14.136
I mean, every 10, 15 years you look back and that one was the big one, right?
789
00:53:14.156 --> 00:53:16.797
Because this is the new one and it's not quite as crazy.
790
00:53:16.817 --> 00:53:20.639
But again, if you ask me, we've had a great recession every 10, 15 years.
791
00:53:20.659 --> 00:53:21.939
Yeah, absolutely.
792
00:53:22.519 --> 00:53:24.580
But, you know, we chose to do that.
793
00:53:24.640 --> 00:53:31.563
So now the golf world for us is, you know, if you're looking for like the TaylorMades, the Calloways, the Adidas, the Pumas,
794
00:53:32.303 --> 00:53:34.425
models from last year or prior years.
795
00:53:34.885 --> 00:53:35.966
That's where we specialize.
796
00:53:36.006 --> 00:53:40.209
You don't want to play the full price in our world because that's lower margin and it's very competitive.
797
00:53:40.909 --> 00:53:44.632
So we found ourselves a niche, much like with true local.
798
00:53:45.352 --> 00:53:47.113
We're not in everything grocery.
799
00:53:47.394 --> 00:53:50.015
We have meat and seafood from local farmers grocery.
800
00:53:50.295 --> 00:53:56.340
So the word niche is still very, very important in differentiation and not competing with the big boys.
801
00:53:56.360 --> 00:53:56.640
Yeah.
802
00:53:57.240 --> 00:54:01.423
But at the same time, in golf in Canada, what are you seeing in terms of adoption of the sport?
803
00:54:02.043 --> 00:54:19.473
Because if there are trends of new entrants into golf being youth or otherwise people, you know, taking it up as a new form of recreation later in life, you know, the interest in that kind of like pro golfer, I need the latest thing, is probably not there.
804
00:54:20.113 --> 00:54:21.074
So a lot of opportunities.
805
00:54:21.154 --> 00:54:21.955
It's very interesting.
806
00:54:22.256 --> 00:54:33.592
Apparently, when we acquired Underpower back in 2019, that was the original golf business that we started with, the trends were that golf was a sport in decline.
807
00:54:34.093 --> 00:54:34.293
Right.
808
00:54:35.535 --> 00:54:36.937
And the pandemic switched that up.
809
00:54:37.538 --> 00:54:40.021
Completely, because everyone at their mother was playing golf.
810
00:54:40.141 --> 00:54:44.706
And when they were working at home, they had more freedom and they wanted to, you know, all of that stuff.
811
00:54:44.746 --> 00:54:44.986
Right.
812
00:54:45.387 --> 00:54:46.828
And so the sport exploded.
813
00:54:47.009 --> 00:54:48.350
That wasn't a good thing for us.
814
00:54:48.470 --> 00:54:50.893
It was actually because golf courses were so busy.
815
00:54:51.433 --> 00:54:55.037
They didn't need us to help fill in, fill out their empty slots and tee times.
816
00:54:55.157 --> 00:54:55.658
Yeah.
817
00:54:56.118 --> 00:55:00.001
So that's where we canvassed into the product side of the business.
818
00:55:00.181 --> 00:55:01.582
We're sitting on all these members.
819
00:55:02.243 --> 00:55:03.684
How can we sell them something?
820
00:55:03.744 --> 00:55:07.146
And so we let's sell them golf equipment and apparel because they're playing golf like never before.
821
00:55:07.867 --> 00:55:10.068
So our businesses on the product side exploded.
822
00:55:10.869 --> 00:55:20.055
Now as the economy weakened, the golf experiences side is coming back as golf courses need us more to fill out these empty slots.
823
00:55:20.095 --> 00:55:20.896
Yeah.
824
00:55:21.136 --> 00:55:27.222
And on the product side, we went and acquired a business called Tea to Green last year, very opportunistically.
825
00:55:28.343 --> 00:55:31.346
And they specialize in a lot of the clearance outlets.
826
00:55:31.366 --> 00:55:33.128
They do pop-up stores, retail.
827
00:55:33.148 --> 00:55:34.730
So a lot of the old school, I'll call it.
828
00:55:35.010 --> 00:55:35.490
Okay.
829
00:55:36.251 --> 00:55:39.073
And so we have a multifaceted approach.
830
00:55:39.093 --> 00:55:39.613
Yeah, you're right.
