Own Your Shelf: Building a Competitive Advantage with Private Label
LIVE from the main stage at MAGIC Las Vegas!
Most independent retailers know the feeling of watching cash sit on the floor. That skirt from February. The jacket that hit its six month anniversary and still has not moved. In this on-stage edition of Indie Insights Live, Dane Cohen walked a room full of boutique owners through where their cash actually goes, why more than half of it lives in inventory, and how the right pricing and markdown decisions free it back up. Then he turned the conversation to the part every retailer is curious about but few know how to start: building a private label they own outright.
To bring it to life, Dane sat down with Sarah and Carrie of Girl Tribe, who grew from forty-eight screen printed shirts and two hundred borrowed dollars into their own brand with a booth on the MAGIC floor. They were refreshingly honest about the false starts, the terminology they had to Google to learn, and the moment the numbers finally convinced them to bet on their own product. If you have ever wondered whether private label is realistic for a store your size, this session showed exactly how retailers in your shoes made it work.
You'll learn:
Why pricing to customer value instead of anchoring to cost can add thousands to the bottom line from a single markup adjustment.
A practical markdown discipline that turns aging inventory back into cash instead of letting it die a slow death on the shelf.
The tiers of private label, from simple white labeling to full factory production, and where a first timer should actually start.
Real questions to ask a factory about minimum order quantities, lead times, and hidden costs before committing a dollar.
-
Own Your Shelf: Building a Competitive Advantage with Private Label
Recorded live on stage at MAGIC. Dane Cohen of Management One presents on cash flow and private label, then welcomes Sarah Baucom and Carrie Barker of Girl Tribe for a Q&A.
Samantha (Host): So getting ready, we are gonna be jumping into the topic of private labeling, and I am in-- so happy to introduce, um... Don't let him come out yet. Don't come out yet, Dane. Uh, Dane Cohen. Dane Cohen is the head of business at Management One. Um, he is known for his eye for inventory, not only deciding, um, helping you decide what to buy, what to wear, but actually looking at the numbers. He's great at running reports. Um, he's got the sense that can help you make your business more scalable. And today, he's gonna talk about private labeling, which is something that I know a lot of you are interested in. And the great thing about this session is Dane is a very exciting speaker. So get ready. He's gonna entertain you, he's gonna inform you, and by the end of it, you're gonna be making more money. Let's welcome to the stage Dane Cohen.
Dane Cohen: Thank you, Samantha, and thank you to the Boutique Hub for organizing all the education for the event. Okay, so a few things before we start. I promise I'm not talking about AI. I know there's been a lot of AI talk, but we're gonna talk about something maybe even more important, and that's cash and how you get more cash out of your retail business.
So I know it's lunchtime. If you're hanging around, come hang out. We're gonna be doing a lot in this session. We're gonna be talking first about how retailers could make more cash in their business, how they could invest that cash in private label opportunities, and then we have a very special guest. We're gonna have Girl Tribe up here, who are a great example of retailers... There we go. Great example of retailers who not only develop their own private label, but actually have a booth here and their own label, and that's how big the brand has grown. So you're gonna learn straight from retailers who have been in your shoes and have experienced what you've experienced. And if you're interested in getting into private label or making more cash in your business, this is the place to be. Uh, I'm gonna need some audience participation during this presentation. I'm gonna use this whole runway, so we're gonna have some fun. Let's get into it. First off, if you want a copy of the presentation, um, scan it now. We'll email it to you. This way, you don't have to take so many notes. You could focus. We'll send you the presentation. It's gonna have a lot of information in there, so you could use that QR code. And I know Samantha, uh, introduced me, but I just wanted to introduce myself. I'm Dane Cohen. I'm the head of business development at Management One. We are the largest inventory planning and financial merchandising team in North America. We help retailers plan their inventory, make more cash in the business. And a little bit about myself, I've been in the industry for sixteen years now. This is my eighteenth Magic. Eighteenth Magic. And I've worked for vendors. Uh, I've run a independent retail chain, so I've been in your shoes. I'm not talking as some expert that hasn't lived the life or talked the talk. I've been right in your seat.
So we're gonna cover a lot, but here's where we're gonna start. Fifty-two percent. That's a pretty big number. Fifty-two percent. That is the average cost of purchases for a retailer. That means that fifty-two percent of your cash is going right into your inventory. So if we wanna talk about business, if we wanna talk about retail, we have to start with inventory. And the reason that we're gonna start here is because you cannot create a private label, you cannot build out private label opportunities for your retail store without cash on hand in your business.
So let's talk about the retail model, right? We all know it. We have wholesalers. They sell to the retailer. You s-- They-- You buy it at cost, sell it at retail price. The difference is your gross profit. You cover your expenses, and you're left with your net profit. What we're gonna be talking about today is how do you become a part of that wholesale chain, right? How do you become a part of that retail food chain? So who here is a buyer? Who here is a buyer for a retail store? Don't be shy. You're a buyer. Raise your hand. Come on. We're not gonna be shy today. Who's a buyer? There we go. We got one. We got two. Okay, we got some buyers in the audience. But I want you to rethink about what your role is in your business, because you are not just buyers, you are inventory investors. You are coming here to invest your hard-earned cash into inventory, not just to buy it, but to make a return on that investment. So when we come to shows, when we're at markets, even when we're buying online, this all has to be strategic, right?
