002: Andrew Youderian On How To Make 7 Figures With A Dropshipped Online Store

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Andrew Youderian

In this episode, I’m really excited to have Andrew Youderian on the show. For all of you who aren’t familiar with Andrew, he runs the popular site EcommerceFuel.com where he writes about his experiences running his dropshipped online store RightChannelRadios.com

Andrew is a great guy and today he takes us back in time to when he first started his dropshipped online store selling CB radios online. Learn how he got started and how he grew his store to over 7 figures in sales.

What You Will Learn

  • How Andrew got started with his dropshipped CB radio store.
  • Why passion for your product doesn’t matter
  • What Andrew looks for in a great niche
  • Why Andrew chose dropshipping as opposed to carrying inventory
  • How much Andrew invested in his business starting out
  • Learn the pros and cons of dropshipping
  • How Andrew’s link building strategy has changed over the years
  • How Andrew got sales for his store early on
  • How Amazon is changing ecommerce and what Andrew is doing about it
  • When to sell on Amazon and when to avoid them
  • Andrew’s advice for new entrepreneurs

Mentioned In The Podcast

Online Services Andrew Recommends

Favorite Books

Transcript

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Steve: You are listening to the mywifequitherjob podcast episode number two, but before we begin, I just wanted to give a quick thank you shout out to my buddy Jeff Rose who blogs at Goodfinancialcents.com and Dollarsandroses.com. Now Jeff was actually one of the people who inspired me to start this podcast, and for that I am very thankful. Now on to the show

Welcome to the mywifequitherjob podcast. We will teach you how to create a business that suites your lifestyle, so you can spend more time with your family and focus on doing the things that you love. Here is your host, Steve Chou!

Welcome to the mywifequitherjob podcast. Today I am honored to have Andrew Youderian with me on the podcast. Now Andrew is actually someone who I came across randomly one day on the internet and at the time he had just started his blog EcomerceFuel.com and I was just so impressed with his content that I actually decided to reach out and say hi to him directly. And I’m so glad that I did because since then he has become a well known figure in the world of small business ecommerce. He runs two drop shipped online stores at RightChannelRadios.com and TrollingMotors.net. Actually he just sold one of those recently and it was actually very interesting how he did that. You should go on his blog and check that out, but he also runs an ecommerce forum that is heavily populated with successful ecommerce entrepreneurs as well. Andrew is a great guy, extremely intelligent and I’m happy to call him a friend. Welcome to the show Andrew, how are you doing today?

Andrew: I’m good Steve, thanks for the kind intro; it’s looking forward to talking.

Steve: Yeah, so you know for all those who aren’t familiar with all the different sites that you run, can you give us a quick background story and tell us mainly I guess focusing on your baby which is RightChannelRadios.com.

Andrew: Sure, so just in terms of what I do, or do you want the back story as well?

Steve: Yeah, let’s start with the back story and then you know transition to you know what you’ve done and what you actually sell on that site.

Andrew: Sure, so I guess my story is I got a, I got out of college went to do a job in finance for a couple of years and learned a lot, met some great people but it was just– you know it was not what I envisioned myself doing for the next 10 or 20 years especially given the work life balance that was there or not there rather I guess. So I just ended up saving up much of my money and doing my best to and quit so I had a little bit of time to explore my options and well do the much different things and finally settled on ecommerce as a business model that you know could scale really well, was location independent, that is at least in terms of how I got started with drop shipping, didn’t require tremendous amounts of capital and just carried this research and stumbled up across the radio niche, the CB radio niche as something potentially that might work out.

And so I spent, I guess that was in 2008 I spent the next two or three years really just building up that site, bootstrapping that site, and after a year was, you know helped me make right about a full time income and I guess two or three years then started TrollingMotors.net with the same kind of idea, drop shipping site wanted to just get a little more experience to versify my income and a couple of years after that I started EcommerceFuel which you mentioned, which I do a lot of the stuff that you do Steve. When I was getting ready to start, you know you were one of the few people that was really producing really interesting, compelling ecommerce content and I wanted to do something along the same lines and so that’s kind of where I am now right on the RightChannelRadios, sold trollingMotors.net recently and then also like you mentioned just have the EcommerceFuel forum for existing store owners and ecommerce professionals.

Steve: Okay, great. Yes thanks for the kind words by the way. I was just curious so if you know, if you can take us back to when you first started thinking about selling CB radios, how did you kind of come up with the idea, how did you research that niche and decide that you want to go in to it.

Andrew: You know it’s really tough because that was 2008 and so here we are in 2014 and I’ve learned it’s harder for the last six years as you do is you know diving and getting your hands dirty and sometimes you wonder how much you project back on to your past self and how much is actually you know you thought about in a moment. But the high level process I took was really for me building a profitable business was most important and I didn’t necessarily need to be selling something that I was deeply passionate about. I liked the business process and so I really took a top down analysis type of approach and just looked for– some of the things I was looking for, I was looking for a decent amount of keyword traffic enough to be able to support a business but not so enormous that there was going to be a lot of huge stores really specializing in that niche. That was one thing I looked for; I looked for an area where I could add value.

Steve: Okay

Andrew: So some kind of product where there was really a lot of confusion, a lot of potential pre-purchase anxiety about, wow shoot if I’m going to buy this, this is going to work with my application. The radios I sell go in to a whole you know myriad of a different number of vehicles and there is different installation options and so there is room to add a lot of value there, look to something where very decent suppliers I could work with and so I looked at just a number of criteria, looked for something that wasn’t available locally. There is just you know probably a checklist of maybe 10 different things that I had and then I just went out and start brainstorming everything, you know every idea under the sun.

