With Scott Orn

A Startup Podcast by Kruze Consulting

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Scott Orn

Scott Orn, CFA

Ben Munoz of Nadine West - Personalized & Affordable Monthly Outfit Subscription

Posted on: 01/05/2018

Ben Munoz

Ben Munoz

Co-Founder & CEO - Nadine West

Ben Munoz of Nadine West - Podcast Summary

Ben Munoz of Nadine West discusses the entrepreneurial journey - from sleeping in his office and renting out his apartment to help fund Nadine West - to a successful subscription commerce business that is profitable and growing rapidly.

Ben Munoz of Nadine West - Podcast Transcript

Ben: Welcome to Founders and Friends Podcast with Scott Orn. Today my very special guest is Mr. Ben Munoz from Nadine West. Welcome Ben.
Ben: Thank you. Great to have you. Ben and I have been friends for many years, I think 10 years, 12 years. We also started Ben’s Friends, the non-profit for patient support communities together. But that’s a different story. We’re going to talk about Ben’s real job, which is Nadine West. Ben started Nadine West probably three or four years ago. It’s an awesome site. I’m actually a personal investor in the company. Very happy to be a personal investor. Ben and Nadine West are also clients of Kruze Consulting so wanted to have them on. Ben maybe tell the quick background on Nadine West, how you got involved.
Ben: Yeah. Sure. It’s a very unconventional story. I don’t have a background in apparel or eCommerce. The way that I got here is unconventional, but I think there’s a lot of patterns that you can see, and a common thread running through both Ben’s Friends as well as the startup Nadine West. I went to Kellogg’s business school with Scott, that’s where we first met and have been friends since back in 2005 I think. Yeah. It seems very … We’re getting up there.
Ben: Yeah, we were. We are. Before we started recording we were both talking about how tired and old we looked on video so you can visualize the two young, young people meeting, becoming friends.
Ben: Or you can thank God that this is only an audio podcast and you don’t have to look at us. Yeah, so actually during Kellogg, the reason for starting Ben’s Friends was because I had a brain aneurism that ruptured. So I took a detour from the typical business career and I went to medical school for a couple of years. In my first year of medical school, my friend Sidney, who’s the co-founder at Nadine West, and we’d worked on some ventures before, he proposed to me an idea. He just needed help with it. I’m more of the tech guy than he is so I helped him build the initial website just to see if the proof of concept was going to be worth pursuing. I did it on evenings and weekends while I wasn’t studying for medical school exams. So we built it and spent a little bit of money advertising on Facebook. This was I guess 2013 I believe. Immediately there were customers that loved the concept. The concept was you would sign up with Nadine West. You would give us your credit card and fill out a style profile and then we would send you an outfit every single month. No risk to you. Whatever you kept, we would charge you for. Whatever you didn’t like, you would return and the postage would be included. Everything would be included in the service and we’d try to do a better job the next month of styling you. Yeah, even for the very first day it was immediately a hit. We haven’t changed the business model since. There’s been an explosion in subscription services since, but this was our unique variation of that. So we operated that and we kind of improved it. At first, it was just a WordPress page with some very simple credit card processing. That’s all that was needed, but eventually things got bigger and bigger, and I started helping Sidney out with more systems and infrastructure. We built a customer service platform. We started to build an inventory management platform inhouse. Then it just got too busy that I had to make a decision. So I asked the dean of medical school if I could take a year off to help my friend launch this company. She said, “Oh yeah, sure, no problem.” So I took a year off. I packed up my belongings. I was a broke medical student at the time. I packed everything up into a pickup truck. Drove from Houston to Austin. We set up shop. We got a little warehouse, which was actually a metal barn in the backyard of somebody’s house. We just went to work packing and shipping. That was three years ago and I haven’t returned to medical school. We’ve now grown from the two of us packing and shipping in that barn to a team. We’ve got 30 people, half of who are here in the warehouse and the rest abroad working to build Nadine West into the special company that we think it can be. That’s an amazing story. There’s a ton to unpack there. I want to talk about how you guys took the big data approach to picking out the right styles and things like that. Aside from just doing the Best Friends journey with Ben, and of course I would invest and trust anything you will do in life, but I still remember before you raised any money whatsoever, you did something that’s legendary, which I’ve told many other Kruze Consulting CEOs when they complain about not having enough money or things like that. Do you want to tell that story about your apartment?
