Leveraging Data to Evaluate and Acquire FBA Private Label Brands

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Sebastian Rymarz is the Co-founder and CEO of Heyday. Heyday partners with sellers to acquire, launch, and incubate successful brands on digital marketplaces like Amazon. Its mission is to help e-commerce entrepreneurs reach new heights by providing the capital, tools, and insights to accelerate their brands in the marketplace ecosystem.

Prior to starting Heyday, Sebastian worked as the Chief Business Officer for Fundbox, a financial services platform that specializes in providing revolving lines of credit to entrepreneurs.

Here’s a glimpse of what you’ll learn: 

  • Sebastian Rymarz shares the factors that have sparked the recent interest in FBA private label businesses
  • How Sebastian’s experience at Fundbox informs his work at Heyday—and what he loves about the Amazon space
  • Heyday’s process for maintaining an entrepreneur’s enthusiasm and passion after acquiring their business
  • How Sebastian finds founders looking to sell their businesses
  • Sebastian explains how he evaluates a business for current and future value
  • What Heyday does to differentiate itself from other buyers
  • The future of investors in the FBA private label space

In this episode…

With the current growth of the FBA space and the increased number of private label brand owners looking to sell and exit, it can be difficult for a buyer to evaluate which businesses to acquire. So, how do you determine the current and future value of a brand? Which criteria are most important? And, how do you choose one brand over another? 

According to Sebastian Rymarz, the best approach is to leverage the power of data science to assess a business’ value and future potential. At his firm, Sebastian utilizes data to evaluate two essential pieces of criteria: defensibility and opportunity. With this data-driven approach, he can effectively decide which business to acquire based on the quality of its products, their differentiation in the marketplace, and more. 
In this episode of the Buy Box Experts podcast, James Thomson In this episode of the Buy Box Experts podcast, James Thomson interviews Sebastian Rymarz, the Co-founder and CEO of Heyday, about how his firm leverages data from Amazon to evaluate and acquire FBA private label brands. Sebastian talks about how he finds businesses for sale, the criteria he looks for in a brand, and Heyday’s equity offer to sellers. Stay tuned. 

Resources Mentioned in this episode

Sponsor for this episode…

Buy Box Experts applies decades of e-commerce experience to successfully manage their clients’ marketplace accounts. The Buy Box account managers specialize in combining an understanding of their clients’ business fundamentals and their in-depth expertise in the Amazon Marketplace. 

The team works with marketplace technicians using a system of processes, proprietary software, and extensive channel experience to ensure your Amazon presence captures the opportunity in the marketplace–not only producing greater revenue and profits but also reducing or eliminating your business’ workload. 

Buy Box Experts prides itself on being one of the few agencies with an SMB (small to medium-sized business) division and an Enterprise division. Buy Box does not commingle clients among divisions as each has unique needs and requirements for proper account management. 
Learn more about Buy Box Experts at BuyBoxExperts.com

Podcast Episode Transcripts:

Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.


Intro  0:09

Welcome to the Buy Box Experts Podcast. We bring to light the unique opportunities brands face in today’s e-commerce world.

James Thomson  0:18  Hi, this is James Thomson from the Buy Box Experts Podcast. Today’s episode is part of a special series of interviews that we’ve done to dive deeper into the recent phenomenon of private equity companies and FBA aggregators investing in private label brands that are leveraging the Amazon sales channel. As part of this series, we interview a wide range of investors, brokers, consultants, and entrepreneurs that have recently sold their private label brands. We peel back the layers on what’s happening in this new investment space, and look at how private label

brands are finding financial success through the building and eventual sale of their online businesses. For three weeks from mid February through early March, we will release a new episode every weekday on this topic, sit back and enjoy today’s episode. 

