Latest / 1 to 100 / E36: Back in stock with Jannik Semmelhaack

Transcript

E36: Back in stock with Jannik Semmelhaack · 1 to 100

0:00
But yeah, like I was going to ask you, yeah, like can you give
0:02
us the sort of 2-3 line sentence on or sentences on, on, on the
0:08
company and yeah, and how you got connected to Jack?
0:12
Yes. So I think our journey started
0:15
roughly around 5 years ago when I was yet working at Philips.
0:19
So consumer electronics selling toothbrushes and hair dryers
0:25
online and this channel was just a very small with it within the
0:29
Phillips universe, but it grew quite rapidly then from 5 to 40
0:33
million in the online channel for the German market.
0:37
And during that time when I was responsible for that Channel, we
0:40
recognized that often times marketing and operations are
0:44
usually misaligned between which best sellers are we scaling and
0:47
promoting on TV ads and what are the ones that we need to buy to
0:51
make sure that we can actually fulfill that demand.
0:54
And from that problem observation voids started
0:59
because I was really having a pain in the ass of this
1:03
misalignment in the, so to say forecasting and SNOP process.
1:07
And we figured out that the companies to target on this
1:10
problem first we shop would be brands that suffer from this the
1:15
most. And it's not the Philips of the
1:16
world, it's not the Colgatas or whatsoever the the large
1:19
enterprises, it's many of the SME companies, small for
1:23
example, Shopify brands with a revenue of 10 to 100 million, so
1:27
to say, who bring not a lot of expertise often times within the
1:31
forecasting and OPS part and really requires so to say an
1:35
accurate forecast that they can rely on.
1:37
And this is what we provide. So what is right now forecasting
1:40
around 1.5 billion in net revenues for our clients across
1:45
Europe. And our current stage is that we
1:48
are planning now to expand into new markets potentially also US
1:52
in 2026. So team, I'm really looking
1:55
forward for this exchange and nice to meet you.
1:58
I'm one of the two Co founders of Floyd Sionic.
2:01
The other one is Toby, he's the CTO of the company and we're a
2:04
team of 10 people and trying to rock that path to make SME
2:09
companies and consumer brands lives easier.
2:12
What do you, what's the reason that you want to expand to the
2:15
US potentially? Is it just that it's a bigger
2:18
market? Is it that you feel like you've
2:22
like done the work that you want to do in Europe?
2:25
Yeah, I guess like I'm, I'm like immediately curious when someone
2:28
says, hey, we're doing this thing and we want to now go
2:30
here. It's like, is it push?
2:33
Is it pull? Is it a combination?
2:36
So for sure it's a big bet and a very risky one for us because I
2:42
think we do a quite good job here in in Germany especially.
2:45
So to say 90% of our customers yet come from Germany, Austria
2:49
and Switzerland. And what I can say is, is that
2:53
the observation that I made is that at least 90% of brands I
2:56
get planning entirely in Google Sheets, in Excel.
3:00
And this is something that is not solely limited to the German
3:04
or Austrian or Switzerland market or brands from UK.
3:08
This is also something that we've seen quite a lot for US
3:10
brands that I've been talking to.
3:12
And I have to say that the sort of same ICP that we target right
3:17
now is quite a small one actually.
3:19
It's 506 hundred brands in Germany mostly.
3:23
And for sure, this is something where we have a relevant market
3:26
share soon of so to say 2025%. But this gives me a little bit
3:31
of the indication you shop that I rather would like to scale
3:34
into a different market instead of building a horizontal tech
3:37
stack where I'm scaling across Shopify, Magento and Shopware or
3:41
many other platforms. And This is why we look into the
3:46
next stages, but very at the beginning.
3:49
Nothing majorly rolling out yet. So you're already at around 20%
3:54
of your ICP, you said? In the German market, I would
3:57
say this is where we are right now close to exactly.
4:01
And I think it's difficult to, I mean it's difficult to close all
4:07
the brands, right. You cannot really convince
4:10
everyone to become a customer. It's nearly impossible.
4:14
And now after three years after founding the company, I think we
4:19
are in good touch with most of the relevant players.
4:21
And now it's the question, hey, where do we head to next?
4:24
And just as a comparison, what we see that there must be at
4:26
least plus 10,000 brands of the relevant size in the US.
4:31
So team, really looking forward to your feedback, your expertise
4:36
and also honest feedback in terms of, hey, how relevant is
4:39
the problem that we are solving for brands in the US, for
4:42
example? I think for me, it's just
4:43
becoming more and more clear that I needed to go like spend
4:46
like two or three months in Germany to figure out what the
4:48
fuck's happening. Because we had like Neil's on
4:52
the podcast with perspective and like they built perspective to
4:55
like 10 million ARR only inside of the German market.
4:59
We have like a lot of our largest customers are in the
5:02
German market. And I don't know, it just seems
5:04
like there's a whole like world built within a country seemingly
5:09
inside of Germany. And so it's, I don't know, like
5:12
it seems like it's like I, I, no one's been able to explain it to
5:15
me all that well. Like I've asked people why is
5:18
there so many advertising agencies in Germany?
5:20
Because if you look at it on like a per capita basis, it's
5:23
like way oversubscribed. And so maybe you could help
5:26
answer this question as to like seemingly why Germany is such a
5:30
great place to like start companies that's like,
5:35
especially in like this SMB, but it just seems like they're like,
5:39
I don't, I don't know what it is like, because there's also like
5:42
not like a language barrier because every German that I
5:44
speak to like, also speaks very great English.
5:47
So I'm super curious, like your perspective, what's going on
5:51
over there? It's interesting, Zach, if you
5:54
would ask a German founder that would say, hey, the US is the,
5:59
is the dream to start your, your own E com agency or consumer
6:04
brand. And we would say that our market
6:06
is astonishingly small. So it's interesting to hear that
6:08
from your side. I'm not saying that it's, it's a
6:11
large market, it just seemingly is.
