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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 have Mike Brown on the show. Now Mike is someone who I was introduced to through Tommie Walker who runs the Shopify Plus blog. Normally I don’t actually interview referrals who I haven’t met, but Mike has an amazing story.

He runs the popular coffee brand Death Wish Coffee, which even has its own Wiki page which I found out while I was doing my research. His company has been featured in countless publications, and he even had an ad in a super bowl which is pretty cool.

Normally I wouldn’t necessarily advise anyone to go into the coffee business, because it is extremely competitive and quite saturated, but Mike made it work with a very unique value proposition. With that welcome to the show Mike, how are you doing today man?

Mike: I am great, thanks for having me here.

Steve: Yeah, so I did a bunch of research on you prior to this interview, but please give us the quick background story, and tell us about Death Wish Coffee, how you got started in the coffee business.

Mike: I was a [inaudible 00:03:03] right out of college, and I worked for the city of New York in the controller’s office, and I realized real quick that wasn’t for me really. I got to study forensic behind a desk all day look inside like bank accounts, so I just took time off. I tried to figure out what I wanted to do and I’ll hang out of coffee shops a lot. I sat there, I decided, hey maybe I’ll try and start my own coffee shop.

Steve: Just randomly or?

Mike: Yeah right away, I wanted to learn about business, learn how to run a business, and the coffee business seemed pretty simple, just making coffee and sell it to customers that walked in.

Steve: So this is a brick and mortar coffee shop, right?

Mike: Right, a brick and mortar coffee shop. I tried to start a couple; it didn’t really work out so well. Then I finally found a company, I found a guy that wanted to sell his coffee shop, this is in 2008 when everything was kind of turning sour for everyone.

I got a decent deal on it, but at the same time it’s not a great time to go on business by yourself, so I started losing money head over face. I learnt that running a business wasn’t as simple as putting products on the shelf and hoping people will walk in.

Steve: Was this because your coffee shop was just like every other coffee shop, and was it like the rent that was pretty much dominating your costs?

Mike: Yes, certainly a grey area, but yeah the rent was high. Actually the employees, that the cost employs it, that was always the highest expense on my books just keeping people behind the counter, and yeah it was like every other coffee shop. I mean we tried to differentiate ourselves a bit by offering fair trade organic products, and some local products, but I don’t think that was enough really.

Steve: Were you selling online at the time or no?

Mike: No, not at this time, it was just solely brick and mortar. I kind of made the big mistake of when customers came in and gave me a suggestion, I pretty much took everyone’s suggestion, I put on the menu. After a couple of years I had this menu that was like four pages long. Buying inventory was a nightmare, and just keeping stock was a nightmare and things would go bad.

It was a big mess throughout; I realized I was going to lose money. It took me long to figure out how to run the business and what decisions I should make to make the business a little bit more profitable.

Steve: At the time it wasn’t called Death Wish Coffee either, right?

Mike: No, it wasn’t, it was called Saratoga Coffee Traders. It still exists in Saratoga Springs New York. The menu is a lot smaller now; really kind of learned to kind of focus on our best products.

Steve: How did that evolve into Death Wish then?

Mike: As I was struggling with making ends meet, I started doing whatever I could to learn more about business, to learn more about making money so I could keep the coffee shop always open. I started reading a lot of books about selling online, and that really caught my interest. I had an idea for this coffee by customers actually coming all the day, and every day and ask for my strongest cup of coffee.

I was always like do I give the dark rose or do I give them the coffee that the most caffeine, which sometimes isn’t the dark rose. When I knew what they were looking for, the taste, but they also wanted the caffeine as well. I put together a dark rose to have a lot of caffeine, and put our scary label on it. I sat down one day after work and made up this website, and I called it Death Wish Coffee.

Steve: What was the website, was this your own personal ecommerce store at the time?

Mike: Yeah it was. It was deathwishcoffee.com, it still is today. It looks a lot different now than it did when I first made it.

Steve: Sure, what platform you were on, just curious?

Mike: I was on Weebly.

Steve: Weebly, okay wow, and then what is it on now?

Mike: Now it’s on Shopify.

Steve: Shopify, okay of course dah, tell me about that.

Mike: I put these websites together, and I made the logo myself and put some software I got at Staples. I had the coffee, I knew what the coffee was going to be, and I knew what– I had the logo online. I didn’t actually have a product at the time put together. It wasn’t until I think a few weeks later when someone actually went on my website and bought the first bag.

I was like okay crap, now I need to put these products together, so I went back to Staples, I got some stickers, I got a coffee bag. I put together the beans out of my coffee shop and I blended them together the way I’ve been testing and I sent it out, and I got a good review. From there I sold a couple more.

Steve: How did that first customer find you, just curious?

Mike: On Facebook ad.

Steve: Oh you were running ads to a site when you didn’t even have a product?

Mike: Exactly yeah. I really wanted just to test it out first to see if it would sell. I did some testing on the product search. I had the product, but actually I didn’t have the packaging or anything, does that make sense?

Steve: Yeah, yeah of course. Okay, so you had already developed this really strong blend of coffee.

Mike: Mm-hmm.

Steve: And you were actually probably serving it in your shop?

Mike: Yeah, I was testing it out on my customers in the coffee shop, and they were loving it.

Steve: Okay, so you run Facebook– can describe what that first Facebook ad looked like?

Mike: It was a sword and cross bones, and I believe it said something along the lines of do you like strong coffee, click here pretty much.

Steve: And it just led to your site, you only had one product on the site?

Mike: Yeah just one product and actually still we don’t have many products. We just focus on our signature brand, our Death Wish Coffee. We do have 2 other brands, Walhalla Java and Belvolene [ph] coffee, but our focus is very more of I don’t know, I guess I want to say a separate basic, they are like a separate project off of the Death Wish Coffee

Steve: Okay and I actually looked around for strong coffee and there weren’t a whole– I mean there is a lot of people who sell coffee, but I couldn’t find a lot of people that specialize in the strongest coffee. Would you say that that’s the main reason why you’re standing out?

Mike: I think so, yeah, because at the time when my customers were asking me for strong coffee, I went on Google, and I was like, hey if I could find I’m the strongest coffee out there, and amaze my customers with it one morning, they are going to think I’m great, and consider even coming to my coffee shop.

When I goggled there was nothing, at the time there really wasn’t any strong coffees available. And the ones that were available they weren’t — I have had them before, and they weren’t that great. So that was the light bulb that went off. I was like; okay I can make this and sell it online.

Steve: So you have your site now and you are driving Facebook ads to it. Meanwhile you are still running your brick and mortar coffee shop, right?

Mike: Right.

Steve: So when did this shift happen and how did it happen?

Mike: So the shift happened when I decided to really focus on — I won’t even say focus, really good consistent on marketing like my new coffee brand. Actually one of my barristers was quitting and I’m like — she said, I’m like what are you going to do? And she goes like, well I don’t have real shares, I don’t want to be behind the counter being a barrister any longer.

And I said, well I got this new coffee project I’m working on; it’s an online coffee company. I’ve got a couple of sales; I’ve got some good reviews I think it can really take off if I really put some focus on it. So if you wanted to just work on the computer every day, and just post on social media, pay attention to the Facebook ads, pay attention to the different social platforms and kind of get a conversation going, I think that would be valuable.

And once she started doing that, that’s when it started to take off. When we started working on it every single day and actually I wrote out a template for her. I’m like here is a template, just a letter. Send it out to influencers, people online that have a lot of followers, or they have a good blog, or that have a good following, and see if they want to review this coffee and…

Steve: Can you talk about what was in that letter or template?

Mike: Yeah, of course I have it somewhere, but actually I know I’ll look it for now. But yes said something along the lines of we’re big fans of what you do. We have this great product; it’s got a lot of great reviews. Our audience is growing and we would like to see if you would like to try our products and possibly write a review. If so we’ll share the review with our audience.

Steve: So these were coffee blogs?

Mike: No actually, never really focused on coffee blogs. We focus more on blogs that had cool innovative products like one of the blogs…

Steve: What was your biggest here, what was your biggest feature at the time like your first early feature?

Mike: Well a blog called Cool Material…

Steve: Cool Material, okay.

Mike: Yeah they wrote a nice piece on us, and then…

Steve: And you pitched your coffee as like the world’s strongest coffee?

Mike: Yeah, we pitched it as the strongest coffee and I’m trying to remember exactly how this went, it’s a few years ago now. And it’s funny after Cool Material wrote about us, all these bloggers and news reporters, I feel like they all follow each other in some way.

So once one big blogger wrote, and I think it was a Cool Material blogger who wrote this blog piece. We started getting phone calls from other bloggers and other news reporters. And then in March of 2013 Good Morning America called, and were like, hey we read about your coffee online, we want to come up to your coffee shop and shoot a report…

Steve: Wait you didn’t do anything for that one, it was just — they just came to you out of the blue because of these blog mentions?

Mike: Exactly, yeah they came to me out of blue, they were like, they called me at 10 am, and I’m about three hours north of New York City where they are out of. And yeah they called me at 10 am and they are there by 4 pm, so I hardly had any time to prepare. And the next morning they actually opened their show drinking my coffee, and gave us glowing reviews and they said how much they loved it.

And then right after that, sales kind of took off right off almost to the point where it’s detrimental to my business, because we were selling a very small amount at that time, maybe 10 pounds a day. And all of a sudden we had thousands and thousands of pounds of coffee that we needed to fulfill. We didn’t have enough bags, we didn’t have enough coffee, we didn’t have enough labels.

I didn’t have enough staff; it was just me and my barrister, my former barrister. So I actually called customers out of the store to help me fulfill as much as I could, like place the orders for more coffee or more bags. It took me 30 days to fulfill some of these orders. I ended up refunding half the money. But what I did do throughout the entire time, I mean even though I got kicked off — I was selling on Amazon at this time too.

I got kicked off of Amazon; I got kicked off in eBay. But even though it took me 30 days to fulfill some orders and I had to give a lot of the money back, I always kept on good terms with the customer, and I was able to capture their information. So I was able to build my mailing list by about probably 30,000 people at this time. So even though the first six…

Steve: Okay hold on, so before the Good Morning America you already had 30,000 subscribers prior to the Good Morning America?

Mike: No, I probably had 20, but I think I gained another 30 right after.

Steve: Okay, so let’s back up then. So how did you get these 20,000 subscribers?

Mike: So one of the — from day one I’ve always had an email opt-in on my website, and I’ve always run campaigns to get people to opt-in to my mailing list.

Steve: These are Facebook ads?

Mike: Yeah mostly Facebook ads, I might have messed around with Google ads at the time. But yeah I was just trying driving people to our capture page, lead capture page. I think I was even…

Steve: So what were you giving away?

Mike: I think I was giving away free samples at the time of the coffee. That worked well, I mean it turned out to be kind of expensive, I mean it probably cost me about $2 for the coffee, and then another two bucks to send it out. So it just cost me four bucks a lead.

So I wasn’t making any money from the coffee, I was kind of investing just about every dollar of sales back into the business. But it’s working, it’s build there a good list and as that list grew I saw my revenue rising.

Steve: Okay that’s really interesting. So you started your list very early on giving away free coffee samples, that sounds really expensive. That’s like $80,000 worth of free samples?

Mike: Yeah, I mean I’m sure they weren’t all free samples, I’m sure some were like organic, that does sound like a lot at that time especially because I was broke.

Steve: Yeah, I’m sure this is overtime but yeah.

Mike: Yeah, that’s over a couple of years.

Steve: Okay so you would drive Facebook ad over to a landing page where you gave out a free sample. And then you would send it out, people would try it, and they would come back for sales. So I’m just curious how did you correlate the sales from those people back to your store?

Mike: I don’t think I understand the question. How did I correlate — how did I track that?

Steve: Yeah, how did you track it?

Mike: I don’t think I did at the time, I wasn’t tracking. But I was seeing growth on my mailing list, and I was — we would offer pretty much a deal just about every week, or we had some type of free giveaway, every week. So we sent out a newsletter. We could see as our list grew the revenue also increased, and we still do that today.

Steve: Who do you guys use for email provider?

Mike: Right now — we were using MailChimp back then, now we are using — I’m sorry we were using Constant Contact back then, we are using MailChimp now.

Steve: Okay and you mentioned that you got kicked off of Amazon, presumably you were doing merchant fulfilled then?

Mike: Oh yeah, yeah I was doing merchant fulfilled. Actually I was doing FBA, but then as my inventory ran out, I didn’t want the sales to stop, so I switched to merchant fulfilled, which wasn’t a great idea. But it took a little bit of time for me to get back on both platforms. Actually eBay was a lot of harder to get back on than Amazon believe it or not.

Steve: Really? Okay so when you get banned what happens? Like so Amazon banned you obviously because you couldn’t fulfill your orders and you had to cancel a bunch, right? So how did you appeal?

Mike: Right, you just write them letters, just call them up, talk to them. We had to put a plan in place. Pretty much draw up a plan that says why will this never happen again. Pretty much I just told them I’m just going to keep on FBA, and I’m not going to switch it back over to fulfillment by seller all the time, but on inventory and they record that.

Steve: Okay and in terms of when you first got started, did Amazon come first or eBay come first, or did your own site come first?

Mike: My own site came first. But if I had to do it over again I would recommend testing out the product on Amazon or eBay first before…

Steve: Okay and so when did you actually start selling on Amazon then, shortly after?

Mike: It is relatively shortly after. I don’t remember exactly but I started in 2000 — end of 2011, I was probably selling on Amazon in 2000. No, I was definitely selling on Amazon in 2012 because I got one of those, I think they sent them out to everyone at the time. But there was one of those cards that said you are a top Amazon seller in 2012 or top holiday seller. I was so thrilled, and then everyone I know now is like yeah I got one of those too.

Steve: Yeah, but you were one of the early ones. So would it be fair to say that your Amazon sales were exceeding your own website sales in the beginning or?

Mike: They were about…

Steve: They were about equal?

Mike: They were about equal. I think the website was a little bit more just because I had that email list, and that’s a lot — I drove a lot of business that way.

Steve: Okay, let’s talk about your email list real quick. So did you have autoresponders, or were you just sending out deals on like a weekly basis?

Mike: I did set up an autorespond program; basically if someone signed up from my list they got a welcome letter, and then a couple like a week later they got a discount probably in the week. I think pretty minimum and it wasn’t based on any — it wasn’t really based on anything. They were getting them whether they bought something or not, you know what I mean?

I think now ours is a little more dynamic where if they don’t purchase, then they’ll get a reminder something like that. It’s sort of more complicated right now, but yeah back then it was pretty just — I think there was like three or four emails in the autorespond chain.

Steve: So I was just — was most of your business derived from email, would it be fair to say early on?

Mike: I would say possibly, I think most of it was derived from influencers writing blog posts about us. We were really able to really crash it early on, because people were reviewing our products and giving us great reviews online.

