Summary
In this episode of The Ecommerce Finance Podcast, Stephen Brown interviews Ben Hussey, co-CEO of Katana, discussing the complexities of manufacturing and inventory management in the current ecommerce landscape. They explore the challenges posed by rising costs, supply chain disruptions, and the importance of real-time data for effective decision-making.
Ben shares insights from his extensive experience in ecommerce, highlighting the shift towards hybrid business models and the necessity for brands to adapt to changing market conditions. The conversation emphasizes the need for strategic planning and the value of technology in navigating the evolving ecommerce environment.
Takeaways
- Cost of goods sold increased dramatically due to future buying.
- Real-time data is crucial for effective inventory management.
- Businesses need to diversify their supplier base to mitigate risks.
- Planning and forecasting demand accurately is essential.
- The shift to hybrid business models is becoming more common.
- Companies that adapt quickly to changes are more likely to succeed.
- Inventory management requires active engagement and oversight.
- Technology has made it easier for small businesses to thrive.
- Understanding true landed costs is vital for pricing strategies.
- The e-commerce landscape is evolving, requiring new skills and strategies.
What We Cover:
- 00:00 Introduction to Ecommerce and Manufacturing Challenges
- 02:51 Ben Hussey’s Journey in Ecommerce
- 05:29 State of Manufacturing and Inventory Management
- 08:37 Navigating Cost Drivers in Manufacturing
- 11:09 Trends in Supply Chain and Manufacturing Decisions
- 13:58 Global Disruptions and Market Responses
- 16:53 Shifts in Manufacturing Strategies and Business Models
- 20:23 Impact of Regulatory Changes on Ecommerce
- 22:57 Common Mistakes in Inventory Management
- 24:55 Ecommerce Evolution: Skills vs. Arbitrage
- 27:11 Key Differentiators for Business Success
- 29:45 The Importance of Active Management
- 32:17 Navigating Challenges in Consumer Products
- 36:52 Opportunities in a Changing Market
- 39:58 Recommendations for Future Success
Guest Information
- Katanamrp.com
- Why Choose Katana?
- Ben Hussey – Find him on LinkedIn
Ben Hussey is a growth-focused leader with extensive experience driving business transformation through sales, product innovation, and operational excellence. He has led high-performing teams across eCommerce, inventory, and order management, and spent his career in SaaS leadership roles as a client and vendor. Ben is passionate about using the power of software to deliver customer value and transform businesses. Known as an innovative problem solver and team builder, he’s a trusted partner in driving long-term success.
Work with LedgerGurus
If you need help with your ecommerce accounting, reach out to us at LedgerGurus. We are an ecommerce-specialized accounting firm, and we can handle all your numbers so you can focus on growing your business.
Transcript
Stephen Brown (00:00)
Welcome to the Ecommerce Finance Podcast. I’m Stephen Brown, your host from LedgerGurus. With me have Ben Hussey, the co-CEO of Katana. And we’re going to talk about manufacturing and inventory and some of the costs and challenges related to all that. Ben, thanks for joining me.
Ben Hussey (00:14)
Thank you for having me. It’s a pleasure to be here.
Stephen Brown (00:17)
Ben, can tell that you’re, and I looked at your profile, you’re from the UK, is that correct?
Ben Hussey (00:22)
Yeah, that’s right. I came from the UK. I moved up to Canada about 20 years ago now, and I’ve been based in Toronto ever since.
Stephen Brown (00:30)
Awesome. Tell me about your journey to ecommerce. How long have you been around ecommerce? What have you done?
Ben Hussey (00:36)
Yeah, completed Masters in Business here in Canada, I started working for one of the big Canadian telcos. And kind of by luck or happenstance, not sure which was, but ended up in the team that ran the web content for the retail locations. And a lot of what we were doing was actually diverting calls away from the call center by automating
online transactions for the source. And that was right kind of at the beginning of the ecommerce boom. And so I was there for about six years running various ecommerce related, you know, projects, build outs, teams. And then one day someone I knew called me up and said, I think you’d be good at ecommerce sales. And so I joined a company then called Hybris later acquired by SAP and spent the next few years as a
an enterprise software salesperson selling ecommerce with various small, medium, and huge companies all across North America. And I did that at a few different companies as a revenue leader over the years. And then as part of that, obviously, ecommerce, auto management, inventory, all part of that puzzle. So all in all, I’ve been doing that for 15, 20 years now.
Stephen Brown (01:48)
Awesome. And co-CEO, I’m always fascinated when I meet a co-CEO. Tell me about how the journey to Katana and co-CEO.
