Tariffs, Returns, & the In-Country Advantage: How Brands and 3PLs Can Optimize the Supply Chain

Last week, I had the opportunity to chat with some DTC and 3PL industry experts on a webinar hosted by Two Boxes, a company aiming to build the world's best returns processing solutions. I’m an advisor and a big fan of what Two Boxes is doing, and they brought together a fantastic panel to help brands and 3PLs make sense of the current economic situation. We discussed how tariffs and other current events are impacting brands’ strategies and their relationships with third-party logistics companies, and we touched on topics ranging from bonded facilities and free trade zones (FTZs) to how e-commerce brands are managing consumer experiences in a fluctuating market.

I was joined by Alex Kent (Director of Strategy & Innovation at Stord), Chad Brinton (Head of Operations at True Classic), and Kyle Bertin (Founder & CEO at Two Boxes), who moderated the discussion. 

Watch the full webinar here on YouTube, and read the transcript below.

From navigating tariffs to evaluating 3PLs, you won't want to miss this discussion! Featuring... Chad Brinton, Head of Operations at True Classic Kyle Bertin, Founder & CEO at Two Boxes Alex Kent, Director of Strategy & Innovation at Stord Matt Hertz, Founder & CEO at Third Person Learn more at twoboxes.com

Webinar Transcript

Kyle Bertin (Founder & CEO at Two Boxes): All right, thanks everybody for joining today.  I'm really happy to be joined by this group today. I think it's an awesome cross-section of, you know, kind of merchant 3PLs and operators in the space that understand a lot about the current market environment and how brands and 3PLs are navigating together through this. We've only got about an hour today, usually that goes fast, so what we'll do here is we'll kick off with a round of intros. I'll keep mine short and then I'll, you know, kind of direct us from here. So everybody, I'm Kyle Bertin, I'm the co-founder and CEO of Two Boxes. We build return processing software that serves, you know, dozens of 3PLs and hundreds of brands across the globe.

We help those returns effectively, we say returns become an asset when you work with Two Boxes. And through this journey, I've been able to meet these three guys on the call and when we were thinking about putting together a panel of, you know, how could we, you know, have something, you know, sort of intelligent and hopefully helpful to say about the current landscape in regards to tariffs, this was the group that we really thought of right away. So really excited to have Alex, Matt, and Chad here. Maybe what I'll do is I'll kick it over to Alex to start. Alex, if you can tell us a little bit about your background and your company and then we can go from there. 

Alex Kent (Director of Strategy & Innovation at Stord): Yeah, thanks, Kyle, and thanks for having me. Alex Kent, I lead partnerships and strategy here at Stored. So Stored is a e-commerce 3PL primarily, but more of a commerce enablement company. And what we really try to do is combine the physical aspect of operations and logistics from port to porch and porch back to the warehouse, but also the technology that operators and brands need to help sell more, reduce headaches, and eliminate costs or reduce their costs. So obviously a lot of our customers are affected by the recent global trade announcements and I'm excited for the conversation today. 

KB: Awesome. Thank you, Alex. Matt, do you want to go next for us? 

Matt Hertz (Founder & CEO at Third Person): Sure. Thanks, Kyle, for having me. Full disclosure, I'm a very happy and active advisor of the Two Boxes team. I wouldn't be advising them if I didn't think they were an excellent software that brands and 3PLs should be using. So Matt Hertz, I am the CEO and founder of Third Person, which is a platform to help connect brands, e-commerce brands with 3PLs. I'm also fortunate to have Alex and his team at Stord on the platform as well. My background is really from the brand side. So I've worked at a few high growth brands earlier in my career, companies like Rent the Runway and Birchbox, sort of pivoted that experience to running a consulting business called Second Marathon, sort of like a fractional operations consultancy. And then last year, launched Third Person to help brands discover and connect with 3PLs. So really excited to be here and share a little bit of knowledge about what I'm hearing from both 3PLs and brands as it relates to duties, tariffs, and all the latest news out there. 

KB: Awesome. Thank you, Matt. Thanks for being here. Chad, you want to go last here? 

Chad Brinton (Head of Operations at True Classic): Absolutely. Thanks for having me, Kyle. Excited to be on this panel with you guys. Started my e-commerce journey, what feels like forever ago now back at Walmart e-commerce, then moved on to Made In Cookware, where I was lucky enough to meet Kyle and the Two Boxes guys, kind of be an early partner with you guys. And at the time we were running our own fulfillment and got to deploy Two Boxes in our fulfillment center. And very soon we'll be using it again via our Stord relationship where I'm the head of operations now at True Classic, overseeing fulfillment, logistics, sourcing, and production. So some pretty relevant topics for the discussion today. 

KB: Awesome. Thanks, Chad. I mean, for those on the call, you can always put comments and questions in the chat here. We'll kind of take some Q&A, I think, throughout, but then also at the end. I just wanted to set the stage a little bit, some data points that really stood out to me coming into this call. There was a great survey that went out through the TTC newsletter and just some highlights here. And then I want to get some reaction from the panel. So 36% of respondents in that survey said that tariffs are going to have severe impact on their business. 40% said tariffs will impact their next PO. 72% of respondents said that they plan to raise prices. And 60% of respondents said that they are somewhat confident, or sorry, that they're only somewhat confident or very uncertain about their ability to navigate tariffs in the next 12 months. So I think there's a lot of uncertainty and doubt out there. 

Just to kick it off, maybe I'll pick on Matt and Alex as an open note here. And you guys can kind of pop on here if you want to go first. What are brands asking you in this environment? And any common questions or things that you've been helping them address? 

