Latest / The Growth Class with Phil Masiello / Retail E-Commerce: Scaling a Suit Business Across Multiple Channels with Marty Babayov

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Retail E-Commerce: Scaling a Suit Business Across Multiple Channels with Marty Babayov · The Growth Class with Phil Masiello

• 0:21
  SPEAKER_01: Hey everybody, and welcome back to another growth class.
• 0:29
  SPEAKER_01: Today started uh my guest today started his business journey as a teenager, flipping clearances, fines on eBay right out of his family's basement.
• 0:38
  SPEAKER_01: Fast forward to today, he's turned that hustle into a multimillion dollar retail operation.
• 0:42
  SPEAKER_01: He's the founder and CEO of the Suit Depot, a brand that didn't just build a massive online e-commerce engine, but also scaled a destination brick and mortar footprint in a category dominated by traditional giants.
• 0:55
  SPEAKER_01: The things that he knows about are inventory strategy, D2C scaling, multi-channel growth, and what it actually takes to build a brand that lasts.
• 1:05
  SPEAKER_01: So just welcome to the growth class, Marty Babayov.
• 1:08
  SPEAKER_01: Marty, great to have you on.
• 1:09
  SPEAKER_01: Thanks for taking the time to come on.
• 1:11
  SPEAKER_00: Thanks for having me, Phil.
• 1:13
  SPEAKER_01: Yeah, my pleasure.
• 1:14
  SPEAKER_01: So why don't you take us back?
• 1:15
  SPEAKER_01: I I I sort of touched on your background a little bit.
• 1:18
  SPEAKER_01: Why don't you take us back about how you started uh everything?
• 1:21
  SPEAKER_01: You know, what you started doing, your your experience with eBay, and then how you turned that into what you have.
• 1:27
  SPEAKER_01: Sure.
• 1:27
  SPEAKER_00: So um started on eBay probably when I was like 12 or 14, somewhere in that range.
• 1:33
  SPEAKER_00: Um originally just dabbled in anything I could find to sell, you know, around the house.
• 1:39
  SPEAKER_00: Um I I think by the time I was like 14 or 15, it was mostly electronics.
• 1:43
  SPEAKER_00: Um that was I was buying a lot of refurbished goods on Apple's website.
• 1:48
  SPEAKER_00: Um and then just selling that.
• 1:50
  SPEAKER_00: That actually I sold more locally.
• 1:52
  SPEAKER_00: And then once I started going online, I'd find like wholesale deals or batch deals, things like that, um, and sell them on eBay.
• 1:59
  SPEAKER_00: Little by little that transitioned into clothing when I realized that uh clothing in general was less risky.
• 2:04
  SPEAKER_00: Like if Apple released a new product, the old one just crashed in value, cratered.
• 2:08
  SPEAKER_00: If an item got stolen out of the mail, like a that could be hundreds of dollars for a 15-year-old kid, that's a lot of money.
• 2:13
  SPEAKER_01: Yeah, yeah.
• 2:15
  SPEAKER_00: And that's where I realized clothing was much safer.
• 2:17
  SPEAKER_00: Um, also very underserved.
• 2:20
  SPEAKER_00: Really?
• 2:21
  SPEAKER_00: Yeah.
• 2:21
  SPEAKER_00: Men's particularly.
• 2:22
  SPEAKER_00: I wouldn't say clothing in general, men's particularly, it's not as um quick, fast fashion as women's.
• 2:28
  SPEAKER_00: Women's, the styles can change six months, nine months.
• 2:31
  SPEAKER_00: Um, you could be holding merchandise that just nobody wants.
• 2:34
  SPEAKER_00: With men's, I would notice that I would be getting used clothing from relatives.
• 2:38
  SPEAKER_00: Older nice suits, you know, nice, you know, shirts, ties.
• 2:41
  SPEAKER_00: This could be worn five, 10 years old and still have a market on eBay, which just blew my mind.
• 2:45
  SPEAKER_00: Like that men's clothing really doesn't change.
• 2:47
  SPEAKER_00: Quality menswear doesn't change drastically over a decade.
• 2:51
  SPEAKER_01: So you were selling men's clothing on eBay?
• 2:54
  SPEAKER_00: Yeah, men's clothing on eBay.
• 2:56
  SPEAKER_00: Um, we grew that pretty quickly.
• 2:58
  SPEAKER_00: Uh, by the time I was like 19, we were doing$2 million on eBay.
• 3:02
  SPEAKER_00: Really?
• 3:03
  SPEAKER_00: Largest men's suit seller on eBay.
• 3:05
  SPEAKER_00: Yeah.
• 3:05
  SPEAKER_00: So just selling used.
• 3:07
  SPEAKER_00: No, that point we was new already.
• 3:09
  SPEAKER_00: By by by 19, it was already new.
• 3:11
  SPEAKER_00: And I would say in about 16, 17, I transitioned into new.
• 3:14
  SPEAKER_00: I started buying um returns and overstock from department stores.
• 3:19
  SPEAKER_01: Well, how'd you figure that out?
• 3:22
  SPEAKER_00: So originally I was going to stores like TJ Maxx, Marshalls, selling that, and it wasn't like a scalable model.
• 3:28
  SPEAKER_00: I was like, okay, so if I can buy from them, have a margin to sell online, then where do they get it from?
• 3:33
  SPEAKER_00: So I just started calling all of the TJ Maxx's Marshalls and asking, you know, to speak to the manager, speak to somebody who could like explain me how it works.
• 3:41
  SPEAKER_00: Um finally, one manager walked me through it a little bit.
• 3:43
  SPEAKER_00: He he said he said they're not involved in the buying, but he walked me through the process of how the merchandise flows in the in retail.
