From Earscaping to Earrings: The Untold Story Behind Studs' Success

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Welcome back to another episode of E Commerce on Tap brought to you by Sourceify and Isba. I'm your host Nathan Resnick, joined by my co host Aaron Alpiter. Aaron, how's it going?

Doing pretty good, Nathan. It's certainly a newsworthy couple of weeks going on, but I'm glad to be here with you.

Yeah, likewise. I mean, the tariffs have gone kind of crazy, so I'm sure we'll touch on that in our kind of tidbit section. But for those that are, that are joining E Commerce on Tap for the first time, do you want to give a quick overview of what we do?

Yeah. So each episode we take a well known, typically venture backed DC company, we tell their founding story, reverse engineer their supply chain and then talk about their exit potential.

Yeah. And this season we've been covering jewelry, which has been pretty fascinating because number one, most of the time the margins are pretty high. Number two, a lot of the time these companies are a lot bigger than I thought they were. And number three, Aaron and I, who do not buy much jewelry, have learned so much about the jewelry industry and I think we both have unique perspectives, either having run supply chains for large jewelry brands or being on the ground floor. Like me seeing a ton of jewelry factories across China. So today we're covering studs, which is just this really fascinating experiential retail and E commerce brand that's kind of reimagined the ear piercing experience. And so we'll do a deep dive on them. And it's a pretty incredible story. But before we get in, was there any kind of tidbits that caught your eye the past week?

I mean, there's, there's a ton, but I think the one that I want to focus on is just the trade war from the Canadian perspective. So as many of our listeners know, I'm an American. I'm living in Montreal for the next couple of years and I am witnessing this just historic galvanization of Canadians. A lot of people are calling Trump the great unifier of Canadians. And there has been this massive shift toward, I wouldn't say it's anti American sentiment, but anti American government sentiment. I haven't felt anything against me personally, anything like that, but it is amazing how much the society is banding together to push back on the US Everything from we were in the store this past week and there was a whole palette of beautiful looking strawberries from Florida that nobody touched because they came from Florida. People are intentionally looking at where the products were made. If it's American brand and it wasn't made in Canada. Then they're, they're buying a Canadian alternative and so they're really, you know, voting with their wallets. There's a lot of people who are canceling trips to the US putting, you know, hundreds or thousands of winter homes up for sale in Florida. And so it's been really interesting and I think what really summarized it to me is I found this article and in the article they have this, this graph about how Canadians feel that they should be responding to the American government and then how Americans feel they should be responding to the Canadian government. And there is a wide, wide gap on the American side. Well over 90% of people think that Americans, the government should be treating Canada as a, as a trusted friend, a partner, an ally, be on friendly terms, those sorts of things. And that same poll shows over 75% of Canadians now taking the posture that they should be treating the US as an enemy, as potentially a threat to national interest or just cautiously. And so there is this wide gulf of how people feel the governments should, should act and retrench. And in general people are not happy about the terrorists or the 51st state. Talk up North.

Wow, that's super interesting. There's a lot going on in the world and especially just north and our northern borders. It's kind of crazy to hear it firsthand perspective.

I think the thing that's interesting is like, okay, let's suppose that the tariff threat goes away and this is no longer a thing. I think that there's been some real damage that's been done to the relationship here that will take decades to heal. I just, I get the sense there's going to be a lot more, I guess Canadian assertion of Canadian independence from kind of the US led economy and things like that and obviously huge trading partner no matter what. But just the mentality here of Canadians for Canada has been really interesting.

Yeah, that is super interesting. For me. What caught my eye is I don't know if you own a solo stove, but it's basically this brand that enables you to have a campfire without smoke. And they've created this roll up, they've acquired, you know, a multitude of different brands over the past few years. They went public kind of early in Covid and at the time did really well in the public markets. You know, last year they reported about 450 million in revenue. But you would not believe their stock price right now. It's insane. They've dropped to a $24 million stock price and they're, I mean they're doing a few hundred million in revenue. But I think what it is is that their revenue is in decline, they're not making money, and they've just gotten crushed in the public markets. I mean, there's been a lot of talk on, hey, someone should take this private and really optimize these brands and just cash flow them because obviously public market investors do not like this. But it's just insane to see an E commerce brand that's doing a few hundred billion in revenue be worth basically 25 million in the public markets. I mean, it's hard to fathom that's.

