DTC POD Nathan Resnick - Product Sourcing & Development 101
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What's up, dtc pod. Today we're joined by Nathan resnick, who is the founder of Sourceify. So, Nathan, to let you kick us off, why don't you tell us a little bit about Sorceify in your background?
Nathan Resnick 00:01:01 - 00:02:22
Yeah, totally. I mean, brief background. I actually started in China when I was 15 years old as a foreign exchange student. So I lived with a host family, didn't speak English, attended a local school there, and just became so fascinated by how products were made. And so that year, I started importing products myself and selling them on ebay and Amazon. By the time I was 19, I had done over $600,000 online, and I thought I had made it, of course, as a 19 year old and soon realized that to have longevity e commerce, I needed to have my own brand. So I launched a watch. Brand called Guestman watches. I had the sunglasses brand. I really focused in the fashion accessory category. But as my own brands grew, people always ask me, how do you manufacture products efficiently in China? And so I started Sourceifying 2017 to really solve that problem. We've since expanded to four other offices china, Vietnam, India and Pakistan. And so we have a B to B supply chain software used by a lot of ecommerce brands, both shopify and Amazon. And four offices, sourcing offices, where we go in audit factories, manage production, handle quality control, and then often handle the freight as well. So our goal with any customers to save them money in their supply chain. And for me, I just love e commerce. I've been doing it for a really long time and really excited to be here today and talk about it.
Yeah, amazing. So would love to get a little bit of context about maybe how that whole process works because you obviously were able to figure it out by launching your own brands in a couple of similar but adjacent spaces and realizing that there's probably a similar process that goes on for launching a brand.
Nathan Resnick 00:02:39 - 00:02:39
So for people who are maybe thinking about not only, like, launching a brand from the ground up, but also who maybe have a brand and are looking to expand into different product. skus, why don't you just give us the quick rundown or 101 on what goes into building sourcing qc a product before you can actually sell it online on shopify?
Nathan Resnick 00:03:01 - 00:05:16
Yeah, it's a really good question. I mean, bringing a product to life, any product, is just so in depth and there's so many nuances to it, right? Like, even this hat, there's so many different materials that go into a simple hat like this. A lot of people come to us and say, hey, we want to produce a T shirt, right? But there's so many cuts and trims and fabrics that go into a shirt that you really have to dial in exactly what you want. And I think that's one of the biggest challenges for brands like to expand their product line is how do you actually get your spec styled? That can be either through a cat or a tech pack. And then at the end of the day, it's a matter of finding the right factory for you. So most brands, when they're starting out, they typically go on Alibaba Global Sources, which is a great starting point. But as you scale up, a lot of those factories that you start with might not be the best fit as you grow past 510, $15 million a year in revenue. And so really, where Sourceify comes in is to help those brands that have reached that 5 million plus dollar mark that are now looking to save money in their supply chain. We go in and really do a cost analysis on what factory is best suited to work with them, right? Because if you're either making up a small portion of a company's of a factory's production line or taking up a majority, those could be good and bad scenarios, right? And so most people look to change factories either because they don't think the cost they're getting is right, the lead time is messed up, or the quality has a lot of quality fade, right? And so for us, those are the three main pillars that we look at. Price, obviously, is always top of mind, but if quality and lead times aren't there, then it's a big problem as well. And so when it comes to actually going into a factory, there's so many metrics that we look at, like from an audit standpoint, we look at the financials, we look at typical iso or bsci certificates that they have. But to be honest, I think a lot of those iso type of certificates are just bs because of factory. And I've seen it firsthand, the factory will go in and make their factory look all nice for an auditor to come in, and then the next week you go and it looks completely different, right? And so I think always having a pulse in your factory is so important, especially when supply chain is the backbone of any ecommerce business.
