Richie: [00:00:01] Hey, it’s Richie Siegel the founder of Loose Threads. I hope you, your family and your team are hanging in there during these challenging times. In our new podcast series, Offense versus Defense we’re talking with leaders across the consumer economy about how they’re managing their business, balancing playing offense with playing defense. Defense is about cutting back as much as possible to preserve cash. Offense means making calculated investments and taking risks to put your company in a stronger position. Just like in sports, a team can’t win by only playing defense. The companies that can weather this storm and make opportunistic investments will emerge in a stronger position than where they entered. 

Richie: This week we spoke with Abe Burmeister, co-founder of Outlier, a menswear brand pushing the limits of materials and performance. We discuss how the brand has handled supply chain woes, invested more in social media and struck a balance between customer communication about when to spend money on clothing and when to save it. Here’s how Abe and his team have managed the crisis so far. 

Abe: [00:00:58] I have been kind of in the middle of trade shows season, so I flew out to the outdoor retail trade show in Denver and there was a little edge there and there’s a China section. I still went there and you know, certain people couldn’t come in. There was just this little energy. It was all very much like, oh, it’s China. And I thought it didn’t really affect us. We have some supply chain stuff in China, not a huge amount. And so it didn’t feel material to the business, but it felt material in a small sense, like you could feel that rising and that was like mid January, late January. 

Abe: Then a couple of weeks later, I went to Paris. And it sort of amplified up there. And it still wasn’t big in Paris. It hadn’t officially been identified in Paris at that time or Milan even at that. I mean, maybe retroactively they have, but there wasn’t talk of it. Right. But you can feel the energy and a lack of China. I think there were no Chinese exhibitors or something like that. But materially, sometime in March, we started feeling it creep in and reading things. And I remember personally reading an account of a nurse in Italy on Twitter or something. And I was like, oh my God. That’s when you stop feeling like a bunch of weird news stories that didn’t fully make sense and started feeling like, oh, wow, this is happening and it’s coming. So we started preparing a little bit. But we were kind of blindsided like everybody else. 

Abe: There’s a little bit of preparation that was like, all right, let’s get masks like the receiving of returns we do in-house. The warehouse handles all the shipping separate from third-party because we’re very high touch with our returns. We let people wear the products for forty five days, it kind of has to be in-house. And so I was like, all right. How do we handle things coming in? We started quarantining the boxes for two or three days. You know, just because people were uncomfortable handling them. It was like comic stuff coming back in transferring or we didn’t do any big proactive things. I think I cut a color out of the fall range and we started sort of putting off making a couple decisions. But we certainly weren’t hyper prepared. And then like March was wild because we actually had a really good march, including the lockdown periods. We had a lot of product coming in. Right. It’s like from an inventory standpoint, it was kind of the worst possible time for this to happen because March is when all the spring stuff really starts loading in and so you kind of like at a low cash and high inventory point. But it’s also a good product and that’s exciting. So when we started locking down, we kind of accelerated our whole schedule based on what we had. And the first week was like a blockbuster. But that’s partly because we threw a discount. We were like, oh my God, we need to stockpile cash. Like, is there a discount in here? Let’s go wild. And so that week was huge and they want a weekly drop schedule. But we’re trying to chase the big ones every two weeks. 

Abe: And so we accelerated the big drop a week because we didn’t know if we’d be able to keep shipping or what those situations were. And it was still quite a big one because you know, our numbers look different now. So we just looked at numbers that would have looked horrendous for what I was hoping to do in April and May that now look pretty good. I’m like, OK, as to what it is, but that’s after a lot of adjusting. The warehouse stayed open, which, you know, it’s a loophole. What we sell is not essential to anyone but warehouses and was classified as an essential business. So that’s something we evaluated, did we have any impact on the warehouse’s decision to stay open? And we decided that it’s pretty clear we did. 

Abe: And watching their tener change over those times was really interesting. And there was a certain point it was actually when Amazon announced they were hiring people at a higher rate. It became a pure business thing on the warehouse side. They just see their thought process shift from how do we balance this out in the best possible way to be like, how do we survive? And that’s when I realized that was classic Amazon, brutal PR maneuver, right where they got great PR. And at first really great. They’re paying the workers more. They’re hiring, these are all good things. And then as soon as we started talking to the warehouse, third party fulfillment, people were like, wait, wow. This is actually them using this crisis as an opportunity to try and like stomp on the competition, which is wild. I mean, I guess the business on some levels was an eye opener. 

Richie: In terms of stealing employees. 

