YouSaid · the spoken record

Jeremy Cai

lines on the record: 43
first: 2021-05-13
most recent: 2021-05-13
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Like all the technical change that it's gone through over the past 20, 30 years. So even though they might not realize it was kind of like that actually was what directly inspired the founding of italic is spending so much time in the ecosystem there. So yeah, I think those are probably two that come to mind immediately.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“I say two things. Okay, I think the first one I have to say is being a partner to a founder is really, really hard. And I know that from personal experience as well as having a lot of friends who are founders. So I'm very thankful for Katie who stuck it out with me through six, seven years of startup experience. I know it's not like a single thing. I can't debate the fact that it's really tough to be with the founder. So it's oftentimes like a free co-founder with no equity. So that's one. And then I think secondly, I have the classic Chinese immigrant story where my parents moved here from China. They escaped. Actually, I can't even say this. They like willingly moved here to chase the American dream at the time. And to be honest with you, they probably would have been financially better off if they stuck in China looking back. But I think on the flip side, like they took me back every year. And I think even though it's not, they probably wouldn't recognize it as being like kind whatsoever. I think that experience actually really showed the growth of the country.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Different when they say they're going to buy things versus when they actually buy something. So I think Fitalic is important that we became verticalized as quickly as possible across as many categories as possible.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“For example, it's great when you're the only player and you can take really large margin that historically was paid out to a retailer and you keep that and you pay your Google and Facebook fees. It's not so great when you have like a thousand competitors in the same vertical that you were alone in just five years ago. The natural narrative there was like, okay, let's actually introduce a whole suite of products around that. And I've seen it maybe succeed like one time or two times in all of the brands that I have looked at or spoken about. Most times it's really large investment, both from investors because it's like, oh, if it worked here in mattresses, it should work in like the next vertical over. And very rarely does that actually apply. I think if you want to be multi-category, you have to do that from day one. So for italic, that's why we've operated with such a high velocity and focus on product speed and getting products to market is as soon as consumers pigeonhole you to one vertical or as soon as you have the assumption that something's going to do well, you don't know that unless you actually test it with the market.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Is pricing is like the dark horse that people don't really talk a lot about in consumer brands, but it's so important. No one wants to be the cheapest option, but it's also a very good spot to be in if you can play it well. I think the second one is that there was a notion maybe three, four years, if you operate in the whole directly consumer world, you'll observe these things that are popular for a year and then not the next. So for example, in like 2016 into 2017, there's probably like using influence of microinfluencer marketing 2017 to 2018. Everyone poured money into offline experiences building stores. And you saw huge rollouts across the board. Two years ago was probably podcasts. And then now it's TV, which is a really new vertical. Another notion that I think was popular maybe 2014 to 2016 was like, hey, I'm going to start with one hero product and then use that to branch off into more verticals and cover more of our customers' lives. And the reason for that is like a lot of these transactions are one-time things. So in the case of, let's say, mattresses.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think there's probably two things that stand out to me. One is when we actually got going, our prices were typically 15 to 20% less than direct consumer brands. And the realization was like, that is not enough. These brands have poured basically all of their money and all of their time into building stories and communities around a specific vertical. And for some anonymous new company to come in and say, like, hey, it's 20% less, like you should try us out. That is not enough to sway a die-hard or at least like to compete against a brand that is like poured everything into that, into a specific product or vertical. And I think the nuance there is like when we do pricing sensitivity tests, when we actually got to a 50% threshold, that's when we actually saw a lot of switching occur, where, okay, it's enough for me to actually give this a shot or at least like buy it over the direct to consumer counterpart. And I think the pleasant surprise of them is like, hey, even though it's cheaper, it's actually not worse. Sometimes better. So I think that's one.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Still don't accept payments for CBD businesses. So you really have to kind of go and look beyond what is currently available. And actually, there's a lot of great providers that actually offer just as good, if not better, rates than a lot of the bigger providers do. You just have to kind of know where you're looking. And it also kind of gives you a sense of like, when should you build versus buy. And then I think for Notbot as well, it's given a sense of like, well, this is how a really well-running, super efficient bootstrapped business can do this with like one or two people. How can we abstract that and have the same efficiency with a much larger org in italics? So it's been an experiment that took off, never quite died, and it's incredibly efficient business now. So I'm thankful for Katie, who, I suppose my partner in life as well as in the business.