Retailer 2BigFeet Shifts to DTC

For years Brandon Eley’s online shoe company, 2BigFeet, prospered by reselling prominent brands. But the profit margins slowly narrowed as did the sources for large footwear sizes, Eley’s niche.

The solution is Michael Ellis Footwear, Eley’s direct-to-consumer brand, launched in 2021. “We finally decided to take matters into our own hands,” he told me.

In this second appearance on the podcast, he and I discussed the evolution of 2BigFeet, the launch of Michael Ellis, custom manufacturing, and more. Our entire audio is embedded below. The transcript is edited for clarity and length.

Eric Bandholz: Tell us about your business.

Brandon Eley: I started a company 24 years ago that sells shoes to guys with big feet, up to size 21. It’s called 2BigFeet. Our most popular sizes are 16, 17, and 18.

We added Michael Ellis Footwear, our own shoe brand, in 2021. We have been selling roughly 40 other brands for years. It’s always been a struggle to find items that our customers want. We beg and plead with manufacturers, these big national, international brands, multi-billion dollar companies. But they will not invest in extreme sizes and widths for the popular style. After years of begging, we finally decided to take matters into our own hands.

Bandholz: Are custom shoes an option for extreme sizes?

Eley: The cheapest custom shoes we’ve seen are around $600 a pair. They’re handmade leather soles, hand-stitched with hand-cut leathers. The manufacturers make cardboard templates and cut the leather by hand. It takes a long time, many months. They’re ugly shoes, not anything a young guy would want to wear.

Parents call us desperate to find shoes for their kids. Clothing is a problem if you’re 6’8″, 300 pounds, with an enormous foot. It’s hard on a lot of these kids going to school. We empathize with them. Those sizes — 21 and higher — are not huge moneymakers, but we want to say we’ve got shoes for everybody.

Bandholz: So anyone sized 21 and up has a limited choice.

Eley: Yes. To my knowledge, Bogs is the only company besides us that makes a 21. The rumor is it’s for Shaquille O’Neal, the basketball player. He’s reportedly a 23, but that’s in Nike, and they’re not true-to-size. Shaq, or somebody like Shaq, wanted a pair of hunting boots, and Bogs made them. They already went to 18 and now have sizes 19, 20, and 21. But that’s it. And it’s only in medium width.

We make ours in four widths: medium, wide, extra wide, and extra-extra wide. And then each whole size up to 25.

Bandholz: How do you know they won’t sit in inventory, unsold?

Eley: We order only a few pairs of each color, size, and width. We know the customers who will buy them. It takes a while to manufacture those units, and then they sit on a boat for a month and a half. We don’t want to be out of stock for long, but we’re also not going to order a dozen pairs of each.

It’s a small market. There’s a good chance we’ll never recoup our initial mold costs on sizes 22, 23, 24, and 25. Again, that’s not the goal. We want to be known as the company that has shoes for everybody with big feet.

Bandholz: You’ve found a niche.

Eley: We fell into it. My former business partner has big feet. It was a struggle for him, but that was the idea for our business. Building a successful footwear company targeting everybody, all sizes, would be much more difficult. There are thousands of those brands. Many are venture-backed and spend millions of dollars on advertising.

We’ve worked at our Michael Ellis brand for several years. It’s a slow and expensive process, and we’ve invested a lot of money. It’s a risky proposition, but we saw the margins shrinking in reselling name-brand products. We’ve been in business for 24 years. At about 18 years, making a decent profit with pure retail started getting harder. We’re a small family-owned business with fewer than 10 employees.

Bandholz: What are the lessons thus far with an in-house brand?

Eley: We started our manufacturing journey in India. We had intermediaries between us and the factory, not knowing what we didn’t know. We skipped a few steps in quality control and then tossed a good portion of the first container of merchandise. The quality was bad, and the sizing was off at least a third. And then the delays with the back-and-forth on creating samples, testing sizes, and, again, quality control.

We missed much of our fourth-quarter sales last year with our sneaker launch. The container got here on Cyber Monday. It easily cost us $150,000 in revenue. We still made money on them, but it will take time to turn that inventory because the first half of the year is much slower. That means less cash flow going into other styles.

