The CFO of Thread’s Guide to Navigating Tariff Impacts

Ryan, thanks for joining me.

0:13 Ryan King

Hey Stephen, it's great to join you. It's always great to chat. Glad we're doing this over podcast for the first time.

0:19 Stephen Brown

We'll try not to go on tangents. You and I could probably talk for an entire day, because we have very robust conversations, and you've been on my short list to have on the podcast because I think we just have really good conversations.

But today we want to talk about navigating tariffs. Before we do that, let's get a little background. Tell us a little bit about Thread, kind of what Thread does, your history of Thread, and then let's go from there.

0:43 Ryan King

Yeah. So the history of Thread actually starts in 2014, where I was the beneficiary of good old nepotism, to be honest. Because it was my brother-in-law, him and my sister are the ones who started Thread.

But what happened is he lost his wallet surfing in Hawaii. And he lost his wallet and then went and got a broccoli rubber band from the grocery store and put that around his remaining cards. That was the idea for Thread. And you might be like, well, what's the connection between the broccoli rubber band and Thread? He basically thought, hey, I can create a better rubber band. And he did that, and that was Thread. So he made a glorified rubber band with fun designs on it.

1:25 Ryan King

So that was back in 2014. Thread was incorporated January 1 of 2015, and been off to the races since.

So when I got back from an LDS mission in the spring of 2015, I started making the wallets with my brother-in-law and sister in their spare bedroom and in my parents' garage. And so you talk about supply chain, back then it was super simple. We made these wallets by hand.

I remember vividly stories of Colby saying, hey, we've gotten 15 orders for this wallet today and we have five units. We need to ship these out by the end of the day. So we would literally make those wallets that day. I mean, talk about just in time inventory. That's what we were doing early on.

2:15 Ryan King

And then I studied finance at BYU. So I took a little break from working in the business while I was heads down in the finance program.

Then 2018 I started back up, and at that point Thread, the ball had just really started rolling and we were growing with more products. Not just our original elastic wallet, but lanyards, other wallets, we've had bags, shoulder slings, backpacks, AirPod cases, stuff like that.

So we just hit 10 years in business in January of this year, which we're pretty proud of honestly internally. Making it to 10 years, that's a huge milestone, and we hope to make it 10 more.

And just for the listeners or viewers, we sell on our website, Amazon, we sell to wholesalers or retailers nationwide. We own a few stores ourselves here in Utah, up and down the Wasatch Front. And then we have a corporate gifting and custom division in the business. So that's where we sell our stuff.

3:18 Stephen Brown

One of the things I love about Thread, I mean, your online store is still threadwallets.com, right? But you started with the, this is my favorite type of customer, people that start around a product and the desire to build something better. And then it evolves. Like now it's not just Thread Wallets, it's Thread. And you guys have a variety of things for carrying. Kind of your underlying principle, right? Carrying things.

3:44 Ryan King

Yeah, carrying things. What do you carry every day? That's at least where we're at now. We talk about everyday carry, where it's like, hey, you carry your stuff to school most days, you carry your wallet or your cards most days. So we're not yet to, do you take your duffel bag or a carry on case, whatever luggage is. That's not something you do every day, so we haven't branched into that. But it's kind of a focus on, what do you do with your everyday stuff?

4:12 Stephen Brown

Do you know who else uses the term everyday carry? That's in gun culture. That's like the concealed carry. They'll be like, what's your everyday carry?

4:18 Ryan King

Interesting. I actually didn't know.

4:27 Stephen Brown

So as you use that terminology, just be aware that if you ever collide with the gun guys, which I know there's a lot of here in Utah, they have a whole different mindset of everyday carry.

4:37 Ryan King

Well, if my dad listens to the podcast, or my brother, they might be ashamed, because I come from a big hunting family. Although they don't really do the concealed carry themselves.

4:47 Stephen Brown

Then everyday carry is usually what you're concealing that you do have. But I do think the concept makes sense. And honestly, maybe you will branch into everyday carry holsters.

4:53 Ryan King

Maybe, yeah. People are carrying that every day.

4:56 Stephen Brown

So after you came back, were you immediately over finance when you finished college and came back?

5:00 Ryan King

So a little backstory of me. My dad was in wealth management. He was a Merrill Lynch lifer, literally from the day he graduated college till the day he retired. He was just wealth management, financial advising at Merrill Lynch. And so I thought I would go into that, to be honest. I thought I would take over his practice, something like that. But something kind of led me a different route. I went and did an internship with a mutual fund, I didn't love it. And then I was offered the job here.

