Supply Chain Therapy with Flexport and Portland Leather

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Morgan Becker
How are you supposed to make decisions when you're so stressed out that your capital partner is going to drop you at any time or change their mind on you. And so it was just that level of trust. Another big thing is I like to know who's actually making the decisions. And I felt like at the bank, I didn't know who was making the decisions. I never had met the CEO or the CFO. And it was like I was being promised a 10,000,000 dollar home like you're gonna get this home. And then in the end, they were like you actually can only have a 200,000 dollar condo.

Stuart Leung
hi, I'm Stuart Leung, CFO of Flexport. I'm here with Morgan Becker, CFO of Portland Leather Goods. I'm excited to get into a conversation.

Morgan Becker
Yeah. All right. Very exciting.

Stuart Leung
Morgan. How are you?

Morgan Becker
I'm good. I'm feeling good. We're in sunny California.

Stuart Leung
I know the sun came out. I'm really excited about that. Well, I'm excited to be here. We've done some work together between Portland Leather Goods and Flexport. Tell us a little bit about Portland Leather Goods, how it got started. What do you do there?

Morgan Becker
Yeah. Well, I'm obviously the CFO, Portland Leather Goods, I finance and accounting, but I think really why we're here obviously at our logistics conference is my role has really evolved into the operations. We don't have an active coo right now. And so I think people underestimate how much finance and operations go hand in hand. And so I've really kind of taken, that step in overseeing the operation side just because I like to see and make those decisions prior to seeing those hit the PL and balance sheet. And so, yeah, that's why I'm here and plg started in 2015 out of our owner's garage. Curtis. He really saw a gap in the market for affordable quality leather. And so he started selling and making leather journals and selling them at art festivals. And with his partner at the time, they were driving from Portland to boise and it's about a six hour drive. And at one point during an art festival, they paid somebody to go and drive back from boise and load their minivan with all these leather journals because they were selling out so fast. And then they drove back from Portland to boise and completely sold out. And that's kind of when they knew, okay, we have something this is super exciting started selling on etsy. And then after we became one of the top retailers on etsy, quickly decided to sell on Shopify, started our own website obviously. And that's really where things took off. And so we found a niche in the market which was affordable quality real leather and just marketing it to women, and they love it. So, it's a it's exciting brand and it's exciting to be a part of because we're growing and growing fast.

Stuart Leung
That's awesome. That's a great story. You speak to sort of the customer feedback. You have a really like strong viral following, like customers love your product especially on social. How did you guys achieve that?

Morgan Becker
Yeah. So I feel like, my takes gonna be different than obviously what our CMO and CEO say, but I really think it's the community that we created. Our social media team has done just a wonderful job. And so we have a group for example, called the insiders and it's a group of about 190,000 people and they just get on there to talk about bags or talk about life. And it's really just creating, that community and that excitement. And it's a great thing for our customer service team because we'll have people that go on there and they're like, why is my nutmeg bag scratching? And then somebody will answer on our behalf. And so it's just been just, so so special and so great for them to be a part of something bigger than just making a purchase. Yeah. So that's really exciting. And then I have to give credit to our ad buyers and our meta buyers. So all of our marketing is done in house from photography to obviously social media to ad buying. And so they've just, they built it from when E commerce wasn't so huge. And when meta was still young and just the placement of ads and really putting those in front of who we think our customers are, has just paid dividends. So it's been.

Stuart Leung
Awesome. Yeah. All of that. You've been working with Flexport for a few years. We've been really happy about that. Hopefully you have been too. How did that all come about? How did that relationship?

Morgan Becker
Develop? Yes. Well, we started, it was from the logistics side. So we've always used Flexport to move our product from our manufacturing facility to our three PL in Texas and, we had previously worked with traditional banks and traditional abl structures. And at the time we were working with a bank that, I won't name, but, it was a really disappointing relationship. It was going really well. And then it wasn't they wouldn't they promised us so much and only delivered a little. And so it was one of those things that the company was still young. We weren't ready for a super large institutional investor or traditional investor that's just not what we needed especially as we were growing so quickly and I didn't have a huge team supporting me and so we really were.

Morgan Becker
I think it was somebody who previously had worked for Portland Leather Goods, who was working directly with Flexport. Was like Flexport just opened a capital branch and you should really look into them and start talking. So, Quentin shout out, Quentin came to our Portland office and met and it was, I think it was only an hour long conversation but it was like a promise to us, that I just, I trusted and I was like these guys seem really great and, I feel like I can trust them. And it was, it made me excited because I felt like I was able to take a step back, do my job and not have to worry about the capital side of things. So that's kind of where it started.

Stuart Leung
That's awesome. You spoke a little bit about, the challenges of working with like an institutional bank or a lender. Can you speak a little bit more specifically? What are some of those challenges?

