Ep 317 – Emjay CEO Reveals A Surprising New Approach To Cannabis Delivery

chris vaughn emjay 1

Cannabis delivery platforms are evolving quickly as they find better ways to retain customers and reduce churn, and Emjay might just have the best approach yet.

Here to tell us more about it is Chris Vaughn, CEO of Emjay.

Learn more at https://heyemjay.com 

Key Takeaways:

[00:51] An inside look at Emjay, a premier cannabis delivery and retail company in Los Angeles, CA

[1:48] Chris’ background in the alcohol industry and how he came to start Emjay

[12:27] Emjay’s hub-and-spoke business model and how the company functions both as a retailer and delivery service

[17:40] How Chris’ experience in the alcohol industry has influenced his approach to cannabis

[23:08] Unplanned versus planned purchases and how this differs between alcohol and cannabis

[26:25] The advantages of owning your own supply chain as a cannabis retailer or delivery service

[38:39] Regulations around the types of vehicles that can be used to deliver cannabis 

[40:12] Where Emjay currently is in the capital-raising process

Click Here to Read Full Transcript

Matthew: Hi, I'm Matthew Kind. Every Monday, look for a fresh new episode where I'll take you behind the scenes and interview the insiders that are shaping the rapidly evolving cannabis industry. Learn more at cannainsider.com. That's C-A-N-N-A-insider.com. Now, here's your program. Cannabis delivery platforms are evolving quickly, looking at ways to be more efficient and keeping a keen eye and retaining customers and reducing churn. Here to help us learn more about cannabis delivery is Chris Vaughn, CEO of Emjay. Chris, welcome to CannaInsider.
Chris: Hey, thank you for having me.
Matthew: Give us a sense of geography. Where are you in the world today?
Chris: I'm at my house in Los Angeles.
Matthew: Okay. I'm in Coeur d'Alene, Idaho. Chris, what is Emjay on a high level, and can you spell Emjay just so people get the right visual in their mind?
Chris: Sure. Emjay spelled phonetically, so E-M-J-A-Y, a play on obviously M and J, marijuana, but Emjay at its core is a shopping platform for customers to come and order cannabis and have it safely and reliably delivered to them. We also have today a retail store in the heart of Los Angeles, but we have a handful of others coming online throughout the back half of this year and into early next year. We'll have a sort of in-person as well as e-commerce experience for people who want to come in store and meet one of our team members or if they want to order online and have it brought to them. Today we operate a store on Fairfax in the center of culture in LA and then have delivery that covers most of greater Los Angeles.
Matthew: Chris, can you share a bit about your background and journey and how you got into the cannabis space and started Emjay?
Chris: I'd say for about the past decade or so, I've predominantly been in the alcohol industry. Built a company from scratch called Saucey along with two terrific, co-founders Andrew Zeck and Daniel Leeb. We have been addressing this highly regulated category that really have been untouched by e-commerce or innovation or capital even in 80, 90 years, and have been on that journey for quite some time. I think right when the recreational regulations started to come down or look like they were starting to come down, I started to spend a lot more time focusing on just what did cannabis look like as an industry from a regulatory perspective? What did it look like from a customer perspective? What it looked like from a-- I think just the history of the legal issues in the space and was fascinated by really two or three things.
I started by sitting in on a couple of local community meetings in LA just sitting in the back and listening and one of the things I'd say from a regulatory perspective, that was very interesting is I heard community members and neighborhoods really come to these things and oppose any sort of dispensaries is being rolled out in their neighborhoods. That was a little bit of deja vu for me because we had heard so much about this in alcohol before. There's so many liquor stores throughout the country. There's more liquor stores than there are gas stations or grocery stores in the US. Communities are actively trying to pull back the number of liquor stores in a lot of these neighborhoods. Particularly I'd say lower economic neighborhoods that literally can have a liquor store on every single street corner.
Hearing those meetings for years where people were sort of, "We don't need this many liquor stores or cigarette stores on every single corner," and then all of a sudden here comes cannabis legalization, and obviously there's great consumer demand. People want it to happen legally. Communities want the tax revenue from it, but they didn't want stores to pop up on every single corner of the way that they did in alcohol. That was very fascinating from a delivery perspective and coming from a delivery background to say, "Okay, there's demand. People want this to happen. They want this to happen legally, but they're very nervous about having shops pop up on every corner." I think the second regulatory thing that really intrigued me was that there wasn't going to be a three-tier system like there is in alcohol where you can only be a brand/manufacturer or a distributor or a retailer.
That cannabis in the US was going to operate a little bit more like alcohol does some other countries like Brazil or China, or to a degree parts of Europe where you could be the brand manufacturer and retailer all in one company. I think your supply chain fundamentally changes how you think about the customer experience, it changes your margin capture, everything else. Then around the same time I was talking to some friends that had started investing in the space fairly early and heard the story of one of my friend's grandmothers that had been going through cancer, it was actually a family down in Texas where cannabis wasn't legal and the doctor honestly recommended just, "Hey, if you guys can get cannabis to her, I didn't say it, but you should try and it'll dramatically improve her quality of life."
They did. It was a game-changer for her treatment plan and how she went through that time as a person. Hearing similar stories like that, seeing some of the effects that obviously we have this huge issue in the country with opioid addiction, well as, PTSD in veterans, and started doing some of the research in those categories. The combination of those things, watching how communities were reacting to this, watching how the regulations were going to shape the way that companies could be formed, watching personal stories from friends and friends of friends that had, I'd say, terrific medicinal effects from this plant. Then lastly, the greater impact that it possibly has on medicine or getting people away from reliance on opioids. The combination of those things was fascinating and thought that our background and expertise could possibly create something pretty special in the space.
