BFCM Supply Chain Playbook: How to Prep for Peak Season Success

Foreign welcome to Supply Chain Moves, the podcast where we explore the latest strategies, insights and innovations shaping the world of E commerce or DTC brands. Today, as we're on the brink of holiday season, we're discussing Black Friday and Cyber Monday preparations, the biggest shopping event of the year and the crucial time for brands of all sizes, of course. Joining us today is Greg Cary, the CEO of Section 118, a brand known for its unique music inspired apparel. And Greg brings years of experience in the EE Commerce and DTC Space with hands on experience in navigating the high stakes world of holiday sales. As a leader who's transformed section 118 into a standout brand in a crowded market, Greg's insights are very helpful, especially for new business owners and brands looking to maximize their success this bfcm. And in this episode, we'll explore not only the essential steps of for BFCM preparation, but also how to align and empower your team to make it all happen. So if you're aiming to make this holiday season your best yet, get ready to learn from an industry pro. Greg. So let's jump in. Hello Greg, how are you? And how's actually how, how ready are you with a bfcm?

We're very ready. I mean we're very ready because we have a kick ass team that is on the ball and you know, and the thing that I kind of take away though, or the thing if I, if I were to give some guidance which is probably more appropriate for next year, is you want to be, you want to proactively prepare for Black Friday Cyber Monday so that you can be reactive during Black Friday Cyber Monday. Right. And I'm kind of expend extending Black Friday Cyber Monday to kind of entail the entire holiday shopping season. Right? But your preparedness, your proactive preparedness of having your marketing calendar of understanding what your discounts are, understanding what your campaigns are, what you know, what your inventory target, you know, your inventory levels are. Your target and inventory levels are. You want to have all that, that ready to go so that you become in the driver's seat just kind of pulling levers, say okay, go and watch, go and watch, right?

Yeah, yeah.

And that because what you don't have is the details around the response, right? You might be able to, and what I mean by that is you don't, you might be able to, you know, project your top line revenue, top line sales, but you might know what, might not know what products are going to like hit more than others, right. And so you know, after, and you're pretty Locked in a Black Friday Cyber Monday. But after like that next two week period where the final shopping is happening, that's when you're kind of, you know, you, you're still proactively prepared. You know, 12 days of Christmas, like whatever, you're still hammering the customers, but you want to be able to be able to tweak and be like, wow, we're very heavy on this. Let's push a stronger, you know, stronger discount for this particular product so that we can move it. Because part of what you're doing is also trying to empty your inventory during this mass holiday season as much as possible. You know, given that, that, you know, things drop dramatically in, in January and February. So the big theme for me is like, you know, extreme preparedness and proactiveness so that you can sit in the driver's seat, make your moves, execute your plan and then react as necessary so that you can tweak to get the final results. But you know, one other key principle that I keep in mind is do not get seduced by top line sales only. Everyone is kind of in. We all have different businesses and adopting a narrative of another business that's doing nine figures may not work for you. Right. They have maybe more leverage on their operating expenses than you do if you're doing 10 million. And so do not lose focus on the principles. Right. You, yes, this is a period where many Companies are doing 30%, 40% of their annual sales during this two month period. Right. But you want to make sure that it's, that, you know, that it's 30 to 40% of your contribution margin as well. And so don't get seduced by the top line sales and try to hit record breaking numbers if you're not bringing contribution dollars into the business. So just in summary, like, you know, be proactively prepared so that you can react and then don't lose sight of the fundamentals and play your own script that drives contribution dollars.

Yeah, yeah. Since we're talking about preparations and being proactive, Greg, I coming from the space of supply chain experience, I know that three, four months we are already preparing for Black Friday Cyber Monday. But not coming from the curiosity of not being an expert in marketing. Like which comes first in terms of preparation, the marketing or the supply chain?

