The E-commerce Leader

We are Michael Veazey in London, England,

J smiles in Seattle, Washington.

More importantly, you are the owner of a thriving online business. And you want to become the best e commerce leader you can be. We’re here to get you there for show notes with links and resources mentioned today. And for other juicy resources like downloads and free mini courses. Just visit our blog, the e commerce leader.com.

Michael, how you doing, man?

Yeah, I’m doing well enjoying our conversations. And we Yeah, we’re deep diving in some great stuff, man. So let’s let’s jump in because you teed up the business model thing as a driver of profitability. And you gave me a vehicle metaphor, which is candid to me. So I’m all right.

I didn’t know you were a car guy. But let’s do the let’s go with a vehicle metaphor here. So business models, that’s the topic of the day. And so obviously the business model you use is the set of sales strategy. Jeez, I would define it as the sales strategies and product strategies that define your, your business. And obviously, most people scale into one core business model. And then they’ll have other things that they do that are adjacent strategies. And so that’s kind of how I look at business models. It’s like the it’s the product and the sales tactic that you’re using to define what you know, the core essence of your business. And so that’s, I guess that’s the first place to start is the definition of a business model. Does that strike you as something that seems like a good definition? Or do you have something that’s different?

Hmm, that’s an interesting question. I guess. I don’t have a specifically defined way of doing it. But let me put it this way. I think it’s your specifically defined way of doing things. And that’s got to free commerce include the sales and product tactics, but I guess in the end is got to include something that’s a bit unique to explain. as well, because otherwise you’ve baked in the fact that you’re just going to do the same thing as everyone else. Yeah. And a lot of people do that in the Amazon space, they actually, from the execution side of things do quite a solid job, although it’s within one channel, and of course, there’s a lot to discuss there. But on the product strategy, that their marketing strategy, maybe they’ve outsourced stuff to V A’s. But if they’re using the same tactics, then I think what they’re missing is at the strategic level, which is the differentiation piece. So I would define a bit a little bit more broadly. And I would call that branding work.

I would call that second step in my my conversations, the branding element added to your business model.

Okay. That’s a point of difference. That’s interesting. Yeah, that’s what it said. Yeah. helpful way of looking at it.

Yeah. Okay. Well, let’s, let’s define what we’re talking about. So, you know, most people who are in the e commerce space are familiar with a good number of common models. And so, I have in prior work, I done in a book that I’ve written that kind of thing I think it lists 16 so I put those in our we can put them in the show notes too but let’s just rattle off a few I started our eBay business with handmade items. That was the first thing we started selling at auction on eBay so it was a handmade items. And of course, Etsy is the massive marketplace for handmade items now so that’s the first one that comes to my mind because it was where we started. You want to just bounce back and forth What do you got? What Yeah,

sure, I mean, the other ones that are very sort of Amazon centered I mean that the classic one to start with is not private label which is what I started with because that’s just not very sensible starting point because it involves a lot of risk and a lot of capital. So retail arbitrage This is a classic standpoint, retailer online arbitrage as well.

Yeah, which is buying goods and then just simply reselling that you can buy at a retail store sell it on Amazon, which is a classic retail arbitrage you can buy on eBay and sell it on Amazon which is online arbitrage or validity iterations of all Have that yeah. So those are common common models that grew really scaled and grew around. I would say eBay first. And then Amazon really took them to a crazy level. You mentioned private label, which of course is there’s companies that will manufacturer packaged goods and just put your brand name on it, whatever you tell them to put on it, they’ll put on it. Private Label products is that is the reference for that. You know, the other model that’s obviously there for many people is just to sell. I call it wholesale arbitrage, but it’s just going and finding a manufacturer who’s selling you goods at volume. And you just you’re just the retailer, and on the online side.

