Mark Taylor is the CEO and Co-Founder of Warehouse Republic, a team of passionate professionals who provide third party logistics solutions for Amazon FBA and e-commerce sellers. With years of experience in this domain, Mark has a deep understanding of the challenges and opportunities faced by online retailers and how to optimize their operations and profitability.
On this episode, we discuss Mark's personal experiences that led to the creation of Warehouse Republic, how he simultaneously competes with and works with Amazon successfully, warehouse logistics at large, and much more.
What is Warehouse Republic
Mark Taylor: So I started selling on Amazon as an FBA seller in 2015. And after a couple of seasons really figured out, we needed to kind of figure out our own logistics just to save money and help with, you know, the seasonality of product. And so I started looking around at a warehousing partner later. I didn't even know it was called the 3PL at that point, but 3PL stands for third party logistics.
3PLs at that point, wouldn't even talk to us because we weren't big enough. And so after I kind of figured out the, you know, the warehousing piece for ourselves using, you know, friends and partners and things like that, I said, man, I think there are other people out there like us that need this. And so we opened in 2018 moved to Southern California, slept on an air mattress for three months while getting everything up and running. Here we are today still serving the same FBA customer.
Alex Bond: No, that's great. And so, you know, to my knowledge, as you have said yourself, you didn't really just randomly come up with this idea. You know, you didn't have a shower thought of this would be a great thing to do.
I've read a really good interview or a really good piece about how you actually had that personal experience that spurned this idea. And I'm interested if you could kind of peel back those layers specifically about experience you had getting stuck with all this products in Amazon warehouse and how you had to leverage that into essentially this business.
Mark Taylor: Yeah. So effectively what ended up happening was we tried a bunch of different products and kind of the first, what I would say, bulky product that we did was etched wine glasses. And so you don't think a wine glass takes up that much, you know, it's about that by that, but when you've got 75, a hundred of them, it takes up a lot more space.
So what ends up happening is we had two SKUs that we launched with. The first one absolutely killed. We were sold out before the end of Christmas. We were all like, man, we wish we had more of that one. The second one sold about 25% of what we brought into the States and it just did not have the same kind of traction.
So here we are, you know, after the Christmas rush where, you know, anybody who's got a seasonal business is going to sell 65, 70, even more, maybe percent of their stock during those 30 days between kind of, you know, Black Friday, Cyber Monday to about, you know, December 21st or so. And we've got five or 6,000 units left over of this one, SS K U and no amount of price cutting or anything like that was doing anything.
So you roll back around the year and we've been paying storage fees on these, you know, all through Q four and then all the way through August, September, and then you start getting into long-term storage fees and we just, we had to bring 'em back at some point.
And what we found is that just how expensive that was, you know, we said, look, man, we really need to figure out how to bring these things stateside, land them, and then drip, you know, the drip strategy is everybody says, and drip them into Amazon that the need for that partner, that kind of middle middleman.
So momentarily, or for some period of time, hold the product with what we needed ourselves. And then, you know, there are some things that come, you know, you get more flexibility on your product. Like if you do that kind of strategy, selling omni channel, if you don't want Amazon to do multi channel fulfillment, which I think they've really even started stepping back from to a degree or at least making it more challenging.
But if you want to really control your own data, control the flow of your products, we said, look, this is the answer. And so that's kind of how we went for it. I mean, I thought that was our customer need.
Alex Bond: No, that's awesome. That's a really cool story. And and so now you have your own warehouses where you run that storage for Amazon FBA sellers instead of the Amazon FBA warehouse. I'm curious. Do you personally own the warehouses or are they are they leased from a third party?
Mark Taylor: No, they're leased right now. I mean, they were giving away buildings in Southern California, like in 2000. I mean, if you bought the land and now, I mean, you've got some of these things going for, you know, 200, let's just say, well, 150, 000 square foot building we were in right now.