• 3:51
  SPEAKER_00: And once I understood that, you know, I contacted Macy's, got through to somebody there, and eventually was buying um overstock and returns from Macy's.
• 3:59
  SPEAKER_01: Yeah.
• 4:00
  SPEAKER_01: And then site unseen.
• 4:03
  SPEAKER_00: Um yeah, they give you like a spreadsheet.
• 4:05
  SPEAKER_00: Um, but yeah, site on scene.
• 4:06
  SPEAKER_00: It's at a first batch, it was a little surprising how bad some of the damage was, but at the same time, it was great margins and a lot of opportunity.
• 4:13
  SPEAKER_01: Oh, that's fantastic.
• 4:14
  SPEAKER_01: Yeah, I have a guy who's a friend of mine who does um he's one of the largest liquidators and close-out guys in the country.
• 4:23
  SPEAKER_01: Uh he's based out of Canada, but he does North all of North America.
• 4:27
  SPEAKER_01: He does international.
• 4:28
  SPEAKER_01: And like he he'll somebody will call him and say, you know, I have this 200,000 square foot barbecue store, you know, that's liquidating, and he'll he'll go in and buy everything, like everything, shelving and and telephones and the whole thing, and then he just disperses it out.
• 4:47
  SPEAKER_01: It's an interesting sort of business model, but God, it you have to really know what you're doing and what you're buying in order to do it effectively, you know, when you're not buying a contract.
• 4:58
  SPEAKER_01: I mean, now it's a different business for you, right?
• 5:01
  SPEAKER_01: Because now you're you're essentially buying new products that's manufactured for you, by you.
• 5:07
  SPEAKER_00: Correct.
• 5:07
  SPEAKER_00: So I I think the when once we started moving away from the platforms, that was like a big thing for us, moving away from eBay, Amazon, um, just because you don't own your customer.
• 5:17
  SPEAKER_00: You know, there's no life, you know, lifecycle value for these customers.
• 5:20
  SPEAKER_01: That's true.
• 5:20
  SPEAKER_00: So and in general, like we we wanted to be able to grow our business in a scalable way, and it's very hard on these platforms and the algorithms change.
• 5:29
  SPEAKER_00: Um, there's so many things you're not in control of.
• 5:31
  SPEAKER_00: So we started moving towards retail and e-commerce.
• 5:34
  SPEAKER_00: And when we had did that shift, we we started seeing that the model wouldn't work anymore because the average retail customer comes in, he's not looking for a Ralph Lorenz suit, uh, a Tommy Hilfiger suit.
• 5:44
  SPEAKER_00: He's looking for a black suit, a navy suit.
• 5:46
  SPEAKER_00: He has very specific needs, and buying only closeouts, we couldn't fill those specific needs.
• 5:51
  SPEAKER_00: So we started manufacturing and producing.
• 5:54
  SPEAKER_00: And over the years, it's gone from you know 10, 15% of the business of supplementing the closeouts to probably at this point I would say 60-70% of the business is just manufacturing.
• 6:04
  SPEAKER_00: Um, specific to the specific needs of the consumer.
• 6:07
  SPEAKER_01: Yeah.
• 6:07
  SPEAKER_01: Yeah, I would think that it's sort of a like TJ Maxx's model to me, whenever I go in there, it's sort of like a treasure hunt.
• 6:16
  SPEAKER_01: You know, you're you're looking for something and you know, maybe you find it, maybe you don't, and and you're not upset because you're not it's sort of it's not a an essential buy.
• 6:24
  SPEAKER_01: It's sort of a little, you know, it's like when you go into Costco and you go into the center aisle.
• 6:28
  SPEAKER_01: You didn't go in there specifically to buy something, you just start wandering the aisles going, oh, this looks good.
• 6:33
  SPEAKER_01: You know, I always I always wanted a 12-piece blow-up Christmas thing for my front lawn.
• 6:39
  SPEAKER_01: So um, but yeah, I can imagine how the closeout would be, would have limited life.
• 6:44
  SPEAKER_01: Amazon, you know, it's it's really funny.
• 6:48
  SPEAKER_01: We started building brands on Amazon around 2006, and we started in the beauty business, and I didn't like it.
• 6:55
  SPEAKER_01: I didn't understand why we wanted we we sort of got pushed into it by some of our investors, and we were saying, Oh, you got to be on Amazon, gotta be on Amazon.
• 7:03
  SPEAKER_01: And we got on Amazon and I was like, you know, it doesn't make sense to me.
• 7:07
  SPEAKER_01: I'm putting all this effort and work in, and I don't know who that customer is.
• 7:11
  SPEAKER_01: I don't have any connection to that customer.
• 7:13
  SPEAKER_01: So then we started to do some things.
• 7:15
  SPEAKER_01: We started to look at what we were allowed to do on Amazon at the time with emails and things, and we figured out a couple of ways to get people who bought from us maybe one time or two times on Amazon to come back to the website.
• 7:31
  SPEAKER_01: And we figured out a way that we could track that.
• 7:35
  SPEAKER_01: And we we were very successful at it.
• 7:37
  SPEAKER_01: And then I think around 2012 or 2013, Amazon started taking some of those those what I'd call backdoor openings away.
• 7:47
  SPEAKER_01: And today, I mean, it's so difficult.
• 7:50
  SPEAKER_01: And it's really you almost have to look at it as a wholesale sale uh because of the economics of it all.
• 7:58
  SPEAKER_01: So I can't imagine and and fashion I can't imagine doing just because of the high rate of return and the fact that especially with suits, you know, you buy it, you still have to get it altered, you know, you still have to get it fitted.
