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If you want to keep up with what’s going on in the eCommerce industry, the best thing to do is to go straight to the source and ask. But where can you find a group of eCommerce business owners openly talking about their pain points, sharing tips about how they grow their businesses, and combining their knowledge to solve problems together? 

Does such a mecca exist? 

Andrew Youderian is here to tell you that it does. Andrew is the founder of eCommerce Fuel, and on this episode of Up Next in Commerce, he discusses how he built a community of more than 1,000 seven-figure eCommerce business owners, plus he shares all of the insights he’s gathered along the way. From questions about Amazon, to a crash course in community-building, to the single metric he says should guide eCommerce businesses today… Andrew divulges some of the industry’s best-kept secrets and more in today’s interview.

Key Takeaways:

  • The Value of Selective Community Building: A community is only as strong as the people in it. Together, a community can deliver ideas, content, and capital to other members who would not be able to find those things on their own. But to ensure that all members are receiving value, it is important to be selective about the acceptance process.
  • Finding Your Way Through The Amazon: “If I’m selling to wholesalers, should I let them sell on Amazon?” “How do I control my brand identity on Amazon?” These questions and more are plaguing the industry and at eCommerce Fuel, the community is gathering to come up with answers, including how to capitalize on the recent delays in shipping Amazon has seen.
  • Meaty Metrics: While most owners will point to revenue as the main metric to judge success, it is widely believed that revenue is one of the least important metrics when judging the health and long-term viability of a business. There are other metrics that are more telling, including repeat purchase rate, and one other that gets very little fanfare but could change the course of your business: price per visitor.

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

Key Quotes:

“If I could only do one thing well in a community it would be to bring the right people into it.”

“Community building is like building a brand. It’s insanely hard to get up and running, the amount of time and energy and love and relational work that you need to put in — building relationships takes a tremendous amount of work. It takes a ton of time but it’s insanely defensible. You can’t steal people’s friends.”

“I think brands are increasingly not going to sell on Amazon because there are huge IP issues and people ripping you off. So, I think there is going to be the hollowing out of eCommerce — Amazon is going to be a big donut and in the middle, and a lot of people are going to be selling directly on their own sites just because it makes more sense.”

“Advertising is doing nothing but getting more expensive. It’s getting harder and harder to get in front of people without paying the big tech gatekeepers. So, the more likely a customer is to come back to you and needing that product the more likely you can actually build a viable long term business.”

“If I would have to identify the one thing that I have done across multiple businesses in my life that has had the biggest impact and taken the least work, hands down it would be pricing. So few people play with it. Some people can’t, a lot of people can. And it’s terrifying to change prices because we all fear that when you change the prices that your business is going to disappear, but that rarely happens especially if you do it in a really smart way.”

“In tech investing you can get away with a lot of sloppiness because you’re swinging for the fences… But with eCommerce, we’re looking to do singles and doubles and it’s hard to find really good businesses that you feel are going to be around for three to five years.”

“I’ve always liked to try to make the copy and confirmation emails and things like that fun and interesting and a little bit different…Transactional receipts are one of the most opened emails across all emails, shipping ones absolutely, and if you’re trying to build a brand, there’s no better point to be able to have some fun and be able to be different and differentiate yourself.”

“There’s going to be more and more tools and services that let you curate your email and really slice down who gets to hear from you and so email is going to get harder and harder. But if you look at just text message delivery versus email it’s an order of magnitude higher engagement, readability, click through, et cetera, and I think that marketers are already starting to do that.”

Mentions:

Bio:

“Andrew Youderian is the founder of eCommerce Fuel, a community of more than 1,000 vetted seven-figure plus store owners. Prior to founding eCommerce Fuel, Youderian worked in the world of finance, which he left in 2008 to start his first online store, which he sold. He also hosts The eCommerceFuel Podcast where he engages with eCommerce thought leaders weekly.”

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

Transcript:

Stephanie:

Welcome back to Up Next in Commerce, this is your host Stephanie Postles and today we’re joined by Andrew Youderian, the founder of eCommerceFuel. Andrew, welcome.

Andrew:

Hey, thanks Stephanie. I appreciate you having me on.

Stephanie:

So, is a weird feeling a podcaster being interviewed by a podcaster? What are your thoughts right now?

Andrew:

I think it’s great. You have to do all the work and I can just sit back and relax. Well, unless you send some really pointed questions my way, so maybe I shouldn’t be relaxed, so we’ll see.

Stephanie:

Oh, yeah. I don’t know.

Andrew:

But, yeah-

Stephanie:

You might have to sit up straight and get ready, this might be intense.

Andrew:

This may be, I need to stop slouching here. But no, it’s good. Good to be on, it’s fun to be on the other side of the mic for a change.

Stephanie:

So, I want to dive into your company eCommerce Fuel. I looked at it and it seems awesome. It seems like you have gathered so many insights from this company that you’ve built all around eCommerce, but I want to hear in your words what is eCommerce Fuel?

Andrew:

At eCommerce Fuel we provide community content and capital to seven figure plus store owners, and so we do that through an online form which is really the heartbeat of our community. We’ve got over 1,000 vetted store owners, and the idea was really just get a lot of people together that are doing this day in and day out, that we’re running seven… our average store owner is probably doing three or four million dollars a year with their business, so that’s community aspect. We also do a big event every year for our community through content, like you said I’m a podcaster. I’ve been doing the eCommerce Fuel podcast for I think it’s about seven years now, which is crazy.

Stephanie:

Wow.

Andrew:

And then we have a capital arm as well where we invest in promising eCommerce businesses. We have 20 investors that have a lot of similar experience or world class experts, everything from Facebook marketing to email marketing to product design and so we invest in companies that we think are interesting, so that’s what we do at eCommerceFuel.

Stephanie:

That’s such a cool model. So, for you podcast I think I saw you had over 300 episodes.

Andrew:

Yeah. I think, actually I think we’re… yes, we do. I’ve been, like I said, been doing it since July 2013. Yeah, been going at it for awhile. It’s been fun.