Ben Hussey (01:57)
Yeah, that’s a great question. So I joined Katana two years ago as the Chief Revenue Officer, so in charge of the sales side of things, obviously the revenue. And over the course of the next year, we made some changes, we made some great progress. The company’s been doing well, we’ve been growing successfully. And as part of that journey, one of the things we realized, and our biggest market is North America, 60 % of our customers are here.
And so having an executive over here and seemed the right thing to do, being much closer to our customers. Most of our commercial support teams are over here as well. And so that was part of the decision. And the other part of the decision was just the stage of the company we’re at. We’ve got investors that require kind of ongoing support management and so forth. And so kind of they just ended up being this natural.
split my responsibility where I could focus on the day-to-day running of the business and all the different aspects of that. And then my co-CEO Christian has been focusing more on the overall business strategy, funding, financing, that side of the house. It actually ended up being quite a kind of natural division of responsibility.
Stephen Brown (03:05)
Awesome. Well, Katana, you guys have done a lot, particularly around inventory and manufacturing, which is why I want to have this conversation. It’s a really interesting time to be having it because. Sorry, on behalf of Americans who are if you’re an ecommerce, it’s hard to not be like it sucks for all of us. ⁓ Anybody Anybody they talk to that’s like.
feels like the changes with the tariffs here in the US aren’t a big deal. It’s like, well, you’re clearly not in consumer products because it’s been really difficult. So I’m assuming you have a whole lot of perspective with your customers on manufacturing. Maybe this should kind of take a state of manufacturing. Historically, think consumer products businesses have manufactured in Asia, unless you had a very distinct regional product.
Now it feels like everything’s going What are you guys seeing around manufacturing as it relates to ecommerce, consumer products, businesses?
Ben Hussey (03:56)
Well, yeah, the craziness, the volatility. What we have seen is really coming, obviously, through the election last year, uncertainty and volatility have been the big drivers. And what that’s really meant for manufacturers is, in some cases, a lack of clarity as to what they should be doing. And what we’ve seen is some actually some really big swings. So behaviors have shifted dramatically.
Couple of examples. Last year in Q4, cost of goods sold across our customer base, which is about one and a half thousand customers, that cost of goods sold went up 103 % in the quarter, which is wild, right? I mean, you think of that and it’s just, that’s mind blowing. So we kind of picked into why and, you know, try to was happening. There was a couple of things going on. So one of the big things that was going on was future buying.
Stephen Brown (04:31)
my gosh.
Ben Hussey (04:44)
Because the businesses expected tariffs to kick in, lots of them were future buying. So in Q4, the automotive sector purchased one year’s worth of inventory ahead of time. They bought it all in that year. So, you know, that’s a pretty big swing in how you normally do things. And that was just one sector. We saw in Q1, Q2 this year, food and You look at food and beverage, it’s an industry obviously consumable.
Stephen Brown (04:54)
all in that year. you know, that’s a pretty big, deal. And that’s in a sense, of Q1 to Q2 food and know, food and beverage is essentially, obviously, super-vol,
it is very important. And so, sort of, typically, you don’t want to…
Ben Hussey (05:08)
It’s perishable and so someone typically you don’t want to have
inventory on the shelves, right? You don’t want to be left with anything because you’ve got to throw it away for sure. But if you do a beverage in April, there was a record order volume. It went up 46 % over Q1 this year. Why is that? Well, it was May that the tariffs were going to kick in that would affect that segment. And so in April,
They actually did a lot of demand forecasting. They were looking ahead to Q2, Q3, and they figured, hey, it’s going to be pretty good. We’re going to have lots of orders. It is a growing segment. And so in April, they all put money on the table and bought up a huge amount of inventory. Completely different in some of like timber or cosmetics that have kind of seen the opposite. And so can apply these big picture statements we saw overall price increases in about
20 % from January to February in raw materials. From January to March, was almost 50 % in raw material costs increase. And so you get the big picture numbers which are frightening, but then when you dig in some of these like individual segments, it becomes really real. Like as a small business, a medium sized business, any business actually, managing that kind of bigger difference in things, that volatility is really tough. And I think, you for me, that’s been one of the biggest storylines is just people kind of sitting there going,
Stephen Brown (06:00)
I was 15 % of property owner. So you get a big picture of this, is frightening. think digging some of these individual segments becomes really real. As a small business, there’s many different types. Managing that is a big difference to things that are too easy to be taught. I think, know, we are seeing one of biggest storylines is just people kind of saying,
oh,
Ben Hussey (06:23)
How do we do this? Do we need have multiple suppliers instead of just having one? That used to be an optionality premium. I very much see it now as an optionality privilege because you might lose a bit of margin if you’re buying across different suppliers, but you can probably save a ton of money by not being understocked. Or actually, you’re understocked and you have to go and buy an emergency purchase at a much higher price.
