Bruce Borenstein: 08:16
Oh yeah. Yeah. We it this was. I have to tell you, let me just preface that and say it was a real challenge because we were the first company to ever offer a consumer open air headset product. People did not know what that was. And so the real challenge was educating folks to say, hey, you know, you can actually listen to music or a podcast. Of course, back then, I’m not sure the podcast was that big, but without having to stick anything in your ear. And it really resonated when we start to talk about connecting as to who does that really benefit. And certainly for people that were doing outdoor activities from a personal safety standpoint, to be able to be aware of your surroundings. Big deal. Right? The comfort factor, I, I don’t know about you, but I know a lot of people who get what’s known as earbud fatigue. They stick earbuds in their ear, and after about a half hour or an hour, things start to get a little uncomfortable, a little itchy.
And sometimes you’ll see runners out with one in, one out, and then they switch them because they are uncomfortable. You don’t have that issue. And then lastly, which is also important is one of health because earbuds, unless you’re religious about cleaning them, will potentially pick up bacteria that you then introduce into your ear canal leads to ear infections, ear wax build up. So that that was really the the, the challenge. And from the standpoint of. Getting placements, obviously one of the, the, the key ones was, was Best Buy. And in fact, if you go into Best Buy today, although I, I, I can’t say that I’ve had anything to do with it because I haven’t been there in a number of years with, with shocks, but they have a big end cap display featuring all of the shocks products and it’ll, you know, started out very simply with getting a skew or two into the assortment. And it kind of grew from there. And the thing that is cool is that there are, you know, the headphone business is a very, very big business, about $13 billion, but it’s also a very competitive business.
And, and I don’t know the exact count today, but there’s many hundreds, hundred, maybe a thousand different vendors that are out there selling headphones. So it’s very hard to differentiate. And so you have to be very clear about what your value proposition is to the consumer and why they should buy yours over somebody else’s right. Sometimes it’s a brand name that they feel comfortable with. Apple, probably the best known in that regard. And they’re the number one seller of headphones in the world today. But then there’s other little niche pieces. And and because the business is so large, if you can carve yourself another niche, you can build yourself a nice little business. And that’s probably true in many industries where if you can define what makes you different, unique, better than a competitor, you got an opportunity to capture some of that market share. You don’t have to be the market leader to have a successful company.
Dr. Jeremy Weisz: 11:36
Yeah. I mean, Bruce, you know, now you go to Costco, right? And and they’re everywhere. but getting those first few is not easy, right? I mean, when you when you have the first few is like, oh, we’re in Best Buy, we’re in Costco. Like, okay, they’re legit. But the first few talk about maybe some of those first few, how did you actually get in touch and get in, get in the door?
Bruce Borenstein: 12:01
Well, I’ve always used manufacture. Well, it kind of goes back to my history. I was a manufacturer’s rep for many years. I owned a manufacturer’s rep company in the consumer electronics business. I represented a number of different audio companies before I kind of moved over to the, as I like to say, the dark side, you know, became a manufacturer myself.
And one, one of the things that you take advantage of by using manufacturer’s reps is because they’re selling multiple lines of products to customers. They have relationships that they’ve built over, usually over many years with those customers. And so it’s not just you knocking on the door trying to get an appointment, which is many times 50% of the battle, just getting in the front door, they already have access and being able to have access is huge because now you have an opportunity to at least potentially make a presentation and then share your passion with the person on the other side of the table.
And really, that’s kind of how it starts. But recognize that getting the placement is only the beginning. And in fact, the tougher part, I mean, certainly getting in the front door is tough, right? But then after you get on the shelf, now, what are you going to do to create the sell through? That’s going to mean continuity so that that product can continue to grow and be successful. And that’s a challenge unto itself. A lot of it revolves around, you know, certain marketing activities, which, you know, earlier when I was working, social media was not really a. I didn’t really exist. And and now, of course, it’s so much easier to, you know, to get out there via all sorts of, you know, the various social media platforms, whether it’s Facebook, Instagram, YouTube, TikTok, they’re all out there. And but the challenge again, because that’s a competitive space, you got to do creative things to make yourself stand out and be different.