Stephanie:

Yeah, that was really cool to look at your backlog and the guests that you’ve had on. So, your business models’ really interesting how you have a capital arm and community, I mean two things that I would say are very hot right now. Everyone is always thinking about of course being investors, I mean at least here in Silicon Valley that’s everyone’s dream it seems like. And then building up a community is something that we’ve heard a lot of guests mention on the show, like how to properly build a community. What was your idea behind starting this business and having those different arms of the business?

Andrew:

They came in stages, so in a nutshell, left the corporate world and got my teeth in eCommerce for starting in 2008 on a couple different eCommerce businesses and built those up. So, I had a sense of this space and nobody was talking about eCommerce unless it was like from a Home Depot or like a Lowe’s, like a, you know, Fortune 500 style?

Stephanie:

Mm-hmm (affirmative).

Andrew:

And so I started writing about what it’s like to grow an eCommerce business for a small team or a single founder and developed a little bit of a following on the blog, started podcasting, and then from there that kind of just naturally led to me meeting all these great people and I thought what if we got a bunch of people in a community together that had some kind of vetting thresholds and just made sure everyone had some level of experience? And that launched the community and built that up over time and then the capital arm is fairly recent, really recent in fact, it’s about five or six months old. That just came as a natural extension of seeing all these interesting entrepreneurs that hopefully we’d built some trust and report with, or that people knew about us from the time running the business. And then also just a really great group of investors who also had not just money, but a lot of in the trenches experience and advice to lend, so it kind of came in stages.

Stephanie:

Yeah, that’s really cool. To start with the community aspect, what are the vetting procedures that people have to go through? How do you know who to bring in to keep it a high quality community? Because I think that’s biggest problem when you’re getting in all these Facebook groups or communities, you’re like, “Oh my gosh, just everyone’s in here and I’m actually not learning anything.” So, what does it look like to get into your community?

Andrew:

Yeah, you’re right. I mean, if I could only do one thing well in a community it would be bring the right people into it. So, our guidelines are a little nuanced but you need to be operating a seven figure business. If you have a very proprietary product that you’ve made from scratch or that is a little harder to make sometimes we’ll take people in kind of the mid to high six figure range. If you’re selling just on Amazon usually we require a little bit more than that, so that’s on the revenue threshold sides.

Andrew:

So, we keep it no major SaaS vendors, and then for service providers we’re really careful. I’d probably say only 10% of our applicants that we accept are service providers and they need to be recommended by an existing member because you can… An amazing email marketing expert that knows the space, that is respectful of people and isn’t going to come in at a hard pitch and is going to build relationships the right way through adding value, is a huge asset. But we want to make sure those are the type of people we have and not people who are just trying to sign somebody up on the first day, so.

Stephanie:

Yeah, that’s really important. How many people are in your community now?

Andrew:

We have about 1,100 members in the community.

Stephanie:

Okay. How did you go about building that up? What is your method of bringing new people into the community? How do you get in front of people and even tell them about eCommerceFuel?

Andrew:

Community building’s interesting. You’ve got this chicken and an egg problem, right?

Stephanie:

Mm-hmm (affirmative).

Andrew:

And the way that I did it was when I was blogging and podcasting early on about eCommerce, just over that probably 12 month period really focus on not trying to monetize the business or anything, just trying to build authority, get a little bit of a reputation, and connect with people. Over the course of a year, just naturally, organically, met about 100 to 150 really interesting people. And any time I did, I’d just put a little tag on them in gmail and say, “Community seed member.”

Stephanie:

Oh.

Andrew:

So, a year in a had this list of 150 people and I reached out to them and said, “Here’s what I’m doing. I’m starting a community, are you interested?” And then over the course of about 30 to 45 days I dripped in, I added, about four or five people a day. I’d bring them in, I’d introduce them, I’d introduce them to other people, I’d ask them questions, kickstart discussions, and so it gradually grew. I didn’t just drop everyone in at once, and it took about like 45 days but we had a bit of a community at that point. And then from there I had over the last year built up some traffic to the website, was able to put up a page that said, “Hey, here’s the community. You can join,” and that gave us kind of… because you need both things, right?

Stephanie:

Mm-hmm (affirmative).

Andrew:

Like in community you have to have new people come in because you always have a drop off even in the most healthy. So, from it was able to kind of, with a lot of work, get to self sustaining within probably 18 to 24 months, so.

Stephanie:

Wow. Yeah, that’s great. And it is a paid community?

Andrew:

It is, yes. It’s a paid community, so it’s… yeah, it is. It’s $99 a month.

Stephanie:

That also helps… Okay, yeah. I’m sure that also helps with quality and bringing in people who are serious and really want to learn and contribute to get their monies worth.

Andrew:

Oh, it helps so much. I mean, for a couple reasons why. We have, just like you said, on the vetting side, yeah, it shows that people are actually serious about this. The other nice thing is it gives us the resources to do things like hire a real community manager. We have someone full time that their whole job is just to vet people to make sure that if people have questions that don’t get answered they can move them to the right people. It let’s us invest in technology, we’ve probably poured six figures plus into the custom tech for the community, so yeah, it makes it a lot easier.

Stephanie:

Yeah, that’s really cool. When it comes to keeping the community engaged, because to me that’s one of the biggest things to make sure people keep renewing their membership and they want to check in everyday and see what’s new and see who’s talking, how do you go about keeping them engaged? And maybe what have you seen works and what didn’t work? Like any tests that you’ve done where you’re like, “We’ve tried this and this failed,” or, “We tried this and this really increased engagement a lot and helped keep it going?”

Andrew:

I think the best thing you can do, two things, the first thing is to actually have discussion and content that are highly relevant to what people are doing day in and day out. So, again, kind of going back, if you get the right people in the same room that’s 80-90% of the battle. From that point, setting up custom notifications is really important. So, some of the custom tech that we’ve talked about, when people sign up we don’t just blast them with every single discussion that pops up, that’s crazy, right? They’d just drowned in a fire house because we have like 5,000 comments every months in there. But we do try to figure out like, hey, what are you an expert in and what are interested in learning about? And then when they join we tailor their notifications to try to create the highest level of a signal to noise ratio possible, and so that’s another thing. The third thing is just maintaining a really respectful environment, like we have a pretty strict no jerks rule. I probably shouldn’t say this, but I get a lot of pleasure out of throwing people who are just downright disrespectful and just, you know, kind of just generally unpleasant out of our community because they’re horrible.

