The E-commerce Leader

[00:00:00] Michael: Once you’ve got some cash reserves, don’t go out and spend them too quickly.
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[00:01:13] INTRO: Hey folks, we are back at the e-commerce leader and we’re talking today about how to not only survive, but thrive in a downturn in e-commerce. It may be that it’s specific to your particular market. It may be the e-commerce as a whole is challenged. As people go back to physical shops. Now in early mid 20, 22.
[00:01:31] And it may be that there’s an overall recession in the economy, in each case, rather than reading the news and falling into doom and gloom, we need to stay positive in an intelligent way. And we have some principles that hopefully can help you do that. Today. We are going to focus on the principles where you can start to really gain market share, and really produce a powerful business on the back of, a difficult situation.
[00:01:53] So stay tuned. I hope it’s helpful. And thanks in advance for listening.
[00:01:56] Michael: So principle number six is pivot your market if needed. So there’s a couple of potential pivots in this because I think they’re both different, but really critical. So based on the star prints, I would say if you are in a market where the future is bleak, because it’s shrinking, for example, it’s two is 2020 in about March, April, may, and you’re in the travel market as sadly, a couple of my friends in London, in their.
[00:02:17] E-commerce space are where, then you may need to pivot rather swiftly. And that may mean selling out the businesses. One of them did that may mean, ramping up a service-based agency is another one of my clients did, which really brings you to principle number seven, which I think.
[00:02:31] Putting it together, I suppose in one way, because they’re both about pivots that’s pivoting business models. So you may need to pivot market if you’re in two or three markets and they quite a few people in the mastermind that the price is five brands that one of them runs, which is a bit extreme. But if one of those markets tends to actually is, then you need to pivot your money and attention into the one that’s working.
[00:02:49] But in that case, there was a pivot of a business model from being more physical product based to being an agency working on behalf of the. I wasn’t satisfied with doing very well cause those markets are blown up. So in other words, you’ve got to really do what you need to survive.
[00:03:01] Jason: Yeah, totally agree. The pivot is vital in times of downturn. The product mixes where my mind goes here is, do you have products that are, optimal for a down economy? Some people do. We do actually in our core business, we’ve always believed that we are optimized for the frugal minded.
[00:03:20] Economic downturn scenario buyer, and I’m in pixie fairs, what I’m talking about specifically. And that means that, we know that when people have a flight to, lower price options, they’ve come to us, as opposed to the highest priced options in a market. So whether you have that.
[00:03:38] W at the beginning of an economic downturn, you can certainly think it through for the economic downturn and reposition your product mix. And even what you might call the modality, which is digital versus physical products. In your example, if somebody moved from, selling something to a certain.
[00:03:53] And th there are a lot of related services to any niche or industry that you could certainly pivot into. If you’re really good at running social media, really good at running advertising, really good at building websites, or copywriting, any of those things can be a pivot, that move you away from a product that might be less than optimal for an economic downturn to one that would be, an interesting bolt on if it fits strategically with your business director.
[00:04:17] It’s surprising to me, but interesting in the last few years, apple, which we all think as a hardware maker has shifted more and more of their top line revenue to service. And they’ve moved into digital, Google with YouTube Mo moved into like video digital versus their core search product.
[00:04:36] And many businesses, ours, little businesses included can think through how do we pivot our product mix to something that might be more, positive, for, boom. Economy and a secure and safe for a downturn time economy. And it’s something to think through. And I think there’s a lot of options.
[00:04:54] There. There are many podcasts could spin off just from that one topic by itself. But okay. Let’s keep going. What’s your principle number eight.
[00:05:03] Michael: Just one tiny response to that. I guess what you’re talking about getting the right mix of products, it feels a little bit like there’s a famous way of putting a portfolio together that Ray Dalio, one of the most successful hedge fund operators ever has talks about, which is really that if you’ve got things that go down in, that respond to inflation badly, but other things that do well in an inflationary environment and then the opposite and so forth.
[00:05:24] Then, what that can really do is create a very defensible portfolio that actually almost have the best of both worlds. And that feels like the sort of thing you’re talking about. So then
[00:05:32] Jason: exactly, it’s exactly what you do. If you’re managing more than one product, if you’ve got a second product, then you’ve got the dynamic in which one could be better than the other in an upturn or downturn market.