Steve: Okay so the influence — in terms of finding those influencers was it just basic outreach, did you use any services to do that?

Mike: Yes basic outreach, I would go on make a list of people I saw on like Twitter, Facebook just in news articles. I would go to like BuzzFeed, and I would like find their authors that go to New York Times, Huffington Post.

Basically anyone I could find, I would write — and don’t get me wrong most probably about 90%-95% of people wouldn’t respond at all or would say no. But between like 2% and 5% would respond and only a couple would say yes, and it really only takes a couple of people to say yes for it to have a big impact.

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So I’m just curious you mentioned early on that you didn’t really target coffee blogs. Is it because you were just looking for much larger publications, like what was the rationale for that?

Mike: I feel like coffee blogs at the time and even now they are more focused on really high — they are focused on a different type of coffee, I guess the specialty coffee, the third way of coffee, the high — I don’t know. A lot of specialty coffee is in the market right now. They are like the opposite of what our coffee is.

They try to get like the sweet floral and fruity notes out of the coffee bean where that’s not my coffee. My coffee is like the high caffeinated, you taste it and it wakes you up immediately. And I actually use Robusta beans in my blends. And Robusta beans are looked down upon in the coffee industry for probably the last 20 years. It’s just recently that they are coming around now.

I think it’s because there is such good quality of Robusta beans coming into the market right now. That there is actually Robusta coffee that isn’t even considered a specialty coffee by the SCAA, and only Arabica beans are. So the fact that I was using Robusta beans in my blends I avoided the coffee brands…

Steve: I think I understand where you are getting at, like there is similar things with wine, right? Yeah okay cool. So let’s — okay so how did the super bowl ad thing happen? So you have an email following at this point, you’ve been on Good Morning America. How did the super bowl ad thing come into play because that was huge, right?

Mike: Yeah, this is a giant. In 2014, let’s see 2013 I watched GoldieBlox; it was a company that made engineering toys almost like legos for girls. And I watched them when the super bowl commercial threw into its small business begin competition. And I was like — I saw that and I was like, wow if I could win that with this business, it would be the biggest splash ever of a cool product.

I think it’s the best product in the world, I know I’m biased, but I think it’s amazing, and I think everyone else would too. And in 2015 last year in June they decided to run it again. I saw I had come across my Facebook news feed, and I got my team around me.

Actually a lot of my team that stay with me now are the same people I pulled out of my coffee shop back in 2013 to help me fulfill the orders. But I pulled those guys around, and I hear they are in this competition again. We have a decent online following now, I think we can make a run at this, and they are like yeah let’s give it a shot and…

Steve: So what was involved in entering the contest?

Mike: Entering the contest wasn’t too bad. We had to make a profile like online profile, and join their social network called Own It which is a social network for entrepreneurs. It’s actually really cool and helpful, you should check it out if you are entrepreneurs. And we had to make — I guess two activities such as take pictures of my team, make a video, answer a bunch of questions, take some interesting surveys, and basically make an online profile that when people went to it, they would want to vote for your company.

And it was all about entrepreneurship and who embodies entrepreneurship better than I guess the rest. And it actually would have come — the companies that came down too at the end, they are all amazing companies. And it was almost like a big vote off towards the end where there was 10 finalists, and we all had to see who could get — drive the most people to our voting link to get votes for…

Steve: So let’s talk about that a little bit. So you obviously used your email list for that, but how did you — because I imagine every company at this point has huge followings right, I would imagine?

Mike: Oh yeah, one of the companies Chivies they make short reports. I mean they have a following like millions of followers on Facebook and Instagram, and yeah they have a giant following. We thought they were going to be — were going to run away with it. And as it turned out they didn’t make it into the final three with us.

There was us, there was [inaudible 00:27:57] a brick and motor store actually out of Buffalo in New York, they were in the top three as well. They hardly had a social following at all. They had a few good YouTube videos, but they just had the support of the community around them, around Buffalo and New York. And they had such a loyal following in their community that they were able to just drive consistent votes every single day.

Steve: How did you guys do it?

Mike: So we tried everything, everything, everything, but I’ll tell you what I think works. We weren’t able to see the actual vote count or keep track along the way. So we were able to kind of get an idea of what was going on by looking at Facebook shares on everyone’s voting links. So we could see each person’s voting link and through Facebook we could see how many shares each of those got.

So we kind of used that as a gauge there. We were doing bad in the beginning, and it wasn’t so we just used the strategies that we use to build the business to reach out to influencers…

Steve: Interesting okay.

Mike: So we used Zack Wild, we actually do coffee for – he’s got millions of followers online. We were able to work with him and his Facebook account, and his social media account to push our leading link to his fans.

Steve: Well was there any incentive for him to do that, or was he just doing you a favor?

Mike: No there was incentive for him because we do sell, I’ll probably call it Walhalla Java which is for him and inspired by him, and actually he has all the branding rights on it. So he gets the royalty from that. So if we wanted, it was going to be good for him, and it has been great for him.

Steve: Okay.

Mike: Also Lisa Kelly from Ice Road Truckers, and the whole Ice Road Truckers crew, they helped us out of time and…

Steve: These are like major TV shows right, I mean Ice Road Truckers…

Mike: Yeah.

Steve: Yeah okay. How did you hookup with them?

Mike: Somebody on my team had a good relationship with their manager, or developed a good relationship with their manager. And yeah we started talking and they helped us out pretty much out of the kindness of their heart, there really wasn’t much in it for them. I mean we sent them coffee when they wanted, and we sent them sweat shirts and t-shirts and stuff, but they helped us out at the time, they are really good people.

Steve: So it sounds like a lot of what made Death Wish Coffee successful was like the people relationships that you developed in the outreach if you were to just choose one thing that voted you guys to the top, is that accurate or?

Mike: Yeah, that’s very accurate yeah. And I think right now when I think to have this win as we have some like crazy loyal fans who are amazing, and they are like huge brand ambassadors. They go above and beyond for us and not only voting, but they start their own campaigns and even get their own social campaigns going to try to get people to vote for us.

Steve: How did you get those fans? Was there anything special that you did to get those raving fans?

Mike: I think it was cool like logo cool brand identity, that’s part of it. But also we have pretty much of a no bullshit policy here where our number one value is customer satisfaction. If the customer isn’t satisfied they get their money back right away, and we’ll go over the top to make sure they are satisfied.

So not only that, our customers are always happy one, and we always try to over deliver and under promise. So everything we do we try to just kind of go above and beyond so when a customer gets the product they feel like they are taken care of. And we follow up with them afterwards to make sure they are happy, if they are not they get their money back.

It’s those things that we hear day to day; hey companies don’t do this anymore. They don’t really care about the customers, but you guys do. Like I have a customer service team, there is three of them right now, and that’s all they do all day is they not only reach out to the negative reviews. They reach out to every positive review, every question, every — yeah they are amazing.

Steve: Actually what I was trying to get out was are you guys actually putting out content also that people are consuming that really makes them huge fans, or is it really just about the product itself?

Mike: We put out some content, not enough I don’t think, but we would go over things to put out content. Our customers put out a lot of content which is even better…

Steve: Interesting.

Mike: Yeah they make content nonstop, and there is always — I always see my Google alerts newsfeed like a new piece of content, or a new video that one of our customers created on YouTube or something. And yeah those are…

Steve: So what do they talk about in this content — like if they put out a video, are they are just raving about your product?

Mike: Yeah they are really raving about it, or they are doing some type of challenge with our product like eating coffee grinds, yeah it sucks. Sometimes it’s like irresponsible stuff like how much of this coffee can I drink before, or really like makes me sick or something. I don’t know so they do crazy stuff sometimes. Most of the time it’s just they drink this coffee, and I don’t know like a rainbow shoots out their butt and they fly over the clouds. I don’t know they make some crazy stuff.

Steve: Okay and this is probably just the tribute effect that you have the strongest — you are known as the strongest coffee out there, right? So that kind of sparks off all these interesting pieces of content that people produce?

Mike: Yeah, absolutely.

Steve: Okay, so let’s talk post super bowl. So you get this ad, how do you prepare for it, and how much did your sales spike as a result of it?

Mike: So we found out in late November that we had won the competition. And we were super thrilled, but they were like okay now we really need to focus because how much coffee are we going to sell? Can our website handle this, can we produce enough, can we — there was all these questions. Is customer service going to get overwhelmed? We don’t want to get kicked off of Amazon again.

Since we got kicked off of Amazon in 2013, I had worked to make the business as scalable as possible. So we started working with fulfillment centers. So we didn’t fulfill our own products anymore, we had fulfillment centers do that. So we had to contact our fulfillment center, let them know. I actually made a list of every part of my business that would be affected by an increase in traffic, and came up with a worst case scenario, best case scenario, and probable scenario, and different steps to take at each one.

Steve: Okay, what was the actual scenario and — like first of all what was the increase in sales?

Mike: So the increase in sales once the commercial went live — and actually went live about two weeks before. They released the commercial on CBS This Morning — I think it’s CBS This Morning. Yeah they released commercial two instances before on CBS This Morning, and right from there we saw initial spike in sales.

Steve: Are we talking like 10X, 20X, 100X?

Mike: I think it’s probably about 10X to 15X on that day. But the day of the actual super bowl we did about 25 times of what we typically do on a day.

Steve: That’s crazy okay, and so at this point had you changed your website over from Weebly to Shopify or?

Mike: Yes, yes, yes, we were at Shopify at this time. We called them up, they had a team of 12 just waiting to see what happens when the commercial went live, and to handle any problems. We were able to follow the stats online through our…

Steve: And then you guys had enough coffee, because you had 4 months to prepare for this?

Mike: Yeah, we had to reach out to third party rosters to help us with the roasting process and packaging. But yeah we were able to get enough coffee everywhere our inventory channels where we didn’t run out. At the time of those commercials we had 125,000 people hit our website at the same time.

Steve: That’s crazy.

Mike: Yeah, it didn’t crash, it stayed up. That was a big — we celebrated for that. And then…

Steve: You– sorry go on.

Mike: Then after that sales were so good for — I mean it’s still good right now. They leveled off right around four or five times than they were before super bowl, so I have a business now that’s pretty big. It’s pretty big compared to where it was just a year ago today.

Steve: So wow okay, so the super bowl ad – you had already prepared for by using a fulfillment house. And were you using that fulfillment house prior to winning the contest, or were you still fulfilling everything yourself?

Mike: Yeah, but prior to the contest we were using the fulfillment center. We started using that at the beginning of– probably in the middle of 2014.

Steve: But you guys still have to pack up the coffee right, or were you still doing that yourself?

Mike: Yes.

Steve: Okay.

Mike: Yeah we package the coffee here, we put it in the case packs, and we send it down to our fulfillment center. From there the individual orders come in, and they ship it directly to the consumer.

Steve: So do you have a huge team then to do this packing at your own facility?

Mike: No, not a huge team. A year ago we had six — there were six of us. And now there is 14 of us. And on the production side there are– let me see, there is about seven.

Steve: Okay, I’m just trying to think like if you are getting like 100X sales or 25X sales during that stretch, I guess you had time to prepare, right? So you probably stock piled a bunch of stuff?

Mike: Yeah, we had time to prepare and at that time we were actually working with two third party rosters who were helping us roast and pack. Now we started to bring all that back in-house, we have invested in new equipment, two packaging machines, a new grinder, and we made some improvements on our roaster too.

Steve: Okay, and so a post super bowl like has your strategy changed at all?

Mike: We focused a lot of — a little bit. We’ve been focusing a lot on making those onetime purchasers regular purchasers. We want to get our frequency up, our products sometimes can come across as gimmicky, or I don’t know. I’ve heard some people figure as something you’ll find in Spencer’s and it’s really good coffee, and we really want to focus on getting those repeat purchases.

Steve: So how do you do that?

Mike: Well we started; we put a subscription platform in place.

Steve: Okay nice.

Mike: Yeah both on our website and on Amazon. And that’s a great route to — just in about a year I think we are up to like 6000 subscribers with…

Steve: How does that work? So they pay upfront for like a whole year, or they pay monthly?

Mike: Oh they pay monthly right. They just put in their payment information, and they get charged monthly at a discounted rate. And it just gets automatically shipped to the house, so they don’t have to worry about ordering coffee every month, it just shows up.

Steve: Okay, that’s very nice. And then for the other people who aren’t on the subscription plan are you just sending out emails to get them to join the subscription. Like what’s your strategy for acquiring subscription customers?

Mike: Yeah we have actually – it’s actually not released yet. But other than the discount there is a subscriber only deals that they can get on merchandised ads on exclusive releases that’s only available to them. And we would let our customers know through our mailing list…

Steve: Okay and then all this stuff is all done through Shopify, through some sort of add on?

Mike: Right, yes all done through Shopify apps. [inaudible 00:39:50] is a good company we work with and we have a good relationship with them. And they really do pretty much what we want most of the time, it’s fantastic.

Steve: Are you guys still running Facebook ads and Google ads?

Mike: Yeah. We still find that’s our best — I mean in my opinion that’s — I can’t quote the number here, I think Facebook ads have the best return on investment, other than maybe a super bowl commercial.

Steve: Yeah, other than a super bowl commercial. Real quick though on your Facebook ads like who you are targeting just curious. Like you are obviously targeting people that reach your website, but in terms of new customers how are you getting them?

Mike: We do look alike audiences. We do sometimes even competitor look like audiences, sometimes we do — we are always trying different things out.

Steve: What’s worked the best?

Mike: I mean re-targeting probably is the best, but yeah I mean other than re-targeting I guess look a likes or friends of our customers.

Steve: I’m just curious like when you are running these ads, are you still running them directly to your shop, or are you running them to content pages?

Mike: Right now I do them direct to our shop unless there is a specific goal we have in mind. If we are trying to build a mailing list we can send them two piece of content. But at this exact moment in time I think we are running — I think it’s some retargeting. Or somebody goes inside a product and they don’t buy it, they get retargeted with that product and there are news feeds somewhere.

Steve: I’m just curious are you still giving out free samples, or did you just stop doing that long ago?

Mike: Well actually we stopped doing that yeah. I mean we do it at events and stuff now when we go out like physically to events around the country, but yeah not online. We do have a free or we do have 100% money back guaranteed. If somebody is not completely satisfied with the product, I tell them, “Hey if you just want to try it, just buy it and if you don’t like it let us know, we’ll give you your money back,” it’s not a the big deal on our part. If you are trying the product we like to think that you are trying it to buy it anyway, so there is really no risk.

Steve: I’m just wondering how your Facebook ads have kind of evolved, like in the beginning you were trying to get leads by giving away free coffee. Like how has that evolved, is your brand name good enough now that you just put out an ad and link into your shop and people just buy?

Mike: I think it’s funny though, it’s changed a lot, because I don’t do it anymore and so…

Steve: Okay, so I’m asking all these specific questions around the campaigns, okay.