Stephanie:

Yeah, good. Boot them.

Andrew:

And also non-solicitation. We kind of have a one strike, one warning, and then if you do it again you’re out. So, we don’t put up with pitches, you know, if people are hard pitching stuff they’re out. So, I think those are the big things that help with maintaining an active community where people keep coming back to.

Stephanie:

Yeah, those are such good points and it’s not only applicable to your business but even thinking about any eCommerce business of how to build up… I mean, everyone talks about building these communities but how do you actually make it helpful and personalize it to people in a way that people want to engage on your social media post or they want to engage on your blog or tag themselves wherever they’re in your clothing or with your mug or whatever. So, I think these lessons actually can apply across industries as well and not just upon building a community like you’re doing.

Andrew:

Yeah. Community building, it’s interesting, it’s kind of like a brand. It is a brand. It’s insanely hard to get up and running, like the amount of time and energy and love and relational just work that you need to put in, I don’t say it in a bad way, but just building relationships takes a tremendous amount of work. It takes a ton of time, just like building a brand. But it’s insanely defensible, I mean, if you’re willing to put in that, you know, if you have a multi year approach. You can’t steal people’s friends, right?

Stephanie:

Yeah.

Andrew:

And that’s what happens, whether you’re building a community for your brand or kind of a micro niche community like this for eCommerceFuel, is people come in and they stay because they get value and they stick around for a couple months but then they come to an event, they connect with people via PM, and then build genuine friends. I don’t know, you’d be hard pressed to tear me away from my good friends and it’s really defensible in that department, so.

Stephanie:

Yeah, I agree. I love that. So, you probably get a lot of really good insights into the world of eCommerce and where things are headed just by some of the questions that some of the members in your community are asking each other, and I wanted to know what kind of top questions do you see occurring right now where it’s like quite a few people are asking the same type of question or these same things keep popping up?

Andrew:

Yeah. Let’s start with the 500 pound gorilla in the eCommerce space, and that’s Amazon. Some of the questions I think people are asking on there is how do I… I’ll just go through a handful of them and then maybe we can talk about ones that are most interesting to you. If I’m selling to wholesalers, should I let them sell on Amazon? How do I control my brand identity on Amazon? There’s some interesting popping up right now about how… I don’t know if you’ve noticed this, but Amazon Prime used to be for awhile it was free shipping, then it was two day, and it was one day, and now it’s like-

Stephanie:

Yeah.

Andrew:

… three to five days if you’re lucky depending on where you live.

Stephanie:

Yeah, I did notice that and I was like, “What’s happening here? Usually I can get my stuff for my son in like a day and now it’s taking a week.”

Andrew:

Yeah. It’s kind of crazy, and of course because of just with COVID eCommerce is blowing up, the capacity is limited on the delivery networks. But it’s interesting because it kind of levels the playing field at this moment in time for independent brands because the shipping factor is not so much of an issue, and in fact a lot of people are probably are almost in… If somebody gives you something and takes it away it’s worse than if they just had never given you anything to begin with, right?

Stephanie:

Yeah. Yeah, yeah I feel way more sad right now than I ever would have before this.

Andrew:

Exactly, right, because the expectation’s there. So, that’s creating an interesting opportunity. One of the things that Amazon just recently came out with I think in the last couple days was re-introducing… Way back, I don’t know, two, three, four, I don’t know how many years ago, multiple years ago, you used to able to ship your products from Amazon’s warehouses to customers. You could use them as a 3PL fulfillment center without Amazon branded boxes. They changed that for many years and just this week I think they changed back to saying, “Oh, actually you can use our fulfillment services with your own proprietary boxes,” or at least with unbranded boxes. And I think potentially… Who knows why they did it, it was kind of perplexing to a lot of people, but perhaps because they realize that they’re losing on the shipping game and other merchants maybe are starting to migrate other places and if independent merchants are able to deliver the same shipping without Amazon maybe more then we’ll move off. And one thing that we’ve done, we’ve done a State of the Merchant Report for the last three years, and our one for this year should be hopefully coming out fairly soon. But a trend that is really noticeable is the number of people that are going to Amazon is really… it’s not reversing but it’s plateauing very significantly.

Andrew:

And even just chatting with merchants and seeing a lot of case studies, people are taking a lot harder look at is it worth going on Amazon for how much channel risk you take on, how much loss of control of the consumer that you give up, you don’t have addresses, all these things. They’re just taking a lot harder look at is this good for my business long term?

Stephanie:

Yeah. So, do you think 2020 will show that a lot of people are pulling back from Amazon?

Andrew:

That is a good question. I think not a lot of people, but I do think when we released the report I made this prediction in the report too, so very likely could just fall on my face in the mud here, but I think the percentage of people who sell on Amazon, it was about 55% of all stores that we surveyed last time, I think that will decrease a small amount. I don’t think we’re going to see a precipitous drop but I think it goes from 55% to maybe 54 or f… I think we start to see that inflection point.

Stephanie:

Yeah, that’s really interesting. The one thing I also read in your 2019 report was about the different marketing channels that people were using and I saw that Amazon ads had the highest ROI but not many people are using it, so I’m wondering what are your thoughts around that aspect of using it as a marketing tool?

Andrew:

Yeah. No, it’s… Wow, good prep work. If you’re on Amazon, Amazon ads you have to have a… people reported them being the most effective sales channel that they use. So, if you’re on the platform they work really well, so definitely should be doing that if you’re on the platform. I think it’s just more of a… it’s not a question so much of should we use Amazon ads if you’re on the platform, you absolutely should. It’s more of a question of do we want to be on Amazon in the first place? But, yeah, for people selling on Amazon they work really well.

Stephanie:

Yeah, okay. But then the other interesting thing I saw was that the average order value was way lower for… because if it’s maybe a direct to consumer site or anywhere else people can maybe stack on additional things from your brand, where I think I saw on Amazon the average order value was much lower which makes me think you’re not getting that, hey, you should maybe also try this from my brand and this from my brand as well and kind of increase the cart value.

