this week what happens to all that stuff we return to the store? marcus schenn knows. he has most of it. meet a young entrepreneur helping restaurants survive the pandemic and startup that's bringing live music mandolin's ceo mary kay hughes. that's this week on press: mcg. i had not realized this, but my favorite restaurant makes less money off the hamburger that they're famous for if i buy it off doordash as opposed to if i pick it up myself.

that is because doordash not only up charges me, it charges the restaurant as well. which is why you may find a flyer in your next doordash bag of food promoting the restaurant's own delivery service. they don't want you to doordash if they can deliver it themselves. now, this flyer is fictional to protect the name of the real restaurant because honestly, what they're doing displeases doordash. to walk us through the economics of this is adam guild. he is the ceo of a company called profit boss. his software powers some of the independent delivery services, and adam, thanks for joining us this morning. we're used to young entrepreneurs, but you are one of the youngest. i'll point out to my viewers, you recently landed $3.5 million in a seat round, so you must know what you're doing, right? >> i'd like to think so, scott. i hope i know what i'm doing, but i was really motivated to act when i saw how these restaurants that have such tight

margins as already being exploited by the third-party platforms and having more and more of their profitability taken away to the businesses on online orders wasn't profitable. >> so walk me through that. what is the economics of doordash that this is hurting restaurants? >> so the number you need to know to fully understand the picture are that independent restaurants, mom and pop shops have an average net margin around 5%. for every $100 they get top of line in revenue, they end up netting $5 in profit. the issue with the third-party platforms like grubhub, like post mates, like uber, is that they take between 20% and 30% of each transaction that flows to the restaurant, and that is a cost that the restaurant doesn't have enough margin to incur. so their margins are 5%, but they're losing 20% or 30%, almost all independent restaurants are actually losing

money on each transaction. that's what's totally unfair and i felt we needed to build technology to help them solve. >> because doordash is charging the restaurant money as well for the honor of picking up that ham burger and sending it to me. >> exactly. so in addition to charging tor customer, which is typically a really high fee, between $7 and $11 on the average $40 transaction side, they're also charging the restaurants themselves more money than they have in profitability on that transaction. the restaurant feels trapped.by and they need a way to fight back and restore that relationship that they have with their customers so they can operate their businesses profitably. >> if the restaurant had its own delivery service, it would save money because it wouldn't be paying the doordash fee, but of course it would have to pay to create a delivery service, either through you or doing it itself. you kind of split the difference

on this, right? you offer the delivery service, but you're not actually charging the restaurant a fee? >> exactly right. so what's really interesting about the economics of these delivery service companies like grubhub, doordash, post mates and uber is that the majority of their cost is actually coming from the marketing side of things because they have to spend so much money in social media advertisements and television advertisements in order to acquire users to use their platform. if we remove that from the equation, we're able to utilize their drivers via an api programmatically so when an order is placed drebtly on a restaurant's website we can hav customer ordering can incur entirely. sometimes the restaurant does choose to put a little money towards that delivery cost so the customer order pays less. either way it saves both parties

ha lot of money. we have several restaurants in the bay area like yolked and san jose that's generating over $10,000 a month in direct sales using the online ordering system and saving over $2,000 a month in fees he would otherwise have to pay to a third-party. which makes a huge difference in thes idea that doordash is overcharging the restaurants and you've got this system, you know, your own delivery system to offer restaurants where they would save money, but you're using doordash to do it. >> that's exactly right. in the same way that a lot of shopify e-commerce vendors use amazon fulfillment centers to get their goods from point a to point b, it turns out that doordash has built an amazing logistics network that's fast and reliable and there's an economically more fair way to all parties involved to use that network. that's by ensuring that the restaurants themselves receive the order directly as opposed to

coming to doordash, coming to the restaurant's website. that is more economically viable because there's no marketing cost associated with actually getting the customer to use the restaurant's own website. the restaurant promotes that to their customers. so the restaurant doesn't have to incur dozens of dollars in marketing expenditure to get that transaction through their platform and savings is distributed to all three prties of the transaction. >> i got a safeway delivery that wasn't actually delivered by safeway, it was delivered by doordash. safe way is using the doordash service much as you're using this doordash service. why would doordash open up its api so that you could use it to undercut doordash? >> i can only guess here, but i'd imagine speculatively that the reason that they opened up their api is because this is actually their long-term vision as a company. they've said this since day one that their long-term vision is to become a next mile delivery service, or a ups, fedex for