Yeah, it's for us, you know, in a company our size, you, there's a lot of like, you know, cross training of roles. Right. Our, our head of marketing plays a big role in kind of directing the assortment for the upcoming season. Right. And so we, you know, we'll collaborate and look at last year, right. We'll look at last year as our kind of template to guide the category mix. Right. So what, what percent of our sales are going to be sweaters and hoodies? What percent are going to be socks? What percent are going to be robes? We'll look at that category mix as this kind of, you know, kind of template for ordering. And then we will make growth assumptions based on, you know, the trajectory that we've, we've seen in the year, you know, leading up to this. Right. So we'll, for us, we'll look at the two peaks in the year, Father's Day and holidays. We'll look at Father's Day and, and see, okay, we, we performed at this level year over year. So let's make those same growth assumptions for Black Friday Cyber Monday and order our if top line inventory, you know, value should kind of match what is required to deliver that revenue. And then below that is okay, we got a top line revenue, let's fill in the blanks with the appropriate category mix. And then within the category mix we making our assortment decisions. And so you know, so it, it's, it's, it is this, this kind of dance. Just because we're a small team, we like working with each other, you know, having calls where the demand planners coming in, the head of marketing's coming in our, you know, our sourcing supply chain manager all coming in and we're kind of, we're collaborating on, you know, what are the top line numbers? What are those SKUs giving feedback like, you know, let's, let's tweak this a bit here. And there's always an element of, you know, it's data driven with an element of gut feel, you know.

Got it. Also just, just now I remember while during the selling season marketing is still going to be very active making sure you've mentioned about pushing the sales while supply chain at that moment is already preparing for CNY holidays if proper products are coming from Asia. So yeah. And for the talking about inventory levels, Greg, which is a main topic during Black Friday Cyber Monday, how do you recommend DTC brands to anticipate and manage inventory levels to avoid stock out or excess inventory for limited edition or winter types of products for bfcm.

Yeah and this is something, this is something that we continue to think about, try and do our best on that. You know, that isn't just a constant learning. It's like this constant learning of actually if, you know, in the time that I have available and the learning that I have under my belt. It's constant learning with the acceptance that oh man, you're never going to get this right. And I don't think that's uncommon. Right. You know, luxury brands are recycling, you know, throwing stuff away. Every brand is, is doing major discounts, you know, to support this, you know, just that buying pattern of customers and discount expectations. And so you do your best and you continue to learn. The general kind of rule that we've had in the past is we have anywhere between like, you know, whatever our sales projection is, we have about, you know, the inventory, the retail inventory of that is about 150% of what our projections are. You know, and it's tough to, you know, you can't be 100% because you don't know how sizes are going to necessarily, you know, and you do your best but like, you know, there's usually some smalls and triple xls lingering out there. You're waiting to find that person, timing it up. So, and all that stuff over, you know, dozens and dozens of SKUs, you know, just kind of adds up. Right. So it's, the takeaway for me is like, you know, be thoughtful, always be thoughtful about it and inform so that you build that muscle of knowing how to think about it while accepting that this is a, this is a process and practice that doesn't have a right answer. But the work is doing the thoughtful, thoughtful work and thinking about it so that you fine tune your intuition and intimacy with the inventory.

And Greg, during that selling period, if the inventory planner or anyone from the company is checking the sales daily, you can still change the marketing strategy to push for other products. Is, is that is are you flexible to doing that? Making sure that we, we push those who are products that are for Black Friday, Cyber Monday and then adjust based on sales. Can you do that? Flexibility?

Yeah. I mean, and that talks to like the reactive, you know, in, in my, you know, four or five year history. Again, you know, we're a 15 person team. Our corporate intelligence is our collective experience and the experience of experience kind of aligned within this brand. And so by being prepared, you're able to react. Right. If you're not prepared and you're just constantly in react mode, you're now it's, that's way too chaotic. Right. The preppered preparedness gives you the foundation to have all the tools available and you may, you know, you may. So you have the creative assets, you've done the work that emails are set up, you know, the segmentation, the thoughtfulness around the Segmentation set up. The, the, the direct mailer is, is kind of ready to go. But you might see that while we've really moved this sweater and there's, you know, we're going to replace this with another one, you may find that, you know, certain things just aren't moving and you need them to move because you don't want to sit on them. So you're going to, you know, you're going to cut the price by another 20%. Right. So we always try to think that we don't know what the customer will buy. Right. We'll always learn. But you take an approach from merchandising and a philosophy that kind of says the customer will buy what we want them to buy. You know, so you got to kind of go out with that approach and then continuously iterate based on the results you're seeing.

Yeah. And I feel like, I feel like for business owners in marketing during the selling season, they're just sitting and waiting for the sales to come in. Now I'm realizing that a lot your team members should be able to really check everyday sales inventory so that the adjustment and flexibility can, can happen during that selling period. So it's still a working, working season even during that period of selling.