Why are they profitable?

Do you know that they're not profitable? No.

So, yeah, I mean, we kind of always come back to that. On the acquisition framework here where the game has changed, you either have to be growing hand over fist with a very clear line of sight profitability, but if you are just there and you're not profitable, then that's how you get, you know, to be a tenth of the valuation that your revenue is.

Yeah, it's crazy. I mean, I think in general, E commerce companies have gotten really scrutinized in the public markets and, you know, this is a great example of that. And I mean, my guess is they'll be taken private and turned around and, you know, hopefully continue to grow because I think they have a few great brands that they own, but it is just crazy to see how bad they perform in the public markets.

Yeah, I love my solo stove. It's great. But I don't know. Do you think that. Here's a question for you. Do you think that the generation of founders from the 2010s when it was zirka environment and it was just kind of grow, grow, grow early Facebook, do you think that they ever learned how to build solid businesses as a generality or did they just get really good at raising money and selling on Facebook?

That's a good question. I mean, I think they've had to switch their mindset and obviously that's hard to do. Right. If you're in a growth mindset and just really optimizing to grow, that's a lot different than operational efficiency and making a profit. Right? So there's definitely been leadership turnover and maybe that's a good thing. Maybe there needs to be more because obviously they haven't optimized enough yet and they're still losing money. So I think any operator needs to switch their mindset from a growth perspective to a, you know, profit and operational efficiency perspective. And I think a lot of companies still have not done that, are still transitioning to do that and you know, when the market shifts, do that quick. So I think they're, they're facing that headwind right now just with how they've been operating in the past.

Yeah, Amazon kind of spoiled everybody because they famously didn't have a profit for 10 years and then became a trillion dollar company. And that's, that's probably more the exception than the rule for most folks out there.

So for sure, 100%. Well, today I'm so curious with Studs, right? I mean as I was researching this brand and just this amazing business, the founding story is super interesting. You want to start kind of just diving in with.

Yeah, let me set the table. So imagine taking a routine mall kiosk service and turning it into a trendy tech savvy retail experience. And that's exactly what Studs has done for ear piercing. They are often described as like the Gen Z Focus challenger to legacy players like Claire's. I don't have my ears pierced, but I always knew that if you wanted to get your ears pierced, you go to Claire's. They've carved out a really unique niche by making ear piercing cool, convenient and experimental. And in just a few short years since launching in 2019, they've exploded in popularity. Their onset online sales have grown about 30x during COVID and as they were really focused on people who were stuck in their home. And they've even trademarked the term earscaping sort of before that, before that came from Studs. And so these really sleek studio boutiques have neon lights, they're always selling out of inventory, they're on trend and they're really not your typical jewelry retailer, which is why we want to tell their story today.

Yeah, it's super interesting. And I mean the insight basically for Anna Harmon and Lisa Bubbers, who were the founders that created studs in 2019, was that they felt like they didn't fit into like, you know, a tattoo parlor to get their ear piercing and they didn't fit into some like mall kiosk. And they wanted an experience that would just make them feel comfortable in a clean environment to get their ears pierced. And so their kind of main target market are not necessarily, you know, getting your ears pierced for the first time. It's kind of if you're getting like a second or third or fourth piercing and you know, I don't have my ears pierced either, but I can imagine, you know, it's a huge market and creating a comfortable environment has definitely resonated with their consumers. So Anna, you know, studied law at Princeton, but she decided she wanted a career in finance and analytics. So she worked at Bridgewater as well as a few startups across New York City. And, you know, when she was out trying to get a second ear piercing, she really struggled to find a safe and appealing option. And she felt kind of like razzled by the places that she was looking at to get her ears pierced. You know, I can imagine her in New York City, like going on Google Maps and being like, ear piercing. And it's like all these tattoo parlors and, you know, different places that are either for the, for tattoos or for kids. And nothing really resonated with her. And so that was like really the unique insight. And so she was curious why no one had filled this. And she learned that, you know, this is obviously a capital intensive business, you know, despite excellent margins and fundamentals. And, you know, she realized to Saki, I've got to go raise funding, right? I can't, you know, bootstrap this business. And it's also a highly regulated industry, right. So there's different laws and different states and that have specific regulation around, you know, what equipment can be used and, you know, how to make sure they're compliant in each state. And so, you know, they decided to launch studs in 2019 and they wanted to basically connect this kind of shopping experience for earrings to the actual ear piercing market. And that's really how that term earscaping came to be that you mentioned. And it's just a fascinating story. And their funding story was pretty unique as well.

