diapers.com: Marc Lore. The ecommerce visionary who lost to Amazon but still made billions (2021)

0:06 Hey, it's Guy here. So this week we're revisiting my conversation with Mark Lori, the founder of diapers.com and jet.com. It is An incredible story. You will learn so much in this episode. Anyway, Mark is now working on a new business called Wonder. It's a high-tech food delivery concept. And back in 2024, he joined me on the Advice Line podcast. And he talked about some of the challenges and changes that Wonder is facing, so if you want to hear more about that, you can scroll back in your queue. But for now, let's hear how it all began with Mark's earliest business and diapers.com. Here's our conversation from May of twenty twenty one. Enjoy.

0:49 In the early days, believe it or not, we'd actually go to the wholesale clubs. So BJ's, Sam's Club. And we would buy the diapers. And you were just paying full price for these diapers? Full price, no discount. Then you gotta mark it up on the website. So why would somebody buy them from you on the website? We didn't mark'em up. You didn't mark them up?

1:10 No, we just lost more money. So you were basically losing money to make it more convenient for people to get diapers. As one investor liked to say Let me get this straight. So You're selling a dollar for ninety cents. Welcome to How I Built This.

1:28 A show about innovators, entrepreneurs, idealists, and the stories behind the movements. they built. I'm Guy Raz, and on the show today, how Mark Lori took an idea guaranteed to lose him money selling diapers online. Built an e-commerce giant, sold it to Amazon, and then went head to head with them by building an even bigger business. Jet.com

2:07 Lots of stories we've told on this show are about consumer brands that succeeded not by creating something entirely new, but by taking something old or Unremarkable. in selling it more cheaply or efficiently or seamlessly than others. Michael Dubin took the frustrating experience of buying men's razors at the drugstore and turned it into an easier and less expensive one. by creating Dollar Shave Club. Same story with Warby Parker and Framebridge.

2:39 These companies offer their customers pretty much the same type of glasses and the same type of picture frames you could buy anywhere else. And just figured out how to make them easier and cheaper and even slightly cooler to buy online. And that Basically, is what Mark Lauri wanted to do with one of the most essential products ever invented. Dipers. He wanted to sell them online.

3:05 Easily, cheaply, and effortlessly. Except that unlike glasses or razors or picture frames. The margins on diapers? S In fact, diapers are a loss leader.

3:18 Most stores that sell them don't make money on'em. They make money by getting you into the store to buy other things. baby wipes, pacifiers, clothing, strollers, and more. And Mark Lori believed that he could pretty much do the same thing. Except without the costs of a brick and mortar operation.

3:38 So in 2005, he launched diapers.com with a partner. And by 2010? His company became the biggest seller of baby products on the internet. Which was great, but It also caught the attention of one notable

3:54 and powerful competitor. And that competitor Yes, it was Amazon. would end up acquiring diapers.com for nearly half a billion dollars.

4:05 Which as you will hear was not a happy moment in Mark Lori's career. So a few years later, he started another e commerce site. A retailer that went head to head with Amazon. And Mark called it Jet.com.

4:21 A business that would eventually be acquired by Walmart for around$3 billion. As a kid, Mark Lori grew up in New Jersey. His dad ran a computer consulting business, and his mom was a personal trainer. and a bodybuilder.

4:38 So that's kinda fun, you know. I was probably a junior in high school going to my mom's bodybuilding competitions. Wow. But uh She did well. She she won a couple of competitions and things. It was fun. But really inspirational as a kid, you know. I bet. Yeah. My mom's a bodybuilder.

4:53 There's my mom, my ripped mom, she's like kick your butt. She used to squat like three hundred and fifty pounds when she was like. A hundred and ten pounds. Yeah. That's insane. I know. I I read that like when you were in middle school you got into

5:08 Yeah, different businesses and stuff and you started like selling baseball cards in high school and uh did you make money? Were you were you good at like buying cards for cheap and selling them for For more expensive. Yeah, I would say we did okay. I did it with uh

5:22 Very close friends, Laksh Chandra. Big part of the business was Grunt work. We would buy cases of baseball cards weren't sorted. And then we would basically sort them into full sets and then sell the sets. And the sets were sold at a premium because somebody had to sort them. Yeah. But so we would do that all summer.

5:40 But also Did every possible sort of job a kid could possibly do everything from you know newspapers, recyclables, washing cars, mowing lawns, picking weeds. Anything to make a buck. Yeah.

5:55 Um How were you at school? As a kid. Were you good in school? No, I wasn't good at school. I I

6:01 Definitely had some Yeah. My parents used to fight all the time. It was like a it was rough growing up. I didn't focus on school at all. My parents I was the first person to go to a four year college and

6:13 My parents didn't really know much about school. My mom Went back to get our high school diploma. You know, they got married when

6:20 My dad was twenty, she was nineteen, had me less than a year later. Yeah. It w it was I I I didn't do homework. I Didn't pay attention in class. I was the class clown. I would Just didn't take school seriously and there was no

6:35 Repercussions at all. In fact, When I was a sophomore in high school, I remember somebody asking me, Hey, so Where are you gonna go to college? Were you thinking about college yet? I said, I don't know, I'd probably just go to Harvard.

6:46 And they said Harvard. You can't get in Harvard. What do you mean? And I said, What do you mean? Like don't you just Say where you want to go and then you pay and you go.

6:55 Like no, it doesn't work like that. You have to actually get into the school. They have to accept you. This is literally the first time I ever Understood or new. sophomore in high school that you had to get accepted. And so that was sort of a wake up call and then and then junior year I did

7:11 start like applying myself and did did better. Yeah, it sounds like it wasn't particularly stressed at home, that like you had to do well and make good grades and stuff. Yeah, not at all. Mathematically gift it. Like Gifted in math.

7:24 When I was a little kid. As a soothing mechanism, you know, I used to Count. And then eventually when I got a little bit older, I used to do multiplication problems in my head.

7:33 And Big stuff like that. Yeah, it was just it just I guess it was just natural. You ended up going to Bucknell University in Pennsylvania And I guess on a track and field scholarship, right? Like you that was why you ended up going there because

7:48 As a kid you were like a pretty gifted athlete, you were like a a high school state champion. Yeah. So it w it wasn't they don't give scholarship, but it was what helped me get into that school because I didn't have the grades to get in. But uh

8:04 When I got there, I didn't realize this, but when I got there, the coach sat me down. He said, Okay. you know, you're basically on academic probation the day I got there and they said, you know, you need to like get certain grades to stay on this team and I said, Well, you know, I wanna be a the cathlete, which is ten events and He said. No, you're not gonna have time to train for that. You need to focus on school if you're gonna stay on this team and stay in the school. I'm like, wait a second, I just got here. So that kinda got me fired up and I told the coach, I said, All right, well listen, how about this? If I get straight A's first semester, then I'm good, right? Then you'll train me. And he laughed and he told the team, he said, Oh, Mark just made me a bet, you know.

8:42 Uh, I gotta trade him for the decathlon if you get straight A's. So I was like, Okay, fine. And then I got straight A's the first semester. Wow. What what did what did you uh what explains that? Did you were your classes more interesting once you got to college? Were they easier or or what? It was more just First of all, I was challenged by the coach and I felt like Yeah, I think he thought I was just not smart or something'cause the way it started off. Did you by the way, did you think you weren't smart?

9:08 No. No, I knew I was smart. Yeah. You knew you were smart. Yeah.'Cause If I ever had to turn it on.