Yeah, and by the way, I think that’s a really smart thing to have as part of the mix because a lot of people jump from retail arbitrage to private label. And I would say that wholesale has some of the characteristics of both but is less eye watering the risky and capital intensive but least start with obviously, if we’re going to scale it, anything is capital intensive, but you can turn stuff around quicker, you can sell your stock over quicker if you’re sourcing in the US and selling us and so forth. Yeah. The other thing to say about that is that private label, I think, is in the pure sets, you know, you put your logo on something and do unique packaging, but the product looks exactly the same. Even several years ago, that was a pretty difficult business model to defend. And I think now it’s not really as good as the others. Actually, I would say that the next level up is customization, which has a lot of the same characteristics. You got to make development Asians, but they still got a source from China most of the time, and you have all the other mechanics that go into private label. So I would I would flag that up as an additional. This is my one, what do you so you refer to that as so you refer to the first one is just wholesaling is by I guess I would Yeah, I would say my first sale. Yeah,

you refer to the second one as customization. I call it I would, yeah, right. But it’s original, of course in the auto parts section. Since we’re using the car metaphor, the original equipment manufacturing Yeah, some product making is is what we’re describing where you go to China factory or anywhere and you have them uniquely make something for you. Yeah,

yeah. Here’s the problem with China they misuse all international terms. So if you simply go to them and get private label done they refer to as OEM, when they should be ODM, I believe specifically So yeah, I would just be wary of using the precise terminology with the Chinese because they will use precise terminology but in slightly the wrong way just to warn you, in my experience, anyway. Yeah. Okay.

Yeah. So now Okay, so let’s keep going. So those are so we’ve got a good collection there. Of course, just to add to that, because it’s sort of an entry level strategy would be garage saleing. And it just in and that is buying new in the box packaged items at garage sales. Typically, this is the strategy, finding new items at garage sales and then selling them online. You can of course, buy you know, unique items and sell them on eBay. But, but more scalable processes to look for items that are fairly still newish and packaged Christmas tree ornaments and on and on and on. I’ve got a buddy, what at some point when we get into stories, I’ll tell you about a friend of mine who I taught how to do online selling and he just made a ton of money with a funny garage sale story. But we’ll let that hang for a future episode.

Okay, so what else do we got? So, we’ve mentioned a good number, what else is in the universe of business models that are common? Well, I guess you’ve I can see on your list that you put manufacturing and selling items you’ve designed, which I guess is the same as custom products? Well, I was just saying, but I think it’s an actual step forward from the private labeling thing. I mean, it’s going to cost a bit more money in time to develop a product but a lot of the skill sets are the same. You can you can just have a treat as an extension of that.

Yeah. Yeah. We’ve got we Got merge merge and the world of print on demand of course that’s which has become all the rage in the last three years has married

entry, though. Not there. That’s the problem with that model, isn’t it?

Oh, I was just gonna talk positively about Oh, sorry.

Apologize.

Reserve compensation compensate for your needs first. No, I was just gonna say I’m running a T shirt. sale right now on bonfire. It’s not merged through Amazon. It’s bonfire, which is a different platform. And it was a it’s a T shirt sale for our charity. And I have a very cute design that was made. I had a poll about the phrasing or wording. Then I had a graphic artists make the T shirt so my community helped vote on the phrasing. And this is a fun little t shirt strategy. If you have a community haven’t vote on the phrasing, and or word or concept and then have a graphic artist make artists make it really nice. And then go right back to everybody and say okay, look at how cute these are. And so that’s that’s print on demand t shirt making and merge is actually a Amazon tool or product for doing this on Amazon print on demand t shirts is common. And then there’s obviously other items on T shirts that you can do that way. So yeah,

it’s To be fair, it sounds like you’ve done things with with quite a nice branding and an immunity lead twist, which is better than what most people are doing. Although I shouldn’t poopoo it I just always wary of things without a barrier to entry because I’m used to getting burned by the level of competition on Amazon. I guess if you’re off Amazon, it’s going to be less intense. So of course, yeah, yeah. So I retract my comments in

no good point, which I think we’ll get to a conversation about these later, which is a quality rating systems. How do you rate business models and evaluate them is a different topic. But of course, self publishing is different than that I you know, doing books. I was a blogger originally just for my teaching and and you know, online Like, you know, teaching type things. I started as a blogger, and then I got a book deal with McGraw Hill and then that led to online courses and that kind of thing. So self publishing to me. Of course, Amazon has that on lockdown as well. Yeah, through Kindle, but self publishing of books or courses would be the other angle on that online teaching on courses are two great business models. self publishing on Kindle in particular went through a heyday. Season of life, I would say it probably peaked in maybe 2012 2014. But it’s still certainly there. So those are two other so you know, Udemy is a is a huge opportunity for online courses. I’m I’m on Udemy I think with 11 courses. Wow.