Yeah, exactly. I mean, before they were launching, they were going out and pitching investors. Keep in mind, this is 2019 when they're doing this, late 2019, that'll become important here in a moment. But some of the investors were concerned about the small tam and, you know, whether this was going to be an attractive investment or not. Others were concerned about kind of how quickly fast fashion fads came in and out. And, you know, maybe, yeah, piercings were trending up, but maybe they're going to be trending down in five or 10 years. But they were able to successfully draw a linkage between companies like Warby, Parker and Claire's and showed the market already been validated, confirming that people wanted these sorts of experiences. And so they felt that just with a little bit of innovation in the space, they could, they, they could really make a difference. And so, interesting enough, they got really interested in the ear piercing part of the business. Jewelry is fantastic, but they wanted to be an ear piercing company first that happened to sell earrings as opposed to an earring company that happened to do ear piercings. And so they, they went deep into the research. And actually you and I got deep into the research too as we went through here. And I learned that there's just, there's two ways to get your ears pierced or to pierce anything. You can use one of those guns that I think I'm most familiar with seeing, or there are needles. And needles are by far and away the safest, least pain free, most hygienic way of doing this. Although I'm thinking of my dad who I think would faint at the even thought of a needle. And so, you know, that's probably why he's an empty, his ears pierced or anything like that. But they really got into that and they said, okay, we want this to be an ear piercing company first to some extent. And so to maintain this quality as they scale, they started to build out like a six week apprenticeships program for people to bring on to peer Sears. And this training is actually a really good program long term for both sides because it's a clear career path for their employees and then also helps improve the product for the business. But they really went out and they raised some money and they intentionally spent a good chunk of their initial seed money on buying the domain studs.com, which is an awesome domain. They took this provocative URL. Who knows what studs.com was before? Maybe it was a horse site or something like that, maybe not. But they turned into this really powerful branding asset. Their initial seed round was about 3 million bucks invested by First Round Capital. And with this money they opened their first piercing boutique in Nolita in New York. And at the very beginning, Studs really stood out. They were starting to attract Gen Z. They were very Instagram friendly, they had neon signage, they were talking about the needle based piercings instead of piercing guns. And it was a really good way for them to balance the trustworthiness of, of kind of this collective brand that was going on in a fun, appealing environment. But as I mentioned, this was late 2019. And as everybody knows, what happened a couple months later was Covid. And so, you know, Nathan, just talk us through what Covid did to their business.

Yeah, I mean, the timing was on one hand horrific, on the other hand, very, very lucky. Right. Because basically just weeks after opening their second location at Hudson Yards, COVID 19 forced, you know, all their two locations to close. Right. Covid was a crisis. You know, it's really bad in New York City. And virtually overnight, all their in store revenue evaporated. And they hadn't even really invested too much on the e commerce side of their business prior to Covid. And so this really pushed them to urgently pivot towards building a robust e commerce business that previously was kind of just a, you know, side project of Studs. Right. And so what was surprising to them, and very, you know, fortunate and opportunistic is that people were shopping so much online that earrings became popular in a unique way to express yourself. When you had your mask on, you know, you could at least, you know, see your ears. And so, you know, these small accessories really were a way to kind of brighten Zoom calls and, you know, help people express themselves during COVID when everyone was wearing masks. Right. And so Studs, you know, survived and even kind of a little bit, you know, thrived during this time of, you know, really focusing on their e commerce business. And in retrospect, Anna considers that they were lucky to have, you know, number one, secured financing just before the pandemic, but number two, been able to really, you know, rapidly pivot to an e commerce business when their stores were locked down. Right. And so they leaned into the kind of quote, unquote, zoom fashion aspect of COVID And I mean, I remember just so many different Zoom calls, and it was a crazy, crazy time in our lives. But, you know, after the pandemic, they were concerned, like, are customers actually going to return to stores? And what they saw was actually an increase in foot traffic than before COVID Right. So they had more people going to their stores than even before COVID which was, you know, just, just incredible for their business because now they had this E commerce side of their business as a foundation and were then, you know, capitalizing on their two locations.