So it all starts there. We're gonna talk about the five levers of profit. So markup, markdowns, gross profit, your expenses, and ultimately your net profit. And I promise you, coming out of here, we're gonna learn more about cash, we're gonna get right into private label and how it all connects. So as I've said many times up here, you need cash flow in your business to create private label. So if right now you're a retailer and goods are coming in for fall, and you're landing fall goods, and you still have a bunch of inventory left over from summer, and you're having trouble paying your receivables, we need to fix that problem before we start thinking about private label.
So let's start with the first pillar, markup. Okay? Markup is your profit ceiling. When you price your retail goods, you are essentially setting your ceiling of profit. You will never make more than the price you set it at. It is only gonna go and potentially be marked down. So where you price your goods is key to your success. So we're gonna do a little experiment, and again, I need audience participation. Misty, you're gonna lead the charge. Okay. You come here, you're at Magic, you're talking to a vendor, you're in their booth, and you buy this lovely dress, okay? It's ninety percent polyamide, ten percent polyester. It's made in China, and the cost price is twenty-five dollars. Misty, what are you selling it for in your store? You give me, yeah I need a number. I need a number.
Audience Member: $138.
Dane Cohen: Throw out a number. $59. $75. I need one more. I need one more. 80 bucks. Okay. Now I'm gonna show you a similar dress. It's made out of 69% polyamide, 31% co- uh, cotton. It is a designer name, but it's still made in China. Okay? I need some numbers. What are we pricing it at? It has a, it's not like high designer, but it's a known name. Seventy-five. Eighty-nine. Anyone else? Three twenty-five. Three twenty-five. Okay, here are the prices of those dresses. This is one thousand six hundred fifty-nin-- fifty dollars. This is sixty-nine dollars. I wanna ask why the price only got up to three fifty. When I asked the audience what this beautiful dress should cost, and the price only went up to three fifty. That is because of your anchoring bias. Once I gave you that twenty-five, that twenty-five dollar wholesale cost, you were attached to that number, and we have to rethink it, and Misty did say it first. We have to think of what our customer will pay for it.
So when you create private label, you control the pricing of your goods, right? There's no competition. There's no, uh, vendor-recommended markup and MSRP. But whenever you are pricing and as you start building your business and your cash flow, you have to be pricing based on value, not based on cost. So if your customer will buy that dress for five hundred dollars, price it at five hundred dollars, right? And as you find the vendors that align with your vision, you'll get better quality and move up in the ranks, but you need to price based on value and not just tie it to the cost price because, again, that is your ceiling of profit. Ultimately, that profit needs to cover all of your expenses in your business.
So I know that pricing, sometimes we're just doing it, you know, we're not even looking. I've been guilty of that. I get it in for something for fifty dollars. I price it at one twenty, but everything should be looked at with a fine-tooth comb. And I wanna show you the difference this can make. Just a fifty-two and a half percent markup versus a fifty-five percent markup, okay? And just to make it easy, that's a two point one markup multiplier or two point two. If you buy something for nine dollars with a fifty-two point five percent markup, you're pricing it at nineteen dollars. If we go up just two and a half percentage points, you're just adding ninety-nine cents. That's it, just ninety-nine cents. But that translates, that ninety-nine cents translate in a million dollar store to thirty thousand dollars in bottom line profit. That ninety-nine cents, just increasing that markup by ninety-nine cents across a one million dollar store immediately puts on thirty thousand dollars, assuming markups stay constant, to your bottom line. That's how... So when people tell me, retailers tell me, "I can't control my pricing," ninety-nine cents can mean thousands of dollars in your pocket. So private label gives you even more control over your ability to price your goods. We're gonna learn how, but it's gonna give you even more flexibility, again, because you don't have that competitive with your fellow boutiques, right? It is your owned label.
Okay. I said at the beginning that when we come to market, when we're buying, we have to be strategic. Who here sometimes feels like they're winging it with how much they're spending at market? Yeah. Okay. Thank you. Thank you for the honesty. Maybe we're winging a little bit. We didn't come with budgets. We don't know exactly the right amount to spend or where to spend it. So it all starts here. This is one of the most important parts about how you're gonna develop your private label. You need a incredible category structure in order to start measuring what is performing in your business, okay? Because if denim is a terrible seller for you and doesn't make you cash in your business, don't develop a denim private label line, right? We wanna track our business so that the, the category that we're attacking eventually is the category that is producing the most ROI for you. So this can mean just the classic department, class, subclass, right? So department would be your apparel department, and let's just look at something like outerwear, okay? When we're looking at outerwear, that's not enough. That is not enough. You're from North Carolina, right? Right. You may have a winter coat. Does that behave the same as a denim jacket? It's different seasons. It's different price points. It's different margin. It's different turn. So we have to be really sure, and we're all guilty of it, our point of sale systems sometimes get a little clunky. Our categories get mixed. You label something a T-shirt or a T dash shirt, and then all of a sudden your numbers are wildly thrown off. So having that great uniformed category structure, department, class, subclass, is gonna allow you to track your data to understand what's moving, what's selling, where you have too little, where you have too much, and most importantly, the cash ROI by department, by your class, by your subclass. It's not about your vendor, right? 'Cause you're trying to be the vendor. So if you're just looking at vendor data, you won't know where to invest in private label, okay? So this is key. I know POS data hygiene is not the funnest topic, but it is a topic that will ultimately make you money.