Dr. Jeremy Weisz: 14:10
What did you do, Bruce, at the time to help with sell through? Like you said, there was no social media. What did you do?
Bruce Borenstein: 14:17
Well, basically, and fortunately we had a good partner in Best Buy and they worked with us. And, and really, and I think this is true, whether it’s a big company or a little company is they know what works best with their customers. I’ve always taken the tack that you. You ride the horse in the direction it wants to go. And and and I say that because too many salespeople go in and maybe it’s because of either their own opinions or what their management thinks, and they want to tell the customer what they think is going to work in their environment, right?
And they’re going to support that with dollars. But really, I think you’re doing it backwards. I think what you really want to do is you want to ask the customer, what is it that resonates with your customers? Because everybody’s different. Everybody has.
And, and, and it may be, you know, that they have a, an email campaign that they know is successful. Their weekly insert, you know, in the newspaper, although newspapers are that’s kind of getting passe. So, you know, in today’s world, it might be a banner ad on their website that works. Obviously, everybody responds to a A sale offer, right? To get people to to be exposed, you know, to their product for for a first time and work with that customer in the development of the message. And typically, you know, three bullet points because people’s attention span is very short. What are the three real key, you know, like, and I just shared what whereas well, open air benefit, what that benefit was, you know, from a safety aspect, from a comfort aspect and from a health aspect.
Dr. Jeremy Weisz: 16:10
Do you remember what do you remember what Best Buy? I mean, one, like, I gather like partnerships keep me keep coming up as a common theme, right? And so like, tell me if I’m understanding correctly, you’re a manufacturer’s rep, you rep a lot of different products. You form these relationships because you know, there’s tried and true proven product and you, you’re, you know, kind of in touch with different retail stores and chains and things like that. And then you have an idea for an innovative product with shocks. And so you have these relationships. You still have to you still you, you have a little advantage to get in the door, but you know, it’s still competitive. So you get in the door at Best Buy and there’s that partnership. So they’re willing to spread the word, your relationship with them, what do they do? Like what what do you partner on? What kind of campaigns do they run? Is it like in-store? Is it TV? I mean, they have obviously a lot of buying power.
Bruce Borenstein: 17:10
Yeah. So and again, you know, it a lot of it obviously has to do with what kind of marketing budget you’re going to be able to provide to support them. Right. And I’ve always taken the tack particularly very early in the game, is you can’t be fixed into a. I have to make this amount of margin in order for, you know, me to have continuity in my business. And that’s certainly very, very important. But very early in the game, I’ve always taken the tactic that if I can break even, right, or even if I lose a little bit of money and I’m building, I have a longer term goal. You know, as I like to say, it’s a marathon, not a sprint. And if you’re not flexible in recognizing who you’re dealing with.
I mean, some customers, obviously you want to do more for than other customers. Why? Because the upside is that much greater. So, you know, taking that into account, my attitude was, I like to say my favorite word is yes, I want to be able to come. If they ask, say, okay, this is a program that we want to put together. Can you support it? I want to get to yes. And as long as it’s not totally out of whack, I, I probably will say, yeah, I’ll do it because I want to have every opportunity to start to gain traction early in the game because I know that’s going to pay dividends down the road.
Dr. Jeremy Weisz: 18:34
Yeah, it’s really interesting at that point because I remember Bruce, I, I saw Guthy-Renker speak and if people don’t know, they have a lot of brands, one of them’s Proactiv. And he talked about how they would lose money on the marketing and it would pay back after I forgot whatever it was like.
Bruce Borenstein: 18:56
Yeah, yeah.
Dr. Jeremy Weisz: 18:57
36 months. But they would know their lifetime value. So they go, okay, I’m willing to spend more than every single person out there and even lose money because they knew their lifetime value and they’re willing to wait and be patient. Right. And that’s a compelling argument for, hey, Best Buy, we’re going to spend, we’re going to contribute X amount of dollars. And they’re like, okay, if you’re going to do that, Bruce, like we’ll, we’ll run the campaign. At that point, had you figured it out like early on, like what that looks like because you, you kind of have to know the metrics.
