In this episode, we’re going to be talking about product innovation in commerce for consumer brands specifically. It’s a great episode you do not want to miss.

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Welcome to the 2x eCommerce Podcast Show. This is a podcast dedicated to rapid growth in online retail. Each week, I try and bring an expert, whether it’s a founder expert or whether it’s a subject matter expert, or a representative from a best-in-class eCommerce SaaS platform that has access to a lot of eCommerce data that they can share with you guys for one purpose, and that’s growth. In fact, if I was to rename this podcast, I’ll call it eCommerce Growth but it is to 2x eCommerce. That’s why we’re here every week. We turn up every week.

This podcast, we tend to publish on Saturdays now so you have a lot of content over the weekend to go through. In this episode, I thoroughly enjoyed this one. It was with a product expert, his name is Oren Schauble. I thought that we were going to be talking about his cannabis brand but apparently, within a three-year period, he had been part of this cannabis brand that exited via IPO and through roll-up. They acquired a number of cannabis brands that were big enough to exit within three years. I found that phenomenal for him to be part of that experience. He’s a product guy so we talk about product innovation in this podcast.

We went through a lot. We talked about differentiation, how you should take innovation in terms of the iterations, how teams that have lagged in innovation, or how R&D can revive it. Also, what to do when you merge a business, and how you treat the merged entities in the sense of where you keep innovation. We talked about interfaces of mergers and M&A deals in eCommerce. He talks about the current state of crowdfunding and where all that traffic and interest from crowdfunding is now evolving to how to launch a brand.

It was a deep convo and it resonates with me because I’m a cofounder at Octillion Capital Partners. We are a consumer brand platform that’s going through M&A and innovation is critical in what we do. With everything in this convo that we had, I resonated with everything. He also talks about a unique approach to product development, his methodology on the cadence of product development and we go into niches.

What’s your product development look like if you are a beauty business? What’s your product development look like if you were in a food or drinks business? It’s all of that stuff. He’s a clever individual. He was not making anything on the spot. He was speaking from experience. It’s a good episode. I would encourage you to read on if all I’ve said resonates with you. If all of that resonates with you, definitely give this one a read. It is Oren Schauble. Enjoy this episode.

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Oren, welcome to the 2x eCommerce Podcast.

I’m so excited to be here. I’m looking forward to our conversation.

Let’s start out with you. Do you want to give us a brief overview of who Oren is and what you’re up to?

Sure. I started my career in graphic design. I was a designer on the agency side. I became a creative director with agencies working mostly in lifestyle brands like liquor, fashion, and things of that nature. I went over to the brand side and I was a sales and marketing executive at various CPG and consumer electronics brands.

In the last few years, I did a public company roll-up with some partners where we put a bunch of acquisitions and mergers together in the cannabis space, in particular, with a company called Unrivaled. We took that onto the public markets in July 2021 and then we operated that for about nine months. Now, it’s got a leadership team that is focused on taking that forward.

I’m back again, looking at various product opportunities, and marketing opportunities in different spaces. I run a community called Product People with a website called Product World that helps entrepreneurs dive into either selling products for the first time or if you sell existing products, expanding and making them better and finding better margins. That’s the short recap.

Let’s take that back a little bit. You’ve taken a company public. Is that right?

Yes, it is, with all the ups and downs that come with it.

I have a lot of respect for you. It’s a pioneering company. It’s a cannabis company. Cannabis was legalized. At the time, you were based out in California, right?

Indeed. I am still here in Orange County.

You jumped on the industry tailwind with cannabis legalization. You manage to take it public in how many years?

We started the process of this more than three and a half years ago. It took about two years. There’s an initial merger with three companies and then we did a merger with an existing public shell, a reverse merger in July of 2021. An acquirer emerged with a series of companies a few months after that. All in all, it was about two years from the initial concept of rolling up some of these companies to executing it. There are a lot of people involved along the way.

It’s an exciting industry with a lot of people that are interested in participating in it and a lot of attention from the stock market. These last few months or so is a complicated time to have had a public vehicle with what’s happening in the stock market. The cannabis space is still, generally, in flux all the time so it was a great experience. The overall project got a lot of traction. I feel like I learned a lot of things.

Looking at how I can help other entrepreneurs who are looking to do similar things, whether they’re doing their own roll-offs, acquisitions, looking to go public, or they’re looking for some insights. We crammed a lot of product development, work, and experimentation industry into a relatively short amount of time.

I like to speak to that bit of your career in this episode. Let’s get into your project. It’s your product community that you’re building out. Why the focus on physical product development? Why do you think that there is an opportunity? Why build a community rather than build a company? I’d like to get into your mode of thinking right now.