Because you were on the ground, like you said you were in China and you kind of were boots on the ground getting a feel for what this stuff looks like. I know that maybe back in the day, some of the first brands that started there were probably founders who would go overseas, find a factory partner manufacturer, and really do it like that. But today, everyone in their mom's launching a brand, and a lot of times they're not doing that. All this stuff is remote and virtual. So why don't you walk us through a little bit about what's the whole process like these days of someone who might be launching a brand today? What's their diligence process? Are they going over to Asia to find a factory? Are they finding them online? Like, what resources do they have to figure out who?
Nathan Resnick 00:05:59 - 00:10:38
Yeah, I mean, you know, I used to be in Asia four to eight times a year, right? And with COVID I haven't been back since. I mean, it's not that I'm scared of COVID It's just the lockdowns that they've had and now COVID, now that they've lifted the zero COVID policy there, it's spreading like wildfire there. So you got to be mindful of that. But at the end of the day, if you're a startup just looking to get started in ecommerce, your best bet is honestly alibaba global sources. What you need to realize, though, is when you search for, let's say, a shoe or backpack manufacturer or whatever, candles, whatever it may be, alibaba as a marketplace is paid to play. So all the suppliers that you're seeing are paying the list to rank for that keyword that you're searching for. So if you're searching for candles, the factory that's number one or two or three or whatever it may be, they're paying to be in that position. They're paying alibaba to be in that position, similar to how brands rank on Amazon, right, when you search for candles to buy candles on Amazon. And so that's what you need to realize right off the bat, because just because the factory is the number one result on alibaba doesn't mean they're the best factory for you. So right off the bat, just know that. And then I would dive into the response time of the factory rep that you're talking to. Most of your communication is going to be done through WeChat. So if you don't have WeChat definitely download it right now. And then it's a matter of understanding that factory capacity, what products they've produced in the past, what brands they've worked with in the past. And you can verify that by what I call kind of like a paper trick, basically is like you tell your sales rep to write their name and the date on a piece of paper and have them go around. The factory taking a video of that piece of paper or photos of that piece of paper with their production line to see what's actually going on in that factory. And you can get a real feel and sense for that factory without actually being there, then. And all sales reps that work with cool brands, if they actually have worked with those cool brands, they'll have photos of those products because they're excited and really just thrilled that they've been able to work with those brands. Right. And so at the end of the day, it's not bad if a factory is producing a similar product to you. Obviously eventually you're going to have to grow out of that factory and work with your own factory to have a competitive edge in your supply chain. But when you're starting out, it's not a bad thing if that factory is producing a competitive product to yours because that means they have the expertise. That means they might already have some scale in terms of volume with that exact type of product. And then it's a matter of making sure you communicate your specs extremely well. Right. There's so many nuances with specs and you really need to detail every single component. Right. And so that's why I think all the cad and tech pack files are so important. Because if you're just telling your factory, yeah, I want a hoodie that has drawstrings like this, but I want it looped like this and you don't have the exact specs detailed in a tech pack, then nine times out of ten they're going to mess it up. And it just means you're going to have to go back through the sampling process, which for, you know, most products is a, you know, four week process. Right. So if you want to produce samples fast and, you know, get what's called golden samples the first time around, really try to have your spec styled in. And then it's a matter of placing a test production run depending on their mouse, depending on the price, it'll probably be anywhere from like 5000, $5,000 or so, sometimes more if it's a custom mold and a much more expensive product. But that's the ballpark I think you're going to look to spend when you're just starting out to get your first batch of inventory. And then it's a matter of always doing a third party inspection. So your payment terms are typically going to be like 30% down, 70% before shipment. Before you pay that 70%, go to factored quality or chema or there's so many third party inspection companies out there and get a third party inspection, it's going to cost you like 200, $400. And it's kind of like your insurance to make sure that what you're receiving from that shipment is actually what you're expecting to receive. Right. Because literally the worst case scenario is when you receive product and it's not what you expected because now you have product at your warehouse, which is when you're starting typically just your house and you've got a bunch of product that is messed up and that is a horrible position to be in. So get thirdparty inspections done, even at the scale of sourceify, we always do them because it's just why not insurance for your product?