local. the reason they're doing it is they want to built an ecosystem of other technologies that utilize their drivers in order to fulfill deliveries. i believe that that's more profitable than their core business itself. their core business itself is actually struggling in the marketplace. there's so little differentiation between doordash, uber and grubhub. so they're trying to prop up this other component of the business, which has always been aligned with their long-term vision by offering the ability to use their drivers in this white label capacity. it turns out if you use their drivers in a white label capacity, they have a built-in gross margin. they get to determine the terms and they don't have any marketing costs associated with actually having produced that transaction. so it's a higher margin form of revenue. >> so to use an analogy, when we thought of amazon as only a book seller that would be the closest i could think of. they weren't really into selling books. they were into we want to sell

everything. we're going to start with books. doordash may say, you know what, we don't want to deliver tacos, but that's what we're doing as we learn how to deliver everything. >> exactly right. from reading about doordash's history and watching interview from the ceo tony, i've realized that that's their long-term vision and that's why they're willing to do it. that is a more profitable market opportunity and that's been their vision since day one. >> let's circle back to what i started with. that is that you are a young entrepreneur. how did you get started doing this, and when i say young, how young are we talking? >> i'm 21 years old. >> okay. how did you start this? >> very weird life, very weird journey. i've been building technology projects since i was 9 years old. i built my first successful project at 12, and then i had this whole random series of the years and building one of the largest minecraft service networks and building social media accounts and then building my own games, and what inspired

me to start focusing on how to service the local business market was an experience that i had in working with my mom. specifically she pursued her lifelong dream of opening a dog grooming store and even though she created an amazing experience, when she first opened up she was really challenged and devastated because it was really difficult for her to get new customers in initially. she came to me for help because she knew i was her nerdy at that .17, 18-year-old son and built these things online and the solution that i ended up building for my mom it turned out had a lot more utility in the restaurant market. i worked with larger brands like p.f. changs. coronavirus totally wiped out our business, and i at the beginning of this year had not raised capital or very much capital at all, just a very small amount from angels and i almost ran out of money essentiaompany was being challenged, i started to ask myself, how can i add value in this new time of coronavirus. what specific problems are most

important to solve because our old product was good at driving in-store traffic. that wasn't a thing anymore. so i ended up after talking to hundreds of restaurant owners realizing there was a way t help them save money and increase sales during this incredibly desperate time while solving a lot of their other operational challenges as well. >> amazing. i wish you the best of luck in the future. adam guild, the ceo of profitloss. we'll be right back.

this california family is on the job helping our state's recovery. you see by keeping their vacation in california they're supporting our local businesses and communities. so you could say every juice box enjoyed on our beaches is also bringing nourishment to our state's economy. that's the taste of recovery. calling all californians. keep your vacation here and help our state get back to work.

and please travel responsibly. welcome back to press:here. it was hard enough to buy christmas gifts this year. it's going to be equally hard to return what you don't like. it would probably be safer to just stay out of the store. but it didn't stop us from wondering what happens to all of those returns. do they go back on the shelf? do they end up in the trash? where does that blender you didn't like go in the end? they probably end up in a warehouse run by marcus schenn. he is the coo of a company called b stock sourcing that auctions off literally tons of returned merchandise. he says the amount of stuff they have to deal with jumps 30% in the first quarter, the months following the holidays.