Yeah, absolutely. And you bring up another good point. Like when you're, you have, you allocate a certain amount of time for observation. Right. And then it's critical that some of your work is literally just moving skus around in a collection page. Right. Because oh wow, let's. These ones, these ones are almost sold out. Let's, let's give some air time to some other ones. Let's move, move those up. Right. And I was talking to, you know what, someone on our marketing team the other day and we talked about this explicit like, like we need to add. Allocate time for observation. And, and you can do that if you're prepared. If you're in react mode, you're constantly doing the work in real time, trying to scramble to get together. And so you're not able to really observe, internalize and make the right decision. You know, there's no time to, to think. And I think that's kind of the, you know, I find that, that. And there's always like, because the numbers are so big, small tweaks make a big difference. Right. So pushing, you know, pushing this product instead of another product and moving this collection page around to represent, you know, where our inventory levels around those things over millions of dollars make make a difference.

Right. You've mentioned earlier that this is still a year on year learning experience for, for section 118, even if it's four or five years already. What is the, what are the common mistakes you've observed new brands make when planning for bfcm and, and, or probably if you've had that mistake that you've learned from, what is the number one that you think should be avoided?

Well, I think especially, especially in these times where the, the cost of, of capital, the cost of debt is expensive. Right. You'll, you'll take a different approach and you, I imagine, you know, most brands are leveraging some type of debt in order to purchase the inventory for the holiday season. And so the, and I think it's also a period where you want to, you know, you'd rather sell out than be overly, you know, plentiful. Right. Because the alternative is that you're, you end the year with a ton of inventory that then you can't move and you know, you got a big write off in your books that changes what your income statement looks like. That may change the bank's perception of what, what it looks like. And so I, you really want to, you have to have a extreme level of confidence of what your sales can do and not be overly driven by optimism. Now a different sized company at different levels can take different risks and push different level levers, but you need to know the stage that you're at, the cost of capital, what the risks are and order appropriately so that you can knock it out of the park while not take it, while reducing risk.

Greg, if it's okay to mention for the purpose of having a reference, what annual revenue are you in right now so that the listeners have an idea.

Yeah, we're around 8 billion.

And balancing marketing efforts between new customers and re engagement of existing customers for major sales events. What is your best practices here?

Your philosophy around this starts with really understanding the LTV and cohort analysis of your customer. And so there's products like lifetimely where you can connect your Shopify data, your marketing data and understand that new customers by cohort by months, what is their, you know, return rate over the first 90 days or the first, you know, 12 months. And if you're lucky enough in, you know, apparel space to have customers that come back, you know, what's the rate that they're coming back after two years? Right. And so you use these returning customers to really drive the majority of your, your profit because you've already acquired it. And so you leverage all of your retention tools, email, sms, you know, direct mailers, you left your retention tools, which are much lower cost relative to the database that you have and relative to marketing to drive, you know, profitable to drive contribution margin from that, that cohort. On the new customer approach, it varies over the, over the course of the calendar, but as you lead up into the holidays, you may be acquiring new customers. You know, there's two kind of acquisition mindsets of customers leading up to the holidays. One is you want a new actual customer, right? And so if you look at all the, we take all of your marketing spend and just say, okay, all that marketing spend, while it does bring back returning customers, we're going to calculate it as though what's its return on new customers, right? And so we're looking at those new customers and seeing okay, what is the acquisition cost of this cohort for all this marketing spend, how many new customers does it bring in? And we know what the trend of lifetime value is through a pull forward analysis. Right? So we, you get that, but then alongside that as you lead up to, you're also paying attention to how many emails are we getting, how many SMS are we getting, how many app downloads are we getting? Right? So you're building your database of potential new customers that are in this window shopping period that you hope to convert during, during the holidays, right? So there's kind of these three buckets of, you know, your returning customers, your new customers leading up to the holidays and then your new leads of emails, SMS that you're getting and what are you going to do to convert those? And you ideally, you know, you just want to be looking at that, you know, the cohort of new customers that you're acquiring and you know, at the very least you want to be breaking even. But if you can be profitable on first purchase, that's the ideal situation. And we, you know, it kind of ebbs and flows over, over a calendar. Like when is that new customer, first person, first purchase profitable? It depends on kind of the buying pattern within apparel. It depends on like the time of the season, the buying pattern. And so a bit of a nuanced answer, but if the there's any apparel brands out there that they should know what I'm talking about.

