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- [00:00]
Guy Raz
Wondery subscribers can listen to How I Built this early and ad free right now. Join Wondery in the Wondery app or on Apple Podcasts. Audible's best of 2024 picks are here. Discover the year's top audiobooks, podcasts and originals in all your favorite genres, from memoirs and sci fi to mysteries and thrillers, from romance and well being to fiction. Audible's carefully curated list in every category is the best way to hear 20 best of the Year in audio entertainment. Like an almost unbelievably star studded production of George Orwell's 1984, which both honors and invigorates the terrifying classic, it's one of the best original dramatizations we've ever heard. Or check out romance that hits the spot like Emily Henry's Funny Story. You can also find heartfelt memoirs like Supreme Court Justice Ketanji Brown Jackson's Lovely One and listen to the year's best fiction like the Women by Kristin Hannah and Percival Everett's brilliant, brilliantly subversive James Right now I'm listening to Profit Song by Paul Lynch Audible there's more to imagine when you listen. Go to audible.combilt and discover all the year's best waiting for you. If you've been listening to me for a while, you know that I am really interested in fitness and eating the right foods. And for the past year, the single biggest game changer for me has been a biowearable called Lingo. Basically, it's a little device that you stick onto the back of your arm to measure your body's glucose levels to see how your body responds to food and learn what you can do to improve your metabolism. Try Lingo. It starts at $49 for a two week plan, no prescription needed for a limited time. Save 10% on your first order by visiting helolingo.com and using the code HIBT at checkout. The lingo glucose system is for users 18 years and older, not on insulin. It is not intended for diagnosis of diseases, including diabetes. For more information please visit hello lingo.com us and now a word from our sponsors at Betterment do you want your money to be motivated? Do you want your money to rise and grind? Do you think your money should get up and work? Don't worry, Betterment is here to help. Betterment is the automated investing and savings app that makes your money hustle. Their automated technology is built to help maximize returns, meaning when you invest. With Betterment, your money can auto adjust as you get closer to your goal, rebalance if your portfolio gets too far out of line and your dividends are automatically reinvested, that can increase the potential for compound returns. In other words, your money is working like a dog. While you can be sleeping like one and snoring like one too. You'll never picture your money the same way again. Betterment the automated investing and savings app that makes your money hustle. Visit betterment.com to get started. Investing involves risk. Performance is not guaranteed. This episode is brought to you by Klaviyo. Klaviyo helps you build smarter digital relationships with your customers with its unified data and marketing platform featuring email, SMS reviews, and more. Make every moment count with Klaviyo. Learn more@klavi o.com hello and welcome to the advice line on How I Built this Lab. I'm Guy Raz. This is the place where we help try to solve your business challenges. Each week I'm joined by a legendary founder, a former guest on the show who will help me try to help you. And if you're building something and you need advice, give us a call and you just might be the next guest on the show. Our number is 1-800-433-1298. Send us a 1 minute message that tells us about your business and the issues or questions that you'd like help with. You can also send us a voice memo@hibtid.wondery.com and make sure to tell us how to reach you. And also, don't forget to sign up for my newsletter. It's full of insights and ideas from the world's greatest entrepreneurs. You can sign up for@guyraz.com and we'll put all this info in the podcast description. All right, let's get to it.
- [04:35]
Mark Lore
Joining me this week is Mark Lore, a one time bobsled champion and also the founder of Diapers.com, jet.com and Wonder Mark. Welcome back to How I Built this.
- [04:47]
Thank you Guy. It's great to be here.
- [04:49]
So you were first on the show back in 2021 and we of course heard about how you founded Diapers.com and then Jet.com and if I remember, you got the idea for Diapers.com back in the early 2000s when you had young kids and even though margins on diapers were pretty razor thin, I think at one point, I remember an investor had said to you you were selling a dollar for 90 cents. You ended up getting acquired by Amazon for over half a billion dollars in 2010, which was an amazing but also I think you had sort of Mixed feelings about that acquisition of that end at the time.
- [05:30]
I did, I did. We had a big vision for what we wanted to accomplish and it was cut short. So, yeah, I mean, you would think after a sale like that, we made obviously a lot of money, me and my co founder, but we said, do you want to celebrate? You want to go grab a drink to celebrate this? And we're like, nah. I'm like, yeah. I mean, no, I don't want to either. So it shows you what it is to be a missionary versus a mercenary. You know, it was not about the money. It was about, okay, the dream is basically dead now, you know, and that was sad.
- [06:05]
And for those who remember the episode you went on to take on Amazon after that happened, you launched another online shopping platform called Jet.com, which then sold to Walmart for over $3 billion four years later. And these were just amazing pivots in both of these stories along the way and well worth listening to. Somebody actually asked me recently, I and spoke at a conference and somebody said, name five of just off the top of your head of the best entrepreneurs. And Mark, you were on that list. No question that I interviewed that in all the 700 episodes of the show. You are right. You are absolutely on that list before we get to our callers because you are going to help us answer questions from early stage founders today, which is super exciting. So when you actually came back onto how I built this, I think maybe a year and a half ago, you were at the time we're launching about to launch Wonder, which it was going to be a business where trucks, like food trucks with full kitchens inside would come out, you'd order food, the truck would pull up in front of your house and make like a perfect, you know, medium rare steak and perfect crisp french fries and delivered to your door from the truck. That has changed a little bit. Tell me what Wonder where Wonder is now and what it will be.
- [07:26]
Yeah, so you're right. It was out of a Mercedes spinner van, so very small space. We had one piece of electric equipment and the driver had to cook. And we innovated for a couple of years trying to figure out how do you cook a steak in six minutes to perfect temp in one piece of electric cooking equipment where the driver has to do it fast.
- [07:47]
And you developed all this equipment and all kinds of cool things for this?
- [07:52]
Yeah, we, I mean we invested a ton in culinary engineering, food science and tech to be able to do that on the truck. And then at some point we tested a Brick and mortar. Because we realized that we can put 30 different restaurants in a 2,800 square foot kitchen with the same two pieces of electric cooking equipment and no hoods, no gas, no chefs. And we thought, wow, that's going to be able to be an incredible offering where consumers can order from multiple restaurants in a single delivery. So we switched to that model. So it is a brick and mortar, like a fast casual sort of restaurant where you can sit down and eat, there's maybe 10 seats and then pick up and delivery. So they are located right in the heart of where people live. And we set a really tight six minute delivery radius. So you're getting the food fast, hot, really high quality and of course, multi restaurant.
