The E-commerce Leader

[00:00:00] JM: If all you did was just work on those two steps, we acquire them and then we get them on a subscribe. Subscription type program, um, you would be doing insanely well. And the value of this is similar to the membership programs
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[00:01:15] MV: Today I wanna talk about something Jason, that came up in the Mastermind recently, which is always good cuz I know that e-commerce operators are thinking about it cuz they’re telling me in the mastermind, in, in confidence, not in public. And somebody asked, uh, I’ve got a, an Amazon business, they’ll actually ask, should I do this?
[00:01:30] But that was my question to him. They were gonna add a direct-to-consumer website of their own. And then they also wanted to bolt on a business business to business side to wholesale within that website. So, I wanted to discuss what came out of that, and I guess it comes down to adding business models to an existing business.
[00:01:45] Should you do it? What are the benefits? So that’s
[00:01:48] JM: today’s topic. I love it, man. I like that a lot. That’s an exciting topic. Where do you wanna take it?
[00:01:56] MV: Well, I would to just mention, um, the reason it came up in the mastermind originally is because, you know, this person was talking about how to do things rather than should I do it?
[00:02:04] Mm-hmm. And my question back to him being typical awkward, me maybe the lawyer’s son, before you do stuff, should you do it? Just because you can, doesn’t mean we should, as Jeff Goldblum said in, in uh, what do you call them, Jurassic Park. That’s the one Exactly. I love Jeff Goldblum. He’s such a deep, he’s like chaos.
[00:02:20] Anyway, but I always think it’s a good question. I just said to him, well, you know, my worry, this is sort of me being prematurely practical, is like go and talk some business brokers and find out whether the entity you create that way is a sellable thing. So that was one sort of lens that I’m looking at through, um, but then, When I brought this to you, you, you are very excited about the idea of adding business models to businesses.
[00:02:39] Yeah. So we’re gonna mash this up today and see where this takes us. Um, but I know that you’ve got some business models, six business models that anyone consider adding to their company to expand, increase revenue, and ideally profits Yeah. Are meant to profits. So let’s get into those cuz I want to, I wanna give this a, a good run.
[00:02:56] This is an ex exciting topic for me. Well,
[00:02:58] JM: yeah, I mean, I think your question in the beginning was an interesting one, which is, is it make the business more sellable to do those things? The other questions that you could ask would be, does it make it more profitable? You know, so some strategies are to maximize top line revenue.
[00:03:14] Some strategies are, uh, to maximize bottom line profit. The other questions or lenses might be, does it make it more. Um, easy to run, you know? Uh, is the business model you’re considering bolting on making you a slave to your company, or is it making it more liberating place for you to be, you know, um, and, and then I guess the question, the final lens maybe would be, is it, is it fun?
[00:03:40] Is it make your business more enjoyable? Um, so I think, you know, if you’re gonna add business models to what you’ve got going, you’ve gotta ask yourself sort of holistically, What is it that you’re trying to accomplish? And there might be two or three things, but what are the things you wanna avoid also, uh, before you actually bolt on new business models?
[00:04:00] And to your point, yeah, there are lots. I think there, we could talk about six of them, uh, today that are great. Um, but I do think this initial question about what, you know, what impact will it have on your business as vital to think about.
[00:04:13] MV: And that reminds me of the, the approach Tony Robbins, I think talks about with adding things.
[00:04:17] I think he calls it an ecology check, right? So does it fit into your life? Will it fit into the other stuff? And, and I think, yes, that those lenses that you said, very, very good, sellable, profitable, easy to run, and more fun. I think you’re so right to emphasize that cuz owner operators often make their lives really miserable in the pursuit of the raw almighty dollar or pound or euro.
[00:04:36] And, and actually, In my experience, people who are miserable owned businesses are never doing well anyway. Whether it’s chicken or egg, I don’t know, but it doesn’t correlate well. So you’re right, easier to fun. Fun is important. Um, that said, uh, let’s get into these six business models cuz I think this is.
