Behind the Sheets: Operational Considerations Behind Linen Choices in STRs

Alex Husner  0:36  
Welcome to Alex & Annie, the relevant of vacation rentals. I'm Alex and I'm Annie, and we are joined by Deepak Mehrotra, who is the CEO and founder of California design. Den., it's so good to see you.

Deepak Mehrotra  0:49  
Same here. Thank you guys. I'm excited to be here. Appreciate it. Yeah, so we're

Annie Holcombe  0:53  
excited to learn a little bit about what you have going on, but what we like to start out with for our listeners is to kind of get your background, maybe in business, and what ultimately was your aha moment that led you to create California design den, sure.

Deepak Mehrotra  1:07  
So I've been in the linen space, if I want to use that word, manufacturing linens for top retailers in the US and Canada, actually, for last 20 years. So that has been my background. And you know, being located in California, just off the Silicon Valley, where every other person works in technology, the E commerce portion, you know, always was kind of just right there within our reach, but we never did anything about it. And sometime in 2016 we said, you know, lot of consumers are buying stuff online. You know, things are improving, things are changing, and we should be with all the learnings and understanding we have about the consumer preference, about bed linens, good quality cotton sheets. Why don't we sell online? Why don't we sell directly to consumers? And in 2017 is when we launched California design den. No one told us that, hey, online, if you're creating a brand, don't have a tongue twister. Such a long name called California design den, we did that, and we started to, you know, sell some of our best sellers online. We went on marketplaces such as Amazon. You can say the timing was right, the stars were aligned, or whatever reason it could be. But, you know, we grew very rapidly, and we're very proud that if you look at the cotton betting as a subset, not just any bedding, but especially cotton. Then California design, then is the leader in that space. We have the largest market share on platforms like Amazon, you know, with products like a 400 thread count, having almost 90,000 reviews, 4.5 star, which, which is a very consistent ranking and quality indicator, and we have been able to consistently grow our business focused on cotton sheets, cotton duvet covers, just cotton linens. Right? Natural, sustainable. Great price, great value. That's the the everyday aha moment we have, we are fortunate that many of the top editorials, whether it's the Good Housekeeping every year, we some of our sheets win the Good Housekeeping award or other, you know, marquee publications like architectures digest and what have you call out our sheets for the tremendous quality, and let's just say, insane value. What and how do we do it? Because we own our own manufacturing. So my family, which is my with my younger brother, based out of India, we own a facility in India that makes these sheets. I mean, that's what we have been doing for 20 years, and now, having a direct to consumer brand, we are able to connect the dots of owning the complete supply chain. Cotton owns own. Cotton is grown on small family farms. It's procured. Top quality sheets are made, and we are selling direct thereby passing the savings to the consumer. Couple of years back, we started to notice a trend in our reviews that some people are giving reviews that they are very excited about our sheets, because they buy 50 sets every three months. And we were like, wait a second, what's going on here? Why are people trading? You know, we are not crypto. Why are people trading in our sheets? We realized this, this beautiful niche of short term rental. It's a great niche, because short term rentals need a luxury product, but a luxury product which can be washed institutionally and priced institutionally. And somehow we were luckily in that space of having products that perfectly fit the bill. And over last two years. When we have focused in the in the short term rental space, we have seen tremendous growth for our customers, the product uptake, how some of our top sellers are now a staple for many of the many of the STR owners, whether they have 20, you know, 20 properties, up to, you know, 800 property you know customers, so that that's pretty much, you know how we are seeing ourselves as a as a disrupter, if I want to use that word for the linen space in the in the short term rental industry.

Alex Husner  5:38  
So when you say you sell direct to consumer, you mean that you're if I'm a vacation rental company here in Myrtle Beach, and I've got, you know, 100 properties, I come directly to you to buy those linens. Absolutely.

Deepak Mehrotra  5:50  
So when, when we say direct to consumer, that's how our business is currently built. So we have served over 8 million unique customers in the US, wow. So that's, that's, that's a lot of you know, two and a half percent of US population should have our sheets. Has our sheets. Wow.

Annie Holcombe  6:10  
So how do we know if we have them? Does it have your name?

