Dave Wardell of Chubbies Shorts: Succeeding in the DTC space
The Profit Forecast: The eComm CEO's Podcast
Episode #21: Dave Wardellof Chubbies Shorts
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Ben Tregoe: [00:00:00] Dave, welcome to the Bainbridge podcast.
Dave Wardell: Thanks a lot. Appreciate it. Probably hearing my dog barking in the background, so apologies.
Ben Tregoe: No, it sounds good. Dave Wardell. I've been really excited about this conversation because you had this inside view and instrumental view along with the founders of chubby of one, of the big successes of the D two C space over the past few years.
And I think I'm really excited to talk about, how you built those processes that disciplined you instilled or helped instill at that. . And then, how you had your big success in getting acquired by Solo and then maybe we even could talk a little bit about, your experience at Solo.
Cool. But why don't we start, cuz I'm gonna not digest this to your background. Like, how did you even get, to chubby and like, where did you start your career? Yeah.
Dave Wardell: No, I appreciate it. Thanks for having me on Ben. , big fan of [00:01:00] what y'all are building. And I think obviously it's come through some of our conversations previously, but I think there's a, it's cool that there's a lot of overlap between the software that you're building and some of the more manual or stitched together systems and processes that we had at Chubby.
Yeah, I eventually was Chubby's brand president after we merged into solo brands and prior to that CFO for a handful of years prior to that, VP of finance, director of finance. Frankly, when I got hired as Director of Finance, it's a fairly lofty title. I was doing a lot of everything took over from the founders, writing checks by hand to our vendors.
Second day on the job was out pitching VC with with Kyle one of the founders to raise capital building models from scratch. Revising them time and time again when inevitably a sales channel changed or something changed with how we were approaching. Budgeting for marketing or fulfillment or what have you.
And and that's probably the story of our time there, is just continuously reinventing and [00:02:00] reevaluating. We were founded back in 2011 early Shopify Plus customer wasn't even Shopify Plus then, I believe. And so we were part of that earlier wave. , you're really figuring out what does it mean to be one of these companies.
A lot of VC money was pouring in a lot of people trying to treat it and apply some of the same principles from SaaS investing into it. And looking at, ltv, like it's a recurring revenue stream. I think since then people have. come to understand some of the fundamentals, such as every single time that someone comes back to purchase, you're hopefully having, you're probably having to convince them to do and so fundamentally not the same as having that in a contract. And and so yeah, that, that scale that we built to was slowly but surely. I think if I go back, so much of it has to do with the founders mindsets, all of them. Very financially literate individuals. All of them cared about us operating the business [00:03:00] sustainably, not sustainably in terms of in terms of environmentally, but sustainably in terms of cash flows, profits, things like that, right?
Not going negative on on contribution at acquisition point was the first original kind. Line that we drew in the sand to say we need to operate responsibly. And that was them really understanding that that we had to get people, continue to get people to come back and purchase from us.
But that we couldn't lose money up front or else we would go into deep cash flow hole. That was advice from some other people who were even, before us in the D two c e-comm world. Who had done things, I dunno, let's say for lack of a better term, incorrectly going really deep into discounting or super high acquisition costs on that first purchase, and then having to have the entirety of their profits driven by those future that future retention which, is un especially in fashion and apparel whether you're gonna have someone come.
Ben Tregoe: what? [00:04:00] Just in case people don't know the brand or aren't super familiar with the brand. Yeah. Maybe give a little bit of the founding story cause it is such an iconic idea. Very true. The founders had a very clear vision that you've really got a sense of the founders from that vision.
But it, it might also, I wanna get into the details of what you were just talking about, but I wanna make sure people understand what you're selling. .
Dave Wardell: Yeah. And I'll kind I'll try and weave how I got involved into that. So 2000 seven, eight founders are graduating from Stanford, Facebook, early, early days, no real ads on their Instagram becoming a thing.
