#122. Rhone engineers performance lifestyle products for men. We talk with co-founder and CEO Nate Checketts about Rhone balanced its ecommerce and wholesale channels early on how it has evolved the business from activewear to broader performance products for men. The Loose Threads Podcast features in-depth discussions with leaders across the rapidly changing consumer economy.

Check out the full transcript below.

Nate: [00:00:02] I wanted to get the kettlebells out of the stores. I wanted to make sure that people didn’t look at this as, okay, this is just what you can wear to work out in. That this is what you can wear to live in, and that you’re not going to find better product anywhere for your life. 

Richie: [00:00:22] That’s Nate Checketts, co-founder and CEO of Rhone, a men’s performance lifestyle brand. Nate started the company with his co-founders after seeing the men’s activewear market lag far behind women’s, both in terms of quality and choice. He set out to engineer products that were best-in-category while building a brand worth believing in. 

Richie: [00:00:40] I’m Richie Siegel the founder of Loose Threads, which analyzes and advises next-generation consumer companies, and FaceLift by Loose Threads, a retail incubator and accelerator for leading brands and retailers. For our latest analysis and insights check out our free weekly newsletter at LooseThreads.com. We also just announced Loose Threads Live, our invite-only and entirely-off-the record gathering for founders, executives and investors, on October 3rd in New York City. Learn more at LooseThreads.com/Live. 

Richie: [00:01:07] I started the Loose Threads Podcast to spark engaging discussions with leaders across the consumer economy. That’s why I was excited to talk with Nate about how Rhone balances ecommerce and wholesale channels early on, and how it’s evolved the business from activewear to broader performance lifestyle products for men. Here’s how it all began. 

Nate: [00:01:29] So I moved to Connecticut to work in Manhattan. I’d grown up watching my dad do that, I had seen that you could be effective on a commute. I thought, oh this is gonna be great. And about one weekend [in] I was like, this is the worst thing ever. You wake up really early. You are like a cow just in line waiting for the train to come. Metro North, you know, bless their souls, they are not regular on time. It rains and the world falls apart then. 

Nate: [00:01:58] And so, I remember coming home and saying to my wife, “The day I come home and say, ‘Wow, I had a really great commute,’ that’s the day I know I need to stop doing this.” Because I never want to get comfortable with this thing that I’ve agreed to. And so, I was a few months into the job at the NFL, and all of my friends are like, “Oh my gosh, it must be amazing to work at the NFL. What a cool place. You walk in, there are TV screens playing football constantly, there’s AstroTurf on the ground.” And so, I felt guilty. I was like, why am I not happier? I’m in a job where clearly this is what people want to do. It’s where my friends tell me I’m lucky. I now have more stability than I have running a startup. I have a 401k, I didn’t even know what that really was. And I was miserable. 

Nate: [00:02:49] I started to do a lot of self-reflection as to why. And I think one of the challenges that I learned in that process is I had always admired people who knew what they wanted to do. You know, I want to go into this particular industry vertical, I want to be in medicine, I want to be in sports, I want to be in entertainment. You know, or people who said, you know, a specific career; I want to be a musician, I want to be a doctor, I want to be a lawyer. I didn’t have that, at all. And so I couldn’t figure out why. But then I realized what my one thing was, and that was I loved building things. I loved starting things that didn’t exist before and then building them from the ground up. And so I remember opening up my journal and writing in there, “I want to build a brand that matters.”. 

Nate: [00:03:33] And what I learned from that statement is, one: I wanted to lead something. I needed to have the ability to impact—you know, as great as the NFL is, there’s layers of bureaucracy, red tape. Great people, but it’s a large organization. And the second piece of it is that I needed to do something that was more meaningful than what I was doing then, which was basically selling sponsorship packages to large corporations. I knew that that didn’t mean I was gonna go cure cancer, but I didn’t know exactly what it did mean. And so, that was kind of the initial spark for me. 

Nate: [00:04:06] And then I started to open my eyes and ears to opportunities. And, you know, Rhone came about as an idea with my brother-in-law. When you look at the breakout of active brands, you saw these two huge clusters; one are all the mass brands that we grew up with. Nike, Under Armour, Reebok, the Adidas of the world. And the second was this new influx of female-focused premium active brands. Call it 140% price index versus the Nikes of the world, really led by Lululemon. And, you know, when you looked at the other side of it—male-focused premium activewear brands— we couldn’t find anyone. You know, you’d see these sports-specific brands like a Rapha in cycling, but nobody in kind of this general active space. And we believed, fundamentally, that this idea of what we called performance lifestyle was going to be at the epicenter of a man’s closet going forward, just as it had been the previous five to seven years for a woman’s closet. And men, you know, we’re always slow to catch on to trends. 

Nate: [00:05:03] So then from there, we don’t have an ecomm background, we didn’t have a fashion background. We just started asking ourselves, “Do we think we’re capable of making the best product possible in these categories?” And we spent about a year, just on our train rides, going back and forth, finding potential product development groups and doing a ton of wear-testing. 

Richie: [00:05:25] What gave you the confidence over that time that you could actually answer that question in the affirmative?

Nate: [00:05:30] It was a lot of questions. And this was also right at the kind of birth and renaissance of direct-to-consumer companies. So, my brother-in-law had gone to business school with Brian Spaly and Andy Dunn of Bonobos, so I had several conversations with them. I had been introduced to Neil Blumenthal at Warby Parker. And what we quickly realized is, in today’s age you can make anything. Yeah, you might be giving up on margin and, yeah, it might take you a little bit longer to figure it out, but if you have an idea and you have some level of resources and you have some level of maniacal focus, you can make anything. The bigger question is, can you sell it? Because it doesn’t matter can you make it, it matters can you sell it. 

Nate: [00:06:11] And so, we quickly figured out that we were gonna be able to make really beautiful, great product, mainly because, one, we were willing to give up margin to do that. And we were going to focus primarily on being direct to consumer so there was extra margin and kind of that vertical model. But then, two, the bigger focus quickly shifted to, okay, can we build a business around this. 

