Sean (2:22)

Welcome to the operators podcast. I have two of my favorite people on earth here. Katie, who's a regular, a new gold star member of the operators family. She's gonna be on every episode going forward because we fired everybody else. And we have Taylor Holiday, the most famous agency operator on earth today. We just want to sit down and talk about, you know, different perspectives in this podcast. Taylor recently had some big news. I mean maybe not that recent anymore, but sold his agency or he brought in a partner to his agency. So we talk about that, we want to talk about what brands should be focused on right now. How can they win? Or talk about my favorite Taylor Holiday tip of all time. I have a whole big list of stuff to talk about 2020-2025. I think everybody had a really good year. Everybody had a really bad year in there. So I want to reflect on what was the best part, what was the worst part and what we do differently. Okay, off to Taylor to start.

Taylor Holiday (3:09)

That is like such a roller coaster of years, right? Like we 2020, 2021 through the first half of 2022, you're in euphoric hysteria like in this like tailwind. Everything's going great. It's all going to the moon. Buy your NFTs. It's, we're all, we're all going to make it. We're going to be China. There's going to be 30% E commerce as a percentage of retail. And then as went up like it came down the second half of 2022, I remember like very vividly there was a specific customer that we ended up like parting ways with the second half of that year. And that was like this indication that every customer just decided at that point, like it's no longer a game about top line revenue. There's no more available capital. All of retail has opened back up and it just stopped, stopped. The second half of 2022, I've told the story many times. We ended up having to lay off 100 people. Went through like a complete reset of our business. Transitioned everything into this like sort of immense focus on the overlap of marketing and finance. It was shift towards profitability and that sort of led to force like sort of this novel positioning for us that actually really transformed who we were as an, as an agency. And then 23 and 24 were sort of our comeback story. 24 was definitely our best year ever. 25 has been another great year and then we ended up selling halfway through this year. So that's like our very fast version, but we mimic the industry like we are so much a byproduct of the health of all of you. And so that was like. It's been a crazy journey through what has been a very volatile a five years from my, my seat.

Sean (4:33)

Taylor, do you think you're a, like a preventative metric? So like your, your, your health is ahead of the market or you think you're downstream?

Taylor Holiday (4:40)

I think given our present position, we're actually inverse to it. So because now we've sort of centered on you've got a problem, we're going to help you resolve it. The more problems there are, the more there is demand for what we do. But at the time, I think we were sort of a leading indicator because most of our deal structures at that point were a variable on percentage of spend. So as soon as everybody pulled the brake, our revenue fell off a cliff faster than theirs even did. Because what happens for everybody is that generally speaking, you can ride your existing customer revenue base through some period of profitability before the decline of new customer acquisition catches up to you. So but for us, it's instantaneous the second you stop spending. Our revenue at that moment had fallen off. So the way we were previously designed, we were very much a leading indicator. That's actually what allowed us to see where it was all going to go quicker and change who we were, I think.

Katie Lane (5:28)

But were they all. But surely all your accounts weren't have. Because my years that were hard are very different from your years.

Taylor Holiday (5:34)

Oh, interesting.

Katie Lane (5:35)

So, and, and I feel like even in like our chats, like you, you know how it is like in the big groups, people are like, is anyone else seeing bad or whatever. And then people chime in and there's always like the outlier like Sean, this Q4, it's like I'm quit crushing it. And we're all like, oh no, new customer acquisition is really hard and the whole thing. But surely you had like groups that would. Right. Like some were doing really good and some weren't because.

Taylor Holiday (6:00)

So you have to think about the portion. So we service what we would call. It's like the Shopify Mid Market, 5 to 50 million. Okay.

Katie Lane (6:05)

Yeah.

Taylor Holiday (6:06)

And the, the effect of the decline of efficiency of new customer acquisition is lagging relative to your size. So let me try and explain this in the simplest way is that the bigger you got during COVID with new customer acquisition, the longer it is until you feel the effect of the decline of the demand because you're. You thrive off this existing base and your margin will actually, it'll actually feel more profitable for a little bit.

Katie Lane (6:28)

But that's only because they're not monitoring their new customer acquisition rate, right?

Taylor Holiday (6:32)

Well, no, it's because that doesn't show up yet. Generally speaking, new customer acquisition doesn't affect the P and L in the short term. Right. Like most contribution margin is generated for a lot of brands off of existing customer revenue because they're driving their new customer acquisition at fairly slim acquisition margins.

Katie Lane (6:46)

Yeah, well, subscription can definitely plan like that. Right?

Taylor Holiday (6:49)

Not even subscription. I'm saying like hard good is. Let's say, let's. Even if you're like first order profitable at a small amount, that's still not going to drive the vast majority of the contribution that flows through to that month's P and L. Yeah, I'm not talking about negative contribution. Like subscription will go negative contribution on first order. I'm talking about even hard goods where your break even are slightly profitable on first order. That's still not going to generate that many incremental contribution dollars at scale.

Sean (7:15)

Well, because even a company like Ridge, which has very little return on customer rate, we have so many customers that like in any given month, you know, I have 10 million customers, some of them are going to come back. Right.

Taylor Holiday (7:26)

And even apparel, that's like you guys would be an extreme version because you have so little LTV, but apparel, let's say you have like a 100% increase in LTV in a year and you're like we were working with at that time, like with like Ann Taylor Loft, like this is a company with like 10 million customers. Right. Like that they could, they could exist off that base of existing customers for like years.

Katie Lane (7:45)

Yeah.

Taylor Holiday (7:46)

In ways. So the decline for them is very lagging in many ways.

Katie Lane (7:50)

Yeah. And sometimes you don't even see it like a saving grace for us this past year was that we really put a lot of focus on LTV and aov and so and we have such a strong returning customer base like coming back and buying that just those two things increased our revenue so much that showed growth without our new customer rate. Right. Like increase like now, this next year, we're like, we gotta fix new customer so we can really crush it. Uh, yeah, but.

Sean (8:18)

And, and once you get to 10 million customers like intel or Loft or I think Ridge has crossed that this year. Um, there's very few new people to actually go out there. It's like actual net new people for Ridge and it's reactivated just for Ridge. Yeah. And I mean or even for Ann Taylor Loft, I'd assume. Like how many professional women are left after 10 million?

Katie Lane (8:37)

Well, I think a lot of brands though. Like at what point do you consider somebody new again? Like I could go shop at Ann Taylor and then maybe not buy anything for four years but all of a sudden I get a new job or you know, a trend emerges. I think it's how do. What do they consider new customer again too?

Sean (8:55)

And that's something I think is going to change like in 2026 is this idea that a true new customer is like a unicorn. It's really just about this reactivation number and it's like if they haven't shopped

Katie Lane (9:08)

in a year, they're new customer for the same product type. I think new like new product types do open you up to that unicorn. Right. Just with a different product because you're

Sean (9:18)

starting from a base of zero. Yeah, but Katie, you said you had different years until you've got a point.

Taylor Holiday (9:22)

You're exactly right. We, there's one of the things that we look at with every customer is what we call their active customer file which is how many customers are in that state between when you would make your first purchase and your 80th percentile of customers that would make their second purchase that window. You're considered an active state before you churn. Klaviyo has a distinction for this and I think that the size of your active customer file is actually the best predictor of your future returning customer revenue. But most people look at their overall customer file which grows like this over time. But the reality is many people's active customer files in decline.

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Katie Lane (10:54)

What is this next? Tell me, Twitter kings, what is this next year's word going to be? What do I need to start practicing into my vocabulary right now?

Sean (11:03)

Yeah, we have to come with a better term than active customers. Like, there's like, maybe, like. Yeah, like true customers. I think that's. People are gonna actually start.

Katie Lane (11:10)

Okay, well, everyone heard it here. Sean said, you better start tweeting about active customers if you want to get ahead of the trend on Twitter.

Sean (11:18)

Well, Taylor has a different name it

Taylor Holiday (11:22)

after you, like your namesake.

Katie Lane (11:23)

Oh, I. I saw that. I thought about that. Yeah, it is your namesake.

Sean (11:27)

Yeah. So. But anyway, I want to talk about your journey for the past five years, Katie. So what was your worst year? What was your best year? And what would you do differently?