Udemy is favored, e commerce instructor as well. So I know that

I have been I think I’m number two right now which is really upsetting to me, I might like but I’ve been number one for a long time. Time. And so I’m going back and forth with a dude who’s a WordPress type advocate. So it’s Shopify vs WordPress, to the e commerce space. And we’re into Udemy right now. But yeah, so so online teaching is, is an opportunity. And it’s there’s real money there. It’s a real business model. And it’s course it’s scaling, you know, the whole COVID-19 thing is really press the issue of, you know, studying from home, what, you know, what is happening to the schools, colleges, that kind of thing. So those business models, they’re not going away anytime soon. As people learn from home from their desktops, it creates opportunity for many, many online teachers to rise to the occasion. Yeah,

yeah. Just quickly on that one, you’re including that in in e commerce. And so tell me about it because this always interests me as somebody who’s done both. I’ve also created courses, nothing like as many or as successful as you and gearing up to get a book or two out hopefully in the next couple of years, but was felt that wasn’t in the realm of e commerce. So what is your thinking around that?

I Well, I guess it’s a great question. The way I look at it is e commerce is a pretty broad set of of business models I guess I just I guess the I’m framing it as including it because to me ecommerce just means online transaction of goods and services. So that the e commerce commerce off commerce electronically i think is the original right ecommerce. And so I yeah, I guess I would just say that if you’re if you’ve got a digital product, because our whole business model like if you’re wondering what is my business model that we’ve scaled over time, we run a digital goods marketplace, Pixi fair is actually not I’m not a digital goods seller, per se. I run a marketplace that is digital goods. So it’s it’s sort of a layer of abstraction there. But yeah, um, digital goods for sure would fall into e commerce in my mind. So that’s online. courses. It would also be memberships. Membership models, I would include as an e commerce business model. So we have a membership program with about 1000 people in it. Give us nine to 14, nine to $14 a month, individually. And so that adds up and that membership model I would say is also ecommerce. Sure. And yeah,

yeah. Interesting. And I’m By the way, I’m not saying that as a challenge to your legitimacy or on the opposite. I think actually, one of the things you bring to the party, particularly farmers and sellers, emerging blink into the sunlight, there’s a ton of other options for e commerce, but also, I think, you can define this as an interesting business model question actually, which which is I’ve stumbled into, which is if you’re defining your business or the edges of what you think your business is, in the business of doing by product type, including is it physical or digital, there’s a sharp demarcation at the edge of that which would say not include membership for example, membership sites or home Or ebooks. But I suppose then that comes to another question around the business model. Or if you like, what are the edges? What do we do here? What do we not do here? Are you defining that more by a focus on a particular kind of customer avatar than a particular type of product? Would you say no, I really,

I really consider anything that you’re selling is your product, whether it’s one on one coaching done for you services, which would be two more models. A membership program, if you’re selling a membership program online, you’re an e commerce, you’re an e commerce operator and your product is a monthly subscription. Netflix, I would say is in the ecommerce space. Yeah, yeah. I mean, I would put all of those types of monthly recurring subscription type businesses that are online transactions in those are ecommerce operators. You go go into the DNA of those companies and talk to them about their culture. Those are their ecommerce focused, content delivers. And so membership programs certainly fall into that in my view, and it’s just so I look at as a product You know, your product is a monthly recurring membership offer or your product is a digital ebook or your product is an online course.

Interesting. By the way, this is a really important conversation because I think it sort of breaks open a lot of barriers that people put in their brains, I think, to the question of business model, and so to distract you from our listener, and most the way through, but I think this is really important that the difference between focus and rigidity is is a subtle one, isn’t it? Because you could argue, okay, as you’ve talked in the previous episode about the fact that you have multiple skill sets to get a grip to grips with as ecommerce sellers, which is hard. And you could argue that getting good at you know, getting products made in China and important to USA is enough difficulty and then you’re selling on Amazon, and you should focus on that. But then I guess the question of the the risk or the you know, the characteristics of that that aren’t good, I suppose what I’m saying is, what are the sort of justification This is another episode, isn’t it and what are the locations for changing business model or Having physical versus digital? Well,