I probably had all a list of 50 or 60 totally reign on my ideas, everything you can imagine, a lot of ridiculous stuff were there too and then I just started going through and after I had that initial kind of free form brainstorming session, just went through and started evaluating those ideas that are high level against my criteria and when I got down to two or three or four I really did a deep dive in terms of looking at competitors, looking at you know trying to get an idea of margins, you know trying to get a sense for the market place and then ultimately ended you know picking CB radios to move forward with.

Steve: So was CB radios something that you actually knew a whole lot about because you mentioned you wanted to pick a niche where you could add a lot of value to?

Andrew: I knew nothing, I had never used one.

Steve: Wow! That’s amazing.

Andrew: And I think for the first year that I was in business, I don’t even think I saw a CB, no I wasn’t sure, I ordered one to install on my vehicle so I could get a sense for how to install and get some kind of tactile and a physical and personal sense for the product, but 95% of the products I saw that first year I had never even seen in person.

Steve: Wow, okay so you really took a business approach in deciding what you wanted to sell so, is that something that you recommend in general versus going after something that you are passionate about?

Andrew: Yeah, it’s a really good question and I think it depends on you as a person at least the entrepreneur in question. Whether or not, you know how you build if you love business for the sake of business and you love hassle for the sake of hassle, I think you can go out and sell just about anything, it doesn’t matter if it is something you are interested in. But if you don’t really necessarily having a need, desire and love of business in and out of itself, I think that’s going to be a lot harder. It’s a lot harder to sell something that you have no interest in and I think at that point, if you do want to build a successful business, you do need to be selling and offering something that you are passionate about because you are going to have that passion come from one of those two places and if it doesn’t come from one of those two either love of business or love of the product, you are going to be in trouble. And so that’s kind of, I think that’s kind of an internal discussion that people have to have with themselves and be really honest about.

Steve: Yeah I agree because coming from our story so handkerchiefs and I’m certainly not into handkerchiefs but I am very into the business and running the day to– you know running and planning the marketing strategy and that sort of things so I can kind of see where you are coming from. Let’s talk about the business model a little bit, why did you choose drop shipping as opposed to a traditional role which is carrying inventory and that sort of thing?

Andrew: Yeah, it’s a good question. I think like most people with drop shipping I was attracted to the convenience of it. You know of course when you drop ship you don’t have physical inventory. You are working with other suppliers and they take care of all the ordering of the stocking, of the shipping, all the fulfillment inventory side is outsourced and it’s you know it was really attractive to me and it’s also low risk when you are starting and it can be a great… we can’t do it for all markets but in some markets it’s a great way to test the viability of the market without having to go out and order a bunch of stuff.

So for me it was really the location independence at the end. You know I’m really glad that especially for the first couple of years, I am really glad I did go the drop shipping round. I think as you’re starting, it can be a great way to learn especially without having to risk internal capital. I was able to leverage the location independence of it, I was able to do some cost off without being tied down to a warehouse in terms of being able to do a little bit of travel during that time and have flexibility, but I think that I have said this before in my podcast, you starting from scratch now with my experience and if somebody has a little bit more savvy in the ecommerce world and maybe some money to invest, your long term returns as you know Steve you know in terms of making your own products or stocking your own products are going to be significantly higher if you know as opposed to drop shipping. So it’s a mixed bag, I’m glad I did it but definitely you know drop shipping is not like this you know necessarily the land of magic in unicorns and easy profits, so I think a lot of people may be you know [laughter].

Steve: Nothing, nothing ever is, so I was just curious though how much did you ever invest starting your drop ship store?

Andrew: I think all in 1500 bucks.

Steve: Okay, that’s really inexpensive.

Andrew: Yeah, it wasn’t much and it was all bootstrapped from there, I think by the end I mean I always say I rolled profits from that company back in but the only capital infusion I think was 1500.

Steve: Okay, yeah that’s nothing, I mean for us I think we invested 630 but I also did all the website development myself. I imagine you got, you got help in that department?

Andrew: No, I did it myself.

Steve: Oh you did it yourself also?

Andrew: Which is very evident by how the website looked but…?

Steve: It looks great I don’t know what you are talking about.

Andrew: Oh thank you, thank you, this is version two or three or four by now. First version looked aha, looked like the web 1990s web just mobbed in on a webpage in 2008.

Steve: So I thought you could comment on this, one trend at least since I learn a class and I have students who are interested in drop shipping. One of the trends that I’ve been noticing actually is a lot of these vendors want you to actually have a breaking model store in order for them to be willing to drop ship for you as well, so can you comment on how to get around that if you’ve ever encountered something like that?

Andrew: Yeah, I know that happens a lot and it’s tough. I know I was telling Billy Murphy of course he’s a fun of both of us and he– I think he got around that one time by partnering with a local shop who were selling the same goods and I think he pretty much went to them and said hey, here’s my situation. I want to sell this product and the only way I can do it is open up a breaking model store, so I can either (a) open up a store in town and compete with you here or we can partner up and you can be my I guess just my partner on paper if for nothing else so that I can think this agreeing with the manufacturer to be able to bill us all the pack. And so I think that’s what he did and it worked out for him which was great, so that’s one way you can also of course I think a lot of people sometimes will buy just a little small office space so I suppose even like a storage container and– what are they called, is that what they call a storage?

Steve: Yeah, yeah, it’s self storage place, yeah.

Andrew: Yeah, thank you self storage, but it’s tough you know it’s you unfortunately you either get billed something or be a little sneaky in how you do it and it’s not always necessarily guaranteed to work. So it’s tough, it’s not always something you get around.