• 8:12
  SPEAKER_00: So with us, people are shocked at how low the margin is on apparel on Amazon.
• 8:18
  SPEAKER_00: We do sell on Amazon and it's a significant like sum of a stream of revenue that we don't want to give up, but it's a very low margin business.
• 8:26
  SPEAKER_01: Yeah.
• 8:26
  SPEAKER_01: Yeah, it's a it's amazing.
• 8:29
  SPEAKER_01: Some of the well, you know, when you start thinking about the supply chain, the extended supply chain from you know point of manufacture to point of sale, and you start putting costs to it along the way, a lot of businesses that people think have a lot of margin are very slim.
• 8:45
  SPEAKER_01: And and trying to give up uh all that margin to to Amazon, it's tough.
• 8:51
  SPEAKER_01: I mean, it's tough to just come out of the gate and give up, you know, 30, 40 percent before you even started advertising or doing anything else.
• 8:59
  SPEAKER_00: The bigger thing to me is also the unpredictability of Amazon when you don't control everything around it.
• 9:04
  SPEAKER_00: Like we've had where Chinese sellers come on there, mimic our products, take our pictures, and you've got no recourse.
• 9:09
  SPEAKER_00: There's nothing you can do about it.
• 9:11
  SPEAKER_00: Um and then your season is shot and you're sitting on you know a container of suits that was just for Amazon.
• 9:15
  SPEAKER_00: So that's that's one of the big reasons I've moved away, and so many others I know have.
• 9:19
  SPEAKER_00: Um sometimes Amazon becomes your competition.
• 9:21
  SPEAKER_00: If a product is too good, Amazon will go in, ask you for your paperwork, and then go buy directly from your supplier.
• 9:28
  SPEAKER_00: It's insane that they get away with it.
• 9:30
  SPEAKER_01: Yeah.
• 9:30
  SPEAKER_01: Well, I mean, they've been sued and they've won because at the end of the day, nobody forces you to sell on Amazon.
• 9:37
  SPEAKER_01: It's their world.
• 9:38
  SPEAKER_01: You come on, their rules, they can do whatever they want.
• 9:41
  SPEAKER_01: And um, yeah, I've seen them do some some strange things.
• 9:46
  SPEAKER_01: Um, but I've also seen them go out and get into all kinds of businesses when they got into fashion for a while, but then they exited it because they couldn't they couldn't make it work.
• 9:55
  SPEAKER_01: They didn't understand it.
• 9:57
  SPEAKER_01: You know, yeah, they got into a lot of personal care categories and then they exited them.
• 10:01
  SPEAKER_01: Uh, you know, and and I think they they realize they're better off having third-party sellers.
• 10:07
  SPEAKER_01: But today I think the dr the the biggest change, the biggest shift I've seen from 2006 to today, which is 20 years, is the way that Amazon treats third-party sellers.
• 10:22
  SPEAKER_01: They used to treat them really well.
• 10:26
  SPEAKER_01: Today they treat them they just don't care.
• 10:28
  SPEAKER_01: It doesn't matter.
• 10:29
  SPEAKER_01: We're just gonna do what we're gonna do.
• 10:31
  SPEAKER_01: And they and I think it's because there's so many people just ready to take your place.
• 10:37
  SPEAKER_01: There's always somebody else that's gonna come on and start selling stuff.
• 10:40
  SPEAKER_01: But I agree with you.
• 10:41
  SPEAKER_01: You know, I I I don't think that you can build a significant brand um on Amazon anymore.
• 10:48
  SPEAKER_01: You have to have a presence.
• 10:49
  SPEAKER_01: I I would say that you have to have a presence with certain things because if I'm selling in certain categories, if I'm selling, you know, a consumer product, having it on Amazon because customers hear about you, they're gonna go and buy it on Amazon or they're gonna go look on Amazon.
• 11:05
  SPEAKER_01: Um but you know, if it's a repeat purchase, something that they're gonna buy quite often, you have to figure out how to get them to your website or else you're just gonna you're just you're not generating long-term value, you're not generating repeat purchases, you're you're just paying for each transaction.
• 11:21
  SPEAKER_01: Exactly.
• 11:22
  SPEAKER_00: Yeah.
• 11:25
  SPEAKER_01: So then you g y you started on DDC d D2C online selling new suits, but then you moved into the retail store, or was it vice versa?
• 11:36
  SPEAKER_00: Around the same time, I would say, but yeah.
• 11:38
  SPEAKER_00: Um we moved to brick and mortar a little over ten years ago.
• 11:41
  SPEAKER_00: Um years now.
• 11:44
  SPEAKER_00: And we found that while there will always be a market and we actually aren't slowing down on the e-commerce side uh on our consumer website, but um it's a much cleaner model um doing a brick and mortar.
• 11:59
  SPEAKER_00: Um just because the return rate is close to nothing versus online, your return rate could be 20 to 30 percent.
• 12:05
  SPEAKER_00: Um, there's a lot of other fulfillment issues along the way and expenses along the way.
• 12:09
  SPEAKER_00: Um it's actually it's interesting to uh track the buyer satisfaction, and it's so much higher in a retail store than it is online, even trying to go over the top four customers.
• 12:20
  SPEAKER_00: End of the day, it it's a much more fulfilling experience, I think, as a consumer being in a store, touching the product, feeling it.
• 12:27
  SPEAKER_00: We're trying to mimic that and mirror that online, and we we really do try to make it so that when you're online, you feel like you've touched that fabric or someone has touched it for you.
• 12:35
  SPEAKER_00: And we try to show it to you as in detail as possible.