No problem. There are a couple of things that I’ve noticed as I’ve been working at all these larger brands, and then over into what we did the last few years. I’ve noticed this trend of these companies that are able to move much faster and achieve much better margins and results who are essentially global companies.

The idea is that if you can go direct a factory in China, Pakistan, or a place that is an expert in making the product that you want to make and skip out any middlemen and things of that nature, you can optimize your margins. You can optimize your margins in a way that never existed before Alibaba and some of these platforms that have enabled connections between East and West. At the same time, you can also work with experts at various price points with various opportunities inside markets overall.

For instance, one of the companies I work with has designers that are in Eastern Europe. They have developers that are in India, they produce their products in Hong Kong, and they have a team that’s in the UK and in the US that manages the majority of the day-to-day operations of the business. They’re all playing to their strengths. They sell products on Amazon in Europe, specifically, because they’ve seen that Amazon Europe is less well developed than Amazon US. There are these people who can think and develop these new relationships in this new world that provide an interesting opportunity. I saw that coming together.

The other key philosophy is the idea that all of these large companies that we grew up with, whether global food conglomerates, auto conglomerates, or electronics businesses, they’re being disrupted by faster-moving internet-based companies that are appealing to specific niches. For any entrepreneur, I feel like there’s the ability to create a $1 million to $5 million business in a specific niche that serves someone’s needs very well. It’s a great business that they can keep going and keep cashflow positive in a way that never existed before.

I created this community mainly because I didn’t have a need to create some big company and I wasn’t ready to jump back into running another large operation. I thought that I’d rather share some of these ideas that I have, share some of these practices, work with some of these various entrepreneurs, and then see where it goes. It’s an interesting time to sit back and look at the trends that are unfolding in front of us and plan the correct next move. It’s been great being able to talk to so many interesting businesses and ideas and help them connect the dots.

Quite impactful. I can imagine how many new products and companies you’ve birthed from the impact you’re making on the community at a one-to-many level. It’s incredible stuff. Product sourcing and product development vary from industry to industry. You’ve had industrial experience. You’ve been involved in aerospace at some point in your career and that varies to a CPG food brand. Are they any sorts of first principle thinking or pillars of thinking that resonate regardless of the product you’re trying to bring to market or bring to life? What should entrepreneurs or product builders have as a foundation from an approach to bringing any product to life?

One of the biggest ones is differentiation. It’s something people don’t think about. It seems almost common sense but often it’s something that entrepreneurs struggle with where you say, “If I’m going into a niche, whether it’s aerospace or whether it’s a protein bar, how am I going to stand out from the products that are around me on the market?” What I’d like to present to people is almost a matrix of how you can stand out.

You can look at things like price. You could say, “I’m going to have the cheapest thing on the market or I’m going to have the most expensive thing on the market.” You then can think about customer experience, “I’m going to go for the best taste or the best performance and then justify a certain price.” You can also think about the niche. You can say, “I want to appeal to people from specific cultural backgrounds, in specific regions, or who purchase things because of their values like sustainability or women doing businesses.”

There are all kinds of different angles with which you can help stand out and so I like to challenge entrepreneurs and categories or people with companies who don’t seem to have the traction that they want. How do you differentiate? The best answer is always the same across any industry, it’s the product experience.

If you have an amazing experience with your product or if you have the best thing that you can buy in that category, you can think of an iPhone, Tesla, or some of your popular examples in food and beverage, then you’re going to be able to succeed because people love your product. Getting there is always the number one thing. If you can’t do that or there are challenges to it, how do you find and zone in on these particular lists of things around your price point, experience, your niche, and presentation to make sure that you have an anchor that makes your product different?

Once you have that, a lot of it comes down to the marketing of letting people know that difference, which is another place where entrepreneurs fall. They may make something compelling to a set user but they’re not explaining it to them in a way they understand. They’re not putting themselves in the customer’s shoes. You have to work through every touch point that a potential customer has with your brand to say, “How are we getting this differentiation message across in a way that matters to that customer?” Those are the general things that come up all the time when talking to people about making products, regardless of industry.

Differentiation is super important. I like the breakdown you’ve done and provided in regard to the niche, the price point, and the other points you made. The other thing is having the expertise to produce the product or producing the experience you’re looking to innovate on. What’s your take on getting experts? If experts are your thing in terms of recruiting an expert, how do you work with an expert to deliver the desired results, to get something truly different and uncompetitive, something that will compete in the market?

Maybe it’s a little less towards working with an expert. The number one exercise that someone should go through when they’re trying to create something differentiated, whether you are working directly with a factory, a designer, or a team, is an Amazon exercise. I do a lot of products that are selling on Amazon so we refer to it as an Amazon exercise. If you were to order something in your niche, whether that’s a car, a light, or anything, I ask people to document the entire experience from step one.