[00:04:51] A, a strategic level change for business. I see. Underutilized by people selling on Amazon. I’m like the clues in the name just selling on Amazon. Right. So, uh, let’s get into this. What’s the first one? I think this is probably one of your favorites, right?
[00:05:02] JM: Sure, yeah. Well, any business e-commerce operator that’s not doing some version of digital products.
[00:05:09] Should absolutely look into it. Uh, this is one of the things we recommend to all of our coaching clients and talk to them about. It could be as simple as things like a companion ebook to your product or a how to guide for whatever your customers are trying to accomplish. It could be things that would be, you know, nice supplemental content pieces to add.
[00:05:31] It could certainly be beyond. eBooks or PDFs, it could be video as well or anything else digital these days. Uh, you could build your own AI app or of whatever tool if you wanted to, I guess make a robot for your customers. Um, but something digital that you can sell to them. And the use case there for digital goods is I think, super powerful.
[00:05:53] Um, you know, there’s a lot to be said for, you know, digital goods. Um, low overhead cost, great profit margins. Um, They’re flexible to use. Uh, digital delivered items is a growing thing. It’s a growing market. Um, and they’re scalable and, you know, all of those benefits stack together to make a digital item added to your business.
[00:06:15] Super powerful. And so that’s one of the first things I think about bolting on. And you know, that, that to me is, uh, an absolute. It’s not a no-brainer, but it’s something that you would say you certainly should consider. Um, and I always do the little bit math project with this one with, uh, clients. When I say, you know, let’s say you’re selling a million dollars worth of, uh, whatever widget you sell or you’re item, and let’s say you’ve just got a, you know, like a 10%, uh, net profit, you know, uh, so you’ve got a hundred grand right.
[00:06:49] But what if I told you you could sell, uh, you know, $50,000 worth of, uh, digital goods and grow your net profit radically, like, dramatically, you know, so you’re only selling a million and $15,000 worth of goods, but your net profit goes, you know, crazy high. It goes through, through the roof, uh, as a percentage that, that’s the thing you wanna think through as relates to digital goods is.
[00:07:15] How much they can add to the bottom line, even if the top line sales isn’t that dramatic. So all that to say, um, I do think that’s the first one that people should consider.
[00:07:25] MV: So a couple of responses. I mean, the first one is, um, this is an uns scratch it for me. And I think with my new sort of acquisition hat on that I’m, I’m trying to scale myself up and, and get out there and acquire businesses.
[00:07:35] I’m probably gonna be looking at acquiring a dish. Business now rather than just trying to develop one might just to go through the pain of trying to credit develop my own products. Although I probably end up doing, I both, I suspect. But having said that, it’s, it’s, uh, something I’ve been aiming at doing but not done.
[00:07:49] And I look at my clients and I see the same pattern that people get interested by this and then they don’t tend to do it if they tend to be physical product focused people. So why do you think that is? And, and how do we go over that hump?
[00:08:00] JM: Yeah. Well, I think there is a different discipline and core skillset required to do digital goods than there is physical goods.
[00:08:10] Um, I also think there’s different sort of psychological or emotional reward, uh, mechanisms of feedback loops in digital goods than there is in physical goods. Uh, and so it, it satisfies. Entrepreneurs differently, I guess you could say. And if you’re really hardcore addicted to moving units, you know how many boxes, how many containers, how, you know, how big a deal am I, because of all of the stuff I’m sending into Amazon or whatever.
[00:08:38] An ebook can seem very, very, almost hypothetical. You know, that’s like, doesn’t seem tangible, doesn’t seem practical or real. Um, So, I mean, I think there, there’s some of that. There’s also just the execution challenges, you know, um, digital goods are di a different animal to build, put together in market. Um, and that can take some learning and some, some, uh, you know, effort.
