Rolando Rosas 5:15

want not only not afraid, but they’re doing it. They are doing it and so yeah, and before we jump into the research that we uncovered for this episode, I want to give some big props. Props to James Orsini, aka Jimmy the pencil, who stopped by the podcast earlier of one another episode, you know, key was if you don’t know about James Orsini, let me just tell you a two second, maybe 10 seconds about him. He was handpicked by Gary Vaynerchuk, aka Gary Vee, to head up his organization within a certain group. He’s right now heading up The Sasha Group. I understand he may have some news in the coming future with regard to what he’s his role there is so I’ll wait for him to break that news. But Jimmy, the pencil, you know, reminds me a little bit about I told him you remind me a lot of our porcini and I put a vote. I put my vote in right now for when they do the reboot. He leaves the lead actor for the role of the new Michael Corleone James Orsini you get big props today. No, Dave. I can’t wait till he comes back a second time because he’s got a lot going on. And I know that when he was handpicked by Gary Vee, the biggest reason he he told us he wanted to avoid the big business mistakes that come with businesses that have been in business for 2630 or more years. And he was at the helm him James at a lot of other organizations that were large, other media companies, ad agencies, and he wants to avoid the traps and mistakes that those agencies made. Well, hey,

Dave Kelly 6:56

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Rolando Rosas 8:08

Thank you, Dave. Terrific. So we were just talking about online, e commerce and talking about the changing preferences. I just want to ask the question, What happened to Zhu Lily, Dave?

Dave Kelly 8:23

What happened to him? You know, I mean, what,

Rolando Rosas 8:26

what’s happened, what’s happening in the online e commerce space today, because we’re in a new place than we were in March of 2020. We’ve had invoking James Orsini, he said, you know, companies can swell. And companies can grow organically. And he had a front row seat, you know, he worked as a, as an analyst, I think I recall, as an analyst for Goldman Sachs, the financial analysts, and so he had a front row seat to numbers, who IPOs and all the rest. And he told us, he says, you know, you want to grow, you can grow, but you can swell, or you can grow organically, which you can sustain. And I would imagine that a lot of companies during COVID, some of them shrunk, because their industries got hurt. And some of them just grew, especially if you were anything online, and you could ship it out tomorrow or the following day. And

Dave Kelly 9:22

you know, my question to James, it had to do with, you know, what are the dangers of what’s the danger of a swell, a swelling business versus a growing business? And we’ve seen this in the communications industry, right. So during the during the pandemic, people needed solutions, they needed communication solutions, they needed platforms. So we saw some public organizations just go through the roof within a very short period of time. And when that happened, they had they had to hire, they were on a hiring, move. It’s like we can need as many people as we can. And I think of organizations like this Boom, zoom, they became a household name in such a short period of time, I didn’t follow their stock price. And I feel like I should have spent more time analyzing that. But obviously the business is growing customer demand, customer expectations. And then once the pandemic kind of moved along, and people started going back to the office, and people were using different platforms and just zoom, that the need for all these employees was no longer there, you know, so they went through kind of a budgetary, I don’t want to call it necessarily a crisis. But we had a lot of contacts that were with Zoom one day and no longer with them. The fraud the

Rolando Rosas 10:43

next that in that’s kind of the like, what you’re saying riding that wave? And so we, like you said, Dave, riding that wave and going back and understanding how did this all go down? You know, are there some some things that are happening because you Lily’s not in the same boat? I mean, Zulily, Etsy, and I want to say there’s another online retailer, forgive me if I’ve botched that one. But I know there was another one floating around that was contemplating bankruptcy as well. When those kinds of things happen, those are signals that there are shifts, because, you know, overnight, things can change. And that happened at the beginning of the pandemic. And I wouldn’t say overnight, things have changed since the packing because it’s not overnight. It’s just been a rolling thing like work from home, hybrid work, all of these things have contributed. But in this case study when we’re looking at Zulily, there were some factors that led up to where, where they are now, which is essentially bankrupt. So Dave, if we’d look back, I’m going to look at my notes because there’s there’s a lot of stuff that we were looking at a timeline, it turns out that Zulily’s marketing was predicated heavily on email marketing, which is interesting, because, um, you know, we, I heard a video where gret, Gary Vee talked about back in the day, the early 2000s, Zulily was re, or he was just in terms of like, he did a ton of email marketing, and the open rates were through the roof, like 70 80%. That’s not the case today. But if you’re relying heavily on email marketing, and we’re showing a video here, if you’re if you’re listening to us on the audio platform, we have a video of Zulily playing on the video side. They’re really catering to the the market female market, the 20s, the 30 year old in that demographic, that’s also budget conscious. And that demographic has changed. And we’re going to talk about that later on as we jump into the retailers that is succeeding in this current environment. But given that they pushed, pushed a lot of emphasis and pushed a lot of their marketing through the email, there was a constant bombardment date, that led to spam, fatigue, and customer annoyance, which, which is interesting. I don’t know about you, but I’ll get tons of spam every single day, I’ve hear that Google’s doing some major things that they’re planning on doing to cut down on the spam. But we’re going to wait and see here and 2020 for how that all plays out. One other thing that came up that was interesting was that they did a lot of flash sale. So constant flash sales, which led to an erosion of that thrill factor, you know, think about what Amazon does with prime, and Amazon Prime days, there used to be one now there’s two, usually one in July. Sometimes they throw one in q4, as well. It’s so imagine a prime day every day, or something of that sort, where you’re having, you know, very all your all your vendors, lower their prices, eventually doesn’t really become an exciting thing. Eventually, it’s not really a sale. It’s not really a deal, per se. And I know when I worked in the consumer package industry, that was also the case, you run the risk. If you’re constantly quote, having a sale, then it’s never a sale. There’s never really a deal because the consumer starts becoming used to the fact that what was the deal, a special deal, it no longer becomes special in the mind of the consumer.