6:15
And like this could just be like anecdotally, a phenomenon in
6:19
terms of the people that I've connected with that's making it
6:22
feel more, more real than it is. And like it could be
6:25
coincidence. But like, I'm not, I, I don't
6:28
hear that from like France or Italy or like even the UK.
6:36
Yeah, the only other one that I hear Zach is Australia,
6:39
honestly, right? Literally, I hear Germany and
6:42
Australia. I end up with the same question,
6:45
which is like, it feels like there's something in the water
6:48
in these two places. I sense that the good thing is
6:54
that if you want to enter the German e-commerce market with a
6:57
software solution or an agency, it's a very small network of
7:01
maybe 1 to 3000 relevant players and they all know each other.
7:06
So they are. Once you've hit a certain
7:09
threshold, it's so to say self fulfilling prophecy that people
7:15
will get to know you and you will get in touch with the right
7:17
people. If you hit a certain level of,
7:20
hey, we're solving A relevant problem and you're doing this
7:24
quite well. And this is what what happened
7:26
to our sex. So in the beginning it was a
7:28
complete nightmare because I knew nobody in that space and I
7:33
had those kind of first referrals ongoing asking wildly
7:37
on LinkedIn. Hey, do you have time to chat
7:40
for expert opinions on what we do?
7:43
And that is just three years ago.
7:45
And I think Zach, you are right, the market is very nice.
7:48
If you then hit your check mark your first stages and because I
7:53
would say in the last 12 months, we've grown with around 400
7:56
five, 100% and now are close to 2 million AR.
8:00
And the next stage would be potentially hitting that a 10
8:03
million AR in software sales per year and especially the last 12
8:08
months were nice because this market is so to say, having this
8:11
dynamic of referrals from one friend to the other and it
8:14
really works well here. Got it.
8:16
So this is like a really solid ecosystem.
8:18
And I get the feeling that German companies do prefer
8:23
buying from German companies like I've I've heard that from
8:26
other software companies like they, they look for a German
8:28
solution. Is that something that you think
8:31
is true? I hear that about French
8:33
companies selling to French companies are buying from French
8:37
companies. And I think it's something which
8:40
I have not observed too much, I have to say.
8:44
But I would say that in Germany or in the German e-commerce
8:50
market, which we are majorly serving, it's this advantage and
8:54
disadvantage at the same time. If you fuck up something and it
8:57
goes around, then everybody knows it.
9:00
And This is why it's so important that our that we, that
9:03
we do not fuck up on the forecasting quality and the
9:06
service that we provide. Because it's, they have all
9:09
their WhatsApp groups. And when I, I know already for a
9:12
fact when we fucked up one use case, there's a screenshot
9:16
shared and five other groups and it goes around and then I have
9:19
to have to fix it again. So this is really the, so to say
9:24
advantage and disadvantage of that network that we are working
9:27
in, Yeah. It actually is it, it sounds to
9:31
me a little bit like, you know, if you like in the US, there's
9:35
almost like different pockets within that market because it's
9:38
so massive. So you've got like your your DTC
9:40
Twitter crowd, for example, which is like if you break into
9:44
that group, you can move very quickly.
9:46
But that's just actually like the tip of the iceberg in terms
9:49
of what's available there. So yeah, it's this idea of like
9:53
once you get into, you get, you get enough connections within a
9:57
subset of the market and you can grow quickly within that subset
9:59
of the market. If you're coming to the US, that
10:03
is not the market that I would start with for what little it's
10:05
worth. And I'm sure I'm going to get
10:08
roasted for saying this out loud.
10:10
But I think and maybe, and maybe this can now like pivot a little
10:15
into like what strategy you're hoping to deploy in the US, But
10:19
I guess it depends a little bit on what you're hoping to
10:21
accomplish. But Jeremiah is exactly correct.
10:25
There are like, it's such a big market that actually they there
10:29
are many pockets of it. And many of those pockets do not
10:32
know that the other exists. Like not only do they not talk
10:36
to each other, they don't even know that the other one like to
10:38
say that there's a Ecom Twitter market, there's like tons of
10:43
people that don't even know that that exists.
10:45
So, so forget about like talking to them.
10:47
And so I think the question is like what I mean, everybody
10:51
wants growth, but like what are you hoping to accomplish longer
10:55
term by coming to the US is really the question that you
10:58
want to answer. And then based on that, you
11:01
should figure out what strategy to deploy in terms of how you
11:07
grow in the US, right? Because like we had PJ on from
11:14
Judge Me and like, dude, this guy like he's like a machine.
11:21
He like does not care what pocket you are in.
11:24
If you are on like his view is, if you are on Shopify, you will
11:29
download my software, right? Like that's how he views the
11:33
market. And, and the consequence of that
11:35
statement is that he has optimized his whole business
11:40
around getting recommended by Shopify, which is like, I mean,
11:44
the, the clarity of that strategy was insane to listen.
11:49
I don't know how the other guys felt about it, but I was like,
11:53
like my, I was very impressed, honestly, in that in that
11:57
conversation. But yeah, I think it depends a
11:59
little bit on what you're trying to trying to do in that
12:03
expansion in the. US so my most honest answer is I
12:07
don't know yet what we've been doing in the last 8 to 12 weeks
12:13
he shop was speaking to opinion leaders such as maybe someone
12:17
like Nick Shackleford or or others so to say in that range
12:21
who are for example founders of larger for example performance
12:26
marketing agencies that serve exactly the same ICP that we
12:29
want to help and this is also Risha what we did in Germany
12:33
first we spoke to those who as to say suffering from brands not
12:39
really knowing how much they will sell and how much they
12:41
would they need to buy so for example one of our last invest
12:45
our large investors would be touchpoint.