So yes, I was over finance from day one. And it's actually funny, you can look at my LinkedIn profile and I've kept it there for a few reasons. But I had so much imposter syndrome of, I'm not qualified to be the CFO. So Colby hired me as the CFO, my sister hired me as the CFO, but on LinkedIn I put head of finance, because I was like, I'm not qualified to be the CFO.

6:00 Ryan King

And I also was running, I mean, startups, you have multiple hats. So I was also helping do our custom wallets. And so I had head of finance and brand collaboration was the title I came up with. And then Colby was like, what are you doing? That's not your title, I didn't hire you for that. And so I changed it, but I've kept it. And it's kind of just a reminder to me of, always keep a bit of humility and don't take yourself too seriously, or your title too seriously.

6:35 Stephen Brown

You guys have done a lot of things, a lot more than a lot of brands, so I'm sure you've had to grow tremendously as a professional as the business has grown.

6:43 Ryan King

Absolutely. Yeah, I also remember vividly, and this might be like, well, why the heck did Colby hire you?

I think it was because him and McKenzie, they were doing it full time. They hired a few other people, they hired a CMO at the same time as me, and they wanted to build the C-suite team. But neither of them had a finance background. So they thought, hey, this guy cares about it, he wants to dive into the numbers, he cares about the brand, he's been helping make the wallets pretty much since day one when we incorporated as a business. But they were like, we're not finance people. So they took a risk on me.

7:30 Ryan King

But I also remember, literally those first few months, Googling, what does a CFO do, or what does a CFO's daily job look like? Because I knew the basics of, I think the finance program at BYU did a great job of teaching me the language of business, and I knew what a P&L was obviously. I'd done case studies, made my own for mock companies for classes. But when it came to putting rubber to the road, it was a little different. A lot different, honestly. And so a lot of learning on the fly. But I think that's been really helpful, honestly, for all of us.

7:55 From handmade to industrialized

Stephen Brown

Well, let's dive into the topic. So interestingly, you talked about supply chain. You guys were manufacturing yourselves, in almost like an Etsy store, right? When did you guys move to industrialized manufacturing?

8:04 Ryan King

Yeah, totally. And this is maybe just a side note, because we wanted to touch on tariffs today.

One thing that was interesting is, early on what hampered our growth is we could have grown a lot quicker. We had a lot of positive feedback on the product, but it was just bandwidth. Like I mentioned, we would get an order for 20 wallets or something from someone and we didn't have that in stock. So then we just made it by hand.

8:40 Ryan King

And I remember one time we had Maverick, the local gas station, this was early, before I'd been here full time at Thread. I think it was probably 2018. No, it would have been before that, because we were making them by hand still.

I literally didn't even know logistics or how it would work, but they ordered like 5,000 wallets. And we had seamstresses that we had contracted with that helped make things. And she would drop off a hundred every night. She could do a hundred every day. And so it was just this process of, we would print on the elastic, we'd give them off to her, she had a day job so she'd do them at night, she'd then bring back more.

9:20 Ryan King

And then we got done with them and I'm like, they're all in the house, I don't know what to do with them. So I literally went to Walmart and got those plastic Rubbermaid bins, because I was like, where else am I going to put 5,000 wallets? We weren't using a 3PL, we didn't have a warehouse, it was the spare bedroom. So I literally just shoved them all there.

And then I called up the lady and said, hey, I'm in the parking lot at your headquarters, where do you want the wallets? And she was like, what do you mean? Like USPS or FedEx or what? And I was like, no, I have them. And she came down and then got some coworkers and we just brought bins up. We were so proud of the order. But I think she was so confused by the order, because we seemed way bigger than we were, but we made them all by hand.

9:55 Stephen Brown

That's a great story. When did you guys move from doing it that way? Did that push you guys over the edge, or was it something else?

10:00 Ryan King

Yeah, stuff like that pushed us over the edge of, we can't sustain this.

And to tie this in, not to make this too political by any means, but we originally looked at, can we do this in America? And the manufacturing base just isn't here. Certain things there are, right? We still make a lot of cars in the US. We obviously import a lot of cars too. But there just weren't companies making what we were doing. We reached out, we tried to find people, and it wasn't there.

10:30 Ryan King

And then some of our first factories that we found literally were just on Alibaba. And it was, hey, do you think you could make this, conversation. We'd send a sample over, they'd send a sample back. Some of them were pretty spot on right off the bat. And then it was like, what's your capacity?

