E278: Dave’s Year 2 Update on His Off-Roading Gear Business

It's Dave doing a solo podcast today. I’ve been giving periodic updates on how my current ecommerce business has been doing so far. Having recently marked two years of owning and running OffRoadingGear.com, another update is due.

If you’re new to the podcast or need a refresher, here are quick links to previous episodes in this series.

• Part 1: Rebuilding a $1million Ecommerce and Importing Business from Scratch
• Part 2: Rebuilding a $1M Ecommerce Business – Finding Products and Suppliers
• Part 3: Rebuilding a $1M Ecommerce Business – First 60 Day Results
• Part 4: Rebuilding a $1M Ecommerce Business – 6 Month Results
• Million Dollar Update – 12 Month Update
• Road to 1M – Dave’s 18th Month Update on His New Ecommerce Business

In this episode, I also let you in on the following:

• Last month’s revenue (1:23)
• How it compares to the previous months (1:57)
• What makes up the $100K revenue (2:57)
• What my product inventory looks like (4:05)
• Product development strategies I use (6:32)
• Having a content website like OffRoading.com (14:45)
• The negatives of running this business (18:04)
• Do I sell or not? (25:11)

RESOURCES MENTIONED:

• Epic 62-step checklist
• Linnworks
• Sellics

Get on the waitlist for EcomCrew Premium here.

Learn more about Helium 10 through this mini-course.

I hope you enjoyed this latest installment of the podcast. As always, feel free to leave a comment below.

If you think this episode has been useful to you, please take a moment to leave us a review on iTunes.

Till the next one. Happy selling!

Full Audio Transcript

Dave: Hey, guys, welcome to this episode of the Ecomcrew podcast. It's Dave Bryant giving a solo podcast episode today and today's episode, I'll be giving a two-year update on my brand. Offroading Gear, I'll talk about how much revenue the company is bringing in over the last 30 days. Plans going forward. Will I sell the company? Will I hold on to the company? And other captivating things are yet to come in this episode. So without further ado, let's hit the intro and get into it.

Intro: Welcome to the Ecomcrew podcast. The Web's most transparent podcast from two seven-figure sellers who share the good, bad and the ugly about running an e-commerce business. You'll learn how we build our brands, find products, and develop marketing strategies that will help you start and grow your own million-dollar e-commerce brand. And now your hosts, Mike Jackness and Dave Bryant.

Dave: Okay, let's talk about revenues for Offroading Gear. I know that's the thing that most of you care about and most of you are going to listen to and then possibly tune out the podcast. That's fine. One of my favourite podcast, Mixer G, the host, Andrew Warner, always opens up every interview by asking the interviewee what their revenues are. And I'm pretty much the same way I listen to the revenues and I kind of tune out the rest of the interview. So at least you'll hopefully get some interest and value out of hearing what the revenue number is here for Offroading Gear. So in July 2019 and that is measured from June 17th to July 16th. It's just kind of the quirky way that my accounting works, is I go in the middle of the month to the middle of the following month. That's just kind of how my accounting works. But it worked out in my favour because I got a bit of a Prime Day boost here. Revenues in July 2019 were $100,879. So just over a 100,000 for that 30 day period. Now, how does that compare to previous months? Well, in January 2019, revenues were around $92,000. In April of 2018, revenues were $45,000. And in July 2017, two years ago, to the date, revenues were $13,000. So the company has gone in a little bit over two years from $13,000 dollars a month to $100,000 a month.

Dave: Abby, enter the applause right here. And we don't actually have enough money at Ecomcrew to enter sound effects into our podcast.

Dave: So that was actually just me clapping my hands there. Could you tell? So the truth of it is though, it's not all applause and jubilation here. After two years, there's been some good things that have happened in the last two years. Some bad things that have happened over the last two years. So let's kind of talk about some of the good, the bad and the ugly. First, let me give a rundown of how that $100,000 was made up. So $76,000 of that 100K came from Amazon.com, $21,000 came from Amazon dossier. And I've adjusted that from Canadian dollars to U.S. dollars. So it was around $30,000 Canadian. But with Canada's crappy exchange rate, it works out to about $21,000 in change in U.S. dollars. There is zero dollars in sales from eBay.com. I'm going to get into that here shortly. And Shopify sales were only $2,400 and that's down from a high of around $5,200 in January. So talking about kind of the decline here in eBay and Shopify sales is something I'm going to talk about in a few minutes here, because although Shopify and eBay sales are small, the fact that they're going down pretty rapidly is a bit of a concern for me. So one of the benefits of doing a podcast like this is I can kind of dissect what happened and why these declines happened and kind of take a granular approach to it and figure out what exactly is going on there.