several episodes. The first question is how do you evaluate business models? Yeah. And, and objectively I mean, if there was a panel of experts like the you know, Babson College is a great entrepreneur school or you know, you got professors from Stanford Business School or whatever, and they all were sitting in panel and saying to themselves, let’s evaluate these business models, what would they say? And so that’s a whole. I mean, we can do that work ourselves, we can talk through the pros and cons of different business models without being unkind to anybody. It’s not, it’s not a subjective concern for people to step back and say, What are the merits of my business model? And I think that’s a we should definitely do that as as that episode where we just talk about the kind of structural metrics that you could use, yeah, that we’ve been I’ve done I’ve done some of this previously. So I can kind of I can work through a little bit of what my own thinking has been on this. And we can go through it and I think it would be really helpful.

So I’m unlike my defined by prejudice approach to

example, yeah, that was

my particularly ridiculous response to that. You know, but but it’s interesting is that we do have that last exactly slide, print, I was unwittingly an example of sort of prejudice of rigidity about business models, or product types, or Charles, that actually, I think, is an example of the rigidity of thinking clearly today.

It’s, it’s easy, it’s easy to judge a model that you haven’t done yourself and that you don’t see success in or you’ve seen concern in. But you know, all it takes is one honest person saying, Let me share with you how I’ve done this successfully. And if they’re not, you know, snake oil salesmen, but if they literally will say, here’s how this really works. And here are the pros and cons. A lot of times if you hear that about a different business model, first thing you want to do as an entrepreneur, of course, is start doing that business. But if you just step back and say no, that’s not for me, but at least I Appreciate the merits of the model. I think that’s important. So okay, let’s, let’s wrap up our list and then we can tee things up for maybe a second episode or keep going here. So coaching is obviously a business model that I would, I would include it in e commerce. In particular, if you’re coaching about e commerce, it’s sort of self evident. It’s your sort of inception in a way there that you’re you’re you’re doing an e commerce work about e commerce, but um, I think coaching online coaching as an e commerce business model, because it’s virtual, I mean, you know, using zoom, and offering coaching to people you can do worldwide in the olden days of course, you had the big consultancies that would go around and and meet in person and camp out at your office for three months and charge a gazillion dollars and now you can literally have somebody spend, I mean, you can literally get their platforms where you can get 15 minutes of somebody’s time.

Yes, indeed. I’m on one it’s quite remembered it is called which is really bad, but they give me a few hundred dollars of the year. is big money, but it’s pretty handy for people because it says lets you charge by the minute. Yeah, I should remember what it is. I’ll put it in the show notes. Yeah,

well, you can dig in that one at some point, but micro coaching like that, but then there’s obviously all structured programs like you and I, you know, we both run these and yeah, and so in our program, it’s a six month program are in our kind of top level program, six month program, it’s 1000 bucks a month currently, and we have a lot of students we meet with clients all week long. I mean, my schedule is packed with these calls all week long, and it’s a blast. It’s so fun. And so that’s a that’s a completely legit business model.

Yeah, by the way, I just want to worship a really important word you’ve mentioned which is monthly recurring revenue when you mentioned in relation to membership communities, but for both of us, I think we run our coding the same way. There is magic about that and I’m just going to say that and leave it out there and and do a deep dive into into monthly recurring revenue because that’s a real Biggie, I think. Yep.

Yeah, I totally agree. We should dive into that. One. At some point a membership models and that kind of thing. Okay, so a few other models that I know are viable that in I have a few of these in operation social media influencer, I have a company called the Happy Gardening life and I am a social media influencer in the gardening space Believe it or don’t laugh, man, don’t laugh. But, you know, it’s a fun, it’s a fun little business model to run. And it’s, um, you know, not huge, but it is what it is. And I can describe the merits of it. And I think influencer strategies are huge, and they peaked about a year and a half ago in terms of the site guys, but nonetheless, it’s still a viable marketing strategy for many, many niches and industries. And it’s something we teach our clients how to leverage. And so that’s that’s a real that’s a real ongoing business model that I don’t see going away anytime soon. And then a few others advertising and affiliate income of course, affiliate income is, you know, sort of the classic 20 year ago 15 year ago, shiny object You could just set up a website, one page website and make all this money. Just you know. So that’s but there I am disparaging it. And I’m sure there are people who are legitimate operators, I think we’re returning the favor because

