👋 Hello great people of the D2C Community! This is your host Berkay writing.
In the 18th episode of the D2CVille Podcast, we sat down with Izzy Rosenzweig , the founder of the home and kitchen D2C brand Browze and the next-generation 3PL company Portless . 📦
Born into a family of small manufacturers, Izzy developed a deep appreciation for hard work and entrepreneurship. He understood that customer satisfaction was the key to success in their business. So, when the industry began to change with the rise of globalization in the 1980s, his family didn't resist. Unfortunately, these changes forced his grandfather to pivot into a niche market, eventually leading to the closure of his business.
Drawing from a rich family tradition of building businesses and leveraging his network of key contacts, Izzy founded Browze in 2012 as an open marketplace. Over time, he transformed it into a more exclusive platform, prioritizing customer satisfaction above all else. Recognizing the importance of this satisfaction, he took a bold step by opening a fulfillment center in China. This move allowed for faster delivery and lower costs, and eventually evolved to be a separate business by itself, Portless.
Without further ado, allow me to share Izzy's remarkable entrepreneurial journey. Sit back, relax, and enjoy his story.
🚢 1980s and the rise of container shipping Izzy entered the D2C industry a decade ago, drawing inspiration from his family's manufacturing background. His grandfather's clothing business in Canada during the 1950s to 80s faced challenges with the rise of container shipping, prompting a shift towards niche markets.
During this shift, many local manufacturers struggled and ran out of business, and some others either specialized in niche markets or moved their production overseas to remain competitive. Izzy's family took a niche approach due to the evolving market dynamics, and he grew up with an understanding of how changes in the supply chain could benefit consumers.
Izzy was born into the right environment "I had an appreciation for entrepreneurship and hard work. Nothing comes easy." Izzy's father played a significant role in his upbringing. Together, they worked on various tasks, from material handling to drawing and cutting. This hands-on experience instilled in him a deep appreciation for entrepreneurship and the value of hard work.
Izzy understood that success doesn't come easily, and every aspect of a business matters. He learned the importance of efficiency in operations, especially in sourcing raw materials and managing inventory.
His grandfather's wisdom about inventory being "deaf" stuck with him, emphasizing the critical role of inventory management in any business.
In the world of specialized manufacturing, attention to detail is paramount, and Izzy enjoyed immersing himself in this process. He recognized that every detail, from the type of materials used to other factors like rail selection, played a crucial role in the success of the business. This hands-on experience was a valuable source of learning and growth for him.
🏄 Browze Growing up in this environment, Izzy grasped the potential of supply chain changes for consumer benefits. Izzy's interest in unique supply chains and consumer-centric business models led to the creation of Browze .
Initially importing unbranded goods from overseas to Canada and the US, Browze's transformation into a global marketplace connecting Chinese sellers with worldwide customers resulted from a meeting with Alibaba's former CFO. Browze aimed to offer cost-effective prices, maximize consumer value, and feature diverse product categories on Browze.com, reflecting Izzy's commitment to delivering value in the evolving e-commerce landscape.
Browze
Transition to a Closed Market Model Around 2016, Izzy transitioned from a local focus to a more global approach. Initially, he had been dealing with local containers, but the shift was necessary. Fortunately, their journey took a turn when they connected with advisors and investors who were senior executives from one of China's largest e-commerce giants.
Their first move was to establish a marketplace, a pivotal moment in their journey. They quickly grasped a fundamental lesson that would guide them throughout their venture: the paramount importance of customer experience , a concept not universally understood in the business world.
At the outset, their marketplace was open to anyone, like platforms like eBay, though Amazon had a bit more rigor in its approach. However, they discovered a crucial nuance: sellers in an open marketplace often prioritized sales over customer experience. This misalignment posed a challenge, as a lack of focus on customer satisfaction led to low customer retention rates.
This realization prompted a significant pivot in their business strategy. They transformed their open marketplace into a closed one, becoming selective about the sellers they partnered with and establishing stringent rules for success on their platform. This change aimed to ensure a superior customer experience, even if it meant fewer products available. In their journey, this shift represented a vital learning curve.