831
00:55:39.633 --> 00:55:42.555
There are different spinoffs of golf.
832
00:55:42.575 --> 00:55:43.656
There's simulators.
833
00:55:43.696 --> 00:55:44.837
There's other things going on.
834
00:55:44.857 --> 00:55:45.797
There's youth.
835
00:55:46.058 --> 00:55:48.659
Women is a bigger and growing part of this segment.
836
00:55:49.080 --> 00:55:51.421
We're not banking on golf being a growing sport.
837
00:55:51.441 --> 00:55:54.783
I always look at it and say, like, we have 400,000 golfers.
838
00:55:54.864 --> 00:55:58.826
I think in the U.S., there's about 30 million golfers.
839
00:55:58.866 --> 00:56:01.088
In Canada, there's at least a couple of million golfers.
840
00:56:01.928 --> 00:56:05.670
And so I'm like, I don't worry about whether 30 is going to 32 or 28.
841
00:56:06.010 --> 00:56:08.271
I worry about how 400 gets to 4 million.
842
00:56:08.331 --> 00:56:08.851
Right, right.
843
00:56:09.111 --> 00:56:09.351
Right.
844
00:56:09.451 --> 00:56:11.652
That's kind of my sort of take on it right now.
845
00:56:11.672 --> 00:56:11.872
Okay.
846
00:56:12.753 --> 00:56:14.533
Interesting.
847
00:56:15.174 --> 00:56:28.499
What can you say to aspiring, let's forget about this like portfolio side of things, but even people that are looking to launch new e-commerce brands, looking to take products and services to market.
848
00:56:28.519 --> 00:56:29.500
Yeah.
849
00:56:30.540 --> 00:56:38.265
Are there lessons that you would relate to anyone coming to you for advice who are thinking of starting stores online?
850
00:56:40.126 --> 00:56:51.593
The honest to God truth advice is if all you want to do is start a nice little e-commerce store, the honest to God advice is don't do it.
851
00:56:53.255 --> 00:57:02.139
And the reason I say that is e-commerce is one of the most difficult cutthroat sectors of all.
852
00:57:02.959 --> 00:57:04.700
It's a really low margin business.
853
00:57:05.960 --> 00:57:08.121
It is extremely demanding.
854
00:57:08.181 --> 00:57:12.983
It takes like crazy amount of grit to get to a certain level of scale.
855
00:57:14.403 --> 00:57:31.191
And from what I've seen, even if you do it in a bootstrap way and say you make a million dollars in profit one day, the problem with e-commerce, especially inventory based e-commerce, you got to take that money and pour it back into inventory.
856
00:57:32.051 --> 00:57:39.917
And so the amount of money you can take out of the business as a bootstrapper is really low if you're invested in growth.
857
00:57:39.937 --> 00:57:43.239
If you don't care about growing and you just want to do a lifestyle thing, sure.
858
00:57:44.900 --> 00:57:52.406
But like there's a million and one ways to make money in other ways than just do a small e-commerce store.
859
00:57:53.698 --> 00:58:08.649
And I say that not to be negative about it, but to almost reflect that even in my own journey, the reason I said, okay, if you heard what I said at the very beginning, I said, how do we get to sustainable scale?
860
00:58:09.009 --> 00:58:09.189
Right.
861
00:58:10.070 --> 00:58:20.554
And in e-commerce, you're either venture backed, in which case you're doomed because you're now one out of you got to be that one out of ten or one out of 20, which is already odds are stacked against you.
862
00:58:21.134 --> 00:58:22.615
And e-commerce is not even a venture backed.
863
00:58:22.695 --> 00:58:24.935
Like you can't even raise venture capital for e-commerce these days.
864
00:58:24.975 --> 00:58:25.916
It's not interesting.
865
00:58:26.854 --> 00:58:28.475
But then you want to do a lifestyle thing.
866
00:58:28.635 --> 00:58:28.995
Okay.
867
00:58:29.055 --> 00:58:33.258
But then whatever you make, you got to pour back into the inventory unless you take on some debt.
868
00:58:33.578 --> 00:58:40.083
Well, the problem with debt is if the world turns on you, now you have a problem with your debt holders and now your equity is crushed.
869
00:58:41.143 --> 00:58:41.924
So it's like, why?
870
00:58:42.344 --> 00:58:44.065
My question isn't how to do it.