Steve: Okay, so you know you’ve done drop shipping and you do carry a little bit of your own inventory, is that right today or?

Andrew: Yeah, a little bit not a ton but I mean may be there’s may be three or four items we carry that our suppliers don’t have and we said that we have a good working relationship with our suppliers where we buy it from the manufacturer. We ship it to our drop shipping suppliers and they try and keep an encoder for us and act as our fulfillment house and will throw it in for orders says let’s see what has come in.

Steve: Oh okay that’s pretty clever. So do you have multiple, do you just work with one or two vendors or do you have a whole bunch that you work with?

Andrew: We definitely have more than one. Yeah it’s, I think any time you sup your business procedure especially if you’re drop shipping and you rely on one source for that, it’s a pretty dangerous place to be both in terms of availability and in terms of pricing too.

Steve: Okay, I’m just curious how you have things set up also. So if someone places an order on your site, does that order just go straight to the vendor and do you have tracking information about the inventory and that sort of thing?

Andrew: We don’t. This is something where it’s almost embarrassing to talk about and– but we are really old school in the way we do things, it’s I’ve been wanting to write a post about how a lot of stuff in business just you think like you look at the service and it looks all smooth and operating flawlessly and you think people have everything together and you actually dive into the systems and a lot of times stuff is just duck tapped together and really getting old.

Steve: Oh yeah, I mean we have a lot of get old stuff too so I mean we can have confessions if you want.

Andrew: Always good at that, you make me feel better all seriously and so one thing that is on my list to do this year is to set up a little more real time inventory tracking in order running and we had that with our Trolling Motor site before we sold it but for Right Channel we just you know we have a staff member who as orders come in she goes, she will route them based on product availability and then also based on location so we have multiple suppliers and usually we try to wrap that to the supplier that’s closest to the customer to save on shipping and also to save on I guess to expedite the delivery to that person. So right now we don’t have a whole lot of over, a lot of it is done manually but we’re looking at bringing something in like Ordoro or you drop ship from Agenta of this year to automate all of that because it is pretty embarrassing that we are still doing all of that manually.

Steve: Yeah, I don’t think it is all that embarrassing and you know I think a big mistake that a lot of people do is they spend a whole lot of money on this stuff upfront when they don’t have any business so it’s just a gradual transition right. Once it gets to a point where you need to automate, you just go ahead and automate it. At least that’s my opinion.

Andrew: Yeah, I know it’s a good point, I think that’s sad, if I had to be in one of those two categories it will be definitely the latter you know doing it manually for a while because it’s true I think there is a temptation to create a perfect system for something that doesn’t yet exist.

Steve: Yeah, definitely so you know you’ve done a little bit of both so you are in a pretty unique position to kind of understand the challenges associated with drop shipping and carrying inventory so what are some of the challenges that you faced with drop shipping?

Andrew: With drop shipping it’s, man you know I even never thought about the challenges. I think margins are probably the biggest one. You’ve got you know, it’s got a very big the margins for drop shipping anywhere from 10 to 30% which 30% is on the high side for drop shipping for example our TrollingMotor site the margins were about 11, 12%. A little bit easier in that market was lower margins because we had a very high per order price, which had offset it data back but still pretty low. And so one thing, the hardest thing is I think it’s difficult to scale with pay traffic, if you are going run a drop shipping site, it’s hard to make that work, it’s hard to pay for customers and advertise to grow your business. Just because I think AdWords, a lot of AdWords have made 20, 25% is about the margin areas where a lot of times just divided by niche but roughly where you really make sense to start paying for customers and unless you have a really high lifetime value right unless you want to lose some money on that first sale to when you make it up over repeat purchases in the life of the customer.

So you’ve really got to be good at hassling, at organic marketing, at SEO, at building traffic and attention in other ways and that takes a while to do. Another issue is this, that any time you put an intermediary between you and your customer, it’s going to cause problems you know we have one of the– I think one of the things I think is most frustrating in life in general is having to own up and accept responsibility for someone else’s mistake and we have to do that on a weekly basis or other times when a customer gets something that’s an item was missing or it got shipped to route Canada versus you know Texas, and it’s tough because you can’t say hey I’m sorry I was a drop shipper, it’s not our fault, it’s highly unprofessional right.

Steve: Yeah, absolutely

Andrew: You know and so you just have to own up to it, you got to make it right and you know that’s another thing that is tough and then also the shipping experience I mean you can– you got someone else who’s managing your shipping and so you can’t necessarily control standards quite like you’d like to. You don’t have– we don’t always work with our own shipping accounts so if an item goes out and we need to return it and need to issue an intercept, we need to issue like a call tag to bring something back, we really don’t have our own UPS account, we have to go through our supplier, and then our supplier has to take care of things and communicate back to us and then we have to wait for them and then we talk to the customer, so there is a leg time on everything. So those are some of the frustrations in terms of drop shipping that we say that we’ve run into.

Steve: So that kind of implies that your partner or your vendor is a very integral part of your business and it is essential that you guys have a really good relationship.

Andrew: Absolutely, yeah absolutely and it’s tough you know because we’ve– it’s, it can be a fine line because you want to maintain a good working relationship, a good rapport but sometimes and we do, we have a great relationship with our suppliers, but you also have to be a little hop on the phone occasionally and buzz some chops when stuff is slipping and you know that it’s, you’ve got to be able to do that in a way, you’ve got to know when to do that in a way to make sure things are continuing to be taken care of properly and in a high quality manner and you also have to know when to give a little grace and a little bit of understanding when– this is tough, I mean any business is going to have mistakes I’m so sure.

