The E-commerce Leader

[00:00:00]
[00:00:30] Jason: Hey, e-commerce sellers. Are you hoping to have a terrific Q4? If so, this episode is for you. We’re about to break down a simple plan designed to help you have the easiest and most lucrative Q4 in your business history. Michael. Are you ready to have a fantastic Q4?
[00:00:49] Michael: Absolutely. I love the positioning of this.
[00:00:51] W we’re not an ambitious with that title. So I’m looking forward very much to hearing how to do that. Absolutely critical. Before we get into that, I just want to quickly talk to you about something that we’ve been brewing up behind the scenes. Cause I know that we’re going to be getting into our, what we’re calling our new season three from October or so.
[00:01:07] Awesome. Yeah. Tell us about the
[00:01:08] Jason: plans. Well, season three is going to start for the e-commerce leader. You know, we’ve been doing these in, in these kind of long seasons. We had a great first season. This is going to be the wrap up of our second season soon, I guess we’re ending soon. And then we’ll be cutting over to season three.
[00:01:25] And we’re really excited about a couple of components of it. We wanted to mention, the first one is we’re going to weave in a new format with new co-hosts. And so if you’re not familiar. A call in tool called the call in app. Then we’re going to start using it. We’re going to do call in episodes and then we will weave them into the e-commerce leader podcast as just an additional episode.
[00:01:48] So we’ll continue to do what we’re doing now, but we’ll have these, co-hosted call in episodes that we’ll start to weave in as well. And our co-hosts are going to be Chris green and Kyle hammer. And so Chris is going to start joining us. Kyle’s going to start joining us and we’ll have round table discussions on e-commerce topics.
[00:02:05] Of course. And so we’re really excited about that. We’re also going to start to lean in more and more to user generated content. Feedback and questions. So we’re going to have tools on the website to collect people’s questions and topics. And then in the call-in show, we’ll see how it goes. We might even just bring people into the show.
[00:02:26] We’ll see, you know, kind of playing that out. We’ll see how it weaves together, but we’re really excited about that format. We’re excited to have Chris green join us as a co-host for the e-commerce leader. It’s going to take it to the next level. If you’re not familiar with him, he is sort of the godfather of retail arbitrage in a lot of ways.
[00:02:43] And so in Kyle Haimer is an Amazon selling expert and my business partner, in our business. So there you have it that’s season three, man. What do you think about it?
[00:02:51] Michael: Yeah, very excited. I’m obviously I’ve I know both Chris and green, Chris and green, let me try to get Chris and Kyle quite well. Kyle, from our coaching work in the past and Chris I’ve had on the podcast at amazing FBA two or three times with very different business models each time.
[00:03:04] He’s, he’s a man who keeps ahead of the cutting edge. So he’s not just about arbitrage, he’s obviously a lot of the Kindle publishing and in your conferences, he’s talks about that. So, yeah, it’d be a really fantastic sort of brains trust, I think, really looking forward to getting some real deep insights there.
[00:03:18] So yeah, it’s exciting stuff. And obviously we’ll keep you informed if you’re listening. As to how to interact, because that’s the missing piece from podcasting. I love podcasting as a medium myself as a listener of all things, but the lack of interaction is always been a problem. So hopefully we can dive into that.
[00:03:34] So we better get on with the Q4 planning because it’s nearly upon us. And it’s obviously a really critical topic. I know that you’ve come in in the past with the 10 K collective mastermind. And we had a special session when you came in as a guest and work with the mastermind members who were doing, you know, six, seven, even some cases come coming on towards eight figures and you’ve had a very good annual planning process.
[00:03:53] So I guess the Q4 planning is a bit of a smaller version of the same things. Is that right? I mean, how do we go about the process of setting that sort of shorter, but very intense arc? Yeah,
[00:04:03] Jason: yeah, no, that’s a great question. And, so for context for me, I, I think that, this time of year is always win. If you’ve done, e-commerce selling for a while, you know, Q4 is coming and you’re really starting to think through, and many people do it even earlier.
[00:04:19] I’m working on Q4 and, you know, the summertime or something like that. But, but for us, now’s the time where we’re really getting our battle plan sorted out. So in this podcast, recording, we’re going to share five simple steps to really get the Q4 put together of your dreams. Let’s call it. And, that means it’s lucrative best ever in terms of income.