Ben: Yeah. I mean I knew there was something there and I had a belief in my business partner, my co-founder Sidney, and I had a belief in myself. I don’t know. It’s not like I was this risk taking guy, but I knew that there was something really here and it was worth it. So I rented my condo out to free up some cash and instead of living there, I slept on the floor of the warehouse for six months on a futon. This was before we had warehouse employees that would come in in the mornings. It was just me and Sidney at the time but that’s exactly what I did. It was on the futon. I had a suitcase of clothing on one end of the futon and like a little mini fridge on the other. Every morning I would get up and I would pack and ship in the mornings. Get everything out by lunch time. In the afternoon I would write code or I would help Sidney out with marketing or we would try to process incoming inventory, just so that we could get some initial traction and save all of the precious investor capital or even before that, our credit card balances so that we could use it on inventory. So to reiterate, you slept on the floor of the office for six months so that you could fund the company. I mean that is I still think one of the most amazing things I’ve ever heard from a founder. When you told me that I was like, “Well, of course, I’m going to invest in this company.” Like if you’re willing to make those kind of sacrifices, of course I’m going to do it. Kudos to you man. When we were building Kruze Consulting in the early days, I made a lot of sacrifices and Vanessa’s made way more sacrifices than me, but that’s next level stuff. That’s incredibly impressive.
Ben: Thank you. I mean even before we found the warehouse, I lived in my truck. I lived in the backseat of my car for a month. That’s how extreme I got. That’s how much I believed in Sidney and in myself and in the idea. I knew it was just temporary. I knew it was just, “Okay. Who cares? This is super temporary. It’s nothing glamorous.” My dating life, of course, was going to be nonexistent but I knew that it would pay off. Yeah, and it has. It has. Well, as I was telling you before we started recording, I read your investment newsletter yesterday and one thing I’m always impressed with … Well, maybe talk a little bit more about, before we talk about customer service and focus on customers, talk a little bit more about what Nadine West is sending its clients every month so people can visualize what you’re doing.
Ben: Every month, depending on the service, the plan you pick, it might be every two weeks. But at least it’s every month. Our customers will get a curated outfit. It’s an outfit. It has two articles of clothing usually and two accessories, jewelry, necklaces, bracelets, scarves. The prices are very affordable. I think if your readers are familiar or your viewers are familiar with Stitch Fix, that is the big name in our industry, and so we’re an alternative to Stitch Fix. We have a similar, close to identical business model but we target a very different consumer. Ours is the middle-income consumer. So we have to, have to, have to, keep our prices affordable. So we send an outfit that is affordable, that it’s trendy, it’s quality clothing. It’s similar to like a ZARA, same, similar to ZARA, H&M, right around that price point and quality. The important thing is that they don’t have to keep anything. That’s what makes our company logistically different is that if you have a fashion subscription service, there’s hundreds and hundreds of them. They just send you stuff. They keep on sending you stuff, sending you stuff, until you cancel. It used to be only startups that had the service. Recently it’s been a big deal because especially Amazon’s really crushing everybody. Stitch Fix has now proven a different kind of model. So now there’s a lot of attention on this space. A lot of the Fortune 500 bricks and mortar retailers are starting to get into this. But there aren’t that many companies out there doing our model, which is that you only have to keep what you love. Everything else you can send back and we make it incredibly easy because we include a mailer and a postage label, which is post office. It’s not UPS, which makes it even easier. You don’t even have to schedule a pick-up. Just drop it in your mail box and your friendly postman comes and picks it up. It’s incredible. I love how like even your business model is connected and pro-consumer. You know? I just love how that courses through every aspect of the business. Every time you send the investors anything, it talks about how much you care about your employees and how much you care about the customers. You see that. I see YouTube videos of people raving about Nadine West. I see the Instagram posts and things like that. It’s super exciting what you’ve been able to build. How did you kind of get this religion around customer service and focus on the customer?
