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“I spent a month or so writing a business plan, and trying to figure out why that was, and realized that there is actually a huge market and a really huge business opportunity…”

Hi, everyone. I’m Mike Sullivan. This is MO.com. Thanks for joining me. With me today is Jason Ross, of JackThreads. JackThreads is a members-only online shopping club that curates top-tier street, skate, and contemporary men’s fashion brands, offering daily sales of up to 80%. Jason, thanks for joining me. Can you start out and tell us a little bit about how this concept came into your mind, how you decided you wanted to create JackThreads?



Jason: The original idea came about because, myself, I was a customer looking for a service that really didn’t exist, and I think in searching for that service, and being frustrated that it didn’t exist I decided that I wanted to be the person that went out and figured out how to make it happen.

Just to give you a little bit of a background, I graduated from Ohio State in 2003, got a finance degree, started a company right out of school with a friend of mine, a sport marketing business. After two years I had a lot of great experience, but realized that the idea wasn’t something that I was really passionate about.

So, I spent the next year figuring out what I was passionate about, and I wanted to make sure that the next business I got involved in was a passion play, but also married with a high-growth business opportunity. That kind of catches us up in speed in terms of, at the time, the customer looking for a service that didn’t exist.

And basically, that service was, I had always been into cool things, clothing, and just I guess I’m the friend who my friends would turn to when they wanted to know what a cool fashion brand was, or a cool bag, or a cool pair of sneakers. They’d turn to me. I had a natural interest in that world, but at the same time I was raised a discount shopper.

So, when I was out looking for the brands and products I wanted at the prices I was willing to pay I realized that there wasn’t a retail solution catering to guys that was selling off-price merchandise. I spent a month or so writing a business plan, and trying to figure out why that was, and realized that there is actually a huge market and a really huge business opportunity, if somebody decided to create a retail solution that provided value to the brands in that space, and could kind of be the connector between the brands in the space and consumers looking for it, like myself. That’s really how the business idea came about.

Mike: Jason, how did you take that idea and turn it into a reality?

Jason: The idea came about and then I spent two and a half years working out of my house, really, cold calling the brands that I wanted to sell, attending trade shows to really pitch them on this idea of working with me. And I also spent time in that timeframe trying to figure out how to build an e-commerce platform. I had no experience doing that.

I always kind of say that there are three things that we needed when we started. We needed brands that wanted to work with us. We needed an e-commerce platform, and then we needed money, just to survive financially throughout that time period. To get the brands, like I mentioned, we attended trade shows, a lot of cold calling.

To get the e-commerce platform built I partnered up with Ohio State University with one of their computer science classes and had them build the foundation for what is our code today as a part of one of their projects. And then, after that I hired a couple of developers over the next few years to continue to push the business forward.

And just to stay out of debt I got an SBA loan based on writing my business plan, then I just worked at night and for my uncle part time, so I had my days free. And those three things took me two and a half years to the point of launch. That’s really how we got the business started.

Mike: How are you able to offer these deep discounts on brand-name apparel?

Jason: I think what I found in the early days, when I mention I’m looking out in the market to figure out why the brands that I cared about weren’t selling off price to anybody, I realized they spend a lot of time building up their reputation and their image, and by having their off-price product out in the market they felt like it kind of polluted their in-line business.

They didn’t want to sell to a retailer at half price so that consumers could start to be trained that their merchandise was going to be available at this store for half price versus their regular inline business at full price.

So, once I heard brands saying this message to me over and over again, it was right around the same time I saw a business in Europe called [Von Trevay] doing this concept of a product shopping club that really addresses that exact issue that the brands had; you know, a private shopping club for one. It’s members only; it’s private.

And basically, the online my search engines can’t necessarily search the page so that the deals populate all over the Internet when people search for those kinds of products. So that was one side of the value proposition.

And then the other side was the flash style format allows a brand to only have their product featured for two to three, to four days at a time, whereas if they were selling to T.J.Maxx or a typical brick and mortar retailer or a regular online commerce business who had a traditional model their products could sit at an off price for months at a time.

That’s really how the private shopping club addresses the concerns that the brands had in the space. And I think by bringing that model over here to the U.S. is how we were able to get so much brand participation in the early days.

Mike: It sounds like based on that you’re working closely with these brands, these suppliers. You must have developed pretty strong relationships at this point?

Jason: We do. In fashion, brands are constantly having to launch new product to match up with the latest season. I think any time brands are having to make decisions on product well ahead of time they’re going to make mistakes.

And so, that’s kind of where we come in. We partner with these brands, and we buy their off-price merchandise, and then we shoot it and style it and present it in a way that looks brand appropriate. It’s in line with some of the best full-price retailers. But I think that’s why they want to work with us.