[00:05:43] And that’s absolutely what you want to think through. And then you’ve got, a couple, ways to approach. Any market, we emphasize one versus the other, depending on what’s happening in the real world. So there you go. Yeah.
[00:05:53] Michael: Th that flexibility, again, the productive paranoia, instead of going there will never be a recession in my life because I’m a positive guy.
[00:05:59] There will never be a recession in my life because I’m a positive guy. You go, there may be a recession. And if there is, we’re beautifully placed to ride it out and then you can be genuinely optimistic about the future, not Pollyanna to get it. Yeah. Principle is timing you’ll move, which is similar to keeping your powder dry, but there are two sides of the same coin.
[00:06:14] One is if you think there’s a great opportunity out there, don’t start splashing your cash on foolish things. Without really looking into, is this really, for example, is this really a great time to advertise? Or is it Amazon just inducing you to do so and make lots of money off you? Is it a great time to buy another brand or will you in fact struggle to swallow it?
[00:06:32] And it may not be a good thing, et cetera. So once you time you’ll move, that means really you’ve had time to look at things. And then there is probably an optimal time to, do any of these moves that, for example, If you look at the stock market, it just spiked right down in March, 2020.
[00:06:47] That was like an, almost an optimal week in which to acquire pretty much any stock ever in the footsie, in London or in, in the NASDAQ or in the S and P 500, whatever the New York stock exchange. And I think that you get analogist moments in extreme times. In any market, including an e-commerce.
[00:07:02] So I think sometimes there’s just a sweet spot where you followed companies for, while you follow products, you product follow there, put it makes you follow the advertising and now’s the time to strike. And that can be really when you transfer a lot of wealth from somebody else to yourself, if you get it right, I think.
[00:07:15] Jason: Okay. What’s a what’s principle number nine. Okay.
[00:07:19] Michael: Principle nine is what I call big fish shrunk pond. So it comes back to the, get a star principle or the, Boston consulting group matrix, which is in order to build a really valuable business or valuable product line or both. You need to be part of a rapidly growing market.
[00:07:34] And you need to be the market leader by some margin. So you’re, if you’re talking about product lines, for example, you want to be selling pretty much twice as much revenue as anyone else in your market. Now, how you define a market, we could discuss forever. That’s a whole podcast, but let’s keep it simple and keep that principle in mind.
[00:07:49] The greatest time to acquire market share is when a market is small, not big, a simple seasonal version of that is you don’t want to be advertising like crazy to build market share. In October, November, if you have a seasonal product for Q4 for Christmas, And in recessions, you get even more pronounced down and upside.
[00:08:07] So if you are courageous enough to invest a market that is small, but starting to grow again, that is when you can really dominate that market. And in the future, that market, once it’s grown with you at the front end of it, staying the leader can becoming very valuable. And I believe personally, that is one of the principles that drives the incredible companies that are everyday companies that, that principle of explosive growth and value growth.
[00:08:32] Jason: Yeah. You mentioned the star book, Richard cautious a book to me, last week or the week before I hadn’t listened to it or read it before. And, I, yeah. . So what is fascinating because I have a major critique of his book, which I want to talk to you about, and it fits in perfectly to this topic, which is, he, Has two core principles, a fast growing company and being the market leader or being the market leader in a fast growing niche or industry.
[00:09:00] But here’s the wrinkle. There are many, businesses that are in industries that are not fast growing, but they’re, e-commerce. Sales for that industry is fast growing. So in other words, there’s a different lens to look through other than just is the niche or industry fast growing. The question is the acceleration from offline to online sales.
[00:09:23] Happening quickly. And that is almost true of every industry or niche. Not all, but many industries or niche have old retail, brick and mortar, PR approaches that are not fast. But their conversion to e-commerce is fast-growing. And I personally know of a good number of really successful e-commerce operators that slipped right in to the middle of that, where they weren’t a leader.