Stephen Brown (06:42)
Mm-hmm.
Ben Hussey (06:48)
Kind of managing some of those things in real time has been one of the big shifts we’ve seen.
Stephen Brown (06:53)
That’s some incredible numbers you threw around. I mean, one of the things that I was thinking about as you were talking about things, even if we were manufacturing here in the United States, you still have to get materials, right? And materials, unless they’re coming domestically, oftentimes, the way the global supply chains work, you’re still going to have to source
somewhere and lot of times you’re sourcing internationally and you’re still going to get impacted. And the narrative that drives me crazy is like, oh, just manufacturing the US. It’s like, well, I need a manufacturer. I need a source, everything to not be impacted by tariffs.
Ben Hussey (07:16)
Mm-hmm. Yeah.
Yeah, It’s not just make it right you I mean, that’s labor shortage in in manufacturing in the US right there has been for a long time of the right type of skilled labor. Presumably that problem only gets worse with increased, demand on that labor pool. And then, depending what business you’re in, you know, you’ve got to buy machinery, big lead time, you’re looking for a plant or a factory, big lead times on those.
Stephen Brown (07:32)
Mm-hmm.
Ben Hussey (07:51)
massive investments that people have to make. I it’s a huge amount of cost. And as I’m sure, you union listeners obviously know, if you’re making in-house, it’s very expensive, very high fixed costs. You don’t get much flexibility. You’ve really got to push the volume through on a constant basis. But at the same time in the market, you’re demand drop by 20 % in the first half of the year. So how do you plan for manufacturing in the country when the demand’s dropping?
Stephen Brown (08:15)
Yeah.
Ben Hussey (08:16)
they’re contradictions, right? So normally you would say, well, in volatility, I’m going to outsource because sure, my variable cost might be a bit higher, but I much less risk, have much more flexibility, I can scale up and down as I need to. Yeah, you can’t do that if you’re manufacturing a house. And yeah, like you said, I mean, you can’t just turn it on. It’s not just a switch, if the thing is even available here, right? And even then, you know, we saw, in UK, think it was…
Stephen Brown (08:39)
Yeah.
Ben Hussey (08:43)
They weren’t hit so much by the price changes in the UK, it was supply chain delays. The timelines for shipments went up by 18 or 20 % in the first quarter.
Stephen Brown (08:53)
Well, we’re probably preaching to the choir here because if they’re listening to this podcast, they’re already in this world and they’re just like, yeah, tell me about it. Let’s shift gears. We’re dealing with a lot of turbulence. What are some of the things that you’ve seen with your customers in this industry, manufacturing decisions that
drive better financial outcomes as it pertains to and whatnot.
Ben Hussey (09:14)
Yeah, that’s a good question. So I think one of the things that we maybe I guess, let’s start the challenges to it. So essentially with inventory, what you’re trying to do is prevent being overstocked and having money on the shelf or understocked and leave money on the table. And so the challenges right now people are saying are kind of very frequent changes in pricing and tariffs and rules.
price increases across the board. So really the people who have been able to manage that well are the people who have more real-time information. And so they’re able to make decisions much more accurately, much more quickly. You know, they’re not waiting for the month end to close halfway through the next month to realize that they just lost all their margin on that product they thought they were doing really well. They’re not realizing, people who work in real time, they’ve got
if you’re at landed costs, for example, because landed costs would include tariffs and everything, they’re realizing that the landing cost just went up by 50%. And so maybe they need to increase their prices. And again, they can do that much more quickly, much more accurately, if they’re planning ahead and using real time data. And so what we’ve seen is a lot of people actually coming to us are coming maybe older platforms or even Excel, where they’re really not able to get the information they need to make the good decisions in a quick.
And so that’s really one of the big things is getting into that kind time data when you truly understand what you have in stock and where, but also like the impact of things. So, hey, if I change this supplier or with this tariff, updating in real time so you can see the impact and plan accordingly, maybe get a different supplier. Those are all the things that kind of typically we’re seeing people doing
getting a lot of value from in terms of their margins and their stock.
Stephen Brown (10:54)
What are some of the most common cost drivers that smaller scale manufacturers are dealing with and how can they control them?
Ben Hussey (11:02)
so the obvious big one obviously is, know, inventory, like raw materials, components, right now, very, lots of, rapidly changing pricing and volatility, labor and overhead, obviously big one, staffing, facility costs, utilities, logistics. You then get the image of carrying costs, which is always the big problem with overstocking, because then you’ve got storage expenses, insurance, risk of obsolescence.