Dave: Ok, now let's talk about product selection and kind of what my product inventory looks like. So of that $100,000, my fancy-dancy Excel worksheet and this Excel worksheet is actually kind of the lifeblood of all the brands that I have. This worksheet lists all the different products that we have. And it has dozens and dozens of columns listing every different data point from cost to estimated Amazon FBA fees, estimated storage fees, duties, whether an item is oversized or undersized or whatever. It has dozens of different columns and just lets me quickly find out pretty much any data point I want on a product really quickly. Now, I do use a lot of software, of course, too to manage inventory. Everything from Linnworks, which is an inventory management software solution, Sellics and even QuickBooks to a degree. But nothing is easier than having an Excel spreadsheet right in front of you in terms of time and ease and ability to kind of manipulate data however you want. Nothing beats Excel. Yes, it's true. Excel still has a place in this world. But getting back to kind of the question here, how many SKUs do I have? Well, I'm showing right now 44 SKUs. Now, that sounds like a lot of SKUs. Once I divide out all of the variations, this works out to less than 20 kind of parent SKUs. So there's a lot of size and colour variations there in Off-Roading. You have a lot of different sized products that you need depending on what size of vehicle you have.

Dave: So there's a lot of size and colour variations. So removing the variations, there is, looks like, around 18 or 19 kind of parents SKUs. So having a lot of SKUs, no matter how you look at this, whether it's 18 SKUs or 44 SKUs, whatever number you want to pick. It's still a lot of SKUs. And to a lot of people listening to this, they're saying, wow, Dave, you do just over a million bucks in revenues and you have 44 SKUs, that's way too many. Well, this has been a very concerted strategy by me from the beginning. So just to kind of give you an overview of the strategy, if you've been following the series, you kind of know this. But I'll give another overview of this strategy and whether you agree with it or you don't agree with it, it's a pretty reliable way to have a nice little business and it's a pretty reliable way to launch products and have relative high probability that they're going to do okay.

Dave: Now with this strategy, you're not going to get a ton of home run products that are doing a hundred thousand dollars a month, but you're also not going to get a ton of losers where you basically need to destroy the inventory. So anyway, the strategy is pretty simple. So I'm focusing on products that can bring in per month roughly five thousand dollars to ten thousand dollars a month in revenue. Now, of course, when they first get started, they're not going to do 10,000 dollars a month in revenue, but after around 3 to 6 months, I want to see that product doing five to ten thousand dollars a month in revenue. Anything significantly higher than that, I'm kind of deterred by for a couple of reasons. Number one, it's too competitive. So it's really hard to get on page 1 or even page 2 for those products. And the second reason is, is that when products are more competitive like that, what happens is that their very price sensitive and there's a lot of price competition. So the margins are a lot lower. So it's great having a product doing a hundred thousand dollars a month. But if you're doing 1 or 2 % in profit margin, I would rather have a ten thousand dollar a month product doing 20 or 25 % in profit margins.

Dave: So how do I find these products? Well, my normal starting point is not actually Amazon or even JungleScout. A lot of people are doing that. They're going to JungleScout or Amazon looking for products and just trying to find things that are selling well and have a tool like JungleScout, you have a nice algorithm and say, hey, this product is going to make you a millionaire. What I'm doing is I'm actually normally going through either product catalogues or 4×4 product catalogues, 4×4 magazines that I pick up at my local Safeway, going to trade shows, I was at the SIMA trade show in Las Vegas. Basically the world's largest auto show. I was there in October looking for new products. Basically, I'm looking for products that are doing well in brick and mortar that haven't really been capitalized online yet. So those are kind of the lowest hanging fruits. If there's a product that's selling really well for WD Supercenter and they're not really being sold online, well, chances aren't selling great offline. That's going to sell great online. Now, finding products like that, which you don't really need to change all that much and you can just put online and sell a few thousand bucks a month of. That's great. But unfortunately, they are few and far between. So a lot of the products that I'm bringing in, I'm actually modifying quite extensively physically. Now, when I say quite extensively, it doesn't mean I'm reinventing the wheel, but I am actually changing the product in so much that it's going to take me a few weeks to develop.