Richie: [00:06:34] So, you’re in this year of development basically—this is pre-launch. Bring us up to the launch in terms of, how did you think you were gonna sell this. 

Nate: [00:06:41] It’s just about talking to every single human I ever met, giving out these cards, saying, “Hey, we’re gonna make this really cool—”

Richie: [00:06:48] So it was a card. 

Nate: [00:06:49] Yeah it was a card. I was like, I called them my pass-along-cards. So I used to set these goals, like whenever I’d go on an airplane or even when I was on the Metro North train, so commuting, saying I’m going to give out at least this many cards. I was trying to collect emails, because our site, at the time, all it was was a splash page of, you know, I think it was like, “Something big is coming, it’s gonna be great, you’re…don’t miss it! Enter your email.” And so, at the time when we launched, I think we had over five to six thousand emails, pre-registered, and it was literally just me and my co-founders passing out these cards. 

Richie: [00:07:22] From a product perspective, what did you aim to launch with? Or like, what was there from the beginning? 

Nate: [00:07:26] I can’t emphasize enough how little we knew what we were doing. I mean we really just didn’t know but we thought you can’t just launch with you know as shirt or a short. So we had a short, a short-sleeve, a tank, and then a long-sleeved shirt and a pant. So we had five styles, if you will, that we went out to market with. The big key learning was, I wish we would have just picked one thing and been so overly focused on doing one of those pieces really well, and then been known for doing it really well. You know, we make the best workout shirt, or the best running shirt or the best short. And we went way back and kind of paired, and then got extreme focus afterwards. But, you know, the products that we launched with initially were good. They weren’t amazing. But I had read somewhere, if you wait until your products perfect, one, you will never launch, and two, you’ve waited far too long. And so I am eternally grateful for those customers who gave us a shot, many of which are probably related to me or people who were friends related to them. And, you know, it just gave us enough confidence to say, we can keep doing this. 

Richie: [00:08:34] So you launched, you had a few thousand emails. Did you have a launch day number in your head of what you expected to do?

Nate: [00:08:40] No, we didn’t. You know, we hadn’t really taken outside capital. This was just kind of this hobby. I certainly wasn’t full-time in the business yet. We had no full-time employees. When I watch these companies who, today, you know, take outside institutional capital, spend a year hiring outside branding agency, do the packaging, get the product perfect. You already have a team of like ten to 12 people. This was not that, at all. 

Nate: [00:09:04] But we did about $80 grand over the first two months of sales. Which, for us, you know, was kind of a win and exceeded expectation. I think we had set a goal to do $25 [thousand] a month, and so we beat that. And it was like golf, and I’m not a good golfer, but it’s like, you hit one good golf shot so that you convince yourself you can go back and keep playing. 

Richie: [00:09:24] So when did you end up quitting your full-time job? 

Nate: [00:09:27] It wasn’t until November of 2014. 

Richie: [00:09:29] And the launch was when? 

Nate: [00:09:30] Well…so we did this kind of soft friends-and-family six to eight months before that. And so we really refer to our official launch as when we decided, oh wait, there’s something here, let’s go build this. And so I came over. We made a couple of our first hires, then we raised outside capital. And that’ll happen in November of 2014. And then, you know, at that point, we are starting to do some real volume. 

Richie: [00:09:54] Where did the growth come from at that early stage? Was it from paid social, was it all organic? Like, what’s driving the bus? 

Nate: [00:10:01] We spent no money on Facebook or Instagram. Again, we were learning along the way. We knew that if we made great product, people would talk about it, and then if people talked about it then they would come back. We did gift some kind of early fitness enthusiasts but, you know, the ambassador market wasn’t as robust as it is today. So it was a lot of word of mouth in that first real year of operations. It was strictly that. And then we got a lot smarter after that and really started to kind of figure out how to spend dollars wisely, how to invest in marketing. 

Nate: [00:10:35] Whenever I hear an entrepreneur who’s like, “We don’t spend a dime on marketing,” I’m like, that’s not exactly the smartest thing that you could tell me. Like, I’m appreciative that your business is growing organically. We similarly use that as this medal of honor but, truthfully, we were missing opportunities. 

Richie: [00:10:50] Bring us to the next like, inflection point of the business. Like raising money and kind of the official launch was that. What did the goals, or your own priorities, I guess, shift to at that point? So we’re in the end of 2014. 

Nate: [00:11:02] Yeah. One of the big shifts that we had is—again, this was speaking to advisors and mentors—is the idea that we were actually going to strategically leverage the wholesale channel. At the time there were all these articles coming out saying, you know, retail is dead, the wholesale model is dead. Lots of prominent high growth brands are saying, “I’ll never work with a wholesale account ever.” And yet, when I spoke to Neil and Andy, these guys said, “If I had gone wholesale earlier, I would have been able to raise substantially less dollars.” And there’s a very simple reason for this, which just comes down to pure economics. When I say we didn’t know what we were doing, the one thing I did understand was the unit economics of what we were trying to build, and what I realized really early on, and looking at the wholesale model is that, if we had sufficient margin to go after wholesale, and we kind of just did that on a contribution basis, wholesale would actually throw more to the bottom line than direct would. 

Nate: [00:11:58] Because when you think about with direct, you have the shipping both ways. You have to hire a marketing team, you have to hire designers, you have to run the site. Until the sales reach a certain threshold. it’s just not going to pay for itself. To run a wholesale model, you need a salesperson. And, really, you only even need to pay them commission in the early days. And so, we had found this incredible talent, this woman who had been in the premium denim space, she’s still with us today, runs all of our sales channels, she’s amazing. And she said, “You know, I think I can get you into a couple of really high-prominence stores.” And that changed everything for us. Because once we were in beautiful displays in Bloomingdale’s and Saks and Equinox, then we were real, and we were starting to get noticed. And it was a way of acquiring users at negative acquisition cost, which is hard to do in D2C. 

Richie: [00:12:50] If you put yourself in their shoes, what do you think was interesting about you to them? 