[00:09:00] So I think, I think those are things that slow people down. I also think there’s an interesting question with digital goods about match to market. You know, you have to find something that your [00:09:10] current customers actually want. That’s a digital item. You can fail at that. Pretty quickly and then conclude that digital items don’t work for your customers.
[00:09:19] That would be a completely wrong thesis. The correct thesis would be the digital product we tried to launch didn’t work. Um, and so, you know, the question is what, what didn’t work? Was it a bad match to market? No, no appeal. Is it badly marketed, um, et cetera, et cetera, et cetera. So I think there are reasons why a lot of physical e-commerce sellers don’t get into this, but all that does is make more opportunity for the ones that do.
[00:09:44] MV: Yeah. And, and I think, um, there are two characteristics about physical products that you’ve touched on I want to emphasize. One is revenue versus profits. And, and everyone. Everyone, not everyone, but pretty much everyone that I know in product space measures their value as a human being and their latest sales revenue.
[00:10:04] It, it reminds me of Reginald Perry back in the seventies. It was an English sitcom and situation comedy and, and there was this guy, cj, who was very old school business owner, and when, when times were good, he had a really fat cigar and when times were bad, he had a thin cigar and like people’s egos inflate and deflate month by month.
[00:10:19] Mm-hmm. I can always tell he’s had a good month of sales. Mm-hmm. But yeah. Did. Yeah. The, the profit is what matters and the profit margin on physical goods. Once you’ve got some extra cost built in there, like, um, a third party logistics warehouse, three pl, it can be frighteningly low. And I, I think that’s the first thing that people measure their net worth by, by their not their net worth, they’re worth by the revenue and they should be measuring Yeah.
[00:10:43] If they’re gonna attach their net worth to, to something. Their mental worth. Sorry. To the, the net worth of the business or the value of, I’m trying to avoid the word net worth, like, guys, it’s what it’s worth to the market. It’s not about the revenue. Wait. That’s the first
[00:10:55] JM: thing thing. Lemme take a, lemme take a whack at this.
[00:10:57] Yeah, please. People, people attach their self-worth to their. Revenue, when they should attach their self worth to their net worth or net profit. You’ve rescued
[00:11:08] MV: me from my garbled brand here, but Yes, absolutely. But actually
[00:11:12] JM: they shouldn’t attach their self worth to their profit. They
[00:11:14] MV: shouldn’t do that either.
[00:11:16] That would be like stepping of the two, like, like you are not your business, just like a performer is not the latest performance. And you know, I, I, I’m busy, but to your
[00:11:24] JM: point, yeah. Most business operators that have been around for a while don’t care about the top line revenue number. In such a sens sensorial way or flashy way, as they’re thrown around on the shiny objects of the internet marketing tools, they people care about the net profit and you, you know, most people are sophisticated enough to know now, yeah, it doesn’t matter what your top line revenue is, really, it matters what your net profit is.
[00:11:51] You know
[00:11:52] MV: what? That would be the case. I, I, I would’ve thought, but I know some people who’ve been in business that they’re like fourth generation or something of a family business, and they still care about sales. So it’s interesting. It would be nice to think they cared about net profit. Anyways, the second point is doing a lot of stuff that’s really expensive and difficult feels like a great achievement, and it is.
[00:12:10] It is, I, I salute anyone who moves whole containers of stuff around the world. But the thing is, who’s an achievement for, it’s an achievement for the consumers cuz they get great goods from other, other places that are beautifully produced at, at very low cost per unit. It’s an achievement for Amazon cuz they’re taking maybe 30, 40% of that revenue.
[00:12:27] But is it an achievement for you as a business owner? And this is the thing we can get addicted to activities. So anyway, all of which is to say, The psychological rewards that you mentioned I, I think, are actually really big barrier. I think it’s not so much a, a how, it’s a sort of mental shift thing.
[00:12:40] Mm-hmm. Mm-hmm. Anyway, so that’s, that’s digital goods. Um, so what’s the next, uh, business model that we could, uh, add on to the operations?