AK: I think for us, the conversations started as far back as August of last year when the election was coming up and people were evaluating if Trump won, what was he going to do? And this all kind of started in 2016 with some of the implications he put on tariffs back then. But some of the conversations started happening then. And then obviously, December, you had some changes in the IMEX program. You've had disruptions in the carrier and parcel delivery networks. So the conversations are continuing to go.

Obviously, there's a lot more brands now that are coming to us and asking questions specifically on inventory plays with bonded facilities and FTZ facilities. And Matt, I know you are fielding a lot of those questions. But just looking for different strategies on, hey, are these tariffs on China going to stick around? And if so, what do we do? And I think we've already helped a number of brands through the IMEX changes with our 13 facilities here in North America, 11 in the States, two in Canada, and being able to be flexible and nimble and launch new brands quickly. That's what they're looking for out of a new provider too. 

MH: Yeah, sure. Yeah, I think a lot of the sentiment that Alex has shared kind of resonates with amongst the conversations I've had with brands and 3PLs. I think at the highest of high levels, brands are asking like, what the hell is going on? What do I do? Do I panic? Do I make a change in the next 30 days that will have years-long implications? Or do I just kind of sit and wait and see what will happen in the next hour, in the next day, in the next quarter, in the next year? 

My recommendation to brands has always been like, while you don't necessarily need to make a change in the next 30 days, let's be aware of what our options are. And Alex mentioned bonded warehouses, bonded facilities. I'm sure we can talk about that later in this call. Slash FTZs, free trade zones. Bonded warehouses are certainly becoming a very popular topic. Candidly, it's the most common question I've gotten in the last week to two weeks is, what is this bonded warehouse thing? And does it make sense for me? There are a limited number of where... According to Claude, AI tool, there's about 250 bonded facility operators in the United States. So actually a very limited number. I also believe there's over 10,000 3PLs in the United States. So a very small percentage of them. So does that make sense? As Alex said, how do I incorporate the margin impact of the tariffs as we know it today into my product? When most e-commerce brands on average have a fairly thin margin, and I'm not going to ask Chad what True Classic’s margin is by any means, but he could probably talk a little bit about typical margins with DTC apparel brands.

If you're running a 15% net margin, you are killing it. And now if you're producing your product in China and there's currently 145% margin on the value of the product, that is hugely impactful. So it's a lot of branches asking, what are my options? And let's try to be thoughtful in evaluating which option is best for my business looking forward.

KB: That's awesome. Thanks, Matt. Chad, I think maybe I'll pick on you next. I know that this has been something that you've been evaluating for a long time. It wasn't news to you that these things were coming. Can you walk us through how did you and your teams plan for this? And how have you been responding right now? What are you monitoring? 

CB: I think the team, far before my tenure, really saw the writing on the wall as it related to China specifically. And I think we all saw that one coming, both as it relates to tariffs as well as just the treatment under section 321 and de minimis thresholds related to China product. And the team really did a great job in being diligent and moving that manufacturing to other geographies.

And I think a lot of people did the same thing. And I think the manufacturers themselves saw the writing on the wall and stood up manufacturing footholds in other geographies, such as Cambodia and Vietnam, and even some in Kenya and other areas of development. I don't think we anticipated, and I'd be interested to hear if anyone really did, the first round of the reciprocal tariffs that were put in place and now hard hit some of those geographies that we particularly took advantage of were with Cambodia getting a 49% tariff, just as a reference, right? Vietnam, 36%.

That was a bit of a shock and frankly, a pretty scary realization for us in our business and our margin profile. The thing that has been the wake-up call for us, both as someone who oversees sourcing and manufacturing, as well as our fulfillment and logistics side of the business is during these tumultuous times where policy is very volatile, trying to not have our reactions to those be very volatile, but for us to just keep as many options on the table as possible, right? So things are definitely going to continue to change and we need to be ready to source product out of additional locations in Southeast Asia. We need to have locations in Central and South America that are ready for us to move manufacturing volume there.

We need to have fulfillment that can be flexible to bring a product into the US or deferring bringing that product in. I think we're all also waiting with bated breath about what the future for Section 321 looks like for non-China product, where the timeline has been very nebulous on what that looks like. So yeah, we all know that there are going to be a lot of changes and I think we've been shown that it's going to be more volatile than maybe we had anticipated. I'm just trying to keep as many options in play as possible just to be able to react to those in a thoughtful but also swift manner when they come. 

KB: That's awesome. Chad, thanks for that. I think what we'll do here is after we set the stage here, I wanted to move a little bit into more kind of tactical things for brands. Maybe I'll keep it going with you, Chad. You guys did make a lot of changes in the supply chain recently. What kind of made you have the confidence to change some of those? We talked about sourcing. Sounds like sourcing you guys were well ahead of. But maybe could you talk us through kind of the fulfillment and logistics side of things and some of the changes that you made at a high level and why you had the confidence to make those? 

CB: For sure. I mean, this was another sort of unanticipated policy change. Early in my tenure at True Classic, no way to prove your worth to a new organization than have to deal with some legislative changes, a supply chain crisis. We certainly didn't anticipate some of the Mexico changes relative to IMEX that happened at the end of last year. I think that caught a lot of people by surprise. Again, we're just in a position where I think we were shown that we were a bit susceptible to risk and not well diversified from a fulfillment perspective when that came about. Being able to move quickly and Alex, obviously, we were pretty vocal about the help that Stord provided us during that period of time to just be able to accept the scale of our business and kind of quickly react from a technology perspective to integrate and allow us to kind of ship orders in a short fashion.