Matthew: Okay, you have this background in the alcohol industry, highly regulated industry. You're seeing what's happening on the community level. There's too many alcohol shops. You feel like you have an aha or a moment where you feel like you understand this regulated market. It's similar to alcohol, but you're going to go after it a different way than these traditional retailers who are throwing all this money into a retail footprint. Just talk about what you believe your unique angle is there.
Chris: Sure. Emjay was effectively formed in a partnership with a couple different groups. There were some people in the industry, we had friends that were investors who had been investing heavily in the space and a few local operators and all formed Emjay. Myself and Daniel Leeb have effectively been advisors of the company since it was formed and helping get them set up and running. Then in January of this year we stepped into full-time management of running the company and growing it from there. The unique angle that we bring is if you look at the early days of this, the end of prohibition, if you will, and the green rush and all these companies rising up and in many ways taking a very venture-style approach to growth and building businesses, which has raised tons and tons and tons of capital invested all in high growth.
Burn lots of money in the process, but go after market share. That to me seemed very risky in an industry that's regulated and with this limited access to capital markets. You had a lot of companies come out of recreation, raise huge amounts of money, or go public in Canada via these reverse transactions or these RTOs. You had a ton of retail investors pumping money into this space on the stocks. It was just a race. You saw companies just racing to grab licenses, racing to grab leases on places, racing to grab assets anywhere that could, because for a period of time, your valuation was almost propped up by just what licenses you owned. It doesn't even matter if they were operational or not. That was really interesting to me.
Then seeing, when Jeff Sessions came out with his memo and all capital dried up for a period of a few months in the industry, that was very telling that this isn't the same as if you're building a SAS company, or isn't the same as if you're building something in the pet space. Capital can come and go very, very quickly in this industry. You saw it happen again with all the issues around vaporizers and vapegate. You've had several series of events where capital can flood into the system and then flood out of the system specifically for this industry and that 1.0 wave of cannabis companies. There was a lot of carnage and there still is a lot of carnage today of companies that in January of '19 were doing famously well, then by mid-summer, were really, really struggling and their stocks were down and everything else.
A lot of that comes back to just the underlying fundamentals of any given company. If you think about people who are really pursuing this retail model, and you think about the economics of a dispensary, versus a fashion store or a sunglass store or a pet store, or even a liquor store, there's just a lot more cost that goes into operating one from a security perspective, utilities perspective. Most the landlord's back in this time, if you were a cannabis company, they wouldn't issue you any favorable lease, it was a lease with a hefty premium. The staffing of the locations, all of your costs on a per-location basis could be much higher.
A lot of those, we call them 1.0 companies didn't care. You had people that were buying licenses at exorbitant prices, doing build-outs on stores at exorbitant prices or going over budget, paying exorbitant lease rates, overstaffing stores, plus security, plus the utilities, plus the insurance and then you turn around and the mountain that you've created for yourself that you have to climb up before you can even get to break even, is almost totally insurmountable. The interesting thing that we really looked at is, there's a model in the space that was delivery only. There's obviously some leaders, particularly in LA and in California on the retail side.
The way that I fundamentally look at the hybrid of those two things is that retail can serve as a jump-off point for delivery, but because your cost structure at any given retail license is just much greater than it is in most industries, you have to maximize the coverage of any given location as much as humanly possible and we do that via delivery. The in-store experience is predominantly we find for some people that are curious, if you will, some people that are veterans and experts that really want to come in and get educated on new products that maybe have come out or smell and see the flower that they're going to buy. Then we see a lot of new time customers trying delivery, or the repeat purchases happening via delivery.
From that one single jump-off point on Fairfax today, we're able to cover a lot of greater Los Angeles, while in a retail-only model someone maybe has to do that with four or five, six shops, and that's four or five, six times the cost structures that are set up to cover the same amount of people.
Matthew: You're looking at this a little differently here, you have a hub-and-spoke model where your retail store in Fairfax is your hub. You're thinking right out of the gate, it's not an afterthought, like, "Oh, now I'm going to do delivery," you're thinking, "How can I strategically have this retail presence?" That'd be the hub for a delivery radius in the LA area. Is that right?
Chris: Yes, almost even the opposite, which is how do we cover a city with delivery, and then make sure that we have retail experiences where if people want to come experience a brand or a product or meet people or learn about the industry, they can come talk to people at one of our location. That we're definitely a delivery first company, and then have that retail as well, because we just fundamentally cover so many more households, so many more customers via that delivery infrastructure. I think that California was very thoughtful in how they approached delivery as a shopping part of this industry meaning, one, you had a lot of communities and municipalities that were arguing how they wanted to think about delivery and so you had a ruling came out that said if you have a delivery license you can deliver anywhere in California.