Mike: Cane a guy that works with me on my team. He handles our Facebook ads and most of our advertising. And we work with a consultant who works with us to try different things out and try to optimize it, so we have the most return on investment.

Steve: Okay, are you guys still doing Google ads or no?

Mike: Not as much, a little bit, but no not as much, they got really expensive.

Steve: Yeah, because I would imagine like coffee keywords is just ridiculous I would imagine.

Mike: Yeah they are ridiculous, and it turns out we ended up — yeah it just seemed like a lot of keywords we were targeting weren’t working out as planned, and like some of them got expensive so – a little bit on the fence. Like for a while we were targeting like our own branded keywords. I mean that seemed to be doing well but…

Steve: You would probably write number one for those anyways but yeah.

Mike: Exactly so it’s always like am I just throwing money away here or not?

Steve: So let me ask you this, so I mean a lot has happened over the years. And if you were to start a coffee business from scratch today, like what advice would you give? Because it is still a saturated niche, so how would you have done things differently, and what things would you have done the same?

Mike: You definitely want to stand out. So I won’t do that the same. I probably would have done more testing in markets that are already setup before I went ahead and created my own website.

Steve: So what does that mean exactly?

Mike: I mean the first thing I did when I started my brand is I went and I spent money to build the website. I didn’t spend a lot of money, because I did it myself, but there was still money like signing up for the Weebly platform. I could have just made the product and put it on Amazon, and done the same thing, and it wouldn’t have cost me anything.

Steve: Okay.

Mike: Definitely I would have started the mailing list like I did, maybe focus on that even a little bit more. I think that’s — I think there is still tons of value there even with the changes that Gmail and I think will be happening in the future, where people will be able to kind of get ads out of their news — out of their email. But I still find there is tons of value there, I might focus a little more on Google ads in the beginning, I think they are so worthwhile at the time.

Steve: What type of ads like AdWords or Google shopping or what type specifically?

Mike: I was using Google AdWords back then.

Steve: AdWords, okay.

Mike: I think we are doing more Google shopping now, but I can’t seem to get results I want with that so…

Steve: Interesting, okay.

Mike: Yeah it just requires more work, a little more work on it.

Steve: So influencer marketing would still be your number one?

Mike: Oh yeah anything free. The free step I think is the best. We do influencer marketing, yeah that’s by far the best. What are some of the free — I had a whole — there is this book actually out there, it’s by Jim Cockrum, it’s called 101 Free Marketing — Online Free Marketing Lessons or something.

It’s by Jim Cockrum. I actually went through that book about six times, and everything I tried in that book was knocking out a product, and it didn’t cost any money. So I mean the return on investment there was surreal.

Steve: Amazing okay, so you didn’t really have to compensate these influencers that much outside of giving product away?

Mike: Yeah no I didn’t pay them anything, I was just kind of showing a new product, giving them some content that they were looking for at the time. I think that the game might have changed a little bit now I think influencer marketing is more of a popular term than it was back in 2012.

Steve: Sure oh yeah definitely. So in terms of — I imagine you were getting back links this whole time also right whenever you got published?

Mike: Yeah, I never focused on SEO or back links. I mean I’ve kind of started to look into it more now, but at the time I was just kind of focusing on my product, my customers. The content I was putting out there wasn’t like — there was no strategy behind it. I was just doing what I thought was best for my customers.

Steve: So is search like a significant portion of your sales, or not so much mostly social influencers and that sort of thing?

Mike: Well we get a lot of traffic from search definitely now, and we just started working with an SEO Company to help us learn how live it more now. They’ll hopefully sign to it because a lot of the content we have is great content, it’s just not like optimized for anything.

Steve: Okay cool man. Well it sounds good, the subscription thing is going to be huge I would imagine. Because then yeah you got this customer, and they are just paying you every month for life.

Mike: Right, the trick there is to get them to stay on, and to continually provide more value month and month out, so that’s been a challenge for us. As many subscribers as we have there is been good amount that’s dropped off, just because all the value must not have been there. So we are revisiting that, and we are putting together a pretty cool platform where they are able to get a lot more for less money.

Steve: And I would imagine once people try your product and it’s really strong, they can’t really go to any other coffee brand after that, right?

Mike: That’s what I hear.

Steve: Because your stuff is like crack.

Mike: That’s all I drink.

Steve: Cool Mike, I have had you on the show for over 40 minutes, and I want to be respectful of your time. Where can people find you, and where can they actually try some of your coffee?

Mike: So if you are located in upstate New York, that’s where I am from, all the New York and Connecticut area, or you just moved in to over 100 price choppers. If you are not in upstate New York, but anywhere else in the world you can go to Amazon, or usually you can just type in coffee, we are usually the number one two or three coffee on Amazon just about every single day. And you could also look through deathwishcofee.com, and signup for our mailing list, you’ll get tons of free stuff with every order.

Steve: That’s awesome mike, well hey I really appreciate you coming on the show, it was great.

Mike: Yeah thank you so much, thanks for having me.

Steve: All right, take care.

Mike: Bye, bye.

Steve: Hope you enjoyed hearing about Mike’s incredible story. And here is the important take away; if you are going to go into a competitive niche like coffee, you better have a strong value proposition. And the reason mike succeeded was because his coffee was the strongest.

For more information about this episode, go to mywifequitherjob.com/episode133. Once again I want to thank sitelock.com for sponsoring this episode. If you run your own hosted online store or any website for that matter that handles monetary transactions, then you should definitely give SiteLock a look. They can also help your site with site speed issues as well, and did you know that ecommerce sites that take longer than 5 seconds to load often shed customers.

Now SiteLock offers a service called TrueSpeed which is a content delivery network that can increase download speeds by up to 50%. So go ahead and check out SiteLock today at sitelock.com/mywifequitherjob. Once again that’s sitelock.com/mywifequitherjob.

Once again if you are interested in starting your own online business, head on over to mywifequitherjob.com, and sign up for my free 6 day mini course, where I teach you how to start your own profitable online store. So go to mywifequitherjob.com, sign up right there on the front page, and I will send you the course via email immediately. Thanks for listening.

Outro: Thanks for listening to the My Wife Quit Her Job podcast, where we are giving the courage people need to start their own online business. For more information visit Steve’s blog at www.mywifequitherjob.com.

Now before we begin, I also want to give a shout out to sitelock.com for being a sponsor of the show. SiteLock is the leader in website security, and protects over 8 million websites by monitoring them from malicious activities 24 hours a day, 7 days a week. So here is the thing, most online business owners never think about security until they get hacked, and a long time ago my online store actually got hacked, and it was the most miserable experience ever.

I basically lost thousands of dollars as I frantically tried to patch the issues on my site, and get my store back online as quickly as possible. In the event that you get hacked, you can call sitelock.com, and they will help you out, or even better protect your site before you even get hacked. For more information, go to sitelock.com/mywifequitherjob. Once again that’s sitelock.com/mywifequitherjob. Now on to the show.

Intro: Welcome to the My Wife Quite 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 thought I do a solo episode mainly because I’ve been getting a lot of questions lately about what type of e-commerce business model to pursue. Every time I publish an article on entrepreneurship that encourages my readers to start their own businesses, I find myself tip-toeing across a very fine line.

On one hand starting an online business, an e-commerce business is pretty simple, relatively risk free, and it doesn’t require a lot of startup capital, but on the other hand running a successful business also requires a ton of hard work, perseverance, and a little bit of luck. The problem is when I emphasize the enormous amount of work that’s involved to launch a company; I tend to turn people away from wanting to start a business. But when I emphasize simplicity, people tend to harbor unrealistic expectations and expect a quick path to riches.

In fact one of the number one questions I do get asked is how long it actually takes to make good money with an e-commerce business. It’s unfortunate and this is a pattern that I’ve been seeing, but a lot of would be entrepreneurs tend to choose the business model to pursue based purely on how easy it is to start, as opposed to considering the actual probability of success. In fact just the other day I was getting emails from people asking me, why they should go through the hustle of selling physical products online when they can just be an affiliate.

Why should they start their own inventory when they can simply drop ship all their goods, and why should they even bother setting up a shopping cart when they can just put up a blog, and sell advertizing? What makes things even more confusing is that these people, they are on Facebook, and they are looking at their feeds, and every time they go on Facebook they see a brand new business guru pushing yet another e-commerce business model.

While a lot of these methods are legit, just the sheer number of choices is pretty overwhelming even to me, like I had to go through, and watch some of these webinars to just get an idea of what some of these gurus were pushing. Now I don’t really consider myself a guru, but I do get quite a few emails from readers asking for advice on what type of business model to begin.

What I thought I do today is go over all the different e-commerce business models that I’ve seen online, and give some commentary on them, and discuss the pros and cons, and let you decide for yourself. Whatever you do you should never pursue a business model simply because of how easy it is to start. Instead you got to make sure you consider other factors like the long term sustainably of the business as well as the probability of success.

Now keep in mind that when you are listening to the business models that I am about to describe, some of these business models are really easy, they have very low barriers to entry, low cost, and lower overhead. Some of these business models are easy to start, but they are super competitive. Some of these business models require a decent upfront investment to start. Some of them require inventory, some of them require that you put up your own website.

So I’m going to discuss the pros and cons of all these business models based on the following criteria, how easy it is to get started, how quickly you can make money, and the defensibility of your business and its long term potential to create sustainable income, and basically how hard it is to make money, and how easy it is for some of them to just go ahead, and all of a sudden launch a competitor to your business.

If you have been reading my blog for a long time, I have this strong belief that the more work and the more effort that you put into your business to be successful, the more sustainable your business will be in the long run, because it will be that much harder for someone to copy you. So that being said one of the most popular business models that I get asked about is drop shipping.

Now if you guys aren’t familiar with drop shipping, drop shipping is basically when you put up a website to take orders, but you don’t have to carry any inventory. Instead of fulfilling the products yourself, what happens is when you get an order, you don’t fulfill yourself, you send it over to your vendor, and then the vendor is responsible for shipping the order to the end customer.

One of the huge advantages of this business model is that you don’t have to carry any inventory; you don’t have to do any order fulfillment. It’s really cheap to start up a drop ship business, because all you need is a website essentially, and infact as part of my 6 day mini course I show you how to set up aside an open cart for 5 bucks a month, and you can easily do drop shipping with just a very simple open cart shopping cart.

It is really simple to start basically, all you need to do is find a vendor who is willing to drop ship for you, and all of a sudden you have a whole bunch of products that you can list on your site. In order to get one of these vendors to approve you, you have to show them that you are legit. Often times you might have to put up your website, and a good looking website, and populate it with mock products before you can even get approved as a retailer, but once you do get approved, you will have access to that vendor’s entire portfolio which you can list in your shop.

What’s nice about the drop shipping with your own website model also is that you are in full control of your store brand, because you own the website, but the downside of drop shipping of course is that the margins are super low. Mainly because someone else is storing all the inventory, and doing all the fulfillment for you, naturally you are going to have to pay for that.

Now the profit margins for typical drop ship stores are anywhere between 10 and 30%, and most people who I have met, who have had successful drop ship stores tend to sell products that are more expensive, anywhere from $200 to $1000. Because the profit margins are slimmer, you want to sell more expensive products to make up for that fact.

Now because the margins are so low, paid advertizing becomes a little bit more challenging, because you don’t have as much margin to play with, and as a result of that often times you are going to be stuck relying on search engine optimization only, and all the free traffic that Google can get for you, or you might rely on social media or Pinterest or Facebook.

Some of the drop shippers that I know who have been successful, they have been able to run Google shopping campaigns successfully, but in terms of regular Adwords or Facebook ads, they have not been able to get that profitable, mainly because it requires a larger margin to get those advertizing mediums to work.

Now the other thing that can be problematic as well with drop shipping is that you might be competing with other shops carrying the exact same product you are, except physically carrying inventory, and because their margins are higher they have a little bit more flexibility in what they can do with their products in terms of promotions and that sort of thing. Finally since you are selling other people’s products, you aren’t really in control of the product mix. A vendor can obsolete a product at any time, and you will have to update your website accordingly.

The other downside of drop shipping is that you are not really in control of your customer support, because you are not the one fulfilling the products. And so let’s say an order comes in, and you send it over to your vendor, and the customer complains that they never got it, well guess what, you are responsible for the fulfillment even though you are not the one doing it. What ends up happening is you have to contact the vendor and act as the go between, between the customer and your vendor to make sure the product reaches the end customer.

Anything that goes wrong it’s on you; it’s your store’s reputation and not your vendor’s. What’s also complicated also is maintaining inventory issues, because you don’t really want to be selling stuff when your vendor is out of stock. And so you want to make sure you work with the right vendors that have the EDI system in place, so that you can track the inventory and make sure you don’t sell something that is accidentally out of stock. But overall what makes a drop shipping a little bit more fragile in terms of business model for me, is that you’re heavily dependent on your vendors for your business reputation.

A vendor can cancel the drop shipping arrangement anytime. They can discontinue products, and basically you are at their mercy. The other thing I don’t like of course is the fact that the margins are low, which greatly limits the paid advertizing options. For our store at Bumblebee Linens, we spend a lot of money on paid advertizing, because it converts very well, and our margins are really high, so that we can afford to do them.

The next business model I want to talk about is drop shipping from Amazon to eBay. Now this is also known as eBay Amazon arbitrage, and here is how it works. First you find products at Amazon that are selling higher on eBay, and then you take the images and the product copy from the Amazon product, and you post an identical listing on eBay that is significantly higher in cost.

There is a bunch of courses and software out there that will do this for you pretty automatically, and the reason this business model works is because people who shop on eBay tend not to shop on Amazon, and for some reason there is a lot of people on eBay who are not aware that eBay is not the cheapest place to be shopping. As soon as the auction closes on eBay the seller then purchases the exact same product on Amazon, and has it shipped over to the eBay customer.

And so basically you are just leveraging the difference in prices from Amazon and eBay. What ends up being problematic to the brand owner is that the product gets shipped in an Amazon box. Let’s say you are an eBay customer and you get shipped a product in an Amazon box, you are going to be thinking to yourself, what’s going on here, and you might actually go and check up on Amazon for that exact same product, and then discover that you got ripped off.

Usually what happens is that that customer will complain to the brand directly, which usually results in a return, and so just this practice tends to piss off brand owners. I know a couple of brand owners who have complained and have gotten some of these eBay sellers banned, so this is a pretty dangerous business model. Personally I actually hate people that do this, but it is attractive if you want a business that has no over head costs, there is no website required, you don’t need vendors at all.

Basically all you need is an eBay account, and an Amazon purchasing account, and that’s it. Easy to get started, but you know you are going to get nasty letters from brand owners, you might get banned on eBay, you might get banned on Amazon. Personally I just don’t like people who do this business model, because you are not really adding any value at all. The other big downside of course is that you constantly have to be on the lookout for new products, and you have to watch the prices on Amazon like a hawk to make sure that you are still making a profit.