Deepak Mehrotra  6:14  
Yeah, exactly in fact. In fact, I have had customers come to me, you know, right to our help desk, you know, saying, you know, we saw this in the short term rental where we were sleeping, and we loved it, right. So now to answer your question, direct to consumers. So yes, you can buy our sheets if you go, you know, on Amazon, Target, Walmart, anywhere, right? We are available across the board. However, because of the STR focus now that we have, for last two years, we have developed a special VIP program that's just for this industry. So we are not talking about, you know, any other industry in hospitality. We are talking about short term rentals here. So what we do is, it's a free VIP signup. We just check that you are a short term rental professional, you know, whether you have, you know, your own properties, or your manager or whatever, just because we don't want people to be buying in, you know, reselling our product, because the VIPs then get a substantially low price every day, 24/7, lower than our own Amazon prices. I have to say it softly before someone on a before someone on a yacht listens to it and and you are getting everything you would to make life simple, which is a free shipping two to four days deliveries across the lower 48 we also shipped to Alaska and Hawaii. But, you know, there's a little bit of charge for shipping. You get case packs. And these case packs are small configs, case packs of six or eight, you know. So they're very easy to buy, because we heard from the owners that look, they don't have a lot of store of storage. They don't want to be buying case packs of 24 those case packs are almost 65 off retail, 65% off retail. So that's an amazing value that is passed on. You have access to a phone call to a live person to help you through an order answer questions or anything you want and to move to the digital world, apart from having a simple website where you just use your email to log in, you get a passcode in your email box within two seconds, so you don't have to remember any passwords when you log in, you see your low prices as you don't have to Put any codes or jump through the hoops or anything. You don't need any minimums. You can buy one set. You can buy 1000 sets. So this way, it makes your life simple. And now we recently launched our dedicated app for the industry. So this app is on your app store, or if you use Android on the Android store, it's called California design den. You download it, you sign up with your email. It has your account history. You can store all your shipping addresses. So if you have 20 properties and you want to, you know, ship to property a or property B, or whatever, it has your history. So you now, you know you're buying, for example, 403rd country, you know, queen size, whatever. You just one click, two click, and literally in like 20 seconds, you're out of there. You're ordered

Annie Holcombe  9:28  
to clarify. So all you do is linens, right? So you're not, you're not competing with like a Minoan or a host GPO that's doing all the things. You're just strictly doing linen. So are you supply? Are you supplying linens to any of these groups, or this is only okay,

Deepak Mehrotra  9:45  
sure, so we are partnered with with some of the some of like Minoan VR. We have partnered with them as well, because, you know, many customers they are. They want to buy lot of things in one. Basket, and we get that. So we want to make sure that they have access to our product, so they can definitely buy us on, you know, Minoan as well, right? And, you know, should they choose to buy directly from us? VIP program? It's literally 30 Seconds to sign up, you download, then you can download the app, or you can buy on the website, or you can call our biz dev person, and, you know, get an order done whatever way. It's easy. What you will have access to is the lowest price you will get from us across all channels, because we do have lot of customers who come and say, we buy you on XYZ marketplace. I mean, we all know that big a right? So it was also a challenge for us to ensure that we are giving you a price that is better than that. That's why the price is behind a firewall of a login, right? So one thing you got to be you know, to your listeners, as soon as you sign up for a VIP. I mean, don't get confused when you go to the website and look at our retail price, right? Because then you can start comparing with, you know, the big A or other marketplace and say, well, they are $2 cheaper or $5 cheaper or $10 cheaper. Hold on. Log into the VIP. The moment you log into the VIP, your prices change, and that's when you can compare whatever. And you know you're getting, you don't have to wait for a deal, right? On Amazon, other marketplaces, you have to wait for a deal. Oh, you know I'm going to buy when they are on a deal. You don't have to do that. You're getting 24/7, low prices.

Alex Husner  11:36  
And I think you guys are giving us a special offer for our listeners too.

Deepak Mehrotra  11:40  
Absolutely, absolutely. I mean, we appreciate, you know, you you giving us time, and you know, to present what we do. So we have an additional 10% off. There is a code which is, of course, on your website, and using that code when, when the customers are using that, course, they'll get that additional 10 off. But I must remind that please sign up for VIP, because that's critical. It doesn't cost you anything,

Unknown Speaker  12:05  
yeah, then

Deepak Mehrotra  12:06  
you log in, and then you, then you, you know, choose whatever you want to choose. Then when you put the code, you get additional turnout.