At the time, we were unable to receive any product to our fulfillment center servicing the US at the time. So, it was definitely a scary realization to wake up to. As we look at that sort of shock and the realization there, I just go back to the comment about keeping options in play. The bet that we made in moving some of our fulfillment to Stord was that our incremental cost of importing product to the US would be covered by reducing outbound shipping to the customer by being a bit closer to the customer and then an added benefit of a reduction in time and transit for those orders. Thus far, that business case is proving to play out well. So, it was a good bet on our behalf.

But I go back to the comment about keeping options in play and when tariffs are high, having fulfillment in other geographies where we can take advantage of Section 321 is also critically important to us. So, just trying to keep as many irons in the fire and just provide our business with as many alternatives as possible to kind of wade through these policy changes. 

KB: Really helpful. Thank you, Chad. Matt and Alex, I'll kick it back to you guys. What questions are you getting right now from brands about kind of fulfillment capabilities? So, Alex, when people are coming to you, what are they asking you? And then Matt, when brands are looking for new fulfillment providers through Third Person, what are they asking? And also, what do you think they should be asking that maybe they aren't asking today? 

AK: Yeah. I think a lot of what Chad said is what does that cost look like? What's the operational cost going to look like if you domesticate your fulfillment here in the States? Which nodes make sense? Do I need two, three fulfillment nodes? Do I need four? How can you help me in other countries? How can you help me ship internationally so you're still fulfilling those orders and reaching those consumers? I think to answer the second question, is the staying power of the 3PL, right? How's the 3PL operating and how's your fulfillment partner operating? Fulfillment is like a marriage, right? And you have to choose a partner that's going to communicate with you.

But also, how financially stable are they? You don't want to pick up and move two to three times in two to three years. You want to have longer-term relationships and be able to be supportive of those brands that you're signing on. So, I think that's one of the things to look at is what does the leadership team look like? How financially stable are those organizations? And what's the staying power of the partner as you are evaluating different fulfillment? 

MH: Alex, I say all the time that fulfillment is like marriage, but I told my wife that she's like fulfillment and she did not like that. But no, I do say that all the time. It's absolutely right. I think many people think that selecting a fulfillment provider, a 3PL, is like a transactional decision. They think it's like finding a hotel for the weekend, where if it doesn't work out, not an Airbnb, right? If it doesn't work out, no big deal. It's probably not going to be too bad. And next time you go to that destination, you'll stay somewhere else.

But this relationship is really important. And I think what's underlying in what Alex said is that the best partner you can choose will be the cheapest partner. And cheap is not defined by the initial pricing proposal you receive from half a dozen 3PLs. Cheap is defined by the total cost of managing a partner. And I've worked with literally hundreds of brands, helping them through the process. And ultimately, it's the brand's decision.

Just like if you're dating and you ask your best friend, who should I actually date or who should I marry? It's ultimately your decision who you want to take the next steps with. But there have been times where brands are gravitating towards the lower-cost solution. That's not to say the low cost solution may not be the best solution for you, if that works out fantastic. But there's often costs that you don't necessarily see in a spreadsheet that are real. 

So what I'm sort of wrangling with right now, given all the excitement around bonded facilities and free trade zones and some of these other opportunities in the spaces, might it's... And Chad, you were kind of hitting on this when you were talking about selecting Stord for some of your logistics needs, for some of True Classic's logistics needs is that maybe if Stord was the best partner for True Classic at that moment in time, which it sounds like they absolutely were, maybe just choosing that more expensive option, maybe it doesn't have all the cool bells and whistles of being a bonded facility or enabling Section 321 or anything else. But if you really aligned with the management team, the operators on the ground at that specific, in this case, Stord facility, who you really resonate with, who you can talk to, who you can communicate with, who are doing a good job, that might be less expensive than all this whiplash that I know a lot of brands are kind of pursuing just to find what in an Excel spreadsheet indicates to be the lesser cost option.

So I think that point you made, Alex, is really important about really thinking about this as a marriage where there's lots of variables and inputs into the ultimate decision. 

KB: Thanks, Matt. Awesome. I wanted to talk about two other things in this section. The first is, maybe Chad and Alex and Matt can jump in as well. Are there any specific kind of more, I'll call it, advanced tactics that brands are looking at right now or should be looking at? Some of the things that I hear about is obviously bonded warehouses, but also certain people shipping direct from overseas, people looking at kind of tear-up engineering in certain ways. And then also, I hear a lot more interest in things like duty drawback than I did a year ago. I think a lot of brands didn't even know what that was. Can you maybe talk through that? Things that you think are appropriately hyped versus overhyped and anything that you guys are taking pretty seriously from that regard? 

CB: Yeah. I think it's a “yes, and” conversation to everything you just listed. I mean, certainly with the announcement, I guess, almost two weeks ago now and to the extent to which some of those tariffs were originally communicated, I think it had brands looking at all options and trying to think creatively about all those solutions and then some. So yes, I think all of those have been topics that have been in conversation with us today, as well as having some hard conversations about new product launches and development in the pipeline and open purchase orders, where maybe that's not a business we want to be in anymore. And kind of forcing some of those conversations that maybe we would have not had in terms of SKU rationalization and assortment changes that just maybe is not a business that makes sense for us anymore. I think the biggest change that we are going through in a business is really just evaluating how we identify and source and vet and bring on board manufacturing partners to us as well as any business, right, quality is paramount and we wouldn't make any sacrifices on one that impacted quality of the product at the end of the day. So making sure we go through all that right process.

