What do water bottles, train robberies, inventory management, 7x increases in shipping containers, employee purpose and the great job exit, have to do with one another? They're all topics of today's fascinating conversation with Simple Modern CEO, Mike Beckham. From Mike's first reactions to Covid, to his company's purpose and how that translates into keeping employees around, you won't want to miss this next interview!
As a reminder, Mike was interviewed in our last Core episode on the Supply Chain crisis, so if you haven't caught that one yet, make sure to give it a listen!
Want to be a guest on the PPC Ponderings Podcast? Apply here!
Interested in PPC help for your business?
What do water bottles, train robberies, inventory management, 7x increases in shipping containers, employee purpose and the great job exit, have to do with one another? They're all topics of today's fascinating conversation with Simple Modern CEO, Mike Beckham. From Mike's first reactions to Covid, to his company's purpose and how that translates into keeping employees around, you won't want to miss this next interview!
As a reminder, Mike was interviewed in our last Core episode on the Supply Chain crisis, so if you haven't caught that one yet, make sure to give it a listen!
Want to be a guest on the PPC Ponderings Podcast? Apply here!
Interested in PPC help for your business?
Mike Beckham:
It sounds absurd now, but at the time, there was just a widespread assumption that this is just a thing that's going to happen in China and it's just going to somehow go away.
Chris Reeves:
Welcome to the ZATOWorks PPC Ponderings Podcast, where we discuss the philosophy of PPC and ponder everything related to digital marketing. Today's show is a bonus episode of our full interview with the CEO of Simple Modern, Mike Beckham. Mike has tremendous insight into inventory management and how the supply chain crisis of the last couple of years nearly broke the system.
Chris Reeves:
He also shares some business best practices that can't be missed. If you haven't heard Mike in our fourth official PPC Ponderings Podcast episode about the supply chain crisis, go give it a listen. Otherwise, please enjoy our behind the scenes conversation with Mike.
Kirk Williams:
Okay. So, let's go ahead and just hop in. What is your name, title, and where do you work?
Mike Beckham:
Yeah. Hi, my name's Mike Beckham. I am the CEO and co-founder of Simple Modern.
Kirk Williams:
And when did you start as CEO, by the way?
Mike Beckham:
So, we founded the company in 2015. We didn't sell our first hydration product, which is most of what we do, until March of 2016. So, coming up on six full years.
Kirk Williams:
So, you were definitely a part of the last couple of years. I mean, you were at the head and running things from the beginning, even before COVID then, and then through all of the last two years then.
Mike Beckham:
Yes, absolutely. So, I've been in charge as CEO from the beginning and we've been a very rapidly growing company. So, there's all kinds of challenges and decisions that you have to make when you're growing at the rate that we are, which I think exacerbated some of the challenges and tough decisions that COVID brought about.
Kirk Williams:
Okay. So, March 2020, things hit the fan here in the US at least. Maybe just walk us through a little bit of your team's emotions, your emotions, your experiences, what do you remember from that time period?
Mike Beckham:
So, I actually remember that time period incredibly vividly. For most people, COVID was not something that they thought about or talked about until late February, early March at the earliest. For us, we started hearing from our contacts in China in early January, "Hey, there's something going on in a neighboring region that could be worth watching." So, this was pre-Chinese New Year. And as we paid attention to the situation in China, our team, there were several of us that were fairly alarmed. Partially, just because you would see crazy videos like, oh, it looks like they just blocked that entire apartment building, they literally barricaded the doors and they're quarantining people with some pretty draconian measures.
Mike Beckham:
But the more that I started to really look into COVID, the more that I became convinced, this is not a containable event, it's a virus. And in retrospect, if you zoom backwards two years ago, it sounds absurd now, but at the time there was just a widespread assumption that this is just a thing that's going to happen in China and it's just going to somehow go away. No one really knew how. It was kind of magical thinking, but this idea that somehow a virus was going to just not spread once it had reached a critical mass. I have no idea why we believed that, but that was the prevailing thought process at the time.