I have made quite a bit of money from affiliate income. And when when it works is beautiful because it works out the client, it works for the merchant, the person selling it, and it’s very straightforward money because you worked really hard to create a channel like a podcast, for example. But then actually, when you mentioned something, and if it’s relevant and well delivered and you got to be choosy, then it’s it’s a win for everyone. But the nice thing is, you don’t have to create the course if it’s also example you deliver it if it’s coaching, which is wonderful.

I really think I disparaged. I have to say I disparaged the business model that underwrites the whole podcast. By

the way, we’ve we’ve done that we’ve we’ve both done one of those. So there you go. It just goes to show that we have these mental preconceptions, which you know, may turn out to be proven but as you implied gently about My my rant about, you know, on demand printing Well actually, maybe you should review the facts first, which is a very good point. Yeah, well, we can take and influence each other about that. That’s very interesting. Funny,

let’s mention one final ecommerce business model. And then let’s let’s maybe tee things up for a future conversation or a break the episode or whatever we want to do here. But I think the last one I would just mention is what you could call the gig economy or service work. A lot of e commerce transactions now are easy, easily structured on sites like Fiverr and other platforms. 99 designs is one that I use later, I literally have a design project going on 99 designs almost constantly now. And it’s for graphic artists. And so service work in my view, that’s ecommerce business model, because it’s a gig economy type deal. You you do work from home, do small, you know, small projects, and You know, that was one of the ones you know, when I’m when my kids were sort of, you know, three, four or five years ago, six years ago, I was teaching them about this stuff. I taught my kids retail arbitrage. And none of them really cared for it, but also also taught, you know, service work on on Fiverr, in particular, and my son has been doing it for six years.

Wow, how to just work on this 23.

Right. So it just works for him. And so that’s, you know, that that model is a legitimate business model. And, and just wanted to mention that one. Yeah,

absolutely. Wow. So there’s, there’s a lot of business models to absorb. So I mean, I guess we’ve got a few things that we’re going to have to talk about. And by the way, evaluating your business model, you’re really critical. You’re gonna have to give that at least its own episode, if not a couple because I think that’s, you’ve got a deep dive right? By definition. We can’t sort of try and do that now. But one question I’d like to ask about You obviously have a lot of business models that you are involved in, because you’ve given examples of that. And I’ve mentioned a couple that I’m involved including you, you know, the entertaining conversation between the affiliate marketing myself and the print on demand publisher yourself. But what what would you say is your favorite business model or one of your favorites? And why? Just quickly, quick tease that one for us?

digital goods, in some form, either standalone or recurring, has got to be the most elegant and profitable in many, many ways. I mean, there’s pros and cons, and you can do it without profit, but, but digital goods and then I would add to that the monthly recurring, like membership styled delivery of digital goods. Fantastic. Yeah, that would be my top I think, but I love brands too. And I love physical product marketing. So but you know, I would say the number one would be would be digital goods. What about you? What are your what’s your number? One out of these, what do we list 15 or 20? here and loads,

I mean, monthly recurring revenue is a beautiful thing. I mean, I think that that certainty of income the father, dad is rolling in with the empty cell. Again, the father is profitable, because you know, the most expensive thing is acquiring new customer once you’ve got them, you know, all of that. So for me that as a delivery model, but that’s not quite the whole business model, I would say. You know, I think I’ve already talked about affiliate income in the sense that can be very badly done, and often is, but if you do it with integrity, as some people do, I might mention Pat Flynn, for example, who I find as a listener, sells with integrity, and we’re going to take you selling Bluehost, for example, you know, hosting, I mean, that’s the most common common thing which you would expect to be shoved down people’s throats very badly and if it’s done well, and what I really like about that is the effective hourly rate, which is James Franco’s point. I was just listening again to his wonderfully direct book work less make more, which is typical of him and his Australian accent and swearing a bit in You know, he’s very to the point. And one of the things