Nate: [00:12:55] I think that these big, you know, kind of third-party-driven retail stores were starting to see a shift in the leverage that they were having with brands. And so, instead of continuing to exert this, “We own you, we make the decisions,” it was almost this courting of, “Hey, it’s so great to see one of these new young brands willing to work with us, and as a result we’re gonna put you in very prominent places.” You know, we were right next to A.G. and Vince, and we got beautiful displays. I think it’s because we were one of the first to say, yeah, you know, wholesale’s not dead, it’s not inefficient. We can’t build stores in all 50 states and, you know, the most prime locations of these cities. And yet, we can have a display there, with the right kind of shopper and the right kind of retail associate, who’s been trained to take care of the customer. And, again, it was a real eye opener for us, but it went, completely against—I hate to use the word “conventional” because it was still new—but it went completely against the advice of the day, of you know, never worked with a wholesale account. 

Richie: [00:14:01] Who are the first kind of few. I guess like… 

Nate: [00:14:04] We worked with Bloomingdale’s and Equinox really early on, and then it was some very high end specialty stores and boutiques. Darien Sport Shop was our very first wholesale account. It’s this little store in the neighborhood town where I grew up in, but these guys are unbelievable curators—they were actually the first wholesale account for Bonobos and a number of direct-to-consumer brands—and they were excited that one of these brands had been started, you know, right, basically in their backyard. 

Nate: [00:14:30] So we just started developing these relationships. It was a small part of the business early on. Fast forward today, it’s still the vast minority of the business, but we’ve become the number one men’s brand at Equinox the number one men’s brand for Peloton, 80 Nordstrom doors. Like, we’ve had huge growth in that channel but we’ve been very selective about not letting it dominate our supply chain, or letting it dominate, you know, the overall business mix. 

Richie: [00:14:57] You mentioned on the margin side that it just worked. Was that a concern, early on?

Nate: [00:15:02]  It was a huge concern. To put it in actual tactical numbers we had seen, looking at public comps, that intake margin for a lot of these apparel companies was 70-plus percent. We weren’t even close to that. Two reasons. One, we didn’t have scale, and two, we had over-invested in our product. 

Richie: [00:15:22] Right. So you’re doubly punishing yourself. 

Nate: [00:15:23] Exactly. So we made sure that our product was absolutely the best quality, using the best fabrics, the best trims, the best zippers, and we had no scale with our suppliers to actually drive any meaningful terms. So not only were we paying with this with equity financing and also, essentially, overpaying because we hadn’t developed those relationships, we didn’t have the scale, but now we’re going into the channel that’s the most punitive from a margin standpoint. 

Nate: [00:15:45] But it ended up being I think a really good decision for us because that’s where a lot of the direct growth came from. In fact if we ask our direct customers, our loyal direct customers today how they heard of us, I don’t know what the exact figure is, but the figure that we’ve seen is almost 25% to 30% of our customers found out about us through a wholesale partner, and now they’re direct, loyal, consistently-buying-on-Rhone.com customers. 

Richie: [00:16:14] Can’t ask for more than that. Okay, so bring us—I guess we’re in 2015, kind of early 2016—next inflection point in the business. 

Nate: [00:16:23] The big inflection point was a couple of big PR hits for us. The Wall Street Journal decided to do a write up on us and the initial title of the article was, “These guys want you to stop wearing your wife’s yoga pants.” It was a great title, a great story. We heard and we later learned that Lululemon’s publicist and PR group were furious, that they actually forced them to change the title. So I think in the original newspaper it’s still that, but if you go back to the online article they’ve actually changed the title. And so, that drove a ton of interest. You know, we didn’t have enough inventory to handle the demand nor were we fully capturing, kind of, efficiently all of the user data that was coming in at that point. But that was a game changer for us in terms of growth. 

Richie: [00:17:12] So we’re in 2016. Like, what wasn’t working as well as you wished at that time? 

Nate: [00:17:17] Mostly it was around supply chain. We had started by using these outsourced design shops in an effort to stay really, really lean. And even though we were maniacal and we were focused on all the product feedback and we were in every review session, we just didn’t have enough control of the supply chain in the process, and there wasn’t enough of a direct relationship between us, and the fabric mill, the trim suppliers, the end factory. And so that’s when we decided we’re gonna completely blow up this model, and we brought it all in-house. And that was a great decision, and from that point, our margin has steadily increased and our product quality has dramatically increased. When I compare our product today versus our product then, even though we were investing in great fabric, the quality of the construction and the trims and, you know, just even the product design and the fit is so much better today than it was three years ago. 

Richie: [00:18:14] Where else did that money from that first raise go towards? 

Nate: [00:18:17] A lot of it was invested in what I would call creative content. We’ve always been very big on focusing on photography, really robust storytelling. At the core of our brand is, we’re trying to inspire our community to lead great lives, to not be content, [not] to just sit and let life happen to them, but to intentionally go out and to live their life. And I think that because it’s been something that’s such a passion project, compared to a different company, we’ve always invested in content, photography, videography, and in the early days we certainly did that. 

Richie: [00:18:56] What was the purpose you envisioned of it, then? Was it a brand-building tool solely, or… 

Nate: [00:19:00] So, today, I would characterize it as a brand-building tool. Then, I just knew that we wanted an identity. When I’d looked at great winning cultures in any industry—you know, and I grew up in the world of sports—you look at great basketball franchises, the bad boys of the Detroit Pistons, they had an identity. Everybody bought into that identity, and it was because, at the time, their coach had convinced Joe Dumars and Isaiah Thomas and Bill Laimbeer, nobody likes you…so just embrace that. And then you look at these different dynasties and cultures, they just had an identity and, for us, I knew what we wanted to build, I knew the community that I wanted, and I wanted to make sure that no matter what we did not lose sight of that. That was really, really important to me, because I needed to have that in order to get excited to go into work. 

Richie: [00:19:52] So I guess we’re at the end of 2016. What did you see as the next inflection point in the business? 

