Dashboard: ‘We’re Not Giving Up’

[Music] Welcome to another 21 Hats dashboard. I'm Lauren Feldman and I'm here with Ben Neppepler, co-founder of True Places, which makes portable outdoor chairs. Welcome back, Ben. Uh although I'm sorry it's not under happier circumstances. I gather you've decided to suspend production of your portable chairs. >> Uh yeah, hi Lauren. Thanks for having me back. It's it's always good to speak to you, but uh yeah, I too wish it was under better circumstances. So, you know, Ben, I'd love to talk to you a little bit about the evolution of the past year and how you've wound up at this place. Uh, initially, um, for all the usual reasons, you chose, uh, you and your co-founder chose to manufacture the chairs in China. Last year, you saw the writing on the wall, and as you told us the last time you were on the podcast here, uh, you moved production to Cambodia. It was, as you explained, not an easy or an inexpensive process. Um, maybe you could start by reminding us why did you pick Cambodia and what was the tariff situation at the time that made it seem promising? >> Sure. Well, even just to back up a tiny bit, you you described it as a choice to manufacture in in China, but really it wasn't a choice. The entire industry is in China uh for what we do. So, as a reminder, we we're a startup, but we we started the business uh to create a a brand and a company for what we're calling the modern outdoors. Uh we realized we were spending a huge amount of time uh in our lives outdoors and outside. Not necessarily going on a huge trip somewhere, but in all kinds of occasions like the sidelines of kids sports games and in the backyard fire pit and concerts in the park and all these types of occasions and most people are just using old camping gear for for these situations. So our first product is a portable chair. Um but the the the nature the materials used and the nature of the manufacturing and assembly of that um is very kind of specific and they the entire industry of that manufacturing had moved to China over the past many decades. So when we started the business, even though we do everything else in the US, we do all of our marketing but design, engineering, warehousing, shipping, logistics, customer service. Basically, our entire business is here except for the manufacturing and assembly of of our product. So we had no other option uh but to be in in China when we started. uh we've been facing tariffs from the first Trump administration of 25% which had been just an anchor on the entire business weighing us down and not letting us grow even though we know there's a huge market opportunity for what we're doing. So from the very start we had been trying to figure out ways to avoid that that tariff. Um, we managed to find a finally a viable solution outside of of China in Cambodia in the middle of last year. So, in mid 2024, we made the decision to move our entire manufacturing operation from China to to Cambodia. And that's not something that is very quick, easy, certainly not for a startup or costless. So financially, it was it was very expensive. We actually took on a lot of debt in order to make that manufacturing transition happen. And we've been doing that over the uh the past 12 months. Um when we made that decision last year, there were zero tariffs on goods coming from Cambodia. So that was a big part of from a financial perspective of uh being able to make that decision. So fast forward to to this year, which I think was your your real question. Um on April 2nd, we were in the middle of our first uh production run in our new factory. So getting started up in a in a new factory is a a huge process. I actually flew out to to Cambodia uh to be there for uh the startup of our production. Uh we were in the middle of it on April 2nd when the announcement was there would be 49% tariffs on on Cambodia. So over the past few months, we've gone from 0% tariffs to 49%. A week later it was uh 10% for 90 days. And then in early July, letters went out from the Trump administration saying it would be 36% for Cambodia. And then last night, we just heard that it's 19%. So, we've got no idea what it's really going to be in in a few months time. Um the the timelines that we're dealing with are obviously much longer than the like political news cycle. Um and so we have to make decisions that to whether to produce or not and we won't get that product for another three or four months. Um and so that's when you have to actually pay the the tariff payments. Um and so a few weeks ago we had to decide whether we were going to roll into our our next production run as planned or whether we couldn't really do that. And it was pretty clear to us that we we couldn't we we couldn't produce um at that point. And we have some seasonality to our business. We're we're an outdoor outdoor products company. And so even if we started producing today, we wouldn't get any new product in to the US before the end of our season. And so for many reasons, we had to make the decision that uh we wouldn't produce again, at least not this year. So had you gone forward and produced, you would have had to pay for the production, you would have had to pay the tariffs when the chairs arrived in this country. Um, and then you would have had to you would have had to sit on those chairs uh through the off season until you could sell them when the season began again next year. Is that right? >> That's correct. Um, also I should note that there are a lot of other indirect effects of the of the terrace situation that um people probably don't don't realize, but um when we were in the middle of our first production, which was a small run, it was our first first run at in our new factory. Um the there there was this you know announcement that it would be 49%. We literally called up our factory that night and said stop stop producing