Abe: Yeah, that’s essentially what the warehouse was like. Now, we haven’t placed, we’re scared to come in and now some they might just go to Amazon instead. And we don’t use cheap labor, that’s one of the things we do obviously. Well we like to pay a fair wage to people. And so I’m not opposed to the rate for this going up. It obviously ends up getting passed through to the customer at the end of the day. So it’s something to think about. So when Amazon announced it was cool. It almost felt too good. And then I started thinking through and again, it’s Amazon. So they play hardball. 

Abe: Towards the end of March, we kept full staff and I was doing these big Zoom calls. And we realized that even if we got through it all, there is no way like we’d be able to emerge from this lockdown state at anything close to what we were, just because the product was going to disappear. It was literally like if you look at the straight up product inventory in the math, we can’t be the same size company and that’s without even taking account of what happens to demand. So that was really hard. And so we ended up having to furlough half the staff. We’re still paying their health insurance. And right now the situation is not in bad shape because there’s like all the different programs in place right now. That was super brutal. Really, really hard to do. And then we kind of restructured ourselves in this leaner, half size unit. And April became like, oh, we can start thinking about weeks instead of thinking about days. But, you know, it’s crazy because a month before that, we had been thinking about years. Right. So it’s kind of a reset.

Abe: There are scenarios for what might happen going out. What products are still in the pipeline that might emerge and which ones are worth pursuing and under what circumstances? You know, they’re still potentially summer products. Well, some of it’s already in the pipeline, right. It’s like once it’s cut, there’s nothing left to do but finish. So it’s really a lot of just constant juggling and rescheduling and dealing with the circumstances and the kind of watching the supply chain side really up in the air. Italy’s kind of reopening this week. 

Abe: But the other weird thing with Italy is they actually closed much later than you would think because every country does their lockdowns differently. And so there were mills that are in Lombardy. I get an email from them and they say they’re open. I was like, isn’t Italy shut down completely? Isn’t Lombardy shut down? And then I go look at them on the map and am like, what’s going on? And that changed. And they eventually shut down and Portugal semi-shut down,  there’s not a lot of movement, but a lot of those factories are based on these kind of small towns up in the mountains and stuff. I think they just seal up the town, kind of the way China does with their gigantic communities clustered around factories. So that stuff’s moving. But when you’re dealing with a global supply chain it’s tricky because one or two pieces go missing and then to figure out what the substitutes are and all that stuff. 

Abe: And then New York is like another wild thing. So one of the things that we started thinking about really quickly, it was like mass, like everybody else. But we’re Outlier. There are a lot of people that are like, oh, let’s make a fabric mask out of this basic pattern. We didn’t see the point in that. The point of Outlier is to try to make products that are different and that are materially better. Right. So we went to our materials and we’re like, oh, can we figure out how to make a mass that’s actually more comfortable to wear filters better or is easier to put on and sort of focus on that. And so we’ve been slowly playing around in that realm. But one of the things we realized really quickly is that nobody in New York wants to be open right now. And the people that are, got requisitioned by the government, which is cool, actually, I’m happy for them. New York City has an order for like over a hundred thousand hospital gowns that are going out to whatever is left of the garment district that wants to reopen, which is super cool. But where are all these masks coming from? A lot of preorders, which is a little sketchy. And then a lot of them are coming from  L.A. factories. And I lay it out on their own factories and we were able to pivot and they’re not hit as badly out there. So to their credit, they handled the situation a bit better. 

Richie: [00:10:02] In terms of the product assortment, did you think or did you have the opportunity from a supply chain perspective to think about doing more stuff that works at home? Or is that such a radical shift that it was harder maybe than it sounds? 

Abe: [00:10:18] It’s much harder than it sounds because we’re very custom. We order our own fabrics, like some of them are developed for us. And so from that standpoint, if you’re gonna start with ordering custom fabric, go all the way through, that’s a six month process. So it’s like there is homeware slated for November, which is cool. And then the fabric mill has to be open and they have to be able to deliver it. And the rest of the pieces might have to be shuffled around. We can work with that. But if you’re a material driven company and the materials aren’t there, then you can’t do a thing. If the garment district was more open. If we own our own factory, it would be a slightly different story because we are sitting on a bunch of fabrics as well.

Richie: [00:11:01] Does that change your thinking about either being material driven or the value of having a factory or some version of it? 

Abe: [00:11:09] Yes, it certainly does. I for the longest time had no interest in running a factory and I still don’t. But I see the value more like on a larger scale. It really drove home the need for having a resilient infrastructure. The clothing business as a whole is pretty lean. With the exception of the big luxury players. Right. People aren’t building a lot of extra buffer into their operations. The margins are quite good from a pure raw standpoint. But once you go into marketing and expenditures and everything like shipping and returns, right, it ends up very lean. 