Shipping logistics technology is actually probably not one of the bigger costs, but certainly I would argue it’s one of the more important ones to help you solve some of these challenges. And so how do you control them? guess it goes back in part to the previous answer in terms of really understanding your capturing your true landed cost in real time at the item level. And you can use things like moving average costs so that your valuation of things matches reality, right? That was the news story of
someone who had a shipment coming into the US and because of tariffs, there was an extra $5,000 bill on it or something. And so that $5,000 bill was worth more than the product itself. And so they were stuck, right? And in the hole, obviously. And if they’d known or been able to react quicker, then perhaps we’d be in a better situation. So that ability to diversify of what you’re doing and really have a bit more flexibility in how you operate.
I think is really important. And then the other thing is efficiency, know, reducing scrap to make sure they’re not over- removing lateness, expediting deliveries, anything to collect cash as quickly as you can. Those are all the types of control that we’ve seen people put in place. other we’ve seen a is demand planning. We’ve got a lot of people, particularly food and beverage actually, that really do
look ahead and do very accurate demand planning and really buy really close to what they’re projecting and they’re really trying to limit the buffer stock or safety stock that they have and they would almost rather undersell than oversell because it’s perishable good. right they
Stephen Brown (12:47)
Yeah.
Are there any interesting trends that you guys are seeing with all this supply chain turbulence we’ve seen with tariffs? Anything that’s like unique or like unexpected you’ve seen customers?
Ben Hussey (13:01)
Yeah, interesting trends. Well, know, that cost of goods sold was a really interesting trend because I think what it pointed to me was actually just that big shift in behavior with certain industries. And I think the divergence of behavior across different industries is one of the really big trends we’ve seen this year. And it’s really been driven by the tariff and the tariff timing and the countries associated with those tariffs. And that’s wildly affected their behavior.
in those different groups. And I mentioned a couple of them earlier, like through the timber, the big one between Canada and the US, that’s another group that really had to make some quite big shifts in how they did things. So, I think the biggest real trend for us is the kind of having to manage to this volatility in a way that, you know, I don’t really think people have to think about for maybe in COVID, but even then that was a bit, it was volatile, but in a different way.
Stephen Brown (13:51)
Mm-hmm.
Ben Hussey (13:53)
volatility, it’s just kind of a decrease.
Stephen Brown (13:54)
Yeah, I think the the uncertainty, right? It’s literally to week, things can change. I can read the news every day and there’s a new potential tariff or agreements talked about and then, it’s like, how do you even plan for that?
Ben Hussey (13:58)
Yeah.
Yeah, and then, you we had that one week tariff was lifted, it was put back in place, then the court said you couldn’t do it, and then the court was appealed and all, know, in four different decision cycles, And you kind of just sat there scratching your head as a business, you and your listeners wrote to me, as a business, consistency and certainty are kind of what you need. And it was the antithesis of that.
Stephen Brown (14:20)
Yeah.
Now we primarily work with American sellers or international companies that are selling into the US. You guys are an international business. Sounds selling in multiple geographies. Out of curiosity, are you seeing disruption other markets with all this stuff that’s going on?
Ben Hussey (14:49)
Yeah, we are sweet. have customers in about 80 countries now. We’re pretty well distributed globally in terms of the markets we part of our customer base for sure is the US, but definitely all over. And yeah, we’ve certainly seen the US side of things, which we talked about, but internationally we have also seen challenges. But those challenges really seem to be more around the instability of the supply chain versus
Stephen Brown (14:53)
wow.
Ben Hussey (15:14)
necessarily the cost side of the picture. So it’s been a bit more around the kind of the impact of delays we’ve of course had, you know, various conflicts. And that has obviously led to some uncertainty around supply chain timing of shipping routes and things. And so lots of the kind of the European and even some of the Asian markets or customers have been impacted more by the supply chain kind of operational certainty versus specifically the cost side of things.
although certainly there’s been variability in costs as well.
Stephen Brown (15:43)
Do you guys get a sense for how much movement of manufacturing is going on as a consequence? Like, do you see people switching manufacturing or moving to other countries? My take has been there’s a little bit of wait and see, but what are you guys seeing?
