Today I am honored to have Andrew Youderian with me on the podcast. Andrew has the distinct honor of being the very first guest on my podcast ever in episode number 2.
Back when this podcast had 0 listeners, he took a risk to come on and I really appreciate it. Andrew has created and sold 2 dropshipped ecommerce businesses. He is a well known figure in the ecommerce world through his blog and podcast at EcommerceFuel.com
And he runs the best small business ecommerce community that I’ve come across that specifically caters to 6,7 and 8 figure businesses.
Anyway, today we are going to talk about some interesting statistics regarding the ecommerce landscape based on the members in his community.
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What You’ll Learn
- Andrew’s motivations were for starting the Fuel forums.
- Some interesting statistics from his state of the ecommerce merchant survey
- How to build a fantastic community of ecommerce entrepreneurs and what it takes
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You’re listening to the My Wife Quit Her Job Podcast, the place where bring on successful bootstrapped business owners and delve deeply into what strategies are working and what strategies are not in business. And today I’m happy to have my good buddy Andrew Youderian back on the show. And since I last had him on, a lot has happened.
Andrew has sold all of his e-commerce businesses and is now focusing all of his time on his super successful forum over at Ecommercefuel.com. And today what we’re going to do is we’re going to find out the exact steps he used to create such an amazing community.
But before we begin, I want to give a quick shout out to Klaviyo who is a sponsor of the show. Always excited to talk about Klaviyo because they are the email marketing platform that I personally use for my ecommerce store, and I depend on them for over 30% of my revenues. Now, Klaviyo is the only email platform out there that is specifically built for ecommerce stores, and here is why it is so powerful.
Klaviyo can track every single customer who has shopped in your store and exactly what they bought. So let’s say I want to send out an email to everyone who purchased a red handkerchief in the last week, easy. Let’s say I want to set up a special auto-responder sequence to my customers depending on what they purchased, piece of cake, and there is full revenue tracking on every single email.
Klaviyo is the most powerful email platform that I’ve ever used and you can try them for free at mywifequitherjob.com/K-L-A-V-I-Y-O. Once again that’s, mywifequitherjob.com/K-L-A-V-I-Y-O.
Now I also want to give a shout out to Privy who is also a sponsor of the show. And Privy is the tool that I use to build my email list for both my blog and my online store. Now Privy is an email list growth platform, and they manage all my email capture forms. And I use Privy hand in hand with my email marketing provider. Now there are a bunch of companies out there that will manage your email capture forms, but I like privy because they specialize in ecommerce.
Right now I’m using privy to display a cool wheel of fortune pop-up. Basically, a user gives their email for a chance to win valuable prices in our store and customers love the gamification aspect of this. And when I implemented this form email signups increased by 131%. So bottom line, Privy allows me to turn visitors into email subscribers, which I then feed to my email provider to close the sale. So head on over to Privy.com/Steve and try it for free. And if you decide you need some of the more advanced features, use coupon code MWQHJ for 15% off. Once again, that’s P-R-I-V-Y.com/Steve. Now onto the show.
Intro: Welcome to the My Wife Quit Her Job Podcast. We will teach you how to create a business that suits 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.
Steve: Welcome to the My Wife Quit her Job Podcast. Today I’m honored to have Andrew Youderian with me on the podcast. And Andrew actually has the distinct honor of being the very first guest on my podcast ever in episode number two. Back when this podcast had zero listeners, he took a risk to come on and I really appreciate it, and it’s been three years since then. And maybe there’s a reason why I actually haven’t had him back on in three years.
But anyway Amazon – not Amazon, Andrew has created and sold two dropship e-commerce businesses, Right Channel Radios and Trolling Motors. He is a well known figure in the e-commerce world. There is a blog and his podcast at Ecommercefuel.com. And in my opinion, he runs the best small business e-commerce community that I’ve ever come across specifically catering to six, seven, and eight figure businesses.
And today what we’re going to do is, we’re going to talk about how Andrew created this incredible community, and some interesting statistics regarding the e-commerce landscape based on the members in his community. And with that, welcome to the show Andrew, how are you doing today man?
Andrew: I am doing well Steve, thanks for having me on. And I think it’s probably wise of you to only have me as the first guest when nobody was listening as opposed to 10, or 11 or 12 because it’s a safer bet for you, you didn’t scare off as much of your audience, and you’re probably the better for it today. I’m surprised you had me back on.
Steve: I think it jump started the podcast actually in the very beginning. So it got a slew of visitors sucked in from your community, and it just propelled it upwards from there.
Andrew: Well, it’s good to be on here man, thanks for the kind intro.
Steve: Yeah so I mean it’s been three years since I’ve last – well not really since I’ve checked in with you but since you’ve been on the podcast and the listeners have checked in with you. So what have you been cooking up, and do you ever plan on selling physical products again?
Andrew: Yes, you give me a hard time all the time which is really funny as do other people very justifiably so. Yeah I guess three layers of what’s happened in the last three years. The last three years, I have sold my last like you mentioned, that last physical products business the CB radio business. That was 18 months ago. I really doubled down on Ecommerce Fuel which is like you mentioned private community for kind of seven figure store owners.
And I still I have — there’s – I’ve got a small product, I manufactured and designed and sell on Amazon that there’s a very small amount of revenue that keeps me just a little bit [inaudible 00:05:06] sturdy into the game. But really trying to spend most of my time, 80% of my time on Ecommerce Fuel and just doing my best to connect to merchants over there, build a great community there rather than selling and that’s what I’m focused on. So, to answer your question, potentially yes in terms of the big physical products business like a massive one. I think my focus is going to be on the community for the foreseeable future.