Annie Holcombe  12:13  
So that sounds like a good deal. This is the best time of, I think the January, February is like when all the companies have their white sale, right? Like, this is the best time to buy linens for, yes, fresh spring, spring cleaning when you redo all your units. So good

Deepak Mehrotra  12:27  
timing, absolutely, absolutely. I mean, I mean, we are getting tons of calls and emails and orders, of course, because, you know, now is the time people are taking stock of what they have, what they don't have. You know, we also are very quick in sending samples. So if you don't know about California designed in, I mean, the chances are if you have bought cotton sheets and you are in the STR industry, if you have bought cotton sheets and never paid attention to them, chances are very high that few of them are already caught California designed in. I mean, chances are very, very high, because, you know, when you go on, let's say Amazon, and you type cotton sheets. I mean, you'll see us. Last seven years, we have been the number one seller for cotton sheets. So the and, you know, it's a great price, right? You can buy a 400 thread count Queen sheet set for, you know, less than 50 bucks, right? I mean, sure, when you are a VIP you'll get it for 40 odd bucks.

Speaker 3  13:25  
Yeah, shopping after this, yeah, I know, right. I know I need new sheets too. Yeah, no,

Alex Husner  13:33  
that's, that's great. And, you know, one conversation that comes up has always come up in the industry a lot, is just, I mean, companies that, if they a lot of companies, they rent their linens, and some, they go into a transition where they start buying linens for a portion of the inventory, and then their goal is to get enough for the entire inventory. It's a, for sure, a good investment to do that. I mean, it's going to make the business more profitable, and you have much more control over the quality when you actually do own the linens. But it is a, it's a, you know, financial undertaking, and then not only getting the linens, but who's going to wash the linens? And that also comes up quite a bit at conferences, too, of starting your own, you know, have getting the machines and having your own actual linen room there where you're washing, and a lot of companies end up doing well with it, and then they decide, okay, I'm going to actually sell this service to other rental companies in the area, because I did invest in getting these big machines. But do you ever have the operators ever come to you when they're at that point that they've decided, Okay, I'm going to make this investment and and buy my own linens, and now I'm going to go with you. Like, do you guys ever get involved in those conversations?

Deepak Mehrotra  14:43  
Yes, yes, absolutely. In fact, some of our big customers are operators like these, who are having, in fact, on the east coast, on your coast, where they are, they started exactly as you said. They set up those machines to wash their, you know, their own linens in a. Centralized place. Then they had the capacity. So then they started to, you know, do that service for other short term rentals in their zip code, or, you know, nearby zip codes and and they came to us and they buy our sheets, because one thing unique about our offering is also the following, okay, so if you step back to look at. You know, first we had hotels and motels, right? There was no STR there was no no short term rentals, right? And then the short term rentals started to come into existence. Right now, when short term rental came into existence, and if we just talk about getting linens, what do they do? A they either go to, you know, Macy's or Costco, right? I mean, that's how we all started, right? And then they started to figure out, you know, when they got bigger, they went to the institutional suppliers, you know, other, you know, much larger players in the industry, right? There are institutional however, there is a gap. The gap is the following, the institutional product line was either suited for very high end, Ritz Carlton or Hilton's right, who were then buying directly, or was suited for motel sevens, Motel Six, right? So, you know this whole thing about blends and microfiber cheap, because it can be industrial wash, you know, somewhere, because, you know, when I attend the shows now, I get this question a lot right, and I think it's very important for the listeners to understand that when you are buying quality cotton linens like our 400 thread count or our 600 thread count, which you know, which people Love, they can be beaten down, washed in hot water, whatever they've gone through the test of time. So one should ensure that they are buying, whether California designed and or others, good cotton sheets. Because you know, if you're spending few $100 a night on a house, on a vacation rental, you expect to sleep well at night, and those eight hours, you need good sheets, good cotton sheets that are breathable. I mean, last couple of years, I saw it on Amazon, the microfiber trend. I mean, microfiber, it's plastic. It's, I mean, we use, we all use microfiber to wipe our sunglasses, our eyeglasses, because, guess why? Because it sticks to dust. That's the characteristic of that fabric. Just to save five bucks, buying that product, I don't think is the right thing for for the guests. It's not. It's a disservice, whether you buy California or not, so therefore, you know, having cotton sheets that can take home laundry, of course, and take industrial laundry that I think is important. In fact. You know, one of the other things that at least I learned initially in the industry was there was insurance available for linens. But now, as I hear, more often than not, insurance is not available for linens, right? I mean, what do you guys hear about this?