Dave Kelly 14:40

That’s one of the things I really hate when I’m shopping for something online or even doing some research online. And I haven’t just seen it with physical goods. I get spam. I get emails marketed every single day. And sometimes it’s one company and In the messaging is always, you know, it’s 50% off, it’s 60% off, it’s always a buy one, get one, which is 60%. Like, it’s always this the exact same offer. And I say to myself, do they think that I’m so stupid that I have to jump on this? You know, I’m looking, we have a gym, we have a new gym that just went up about five miles away from my house. Five days ago, I went on their website, I was just curious, are they offering anything for, you know, end of year, beginning of 2024. And they did, they had a special and that special ends today. This was five days ago. I went on their website last night, and it’s giving me the same thing. It’s like the special ends at midnight tonight. And it’s the same offer that I was looking at five days ago. So I’m thinking to myself, what’s my hurry? Don’t trick me. Don’t trick me into but your call to action? You know, the marketing people out there, it’s always this call to action. Put a timer up. That’s the worst one Rolando, the timer,

Rolando Rosas 16:08

there was words. Yeah, yeah, a lot of websites have gone to timer. Some of the travel websites had been very notorious for doing that. And there was a video that was circulating on the internet recently, when Black Friday happened. I believe it was target. This this this this woman was with her camera going around taking to the stands in the kiosks that were they have these deal with like, you know, this big pallet of, of paper and and socks or whatever the heck it was. They had the call outs the price call outs right that sit above you know, these kiosks. And on it, it said Black Friday sale. And then the lady took off. There it is. That’s the one. So you can watch this on the video, or a you are spot on today, you get a clap or look at this Black Friday. So pause that already. We go back and when when she’s taking the price out the app, what right there, look at this. Look at this. And she found this throughout the store Dave The so so this is the physical version, the physical manifestation of what you were just talking about. Now, it’s a little switch a Roo. It’s not saying save, it’s making it seem like a deal. It’s not really a deal, because it was the same deal that was there yesterday. And that’s all you’re doing is putting a new cover on it thing at Black Friday sale. And you could see if you’re watching this video, so if you’re not watching it to tick tock video that went viral with a lady shopping through Target and she’s removing the prices that are on the call outs and they’re the same that they were previously there’s no difference. So if you overplay your hand at this, and it seems like Target got caught here, in doing a little bit of this switch a roo then eventually the customer is going to find out information. It’s instant today, right? Back in the day, 1015 20 years ago, you could probably get away with this switcheroo. You can’t today, customers are going to share that information. And I would imagine over time, it’s nothing special. Dave it was just like you said the same deal. It was two weeks ago

Dave Kelly 18:32

to be in one of those board meetings with those marketing geniuses, right? To Ivy Leaguers like, well, what’s our move for Black Friday? And someone said, Let’s spend money. Let’s spend money to look like people are getting a deal. Let’s let’s reduce. Let’s reduce our sales margins, increase our operational expenses, all for the sake of fooling the consumer. Yeah, I feel like there’s a lot of that happening. And I’m insulted. I am insulted by it.