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Oh man, I say it's an American wellness company that my girlfriend Katie and I started five years ago or so. And I say American wellness because we sell CBD products and it has such a bad stigma in the market by now. But if you think about it like five years ago, that wasn't the case. It was still very much gray area at the time. It wasn't federally approved like it is today. So I think probably two things that have been really interesting. So Italic is a very classic example of a venture-backed business. We raise quite a lot of money for it and it takes a lot of work and people to get it to a point where we can actually go to market whereas for not pot, it's the exact counter example where all the tools exist for it. You don't really have to innovate on the supply chain all. It's really like, hey, let's build a brand by product and then sell it at a markup to a customer in a way that drives value to them and also it's good for us and we can take a profit. What I like to say at least is like I've learned a lot that is shared knowledge between both. Payments is a great example. Stripe Brintri, so on and so PayPal, they”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Technology, or at least like bundle the players through technology, I think you can build really exciting businesses in them. And then I think lastly, this is just from a personal investment standpoint, but I love API businesses. I think there's still endless applications for these, especially, I think a lot of the first layer protocols and APIs have been played out over the past five to ten years, but I think there's a lot of second level, I guess, lower level API providers that could be really interesting. I guess a better way to put it is what are the APIs that software businesses need to rely on that don't exist yet? And I think there's still countless examples of that.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“And secondly, it's a much better customer experience. So I think having a singular interface for a managed marketplace is really great. Uber and Airbnb are the great examples of that where it's kind of a testament to like they've passed our screening tests and generally can deliver this service to you. So I think that's one that I do think there's still a lot of room in the business world, less so in consumer where I think a lot of managed marketplaces have verticalize quite efficiently. I think secondly is infrastructural businesses. The Western world, it's mostly been around the three PLs. So providers like Shipbob or Shipmunk or Flex and what they offer is essentially like a centralized service of fulfillment of individual orders. But I think there's a whole lot more into the supply chain that currently is not bundled and provided as a tech service. Basically in supply chain, when you think about anything in supply chain, like 1% of the supply chain is we're talking about like billions and billions of dollars. So if you find these verticals and make them super efficient.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Would say three things that I would bring up right now. One is I do think there's a lot of opportunity to managed marketplace services. I really admire this company. It's called Pilot. They provide essentially like bookkeeping as a service. If you think about the traditional model of these service providers, it's always centralized to people who are under payroll of a certain company. Whereas I think what could be more interesting is actually if you take these service providers and actually abstract them into a marketplace model where you have a number of, let's say like bookkeepers in this case, actually Flexport is another great example of like in the beginning they were booking freight for their clients on a number of different existing players but instead they were the consolidated view for a user to engage with a user interface on. I think one that provides scale advantages because it gives you pricing power the more business you drive to a player the better prices you should get and then you can pass that to a customer.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Actually, definitively trying to take our merchant down to is use services and tools that already exist while we search for a long time and we try to build on top of them to a point where we realize like, oh, this would have been easier to just build it ourselves in the first place”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“States, we have New York, LA, and SF. And I think operating the distributed company has shared a lot of knowledge specifically from the China market. The way they do things there is so different than the way we do things here. I listened to the podcast you did with Brahm as well. I wouldn't categorize it as always being better. There's a lot of things that I think the Western style of fork is actually much better suited for startups, but at the same time, you cannot dispute the work ethic. You can't dispute the competition. One of the really great advantages of having a cross-cultural team is that you kind of get to pick and choose what you perceive to be the best parts of both. The third I would just quickly say is it never gets easier and it never feels like you know what you're doing. It's more like if you're building your own category or you're trying to do something that's like legitimately new versus operating an existing playbook, you really have to think from first principles. In this case, the logical decisions in all these were take margin at the outset, build that into your business model where it's for us like”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Biggest one I would say is a lot of founders have to make up the story around why they're excited about their