Dave: I'm going to be going back and forth with the manufacturer quite a bit. And a lot of times I'm actually going to be in China and sitting down with the factory manager and discussing how to make the modifications to that product. So it's some fairly extensive product modifications. Again, it's not something that is so new and unique that it's patentable or that somebody with enough knowhow can't go and rip off. But it is one line of defence for the product and kind of my strategy for differentiating the products I go into and the seven-figure brand course within Ecomcrew premium. So keep an eye out at the next time Ecomcrew premium opens Ecomcrew.com/premium if you want to get on the waitlist. There I talk about kind of the strategy, I go about physically differentiating products, negotiating with factories for those changes and how to actually get those changes to fruition. So that's roughly 60 to 70 % of my product selection. The other 30 to 40 % are products that I didn't really need to change all that much. And just because I was kind of the first person into the marketplace, I didn't need to significantly change the products. Now, I do always by default, always significantly improve the packaging because that is what results in the most reviews. So no matter how much I'm changing the product, I'm always significantly improving the packaging just because that's the easiest way to get a lot of five-star reviews.

Dave: So once I've actually found products which I think are going to be potential good products, that's when I start using all these Amazon tools at my disposal. So the first thing I'll do is I'll go to helium 10 and Ecomcrew.com/helium10 if you want to help us out. So if I'm looking at importing dog beds, then my top-level keyword would be dog bed. It wouldn't be pet bad or soft, leather dog bed. It would be the top level. Q would beat dog bed. So I'd look to see what the search volume is for that. In Helium10, for a product to do anywhere from $5,000-$10,000 a month in revenue. Normally I'm looking for keyword volume of around 1000 to 3000 searches per month. Now that's not a hard, fast number because obviously keyword volume is going to have a lot to do with item price in terms of how much potential revenue a month it can bring in. But in my price range, normally I'm going for products around 50 to 100 dollars as a retail price point. Keyword searches in that thousand to three thousand range are what I'm looking for. Now, outside of using helium10 though, my new favorite tool by far is Amazon's Brand Analytics tool. You can get brand analytics by going to reports and within Seller's Central and then going down to brand analytics. Now, unfortunately, you do need to be brand registered to access brand analytics. So hopefully you are and you can access brand analytics. So the most important part about brand analytics is something that Amazon calls Amazon search terms.

Dave: And this is basically their search term tool, kind of like Google's keyword planner. And this will give you the search frequency rank of any keyword that you want to search for on Amazon. Now, the big caveat here is that brand analytics is only going to give you a ranking of that keyword. It's not going to give you the volume. Now, unfortunately, Amazon closed the advertising API backdoor that it used to have where you could actually see real volume for search frequency or not search frequency, search volume within Amazon. So now Amazon's only giving you search rank, which basically says, hey, this is the four hundred and ninety-six top searched keyword on Amazon.

Dave: Now we're not getting the actual volume with brand analytics, but we are seeing the search rank. So what I'm looking for is keywords that are in that 50,000 to 100,000 search frequency rank. So I'll give you an example of one of my products. I'm not going to tell you exactly what product it is because I don't want you getting all the sensitive data on my products and going and ripping them off. But I have a product doing about $10,000 a month on Amazon. Its top-level keyword has a rank of 59,000. So this just goes to show that for top-level keyword that has a rank of around 50 to 60 thousand. It can do $10,000 a month in revenue. So that's kind of the range I'm looking for somewhere in that 50,000 to 100,000 search rank. Anything lower than I mean, less than a hundred thousand, there's not enough search volume there to get a lot of revenue and anything higher than that. So anything ranked 1 to 49,999: it's too competitive and people are going to be aggressively in that category and the competition is going to be too thick and margins are going to be too low to make it worthwhile. Now, of course, there's always exceptions to every rule, so don't take this in stone.

