EP. 17 - Jeremy Cai - Reinventing For Luxury for New Generation

✅ Hey guys! Enjoy this EPIC interview w/ My good Friend, Jeremy Cai ! Jeremy takes us all the way back to his early days as entrepreneurs and shares with us his backstory which ultimately shaped his career and his future!🙌 Jeremy shares TONS of gems in this one! What is your favorite lesson from this interview?! Let us know in the comment section below!

TRANSCRIPT

[00:00:00] Welcome everyone to the take care of podcasts. Today's guest is Jeremy Chi. CEO of metallic. Atellica is disrupting. The luxury market to make it more affordable and approachable for everyone .

[00:00:15] Rishi Sharma: [00:00:15] welcome Jeremy, happy to have you on the take care podcast.

[00:00:20] Jeremy Cai: [00:00:20] Hey, thanks so much for the invite. It's great to be here. Yeah, it's

[00:00:23] Rishi Sharma: [00:00:23] real. It's a real pleasure to have you here as somebody who is also an active user of a tower to have the CEO here, talk about their journey and the brand itself is great.

[00:00:36] So maybe you could just start the audience, give them brief summary on your backstory that led you to the point of creating a Taluk and the Genesis of that idea.

[00:00:47] Jeremy Cai: [00:00:47] Sure. I have your classic stereotypical tech backgrounds, I grew up in the Midwest. I I, went to school out East and then I dropped out, read December the scare and started a tech company and, did that whole thing.

[00:01:01] But I think the, background with, italic was that, first of all, I think when you drop out and start a business, you really ought to enjoy what you're doing. I started an HR tech company and frankly, I don't think any kid drops out of school too. Work on selling enterprise HR software.

[00:01:19] I got I think four or five years and I was pretty tired of it. I'm still on great terms with the company my co-founder and I have that come near very close, but I think for me, I wanted to work on something that was much closer to what I was passionate about. My parents come from the manufacturing world.

[00:01:36] They've been in it for 40, 50 years now. And I think the longer you spend working in manufacturing, the more you realize how backwards and antiquated the entire of the industry is. Manufacturers are they're producing the final products, but they're oftentimes making maybe four to 5% of the final retail price of what the consumer base and in doing so a customer is really paying for the brand or retail price.

[00:02:02] Or, sorry, they're paying for a brand or a retailer is markup on all the price points. So I think the Genesis really came from the idea of taking a technology point of view, learning from a lot of the great marketplaces that had started around the same time as I was starting my first company.

[00:02:18] This is like when we were in an Airbnb, really hit their stride. And I think learning a lot about the marketplace principles and applying that to a very, offline world of manufacturing and, consumer goods. So that's really the Genesis for it. Nice.

[00:02:38] Rishi Sharma: [00:02:38] Nice. And we're abouts.

[00:02:42] Is there any particular regions that you look for your, goods from based on your parents' background and whatnot? Is it primarily in Asia as a Europe? Is it a combination and a mixture of all.

[00:02:55] Jeremy Cai: [00:02:55] Yeah, sure. So we have manufacturers in Europe, Asia, and the U S right now generally when we're sourcing our products, we try to find the best possible manufacturer for a specific category.

[00:03:07] So for example, at luggage, that's most likely in China water bottles, that's most likely in China. But when we're talking about things like leather goods, sometimes we'll look at Italy. Our sneakers are in Portugal. Some of our apparel is in the us. So we really try to take a agnostic. We try not to buy ourselves by saying Hey, we'll never manufactured X, Y, Z, but instead, try to find the best possible manufacture for the category and really, vet them by saying who have you produced for the past?

[00:03:35] What certifications do you have? Know what employee count, like how old is the business, et cetera. Just to make sure that Hey, we're partnering with people who really want to be in business with our relationship with our manufacturers to jump ahead a little bit is not the standard relationship in which we're simply placing purchase orders and there a vendor who, whom we'll, go to every couple of months.

[00:03:59] Our manufacturers are really close financial partners in which they're actually taking on humans, very risk of their own. So it's very different than a standard brand or a retailer relationship. So I think we really care about finding partners that are reliable oftentimes that isn't China but also partners that are really focused on producing high quality goods regardless of what the category is.

[00:04:20] Rishi Sharma: [00:04:20] So if just curious question, if they are taking a piece of. The inventory risk. Are they also getting a piece of the upside also? Is that how you wind them on? Okay.