business. And a lot of times I know behind the scenes they fell into place, meaning like they started a company for the sake of it or thought it was a good financial opportunity and had to be pretty disingenuous about that and then like innovate until like oh wow there's actually a lot of financial interest in this model like I'm basically stuck in the driver's seat and I know a lot of founders who are in that case I think for italic it was exciting because when you weave what is legitimately personally exciting about a business and also a really potentially large outcome, I think that's kind of the secret sauce where you're both personally legitimately excited about it and also the business outcome could be large. So I think that's probably the main thing for me on a personal level is just when you're jazzed about what you're doing, it changes everything in the world. Second thing I would say is we've operated as a distributed company from day one so we have full-time employees and Shanghai and Manila and then obviously in the”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“An unbeatable price point because even in Amazon's case, for example, or any of the providers I just shared, ultimately you're still buying from a merchant who buys from a manufacturer. Amazon merchants are merchants in the traditional regard where they'll buy inventory from a manufacturer. Their job is to ocean freight it all the way to Amazon. And then when you actually buy as an Amazon customer, you're not actually getting like what a manufacturer is paid. You're getting what the merchant paid for the manufacturer plus their own margin, which is typically three, five, ten times. So I think that's really where we see ourselves in the market. It's like it's a full stack e-com layer of providing these services for our.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“The way we think about it internally is our vision to essentially build the next generation everything store. And if you think about it, every generation really has had one, like in the 1800s, there was Tiffany's and Sirius Robook with the first catalogs. I'll skip ahead all the way to like Walmart, you know, being the first superstore and then Costco being like the first generation shopping club in many ways all the way to Amazon with especially with Prime really opening it up to a mass market. Prime, I think, is an interesting case because even with Amazon existing, Wish was able to really capture a large portion of the audience. Chewy has done phenomenally well with different verticals. Wayfair has done quite well. Etsy has done well, so on and so forth. So I think for Italic, the goal is like, how do we carve out room to show to customers like, hey, you can buy really high quality products from a really great manufacturer. And the reason why you do it is ultimately because it's a very rational, smart decision to make. You're getting a high quality product that basically”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Part, which is producing product and then making sure we can actually sell to a customer. But all of that is kind of like foundational. You can't operate italic without that existing, if that makes sense.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Service providers who've only popped onto the cross border commerce market. And then lastly, I would say is payments and financial transactions. It's not hard to remit payments from the US to Asia. Obviously, like millions of people do that on a day-to-day basis, but a lot of the automation and one more layer of sophistication beyond just like remitting a payment, especially if you're a marketplace business and you rely on these APIs to exist simply do not exist. So transfer wise, which is pretty well known, like you can't pay to businesses using transfer-wise either in China. So there's a lot of technical operational and financial work that has to get done. And there's great companies working on this, but I think for the most part, like we've literally spent by now like three years trying to find these service providers and they really don't exist. So we have to build them from scratch. And all of that is really in service of essentially enabling a manufacturer to onboard as a merchant. Once we have them onboard, then we can actually start the”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“It's very much still like day one here, where a lot of this infrastructure simply doesn't exist from, I would say three core verticals technology. Shopify is not servicing marketplaces. Asian marketplaces, for example, you need an ICP license to operate any software whatsoever or any domain in China. And you have to have an Asian entity for that. So there's a lot of technology that currently might surprise people really does not exist for this cross-border marketplace type of model, even though it's like an extremely prevalent business model. Secondly, operationally speaking, one of the biggest operational blockers to brands starting up today is it takes a very long time to produce, but then also to ocean freight or air freight and then fulfill in order to a customer. They can take anywhere from like even four to six months to replenish a product that's out of stock that's already designed and everything's ready to go. So operationally speaking, a lot of this infrastructure doesn't exist quite yet, or at least it does, but it's extremely offline, provided by very small.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Which permits finally to the vendor. And that to me is pretty crazy. Other things that might surprise people, like yes, logistics services are starting to be digitized. And I think there's a lot of investment being poured into that. Ocean, air freight, trucking, train, whatever it is. Generally, you can book that through a digital broker today. Fulfillment services, on the other hand, Apple, for example, they fulfill most of their orders straight from China. So if you order from, let's say, Chicago, where I am right now, they would actually pick and pack in Asia and then ship it directly to me. That sounds counterintuitive because you would imagine like, oh, that's actually probably super expensive for them, what have you. It's actually not, it shouldn't be that expensive. It's much more expensive than like ocean freighting it and stocking a large reserve here, which obviously they do for their stores, but to a large degree, it's actually pretty economical once you get to scale. So I think for italic specifically, I hate to use Amazon.