We quickly learned the importance of personal relationships at the factories. The factories we work with now, in China and Brazil, are second- and third-generation owners, and the founders, their children, and their grandchildren are active in the business. They employ high-skilled workers — craftsmen and artisans.

Bandholz: Where can people buy your shoes?

Eley: Go to 2BigFeet.com. Our Michael Ellis brand is there and at MichaelEllis.com. We’re on Facebook, Instagram, and YouTube. I’m @beley on X.

ARTO Owner on Generational Businesses

In 1962 Arto Alajian arrived in the U.S., having fled Egypt and his shoe-manufacturing business. He became a milkman in Los Angeles, and then a ceramic tile installer, and then, in 1966, a tile maker.

Fast forward to 2024, and ARTO, the company, is a global supplier of handcrafted ceramic, porcelain, and concrete products. Armen Alajian, the founder’s son, now co-owns the business.

He and I recently spoke, addressing the challenges and rewards of generational, family-owned companies. The audio of our entire conversation is below. The transcript is edited for length and clarity.

Eric Bandholz: What do you do?

Armen Alajian: I’m the co-owner of a company called ARTO. We make rustic and elegant handmade ceramic and concrete tiles. We manufacture in California and sell online and in showrooms in Los Angeles, nationwide, and globally.

My dad, Arto Alajian, started the business. He and my mom had a factory in Egypt. They made leather shoes there, but the government took their business. So in 1962 they came to the U.S. My dad was a milkman in the morning and went to school at night to be an airplane mechanic.

He eventually met a woman who made ceramics. She did mission restoration work. On his milk route, my dad would take her ceramic bricks to restaurants and moms in El Segundo and Santa Monica and return on weekends to install them. That’s how he started, in 1966. His first product was a clay brick.

My brother Varoujan and I started installing at a young age. My parents divorced when I was 10, and I was estranged from my father. He fired me five times, and I quit five times. We argued about the business.

Later on, we made peace, and we grew. My dad called me and said, let’s figure it out. And we did. He respected me, and I respected him. Before he passed, we were partners and friends.

My brother is an owner. I’m learning how to be a CEO. I’ve always been a partner. My brother is a full-on partner and owner, and we discuss strategy.

He has one kid. I have eight. We’re thinking about the next generation. Being in charge of your destiny is the trick, controlling your income and liberty. He wants that for his kid; I want it for my kids.

We can only offer our children an opportunity. We can’t force them. Generational businesses are nothing more than being a family.

Bandholz: Are your kids interested in the business?

Alajian: Yes. I let my kids work in the business when they were younger. I’m a salesman. When we traveled the country in a van and saw customers, we homeschooled. The kids would walk in, shake the person’s hand, and say, “Hello, my name is Adam,” or, “My name is Sarah.” So, they’ve all been around business. They love business. But I forced them all to leave and work for other people, too.

They have since returned. They all want a role in the company. I insist they come in early and leave late — the old-fashioned style of working. And then find your place. I want the kids, at the end of the day, to be owners. They don’t have to be operators.

Bandholz: I intend to give my kids ownership if the business interests them.

Alajian: A business becomes generational when operators are separated from owners. My kids who become operators will be treated like executives and compensated well if they perform. But owners have a separate mentality, whether working the business or not. That’s the way to extend it to the third or fourth generation.

But the key is to give kids the option to be operators, owners, or both. Don’t force one or the other.

My goal used to be achieving generational wealth. But no more. My wealth isn’t money. True wealth is that my kids’ kids know and love each other. Money is a tool to help you keep a family together. Wealth isn’t actual cash. It is experience and the ability to survive the next generation because liberty comes from having capital in your pocket.

Bandholz: Where can folks buy your tiles and bricks?

Alajian: In 300 stores around the U.S. or at Arto.com. Our Instagram is @artobrick. I’m on LinkedIn.

OverstockArt Founder Thrives 22 Years On

Before Shopify, YouTube, and Facebook, there was OverstockArt. David Sasson launched the company on the Yahoo Store platform in 2002 in Wichita, Kansas. It sells original, hand-painted reproductions of works by Van Gogh, Monet, and more.