Bruce Borenstein: 19:31
Yeah, absolutely. You do. And here’s the other piece too, is that you cannot have a fixed method, like if you have multiple SKUs in your product line, which obviously we did. Right? And so you’re going to key in on one and you’re going to take that, that attitude of, okay, I might lose money on this piece. But the other piece is you have other products that are also being included that your, your margin. So don’t look at everything in your product line as a standalone, because at the end of the day, you’re going to add it all up. What is it in the aggregate? You know, what, what, how did you do at the end of the year when you know, you did your PNL and you said, oh, it didn’t turn out so bad? Yeah, I lost a lot of money on that one SKU, but because I’m doing these upper end, you know, these higher margin SKUs, when you blended it all together in balance, it was the right move.
Dr. Jeremy Weisz: 20:22
Yeah. And I do want to talk about customer support. I think they still well, to your point, like I bought these, right? And my wife and daughter are like, oh, those are really cool. I want to get another pair for running. And so now they have a pair each, right? And so when you talk about lifetime value, you know, I bought these, but there’s three pairs in our household right now right from that one pair. But what I have to say is the customer support, and I know this is this comes from kind of your values of really valuing customer support, right? So I had an issue with one of it because like it just stopped downloading and literally I was like, oh yeah, we’ll, we’ll send you a new pair. Right? They, they helped me troubleshoot it. Talk about your philosophy on customer support and what, what are some things you did early on.
Bruce Borenstein: 21:12
That is my philosophy by the way. My philosophy has been, and I will tell you, one of the things that I did a little different with open sound. I did do it in the beginning with Shokz. And then they, when I left, they changed it. I offered a lifetime warranty on the product. Okay.
And and I’ll be honest, more often than not, we’re not talking about super big ticket type product. So. Most people, and this has been my experience, most people do not take advantage of the lifetime warranty, meaning that if they have an issue, maybe they go out, you know, they they buy another one or whatever.
But, but we’re again talking about how do you differentiate yourself from everybody else is I’m one of only two companies and I’m the only company in the open air headphone space that has a lifetime warranty. Right? It breaks it sometimes breaks the tie because a customer is going to say, oh, wow, I have a lifetime warranty. Geez, it must be pretty good stuff if they’re really to put their money where their mouth is and back it up and in that vein. Okay. And I’ll tell you the other reality, even if you only had a one year or two year warranty, a smart company, if they get an irate customer on the phone or an email or whatever, and says, oh, I’ve had this problem with your product.
Dr. Jeremy Weisz: 22:29
I was super nice about it. Bruce just.
Bruce Borenstein: 22:31
But I’m just saying. Yeah, you know, people do get a little irate. My attitude has always been, you know what? Take care of the customer because it cost you. Again, we’re not talking about a $50,000 automobile here. That’s a different ball game. I’m talking about a maybe $100 headphone right. Replacing that headset in terms of the goodwill that you get from the consumer. Because now, maybe just like in your experience where you told, you know, the rest of your family about how you love these open air headset, they tell people, man, this company, they really took good care of me.
Right? And the opposite is true too, because if you basically tell them the pound sand, you know, some of these people, man, it goes up on social media. That’s the big downside. And you get panned, right? Or they bought it on Amazon and you get a real one star nasty because I mean it’s just so my attitude has always been is that it probably in the long haul is less expensive, right, to take care of the customer than it is to, you know, say, oh, well, I’m going to lose money because I got to send them a replacement pair. You know, it’s like, what was it, the old Fram oil filter. You can pay me now or you can pay me later. Right? Same deal.
Dr. Jeremy Weisz: 23:51
I do want to get to OPN Sound and and why you started that. But before we do talk a little bit about I mean, you grew Shokz to, you know, multiple tens of millions of dollars and then sold it. But I thought the original agreement you had was very interesting. And that was almost in the agreement. Can you talk a little bit about that?