Andrew:

I think that could definitely be part of it. I think a big part of it too is that if you have people on Prime there’s no free shipping threshold, right? Have you ever ordered a… what’s a good example here? Like a $3 koozie and it shows up and you’re like, “How did they pay for the shipping for this? They lost money on this.” Or even better, you order a $7 paperweight set that weight like 10 pounds and they ship it. There’s no threshold so it’s easy to impulse buy small stuff on Amazon.

Stephanie:

Yeah. Good point.

Andrew:

Whereas if you’re buying from an independent merchant not always, but more often than not you’re going to have some kind of free shipping threshold. So, either you’re intentionally going to seek it out or you’re buying multiple things so I think that probably also has a big part in why those order values are different.

Stephanie:

That’s a good point. That’s a good reason to look further into data and not just look really quickly like I did through the report. So, what other trends are you thinking are happening either right now, because a lot’s been changing because of COVID and things are kind of just all over the place where some people are struggling, some people aren’t. It seems like the market is changing quickly. What other trends or things happening do you see that people are surfacing in your community, or are you building into your next report coming out?

Andrew:

Yeah. So, eCommerce obviously no surprise here is just exploding, and we did a survey, this was in March when the world was falling apart and nobody knew what was happening and it was much more uncertainty than there even was now, and you saw early on in that you kind of saw a very big dip for the first probably week when COVID really started spiking and being taken seriously. And then you saw kind of half and half, half the businesses were doing okay or growing and half were failing, now I’d say you definitely have some businesses that are really struggling. If you’re in the event space, if you sell items in the event space, any of the kind of in person things are having a hard time, but by large I’d say most of our stores are doing, you know, most of the industries are doing really well so that’s fantastic. One thing that’s tough, it’s a downside, and anybody who’s selling is probably going to be aware of is just the sales tax issue in the Unites States is just an absolute disaster, just on making-

Stephanie:

Tell me a bit about that because whether-

Andrew:

It’s just a dumpster fire.

Stephanie:

I don’t know if I… well, I actually probably have avoided anytime I see tax I’m like, “Oh, no thank you.” So, I would love for you to dive in a bit and tell me why is the sales tax a disaster because [crosstalk 00:18:28].

Andrew:

Yeah, so I’ll try to be somewhat brief because you could probably talk about this for quite awhile, up until two or three years ago pretty much the case was if you… The only places you had to collect sales tax for was if you had Nexus in a state. So, if you had… I run a business out of Montana and Arizona, so Montana doesn’t collect sales tax and so traditionally we’ve only had to collect sales tax in Arizona. There’s a big Supreme Court case that came across in 2017 or 18. It was Wayfair versus South Dakota and pretty much the shakeout from that was that the Supreme Court said that states can require sellers that are outside of their state, they have no physical presence in their state, if they sell to a customer within their state they can collect sales tax on them if they reach a certain threshold. If they sell either a certain dollar volume in that state or if they have a minimum number transactions for that state. And it could be as low as 200 transactions and $50-100,000. So, the problem that causes is that now you have companies who create this economic Nexus and now all of a sudden they have to be responsible for collecting and submitting sales tax not just to 50 states but to potentially sometimes all these different municipalities and cites, and just creates a disaster of a compliance thing.

Andrew:

So, you’ve got companies that have sprung up to try to deal with that, and one top of that, if you sell on Amazon, technically if you have inventory… Normally, you send your inventory into Amazon and they a lot of times will split it up in three or four warehouses so it can be delivered quickly. Well, technically now if you have those inventory in those four states you have Nexus in those states and you have to also collect sales tax. So, it’s just on the Amazon front, on the independent front, it’s just created… We don’t have any central governance for this. What I think would be best is if the federal government kind of took it over and said, “Hey, we’ll create a national sales and redistribute.” But at the moment you either have to deal with an insane amount of complexity, especially as you get larger, or you have to run the risks of being out of compliance and facing huge fines. It’s a really rough place to be.

Stephanie:

Wow. How are you seeing eCommerce companies tackle this? That is not something that I’ve even thought about honestly, and it kind of scares me to ever start an eCommerce store now.

Andrew:

Yeah. There’s a lot of different ways. Sometimes there’s places… I have a company called The Tax Valet that helps out, they do a really good job. Kind of a personal hands on approach to doing this. Some merchants will use SaaS software like Taxify or TaxJar to be able to do that kind of stuff, Avalara as well. And some people just roll the dice and say, “Hey, this is a nightmare I’m not going to try to deal with this,” so there’s a lot of different… it depends on your risk tolerance, it depends how big you are, but people are taking a lot of different approaches to it. But to do it right it’s really unfortunate.

Stephanie:

You’ll have to hire someone.

Andrew:

Yeah, hire someone or really go deep on the SaaS side of things and dive in.

Stephanie:

Yeah, that sounds messy. Well, earlier you were talking about the howling out of eCommerce and I wanted you to talk a bit about that because we’re talking still about the trends and what it’s going to look like in the future, and I thought you had an interesting take on that so I’d love for you to go over that if you could.

Andrew:

Sure. And again, of course totally could be wrong here, but when I look forward into the future I feel like Amazon’s going to be hallowed out in the sense that, or excuse me, eCommerce is going to be hollowed out in the sense that you have… On one side, you have brands on Amazon that sell either one or two things, they’re either well known national brands, like the… well, I don’t think Nike sells on them anymore so that’s a bad example, but the… Why am I blanking on big national brands here? Tide for example could sell on there or Rubbermaid or Adidas, brands people… household names. They sell on there because it’s just they know that brand, they go find it, and they want to buy it. You have people who are selling really small things, like we’re talking about koozies or you needs stapler, or maybe you need a little backyard pool for the fact that your cousins are coming over and you really don’t care if it breaks in three weeks and so you buy that. But then for anything in the middle that’s like kind of not a huge national brand but also something that you want to have that’s quality, I think a lot of those companies are going to start… people are going to buy much more from the companies themself, direct to consumer.

Andrew:

Because they can merchandise them better, the shopping and check out experiences are getting easier. I think brands are increasingly not going to sell on Amazon because there’s, in addition to all the things we talked about, you also have huge IP issues and people ripping you off. So, I think that’s going to be the hallowing out of eCommerce when Amazon’s going to be a big donut and in the middle a lot of people are going to be selling directly on their own sites just because it makes more sense for all the reasons I mentioned, so.