Much has changed since 2002, but not Sasson’s passion and resilience. He has faced legal crises, replatforms, and competitors. Yet OverstockArt thrives.

In our recent conversation, he shared his journey, outlook, and advice for budding entrepreneurs. The entire audio is embedded below. The transcript is edited for clarity and length.

Eric Bandholz: Tell us about yourself.

David Sasson: I’m the co-founder and CEO of OverstockArt.com. We launched in 2002. We’re an ancient company by ecommerce standards. We sell art online. Our main product line is hand-painted oil reproductions of works by Van Gogh, Monet, Renoir, and artists of that caliber. We reproduce them by hand, and customers can choose the frame. We do all the framing in our facility in Kansas and ship to consumers nationwide.

Bandholz: How does copyright come into play?

Sasson: Everything we deal with is in the public domain. Copyright law is complicated. I’m not a lawyer, but the vast majority of art in the U.S. is in the public domain if produced before 1923.

There are global limitations due to treaties among countries. For instance, there’s art in the public domain in the United States but not in Europe. We stick to art produced before 1923.

Bandholz: How does your operational system work?

Sasson: We work directly with studios overseas. We built our own supply chain software, which we use to create orders for the studios. The orders include imagery, part numbers, and the quantity to make. The studio produces the reproduction and uploads a photo. We then approve or reject it. Once we approve it, the studio will prepare the shipment to our facility here in Kansas.

Our site shows photos of the reproductions, not the originals. Once customers place an order, it will usually ship the next day for three- or four-day delivery. Selling art requires holding very broad and very shallow inventory. We have a lot of variety. We anticipate what will sell and how many to hold of each piece.

We’ve built a fairly sophisticated supply chain and demand planning tool that tells us how many to order for each painting. The model helps us hold stock profitably. It’s not simple.

With Prime, Amazon changed consumers’ delivery expectations. Now everyone wants an item in two days. The closer we get to that, the better we are, although customers understand longer waits for custom orders.

Bandholz: You’ve seen many changes since 2002.

Sasson: In 2013, we almost went out of business due to copyright claims. We had to take down a lot of questionable art, including Picassos. We paid attorneys and others — the stress was heavy.

We had a strong 2012, and our studios struggled to meet the demand. We started 2013 at the same pace and suddenly faced a copyright legal crisis. We had to remove a considerable percentage of our stock, plus many of those items were in transit from our suppliers. So I’m paying for a product that I can’t sell, and I don’t have suitable replacements.

Our sales dropped by 50%, but our costs stayed the same. We went through all our cash, and I had to put money back into the company. We couldn’t focus on increasing sales because of legal problems. For a time, I was convinced we would go under.

We finally turned a corner in 2016. By 2017 we saw real success. By the 2017 holiday season, we were suddenly flush with cash and doing what we wanted, not what we had to.

I believed in our mission, and we came through, but it wasn’t without doubts and difficulties. If you’re a new business owner, be ready because these situations can happen. It can be challenging in the moment, but it will get easier.

Bandholz: Have you considered selling OverstockArt?

Sasson: An entrepreneur’s goal should be to build a great business. If you’re having fun, why not keep doing it? If I sold the company, I would probably start another one. It’s what I do. If the perfect opportunity presents itself, I might sell, but I’m not seeking it. I want to build a great company. If founders set out to create something amazing, everything flows from there. I don’t see a reason to do something else.

Every decision in life has consequences, especially for business owners. Many folks don’t want the responsibility, and it’s common to run into problems. But if we are willing to step up, do the work, and believe in ourselves, we can push through obstacles.

My number one suggestion to newer entrepreneurs is to take time to think. I spend much of every Friday away from the office, often at a coffee shop. I’ll bring paper and write. I’ll think of a question or a topic, start writing, and read what I wrote. That’s how I come up with solutions to problems. Entrepreneurs seek action. We see something and go after it. But we can improve and develop an edge by pausing to reflect and brainstorm.

Bandholz: Where can folks connect with you?

