Bahadir Efeoglu
Invest in inventory solutions in the early days. As much as it doesn't seem like the top priority or the sexiest thing that you can do at the early days of starting your venture, inventory is the fuel of your business.
Chase Clymer
Welcome to Honest Ecommerce, a podcast dedicated to cutting through the BS and finding actionable advice for online store owners. I'm your host, Chase Clymer. And I believe running a direct-to-consumer brand does not have to be complicated or a guessing game.
On this podcast, we interview founders and experts who are putting in the work and creating real results.
I also share my own insights from running our top Shopify consultancy, Electric Eye. We cut the fluff in favor of facts to help you grow your Ecommerce business.
Let's get on with the show.
Hey everybody, welcome back to another episode of Honest Ecommerce.
Today, I'm welcoming to the show the co-founder and CEO of Fabrikator, a growth-focused inventory planning software specializing in direct consumer brands.
Bahadir, welcome to the show.
Bahadir Efeoglu
Hi, Chase. Great to be here.
Chase Clymer
I'm excited to talk. I don't even think we've ever really dove too deep into what Fabrikator’s good at.
But before we get into that, let's talk about your background, how and how you ended up becoming the CEO of this brand and specializing in these types of problems.
So…Where do you want to start? Where do we go?
Bahadir Efeoglu
All right. So as a profession, I'm actually a digital product manager. I've been in the market for 10 years. I worked at B2B and B2C solutions, mainly in FinTech and also in Ecommerce.
So my co-founder is also coming from a similar background. We're actually coming from the junction of D2C and software development.
I worked at Martha Stewart's Marley Spoon as a digital product manager who is building the CX viewing in the supply chain and the operations part of the business to make sure that everything is being delivered in a perfect way to our customers.
That company I also see in the problems on the supply chain, obviously, Marley Spoon is a huge company. I think now they're across 10 countries and they're also public.
One of the first public food delivery companies out there. So it was a huge operation. I've seen the supply chain pain there.
And my co-founder used to build the QuickBooks for the Turkish market. He's a great software developer and he's been very closely working with SMEs and he knows how to build software for small businesses.
So putting together these two, we decided to build Fabrikator, which will help DTC brands to scale up their operations without worrying about inventory.
Chase Clymer
Oh, that's amazing.
So just quickly, could you explain the problem that a software like yours solves?
Bahadir Efeoglu
Yeah. At the simplest level, it's out of stock and overstock because if you look at the psychology of the merchants, how it works, if you run out of stock once, you panic because you're losing revenue and your next purchase order is going to be bigger than it should be and you will end up with an overstock, which is going to hurt your revenue, not your revenue, but the bottom line, profits because you would be buying more than you needed to.
And if you have this kind of swing between out of stock and overstock a couple of times, then you realize that there is a problem.
And most of the time, DTC founders are great people with creative stuff like packaging, product development, marketing, storytelling, and a nice supply chain.
It's kind of like the unsexy and the bloody part of the business that no one ever wants to touch, but you have to master it as well because that's what keeps your business running.
So they go to the most familiar solution that they know for long, and it's usually the spreadsheets. They try to plan their inventory on the spreadsheets, but their business grows faster than the offline data they have on the spreadsheets.
And at some point, it turns into chaos. They're losing track of what's incoming, how much they're going to order next.
And running into these kinds of problems, they either try to solve it by outsourcing someone, let it be a freelancer or a part-time head of operations, but that skillset is also not very easy to find.
So when I realized this, I wanted to offer a solution that actually takes that heavy weight off their shoulders and keeps them focused on what they're good at.
Chase Clymer
I agree with you when you're talking about how inventory planning is unsexy.
I think a lot of direct consumer brands get into this because they're creative and they're passionate about solving a problem. But things like inventory or all the things you're talking about are so unsexy.
With that in mind though, every problem, when you start a brand, isn't like a problem that founders should really be focusing on right then and there.
So when would inventory planning software... When in their growth cycle, how big should they be? When is this a problem that they should probably be concerned about?