Got it. And then how do you think about like, also finding the right factory and the right partner for whatever product you're manufacturing, right? Obviously, you can go and start looking for brands or factories that have made similar products for similar brands. But when you're really thinking about it, what are some of those other factors that you might want to be taking into consideration that might be maybe aren't so obvious?
Nathan Resnick 00:11:03 - 00:13:40
Yeah, that's a good question. I think one thing you need to realize is that a lot of factories that produce the same products in the same city, right, like all the watch factories are in this one area of shenzhen. And that should be because there was one watch factory. And then the GM wanted to start their own factory and just kind of this cycle. That's how these factories typically work. So you're going to find that certain hubs and cities have all the specific type of product production done in that hub. And then it's a matter of really understanding what size each factory is in terms of what their production run looks like, what their working capital looks like, because when you place a po at a factory, they have to then go buy the raw material to produce that product, right. So they also have working capital issues. And especially as you scale up, that's a pretty big deal in terms of making sure you're transparent about your forecasting. Because there are scenarios where your factory, if they don't have the working capital to produce raw material and they're floating money for you because you're trying to improve your cash conversion cycle, all of a sudden the factory hits you up and says, hey, we don't have the money to buy your material, produce your product. Right? And that's a really tricky situation to be in. So at a smaller scale, you don't really have to look at that. But as you grow, forecasting is so important, and being transparent about that with your factory is vital. And then I think it's a matter of, like I said, third party inspections or it is really amazing if you have the opportunity to go over there and visit your factory and build an in person relationship with them. It is just an incredible experience and it is eye opening to see how products are made. Right. I remember I was in those plush toys factory. Before I forget, that kids toy brand that was so popular had all those plush toys. But I literally remember as a kid, I thought those little toys was just going to be produced in a magical place. And I ended up going to the factory that was producing those products, and it was just not what you would imagine. It's just them having a machine one by one, just filling it with the stuffing that they use for those plush products. And it's just so different than what you think in terms of how the products are made. And don't get me wrong. They are very high quality and a lot of factories are extremely high quality in China and Asia. But that's another thing you need to keep in mind is what kind of areas of your product might have a defect rate. So keep that in mind if there's, like, a breakpoint with your design or tech pack in terms of where do I think the factory might mess this up?
Yeah, I think that point you made about the raw materials that are going into your product is really interesting, because a factory might be really good at making a bunch of products that look similar to another brand. But if you have a design spec that's like, no, I need to be made to this quality standard with this type of material, maybe at that level, it's actually a different factory. That might be better for you and your product, because the way they're quoting you or the way that they're used to setting up their production, it might be different. So that becomes really important to consider too, if your design requirements are right.
Nathan Resnick 00:14:15 - 00:15:38
Totally. I mean, the other thing that blows my mind, too, is when you go get quotes from a factory, they give you a price, right? And it's a price per unit. But you don't actually know what makes up that price per unit. Right. Obviously you have the material costs. You have the labor cost. You have the facility costs. Sometimes you can get as granular as the electricity costs to produce your product. And especially on the raw material side, it's really cool to figure out and understand. How does this factory actually get to this price per unit? And it blows my mind that very few founders and ecommerce brands, they just don't ask. They don't ask, like, well, how is my product costing? $5 or $10 or whatever it might be. Right? If you look at watches, for example, there's like, I don't know, four dozen different components that go into a watch. And all those little components a lot of times come from different sub suppliers. Like the watch case, the watch hands, the watch strap. All of those little components of a watch come from different suppliers oftentimes. Unless it's a very large watch factory that has their own case mold and all that stuff. But for the most part, a lot of those factories are just assembling the watch and they have their own suppliers that actually produce those little individual parts. Which is crazy, because you could literally have factories producing millions of watch hands, which is just nuts.
No, absolutely. And the next thing that I kind of want to talk about and this kind of goes back to your experience in building Sourceify and having all that experience not only working with factories, but being on the ground floor and seeing them in action. Let's talk about Sourceify the business. How did it really start? What was like the MVP? Who were your first customers? How many factories were you working with in the early days? Let's talk about that whole journey.
