The E-commerce Leader

Intro: [00:00:00] Hey folks, welcome back to the e-commerce leader, the podcast for those who want to be the best e-commerce leader, they can be. If that’s you keep listening, we are in the middle of discussing product development today. How to design your own unique products, which is a fantastic thing to do. If you want to have a very defensible business and a very long-term profit margin from the arc of a product of it’s unique, you own it.
[00:00:54] You own the intellectual property. And everything else around it, then you’ve got something very, very valuable. That could be the basis for a really solid, valuable sellable business. It’s however, quite involved. And you need to think the process through. So if you’re relatively new to it, or even if you’ve been doing it for a while, but you’d like to check your process against what other people do, stay tuned and we will guide you through it.
[00:01:15] Jason: [00:01:15] Okay, so you’ve got your customizations done. You’ve got your minimum. You know, quantity. Is that the next step or are you, you know, you, you get your commercial , run of the product or what’s the next step?
[00:01:25] Michael: [00:01:25] Well, this is going to vary a lot depending on where you’re sourcing. And this is why I’m always very keen these days on , a situation where, and we’ve talked about this before, but it’s worth reiterating that if you can create a situation where you can do quite a small batch. Of, you know, commercial, not just samples, but a commercially viable batch of say a hundred units.
[00:01:44] That’s just a much lower risk because you still you’ve. You’ve given it’s 10 people. Maybe it’s a third prototype that Evelyn out of 10 people, eight people said, yeah, I really like this. Okay, well, you’ve got some kind of data by the way. That’s way more feedback than most people out there. 95% of people just don’t bother the smart people.
[00:02:00] They do. It really is a striking difference, but even so it’s a bit of a risk. So if you feel sourcing horn, hand crafted rural goods, you could probably go for a hundred, hundred and 50 units, minimum order quantity. If you’re in China and it’s custom made, generally speaking, it’s going to be depending on the price point 500,000 units.
[00:02:18] So you basically, I would suggest that you go as small as you can get , in order to really just get a bit of a hint from the market about whether they like it or not. Before you commit a ton of money, really. Can you
[00:02:29] Jason: [00:02:29] negotiate on price at that point or on minimum order quantities? Or are you pretty much at the minnow?
[00:02:36] You’re just at the mercy of the manufacturer?
[00:02:40] Michael: [00:02:40] Well, kind of, I mean, a few things to say about that, first of all , and this is a bit hard to get your head around for, for most of my clients, but I think it’s valid, which is, I want to see where that if we do this at scale, The numbers are gonna make sense.
[00:02:53] So assuming for the moment and assumptions, as long as you know what they are they’re okay, but you shouldn’t keep them as assumptions used to test them. But assuming that the product to market fit is now there, because you’ve taken a lot of trouble over that now I need to see is, is the profit going to be there?
[00:03:08] So if I go back to the manufacturer, say, okay, great. We like this prototype number three, by the way, there’s often a bronze silver gold prototype, which is what a friend of mine, a client , Ashley Pierce, who took that from Tesco’s you offer. The third sort of , iteration on the product. That’s the one that you can actually use.
[00:03:24] Right? That’s tends to be the case. Doesn’t have to be good before it could be. Then, okay, you got that. Then you need to go in and negotiate and say, okay, if I order a thousand of these, what price do you give me? And then you look at the numbers and you run some numbers based on your understanding of where it might go with Amazon or Shopify or whatever, and then negotiate based on those numbers.
[00:03:44] So if you can’t make a profit, even on paper, based on some reasonable. I think it was a bit premature to be launching the product once I’ve done that, I might then well say, okay. So if it’s say 500 units and it’s Raleigh hand handmade, therefore I could probably get a smaller MOQ, I would say. Okay. So maybe they’re going to sell it to me for $10 a unit for, for 500 units.
[00:04:06] Great. I’m going to say, look, I want a hundred units to test them. I’m prepared to commit , two to 500 once we’ve done that. What price can you give me that? And I don’t really care if I just sell those at breakeven or a small loss, because the point is to test the market. So at that point I might be prepared to pay 15 or even 20 bucks a unit for a hundred units, get them out there and do a bit of a launch.
[00:04:25] See if there’s any kind of market adaptation and you know, maybe it’s 200, maybe it’s more, but it’s a small,
[00:04:32] Jason: [00:04:32] most of the clients that we work with. Really do well have found product opportunities that have a really nice markup, multiple, you know , not three times. I mean, some of the clients that we work with that do really well.
[00:04:48]Six to 15 times markup or more 15. It’s crazy. I mean, and, and, and so, I mean, I think if you’re new to all of this and you think, well, I could double my, you know, spend a thousand dollars in product and make $2,000. If I. Do it at this price point , that’s where these ideas fall apart and the veteran business operators say to themselves, I’m not getting out of this deal alive.