- [08:42]
Guy Raz
Was it hard to make that pivot?
- [08:44]
Mark Lore
Did it take you a long time to kind of say, you know what, I'm going to let go of this thing and focus it, focus on this part of it?
- [08:51]
Yeah, I think this is what advice I always try to give entrepreneurs. But it's sort of, you have to be truly objective about what the risk of the status quo is because people, it's easy to see how risky it is to make a change because there's unknown and people define risk as the unknown. Whereas the status quo doesn't feel as risky because you're kind of doing it now. It doesn't feel risky to just keep doing what you're doing. But I recognize being objective that if we just kept doing what we were doing, that was extremely risky. So it made the decision to move into brick and mortar very easy. Even though it meant going into the board meeting and telling the board, 450 trucks on the road and 30 million in revenue, we're going to take that to zero. We're selling the trucks, we'll take revenue to zero. But being able to have conviction and know that it's still the smart decision and that the brick and mortar had much bigger profitability potential, higher return on capital, like all the things that you would want. Plus for the customer, it unlocked multi restaurant ordering. Better on time delivery. The way I think about it is you have to have the mentality that you start off a startup and you're sort of digging for silver, but you got to be on the lookout for gold all the time and you might just see gold and when you see it, you got to go for it. And it doesn't matter what egg on your face, it doesn't matter money you lost, everything's a sunk cost. It doesn't matter what you told the board, what you told the press, what you told employees you have to go after the gold.
- [10:27]
Yeah. Mark, why don't we go ahead and bring in our first caller?
- [10:31]
Okay, great.
- [10:32]
Guy Raz
Hello.
- [10:32]
Mark Lore
Hello, caller. Welcome to the advice line on how I built this. You were on with Mark Lore. Please tell us your name, where you're calling from, and just a little bit about your business.
- [10:42]
Ben Bailey
Hey, guy. And Mark, my name is Ben Bailey. I'm the founder of Chomp Chocolate in Salem, Oregon. We are a cocoa bean to bar chocolate factory, doing the whole process, and we make vegan milk chocolate for everybody.
- [10:53]
Mark Lore
Amazing. Ben, thank you for calling Chomp Chocolate. Okay, so you are a bean to bar chocolate, and that means that you manufacture the chocolate bars. Everything. You do everything yourself?
- [11:05]
Ben Bailey
Yeah, I actually built a chocolate factory and didn't know what I was doing, but figured it out piece by piece. And we do the whole process, from roasting the cocoa beans to packaging the bars in the factory, and we do oat milk chocolate bars, peanut butter cups, and then we just did a pivot to build your own chocolate bar. Kind of like a build a bear workshop, only for chocolate.
- [11:28]
Guy Raz
Wow.
- [11:29]
Mark Lore
Okay, cool. And you're in Salem, Oregon?
- [11:31]
Ben Bailey
Yes.
- [11:32]
Mark Lore
And tell me how you did this. I mean, you have a chocolate factory. There's machinery, it's expensive. Most people who start chocolate brands, they outsource it and they just kind of sell the chocolate. Right. They'll have the recipe. Tell me how you got into this.
- [11:52]
Ben Bailey
Long story. But keeping it short, I'm an entrepreneur, Mark. I sold basketball cards when I was 10 years old, went to all the card shows, sold candy to kids on the bus, took their lunch money, don't feel great about it, but learned some moral lessons, you know, mercenary versus missionary kind of stuff. Started two e Commerce companies in New York City. Very small exits. Took a little bit of time to get away from New York City and back to Oregon, my hometown. And growing up in a small, conservative farming community, I saw that a lot of things have changed in the environment. I came back to an orange sky because of the wildfires here on the west coast. And I also had a little bit of a confrontation with factory farming of animals. And it didn't really sit right with me. And I love chocolate. I have a sweet tooth. So I set out to create the best vegan milk chocolate replacement. So it's not a compromise for people when they have the choice between our chocolate and a traditional milk chocolate, that it's an easy switch for them. And yeah, so kind of a big overreaction. But I had sold two e Commerce Companies and put every single penny I had and then some into chomp.
- [13:03]
Guy Raz
Wow.
- [13:04]
Mark Lore
I'm curious. So can you give us a sense of how much it costs to buy that factory?
- [13:08]
Ben Bailey
So I put $700,000 in. This is everything I had. And that got us open. So basically from a concrete box rectangle, I kind of sat on the floor the first day, documented it on Instagram, and then learned everything from antimicrobial floors to shatterproof bulbs in the whole process, bought the equipment, a lot of ups and downs just to get open. And then we opened September 21st.
- [13:32]
Mark Lore
Okay. And so now you make chocolate bars and you sell. So first of all, I want to get to this other Build a Bear side to it, but do you sell chocolate bars to consumers or in stores?
- [13:43]
Ben Bailey
Yeah. So my wheelhouse is direct to consumer online. So that's kind of why I took the plunge into building a factory. And I knew I could kickstart the company with email marketing, paid advertising. So about 70% of our business is currently direct to consumer, and then about 30% is wholesale retail. We're in about 400 grocery stores.
- [14:02]
Mark Lore
Ish.
- [14:02]
Ben Bailey
Right now. But yeah, we did $400,000 the first year we opened and then 750,000 last year. And this year we're set to do a million dollars. And 70% of that's coming from E Commerce. So.
- [14:18]
Mark Lore
Wow. And so you. And now tell me about this Build a bear model here. You can build your own chocolate bar.
- [14:25]
Ben Bailey
Yeah. So back in March, Cocoa bean prices just went through the roof. 70% of the world's chocolate comes from West Africa. We actually don't buy from that region because of some ethic issues. But a lot of the bigger companies that usually buy in West Africa, they had crop failures, so which drove the prices up. So we had done something at the chocolate factory a year before where we invited the community to come through the factory and build their own chocolate bar. There's nothing like it. It's so much fun. You get to pick all your mix ins, you get to name your bar, choose your wrapper. And I thought, what if we could take that online? And went on a deep dive through Build a Bear Workshop's business model. And they do it online too, and actually performs very well. And so now you can go on our website. And we found a way to kind of like, you know, offset the margins we lost during the cocoa bean crisis. Until either, hey, maybe this is a permanent pivot we take, or maybe we go back to the other stuff, or maybe kind of a combination of both.