Bahadir Efeoglu
Yeah. I've asked this question to myself a lot as well because we're serving the long tail of Ecommerce and the long tail of the market is quite long.
But I've seen...I tried to put a number on it.
First, I was saying like when they make their first million, they start looking for a solution to automate operations on the inventory side.
But then I realized that's not the real hint for us to understand when the pain becomes so unbearable that they look for a solution. It's actually the first out of stock.
When they have their first out of stock situation, they're like, “Oh shit, we need to do something better. We need to get better at this because I'm spending a lot of money on my ad campaigns. CPCs are going over the roof. And we are just not selling people what they want when they land on our website. We need to get better at this.”
And it's actually very good timing. Now we are talking about it because usually they have this problem during the high season, Black Friday or the Christmas season.
So that's where we get most leads right after the high season, because that's when they get hurt for the first time and they search for a solution.
Chase Clymer
Yeah. This is going to come out right after Black Friday and that Q4 holiday sales rush. You have their ears right now.
So what do you want to tell them? How can you help the pain go away?
Bahadir Efeoglu
Get to know your inventory cycles, understand your logistics, do not always ship via air because it's a panic buy moment as well. When you just ship everything via air, you're paying almost 10 times more than Ocean.
But if you know your inventory, if you know what you're going to order next, you can actually minimize your cost.
There are awesome solutions out there. Fabrikator is one of the leading ones.
And if you are not ready to invest in software, it's okay to start with an Excel sheet. Just get the grip on your lead time, on your average days of stock.
Keep a very good track of what is selling faster in the last 2 weeks, in the last month, just to understand the velocity of the products before they're reflected into the averages because it takes time to see them in the averages.
Keep an eye on your best sellers because these are the ones that will hurt you the most if you run out of stock.
And always plan for the worst. So have a plan B.
And I actually have a couple of tips and tricks to share about this too. But yeah, happy to go with your next question too.
Chase Clymer
Yeah, we'll definitely get into tips and tricks before we wrap things up here in a little bit.
But way before that, I want to know... I want to specifically ask you.
We're talking about growth and inventory planning. We know how that affects being out of stock. You're not selling the thing. You overbuy.
You have just too much basically cash parked on a shelf in a warehouse that you can't realize until it's sold.
So how exactly does an app like Fabrikator make it easier for a merchant to run their business?
Bahadir Efeoglu
When we started, we looked at the market, what kind of solutions there were. They're usually ERP solutions, just keeping track of what's coming in, what's going out.
It's a system of record. It's not giving you any future outlook of what your business is going to look like.
And for D2Cs, it's very important to split your limited working capital between generating demand, AKA marketing, and supplying for that demand, which is inventory procurement.
And the problem is that when you're spending marketing dollars, your return, the effect of your return can be seen today. If you double your Google Ads campaign today, you'll see the effect today or tomorrow.
But inventory is not like that. There is a delay. And even if you double down on your inventory, it's not going to arrive at your warehouse two times faster.
So there is a lag between your investments on both sides of demand and supply generation.
And we're trying to bridge that gap by putting all of these things in one platform.
So imagine it's kind of like a business plan showing you month over month with all your inventory listed, and your marketing team is able to input what campaigns are coming up and what's their expectation from this, like, how much uplift they're going to bring for particular SKUs.
And our software uses that as an input, running a forecast and telling you, “Hey, you're going to sell this much of products. And if you want to be in stock by considering your lead time, you need to place a purchase order now, maybe three months ahead, six months ahead, so you can be in stock with the right quantities.”
I know the supply chain is fragile. It's also volatile as well. Everything's going to change in between that time.
That's why we are always in full sync with your ShipHero, with Shopify, and soon with your freight providers too, just to adapt to the change because it's not a static world anymore. We need to keep an eye on every moving piece of the business.
Chase Clymer
Absolutely. And just to pair it back to what you just shared and use an analogy that I like, I guess. Maybe it's not an analogy, but we're talking about your cash flow cycle.
And when you pay Facebook money for a customer, then you have to fulfill the product that they buy. And a lot of people just look at that as their equation.