But while it's not maybe the most technologically advanced solution or really like a creative thought, it really is just a wake up call for us to just make sure that we can be nimble on where and how we get products manufactured. Because to us at the end of the day, fulfilling from Asia where our product is made, yes, that might have some benefits, but that's certainly a change that the customer is going to see in terms of shipping speeds and things like that. And I don't know that that's a direction that we really want to go. And of course, we're exploring it and we'll answer the question. But there are things that we can do that have less direct customer-facing impacts that are going to be our first opportunities for sure. 

KB: That's awesome. Matt or Alex, anything you guys want to add there? 

MH: Yeah, I can jump in first this time, Alex. Yeah, I think Kyle, you mentioned duty drawbacks as an example. I'm certainly not an expert on that. Looks like we do have an attendee on this call who is an expert on that. A company called MeetCaspian.com. I'm not incentivized by them. I just know they're a great provider. They help brands like True Classic with duty drawbacks. I think that's absolutely something that all brands should evaluate. It takes time to get up and running with that program. So why not start now? And also, I know there's a handful of 3PLs on this call and other providers. Caspian and partners like that are ones that you should absolutely be recommending, encouraging your clients to use.

And I think from a 3PLs perspective, I think today is a really good opportunity. When I say today, where we are with everything going on, it's a really good opportunity to introduce your clients who listen to you, who respect you, who are leaning on you to be de facto consultants to them, recommending these types of solutions to help them save some margin. So whether it's duty drawback, obviously, Two Boxes is an incredible platform to allow you to essentially resell or make use of inventory of returns that traditionally is like an afterthought. I know Kyle knows the exact percentage, but directionally, I believe 1 in 5 things that are sent out are returned. About 20% of Ecommerce-ish are returned. And I know in talking to Kyle that much of that 20% is not actually re-merchandised, resold. And that's a huge, huge... And by the way, that stuff is not dutiable the second time, right? Because it's going from my home in Nashville back to Alex's 3PL, Stord’s 3PL in any market.

So really being mindful of these opportunities that are generally lower-hanging fruit that aren't requiring these massive operational changes are really interesting opportunities to save some of that margin that might now be going to Uncle Sam. 

KB: Thanks, Matt. Appreciate that. Alex, anything you want to add here? 

AK: Yeah, I think just a couple of other things is a lot of these DTC brands offer free shipping and evaluating, okay, what is that order value to achieve free shipping and looking at that as a way to pass some of that cost back to the end consumer. But also around the returns process, right? We're all used to this kind of free returns that Amazon has enabled us. And is it really that feasible anymore for a mid-market DTC brand to be offering that? There is labor that goes into processing that return. There's great software that helps it make it more efficient, but there is that parcel label generation for that return as well. And I know we'll get into more return talk here shortly, but just looking at ways that you can pass some of that cost back to the consumer while still achieving and giving the consumer a great experience. 

KB: No, that's awesome. And actually, I guess, Matt and Alex, you guys teed it up nicely. I did want to talk about returns a little bit. Obviously, I don't want to make this a Two Boxes sales pitch, but I just want to talk about from your guys' perspective, how has the importance of returns changed from both the 3PL and the brand side in the last 5 to 10 years? And maybe we'll start there. So I guess, Matt, maybe to mix it up a little bit, when you're talking to brands and 3PLs, how has the importance of returns changed recently? 

MH: Yeah. And again, not to make this a pitch about two boxes, I'm just kind of addressing what I see as kind of reality, and there's no sense in not embracing software platforms that are the right ones to partner with going forward. But I sort of mentioned this in my last comment, but returns have always been kind of an afterthought. I've walked into at least a couple hundred warehouses, but probably hundreds of warehouses over the last 15 years. And every one you walk into, there's kind of this, I call it the graveyard on the side of the warehouse, which is just all this crap, all this returns, collecting dust and cobwebs. And no one knows, everyone's afraid of that.

Back when I was at Birchbox, we're doing a million orders a month, we got a lot of returns for any number of reasons, rejections, RT, return to senders, et cetera. And it was always like the KPIs or the SLAs of most warehouse brand relationships, the number one thing that brands are typically concerned with is getting out today's orders today. It's like the outbound fulfillment.

Like, Matt orders a couple of teas from True Classic, Chad's brand, which I've done many times. I expect that to ship really, really quickly. And Chad manages his 3PL partner accordingly. Returns is kind of that afterthought. It's like, just sort of get to it when you get to it. But that is changing.

And with 3PLs, it has historically been difficult to change that because they're tedious, everyone's a little bit different. It's like receiving eaches versus receiving a fresh, clean pallet or a container of well-labeled SKUs and cartons. So I think as the dynamic is changing and as platforms like Two Boxes make it more seamless and easier to receive, and frankly, as different RMA, returns management platforms like Loop Returns, for example, make it easier for the customer, for the consumer to return and integrate into platforms like Two Boxes, I think the tide's returning where 3PLs are starting to recognize that this is something that is important to brands.

I mean, frankly, having represented many brands through the RFP, I'm seeing 3PLs sell or pitch platforms like Two Boxes. And I see Alex was kind of nodding too, and maybe Stord does this. I can't, I can't recall exactly. So I don't want to put them on the spot, but I've seen a handful of 3PLs spell this as like a significant value added service. And when, when customers, when brands like True Classic see this, they're like, Oh my gosh, like, absolutely. This makes sense. And, um, you know, that's why I think. The ability for, uh, brands and three PLS to really embrace returns as a revenue driver and not this like boring kind of graveyard side of the warehouse, you know, cost center that, you know, once a year when we do our physical inventory, some accountant is going to write it off and tell us what the amount is like. That is really, really important, particularly in this market where tariffs are quickly becoming a meaningful, uh, blocker or, you know, hurdle to brands. 