Hi, I’m James Thomson, one of the hosts of the Buy Box Experts Podcast. I’m a partner with Buy Box Experts and the former business head of the selling on Amazon team at Amazon, as well as the first account manager for the Fulfillment by Amazon program. I’m the co-author of a couple of books on Amazon including the recent book, Controlling Your Brand in The Age of Amazon. Today’s episode is brought to you by Buy Box Experts. Buy Box Experts takes ambitious brands and makes them unbeatable. When you hire Buy Box Experts, you receive the strategy optimization and marketing performance to succeed on Amazon. We also support investors with due diligence services. Go to buyboxexperts.com to learn more. Before I introduce our guests today, I want to send a big shout out to the team at Disruptive Advertising. For off Amazon advertising, Disruptive Advertising offers the highest level of service in the digital marketing industry, focusing on driving traffic, converting traffic and enterprise analytics. Disruptive helps their clients increase their bottom line month after month. Check out disruptiveadvertising.com to learn more. Our guest today is Sebastian Rymarz, CEO and Co-founder of Heyday. Heyday partners with sellers to acquire, launch and incubate successful brands on digital marketplaces like Amazon. The platform is being built using technology data and operations tailored specifically to marketplace commerce. Prior to Heyday, Sebastian worked for Fundbox. A firm specializing in providing revolving lines of credit to entrepreneurs in full transparency to our listeners. I am an advisor to Sebastian and Heyday. Sebastian, welcome. And thank you for joining me today on the Buy Box Experts Podcast.

Sebastian Rymarz  2:44  

James, thanks for having me. And thanks for having us.

James Thomson  2:47  

So let’s talk about all these FBA private label businesses. They’re a hot commodity today. And yet, what’s happened recently to create so much interest in these firms. These firms have been around for 20 years since the beginning of the Amazon Marketplace. But investors have really only started paying attention recently. What are your thoughts on that?

Sebastian Rymarz  3:06  

Yeah, it’s interesting, I think, like most interesting questions, it’s a complex system. There’s not a simple answer. Cause and Effect is a little complicated, but a few factors. One is the scale of the opportunity. Right? So this went from you said 20 years ago, it’s a small marketplace, to it’s a large marketplace to oh my gosh, there’s 300 billion of gmv. Right, right, all of that accelerated by COVID. You know, what did the McKinsey report 10 years of COVID 10 years of e-commerce penetration in three months time? So I just think it’s a completely different scale of opportunity than even was a few years ago. Okay, that’s gonna attract investor interest. 300 billion of gmv. That’s massive. 

James Thomson  3:50  

That’s a big number. Yeah.

Sebastian Rymarz  3:51  

It’s a big number. I think the other is the secular trend. So not only is it big, but it’s growing at faster than the rate of ecommerce growth. Right, which that’s an important thing, right? digital marketplaces are gaining share of e-commerce. I think in 2019, Amazon grew at like double the rate of e-commerce growth, right? also big By the way, that trend just makes a ton of sense. Like, why would I want to click on a different Instagram ads and go to eight different websites? Why wouldn’t I rather have one stop shopping, okay. And the data edge that a platform like Amazon has, and its ability to use that to personalize the experience. And you know, ecommerce is still a physical business and economies of scale matter and the ability to deliver in one or two days matters. So all of that really points to this trend continuing. And I think people are seeing that. And by the way, by that trend, I’m specifically talking about digital marketplaces. I think another thing you can point to is this sort of like realization of the value of an Amazon account. Okay, look, it’s easy to take things for granted. But I think most things at one point in time were an innovation or realization. And I think realizing, Okay, wait a second, there’s all this traffic coming to Amazon. And it’s searching for keywords. And that’s pretty predictable. Yeah. And then there’s all this organic shelf placement, you can think of it as digital shelf placement, right? And that leads to traffic. And so then you start looking at things like, well, what, what accounts for your digital shelf placement, and it’s all of these intangible assets that have to do with the account, right, from reviews to its history, etc. And I think you start to look at it that way. And you realize, Oh, this is different than buying just any other e-commerce business, you know, there’s ways to underwrite defensibility, in that digital shelf placement or in that revenue stream. And I think like, you know, that reminds me a lot of I before becoming an operator and spending six years helping build Fundbox, I was an investor and I spent a lot of time doing splits, called special situations, investing spent a lot of time and credit in new emerging ecosystems. And one of the things like, if you look back to software, like, it wasn’t a no brainer that a bank would lend to a software business, you know, banks will lend to businesses that have hard assets, and banks will lend to this.

James Thomson  6:18  

What are the assets? When you’re an Amazon seller, it’s a lot harder to see a wallet in your hands?

