Alexej Pikovsky is the CEO and Co-Founder of Alphawell Brands, a vertical e-commerce platform in the health and wellness industry. We discuss how to scale your brand, the advantages of operating in a niche market, how to explore brand acquisition, and much more.
How Alphawell Brands started
Alex Bond: I've read a couple interviews with you and about you. There was one really good one that I read from, I think it was called Get Daily, that you did that gave a little background on you and your company, and I kind of wanna know how Alphawell Brands started out, to my knowledge, it was originally called Alpha Green Groups.
Alexej Pikovsky: I spent 10 years in finance, initially in investment banking, and then as an investor, you know, after looking at 50 different companies in the cannabis space. We ended up saying, look, CBD as a marketplace, and then later on THC is the way forward.
And so we launched Alpha Green IO initially at Marketplace, which was a drop shipping marketplace, that meant that we connected via an API key to lots of different Shopify, WooCommerce and Magenta brands. Ultimately, we scaled mostly through SEO, but the reality was legalization was much slower than we expected.
And we had to show better numbers and we said, look, why don't we start acquiring other brands outside cannabis as well? And also because we were so successful with SEO, we ended up launching an SEO agency as a subsidiary as well. And therefore we are a consumer wellness brand now with an agency arm. And so that's, yeah, how we evolved from Alpha Green Group to Alphawell Brands.
Alex Bond: And that's great. I actually read that your goal was to become the UK's number one marketplace for CBD, which you actually ended up achieving in only like six months time. So you know, one of my first questions that I have for you, how did you achieve that so quickly? It sounds like SEO optimization was part of it, and what were your metrics to determine that you achieved that goal? Because that sounds kind of vague to me personally.
Alexej Pikovsky: So the number one metric, we used products and brands listed on our marketplace rather than necessarily GMV or revenue. It's very difficult in a private market to say whether you are the largest in terms of financials. Having said that, we were actually very likely also the largest in terms of financials, but that's just because everybody else sucked, not because we were great. The way we achieved the number of brands and products.
We built a very strong and stable infrastructure and we were also present in 11 different European markets, which allowed us also to onboard many other non UK brands. And then in the UK we started off with very strong PR. And so a lot of the brands out there got to know about us fairly quickly. We were at a lot of different conferences.
We sponsored one large conference as well where we obviously, We're a speaker as well overall. Yeah. Lots of PR, lots of advertising, so to say in kind of like conferences. And then of course SEO, right? Because what happened is we ranked really well for longtail keywords initially, and then we also ranked really well for branded search.
A lot of the brands, again, you have to understand that in cannabis and CBD, nobody can advertise on Facebook or Google. So every time a brand owner google CBD gummies and so we have to list on that marketplace. And so we had a lot of inbound from a lot of brands as well.
Alex Bond: No, that's great. I mean that's an extremely impressive approach to it. I think one of the other things that impressed me, your approach is keeping it a bit niche, I think is how you worded it in one interview that I've read is that there are a couple different ways that you can kind of approach things, right?
So I think the way that you articulated it is you essentially have a niche brand in the health and wellness. Right. So instead of trying to do it all a little bit, kind of like maybe an Amazon does, you focus a lot of your energy on creating an extremely high quality and impressive niche catalog.
I was wondering how you could speak to that a little bit cause I have a follow up question as to why that is. You know, Walmart's successful because they do it all. So why go in the opposite direction?
Alexej Pikovsky: I would say every time there is a marketplace or some sort platform. It starts very broad. And then there is the disintermediation, or I guess like the specialization of subcategories, right?
If you look at Craigslist, that was very, very general. You could hire people through it. You could rent properties through it, you could whatever, by secondhand stuff from it, right? And then later on you had Airbnb and you had Upwork, and you had whatever, eBay, right? And now you have specialized Upwork in every single domain expertise.
Airbnb has like tens of competitors in, you know, family rental homes, single rental homes, offsites with teams, luxury destinations, better destinations, right? And same with marketplaces. So if you look at Walmart and Airbnb, they're very generalists. And if you look at a lot of successful marketplaces, they're very, very specialist when it comes to pets. You have Chewy, right?