And that can work until like a million dollars a year, maybe even a little bit higher. You know, if you double down on Facebook ads, you're probably going to see double the sales.
But as you start to scale, you need to really understand where you're parking your cash and capital. And so if you don't have the actual products to fulfill the demand that you've generated from Facebook, or whatever your performance marketing thing is, you essentially like that money on fire.
So if you don't have this kind of forecasting figured out, which is... I would honestly say... I know I asked you the question, but I'm just going to give my opinion.
I would say this is one of the harder things about scaling a business. And I would... I've been on record saying I think you're in that scaling phase between $1 and $10 million, where everything that got you to $1 million is like toothpicks and duct tape and it's going to break.
This is 100% one of the things that's going to break is understanding this inventory forecasting stuff because it is this money math equation that you have to master so you can scale to get yourself out of just these weird growing pains of being a direct consumer startup.
I went down an insane rabbit hole there. Is there anything that you want to help me clarify?
Bahadir Efeoglu
It is. It is pretty complex actually. So there are a couple of tools in our tool belt to make this a little easier.
One of the things that I was really impressed to see that a customer is using is pre-orders as a research tool.
So the high season for them was coming up. They didn't know which products to order. They were too afraid of ordering the wrong styles, which might be out of fashion. And no one knew what's going to sell the best that year.
So they started taking pre-orders for a very limited quantity, but across a variety of colors and styles. With these pre-orders, they actually gauge the demand before the season hits. They knew what was coming up next and before their competition did, actually.
They didn't really care about the margins, so they paid an extra to their manufacturer to produce these products at a higher cost with a low quantity and ship them with the express shipping from overseas to their warehouse.
And they just kept their promise, fulfilled these pre-orders to the early adopter customers. But they actually purchased very important data on hand. They started to have a better understanding of what's going to sell better in that season.
So they placed the right products as a purchase order and they hit the market before the competition did with the better quantities, more accurate quantities.
I was pretty impressed when I noticed that they did this because when we designed that feature, we were not thinking about this.
And these are the moments that I really like when I learn from merchants how they use different tools.
Chase Clymer
So does this plug into my existing Klaviyo preorder? And then I plug this into Fabrikator as well and it just helps better the predictive analytics of what my inventory should be?
Bahadir Efeoglu
Actually, it does. Yeah. That's the part that I didn't really touch on but it's very important.
So the way we position Fabrikator is kind of like the head of operations or the central nervous system for your ops, which is connected to your storefront, your Klaviyo and your ShipHero and your purchase orders, which is your supply chain.
So it works like this. You create a purchase order, which is going to arrive in three months. And while you're waiting for that PO to arrive, you may run out of stock.
Instead of showing ‘back in stock’ alerts or collecting emails, what we do is we change the storefront as well, we change that out of stock button to pre-order button. We place the estimated arrival date of the products based on the purchase order, so the customers always know when it is going to be shipped.
And we do this at every single step of the buying journey. So the product page, the basket, checkout, order confirmation emails, and then the Klaviyo emails too.
So Fabrikator is actually an inventory solution that's creeping its way into every single bit of the operations, including the customer communication and CRM, because we want to make this very seamless and easy.
And we want to cushion the risk of running out of stock by offering pre-order automation. So that's how we thought about this whole value map connecting the loose ends.
Yeah. And I think it's the only software out there which is focused on inventory planning but also is able to modify your storefront on different conditions.
Chase Clymer
That's really interesting. You mentioned earlier that you had some tips and tricks. I want to make sure that I didn't forget to ask you if we forgot to bring any of those up.
Bahadir Efeoglu
I actually spoiled it a bit because pre-orders were one thing to prepare as a plan B because… that's what I learned during the COVID times.
So we were developing this algorithm to make sure that it's going to run with the highest accuracy. And then this Evergreen ship got stuck in the Suez Canal, if you remember. And then the whole supply chain was screwed up, everything being delayed.
It was a great meme for everyone, but it was actually a great reminder of how fragile the supply chain is. And your forecast can go wrong for the reasons that are not in your hands.