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“First of all, thanks for doing the research and sharing our secret plan publicly. It kind of goes to the point that I made earlier, which is a lot of the infrastructure for cross-border commerce does not exist today. And that might surprise a lot of people because you could argue like, I buy something that's made in Vietnam mermaid in Italy. How does it not exist? I'll give you a perfect example. Stripe Adian, you can name whatever it is. Do you think of them as global businesses that have wanted all, at least in the tech world? And Stripe doesn't have a China office. You literally cannot pay using Stripe Connect or any of their services into China. They had a Hong Kong team, they had a Singapore team. That function does not exist. And that's the same for pretty much every Western service provider. And believe me, if it existed, we would use it. It's kind of crazy to say, but in 2021, we have to build our own payment orchestration service to calculate payouts and remit payment into our Hong Kong entity, which then pays into our China entity.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“And then they'll stamp my logo on it and say it's mine. So I think on the design side, it's changed a lot over the years. And then the second point I think on the consumer side, I think ultimately the role of a brand again is consistency. I know there's this concept of like brands are losing consumer loyalty with the modern age and new generations. And I think, of course, like to generational change, that's true. But I think on the flip side, I actually think brands are more powerful today than ever before. And I don't think they'll ever go away. Instead, I think customers are significantly more educated on their purchasing decision. So when it comes to purchasing XYZ product, if I'm making an emotional purchase, I'm probably going to pay for a brand because I want it's a status symbol. It's like, it could be any different thing from like grocery to like a handbag in your example, which is probably the most extreme. And in both cases, I think consumers will have to make the decision to either purchase emotionally, which is, again, buying from brand or rationally, which is optimizing for value. And in the case of value-driven.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Following season, the flip side, I think on the brand, what that really entails is okay, if my job is to deliver a consistent experience or set of products to my customers and they expect this from me, my job is to less so build things from scratch, but actually more to curate or to develop things that I see promise in and to things that we think can actually go to market on a consumer side. So I gave the example in apparel, but this is true in many different regards like cookware, for example, there's thousands of stainless steel pots on the market made by a pretty centralized set of maybe i'd say 30 or 40 manufacturers, mostly in China. And this is for the esteemed like Swiss or German or Nordic cookware companies. A lot of it is frankly made in China, but they are not creating new castes or molds for these pots from scratch. It's like an assembly of here's a handle and here's a pot and here's a surface and here's a color that I think looks well and will bode well for our customers.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Housing a lot of the RD, so take apparel, for example, which is one of the most design centric businesses. If you actually go to a manufacturer today, oftentimes you won't be making like specs from scratch anymore. Instead, you'll walk into a manufacturer's showroom of like, here's our assortment, what we believe will do well, and we'll pick and choose two, three, four, five styles and then make tweaks on them, and then call it ours. And obviously, like that's a very simplified version of what that is, but we're not talking about like super high fashion in this case where it's made from scratch. And that's by and large how a lot of these brands operate, at least when adding new skews. So these manufacturers, I think what that means is two things. Like one, they have to get very sophisticated around consumer insights, and they're getting constant feedback, not just from one client, but from maybe a portfolio of, let's say, 20 or 30 clients who are basically placing orders from them. So they should be a centralized source of truth for here's what's actually going to be in trend next season.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“I've spent a lot of time over the years, I think, thinking about this, both from a brand side as well as a consumer side, but first on the brand, I think you have to go back to what is a brand. And ultimately, I think what I believe a brand is, it's a stamp of consistency. It's like, if I buy this product from XYZ, I'm going to get the same thing every time if they launch something else. Like I generally know what that will look like or feel like based off of what their other products are and what the brand stands for. And obviously brands evolve over time. I think at its core, that's what it is. And I think the way that brands manifest that is by having a consistent design philosophy or having like consistency across aesthetics and copy as well. So I think it was a big realization when I started having these conversations with literally over 150 manufacturers and revisited them on site as well. Something has changed in the past probably like 