JF1103: Using Your Money Wisely and Staying Ahead of the Curve #SituationSaturday with Sarah Davis
Sarah’s first company was when she was in high school, picking lice out of people’s heads, for $10 a head! Who would have thought? Now she sells used designer handbags online and has been making money from the start. Hear about the specific situation that she is here to share with us today. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Sarah Davis Background:
-Owner of FASHIONPHILE, the largest and oldest handbag reseller online Featured on Good Morning America, Good Day LA, and Forbes
-On track to sell over $60 million this year and have always been profitable
-Their app that helps you earn cash for your luxury bags
-Based in San Diego, California
-Say hi to her at www.fashionphile.com
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Joe Fairless: Best ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluff.
I hope you’re having a best ever weekend. Because today is Saturday, we’ve got a special segment for you called Situation Saturday where we’re gonna hear about a sticky situation that our Best Ever guest was in and how she overcame it. With us today to talk through that – Sarah Davis. How are you doing, Sarah?
Sarah Davis: Hi! I’m doing great, thanks.
Joe Fairless: Nice to have you on the show. A little bit about Sarah – she is the owner of Fashionphile, who has built a company from scratch and is now the largest and oldest handbag reseller online. They’re on track to do over 60 million dollars of sales this year, and have been profitable from the start. She’s been featured on Good Morning, America, Good Day, L.A. and Forbes among many others. She’s based in sunny San Diego, California.
The focus of our conversation today will be the sticky situation that she was in when she got started. Her and her husband were in school and they didn’t have any money coming in, they had money going out, and she has built this company. As real estate investors, we’re entrepreneurs, right? And we can learn from fellow entrepreneurs for how they overcame the challenges of starting from nothing and growing a business; that’s gonna be the focus of our conversation today.
Sarah, with that being said, before we get into your story starting from nothing, can you just give the Best Ever listeners a little bit more background on your company, so that we have some context?
Sarah Davis: Yeah, we sell pre-owned (used, basically) luxury handbags: Chanel, Gucci, Louis Vuitton, Hermes… All of the brands. Basically, the favorite luxury brands into the really high-end sector. We don’t sell Coach and [unintelligible [00:03:01].17] and Michael Kors and [unintelligible [00:03:04].10] – those are all great companies, but we don’t even sell those more accessible luxuries (that’s what they call it), but we’re talking about the really higher upper end, average selling price about $1,300-$1,400 purses, but used.
People said we’re kind of like [unintelligible [00:03:17].14] for luxury bags. You bring us your Chanel handbag you used for a couple of years and we write you a check for $1,400, or whatever that is. So that’s what we do, online.
Joe Fairless: Got it. Now let’s rewind to the very beginning… Tell us your story.
Sarah Davis: My husband and I were both in school – I was in law school, he was in medical school, so it’s not like we had a future [unintelligible [00:03:40].18] We thought a direction where we were going, and I’d never really thought of myself as a business person or an entrepreneur, although I was one of those types that had started lots of little businesses; my mom called me “industrious” when I was growing up. She just didn’t have the vocabulary, she wasn’t thinking about [unintelligible [00:04:00].21] When I was in high school I started a company taking lice out of kids’ heads for $10/head. That’s just weird. Or like — I just always had businesses that I started and I was always trying to make a buck on the side.
I’m in law school, my husband’s in med school, just writing checks and bills, and things are adding up, and student loans… We had no money coming in, so I actually had heard about eBay, and started selling some of my own stuff on eBay; really long story short, my husband was on Price Is Right, because he’s in the notary, and there was notary people. He [unintelligible [00:04:36].23] bunch of stuff that we really didn’t use, so we sold that on eBay. That’s the first stuff we sold.
Then we just started selling my own things, and what I realized right after that was that women’s clothing accessories do okay, and especially things with a name brand really keep their value… So when we really just kind of whittled it down I realized that my size for pants may be a size [unintelligible [00:04:56].13], so clothes are kind of a drag, but that handbags really keep their value. You can sell them really close to retail, depending on what the condition is, and things like that. So I whittled it down to just selling purses. Right from the get-go, I realized I was on to something good. Like I said, women just love purses, so it’s not a hard thing to sell, and especially women love a branded purse, a Chanel or a Louis Vuitton authentic bag.
When I started selling, there was nobody else doing what we were doing online. I think women were really clamoring for a source for authentic used luxury handbags, because the brands that we sell – they don’t discount at all. Louis Vuitton – they don’t have a sale ever. There’s no [unintelligible [00:05:42].01] there’s no outlet, there’s no wholesale. The only way to get a Louis Vuitton authentic purse for less than retail is to either work for the company, and there’s a limited number you get, or you buy used. Those are your two options.
Like I said, when we started doing this, there was nobody else doing it. You might go to your local consignment shop and you’ve got like eight purses in there; one of them is [unintelligible [00:06:06].04]. So just the idea of building a place where people can really trust that what we’re selling is authentic, and they’ve got a great selection — I consider it like the muffin shop of consignment shops. The best section and only the best pieces of your local consignment shop times like a thousand and online.