Steve: Yeah that’s interesting because what are some of your motivations, so what were some of your motivations for starting the forum in the first place, and how have they kind of transitioned now that you’ve sold your businesses?
Andrew: Yeah the motivations I think were to twofold. One was I didn’t see anyone doing it. There was no to my knowledge — well actually you, I would say you were probably the — in terms of at least the blog and the content, I actually remember looking at your site before I got started at Ecommerce Fuel I think and this is really cool, but I wish there was more of it. So motivations on the community side, was to build a community of peers in the e-commerce space, because I didn’t see that out there.
And then also just thinking I felt like I had a – there was something I would enjoy doing. I thought maybe I could add value to people’s lives through it, and also potentially make it into a viable business. So I’ve always enjoyed getting people together, kind of community building at some scale. And so those were the two motivations kind of behind the genesis of it.
Steve: I’ve actually tried to start small communities in the past, and I must say that I’ve never been nearly as successful as you have. So I kind of wanted to know your secrets. Let’s go back to the beginning, like when you had zero members like how do you start a forum? And just for the listeners out there, Andrew actually charges a monthly fee to belong to the forum, and that makes it actually double as hard. So let’s start with the basics first, like how did you choose your platform? What do you use and why did you choose it?
Andrew: The platform isn’t super important. There’s a couple of key things you should have. Like anything a lot of times in some instances technology is probably far more important as like who’s in the community, the personal relationships, and kind of your strategy. But to answer your question, the platform we’re in one right now is called Vanilla Forums. It’s a hosted forum software. You can also get the open source version if you want to run it.
And the big, probably the biggest thing for me when picking forum software was that I cared that it had the mentioned features. So in some forums if you’re going in and in our forum at least you can do an ad to like Steve Chou. And you will be notified if I mention you in a discussion. And when you’re starting a community, to get the community to a point where it’s going to be able to be self-sustaining based on the kind of organic discussions and contributions from the membership. That takes a long time.
And so you have to have someone likely the founder who have [inaudible 00:07:48] to really drive that engagement discussion and activity for a long time. And so having the ability to take people in discussions that also notifies them and pulls them into the discussion was huge and that was the biggest feature I looked for.
Steve: Interesting, yeah because the forum software I use, I actually didn’t do enough research, and mine does not have that ability. And I guess that — is that — would you say that that actually drives a lot of discussion, the ability to tag other people?
Andrew: I would say it doesn’t drive a lot of discussion now. I think it’s a crucial element for any forum software, but I would say it’s probably two to three or four times as important early on, when you’re trying to really get some of those early discussions going. So yeah it’s — and I’d still say it still drives email notifications I would say even more in general probably drive a lot of the discussion and the engagement people coming back in.
Steve: And when you’re starting a community, it’s like a chicken and egg problem, right? So in the beginning when you have no one and especially for a community like yours where you actually screen out based on revenue, how do you convince someone who’s making a lot of money to join this forum when there’s nobody there in the beginning?
Andrew: Yeah so it’s tough because some of my strategy was you’re exactly right, you have a chicken and egg problem, and you can’t charge for something when there’s no value there I think. So most people try to say, hey to join my community it’s $100 a month, but it’s crickets that doesn’t last. That’s pretty sure fire recipe for disaster. So my plan was — and it really takes a while to ramp this up was I spent probably a year just blogging, starting to get to know people in the e-commerce space and this has been after probably four or five years of just running an e-commerce business, and building up connections and a network in the e-commerce world.
And so every time for that year when I was blogging, I’d come across someone that I thought was interesting, had meaningful experience that I really enjoyed talking to, and I thought would add value to a community. I would add a Gmail label to them saying I’ll try to remember in the community. And I did this for the whole year, so it took me probably a year to build up a kind of an initial group of 150ish maybe 175ish people that I wanted to see the community with.
And so that took 12 months, and then when I was ready to go over the course of 30 days, so okay here we go. And you really have one shot at this, right, you have one shot to build the momentum, because if you lose the momentum, it’s going to be really difficult to get to where — if you try to get it again with the same people which is can be challenging or you want to build a new seed list of people. And so for 30 days, every day I would bring five people into the community, tell them what we were doing, invite them personally.
And I think for those especially that initial group of people; you have to have some kind of personal relationship with them. And so bringing them in, I’d make introductions to everyone that came in with other people, every week starting probably at least three or four discussions where I would kick it off and then try to using that tag feature to bring five or six, or seven people in to try to get it going. So that was kind of how I got it going from nothing.
Steve: I mean how do you get people to post their content? Okay so for the people who have never been to these forums like there’s members there right full on like ten page essays on what they’re working on and what’s working and what not, like how do you get that, how do you encourage that?
Andrew: I think part of that is just the type of people that you invite in. Some people like to do this, some people don’t. Probably that’s by example, I’m less good at this now especially since I don’t have as much hard data too. I’ve kind of gone for more of an operator role to more of a kind of a community manager and try to set the direction and vision for the community and have a macro role as we’ll talk about later with some of the industry stats. But early on in the early days I tried to lead by example with that with some posts.
And so probably setting that culture and bringing in the right people. Part of it too is highlighting people and appreciating people. I think when somebody goes in and they have a post, and they spent a lot of time on it and nobody notices it, then that’s tough right there. So what is the reward for doing that? But if they do spend a lot of time on something and the person who’s running the organization really notices and reaches out to them and thanks them for it, that’s beneficial if they get a lot of likes.
