#360 – From Hip Product To Great Brands Zack Leonard’s Formula For Better Product Development

#360 - From Hip Product To Great Brands Zack Leonard’s Formula For Better Product Development Speaker 1: Welcome to episode 360 of the AM-PM Podcast. This week my guest is Zack Leonard. Zack is one of the co-founders of a company called Gembah and their specialty is helping sellers bring new products to market whether that's a brand new idea and complete innovation Or just making incremental innovation on existing products, which is one of the most important things you can be doing now as a third party seller, especially on Amazon. The days of just going onto Alibaba and finding something and sticking your name on it are pretty much over for the most part. And so Gembah's got some pretty innovative ways to actually help sellers do differentiation, create new ideas, and they have a new marketplace as well that's pretty cool. We're gonna talk about all that in this episode. Unknown Speaker: Welcome to the AM-PM Podcast. Welcome to the AM-PM Podcast, where we explore opportunities in e-commerce. We dream big and we discover what's working right now. Plus, this is the podcast where money never sleeps. Working around the clock in the AM and the PM. Are you ready for today's episode? I said, are you ready? Let's do this. Here's your host, Kevin King. Speaker 1: Welcome to the AM PM Podcast. Zack, how are you doing, man? Speaker 2: I'm doing good. Doing well. It's good to be on the show. Speaker 1: It is. I used to see you all the time when you were living in Austin for a while. And you recently headed up north to Minneapolis. And so I don't get to see you and go to all these cool restaurants. And I don't get to pick your brain on what are the cool speakeasies and what's the latest code word to get into these underground bars and all that stuff that we used to be able to do. Speaker 2: I know, I know. You're going to have to be the one who takes me around town next time I'm back down there. So it'll be fun to catch up in person and hit up all those speakeasies, but you're going to have to show me which ones are the cool ones to go to this time. Speaker 1: So how did you always know the speakeasies? Like, I know you went to the University of Texas, and I'm sorry for that. But I apologize that someone forced you to graduate from UT. Speaker 2: I know, right? Oh, man, it's so hard going to the premier school in Texas. It's really, really hard. Speaker 1: The reason I say that, for those of you who don't know, we always give each other a hard time because I'm an Aggie from Texas A&M and Texas A&M is about an hour and a half from Austin and the University of Texas is in Austin, the capital, and so they've been big rivals for a long time in sports and in All aspects of life but it's a, UT is a good school. Aggies call it TU, little T, little U. We reverse it, you know. We've got jokes for each other and I know it's a friendly rivalry but it's the two premier public schools in Texas. Speaker 2: Yeah, it's like having a little brother who thinks he's bigger than you but he's not. That's the main end. Unknown Speaker: You know, you're right. We don't have a healthy rivalry. Speaker 1: We don't have a long horn that poops everywhere. You know, our dog, our, our, our mascots, well-trained. Speaker 2: Yeah. Right. Yeah. Yeah. Speaker 1: Now it's a big rivalry in football and it used to be on Thanksgiving every year. And, uh, the two teams would play and it was a big deal. Like the whole state of Texas, you're picking one side or the other. And sometimes you have mixed families where the husband's an Aggie and the wife's a long horn and You know, the shirts are split down the middle or something. So it's a lot of fun. Speaker 2: I don't think I've been to a losing UT A&M game though. So the years that I was there was, you know, we had Colt McCoy and went to national championship and stuff. So we didn't really lose. But now that we're back in the SEC, we may actually renew this rivalry that was, that's been missing for like the last, you know, Almost decade now. Yeah. Speaker 1: Yes. 2012. I went to that game, that very last game where they play played in 2012. I was there in the nosebleed seats and you guys kicked a field goal in the last few seconds or something to win that game. And I was like, Jesus Christ. And so we have to live with that for the last 10 years. So we need it. We need that. Those matches rekindle. And I think they will be with the move to the SEC next year in 2024. So that should be should be good. Speaker 2: But back to your original question of how did I find the speakies, I mean, yeah, going to UT there and then I was there, you know, in my, I went to Chicago for a couple years and then came back down to Austin just because I loved Austin and you know, when you're in your early 20s, mid 20s, you kind of try and find the cool spots in town to go and I was, you know, young and all that stuff. So, kind of grows on you and then if you, you know, I've always been I've always liked, you know, the food scene as well. So you kind of get a mixture of both with the good food and some of the speakeasies are in the bottom or the basements of these good restaurants. So it makes it kind of a nice night to, you know, entertain or bring your girlfriend or fiance or whatever at the time when I was kind of learning this stuff. And then, yeah, I just kept going to them and I would, I just really enjoyed it. Speaker 1: One of the sushi bar, the one that the guys that own Pasta Bar, wasn't that originally in the back of another restaurant and you had to know like the curtains to go through or something like that and the secret word to get back there? Speaker 2: Yeah, I can't remember which one that was, but there's that. There's one in the back of Greenlight Social. There's one in the basement of Buenos Aires Cafe. There's one that you have to have an app with a password that they give out and you have to reserve a spot. There's Midnight Cowboy. There's a bunch of stuff around town. Speaker 1: Floppy disk repair company. Speaker 2: Yeah, floppy disk. That's the one that you have to know the code and they change the code every month. So yeah, you just got to know the right people and have gone there for long enough to get on those lists and all that. But yeah, Austin has no shortage of fun bars and restaurants to go to. That's for sure. Speaker 1: You probably don't miss the traffic, but Austin has not kept up with its massive growth and popularity on the streets. Speaker 2: I know it's it was never meant to be a big city, right? It was meant to be a train, you know, kind of a transient town where people just kind of drive through and then all of a sudden, you know, I think there was some there's some studies that come out that like all these things kind of happened, which is why Austin became as big as it is. It's like, you know, the capital there, and then you built the university