Yeah, I think if there's one thing about Studs that, that I'm impressed by, it's just their ability to pivot. I mean, they went out trying to be an ear piercing company, and we're doing a really good job at that from all accounts. And then people didn't want to get their ears pierced. Right. Or they weren't going to make that, that risky attempt to go out and get their ears pierced. So then they pivoted to E commerce and jewelry. And like you just said afterward, after Covid, they kind of had these two strengths that were growing independently, that they fused together. And their, their stores today are some of the best examples I can think of of really blending that omnichannel experience and making it in experimental or experiential retail experience. What are some of the things that they've done to really make themselves stand out?

Yeah, I mean, they've done a lot, but I mean, what I found through my research was number one, Studs leveraged mobile innovation through kind of quote unquote, Studs on wheels. And so they had a mobile piercing truck that would enable them to penetrate new cities without the overhead of a permanent studio. And this kind of enabled them to ab test different locations, you know, see what cities, you know, resonated, see what worked well. And it was, you know, really a highly Instagrammable experience. And so they got a lot of traction through social media and just, you know, kind of pinpointing, hey, our mobile piercing truck's going to be at, you know, this corner today or this street today. And then recently their strategy has really revolved around different food collaborations, which I thought was pretty unique and interesting for a piercing parlor. So this kind of strategy emerged specifically around New York after the Stud Loves New York kind of line. So they featured like bagels and pizzas and martinis and dumpling shaped earrings that perform well during these kind of promotions. And it revealed that basically people resonated with free food in their piercing studio. And kind of the average age demographic that goes into these type of events is 27. And they in general had a interest in viral food content over, you know, kind of traditional fashion. And that's what, you know, enabled them to resonate with Studs. And, you know, they mentioned that in order to choose kind of what foods to partner with, they just kind of look on TikTok. Right. I mean, we've seen so many viral TikTok creations in every category now. It makes a lot of sense. And so in the last year, Studs has partnered with everyone from Shake Shack to bakeries like Grace and Noah. And they offer everything from burgers to custards to cookies and hot chocolate. I mean, it's pretty wild. Imagine you go in, you, you know, getting your ears pierced and you get a hot chocolate. Sounds pretty good to me. And, you know, I think what Lisa has said is that these collaborations were a strong way for them to increase foot traffic and organic social engagement. And Anna mentioned as well that free food has significantly boost store visits. Right. So I guess it's part of the acquisition. You know, you want a free burger and your ears pierced. There you go. Right. So I think it's, you know, what resonates to me hearing that is that, you know, even in a physical store that Studs Operates in their stores. They try to find unique viral trends to stick out. And I feel like, as we've talked about so many different e commerce brands, especially in the jewelry category here, that are all online in our previous episodes this season, they have all kind of tried to incorporate different trends on social media to gain more attention and more traction. Right. But I haven't heard of one incorporating food like this. So this is pretty unique.

Yeah. Well, let's talk about kind of why this works. And it goes beyond just what worked for me in college where, you know, if any club was. Was having any pizza or free food, I just showed up to it because I'm like, you know, I was hungry, I think where, you know, they're not taking an IKEA approach. Right. They're not serving the same thing over and over again. People know it's cheap and it's there to kind of fill a need that people have when they're shopping. What they're doing is they're focusing on something that's very timely that people would seek out anyways and it's scarce. And so they just happen to use their piercing parlors, which, oh, by the way, are highly Instagrammable and are Instagram whether or not you're getting your ears pierced, you're showing off your earrings, or you're having this food. And so it just, it just resonates really, really well there. And so I think that, that they have done a better job than most, getting the most from their retail presence in this way through these smart collaborations.

Yeah, yeah, I agree. I mean, it kind of proves, you know, free food and these different collaborations still work. And I've seen a lot of brands, you know, try to collaborate with kind of bigger nationwide brands to grow a lot. Right. Like, I think of the fragrance brand Pira. They've partnered with a lot of, you know, famous car brands like Porsche or Ferrari to create, you know, specific fragrances and grow that way to really resonate with those. Those people that resonate with that brand. So I think it's a great way to grow. And, you know, partnerships in general, I think have been a great way for e commerce companies that are smaller to get more attention. Right. I mean, it's pretty incredible to see studs incorporate this into their physical retail strategy.