15 years to 20 years where manufacturers started in”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“A lot manufacturers, this will not work, mainly because it's exactly to your point. It's like their cash trap businesses and cash flow is everything for manufacturers that have become established do have cash reserves or on the flip side you could also make the argument like for manufacturers where minimum order quantities aren't in the tens of thousands but instead could be in the hundreds or thousand to two thousand, they have a lot of excess materials sitting around they have a lot of excess labor. What the game of a manufacturer really is is optimization around production lines and capacity so if you have a sitting production line that is not producing anything for a given client that is literally money burnt because you're paying for that labor the equipment is being financed so it's not being productive whatsoever it's really all an optimization and i think for businesses like italic the financial reason is hey i could get triple the yield from an existing line that is otherwise going to be producing for someone else”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Essentially globalized most of our manufacturing is wholly dependent on getting inventory from overseas to our domestic DCs. Whereas in Asia, because the manufacturers are geographically located very close to the consumers, dropshipping, which has a really negative connotation and stigma in the West, is actually a really great experience. It's super, super cheap. You can get one to two dollars per shipment, sometimes three to five dollars max of most orders delivered to you in one to two days. So it's almost like an Amazon level of experience for everything that you buy. And I think the difference for Italic and really where this kind of bridges into the Western ecosystem is, you know, in Asia, most of the ecosystem is dropship with the exception of JDE, where manufacturers will essentially, they can do the pick and pack so they can actually store the inventory and then pick and pack and fulfill the order to a customer. And the customer will get it in one to two days or they'll ship it to the local DC and that takes like a week for most Western supply chains.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“These really legacy manufacturers to produce product for them, but then secondly, pay for that product that they're making for someone else, which is a very kind of like counterintuitive example of how inventory works. But I think the reason, again, is like whoever owns the inventory owns the upside. So if these manufacturers could list on the platform where they could double or triple or even quadruple their profit margins of four to five percent, which to a customer isn't really that much, but to a manufacturer hugely impacts their bottom line, that could be a really exciting model. So Xiaomi has a marketplace called Yoking. There's NetE's actually has one as well called Yenshin. JDS as well has one. There's a special store in T-Mall dedicated for this service as well. So C2M, I think, is the trend, at least in the West, is extraordinarily hard to replicate for a number of reasons. I know you had Ryan on from Flexport on the show as well, and we're a huge fans of Flexport over here, but I think it largely has to do with the logistics ecosystem. Logistics in most Western countries now, because”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Aside from the e-com players that are small mom and pop merchants on Alibaba, no legit manufacturers on Alibaba, they're all offline. We work with five or six publicly listed manufacturers by now. None of them have a website that is all relationships who you know past clients and so on and so bills of lating like do your research. So I think what we've found is from 2015 onwards there were a number of Chinese companies that they started this concept called like C2M customer manufacturer. Effectively what they did is they went and found the same manufacturers as high-end brands, which is what we do as well. They convinced them to essentially digitize their business by investing into inventory for the first time. And you have to, I think another thing that I kind of pass this off because I talk about this every day, but the interesting thing here is a manufacturer can be around for 40, 50, sometimes like 80 or 100 years and never in that entire life cycle of a business have they ever invested into their own inventory. In this case, these companies effectively convince”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“The equivalent of Amazon here and obviously TMOL and Ali, but I think what happened from 2015 onwards really changed a lot of how e-commerce looks and the fabric of that in Asia. The most notable player here is Pandora. The exciting thing that they do, obviously besides a group buying mechanic, which I think it's very hard to replicate here, is that they actually source straight from factories. And the difference with Pindodoa was that they source from basically like everyman factories. So you're not really caring about quality. In that case, you're caring about price point. But beyond Pendoto, there was a number of Chinese platforms that have come out that have similar notions to italic, which is, hey, we're going to actually find not crappy manufacturers, but like actually really legit established manufacturers and actually bring that manufacturer online, manufacturing even to this day is an incredibly offline business. Like if we talk about e-commerce penetration in the US or China, it's like we're making a lot of progress there. Manufacturing as a whole.