there. And then the tech scene started to come there. And then it's like, okay, it's really business friendly. So all the big companies started to move there because it was a cool city. Speaker 1: And, and then you know, yeah, Tesla, all the, all the tech. And then you, from an entertainment or drawing the younger crowd is the real MTV's, the real world came here. And that's, I think like 20 years ago or something and roughly somewhere around there. And that's kind of what set off this trend of this cool city. And it just, then X games were here and a whole bunch of other, other stuff and just started getting featured. They were a queer eye for the straight guy. Most recently, you know, that's a popular show on Netflix and. Speaker 2: Yeah, and they built an F1, you know, F1 track. Southwest and ACL. So they've always kind of been entrenched in like the music scene. Like, it's really cool because it started off, you know, like, like, as the music city kind of a little bit more party, but then you start layering on like this more sophistication of, you know, tech and big companies. And now it's just like, Such a booming city. It's so exciting to be in, you know, a place like that, or it was exciting to be in a place like that. And definitely, you know, my business still being based there, I get to go back there, you know, every so often. So it's always a good time to go back. Speaker 1: I live downtown, I'm looking out my window right now and there's like, I think I counted a few weeks ago sitting on my balcony, I counted 30 something cranes, 32 cranes. Speaker 2: That's the state bird, haven't you heard? Speaker 1: It is, it's the state bird. Yeah, and now it's become, you know, Silicon Valley is the home of all the computers and IT and investment bankers. Austin's become this everything internet, basically. I mean, the internet marketing, not just Amazon, but The internet marketing scene here and agency scene and digital marketers based here, Joe Grogan moved his whole show here, several others, Ryan Levesque, the Ask Why guy, and there's tons of, I mean, the list goes on and on and on and on of people that have moved and made Austin their base. Speaker 2: Yeah, and I think some of the big exits that have happened like Trenkite, which, you know, is a ad tech or media or marketing tech company, right? Like they had a pretty sizable exit of, you know, five, 10 years ago. And so again, I just think there's been a lot of, like you're saying, a lot of cool, cool things have happened and that have kind of exacerbated the growth of Austin over the last 10 to 15 years. Speaker 1: And like you said, Texas is very tax friendly and business friendly and I remember when Manny and Guillermo who founded Helium 10 When they built that to exit and before they exited, they were looking at, they got to get out of California because they were based in California. The company is still based in California, but they personally need to get out of California because the taxes were going to kill them. And I remember Manny, it was like February of 2019 or something. They knew that they're going to sell at some point that year and there's like a six month window. You got to get out. You got to be somewhere else for at least six months to actually not fall under California law. I don't know the specifics on it, but something like that. So it was like almost overnight. They're like, we don't care about the lease. We'll just pay off the last five months of our lease. And they moved like within a week to Austin. And then when they exited in September, 2019, it was a huge exit. And they told me that it was a multimillion dollar move. So yeah, it was huge. Speaker 2: Yeah. I mean, you're going from, you know, California state income tax, which I think is pretty high, especially for that tax bracket. And then you go, you know, to Texas where there's zero state income tax. Right. Speaker 1: Yeah. Speaker 2: So yeah, that's, that's awesome. And he's, Manny's stayed, right? Speaker 1: Yeah. Manny and Guillermo are still both here in Austin. Yeah. They, they stay here. I see them, uh, every, we hang out from time to time and, uh, yeah. Speaker 2: I've caught up with him a couple times too since they exited and he seems to be having fun and he's doing that NFT thing. Speaker 1: Yeah, the Bulls and Apes project is one of their latest projects that's doing pretty well. So you graduated from UT, what was your degree in? Speaker 2: Finance. Speaker 1: Finance, so how did you end up in the sourcing stuff? I mean, for those of you who don't know, Zack is the co-founder of Gembah, G-E-M-B-A-H, Gembah, that's a company. What does that actually mean? What does Gembah mean? Speaker 2: Yeah, so it's a theory in Kaizen manufacturing, which is Japanese, like they kind of made the whole Kaizen theory With Toyota and a lot of the stuff that they did, they're like pioneers in that space and some of the best in the world. But Gembah is the place on the manufacturing floor where value is created. So people talk about going on Gembah walks. They literally just kind of sit on the manufacturing floor and just watch everything from an operational perspective and try and find ways that they could incrementally improve their operations on the assembly lines and machinery and all that stuff. So you talk a lot about Gembah walks. I hear a lot about that and that's what the company is based on. And then in Chinese, Gembah is kind of like bottoms up or cheers. So it's kind of a play on both of those words. Speaker 1: Did you come up with that name or what's that? Speaker 2: I think it was, I can't remember exactly it was me or Steven, but we kind of, you know, put some stuff on the board and, and, uh, Steven's one of my co-founders. Uh, and we, you know, it's kind of all those things are like, I don't know if you, you know, if you've named your kids or you named something, whatever, like kind of have to let it settle and see if it sticks or whatever. And then, uh, you know, when you keep coming back to it, you're like, all right, there's some good energy here and you stick with it. But just when we started the company, you know, we were, we were meeting like every month, you You sign those incorporation docs just to like make sure everything's official and then we started meeting every week or every month and it turns into a week and it turns into every day and it's not, you know, then you're like, alright, something's really here but my route to get there was a little bit different. I went straight from school into the consulting world. I worked at KPMG. For a few years doing credit risk operations as a consulting for banks and mortgage originators. I think I learned a lot from KPMG and how to really organize chaos. You get thrown into projects as a 22-year-old and learned a lot of good Excel and VBA and modeling skills and all that, but it just didn't excite me enough. There was a path that I could take to go down there, but it