The transition was a terrible workload Transitioning from an open to a closed marketplace was a tough choice, but Izzy prioritized customer satisfaction over an easier path. Despite the short-term revenue impact, they committed to the change, recognizing there was no easy way out. To gain the trust of their Chinese partners, they took extensive measures, visiting warehouses, improving operations, implementing quality assurance checks, and demanding accurate product photos. Although this reduced their SKU count to 3,500, they prioritized quality over quantity.
This shift marked Izzy's first step towards vertical integration. Rather than risking customer experience by broadening their product range, they focused on their expertise and pursued a more sustainable long-term strategy for their business.
Before making the strategic shift, Browze operated in a total of 15 different categories. However, they ultimately decided to narrow their focus exclusively to the home and kitchen sector. This niche approach allowed them to specialize and excel in everything related to home and kitchen products, becoming their core business focus.
🪄 “It's the supply chain, that's where the magic is!” One significant point worth highlighting is the common misconception about cross-border commerce. Often, people associate it with low-quality products, fake images, and subpar experiences. However, the reality is quite different. Some of the world's most renowned brands manufacture their products in countries like China, Bangladesh, and Vietnam. It's ultimately up to the brand to ensure a great customer experience.
Cross-border commerce is not about the specific products being sold; it's all about the supply chain. In Browze's case, they deliberately chose not to follow the AliExpress route. Instead, they prioritized quality and aimed to stand behind the products they sold. They excelled in marketing, having accumulated a decade of experience in this field. They were proficient in creating video content and collaborating with influencers
🛩️ When air shipping became efficient… A significant transformation over the past decade took place, much like the advent of container shipping in the 1980s. Initially, cross-border air logistics were inefficient, with packages taking several weeks to reach their destinations. Tracking information was often confusing, and the overall customer experience was subpar.
However, in recent years, the model has become remarkably efficient, thanks to brands and businesses leveraging this approach. Millions of packages now traverse the globe, with delivery times significantly reduced to around 5 to 6 days for the United States, even faster for the UK and Australia, and approximately 7 to 8 days for Germany and Western Europe.
💪 Turning cross-border ecommerce into a local experience The process involves pick-and-pack operations in performance centers, where packages are customized, labeled in English, and sent out on daily flights from China. These packages are then efficiently routed through local fulfillment centers in the destination countries, minimizing transit costs and delivery times. The focus is on optimizing the final leg of the supply chain, ensuring products get as close to the customer as possible for speed and cost-efficiency.
This approach creates a local experience for customers, who receive a USPS tracking number within 24 hours, making it seem like the package is coming from a nearby source such as LA, New York, New Jersey, Royal Mail (UK), Australia Post (Australia), or DHL (Germany). This local feel boosts customer satisfaction and provides brands access to a streamlined logistics solution, a rarity in the industry until Portless emerged.
“Customer experience is everything and we hated it if we felt like we weren't delivering a perfect experience”
When Browze shifted from an open to a closed marketplace, customer experience became their top priority. The founders were deeply committed to providing a flawless experience. To achieve better control, they reduced their SKU count to around 3,500 unique products, resulting in significant financial advantages and the ability to operate with lower inventory levels due to proximity to their factories. They implemented a "just-in-time" inventory system.
To further enhance control, they opened their own fulfillment center in China, a complex process taking two years. Local advisors-turned-friends and navigating Chinese bureaucracy were instrumental in overcoming challenges. This effort led to remarkable improvements in delivery times, approximately 5-6 days to the US and 5-7 days to the UK, enhancing customer satisfaction.
Browze maintained its identity as a US-based consumer brand that prioritized design, packaging, customer communication, and the overall customer experience. This shift was challenging but transformative for customer satisfaction and operational efficiency.
😬 Challenges of a traditional supply chain For people less familiar with traditional supply chains, it's important to grasp the financial complexities involved. Consider a scenario where one is selling baseball caps. Initially, they secure a $50,000 investment and purchase inventory. However, as the business expands, inventory needs increase significantly, leading to a requirement for half a million dollars' worth of inventory.
In a traditional supply chain, this entails engaging with the factory, initiating production orders, and procuring several months' worth of inventory—precisely four months. Subsequently, the inventory is loaded onto a ship, leading to a wait of 45 to 60 days or even longer until it arrives. Only then can it be moved to the fulfillment center for shipping, all the while managing financial commitments such as employee salaries and marketing expenses. This process imposes a substantial strain on cash flow, a challenge that businesses have grappled with since the 1980s when manufacturing overseas became prevalent.