You’ve to got know where that threshold is. It is kind of like management right, you know you want to be, if you have people under you and you are a leader you want to be hold people accountable, but you don’t want to be just a hammer head. You want to be someone whom they look up to and can come to with questions but you don’t want to be a pushover too. So it is a fine line to walk.

Steve: Yes, almost like having your own employees in a way except that you have no direct control over.

Andrew: Yeah, it’s a little vague, that’s a good way to look at it.

Steve: So if you are– so when you get returns, do they come back to you or do they go back to the manufacturer?

Andrew: Well, it’s funny you asked that, they usually will go back to the manufacturer but sometimes they will come back to us based on because I think US PS makes it harder to put all return, put the suppliers return address on the packages as opposed to warehouse and so if they get returned or come back to actually my office or sometimes people will just you know I guess there is this, it is kind of confusing because sometimes the UPS label will get scanned even though even it says our supplier on the return address, the address on the label will say our office and so I’ve got you know right now I’ve probably got three to four radios and six antennas in my office that they just happened to come back to me, so most of them go back to the supplier but I definitely get some straylers coming back to me.

Steve: It’s just a shared story, we got returned merchandise in our office too that’s been unprocessed, so you’re not alone there Andrew.

Andrew: That’s good to hear and it’s tough because it’s– sometimes you look at stuff and you just get caught up and usually we are pretty good about getting you know following up on people and figuring out what happened but you know sometimes ashes occasionally fall to the cracks and then there is some, I mean there are some right now in my office and I’m like oh man I’ve got it I have to figure where this came from [laughter].

Steve: Yeah, so you know in the earlier point that you just made about not having the margins for paper clip traffic so how do you get the customers on to your site if you are not paying for it?

Andrew: Yeah, a good question you know back in when I was building a bright channel it was just a lot of it was good old fashion networking in the niche, a lot of guest posting, a lot of really pitching people on quality articles and biased cards that we would put together for their audience, and so we would go out to– we would try to identify okay who are our customers? They were vehicle owners. Where do those vehicle owners hang out? There was a lot of communities for different vehicles of all different vehicles of course online, and then we would try to go identify the owners of those communities and try to build a relationship with them first and then try to network with them and then offer them something of value to their visitors and really picture as not hey can we guest post on your site but more of hey we notice that there is this gap in the articles you offer. The researches that you offer to your visitors, not sure if it would be interesting but if you would like kind of a comprehensive bio skid on taking radio equipment for let’s say covet for example, we’d love to write it for you.

And sometimes that will work and sometimes it won’t but that’s how we were able to get a lot of early slip back links out of the traffic and the relationships and I think really it’s about building relationships if you can pull genuine relationships with people in your niche and with people that serve you and customers. Eventually that’s going to lead to something as long as you have something genuine with value to offer that’s going to lead to that exchange. I think it’s when people read right out of the gates with emails that are just hard sells right up front that people get turned off and so that was the approach we took for marketing RightChannelRadios in to a last exceptionally models.

Steve: So you were guest posting on just related blogs or– and making partnerships with people on your same niche and then that just gradually build up your search engine traffic?

Andrew: Yes

Steve: Okay

Andrew: Exactly and blogs– probably blogs somewhat but then also probably even more communities and forums and a lot of like forums out there for hobbyists and enthusiasts who have a forum section and a lot of times they have regular articles and a research section and we love those.

Steve: Okay, okay so I’ll just you know since we’re on the topic of SEO, Google’s making a lot of changes these past couple of years and I just wondering if your strategy has changed at all as a result of that.

Andrew: Yeah, it’s a good, it’s a great question and it hasn’t. To be honest, I haven’t, I haven’t. It’s been you know probably three or four years since I launched a brand new ecommerce store, but at least with ecommerce if you are kind of a content community site, and that’s been about you know real lesson two years I’ve been running that and for that the approach has differed significantly I mean take the old SEO we used to do for RightChannelRadios, we would focus a lot on anchor text. We would focus a lot on really key word research still is important but we were really aiming on that you know making sure the exact phrase was perfect for what the search volume was and guest posting would probably focus more on quantity versus quality.

Fast forward to what the strategies I’ve been trying to use with EcommerceFuel and it’s been much more focused on getting a lower number of high quality links. It’s been much more focused on trying to write along or create a lot of quality in-depth long forum content and build a reputation, drive people to really engage with that content and choose their comments and shares. It’s been about building relationships with a lot of high profile key players in the space and really it’s been– it hasn’t been focused as much on anchor texts or exact key words. I’ll still look for you know when I’m running a blog post for example on EcommerceFuel, I’ll still a lot of times try to come up with a key word that I think is a key word or a key word phrase that I know people are searching for, but once I have that like for example I’m going to get write a publisher post on bootstrapping and so I did a quick search in Google autosuggest for bootstrapping in business and came up with I think bootstrapping my business was the phrase people searched for.

And so although I had to make sure that SEO url for my blog post, I’ll make sure I get that phrase at least once into the copy. I may or may not include that phrase in the title exactly based on how compelling it fits in with a really strong title and that’s it. I’m not going getting out and try to build links with it back without anchor text, I’m not going to make sure it occurs five times in the copy because Google is getting I think much better at deciphering intent and really being able to distinguish high quality stuff versus lower quality stuff and for me it’s been more about building a highly authoritative site and letting the site authority and the domain authority really help propel the rankings for individual articles as opposed to trying to game the system.

Steve: Great, it’s all right. And that’s on your blog that you were talking about right, do you still do posts for RightChannelRadios or…?