Nathan Resnick 00:16:03 - 00:19:40
Yeah, totally. So it just started me in my living room, and kind of our main channel of growth was actually Facebook Groups. There was a lot of Ecommerce Facebook Groups, and so I started sharing content around manufacturing and sourcing products. And I wasn't being promotional at all, just educational. And I always would ask the Facebook Group admin if I could talk about what I was doing before posting. And at the time, this was like 2016, 2017. There was very few people in Ecommerce talking about supply chain. And I think even to this day, most people want to talk about growing top line, but you don't realize to boost profitability, like making sure your supply chain is dialed in, is so crucial. It was just me charging a flat fee, like anywhere from five hundred dollars to two thousand dollars to source a product. Just a flat fee. And then in 2018, we got into Y combinator, and it was crazy. To this day, I'm one of the only solo non technical founders to go through yc, and I didn't really know much about software or what software was, but they saw that we were trying to create and kind of optimize and improve our process through software. And so we raised a seed round, we hired a development team, and we started building supply chain software for teams to have more transparency and visibility into production. And that was a great time for us because it enabled us to have some SaaS revenue while also taking a commission on production. Right? So that's our revenue model. At Source Five, we charge a monthly subscription for our software, and then we take a commission on production, just depending on the volume, so it's variable. And we try to align ourselves with our customers as much as we can. Like every new customer that we sign up, we're saving them at least 10% of their unit costs. So we go in and do a really good job making sure you're working with a factory that can produce the best product for your business. And in terms of our growth journey, it was just a matter of expanding with our customers. Right. Like, we were early on with Cuts Clothing. They ended up outgrowing us, actually, with payment terms. We couldn't keep up with the terms that they wanted, and payment terms are so crucial for a company to grow, and at the time, we didn't have the capabilities to do so. We were very early on with Jackson, the men's jewelry brand. I think they were Forbes 30 under 30 last year, two years ago, and announced that it's $70 million in revenue, which is just incredible. So we still work with Jackson today. It's just incredible to see their growth. And a lot of Amazon brands. Most of our categories we do like fashion accessories, home goods, sporting goods, and non FDA medical supplies, but not ppe. We ended up hiring a team member in China that was just extremely strong sourcing, like heat pads and all sorts of random non FDA, non ppe medical supplies. And it's become a really big category for our sourcing team. So that's kind of the journey. And then eight months ago, we did a deal with isba, which is like kind of like a deloitte for supply chain. And so they bought into our business, we hired a new CEO, and, you know, we've since continued to reinvest in our technology and our team and just, you know, our customers as well.
And what did it look like? Because you guys had to build out your network of factories that probably just went beyond the couple that you had worked with for your own brand. So what was it like on that side of things? Starting to build relationships and find how did you find all these factories? Where did you find did you start working with them? What countries are they in? Let's talk about that side of the marketplace.
Nathan Resnick 00:20:05 - 00:22:00
Totally. Yeah, I mean, when I was starting, it was just going to every trade show, like every canton Fair, everything that is like canton fair. There are some shows in Vegas like Magic Sourcing or asd sourcing, just going to every single trade show you can think of that had suppliers at it and just networking with those suppliers and building a relationship with them. So that was kind of phase one. Phase two was actually hiring and expanding our own sourcing team. So that originated in guangzhou. I ended up probably spending like six or eight months of the year in 2018 or 2019 in guangzhou and 2018, and just really growing our supply chain through team members. Because all of our team members have been in the sourcing industry for over ten years, they have strong long standing factory relationships. And that's what's I think become so core to our expansion strategies. So even as we've expanded to source products in India, Pakistan, Vietnam, all of our sourcing capabilities really stem from our team members and their past experience sourcing products in those categories. So though I've been to trade shows in the Philippines and Vietnam and all over Asia, I think having long standing relationships with suppliers is so vital. And that's really why we focus on hiring team members that have a lot of great experience. But at the end of the day, too sourcing. And supply chain is demand driven, right? Like, the more product you're producing, the better terms the factory is going to give you, and typically the better they're going to treat you. That's one thing. We try to focus and do more of our customers at Source by now is kind of consolidate some of our demand to get better pricing and better payment terms for our customers.