9:14 Once in biology class. I got the lowest score in the class, and it was like a seven or something, and I didn't study. It was really embarrassing because he This teacher, Mr Arminati, would announce the lowest and the highest score. And it was just really embarrassing. He's like in the lowest and he would do it in a really condescending way. And everyone laughs. It was just very bad. I can't imagine doing that today. But anyway, after I got the lowest score.

9:39 I study for the next exam. Um He announced my name again, but this time it wasn't the lowest score, it was the highest score. So it sounds like what drove you was a competitive Spirit, right? Like you wanted if you had to

9:54 And to prove yourself, you you you were gonna be the best. Yeah. Also it's just a Probably just based on Growing up, my dad

10:02 You know. Well Not completely present. And The only way to get my dad's attention was to do something

10:09 Extraordinary. Hm. So it's sort of a Programming. as a young kid, like to associate Doing big things with

10:17 Feeling love, basically. Mm-hmm. I didn't realize that growing up, obviously it's only With therapy and Sure. As an adult. Thinking back to that stuff, but

10:28 That is ultimately where my drive came from. It it didn't come from a healthy place. It's wasn't healthy. But I've turned it. Into something more healthy today. So it sounds like you were a talented track and field athlete. And you studied I read you studied business and

10:43 economic. So was it kind of in your mind that And given that you had some like strengths of math that you would go into something around. Finance out of college, was that in your mind? Yeah, when I was

10:55 In middle school I started reading books, like in seventh grade, I started reading books on derivatives. Like when it came to learning about how to how derivatives work. I could get into that book and Read it cover to cover, no problem. Unbelievably boring.

11:11 Okay, keep going. Yeah, so no, so I would I would literally read books on DeVritos, any book I can get. So when I graduated from Bucknell, I wanted to get into Derivatives basically. I was very entrepreneurial. I didn't even know that was an option, this yeah the idea that you could be an entrepreneur at that time.

11:29 So you I guess you graduate in nineteen ninety three and your first job Uh of schools with bankers trust in New York City and I guess your goal was to work at the trading desk. That's correct. Did you enjoy it? I mean you you're in

11:42 New York City, you're on your own, you're independent, you got your own apartment, like Was it exciting? Um were we always working? What do you remember about that time? Yeah, no, I I l I loved uh I did enjoy college as much as other people. I was ready to get in the work world, start have a job and make money. I was I grew up Basically a mercenary, as I call it, you know, I was grown up in a household with

12:03 My dad always talking about, you know, making money and my uncles making money and going to Atlantic City and trying to beat the house at Blackjack and going to the horse track with my uncles and trying to make a buck. It was like everything was about making money. That's that's what I call mercenary kind of attitude. And when I got into banking All I wanted to do was make money. I put a I put a sign on my cubicle that said Goal six figures by twenty six, seven figures by thirty seven, eight figures by forty eight.

12:32 And I basically Worked as hard as any person could possibly work. I was always the first one in the office at the bank, the last one to leave. It'd be eight o'clock at night and You know?

12:44 Ask what else can I do? And this is kind of a rapid rise. I I read that like from, you know, ninety three,'cause you're just out of college. Through the nineties you really Got um some really I mean within

12:58 Seven years you were like The head of the risk management division at at San Juan. Bank. Yeah, I was the executive vice president, which was By far the youngest executive vice president. You were barely thirty or twenty nine or something, right? Yeah, I was twenty

13:14 So you were just uh you were just grind and and by the way. Just to add one more thing. I believe that in nineteen ninety six, in the midst of all this, I can't even believe I'm these words about to come out of my mouth. You qualify for the US national bobsled team. Yeah. Yeah, not a lot of people know that, but yeah, that's true. So my extensive knowledge of bobsledding comes entirely from cool runnings, and I know that they were I'm in that movie, they were track and field athletes and that's why they were good at bobsledding. Is that how it works? Like if you're really good

13:46 fast runner, like you can become a good bobsledder? If you're Not only fast But explosive Legs and speed. So it's sort of like

13:55 If you could squat and broad jump and high jump from a standstill, so The way this all happened Yeah, y I mean, you're a banker in New York and you qualify for the U S national bobsled team that's going to the Olympics in nineteen ninety eight. Yeah, how do you how does that happen? Okay. Yeah, this is the story of how it happened. So

14:17 I'm having lunch down at the World Financial Center and I see that there's a Like bobsled track set up and there's like a tent basically like five bucks come down, push the sled, and they'll time you on how fast you push the sled. That was Fun and interesting, but

14:33 More interesting was the thing that said the fastest time of the week. They'll invite you to the training camp. Wow. So the next day Uh I brought my sneakers and I pushed the sled and the guys there were like Whoa That was the fastest we've seen anybody push the sled so far.

14:50 And so it turns out I had the fastest time of the week. And I did get this call and they said, Hey, do you want to come up to Lake Placid? It's basically like people get invited up there and they they take a test. Strength.

15:03 Speed. Explosiveness, broad jump, high jump, and they scored me and they said, Hey, you got a great score. This is pretty amazing. Would you want to train For the next month. Because we have at the end of the month there is the tryout to make the team.

15:18 Wow. Push the sled. And And I S Sure, let me see if I can get a month off from work. And I got a month off and I lived up in Lake Placid. And trained every day for thirty days.

15:29 on how to push the sled and All kinds of other techniques and things. Wow. And then at the end of the month. They had like the time trial to see who makes the US national team and they were gonna take thirteen people.

15:41 And I finished thirteenth. It's like a movie story, right? It's like that movie Rookie of the Year where the kid throws the baseball back And and he's got this amazing arm and then he joins the Chicago Cubs. You know, you're just having lunch at it in downtown and you push the sled. This was perfect for me. Yeah, I I I'd still been working out and but I did when they told me that I was invited to go train at the Lake Placid. It was like a few months from the time they were at the the World Financial Center.

16:10 So with those few months I basically just Push cars around. every day after work I would go to a parking lot empty parking lot and push cars. You'd push cars. You'd put the car in neutral and just push it around. Neutral. Yeah, basically.

16:27 This is a New Jersey. Gotcha, wow. Um but but I guess ultimately you decided not. Take this spot on the on the team, right? Because Y you would have basically had to quit your day job to train for the Olympics. I don't have to travel around the world with the team for two years before the Olympics and bobsledding is is not really super lucrative. And and I was driven to make money, remember, I'm a mercenary, so at that point in my career I was a mercenary.

16:52 Alright, so you're back in New York, not on the Bobsled team. And the story I've read, and I and I'm sure there'd more details to it, goes something like this. You you've got this great career in finance. You're in your late twenties, but uh It's just something about about it's just not fulfilling you and you are watching all this dot com action going on.

17:11 And you want to get in on it. Like you decide, I gotta get out of this. and get in on this thing. Is that what happened in two thousand? Pretty much. I was watching all that stuff happening. I was making a half a million a year at twenty eight. Wow.

17:26 And At that time I was married and had just had a baby. And I felt This desire to want to be an entrepreneur. Like

17:35 You know, I wanted to be a farmer. When I was four years old. And I wanted to be that for years. My grandmother would ask me what I wanted to be and I'd say that and she didn't understand and used to laugh and I said But Nan they grow stuff from nothing. Mm.

17:49 And now I get it, you know, I I just wanted to grow stuff and The other thing that was happening at the same time was I hated the culture in the bank. I hated the way people were treated. Yeah. It was Very condescending.