• 12:38
  SPEAKER_00: But there'll always be even just fit, it's it's there's surprises when you get the product, it'll never fit exactly, you know, no two products will feel exactly the same.
• 12:45
  SPEAKER_00: So the the brick and mortar to us is I think the cleanest model.
• 12:53
  SPEAKER_01: Yeah, I would agree with that in your category.
• 12:55
  SPEAKER_01: I mean, it's it's I know just personally, uh again, uh a uh focus group of one, but I know that I have a hard time buying clothes, men's clothes, certain types of clothes online.
• 13:09
  SPEAKER_01: Like I couldn't buy a suit online, I have to go there.
• 13:12
  SPEAKER_01: I have to try it on, I have to see how I like the material, I have to see how I like the pattern, you know.
• 13:17
  SPEAKER_01: Um shirts, could I do it?
• 13:19
  SPEAKER_01: Yeah, I've done it.
• 13:20
  SPEAKER_01: Uh it's okay.
• 13:22
  SPEAKER_01: Jeans, certainly, you know, things like that.
• 13:24
  SPEAKER_01: But when it comes to I think blazers, you know, uh sport coats and uh and suits, I I think you're a hundred percent right.
• 13:32
  SPEAKER_01: Uh y you need to go to a store.
• 13:33
  SPEAKER_01: Now then then the problem becomes you know, finding a I mean, in this area, finding a good store, right?
• 13:40
  SPEAKER_01: Right.
• 13:40
  SPEAKER_01: We're we're the the home f of Joseph A.
• 13:43
  SPEAKER_01: Bank, so that to us is like there's 20, 30 of them.
• 13:47
  SPEAKER_01: And uh, you know, it it it's a personal preference as to whether or not that's a you know good store or bad store, you know.
• 13:56
  SPEAKER_00: Right.
• 13:56
  SPEAKER_00: So I think a lot of our customers, it's it's they they would prefer to shop in store.
• 14:01
  SPEAKER_00: I mean, Michigan customers, the majority are not buying online, although we do have some.
• 14:04
  SPEAKER_00: Some know what they want, they've had the brand, some have shopped in store and they just like the convenience of online.
• 14:09
  SPEAKER_00: So once you know your size, you trust the brand, you trust the label, it's like okay, ship me this, this, and this, you know, and then maybe you'll get a return here and there.
• 14:16
  SPEAKER_00: Um, but a lot of them, they just don't have a store where they're at.
• 14:19
  SPEAKER_00: That's a reasonable price.
• 14:20
  SPEAKER_00: So I think that's like a big, uh, a big, I think, draw for our business is once you know the model and you know that the value is there, sure.
• 14:28
  SPEAKER_00: So you do have to return 25% of what you buy.
• 14:31
  SPEAKER_00: It's still well worth it if you're buying the suit at half the cost you buy it elsewhere.
• 14:34
  SPEAKER_00: Sure.
• 14:35
  SPEAKER_00: We wholesale our suits, and I watch what some of the stores are selling it for.
• 14:38
  SPEAKER_00: There are most stores we wholesale our suits stores sell it for 50 to 100% more than we do, which to me is crazy.
• 14:44
  SPEAKER_00: You know, we're the manufacturer and they're selling it for 50 to 100% more than we do.
• 14:49
  SPEAKER_01: Yeah.
• 14:50
  SPEAKER_01: Well, they're trying to take into account, you know, I think a lot of their expenses and that return rate and things like that.
• 14:56
  SPEAKER_00: But you know, these are actually brick and mortar stores, a lot of them.
• 15:00
  SPEAKER_00: I think they just it's the the menswear arena has operated on such a high margin, I think, that there's very few who are looking to scale.
• 15:08
  SPEAKER_00: I think that's the difference between where we're at and others are.
• 15:10
  SPEAKER_00: To me, I'd rather cut back on that margin, but provide a value to the customer that there's a reputation.
• 15:16
  SPEAKER_00: Everyone's like, oh, the Zoo Depot?
• 15:18
  SPEAKER_00: Like, yeah, that's a great value.
• 15:19
  SPEAKER_00: Same thing we're doing online.
• 15:20
  SPEAKER_00: I want to do that in-store as well.
• 15:22
  SPEAKER_00: So we're gonna cut the margin a little bit.
• 15:23
  SPEAKER_00: We're not gonna make the the markup a lot of these retail stores do, but at the same time, we don't want just one store.
• 15:28
  SPEAKER_00: The goal is to start scaling.
• 15:30
  SPEAKER_01: Sure, sure, sure.
• 15:32
  SPEAKER_01: Yeah, it's uh I think people don't necessarily relate or uh I I won't say people, I don't I don't think a lot of businesses or a lot of founders relate, you know, margin and scale.
• 15:45
  SPEAKER_01: Uh they they sort of stick to a certain model that they get, there's a certain margin.
• 15:50
  SPEAKER_01: They don't think about cutting it.
• 15:52
  SPEAKER_01: And then you have the flip side where you have guys that destroy their margin thinking that they're going to make it up in s in scale.
• 15:58
  SPEAKER_00: And you're going to be like Amazon did it successfully.
• 16:00
  SPEAKER_00: Yeah, yeah.
• 16:02
  SPEAKER_00: Worked on zero margin negative.
• 16:03
  SPEAKER_00: Like Amazon was selling on non-iron shirts that cost$20 to produce, and they're selling it for$25.
• 16:09
  SPEAKER_00: I'm like, what's the game?
• 16:10
  SPEAKER_00: And they ended up leaving that.
• 16:11
  SPEAKER_00: But the thing is they got people to start buying it on Amazon.
• 16:14
  SPEAKER_00: That's what they did in essence.
• 16:15
  SPEAKER_00: They changed their behaviors.