[00:04:40] And it’s simple to execute on and that’s, those would be the two, the frameworks. So the five steps we’ll walk through, but the first one, is, is, is very simple and that is get goal clarity. And it sounds simple, but obviously taking the time. Away from your business going to 10,000 or 30,000 feet view and asking yourself some important strategic questions about, the goals is sort of the starting point, cinnamon in.
[00:05:06] And I, did that this last week. We, we have different traditions that we do around planning and goal setting work. And so we went out to a little restaurant called the black diamond cafe, did an early lunch and sat there for hours, talking about Q4 and creating a clear, you know, kind of a process for getting after our goals.
[00:05:28] And so, so that’s the first bit of it. I’ve got a, you know, a few questions here, like five questions. You could ask yourself to get clear on your goals, but Michael, what are your thoughts on that as sort of.
[00:05:38] Michael: Yeah, I think it’s really, really important before you do stuff as in take actions in your business that you’re clear about why you’re doing them.
[00:05:44] And it sounds such an obvious thing to say, but it’s incredibly easy under the pressures of operational day-to-day week to week, even months, a month to not even think about why you’re doing stuff, you’re doing it because you’ve been doing it or because it feels necessary. So I think it’s really, really important to get gold carts.
[00:06:00] And it’s surprisingly hard. It’s kind of answering the question. What do I want? But actually it’s not easy to ask the question what I really want in my experience. So I think that’s an excellent start. So yeah. What, what are your, what do you find that the things that you need to fight the most for goals?
[00:06:14] Jason: You know, it’s, it’s surprisingly difficult, as you said, some of this stuff you would think is easy, but then when you really start to get clear, it can be a challenge. I would say, you know, here are, you know, four or five questions you could ask yourself and here’s a framework. Where, you know, you’ve got it clear.
[00:06:32] And it’s a one sentence, goal. And so let me, let me pose four or five questions here, and then I’ll give you the, the goal statement. First question is what was your overall revenue by product and by Pratt platform in prior Q4 hours and go back as far as you want. So, you know, one of the ways you might structure this is if you’re an Excel nerd, you know, the breakout, a new Excel spreadsheet and call it your Q4 twenty, twenty one or whatever year planning.
[00:06:58] If you’re more of a notes journalist type person, take a notebook out and get after this, and answer these questions. So the first one, what’s your overall revenue by product and by platform. Second question is what was your profit by product and platform in prior Q4? Third question is your pricing.
[00:07:16] Prior Q4. And then for fourth question is what challenges or problems did you have in prior Q4 that you want to avoid? And then what constraints or obstacles, in prior key fillers that you want to overcome this year, and then you could go from there and ask yourself as many questions that you want to get real clear.
[00:07:36] You’ll know, you’re clear when you can have one sentence that says something like this. My Q4 goal is to make X amount by selling Y number of products on Z platforms. So for example, my Q4 goal is to make $200,000 selling five products on Amazon, eBay, and my own Shopify site. If you can write your goal, that concisely, then you’re really off to a great start in terms of getting clarity on what you want to do.
[00:08:07] Michael: Nice. I think in the end, a lot of the revenue side of things breaks down to number of units, times price per unit. And that’s kind of obvious, but it’s good to get that bigger picture rather than just let it kind of drift along and be dictated by the market. So, I really liked the fact that you’ve got revenue goals, profit goals, and pricing goals.
[00:08:24] The one question that strikes me is obviously you’re referring to prior key falls. So for any established business, which is, I suppose, mostly who were gear the, the e-commerce leader to what we have done so far. Yeah. That makes sense. What do we do if we haven’t got prior key four data of our own, how do we go about creating some nevertheless, something that is informed by.
[00:08:43] Jason: Yeah. Yeah. Obviously your, your key data set is the prior Q4. If you have it, because that’s the most appropriate seasonally, but if you don’t have it, then you just use a prior data set that you have. If you’ve only sold for one month, look at your prior month data set. If you sold for Q1, Q2, and you’re in Q3 right now, then look at the first six months of the year, you’re looking at your data set to ask yourself these questions and they’re all relevant.
[00:09:10] The only question then, which would be the variable is how does your product and, and, and, you know, all the details work in a Q4 versus just normal time of the year. And some businesses, you know, everybody’s unique. Some businesses will be like, oh, I don’t really have a Q4. That’s different than Q three or Q two other businesses are highly seasonal.