I know it was appraised somewhere in the 30 million dollar range. The operating company, you know, that was a few years ago, so it's probably gone up. The operating company that we run, Warehouse Republic, that we lease, we have partners. Our East Coast warehouse is actually owned by one of our investors and somebody who's a very strategic partner to us.
You know, real estate is something we'd love to get into, but It's really just it's 2 separate business models. And so it's great if you can do it. But like right now, we're focused on really just serving customers and, you know, actually doing the operating piece of it.
Alex Bond: No that's fascinating. It reminds me kind of the story of Ray Kroc and McDonald's and how he eventually was kind of getting pushed out. So he got into the real estate business instead of the fast food business. And I think that's kind of an interesting look at it. So you leased three different warehouses. Is that correct? One in California, one in Texas and one in North Carolina. Is that accurate?
Mark Taylor: Texas is forthcoming probably in the next, I'd say two to three years from now. Right now we're focused. We've got one in Southern California located in Ontario. And then we've also got another one in Reidsville, North Carolina, which is kind of I call it a suburb of Greensboro, North Carolina. Yeah, in Reidsville, North Carolina, which is just a, it's kind of Northern. North Carolina west of Raleigh Durham by about, you know, hour and a half, two hours.
Alex Bond: Sure. No, I think that's really good location. Who handles the actual shipping and the logistics of parties when you're trying to move products around is that you guys, or do you, or the clients that you work with provide that sort of the shipping and logistics?
Mark Taylor: So the majority, I mean, in any e comm seller that's selling through FBA, I mean, you're going to do everything you can to run your shipping through Amazon partner carriers, whether that's using their FedEx account. I mean, sorry, not their FedEx their UPS account, their LTL shipping, Amazon transportation, any of the partnerships they have with other large trucking companies, that's going to get you the best rates.
I mean, that's kind of what would make, that's what really part of what really makes Amazon FBA such an incredible offering when they opened it up back in, I think, 2006, 2007, was that you, they were allowing you to use to leverage their buying power for freight and moving goods around and fulfillment and things like that.
We do have, I mean, we've grown to lots of omni channel sellers. And what we mean by that is somebody is not only on FBA, they're selling on their own Shopify site. They may have, they may have a Walmart marketplace set up.
They may sell on Macy's. They you know, any of those sorts of things. Tundra fair, we will work with our warehouse management system and we'll make sure we've got the inputs in to basically ship out. We use, especially for our customers that that are doing their own Shopify, their own big commerce, but their own web fulfillment, we offer typically our rates.
And that's typically, you know, UPS, FedEx, USPS. The relationship with DHL, we don't really have a great one established. It's not that there's nothing wrong with DHL. It's just, we don't, it's not where we we've gone at this point. We don't have the volume that really fits with their shipping model.
Alex Bond: And what are the specific services that you provide for clients? I mean, you hold on and store their products, but you also do a lot more than that.
Mark Taylor: You have to think of it from the perspective of like how it comes in. So it comes in, it can be inner floor loaded. It can be palletized. It can be small, it can be parcel. You know, individual parcels, like we've got some companies that will ship us, hey, we've got 40 cartons of master cartons of our goods coming in, please receive it. And that'll come on a UPS truck, just like it might to your house.
We've got the LTL piece of it, which is items show up in a truck, there might be 20 pallets in a truck and 3 of those pallets are our customers. We unload them, we check them in, we put them up in the racks. And then, of course, there's floor loaded containers, which anybody who's doing any ocean shipping, most often to maximize space they're gonna, it's gonna come in, just you open the doors of the container and all of a sudden it's giant massive boxes.
And so, you know, the most basic thing any 3PL does is they're gonna receive in those goods. Sort them, compare them to what your customer said was coming. Can we verify that actually, you know, what they said is coming is coming. We'll put it up in the shelves. We'll do any kind of picking and pulling whenever they put an order in and we'll ship it to wherever they want to ship.