Yeah. And I think that beyond just the food thing, which can be difficult to replicate and do at scale over and over again, they've really tried to find other excuses to make noise themselves in these viral moments. And so, as you mentioned, they've started to target Some bigger brands. And they're talking about how, you know, they want to find some of these partnerships that help them test different demographics or different price points. And so one recent one was partnering with Stephanie Gottlieb, which is a premium jewelry brand. And so they were able to put Stephanie Gottlieb's products in their studs parlors. And you know, they did it in such a way that it didn't cheapen that that brand. But they were also allowed studs to basically explore a higher price point with their customer to say, hey, you know, we typically sell things for 30, 40, 50 bucks. How would you like a couple hundred dollar earring? Like, do people want that? What does that demographic look like? And so that is a great way to pull some of that premium brand equity from another partner onto to your brand, but also allows you to say, hey, maybe we should think about launching our own super expensive or higher end earring brand.

Yeah, yeah. Great way to test the market and, you know, great way to expand with a partnership. I think that was a smart move from a financial perspective. You know, they do a good job of keeping most of their numbers private. So we know, you know, 2019, they got a $3 million seed round from First Round Capital. 2020, they obviously pivoted to e commerce. Online sales grew a ton and became 35% of their revenue. And in 2021, they raised a Series B of $20 million, led by Spark Capital. And, you know, I think the founders have been focused on creating a business with great fundamentals. You know, they'd seen, as they said, companies die from a thousand paper cuts before because of a lack of focus and lack of fundamentals. And so I think they really focused on, you know, that as operators. And, you know, there's been some unverified estimates that put their revenue around 40 or 45 million, but it's, it's unverified. We're not sure. That's just kind of the ballpark that we've seen people talk about online. What stood out to you from a supply chain perspective?

Yeah, a couple of things. So I actually had the opportunity to meet Anna when they were just in the middle of this pivot during the pandemic. And so we met a couple of times. Try to share some advice, be helpful. But they've done a really good job of building an omnichannel supply chain that seamlessly integrates that physical retail, that physical piercing studio and with an online business. And so They've got over 250 distinct jewelry styles. And I think what's, what's really interesting about this is you think about the complexity in managing an omnichannel business when you don't have, you know, hundreds of millions of dollars in inventory to deal with. You've got to make sure that your, your studios are stocked with what they need. Probably one of everything. You need to be able to allow people to, you know, either buy right there or send it home. And then just with all these styles you don't know what's going to be popular. And so you don't want to end up with a lot of excess inventory. 250 styles. Luckily there's only, you know, one size of earrings so you kind of get some benefit that way. But just the complexity managing what stock is in the, in the studio, what stock is in the fulfillment center and you know, how you deal with return sticking is very interesting. Another thing that really stuck out to me was their early commitment to this needle based piercing really forced a lot of other decisions. And what that, what I mean is that they had to have very strict supply chain management because they were going to be sourcing medical grade needles. And so they needed standardized piercing equipment across these, these locations. And so they, they really, you know, there wasn't a, a large number of players they could go to to say, hey, we want all this. It's not as if you can go to Alibaba and get, you know, 500 suppliers. There's, there's a handful that would be able to do that. And so they've got to qualify for it. They've got to make sure that that works. These single use items. Some other things I think that they're probably doing is just looking at some advanced inventory platforms. You know, loop returns is probably one I think I've seen a collaboration announced and just the, the ability to adjust their inventory on viral social media trends, trying to match, you know, what's, what's hot, what's not. How do you get that competitive advantage against larger, slower rivals. And they do this a lot in a similar way that majority does where they're, they're having scarcity, they're intentionally doing drops of limited edition earrings. So you have, over time you have this baseline of hey, we know that we're always going to sell about this many of this item, but when I test something new, I'm only going to have less than what I think I can sell. Right. Because I want there to be urgency, I want people to come back. And so with this they've been able to do some other investments on the Tech side where they've gotten into augmented reality. So if you go to their online platform, you can actually do a virtual try on. And that's obviously, as you can imagine, dramatically increased their conversion rates and reducing returns on E commerce. And they're doing a lot of other interesting things in that space.