That that was very important and that a lot of people, a lot of the communities view delivery as something scary because it reminds you of a drug dealer. How did you get cannabis before it was legal, guys driving around in cars selling weed, right? In their mind, I think you think of delivery as, "Oh my god, there's weed going around, there's cars. It's dangerous." It's all these things. In reality, I believe that delivery is the solution that they're looking for when it comes to wanting the tax revenue from cannabis but not wanting a dispensary on every single street corner in your city. There's huge customer demand. There is nowhere near the brick and mortar footprint built out to meet that demand and unless you want to put it all in physical retail, the way to unlock that's via delivery.
That was one ruling that was very important. The second is how they structured delivery, which is that a driver as long as they have orders or scheduled orders or places that they can go out and hit throughout the day, they can carry up to $3,000 worth of product in the vehicle. It has to be locked in a separate compartment in the car. It has to be tethered to the car and secured. You have to have trackers in the vehicle so you know exactly where the driver is at all times. That driver can't just go off and go watch a movie or something that route, it has to be en route to an order. There's a lot of very thoughtful regulations around it but that means that from a single jump-off point, a team or a group of drivers can effectively go out and in many ways act like little mobile dispensaries.
When we open up for the day, while we are operating out of that one initial place, we could have 50, 60, 70, 100 little mobile dispensaries all over the city. We run both hub-and-spoke orders from a very broad selection. I believe that we have the greatest selection or the largest selection out of the delivery players in Los Angeles. You can order hub-and-spoke of any of those products that you want, or for a smaller group of orders that are available in drivers' cars, and you can have those delivered much much faster. That's our version of Amazon Prime we call it Emjay Now. In other states, they've really struggled with delivery regulations. You look at this in like Massachusetts, and you can see how the regulations came out.
The way that they did, but you can't just have a single driver going out and doing an order, they have to be accompanied by a second person or security. Some of the states are talking about having body cameras. Every single order has to be hub-and-spoke, only one order at a time. The way that they pass the delivery regulations was literally the exact opposite of everything that you could do to run an efficient and profitable delivery company. They put in place, every single barrier that you shouldn't do to totally mess that up but you get how it happened. It's people, community members and regulators sitting around a table, thinking about how do we do delivery? How do we make this safe for our communities, and people throwing out ideas. Then all those ideas come into something called a bill, and then it gets passed. Then people have to operate with that.
California did a very good job and how they think about unlocking delivery for the state, as well as the model so that you could actually operate it profitably or operate it in a way that makes sense for any given business to try them.
Matthew: There are so many smart people in Massachusetts but they have a unique flair for regulations that just confound. I'm surprised they didn't regulate a helicopter that follows a delivery car with a spotlight on it. It's like, it's really that it's gotten that far but that's one of the reasons that Massachusetts license holders, that's a valuable asset because you're dealing with a nonsensical regulatory body that you have to put up with. I think that's one of the reasons I'm hoping that there's some benefits for them Let's circle back, you talked about the alcohol industry, what would you say your deepest insight from working in that highly regulated industry that you've taken over to now Emjay where you feel like, "Hey, my understanding of the alcohol industry is really helping me with this"?
Chris: That's a tough one. I have to split it into two halves. I think one is definitely from a regulatory perspective, just working with regulators and thinking through regulations and how to do things, not only with utmost compliance but trying to also do things from a perspective that benefits and moves the industry forward. When we first started delivering alcohol, we didn't just go wing it. We sat down, we met with regulators, we talked to them, we communicated our intention, "Tthis is what we would like to do." Then we took it one step further, which is, "How can we also be helpful? How can we help you with issues that you have, whether it's checking for underage drinking or all transactions being credit card transactions, so you eliminate some of this cash under the table business?"
I think bringing that thoughtful approach to cannabis from the onset, it has helped structure in many ways, the way that we operate as a business. There's still a lot of fly by night delivery companies, there's still a lot of fly by night retail operators where people operating on the skirts of what would be deemed helping the industry move forward. Taking that approach and being willing to go through that brain damage and alcohol and then go over it again for better or worse, I think our team's developed a bit of a reputation for being willing to go through very tough things that other people aren't willing to go through or they're just confusing or brutal to navigate through. We've been able to carry that over. On the other side, what's fascinating to me, is the consumer. I'll give you a small example.
In alcohol when we send an e-mail to somebody about new products, it doesn't get a ton of pickup. There's a brand new scotch that just came in or there's this very unusual new rum that just came in. A very small percentage of our customer base cares about that. It's more so, "I like Bulleit bourbon. Just bring me that," or, "I like this wine bring me that." New products just don't fascinate as many people. In cannabis, we send it in an e-mail about, "Here's new products," and people just eat it up like crazy. They just buy it. They just to have it on their shelf at home. I think that the difference is if you went back to prohibition and alcohol and all you've been drinking is moonshine or bootleg whiskey or something and all of a sudden the local store said, "We have a wine from California available," or, "We have a new rum from Jamaica available," you'd be like, "Oh my God, I got to go get it. I got to go get this one. I got go get that one. I got go get this stuff."