[00:04:30] Jeremy Cai: [00:04:30] Exactly. That's the that's the model. So manufacturers typically will make maybe 15 to 25% on a good day of a, bulk order that would, they would receive from them a brand.

[00:04:42] And and then when a brand buys that obviously they're in, apparel, it might be five bucks in skincare might be 10 X. It's a pretty hefty markup. That's baked into these bike margins. And and when it comes to the final sale and manufacturer rolling, make a fraction of what the brand does in the real reason is because their brand is taking inventory risk.

[00:05:00] And same in the retail distribution line, the retailers buying your reserve from a brand, maybe with Keystone pricing and. They're splitting the profit, but really the risk is on the retailer by then because they're taking the inventory risk. So if a manufacturer wanted to take inventory risk by any means possible, right now, there's really no ways to do it.

[00:05:17] They would either have set up their own brand, which is clearly not in the competency of a manufacturer, trying to distribute on Amazon where quality frankly is. It's very hard to differentiate. Since most things are commoditized by then it's a, really what I call our telecast. We call it like more of a private label as a service.

[00:05:34] In which we only work with really high quality manufacturers. We try to find the same ones as the top brands in the category. We'll use the same quality of material, but because we're actually empowering them to have a direct line of distribution, we're trying to triple more. So double the triple their profit margins, which is still a very small amount for what it's worth compared to a brand price.

[00:05:55] But in doing so they're increasing the yield of their production capacity. By taking the rest of themselves and having a direct line of distribution. Yeah.

[00:06:03] Rishi Sharma: [00:06:03] And it also makes your supply chain a lot more efficient if they know they have some risks and some upside they're going to prioritize potentially your orders over somebody else, potentially supply chain.

[00:06:15] So

[00:06:16] Jeremy Cai: [00:06:16] exactly.

[00:06:17] Rishi Sharma: [00:06:17] So that's that on a company that's dependent on Through a membership, it dependent on reliability and goods being in stock on a regular basis because they're paying to be a part of a network or a community. It's a very important, it's a very clever way of putting it together.

[00:06:37] So let's take it back to when you took the jump thinking with your co-founder for the HR software. What were the, valuation that you took as someone who was taking that leap of faith into entrepreneurship? What were the factors that you consider to take it? And so if somebody else is also considering taking that leap

[00:06:58] Jeremy Cai: [00:06:58] right now the, I think the biggest it doesn't it, hasn't been that many years.

[00:07:07] We started the company in like the winter of 2014 and but even in the span of five, six years now it's the world's changed a lot, I think in many ways Actually on in terms of valuation. I had a friend recently who raised up a really sizable series B I think like a quarter billion dollar valuation, and they were doing the same monthly recurring revenue as we were, when we raised our seed round in 2014 for fountain, which was my first company.

[00:07:35] I think Valid valuations are always a tricky thing. Cause I think if you're young, you don't know better and 20% doesn't seem like that much because you're like, you still own 80, but you know that the dilution really does add up. I think in terms of your, first time, yeah.

[00:07:50] There's a lot of really bad advice online. I think you, should try to find a network of people who you can actually trust of founders. Who've been there before. I think if you can find someone who has been down your path, but maybe three years in the future and and they're willing to take a chance on you and help you out through some of these things, whether they're investing, advising, whatever it is.

[00:08:12] If you're if, they're advising, by the way, don't give them we're talking to 0.1, five to 0.2%, of equity don't do a lot of, I think first time founders will, they would try to do one, two, three, four, 5%. It really is. If you're building a venture business, like that's really not a smart move.

[00:08:31] But I think if you can find someone like that to really be your champion and make those interests for you talk through these, deals. Fundraising is like a, I think a very opaque process that I think you really have to go through a couple of times to understand how to do it the right way.

[00:08:44] Otherwise realistically, a venture capitalist like job is to obviously be supporting the founder, but also to be better at getting the best possible, like ownership position for the least amount of capital. I think I could talk about valuations all day, but I think with, fountain specifically, I think we we actually had.

[00:09:02] Threes, like it was, a pretty complex early, financing history. And frankly it's because we didn't know any better. We did the, we did a seed round on a price. We did a safe round several safe rounds and it, became, it got to a point where we're like, okay, Even to a very sophisticated council, it was unclear as to who owned what, because there's convertibles hadn't converted a price yet.

[00:09:27] I think the earlier you can set yourself up for a clean cap table with, good people on board. The better you're setting yourself up for success later.