Katie Lane (11:35)

Oh, God. Well, okay, so going back, I mean, so we've had over year, right? So I would say each year has gotten better and better, but we've had a different set of problems each year, and all related to, right, like, substantial growth. Like in 2020, 21, 23, we had, like, 2000% growth or something like that. So it was insane. So what was hard about those years? Although I do remember, like, you mentioned the whole, like, Covid bump, which to me felt like a slingshot, really. Like, we didn't see a screeching halt in revenue after that. But I do. Specifically when the iOS update came out, and that really affected a lot of our numbers. And that was in 20, what, June of 21. But it didn't. We have. We had really healthy margins, and so we absorbed most of that. The hardest year, looking back five years ago, was, I would say, 24, which is weird because a lot of people had really good years in 24. And then this past year, in 25, we saw substantial growth again for us. And when I say growth like ours, Taylor, too, was, we're only D2C. Like, we just opened up wholesale, so we're not omnichannel. We didn't get to. We didn't have the impact of, like, large retailers closing or Amazon shifting or any of that. Like, ours was just straight, like, direct to consumer this year. God, I don't know, Sean, what the hardest part of this year has been. Last year, it was just, man, actually, the I would say the last two years, the hardest part has been dealing with. With Meta's inefficiency.

Sean (13:14)

Yeah. It's funny you bring up 2024, because if I have to think about my hardest year, like every year had a little bit of bad.

Katie Lane (13:20)

Yeah. But they were all different, right? Like it just changed. Yeah.

Sean (13:23)

Yeah. Because you talk about COVID you talk about the iOS update. 2022 was a hard year. I mean, we saw gas prices shoot up. That hurts discretionary spending. It ruined our 2022 Father's Day.

North Beam Representative (13:34)

Right.

Sean (13:34)

We had a horrible Father's Day. 2023 was awesome. Probably the best year. And then Q4 20,

Katie Lane (13:41)

like, you know, in ours, crushed.

Sean (13:43)

We talk about like this, but it

Katie Lane (13:44)

can just be like one random outlier. Right? Like that affects it. It might not be like. And I think it's just so brand specific too.

Mike Beckham (13:52)

It's.

Katie Lane (13:53)

It's funny, this is where I think,

Taylor Holiday (13:54)

like sometimes the benefit of the seat I sit in is that we look at an aggregate all the time. Like, so when I think about how things are going, I never. I no individual point. Because you're right, Katie. There are brands that are always winning, There are brands that are always losing. But it's the distribution. And if this is like the normal distribution, right, at any given point the median moves in some direction in that data set. And that's, that's what's the signal to me is like in this period of time, was the median result up or down relative to expectation? I've published like the. A lot of stuff about the median growth rate year over year. Across those years. In the, in the COVID years it was like 50 plus percent and then it dropped to 20 and then I think in 2023 or 4, it was down to like 12% was like the median growth. And yeah, so much of this follows. The availability of capital is like really the core driver in an inventory based business of like people's expected growth rates. Because it has a lot to do with your availability financing to determine how much excess growth you can sort of go out and get. There's a lot of other pieces.

Katie Lane (14:49)

You're right. And that's a great point. Like, I feel like in 2020 and 21 there was a lot of brands that were still like VC backed. Right. And it was just they like the debt ate their lunch. And like what we all know on the brand side is that cash is king. Right. And that's what manages it. But I think, I still think in your seat, it'd be really hard to look and see any kind of trends when you're comparing brands that are between 5 million and 100 million. Because there's some things about being a nine figure brand that make things very easy. Right. And you can sustain like hiccups in whatever it is. But then there's some parts where like as a $30 million brand, you know, maybe, maybe some of the impacts are harder on different levels. Like I just, I feel like that it's not fair to put everybody in the same bucket because what's hard at different levels is, is relative to their size.

Sean (15:42)

Yeah. And you know, on this, a $30 million brand can double like and that's where the industry have people like doing like the flexing, like I grew 100%

Katie Lane (15:50)

or whatever without their ops breaking, without their inventory supply chain breaking, like all of that. Yeah, yeah.

Sean (15:56)

The, the advantage of a nine figure brand is it's very hard to sync. Right. If you're cash flow positive and you know, you have a team, you have infrastructure, you have systems and like more or less it operates pretty smoothly day to day. But you're, you're lucky to get 25% growth because it's just so much revenue you have to extract out of the ether.

Katie Lane (16:13)

It's another 30 million. Right. Like, it's insane.

Taylor Holiday (16:16)

Yeah, totally.

Sean (16:19)

But so Taylor, you're looking at the next five years, midway through the decade. Do you, are you, are you bullish on this idea of brand and E commerce stores and basically what built our fortunes the past 10 years, the next five years? Are you bullish on that?

Taylor Holiday (16:36)

I think brand is like one of the constants that exists and I think that's like sector agnostic. Like I think about that a lot as a service business. What is the brand that I'm trying to create? So I think that that will perpetuate forever because identity matters and brand is identity and people care about alignment towards those things. And even if that's individuals becoming brands, I think the principle still is the same. E commerce I think is going to be like an archaic idea. I think it's like completely going away. Even though I just wrote my twice.

Katie Lane (17:05)

They're just going to shop in their sunglasses. Like.

Taylor Holiday (17:08)

Yeah, you're going to shop everywhere. Everywhere. Like it's commerce. Like I think that from LLM chats to yes AR to voice to retail, like the honest company just in the

Sean (17:18)

next three years shut down their website.

Katie Lane (17:19)

Taylor, in the next three years you think that people are gonna be clicking some imaginary button in their sunglasses.

Taylor Holiday (17:24)

Oh, I think they're gonna be buying it with their brains, probably Katie, like, without even clicking a button.

Katie Lane (17:30)

Doesn't change. In three years, we're gonna blink and we're gonna be back in this podcast in three years. And I'm gonna be like, hey, where's your sunglasses, Taylor? And you're gonna be like, well, I

Taylor Holiday (17:39)

own, I own, I own. I wear Meta Oakley's all the time and film my kids Lily games with them and create instant AI highlight clips of every game they play, which is

Katie Lane (17:48)

great, but you can't share it with any of your friends because none of them own the sunglasses to be able to watch it in.

Taylor Holiday (17:52)

They're on Instagram every time. The second the game's over.

Katie Lane (17:56)

Yeah. Okay.

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Sean (18:44)

Yeah, well, look, I, I, I share the sentiment that, like, the, a website's going to look, look more and more like a catalog over time. Right. It's just like, like the idea of a catalog is, is archaic. And like, you still get them, Yeti sends them, J. Crew sends them. But, like, it's not how I'm actually shopping. And it just makes sense that, like, in five years, ten years, like, the, your website just looks more and more like a mobile app today, which is like a weird thing that, like, some stores choose to have.

Katie Lane (19:11)

But John, 20% of our revenue is on our mobile app.

Sean (19:16)

Yeah. You have the perfect customer base for a mobile app. It's like young moms, they're on their phones. You can send, push.

Katie Lane (19:23)

I know, but that's the whole point, right? Is I think, like, each, like, you can't just call it brand. Like, there's so many definitions. Like, I can't imagine my mom's shopping in sunglasses. I just can't. But like, I can totally picture your customer doing it, Sean. Like, totally.

Sean (19:40)

Yeah. Well, I guess the point I'm trying to get at is like, look, the past five years have had their own challenges, but, like, there hasn't been very many structural changes. It's like, Amazon's still big, people still go after wholesale. But, like, the next five years is like, is the industry about to, you know, continue to climb up and, like, we'll see E commerce penetration go up or we on, like, an edge and, like, there's a cliff in front of us? And like, that's what I'm trying to.

Katie Lane (20:02)

Five years ago, everybody was saying that brick and mortar is dead. And I don't think it is. I mean, you've seen a lot of growth, right? And you're like, retail Costco.

Sean (20:13)

Yeah, yeah, yeah.

Taylor Holiday (20:15)

So we.

Sean (20:15)

We had basically a $2 million wholesale business in 2020, and now it's, you know, in the eight figures. And it is. It is probably the second fastest growing part of our business right now. But I. We bring up things not changing. Like, we're talking about shopping on AI sunglasses and they still use eei. So it's like. It's like that. That world is very far away. But, Katie, you sound pretty optimistic for the independent brand. So where do you think things go for.

Taylor Holiday (20:42)

I do.