didn't. So my older brother was in the startup scene and he was early on at Groupon and they exited, he was there from like early on until they exited. So I saw what getting in that space could do just from an excitement level but also from a personal wealth level, a guy who had no exposure to it. And so, you know, he kept on telling me like, you got to try this out, you got to try this out. So I did and I got lucky. The first one I went to was Instacart. And so it was a same day logistics company. So kind of the last mile of logistics, but still, you know, starting into the supply chain, but it was just, you know, the last mile of it. And I got lucky because I was, you know, early on there too. I don't know why. My brother and I seem to pick the winners in terms of that space. I started off managing the Austin market and we expanded into Dallas, San Antonio and Houston while I was there. Help foster partnerships with Whole Foods, the whole build out that they have at the 6th Street with the freezer outside, like we did that. We brought, you know, Austin to profitability and then they started replicating that throughout the rest of, you know, some of the cities that they could function the same way that Austin did. Like New York obviously has different challenges than Austin from a driver capacity perspective and all that. So it's just the cities that looked similar and dynamic to Austin, they could replicate those models with. Speaker 1: So basically Instacart for those that don't know is they make partnerships with local stores. A lot of times it's a grocery store. It doesn't have to be a grocery store, but a lot of times it's grocery stores and you basically, the grocery stores mark everything up. So a bottle of ketchup, if you go to the store, it might be, I don't know, $2.69, but on Instacart it's $3.89 or something. And then there's a little bit of a service fee and they go and basically shop it for you. So you go online, you say this is what you want and then within, there's different delivery parameters. Now it's like within a couple hours. Back then it might have been a little bit different. And they actually go and they buy it from the local grocery store or the local Target or whatever it may be and they bring it to you. That's basically what, for those of you who don't know what Instacart is. Speaker 2: Yeah, definitely. Funny enough, but like some of the stores they don't mark up, like Whole Foods, they didn't. But that was back in the day. I don't even know if Whole Foods is on their platform anymore because Amazon bought Whole Foods. It's basically the foundation of what Instacart happened. Yeah, so it's funny, all the buildup that we did and Amazon ended up buying that out and Instacart kind of was like, all right, well, whatever. But then after that, I worked for a company locally in Austin. It was a national company, but it was based in Austin called Drop Off. Same thing, same day logistics, ran strategy for that company. And then I met Steven, one of my co-founders, more personally, like he was a roommate with one of my friends growing up at where he went to school at Kansas. So we kind of loosely knew each other, but then when we moved to Austin, or when I moved to Austin, moved back to Austin, I met him. He had a product company that, you know, went on Shark Tank and they got a deal from, I think, Robert and Lori. And so he kind of opened my eyes into the manufacturing world. He would always talk about the challenges of, you know, what it was like to be a small business in manufacturing and he would go over there so many times and, you know, he would visit a lot of factories and they weren't being transparent. And then, you know, he was also talking to our CEO Henrik at the time, our other co-founder. About the same thing and Hendrik was in the promo space, promotional product space and he would have the same issues. He was just like, I would go to China and go to these factories and I would always ask like, where does this come from? And they're like, they wouldn't have any answers. And so, you know, this was six years ago, five, six years ago. And out of that, like I said, started meeting monthly, then weekly, then, you know, kind of every day. The basis of what Gembah was, was to help give transparency to supply chain. So giving you boots on the ground. And having people show up at your factory, not in a QC perspective, more of like your eyes and ears on the ground. So acting as if you were physically there. So taking pictures, videos, speaking to people, like building your team, just standing more shoulder to shoulder with you, again, you know, with the factory as opposed to like going as a QC, like check the box activity, fill out these things, say it's done and leave. So that's how it started. And then we quickly were, you know, we started to go into the Amazon FBA space as getting a lot of customers there. I actually remember the first time I met you at Prosper, I just kind of tapped your shoulder and we started talking and I think, you know, you were, you were awesome. And I think the fact that, you know, I was in Austin, maybe helped us out a little bit. I didn't tell you I was, I didn't go, I didn't tell you I went to UT yet, but yeah, shortly thereafter, you figured that out. Even so, you had always been a great advocate for us and kind of helped us get our name out there and even became a customer of ours to prove out that we were for real, but we started to find quickly that The same problems that people have with small businesses, the same challenges, same dynamic or same customer personas, they're having challenges with launching and designing new products. And so we already had this marketplace ecosystem of people in China and India. And a large factory network that we were building and so we thought well hey look like we can serve these customers better there's there's more that we can do there's more value that we can have further up the chain supply chain so we started to. Tap in and go into the design aspect of it. We hired some really awesome people Our head of design, you know comes from Dyson, which is one of the best Design firms in the world best product companies in the world and he reported directly into James Dyson He has like 80 to 100 patents under his name personally Some of the products that you probably have in your house. He he created or helped create right? So I You know really about and then building out a designer network that you know we vet and make sure similar how we do with our manufacturing network like there has to be a certain quality and a certain standard that fits the bill of working for Gembah, working within our ecosystem. The first part of it is like you have to have made a product before and it's had to be mass manufactured before. But also you have to have good chops with customers if you're going to manage your own product and product development cycle. So along with some other things that