Bruce Borenstein: 24:13
That wasn’t the agreement. So when I joined shocks back in 2011 and I had the meeting with the with the Chinese partners who were also the manufacturer. My agreement was what’s known as a put call. Right. And it was a five year contract. And what that basically means is that at the end of that period, okay, if I wanted to sell, they would have to buy. But conversely, if they wanted to buy, I had to sell. They wanted to buy the the trajectory was moving ahead at an exponential rate. I had taken him to about 25 million in sales in five years. Of course, now I think they did last year about 250 million. So had I not had the put call and had the ability to stay, I think I would have stayed.
But, you know, they obviously decided that. And now the company is basically like 100% Chinese. You know, everybody who works for the company sell every aspect of it is, is Chinese. And that, I think was always the intent was to what I call China fee the company. And and obviously they continue to be successful. So, you know, they have good people and they make a good product. And I’m still friends with the CEO, the guy who originally, you know, brought me on, you know, we have a good relationship, even though, you know, we’re competitors, although I’m, I’m clearly the David to their Goliath.
But but that aside. It it it at the time for me, it was a good deal because I had a nice equity stake in the company and it was all sweat equity. It was all based upon my building the business since they had no knowledge of the consumer electronics business really to speak of, they were a OEM manufacturer for bone conduction headphones and microphones for military and law enforcement purposes. And they wanted to get into consumer business because they at least were wise enough to see. That’s where the. That’s where the pot of gold laid. And. But they needed somebody to take him there. And, and that was me.
Dr. Jeremy Weisz: 26:31
At the end, that conversation. What did that look like at five years? Was there an option for you to go listen, I’m going to buy you out. Or was it more like, if they want to buy me out, then that’s the way it’s.
Bruce Borenstein: 26:43
And it’s a nice buyout. You know, it was a, it was a seven figure, you know, buyout based on a independent valuation of the company at the time.
Dr. Jeremy Weisz: 26:54
So there wasn’t like a predetermined.
Bruce Borenstein: 26:57
No.
Dr. Jeremy Weisz: 26:57
No, no valuation, like in the first.
Bruce Borenstein: 27:00
Year at the time of the execution of the sale. Got it. So it was, it was, it was fair. It was definitely fair. And. You know, it it, it’s like anything else, you know, when you go into a arrangement like that, you, you’re doing it with your eyes open. So you know, and hey, it just as easily could have not done well, you know, and then it would have been a different story. Right. So but, you know, looking back, I would say it was the best experience of my working career and opened up so many more doors for me that I’m enjoying today, which probably would not have been open to me had I not had that five year stint at shops.
Dr. Jeremy Weisz: 27:48
Pretty amazing. I mean, that’s incredible growth in just like a short period of time. Yeah. Let’s talk about open sound a bit. I’m going to pull up the screen and then you know, why start open sound and talk about some of the products.
Bruce Borenstein: 28:05
Why did I start OPN Sound? So when I left Shokz, I took some some time off and my wife basically wanted to get me out of the house and said, find something to do. And I said, geez, what can I do? Oh, how about another headphone company? And with Shokz kind of as my model, I was the first one to actually come out with. Now remember, shocks was only making bone conduction headphones, which you were talking about earlier. And bone conduction basically delivers audio by creating vibration against your cheek bone.
And these special transducers speakers that vibrate create the sound that goes through your cheek bone. Hence bone conduction so that you can listen. But the thing with bone conduction, not that it’s bad, is that it creates vibration. And the louder you make it, the more vibration it creates. So we were the first ones to actually introduce directional audio, which is basically air conduction, just like regular speakers that you have in your home or really on any audio device where you know you’re listening. Those are all air conduction, but these were also special speakers, transducers that created the sound without the vibration, but directed that sound directly to your ears. So you heard it, but nobody else heard it.
Dr. Jeremy Weisz: 29:27
So like the Aria Pro that we’re looking at.
Bruce Borenstein: 29:30
That would. Be an A, that’s a directional audio product and everything in our line.
Dr. Jeremy Weisz: 29:36
So it doesn’t actually go in the ear. It’s just no, no.
Bruce Borenstein: 29:38
It doesn’t go in the ear. It it, it, it, it sits outside the ear canal. And like I say, based on those special speakers can direct the sound to you. You hear it, nobody else hears it.
