Real-Time Inventory, Real Results: Katana's Take on Smarter Supply Chains

Ben, thanks for joining me.

0:14 Ben Hussey

Thank you for having me. It's a pleasure to be here.

0:17 Stephen Brown

Ben, I can tell, and I looked at your profile, you're from the UK, is that correct?

0:22 Ben Hussey

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.

0:30 Stephen Brown

Awesome. Tell me about your journey to ecommerce. How long have you been around ecommerce? What have you done?

0:36 Ben Hussey

Yeah. I completed a Masters in Business here in Canada, and I started working for one of the big Canadian telcos. And kind of by luck or happenstance, not sure which it was, but I 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 at the source. And that was right at the beginning of the ecommerce boom.

And so I was there for about six years running various ecommerce related 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 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, order management, inventory, all part of that puzzle. So all in all, I've been doing that for 15, 20 years now.

1:48 Stephen Brown

Awesome. And co-CEO. I'm always fascinated when I meet a co-CEO. Tell me about the journey to Katana and co-CEO.

1:57 Ben Hussey

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, our biggest market is North America, 60% of our customers are here. And so having an executive over here seemed the right thing to do, being much closer to our customers. Most of our commercial support teams are over here as well. So that was part of the decision.

2:40 Ben Hussey

And the other part of the decision was just the stage of the company we're at. We've got investors that require ongoing support, management and so forth. And so it just ended up being this natural split of 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 natural division of responsibility.

3:05 The state of manufacturing, and what drives better outcomes

Stephen Brown

Awesome. Well, Katana, you guys have done a lot, particularly around inventory and manufacturing, which is why I want to have this conversation. And it's a really interesting time to be having it.

Sorry on behalf of Americans. If you're in ecommerce, it's hard to not be like, it sucks for all of us. Anybody I talk to that 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 let's take a state of manufacturing. Historically I think consumer products businesses have manufactured in Asia, unless you had a very distinct regional product. Now it feels like everything's changing.

What are you guys seeing around manufacturing as it relates to ecommerce consumer products businesses?

3:56 Ben Hussey

Well, the craziness, the volatility. What we have seen, really coming 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 really big swings. Behaviors have shifted dramatically.

4:20 Ben Hussey

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 that's mind blowing.

So we kind of picked into why, and tried to understand what was happening. There were a couple of things going on. So one of the big things that was going on was future buying. 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 that's a pretty big swing in how you normally do things. And that was just one sector.

4:54 Ben Hussey

We saw in Q1, Q2 this year, if you look at food and beverage, it's an industry that's obviously consumable, it's perishable. And so 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.

But if you look at food and 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.

5:40 Ben Hussey

Completely different in some of like timber or cosmetics, that have kind of seen the opposite.

And so if you apply these big picture statements, we saw overall price increases of about 20% from January to February in raw materials. From January to March, it was almost 50% in raw material cost increase.

And so you get the big picture numbers which are frightening, but then when you dig into some of these individual segments it becomes really real. Like as a small business, a medium sized business, any business actually, managing that kind of difference in things, that volatility is really tough.

6:23 Ben Hussey

And I think for me that's been one of the biggest storylines, is just people kind of sitting there going, how do we do this? Do we need to 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. Kind of managing some of those things in real time has been one of the big shifts we've seen.

6:53 Stephen Brown

That's some incredible numbers you threw around.

One of the things that I was thinking about as you were talking is, 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 a 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 manufacture in the US. It's like, well, I need to source everything to not be impacted by tariffs.

7:30 Ben Hussey

Yeah, it's not just make it, right? I mean, there's a labor shortage in manufacturing in the US, 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've got to buy machinery, big lead time. You're looking for a plant or a factory, big lead times on those. Massive investments that people have to make. It's a huge amount of cost.

7:51 Ben Hussey

And as I'm sure your 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've seen 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?

8:16 Ben Hussey

There are 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 have much less risk, I have much more flexibility, I can scale up and down as I need to. You can't do that if you're manufacturing in-house.

And like you said, you can't just turn it on, it's not just a switch, if the thing is even available here. And even then, we saw in the UK, 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.

8:53 Stephen Brown

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, manufacturing decisions that drive better financial outcomes?