Overall that business is great for cash flow, but I wouldn’t even really call that a business, it’s more like money making scheme that’s temporary. The next business model I want to talk about is called retail arbitrage or RA for short, and it has become increasingly popular over the last couple of years because of Amazon. If you recall I had Jessica Larrew on the podcast a while back. She makes 6 figures doing this, and she has been teaching other people how to do this as well, and here is how it works.

Basically you walk into a liquidation store like a TJ Max or a Marshalls, and you go straight to the clearance section, and you will find that there is always going to be products that are cheaper than Amazon retail prices. So you basically go in, you buy the entire clearance section, and then you list those products on Amazon. The reason this model works is because a lot of consumers don’t have access to some of these stores, the only thing they have access to is Amazon, and so they are willing to pay higher prices.

What’s really nice about this business model is that you don’t need a website, you can leverage Amazon’s huge market place for instant sales, there is practically no start up cost except for your initial inventory. But the major downside here is that your business is 100% at the mercy of Amazon, and you basically constantly need to go on these shopping trips to find new goods to list on the platform, which basically means that the amount of money you can make doing retail arbitrage is limited to the amount of time you can go shopping for bargains.

Also in the last couple of weeks I would say Amazon has introduced a lot of new rules that strongly discourage this business model. So for example Amazon has been preventing sellers from selling certain brands without approval from the manufacture. Let’s say you just bought a couple of thousand dollars worth of Legos …

I just want to take a moment to thank Bench Accounting for being a sponsor of the show. Now I love running e-commerce store, but you know what I hate doing the most? Book keeping, seriously keeping track of receipts, expenses, and especially inventory cost are easily the worst aspect of entrepreneurship hands down. And here is where Bench Accounting comes in. Bench is an online book keeping service that specializes in e-commerce businesses. They are experts at handling all e-commerce related reports, whether they be from Amazon, Shopify, Big Commerce, Stripe, you name it.

All you got to do is sign up and they will pair you with a team of dedicated book keepers who will handle everything for you. So no more data entry, no more data crunching, no more headaches, plus it is reasonably priced, and the best part is you can get 20% off your 6 months if you go to bench.co/mywifequitherjob. Once again that’s bench.co./mywifequitherjob to get 20% off your first 6 months, now back to the show.

Recently Amazon actually started gating Lego products, and so you spend a couple of grand on this and guess what? Obviously you can’t sell this on Amazon anymore, and you are stuck with a couple of grand worth of legos that you can’t really get rid of because you can no longer sell those on Amazon. In fact all it takes is for Amazon to shut down a couple of brands that you have inventory of, and could shut your business down just like that. That’s why retail arbitrage is risky right now.

Amazon is placing more focus on supporting brands which does not favor retail arbitrage. They’ve also introduced some large upfront cost to sell certain brands anywhere from $500 to $5000 from what I heard just for the privilege of selling a brand. And also recently they’ve started enforcing using GS1 bar codes that where your barcodes must actually match the brand that you are selling. All of those factors are making retail arbitrage really difficult right now, and so as a result, while this business is easy to do and it can be lucrative, it is pretty risky right now because Amazon can ban your brand.

Next business model I want to talk about is drop shipping on Amazon, and drop shipping on Amazon against versus your own site, they are actually quite similar. The only difference is that you are drop shipping to people who’ve bought on Amazon instead, and the procedure is the same. You need to find drop ship vendors who are willing to ship products to the end customer on your behalf, and it’s important to note that this business model does not use FBA or fulfilled by Amazon.

Basically you are responsible for filling the order to the end customer in a timely manner, and this business model is attractive because there is no start up cost, you don’t need a website. Because you are going with a drop ship vendor you can instantly have hundreds of products at your disposal that you can list on Amazon, but of course the problem with drop shipping is that everyone has access to the exact same products. The fact that it is so easy to list something on Amazon, there is probably a high probability that particular item that you are trying to drop ship on Amazon is already being listed on there.

The other thing that’s extremely dangerous about this business model is that Amazon has really strict requirements on seller quality, and on time shipments. That’s why finding a reliable vendor is of the utmost of importance. So let’s say you have a huge sale, and you sell a whole bunch of products, but for some reason your distributor or your vendor has had an inventory glitch, and you can’t really fulfill the products to the end customers, and so what you end up doing is you have to cancel a whole bunch of orders on Amazon.

Well guess what? Amazon is probably going to ban your account for doing that. Like I said Amazon is really strict on, on time shipments, and the fact that you don’t cancel orders that you’ve already taken in. If you guys are interested in this business model, in episode 108 of my podcast, my buddy John Rampton, he was doing drop shipping on Amazon, and he actually got banned for the exact same reason I just described.

Basically he lost his 7 figure business overnight. So while this business model is very easy to get into, and it doesn’t have that much upfront cost to it, it is extremely risky, and it’s not really a sustainable business model. If you are thinking about doing this business model, go and listen to episode 108 first.

All right the next business model is private labeling your own goods. Now private labeling is the act of placing your own brand or label on a product that you produce yourself. Basically the way it works is you first have to find a manufacturer to produce products for you in bulk, and basically they will allow you to put your own brand on the product. What a lot of people are doing right now is they are going to Ali Baba to find these manufacturers.

Once you produce your product, you then ship off all of your goods to Amazon FBA, and you take advantage of Amazon’s huge market place to sell your goods. Because you are manufacturing, and you are buying your own products in bulk, you have to put more money upfront to actually get those products into Amazon’s warehouse first. So the typical minimum of investment I would say to do a private label product, the minimum, absolute minimum, is plan on the order of $500.

Preferably you should have a 1000 or a couple of 1000 in order to purchase that initial inventory. In general what’s really nice about this business model is that you don’t need a website, you don’t need to generate your own traffic, because Amazon’s market place is getting you all the sales. There are no inventory requirements, because Amazon is housing all of your inventory, and the best part is that you are producing products with your own brand on it, so in theory there are no competitors.

Now overall this business model is a little bit more challenging than the others, because it requires interaction with a vendor outside the country typically. You will have to likely deal with an Asian vendor where the cultures are different, but the big positive is that you own your own brand, you own your own products, and the margins are super high, greater than 66%. In fact for our store, for our private label products, our margins tend to be on the order of 75 all the way up to 95%. Because Amazon’s market place is so large, you can make a lot of money really quickly especially over the holidays when Amazon goes nuts.

Now the downside of course of private labeling on Amazon is that you are dependent on Amazon. It’s been getting really competitive lately. If you have a successful listing on Amazon chances are you will get piggy backed or hijacked. What that basically means is you might have other sellers trying to sell on your listing something that is not the exact same product, and the upshot of this is if you end up selling a popular product, you basically have to monitor your products like a hawk.

You also have to monitor your feedback for your products, because Amazon can ban you at anytime in the event that you get a string of negative feedback. The reason why this is really dangerous is because you are investing a large sum upfront for inventory, and so if you ever do get banned on Amazon for any reason, you could get stuck with a lot of unsellable products.

Now I have been selling private labeling products on Amazon for a couple of years now, and the market place is pretty cut throat, and I’ve met and encountered a bunch of scumbag sellers. I’ve gotten tons of piggy backers. I had one dude over the holidays, he bought up all my inventory, so I had nothing to sell for that particular product over the holidays, and then once the holidays were over, he ended up returning all the merchandize, and so I didn’t get to keep the money for those products, and I lost out on the holiday sales as well.

Stuff like this is going to happen, and it’s just a fact of doing business on Amazon. But you know overall selling private label products is actually the way I recommend, because you own the brand, you own the product, and you have the option of selling these private label products on your own website. It is by far the most sustainable way of making money on Amazon of any of the other models that I have presented so far.

Next business model I want to talk about is closely related to selling private label products on Amazon, it’s selling wholesale products on Amazon using FBA. To sell wholesale products on Amazon, you first have to find distributors who offer a variety of products to sell, and basically you buy those products that you think are going to be profitable, and then you list them on Amazon.

You send the on Amazon using FBA, and margins are typically on the order of 50%. Now similar of a private labeling, there is very few barriers to entry, you just need some product, then you just ship over to Amazon, and Amazon pretty much does the rest. You don’t really need a website. All you basically need to do is find wholesalers with large product catalogues.

Once you sign up with a couple of vendors, you instantly have access to hundreds of products to sell at your disposal. The main difference between private labeling and selling wholesale is that when you sell wholesale, you don’t have to buy a large upfront quantity of goods like private labeling. When you are doing wholesale often times the minimum order for a particular product is on the order of $100.

When you do wholesale, it’s really easy to just get a bunch of product, and just list them on Amazon, see which one sells, discard the ones that don’t sell, and then focus on the ones that do. But the main downside to selling wholesale on Amazon is that you are probably going to be selling the exact same product as someone else, and the thing about Amazon is that it’s really easy to list a product on there.

And so if you are listing a product on there, chances are someone is also listing the exact same product as well, and when that happens the price tends to erode really quickly. This is actually something that happened to my buddy Lass. For about a year he was the only seller of this wholesale product on Amazon, but all of a sudden got discovered by someone else. Then it was only a matter of months, it happened so quickly, and he said all of a sudden he had all this inventory that he couldn’t make a profit on, and he ended up having to just liquidate everything for no profit.

Selling wholesale on Amazon might sound attractive on the surface. In terms of long term potential, and sustainably, it’s not so great because you are selling other people’s products on Amazon, and chances are there is going to be others selling the exact same thing. Moving right along the next business model is selling wholesale products on your own website, and carrying inventory. Now 5 years ago this was pretty much the only business model around.

It’s a pretty traditional model, you basically carry products, you hold inventory, and then you ship to people who buy from your website. Margins tend to be on the order of 50% when you do wholesale, and you need to handle your own inventory, which is a negative to a lot of people, but you can use a 3PL or a 3rd Party Logistics firm to handle the shipping and fulfillment for you, or you can even use Amazon FBA. Whenever an order comes in, you can go on Amazon’s interface and have Amazon ship a product to the end customer, and so that way you can list on Amazon as well on your own website pretty easily.

Now what’s nice about doing wholesale on your own site once again is that the minimum order is a lot less than private label, often times on the order of 100 bucks. The main advantage of selling on your own website wholesale versus Amazon is that you are in control of your store brand; you are in control of what your shop looks like. You can probably do a better job with the sales process, putting content on there to convince people to buy, having an email sequence, and a funnel again to convert customers over.

The downside of selling wholesale once again as with all wholesale business models is that you are selling the same products as other people, and whenever that happens the prices tend to erode pretty quickly. You really need to differentiate yourself based on content and the sales experience in your customer service in the event that you decide to sell wholesale on your own site.

Now I saved the best business model for last which is basically selling private label products on your own website. It has the highest long term potential, because you are in charge of everything. You own the product because you are manufacturing your own products. You are driving traffic to your own store, you are in control of your own traffic, your own advertizing and everything. The downside of course is that you really need to know how to do all of these things on your site. You can’t rely on Amazon to drive traffic for you.

You basically have to learn how to drive traffic yourself, and similar to selling private label on Amazon it does require some upfront capital as well to import some of these goods from overseas, but it does carry the greatest long term sustainability. You are in control, you can set pricing, you can define the product however you want, you can never get banned by anyone. So in the long run, and this is the business model that I really favor in case you want to start a long term sustainable business.

If you are willing to put forth the work, selling your own branded products on your own site is easily the most secure way to run an e-commerce business. We have been in business since 2007, and things are still going strong, we have been growing in double and triple digits every single year. That’s just a high level overview of all the different e-commerce business models that I’ve seen around, and based on the webinars that I’ve been seeing on Facebook as well which I’ve watched.

Those are the basic e-commerce business models that people are pushing right now. Now it’s important to note that there is nothing that excludes you from combining the different models, so for example just because I run my own site doesn’t mean that I can’t sell on Amazon as well. Just because I sell my own private label products does not mean that I can’t drop ship either, and just because I sell private label products on Amazon doesn’t mean that I can’t mix it up and sell wholesale products on Amazon as well.

I suggest that you give all these business models a try to see which one fits your personality, but overall just keep in mind that selling private label products is the way to go in the long run if you want to create a sustainable business. It doesn’t matter whether you are selling on Amazon or your online store, owning your own brand and your products is the way to go. My philosophy is that if you are going to be spending the time and the effort to launch a business, you may as well chose a business model that is built to last, something that is sustainable in the long run.

Now for our e-commerce, we sell private label products on Amazon, we sell private label products on our own store, and we also sell wholesale products on our own store as well. In the past, in the very beginning, we also dropped hipped a couple of items to fill out our store, because when we first launched we didn’t have a whole lot of products in our store. So in order to fill out some of the categories we had a couple of drop shipped items that we actually ended up not really selling that many, because we jacked up the price, but it was just there to make the store look fuller.

One thing that you guys can do though if you are a little bit more risk averse is you can start out selling wholesale, and then find the wholesale goods that are selling the best, and then go and private label those products. Try to produce your own brand, make modifications to make those products better, and then just start selling under your own brand. The key thing to remember is that the more effort that you place on your business, the more defensible it’s going to be.

If there is one take away that you take out of this episode is that you don’t want to be tempted into just starting a business just because it’s quick and easy and little risk, because chances are it’s not going to be sustainable. Now let’s just take retail arbitrage for example, Amazon is already changing the rules by preventing any arbitrage seller from selling certain brands. I know for a fact that Amazon is going to be starting brand central pretty soon, which will allow other private label sellers to prevent other people from piggy backing on their brands.

And so when it comes down to just starting an e-commerce business, you really need just to be conscious of your cash flow needs, and decide whether you are going to be satisfied with doing something that’s a little bit more temporary in nature versus something built to last. One of the main reasons I like the private label route is because the barriers to entry are higher, because you got to source products, establish relationships with vendors in Asia. That’s one extra thing that a competitor has to do to copy your business idea, and that’s not even taking to account the relationships with the vendors that I have.

Those are very valuable, and it’s very hard for someone to replicate a relationship, because it takes time to establish that. And of course because I manufacture a lot of my own products, and I control my own website, it’s much more difficult for someone else to carry the exact same products, or to copy my site. I’ve got years of SEO work in there, I’ve got years of content, I’ve got years of B to B customers that I have built up overtime, and it’s really hard to take that away.

On the Amazon front as well, you know once brand central kicks in, it’s going to be hard for other people to sell my products as well. Amazon is less defensible than having your own website, but it’s really good to just launch your products on Amazon, pick the ones that are doing well, and then create your own website based on the products that are doing well on Amazon. Okay, and so hopefully that has provided you with a high level overview of all the business models.

I really don’t recommend drop shipping on Amazon or selling wholesale on Amazon, or especially doing the Amazon eBay arbitrage in the long run, because those business models tend to be less defensible. Well I hope you enjoyed that solo episode, and going forward I might mix in more solo podcasts in with the interviews if the response is positive.