Dr. Jeremy Weisz: 29:54
Yeah.
Bruce Borenstein: 29:56
I have bone conduction as well. And and, you know, it’s funny you mentioned about your swimming headset. Swimming headsets have to be bone conduction. And the reason why they have to be is that all these other headsets are all Bluetooth, right? But Bluetooth and water do not mix. When you stick your head underwater with a Bluetooth device, you would lose the signal. Okay.
And so what you have is you have a bone conduction headset that has a hard drive that you upload your whatever you want to listen to. And you’re actually listening internally with the stuff that you uploaded to the hard drive via bone conduction, because air conduction also won’t work well underwater. Because you have that space between that speaker and your ear, but now it’s being filled with water. So it it bone conduction is the solution to a swimming headset as an example.
Dr. Jeremy Weisz: 30:52
So Bruce, with the open sound, I’m just curious about the price points too, because I know you made a definite conscious decision on that because, you know, just like from what I researched on these, just as high quality as anyone’s out there, but they are significantly less expensive, right? Because like these, if you look at the arias, it’s $70. Yeah.
Typically, I’d get something similar for 150 to $200. Same thing with the swimming ones here. It’s $130 at this point in time if you’re looking. Later on, I can’t, you know, ten years from now, who knows what it is. But right now these are going to be double almost. Right. So talk about your philosophy and thought on the pricing.
Bruce Borenstein: 31:39
Yeah. Remember when I was saying earlier that, you know, the differentiator, how do you differentiate you so that people give you an opportunity to be considered as their product purchase, as you know, as it pertains to going out and buying an open air headset. My M.O. was to have a high quality product comparable to shokz, because shocks makes very good product, but I want to deliver a better value proposition to the consumer so that I could get into the conversation when they were making a decision. And now I’m sure I make. In fact, I know I make less margin on my product than shock snakes on theirs. Okay. But again, it was to set the table. And and, and to deliver a comparable product, but at a lower price.
And, and, and that’s been effective. I mean, it, it does seem to resonate with consumers assuming that, again, you know, when they’re doing their research, that they come across OPN Sound and see what we’re offering and say, oh, wow, just like you just said, seems to be a lot less money is what is that all about? Then we got the lifetime warranty. So they hopefully feel comfortable, you know, 30 day trial period. You buy it, don’t like it, send it back. Right. So we try to make it as easy for the consumer as possible to give us a shot. And we think that if they give us that shot that they’ll be happy with their purchase.
Dr. Jeremy Weisz: 33:07
I do want to talk about distribution for a second before we do though, talk about the product line and how you decide on certain you know, if you’re looking at the directional audio here, you have certain, you know, products here, right? You can, you could have just done one, you could have done two, you could have done three. I’m, you know, talk about your, your thought process on the different products that you have available.
Bruce Borenstein: 33:31
Sure. So, you know, a lot of companies in the headphone space will have, you know, take more of a kind of good, better, best mentality. That’s not unusual. I took more of an application driven meaning, what are you going to use it for? Okay, so swimming headset, obviously swimming. You got up on the screen. Now my chat pro that’s communication headset for doing, you know, Zoom calls. You got a home office, you want to do a Zoom call. This connects directly to your computer with that little dongle. So you don’t have any interference. And it’s got a noise canceling boom microphone air conduction right. Not bone conduction. So that’s the application for that. Then we have our we have the dash light product, which is a product that has a bunch of LED lights on the on the back.
There it is on the back of it. Right. What was that all about? Well, the idea was, okay, if you’re a runner, right? Or a walker or a biker and you’re doing stuff at night or early in the morning when it’s still dark out, how about personal safety? So you have these LED lights that allow you to be seen. Yeah. You know, when you’re doing stuff out at night, that was the application. And then we have application for entry level price points. So like I have two products, one bone conduction, one directional audio called the Aperto and Osso. And that was for a price point because, you know, opening level price point. And I always use shokz because they’re the £800 gorilla in the open air headphone business.