[00:09:31] And then, just wintertime season in north America or Europe, other businesses are, are high. Q4 Christmas focused, giving focused. And so those are the seasonality elements you want to think through. And so you do what you can with what you have in terms of data. I think the key thing to suss out here is some of the qualitative outcome, not just quantitative and what I mean by that is you want to reflect back and say to yourself what happened last year.
[00:09:59] That was amazing that I was surprised by and how can I do more of that? And what was a total nightmare that I want to avoid? You know, I mean, just, just at a operational level, where are there products or platforms that were total disasters for you and you want to remember those things and say to yourself, oh yeah, I forgot this product gets, you know, so many returns.
[00:10:20] We can’t handle it and I need to just totally do something different. Or, or whatever. I mean, maybe you have lessons from prior years that you want to refresh and remind yourself up and weave into your goals.
[00:10:32] Michael: Yeah, that’s really good. I think that qualitative reflection thing is, is something we all naturally do, but we tend to do it emotionally at a particular point.
[00:10:40] And then as we all get stressed and shouts at staff or argue with your partner, but the thing to, to make space, to reflect on. Hmm. So you know, that day where you scream to everyone in the warehouse from operations and our warehouse broke down, let’s huddle. Why that happens. So we don’t repeat that this year.
[00:10:55] And it’s a very, very good idea to build that in. I like that a lot. It’s not just numbers in other words. So I liked that the other couple of things that strike me about what you said is having profit goals, as well as revenue goals, I think are really, really critical. I think it’s so much harder to measure profit that is very tempting to just default to revenue goals and think I was so tight profit afterwards, but I think that’s a total disaster.
[00:11:15] If you’re selling an Amazon during Q4, you could spend so much money on PPC. You’d be throwing money away without even realizing it. So I really think that’s a very critical.
[00:11:24] Jason: It’s a disaster as you described, because if you really do a good P and L statement and look back on your, on your profit by product and channel, the goal here is not just work.
[00:11:38] The goal is smart work. The goal is to eliminate bad work. So for example, just as a, as a practical example, if you have a product that you sold a lot of last year, but it made, you know, profit, then if it’s not a lead generator for you, if it, like, if it doesn’t lead to additional selling of a different product, or it doesn’t lead to customer data acquisition, or, you know, some, some good goal, then you know, the first question would be, why are you.
[00:12:05] You either have to make it profitable, this Q4, or you cut, cut it loose. And you know, so these are the things you want to think through. If you can, you know, ideally make maximum money from minimum products and minimum customers, then that is the efficiency goal that you’re after, you know, fewer skews possible, maximum price possible, you know, for an, the fewest customers possible to fulfill your dream, revenue and income goals.
[00:12:33] That’s the, the thinking you want to put into this. So it’s not just about what you want to do. It’s about what you want to. Yeah,
[00:12:40] Michael: I really like that a lot. I think that’s an emotional discipline. I know people who’ve been in the business literally generations or three, five years or whatever that have a sort of inherited from themselves, a legacy of products.
[00:12:51] And they just sell more because they buy unconsciously. I think they buy into Amazon’s driver, which is, you know, particularly sell on Amazon. But not only that Google wants lots of results for its, you know, searches and Amazon absolutely wants to be the everything store, but it’s not necessarily relevant in any way, shape or form to your outcomes as a business owner.
[00:13:08] So here’s the other reflection. I would say, if you are tying up capital in stock, even if it makes something of a profit and it moves, but somewhat slowly. Going to go out, almost put huge amount of money on the fact that you are going to go out and stop by definition on your best sellers because they sell well, the two’s in the title, and you will lose so much money in terms of, opportunity cost in my experience, every single key for I’ve spoken to a lot of series salads for a number of years in a row about their key for analysis in January and every single one of them without fail will mention the product that made so much money.
[00:13:39] And then they went out of stock and it went to zero, right. And that money being tied up in, in mediocre, even quite good products is the enemy of the great products. And I just cannot stress enough how important that discipline is of elimination. You just mentioned. I think you’re a hundred percent right in that.
[00:13:56] Absolutely
[00:13:56] Jason: right. Yep. Okay. Great. All right. So that’s the, that’s the, the. You know, go, go step. And then we go beyond that and we do a deep dive in step two is a focus on your product strategy. And so we’ve just articulated some of that. But the focus here is, what product offerings are you going to, you know, bring into Q4, and that you can sell at scale and you want to eliminate or minimize work on non-essential products.
[00:14:24] And, you know, part of having a rational logical Q4 is focus and getting your time on, you know, under, under, control. So questions ask yourself what was your most profitable product? And can you sell more of it? What’s your best selling product and how can you increase the margin in it? What’s your biggest pain in the butt product?