Nate: [00:19:59] Well, really it was about making these micro-improvements across every single channel. So you know we changed a lot of partners at that time. You know, going into 2017 in particular we moved 3PLs and we developed a really great relationship with a new 3PL provider that was launching from the ground up. We went and we changed our PR firm, probably for the second time at that point, and we continued to invest in people. We also decided to open a second office out west because we knew that we needed to invest in technical talent, in terms of developers and designers, and we weren’t able to find that level of talent in Connecticut where our office was headquartered. 

Nate: [00:20:40] So we opened up the second office. We built out our customer service team there, our operations and fulfillment team was out there. And then dev talent and marketing talent was out there, and there was such a great pool there that we could draw from at a much more efficient use of resources than where we were located. 

Richie: [00:20:59] Did you see that as a risky move to split so early?

Nate: [00:21:02] Yeah it was such a risky move and, in fact, we had a lot of people tell us you know this is a terrible, terrible idea. And I think it has been, by far, one of the best decisions we’ve ever made. 

Richie: [00:21:12] Because? 

Nate: [00:21:12] Because the team that is there is so fantastic, and they have done such a great job at executing on the vision of the business, but I don’t believe for a second that we would have been able to build that same talent pool where we are today. So it was either move the whole company there or open a second office. And the reason why we didn’t move the whole company there is I think our proximity to New York helps us dramatically in the form of PR staying relevant for what’s happening in the fitness and wellness movement. So it’s actually worked. 

Richie: [00:21:45] How at that point are the two different channels kind of growing, working together, competing, etc.? 

Nate: [00:21:51] I mean, I think there has, especially in kind of 2017, that’s when it came to a real forefront. Because we started to become a little bit of a darling in that industry and so everybody wanted us, and there was dollars there. And we were like, “Gosh, man, this is a huge purchase order, we should take this.” And yet staying very disciplined to the customer that we were targeting and the brand that we were building, and not letting the tail wag the dog, in terms of wholesale being the channel that was driving business decisions. And so we made some mistakes there, but I think we were able to remedy that, and getting those two channel leads to work really, really effectively together. 

Nate: [00:22:33] And now—really it started at the beginning of 2018, is when I saw the inflection point—those channels work so well together. The marketing teams work across channels. It was a little bit about reporting structure and personnel, but we did come into conflict. We had situations, we would get limited amounts of product and the wholesale team would say, “We could definitely sell this.” And the direct team would say, “Well we can definitely sell this.” It’s like, well, this is a really important account for us. And then the direct team would say, “Well, we get much better margin when we sell it direct to the consumer.” There was a lot of conflict, especially in what I would call the back half of 2016 and all of 2017. 

Richie: [00:23:12] How did you feel, if at all, the market broadly evolving at that time as well? Like, did you feel things shifted a lot from when you started?

Nate: [00:23:19] I think it’s been a continued shift in evolution, to brands having more power and communication with the end-consumer, and learning how to harness that role in the ecosystem of having data on there and consumer, right? And so, the best way I could compare it is, if we go back 100 years ago, I think I’ve said this to you before, you go and buy your meat at the local butcher and you buy your bread at the local baker and your shoes at the local cobbler. And fast forward to 15 years ago—and, really, it has continued to a degree—mass consolidation of everything. Now I can go on Amazon and buy literally anything that I can think of except for some very specific brands, and I think what’s happened too is the consumer has started to rebel against that idea. It feels like the evil empire in some science fiction movie. And I think that’s positive. 

Nate: [00:24:16] And so now we’re moving back to that local environment. But the local boundary isn’t geographical, it’s interest-based and it’s community-based. So I want to find the absolute best brand for my lifestyle and the way that I live, and my propensity to spend and invest in quality or not spend in quality, and I think it’s such a beautiful thing. And what I’m excited for the next five to 15 years are systems and tools that empower the consumer to have the same beautiful experience low friction that they have with the Amazons and the Walmarts today with these brands. And, by the way, Amazon and Walmart are trying to solve that too, but I think there will be other solutions that will come. 

Richie: [00:24:59] So I assume you don’t sell on Amazon. 

Nate: [00:25:01] Everybody sells on Amazon to a degree, right? Because… 

Richie: [00:25:03] Whether they’re obliging or not. 

Nate: [00:25:05] Yeah, exactly. You know we—it was interesting; Amazon actually flew me and 19 other direct-to-consumer CEOs out to have a conversation about this. I would say five of the 20 actually sold on Amazon at the time, and one of the biggest questions is, what do we do about people who are selling our product on Amazon? And what Amazon said is, as long as it’s legitimate product, there’s nothing we will do. 

Richie: [00:25:30] Right. 

Nate: [00:25:30] So, you know, this could be a consumer or it could be a wholesale account, although we prohibit this with any of our wholesale accounts, but it’s still an end-consumer who will go buy our products, generally at full price, and then go to Amazon and sell them. They might even be drop-shipping them, and in some cases they’re charging a premium for that Amazon customer who says, you know, I just want to go to one place where my credit card’s stored. So it’s tricky. I do think that every brand’s gonna figure out how to work with this gigantic force that is Amazon. 

Richie: [00:26:03] When did the next capital raise come? 

Nate: [00:26:05] So, the big capital raise came in the middle of 2017. 

Richie: [00:26:09] What was the thinking or impetus for that and the plan to spend it?

Nate: [00:26:13] Well, at the time we had been raising capital from mainly individuals, high-net-worth angel investors, and I was really starting to look at the world of brands that were doing well and many of them were backed by these prominent venture or growth equity investors, and I felt like everything that I was learning, I was learning either by trial and error or by going and talking to other people. And I wanted to have somebody who had a vested interest in the business who I could help unlock some of those key learnings from and decisions, because I knew there was no way that I could just freeze time go to business school for two years, just focusing on how to build this company, come out and then pick it back up. So I was willing to give up some dilution to go and get a really great partner. 

Nate: [00:27:00] We had multiple term sheets come to the table. We had group, a publicly traded company trying to buy us right at that same time. 

