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Nathan:

Hey, what is up? It is Nathan Resnick with Sourcify and today we have another amazing guest on Product Sourcing Stories. This is a show about the entrepreneurs, creators and founders bring ideas to life. Let’s dive in and hear how these people groove.

Nathan:

What’s up? Welcome to Product Sourcing Stories. Today we have Dee Murthy. This is probably, honestly my favorite entrepreneur founder in the world. Just his energy is amazing. Dee, thanks so much for hopping on.

Dee:

Thank you.

Nathan:

I want to start, can you give us a quick introduction about yourself?

Dee:

I’m the CEO and co-founder of the Five Four Group. We started 18 years ago as a fashion brand called Five Four and now it’s morphed into a portfolio of eight different fashion brands that we own and operate. And then we have a service side of our business where we’re doing fulfillment, production, customer service for emerging brands. And as of five days ago, I’m in the hand sanitizer and mask business.

Nathan:

There you go. You got to adapt to times. I want to jump back to 18 years ago because not many people have been in the game as long as you have. What was the first product he ever manufactured? What was that like?

Dee:

The first thing we ever made were screen printed t-shirts locally. And we went downtown and we just drove around on Los Angeles Street and just walked into little shops and said, “How can we get some blank t-shirts?” And this guy goes, “This is a great deal. You should buy this.” We buy it, we get it printed. The printer’s like, “You just bought irregulars you idiots.” Our first attempt at buying something we got scammed.

Nathan:

Oh my gosh.

Dee:

That really raised our eyebrow. But back then, there was still a local manufacturing scene. Specifically for t-shirts and things like that, you could make stuff pretty price effectively. But really quickly, about two years after that, we got connected to people in China and we started making stuff. We started making denim and it’s so random that how it actually happens is someone said, “I make jeans in China.” And we’re like, “Okay, you’re our guy.” It wasn’t, Alibaba and all those things where you could even see options didn’t even exist. Just you knew a guy and you just trusted him and some samples showed up and then it was like, “Okay, cool. Here’s an order.” And there was a lot of trust that I still think happens today but the fact that we just, we never connect, we only talk on email. We never saw their face barely. It took us months to get production or any sense of what’s going on. But that’s how we started.

Nathan:

Wow.

Dee:

We just kind of one person led us to another.

Nathan:

Did you go ever go over there 18 years ago? What was that like? Because not many people have even been over there and then going over the 18 years ago, China’s a kind of third tier country.

Dee:

Yeah, we probably went for the first time in 2006, 2007. Probably that era. It was very different. It was you were going to these rural areas. People didn’t have all those fancy showrooms and there was a point where we got big enough in the last couple years, we just said, “We’re going to be in Hong Kong and Shanghai, if you want to see us, you come to our hotel.” That was not possible back then. We were going in these, and it just so happened these are the first factories we got introduced to. They were rural, middle of China.

Nathan:

What were you thinking when you went out there? You got to be suddenly going through your head.

Dee:

It really was just like, it felt like the wild, wild West. And I always, we used to always say, “Man, if we just lived out here, we would really understand this business so much better.” Because I’ll tell you one thing that we have noticed, when we first did our first order in China, we got ripped off. The second order, the price went down. Third order price down. 15 years later, the prices are still going down. It’s just mind boggling that every time we think we’ve got the best price, someone comes in actually cheaper. And the quality and it’s just, I think unless you’re on the ground there, if you haven’t done trips there, I don’t think you could truly understand the actual cost of a garment or in my case, a garment or understand what things actually cost.

Nathan:

Totally. And the thing is too, when you’re going over there, you don’t a lot of times realize the amount of detail that go into these products. Walk us through that process in regards to what does your product development process look like? Because there’s so many cuts, trims, you guys are doing so many different types of products. You have to have a whole team to be experts in all these products.