Yeah, yeah. And to keep, that's a lot. And to keep your team focused and motivated during this intense execution of bfcm, what are your strategies to make sure that everyone is focused?

I mean, we got a great team. The better question might be like, what does my team do to make sure I'm focused on.

Yeah.

You laugh as, as though you may know from experience that, that is some truth. I tell. One thing that we've been, you know, I've been just so fortunate with is that we have, we have an awesome team. A team that like, is incredibly competent, has an, like, I think a superior skill set when it comes to just like, you know, the, you know, the, the average skill set within the industry and our, our space. And so that makes everything easier. You know, that makes everything easier. But what I try to do, it's less about focus and it's more about just simple. A simple framework for thinking. I personally, you know, can only manage if I can really like, just understand something and communicate it. And the more complicated I make it in my own head like that, I just. Then I don't understand it. Right. And so I spend a fair amount of time with everything that we're doing around. Okay, what are, what are the principles of how we think about supply chain? What are the principles of how we think about marketing? And I try, you know, and I, I'm thoughtful about what are the principles? How do I communicate that? And you know, because I think simple. Simple is smooth, smooth is momentum. Momentum is fast. Right. And we can ensure alignment. So as a leader, I think you want to constantly be thinking about how can you simplify your business and, and then outsource that, that thinking and that, you know, creativity and the improv to your team within those, that framework. And, and also you have to, um, you have to be okay with being redundant. Yeah, I say the same stuff over and over. Part of it's. I mean, it's all on, on, on purpose, but it's also for me to like, reinforce like just my own comfort level. Just be like, all right, is this making sense? It's like, let's apply these principles to the story of the, you know, the context of today. So.

All right. And diving deeper a little bit in under supply chain. Greg, how important is it to have a contingency plan or if you can cite an example, in place for potential supply chain disruptions during bfcm.

I can't say that this is. Was a thoughtful kind of contingency design as much as it is the scenario that we create for ourselves has enabled options and contingency and given us that benefit. It has downsides to it as well. But we have, we have multiple locations of where we can ship out from.

Yeah.

You know, that creates some benefit. We split shipments from like, air and. Right. So we're splitting it. So if something, you know, over the course of all these pose. And we're not Big enough where we're sending like just a couple of containers over, it's all broken small orders. And so yeah, I would say we have multiple locations which multiple locations for warehouses does create some, that creates some complexity that has a cost to it as well. But there's some value of contingency and split, split, split orders. You know again there's additional cost there as well, but also benefit and then there's just like the longer kind of. Which is a bit different question for you but like how do we think about contingency in the supply chain overall? And right now you know the majority of our manufacturing is in China and just being thoughtful about you going into different markets, testing that, creating contingency there as well. So that's something that should never be, always be sourcing. I feel like.

Yeah, I think for me our biggest contingency plan this year is having a warehouse in China and having a partner or a vendor partner that can produce small quantity in a very quick lead time. And so if that's 10, 10 days of producing a certain product and we can deliver it to Shenzhen which is where your warehouse is, that's slashing 45 days of via C and then the customer can receive your product in 5, 7 days, 9 days which is still acceptable for the season. So I think it's a combination of the strength of your supply chain. Having partner in port as having vendors that are reliable in terms of lead time and vendors that can produce 100 pieces. Kathleen, when we visited some of your vendors in China we have some vendors that has MOQ of 30. 30 pieces. 50 pieces. So we've unlocked that flexibility with your partner vendors and it's so easy to request for, for a very rushed order.

That is a great point and that's almost like you know, it's a great case for portal is like having a relationship with portless as a contingency strategy. Yeah is, is helpful because you know if, if we have a gangbuster like kick ass holiday season where our inventory moves at a level we didn't anticipate and then we're really hurting, you know for January and February if we have to rely on our, our you know, us based modes of getting, you know, getting everything here we, you know that that's risky. Right. So come beginning of December then realized.