Dave: If you find this great product that has a search rank of 48,000, don't say, oh, well, Dave said anything about 50,000 is not good enough. Use this kind of as a broad general rule, but it is a fairly reliable rule somewhere in that 50,000 to 100,000 range. Now once I have these products, I'm not going to go into detail about my exact launch strategy because you can go to Ecomcrew.com/checklist. You can download our 62 point private label checklist. And this is a pretty exhaustive list that Mike and I and actually, all of Ecomcrew put a significant amount of time into developing. So head on over to Ecomcrew.com/checklist and you can see kind of our exact launch strategy. However, I'll just kind of bring light to one of the more different things that I'm doing and I've brought this up in a previous podcast as well. Mike has also talked about this a lot as well, because it's an important part of his whole e-commerce strategy as well. And that's to have a content Website and not even a Website, but a network of Websites. It's kind of the backbone for product launches and building trust and authority. So I operate the website Offroading.com, and this is strictly an information-based website.

Dave: Now, right now, it's kind of a product reviews website, which is the hot thing right now in digital content, is doing product review sites. Now, I don't really like product review websites because I think they're a little bit disingenuine. And they don't offer a lot of sticky content to users. They are great for those one-off searches. Hey, what's the best winch rope right now? And you get the user on there for one session, then they go and buy their rope and you get your commission and they go off into the sunset. So I don't really like it in that way, but it is a hot thing right now and its a easy format to kind of give to a V.A. and have them duplicate. So that is a big part of my strategy is to have digital content totally separate from the brand, that's helping to promote our products. So we've been developing offroading.com over the last, pretty much year. And I've had a V.A. in the Philippines pretty much exclusively developing content for that website and it's finally starting to get traction. And Google, for whatever reason, they always put you in a sandbox for anywhere from three to six and sometimes up to 12 months. So in the first few months of launching this website, we had almost no traction at all.

Dave: And now we're getting almost 400 unique visitors a month from Google. Now, that's not huge, but this has gone from basically 0 in January of this year all the way up to 400 a month right now. So I'm sure by the end of the year, this content and this traffic will nearly have doubled. And so with this kind of separate content Web site, we can do a couple of things. Number one, we can promote our own products. You have to be careful about that, obviously, how you make it clear to users that these are your products. And number two, we can also promote other company's products and get a nice affiliate commission for that from Amazon. And I'm currently getting over $200 hours a month in affiliate checks from Amazon. I'm actually getting these given to me as gift cards just because it's easier being a Canadian to get gift cards than it is to get checks in the mail from Amazon. So I'm having a ton of Amazon gift cards going into my Amazon account each month and I'm finding useless crap to buy with all those gift cards. So that's a big positive. But the third big advantage to getting all this affiliate revenue is that I can see what exact products people are buying.

Dave: That's resulting in me getting this affiliate revenue. So you know what? It's also a great product research tool because I can see from our basically affiliate record of all the products that are being bought, what are probably high converting products that we can import and launch on our own. And the great thing is that we can simply plug our product into that Website that's promoting right now these other products, we could plug our product in there and customers would go and buy our products instead of the other ones that are on that Website, or at least in addition to those other products.

Dave: So moving on from product development strategy over to some other points about the last couple of years of running this company. I'm going to address a couple of the negatives here. Over the last not necessarily two years, the last few months, and addressing the one that I mentioned during the introduction, our Shopify and eBay revenue has basically dropped to nothing. Now, eBay, I'm not so concerned by just for the fact it's even during a great month. It's only been a few hundred dollars a month in revenue. It still irks me that it's that low because in my previous company Anchoring.com, eBay, we had significant revenue going through eBay, hundreds of thousands of dollars a year going through eBay. And I kind of imagine that Offroading would have been similar effects. Now, eBay's been declining a little bit, so I don't know how much of this is macro stuff going on out of my control and how much of it is just me not executing it. So I'm looking into a couple of things to expand into eBay. Still trying to find a great Shopify integration for eBay. Linnworks, our inventory management software we use is supposed to have eBay integration. It's finicky. Shopify's eBay integration is finicky and eBay, in general, is finicky. So all three of those things make selling on eBay a bit of a challenge, but hopefully, it's something I'm able to crack here sometime in the next few months.