Rolando Rosas 19:09

Well, you’re not the only one because when you look at the timeline here so in 2015 According to what we found in 2015 these flash sales started eroding for Zulily was a thrill was gone. The surprise factor has gone and in some instances probably they’ve the same thing that we just saw on this video from Target was happening a 48 hour sale on Friday. So you think okay, but if I do this before I get back to work on Monday, you go back on Monday, you go if you go back on Tuesday, you see that’s a 48 hour sale again. You know there is another retailer actually online. I won’t say who they are because I know who these people are they sell hundreds of millions of dollars and they use this tactic for years. 48 hours sale, you go back on Friday. So still, back on Wednesday, it still says 48 Hour Sale. So they said it was warmer, right? Yeah, um, there was a timer counting down. So they, they could do that. Because sometimes customers don’t come back every single day to their website, they know that the traffic you do by looking at the analytics, you know that that’s not happening. But if you’re trying to build customer confidence, you’re trying to build brand loyalty, you’re trying to have build a community of customers that are coming back over and over again, because that’s where the money’s made Dave, coming back, repeat customers, you can’t resort to these tactics forever, because they’re not going to work overtime. So in 224, think about 2015. Dave. So around 2015 2016, Amazon really starts ramping up their efforts when you’re talking about prime. So one of the things that we saw was that Amazon around this time is ramping up their efforts, especially around the subscriptions around prime. And so if you look at the timeline between 2015 and, and right up until the pandemic 2020, you see that over time, things start happening to Zulily, you know, they do get they get acquired in 2015 by a group called the cooperate group or curate retail group. And when you bring in a new set of eyes, a new set of management, you inevitably are going to have friction, some people in the company being acquired are going to see things one way the acquirer is going to see it another way. And so one of the things that we found was that this management led this new team that took over, there’s obviously some conflict there in the in terms of the vision, and this turmoil, you know, is never good for any organization, and is it all plays out. And as you move forward in time, you get a couple of other things that start popping up on the radar. Dave, and what we found was that they they started running into shipping delays, and being in the online space ourselves, being sellers on the on our own website and on Amazon, you know, like what you just said about customers, customers today want delivery next day. And in some cases, they can get delivery, same day with delivery. And it’s more retail stores curbside pickup the same day. So the expectations the preferences of the consumer, you know who you know, who told us the same thing, James Orsini told us in big props to James again, he said he was sitting at a at the mall. And he’s like, you know, why am I sitting here? Waiting 20 or 30 minutes, actually, I could get this to delivered today by Amazon. So when you have competition, like in the way of Zulily, they’re competing against Amazon in some ways, and Amazon did ramp up their fashion. They’re they’re they’ve ramped up their efforts to attract fashion brands to their website, and I. And I really remember that in a strong way. Because, you know, we get emails all the time from Amazon every single day, as a matter of fact, and more and more started popping up on the radar. When it comes to sellers in the fashion business sellers that sell clothing sellers that sell to women, they started changing their policies. So in the background, you don’t always know what’s going on over there. I know. And Amazon plays a very strong a very good role here, because as a competitor, they can influence the landscape in ways that others can’t. And during that timeframe, David if we if we move forward, and you think about shipping delays, you also add inventory issues. You add the fact that you know these 48 hour sales or flash sales are not real sales anymore. What do you think that’ll do to a brand? When you know, things don’t arrive on time, you have inventory issues. Deals are not really deals anymore. What do you think starts happening,

Dave Kelly 24:16

you know, people get excited about a hyped up brand. So if they make if they’ve made the purchase, they’re waiting for it to arrive. And then if the product is stuck because of bad delivery or there’s no inventory available, if the consumer has to cancel the order, they’ve probably lost a lot of hope or desire, you know for that brand. It marketing marketing and getting that brand loyalty is in creating the excitement around a brand is so hard with all of that work and effort to then not be able to to deliver the physical goods,

Rolando Rosas 24:53

man all that work for nothing. And you’re absolutely in think about the timeframe. where, you know, the pandemic hits, all the all of the 2020 hits, you have shipping, global shipping. So now is throw a brand, Zulily, who’s big focus was on clothing, and marketing towards females. Every single container ship that was out there in 2020, and 2021, was absolutely being called to the call of duty rates were through the roof. Companies were also going out and purchasing their own container of ships during rush to move cargo, because it was, what was $2,000 or $3,000, that container went up as high as $20,000, that container, ouch. Wait a minute, I’m gonna hit the Run button. Hooray, hooray for the shipping guys. They made profit hand over fist retailers. If you dependent on clothing, which most of it isn’t made in the US, Dave, most of it is made off offshore, China, Vietnam, Pakistan, India, we’re all the all. In Central America, you can’t get goods fast enough during the pandemic, right, just like you’re saying. So now, things start swelling. But you run a foul even we ran into some of these issues. customers need as I want that scared me, that’s I need a headset, I need a phone, I needed this, I needed that because we got to send people home. Now we can’t get good. So you go fast forward into 2022, you haven’t resolved those issues, a lot of the third party sellers that are on their platform become a little bit annoyed. Let’s just put it that way with what’s happening there. You you start, you start this vicious cycle, and then compound that with the fact that and I want to give you the numbers here. So if you’re, if you’re a nerd like me, and you just give me the numbers, I’m gonna give you the numbers on their on their profitability, just so that you can get a timeline, you know, the lack of profits will make the company will put a lot of stress on a company. So in 2020, they reported a negative margin of negative 18.9%. Net income margin. And these are financial numbers that are being provided here on Google, and 2022. A minus point oh, eight margin, and up to 2023. For the records that are available, a negative 12.73 margin compared to compared to Amazon, Amazon, in all of those years that I just mentioned, 2020 2022, and 23, was right around two to 3%, margin 2.99 and 2020, all the way to 2.4. So far in 2023. So even though it was still only a few points in profitability, profitability is different than negative, you’re in the negative, you’re in the red, you can’t survive, you cannot last you got to be able to make profits to survive. So all of these things compounded Dave, which, in the end, if you’re not making profit, you’re not going to be around for a long time.