12:47
They are the largest Google Ads agency in Germany for Shopify
12:51
brands. And they started talking to us 3
12:55
1/2 years ago when the platform didn't really exist and said,
12:58
hey, once you fix this, let me know.
13:00
Because we cannot scale our ads and so to say get everything out
13:05
of the upside of scaling products because our customers,
13:10
they simply don't know that they have to reorder in time to
13:14
actually being able to fulfill that scale.
13:16
And This is why right now our strategy a little bit looks like
13:19
talking to people like Nick Shekelford or other to say
13:23
founders of performance marketing agencies, because they
13:26
would benefit a lot from their customers knowing exactly what
13:30
to buy and when. So they can scale all these, so
13:33
to say, marketing channels as efficiently as possible.
13:36
And it works out quite well actually.
13:38
It's crazy to see because so many of these partners that we
13:41
talked to in US, they are quite open and they say, hey, let's
13:45
get this list going with the Google Sheet list.
13:47
I hit all my so to say accounts that are under under management
13:53
in that list. And we, you just pass with me
13:55
through it to, to make direct introductions.
13:58
And we are close to, so to say that stage of maybe the 1st 5 to
14:02
10 partners we shop that really refer us from the, the bottom of
14:05
their heart. Maybe that's a strategy if you
14:08
want to call it that way. But it worked out very well in
14:10
Germany and starts to work out now for the first steps.
14:14
I like this reputation based growth and and just actually
14:17
providing supply to the market. Man, I think that this is, at
14:21
least from my cursory glance, how Germany is become such a
14:26
great market, right? It's by making stuff for other
14:29
people, which is very different to the United States.
14:34
I think part of why the US is so attractive is because it's just
14:39
such a good market, right? There are so many people to
14:42
serve. But there's also that other
14:44
piece of the US market that's probably attractive to a lot of
14:46
software companies, which is capital, right?
14:50
There's just so much cash. What would Zach or the rest of
14:55
the team, what would you recommend me to do?
14:57
Because so to say, like if you wear my shoes because we shop,
15:02
from what I hear from from your first impression, it's like,
15:05
hey, it's too early. It's it's so to say.
15:07
It might be it. No, no, no, I'm not suggesting
15:10
that at all. That way you know, but it, it
15:13
sounds to me, hey, be aware that this market is huge, is huge and
15:17
that that itself interest of network effects, they have to be
15:21
balanced out very well because there are so many different
15:24
separated networks from each other.
15:25
Well, I, I love the appropriate you're coming at it from because
15:28
when you run an e-commerce brand, there is a real problem
15:32
that you're solving. Unless you're drop shipping mass
15:35
produced products, you have to take inventory and that
15:38
inventory is going to represent inventory risk, right?
15:41
Overstock risk and stock at risk.
15:43
If you buy too much of the wrong product, you might end up with
15:46
dead stock and a lot of people who have made that mistake.
15:51
I don't know, I remember this one founder, she bought like
15:54
10,000 candles. No one wants to buy a candle.
15:56
She's like, Jack, what do we do with all these candles?
15:58
I'm like, I don't know. I don't know what we do with
16:00
these candles, but if you buy too little of the right product,
16:03
and I think this is one of the ones for the types of brands
16:06
that you're speaking to and you stock out, you're going to incur
16:09
an opportunity cost. And on top of that, especially
16:13
right now, you know, with Black Friday and the, you know, the
16:17
inflection point of sales velocity that people see, which
16:20
makes everything so much harder to predict, You've probably
16:24
spent too much on marketing, right?
16:27
So this isn't just a problem that applies to the the founder,
16:29
it's all of operations, the marketing teams as well.
16:32
Because you can imagine if you're on track to run out of
16:34
stock of your best sellers and your marketing team is just
16:37
blasting budget on ads to your best sellers because they have
16:40
the lowest CAC and the highest row ads or whatever metric
16:43
they're using to guide their decision making.
16:45
You as a business owner are trading profitability on every
16:49
sale in exchange for sales velocity, right?
16:52
You're saying I'll sell these products faster at less profit
16:59
and introduce that additional marketing cost, right.
17:02
That's unnecessary. So I, I think this approach is,
17:05
is the right approach. Maybe it's, you know, E com SAS
17:07
isn't the the best market out there and there's there's
17:09
different software products that are much more attractive, but
17:12
man, you're you're solving a very important problem for
17:15
people. When you say we we're getting
17:18
ready to move to the US market, what does that mean for you when
17:21
you unpack that statement? Like is there what is there a
17:25
specific hurdle right now in which AUSE commerce brand cannot
17:28
buy your software or is your biggest issue that you don't
17:31
have awareness? I think on the on the tech side,
17:34
it's not, not a not a very big hurdle because we would exactly
17:39
target the same ICP as we do here in Germany.
17:41
Maybe they have a slightly different setup because AUS
17:44
brand that makes 10 to 15,000,000 might be also selling
17:47
not entirely only on Shopify, but also maybe other
17:49
marketplaces such as Target and Walmart.
17:52
And then you need to have a slightly different setup.
17:55
But I have to say that Zach or Zachary, half of our customers
17:59
are selling multi channel. So on Amazon or maybe offline
18:03
retail as well. And we forecast that as well.
18:05
So in FC buy on, they're not entirely just forecasting with
18:09
us, the online shop where they forecast the Hurricane trickles
18:13
and jerseys, but it's also how much they sell in the stadium.
18:17
And so to say, I don't see that this should be a big, big block.
18:22
Yeah. So, so, so it's just I mean like
18:25
if what worked in Germany was, was having really good
18:28
partnerships with agencies, like I feel like you have the
18:31
infrastructure in place to do that.
18:32
That's just kind of what what I what I would do.
18:36
And then are you, are you guys like PLG or do people need to
18:39
talk to sales to even sign out? Yeah.
18:42
So it's not product like growth. I would say it's much more so so
18:47
to say when you say awareness, it's not just getting into
18:51
conversations with founders of brands.
