As I mentioned in last week’s email newsletter (sign up here for free), I just got back from an ecommerce mastermind weekend with 11 other entrepreneurs and it was an incredible experience.
In the Silicon Valley where I live, almost all of my close friends either work full time at a tech company or practice as a doctor or lawyer. Very few people I know sell physical products online which is why I often feel lonely with no one to talk to when it comes to ecommerce.
Anyhow, this mastermind retreat was just what I needed because it was an opportunity to hang out with other like minded entrepreneurs making 7 and 8 figures selling online.
Not only were these guys and gal(What up Dana?) fun to hang out with but I came away with a bunch of new action items and a better understanding of where the ecommerce landscape is headed in the coming years.
Here were some of my key takeaways.
Amazon Is Getting More Competitive At An Exponential Rate
I’ve already been feeling this for the past 6 months, but this weekend pretty much confirmed it.
If you are selling other people’s products with little added value, then you’re not going to be in business much longer.
The level of competition is so fierce that unless you have your own brand and a strong value proposition, someone will hop onto your products and erode your profit margins very quickly.
Amazon feels like the gold rush right now with people throwing up whatever they can and making sales because Amazon’s reach is so large. But I’m predicting that this gold rush will only last a few more years because too many people are jumping on the bandwagon.
One of my mastermind buddies witnessed this first hand when one of his cash cow products making nearly 6 figures per year got piggybacked by another seller.
And when he retaliated by lowering his prices to win back the buy box, the other seller reported to the manufacturer that he was violating MAP pricing. In the end, he lost his cash cow product in a matter of weeks.
In fact, he’s lost many profitable Amazon products in the past year and is now focusing all of his efforts on his own branded products from here on out.
Here’s how I see the future of selling on Amazon.
Those doing retail arbitrage will be the first to fall followed by those who sell other people’s products. The only ones who will be left standing are businesses who have established their own brand with a strong online presence external to Amazon.
Which brings me to my next point…
You Must Have Your Own Online Retail Presence To Survive
One of my favorite quotes from the mastermind weekend was this one…
Selling on Amazon is like getting paid to dig your own grave but at least you’re making good money doing it
As you are running your ecommerce business, you should do so with the expectation that Amazon can and will ban you at some point in time.
This week, I have 2 stories to share with you.
The first is a story I heard first hand from my friend Mike Jackness who runs an awesome podcast called Ecom Crew. One of the members of his mastermind group got his 7 figure Amazon account banned in the unlikeliest of circumstances.
Basically, he hired an Amazon consultant who accidentally logged into his account from an IP address that was associated with a banned Amazon account.
And poof!!!! Within the week, his account was instantly banned even though he did nothing wrong.
Amazon keeps track of everything. If you accidentally log into your account from a computer that has previously logged into a banned account, you risk losing your account as well.
Right now, his buddy is appealing the suspension but it’s not looking good.
In other news, I recently interviewed an ecommerce seller who lost his 7 figure Amazon business overnight because he got banned as well.
This person did nothing illegal but an unfortunate stream of events led to his demise. (This episode comes out in 2 days and I’ll link it up here)
Here’s the episode: How John Rampton Lost His 7 Figure Amazon Business
I don’t know about you. But I would never ever build 100% of my business on someone else’s land, especially if you are depending on this revenue to survive.
Everyone who attended the mastermind weekend is focusing their efforts on building their own website and brand for this reason. Amazon is great for cashflow but lousy for brand building.
The Case For Owning Your Own Platform
One of the recurring themes of the weekend was the ridiculous number of services required to run an ecommerce store at scale and the cost/benefit of relying on 3rd party platforms.
On one hand, building your house on a 3rd party platform is both easy and effective. But on the other hand, you are constantly at their mercy.
For example, one well known fully hosted shopping cart platform recently increased their prices dramatically which led to cost hikes of up to 400% for certain sellers. Can you imagine running your store one day and then finding out that your costs were going to increase 4X in a few months?