Katie Lane (20:43)

I think things are going to change. They always change. Thank God. Because if we had to do the same thing over and over again for the next five years, we'd be miserable. Right. Like, things have to change and they have to evolve. I don't think we're going to fall off a cliff. I don't think that we're just going to, like, all of a sudden wake up and Shopify is dead and we have to find a new way to sell these customers. I mean, I started in an age where celebrities were in magazines, Right. We just talked about that. Now it's influencers. Like, there's. I think with change comes opportunity. And I don't know. I don't. I'm. Even all this AI stuff, like, I think there's so much that we're gonna all lean into. But. But brand is something that maybe AI can't replicate. And. And I would say in the next five years, the brands that probably create relationships with their customers and stay real, right? Like, who's gonna be the first person to start an AI brand? You know, I don't know.

Taylor Holiday (21:41)

So I wanna be clear. I completely agree that I think the future is full of opportunity. Channels favor incumbents, and new channels favor upstarts. And so, like, think about like, what comfort represents as an illustration of like growing faster maybe than all of you guys. I, I think, I don't know exactly.

Katie Lane (21:59)

Hudson grew like crazy. Yeah.

Sean (22:02)

Right.

Taylor Holiday (22:02)

And so, so as, as, as novel channels emerge, the problem is it's really hard for legacy players to shift their infrastructure into that new adaptation. Right. Like, they don't move like that. So what happens is depending on the size of the new thing that gets unlocked, you unlock these bigger and even more emergent things that can. And those legacy channels are still huge portions of the market. Target and Walmart and all of these things, even websites will exist that way. But the problem is the economics for a new person to enter in into those spaces becomes really, really, really challenging because all the digital real estate has been seeded. Like, you can't go in and win categorical search on wallets or categorical search on Amazon for silicone rings the way that we did back in the day that digital real estate is gone. It's like Malibu beach property, it's been sold out. So the new place has to emerge for those things to go arbitrage some not net new area of opportunity.

Katie Lane (22:52)

Dude.

Sean (22:53)

And I agree completely on that. Is that like the most dangerous advice people ever gave was to not sell on Amazon because it's so obvious now that the Amazon. That's right.

Taylor Holiday (23:00)

Absolutely is right.

Sean (23:02)

Just, just like your customer list just like because they built themselves into such a large incumbent and you just benefit from that. Right. In a way that like, it's, it's a, it's like being really tight to Walmart. Like Mike is. He can get end caps before anybody else. I can't sell my water bottles into Walmart because they have a vendor that they like. Yeah.

Taylor Holiday (23:18)

And I even think the biggest thing is that. So the biggest battle to be determined to me is like, which product gets surfaced by the LLM when you talk to it. And there's a real question about whether that's going to be your Shopify feed, product feed, or whether that's going to be your Amazon product feed or a Walmart feed or a Target feed. And I really think that the most likely answer and the recent $10 billion investment from Amazon into but OpenAI is an indication to me that there's a huge incentive for ChatGPT to make that Amazon because it's by far and away the best user experience from a fulfillment standpoint.

Katie Lane (23:47)

Yeah, I think Meta is already optimizing for Amazon. I think everybody's optimizing for Amazon.

Taylor Holiday (23:52)

So to your point, like, to Sean's point, if you didn't win the retail listing and you aren't the dominant player in that place around that category, that's a huge disadvantage to that space. But there are going to be places where that's unrealized or underappreciated and I think there's going to be opportunity in that, that for a bit.

Katie Lane (24:06)

Yeah. And for everyone listening, that's not Amazon. I do not depend on Amazon. I don't think you have to have Amazon. Right.

Sean (24:13)

Like, yeah, but the concern is that if the future is LLMs and Amazon is a leading player in that they have all the money on earth and they can, you know, buy their way into ChatGPT, then like they, they win more. It's an incumbent becoming more in, in enticed in everything we're doing.

Katie Lane (24:33)

Do you think though that consumers will be hesitant because they know it's that LLM's gon lean into paid advertising?

Sean (24:41)

Dude, I, I, me and Connor have this debate all the time, like about the consumer and I think the consumer doesn't care. I think the consumer doesn't care it's paid. I think the consumer doesn't care. It's AI. I think that, I don't think there's going to be movies in the future. I think people are just going to watch custom AI videos that are designed for them. And he's like, no way. He's like, that's so sad. I'm like, I think it is sad, but I think it's where it's going.

Katie Lane (25:02)

I think I'm going to agree with Connor. I think I'm going to agree with Connor. I think that, I think actually it's going to put more value on things that aren't a, to us, to a certain customer cohort. Right. Like not everybody.

Sean (25:15)

Yeah. And like I, I want to believe in that as well because it's like this, like people are back to reading books and meeting in parks and like having fun and like being in the real world. But unfortunately I think it's going to be people in their basement swiping and it's custom AI videos talking about how great they are and then they buy

Katie Lane (25:30)

rich wallets because you're just defining men. Women are not going to do that. We're going to be like, we do not want to be in our basements. We do not want to be living in AI. We want, yeah, we want real life experience, I think. Yeah.

Sean (25:43)

Yeah. So that's, we'll see how the future plays out. This is a good five year episode we'll come back with our AI glasses and we'll figure it out.

Katie Lane (25:49)

I'm going to die if in three years I'm the one with the glasses on in here. And I'm like, okay, you guys were right.

Sean (25:56)

So Katie, you're optimistic about everything going on now. Do you kind of unpack your push into wholesale, right? Because you've just been DTC first, you have a massive nine figure brand just doing your website in your mobile app. You're avoiding Amazon. Why are you going to wholesale?

Katie Lane (26:11)

Not because I think it's like the next big strategic move and it's going to add a certain right, like dollar amount to my bottom line. Although it will be profitable, I think it's for us it's more a stepping stone to what my ultimate goal is, which is owned retail. So you know, I've kind of our, our big one in our industry is Carter's. Right. That's not doing as great. But it's a $3 billion industry that, that or brand that 60% of their revenue comes through retail. And I think that I still think there's gonna be a lot of opportunity in experience with retail. And so the way I see wholesale is almost, you know, training my company right. And every part of it is what's gonna work, what is the, you know, what are the skus that works, what are the different product types, the product assortment we need. Like I could go, I have a brick and mortar, I could go open up 10 more. But how interesting is a whole store with pajamas and swim in it? Like I need all the product categories that are going to have the like gifting experience that I want in own retail. And I think going into wholesale right now is going to let me test and really see what does. Well, what doesn't. And then also I think it's just kind of de risking myself from meta. The nice part about babies is it's a life event getting pregnant, you know. Right. And it's like buying a wedding dress and they still want to go in and touch and feel and see in person. And so I, I do think it'll be a nice like top of funnel move for us too.

Sean (27:49)

Yeah. To unite the two ideas. It's like right now we have a industry changing event that is like on par with the Internet. Right. Like Shopify is an e commerce company. They have to become a commerce company because there's going to be a fight for the LLM chatbot, there's going to be a fight for the sunglasses. Like, like how those people shop it's going to be a fight. And the reason why I'm doing wholesale and I'm glad you're doing wholesale too, is like, it's just a diversification. It's like, look, if the experience, you know, like real life, people win and people are back in malls, I need to have some totally there. And I'm doing TikTok shop now. I've. I've talked all year about this. TikTok shop sucks. I'm like, there's no way it's going to work for my brand. Like, it is a. We're a luxury price point men's wallet. It's never going to work on this. There's tons of knockoffs. I'm spending hundreds of thousands of dollars a month to get hundreds of thousands dollars a month in sales because I just need diversification. I have to try it all.

Katie Lane (28:42)

And you're gonna have to follow, like, make sure those customers you're acquiring through there are valuable customers. Right. Like, because it's. You're still trying to understand if it's a profitable channel or not. I just, I do see the value in diversification for sure, but I don't think you have to do. I don't. I don't think there's like one big win. Right. Like at some point the, as a brand you get big enough where like you've really leaned into product diversification. Like you said, right. Like most of your growth this last year is in new product categories.

Sean (29:13)

All of my growth, yeah. I think the core wallet business is probably flat. But like, that's why I can't tell you where the puck is going. I know the puck is going to move, but I know what the puck's made out of. And that is like, for me, it's product. Like, that's what I'm doing is just more product.

Katie Lane (29:29)

And I think so smart. Because what if all of a sudden you don't have credit cards anym. Right. And wallets become obsolete? Then you're not. You don't have all your eggs in one basket. That's that like your people are gonna still possibly get married and want wedding rings or Right. Like lean into luggage or, or whatever you've got up your sleeves right now. Um, I think product diversification is probably one of the safest bets brands can make right now.