And some of these factories, don't quote me on the numbers because this conversation is back in 2016 probably, some of them were like, we could do a million a month. And we're sitting there and we're like, man, by hand we were doing a few thousand a month, that was the most we'd been doing. And they're like, yeah, if you gave us like a 12 week lead time, we could do a million units. And we're just like, what on earth? And so they just have the manufacturing capabilities.

11:20 Ryan King

And then when we moved that over, it just freed up so much time. Especially for Colby and McKenzie. Colby was overseeing all manufacturing of the wallets, I was helping him, I was kind of grunt work to just make the wallets. My mom would sit watching a show in the afternoon, cutting elastic or cutting the paper that you print onto the elastic while she's watching reruns of Seinfeld. This was early on. And then going from that to very sophisticated manufacturing in Asia, it was just crazy how much time that freed up.

11:51 Diversifying out of China, and why US manufacturing said no

Stephen Brown

Did you guys go to China initially?

11:55 Ryan King

It was China initially. And we worked with just Chinese manufacturers for years. And then during the first Trump administration, we saw his stance towards China and thought, hey, it'll be good to diversify the supply chain to include countries outside of China.

So we really hit it hard to diversify, to where now we're making stuff in China, about a third of our product is made there, a third in Vietnam and a third in Cambodia.

12:26 Stephen Brown

So when you guys did that initial diversification, it seemed like for the most part the tariffs, Trump part one, were very targeted towards China. So did that diversification more or less mitigate the downside financial risks?

12:35 Ryan King

Yeah. So the honest answer would be, and this is, I'm not the COO, so I'm not in the weeds every day interacting with the factories like our operations and product teams are.

How I understand it is, even now, if there weren't the tariffs, it would be cheaper to make things in China. And also really well, too, right? But also you just have to factor in shipping. Ports are more built out in China so you can get stuff quicker, lead times are quicker. And so it is a trade off. It's not as quick and it usually is a higher cost, not factoring in the tariffs, outside of China. When you factor in the tariffs, it can be cheaper to make in countries outside of China.

13:26 Stephen Brown

This is my understanding as I've heard people say, they're not even the cheapest place to manufacture anymore. They're just really, really good.

13:32 Ryan King

Totally. And that's another thing. I have friends who, luckily being in this business full time since 2018 and on and off since 2015, I've gotten to know a lot of other business owners, and they've said that exact same thing. They say the molds and just what is being built, a lot of people think it's just cheap crap that's built in China. And sure, there is that, right? There are really cheap things, tchotchkes, that break really quick. But they also just are really good at it. They've gotten good at manufacturing.

14:08 Stephen Brown

Yeah, and this is part of my frustration with this economic policy that we're experiencing. I think COVID was a wake up call. Like, hey, we've got an over dependence on the foreign supply chain for a lot of us, especially for critical goods. But it's not like you can flip a switch and make a million wallets a month in the United States.

Were you able to find anybody in the United States that could make what you guys were selling?

14:39 Ryan King

I mean, I think lanyards we could have. Lanyards, one of the goods, I think yes, that could have been done here. But outside of that, I really don't think so.

And this even just comes to bear in the last few months, Stephen. Let's say April, when these Liberation Day tariffs kicked in or were announced, we reached out to some US manufacturers and they said, look, we could do your simple one colorway, your black bag or your off white bag. But when you're doing color blocks and sewing, there are some wallets that we have now that are a patch of blue on one side, the other side's red, and there's a yellow with a colorful little strap or something. They're like, we literally can't do that.

15:30 Ryan King

And then we've also had some US manufacturers, which is another interesting point that could be discussed. One manufacturer in the US we talked to, he said, we can't do that. But even if we could, we don't have the labor to increase demand. We can't find and keep labor in these factories in the US. So you're going to run into a labor shortage, which then constrains the quantity that can be made.

15:55 Stephen Brown

And this is my, again, building on the frustration. Even if we all said yes, I think it's good to have more manufacturing in the United States, the capacity is not there. It's not like a turn of a key and a factory emerges, right? It's months, years, to sometimes get these factories going.

16:14 Liberation Day

Stephen Brown

This is what I really struggle with from an economic policy standpoint. We could easily have a this is dumb conversation. What I really want to talk about though is how you guys are navigating this.

I think everybody knew more tariffs are coming. I think my thought was it's going to be very targeted on China. And then when the announcement came in April it was like, oh my gosh, he's going nuclear on the entire world.