Moreover, importing goods in bulk incurs significant duties and container costs, further impacting expenses. However, the Portless model eliminates container costs entirely by shipping directly to end consumers. Import duties are often waived when shipping directly to end consumers in many countries, resulting in substantial cost savings. Shipping rates are also highly cost-effective, as packages are injected directly next to the customer and transported in bulk via airplane. As an illustration, delivering a quarter-pound item to the Continental US might cost less than $5.
✈️ Portless The transition from Browze to Portless was driven by a focus on profitability and cash flow improvement, aided by strong customer experience outcomes. Investors introduced Portless to the Direct-to-Consumer (D2C) sector, recognizing its potential in a capital-constrained environment.
Traditional supply chain challenges, such as inventory costs and shipping expenses, led Portless to develop a model that eliminates container costs, waive import duties for end consumers, and offers cost-effective shipping. Efficient pick and pack rates enhance cash flow.
Investor interest prompted Portless to emerge, leveraging its logistics expertise to assist D2C businesses. They offer direct factory-to-customer shipping, reducing overhead and enabling resource allocation for growth areas like marketing and partnerships. Portless aims to enhance profitability, and cash flow, and streamline logistics and customer experience for D2C companies.
How does Portless operate? Navigating supply chain and inventory management challenges is complex but crucial. The company's approach to assisting businesses involves several steps:
1. Analyze Shipping Costs Begin by assessing the client's shipping expenses in comparison to the model's capabilities. The model is most effective for lighter products under £5. The analysis determines immediate cost savings for some clients, particularly in shipping costs.
2. Explore Cost Factors Delve into various cost factors, including import duties, container costs, third-party logistics provider (3PL) fees, pick and pack costs, and container shipping-related expenses like broker fees, drayage, security fees, and administrative charges. Understanding total landed costs is vital, as these expenses can add up significantly.
3. Consider Capital Costs Emphasize the cost of capital and the financial implications of tied-up capital during transit. Inaccessible capital due to inventory or transit delays can hinder other essential business aspects.
4. Cash Flow Focus While D2C businesses often prioritize marketing metrics like CPC, CTR, and CPM, equal attention is needed for backend operations. Managing cash flow is crucial, as it plays a pivotal role in sustaining and expanding operations. Profitability alone is insufficient; sound cash flow management is paramount.
🏆 A Success Study from Portless There was a situation involving one customer who needed to transport 5000 summer hats to the Film Center in Florida. Initially, they were considering paying $11,000 for this shipment.
However, Portless stepped in and offered an alternative solution. The customer paid just $100 to move the hats from the factory to Portless’ fulfillment center.
Additionally, Portless’ shipping rates proved to be more cost-effective than those in Florida for delivering to the end customers.
As a result, the customer not only saved $11,000 in shipping costs but also managed to get their products to market 10 days earlier. This not only improved their cash flow but also provided faster delivery to their customers compared to traditional bulk shipping methods, which can be quite expensive.
🤔 How about the high seasons like CMBF? During the high season historically, there have been 2 to 3-day delays. Interestingly, this delay is not on Portless’ end, as they ship out orders daily. The issue lies with the overuse of USPS, Royal Mail, and similar postal services by customers worldwide. While Portless can get packages to the United States, USPS typically experiences a 2 to 3-day delay during Q4, from Black Friday to midsummer.
🤓 The future of D2C shipping If you're a manufacturer overseas, there's a better way to run supply chains. And we're very excited for these companies to capture demand and to do it in a very cost-effective way. Izzy believes that the D2C space has a promising future despite recent challenges. Publicly traded D2C companies like Warby Parker and Casper have faced difficulties due to cash flow issues, but the demand from customers remains strong. People are drawn to unique brand experiences and products they love, making the D2C market poised for growth.
What excites Izzy about the future is the possibility for manufacturers overseas to streamline their supply chains, making it cost-effective to meet global demand. Traditionally, shipping internationally has been costly and complicated, but solutions like Portless simplifies this process by enabling businesses to open up
If you reached this point, well, thank you! Please consider following D2CVille on social media and contacting us if you’d like to be a guest in one of these podcast episodes!
Visit Browze for affordable house and kitchen equipment and Portless for a ground-breaking 3PL experience!
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