Sean (29:54)

Sean here to tell you about Saris analytics and Saris Pulse Ridge is profitable every single day. And we've taken that, that super seriously since we built this business. We track contribution margin by day. We look at the SKUs we sell every single day and we have to do this manually up until Sarah's Olympics came out. We take all of our SKU level data, we build it into the data warehouse. Everything that goes into making a true P and L I get on a day to day basis. Seres Pulse gives you clarity. So your COO and your CFO and your CMO start speaking the same language. Contribution margin shifts teams away from hoping profits survive the season to manage them in real time time. Book a walkthrough with the Saris Pulse team today. Click the link in the description and thank you Saris for bringing you this show. Yeah, and everyone wants to talk about where to sell stuff and how to sell it, like new ad strategies because that's, that feels instantaneous and sexy and new and like there's secret alpha somewhere and it's really hard to make new products. But Taylor, you love TikTok shops. You want to break down social shopping.

Taylor Holiday (30:51)

I think it's a giant, like an affiliate Ponzi scheme, but right now it's the arbitrage, right? Like I think what people are finding is that I actually think that the secret here is that the underlying massive cost to run and grow an E commerce business is actually the creative plus the media. Right? So it's this idea that you have to go out and produce all of these assets and then you have to spend money to distribute them in hopes that they generate some positive return for you in this marketplace that you don't actually know the price of until you go and spend in it. And it's like that thing is really, really expensive. TikTok Shops did this really smart thing with social commerce was that they introduced this layer and said we actually will allow you to outsource the creative production portion and you can create this affiliate system by which you'll get all of this content generated for you. Right? And it's going to generate all these impressions and views for the sake of growing this potential channel. We'll subsidize it for a bunch of time to help all of these people be incentivized to make a bunch of money and make a bunch of content for you. And now they've done an amazing job of making every brand believe that they have to be there for this halo effect. This is like the ultimate move to make people believe is that like you have to be here, you're going to make no money, we're going to make all the money and then you're going to capture the value over there and you have to do it and that's what they've managed to pull off. And it's because we're all so desperate for this creative asset of content creator in particular. And they understand that that's like the authentic culture moving development. And so it's like this is a mechanism to that asset as much as is the revenue.

Katie Lane (32:21)

Isn't that the one thing that we're certain AI is going to replace? Right.

Taylor Holiday (32:26)

Like we see it depends on who you ask. I don't know.

Katie Lane (32:29)

Like I, I, I'm not an AI. I'm not on the gravy train. But I do know that like the creative stuff, I think it is there.

Sean (32:38)

Yeah. And look, and this is what me and Connor debate about because, because when you, the affiliates have two things to them, right? They have the distribution that to pay for and then they have the content creation. And I think nobody will debate that. AI content creation is almost, I mean I will call at this point indiscernible. I think if you actually can look at an AI UGC video and a normal UGC video and actually tell apart you're a unicorn.

Katie Lane (33:04)

That's us that see it all the time. Right. Like the average person, I agree, cannot.

Sean (33:09)

Yeah, but then will those videos get distribution? That's the question. I think they will. I think people TikTok feed will just be AI videos. Connor doesn't think so. He thinks people are going to still follow influence.

Taylor Holiday (33:20)

Well, the other thing I'll tell you though, and this is again, I work with 200 brands, okay. There isn't a single one of them, not one of the 200 that has more of more than 50% of their creative production through AI. Not one. Oh, they are so lagging on this. It is there. And it's because the entire system was predicated on this idea that there's a set of brand standards that an individual holds the key to. And everything flows through the gate of this individual, individual person. It's like the most inefficient creative system for the modern landscape you could ever imagine. But that's how it like gets gatekept. AI just blows that apart. It's like it overwhelms their system with things that they don't like. And so they, they like are so slow to, to engage it.

Sean (34:00)

And I would say 50% is an insanely high threshold right now. I would say the average, the Average brand's at 10%. There's one, there's one brand I know that is 100% AI and it's minerals and, and maybe you guys know Those guys. But you should check it out. If you don't. They. They just run the most insane AI videos over the top and they're scaling like crazy. I mean, they're. They'll do high eight figures this year. It's just, it is just like they take a very specific.

Taylor Holiday (34:26)

If you guys ever listen to the mobile Dev Memo podcast with Eric Seyfert. Have you ever had him on? He's. He's awesome. If you haven't, you should. But he interviews like a lot of researchers in the AI space. And he had these, these group of researchers on that did a study recently about human interaction with AI and whether AI could outperform humans creatively. And they did it in three ways. One was just human designers. One was human designers using AI. So they got to like, here are the standards, here's the prompts, the output. The other one was like unchained AI. Like, give it no boundaries at all. Which one do you think? What of those three?

Katie Lane (34:55)

I'd say B.

Taylor Holiday (34:57)

No, it's the unchained AI, the one with no constraints. Like when humans inject themselves into the AI interaction, they impose all the biases and limitations that make it so hard for humans to create diverse content. Content. It's because we only extrapolate out of our own lived experience. It's so hard for us to. I can't be you, Katie. I don't know how to speak to. To your customer the way that you do. But an AI like is unbound by that and will create anything relative to the objective. And so I think you have to wrestle with that.

Katie Lane (35:23)

I think you think AI is going to learn how to. Because humans, we naturally change all the time. Our behavior changes. You think AI is going to stay in tune with that?

Taylor Holiday (35:34)

I think it is. I think already the AI would produce better creative if you removed your interaction with does when you try to prompt it and guide it.

Katie Lane (35:45)

I hope you're wrong.

Taylor Holiday (35:46)

Yeah,

Sean (35:48)

yeah, yeah. And like this, this is why it's such like a, a weird take on the future. I want to go back to what TikTok shop did so beautifully is everyone tries to solve, you know, a very small percentage of the actual e commerce stack right out of a hundred percent revenue. Payment processing is 2%. Your people is 10%. Like fulfillment's 10%. COGS is 20%. And for a typical brand, 30, 50% is actually marketing. Right. And people always like, you know, pitch me like different SaaS platforms or new SaaS they could build for E commerce. And I'm like, look, unless you're solving that 30 to 50% problem. It's just you're not going to build something very valuable. It's like build me a software that actually gets new revenue. Right. And nobody, nobody's been able to do that. Right. It's just, it's because it's impossible. How do you get impressions? How do you get distributions? How do you actually get new people coming in? And TikTok shop did it by getting all these affiliates to make a bunch of content for you and then they packaged the commission, the sale, everything to that distribution. It's just a different way to get, you know, you know, ads. But I also think they're going to stop, I mean they've stopped subsidizing it. I think TikTok's basically going to go away because the Ellison family's buying it and they just want to control the media.

Katie Lane (36:59)

Is that a good thing or a bad thing? Because a lot of reason that brands didn't get on TikTok shops is that there was so many knockoffs. Right. Like all the junk that was on there. So, but now if that's going away because of tariffs and. Right. Like the whole thing, is it a good thing or bad thing that shops goes away?

Taylor Holiday (37:17)

I think you want as many distribution opportunities for your business as possible. Like, because the reality is, is that every piece of digital real estate gets competed down to zero over time. Like this is like the unfortunate truth of every listing where that's an auction based environment. There's always going to be somebody that's going to be willing, whether they're subsidized with venture capital or whether they have better LTV than you or they have alternative streams of revenue like Amazon that's going to be willing to pay a little more for the click and a little more for the click and a little more for the click until the categorical search term for wallets becomes profitable to no one. Like, and then that's, that channel gets disintegrated, then the next one gets disintegrated. And so the unlocking of new channels is really important to the continued growth of the ecosystem and for brands because otherwise it like these stuff just gets bladed down to nothing.

Sean (38:02)

Right. But Taylor, I, I have one counterpoint to that is that yes, I, I would love there to be more channels, more apps, more new ad platforms because new ad platforms, the first three months of App Lovin was free money, dude. It was amazing. But then as soon, as soon as you have to comp that next year, it's really, really Hard. Right. So the new ad platforms are better for everybody, but I think we're going to a world where incumbents will win more. So if you're not an incumbent bit, what. What is going to be the newness that you can actually go in there and win? And it's new products coming out. So it's like consumer taste is going to change. There's going to be some new supplement. Everybody wants. Like, it was creatine for a long time, right. The past three years it's been about creatine. So, like, if you can't win Amazon for wallets because I'm there, or you can't win, you know, Facebook or meta ad auctions because Katie's there for baby clothes. What you have to do is look for new places, new emerging white space, which was creatine or. Right now, I think the biggest opportunity is just pouches. Like people are doing Zinn nicotine pouches. Pouches for everything. Pouches for vitamins. I think that's going to be a huge category and it's new. So anybody.