Dave Kelly 28:37

So what was interesting that you just shared was in 2020, that’s when they started, I started to feel a kind of a drop in revenue. The

Rolando Rosas 28:48

in net income while I didn’t look back, we didn’t look back to 2019 or 2018. But what we could get was from 2020 to 2023. And in those years, it was all negative. I don’t know prior to that, if it was positive or not. But what do know is that their valuation peaked right after their IPO and just kept steadily going down. Based on on the information we have. So if if their stock valuation keeps going down, then you probably are going to run into some issues here, when it comes to profitability because the market would only hang on so long and asking where’s the prophets?

Dave Kelly 29:30

It’s interesting with Zulily being fashion, how fashion you know, I’m thinking 2020 height of the pandemic. Fashion was no longer a priority. Right? People were in their homes,

Rolando Rosas 29:45

right and Who knew Who knew think about 2020 Now when jumping back into 2020 from we did not know that everybody was going to be hanging out at home forever. Right? Or that work as we knew I remember in March 2020, having to cancel meetings and I remember telling a couple of our suppliers that we’re going to we’re going to meet Well, you know, I’ll see, you know, I’ll see you in a month, don’t worry about it. That turned into many, many, many months, two weeks, two weeks, off in a couple of weeks, you know, we’ll get this under control. And that didn’t happen. But here’s the thing, Dave, after people started getting a taste for working at home, right now, we’re around 25, a quarter of the workforce that can work is working some kind of hybrid or remote work. That number is not insignificant. And you know, we talked to Stanford economist Nick Blum, who said that there major shifts happening in worker preferences. So one of the things that you have to ask yourself, if customers patterns, whether it’s at work, or other patterns are changing, can it have an effect on the online buying patterns, and I say, Yes, and we have some of our own data that we’re going to share in a little bit to show that it does change. So if customers are now also changing what they normally do on a given day, that affects what I’m going to buy, based on what Professor Blum had told us, people are, are doing less of the, like regular daily personal care or hygiene, they’re showering less, today has the save time on on this shower, they would have taken their shaving less. So there’s, they’re saving time on the shave that and all of this can add up to about 70 extra minutes. 702 big amount of time. So now, Dave, the question I asked you, if you’re one of these workers that gets to work home, whether it’s two days a week, three days a week, or even fully virtual? Wouldn’t you think that is my pattern has changed regarding work, that that would also impact other parts of my life? In what I’m going to do in my experiences in my shopping behavior?

Dave Kelly 32:16

Yeah, absolutely. Absolutely. You know, I used to buy a few pairs of shoes every couple of years, because I’m using them all the time. Same thing with my pants, and my shirts, and you know, my, my dress, my dress, clothes, my work clothes, I haven’t had to update anything, because I, I really haven’t gotten a lot of miles out of the clothes. I have not, I haven’t left, I haven’t walked as many miles in my shoes. My clothing is lasting longer. Because really, I’m wearing trackmate May, my workout clothes, my sweats, my, my athletic wear, my casual stuff is kind of what I live in. Now, if I’m going to be on camera, I might throw something on what do they call that waist up? That’s higher. By, you know, if you saw the sneakers that I have that usually or sorry, if you saw, if you saw the shoes that I had, that I have right now, you would be shocked if I told you that I’ve had him for six years, I haven’t had to, I haven’t had to wear them all that much. So again, you know, if you’re not, without that normal wear and tear, it’s going to last longer. So you won’t need to spend your money on it to replace it.