For more information about this episode, go to mywifequitherjob.com/episode131. I also want to thank sitelock.com once again for sponsoring this episode. If you run your own hosted online store or any website for that matter that handles monetary transactions, you should probably give SiteLock a look. They can help you with your site, and your site speed issues as well, and did you know that e-commerce sites that take longer than 5 seconds to load often shed customers.

Now SiteLock also has a service called TrueSpeed, which is a content delivery network that can increase download speeds by up to 50%. Go check out SiteLock today at sitelock.com/mywifequitherjob, once again that is sitelock.com/mywifequitherjob. Once again if you are interested in starting your own online business, head on over to mywifequitherjob.com, and sign up for my free 6 day mini course, where I show you how to start a profitable online store. Sign up right there on the front page, and I will send you the course via email immediately. Thanks for listening.

Outro: Thanks for listening to the My Wife Quit Her Job podcast, where we are giving the courage people need to start their own online business. For more information visit Steve’s blog at www.mywifequitherjob.com.

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 thrilled to have Jason Weisenthal. Jason is someone who I met at a Mastermind group meeting that I attended in San Francisco last year. What’s cool about Jason is that he has managed to combine tech and ecommerce together to form Wallmonkeys.com, which is an online store that offers more than 20 million images that you can print and stick on your wall.

Not only is his business model ingenious, but he can basically run his seven figure ecommerce company with just a handful of employees, because of all the automation that he has developed. What’s also cool is that he has encouraged and raised his son to be a seasoned entrepreneur as well, which is something that I plan on doing with my kids.

In fact I really wanted his son on the show today, but Jason told me that I had to interview him first. Fine, I’ll guess I’ll settle for dad. Welcome to the show Jason. How are you doing today man?

Jason: I’m great Steve. Thanks for having me.

Steve: Give us a quick background story about Wall Monkeys and how you came up with the idea of selling wall decals online, and what you were doing beforehand also?

Jason: Before Wall Monkeys, I was in a completely different business. I owned a retail children shoe store for about 14 years in New Jersey. Business was good, grew the business, was kind of …

Steve: Was it brick and mortar? Sorry.

Jason: Yeah, brick and mortar. Everybody walked in the front door: Nikes, Air Force Ones, Jordans, Timberlands, all that good stuff. We really had a good business, solid crew of employees and was finding myself bored in my office too often. I started to look at other businesses. It’s right around when Fathead came around, and I’m sure you’re familiar with Fathead. They have all the professional athletes. I thought it would be really cool to put … My son was playing little league baseball and so was my daughter. I thought it would be really cool to put my kids on the wall instead of Derek Jeter, A. Rod or a football player.

I checked out, looked around online and no one was doing it. That was the extent of my market research. I knew nothing about it, I just bought a printer. I did my research and bought the proper printer, found someone to help me learn how to use it, had someone to build a custom website. I just found people to put the pieces together and just learned step by step on my own.

Steve: Wait, so just based on that, you decided to start a store where people can upload pictures of their kids.

Jason: Yeah. I pretty much bought the printer.

Steve: Lease or did you buy?

Jason: I bought it.

Steve: Oh wow!

Jason: My retail business was doing fine. The printer at that time I think it was about $25,000. I didn’t want a monthly payment. Again there really wasn’t too much research. Shopify wasn’t around. It was just at the very beginning. It actually turned out to be a good idea that was just too soon. Cell phones didn’t take high enough resolution images. Parents who wanted to order, they had a hard time uploading the proper file sizes. We really struggled at the beginning. It was a good thing that it was a hobby and not my source of income, because we would have failed for sure.

Steve: I can imagine that’d be a pain in the butt, right, because a lot of people don’t know about images, and what’s required for printing.

Jason: Yeah. At that time I think most cell phones had about like a 1.3 megapixel image, and then email programs were compressing images. People would send a picture of their kid was like a spec in the background. A lot of times the sales we did make we were refunding … We didn’t have content at that time, it was all custom. While it was a good idea, it was too soon. I was able to stick it out and keep trying different ideas until I found a better way to make money in that same business.

Steve: How do you get your content today actually?

Jason: The majority of our content comes from licensing deals with companies like National Geographic, and Corbis Images, and Stocktrek images and some other stock photography companies. I looked for over time just to fill in every possible niche for medical images or animals, or just whatever I thought we needed more of. I found a company and made a deal. Now we have access to … Oh God probably 60 million images if you wanted to look.

Steve: That’s crazy. Do you still let people upload their own images anymore or no?

Jason: We do. Custom is a big part of our business. Whether it’s professional photographers or companies uploading business logos, things for trade shows … One of our strong suits is we are really good at turning orders around quickly, and it’s made in the USA. Custom is actually growing quite nicely right now because our quality is great, and our turnaround time is faster than practically anyone. Maybe it might be faster than everyone.

Steve: I’m just curious though. Why did you choose the licensing route instead of creating your own images and your own artwork?

Jason: When I first stumbled upon the idea of some content, I started with basic silhouettes and I was literally in my basement by myself. Again I wasn’t a graphic artist or anything … Clipping images in Photoshop and Illustrator, and saving them, and file naming them. I noticed they were starting to sell and just like any good entrepreneur, you do 100, you do 200 and you say, “Of 100, 200 sells, it’s going to take me a while to get to a million. What’s the fastest way to get a lot of images?” That’s through a licensing deal. That’s what we did. We went from nothing to a few 100, to millions. When you offer millions, you sell more.

Steve: What does a licensing deal look like, I’m curious? How much does it cost you guys and how is the deal structured?

Jason: There is 2 ways. It depends on the company you’re dealing with and the amount of money that you’re maybe either guaranteeing them, or based on your relationship. You’re either paying them a percentage of the sale. If you make $100 sale you might pay as an example, 10% or you can pay a flat dollar fee.

Steve: 10% of the sale or 10% of some other number you agree to.

Jason: 10% of it. It’s a retail. Print on demand … That’s an example. Not every deal is that, that’s just an example number but yeah, it would be on the retail selling price. Then we do have a couple of deals that are just based on … Because we print a lot of images, a flat fee per image. That works out to be a better deal for us, but because the volume is high, it works for us and for our partners.

Steve: I see. Is there any upfront cost?

Jason: For the licensing deals?

Steve: Yeah.

Jason: Again if you are a new person coming into the business, it depends on the brand, the licensing. We don’t have Disney. If you wanted Disney … Even if you could even get it, there would be a huge upfront cost. Some of our deals, I can’t tell you the exact numbers, but because of either our history or because of the confidence and knowing we would sell, some companies, you have to make sure you pay them say $25,000 or $50,000 over the course of the year to get that. It’s a volume discount just like anything else, so either based on if you’re willing to agree to a guaranteed minimum, or if your purchase history proves that you’re worthy of a better rate you can … Just like calling up anyone else to renegotiate, you can work out a better deal.

Steve: For you though when you were starting out with nothing, how did you approach your first company?

Jason: Actually he’s a really great friend of mine now. There is stock photo company … No one was really doing this for print on demand like APIs for … All these stock images were relatively new. The industry was totally different. I had this idea to rather than buy the images upfront which is what people were doing, I wanted to offer all of a company’s images, let my customers browse them, and then only pay when a sale is made.

That really wasn’t how it was happening. I just pitched my idea. You probably know or you’ve read how people say it all the time, just ask, somebody might say, “Yes”. I made my sales pitch and said, “I think this will benefit your company and mine. This is what I want to do. This is my vision.” The person that was in-charge of North America pitched it to the CEO, and they trusted me, and we made it work.

Steve: This is when you had nothing and your friend was instrumental in opening up the doors for you so to speak.

Jason: He wasn’t a friend then. Its just this company is our longest standing partner. The company is Fotolia. They got bought by Adobe several months ago. Chad believed in what I said and pushed it through. Just because it’s been so many years and he’s such a great guy, now we are great friends. At the time he just believed in what I presented.

Steve: One thing that I’ve been wondering is our online store only has 480 skews. Here you are talking about 60 million. Does that imply that you have 60 million product pages or just a library of 60 million products on your sites?

Jason: We filter down and we’re about to … It’s going to look really good in probably about definitely less than 2 weeks. It might be ready in a few days. Our search is pretty complicated. We have a Solr database. If we have access to 60 million, we’re going to offer far less than that. There is a lot of filters we use to purposely eliminate many images. It probably ends up being about the top 10% is what you could search through my site.

Steve: How does it work? Did you have to develop your own search algorithm or you have a Google Box or something? How do you do that?

Jason: We use Solr which like MySQL. Solr is a search program. I don’t know how to explain it. I don’t know if your people would really care so much about that, but because we had so many images we needed to create a custom solution. We couldn’t use Google search tool. We couldn’t use some of the other elastic search.

There is companies out there that will handle your database and do things like predictive texts and making suggestions and learning from sales. We built ours from scratch because we are importing so much metadata and images that we just needed to build it ourselves.

Steve: I’m curious, how many people do you guys have now? The last we talked it sounded like you only had a handful of people, right?

Jason: The business is really … The simplest way is its 2 pieces. We have the office where it’s customer service, production, shipping. Everything that has to do with the customer placing the order to the order leaving. That all happens 5 minutes from house in Maryland. In the office we have about … Not about, we have exactly 6 people and then outside of that is where everything else is: IT, things to do with SEO, pay-per-click advertising.

Those people are all outsourced freelancers, but I have pretty good relationships with them now. Most of them are giving me more than half their time. I’m definitely primary source of income and there is 8 people that do that. They are all part time to some degree, but there is a lot of IT.

We are constantly working on something, whether it has do with how we send information to Amazon or something to do with … Right now we have 3 people that are working to finish improving search on our site and how navigation works completely, how you can go through the user experience. That project is going to end and those 3 guys are going to drop off. I’ll probably dream up something new 5 minutes after that.

Steve: Everything is project based, and they’re of … You just hire them on a consulting basis.

Jason: For that kind of project. My pay-per-click guy has been with me for over a year now. I did hire a woman who is operations manager. She’s really helped become a go between the developers and people in the office and just to really take away a lot of the tedious tasks from me so that I can focus on bigger things. That’s been very, very helpful.

Steve: Are you a technical guy at all?

Jason: I am not technical programming wise but I have … The only way I can explain it, I can think it and communicate it very clearly. I know what skills are needed. I can and then hire the right people. I also have one of my IT guys who used to do a lot of programming. He is pretty much oversees all of the IT projects. His role, he doesn’t program anymore. He just takes what I say that’s in English and communicates it to these guys to the final …

Steve: Sure. No that’s all you really need, yeah.

Jason: Yeah, I know what I’m good at. Then I found people that fill in those places where I need help.

Steve: One thing I was curious about, you mentioned in the very beginning that you purchased your printer right off the bat, did you ever consider just having a printing partner because I used to work for a printing company. I know those machines are finicky and they require maintenance. I was just curious why you went that route right away.

Jason: At the very beginning, I could have looked for a partner, a company to print but I feel very strongly that’s our core competency is printing and we do a lot of rush orders a lot of things that are time sensitive, a lot of things where errors are not acceptable. If it’s your core competency, you need to do that in-house.

There’s no way that I would outsource printing. That’s what we do. If I outsource that, most of what we say, and most of our advantage over other companies would vanish, they would be in the hands of someone else to do the job.

Steve: Okay, and so you do it yourself mainly for customer service reasons and deliverable reasons, why we do our own embroidery, right?

Jason: It’s quality control. It’s our processes, it’s our procedures. It’s our automation. It’s our … If we make a mistake we can learn from it. There’s just no other way in my mind.

Steve: How much did it cost you to start the company then? Actually how many partners do you have now, I’m just curious.

Jason: We have 4. We use different printers now. We also now have cutters so we have … There’s 6 pieces of equipment in the office that are either printing and cutting or printing or cutting. How much did it cost us to start the business? I guess the printer cost $25,000. I probably spent another, God I don’t know. I’ll say $50,000. By the time I learned how to print and made a bunch of mistakes, built a website, painfully because it wasn’t really that easy back then, probably about 50 grand.

Steve: What platform are you on now? It was custom before but did you change platforms over the years?

Jason: Yeah, we use Magento.

Steve: Magento okay. Enterprise or regular?

Jason: Regular but it’s very highly customized. We’ve spent a lot on customizing that platform.

Steve: Okay, let’s talk about your process a little bit. Do you guys carry any inventory at all or is it all print-on-demand?

Jason: We ship some of our best sellers to Amazon now FBA. It is all print on demand. Orders come in and around 6 or 7 am every morning, we run an automation procedure that goes and pulls all the orders from the various sales channels, and then runs it through another automation that will identify and grab all the images that much the order and resizes them and renames them and puts them into the proper folders.

We print and ship over 95% of our orders within 24 hours. There’s no reason to hold inventory. We just print on demand and we get it right out.

Steve: As a tech guy, I’m really in awe of this automation that you have. Literally an order comes in, and then machines just automatically resize everything and then is it as simple as it being sent to the printer automatically and someone just needs to be there to pick it up and box it?

Jason: I wish. It’s not exactly but yeah, most of the steps it’s just, you just broke it down step by step so it’s not one big magical automation. We use … Our Amazon orders come in through ShipWorks. The program we wrote goes into ShipWorks and grabs the orders. The resizing, those are actions that we add written, scripts we had written that work in Photoshop and Illustrator and then we rename files with certain naming patterns. I had someone write a program that nests the orders to make the optimal use of space.

Once it gets through the whole process, the automatic part, the orders are nested. They are groups of orders that we just because of, just to make sure in case there’s a cancelled order or there’s a size change. If there’s something that needs to be addressed, that’s where the humans come in and will then take those orders and you are pretty much just dragging them into the rip software that’s going to print them.

Yeah, we print and we just have to cut the sheets off as they come and then they go to the back and the shipping labels are ready to go and the guys cut the orders down and march them up and put them into the shipping tubes, put the labels on. It’s still a process but we’ve just taken away a lot of the like the key stroke errors and a lot of the time wasting.

Steve: Sure, sure. No that’s incredible. You mentioned that you are selling on Amazon FBA as well. Given that most of your business on demand, how does it work for Amazon? I think I heard a rumor from someone. I can’t remember whether it was Jason or not who told me that you have a million skews on Amazon?

Jason: Yeah, we have more than a million. It’s a long tussle. We don’t have a million best sellers. We have a way to put a lot of listings up there and then the ones that are the best sellers, those are the ones that we’ll print in advance and send those to Amazon for FBA because they are going to show up as prime and the customer is going to get them faster. It’s important but it’s not that large of a percentage of our business because it’s such a long time. Everyday about 30% of our orders are images that are being ordered for the very first time.

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Steve: Okay, in terms of Amazon then, how does your process work? Do you just ship a bunch there, see what sells and then drop some of the ones that aren’t selling?

Jason: No. We are going from historical sales data. We didn’t start to use FBA until I’ll say maybe a year or so ago. We have been selling on Amazon for years already. We have whatever tens of thousands, hundreds of thousands of sales and we can look in. We know certain things where you see them print 10 or 12 times every single day or whatever the number is.