And that's your most basic kind of in and out. We hold the goods for a while. We ship them out. That's your most basic service. We have a lot of good customers where let's say there's a snafu with the manufacturer. And they put the wrong label on. So we'll pull everything out. We'll open them up and we'll resticker all the products with the appropriate skew.
That's like stickering projects. We'll do kidding sometimes. So a customer realizes, oh, my gosh, man, I've got these three products. They're all selling well, but if I combine them, they sell really well. And so while they work that out with their manufacturer, like we can do the kidding piece of it in the last, I would say year, two years, we've really gotten a lot more into the reverse logistics piece.
So what's very what's talked about in my world a lot right now is returns and returns have turned into this 1 trillion issue. And I mean, that's still accounting the brick and mortar returns and everything like that. But your average e com returns, they estimate it 25 to 35% and e com sales last year, just for like right out of trillion.
So you've got 250 to 350 billion worth of returns happening. A lot of cases, which a warehouse will typically do is they'll just kind of put it in the corner and be like, okay, guys, what do you want us to do with this? And, you know, nine times out of 10, if it's a very valuable product.
Then they'll liquidate it and that's where you go to like B Stock or Aptoro and you'll, you'll buy truckloads of returned goods for, you know, like a couple thousand dollars and you'll bid them up and you get the truckloads in 30% of it, you throw out and then the rest of it, you try to auction off or do whatever with.
Now customers are really, really looking for the, for partners. And this is what we were trying to react to who can bring the product in, rate it, make sure it's still, you know, is it like new? Is it used good condition? Is it used, you know, average condition, whatever it may be, and come up with an option for like what those customers are going to do afterwards.
So that's a very, very messy, very, very labor intensive thing, but that's also something else we've, we've kind of come to do. You know, and then there are other things that are like, you know, I would call it advanced kidding. So like influencer boxes and things like that. Like, I mean, we can do all that sort of stuff as well.
Alex Bond: But what I'm hearing you say, Mark, is that you're trying to essentially anticipate the customer's needs a little bit.
Mark Taylor: Absolutely. I mean, you can't like, and I think that's just true of any business out there. It's like, if you're not serving a customer, if you're not really going and really thinking about where your customer needs you to go and help them out and you know, and it can't just be like a bunch of little one offs.
I mean, these are trends. These are widespread trends we're looking at and analyzing. If you're not going to adapt, then you're going to die. It might be a slow, painful death, might take a long time, but we're trying to aggressively grow, looking and anticipating what is going to be the most valuable thing to our customers, not just today, but in the next 5, 10 years.
How prioritizing above-average wages transforms company culture and boosts team morale
Alex Bond: And speaking of trends, I want to talk about something that you're a big proponent of that is, I think, a trend that's moving forward. I mean, it's very interesting now in the climate, but you're a strong proponent of paying your warehouse workers wages above the industry standard, going so far as saying yourself that minimum wage delivers minimum results. How has that mindset positively impacted your company and team morale there?
Mark Taylor: You know, I think it's an interesting thing. And I mean, I want to be very, I feel like to get an industry worker at worth is salt at this point you're so far, you know, California just passed, I think the minimum wage of 15, right?
And so warehouse workers are all starting a few dollars higher than that, like, you can't get even come in your warehouse for minimum wage in any state that I know of at this point. That's probably not a fair statement because I'm not operating in Seattle. I'm not operating in New York. So it's like, maybe those states are different.
But from what I see. At least in the markets of North Carolina, California, and then what I know about the Texas market, all warehouse operations are starting like fairly high, but what that means is, so at least if you're kind of in that band and you're paying these guys, you know, and these men and women to come in and want to be there, you treat them with dignity and respect.
And then you really work on training them. And I tell all of my people, like, if there's anything I can do for you, then let me know, we'll help you, what we understand that not everybody is here for a career. And so I've got some guys, for instance, there's a gentleman that's working for me now.
