Video Transcript
Dan Van Meer: Hello and welcome. This is day one of our new Pallet Side Chat podcast, vlog, video podcast. Not sure what we're calling it, but I'm Dan from ShipHero. This is Alex. We're hanging out today at the home of 123 Fulfillment and Black Wolf Nation. We're super pumped to spend a bit of time chatting. This is an idea that we came up with. We're excited to be connected with Alex. He's been a ShipHero customer since 2019, which is awesome. Using it for his brand as well as his 3PL. He's got a ton of great knowledge to share, so we thought, "What better way to do that than just spend a bit of time hanging out and chatting?" Looking forward to learning more about your journey and what got you here. We're pretty informal guys, which you'll come to realize, so our goal with this really is to be real. We know that I think, everybody that runs a brand or a 3PL faces pretty similar challenges across the board. And Alex, like I said, has a ton of good info to share. So Alex, why don't you just tell us a bit about your background? And then, maybe we can unpack your journey so far for the first couple of minutes today. Alex Lewkowict: Sure. Really excited to be starting this. Logistics has a lot of big buzzwords that people don't really know or think that they know. Like, pick and pack, receiving, and special projects, but what that all means, how it affects the challenges that D2C brands are facing today, that's what we're going to be unpacking in this podcast. I'm going to share a little bit about my story, the story of Black Wolf, and how it turned into a 3PL called 123 Fulfillment. And in other episodes, we'll be bringing in other ShipHero customers and D2C brand owners and really unpacking and figuring out the logistical challenges that they're having and the solutions that they've found through us or other means. Dan Van Meer: That's awesome, man. Well, let's maybe start with just the journey behind Black Wolf. I guess that's how you got into things. So tell us a bit about that. What does that look like? Where'd you guys start, and where are you at today? Alex Lewkowict: Sure. Right now, I'm 25, but the journey of Black Wolf goes back many years. Everything that I've done in business has been 50/50 partners with my brother, Sam. And back in high school, we were the guys always selling things. We were doing drop shipping without even knowing that it was drop shipping before it became popular, buying things in China and selling them in school. I used to resell Webkinz on eBay. Any business you can. The first of, we were doing until we came up to the time when we were ready to start Black Wolf. Now, Black Wolf was the first business that we were going to do legit. We were going to register the company; we were going to get a logo made and really make a special, unique product. That was the idea when we were really, really young, just graduating high school. Little did we know how challenging it would be, and the journey of executing on our vision to get into men's skincare with our own brand was really a huge learning experience for us. And pretty much anything that could go wrong did go wrong, but we learned a lot, and it's actually a really cool story. Dan Van Meer: That's awesome. Let's dig into that for a second, but before you do, what was your first drop ship product? Alex Lewkowict: We sold baseball hats and hockey jerseys in school. We were at the age where to buy online, you needed a credit card, and none of our friends had credit cards. We grew up in a strict house, but one thing we were allowed was to have our own credit card, and we had been saving since I was like nine years old, always working. So we would buy jerseys on our credit card and then resell it to our friends for cash for obviously a lot more. Dan Van Meer: That's awesome. That's cool. Yeah, so let's go to the early days of Black Wolf. What did that look like? Were you running it out of a garage, basement? Alex Lewkowict: Yeah, so we became known as obviously the guys selling things, and in Montreal, Canada, where we grew up, there was a guy selling a razor bump cream. It was for men, for women. The branding was really not very nice, and it didn't smell good, but the product really worked. And I've always struggled with razor bumps. Every time I shaved my neck, I always got red dots, and it burned. And it was a huge pain point, so this guy knew we were selling things and approached us to see if we could sell it to some of the cool barber shops. He was really more in aesthetician offices and laser places or whatever. So we took the product on, we tried to sell it to some of the cool barber shops in Montreal, and nobody wanted it. So we thought, "Okay, maybe let's expand outside of Montreal." And we started cold calling barber shops in the US. Again, no one wanted it, so just instinctually, we knew that there was a huge opportunity in this because it solved a real problem, and that's the foundation for any successful product or business idea. So we came back to him with this idea of, "Okay, let's make this focused on men, focused on razor bumps in really cool, sleek, black packaging and see what the response is like." So we got a friend who was a graphic designer to throw together a little brand deck concept, and we went to this guy who had the product, and he did not want it. He was not interested. I think in the meeting, Sam remembers the exact thing he said, but he's like, "This is like somebody coming to Coke and suggesting to rebrand because they can't sell the Coke bottle to a store." He's not Coke, but same idea. We decided to just do it on our own. Easier said than done, but at that moment we said, "This is not the future. There's a huge opportunity here, and