And the thought was first, like, how. What a unique time to be able to speak directly to the customer, create community, create relationships talk to this customer like it's one of your buddies in the group text. And it iterated and spun out from there, but it was trying to find the right kind of product, the right kind of brand mix and messaging that, [00:05:00] that resonated, that felt relatable.
That idea was always to have a bit of a bigger lifestyle brand around it. But short shorts as it happened was that initial first product. I don't think anyone assumed. Big of a business, we'd be able to create off a core five and a half inch inseam cotton shorts. But but it really took off and so it was off to the races from there east, the four founders eventually quit their jobs and started working on it full time.
I was living in San Francisco at the time. With a couple of them and think about what I want to do next in life. I was at pwc, I had done a spin in audit. I had done a spin in the m a due diligence and consulting group. Knew that I wanted to move on from that. Had some great opportunities there and learn a ton really good basis, but realized I didn't wanna be a partner and I wanted to be more of an operator.
My mom is a cfo or recently retired, but was a CFO of a large construction company. And so I really looked up. How she had built her career. And once I actually got into pwc, I understood a lot more about what it was she [00:06:00] actually did. And so that was the goal and I was trying to figure out how to get there.
Business school I was applying to, and thankfully one of my roommates took was reading my application and took it to Kyle, who would eventually be my boss, one of the founders, and said, Hey. Need someone filling this role, which was, I was basically trying to sell myself as a director of finance eventually both business school.
So really worked out well. And at that time we were probably 10, 12 people. We were fulfilling all in house and and growth was starting to to take off. And I think the. , the founders got some advice that was very fortunate for me from an early investor, same person who talked about not going too deep into into the hole on your acquisition around investing earlier than you would potentially otherwise think to in a good finance and accounting function.
Nice. And so thankfully, yeah, I like, I happened to be right place, right time and jumped in head first. I wouldn't say I always had a dreamed or imagined that I would be [00:07:00] working in fashion selling, selling men's shorts but but it was a great opportunity to to jump into the startup scene.
And that was with some friends and some really intelligent driven people. So that's that's where it happened in them. As we started to grow Chevys started to explore new opportunities, right? New categories new sales channels, open up our own stores, try and pop up shops in.
Washington DC in the middle of the winter. Shout out to John Mark who manned that store and stayed at one of the founder's parents' houses for a couple months. Turns out that, when you only have shorts to sell in DC in the middle of snow season is probably not the best. Not the best PNL that you're gonna be.
Out outta a single location, but learned a lot from that. And eventually, a lot of those learnings led to a thriving stores business. Wh why did,
Ben Tregoe: yeah, why did you guys decide to expand product lines and distribution channels? Was it, Hey, we need more growth, or we see an opportunity like, was it, [00:08:00] let's throw some stuff at the wall and see what sticks?
Or was it really premeditated?
Dave Wardell: A mix, we are still learning a lot. Then this is 20, let's say 2014. Yeah. And. Wild west days of social digital advertising. But we could already start to see on the stores example, right? And even on category expansion we could already start to see some of those costs rising.
The early arbitrage of acquiring a customer into your community liking your page, becoming a fan, and then converting them into a customer. That arbitrage was already starting to show signs of going away. We had some great early success with that, but yeah, that was showing of going by the wayside as more people figured that out.
As more dollars from big advertisers started to corin. Tests at first. So some of that is just finding finding balance, finding physical ways of acquiring customers, the good old school stuff. A lot of it, trying to take some of the things that work in traditional retail and not reinvent the wheel, right?
Like category expansion can be directly tied [00:09:00] to lifetime. The more items you have the message about in an e-commerce environment the more reasons you have for a customer to come back and purchase from you the higher lifetime value you're gonna effectively drive on average over time.
And really the the higher the profit and sustainable growth that you can drive the. . The kicker there though is there's always a balance and some of those tests don't work. And so how do you how do you do that? What metrics do you use to inform that? And that's what took years and years between marketing and merchandising and finance and what have you to to try and figure out.