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Because it's a brand, and I think a lot of these direct consumer companies have masqueraded as tech companies for a long time and traded at similar multiples. And I think obviously that story has ended. Going back to ultimately what matters, which is the consumer, I think they realize now, like when I buy something, the rational reason to buy it is for value. The way I kind of architect, it's like value is the quality that you can get for the price that you pay. And then on the manufacturer side, like all I'm optimizing for now is just getting more clients. But I'm still making Razorth in margins. If I become wholly dependent on a client who drops me, I'm out of business. So I think that's kind of the perfect storm. If we actually look to Asia, this is where a lot of the inspiration for ITEL came from. I bring this up because I spent a lot of time there growing up up until I would say like around 2015, the Chinese e-com market looked actually very similar to the Western e-com market today. You had major players such as JD, which is actually.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Obviously, we all know it happened since then. Thousands and thousands of brands have flooded the market. Facebook and Google have gotten extremely competitive and quite saturated and very hard to compete in. So it kind of goes back to the brand model, which is the brand has to make money through markups. They buy inventory for a price and then they have to sell it to a consumer at a price where they make a profit. And obviously your incentive there is higher prices, lower cost. I guess this all kind of brings me to today, which is as a manufacturer, maybe 10 years ago this is different, but well, let's say you're in Italy, where your margins are 20 to 30 percent, you don't care if it's x, y, z traditional incumbent brand, legacy brand buying from you or XYZ direct-to-consumer brand buying from you to them, it's just a client, you're making the same margin on both. And then to a consumer, I think people have gotten a lot savier nowadays where they recognize, hey, if I buy like a product from a direct to consumer brand, I'm not doing it because it's a good value anymore. I'm doing it because I like the story. I like the brand look. Ultimately, you're buying.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Produce the finished goods for a brand. And the consumer, obviously, in that case, people are smarter nowadays than they were about the supply chain 30, 40 years ago, but they're paying what is literally like five times what a product cost to make. So I think there's a lot of interesting things that have happened over the past decade, specifically in the past 20, 30 years as distributors have largely lost a lot of power. Groceries and food distributors are still very, very entrenched in the ecosystem for a good reason. They're almost like mafia members in the ways they operate. And a lot of other industries outside of grocery, you know, distribution has”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“You're constantly getting pressure from even people who are supposed to be on your side, your clients, constantly giving you pressure to bring costs down. And a great example is what these very large businesses like Costco or Sam's Club do for these manufacturers where you're going to take a razor thin margin, but the reason why you take these orders is you're taking like a 5% margin on like, let's say a massive order that can make your business. This has changed a lot historically. The margins are 15 to 20% more normally on top of cost of goods and labor. So it's very razor thin. If you think about it, like actually tracing the numbers, it's let's say a shirt costs $15 to make 20% on top of that. Let's say like they actually sell it very conservatively and pad their margins for $20 to a brand. They're making $5 march in there, but the brand is ultimately going to sell that at the end of a customer for $100 like normally speaking. So on a hundred dollar consumer sale, a manufacturer is making four to five dollars, even though they actually”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“All they do is they are reliant on these brands. And this has changed a lot over the years. But the core is brands make money by buying inventory at a low cost and selling it to a consumer for a higher price. And that's very literally how a brand makes money. And what that incentivizes for is how can I charge higher prices and then also minimize my operating cost, the largest of which typically is marketing, but the second largest of which is the actual cost of the unit. So I'm constantly placing pressure on my retailers, my distributors, my manufacturers most importantly, and the way I do that, of course, is by saying, hey, I'm going to take up more and more production line, larger and larger quantities so that I have negotiation leverage with you to bring down costs, let's say, 20% from where they were last year and another 20% the following year. So you can imagine being both in the business of a brand is not easy because you're constantly having to sell to another person and you're taking the financial risk of owning inventory. What I would argue is even a harder business is actually the manufacturer.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“To a retail store, and then the retailer obviously has their margin. Even in grocery, which is notoriously a low margin business, there are still many, many levels of margin that's added on. And ultimately, by the time a customer buys it, you can see this, the actual value of a product minimum tripling. And so let's say products in categories like CBG from the actual cost of production at a manufacturer to then end consumer. And in more traditional, let's say, quality good sectors such as luxury goods, soft leather goods, bedding, towels, textiles, these product values can effectively 5, 10, 15x from the actual cost that a brand purchased it from manufacturer. And the main reason for that is there's this concept that I think really harkens to. The reason why we started italic, which is whoever owns the inventory owns the upside. And it's just like an insight that I think the longer you look into and spend in manufacturing, you realize manufacturers never had a distribution channel whatsoever. They don't have distribution.