Okay. When we come to the show and when we get overbought, there's usually one primary reason it happens, okay? We've all felt a little overbought in our businesses, okay? It's because you're buying from too many vendors, right? You come here, you're in seventeen different booths in an hour. You find something you like in this booth, something you like in that booth. "I like a dress here, a T-shirt here," and you're nitpicking across vendors. When you start concentrating your inventory like that, you get over-assorted and thus overbought. Again, ding, ding, ding, another reason to start thinking about private label. When you get over-assorted, you become a little bit of everything and a whole lot of nothing. Retailers, independent boutiques, Main Street boutiques, you are the original influencers. People come into your store not to buy product, but to be inspired, to be curated, to know what's ahead of the trends. That's why you're here months in advance, right? You're not here just to buy product. If you were buying product, they could go anywhere. They could buy it online. They could buy it somewhere that probably has lower prices. They are coming to you for your vision and your curation, and you're gonna bring that same vision to your private label. So when we come in here and we buy focused and we understand what categories are driving our business, that's when you get a store that feels, again, like it has a perspective, okay? So we wanna think about buying narrow, buying deep into the categories that matter.
The next thing we have to worry about, and this is overlooked, okay? 'Cause margin is great, but you can't take margin to the bank. So your accounting can tell you that your gross profit margin is fantastic, and you could have zero dollars in the bank, and that's because of time. Time is one of the most important factors in a retail business, and time determines how much cash you will pull out of your business. Retail is a cash business, and if you're not selling through product and continuously putting cash back into the business, you're not gonna take gross profit to the bank. It just doesn't happen. The appetite for fresh product is immense in trend boutiques and retail boutiques. Look at this statistic. Fifty percent of a boutique's business comes from merchandise that is delivered in that month, delivered and sold within that month. Fifty percent. Your customer wants newness. They want freshness. Ninety percent of the inventory sold in a well-oiled boutique, ninety percent is being sold within ten weeks of delivery. The appetite for fresh goods, for trend product, is what keeps boutiques in business. So think about a grocery store, right? When you walk in and the produce section, that's the first thing you see. Every grocery store, you never walked into the canned food aisle. You either walk into the bakery 'cause it smells like fresh bread, or you walk into the produce aisle because you see this, freshness, fresh inventory. Think about it like that.
Where your cash gets stuck is when you have a shelf full of brown bananas, okay? And we're all guilty of it. That skirt that's been sitting there since February, right? That jacket that you really loved when you bought at Market and it's hitting its six-month anniversary in your store. That's not good. That's your cash. I want you to start thinking about your cash as brown bananas. Is my cash just rotting on my floor? And I know that's a dramatic picture, but I promise you, holding on to something just to get the, "I spent this much money on it. I can't mark it down." Yes, you can. If you want that cash, bring it back into the business and reinvest it in the goods that are performing for you.
The full private label discussion, I'm gonna talk about my favorite topic. Now, I just told you that gross profit isn't everything and the way that you make cash in your business is freshness coming in, and when freshness comes in, what else has to happen? Misty. When fresh-- We have to get the old goods out. And how do we do that? How do we do that? How do we get the old goods out of our store? Markdowns. Markdowns. Now, I know people have very complex and emotional relationships with markdowns. Okay? It's a, it's a love-hate relationship. But I want you to start thinking about markdowns in your business as an actual tool to generate cash. There's only one retail in Amer- retailer in America that doesn't do markdowns. Any guesses? Costco. That's it. And you ain't Costco, okay? So every retailer, it's a part of the business. It is a healthy part of the business.
And so here are my five rules of markdowns. Number one, plan them, okay? There is a target markdown percentage depending on the type of boutique or retailer you are. So a women's fashion boutique, you're probably looking somewhere of upwards of fifty-- fifteen percent markdowns as a total percentage of your sales. That's healthy. If I see a retailer come to me, and they have a four percent markdown rate, I know that they have old goods and cash just sitting in their business. So markdowns are healthy. We need to plan for them. Number two, use ten to twelve weeks as your goalpost. I'm gonna go one step further. Use eight to ten, okay? Once merchandise starts hitting that two-month anniversary, and it's been sitting there with not a lot of sell-through, you wanna start putting it up on the markdown list. Keep track of your aged inventory, know what's been sitting there, and make decisions when you hit that eight-week mark, we wanna start thinking about it. One of the oldest tried and true sayings in retail, "Your first markdown is your cheapest." Okay. Here's where a lot of retailers get into trouble, and here's why this matters. They take their first markdown, and they do ten percent, then they do fifteen percent, then they do twenty percent, then maybe thirty percent. And by the time you get to forty, fifty percent, it's just dying a slow death on your shelf, okay? Put it out of its misery. Ten percent is not a markdown. Ten percent is what you get when someone gives you their name at the register or their email at the register. It's not a markdown. It's not creating demand for product that isn't selling. If you have a hundred dollar dress and you take a ten percent markdown, it's ninety dollars. No one's buying that dress for that price, okay? Put it out of its misery. Go for the gold. Twenty-five, thirty percent, that's a markdown, and then we go from there. Oh, okay. Number four, learn from every mis- markdown. Okay? It's only a mistake if you don't learn from it, and here's why that's so important for private label. You are collecting information about what your customer is voting no to, right? So think about colorways, think about sizes, silhouettes. You wanna understand and learn from the product you're marking down 'cause those mistakes, you certainly want-- don't wanna go and buy them again, and you certainly don't wanna go and create a private label around goods that you've already been marking down. So we have to learn from every markdown. And then finally, have an exit strategy. Your markdown should come with an exit plan. Are you doing an end of season sale? Are you doing grab bags, uh, price point selling, bucket selling, a street fair, a sidewalk sale? We have to have that end point where we're going above fifty percent. I know it's painful. I feel your pain. But get the cash back and have an exit plan.