Mike Beckham:
And so, by mid to late-February, I'm like, "I think it's coming here. I think we're going to have to go through lockdowns." And I'm like the crazy guy, right? My role on the team is to be the forward thinker, be looking out on the horizon. I'm buying the multi packs of macaroni and cheese and toilet paper on Amazon. My wife is actively mocking me. I'm not a prepper, but I'm acting like a prepper. And I'm making fun of myself, even with the team. I'm telling them, "Hey, I think this is going to be disruptive." And we have this pond in back of our office, I'm like, "When the apocalypse happens, we can survive by eating the ducks in the pond for at least a couple weeks."
Mike Beckham:
So, I'm making light of it, but I really, seriously am telling the team, "Hey, I think this is going to be disruptive." So, we were very aware and very prepared. Oklahoma City has a very unique relationship with COVID, because I think for many people, the pivotal moment was there was a Thunder Utah Jazz game that was supposed to happen, this was March 15th or something. And all the players come out, they're warming up, the stands are full. And then all of a sudden they just shut it all down, because Rudy Gobert from the Utah Jazz had tested positive.
Mike Beckham:
Within 48 hours, just everything hit the fan. Tom Hanks is positive and we hear about a couple of other people that are positive. And, oh my gosh, this really is here, there's quite a few cases. And just everything starts to shut down. So, we were prepared that that was probably going to happen. And we almost immediately went to a work from home situation. We're fortunate that we run a company that has a highly digital piece of what we do. And so, we were able to go to work from home, but I'm messaging to the team the entire time, "Hey, we've been prepared for this. I would expect two to four weeks of disruption, and then we're going to get to the other side of this. And I think everything's going to be back normal."
Mike Beckham:
So, I was certainly in front of, that this was going to be a disruptive event, but just like everybody else, I never could have anticipated just how disruptive an event we were prepared to go through. So, that was where our team was right as things started to grind to a halt. I don't know if you want to ask the question or if I can go ahead and anticipate, I can tell what happens next, because what happens next is super interesting.
Kirk Williams:
Yeah, go ahead.
Mike Beckham:
Our biggest sales channel at the time, our two biggest sales channels were Amazon and Target. And at this point, this year we'll probably sell 11 million units, I think maybe we were trying to sell five million units that year, 2020. And maybe 80% of that was happening between Target and Amazon. Amazon's fulfillment centers are overwhelmed, because so much shopping shifts to Amazon, that they're just inundated. They can't keep up. They're obviously putting priority on essential items, food, medical, that kind of stuff, as you would hope that they would.
Mike Beckham:
So, one of the ways that they responded is they said, "Everything that we don't deem is essential, is now going to a one month delivery timeline." Their application of that was interesting. We had a couple of products that didn't get dinged, somehow stayed in the group of products that were still getting decent timelines, but everything else goes to just nothing, right? The sales rates just go to the floor, because why buy something if you can't get it for a month?
Mike Beckham:
With Target, they contact us and say, "Hey, we can't even place purchase orders right now, because we have to use all of our available capacity for essential items." So really, there was this point, probably two weeks into COVID, where I was thinking to myself, "It's bad. It's going to be fine. We're a very strong company. We've got a solid foundation. This will be tough, but we'll be fine." Then there was a point like a week and a half later where it was like, "Are we going to be fine? It's not entirely clear to me that we are. How long is this going to last? We can't even get product out to our major sales channels right now."
Mike Beckham:
Our revenue, right before COVID hit, we were hitting the biggest revenue numbers we'd ever hit. And then within three weeks, we're down 80% year-over-year. We went from up 60% year-over-year, to down 80% year-over-year. And it was a very gut check moment, I think. One of the things with our company that's unique is, we really built the company around the cornerstone idea of generosity. From our perspective, capitalism has gone off the rails a little bit, where the only stakeholder that really is prioritized in a lot of situations is the shareholder. But there's all these other stakeholders, there's the employees, there's the customers, there's the local community, there's the environment, there's all these other things that often suffer in service of trying to just please the shareholder.
Mike Beckham:
So, we said, "What if you built a company where really it was about generosity, that every single stakeholder that's involved, wins, and experiences generosity?" One of the ways that played out in this period is, we've got this real desire and commitment to generosity. I think there were five or six million people that lost their jobs almost literally overnight, right? When the economy just shuts down. And there's all these frontline workers. And at the same time, our business is falling apart before our eyes, right? We don't know what's going to happen.