You say, “If I want to purchase this, how do I start? Do I search on Google?” Once I go there, “What kind of website do I go to?” As I check out, “What messages are given to me? What emails do I receive?” When I get my package, “How is it packaged? Is there enough room in the package? What is on the packaging? What does the manual look like? When I open it up, how are things wrapped? How do I use it?” It’s going through every single step from ordering to receiving to using it for the first time to using it multiple times and then starting to think about, “What will my experience look like using this a year or two from now?”

Document that entire process out. When you do that documentation, “Where is this bad? When I opened this box, was there too much room? Did something break? Is the user manual not clear? Do I not get a series of emails explaining to me how I use the product?” It’s identifying all those weaknesses inside that entire process. One of the particularly good ones is longevity. It’s saying, “I bought a blender but in two years, am I worried about it breaking? What would come to the point of doing that?”

If you sit down with an expert with the team or the factory and break down that entire process and say, “Here’s where we need to be great, and here’s what the standard is of what exists already,” you can find the opportunities to make your product better. It’s an exercise that requires painstaking detail. You can’t remove any stage from it from how hard the box is to open to what your power cord adapter looks like or any one of those things. Any little item drives a ton of value. If you’re thinking of developing a product in any industry, do that exercise. If it’s a cheap product, do it multiple times in multiple brands. If it’s expensive, do it once or simulate it. That’s the crucial exercise to do whether with yourself or with experts to find out where you can improve your experience.

There’s a famous SaaS quote, which is, “If you want to build a product, that would be 10x better than what’s out there.” In the physical world, it’s different. My question is, what magnitude of differentiation should be the absolute minimum? What should entrepreneurs or creators look to aim for from a differentiation magnitude?

It’s a sliding scale based on how big you want your business to be. When I end up talking to businesses, they fall into 1 of 2 categories. One is people that are trying to build a $1 million to $5 million a year business that cashflows well that they can keep small, but makes good money. With that business where you sell on maybe direct-to-consumer, Amazon, some light stores, or some medium-sized retail distribution, you don’t need to 10x the quality of the experience.

What you need to do is 1.5x the quality of the experience for a specific niche or with a specific differentiator. That’s a great business for most people to build. It’s an interesting opportunity for a lot of people. You can do that exercise that I mentioned. You can find 6 or 8 things to improve. You can do them slightly better and you’re off to the races.

If you want to create a much bigger business, this is the other side of people I talked to who say, “I want to dominate this industry. I want to create a large business so we can become a $100 million business. We’re going to do mergers along the way and we’re going to own this product category.” That’s when you have to have that higher amount of differentiation.

10x in a physical product world is a lot. It may almost be impossible or an unbelievable differentiation at one point. It’s like, “This price is unbelievable,” or, “The customer service and white glove experience I get is incredible.” There’s something that stands out or maybe it’s more of a 2.5x, 3x, or something much better. That’s what you need to do to build a huge brand at this point. Otherwise, you’ll get to a certain point of resonance but if it doesn’t move on its own, if people don’t recommend it to other people because of how great the experience is, it’s hard to get to that $100 million range. Luckily, we have that scale depending on where you want to live.

What are the critical points in a physical product experience, selling experience, and usability experience that readers should be aware of that can resonate well with optimization? This is an assessment and optimization exercise where you’re auditing what is out there and you’re trying to innovate.

There are a lot of areas you can focus on but one that is relevant right now is documentation and content. Enablement is the right term. If you sell someone some fitness equipment, anyone can buy a kettlebell or some weights or machine but if I buy it from a company that provides me with, “It comes included with 100 videos of different exercises that I can use on it.”

“It’s from a TikTok fitness influencer that I might know,” or, “I’m buying an espresso machine. It comes with in-depth content analysis on how you become amazing at how you refine your grind and pick your beans and different experiences you can have with it.” It’s the same thing in any nutritional product. It comes with diet plans, information on supplements, meditation routines, or whatever it is.

That’s a huge opportunity right now because it’s not as much about the product itself as it is about the person’s experience with the product. It doesn’t have a physical cost. It has the cost of either taking existing content and paying for it or developing content once to use forever. That’s an interesting point a lot of entrepreneurs can look at that’s relevant to this TikTok and Instagram-dominant world we live in today. You can use it to stand out by providing a lot of enablement and documentation and people feeling excellent about their experience.