Andrew: We you know we– it’s been– we haven’t done a marketing piece for RightChannel in a while and I don’t know about you Steve but I tend to be very like silo focused like I will spend six months focusing on like promotion for EcommerceFuel and then I’ll spend six months on or three months focused on like selling one of my businesses then I’ll spend four months focused on really gearing up and improving the processes for like RightChannel and so it’s been a little while since we’ve done a marketing piece for RightChannel and so a lot of the growth we’ve seen there has been more based on word of mouth and organic referrals I think for the business, so it’s, we– to be honest with you we haven’t done a lot of guest posting.

Steve: Yeah, you know I’m the same way with you. I can’t really focus on multiple things at once, so I tend to just do one thing and when that’s done I move on to the next so…

Andrew: Yeah exactly, I feel I get so much more efficient than trying to juggle four big projects at once.

Steve: Absolutely, yes so it sounds like a lot of your traffic to your store is SEO and at least with my store SEO traffic didn’t kick in until much later in the first year so how did you get sales early on and how did you prevent yourself from getting discouraged at the beginning?

Andrew: Yeah, that’s a great question. I’m a big advocate of even if, even if it’s not necessarily profitable early on with the store to run some pay traffic to and so I’d say for the first six months we run page traffic with Google AdWords primarily to RightChannel, just for those two reasons. One to not get discouraged because man even– there is a lot there’s an emotional aspect to seeing those sales coming even if you know you’re not necessarily making a whole lot of money or any money on them, it gives you motivational factor but even more importantly it helps you start engaging with customers, understand who they are, what they want, what kind of problems they are having, what kind of products they need that you don’t offer. It’s always you know, you learn so much engaging directly with customers and so we kind of we would start with that and then as the search engine and traffic picked up and started to really become a lion share, the traffic then we kind of discontinued, or slowly trailed off on with the pay traffic but it was very useful starting you know.

Steve: Yes and what were some of the tools that you used to analyze your customers, was this just from talking with them on the phone or…

Andrew: Yeah I’d say the best tool was getting people on the phone.

Steve: Okay

Andrew: You know it’s funny because I think we probably– we could probably have a whole podcast about this too Steve in terms of whether or not you should have a phone number and we you know right now with RightChannel we do a lot of things to try to really stand out with customers but we don’t necessarily offer like a phone where people can just call up and talk anymore. And it’s okay we can talk about the pros and cons there but for early on it’s so viable. You get someone on the phone, you talk directly with them back and forth and you learn so much about who they are, what they need, where your short comings as a business are. Just being on phone as you know I think it’s the best tool you can use to get market intelligence with your customers.

Steve: Yeah, I think it really depends on the niche because in ours which is the wedding industry you absolutely have to have a phone number because you have all these frantic people calling you up with deadlines [Laughter].

Andrew: It’s really funny, yeah and it’s funny like same thing with the TrollingMotors. With Trolling Motors you know people are looking at buying a $1500 trolling motor. If they can, everyone may not need to call or want to call but if they feel like they can’t call, that’s a big deal you know. I would not want to order a $1500 order trolling motor from some place you didn’t really exposed to a phone number or that I can get a live person on the phone from. So I think it is market specific.

Steve: Yeah, absolutely. So let’s change, let’s switch gears a little bit and you know at least on my mind and this is kind of spurred by one of the topics on your forums on the EcommerceFuel forums and this is just the whole topic of Amazon and how Amazon is kind of commoditizing a lot of the online stores. So what do you see happening and what are you doing with your store to kind of fight against Amazon?

Andrew: Yeah, it’s a great question and it’s Amazon is just eating up retail and it would be nice to build a hit on them but they are you know they do a really good job in terms of customer service, in terms of offering the best combination I think of for a lot of products value and convenience and so you know what I see happening is I really see– I see kind of a hauling out of the middle of the market. If you are a big store that sells a lot of you know– it’s fairly broad based and sells a lot of existing products, existing products from the market, I think it’s like they’re going to have a real hard time in the next couple of years. Places like I don’t know why Tiger director always comes to mind but I feel like they are kind of just a general retailer, reseller or kind of just general electronic parts and I don’t see how they are going to survive in the next two to three or four years.

And so what I see happening is you either have you know you either need to do one of– Amazon’s going to be the place if you are looking for something and price is very important to you. An existing product people are going to go there a lot so and really as independent retailers you either need to offer one of three things. You either need to offer a unique product that you can’t get anywhere else so you control the distribution. An example is the guys over; did you see the kick start campaign for Minaal for Minaal travel bag?

Steve: I did not.

Andrew: Also I have to link, may be you can put in the show notes.

Steve: Okay, yeah.

Andrew: Jimmy and Doug over there, they’re great, great guys and they’ve put together an incredible travel bag that solves a lot of problems that light weight travelers on the road have. I bought one of them and it’s amazing. They’ve got something that’s not sold in the market and it’s a you know they control complete distribution so they can set whatever price they want, they can control that supply chain so they are not getting undercut. That’s one option having your own product. The other option is having very strong branded experience, so if you are going to sell existing products, use something really unique, really you know something where somehow the experience is to hide into the product, that’s another option.