9:14 Ben Hussey

Yeah, that's a good question. So let's start with the challenges.

Essentially with inventory, what you're trying to do is prevent being overstocked and having money on the shelf, or understocked and leaving money on the table. And so the challenges right now people are saying are frequent changes in pricing and tariffs and rules, price increases across the board.

9:40 Ben Hussey

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. 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 on.

People who work in real time, if you're at landed costs, for example, because landed costs would include tariffs and everything, they're realizing that the landed 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.

10:20 Ben Hussey

And so what we've seen is a lot of people coming to us are coming from older platforms or even Excel, where they're really not able to get the information they need to make good decisions quickly.

And so that's really one of the big things, is getting into that kind of real time data where you truly understand what you have in stock and where, but also 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 typically we're seeing people doing and getting a lot of value from in terms of their margins and their stock.

10:54 Cost drivers

Stephen Brown

What are some of the most common cost drivers that smaller scale manufacturers are dealing with, and how can they control them?

11:02 Ben Hussey

So the obvious big one is inventory, like raw materials, components. Right now, lots of rapidly changing pricing and volatility. Labor and overhead, obviously a big one, staffing, facility costs, utilities, logistics. You then get the inventory 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.

11:40 Ben Hussey

And so how do you control them? I guess it goes back in part to the previous answer, in terms of really 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.

There 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. And so that $5,000 bill was worth more than the product itself. And so they were stuck, and in the hole obviously. And if they'd known or been able to react quicker, then perhaps they'd be in a better situation.

12:20 Ben Hussey

So that ability to diversify 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. Reducing scrap, 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.

The other thing we've seen a lot of is demand planning. We've got a lot of people, particularly in food and beverage actually, that really do look ahead and do very accurate demand planning and 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 a perishable good.

13:01 Trends by industry, and diversifying suppliers

Stephen Brown

Are there any interesting trends that you guys are seeing with all this supply chain turbulence we've seen with tariffs? Anything that's unique or unexpected you've seen with customers?

13:01 Ben Hussey

Yeah, interesting trends. Well, that cost of goods sold was a really interesting trend, because I think what it pointed to for 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 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.

13:51 Ben Hussey

So I think the biggest real trend for us is having to manage to this volatility in a way that I don't really think people have had to think about, maybe in COVID, but even then it was volatile in a different way. That volatility, it's just kind of a decrease.

13:54 Stephen Brown

Yeah, I think the uncertainty, right? Literally week 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?

14:20 Ben Hussey

Yeah. And then we had that one week where a 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 in four different decision cycles.

And you kind of just sat there scratching your head as a business. As a business, consistency and certainty are what you need. And it was the antithesis of that.

14:32 Stephen Brown

Now, we primarily work with American sellers, or international companies that are selling into the US. You guys are an international business, sounds like selling in multiple geographies. Out of curiosity, are you seeing disruption in other markets with all this stuff that's going on?

14:49 Ben Hussey

Yeah, we are. We have customers in about 80 countries now. We're pretty well distributed globally in terms of the markets. 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 necessarily the cost side of the picture.

15:14 Ben Hussey

So it's been a bit more around the impact of delays. We've of course had various conflicts, and that has obviously led to some uncertainty around supply chain timing of shipping routes and things. And so lots of the European and even some of the Asian markets or customers have been impacted more by the supply chain operational uncertainty versus specifically the cost side of things. Although certainly there's been variability in costs as well.

15:43 Stephen Brown

Do you guys get a sense for how much movement of manufacturing is going on as a consequence? 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?

15:59 Ben Hussey

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 in the US, maybe I'll buy it from country X instead of country Y.

16:30 Ben Hussey

And the challenge 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 they were then in a position where perhaps they had to be acquired, or maybe they were the acquirer. So some people certainly take advantage of that. And I don't mean that in a bad way, that's just the market.

17:20 Ben Hussey

Others, I think it's more the redistribution of suppliers versus just a, I'm going to buy overseas, I'm going to manufacture 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. So we get lots of specialty food and beverage, we get lots of other kinds 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.

18:00 Ben Hussey

And so that multiple 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 of models, [unclear], all that kind of stuff. But we're seeing more and more of this kind of blend coming in as well.