[00:14:46] And can you live without it? Do you have an opportunity to launch a new product and how are you going to do that long? And then the final question is, do you need to hold product in reserve to ensure you don’t run out through the duration of Q4 to your point a moment ago? So these are the kinds of questions you want to camp on.
[00:15:05] And again, with the object of elimination, as well as, addition, and, and management of the current, and this is an opportunity to really, to get clear on, you know, what’s happening inside your business at the product level. The famous example of course, is Steve jobs. When he came back to apple and they had, I don’t even remember what it was, but like it was hundreds of products and he drew a four-quadrant grid on a white board and said, this is our new product.
[00:15:31] It was like a laptop for personal, a laptop for corporate. I don’t remember other foxes, a desktop for, you know, it was like, was like so simple. And that was how he started back in 1999 or whenever it was, and the rest is history, but it was a very clear focus. And the reason for that is because it allows every part of your system to be optimized around that specific.
[00:15:55] Michael: I like the idea that, mental focus is something you have to take account of. I think you’re upset. You’re right. It’s very weird. How, I think it’s a legacy of corporate culture that we, most of us, you know, grew up in, at some point in our work lives. It you’ve obviously been in years in, in that I’ve sort of touched on it, which is two things.
[00:16:13] Number one, doing stupid things that, that feel like more work than they’re worth doing is just standard. If you’re an employee anywhere, that’s true for CEOs, by the way that I know some major companies and it’s true for the, you know, the lower down the ladder thing, but we don’t have to do that as entrepreneurs or owners of our own businesses.
[00:16:30] And I think we forget that we are allowed to cut sways of things that don’t make sense. And that’s, that’s the first thing. So the biggest pain in the butt product might financially on paper makes sense, which is my second point, which if we don’t have to just be robotic because we have our operational cells, we’re sweating and swearing and constantly put night.
[00:16:49] And then we have all sorts of analytical cells that sit down with a spreadsheet and we need to come back and kind of join the dots. I think the value of kicking out a product that makes money, but there’s a nightmare is very, very high. Actually. I really liked the fact you’re giving us permission to do that.
[00:17:03] Yeah, that’s really important. Great
[00:17:05] Jason: question just popped in from one of the live viewers of the show, and that is for retail arbitragers and people who do Replens are replenishable items selling in Q4. Is it a good thing to focus on toys because it’s holiday gift-giving, you know, people that are looking for specific toys or on more replenishable long-term evergreen items.
[00:17:26] And the answer is if you’re running a retail arbitrage business, then you’re running a portfolio business of a set of products and you have to decide how much time and energy you have to spend on. Toys that are popular for the year and bird-dogging them. But if you’re going to be in large box stores, Walmart, target Walgreens, wherever it is, and the toys are there and you’re already sourcing for Replens, then doing extra scans, taking the time to identify what toys are hot.
[00:17:59] You know, there are people who make whole lists of the hot seasonal toys. If you can arbitrage those out on Amazon or on eBay, then of course, you’ve got the opportunity to do that. So I would just say, it’s both. And, and it’s really depends on the mix of, you know, your Replens business and how strong into it you are and how much time you spend on it.
[00:18:17] And then how much margin you have for, something that would be a more short-term win, like a, you know, a toy that’s super hot, that kind of thing. Yep. Okay. So
[00:18:25] Michael: coming back to this, framework you’ve got then, so the third step, what’s the
[00:18:29] Jason: what’s the next, yep. Third thing is you want a pricing strategy, examine your pricing and determine if a price increase is possible.
[00:18:37] And if so, how much and when you’d want to execute on it. So, additionally, you want to do any promotional pricing strategy when you’re going to do discounting. When you’re going to mark things down, what your battle plan is going to be. If you’re not getting sales velocity that you wanted, you want to really think through your Q4 at a pricing level and create a plan for that.
[00:19:00] The, the opportunity here is really to create margin for yourself. And to, you know, turn products that are marginal in terms of any profit you make on them into profitable products. Or if you’ve got a super hot product to really think through what’s your appropriate price positioning is compared to your competitors.
[00:19:19] I just, went to breakfast yesterday morning with my mentor. And one of the things he mentioned was he just went around to his competitors and he looked at all their pricing and he tuned up his pricing and I was like, oh, yep. It’s time to do that. He just, you know, he does it, systematically for his business.