Like, like having the partner like portless, you're, you're not just slashing the 45 days shipment but also in terms of cash flow support to your brand. I remember Greg, during the time that we're working with Corporate supply chain. We are a supply chain under one corporation. We can, if there's a rush order and it's really like this season, two like the pest season, selling season, we even go to our manufacturer and ask them to produce right there and then then if there are other products that will, that is currently being produced, then we even find an alternative manufacturer to do it right there then. So it's like we, we can produce a product within five days if it's really, really urgent and if, and that's something that is also possible for dtc. A lot of DTC brands think that they are tied with the lead time of 30 to 45 days that their suppliers give them. That's of course the lead time that they give you from start of ordering the raw materials up to finishing the production. But having a very flexible vendor and partner, they have different partners of manufacturers within the village or within the subdivision. Like they can, they have a competitor a few blocks away but during rush times they can leverage that third party. And so making sure we didn't know this is also possible until we visited China and see their warehouses, their partners and their capabilities to produce. So I think as long as you have a clear instructions to your team, to your vendors, rush and urgent request if there's a need to produce and then using a partner like Portless is very helpful as a contingency.

That's actually a really good point. And as I listen to you speak over the course of building a company, you're collecting all these learnings and philosophies and these, the content within the community has always been very meta focused and then contribution margin focused and now people are starting to think about supply chain more. But one thing for a brand, during certain periods the name of the game is growth. During certain periods the name of the game is survival. There's so many inputs that influence that. Whether it's the, you know, the debt markets or you know, customer demand or, and having flexibility within your supply chain is like, is a defensive move that you need to like think about. It might not show up as like top line, you know, revenue or growth but like knowing when your, you know, inventories dip and you need to move quickly like what levers do you have to kind of pull that Because a slow, a slow month or poor inventory management is like, can be like you know, devastating right on, you know, on, on other side too much or, or too little, you might, too little could put you in a period of a two month drought with like no product. Right? So having these tools at Your disposal. There's almost like just, you know, I don't know if MOVE has like a wellness checklist or something, but I can see, you know, I can see all these things that I've learned from you over the, the year. Just showing up on that and be like, you know, what is your, you know, what is your strategy for when you just run out of inventory? You know, you got to accelerate certain things like having all these contingency plans. It's. And those things are tough for like a small entrepreneur to kind of think about because it's like, you know, insurance. It's, you know, you're paying for it and you may never need it. Right.

Yeah.

But, but if you ever need it, it could be, it could. That decision to have it is the decision. It is the, you know, the tool that then becomes the sole reason of which you're able to survive.

Yeah.

Right. And so that, that's a. Yeah, that's a good one.

Yeah. I think there's, there are, like, we're, I've mentioned this in Andrew's podcast before when we were the guest. Like, it's level one and then there are secrets in level two, Level three. I. And if you're. It's, it's. I'm excited to reach that level because DDC brands is reaching the level where they need more supply chain support. And so that's something that we can, we can do. And I'm, I'm proud that session 119 team members right now is in the forefront of that leadership and expertise.

That's a great. But by the way, that's like a great, that would be a great lead magnet for Move. Like, you know, level.

What's.

Here's level one, Level two, Level three, like, you know, what, what level is your supply chain at? And they go through like a, you know, Q and A survey and then we get all the results and say, you're level one. Here's. Here's your next steps to like, get to level two.

Yeah. So, so thank you for, thank you for that idea. That's really, it's a good idea jumping from supply chain to customer service. I'm just curious, Greg, if you're ramping up customer service at this point, especially when I was working with section 118, there's no additional team members, but do you have one right now? It's going to be like seasonal customer service to support.

Yeah, we have two. We're not adding any. We have the bandwidth to absorb that often. A lot of the customer service kind of Comes in January as well. Just dealing with like, you know, returns and, and things like that. But the tools are improving dramatically. So the customer service agents can get more leverage than they used to with, you know, support of automations and, and AI. And so those things help to give more leverage to, to that team. And so the, the need to ramp up is not, you know, is not, not necessary for us.

All right, last question, Greg. For new brands looking to scale, what advice do you have on building a team that can handle the demands of high traffic periods like the fcm?