Dave: Now, the Shopify revenue is the one that's kind of bothered me more than eBay just for the fact that we had quite a bit of revenue going through Shopify or Web site. Well over $5,000 during a good month and now it's around $2500 a month. Now, one of the great things about running a podcast and a blog is that when you do a little report like this, it kind of forces you to dive into the numbers. You have something to talk about. So I dove into the numbers and figured out what's going on here. Basically, I opened up Google Analytics and I did a report of July's numbers versus January's. And January was a great month for us, for our Shopify site to see, OK. What happened? Where did we lose all that money? Now, almost like diagnosing an Amazon listing. The first thing I always like to see is, is this a traffic issue or is it a conversion issue? So I compared the numbers of January compared to July and overall traffic was down about 20 %. And right there, that is kind of an alarm to me because our revenue dropped well over 18 %. It dropped more like 50 %. So obviously, it's not strictly a traffic issue. It's a conversion issue. And going through analytics a little bit more deeply, I can see that the big drop in revenue came from Facebook traffic. And even though our Facebook spend, it decreased a little bit, it did not decrease that significantly.

Dave: So somehow we have a conversion issue going on with our Facebook ads. Basically, people are coming to the Web site, but once they get there, they're not actually buying. So I'm going to have to dive into our Facebook ads a little bit more deeply and see what's going on there and why is our conversion rate all of a sudden dropped so significantly? Now, it could simply be a seasonal thing. A lot of our products tend to do a little bit better in the winter, in the fall months. Surprisingly to me, just because people are out getting stuck and they need different recovery here and that type of thing. So it could be a little bit of seasonal variation there. My stronger suspicion is that I kind of screwed things up somehow monkeying around with the Facebook ads at some point. So that's what I'm going to have to dive into here. See what's going on there. And I would actually like to see our Facebook revenue doing well more than it did even in January of this year. So I'd like to see us get up to five figures in revenue coming from Facebook. So that's something here in the next few months, I'm going to make a concerted effort to dive into. Likely it's going to mean developing better content and content for Facebook to really excel means developing better product videos.

Dave: The other big negative in the last few months has been everyone's favourite topic, of course, and that's tariffs. Tariffs went up 25 % earlier in the year. We had almost every one of our products affected at this point, so we had avoided the first two rounds for the most part. The third round hit us pretty much all of our products. And just as I'm recording this podcast, Trump tweeted out something about basically all the remaining products being tariffed as well. So I think we had a couple of products that escape round 1, 2 and 3. Every product that we have is going to be tariff here in the next few weeks. Boo hoo. So my strategy for dealing with these tariffs last year was simply to ignore, wait for the storm to pass. It was a 10 % increase. OK, that sucks.

Dave: But on the second up, on the bottom line now at 25 %, there's no escaping the material harm that these tariffs are doing. So 25 % tariffs, basically cost of goods sold is one-third of all of our expenses. So that means a 25 % tariff has resulted in a little over an 8 % cost increase to all of our products. So I simply dove in to all our products a couple of months ago and increased all our prices more or less by around 10 %. And that pretty much took into account all the tariff increases. So good news is that our revenue hasn't seemed to decline all that much from jacking our prices up 10 %. So things have somewhat stabilized there. A little bit of a dip would seem actually if you take into account the fact that we have more products, yet our revenues been somewhat stable over the past few weeks. However, sales have not fallen off a cliff. Like I kind of feared. So that's good news. And the great news is, is that once these tariffs do go away to the chagrin of all offroad consumers out there, I'm not going to drop our prices. At least I don't plan to unless all of our competition is dropping their prices left and right after the tariffs go away. I have no intention to actually drop our prices once the tariffs do go away. So it's going to mean higher profit margins indefinitely in the future. So the tariffs suck and it sounds like they're not going away here anytime soon.