Mike Beckham:
But one of the things I was the most proud about from that period is we really made the decision of like, "Hey, we've got this giving budget for the end of the year, several hundred thousand dollars, and we've got a lot of extra bottles and let's do that giving now. Even though it's a super uncertain business environment, let's go ahead and do that giving now. And we leaned in and did a bunch of giving.
Mike Beckham:
And the reason why I've always been really proud of that story is that it's hard if you didn't go through it, to really communicate the amount of uncertainty and to some extent, fear that everybody was experiencing, because nobody knew what was going to happen. But even in the midst of that, we were able to make some really key decisions to lean into the very core of what we wanted to be about. Now, obviously, things got better, but the way that we responded in those three or four weeks near the very beginning, I think, were really foundational and have really helped shape the company's DNA.
Kirk Williams:
Yeah. That's amazing. Yeah, it's especially cool to see someone's core values, they're going to primarily be tested in times of difficulty, right? It's easy to uphold your core values when things are great. So, that's really cool. Okay.
Kirk Williams:
So, you're very dependent, from what you've communicated in terms of manufacturing that, on China. Obviously, China's the first place where this all starts. Maybe talk to us a little bit about supply chain stuff. When was the first time that you were ... I mean, I'm sure you were concerned from the beginning. When was the first time where you were actually starting to be impacted by the supply chain? What did that look like?
Mike Beckham:
Yeah. When you run an inventory business, imagine a pendulum and there's two extremes it can swing to. One is, we have too much, and one is, we don't have enough. And really, the experience of running an inventory business is the process of perpetually swinging from one end of the pendulum to the other. And the only time that you're really perfectly in the middle, where you have just a right amount of stuff, is as you're swinging from one side to the other.
Mike Beckham:
So, if you had talked to me in April of 2020, it's like, "How am I going to sell all this stuff? We've got all this stuff that we've built. We've got all this inventory that was built around this certain rate of growth. I have no idea how I'm going to sell it." Then as things start to open back up, all of a sudden you're like, "How do we get more stuff? We missed production. We didn't order for a period of time. We really probably needed to, and we've got to catch up."
Mike Beckham:
And I think that this is probably almost universally what inventory businesses went through during that period. They went through the, "Wow, we've got to get conservative, quit making stuff, quit buying things. Let's see what's going to happen." And then, "Okay, the world's not going to end. We've got to make up for lost time." And so, everybody, in really the global economy simultaneously goes through this cycle. And what that leads to is a period where China's not shipping nearly as much stuff as it usually ships, and all of a sudden China and some of these other exporters, they're just slammed with orders. The way that I describe COVID to people is, if you've heard the term butterfly effect, I think that's a good way to describe what happened. It's a cascading set of consequences that's fairly unpredictable.
Mike Beckham:
When you walk through each thing that happened and why that happens, it makes sense. But I remember saying this to some people in April of 2020, "If you know the second and third order effects of COVID, you're going to be like a billionaire, but nobody knows what they are, because it's just too impossible to really understand how this thing's going to ripple out." And supply chain has certainly been that, that what happens is you don't ship stuff for a while, then China's inundated with orders. That incredible demand for orders leads to electrical shortages in China, it leads to supply shortages in China. You've got monetary impact happening where the US and China are doing different things with their currencies, which is messing with the exchange rate.
Mike Beckham:
All of a sudden, shipping rates on containers go from, it might have cost us four or $5,000 to ship something from China to our 3PL, now it's $25,000. I mean, we've seen literally 5, 6, 7X increases. And not only have the prices skyrocketed, but also, it's taking forever. I've got some images that I've shared. We use Flexport for a lot of our freight forwarding. And one of the things that Flexport does is they'll show you where all of your different shipments are in the world. And you can trace out ships that are coming from China, you can trace their route all the way coming to the US and going to your 3PL or wherever they're headed.
Mike Beckham:
And there are these pictures that just show a ship, getting across the ocean, getting to the port, and then just going on some kind of pleasure voyage from hell around the West Coast, where they're just going in figure eights and all kinds of ... Because they can't dock, they can't unload. And so, you can't get things off of ships often, like the ship's here, but it's been sitting in port for 45 days. So, that's a complexity.
Mike Beckham:
But the other piece of the supply chain complexity that you really can't understand as viscerally, if you haven't actually run an inventory business is, so much of your capital when you run an inventory business is in your inventory. At this scale, for us to sell 11 million units this year, we might need to have somewhere between $20 million and $30 million in inventory at any given point in time, which is obviously a material number.