we do obviously, but loosely that's like a lot of the criteria that we start to better. Speaker 1: Basically someone has either they have an idea for a product and they can come to you and you guys will walk them through the whole design phase, the whole, you know, Creating the STLs, all the CAD stuff, all the manufacturing parts list, and then they can stop right there if they know how to have their own factories and have their own stuff, or they can continue on the process where you guys actually help them source the factory, and they can stop right there if they have their own 3PL, or you can bring them in and manage the whole thing from basically birth to graduation along the way. Right, exactly. Speaker 2: Exactly. Yeah, so there's multiple entry points in terms of if you have problems as a brand, right? Like if you need help with your first product, your 10th product, your 100th product, we can help. And it doesn't have to be, you know, do it all or nothing. It's like you said, you can come in just for design, you can come in just for research, you can come in just for sourcing, you can come in just for logistics. At the end of the day, we've built up, like I said, now it's Over 3,000 factories in eight different countries that we partner with and they all go through the same vetting process that we have to make sure that they're legitimate and I think where Alibaba I think goes for quantity, we go for quality. You can download big lists of manufacturers. I think there's over 150,000 factories in China alone. But we don't, you know, they have to be real factories for us to work with them and they have to be making good products for us to work with them. Speaker 1: So, um, a lot of people don't understand that the products developments that's life cycle or that the stages and how, how complicated that actually can be, even for simple products. I mean, when I first started on FBA, I've been making products for 20 something years, you know, in the collectible space and in other spaces and the printing space, printing and overseas. But when I started doing, creating my own products for Amazon in 2015, I launched five brands and two of those, I built the products from scratch. You guys didn't exist then. And so I was having to go out to Fiverr or Upwork, I think back then it was called Elance and find people. And I was able to find some pretty good people that could do the work that I needed at a pretty reasonable price. But I knew what I was doing. I've been doing this for a while. I didn't know everything, but I This didn't scare me or anything, but a lot of people, they don't have that experience. So coming to someone like yourself that can hold their hand along the way, I think is wise. And it's not necessarily the cheapest. I mean, we've done stuff, like you said, we've done stuff with you too with one of my companies. And it wasn't definitely the cheapest, but it was actually the quality that you get is because the designers and the people that you guys have is far superior. I mean, just package design, you know, like some of your full-time people, then you have freelancer or people that are, I guess, freelance too. They're working for like some of the biggest design, package design firms in the world. Uh, and these are like sharp people that are very, very creative and very, very good. And if you want to create a true brand and get to that next level, sometimes you got to pay a little bit more. Speaker 2: Yeah, totally. Um, I think, like you said, there's, there's just a, I think there's almost like a, A fear that it's going to take a lot of time, a lot of money and a lot of energy to launch your product and don't get me wrong, it should. It does. But it's not as unapproachable as it used to be, I think, when you started doing yours. And even recently, we've launched a new product, a marketplace that makes it even faster and cheaper to go down that path. We can talk about that whenever you want. Yeah, like you said, I think from our perspective, we've always been Trying to help make manufacturing more accessible and more approachable, make design and product development more accessible and more approachable. Even our slogan, our company values is democratizing product innovation. It's about making it more accessible, making it easier, making it more affordable for people because we want to bring new awesome products to the market. That's how things like All the AI stuff that happens now, that didn't come overnight. That's been a buildup of data and machine learning over a long period of time. It's the same thing as like an iPhone, right? The original iPhone that was launched was a buildup of all these other phones that came out. And then all of a sudden, Steve Jobs is like, I'm going to do this. And that doesn't happen overnight. But there's some really cool products that inventors and creators have these infinite capacity to think through. And we're there to help hold their hand and help inspire and keep that journey going. So it's really powerful for us, I think, as a company to help get these products out in the market as fast as possible and make sure that those mistakes and those things, again, they can come up, but that you avoid as much of those risks as you can by going with people who have done it before. Speaker 1: You have a lot of the aggregators and some of the bigger sellers that come to you to do whole product lines and whole brand lines instead. This is not just individual sellers that need to try and launch a product. You've done some pretty big projects for some pretty big companies. Speaker 2: Yeah, yeah. I went on your training course the other day and I kind of walked through, you know, one of the projects that we did that was really successful for one of the early aggregators, one-on-one commerce that got bought out by Goja. And, you know, we kind of deep dove into what it took to launch a massage gun, right? And how to do it effectively at the things that we were looking at with them and the process of, you know, shortcutting some of the things that come up that, you know, maybe if you haven't done before, or even if you have, that's going to save you a ton of time and energy and things to think through like that. So the cool thing about developing a product is it's not a linear path necessarily, right? Like there's things that come up, there's, there's things that you can do to shortcut the path, right? It is from point A to point B. But again, if you're like, Think of it if you're flying a plane from New York to California, there's a preferred route, but let's say there's turbulence that happens over here, you're going to want to avoid that. There's a storm that pops up last minute, you want to avoid that. We know what the end destination is on both sides. We know where we're starting, we know where we're ending. How we get there is really about what it is. It's the journey and we try to make that as smooth as a ride as possible. Speaker 