So you're basically able to kind of build up a network where if you're sourcing for several brands that are doing over ten to 50 million revenue or something like that, and they're both in the apparel space, you're able to funnel that demand into one factory that does massive runs. And they're pumped because they get a bunch of traffic. And then your customers are pumped because they're able to share in terms of the pricing. Right?
Nathan Resnick 00:22:27 - 00:22:55
Yeah, exactly. So kind of economies of scale with factories as we try to work and consolidate some demand from our customers into factories that we really have a long standing and deep connection with. So that's I think the beauty of our business, too, is even if you're a smaller $5 million brand, we still can most likely get you better pricing and betting better payment terms than your existing factory.
That's Amazing. And then now I just kind of want to talk about the landscape in Asia. Right. It seems like when you went over there, China was the place to be. Obviously you've got Geopolitical stuff going on between the Us. And China. You guys are clearly in other countries as well. So let's just talk about supply chain strategy from a brand's perspective. What's the latest and greatest from on the ground how are you guys thinking about this? What are some of the like learnings and lessons that you've seen along the way?
Nathan Resnick 00:23:28 - 00:25:54
Yeah, Totally. I mean, you know, I think supply chain goes through phases, right? Like 2018, 2019. Everyone was talking about the trade wars and tariff increases and what that means for smbs. And we saw such high demand trying to move outside of China. But at the end of the day, a lot of factories in Vietnam or India or Pakistan just weren't ready and capable of producing for ecommerce brands either, because they didn't have the right certificates. The quality that they're producing just wasn't meeting our standards here in America. And now, like you said, there's so many geopolitical issues. And I think, too, like the flip of a switch in terms of China's zero COVID policy to now completely being open, which I think is great, just means that COVID has spread really crazy there and it's made for even more factory delays. And so I think we will see stabilization I mean, you look at freight rates, right? Like freight. The cost to import a container just skyrocketed during COVID And now it's gone back down, basically to normal, and sometimes even lower than what it was before COVID So I think, overall, China is still the world's manufacturing hub. Is that continuing to shift outside of China. Yes, but if you look at just their cost of labor, their cost of electricity, they're investing more than any other country in nuclear energy, which, from my research, is like, the lowest cost of energy. Right. And so it's hard to compete with china because they are so well positioned to be the world's manufacturing hub. And though in America, from a macroeconomic standpoint, we're having a lot of governmental incentives like the Chips Act to bring manufacturing back into America. And I think that act is not only strategic from a manufacturing and job standpoint, but also from a kind of security standpoint in terms of not being so reliant on Taiwan or China for chips. But even from an ecommerce angle, it's going to be really hard to compete producing most ecommerce products in America and even in Mexico. Right? A lot of the suppliers in Mexico get the raw material from Asia, so it's always a changing landscape. But as of today, china is definitely still the world's manufacturing hub.
Yeah, it's a great point you make, even when you think about just, like, the cost of labor. Like, obviously, the cost of labor is a lot lower in China. But even something like Mexico, you've got political instability. You've got if they're importing the stuff from Asia anyway, they're still floating that across the ocean, getting it there and then shipping it up to the Us. So it'll be interesting to see how things continue to shake out. But how would you recommend brands? Think about this, right? Is there consumer sentiment around manufacturing related to China? Do you guys source from other areas? If you're a brand today, does it matter what segment you're in? Are you trying to build out a strategy where you're like? We'll do volume products in these certain instances in China, and then we'll do other sort of flagship products in different locations. How do you think about building out that strategy as a brand owner?