Dee:

Yeah. Early on, so my business partner who is at the time head designer said, “I’ll go and learn it.” And so whether it was wash houses in LA and Mexico or trim suppliers in China, he went and learned the industry and the business. And the beautiful thing is in sourcing it’s you don’t need to go to college for this stuff. You just have to go sit in a factory and you learn everything within two days. I would become an expert about denim after my first trip to China, where I understood the entire process and I understood where all the money’s being made. And then we were like, “Oh, okay.” Now we understood what we could do. People don’t put the work in often.

Nathan:

Exactly, exactly. Walk us right now through your process of how to validate it. Validate ideas before you bring them to life. You guys have this huge customer base. Are you placing big POs right off the bat? How do you validate an idea before you’re having to go place a PO?

Dee:

It’s a great question. I think there’s two things that are constantly happening. One is if we have time and we have the patience, what we’ll normally do is we’ll have a very long development process to perfect the sample. We will take three, six months to make sure we get the perfect product. We talked about it for footwear. Footwear is such a sensitive thing. We’ve taken six months, nine months before we’ve even placed an order. We will take our time. On the flip side, when a crisis, like what just happened in the last couple months, we’ve just had to pull the trigger. We had never made footwear outside of China, but all our factories were shut for two months and we just couldn’t afford to do it. We just, we took a leap of faith and we placed the orders in places.

Dee:

And what we on the back end do is let’s have a very strict QC process and really at the departure of the goods, spend more time then and filter out the garbage so we don’t get shipped a bunch of stuff that we can’t sell. And that’s really all that we’ve been able to do. We do have a small team on the ground in China, but in these other countries where we’re quickly pivoting to, it’s a lot of leap of faith that samples and really making sure we’re attentive. If you’re attentive in the development process and you’re super transparent, then at least you know what type of factory you’re working with because the factories just want to move things along. It’s not their fault. They’re just trying to push through an order. But we’re so adamant that we want things perfect. That allows us, that we have some level of comfort that they understand what we’re trying to make.

Nathan:

Got it. That makes sense. Can you touch on your experience manufacturing outside of China? In Vietnam or other countries that you’re in right now?

Dee:

We’ve done in the last year, in our history, we’ve done India, Pakistan, Bangladesh, Mexico, Vietnam, Korea. It is very, very difficult outside of China right now. China has one, a lot of experience. They have all the equipment, they can get any material in the world down the street. Lead times are great. Port accesses are great. There’s plenty of shipments coming everyday. Clearing goods is easy. The weather is a little controllable. We did a huge order in Bangladesh a few years ago, worst floods in years, everything got delayed, goods got damp when they got here, it was a disaster.

Nathan:

Wow, yeah.

Dee:

And the boat time from Bangladesh, India, Pakistan are so long. I would say today where we sit, anything outside of China has been very challenging. Doesn’t mean we’re not going to continue to try, but it is very, very difficult. The ecosystem in China to manufacture anything is like nothing we’ve ever seen before.

Nathan:

Right, right. It’s the manufacturing hub of the world. I want to also touch on your fulfillment center. Did you always have this fulfillment center? Walk us through starting your own warehouse. What’s that look like?

Dee:

We always felt that we wanted to ship our goods because we wanted the flexibility to really change on a dime because world changes, we need to bundle products or sell wholesale, do whatever, put stuff on sale. It’s just a lot easier when you control the warehouse. I also think we grew up in an era where everyone just had their own warehouse. We just started doing that for ourselves. And then the last two years, a lot of emerging brands were having challenges using 3PL because they are very restrictive. A 3PL service is great for someone that has all their processes in place, but for a new brand that’s exploding that doesn’t even know how to properly QC goods. We’ve become a really great alternative. And so we understand all the challenges a small brand face and we feel like we’ve become a great partner for a lot of really fast growing businesses.