18:53
It's also explaining to them, hey, you've done a great job
18:57
scaling your, your, your, your brand under 10 million.
19:00
But you will hit a certain threshold that you cannot
19:04
surpass if you don't find a scalable operations process.
19:07
And it's also a lot of education that we have to put into the
19:11
conversations to explain to them, Hey, for some of them, if
19:15
you don't solve this, it will always be limiting your growth
19:18
and your profitability because you will continuously run into a
19:21
manual fuck ups with your Google Sheets and access system.
19:24
So I would say, I would, I would say that there are many founders
19:28
that are not yet fully aware of how much profitability they are
19:31
leaving behind. And then we have other cases
19:33
where we can prove how much can be done.
19:35
I give you an example. We had this the fastest German
19:39
ecommerce growing ecommerce brand of the last 20 years.
19:43
They they've been just started roughly last year and have been
19:46
now scaling beyond 9 digits. And and for German brand that's
19:50
where that's a fast growth when it's bootstrapped.
19:52
But they were only able to achieve that because they had a
19:55
stock reach of 30 days and availability of 9797% on 4000 SK
20:02
US. So think about it, a team of 20
20:05
people bootstrapped 0 to 9 digits within. 12 months on 4000
20:11
SKU's, 30 days of stock reach and 97% availability.
20:15
And for us that was the first time where I was thinking, hey
20:18
fuck, if we can allow a German founder to achieve that, why not
20:23
giving other founders around the world the same access to the
20:26
same technology? And yes, it's a lot of work in
20:28
explaining how it's done and teaching them how to use the
20:31
platform efficiently. We should bridge that gap ASAP.
20:35
But that's at least my my proof point, which I take to to now be
20:39
brave enough on the on the next step.
20:41
I love that. I was thinking about this
20:43
earlier with AI products and how AI products require a fair
20:47
amount of input. And the problem that the average
20:49
consumer of or user, even if it's a prosumer of AI products
20:54
has is that they actually don't know what to ask for.
20:57
They vaguely have an idea of like the maybe the business
20:59
case, the goal that they have that they want to solve, but
21:02
they have no idea like the incremental steps to get there.
21:05
And I guess it applies across a lot of technical products where
21:09
the full reason to opt into the product, the opportunity cost
21:13
problem that you solve is maybe not understood.
21:17
You have to get through that as education before the sale can
21:20
happen. Hey, sorry, I, I was just trying
21:23
to understand, is the person who feels the pain of the problem
21:27
you solve more the operator or is it the agency because they
21:32
want to be able to spend more for the brand?
21:35
Like is, is the reason the agency partnership work so well
21:38
because of that thing you said earlier, which is you can spend
21:43
more if you can forecast better. And and the reason I'm asking is
21:48
I'm just trying to understand like, yeah, why?
21:50
Why doesn't it care? Basically, right?
21:54
Yeah. So I sense that our sweet spot
22:01
person that can relate mostly to the problem that we solve is
22:05
often times actually the founder because they will understand
22:09
that our usually planning and forecasting is usually so to
22:14
say, founder, founder task until a very late stage of a consumer
22:19
brand. I have so many founders that I
22:21
talked to that make plus 20 million in net revenues, but
22:24
they still do this. They have a team of 25 people
22:27
that work for them, but they still plan and forecast
22:30
everything themselves. And I sense we shop.
22:33
The reason for this is because they know how important it is
22:36
that this works. But at the flip side, sometimes
22:40
it's challenging for us to show them, hey, you have right now a
22:44
stock reach of plus six months and it could be one month and
22:47
that's six times the six times the working capital that you
22:50
need to fulfill the same demand. And the flip side, you have
22:54
maybe an availability of 85%, which means that 15% of your net
22:59
revenue more or less across the years is, is lost due to out of
23:02
stocks. And for us, the one side, the
23:06
marketing agencies are the ones that refer us very actively
23:08
because they know how we can scale ads more efficiently.
23:12
And you solve a problem for me. But also what in Germany, the
23:15
marketing agencies are oftentimes the closest trust
23:19
relationship partner of many E com brands.
23:21
And This is why it works so well because they know the pain as
23:24
well when on Black Friday, they want to, you know, get
23:28
everything going. And then at 3:00 PM in the
23:32
afternoon, everything is already sold out.
23:34
And they are like, what do we do now?
23:37
Are there so to say activities have been in place but we
23:40
couldn't really win. So I hope this answers answers
23:44
your question. That's interesting because so if
23:47
I understand correctly, the the primary stakeholder ends up
23:51
usually being the owner operator.
23:53
Is that correct? And do you find that in cases
23:57
where the owner operator is the primary person using this, do
24:01
you find that the way that they use it is different than if they
24:04
have, if, if ecommerce brand has somebody who's dedicated towards
24:09
that function? Because my, my, and I'm, I'm
24:11
asking this because I, I suspect that the owners maybe even
24:16
harder to work with sometimes because they're probably a
24:18
little bit more inclined to just be like, yeah, that's what the
24:21
data says. But I actually think this right.
24:24
So I'm curious how you how you do that because I feel like
24:28
owners in general are just more likely to to behave that way.
24:32
Yeah, it was also a journey for us, Jeremiah, to understand if
24:38
you talk to an OPS manager or a buyer supply chain manager, how
24:42
to sell the solution to them instead of the the founder,
24:45
because it's a completely different story.
24:48
The, the one part is, I have to say the, the operators in
24:52
brands, they often times are much more interested in how much
24:54
time can you save me? And our value proposition is,
24:59
hey, we give you back 90% of your time to make the difficult
25:01
decisions better and more efficiently.