[00:12:48] JM: Yeah. I think most e e-commerce operators could add on a membership program or what you might call a V I P club. Something along those lines. And this is differentiated from subscription products, which we’ll talk about in a moment, but a membership program.
[00:13:04] Think of like the Costco, uh, model or Amazon Prime. You know, it’s like you, you sign up for, uh, you know, for some kind of status level upgrade, v i p whatever your, your version of Prime, and you get a list of goodies and benefits. And that type of program can be created in, I would think, any niche or you know, type of industry.
[00:13:30] The ones that I’m associated with for our consulting and our personal work, there’s clearly opportunities in all of them for that type of. Program and there’s a simple execution available on Shopify with specific apps. A bold membership app or the 8 trillion apps really good too. We have clients who have, um, used that to set it up.
[00:13:50] And the thing that’s really powerful about membership, just to sort of make the use case for it, is people pay you money for benefits in the future that you may or may not have a lot of cost of goods associated with. And you have, you have that pile of money sitting there that you can use for any reason you want, um, to create the benefits that you’re promising them, or, you know, I mean, the simple execution is create a membership program and then give all of the people who join that group a 20% discount for 30% discount.
[00:14:26] Now, a lot of loyalty programs give that away for free. You know, just join our loyalty program and you’ll get some kind of rewards, but you could set it up like Costco does. Or Amazon does, where you pay for that privilege as a customer. And uh, for on the business side, that’s free cash flow and that that is completely untethered cash.
[00:14:47] And so there’s just incredible value there when you think about it. Um, and we’ve helped set this type of program up for our clients. We run this type of program for our own businesses and it’s really, really powerful to, um, bolt onto any business in any niche.
[00:15:05] MV: Yeah. My experience of it is, is limited only to say the 10 K collective and, and, uh, the mentoring programs I do, which is not really a clean e-commerce example, but even so when you look at the lifetime customer value, even if it’s really very low charge per month.
[00:15:18] It so adds up. Like somebody left a mastermind the other week after being a member for several years, and I looked at the tel value and yeah, they were paying terrible money, but it was thousands, uh, over the course of five years. I’m like, oh, wow. You know, that’s been useful. And so this is one of the, the terrible characteristics of Amazon.
[00:15:34] It’s, it’s kind of, Spearfishing using great skill and, and fighting really hard with a bunch of other people over the watering hole to get a fish. And then you’ve gotta start again every, every single time. Now there’s a lot of fish in the Amazon River to push my metaphor to breaking point here, but nevertheless, there’s a lot of people fighting for them, and everyone is like a hunter gatherer.
[00:15:52] And the wonderful thing about a recurring revenue of any description is you fight and hunt once to get the customer and then they keep paying. And I think that’s, it’s so powerful that it, it adds the values of businesses as we know the. Their businesses have such high valuations relative to the profits.
[00:16:09] Yeah. Um, so it’s, it’s so
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[00:16:59] JM: powerful, man. I, I really think, yeah, that this is one that really, if you, this is one that if you construct it right, adds tremendous value to your business and doesn’t add tremendous work to your business. Uh, and to your point, as you know, uh, the cashflow that just comes in the, um, the thing about it, I like the thing that you just said about.
[00:17:21] People competing on Amazon for a one-time initial purchase. If you think about it, like the first purchase that anyone makes from you is in that moment you’re interacting with the least valuable customer you have, you know, uh, but if they come back and make a second purchase, they’ve just gone up the food chain a little bit.
[00:17:40] They’ve, they’ve escalated up the ladder a little bit. Now they’re not a one time transac or now they’re a returning second purchaser. And then, and they’re more valuable to you. And then if they come back a third time, they’re even more valuable to you. So having a v i P program where you’re building something that really serves and bene, you know, benefits the people who are most, uh, loyal to you and most, most valuable to you, makes a ton of sense.