Rolando Rosas 33:24

Right. And so, I recall a conversation I had with with people leave it was Tim Asha told us that, you know to create change, you only need about 20% 20% of people to create change if you’re talking about an organization and other things 20% seems to be the the mark where it then starts making an impact. And we’re over that margin over the 20% when it taught when we’re talking about people working from home and just like you said they’ve, you know, you think about and behaviors changing. You know, again, we if we were to cite Nick blooms research from Stanford, he talks about leisure activities, increasing golfing, and gyms he said gyms were, we’re about to be gone. Right? And so golf courses, and now it’s reversed. People, we a lot more people used to live in cities, people moved out. Some of those people have been recalled with return to Office mandate, but a lot of people moved around, change their lifestyle, change their priorities. Travel right now to foreign countries is as high as it’s been since the pandemic. So people have shifted their dollars, it’s a shift of dollars. Maybe I did buy an extra a tie and you know, if I want some heels in my buying some extra heels because you know, the other ones broke from going to meetings and conferences. That’s not happening nearly as much. And one of the things that we had in one of our previous episodes is those signals, the signals being ignored. And over time lead to really big problem. So one week, oh, a little lower I can find next week. Third week, if if that isn’t being watched, when specially when it comes to inventory, big problems can happen. You know, in in, in the case of the pandemic, post pandemic, inventory, in logistics are all a mess, all of them are a mess. And if you don’t have it down cold, or if you don’t having real tight systems to manage this, because all of a sudden consumer preferences start changing, the inventory that took nine months to bring in, is going to sit there for a lot longer, and tie up a lot of cash. So now during the pandemic, Dave, because we’re talking about a shift, you know, things started opening up, people started shopping, again, stores, they went from being closed a lot to opening and having hours where, you know, early hours for seniors, still the vulnerable folks, because shop, and more and more places started doing pickup curbside pickup, same day pickup. And as things started opening up, to my surprise, Dave, you know, we’re, we sell tons of stuff online. But to my surprise, and I think a professor bloom kind of planted the bug him in our heads a couple of weeks ago, when he came on, he said big enterprises doubled their profits, when you look at 2022 Compared to 2020. And we check that out, and it checks out Dave, I would call it the comeback of retail, especially for these three companies that we looked at, in this case study.

Dave Kelly 37:00

You know, I I’ve done some shopping recently, and was blown away that it was hard to find parking. There were lines, there was a buzz in the air. You know, there was product on the shelf. And here we’re seeing that sales are up, I’m impressed that, that the consumers still are attracted to retail stores going and going out and making purchases. You know, I don’t know if it’s because FedEx can’t deliver a package anymore. I don’t know if it’s because delays with Amazon or where the delays are coming. But I’ll tell you going into a store touching something, holding it, buying it you leave with it. That’s that satisfaction, all

Rolando Rosas 37:52

immediate, immediate gratification. It’s an immediate gratification. And I think retailers, the good ones, right? This is not happening across the board. But the ones that were strong prior to the pandemic, and they were growing like TJ Maxx, like Walmart, like Marshalls, and Ross Dress For Less. And the reason we’re highlighting those four is that those four have an overlap with the Zulily customer, in some cases is particularly the off price retailers. And so if you’re a budget conscious female, and you were shopping on Zulily, and you have a lot of overlap in the inventory that Zulily had, and now, you know things open up. And sometimes it’s horrible timing for some companies, it’s all about the timing. Right? These companies, you know, in 2020 2021, they saw they saw a temporary pullback, and so they’re thinking, how do we bring them back? What do we need to do? The consumer doesn’t, you know, like you’re saying it’s top up or what is it from from the waist up the waist? You know, there’s still people zooming and doing all of that on camera. So that’s still had driving some sales and we’re showing here a graphic of of TJ Maxx as sales and that their profits doubled. I know we have we have those numbers. Let me tell you a little bit about those numbers, because they’re amazing, TJ Maxx after a slight dip in 2020, TJ Maxx saw its revenue return to pre pandemic levels by 2021. And they have steadily reached $16.3 billion in 2023 with their fiscal year ending June 30. Now, get this The important part is not the top line number that gives us just like a thermometer that it’s telling us more or less what’s happening, but what you want to know is how much money they put in the bank as a result of all those sales in here. Here it is, in 2020, they generated net income of 434 million. That’s about 100 million every quarter. Amazing, amazing. But in 2020 2320 23, kanessa 2023, a generated income of $808 million, they’ve doubled, almost doubled. And that’s exactly what Professor Nick Blum told us. But it doesn’t end there. That was just TJ Maxx. Do you think, okay, that’s just one blip. We found that to be the case with a few others, as well.

Dave Kelly 40:42

doubled their revenue. Sorry, yeah, doubled their, their, their profits in two years. Yeah.