Sasson: Our website is OverstockArt.com. I’m on LinkedIn.

Amid Downturn, Ecommerce Investor Perseveres

The post-Covid ecommerce hangover has hit Roman Kahn. He launched his first direct-to-consumer brand in 2013, acquired others, and in 2021 founded Peak 21, an aggregator with equity investors. The outlook was good.

Fast forward to 2024, and many ecommerce companies are struggling. Mergers and acquisitions have cratered. Yet Kahn perseveres. His team reviews dozens of purchase candidates every month, albeit cautiously.

In our recent conversation, Kahn shared his investment criteria, current market conditions, and predictions for a recovery. The entire audio is embedded below. The transcript is edited for clarity and length.

Eric Bandholz: Give us a rundown of what you do.

Roman Khan: I’m the founder and president of an ecommerce holding company called Peak 21. We buy, grow, and sell direct-to-consumer brands. My DTC experience began in 2013 when my wife, Jennifer, and I started Linjer. We sold leather bags but now it’s mostly jewelry. We launched it on Indiegogo.

By 2016, we were doing a couple of million in annual revenue — big enough for Jennifer and me to quit our jobs to work on it full-time. In 2017, Linjer produced $1 million in EBITDA — earnings before interest, taxes, depreciation, and amortization. By then we had raised quite a bit of money on Kickstarter and Indiegogo and built up street cred. Folks were reaching out, asking us how we did it. We decided to diversify. We needed more brands, and Meta ads were working well.

I took that $1 million of cash, our street cred, and combined sweat equity with cash to invest in three other DTC companies. Each was doing less than $1 million in revenue annually. By 2019, we were doing $50 million in sales as a group.

When Covid hit in 2020, revenue ballooned to $100 million annually. In 2021, investors were knocking on our door, particularly Jeffrey Yan, whose family owned Forbes Media up until this year. He came to my office and said I needed to take on external capital to buy more prominent companies.

We set up a special purpose acquisition company — a blank check company — called Peak 21. Jeffrey Yan and others invested eight figures in equity. We’re now using that SPAC to buy companies. We seek brands doing $5 to $50 million in annual sales.

Bandholz: What’s an ideal acquisition candidate?

Khan: The pool is shrinking. I’ve spoken with many owners. My acquisitions team talks to 100-plus businesses every month. Only about 10% have a product-market fit that can grow with low budgets. Our main criterion now is size. We look at the fundamentals. What’s the customer acquisition cost? And the repeat buyer rate? The best scenario is 70% of first-time buyers repeat in the first quarter. We know the investment will likely work out at the rate.

Two, we look at customers’ buying habits. For instance, we own a company called Nutrition Kitchen. It’s a daily meal delivery service. Daily rather than weekly or monthly habits play a significant role.

Beyond consumables, we look at contribution margins on three levels.

First, we calculate revenue (net of taxes and coupon-driven sales) and shipping fees collected at checkout. That leaves us with “profit contribution one” — PC1.

Then, we deduct roughly 10 variable costs, such as warehouse storage, pick-and-pack, shipping fees, returns, and exchanges. That results in profit contribution two — PC2.

Lastly, we deduct marketing to determine PC3.

From PC3 we subtract operating expenses to arrive at EBITDA.

A key acquisition metric is a 50% or higher PC2 while maintaining a competitive suggested retail price.

Bandholz: A hundred candidates a month is a lot to review.

Roman: Many ecommerce companies are struggling now. Revenue and EBITDA are down. Out of our six main brands, two are struggling massively. Overall we’re okay. We’re growing with a diversified portfolio. But those two are a nightmare. We have lent over $1 million to each one in the last 24 months. So it’s been hard. Many founders are holding out until 2025 or 2026 to sell.

We buy companies in four ways. One is cash. Two is seller financing. Three is using debt, where we borrow the money against the acquired company’s value. That avenue, I should add, is very challenging now. The fourth method is an equity swap wherein we acquire a company with Peak 21 stock. Cash is scarce right now. Our willingness to pay a lot of cash upfront is low to non-existent. We’re often the only real buyers when talking to a company.