Where the customer is in their journey with the product it's so different. I think that's fascinating. I think if you rewind to the medical days where everything was just in prescription bottles or you're buying weed out of a ziplock bag or something, and then you saw some of the first innovations that really hit like the Dosist pen, it was revolutionary. When people saw the Dosist pen come out and that you would use this or held this product and then it'd vibrate tell you what a dose was. That was a game-changer in cannabis. You saw other brands that were trying to mirror some of these high fashion brands or whatever, and seeing just this gorgeous CPG packaging for the first time ever was a game-changer to consumers.
Even in the short period of time since rec legalization, till now, you've seen that change dramatically where people don't necessarily care if you just have some gorgeous packaging. The number of vaporizers with all these interesting ways that you can use the product is plentiful on the shelves. If you're going to be a brand that stands out, you really need to know which customer you're going after and how you address that market. I'd say 60%, 70% of our sales today are flower products despite being in California where we're probably more advanced than a lot of states in the different form factors that we're able to offer. If you want to address the market today, you have to be able to sell really good predominantly flower products to people that consume a lot of cannabis.
If you brand yourself too much for that everyone called it the "Chardonnay mom" and all these meetings way back when-- If you brand too much for that, you're not going to address today's consumer, but if you brand too much for just the cannabis consumer of today and you don't welcome the possible newcomer, then you're never going to get that customer either. You've got this very sort of unusual stage in cannabis where what form factor will be the one that ultimately wins, what form factor will be, how you introduce non-consumers into the category, and what form factor will be the one that aficionados really continued to use and so on and so forth. I think that'll be fascinating and a lot of our experience in how to think about consumption on a per-category basis beer, wine, spirits, mixers, et cetera, et cetera is transferred very well into how we think about that.
Matthew: Alcohol is a unplanned purchase. Maybe that's why there's so many places you can buy it, but here is cannabis on the planned versus unplanned purchase and maybe talk a little bit about alcohol being unplanned and then work how it fits in.
Chris: I think they're very different. Alcohol is an impulse-driven by for sure. That was one of the early hypothesis we had when we started the company. It's proven to be true. I think something like 80% of wine is consumed within hours of being purchased. Even early days when we were raising money, you had some of these venture guys be like, "I don't get it. I have a wine cellar with a hundred bottles of wine why would I use 30-minute alcohol delivery?" I was like, "Okay, well, you are less than a fraction of 1% of the customers out there." To you point, there are so many retail locations where you can buy alcohol that if you are not fast, the person might as well just run out of the store. I maybe even ordered Postmates for dinner or I maybe cooked dinner, whatever it may be. I know that I'm going to have dinner tonight. I don't know if I'm going to feel like having a drink later.
Maybe I have dinner, maybe I'm watching a movie or I'm getting some work done. Then you feel like having a beer or you feel like having a cocktail and you can press a button and have it show up quickly. It has to show up fast otherwise, you're not going to get the repeat purchase. If it shows up closer to an hour, hour and a half, not bad. The person's not complaining. We don't get customers that are like, "That totally sucked," but it wasn't great. It wasn't a phenomenal experience where I'm going to transfer my buying behavior over to it. I think speed is very key in alcohol again, because if you're not fast, I could have just in that hour run out and gotten it myself.
In cannabis, we are not seeing that to be the case. I think people buy cannabis much more like they buy groceries where delivery is about saving you the trip to the store. It's about saving you the trip and the check-in, or the shopping and all that stuff. It's about convenience. We definitely have customers that feel like having a product. They want it right now. That's why we have the Emjay Now offering, which is it's brought to you in 30 to 40 minutes. You can choose from anything that you want. A whole menu, you can have it brought to you in closer to an hour, hour and a half. There was a huge emphasis by some of the delivery companies predominantly eats in the early days of saying, "Fast delivery, fast delivery, fast delivery."
You had other people that were all scheduled, scheduled the next day. I don't think it's either. I don't think every customer needs it fast in this category. I also don't think that you can only operate in a schedule a day or two ahead model. You need to be able to provide both if you want to be a leader in this category. We see customers utilizing both in different purchase occasions. Again, I think that there's a bit more planning. There's a bit more, "I'm going to stock up on products that I like." "I'm going to buy it a little bit more regular cadence." We see that in the retention rates, we see that in the repeat purchase rates, we see that in which category people like to buy from Emjay Now versus the regular order. It definitely is a different type of buying behavior.
Matthew: You mentioned a little bit about this earlier, but a lot of cannabis retailers ran into trouble in cannabis 1.0 as you were saying with the initial costs, the build-out, the capital structure. There was this a firing gun like a sprint, but you took a step back and looked at it and said, "Well, really these are the most important things to do to make a sustainable business." How would you really say you're different in terms of how you went about looking at the metrics that you need to be profitable and sustainable versus these cannabis 1.0 companies that threw money at every problem.