Dave: So it is going to suck for the foreseeable future. But eventually, when they do go away, it's going to be a much stronger company and a much more profitable company. Another thing I'm doing to deal with tariffs is being a Canadian company and having a pretty significant Canadian footprint is that we're bringing more inventory into Canada than normally we would and the intention is, especially when we're launching new products and kind of trailing them to see how they do launch heavily in Canada and bring more stock into Canada than we normally would. And also, of course, bring stock into the US. But less than we normally would. And depending on which marketplace takes off quicker, if the US does take off like a bat out of hell, then what we can do is take some of that inventory that we have in Canada and send it to the U.S. to U.S. FBA fulfillment centers using the 800 dollar per day de minimis advantage and basically ship those goods from Canada into the U.S. duty free. Now, that's not a very scalable solution. Eight hundred bucks a day. That only works out to around three hundred thousand dollars per year that we can ship into the U.S. duty-free. But it's an okay strategy right now, especially when launching new products. It's one kind of micro strategy to avoid tariffs. So looking ahead for 2020 and the next year to the big question I had when I started this brand roughly two years ago was, OK, am I going to develop this brand and kind of hold it and make a hopefully a bunch of money off it? Or is it something that I plan to sell again, kind of like I did for my previous company anchoring.com.

Dave: So one of the pieces of wisdom I took away from selling my previous company was that selling a company, especially an e-commerce company, is normally not the correct financial decision to make. Normally you're far better off to hold on to a company than you are to sell it. And Mike and I had a debate actually on the podcast a month or two back about this, arguing the merits of selling a company versus holding on to one. And Mike and I, both of us sold fairly significant e-commerce companies over the last couple of years. So we both can kind of speak from experience on the topic. And my point of view and Mike actually kind of agreed with me to some degree with this, too, is that financially doesn't make sense. You only get around three times multiple if you're lucky on your business. And just holding onto the business and growing it organically is nine times out of 10, the better decision financially. Now, why most people sell their e-commerce companies, it seems, is that they get stressed out. That was my case. That was Mike's case. So, yeah, stress is a big contributing factor to burnout and just selling your e-commerce company. And I think another little nugget of wisdom I have after having managed a fairly significant e-commerce company and exiting one is how to manage that stress better.

Dave: So the big thing I've kind of learned is to not put all my eggs in one basket and take all the money that I have and buy a ton of inventory and have everything invested into the company. Now the company is growing, you know, roughly a hundred % per year and I'll probably hopefully double again in 2020. Now the temptation is, okay, let's sell everything I have, take all my savings and invest in the company and I can double that money instead of getting a 5 to 10 % return on the stock market next year. And I've just realized that that's not a great strategy because the ultimate end to that equation is burnout and feeling like I need to sell an asset, in this case, my e-commerce business at an undervalued rate. So right now into the immediate future, I have no intention to sell this company and I'm actually having a lot of fun and kind of building this company up again from scratch. And the great thing is now it has some traction and it's doing over a million bucks a year revenue. I'm starting to hire more employees and it's great hiring five hundred dollars a month employee as opposed to five thousand dollars a month employees like I had in my previous company. So hiring five hundred dollars a month V.A.s, it's kind of great seeing this team form. I'm just getting in the process of hiring another V.A. here. So my little team is growing bigger and bigger and that's kind of nice.

Dave: Some people hate managing people like kind of enjoy it. So that part is kind of fun. Yeah, I'm excited to see kind of what I can turn this brand into. I still see a lot of opportunity on the table, still get stressed out to no end every time Amazon decides to suspend an ASIN or Cynthia Stein comes out with some doom and gloom report about Amazon shutting down a million accounts in one fell swoop. So it still gets stressed out. But I don't lose sleep over running an Amazon business like I used to in the past. So hopefully I'm in this, if not the long run, at least for the near future. So no intention to sell right now. Definitely planning to hold on to this company, at least for a couple of years here. And I can see how things pan out. So hopefully you guys found that interesting. Hopefully you have at least one or two things that you can take away from this podcast and developing your brand, especially if you're developing a brand. Starting from scratch. Hopefully, learn something from my mistakes and tribulations. And if you do have any feedback head on over to the Ecomcrew.com and find the podcasts there on the website, I'm not sure what episode this number will be, but head on over to Ecomcrew.com. I'm sure you can find out where the podcast page is and leave a comment there. I love to hear from you. And until the next one. Happy selling.