Now I think we have like 10,000 items on the site. We’ve built this kind of machine where if you want a used luxury handbag, depending on how much money you’ve got or what kind of condition you want, you can get any type of range of thing. So we kind of started from that… From the early days, I sold my own stuff first, and then I used some of the money that I had there, which was in the hundreds of dollars – we’re not talking about thousands of dollars – to actually buy things from consignment shops. I’d buy a purse for a few hundred dollars, and then I’d sell that purse. Then I’d take the money that I made out of that sale and I’d buy another purse, one at a time.
Joe Fairless: And you were selling them on eBay, or on your own website?
Sarah Davis: I was selling them on eBay. In the beginning, everything was on eBay. It was actually a great platform. It still is a decent platform. Today there’s lots of really great platforms for whatever you do, where I was able to watch tutorials and learn from other people and see what other people were doing, and research pricing and all that… I consider eBay kind of like my MBA. I never went to business school; like I said, I went to law school. But I learned a lot about selling used items [unintelligible [00:07:41].29] I just actually learned on eBay. Anyway, I did that for a couple of years and started hiring people to help me, because in the early days it was just me. I had PTSD sometimes, because I’ll have these memories of the time — I had a family, I started having kids, and I remember going to the post office with a stroller filled with boxes, and a kid strapped to my belly, trying to keep the closing time at the post office…
Now we’ve got like 90-something employees, we’ve got multiple locations, and we have a 30,000 square foot building in Carlsbad. It kind of looks like Willy Wonka for luxury bags. It’s [unintelligible [00:08:19].14] it’s so fun.
Joe Fairless: So now let’s talk about the challenges. Name the top three challenges you’ve come across.
Sarah Davis: Like I said, I started myself, and lots of it — I had no background; I didn’t have training, I didn’t know what a [unintelligible [00:08:38].20] I really didn’t wanna know… So basically, just kind of getting myself, while I was in law school – like I said, I didn’t give that up; I passed the bar, I graduated from law school and really wanted to finish that, but at the same time I had a lot to learn. The thing that’s amazing nowadays is there’s so many great resources; there are books that are not only filled with amazing information, but that are easy to read and enjoyable, that didn’t feel like punishment for me to read. Now there’s video tutorials, and there’s information online with websites, and you can take classes from universities for free online… There’s all those resources. So I never went to MBA school; I always in the back of my head was like “That sounds like a lot of fun, maybe I should do that. Maybe I should think about that.” But really, I learned so much, and really everything I needed to know, from reading, from all these resources and from what was on the internet.
I had in the very beginning kind of like — they talk about impostor syndrome, where I’m like “Okay, I own this business, and I’m acting like I’m this businessperson, but I have no idea…” And nothing has changed as far as my degree or anything like that, but I don’t feel like that anymore because of the training that I got myself. [unintelligible [00:09:57].18]
The second thing was I never really felt like money was a challenge in the beginning, because there was nobody else doing what we were doing, and like I said, I would just invest the money that I’d make back in the business, and we slowly grew it that way; there was never a profitability problem, we were always profitable, but we didn’t have some of the — when you get a bunch of VC money and there’s like money flying out and there’s not a lot of thought put into where it’s all going precisely, and maybe money is wasted in different areas that wouldn’t be if it’s your own money. When it’s your money out of your own pocket – we were so careful about every purchase that we make and every dollar we spent.
So that wasn’t an issue in the beginning, but it actually became more and more of a challenge as people noticed that what we were doing was working, and that we were growing. People could see that there’s money to be had in this niche, so now we’ve got lots and lots of competitors. All of the time someone will send me a link, or I’ll get a Google alert, something will pop up and it’s another company that was started, and “Oh my gosh, this one [unintelligible [00:11:04].09].” Some of our company has up to over 173 million dollars – one of our competitors has raised that much money… So how do you compete, when we’re bootstrapping? I felt like that’s the direction we should go.
So just really trying to use our money wisely and to continue to stay ahead of the curve. Like I said, there was nobody else doing that when we started, but you can very quickly lose your position in the market and that advantage that we had when somebody comes in who’s got a lot of money. We’ve been able to maintain our growth trajectory, and really just by paying real attention to those numbers and making sure that we have people on our teams that are really good with numbers and that we’re smart with the way we spend our money.
I read something – I think Malcolm Gladwell… I think it was actually something he wrote in the New Yorker, where he’s talking about planes, and how small planes crash, and he’s talking about the fact that when these pilots will be flying, and just flying in an area that’s really murky or foggy, and they use the plain of the earth as a way to keep balance. They wanna keep their wings balanced with the plain of the earth. And if they just start to lose that sight, they try to look ahead and they try to [unintelligible [00:12:22].10] themselves and they end up in a tailspin and they go down. And he talks about the fact that if those pilots would just look at the instrument and not look around… If you look around, you get stressed out – it’s dark, it’s foggy – so look at the instruments that you can actually fly that plane without visibility.
