Baubles + Soles
Baubles + Soles is a shoe company from Huntington Beach, CA, run by a husband and wife pair of entrepreneurs that wants to keep up with kids as their tastes and outfits change. To that end, they've created a line of shoes that can be styled for every outfit. This is done through the use of little "baubles" that can be twisted on and locked into place to change the appearance of the shoes.
The idea was originally inspired by the entrepreneurs' own eldest daughter who loved a pair of shoes with a heart design on it but who also knew she would outgrow them. She expressed a desire to be able to take the heart and put it on her next pair of shoes. Now, with Baubles + Soles, she could do that, transferring the "bauble" from their old pair to a new pair that is the right size for her growing feet.
Baubles + Soles shoes has a line of twenty different baubles to attach to their line of shoes. All of their shoes are also machine washable, slip resistant, recyclable, and made in the United States.
A starting shoe package retails for $49.95 and costs just $11 per package to manufacture. They wholesale this package for $25. A package of additional "baubles" ranges from between $12.95 to $16.95. In the last year, Baubles + Soles has made $150,000 in sales, 80% of which has been wholesale. They project to earn $300,000 by the end of their current year and book $170,000 in profits.
Given their strong sales projects and profits, they state that they have brought Baubles + Soles into the tank in an effort to find a strategic partner to help bring the company into the United States.
Making A Deal
Daymond is the first to comment and says that he sees a massive inventory challenge ahead for the company. Claiming that "inventory has killed more people than the plague", he exits the deal much to the dismay of the entrepreneurs who claim that they only need to order 300 inventory items per product mold which allows them to do small orders.
Robert doesn't like the fact that they've only made $30,000 in sales direct to consumer through their website and drops out. The entrepreneurs respond by saying that they have been trying to follow the "build a bear" model.
Mark appears to like the idea but says he doesn't see an obvious difference between it and other similar products and that they clearly have yet to figure out how to market it. And, for those reasons, he is also out.
For once, Kevin says he actually likes the $1,000,000 value the entrepreneurs have put on their company. The entrepreneurs respond that they've priced it as they have because they are there to make a deal. But, unfortunately, Kevin also says that he's learned a lot about shoes since being on Shark Tank and does not want to be in the business despite their "awesome" presentation.
The entrepreneurs, perhaps in an attempt to save a deal pitch that is quickly heading downhill, mention that they have a 46% customer return rate and mention that the product is also easily demonstrable. Which is not coincidental given that Lori Greiner is the last shark listening to the pitch.
Unfortunately, Lori says that she's being forced to weigh her heart against what she feels is a good investment and that she believes Baubles + Soles is in for a tough journey ahead. The entrepreneurs note that, because their product is domestically manufactured, they can turn around inventory in just thirty days while holding on to very little. But this isn't enough and Lori, too, exits the deal.
Unlike a lot of other deals where the entrepreneurs are essentially shown the door, Baubles + Soles are allowed to ask what they can do to "de-risk" the deal for the sharks. They're there for a deal, after all. They ask whether paying back the money in $100,000 sums each year for two years might not interest anyone. Robert likes the idea but just doesn't think he'd see the return because of the current size of the business.
But it lures Daymond back in, who makes them an offer of $150,000 at 25% because he now believes that they won't fail. In fact, he mentions that it was their thirty-day inventory turn around time and small minimums that proved to be the tipping point for him as well as the work ethic he felt from them.
In asking for 25% instead of the original 15% equity on offer, Daymond effectively bit $400,000 from the value of Baubles + Soles but, perhaps with his backing, they might be able to make up for it.