Rolando Rosas 40:51

That’s amazing. So they figured out, they figured out, Hey, real quickly, we got to find a way to survive, right, the pandemic shut us down, we got to find a way to survive, people are not going to be wearing as many ties, people are not going to be you know, buying wingtip shoes, and all the other stuff that comes with normal office wear, right, and other things and other preferences that that they sold home goods, all the rest. So your inventory mix has got to reflect that change. What you have got to get rid of some of that stuff, you got to bring in what the customer wants. And I’m only that Dave, but then they go in and start doing some of the Amazon like things about pickup and returns and improving their processes. The customer experience now gets way better than, you know, at that Zulily. I keep messing up my order, or it gets canceled, or it gets delayed. I’m not doing that anymore. Right doesn’t take long for customers to bail on you when you have that kind of experience.

Dave Kelly 41:55

So now the question remains is what we’re seeing in retail places like TJ Maxx? Is this sustainable growth that we’ve seen for the past two years? Or is this a swell? Hmm, interesting

Rolando Rosas 42:10

question, Dave. I think we before we answer that question, we have to look at what’s happening in the retail space as a whole, especially in these off retail brands. And we’ve got two others that we want to highlight before we answer that question, the whole that question, let’s come back to it. All right. Marshalls, another competitor to Zulily. There’s some overlap with the budget conscious Marshalls. I’ve found good deals myself going to Marshalls. I’ve gotten stuff that you know, they love selling stuff that’s liquidated merchandise from the retailers or high high brands, those luxury brands that are selling goods at Marshalls. But check this out. Let’s look at the numbers. So here’s what the numbers say about Marshalls. Marshalls revenue, jumped back in 2021. And climbed the top line numbers jumped to 11 point 4 billion in reaching I’m sorry, reaching 11 point 4 billion in 2023. Here’s what that again, ignore that part. This is just the top line number. Here’s the profits, the what matters to the investors, what matters to the shareholders, what matters to management, net income or profits witnessed a rebound. They went from 246 million in 2020 to a whopping 500,000,020 23 in year fiscal year 2023. Dave, again, doubled the profits is exactly what Professor globe told us. And that’s exactly what’s playing out here with Marshall. Let’s round it out with the anchor leg of all, all the money and why would I guess some people call it the mother of all off brand retailers Ross Dress For Less, they experienced in 2020 a temporary they will call it now temporary decline in in revenue and return to a pre pandemic trajectory in 2021. And still since 2021 has maintained a consistent growth in their numbers were in 2023. That top line number was $14.9 billion in sales. Again, let’s look at the bottom line what they kept in the bank the profits that their net profits saw steady recovery recovery going from 378 million in 2020 to 600 million in 2023. So, again, the almost doubled again, following the pattern that economist Nick Blum had mentioned during the time And so, to me, there’s a clear pattern right now. They’ve been steady ly growing their profit their bottom line, usually a good sign of management as well. And if they’re able to keep their finger I just what I would say getting back to your question about is this sustainable. they’ve doubled their profits in two years, three years. Right. 2020 2120 2220 23. So three years, they’re doubled their profit, you know, as they grew 80% In one year, which is what happened at Logitech. That’s unsustainable, right? Because it didn’t, you need a lot of stuff to meet the demand when 80% growth is what you experienced. And so a lot of companies that were in a tech space that were in a hardware space, and others that delivered goods into ohms. And into people’s lives to make it better during the pandemic saw a huge drop off, because now I can go back to Italy, I want to go to Rome, Dave, I want to go experience something in France, I want to, I want to travel, you know, a lot of RVs took off RV sales took off during the pandemic now. A nice glide down, the patterns change. So having the finger on the pulse of the customer, whether they’re buying RVs, whether they’re buying cameras, or now flying to Monaco, or France, or Brazil, or wherever, that’s going to have an implication on other things that have ripple effect. And really good companies are paying attention to those signals. And the signals, sometimes they’re just hidden, because you really think that tech can affect me, but hold on there. Because you can end up Oh, yeah, real bad situation when one thing leads to another leads to another leads to another, which is what we’ve found in the case of Zillow, one thing leads to another their competition was doing better offline retailers are improving their game. And now if the experience with your customer is poor, and which seems to be the case, as well,

Dave Kelly 47:19

things are gonna go bad. Well, I’d be interested to take these three companies and kind of see what they were doing pre pandemic, it’s my feeling that it’s my feeling that there has been a shift where folks want to go to a retail environment, but this, we don’t have enough information here to really, but to really gauge that. If it’s my opinion. You could, yeah, well, it’s, you know, I’m thinking I’m considering that if, if for TJ Maxx, for example, if they were able to double their net earnings in two years. Now, what were they doing prior to the pandemic? Because if it if it’s still flat, is that a is that a major win? But we don’t have the numbers to compare it? Well,