he doesn't see it, so let's just make it ourselves." Dan Van Meer: So, wants you to start. Alex Lewkowict: Yes. The first step was, "How do we make an even better product for razor bumps?" So we hired a formulator, and we made a new version of this razor bump solution. That was our first product called Bump Cream. It went from a tonic to a cream, it smelt great, and it was in really nice packaging. Launched it and didn't sell any. We had washed cars an entire summer, bought a website, put it up there, got the production run done, this whole thing, and literally sold nothing. We didn't realize that you have to actually market a product to sell it, funny enough, but you really don't know. Especially back then. We were not exposed to any other founders. We were young; we'd never taken any business class. So we really had no idea that you actually had to drive traffic to a website. So we took a step back and reevaluated, started looking at some other brands on the market, and said, "Okay, maybe we need to be more than just a single SKU product. We've got to be a complete solution. Something like Proactiv, but for razor bumps." So we developed two new products. We had a face wash, a moisturizer, and this bump cream. It was going to be a three-step process to help reduce razor bumps. Again, we launched it, and really didn't sell a lot because we looked at other competitors at the time, Harry's; they were in shaving, and it was kind of different. But we looked at how beautiful their website and their offering was and their copy. We thought if we could get to that level, we'd be successful. Pretty naive of us because now we know that there's so much more involved in it. You're a marketing guy, just driving top-of-funnel awareness, bringing them into the brand, converting them, and knowing how each touchpoint is part of the customer journey. We didn't know any of that. But then, finally, when we started getting traction, we rebranded. We took about six to eight months to really nail down a marketing strategy. I actually taught myself how to buy Facebook ads. We started reaching out to people on Twitter who are CEOs of other successful brands and really getting a lot of just collecting knowledge and a game plan and really just immersing ourselves in the D2C world that we didn't even know existed back then. And then finally, it was Labor Day 2018, and as a founder, you're constantly trying to iterate and improve, and we're like, "Okay, let's just sit down. Let's make ten pieces of ad creative. Let's get ten angles down, and let's actually just put some dollars behind this and see if we can drive sales." So we did. We launched them. Nine of them didn't work, but one of them did work, and we started to get sales rolling in. And it was actually Sam who kept us really disciplined. He said, "We don't need to change men's grooming forever. We don't need to revolutionize anything. Let's get one sale every single day." And we focused on that until it was one consistently every day, never missing a day. Then, we scaled and we're like, "Okay, let's get 10, and then 20, and then 50, and then 200." And we grew the business like that, quite bootstrapped, all the way up to almost a thousand orders a day. Just iterating, reinvesting, launching new products and learning along the way. You learn so many little tips and tricks as there is with every industry. How to capture emails if they're not ready to buy yet, how to convert them to sale through SMS or through email, retargeting, what type of ads work, how to get more content, how to target properly. Black Wolf was really an exercise of analytics and testing and just incremental goals, just constantly trying to reach that next benchmark. But I think the really unique story of Black Wolf is, I would say, the vast majority of D2C founders in the era that we were building Black Wolf, like the D2C 2.0 era, was taking something that's a commodity, that's boring, getting it direct to consumer with a nice brand and nice positioning. And that was really the skill of a lot of D2C founders was the branding, the marketing, building hype, getting influencers behind it. Sam and I were terrible at that. So how are we going to crack through in a market that's competitive when we have no idea how to get football players to start using our product. This is not our comfort zone at all. So we used operations to really be competitive. And what I mean by that is how do we get our supply chain to be the most nimble? How can we launch new products in just a few months instead of over a year? How do we cash flow the business properly so that we can scale ads without having to raise money or run out of money? That's really what we focused on, and we built the business like that for years up until we did our first big round of funding. Dan Van Meer: That's awesome. Let's dig into the operations piece for a second, especially around fulfillment. In early days, what did that look like for you guys? Alex Lewkowict: We manufacture our products in Boca Raton, Florida. We were referred to a small workshop. They worked with a lot of people with developmental disabilities, and this workshop does simple kitting, and they pay these people. And then, they also have a very, very small warehouse that does pick and pack on the side. We used them up until we were about 20 orders a day. I was living in Montreal; it was remote. There was a woman, Amy, who worked there who was lovely. But as we grew, it became really challenging to have our fulfillment outsourced for many reasons. We were growing fast, so we were often back-ordered. And these big shipments would come in, and we'd have to get them out fast. We needed quick answers on inventory. We were trying to be so lean