[00:05:11] If I don’t get four or five, six times markup, at least. And then other people will be like, wait, that’s way too high. But I think the proven operators just realize if they don’t have margin in a product at best. If they sell it direct to consumer, there’ll be building a list of customers. But at worst, if they sell it on Amazon, they won’t even be making a break even number.
[00:05:34] Yeah.
[00:05:35] Michael: [00:05:35] Right. True. Yeah. You got to run the numbers. As I said, like I promised, I mean, I literally yesterday sat down and went through a spreadsheet with six tabs with a poor client of mine whose brain was hurting by the end. So I’d take the numbers. Extremely seriously. And I actually ran it past their cashflow projection expert who had happened to interview the day before.
[00:05:51] So I think you got to take the number seriously, and if that’s not your bag, please get somebody involved. He does. But all I would say is , first of all, yes, you’ve got to get , you’ll probably find the numbers , such that you need to source at 25% or 20% of the selling price or, you know, lower, I mean, six times markup is, is good.
[00:06:07] 15 is extraordinary. It does exist. Not so easy to find, but yeah. But in the end, you’ve just got to run the numbers, such that you end up with whatever you’ve you personally defined as an acceptable net, profit net, meaning net of everything, including tax. So again, you’ve got to come up with some projections before you even place an order.
[00:06:23] And in my opinion, I mean, you can go ahead without doing any projections, but then you really driving blind because if it doesn’t look good on paper, it sure as heck isn’t going to get any better than real life, because there’s always some snagging real life you’d never thought of. So , yeah, running the numbers is really important.
[00:06:38] Part of what takes time and negotiation, because you could run the numbers, it doesn’t work. You go back, they need to decide what features to ditch, or maybe you compromise on the packaging or whatever it is, you know, and then back and forth.
[00:06:50] Jason: [00:06:50] Yeah, of course. At some point in this process, you’re going to be testing your pricing power as well.
[00:06:55] And if you do come out with a new shiny, happy, amazing, Product that’s better than anything else out there. The question is, do you have pricing power? Will people pay more for it? And the question is how much more and how successful can you be at that higher price? And so really the journey beyond this sixth step is all about , sales and marketing.
[00:07:16] Isn’t it. And figuring out whether you. You know, a match to the marketplace with an interesting new product. Let’s assume those things go well, you’re off to the races, aren’t you, you’ve got a new product out in the universe that people are excited about and you’ve got margin in it. And the beautiful part, of course we know, which is what everyone’s heard about is just these amazing stories where, you know, one viral Tik TOK, video, or Instagram shout out from an influencer is.
[00:07:46] The magic that needs to happen to make your product below up and Amazon frequently in categories is an unstoppable sales machine. And I guess, you know, I don’t want to leave people with a downer set of this is hard. This is hard. This is hard. The truth is this is work and, and there are people every day who are threading this.
[00:08:08] Absolutely right. And who are coming to market with exciting new opportunities for customers who are wowed and impressed by what has been created and are excited to pay for it. And new businesses are born every day. I think that’s the most amazing part to me is this journey of discovery and then of success.
[00:08:27] And again, I w Kyle and I work with coaching clients that we see over and over and over have done this well. And. I dunno. I mean, that’s, to me where this gets really exciting is to say, this is the makings of a life-changing business.
[00:08:40] Michael: [00:08:40] No, I agree. And here’s the interesting thing about what we’ve been discussing.
[00:08:44] The process sounds a lot of hard work, as you said, it is work. But the two pieces of it that I think are really missing from most people’s processes, not the good people that I know, but the average , and average is toast by the way, on Amazon or, or Google these days is that you’re in close contact with the customers before you get the product and you kind of sit with it.
[00:09:02] Before you scale the product production, such that you already know that somebody loves you before you put it out there on Amazon or Google or whatever. So you’ve already kind of proven it before you go scaling. And that’s actually more reassuring. It was more work, but it’s way more reassuring to have had 10 people go.
[00:09:19] This is amazing. If you’re not in doubt, order another 10 and find another 10 people to sell it manually, then you’ve got 20 people who said this is really great. That’s a really good reason to go in. 500. That’s way more reassuring than the traditional thing is when you do a load of helium 10 research, you have no idea what people think because you never talk to them and you look at the product reviews, but that only tells you what’s competing on Amazon.
[00:09:40] It doesn’t tell you what people really think it outside of that or the context of their life or anything, human. You don’t understand the customer. So your market is going to be generic. But the great thing about this process , not only have you proven stuff before you launch, but also if you, if you’ve chosen a winnable market, you know, the need is there because you’ve really talked to people, you created a great solution and the product you’ve already looked at the numbers in advance.