Rolando Rosas 48:14

you think about retailers that have been in business, you know, so one of the key indicators is that really good organizations are able to learn from failures. You know, we I’ve heard that recently from several, several guests, watching other podcasts that have other experts on it, learning for failures is key, you know, we learn for us just internalize it to our own experience, both pre and post pandemic, is that you’re gonna have to make pivots, sometimes several pivots, you know, for us, we had to change the way we got inventory, the way the inventory went out, the types of products customer wants, the customer wants. And today, that has changed as well simply because the customer needs are different than they were two years ago, three years ago, even five years ago. So meeting that customer demand is can be very elusive. Because data can have a lag on it. In weeks, sometimes months, but having a good strong connection to both the customer as well as the data to backup, you know, the hunch or decision is where companies tend to excel. You know, there’s a lot of company there’s a lot of data out there today on all sorts of things. And I would imagine that those companies that as part of their DNA as part of their culture, look back and reevaluate what’s happening rather than saying, hey, you know, it’s all good. We don’t need to change we we got the best widget in the world. I mean, we had the President of blackberry, former president of BlackBerry that was on let me know that that whole business has changed, right? BlackBerry was great. They are no more Compaq was great. They are no more. Digital was great. They are no more. And so you’re only as good as your, your, your your desire to keep up with change. I would I would say for us in the IT business, that’s especially true because of the rapid change, rapid innovation, things are changing AI who knows what’s going to come down the line with AI that’s moving so fast. But the ability to say, hey, look, we don’t have all the answers today. But we know things are changing. And we always have to go back and reevaluate. What are we doing right? What are we doing wrong? what’s working, what’s not working, and be willing to say, You know what, we felt that that but we’re going to make the next version better, is something of I think, a mindset and some people don’t want to admit, they’ve made bad decisions or wrong decisions or failed, which doesn’t always need to be a bad thing. I’ve heard what Stephen Bartlett say, he failed 70 times and the ability to learn from those failures and say, Okay, I’m not going to do it this way, I’m going to do it this way, I’m going to run this experiment so that that experiment, and to keep that going, is what allows you to then come up with this is exactly what the customer wants, this is exactly what they want to hear. This is the exact product we should be building. Because we tried for four versions that didn’t work. And we learned from those four, this is what we’re gonna put on version five, right? So I think there has to be part of the culture is to constantly be learning, constantly improving.

Dave Kelly 51:45

You know, I think about my experience with some of the brands I’ve worked for an every few years, there was always some massive changes, we had to change our strategy and our playbook you had to evolve with the marketplace, you have to evolve with your customers. That’s kind of our our lead in with, with the technologies of the solutions that we offer. We want to help companies evolve their technology to meet the changing customer demand. I’m not trying to put a commercial in the middle of this. But this is this is sort of our mantra, we have access to new technology that can help the small to medium businesses, upgrade their technology, you have to evolve your strategy, your playbook is changing. Your customers are changing, you need to update your technology to meet those customer demands, or else you’re risking the you’re risking your business. So I didn’t want to I wasn’t trying to throw that in there wasn’t trying to be corny about it. But change is good. If your business isn’t changing their playbook. Maybe you’re in a market that’s not changing. But how can it but how can it not be unless you’re a boutique, boutique seller have something special and you know what your clients are, but you know, not not paying attention to where they are or how you’re going to change the way that you grow sales or meet customer demand, whatever it might be. You’re you’re not you’re doing a disservice by by not paying attention to that. And so much is changing, and so much will continue to change. I hope that the retail environment, I’ll tell you, nothing is more depressing than driving through a town and seeing seeing a mini malls. What were those called the stretch, I don’t even know the names of strip malls. Yeah, the strip malls. Seeing a strip mall that’s just vacant is a very depressing sign. Seeing a huge mall. With a vacant parking lot or just 10% of the parking lot being used. That’s a that’s an ugly, bad sign. When I drove by my minimum mini mall and our full size Mall. This past weekend, both were packed. And I don’t know why it just makes me feel good. It’s nice to know that people are still out there spending money doesn’t have to be online. But it’s nice that they’re that they’re out there buying things and that they’re not afraid to still use their money or get in their car and get out there and to do it. Not everything can be virtual business. Maybe it’s part of your strategy, but the customers what I’m seeing from just this past week from compared to a couple of years ago. I feel just from my own eyeballs that more customers are out in retail. So for me, I like that idea what our products that we’re selling, we’re not going to be in retail anyways. So we’re selling more business to business type solutions. So it’s not an indicator for our business. It’s an indicator that people are perfect app’s tired of waiting for a delivery truck to get an item that doesn’t fit that they’re going to return anyways. So well,

