Steve Chou shares the strategies he used to create numerous online businesses that gave him and his wife the freedom they wanted. Steve is the founder of MyWifeQuitHerJob.
Transcription Episode 92: How Selling Handkerchiefs Online Has Given Him The Lifestyle He Only Dreamed Of – With Steve Chou
This is your host, Derek Gehl.
Today we’re going to be diving deep into setting up e-commerce shops and creating e-commerce business online. I know this is a business model a lot of my listeners ask me about, a lot of my students were asking me about, and so today we’ve got a special guest to share their vast wisdom and experience on this exact topic.
He’s the founder of bumblebeelinens.com, an e-commerce store that specializes in selling linens and handkerchiefs, as well as the founder of mywifequitherjob.com, which is a brand I absolutely love, where he shares his successful e-commerce strategies with budding digital entrepreneurs through his blogs, training and podcasts.
If that’s not enough, he’s also the founder of the Sellers Summit, which can be described as the ultimate e-commerce learning conference. Without further ado, I’d like to welcome Steven Chou to the show.
Looked everywhere for handkerchiefs. Could not find any except for this factory in China. We ended up buying a couple of hundred of these handkerchiefs because that was the minimum order. We used maybe a handful of them and then we sold the rest on eBay and then they sold like hot cakes. That was the end of that.
Then later on, when we became pregnant with our first child, she wanted to quit her job and we live in Silicon Valley which is a very expensive area. You pretty much need two incomes in order to get a house in a good school district, and so we got back in touch with that vendor, started importing these handkerchiefs and we threw up our own website.
It started going really well because we kind of already validated the idea on eBay. Within an year we had already supplanted her six-figure salary just selling handkerchiefs so my wife quit her job.
Likewise for Amazon. Amazon is pretty transparent also in terms of how much money each seller is making. You can use a tool like Jungle Scout to get an idea of how much everyone is making, selling these goods on both of these platforms. Between the both of them, you can just go in and just start brainstorming stuff that you might want to sell to see whether it’s competitive or whether it’s saturated and whatnot..
It just falls apart, right? You can obviously see what demand is and yeah, is there a lot of demand for iPhone cases? Sure, there are, but there’s a bucket of competition out there, right? What are you looking for specifically when … I mean, demand is just one piece of the puzzle.
Let’s take eBay, for example. Let’s say you wanted to start a business selling on eBay. For Terapeak, there’s this number that they provide called the sell-through rate, which is the percentage chance an auction will actually complete if you list a particular item on there.
You can use that number to judge how many people are selling that item to determine how saturated that environment is, but in general, I think the most important thing is to not just sell a “me too” product online or something that everyone else is selling. Make sure you have some sort of value add and as long as you can present that value add to your market, you should do okay even if it’s a competitive environment.
A lot of people don’t want to be doing this, and because we do of all this stuff in-house, so we have these industrial-strength embroidering machines in-house, and we can turn these things out on a dime, because everyone waits until the last minute. Our key value propositions are the largest selection and we will bend over backwards to make sure your stuff gets delivered on time because we do everything in-house.
I’m not a huge fan of eBay as a major platform because it’s a lot of trouble, but if you sell it on eBay first just to make sure that you can unload the item in the event that things go wrong, then that’ll make you feel better.
Then you want to sell it on Amazon because there’s just huge built-in marketplace on there. If you can get traction on Amazon and you know that you can unload this stuff on eBay in case the stuff does not move, then that should make you feel comfortable enough to actually make a bulk order.
Essentially, if you are just selling on a single marketplace that is not controlled by yourself, you are in very great danger in case Amazon decides to change the rules or even decides to ban you.
Just to give you an example, let’s say you have one bad batch of product that you accidentally ship to Amazon. As a result, the customers get this bad product and you get a string of negative feedback. That could lead to your listing getting suspended.
All of a sudden, you’ve got all this product inventory over at FBA and your listing is suspended, and you got to beg Amazon to un-suspend you. This could take a period of weeks or even months and meanwhile you’re just losing money, whereas if you have your own property, you can collect your own email addresses, build your own customer base.