Dee:

Because on the apparel side, you got to be nimble. Because unless you make like an iPhone case, which easy to ship, doesn’t take up too much space, something that’s, or like Dylan from BruMate who makes, it’s a classic items that don’t get old, that he can move through at his pace. Apparel’s a very seasonal business and so you need that flexibility. And so we really pride ourselves on, you want to come to the warehouse, come check it out. You want us to do the QC? We have a full QC team for our own business, we’ll do it for you guys. Those are the kind of areas where we think it’s important to kind of touch and feel the product.

Nathan:

Got it. That’s huge. And I know a lot of listeners right now, they’re probably curious, well, should I reach out to Dee to explore 3PL services? Who’s your ideal customer for this 3PL? For your 3PL?

Dee:

I would say a business that’s growing their direct to consumer business pretty quickly on the apparel side. I wouldn’t say where, if you’re in beauty, I don’t have probably the right storage. I don’t have the right capacity for that. But on the apparel side, I would say anyone that’s fast growing that needs, we have customer team in LA, customer service team in Mexico. We on a good day can ship out 10,000 orders a day. We feel like we can handle pretty sizeable volume.

Nathan:

That’s amazing. That’s great. What’s one tool in your supply chain or in your business that you could not live without?

Dee:

WhatsApp.

Nathan:

WhatsApp. There you go. That’s a good one. I was going to say, it’s got to be either WhatsApp or text because I feel like, you’re not on Slack that much are you?

Dee:

I actually don’t have Slack. I don’t have any communication office tool that my entire staff is on. Here’s be honest, being transparent. My phone is ringing and texting, exploding all day. I just don’t have the capacity even to leave text because it’s just too much. I turned my phone over during this, I’m afraid to look at it after not looking at it for 20 minutes.

Nathan:

Totally. Totally. All right. Tell us about a manufacturing disaster you’ve had or if one doesn’t come to mind, a big manufacturing success story where a vendor came in for a crisis or to really help you out.

Dee:

Disasters galore. I have plenty of those. I’m dealing with one right now, a vendor, a chinos vendor of ours, got delayed because of the coronavirus. Finally got the goods here. We did an air shipment slash sea shipment. Goods get here, they’re already late. 50% damage rate.

Nathan:

Oh man.

Dee:

The QC, they didn’t do QC in China. And now we’re fixing and repairing the goods here. I’m going to be late on shipment. Some of these goods have to be rewashed, cleaned up on trim. And it’s just, this is the challenge when you’re in a rush. Anytime you know you’re going to rush something, it’s a 100% a disaster. There’s never, ever been a situation for us where we’ve pushed someone and actually everything worked out. I think my lesson is, when you’re going to rush and push people, you’re going to deal with the consequences of that unfortunately.

Nathan:

Yes, that’s very true. I got to ask, you have so much going on already. You have just a huge, huge following and so many brands, New Republic, Grand AC, what’s next? Is it continuing to launch more brands? What’s really the next five years, 10 years look like?

Dee:

If you’d asked me that question a month ago, I think it would have a very different answer. I feel the world has dramatically changed. And what it has done for me is re-envision how the world is going to live and find opportunities based on that. We’re actually today launching our clean brand, it’s called Clean Monster and it’s hand sanitizers, wipes, branded in a whimsical fun way. And I think that’s just one step of it. That’s just the low hanging fruit. But what happened in the last month, every industry has to evolve and adapt. How you make clothes, how you buy food at a grocery store, how you eat at a restaurant, those experiences have to change. My mind has gone wild at all the opportunity that’s out there today.

Nathan:

Totally. And the rise of eCommerce is only going to grow through this coronavirus outbreak. Dee, thanks so much for joining us on Product Sourcing Stories. If people want to reach out or get in touch or follow you, where can they find you?

Dee:

Dee Murthy on Instagram. I’m on LinkedIn with you. You always post amazing stuff on LinkedIn. And Twitter, I’m just talking shit on people.

Nathan:

Awesome. There we go. Everyone, there you have it. Dee Murthy, thanks again.