Katie Lane (39:07)

That's right.

Taylor Holiday (39:07)

So think of everything existing on an XY matrix of volume and competition. Right? And so what you're describing is that when trends emerge, you get a period of arbitrage where the volume of demand outpaces the competition. Right. And that's what that is. That's like arbitrage. And it shows up in the click price relative to the conversion rate for the brand. Eventually, because we live in a perfectly capitalistic system, all of it gets competed down to zero. And the perfect illustration of this is like what happened with masks in Covid, like the day on March 18. The value and the conversion rate of a click of face masks was like, not that. Like there was no volume and there was a little bit of supply and it was a dead market. And then suddenly the volume of demand went through the roof and a bunch of people made a ton of money from like two weeks.

Sean (39:48)

Yeah.

Taylor Holiday (39:49)

And then every. And then everybody on earth started selling face masks and the supply completely balanced relative to the demand. Then the demand collapses and everybody has too much supply, but people go broke. That happened in a ton of industries, but it happens so fast in every category. And this is why, like, Sean, I think I. I've sort of like lauded you because I think those. This is where having some sort of moat relative to IP and the protection of your IP defends the collapse of that. Those. Those. That dynamics.

Katie Lane (40:16)

Yeah, I think that's what you're saying, Sean. That's why it's so important that that's going to ultimately happen in every new category. You've got to be the brand that's willing to go, okay, that, that one has had its time. I'm on to the next. And then you looks for the next big opportunity because especially with AI it's probably going to bring that window of opportunity even tighter. Because if the like ad buying turns into well this is the terms and that, right. Like if it becomes so automated that it can optimize faster, then I think hot trends are going to die quicker also.

Taylor Holiday (40:49)

For sure.

Sean (40:52)

Yeah. And going back to the x Y axis, the Z axis is new channels, right? So it's like this. There's new trends, right. And then new trends have attention and then eventually competitors come in and compete it away. But when you add Z, there's just like there's. You could sell different places. So it's like creatine gummies had had the D2C moment, it had the Amazon moment. They probably haven't had retail moment yet. That's the z axis. Is that like being the first there unlocks.

Taylor Holiday (41:19)

That's why new channels are so important. And I think but, but to the point of the defense channel, I think one of the things that again this idea, like you said, wallets are flat. I think the reality is for most businesses what happens as a category matures is that it actually declines substantially. And so the new thing that they add on is actually just subsidizing the deficit. So I'll give you a couple of things that we were intimately connected to for a time. Long time, Solo stove, ruggable, born primitive selling women's leggings. In these categories. What happened was because there was no defensibility at all, you had this massive run up of demand in these product categories that when they leveled off or when the the competition grew and the demand softened, they weren't flat, they were down a lot. And so anything new that they tried to add was just subs. It was like a falling knife and they were trying to stack on top of it. The fact that you can hold wallets constant is like really, really important to the potential for the overall growth. And for a lot of brands, holding the category constant is actually really, really freaking hard. Because all but all it all gets competed away a little bit further, a little bit further over time.

Katie Lane (42:17)

But don't you think it's because some of those brands grew so fast that they were a lot of trend based. And I think Sean's like Ridge has longevity, right? Like it's. I Think he's built a really great brand and that's what carries it. Whereas brands that grow super crazy fast, I, I do think that sometimes they crash.

Taylor Holiday (42:37)

Yeah. There was artificial demand from COVID that like is part of that story for sure. But like women's leggings are a little different. It wasn't like in the same way the outdoors industry. But if you go, if you go look at the SERP page and you type in like black women's leggings right now there's not a profitable click on that page anymore. Yeah, five years ago there was a lot of them and you made a bunch of money and. But now like a business like Born Primitive who's an awesome customer has done amazing work by shifting their business almost entirely in the product categories that they're in. Was all women leggings four years ago. But now that product category, Aloe and Viori and like the biggest brands in the world with the most margin and the most money ever are competing. There's. They can't win in that same way anymore.

Katie Lane (43:16)

Yeah, they just got to try something new.

Taylor Holiday (43:17)

That's right. And so they, they evolve into new product categories entirely. But for them, they actually have to subsidize the decline, not just like the concept. Instant revenue. And that makes it even more challenging

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Sean (44:14)

Yeah. And it's, it's a sense of paranoia that like the fake. Eventually like I, I wrote this down. But like right now we're all pros. Okay. We are professional athletes. We, we're, we're pro players. We're playing pro ball that is acquiring customers and eventually our leg is going to give out and we're not going to be able to do it anymore. And you have to have some, some sort of stable to, to retire on. Right. So if it's good Amazon listings, good wholesale listings, a bunch of diversified products. Because when you have black leggings and you scale them from 0 to 50 million, you're like, I'm. I'm going to take these black leggings to 500 million. But no, eventually you get wiped out,

Katie Lane (44:50)

because then the next day, people are like, I like red leggings.

Mike Beckham (44:52)

Leggings.

Katie Lane (44:52)

You know, and then you're like, totally, totally.

Sean (44:56)

Yeah, yeah. And. And solo stove, because I'm close with that on a personal level. They. They did just sell every single person who would ever want one. One. And they had nothing because they last forever.

Katie Lane (45:09)

You don't even replace it. You just keep your solo stove forever.

Sean (45:13)

Yeah, from. I mean, I. I know Spencer over there. When they were doing, like, 30 million, they took it to 400 million. And I'm like, yeah, that's too big. It's like Traeger grills. Traeger girls are publicly traded disaster of a company right now. Great product.

Katie Lane (45:26)

So do you think that a brand can get too big where they can't introduce new product categories because they're the expert in one? Like, did we, Sean, like, start introducing new product categories at just the right size, where we still had kind of like, the brand recognition behind it? So when you came out with rings, people were like, oh, yeah, it's a great brand. They're good quality. I'm going to try that. But, like, if you get so big that you're 500 million, solo stove, and they're like, now we're gonna do, I don't know, bikes, then are people like, what, you're. A stove company, you know?

Sean (46:00)

Well, yeah, we've had this problem where we'll launch something, and this is actually in 2018. So the wallet business was doing, like, $20 million a year or something. And we had a backpack, and the backpack was doing $3 million a year. And we shut the backpack down because we're like, it's only $3 million a year. I can't get excited about this. This. If I would have kept that backpack in market today, It'd be a $40 million backpack, right? And I. Everyone would be so excited by that. But I was too dumb to realize when something was good, right? And so that's. That happens at a really big company. If you're doing a billion dollars a year in sales and somebody launches, somebody does 5 million, you're like, this isn't worth our time. Because they don't realize how long it took to get to a billion dollars in Sales like these things just take forever. And then you get so big where, like, you're Lululemon, you launch shoes like your expectations are too high. They want to do a billion dollars in shoes in year one that is never going.

Katie Lane (46:52)

Whereas their sales issues probably is like a really good, whatever, $50 million branch of their brand.

Sean (46:59)

Yeah. And if anyone else did $15 million in year one for shoes, they'd be ecstatic. But not if you're losing totally.

Taylor Holiday (47:07)

I also think that if you control the distribution, it also gives you a better opportunity as well. Like we. Back in the early 20 or late 20 teens, there was a brand down in San Diego here called Skills. I don't know if you guys ever remember this brand. They got enormous selling, like, sports training equipment. Think of, like, mini hurdles, the mini basketball hoop, like, all these things. They basically would license the IP of these, like, random tchotchke toys. But they got enormous in distribution through Walmart and Dick's Sporting Goods, every major big box retailer. And that was all their distribution. And they left D.C. alone. They had none of their own Chuck channel. And then what happened was every one of those retailers, one by one, started white labeling their commoditized product and just replacing them on the shelf. Replacing them on the shelf. Replacing them on the shelf.

Katie Lane (47:48)

That's what Target did in the early 2000s.