• 16:16
  SPEAKER_01: Aaron Powell I think, you know, I saw I I saw this article the other day uh on LinkedIn where this guy did this comparison, and I hate these comparisons.
• 16:25
  SPEAKER_01: Like, you know, Amazon's the number one retailer over Walmart, over this, over that, and they take Amazon's total sales and they forget, you know, uh you're 100% right.
• 16:34
  SPEAKER_01: There are certain things that Amazon will do to lose money.
• 16:38
  SPEAKER_01: Almost 40% of Amazon's profit comes from AWS.
• 16:41
  SPEAKER_01: And Walmart doesn't have an AWS, Target doesn't have an AWS, none of those guys are have that infrastructure.
• 16:47
  SPEAKER_01: Then you've got supply chain, because Amazon makes a boatload of money on supply chain, moving goods around the world.
• 16:54
  SPEAKER_01: Forget about moving them just to their warehouses and selling them to the consumer, moving goods for you from China to the United States or from Greece to the United States.
• 17:03
  SPEAKER_01: And then they make a ton of money on uh content, uh, movies, videos.
• 17:10
  SPEAKER_01: You know, Walmart doesn't have a video streaming service, neither does uh Target or any of that.
• 17:15
  SPEAKER_01: And then the kicker is how much money they make off their advertising platform, because their advertising platform isn't just to advertise your products on Amazon, it's to advertise on the demand side platform, programmatic advertising, which you can run everywhere, plus on Fire TV.
• 17:33
  SPEAKER_01: So I mean, you know, i if Amazon didn't make any money on Amazon.com, right, or Amazon.japan or Amazon.whate, it's okay.
• 17:43
  SPEAKER_01: They're making a ton of money on all these other services that nobody else has.
• 17:46
  SPEAKER_01: So you're 100% right.
• 17:48
  SPEAKER_01: It enabled them to get people to come to Amazon.com, and that has paid off tremendously because that's the first place people look, right?
• 17:58
  SPEAKER_01: I think the last number I saw was I think 90, 92 or 93 percent of the buying population in the United States has the app on their phone.
• 18:08
  SPEAKER_01: You know, they I I don't think Walmart can say that, Target can't say that, Walgreens can't say that, nobody else can say that.
• 18:14
  SPEAKER_01: So that's why I said before, I think if you're building a brand, you have to have a presence on there.
• 18:19
  SPEAKER_01: Now, whether you try and promote that presence is a different story, right?
• 18:24
  SPEAKER_01: Because it's it it gets awfully expensive.
• 18:27
  SPEAKER_00: Exactly.
• 18:27
  SPEAKER_00: Yeah.
• 18:28
  SPEAKER_00: To us, like it wasn't as much for having a presence for the sake of the brand.
• 18:31
  SPEAKER_00: I don't think we needed.
• 18:32
  SPEAKER_00: It allowed us the scale.
• 18:34
  SPEAKER_00: So if we could sell an extra million dollars on Amazon, that allowed us to scale to produce certain products, increase the margin so that we can lower the prices for retail and for the brick and mortar and for the online store.
• 18:45
  SPEAKER_00: So really it was just getting that volume up to where we needed it to be able to produce everything in house.
• 18:50
  SPEAKER_01: Yeah.
• 18:51
  SPEAKER_01: Yeah.
• 18:51
  SPEAKER_01: There's a lot of guys that that I deal with that uh have taken that approach where they said, you know, we just treat it like a wholesale account.
• 18:57
  SPEAKER_01: We make slim margins, but it gives us more volume and we use that volume to lower our costs everywhere else.
• 19:04
  SPEAKER_01: I got it, you know.
• 19:05
  SPEAKER_01: I I I also have seen these guys that now young, young entrepreneurial guys that have brands that started selling on Whatnot.
• 19:14
  SPEAKER_01: I don't know if you've ever been on Whatnot, but it's uh you should take a look at it.
• 19:19
  SPEAKER_01: It's uh it's it's really funny to me.
• 19:21
  SPEAKER_01: I thought it was a place for secondhand merchandise, right?
• 19:25
  SPEAKER_01: You see a lot of guys think eBay, you know, think eBay with video with you going on and being the seller and having people come and listen to your spiel while you're you know while you're selling.
• 19:37
  SPEAKER_01: They uh and they go on, they they're in the uh dog uh uh dog business.
• 19:42
  SPEAKER_01: They they sell pet pet supplies.
• 19:44
  SPEAKER_01: And they go on, they'll do, you know, they'll be on for an hour, they'll do twenty-five, thirty thousand dollars in and out.
• 19:52
  SPEAKER_01: Yeah.
• 19:53
  SPEAKER_01: And I was like, what?
• 19:54
  SPEAKER_01: And I thought it was just for people that you know selling trading cards or selling coins, and you know, I I got that part, but these guys are on there uh seven, eight times a week.
• 20:05
  SPEAKER_01: It's it's one of their largest channels for for uh I heard about this.
• 20:09
  SPEAKER_00: Actually, sounds interesting.
• 20:10
  SPEAKER_01: Yeah, you gotta go and check it out.
• 20:12
  SPEAKER_01: Pull it's uh download the app, whatnot, and then just uh I'm surprised you haven't seen the commercials.
• 20:18
  SPEAKER_01: But uh yeah, just download the app and take a look at it.
• 20:21
  SPEAKER_01: It's pretty, it's pretty, it's pretty wild what's happening.
• 20:24
  SPEAKER_01: So um yeah, it's interesting.
• 20:26
  SPEAKER_01: So how many retail stores do you have now?
• 20:28
  SPEAKER_00: So right now we have one.