[00:18:07] And a lot of us as e-commerce operators spend tons and tons and tons of time and energy. Trying to find that first purchaser. And we spend no time and no energy [00:18:20] trying to get them to come back a second, third, fourth, fifth time, and building systems that ensure that that happens. Um, and so the wise marketer is the one who spends time building that membership type program or model to reward, uh, you know, faithful repurchasing, you know?
[00:18:39] MV: A question for you then. I, I know you, obviously you guys have got a membership program yourself, and you and Kyle have worked with quite a few Amazon focused, uh, e-commerce operators to start with. Um, is it possible for somebody who’s just focused on Amazon, just physical products to create a membership program in one leap?
[00:18:55] Or do you think that there’s interim steps or is it even possible at all?
[00:19:00] JM: Oh, I mean, I think it’s highly possible you have to sell it to ’em. So, you know, the question is how do you get it sold? You absolutely could have an insert though in your products that says, Hey, join our v p Gold program, or our Platinum Plus program, or our Prime, you know, our prime program and, uh, sign up here at this website and you’ll get whatever it is, uh, some kind of, uh, benefit.
[00:19:23] Now you have to think through the benefits and what that, you know, how, how it’s delivered and. All of the details associated, but the, uh, but the, the logic of that is pretty straightforward. Can you convert someone from Amazon sales to a, a membership program that was elegantly designed? I don’t know. I mean, I, I’ve never tried it just with that pure, you know, starting point.
[00:19:48] Uh, we’ve always started with people who are already mixed into Shopify, but, um, It would be a noble venture. And what would happen if you did? What if after every 1000 people, you got one person to join your, you know, v i P program or whatever and give you, uh, $97 a year? Yeah, I mean, I, you know, it’s, It just, it’s interesting math questions, isn’t it?
[00:20:12] It is, isn’t it?
[00:20:13] MV: Just calculating in my head how many transactions a month that, that one of my typical clients in the mastermind would have say, typical, not mean, mean, average, but say they’re doing $4 million a year, so what is that per quarter? It’s a million dollars. So per month they’re doing. Yeah. I dunno how many transactions up Probably turns down to several tens of thousand.
[00:20:31] So yeah. Even if you get one in a thousand, you end up with every month accumulating a thousand in, uh, monthly recurring revenue. And if you start running the mass on monthly recurring revenue with the spreadsheet, it adds up a big number depending on how quickly people stick around. I mean, and if all’s
[00:20:45] JM: all you did, if all you did was use that money they gave you Yeah.
[00:20:49] To, um, for acquiring new customers, just pour it right back into marketing. Yeah. You’ve now got a flywheel. That’s been a new level of velocity.
[00:20:57] MV: I like it, man. This is great thinking. This is the sort of thinking that needs to be brought to bear in the Amazon sort of universe, really. I mean the one caveat I’d flag up, I suppose, is the terms of service might make it unwise to go directly from, here’s our product at Amazon to come and buy off Amazon.
[00:21:12] Cuz Amazon hates it. No. Right. But you can always, you can always do something like get ’em to sign up. Everyone in the world’s trying to get them to sign up for a list where they can ask them for reviews so you could do something better like this.
[00:21:22] JM: That’s what’s interesting is the delivery of the V, the benefits for being in the membership program don’t have to be, uh, uh, the product.
[00:21:30] Mm-hmm. It doesn’t even have to be a discount on the product. It could be something completely different associated with, you know who, you know, they are what you know they do. Yeah. Digital kids something. Yeah. Sure. So that’s the creative brainstorming part of it. Yeah. But I
[00:21:44] MV: love the, I love the idea like even if you said a thousand dollars for in a thou, one in a thousand people and they give you a thousand dollars a year or something, or I dunno, 97, I dunno, any small number, it adds up.
[00:21:55] I really like that idea. And if you get like a, a handful of people every month. Wow, this is great. So I guess this kind of, this brings us to the next one that, that you, uh, had on, on the list as well. Yeah. So it’s a recurring idea. Yeah.