18:05 Toward women and empathy and kindness didn't play a role. And keep in mind, you know, I was kinda torn. So I was I grew up in this mercenary household, my dad and uncles and sure stuff, but then because I was My parents were so young when they had me, my mom used to leave me with her parents, which I called Big Nan and Big Pop. And they were the

18:28 the complete opposite. You know, my grandfather came f over From Italy and had a job working on the railroad and used to say that he had the best job in the world, laying railroad times. And was literally serious. Like he He used to say that he was the wealthiest man in the world and he would count all of his grandkids and children as a million bucks and he was just like the complete opposite in the classic missionary. He was driven by a higher purpose and I was always drawn to that.

18:55 But each year like I was only in banking for seven years, you know, before I quit and something was really missing, something was wrong. I didn't feel fulfilled and I felt like seemed like a No road to nowhere. So you You decide. To quit.

19:10 Which is a big deal. I mean you had a Big paying job. And to go and start. A business with a childhood friend of yours. Veneet Barara. Is that am I pronouncing his name right?

19:21 Yep, we need. Uh we call him Vinny. But yeah. And um and were you was any part of you nervous about About doing that? Yeah, also I had a newborn baby at the time, so yeah, it was uh And actually did it with Vinnie and

19:35 Laksh Chandra, um so two we were all three of us were best friends and Lax I did the baseball cards with both of my childhood friends. Childhood friends since I was ten years old. By the way, what was the enterprise that you were gonna do? What was this business idea? This was Like basically a sports stock market. We use baseball cards as a proxy for the athlete.

19:56 But it was much more of a stock market than it is anything to do with baseball cards. People would have accounts, they'd have Build a portfolio, there was a ticker, there was market makers, there was bit offer spreads, it was meant to be a stock market for sports players. So this is gonna be a marketplace for I just still don't fully understand it. I'm I mean it's just a marketplace to sell. sports collectibles online, is that a fairly

20:24 A baseball card that you never take delivery of. So it's just it sits there as a proxy. for the athlete. So you'd buy the cards, they'd go in your account, the price would go up, and then you'd sell them, and the money would go in your account, and you'd buy and sell and trade. And so actually It felt much more like a stock market. Like we would watch the games and And if players did well, the stock would go up.

20:45 play it to bed the stock would go down and people were trading. pretty aggressively during the games. And you raise some money, right? You you guys raise like five million dollars all from Sixty angel investors. Who really believed in this idea today, if you pitched me that idea, I would be very skeptical. Well here's the this is gonna be This sounds like I'm absolutely crazy when I'll tell you this, but

21:10 I investe 390,000 of my own money into the company. And you know, the investors, the angel investors said, We're not sure about this idea, but Wait, I see here, Mark, you invested three hundred ninety grand, that's a lot of money. You know, you're not that old. Um Why three hundred and ninety and why not four hundred?

21:27 And my answer was Because that's all I had. So I literally had three hundred ninety thousand in the bank. And I think the investors saw that and they said, Wow, this guy's got a lot to lose. Yeah. Now Would I recommend this? No, I wouldn't recommend you take every dollar that you have. But I'll tell you what, if I didn't do that,

21:46 Wouldn't have got the investment dollars. No. And we wouldn't have worked either because it really felt like My life was on the line. Alright, so you and by the way, this is call the pit, right? This was a pit. So you get the money. And you launched this in two thousand one and and it's a website. Two thousand two thousand two thousand one. And it's a website it looks like a a marketplace with a ticker going across the screen and and stuff like that? Yeah.

22:09 Yeah, it's just look yeah. Exactly. And and did you get like some media attention for this and and we did? Yeah. And we got a lot of customers. You got a lot of customers. Yeah, we got a lot of people came on there were trading, they would send checks for ten, fifty thousand dollars and start trading. And how would you guys make money? What was the revenue model? We made money on the bid offer spread.

22:30 And commission. So you launched this thing, you're getting some traction. Was it did it show promise? Did it look like it was gonna It was yeah, it was really working. The first ten months we were doing about Ten million in

22:42 Transaction revenue? Wow. It was it was going really good, but then About ten months in the Nasdaq crash. This is when the monster, monster crash. Yeah, that was the beginning of the bubble bursting. Yeah. And you immediately felt the results of that.

22:57 We've needed to start raising money and it was just Ghost Town. There was no money. Zero. And so I guess you because I'm wondering why this happened, but basically ten months in you sell the business to tops, the baseball card company. for five point seven million, which is not that much more than what you raised.

23:14 That's right. And believe it or not, everyone got their money back and a little bit more and they said it w you know it's the best performing Investment in their portfolio. So everybody get their money back and a little bit of change on top. and tops now, the biggest one of the biggest, maybe the biggest baseball card company in in the US. owns you and you go you and and

23:35 Vinny become. Top's employees, right? Yep, and Lax, yeah, all three of us. And then Vinny went on to become the general counsel of tops, Inc., uh, Lax. Ran the pit. And I went out to Seattle to run a game company called WizKids.

23:51 Which was acquired by Tops as well. And just to be clear, they didn't make computer games, right? WizKids made like physical games that you physical games. Think about like little miniature figurines that have stats and things. Almost like Dungeon and Dragons, but like with Miniature figurines and you would collect the figurines. The figurines were collectable.

24:14 For two years. And um you decide that you Is that is that what happened? Yeah, I've I was a little bit it was tough. Like I was probably the after I was there for two years, I'm now Ten years out of school. I'm like thirty two.

24:31 Thirty three ish. I had ambitious goals and dreams for my career and things. And I'm basically one day I remember it was like after hours, I'm sitting started getting into this Dungeon and Dragons and sitting around with a bunch of gamers at night and I'm got this twenty sided die in my hand and I'm rolling it. Just thinking

24:50 What happened? You know? I was like On top of the world at twenty eight. the fastest to EVP making all this money. You know, and then here I am at thirty two.

25:02 rolling the twenty side to die. You know? It was just I don't know. It's like surreal. It was like um That didn't feel right. The banking didn't feel right, but also didn't feel right just And you were not gonna go back into finance. That was out of the question. Definitely not going back into finance, no. So I I guess around this time, uh you and Vinnie start talking about doing something new, uh a new business. And we now know that this would lead to to diapers dot com, but I want to understand w w was going on.

25:31 Did you guys start to have conversations like You know. What can we do in what opportunities are out in the world, like How did you even start? What was the conversation?

25:41 Yeah, I'll tell you exactly how it started. This is even before talking of any, but I I would just go on Google and search for Random words. and see how many times they were searched in the search engine. And I remember searching the word diapers.

25:56 Why? Well, I I was doing a lot of diapers at the time. You were changing a lot of diapers yourself. Yeah, I guess. Buying'em and changing them and Yeah. But I put lots of words in I mean, I don't know, hundreds Maybe a thousand different things. Just Getting the brain going. Yeah, just some nugget of like what are people searching for? Just try to get ideas brainstorming basically, you know, not knowing what you'd find, no idea.

26:19 But uh put in the word diapers and I remember it came up two hundred thousand times in a month. Search. And I'm like, that's really interesting because you can't buy diapers online. Not even Amazon at the time. Could you buy'em? In two thousand four, you couldn't buy that.

26:34 Yeah. Two th it might have been two thousand three, two thousand four, somewhere around there. You could not Buy diapers at a normal price. They were like prices were like jacked to ridiculous levels. It just wasn't a thing. Nobody bought them online. Then I went to Vinny and I said, Hey Vin, what do you think about this idea of like selling diapers, delivering'em like overnight to moms and dads Uh Normal.

26:56 Walmart prices. I think we said Walmart prices. And He started t talking it through. And Thought yeah, there's something here.