He's been working for me since he's 18. And he said, from the very beginning, he said, hey, my dream is to work for the sheriff's department or to work for the highway patrol. And I said, great. Well, let us know how we can, you know, let us know how we can help with that.
And so, I mean, as it relates to being background references and things like that, writing letters of recommendation those are things that we do for our employees when we can do it kind of back to your original question.
What does it mean? Like, how does that work out for you? It's like, I would argue that if you're not at least within that industry band, which is still a few dollars over minimum wage, that you're not gonna have a business.
I mean, and these people can go and get a job, they can call a temp agency, have be on a job the next day, they can go and they can apply to Amazon if they haven't before, I mean, maybe even if they have and they're eligible for rehire, and then go get another job there, you know, the pay is only one tool of differentiation.
I think the big thing that you have to do is like treating them with dignity and respect. Doing things like, you know, having team building exercises, really working and speaking, working with the individuals and unfortunately, like, you know, in a company where you've got 600 employees, that becomes much more challenging in our spaces, like our operations are very much, much more than that.
And so we're able, I'm able to know everybody by name. I'm able to, you know, speak with them 1 on 1 and we celebrate birthdays internally and stuff like that. So, I mean, there's a little bit of charm of hominess. I guess you could say of having a smaller, a smaller operation. And I think a lot about how are we going to maintain that as best as possible when that head count does go up over 100.
Warehouse product range and regulatory considerations
Alex Bond: I'm interested in what sort of products you typically get in store at your warehouses. And even more specifically, what type of products you can't because of maybe some sort of regulatory infractions that could arise?
Mark Taylor: Well, I mean, it really depends. So, you know, we've got if you're going to store food, you have to be FDA certified. In North Carolina, for instance, we have our team is all hazard hazardous material certified. So we've got the option to store up to a, I mean, they're certified to a certain type of product for instance.
In this case, where those guys can handle butane and things like that, you really, and this goes back to kind of following that customer need, like when you get a customer and the, and it's, and it's the warehouse location is right for them.
Their operation is going to fit with your operation and that kind of thing. Oftentimes doing the compliance piece is. You just have to sit down and figure out what that means and go after it. So, you know, I would say the most typical thing that we sell is anything on Amazon that's typically non hazardous with our North Carolina facility.
We went, we got certified to handle hazardous material because it was a particular customer. And that's turned out, you know, it's turned out really, really good for us. And in some cases like, you know, with an FDA certification and things like that.
It's a little bit more of a rigorous process because I mean, you've got food in there, you don't want your rodents around and you have to have not supposed to be able to see daylight in the warehouse like that kind.
Temperature. Not so much if it's shelf stable, but on your cold on your cold storage, your temperature, temperature controlled storage. Like, that's something you really don't want to mess around with.
So if somebody comes to me and says, like, we've had people say, hey, can you store wine? And for a myriad of reasons, we can't, I mean, and the alcohol control piece of it is 1 thing, but also the temperature piece to your point is another. And so, like, gummy bears and things like that, like supplement gummies, a lot of times.
Which we say, okay, well, I mean, you know, the ambient temperature of this warehouse might get up to 85 degrees. Is that going to be a problem for your product? And sometimes it is and sometimes it's not.
Streamlining the process of order fulfillment
Alex Bond: How do you receive orders from a client when you need to send out some of their products from from your facility? How does that process work? Because I imagine you have hundreds, if not thousands of clients, how do you know how to move it around essentially?
Mark Taylor: You know, we work with in keeping with that original, like, hey, nobody will talk to us. We're too small. TWe were trying to be the antithesis of that. So I've got customers that hold two pallets in the warehouse. And most of those guys are going to just manually upload their orders.
And if they've got a trickle of orders, that's not a problem. We'll allow it. And they've got a CSV file that they can directly upload into what's called the warehouse management system or in the industry is the WMS. So the WMS, basically everything goes into that.