Sebastian Rymarz  6:23  

Well, right. And where I was going with the software analogy, it’s like, then there was this realization, well, wait a second, that contract itself is an asset, and there’s a recurring cash flow stream there, and you could underwrite to it. And so in a similar way, I think there has been this realization about the value of this Amazon asset. And that’s a special thing. Look, I think, another thing I would point to, is there was a successful proof point in the market. And that’s through SEO. Okay. I think like people talk about and if you’ve heard this expression, like the four minute barrier, four minute mile barrier, and that goes back to this idea that like, you know, humans have been trying to basically run a four minute mile for ages. And then finally, this guy, Roger Bannister, sometime in the 1950s, or 60s, does it and then that same year, like a ton of other people do it, because he proved it was possible. And I think, look, you know, props to Thrasio, they went out there. And they weren’t the first right. There were others ahead of them. But they were first to do it successfully. And it’s very impressive what they achieved. And I think that opened a lot of eyes and then made it possible. And I think for investors especially, that’s a validating data point, you know, and you could point to other things you can talk about, Well, listen, there’s now a, there’s an m&a ecosystem of brokers. And that’s grown a lot. And, you know, transferring Amazon accounts from one person to another is easier. So there’s all these other factors, you know, I’m not going to point to one or two, I think it’s a combination of all of them. And of course, all of it kind of accelerated by by by COVID,

James Thomson  7:55  

you didn’t come up through the Amazon system as an FBA seller, you you were an investor, and then came to the Amazon space. Let me ask you what, when you look at what’s going on, in the private label space for these Amazon sellers, what are some of the surprises? Or what are some of the issues that surprised you the most about what’s going on in this subculture of entrepreneur? Yeah, well, listen,

Sebastian Rymarz  8:16  

let me just start and just touch on your first point, you’re right, I didn’t come at it. As an Amazon seller, I didn’t grow up in e-commerce, I spent the last six years helping build a business Fundbox, which revolutionized access to credit for entrepreneurs, many of whom are Amazon sellers, and also other small businesses, right. And we built this solution that allowed entrepreneurs to access credit, literally in 30 seconds, okay. And we did that by tapping into this tectonic shift in the data landscape that was happening. But I have a point in saying all of this, so just bear with me for a moment, at the at the highest level, what we were doing at Fundbox was deploying capital, data and technology to help transform an entrepreneurial ecosystem. And that’s how I view what we’re doing at Heyday is we’re taking capital data and technology and using it to transform an entrepreneur ecosystem. In this case, it’s the digital marketplace economy. Okay. And, frankly, what drew me to the space James and his I don’t know if I’ve ever told you the story, frankly. But we were actually pitching Amazon execs in late 2019 on embedding our credit solution at Fundbox into their marketplace, and just a couple realization realizations hit me in that conversation that really set me on this course. And one of them was, yes, Amazon’s an impressive company. Yes, this is an amazing and huge marketplace that’s growing quickly. But what we’re really looking at here is the world’s largest retail economy. That was one realization. And then the other realization was if you looked at the sellers on this ecosystem, okay, and if you just kind of rank them by estimated revenue, they exhibit a power law. Just tribution right like, like most marketplaces, you know, it’s something like, and I’m going to be a little bit loose with the numbers. But something like 90% of Amazon sellers do less than 100,000, or revenue, something like 98.5, do less than a million somewhere around there, right? And but here’s what’s interesting, if you look at that top one and a half percent, no one’s doing 20 billion of revenue, or 10, or five, or even one, and maybe this year, there’ll be a couple that cross the 1 billion threshold. But that to me, was surprising. Because although Amazon has lowered the barriers to entry for competition and made it much easier, right, today, you and I can go on Alibaba, we can source a product and slap a label on it, it doesn’t take a lot of money, and we can start selling doesn’t mean we’re gonna be successful, we can start selling. But there’s still an advantage to scale. Right? If we, for example, have sourcing agents on the ground, if we have an industrial design team, if we have quality assurance, we have scale with our freight forwarders, all of those things are going to lead to better outcomes. So the realization was, whoa, this is an economy that is massive, growing quickly, and in the early days of institutionalization. So anyways, that’s a little bit of the backstory I wanted to touch on. Because you may in the audience may be wondering how I found my way to this space. I think as far as the question around, kind of what surprised me. Look, I’d say I wasn’t so much surprised, as I was impressed. You know, I spent the last six years working with entrepreneurs. I loved it, and I still love it. That’s why I was excited to get back into it. They’re scrappy, they’re hard working, they’re imaginative. And frankly, they have a lower ego than most folks I know. So it’s just been more of that, and very exciting.