Doing B2B stuff is a lot easier when you have your own brand as well. There’s a variety of reasons why you need to get off Amazon.
You never hear from that company again, because you bought off Amazon, and there’s no additional marketing material in the product when you receive it. There’s no incentivization to try and capture my lead. I scratch my head going, “Am I missing something with what I’m seeing in some of these commerce businesses?”
Sure, you can put some sort of insert in the package. Once a customer sees it and have them register to get their email, but Amazon polices everything. You cannot have an ounce of marketing in any of the emails that go out to their customers and they act as a go-between as well. They’re purposely trying to limit your contact with the customer.
Let’s go back to your website then because I think this is the part where I see a lot of the new generation of e-commerce people failing, because us, old school guys, have been around for a while. We’re just programmed. Create websites, market those websites, find channels for customers.
The new guys are saying, “Why do we even need websites?” You create a website. First of all, let me ask you, do you have any platform of choice? Are you a Shopify guy?
What’s nice about Shopping is that they actually see the picture of the product and then they see the price and then they see your store name, and so that if they actually click on that link, there is a strong purchase intent, so those ads tend to convert pretty well as opposed to just buying keywords for regular search.
In your example of just buying AdWords and paying a dollar per click, the average conversion rate for a store online is on the order of 2% or 3%, which basically means that you’re paying money to drive traffic to your site and 97% of these people are not going to be buying, right?
You also need to do retargeting. For your listeners, these are ads that once you land on the site, you can buy specific ads specifically targeting the people who already know your brand, who have already been to your website. It’s just this process of having all these pieces together, driving traffic to your site and bringing them back on a consistent basis, and then making consistent sales that way.
What’s worked for us is we’ll send a Facebook person over to a piece of content and then retarget them at that point with offers once they’re familiar with our brand. During that first sequence where we’re sending them to content, we’re trying to grab their email address.
For us, we retarget both ways. If someone actually looked at a product, they will see an ad on Facebook with a picture of the product that they looked at. If they didn’t see a product, they will see an ad, whether it be a video ad or just a regular static image ad, which will take them to a page that really just shows off our unique value proposition and that at the end has links to the various product categories.
The way you get those is you find out what the publication calendars are like for some of these popular magazines and then you just write a quick and dirty pitch. You find out who the editors are and you just pitch your products. Over the holidays, if you’re lucky, they’ll choose one of your products. It’s like a volume game. You send out a lot of pitches. Most of them aren’t going to get accepted, but the ones that do, it’s great. You get published.
Now we’re going to shift gears again. I want to bring it back to the actual logistics of running a physical product business.
In theory, if you already have your own site, if you’re following my methods, you probably have stuff on Amazon FBA. The next logical step is to just simply fulfill your goods from Amazon FBA so you don’t have to carry any inventory.
Looking back to when you first got started, knowing what you now know today, what are some of the things you would have done differently?
I remember that first question that you asked me, like, how do you put together a compelling lead magnet for a physical product store outside of giving away physical products? That was just one roadblock that prevented me from taking action on that. I didn’t want to give out coupons. I’m actually not a big coupon fan.
It wasn’t until I’ve racked my brain a little bit to figure out what to give to the customers, and that’s when it all started clicking and we started gathering emails. Email is actually a significant portion of our business today.
I was always fascinated watching the e-commerce guys. They would never build a list. They were always just working on chasing the next new customer.
Yeah. I like your philosophy there. I’ve never been a fan of that either. I think that’s a very good approach.
If you guys liked what you heard here, make sure you head over to iTunes. Leave me a rating, leave me a review. If you’re an Android user, leave it on SoundCloud.
Now it’s time to take the e-commerce tips, tools, strategies that Steve shared with you here today and apply that final essential ingredient to actually making this stuff work for you. That ingredient is action, so go forth. Take action. Even just take one thing and apply it. Apply what you learned here.
Stay tuned for more info-packed episodes of the Entrepreneur Ignited Podcast.
This is your host, Derek Gehl signing off.