1: When clients come to you, what are some of the big pain points or mistakes or something that you're seeing that they're making? What are some of the misconceptions or some of the issues, the fires that you have to put out when someone comes to you when they have an idea for a product? Maybe they just have the idea or they've already started? Speaker 2: Yeah, it's a great question. I think it really depends on how far along in their brand they are. So let's just say that they're starting out. The issues that come up is like, I've never done this before. I don't even know how to source a factory. I've never created a product before. Who do I hire, right? That's kind of the The journey for them is like, I haven't set up my website before. I don't know how to do packaging. I don't know all these things. So that's kind of like your first time or just launching my brand. Those are the issues that typically come up. Speaker 1: So they're more of the just the ideation people or the inventor type of people or someone that has a good idea and they just don't know how to execute on it. Speaker 2: Exactly. That's that's kind of that bucket. And then you go into the next one is like, I have a product that's done well. Now what do I do? Right? Like I need to launch another. I'm trying to build it from a product into a brand. How do I extend my line of products so that it becomes a brand rather than just a single product? And so that's more of the product development looking into trends, market research, seeing what other SKUs are performing well that could be complimentary to the hero SKU that you have. So that's like, I want to develop a brand, that persona. And then you have like an aggregator who's, I have a large SKU, I have a large slate of brands. I need to have high velocity launches, meaning I need to get 50, 100 product launches out in a year. How do I do that with a limited team, right? So that's a totally different persona than the first two that I mentioned. The fact of the matter is like regardless of what you're doing, I think as long as you have a product and you're in the e-commerce or DTC or retail or you're in the consumer goods space, right? We've been trained as consumers to have cyclical buying patterns, right? Like in fashion, I expect a line of clothing to come out by these brands every single quarter, aligning with the seasons. I expect this fall line, summer line, spring line, winter line. If I'm buying a car, I expect that there's a new car coming out with better technology every single year. If I'm buying an iPhone, I expect a new iPhone every year. So we've been ingrained as consumers to have new products hit us on some cyclical measure. What I think most people don't do is understand that just because you have a hit product doesn't mean you're going to have a hit brand. And part of having a hit brand is that you're listening to your customers very intimately to what they want to do with your product or your brand, right? It's up to you as a creator to action that, right? Like, what is the best thing that I can do to add value to my brand, ultimately add value to my customers? That's the CEO, creator, whatever, inventor, that's their job to make sure that they're listening. But if there's feedback specifically on your hip products, like someone's gonna listen to that feedback and try to compete against you, or you have the leg up, it's your product, you know, your customers, you know, your product better than anyone else, you can start that process, right? You can come up with a version two of your product. That will potentially most likely and hopefully be better than the first version of your product. And so that's I think where a lot of people get a little caught up or in their head as brands or inventors is they're unwilling or scared to take that step for some unknown reason, whether it's fear, whether it's capital, whatever it is. But if you really know your customers, you really know where your brand is trying to go, You can utilize tools out there, you can utilize research out there, you can utilize partners out there that can help you get to that next step, which is going from a hit product to a great brand and then going from a great brand to an aggregator, a big conglomerate of brands that can launch products at a high velocity. Speaker 1: Back on that massage gun, that was a few years ago but that category is super super competitive even back then when you did it. So what did you guys do? What's one of the skills of Gembah to actually make sure that thing's got a good chance of success in a highly competitive market? Speaker 2: Yeah I think we were fortunate enough to work with That company early on when it wasn't as crazy competitive, like the pricing, the things that we looked at were pricing pressure. We looked at, you know, review, the average review scores, total number of reviews to get to page one, top three at page one. Like those are things that you want to do from a research perspective. So they kind of helped show that stuff to us. And, you know, there was an opportunity to become a premium brand where everyone was going low. If you came premium brand, it took all the data that said, like, here are the things that people care about. Here's what the reviews are saying. So that's the qualitative side. The quantitative side is like, where do we need to price this? How fast do we need to launch this? What's the velocity we need to sell? Like, those are more of the quantitative side of it. So you combine all those things. It came up with a premium massage gun. Speaker 1: This is from scratch. This is not taking something off the shelf and modifying. This is built from scratch, right? Speaker 2: Well, this was actually was incremental innovation. It was taking something that already existed and making some slight adjustments, which is why we were able to launch it so fast. I mean, like the things that we looked at from a quantitative side that we were getting feedback on is the battery power, right? So going to four hours versus three hours. People complained that the juice would not last long enough. So, getting a battery that lasts long enough, having different attachments for the pulsing, have different speeds for the pulse and then visually looking at like what would that look like on the actual massage gun itself, right? So, making sure that if we're going to go for a premium look, like it has to look a certain way and so getting feedback on that as well. And then working with the other part that again I think most people need to understand about, you know, doing this type of development is Making sure that the factory has the capacity and the ability to do this kind of stuff in-house. So, you know, you're on Alibaba or you've sourced a factory before, like some factories don't have sampling in-house. They don't do that in-house, whether you're a trading company or you're a smaller factory, like sometimes they outsource