Yeah, I mean, I think operationally, you know, they've done a great job. You think about the number of SKUs that they have, obviously it's a lot. And across E commerce and retail it's a ton to manage. And I think they've tried to be efficient on all sides of their business. Right. They mentioned, I saw online they deployed slang AI which was like a automated, like an AI powered customer service system that automated about 30% of Peersteam appointments that frees up staff from, you know, having to make appointments. Actually focus on customer interactions. And their stores in general are mostly located close to colleges, but you know, their focus is getting to the masses, you know, regardless of the certain locations that they currently have. And so, you know, I think overall you think about their supply chain, you think, number one, like you said, a ton of different SKUs when it comes to earrings. You think about the medical grade equipment they have to have to actually pierce someone's ear. And you know, you think about the coordination across E commerce and their physical retail stores. That's a lot going on. And so I would assume they probably have some sort of centralized fulfillment location that helps distribute those SKUs to their stores as well as fulfill their online orders. Because otherwise I think, you know, I don't think they're shipping their product from. I don't think they're shipping these earrings directly from their supplier to these stores. I'm sure they have like a centralized distribution warehouse to handle that fulfillment on, on these locations as well as online.

Yeah. It would be interesting to see how much in store fulfillment they're doing because that's something that's very easy. I mean, earrings and jewelry in general is just kind of the perfect E commerce product. And so it wouldn't take up that much room and it wouldn't probably be that difficult to do that. So I'll have to go back, take a look at this to see which route they're going. Maybe they're doing some sort of hybrid.

Yeah. From an exit potential, what does the potential look like for a company like Stud? And what do you think about this industry in general? Right. I mean, it's very unique. We haven't really covered an earring brand before, especially one that has a physical presence like this either.

Yeah, I think because the ear piercing service is so core to their business, you really have to evaluate this as something unique, just as not just another run the mill earring company, although they've got a good business there. So I kind of went down a rabbit hole in this one and really researched a lot because I was pretty interested in kind of what the future could look like for Studs. But they've really. Let's look at what they've done really well so far. So they've got a very strong market position. They are probably the, you know, preeminent experimental brand appealing to Gen Z and Millennials. And they've got about 30 studios as of late 2024, so they've got a decent footprint. You know, there's lots of, of positive press that was coming out in like the New York Times and New Yorker. It was talking about this interesting trend in, in piercings and the piercing parlors and how much the experience has improved recently because of. Of companies like Studs. And people are talking about how ear piercings have become an affordable luxury. Right. And you know, how this is something that is generational and so there's some positive tailwinds that way. From a just zeitgeist point of view, if you look at the overall market itself, ear piercings is expected to be about $2.6 billion by 2031. It's just the services, and that's a global number. And body piercing jewelry, which earrings will be part of that, is expected to be almost $11 billion by 2031. So not the biggest TAM in the world, but also not nothing. So it's worthwhile there because of this. There have been some retailers like CVS and five Below that have gotten into offering piercings as a service.

Yeah, I mean, what stood out to me was the market is small for ear piercing services. Right. I mean, 2.6 billion is a small market, but I think that's why Stud specifically supplements that with actual actually selling earrings and jewelry as well. So I think kind of in one hand, the ear piercing is actually the hook, and then you come in, you probably buy a few sets of earrings as well. So, yeah, I mean, that's what stood out to me is that the size of the market is small, but in terms of actually, you know, jewelry sales, I think that's going to continue to grow and be a huge revenue driver for them. Is there anyone else in this space that kind of was looking to fill a similar gap that Studs is focused on?

Yeah, it was really interesting I was surprised to learn about a company called Rowan, which was also founded in 2019 and is also headquartered in New York. So it's like there's something going on in New York in 2019 where people were saying, hey, we need to reinvent this. Just a quick cliff notes on Rowan. It was founded by Lisa Schneider, who had a very different experience than what Anna was looking for. So she basically was looking for a safe and celebratory environment to take her daughter for her first piercing. And she didn't really like what she saw. Right. So again, Claire's is there tattoo parlors. You're not going to take a tween to a tattoo parlor. And so she went out and said, there's got to be a better way. And so they've intentionally gone out to create an environment in a brand that was really all about health and safety. They, you know, on the website they talk about how all the piercings are done by registered nurses. And they've struck some strategic partnerships with, with Target in particular and have grown to about 65 stores nationally. And they reported in 2024 $100 million run rate, which is a pretty massive kind of niche for this sort of business. But I think what's really interesting about this is that while Studs is focused on your second and third and fourth piercing, Rowan's is really focused on the first piercing and really focused on that tween and children's piercing, whereas Studs is a little bit more young adult.