And then that's what sends the signal back to the floor that says, Hey, this is where this needs to go. Your typical customer is going to have what's called a tech integration, which is literally just Shopify and our WMS. And then Shopify says, Hey, this is what we've got.
And then so we'll fulfill that order and then, you know, in a given time interval, it's usually every 15 or every 18 or every 24 hours, whatever you set it to the WMS writes back to Shopify, make sure you adjust the inventory. This is your inventory, like at the end of the day.
And what happens is, so whatever that count was at the beginning of the day, let's say Shopify says, okay, well, we're gonna sell two of these 20 units and then so Shopify says we only have 18, but then warehouse the next day, either since that confirming signal inventory counts 18 or inventory count is now you know, we received another 100. So it's 118 kind of a deal.
So there's got to be this, like this, this bridge that goes back and forth between the marketplace or the website or whatever it may be and the WMS. And then when we ship it, you know, we've got another integration that goes with the shipping software that shops rates and things like that.
And then it writes back when we close out orders, tracking numbers and everything like that, then get written back to the Shopify later on. So it's all tech integrations. And that kind of thing is really the way to go.
Alex Bond: Yeah. That is symbiosis. I'm curious, mark, what your shipping times are currently like in terms of the actual logistics. I'll just give this in a two parter. What is your shipping time like? And is it only limited to the United States?
Mark Taylor: We're only tracking it related to the United States. Everything. With most of our customers, if something comes in by noon, then we ship it out the same day. It leaves our facility. But I mean, our guarantee is so there's that, but then it's like depending on where it's where the origination shipment is.
And then where it's going. So if it's going to New York, that could take, you know, three, four days, once it's left our building, it's going to Southern California, it gets there the next day. If it's going to, you know, if it gets up to like San Francisco, Seattle, and that kind of thing, it's two days.
So that it really becomes more dependent on the zone shipping maps of like UPS and FedEx and USPS. I find that during the pandemic and this is something I think that's important for not only business owners, because a lot of people don't believe it when we say this, but like, and it hadn't happened for a while.
But, you know, there were times like when, and in peak season, it's not uncommon for, if you've got a lot of volume, so it's like, if you're just shipping a few parcels a day, UPS will, a guy in a truck and he'll scan individually each item.
Well, now, if you're shipping several thousand parcels a day, there's a guy in a truck that is basically just going to back his trailer up and you're going to load pallets onto his truck and then he's going to take them to the fulfillment center. And that's where they get scanned in. So the guys, the UPS guys on the truck and the FedEx people, they do not carry scanners. So they don't have the ability to scan in that product.
And so it's really, really important for the warehouse to like, say every single tracking number and then have it in a sheet or some kind of module. And then when they see the number on the truck, they say, okay, this truck at this time with this trailer number is where these goods are and scan it out.
That's the impetus there is on the the warehouse because what happens is like sometimes I mean, you know, everybody is as good as we are and as good as UPS and FedEx are that trailer will sometimes go into a yard and it'll sit for 2 or 3 days. They lose track of it. And then so we've customers yelling at our customer, you know, end users and purchasers. Yelling at our customers and our customers saying why haven't you ship this? A
nd we're saying, no, no, we shipped it. It's probably in a yard somewhere. And then you have to go call ups and say, hey, this trailer and, you know, calling them is typically going to be like, all right, we'll look into it. And then eventually, all of a sudden, 4 or 5 days later, everything will just start moving and tracking number. It's gotten so much better, but I mean, during the pandemic.
Alex Bond: I bet it was a mess. So how does that impact shrinkage? And I don't know if our audience knows what that is, but that's essentially like losses at a warehouse, right? Things that could be missing or damaged or stolen. So how does that affect shrinkage? And then I've got a follow up for you there as well.
Mark Taylor: So that particular, I mean, the way that they're operating doesn't typically affect shrinkage. I mean, if it's just on a truck and it moves after a few days, rarely are people gonna do anything about it because I mean, usually that the description I just said was UPS ground and most people, if they really, really need it, they're going to two day it or overnight it.