It was an inspiring moment for me. I was like, hold on a minute. Instead of trying to increase the accuracy of the model by one base point, maybe we can give our customers a safety net which will protect them from these kinds of unexpected events.
And that's how we actually connected the pre-order solution to our inventory system. So it kind of acts as the insurance that you can actually sleep tight at night without thinking about your products running out of stock because you can still take pre-orders.
Of course, you shouldn't do it for products that are going to arrive in like 100 days. But if the arrival date, arrival periods are shorter, you should definitely leverage that as a safety option.
Chase Clymer
Awesome. Is there anything that I didn't ask you about today that you think would resonate with our audience?
Bahadir Efeoglu
I think we should also talk about the marketing aspect of it because when your team is smaller, probably the marketing guy and the ops guy are talking to each other quite often.
But then when you scale, this connection starts to loosen up and marketing is not always telling the inventory part of the business what's going to be like in the next couple of months. And that miscommunication is causing problems.
They run out of stock and the marketing gets angry because they need to turn off their ads at campaigns and the platforms are punishing you when you turn off your campaigns for a shorter time.
Everyone is losing in that game.
And whenever I talk about the pre-orders, actually marketing people are the ones who get the most excited because they're like, “Okay, then I don't need to turn off my campaigns in the event of running out of stock. We're not going to get punished by the algorithm.” So they also have a peace of mind with this.
The second thing, we give them a common platform to collaborate. So the marketing teams are also using Fabrikator extensively to see what's selling better, also what's selling worse, so they can actually push them as bundles or stock clearance to make sure that they're not taking up space in the warehouse.
I once met with a customer who had thousands of iPhone 10 cases in their warehouse, which they didn't know what to do with. They were landfill recycling, but there's just too many. And they were like, “We wish that we had Fabrikator back in the days. We wouldn't have this much stock on hand.”
And phone cases and accessories for tech, these kinds of products, you really need to nail them at the right quantity at the right time because a year after, you will not be able to sell them again. So... Yeah.
Chase Clymer
Oh, man. I would feel so awkward having that problem.
Because when you mentioned that, my first reaction was like, oh, well, if you have a bunch of extra stock on hand and you want to get rid of it, you should do a free gift with purchase. So instead of eating that cost, it's incentivizing people to purchase more.
But that whole idea of tech… every 6 months, there's a new iPhone, right? And no one wants that old weird case style anymore. That definitely makes it a lot more important to get your orders right the first time so you aren't in a situation like that.
Bahadir Efeoglu
Definitely, yeah. And I think there's also an environmental aspect as well. At the end of the day, we are living in a fast consuming world. Thanks to Amazon, thanks to other big marketplaces, we are all conditioned to order more than we need. Like we order five sizes, try and send four back. So our carbon footprint is quite big on that end.
And that behavior is also continuing on the DTC side as well, because as a consumer, we are conditioned to get the service level that we get from Amazon.
And maybe our solution is not able to change that behavior on the consumer side, but we can actually create a better impact by ordering the right amounts from the factories overseas, shipping with less carbon footprint by selecting the right shipping option.
So we're trying to do our part in that because I really feel responsible as someone who's working in Ecommerce to reduce our footprint.
Chase Clymer
That's amazing. Now, Bahadir, I've listened to this episode and I am terrified of overordering or I've experienced the pain of underordering. And I just want to learn more.
What should I do? Where should I go? How do I get a hold of you and the team?
Bahadir Efeoglu
Yeah. So our website is the first place that you can go. It's fabricator.io. I know it's a difficult pronunciation for most of our English speaking customers. It's fabrikator.io with K.
You can schedule a call with me. I personally take all the onboarding calls because I believe every business is unique and they have different supply chain needs. So, you can find me on LinkedIn.
Wherever you find me, I'm always a message away. And I'll be the one who's onboarding you to Fabrikator.
Chase Clymer
Awesome. Thank you so much for coming on the show today.
Bahadir Efeoglu
Thank you very much.
Chase Clymer
We can't thank our guests enough for coming on the show and sharing their knowledge and journey with us. We've got a lot to think about and potentially add into our own business. You can find all the links in the show notes.
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Until next time!