Ben: It’s just our core values that we don’t want to … Who do we care about? Why did we build this company? It was to build something special. Like there’s no monetary goal that we wanted to hit. It was because we generally enjoy building interesting and great things. Like what you and I did with Ben’s Friends. You know we’re not getting any money out of it. It’s just because we enjoy building something special. That’s the same exact thing that we’re doing with Nadine West. We want to build it into the kind of company that customers love. That customers love to buy from, employees love to work for, and investors love to be associated with. That’s a long-term view and I think we could chase growth, and we could chase revenue, and we could chase some vanity metrics in the short-term, but over the long-term, unless you’re making your customers happy and your employees happy, you don’t have a company that’s built to last, which is one of my favorite books. I love it and I’ve seen you do this in practice so it’s really cool. Now one of the things I talked about a little bit earlier was you’re the MBA who also has a computer science background. So you started seeing all these clothes getting returned and started actually putting the pieces together of like, “Hey, I think we can do this in a more efficient way. Actually use big data to figure out what people actually like.” Can you talk about that initiative and how you built that?
Ben: Yeah, a hundred percent. This is where one of the benefits of being a newbie in an industry or whatever, right? You don’t have the biases or the best practices to weigh you down as baggage. You just look at something with a completely brand new set of eyes. I don’t have an apparel background. I don’t have a retail background. Before I started building the first version of the inventory management system, I didn’t even know what a SKU was. I had to Google, “What is a SKU?” So it was like, “Okay. We’re figuring it out as we go, but we don’t have any of the baggage.” If I were going to build an inventory management system, how would I build it so that it would be fast, efficient, it wouldn’t occupy a ton of working capital, we could do a good job of only buying products that we know are going to be sold? So we have a really fast turnaround, really high inventory turnover. That’s the trend nowadays. We’re like H&M and ZARA. The reason they’ve been able to dominate in retail is because they have such fast turnover. Like ZARA, I think can get something from the runway to their stores in a matter of weeks. Then you get these big box retailers that they’re buying a year ahead. So how can you possible predict what’s going to be a year in advance? So we set the system up to be very data driven. We set the company up to be very data driven. There’s two components, right? We have a, we call it, “A Heart as Big as Texas”, we really, really, care. But then on the other side, we’re incredibly, we’ve got propeller heads just figuring out this stuff and we’re just like all constantly, “How can we make it more efficient, more efficient, more efficient, eliminate waste like Toyota production system style?” How we buy inventory and how we run the warehouse is all run by a bunch of analytics and constant pushing the envelope forward in terms of can we improve the metrics? That’s amazing and you guys have the advantage of one of the cofounders, you, being just super-strong technically and you’re able to recruit a lot of good technical people too into the company, which I would imagine is usually pretty hard for a retailer.
Ben: Well, yeah. We’ve had brick and mortar partners that one of the reasons they love us is because we’re so strong in the analytics. Then they’re asking us to, it’s just shocking, they’re asking us to help improve their inventory management systems because they can’t hire the kind of technical talent at their size that we have already. It’s been a tremendous competitive advantage having a very lightweight, like SWAT team of just brilliant computer science people. You touched on this. Another great aspect of the business is that instead of … You’re not focusing on like the one percenters. You’re focusing on the broad swath of the U.S., people who are working, working families. You know, people who want something nice but also needs to be affordable. How did you zero in on that target market?