18:24 The end of de minimis, and the biggest mistakes

Stephen Brown

Well, you mentioned drop shipping. Do you know what happens, I think, so we're recording this on August 28th. Do you know what happens tomorrow?

18:31 Ben Hussey

I feel like I should, but.

18:34 Stephen Brown

They're shutting down the de minimis exemption here in the United States. So all of those shipments under $800. They targeted China and then they were going to do a phase out, and then they're like, no, we're just going to do it in a month.

18:45 Ben Hussey

Yeah, I mean, that's going to hurt a lot of people, right?

18:52 Stephen Brown

Yeah. It's been interesting, because you had Temu and Shein and marketplaces that have been really strong here. And it's like, does that just neutralize that entire 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.

19:11 Ben Hussey

Yeah. I mean, as you say, you get those big two, but there are lots of much smaller local, regional, very specific product type of companies that will, I think, also struggle because of that as well.

19:25 Stephen Brown

What do you think that is? Just because they're built around that kind of model?

19:29 Ben Hussey

Yeah, I think because they're built around that kind of model. And I think also there'll just be the 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 crop up over time.

19:54 Stephen Brown

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 the biggest general mistakes that you guys have seen over the years that brands make when it comes to inventory management and supply chains?

20:10 Ben Hussey

Oh, I'm going to be really boring and say that if you fail to plan, you're planning to fail.

Because what lots of people do is, with uncertainty, they'll kind of perhaps freeze and not know what to do. Which I understand. But what that often does is put people into a very risk averse position.

20:35 Ben Hussey

And 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.

21:00 Ben Hussey

Those that perhaps aren't used to that more real time management, people who are using spreadsheets 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 compounding. So those are big things.

Failing to forecast demand accurately is another big one. 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 bloat in your own system, in your own operations.

21:39 The arbitrage era is over

Stephen Brown

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 dot-com days. And I feel like there's kind of a similar pattern. When I started my career it was actually in educational technology, I never actually worked for a dot-com. But [unclear] when you're in tech, you're like, I should be at a dot-com, that's where all the action's happening.

Ended up moving to enterprise security software, super boring. But as I was watching that market, it went from super hot to just fell apart. And the technology companies that were built on real value, they stuck around. And people that were in the industry that had real skills stuck around, and those that didn't evaporated.

22:20 Stephen Brown

And I kind of feel like the last couple of years for ecommerce have been like a slower moving version of the dot-com blow up. In that, five, six years ago you could have gone to Alibaba, you 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 I'm feeling like we're experiencing is a sifting of those who are gaining the real skills and those who are not.

What do you think of this theory?

22:57 Ben Hussey

I think it's a good theory. Because I guess the arbitrage that existed to allow those types 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. Ultimately the market has seen through that. And 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, on Alibaba or something, get it somewhere else to then be able to put it on your Shopify store, or perhaps through Fulfilled by Amazon type of approach, so you never even touch it.

23:35 Ben Hussey

And yeah, I think the two ends of that spectrum have condensed. 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 sell it so cheaply.

But then you've got all of this added cost 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.

24:02 Stephen Brown

On that note, what are you guys seeing within your customer base? What are some of the key differentiators you're seeing between the customers that are surviving and thriving and those that are struggling and going out of business? Is there anything that you're seeing that's a pattern for success versus failure or struggle?

24:20 Ben Hussey

I'd say not at a specific level. I will say that our customers on average are growing their revenue at double the market average rate. So from our standpoint we certainly think that customers using tools like ours, and having that real time inventory visibility, are ones that will do better than the others. Those that are not using Katana or 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.

24:55 Ben Hussey

Other individual segments or companies doing better than another, that's not necessarily because of anything they're doing, like I said, they're behaving differently because of the tariffs impacting different segments differently. Timber versus food and beverage versus toys, whatever it is. And so that's creating differences for businesses.

And there are definitely some companies that we've seen have just kind of put up their hands, and I think the owner has kind of said, it's not worth it, it's not worth the stress, it's not worth the hassle. Small business, I was doing fine, I was making my salary every year or whatever it was, but hey, I can retire, I'm going to. And so I think there are also businesses that have just said, [unclear], and decided to move on or sell their companies. Which is why we've seen, I think, a reasonable amount more activity in the buying and selling of small businesses than we did last year.