- [15:25]
Mark Lore
That's cool. I'm looking at your website now and I kind of want to do like a gummy Swedish fish chocolate bar. It sounds really delicious actually. I think it'd be like that chewiness. All right, and tell us, what's your question? What question have you brought for us today?
- [15:38]
Ben Bailey
Yeah, so my question is, you know, this is definitely my mission era of my life with this company and my initial goal was to get this out into grocery and retail. And that's proved to be a super crazy challenge, especially doing the whole process and not using the co packer since we are, you know, doing, doing every part of the production and fulfillment and marketing in house. So I'm wondering if I should even if cocoa prices come back down, if we should continue and lead with this, build a bar model. It's doing really well and so I'm wondering what the best option for us to do is.
- [16:19]
Mark Lore
All right, let me bring in Mark Lore. Mark, you don't have to answer Ben's question just yet. You may have questions of your own, but please, let's bring you in.
- [16:28]
Yeah, sure, sure. I do have a couple questions. Nice to meet you, Ben. Very cool what you've built. I'll have to try it out. Who is your primary competition in sort of the vegan chocolate bars? How do your costs compare?
- [16:44]
Ben Bailey
Yeah, our primary competition I'd actually say now is mainstream chocolate because like some of the bigger companies launch plant based versions of their chocolate.
- [16:54]
Mark Lore
Is unreal.
- [16:55]
Ben Bailey
A competitor I would say unreal is they're not strictly vegan though. So we're like, I think we're one of the primary only vegan companies which I'm not sure how much of a difference that makes to people. What we've noticed with distribution is taking a chance on a smaller company. Even if our quality in my opinion and our taste is better and we have more of a special process, they're still only going to carry the big companies that put out that version, like Hershey's.
- [17:22]
Mark Lore
Even Hershey's does an oat milk.
- [17:25]
Ben Bailey
They do, yeah, they put out a little bit after we launched. Our peanut butter cups are the, the bestseller for us and they launch plant based releases too. We've also had to say no to a lot of big stores, like over 2,000 stores in the last year because I have the factory and the production equipment and technically we could produce more chocolate. But funding another crew and then the purchase orders that are 30 to net 30 to net 90 is just really difficult. And we're doing our own fulfillment too. And it's been. I've raised a little bit of money, friends and family but I feel like Build a Bar might be a way to have this higher margin model that funds the backside of the business and we can kind of take control of our own destiny. Being primarily an E commerce business.
- [18:10]
Mark Lore
Yeah, I personally Ben, just hearing your whole story, I mean it's going to be difficult I think to compete on a commodity basis. Doing it yourself, it's going to require a lot of capital. I know I'm pretty close with some of the big manufacturers and they've invested hundreds of millions if not billions of dollars in plant and equipment to get the cost down. And I'm not sure just the sort of the higher quality on a commodity basis that people are going to pay that much extra to get vegan chocolate. I think the way you're set up though, you can do what no one else can do. There's no way a big company can do the sort of build a bear type approach in chocolate. And so you could really own that market and you have the ability to be so much more flexible and your system's built for flexibility and that flexibility will give you margin, pricing power and people will pay for it. It's gift I think the market for build a Bear chocolate is still massive if you owned it. So if I were you I would push that hard and see how big you can get it and then you could always move into other areas if you start to tap out. But I think you've got a long Runway there personally.
- [19:27]
Essentially customization I should mention when you build the bar you get a customized label. You can put your name on it, you can do all that stuff.
- [19:35]
Incredible, incredible gift.
- [19:37]
Ben Bailey
A lot of business to business opportunities too we've seen and Mark, I think you're right, you know, competing with this commodity level like and I think I know guys talked about this too is you kind of find out what consumers care about or at least what they're willing to pay for. And unfortunately some of these mission based things and I don't blame the consumer but they don't really matter as much as you initially think they do. So I think build a bar is kind of my way to almost kind of go into the back door and build a brand that's really fun. Maybe even open physical locations where you get to go build a chocolate bar and go to like yeah and like.
- [20:10]
Mark Lore
Yeah, a lot of there's a lot.
- [20:11]
Ben Bailey
Of experiences with your family and maybe there's other experiences you have when you walk into a chomp ville you know.
- [20:17]
Mark Lore
Yeah, Wedding favors, showers, things. I mean, just like you could think of a customization in chocolate and possibilities there.
- [20:27]
I guess what, what I think is, is interesting is I think you're right, Ben, that, that consumers don't really care so much about, you know, you know, where you're sourcing it from and the mission. And unfortunately, you know, they're not going to care if you're buying ethical. Some people will, but most people don't. But I do think what they would care about is the fact that you're doing everything. You're buying these virgin beans, you're roasting them, you control the process, you're grinding them, you're using your ingredients. I think you should push that a little bit more, especially on your website. I think that knowing that level of quality does matter to a consumer, they might not care so much about the ethics right now. I don't, you know, some people do, but I do think the quality people do care about it. They know that that's what differentiates you. Aside from the fact that it's customizable, that you really are doing everything in this process to bring consumers the best tasting chocolate bar. That's something that I think would be interesting.
- [21:29]
Yeah, I agree there. I agree with you, guy. I also think being able to make a case that you're sourcing literally the highest quality beans in the world and maybe even different grades, I mean, maybe even educating people the way they do with wine, you know, like where these grapes are from this very specific region of Oakville in Napa at this elevation and like almost the terroir of like the cocoa beans and literally charge some crazy price because of the exclusivity of it and make it almost like a beautiful box, a beautiful, you know, almost like Instead of giving $1,000 bottle of wine or really high end cigars, you're giving this like really high end multi hundred dollar pieces of chocolate and tell a story around that. I think there's something potentially there and again, you're uniquely positioned to do it.
- [22:24]
Ben Bailey
Yeah, I know. I think those are great ideas and I've always kind of thought about how my farming background ties into it as well. So I think, you know, chocolate is a lot like wine and it has terroir and it has a story too. And a lot of the beans we're buying are from small farmers as well because we're not buying these big commodity beans. So I think those are amazing ideas. I think there's a lot of untapped territory there. So. Yeah. Thanks Mark.