Richie: [00:27:07] Did you think about selling? 

Nate: [00:27:08] Not really. I just knew that we were too early. I felt like, gosh, if they’re willing to buy us now, if we could just keep at this, with all the mistakes we’ve made—

Richie: [00:27:17] Right. Not ruin it. 

Nate: [00:27:17] Right. And so we ended up partnering with a fantastic firm called L Catterton. They were the top of the 25 venture and growth funds that I looked at, and they didn’t pay the highest valuation but they were the firm that I felt the most comfortable with, what’s gonna be my partner in the trenches, in helping me drive value going forward. 

Richie: [00:27:41] With that done, where did you start to spend focus, time, resources of the business is at this point? How do we get it to X?

Nate: [00:27:49]  We really started to focus on performance marketing as a big focus for the business, and building out our performance marketing team. You know, over the last two years we’ve been investing in developing single-channel marketing experts. A team to be focused on email, a team to be focused on social advertising. SEO and SEM, direct mail, and kind of breaking out those advertising pieces into individual teams and then having a data collection loop that actually links them all, to basically get us to the point where we’re making more data-driven decisions in terms of buying and also trying and testing and testing and testing and testing. 

Richie: [00:28:27] In terms of scale at this point—I guess, you mentioned, you know, with not selling the company, it was too early, we thought we could get bigger, etc.—how are you assessing or evolving your own thinking of what you want to build, how big it should be, what you need to do that? Because you’re three and a half years in at this point? 

Nate: [00:28:44] Yeah. 

Richie: [00:28:45] You’re a few years in, you have a foundation of the business, you have directionality. There’s a question of, kind of, how big, how fast, etc.? 

Nate: [00:28:51] Yeah, I think we certainly have widened our angle a little bit, to understand, you know, the art of [what’s] possible. When I consider what’s next for us for the next three to five years, and I do believe in long term thinking, I think in many cases people want to give you this sexy answer of, “We’re not just making mattresses, we’re gonna own the bedroom.” Or, “We’re not just making eyewear, we’re gonna own your face.” It’s so ridiculous to me, but I think the truth for us is we need to stay the course, we need to continue what we’re doing, and we need to get better at it. And we need to make the absolute best product possible and not lose focus on that, because the moment you water down that product, the customer is gonna find out quickly, and then eventually you just cannot exist. 

Nate: [00:29:38] There are very few businesses that last for a long time. In fact when you look at the research not only do most startups end up failing, but most companies, every company, ends up failing at some point. Jeff Bezos said in one of his recent shareholder letters that Amazon will fail, at some point Amazon will fail, we just need to delay it for as long as possible. So when I think about Rhone, I try not to get into this grandiose idea that we’re going to own every single part of your closet, and just wait until you see the tuxedo that we come out with, because I think that’s ridiculous. People want us to make the absolute best performance lifestyle product. I do think it’s gonna be the vast majority of a guy’s closet. We’re going to continue to do that and we’re gonna continue to invest in inspirational content that really delivers to our core customer. And we’ll see. We certainly have a few tricks up our sleeves, but as much as I like you, I’m not revealing it right here at this microphone. 

Richie: [00:30:32] How had the product assortment evolved, grown, shrunk at that point?

Nate: [00:30:36] Well, that was a really interesting time for us, because right at that year we launched this product called the commuter pant, and the commuter pant was this idea that we could make a chino khaki-style pant that was made from performance fabrics and that our customer was willing to trust us to do that. And we did survey testing before we actually developed it that said that this was going to outsell our current pant, which was much more of an active—you know, wear it to run, wear it to do HIIT, wear it to do yoga—that was gonna outsell that pant two to one. And we did not believe it. We were like, there’s no way, but we sold through our inventory that we had planned on for ten weeks in two weeks. I mean, it was gone. 

Nate: [00:31:25] And we didn’t even really do a tremendous amount of marketing behind it initially, and that’s when our eyes opened up and we said, you know, the customer is giving us permission to enter these other parts of the closet and that is where the product assortment has continued to shift for us into this true performance lifestyle. So, polos, we made a dress shirt recently—that we started breaking on products in two days, and by breaking meaning we were running out of sizes in two days when, again, we thought we had ten weeks’ worth of inventory. So, that’s how the assortment was really starting to evolve. 

Richie: [00:32:00] So where did that come from? If you call the commuter pant the inflection point of going from, call it this core active business to more of this performance lifestyle business, was that a research thing? A gut thing? It just kind of happened and then opened the floodgates?

Nate: [00:32:14] No, it was 100% research-driven. You know, we were looking at the market and we were trying to assess what was our customer spending money on outside of active, and what we quickly realized is that, you know, particularly with the quality of our product, guys didn’t need eight shorts in their closet. You know, they maybe needed four really great pairs of workout shorts. And same thing with workout tanks and tees. Like, you know even the most active person, going to the gym or running or doing something six days a week, really didn’t need that much assortment. But in terms of what they were wearing to work or what they were wearing out with friends, which we were starting to see condense into this single category, that was the bigger opportunity. And not to mention you have higher average price point in those products, and we felt like we could do them pretty well. 

Nate: [00:33:05] So we started sampling and testing the way we approached it was very different than the way the market had always approached it. 

Richie: [00:33:12] In what way? 

Nate: [00:33:12] Just because true lifestyle pieces had never really been driven by performance. The idea that you would need performance in a work pant or a work shirt is—when you talk to these traditional merchandisers and retailers, they’re like, why would a guy want that? And I think the reason why anyone would want that is because we have embraced health and wellness and performance in our life, and you should come to start to expect it in all aspects of your life. 

Nate: [00:33:38] You know, it’s like the same thing when you go to a hotel, and then you go down to the hotel gym and it’s like one treadmill that’s out of order and a set of dumbbells and a bench. And you’re like, “Who’s running this hotel?” And yeah, I’m never staying here next time I come. And so I think there’s this level of, maybe even entitlement, but expectation from the consumer that performance is gonna be a part of their everyday life. And so I want pants that aren’t going to wrinkle when I get on an airplane and, you know, I’m gonna come off and look sloppy. But I also want these pants to be air-permeable and breathable and anti-odor, and that level of expectation has risen. And as a result the product needed to rise. 