In a similar vein, the other one is customer support. You can take almost any industry, whether you’re selling shoes, you’re in real estate, or any of those things, and say, “We’re going to offer the best customer experience you can possibly think of. You’re never going to hit a chatbot. You’re always going to get a human 24 hours a day who is excited to talk to you and walk you through whatever you need.”

If you say, “We’re going to bear the cost of offering that level of customer service,” you can differentiate it in almost any industry. There’s a certain customer base who says, “I’d rather pay the extra money to ensure I am good no matter what so that there’s always someone who can take care of those problems.” Those are two interesting opportunities that you can apply to almost any product.

It’s interesting that you mentioned the chance availability. Do you think it would lend itself to a certain sophistication in other products? If you’re selling apparel, it might be different if you’re selling an electronic device that requires a lot of settings or what have you.

The more complicated products are going to need more of that service level. The apparel is an interesting one. A friend of mine bought some expensive jeans from this company, Rag & Bone. He was trying to return them and it was an infinite loop of customer service like people who didn’t speak enough English and would take two days to respond. He was frustrated. He says, “I spent $350 on this. It’s way too expensive. This isn’t the experience it should be.” With almost any product, especially if there has some degree of return, there is that differentiation.

The one thing that most of us don’t think about, especially if we’re younger, that’s important is providing that experience for people that are in their 60s and older where screens and small types are hard. They may not know how to use an app. They just want a number they can call at any period of the day to figure out what their problem is.

If you look at your demographic or who’s buying your product and they skew heavily 60 and older or they skew 30% 60 and older, then you have a huge opportunity in customer service. For them, they’re a natural recommendation engine to other people in their age bracket in a way that we consume so much as younger people that you have to stand out for me to recommend something to somebody. In the older demographic, it has a lot more word-of-mouth sales so there is that accessibility opportunity as well.

For readers, typically operators that are lagging or readers whose innovation is lagging or R&D is lagging, how does an existing consumer brand revive that innovation and ensure that there are challenges once again? How do you infuse this mentality of iteration and putting something better out there to an existing team or founder who thinks they’ve lost their way in the market?

I go through this a decent amount with medium-sized businesses. I usually ask those businesses to do the exercise we mentioned with their own products or their competitors. Let’s say you’re working with Adidas. I would say, “We’re going to go purchase six marquee products of ours. We’re going to have different people do it. We’re going to document the steps all along the way and then we’re going to do the same thing with New Balance, Theodora, and a couple of companies.”

“We’re going to document that and then make that matrix of what was worse, what was better, and look at what we can lean into or not.” Undergoing that thinking process of how we sell versus how other people sell is useful because you never make time to do that on your own without some impetus to say, “We need to reflect on this.” That’s one.

Another one that I’ve been encouraging for some of those businesses too is they always figure, “We have to make some giant change in our product roadmap or make some big new product that’s going to take R&D for years.” In our current world, people are used to seeing short-term consumables. They’re used to seeing a drop or something where you say, “I’m going to sell this thing. We’re going to sell 1,000 of them and then it’s gone.”

I encourage larger companies to do that as experimentation or for feedback and say, “You’ll have to develop this whole product.” What you can do is say, “We’re going to make a subset of it. It’s affordable for them and context to make 100 of the thing or 1,000 of a thing. We’re going to sell it to our passionate customers, and then we’re going to make sure to get feedback on it.”

I like to talk a lot about unscalable feedback. Everyone always wants to make processes that scale and use surveys. Let’s have someone who cares, an executive or a customer service person, call those 100 customers and have a real conversation with them. Even if you only get a hold of ten, that level of feedback you get from those hour-long conversations will inform what people need.

The other place I encourage people to go to for feedback on their industry and niches is Reddit and TikTok. If you go into Reddit and you search your brand name or your category name and search the word angry or problem, you’re going to come up with hundreds of threads with people describing exactly why they don’t like something about your industry or a problem they have with a product. That should be your product roadmap.

It should be solving the problems people are complaining about online. It’s the same exact thing with TikTok. People go on there all the time and complain about shipping times, “This didn’t work or that didn’t work.” If you start with the negative experiences people are having and then add that to your product roadmap as a larger business, you can start to see the tides turn. It is the same thing with looking at experiences they like.

If you go onto those platforms and search for the best camera or best whatever it is and start looking at why those articulate users are making videos or writing posts about a specific thing, you can also use that for your product roadmap. It’s like, “These are the things that resonate with my customers so much they feel they have to write about it or make a video about it online.” What’s amazing about this new economy is all this is available to you. It’s a matter of saying, “We’re going to go find solutions and we’re going to go find things that we need to incorporate into our product roadmap and then make that jump.”

That’s super interesting. It’s customer-centric.

Everything needs to be customer-centric. We’re so used to being catered to now.