Another big feature I wanted in my forum software was to have something that could have an upload or a like functionality. We have a like functionality just like Facebook. There’s you know just like Facebook like there’s something pretty cool about spending time on something and seeing a dozen, 15, 20 people who are your peers that you respect acknowledge the work that you’ve done. I think that’s pretty powerful, at least it is for me.
And so those are I think all those things kind of in concert help. If you had just one of them that wouldn’t do it, but I think the kind of the trifecta of it can be helpful in setting a culture and also kind of helping build credibility and trust for encouraging people to post those things.
Steve: So far a lot of the features that you’ve been mentioning in your forum are actually covered by Facebook groups. So I was just kind of curious, why the decision to take it off of Facebook?
Andrew: A few things one, it’s hard to customize Facebook. We’ve built out some custom functionality with our community that there’s no way we could do with Facebook, that’s one. The branding is a second thing. Third, I feel like it’s less of a community like maybe this is just a bias, it’s not fair. But I feel like there’s less of a – it’s less of an independent autonomous community.
I wanted it to be a place where this is the — this is e-commerce so this is where you come to connect with other established writers, not like, oh I’m also checking out pictures from my brother and my best friend’s wedding. Oh here’s some e-commerce stuff too, maybe I’ll jump in there. I want it to be a dedicated place for people to go. And also ownership too, I wanted to own it like Facebook.
Andrew: I mean you think about the credit that they — I don’t know if they’ve done this with private groups, but think about how much they’ve cannibalized the organic traffic you got from your organic fan listings. Like you got to pay through the wazoo [ph] now to reach people that initially they promised that you could always reach if they liked you.
Steve: Yeah they definitely nerved the reach of groups even as well.
Andrew: Oh they have.
Steve: Yeah they have, they have. So yeah I was just curious at the time though it seemed like Facebook would have been the easy way out since it had all these features. Let’s talk about — you mentioned culture a whole lot, and so I just wanted to kind of talk a little bit about how you screen your people to come in outside of the revenue requirements of course.
Andrew: Yes so whenever people apply, we do a full on review of their website. And the requirements right now are you have to be doing at least a quarter million dollars in annual sales or work for a business that — work full time for an e-commerce business. And occasionally we’ll let in very select service providers if we think they are a really good cultural fit for the community. But for an average store, we’ll go and we’ll look and it’s we’ve kind of got like an internal process for doing this, and can give away everything so people can game the system.
But you can look at — on both ends of the extreme let’s take a store that you land on. And you go to their trust pilot page and over the last 30 days they’ve had 400 reviews and their site is well laid out. They have lifetime reviews of let’s say like 5,000 reviews from people. You can read through those. Let’s say they’ve got domain authority on their domain of 40, they’ve got 15,000 Facebook fans. There’s a pretty good chance, I would be shocked if that store was not at least a quarter million in sales right. So that’s pretty easy, and especially if it comes from an application with somebody with the domain in their email address.
On the flip side of that, if you go to a site and it’s not designed very well graphically, it just looks really horrendous, it’s not laid out well, domain authority of 10, no engagement on Facebook or review sites, their product descriptions aren’t well done, there’s nothing that seems like they’ve grown, working toward or social signals or SEO signals. They could still be crushing it with paid traffic behind the scenes maybe on some pages we didn’t see, it’s a possibility. But in that case we’ll ask people for revenue proof if that’s the case. That’s kind of a sense of our process.
Steve: What about like Amazon folks since there’s less evidence I guess.
Andrew: Yeah so if you’re on Amazon a couple things, I mean we require everyone to be transparent on the Amazon front as well. That’s also a big part of the community is transparency, so everyone has to use their real name or real store. Some people don’t like that and that’s totally understandable, but that’s part of our membership and they’re not — if you want to be a member that’s what we require.
So in that case if we look at their merchant page because everyone has a merchant page to list their products, and we see let’s say they’ve got a dozen products and all of their products have over one hundred reviews, probably pretty safe bet they’re doing the volume that we think. And we actually require $50,000 per month if you’re just on Amazon versus you’re kind of 20ish if you’re not. But again same thing if it’s kind of weak sauce, then it’s hard not to mess the long term. But if it’s hard for us to tell at a glance that they’re doing at least what we think we require, then we’ll ask for a revenue snapshot from their Amazon.
Steve: What about personality fit, like do you actually interview these people and get an idea of whether they’re going to contribute personality wise?
Andrew: Yeah good question, so we don’t. We don’t interview ahead of time but we do look at we’re reading the little things in the application and if people are on kind of around the border and they have a real thin application, that’s something that we’ll at times we’ll say, I suppose not a good fit. More so than that though it’s when people come into the community. I have a very — I love discourse and good discussions and debate, and I hate people who are disrespectful and rude.
And so those are done on a regular basis. We’ve tossed out people who were just kind of a one strike warning, like this last month actually we had to reach out to someone saying, hey man, the way you interacted with this person here was totally out of line and just downright rude. If it happens again we’re going to throw you out. And we have a pretty strict no jerks policy and I — yeah I mean I don’t feel bad about tossing people out who are a good cultural fit after they’ve had one warning.
Steve: What happens to posts like semi-naked pictures of like a popular blogger or podcaster of EcomCrew for example? Will that get like a strike?
Andrew: Well it depends how good the Photoshop job is and who it is. So as long as they’re not totally – I agree, I know exactly who you’re referring to, you may be getting an e-mail from Laura. You’ve been on our watch list throughout Steve, so we may have to talk off record about some of your activity.