Mike Beckham:
Well, we went from feeling like, "Hey, you've got to have five months or four-and-a-half months of inventory in the supply chain." To, "We might need nine months in the supply chain, because things are just taking so long." So, it's pretty easy to understand how that plays out for a brand of our size, that could literally mean you've got to get another $20 million into inventory, or $25 million. And just take that, and there's brands way bigger than us, you can extrapolate it out. That the fact that things were taking so long and were so unpredictable, it has caused brands to have to put so much more of their available capital into their inventory, just to try and stay in stock. And if you look at GDP and what GDPs doing over, especially recently, a lot of the GDP growth is just inventory growth and that's not necessarily sustainable. So, anyway, we'll see how that happens.
Mike Beckham:
So, we get to maybe May or June, and I think with everybody else, it's like, "Oh gosh, we've got to catch up. We got to be building." And I think by the time you get to July, August, September, everybody starts to clue in on, "We're going to have a real problem here." Everybody hit the exits at once and everybody tried to come back in at once, and we've got this massive bottleneck. And we've been dealing with it really ever since. I guess, we're a year-and-a-half in and we're still dealing with it.
Kirk Williams:
And that was actually one of my follow-up questions, how bad is it now compared to what it has been? Is it actually still pretty bad? Are there starting to be signs in the right direction?
Mike Beckham:
So, to go back to my analogy of the butterfly effect or cascading, the problem is that every time you try and fix one thing, it is creating a second order effect or consequence that creates another problem. And we recently talked to some people that are very knowledgeable in the industry and said, "When do you think it'll end?" And they said, "Our internal view is when there's a recession." That there's a point where it gets broken enough, that you just have to have a slow down in demand, that's significant enough for this thing to sort itself out. So, that's a pretty grim view. I don't know. And I think anybody who says that they do know, is lying, obviously, because it's just too complicated.
Mike Beckham:
But there is a principle here that I think is helpful. The more optimized the system is, the more fragile it is. And we had a very, very optimized supply chain. I give an example, I've spent some time in Moscow, Russia, and Moscow has this amazing subway system. Moscow, during rush hour after work or in the morning, will have more people on its subway at a given point in time than live in the entire State of Oklahoma. So, imagine taking the entire population of Oklahoma or Montana, putting them all underground in one city, that's the Moscow Metro.
Mike Beckham:
And if you go to one of the really busy stations and you sit there, two things stand out to you. One is, the trains, the trains are just absolutely predictable, every 30 seconds, you can set your watch to it. The other thing you realize is, if those trains weren't coming every 30 seconds, people would be on the tracks, people would be getting pushed on the tracks within a matter of minutes, because they're just flowing in so rapidly, right? So, they've got this incredibly optimized system, and it works.
Mike Beckham:
If all of a sudden, you put 20% more people working in Moscow, the whole thing would break. It would just fall apart. And that's not the way that populations work, of people, like you just don't suddenly get 20% more workers. But that analogy, that's pretty much what we were doing with the supply chain. And then all of a sudden, you did have 20% more goods that you were trying to move around. And it's just broken. Right?
Mike Beckham:
As people have tried to fix it, it creates secondary breaks. So, "Okay, Long Beach is backed up. I don't want my ship to get stuck at Long Beach, I'm going to send it to Houston." But enough people say, "Hey, I'm going to send it to Houston." Then all of a sudden, Houston's jammed up. "Well, okay. You know what I'm going to do? I am going to take it through Long Beach, but then instead of trucking it, because trucking's a nightmare, I'm going to put it on a rail car and I'm going to take it by rail." Now, all of a sudden, there's all these rail car robberies. So, this is, I think where we're living right now.
Mike Beckham:
And we're also in a period where there's this dichotomy of people that are willing to say, "Hey, in a very apolitical way, here's the issue and here are the things we need you to fix it." There's this pragmatic class of people. And then there's this much more politicized game going on in the United States, where everything needs to fit into some kind of a narrative and framed as, our team's doing a good job, or their team's doing a bad job.