James Thomson  11:44  

To make this marketplace work, there has to be a lot of manufacturing capacity available for small entrepreneurs. And when you look at all these private label brands, there are many of them started off by getting on a plane going to China going to some big fare, finding a manufacturer and as you say, creating a situation where they’re white labeling something as their own, and that that’s fine. But that nonetheless needs entrepreneurs who are willing to take risks and willing to try new things out. How does an investment group like yours, leverage that enthusiasm, and be able to take it to the next level?

Sebastian Rymarz  12:18  

Yeah, well, okay, first of all, and I’ll say this politely and respectfully, of course, but but we’re not an investment group. And I think it’s a really important point to make. Because there’s really nothing about what we’re doing. That’s an investment group. You know, I don’t think you would call Procter & Gamble an investment group, or Unilever or Shopify, or Amazon. Right. We have nearly 50 people today. And I’d say maybe four or five have investment backgrounds, but but plenty have supply chain operations e-commerce background, so I just started SharePoint. Fair point. And, and I think, and I think as far as, you know, what was the question of leveraging? How do we leverage the various units?

James Thomson  13:01  

Yeah, because quite frankly, you know, these small in small entrepreneurs are seeing opportunity. They’re taking risks, they’re they’re finding opportunity to build product that is meeting some new need that may not otherwise be there. As you take brands to the next level, how do you also capture all of that enthusiasm and all of that manufacturing capacity and willingness for people to take risks? What does that mean for a company like yours?

Sebastian Rymarz  13:29  

Yeah, well, listen. So I think first of all, one of the things we always talk about, and are just very fearful and mindful of is like, we cannot lose that entrepreneurial energy and passion, once we acquire a brand. Okay? Like those entrepreneurs, the reason they found success, and the reason they’re selling is because of that energy. And that’s a very difficult thing to bottle up. But it’s very easy to go acquire a business, and like, break everything into an assembly line, and like, but we do do that, right. We have an operations platform, we have a technology platform, we have a growth platform, but at the center of our model is a brand management team. And we really try to frankly, we want entrepreneurs to stay on and build their businesses within, in many cases, and we do have examples of that. But for us, you know, how do we do it? Well, we just put a lot of focus against it. And then I think what our opportunity is, is to take what the entrepreneurs created, okay? And then help accelerate it. Okay. And, and, and help grow it. 

James Thomson  14:40  

So Sebastian, you talk about all these amazing entrepreneurs. Talk to me a little about where you’re finding these people. How are you finding them? No, I look at all the aggregators out there right now, a few months ago, everybody was going to the brokers, and quite frankly, that’s a lot of people looking at the same deals. How do you think about the process of finding entrepreneurs who are looking to sell their business? How do you look at the process of finding the right kind of companies that makes sense for your firm?

Sebastian Rymarz  14:59  

Yeah. So So So look, when when we started, we worked almost exclusively with brokers. Okay, just a very easy way to get started. And by the way, we still work very closely with brokers, frankly, even more closely than we did before. And they’re great partners. But, but the thing, the thing that’s been so amazing is over the last several months, you know, honestly, something like 80% 90% of our deal flow has been organic inbound to our website, just from folks hearing about Heyday referrals, it is truly insane. There’s too much for us to process like we’re actually passing off opportunities to brokers, because we just can’t get through them all. We can actually drink that fast. And so it’s it’s a great problem to have. And I think look, I think it’s, you know, I think it’s because our you know, the words getting out there about us great brands know that Heyday is serious buyer, well capitalized, very seller friendly, and frankly, great brands know that Heyday if we love the brand is going to pay more than anyone else, because our platform, and the investments were making afford us the ability to do that. But there’s another thing that, you know, we’ve been slowly talking about with our entrepreneur partners and the entrepreneurial community, we haven’t really gone public with it today. So I guess this is going public with it, James here. And that’s that we let our entrepreneur partners invest or take Heyday equity as part of the purchase consideration.

James Thomson  16:24  

Okay, all right.

