In the rapidly evolving landscape of digital commerce, scaling a business often requires walking a tightrope between expanding into new product categories and protecting the core identity that built the company’s success in the first place. For direct-to-consumer and e-commerce merchants generating mid-to-high-tier annual revenues, figuring out how to introduce new offerings without confusing existing loyal customers or straining internal team resources is a persistent challenge.
Recently, e-commerce veteran and agency founder Rok Hladnik sat down for an in-depth conversation to discuss these exact growth dilemmas. Hladnik, who transitioned from running his own online stores to founding the Slovenia-based marketing agency Flat Circle, shared his insights on navigating product expansion, the shifting role of artificial intelligence in advertising, and the strategic considerations required when launching a secondary brand.
Navigating the Shifts in Digital Advertising and AI
Operating out of Slovenia—notably the home country of NBA star Luka Dončić—Hladnik launched Flat Circle in 2019 after years of hands-on experience running e-commerce storefronts. Today, his agency works primarily with six- to eight-figure brands looking to push past their current plateaus and reach the next level of market penetration.
During the conversation, Hladnik addressed the profound changes artificial intelligence is introducing to the agency and advertising ecosystem. Major ad platforms, such as Meta, are increasingly working to streamline operations by eliminating traditional media buyers. According to Hladnik, these tech platforms ultimately prefer a direct relationship with brand owners and advertisers, effectively squeezing out intermediaries.
This dynamic is compounding a broader industry trend: finding healthy profit margins through paid advertising is becoming increasingly difficult for merchants. Because AI-driven algorithms quickly learn which ad creatives and messaging perform best and automatically apply those insights across the board, ad campaigns are becoming homogenized.
This technological leveling effect shifts the ultimate competitive advantage back to where it arguably belongs: developing superior products that consumers genuinely want to buy. However, Hladnik pointed out that brands still sit on vast troves of proprietary customer data that can be leveraged effectively. By combining customer data with AI tools, merchants can analyze buying patterns, identify distinct consumer cohorts, track repeat buyers, and make more informed decisions that ultimately drive higher profitability.
For merchants who are cautious about adopting new technologies, the learning curve can feel daunting. Eric Bandholz, founder of the men’s grooming brand Beardbrand, admitted to being a relative technology laggard in certain respects, noting that manufacturing tangible physical goods requires significant financial capital and carries very real risks if a business gets the strategy wrong. Hladnik cautioned that AI systems are heavily dependent on their inputs, meaning that feeding the wrong data into these tools can easily lead to catastrophic strategic mistakes.
The Expansion Dilemma: Extending Product Lines Versus Protecting Brand Sanctity
The risks of rolling out new products to new audiences are well-documented in the e-commerce community. Bandholz pointed to Sean Frank of the minimalist wallet company Ridge as a prime example. While Frank recognizes that the wallet market has a finite ceiling and that rolling out new products is necessary to sustain growth, doing so always carries the inherent risk of diluting a brand’s core sanctity and confusing its customer base.
On the other hand, legacy success stories demonstrate the immense upside of successful expansion. Yeti, for instance, famously built its reputation on high-end coolers before expanding into insulated tumblers, a product category that eventually grew to become their top revenue driver. The central question for modern merchants is how to accurately identify a complementary product that naturally appeals to an existing customer base without alienating them.
Drawing on his past agency experience working directly with brands like Ridge, Hladnik outlined two primary strategic pathways for expansion. The first approach is rooted in direct customer feedback. Merchants must actively listen to their audience to understand their daily pain points and purchasing behaviors, and then simply ask them what new solutions or products the brand can create to help them.
The second, more radical approach is to build an entirely separate brand. Hladnik argued that there is inherent value in taking hard-earned operational learnings and applying them to a brand-new corporate entity.
Launching a New Brand Without Fracturing Team Focus
While the entrepreneurial spirit often embraces the excitement of launching multiple new ventures, business owners must constantly weigh ambition against operational bandwidth. Bandholz highlighted a common internal conflict faced by many founders: the fear that dividing attention will distract their team from the primary "moneymaker" brand that is currently keeping the business afloat.
Addressing this concern, Hladnik explained that a secondary brand does not necessarily need to be the company’s top financial performer right out of the gate. Even if it functions as a fourth or fifth category or a secondary line of revenue, it can still be a viable moneymaker as long as the foundational systems and creative engines are already in place.
However, Hladnik emphasized the importance of performing a realistic assessment of the Total Addressable Market—determining how much revenue the new brand could theoretically generate—and avoiding the trap of over-investing too quickly. Because founders naturally tend to get excited about new market possibilities, it is easy to assume that the success of a first brand can simply be copied and pasted onto a new venture, including existing ads, landing pages, offers, and production teams. In reality, Hladnik noted, execution is rarely that straightforward.
Evaluating Green and Red Flags in Product Development
When evaluating whether a new product or expansion strategy holds long-term promise, merchants must watch carefully for critical operational indicators. Hladnik pointed out that positive green flags are primarily driven by genuine consumer demand and early customer validation. If initial buyers respond enthusiastically to a product, founders should focus heavily on fulfilling that market need rather than getting bogged down immediately in complex unit economics, which can be optimized later down the line.
Conversely, significant red flags appear when established brands attempt to cut corners by manufacturing cheaper, lower-quality goods to pad margins. Hladnik warned that this strategy is rarely sustainable over a multi-year horizon, as modern consumers quickly notice drops in product quality and interpret it as a negative signal regarding the brand’s integrity.
Merchants must carefully evaluate their core brand values, considering what they stand for and how they are positioned within the broader marketplace. For direct-to-consumer brands specifically, Hladnik advised seeking out manufacturing partners capable of delivering equal or superior quality at a competitive price point. While enterprise-level manufacturers can often prove inefficient for smaller merchants—frequently forcing them to purchase oversized production minimums that significantly increase financial risk—smaller factories offering reduced production lots can present viable alternatives. These partnerships can help lower unit costs without sacrificing the underlying quality of the physical goods.
For those looking to connect with Rok Hladnik or learn more about his agency’s marketing and e-commerce advisory services, he can be found through Flat Circle’s official website, as well as on major professional and social networks including X and LinkedIn.