Yeah, it's interesting. I mean, I wonder how competitive these two companies are. Right. Because on one hand they're kind of doing the same thing, but on the other hand they're focused on a different segment of the market. Right. And so, I mean, I thought maybe they could team up and operate two separate brands geared towards different customers. Kind of like Old Navy and Banana Republic. But I'd be surprised if they do that. I think, you know, eventually they'll probably crisscross in terms of their target market and become more competitive. But how do you think, or how do you begin to think about valuation when it comes to a company like Studs?

Yeah, I think the best comp that you can look at here is a jewelry retailer called Lovisa, which is based in Australia. Lovisa has about 800 stores across 15 countries and they're publicly traded, which is how we can back into some of these numbers. They are different from Studs in the sense that they focused on fast fashion jewelry sales in high volume mall based stores. And so you think about this like Studs was an ear piercing company that sold jewelry. Lovisa is a jewelry company that happens to offer Pierces. Just a quick snapshot with their financials. Their gross margin is about 82 and a half percent. So really, really healthy margins from that perspective. They've got a lot of overheads, obviously with the stores and employees. So their operating profit was 32% and the net profit was about 12%. In 2024, they did 458 million Australian dollars and they had a market cap of about 2 billion Australian dollars.

That's pretty crazy. What are the Cliff Notes on their story?

Yeah, so not too dissimilar. There's a lot of parallels here with Studs, but they were founded in 2010 by Shane Falshire and Brett Bundy, who raised $100 million by going public in 2024. Prior to the IPO, they had grown the business to 220 stores. So just think about that. 220 stores in four years before they went public. And these stores were in Australia, New Zealand, a couple other markets. And at the time of going public, they were doing about 120 million Australian dollars and had a profit margin about 8% or 10 million Australian dollars. So that just gives you a sense of probably what the size of, you know, a similar comp to maybe where Studs could be if you're in that fast growth area. They entered the US market in 2017 and they celebrated their 200th year US store in September of 2023. So they've really been on a growth tear and just have really made global expansion a key to their strategy.

Yeah, it's pretty incredible. I mean, they're an interesting comp from a valuation perspective. Do you think there's something that could happen between the two companies?

Well, I think strategically it would make a ton of sense for Lovisa to acquire them. And I think Studs is entering their exit window. And so this is kind of the part time where the valuation is going to be such that it's not too crazy, but it's also a good return for investors. And so this is something that I think could make sense. Start looking at some of the options.

And why do you think that makes sense? I mean, is it strategic, is it brand, is it operational efficiency? I mean, what really stood out to you?

I think there's a couple of things. Right. So if you think about just strategic fit, they, they would get a lot more, I guess, piercing expertise. I'm not sure if Louisa is doing needle or they're doing the Gun. But we do know that Studs is really expert at this piercing piece. And so being able to take that expertise and move it across all of their, their, their stores, with their apprenticeship program, things like that could be, could make a lot of sense. I think from a brand point of view, they would be able to keep Studs kind of elevated customer experience and start to bring in Millennial and Gen Z buyers in a different way than they are today and really just be able to kind of give Lovisa another niche to have like a premium experience. And again, it's premium experience that could lead to premium products and premium margins. But then just, you know, from a Studs perspective, it makes a lot of sense too because you now have this vehicle where you could convert some of those Visa stores into Studs or you know, co brand them or, you know, you do have a company that has literally opened hundreds and hundreds of stores over the last 10 years. And so you've got a lot of this, this ability to kind of move into that. So I think it's, it's interesting that, you know, on paper it makes sense that from a strategic point of view they should look at this deal.

Yeah, no, it is, it is interesting. I mean, so studs raised 20 million in 2023, which, you know, probably implies the valuation around 60 million. So third of their company. And if we assume that this is a good comp, they should trade that, you know, 4 to 5x revenue. So I mean, it seems like a sale price could be like around 200, 240, maybe even 300 million. But even though, you know, strategically it seems like it could make sense, I doubt it would happen because Louisa is holding a lot of debt. It looks like if you look at.

Their stock, tons of debt, which is why I look at this, I say, man, even though this is potentially a great idea on paper, I don't think they're going to be able to execute it because they've got hundreds of millions of dollars of debt and the equity on the balance sheet's only like 80 million bucks. So they've clearly funded and improved it. Who knows, maybe their investors would be willing to double their debt load to acquire Studs. But I think that that's probably too much risk. And if I were Studs, I'd kind of look at this as well and be like, well, you know, like, do I really want to cast my lot to a company that could be taken over or default if something changes rapidly?