Their opening price point is like 79.95. The mine is 35. So, you know, again, it’s it’s and actually I think because their entry level price points, they’re also my biggest sellers. So. It really is. What is it that doesn’t create, you know, particularly when you’re a startup, right? You know, cash is king. You have a limited amount of funding with which to drive your business and you want to be smart with that. And inventory is a big cost. And so you want to make sure that you’re not duplicating your efforts by having multiple SKUs that basically do the same thing. Can on, on, on one that’s an application specific and, and put your money there that, that, that’s kind of the philosophy that I had.
Dr. Jeremy Weisz: 36:00
Yeah, yeah. I was just at a conference instead of getting Ubers, I rented a bike and I was a little worried about actually riding at night, and I did have my headset, but if I would have had this dash light one, I would have been less concerned.
Bruce Borenstein: 36:17
It’s kind of cool too, because you can turn it off and then it’s just like a regular headset. Yeah. And you can make it on all the time, or you can even have it flashing, which I think is probably the safest mode to be seen. Not unlike, you know, when you’re driving around town and you see those stop signs now that have the flashing red lights to make it very obvious that you’re supposed to stop. So, you know, that was the mentality with coming out with the dash light.
Dr. Jeremy Weisz: 36:42
What was your distribution strategy in the beginning with open sound?
Bruce Borenstein: 36:47
Well, and I think this is true for a lot of startups is that you don’t necessarily be nice, but you don’t walk into Best Buy right away and get placement on the shelf. It doesn’t happen that way. So you gotta start, you gotta walk before you run, so to speak. And sometimes you gotta walk a long time, right? What’s wonderful now is that online marketing, right? Like Amazon, like walmart.com, like sharper image, like bestbuy.com, target.com. That’s virtual real estate. And, and what does that mean when you’re dealing in a retail store where you have a fixed amount of square footage?
That means there’s a finite amount of product that can actually get placed in that store, right? And typically today, most bigger companies will want you to kind of prove your worth and justify them making the commitment to put you on a store shelf by your online sales activity. Right? And, and it’s very easy to get started online. I mean, Amazon, you can be up and selling product in 15 minutes. Doesn’t mean you’re going to sell a lot of product, because then you got to put some money behind that too, right? In terms of keyword search and advertising and couponing.
And, you know, there’s all sorts of various marketing that, you know, that they put in front of you, which is where they make their money, right? And, but you get the opportunity to start to get exposure for your product based upon being out there in these various marketplaces that are pretty readily available to anybody. So my recommend, you know, when I, if I’m talking to somebody who’s doing a start up consumer product, I don’t care what the consumer product is, the first place you want to be is online. And the other piece of that is you got to get reviews. And most of these Amazon, walmart.com, they all have.
Dr. Jeremy Weisz: 38:49
Here’s your Amazon store, by the way. It looks nice. Yeah, yeah.
Bruce Borenstein: 38:53
What they do is they allow you to spend money with them on. In the case of Amazon, it’s called the vine program, where you can start to get reviews for your product, right? And what your goal is, is to get four star and above reviews and their program, they have a, a. A whole bunch of folks who have signed on to their program to become review people and then put, they get your product for free and they write a review in the product and they post it. You don’t get to influence what they write. Okay. So it’s a true, you know, kind of verified purchase review, if you will, worked for you, works against you. It also, you don’t know what the review is necessarily from an expectation standpoint.
For example, that a product that might be $35 is going to have the same level of performance that a product that sells for $100, that may come across in, you know, in the review as well. But it really helps to. Set the table with marketplace reselling and. There are many marketplaces and that are not nearly as visible as, say, Amazon and and Walmart. I have I, I do a few of them. I have a company called Stadium that runs a incentive program for corporations for their employees, where they get points and those points can be turned into products on their online marketplace, do very well with that. And so, you know, there, there are obviously the, the, the, the most visible on Amazon, probably, I don’t know, from a market share standpoint, probably does 70% of all online sales.
