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2013 in 30 seconds

Busy year. Moved back from Sao Paulo to Philly. Purchase Knot Clothing in February and began overhauling it - we cut over 100 sku's and have been optimizing inventory levels along with rolling out additional products. In October I purchased the assets from Kembrel in Philadelphia and launched Blue Claw 1822 - our holiday pop-up on 18th and Chestnut. Blue Claw had another fantastic year, both b2b and b2c. We appeared in GQ a few times: Here

In August, Alex and I launched Soul Socks - a subscription model sock business; socks delivered to your door for $12. The designs are great and the reception has been fantastic and the sector is red hot; see this NYT article about SS: http://www.nytimes.com/2013/12/04/business/media/sock-of-the-month-clubs-rise-online-bringing-subscriptions-to-feet.html?_r=0

Domestic manufacturing has been busy with our own lines as well as contract manufacturing. Looking to expand this business in 2014 in a meaningful way.

Here's to a productive '14

Soft Back to School..and the Big Miss

Back to school was light for brands both big and small. The big companies ordered holiday pre-back to school and will be stuck with massive inventory loads. Those ships are landing in LA this week and will hit stores next week. This holiday will be full of promotions (markdowns/discounts) and gross margin will be seriously impacted.

Q4 earnings will be rough. Look for M+A activity in Q1; cash rich firms will be able to grab things at favorable valuations.

Changing landscape in physical goods

The physical goods landscape is changing in a major way. Buyers (people that own stores, distributors, physical brick and mortar locations) used to demand 50% gross margin, called keystone in the biz. Today, keystone is laughed at by the big buyers and tier one specialty stores. They now demand 2.2-2.5x or 60- 75% respectively or they will not entertain carrying the line. That means if a store buys something from a brand for $100, they will turn around and sell it for $220-$250 as opposed to the traditional $200.

Their argument is that they are taking all the inventory risk, employee risk, and have basic overhead. We get it. Brick and mortars are struggling and they are clawing at every opportunity to make additional points.

Online only retailers are starting to change that. Online only guys are building businesses that could not exist if there was a middleman. They price their goods directly to the end user with less margin as the direct channel has less friction (less physical hands touching the goods). This post may not appear revolutionary, or it may appear late to the game, but our companies have been to 4 shows in the past 2 months and more and more traditional retailers are looking looking for a larger piece of the pie.

Going online is not always the best or easiest approach. The space is crowded and it is hard to create legitimacy with a new product, especially one that requires touch and feel.

There will be a breaking point eventually. Let's see if we revert back to keystone or if more and more brands move to an online only model.

#online only #brick and mortar

Done Deal

Closed our first deal of 2013 on 2/22/2013 - excited to welcome the Knot Team to our Worton family. Great story, great brand. We are excited.

Doing Good

2012 was a great year for me both personally and professionally. I saw all of my businesses grow exponentially, I lived in Brazil, and I became closer to the JB through all of our time warped conversations.

The JB and I set a goal a year or more ago that we would give ourselves to our communities once a month. This month I had the opportunity to organize and distribute food at Philabundance: http://www.philabundance.org/. This is an organization that I know I will be donating more time to and I suspect the JB will do the same. We set out over 2,000 pounds of food for families in need. This was the week before Christmas and a bitterly cold week in Philly - almost everyone was extremely gracious and thankful.

If you are reading this, you are more fortunate than most. Go out and give some time to your community.

#Giving back

Curated: The Most Over Used Term

Everyone is curating something these days. The number of pitches that mention that their idea is well currated, that they have specialists curating the user experience, the product is highly curated is at an all time high. The reality is, most are not curating anything. They are throwing wide nets at companies that they like and seeing who will get caught in the net.

Those who actually know how to curate will rise to the top. Until then, it is word inflation.

#Curated #Curation overused

Oil Map from Cushing, Oklahoma.

#Oil Flow #Cushing Oklahoma

Flash Sale Sites Cooling Down

For the past two years every time our B2C business (fashion space) picked up press, we were pinged by flash sale sites to do sale. This was relentless. Many of them never launched, many of them were home coded, many of them were clearly just reaching out to see if their business idea was viable, and many of the felt entitled to post your items. We were even insulted a few times by a company that said ''no one knows your brand''.

The cream has risen to the top. There are some flash sites that do excellent work and they will continue to take more market share. That does not come without its struggles. One great site that I have in mind is now so large it is alienating the smaller brands because they have a minimum possible sale of $40,000 - something many younger brands simply do not have in inventory or can make within the 20 day window.