Annie Holcombe  18:10  
Yeah, there is somebody that does it. And I'm trying to remember we talked to somebody

Alex Husner  18:15  
we talked to thankfully, when he was with,

Annie Holcombe  18:18  
safely, safely. Yeah, they have a program

Alex Husner  18:21  
something, yeah, but

Deepak Mehrotra  18:23  
more and more, you know, insurances are being withdrawn or taken away. Yeah, it's an interesting right? And we are trying to tackle that as well. Now we are not an insurance company, however, we do have a pilot program in place, and people who are interested, can contact our biz dev team, where we will have a program set out for replacements for our own sheets. So if you're buying our sheets, you know, just for a very, very meagerly amount, maybe the shipping and handling amount, you get x number of replacements every year. Oh, wow, that's

Unknown Speaker  19:01  
really cool. That's good, yeah, so that pilot is on right now.

Alex Husner  19:04  
Manufacturer issue, like if they tear, or something like that, I'm sure

Deepak Mehrotra  19:09  
for any reason, wow, look, number one problem. Let's face it, number one problem is people staying right.

Alex Husner  19:18  
Manufacturer user error,

Deepak Mehrotra  19:22  
any reason, for any reason, but you will get X number of replacements in a year, not like every month, right? Yeah. So you get, you get, let's say, 2x two replacements in a year. Okay? And you're just paying for shipping and handling, right? And, and there is a, there is $1 or two fee for that every month. You know, we have figured the maths out. That's why it's in pilot right now. And when you total the math as an owner, it equals to what you would have paid us anyways, through the VIP program, right? No, it's not that you are, you are ending up paying. Know, wait a second, you're almost charging me double the price.

Alex Husner  20:03  
No, yeah, we'll be back in just a minute. But first a word from our premier brand sponsor.

Speaker 4  20:08  
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Alex Husner  23:03  
One of the things that hosts and property managers deal with the most is, if you're trying to go back through Airbnb to recover damage, if there's, you know, the linens are damaged, it's, you know, it's a it's a pain to do that process. And because of that, a lot of companies have started offering or selling damage waivers, or including a damage waiver to protect that. But, you know, depending on the damage waiver, companies still have to file claims. And to me, it seems like this is just the easy way of like, all right, they're ruined. Let's get a replacement, you know, if it's

Deepak Mehrotra  23:33  
and, you know, maybe that damage replacement, or whatever the host has to do, is way smaller. So it's, it's non burdensome, burdensome on the guest as well, right? If the guests are just paying 1020, bucks and all right, okay, you know, the kid damaged it. It's all right. You know, we just trying to be the disruptor in the industry because we feel that we have the whereabouts. Because we are not a fly by night operator. We are not a trading company, and nothing against it. We are the manufacturer. We have made sheets for, you know, large retail names. Some remain in business, and some are gone, Linden things, Bed Bath and Beyond, and our Ross, TJ, Maxx, you name it, we have made sheets for all of them, tons of sheets. So we know what it takes to make the sheet. We know what it takes to make the right sheet and the right price. And now, because you're buying directly from us, you know we can pass on the savings. And that's simple as that. I mean, if you if you just Google our name, California design then and Wall Street Journal, they had an article, I think, last year, last year, last year, and they named us as the most value price sheet in a cotton sheet in America. In fact, the problem the editor had, or whoever reviewed it in that article, was, it's too good to be true. It is right too.