Stephanie:

Yeah, that’s interesting. We’ve also talked a bit about the conscious consumer that’s kind of rising out of all this and how people are starting to care about what is the source of this product, is it actually sustainable? Is it a quality product? And less about can I have more and more focused on quality and sustainability. Have you heard that trend as well in your community?

Andrew:

Yeah, I would say I think that’s something that’s been kind of gradually increasing over the last five to 10 years. I think more than anything how it ties into our conversation is that Amazon over the last couple of years, and they’ve been fighting it and they’ve done some, to their credit, they’ve done some things to combat it, but they still have a… If you buy something on Amazon most people are not going to think it’s… there’s a little bit of a thought that it’s probably not high quality, a little bit of a stigma for buying stuff on Amazon especially if it’s not a name brand. Part of that-

Stephanie:

Even the name brands people wonder if it’s it… is this a legit name brand, I’ve seen that a lot in comment and reviews.

Andrew:

Oh, totally. Partially because of review manipulation, partially because of counterfeiting, and partially because there’s just a lot of… I mean, there’s everything on Amazon so how do you filter through it, right?

Stephanie:

Yeah.

Andrew:

So, yeah, I think that’s part of going back to that [inaudible] about the hallowing out of eCommerce unless it’s a brand you absolutely have faith in or it’s something that you don’t care about the quality. Would you rather buy one of those borderline things from Amazon and roll the dice with an unproven brand, roll the dice with one of those mid-tier brands being counterfeited? Or, especially if you can get it just as quickly either because Amazon is shipping stuff really slowly or because increasingly independent merchants can deliver it more quickly with some of these other options via straight from the horse or straight from the source rather. So, yeah, I think for me that’s how the quality issue ties in I think to the larger discussion.

Stephanie:

Yeah, that makes sense. Do you think that is why the drop shipping model has kind of decreased? I saw on your report that that is not as big of a thing as it used it, and I just remember… maybe even like last year, over the last couple years that was a huge thing. Everyone just said, “Start a eCommerce company and just drop ship things and let other people take care of it for you.” What are you seeing with the drop shipping trend?

Andrew:

Yeah. So, when we talk about drop shipping I think it’s important to differentiate two different things that come into people’s minds. One is drop shipping, you can build a great high quality business based around drop shipping. A couple of businesses I started were drop shipping based businesses, one of them’s still, under a great new owner, is still doing well. Really at the end of the day it’s less about the product quality and more about how it’s delivered. So, like Home Depot for example, they drop ship a ton of their stuff, some of their even big name brands because they’re can’t afford to hold everything in stock and that can potentially work out reasonably well. I think where it got a really bad reputation with all AliExpress side of things and so where-

Stephanie:

Yes, that’s the stuff I read.

Andrew:

Yeah, right. And that’s a whole different ballgame, and for people who, you know, if you’re not familiar with that the 30 second version is you go onto AliExpress which lets you pretty much ship pretty much ship products directly from the factory in China to consumers in the US very cheaply through some kind of loopholes in the postal service. You can set up a store really quickly but by and large the products are garbage. They’re just crappy, so that I think is where… There was a big rise in that, people ran that for a while, tried to run with that, but the problems were you couldn’t build a brand around it because the products were awful, and because it took weeks to get your product to your customer, and probably because most likely if you’re launching one of those businesses you know nothing about the product, so.

Stephanie:

Yeah. Never seen it, you don’t even know if it’ll make it or not.

Andrew:

Yeah. But even on the other side I’d say, that all aside, even if you’re selling really good quality products, Amazon in the last five years has completely solved distribution. When I started for awhile I sold trolley motors, I sold CB radios, and back in those days you really could get a business up and running purely by sourcing a relationship with a wholesaler, doing a decent amount of marketing, having reasonable customer service and you were in business. But like today if you know what you want to buy, you know the brand, and you want it at a fair price, at a reasonable quickly you’re probably going to go to Amazon for something you discreetly know that you want. So, Amazon’s solved, at least before COVID and probably still I’d say a large degree, they solved distribution. So, how do you add value? You got to add value through some other way, usually that’s through a lot of education or a really curated product line if you’re going to sell existing products and those can be harder to get right. So, I don’t think drop shipping is completely dead but I think it’s gotten significantly harder versus even just two or three years ago.

Stephanie:

Yeah, that makes sense. So, one question I always try to ask on here is about metrics and data, and with access to your community I want to know what kind of metrics do people talk about as their success metrics or what do you hear people debating about when it comes to metrics behind if a business is doing well or not?

Andrew:

Yeah, I think the one everyone loves to talk about is revenue, right? But I think that’s probably a pretty horrible metric to use. It’s easy, and we’re totally guilty of it, that’s one of our thresholds for even membership. So, guilty as charged, I’m going to slay myself along with everyone that I slay here. We use it because it’s easy, we use it because it’s socially acceptable. It’s way easier to say, “I do three million in revenue versus I made $600,000 last year. It’s also way easier to say, “I did three million revenue,” than, “Oh, I only made $20,000 last year and that was I didn’t pay myself anything,” right?

Stephanie:

Yeah.

Andrew:

But metrics that I think are most important, one that… To be totally frank, in the community we don’t talk a ton about… a lot of our conversations really don’t revolve around what metrics should you track. Bottom line is a big one, of course. Conversion rate’s a big one, average order size is a big one. Repeat purchase rate is a big one. And I’d say we don’t have tons of conversations about them, but I think probably the most important ones to think about today are repeat purchase rates because advertising is doing nothing but getting more expensive. It’s getting harder and harder to get in front of people without paying the big tech gatekeepers. So, the more likely a customer is to come back to you and needing that product the more likely you can actually build a viable long term business, that’s a big one. I think profitability per visitor is a huge metric. It’s harder to calculate but if I was going to run my business on one metric it would be profit per visitor to my website. And the reason I say that is because it encapsulates a lot of things, conversion rate, traffic, all these different things.