[00:22:07] JM: And that subscription model. So, um, you know, Amazon has the subscribe and save, uh, functionality already baked into their site.
[00:22:16] You too can create a subscribe and save model where you have people on recurring subscriptions, the. Logic and the interest in doing this is tied to what we said a few moments ago about the whole idea of first purchase, uh, value versus second purchase and third purchase, um, having com, you know, uh, your company built on the acquisition of initial customer and then the integration of them into a subscribe and save program.
[00:22:43] If all you did was just work on those two steps, we acquire them and then we get them on a subscribe. Subscription type program, um, you would be doing insanely well. And the value of this is similar to the membership programs in that, you know, you’ve got a, you know, incoming revenue. This is obviously in fulfillment of delivering a product though.
[00:23:05] So that’s where, in my mind, this is sort of, I guess, a little, little, not as good, a little bit not as good. As a v I P membership type program because, um, because this is basically fulfilling your, you know, your second purchase, third purchase, fourth purchase, you know, promise, and, and having them basically, you know, sign up for that so that you at least have predictability in your sales.
[00:23:31] You know, and the greater to uh, extent you have people subscribing to your product on a monthly basis. Uh, you know, at least, at least if nothing else, you can start to plan and be more strategic in terms of how you are, uh, preparing your number of units and that kind of thing. Uh, for customers, um, there are apps like Bold subscription app is great in Shopify, um, and it, uh, it’s set up for this kind of thing.
[00:23:55] There are other apps that are great as well. That really allow you to program your site so that you can have people converted into subscribers. It’s fun for us to look at our clients, uh, Shopify Analytics with them and, um, we do this when we meet with clients regularly and we’ll, one of the things we look at is how many subscription dollars came through.
[00:24:18] You know, what are your subscriber counts look like? Is it growing? Is it declining? What’s the churn rate? All of those details. Sophisticated Shopify operators use this, this tool, and they use that math and that logic to build their value in their business.
[00:24:33] MV: That’s brilliant. And I just wanna say, uh, I kind of wanna go backwards in a sense for one second cuz I know that the Amazon sellers, I know that the physical product, Amazon sellers, they kind of, as you said, died in the wool, has become a mental habit.
[00:24:45] And, and uh, I think you said years ago, uh, you know, be careful what ru you choose because you’re gonna be stuck in it. I think you have to break outta that sometimes. So yes, you could sell physical products. Mm-hmm. Sorry, lemme just try that again. Yes, you could sell physical products, uh, on a subscription, as you said, at least it gives you predictability of revenue, but you’ve got all the, the costs of physical goods and you’ve got all the hassle of getting them and the, the, the supply of, you know, moving atoms as harder than moving electrons, as they say.
[00:25:05] So, mm-hmm. I would say going back to the membership by the, or, digital goods, if you think that your products. Uh, I would say two barriers that I can think of that I would want to try and remove for physical product focus sellers and Amazon focus sellers. Number one, if you think your product category doesn’t lend itself to that, I, uh, not only would I question that, but look at the Amazon results.
[00:25:25] Some products, categories, like, you know, pets, you can have pet training, some things you can hardly move for books mm-hmm. On some, you know, search results pages around certain categories and that. That’s a bit of a massive hint that somebody’s making money outta the digital product thing. Mm-hmm, mm-hmm.
[00:25:40] And the other thing I would say is this, you don’t have to make it yourself. I know the odd person who’s made their own face cream at their kitchen table, the obsessive types. It’s very rare. Most of us outsource it to somebody who’s an expert in making plastic widgets off the other side of the world. So I don’t see any reason why you wouldn’t outsource making books as well.
[00:25:55] So this was sort of working backers, cuz I know people will latch onto the subscription thing cuz that’s comfort zone. So I’m just kinda challenging that, I guess. Mm-hmm. Mm-hmm.
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