Ben Tregoe: So you, you had some really, you were lucky to get some good advice early on from this investor who was like, invest in finance and accounting and earlier than you think your founders, you said, were highly financially literate, so they cared about this. And then another good piece of advice was like, be super careful about your acquisition costs, right?
Yeah. Which was of countered of what the market was saying at the time. Go. Make up for it in the ltv. Yeah. [00:10:00] What specific did you have? Like a you, I cut you off at the very beginning, but I think you were talking about like maybe a metric that you had that for acquisition costs, it was like, what had to be greater than contribution profit, or was that where you were going or yeah.
Dave Wardell: But below tion profit. Yeah. We, that's where we started it. It evolved. And we would test, we would come to test the upper bounds . Can you, can we spend through stagnating growth to spur more business like maybe in some. Advertising channels that works not in Facebook where the algorithm is so perfected to every incremental dollar you spend typically is going to be less sufficient.
So you know, some of those lessons we learned the hard way. But yeah, we had great key people. There was the one, there was one investor that gave us a few of those tidbits cause they had been through it. But we, I think we did some smart stuff around the people that we brought in the early days that invested in us.
We did not, seek, maximizing [00:11:00] valuation above all else. We had some incredible strategic investors and strategic in the sense of not that these are, future corporate acquirers. Strategic in the sense of, there's someone who had built many supply chains of fashion companies.
There's, there was someone who had been a cfo, of large retailers. And so we had them chirping at us about certain things. One of 'em, we. every single financial close meeting. He was an advisor as well. He was in every single financial close meeting and demand planning meeting that I think we ever had from 2014 onwards.
He was instrumental in asking Huff. Questions. This is a seasoned CFO o an investor advisor in multiple businesses and we were very open with him. He was in all of those meetings. He could join our weekly calls when we wanted to. We had a great relationship, really trusting with him and.
He taught us the hard questions to ask and and did not shy away from, as soon as we one, one month it would be we were too heavy on [00:12:00] inventory and asking us why, and then we would've had a pickup in sales rate. And this question next month is okay, so you must be, missing some inventory or gonna have some gaps.
Where are they, how are you correcting that situation? And and there was a really good diversity of talent and experience on the team. We had some of those types of operators. We had a bunch of people internally from GAP and Abercrombie and other brands that knew how big retailers operated with open buys and merchandising approaches.
But we also had a lot of people. Hadn't ever been, like myself in fashion before. And so it's a good, it's always a good balance and debate. We always have plenty of people talking about, Hey, this is retail, fundamental retail math. And people right there at the table willing to push back and say, yeah, sure.
But that's predicated upon, 200 stores or a wholesale approach that doesn't take into account. The information that we can learn and glean from our customers online by running a advertising test. So it was always that , I think we had a really [00:13:00] good balance and an appreciation and respect for dissension, for contradiction at that table.
So that's from a, how did we get there? There's a big cultural emphasis on that. A big cultural emphasis. interesting. On building consensus and hearing contradictory questions and information. Whether we chose to eventually go that path or not. That's ultimately was, each functional leader's kind of decisions, CEO's decision.
But we were always open to it from a cultural perspective. In terms of shifting to a little bit more of the hard metrics? Yeah. The very first kind of metric we ever had on marketing was every single week I was sitting down and updating. How much did we spend on all of our channels?
And at that point fairly narrow. Mostly just Facebook. Yeah. And how many customers did we acquire and what was our gross margin estimated to be and such, and figuring out were we contribution positive or negative on the, on new customer purchases. So you're doing this trying to isolate. [00:14:00]
Ben Tregoe: Okay, so this is like a, this is interesting.
This is the beginning, one of the beginnings of your processes that you honed. Yeah. You were on like, what, a Friday or something? You were looking at the previous week and doing those calcs.