Mike Beckham:
And certainly with logistics, there's been some of that stuff like, "Hey, we want our administration to look like we're really fixing this issue at the ports. And so, we're going to tell all the ships, they can't park in the port. They have to park 20 miles up coast." Well, that's great, but obviously that's not solving any problems. There's some people, Ryan Petersen from Flexport, has been pretty vocal on Twitter with some of what he thinks the solutions are. But there is also just a fundamental thing here of, if your knee didn't have cartilage, your knee would fall apart. The cartilage provides the cushion for shocks. And the more optimized you build something to be, the less cartilage there is to absorb abnormal events or variants.
Mike Beckham:
And we just didn't want to spend the money. I mean, just generally, we don't want to spend the money to be protected against things that we can't foresee, or that may not happen. And that's true, not just with logistics, but really with our country in general. And so, that's what we're dealing with. And probably, maybe it's a pessimistic view, but I do think you're going to have to have some kind of a slowdown before this thing works itself out.
Mike Beckham:
To me, the biggest question, that I can't really anticipate is, at some point when we do get that slowdown and that normalization, what is the new normal and how does that look? There is this other element that's going on, that's stacked on top of this, which is you've got all these tariffs. So in, it seems like the ancient past, when Trump passed his tariffs. But if you were running an inventory business and you're dealing with supply chain, these tariffs were a massive deal, and there was a lot of outcry about the tariffs.
Mike Beckham:
Biden's come into office, he hasn't removed any of them. And so, that's yet another complexity for brands of like, when you're thinking about, "Hey, how do I handle supply chain? And where do I get stuff from?" If I get it from this country, I have to add 20% in cost compared to if I get it from this country, country B, but country B doesn't have enough deep water ports. And so, they don't really have the infrastructure to support it, but I can get around the tariffs. You have things like Chinese, are manufacturing piece A, B, and C, and then they ship it to Vietnam and they put it all together, so that they can avoid the tariff. So, that's another layer of complexity, that's just stacking on top of. There's a lot going on, obviously, to this.
Kirk Williams:
Yep. So, it's funny, I've been digging into this and first of all, this is the first time I've even heard about an increase in rail car robberies and I quick Googled it, and it seems to be this huge problem, which again, speaks to the complexity of this, because there are so many things happening that even something big like, hey, there's just extra train robberies. Isn't even something that hit my feed, which is literally, I've been digging into this. So, anyways, that's a-
Mike Beckham:
Yeah. If you had, "Chinese virus causes increase in California train robberies," on your bingo card, congratulations. But I don't think any of us saw that connection, right?
Kirk Williams:
Yeah. Yeah. Okay. So, big narrative we've heard over the last year or two is, this is a great example of our over-reliance on other countries for manufacturing and that we should manufacture here in the US. What would you say to someone as far as who would say, "Hey, there's the easy answer, why don't you just manufacture your water bottles here, Mike?" What would you say to that?
Mike Beckham:
So, got lots to say to that. I'll start here. One thing that I think everyone can agree about is that manufacturing's only going to get more automated. It's going to involve more machines, more artificial intelligence. That's the future. We're never going back to, and thankfully, we're not going back to the industrial age where there's a bunch of people standing on an assembly line. Even our primary manufacturers in China are using automation in as much as they can. Now, their business model, I think, prevents really highly automated things, because you have to be able to do a lot of different things, and no robot is ever as flexible or as versatile as a person. But especially when you really have a use case that you're just doing a lot of, the machinery is really good.
Mike Beckham:
So, I think that we could all agree, if we zoomed 100 years into the future, there's very little manual labor and manufacturing that's going to be done by humans, 100 years from now. Even 50 years from now, I'd make the argument, there's probably not a lot being done from humans. So, we're in this period of transition from where manufacturing still is this blend of us using our technology and us being the labor in some cases. And there's different product types. We'll probably transition sooner or later, right?
Mike Beckham:
There's some things that are made, like if you wanted to see how a Gatorade bottle gets made and gets filled, nobody's touching that thing. It's all automated. And then there's other things like clothing, that can still be pretty highly manual. But if you think about it from like, okay, broad strokes, things are going to be a lot more mechanized and automated in how they're made, what will naturally happen is that things are going to be made closer and closer to where the people who buy them, live.
Mike Beckham:
And there's two main reasons for this. I mean, one is, obviously it costs money to move things around and you've got political things like tariffs. But then the other dynamic is this inventory piece, that when I have to move my product around, I have to carry more of my product and I have to put more of my capital as a business, into product that's literally not doing anything, it's just there so that I don't run out, when there's a lot better uses for that. I can give that to employees that can go out and generate sales. I can put that into machines that can make product. Whatever.
