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🌊 Cutting Out the Real Middleman

🌊 Cutting Out the Real Middleman
By Open Water Weekly • Issue #17 • View online
My name is Jacob Peddicord and I’m the Editor at Open Water Accelerator. Today I’m joined by Jeremy Cai the CEO of Italic. In the age of thousands of cookie-cutter DTC e-commerce brands, Italic stands out. Check out their store if you don’t believe me. Instead of expensive socks, what you’ll find is hundreds of luxury quality products at commodity prices. Keep reading to learn how and why this came to be.
Here’s a summary of what we learned:
  1. 🏆 Find new business models that let everyone win.
  2. 🎡 Create businesses with flywheels.
  3. 🎨 True Passions are rare. If you have one, make it your career.

Jeremy Cai🗣️ 
How do you think differently about the future of e-commerce? 
There are two things that are interesting about the way we approach the industry. The first is how we approach the problem at large and then where we think the industry is going. 
On the first end, when people start a business in e-commerce, it’s typically to find a high-margin product. At Italic, we come from an opposite approach. My family has been in manufacturing for 50 years. It’s honestly a horrible business to be in, very low margin, very competitive, and your clients can leave you any second. You produce finished products for brands that will sell them for 5 to 15 times what you charge. For Italic, it was more so how do we empower manufacturers to become merchants of their own? 
We believe if we can provide them with the technology, payment orchestration, operational network, and, most importantly, access to the global market, they can deliver the same quality and design as a normal brand. We’re able to deliver two to three times higher earnings per unit.
That leads me to the second point. When people first started selling products online and building brands, the narrative was about cutting out the middleman. Obviously, the middleman that they were talking about cutting out was the retailer. What they’ve done is replaced those Nordstrom’s and Targets with digital versions of retailers, which are Facebook and Google. It’s the same price point, level of quality, and cost of goods for the customer, but it’s sold to you online. 
The future lies in going back to that original vision for e-commerce. We can make these products better quality for a lower price and ship them to you efficiently for a better customer experience differentiated from legacy incumbents.
How does the membership fee factor into your strategy?
The way Italic works is like a digital version of Costco, where we provide this annual membership, and in return, you can shop unlimited products. Our spin on it is that we found the same manufacturers as these high-end brands. We monetize through this membership fee, so there’s no need to monetize the product side aggressively. We’re able to offer prices that are sometimes 70% or 80% less than direct to consumer brands.
To our members, it’s really a value play where you get the same level of quality and design as you expect from a great brand, but at a price point that is much more in line with getting a good deal.
How did you get your first customers at Italic?
When it comes to marketplaces, there are two ways to think about it. Customers could refer to the supply side of your business, where you’re servicing your merchants, or your end customers, which is who buys the product. 
For Italic, I think of our first customers, not necessarily as end customers, but instead, we spoke with 150 or so manufacturers, and only two or three said yes. That was the hard part for us. We think about building Italic as a flywheel, meaning the more customers we can acquire as members, the more leverage we have to convince manufacturers to join. The more manufacturers we have as merchants, the more products we can ultimately offer to customers. 
In terms of customers, we have a unique value proposition. We had to distill the value proposition into a very simple form, which was, “Do you want high-quality, well-designed products at a price point that is actually affordable to you on an everyday basis?”
We got our first hundred through PR. To anyone who might be trying to start, I would try to interview a lot of people, and before you dive into product development, get a sense of who your target customer is. 
I’m super impressed that you went through hundreds of manufacturers before finding the few that would actually launch with you. That shows some real grit. 
Thanks! Yeah. I think, certainly, no one should ever go into a startup thinking it’s going to be fun.
What’s one lesson you learned since starting Italic that you wish you knew back in the early days?
The most important thing that we’ve come to understand as a company is that culture really matters, and you have to be deliberate about it. It’s not just words on a piece of paper, but you really have to live and breathe it.
For us, it’s shaped how we think about hiring and building the team that will ultimately build the company. The most important thing is keeping an eye on culture and being intentional about it from day one. We could have done that sooner, and we would have saved ourselves a lot of heartaches over the years.
If you could teach the world one lesson, what would that be? 
I think something like 80% of the world doesn’t have an identifiable passion. Those that do should make career decisions around genuinely excites them. 
Frankly, we started the first company for the sake of starting a business, and that’s probably the worst reason to start a business. When you’re pitching new people to join, and you’re not excited about the mission, that’s a bad place to be. Startups are not easily escapable for founders. If you get into it, you should get into it for the right reasons.
That’s the thing I always tell younger founders that really does matter. 
leaving shore⛵: weed-out class killer raises $8 million
Edge Pathways is launching today to decrease the 15% attrition in the STEM field. They are offering an alternative to freshmen year where students earn college credit working for real companies. The founder, Dan Sommer talked about how students “don’t see the relevance of what they’re learning in the classroom” and thinks his program can change that.
You can read TechCrunch’s article on the launch here.
Our Take: Joining a selective co-op program may improve retention, but cant it scale at $15k tuition? They should take a hint from our previous interviewee Austin at Lambda School.
internships 🖥️ 
🤖 Wefunder | Internship | “Wefunder is like "Kickstarter for investing”, every company we’ve funded is full of amazing stories.“
🏦 Lazard | IB Summer Analyst | "The internship is a focused 10-week program for university students in their penultimate year.”
next edition...
Thursday’s newsletter will feature an interview with Danielle Strachman.
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