Steve: So you give people a strike if they’re disrespectful and if they do it again they’re out.
Andrew: Yeah and if they’re really bad. I mean if they come out and they’re just you know — it’s all I mean community management and moderation is something that is tricky. There’s a lot of judgment and judgment calls involved, and if somebody did something atrocious, we will throw him out without a single strike. But usually you try to — a lot of those people don’t — what I have found is people communicate in very different ways just like they would in person to person, same thing with written.
Some people are very careful about how they write and want to make sure they don’t come across as rude or mean or aggressive. Other people just don’t think about that, they don’t understand the way that they come across in their written word, and sometimes people are being malicious, they just don’t — it just doesn’t forever click in their brain that this could come across really poorly. And so yeah someone like that and it’s not in a malicious thing more than just a lack of being conscientious and that’s something we’ll definitely warn him about.
Steve: Yeah so since you have a pretty good community of e-commerce entrepreneurs, what’s interesting is when you have a whole bunch of those people together, then you can extract like kind of macro data about them, and I know you sent out this ridiculously long survey, or you send it out every single year, it takes me a good 30 minutes to fill it out.
Andrew: And you complain about…
Steve: No not that I complain about it or anything. It’s a very good survey, very thorough; it could be a little shorter. I’ve just put that out there.
Andrew: Steve knows I wouldn’t have all these great insights to share on your podcast.
Steve: That’s true, so let’s start sharing those insights. So I’ve got a couple questions first. I know you have a couple of insights that I’m probably not going to ask you about here, but I am actually curious about the percentage of people that are private labeling and what the state of drop shipping is right now.
Andrew: Yeah so this is a report we call The State of the Merchant Report, and if you want to check out the full thing, you can go check it out at Ecommercefuel.com/2018-report. And it’s where we survey — this year we had 450 respondents to it, and so we get data on all different facets of their business. About half, a little over half I think are ECF members, the other half are just people in the community that run stores.
And so you want in terms of private labeling what percentage of people are private label. So we broke it up in a kind of five business models. You’ve got pure drop shipping; you have a hybrid model where you’re maybe drop shipping and also reselling something. Proprietary manufacturing, you’re making your own product private labeling where you’re making something but it’s probably a contract on a contract basis and either someone else’s design or tweaking someone else’s design and then pure reselling.
And so to answer your question Steve, private labeling makes up about 22% of the overall mix. So not just shy of a quarter and drop shippers make up about 16% of the whole mix. So you asked about the state of drop shipping, and it’s interesting because the only reason I sold my business 18 months ago was just being worried about the macro environment, and how difficult it is to be a dropshipper in today’s age.
I think in e-commerce if you don’t [inaudible 00:21:19] I think most people know this, 2018 if you don’t have something proprietary and you’re trying to just win on distribution, Amazon is going to crush you there. But what I found is drop shipping actually has — there definitely if I had to pick the model I would least like to be in, it would be drop shipping given the margins…
Steve: What are the margins that in your survey for drop shipping just curious?
Andrew: Yeah so much for drop shipping, so drop shipping your gross margin on average for a drop shipper is 28% compared to manufacturing the high side which is 49%.
Steve: So is that gross margins or net margins?
Andrew: Gross margin.
Steve: Gross margin, okay got it.
Andrew: You look at the net margins; your net margin on average for a drop shipper is 14% versus manufacturing 20% and private label which is actually a bit higher at 21%. But yeah I mean but you still it’s probably the hardest business to be in, but when you look at it, I think last year when we did this 2017 survey, one of the metrics I tracked is the number of stores with flat or declining revenue. And I think it was 45, close to half of all drop shipping stores were either stagnated or declining, in this year that had shrunk to only 33% of stores.
So you had two thirds of them were growing, and the average growth for drop shippers this year was almost 33%. It did better than I thought, and one thing I was wondering about this is I wonder if Ali Express, drop shipping from China and Shopify being over low and doing a lot to promote that, I wonder — I don’t have any data on this, but I wonder how much of that kind of strength and up take in popularity impacted those drop shipping numbers.
Steve: Yeah that’s a good point. I was always curious whether people are actually making money with that. So just for the listeners out there who don’t know what I’m talking about, Shopify there’s this app called Overload which allows you to easily do drop shipping from Ali Express which is this marketplace in China where you can get products really cheap from the manufacturer and then send them direct to the consumer through Amazon. And I just can’t imagine that being a good long term business model.
Andrew: Yeah I think it would be something that could be fun to spin up and play with, but if you want a business that can be around five ten years, yeah absolutely, because barriers to entry are low. It’s there’s a lot of the problems you have to drop shipping traditionally, but with the increased problems of you’ve got longer wait times, you probably have even more quality control issues because you have less intermediaries between the factory and the Customer. Yeah I mean I think it’s…
Steve: Plus you can take a month for the product to even get there.
Andrew: Yeah you get to deal with — and you can set expectations for people I suppose when they buy, but yeah I think there are some — it would not be the model I would choose to try to build a business that is going to be around in a decade.
Steve: There’s nothing in your survey about whether people are doing that, right?
Andrew: No unfortunately not. I was trying to – I heard a lot of people complaining about the length of the survey, trying to be more concise.
Steve: So the next question I had and I don’t know if you have statistics on this is just kind of like we all talk about how Amazon has taken over the world. Is that what you’re seeing in your survey as well in terms of percentage revenue of Amazon versus your own e-commerce store?