Nate: [00:34:20] And so you had performance-driven companies—you know, the Nike, Reebok, Adidas, Under Armours of the world—who were trying to push more lifestyle, but the consumer didn’t trust them ’cause they would still throw huge logos and weird neon colors in there and, you know, it just didn’t feel right. And the customer wasn’t giving them permission to do that. And then you had these lifestyle brands who were trying to incorporate performance fabrics and the customer were saying, “You don’t know anything about performance fabrics.”

Nate: [00:34:44] And so I think, for us, by staying really true to our roots of this kind of performance lifestyle, low brand visibility, best-in-class fabrics, the customer gave us the opportunity to try that and it’s become a big core part of our business. 

Richie: [00:34:58] I feel like Kit and Ace was a fascinating belly-up failure in this category, in a sense. 

Nate: [00:35:05] It also shows you how hard this is, right? So, Kit and Ace, for people who are not aware, was started by JJ Wilson’s wife Shannon. If you haven’t read his book it’s worth reading, ’cause he actually talks a little bit about it. And then his son was kind of brought in to run it. Shannon had found this technical cashmere fabric, tried to get Lulu to adopt it. The Wilson family and Lululemon were at a complete, kind of… 

Richie: [00:35:28] Loggerheads. 

Nate: [00:35:28] Yeah. And so they said, fine, we’re gonna go start this other thing on the side and it ended up becoming a really big conflict, and Chip ultimately left the board of Lululemon as a result of it. But they went and they said we’re gonna open 60 retail doors, and they signed all of these long term leases. And, yeah, they had to back out on almost all of them. You know, here’s this person who had built arguably one of the most important apparel companies over the last 20 years, who has all the manufacturing relationships all of the all fabric mills, all of the everything. Not to mention he’s worth multiple billions of dollars at this point, so there’s no capital constraints, and yet, you know, the brand ultimately didn’t end up working out. 

Richie: [00:36:09] I remember when they launched we wrote something that like, if you went to the about page on their website, it was basically, this brand is for someone who wakes up at 6:00, goes and eats breakfast, goes to the gym, goes to work, hops on a plane, like, sees their daughter—they strung together this ridiculous set of scenarios that they built it for. 

Nate: [00:36:26] You might actually have this day, but it’s gonna be one day in your life, right? 

Richie: [00:36:31] And there are probably like, maybe 30 people that that actually applies to it, and it probably requires a private jet. You know, there was just such an unrealistic… 

Nate: [00:36:38] It was his lifestyle, right? 

Richie: [00:36:39] Right. It’s interesting because, again, conceptually there are a lot of similarities to this performance lifestyle category, but execution-wise it was entirely butchered. And it was just interesting. That was three or four years ago? 

Nate: [00:36:51] I think it was three years ago. I mean, it was like up and down. I mean, they were everywhere and then they were gone. 

Richie: [00:36:57] It’s just interesting, again, that this is so much execution-driven at this point. 

Nate: [00:37:02] It is. And I think your heart has to be completely in what you’re doing, you have to love it and you have to think about it when you’re dreaming, and when you’re showering, and when you’re exercising. It’s about grit and sticking with it. 

Richie: [00:37:17] So this inflection point driven by the commuter pant, of starting to go more performance lifestyle. I’m curious, how did the brand start to evolve to articulate that? And I’m also curious, did it take wholesale time to understand where this was going? ‘Cause you’re going out of the bucket that you’re in for them, right? 

Nate: [00:37:34] No question. And again traditional wholesale model is, they have buyers for different categories. 

Richie: [00:37:38] Right. So you’re crossing over. 

Nate: [00:37:39] Right. And so it’s still taking time. And in fact I had a long conversation with one of the heads of strategy at Nordstrom about this, because she said we haven’t figured this out yet, we’re still so functionally driven by how we buy. So yeah, it has taken wholesale a while, our wholesale accounts, to kind of fully understand the breadth of the brand. Again, you go back to these boutiques, these great stores like Mitchells and Richard’s and Darien Sports Shop, they got it almost immediately. But the bigger players, it has taken some level of time. And I would say the product assortment that they buy mirrors the brand, kind of, call it two and a half years ago, versus our retail stores and our online store tend to have a much different product assortment, with a bigger focus on this performance lifestyle category. 

Richie: [00:38:25] Yeah. Is that a problem or is it actually okay? 

Nate: [00:38:27] I think it’s okay, given that from an inventory level and from a level of scale we’re far past kind of these minimums that we need to hit for us to be interesting. We can make—you’ve met our chief product officer who’s incredible but also eccentric and wants to make the craziest things. Now we can let him do that, and we know we’re gonna at least sell whatever he’s going to make. And it’s actually great, because it keeps the product really interesting and relevant in us trying new things. 

Nate: [00:38:56] So I don’t think it’s been a problem. I think it actually gives us the permission. And this is where I struggle, I go back and forth through that initial point, I wonder if we would have just focused on making the, you know, the greatest running sock in the history of mankind, if that would’ve been a better decision. But now we have this beautiful opportunity where the customer trust us to try so many different things. And it’s up to us to keep a level of discipline, to try everything, but to really be perfect in the categories we’ve decided to engage in. 

Richie: [00:39:27] And then from the brand perspective, what had to change, if anything, to start communicating the broadening focus?

Nate: [00:39:33] I would say in the early days we had this challenge where, because we were so focused on active, even though all of us really believed in this idea performance lifestyle, we started to get picked up by these hardcore gym enthusiasts. The CrossFit world loved Rhone for a period, and it scared me to death, because all of a sudden I started to see that our entire Instagram feed, those who were tagging us, you know, they were guys ripping their shirts off doing Olympic style lifting. And not that we don’t love that customer, but I wanted to be a segment of our customer. I wanted to be a segment of our customer’s lives, I didn’t want it to be the entire thing. 