So your budget is going to run your business effectively, buying with strategy, analyzing your data with strategy. We can't build private label until we understand how open-to-buy works, how your budgets work, and how to effectively make cash in your business. Okay? So if you wanna talk about that aft-- By the way, does that... Who's coming on the tour? We're doing a tour of sourcing right after where we're gonna actually learn how to build private label, okay? So I have a free tool for you. Who uses Shopify here? Okay. This is Retail Orbit for Shopify. If you wanna start analyzing your data, it is a totally free app on Shopify made by us here at Management One to better understand your inventory balances, where you're overstocked, where you're understocked. It is a totally free tool, our gift to you this show. Did everyone get that? You need it again? You're good? Okay.
Um, okay, now let's talk some private label. Can I get a time check? One twenty seven. Perfect. Perfect. Okay. Let- So as we talked about, private label is predicated on the understanding that no one knows your customer better than you. So we come here, we curate, we find the product that's gonna align with our customer base, and this is taking it to the next level. So why is private label so important? I'm gonna bring it all together now, right? First off, with private label opportunities, you set the IMU. You set that pricing ceiling. So when we did that example of a fifty-two and a half percent markup versus a fifty-five percent markup, with private label, we're going up, baby. I wanna see you at sixty percent, sixty-five, seventy percent. My friend right here, we're getting four-time markup on some stuff. That is bottom-line dollars. That's a lot of money in your pocket. It allows you to focus your assortment on your customer's lifestyle, right? So we're not buying just from a ton of vendors. We're focusing on the product that's going to align with our customer's lifestyle, and it elevates your total brand.
So one of the first tricks that I'll give you right now is, there's a few ways that you can go about the branding of your private label, okay? Some people have their label be the name of your store, right? It doesn't have to be, okay? So give me your store name one more time. Sugarco, right? That's a great private label brand, but... Okay, so Sugarco Boutique. Sugarco may have a label that says Sugarco, and we're putting it in T-shirts and sweatpants or blouses, but you could have another label, right? Think of some names. What's the name, the middle name of your daughter plus your dog's first name, right? Uh, or your grandmother's name. You wanna honor her, Mildred, right? Whatever it is. I'm being silly. But you can name a brand. It doesn't have to be your store brand because you're still gonna build brand equity because they can only find it with you. So you could actually diversify across multiple brands. It doesn't just have to be Sugarco, although that is... I mean, really, it's great, okay? So first off, go online, see if anybody has your store name trademarked for apparel, and then buy some other trademarks, right? Look into some name combinations. Um, in our store, we used to have a private label called eight three one, which is eight ways to say I love you. It was cute. We used to have rock candy. We had five private label collections within our store, right?
And so here's what it allows you to do. It gives you a competitive advantage amongst other boutiques because nobody could find it anywhere else. They only could come to your store. They can't search it online. Your store is gonna pop up when they search it online, okay? So it gives you a competitive advantage by having exclusivity. Number two... Oh, I didn't change. Okay, so we wanna be your own number one vendor. Uh, but again, that's really important. H-who here has seen someone search for a price match while in your store? It's the worst, okay? Now they can't do it because you're the only one that sells it. You could do either. So there were some brands within my store where we never told a single soul that it was our private label. And people would come up to me and say, "Oh, I saw this brand in Bloomingdale's. I love it." No, you didn't. You didn't, right? That's actually good. So again, it's good to mix it up. All my accessories were under the store name, right? And then some of my apparel brands, and I had different ones. So I had one for sweatpants, right? So my sweatpant line was called Rock Candy. My women's blouses and dresses was Chloe Rose, right? So you could actually weave in depending on the product you're selling as you're creating your private label opportunities.