- [22:48]
Mark Lore
You're going to have to call Mark and ask him to tap you into all of his rich friends and then.
- [22:51]
Guy Raz
You can sell those bars.
- [22:52]
Ben Bailey
Sounds good.
- [22:54]
Mark Lore
Ben Bailey Chomp Chocolate Congrats man. Good luck.
- [22:57]
Ben Bailey
Thank you Guy thank you, Mark. Guy I've been listening since the beginning and thanks for getting me through two other businesses and hopefully number three, thank.
- [23:04]
Mark Lore
You so much for listening.
- [23:06]
Guy Raz
We're gonna take a quick break, but we'll be right back with another caller and another round of advice.
- [23:12]
Mark Lore
Stay with us.
- [23:12]
Guy Raz
I'm Guy Raz and you're listening to the advice line right here on How I Built this.
- [23:22]
Lindsey Shores
This podcast is brought to you by Squarespace. Squarespace is the all in one website platform for entrepreneurs to stand out and succeed online. Whether you're starting your own business or managing a growing brand, Squarespace makes it easy to create a one of a kind website, engage with your audience, and sell anything all in one place. You can create a completely personalized website with Squarespace's guided design system, Squarespace Blueprint choose from curated layout and styling options to build an online presence perfectly tailored to you and your business with Squarespace. Measure your end to end online performance with powerful website and seller analytics. Plus, Squarespace makes checkout seamless for your customers with their simple but powerful payment tools. I use Squarespace to build out my website guyraz.com and I love the way it turned out. Head to squarespace.com for a free trial and when you're ready to Launch, go to squarespace.com built to save 10% off your first purchase of a website or domain. What does the future hold for business? Ask nine experts and you'll get 10 answers. Rates will rise or fall. Inflation's up or down. Can someone please invent a crystal ball? Until then, over 40,000 businesses have future proofed their business with NetSuite by Oracle, the number one Cloud ERP bringing accounting, financial management, inventory and HR into one fluid platform with one unified business management suite. There's one source of truth giving you the visibility and control you need to make quick decisions. Whether your company is earning millions or even hundreds of millions, NetSuite helps you respond to immediate challenges and seize your biggest opportunities. Speaking of opportunity, download the CFO's guide to AI and machine learning at netsuite.com built the guide is free to you at netsuite.com Bilt netsuite.com Bilt who doesn't love saving money?
- [25:39]
Guy Raz
So when Mint Mobile said it was easy to get wireless for $15 a month with the purchase of a three month plan. I called them on it. Turns out it really is that easy to get wireless for $15 a month. Before Mint Mobile, I was paying hundreds of dollars a month for my family's cell phone plan. Not anymore with Mint Mobile. To get this new customer offer and your new three month premium wireless plan for just 15 bucks a month, go to mintmobile.combilt that's mintmobile.combilt cut your wireless bill to 15 bucks a month at mintmobile.combilt. $45 upfront payment required. Equivalent to $15 per month. New customers on first three month plan only. Speed slower above 40 gigabytes on unlimited plan. Additional taxes, fees and restrictions apply. See Mint Mobile for details. Welcome back to the advice line on.
- [26:45]
Mark Lore
How I built this lab. I'm Guy Raz and my guest today is Mark Lorre. He's the founder of Diapers.com, jet.com and wonder what do you say, Mark? Should we take another call? Sure.
- [26:56]
Caller.
- [26:57]
Hello. Welcome to the advice line. Please tell us your name, where you're calling from and a little bit about your business.
- [27:03]
Lindsey Shores
Hi, I'm Lindsey Shores. I'm calling from Salt Lake City, Utah. I'm the founder of Baby A Go Go, a company that provides and creates innovative baby products to make parent life easier on the go.
- [27:13]
Guy Raz
Cool.
- [27:14]
Mark Lore
All right. Well, welcome to the show Lindsay Baby A Gogo. Tell me what your products or products are. What do you sell?
- [27:21]
Lindsey Shores
Yeah, we currently have two products. We have a diaper kit that fits in your back pocket. It's a vacuum sealed compact diaper kit, has one diaper, five wipes and after usage, you wrap it back up, seal it up with a sticker provided on your wipes and it becomes an odor free sustainable bag. So easy way to stash in your purse or if you're in a public bathroom, a way to seal it up and make it a lot less gross. And then our other product is a magic wipe. It's a small disc that fits in your hand. It's an on the go wet wipe. And once you puncture the middle, it slowly grows into a full size wet wipe. So that's very useful for parents on the go and all consumers on the go. So if you're familiar with the do you remember those washcloths that you throw in like a tub of water and it expands? Yeah, similar to that, but it's a little more magical because it's very unexpected.
- [28:08]
Mark Lore
Wow. Okay, so these are like travel diapers and it's a one off, right? Because I remember my Kids are now teenagers, but we would always pack. I can't remember what they were, that there was different brands. We would pack the diapers in there. One or a few, few of them. And then the. There was a thin wet wipe. We'd put that in there and. Right. But there's not there. This is just everything in one simple package is one diaper, some wipes. So it's designed really for like, I guess if you're at the airport and your, your baby's just like pooped all over the place, you got to go to the bathroom.
- [28:41]
Lindsey Shores
Exactly.
- [28:42]
Mark Lore
Right?
- [28:42]
Lindsey Shores
Yeah, yeah, yeah. Do you like talking about the subject? I don't.
- [28:45]
Mark Lore
I love it. I love it.
- [28:48]
Lindsey Shores
Yeah. It's definitely. I know Mark's a big lover of diapers and the disasters and messes, number.
- [28:54]
Mark Lore
One and number two.
- [28:55]
Lindsey Shores
Yes, exactly.
- [28:58]
Mark Lore
I have to know how you, I mean, I have to know you came up with the idea because it's a great idea. And I love so much of, so much of how I built this is those moments where people are like, we have an episode about Larry and Lenny's protein cookies. And really these guys are bodybuilders. And one day they were like, I'm sick of chicken and egg whites. Like, can we put the chicken and egg whites in? That's how it started, you know? And then it got to $100 million business. How did you, how did you come up with this?