Sebastian Rymarz  16:25  

And that’s a really important point, because there’s a lot of talk in the space about multiples going up. And you know, when we can speculate it’d be fun to speculate kind of where the secret systems going whether multiples are three times SDE or EBITDA, or four, or five or even eight, they’re not going to be 25 or 35, or 40, which is where platforms trade. And to us, that’s sort of like not fair, why did the entrepreneurs leave so much value on the table. And so we give them an opportunity to participate in it by taking Heyday equity. And frankly, like, we want, again, like I said, we want our entrepreneur partners to be our largest investor. So, you know, we talk about our mission being to help ecommerce entrepreneurs reach new heights, and we mean it, this as a whole different brings a whole different meaning to the second bite of the apple, where you may sell your business, and you may have an urn out over a short period of time. But if you’re now owning a piece of the marketplace, and you’re able to participate in what hopefully one day will be a big payday for everybody, when when you go public. Now that that’s very exciting for everyone.

James Thomson  17:32  

Very cool. Well, let me ask you this. When you look at private label firms today, and they jump into this market, how do you see private label brands getting their head around the idea that at some point, they could build up to be big enough that they could actually sell? I’ve worked for so many private label sellers who get into this because they can create a job for themselves. And yet, over the last couple years, they’re starting to realize, wait a minute, I can actually sell and make a lot of money. It’s the strange disconnect between why they got into the business and why they may now be getting out of the business?

Sebastian Rymarz  18:10  

Well, I don’t know that all of them think that they’re getting out of the business, because I think many of the entrepreneurs we speak with, you know, for them, it’s just a way to de risk, right? Like, think of it this way, okay, you’ve built something. Now, that’s something. And by the way, before there was a market for acquisition, that business was effectively worth the cash flow that it was generating? No, there was no way to capitalize that cash flow, right. And there was no like, necessarily enterprise value creation. Now there’s a market now there’s enterprise value. So here I am an entrepreneur, building a business, enjoying it, growing it, and then I’m like, Wait a second, I’m sitting on something worth $10 million. And $10 million is maybe a lot of money to me. In fact, when measured against all of my assets, $10 million, maybe 98% of my net worth, well, I don’t think anyone would go put 98% of their net worth in any one stock, right? Or in any one asset. And so there’s sort of like a desire to do risk. And it’s irrational desire to do risk, right. But then a lot of the same entrepreneurs, when we asked them, What are you going to go do this, I’m going to go do it again. Because this is what I love. So I don’t necessarily think that those are in conflict with one another, at least from our experience, what we’ve seen is a lot of entrepreneurs de risking, and then going and do it again. And frankly, we’d encourage that right? Like that’s a you know, that’s a that’s a prudent thing to do.

James Thomson  19:32  

So let me ask you this. You see so many deals today cross your cross your plate. How do you evaluate a company and see not only is it a good business today, but it has a lot of future runway, using the kinds of assets that you can bring to the table?

Sebastian Rymarz  19:49  

Yeah, look, I mean, I’ll, I may be a little a little cagey about what I share here. I don’t want to give away the secret sauce. You know, I’ll say a couple things. First of all, at Fundbox I had a driver’s seat View the power of data science, okay. And we’re bringing that to play here at Heyday when it comes to evaluating firms, okay. And one of the big benefits of the Amazon ecosystem is the power of data. On the competitive universe and customer feedback, there’s just so much you can learn, you just have to make the investments, right, you have to put the resources into learning it. Okay, so we’ve done that. And we mined and dry insights from the massive data set. And it’s actually a fairly sophisticated process that said, It boils down to two simple things. Okay, we evaluate defensibility. And we evaluate opportunity, okay. And when we talk about defensibility, we’re talking about things like what’s the quality of the product, okay, I don’t care if a product has 100,000 reviews. And, you know, the most amazing margins and trends, if they have a low quality product, which by the way, like that typically won’t happen, those are in conflict with one another. But if it’s a low quality product, like, it’s just hard to get excited about that, especially if you don’t have a game plan on improving that. So at the end of the day, like, you know, product quality matters, that’s our view. And if even if it doesn’t matter, in the short term, it’s going to matter in the long term, okay? product differentiation matters, I can’t tell you how many businesses that we’ve looked at where it is, let’s call it reseller 2.0. It is a product that is identical to 30 other products on the marketplace, rolling off the same assembly line with just a different label on it. Okay. And frankly, it may have more interesting account attributes, right? more reviews, better reviews, etc. But at the end of the day, that’s hard to get excited about. Right, because there’s not much product differentiation, again, I think in the short term you can get excited about, but in the long term, it’s not there, you know, vulnerability of listings, position is something we evaluate. I think when it comes to that’s all things that kind of factor into defensibility. And I think the other the other thing to focus on here is opportunity, what can our platform and Heyday do for brands, our operational operational platform, or tech platform or growth platform? What can we do to improve, okay, and we’re building a platform such that brands are worth more inside of Heyday than outside? And, you know, that’s what I’ll say on that.