Mike Beckham:
So, in general, in our lifetime, this will be a major theme. I'm convinced of this, is that the transition of where things are made, closer and closer to demand centers. If you look at what has caused a lot of the outsourcing to the East, of manufacturing, a lot of it is a product of two things. That number one, it's been cheap to move things around the world. And right now, it's not inexpensive to move things around the world and maybe it gets inexpensive again, but at least right now, that's not the world we live in. And if tariffs stay high, then it'll always be expensive.
Mike Beckham:
The second piece of that is that most things that were made had a really high labor component and labor was cheapest in the East. So, you have a high labor component, you move to where labor is cheap, and it's cheap to move things around, and it works. But as China develops, people are making more, and they're no longer a low cost of labor. And there will always be some country that's the low cost of labor, but I think my higher argument is just that labor is going to make up a smaller and smaller slice of the pie of cost of making things in the future. And so, my view of the future is that you're going to see things gravitate towards demand centers and where you're going to want to make product as close to the people as you possibly can.
Mike Beckham:
There's challenges and there are going to be some things that make that transition later. For us, we sell, if you think about our two major product lines, we sell stainless steel drinkware and plastic, like Tritan drinkware. Stainless steel drinkware has a lot of steps. There's some interesting things with stainless steel, where China has subsidized it. Sometimes in some product categories, you've got elements that make materials harder or more expensive to buy in one country than another. So, the level of complexity there is high.
Mike Beckham:
Our category, 96% of stainless steel insulated water bottles that are made in the world, are made in a 100 square mile or some kind of ridiculously small area. And you'll see this like, oh, hey, almost every prom dress comes from this region in China, and when they shut down with COVID, nobody had a prom dress, because there just weren't any being made. Because you get these kind of cottage industries where a lot of specialization and a lot of the tooling and stuff around that particular use case, comes up. So, for us, getting to the point where we can make stainless steel bottles, I mean, it's something that we want to be able to do, but it is certainly a longer term undertaking.
Mike Beckham:
In contrast, Tritan water bottles are actually the inverse. Tritan is patented by Eastman Kodak. And so, if you buy a Tritan product from China, here's what happened. Eastman made the Tritan and functionally shipped it across the world to China, sold some in China. There's a tariff involved in that process, I think. And then China takes it, they manufacture it. You've got your manufacturer's margin. It goes back on a ship. It's this big plastic bottle with a bunch of air that you're paying to ship. There's tariffs again. And it's actually like this really inefficient process. And what's even crazier is the way that they're made, there are these amazing machines where you ... I don't want to oversimplify, but you can pretty much pour in plastic pellets and you can have machines where you press a button and it just spits out water bottles. If you look at Nalgene, if you look at Tervis, they're making all their stuff domestically anyway.
Mike Beckham:
So, I think there's a lot of product categories, like plastic water bottles, where it is completely viable and even a lot more economical to make it locally. And for sure, you're going to see people pulling the trigger on that. I'm in talks pretty regularly with people at different levels of government, with our supplier, we work with the biggest retailers in the world. Everybody is excited about that story of building manufacturing domestically. It'll be a slow process in some categories, but other categories, I think you're seeing things move now.
Mike Beckham:
There's also in between, the intermediate future might look like people doing stages of manufacturing. So, I think we have a pretty major competitor that I think brings over stainless steel bottles, but they do all of the powder coating and all the ornamenting, they do that domestically. So, some of their manufacturing process is domestic and some of it's international.
Mike Beckham:
But yeah, so anyway, for us, we're fired up. We're fired up about, number one, let's learn how to make things. In this country, we've lost a little bit of the ability to know how to make things, and we're fired up about doing that. We think it'll really help us to make better products and to serve our customers better. And we're starting the journey with, we've leased a couple hundred thousand square foot facility, and then we've bought about $5 million of equipment. But we're going to start by supplying Walmart, Sam's Club, Amazon, Target, with made in America plastic products, and then gradually say, "Hey, how do we gradually grow into being able to do more of our product line here?"