- [29:26]
Lindsey Shores
Yeah. So I was traveling a few years back with my family at the time. My youngest was 1 years old. And we went to a family resort, a beautiful, very family friendly place. I always pack diapers for two to three days and then get to the destination. Go stock up. No, no brainer. That's always how it works. So going to this destination, I thought, of course I'm going to find diapers. I was running out on day three of our day eight trip. And I searched and searched and searched the stores and nobody had anything accessible for babies or infants. Food, diapers, wipes, all this stuff. So my next best option was to take a half a day and go into town, take an Uber, pay the cost of that, leave my family. It was like, this is crazy. Then it hit me that there's multiple moments at malls. You're at the zoo, you're at the aquarium, you're at Disneyland, you're in all these places that you need these diaper kits that are not convenient. So I jokingly told my husband the end of that week of our trip that like, I can't believe this is such a huge Void in the market. I'm gonna start a business tomorrow and fix this. And I did.
- [30:30]
Mark Lore
That's awesome. And can you give us a sense of how you guys are doing right now? I mean, have you broken $100,000 in sales yet?
- [30:38]
Lindsey Shores
No, not necessarily, but we are definitely in the small startup phase. Very excited, though. I love the advice you guys have given.
- [30:44]
Guy Raz
Yeah. This is such a great idea.
- [30:45]
Mark Lore
Where are you selling these right now?
- [30:47]
Lindsey Shores
I'm selling these online. And then we just recently onboarded with Areas, which is one of the largest travel and hospitality companies globally. So we have. We're now in their airport stores as well as a bunch of their turnpikes.
- [31:01]
Mark Lore
How many of their airport stores?
- [31:03]
Lindsey Shores
6.
- [31:03]
Mark Lore
In. In which airports?
- [31:05]
Lindsey Shores
In Atlanta, which is the number one airport.
- [31:07]
Guy Raz
Oh, wow.
- [31:08]
Mark Lore
Cool.
- [31:08]
Lindsey Shores
Yeah.
- [31:09]
Mark Lore
What's your question for us today?
- [31:11]
Lindsey Shores
My question is there's always a really positive response when I'm speaking to retailers and buyers about these products. They're really excited about them. They immediately understand the need for them. But because they are new products in a new space, there's not much to compare it to. So my question is how to take the risk and build more credibility in an untested product market and get within the door without offering a discount or a testing phase that might not necessarily be the hook they need and could be a big loss for our company.
- [31:42]
Mark Lore
Okay. Marc, Lore, I think you know a few things about diapers.
- [31:47]
Ben Bailey
I do.
- [31:47]
Mark Lore
And retail as well. But is the margin structure in such a place that you feel good about, like, the retail selling price? Well, what is the retail selling price?
- [31:58]
Ben Bailey
Yes.
- [31:58]
Lindsey Shores
Yes. The retail selling price is 525.
- [32:01]
Mark Lore
It's a good price by 25.
- [32:03]
Lindsey Shores
Yeah.
- [32:03]
Mark Lore
Can you. Can you do it for 499?
- [32:06]
Lindsey Shores
It was 499 actually, about a year ago. And because of inflation, it's 525. But depending on who retailers we're talking to. Yeah. The 499 is still a possibility.
- [32:17]
Ben Bailey
Okay.
- [32:17]
Mark Lore
And you make good margin at that. I mean, have you made it. Have you offered it as returnable? And that's always protection for the retailer.
- [32:28]
Lindsey Shores
Yes. That's not something necessarily highlighted. So that's a great idea.
- [32:31]
Mark Lore
Yeah. I mean, that's the easiest is like, put it on the shelf, make it returnable, and, like, it's not the kind of thing that spoils. Right. So they return it to you. You just sell it somewhere else. In fact, I mean, I would even probably start on consignment to get some sales history. But if you're really strapped on cash and there's no possible way to do that. The next best thing is to say, yeah, make it 100% returnable. No period of time to return it. If it doesn't sell, we'll take it back. Tell the retailer you will stock all the shelves. Make sure you got kind of one shot to make a first impression. So make sure you have good shelf space. It's on the counter right at customer eye level and have a little maybe point of purchase kind of display unit that looks really cool and literally have that box of 20 or however you put in there and have it right there on the counter.
- [33:28]
Lindsey Shores
Okay, awesome idea. Yes.
- [33:30]
Mark Lore
Yeah, I mean, I just feel like this is a no brainer, Mark.
- [33:34]
A no brainer.
- [33:35]
I mean, it's such a great idea.
- [33:37]
Lindsey Shores
This is the same response I'm getting all the time.
- [33:39]
Mark Lore
The only thing I worry about is, does sound a little bit expensive. Like if you're saying that the demand is there, then it's a home run. But I would think that at massive scale, if you're doing, you know, millions of these, that they would, you'd be able to get the cost, I mean, sort of the retail selling price down even below 499.
- [33:57]
Lindsey Shores
We can do that. It's, I mean, just speaking to and testing out, speaking to a lot of retailers and buyers, that's often the response is, oh, we've got to do these for 4.99 and now 525. And you know, depending on what airport you're in, some have suggested 750. And a lot of people I talk to during, you know, testing period and phase, it's like, you guys are dads. You know, it's at the point that you need it, you're going to pay whatever the cost.
- [34:23]
Mark Lore
You don't care, it doesn't matter.
- [34:25]
Yeah, there's definitely the market for, hey, I'll pay whatever, because this is a necessity right this second. And then there's also the price point where it's like, hey, I'll take a few of these. You never know, I might need them. It's hard to like say, you know, I'll take, you know, three or four of these and suddenly it's 20 bucks. You could buy a whole box of diapers for that. So I'm just trying to think about how to make the market size much bigger. It's more what you can do at scale. I'm always thinking about scale and working backwards. And I would say, you know, at sort of 10 million units, what's your cost of the display and the Packaging and then figure out what the retail price would be off the back of that. And obviously your cost stays a lot higher. But I would sort of grow into it. I would basically take no margin in the beginning and get the right price point, create much bigger market size, and then eventually get the scale you need. So the combination I would do the airport thing and the sort of emergency charge we need to charge, make a good margin on it, but simultaneously be working on the much bigger opportunity of a scaled version of it.