And then you have almost like in every single country, you have a specialist marketplace in a certain domain. In b2b, you have lots of different marketplaces. In cannabis, you have Weedmaps, and you have Leafly in the us, right? So the way we thought about it was an Amazon or Walmart wouldn't go into cannabis because they have more to lose than they have to gain, and therefore, let's play that niche. And then of course let's expand from that niche down the line.
How Alexej determine which brands to acquire
Alex Bond: One of the other things that I found interesting upon doing a little a little research on you is that you are still even selective in what goes into that niche. So you guys have at Alphawell Brands, it definitely seems in your product selection.
You take a more holistic approach, so there's not as much focus on maybe fitness products like dumbbells or like treadmills or anything like that. I guess I'm curious as despite the fact that those products might fall under the health and wellness umbrella, how do you determine what products you shouldn't sell?
Alexej Pikovsky: Yeah, that's more on the the Alphawell brand story now. And so the first acquisition we made was a scented candles brand called 96 North. And the reason we made that acquisition was it is a very emotional category, so centered candles or aromatherapy in general, and it's a recurring purchase, right? So if you look at the lifetime value of a customer is much, much bigger.
If you have a customer returning to your product rather than a dumbbell or a yoga mat, right, where you might buy it once and then you might maybe buy it again in 2, 3, 4 years time if you still do yoga, right? Or if you still do dumbbells, right? And so when we look at brands, we look at brands who have an emotional connection with a customer, and therefore you can build up some sort of brand.
Second point is it has to be a recurring purchase. So it could be something like, you know, macha tea or chocolate. It could also be certain skincare areas as well. I mean, we would probably not go into kind of like certain niche beauty areas, but we would definitely go into certain skincare slash wellness areas where, again, you have a recurring element.
We also look at global appeal, so we would probably stay away from a very, very local trend of local product because our specialty is taking a brand. From the US into the European and the UK market as we did with 96 North. And so we want that global appeal there as well. And that's pretty much it. I mean, of course we look at profitable brands only.
This is obviously this became even more important in the last six to 12 months than then it was previously, where a lot of DTC brands we're just basically growing in a very unprofitable way, growth at all costs, and for us it's very important to have a very profitable base, which we then scale via an omnichannel approach using, you know, different levers such as SEO, such as offline retail. And as well as other marketplaces.
Alex Bond: Sure. So you're acquiring brands that already have a base of profitability, is what I'm hearing you say. You're not trying to gather these brands and create profitability for you or anything like that. That's kind of a required fundamental foundation for you guys.
Alexej Pikovsky: Exactly. And that's why we primarily look at Amazon brands initially. And this is, again, like, this is like taking a lot of the lessons learned from the marketplace, which of course was very unprofitable initially. We made it profitable down the line. But again, there is like a limit in how much you can scale with CBD alone.
And we have to basically be patient is you know, legal substance in, let's say globally or at least in our core markets. And we then said, You know, we are really good in scaling brands, but let's only look at brands which are profitable because you almost have some sort of product market fit and product channel fit there, and you can do much more with that brand without necessarily raising a lot of money.
Difficulty of scaling up vs. staying profitable
Alex Bond: One of the things I think of when it sounds like your primary responsibility is scaling up, is the difficulty of scaling up, but at the same time keeping it up. So is it more difficult to kind of bootstrap a brand and scale it up? Or is it more difficult to continue to thrive at a consistent level? Because, you know, in in business they say, adapt or die. Grow or die. So part of me thinks that the ladder is even more complicated. Could you kind of expound on that for me?
Alexej Pikovsky: Yeah, that's a good question. And there is also saying getting rich is one thing and then staying rich is another one. Right?
Well, the way we look at it is that because we are scaling a brand in a profitable way, which means we do actually stay away from Instagram, Facebook, and certain Google ads as an approach, which usually are very, very unprofitable, at least in the beginning. It's actually much easier for us to stay at a very high level and kind of like at a good level because, for example, one of our core drivers is SEO, right?