16:45 Stephen Brown

And then they had the UK deal come out. Because I've been watching the news like a hawk, and I run the ecommerce newsletter that we do every week, but I'm also wanting to understand what we should be considering. And I saw the UK deal and I was like, okay, the UK has a surplus, which is one of the issues they claimed was how they were tariffing. We're shipping more to the United Kingdom than we're getting back, and they still got a 10% tariff. So I was like, dang, that is the floor, we're not going to see anything better than that. And what we're seeing is that's the case.

As you guys have been dealing with these announcements this year, let's go back up. You guys did some supply diversification in the first Trump administration. Did that prove to be, you kind of mentioned it was successful, but any other insights on diversifying your supply chain and what that's done for you guys?

17:35 Ryan King

Yeah. I mean, candidly it did, in a good way, put fewer eggs in one basket. And so I think that's always good. Especially when, take the tariff announcements out of it, but you deal with, in China you have Chinese New Year. And so then that is kind of a lull for manufacturing for weeks.

But if you're in other countries that don't celebrate that, and you need a chase buy of one of your products that's selling really well to start the new year, you can get that done at a factory outside of China.

18:10 Ryan King

And I would be remiss if I didn't make a skiing analogy here. And I could just not make the skiing analogy, but I am, because I'm just such an avid skier.

Ski resorts talk a lot about ski lifts, that you want redundancy. Because if there's only one way to get out of a basin or a back bowl, or even to the summit, and that lift goes down, well, no one's able to ski that area. So resorts really like to have redundancy in their ski lifts, or ways to get in and out of areas.

And I think that's very similar with us, and just with consumer goods in general. Having redundancy is good. Having multiple factories who are dialed and know how to make your goods, it helps. And there might be slight variation, but if they meet your quality control standards, and hey, this factory doesn't have the capacity because they're not just making your stuff, you can go to another one of your factories and get it done there. And then you also just have competition, right, of pricing. They know that they're competing against someone else. That's huge.

19:20 Ryan King

But yeah, I remember being proud of us. Like truly, look, we've done what the administration we thought was good, is diversifying outside of China. Understanding very well, I think, some of the challenges you have with manufacturing in China, intellectual property theft, and issues that we've had geopolitically with these countries. I was like, hey, it's good that we're diversifying away.

And then I remember even at the beginning of this year reading articles of like, it might just be China that President Trump is going after. And it was like a few weeks before the Liberation Day tariff announcement, you started seeing some articles in the Wall Street Journal or something that were like, hey, there might be a base 10% tariff worldwide. And it was like, whoa, that's higher than anyone ever thought.

20:15 Ryan King

And then when they got announced, it's like, well, that's worse. I will never forget sitting in my seat and scrolling Twitter and seeing this announcement, and then the paper that the Trump administration was handing out to the press, and they had the big plaques of, here are the reciprocal tariff rates.

And I remember telling our president, did you see Vietnam? I can't remember Vietnam and Cambodia, which one was which, but one was announced at 46% and one was 49. And he was like, you're joking. What is it actually? And I was like, no, that's literally what's being announced. And then it just gives a sinking feeling of, well, that could put us out of business if that actually goes into effect.

20:48 Stephen Brown

Well, and then you have this tiff with China where they were escalating to, I think it got like 145%. And at that point it's basically an embargo.

20:58 Ryan King

Yeah, at that point it's an embargo.

21:13 Why these tariffs can't be planned around, and why prices haven't moved

Stephen Brown

And it's just like, are you kidding me? This is crazy.

So the announcements drop, you guys are diversified, but nobody's safe. How are you guys approaching the tariffs now that they're coming into reality, now that we're moving on beyond that 10% baseline to something on a more permanent basis? What are some of the things that you're thinking about to address increased product costs?

21:28 Ryan King

Yeah. The honest answer is, in some regards, especially for months, because we didn't know what tariffs would be long term, we were eating that cost. We haven't raised prices on our products yet, because we wanted to see where things would land.

But I want to touch on one more thing, Stephen, that makes it difficult, and then we can dive into just how Thread is responding, and they tie in together.

22:00 Ryan King

One thing that's really tough with how these tariffs have been enacted, and I don't want to get too wonky for those who aren't terribly political, but how tariffs have worked in the past is Congress sets what's called the tariff schedule. And so it's what's being tariffed, at what rate, from what countries, and it's passed as a law. So once you get Congress acting, it's passed in the House and Senate and then to the President, you get stability in knowing what the rate will be.

With how these rounds of tariffs have been enacted, President Trump has declared a national emergency saying trade deficits are an imminent and serious risk to the United States, which then triggers emergency powers for the President to then implement tariffs.