- [35:31]
Lindsey Shores
Okay, Love that. Definitely consider that we started at the DDC idea of subscription model, but to Mark's point, it was just too pricey to stock up. We have customers that do it. It's not the everyday customer. And so, yeah, definitely excited to roll out into airports and start getting.
- [35:50]
Guy Raz
I want to see these vending machines in the bathrooms.
- [35:53]
Lindsey Shores
Yes.
- [35:53]
Mark Lore
Yeah, yeah.
- [35:54]
Vending machines. That's smart, too.
- [35:57]
Yeah. Super cool idea. Lindsay Shore's Baby a Gogo. Theme parks, too.
- [36:01]
Guy Raz
Theme parks.
- [36:02]
Mark Lore
Yes, yes, yes, definitely. Congrats. Thanks so much for calling in.
- [36:06]
Lindsey Shores
Thanks, you guys. I'm the biggest, biggest fan of the show, so I'm so happy to be here. So great to meet with you both.
- [36:10]
Mark Lore
Thank you.
- [36:11]
Good luck.
- [36:12]
Lindsey Shores
Thank you.
- [36:14]
Mark Lore
I like that idea that you're saying about putting it next to the register. Like you've got your five hour energy, your slim Jims, your pickles, and then the diaper.
- [36:22]
Yeah.
- [36:23]
Right next to that.
- [36:24]
You know, I think there's probably the actual cost, though, at 10 million. She hasn't, I guess, gotten that yet. But I mean, it's going to be a fraction of what she's getting now. And I just think that that could be a big market. Like, if you get that price point down, you could just imagine every parent having a few of those in their purse, pocket, whatever. Right. Like, you know, where it's just kind of part of, you know, part of your diaper spend. Right.
- [36:48]
I mean, how often I find myself buying, like, shaving cream or deodorant at the airport? All the time. I always buy snacks because I don't eat what they're serving on the plane. So I'm like, looking for nuts.
- [36:59]
And you pay like $13 for a bag of nuts.
- [37:02]
For the pistachios, I pay like 15 bucks. And I'm like, all right, so it's available.
- [37:08]
Guy Raz
We're gonna take a quick break, but when we come back, another caller, another question, and another round of advice.
- [37:14]
Mark Lore
I'm Guy Raz. Stick around.
- [37:15]
Guy Raz
You're listening to the advice line on how I built this Lab.
- [37:24]
Mark Lore
This show.
- [37:25]
Guy Raz
Is sponsored by Liquid iv. The holidays are a marathon of gatherings with your family and loved ones and in the rush it's super easy to forget to take care of yourself. Whether you forget to take a sip of water during the office holiday party or you start feeling parched after a long day of traveling or hosting, the best thing is to keep Liquid IV on hand to stay hydrated through the holidays. I spend a lot of time with my family outside. We do a lot of hiking here in California at all times of the year and I almost always take a packet of Liquid IV with me to mix in with my water bottle and it is super easy to use. Tear, pour live more. Stay hydrated through the holidays with Liquid IV. Get 20% off your first order of Liquid IV when you go to LiquidIV.com and use code BILT at checkout. That's 20% off your first order when you shop. Better hydration today using promo code biltiquidiv.com While most CEOs believe innovation is the lifeblood of the future, few of them feel that their teams excel at innovation and more than 8 out of 10 innovation projects stall. The problem is once teams move from ideation to product development, there are a lot of factors that slow the innovation process. Things like outdated process management tools, team alignment and constant updates. Take a big step to solving these problems with the Innovation Workspace from Miro. The Innovation Workspace comes loaded with AI enabled tools to help teams get from idea to output faster. Our team in particular loves AI summaries to condense documents, stickies and overall board content in seconds to produce retrospective summaries, meeting briefs, research notes and more. Whether you work in innovation, product design, engineering, ux, Agile or it, bring your teams to Miro's revolutionary Innovation Workspace and be faster. From idea to outcome. Go to miro.com to find out how that's M I R O.com welcome back.
- [39:47]
Mark Lore
To the Advice line on how I built this lab. I'm Guy Raz and today I'm taking.
- [39:51]
Guy Raz
Calls with Mark Lorre.
- [39:53]
Mark Lore
So Mark, let's bring on our next caller.
- [39:55]
Okay.
- [39:56]
Hello, welcome to the Advice line. You are on with Mark Lore. Please tell us your name, where you're calling from and a little bit about your business.
- [40:03]
Ryan Thompson
Hi Guy. Hi Mark. Thank you for having me. Nice to chat with you guys. My name is Ryan Thompson. I am from Vail, Colorado. In 2014 I started 10th Mountain Whiskey and Spirit Company. We are a philanthropic award winning craft distillery named in honor of the historic 10th Mountain Army Division.
- [40:21]
Mark Lore
Thanks for calling in 10th Mountain Whiskey. 10th Mountain I believe is is no longer in Colorado. I think they're in Fort Drum, New York. They're on the border with Canada today.
- [40:31]
Ryan Thompson
You're exactly right.
- [40:31]
Mark Lore
Yeah.
- [40:32]
Ryan Thompson
I'm impressed with your.
- [40:34]
Mark Lore
Many years ago I was a reporter, I covered the Pentagon. So that's the only reason I know that. But so cool name and tell me how you got into this business.
- [40:44]
Ryan Thompson
Yeah, when I first moved to town in the late 90s, I bartended around town on the ski bum lifestyle, skiing the 80, 90, 100 days a year and bartending at night. In 2002 I started a restaurant that I still have my thumb on today with my two original business partners. 23 years later, about 12, 13 years ago, I was watching what the craft distillery movement was doing. I homebrewed just for fun, for friends and family and was watching what a couple of competitors and other ski resorts were doing. And I thought someone in this town was going to make whiskey sooner or later and just thought might as well be me.
- [41:18]
Mark Lore
Right, so you guys bought a still and you bought me all the things that you need to start?
- [41:24]
Ryan Thompson
Yes, correct guy. You got it. We distill, we mature, we bottle all in house. We have a tasting room at the distillery where we hold events, do tours and whole tasting classes and we have a off site tasting room which is at the base of Vail Ski resort in Vail Village as well.