Chris: Some of this is the operators' fault. Some of this can be investors' faults as well where there's just tremendous pressure to go do whatever is seemingly driving growth and to some of these companies that were acquiring licenses. You had businesses that just used all their disposable cash on buying out licenses, getting them attached to leases, and then figuring it out later. When you sit there and you got a whole bunch of locations you're paying super expensive lease rates on all these locations. They got license fees and renewal fees and you don't have any of them built yet or you don't have any parts of your business that are generating real income yet, you can get stuck. In some ways, that was the operators chasing those dreams thinking the cash would be unlimited and plentiful for a while.
In some cases, that can come from the investor pressure of, "You need to get as big as possible. Here's the money go deploy it as quickly as you can." I think that the key difference that we recognized was there's a big opportunity in cannabis where you can own your supply chain and there's a big opportunity where we saw some of these delivery companies that just provide a delivery portal to existing dispensaries and charge them a little fee per month. Some of them have raised big money recently and they're going to go sign up every dispensary in the country. Well, guess what? There's not that many dispensers in the country. Even if you sign up 2,000, 3,000 dispensaries, that's not a lot of people to be collecting fees from unless you're doing big, big revenue for each of them and can increase those fees or get them on annual contracts or multiyear contracts. That you definitely will get some interesting data.
I think on the other model where there were some delivery services, just trying to sit on top of somebody else's license, it put them at odds with all their partners because the brand is making a margin, the distributor's making a margin, that retail or delivery license holder was making a margin. Then if you were going to be a delivery service on top of that, you basically had to squeeze down everybody else's margin to create your own fourth margin and everyone got pissed at you. There was this opportunity to come in own our own licenses, own our own infrastructure, and be able to have a deeper margin capture. Because of that deeper margin capture, we have, I think huge competitive advantages when it comes to customer acquisition, we have huge competitive advantages when it comes to the service that we're able to offer.
If I think about pillars of e-commerce and you look at e-commerce companies that do extremely well, Amazon, obviously being the best. One, they provide a trusted service and they're bringing an offering that you really want. For Amazon, that's where I can get basically anything that I want on this platform. I think Jeff Bezos had this great quote where he goes, "Amazon doesn't make money when we make a sale, we make money when we help somebody make an informed purchase decision." Really what they did with products was help you buy, not just buy, but help you buy and they create a lot of value there. Two, you have to have the trust that it's going to show up and obviously through their infrastructure they've built throughout the country, the faster and faster shipping became a huge advantage for them.
I think very similarly in our space, one, we have more products available than anybody else. We are trying to help people make informed decisions on what products are the right ones for them. Two, we own our delivery infrastructure and our licenses so we're able to control the experience. I think less than 15% of drivers who apply to be on the platform end up making it to be one of our team members. This space is very different than Postmates and Uber and DoorDash and that stuff, where all the drivers by law have to be W2 employees, so we can really focus on training and the experience that they bring to customers. Then the last pillar that I think Amazon got really well, that a lot of other e-commerce platforms don't is price.
When I buy from Amazon, I know that it's either the cheapest or at least a really good deal compared to other places that I may buy. A lot of other e-commerce platforms by the time I get to check out with fees and so on and so forth, you are paying a premium because they are a marketplace sitting on top of other people's infrastructure. I think what's something that is incredibly powerful at Emjay is because we own the licenses and the supply chain and the infrastructure, our price delivered to you is the same, if not cheaper than if you went to a dispensary. We price our products less than the predominant retail train in LA. Our prices are less than the other predominant delivery service in LA and that is the price delivered to you.
If you think about a competitive offering in delivery, whether it's grocery delivery, food delivery, all these other categories, you're almost always paying a premium for the use of that convenience. What we've unlocked at Emjay, which is, I think very similar to what Amazon has unlocked for the greater e-commerce market, is it's the same price as if you went to the store, but it's brought to you and that is an extremely compelling offering for people.
Matthew: That is really compelling. I can see what you're doing there and you really do have to capture that whole vertically integrated system. You got to have the license holder, the infrastructure, the delivery and the W2 employee and then you can offer that and then people start to think like more, maybe even more favorably. They think about the store favorably, but they're really starts to get friendly and familiar with the delivery platform, which it sounds like is what you want. Just to mention again, you said, Emjay now is under an hour and then for a limited menu and then for the total menu, it's an hour, an hour-and-a-half. Is that right?
Chris: Correct. The easiest way to think about it like Amazon Prime versus their regular offering, which is there's a select group of products that are available super-fast if you want it, which is honestly just the top sellers in your area which changes over time or you can choose from anything that you want but it's going to come to you a little bit later, more like an hour-and-a-half.
Matthew: Okay. Do you think that in five or 10 years, we're going to see what you're doing just all over, because maybe Binny's is probably the biggest alcohol retailer I can think of? There's probably a few others, but by and large, it's a lot of mom-and-pop businesses across the US that sell alcohol. Is it going to be these fiefdoms, regionally doing what you're doing with Emjay?