And that's a whole nother, like, I mean, you hand that to a person or we'll, we'll even take it to a store where the shrinkage actually happens. Let's say you've got a pallet of goods and you've got a master carton. It's kind of got like a bulging, like, let's say it's some sort of fabric. And so a guy moves that thing in on the forklift and it rips through the, and it rips through the stretch wrap.
There was some dust on the box or whatever it may be. And the shipping label falls off. That is surprisingly, doesn't happen often, but it does happen. And so you've got your customer's items as carton is no longer. Nobody knows who it is, where it came from or anything like that, because that shipping label comes off. That's probably the number one place. I think since we've started business that we've seen any kind of shrinkage.
Alex Bond: How does it compare to Amazon's. How does your shrinkage compare to Amazon's?
Mark Taylor: It's a good question. I don't know that they actually, I mean, they may publish those that those numbers me as a seller. I remember in 2015, they lost, they would lose entire pallets of product.
No, I mean, and that was at a time when they would just compensate you. They would say, okay, well, we know you had 100 units of product on here and your payout was going to be good 6 dollars an item, here we're just going to pay you 600 as if you sold it. That was, you know, of course you wanted the sales traffic, but I mean, that was a pretty fair way of going about it.
Alex Bond: Yeah. But that's also not the same thing because then I can't review your product either. You know, I can't even receive the product to say I liked it, I disliked it. That is probably the best case scenario, but it also sucks, if I'm being honest.
Mark Taylor: It's the best case scenario in the shipping world though, because like, you know, if somebody, if that happens to us, and I mean, it really depends, it's circumstantial, but every 3pl out there, the way we get insurance is like, it's based on a, it's based on a weight replacement value.
So let's say you've got 500, and typically what happens is we'll only replace like 25 to 50 cents per pound of whatever it is. So anybody comes to our warehouse. We say, look in a total loss situation, you know, fingers crossed that never happens double crossed.
Actually, if you had a thousand pounds worth of goods, we're going to give you 500 bucks and that's the high end of the market typically. And so we tell everybody, I said, look, the most contentious thing that I feel like in this, in my customer contract to you is my replacement value of goods and you really need to hold your own insurance.
Because if you don't hold your own product insurance and this happens, I know that rarely is 50 cents a pound going to cover, you know, whatever it is you have in my warehouse. If there was a big takeaway from a contractual contractually speaking with any of your listeners.
If you're looking at using a 3PL, make sure you're aware of that. And that you do hold your own insurance because that's not any particular warehouse being shiesty. That's how the insurance companies will write the policies.
Overcoming Amazon FBA storage challenges
Alex Bond: What are some of the obstacles that sellers deal with when using Amazon FBA storage facilities that Warehouse Republic has been able to mitigate?
Mark Taylor: I think, you know, especially as sellers are a little newer, like when they're throwing, when they're putting up new products, when they're doing this, or they're trying new boxes or something like that. We are able to really like take a look at it when it comes off the container.
And we're saying, Hey, or even the, you know, here's an example. There's these things called this cancers where it's like, you know, it's big, a giant silica pads is what they are. So like the things that like keep moisture we've reported back to a lot of our customers, like, hey, you've got a lot of condensation in this container.
You really need to ask your manufacturer to put these silica pads because we're seeing a lot of damage. We're seeing mold. We're seeing some stuff on your boxes and then we'll open up their product and we'll make sure, you know, we'll see that kind of thing, you know, the, the wavy cardboard kind of thing with a little bit of mold on it.
And we'll say, you know, what do we want to do with these products? How do we want to get them ready to go in? We know we, we know you don't want to have a negative customer experience. Amazon will probably flag them as damaged, but if they don't, they make it to a customer. Nobody wants that review or receive the product looked like it was left in a puddle and it got mold on it.