Those were the items that we sent to Amazon first because they are going to sell even more and also it’s going to save time on a day to day basis. It’s a lot easier to send a 100 or 200 of something to Amazon than it is to send 10, 10, 10, 10, 10 every day to 10 individual customers.

Steve: I was just thinking; when you have that many listings, how do you do, do you spend a lot of time on the listings then? Amazon search is very important and I’m just curios how you manage so many different skews and still put out an optimized listing on Amazon. Do you run ads?

Jason: Yes we run ads. We’ve been trying to ramp up the spending as much as we can. It’s a lot easier to spend money on Google than it is on Amazon. The Amazon ads have been the most efficient ads spending that we have. To create the listing you have to optimize them, they are not as optimized as if you did them by hand. We have an automated process that creates the listings for us and it uses a combination of I call it static and dynamic information. The static information to be the brand name. Every listing has to say Wall Monkeys, wall decals but then it will take a look at the … Then grab from the image the title for example and say Picasso whatever.

We know to create all the sizes it’s … Everything is automated where it makes the size, it knows our pricing, it adds the shipping weight. All these things are preprogrammed in so that if we have a new batch of say 50,000 images, we can create those listings. We have software that sits on Google cloud and we can create those listings completely and send those to Amazon within 24 hours including the images. If you have a picture of whatever it is, a dog, it needs to also go on a wall and looks like it’s a wall decal, we’ve got that part of the process automated also where most people are doing that manually and it’s really time consuming.

Steve: What about SEO on your own website? With so many different listings, is it the same procedure as Amazon essentially? You take the title and you create a page, with that as the title tag?

Jason: Yeah. It’s similar. We do pay attention to the differences and say, how many characters are allowed for the title or what are the subtle differences that we are aware of. We are indexing many, many pages. It’s similar but different. We are just trying to make the changes where we can. With the new site, with the new Solr search, there’s going to be much better improvements as far as landing pages for categories and sub categories and different artists and things which I think is going to help our SEO. That’s an area that we can definitely improve.

Steve: Just curious, where for your main website, where do you most of your customers come in. Is it through SEO or other means?

Jason: SEO and we disband a fair amount on pay-per-click. Then, ripping customers are, especially our business customers, come back more frequently.

Steve: Business customers. That implies … Is that a large part of your business the business customers as opposed to the consumers?

Jason: It’s growing. Amazon, about I would say 18 months or 2 years ago, it became a little bit scary that Amazon was such a large percentage of our sales. Just like everyone, you need to diversify. We started to put a lot more effort into just getting sales from anywhere else and business to business jumped out as a really good place to go after. That’s something that we are focusing on.

Steve: That’s totally what we did also because those guys they don’t want to order on Amazon. They want to talk to someone on the phone and they have consistent business. That’s been really good for us as well.

Jason: Yeah, and the concern it’s not a race to the bottom with pricing like Amazon is, different … Is a different beast completely. A lot of the business customers, what they want is really great service and if they need it on a certain day, they want to have confidence that it’s going to get there. They are not as price sensitive as they are professionalism and accuracy sensitive.

Steve: Just curious, do you price your products the same on Amazon as you do on your own site?

Jason: We do but most of the business sales are going to be custom. We are just working off of what our pricing is; per square foot versus how much does that picture of a pink puppy cost or something.

Steve: Do you guys do anything with your Amazon stuff to get them back on to your website or you just keep the Amazon channel completely separate?

Jason: If I’m answering this with Amazon listening. That’s what every man … We follow the rules. We follow the rules right closely. I do look at it as Amazon’s customers are, all those sales, those are Amazon’s customers, not Wall Monkeys’ customers but we definitely know that and we see sales from both places. We don’t actively try and break rules and divert people, but on Amazon we are Wall Monkeys wall decors. You probably don’t need a PhD to figure out that if you type in WallMonkeys.com you might be able to see our website and find other things.

Steve: Let’s talk about the early phase of your business when you first got started. How did you get your first sales?

Jason: We got really lucky. One of the biggest breaks even though we didn’t make much money at the beginning, something that helped a lot was about 3 weeks after I started the company, 3 weeks after I got the website up, the contact number on the website was my cell phone. I was running it from either printing from my basement or running it from my kitchen table.

Steve: That’s awesome.

Jason: My phone rings and it was Darren Rovell. He works at ESPN now but he was a sport supporter for CNBC. Says he’s Darren Rovell and I knew who he was. He said, “Hey I was just checking out your products. It looks really great. I was looking at Fathead and I just think this is such a great idea. How would you like to be highlighted as one of the best gifts, best Christmas gifts for dad for 2009?”

Steve: I’m sorry how did this happen?

Jason: He was just doing research on Fathead and bumped into my company because we were one of the first. He just called me on the phone and asked if I wanted Wall Monkeys to be highlighted on CNBC right before Christmas. That was just a huge break because that made sales, but then we also from that we ended up … Somebody, a guy wrote an article for ESPN, the magazine and a couple of other outlets reached out. We got a bunch of press which really helped with sales for months after that. We were making sales every day off of the momentum of Darren Rovell.

Steve: Was that before you had all these licensing deals in place?

Jason: We had nothing, we just had customers, we had 3 weeks. I didn’t even really know how to … Had to have a graphic designer setup the orders to print. I was … We knew nothing.

Steve: That’s amazing, okay they must have found you through search, then I guess…

Jason: Yeah Darren Rovell found me through search. I still talk to him once in a while. I have printed some stuff for him and now he works for ESPN. He is just a really great guy. He was like right time, right place and it was just really fortunate; it was like a nice break.

Steve: Can we talk about search strategy? Do you pump out a lot of blog post? What’s your content strategy to get ranked?

Jason: It could be a lot better. We were blogging a lot more, right now we are not. Right now we are focusing on social media more. We have a visual product so every day in the office where everyone is taking pictures and putting them into this Google cloud … I’m sorry Google drive folder and Instagram and Pinterest right now seem to be best for us as far as driving traffic.

Steve: Okay and in terms of pay-per-click, are you running Facebook ads, Instagram ads, Pinterest ads?

Jason: Almost all of our spending is Google and Amazon. Amazon we are trying to ramp it as much as possible they just don’t seem to use our whole ads spent. I’m not sure where the magic formula is there yet.

Steve: In terms of Google you have so many different images that I can’t even imagine running one of your campaigns. How do you structure these campaigns, or are you bidding on more general terms like wall decals?

Jason: We are not bidding on wall decals, those are general terms.

Steve: Yeah because that would be a really expensive …

Jason: We just have niches. Different business niches, maybe veterinarians or nail salons, hair salons. We know what images. Again we have … We know what sold. We know where we want to drive people and we … It’s taken a long time to build them out but we built out very specific campaigns to target very specific niches.

Steve: Are you using the display network or just search ads?

Jason: Just search ads. Again I pay … I have, I see all the reporting. We have a lot of reports that come to me as well as talking to my pay-per-click guy every once a week but we get … I get reports like crazy.

Steve: Okay.

Jason: We are constantly trying to spend more and refine it and he’s got metrics to hit and luckily we’ve actually we’ve really been hitting them which is nice. I think once, I got to keep saying but once that new searches works on our site, I think all of our numbers are going to get better.

Steve: Have you tried some of the other ad platforms like Facebook and Pinterest. I would imagine those would work pretty well for you guys?

Jason: Facebook we just haven’t … we need to build out … I still feel like we are a start up. I can make a huge list and tell you all the things that were either not doing well enough or not doing yet that I want to. Facebook we’ve … Facebook ads haven’t been great for us but we are also not employing the strategy that I would want to. We need to build out a lot more landing pages to send people to where we really want them to go. Like I said yeah I would say for right now Google and Amazon it’s … And Amazon in particular it’s just keep trying to spend more because it works the best.

Steve: Let’s talk about what’s working well for you guys in terms of getting business. What are some of the things that you are doing that’s generating a lot of business for you?

Jason: FBA definitely is where we’ve been adding more and Amazon’s is huge.

Steve: Have you run into any problems with Amazon?

Jason: We have problems all the time. Recently there has been a lot … We have Wall Monkeys as our brand, it’s trademarked, we are in Amazon’s brand registry. Recently we’ve been spending hours every week. People are getting onto our listings and we have to send cease and desist letters and it’s a real time suck.

Steve: Right.

Jason: Its seems to be more of a free fall than never which is another reason to focus on, to put some more energy on our ecommerce side and on business to business and other things. There is just more sellers than ever and I don’t know when they are going to lock it down or put a limit on it. It’s getting … I see it getting diluted.

Steve: Oh yeah totally I give it 1 or 2 more years until it becomes saturated with junk and then Amazon has to do something about it.

Jason: I think they need to do something now. They don’t protect … they don’t want to get involved fighting for us for us for the brand. They will only get involved if the customer isn’t getting the product as described. Otherwise they are just going to make the money and they are not going to get involved.

Steve: Yeah in that regard, when you guys are doing customer service for Amazon or your own site generally do you just … I imagine your costs are pretty low. It’s just the cost of the paper and the ink right? When you guys run customer service, whenever someone complains do you just essentially give away the product and give them refund or?

Jason: Pretty much.

Steve: Okay.

Jason: Yeah if we think someone is really trying to be deceitful we’ll address it but yeah it’s just kind of the … one of the prices you pay especially for doing business on Amazon.

Steve: Does it worry you at all. What are some of the things that you are doing to shift away from Amazon to your own site?

Jason: There is a couple of things. It doesn’t worry me. I think if you are entrepreneur lots of things worry you. If I wanted to worry all day long I could probably do that. One of the biggest things that we are doing is we do have a pretty good scale at creating these mass listings on Amazon, and how we do it on our website also. We just started helping a couple of other companies create listings for their print on demand products on Amazon.

Companies that don’t have … Again they are facing the challenges that most people face. They might have 1000 listings or 2000 but they have access to say 50000 images and they can’t create those listings. Other companies are now paying us which is really great. Let them enable them they make money and we don’t have to … we are not going to enter that category anyway.

Steve: Is this software that you are selling?

Jason: We are not selling them software. It is software but we are doing it ourselves, we are not putting it in the hands of the customer. We are … There are bigger relationships. We are managing them. We are working hand in hand to create the listings for them and make them live.

Steve: I see okay, a services based thing. Are they your competition though?

Jason: No never. If we sell wall decals there might be a company that sells picture frames and they want to put images in those frames. Picture frames, pictures … A framed picture isn’t going to compete with a wall decal. Putting those images on a coffee mug as an example but you could go on Zazzle and look at hundreds of products. Getting the images is no problem it’s creating listings and all the metadata that needs to be plugged in in the right places, that people have a hard time with.

Steve: Okay going forward, you’ve been doing wall decals for quite a while now. What is your focus right now? Is it to grow the company; is it to enjoy life, what is your end goal with it?

Jason: I don’t know about end goal but right now my focus has been on for a while and I have been spending a lot of energy on just efficiencies in the office, and having creating a better work environment and happy employees. Then personally the same thing. I guard my morning rituals and the way I want my day to go and how I spend my time.

I guard that and always work on that religiously. Now that those things are a lot more in line I think now we are going to be poised for a really big phase of growth for the Wall Monkeys business. I felt we needed to get these other pieces straight before we grew sales more.

Steve: Where is that growth going to be coming from you think?

Jason: I think it’s going to come from all over. I think the biggest drivers are going to be … I keep saying B2B but there is a lot of businesses out there that don’t know we exist, and we are going to let them know that we exist. We also …

Steve: How do you plan on doing that? What’s your strategy for reaching out to B2B?

Jason: I don’t think I want to share it.

Steve: Okay.

Jason: I’ve spent a lot of time thinking about how we go after businesses and …

Steve: Okay.

Jason: Yeah, that’s something I guess everybody doesn’t need to hear.

Steve: Yeah, okay sure. I was curious because we are doing the same thing, maybe after this.

Jason: Yeah, we could talk about it after we hang up the phone.

Steve: Okay, sorry you got B2B, are you, A, Amazon is just going to grow naturally on its own. Do you have any specific strategies for growing your Amazon business?

Jason: We are going to update our listings, there’s … When we update our listings it’s not like going in and updating one, it’s like a pretty big deal because we are … We might be making some pretty major changes across a few hundred thousand listings. You want to really think about it and test it and make sure that they are going through the right way.

I guess the best way say it is, I feel we can do … Aside from the way we process orders and how quickly and accurately we do that, that’s majority of the time, almost every other part of our business can be improved. Whether it’s the ecommerce site, the search, our listings on Amazon, the quality of the content on Amazon, I feel we can do everything better.

Steve: Yeah, but it’s … Maybe you have limited resources, I’m just curious, are you going to be focusing on other ad platforms like Facebook? You mentioned you didn’t feel like you have been giving it any justice, are you going to start blogging again …

Jason: Facebook ads, when the search is done, there is going to be many landing pages for categories, sub categories, artists, lots of different businesses and business niches and types of images. Targeted Facebook advertising is going to be a pretty big part as well as I think our Google advertising has been … Is going to become a lot more efficient because we can change the pages that we’re driving the traffic to.

Steve: Okay, and in terms of staff, do you plan on growing that or do you feel running really lean is one of your goals?

Jason: Running lean is definitely one of my goals. One of the biggest challenges is managing people, I’ve learnt … Again I ran a retail business for 14 years, I’ve been doing this for 8 years, and I feel I’m learning all the time. Running lean is key and paying for A players is something that I learned too late, whether it’s programmers or the people putting in the images.

With programmers especially with Upwork and things like that, you can hire … There’s such a range. You could hire a $15 an hour php guy or you can hire someone who makes $100 an hour or more and there’s times when it really makes sense to hire those guys that are … To search out who’s the best in the world and just pay for it.

Steve: Where do you find these people, are they referrals or are you using services like Upwork?

Jason: Yeah, I’ll ask my network or I’ll use Upwork. For our search right now for Solar I went into that, I knew it was complicated, and I knew it was a specialized skill, and I took the approach on that one. Where can I find who is the best in the world, and I’m going to pay him. I looked on LinkedIn, LinkedIn is a pretty good resource just to look in groups and find … Get leads that way.

But for Solar this project I found the guy on Upwork and you just have to really know what you are looking for very specifically and check their references and make sure you are getting what you pay for. Hiring IT, IT project especially custom work, those are very expensive mistakes to me, because you are starting over you are wasting time, the money and time loss there is it’s expensive and exhausting.

Steve: We are coming on 40 minutes now, I was just curious, do you have any advice for people out there who want to go and into ecommerce? I’m just curious would you if you were to start all over again today, would go be doing this again? Your particular nature, physical products?