The third one is add value, add informational value to existing products and that’s what I try to do over RightChannelRadios is really add a lot of value upfront. Amazon can’t in terms of what goes with what, really specializing in a very niche field and adding value in a way that– one thing we are doing you know you asked what we are trying to do to differentiate ourselves. One thing we are doing this year is really going in and creating in-depth installation guides for specific vehicles. So let’s say you’ve got a Chevy 2010 half tank pickup truck. Not only can you come to our site hopefully in six months and or in three months you are going to be able to understand what products are all going to go together but we’re going to have a ten page illustrated installation guide on exactly how to install that product on your specific vehicle. And that’s something where, it’s going to cost a decent amount of money to produce up front but once we do, that’s got ten, twenty, thirty, fifty dollars with a value. I mean it’s hard to say but it definitely has a lot of value to somebody who doesn’t know how to install, is something as once you create it’s like an information product is added to your ecommerce mix. That’s one thing we are going to try to do.

We’re also really looking to personalize our site a lot more. You know just this week we’re actually going to film an ‘about us’ video for myself, for my sales manager. We are going to get in front of the camera, we are going to talk about who we are as people like how we can help our customers, really put a face to the brand because that’s another thing that just is going to differentiate small merchants from big giants like Amazon is being personal. People love to buy from people and I think that’s going to be increasingly important. So anyway sorry Steve I kind of rumbled on there for a while.

Steve: No, no this is all good stuff and I actually had a couple of comments on that so when I shop at Amazon in-house buying something complicated like a radio that I need to mount on my pickup truck for example, the support just isn’t there. Sure they have an excellent return policy but once I purchase the product, I can’t exactly go and ask Amazon how to install and that sort of thing so I would probably tend to buy from your site because the support will be there right. I could actually call you or contact you in some way.

Andrew: We’ve got yeah, we do– we have a really comprehensive troubleshooting library of resources in terms of installation and troubleshooting some of the problems that popup in tutorials and things that are going to be very specific because Amazon necessarily won’t be able to obviously have those kind of resources.

Steve: Right, so here’s the question, do you actually recommend people who have their own products for example do you recommend they actually post their items on Amazon?

Andrew: Yeah, good question. I think it depends on, I think it depends on if the product is– if it’s your product and you’ve created it, and it’s branded to you I think Amazon is a very powerful platform because you are going to reap into all their traffic and all their reputation and trust and authority. I think if you are reselling existing products, I think it’s tough. I mean I know in our niche we’ve got people who are starting to go on Amazon and resell on products and we have intentionally stayed out of that market because even assuming we could get in and assuming we could make a little bit of profit out of the gates, it just becomes a price war.

Steve: Yeah, absolutely.

Andrew: Because, I mean there have been people on the forums in ecclesial forums who’ve been signing upfront for a while and they just talk about how people do get on there, and they’ll see people selling below cost and they don’t understand if it’s because they are just trying to gain market share or improve their seller reputation and their rank on Amazon by increasing their volume or if they are just clueless and they don’t understand that they are losing money. But I think it’s– I don’t think it’s a good long term strategy for building a profitable income stream. I think there might be a few couple anomalies where may be a bit trashed up opportunities where you can get in and may be for a couple of months here and there, may be even a year you can get in and make it work, but I think selling existing products on Amazon is going to be tough.

Steve: And so, let’s say you were to decide to sell on Amazon, would you go with just selling an Amazon regular or would you actually use their fulfilled buy service, because Amazon prime is very compelling.

Andrew: It is and I think you know I think if you’re using the FPA approach if you’re selling on Amazon makes a lot of sense because like you said you get, it’s going to pop a bit of qualify for and minimum pre-shipping involved you know $25 or $35 for folks. And then also if it’s for prime members, yeah they get to ship from two days for free which is you know I know that I have been trying recently to go less on Amazon especially for unique products I try to support independent merchants more. But there are some things that just are commodities that Amazon is, I think it’s a great you know is a good choice for like diapers for example. You know you buy diapers on Amazon and I know that when I’m shopping for commodities on Amazon, I always click at all Amazon prime band.

Steve: Yeah, absolutely same here and in fact whenever I shop on Amazon, I always look for the prime. I actually don’t buy from anyone who doesn’t have the prime display.

Andrew: Yeah, exactly it’s powerful.

Steve: Yeah, yeah it’s very powerful so that actually presents unique challenges you know when you’re trying to decide whether you want to sell on there because they take a huge chunk out of fulfilled buying, I think it’s like almost a third of your revenue is just rocked off right after that.

Andrew: Are you sure, that seems really rich.

Steve: I just heard someone else on the show actually who sells on Amazon using fulfilled buyer for a living and she said yeah she dedicates a third of her revenue to pay Amazon and she gets a third to buy the product, then she gets to keep a third.

Andrew: Wow!

Steve: So

Andrew: Let’s see I– and again I’m sure she has, she is in a position of speaking with much more authority than I am on it because I haven’t used them but I always heard it was roughly 15% for just listing fee through Amazon on in there and I always thought FPA was more of a fee based. If you use FPA, I always thought it was a fee based thing that was just pretty much like you pay a dollar for every pick and then you pay a shipping fee and that’s it.

Steve: Yeah, I’m not sure of the specifics. She tends to sell smaller items but that’s how she kind of budgets her stuff. You know I think just regularly selling at Amazon, I think the fees are in the order of 12 and 13%. I have to check to make sure since I don’t sell on Amazon but I think that’s what the percentages were.

Andrew: Yeah, I think they are various by categories so like both sources like electronics versus other things but I remember looking at electronics and they were like 15% so we are going to try sell trolling motors online like it’s, the margins are very low.

Steve: Exactly

Andrew: Eventually wipes out your entire margin right there.

Steve: Yes so if your RightChannelRadios, if your margins were a little higher, I don’t know what they are but if they were a little higher, would you consider selling on Amazon or would you just stay away?