Chris: I think it will fall somewhere in between. Again, if you think about just the costs that go into setting up a cannabis operation, it's not cheap even just from a security perspective, but the way that the regulations are formed, even with some of the social equity programming and trying to give different members of the community, different opportunities in this space, it's expensive, it's heavily taxed. If you want to set-up whether it's a shop or a delivery operation down to security and everything else, it's expensive. It is much less expensive to go open a convenience market or a 7-Eleven or a liquor store and so because of that, I think that in many ways, liquor stores are proliferated because of that. It was a higher margin product than groceries. It was a product that is recession-proof and always in demand.
I remember when we first started working with liquor stores, we'd asked them, "What type of marketing do you do? How do you retain customers?" They looked at me like I was an alien marketing. I just show up at 6:00 AM and open my doors seven days a week and it works. I think in cannabis because you have a very conscientious community now and community being the community groups and neighborhoods and homeowners' associations and all sorts of stuff that all chip into these conversations, you're not going to have the proliferation of dispensaries like you had with liquor stores. There's some people heavily trying to push that. There's some advertising platforms that obviously are trying to push unlimited cannabis licenses because that's more people they can collect revenue from, but I just think it doesn't make sense.
In today's day and age, when you have delivery and delivery can unlock this service and the tax revenue and everything else for entire geographies, you fundamentally need fewer of those retail locations. Dovetailing back into your question of what does that mean? Yes, it's more expensive to set up a cannabis operation than it is alcohol. I think there will be less players. They'll honestly, some of the absolute best stores in Los Angeles are the independent mom-and-pop operators. They care about the product. They know it intimately, they care about their customers and they're not the chains, they're not these public companies there and you can go to them. There's some shops in LA, they're just absolutely fantastic. The staff is fantastic and they do a terrific job. I think on the delivery side, it'll be a little bit harder because honestly, delivery is just brutal.
It is a brutal tough business to run. Knowing and understanding all of the different KPIs and metrics and all the different data points that you have to track in order to make delivery efficient and profitable at scale is an insanely hard job. We joke internally that one of the reasons we started Saucey is because we wanted alcohol delivered to us and in those early days, we were our own careers. We did all the deliveries ourselves and so it was a little backwards. We wanted to be able to order alcohol and we ended up creating a platform where all we did all day long was deliver alcohol to everybody else, but ourselves. Looking at delivery in any category, grocery, food, alcohol, cannabis, a lot of people, big grocers, whoever it is, step into the delivery game.
They start to rack up some big numbers in terms of sales and then they get bigger and bigger and then they turn around and they just can't believe how much money they're losing, because it is very difficult to run an operate. We've even seen some of the big MSLs try delivery, pull back from delivery. It is different than retail. It is different than creating products. It is different than all these other things. It is a very tough game and that's where I think even some of the marketplace plays that just sit on top of all these individual dispensaries, they'll do their own deliveries and so on and so forth. If you just want customers to have a reliable ordering system, you probably need to control more of that infrastructure yourself, similar to the way Amazon does and you may have a bunch of delivery licenses to get issued a bunch of small independent operators that attempt to do it.
Some will make it, some won't just due to the complexities of how hard it is to set up things like route optimization and batching of orders and scheduling and managing labor costs up and down, not weeks in advance, but inside of half-hour increments and all sorts of stuff like that. I think it'll be a hybrid.
Matthew: How do you think about the type of car, truck you have, how making deliveries? Is it just an internal combustion engine, is it hybrid cars? Are you thinking electric cars? How do you think about that? Does it make a big difference on the type of vehicle you have as long as it's somewhat efficient?
Chris: Yes, today most all of the vehicle are our couriers bringing their own cars and then we retrofit them with both a tracker and a locked case. They can go in the vehicle. Obviously it has to be a specific type of vehicle, like it can't be an SUV that's just open access to the trunk. It can't be a Vespa scooter or something like that and there's regulations around what type of vehicles can and cannot be used. We are evaluating and looking into buying some of our own fleets to have a hybrid. People could either bring their own vehicle or drive one of our vehicles. Obviously, in a case where we have our own vehicles, we'll be looking at the most economical or efficient approach, whether that's hybrid or electric cars.
I think we also just for the environment and everything else do have a focus on how we have a small footprint as a company. We're not going to be buying a bunch of diesel pickup trucks As cool as that may be, to do deliveries all over town that obviously wouldn't make sense. Yes, it's something that we're looking into right now as we're looking at purchasing some of our own fleets.
Matthew: Chris, where are you in the capital-raising process?
Chris: I'd say that Emjay raised privately around the capital when it first got started, primarily to start acquiring some of its early licenses. It's one some additional licenses through application processes and it's backed by a terrific group of investors who honestly have deployed a lot of their own money, their own capital into the space for the past couple of years. We haven't disclosed how much money it's raised. I don't know if we intend to or if there's any real benefit to other than it gets you splashy press headlines. I'd say the business is doing very well. We run lean operations that we know how to scale. I would say that the company is in a position today where it does not need to raise capital which is definitely a good position to be in.
As a delivery business, there's been a lot of investors and different groups reaching out, hitting my inbox, and some of our partners' inboxes daily. People recognize I think so how quickly Emjay is growing, how quickly it's taking over L.A. in many ways as a meaningful option for people to be able to purchase. There's interest there but I think for now we have enough on our plate where we're just really focused on executing right now.