[00:10:03] The launch should be relatively easy provided you’ve done. Even half of that job. A good percentage will click on the search results because they will be, you know, the product will look good and you’ll have obviously got to do the job on the marketing. And assuming that you’ve got great images and a fair price, then you’re likely to get conversions if it solves a problem.
[00:10:23] And then all you got to do is really articulate everything you’ve already done. Articulate the problem, articulate why your product is the better solution.
[00:10:30] Jason: [00:10:30] Now, if you’re a veteran business operator or you’ve done this routine once or twice and hit some singles or doubles in American baseball terms, then you want to really go for the Gusto.
[00:10:43] Then I can tell you what. One of the genius marketers that we’ve worked with previously did that makes this whole process almost, even more magical. And that’s that they started it with a Kickstarter campaign and pre-sold a whole community of people into. Product creation journey. And if you’re not familiar with Kickstarter, you can go geek out over it, Google it, go look at how they, they work.
[00:11:12] But basically if you’re very confident in your ability to execute on this process, you really can go launch it before anything happens, collect people’s money through a Kickstarter campaign and have the tribe along with you. That is not just your name. And your cousin and, you know , your, your friend who feels pity for you, but you can go to people who are really passionate about new gadgets products, whatever.
[00:11:41] Have them pre-order and there’s a whole massive marketing system around doing Kickstarter campaign successfully. But if you can do that and I would not do that your first time through this process, but if you’re good at this and you do it through Kickstarter, you can fund the whole thing, have the trial.
[00:12:00] Have people ready, willing, and able to do the reviews and the feedback and the whole thing. I mean, you, you build a business out of it , you know, beforehand and during and after. And it’s a, it raises the stakes substantially, but people do that very effectively as well. And that really adds rocket fuel to someone’s product business.
[00:12:22] And it’s an interesting angle,
[00:12:24] Michael: [00:12:24] again, in a sense, because you’re pre-selling stuff. If people are pre-ordering, that means you as the marketer. Pre-selling that again, that’s really, really smart because if you’ve got some kind of market adoption, I mean, it’s a little bit different if even an investor is adopting something because they think they’re going to make money.
[00:12:38] It’s a bit of a different reason from people buying it because. The problem, but nevertheless, it’s some kind of proof of market adoption of some description. And I think, again, it comes to the same idea. My version is very primitive and sort of singles and doubles as you say, but this is a more sort of scaled up version of the same idea, which is before you invest your own money and time in a product, pre-sell it, you know, in a sense and, and find out what people really want.
[00:13:01] And if people won’t fund your Kickstarter, that could give you some useful information as well. Why that might be absolutely.
[00:13:08] Jason: [00:13:08] Well, this is a fantastic conversation, man. Any final thoughts before we wrap up the chat? Yeah.
[00:13:14] Michael: [00:13:14] I just think , to the point you were making, it is kind of magic. I’m, I’m fortunate to work with a load of people and have a lot of other people’s friends.
[00:13:21] Who’ve, you know, literally sold businesses for seven figures in some cases after three years, which is kind of incredible, but it’s just a fact, it sounds like something somebody made up, but it’s just true. It’s so it is amazing. I would say. You need to assess whether you are really up for this game, because if you’re not going to be, it’s going to be a lot, you know, but maybe if you do a half job, if it takes you, I dunno, four months instead of nine and you spend. $10,000 instead of 20, that it actually took you just wasted four months and $10,000.
[00:13:50] You’re better off to either not start or go a hundred percent. And if you’re going to do this, run some numbers early, because you’ll probably find that the cash needed is a lot more than you wanted. And that’s okay. If you have a plan to raise that cash, maybe it’s a Kickstarter campaign. Maybe you go and sort of go round your friends.
[00:14:07] You have a bit of wealth and , you know, looking for a more exciting return on it, then bonds or whatever it is. You know, Maybe, maybe you think about loans, but I wouldn’t personally advise that for new product lines, just I’m just saying, but you know, some people do whatever it is, try and see the size of the, the journey before you start it and either decide you’re going up the mountain to go equipped, go with the oxygen masks, go with the snow boots or just don’t go.
[00:14:31] That’s all I would say, because the prize can be huge if you make it. But if you stop halfway, there’s no booby prize for that.
[00:14:36] Jason: [00:14:36] Well, I love that. I’m reminded of Robert Kiyosaki’s. Quote, I’ll do it roughly, which was when someone asked him Robert eight out of 10 businesses fail after the first two years.