I think the key thing is like leaning into building a team, first of all, right. And releasing yourself as a leader from having to do anything. And the execution that you as a leader unleash is an empowered team with a simple framework of principled thinking to, you know, empower them to get that work done. And so as a leader, you, you know, you transform. You know, if you're doing so 5 million or whatever, you have to transform from doing the work to like leading the work. And the, the, the point at which you can do that, the more leverage you get to then think about priorities, think about the appropriate growth measures that you want to use to track. Think about the health of the business and put yourself in this executive function role where the team is feeding you with the knowledge of the business. Build your intuition to lead. And all this, this point of when a leader can be in that mode accelerates when you can do it offshore. If you staff it in the US it's just going to, you're going to, you would have to wait longer to have the capital required, support that staff. If you staff offshore, you can have that access to that talent quicker. And so I think you should be optimizing. You know what, what I fell into during COVID was this, this mode of, I call it like accelerated delegation. That was because of the additional parenting responsibilities of kids at home and realizing that, wow, I'm a bottleneck everywhere if I'm doing stuff, if I'm, if I'm, if I have to do anything, I'm a bottleneck. And so delegate, you know, principle thinking, right? That's a key part. Like what are the principles and values, right? So you need to understand your business, the core functions. And what's the, what's the principle? Thinking that will be the conduit between you and how you think about the business and the team that executes that. And that kind of becomes the bridge to a team that is a reflection of you, someone's, someone else's principles on Supply chain or marketing might be different than mine because they're a different person. And so you've got to design the team according to who you are, build a company according to who you are and what strengths you, you have with an awareness to all that. And then, you know, unleash them. You know, unleash them so that those principles have key metrics of how that they're measured and you can constantly keep tabs on where you are and the performance of all that. The thing with the, the thing that e commerce, you know, for a small business owner without a lot of resources as you're on that path to scaling, it's a complicated business. Like, you know, it's, it's very different than like a software service, you know, tech company or whatever. You got, you have inventory, you have cash flow challenges, you have, you know, you have design, you have like marketing spend, you have, you know, cohort analysis of your, your, you know, and the lifetime value of your, your customer cohorts. Like, I mean, there's customer service, there's, there's this brand, there's product quality, there's supply chain and logistics. Like, it's, it's so many functions. If you're doing. It's a $5 million business. This, both functions all still exist. Yeah, right. And so you got to build, build your team based on the leader that you know yourself to be, which requires a lot of work and then like create that, that kind of scalable conduit. And for me, it's, it's really about simplifying as much as possible so that I can get the awareness to know if and how we're on track. You know, and that story changes. Like I can speak on a path to like, you know, $10 million. That story changes if you're at a different level, of course, and there's new learnings ahead. You know, for me, as a leader that I've not, you know, I'm not equipped to talk about, I haven't experienced that those learnings are pain yet. But I feel like this, this principal way of thinking should help me navigate it.

Greg, I wanted to piggyback on what you've said about delegation because I myself is involved or have been talking to brands that we are supporting in move supply chain. And what I noticed as the best practice or good outcomes is when the leader is ready to delegate. You're right that sometimes the owner is. The supply chain might be a different case with you. So that the letting go part is harder than what I've experienced with you like when I joined your company, you've allowed me to set the processes and take over the whole supply chain. And then there are clients who are having a very hard time letting go of that process. And then what we see there is all the time, if you're not ready to delegate, the working together is not going to be efficient and effective. And it's more of like wasting the resources that you're spending on if you're not ready to delegate and focus on growing the business. So I'm glad that our team, I'm not saying that you don't, you don't, you don't work on there or you don't micromanage, but I know that you have entrusted the team to do their expertise and we're very happy for that. And thank you so much, Greg. That brings us to the end of today's episode of Supply Chain Moves. We hope that you've gained for the listeners to create great insights from Greg on how to prepare E Commerce or DTC brands for Black Friday, Cyber Monday and how to lead your team effectively to bring those plans to life. A big thank you Greg for sharing your strategies, experiences, advice for making the most out of the crucial sales period. And your perspective has shown us that success during BFCM doesn't just come from having a solid plan, but but from having a team that's aligned, motivated and ready to tackle the challenge if you're a new brand or even a seasoned seller. We hope Greg's insight gives you the inspiration to step up your BFCM game. And remember, each episode of Supply Chain Moves is here to help you navigate the ever changing world of E Commerce with confidence. Thank you for listening. Thank you Greg.

Thank you, Lara. This is great. Appreciate it. As always.