Matthew: Chris, I want to go to some personal development questions to help listeners get a better sense of who you are as a person. With that, is there a book that's had a big impact on your life or your way of thinking that you'd like to share?
Chris: Man, if I can I'd say again I'd probably split it in two. I'd say one book that had a major impact on at least how I view and see a lot of things maybe somewhat cliché but is Ayn Rand's Atlas Shrugged. I read it early in high school, I read it again late in high school, I read it multiple times throughout college. I still read it once every few years today. I think as a fundamental way of thinking about humanity and how people approach problems, it's a very interesting book that many people have read. If you haven't I highly recommend it. I think in many ways it predicts a lot of what we're seeing today in the world with people leaving cities and flocking out of crowded areas. I think that was very impactful in my both personal and professional development early on.
I'd say more recently a couple of books that I've read that I really enjoyed that I've recommended to our team to read and they're impactful to different parts of your life. One was What It Takes by Stephen Schwarzman, the founder, and CEO of Blackstone. Incredible life journey from even his early years and to how he [chuckles] got into college, what he did after college. Just always pushing, pushing through to the next level. Fascinating stories in there and setting up obviously one of the most successful firms ever in history. Obviously, how he approaches problems and thinks about the world, I think a fascinating book for anybody who is starting from any point your life humble beginnings or privileged beginnings but are thinking about where you want to go. Unbelievable story.
Extreme Ownership by Jocko Willink and Leif Babin, two former Navy SEALs. Incredible book just about leadership, taking ownership over not only successes but really failures, being willing to go through it when you need to. Unbelievable book for anybody in your company, in your team but particularly your managers and directors and VPs and people like that. Extreme Ownership I think really should instill a lot of characteristics as to how people should be thinking about their people, their team members, and how to uplift people. The last one that I thought was really good that I read earlier this year was Can't Hurt Me by David Goggins. David Goggins, extreme distance athlete as well as former Navy SEAL probably known as "The baddest man on the planet." [chuckles]
Unbelievable life story of overcoming adversity, overcoming every challenge you could think of. Being like a 350-pound-plus guy who I think was working at an exterminator company into being one of the preeminent Navy SEALs out there, completing multiple other military schools and then today he does all the ultra marathons and bad water races. Holds the world record for number of pull-ups in a day. In terms of I think sharpening your mental toughness, fascinating book for either your personal life or professional life.
Matthew: Oh, great, I hadn't heard of that one. Those are some great recommendations there and it does seem like Atlas Shrugs happening in real-time here especially when I see Elon Musk saying, "I'm leaving California." Then he's setting up more operations in Nevada and Texas like, "Hey, the people that are pulling the wagon it's getting too heavy for all the people in the wagon and they're just going to stop creating the things that they are creating for you and just leave if you treat them poorly." It's happening not just in the US but all over the world at once, and it's pretty interesting to see what's going to happen. There might be civilization that move out to sea. Like some venture capitalists are financing where they'll be independent sovereign countries out at sea that will say, "I'm sick of all this regulation and tax and we want to do our own thing and just be free." It's an interesting time and it seems like these trends are accelerating. Any thoughts around that?
Chris: Yes, I would encourage people to read the book. I think it's again an interesting commentary on human nature and how people think, and then obviously that permeates well out into society and in many ways I think has predated a lot of things that are unfolding now. Yes, the societies at sea and things like that, I think that that's a little idealistic.[chuckles] I've seen some of that stuff being backed who knows maybe I'm the fool at the end that's not laughing anymore.
Matthew: Water world. It's [crosstalk] water world, yes.
Matthew: [chuckles] Yes, maybe I'm not on-- Was it Kevin Costner. [chuckles] Who knows. Maybe I'm not on his ship at the end of the day but fascinating book on just a commentary against societies and how people think and interact with one another. You're definitely seeing to your point of a very large exodus from California right now, a very large exodus from Manhattan in New York right now. I was born and raised in Santa Monica, California. I love it here. I absolutely love Los Angeles as a city, the history, the culture, the people. It's tough for me to see some of the decisions that have been made in the state taking the world's fifth-largest economy into a place where we do not have the best schools. We do not have a lot of the best programs and there's really no excuse as to why we shouldn't. It's very very frustrating and heartbreaking but [chuckles] we'll see how the world continues to turn.
Matthew: I think California eventually is going to come back and come back in a big way. It's just there has to be an acknowledgment of what's being done is not working. There's a Stanford professor that says, "California is the United States first third-world area." He said that-- He has like 10 points-- I think I can put this in the show notes, he has 10 points on what makes a third world country. We're an economic disaster country. The first one is; no acknowledgment of what is being done is not working. You could say at the top-level leadership there's no acknowledgment there. There's zero culpability, and until that changes I don't think it'll turn around but when that does change, I think that will be a harbinger of like, "Hey, things still look really bad."
The first step is there, like the keystone, and positive changes are going to come because California's pioneering spirit, the geography of where it is, the weather. How many people would like to return there if it was functioning better is enormous. There's huge demand, it's just not a supply of sensible leadership at the moment so I'll be watching that closely.