Andrew:

But it really makes you focus on pricing. If I would have to identify the one thing that I have done across multiple businesses in my life that has had the biggest impact and taken the least work, hands down it would be pricing. And so few people play with it. Some people can’t, a lot of people can. And it’s terrifying to change prices because we all fear that when you change the prices that your business is going to disappear, but that rarely happens especially if you do it in a really smart way. And what you should be maximizing is your profitability per visitor, at least for new customers at a minimum. So, yeah, those are some of my thoughts on metrics, and again we don’t… total frank, we don’t talk a ton about… those aren’t the hot topics but I think those are some of the things to really think about.

Stephanie:

Yeah. So, now you’ve opened up, what are some of the hot topics? What are some of the heated debates that are going on behind the wall?

Andrew:

That’s a good question. You know what, let me pull it up.

Stephanie:

Yeah, open it up. Let’s see.

Andrew:

I’m going to pull it up here.

Stephanie:

Sounds good.

Andrew:

So, we have a cool little feature. Let’s just surface all the top discussions from the last year. So, I can’t… for confidentiality I got to be sensitive, but here’s some of our top stories from the last let’s say month. The story about how someone sold their brand, their business that they built over the years and just the emotional rollercoaster and what they learned, and how they were looking to hire multiple… How to use influencers on YouTube to build an eight figure business.

Stephanie:

Oh, that’s a good one.

Stephanie:

Yeah, the influencer one is interesting to me because it kind of brings about the question of the social shopping experience and how the US is so based… right now, I mean, a lot of people are looking towards influencers. Whereas other markets, like China, are not really as much about that. It’s more about the social shopping experience. What were your thoughts, or what was the debate when it came to the YouTube influencers and how they utilize that, and do you think that’s a longterm trend?

Andrew:

Yeah. I think one of the big themes I’ve seen is that the really big influencers a lot of times are spendy and hard to track, but you could potentially get a better ROI if you focus on helping maybe working with smaller influencers either for less money or just for product. Because it’s, I don’t know, I don’t know about you but when I’m on Instagram and I see someone using a product, and especially if they even mention it in any little way I’m immediately a little suspicious. I’m like, “Is this person really like this product or are they just getting it comped and they’re having to fulfill their end of the agreement that they signed up for?”

Stephanie:

Yeah, especially the more popular they are, like as it goes up to the really popular famous people then I’m like, okay, do you actually use that whitening strip? How much are you getting paid for that?

Andrew:

Yeah, and so I don’t think influencer market is going away. I mean, we’ve had famous people endorsing things for decades, maybe 100+ years, especially in the United States, but I do think, yeah, I just think you can also waste a lot of money on it if you’re not doing it carefully.

Stephanie:

Yeah, I completely agree. So, on your podcast I’m thinking, this is like self serveant, so I’ll go with it, but what are some of the best questions that you’ve asked your guests before where you continued to get the best answers or the best stories?

Andrew:

Oh, good question. One of my… A couple ones, I would say what’s the biggest mistake, or what’s… excuse me, what’s the last thing you apologized for I think is an interesting one.

Stephanie:

That’s a good one.

Andrew:

I think another one is what’s your number? Like, what’s your number to be happy, like if you had X in the bank and what’s your number where you’d be happy without having anymore? It’s interesting to get a sense. You get numbers from all over the place from a million to 100 million, sometimes bigger, so.

Stephanie:

Oh, gosh.

Andrew:

Yeah. A lot of the questions are very specific to the individual person and their story, but for two general ones I’d say I like those ones and get some really interesting ones those times.

Stephanie:

Yeah, that would be really interesting. A good kind of peak into who that person is or how they think too. I like that.

Andrew:

Yeah.

Stephanie:

So, I know we haven’t gotten to talk about the capital arm of your business yet and I wanted to kind of go into what that was like starting it up and what kind of issues you were encountering when starting a capital arm? What does that look like and I want a little behind scenes for the new side of your business.

Andrew:

Sure. Well, thank you. I appreciate it. Yeah, and I’ll say in total transparency, like I said, very early into this. We’re only about four or five months into this, so still pretty new. But you asked, and specifically were you hoping to know kind of some of the hard parts about starting that?

Stephanie:

Yeah, like what was the… not the thought process, because that seems pretty obvious like you have this great community and you maybe see some of the challenges that are going on, but what was it like starting a investment arm and what kind of challenges have you run into so far in the first four months?

Andrew:

Yeah. So, what it was like, it was terrifying. And I think-

Stephanie:

Sounds like it.

Andrew:

Yeah, traditionally you kind of have these two approaches where either you go out and raise a bunch of money and then you get all these commitments and you close on it and then you have to go out and put this money to work. It’s kind of your life for the next often 10 years, and it’s a traditional fund route. The other route is what’s called syndicate where you pretty much do deals on a deal by deal basis, which gives you a lot more flexibility but the problem is every time you get a deal you got to go pass the hat and call a million and half the people are out, you know, of those half a quarter of them decide at the last minute that… like the funding process is a nightmare on that side. So, putting it together I kind of did something of a hybrid of those two where we have a group of about 20 investors that are tentatively in. I know them, they trust me, I trust them, and there’s kind of a… they signed an informal thing that says, “Hey, I’m in for the next three years for this amount of money.” So, hopefully it gives us the flexibility of not have to go out and deploy money just to deploy money, but we can also can be a little flexible, and we can also have the commitment from some people to go forward.

Andrew:

So, that’s totally on the technical fund side, probably super boring to most people. But in terms of some of the challenges, I think that the challenging thing is just the number of deals you have to look at to try to find a good deal. I mean, I looked at over 100 deals so far at some level of depth and it’s just finding, A, just good companies, B, where it’s a good fit for both parties, and C, where you can see it working out well for everyone. It’s really hard to find good deals, especially as a minority partner that comes in to invest, especially on the eCommerce side because our approach and what we’re trying to do is buy, invest, in the long run with companies to build profitable businesses, like we’re not trying to flip them. And I think in tech investing you can get away with a lot of sloppiness because you’re kind of swinging for the fences. So, if you have a bunch that don’t work out it’s a big deal, most of them don’t work out.

Stephanie:

They don’t.

Andrew:

But with eCommerce, our model… we’re looking to do singles and doubles and it’s just hard to find really good businesses that you feel are going to be around for three to five years. So, the hardest part for us has just been finding great businesses that we feel check all our boxes, so.