Jason: I like what I do, we have a niche, I feel we are … There’s lot of opportunity in my niche; selling on Amazon in general I think is pretty full. I think there might be more opportunity in helping … If I was going to start all over again I would, or if I just close my business tomorrow, or something happened, I would probably focus on using the knowledge that I have to help other sellers sell more, or help companies that have a weak or no presence, establish a strong presence. I think there is more money, a better opportunity, a better freedom helping others than there is in trying to fight it out on your own.

Steve: Interesting. One thing I also forgot to ask you, are you guys using email marketing at all for Wall Monkeys?

Jason: Yeah, we use … We actually use Constant Contact.

Steve: Constant Contact, okay. Is that a large part of your business?

Jason: When we send a good one, it is.

Steve: Okay, these are one offs, do you have auto responder sequences or?

Jason: We do, we have auto responder sequences and things, but I … They are fine, I like to look at the effectiveness of the weekly emails that we send and see if we’re crafting those messages the right way.

Steve: All right Jason, well hey thanks a lot for coming on the show man, I’ve always been really … I admire your business mainly because to me you are not really an ecommerce company, you are like a tech company because of all these process that you’ve put in place. You just happen to sell wall decals but the whole process was well thought out, and the fact you are able to run such a large company with still few people is pretty amazing to me.

Jason: Thank you.

Steve: Does that mean that I can have your son on next?

Jason: Yeah, you could ask him all the questions about being as teen entrepreneur, the websites he built and all that good stuff.

Steve: All right, thanks J.

Jason: All right.

Steve: Take care man.

Jason: Thank you Steve.

Steve: Hope you enjoyed that episode. What I find especially cool about Jason is that he’s managed to turn his wall decal company into a tech company by automating most of the processes. I also find that his business model is pretty ingenious. There are a lot of wall decal companies out there, but Wall Monkeys stands out, because they have the largest selection.

For more information about this episode go to mywifequiteherjob.com/episode126, and if you enjoy this episode please go to iTunes and leave me a review. It’s the best way to support the show and please tell your friends because the greatest compliment that you can give me is to refer this podcast to someone else either in person or to share it on the web.

Now if you are interested in starting your own online business, be sure to sign up for my free 6 day mini course where I show you how my wife and I managed to make over 100K in profit in our first year of business. So go to mywifequiteherjob.com for more information, sign up right there on the front page, and I’ll send you the course via email immediately. Thanks for listening.

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 thrilled to have a very special guest on the show, Pam Cail. Pam is the VP of a company called HYC Logistics, and she’s helped thousands of sellers get their goods to their warehouses from Asia. They’ve been in business since 1948. She knows shipping and logistics inside and out.

The reason I’ve decided to have her on the show today is because many people are very intimidated by the importing process. Plus my wife and I import many times a year by sea, and I’ve been often confused by all the fees on my invoices where we kind of feel like we’re getting nickel and dimed on. We pretty much pay these blindly in a lot of cases, but they do add up.

I’ve invited Pam on the show to hopefully clear up the most scary questions that people have about importing. With that welcome to the show Pam, how are you doing today?

Pam: Hi. Thank you. I’m doing great. I am. I’m very excited to be here.

Steve: Very excited to have you. What I want to start out with was can you give us a quick background story and tell us how you ended up running HYC Logistics?

Pam: I have always pretty much had a transportation background in my family. My father was the vice president of a large trucking company, and my mother was a school teacher. Together we’ve always talked about helping, learning, and also the trucking and transportation world. With that, I got into the accounting side of international shipping through a large a freight forwarder.

I started at the bottom doing accounts for savable accounts payable and have worked my way up. When Harvey Yaffee Company asked me to join their team, I was thrilled and I actually started as an accounting manager here, went into exports, imports. Now I am very happy to say that I run the company, and I’ve got a great group of people.

Steve: I’ve often wondered how someone gets into the shipping and logistics business. It sounds like it was something that you’ve done with your family and then you were interested in the business and worked your way up.

Pam: That’s exactly right.

Steve: I’ve always been curious; from a business perspective what are the margins like in such a heavy service based business? How are your fees factored in the equation when you help someone?

Pam: They are very minimal. I do have to say my CFO many a times says, “Who started this business?” Because most people in the jewelry industry, in the furniture industry, 200% 500% mark-up, whatever … In the shipping industry and freight forwarding like we do with the brokerage service, these are very minimal. At certain times if we make $50 that’s a good day. Anyway it ends up being relative to everything that actually is done at the shipment level if you do just brokerage or warehousing or transportation or whatever.

You make a minimal on each one of them. This is not one of those companies that you’re going to find, going to have the 24 karat gold garbage can. It’s nothing. We chose poorly if that’s what we wanted to achieve. All in all it’s a very necessary part of shipping in our economy and I guess having the background that I do, it’s certainly rewarding. We have time and we have the education to share with everybody and that’s what drives us, not the money.

Steve: A lot of people probably come to you with importing help. What are the biggest mistakes that you see that people have when they are first starting to do their first shipments when they first come to you?

Pam: I think one of them is telling the supplier that they are a new person in this. Just being overly honest because you don’t really know how they are going to react to you. Are they going to tell you things that may not be true or they might be true to them only? For instance, I was told that by one person that they only import into New York. This person came to me and said, “I see that you could only import into the United States by way of New York?” I said, “Where did you hear that?” They said, “Well the supplier.” See the supplier only imported into New York.

Therefore it was honest of the supplier, but it was misleading and they didn’t even know to ask the question, “Well, what about the other ports or is there anything else?” When you are a new person, you don’t even know the questions to ask. That’s the damn fault of not having a representative on the USA side.

When everything is handled on the Asia side, the China side or anywhere else, they don’t know the US customs laws. They don’t know what ports are available, what’s best, what our weather is even like. Are the rail roads flooded or are they iced over in Chicago during the winter? Those types of things we try to say, “Okay. Everyone is good at their area. Find an expert at their area especially if you are not.”

Steve: What are some of the questions that you should be asking to the vendor?

Pam: It depends on the shipment. That is one of those that has the weight, the volume, where your freight, what port they use, where are they going to ship out of, if it’s FOB. There are differences: is it air or ocean and is it airline or air courier express?

Steve: Let’s talk about that a little bit actually. I know typically when I go with a vendor they sometimes give me 2 different quotes. One for EXW and one for FOB. Can you comment on the pros and cons of both incoterms terms? First of all, if you wouldn’t mind defining them and then talking about the pros and cons.

Pam: Incoterms are an international commercial term. It’s used in both the exporting country and the importing country. In layman’s terms it tells you where and how your freight is going to be routed. As you asked, the Ex Works and FOB … The responsibilities of the partners … Ex Works is when your … Which would be my customer would be responsible for providing the financial means of getting their freight from the factory to the ship, the port.

FOB means Free On Board which means that the supplier of my client is financially responsible to get the product to the port. Then my client’s financial responsibility starts at the port, at exportation. There is big difference on that. If your freight forwarder doesn’t have a way to get your export freight to the port that could be a problem. You always want to make sure that if you do have Ex-Works terms on your commercial invoice, that you also have the ways and means of getting it from the warehouse to the port.

Steve: I noticed that the Ex Works quote is always less than the FOB quote probably because of that fact. Is that something you recommend or do you always recommend going with FOB at first?

Pam: No. I don’t have a preference. I do suggest that you get 2 quotes for your product because a lot of times the FOB will be more expensive than the EX Works. You need to judge and you need to analyze and say, “If the FOB quote is $500 more, would it better for you to get an Ex Works quote and have your freight forwarder bring it for $200 to the dock?” If you have that time and you have the desire it’s good to analyze all these. If not the simplest way for my clients is to have FOB terms. They know that it will get there when it’s supposed to and they don’t have to worry about a trucker or anything else on the Asia side that they are not familiar with.

Steve: I’m thinking about some of my factories that we use. They are deep within rural China where it might hard to actually get a freight forwarder there to move the goods to the port. Is that something that you guys handle too?

Pam: Yes, we do. We handle that because we have an agent and a partner over in China. That’s where I use their connection. Sometimes if you’ve got an agent that is not very large, they won’t have the connection. Sometimes if you’ve got agent that’s very large, they don’t want to take the time to go to rural China. They want to just do the nice easy [inaudible 00:12:11] type.

Steve: It just comes down to price really then, EXW versus FOB?

Pam: It does.

Steve: You also mentioned a couple of things. You mentioned air courier, air freight, and sea freight. Would you mind telling us what the differences are first? What some of the guidelines are in using one versus the other?

Pam: The air courier is the most expensive. The sea freight is the least expensive. With the caveat being that sea freight deals with minimums. You don’t want to have the shipment too small to where your minimums end up being larger than your courier. Then the middle of the road is airline is the fastest, but it also is not the most expensive and you can send a few cartons by airline that necessarily might be the middle of the road.

We always look at the carton count and see what’s best for the customer. I would highly recommend that anyone who has a freight forwarder and a broker that they ask for these options because surprisingly enough it maybe that you need to increase your carton count by 10 to make sea freight be so much cheaper.

Then the reverse depending on your financial status and so forth, you may not be able to do that or your supplier may not be able to give you 10 more cartons. Then you end up having maybe the courier versus the airline. Sometimes the courier ends up being cheaper than the airline because of the time of year and also the quantity.

Steve: Interesting, can we talk about the cut offs? When is a good time to use air courier versus air freight for example?

Pam: There is not really a precise cut off on that air courier versus air freight because air courier can be very pricey at Christmas time. It could be $8 a kilo whereas an airline maybe $1.97 a kilo. The difference on the courier and the airline is that on an airline is going to have to go an airport. You are going to have terminal charges and they are going to put it on a pallet. You are going to have to pay for those individual fees, the security filing, all that type. That will add extra dollars to your shipment but it won’t add all the way up to $8 a kilo.

Steve: Okay, would say then that air freight is always cheaper than air courier regardless of the size of your shipment?

Pam: No, I would not say that. Be careful with the season. I’m getting very good air courier rights right now. In a month, when the big retail stores start bringing in their end of the year holiday stuff, courier is going to go up fly up out of the chart. Then it’s going to be better to do airline and also think too that some of these airlines only need a small few packages to fill up their body in their cargo part. You will be able to get an airline right for a little cheaper. Whereas say in express shipment, that’s usually booked for the retail stores and so forth as a whole body of a plane.

Steve: Interesting. Okay, it sounds over the holidays; air courier will tend to be a lot more expensive than air freight. Whereas during the non peak times of the year, courier might be the same price or even cheaper than air freight, does that …

Pam: Yes, that’s it.

Steve: The reason for … Air freight, can we walk through that process? How much more of a hustle is it in the air courier because in the air courier case, they deliver everything straight to your warehouse. You don’t have to worry about anything right?

Pam: Right and it is much simpler, easier, they let the … It’s like sending a FedEx envelope. It’s all right there. All pretty, all but a bow on it. Airline, it would be the same basic airport from wherever you are guest origin is. Then it would bring in to the terminal whereas the courier will come into a warehouse or your final destination or whatever. You’d have to find the airport closest to where it would be. You would then need to take the second step of getting it to the final destination which would be adding trucking to it.

Steve: Okay, could I physically go to the airport and pick the stuff up myself though?

Pam: Yes you can. Yes you can. Now, depending on and I always say depending on the area that you are picking it up, some ports are more friendly, some airports are more friendly to having people walk in and go to the CFS. It is truly your right to be able to do that. Some of the busier airports, you will have to stay in line and wait for hours and pick decent time. You have got to weigh out what your value of time is.

Steve: Okay, and then you also have to factor in the cost of trucking from the airport to your destination which can be expensive as well, right?

Pam: Exactly. Then also don’t forget, our US customs brokerage services on an airline. You do have to … You have to pay for a broker just like in ocean freight for airline.

Steve: I see, I see. Okay, it ends up being a lot more of a hustle whereas air courier handles all that stuff and in my experience you pay the customs after the fact.

Pam: Right.

Steve: Okay, air freight is like sea freight. You have to handle all the customs and everything. The only difference really is that things are shipped by airline instead of boat and there’s no minimum it seems.

Pam: Exactly, right on.

Steve: Got it, got it. All right, that middle of the road option is that … First of all is air freight as fast as air courier or is it going to be slower?

Pam: It’s going to be slower but just by a couple days.

Steve: Okay, because of customs? Is that why?

Pam: No, just that they don’t … Air courier is known for getting to the United States in 3 days, 5 days whatever, however long it is. They leave every night. That’s how the name of the game is get it on there and put it on the first airplane that leaves China. Whereas the airline is a scheduled appointment just like an ocean freight is a scheduled …

Steve: I see. I see. Okay, and let’s talk about sea freight then and when it makes sense to go by sea.

Pam: It makes sense to go by sea when you’re carton count and your CBMs are around 3 CBMs. Depending on the size or the weight volume that determines what’s going to happen on sea freight. You can … I can’t say, okay 73 cartons is the magic number because your port may be different. Let’s concentrate more on the CBMs because that’s how ocean freight is calculated. Everything is calculated based on CBMs.

Steve: Which stands for cubic meters, correct?

Pam: Yes, cubic meters. Whereas an air freight, it’s all calculated by kilos and chargeable weight. Well on ocean freight, there’s no chargeable weight. A CBM is a CBM. A cubic meter is a cubic meter. We’ve got a small typo around here. I always tell the people I say, “Okay pretend it’s a small round table with corners.” To get an idea of what a CBM looks like. That’s the visual of a CBM.

On ocean freight usually from China and Asia they actually come loose. All your cartons come loose. Then when it gets to the United States, it is palletized at the container freight station which is the CFS. You are not paying for the weight of the pallet. You are not paying for someone in China to handle it differently. You don’t have to worry about a pallet jack or a fork lift or anything like that. We do agree with the Asian way of sending it loose freight because of we do not want to pay for any extra weight than we have to.

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Steve: So just to summarize what you said. Sea freight is just by volume. It’s charged by volume whereas air freight is always charged by weight. It makes sense when you have stuff that’s super heavy that you go via sea freight because there’s no incremental cost to adding more stuff because it’s all calculated by a container load.

Pam: Exactly, exactly.

Steve: Okay, can we talk about less than a container load versus having your own container? How does LCL work?

Pam: A less than container load is LCL freight. What happens there is that say you’ve got your cartons and you only have 5 CBM, we are going to assume an FOP which means free on port. Your supplier is going to bring it to the port. The port has a container freight station where they put all these individual cartons together and they load a container. All right, I can arrange a container, my agent can arrange a container, the freight forwarder can arrange it, it could be any which way. We are going to say this is just a generic container.

Steve: Sure.

Pam: MSC has a generic container which is Mediterranean shipping line. Your 5 CBMs are part of this 20 foot container which unless you are sending water you really can’t go much more than 25, 28 CBMs in a 20 foot. Your 5 CBMs are part of we’ll say this 25 CBM container. Now, your freight is put with several other people’s freight. You don’t know them. You don’t know what it is, you don’t know their documentation status, you don’t know if they’re smuggling drugs, you don’t know if they are packaged right. The only thing you can know is that if it is HAZMAT it will not go into a normal container. It will go into a HAZMAT container. You are not going to be exploding … There’s not going to be your container blowing up because you got something next to you inside that container.