871
00:58:44.165 --> 00:58:45.646
It's like, why do you want to do it?
872
00:58:45.726 --> 00:58:48.328
If you, if on the other hand, Yeah.
873
00:58:50.051 --> 00:59:13.456
you have an aspirational brand, you have a niche that you think you have an amazing idea in and you're going all in on it, then you can be, you know, the Dollar Shave Club or like, you know, one of these like really exciting specific stories where you can go sell to Procter & Gamble for two, three, four, 500 million.
874
00:59:13.837 --> 00:59:14.757
But own the brand.
875
00:59:14.797 --> 00:59:16.297
But it's got to be big thinking.
876
00:59:16.397 --> 00:59:19.578
Like doing a nice little e-commerce store, ain't it?
877
00:59:20.098 --> 00:59:32.944
Do you think a big part of that is that the game has shifted in the last, let's call it, well, the insights have come to light that maybe this is a longer term problem that's been part of digital marketing.
878
00:59:32.984 --> 00:59:38.126
But definitely in the last couple of years, you can't trust digital marketing.
879
00:59:38.627 --> 00:59:45.330
And that old posit of like, I put $10 in to get $100 out just is lies.
880
00:59:45.870 --> 00:59:48.051
And it's changing all the fucking time.
881
00:59:49.187 --> 00:59:53.731
It's changing every... Like what works, in what market, at what time of day.
882
00:59:53.931 --> 00:59:54.491
Exactly.
883
00:59:54.591 --> 00:59:55.952
Can you trust the cookie?
884
00:59:56.153 --> 00:59:57.614
Right, exactly.
885
00:59:57.794 --> 00:59:58.634
And you know what?
886
00:59:58.675 --> 01:00:00.416
I mean, that's why I keep going.
887
01:00:00.496 --> 01:00:02.618
I go back to, why did I say brand?
888
01:00:02.638 --> 01:00:06.240
Because with brand comes appeal, loyalty, word of mouth.
889
01:00:06.461 --> 01:00:07.642
You've got to build something.
890
01:00:08.382 --> 01:00:12.605
Again, so that's why it's not your average idea of the day.
891
01:00:12.625 --> 01:00:15.688
Let me just start my little e-commerce store to sell a bit of this, a bit of that.
892
01:00:15.988 --> 01:00:16.208
Yeah.
893
01:00:16.909 --> 01:00:18.390
It's a long drawn out thing.
894
01:00:18.410 --> 01:00:21.593
There's way better things you can do with your time, especially in an AI world.
895
01:00:21.773 --> 01:00:21.954
Yeah.
896
01:00:22.614 --> 01:00:31.282
But if you're addressing it as, you know, liquid death or like very specific angle saying, this is missing in the market.
897
01:00:31.322 --> 01:00:32.783
I'm going to build a beautiful brand.
898
01:00:33.124 --> 01:00:35.105
I'm going to storytell to the max.
899
01:00:35.266 --> 01:00:35.466
Right.
900
01:00:35.926 --> 01:00:37.027
And that's huge by the way.
901
01:00:37.047 --> 01:00:37.488
That is huge.
902
01:00:37.728 --> 01:00:41.251
If you can storytell and if you can have an angle that,
903
01:00:41.391 --> 01:00:44.675
then you can scale and people will follow and tell people about you.
904
01:00:44.815 --> 01:00:45.155
Right, right.
905
01:00:45.175 --> 01:00:50.781
But the days of nice little e-commerce store and I'm going to build an 800K thing and maybe I'll make 200.
906
01:00:50.881 --> 01:00:54.104
And then after tax and after inventory, I make nothing negative.
907
01:00:54.324 --> 01:00:56.767
And, you know, like that's not where things are at.
908
01:00:56.887 --> 01:01:01.431
Last summer we had Jake Carls, who's one of the founders of Midday Squares.
909
01:01:01.972 --> 01:01:05.875
So we had him speak at a conference that I produced.
910
01:01:06.436 --> 01:01:08.117
And that was exactly his take on it.
911
01:01:08.157 --> 01:01:12.882
He was like, look, it doesn't come natural for me to be in front of the camera shaking my butt.
912
01:01:13.502 --> 01:01:16.925
But we learned early on that if I don't do that,
913
01:01:17.706 --> 01:01:19.566
No one's going to know about us.