and nimble, you really need a lot of information to be able to make those decisions."Am I air shipping bottles? Am I not really?" And it just became a huge pain point for us. And my passion since I was a kid was trucks and construction equipment, and forklifts. My mom used to take me to Home Depot on the weekends as an activity to watch the forklift. So we finally had a golden opportunity to run our own warehouse. How cool would that be? So I overruled Sam on this. He was nervous about it, but I took a lease. I got a one year lease on 1200 square feet in West Palm Beach and hired Amy from this other place to run it. So we have one employee in just around a thousand square feet of warehouse and three pallets of product. That's how we started. Dan Van Meer: Just picking away from the pallets? Alex Lewkowict: Yeah. We were using ShipStation back then. Just super, super simple. She brought an old desk from her parents' house. I had a Rollo Printer from Amazon, as basic as we could get because we had no money to spend. Dan Van Meer: Now, I know you guys obviously made the decision to manage fulfillment yourselves, which leads into the second half of the journey with 123, which we'll get to. But I think a lot of brands often wonder about what that line is between when it makes sense to self-fulfill versus either look at a 3PL or scale operations. If you were to give somebody advice today and say up to X orders a day or a week, you should really think about doing it in-house. What would that number be where it's way more efficient to just manage it yourself? Alex Lewkowict: You can't put a number on it. It's headspace. So my passion is logistics. Even if we were outsourced, I would dedicate that much headspace to managing the 3PL relationship. Having it in-house became a huge advantage for us, because it was my expertise and my passion. If a founder, like I said before, is more brand and influencer focused, I think it's a massive waste of time to even think about bringing that in-house. Because now you have to deal with warehouse employees not showing up, missed picks, accurate inventory, it becomes a full-time job. And once you're hiring someone for a hundred thousand plus to run that operation, if you're in your earlier phases, it doesn't pay. And then obviously for bigger brands who have a whole operations team, first of all, still a headache. But then also you don't get the advantages of a 3PL of being scalable, scaling your volume up and down. There's a tremendous amount that goes into warehousing, upfront investments, managing employees, and carrier negotiations. You really have to be saving yourself a lot of money to bring it in-house. Dan Van Meer: But if I'm doing ten orders a day, am I better off doing it myself, or should I be trying to find somebody to do it for me? Alex Lewkowict: I think at that point, if you don't have a lot of inventory, it's probably better just to ship it out of your living room. I think as much as 3PLs say unless you're doing 50 orders a day around, you're not going to get the attention that you need or want in those early phases. And you also learn a lot by doing it yourself. In the early days of Black Wolf, Sam and I used to Google "Street view" every single one of our customers' addresses because, first of all, we were so excited that someone would buy from us. But also you just learn so much about your customers. I knew every customer's name, up to a thousand customers, because every sale was electric. It still is. We did all our own... Sam and I did the customer service up until we were shipping 20,000 orders a month, and then we got someone else to do it. But just having that connection with the customer is so important. And I think trying to get a big 3PL to pack your order with that level of love and care is really tough at a small scale. At a big scale, you can really strategize and achieve awesome unboxing experiences with an outsourced partner. And there are some that are better than others, but really in the early days, if you want to blow a kiss in the package and put a sticker, just do it out of your living room. You'll be happier. Dan Van Meer: Realistically, I'm sure you learned a lot about just customer mindset and the buying process. I'm sure you developed a real empathy and understanding of your customers from doing all that hands-on stuff and having those conversations, yeah? Alex Lewkowict: Oh, yeah. I think a big part of the success of Black Wolf was how close we were to our customers. I'll give you a great example. Our face wash was originally designed to help with razor bumps, but then we noticed people would buy the face wash and the moisturizer and not the razor bump cream. Why? We discovered it was because they had oily skin. We didn't even know what oily skin was. We're very simple guys. Apparently, there's oily, dry, and then there's like ten things in between. But we made an oily skin bundle with the face wash moisturizer, and it became our best seller. Then, customers started saying, "Your face wash dried me out." So we developed a dry skin bundle. And now, no one complains about that problem again. Then, people started saying that the face wash really helped with their acne. So then, we thought we want to make a body wash. What if we turn the face wash into a body wash? Similar active ingredients and make it a body wash that also helps with back acne. Number one best seller. So just that iteration. After our body wash became our best seller, we thought, "Okay, maybe a wash helps if you have mild acne, but what if you have more severe acne? Maybe you need a topical." Guys don't want to put cream on their back because then you put cream and then a shirt, and it doesn't feel good. So we did a quick