Abe: So how we build is still a more robust place. And it’s tricky because as soon as you try and put  more margin in there, you’re going to end up with somebody else’s life. There’s more space for me to slip. That’s the nature of the structure that we built right now. So it’s interesting and it’s challenged the way I think about product and  our development cycles and we were eyeing physical retail and now there’s a whole new universe, right, to think about and who knows what’s gonna happen there. It could be an incredible opportunity to get into great storefronts, or it could be like that was the knockout blow. And it’s all going online, which could be good for us. 

Richie: [00:12:30] How has your approach to customer communication evolved during this time? I think generally you guys are relatively transparent when it comes to the communication, obviously not like on this level. How did you think about like what do we tell and communicate? What do we hold back and how is that different from what happens like another quote unquote, normal period? 

Abe: [00:12:50] I mean, we’re always quite transparent, especially on Reddit. So, you know, we have a full active Reddit community out there participating. We’re pretty open there. And then we do Instagram live every week as well. And, you know, it’s kind of a default openness that we work with. It was really tricky in the early days when people were panicked and it’s kind of a crisis, like how do you achieve the right tone and communicate? And, you know, on one hand, we’re trying to survive and I want to pay, you know, the entire staff’s paychecks. It was very much like, how does the company survive? How do the people of the community?

Abe: And then, how did the actual customer community, how does it all survive? And so that was just a really tricky balancing act, how do we communicate and make it clear and so a lot of it was just being really upfront and being like, look, we’re doing this, but if you’re in a period of financial stress that you’re worried about what’s going on, do not buy this product, don’t take advantage of this. Right. There’s crazy stuff going on. 

Abe: I mean, we’ve shut down our returns completely because we can’t process them. So we have to communicate that to customers. And then there’s a certain set of people, you know, we had to like evaluate each one individually and try to figure out what’s going on. Or like trying to return things for very legitimate reasons. Like they’re like, oh, I just got furloughed and now I need to make sure I have enough to pay for groceries. And I just bought all these clothing items that now seem really expensive. So there was a lot of balancing there and figuring out how to deal with that situation and help people out as best as possible too.

Richie: I didn’t see any other brand that suggested people not to spend if they can’t.  But it seems like that wasn’t a bold thing for you guys to decide to say. It seemed pretty logical, right? 

Abe: [00:14:39] Yeah. I mean, that just seems human to me. But I read all the emails and so we’re communicating with customers and we’re like, we’re still open and we’re shipping. And, you know, at that point, I didn’t even know, I still don’t know if the warehouse should have been open. Right. So it’s very dicey communication. And then it’s like, we’re running a discount. We never run discounts, but don’t buy a pair of pants if you’re worried about how to pay the rent. That’s just human and that’s the last thing you wanted. And I also even from a business standpoint, we don’t know when we’re gonna take returns again. And if somebody buys something and then realizes two weeks later, that was a stupid move, well, they’re going to want return and we don’t have the ability to process that. And obviously we’re gonna process it once we can, extending all the terms and all that stuff. But at the end of the day, you’ve got to deal with people on a human level first. And business has a lot of hard realities, but you know where people first.

Richie: Have there been areas where you have continued to invest either from a time perspective or monetary perspective as this has happened? It’s obviously logical to cut back as much as you can, but are there places where you wanted to go deeper or have gone deeper? 

Abe: [00:15:47] We actually played around a bunch. It was kind of an opportunity in some ways to play around with certain marketing things. We’re not a hugely marketing driven company, we’re mostly on social. And we have a drop model. We really rely a lot on there being something fresh, exciting and new product wise every week. And then we look at the situation where we had a certain stash of products, you know maybe a month’s worth of products backed up that we kind of pieced out per month. And then it was kind of like we’re gonna be out of product, like we have to work with what we’re sitting on. Our sort of anti-marketing strategy with that kind of stuff. These are the core products and we’re going to try these new exciting products in smaller numbers and that generates more energy and excitement. And people come through and then like what they end up walking out with is one of the core products. Right. But as soon as that flash of the dew is gone, like we have to think about. Alright, how do we take this more staid product and talk about it for the third time? The fourth time? The fifth time. Right. Like how do we keep that interesting. 

Abe: So we’ll play around a bunch on social. And we created some interesting stuff like fit-check Fridays is a thing. We started asking customers to submit fits around a certain product and I’m kind of averse to things like contests and stuff. Well, when the structure makes sense there’s a reason for people to submit these things beyond just vanity or whatever, like you can win stuff. But at the same time, it provides value to everybody. It’s not just free marketing for us. By getting pictures of people in every single size, like on these sort of social media campaigns, you generate a wide range of fits that people can look at the product and be like, oh, that person has like a body like mine and I could wear it like that. That’s been super helpful and interesting. 