Dave Wardell: Yeah. Started as every single Monday morning, Monday. That was the first thing I was doing.
For the prior week, Sunday through Saturday, we were operating on a retail calendar. And I was trying to get those over to Tom founder and who led, digital and marketing as quickly as possible so that we understood where we were at. Did we go too deep? Do we have room left?
In the, along those lines and, could we spend down to effectively zero every single week on new customer acquisition? And then. , as I would say, not afterthought, but like secondary measure. What were we spending on repeat marketing? How profitable was that? What did what did that business look like?
Did we, are we trending towards our cohort model or not? So yeah, first super raw with a really, just blending total mar, total marketing [00:15:00] spend over new customers, right? Is that, that was the basis for it. And I think that's how a lot of people have looked at in the past and what we learned over the years is how to fine tune that.
How to segment out, first of all, new and repeat spend. Some of that is more art than science, but coming up with assumptions and logic that makes sense much like people do when they're figuring out attribution on a marketing channel. If they apply any kind of multiple usually.
Loosely based on some math and mostly based on gut and logic, unless you have some incredibly expensive tools and incredibly smart data scientists that you're paying, right? Yeah. But starting out with that big blended number, I, I would credit give a ton of credit again, like very financially literate.
team driven top down by the founders. Our marketing team led, led by Tom, wanted to understand incrementality over time. That's where we eventually got to was, realizing, hey, these dollars that we're spending through holdout tests and through other, [00:16:00] turning on and off budgets and things like that, that I won't get into too much in the tactics partially cause I'm not that literate in them myself.
But I got really comfortable that hey, some of these incremental dollars we're spending the last customer that we're acquiring we're spending a hundred dollars on. You're, cause you gotta assume that you're acquiring some for zero effectively. And so that was how we started to, I would say, turn the ship and really start to understand what we can afford to spend, eventually, , we tied it, we would get to a place where we had tied it into what is our cohort model, how quickly do we want to be generating X dollars of profit in the lifetime value of an average customer?
For us, 90 days was a sweet spot. How did you come to that?
Ben Tregoe: That's pretty sophisticated. Yeah. I How did you. decide that,
Dave Wardell: I would say two ways. One, that's a mark of a season and we were seasonal items and seasonal goods. know, we're launching stuff on a quarter basis some of it's just stems from that.
It's a natural place to set Hey, are we maximizing [00:17:00] each quarter? Yeah. But but a lot of it was also taking the now six, seven years of cohort model history that we had applying. Tax and what we call cpr cost per repeat order to that cohort model, that order base of cohort model, applying some basic mar other margin structure, gross margin fulfillment, margin to it and saying, Hey, are we, if we play to these metrics across this year and see, this growth in new customers and this kind of performance in.
are, what kind of contribution profits are we gonna generate? We know what our fixed costs are planned at. Are we hitting the kind of profit margin that we need to? Yeah. And so that kind of sets the initial target and that, you run in that cohort model on a monthly basis. . Then when you get into operating, that's when you're trying to inch those things up.
Can we get another, that CPR then is inherently tied to, or sorry, CPA or is inherently tied to an assumption [00:18:00] around the amount of repeat revenue that you're gonna drive from a customer. Now because you've averaged it out over, you've pegged that into a full annual view that a cohort model is driving of your revenue and profits.
Yeah. , let's say you have a $50 cack. And that's your kind of baseline any given month. Now you know what your other variables are that you can start to use to inform whether that's you can inch that up or you gotta drop that down if you're really focused on profit and profitable growth.
As you see repeat increase as you see, reorder rates increase you have more room in, in your CAC inherently because you're outperforming that cohort model. Yeah. It's a lagging indicator between measuring customers you acquired 60, 90 days beforehand. But but yeah, I think that's where like we have some.