I’m, I’m sure there’s stats out there that says that. And so you got you, you almost have to be by default, you have to be on Amazon. And. But again, like I said, it’s very easy to get set up. The challenge is how do you get it so that you get yourself. And there are a lot of companies out there that specialize in driving Amazon sales for you. So you may not be the expert, but there are experts who are happy to partner with you. Right. In some cases, you pay them a retainer. In some cases, you can work out programs with them that they truly are a partner. They buy inventory and they share in the profit that’s made on the sale. So, you know, there’s a lot of different avenues that you can go down to, to, to try to do it the right way.
Dr. Jeremy Weisz: 41:33
And Bruce, we’ll talk about PH Advisors because you take on, you know, clients and you help them. And I’m sure you get this question from your clients as well as stuff that you think through for open sound. At what point do you decide, okay, we are going to go from online to offline and actually get distribution offline? I mean, you’ve you’ve done this. I mean, you’ve proven this out obviously at previous companies with open sound. What do you think? Okay. Is it a certain revenue size is a certain what what are some of the things that you look at?
Bruce Borenstein: 42:06
I will tell you, it’s not so much as a fixed number. Let’s use Walmart as an example. Okay? Because Walmart basically uses the sales that are generated on the walmart.com site to use as a measuring stick to decide whether or not you warrant coming into the store. And so that metric is something that they have. And it, it’s different based on the category of product, right? And they don’t tell you what it is. So. But what will happen? What is true. I’ll give you another example. Even on Amazon. So Amazon has two different types of selling opportunities. One is called Seller Central also known as 3P and another one that where Amazon actually buys an inventory of your product for 1P.
If you’re doing very well on 3P, they will solicit you to become a 1P vendor. All right. Good news. Bad news to me. The bad news is you lose control of your product. Why? Because Amazon does what they want and they sell what they want. Amazon will never agree to a what’s called a map program to kind of sustain a level playing field for all your retail partners. They don’t agree to do that. And. That upsets sometimes many of your retail customers just like Costco can do sometimes. Right. And so sometimes what you do is you come up with a, a, a derivative of a product that may only be sold, say, in a Costco. And you can do the same thing on Amazon, right? It’s not available.
Anybody else except them, they can do what they want. It doesn’t upset your overall retail distribution. So that’s another strategy. So so these are all the things that, you know, like I say, that you have to be wise to. And if you’re just starting up, you know, my goal, like a PH Advisor is, is to avoid the pitfalls, making the mistakes, right? That one makes when you don’t know how to play the game. So my job, a lot of times, let me help you play the game because I’ve experienced it. I’ve made those mistakes. Let me let you learn from the mistakes that I made. I’ll give you to this day. Shokz does not have a 1P Amazon account. They still say Seller central. Why? Because they want to stay in control of the product.
And oh by the way, they’re the only ones that sell Shokz on Amazon. These Shokz. Why? Because once you open up the floodgates and you got a lot of other people that’s selling your product and you lose control of what those price points are, it rapidly spirals downhill, especially if you have retail customers, because I will tell you, you go into a buying office and you sit down. One of the first things that they do is they open up Amazon and they look at that price point, because you may tell them that your retail price is 99, but they see it being sold on Amazon for 79. Guess what? When you talk margin with those guys, you’re talking about the $79 price, not the $99 price.
Now, the other good news about selling online is the fact that you’re making a retail sale. That means you make retail margin right now. Obviously, you have other costs associated with doing that business. But I will tell you, like in my space, in the headphone space, the typical typical expectation on selling a major retailer on this category of goods is 50% margin. Okay. So if you have a $100 item and you’re selling it to Best Buy at 50 bucks, okay, but then you have your online sales and you’re selling that at $100, but you only have $30 of marketing expense. Guess what?
Making a little more money there, right? So, so that that’s another, you know, kind of thing to evaluate when you’re putting together your market plan and your rollout to, to, to your earlier question about, well, when do we go to retail? You know, when do we go into, into the brick and mortar store? Some people decide, you know what, I’m never going to brick and mortar. They really, they, they just they say, you know what? The online business is good. I’m in control. I make good margin. What do I need that headache. Okay. That’s a legitimate a legitimate decision.
Dr. Jeremy Weisz: 46:20
Bruce, for PH Advisors who are ideal clients for you there.