- [41:43]
Mark Lore
All right, cool. I'm curious, right, because there's a lot and I'm in Northern California where the wine industry is going through some challenging headwinds right now. Right. Because there's all.
- [41:57]
Guy Raz
Every state.
- [41:58]
Mark Lore
It seems like there's another article about alcohol being bad for you. And I know that younger people aren't drinking as much as people my generation and older. Are you seeing any headwinds at all right now?
- [42:12]
Ryan Thompson
Yeah, certainly. You nailed it, guy. There's almost every day an article comes out in regards to alternative opportunities to relax and enjoy cannabis or no and low out movements, the high and dry movement if you will. And so that is part of my question. So we're at a pivotal point within the business. We're just celebrating our 10 year anniversary. We're doing well, thank you. We're doing well here in the state of Colorado. We self distribute in the Vail Valley. We have a large distributor that distributes outside of our area but within the state. And so about 80% of our sales comes from within the state of Colorado. About 20% are in a number of other states and distributors. However, 80% of my headaches comes from that as well. So a little bit about the 8020 rule. Right. And so I own 100% of the company. I've gotten this far without having to sell equity. I have an SBA loan, beg, barred and scraped as much money as I could put together over the last 10 years. However, I'm to a point where if we continue to grow, do I look to sell off some equity and bring on some investors? Or given the structural market shifts within the industry, do you think it'd be smarter to maybe pull back some of our distribution in some of these outlying states and just focus more locally and then our direct consumer models as well?
- [43:34]
Mark Lore
A lot to think about here because Mark, obviously I know you know a little bit about this, this market too, and it's complicated. Every state has different regulations. So the question I guess is should he double. Was a couple questions. Should he bring on equity partners, but also should he double down on where, where they're doing the best or, or really try to push, push into the, into expanding into, into some of these markets that are also proving to be a bit of a headache?
- [43:58]
Yeah. I have a couple questions. First. First, nice to meet you, Ryan. Great, great story as well. What percentage of the market are you in your current state in Colorado?
- [44:13]
Ryan Thompson
Percentage, the overall market, I'd say we're about 10%. So there's certainly some room for growth there.
- [44:19]
Mark Lore
10% of the whiskey market in Colorado, correct?
- [44:22]
Ryan Thompson
Yep.
- [44:22]
Mark Lore
Okay, then what is it about your product that is special relative to other whiskeys?
- [44:29]
Ryan Thompson
Certainly where our distillery is, we're at 6,300ft in altitude, so it's an ambient dry air climate with some diurnal temperature fluctuations, which adds some different flavors to our products. Certainly matures our whiskey a little bit quicker than others. Other areas, our angel share is mostly water that evaporates and so we're able to get some higher proof whiskeys and do some special single barrel picks. And so we're well known for our whiskeys. We make a bourbon, a rye and a single malt. We make four other additional spirits as well. And then certainly the amount of respect and support we give back to the military, both active and veteran soldiers alike.
- [45:13]
Mark Lore
So one last question. In terms of your goals, like would you be happy doubling the size of your business over the next few years or you know, are you really saying now I really want to go for 10x or 100x or no, you know, in the next few years if I could double the size of the business and keep 100%. I'd be really happy with that.
- [45:32]
Ryan Thompson
So originally 10, 10, 12 years ago, when we were starting, we wanted to be a national brand, and that was the original goal. Given the industry market shifts, I'm thinking it might be Smith might be smarter to pull back and just be a regional brand. However, I still have inside me that I want to grow this. I love the challenge of it. It's a tough industry. It's an exciting industry. I love all aspects of it. And so in one hand it's do we lose the battle to win the war and pull back? Or on the other hand, if you're not growing, you're dying. Right. So it's a little bit of both that I'm having to struggle with here.
- [46:09]
Mark Lore
Are you growing? Are you on a path to grow this year?
- [46:13]
Ryan Thompson
Yeah, Guy, we have been growing about 10% year over year. This year we're going to be about. We're going to be flat, which in the industry, from what I've been told, is a win. Yeah.
- [46:25]
Mark Lore
So if you're 10% share in Colorado and 10% growth, that means you'd be going from 10 to 11% share. If you just focused in Colorado or 12 share is 20%. It feels like just from the outside looking in, given all the things that you've said where you have a competitive advantage, I would double down on that competitive advantage that you have in the state of Colorado. It's working. The brand resonates with that audience. You've got physical brick and mortar. People are feeling and touching your brand. And if you only have 10 share, I mean, you can go to 20 share. That's why I was asking 20 share and double the size of your business. That's some pretty good growth over the next few years. If you were able to double your penetration, I think the level of focus is not to be underestimated. Like you said, there's a lot of complexity. And going into other states, you don't have the same marketing power that you do in Colorado. And it takes a lot of time. And so I think there's a benefit of focusing and saying, hey, we're going to double share in Colorado and this is how we're going to do it and get everyone thinking on the same lines. And then after you start getting that real traction there, maybe you pick a second state that's closest in that you think would most likely be a state to resonate. But it doesn't feel right to me on the outside thinking about taking the brand national without the same marketing budget or bang, that Some of the bigger players would have.
- [47:57]
Ryan Thompson
Right, Mark? Exactly. I appreciate that insight and your opinion there, and that's exactly what keeps me up at night, is trying to figure that out. And so certainly respect your. Your career, and I love your insight to that. So I really appreciate that.
- [48:10]
Mark Lore
Yeah. The challenge is the next state over is Utah, and I don't know how great of a market that is.
- [48:14]
Ryan Thompson
Yeah, I think we probably look to go north to Wyoming or south New Mexico first.
- [48:21]
Mark Lore
Right now, I may have missed this, but did you mention your annual sales?
- [48:24]
Ryan Thompson
Right now we're a little bit north of 2.5 million.
- [48:28]
Guy Raz
So one question I have for you is what.
- [48:30]
Mark Lore
What do you. What's sort of the end game for. I mean, Vail is a really important. You know, if you're talking about building a brand, Vail is a great, especially a whiskey brand, a great place to do that because it attracts, obviously, skiers from around the world. It's, you know, it's one of the. Probably the five greatest ski areas in North America. I mean, is there a world where you want to. You would one day want this brand to be acquired by a Diageo or a bigger, you know, a bigger multinational.