We really saw, I think around the corner and started applying some of those types of models earlier. Yeah. And eventually got into a place right [00:19:00] where that's, that was core to our weekly reporting. That was in our, the, all of the dashboards we needed to manage. All of that was in, built into either one spreadsheet plus looker with all the assumptions so that, , hopefully just 15, 20 minutes for a couple people to update.
Usually, ideally twice a week so that we could make tweaks and adjustments. And then, a lot of the, more sweeping assumptions, those were still built in on, daily reporting so that the marketing team in particular could understand with a CAC that we had helped them translate into roaz.
How are they?
how did you, A lot of buzzwords there. Sorry. That's a lot of, go ahead. What lot? Sorry. A lot. A lot of acronyms and buzzwords
Ben Tregoe: there, . No it's awesome. And I'm like, one of the things that I was really impressed at when I read the solo S one, they had to share some data about chubby and the margin structure, and you guys had a.
by that, by the point of the acquisition. I think if I remember correctly, you guys were like in the [00:20:00] mid or high thirties EBITDA margin. Does that sound right?
Dave Wardell: Yeah, probably that probably was our first half proforma. Okay. I bet for six months of the year I That sounds probably about right.
Ben Tregoe: To get there? Was that like a conscious thing, like you guys were saying like, Hey, I want to be at a 35% EBITDA margin, so you backed all your numbers up from there? Or was it a process of iterating over time like, Hey, first we just wanna get profitable. Now we wanna get to 10%, now we're gonna get to 20%.
Like how did you think?
Dave Wardell: Yeah, I think our, that sounds right for our front half contribution margin or so the the path to get there was definitely intentional. Started probably 2016. I think I, for the first time, we. Built really a good, like first time I really built a good five year, six year out strategic model.
We had done some really high level ones in the past. This was the first time where we made an effort to. [00:21:00] Really understand each channel, understand the key levers, and use it as a, Hey, how do we get to 10%, even a margins on an annual basis. What do we need to do to get there? And so it was fascinating.
It showed us there was a couple margin structure changes that we needed to make to unlock that gross margin being by far the most. , like we were just not gonna get there unless we brought our gross margin up a whole lot of points. And so that kind of gave us the roadmap and I think the best thing was is that we rallied around profitability and profit margin as a metric for the entire team.
That became our kind. Call to action for the whole team. That's what we talked about in our all hands meetings. That's what we talked about in our, any kind of monthly touch bases. That's what we talked about at the beginning and end of each year. And so every person at Chubby's [00:22:00] from founders and executives to associates in the store.
everyone knew that profit growth was the most important factor for us. That's amazing. Uh, This is 2016, right? Yeah, 2016. We started working on it 2016. We probably started really rallying everyone around it. 20 17, 20 18 permeated the culture, I would say by 2018, such that I think 2019 we were finally hitting.
Those, some of the key metrics took us then a full year, longer than expected which I guess should be expected to truly turn profitable. But yeah, it was all out team effort, right? Because any given individual, the beauty of profits were, and profit margin is that pretty much every single person on the team can affect that.
Not every single person on the team can affect sales. Necessarily, but everyone in what they're doing, if they understand their levers and the order economics of the business, everyone can [00:23:00] affect profits. And look like we spend a lot of time trying to educate the team on, Hey, what are e-commerce order economics?
How's that different from a store's p and l? How is that different from a wholesale p and l? What are the similarities? I'm not gonna act. That message always got through to everyone, but we harped on it a lot. And I hope, I would like to think that a lot of people really understood what it meant to go from sales down to contribution and what the main components were.
Cause merchants, right? Were not just picking the items we're gonna sell in the future. They were reviewing return rates by sku, by category and selecting back. Intentionally using that as a qualitative criteria at minimum. If not a criteria, when a return wass really bad to just strike something in, in general from from the future allocation or sorry, assortment or at least, needed to be reworked dramatically if it was gonna make back in.