Morgan Becker
Yeah. I think every, I think just with our size and where we were heading, we just weren't ready for that level of just diligence and paperwork and legal. And I almost it's not that they're that they were out to get us kind of thing, but we were young and we didn't really know like what to expect from working with a large institutional investor. And so I couldn't do my job and really think of like strategic growth mechanisms with somebody breathing down my neck. And I felt like it was consistent like every week asking, okay, what was our next step for growth? What was our next step for making this report look like this? And I was like I would love to answer to this bank, but I know that it's more important to answer to my employees or to the CEO to make those decisions. And how are you supposed to make decisions when you're so stressed out that your capital partner is going to drop you at any time or change their mind on you. And so it was just that level of trust. Another big thing is I like to know who's actually making the decisions. And I felt like at the bank, I didn't know who was making the decisions. I never had met the CEO or the CFO. And it was like I was being promised a 10,000,000 dollar home like you're gonna get this home. And then in the end, they were like you actually can only have a 200,000 dollar condo. And I was like, okay, you're not that's not what I was promised. And so it was really just that trust and that transparency was so important. That's what I felt like with the Flexport Capital team.

Stuart Leung
That's awesome when you were going through the underwriting process and getting introduced to the team and the business. What did that feel like? Or how did that go? Yeah?

Morgan Becker
It was a long time ago. Now, I think at that time having somebody that you can work with that's comfortable. It goes back to the transparency side of things and feeling like I could ask questions and not have that used against me because in a lot of those situations, I thought that with these large investors, if I asked a question whether it would be like a legal question or just something that I didn't have knowledge about, they would come back and be like, she doesn't know this. And so this way we can adjust something in the contract and she's not gonna catch it or like it just felt sneaky and in a sense. And, I didn't get that feeling nor did I knew that they weren't that Flexport wasn't going to do that to me and wasn't going to take advantage of the fact that we were so busy that we didn't have time to go through… it. They were like the signed contract is three documents that protects us. It protects you. And you should feel confident with this deal. And it didn't take so much of my day away from me, which was, really nice. Just a much easier transparent process than with a larger investor bank investor.

Stuart Leung
That makes a lot of sense. And to, your point on leather goods, really awesome high growth business. You're focused on growing the business, reaching more customers. What did that funding allow you to do?

Morgan Becker
So, much so, we, in the beginning when I first started, we had such an emphasis on growth. And my biggest goal when I came in was to really transform and understand that okay growth is important. I have such a good relationship with our CMO and CEO and I want to maintain that respect and I think growth is important, but I think profitability is more important and our net income is more important. And so really making sure that those both grow in tandem was so important to me. And so I at that time knew that we weren't making the net income that I wanted us to be making. And so, in order to take those steps and really make those operational changes in order to start producing that net income and getting that cash flow in the door, we needed upfront capital to support us as we grew. And so what that capital did for us two years ago is so different than what that capital is doing for us now. And so two years ago, I would have said this is covering our operating costs and payroll and things that are just helping us move forward and operate as a business and helping me make better decisions. And now it's expanding into retail, increasing our inventory. We've always been short on inventory during our peak season and never been able to meet that demand which is obviously, so much in missed sales. And so, it's exciting that this is actually our first year that we're we have more inventory than we're expecting to sell. I'm sure our CMO is going to sell everything, but it's exciting and it's somewhere that we've never been before and you can't do that without working capital, and a really good capital partner. And so, the inventory and retail, those are, the two big ones for us right now that's.

Stuart Leung
awesome. Your, your expansion to retail? Would love to hear more about that like, where are you building stores? What's what's your vision?

Morgan Becker
Yeah, retail is exciting. We decided to go into retail because we were exploring new sales channels. There's so many things right now. We're majority direct to consumer, via our website and shipping and meta and all these different it's expensive. And so we're like, okay, what is a different outlet that we can give to our customers to make them happy? But then also see obviously that on the bottom line, retail stores are very profitable. And it also gives us access to new customers. And that's something that's really difficult to do, visually via meta. And so we're able to go into places like boise or Atlanta, Georgia places that we wouldn't necessarily be able to measure online and see those new customers coming in. And so we partnered with an agency called beta and they're helping us place our retail locations based on customer demographics. And so boise's one Seattle. Obviously, Washington's a big place for us. I think we're gonna have, I think eight stores, eight new stores open this year. So we had three and so eight more. Yeah, don't quote me on that number but it's exciting. But we're kind of we're putting a pause on it once these stores are open and really trying to understand where we want to go from there. One thing that we have learned is data is so important. And even though we want to grow and we want to grow our retail presence, we're not going to choose something or do something if it does not make us money, if it does not make us profit. And I think because we expanded so rapidly and grew so rapidly. On the E commerce side, we learned so much from that. So, on the retail side, we're like, OK, does a boutique make us more profit? Does an outlet store make us more profit? What do malls look like? Malls don't look great for us here? And we just need that data. And so, we're going to see what the end of the year where it takes us. And then we'll see what next year brings for us. So it's exciting. It's cool. And retail is also, it's so tangible. And we opened when we opened up our retail location in Seattle, that was so fun. We had over a 1,000 customers lined up on the street for more than four hours and just seeing the excitement and like the community and people were there like women and their daughters, their dad, like dads were there, men were there like, it was just such a cool experience and that's something that you can't get especially right now. With like I'm working remote, my team's working remote and so being able to fly there and get that like tangible excitement was just so fun. It was so fun. So it's cool. It's a cool side of business that I hadn't gotten to experience before. So.