[00:14:50] And after the first five years, it’s like, you know, you know, 95 out of a hundred fail. So what are you talking about? What, why would anyone want to do this? And he, his response is I don’t care. He said, if my first business fails, I’ll just start another one. And if that one fails, I’ll start another one. And you know, if you fail at this process, 2 3, 4, 5 times you’re going to become expert at it over time.
[00:15:14] So if you’re really committed to this game plan, all I can say is, you know, very rarely does anyone get stuff right out of the gate. So commit to it, do it. Dust yourself off and go for it again, man. And as Robert Kiyosaki says, who cares? The only thing that’s gonna matter is after five or 10 years, you look back and think, oh, I got it right?
[00:15:37] Yeah. I got it right after a while. Yeah. And then that’ll be an amazing time in your life and it’ll really be a corner to turn and a future that will be changed because of , business success and you know, all that, all, all I can say is it’s just mesmerizing to me to watch people change their futures.
[00:15:53] Radically by launching successful businesses. And that to me is really, really exciting to behold. And it is. It is not just the special insanely smart people who can do that. It is the everyday work, a day guy or gal who can do that, who just puts their head down and says, I’m going to learn a process and I’m going to do it until I get it right.
[00:16:15] And it’s going to change my life. And I mean, there’s huge power in that. So that’s the part of this that I. Love. Well, this has been a fantastic conversation, man. I really appreciate the insights here and your perspective on all of this. Let me just say that the opportunity to work with you is there in terms of people working , through this journey with you, if that’s correct.
[00:16:36] So tell us more about how you can help people through consulting and. Sure.
[00:16:41] Michael: [00:16:41] So I only work with businesses that already have revenue these days. So I’m working with a couple of guys who’ve got, you know, maybe if you 10, $20,000 a month going through the business, I’ve also worked with people who are doing a couple of million pounds a year.
[00:16:52] So whatever, just have a 2 million bucks a year with existing reselling businesses. But when it’s private labeling , or custom products to the mix. So , two options. If you want to work one to one amazing fba.com for such mentoring. And then if you want to come and join the mastermind where we got quite a few people transitioning from primarily reselling to private labeling, then that’s at the Amazon mastermind.com.
[00:17:14] Amazingly, the website’s still up. Hasn’t been taken down by Amazon Slayer. So the Amazon mastermind.com.
[00:17:21] Jason: [00:17:21] Living on borrowed time with that URL.
[00:17:23] Michael: [00:17:23] Redirect. It’s not my main site. It’s
[00:17:25] Jason: [00:17:25] a redirect. Okay. It’s good though. And your group in London is amazing. It was an honor for me to be able to speak to that group not long ago and just a wonderful collection of smart folks.
[00:17:38] So that’s really cool. And it’s, it’s a virtual. As well now it’s not just, in-person only, or what’s your stance on that
[00:17:46] Michael: [00:17:46] question? I mean, it’s been virtual out of necessity only for the last year and we now have some options in the UK is kind of a bit, are we, is he, isn’t he sort of teetering on what his things are opening up or not?
[00:17:56] So we’ll end up doing a rhythm. Well, we’ll do mostly online and we’ll do , three, maybe four meetings a year. So that’s what we’re going to have as a rhythm going forwards. And the other thing obviously is that you mentioned some of the Kyle that you and Carla have been working with some amazing clients, you know, the guy who did the Kickstarter campaign, et cetera.
[00:18:12] So , where do people go to explore working
[00:18:13] Jason: [00:18:13] with you guys? Sure. Winning on shopify.com is our current URL. Although we are rebranding our entire business later this year, so that’ll be exciting, but it’ll always redirect to our new name and brand, but winning on shopify.com is a location for applying for coaching, that kind of thing.
[00:18:31] And we have tons of resources there. Yeah.
[00:18:33] Michael: [00:18:33] And the last thing we ought to mention Jason, before we forget is that we’ve got a contest running. So you’re the expert on contest. So just remind us how that, how that works. We
[00:18:40] Jason: [00:18:40] do, we’ve got a contest. If you’re listening to this , before the end of July, 2021, then you can jump into it.
[00:18:47]Contests dot the e-commerce leader.com it’s contest, not no S there. So contest. Dot the e-commerce leader.com enter to win by subscribing to our podcast on your player of choice. And , one lucky winner is going to win a $250 visa gift card. And , of course we’re excited to have people subscribe to the podcast.
[00:19:11] It’s just an honor , in Spotify, if you look for e-commerce with a dash between the E and the C, where number one, we have a growing community of people who are loving the podcast, and it’s just a huge. Honored to be able to do it. And , your subscription on your player of choice is really, really helpful.
[00:19:27] Of course, a review would be great too, or a thumbs up or star or like, or whatever you can do on your player of choice , to help us spread the word about the podcast. So there you go.
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