Kirk Williams:
Very cool. Okay. Let me switch gears. So, thinking through the inventory issue of bringing in too much inventory, then bringing in too little, and all that. So, over the last couple years, did you notice that to the extreme with, let's say, consumer purchasing ever increasing? Did you notice things like stimulus bumps that some people talk about, things like that? Was that part of the challenge the last couple years, and what did that look like?
Mike Beckham:
So, two things that were challenging. One was, we sell tumblers, we sell water bottles. Usually, people will drink from tumblers when they're more stationary, more time in cars, more time sitting at a desk, more time at your house. They'll buy water bottles when they're more traveling, like I'm going hiking or I'm walking around the city or whatever. It's usually tied to how long you're spending, sitting somewhere. The less time you're sitting, the more likely you are to buy a water bottle, is the basic correlation.
Mike Beckham:
So, you can imagine that what happened with COVID and so much work from home and everybody's patterns getting blown up, is the mix of what they bought really shifted. So, that was one thing that we saw right off the bat. We weren't actually necessarily that far off in terms of how many units we sold for 2020, but the mix was completely different than what we thought. And so, that's the thing, is it's like the hard part about an inventory business is, you're not just trying to guess, hey, what's the total demand? You're trying to guess, what's the demand for each of these individual things?
Mike Beckham:
And that's every single thing you buy, you're either over-buying or under-buying, and we really had some categorical misses. Another example was, anything having to do with drinking at home, like wine and spirits products, we don't sell a ton of that kind of stuff, but that stuff went bananas during this period. Stuff that involved going to the gym and being out, or traveling to work, commuting, some of that stuff was really weak. So, that was one thing.
Mike Beckham:
The other thing we saw was, and this is, I think, for what you do, and people that are listening to this that are in the e-com industry, March 2021 through early April 2021 is just an impossible column. Everybody is going to have some really ugly dashboards for the next month or two, because, it turns out that if you just dump buckets of money in the population, that everybody sells more stuff. And so, the way that I think it functionally played out for most of the peers that I've talked to is, you went into '21 thinking, "Hey, there's vaccines. There's going to be a return to normalcy here. And everybody's fired up about that."
Mike Beckham:
And then, there's all this stimulus money that gets dropped in January, February, March, April. And March is just this unbelievable sales month, basically for every single type of company in the world, everybody who sold products in the US, they killed it. And it was a pump fake, basically. You get to May and you realize, oh, that's just a super artificial ... The reason we were up that much year-over-year, was that people just had this crazy amount of money that they got dropped on them. I mean, I think you saw it in the equity markets. I think you saw it in the crypto markets. You definitely saw it in consumer package goods.
Mike Beckham:
So if anything, what that did is it exacerbated the supply chain thing, because it caused people to order even more product like, "Oh man, we're just going to blow it out this year." And I think recently, Peloton announced that they are completely pausing production right now, because they're so oversupplied. And it makes sense, right? You get a product, you get a mix change. All of a sudden everybody's at home, so they're buying tons of treadmills. And then you get this massive, January, February, March bump, and you just go super big. And then all of a sudden, you get to May and June, you realize, okay, that was a head fake, and you're really heavy on inventory. So, those are a couple of the ways that we've seen it.
Kirk Williams:
Yep. Nope. That's great. Same. Yeah. It's funny, because it basically doesn't matter who you talk to, the story is pretty much the same, which is sometimes actually helpful, right?
Mike Beckham:
Yeah.
Kirk Williams:
The more that you realize like, oh, hey, this is what we experienced as well.
Mike Beckham:
I do think it's interesting how people are looking for brands, they're caring a lot more about brands and their values than they ever have before, or maybe in a different way than they ever have before. And I think some of the political unrest and the racial issues of the last two years have really highlighted that. And I think that that's been interesting to think through. I think the pricing thing is interesting. I mean, we have definitely raised prices, and that's been interesting to deal with, although I don't know what I would say, other than the fact that we have had to raise prices.
Mike Beckham:
And generally, there's been a lot of understanding, even from people like Walmart. It's so bad that, historically a place like Walmart is like the last bastion of inflation protection for the United States. Their buyers are just trained that costs only go one way. And we've had conversations with them where they're just like, "Hey, we get it. Your shipping is five times as expensive, the costs have to go up."