22:50 Ryan King

And so what's really tough is, even now that these trade deals are being announced, they're not binding from Congress. It's President Trump saying that this is the deal. Who's to say China or Vietnam or some country doesn't do something that upsets him again, or one of their leaders gives President Trump a really glowing letter or something and they get lowered, or they get increased because he didn't like an article he saw in the news. And so that's just made it extremely difficult to plan. Businesses love stability and knowing what the future brings.

23:20 Ryan King

We still, I would honestly say, don't know what the future holds. Because some of these deals, it's been one page letters that are really bare bones of what's actually going to happen. And who knows if they actually stay the same.

And I'll just share one example of that. When the Liberation Day tariffs were announced, these reciprocal tariffs, we'd done some initial work with some countries in Latin America that are building out manufacturing bases. And they were only tariffed at 10%. And it's like, well, we should have gone there ages ago if we would have known that this was going to be the cheapest place to manufacture, but they weren't quite ready.

24:05 Ryan King

But then it's like, well, now the reciprocal tariffs are paused and it's a 10% tariff, so then that makes them all on an even playing field. And then we get announced a few weeks ago that Vietnam is at this percent and Cambodia is here. So it's like, well, okay, higher than these Latin American countries, we should have gone there months ago and been working on building out a supply chain there. So there's just a lot of stuff up in the air.

24:31 Stephen Brown

Yeah, I agree with that. When you're talking about inventory, product development, how long does it take to find and bring online a new manufacturer for you guys?

24:42 Ryan King

It takes a long time. I wouldn't actually know, I could get that answer in talking with our ops and product team. But like you said, it's not like you flip a switch and it's working overnight. It's not even you flip a switch and it's working a month from now. Especially when you're dealing with places overseas, it might be multiple factory visits over a year or six months.

25:07 Ryan King

Or them sending samples and saying, hey, we can do this, but then you do small test runs to see how those go. And then you build into it. You never just give a brand new factory a million units, you've got to build into it.

So to truly build trust with a manufacturing partner and a factory, it is a year, if not years, to get that fully up and running and then building trust.

25:34 Ryan King

And also there's the financial implication. Stephen, what a lot of people don't realize is when you're working with a factory and just starting out, you're not going to get nearly as good terms as if you've been working with them for years. Because if there's trust built of, hey, we pay on time or we pay early, over time you can also build to say, hey, instead of 30% upfront, 70% on the backend, that goes to 20/80, or zero upfront, 100% on the backend. Or it can even be zero upfront, 100% 15 days after the boat leaves the dock. That can just have an effect.

And so when you're having to constantly rebuild a supply chain or move it to a different country, you're then just building those relationships from scratch.

26:16 Stephen Brown

Yeah. So we're dealing with uncertainty. You guys haven't raised prices yet.

26:21 Ryan King

That's a great question, and the answer lies in what I gave you right at the beginning in introducing Thread, which is where we sell our product and our channel mix.

What happens is, if we were just selling online, it would be easy to adjust prices. But a lot of our stuff is, we've committed to wholesalers. We've committed products at a certain price, letting their buyers sell at a certain price point. Because they want to hit, okay, maybe we're in the accessories category and they want everything to be under 15 bucks in their price point, or in their part of the store. So we committed to those months ago for a December delivery date or a January delivery date.

27:10 Ryan King

So you're just so far ahead on calendars and planning, especially from a wholesale perspective. We're already sending out catalogs to get pre-books, is the term that's used, of stores saying, hey, we'll buy this many of this, for orders for well into next year is where we're starting to get orders. And you're not sure. We haven't been sure since April of what the tariffs are actually going to be. So it was really hard to then tell a wholesaler, well, here's what your price has got to be.

And so now that we're getting, like I said, it's still so much up in the air, but we seem to be getting at least some more consistency of here's what the tariff rates are going to be, this is a conversation that we're starting to address again. So candidly, I wouldn't be surprised if we do see prices go up in the next few months, or for our goods starting 2026.

28:01 Stephen Brown

Here's a two man poll. How likely do you think consumer product prices are going to go up for a significant number of products in the next six months? What's your take?

28:12 Ryan King

I think it's a hundred percent. I'm a hundred percent certain that products go up. We're not the only business that has been kind of in this wait and see. We're in a holding pattern.