914
01:01:19.807 --> 01:01:28.008
And his take was every company who's starting out, especially in the consumer goods, he was like CPG particularly.
915
01:01:28.048 --> 01:01:33.550
He was saying every company to get market share, to build market share needs to be a media company.
916
01:01:34.450 --> 01:01:34.730
Right?
917
01:01:34.910 --> 01:01:38.251
And that's part of the storytelling, but it's about the how as well.
918
01:01:38.291 --> 01:01:47.373
And that's an incredibly engrossing, difficult role to play is to constantly be marketing yourself.
919
01:01:47.873 --> 01:01:49.854
Right.
920
01:01:50.774 --> 01:01:55.235
And yeah, I think that's something that a lot of, well, we see it in tech.
921
01:01:55.255 --> 01:01:57.276
We started saying this off camera downstairs.
922
01:01:57.316 --> 01:02:09.060
I was saying early stage founders in software don't, often cases are terrible at storytelling and don't understand how to relate the value prop of their product or service to their potential customers.
923
01:02:09.900 --> 01:02:26.175
So now you take that a step further and say, you know, if anyone's trying to build, like you said, a lifestyle business out of e-commerce and they're not able to take on that mantle of building an audience for their brand and you can't outbid ad space.
924
01:02:26.395 --> 01:02:26.515
Right.
925
01:02:26.756 --> 01:02:32.601
Or even if you do outbid it from competitors, you know, it's not going to be reliably converting, right?
926
01:02:32.761 --> 01:02:33.422
Yeah, absolutely.
927
01:02:33.802 --> 01:02:35.784
So it is a difficult place to be.
928
01:02:36.168 --> 01:02:36.408
It is.
929
01:02:36.608 --> 01:02:41.632
And, you know, I'd rather like spit out like frank advice, right?
930
01:02:41.832 --> 01:02:45.134
If any of your listeners are just like, hey, I've had this thing I've been wanting to try.
931
01:02:45.154 --> 01:02:46.755
I think those days are over.
932
01:02:46.795 --> 01:02:51.538
I think you either go like anything, like the world's kind of converging.
933
01:02:51.758 --> 01:02:55.500
And I think you just have to have deep conviction and passion in what you're doing.
934
01:02:55.520 --> 01:02:57.662
And if you want to start an e-commerce company, you can.
935
01:02:58.322 --> 01:02:59.003
You got to go all in.
936
01:02:59.043 --> 01:03:02.385
Like I don't think the whole like side store thing is it.
937
01:03:02.645 --> 01:03:03.005
Yeah, yeah.
938
01:03:03.025 --> 01:03:04.165
You'll never have enough time.
939
01:03:04.185 --> 01:03:05.366
You'll never have enough effort.
940
01:03:06.006 --> 01:03:06.766
Okay.
941
01:03:06.786 --> 01:03:08.286
I have one more question about this.
942
01:03:08.586 --> 01:03:13.527
And what's your take on convenience burnout?
943
01:03:14.408 --> 01:03:23.629
The idea that the gig economy was exciting for a few years, and then in the last few years, as everybody's ordering everything on demand, it's less special.
944
01:03:24.350 --> 01:03:26.150
And the convenience can't demand a premium.
945
01:03:28.413 --> 01:03:28.993
Is that real?
946
01:03:29.053 --> 01:03:30.774
Is that a truism?
947
01:03:36.817 --> 01:03:39.738
I mean, I think it's here to stay.
948
01:03:39.918 --> 01:03:42.079
Like, you know, I haven't given it enough thought.
949
01:03:42.099 --> 01:03:50.122
I think, you know, premium pricing for convenience, well, I'm just thinking of myself.
950
01:03:50.162 --> 01:03:51.423
I mean, I tend to pay it.
951
01:03:51.483 --> 01:03:52.483
Like, I don't know that I...
952
01:03:53.180 --> 01:04:03.572
Yeah, it's everywhere and everything, but I just think like if you're thinking of it from a customer, customers are always going to pay for convenience, I think, right?
953
01:04:03.692 --> 01:04:07.837
Obviously, you know, it's up to the competitors to come in and start pricing out and...
954
01:04:08.498 --> 01:04:10.579
offering you other ways to do it for cheaper.
955
01:04:10.659 --> 01:04:13.680
And then the customers will follow that train naturally.