KB: Thanks, Matt. I, uh, really appreciate that. Um, Alex, maybe I'll, I'll have you go. Cause I want to end this section with Chad and ask you more specific questions on returns when it comes to the brand side, but, but please, anything you want to add?

AK: No, I think, you know, the return section of the warehouse, if you're doing a facility tour, I was in our Kentucky building last week, uh, touring with a brand and we highlighted the returns for this apparel customer. And, um, you know, the, how we process that and, you know, asking questions of like, what's, what's the long end of the tail, uh, as far as processing returns, because it does affect the consumer experience too. Um, you know, a lot of that is going to be the, the parcel shipping and getting that back into the warehouse. It's not the actual processing time and getting it back to stock and, um, available for, for resale. But, um, you know, you also kind of evaluate the, uh, when you refund that customer and, and allowing that, you know, so many brands today are issuing that refund on whenever that parcel label is, is first scanned.

And, uh, as we talk about cashflow and how brands can, uh, you know, respond to these tariffs, having a great returns process where you have a, a RPS, a returns processing system in place, allows you to actually check that you're getting the actual return and the, you know, the consumers being honest, and then you can issue a refund. Um, so like Matt said, through a great RMA providers and, and software like Two Boxes, you have the visibility as, as the 3PL to know what's coming. You can staff accordingly to, um, what the returns are going to look like, but also have that, uh, capability to have it, have it as a selling proposition, uh, during the sales cycle too.

KB: Thanks Alex. Um, yeah, Chad, I wanted to, you know, kind of finish with you here. I mean, obviously you have the experience that made it an entry classic. Can you talk about just like how you've seen, you know, brands kind of reevaluate returns and then, you know, really end to end. Right. Not just inside the warehouse, but, you know, I think a lot of brands, I'm going to get this stat wrong here, but just something that, that really has been interesting to me over the last few years is I think something like 60 to 70% of returns or sorry, 60 to 70% of brands on, uh, you know, companies like Loop and Narvar and others are now starting to charge for returns, uh, at least in some form or fashion. Um, and then, you know, obviously there's lots of other things embedded with, with fraud and abuse, like Alex was getting at, but you just talk through like how that, the math of returns has, you know, kind of evolved for, for you guys and, you know, where are the things that you're, you're really trying to like button up that process? 

CB: Yeah, absolutely. Yeah. I mean, if I think back, Kyle, to kind of some of our original conversations, we were back at, when I was back at Made In and we were looking at deploying Two Boxes in our fulfillment center, you know, I always felt like, you know, being an operator, the easiest way to get spend like this approved is to be able to say like, you know, this spend is going to make us more efficient such that, you know, we're going to save costs like incremental to what the system costs us. And it was pretty easy for us to articulate that with Two Boxes in terms of just kind of the, you know, I think you had some stats and I agree with them. I think we went from like 25 units per hour on returns processing to like 75 units per hour. So like, it was easy for me to sell the system internally. I know this isn't a sales pitch for Two Boxes, but it's just the reality of my experience. You know, the, the, the real partnership though, is, is the value that you create on top of that. Right.

And I think that's where we really saw the cycles come into place where at the time it seemed like returns fraud was just a big topic in the DTC industry. And we were not exempt from that. It certainly was, we were one of the brands, I think that had been identified in some of these groups online where, you know, somebody identifies that you are a Loop customer and that you have policies to refund at certain points in the, you know, reverse logistics process, as Alex mentioned and folks were taking advantage of that.

And so, you know Two Boxes became a critical part of the returns process for us to, you know, be able to validate that the customer is sending us back the right product, but to do so quickly so that they got the refund in a reasonable amount of time. And it wasn't, you know, a two-week delay on processing that return. You know, really the, the kind of unspoken, but I think biggest benefit of this is, you know, we were in a facility where we were really utilizing independent upon temp labor and, you know, for us as a, you know, a premium cookware company or now as a, you know, a premium men's apparel company, again, quality is, is paramount, right.

And for us to be able to, you know, stand up a new operator who maybe has never seen our product before but we can give them a very guided process on the things to look out for, to know that a product is, is sellable again so that, you know, we can take advantage of getting this product that we just paid all these tariffs and duties on back into inventory to sell again, but know that it's the right quality and that a customer who then purchases that product is not going to get something that they, you know, are curious about what happened and was this, you know, a return product. So I think all of those points together, like make it a really nice business case for brands to optimize on the returns process. And it's only going to become more important and more critical.

The last thing that I'll say is like, you know, having been on the journey with Made In, and then now at True Classic, like there were these very well-defined gates as we built the business. And the first one is generate revenue and prove that a customer is going to buy your product. The next was build a profitable business. And, you know, we thought that was the goalpost. And as soon as we got there, you know, your investors tell you that now cash flow is, is the important milestone to achieve. And this is, you know, squarely in that cash flow home where the quicker you can get product back into sellable, as Alex was saying, and, you know, generate the cash against that and get product back into the customer's hands really is going to help you achieve that goal as you, you also are looking to build and scale a business. So anyway, I know that was a lot, but you know, returns are definitely at the center of all that for us. 

KB: That's awesome. Thank you so much, Chad. All right. So we're going to move on to like the last kind of, you know, topic section here and then we'll have some Q and A. It looks like there's already been one question thrown in the chat that we'll cover. So anybody, if you have questions, please get them in now, because we'll, we'll save the last like 10, 15 minutes for the call for those. The last thing here, I think is just turning more to kind of the fulfillment side of the aisle. And maybe, you know, Alex, I'll start with you here. You know, kind of first question is like, you know, obviously a lot of things that you need to be good at as a 3PL and a fulfillment partner to a brand, like True Classic.