Ben Hussey (15:59)
Kind of the same, actually. I don’t think we have seen a big shift. What we have seen is more shift in diversification of supplier base, not necessarily I’m going to move manufacturing in-house, but I’m going to look at different suppliers or other suppliers as a way to substitute or rebalance where I’m purchasing from. So instead of saying I’m going to move manufacturing to the US or make this product from the US,
Maybe I’ll buy it from the US, but maybe I’ll buy it from country X instead of country Y. And so the challenges you alluded to is you can’t just flip a switch and you still need to keep your business running. We’ve certainly seen an increase in the number of businesses that are going under or getting into trouble and having to sell. That’s an opportunity for someone else because we’ve seen lots of acquiring businesses too. And so there definitely has been a bit of a shake up of those parts from businesses that couldn’t
pivot quick enough. And so, you they were then in a position where perhaps they to be acquired or maybe they were at the acquire, but there’s some of those pivots. So some people certainly, I think, take an advantage of that. And I don’t mean that in a bad way, just that’s the market. Others, I think it’s more of the redistribution of suppliers by channels versus just a, I’m going to buy overseas, I’m manufacturer in the US. The other thing we’ve seen is actually, there has been a shift in business model. And I think this is
maybe accelerated in the last nine months. But what we have seen is this continued shift to more of a hybrid business model where you get a brand that sells their own products through multiple channels. And so we get lots of speciality for beverage or we get speciality for beverage, get lots of other kind of different types of companies, tooling companies is another one.
that they make and sell their own brand, their product, but they might sell it online. They might also sell it to a distributor. They might sell it to other retailers. And so that multiple kind of channel, that mix of D2C, B2B, digital and traditional, we’re seeing more and more of that on a consistent basis. And what we’re seeing is hybrid sourcing. So increasingly, we’re not referring to a manufacturer or non-manufacturer. We’re talking about a hybrid sourcing model.
You might manufacture part of your product or a bit of what you do, but you might also be repackaging three or four other things that you’ve bought from other people. You might be combining that with something you made in-house, all of which to get your product out the door. You still see the traditional ecom drop seller, 3PL types models, football bands, all that kind of stuff. But we’re seeing more and more of this kind of blend coming in as well.
Stephen Brown (18:24)
Well, you mentioned drop shipping. Do know what happens? I think so we’re recording this on August 28th. Do you know what happens tomorrow?
Ben Hussey (18:31)
I feel like I should, but…
Stephen Brown (18:34)
they’re shutting down the de minimis exemption here in the United States. So all of those shipments under $800, they were gonna, they targeted China and then they were gonna do a phase out and then they’re like, no, we’re just gonna do it like in a month.
Ben Hussey (18:37)
Yes, yes, I did.
Yeah, I mean, that’s gonna
hurt a people, right?
Stephen Brown (18:52)
Yeah. Like, it’s been interesting because you had the team and she and, kind of marketplaces that have been really strong here. And it’s like, does that just neutralize that entire kind of business model? And personally, I kind of think it’s probably okay, but I don’t like it when they do things so quickly that it just doesn’t give businesses a chance to adapt and evolve.
It’s crazy.
Ben Hussey (19:11)
Yeah,
I mean, for you, as you say, you get those big two, but you know, there are lots of, much smaller local regional, very specific product type of, of companies that will, I think, also struggle because of that as well.
Stephen Brown (19:25)
What do think that is? Just because they’re built around that kind of model?
Ben Hussey (19:29)
Yeah, I think because I built around that kind of model, and I think also they’ll just be the kind of natural uncertainty and I think even consumers may just start to feel the pricing and the idea of smaller, less expensive things being online as being kind of less attractive or less easy. And so I just think there may be some ripple effects and as always, there’s probably some unintended consequences that
will prop up over time.
Stephen Brown (19:54)
So other than all the turbulence that brands are experiencing, what are some of the biggest mistakes outside of maybe not adapting to these changes? What are some of biggest general mistakes that you guys have seen for over years that brands make when it comes to inventory management and supply chains?
Ben Hussey (20:10)
Oh, going to be really boring and say that if you fail to plan, you’re planning to fail. Because lots of people do is with uncertainty, they’ll kind of perhaps freeze and not know what to do, which I mean, I understand that. But what that often does is puts people into a very risk averse position.
And that’s that usually from the inventory standpoint puts you into one of two positions, which is I buy lots of it because I don’t know what else to do. So if I buy lots of inventory, then I’m safe because I’ve got lots I can sell. Pretty expensive can be risky with waste or I won’t buy too much and I’ll just sell what I’ve got. But then you find your revenue starts decreasing and you’re hopefully not surprised as to why, but you might
Those that perhaps aren’t used to that more real time management and ongoing management of, people are using spreadsheets and or pen and paper even, or siloed systems and don’t have the agility and insights, I think just kind of add more buffer to their decisions because that’s kind of their only option, I guess. And, they may not have diversified suppliers quickly enough and now there are supply chain shocks kind of compounding. So those are big things.
failing to forecast demand accurately is another big one. So those really not looking ahead in terms of demand and not making active efforts to match your supply closely to that to try and reduce some of that of bloat in your own system, in your own operations.