Andrew: Yeah so you look at the some of the trends with Amazon, and so I’ll give you three here. So the number of stores that listed Amazon as their number one sales channel was 26% this year, and that was up from 20% last year. So the number of stores that Amazon is the number one place they move product that’s up almost a third. Number of stores selling on Amazon in any capacity is 55% of merchants.
And if you look at the — I think this is maybe the most telling number — if you look at the aggregate revenue, so if you look at all the revenue from all of the people who responded to the survey, it’s about a billion dollars in revenue. And if you look at the percent that came from Amazon, last year that was about 200 million, this year it was about 276 million. So up pretty starkly from the year before. And so Amazon is definitely of course — I mean this isn’t a surprise they’re growing and you can see in the numbers. So they’re definitely taking up a larger share of the…
Steve: It seems much lower than I would have expected actually. So that’s like a third of the people, so most of the people are making a third of their revenue off of Amazon it sounds like.
Andrew: Yes if you look at not even that. So Amazon well it would be the percent so you look so actually on aggregate basis probably about a little over a quarter of the revenues coming from Amazon.
Steve: Right like 27 yeah interesting. And then how many people are just – did you say 20% are just only Amazon?
Andrew: So if you look at the people that are let’s see, I don’t know if I actually have a number for the percentage that are actually…
Steve: It looks like the survey is going to get longer man. It’s just not comprehensive as I thought it was.
Andrew: To be fair, if you’re listening to this thinking like why in the world would anyone spend 20 minutes filling out a survey, we do every year give out a free international round trip ticket anywhere in the world. So that’s kind of the carrot that we use to daggle in front of people.
Steve: Has anyone been announced yet, because I didn’t get a notification that I had won.
Andrew: Yeah, I was looking forward for this podcast.
Andrew: They’ll send you the notification so we can make it official. I don’t actually — I could get that, I could circle up with you up on the show notes. I don’t know the number of people that actually are you know what was your question, your question was how people that are predominately selling on Amazon?
Steve: Yeah or only selling on Amazon.
Andrew: Only selling on Amazon. So I don’t have that number right in front of me. I would guess just based on a long weekend spreadsheet data that is probably about 25% of people are pure play Amazon players, but that’s just a guess.
Steve: Okay and I’m also curious of the members in your forum who are making the most, how long have they been selling online period, like did they start out with their own stores, did they start on Amazon and transition over?
Andrew: Yeah. You mean just anecdotally?
Steve: Yeah anecdotally or what you know. I mean you talk to a lot of the members of your forum; I was just kind of curious.
Andrew: Yeah I would say I think it really varies. I don’t think there’s a hard and fast rule there for who kind of that — I think about people that are really killing it in the community. You have some people who don’t sell on Amazon, have a really high quality branded sites with a very cool product, high quality products, high quality branding and they’ve figured out a way to drive revenue off Amazon.
And you have people too that are doing incredibly well with but with you know with an Amazon channel, that they went on Amazon, they used that to kick start the brand and now they’re taking a lot of those proceeds and the spoils from the Amazon launch and using that to build their own brand site at their own independent website out. So I see people doing very well with multiple different approaches. I don’t think there’s necessarily a category or a mold you can fit people into.
Steve: So you mentioned growth numbers earlier, and I’m curious did revenue — like how did revenue go up with people’s own sites in general as opposed to Amazon sales?
Andrew: Yeah so if you look at the revenue growth for stores that kind of broke it out, if you’re not selling on Amazon — so the average growth rate, I can’t remember if I mentioned this for the entire group was about 37% year over year.
Steve: That’s crazy.
Andrew: It is crazy although if you look at e-commerce growth in general year over year, it’s roughly isn’t going to serve [ph] a couple of days ago roughly and like for 2017 in the low to mid 20s range, so call it 22, 23%. And that’s for everyone right, even enormous massive big box stores. So when you think about merchants that are on the smaller end of that which relatively speaking seven figures are still pretty small in the broad scheme of things in a global economy, you make sense that they’re up a little bit so 37% on average.
If you look at stores that do not sell on Amazon, they grew at a 30% rate. If you look at stores that are selling on Amazon in some capacity even if it’s just 10% of what their sales, they’re growing at a 41% rate. If you look at stores where Amazon is sixty plus percent of their revenue, so the majority of their primary channel, they’re growing at a 51% rate.
Steve: Wow, Amazon is just killing it.
Andrew: Yeah they really are. I mean they’re — and not to say it’s the only way you can grow, but on average the more Amazon you have the faster you’re growing.
Steve: What about the best source of traffic like if you’re running your own store, like what are most people using to get new sales?
Andrew: Yeah so I looked at top traffic sources for everyone, and so this isn’t the — when I say these percentages, this is not the average percent of traffic that comes from a certain source, but it’s the percentage of merchants that listed this traffic source as their number one traffic source. And it’s interesting because you look at merchants that pay for traffic and three quarters of stores actually pay for traffic, but only 30% of stores list traffic paid traffic as their top traffic source.
You look at even despite all of the myself included moaning and groaning and wailing on the fact that organic traffic is getting harder to get and Google is just pushing those organic results further down below ads, organic search represents over half like 51% of all the – excuse me 51% of merchants reported that organic search was still their number one channel.
And in terms of conversion rates out of this, from that kicking out dive into deeper, but if you look at the conversion rates for merchants, so again this is the conversion rates reported by merchants based on their number one channel, direct was 3.94%, email was 3.32%, paid traffic was 2.66, and organic was 2.40. So email and direct email and paid traffic were by far the best converting channels for people that had that as their number one.
Steve: Interesting, you just said paid traffic was only 2.6%?
Andrew: Yeah 2.66% yep.