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Probably the starting point is the fundamental concept of how product arrives to a customer. Let's take a hundred years ago in the States, the manufacturer, let's say in North Carolina or somewhere in the East Coast would produce a product, a brand obviously place that order. So the brand purchased that product typically on like, let's say, a 30, 70 split of a deposit and then a payout. The manufacturer effectively needs the cash flow up front so that they can finance their materials, their inventory, the labor, the equipment. So that's what they do with the deposit. But oftentimes for the receivable, they'll factor it. These businesses are very cash flow dependent. So they'll take that remaining 70% and they'll actually take like 80, 90 cents on the dollar for the remainder. The brand, once they purchase it, they finish production that typically gets handed off to a distributor who then would place it with a retailer who ultimately will sell it to a customer. And between each of these, there's a logistics arm trucking the inventory to a distribution center, getting the distribution.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Don't want to just be a marketing machine that just takes product that already exists and then marks it up and sells it at a profit. So I think for us, like the membership, we essentially came to the conclusion like, hey, we now have over a thousand SKUs. We see sufficient purchasing behavior where it suggests that a membership is actually going to do potentially well.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“The second thing I would say is, and we can talk about the membership component quite a lot, but I think what we found is the membership really for us was a noble experiment in many ways. I think it was Q4 of 2019 and there was a very well-known direct-to-consumer brand kind of went bust. And their recap basically priced them at the same price that we were at pre-launch back in 2018. So I think the realization was like, hey, one, we didn't start this business to be essentially a direct-to-consumer business. I think the opportunity of what we're doing is substantially. Necessarily larger than a brand, let's say 50 years down the line, but at least we're trying to do something that's generally different in industry. Secondly, my background's in technology, that's what we're excited about technology and operations.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Good content, really strong landing pitches, so on and so forth. Whereas Costco, it's really driven by word of mouth. They famously don't advertise. Obviously, the counterpoint there is the store is the advertisement. Every time you pass a Costco, you recognize it and everyone has a friend or a family member who's a Costa member. So you'll eventually hear about it that way. Whereas Freitalic, because we don't have that presence, we have to hit you through every possible digital channel to really educate you on like, hey, you're buying high quality products at a price point that really other brands can't achieve. And we do that because we offer this essentially this membership, which is a very, I think, unusual new value proposition to consumers. So there's a lot of education that I think has to go into it first and foremost.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm not supposed to compare the business to Costco anymore. We definitely have ruffled some feathers there. But on the flip side, it's obviously the most direct analogy that I think most consumers are aware of. I think the fundamental difference, I would say, is that we have to really, I think, aggressively educate the customer online through”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Five ten, sometimes 15 times what I sold it to them for business model for italic is ultimately to essentially provide the infrastructure, I call it private label in a box for these manufacturers to empower them to become merchants of their own. So specifically what that means is we actually most times we will not buy inventory and when we actually make these sales we try to issue payouts typically two to three times higher in terms of profit margin than what these manufacturers are used to. But that's in return for them taking the financial risks. So really what we can provide is a way for these manufacturers to use our payment orchestration, our operational network, our distribution, our technology tools, access a global market of consumers, but on the flip side get significantly higher yield on their existing production capacity without having to change a thing. So really those are the two core parts of our business.”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source
“Really, we have two components of the business the consumer side is obviously what you see publicly and what we offer is a membership that provides access to over a thousand products that we design and develop ourselves and consumers pay a membership fee to shop from our store and the spin on it is that we went and found the same manufacturers as high-end brands but we sell those products at prices where we don't really monetize so typically 50 60 sometimes 70 or 80 less than what direct to consumer brands or traditional incumbents might charge but what's i think more interesting and where we spent a lot more time is is actually on the supply side not many people know this but we actually run a very heavily managed marketplace model underneath the hood i come from a manufacturing family it's really bad business to be in to be honest with you it's very low margin super competitive you know you can lose clients in a second but ultimately i think the longer you spend in manufacturing the more you realize hey i'm producing these finished products for someone else to ultimately sell”
2021-05-13 · Invest Like the Best · Jeremy Cai - Manufacturer to Customer – [Founder’s Field Guide, EP. 33] · IDENTIFIED FROM THE TRANSCRIPT · source