Nate: [00:40:14] And so we very proactively started to go after non-fitness ambassadors and relationships to help diversify and understand the breadth of the brand. I wanted to get the kettlebells out of the stores. I wanted to make sure that people didn’t look at this as, okay, this is just what you can wear to work out in, that this is what you can wear to live in, and that you’re not going to find a better product anywhere for your life. And so we’ve tried to, from our photography from our copywriting from our engagement and social. It’s been a significant focus over the last 18 to 24 months. 

Richie: [00:40:53] And then I would say just bring us up to, kind of through 2018, in terms of your focus in into this year. 

Nate: [00:40:59] The focus has continued to be on these two channels, and then we opened up the third channel of retail. We now have four retail doors, all of which are focused kind of in a 30 mile radius of our home. You know, three in Manhattan and one about five miles from our headquarters. And really trying to understand how to invest in this kind of offline experience. I hate that term, it’s the real life of our customer. Because I strongly believe that even though our transactions have shifted digitally—and by the way, they haven’t all shifted, nor even the vast majority of shifted digitally yet. 

Richie: [00:41:34] You mean globally. 

Nate: [00:41:35] Globally, yes. I think in the US, in apparel specifically, still, 70-plus percent of all apparel is purchased in physical stores, not online. But we confuse ourselves because we are the hyper-educated, bi-coastal consumer to believe that, no, you never buy anything in a store ever again. And I do think that’s the way the world’s going. But even though we buy things online and the transactions have shifted digitally, we still make decisions generally on what to purchase or we’re still heavily influenced by what we experience in real life, right? I see the shirt that you’re wearing or, you know, we’re talking about your weekend and I pass by a store display or I see a billboard or I’m hearing a radio ad while I’m driving and it makes an impact on me. Certainly, digital advertisement[s], emails, those all play a role and they all have a point. But I think that we have started to invest in a field marketing team that’s going doing events and connecting with our customer and gathering data points and opening retail stores, all with this idea of we want to create community, and it’s very hard to create just strictly online community. 

Richie [00:42:49] What’s been the retail journey at a high level, in terms of what was the impetus for the first one, and maybe a few lessons along the way. 

Nate: [00:42:57] Yeah so the first one was opportunistic. We had moved into this office space and there was an opportunity as part of that lease to open a retail store and we thought, why not, let’s do it. We could even have team members kind of running it and working it. And again it was kind of this side hobby. You know, we learned a lot of lessons since then. I mean one of the main things that I think we’ve learned with retail is you can’t just stick it in a corner and hope that it makes money. It really takes tremendous focus, tremendous intention, taking yourself back and looking across and saying, what do we want people to feel when they walk into the store. What do we want them to experience, what do we want the outcome to be? 

Nate: [00:43:35] And, by the way, it’s not always just a purchase. There are multiple successful outcomes that can come from anybody engaging in a store environment. And so we actually finally started to hire people with a specific focus on retail because, believe it or not, we’re sitting here running this retail ecomm company that we have almost nobody with physical retail experience. And so there was all this low hanging fruit that we weren’t seeing because we didn’t have any traditional retailers. Now all of the stores are profitable and doing substantially better than when we first started. And we’re very proud, we recently opened a store in Hudson Yards in New York, kind of our first real store, a thousand square feet, and it’s doing tremendously well for us. 

Richie: [00:44:21] How do you think about all three channels today, now, and kind of the interplay between them?

Nate: [00:44:26] I think that the focus continues to be on the end-consumer, how do we continue to make a big impact on his life. And I think that, really, whether or not the transaction is happening in a retail store, happening online or in somebody else’s retail store, how do we impact that customer and that experience, and develop a relationship with him? So that’s been the focus, is data collection and making sure that we’re making product decisions, marketing decisions, sales decisions, even personnel decisions to help drive that outcome, of building a deeper, more meaningful, long lasting relationship with our customer. 

Richie: [00:45:05] Talk about the Peloton relationship a little bit as well. 

Nate: [00:45:08] Yeah. So they’ve been great partners of ours from the beginning. I mean, when they were first getting started I remember I went and met Jill Foley. So, you know, Peloton as a brand was started by John and Jill, this husband wife team, they’re amazing. And they are still very involved in every aspect, and Jill runs their product side of the business. And we said, we think we make the best product in this category, and so they gave it to a bunch of their employees they tested it, and they all fell in love. And they said this, they’d never seen anything like this, and they had access to everything. And we just continued to invest in that relationship, and spend time with them, and also try and do creative things together, and they’ve been an amazing partner at pushing us and saying, have you thought about this or trying this? And you know, they’ve come up with unique designs that we’ve tried to execute on. 

Nate: [00:45:54] And again, I have to give credit to my co-founder and chief product officer and who’s just an enormous talent there, and has done a great job cultivating that relationship. 

Richie: [00:46:06] And then, into this year, where are you starting to spend your time and how are you looking at the next six to 12 months? 

Nate: [00:46:11] It’s about kind of improving these standard operating procedures, setting operating procedures and process throughout the company and really starting to have an even deeper focus, for me personally, on the hiring and acquisition of talent in the organization. 

Richie: [00:46:29] How are you thinking about like, where the market is today? If you look back to where it was when you started versus now, I assume things are gonna get harder, not easier?

Nate: [00:46:37] Yeah. I mean on the one hand there’s increased competition. It’s a very narrow moat to be able to block out somebody from trying to try something. I mean, it never ceases to amaze me that when we try something new, immediately there’s like a group of three or four copycat companies that will like, turn on the copycat machine, even using the same level of photography or copy on a website or…so it’s not about blocking out competition. I think it’s much more about just staying innovative and ahead of the curve and trying new things. And so it’s much easier than it used to be for us to be able to do that. 

Nate: [00:47:13] We have a level of scale, we have a number of resources. We can do that in a way that we just couldn’t before. And so from that sense I don’t think it will be harder. But yes, there is increased competition. And, you know, the other thing that nobody tells you is as you have success people try and hire your people away. You know, you end up spending less of your own time operationally in the business. And so there are these challenges with scale that we’re trying to be proactive at guarding against. 