[00:09:53] And it wasn’t a fast growing niche, but because of. Online, they were early on Amazon or wherever they caught the slipstream and really, profited from that conversion from offline to online. So anyway, to your point, I think there’s nuance here because what is a large industry offline that hasn’t converted to e-commerce sales yet, is different than a large industry.
[00:10:18] Converted to e-commerce and honestly, some industries go slower and faster than others, it’s not all, equip equal from niche to niche. So anyway, that’s my kind of thought as it relates to star principle. Yeah. Interesting wrinkle. Yeah.
[00:10:31] Michael: Yeah, no, it’s an interesting week for sure. It’s incredibly important one.
[00:10:34] I would say go back and read the book because the very first investment that Richard costumer to invest a million pounds, so about 1.4 million bucks and turn it into a hundred million. And his very first investment. And that was in the thing called Betfair. And to your point, offline, betting shops, a lot of occasionally being passed them.
[00:10:50] And they’re full of old men in flat cats, smoking and kind of grim places. I’m personally, not a fan of gambling and that’s a different kettle of fish. So anyway, so there were sad little places that weren’t going that fast when they went into its online version. Betfair to your point, that was exactly the move.
[00:11:04] Blew up his wealth. And that was his first of 16 investments, eight of which had been positive return, which is why I take Richard cost seriously, but you’re upset you, then a lot of markets go from online, offline to online and blow up in speed. And that is exactly why if you, if, and this is the key, you can stay market leader, they can be incredibly valuable for you, but.
[00:11:23] What I would say is the best time to become the market leaders when it’s small, because it’s a lot less expensive. And then of course, you’ve got to invest in reinvest to stay ahead of the Kevin’s stay the market leader, which is the difficult piece. Of course,
[00:11:35] Jason: I think we needed a whole podcast on this one because there’s a lot of nuance there.
[00:11:39] That’s very interesting. Yeah. Okay. What’s your 10th? So
[00:11:41] Michael: the 10th principle really related to that, that you can grow by, taking market share from other people through advertising, whatever, and you can grow through acquisition. So the 10th principle is swallow. The smaller tasty fish. You may wish to reword that into something more tasteful, but go and hunt for what is still a hunting metaphor.
[00:11:58] Isn’t it go. And tastefully have chats to people who have businesses that are distressed, and we’d like to get out of those businesses and offer to acquire them at a reasonable market. Buddy, that’s the most polite version, but either which way there are people out there who have actually got them on one of my most, my moms is in that exact position.
[00:12:14] They have a lot of assets and some beautiful design and a lot of things. What they don’t have at the moment, it’s a profitable business. And because of various disasters that are before them, that’s not likely to happen. And they’re moving out of that market. Now that could be a great place. It would be a real win for him and a win for the acquiree to go and say, okay, so we’ve got some, let’s untangle the stuff that’s not helpful and not useful to us, to the stuff that is useful.
[00:12:35] So might acquire that stock. There might be some very useful intellectual property, some beautiful image assets, et cetera. So I think it can be done the right way. Be a very. By very mutually beneficial for both the acquirer and the acquiree.
[00:12:49] Jason: Yeah, no, this is really key. But this, this topic is really broad as well because, cinnamon and I have acquired 13, brands over the last five, four years, something like that.
[00:12:59] And, people just capitulate at different times and say, they’re ready to retire. That kind of thing and want to sell their e-commerce business. And, and if you’re a growing and thriving and you have the opportunity to, be a good partner to them in the transition of their brand, it is an opportunity.
[00:13:16] And, I can’t remember the exact number, but I think I saw something that said. In the United States alone, there’s 800,000 businesses that closed a year. I think it was enrolled in Frazier’s marketing for his acquisition, a course that is striking. And those people are, if they’re not selling, then they’re just saying we’re done.
[00:13:38] And if it’s in a niche or industry that you’re operating in and you can say to them, Hey, I’ve got, I see value. And. And your product line, in your intellectual property and all that. Is there an opportunity then to, be that go forward, owner and, even in the COVID pandemic, I don’t know if you’ve watched, the growth of, some very large e-commerce operators, which again, this will be a whole different podcast, but, that have basically.