And now that we are, I mean, to just walk people through as the finance guy, I don't want to make this too elementary, but you look at a profit and loss statement, your income statement. You have revenue at the top. Hopefully that's, that's got to be, should be, if you want to be profitable, your biggest line item, right? Then you get dipping down into your expenses. And for the vast majority of companies I know in the consumer product space, marketing is going to be one of your biggest expenses. And then COGS, your cost of goods, either is your biggest or close to your biggest expense. There might be some that have really good gross margin, and then they spend more on marketing than their COGS.

29:10 Ryan King

But COGS is, I'd be curious your take, I don't know what the percentage is, but clearly it's one of a business's biggest expenses. If you all of a sudden up that by a minimum 10%, because I don't know any country that's tariffed less than 10% at this point, so a minimum 10% increase on that line item, well then the business has to change in other areas.

So you either have to lower salary costs, layoffs, pay cuts, something like that. Or less marketing. Or, hey, we're cutting back on employee meals, we're not bringing in lunch to the office every week now. And so all of these things have a ripple effect through the economy. And it's really hard to swallow as a company.

So yeah, the business has got to change in some way. It's either you've got to increase revenue by a lot to compensate for the increased costs you're paying for your goods, or cut expenses elsewhere.

30:05 Cost of goods and elasticity

Stephen Brown

Yeah, answering your question, because I look at a lot of brands, I would say a good direct to consumer brand is going to have a cost of goods sold that at the most efficient level is about 20%.

So case in point, I'm a co-owner in Solé Toscana, it's Italian organic skincare. Skincare tends to be a high gross margin product, we're about 20%. But it's spent a lot on customer acquisition, because you're competing against a million skincare vendors out there.

30:40 Stephen Brown

Usually when you get over 40% it makes it really hard. Because marketing, I'd say you're between 20 and 35% for a direct to consumer brand. I actually saw one yesterday that's really interesting, it's apparel, and they're only spending single digits, it was between five and 10%. And I was like, dang, that's amazing. I don't usually see that in a direct to consumer.

I will see higher cost of goods sold in somebody that's just reselling, like they go out and they get product from a manufacturer. And my thesis there is you're competing against multiple people that are selling the exact same widget. So there's a lot of pricing pressure on how much you can sell it for, you don't have the leverage to increase prices. Sometimes your manufacturer suggested retail price is the price you have to use, or that's usually the ceiling for a lot of reselling of product.

31:25 Stephen Brown

So that's usually what I see for cost of goods sold. And the challenge there is, the higher the cost of goods sold, the higher the financial impact is going to be to a business. And you've got to either, like a reseller can't necessarily raise that price. But even a direct to consumer, there's only so much you can raise a price before the consumer says, I'm done.

31:51 Ryan King

Right. And that's what we've been debating, because total pun intended, our elastic wallets are an elastic good. The more you raise the price, people don't need a new wallet all the time. It's not like milk, or diapers, whatever. And so you raise prices too much and then consumer demand falls off.

32:15 Ryan King

And then another thing that we haven't talked about, but it's been something that weighs on us daily, is not only are people going to maybe face higher prices for our wallets and our accessories and bags, but if they're paying more for all of these other accessories, what does that do to their appetite to spend more? If you're all of a sudden spending more money everywhere, then you might decide, hey, I don't need that wallet.

So then you're not just dealing with higher costs, but you're dealing with softer demand. And that's just a recipe for disaster, soft demand and higher costs.

32:49 Stephen Brown

Yeah. I'm not an economics expert, and I'm sure there's a concept for this, but I kind of feel like there's your micro elasticity, and then I feel like a kind of macro elasticity. Which is, when everybody is being impacted by higher prices, not only is there that willingness to pay for your product, they're having to juggle. They may buy a wallet, or they might keep their Netflix subscription. So there's going to be pressure for the consumer to say, they might just be like, well, I'll live and let live with this category of consumption, because I want this other category.

33:30 Stephen Brown

I think as an economist, the next couple of months are probably going to be fascinating, because you're going to see behavior that we probably haven't seen in decades, if ever.

This is the kind of thing I'm thinking about. Not only, if you do a price increase, there's that volume elasticity thing you have to consider. But there's also, to use your analogy, it's not like the money in people's wallets is expanding. We're not seeing wages go up. And so they're going to have to pick and choose where they spend as prices increase across the board.

34:05 Ryan King

Right. No, I totally agree. And especially for a brand like ours, we're very much an impulse buy. There's a lot of stores that we sell into where our products are on display right at the checkout.