And so there are different tiers of private label, right? All private label is not created the same. So let's look at those tiers. I know these chairs may be blocking. The first is really simple, blanks, right? You buy a T-shirt, you buy a sweatshirt, you put a graphic on it. Maybe it's your store name. Maybe it's the name of your town. Maybe it's a cool saying that you came up with. That's private label. You designed it. It's your design. You can only get it at your store. Or a custom logo product, right? You're branding it with your store insignia. Number two is white labeling. So number two is you could go to a vendor at Magic and you could actually say to them, "Do you allow retailers to white label?" And they will let you take the labels out and put your labels in. And there are services, there are a lot of services that you can ship the goods right to that service. They'll flip the tags for you and deliver it to your store as your own private label. And all you have to do is have a conversation. And then you get to control that price point and really elevate. And that's a great way, that is my number one tip for starting to get into this space, white labeling. Capsule collections, you could talk to a retail, uh, vendor that you do a lot of business with and ask them if they'll do a capsule collection where maybe they give you a sweatshirt only in a color that you have, right? Or they give you a sweater with a design that only you have. That's another way. Or finally, when you come over to sourcing, there's something called manufacturer own brand, where in sourcing they are actually designing the product. You get to have some say in it, little tweaks here and there, and they will deliver it with your branding on it, right? And that's over in the sourcing show. That's a great way to get margin as well. Uh, and that's something that you have to do with factories, with, um, teams over in sourcing. Now we're getting more advanced with original design manufacturer, ODM, okay? That's when you start working with factories over there to actually help in the design process. They still have the designers, the tech packs and all the resources, but you get desi- you get involved with the design process, so you get to have more say in what it actually looks like. Now of course, that does come with more orders having to be placed, more quantities, but it is a great option. And then we go to full private label, which is original equipment manufacturer, OEM, and that is when you are actually working with factories direct. So you are choosing the buttons, the zippers, the design, and then working with a factory to put it all together. That's really advanced, right? So we don't wanna start there, right? Don't go to sourcing and think you're starting creating your brand tomorrow, right? We wanna start and build up to that, and having those conversations in sourcing is what's gonna start to get us there.
So I'm gonna bring on right now the founders, the owners of Girl Tribe. Girl Tribe is a retail store that blew up and really was a leader in the industry, and then they created their own private label, and it took off because they are trendsetters, they understand their customers, and now they have their own brand right here on the magic floor. So we're gonna talk to them about how they got started with private label. Please welcome Sarah Baucom and Carrie Barker.
Girl Tribe: I did it.
Dane Cohen: Good job. You did good. Okay. So I think one of the questions that a lot of people in the audience are gonna have, and we're gonna open it up for questions, please feel free to raise your hand. I think a question that a lot of people are gonna have is- What was the tip? Like, how did you make that initial decision to start dipping your toe in the private label pool?
Girl Tribe: Okay, so when we-- we used to have a bunch of storefronts, and by a bunch I think it was, like, three to four, depending on how you counted them. During around twenty twenty-two, twenty twenty-three, we were coming to Magic and buying a ton of pre-packs, and we ended up just simply private labeling the items that you can buy here. Do y'all-- does anybody do that here already? So you know how to do that? Okay, so any of your manufacturers out here can do it. So I think it was, like, Olivaceous or... Can you not hear me? My dad always said I do not have an indoor voice, so I can't believe you can't hear me. Okay. But anyways, but you can ask any of your vendors here if they will simply go ahead and send those pre-packs that you're buying here to a packaging or labeling place, usually in LA, and then they can split ship those to your store. So I think for if you're just dipping your toes into it, that's a great way to do it, and that's how we did it. And it's like it adds a dollar per item, and like what Dane was saying, if you can charge five more dollars for that because people don't know how to track that item. Or more-- it's, it's really more like this is our collection. This is what we decided is going to be in our store. You're not trying to dupe anyone. You're really just trying to say, "Here's what our value is for this item." Um, so I think private labeling from the LA factories is, like, great way to start.
Dane Cohen: Okay. So that was exactly when we look at the tiers of private label, right? I would strongly suggest that when you start thinking about it, don't start thinking about this as I'm gonna design a full collection. Start dipping your toe. That's a great way. Okay. Now, I personally think viewing from the outside, the phenomenon kinda happened when we brought graphics into the mix. Would you agree with that?
Girl Tribe: Yeah, a hundred percent. So when we started Girl Tribe, we have always designed graphics, but we kind of ignored it, especially w-when it came to our storefront. We got busy buying dresses and jackets, and we kept coming back to the numbers and looking at our margins when it came to the designs we were creating and the shirts we were creating. And there's nothing, like they're original to us, so it's the only thing in the market. And we were able to start creating demand in our store for these items and getting crazy margins. So we w- started having kind of little drops like-- And you could start with, like you said, a small collection. So we are in Charlotte, North Carolina, so we would do it around Panther season for football or for Halloween or Christmas, just like really thinking small around a specific collection and then building excitement and demand, and then having a line out the store trying to buy our graphics. So that was kind of like our first tiptoe in, like from our own label.
Dane Cohen: Yeah. And I just wanna highlight something there, right? Because it's, it's what we talked about at the beginning of the presentation, which is you found the sweet spot of where your business was being driven, right? And I do have to give a shameless plug. Carrie and Sarah were clients of Management One, so they had the power to really understand what was driving their business and how to reinvest into it. So I-I've also talked to you guys about this, and I love it. How did you start creating these graphics? Like, these are really interesting. They're fun, they're different. They're not something that you see. How did you actually decide-- Like, were you guys on a computer? What, what did that look like?