the sampling process. So, you also want to make sure that, you know, if you're going down this route of innovation that The factory understands what the DFM or design for manufacturing process is. Typically, that means that they have some sort of engineering capabilities in-house as well. Speaker 1: I remember when I launched by 2015, one of the products that I launched was an Apple Watch charging dock. And back then, this right when the Apple Watch came out, the first one was about to come out and everybody was doing like these little bamboo stands and like little just junk stands. And I was like, if someone's spending, I don't remember what the watch cost back then, four or five, $600, whatever it was for a watch, they don't want a little $17 piece of crap stand. And they were selling like crazy. I was like, I'm going to develop a really nice stand that's made of aluminum that looks like, Looks really good with the watch. You'll charge the watch and an iPad and a phone at the same time. Has a Bluetooth speaker inside. Hides all the cables in the base so you don't have all these cables all over the table or all over the nightstand. So I developed that from scratch but I was lucky like you said and I sketched out kind of what I wanted to look like and I found a factory on global sources. And they said just pay us a thousand bucks and we'll do all the design work and we'll credit the thousand dollars to your first order and you got to do a 3,000 MOQ and these things cost me like $24 a piece I think landed somewhere in that neighborhood at that MOQ and and I was selling them for $89.95 and I was selling A lot, like $15,000, $20,000 a day when they launched, so much so that I had to air freight 6,000 of them over for Christmas just to get them in time. But if you can find a factory that does that, but that whole process, you know, we were going through 3D, I was doing 3D printing, where I had a guy here in Austin had a bunch of, he's down in Kyle, he had in his, he had set up in his Garage, it was a separated building from his house, but like 20 different 3D printers in there and he would print different sizes, different materials and he would print these for me and I'd take it to the Apple store and actually say, can I, it's a 3D printed version of it. Say, can I, can you take all the watch bands out of the cabinet and so I can test them to make sure they all fit and hang right and to make some changes. I just check the channels for hiding the cords and then you go to a, you know, another process where they actually make a, I forget the name of it, but it's a, it's actually a, a working copy. That's like a, it's actually like they make three of them and you test that and it's not the final polished version. And then you go to the final polished version and the packaging and, It took like eight months to get this from inception to actually being a live product. Speaker 2: Right. Yeah, I mean, that's I think typically how the development cycle goes. And I think it's really hard to find the factories that are skilled enough to shortcut those steps. So it doesn't take so long for you to Build that and product a lot of things a lot of times also like I've seen it common is where Especially in the FBA space where people will go engage a factory with no blueprint or no design files And try and get them to you know, make slight tweaks with the factory and you know, sometimes they're successful But it's a lot of you know going through the sampling process to do that in the factories They just don't like that necessarily right like they want the purchase orders. They don't want to spend time and And sampling, and they kind of know if you're going to go through multiple rounds of sampling, like you're probably doing that with other factories as well, especially coming to them with no design. So you just don't look as professional going to them and engaging in that manner. And some of the smaller factories may, you know, if they're need the cash, they'll, they'll entertain it. Right. But the bigger, like tier one, tier two factories, like they, they will kind of suss you out pretty quickly if you don't have that stuff buttoned up. And the reason why is for that exact, like the reason you kind of talked through, which is like, If you're going through the sampling process and having to do multiple iterations and all that stuff, that's a waste of their time with no guaranteed PO. I think, again, when you started doing that maybe 8 to 10 years ago, that wasn't as common. But now with all the tens of thousands of Amazon sellers all trying to do this and potentially not doing it the correct way or the way that the factories like that, I think it's popped up a lot more that, you know, the smaller factories or some of the trading companies that take on low MOQs are going to be willing to do that. But again, if you're working with a good factory, you better have your stuff together, your design files, all that good stuff, or you better have a good relationship with them where they'll start sending you, you know, some of their new latest and greatest ideas. Speaker 1: When you see this on Kickstarter, I don't know if you all work with any Kickstarter or Indiegogo type of stuff, but there's so many campaigns on there where people have a good idea and they may even have a good working prototype or some 3D imagery or mock-ups that are done that look good. But I don't know what the number is, but a significant portion of Kickstarter things never actually make it to market. And then a lot of the ones that do actually take Months if not years. I'm waiting for something right now from 2017 that's a Kickstarter project that I did and I get updates from them and they're showing me here's a bunch of things on the factory floor and we're doing testing round number three or whatever it is but it seems to be a common problem. People don't underestimate what it actually takes to do this. Speaker 2: Yeah, we've worked with a couple Kickstarters and their products actually launched because that's our goal. We don't want to work with people who aren't going to launch products. One of them was, I don't know if you're familiar with the guy by the name of Eric Howard. He launched a brand called Cali Weights and now I think they've done some stuff with QVC and they're on QVC. So it's been cool to watch his company grow. But yeah, I mean, I agree with you. There's so much noise out there in the manufacturing and product world that you just really have to have a good process in order to make sure you're working with the best people on The design side as well as the manufacturing side to make sure you don't run into those issues of predatory behavior by the factories or working with the designer who just has never made a product in mass manufacturing before, right? Those are killers of ideas. You get tired, you get burnt out, you know, the entrepreneurial journey from your first time if like it's taking