Taylor Holiday (47:50)

Well, that's what every retailer ultimately is going to do that to anyone that they think that they can create marginal leverage against. Right. Like, if they think it's a commoditized category and they can make more margin, they will do it that way. But the pro. And the problem was they had no brand leverage. They had no. So introducing a new product, Dick's was just like. Like, we're good, thanks. Like, they. They weren't going to reintroduce that when they're competing against them now in the same place. So in that case, they couldn't develop their toy at it because they had no direct business at all. And so they. They were a $500 million business with 480 in retail. And all of a sudden, those guys started collapsing. There was no way to get it back up over their operating expense against it. And so you. It's so much of it depends on how do you have the ability to take that new product and control your ability to distribute it, to subsidize whatever decline exists, otherwise you end up in a lot of trouble.

Katie Lane (48:35)

Yeah.

Sean (48:37)

Yeah. And this is. This is why when you can currently acquire customers, you have to do it right. If you can do it profitably if you can build up new lines of business because eventually it's going to get too hard. Okay, this is really awesome. We brought up products a bunch. I'm going to give you guys my, my, my product insights. Without a doubt. My biggest win in 2020 to now is launching new products. In 2020 we just sold wallets. We were 100% company because I shut down that backpack I told you about earlier. Right. And in, yeah, 2025 wallets were flat year over year. And in 2024 they were probably up single digit percentage basically flat again. And that means for like two or three years in a row all of my growth has been everything else. And the company's grown significantly in that time. Right. We're talking tens of millions of dollars in net new revenue from other stuff. And that's just because I realized how difficult it is to sell the next product. Personal wallet. Right. So we, we, I think on us.com so our US only Ridge store, we acquired like 600,000 wallet customers in 2025. So there's a ton of customers now. We have Amazon, we have international stores, we have everything else. But that is just people buying wallets. So how am I going to grow that next year? We're talking like this is the city of Seattle basically and they have to. I'm going to comp that at least. How do I get that to be 1.2 million people? Right. That's just really difficult. I mean it's a durable good that sells for a hundred dollars or whatever. So our expansion has just been all these new products we've launched and I'm going to continue.

Katie Lane (50:06)

And you're, you're using, I know Taylor, you mentioned like talking about teams but you're using Sean. Really the same team for all the different product categories. Right. Like you don't differentiate like. Right. Social posts for all of them and your graphic designers work for all of them. Like there's not specific teams for each product category, is there?

Taylor Holiday (50:23)

There?

Sean (50:25)

No. So the media buyers are somewhat separated, focused. Yeah. But everyone else, it's the same. It's the same graphic designers, the same studio, same product team, everything like that. And this goes to Taylor, wanted to talk about the marginal increase in productivity from employees. We have 50 full time US employees right now which is like the lowest it's been.

Katie Lane (50:47)

Not including fulfillment.

Sean (50:48)

Right.

Katie Lane (50:48)

That's just office.

Sean (50:51)

Yeah, that is just office. We don't do any of our own fulfillment. So we have less office employees than we've had since 2022. Getting way more Way more revenue. And it's just because we found a way to have a lot of shared resources across all of that. By the time this podcast comes out, our new brand will be out. And we launched a brand called Gut Culture. So this is under Ridge. This is the same equity owners, and it's. I've talked about how great supplements are for so long. It's my first attempt to try to do a supplement brand. So the same team, we put our money into it and we launched it, we spun it out, and there'll be some overlap. Like, you'll know it's from Ridge. If you buy from ridge.com, you'll get a sample in your mailer. And we have, like, a Progress bar. You'll probably get free samples in the Progress bar, but besides that, it's a fresh ad account, and the goal for the first year is 5 million.

Katie Lane (51:40)

Oh, you're going to crush that. And if you're going to totally crush it.

Sean (51:42)

Yeah, but if I. If I launch a Ridge product and it only does $5 million, like, that's kind of like a whatever. But I'm like, I. This goes back to anchoring.

Katie Lane (51:50)

So you're sandbagging yourself on purpose so you can celebrate when you crush it.

Sean (51:56)

I don't know if I'm gonna. I've never. I've never used recharge before. I've never used subscription. Like, I have no idea what I'm doing over here, but it's like, look, we. If we can hit $5 million, we should be so stoked. It's like, how do we run this thing? As actual, like, as close to profitable as possible. So this is, like, me going into the world of product. What I think is the most important thing.

Katie Lane (52:14)

And I think you saw. I think it's important, like, you saw opportunity in this one category. People aren't doing it yet, and you're leaning in and taking a risk. Right. Like. And I think you've got Ridge to carry you through it, really. Right. Like, just. I mean, how many orders do you ship a month that you're going to put samples in? That's, like, free. I mean, that's like, people pay a lot of money to do that, you know?

Sean (52:40)

Yeah. So it's 50,000, whatever orders are going to get every single month. But I've bullied Mike for so long. I'm like, mike, you have to sell hydration stuff. You sell water bottles. Like, get out of. Get out of a horrible business. And he launched Trevi. Trevi's been a big Success. Then I was like, oh, I gotta take my own advice. I gotta, I gotta get it on this. So, yeah, fiber first, hydration drink.

Taylor Holiday (53:00)

Well, I just want to. Our job all the time as CEOs is to increase enterprise value you in any way we can. And if you're telling me that you can't take the capital that you have in the bank and deploy it against growth of wallets. And if you were to launch another hard good, let's say you, you added $20 million of a hard good business at 10% net margin. It's $2 million of added EBITDA to your business. $5 million of subscription revenue with a growth rate that looks like this might be worth more to the enterprise value of the business, to be honest. Like, and so I think some of this is just like a good capital allocation relative to the opportunities available to you. And I think you've got to look at like, I'll give you an example. In my business, my service line revenue like meta Media buying in Google is flat in part because the price that you can charge from it for it is like on a slope like this, we used to charge 10% of spend to manage a Facebook ad account for somebody spending a million dollars.

Katie Lane (53:52)

Holy. You'd get paid a hundred killing people.

Taylor Holiday (53:56)

You get paid $100,000. That was the market rate.

Katie Lane (53:59)

Do not pay 10%. That is insane.

Taylor Holiday (54:02)

Katie. There's lots of people still paying that today. But the point is that the market

Katie Lane (54:07)

moves you people that are doing that, you call me or email me and I'm going to teach you how to negotiate. That is insane.

Taylor Holiday (54:13)

That's right. Well, so you're exactly right. What's happening is you're awakening to the market dynamic of what's available to you for a price. And now the price is more like $5,000 to manage that same ad account. So the underlying service market expectation went from 100,000 to $5,000. And so my growth in that category, well, I can't go. My business is going to grow by more Met buying. Well, not at all actually. That's flat or slightly down. But as we get into now, we launch emails as a service or Amazon or the forecasting or whatever it might be, that's the same thing for me. So it's no different. The service expansion is no different than product expansion.

Katie Lane (54:47)

Total, yes.

Taylor Holiday (54:47)

And the market dynamics for all of them relative to my opportunity in the future is just like what you're assessing.

Katie Lane (54:51)

And it's the same thing we're talking about like your clients ultimately, right like trust you. And so if you're like, now, let me help you manage xyz, it's gonna be an easier sale than acquiring a brand new customer.

Taylor Holiday (55:02)

That's right. Exactly.

Katie Lane (55:03)

Yeah.

Sean (55:04)

The ironic thing is actually it was probably easier to manage Facebook ads back when you could turn and now that it's harder.

Taylor Holiday (55:11)

Exactly.

Katie Lane (55:11)

Literally. Yes, you're right.

Taylor Holiday (55:14)

Yeah.

Sean (55:14)

So that's what I'm doing right now to win. Right. Like how, how do I plan on Ridge growing as a business? It's like, look, Ridge will still grow this year because of these new durable categories we're in. We have enough capital where I can still expand tech, I can still relaunch travel, I can do all these different things. But like, if I have excess capital, either distribution, which, like, what's the difference between doing 10 or 12, like million dollars paid out in a year, who really cares, right? And. Or I could really try to build enterprise value with new brands. And I want, I want to launch a new brand every single year. But that's what I'm doing as a brand. I want to hear what Taylor is advising people to do. And then Katie, I want to hear what you're planning on doing for the next couple of years. So Taylor, what are you advising?