Stephen Brown (21:39)
I have a theory. I want to tell you about it and see if you agree or not. I started my career in tech. I spent 20 years in enterprise software, started in the DotCom days. And I feel like there’s kind of a similar pattern in that I saw when I started my career, was actually in educational technology, never actually worked for a DotCom But
I wanted to write your, your intact, you’re like, I should be at DotCom That’s where all, that’s where all the actions happening ended up moving to enterprise, security software, super boring. But as I was watching that market, you know, it went from super hot to just fell apart and the, technology companies that were built on like real value, they stuck around and people that were in the industry that had real skills stuck around and those that didn’t.
evaporated. And I kind of feel like the last couple of years for ecommerce have been like a slower moving version of the DotCom blow up in that, 10 years ago, maybe not that that might have been too far back, but five, six years ago, you could have gone to Alibaba. could have sourced something. You could have thrown up a Shopify store, an Amazon store, thrown a bunch of money at Facebook and you had a pretty good business. And I just feel like the last couple of years,
have just gotten harder and harder. And what what I’m feeling like we’re experiencing is a sifting of those who are gaining the real skills. And those that are not. What do think? What do think of this theory?
Ben Hussey (22:57)
You know, think it’s good theory because I think some of the, I guess the arbitrage that existed to allow those types of kind of, remote businesses, virtual businesses where you never actually touched the product and to your point, your value is limited that you’re adding to it. Yeah, I think, mean, ultimately the market has seen through that and, you know, lots of people, I think, were making the money because of that arbitrage where they were able to find it.
A product, as you said, in Alibaba or something, get it somewhere else to then be able to put it on your Shopify store or perhaps, and it’s through an FBA, filled by Amazon type of approach, so you never even touch it. And yeah, I think the two ends of that spectrum have condensed, know, Amazon’s not wanting to leave money on the table by selling something themselves. And equally that person you’re buying off has realized that they don’t need to it so cheaply.
But then you’ve got all of this added cost and security in the middle of tariffs and taxes and other fees and supply chain issues that all erode the margin. And I suspect just don’t make it worth it for those people anymore. So like you say, the real businesses where there’s value added in the chain is ⁓ what is sticking around.
Stephen Brown (24:02)
On that note, what are you guys seeing within your customer base value add? What are some of the key differentiators you’re seeing between the customers that are surviving and thriving and those that are struggling and go out of business? Is there anything that you’re seeing that’s a pattern for success versus failure or struggle?
Ben Hussey (24:20)
I say not a specific level, I will say that our customer on average growing their revenue at double the market average rate. So from our standpoint, we certainly think that customers using tools like ours, and you have that real time imagery visibility,
are ones that will do better than the others. Those that are not Katana tools like us, I think are the ones that are going to struggle because they’re going to continue to get caught out by some of these shifts. Other individual segments or companies doing better than another, yet not necessarily or certainly not because of anything they’re doing, like said, behaving differently.
Because of the tariffs impacting different segments differently, you timber versus food and beverage versus toys, whatever it is and so that’s creating kind of differences for some certainly for businesses and there are definitely some companies that we’ve seen have just kind of put up their hands and basically I think the owner has kind of said It’s not worth it. It’s not with the stress. It’s not worth the hassle Small business. I was doing fine. I was making my my salary every year or whatever it was
but hey, I can retire I’m going to. And so I think there’s also businesses that have just said, there’s just no message for me, so I went out and it kind of just decided to move on or sell their companies, which is why we’ve seen, I think, reasonable amount more activity in the buying and selling of small businesses than we did last year.
Stephen Brown (25:25)
Yeah.
Interesting. Yeah, I heard study, we work a lot with Intuit and QuickBooks Online, and I’ve heard Intuit talk about some studies around survivability and success rates.
of businesses that work with accountants versus those that don’t. I think it’s kind of comparable what you’re saying. To me, there’s like just a sophistication. Are you riding a wave or are you digging in and building business muscles? Because inventory management’s hard, even with tools. It requires an engagement level that, like I’ve worked in bigger companies before
getting involved with LedgerGurus. And there’s just a different way you operate when you’re big. There’s a reason big companies are big. For all of their criticisms and flaws, you see, hey, they do things a certain way. And part of what I think you’re describing and what I’ve seen, observed is like digging in and building the muscles that you need to succeed.
Ben Hussey (26:24)
Yeah.
It’s a really good point, actually, because, and, kind of mentioned it, but maybe didn’t, think I articulated differently, but I think it’s spot on because it is the ones that do well and that can manage, you asked me earlier about kind of the impacts on costs and that the ones that do well and don’t, and actually, and I said, kind of the failing to plan, planning to fail thing, right? mean, that’s essentially what it’s kind of in part coming down to. It’s actually the ones that do well are the ones that kind of step back and think through.