Richie: [00:17:34] That was the first time that I’ve seen the Outlier community in a sense. 

Abe: [00:17:39] Yeah, it’s funny because we have so much community centered around Reddit, which is so unusual. And there are like what I wore today threads and things like that. But even  then you have to be really committed as you go in there. You don’t see the pictures. You get to click on every link. And we’ve always seen the Instagram crowd as not being that overlapping. There’s not a huge overlap between the people on Instagram and the people on Reddit. And then there’s certain people that completely told us, on Reddit, that the only reason that they have Instagram is because we do our lives or something, which is news to me, I’m like, how can you not have Instagram this day and age? But there’s still people who are like yeah I don’t do Instagram and I usually am just like make a burner account this is where culture happens live. I don’t love Mark Zuckerberg. I don’t know Facebook. I wish there was a better platform. But this is where the people are, that’s where culture is happening. 

Abe: So that’s another thing we just did, which was super fun. We did a live auction. We had a certain type of product that we’ve struggled with for a long time, which are like super artisanal products, usually built on top of something that we created. So we have been working since last year with this incredible marbling artist. She was just marbling for books. Her name is Cheryl Oppenheim and she’d been doing scarves for us and bandanas—this type of product is one of a kind. Like thats the way that marbling works, you make literally one at a time. And so we ended up with these beautiful, really expensive one-off products,  in a pandemic, unprecedented unemployment rate. So we’re like, how do we make this work? What do we do with it? And finally, we’re like, all right, let’s make a charity auction. So we picked a charity, this very local charity for the Hungry Monk Rescue Truck that’s out in Queens, working in some of the hardest hit communities. And that’s kind of like the epicenter of the epicenter. 

Abe: And we just did three bandannas tests, but did super well and was super fun to do. And part of the inspiration from that was watching how night life has happened on Instagram. You know, there’s the verses beat battles and there’s like people throwing parties deejaying live. And it’s fun and exciting. And it’s the culture at scale. Right. That’s what Instagram has. That’s undeniable. And so we do Instagram Lives 12:30 every Tuesday, New York time. They’re great. But every time we try to find other ones, you know, they’re tied around a product or anchored something physical and they make them great. We’ve never been able to like find another reason to do other ones that had the same level of excitement and some kind of anchoring. So this gave us the ability to do that and was super fun. So hopefully we’re doing more of that. 

Richie: [00:20:15] I’m curious what the cheapest and most expensive lesson you’ve learned during this time has been?

Abe: [00:20:20] I mean, the cheapest lesson is the one that I sort of knew already, but it’s be honest and be upfront like there’s no reason to hide what’s going on. And people respond to that, they can see it, sense it, it costs you nothing except for maybe pride. And the most expensive lesson I doubt it’s going to be by now being the most expensive lesson, but the whole PPP thing was wild. 

Abe: You know, we bank with Citibank because we don’t do that much banking stuff and they’re great for international and we do like a lot of international wire transfers and stuff, but they’re not great in any other way locally. But, when we started no bank knew how to deal with e-commerce, so it didn’t really matter. They were just there and we just used them. They had the tools and again, the international side was pretty good, but they were so unprepared to deal with this PPP. And I was like, oh, maybe even if we went to a more smaller business oriented bank, they still probably wouldn’t be set up to deal with the type of cash flow. We are an ecommerce company. We don’t have receivables. And banks hate that. 

Abe: But, we should have gone to a smaller one that was more set up to deal with businesses like us. So we still know, I think we technically, I suppose, get some of this next slice of PPP, but who knows? That’s a material less than that. The bare minimum we can put a very substantial number on that hopefully doesn’t cost us in the long run, but it definitely costs us that in the short run. 

Richie: [00:21:55] Of all the changes you have made as a business, as a leader, etc., what do you think is going to stay or what do you want to keep? Basically assume again in the coming months your life goes back to some sort of normal, obviously with some changes, but what developments or processes or so forth have changed in the last few months that you actually think are positive and worth keeping? Well, beyond being in a state of crisis.

Abe: I think we built some really interesting stuff on the social side, you know, it forced us to look at a side of our business that we weren’t, I don’t think doing really badly at, but Instagram had gotten kind of boring for us, for a while. And it was sort of this challenge where everybody’s there, it’s the place, but it doesn’t have the energy that it once had. This forced us to look at it in a new light and build some new processes in place and put some sort of rhythm and pattern into it and I think that’s going to stay for sure.