Andrew: Again we’d stay away. The only thing I would consider selling on Amazon is something which will add some kind of value to because again we’ll just get– even if it’s not today, in the next three, six months more people are going to come in and just drive that price to under zero and you’ve got you know these smart time, you’ve got to invest in, not a crazy email, you’ve got to get in, set it up and engage your listings going. So the only thing I would sell is may be smaller packages that we buddled together and included the very in-depth personal video that walks through the highlight and also included the installation guide more valuably that walks through the process because then you get some kind of differentiator, some kind of value add where you’ve got a reason to be able to charge a different price and it sets it apart so people can’t compare apples to apples but it’s yeah not interested in getting in and slogging it out with 20 people who are willing to have a fraction of a percentage profit margin.

Steve: Yeah, speaking of which I hadn’t considered this strategy with my store since we sell products that are– many of which are pretty unique, we are thinking about just posting stuff on Amazon at higher prices to cover the fees and then you know if someone buys, we can kind of just in the packaging provide a lot of collateral about our store and hopefully the second time though they should come directly to our store and then we can incentivize them with the coupon or something like that.

Andrew: It’s tough, I’ve heard that and again this is me speaking a little bit out of my authority zone but I’ve heard that Amazon has restrictions on how you can brand and what you can include in your product when you are selling on their market place.

Steve: Aaaaa

Andrew: Yeah, if you use Fulfilled By Amazon as your fulfillment center and you don’t sell on Amazon’s marketplace. So let’s say you use a fulfillment center but you sell on your own you know [Inaudible] [00:39:57] but you use FBA to ship it out, I think those restrictions are lifted, but if you have any of your products listed on the Amazon market place where people place the order through Amazon, I think they’ll remove all they know about you including branding and marketing material. I don’t think they let you do it, and I actually think you have to pay. They ship everything else in an Amazon branded box. If you want them to ship out in a box that is not branded with Amazon, just a blank one you have to pay extra for that.

Steve: Aaaaa

Andrew: So they’re very conscious of using the fulfillment services and using I guess using the fulfillment services to brand Amazon as well as not necessarily allowing merchants to use their platform to really siphon people over their own brand. I think that’s tricky.

Steve: They are clever on their part, they are very clever. Well played Amazon, well played.

Andrew: Have you read the, do you read ‘The Everything Store’ by chance?

Steve: I have not.

Andrew: Yeah, you should read it, it’s interesting, it’s a– I would recommend it to anyone listening. It is just kind of a biography of Amazon, of Jeff Bezos. It’s a good read and it’s very telling also.

Steve: So we’re coming up on to 40 minutes. I don’t want to take up too much of your time, so I wanted to just ask you, if you had any advice for people who are listening who want to create an online store, who may be want to double on drop ship or carrying inventory and that sort of thing.

Andrew: Yeah I’d say, I say if you are going to start with drop shipping, try to make sure that you have an ability to grow beyond that into stocking your own product. That’s one of the kind of little regrets I have about CB radios and that niche is even as we’ve grown, just the economics of buying products or bringing them in house really doesn’t make sense. You know so the increase in margin we would get as we bought products wholesale and brought them in-house really doesn’t offset the hassle and cost of warehousing them in the capital LA. And so it’s still a great niche but I wish we could, I wish the market allowed us to grow into that and invest more money to see higher rewards.

So drop shipping again like we talked about it’s got some great advantages but make sure you’ve had a long term plan that will let you grow past that. I mean for me personally the next business I start will likely, ideally I’d like to start building and creating my own products. At a minimum stocking products that are harder to get, but ideally in creating a unique product under our brand, that’s not available other places just for other reasons that we mentioned because it’s so much easier to scale when you’ve got those higher margins. You can use paid advertising, you differentiate it, you can leverage Amazon versus having to wait into the mark and compete with people on tiny profit margins. And so that would be my advice is don’t really think through it, if you’ve got the capital to invest, if you’ve got– if you are willing to take a little bit more of a longer approach to seeing returns. Creating your own products or stocking products at minimum is going to give you all those higher returns in the long run and if you do so with drop shipping make sure you do have one; a plan to really understand how you are going to differentiate yourself. If it’s price, if the only way you are going to be different from other folks is price, don’t get into that market.

You really need a very concrete action plan on how you are going to add value to existing products and then secondly make sure you’ve got, you know talk with your suppliers ahead of time, talk with manufacturers and say hey what’s the margin increase I get if I buy direct from the manufacturer in bulk versus buying from a wholesaler. If it’s only two, or three, or four percent, it’s tough. If it doubles or triples your margin, that’s a much more attractive growth projectory as you are increase your revenues.

Steve: Yeah, then one thing I just want to add to that is speaking of adding value, one thing I notice that in terms of personalized products, Amazon doesn’t really do a really good job of doing that. So if you could add value by personalizing, which is becoming kind of huge these days. That will help a lot with your shop as well. I don’t know if that applies to a lot of things but…

Andrew: No, I think it’s a great point. Yeah if anything people love personalized stuff and yeah you’re right, that sounds something. I don’t think, I’m not sure if I’ve ever seen anything being personalized on Amazon.

Steve: I don’t think they have the interface to do it right it now. I’m sure they have something in the works though but for now at least…

Andrew: Yeah, that’s mean, we’re going knock on them. Give them three months and they’ll have it rolled out.

Steve: So I thought I’d end this interview, you already mentioned one business book that you recommend that we all read which is ‘Sell anything’ or ‘Sell everything’. Is there any other business books that have kind of shaped the way you look at business and running stores?

Andrew: Yeah or do you mean ‘The Everything Store’?

Steve: Yeah, ‘The everything store’ sorry I got the title wrong.

