The Exchanges

Q So you're paying, I looked at it, I looked at it like you're paying yourself eighty million bucks, right? So The other 75% you're paying obviously out to the seller for that object, or do you have other costs in there? I don't know about.

A No, that's right. That's, so we take the 25% and the other 75% goes to the seller. I mean, I could go into the weeds on that. There's, there's some stuff that's, that's, that goes, you know, that gets passed through. So for example, we charge the seller sometimes for shipping, then the seller buys that shipping through us, but that's kind of passed through revenue in general, but the seller gets about 75% and we get 25% Our costs after that are really, um, well, there's a few things. There's the cost of running the, you know, the site and the cost of, um, you know, maintaining what we do so that, so our gross margin on the, on the 80 to a hundred is about 80%. And then below that we have, you know, a pretty big team and we spend on marketing as well.

AI assessment note: “we take the 25% and the other 75% goes to the seller”

Q going twice, bid 16 dollars plus four dollars shipping, and Suzanne is winning. There's 14 bids. Oh, Catco just bid, and now it's up to 18. So how did this, I see the real time aspect. Now it's up to 20. Like how are people discovering this in the first place? Are you notifying them cause they bought a watch in the past? How do you bring in the bidders?

A Yeah. So we, we've built up an audience over time. So we've been at this for about six years now, actually. In the beginning we had to, excuse me, in the beginning you had to build a critical mass. So we would market to, to people, let friends know, let other people know. We started with a very small group. We would run auctions like for a couple hours a day. Because we wanted to match the supply of the demand. But now today we've got, you know, millions of consumers coming every day. And what they do is they set reminders on products that they might be interested in. And then they look at the items that are ending right when they're on the site and, and they bid in the, in this sort of live competitive environment. Um, so it's grown a lot since we started, but it's fundamentally the same kind of experience where we're selling things one at a time in this live auction format.

AI assessment note: “In the beginning you had to build a critical mass. So we would market to, to people”

Q Are these going through, like, do you have to worry about, like, inventory management, or warehousing, or anything like that, or the person who uploads it also mails it?

A Yeah, we don't have to directly worry about it, but we obviously spend a lot of time understanding What the supply chain looks like because our customers, the buyers on the site want to get their products quickly and want to know when they're going to receive their products. And we also need to know how much inventory our sellers have available. So we're a marketplace. We don't take inventory. We don't own warehouses and deal with that, but we do work directly with the suppliers that are uploading products to the, to the platform to understand how quickly they ship, how, how satisfied customers are when they get the item and how much inventory they have available. So We, we, we rely on a lot of data to do that, but we don't actually do the, the heavy lifting of actually owning the warehouse ourselves.

AI assessment note: “We don't take inventory. We don't own warehouses and deal with that”

Q Uh, and give me, so I've done this. I'm curious about this. So I just like dove right in like a hungry shark for these numbers, but go back and give me the history here. What year did you launch company in?

A So we launched the I shouldn't say company. We launched the product in 2012. So this is our sixth year. Um, and we've essentially doubled the business every year since we, since we started. Um, so before that, the company, we actually had been around for a few years before that, where we were playing with a bunch of different products, all sort of in a similar space of discovery commerce. But this product that we launched in 2012 was, was the first that really got a lot of traction and just had a life of its own. And, um, yeah, since then we've just been growing. I mean, the experience looks very different than it did six years ago. Um, but the underlying, the underlying idea and the underlying business model was pretty similar.

AI assessment note: “We launched the product in 2012. So this is our sixth year.”

Q No, I want to know, Andrew, all these questions are trying to frame you so you can share the constraints. I'm trying to get at that. What are the constraints?

A The constraints? Well, so it's like any other e-commerce business. The constraints are the, how much it costs for you to acquire a customer and then what, how quickly you get payback and what the lifetime value of those customers are. And if you take your marketing spend and you go 10 X, it's going to cost you something more than it costs you today to acquire a customer. And that's just, that's just common sense. So, so what we've done is we've, Been relatively conservative, although, although in some circles you'd consider it aggressive in that we pour all of the contribution back into more marketing so that we grow our marketing spend But we do it incrementally instead of in one fell swoop, because if you do it in one fell swoop, there's no way the economics are going to hold. If you suddenly start buying, you know, Superbowl ads, they're not going to perform. But if you get to a point where a Superbowl ad is a small percentage of your spend, you can grow into that and perform.

AI assessment note: “The constraints are the, how much it costs for you to acquire a customer”

Q So how many, I mean, give me a sense of like growth. So like in the past 30 days, how many, I guess, is it, you call them SKUs? I mean, are these your, they're not your products. How many items have you sold?

A Yeah, that's a good question. So we sell about, well, I don't want to disclose too much that I'm not supposed to disclose, but we basically, we do about a million dollars a day of transactions right now. And Our average item, you know, with this, the kind of stuff we sell is, is relatively impulse purchase. So it's, you know, between, between 10 and 20 dollar price point on average, although there's stuff that will sell as you see for, you know, over a hundred bucks, then there's stuff that will sell for less than 10. But on average, we're about 10 to 20 bucks, and we do about a million transactions, sorry, a million dollars of volume a day.

AI assessment note: “we do about a million dollars a day of transactions right now”

Q So how much do you spend per month on, on marketing? Would you say?

A Yeah. So, um, we're not, we're not sharing that, but we basically, one of the benefits of the business Is that because I don't know if you, it sounds like you've been on the site, you've seen what it's like. We get users engaged and, and bidding pretty actively. So we actually end up getting payback on our marketing spend usually within about. 30 to 60 days. So we end up spending alongside, we end up spending quickly alongside our, our payback. So essentially we're trying to operate the business where we can grow as fast as we can right now and pour back As much of that revenue back into marketing as we can, provided that we've got payback. So he is breakeven. We, we essentially are operating at, at breakeven pace in order to grow as fast as we can.

AI assessment note: “we're not sharing that, but we basically”