Chris: I totally agree. California is one of the leaders obviously of innovation and technology but it's also a leader in entertainment. It's a leader in manufacturing, it's a leader in agriculture in many ways. It's an incredible place with a lot of industries and businesses that could do tremendously well. Yes, I think acknowledgment is a big issue that certain things don't work, they just keep chugging along the same path. If you have not visited San Francisco in the past two or three years, it's in my opinion a very solid example of somewhat of a failed state. You have unbelievable wealth. If you just go out to dinner and, talk to whether you're in the VC communities or whatever, the problems that people are working on are fascinating. The companies that are being built are fascinating, and then you can go outside and you have unreal amounts of poverty that is not being addressed. Obviously, some people like Marc Benioff and some of these others are all trying to personally address that and figure out how they can turn the city around in a big way and huge props, some of the individuals taking that on, but it's brutal.
It is a brutal example of what happens when you don't take the ownership in the first place. I think our leaders could probably do with reading the book, Extreme Ownership Jocko and Leif Babin.
Matthew: I was just going to say that.
Chris: I agree there's definitely a world in which California could be a tremendous place again, and it's heartbreaking to see-- I've three young kids so even when you think about education and stuff like that, it's just tough. If you want to build a family and you're in California, and you just look at school rankings for basics math, science reading, we suck. When you think about wanting to raise children outside of just yourself as an adult, there's a whole list of additional questions that you have to be thinking about. It's tough.
Matthew: I think all the rules are being rewritten now is the good news. I think about where I grew up in Chicago, they spend about average $15,000 per pupil, but very little of that money actually goes to people's education. There's all kinds of-
Chris: Of course.
Matthew: -the structure and bureaucracy and stuff and I just think, "Hey, if a parent could-- and Vaughn, you're paying, a lot of parents are paying a ton of money in property taxes, and they're getting just a terrible option. If you could just get on a card that said education card with a visa logo on there or something, spend it where you want for your kid, I just feel like that choice would unlock just a myriad of options of what's available, but we're caught in this cartel of education, that's now really breaking apart. I think it's going to be scary, but it's going to be great in the medium and long term.
Chris: Agreed.
Matthew: One final question here, Chris, it's a Peter Thiel question. What is one thought you have and that you believe to be true that very few people agree with you on?
Chris: Specific to the industry or about anything?
Matthew: Yes.
Chris: Man, I probably have a few controversial ones.
Matthew: That's what we want, give it to us don't sugarcoat it, we can handle it.
Chris: I would say that I think that most people veer one of two ways throughout their life and it can be impacted by the events that take place, their upbringing, socioeconomic status, what they're told they can and can't do all sorts of things, but I believe, people end up either in some ways, being, the wolves, they're the strong, or they end up being the sheep and they don't believe in themselves. I don't mean that in terms of predator and prey. I don't mean that in terms of violence, I don't mean that in terms of one attacking the other, but I mean that in terms of there are people, and it usually is through life circumstances, it's through events that can take place. It's through your upbringing, or parenting or whatever but there's usually some event or a series of events that can happen to somebody that either turns them into somebody who believes in themselves and they believe that they could make it through anything and because of that, it permeates into all other elements of their life.
Their ability to take responsibility for things, their ability to take ownership over themselves or their body or their mind, and try and push things forward or there's people that for one reason or another, don't get that power and don't believe in themselves. Again, I think that permeates into all sorts of things where they don't take responsibility for themselves, or don't take responsibility for the world around them or their bodies or their minds or anything else. I think that you see those fall very clearly into two buckets as to how people end up living their lives, blaming others for things or taking ownership of things. Maybe it's not that controversial, maybe a lot of people already know that but I've also seen and witnessed firsthand people turn it around for being somewhat sheepish and not feeling empowered to do anything. I think with a little bit of resistance training and direction, anybody can feel empowered to really become an impactful person who takes ownership.
Again, sometimes it takes really hard life events to get there. It can take, going through tough times at work or tough times personally or with family. People respond to those tough times in different ways but they usually fall into one of those buckets and then it starts to permeate into other elements of their life. I think you can identify in people pretty quickly when you meet them.
Matthew: That's great. Empowering too. This is a good place to end Chris. Where can people find out more about Emjay, we've got a lot of listeners in Southern California so let them know how they can connect. Find your retail store, scheduled delivery and all that good stuff.
Chris: Sure, you can check us out heyemjay.com. H-E-Y-E-M-J-A-Y.com shop, browse, see our coverage areas all sorts of things like that. You can see us on social as well on Twitter and some of the other channels, but probably best place for Emjay is heyemjay.com
Matthew: Great, Chris, thanks so much for coming on the show and educating us. You're a really smart guy and I believe great things are coming for you, they're already there. Good luck with everything going on and keep us updated as your story progresses.
Chris: I appreciate the very generous and kind words we got a long ways to go. Thank you so much for having me on today. I really appreciate it and looking forward to the next couple years in this industry for sure it's going to be wild.
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