25:04
And they're like, oh, finally, because I'm wasting so much time
25:06
across the week while the, the founders, they are just
25:09
interested in, in, in profits and how much cash we can give
25:12
them back. And then it's a completely
25:15
different selling story, right? And the challenge for us is
25:19
Jeremiah, because that the, the, the, the, it's an advantage and
25:23
a disadvantage. We solve a very, very big
25:25
problem for the brands and it it kind of have a huge cash impact
25:30
and revenue impact. But the flip side, our solution
25:33
is also not very cheap. Maybe you you did your research,
25:37
but to give you an example, there might be simple Shopify
25:41
apps that cost a few €100 per month.
25:44
We have a few accounts that pay US202530K net per month on
25:50
solving this problem for them and that's on the one side very
25:54
nice. But you also have the flip side
25:57
that you really need to translate.
25:59
Hey, your OPS manager maybe earns 405060K and our solution
26:04
costs more than they do but still translating.
26:08
Hey, the problem that we solve is so much bigger, so it will
26:10
pay out 1020 X for you anyhow, So why don't you solve it with
26:15
us? And so we don't need a lot of
26:17
accounts to scale to a certain size, which is great.
26:20
And we chose this pricing that way.
26:22
But at the flip side, it's also the constant exchange there.
26:26
My, how do we translate the value add that we provide and
26:30
keep customers happy? Because we also had a few
26:32
customers that scaled from 4 to 20 K Nets on a paying monthly
26:36
basis. And that's a journey, right,
26:38
where they see the bill of 4K starting and then after a few
26:40
months it's 20 and they're like, oh, I'm paying €20,000 for a
26:45
software solution. Can you explain to me?
26:49
They get the value, but it's a constant.
26:51
It's a constant also journey for us to explain to them, hey, this
26:55
is where you get your money out and This is why you should
26:59
really continue working with us. I like that you can actualize
27:02
the cost of your software against labour and the benefit
27:06
as opposed to other software, right?
27:09
If other software is only $200, you can't be put in that same
27:11
category. You have to be in the category
27:13
of Labor. You have to be in the category
27:14
of what is the benefit that the business is getting right.
27:18
I want to hear Jeremiah and Zach's feedback on this.
27:23
Do you guys think that if he starts with I'm using Nick
27:30
Illustrator, but like the people who are popular on Twitter and
27:35
their agencies that this pricing model will work with that go to
27:39
market? I don't think it would be
27:41
drastically well received. Yeah.
27:43
But I also don't like you when you say, when you say $20,000 a
27:46
month, like what is the size of that business?
27:48
Yeah. So it's a range, right.
27:50
Our average rather is a customer that makes I would say 4 to 5K
27:56
net in costs that we charge for the software solution and the 20
28:01
K would be rather the brand that makes 50 to 100 million in net
28:05
revenues. What?
28:06
What would like a $25 million a year software company pay for
28:11
it? Do you mean a 25,000,000 net
28:14
revenue consumer brand that we help?
28:16
Yeah, like what would their, what would their expected bill
28:19
be? Yeah, I would say between 5:00
28:22
to 6:00 K net. Come on.
28:26
And does that mean that they don't need an OPS manager or
28:28
like an inventory person anymore or what?
28:32
Yeah, I would say what we help them is providing a so to say
28:38
solution that allows them to stay with one person on towards
28:42
9 digits without building up a team of four to five or six
28:47
people to achieve more or less the same.
28:51
Anyhow, I would say that it's almost impossible to be as fast
28:55
and accurate as the system that we provide because it's it
28:59
updates every day more or less. The forecast has much more depth
29:03
and granularity that as you can get into for, I don't know, a
29:07
portfolio of 2 to 3000 SKU's which you'd need to manually
29:10
check and excel and override with your own assumptions such
29:13
as seasonality, historic out of stock effect like Friday, Monday
29:17
peaks, product life cycles, etcetera, etcetera, etcetera.
29:21
And these are all those kind of granularities that we bring into
29:24
the system with our solution. So to come back to your
29:27
question, I would say helping the brand scanning from for
29:30
example, 20 to 100 million with one OPS manager, that could be a
29:34
good value proposition that we are.
29:36
We've also seen doing well. Yeah.
29:40
What's the entry point on your pricing?
29:42
It's around 1 to 2K per month. Average is 4, right?
29:45
Yeah. The average is rather four to
29:47
five, yeah. I'm gonna risk sounding really
29:49
stupid, but in case there are any e-commerce brands that are
29:52
watching this, I don't know why it would be, but like the quick,
29:56
we hope not, no. No, there is there is no, no,
30:00
no, are you there is are you showing?
30:01
I went to like a Basil event yesterday with a bunch of
30:04
e-commerce brands and multiple people were like, oh, I listen
30:05
to the podcast and I was kind of like, why?
30:08
Like why? Why why dude?
30:09
You want to I? That's what I want to know too.
30:12
This is for us. You guys should listen to to the
30:16
other operators. Yeah, no, I'm kidding.
30:20
But sorry, but I mean, like the quick rule of thumb that I have
30:24
in my head is that, you know, days of supply should exceed
30:27
your lead time. So the idea being if you have
30:29
100 units, you sell through 10 a day and you have 10 days of
30:32
supply and 10 days, you're going to be out.
30:34
But if your lead time is 30 days, then you probably should
30:36
have reordered at least 20 days ago, right?
30:39
That's like the, the low rough, you know, touch that I've had
30:44
with it. But then I, I think that
30:45
there's, you know, there's brands out there and maybe some
30:47
that are listening to this. They're thinking, or sometimes
30:49
we have a creator on TikTok shops or just something happens
30:52
and maybe it's hard to track what it is.
30:54
And we just sell like nothing else, right?
30:58
We just sell through units, right?
31:00
And our scales skyrocket. How, how do you forecast that?
31:04
How do you plan for that sort of thing where there's just a very
31:08
acute, because this is normal, I should say that this is this
31:11
isn't like rare for e-commerce brands.
31:13
Any e-commerce brand that's got to the size that we're talking
31:15
about has experienced this at least once, right?