We stress out — just in this last week we found out that one of our competition have raised another 50 million dollars… And you can just stress yourself out and say “What is going on here? [unintelligible [00:12:50].06]” And what we realized is like “Okay… Let’s just look at the instruments. We’re doing pretty good here.” Just checking everything to make sure that we’re all — you know what I’m saying? Just to make sure that we’re on track… That we’ve got a plan, we’ve got a direction we’re going and we’ve got a speed that we wanna get there, and rather than get stressed out about the things that you might see around you or hear, you just have to watch the instruments and look at your numbers, and pay attention to those things and pay attention to metrics and goals you’ve set for yourself, and then you can say “Okay, we’re doing okay”, and not allow yourself to get really wrapped up in that. I think that’s been really important.
I think just trying to stay — again, when you’re really super budget-conscious, like we are, where money is an issue and you’re trying to really be careful with your money, just making sure that we’re using it smart in the way that we do our marketing and social media, and really trying to develop a brand.
For us, we’re like — we recognize that people who want a Louis Vuitton purse or a Chanel purse, or [unintelligible [00:13:51].11] or a Gucci purse – those people care about brands. They care a lot about the quality, and they become very brand loyal. They like the history of it, and they like the story, and again, there’s different things that make them love that brand… So we decided early on that we want to be a brand like that – a brand that they appreciate our story, they appreciate the fact that they can trust us, they appreciate our customer service, that we have a reputation, and just that we become an actual brand… Not just a company selling bags, but they become loyal to our brand, because we are loyal to them and we just kind of do a lot of those things. Part of that means that we should be very involved in social media — and I actually do all the social media myself still.
A couple of times we thought about having somebody else do our Instagram, our Facebook, and we realized that at this point it doesn’t take me long… I’d be walking around the office and I’ll see something, I’ll snap a picture and I’ll write a little thing, and it’s real, it’s authentic, and it’s my voice, and it makes sense to the business.
I think people appreciate feeling like they’re getting a secret, behind-the-scenes view from my voice, so that’s been a helpful way that we can keep the word out and have our buyers and our suppliers — they all feel like they [unintelligible [00:15:10].11]
Those are, I think, three challenges that we’ve had and ways we’ve addressed them that have made us actually stronger in the end.
Joe Fairless: With your marketing and social media – you said earlier that you pay close attention to the numbers… What numbers do you look for from a “This was successful” standpoint?
Sarah Davis: One of the things that is really important to us is that — there’s lots of ways online that you can manipulate all those numbers, where it’s just not real. You can run contests, but there’s lots of other (even little black hat) ways that you can grow your numbers that they’re not gonna end up benefitting your business. We want followers and people engaged that actually care about what we do, that potentially are buyers or suppliers, or aspire to be that.
Our goals are a little bit different than maybe other people’s goals that are just looking for awareness building in the grand scheme of things… Because you can really ramp up numbers really quickly in using black hat methods that we just don’t agree with. So we have tried to very slowly but surely just use tools like engagement, making sure that we’re holding an online conversation, that we’re engaged with the people that are commenting and sharing, and that we’re appreciative and generous in that.
So for us, we keep close tabs on things like Google Analytics. Google allows you to monitor very closely when you’re doing online sales — we can see where all of our sales come from. We can see that “Oh, this percentage of people found us from an organic Google search” or “This percentage of people found us from paid Google ads” or “This percentage of people came to us from a Facebook post and then made a purchase.” We can track all that, and it’s actually awesome to see that.
What we sell isn’t really an impulse buy; if we were selling cute $25 T-shirts, we might put up a Facebook ad and sell 25,000 shirts, because it’s a small price and you can just impulse buy.
For us, part of it is how many things people buy from us every year or two years, and we just try to make sure that we are keeping people engaged so that the next time they’re looking for authentic bags, that we’re the ones they will come to.
It’s not that we’re gonna put up a Facebook post right now or an Instagram, and then all of a sudden we’re just gonna sell 200 purses… What we sell is something that lots of people think about a little bit more. It’s like “Oh, you want a $4,000 purse? Maybe I’m gonna save, or maybe I’m gonna get it for my birthday.” We want you to remember Fashionphile when that comes, because maybe you are ready to buy at that moment.
Joe Fairless: Sarah, how can the Best Ever listeners get in touch with you or your company?
Sarah Davis: I respond to all of our social media posts, so on Facebook, Instagram, Twitter – Fashionphile. If you have a question in particular, you can find me at Sarah@fashionphile.com
Joe Fairless: And the Fashionphile website link will be in the show notes page, so Best Ever listeners, you can just click that and check it out.
Sarah, thank you for being on the show. Thanks for talking about your journey as a fellow entrepreneur and the three challenges that you have come across from a macro level. One is just learning what it’s all about, all the different aspects of the business – not having a formal training, but having kind of a hard knocks training. Two is that investing money back into the business and knowing that really you’re competing against some companies that are funded with more dollars than yours, so how you can be nimble and compete at that level, and your solution was to pay close attention to the numbers and be smart with how you’re spending the money. You talked a little bit about the types of metrics that you look at.
Then three is being really focused on building a brand that people care about, and that’s why you personally do the social media stuff, to make sure that your voice is being shown on the brand channels and the engagement levels there.
Thanks for being on the show. I hope you have a best ever day, Sarah, and we’ll talk to you soon.
Sarah Davis: You too, thanks so much. I appreciate it.