So, we’re partnering with them. We’re taking excess inventory off their hands, turning it into cash for them, and then presenting it online in a way where customers, 1) get a great deal on it, but 2) the product just looks like full-price merchandise. I think the brands really respect that their brand is being presented in a very positive way.

And because of that we’ve built really great supplier relationships. And I think we’ve looked at our business in two ways from the early days. We have two customers; the consumers buying product from us, and then the suppliers that we’re buying product from.

I think that whole mantra has allowed us to really grow our supplier base, because the brands that we’re working with have such a great experience that they’re telling other brands in their space that they’re friends with to also work with us.

That’s allowed us to go from not just selling excess inventory, but we also now have brands that are creating product exclusively on our behalf. They’re actually manufacturing it for us. That’s been a big initiative for us as we’ve grown.

Mike: Do you have a specific demographic, or target market that makes up your customer base? And also, how did you go about growing that customer base into what it is today?

Jason: I think our target market is typically an urban-dwelling guy between the ages of 18 to 35. It’s a guy that basically cares about his personal appearance, but also doesn’t necessarily have to have the latest thing that just hit the shelves. He’s educated on the different looks and the different styles out there, but is willing to wait a little bit in terms of making sure he gets a great deal.

I think that’s who we cater to. That’s really built on myself, I guess. And so, in terms of us reaching these guys, in the early days we didn’t really have a marketing budget, and so my thought was like, all of the different online communities that are catering to the client, or the customer, that we’re also trying to reach. I just basically got on the phone and cold called them, and let them know that we were out there.

And I saw a lot of these communities writing about the brands that we were selling, and writing basically speaking to the lifestyle that we were also trying to speak to. I think any time that I called a community and actually featured us; we found that their readers would sign up. They would start buying, and they would refer their friends to the site. We realized then that we were onto something big in year one when with a zero marketing budget we were able to sign up 35,000 members.

It was really exciting. Then we took that momentum and the profit from that and reinvested it into online customer acquisition. So, year one was really bootstrapping, and not paying a cent for a user. And in year two we figured out how to profitably acquire customers through channels like Google, and Facebook, and even paying, going back to some of the online communities who wrote about us in the early days, and paying to have our advertisements and our message featured. We saw a lot of success. And that’s where the Thrillist relationship really came about, as well.

Mike: So, JackThreads was acquired by Thrillist? Can you talk a little bit about what goes into an acquisition and what some of the things are to consider?

Jason: We launched July 31, 2008. In November of 2009 we had a number of parties coming to us, either looking to finance our business or looking to acquire the company. Of the five businesses that came, I quickly ruled out four of them. I think the things that I looked were just a personality and a culture match in terms of the executive team and their business and our executive team. Because obviously, in an acquisition we’re going to be working together pretty closely.

Then the other thing I was looking for was also a partner that could bring some sort of strategic advantage to the table. And I really found that in Thrillist. For one, their executives were too young guys who started from scratch, kind of just like I did. They were a little bit further along in the process.

And also, from a strategic advantage, they’ve had a lot of success creating content, and leveraging that content to attract an audience, and then pulling in national brands who want to advertise to that audience. The advertising income was there, revenue stream. But they wanted a secondary revenue stream.

For us, we had built an amazing e-commerce platform, and deep supplier relationships, but we weren’t growing quick enough. I needed the ability to grow faster, and they needed a secondary revenue stream. So if you think about it that way, combining forces just made a lot of sense from a strategic advantage.

Also, there was a culture fit. I guess I’d recommend for anybody who’s going through the acquisition to kind of just think about it that way, making sure that the partner is somebody who you’re going to want to work with long term, and you also feel like they’re going to provide a lot of value to your business long term, because ultimately, it’s a marriage. Depending on your contract, you’re going to have to make it work for a set amount of time. Thinking about it that way will make the transition much more smooth, than just taking money from anyone.

Mike: I understand you had paying customers on day one of your site’s launch. Can you tell me a little bit about who those customers were, and how did that first day go?

Jason: That’s a good question. So, of the three people who ordered day one, two of them were friends and one was a customer from Boston who honestly I have no idea to this day how he found us. But the funny thing about that story is that it was great that we were taking orders, and I shipped them out right away. I was all excited.

Then I realized quickly that our credit card processor was still in test mode, and our developers had left it in test mode by accident. So, the transactions went through, but we never actually charged the cards. So I had to get on the phone with those users and called them up and basically take their credit card over the phone, which worked out.

But I think, you know, in the early days and kind of going back to what I said early on, we didn’t have a marketing budget and we didn’t have any members. So, getting those early customers was basically that we had to get creative. I just looked at our business and made an assumption on who the target customer was. And I just sought out different online communities that I felt fit that target customer.

And just like everything else that we experienced day one, it was just getting on the phone and cold calling people, asking questions, and trying to get anybody who would listen to feature us. I think that’s how we were able to sign up so many members in our first year.

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