Steve: I’m wondering then if most of those people are running Facebook ads then, because usually Google AdWords conversion rates tend to be higher, at least for my store. I mean I only have one data point.
Andrew: Yeah again those people, I didn’t differentiate to try to – on the…
Steve: Oh God, this survey is worthless man.
Andrew: I am going to send you and let’s see where the [overlapping 00:31:36]. And when you don’t fill it out I’m going to go on my podcast and totally call you to town for it.
Steve: So are there any other interesting statistics? I know you’ve got a whole spreadsheet probably in front of you right now, that we hadn’t covered.
Andrew: Yeah so a couple more that came up. I was actually surprised that I saw that gross margins have stayed pretty resilient over the last year. So last year Amazon of course as we’ve just talked about Steve, they’re blowing up, their fees are always increasing and they take their little cut. Paid traffic costs are up this last year by 15% or so.
Steve: Ouch okay.
Andrew: But when you look at the margins year over year, they stayed almost the same. I mean you look at let’s see — so if we look at the margins in general when I go to that part, so gross margin on average were 39.2% across the board. I think they were like 39.6 last year and net margin 17.4 this year; last year I think they were 17.7. So they’ve stayed stronger than I would have guessed, that’s one thing.
You look at the discrepancy on the margins between people who sell primarily through their own store versus selling primarily on Amazon, and that’s widening a little bit. Like if you’re selling primarily on Amazon, your gross margin is 36% and your net margin is 16.6%. If you’re selling primarily on your storefront, your gross margin is going to be 40.4%, so about 4% higher, and your net margin is going to be 17.7 so a percentage higher and that’s widening a little bit from last year. So that’s one interesting thing.
Steve: So before you go on, so PPC costs you said have increased 15% roughly. And so how are they making up for it on the margin side?
Andrew: And that’s a big question I had. You’re thinking like how are the margins not getting eaten away more when you have these increasing costs? And the one thing that I saw and I’m not sure to be honest with you but the one guess I had and this kind of ties in to the probably the most startling data point I saw from the entire survey was that conversion rates, I think conversion rates last year were 2.10% across the board. This year they jumped up to 2.62%, which is like a 20% plus for revenue, like that’s normal number but anyone who’s tried to increase your conversion rate by twenty plus percent like that’s hard to do for one person let alone for like an entire universe of 450 store owners.
So thinking through that I thought that maybe one of my hypothesis was maybe more people, just a ton more people are getting into manufacturing and other markets maybe where they have better margins and better conversion rates because conversion rates in manufacturing tend to be higher than some of the other reselling models. But I saw the conversion rates go up across the board, across all different types of models. And so my best guess is that just it’s been a really good year with the economy at least because it’s a pretty US centric survey and the people are willing to spend more. But I think that’s part of the offsetting of the increased cost.
Steve: Either that or people are getting more intelligent about retargeting and site design and that sort of thing which is incidentally things that you learn just from browsing the forums because people share all that stuff pretty openly which is pretty amazing.
Andrew: Yeah it’s a good point, I should use this to leverage.
Steve: Come on Andrew, I’m just marketing your forum here.
Andrew: For the community, I’m slacking here.
Steve: Well it is true like [inaudible 00:34:59] Mike Jackness for example; he’ll post like this five page essay on what he did to improve sales whether it be like Facebook Messenger or whatnot. And this is stuff inside that I’ll read and then I’ll go try and instantly I just started doing Facebook Messenger stuff about a month ago, and I have almost 1,000 people and I sent out my first blast the other day and I made about 50 cents per subscriber which I was impressed upon because I didn’t even know what I was doing, so stuff like that.
Andrew: Yeah and that’s a good place, I didn’t even think about in terms of because you’re yet to see the survey, so ECF, Ecommerce Fuel centric. That’s a good point, I didn’t even think about that. A couple more metrics and before you throw me off the podcast here Steve, this is kind of fun, your favorite billionaire, so you have to really guess this between Elon, Richard Branson, Mark Cuban and Jeff Bezos, who do you think people most wanted to have lunch with?
Steve: Elon Musk, that was my answer at least.
Andrew: Elon and who do you say number two was?
Steve: Probably Bezos.
Andrew: So Elon Musk you’re right. Number one with 30%, almost 30% of the votes was Elon. Richard Branson was number two, 24.8, Mark Cuban was number three with 23.1, and in an e-commerce survey Jeff Bezos came in dead last with 22.2%.
Steve: Wow okay. I guess it’s because the other guys seem more personal, like Richard Branson just seems like a really nice guy, right?
Andrew: He does I agree, and he’s also to be fair he’s not trying to kill a bunch of members businesses, that might have something to do with it too.
Steve: That’s true, that’s true. And Cuban is pretty nice too. I mean if you get on his good side it seems at least, based on Shark Tank.
Andrew: Yeah and this is before too the whole of the Falcon Heavy launch and all that kind of stuff, so it’d be interesting that we do the poll the today. One less thing on Amazon front then we can if you have any question Steve, but the last thing I want to mention was if you look at obviously Amazon is becoming a bigger part of most people’s businesses and growing like crazy and powering a lot of growth. But I also took a look at — one thing I ask every year is what’s the number one struggle in your business this year? And this year I noticed a 3x increase in the number of people mentioning Amazon when asked about the biggest problem or concern, or struggle in their business.