• 20:29
  SPEAKER_00: So we've been focusing on um perfecting the model and getting it to a point a processes and systems in place so we can start plugging and playing.
• 20:40
  SPEAKER_00: Um we're we're in the point now where we're looking at opening two locations within the next year.
• 20:44
  SPEAKER_00: And then if that works, continue to scale it outwards.
• 20:48
  SPEAKER_01: Two locations in in Michigan?
• 20:50
  SPEAKER_00: Uh one in Michigan, one nearby in Ohio.
• 20:53
  SPEAKER_01: Wow.
• 20:54
  SPEAKER_01: That's interesting.
• 20:55
  SPEAKER_00: Near enough that we can supply it from our warehouse easily, you know, uh rotate the workforce as need be if you know if emergencies arise.
• 21:03
  SPEAKER_00: We're trying to stay closer to home in the beginning.
• 21:05
  SPEAKER_00: Um, but the main thing really is perfecting the systems and processes because anyone can run a one store on their own.
• 21:12
  SPEAKER_00: It's just about how good of a manager do you have.
• 21:14
  SPEAKER_00: It's can can you rinse and repeat and do it over and over?
• 21:16
  SPEAKER_00: That's where we're really trying to see if we can make a model that doesn't require really any management, you know, just systems and processes.
• 21:24
  SPEAKER_01: Yeah, that's um that'd be interesting because uh I think in retail, especially in this, right?
• 21:32
  SPEAKER_01: Sort of a high touch uh it's sort of a high touch environment.
• 21:35
  SPEAKER_01: You know, you you you go in there, you you really want, I guess it really depends on the salesperson, right?
• 21:40
  SPEAKER_00: Aaron Powell So you still have a good sales staff, but we're at the point where I go to my retail store, and this is intentionally.
• 21:46
  SPEAKER_00: People I I some people wonder if this is a mistake not only going there.
• 21:49
  SPEAKER_00: I go there maybe once a month.
• 21:50
  SPEAKER_00: Um To the store?
• 21:52
  SPEAKER_00: Yes.
• 21:52
  SPEAKER_00: And I don't want to be hands-on.
• 21:54
  SPEAKER_00: I want to see if we if we've built something that can sort of run itself.
• 21:58
  SPEAKER_00: In the beginning, I was the face of it.
• 21:59
  SPEAKER_00: I was In there talking to customers and had relationships and I enjoyed it.
• 22:02
  SPEAKER_00: But at the same time, then I don't really have a business.
• 22:04
  SPEAKER_00: I have a job, you know, selling suits at a suit store.
• 22:07
  SPEAKER_00: And I'm encouraging my current retail store manager, who we're gonna, you know, uh as we scale up, would be a uh an uh uh area manager to also try to do the same thing, pull back a little bit and you know, spend his time more strategically than on the ground in the store.
• 22:24
  SPEAKER_00: And we've had success with that.
• 22:25
  SPEAKER_00: He'll leave for a week, two weeks at a time and nothing breaks.
• 22:27
  SPEAKER_00: And that's like that's what's convinced us at this point that we're pretty much there where we can start scaling.
• 22:33
  SPEAKER_01: Yeah.
• 22:34
  SPEAKER_01: Yeah.
• 22:35
  SPEAKER_01: I guess it it it really depends on um I guess having a robust sort of sales uh uh sales model or sales um training model, you know, because you really want it's really your sales people that are going to make or break you, right?
• 22:54
  SPEAKER_01: The management of moving goods and you know displaying goods and things like that, that can be systematized, I think.
• 23:03
  SPEAKER_00: But even on the sales side, and when they have questions, usually what's a manager's role is answering basic questions.
• 23:09
  SPEAKER_00: Um nowadays you can really uh train a model, a GPT, you know, it's uh some sort of LLM model to answer those questions.
• 23:16
  SPEAKER_00: You just put the knowledge base in there.
• 23:18
  SPEAKER_00: And at first it seemed like uh a far reach, but as we're doing it more and more, we're seeing less need for management to step and make decisions.
• 23:25
  SPEAKER_00: So for instance, on the e-commerce side, a lot of the time was spent authorizing returns and exchanges and what to do in specific scenarios.
• 23:32
  SPEAKER_00: You know, you spend four hours writing up all the rules and parameters, and then all of a sudden your customer service rep isn't asking you every day.
• 23:38
  SPEAKER_00: He's got the answers.
• 23:39
  SPEAKER_00: And you audit it once in a while just to make sure.
• 23:41
  SPEAKER_00: And we've seen that the customer satisfaction increases significantly when you have quick answers on the spot.
• 23:47
  SPEAKER_00: And then with time, even automate that where it's not even a human doing it.
• 23:50
  SPEAKER_00: Um so we're seeing that it's been helping us a lot.
• 23:52
  SPEAKER_00: Um you know, using LLMs um and automations has been huge for us in the last year.
• 23:58
  SPEAKER_00: I don't know that we could do that without it.
• 24:00
  SPEAKER_01: Yeah.
• 24:01
  SPEAKER_01: No, I yeah, I hear you.
• 24:04
  SPEAKER_01: I mean, there's a lot of things we automated with agents, uh, with AI agents that are great.
• 24:11
  SPEAKER_01: Um I just think that in a and you're right, you know, you can if if the bulk of the time is spent authorizing returns and all that, 100% you can automate that.
• 24:22
  SPEAKER_01: You can get an AI agent to build it, to do it.
• 24:25
  SPEAKER_01: Guys can be walking around with handhelds and ha answer questions right in front of the customer.
• 24:29
  SPEAKER_01: I mean, that's that's a simple thing to do.