uh because we can't afford to bring that product into the US. A week later there was a change of mind uh from the administration and there was this window of 90 days where it would be 10%. which is still very difficult for us, but we could at least finish our production. Uh so we called the factory back up that night and said, uh, let's restart production. It's not something that you can just flick a switch and do. And so that caused a lot of delays. At the same time, everyone in everyone who could was trying to get products from Asia to the US and so shipping rates and all the costs to do with transportation and freight skyrocketed as well. um we had to pay on top of those skyrocketing rates. We we had to pay extra in order to actually transport our product from Cambodia through Vietnam in order to get on a boat that we could find space on that would get to the US in time for the end of the 90 days. And normally we send half of our inventory to the West Coast and half to the east coast. there wasn't time for that. We had to send everything to the west coast. Um, which has caused like a lot of additional costs for domestic shipping for us. Um, and then on top of that, when it arrived, uh, we finally got it in before what was going to be the end of the 90 days. Um, at port, we didn't hear anything for a while. And then we got a message saying that we had been quote unquote randomly selected for customs inspections. Um, and so our inventory was was delayed. Then uh we we don't get told what's going on. Um, you don't know how long it's going to take. And then once that was finally released, we then also get a bill for the pleasure of that inspection. So all of that just adds up to an enormous amount of additional costs that are indirectly caused by the the tariffs as well. And that's really really difficult for for us as a small business and a startup. >> I can't even imagine how discouraging that must be. So just to to recap the scoring on April 2nd you were hit with 49%. A week later it went down to 10%. Is that what you said? >> Correct. >> And then in July letters went out saying 36%. >> Correct. Yeah. So instead of the instead of the end of the 90 days, um you know, no one knew what was going to happen. Uh but a few days before the end of that 90 days that we had scrambled to get product into the US in time for um instead of that they uh the Trump administration just sent out these these letters uh to to dozens of countries saying actually sort of forget about that. you're going to face a well that we're going to put what whatever tariff it is on uh products coming from your country. >> And was that effective immediately or was that going supposedly going to be the rate at the on you know when that interim period ended? >> No. So they instead of the the 90 days was meant to end July 9th and those letters said it would end August 1st and from August 1st whatever number was in the letter would be the new tariff rate. >> So you thought it was going to be 36% going forward at that point. >> Correct. >> And that's when you made the decision to suspend production. >> Correct. Um, now we're recording this on Friday, August 1st, and it was, as you referred to, it was announced just last night, uh, that the rate going forward is going to be 19%. Is is that an amount that had you known it was going to be 19%, you could have proceeded, uh, with production? >> It would be very difficult. So, um, I I'd make sort of two points related to how we're thinking about it. One is 19% is still an incredibly high tariff. We made the decision to move to to Cambodia based on 0% tariff. So going from 0 to 19% is an incredibly uh big change in like overall trade policy and and protectionism um that that we have to pay. So that would be very difficult. Um we'd need to figure out other ways to financially make it make it work. We'd almost certainly need to need to raise our prices um and and various other things. Um but it would be very difficult. I think the the equally challenging aspect of it is that it last night it was announced that it would be 19% but who knows what it'll be tomorrow. Um a few weeks ago it was announced that it would be 36%. And that was until last night. Um, in in in that intervening time, there's there's been a a dispute between international relations dispute between Cambodia and Thailand um that uh President Trump tried to get involved with by threatening different tariff rates on those countries. And so we're seeing tariffs being used for um international diplomacy or complete reasons that are completely unrelated to to the trade of of products. Um, and so it's very difficult to have any kind of confidence that even if we could make 19% work, that that would actually be the rate when we bring our product into the country. >> So as you sit here today, do you have a sense of where you go from here? Are you thinking of trying to find somewhere else to manufacture? Are you hoping to wait it out? Do you have any idea what you hope to do next? >> Yeah, there's there's nowhere else to manufacture. I mean, we've already invested a huge amount in making the transition from China to Cambodia. This the manufacturing of these kinds of products just doesn't doesn't exist in the US. And uh you know, it's it's it's taken us the last 12 months in order to move our manufacturing. >> Let me stop you there for a second. When you say these kinds of products are not manufactured in the US, what exactly are you referring to by these kinds of products? >> Yeah. So, I I want to be a little bit careful cuz I I I know about our very specific category of portable outdoor chairs that is a combination of of soft and hard goods and has complicated mechanical engineering. um for us like there there's no option to manufacture in the US certainly not at any kind of scale and um any kind of cost that would be viable. Uh but it