And SEO for us with our new Optima growth agency, it's all about, it's like CapEx, right? Like we invest into content. And that content similar to what you do with podcasts, right? Once you have all the published content out there, you have some, you know, unique visitors coming always. And the more of that content you publish, The more visitors you get, but you kind of have a stable base.
Similarly, on Amazon, once you achieve a certain review current, like more than 1000 reviews now, super high rating. We don't need to run ads to sell the product because we already rank organically. So that's how we think about scaling.
Alex Bond: It's more long-term based in the short term. I mean, is kind of what I'm hearing you say.
Alexej Pikovsky: Exactly. It's more long-term based. And then what we usually do, again, differently to to many other people is we always try to identify another growth channel, which might not have had the influx of brands. So for example, in our category of oral therapy, Etsy's still an interesting channel, or Pinterest is an interesting channel, and driving external traffic to Amazon via Pinterest is something not many people are doing yet. While, for example, TikTok is becoming a very saturated channel for the social media space.
Operating with a long-term and short-term mindset
Alex Bond: One of the themes that I continue to hear in your answers in the way that you talk Alexej is long-term solutions, right? So I think part of these struggles, especially early on for a lot of entrepreneurs and business owner, I gotta make a dime by the end of the year, you know? Or else I won't be able to have my business.
I'm from a background where I worked in a lot of restaurants, and restaurants are probably the most risky businesses that you can own. I don't know how many times I've worked in one and it was closed within six months or something like that. I guess the root of what I'm trying to ask is how do you focus on the long term?
Because that's the goal, that's the end goal at the end of the day, while you're still figuring out how to kind of operate on a day-to-day basis? I mean, what, what's kind of the strategy of being able to do both at the same time a little bit?
Alexej Pikovsky: Well, I guess we always want to show and see growth, right? And of course it doesn't always happen. There are months where, you know, we might run out of inventory for certain variation which was like, for example, a hero product.
And then we suddenly see our revenue drop, even though, you know, everything else is doing extremely well and, and even better. But yeah, it just happens that, I dunno we bought too little of a certain product and therefore we kind of like see some, some drop, right?
But ultimately, of course, it's kind of like still managing the financials that, you know, at least every quarter you're growing on a consistent basis. You can see that your customer acquisition costs are coming down or at least staying the same, and as long as you have returning customers as well, over time, you are just seeing a linear growth.
We did raise money, so we have cash, which we use to launch new products, so we experiment with new product ideas. We experiment with new, I mean, for example, we're about to launch breed Diff users. On top of the center accounts we have, we are about to launch new, new scent as well. And we are also expanding into new geographies, right?
So there is basically a lot of that. And then again, like I think the, this about our business overall, which is again, very different to some of the businesses who attracted a lot of funding is the fact that we have this agency arm, right? And the agency arm is, is profitable as well. And that kind of like allows us to be slightly, maybe more risky even in pushing the consumer brand as well because we know. We get cash from the agency arm to fund some of the growth of the brand as well.
Alex Bond: And you used the word that's very important I think in long-term business decisions and that's experiment. I think the ability to do trials and experiments to try to re-acclimate what your brand looks like and how to create growth in a brand or a company is important.
The importance of trial and error
Alex Bond: A lot of times someone has like an idea for how their company should operate, right? And they keep trying it over and over again expecting different results because that's kind of the game plan all along.
So do you think trial and error is something that you have to learn to put into practice the longer that you're in business? Or do you think it's something that you should kind of be open to trying as soon as you are opening up a brand or attempting some actual scaling up yourself?
Alexej Pikovsky: Yeah. I mean the way I think about it is that you have 100% of your activity and you break it out into 70 20 and 10.
70% is the stuff which already works and you just double down and double down on the same stuff, right? 20% is basically stuff which you are working on where you know, you're running certain experiments and they might fail, they might succeed, but you know, it's 20% of your budget or slash your activity so you know it wouldn't kill your business.
And then 10% is what I call rocket ship of like blue sky experiments, right? So this is basically where we say, okay, let's try something. Let's try something like completely crazy here. But that might really change the business, right?