That's a, with, in an e-commerce business, that's critical. Our supply chain. Completely changed [00:24:00] our our QC process in a couple different ways. As another example on the returns front our marketing team were hawks like I, what marketing team do you have where you have to go tell them to spend more money?
Sometimes like that's unheard of. Those are great. They're, they were phenomenal partners. And so everyone really linked arms again, like I, this is not paning, this is like tone at the top for years drilled into everyone's teams and incredible alignment amongst the founders on that being the most important thing.
We didn't know if that was for an exit or if that was just to build the. For 20 years. But we knew that we needed to do that to survive. We knew that that, the chickens were gonna come home to roost. Hopefully I'm not butchering that saying and the VC well was gonna dry up.
We knew as operators that these were not businesses that could be warranting massive revenue multiples. We felt a lot of conviction. And that was, Kyle, using a great investor and kind of resource allocation mindset. Our [00:25:00] CEO and founder looking ahead and saying, Hey, this market's gonna come back to how it was valued.
And so real team effort and great alignment amongst them on on, Hey, we wanna build this the right way. We're gonna slow down at times. We're going to accept maybe a little bit slower growth to get our business right, to understand what our baseline is. Things like that, that are tough decisions that that they took.
Ben Tregoe: So that's really impressive. , especially during that period, the, your peer set was the opposite, right? The peer set was like, raise lots of money and grow like crazy and scale the profits at one point,
Dave Wardell: yeah. The peer set that gets publicity was, okay I don't wanna act like we were the right, we are not.
We're not the only ones seeing this building like this. There's plenty of companies bigger than us, direct to consumer brands that we're close with that never raise any outside capital bootstrap, the whole darn thing. So those are the ones that I have the most immense respect for. [00:26:00] Yeah. Because we were, we were still able to leverage some serious capital and relationships because of that.
Yeah. There's the people who raise minimal outside capital, the ones who are like, are really and grew sustainably are super impressive to me. But yeah, there, some people saw it, it just wasn't getting much publicity until it did. And then all of a sudden, It's funny, the last few years, it's all anyone wants to talk about.
And so I'm just, I'm thankful for the team that we had in place across the board, my counterparts who are leading other business functions incredible partners on that front. And they were all in on it too. Nice. Everyone was focused on. Profitable, sustainable growth and being around and being one of those brands, hopefully that's here in, in 20, 30, 40 years.
Ben Tregoe: Dave, one of the things, this is January, 2023. A lot of companies are worried about cash and, growing cash, keeping cash, generating more cash. How did you think about cash at [00:27:00] Chubby's, your cash conversion cycle? What were some of the things. Learned and put in place.
Dave Wardell: Yeah.
We had a great debt partner Dwight funding. They're they're really good. And we're a phenomenal partner along the way. And , it's funny sometimes they told us we were being too conservative, which is just hilarious, . So I, some of that, I don't know, I, it ties back to some of the theme I think where we were always really concerned and thoughtful about cash flow and our balance sheet and how we were building the company.
We debt capital and leverage is the way to go as long as you're responsible about it. Fund your inventory that way, but make sure that you don't get upside down in your inventory that you're selling through your goods. We were, I was talking to a seasoned D two c investor, entrepreneur advisor today.
You know that every DSE brand has the problem of. They have their unit, their, they're items that are just flying. They're, they're workhorse [00:28:00] on digital advertising that they're gonna sell out of, and, and before they, they get the new stock in. Meanwhile they have other stuff that is that is sitting there on the side lingering, with the slower sell through and longer weeks of supply.
And how do you balance that? I That. So our marketing and inventory planning. Constantly balancing that, constantly talking through that. I think inventory planning team did a phenomenal job of of creating an environment where we had all the information we needed to make the right decisions on that front and managed inventory.
I think they really. We're great partners to us on the finance side of the house. And and we certainly spent our fair share of time just trying to, in the earlier years, trying to just reconcile whose number was right, , right? How do we have this unit X units or Y units in this category, and why is this rule forward not working?