Rolando Rosas 55:09

to speak to that, Dave, I know we were, we were going to share some actual numbers around golden hours. Now what is golden hour. So if you’re selling online, here’s some insight. If you can determine when your customer is shopping, or the bulk of your orders are coming in online, and you can target them better. Through ads on the for us, Amazon is a 111 channel, it’s a very big channel for us. And if we can know when the consumer is going to be online shopping, we can target them much better than if we just spray the ads from midnight to 11:59pm. This is consumers doesn’t shop that way. They don’t shop at all hours all the time, all those shopping is occurring through the entire day. And when we look at our data, there is a concentration of that. So now if I can find patterns in that data, I can better allocate my budget, I can better allocate my time or resources and targeting those customers. So we look back at 1000s 10s of 1000s of our own orders when it comes to online. And here’s what we found. We found that in 2022, there was golden hours for our products. Now we are in the office space, a lot of our products are used in I, our IT products use, you know for folks that are sitting at a desk or road warriors, that kind of thing. And we found that, for example, Wednesday’s gold golden hours for shopping, were 9am to 9pm, which means that I got a long stretch of about 12 hours where a good chunk of orders tended to come in Fridays at 8am to 6pm. So there’s some shifts just within those two days are those golden hours, but get this in 2023? Well, we found this on Wednesdays, that shifted from that 12 hour window to 8am to 4pm. So the window shrunk, where the bulk of the orders are coming in. Same pattern on Friday, right isn’t 2023 We found that 8am to 3pm. We’re golden hours where again, bulk of the orders tend to come in. So this shifts in the buying patterns so that if more people are doing that, what we also find that supports the patterns of hybrid and remote work days when people are in the office versus at home. And this pattern, and the golden hours is also magnified when you look at summer versus winter. We found that on Fridays, the golden hours instead of the 3pm mark, that I mentioned, I’m sorry, 6pm, during 2022, that we would see that even at around 2pm. A massive on Friday, around 2pm. Friday, during the summer, there’s a massive drop off in orders. And we found this over and over again, throughout different product lines. So Fridays, are not friends, Fridays are not a friend of the employee to go into work. And they’re not always a friend for folks that are selling products like us. So why would you waste Money when they’re not at their computer, they’re not on their mobile phone shopping, it would be a total waste of your ad spend ad dollars marketing budget, if they’re like a lot of our customers are during those hours, whether they’re on their phone, mobile phone shopping, or they’re on their computer doing the buying, want to target them when they’re there. And what we found is a better ROI when we’re doing that. And that’s what we wanted to share with you that take a look at your marketing, advertising budgets. If you’re if you’re doing that with digital ad, you will find a pattern it may not match ours. But I guarantee whether you’re marketing something to the consumer, or you’re marketing to a business buyer, you will find a pattern and patterns are hard to break unless something major like what happened with COVID. And what happened with after the pandemic. Those patterns don’t change. People get up in the morning. They log into work. They start working now more than ever on the on their laptops at home. And those patterns tend to repeat themselves over and over and over and over again. Finding those patterns can make you a lot of money bank urge you to find those patterns, those patterns right now, if you go check out those patterns, I guarantee you the data will validate what your hunch and somebody said this to me recently, you instinctively know that whether you’re in a big business or in a small business, this is when this action is occurring, you may just need the value the validation from the data. And I guarantee you, you’re gonna find it if you look in your data, especially if you’re sharp. If you’re selling online today. Dave, did I miss anything else are you do you want to add something about executing and targeting customers during golden hour? You

Dave Kelly 1:00:38

know, I’m glad that you analyze this because there’s a lot of money that’s being spent on ads, understanding your golden hours when said, I’m glad I said hours. Analyzing when that’s hot is obviously important to keep your operational expenses in line. I’m very interested to see what happens when we take a deep dive and 2023 to kind of look at those trends and of course, have our ear to the ground for 2024 trends coming up. I

Rolando Rosas 1:01:06

And so I can’t say any more there, Dave, because I think we’ve set it all today. But if you’ve been hanging out here, we want to tell you we appreciated your support in 2023. and are looking forward to an unbelievable 2024 with you. If you want to support us go ahead hit that like and subscribe. We don’t normally say that. But go ahead and do that. It not only shows your support, but helps us bring this program to you, as more people get to see it when you hit the subscribe as well as hitting the like button on whatever platform you’re on. So we really appreciated your support in 2023. And if you want to nerd out on more of these failures, Dave because you learn by other people’s mistakes because I don’t want to make other people’s mistakes. And if I can grab a couple of nuggets out of there and put it into play in our business. That’s what I want to do. So go ahead and check out some of these big business failures when it comes to the missteps made by compact sunbeam and Sports Authority. We cover those in previous episodes with actual tangible, executable things that you could do so that you can avoid some of those same mistakes. Dave and I will see you in those episodes.