27:05 When we But ask people though about Whether this would work, people that knew it. Something. They said that's silly idea. There's no way it'll work because don't you know that diapers are a loss leader for these brick and mortar stores. They drive

27:17 traffic and so they lose money on them. And if you're gonna pay for shipping and fulfillment, you'll lose even more money. There's no way it can work. And and just so I understand. Is the reason why diapers didn't Nobody wanted to sell them online was because Once you paid for shipping, you weren't actually making

27:32 you were not gonna make money off them. Even if you were able to get great prices from Oh. Not even hard, it's impossible. Hm. Because they're a loss leader, so there's there's very little margin in diapers. And yeah, the cost to ship because they're heavy is really expensive. You are definitely going to lose money.

27:50 On diapers. But what I'm trying to understand is why are diapers why do diapers lose money? I mean Everybody who was a kid. is gonna bupers for two to three years. Mm-hmm. So that seems to me that there's a lot of money to be made there. Wha h how is it Yeah.

28:03 That's not the case because All the co the retailers compete. For People looking to buy diapers and they'll keep lowering the price to try to drive. Basically. It's a race to the bottom. I got you. So the retailers are pricing it down just to get people in the door to buy other stuff.

28:19 Exactly. But you must have figured this out pretty quickly that you're not you can't make money off diapers. So I'm thinking if I'm talking to a friend about a business idea, we're like, all right, we we looked at that, let's go to the next idea. But that didn't happen. W why? 'Cause I think we saw the bigger vision, which was wait a second.

28:36 These things were lost later for a reason. They drive traffic. Yeah. And online. The difference between a brick and mortar and online is online you can sell so many more things because

28:49 The unlimited shelf space. So we thought okay. Great. So let's drive people you know, we're gonna lose more money than a brick and mortar does in diapers'cause we have to pay for shipping. But that's okay, we can sell even more products. So you guys start working on this.

29:05 And I guess initially it's not called diapers dot com, right? It's call it started off one eight hundred diapers because we couldn't afford diapers dot com domain. And you guys uh I guess kinda relocated to New Jersey where both of you grew up, right? Yep. In Montclair, New Jersey. Yep. And W what did you I mean

29:21 You have to build a website, you had to get inventory. Let's just break this down because Building a website in two thousand four in server space was really expensive, right? Yeah, we had our own box, physical box. There was no cloud. And you guys put I mean, imagine you were putting you put all of your money into this.

29:39 A lot of it, yeah. It wasn't three hundred and ninety thousand this time, but but it was And what like I guess w when when you started calling up manufacturers to buy their diapers was it just like was everyone just Just saying. Like this is a bad idea, like selling diapers online is just Crazy. It was crazy, so crazy, I guess, that Procto Gamble and Kinley Clark

29:59 the two big diaper manufacturers that make pampers and huggies. They refused to sell us diapers. They said They Just don't wanna waste our time on a business that's never gonna work.

30:12 When we come back at the break. How to turn a big fortune into a small fortune. By selling diapers online. And how Mark and Vinny eventually figure it out. Had to turn things around.

30:25 Stay with us, you're listening to how I built this. Hey, welcome back to how I built this. I'm Guy Raz. So it's 2005 and Mark Lori and his co-founder Vinny have just launched their website, which at the beginning is called 1-800 diapers. But as customers start to find out about the site and start to put in orders, Manufacturers refuse to sell them any diapers.

31:07 So the two co founders have to figure out How to get'em. In the early days, believe it or not, we'd actually go to the wholesale clubs. So BJ's, Sam's Club. Costco and we would buy the diapers.

31:22 Shopping cart and just Loaded with diapers? At first we go with a big shopping cart and then we would make a deal. They would load'em up with their Um.

31:33 P Yeah, they they'd move the pallets and put'em on truck. Like we'd rent like And they did they ever ask, hey, what are these diapers for? Uh no, they just they loved getting the sales and they were ha quite happy to sell them. We had a little arrangement where we'd leave them some diapers for their other customers and in return they put'em on the truck. And uh

31:55 Eventually we would we were clearing out like Multiple clubs at a time. And you were just paying full price for these diapers? Full price, no discount. Alright, so this is I'm no business genius, but I'm thinking if you buy the diapers for full price Then you gotta mark it up on the website.

32:12 So why would somebody buy them from you on the website? No, we just lost more money. So you were basically losing money to make it more convenient for people to get diapers. As one investor like to say, Let me get this straight. So You're selling a dollar for ninety cents?

32:31 That's what you were doing? You were buying the diaper for let's say a dollar and then to compete against BJs in Costco, you were selling it for ninety cents? Basically, yeah. And paying for the shipping costs. And pay for the shipping and fulfillment. That sounds like a crazy business.

32:47 I mean I read that within like a year after you launched, you did eleven million dollars in revenue, but that probably means you were still 'Cause you were losing money. The more revenue we had, the more money we lost. That was the problem. So how are you financing the loss? W before you even raised any outside investment. You were just watching your money.

33:08 being burned out of your bank account. I know it doesn't sound small. It doesn't it sounds nuts. We had a we had a plan. We had a vision. Your vision was it's gonna be okay because we're gonna figure this out. We just need to get customers first. Yeah, I mean I think the learning, you know, just And it still stands today, it's the idea that As long as Customers love the service.

33:29 And they're repeating. And they give you good marks that you had something. You had something that was valuable, you had a brand. And There was lots of ways to solve the economics is is what we thought and felt.

33:41 How many people did you were you able to hire before you got outside capital. At eleven million in sales, it was basically just me and Vinny and we hired another woman to like help us with customer care and And some of the fulfillment. But we got up to eleven million in sales with two people b three people basically.

33:59 It was really hard. And you were still only selling diapers, right? In the first couple of years. We were selling diapers, wipes, and baby formula and some other things, but yeah. Alright, I guess. in two thousand six you were able to raise some money, the four million dollars in venture funding. Mm-hmm.

34:14 And you started to get Around that time, Preton Gamble. Kimberly Clark and a few others directly selling to you. The only reason why they did, by the way, is because we changed the rules with the wholesale club. We you know we used to leave them some diapers and then we said, you know what wonder what happens if we take all the diapers. Maybe they'll get mad and they'll like call P and G and so so we tried it and it it actually worked. We went in there, we took all the diapers, they said, you know, our deal was we load the truck up And you leave us diapers, and we said okay.

34:43 Well Then You don't have to load the truck, but we're taking all the diapers. And they're like whoa, whoa, whoa, whoa, you can't do that. And like I think we can. We're just like any other customer. He's like, Well yeah, I guess you can

34:54 I guess you can, but and we said, Hey, the only but is please please call your Crocking Gambling, Kimberly Clark. You know, wrap And tell them. to just sell us direct and then we're then we're out of your hair. We won't take all the diapers. Yeah.

35:09 And Very soon they did that and we got a call from Procter Gamble. And Packing Almost said, Hey, um Yeah, we're doing a favor basically for a very important customer of ours who would like us to sell you. We don't believe in your business model. Nothing's changing our side, but but we're going to sell you. Alright, so by two thousand seven, this is now

35:29 But two years, two and a half years after this. idea really launches, you become diapers.com. You buy that domain name and you become diapers.com. What was the pitch to your investors? Did you say to them? Like what was the vision you laid out for them? Was it like

35:44 Your one stop shop. For all things baby strollers and Car seats and everything. And I guess um while you were in finance

35:58 There was a guy that you had worked with named Lev. Lev Borodovsky, is that right? Yes. Yeah. And he was like a genius, or is maybe is like a PhD in nuclear physics, is that right? Yeah. You

36:12 kind of recruited him to help you figure out 'Cause he was like such a smart guy. What did he figure out? What did How was he

36:24 gonna make the business more efficient. Well There's a little technicality on on how you figure the price of shipping. Mostly it's based on weight, but at some point

36:34 If the box is big and it's not that heavy, you'll get charge for the actual cube of the box instead of the weight. The dimensions, not the weight. The dimensions. Yeah, the dimensions instead of the instead of the weight. So we noticed that there was still a lot of Empty space in every box. We put diapers, we put formula, we put

36:53 baby food, whatever, and then you look at what percentage of the box with those products actually taken up, it was like maybe like Forty percent. And so we thought what if we had twenty, thirty different

37:05 Box sizes. And we could build what we call box em was basically a a way to figure out exactly What box?