Andrew: Aha it’s ‘Everything Store’. I’d say a couple of books, a couple of books I’ve read recently that I really enjoyed. One was ‘The 7 Habits of Highly Effective People’ and that’s kind of a classic. And I always– I remember you Steve but I’m always a little bit relied in these self help books so like it’s really inspirational kind of feel good. If it’s feel good in titles like that, and I was like really like how much you know how impactful is this going to be, but I read it and I was really impressed. It actually has changed the way I’ve kind of looked at business. It’s made me be more intentional about what I spend my time on, how I structure my day. So that is a book that I would recommend. Again ‘The 7 Habits of Highly Effective People’, great book.

Another book if you are managing people is ‘EntreLeadership’ by Dave Ramsey. He really talks about how you structure your businesses, how you build the team, how you lead with intentionality and with integrity, and in a way that is going to inspire confidence and loyalty with your team members. So that’s going to be something a little bit more for folks who they do have a team, or aspire to have a team in the future, but it’s a great book ‘EntreLeadership’ by Dave Ramsey. So those are two recently that have been impactful for me.

Steve: Okay, I have not read the Dave Ramsey book yet. I’ll have to go and pick it up and check it out. That’s great.

Andrew: What about you, what are you– read any books recently that have had a big impact?

Steve: Yeah, you know I get asked this question all the time and right now I’ve been reading a lot of technical books because I’m just trying to learn all the tech behind websites and become more professional at it so that in fact I can contract out the work a little more effectively, so I can kind of understand what the developers are doing to help me out and that sort of thing. So I like to understand everything before I contract anything out. So that’s just in my personality.

Andrew: I think it’s a great– I mean like we were kind of talking about this offline before we started the interview but I just wrote a post on bootstrapping and I think that’s, I think it’s one of the big mistakes people make is not having understanding about different areas of their business before they go out and hire out because I just– more often than not it just leads to chaos.

Steve: I agree and just like this podcast, so I learnt how to post process all the audio and then maybe I’ll be using your guide to do all the post processing after this, who knows. So I would like to close, you know any other online services that you use for your businesses that you can’t live without?

Andrew: It’s a good question. I use Google docs really for a lot of processes that we set up in our documentation, use Asana for setting up who is responsible for what, not only for kind of project tracking but for managing SOPs and things like that, responsibilities and other services. Those are couple of the big ones that we…

Steve: Okay

Andrew: Apart from hosting and helped us conserve but I think a lot of those people are probably familiar with these.

Steve: Okay, so near to close do you want to tell everyone how they can find you and what all the other sites that you own are?

Andrew: Yeah, that would be great. You can find me depending on where you land over twitter@Yauderian or at EcommerceFuel. Of course eCommerceFuel.com is where I blog about ecommerce and I also have a private community. If you are a store owner and you’ve got established store with at least you know four or five thousand in monthly revenue or an ecommerce professional with at least a year of experience on the space, that’s the forum that we run for those– a vetted forum for those groups of people over there. And I also have a podcast that as well you can learn more about on iTunesall@ecommercefuel.com again the name of podcast is EcommerceFuel. So that’s you know that and the RightchannelRadios.com is the radio business we’ve been talking about and then TrollingMotors.net no longer mine. It’s in good new hands but that’s the business we just sold, so I think that’s kind of what I’ve got going on online.

Steve: Great I just thought I put it in plug for you forums as well. The amount of people, the quality of the people on that forum is very high and I’ve actually personally learned a lot myself.

Andrew: Oh, thanks it’s been good having you in and spend– it’s been fun growing in the community and just– it’s cool having a group like that of people who are in trenches that we can kind of bounce off of each other and you know that everyone there at least not to be exclusive you know to be whole it all we don’t exclude people for the sake of excluding people but I think that you know it’s, there is certain reason for having people there all in the same place in terms of maintaining a count level of conversation that everyone is kind of able to plug in to relatively quickly.

Steve: Yeah, I don’t know about you Andrew but I get lonely, because I don’t know a whole lot of people that run ecommerce stores so it’s a good outlet for me at least.

Andrew: Yeah, I like all this is human Steve, yeah.

Steve: I know, thanks for coming on the show Andrew, I really appreciate your time.

Andrew: Hey, thanks for having me Steve, it’s been good chatting

Steve: Take care

I always love chatting with Andrew Youderian. Now, what I really like about him is that he’s really down to earth, extremely personable and always willing to help. He’s also created an incredible ecommerce community on his forums, so I recommend that you go check them out at www.ecommercefuel.com/ecommerce-forum. So be sure to check out the show notes for this episode where you will find the sites and the links mentioned in this episode. Also if you have a minute it would really help if you could subscribe and leave a review on iTunes for this podcast. Also don’t forget to enter my free podcast giveaway where I’m actually giving away a lifetime membership for my profitable online store course. For more information about this giveaway go to www.mywifequitherjob.com/podcast-launch. Once again that’s mywifequitherjob.com/podcast-launch. Thanks for listening.

Thanks for listening to the mywifequitherjob podcast where we’re giving the courage people need to start their own online business. For more information, visit Steve’s blog at www.mywifequitherjob.com.

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4 thoughts on “002: Andrew Youderian On How To Make 7 Figures With A Dropshipped Online Store”

  1. jason says:

    Really great interviews steve. You are asking the right questions which shows you are an expert in this area.

  2. Oscar says:

    How do I download the podcast? I don’t want to install Itunes to save it onto my mp3 player and listen to it on the go.

    1. Oscar says:

      Wow that was quick. It almost feels like I probably missed it the first time or something. This will actually be the first show I listen to after my friend recommended this site to me. Thanks bro!

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