Girl Tribe: Yes, we design on computers. Um, so well, we started with graphic T-shirts when we originally opened in 2014 because they were really cheap to make, and we had no money. So, like, Carrie just happened to know a screen printer in, in town. We were like, we both put a hundred dollars in, and we cranked out forty-eight shirts, and that's how we started our business. Um, but we design everything in-house, and like Carrie said, it's all-- it all comes from demand of what our customer is saying. We also do come to market and see what's going on. But honestly, more than anything, it's just what we think is actually gonna sell 'cause it's our money. So, I mean, there's no investors. There's no, like, there's no wizard behind the screen. Like, it is just our money, so we have to really decide, are we gonna produce this? Is this actually gonna sell? And we have definitely designed some real doozies that didn't sell and that we sat on for a long time until we burned them. Yeah, and the great thing about T-shirts is obviously you would have to find a designer or have a designer in-house, but it's a low entry price point. So you're able to buy, let's say you have a design idea, or you maybe have three design ideas, and you're able to buy the T-shirt blank domestically for pretty cheap. There's plenty of suppliers that you can find. You get your design, and then you can find a screen printer who's gonna print twelve of them for you. You can immediately see how your customer reacts through email marketing in your store, and then you can either double down or you can be like, "Oh, that was a loser." You know, like, and then that's how we scaled is, like, we started with four, four SKUs, twelve each, and then we doubled that, and then we tripled that, and then we qua-quadrupled that. But we were really specific in testing the market of what's gonna work, um, what does our customer want, and then tripling down on the theme or the collection that they immediately responded to.
Dane Cohen: Right. And, and we were having this conversation before, uh, the presentation. It's, it's like you, you can't just go from zero to sixty and think you're gonna go and just start selling jackets and pants and denim, right? Like, you have to focus in on what is moving the needle. Okay, I wanna ask a very specific question. You're gonna hear the term a lot in private label, MOQs, minimum order quantities. So that basically means in order to work with, let's say, a more advanced factory, buy direct from factory, uh, there are minimums. And it used to be that those minimums were sky-high. Like, unless you bought five hundred of something, you couldn't work with them. Those have come down immensely. Was that something that was scary to you when you first started this process?
Girl Tribe: Oh, yeah. The MOQs will kill you from the get. So, um, we still have one factory, and I think it's, like, six hundred, um, per item, and that's still a ton of money for us. That's why we're here at Mar- at Market. Please come buy from our booth so we can make that MOQ happen. Um, but you can definitely-- I think that's, like, one of your first questions when you're interviewing factories is, "What is your MOQ?" And they'll tell you right off the bat. They're like, "We will not talk to you with under a couple hundred." And you're like, "That's okay to say no." It-- Like, there's no feelings in manufacturing. Like, you just have to, like, move on and find somebody that's gonna work with you. Um, and then always sampling. Like, how low can you get your samples to go? How quick can you get things? What's the lead time? All of those things will, um, are really important. But I mean, yeah, I mean, some, some are still, you know, six hundred. And it also depends on what the item is too. And I think when you talk about private labeling-- I'm sorry, Dane, I'm jumping over you. But when we started working with factories, they'd be like, "Okay, so what do you wanna make?" And we'd be like, "I don't know. What can you make?" Like, no, you gotta know what you wanna make before you go into it. So for us, it was T-shirts, sweatshirts, mock necks are big. Like, can-- Like... And then they're gonna ask you all these other questions about it, but you really need to know, can this factory, do they even do this item? Like, can they do T-shirts? Is that what they already do? Um, because maybe an MOQ of six hundred actually makes sense for a boutique. If you go back to your numbers and say, "We sell six hundred black T-shirts from September to December, we might as well get them for four dollars apiece instead of eighteen over here, put our own label in it." So there, it-- That's, that's really kind of more of a data thing, but I'm running on.
Dane Cohen: No, but that, that is very important, the data piece of it, right? And that's a great example. You can't buy into six hundred units of something unless you've proven that you're coming close to that. And I just wanna highlight something, and it's really impressive. Four SKUs you started out with to ordering six hundred minimum order quantities an item. That is impressive, right? That's wildly impressive. So 13 years.
Girl Tribe: Thank you. 13 years.
Dane Cohen: So, right, it doesn't happen overnight. So if this is your first time coming to sourcing, dipping your toe in, you're not gonna walk out of there with a full private label brand. We need to measure expectations.
Girl Tribe: Yeah, I think we walked sourcing in 2019, '18. We came to sourcing probably four or five times and immediately got really, uh, embarrassed because we didn't know how to talk to factories at all. Like, we were just like, "We wanna make a T-shirt," and they're like, "Okay, cotton?" And we're like, "Yeah. Do you do cotton? Yeah, that's good. Yeah." Like, it was, like, a lot of that, and it still kinda is a lot of that. We just got tougher skin. Um, but when you walk over there, if you have something in mind, like, they have their mannequins on display for a reason. That's what they do best. Walk, walk away from a booth if they do denim and you're trying to do dresses. Like, you don't need that. That's not... You need to focus in on what, who you need to talk to. Um, and, and honestly, they're only interested if you are really interested too.