And originally I thought like hey maybe this is just a bunch of people who have their own sites that are getting crushed by Amazon, it’s killing their own off Amazon model, but that was only 20% of people. 80% of the people mentioning struggles, it was related to like compliance issues, Amazon getting more competitive, them being more overly reliant than they wanted to be on Amazon, some kind of variation of I’m having problems or worried about Amazon actually selling on, so I thought that was interesting.
Steve: And is it because people are getting banned or it’s because they’re getting maliciously attacked?
Andrew: It’s all over the place. So I kind of broke it down, people complaining about Terms of Service, policy compliance, things like that was about 70% just people complaining about Amazon getting more competitive in general, and that would also include people hijacking their listings, trademark issues was about 31%, and then over reliance on Amazon was also about 31%.
Steve: I just want to take a moment to tell you about a free resource that I offer on my website that you may not be aware of. If you are interested in starting your own online store, I put together a comprehensive six-day mini course on how to get started in e-commerce that you should all check out. It contains both video and text based tutorials that go over the entire process of finding products to sell all the way to getting your first sales online.
Now this course is free and can be obtained at Mywifequitherjob.com/free. Just sign up right there on the front page via email, and I’ll send you the course right away. Once again that’s Mywifequitherjob.com/free, now back to the show.
Interesting, interesting. Yeah I noticed that too just with the members of my class as well. I mean a lot of these unscrupulous sellers are actually — it seems like they’re paying people to just maliciously leave negative reviews and just destroy your listing right off the bat, and that’s happening a lot more these days. I hope Amazon does something about that.
Andrew: Yeah I totally agree. I’ve been seeing more of that too and it’ll be a hard thing to — I guess it depends on circumstance, some could be pretty cut and dry who’s right or wrong, but yeah it probably requires a lot more human interaction on that and that’s Amazon is all for getting the humans out of the equation.
Steve: I want to switch gears a little bit, like Andrew you’re sitting on a boatload of cash from two e-commerce store sales, how are you investing it, what do you plan on doing with that boatload of cash?
Andrew: Thank you for wishing that.
Steve: By the way Andrew lives, his address is…
Andrew: So investing is interesting. To be — I mostly just kept it in cash. I have done a little bit; investing a little bit in a very little amount in crypto, most is for funding anything but that’s a tiny percentage. So that’s been fun to watch, it’s just kind of a fun kind of debt speculative bet. But for the most part 99% of it is still sitting in cash waiting for some good opportunities to come along. And I think actually it’s funny you mention this; we’ve had some private discussions about this in the past.
Next week I have multiple days blocked off to really thinking through how to put some — have more of a tangible plan, but yeah right now it’s been most in cash. And my hope is to be able to with some business stuff coming up in the future, I think we’re as entrepreneurs a lot of people listening plus some of the best return you can get on your money is to be able to employ that in your own business or in other businesses that you can control.
So that’s going to be part of that with some stuff we’re going to be doing in the future hiring some more people to help out with some things, buy some assets, things like that. And the other too is I think we’re in a huge asset bubble right now. And so we did a podcast about this at Ecommerce Fuel about trying to time the market, so I’m not planning on timing the market. But I was pretty excited to see the stock market take a nice little hit this last week. It’ll probably be a tiny [inaudible 00:41:16] before it runs to 50,000.
Steve: I guess the reason why I’m asking this question is do you plan on deploying this money on buying another business, and if so would it be an e-commerce or something else?
Andrew: Probably not e-commerce just because it’s really kind of it’s my commitment to try to double down on the Ecommerce Fuel community and brand an ecosystem. I think it’s hard to do a lot of things well at once. But I would invest more in — like one thing I’m going to be doing in the future is a job board and really trying to build out a more dynamic job board for e-commerce marketing and world class customer support position.
Steve: Andrew you spoiled my next line dude. I was going to say, you know what, it would be really nice if there was just a centralized place where I could find help with my e-commerce store. And that was supposed to lead into that but you just ruined it.
Andrew: Sorry, I do that all the time. I step all over your…
Steve: This way it doesn’t seem like you’re pitching yourself and I’m genuinely curious about it.
Andrew: Which dude I need all those cues, do I put personal too much in your docket?
Steve: All right, tell us about your job board Andrew.
Andrew: No I was just — that’s probably where I was going to potentially put some money. Yeah so those were one thing, where are you thinking about putting money right now?
Steve: Probably real estate as soon as things slow down a little bit. So one of the number one questions I get asked from readers and listeners is why not just start — like you teach a class, why not just start like an infinite number of e-commerce stores? And I have an e-commerce store, I’d like to diversify. And so that’s why I went to blogging, that’s why I went to podcasting, that’s why I started an event.
And what’s next on my list, maybe something in the software space because that’s something that I haven’t done yet, but it’s just taking me a long time to figure out what that piece of software is going to be. I haven’t — I’m really anxious to start typing and coding because that’s what I enjoy doing, but I haven’t found anything that I feel like is going to have long term potential versus my time, because doing anything in tech, there is support, there is a whole bunch of other costs involved that ecommerce actually doesn’t have, or info products doesn’t have.
Andrew: Yeah it’s hard to do a lot of things well, that’s the other thing too is it’s really — I am not even in the same ecosystem as Elon Musk, and I think you do a really good job of this. I don’t know how you do it so well, but for me I do better when I focus on fewer things, I think most people do. And so yeah it’s hard to do a lot of things. Real estate was only — you mentioned it and I like that too. I like — we flirt with the idea of that happens somewhere else as opposed to where we spend some time. And the thing is it’s stuff for us right now as I’d love to invest in some real estate too, but it’s do you worry about how expensive the markets are in real estate?