Mike Beckham:
And then the other thing that I thought was interesting, talking about the worker shortages, we really have not experienced that, but I do have some strong opinions about that. I mean, I think that there's a macro secular trend going on, that is, people are thinking about what they want out of companies differently, both as consumers and as employees. And there are some things that COVID changed, that I don't think the genie's going back in the bottle.
Mike Beckham:
One of the things that became obvious is with the racial tensions of the last couple of years, with the highly politicized nature of the United States, that people care about what values the brands that they buy from, stand for. There are brands that have been extremely vocal about taking stands on particular issues, and have had problems doing that. And there are brands that have really tried to not take a stand on things and have had an issue as a result of really trying to not deal with things.
Mike Beckham:
And I think for anybody who's trying to run a company, you really have to know what you stand for and you can't manufacture that based on what you think the public wants to hear. I think you have to really start with, why does this company exist? What do I want it to be about? What are the core values? And I am willing to have the company's success rise and fall with that, but I'm not going to try to change that around, to pander to people, to play the public perception game.
Mike Beckham:
We're just going to be about what we want to be about, but you have to be about something. And I think, if the extent of what you're about is to make money, I think increasingly it's just going to be hard. There's just not an appetite for that type of company in today's environment. And I teach up at OU, I'm the entrepreneur in residence. And I can just tell you, talking to today's college students, they are more motivated to make an impact through their careers than any group of people that I've interacted with. And there's less patience, I think, for what they view as corporate, self-serving greed, dollar motivated thought processes and organizations.
Mike Beckham:
And the way that plays out on the employment side, is for a long time, companies in this country competed on financial compensation. And if you want to be successful over the decade and decades to come, you are going to need to be ready to compete across a lot larger dimension than just how much you pay somebody. That if you think about it, what we all really want out of our work and out of life, is we want quality of life. And for sure, when we have resources, that really helps with quality of life, but quality of life is so much more robust than how much money we have.
Mike Beckham:
And in fact, I would make the argument that the relationship and correlation between how much money you have and your quality of life, is actually fairly weak compared to a lot of other things. And I'm not the only person that says this, Yale has a whole study on happiness and quality of life that says as much. And the people you work with, and do you feel connected to them relationally? This matters.
Mike Beckham:
We're in a remote work kind of generation, and I'll just tell you, it won't go well in terms of organizational culture in a lot of places, because if you don't feel relationally connected to the people that you work with, that goes against the way that we've interacted as humans for centuries. And people are going to, they're going to feel that, they're going to feel less bonded to their coworkers, and they're going to feel less satisfied with their work if they don't feel bonded to the people that they're working with.
Mike Beckham:
What you're working on and feeling like there is a compelling why and a purpose behind it, is more important to people than ever before. And if you can't provide that as an employer, no matter how well you pay, you're going to have a really hard time hanging on to people. Because feeling like your life matters, and we all have to put 40 or 50 hours a week working towards something and feeling like what that's going toward matters, is a huge part of quality of life.
Mike Beckham:
Not to mention, are you feeling empowered? Are you feeling coached? Are you feeling developed? Are you getting to work on interesting problems? Are you developing a skill set? These are the things that people are looking for. And the great resignation is really just all of that coming to a head. And certainly, some of that will normalize, we're in an abnormal period of people resigning and moving jobs. But I think all of that is part of this larger, macro secular trend of people are changing jobs more frequently than they ever have before.
Mike Beckham:
The department of labor releases statistics, you can go back 50, 70 years. This is a trendline that's just been up and to the right, the whole way. People are just, you're likely to work more jobs. You're more likely to change jobs than ever before. And even if the great resignation is a little bit of an outlier in terms of how much people are doing it, it's all part of this larger trend of, we're just more restless, professionally, than we've ever been.
Mike Beckham:
So, if you're running a company, if you're trying to lead people, you better have a compelling reason why people should want to come along and how you're going to help drive quality of life. And it's got to be more than a paycheck. That's probably one of the things I feel the most confident about in all of my conversations with other business leaders, with the people that are a part of our team. And it's very doable, but it starts with really having a clear understanding of your why.
Chris Reeves:
This has been a bonus episode of the PPC Ponderings Podcast. Keep checking back for more interviews and our next full episode. If you like what you hear, please consider sharing this with your network and leaving us a review on Apple Podcasts. Until next time, may the auctions be ever in your favor.