31:19
Yeah, it's it's the same question as hey, Corona hits,
31:23
how do you predict that? Or we have a Ukraine war, how do
31:27
you predict the drop in demand of the spike?
31:30
So I always say we're not the Oracle of Delphi.
31:34
You know, like there are certain things that you cannot really
31:37
forecast and predict, and it's not about us forecasting the
31:41
future perfectly. It's rather how much can we help
31:45
you to make it as accurate as possible and making as accurate
31:48
decisions as possible. So I sense that there are so
31:54
many brands that try to reach perfection and forecasting and
31:58
then we shop. We have the same problem as you
32:00
described it. The founder thing say I really
32:02
know my business and how SK US will sell in the future.
32:05
And they do that until a certain stage.
32:07
I always say stay as long as you can in Excel if possible.
32:12
But then once you've scaled beyond a certain amount of SK US
32:15
or beyond a certain amount of sales channels, it just becomes
32:19
increasingly so much more difficult to keep the overview
32:22
of what is currently performing and what isn't.
32:25
And then, Jack, in the case that you described, once an outlier
32:28
event hits, right, something unpredictable.
32:32
It's more about how fast am I to make a decision here in terms
32:35
of, OK, if this continues, I'm running out of stock and I have
32:39
to take a decision to maybe use air fry instead of just see fry
32:44
coming from Asia and make that call, invest that money to not
32:47
run out of stock. And in this case, it's more
32:50
about being fast on the decision making, but not more accurate
32:54
because those kind of outliers are impossible to predict.
32:57
I like that. I'm trying to imagine a future
32:59
where that decision is made for you.
33:01
Right. If you had enough information
33:03
like, I don't know, spike in sales is caused by TikTok shops
33:06
probably won't last. Let's respond to this.
33:09
No, with respect to the source, right?
33:13
With respect to all of the information that we have to
33:15
inform the decision. And then you could share that
33:17
information across all of your stores, right?
33:20
So if you see that sales spikes from TikTok shops for example
33:24
don't lead to sustained high velocity of sales, you can share
33:27
that information to the decision making with the rest of the
33:29
stores. Right.
33:30
And I was just going to hop back to like a previous question,
33:33
which is like the initial go to market.
33:36
And I, I, I do, I, I mean, again, I think like the episode
33:41
with PJ, if you haven't heard it, I think there's like a lot
33:44
to learn from him. At least I, I felt like I
33:48
learned a lot from from that conversation.
33:52
But there is a price market fit or a pricing bottle market fit
33:56
thing. I'm sure Jeremiah, Zach also
33:58
have like the nice thing here is that you actually have like like
34:03
a pretty broad spectrum of pricing strategies on like even
34:07
in the three other businesses that are represented here,
34:11
right? And I, I do think your pricing
34:14
model does impact your go to market and which market you
34:18
start with first. And it's just not obvious to
34:22
like I, I would take Zach's feedback and I agree with it,
34:26
which is, it's not obvious to me that the entry point you've
34:29
chosen is where you're going to find the best fit given the
34:32
pricing model. And I, I think like that market,
34:37
like I think PJ strategy is, is more effective in because like
34:42
what you're describing, which is, hey, like you, you need a
34:46
buyer who wants to buy software at the price of value, which is
34:52
a different type of buying psychology than I think.
34:59
And not every part of the market behaves that way, basically.
35:02
And so I think it's important to just be cognizant of which parts
35:05
of the market are like buying in, in what types of ways.
35:10
I mean, the most obvious thing to say out loud is like
35:14
enterprises buy software on value, which is why a lot of SAS
35:18
companies end up selling to, to larger companies, right?
35:22
Because it's like the way they buy is that internally they have
35:25
to present a business case to someone and then in that
35:28
presentation of the business case, that's how you actually
35:31
learn how do I do this equation of value and price and things
35:36
like that, right. And so like every buying
35:38
conversation you have with an enterprise by definition comes
35:42
with this idea of like, hey seller, you need to give me the
35:46
business case that I go to my boss with in order to buy this
35:49
piece of software. That's very different from like
35:52
the person who's like fast to adopt new software where what I
35:57
would describe it as like like high trial people.
36:01
So like people who are like at the bleeding edge, who like try
36:04
things very fast and things like that.
36:06
They're not thinking in the context of like what is the
36:10
business case? They're thinking in the context
36:12
of is this thing going to give me value or not?
36:15
I just want to try it really fast.
36:17
And I think you have fundamentally different buying
36:19
psychologies in those two contexts.
36:22
And so that's just something to think about in terms of like
36:25
understanding the, the part of the market that you sell to in
36:28
the US because there's like, again, there's a just such a big
36:31
spectrum that you want to choose how you, how you, how you go to
36:35
market basically. Yeah.
36:37
I think the, you mentioned, I think you said three years kind
36:41
of want to take you to sort of like really break into that
36:44
piece of the market and get to the point where you are today.
36:48
It's, I feel like it's probably something similar in the US,
36:51
Hopefully not three years, but it's going to be a longer cycle
36:53
than like if you came in at $200 a month, that is a price point
36:58
at which these brands would just try it.
37:00
They would just say that sounds interesting.
37:03
I'll turn it on. Sean Frank on I think it was in
37:06
July and he was talking about I, I think he said anything under
37:10
$500 a month, he'll just test it.
37:13
Like doesn't like, doesn't matter what it is.
37:15
If it's interesting, he'll install it, turn it on and and
37:18
see, see what happens. But that isn't the case at 1002
37:24
thousand 5000. There's a whole different
37:26
process and it's, it's months and months and months to, to
37:29
make that happen. So I actually think that about
37:31
that a lot in terms of there's something very appealing about
37:34
pricing higher because you need less customers.
37:38
It's usually stickier, it usually gets more like more
37:42
deeply embedded into workflows. But the challenge is that's a
37:44
long process, right? And so and then the flip side,
37:48
and this is what we've done at no is everything is inexpensive.