dry spray. Just all of that customer feedback we've used to iterate and really improve the offering and get closer with our customers. Dan Van Meer: Yeah, that's great. Sorry, we've done a bit of a rabbit hole there, which I think we'll probably do pretty consistently in our conversations. But you were talking about your first warehouse at 1200 square feet. Maybe quickly just take us through the journey from 1200 square feet to where you are today, and then let's leave a couple minutes to talk about how you got into the 3PL side of things as well because that's really interesting. Alex Lewkowict: Sure. From June 2019 to June 2020, in that first year, we went from that 1200-square-foot warehouse to four 1200-square-foot warehouses in that same complex. The brand just completely blew up that year, and we kept having the issue of having no space. Climbing over pallets. I didn't want to buy a forklift, but then I realized that I had to buy a forklift, and I had to buy racking. Dan Van Meer: You weren't pumped to buy a forklift? Alex Lewkowict: I was pumped about it, but not about buying it. That $4,000 forklift that I bought off OfferUp lasted us three years. Best purchase ever. But yeah, just tremendous growth with Black Wolf, and then I was at an inflection point. I needed to get a big warehouse. Obviously, our leases were up. I was tired of signing these, basically, storage unit-type warehouses. And also, we saw an opportunity after talking to a ton of D2C brands; everyone hates their 3PL. So we were like, "Maybe instead of getting a slightly bigger warehouse, we could get a much bigger warehouse and bring one or two other brands in to make it make sense." Started looking at warehouse space. This was peak COVID, so it was 0% vacancy, and we were looking at around 10,000 square feet. Nothing in that range or stuff in that range that doesn't have loading docks. I needed a loading dock. We had dealt without having one for years. So finally, I would drive around. I found a big warehouse for rent. 35,000 square feet, took a big risk. They wanted three months security deposit just because of our credit. Scraped together the cash and put the down payment. Very scary, but best decision I ever made because that was exciting. But when we moved our four packed units into this place that we're sitting in now, I was like, "Holy shit. We went way too big." It was like a tiny corner. Dan Van Meer: How many square feet are we in today? Alex Lewkowict: This is 35,000. And by 3PL standards, that's tiny. But when it was just Black Wolf in here, I was like, "Wow, this is way too big. It's $30,000 a month in rent. How are we going to make it happen?" But we had the pressure. We had to make it happen. And from March of when we moved in until the December of that same year, so what's that? Seven, eight months. We went from shipping 20,000 orders a month for just Black Wolf to we shipped 286,000 packages that December out of two warehouses, not just in Palm Beach. We also got a warehouse in Irvine, California. And my brother's a sales machine, and we not only paid for the rent, but we built an entire 3PL out of this place. At some point in that journey there, we transitioned from ShipStation to ShipHero as a SaaS customer. And the reason we did that was we knew that we wanted to build a 3PL and also Black Wolf way out of cruise ShipStation. Inventory control and efficiencies with pick and pack and bulk ship and rate shopping alone would pay for the monthly fee. So we paid the extra 200 to go from brand to 3PL, and then we just started onboarding 3PL clients from day one with ShipHero. Dan Van Meer: That's awesome. That's great. I'm just scribing lots of notes here while you're chatting. There's so many things I'm pumped to unpack more with you. But if I just looked back at our conversation today, it's interesting. What I heard is that you guys started off with a great product idea and focused on building a brand, which is amazing. I think a lot of your success comes from just scrappiness. I love how you talked about teaching yourself how to run Facebook ads. I know part of your success has come from the network that you and, specifically, Sam worked hard to build. And we can touch on that some other time, I'm sure. And I love that point about how you guys stayed close to the customer. I think there's probably a whole other conversation we could have about product development and how those feedback loops helps you guys iterate faster and get better. So I'm pumped about where we can go next. I'm excited, man. I appreciate you taking the time to chat today, and looking forward to covering more of these topics for sure. Alex Lewkowict: Absolutely. And now, I'm excited to share more of my journey, and then also, every founder has unique journeys but also very similar issues. So I'm excited to bring on other founders and other people from within ShipHero as the 3PL side and really share those stories. And I'm sure other people can learn a lot from issues that other brands have had and how they've solved them and different solutions. Dan Van Meer: Yeah, absolutely. Well, if you made it this far, we appreciate you taking the time to hang out with us today. Like we said at the beginning, we're not holding back on anything. Alex has done a lot right, but from chatting with him, I know that there's been some lessons learned along the way, and we're keen to unpack that stuff as we have more of these conversations. So stay tuned. Lots more to come. We'd love feedback as well. If there's anything you want to hear us cover or if you have questions for Alex, we'll post some information in the show notes about how to get in touch with us, and we look forward to seeing you next time. Thanks a lot.