[00:19:39] And I, we have not done that in our businesses, systematically as he does. And that’s why he’s my mentor. So you want to do that same exercise. You want to say to yourself, what’s the industry telling me about the appropriate. For these products that I’m selling and, you know, it’s an inflationary period right now in world, economics.
[00:19:58] And, so the question is what’s the appropriate price. I think you, just as a mental tip need to do. Value judgment. This, if that’s a phrase D value judgment, it just look at the math and just do what is appropriate in terms of price points, compared to what your competitors are doing and what you think is, you know, kind of, in line with your approach to them.
[00:20:22] And if that means, you know, a specific percentage of increase or whatever, then execute on that and figure out when you’re going to execute on it. So there you go. And I’ve got a list of questions here. You can ask yourself about that as well, but what are your thoughts on pricing management and strategy?
[00:20:33] Michael: I think it’s really key. I think, one of the things that, has emerged from conversation with one of, with probably an eight figure seller now, annually, if that’s that the most mind is that they, do operate quite a dynamic pricing strategy relative to most people. Is it still done on a spreadsheet?
[00:20:47] And I’m not sure that I buy that as an operational way of doing it. There’s an extremely good, company that’s really developing very sophisticated tools now called eva.guru. And I’m working with them to try and fine tune the tunes to the needs of, of Amazon sellers in the UK now. And they practice dynamic pricing, but either which way, whether you do my name manually or it’s artificial intelligence engine that is genuinely learns as opposed to most rule-based systems, however you achieve it.
[00:21:09] The level of price sensitivity is probably less than you imagine. And that’s even without taking Q4 into account where prices tend to rise sometimes rapidly, as people get closer to the day in panic, having bought the products. And, without, as you say, taking account of the inflation rethink. So if you had those three things together, you might why find that key four plus the inflation environment, plus generally, or underestimation of the price flexibility, depending on the market, it might mean that you end up raising quite a lot of prices quite a lot, and that might feel quite alarming.
[00:21:40] And I think you need to do a rational analysis, but have the courage to follow through on your analysis rather than just assuming it has to always be cheaper, cheaper, particularly on Amazon. That’s generally been the case, but I don’t think it necessarily has
[00:21:53] Jason: to be. Yeah, I think the other interesting part of this is just to know what, what the smart kids do in terms of strategic price, man.
[00:22:03] Vis-a-vis inventory counts. So when you do your pricing increases is, is interesting. Isn’t it? Because for example, you might be counterintuitive and as you go into Q4, have your price be like, if you did a high, medium, and low range of appropriate price for a product, you might go into Q4 with your price, you know, really high compared to relative to competition so that you don’t run out of stock a hundred percent.
[00:22:31] And then when your competition runs out of stock, you go from high to ultra high.
[00:22:37] Michael: Absolutely right. Yeah. Yeah. By the way, that single statement you’ve just said, there are people take that on board and actually have the courage to do it. Could make you so much more profits and revenue because here’s the thing that strikes me.
[00:22:48] You can always lower the price and the stock will generally flow out quicker. But if once you’re out of stock, you’re out, that’s absolute, you can’t rate, you can’t tweak the price what’d you have no stock. So if in doubt, I think you’re so right to start with a high price. And you know, if you’ve got to rank your products, do it when it’s cheaper, key 1, 2, 3, then try and rank your products in Q4.
[00:23:07] If you’re not ranking very well for as a keyword, but on the other hand, you were going to run out of stock. Anyway, the price is still too low and that’s the thing that people are. So they’ve been taught on, on Amazon, but also on Google and other platforms to play the ranking game so much that they, they forget your emphasis to make profit.
[00:23:21] It doesn’t really matter if you’re on cue and pays to, if you’re selling 10 units a day and you’ve only got enough stock for the next 60 days, that’s something.
[00:23:28] Jason: Th this is, such a central, topic. I have an ebook on Amazon and just the thought comes to my mind that it might be a good resource for people.
[00:23:35] It’s 13 pricing principles. One of them is, that, seasonality or timing, creates pricing power. And the 13 pricing principles are about creating, creating pricing power. And so, yeah, you know, to, to this point, you know, th the new novice person would come into Q4, have their price be high and not see a lot of sales velocity, and think to themselves, I need to lower my price.
[00:23:57] They might actually end up doing that just at the optimally bad time. You know, where, where they’re, you know, their competitors are not to go out of stock. And they’re about to be the only game in town when they should be raising their price, they’re lowering their price. The worst thing possible in this is to do the exact opposite of correct.