Nathan Resnick 00:26:54 - 00:28:32
Yeah. I mean, I think number one, the most important part and the most important thing I'm going to say is never be single sourced. Right? So many brands are single source, meaning that they only have one supplier that can produce their product. And even if that's your go to supplier, you should always know and have a backup supplier that has produced golden samples for you that you know you can place a po with if something happens at a factory. There's been countless times where factories have been shut down because of fires or because of environmental disasters or because of labor shortages, whatever it may be, we've seen factories shut down. And being able to pivot to a factory that you know can produce your product with a similar cost and similar lead time is so important. And so right off the bat. Just never be single sourced. And then when it comes to exploring other countries, I would say it really depends on the product and it depends on how sensitive you are to the price of that product. Because though you can find and work with some great factories outside of China, your cost per unit might be. A little higher, but your net cost might be similar in terms of if you calculate your freight rate and tariff and all of that. So I think if you are looking to expand production outside of China, just really calculate it from, like, your net cost in terms of, like, what does it actually cost me to land this product at My warehouse and pay off the tariff or duty versus hey, this price per unit is 10% higher than what it is in China.
Yeah, I think that whole point about never being single source is a really good idea. And I could see a lot of first time founders just kind of getting blindsided by having a ton of their inventory being supplied by one factory. And then there's a problem at that factory or something happens and all of a sudden they're like, oh my God, now what do we do? And then they end up in a situation where you're kind of back to square one, scrambling for a different factory to meet your demand. So that's not a situation you want to be in. So what you're saying is you'd recommend for brand owners once you've locked in a supplier, that's step one. And you immediately want to make sure that you've got a backup plan and a plan B and C, just in case you need to pull the joy route.
Nathan Resnick 00:29:14 - 00:29:16
Right? Exactly. 100%.
Sweet. Okay, so moving forward from the sourcing stuff and the brand stuff, also was excited to be able to have the convo today just to chat about some of the other cool things that you've been seeing going on in Ecommerce, other projects that you might be working on. So yeah, what's the latest in your world?
Nathan Resnick 00:29:38 - 00:31:15
Yeah, I mean, I'm always keeping an appalling on what's new? Right. So I've been really interested in AI, and I think it's just so exciting for Ecommerce, both from a design standpoint, from operations standpoint, from a customer service standpoint, I think there's so much that you can do. I've seen a lot of brands just be able to iterate on ads so much faster through AI. Right? So whether that be product photography or graphic design or whatever it may be, you can iterate so much faster on your ads right now through AI. And if your growth marketer on your team is not doing that yet, they are behind. So that's right off the bat. Use AI to your advantage from a marketing standpoint and then from an operations standpoint, I've gotten really interested in the convergence of AI and customer service. I've actually been working on a tool, Caffeinated cx is what we're calling it, and basically we're training AI to auto fill responses for your customer service team so they can respond a lot faster and handle a lot more tickets. So it's on zendesk and intercom and eventually gorgeous as well. But we aren't trying to replace your customer service team. We're trying to empower them so your team can handle ten times more tickets with the same number of team members. So that's what I've been up to in the AI world. And I think really people are a bit scared of like, oh, is this going to take my job? Or whatever it may be. But if you're using AI, right, you're just going to be so much more powerful as a team member, right?
Yeah, absolutely. And I think the big trick in AI, and obviously we've been developing a whole bunch of products and it's been like, really fun for me as a founder to kind of go down the rabbit hole, see what opportunities there are. Obviously we're doing all our show notes with Cast Magic, which is an internal tool, because that was a process where we're like, every time we have an episode, we have to manually transcribe it, create our own content, go through the transcription and look for quotes and hooks and things where our audience might find value. And I was like, wait a minute, we can literally take AI, automate this whole thing, upload an mp3 and get all our content out. But I think the key to it and understanding when there's something to build versus not. I think the people who can figure out how you can use AI in a repeatable, scalable way, that's where the massive value unlocks. Is like, sure, chat. gbt is great. And if you can like, oh, I have this one problem and I'm going to go in and write it a prompt and get my answer today. Okay, that's great, but how can you build systems with AI as opposed to just building a one off? Like, oh, I did my homework tonight.