But but as we got systems in place, as we got more mature in, in. Functions and processes there, [00:29:00] we were able to really spend a mass amount of time understanding where those liable inventory areas were. And thanks to, the advisor that I mentioned earlier, always pushing us on that we we focused on trying to balance and ensure that those slow movers were not lingering six months, nine months, a year out.
Being aggressive there. Earlier we learned was the name of the game. We learned that the hard way. But the, if you have something slow moving, figuring out ways to repurpose it or promotionally get rid of it at a faster rate those are gonna be critical to, to maintain your cash position.
Yeah. You can't just focus. that those core winners and expect the other stuff to just magically disappear. Because at the end of the day that's just sucking up cash that you should be reinvesting into better buys in the future. So I, I think again, it was a long arc of evolution there.
We had a nice capital. [00:30:00] Infusion in the early days. And we had some, a great debt partner and revolving line of credit that moved with us. There were plenty of times where we were really tight on cash. And so the, I think the final piece was just a maniacal, like weekly cash forecasting habit that.
I got into and then and then, my team eventually took over comparing that to our monthly operating model to try and pick out three months, six months from now, do we have any differences? If so, why? And hopefully see. Cash issues around the corner. One more from a top town, one more is bottom up.
You're probably not looking six months out on that weekly cash flow but you should be able to see 1, 2, 3 months out, start to see a divergence. Yeah, that, that indicates, hey, we, we have some assumptions here off somewhere. And so you should be looking at that every single week when you're doing that weekly cash flow roll.
And comparing that to your operating cash flow model and saying what is off is [00:31:00] this. indicative of just we're we have some different sales assumptions. That could be fine if you're being more conservative in your monthly operating, operating model than you should be.
If you're being more conservative than trend and forecasting lower cash and higher inventory in that monthly operating model. But if the opposite's true, that weekly. Cash model just saved your bacon because you're not, you're gonna see now probably instead of seeing it the next monthly close when you refresh it inevitably you're your monthly model.
You're gonna, you're seeing it now, and you're able to hopefully start asking the right questions. Going, talking to inventory planning team, talking to your merchandisers and supply chain about orders coming up. And are, is there inventory we can move in and out? What's our flexibility going, working with supply chain to talk about, hey, can we get some exceptions and better terms for the next couple months to help us manage through this?
If not, we're gonna have to like, push out some units or make some changes to other budget items that we had. A lot of it just become. [00:32:00] problem solving at that point. But I think far too many people do the diligent weekly cash flow modeling. Cause it's a giant pain in the ass. And IUs and you're getting your information from really completely different places. But such good hygiene. .
Ben Tregoe: What? That's fantastic advice. I think absolutely critical, especially in this year. What, how did you manage the tension? You talked about wanting to expand lifetime value per customer, adding products.
You, but then you've also been talking about Hey, we slower moving items, we have our kind of hero skews that are killing it. Yeah. I think that, . In my experience there's always like a tendency to like, let's add more products. Cuz that's fun, right? , yeah.
But you, how do you balance that? Because there could be an argument, in a very extreme argument, which would be like, why sell anything besides your hero skews, right? Or yeah, be very rigorous about testing. We're only gonna test one thing. [00:33:00] Where do you think, how do you think brands should think about that?
Dave Wardell: Yeah, I, it's tough to say cuz this is . The, this gets to like the fundamental success . Can you effectively increase your lifetime value through a narrower skew assortment? Like how do you do that? If you can do that, you're gonna be successful. I would say Our merchandising, marketing, planning, sourcing development teams.
This was that, this was what they spent seven, I don't know, 50 to 75% of their time on was this airplane interaction.
Ben Tregoe: That's fascinating. Those are big. That's a lot. People hours
Dave Wardell: think Yeah. Thinking about this, with that aim Yeah. In mind. Yeah. I think our our product team teams, right on the merch design inventory planning, sourcing all that, right?