James Thomson  22:17  

So while you mentioned some of the aspects of your business around how you do things, talk to me a little bit about how you make things interesting for buyers, to get them excited about selling specifically to Heyday.

Sebastian Rymarz  22:29  

Yeah, I think what I think what all buyers will tell you is that the most exciting thing is a big price. And, and it kind of starts there, and I think we are competitive. And when it comes to brands we like and I think we are more selective than others, when it comes to brands we like we pay more. And again, we can afford to pay more, as I mentioned before, because of this platform investments that we make. Now, as far as our process and how we differentiate. Look, you know, there are people talk about speed and nightclothes in 30 days, I closed in 25 days, like we’re fast, okay, we’re as fast as the fast we can close in two weeks, we can typically will close in three weeks. But like I don’t think a day here a day there is going to be the differentiator, I think seconds to value, I think is trust, okay, because at the end of the day, there’s a lot of diligence. There’s a lot of contracts, but at the heart of it all lies trust, okay, and the seller has to trust you. And I think we’ve done I think we’ve been very trustworthy. And we’ve done a great job as we’ve engaged with sellers to, you know, earn their trust, build their trust, and then ultimately keep their trust, okay. And so that’s a very important point, because things come up, right things come up, after the APA is negotiated and signed, things come up during diligence. And, and again, if you have a trusting relationship to kind of fall back on that’s, that’s what’s critical. And that’s how we like to differentiate. We’re also very seller friendly. You know, our lawyers have told us we have the most seller friendly APA, doesn’t mean we do but that’s what we’ve heard. And that’s what we’ll strive for. And we’re not going to nickel and dime that just like we don’t think that’s the right approach to the market. And so yeah, I’d say that’s how we differentiate.

James Thomson  24:12  

So what do you think will make your business successful in the long run? How do you see FBA investors getting their value out of the growth effort that they’re putting into their portfolio brands?

Sebastian Rymarz  24:22  

Yeah. 

James Thomson  24:24  

we’re kind of at that stage right now, where there are a lot of new companies who have come into the space that are buying up brands, and it’s exciting, exciting times. But in the next two years, a lot of things will probably change, as it becomes more apparent that there are companies that know what they’re doing, and there are companies that don’t know as much of what they’re doing. Take me through your thoughts.