37:16 certain items can fit in. So you pick the box since you knew the items and what configuration They need to be packed in the box to fit. If we can be super efficient with the way we package things. And then how we ship them, we actually might be able to make money even off diapers. Nope.

37:36 No. Could not make money on diamonds. Yes. But But you could make money because

37:43 The way shipping works is If You're shipping a box of diapers to someone and you have empty space in that box. the marginal cost to ship the next thing you put in the box is Very, very small, very low.

37:55 Like it might be you put something that weighs a pound. Into that same box it might cost you ten cents of incremental shipping. So the margin on the margins was great. That means you had to encourage consumers to buy more for every order.

38:09 Is that is that right? That's exactly right. Yeah, buy more stuff, buy baby clothes, buy pacifiers. So how did you do that? I think we just built a really Good user experience online. Um

38:20 We had everything that mom and dad could possibly want for their baby. They were all First party. So that w was we didn't have third party sellers, like everything was handpicked by us, and we had all the products that Moms would want.

38:33 And we organized it in a really convenient way. Everything was covered. How are you getting the other stuff? The clothing and the you know, the other products was it were were retailers coming to you and saying Hey. No. No. Okay.

38:47 Like once again. much harder than you possibly could imagine trying to convince retailers to sell you product. I didn't I had no idea, I was never in retail and we had to fight really hard to get manufacturers to sell us products. One thing I'm wondering about because I'm trying to put myself in your shoes, right? And our listeners know And anyone who knows me is that I have uh Probably more anxiety than you do, but but maybe you do too and you just kinda hide it better. But I would be worried.

39:14 If I was like in my mid thirties and I was like watching all my money go down the tubes. Like I would be Yeah. I'd be nervous about the the people who came to work for me and whether they were gonna have jobs and like they depended on me and their families depend on me and like a at a seven year old, at a four year old, and I had all my family and friends. Invested in the business, losing money every day and I just always thought, like, what do we need to figure out? What do we need to do? What's the problem? What's the next hurdle? Like what do we have to do? And and that was like motivating me. You know, it was it was sort of like a challenge.

39:49 It always came down to like are we gonna be able to make payroll? Like so it it was n it's never been easy. Yeah. But it sounds like it didn't I don't know, you didn't get that like Horrible.

39:58 sick feeling in your stomach about that possibility. Maybe the way you're wired it just enabled you to kind of Feel like it's gonna be okay. Yeah, I like to talk about the sixth gear because that's the only thing I can I can say is that

40:12 I didn't know it at the time. I was working in banking, working really hard, working really long hours, but I never got out of fourth gear. It's only when you have your life on the line and you can't afford to lose Can you find the sixth gear? And when you're in that sixth gear, at least for me It's like a out of body experience. It is like

40:31 You don't have time to worry, think, be anxious. I think what's so fascinating to me about Everything I've been reading about diapers dot com is It was like multi pronged, or your strategy was multi pronged. It was like, Okay, we're gonna diapers will be the entry point. We'll sell a bunch of stuff. And then we'll be super efficient. We'll be really efficient, and and that's where we'll make our money. We'll squeeze.

40:54 This is the same. Get rid of any waste. We'll put warehouses in very targeted specific places. Like I read that You had warehouses in

41:03 Camp Hill, Pennsylvania, Sparks, Nevada, and Lanexa, Kansas,'cause those were the most Efficient and strategic locations to enable you to save money. Yeah, we had to we had to have every cost advantage we could find. But the the vision was even bigger than just selling everything for

41:20 Parents everything. So we l we launched another website that was Wag dot com for Pets and soap dot com for Household supplies, yeah. Make up and cosmetics, right?

41:36 Yep, yoyo.com is toys, kasa dot com is home. We had like ten websites. And this is where you kind of started to operate under the parent Quidsy. Yeah, Quidcy, we changed the the the corporate name to Quidsey, but we wanted to keep the specialty stores. because we felt that was sort of the magic as opposed to just a mass merchant where you sold everything.

41:56 But we had one shared shopping cart. So you can shop on diapers.com. Add stuff to your cart, you can click on the Wag tab, turns to Wag.com. Now it feels like a pet specialty shopping experience, but you add into the same cart and you check out. Yeah. All right. Now we're going to get into the chapter of your life. Where you begin to encounter Amazon.

42:17 You know, you guys were I think by the end of 2010 you were on track to do three hundred million in revenue. You were still not yet profitable, if I'm right. But but it but there was a path to profitability. It started to look clear that that that was gonna happen. As you grew. You obviously became a god on the radar. Of Amazon.

42:39 And the reason why I know about this is because there's a book. About Jeff Bezos and Amazon, written by a reporter named Brad Stone and and he devotes quite a bit of it to the story of Quidsey in diapers dot com. So I wanna I wanna dive into this a little bit because I know that from what I've read as early As

43:01 Two thousand nine. Amazon approached you guys and said, Hey We'd like to acquire you. Is that right? No, we had a discussion with them, but they didn't say They would say would you consider selling the company, something like that, just to fill you out? Yeah, like'cause they said if you're ever open to selling it, like

43:18 Let us know. So, from what I understand, not long after that. Amazon. slashed its diaper prices by like 30%. Let's just say it was coincidental, but is is the timeline. No, it w yeah, it wasn't coincidental. It wasn't, okay. No. It was unheard of at the time, the the idea that a commodity product that already lost money. It's already a loss leader that you would lose another thirty percent. That's

43:42 Unheard of, unprecedented in the history of retail. Did that have any quick impact on Diapers.com on on your business? It definitely slowed our growth rate. You would have thought it would have a much bigger impact. Like we would actually shrink in size, but all it did was slow our growth rate. The customer base we had was very loyal and

44:02 We didn't lose many customers. Which I think was surprising to Amazon. So that didn't make you nervous when that happened, you thought We're gonna be fine. No, if t I mean When you say nervous, it w it was definitely

44:13 something that we had to seriously like focus on figuring out how we're gonna combat that. Anytime you have a company that size that's targeting you, yeah um Yeah. So it it seems like this is two thousand ten. It seems like Your only option at that point.

44:29 I'm thinking is to go out and raise more money. Mm-hmm. And is that what you tried to do? Yes. We had only raised fifty million, fifty five million dollars. Up until that point, which was pretty modest amount of money raised compared to today's standards. But we went out and we needed another hundred million.

44:45 To keep all the websites going and it really Blow it out. It started Put in some But everybody said

44:52 Hey, listen, Amazon's coming after you work. That's that's too risky for us. By the way, by two thousand tenure. When you're doing roughly three hundred million in revenue, how many employees did you have? Uh Maybe like three hundred. Right. So there's a lot of people involved at this point.

45:07 What what are you telling yourself? What are you saying, Okay, maybe we try this. What was the this that you would try next? Yeah, it was really like we were Gearing up. to battle or raise that money. But uh at the same time

45:20 Amazon had Uh asked us to go out. To see them.