Yeah. Well, are there other acquirers that would make sense that stood out to you?

Yeah, I mean, I think like everybody thinks first and foremost about Claire's. So this would be a move where Claire's is looking to fend off a competitor and retain kind of that ear piercing market dominance or expectation. We don't know the financials of Claris, but they did attempt an IPO in 2021 and they disclosed a $275 million profit. Profit in 2021. So that's an interesting piece there where certainly they had the cash. I think that a Sephora or an Alta could be an interesting one as well. Lvmh, which owns Sephora, is a multi billion dollar business and Alta does about $11 billion a year. And both of these companies have talked about wanting to offer more in store services. And so seeing Studs as kind of the premium ear piercing brand that's embedded inside Ulta could be really interesting. And I think last we have to take a look is Warby Parker, which is an early comp they had. They've got a really strong presence in retail and obviously have digitally native roots. And so there's just a lot of similarities there. In founding, they did about $770 million in 2024, and so, you know, not nearly as big. And I don't know if this makes as much of a bet to go into earrings as it would to continue with eyewear, but there's a lot there and I think they've got their options is kind of what I take away.

Yeah, yeah. I mean, I think Warby Parker would be an interesting fit. Right. Because you think about the business model, you think about the distribution. You know, Warby Parker does a ton obviously in store as well as online. It's kind of a similar type of business in some sense. You know, within a Warby Parker store, you have people that obviously help you make sure you have the right fit of glasses. And I think with Studs, you have people that are helping you pierce your ears. Right. So I think it's an interesting fit there. As I thought about what their exit looks like, but it's definitely a company I'm going to keep an eye on. I mean, if you were Studs, what would you do to prepare?

Yeah. Again, I think the key thing here is that businesses are bought, they're never sold. It's. And so you need to have a clear vision. You need to be operating a profitable business doing all those fundamentals that I know Anna and her team have done from day one. And so that's kind of the first piece that's there. But the next thing is I would try to get to know all of these potential acquirers and see if there are opportunities to partner. Right. Maybe, maybe there's a world where Lovisa is willing to do a open some stores, right? Or maybe they've got stores that they want to call their portfolio. Maybe there's something there that those teams start to work together. I would certainly try to partner with an Alta or Sephora to say, hey, can we trial offering services inside of an Alta? That seems like a great idea. Like, let's go do that. You know, Warby Parker I think is interesting, but I think it's probably too much of a reach. But I would at least have those conversations and say, you know, if we can't have something in your store, can we try some sort of co marketing campaign? Maybe we look at putting our studios next to your Warby Parker stores just to test it and see what's there. So I think the key thing here is that typically you don't really end up in a situation where someone who you've never met calls you up and says, hey, I want to give you $300 million for your company. Usually it's something where these relationships have been formed, these conversations have been floated and you're kind of feeling each other out for a period of years in many cases. And so I think they need to continue doing what they're doing, ensure that they're profitable, ensure that they are adapting to kind of the landscape that's going on today. But I would potentially look at getting into other, other jewelry. Right. Beyond just earrings. It wouldn't be that difficult to start offering necklaces, rings, bracelets, things like that that can kind of mix and match and go together. But yeah, I think there's a lot there. But anything that comes to mind for you?

Yeah, I mean, I just love the founding story. I think operationally they have a lot going on, right. They're opening physical stores, they have to distribute their product to these physical stores. The supply chain, I think is really interesting. You know, this isn't your traditional E commerce brand that we typically cover on E Commerce on Tap. And I really enjoyed that. You know, I think in general, most brands today need to, you know, shift their focus and, and create unique strategies. And so I thought from even a partnership standpoint, what they do with these food collaborations was great. I really, really enjoyed this story and appreciate everyone tuning in to this episode of E Commerce on Tap brought to you by sourcefine Isba. Please like subscribe Leave a comment we want to hear what you think. And if there's a brand you want us to cover, let Aaron and I know on Twitter or LinkedIn, we always love kind of diving into different stories that we haven't heard before and doing as much research we can to find unique takes. So, studs, this was awesome. Really appreciate everyone tuning in, and thanks again.