37:51
And I mean, the, the reality is most brands are coming in at 20
37:55
bucks a month to $300 a month and then some of them will scale
37:59
up over time. But at that price point, if you
38:01
want it, there's no hesitation if you're doing 10 million a
38:04
year in revenue. So I do think probably what
38:07
you'll see is like, you need to find that, like where is their
38:10
interest? And then really invest in that
38:13
and commit to it for a year, let's say, before determining if
38:16
that's actually the right market or not.
38:19
Yannick, what's your cost of delivery?
38:21
Because I wonder how this interacts with free trials,
38:26
right? Like if, if there was a 30 day
38:28
free trial, you got integration into workflow, right?
38:32
And then they're like, well, I, I can't not have this in my
38:35
business. One of the best changes we made
38:39
at Foreplay was switching from no credit card free trial to
38:43
credit card free trial to weed out bad customers to qualify
38:47
people who were serious about buying the software.
38:51
But that free trial, I think we, you know, I think it's an
38:54
important part of the onboarding to the software is getting your
38:57
hands on it, trying it out and integrating it with your
38:59
workflow, right? So I think to for us to to to
39:06
allow that and I would be happy to do it.
39:09
Jack is we need a process which allows for for complete cell
39:13
phone boarding. And the problem here is right
39:15
now only that what we really do and why the onboarding use it
39:19
usually takes three to four weeks.
39:21
It's not the time invest the brand has to put into it.
39:23
It's more like a providers that Shopify API and access and then
39:28
let's go plus the other performance marketing channels.
39:31
But Jack, the, the, the problem that we yet have is that we
39:35
really sort of say customize the forecasting models for the brand
39:40
specifically to, to their needs. So there are actually people
39:43
sitting down on our side, people who've previously built the
39:45
replenishment system for Zalando or for Blue Yonder and for a few
39:49
100,000 SKU simultaneously. And they actually, they actually
39:53
take care that the forecast looks really good and works.
39:56
And this is a currently at a case by case where we really
40:00
look into, hey, this is a supplement case and it works
40:02
differently than a fashion case. This is a fashion case.
40:05
It looks differently than a customer that sells. 10s for
40:08
cars and therefore I would love to do it, but we would get me to
40:13
crack the nut on how can we simply say, hey, this is a
40:18
fashion case and it will always work and we just press the
40:20
button and the forecasting looks looks awesome.
40:22
I think this is not where we are yet in and This is why we invest
40:26
more time in the onboarding process and cannot give free
40:28
trials yet. But I would love to do it.
40:30
Like trust me, that's my next. That's my next big goal here.
40:35
Because I would also say that there are so many brands on the
40:38
go live that I like, oh fuck, I'm running out of stock in 60
40:41
days. I didn't know I'm my best
40:42
seller. And then this is this moment
40:45
where there for the first time realize how much cash they can
40:48
make out of this. And then coming back to your
40:50
feedback, Jeremiah, this is also moment where they say I'm
40:53
willing to invest the money and I see the value add and
40:57
interesting is to set. We signed around just in the
41:01
last seven days by coincidence, more or less 100, roughly 180
41:04
KAR and it was just three deals. And the funny Side Story here is
41:12
Jeremy Jeremiah that it didn't took, didn't take a few months
41:15
to sign them, but it was two touch points, one call each on a
41:20
Wednesday and then signing on a Friday.
41:22
So I have to say that what we observe, at least for brands
41:25
here in Europe, is that if you talk to the right person at the
41:28
right time, where the pain is really high and the awareness,
41:32
Zach is, is also high enough, then it's a very, very short
41:35
signing process. And that makes this whole thing
41:38
that I'm working on so interesting for me because it
41:40
actually solves, from what we see, a really, really big pain
41:42
point. This is why they signed so fast
41:44
on so big tickets. So big tickets, but yeah.
41:49
In that context, how do they find out about you?
41:52
It was recommendations. So that's like I have to say
41:56
half of our new customers, they come from founder to founder
41:58
recommendations next to the agencies or partners that refers
42:02
it's made Bolsky founders to founders.
42:04
So in this case, it was for example, one of them was I can
42:07
Amsterdam. I'm sure I can say it like Ruben
42:09
from the founder. They are and they were like, he
42:13
was pinging me on WhatsApp and was like, hey, yo, can you help
42:15
me? You are working with the largest
42:16
freeware brands in Germany. I, I heard that you did good
42:19
things there. And how can we start working
42:21
with each other? So a lot of trust already before
42:25
signing the deal. I feel like you need to find the
42:28
brands in Germany who know people in the US that they're
42:32
friends with and go to those people.
42:34
Like that's the that I feel like that's your entry point to the
42:38
US market is word of mouth, because it is true.
42:40
Like the, so those same brands that they didn't find out about
42:43
you from word of mouth. It may have been months long
42:45
sales cycle, but because they you had done good work for
42:48
somebody that they know there's an immediate, as long as you can
42:52
solve their problem, that's all that matters anymore.
42:54
Like the the trust aspect, it has been taken care of by
42:57
somebody else. Earlier you were talking about
42:59
how you know if you mess up in Germany, your reputation is
43:03
shattered. I think this reputation thing is
43:05
it's so good because not only is it part of your the growth of
43:08
the business, but it's forcing you to have a great product that
43:11
serves your customers so well. Whereas if you're in a huge
43:14
market, you can, you know, know some brands that just churn and
43:18
burn, right? They don't mind if they let
43:20
people down, right? If they don't serve their
43:22
customers very well because the reputation component doesn't
43:25
really matter, they can just move on to the next business.
43:27
But I think this is such a great place to start before coming
43:31
into the US market, coming in with a product that really
43:34
solves the problem for your customer.
43:35
Yeah, I agree. I I have not yet found for
43:38
myself a problem that is so significant for so many SMEs and
43:43
I stumbled upon this from case to case.