forever and you aren't getting the results and you have a, you know, you kind of lose momentum, you lose steam and you put, you know, 10 to 25K into a design process or production process and, you know, you get no results like that's sad, that's hard, you know. Speaker 1: I think my tooling cost on that watch stand were like $38,000 just for the tooling cost on it. Speaker 2: Yeah, stuff can be expensive. Speaker 1: So what do you think now, I mean, the old days, a lot of people were just going to Alibaba, finding some opportunity on Amazon that they could get on Alibaba and sticking their label on it, maybe making a bundle or making some small change and putting it out there. That still happens from time to time, but it's much more difficult now. Now, you really need to actually, like you said, do incremental changes or innovate. I mean, all business comes down to two things, is marketing and innovation. So how important do you think is it that, or are you seeing this actually? How important do you think it is? And are you seeing this shift in the mindset of a lot of, especially Amazon sellers, that, hey, I can't just do that anymore. I've got to come up with original ideas or do these incremental changes and actually get serious about this. And are you seeing that and you think it's going to continue going in that direction? Speaker 2: Yeah, absolutely. I think the competitive pressure, if you go back to the massage gun, I think when we launched it, like they launched it, it was priced around like 200 bucks. And now I think you can get them for like 30 to 40 bucks, right? So if you're just taking a white labeled product, And launching that, you'll see what the pricing pressure will do over time. There's no barrier to entry there. Like we were talking about earlier, we're just so ingrained to have new products that solve problems faster now. With AI, I think it's going to get even more, the trend is moving into much faster iteration and much faster feedback across the board, not just in product, but just in life. Things are going to happen so fast and the economies of scale you're going to get from AI are going to continue to fuel this innovation and the cadence of innovation, meaning that it's just going to continue to speed up. And so that's like precisely why we launched the product that we did earlier in the spring. Speaker 1: It's the marketplace product, right? Yeah, let's talk about that. So that's pretty interesting. I saw that when it first launched and it was something around A bunch of product, you've kind of partnered with some factories that had some ideas and had some ways to change things and then you vet them and put it on your site and it's like $500 or something and then you get the rights, you're the sole person that comes off the site, you're the sole person that can then, you introduce them to the factory and they can run with it from there, right? Basically, and you kind of pre-vet it so it's almost like a product in a box, ready to go and take those next steps. Speaker 2: Exactly. So I think what Alibaba has done for white label products, we're doing for private label products, right? So we're taking concepts that have not hit the market before, and you get the exclusive rights to develop them with the factory. And so it's a combination of, you know, market research and data and AI mixed with our design network to come up with the concepts. Speaker 1: So you're taking like AI, like looking at reviews of top selling things and looking at patterns and trends with Amazon Dan say, Hey, if someone did a, I don't know, water bottle that did this, this, and this based on these reviews and the trends. It could probably do well. So let's put our people to work and make a prototype or a virtual prototype, a concept. And then have the factory, what can you do this for? If we change this, this and this, can you do this? And what would it be? Okay, here's the cost. We have the material list, we have everything. And then sellers can come to you and say, let me validate that. This water bottle looks pretty cool, might fit into something I could sell. Let me go do my own homework to actually validate that there's an opportunity here and I can afford to do this. And if so, it's like, you're like, here you go. And you have a pretty strong differentiation, differentiating factor out of the gate. And a leg up and a jump on everybody else. Speaker 2: Exactly. So yeah, again, it's kind of like first first right, you know, if you if you click that reserve button, and you, you reserve the product, you're put directly in touch with the factory. So you've kind of shortcut the development process, and you shortcut the sourcing process. Because the marketplace has done that for you. So you have the concept, you have the factory behind it, and you have the unit economics that tell you like here's the MOQ, here's the price, and here's the sampling cost, and here's the mold and tooling cost. So all that is accessible by a push of a button. And as soon as you press that button, you're put in touch with the factory into the sampling process for those fees that are set that are stated on on each reservation. And if you don't, you see something, you know, you don't see something that you like, you can put in a form for us to get a custom product. So that's more of like your traditional design route. But we'll try and use the same process to make sure that we can launch something very quickly. So taking more of that incremental innovation approach that, you know, working with factories that have that process going through the AI engine, using our design network, and still doing that, it's just It's not as fast as just clicking a button. It's more of a two to four week process versus an instant process. Speaker 1: Where's that marketplace? Is it at gembah.com or is it marketplace.gembah.com? How do I find that marketplace? Speaker 2: Brand.gembah.com. Speaker 1: Brand? Unknown Speaker: Brand. Speaker 2: B-R-A-N-D. Speaker 1: Brand.gembah.com. Speaker 2: Yeah. Brand.gembah.com. Speaker 1: I think that's a brilliant idea. What about people that say that either that are buying one of these products off your marketplace or they come to you with an idea. There's a lot of people listening right now that are like, I've got a great idea or that's a great idea that you have, but how do I protect myself? How do I keep the factory from stealing this? Or how do I know that someone at Gembah is not going to send this out the back door and do their own version? That's a fear that a lot of people have. So what do you say to that and how does people potentially protect themselves? Speaker 2: Yeah, I think there's a few things, you know, nothing would be invented if those fears weren't real, right? But at the end of the day, we wouldn't have all this innovation if people believe those fears wholeheartedly. There's things that you can definitely do to protect them. You know, putting the Gembah