You know, how, like, are there specific areas where, you know, you think 3PLs are kind of separating themselves on winning versus losing in this environment? And can you, can you kind of, you know, talk us, talk us through that?

AK: Yeah, I think, you know, what we hear a lot is we're, we're providing through our technology platform, our order management system that we're integrating into Shopify or an ERP system and, you know, providing a lot of value through carrier diversity and diversification among the carrier mix to avoid disruptions in that market. Right. And by working with a number of different carriers, I think we're up to 20, maybe 20 plus at this point, we have the ability to rate shop and look at, okay, which carriers work for this, you know, and also look at looking at costs and how we can be most efficient for the brands.

So, you know, by leveraging that carrier diversification, we're able to avoid a lot of disruptions. A number of carriers, Matt, I know you've talked about this a bunch, but have gone out of business recently and, you know, the impacts of UPS or USPS parcel select and ground advantage and the changes that are happening among the carriers. A lot of brands are feeling that, but, you know, the diversification is super important.

And then I think just, you know, I go back to the team again, you know, how does your culture align with the 3PL's leadership team, the team on the floor that's fulfilling the orders and what does that kind of look like and how does that relationship work? 

KB: Matt, maybe I'll pick on you here. Like, you know, you obviously see a lot of 3PLs, a lot of brands. I think, you know, at least anecdotally, I hear that there's certain 3PLs running a lot of business in this environment. You know, what are the top list of reasons that you think 3PLs are closing more business than others in this environment? 

MH: Yeah. I touched on some of it earlier and, you know, Alex did a pretty good job of expressing similar sentiment just now. But, you know, there are so many 3PLs in the United States. I like, I think I mentioned this earlier at the start, but like conservatively over 10,000 3PLs in the United States. So you have many, many options. You know, I've been in the business for over 15 years now and I've probably met 300 3PLs.

So a very small share of the total number. And I say that because what's most important is really finding one that resonates with you, whether it's, you know, the communication and the culture that Alex just mentioned. You know, obviously pricing is important, right? Like period, right? I've probably worked with one, maybe two brands, you know, across the hundreds that said pricing is not important, right? Like it's important, period. And even if they say it's not important, it's important to them, right? 

Operational performance is important, right? You need to get out today's orders today accurately, efficiently, and at a cost effective price, right? That's fundamental. But given that most, and, you know, I've done hundreds of RFPs for brands, like pricing is typically very close, right? There might be a five or 10% spread. You know, if you reach out to five or six or seven 3PLs, most will be around five or 10%. So not a huge, huge difference, right? It's not like, you know, trying to buy a car and go into five dealerships where like the prices will be kind of all over the map. So if you assume that price will be roughly the same with most providers, like it's some of these intangibles. It's this partnership that's really important. A partnership, again, could be the communication, the culture, the style.

You know, I have a brand right now that I'm working with that is visiting 3PLs as we speak, you know, three different 3PLs in the New Jersey/PA area. And I, you know, they said like, what do we do when we show up? Like, like what questions do we ask? Like, who do we talk to? And, you know, of course I had a handy one pager that I was able to share with them. But it's like, just talk to people, right? Like know who the GM or the director of the facility is.

Like, who is this person? Do you like him or her? Like, who are the ops managers? Like walk around. It's like, you know, many of you may have gone to college, right? Like when you, when you, when you go on site to like walk around the grounds, like you just learn so much about like the culture of that community. So that is so important.

And certainly part of culture is a 3PLs willingness or amenability to new software, right? And this is changing a lot, right? This is changing rapidly in the last few years. So brands that are willing to embrace, not just willing, that are eager to embrace new technology, you know, whether it's, you know, super tech enabled 3PLs like Stord or, you know, maybe it's, you know, a third generation 3PL that's been around for 50 or 60 or, you know, many years, you know, where the new leadership is really embracing new technologies, right? Like, but aligning yourself with these folks who can help you kind of innovate, and as I said earlier, almost serve like a de facto consultant for your brand is really, really important. And like, that to me is priceless. If they're a dollar more in order out the door, that'll still be cheaper than finding someone who might be the low cost leader, who's not, you know, who's working with an old warehouse management system and who just doesn't embrace new technologies.

KB: No, some really important points there. I will comment on one, which is, you know, when I am asked by, by merchants in particular, what should I be looking for in a 3PL, right? Because I talk to a lot of merchants. One of the pieces of advice I always give is like, make sure you go see the facility or the facilities. Like, make sure you actually go, like you shake people's hands. You see the environment. I think you can learn a ton about a 3PL by just walking the floor and meeting their employees. Like seeing how happy they are, seeing the, you know, how organized or disorganized the facility is like, meaning if everybody kind of understands what they're doing and, you know, looking like they're, you know, enjoying coming into work every day. I think that's, that's really, really critical. 

Chad, I'll, I'll, I'll want to pick up on this. So you've obviously, you know, been at, been at Made In, you've been at your classic, you've evaluated a lot of 3PLs. When you're evaluating 3PLs, right? Like, you know, Matt says he's got a cheat sheet for brands. Like what's on that cheat sheet of like, what are you asking? What are you trying to determine? You know, what tips would you give to somebody just starting out on the brand side with less experience than you? 

CB: Yeah, for sure. I, you know, at the risk of kind of restating some of the topics that Alex and Matt, you guys have hit on, like we use the same analogies, right? Like it's a marriage and you're going to go through some tough times with that partner and you need to know that you've got the right people on the other side of the phone or the other side of the relationship that we're going to do right by you. Yeah, I definitely still have a lot to learn in my career, but there's one lesson that I've learned the hard way and is never going to leave me and that's finding partners. And once you find a partner, you stick with those people and you figure out how you guys can win together.