Taylor Holiday (55:53)

Not, not too dissimilar from what you're describing, which is one, our job at the beginning is to help them set the baseline expectation of the future of the core thing that's they have. I think this is a thing that most people are not rooted in reality. So a lot of our job is to anchor in what is true today, that your core business in the future, you can expect this level of growth off of that. From there, we sort of get to hand them back optionality to make the kinds of decisions you're describing, which is that if you think your core business for wallets next year, if someone was like, oh, it's going to do 50% growth next year, well, then they wouldn't make the decision to do the gut health thing you're describing. But when you start to realize, like, hey, your CAC is on a declining slope like this every day the marginal frontier moves closer and closer to you. Like you can spend less and less money.

Sean (56:30)

Money.

Taylor Holiday (56:30)

We need to think about product expansion. We need to plan some new moment or big swing. We need to think about distribution expansion. And so a lot of our job, because we don't do their product development or even manage their, you know, like, marketing calendar, so to speak, is to help them anchor in what is true today. And the potential capacity of your business for the sake of making good decisions like the one that you're describing. And I think that data clarity and clarity of what's possible out of the core thing gives them back the optionality to go. And then from there they're making the same kinds of decisions you are. Which is. Okay.

Sean (56:57)

Okay.

Taylor Holiday (56:58)

Out of this then. Do we need to expand distribution? Do we need to expand product categories? Do we need to take some bigger partnership swing to alter the dynamics of the demand for our product in the present state? Like those are all the things that you sort of sort through from there on.

Katie Lane (57:12)

Yeah.

Sean (57:13)

Yeah. Well said, Katie. With.

Katie Lane (57:16)

I agree. I mean, I, I don't think there's one big swing. We don't have one big swing lined up. Right. Because then you're putting. It's so much risk. Ours is, is for sure in product expansion, Sean. And not just in the baby too. We're launching PET in the next few months, which will be amazing. And I feel like a lot of people think, you know, their pets are their children and so it, it kind of correlates. Right. With Kaden Lane. I think that will be a big opportunity for us. We have a lot of white space in channel expansion because we have none. So there's a lot of opportunity there. We're going to lean into corporate gifting, which is kind of fun. And then I'm going to try a thousand different things. I think we actually launched 11 new product categories this last year, which is insane. But like what you're saying, some of them were just $5 million wins and I think. But a lot. But if I launch 10 of them and they're all $5 million wins and I get to use the same resources and not overly complicate my operations then, and that there's a lot of growth opportunity there. And I think that's what I'll always lean into. Like, I just don't see there being one. And then an owned retail. I, I, I am going to be massive with owned retail one day.

Sean (58:34)

Yeah. Katie. What your business and my business have a lot in common. And that I call them blobs is that like, there's a lot of different ways to. Right. If you're Hudson at Comfort, you're like, I'm gonna do a billion dollars in revenue off a TikTok shop. I have this perfect flywheel. I'm gonna scale it forever. But we, we have to grow slowly. It's like, and, and the blob eats everything, which is slowly all the time. So like, we will Get.

Katie Lane (58:55)

And I'm okay with that. Like, I, I'm kind of okay with the slow. I feel like I. My little thing fell. I. I feel like the blob feels safe. Right? Like, I've. I've been doing this for 21 years and I have seen a lot of rocket ships crash and come. I'm not saying Hudson Will Comfort is amazing and he's had product expansion. His blankets are freaking amazing. Amazing. But I don't think it's bad to be a blob, Sean. Right?

Sean (59:26)

Yeah. Yeah. And I, I hate to pick on Hudson. Maybe like a coffee alternative, right? Like, they're just like, we're gonna do subscription coffee alternative on D2C. We're gonna scale that forever. And it works until it doesn't. We're. We're being a blob and just like slowly eating the edges. I think there's a lot of growth there. And then I. I want to talk. I always say this. Not all of my product wins are great. The reason we launched this new brand Gut Culture is, is I did mini knives on my website and they cost $350,000 to make them, to buy them, to ship them to my website. And then I sold $42,000 of them in an entire year. And I'm like, well, I just lit money on fire. Like, might as well do it with something that has high upside, not these.

Katie Lane (60:05)

But you're not doing it right if you're not failing on some of the product categories. Like, you're just. Then you're not trying hard enough.

Taylor Holiday (60:12)

Well, this is the thing that, like, I think is a weird. We have a weird relationship with the way we think about the expected value value of the allocation of our money, where, like, we'll gladly go into the meta arena, where we think about the bounds of outcome being like.08 to 1.3 as like the expected value of a million dollars investment. Whereas, like, new product categories have such asymmetric upside that it's hard for people to conceptualize, like, the EV of that bet. So, like, and they become, like, dominated by the outcome. So like a mini knives bet, Sean. Like, it's easy to sort of play Monday morning quarterback that, like, oh, it didn't work. But if the percentage likelihood. This is a probabilistic bet on the future, right? If the. If there was a 20% chance that it was going to be worth $50 million, well, then that's a $10 million expected value bet. So how many times can you deploy $300,000 against an expected 10 million you should do that every chance that you get.

Katie Lane (61:00)

And it doesn't have to be big swings at the beginning. You can ease into it because you don't. Right. Like there's always going to be.

Taylor Holiday (61:07)

You're going to fail 80% of the time. It's a 20% likelihood of achieving an outcome. So most of the time you're going to fail and it's still the right decision.

Katie Lane (61:13)

Totally. Yeah.

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Sean (62:01)

Yeah, and so our, our launches Gut culture costs about $350,000 to launch, but I'm doing another sleep focused brand. It was $75,000. So you can launch these things pretty cheap, especially with AI now bro. Like i3 click prompt in lovable and get a website out of it and it's like, okay, this is, this is the future where this is going.

Katie Lane (62:19)

That's the part of AI I love is it's, it has really simplified some of the things that used to make it really hard to get a brand or new product like on its feet. Right.

Taylor Holiday (62:29)

So, so let me. So then this is the question I text you guys because I, I'm wrestling with this and I'm curious how you guys think about this, this as brands. How do you contextualize what the expectation is of your people in this world? So like if Sean, if you can build a brand like the way you described for $75,000 then like what is each person in your company expected to be able to do? Like how high is the bar of contribution for every employee inside of a company?

Katie Lane (62:53)

I know what, probably Sean just tells them you're going to do it and if you don't like it, get out.

Taylor Holiday (62:58)

But like do you have 10 times the expectation of them this year than you did last year? Like, like how Much more output do they have to generate for the same amount of money.

Sean (63:06)

Dude, the future, the future is here and it's uneven. So we have. We have three, maybe five people on the team who are AI geniuses. Like, literally their output is going to match the entire rest of the company. Right? So we have like five people who are doing the same work as 50 people. And then it's getting as many of those people, 50 people to not be scared of AI and lean into it and try it and experiment with it. And we're using a lot of. Of tools and coaches and teaching to get that done. But, like, if you get it and you jump in on it, you are really. It's like, you know, people talk about 10x engineers, though. You're like a 100x employee if you can go in there and build these systems. But the problem is you can't find those people. You can't hire those people. They either you innately have it or you don't. And then getting them to actually try to be coaches to get the rest of the.

Katie Lane (63:50)

But they're coming out of college right now, I think, I think that that will be an entire specialty. Right. That they have. Have. So. But real. But, like, what you're saying, Taylor, is how do you. If Sean's coming out with this new product category and his whole team knows nothing about supplements or whatever, then how do you get them to absorb the work? Is that what you're saying?

Taylor Holiday (64:09)

Like the expectation? I'll give you an example of an experience I have. So we have a marketing team at ctc. And if I were to say to them, hey, I'm going to write a blog. I'm going to write my 26 predictions for 2026 blog, I want you to turn it into. To a blog post on our website, a deck, a set of graphics for IG stories. They would say, great, we'll get back to you in a week. And they would go off and I'd be like, that was amazing. Thank you for making me better.

Sean (64:35)

Yeah, I.

Taylor Holiday (64:36)

In Manus, like, while we're talking on this podcast, I made a 26 slide IG story graphic set off of a file I uploaded. That's better than any design anyone could give me in a week.

Fulfill Representative (64:47)

Yeah.

Taylor Holiday (64:48)

What does my designer on my marketing team now have to be able to do do to be worth the same amount of money they were two years ago?

Katie Lane (64:55)

They have to be able to do what you just did, because it shouldn't be.

Taylor Holiday (64:58)

But, like, at what scale if I can do it myself, in seconds, what do they have to be able to offer to be able to be, to contribute to the ecosystem?