Ben: A little bit of strategy, and a little bit of luck. The luck was that because we had very little capital invested, we had to make it stretch. So we had to get as many pieces as possible of clothing. You can’t do that when you’re focusing on high-end, so that’s the luck component. The strategy component was, who else was out there and who are they targeting? So initially, I mean it was obvious that every startup out there goes for the high margin item, the high margin customer. They have this, I don’t know if it’s a blind spot, because I’m sure they’re aware of it, but it’s just so incredibly difficult to make money on lower price items. It’s so much harder that they figure, “Well, why do we have to when the entire space is wide open?” So they go straight for the upscale, high margin customer. We have a strategic decision to continue to focus on the underrepresented consumer, not only in price point but also even in plus size. I mean now it’s a little bit less underrepresented in terms of company targeting, but I know we’re happy to offer something for everybody. That’s awesome, Ben. What’s the future hold for you guys? I know you’re just like, especially from working with you at Ben’s Friends, you’re just like a straight, cold-blooded executor. Like you just love, nothing makes you happier than solving problems and continue to execute. You’re not a big, get caught up in the big vision kind of guy but like what are you guys working on over there?
Ben: I mean you’re 100% right. Execution, execution. I’m an operations operator guy. I think probably it would be good if I were a little bit more glamour and fame and PR focused, but I’m a little bit more focused on internal. I’ll keep on focusing on that just keep on, I think we just want to double and double and double again. I think that will give us the opportunity to continue to build something really special here and make our employees proud, our shareholders proud. Yeah, just more of the same I think. Any advice for the budding entrepreneurs out there who are so dedicated they’re willing to sleep in their car for a month and then the office for six months? I’m sure people come up to you and ask you questions about doing a startup or being an entrepreneur. What kind of advice do you give people?
Ben: There’s tons of advice. I would say … I didn’t have in-person mentors. I know people really emphasize how important they are but if you don’t have in-person mentors, books, I read books just tons of books. I probably read a book a week. There’s just so much to be gained from reading how Sam Walton built his empire and how Tony Hsieh built his Zappos empire and Jeff Bezos built his Amazon empire. If you read books and you want to think independently and yeah, stay focused on your customers, I think you’ll be fine. The Amazon book was one of my favorite books of all time. I just finished that like six months ago. I’m just starting Sam Walton and I’m reading the Nordstrom’s book on customer service right now, which is really good.
Ben: Yeah. Yeah. You’re blessed to have a really good partner in Sidney. What did you see in Sidney that made you want to partner up with him and take the leap?
Ben: That he thinks independently. He’s always questioning the mainstream. He’s always questioning common sense, which is not so common. He’s always questioning conventional thinking. He won’t just accept an answer as given. He’ll go and test it for himself. I think those lead to insights, which lead to competitive advantages, which over the long-term accumulate and lead to successful business. Yeah. I totally agree, and he’s a great guy. Well, cool man. Well, this has been fantastic. Can you tell the audience where to find Nadine West and how to get in touch if they’re interested?
Ben: Absolutely. Probably the best place to find us is I’m pretty easy to get in touch with. You can also find us on Facebook, or you can find me personally on LinkedIn. Yeah. Cool. You guys have a big Facebook presence.
Ben: Yes. You also have a great YouTube presence, which I always like. It’s just crazy how many fans you have out there who are recording videos and talking about Nadine West. It’s really amazing.
Ben: Yeah. Yeah. We love our customers. All right man. Well, thank you for spending the time. Really appreciate it and kudos to you and best of luck in the future.
Ben: All right. Thank you. All right, bro. Take care.

Kruze Consulting is regularly reviewed as one of the preeminent providers of finance, accounting, tax and HR services to high-growth companies. For our offices in San Francisco, San Jose, Santa Monica, New York and now Austin, TX, our experienced team serves venture and seed backed companies in diverse industries from SaaS to biotech to hardware to eCommerce.

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