And so it's like, oh, hey, I'm here in REI, one of our wholesale partners. They might've bought new skis, I don't know, or a new jacket. And then they see the $10 lip balm holder, and it's like, oh, it's only $10 on top of what I'm already spending here.

34:35 Ryan King

But what does that do to consumer demand when they're spending more in every aspect of their lives? They might get to checkout and be like, I don't need that wallet. I'm still buying the coat because I need that for my ski season, or I haven't gotten one of those in years. I don't really need that extra thing. And that's where we've thrived, is being that little extra add-on at checkout. And so what does it do there?

35:03 Stephen Brown

Yeah, I'm looking at your best sellers right now. Your lanyards are like on the website for $10.99. You've got one of your tote bags for 65 bucks. Fairly affordable as a consumer good, easy to just be like, hey, I want a wallet.

I also kind of think, to a certain extent you're fast fashion with your wallets, and you come out with new designs. So the affordable price points mean you could have different wallets, kind of almost like clothing. That really changes the dynamics.

35:47 Cutting costs and looking ahead

Stephen Brown

So with the wholesale, with the uncertainty, you guys have been slow to address prices. So are you tackling costs? What is it that you're doing?

35:52 Ryan King

Yeah, that's been something that we have been dogged in trying to rein in. And it's unfortunate in some ways, because we'd like to be spending more. It's like, hey, we're thinking of doing this high level, high funnel brand initiative, we might not see the results right now. Can we do it? No. The answer is going to be no from finance.

Or budgets are being tightened on how much our team's traveling. I know we've postponed trips to go visit factories, or even retailers, or trade shows. Or we're taking fewer people to trade shows. Because we're trying to cut back where we can to mitigate the increase in costs associated with tariffs.

36:31 Stephen Brown

Sounds like my Fortune 500 days. I worked for one Fortune 500, a couple of public companies, and that's the kind of thing that they would do.

My favorite though, I worked for Fortune 500 Symantec. They're long gone as an independent company. But they were so funny. We had no travel policy all the time. They'd be like, hey, we need to have a meeting. Not a customer meeting, an internal meeting. Next week, can you come down to LA, which is where we had a big office. And then things would get tight and finance would come in and it'd be like, no travel whatsoever. And I'm like, why don't we just be smart and have travel policies where you've booked two to three weeks out instead of five days? But when things are tight, you've got to make those moves.

37:18 Ryan King

Right. And it's unfortunate that we've had to do it, because the finance department and our president sometimes have to be the bearer of bad news, which honestly sucks. I wish we could say, hey, let's do that brand initiative.

And candidly too, there have been some good wins over the last few months, because of just our low price point. I think we're beating out other brands who maybe are at a higher price point, because of people thinking, there's this cool brand that has the $11 lanyard, I'm going to buy that instead of this other really high end whatever. And so they're almost shifting their focus down to lower price point items. And we've seen some wins there. But we've also seen some losses since April.

38:00 Ryan King

And if I can, I'm going back to a topic that I should have addressed earlier, but I wanted to get out there, one thing that I find interesting.

Because I am a born and raised Provo, Utah American, right? Lived here my whole life outside of a few years on a mission and then an internship. But what's interesting is I think people sometimes forget that the manufacturing of a product is only one aspect of a business. And so we've taken the heat from people, whether it's family members, friends, or customers, of like, why don't you make things in America, or why aren't you an American business?

And it's like, we're about as American as it gets. We started in Provo, Utah. I guess Hawaii was where the idea was, but we started in Provo. We have been in Provo, our headquarters, since day one. We bought a building a few years ago that was dilapidated. We renovated that. That's our HQ now.

39:20 Ryan King

And then if you look at just any business that's American, even if they manufacture overseas, what they add to the American economy. I've been telling people this in these tariff conversations, and they've come back to me and said, you bring up a good point. And I'm open to pushback, I'm just sharing our experience.

But you look at the building, for example. When we bought it, it was in a dilapidated part of downtown Provo, the building was falling apart. You had the architect who we paid to help design the space. You had the general contractor who got paid to build the space, who's buying goods, a lot of those are made in America, a lot of those are made abroad. And you have his subcontractors who are coming in and getting paid. You then have our employees here who are getting paid. You have people who come down, eat at a restaurant down the street and then buy from us.

40:10 Ryan King

Well, then the display in the retail space, the printouts that are on the windows, the window displays, those were printed here in America. So we're paying for those to be made here. You have the models who were on the photo shoot on the window display that are American, that were paid in US dollars, who then our team traveled to California to do that photo shoot.