And as you say, it is, it is be difficult. And imagery can be, we have one customer who, who you’ve got up and running in Katana and we were talking to them and they told us they found $40,000 worth of imagery they didn’t know they had. Right. Cool. it was on a shelf somewhere and it hadn’t been properly kind of counted and monitored and put into the system. And so they were really happy of course, cause they just found an extra 40 grand on the balance sheet.
Stephen Brown (27:10)
wow. Where was it?
Ben Hussey (27:21)
The flip side to that is they didn’t have it until then. So the exact example of active management of your, and maybe that’s what we call it, right, active management of inventory, have to actually, and if you’re for a small business of two people, that can be a really difficult thing. Even with 5 or 10 people, it can be hard. But the ones that do well certainly take that time and do things like demand planning and supply management and all those things. does, you’re right, and absolutely.
And presumably QuickBooks came to the same conclusion with accountants, which is having someone to actively manage your books and look for the challenges and the issues and the opportunities is a really helpful thing. Certainly see the customers that we offer onboarding to help people get set up, And definitely the customers that use that service and engage with us do better and they get more usage and they get more value for sure.
Stephen Brown (28:07)
Yeah, It’s always fascinating to me when I meet these brands that are making millions of dollars, sometimes fairly profitably so, and they don’t have a clue about their business. Now, I think that’s becoming less common. Like a few years ago, I can’t tell you how many people I ran into that were having a lot of success, despite maybe not understanding
all of their business, they might’ve been really good at maybe product design, maybe they’re good at marketing. And now I think you need to have well-rounded business acumen. You can’t just say, we can be weak here. I think you’re going to have to be good at all aspects, not perfect, but good at all aspects of running a consumer products business.
Ben Hussey (28:45)
Do you think that ties back, because you were saying earlier about and the feeling that there’s been people riding the wave, of businesses’ success in the market that maybe didn’t have the true skill set or value add. And perhaps that’s linked that now what we’re seeing is the other side of that wave, where the ones with true expertise value, and all those things are the ones that are seeing it through and able to continue and want to continue.
versus those that perhaps were riding the wave or perhaps didn’t know enough of the detail now that times are harder, right? And you’ve got to react in a different way than you did a year ago.
Stephen Brown (29:19)
Well, you got me thinking. I think when you talk about arbitrage, which for those who aren’t familiar with that term, it’s the idea of you’re just exploiting, I don’t know, what’s best way to define arbitrage? trying to think. I know what it means, but I’m trying to think how would you define arbitrage?
Ben Hussey (29:32)
You could think of it as, you live in Florida, there’s a widget for sale in Texas for $10 that you can buy for 10 bucks in Texas that is for sale in New York for 20. Assuming no other thing is in the middle in terms of cost or whatever. And so, you can buy it for 10, sell it for 20 and you make the difference.
Stephen Brown (29:52)
Yeah.
Ben Hussey (29:53)
There’s no difference in the product. There’s no innate difference in the product for the market that sustains that price difference. It’s often used in foreign currency exchange markets. Use US dollars to buy British pounds, then go and buy Canadian dollars and then sell back in US dollars and make money on it.
Stephen Brown (30:07)
So I think that’s a really, I really like this concept that you brought up because part of me is like, has ecommerce partly the growth of the last 10 years has been arbitrage and we’re moving into an era of real value add. And it’s not to, I don’t want to diminish those that have played the arbitrage game because there’s a lot of moving parts to running a business. So kudos to you if you’ve been able to pull that off, but markets, pre-markets have a way of shrinking
those kind of arbitrage opportunities over time, like more people pile in and it just shrinks the margin opportunity. The thing that I get excited about. So let me extend my analogy. You look at post.com 2001, 2002, like of businesses that went away. Some of them, some cases, the business models were just garbage. In some cases, they were too early. A lot of the early ecommerce started then.
There just wasn’t all of the capabilities, technology and infrastructure wise. And now we’re seeing those come into play. But after that, I remember when people were like, the internet’s dead. There’s no, there’s, you’re not going to make money on the internet, but then you had web 2.0 and you had, social media and you have all these, you know, Google became a monster. Amazon becomes a monster. Facebook, all these other companies, SAAS didn’t exist.
So in my mind, those that are driving to use your words, driving towards value add, there’s plenty of opportunity. And the reason I believe that is a lot of the older consumer products companies, they don’t innovate. And I love working with these brands that have really cool products. I don’t know about you, but when I meet somebody that has a really cool product, it’s just like so refreshing.