[00:09:36] Rishi Sharma: [00:09:36] Oh, that's crucial. I think great advice for somebody that's starting a new fund funded company. I want to get back to a Taluk.

[00:09:45] What is, what was that unique insight that you, and then you mentioned you saw antiquated nature in the manufacturing industry, but there must've been some event, some moment that sparked or a series of moments that spark that idea, if you could just delve into that a little bit.

[00:10:02] Jeremy Cai: [00:10:02] Oh yeah.

[00:10:06] I think the, I don't think there's like a single. Point where it was like, Hey, that's the, what started at all? I think it was a continuation of I was I think a good way to put it as around the same time as we were thinking about the idea for italic. I think a lot of the second generation of direct to consumer brands have had, come out people call them DTC brands, digitally native, vertical, whatever the term is like these yeah.

[00:10:33] To me, they're actually just brands. They're not tech companies whatsoever, but they're raising value rounds, evaluations. That would be 10 20, sometimes 30 X top line revenues, which to a, to an investor who has spent any time in retail. That makes no sense whatsoever. But but I think the around that same time I think there was a, an interesting.

[00:10:55] I guess on the consumer side, there's an interesting trend where, you know, the first generation of direct to consumer brands this is like the war BS ever lanes Banabos is they, had this common phrase, which was we're cutting out the middleman. And I think at the time it was actually true, they were cutting out the retailer and and instead they were spending that same amount of margin, frankly, on Facebook and Google. And the price points like, yes, they might've been slightly cheaper for a customer, but they weren't like drastically cheaper, but it was directly to your doorstep, which I think was just different.

[00:11:24] I think that original narrative, which I think was really exciting and, I think could have been taken to a logical conclusion of cutting out consecutive middlemen as, the technology to became stronger. I think actually worked in many ways in which like around the 2014 to 2018 era of what I call the secondary of like direct consumer brands, they really weren't even talking about that at all.

[00:11:47] It was just like, Hey, we're building a brand online. And it's oftentimes a couple MBAs who like, have this idea to sell a product online. Cause there's great margins on it or whatever have you. And I think the if you, look at that trend from a manufacturing point of view it doesn't matter if the brand, if your clients are traditional like a legacy brand or a retailer, it doesn't matter if they're wholesalers doesn't matter if they're a new brand, like a modern online brand they're your margins are the same either way.

[00:12:17] And you get screwed out of the upside, whatever way you turn it, doesn't matter. So I think I think the idea for the consumer side was, Hey, like these people are unknowingly paying really high multiples on cost of products that like actually don't cost that much to, produce.

[00:12:36] And then on the flip side for supply. They really are, not able to access the actual upside of the product that they're themselves are producing. So, I think there's a combination of Hey, a lot of these brands are popping up raising, like eye-popping multiples. And and, I think on the to a customer I think there's a lot of value driven customers out there who are really the appeal is these are nice things that are sold.

[00:13:01] You're online with a nice brand on it. But like frankly, the actual cost of, these products is not that high. And then on the flip side for supply, it's really just how do we empower the manufacturers to, like basically own their own destiny by controlling their own product lines putting in their own money into inventory and, hopefully getting returned out of it.

[00:13:24] Thank you

[00:13:24] Rishi Sharma: [00:13:24] for breaking that down. So just the next logical step in the conversation is how do you decide, like what product lines to launch, what products to launch, what categories launch, what's the process that you go through to, as you develop these new categories.

[00:13:43] Jeremy Cai: [00:13:43] Yeah. We, take I think, there's we do two things.

[00:13:50] One is like very quantitative. One is qualitative qualitatively it's very simple. We'd have a lens of which if we look at a menu, if we look at a category, is it a category that is sufficiently high margin? Are we talking like five, 10, 15 bucks markups, classically across the industry?

[00:14:08] Is it something that has maturity online? We don't want to be the first people selling something online. I think that's not our competency. And then. And then lastly, it's we don't want to take anything logistically complex, so we don't want to be shipping perishables. We don't want, reshipping like very large items.

[00:14:26] We, want the sweet spot of like small to medium sized products. So that's just qualitative. I think there's more in there, but generally that's how we view the categories when they're submitted. And then the qual, the quantitative side, I think is, much more I think it's actually much easier to arrive at conclusions as to what's what, is going to sell well on one hand we constantly survey our, both customers, as well as non-customers.