Bruce Borenstein: 46:26
Yeah, I like working with startups.
Dr. Jeremy Weisz: 46:28
So does it have to be like a physical goods or electronics? Like what what.
Bruce Borenstein: 46:33
My, my sweet spot has been. Obviously, I’ve been in the consumer electronics industry for 30 plus years. So that is definitely my sweet spot. But I would say any consumer product, hard goods, you know, I don’t do anything with software. It could be a home appliance. It could be a. You know, anything that’s that is a physical product where there’s inventory involved. And, and the company maybe is, you know, has just done, you know, friends and family to start the business to get money. They’re maybe going after some seed money or maybe they’re a little bit more developed and they’re doing a series A.
I would say, you know, from a pure startup play to where they’re even thinking about, they, they haven’t even come to market with their product yet. And, and developing the plan to go to market. I like helping with that. Or a company that’s been in the space for a couple of two, three, four years, but they’re looking to scale now and, and they just need some, some input. I don’t do enterprise. that, you know, that’s not my forte. But it’s really small business. That that would still be looked at as being a kind of a startup business.
Dr. Jeremy Weisz: 47:57
Bruce. I have one last first of all, thanks for sharing your, your lessons and your journey. It’s, it’s really instructive in a lot of ways. And my last question and I want to just before I ask you to encourage people to check out Beyond the Startup book, check out OpnSound.com. You can also check out phadvisors.com is around beyond the startup, which is. You do talk about being comfortable with the uncomfortable. So I figured we’d, we kind of, you know, finish up things there. And yeah, obviously that comes from beyond the startup, what every founder needs to know after launch. Yeah, talk about that.
Bruce Borenstein: 48:34
Very good point. Particularly, you know, we were just talking a little bit about, you know, like raising money. There are certain things in this world that people just find it very difficult to do. They’re very uncomfortable asking for money. And that means, you know, and typically when you’re in a startup, it’s usually friends and family or family office. You know, it typically startups are not necessarily going the venture capital route because they’re not ready for that. And so that that’s an uncomfortable situation. And in the sales world, I, I don’t think you can find a salesman out there who finds anything more uncomfortable than cold calling. Right. I mean, it’s very uncomfortable. But as I say, how do you get comfortable with the uncomfortable?
It’s the Nike way. Just do it right. And so the more you do something that may have been uncomfortable to you, the more comfortable you get in doing it. And that comes with experience. And recognizing that the first couple of times that you put yourself in those situations, you’re not going to have a great feeling in your pit of your stomach. But the more times you do it, the the more comfortable you get, and not only more comfortable you get, the better you get at it. So that that’s typically that’s what I mean about getting comfortable with being uncomfortable.
Dr. Jeremy Weisz: 49:54
Is that the self-talk you tell yourself? Yeah, when you’re doing something the first time.
Bruce Borenstein: 50:00
Yeah. You just gotta, you gotta put yourself in that situation. Because if you don’t, it’s. And it kind of all ties together because how do you even how do you become passionate about doing that? Well, it’s the same thing. If it shows how uncomfortable you are in doing it, you’re not necessarily going to make the connection that you want to make. But if you can show you and this requires also knowing your stuff, right?
Don’t, don’t go at it without being fully cognizant of what it is that you want to communicate to that person on that other side of the table. Because the, the, the more you know, right, that you won’t make yourself just the worst thing that happens in those situations is you you get questions that you can’t answer. And then you start to get really uncomfortable. So be prepared. Right? The old Boy Scout motto, be prepared. And and if you are prepared, I think that comfort will will come.
Dr. Jeremy Weisz: 50:59
Yeah. No that’s good. That’s great advice because I in my mind, when I’m uncomfortable with something, I equate that with growth. And so I’m like, okay, I’m uncomfortable, but a part of me is going to, you know, when I expand my comfort zone, I’m going to grow from that. So everyone check out Beyond the Startup and Bruce, I appreciate the knowledge, expertise.
We’ll see everyone next time. Bruce, thanks so much.
Bruce Borenstein: 51:23
Hey. Thank you. I appreciate it.