And you talk to these people and they’re passionate about their product and they’re passionate about their design. And they’re putting products into the world that just make it better. I’ll give you an example. We had a customer years ago, shout out to Nomadic. They make bags. They actually started with wallets, but then they pivoted into bags. And I’m a former road warrior. I used to spend a lot of time on the road in my tech career.
And I saw these bags and I remember telling my partner, who’s also my wife, I’m like, my gosh, yes, we have to get these guys as a customer. Their products are amazing because they were really had this huge attention to detail. And I love their products. They make these really great bags. And I just think that’s the kind of stuff that ecommerce has enabled is people who are passionate about products or passionate about solving problems for the customers.
And now if they can get those business skills to deal with kind of the more challenging market, I still feel like there’s gonna be a ton of opportunity. It’s just not gonna be the easy mode that we’ve had for years.
Ben Hussey (32:37)
Well, yeah, I mean, think you’re spot on because, I mentioned the growth of this hybrid business, right? We’ve got so many hundreds of customers that fit this profile, but you we’ve got this one in Canada that is a customer of ours called Good Protein, and there’s Peace Collective, which is another big one of ours out of Toronto. And, they make these products, but their market is the world, right? Their distribution point, you know, 10 years ago, kind of pre-internet, when I say 10 years ago, would be
design, make your product, go sell it to one of the big grocery stores, hope that they buy it, put it in, compete with all the big CPGs, realize you don’t have the money to do that and get into trouble. These days, they don’t need to go down that road. And so their distribution modes now are so much less expensive, so much less risky. So they can produce this product, they can create their own fantastic brand on all the social media channels, pretty inexpensively.
They’ve actually now started moving into some of the grocery stores because they got so popular. So yeah, for them. But the, internet’s really allowed them as a smaller company to have a much bigger market available to them, which means that that product can thrive. Same as a company we’ve talked to that makes custom baseball bats for people, special, above-ground pools. There’s all these different kinds of really cool products that
buy themselves in kind of a single state market or a single city market, there would never be enough customers to make that business really work. But today, you can make sell across multiple channels. You know, I argue you’ve got the right technology, can do that at really low cost point because you know, systems like ours are not expensive, right? For a few hundred bucks, you can manage your inventory Shopify, can, $100, QuickBooks are not expensive, but those three technologies, you can run your entire business. And so
for, let’s call it $1,000 a month, you can run everything for your business on modern up-to-date tech. So now all of a sudden, the cost of technology and the power of technology that used to only be available to the big, large enterprises that you and I worked for 10, 15 years ago, and SMB can now afford. And like you said, AWS, Azure, Google Cloud, they brought the price of technology down.
Because they’ve now allowed companies like us to build products and deploy products at a much, much lower price point than we ever could before. I remember when we used to build our software and deploy it onto servers, you used to buy rack space, bare metal to run stuff. So it used to cost a fortune just for hosting. All of that’s gone. So now the price point is so much lower that these really cool companies with these really, really cool products can actually access now this big market and be
a viable business in a way that I just don’t think was possible 5, 10 years ago. And it’s really exciting for me. I love it.
Stephen Brown (35:07)
So let’s wrap this up, if there was… You’ve given some good recommendations, if you can repeat one. If there’s one recommendation that you would give brand, whether they’re a customer of Katana’s or not, for the next 12 months, what would you give as a recommendation for them to
implement in their business.
Ben Hussey (35:24)
real time analysis and thinking. And, you know, I’ll be biased and say, from my perspective, that’s, that’s inventory, but I would certainly apply it kind of, everywhere, like you said earlier, right, to take the step back and kind of think about things in detail. We’re actually we’ve launched a free plan on Katana now. So anyone can sign up to Katana for free. And they can use the entire
software set for a small number of products and they can do that for free. And so if you’re listening to this and you want to go do that, go for it. And there’s a, you can do that with Shopify, can do that with a bunch of different tools to figure out what works for you. But take a couple of days and kind of look at some of those things. If you stay on Excel or paper and pen, ultimately I think it’s going to catch up with you.
Stephen Brown (36:03)
Awesome. Well, thanks for joining me today, Ben. If somebody wanted to connect with you, what’s the best way to do it?
Ben Hussey (36:08)
You know you can find me on LinkedIn you can just look up Ben Hussey at Katana, can find me on LinkedIn, can think you can Google me and find me pretty easily. can also reach out to me an email if you want you can just do can also find me on our website katanamrp.com you just search for Katana Inventory and you’ll find us and you can get hold of me that way
Stephen Brown (36:27)
All right, thanks for joining us.
Ben Hussey (36:28)
Thanks, Stephen. Really appreciate it. Thank you.
Stephen Brown (36:30)
Bye.