[00:24:17] At the worst time, this is why experience matters. And you want to think through these things ahead of time. So you’re not just doing it emotionally or, you know, at 1130 at night, you’re, you’re not, you know, working on this stuff or, you know, at 5:00 AM in the morning, you know, on Thanksgiving or something like that, you’re working on your pricing battle plan.
[00:24:33] You don’t want to do it that way. You want to think through it ahead of time.
[00:24:36] Michael: Absolutely. And again, to the point of why is Q4 planning important that you put your finger on it to, to pre, you know, to see ahead of time, those moments. If you didn’t make a plan, you just panic and you’d be reactive, as opposed to sometimes you need to do the absolute opposite.
[00:24:51] It’s a bit like racing, driving. I guess you’ve got to plan in advance that when you turn into a corner, apparently, you, you’ve got to do various counter-intuitive things when you’re driving in 180 miles an hour, which includes turning into corners. You would normally turn out and kind of things that feel weird at the time.
[00:25:03] You have to plan for that mentally so that you’re trained yourself to do the right thing. And that’s a very good, important point. The other general point from this, I think is just critical to get is this it’s really simple on paper and sees it to say, and it’s really hard to do in practice, but in critical scale, stock management and pricing are two sides of the exact same coin.
[00:25:24] And if you think as a marketing lead person, and you think in terms of, you know, profit. Pricing and ranking, and you divorce your thinking for stock management. You are going to lose a ton of money relative to what you could have said. Cause you’ll be out of stock if on the other hand, and it’s very uncommon, but you could be stock obsessed and not thinking about setting opportunities as well.
[00:25:43] I’ve not actually come across that either which way they have to be two sides of the same coin. And really, again, like either I don’t bang on about one particular tool, but it’s, it’s the one tool I’ve seen out there that will dynamically. It only works for Amazon sellers at the moment. It’s not multi-channel, but it will dynamically adjust pricing to maximize for profit, including the fact that if you run out of stock, you make zero profits.
[00:26:02] So you really, whether you do it manually or through a tool, those two are two sides of the same coin. And yeah, you need to adjust your price in order to think about sales velocity based on your stock, including the lead times that are super long at the moment as well. So there’s a real art and the science that goes into this.
[00:26:20] Jason: Yeah, totally. Right. And just to tie this off to the, you know, to the prior, point of, of product strategy, you do, you could be in a situation where you have dead inventory and, you know, in, in those situations, if you’ve got dead inventory, then this product and pricing go together, and you, you, sometimes you want to solve those problems as well in Q4 and you know, of dead inventory.
[00:26:40] And by that, I mean, inventory, you just can’t move at any price point, just it isn’t working. Then you want to think through what, what’s your, what’s your approach to that dead inventory, whether it’s in Amazon’s warehouse, which would be paying for, or somewhere in your own warehouse, garage, back bedroom, or wherever is literally cash, not recouped and.
[00:27:04] The opportunity to recoup that cash is central. So for example, you got dead inventory. Could you in Q4 create a bundle product where you put your dead inventory, nobody wanted as a free gift to your best-selling item, and get rid of it that way and make a new kid, a product that you sell. Can you, just literally, you know, repositioned pricing wise, you’re dead inventory and get rid of it at any cost.
[00:27:30] And recoup the cash and just write it off. Just be like, I don’t care. I, I paid $50,000 for this. I cannot sell it. I just will get anything back out of this that I can is. So I’m going to sell it, sell it all at a loss, but I’m going to get 10 grand in my pocket. You know, these are the types of things you want to think about with your product and your pricing, and, and go from there.
[00:27:50] Yeah.
[00:27:50] Michael: And all of these things, by the way, a true in any, retail form of business, whether it’s 1890s and you see is selling while the railroad or whether it’s now, but. One massive thing. You’ve got to bear in mind if you’re an Amazon, is that the opportunity cost for your business is an opportunity cost for Amazon’s FBA warehouses.
[00:28:10] So if they’ve got dead stock in there, they’re not just going to charge you, you know, more money like they traditionally do. They’re going to penalize you very, very, very heavily. They may affect your ability to sell your best-selling products and it’s happening all the time at the moment. Yes. If you’ve got, if you’ve managed your other products poorly, so Amazon, well, it seems kind of like, you know, cutting off their head to nose, to spite the face or something, but they will shut down if effectively your ability to sale or minimize your ability to sell or stock or fulfill.