You know, we want our 3PL partners to win just like we want to win. We want all of our partners to win, right? Like, you know, we never want to be in a situation where our success is, you know, taking a dollar out of somebody else's pocket to put it in ours and putting them at risk as a result. Right? So, you know, my main thing is kind of like some of the stuff that you talked about, Kyle, you know, you want to spend time to get to know these people.

And, you know, from the leadership that, you know, you're going to have to call on them when times are hard to ask for their support, but also the folks who are, you know, picking and packing your orders and are really the ones who are going to be the folks having the last hands on the product before it goes into a box, before your customer sees it. Right? Like all of those things are critically important and invest time in building that relationship and fostering that relationship. You know, even in, you know, more stable times, although I don't know what that looks like with the last five years that we've had on the operator side, but, you know, things for startups change really quickly in the business that we were at times when we signed a 3PL relationship to where the business we were by the end of that contract, we were very different and things have changed a lot.

And with all these exogenous sort of macroeconomic variables changing now ever more quickly, things are going to be tumultuous. And knowing that you have a partner on the other side of the equation, who's going to stand up and help you out. And maybe at times not hold you to the letter of the law of the agreement, but understand that now things are different and we want to go in a different direction is worth way more than getting an extra nickel out of, you know, a certain line item on the quote. Right. So again, I know I'm not saying anything different than what hasn't already been said, but like from a different perspective is just the most critical thing I've found thus far in my career in this industry. 

KB: Awesome. Thank you, Chad. I have one last question in this section and then I think we'll go to Q&A. Alex, I just had to ask since we have you. Stord obviously very well known for, you know, their in-house tech and everything you guys have been able to build there. It's really pretty remarkable if you look at the kind of history of the business. Can you just talk a little bit about, you know, decision-making process of like build versus buy? This is something that comes up a lot, you know, on our side of the aisle. Just love to hear kind of your perspective.

AK: Yeah, I think when we're, you know, brands are evaluating Stord, they're asking if we have certain integrations, right? And okay, how are we partnering with those organizations to build closer relationships? And it's certainly part of the RFP process or the selection process of how well do you work with so-and-so vendor? But also on the build versus buy aspect, you know, we will continue to be a commerce enablement company and build out aspects of our software and our tech stack for brands of all sizes, right? You could be someone that is, you know, 500 million in revenue a year that needs different aspects, but you could also have a brand that is just starting out and they just need a super simple solution. 

So we're always evaluating kind of the product roadmap, but also looking at things of, okay, can we build this fast enough to create efficiencies? Or can we partner with someone that has existing tech, leverage that relationship and gain those efficiencies even quicker? So, you know, evaluating that, the product team and their roadmap change constantly like any software company. But, you know, the requests are coming from their brands and we're listening to those brands on, you know, should we build or partner with someone and leverage that technology? 

KB: Thanks for that, Alex. All right. Before we get to Q&A, I wanted to do one last fun kind of question here. So hopefully not to put people on too much on the spot, but you can either pick a final piece of advice or a recommendation of someone you know that brand should be connecting with, right? Like we all know great people in this space, like who should brands be following or trying to talk to, to make sense of what's going on or like what's the final piece of advice that you might have? Alex, you're nodding to the beat. Maybe I'll pick on you. 

AK: I've been following Matt Hertz for a while now. And, you know, through the De Minimis changes, IMAX changes, he's kind of been a voice of reason for me and reading his opinions on the certain topics. But, you know, talk to other 3PLs, talk to other brands and see what they're doing and how they're, you know, approaching all these different changes and supply chain disruptions. But certainly follow my friend Matt here. And, you know, he's a great expert on a lot of these topics. 

MH:  Yeah. I appreciate that, Alex. I do have a free newsletter, which I'll pop in the chat here that covers topics, a lot of opinion, more, more, more opinion than fact at times. 

KB: But you get your follower count back up after the last one. That was a little bit spicy. 

MH: Yeah, yeah, exactly. But yeah, feel free to subscribe there. But yeah, I think, you know, certainly follow everyone on this call. You know, the three, you know, Alex, Kyle, and Chad on LinkedIn at the very least, you know, even just kind of following likes and comments. But yeah, I think the point is, like, no one really knows what's going on. You know, there's a lot of rhetoric. There's very little facts out there. Things are changing by the hour and by the day, which, you know, maybe, you know, if it's a fact today, it may not be a fact tomorrow. So I think just kind of talking to folks in your community, you know, like-minded, you know, operators, you know, founders, you know, supply chain folks is really the best, you know, resolve.

And, you know, the more conversations you have, the more webinars like this that you participate on, you really start to hear of, you know, platforms and companies that can support your business that, you know, maybe prior to this you, you know, were unfamiliar with. So, yeah, people are, you know, tend to be very friendly in this, you know, community. And, you know, I'm sure Kyle and the team will kind of share our information. Happy to chat with anyone and kind of direct you to the right people if I don't have the answer for you. 

KB: Thanks, Matt. All right, Chad, I'll give you the last word here. Any final thoughts? 

CB: You know, I was just thinking as you guys were talking, you know, as one call out, even going back to COVID, you know, I don't know how Ryan Peterson over at Flexport seems to always have the inside track on, like, you know, even the word coming out of Washington, but he is always at times, you know, seeming to show up as a knowledgeable party on these like volatile changes. But, you know, at the risk, again, of just doubling down on what these guys have said, like, I can't tell you how valuable I find the network and how close this community of operators in this kind of commerce DTC enablement spaces. And, you know, like the folks that I worked with back at Walmart are now in my same position at other companies.