They all. Understood , [00:34:00] that assortment expansion was around was inherently LTV focused. And so even the designers at Chubby's, knew or were, had alignment with marketing that that it was, what we were looking to do was extend, expand ltb the. The tough thing.
Yeah. There's surveying there's ads with, fake products that lead to signups that you can create. There's surveying of your customers, your team random randoms on the internet all that stuff. Certainly you should be doing all of those things. And then you should be looking every year.
Our merch team did a phenomenal job at this. And with, a lot of rigor and forcing from planning, they really looked hard at what skews we're performing versus not. What were profit what, when, once they applied cost of goods and such were, were profitable versus not using that to inform future bias.
Also, when I talk about stuff like this, it's not like we were doing this in 2013, like this took years and years. Develop in, in [00:35:00] home and put into practice. It's where they eventually were able to build into. And they, there was a year where we went really wide in excuse and we learned just what you were talking about, that it doesn't work necessarily always.
And so that next year we tighten things up dramatically.
Ben Tregoe: What's been blowing me away. How practical and it's just so unusual. What I'm hearing from you, from what you know we sometimes witness with other companies and I think there's so many people that are trying to build towards this, but I I don't know if , I guess like my hope is that we could help accelerate them there because you guys were able, because you had that focus on profitability, you were able to like learn, always live another day, learn, keep going.
Yeah. But it's like amazing how disciplined you guys were about an intentional, you were about so many of these. .
Dave Wardell: Yeah. Yeah. I We raised money, but we didn't raise nearly as much as some of our, [00:36:00] comps or competitors or what have you. . It is on that front, right?
There's capital constraint is real. Some of that is forcing function. Some of that is, we had a ton of really smart people. Log is just cultural. From Chevys was always a little against the grain, right? , I remember when I first joined walking around in San Francisco in short right neon shorts you would get people that loved it, that walked by and you would get people.
Outwardly commenting, like just not even shying away from talking trash about what you were wearing. And it wasn't a lot in between. And so I think we always felt a little. We always felt fairly comfortable being contrarian and charting our own course. And I definitely think this was part of it.
We had some incredible advisors, investors around us. We have, we had founders who like really believed in this and also got, did the work to get a line and get their teams [00:37:00] on. I tried to do a lot of work with my team to educate the team at large and we had an employee base that really rallied around it that was receptive to it, that believed in, hey, that story and that tie of sustainable, profitable growth is how this is, becomes a sustainable kind of heritage brand.
And , all really blended well together and I'm grateful for, everyone around me. Who, at the end of the day, those are all the operators that actually made this happen, right? Made the decisions on the inventory plans we were buying, made the decisions on like what ads they're shutting down versus turning on and really took the time to think about and understand we wouldn't have accomplished this.
Them. And it set us up for success, right? It made us stand out. When it came time to think about what's the future of the business? Are we going to pursue and exit? Are we going to try and take another [00:38:00] sizable investment growth equity type? What, how do we wanna proceed? It gave us a lot of options and freedom because we had gotten to a cashflow positive place and had such a strong balance sheet that we could, you.
within reason choose our destiny to a degree, right? Yeah. You ultimately, need to have a dance partner there. But thankfully, we had set ourselves up for success by doing a lot of the hard stuff early. Some of those years in there felt like we were wandering the wilderness a bit.
It's will we ever get to profitability? Can we ever create cash flow? There were some dark moments where it's goodness, this is a multi-year journey. But thankfully we had a lot of really committed employees and team members that phenomenally talented, that enabled us to get there.
Ben Tregoe: That's awesome. That's awesome. I think that's a great place to end too. Thank you so much, Dave. And I hope we'll come back and do part two the exit. .
Dave Wardell: Yeah. Perhaps I [00:39:00] got I'll have to figure out with that, with the powers that be about about what can be disclosed versus not. But but yeah that would be great and really enjoyed the time today.
So thanks, Ben.