Stuart Leung
I can appreciate that in my prior days, we had retail stores in my old business and being able to walk into a store, see how customers are engaging with your products, right? Engaging with your brand in different ways is really exciting. So that's awesome to hear. And also CFO, to CFO. I appreciate your focus on, you know, profitable growth, right?

Morgan Becker
Yeah, it's so important. It's so important. I think especially right now there's such a push for high growth companies. How do you reach that next mark? Like how do I make you become the next millionaire? And I think growth is so exciting. But a healthy business is just, it's so important. And it's so important for our employees. And I think the biggest thing for myself and our executive team is we care so much about our employees and I think we don't want to ever put them in jeopardy of losing a job or having to find something else. But we also have so much fun and we just love what we're doing. So, why jeopardize that by doing some crazy growth mechanism and not worrying about that profit? And so it just is coming, I think from a place more about caring for people and caring for our employees, that's awesome for.

Stuart Leung
your retail store expansion, which is so exciting. How has Flexport Capital come into play?

Morgan Becker
Yeah, it's really. I would say that the inventory in order to stock the stores has really been that's been where it mainly has helped. And so luckily… enough, we have a really good legal team and we negotiate our contracts, well, that the capex spend isn't necessarily, it's not large but the inventory to stock those stores and to make sure that you have all the SKUs and the variants and that kind of thing. All of that in stock is so important. And if we didn't have the upfront capital in order to put that into the store. So we, I think in the month of October and our VP of retail would know this better, I believe there's going to be… six out of the eight stores opening in one month, which is crazy. And so we had to front load all of that inventory, move all of that inventory. And I think one store is probably anywhere from 50 to 100,000 dollars worth of inventory and so a significant amount. And so that movement is so important and to make sure that we have enough there for when the customers come in. And so that's the inventory piece that's been huge for us.

Stuart Leung
Yeah, especially given the amount of customer demand. Yes.

Morgan Becker
That's awesome. Yeah, it's exciting but crazy.

Stuart Leung
Is good. Yeah. In some cases, in most cases… you know, direct to consumer companies have so many different options when it comes to both logistics providers, capital providers, you work with Flexport for both. Yeah. So what are some of the considerations that you take into account when… if you were a DTC company looking for a logistics partner and a capital partner?

Morgan Becker
Yeah, I think, I know, I keep going back to transparency but that's just so important to me and I really value good relationships and good people that I can trust. We do that with all of our employees too. It's a great thing if you have a great background. But if I don't trust you and if I don't love working with you, that's never going to work and that's never going to help us be successful. I think that's what I strive to find in vendors and that's what I have found in Flexport. It's not only that transparency but really that trust and that excitement and that feeling of wanting to pick up the phone. I feel okay and I'm happy to call the capital team. If I'm envisioning a problem six months down the road, I'm not nervous about calling them and be like heads up. This is what I envision happening, finding a vendor that's okay with that and can help us through. That is so important. I really value trust. One thing that I've always done that has never led me astray has been follow my gut especially with people and just making sure that I enjoy working with them and, you know, when that partner is not working out for you anymore. And so, it's really nice obviously to not have that feeling with Flexport and having that trust there.

Stuart Leung
That's really good to hear.

Morgan Becker
I love you guys.

Stuart Leung
We just heard from Ryan our CEO about the more than 25 tech and AI products that we launched as part of the fall release? Huge? Any of those products and features catch your eye? What are you excited about?

Morgan Becker
Everything obviously, tariffs is the biggest one that's so difficult to monitor right now and a lot of those things too. And I mean, that goes back to me kind of trying to jump into operations as well in that CFO role. So, some of that I didn't even know that there's potentially mistakes on your customs declaration or like that kind of stuff didn't even ever. I didn't even really think of it. And so knowing that you guys are being proactive is, so important. And I especially right now if you are not implementing AI or using AI in your business, you are so far behind and so being able to help teach it, learn from it is so important. And it's just, it's exciting to know that Flexport values that because we also value that and that's kind of where we envision our business. And so knowing that you guys are also working towards that goal is it's just awesome. And I am having software and obviously we're a company on Shopify, having software that makes sense with our software and can integrate is just from a time management perspective and it's just, it's so exciting. It's it's just really like it's positive. And I think we've been failed so many times by the promise of good software. And you guys have shown us that it's there and shown us that it's working. And so it's just, it's exciting. And I know our logistics team is gonna, they're gonna love it as well. That's awesome. Yeah, we're excited.