[00:14:52] So on the customer standpoint we'll, be asking like, what do you, what products are we missing? What can we do better? And, that every brand in the world asks you that. But I think like very few actually put that into practice. We have a weekly cadence of actually reviewing these requests.

[00:15:07] On that end, we'll look at products where we believe by introducing that category or product, it will improve our ability to retain our customers and members and, basically by giving them what they asked for quite literally. And then on the flip side a lot of people don't convert into members today because.

[00:15:26] We're missing X, Y, Z. So for example, I live in Utah and a lot of the people here are really into outdoor products. And frankly, it was people who are really outdoors enthusiasts. They probably won't be a good fit for our current cat catalog. Cause we have like quality goods, luxury goods, apparel, accessory a lot of casualty products, but we don't cover a lot of outdoor centrals.

[00:15:46] I think if those people ask us like, Hey, can you make these things for us? Then we know that if we introduce these categories, we believe we'll have an incremental lift in our ability to convert net new members. Really I think we, take we know we're not like artists here where we're, obviously there's a level of art that goes into the design and and, curation of, what we believe it will do well.

[00:16:09] But at the end of the day we're, in the business of listening to what our customers want from us. Okay.

[00:16:15] Rishi Sharma: [00:16:15] And How do you know when you launch a product, how often are you reiterating on that product based on consumer feedback? Not how often does that occur?

[00:16:32] Jeremy Cai: [00:16:32] Yeah, we we iterate based off of reviews both from real customers, as well as just kind of internal decisions to improve products where we see fit.

[00:16:46] This happens on a lot of different products, actually, for example our, bedding originally our dovey covers didn't come with ties and very quickly realized, Hey, if we need to add those ties in. So we were able to work with our manufacturer to prioritize a second run where that was introduced our backpacks We've improved the the, pocket positions our shoes, the sizing was, not great the first time around.

[00:17:09] So the second and third runs we were able to fix that our down comfort, like an example in a transparent, like the challenge we have right now is our down alternative. Pillows there isn't enough Philly the fill power isn't strong enough. So it doesn't support your neck when you sleep enough.

[00:17:26] For many customers, that's not all we've seen this happen. Our return rater, I think relative to the rest of the industry is still really low. We generally fluctuate between three to 10% on average per month, but. I think generally what we really are seeking is constant very fast feedback loop.

[00:17:47] And also because we're our manufacturers literal money is on the line. They tend to prioritize those fixes as quickly as possible.

[00:17:56] Rishi Sharma: [00:17:56] Thank you for bringing it down. So let's take it back to a previous comment you made mention once before the second generation of DTC brands where two MBA students would just come out and launch whatever product at the high margin.

[00:18:09] Obviously that's led to a very crowded space with a lot of brands. How did you go about establishing. The value, obviously have a great value proposition with the top, with the talent, but how'd you go about standing out from all the various other brands that are marketing and using similar channels as

[00:18:29] Jeremy Cai: [00:18:29] iTalk.

[00:18:31] Yeah. And just to clarify one thing, even though I do think that is oftentimes the case where two business students will get together and say Hey, wouldn't be this when this is such a good idea to sell online. And there's nothing wrong with that. I think that's how brands have started for, decades at this point.

[00:18:46] And, I think that's still a healthy business. I'll be it oftentimes not venture backable. I think in terms of how we differentiate really? It's just a and quite frankly, like we haven't spent a lot on, marketing quite yet. I think we have, we've been relatively conservative with this front, but generally what we're really thinking about is how do we do more brand education?

[00:19:12] This is not simply saying Hey, we sell XYZ online. But there's a lot more that goes into it. So for example, how do we inform a customer, you're shopping straight from the source and the source being the manufacturer is actually trustworthy. You can do that through typography.

[00:19:26] You can do that with great Design and creative, but generally, like you have to come off a certain level of Polish for people to trust you. I think same with the whole concept of Hey, this is the same manufacturers, XYZ brands. That's obviously something that I think some people really like, because they have a strong affinity.

[00:19:44] Affinity, concern, certain brands that they see Hey if you buy our water bottle, which is made by the same infection, it's like hydroflasks and and and swell and, so on. But ours is 60% lower prices than I think there's a lot of that can't be right.

[00:20:03] Like this is too good to be true. So there's a lot more that I think like we have to do in terms of education and that comes in the form like CRM the entire life cycle side of the, marketing stack. But yeah, I think we're, still figuring out I, can't say where we're the best at that.