• 24:32
  SPEAKER_01: What you really what's really difficult, and we have a client who is in the wedding uh uh world, high-end, really beautiful high-end wedding dresses, gowns and things, real designer and uh proms and and all that.
• 24:48
  SPEAKER_01: And she has this, she built this AI robust agent.
• 24:53
  SPEAKER_01: We helped her with it, but to train people, her people when she hires them, because it's all about that customer service.
• 25:01
  SPEAKER_01: Like the rest of it, the back end, she's like you, she doesn't go to the store much.
• 25:05
  SPEAKER_01: She has a couple of stores, she doesn't go to the stores much, she spends most of her time analyzing, looking at matrix, uh KPIs and and dealing with you know, buying and designers and stuff like that.
• 25:17
  SPEAKER_01: But it's uh it's really interesting the way that she went about training uh because really that's her whole thing.
• 25:25
  SPEAKER_01: It's like people come in specifically for that.
• 25:28
  SPEAKER_00: Right.
• 25:29
  SPEAKER_00: Yeah.
• 25:29
  SPEAKER_00: It's a it's amazing that we can do that.
• 25:31
  SPEAKER_00: Like it's it's moved so fast.
• 25:33
  SPEAKER_00: I don't think anyone anticipated the speed at which it would move.
• 25:37
  SPEAKER_01: I mean, uh, we started about two years ago.
• 25:39
  SPEAKER_01: We started with one agent that we built because I you know, we we people don't it's really difficult for people that own businesses to understand what SEO does for them and and the value of it and paying for that value, right?
• 25:55
  SPEAKER_01: And I have a hard time with it as well because you know, you you I'm paying you gotta pay somebody, you know,$5,000,$10,000 a month to do your SEO.
• 26:04
  SPEAKER_01: And it it just it's too much resistance.
• 26:06
  SPEAKER_01: So we built this agent to handle SEO for people.
• 26:09
  SPEAKER_01: And it and and it worked fairly flawlessly.
• 26:12
  SPEAKER_01: And uh, they didn't know it was running.
• 26:14
  SPEAKER_01: We were running it in the background and uh and testing it and refining it.
• 26:18
  SPEAKER_01: And then I said um to to my partner, I said, Brian, can we build one that just executes ads?
• 26:25
  SPEAKER_01: I don't want it to execute creative, just the ad, the the execute it, tell me every day what's working, what's not working, do the analysis.
• 26:33
  SPEAKER_01: And we did, and it worked.
• 26:34
  SPEAKER_01: And we've been testing it for like a couple of years.
• 26:36
  SPEAKER_01: So we we built all these agents, and about uh about two months ago, I said, you know, we should just start selling this because it's a platform.
• 26:42
  SPEAKER_01: And it's not vibe coded, it's not clawed, it's it's real, it's a live software, it's it's coded, but it's all based on and when you go in, you can select which which uh platform you want to run as a uh as a user, you can select which platform, which AI platform you want to run, which task.
• 27:03
  SPEAKER_01: Because each task, right, you don't want to burn up your your um your money on on uh AI because it'll it'll go really quickly.
• 27:12
  SPEAKER_01: Right.
• 27:12
  SPEAKER_01: One guy, I I read this article, he he built something in rep uh Replit and uh which is just a prototyper, and he uh walked away from it, didn't put controls on it, went to lunch, came back, and it had spent like you know,$72,000.
• 27:29
  SPEAKER_01: And it was like, you know, and and unfortunately that happens if it's not controlled, no guardrails.
• 27:35
  SPEAKER_00: So yeah.
• 27:36
  SPEAKER_00: I think that's the picture of all these services, all these uh SEO services, it's gonna be people who you know built these agents and uh you know they'll built the tool the back end of it.
• 27:46
  SPEAKER_00: You spent you spend time building it for the average customer, they'll be saving significantly utilizing tools like that, definitely.
• 27:51
  SPEAKER_01: Well, absolutely.
• 27:52
  SPEAKER_01: And and you you you think about how many companies that are doing you know one to two million in sales that want to get to ten million but and can't afford to hire the staff themselves, and they can't afford to hire uh uh you know an agency like mine, the that's it's correct for them.
• 28:08
  SPEAKER_01: So, you know, I don't want to be sitting there going, I put myself out of I want to put myself out of business.
• 28:13
  SPEAKER_01: You know, I want to uh that's my goal.
• 28:16
  SPEAKER_01: Huh?
• 28:17
  SPEAKER_00: Evolve.
• 28:18
  SPEAKER_00: That's where the future is.
• 28:19
  SPEAKER_01: Yeah.
• 28:19
  SPEAKER_01: I want to be, you know, like you, not coming in and just watching it you know flow.
• 28:24
  SPEAKER_01: But um yeah, we're almost out of time.
• 28:27
  SPEAKER_01: Any uh any last minute, where can people find you?
• 28:30
  SPEAKER_01: Where can people buy from you?
• 28:32
  SPEAKER_01: Where should they look for you?
• 28:33
  SPEAKER_00: So check us out at thesuitdepot.com.
• 28:36
  SPEAKER_00: Um you can also follow us on social media.
• 28:38
  SPEAKER_00: We try to share updates, what we're doing, um, the direction we're going with the suits that we're producing, and just to stay on top of you know, the fashion trends if you enjoy fashion.
• 28:49
  SPEAKER_01: I do have one more one more question real quick.
• 28:51
  SPEAKER_01: You know, I we had I had somebody on uh a couple of uh about a year ago who's trying to do for men what rent the runway did for women.
• 29:01
  SPEAKER_01: Uh and I don't know personally, I don't know if it translates just because of the way men buy.