- [48:57]
Ryan Thompson
Right, Guy? It's. I certainly love what I'm doing. I love growing it. I love the challenge. I can see me doing it for a number of more years, but I get asked this question often, and everything's got its price. I think certainly I will see if there's a price I can't or an offer I can't pass up, then it might be something I'd entertain.
- [49:17]
Mark Lore
If you are thinking about maybe one day, if you are thinking about selling it, then it would be more valuable to have deeper penetration in a regional market than a shallow penetration in a national market. So that's something to consider as well.
- [49:29]
Ryan Thompson
Got it. Thanks, Mark.
- [49:30]
Mark Lore
Yeah, I think that's great advice, Mark. The brand is called 10th Mountain Whiskey and Spirits. Ryan Thompson, thanks so much for calling in, Guy.
- [49:37]
Ryan Thompson
Mark, I appreciate your time. Thank you very much.
- [49:39]
Mark Lore
Thank you, Ryan. Good luck.
- [49:39]
Good luck, man. Yeah, it's. I mean, we've had a couple of spirits brands on the show that have been acquired and some that haven't, but I think that's exactly. That's such an important point, Mark, which is better to have to really be a known quantity in a region than to kind of just be.
- [49:59]
Yeah. To be something special, like really stand out. And I think you start going into the 20 share plus and start, you know, you'll start to become a meaningful brand. In that region, that's where I would focus. I think also he said before, like how 80% of his time is outside of the existing region. So just switching focus is going to help build that brand. And he's got a much better chance, I think, of doubling in Colorado than he is trying to do it nationally.
- [50:27]
Mark, before I let you go, I want to ask you about. Here you are, you're still a young guy, you're only in your 50s, and you've accomplished all these things and you've got a whole new business now that we're going to be hearing about for the next, you know, 20, 30, 40 years. If you could go back to when you started diapers.com and even before with what you were working on and you could give yourself advice and say, hey, you know, you need to know this, I'm coming to you from the future. What do you think you would have said to that guy?
- [51:04]
Oh, there's so many lessons. If you're asking for, like, what's the number one lesson?
- [51:09]
Guy Raz
Sure.
- [51:10]
Mark Lore
Yeah, I think I have to. If I could only pick one, I think people, I think I would. I've learned so much about the type of individuals that can really help propel a company. And at the end of the day, like you win or lose, it's down to execution and it's people. And how do you find the people that are going to be most successful in an early stage startup? I want somebody that showed a demonstrable level of success in everything they've done in their career. You know, they don't have to go to the best school, but in the workforce they've shown a demonstrable level of success. They're in a company, they've been promoted and when they move from one company to another, it's a big step change.
- [51:54]
They make an impact.
- [51:54]
Yeah, stars make an impact. And when they move, it's noticeable. Like, you know, and, and those people are the ones that, I mean, 20% of your folks do 80% of the work and if you can get those top 20 percenters, even top 5%, if you're lucky enough to get that, that could make the company. And every company that I've had, there's always a few people that are top 5% and those are the people that really drove and made the company what it is. So I would have just, I didn't really know that back then and just hired people and just, you know, I was like, thought I can interview somebody and find out if they're good and you just can't it comes down to resume. You have a history, you've been in the workforce. What have you done?
- [52:37]
That's actually really great advice. It's because you've got to surround yourself. Great entrepreneurs are not great entrepreneurs are great people who surround them. That's really, I think the greatest entrepreneurs are often the greatest talent spotters. But you're right, it's hard because you can talk to somebody really like them and it just doesn't work out.
- [52:57]
It used to be, I call it Honeypot. You know, you sort of, it's like, oh, I can get a beer with this person. They took a good game and in an hour you're like, oh, I really connected. I like this person. But then they don't. They're not able to like really push the ball forward, you know, and there's only a small percentage of the population that can truly invent, create and make stuff happen. And there's a certain resume that it shines through. And now I can spot those. And so I would teach myself how to, how to spot that if I went back in time.
- [53:29]
Yeah, that's great advice. Marc lore, founder of Diapers.com, jet.com and wonder, thanks so much for coming back onto the show.
- [53:38]
Thank you, Guy.
- [53:39]
It's great having you.
- [53:40]
Guy Raz
And by the way, if you haven't.
- [53:41]
Mark Lore
Heard Mark's original How I Built this episode, you've got to go back and check it out. You can find it in the podcast description. Just click the link there. And here is one of my favorite moments from that interview.
- [53:52]
I'm happiest when I'm doing something entrepreneurial, building something. I mean, it could be inside of a big company building something. It's really about the autonomy to just sort of like just run and build fast and not have to get, you know, traditional corporate buy in before doing everything. Because, you know, corporations, they just tend to shy away from risk and low probability outcomes. And I sort of gravitate more toward low probability outcome but massive upside. And I think that's where the opportunity lies for an entrepreneur.
- [54:29]
Guy Raz
Thanks so much for listening to the show this week. Please make sure to check out my newsletter. You can sign up for it for free@guyraz.com each week. It's packed with tons of insights from entrepreneurs and my own observations and experiences interviewing some of the greatest entrepreneurs ever. And if you're working on a business and you'd like to be on this show, send us a one minute message that tells us about your business, the issues or questions you'd like help with and hopefully we can help you with them. And make sure to tell us how to reach you. You can send us a voice memo@hibtid.wondery.com or call us at 1-800-433-1298 and leave a message there. And we'll put all this in the podcast description as well. This episode was produced by Kerry Thompson with music composed by Ramtina Rabloui.
- [55:22]
Mark Lore
It was edited by John Isabella.
- [55:24]
Guy Raz
Our audio engineer was Sina Lofredo. Our production staff also includes Alex Chung, Chris Masini, Carla estevez, Elaine Coates, J.C. howard, Kathryn Cipher, Devon Schwartz, Neva Grant, and Sam Paulson. I'm Guy Raz and you've been listening to the advice line on How I Built this Lab.
- [55:50]
Mark Lore
If you like How I built this, you can listen early and ad free.
- [55:53]
Guy Raz
Right now by joining Wondery plus in the Wondery app or on Apple Podcasts. Prime members can listen ad free on Amazon Music. Before you go, tell us about yourself by filling out a short survey@wondery.com survey.
- [56:09]
H
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