I think kind of being your local eyes on the product and making sure that we call out things like this box is getting very, very damaged or this box actually is over, you know, 25 inches, which is going to sit you up into a new, this might get rejected. It's overweight. Do you want us to rebox these things?
Like, so it's kind of like a final, it's our job to understand what Amazon wants and their shipping requirements of sending stuff in and advise the customer to say, hey, this is something you want to think about. We recognize you might see a lot of damage with this configuration. Another customer solved it like this that might help that kind of stuff.
Navigating the relationship between competing and collaborating with Amazon
Mark Taylor: There's a famous Harvard note out there. It's called Porter's five forces written by a guy named Michael Porter. This note has been around forever and it's kind of it's scripture in a way. And so it's like when you look at it, it's like and I'm not going to recite all the forces, but it's like, you know, your supplier competitor vendor, what are the in the world of business?
Like, where do you set? And of course, Amazon is almost everything. So, I mean, they hit all five forces. And so Amazon is very, very good at very basic at these very basic things of pulling stuff in and then shipping it out when everything goes perfectly. And so, but when you're the everything store, yeah.
And you've crowdfunded, I mean, you've crowdsourced, you know, Spider Man sewing symbols, because only some person in Des Moines, Iowa and their sewing club who really also loves comic books is going to know that there's a market for that, right? And they're going to know what to say about it and how to market it.
You know, Amazon couldn't hire enough people and they couldn't raise enough money to fund all that product, take that product risk in that world when you offer all these different things. They're always going to be these little exceptions, you know, for them, they want to do what they do best, receive product, ship it out super fast and provide an excellent customer experience.
All that other stuff is going to fall to other people. They've got these really interesting, you know, impetuses out there. But I mean, just on the return side, I mean, Amazon is likely leaking billions of dollars a month. I have without saying names or anything along those lines. I have a colleague of mine who has probably 50 plus pallets of completely refurbished Apple product, like sitting that's been sitting on his shelf for two years.
That just somehow ended up in his warehouse because he was, you know, doing refurbishments and things like that. And that product is sellable or it was sellable two years ago. And now it's two years obsolete. And so the question is, you know, they could have gotten all that re the refurbished sale on that, but it's just sitting there now.
And eventually it just goes to show, I mean, even the company that looks like they're the most buttoned up and they've got chinks in their own armor where it's not that they're not, that's not going to sink them. It's just a place where it's like, you know, if that's in that one warehouse that's happening all over the place.
Warehouse Republic's journey of success in the past five years
Alex Bond: How have you Mark been able to grow the company Warehouse Republic in the last five years? That's about how long it's been around, correct?
Mark Taylor: Actually, I moved out five years about four days ago. Five days ago. We started the company, but I mean, the actual day, I mean, we started it in January, but the actual day I moved like a May 6th.
Alex Bond: Your first night's sleep in the warehouse is what counts, right?
Mark Taylor: Right. Exactly. That was when it got really real. And then it was also an interesting awakening to California because it's like, I remember waking up that morning because I stayed the May 5th and a hotel and there was a minor earthquake.
And I heard like, it sounded like somebody with a drink cart was going down the hall and it was just like, like rattling the drink cart. And I was like, Oh, I'm in California. So no tornadoes that I know of, but earthquakes, whole new thing. But yeah, no, so five years our market has just evolved so, so fast.
You know, if you just look at everything from real estate, you know, our first, the first rent we paid in our sublease was 55 cents per square foot all in now, you know, for a while there in the last six months, you had stuff going to almost 2 per square foot all in per month. And. You know, that's almost close to four times growth just in the rental rates.
So when we started, it took about three or four months to get ramped up. And we would just take everything that we could take. If somebody asks, can you do this? Absolutely. We can do it. And so, you know, we've really focused over the years on serving that Amazon niche. And I think during the pandemic, Amazon said, we're not selling stuff.