956
01:04:13.720 --> 01:04:17.882
And but I don't think I don't think the gig economy is going anywhere.
957
01:04:18.142 --> 01:04:23.844
I think this idea and especially with these new generations, I mean, there's a feeling that they want autonomy.
958
01:04:23.864 --> 01:04:25.204
They want to control their time.
959
01:04:26.205 --> 01:04:33.168
They want to do it for multiple businesses, you know, sporadically, the way they wake up, the way they feel, they got to decide.
960
01:04:33.188 --> 01:04:33.868
They want the power.
961
01:04:34.568 --> 01:04:43.374
And I think we're just in that sort of phase where the gig economy is probably going to be central infrastructure to anything else that comes up.
962
01:04:43.935 --> 01:04:44.195
Nice.
963
01:04:45.376 --> 01:04:47.778
Well, it was awesome spending some time chatting.
964
01:04:48.078 --> 01:04:48.938
Thanks for coming in.
965
01:04:48.978 --> 01:04:49.799
Yeah, it was a pleasure.
966
01:04:49.919 --> 01:04:52.301
It's exciting to hear the journey that you've been on.
967
01:04:52.421 --> 01:04:55.423
And I think there are lessons for people that are considering...
968
01:04:56.694 --> 01:05:11.379
You know, on one hand, I mean, well, I'll say this before we break, but like, I think it seems to a lot of people I've talked to as easier than ever to play armchair asset roll up, you know, especially with things like the Shopify market.
969
01:05:11.419 --> 01:05:14.960
I don't know if that even exists, but that it did recently, right?
970
01:05:15.000 --> 01:05:23.043
That website where you could find other Shopify websites and it shows you the sales history up until some point and then suddenly the stats are missing.
971
01:05:23.123 --> 01:05:23.843
Right, right.
972
01:05:23.863 --> 01:05:25.144
You know, that's where everything tanked.
973
01:05:25.624 --> 01:05:28.385
But yet people can buy existing stores.
974
01:05:29.485 --> 01:05:33.287
And whether those user bases can be kickstarted or not is such a big question.
975
01:05:33.887 --> 01:05:36.768
But so I think people get into it.
976
01:05:36.908 --> 01:05:42.450
And I know we have a family member who tried this and he had a tough run for a few years.
977
01:05:42.610 --> 01:05:45.151
And he had to double down on one particular brand.
978
01:05:45.631 --> 01:05:48.872
And suddenly it was like, well, now I'm not an e-com company.
979
01:05:49.072 --> 01:05:52.834
I'm just whatever he was selling company.
980
01:05:52.854 --> 01:05:53.074
Right.
981
01:05:54.254 --> 01:05:55.676
who relies on digital sales.
982
01:05:55.756 --> 01:05:55.956
Right.
983
01:05:56.456 --> 01:05:57.898
Which is back to basics, right?
984
01:05:57.918 --> 01:06:00.480
Like commerce is commerce.
985
01:06:01.221 --> 01:06:12.772
And, you know, the one thing I would add is like, and maybe one of the biggest learnings around all of this is to keep things scrappy and do things with discipline, right?
986
01:06:12.812 --> 01:06:13.873
Bottom line focused.
987
01:06:13.893 --> 01:06:14.013
Yeah.
988
01:06:14.813 --> 01:06:24.059
And so what we found is like buying stuff very disciplined, you know, the acquisitions we've done at very reasonable prices have turned out to be winning acquisitions.
989
01:06:25.380 --> 01:06:32.444
We've always, you know, I take a very measured view on debt these days, right?
990
01:06:32.484 --> 01:06:33.204
How do we handle that?
991
01:06:33.224 --> 01:06:35.505
How do you sensitize it if you take it on?
992
01:06:35.846 --> 01:06:37.286
Don't just assume 10% or 20% downside.
993
01:06:37.527 --> 01:06:39.228
What about 30, 40% in this crazy world?
994
01:06:41.849 --> 01:06:48.677
So just being prudent and disciplined and grounded serves everyone well, you know, especially in this crazy world.
995
01:06:49.018 --> 01:06:49.458
Nice, man.
996
01:06:49.919 --> 01:06:50.239
Cheers.
997
01:06:50.459 --> 01:06:50.720
Cheers.
998
01:06:50.740 --> 01:06:51.060
Thank you.