Dane Cohen: So I do wanna highlight, when you go over to sourcing, and there's two things here, right? I just wanna pick up on two things. Um, one is you're gonna have to go a few times, right? So start... Y- you just gotta walk over there, and we're gonna walk, literally walk you over there right after this. Um, and just start poking your head around. It's okay to ask questions, and it's okay to ask the wrong question sometimes. But number two is sourcing is laid out by region, right? So there's gonna be a China section. There's gonna be a South America section. There's gonna be a Turkey section. And each one of these regions is usually known for a specific type of product. So, right, Turkey may be incredible for cotton T-shirts, right? And South America or a certain country in South America may be wonderful for sweaters. And so you have to know the expertise of the region that you're talking to, and then one step deeper, which is what is the expertise of the factory or the manufacturer that you're talking to? So you don't go to a denim manufacturer, and that's their specialty, and say, "Can I order 600 sweatpants?" Right?
Girl Tribe: Okay. Yes. Yes.
Dane Cohen: So that was my, that was my soapbox. Um, okay, and then what about, there are some, there are some big scary terms in private label, and I'm just gonna highlight a few of them, right? MOQ, I think... I'll, I'll read them out. Don't worry. I'll read them out. Right? We're talking about MOQs, that's a big one. What about things like nearshoring, right? Is that something that you had to learn a-along the way? Or domestic versus inter-international partners? You know, how did you start picking up these terminologies and really get comfortable with it?
Girl Tribe: Google. Um, anytime they come back to you and they're like, "Do you have..." Like, "What is, you know, what do you want your MOQ to be?" Or what, and like we just Google everything. Um, uh, I mean, Carrie was an architect before this, so we don't really like super have the... You know, we didn't go to a fashion design school. Like maybe some of you did, that's awesome, you probably already know this. Um, so much of it is just you kind of waste money and time until you figure out what they're talking about. Like, right? Is that bad? Is that bad advice? Like-
Dane Cohen: No, I think that that's honest advice.
Girl Tribe: Yeah. I, it's all trial by fire. Um- Yeah and it, and you- We do everything the hard way, so honestly do not ask us any- Well, you just have to start small, you know? Like I think that's like when you're going into private label, you're starting with just white labeling garments that you're already used to buying, and then you start dipping your s- toes into domestic blanks. And then you go overseas and you buy a very small quantity, and you learn from that, you know? Like we have learned a lot of lessons even in this season. We just started manufacturing, um, Mahjong items because the trend is so huge, and in our customers, like that's what they want. But we have learned so much importing these all, all the tiles, all the floating mats that we're doing, and there's, there's different type of shipping. So there's DDP where your manufacturer's gonna h- handle everything door to door from insurance to taxes to tariffs to shipping. And then there's EXW where we're in charge of it and you have full control but you're also in, like you also have to pay all the taxes and make sure all the custom codes are r- right. So it's like you start with baby steps, you start to learn the terminology. You're not gonna know it all right in the beginning but as you order more you're like, "Oh, this is important to me. Like I just wanna do a 50 MOQ and I just want my sample to be $25 and I wanna see how quick they can get their stuff to me." 'Cause that's the other big thing when you're importing, the timeline. So we have a great manufacturer in China, she's great on turnaround times and so we love to use her for most of our stuff. Whereas like we have another manufacturer in India and it's at least a 90-day lead time but like they create great garments so we're like, "For this we'll settle for that but like for other things we need it quicker because everybody's a buy now, wear now customer." Also with your MOQ, if your MOQ is lower tens, your 10, or you're going to probably spend more money per unit. Does that make more sense? So let's say if we have our 1000 MOQ T-shirt company, they might sell them to us for $4 a piece but then we have another one that they'll give us 100 but it'll be like $12 a piece. So then all of a sudden you're talking about it, but like for us that's still very worth it because we're still so inventory risk averse basically on inventory. Um, so un-unless you already have that buy, you come to Magic, you have that ma-major buyer that's committed to those thousand units, it might be more worth it for you just to start with a hundred at a higher price and just charge your customer about the same that you were gonna charge if you got a thousand. So then once you get to the a thousand, it's the same thing for them and more cash in your pocket.
Dane Cohen: Yeah. And that's really important. You know, lead times are really important, but also the hidden cost, right? So tariffs, taxes, I mean, tariffs change this whole conversation. Taxes, shipping costs, logistics, uh, is it being transferred by boat or is it being, you know, DHL? And those costs add up, and it could actually make it cost prohibitive to do private label at ce- in certain areas. So just because you're going over there and having a conversation, you may not actually get the margin points that you need. Okay, we have one more question, then we're gonna open it up to the audience and just a, a little bit of a lightning round. For each of you, I wanna know each of your take on this. When was the moment you knew that this was gonna shift into something more than a private label, and it was actually gonna stand on its own?
Girl Tribe: And we've always been brand first. We've, we've done pretty much every other, uh, job in retail under the sun. Major wholesale is, you know, last couple of years to us. That felt, that felt like we could scale in a more sustainable way than opening a bunch of stores. To be honest with you, we were not that good at picking out the items. Like, even with Management One's help, and that's genuinely, they do not pay me to say this. They should. But, um, the only way that we ever made it from one store to four stores and stayed open for as long as we did was because of their help. We're terrible at buying things. I'm totally that girl that goes in and I'm like, "I want that jacket in 30 days," and nobody else cares for it. So we were-- Once we were-- knew that we were able to kinda control the narrative, we knew what our customer wanted, and were able to work with wholesalers, that's when we were like, "Yeah, let's, let's get out of the storefront game. We can't do it all, and we're much better at this."