marcus, welcome, let's start with where all this stuff comes from. how does it get to you? >> we're both sides of the marketplace we have sellers, those typically are retailers brands, manufacturers, who have this type of excess merchandise, so it might be returns like you were talking about or even overstock inventory. >> so what's in it for the companies that are sending it to you? do you pay them upfront, or do you give them a cut of the auction? >> yeah, no, the great thing about our model is we're a marketplace, so our primary role is to use technology to match sellers with buyers, and so the benefit to them is that they are able to sell to a huge network of buyers who are, you know, ultimately going to sell this inventory downstream to consumers like you and me. >> i was just kind of looking

through the site, this is from your auction site. five pallets of target music returns, retail value $158,000. 7,900 items. so we're talking about palettes -- pallets and pallets of cds and movie, and xbox games and whatnot, and somebody's going to buy that and resell it. >> that's exactly right. we focused on a handful of categories, certainly consumer electronics is a big category, home goods, home furniture, appliances and apparel. those are kind of our major categories. but to your point, sometimes, you know, we see returns of all kinds of sorts and so it is a gr entrepreneurs and buyers who resell this stuff. >> you've also got 11 pallets of just my size two-pack bras at 8,200 units. two to a pack, that's 16,000 bras. i'm assuming that's not a return.

>> i hope not. i think a lot of this stuff, like you said, is likely over stock inventory, things that, you know, whether it didn't sell as much as they expected or they may have ordered more than they anticipate. >> so i can see people could make money selling downstream as you say. there are nest thermostats on your site with a current bid, by the way of $10 a thermostat, a unit. that will obviously bid up, but a nest thermostat is hundreds upon hundreds of dollars that someone is going to buy them, and to be clear to the viewer, you can't go on his site and buy a $10 thermostat. you have to buy basically maybe 100 or a thousand of them, but at some point, somebody's going to buy those, maybe sell them on ebay. they're refurbished. they're good thermostats and they could make a nice little profit off of that. >> that's exactly right. i think what we're really empowering entrepreneurs, folks who probably are part of that

gig economy that we talk about so much that may have, you know, run airbnb or driven for uber. what they're doing here is taking advantage of, again, a similar problem. there's excess inventory, there's excess supply and we're using a marketplace inventory. >> and they can to that on ebay. they could even actually do that through amazon through their small business marketpl it would be strange to think, but i think it's possible that somebody buys a nest thermostat on amazon, returns it for whatever reason. amazon double checks it still works. they then essentially sell it through you to somebody else who puts it back on amazon. >> that's right. it happens more than you'd think, and there's, again, it creates a really interesting opportunity for entrepreneurs to buy this inventory and resell it. it might be in an underserved market. it may be an underserved geography. it might be overseas. those are kind of the

interesting nooks and crannies that obviously these hustlers, these side hustlers actually play this. >> not just anyone can go on there and get themselves a pallet full of nest thermometers. you have to have a business license, is that right? >> that's right. these are all -- we are a business to business marketplace as opposed to, you know, consumers. so the buyers of this inventory are typically -- they could be bricks and mortar shops. they could be online stores that are actually selling direct to consumers. what they need to be successful, you know, certainly they have to have the licensing to sell goods and, you know, some of them have software that sells online and manages the inventory, but probably more importantly than anything they got to have a little bit of hustle. they got to have a little grit. >> mar shen of b-stock sourcing, thank you for being with us, and many happy returns. and "press:here" will be right

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. welcome back to "press:here," live music is probably something we're not going to see for quite some time unless you're lucky enough to have a talented musician in your

own home. but much like your boss figured out how to connect with you on zoom to keep your meetings going, a startup called mandolin is having great success with concerts over the internet, like this one. here's a socially distanced band led by drew holcomb playing on mandolin.com. ♪ i feel like an old soul ♪ ♪ and i feel like a sinking ship ♪ ♪ can't get no sleep, can't just let it be ♪ ♪ like walking on a tight rope ♪ >> mandolin founder mary kay hughes just raised $5 million in seed round including money from her former boss, mary kay left sales force to make mandolin highly

looking back. >> what attracted you to music? you could have left and done any kind of startup, and you chose to do music. >> it was really just the pain point that was exposed when the pandemic started. it didn't take long to realize that both fans and artists were really struggling with the lack of live music, and they needed a way to connect without the in-person shows happening, and the opportunity seemed very exciting, and the music industry, it didn't take me long to investigate it and realize that the ability to leverage technology and digital transformations and many of the things i've learned at salesforce, the music industry wasn't taking advantage of fully yet, and so starting with live streaming but then digital engagement beyond that was a big market opportunity, and the time we've spent so far has continued to build the opportunities very large. >> it is amazing the -- you know, the established industries that still weren't taking advantage of tech, a lot of med tech, i think of, even uber and