Annie Holcombe  25:00  
Cool, yeah, so I wanted to ask you, just kind of because it's top of mind, I think for a lot of people and managers are starting to see this impact them, especially as they go into the new season. Is tariffs, and so a lot of your I would imagine you have you, you import everything, but you have warehouses, so you have a stock. At what point? At what point do you think, or have you already allotted for what the tariffs on imports will like, increase the cost. Are you absorbing it like? How are you

Deepak Mehrotra  25:31  
so fortunately? Look, I mean, you're right. End of the day, US companies have to pay the tariff. I mean, no, no other country pays for it. We are the company here. We import the product, therefore we pay the target. Fortunately for us, a because the prices were anyways, that low being direct, right? Two, we have had this tariff issue for now. What? Totally seven, eight months, if you start it started last spring, right? So slowly and steadily, there has been a slight increase in price and a slight absorption of of tariffs. So we have been able to, let's just say, manage it. Well, I'm not going to sit here and say, Oh, we have not increased any set. It's not possible. How is it that possible? Right? We are all in the business of making some money, so we have to just make sure that whatever we do doesn't hurt the customer. So in our case, the end consumer, as well as the short term rental owners and managers. So if you still look at our pricing, they are insanely, insanely good. That's why I said, you know, 40 odd dollars you get a queen Sheet Set, 400 thread count. So, yeah, so I, you know, I hope that answers the question. And yes, we do have, you know, we usually have, like, four to five months of inventory on hand because of our, yeah, because, because, because our business on for consumers. You know, end consumer, the direct to consumer business on all these marketplaces. And our website is fairly large, as I said, we are the largest cotton sheet direct to consumer brand on on Amazon and some of these marketplaces, so we just have to have tons of inventory on hand. So you know, that's the other thing. Owning the factory, family owned and operated, having a large direct to consumer business ensures that the the short term rental customer that we have gets a quality that is consistent availability of inventory and the great prices. So you have that the combination of three. And because we ship, you know, 1000s and 1000s of orders a day, that's why we are able to ship you, you know, whatever you buy as short term rental owner in two to four days, right? In two to four days, you have delivered in your house at the doorstep, free.

Annie Holcombe  28:09  
Now, what do you do? You have a, do you have a program for a property manager? And I would say, I'll just use, I'll use the Casa go as an example. So they just, you know, they're, taking on vicasa inventory, and they're moving all over the place and say they wanted to upgrade linens across the portfolio, but they don't know, like, you know, they can do like, the large groups first, but it might be unit here, unit there. Do you have a program at which somebody can say, I just need to be able to order, like, ad hoc, like, you know, one house full of linens, and maybe next week, it could be 20 houses full of linens. Do you have a program like that?

Deepak Mehrotra  28:45  
Yeah, yeah. So the VIP covers both ways, so there is no minimums, right? So you know, as you just said, they just want to probably order for a few homes, and that's fine. Just place the order. They'll have a delivery in that two to four days at the doorstep. Now let's say you have 200 properties and you want to discuss, hey, you know, I really want to change everything. What can we do about it? You know, dada, we have our biz dev available on a call. We discuss that. We put a program in place. We ensure that you get the supplies you need right and the support you need in terms of backup. So we have some customers where we have even done co branded linens, so where in your care label you have your you know, short term rental by California designed, end. So we have done those as well. Now, of course, those would require us slightly longer lead times, because the manufacturing needs to be done right, and we need to bring in specially for you. And then, you know, the backup is also available. So both the programs, whether it is you know, these one, two homes, five homes. Or it is the larger industry as well. We do have that.

Alex Husner  30:06  
Okay, well, and I'm curious, back when, you know, getting into the short term rental industry, what's something that's, I'm sure there's been a lot of surprises, but like, what's one of the things that surprised you most about this new arena that you do business in?

Deepak Mehrotra  30:19  
I think what surprised me, what I didn't realize this, this frequency of purchase that is required due to just sheets getting destroyed, you know, it's not because they are not durable, right? It's because of these stains and all that. And that's why we worked hard to launch the pilot program I was just talking about, you know, on in terms of, you know, getting replacements so and the other thing was actually price sensitivity, you know, all said and done with the current environment. I mean, I was actually surprised how much margin pressure, you know, the short term owners and managers, how much, how much pressure do they, they have? You know, if you just look from an outside, you may say, oh, you know, they're charging $400 a night, or $300 a night, or that's a lot of money, right? They must be fresh in cash. But that's not the case, exactly. Yeah. And now you put this one in two, one and one together, which is, look, the margins are pressure. But you also need a good product that the guest enjoys, and you get good reviews, and it is also durable, so that it can last, right? So you put all the three, three of this, and now we need to come up with a solution, for right? So that's so we were surprised how what seemed like a simple thing was not a simple thing. And we are glad that we have been able to, you know, find some solutions to it. Yeah, and yeah,