Nathan Resnick 00:32:19 - 00:33:51
Yeah, exactly. And that's the key right there, I think. How do you use AI to your advantage? And one way I've seen a lot of brands, and a lot of companies do that is they'll just clip up a bunch of videos and a bunch of kind of viral clips of their product and just repost it across a bunch of YouTube shorts, tiktoks, whatever it may be. And you can get hundreds of thousands of million impressions just clipping up your ads and reposting them across a bunch of accounts. And it's just incredible to see the reach that you can get by doing that. And so I think that's one strategy that I think a lot of brands should do, and that could be automated through AI, even as a next step for Cast Magic, is like, hey, you can clip it and then you can also post it, and then you can post across multiple accounts too. Right. So something that I think can really drive value for brands in terms of growth, because in this climate, it is really hard to drive a positive roas just on Facebook or Instagram, right? Like, every brand that we know is really looking at blended roas. And I think that's why a lot of tools like Triple whale or high roast has become really popular, because you have to look at blended roas in this market, right? Like, you can't just look at your Facebook ad manager and say, oh, it's only whatever row as it is. Right. And so I think you've got to really look at blended row ads, and finding ways to utilize that and make it grow through AI is going to be a huge win.
What are some of the tool like? You were just talking about people who are using it to repurpose for ad stuff. I know we've built some internal stuff that can solve for that. Are there any other good tools that you've seen? Is it on open source? Has it been productized? What are you seeing as some of the best alternatives? Like, for example, I know ramon. He couldn't be on with us today, but with trends, they're working with scale to be able to build out ugc, where the creator uploads the ugc. It spits out like, hundreds of different variations for ads and social and whatever. But beyond that, are there any that you've worked with directly at the tool level, or is it all custom?
Nathan Resnick 00:34:30 - 00:35:32
Yeah, I think right now I've seen it all kind of custom, but with Trend, it's a great platform to create ugc. And then how do you edit and upload and optimize that ugc? duai. Right. I think that's going to be the key, is, like, okay, we know this hook is performing better than this hook, so how do we make more hooks like that? And how do we actually train a model to edit that hook to perform even better? Right. And so I think that's going to be more of the future, and I think we're going to see less of those kind of expensive top of funnel, long form ads. I think it's going to be a lot more like data driven testing. Right. If you look at kind of the top of funnel ad that Dr. squatch did or that some of these huge brands have done and spent hundreds of thousands of dollars on. I think, though, that is a really important asset, I think, for a growing ecommerce brand, they're going to look to create a lot more iterations of an ad before they actually invest 150k into a video ad.
Well, yeah, I mean, it's the ultimate, like, a B test, right? abcdefg, you have like a million different variations. You're able to pull them out and really see what sticks. And I think the challenging part is if you're just especially when it comes to creative, right? Like, there's so many variables in creative that lead to something going viral.
Nathan Resnick 00:35:51 - 00:35:52
It could be.
Obviously you have basics like strong hook and captivating image and how the angle is shot and edited. But really, because there's so many variables that all interplay together, a lot of times as human creators, it's hard to figure out what's really going to hit. And sometimes when you're creating content, the content that you think is going to hit doesn't. The content that you're like, I don't think this is going to hit, it blows up. So I think AI, when it's used the right way, it really gives content creators an unfair advantage who are starting to use it now and deploy it in the right way. An opportunity to get more of those home runs, if you will.
Nathan Resnick 00:36:29 - 00:36:41
Yeah, 100%. And that's the key. Right? How do you drive more value and how do you drive greater ros through your content? And that's definitely, I think, the future of AI and e commerce.