taxicabs that there are opportunities still in the world to create a startup where an established industry has not fought through its answer to technology and the internet. >> it's so true. i had spent the last 20ish years on digital marketing and digital transformation, and i've talked about data collection and how you use that with content and personalizing experiences and the rise of both the direct to consumer relationship as well as just the digital economy itself, and those are the same conversations i'm having now with many people in the industry. and we're only scratching the surface so far at how we can do that for music. >> so what are you doing for an artist that couldn't be done on youtube live or facebook live or twitch or all the other established organizations that already do this for a living? >> yeah, really early on many people were going on facebook, many artists were going on

facebook and instagram, and a couple of the biggest changes they had, one was around monetization, and another was just some of the -- you know, an artist is -- that makes music like that, that is their art quite literally, and the mechanics around production and the platform itself and the stream tease and all the technical mechanics of putting on a show and having that confidence it's going to work and it's going to uphold their credibility and their image started to make them feel very uneasy. none of those platforms, there's so many amazing platforms out there, very few had very much -- had focused exclusively on a live streaming concert experience, and that is exactly what we have done. >> i was going to ask you about production because, you know, people don't realize, although i think during the pandemic maybe they're beginning to realize, how difficult video production really is. and taking a look at some of the

concerts that you've done, i mean, they are very high quality video production. this doesn't happen by magic. you have to either contract out or send a crew out there. this is not some guy playing guitar in his living room on facebook. >> absolutely not. we focused on premium experiences that would warrant ticket prices, 15, 20, $25 is our average ticket price is $20. and is doing really well, but it did not take long for me to realize the component of the production side, and you know, similarly to many companies, what's the role of services, professional services and customer success, and it's no different here. we've built a very extensive network of venues and studios and production teams and have made sure that some artists come to us and have all of that lined up, and they just need our platform, and that's great, too. but many times, especially with the market so early, we've had to establish a lot of best

practices and thought leadership and a comprehensive solution to make sure that the experience that they want their fans to feel good about paying for is of the quality they feel good about. >> i think that's -- yeah, i think that's where your future lies is that turnkey, you know, just take care of this for me. i'm an artist, i'm going to play my music. i want to reach my great soluti. >> it's definitely beenne of our differentiator in a market that's gotten extremely crowded very quickly as live streaming has exploded. >> so live stream explodes during a pandemic when we're all stuck at home, including you and including me, but then the pandemic will eventually go away and concerts will come back, and where does that put you? >> we're actually very excited about it. the more recent news of the vaccine progress has led some of our conversations to read more towards, hey, maybe you found some limited touring can come

back in the second half of 2021, and what does that look like,er live streaming experience that's where our product strategy and vision that goes beyond live streaming is so exciting. we are already doing hybrid shows today is like limited capacity. the opportunity to create more digital engagement between the artist and fan and between live shows and album releases as well as the increased monetization. the concept of a capacity in a venue is really can be no longer. we'll need to mitigate cannibalization with geo fencing and, but there's an entire incremental fan base to access now that don't want to go to crowded clubs and theaters and are experiencing high end streaming experiences at home and want to continue that. we really see the digital engagement and live streaming

itself as all incremental revenue aart to access the revenue they were used to. >> i think there's a parallel with the movie industry, warner brothers going to release wonder woman and whatnot directly to video feeds while also playing obviously everyone likes live music in a concert hall, but there is the option to do it at home. >> i think sports is another good analogy. think of the monetization opportunities that are created for backstage access, exclusive content, putting it on your big screen at home. having a front row seat at a very different price, it doesn't take anything away for the people that want to be in that room or in that arena or whatever the case may be. there's so many other ways to create a very unique experience around something so special like live music. >> mandolin founder mary kay

huse, thanks for being with us this morning, and "press:here" will be right back.

>> that's o sunday

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