Here’s the thing. No matter what 3rd party platform you choose, they will do whatever it takes to make a profit and the true running costs are not always obvious.
One of the leading shopping cart providers that rhymes with “opify” provides a very low base price but makes up for it on the backend with numerous plugins that have recurring fees.
For example, one of my buddies pays $80 a month for the ability to display reviews next to their products!
While the base price of the cart is very cheap, by the time you add all of the plugins into the final cost, it often ends up costing significantly more.
Over the past few years, I’ve been carefully considering moving my online store over to a fully hosted platform like a Shopify or a Big Commerce. But for now, I’m staying put because I like having full control over the code.
I’m paying less than $50 a month for my cart and I have the ability to code up any feature that I need on the fly. But don’t get me wrong. It would be really nice to have access to large library of plugins at the push of a button.
Currently I’m in the process of redesigning my ecommerce store website and the jury is still out. We’ll see what happens.
You Need To Have An End Game In Mind
Perhaps the most important takeaway from the weekend was to know and understand your personal goals.
For me, I got into ecommerce in order to spend more time with my family and NOT to grow my businesses to 7,8 or 9 figures and beyond.
However after growing my online store in the double digits for the past 8 years and doubling my blog revenues last year, I’m starting to feel increased pressure to grow even faster. More money, more growth, more success….but where does it lead?
In the end, I’m just a regular Chinese guy who is extremely frugal and spends very little money. My house is almost paid for, my kids’ college education (to Stanford of course:)) is already in the bank and I’m probably one of the least extravagant people you’ll ever meet.
So why do I sometimes get jealous of other more successful entrepreneurs? Why do I need to make more money?
What’s hilarious is that we all went around the room during the mastermind and shared how much we spend in a typical year. And guess what? Almost everyone spends less than 80K per year while making many times that amount with their businesses.
Bottom line, it made me realize that after a certain dollar amount, more money doesn’t make a difference. The goal shouldn’t be to grow or make more money for money’s sake.
You should have an overarching goal in mind that is unrelated to money that truly makes you happy. Otherwise, you’ll constantly be comparing yourself to others who are doing better than you and getting depressed.
I’ll be honest with you. At this mastermind, I was probably one of the least successful of the bunch and I definitely felt like an underachiever next to these folks.
If happiness is your goal, then I recommend that you hangout with people less successful than you are so you can feel good about yourself. But if you want to grow as a person, then you really need to spend time with more successful people.
For me, my primary directive has always been to be there for my kids and my family. But my secondary goal is to constantly learn, improve my skill set and become a better person.
Money is a byproduct of this goal and not the objective. If you want to be happy, then you need to figure out what makes you happy and more money is rarely the answer.
Overall, I learned a lot about myself on this trip and I highly recommend that you arrange your own mastermind retreat with other like minded entrepreneurs.
No matter how successful the entrepreneur, everyone has their own sets of problems that go beyond making more sales and increasing profits.
In fact, I often interview super successful entrepreneurs who are dissatisfied with certain aspects of their lives.
Bottom line, find out what makes you happy and don’t deviate from that path:) And if your goal is to create a long term ecommerce business, focus on your own properties.
- Why Only Selling On EBay, Amazon And Etsy Is Like Gambling
- The Dangers Of Selling On Amazon And Horror Stories From Real Amazon Sellers
- How To Dig A Moat For Your Online Store And Keep Your Competitors Away
- What Happened To Our Store After We Started Selling On Amazon. Here Are The Results
- 5 Painstaking Lessons Learned From Managing Inventory and Cash Flow The Wrong Way
Have you read these?
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- Get A Great Design For Your Store – Create A Profitable Online Store Part 5
- Making A 6 Figure Income With Our Online Store – How Much Work Does It Take?
- A Peek Into The Glamorous Life Of A Small Business Owner
- The Tradeoffs Of Owning Your Own Business Vs Working A Day Job