Well, yeah, and also what you were talking about with Caufinated, I like it. I spent a bunch of time in the cx based building in the space, but again, it's one of those examples where you're not telling the agents, oh, here's chat gbt. So every time a customer reaches out, you can paste something in and do it. There's no manual process. All you're saying is, let's get you to like, 90% with a response that probably could work. And your job is to be like, is this prompt actually? Like, as opposed to the chat bot? Right? Because if it's just a chat bot, then all you're looking at is data. You're not actually understanding what the customer is seeing. But if you can apply your human capital at that last line, at the last mile where all the legwork is done and all they have to be is the filter to be like, okay, I know who this customer is, I know what product is, I know what they're reaching out about. This response is good, but it needs, like, a little brush up to really meet them where they need to be met. Like, that's what you're able to provide. And I think that when you look at it from a black or white perspective, like, chatbot no chatbot this or that, like, it's tricky because, like, everyone knows, like, a lot of times chatbots just you're going to miss on things and customers are going to be like, what the hell? I don't want to talk.
Nathan Resnick 00:37:55 - 00:38:10
Yeah. And I think most customers don't even like chatbots. That's what I think is so crazy about how so many people have approached AI and customer service. I don't think it's about creating a bot. It's about how do you empower your customer service team to be ten times more effective.
No. Absolutely. So, Nathan, as we wrap up here, what else do you have coming up in 2023? You're still involved with Source of helping brands and build great products. You're doing caffeinated cx and applying AI to the cx space. Any other projects or what else just really excites you about this year?
Nathan Resnick 00:38:35 - 00:39:43
Yeah, it's a good question. I mean, with Source Five, just continue to help more brands to source products more effectively. So I'm a board member and run our podcast, actually Ecommerce on tap that we've got to get you on, and Caffeinated cx we're launching in the zendesk and intercom App Store. And for me personally, I think it's just so exciting to see new products and brands brought to life, right? I think over the past even five years, it's gotten so much easier to launch an ecommerce brand. And I think over the next five years with AI, it's going to be even easier, right? Like, you talk about getting your website done, getting your branding done, that can all now be basically automated through AI. And so it's just going to be, I think, so interesting to see how that evolves over the next five years to see we could have an idea for a brand on this podcast and probably by tomorrow we could have all of the website and digital marketing assets done. Because the power of AI and just how you're able to evolve and create so fast in today's world, dude, it's crazy.
We were actually talking about that because when we were building out Cast Magic, we're like, okay, we need to put together the email flow for the onboarding and activation flow. And then as a joke in our group chat, we're like, oh, ask Chat gbt to write me an email and activation flow. And then I was like, wait a minute, I can actually do that. Exactly. So I went in and I gave it all the information it needed. What the product is, where the different sticking points are, what the features are, where it uses. I prompted it enough to say I knew what to do. It wrote us an amazing flow. And then I'm like, okay, this is great. Now I have something to work with. I have the skeleton really done and now I can apply that polish layer. But just to your point, to what you're saying, when it comes to launching a brand, whether it's a sas product, whether it's an ecom product, all these different things are if you know where to apply your skill and leverage and tools using AI and other resources, you're going to be in a really good spot. So that's what really gets me excited about this year is I think AI really empowers the creators and the people who are most creative because rather than spending and wasting their time on labor inputs that are just kind of like mindless and non creative, they're able to get the highest leverage for their time.
Nathan Resnick 00:41:01 - 00:41:29
Totally. Yeah. And that's what it's all about, right, is how do you leverage your time best? And that I think, is the key question for any entrepreneur, I think, too. The one thing I'll say is you're going to be able to iterate and test a lot faster, right? And if you look at brands that have really hit it off and hit a home run, they test at such a high velocity. And I think that's the key for any founder is how do you test? Faster. And iterate faster than anyone else.
Sweet. Well, Nathan, thanks again for joining us. Can't wait to keep up with you guys, sorcerefy and Caffeinated. And for any of our listeners, where can they connect with you and the companies?
Nathan Resnick 00:41:40 - 00:41:47
Yeah, just LinkedIn and twitter. I'm Nathan resnick and yeah, happy to answer any questions and appreciate you having me on.
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