[00:14:02] Store at retail stores that are going out of business. Grant Cardone is who I’m thinking of. And he’s like pier one imports is a big store in the United States. There are other big stores that are sporting goods, that kind of thing. And they were going out of business and he just bought all of their IP and their website domain and converted them into an e-commerce only operation.
[00:14:21] And he’s done. Store after store. And you’re right. This is a perfect, opportunity when an economic downturn exists to look for the, the chance to see a brand that might be valuable in your niche, that you could take forward that the, the owner might want to sell. So there you go.
[00:14:39] Yeah. I love that. Okay. That’s the 10th principle. Any other final thoughts on that one before we go?
[00:14:45] Michael: Yeah, I guess a positive way of looking at this is, I think the word entrepreneur, one definition of it is that you move capital from a low yield to high yield environment. And if somebody has some intellectual property that I’ve spent blood, sweat, and tears developing, and they’re literally just going to close the doors and nobody will get you to use it and you can acquire it for what is for you.
[00:15:02] A moderate Simon saves you an awful lot of development time, or a pattern or a design for product, which saves you months and months of work. Then not as a real win for both sides, I think because otherwise they are just going to shut the doors and you’re going to miss out on something that already exists and reinvent the wheel as it were.
[00:15:17] So I think done the right way and with compassion, and tastes and a good economics, that can be a really positive move. Obviously you have a lot more personal experience. I’m the guy on the sidelines watching my, clients selling and buying businesses with great interest.
[00:15:29] Jason: Yeah, no, it’s an interesting topic in and of itself. And we’ve done a podcast. If you’re listening to this and are interested in the idea of acquiring other businesses, we’ve done a whole episode on how to do that, where I did some storytelling about what we’ve done and examples of how to do that.
[00:15:44] Okay. Let’s wrap it up, man. You want to do a summary recap and, and, we’ll wrap up.
[00:15:50] Michael: Sure. Principles for 10 principles for surviving and thriving in a downturn principle, one price for profits. You may already have a price optimal strategy. And to your point, Jason, thinking about, your pricing relative to the market leader, which doesn’t just mean increasing or decreasing, principle to use stock wisely, don’t just throw stock into the furnace of Amazon, particularly, think about getting a return from it and.
[00:16:10] Potentially raising your price rather than just running out of stock. Principle three early cut ruthlessly, particularly cut product lines that aren’t working for you and a wasteful advertising principle, four stash, the cash, having plenty of reserves and productive paranoia, possibly Allah bill gates, principle five, keep your powder dry.
[00:16:27] Once you’ve got some cash reserves, don’t go out and spend them too quickly. Be mindful about how you spend it Principal six, pivot your market. If you need a principle seven pivot your business model, if needed. And you’ve talked about, there’s quite a few services that people have a lot of ability in.
[00:16:41] That’s a fairly quick pivot for many of us. If you have services that you are good at, in your space pivot and principle eight is time you’ll move. So if you are going to, use that powder that you kept dry, then make sure you do it at the time. That is if not optimal, at least good enough in terms of grabbing market share.
[00:16:58] Principal fi principle nine is be a big fish in a small pond. If the pond has shrunk, that is a great time to get market share and principle 10 find potentially acquire other businesses that have been struggling a bit and have done the right way that could grow both your brand and give those people some kind of payoff for their hard work in a distressing.
[00:17:18] Jason: I love it, man. Great topic today. And so if you’re listening right now, live with us, we’d love to have you hit subscribe on our YouTube channel or the, player that you’re listening to or leave a comment below if you’re on Facebook. And then of course, we would love to have you give your highest and best review in your podcast player of choice.
[00:17:37] If you’re listening to this, on a podcast player, Spotify is my podcast player of choice and I’d love. People leave a review and, and subscribe to the show on Spotify. But if you use apple, that’s cool too. We’d love to have you, show some support for the show on that player as well. Michael, as always, it’s an honor and a great list today.
[00:17:57] This is really valuable content and important, time-wise in the economy. And, hopefully this show serves people well for years and years to come. So thanks for putting the list together and walking through these.
[00:18:08] Michael: Thanks, man. Always a pleasure to discuss these things with you and, yeah.
[00:18:11] I hope people find it. It’s a thought provoking for that.
[00:18:13] Jason: Absolutely.
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