For the market to improve, two things need to happen. First, investors must get over the losses from aggregators, such as Perch, Thrasio, and others. Second, interest rates have to come down. Once that happens, liquidity will loosen up, and hopefully, the market will return, likely by Q1 2026 in my estimation.

Bandholz: How can listeners contact you?

Khan: Our site Peak21.io. They can message me on X or on LinkedIn.

Don’t Outsource Revenue, Says Hair Growth Founder

Faraz Kahn began losing his hair at age 21. Years later, when searching for startup business ideas, he focused on his own experience. The result is Fully Vital, a direct-to-consumer seller of hair loss serums and supplements that he launched in 2021.

He and I recently spoke. We addressed his launch of Fully Vital and lessons learned afterward. Relying on agencies and consultants for customer acquisition is among his biggest regrets. “Don’t outsource revenue,” he says.

The entire audio of our conversation is embedded below. The transcript is edited for clarity and length.

Eric Bandholz: Give us a rundown of what you do.

Faraz Khan: I founded an ecommerce business in 2021 called Fully Vital. We make and sell hair wellness products mainly targeted at women over 40. I’ve been losing my hair since I was 21. I tried pharmaceuticals such as finasteride for a decade.

For years, I worked as a web developer and marketer in Los Angeles. In 2019 I decided to change careers and consider opportunities in ecommerce. I focused my search on longevity and being youthful. I started a podcast and interviewed leaders in the longevity field, but I wasn’t making money. So I looked at my own hair loss for ideas.

I researched extensively. Many companies sell stuff. I wanted to offer unique products to a broad audience. I went to international conventions. I flew to Thailand for a conference of hair transplant surgeons and stem cell experts. I learned enough there to realize the key to hair growth is doing many things simultaneously.

Working with physicians and scientists, I developed a serum and supplements for hair growth and density. Then, recently, we launched products for delaying gray hairs. I enlisted my friend Dr. Sandra Kaufmann, who’s written two books on longevity. She designed the protocol for delaying and reversing gray hairs. We now have two product lines.

I was new to ecommerce and didn’t know what I was doing. I’ve made a hundred mistakes, but here we are, still improving. I’ve got friends in the longevity space who are gracious enough to have me on their podcasts. Every time I do an episode, my messaging has gotten better. We discuss the science, how we developed our solution, and our target markets.

Part of my challenge is translating that authenticity into direct response marketing and Facebook ads. Our field requires education because many women, particularly, have tried many things for hair loss. We have to be authentic.

Bandholz: You’re offering subscriptions.

Khan: Yes. We’ve worked on the subscription offer to make it enticing, which involves educating the shopper. Our products take about 90 days to see results because of the hair cycle. With education, subscriptions have increased — about 40% in the last six months. Our goal is to convert 20% of all buyers into subscriptions.

We’ve focused much of our efforts on serum versus supplements because the margins are better. We need good margins to make advertising profitable.

Bandholz: What would you do differently if you could start over?

Khan: My biggest mistake was not focusing on Facebook ads, the cash cow for most direct-to-consumer businesses. I didn’t know Facebook and thought I wasn’t good enough. I’m not creative. I relied on agencies and consultants—with no results for those efforts. Our cost per acquisition exceeded $200, meaning negative margins. Then I went to Affiliate Summit West in Las Vegas and met people profitably spending $10,000 per day on Facebook ads.

That led me to change my outlook. I got into Facebook, owned it, and began editing some of our ads. I learned when to change creative, how many hooks we need, and hurdles in the conversion path. I had to get in the weeds.

I’ve learned our strengths and differences from other sellers. Our messaging has improved. Facebook’s algorithm changes required us to double down on our messaging at every consumer touch point.

We tried TikTok Shop, but nothing moves the needle like Facebook. Now I spend most of my time there. Last fall, I retained an incredible creative strategist. She encouraged me to spend more on Facebook. It’s made a big difference for me to be involved in the details.

Don’t outsource revenue. That’s my advice to entrepreneurs.

Bandholz: Where can people buy your products?

Khan: Our website is FullyVital.com. I’m @FarazKhan1000 on X and @antiaginghacks on Instagram.