Steve: I mean I hear that there’s a lot of growth opportunities in the San Jose and Bristol [ph] area. I mean it’s just right for…
Andrew: [Overlapping 00:44:06] is a very nice place as well.
Steve: Yeah it’s just ripe for growth. So one thing I wanted to kind of end this is we both run events, and we both know that they aren’t like the best profit centers so to speak. And I was just kind of curious like how your event ties in with your community and why you run them.
Andrew: Yeah so coming from full circle here back to the community.
Andrew: The reason we do the events is not to make money, like we make that little bit of money off of it, but when you look at how much time and energy goes into it it’s we’re probably making two three dollars an hour, it’s terrible. It’s not a good money maker. We do it because — I do it because it’s the most effective way to build relationships and to build community. And for us that’s – for Ecommerce Fuel that’s the biggest thing we’re focused on trying to build a genuine tight knit value adding community for seven figure store owners.
And so that’s kind of the mentality I bring to it. I try to really use the event as a way to cement and strengthen the bonds between the community members than a lot of the other meeting online because I mean meeting in person it’s kind of cliché, but there’s nothing like it and you can’t replace it.
Steve: Yeah totally. So for my event at least the Sellers Summit, I don’t have like this really tight community of forum members. And so the way I try to build community that way is I guess getting my most loyal listeners and readers kind of all in one place so I can get to know them better, and the hope is that these people will come back over and over again, and every year our existing relationships will be strengthened.
Andrew: Yeah, have you seen it like have you seen a good percentage of people…
Steve: Yeah. I don’t have the exact statistics, but I think it was like thirty something percent. We also changed the event a little bit this year in that we are screening for revenue and we’re hoping to get a large percentage of people who actually sell full time as opposed to pure beginners.
Andrew: Yeah I know it’s a great event, I was able to come last year, I was there the first year you did it.
Steve: Tell everyone what you were doing during the event last year.
Andrew: I was in an interview within meet up in the Utah desert hanging out with a bunch of other people who have an obsession with having fun and playing and sleeping in 30 year old fans.
Steve: Yes, yes I don’t know e-commerce Sellers Summit camping out in a van with a bunch of fanatics.
Andrew: If I hadn’t committed to it and paid for it ahead of time, I wouldn’t have been there. And I will be there this year, I’m very much looking forward to it Steve.
Steve: Cool. Andrew, where can people find this job board, where can people find your forums, and where can people find information about your event?
Andrew: Yeah thanks. So Ecommercefuel.com is the best place just to check out everything. If you want or interested in learning more about the community or joining, you can head over there and just click at the join now button, and you can learn more about how that whole process works. The event is limited to community members only. So if you do want to be a part of that, just the first step would be joining the community.
And on the job board front, if you are — we’ve got a job board that we’re launching, and the real vision and focus behind it is to be able to help seven figure store owners get great marketing talent and world class customer support. So if you have a store and you’re looking for people, looking to find a place you can post jobs and get great talent, that’s going to be the focus.
And if you’re in the e-commerce world as well and you want to find out about opportunities with kind of really interesting, fun, cool e-commerce companies, and we’re also going to some internships as well. So if you’re kind of still just getting — if you’ve got a lot of hustle and grit and maybe some insider experience but not a ton of e-commerce professional experience but you want to maybe learn about some of those intern opportunities, we’ll have those over there as well. So, all those would be Ecommercefuel.com/jobs.
Steve: Is this job board for the general public?
Andrew: It will be yes.
Andrew: Yeah we’re definitely going to make it a little more tied in and hopefully will be more of a service to the board members first and foremost, the community members, but yeah it will definitely be available to the general public.
Steve: Cool man. Well Andrew, thanks for coming on again after three years, and thanks for being my very first guest which jump started the entire podcast.
Andrew: Hey, thanks for taking on a limb and let me come back on knowing my personality and what I could potentially do to damage the brand. So thanks for having me, but it’s good to be on as always.
Steve: Yeah man, I think you’re due for a Photoshop job, so we’ll see what we could do about your podcast image for this episode.
Andrew: Thank you dude for a warning before.
Steve: All right dude, take care man.
Andrew: Hey thanks Steve.
Steve: Hope you enjoyed that episode. If any of you are selling online and making over $250,000 in yearly revenue, then I highly encourage that you sign up for Andrew’s forum over at Ecommercefuel.com. It will make a huge difference to your business. For more information about this episode, go to Mywifequitherjob.com/episode208.
And once again, I want to thank Privy.com for sponsoring this episode. Privy is the email capture provider that I personally use to turn visitors into email subscribers. They offer email capture, exit intent, and site targeting tools to make it super simple as well. And I like Privy because it’s so powerful and you can basically trigger custom pop-ups for any parameter that is closely tied to your e-commerce store. If you want to give it a try, it is free. So, head on over to Privy.com/Steve, once again, that’s P-R-I-V-Y.com/Steve.
I also want to thank Klaviyo which is my email marketing platform of choice for e-commerce merchants. You can easily put together automated flows like an abandoned cart sequence, a post-purchase flow, a win-back campaign, basically all these sequences that will make you money on autopilot. So head on over to mywifequitherjob.com/K-L-A-V-I-Y-O and sign up for free. Once again, that’s mywifequitherjob.com/K-L-A-V-I-Y-O.
Now I talk about how I use both of these tools in my blog, and if you’re interested in starting your own e-commerce store, head on over to mywifequitherjob.com and sign up for my free six-day mini course. Just type in your email and I’ll send you the course right away. Thanks for listening.
Outro: Thanks for listening to the My Wife Quit Her Job 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.