Richie: [00:47:42] How do you set the speed or attempt to set the speed at which you do that, or you grow to make that manageable?

Nate: [00:47:48] A lot of that is in our goal setting and the metrics that we orient ourselves around. So it’s not just starting the year and saying, hey, we’re gonna achieve X sales number. These are the things that matter most to us. So we’ve developed what we call the Rhone score which is a mixture of several different metrics that we focus on, and we talk about them every single week in our weekly leadership meeting, and we talk about them in our monthly town hall. And we’re always tracking them. Always, always tracking them. And when one of them is out of sync or when any of them are out of sync we can dive further and say, what’s causing this? What’s creating this issue? And so it’s about setting and establishing a goal and reminding constantly. 

Nate: [00:48:25] If you’re not sick of how often you’re reminding your people about a goal you’re just not doing it enough. Like, it is a constant reminder, it has to be. It’s gotta be at the forefront of everybody’s mind, because you’ve gotta be rowing in the same direction. 

Richie: [00:48:40] Are there times when you felt like you’ve been going too fast? 

Nate: [00:48:41] Yes. For sure, no question. I think there’s been times both personally and organizationally where I felt like we’ve just been going too fast. But the vast majority of the time, like 98% of the time, I feel like we’re not going fast enough. 

Richie: [00:48:58] What’s the cheapest and most expensive lesson you’ve learned building the business? 

Nate: [00:49:02] I would say the most expensive lesson, without question, is not investing early enough in a finance and accounting team. I have a finance background. I felt like I could handle it, and I was really too arrogant and egotistical to realize that we just weren’t doing it well. And once we started to invest in that area everything got much easier. That was an expensive lesson. 

Richie: [00:49:25] From like, an operating perspective? 

Nate: [00:49:26] Yeah, from an operating perspective. You know, just handling and managing, you know, whether it’s the receivables, to making sure we were accurately tracking our margin, and to how we were paying our vendors, and driving working capital terms in our banking partners. And I kept thinking, I’ve got this, I can handle this, and it just became far too much. And, you know, when I got to the point where I knew I needed someone, I had waited far too long. 

Nate: [00:49:50] Cheapest lesson has been that people are the most important. And, you know, I say cheap only because I feel like I knew that going in, and I realized that really quickly. Having great people in the organization is without question the most important thing. You know, in some cases that’s been [an] expensive lesson but it’s something that I learned quickly, and so, you know, I don’t know that I would say it was overly expensive. 

Richie: [00:50:10] Where is the name from? 

Nate: [00:50:14] So, the name Rhone comes from the Rhone glacier and Rhone River which starts in Switzerland and flows down the eastern corridor of France. It was a functional trade route for the Roman Empire but it’s also just a beautiful valley painted by Van Gogh. And, for us, we’ve been trying to marry this idea of function and aesthetic together. We like[d] that region, we knew there was a path to getting the domain. We did some testing and we felt like it was masculine and resonated well with our audience. 

Richie: [00:50:45] What do you see as the risks or risks to the business in the next one to two years? Things that you’re actively trying to mitigate or kind of avoid. 

Nate: [00:50:51] I would say that there’s macroeconomic risks that we all face, but I think… 

Richie: [00:50:55] Are you worried about that increasingly? Just with, you know, nine year bull market, etc. 

Nate: [00:50:59] Yeah. I think if you’re paying attention you have to be worried about it. And I think there is enough in the market to be worried about macroeconomic factors. The things that we can control and that I focus on are really still about improving our speed to market. Going from designed to shelf immediately and trying to do too much. You know I think I’m constantly worried about trying to be too much. I think there’s always going to be risks, but the biggest one is, if we fail it will be because we failed. You know, I can’t blame it on anyone else. 

Richie: [00:51:31] In terms of, call it next six months or a year, what’s on the horizon that you’re kind of excited about, and so forth?

Nate: [00:51:37] I think there’s a couple new product categories that we are spending some time on. And the product is just, aw man. 

Richie: [00:51:44] It’s not a tuxedo? 

Nate: [00:51:45] It’s not a tuxedo. It’s not-not a tuxedo. No, it’s not a tuxedo. But it’s this beautiful, beautiful product that I’m personally so excited about. I love the product development and creation side of the business. 

Richie: [00:51:59] You know it sounds like the focus on product was a core driver from the beginning but you knew or learned very quickly it wasn’t enough. This was not going to be an organic product-driven business. How do you modulate those two things? ‘Cause you hear a lot of like, the product is everything, the reality is it isn’t, ’cause you won’t grow with just the good product, but you also can’t market shit. 

Nate: [00:52:17] To me it’s not about modulation. It’s about you’ve got to do both incredibly well. In the world that we live in with this interconnectivity from a customer standpoint, if you make terrible product, people will know almost immediately. And if people don’t know it’s because they’re just not spending the time to figure it out, because it’s almost impossible to make bad product and have it be a long term game. So It’s table stakes to make great product now, especially for a brand like ours. We’ve got to make the best product we possibly can. 

Nate: [00:52:47] But, again, as I said before, when somebody tells you that, you know, we spend zero money on advertising, it’s like, you’re making a dumb decision. And so we really have to have a best-in-class marketing team that is efficiently spending those dollars appropriately to generate the best possible response. And so I don’t necessarily feel like it’s on a pulley system, where one improves and the other goes down. I think you can have beautiful advertising and marketing and that great product makes that easier. And if you’re doing both well then you can build a great company. 

Richie: [00:53:20] Awesome man, thanks for talking. 

Nate: [00:53:21] Thank you. 

Richie: [00:53:27] Thanks for listening to the Loose Threads Podcast. You can read full transcripts of the podcast and join the newsletter at LooseThreads.com. Feel free to leave review on iTunes, we always appreciate it, and thanks to George Drake, Jr. for editing this episode. We have a great roster of upcoming guests and we hope you tune in next week.