[00:28:35] Really great products, not only does that mean that you’ve lost a huge selling opportunity, but if you now have to use a third party warehouse and do merchant fulfilled, virtual fulfilled is going to kill your selling opportunities because it’s not prime, unless you’ve done seller fulfilled prime.
[00:28:47] And is it extra cost so that when you really wet out, add up the knock on effects of allowing that inventory to sit in an Amazon FBA warehouse is just huge. And by the way, I think it’s a good discipline. They’re enforcing on us anyway, in the short term, everyone’s hating it. I totally get that. But in the medium term, you shouldn’t have it there anyway, you must be ruthless, I guess is one theme that’s emerging might be ruthless, eliminating things that needed elimination.
[00:29:09] And so I was forcing that discipline on us now, I think.
[00:29:13] Jason: Yeah, totally. I agree. And so, so there you have it, the questions for pricing. I didn’t read them. I don’t think, but here they are. So should you raise your prices as a strategic move to sell less and stay in stock for the duration of Q4 selling seasons?
[00:29:25] We already talked about that one. A second question would be what will the impact of a 10% price increase? On your various products, can you make the most profitable products, even more profitable? And by the 10% increase, I mean on your, you know, do a, they call it a proforma P and L. So, so a future forecasted profit and loss statement, you should have the time and energy right now to do that for Q4, create a proforma P and L and say to yourself, what would happen if I sold all of this, at 10% higher or 25% higher.
[00:29:59] And w w what happens to the bottom line to my net profit? You want to focus on net profit in my view, and really think through, you know, how do I get out of Q4 with not just a lot of work and a lot of sales, but a lot of money and a manageable amount of work. And so there you go. So that’s the, those are the pricing questions.
[00:30:21] Yeah, really, really great
[00:30:23] Michael: question. I think, One thing to bear in mind is the structure of the profits over the course of a year. It’s not only the best selling time in Q4 for a lot of people. And by the way, if you sell a gardening products, your Q4 is effectively Q2, I think, and the same, same thing applies.
[00:30:36] You can take this and plan ahead now for Q2. So just to be clear, if you’ve got seasonality, that’s different from, this is no different approach in my opinion, anyway, but the other thing is that not only is say 50% of your revenue on average, I think made in Q4, but something like a bigger percentage of your profits may be made as well.
[00:30:54] So if you don’t take your profits in Q4, your risk of missing out when you have pricing power, and as you say in Q1, you may not have the pricing power anymore. If you’re selling no toys in January, the first, they kind of sit there looking a bit sad and lonely and we tell stories sometimes then they
[00:31:09] Jason: absolutely.
[00:31:09] Right. And you know, to your point, black Friday was the old phrase for, you know, the, this time of year where brick and mortar retailers. You know, started to make money. Am I right on my history on that? I mean, this is when people started to traditionally make, make a profit, well, you need to be running your business.
[00:31:28] So you’re making a profit, you know, every quarter. But let me just say this, if you think through a Q4 battle plan, and do a proforma, you know, you, you might do your profit and loss statement through, you know, the end of August, let’s say we’re we’re in September right now. And just think about what would happen is if you had a Q4 that was outsized profits, I mean, literally your, your business profit for the full year could be doubled easily because a lot of times, you know, profits, you don’t, they don’t materialize, until the full year accounting occurs clearly.
[00:32:06] But if you want to think through, you know, what the full P and L would look like, if, if an excellent Q4 happened for you, that might be a good model. You know, and clarifier. So anyway,
[00:32:15] Michael: there you go. Really agree. A lot of well run e-commerce businesses. I know run at about a 10% pre-tax profits. So if you increase your prices by 10%, during that period, when you got average increased 10% prices, if my message, right, you’ve doubled your profit and it’s not a small, small difference, that’s a
[00:32:31] Jason: huge price price, increased strop straight to the bottom line on your P and L.
[00:32:36] There is no incremental expense associated, so it’s pure profit. Every 1% just literally increases the percentage of. Net profit. You will extract from your business. That’s the simplest form of forecasting you can do because you know, you’re not selling any more additional units. You don’t have any more staff costs.
[00:32:57] You don’t have any more computer costs or, you know, no gas charges for driving somewhere. You literally just have a new amount that drops straight to the bottom line. So there you go. Yup. Absolutely
[00:33:08] Michael: agree with that. And the difference between that and selling more products is when you sell more products, you can have to buy more products.