And I go to them and Kyle, you and I met through the Haas network and, you know, on a panel with these guys. And I just can't tell you how many times in this role I've just been totally humbled and had to come to somebody not knowing what the heck I was going to do and had somebody who had dealt with that, you know, six months earlier and could just help us at least start to understand the space and navigate through the uncertainty. And I'm just so thankful for that network and, you know, building meaningful relationships, like if somebody needs help with a NetSuite item setup, and I can help them out, like I'm going to do that because I know for sure three months later, I'm going to have a question for them about something. So, yeah, the answer to your question, Kyle, is like build relationships with as many people as possible that are going through the same pains and the same trials as you are, because it is a really valuable community. 

KB: I love that. I'll, you know, I'll try to make this quick, but I couldn't agree more. You know, Two Boxes, we're about three years old. I mean, when we were starting out, frankly, Evan and I didn't really know much about returns. We thought there was a big, big problem because we kept seeing, you know, facilities that, like Matt described, but I think my final piece of advice would be don't underestimate the power of a specific request. So, I think the first time I actually ever met Chad, you know, I LinkedIn messaged him, we went to the same grad school, and I had a very specific request. I sent him, I think he followed up with me like same day or next day. So, I think this community, to your point, Chad, is like extremely large, but very, you know, open with sharing information, and everybody, I think, is, for the most part, very supportive.

So, I would just encourage folks on the call, like if you want to connect with somebody, you have a specific question, you know, send them a note. You never know what you can learn from them and the relationship that can develop. So, really appreciate that. 

We've got a few minutes left here. I wanted to hit two questions. So, the first, maybe this is mostly for Chad. There's a question in the chat. I don't know if you can see it in the Q&A section. It says, if a company, if a China brand has 321 set up in Mexico and Canada, can they keep their inventory in those warehouses and just import formally? I want to know if this is any better or worse than moving to a bonded warehouse in the state. I guess maybe, yeah, any of you guys have thought on that? 

CB: Yeah, as we're starting to explore this as a brand who does still maintain a fulfillment presence in Mexico to take advantage of Section 321, our understanding is that, yes, we do at least have some timeframe remaining where we can import those under the de minimis threshold. You know, pretty well-defined May 2nd for China product, although there is some grumblings that maybe that gets extended. And then, you know, somewhat of a nebulous timeframe for the de minimis thresholds to go away for other country of origins. 

So, while there is potentially an end in sight, those benefits are still in place today. As we think about, you know, fulfillment in other geographies, such as Mexico, relative to bonded warehouses, FTZs, bonded warehouses, you obviously have five years. So, that's a pretty long timeframe. FTZs, a much shorter timeframe. I don't remember exactly what it is, but, you know, you've got to make a decision on clearing customs with those goods. Some, you know, bonded warehouses give you the ability to pay the duties at the time you remove your product. FTZs, you've got to pay the duties that were in place at the time you entered the FTZ. So, some implications there just on timing and policies that were placed in time at that time, just to keep in mind. But also watch the cost.

You know, whereas there are quite a few of these locations in the U.S. for both bonded and FTZ types of facilities, that space is going to become more in demand and probably a bit pricier. So, just, you know, keep that in mind relative to the storage cost in potentially other geos where you could park some product if needed.

KB: Alex or Matt, anything to add on that? 

MH: Yeah, I think, Chad, just to be clear, I don't know if this was the spirit of the question, but I suspect that after May 2nd, pending nothing unforeseen, like given like country of origin is kind of the critical piece here, importing from China to Mexico and shipping from Mexico to the U.S. end consumer would not be more beneficial or favorable than shipping from China to a U.S. facility, be it bonded or otherwise, to the end consumer.

In other words, like Mexico is not going to be this arbitrage opportunity via 321 that has existed over the last number of years. Is that accurate?

CB: I would say that it does have a benefit. And at the end of the day, it depends on what you're trying to solve for, right? But I think the example of either a Canadian or Mexican-based facility and then fulfilling the product after the order's been placed by the customer gives you the option to defer the tariff until the customer's placed the order, which from a cash flow and a cash timing perspective could be meaningful.

You know, the trade-off being, you know, are you okay with fulfilling that order from Canada or Mexico where maybe it's a bit longer in transit to the customer? And I think that's a, you know, a decision that a brand has to make at the end of the day. 

KB: Awesome. All right, we have, I think, time left for one question and I'm going to shorten it because it's a longer question. I think this is mostly for Chad. But we had a question ahead of the call, which was, as tariffs increase costs on imported goods, how are you approaching the decision of whether to pass those costs on to your customer? Are you going to increase prices or fees? And if you're not, what is success going to look like? 

CB: Just to answer quickly, I won't say that we won't eventually go down the path of re-evaluating our pricing, but we are going to take the initial task of being better at operating and running the business such that we can absorb the additional cost and not have that be customer facing to continue to deliver the same value. So that's our first challenge. But, you know, it obviously depends on how policy goes. We're certainly not going to make a knee-jerk reaction to change pricing based on how things have been thus far. But, you know, going to do everything we can to not have that be customer impacting.

KB: Awesome. Well, Chad, I think we're right on time, which is a record for anybody who knows me. So Alex, Matt, Chad, honestly, can't thank you guys enough. We put this together really quickly. And I think I learned a lot today. Hopefully a lot of folks did today as well. We'll send out contact information for these guys afterwards. You know, just take their LinkedIn profiles, et cetera. You know, please, please connect with them. And if you have questions for the Two Boxes team, you can always reach us online and shoot me a DM on LinkedIn as well. Hope everybody has a wonderful day. Thank you for joining us.