With regard to supply chains and COVID, it amplified the importance of diversifying supply chains. In fact, some brands have started to think about, “Let’s try and get some local manufacturers.” What’s your take on that? You mentioned earlier having factories in Bangladesh, China, and the rest. Is there a use case for having local supply chains in the US and North America? What is the landscape post-COVID?

There are a number of uses for that. Almost any food and beverage products are better off local so that’s a great place to always look for that. The other option is if Made in America is going to resonate with your customer base, then that’s always an option. You’re going to pay more but that is what it is. The other one that I find and I recommend this a lot to entrepreneurs starting newer businesses is you can’t get a factory International to say they want to partner with you on something. They’ll say, “We’ll take some equity to produce some things for you at a lower cost.” That’s not going to happen with a factory in China or Hong Kong.

If you go down the street to whoever you’re working with locally, let’s say you’re in Minneapolis and you find a producer of the thing that you want, you might be able to work out a deal with them that is beneficial to both of you. They’ll see your vision and work with you on it. That’s the biggest opportunity working with domestic. Whether you’re in Europe or the US, you can forge partnerships with some of these folks. It helps you with R&D and funding or it makes a difference to be able to walk in there every day. For a lot of people, that’s worth the additional cost that you’re going to have saved going overseas.

The key challenge domestically is that there is no Alibaba. I can go and find a manufacturer for anything internationally. I can see how well-vetted they are and they’re probably going to be great. In America, you’re digging through Google at best to find that and these people may not even have a website. How do you find that? There are some companies that are trying to bridge that gap and that’s an interesting opportunity for SaaS.

What are some of the best or most interesting deal structures you’ve seen with consumer brand companies brokering with local manufacturers? Have they been largely equity? Do they have better payment terms?

More often, what I’ve seen are product splits. I’ve seen a lot more equity deals right now with industrial design firms and agencies who would typically say, “It’s going to be $25,000, $50,000 a month to work with us.” We’ll go, “It’ll be $5,000 but we want 15% of your business,” or whatever it is. That’s becoming more common.

Who makes the proposition? Is it typically the brand or the agencies?

It’s typically the brand because they’ll say, “We don’t have the budget to retain someone like this.” If they see the vision, they offer the upside. For manufacturers, a lot of what I end up seeing is the manufacturers need money too. It’s a complicated industry. They have less of an ability with their business to say, “We’re going to do equity for these products.”

They’ll do more like, “We’re going to do a split on sales where we’ll fund some of that inventory to get things rolling. We’ll be able to expand and scale your inventory without you having to worry a lot about cashflow but we’re going to get our money right away.” We’re going to pay that back or do splits regularly. It’s something I see more and more common.

It’s not super common by any means but those are the things you can take to a local factory, especially once you develop a good relationship or they see some traction and say, “I don’t want to have to go raise money to scale my inventory. Can we scale this together and work out a profit split?” That’s an intriguing option for any of those manufacturers because they want you to succeed so you continue buying more products. How can you work that out?

How do you weave a story into the utility of a product? As you said, sometimes, the experience a product delivers does more viral marketing on itself, the word-of-mouth marketing. What are some of the best use cases you’ve seen with brands telling a coherent story that weaves into seeing their product utility? You see a lot of that in crowdfunding sites where there’s some story. I was even going to talk about crowdfunding but we’ll keep that.

I see some brands that have created more of an emphasis on community or more of an emphasis on their more sustainable values. I know there’s a brand called Carbon38. It’s a female athletic wear brand that is focused on the sustainability and accessibility of its products. That’s one where I’ve seen people buy them specifically because of their look at their community.

There’s another popular one that I know. It’s more of a Gen Z brand called Starface, which are little stickers that you can put over a blemish. They’ve done well with their influencer community and their online resonance around that. The product is almost secondary to being a part of the people that are in that community and group but there are a lot of opportunities to succeed in that space. There are probably better examples but I don’t know if I have them off the top of my head.

We’re speaking a lot about product innovation. How do you see crowdfunding as another way to validate or as a go-to-market strategy? Is it still strong? Is it still viable? I can’t remember the last time I visited Kickstarter and Indiegogo but that’s just me.

I feel the same way as you. I used to be in Kickstarters frequently and I haven’t done that in a long time but I do know people that are doing it. What exists is a passionate existing community of people that participate in crowdfunding. It’s not as big as it used to be and it’s not as mainstream as it used to be but those people still exist. If you’re able to work with an agency, or a group that has access to those people, whether through Email US, Facebook Pixels, or something of that nature, that’s going to allow you to tap into that, it still has value to get you that initial set of customers.