45:29 Potential acquisition. I think we had a hunch. Yeah. It's hard to remember exactly, but yeah, I think Before we get to that meeting,'cause I think this happened in September of twenty ten, I mean I imagine that that within your business There was a big

45:42 Dartboard with Amaz you know, with Amazon on it. I mean that that they were The enemy. Absolutely. Yep. So when they contacted you and said, Hey, come out here, what do you remember thinking about?

45:53 About that offer. We were just like, Yeah, they're coming after us. They're clearly targeting us. Now they want to talk, are they are they softening us up to You know, before the before the surrender you drop a couple Couple bombs and then and then Have the talk s you know, about surrendering. It felt like that.

46:09 That's what it felt like. All right, so you go to to Seattle to me with Amazon. About Amazon in the book by Brad Stone. On September fourteenth, two thousand ten.

46:21 You guys go to Amazon headquarters to meet them and they to discuss a possible acquisition. What happens at that meeting? Yeah, now you just sparked my memory, but uh That's when they told us that

46:34 They were launching Amazon Mom. Which was a a program designed to Get moms into their membership program. And it was really driven by diapers. From what I read, it would have meant that like

46:46 If you guys at diapers.com sold a case of Pampers for forty five bucks, You could get it for thirty dollars. the same product for fifteen dollars less. I mean there's no com there's no competing against that. Yes. That's exactly right.

47:00 That is one hundred percent correct. So I mean it sounds like I mean we know what happened. You eventually were acquired by Amazon, but It sounds like you were left with no choice. You had to agree to that acquisition. Yeah, it's even even worse that we got.

47:15 A higher offer. That we didn't take. Higher offer from I would just say I don't think I've ever publicly disclosed.

47:23 This and I don't think I can. But you got a competing offer from somebody else. Yes. For a hundred million more. Why didn't you take that off her? Because

47:33 Amazon very clearly stated that If we took that off or they would Do even more. Two Harm the business.

47:42 And listen. Let's just be honest, this is how a lot of big corporations operate. They shouldn't, but they do. It sounds like a mob shakedown. Felt like it. W did they do it with a smile on their face? I mean these are people from the Pacific Northwest. They're very friendly. How did they I mean, how are they like presenting this to you?

47:59 In a pretty aggressive way. They said hey You gotta Except this acquisition offer. Or else we're gonna crush you.

48:07 We're gonna bury you. They said, Well yeah, we're gonna take the price of diapers to zero and we're gonna Yeah, and and they made some analogies to some Other use explicit language and It was uh Pretty scary stuff. I'll just leave it at that.

48:21 So you you sell it to Amazon. You sell the business to Amazon. They buy it for five hundred and fifty million or something like that. That's a pretty good return. I mean you were raised fift million, so but of course you were losing money every year. But did that mean that your investors

48:36 You know, it sounds like they came out okay. Actually all the investors did really well, but the early investors made Yeah, a huge. Return on their investment.

48:45 Yeah. So now you're an Amazon employee. You are running quidsy, but now under the corporate umbrella of Amazon. And I'm just thinking if it was me

48:56 It would be a little weird. Here was this business that was kicking me in the butt. For Two years. That I could not compete against because they were just so much bigger and they were gonna crush me.

49:09 And I surrendered. I had to. With a great outcome, financial outcome. But now I'm working for you. How are you able to You know, two weeks later or a month later, just like

49:20 become an Amazon employee. Was it hard? For you. Well let me just say I mean one thing we didn't talk about at diapers.com was just how Vinny and I really set that culture up and that value system in a way that

49:34 The culture was everything. Our mission was to make lives easier for for new parents. And That was really important to us. And we brought these people into this organization and we felt the responsibility to the employees. Yeah, one of the

49:49 My personal core values is is fairness. And I felt like Even though I maybe wasn't happy about how that went down.

49:59 You know, we did accept the offer. for five hundred and fifty million. We did sell the company and I just felt The right Fair thing to do was to give it the best we we got. Amazon and the employees more importantly.

50:13 And so that's the kind of the way we looked at it. So there was definitely like wasn't happy. So we were When the day we sold the company, Vinny and I you know, you might have thought would go out and like have a drink to celebrate. She's depressed. We were depressed. Even though that day was gonna be transformational for you. Yeah. Basically I think it was like forty years old at the time.

50:32 And we didn't have a lot of money saved, either of us. And so it was a Never need to work again kind of moment, and we couldn't even celebrate. Yeah. We had a vision for what we wanted to create. We put our heart and soul into it. And then our dream was sort of done. Like Amazon didn't even

50:48 When they brought us in. Say hey, we want you guys to run the mom. baby parent category within Amazon, they said, You know what, just keep doing what you're doing. Just continue to keep competing with us. Wow. That felt terrible.

51:01 So you are still Competing But not It was all part of the same family. Exactly. I understand the disappointment, for sure.

51:11 I think some people listening would say, but maybe, you know, mitigated by the The money. But it doesn't sound like it was entirely mitigated by the money. For sure. Definitely wasn't. Yeah. If I was still, you know, in my mercenary mindset

51:26 I might have felt differently, but I had made the transition by this point to be a full fledged missionary. I've gone all the way from one side all the way to the other, and I was driven and motivated by the bigger mission. Yeah. We didn't want to sell the business at that point. We definitely didn't want to sell the business. We basically sold out. When we come back in just a moment.

51:46 Mark took the hard lessons he learned from competing against Amazon the first time and decided to launch yet another business. This time with an even bigger e commerce idea. Stay with us. I'm Guy Raz and you're listening to How I Built This. Hey, welcome back to How I Built This. I'm Guy Raz. So Mark is running Quidsy at Amazon, but it's not a super happy period in his life.

52:27 And after around three years. He decides to leave. Now at this point Mark has enough money that he never needs to work again in his life. But still.

52:38 He can't quite shake the idea. Yeah. There's more to do. I just felt like there was unfinished business. Meaning

52:48 We had a vision Um It got cut short. And so That vision we had, the mission that we had set out.

52:55 We're still Alive. Like we wanted to uh Give it another shot. Alright, so You start to noodle on an idea around e commerce.

53:06 Again. Talk me through what this idea was going to be in your head before you you decided to launch it. What were you thinking about doing I just still continue to think that there was room in the market for another E commerce player.

53:20 Amazon didn't have any real formidable competition at the time. And Felt like that I saw an angle. I saw the inefficiency that was brought about by people shopping on Amazon. Buying things and

53:33 Yeah, one unit at a time. having shipped across the country and things and a lot of expense. In that And came up with this idea that, you know, what if you empowered customers to And gave them the information to shop smarter to save money.

53:48 meaning that you were able to encourage people to make to buy more things at one time instead of just like a one off not only more things at one time, but more things coming from the same location so they could ship in the same box. Mm. Amazon's packages will ship. From different locations.

54:04 Like what if somebody's building a basket of product and they're about to put a product in the basket that would not be available in that same warehouse to ship in the same box, but was on the other side of the country. You could gives the option to the customer to substitute that product for a product that was in the warehouse that could ship in the same box, that could save$6 in shipping.

54:24 and give three dollars back to the customer. And so we built this real time. smart pricing engine that Showed customers. Lower prices on things.

54:35 That would pull costs out of the supply chain. And so actually If we did have scale. Not Amazon scale, but enough scale. By having a more efficient

54:45 supply chain you could actually have lower Lower prices. And lower costs. But it assumed that you got to some level of scale and so you needed to raise money. Enough money, a lot of money.

54:56 To help bridge. to that level of scale. And this was for what would become jet dot com. Yes. Jet huh. And how much did you raise?