For example, I don't know, like collaboration with certain influencers or creating a certain completely new category where we might be like the first ones to kind of like play in this game right now, this is just 10% of the activity and the budget, so it's the same way as Google operates, right? You have Google, which is obviously search and cloud. And then there is, you know, Google X and that's like a lot of these blue sky experiments and that the same way we approach consumer brand.
Amazon brand aggregator
Alex Bond: I wanna kind of switch gears a little bit and ask you what, what's an Amazon brand aggregator and how can they buy your e-commerce brand?
Alexej Pikovsky: Well, to some extent we an Amazon brand aggregator in a sense, right. Except that we do not use debt at the moment because it's extremely expensive and margins for most brands actually suffer because of supply chain risks and geopolitical issues out there.
And also we don't really aggregate many brands at once. We rather look at, you know, buying one or two brands per year and then like 10 x a brand in terms of growth rather than. Keeping it flat and then just growing because of acquisitions only. But in simple terms, you know, this was the inventor of the Amazon aggregator business model in 2018 when they started acquiring.
Amazon Seller Sellers, so FBA brands fulfilled by Amazon brands, which basically, you know, resulted in them owning more than 300 brands now under one roof, employing, I don't know, 4,000 people or something like that. And then massively failing, failing to IBO, failing to spac, and they obviously are alive because they raise so much cash now, but the business operations are total.
Because basically they didn't manage to integrate all of the, you know, hundreds of brands they bought, but as a mathematical concept, Buying at whatever, four, five times multiple and then trading at whatever, 20 times multiple. It made a lot of sense, but just mathematically, not in practical terms.
Future of Alphawell Brands
Alex Bond: I appreciate that. And I guess what are your long-term goals as a brand, as Alphawell, brands, what are kind of your metrics in terms of establishing growth? Cause we've kind of talked about how you acquire and scale other different brands and everything, so, but for you and your brand what are you guys trying to, you know, achieve in 5, 10, 15 years time? Something like that.
Alexej Pikovsky: That's a great question. Look, I mean, for us it's about, long term sustainable growth and having a really exciting portfolio of cool brands in the, you know, wellness emotional connection space. What it means is in two years time, we wanna have five brands which range anywhere between two to 10 million in revenues per brand, which are obviously growing, you know, 200, 300% per year, which allow us to a cross.
Some of these products to the audiences of the various brands, and this is why we are being kind of like a sector specialist. Equally, we wanna be global house of brands. So our whole team is completely remote. Its very international and obviously US market is actually our largest market by far. But we wanna expand beyond as well.
And we wanna be an omnichannel player, right? So we still think that. You know, offline and retail is not that it, it was obviously, you know, had a lot of attention during covid, you know, understandably. But it's still out there. You know, there are a lot of people who shop offline and who want this discovery process to happen in a retail store.
So we are still very bullish on that as well. We wanna work with lots of influencers as well and collaborate and create maybe collaborations as well for our brands as well. And then ultimately, look, I mean, we have an amazing agency and we actually see a lot of stuff out there, which, you know, be it when we experiment with our own brands and we can then help other brand owners to launch their brand or to to scale their brand and vice versa, right? Like the visibility we're gaining by working with so many other brands helps us to also scale our own brands.
Advantage of operating internationally
Alex Bond: I think one thing that stands out to me is Debutify operates as an international employed company. For example, I'm reporting live from Virginia in the United States right now. And you know, my boss, she's in the Philippines and it's kind of amazing how that works. I've never worked in a space like that before. And despite its complications or obstacles, what are some of the benefits that you can see in operating with international employees?
Alexej Pikovsky: Well, the main benefit is access to global talent, right? So, you know, you are not limited. If you are a German brand, you're not limited to just hire people who are based in Germany or even like in your city, right? And again, I grew up in Germany, so I can tell you the pool of amazing digital experts there is not as big as, for example, in certain, again, US or the Philippines or Eastern Europe or whatever, right?