he points out is is the effective hourly rate. In other words, the amount of profit you make divided by the hours you put in. And for me when it’s worked, and it’s quite sporadic, sometimes but affiliate income has been a really lovely thing. And actually, some Amazon sellers that I know who are private label type sellers and design their own products more than private label their their custom product makers, they are designers of their own products, and some of them are coming around to the idea of doing some affiliate marketing because the profit levels that can be so healthy. Okay, so this is really interesting, just as a side comment, because I really think that the influencer marketing universe that’s grown up in the last, you know, three, four or five years, it leans into the affiliate marketing strategies and a lot of I think there are a lot of underlying business concepts there that influencer marketing is actually built upon. So I retract anything I said about affiliate marketing. And really, I think that’s a great point to do. Maybe a deep dive into is how do these models really put money in your pocket, what are the structures? What are the scalability issues? Absolutely.

Here’s a couple of things about affiliate marketing to teach more about that. Number one is, people say it like that says, you know, it means you are the affiliate. But of course, you could be the merchant, are you the person selling the goods via somebody else? And yes, it can end up being quite expensive if you’re giving for a course typically 50% of the revenue, but you don’t pay them until they make a sale. So there’s a certainty you don’t have an ad spend as an overhead, you have it as a direct cost. And I always prefer direct cost overheads, because in bad times, you make fewer sales, but you haven’t got the overhead eating you. And the other thing is the cash flow of it because you get you pay your affiliates after you’ve built the course or had the offensive unit paying the A’s or whatever designers to design a course or membership or whatever it is so there’s a lot to it I think and if it’s done well and elegant lead some pretty serious people do it well and equally some people do it horribly and give it a bad name says is worth diving into I think

you’ve clearly got some energy and enthusiasm. Yeah. Thank you. Yeah, here’s what I would tee up as our final sort of a tease for future podcast episodes. I think two important questions would be, is my business model defensible? And then is my business model business model scalable to a large number? And so I think those two questions we could just to tease it out for next time, really begin to use those as a mental framework, where we begin to evaluate business models. And there’s many other factors that we can talk about that are great evaluation questions for business models, but let’s just mention those and then leave it. And then maybe that I’ll start the conversation off for next time. Where we really dive into how do you evaluate a business model? How do you understand what to do if you’ve got one, but you want another one? Or you’ve got one and you think there’s another opportunity? How do you juggle business models? How do you stitch them together? How do you think about the way in which you can bring All of these things to bear without creating confusion or, you know, being scattered in grow your business in a successful way, I think these elements of the conversation can be really powerful for people. So yeah,

I really agree. And I love again, just the way that you look at things from this sort of 60,000 foot view first before diving in. And that avoids getting platform specific and yeah, and getting caught in the weeds and you can sort of see things from a structural level and coming back to our point from the previous discussion that we had just to sort of bring it home why this matters, because your your contention was that the profit of a business is largely determined by the business model, right? Absolutely. So if that’s the case, then the choice of business models critical is not just a theoretical nice to know discussion over a couple of beers after a hard day. The the offices it’s like structural stuff that’s going to drive money in your pocket, right so yeah, yeah, looking forward to this one’s got some juicy topics lined up. We got so many topics lined up, looking forward to deep diving in some of their something like you know, defending business. Models evaluated. That’s that’s in itself pretty fun.

Yeah, I think so. All right, well, let’s, let’s wrap it up here. And then we’ll jump into the next conversation shortly. So thanks, everybody, for hanging out with us. I really hope you got a lot of value out of this conversation. And we would love to have you pick up our resources as well. So check out the website, the e commerce leader for all that stuff.

Yeah, the e commerce leader.com. And if you’re listening more than a few episodes in we’ll be putting things under particular places. So this was going to be under the profit strategies sort of umbrella so go to WWW dot e commerce lead the e commerce leader.com. Sorry, Ford slash profit for specific resources around business models as well as I love it.

Yeah, love it, man. All right, good times. Yeah. Take care.

That was the e commerce leader podcast with Michael Veazey. In London, England,

Jason Miles in Seattle, Washington.

We offer you free help on our websites, including PDFs, videos and mini courses on topics like traffic products and sales channels. Some of our members most awful any sales channel to get those and to stay up to date with our podcasts, go to www dot v ecommerce leader.com. Thanks for listening

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