25:25 Stephen Brown

Interesting. Yeah, I heard a 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 to what you're saying.

To me there's 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, 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 observed is digging in and building the muscles that you need to succeed.

26:24 Ben Hussey

It's a really good point, actually. I kind of mentioned it, but maybe I articulated it 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 the impacts on costs, and the failing to plan, planning to fail thing. That's essentially what it's in part coming down to. It's actually the ones that do well are the ones that step back and think it through.

27:00 Ben Hussey

And as you say, it is difficult. And inventory can be, we have one customer who we got up and running in Katana, and we were talking to them and they told us they found $40,000 worth of inventory they didn't know they had.

27:10 Stephen Brown

Wow. Where was it?

27:21 Ben Hussey

It was on a shelf somewhere and it hadn't been properly counted and monitored and put into the system. And so they were really happy, of course, because they just found an extra 40 grand on the balance sheet.

The flip side to that is they didn't have it until then. So that's the exact example of active management of your inventory. And maybe that's what we call it, right, active management of inventory. And if you're 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.

27:55 Ben Hussey

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. We certainly see, 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.

28:07 Stephen Brown

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. 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 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.

28:45 Ben Hussey

Do you think that ties back to what you were saying earlier, 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 and value 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.

29:19 Stephen Brown

Well, you got me thinking. 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 the best way to define arbitrage? I know what it means, but I'm trying to think, how would you define arbitrage?

29:32 Ben Hussey

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 nothing else 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.

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.

30:07 Stephen Brown

So I really like this concept that you brought up. Because part of me is like, ecommerce, partly the growth of the last 10 years has been arbitrage, and we're moving into an era of real value add.

And 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 free markets have a way of shrinking those kinds of arbitrage opportunities over time. More people pile in and it just shrinks the margin opportunity.

30:45 Stephen Brown

The thing that I get excited about, so let me extend my analogy. You look at post dot-com, 2001, 2002, a lot of businesses that went away. In 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, you're not going to make money on the internet. But then you had web 2.0, and you had social media, and Google became a monster, Amazon becomes a monster, Facebook, all these other companies. SaaS didn't exist.

31:30 Stephen Brown

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 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.

32:00 Stephen Brown

I'll give you an example. We had a customer years ago, shout out to Nomatic. 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, oh my gosh, yes, we have to get these guys as a customer. Their products are amazing, because they 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 their customers. And now if they can get those business skills to deal with the more challenging market, I still feel like there's going to be a ton of opportunity. It's just not going to be the easy mode that we've had for years.

32:37 Why the opportunity is still there

Ben Hussey

Well, yeah, I 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.

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?

33:10 Ben Hussey

Their distribution point 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.

33:50 Ben Hussey

So 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 by themselves, in 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 and sell across multiple channels. And I'd argue if you've got the right technology, you can do that at a really low cost point, because systems like ours are not expensive. For a few hundred bucks you can manage your inventory. Shopify, for $100. QuickBooks, not expensive. But those three technologies, you can run your entire business.

34:40 Ben Hussey

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, an 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.

35:00 Ben Hussey

So now the price point is so much lower that these really cool companies with these really cool products can actually access 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.

35:07 Stephen Brown

So let's wrap this up. You've given some good recommendations. If there's one recommendation that you would give a 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?

35:24 Ben Hussey

Real time analysis and thinking. And I'll be biased and say, from my perspective that's inventory, but I would certainly apply it everywhere. Like you said earlier, to take the step back and think about things in detail.

We've actually 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 you can do that with Shopify, you can do that with a bunch of different tools, to figure out what works for you.

But take a couple of days and 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.

36:03 Stephen Brown

Awesome. Well, thanks for joining me today, Ben. If somebody wanted to connect with you, what's the best way to do it?

36:08 Ben Hussey

You can find me on LinkedIn. You can just look up Ben Hussey at Katana, you can find me on LinkedIn. I think you can Google me and find me pretty easily. You can also reach out to me by email if you want. You 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.

36:27 Stephen Brown

All right, thanks for joining us.

36:28 Ben Hussey

Thanks, Stephen. Really appreciate it. Thank you.