even before you get to the cost question it doesn't it really doesn't exist. Um and part of that's related to how the uh the supply chains for the materials and also the expertise of this manufacturing um just doesn't exist at the moment in the in the US. I know that the same is true for many many many other categories. I I I don't want to speak for any of them like specifically because I think people um make very broad generalizations like oh manufacturing will be coming back to America or you you should you should just make this in America or or this type of manufacturing can or can't. So it's very um we just need to be really careful about those generalizations. It it can be very very very specific. However, the tariffs and the the trade policy are just completely broad policies that essentially apply to everyone. Um, with with a few uh noticeable exceptions where there's been kind of the political will to make that happen. >> Got it. So, I interrupted you. Uh, I had asked you, do you have any idea where you go from here? Um, do you know? >> Yeah. So we uh we're currently, you know, selling through the the remaining inventory that we have in in the US from our our first production. Uh we know that we're not going to be able to get any more in this year, which um is a huge blow to to the business. um we're not sure if we'll be able to continue uh the way that we are um as an independent startup. Um and so we're we're trying to figure it out. We're we're having a lot of conversations with a lot of a lot of people uh to understand what the what the potential options might be, if there's a way that we can potentially join forces with with others. um to to create kind of more scale or to at least be able to weather weather the storm. Um if we're able to get some kind of investment in order to um to in effect kind of wait it out ourselves. Um but myself and my co-founder have stopped we we've stopped paying ourselves. Not that we paid ourselves much. We're we're really um in it to to grow a startup to a to a much larger scale. Um but that obviously creates um difficulties on the um on the personal side. Uh so we'll probably need to find other ways to to get some personal income and and other employment. But um we're we're not giving up. That's that's for sure. Um this is, you know, this has been a a dream uh that we we started a few years ago. It's it's really the the the American dream. Um we we knew that we would face a lot of challenges as a as a startup and we've we've overcome many many many challenges. We didn't think that our biggest challenge would be government policy uh from our own our own government, but uh this is where we are. >> Well, I'm glad to hear you're not giving up. You mentioned that you had to take on debt to move operations from China to Cambodia. I assume that was to pay for the tooling and maybe move equipment from China over. Um, are you going to be able to service that debt? >> Uh, it's going to be difficult. We're we're going to have to figure out a uh a way to uh either re refinance it or or re kind of structure that in in some way. But it's going to be it's going to be very difficult because uh you know every we're we're in a difficult situation. But It's it's a similar situation to so many others and so um we're we're not sure yet. >> When you say so many others, are you basing that on what you read uh or are you talking to other companies and trying to figure out what they're doing and seeing if there's anything for you to learn from their experiences? >> Yeah, I've I uh I speak to a lot of other other founders, other small business owners. Um, so certainly anyone who is of a small scale is is finding it incredibly difficult. I um actually went to DC a few weeks ago to speak to Congress about about tariffs um together with a delegation of a few other small small business owners from around the country and it was it was great to meet them. Um but hearing their stories, we we all had had versions our own versions of the same story that um basic that the terrorists are are killing us. Um and so I'm yeah I'm I'm in touch with with a lot of others from that perspective. Um and then you know speaking to to people in in our our industry um we know that it's in in incredibly challenging. You said that you may be looking for other ways to bring in some personal income. Um, obviously you still have your own personal bills uh to pay as well. Are you thinking of taking another job or what kind of things are you thinking about there? >> Yeah, to be honest, I haven't I haven't had time to actually think think about that side of things um properly, but um I I don't know. I don't know. We we we'll have to see. There's obviously a limit. My my priority is dealing with true places and and trying to um get get our business in into a better situation. Um so that's that's what I'm really focused on. Um but there's there's a limit to how how long we can um completely focus on on that without thinking about that personal side. >> All right. Well, I think you said you still have some inventory. If anybody listening to this is interested, it's still possible to to buy a chair. >> Yes. Um this this might be one of the last opportunities to to do so. Um trueplaces.com is our our website. So tru uh places pl.com. Um and uh yeah, you'll you'll see them there. Whatever remaining inventory we have. >> All right. Ben Neper is co-founder of True Places. uh which until recently was manufacturing portable outdoor chairs in Cambodia. Uh Ben, I really look forward to having you back on when you've figured out how to restart production somehow. Uh but in the meantime, thank you so much for for sharing your story with us. >> Yeah, thanks Lauren. I I hope that next time I'll be back, we'll be in the in the midst of our next production. >> Uh that would be great. All right, have a great week, everybody. [Music]