A lot of that has been replaced by TikTok and social media. I can go create a bunch of organic videos on TikTok about a product before it even exists and put up a presale page and say, “I’m going to ship this in a month,” or, “Sign up for the email list for it.” That’s probably going to resonate more and faster if you have a good product than running through the whole Kickstarter process.

The relationship is more direct. If you look at it that way, you got all the metrics.

I’ve heard that from people all the time. They’ll say, “I don’t have the money to set this up.” I’m like, “Get it locked in and then see if it has enough residents that people will buy it ahead of time. If it doesn’t, you probably shouldn’t release that product anyway. If it does and you’re going to feel you have traction, and you can take that traction to investors, or banks, or your factory, or even know in your mind that you’re going to be able to make that money back.”

Let’s speak about two things that I’m passionate about. One is beauty products. There is lots of innovation and funding going on. There’s a lot of generational switching from products. The new generation is saying, “I want that because it aligns more with my values and the results are better.” From a beauty standpoint, how would you approach innovation?

The other is the food and beverages space whether it’s drinks or food. That’s another space. The interesting thing about these two is they tend to have localized supply chains. Do you want to broadly speak to the beauty industry? What are your thoughts on delivering innovation there? How are you seeing the best-in-class brands thrive in innovation in beauty?

Beauty is a hyper-competitive niche and so it’s one of those product categories where you have to be great at everything to succeed. That’s not a bad thing. The things that can differentiate you quickly at a small scale are niches, especially with things like skin tones, skin types, or skin age. You’re saying, “I’m making something specifically for people that have this type of whatever, and then honing in on that.” It’s working with influencers that have that same exact skin tone or type and then getting that message specifically to those people. That’s one way to resonate.

The other is ingredients and being ahead of the curve on ingredients. We saw it go from collagen to matcha to charcoal. It’s evaluating what you think those next things are going to be and being ahead of the trend. What’s interesting about beauty is you have to be continually reinventing yourself and you have to do everything well because of how fast the industry moves. You can be successful in charcoal and then, all of a sudden, that’s not a popular thing anymore and then you haven’t made anything that’s going to replace it and your business can fall off a cliff.

Also, people spend so much money to find new customers for the first time, and then those customers don’t stay with them necessarily. If you want to attack the beauty niche, you need a comprehensive plan. That plan needs to look like, “How do I have a set of core products that are going to be sellable no matter what, that resonate with people? How do I have a regular new set of products, every month or every two months, that are more seasonal that I am experimenting with to see if they resonate?” It’s creating a clockwork promotion technique for that.

At the same time, how do you build out a massive network of influencers? Luckily, it’s a high-margin business so you have the ability to give away a lot of products but you need to have a real entrenched presence inside of social media influence. Also, how do you ensure that you’re ready for distribution? You can have a successful D2C business inside that but the gatekeepers to make those businesses move are going to be Sephora, Ulta, and the people that are able to push beauty wide.

To do that, that means you need to have a significant amount of inventory and you’d have a real retail point of sale experience, whether that’s acrylic displays or specific training or commission programs for employees. How are you going to drive that? This is one of those experiences where you have to be great at everything. Patching has to be great. Your influencer marketing has to be great. Your ad buying has to be great. I would know that going into it that maybe you can have some success but you’ve got to build out a business way more than you have to do in some other places.

Beverages are the same but the regional aspect you mentioned is a lot more important there. What I like about beverages is that if you make a great cold brew, great water, or great any of these things. When you say, “I live in Tennessee. I’m going to be the best and most popular cold brew in Tennessee. I’m going to go to all the local grocery chains, all the local stores, all the restaurants, and all bars and have things on tap. I’m going to make it resonate locally by being an amazing salesperson and having a local brand.”

You can 100% do that in almost any beverage category outside of these real hotbeds Austin or Whole Foods is based or everyone’s doing that. That is still a huge opportunity in food and beverage. To go wide, you end up with the same challenges that we talked about in beauty because of how competitive it is getting into grocery and how fickle the trends are. That was a long answer but I have a lot of thoughts.

It makes a lot of sense in the sense that it requires a lot of passion from a founder because if they don’t have passion, they’re not going to be able to put in the work. We’re talking about a 2 to 3-month cadence, which is every quarter essentially releasing a product. That requires a lot of work. It’s leadership and teamwork.

It’s not easy.

I’d like to find out more about Unrivaled. In your experience with Unrivaled, it was a cannabis brand based in California. How many team members were there? How many founders were there with you?

It started at about 70 team members when I came in. The first step was combining three different companies. There was a retail store in Southern California. There was a brand in California and there was a distribution company in Oregon. It’s about 70 employees overall. By the time we ended, it ended up being about 350 or so. By the time I stopped working there, it continued. In that initial start there, it was four founders. I came in operationally. I was helping configure and grow the business in addition to them.