[00:33:13] That is a cashflow implication, right? And the other thing I’d say about that is there was huge pressure without even realizing it unconsciously. And the entire game is geared to getting us to sell more. Because that’s how Amazon makes money or for that matter, anyone in that game of Google shopping is getting more clicks on the ads.
[00:33:29] They get more money. Right. We have to resist that and thinking about profits, which is the other theme that’s emerging here. Okay. Well, these are really powerful things, man. Fantastic thoughts. What’s the next thing we need to think through?
[00:33:41] Wrapup: Hey folks. Thank you so much for listening to another episode of the e-commerce leader. I think planning is not a sexy word, but it is underrated in terms of the power it has. And I think that a few things emerged for me from today’s discussion. The first thing is to think into, as a quarter’s rather than the next week.
[00:34:01] Or even month is a healthy discipline is more actionable, more immediate than an annual plan, which is also a very good thing to do. And we’ve talked about that in the past, and I think Jason’s got a real knack for simplifying this big complex thing down to a few simple questions. And as ever, if you want to get the show notes, go to the e-commerce leader.com and we’ll give you some detailed notes there.
[00:34:23] But a few things that strike me, first of all, having a plan means that when, you know, the stuff hits the fan, but it politely you’ll find that instead of reacting in the panics wave, you’ve seen that possibility coming before you’ll have a strategy and a plan. I think that’s really, really important. The second thing is having a plan gives you a base from which to improvise the, the moon say you improved.
[00:34:44] Adapt and overcome by having spoken to a couple of ex Marines who sell on Amazon then they say, well, yeah, you shouldn’t fall in love with your plan, but you’ve got to have one in the first place. So if you think that this is a bit too chaotic, a Q4 to plan for, I would urge you to think again, couple of things that emerges from today.
[00:35:00] I think the first thing is. This whole goal clarity question is really important. If you don’t have clear goals, then you do stuff because you’ve already done it always done it possibly for years, and it may not be serving you and your business very well. So that’s a really great hint from Jason. And I think the profit and pricing goals are just as important as revenue.
[00:35:21] It’s easy to see revenue, but I think it’s important to have. A little bit more sophisticated goals and revenue. Otherwise you’re just going to give your money away to Athens. Then if you’re not careful, the second thing is having a really clear profit strategy. And again, the thing that struck me It really the most is the question of what’s your biggest pain in the butt product.
[00:35:38] And can you live without it? Sometimes it’s what you eliminate as Jason put across so clearly today, and I could not agree more. And the other thing is what’s your most profitable products and how you can sell more of it. The other thing that’s coming up again, and again, is staying in. Staying in stock, I should say with your main best sellers is going to necessitate sometimes having less stock or even selling through or stopping selling your less good sellers.
[00:36:04] And that’s a really difficult. As a sunk cost kind of fallacy that comes up all the time. Isn’t it. When you spent years developing a product it’s very easy to be too in love with it, and you don’t want to kill your darlings. And I think you have to be willing to do that. So those are some of the principle things that struck me today.
[00:36:20] I think this is sort of episode it’s worth going back through with a pen and paper and just literally writing. In a notebook of some kind and asking these very simple, but intelligent, insightful questions that’s Jason’s given us and just make a list and then sit down with your team. Or if you’re a solopreneur, go through it, maybe with a consultant or a coach, or maybe reflect on it in the mastermind.
[00:36:41] Some form of reflective process is going to be really, really helpful here. I think you’ll find. So I hope that was useful stuff for me. I think it was as usual. Very good. Jason Miles classic, which is to say really strong, powerful questions, but in a nice, simple absorbable framework, classic stuff. If you are liking the podcast, don’t forget to subscribe on your podcast player of choice.
[00:37:03] And if you are on apple podcasts and you can give us a rating out of five stars. Really fantastic. Obviously, a review as in a written sort of commentary on the podcast will be even better, but a rating is fine. It just helps people discover the podcast and stay tuned. If you haven’t been subscribed before, because we’ve got some new and exciting content coming up at our third season, including Chris green.
[00:37:25] And Kyle Hamus or Chris green, a big, big noise in the Amazon space. And Kyle has also very big Amazon experience and expertise in coaching alongside Jason. So lots of reasons to stay subscribed, stay tuned for more about Q4 planning in the meanwhile just remains for me to say thank you so much for listening to the e-commerce leader.
[00:37:44]