Sean (65:07)

Right. Well, and it's, and it's moving. There's going to be less individual contributors and everyone just needs to be more of a manager. But the thing that they're managing is AI tools, right? So it's like, because either you're a one person team and you do all that yourself, and now that one person team can do $5 million a year in agency revenue, right, which was impossible before, or you're still going to have all these people, you're going to have less of them managing less individual contributors, right. And you're going to have one head of design and then they're coming up with, you know, everything you ever tweet is getting put into decks is getting put into everything that's happening automatically.

Katie Lane (65:42)

So maybe more project manager and more communicators to make sure everything's flowing seamlessly. Because the flip side of that, Taylor, is you created it so fast that is there other parts of the process, right? And getting something live that's not automated or not AI yet. And so, and then you start to get this backlog, right?

Taylor Holiday (66:00)

The annoying part is I have to go log into Instagram and like one by one upload them into my stories. That's the annoying part. But yeah, but it's just, it's hard to fathom like, what the appropriate expectations is of people in this world. That's what I'm struggling with is like, are you outputting enough? I don't even know what that means anymore. That's what I feel like I'm struggling with.

Sean (66:18)

Well, dude, and that's why, okay, people talk about jobs are going to go away, right? Like, they're like, oh, we're going to fire everybody. There's not going to be any jobs. My argument is most jobs are already fake. It's like you're. What we're doing right now, all of us are being paid for. And a hundred years ago I would have been a coal miner or farmer. So look, my job's fake. Everybody's job's fake. But yeah, anyway, good AI point. I want to end the podcast in some practical tips. I have one that I stole from Taylor and I shamelessly steal stuff from people. So, like, I am not afraid to steal good ideas when I hear them. We do a giveaway every year where we give away a car. I stole that idea from somebody else. I was at a Nick Shackelford event and he. So I heard someone say that it worked for them. I'm like, oh, I'm just going to take that now. Now it's like a cultural phenomenon. D2C brands. Everybody gives away a car every year. And I definitely took that idea from somebody else, so feel free to take that idea. But that comes from this concept. Taylor has about four peaks. And it's that like every quarter there needs to be a funnel clearing event. So every brand has two built in. If you're a female first brand who sells to older women, you might have a Mother's Day and we have a Father's Day and then everyone has Q4. What are you doing for back to school? What are you doing in Q1? And. And so at Ridge, we have an anniversary sale in Q1, we have Father's Day in Q2, we have our car giveaway in Q3, and we do Q4.

Katie Lane (67:37)

But you're forgetting, what about Valentine's and Easter and labor and Memorial Day and like, there's more than four, surely.

Sean (67:44)

Right? But this is. This is four leaned in campaigns that are designed to have a big promo attached to Clear Funnel. We still run Valentine's Day sales. We'll do a Labor Day small sale. But this is like, you know, we split spend close to a million dollars

Katie Lane (67:57)

doing the sweepstakes just to fill your funnel.

Sean (67:59)

Because it's like, this is. Yeah, this is like a big flagship event. So this is a good tip. People should steal. Taylor, maybe you link out the four funnels to. Do you actually still believe in this?

Taylor Holiday (68:09)

You think we call it Four Peaks three. And Katie, you're. You're advanced. So this is like we're helping. We're helping people who don't have four yet. Usually it's. And. And the key. There's two other key points to it. What I would encourage you to do as a takeaway, go export your shopify by revenue by week and draw the circles where the peaks are. And you usually will see some valleys. And the problem with the valleys is that the next thing I want you to do on the overlay of that graph is I want you to draw a point on the line when you have to make your largest po. Because the problem with the two peaks is that you usually have to make your largest PO in the valley ahead of the big peak. And so that means you have the worst cash position that you have while you have to write the largest inventory purchase of the entire year.

Katie Lane (68:44)

I have anxiety listening to you right now. You do not need to have these ginormous enormous peaks and valleys. People like spread it out a little bit because. And place more frequent pos. Like.

Taylor Holiday (68:55)

Well, here. Here's. Here's why the peaks matter. Let me give you one more thing.

Katie Lane (68:57)

And the valley is always after the peak. Also like always. Yeah, that's right.

Sean (69:01)

You want to be flush with cash.

Taylor Holiday (69:02)

You want to be flush with cash when the valleys come. But the other thing is Meta, which primarily most of the people work on, is constantly a relationship between the price of the ad inventory relative to your conversion rate and every normal day of the year. Year, your availability for volume is tied to that conversion rate against that price. And what happens is Q4CO or Black Friday EV. All the CPMs go up because everybody's conversion rate goes up. They can charge more and everyone can still make money doing it.

Katie Lane (69:27)

Yeah.

Taylor Holiday (69:28)

What you want to create is moments where your conversion rate goes up, but the market price stays constant. This is how you arbitrage efficiency or volume. You can change. Right? So by creating a sale moment or a product release where your product. Product. Your conversion rate goes way up while everybody. While the market stays constant. So we used to work with 47 brand. They made up an annual sale called 47 Day. Okay, well, guess what? On that day, their conversion rate goes through the roof. And the market price for the inventory stays the same. So you get more volume or you can choose to take it as greater efficiency. That's how you win the game on Meta. Besides just trying to play the creative hamster wheel game.

Katie Lane (70:02)

Okay, I have to tell you my favorite one.

Taylor Holiday (70:04)

We do do it.

Katie Lane (70:05)

And we do the same thing. We have. We. Literally, we.

Sean (70:08)

We.

Katie Lane (70:08)

Man, I hope my customers aren't listening to this podcast, but it's. We have our anniversary sale in October because there's nothing else happening in October. And so.

Taylor Holiday (70:17)

So you have a valley you just described. Exactly.

Katie Lane (70:19)

I have one every month. I don't think it. You should have 12 peaks. One every month, guys. But my favorite hack is. And because I totally agree with what you said. Like, it's hard. I mean, everyone leans into Q4. It's not our best quarter. I love Q1 because. Because it is. It's our. It's baby season. CPMs are lower. I'm not competing with as many brands. Everybody else is like, you know, out of inventory from Christmas, whatever. Okay, so my favorite one is April Fools. And every year we send out a email or a text that says your entire order is free. It's not free, but they all still buy something. And it is our favorite thing to do. And it's just literally because. Because I don't. You know, it's just. We call it like empty. We empty the funnel. Right. And I, we calendar out like we have our complete promotional calendar done until probably, I want to say it's July or August already. And we look at it year over year and we find people use all of these reasons. Valentine's Easter, you should have a friends and family weekend. You should have a April Fools. You should have, have Memorial Day, Labor Day. That is when people have their wallets out and they are converting. And I think a lot of really large brands don't focus on some of those smaller opportunities. And I don't want everyone else to go do it because then it's gonna screw up my whole process of winning in that. But yeah, we have like a hundred peaks, but Four Peaks is good too.

Taylor Holiday (71:50)

Yeah, I think you're right. There's, there's. It's intended to be a metaphor and illustration for an idea.

Sean (71:55)

Yeah.

Taylor Holiday (71:56)

Because. And if you can do more. But I think to Sean's point, there are certain things that, like when you're talking about large scale efforts of planning and organizational wide effort in the same direction, that stuff does usually take a larger investment in like giving away a car.

Sean (72:06)

Yeah, yeah.

Taylor Holiday (72:07)

It just takes planning and timing that you can't be doing that with your team all the time. So, yeah, if you can create 12, by all means, do, do 365. Why not? You know, fire away.

Katie Lane (72:18)

Yeah, dude.

Sean (72:19)

Nothing but peaks over here, guys.

Katie Lane (72:21)

Oh, my God. You just had Q4 and you're such a gifting. I want to be a gifting brand. I want to be where like. Well, I want, I want all 12 months to be November.

Sean (72:31)

Dude, you get. Yeah, just crush it with an awesome blanket and then you'll be the number one gift of the year. Katie, I appreciate you coming on this podcast. Taylor, I appreciate you coming on this podcast. Thank you, everyone who's a part of this. Thank you, all our sponsors. Thank you, Katie, for coming on katylane.com do shopping.

Taylor Holiday (72:48)

Taylor, what do you want to come hang out?

Sean (72:52)

Okay. We have 20,000 listeners. They love this podcast. They're joining E Commerce Fuel. They're on the newsletter. They're liking our sponsors. Thank you so much for being here. I'll talk to you guys later. Goodbye.