Over time, multiple of them exited the business. Right as the merger is complete, they help facilitate some of that and then they move on to other things. We ended up bringing in a new executive team, who would be specific for the public vehicle, who have experience managing businesses of that size and dealing with the complexities and regulatory aspects of a business that is operating at that scale.

What can we learn? This was a roll-up. It was an M&A growth story, which eventually led to IPO-ing from LinkedIn. It IPO’ed to $3.5 million or so. What takeaways did you get from that experience with Unrivaled in terms of using a roll-up strategy towards building better product offerings and building out your business eventually?

This was a pretty big roll-up. Our market cap when we went public was $80 million or $90 million. There were a lot of different businesses there. We did price at $60 million in 2021. It was a pretty large size business but what I didn’t realize is that we went public on the OTC markets, in particular, OTCQX.

What’s an OTC?

They don’t allow plant-touching cannabis businesses on the NASDAQ or the stock exchanges and so there are tier stock exchanges. I didn’t even know that existed. I had worked on two projects previously that had gone on to the NASDAQ and they had done what’s called a Reg A Plus Fundraise and then they had eventually gone fully IPO. I was familiar with that process at least tangentially. The more companies I led, the more projects I worked on.

I didn’t realize that there’s this whole sub-infrastructure of these other exchanges. There is what’s called the Pink Sheets, which is basically, OTCPNK. They allow you to be public unlisted but you don’t have to have audited financials so it’s considered relatively risky. You can put your business out there and whatever you say your numbers are, you don’t have to have some compliant accounting business checking it but you can still be public and invest in it. That’s an option there.

You have built it all the way up to where we were at OTCQX, which is the most akin to being a larger public company. You have to have your audits done regularly. There are a ton of compliance and regulatory requirements but you’re still not quite on the NASDAQ or the Canadian Stock Exchange and things of that nature. That raises some interesting opportunities for entrepreneurs for me because we did it at this relatively large size. You don’t have to be that size.

If you want to have a lower level of compliance to be on some smaller exchanges, that may cost you $100,000 or less every year. If you want to operate on the OTC at the highest scale, maybe that’s $500,000 every year in compliance, additional staff, and things like that. That means that you can access potential public investment. You can access liquidity for yourself and your shareholders if you can generate a certain amount of share volume even with smaller businesses.

What readers out there running eCommerce businesses should be looking at especially now, where we have an economic downturn, assuming it’s going to continue, is look at how you can combine with a few other businesses? If you have a beauty brand, how can you find 4 or 5 other beauty brands or brands that are similar that have SaaS that ties over a beauty or influencer management company in beauty, a small retail chain so you can vertically integrate or manufacture?

How do you combine 4 or 5 smaller businesses into a larger business, save some money on costs and say, “We’re going to centralize accounting and marketing. We’re going to vertically integrate our manufacturing.” Let’s say you all had a $2 million business but now, all together, you have a $10 million business. How do you take that combined set of businesses and say, “We want to do our own little roll-up and bring that on to the public markets.” Also, be able to say, “We believe we’re worth this multiple on this and we’re going to tell that story to investors. We’re going to hire PR and we’re going to go figure that out.”

That’s an interesting opportunity to combine those things and execute on getting a vehicle, especially while the market is low. As the market starts to grow, take advantage of that growth and help tell your story. What I learned through this process is that this is much easier. Getting onto NASDAQ is hard and you need to have an investment bank underwriting unit and all these factors. Getting on some of the smaller exchanges is not that hard.

Any entrepreneur who’s gone through the process of starting their own business and some level of fundraising can figure it out. That vehicle being accessible and the idea that you can combine a few companies and do that yourself is a huge opportunity. All kinds of entrepreneurs that are connecting online should be thinking about how they’re doing that with their businesses and the businesses of their friends to create more value as an aggregator or as a roll-up.

Thank you for that. That’s mind-blowing in terms of the insights there. Mark, I’m not sure whether you follow the eCommerce aggregator space. What is your take on these Amazon roll-ups? Is it coherent? I don’t want to hint at any answers but I’d like your take on these eCommerce aggregators.

A friend of mine had his business acquire about one of those for about $1 million. It wasn’t a huge exit or anything but he was happy with it. I’m pretty familiar with a couple of things. This is the first generation of those. Some of them were a little willy-nilly to start where they were buying anything and the valuations didn’t quite line up. I also think that some of these companies do and they think there’s going to be synergy and there’s not but it’s an amazing vehicle if you have intelligently thought through the companies that you’re buying.