So you look at it and it's like, there are hundreds of people throughout a year. And I actually haven't done the deep dive into this, but it's hundreds of people every year that are American that are getting a paycheck in one way or another from Thread. And this is how a lot of consumer brands work. It's a lot of people and it trickles through a lot of things.

And just because you don't have that one aspect of your business in America, it is interesting to hear the pushback of, well, why wasn't that done in America? You don't ever get pushback of, hey, we went on a cool photo shoot in Europe to get pictures of these bags. But when you make the product overseas, that's where the pushback starts.

40:56 Stephen Brown

You guys are looking at pricing, but it takes time. You've cut some non-critical spending, some discretionary.

As this continues to unfold, and I'd agree with you, it's hard to say things are going to be better, worse, the same in six months because it's so turbulent, but how are you guys thinking about the short term and the long term future as you're navigating costs and all of that?

41:24 Ryan King

Short term, I kind of laugh at this, but it's true. It's kind of just like, get through the day, get through the week, get through the month. In the sense of, hey, if we can book another week where demand hasn't fallen or we have good sales, that's another week of, in some ways, kicking the can down the road a little bit more.

41:50 Ryan King

We're even more aggressively, because it's a weird kind of thought process, but you've got to think on the expense side of where can we cut. But you also have to think of the revenue side, which is raise prices, which we've talked about, but it's also just find more revenue opportunities.

Because if you can find a new vein of revenue, so to speak, or maybe it's a subsector in wholesale of, hey, we haven't hit up ski resorts, that's coming up in the winter and we're not in a lot of ski resorts, ski shops at the base of the mountain. They've got logo stuff there. Well, if we can unlock that and get that more revenue, then that helps offset fixed costs, helps you become more profitable.

So it's not just raise prices to increase revenue to help offset, but where can we find more revenue to help offset these increased costs with tariffs.

42:35 Stephen Brown

Q4 is right around the corner. We're recording this August 2025. What's kind of the feeling around there for Q4? You guys think it's going to be good, meh, or not so good?

42:46 Ryan King

Well, I feel like there are mixed signals.

One of the big barometers for us here in a few days will be, we always do a Labor Day sale, and it's one of our bigger ones for the year. It'll be interesting to see what demand is on the Labor Day sale.

We got through Prime Day in July, and talking with a lot of friends in this space, Prime Day wasn't great in July. They spread it out, also, instead of two days it was longer. So it kind of packed less of a punch. But even those four days, a lot of brands we talked to were either down year over year or roughly flat, but it was over four days instead of two.

43:30 Ryan King

So I mean, if we could sunset what we did last year, we'd be happy. If we could eke out a little bit of growth, that would be great. But I'm not sitting here being extremely bullish of, we're going to do up 50% over Black Friday, Cyber Monday over last year.

43:45 Stephen Brown

Yeah, I agree with you. I think there's more headwinds.

I do think the so called big beautiful bill has, in the short term, I do have concern with it economically in the long term, but I do think some of that could provide a level of consumer stimulus.

It's kind of a mixed picture as I look ahead. I think it's kind of meh in Q4, and beyond that it's even more opaque as to how things are going to play out.

44:22 Ryan King

I totally agree. Spot on there.

44:23 Stephen Brown

Awesome. Well, Ryan, if somebody wanted to buy a Thread wallet, where's the best place to do it?

44:28 Ryan King

The best place I always say is our website, but we're really happy with any of those sales channels. So threadwallets.com. You can find us on Amazon. On our website we have a store locator so you can see all of the different stores we're in, wherever you are. And I think we're in like 14 or 1500 different wholesale accounts around the country. Chances are there'll be something decently close to you. But threadwallets.com is where you can find us.

44:56 Stephen Brown

And if you live around Provo, Utah, you guys have an amazing headquarters slash also a retail store right there on Center Street. I've been to it, it's amazing, check it out.

And if somebody wanted to connect with you, what's the best way to do that?

45:05 Ryan King

Yeah, we love it, it's a cool space.

It's a good question. I would say LinkedIn, as I definitely look on there. That'd probably be the best space. If you really want to find me, reach out to Stephen here and you can get my contact information. I don't know, I've never given that out in a podcast interview before.

45:28 Stephen Brown

I wouldn't suggest you should. But yeah, go find Ryan on LinkedIn. You have some great posts, very popular.

Okay, well thank you for joining me today on the Ecommerce Finance Podcast, and let's cross our fingers for a better future.

45:34 Ryan King

Yeah. Okay, thanks Stephen. It was great chatting with you.