Stephanie:

Yeah, that makes sense. Is there a common theme behind what these businesses are needing capital for?

Andrew:

Yeah, I would say… So, financing for eCommerce businesses is tricky. There are some options out there, there’s things like Shopify Capital, there’s ClearBank, there’s PayPal Capital, Amazon Lending, all these things, but they’re expensive. They also take a… often times you don’t pay them back on a fixed rate, you pay them back on a percentage of revenue which can be good and bad. So, inventory financing is a big one but I’d say the people that we talk to it was probably half and half. Half of them want money for inventory financing to grow the business and half of them just really would love to have someone who has spent $15 million on Facebook ads in their career to be able to help them and give them some high level guidance on what to do and some thoughts there, or someone who’s done a lot of importing to be able to tap into that knowledge based in that network, so.

Stephanie:

Yeah, I agree. When were thinking about fundraising back in the day I was like, “I actually don’t really care about people’s money as much as are they going to help me?” Like, I really don’t want the most famous investor because I highly doubt they will spend any time with me. I want the person who’s ready to get their hands dirty and help me with the nitty gritty stuff that I’m looking for help with.

Andrew:

Oh, totally. Yeah, there has never been… There’s so much money sloshing around right now, right? And so there’s a lot of places that get money, which is good if you’re raising money, but it’s greed. I think the real value ad is the experience side and the money is just kind of a nice perk that comes along with it often.

Stephanie:

Yeah. Yeah, I completely agree. So, you’ve been looking at a lot of businesses and you have a lot of businesses in your community, what is one thing that you wish online sellers would either start or stop doing?

Andrew:

Start or stop doing…

Stephanie:

I like to throw out the hard balls.

Andrew:

Yeah, no this is good. I would say I wish people would start having more fun with the copy in their business. So, one thing I always… and I didn’t, I can’t claim-

Stephanie:

That’s a good one.

Andrew:

I can’t claim credit for this one, but I’ve always liked to try to make the copy and confirmation emails and things like that fun and interesting and a little bit different as opposed to like, “Thank you for your order. Your order is 49732. We appreciate your business.” Such a great… Transactional receipts are one of the most opened emails across all emails, shipping ones absolutely, and if you’re trying to build a brand there’s no better point to be able to, you know, have some fun and be able to be different and differentiate yourself, right? So, I think that’s a big one. You can extend that to the product packaging, your website, all that stuff. But I would say take a little more risks and have a little bit more fun. I would check out a site called mancrates.com, have you heard of them?

Stephanie:

No, tell me a bit about them.

Andrew:

They’re so good. They’re so good. They sell fun gifts for men, so for example, instead of ordering your dad a tie you can order him a 16 inch by 16 inch wooden crate of beef jerky and steak rub that he has to open with a crow bar when it shows up to his house, Like stuff like this that’s different.

Stephanie:

Oh my gosh.

Andrew:

And the copy is freaking just hilarious. So, check them out if-

Stephanie:

Oh, that’s good. I’ll have to check that out.

Andrew:

Yeah, they’re really good. It’s just you’re buying an experience for the recipient and people pay up for it, so.

Stephanie:

Yeah, now more than ever with people not going out as much, not going in stores and stuff, you do have to figure out how to differentiate yourself. And I think that’s a good point that, I mean, right now I’m even thinking I bought something and I’m getting the actual logistics email of DHL or whatever will be shipped at this time, and it’s all this other text that I don’t care about, so it’s like, “Okay, I actually don’t care about this email that’s coming through.” And if they would’ve made it unique and fun and exciting… like I don’t even know what this is that I bought, that’s how bad it is. There’s no branding or anything, it’s just coming apparently.

Andrew:

Yeah, if they were like, “The DHL guy had a wreck but your package was so important that he grabbed it from the fiery box and he crawled with one arm bleeding out and he handed it to the last person he saw and said, ‘Deliver this, please. Deliver it to Stephanie,’ and then he died.”

Stephanie:

Oh my gosh.

Andrew:

That might be intense and maybe it doesn’t work for all brands, but it sure as heck gets your attention and you’re like, “Whoa, this is interesting.”

Stephanie:

You need to write for our brand. I’m going to bring you on our team, Andrew, just for your copy. I need that. Oh man, that’s good. All right. So, I want to do a higher level eCommerce question because I just think you’re, one, you’re willing to take a risk and you’re willing to predict the future which I like. I appreciate that. So, I want to hear either what disruption is coming to eCommerce that’s not already here, because a lot of people have said, “Oh, COVID’s the biggest disruption.” That answer’s already been taken, so either the biggest disruption or you can tell me what the future of online commerce looks like in five years.

Andrew:

Biggest disruption coming, I’ll try to tackle both of them. Biggest disruption is I think that… man, it’s just coming from the guy. You talk about be willing to predict the future, I made a bet with somebody when Amazon was $200 a share that Alibaba was gonna out pace it. And now that Amazon is $3,000 a share, it was a humbling experience and it cost me a very experience steak dinner. That being said, here’s my prediction…

Stephanie:

That’s all right. I want your prediction still.

Andrew:

I would say the biggest disrupter, oh man… I’m going to throw a couple things out there, I think text is going to be a big one, SMS. But that’s not like a big disrupter as much as just a new marketing channel that us marketers can leverage for awhile until we completely destroy texting for everybody which will probably take three or four years.

Stephanie:

That’s a good one though. What are thinking around using that as new marketing channel?

Andrew:

Oh, I just think, I mean, if you look at the… I think email is just getting harder and harder unless you really want to hear somebody’s email. So, I just signed up for the service HEY, are you familiar with that from Basecamp?

Stephanie:

I’ve heard about it and I seen a bunch of drama on Twitter about it, so.

Andrew:

Yeah. There has been… probably between them and the App store and all that kind of stuff?

Stephanie:

Yes, yes.