I am glad to see that these flash sale sites are no longer as rampant as they had been and I hope new ones are not getting tons of funding. Flash Sale sites are much like Groupon and the impostors that sprung up; most did not last long.

#Flash Sale #Flash Sale Slowing Down

I was in Rio two weeks ago and did the touristy things, but I also went to Belfort Roxo and Rocinha:

Copacaban and Ipanema are clearly benefiting from the money pouring into Rio. The beaches were clean, the area was safe and people were out and about. Rocinha was beautiful and enjoyable and I did not feel terrible unsafe - however the military police told us to leave when the sun started to go down. Belfort Roxo was a completely different situation. This place needs help. This is the where the people are being pushed while the tourist areas are being gentrified.

The Rio clean up will have two sides to the coin. The part where tourists will flock will be lovely and the part where residents are pushed will continue to get worse. Rio needs roads, highways, hospitals and schools badly.

I hope the politicians take care of their own people and not just the incoming tourists that are set to arrive for the World Cup and Olympics.

#Rio needs help #Fair and equal

Lots of companies hiring in NYC.

#Hiring #Made in NYC

Selic Rate Cut Again..

... and for good reason. Brazil appears to be sputtering. My operations here show that. Sales are down y/y and customers, with the exception of pharmaceutical customers, are cutting back.

While the cut will help stimulate my business, albeit slightly, it will hurt my unfortunate USDBRL situation.

We are now at 7.5%.

#Selic Rate #7.5%#Brazil slowdown

Launch Day

The launch. The culminating moment. The moment nothing happens.

Launch day is a great day. Today we are launching our Urban line for Blue Claw Co., it is comprised of 30 new products. The urban line is roughly a year in the making. We have worked tirelessly to make it big. I couldn't be more proud of the team for getting us to this point.

The moment you hit ''go'', is actually rather anti-clamatic. If you are not Apple or a few of the other chosen brands, there isnt a line around the block or people camping out to get their hands on your products, but that does not make it any less exciting. Most brands hit launch and expect massive results, server crashes, or huge amounts of cash flowing into their paypal account; seldom does that happen.

In fashion/retail - it takes time for the news to spread. There is usually a lag from when the products are released to when the bloggers and press pick up the new items and that is when the magic often happens. When the authorities see your line and post, you can blow out of inventory in a moments notice.

Let the launch begin.

#Launch day

Asset Classes Over 5 Years Through Crisis

#5 year asset classes

Why would you invest?

#death of equities #purchase real assets

Heading for a Cliff

The market continues to puzzle me. More than 50% of the companies that have reported in this earnings season missed revenue. The ratings agencies continue to downgrade countries debt and outlook. The investment banks are all scurrying to revise GDP estimates. Companies are not hiring and are issuing cautious forward guidance. Equity outflows last week were huge.

Yet the DOW is over 13k, again.

There is one logical reasons for this (if you negate the outflows) and that is the smart money realizes that rates will be low not just through 2013 or 2014, but until 2015 - however, the outflow discounts this theory which I believe will happen eventually. When people realize that rates will stay low for 2-3 years, they will need to reevaluate equities causing a rally.

Back to the lemmings running for the cliff: what is the catalyst for the rally? Europe? They have repeatedly said they will fix the problems and have done nothing. What are they proposing? Using more debt to solve the problem when massive austerity is needed.

Stay small. Stay nimble. Explore other vehicles to invest in, something that you have more control over.

#Dow 13000 #Heading for a cliff #Rally ending

Saturday tune.

The Challenges of Working with Unlike People

In the startup tech world we hear Ivy League, MBA, PHD, and various other qualifications. While one might be Wharton and the other might be Yale, they both have a common similarity: Education.

In other industries, for example my manufacturing entity, many of the factory owners and operators i do business with did not finish high school, let alone attend college. This is not a reflection of the person, it is simply a matter of fact and this fact can cause challenges. Not challenges in the ''I am better than you because I have a piece of paper that says HBS'', but challenges regarding how to run a business, best business practices, and policies.

The most frustrating part is feeling like they just dont get it. They dont understand time lines, time value of money, business processes and the like. Patience becomes a huge part of the game. You must explain, re-explain, and re-re-explain things. This causes lags in just about every aspect of the venture, but it is necessary.

Over a beer - everyone is happy. But over email and phone, it can often be a battle.

Education, even at a basic level, puts a floor in for business dealings. If only more had this foundation.

#education #unlike people

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