• 29:09
  SPEAKER_00: But I think men, for the most part, and there's obviously exceptions to this, men don't enjoy shopping and don't enjoy fashion the same way women do.
• 29:16
  SPEAKER_00: Like, if once I found my jeans, that's my jeans for the next decade.
• 29:19
  SPEAKER_00: Like, you know what I'm saying?
• 29:20
  SPEAKER_00: For all mankind, that's solved my jeans problem.
• 29:23
  SPEAKER_00: That like literally that was the only jeans I wore for probably 10 years.
• 29:25
  SPEAKER_00: And then like shifted to something else that we produced.
• 29:28
  SPEAKER_00: But and the same idea, like once you find a suit, you know, a suit that works for you, you're not looking to rent and change.
• 29:33
  SPEAKER_00: I mean, this is my pinstripe double-breasted suit.
• 29:35
  SPEAKER_00: I like it, it serves a function.
• 29:37
  SPEAKER_00: Like, I'm not looking to change it up.
• 29:39
  SPEAKER_00: I think women want a one-time use.
• 29:41
  SPEAKER_00: My wife's average dress she wears to a party or something.
• 29:44
  SPEAKER_00: It's she gets one weird out of it.
• 29:45
  SPEAKER_00: Like, to me, that's insane.
• 29:46
  SPEAKER_00: It's like if you like it, wear it all the time.
• 29:48
  SPEAKER_00: And it's like, nope.
• 29:49
  SPEAKER_00: Yeah, no, no, no.
• 29:49
  SPEAKER_00: Never wants to be seen in the same thing.
• 29:50
  SPEAKER_00: She calculates who's seen it, which family.
• 29:53
  SPEAKER_00: Men aren't that way.
• 29:54
  SPEAKER_00: If you got me a nice navy suit that I'm gonna wear it until that's you know, thread beer.
• 29:58
  SPEAKER_00: That's just that's how we're not looking to rent.
• 30:00
  SPEAKER_00: We want to own the few pieces we need, you know, the capsule wardrobe, and that's it.
• 30:04
  SPEAKER_01: Yeah, that's my that was my feeling on it.
• 30:06
  SPEAKER_01: But you know, I said, hey, I I'm never gonna talk somebody out of you know, going after their dream.
• 30:10
  SPEAKER_01: Who knows?
• 30:11
  SPEAKER_01: I don't I don't even know.
• 30:12
  SPEAKER_00: I mean, this is coming from a guy, I've I own 50, 60 suits in my closet, and even I know that that concept.
• 30:17
  SPEAKER_00: Like, I wouldn't rent something.
• 30:18
  SPEAKER_00: I just yeah.
• 30:20
  SPEAKER_00: Well, I don't own that many.
• 30:21
  SPEAKER_01: I I have like I I do like sport coats more than suits.
• 30:25
  SPEAKER_01: I love having a great sport coat, so I probably have two dozen different ones, and I have, you know, maybe four or five suits.
• 30:35
  SPEAKER_01: I have a great Tux and then you know a couple of other suits, and that's fine for me.
• 30:41
  SPEAKER_01: Would you?
• 30:42
  SPEAKER_01: No.
• 30:43
  SPEAKER_01: No, no, no.
• 30:44
  SPEAKER_01: I'm let me tell you about that.
• 30:45
  SPEAKER_01: I couldn't buy used clothing.
• 30:47
  SPEAKER_01: I couldn't, I would never rent clothing.
• 30:50
  SPEAKER_01: I when I buy something like shirts or whatever, you know, I bring them home, I wash them before I put them on.
• 30:57
  SPEAKER_01: I can't.
• 30:57
  SPEAKER_00: If if I I think most men are that way.
• 31:00
  SPEAKER_01: Yeah, if I even rentals.
• 31:01
  SPEAKER_00: A lot of customers come in for rentals and they're like, nah, someone wear that I and I don't want that.
• 31:05
  SPEAKER_00: And I know I don't buying it is at the same price as renting it, just own it.
• 31:08
  SPEAKER_00: Where can it be?
• 31:09
  SPEAKER_01: Yeah, I can't, I can't do that.
• 31:11
  SPEAKER_01: Most but I try and uh you know, I like a good I I like I love shoes, I love jeans, and I love sport coats.
• 31:19
  SPEAKER_01: And so and then I figure out what I'm gonna wear underneath it.
• 31:22
  SPEAKER_01: And that's how that's that's like what I can get away with 80% of the time in in a business setting.
• 31:29
  SPEAKER_01: In if I have to go formal dinners and things like that, that's a bit different than I wear a suit and all.
• 31:34
  SPEAKER_01: But I'm I'm not gonna I don't I don't need to wear a suit every day, so I'm not gonna have 50 of them in my closet.
• 31:42
  SPEAKER_01: But my my wife is is like your wife.
• 31:44
  SPEAKER_01: She's got you know, if if if we ever took her closet has windows in it.
• 31:51
  SPEAKER_01: I mean, it's big enough to have windows in it.
• 31:53
  SPEAKER_01: And I always say to her, you know, somebody when when we move out of this house, somebody's gonna buy that and they're gonna turn that into the into the baby's room.
• 32:00
  SPEAKER_01: I guarantee it.
• 32:04
  SPEAKER_01: Yeah.
• 32:05
  SPEAKER_01: All right.
• 32:05
  SPEAKER_01: You know, I really appreciate it, Marty.
• 32:07
  SPEAKER_01: I really appreciate I love the discussion and uh I appreciate you coming on and taking the time.
• 32:12
  SPEAKER_00: Thank you for having me.
• 32:12
  SPEAKER_01: Uh thank you.
• 32:14
  SPEAKER_00: Take care.