You’ve got all, we’ll call it all freight of all kinds and it’s on the container and now you get into the CFS. Your 5 CBMs are put together with this paper work, signed off, checked in, loaded in the container. When it gets to the United States, it is then taken off the vessel with a huge crane and it is taken back to a container freight station where it is actually divided up again. Your 5 CBMs and say your 70 cartons is put over here with this paper work and so forth. That container is divided out again.

The negative part of the LCL and sharing a container is that if your buddy, your new BFF that’s in that with you, if they get called for an exam, the whole container stays in an exam state until it is all cleared. US customs will not partially clear a container. Your paper work and your items might be perfect but if you are sharing it with somebody that’s not, that’s when it’s a negative. You might have a delay or a cost for sitting on the dock. That would be a downside of that even though you are an innocent party.

Steve: For example, let’s say I was sharing a container with someone who didn’t properly label their goods, customs goes in and they notice that the goods weren’t labeled properly, that would delay my shipment as well?

Pam: Yes, yes.

Steve: Okay, I see. Is there any control over who your buddy is on a container?

Pam: I have made that control because I do my own containers. I know that we handle the paper work; I know the due diligence that goes into the products that are picked and put on the container. The control of that is and can be handled if you’ve got somebody like me that will basically hand pick who your new BFFs are.

Steve: I see. Okay since you guys do a lot of business, and often times it’s from the same originating port, you are able to put together different customers within the same container because you know what’s in there and you know that they’ve labeled everything properly and it will clear customs, is that accurate?

Pam: Exactly. They will all have their continuous bonds and we won’t have any hang ups as far as a single entry bond having to be signed off.

Steve: I see, okay. Given that you know who your buddies are on a container and everything clears, is there any other disadvantages to using LCL?

Pam: I don’t really know. It is more costly after it gets to probably about 7 to 10 CBMs. We always recommend if you are at the 10 CBM mark, it is actually going to be cheaper for you to get a full container and only fill it up half way or see if I can find somebody to marry with you because the port charges are so expensive. The core load of these are so expensive. Basically they want to deter having to unload 200 cartons on the CFAs.

They would rather say, “Okay we are dealing with union laborers; we are dealing with port charges that our government mandated so it’s more pricey.” They’ll put extra charges on there, extra fees for that, which is the extra labor and time that they are going to have to do that with. They are going to have to prioritize all those 200 cartons and they come every which way on those pallets. It’s not a nice neat like you would think in a warehouse type environment, palletizing. They’ll just throw along any each way to get them all together.

Then of course something like Amazon or someone that you would want to send it and have a good name for yourself. You would not want to send a pallet looking as though it was all mixed up and upside down yeah.

Steve: Interesting, when you have your full container it doesn’t need to be unloaded for inspection?

Pam: No it doesn’t it will … If it does need inspection and I say an exam inspection, they’ll take the whole container and run through the electronic ice. Then if that still fails then they will ask for it to be moved off of the site. Then they’ll unload it and that’s called an intensive exam. Those are really pricey.

Steve: Okay how often does that happen?

Pam: Not very often we rarely have intensive exams but that’s not to say that you don’t get them. The exams … We usually say about 30% of the US customs has to be examined, things that go through US customs about 30%. That’s where we get into this. Examined and intensive examined are 2 different things. Running it through a laser basically seeing if there is anything that flashes up is totally different and a lot cheaper because it can all stay in the container.

When you start unloading, now you’ve got union workers, government workers and you’ve got an offsite facility. You have to take it off site this that is bonded for an intensive. That’s why it’s so pricey as well.

Steve: Okay how does one decides on a good port of entry for a shipment; let’s say if you don’t live near water?

Pam: It depends your final destination, and how quickly you need it too. Now why we send so much to Long Beach is because it takes 13 to 15 days of sailing time to get it there. Well that’s pretty quick. If you’ve got your decks on a row and your supplier is actually done when they say, and you’ve got it all, everything paid documents everything perfect.

You could have your freight in 30 days if you did a container or whatever. You could have it easily at your warehouse in 30 days. It only takes we’ll say 15 for ground purposes, 15 days for sailing, a few days at the port on each side. It doesn’t … This is one that doesn’t get an exam and you are sitting here looking at 23 days.

Steve: If I’m in New York for example, would it pay to get it shipped to Long Beach and then trucked over. Would that be the fastest way versus sailing all the way around?

Pam: That would be the fastest way, it’s not the cheapest but it would be the fastest way.

Steve: Okay, I see and there is just tradeoffs that depend on how fast you need your goods. What would be cost differential for example for a container?

Pam: I don’t even know to be honest with you. I can tell you that we just, we looked at a trucking for … From LA to Tampa and it runs about $4500.

Steve: Okay for a container load?

Pam: For a container load.

Steve: Okay that’s significant.

Pam: Very significant. New York probably $5200 maybe, because there is a little diversion there.

Steve: Sailing to New York takes significantly longer right?

Pam: It does because it’s called all water A-W-S is all water. We’ve got all water to Houston, Miami, New York. The only one that we have that’s the most economical would be to LA or possibly Seattle to Cama getting into upstate up there. It does take even a couple of more days longer to get to Seattle to Cama than it does LA. Now the other choice is not to truck it. Bring it in to LA and to put it on a rail. A rail road and rail it to New York.

Steve: Interesting okay.

Pam: How it works is there is … We do it in degrees. The ocean freight, sea sailing is the cheapest. You want to keep it on there as long as you can if time doesn’t matter. [inaudible 00:35:55]. Then the rail … The rail road is cheaper, then truck it. You want to keep it on the rail as long as you can. Then the third is you track it the shortest distance you can.

Steve: Okay that makes sense. Can we talk a little bit about customs bonds, first of all what are they and why do you need one?

Pam: All right in order to import into the United States you have to have a customs bond. That gives basically permission for a responsible insurance policy for US customs to get their duty and taxes paid okay? We’ve got 2 types; we’ve got a continuous bond and a single entry bond. A single entry bond is based on 1 entry, 1 shipment and it’s paid every time. It is more costly and it is based on duty and value of your commercial invoice. In a matter of speaking you could easily pay more for a single entry bond than a customs bond, a continuous bond. A continuous bond is $500 for 12 consecutive months.

That means if you got it today this is June, it would expire on June 9th. It’s not a January to December, and you can’t partial you can’t pay for a half of the year. Its 12 months continuous and it starts where it is. In a matter of depending on your duty and your commercial value, you could easily pay for your continuous bond in 3 shipments. Sometimes 2 if you’ve got a high duty rate or a high commercial value right? Remember its $550 a thousand based on the duty and commercial revenue.

Steve: Okay and in general if you plan on doing at least 3 shipments it pays to get the continuous bond?

Pam: Yes, if there is several other caveats to the continuous bond that I personally like. I think it is good to be known by the US government as you support the economic and the retail market wherever you are selling if you are a wholesaler, retailer whatever. You want the government to know that you are not a fly by night. That you are not doing this one time. You are invested in the US economy.

With a continuous bond, that’s what its stating to somebody that just sees a log. It says, “Okay this guy’s really serious about making a difference in our retail or wholesale world.” Whereas a single entry bond it says, “Oh I’m going to give this a try, I’m going to put my toe in it just a little bit, and it may not happen.” Also you’ll have …

Steve: Would you say then you are less likely to get an in-depth exam if you have a continuous bond or?

Pam: I would because that is what we hear. There is nothing of course written that way but it does seem to be an issue on that. Why, if I could explain why. With the single entry bond, the physical paperwork, the documents, they hold your commercial invoice, your packing list, the 7501 which talks about the duty and your release. That is the paperwork, and it basically has to be taken to US customs and signed off. Then that paperwork has to be reviewed at the same time that they are reviewing your product.

You got US customs officer that is actually got your stack of papers in his hands, and he is also looking at your 70 cartons or whatever. He is, just in human sight. If you’re going to have to put your John Hancock on something, you are going to look twice because you know that your authorities know that you are standing right there by and if it doesn’t say that it is made in China or if something doesn’t look right then shame on you. You are just lying; you are leaving yourself wide open for an exam I think personally because of just human nature.

Steve: Interesting, okay that is really good to know. Couple of other things that I often get asked is how do you know what all the different permits that are required when you are importing something in?

Pam: US customs and the government, it stated that you as the importer have to know everything you need to import. You don’t have to do it but you have to know what you need. Let’s just be real, you don’t know everything you need because you don’t even know what to ask. You know that if you’ve got [inaudible 00:42:06] and so forth, you know that if you got a food article that you know food and drug is needed.

It is very important that your US customs broker is up to date and knows about this. If you need certificates, if it’s something that requires FDA or XCC trademark, but if you have a blue tick with the trademark, you’ve got to have permission and that’s got be part of your document packing. That is very important to get this done before it sits at the port, because remember the port is very expensive because it’s union labor and that port has got a lot of movement in it, and that space is very expensive if you are holding, if you are taking up a room.

Steve: Okay.

Pam: For the actual cost, do your due diligence ahead of time. Make sure your customs broker is familiar with the rulings and the filings that are associated with your [inaudible 00:43:21] code which is how deviant taxes are calculated.

Steve: Okay, I can’t imagine doing all these stuff on my own which is why I have always used a customs broker, but I’m just … Can we just go through the entire process from beginning to end, in terms of what’s necessary. I imagine when someone comes to you, you probably ask them very specific questions on how large their shipment is, exactly what they are importing. Can you just walk me through the process as if I was coming to you as a client.

Pam: Sure, the very first thing is we ask a group of 13-17 questions, and that makes it much easier for you to get a qualified quote. We are strong and your quote needs to be your invoice. How can you run a company if you keep getting bills that come through after the facts? We ask very detailed questions. Where is your supplier, what is your incoterms, is it FOP or Ex-Works, do you even have a picture of it so that my compliance manager can look at it and make sure that we are suggesting the correct [inaudible 00:44:44] code.

We go through your carton count, volume pieces, how the value is done. We make sure everything is fair including the commodity, the origin destination. We even go in to; do you need a lift gate at the final destination? Does your warehouse have the access for a regular truck to come in or do you need a lift gate? If you have, do you live in a rural area if you are going to have it be delivered to your house? Will you have someone there to unload because you only have 2 hours free time. Then you start getting charges for holding up the truck driver, and the container or their truck.

We try to get as much information as we can on this, and then that is the generic first of, and then we start getting nitty gritty. We start taking you through the ocean freight? This is your cost. Do you want marine insurance? That’s insurance that covers you while you are at sea. Do you want additional insurance? Do you want warehousing? Do you want trucking? That’s talked about.

Now we have to talk about the Asia side. Does your China supplier have an export license if it’s going to be FOB terms because remember FOB means they get it all the way, and it’s to the ship. Your supplier has to clear it through China customs. Your supplier has to make sure the documents are correct, and in China they have to be licensed just like we have to be licensed in the United States. If not then we need to find somebody who is, that can offer that service.

Steve: Incidentally if you go Ex-Works, the responsibility then is on you to clear China customs, is that correct?

Pam: Yes, that is correct. We need to find out a little more, and then sometimes people don’t know. We will interact with the supplier at this point in time, and we will ask these questions, and keep the client in copy. Sometimes they get too in depth with the answers, and they get confused as far as what are we really trying to say or something especially if you’ve got a language barrier. Then we bring it on, and we go through and we take care of everything, make sure everything is taken care of even if we are not responsible for it.

We make sure that you are taken care of with the terms in China. We get it on the water, we bring it to the port, after the port we break it down. If it’s LCL, if it’s not LCL which is less than container load. If it is a full container, we will get a tractor; we will bring the container to our warehouse. We will take it apart at that point in time, unload it and then we can store it, or we send it on to the final destination.

Steve: Do you have warehouses at each port?

Pam: Not at each port, we have a warehouse in California, and we have a warehouse in Tampa. We are looking into a warehouse in Miami at this point in time. At this point our warehouse in California is more the storage and the traditional warehouse. The Tampa warehouse is more for bundling, shrink wrapping, maybe making something, putting a bow on it.

It’s a little more, what should I say, detailed, and whereas, I was thinking the traditional warehouse is your fork cleft, and you’ve got a bunch of boxes moving around. They can do, is it broken, is it damaged, but can that fork cleft driver really put some shrink wrap round a perfume bottle or a lotion and make it look as good as if it was on a Macy’s shelf, probably thinking not. That’s why we ended up with our Tampa warehouse.

Steve: Doe that imply then that people can ship their goods from China directly to you for some processing and then have you forwarded directly to Amazon’s warehouse?

Pam: Yes, most definitely.

Steve: Okay, I didn’t realize that was a service that you guys offered.

Pam: We do, when I say we are full service we are full service. We can pick it up. The only thing that I can’t do is I can’t pick your product, but everything else I can take care of it, and we can take what you want. We’ve actually improved some people’s product that has got into Amazon. Somebody used to put their product in like a little baggy, for lack of a better word. He folded it over and put a sticker on it, and that was his label, the danger warning and all that. Well when we took it to our Tampa warehouse because he just wasn’t getting the dollar value that he felt like he needed.

We took it our Tampa warehouse and said, “What can we do?” Rather than the 3 labels, and they weren’t always even, we made up an insert that bagged the product, so you could see it, and then we shrink wrapped it to where it did the like the image. Where it all sucks around the product, so that it was nice and neat rather than this zip lock bag. He is very happy; he has gotten his price up because it looks like it is an expensive product that it is. The product was being devalued based on the packaging, and our Tampa warehouse came up with that idea, and he is very happy.

Steve: Interesting, hey Pam, where can people reach you if they need to contact you? If they have any questions about the import process or anything like that?

Pam: You could reach me at, pam@hyclogistics.com, and then copy please my A team that will go to several people incase I’m out of town or away from my desk or helping someone else, and that would be ateam@hyclogistics.com.

Steve: Thanks a lot for your time today Pam. I learnt a lot especially about the air freight versus sea freight. I have actually never used air freight before; I didn’t even realize that that was an option actually.

Pam: Good, it’s a bright new world out there.

Steve: Yeah, and the disadvantages of LCL versus full container, I was not aware of those either, so I learnt a lot today.

Pam: Wonderful, wonderful well I would be happy to help you anytime.

Steve: Awesome, well thanks for your time Pam. Take care.

Pam: Thank you, bye bye.

Steve: Hope you enjoyed that episode. Importing your goods from overseas for the first time can be quite intimidating, and hopefully today’s interview with Pam gave you some insights on what’s involved. If you have any questions you can always contact pam@hyclogistics.com and tell her I sent you.

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Autro: Thanks for listening to the My Wife Quit Her Job Podcast, where we are giving the courage people need to start their own online business. For more information visit Steve’s blog at www.mywifequitherjob.com.