[00:20:20] Rishi Sharma: [00:20:20] Yeah. Yeah, I think it's a journey of a, business is to start off small develop understanding of your customer's cadence. And then. Build brand a brand through what your customer's experiences word of mouth is still the greatest champion in marketing. So I'm just going to take it down to one last question, before we get to the final questions.

[00:20:42] So what's next for what's the, what do you hope it to be over the next several years to come.

[00:20:49] Jeremy Cai: [00:20:49] Yeah. So right now we're really trying to build the flywheel model in which the more customers we have, the more leverage we have against manufacturers to convince them to join our platform. And the more manufacturers we have, the more products we have to attract both retain our current customers as well as attract new customers.

[00:21:04] So yeah, I think really it's it sounds very basic, but it's like, how do we get into categories that we're currently not in? So for example, we just We just introduced like weights which certainly have nothing to do with like cashmere sweaters. The more we introduce, hopefully the more share of mind and share of wallet we would have of our existing customers.

[00:21:26] And then I think on the flip side the more customers you have, the more I think interesting things we can do for them. So think of things, not just in the form of products, but even things like services that Once you hit a critical mass of of, members. I think you can offer such as like credit cards, financial services, et cetera.

[00:21:44] I think that's going to take us a long time I, wish it was an overnight thing, but there's a lot of just when you deal with physical products, it's just like a much. Slower timescale than I think what software development has. It'll just take, I think, several years to develop that, skew count where we'll, be in a good place, but that's probably where, we'll be in the next couple of years.

[00:22:07] Rishi Sharma: [00:22:07] Great. Great. So just final questions. So just like to break down your routine, what's your daily routine and the rituals or practices that you guys do on a constant. You do on a constant basis?

[00:22:22] Jeremy Cai: [00:22:22] I can say with certainty that I I'm I've, I'm very bad at building habits and routines.

[00:22:30] Some weeks I'll wake up really early and sleep late some weeks. I'll I'll, be not so great about sleep and I'll sleep in way too later or what have you, or stay up way too late. I, think a lot of people on Twitter or Silicon Valley have this like ethos of Hey, I have this like perfected regimen down to the minute.

[00:22:51] And I think that's always baloney. I think most people have like lives outside of work that I think Or really I guess the best way to put it is unpredictable. So I think I've been very bad about building habits. There are things that I think are really helpful for work, for example.

[00:23:09] I think like playing, sports and I try to play tennis or go skiing here in Utah or or reading or everyone has their own like thing. Thing too, I'm online. But I think I'm probably the worst person to ask about having a set routine.

[00:23:29] Rishi Sharma: [00:23:29] Everybody has their own way of doing it. Some people more regimented, some non roar, more for laser free. So that's great. So let's move on to the next question. What's the nicest, some somebody has done for you as nicest thing somebody has done for you.

[00:23:50] Jeremy Cai: [00:23:50] I think so many people have done so many nice things for me, but I think one of the, probably one of the nice things that Yeah. I have to, this is such a stereotypical answer. Like my parents are immigrants. The nicest thing they ever could have done for me is just gimme that a great place to grow up in and pay for my education so that I don't have college debt and I dropped out, so I helped them in that way.

[00:24:17] But no I, was trying to come up with something that was smart, but really it's I can't debate that being the nicest thing.

[00:24:24] Rishi Sharma: [00:24:24] Yeah, no, I can relate to that. I would say if I was answering the same question myself, I would say the exact same answer. I definitely, relate to that.

[00:24:35] What does personal care mean to you?

[00:24:43] Jeremy Cai: [00:24:43] I don't, I feel like I don't have anything insightful to say besides like taking care of your mind and your body and for those to believe it's spirit as well. I think that's I'm also very bad at that. So I'm not the best at taking care of myself all the time.

[00:24:59] I think founders will, say I have a therapist and I have three coaches and I have this, but realistically, I think you gotta do what you gotta do. So I think that's what it means to me, but I also know I'm not good at it.

[00:25:12] Rishi Sharma: [00:25:12] Yeah it's always a building process as we get older.

[00:25:16] If anybody wanted to reach out to you and connect with you and follow the journey what's the best way to connect with

[00:25:26] Jeremy Cai: [00:25:26] you guys.

[00:25:27] Yeah. I always recommend following on, Instagram and Twitter, that's at italic or my personal is J Jeremy Kai with the next Virginia in front. Or if anyone has any specific questions or things to ask about I met Jeremy at

[00:25:45] Rishi Sharma: [00:25:45] all right. Sounds great. Great.


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