Sebastian Rymarz  24:45  

Yeah. Okay. So a lot to unpack there. Let me start with, like, you hit on some interesting points about how this all will evolved. And it’s fun to play Nostradamus so so let me dangerous was fun. Let me try to play I think, you know, you mentioned there will be some failures. I cannot agree more, I think there will be a lot of failures. I think there are a lot of teams that underestimate the operational complexity. And I think the view this as an investment operation, and it is anything but Okay, wait till they start drowning in purchase orders. So I think that there will be failures, there have been failures in the past. And I think a big thing, there’s under estimating operational complexity. By the way, the flip side of that is I’ve also seen e-commerce and operational teams that have no investment experience. And so how can you possibly acquire a business and think about risk reward if you have no one in your team that has experience in that? And I think people will make mistakes? And if you buy wrong, yes, no matter how well you invest in the operations, it’s going to be tough. Okay. So I think there’ll be a ton of failures, I think there’s going to be a lot of winners. Look at the CPG ecosystem. It’s not like there’s only five companies. That said, James, I think that it’s not going to be winner take all, but I do think it’s going to be leader take most capital, which you also see in the traditional CPG world, like, Look, Procter & Gamble, in Look, I mean, you know, I’ll be plus or minus 10 20% off here. But I think Procter & Gamble is like a $300 billion company, and then go look at Unilever, they’re like, roughly half that value, and then go look at a business like Colgate palmolive. They’re like, roughly half the value of Unilever and, and you, but there are a ton of cpgs. But there are a few that have commanded most of the value and most of the capital. And I think that that’s what’s going to happen here. I think that it’s not winner take all there’ll be a lot of winners, but it will be leaders take most capital, I think there’s going to be specialization, by vertical by type of business. I think that has to happen. I think, you know, there, there are folks that say like, you know, how can you possibly make this work without specialization? And I don’t, I don’t like by that there’s a lot of economies of scale and leverage. And, you know, for example, like, what is owning tide detergent have to do with owning razor blades? Like those are two very different verticals. And they exist within a company. Yep. So. So I don’t think that like that that’s required, but I think it will happen. And I think there’s advantages to it happening, specialization, by geography, by vertical, etc, I think platforms. And by the way, I think those leaders, so you know, I mentioned leaders will take most capital, and this will get to my, to your first question around, you know, how, how, basically, we’re going to succeed in the long run, right, and how other firms will succeed in the wrong room, which is, I think the leaders are going to be the ones that invest in a platform. So look, I think there’s a great analogy to be drawn here with the traditional CPG ecosystem. The Procter & Gamble’s of the world, the reason a brand is worth more inside of Procter & Gamble, than outside of Procter & Gamble, the primary reason there’s a lot of reasons why, but the primary reason is because their distribution, the relationships, they have the shelf placement, they’ve guaranteed like, you know, that is that is a difficult asset to replicate. Okay. And here’s the thing, though, that’s traditional physical retail, now you move into the digital marketplace economy, okay. And the Internet has basically changed the calculus of distribution, it’s less important, right? And so now you have digital marketplaces, the companies that win, there are going to be the ones that invest in technology, okay, they’re gonna be the ones that invest in brand, and creative and operations, okay. And so it’s almost like the architecture, the platform, you need to win on a digital marketplace, like Amazon is different than the win the one that you need to win in a physical retail environment. Okay, but that’s not to say, you can’t, you know, you can’t sell into physical retail, and also in a digital marketplace, that’s not what I’m saying. You, but there’s no way you can win on both, you can’t be the best at both. Right, because ultimately, your organization is tooled for one of those ecosystems, okay. So I think the businesses that win are gonna be the ones that invest in the platform, okay. And that’s what we’re doing. Okay. One of our first hires was a CTO very experienced one. We’ve been building our tech team, it’s really big already in a big portion of our company. We’re making those investments in the platform, our operations team is huge. We’re making those investments in the platform. And I think that’s how you build an enduring business here, okay? Because then here’s what that here’s what happens, multiple start creeping up, and eventually they’re going to be a lot higher. And it’s going to be hard to make money with the high multiple, unless you have a platform. And one of the interesting things about this ecosystem is because multiples are low, even today, I think they’re very low relative to the value there. And because capital is cheap, relatively speaking, you know, we’re living in a very capital rich world. stimulus, those two forces together are creating a massive subsidization of that platform. Now, some people will take that, like what we’re doing, and invest in the platform. And eventually, when those dynamics go away, when it’s a lot more competitive, the folks with the platforms are going to win. Now, there is another way to play this. And I think a lot of people are playing this as a trade, they see it as a financial arbitrage opportunity. Okay? Which by the way it is, because when you buy businesses for three, four or five times, and then you can trade for 2030 times like, that’s like the world’s biggest valuation arbitrage right now, I think the issue with thinking about it as a trade and thinking about it short term is that invariably, you’re going to underestimate the operational complexity, you’re not going to make the necessary investments and either you’re going to get tripped up by it, or just as bad. Once the world turns to very competitive. a year from now, two years from now, three years from now, you’re not going to have an edge and you’re not gonna be able to compete. Alright, so I think the winners are gonna be the ones that invest in the platform to take advantage of those dynamics. 

James Thomson  31:09  

Sebastian, I want to thank you for joining us today on the Buy Box Experts Podcast. For those of you interested in learning more about Heyday please visit heyday.co. Join us next time on the Buy Box Experts Podcast.

Outro  31:23  Thanks for listening to the Buy Box Experts Podcast, be sure to click subscribe, check us out on the web, and we’ll see you next time.

Meet the Speakers

Sebastian Rymarz

Co-founder and CEO of Heyday

Buy Box Experts
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