Alex Husner  31:56  
that's, that's a basically could encapsulate our whole industry, that what seems like a simple thing, but once you get into it, never, not at all. I mean, if there's any any industry that knows how to make things complicated, it's the short term rental space, for sure. But you know, we're excited to have you on the show today and to continue working with you guys this year. And I think we've got some cool opportunities to bring you together, along with maybe some operators that we again, that back to that conversation of, should I buy my own linen? Should I wash them like or should I keep, you know, having this outsource? Should I lease? I think it's a good conversation that people want to know more about best practices and how people have done it. Our good friends, Lance and Elaine Stitcher, seaside vacations in Maryland, right?

Annie Holcombe  32:43  
Maryland area? Yeah. They're Maryland and the coast of Virginia. Yeah, yeah, Maryland.

Alex Husner  32:47  
Coast of Virginia. They, they embarked on their own linens and made Service Division A few years ago. And I know Lance talks to people all the time and said it was the best decision they could have ever made. But it's, it's not the sexiest thing to talk about, but at the end of the day, when the when the revenue and your margins are much better, you know, that's, that's, that's sexy.

Deepak Mehrotra  33:10  
So we work with them, right? We work with them. And yes, you're right, yeah, yeah. And it's not, it's not the sexiest thing to talk between the sheets, but, but, yeah, I mean, end of the day, the fact is, you know, we need to be coming up with solutions, not just product, but complete solutions that works for all the parties, right? And that's why, you know, having a having good product, having free delivery and great prices and no nonsense. Price also, right? Because, you know, all the managers and owners, they're busy. I mean, the last thing we want them is to break their head to figure out, Is this the best price, and what is the size I bought? And so that's why the app, I mean, that app that we have designed just for this industry, is a great place. Is a great try. You know, people should try it. As I was saying earlier. They can quickly sign up for the VIP and get a sample. You know, test the product. It's right. We'll quickly ship your sample. You test it. And if you're interested in being part of the pilot that we currently have for the replacement. Then, you know, please talk to us, email us, VIP at California design den.com, and, you know, we will talk, and we'll make you part of that. And, you know, and the reason why it's actually more of a pilot currently is we want to make sure that we have a solution that works for everybody. We don't want to mass, you know, launch something that is half baked, and end of the day, we are going to learn from from the people who are part of this pilot, and ensure that we fine tune the program, because we may think it's a great program, but end of the day, you know, customer is the king, right? So there. When we launch it to everybody, we open it to everyone. It's a great program. It solves a huge problem, because I don't think the stains are going anywhere, and I don't see lot of insurance companies offering a solution to this either.

Annie Holcombe  35:16  
So yeah, well, very cool. I think, I think again, timing is perfect. A lot of people are getting ready to do their linen orders for the season to get started. So anybody out there listening definitely reach out and get a sample. That's, I think the fact that you offer that is really good. Because I think a lot of times people don't get to see the quality, and they've had to just hope that it's good. So I think that as good. And we'll obviously share the code for people to get the discount, you know, to

Deepak Mehrotra  35:47  
Alex and Annie turn off, you know, I think that's the additional, by the way, that's additional, yeah. And just remember, yeah, sign into that VIP to see your prices. Don't just go to the website and, you know, you you'll see consumer prices. You won't see your special prices. Awesome, great.

Alex Husner  36:04  
Well, this is enlightening, and it's interesting to meet you know, the makers behind the product, yeah, and you guys obviously have a have a great product, and it sounds like affordable and workable and makes lives easier. So we're excited to support you this year and again, yeah, make sure to go in the show notes to get the offer code and link to get in touch with you guys. But in the meantime, if anybody wants to get in touch with Annie and I, you can go to Alex and Annie podcast.com and until next time, thanks for tuning in, everybody. You

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