55:04 In total. About seven hundred and fifty million. Wow. And so this was going to be If I'm right, kinda like initially like a hybrid between an Amazon and a Costco.

55:15 Which was For fifty bucks a year you got a membership. And then you would be Offered the lowest Prices on like ten million items.

55:24 More or less. Initially that was the idea. And and I guess like Costco, because Costco really doesn't make money off the stuff they sell. They make money off Selling memberships. Shop. Um that was the idea that you would make Money.

55:36 From all those people paying fifty bucks a year. Absolutely correct. So with that seven hundred million dollars, I mean you had to build warehouses, you had to create the supply chain. I mean you now had Considerable. experience in that space.

55:52 But God, it just sounds like a huge undertaking. It was massive, yeah. It all comes down to what I call VCP vision capital people. We had the vision. We need to raise the capital, we need to hire the very best people in the world. And It was the people that made the difference. The people uh that we hired were incredible.

56:10 And empower them. And let them run as fast as they could run. I mean we got to a billion Run rate.

56:19 In revenue within ten months. Mm-hmm. Launching. Think probably unprecedented at the time.

56:28 No. I have a feeling I know how you're gonna respond to this, but I mean if you were being truly honest, intellectually honest here. Mm-hmm. Мі іт саунс

56:38 Like anybody hearing this story is gonna say okay. Amazon really was Not pleasant when they went after Quidsy. So Mark goes and works with them for a couple years after the acquisition. But then he leaves and he basically

56:52 decides to compete against Amazon. I mean, I know at the time you were quoted saying, no, it's not about, you know, them versus us, it's just something I want to do, but that had to have driven you to some extent. Because you talked about being a competitor as an athlete, a competitor in the math test, when you get the worst score in the biology test, you want to get the best score. That that's inside of you. It wasn't about Beating Amazon. It was about You know, a big massive market that was growing fast and

57:19 I was very excited to start A new culture and a new business with all the learnings. From previous businesses. Yeah. And we really honed a lot of the core values and the culture at Jet, like in really cool ways that I'm super proud of, you know, the transparency of

57:34 of salary so everybody could see what everybody else was making, the fact that everybody in the company at the same level made exactly the same amount, you know, to really prevent unconscious bias from creeping in and things like that. But how did you I mean, you knew what Amazon was capable of doing. They could say, we're just gonna cut the price of diapers by thirty percent. And we don't care if we're gonna lose a lot of money because We are going to win this battle. I mean Amazon is a very smart company. Yeah. What was gonna prevent them from doing the same thing this time around? It's a little bit different because we weren't

58:06 Like had one product where it was so Single threaded I. you know, diapers with such a high percentage of our sales and such a low percentage of their sales, so Yeah, we would go in mass. they weren't gonna be able to cut prices on everything.

58:19 So so I guess like three months into launching Jet.com because I remember those seeing those ads Everywhere. The New York Subways were everywhere. I mean you guys but put millions of dollars into marketing this. But three months in you drop the fifty dollar

58:34 a year membership fee. Was that because that just was not gonna w be a smart way to m to make money? No I still continue to think to this day that That would have worked well. The problem was that started to we knew we had to do a big round of financing.

58:48 and starting to read the tea lead from investors who said you know, this membership, they really wanna see what the retention rate's gonna be. people buy the membership, do they stick with you? Do they renew? And sort of got spooked by that, thinking we're not gonna have enough time to prove that out. Yeah. At the same time, we're also seeing great traction

59:11 Without it. And so we sort of pivoted the business model in such a way that the math worked. Without a membership. It didn't necessarily mean that that wasn't the right strategy for the business had we

59:22 had the capital and had the time. So the site launches in July of twenty fifteen. And um you knew that it was going to lose money for at least five years. That was part of the the plan that you showed to investors, but then there was going to be an inflection point.

59:39 We're gonna lose three billion dollars. Before you started making money. That's correct. And what did you have to do to What like what was the plan? What was gonna happen?

59:49 to start turning around and becoming profitable. Just e commerce is all it's a scale game. You build the infrastructure, build the technology, get the people, and then you just need enough sales because the margin, the variable margin on sales is pretty low. And so you need a lot of sales to cover your fixed expenses. I have to imagine that you knew you were gonna burn through cash. But you were not worried about this because this was part of the plan. You had predicted this and you were okay.

1:00:12 And with the money raised the seven hundred million. How much runway did you have? How much time did you have before you actually had to either raise more money or Saturn. We're burning about forty million a month. Alright.

1:00:24 But The real Key was raising we did a six hundred and eighteen million dollar Series A. So we'd raise some money before that, and then we had The six hundred million series A, that was a really tough round to get done. That was

1:00:37 At that time we had negative gross margins. It was going up against Amazon. Yeah, we needed to raise six hundred million dollars to get through the next You know, eighteen months basically.

1:00:50 What did investors who decided not to invest what The sceptical ones, what were they saying to you? Yeah, it always came down to whether or not you can raise the capital you needed to create a really big business'cause you were gonna burn a lot of money competing against Amazon until you got to scale. And so

1:01:06 Three billion. It could have been more. And they didn't know whether or not we'd go out and be able to raise three billion. Even with your track record at this point,'cause you'd already

1:01:16 y you were still getting lots of no's, even with what you'd already built. Oh yeah. Way more no's than yeses, of course, yeah. But I always had a great experience with venture capitalists. I think they added a lot of value to the company outside of capital. entrepreneurs that says, you know, raise as much money as you can.

1:01:33 Get the best. Venture capitalists the best people that can help you around the table. I never worried about control and All kinds of other things that people worry about. You have to trust people. I I think

1:01:45 People start from a place they just trust too much and It's funny. The more you're able to let go and trust, the less work you do. just have a lot more bandwidth to do a lot more. And I do that in my personal life and it's It gives me an extraordinary amount of time.

1:01:59 Just straight up trusting people. I was talking to somebody who's been on the show about a year and a half ago. He's a really wonderful entrepreneur. We're just chatting and I said, um Do you have any resentment or do you have any Do you hold any bad feelings a against the people who doubted you or who turned you down or

1:02:19 Do you remember them or do you not take any of it personally? he said to me. I remember every single one. I take every single one personally. And I love that. That was very honest. How about you? No

1:02:29 Uh I don't know. I just feel like it's you know, usually good reasons. Like I I don't I definitely don't take it personal. It does feel good when There's a big you know, exit and investors say, Man, I should have listened to you. Uh I I can't believe I didn't invest.

1:02:43 You know, that definitely feels good. But It doesn't feel like I I'm not I don't have anything People make Different decisions.

1:02:50 Based on what's right for them and at the time and Mm. I accept that. So jet dot com, I mean it's it's burning through forty million a month, but it sounds like with what you have, I mean you could last a year and a half, but

1:03:03 A year in You get An offer from Walmart. An acquisition offer. Before I I I ask you

1:03:11 This is sort of strange, so I'm gonna ask you why. But then I'm gonna say the price, which was three point three billion dollars. Was it was the highest anyone Had ever paid to acquire e commerce startup. in the US at that point. So imagine that was an offer you couldn't refuse.

1:03:27 Um It depends. So I think we could have refused it. But Again, tying back to what I said before about

1:03:35 mission and values. It was the conversation that I had with Doug McMillan, the CEO of Walmart. On a whiteboard in his office. That sort of made the decision really easy for me. He basically said, Listen, like

1:03:49 First of all, I a lot of trust was built between us from the very beginning of every conversation. He did always did exactly what he said. And we also shared similar vision. of what we wanted to to achieve in e commerce. Walmart had an e commerce site, Chet had an e commerce site. And we felt hey, if we could bring the assets of both companies together, you're sort of the people and technology that we had built it yet with the the the capital resources to stores of Walmart and merge it together.