Dane Cohen: Do you have a-
Girl Tribe: Um, so I th- I think there was probably two pivotal points. Like, one, if we wanna talk about Management One and the numbers, our management, like, if you were to join Management One, you get a, a, a person that, like, walks you through everything, and you meet monthly. And they kept telling us, like, "Your asset is in your product. Your margin's in your product. Your sell-through's in your product, um, that you're making." And we're like- "Oh, is it?" We're like, "But, but, like, midi silk skirts are in." He's like, "No, you make no money on midi s-silk skirts. You've gotta do T-shirts." And we were like, "Okay, fine." But we're just like, "We wanna go buy stuff." We were really hard-headed for a long time on it. We were. We were. And then finally, um, twenty twenty happened, and I think everyone had to kinda reassess what they were doing. Our store got shut down for a few months, and we tripled down on our product and immediately saw results. And we're like, "Oh, this is what they've been telling us." Um, and so I think it was, like, we always knew we were gonna do something magical together. But I think as the years went on, we saw the margin, we saw being able to meet our customers' demand. Like, the, the picture got clearer and clearer. And then I think twenty twenty was a huge p- kinda pivot point for us to, like, go all in on our product.
Dane Cohen: All right. C- Let's open it up to some questions. Do you have questions that we could help answer?
Audience Member: I have a question, um, which is based off having those stores and the margins that you made and, you know, having to put staff on the floor and all the costs outlays. Do you find the transition now is the margins have, like, really grown and you've got a bit more freedom to not worry about too much about staff and positioning in that, in that sense?
Girl Tribe: Yeah, I mean, absolutely. Uh, you know, when you have a storefront, you have the people. The people is always the hardest part, I think, of owning a business, if anyone else probably can agree with me on that. Um, once we transition to... Well, actually, so our last store is closing in a few weeks, and so we'll be completely in our warehouse. Um, that'll be our entire staff will live inside of our office and warehouse. Um, it has been really magical. I don't know how else to say it. It was like we were so ready to be done with storefronts. But again, I think that's just because we had already-- we'd been doing it for so long, it was no longer our passion. I so wish we could have an arm to our business where we could really do the storefront thing, but yeah. Yeah. And I, I, I do think, like, it could look like grass is greener as well. Oh, yeah. Yeah, yeah, yeah. Um, there is a ton of cost in e-com. So that's where a majority of our sales come from. And, like, we do our, all our own pick and pack, and we brought all production in-house. And so we have a full production staff. We have a full pick-and-pack staff. You know, like, there's still, like, we have our warehousing costs. You still have those costs. S-and sometimes, in my opinion, retail could be easier 'cause your customer's coming in, buying it, and you don't have to- Yep. You don't have to- You don't have to touch it again. Someti- Yeah, exactly. Like, how many times do you have to touch that item before it gets to your customer? E-commerce, you probably touch it a lot more than in your storefront. Mm-hmm. Yeah. Yeah. Yeah, yeah, yeah. Whereas now that we've brought wholesale as part of the picture, we are touching it a lot less, um, to... You know, it's like one big order equals a lot less touch points. With less margin- With less margin ... 'cause it's wholesale. But less overhead. And our marketing costs are so much higher. Like, I saw up there you had, like, two to three percent marketing or something. I don't know. It's just, like, the little-
Dane Cohen: Well, that's for a brick-and-mortar business.
Girl Tribe: Yeah. That's right. But e-commerce- It's like- I don't know. I mean-
Dane Cohen: That's your overhead. That's almost like your rent.
Girl Tribe: It, it is. Your marketing costs are almost like your rent. Um, per ad than we do on anything else. Yeah. Yeah.
Dane Cohen: Okay. We got another question over here.
Audience Member: There are so many, uh, companies that make similar products. How do you vet a company?
Dane Cohen: So how do you-- W- whether that be white labeling, I mean, I think you can start with white labeling. You know, how are you vetting it to make sure-- 'cause you're putting, you're putting your name on it now, right? So now it has your name on it. How are you vetting to make sure it meets those quality and design standards?
Girl Tribe: I think when you're buying things at market, just like they were saying earlier about having less amount of vendors, you wanna have less amount of vendors for a lot of reasons, but one is so you can have that relationship with them. Because I'm sure we've all been here where you buy a bunch of stuff you're really excited about, and the pocket's sewn on the wrong part of the pant or something, and you're, like, trying to call them and get them to take it back, and they're like, "You know, finders keepers. That's on you," and you can't sell it. So when you have a really good relationship with your vendor in here, and they know you're gonna private label it, then you gotta hold them to that too. Does that make sense? So you could call them up and say, "Hey, my customer-- this didn't feel like it did on the floor," whatever it is. That's, that's a communication between you two.
Dane Cohen: Yeah. Do not build your white labeling by going one dress from this vendor, one thing from that vendor, one thing from that vendor. You wanna create relationships. You wanna have that dynamic. Okay, we're so over time. Oh my God. But this was so engaging. Thank you to Sarah and Carrie. Thank you for coming. If you want a copy of the presentation with all the notes, all the formulas, it is right here. We are gonna be meeting right in the back. If you have questions, we're gonna be taking a sourcing tour. So please join us for our tour of sourcing.