43:46
So it's just really cool to see that we have actually found us.
43:50
Who I told you this Jack, in one of our previous exchanges.
43:53
Like, I'm not kidding, we have those 22 years old who, who are
43:57
geniuses in marketing and creating great, great hoodies,
44:00
for example, but they don't know at all how to use an Excel, to
44:04
be fair. And then they just have, I have
44:08
one founder who scaled to mid 8 ditches and he did before like
44:12
handwriting reorders. I'm not kidding guys.
44:14
So you guys might be all smart enough to do the forecasting and
44:18
the planning process yourself. I, I, I don't question that, but
44:21
there are so many others that I'm not.
44:23
And this founder, he did that in handwriting and, and we helped
44:27
him to to really do this all by himself now continuously by just
44:30
pressing the reorder recommendations.
44:32
So what he did this year, actually then when achieving a
44:35
class 30 million in net revenues, he were I he was
44:39
inviting me Jack to to a party. And I was like, OK.
44:43
And he was like, yeah, we have to talk.
44:45
And I thought, OK, he will, he will churn for sure.
44:47
Like, I don't know, he, he was a little bit strange on WhatsApp
44:49
and so secretly like just riding.
44:52
Hey, just come over please. I have to talk to you.
44:54
So I came to his hometown and he rented out this huge hotel room
45:00
with champagne in it. And he was like, hey, Anik,
45:02
thank you so much for helping us on that journey because without
45:06
you, I wouldn't have done it, you know, And this is actually
45:09
then really cool to see that there are so many people who
45:12
lack that experience. And we can really help them to
45:15
to to bridge that gap. I'm going to say something so
45:18
controversial, but I'm not sure that I see someone from D to C
45:22
Twitter doing that for one of their SAS vendors.
45:25
I don't know about SAS vendors, but back when I was an agency,
45:28
it would happen to me. I get invited out to golf
45:30
course, not nothing like this, nothing as grand as that, but
45:34
you know, out to the golf course, out to the farm to like
45:37
spend time with the founders. It was lovely.
45:39
I think it's the, I think it's the best part of it, you know,
45:41
to see the recognition and you know, and get together.
45:45
All right. A lot of this is online, but
45:47
getting together with the people that you're doing business with
45:49
is really nice. Hey, didn't you guys, Rashad,
45:52
didn't you rent a castle at one point and invite a bunch of
45:56
people out? I mean the other direction,
45:58
obviously, yeah, the other direction, obvious.
46:01
And by the way, like for our larger customers, I actually do
46:04
get like that kind of thanks. I have yet to get the Yannick
46:08
level, you know, but like I get the silver version, not the sort
46:12
of platinum version. But yeah, it's I just again,
46:16
like, I think Yannick, the thing about the US market is it, it is
46:19
just, there's just so many different pockets, which I think
46:24
is what makes building a sauce business in the US so
46:26
interesting is you have to decide how you want to approach
46:30
the market, what way which which which approach you need to take
46:33
what, which area you want to go into first?
46:36
What are the trade-offs of that area?
46:38
Again, like I'm not, I'm not trying to say anything good or
46:40
bad about anyone pocket. It's just that they all have
46:43
different trade-offs. And so, yeah, just being very
46:49
explicit about your goals in terms of what you want to
46:52
accomplish if you were to, if you were to expand.
46:55
I think is, is, is is is helpful.
46:58
But I'm going to be honest with you, man.
47:00
Like in this conversation, now I'm even more in Zach's camp,
47:04
which is like, I got to go to Germany.
47:06
Yeah, we found it that. I don't know what the hell is
47:09
happening, but I want to sell to people who take me, who like,
47:14
Take Me Out for champagne, you know what I mean?
47:16
Like that sounds great. Bishop, the same founder a few
47:21
months earlier was calling me and was like, what the fuck is
47:23
happening? You know, like it's a quite
47:26
direct communication feedback culture.
47:29
You have the pros and cons about it, but I can just say that all
47:33
of you and whenever you're in Germany, feel free to to give me
47:36
a call. And we have a lot of great cool
47:40
activities that we have here in terms of also the D2C dinner,
47:42
it's for E com founders only, but you, all of you are always
47:46
invited to join. We usually host it at the
47:48
largest, so to say, as spots in the big cities.
47:51
And then we invite 50 to 60 E com brand founders to come
47:55
together to, to eat and enjoy a good night.
47:57
So whenever you're in Germany, pick me up.
48:00
And then we then we get together on that kind of event.
48:04
Zach, should we plan a trip? Yeah, I'm down.
48:07
I'll go to Germany. I'm not joking.
48:08
Like seriously, let's go in the next 8 months.
48:11
Let's. Let's make a specific guys,
48:14
because we have our our latest new joining customers high rocks
48:18
and we plan to do like one of these events now in in Jan on
48:23
Feb. I mean it if you want to come
48:25
over, feel free to do it and we will have a very, very nice four
48:30
or five courses dinner with Hirex and many other ECOM
48:33
founders. If you want to get the market
48:35
dynamics and how this how this market works.
48:37
I think it's a really cool spot because 10, roughly 10% of the
48:40
largest ECOM founders in Germany usually join these, these
48:44
evenings. So would be really cool.
48:46
I mean I'm a big high rocks fan so maybe I'll just go do the
48:50
higher. Is there a high rocks that time?
48:52
I would, I would take out I think the high rocks was just
48:55
lately now in, in, in in October in Hamburg, but there will be
48:59
usually also high rocks in Berlin and in Munich.
49:01
But Zak, we'll make that happen. OK, sounds like a plan.
49:06
This is a good note to end on. This is a solid.
49:09
Yeah. All right.
49:10
Thank you for coming on. Yeah.
49:11
Thank you. Yeah.
49:13
Hi guys. It's great.
49:14
Thanks.