So you can really, really access the global talent. The second is you can go international much, much faster, because again, you have the access of global talent and you don't tell them to come to my office and be located in that city. It's also asynchronous work in terms of people work in their own time and their own basically paste to some extent.
So at Alphawell, I don't mind if you wanna do your whatever fitness session or tennis session or whatever during the day. because I know that, you know, you're gonna just work afterwards. And if you're based on some sort of different time zone, as long as you attend our standup call, it's fine.
Like, again, I don't need you to be in the same time zone. So it just allows for super good flexibility. And right now I'm actually based in Lisbon and tomorrow the team arrives through an offsite, because every quarter we do an offsite, somewhere nice where people fly in. Basically meet each other and like work from a nice villa somewhere. So that's kind of like the benefit.
Altruism in acquisition
Alex Bond: I really appreciate talking with you, Alexej. I mean I think you're an extremely knowledgeable and charismatic and I think what you're doing for these brands, I mean, there's a certain sense of like, altruism to it in my opinion, I know that it's a business. Don't get me wrong.
But it's kind of nice to have such a mutually beneficial relationship with these brands that you're acquiring. Do they, I don't know. I guess what I'm trying to ask is, do they see it that way? Do, do you consider it as, as some sort of version of altruism because it is feeding the economy. It's not just like you and your legion trying to grow your brand. I mean, you're, you're continuously bringing other people into this project. What sort of, I don't know, morality plays into that.
Alexej Pikovsky: Yeah. I mean, look, the morality and the alignment is that we know how to scale and we help people to still see. The child grow up, so to say. Right?
And look, I mean, we are playing out with an approach where, you know, if the owner wants to stay on, for example, and have a much longer earnout and like a much larger percentage still, you know, all the business or the brand owned by that person.
We are now considering that as well in terms of a strategy. Look, I wouldn't probably call it altruism, but yeah, it's definitely. We definitely add to society, you know, we create jobs, we create amazing products, you know, they're all like natural organic products so far. And yeah, we were super excited.
How does a brand look for acquisition
Alex Bond: I guess kind of one of my last questions would be how does a brand look for acquisition? So do you guys. I mean, we talked about it pretty in depth, but when it comes to the actual material acquisition, you guys will headhunt some brands and then others will come to you for acquisition. Like what's kind of, I don't know, the immediate vetting process look like I, I guess to any brand that's trying to get acquired by Alphawell Brands consider this the very first factor, you know?
Alexej Pikovsky: Well, I guess be ready to sell, right? Because I think if you just thinking about selling and you're not ready, maybe don't sell. Don't start the process because a lot of the buyers might get frustrated with you not being prepared. What does ready mean? Well ready means having your ducks in a row, that means you know your financials documented.
Your data room maybe set up properly and your unit economics properly, you know, worked out. So to say that you can basically show a prospective buyer why it makes sense to acquire you and put more money into the brand and scale it rather than, oh, I wanna sell because it's a dying business and if I sell.
I might get some money out of it or something like that. Because of course people figure out if it's a dying business or not. Now in terms of process, you described it. But while there, you know, there are a lot of brands who come to us or go to a broker and then the broker comes to us and vice versa.
We run a lot of email campaigns where we reach out to good brands, which we filter out using certain analytical tools. When, you know, we look at certain categories on Amazon, we then find the emails or find their LinkedIn or their Facebook or whatever. We reach out to them. and then basically see if they're interested or have considered selling or not.
If they have, they usually jump on a call with us. We, you know, introduce ourselves. They introduce our themselves and then, you know, it's usually kind of like a question of the price and the timing. And look, I think the best brands out there, they, they're always ready to sell. It just depends on the price.
You know, the price is a function of the market, right? If the price is too high and the market is bad, then they might not sell. If the price is, you know, feasible and good, and the market is like again, Where the market is right now, you know, look that there might be a deal there. Look, it's a bit of an art and a science and it's ultimately, it's a numbers game, right?
Like we probably talk to 60 brands in order to acquire one brand. And yeah, we probably talk to another 60 brands to acquire one more brand. So it's a lot of kissing, a lot of frogs, basically, before you meet your prince or your princess.