Andrew:

Yeah. So, one of the reasons I signed up for them is because they have this thing where you can screen your emails now, and the first time you get an email from a new sender you can say, “Hey, I want this person to pop in my inbox, or no, Johnny, from Michigan I don’t care about your boat covers. Don’t ever talk to me again. It’s unsolicited.” So, that kind of thing, I think email is going to be… there’s going to be more and more tools and services that let you curate your email and really slice down who gets to hear from you and so email is going to get harder and harder. But if you look a just text message delivery versus email it’s an order of magnitude higher engagement, readability, click through, et cetera, and I think that marketers are already, I mean, they’re already starting to do that. People that I know that are on the leading edge have five, I haven’t six figures, but definitely seen some good mid tier five figure SMS lists and they just do really well. So, the problem is you got to be really careful because when people text me about things that I’m not interested in… like texting for me is very personal. I text my wife, my family, my good friends.

Andrew:

I don’t text with Bobby’s Boat Shop in Michigan, and if he sends me a promotion via text I’m going to be pissed off. So, you got to be really careful about how you use that but I think that will be a big marketing channel going for, so. Not really sure if that’s really a disrupter and it’s already kind of here in some regards but I’ll throw that one out there.

Stephanie:

Yeah, I like that. I think that’s a good one though to think about how to be careful when you start using these new channels, because completely agree. I’ve had I think someone just texted me this morning who’s like, “I’m the education blah, blah, blah person of your district.” I’m like, “What are you texting me right now? Don’t.”

Andrew:

Oh, totally. You can really… and I think there’s some pretty stiff penalties for not being careful about that in terms of if you just spam people via text, which is good. But yeah, nothing’s worse than getting a text from someone you really don’t want to hear about, so.

Stephanie:

Yeah, I agree. All right. So, next we have a lightning round, if you’re ready, Andrew. It’s where I’m going to ask you a question and you have a minute or less to answer.

Andrew:

Perfect. For each question?

Stephanie:

Yeah.

Andrew:

Awesome. Is there like a booing sound if I go over so I stop talking?

Stephanie:

No, it’ll just be me, “Boo! Boo!” in the background.

Andrew:

Do it, do it.

Stephanie:

All right. What’s up next on your Netflix queue?

Andrew:

I don’t really… Oh, actually I do have… what is it? They’re in Arizona, there’s a place called Biosphere 2 where they locked all these people into this kind of self contained environment as a training mission to go to Mars, and they isolated them from earth atmospherically for two years, and surprise surprise it was a huge trauma fest. Can’t remember the name of the movie but that’s what I’m watching next on Netflix.

Stephanie:

Oh my gosh, that sounds insane.

Andrew:

Spaceship Earth is the name of the documentary.

Stephanie:

Spaceship Earth, okay. I will have to check that out. Very interested in that, and I also pontificate about Mars sometimes on our other show Mission Daily, so it’s perfect for me.

Andrew:

Oh, perfect. Watch it tonight.

Stephanie:

All right. Where are you going next for your travel destination when you can travel?

Andrew:

Probably down Tucson, Arizona where… I’m up in Montana right now, but probably Tucson, Arizona which is where we live, so.

Stephanie:

Cool.

Andrew:

That’s kind of a cop out. I need a better one.

Stephanie:

Wait, you live in Montana and you live in Tucson?

Andrew:

We’re up here, we spend some time in the summertime up in Montana just to see family, friends, like that.

Stephanie:

Oh, cool.

Andrew:

Yeah, so we’re heading back there soon. Don’t have any plans at the moment but the next big trip I would like to take would be to Mongolia.

Stephanie:

Oh, that would be very interesting. Do you have an Instagram? I’ll have to follow along when you go there.

Andrew:

@capalisthippie, so.

Stephanie:

Okay, I’ll follow you. If you were to create a Netflix original, what would it be about?

Andrew:

Oh, this is easy. It would be… I’m fascinated with the question of where is the balance between running a business and being ambitious and chasing entrepreneurial success and having a great life and traveling and seeing your family and nurturing other side of yourself, and I feel like so few people get that right. So, my documentary would be pick 12 entrepreneurs from varying levels of that spectrum, live with them and follow them for two months each and try to come to some conclusions about if you were going to try to design your life to be able to maximize both of those, where’s the line?

Stephanie:

Yeah. That’s a really good one. I need help with that right now.

Andrew:

I think a lot of us do.

Stephanie:

Yeah. What podcast guest are you trying to get on that you just can’t get, like they’re just not responding and you really want them?

Andrew:

Oh, that’s a good one. I think awhile we were trying to get Tim Ferriss on the show, which is super cliché. It didn’t work out.

Stephanie:

Ouch.

Andrew:

Yeah, I know. I’m still upset about that, Tim.

What is the favorite piece of tech that makes you more efficient?

Andrew:

Good question. I would say text expander is a big one so you can do saved replies and bump those out. Yeah, I’d say that’s probably one of my favorite. Asana is another great one. I love Asana for we manage all our SOP’s and long term projects there, so I’d say those two.

Stephanie:

Yeah, completely agree. I like them. All right, the last one, what new eCommerce tool are you hearing about that a lot of people in your community or outside of it are having success with right now?

Andrew:

I would say there’s a tool called Bonjoro, and it’s not necessarily just for eCommerce, but it allows you to send custom welcome videos to people really easily. If you think about sending a video to a customer it’s probably not the filming that’s the hard part, it’s probably like the okay, I have to film it and then I have to send it, and then I have to edit and export, and it just lets you cue up these emails, send videos to people for kind of nicer customer service touch. So, yeah we use that for onboarding for a lot of our members and I’ve heard people have good luck with that, so.

Stephanie:

That’s cool. Well, Andrew, this has been such a fun interview. Where can people learn more about you and eCommerceFuel?

Andrew:

Yeah, if you like podcasts, which at the end of listening to me talk for 45 minutes you prob are-

Stephanie:

Do you want more?

Andrew:

… a glutton for punishment, yeah. I would love to have you as a podcast listener on the eCommerceFuel podcast, so you can get that anywhere you get podcasts, iTunes or elsewhere. But yeah the big home is just eCommerceFuel.com, so you can learn about the community there if you’re a store owner and want to get plugged in or if you have an interesting business that are looking for either money or probably more importantly some expertise from a group of really experienced eCommerce investors. Yeah, I would love to have a discussion with you. So, eCommerceFuel.com is the best place for all that stuff.

Stephanie:

Well, it’s been a blast, Andrew. Thanks so much and we will see you next time.

Andrew:

Yeah, this has been fun. Thanks for having me on.

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Episode 31