thing aside, like we do NDAs and NNNs with every person we work with, as well as with every factory that we work with. Speaker 1: For someone that doesn't know, most people know an NDA is, can you explain what those NNN and NDA, what the difference is for somebody that may not get confused? Speaker 2: Yeah, so an NDA is a non-disclosure agreement, right? So it's protecting any of the trade secrets and all that stuff. Works in most countries. In China is the only place that that term is not really a thing. They have what's called an NNN, which is a non-disclosure, non-circumvention and non-compete. So combines all three of those things into one agreement. And that's for, you know, if you're working cross borders with China, that's typically what was, is the most protectable of, you know, working with a factory. So if you don't have that yet, I highly recommend, regardless if you're launching a new product or if you have an existing product, that you have that agreement in place with your factory. The second thing you can do is look down the route of design patents, right? There's two different types of patents, utility or design. Utility is more the functionality. So if you're coming up with something that's truly novel and the world has never seen before from a functionality perspective, you can file a provisional patent and that gives you a year to move forward and file, get that whole thing situated. And I think Rich Goldstein is a good friend of ours who can help you down that path. If it's something that has already been launched in the world but it looks different, so ornamentally looks different, the visual effect of it is different, it's potential that you could have a design patent. So design patent will protect you in the country which it's issued. So if you're selling, wherever you're selling, The first thing you should think about is how to protect the place where you're selling the product. So if you're selling in America, you can get a design patent in America. If you're selling in the UK, get a patent in the UK, right? So wherever you're going to sell the product, start filing those patents. So that's going to protect as much as you can Those different avenues, you know, with the factory or with where you're selling it specifically. After that, it's about innovation, right? Like if you're the first to market, don't be the last to innovate. Be the first to innovate on your product because then you're always going to have a leg up on your competition. So to me, those are the most defensible things you can do is, you know, make sure you have agreements with your factories that clearly stipulate what happens if they do that. You can do things like Move your molds offsite, you can have fees of all that and it's all protected first by that NNN agreement, but then also with the contract at the factory so that there are specific terms if they compete with you. Then it's getting design patents or utility patents wherever you're going to sell the product. Speaker 1: What's next for Gembah? You guys did a big raise of millions of dollars funding around, was it about a year or two ago? Speaker 2: A couple years ago, yeah. Speaker 1: To help really grow the company. So what's next for Gembah? What's happening over under the Gembah hood? Speaker 2: Yeah, the goal is to continue the trajectory. I think the launch of the marketplace has helped make this, you know, democratization of innovation approachable. And that's our goal, again, at the end of the day is to help create the world's best products. And so we're just going to continue doing that as much as we can. So yeah, that's what's next. Just keep trying to make this process more accessible. Keep trying to launch more awesome products. Keep working with great people like you. Speaker 1: I appreciate that. So if people want to reach out to you and find out more about Gembah, how would they do that? If they have some ideas for a brand new product or innovating on something that they're already selling, what's the best way to approach that with you guys and find out if it's a good match? Speaker 2: If you're looking for more general information, go to Gembah.com. That's G-E-M-B-A-H.com. If you want to check out these concepts, If you've done your research and you know exactly what you want to get and we have those concepts online, you can go to brand.gembah.com and just reserve a product and start working with the factories. You can find us on LinkedIn and on our website. Those are the best ways to find us. Speaker 1: Awesome. Well, Zack, I really appreciate your time today and coming on. And once the Aggies and the Longhorns are in the SEC, we're going to have to go to a game together and see if we can stand at being next to each other doing a game. Speaker 2: I know. I know. Well, I think we'll be OK as long as there's some good food and some booze. Speaker 1: I think so, too. I think so, too. We'll have to do that. Put that on the list. Speaker 2: Absolutely. It's always good to see you. I appreciate you having me on, Kevin. Speaker 1: No problem, man. We'll talk to you soon. The guys over at Gembah, including Zack and the whole team are great. I've actually done business with them, and they do an excellent job. So if you're ever looking for product innovation or development or ideation, they're a great resource for you to go to. And as you can tell, just innovation is so key in today's world. And that's really how you're going to build a true brand and set yourself apart. So I hope this talk has helped you and you've gotten some good information from it. We'll be back again next week with another awesome episode. And just as a quick little aside, we've talked a lot in this episode about patent and IP stuff. Just go back to the August 3rd episode with Rich Goldstein. He's one of the top IP attorneys in the space and listen to that episode. If you get some further questions on it, we go into a lot of detail on how to protect yourself on different, on trademarks, patents, Copyrights the whole nine yards and so it's a great episode with a lot of information that may be a nice supplement to what Zack and I just talked about. So that's episode 354 from August 3rd. Before we go this week, the words of wisdom kind of tie into what we just talked about with Zack. People buy identities. They don't buy products. Always remember that people buy identities, they don't buy products. So that's how you can truly differentiate. If you really grasp that concept when you're coming up with your ideas. Just like what Zack said, Dyson, you know, one of the designers of Dyson is working for his team. He understands that. Apple understands that. A lot of the big brands understand that. And if you can get that into your branding and your products and understand that people are buying it for an identity rather than as a product and you can market off of that, it can make a huge difference in your success. We'll see you again next week.