Stuart Leung
How has the Flexport platform been able to unlock value for your broader teams? Not just, you know, the finance team, yeah, but maybe the logistics team, maybe the merchandising and the planning team?

Morgan Becker
Yeah. I think the biggest one that we are actually that we just started using was the tariff, the tariffs feature. I think with the ever changing percentages that's been super helpful, I know that we are going to start using it's. Been difficult for us to know when things are arriving to customs and because we previously are in all of our international shipments that have been coming in, our vendors have not been Flexport that we use for any type of like international shipment and those are, very small, but it's very confusing, to not know when things are coming especially when tariffs are changing every single day. And so being able to know real time where your products are, what those products are sitting in the ocean or air or wherever they might be. So I'm really excited to start using that. There's just so many things that we haven't had the chance to unlock yet that I'm looking forward to so that that's a big one and just having everything all together and just be encompassed on one platform. Because like they were saying this morning, it's so difficult, to pull things and to aggregate that data and to make sense of it when it's coming from so many different directions and so many different vendors. And so being able to have that all sitting in one platform is just so so helpful. And then you can analyze it and you can make good decisions off of it. Whereas before there's no way we could have all that data in one area unless I spent a week of my time pulling in vendor who has time for that. Like, yeah, you're.

Stuart Leung
busy growing the business. Yes?

Morgan Becker
Exactly. So, and that's why we're so excited is because you guys allow us to grow, and focus on that strategic growth. And that's why we want to partner with you is because, you allow us to do that whereas so many other vendors can't do that for us, so.

Stuart Leung
That's great to hear. Yeah, what are you most excited about for plg? What's what's next? What's next for you?

Morgan Becker
Obviously retail is a big one. Branding, branding's a big one. We, we've always focused and had such a strong customer base, but we're like, okay, what's our next step? And how do we want people to envision Portland Leather Goods? Do we want it to be the classic leather tote that you're carrying with you your entire life? Do we want it to be more of just your everyday tote? We're not sure what that looks like. And so it's I've never been in the branding space before. And so it's really exciting, to, just to hear feedback and to meet different people in that branding space. I think the one thing I will say about joining Portland Leather Goods is, my understanding of marketing has just broadened. I, I've never been somebody who's been like marketing. I've always been finance is the best thing ever. And so it.

Stuart Leung
Is the best thing ever?

Morgan Becker
Yes, yes. But marketing just seems it's just such a new world and it's so interesting. And so hearing how important it is and how important branding is it's just cool. It's it's just an interesting part of the job. So, I'm really excited about that and being able to, give that to our customers and just more offerings. We're coming out with so many new products that's another thing that capital helps with as well is product expansion. I mean, before it was so hard for us, to come out with new products because we were just trying to keep up with demand of existing products. And so now we finally have the ability to come out with new products and new exciting things for customers. And so, I'm really looking forward to that as well because it's just exciting.

Stuart Leung
That's awesome.

Morgan Becker
It's a cool thing. So it's good.

Stuart Leung
It's easier that Flexport Capital has also helped, to expand your product offering in your product lines, like what are some new products, that you guys are?

Morgan Becker
Coming out with maybe you can share, yes, yes, we do something called the 12 days of Christmas. And so, for example, we'll come out with 12 new days of products. And so the one thing that we have focused on for this year is our hero products for say, and hero products are our top sellers. And so for the longest time, it was like large totes and they're usually bigger items. And so we're coming, we're trying to come out with this year just larger items for people and we haven't named a couple of them yet. So, but, our big structured bags, it's almost like our brand is becoming just more mature and I'm excited to see it because it's bags that I like to carry and that like I would like to use. And so, it's cool to see that because it's like, okay, instead of using, a 500 dollar tote, I would much rather carry my Portland leather tote for 150 dollars because it's I love the structure. I love the beauty it's just becoming something that's just so beautiful that I feel like hasn't that we haven't been able to achieve before. So, it's exciting to it's exciting to see that, that's.

Stuart Leung
great. Yeah. Well, congrats on all the success. Thank you for such a great partnership. Yes.

Morgan Becker
Thank you.

Stuart Leung
We hope to continue supporting you guys as you continue to grow. Yeah?

Morgan Becker
I'm excited. I hope so too, so, thank you. Awesome.

Stuart Leung
Thank you.