That's not necessary for daily use. We're not selling, if it's alcohol, if it's hand hand sanitizer, you know, whatever it may be, that's for sale. But all this other stuff you can't even ship in right now. And so we became within a matter of months. We went from we just taken over, you know, a building and we were probably about half full to being probably 30% over capacity.
Like, just overnight, I mean, it felt like, but it was over a couple months. And I remember in the month of August 2020, we were, it was like, we were signing up 2 and 3 people a day. And I mean that's largely exaggerated because like 1 client for a large warehouse might be 10,000 pallets for us, it might have been 5. It might have been 10. It might have been 100.
And so that complexity really was a challenge for us come, you know, and then we had to kind of unravel that issue, you know, into 2021. And then really, since May of 2021, everything's run very, very smoothly, we expanded and that's been kind of its own thing. And so we really focus on FBA removals and things like that, kind of following that customer need.
And I think, you know, where we're focused now, especially in our California location is, as I look at FBA selling and that kind of thing, I think you have to address the fact that what's happening in that market is, you know, around two thirds of your FBA sellers at this point are actually Chinese owned or Asian owned companies.
You know, I've spoken with some very, very large sellers who are looking at it and they're saying, look, the value chain is moving back. So it's like, most people used to go on Alibaba and they'd work with a trading company and everybody, you know, during 2015 would say, you know, the Chinese market, the Chinese sellers will never be able to compete with us.
Like they don't know how to market to the United States fast forward eight years. And that's absolutely not the case. And so we find what I'm noticing more and more is like that trading, that trading company is now saying, well, why am I selling to this guy? There's plenty of data out there that shows how I can market a follow on product.
And those margins are just getting squeezed and squeezed more and more. We're really focusing on, you know, how do we help our customers not only with the returns piece and be sticky there. But also, how do we get better and better at individual order fulfillment? And so we're doing this blended strategy, yes, we're still handling bulk goods.
We're still doing carton picks, but we're also really focusing on reverse logistics, eCommerce, that kind of thing. And then we're also focusing on the direct to consumer order fulfillment, which we've always done it. It just has been kind of a peripheral 5 to 15% of our business. Now we're looking to take that up to be a lot more balanced. Like the, in that 30 to 40% range.
Alex Bond: It's a great idea because I feel like it's probably easier to grow when you can plug up all those leaks that you're having in terms of these returns and these sort of losses, you could take that money and help expand with it or compete with China and all these other things. So what I'm hearing you say, Mark is it's kind of a two pronged approach a little bit.
Mark Taylor: Absolutely. And I mean, there's another trend that's going on with the near shoring, like in reshoring of stuff. So it may surprise people, but China's not our largest trading partner. Believe it or not. I think they're number three. It's what I read. I actually read that in an article in the wall street journal the other day, but we still have this great relationship with Mexico.
And I think, you know, there are a lot of things to work out there. There are all these options for warehouses to help. And to figure out and, and logistics partners to help their customers and that kind of thing. I mean, I'll give you a very brief example. You know, it doesn't take long to get certified as, as a free trade zone.
For instance, if somebody is reshoring their stuff and what a free trade zone effectively means is that you can import product and while we hold it, it won't be taxed until it sells or it ships. So a lot of solar companies love this. So what they'll do is they'll import the product into the free trade zone, and then they'll have this glut, like, you know, 500 containers worth or something like that, and then they'll start slowly start selling it off. So as they sell it off, that's when they're paying the taxes on it.
And so what that allows them to do is it's really it's they're still going to pay the taxes. It's just a deferment of the tax payment. But there are there are other things that you can do. You can receive multiple components of a final product, do some light kidding work, some assembly, and then it automatically change the changes the importation code to a whole new tax structure.
These are things that warehouses and logistics partners can do and help their customers out with. And I think In this ever evolving, changing world. I mean, I don't foresee American consumerism going anywhere anytime soon. Logistics providers, partners, we really just have to figure out how can we be value add and the people who are going to win are the people who can solve the most problems.