1:04:17 Wow, we could really really become a formidable competitor. And This is where I say it's the difference between selling out and selling the company. Like we we didn't sell out. Yes, we sold the company, but the mission was

1:04:29 Very much intact. And everything we had set out to do. But now With a higher probability of success. Um and we had more capital to do it. We were gonna get there faster.

1:04:40 Were you surprised how quickly that happened? I mean, a year after you launch. Yeah, I was surprised, but at the same time I got it. It made sense. And and when Doug said Mark, we want to give you and your team the keys to sort of pull this all together and run this and take us to the next level. That was empowering. Now I wanted to give Doug Walmart and their board the very best I've got because

1:05:03 It was very different than the Amazon experience. Didn't feel like selling, by the way. Yeah. It was very motivating. It was like, Wow, now we have we've got, you know, it's sort of like we're we're fighting there with guns and then, you know, all of a sudden you see like the big tanks roll in and like, Yeah. Yeah. Give me the tanks. I want the tanks. I want the Air Force, you know, coming to back us up here. So how was it gonna work? I mean, was the idea that

1:05:28 You would Runjet.com but also Turn Walmart.com into a more formidable player? I mean yeah the Walmart was the number one responsibility. I think

1:05:40 We basically took all the best people from Jet and put them on Walmart. We took the technology, we took the fulfillment centers. It was I think the the goal was really clear, like let's turn Walmart.com into a formidable econ player and use all the assets available to us. It didn't really make sense to have two mass market sites because we wanted to merge the best talent and put them all in Walmart. It wasn't the brand they needed, it was the technology and it was the people logistics and the people.

1:06:07 Yeah. Exactly. What was it like for you? I mean, and this is now the third time. You were required, right? You'd gone to work for Tops, you'd gone to work for Amazon, now you're working for

1:06:18 Walmart. But you know, you're an entrepreneur. It has to be a little bit Strange or hard. All of a sudden work in an environment where

1:06:28 You're not. Totally calling the shots. Yeah, it it was very challenging. Very challenging. I mean I'd already had experience working inside Amazon, so I knew what to expect.

1:06:39 And so I wasn't surprised by anything. In fact, I was probably pleasantly surprised. You know, at the cultural Walmart and the ability for me to make the moves we made with speed. But Still, it's just hard. I mean any time

1:06:53 you're in a big company like that, there's so many people to get on board to convince and you have to educate people and you have to bring them along and It's not the entrepreneur away. The entrepreneur way is, you know Shew. Just go and you can't do that. But compared to to your experience at Amazon, it it does seem like

1:07:12 You had a better experience with Walmart. I mean they they actually made you uh head of e commerce. And and in that role you did some kind of interesting things. Like you uh I think in twenty seventeen you acquired Bonobos. We actually had Andy Dunn, the founder, uh on the show a couple of years ago and and that was a pretty big deal, right? I mean people were like, wait Bonobos and Walmart? But presumably that that was part of your strategic plan around e commerce. Yeah, the high level sm the most strategic part of the plan. Was to change the narrative.

1:07:41 I knew that we didn't have the talent inside of Walmart at the time. to do what we needed to do, we had to attract the best people in the world and at that point you know, honestly, that wasn't the place the best people in the world wanted to go, and so I knew we weren't gonna go anywhere unless we change the narrative. Unless the the people thought that Walmart was now gonna be a contender.

1:08:01 and buying bonobos was part of that strategy because that was a cool Yeah. modern brand focused on millennials, that was more premium product, it Basically open people's eyes. and made him look at Walmart differently.

1:08:15 And that was certainly not one thing alone, that one move, but It was all the moves that we made together. it all started to compound and it really in the last couple of years it really started to come together. You um You recently announced that you are stepping down.

1:08:30 After four years at Walmart. Four and a half, yep. Four and a half. Um Do you feel like you accomplished the things that you that promised you would accomplish and that were expected of you? I do.

1:08:41 I do feel good about it. What I've liked. To done more, gone faster, sure. But if I just take a step back. Did we change the narrative?

1:08:50 Yes. Did we Yeah, dramatically accelerate top line sales. Yes. Did we created an incubator that's now building Startups that could shape the future of retail. Yes.

1:09:05 So All things considered, given the size of the company and The fact that it's an aircraft carrier, not a speed boat. To move it the way we did? I feel proud of that. I think

1:09:15 That experience is gonna make me a better entrepreneur going forward too, which I really appreciate. Um you are Uh either almost or Or already fifty years old. I think.

1:09:27 I'm forty nine, yep. Okay, so it's a scary number. It's a big number. Um And you've got a lot of Experience behind you. But you're at an age where people become first time CEOs.

1:09:40 You've done it. At least three times. There's no question that you're gonna do something else. That's true. I mean There's opportunities in retail, there's opportunities in healthcare, opportunities in energy. Um

1:09:53 And I'm in a place now where I can Really do something really disruptive that can could have a lasting impact on the world. And that's what That's what gets me

1:10:02 That's gonna be fired up. When you when you look over the Course of your own. career so far. How much of your success do you attribute to How hard you worked and how smart you worked and how much do you think happened'cause you got lucky.

1:10:16 I think it's a combination of all three. I could think of things that Where I did get lucky where things Could have gone a different way and I've been really screwed.

1:10:26 But at the same time The Drive to Keep coming, like the terminator. I wouldn't accept Failure.

1:10:35 You know, I just would keep Going and going and going until until the luck turned my way. Yeah. Your um

1:10:44 Every story is different, right? And every journey is different. And um Yeah, you're still going. I mean I can talk to you in twenty years and there may be We may talk about none of this. So we just talked about.

1:10:54 And I wonder when you think about your trajectory, you were a crappy student. And had a rough childhood. Um and and if if you knew That we were gonna have this conversation. then when you were eighteen, nineteen and you would say, Oh my God, look at me now

1:11:09 Would you w what would you think? Would you think Man, I made it. Would you have been satisfied and impressed and Happy? What do you think you'd you'd feel if you had that crystal ball?

1:11:19 Yeah, I think I'd be happy. The path to get to where I am today was It's not a straight line. Like I said, you know, I'm in my Early to mid thirties, you know. Playing Dungeons and Dragons, you know? That wasn't

1:11:31 what I had set out to do, but Once I made the transition from mercenary to missionary and I really Uh let values create the value. That's what happened. Values created the value and and like I feel in a great place now. And I feel like I'm set up

1:11:47 Like you said, the next twenty years are gonna be I think they're gonna be a lot better than the last twenty. That's Mark Lori, co-founder of diapers.com. and check.com. By the way, even though Mark's career as a founder and executive has been wildly successful by any measure,

1:12:07 The competitive athlete in him? Still can't help wondering what might have happened had he chosen a different path. Does a part of you ever kinda wonder what would have happened or Maybe you should a you should have just bought it. Absolutely. Absolutely. Yeah, a gold medal or something? It's possible. It's very possible.

1:12:28 Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And if you're interested in insights, ideas, and lessons from some of the world's greatest entrepreneurs, please sign up for my newsletter at gyros.com or on Substack. This episode was produced by Casey Herman with music composed by Rantine Arablui. It was edited by Niva Grant. Our production staff also includes Chris Massini, John Isabella, Sam Paulson, Alex Chung, Carrie Thompson, Catherine Cypher, Norgill, Ramel Wood, and Elaine Coates. I'm Guy Raz, and you've been listening to How I Built This.

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