If it’s executed by people with operational acumen, who are doing the deals and doing the integration, we’re only going to see more of it. We’re in this first generation where some of them are okay and some of them aren’t. If I had more capital and I was looking to take advantage of the market, I would 100% be doing Amazon fitness brands plus buying a bunch of Instagram pages and email lists of things related to fitness. Also, working to say, “Maybe I can buy a small regional GNC competitor,” and putting something like that together into a rollout is an amazingly lucrative opportunity. We’re starting it right now.

Cluster it up. I put out a post on LinkedIn. It was something I was looking at. I was looking at one of the UK’s biggest fast fashion companies called Boohoo PLC. They started out in ’06. In 2016, one of the founder’s sons decided to create another fashion brand called PrettyLittleThing to resonate with his generation. After that, in 2016, they acquired Nasty Gal and then made nine other acquisitions, and M&As. They’re a $2 billion in revenue company in 2022.

All their growth spurs have been acquisitions. A lot of them have been in distressed sales but they’re turning them around. They’re integrating their technology into their mothership. They have this mothership company and they’re latching on to these companies that serve different demographics. They’re filling out gaps and they’re trying to cover the entire market. They acquired one brand called Karen Millen. Karen Millen tends to appeal to the 30-plus professional women, which was not in any of the brands. They missed and they screwed up the brand, to be honest. They captured that and they kept on.

As you alluded to, eCommerce has not been coordinated with the aggregators thus yet. We’re going to find some formidable players in the mid-market eCommerce companies that are going to grow billion-dollar companies if they know what they’re doing by acquiring by slow M&A. Especially now with the downturn, there are deals to be had.

It brings me to my next question, which is innovation. They have their ways of doing things. The other companies have their ways of doing things. You have your own way of doing things. You try to integrate them into your ways of doing things. How do you maintain or bring in innovation, especially if you see a target doing clever things? How do you bring that product innovation in sync with your overall vision as a founder who wants to make an impact or a dent in a vertical?

The hardest part is the combination of these companies and then keeping innovation as you grow. What we tend to see is that there are people that are good operators or good business people who are acquiring these brands. Especially for brands that have any level of cool factor, you mentioned that they messed up this brand that they acquired, it’s hard for those operational people to understand that. That’s why it takes a real combination of a team. It’s also hard to run innovation across many different units because the same innovation team isn’t going to be able to handle a 30-plus professional brand like a Gen Z brand.

The way I like to look at it and recommend it is that every individual brand is better off with its own small innovation team than having a bigger overall innovation team. A huge part of the purchases for these brands, especially brands that have any amount of cool factor or social media influence, needs to focus on retaining the people that are responsible for that. Also, giving them some degree of autonomy and control.

They can think about all the other things when it comes to the bottom line, syncing accounting, costs, or factories. You can work on that but you have to give autonomy to the creatives. For a certain generation of business people doesn’t understand and can’t act on supporting those people correctly, you need to give them control.

With that example I gave, it looked like they had brought that original demographic from the mothership, the Millennials to Gen Z, and it didn’t make any sense. You’re like, “Why drag the sophistication of that brand of Karen Millen down the gutters?” That was quite interesting in terms of innovation.

I like your points around autonomy with that and nurturing autonomy because there’s a reason why you buy the brand in the first place. They’re doing something right. Why not just water that plant from an innovation standpoint. I could go on and on and on. I’ve thoroughly enjoyed this conversation, Oren. It’s been fascinating. Is there anything you want to cover? I don’t want to say, “I forgot to say this. I forgot to ask you this question.” There’s an opportunity of having you on the show with your expertise.

We had an interesting conversation and covered a wide variety of things. The only other thing I mentioned is I do encourage any entrepreneurs who are working on their brands to be discovering a lot of the things happening on social media themselves. Spend time in their own niche on Tiktok. Spend time on Twitter with other entrepreneurs that are publicly sharing their stories of what they’re doing. You can gain a lot of knowledge through the communities that are online. We had an interesting conversation.

I see we have mutual friends. Nick Shackelford, Chase, and five others. I’ve followed you on Twitter. For those of you who want to learn more from Oren, you have a website called ProductWorld.xyz.

On ProductWorld.xyz, it has my newsletter called Product People on it, which is where most people get their information from me. I sent it out and I have thousands of entrepreneurs on it now. I definitely encourage everyone to sign up there. I’m @OrenMeetsWorld on Twitter, Instagram, and TikTok. I love answering questions and connecting so don’t hesitate to DM.

You’re also quite active on LinkedIn. It’s terrific stuff. Thank you for coming on the 2x eCommerce Podcast. I thoroughly enjoyed this conversation. Cheers.

I appreciate it.