This episode is part one of what will be a two or three part series on brand building. You hear a lot about selling your products to make thousands on Amazon, but the way that we look at it is that those things are just get-rich-quick schemes. You’re not building a long term presence or brand, which is what we’re here to talk about today: how to build your brand.
Personally, we have our own brands that have all individually reached success. We discuss the strategy we’re using of researching a market in depth and looking at other products in the same niche that are similar to what we want to do that we can do better. We see their rankings and figure out how to improve the product and build a brand around those improvements.
We’re here to talk to you about how to do that, and so much more like:
- How we used Amazon as a strong sales channel to bootstrap their brand
- Things that you need to be looking for when you’re starting your own brand
- The pros and cons of owning your own brand
- The truth about being a seller on Amazon
- Cash-flow and higher margins
- Our newly newly-launched business
- The dangers to avoid when starting up your brand
Before you really commit to your brand, be sure to test it out first. It comes down to reducing the damage of your bad decisions and asking yourself: “Are we still gonna sell enough every day to make it worth our while?”
It’s really necessary to get the confidence under your feet to be able to pull the trigger on larger purchases, as well. Having an idea of how much money you can put into your brand for most people will be the predominant factor in deciding what kind of brand you can even launch. If you’re just trying to get an idea of the market, we tell you about a quick test you can do with $500 or less.
If you have any questions or anything you’d like us to discuss on the podcast please go to ecomcrew.com and fill out the contact form. Also we would really appreciate if you would leave us a review on iTunes.
Full Audio Transcript
Mike: Hey, everybody. This is Mike.
Grant: And this is Grant.
Mike: And welcome to this edition of the Ecom Crew podcast. This is a podcast that Grant and I have been preparing to do for quite some time, we just have never really had enough time to sit down and record a double-length or possibly three-part series type episode at one time. So we finally got the time to do that. This episode will definitely be at least two parts, if not, three. So stay tuned next week and the following week if need be for more information on how to build your own brand. That’s really what we’re going to be talking about today is, you know, you hear a lot about selling weight-label products on Amazon or you hear things like the amazing selling machine and all these other programs that teach you how to sell on Amazon and, you know, those are fine. I mean I’m not really here to knock them necessarily, but the way that I look at them and that Grant and I both look at them is that they’re really just kind of a get-rich-quick scheme. I mean for lack of a better word. I mean it’s not really building a long-term brand or a long-term presence.
You know, if you’re selling the same item as a bunch of other people, whether it’s like a wine bottle opener or a spatula or whatever it might be, and doing nothing different than just sticking your label on it, your brand name on it and then sticking it in a poly bag or whatever and sending it off to Amazon, you’re not really building a long-term future for yourself. And, you know, as the competition heats up, it’s just going to be a race to the bottom and another niche, you know. It’s like right now, first it was, you know, drop shipping got kind of raced to the bottom and then it was people that have their own inventory raced to the bottom and, you know, now it’s kind of the same thing with branded products. But if you have your own brand and you create a premium product you can sell at a premium price, all that’s out the window. And I think those are the things that are going to kind of be surviving long-term.
So we’ve been doing that with our coloring book line, which is one of the things that we’ve talked about here and Grant’s been doing it with CuttingBoard.com and both of us have some other brands that we’re developing in the background that are in various stages of the process. You know, they are kind of in the dreamland stage all the way to they’re in production right now and being sold and we’re just not quite prepared to talk about them yet, but we will talk about them at some point on this podcast just like we do with everything else. We just like to have everything kind of polished and shined before we’re, you know, turning it out to the world and let people see what a proud product we can have at the end. So yeah, we’ll be talking mostly about the coloring book project that we’ve been working on throughout this podcast. So before I get really too far deep into it, Grant, do you have any other thoughts on why it’s nicer to have a brand versus doing some mailer stuff I was talking about?
Grant: Yeah, absolutely. And a lot of it – me and Mike sometimes sound like an echo chamber so I apologize if it’s rehashing but, you know, Amazon is great and we kind of call it the Crackberry around here and it’s funny because we don’t generally talk a lot about Amazon and a lot of the is due to the fact that there’s so many resources out there. But the reality is is that I mean you look at Amazon and it’s bigger than every other marketplace – like the next 10 marketplaces combined. And it’s hard to really explain that to somebody on a scope other than: imagine if you walked into a mall and, you know, you kind of go shopping around, you’ve got your Macy’s, you’ve got your J.C. Penney and your Sears and everything. You kind of walk through the mall, you go decide, “Hey, maybe this is kind of cool,” and then you walk out of the mall and then there’s like 10 city blocks and then that’s Amazon.
And that’s what it compares to in the digital form to the brick and mortar form, which is that Amazon is a behemoth and while it’s definitely good to set up your own shop, I mean setting up shop within Amazon is getting access to just an incredible amount of traffic. And that’s very, very tempting and very lucrative for many people that go onto Amazon. And the biggest problem that you have is that, you know, the real way to succeed on Amazon is really through FBA and, you know, obviously you can succeed doing merchant-fulfilled and, you know, specialty niches, but the reality is that FBA is really where everything is. But like mike was saying, at the end of the day, you’re not really doing anything to build your own brand. You’re really building Amazon’s brand and you are really making a pact with the devil in a lot of ways because you rely on Amazon to do all the marketing and bring all the customers in. you really do all the product sourcing and everything, which, you know, can be great, and for a lot of people, it is.
The problem is that your customers are never your own. And that, to anybody, should be, you know, an epic red flag because that’s really what your business is based off of, which is actually owning the customer. We could talk about email lists, we could talk about average lifetime value and all this other stuff. You don’t get access to any of that with Amazon. You simply get, you know, this turnstile of people that keep coming in and out. So you’re kind of a glorified kiosk operator in my opinion. You don’t even have like a true lease. And then the other aspect that most people don’t realize is that Amazon is actually – you know, I don’t want to bash on them hard or anything.
I mean they’re a huge company and they’ve got a lot of growing pains and they are just a very massive, massive machine. But you’re going to get lost in that machine and, for better or for worse, I personally know many cases of people that have been completely —— by Amazon. And, you know, it could be their problem. You know, I’m not going to put all the details out, but even if you’re selling $4 million worth of product on Amazon, you are not completely secure if somebody says, “Hey, you know, you guys are selling counterfeit goods or you guys are selling whatever,” and they might even be your own branded products or they might even be completely legitimate. I mean, in most cases they probably are legitimate when you get complaints.
And if you get enough bad things to you on Amazon, I mean they can just shut you down. Period. I’ve seen it. And it’s going to be really scary if you put all your eggs into one basket and you’re doing $4 million in sales in Amazon and you’ve got, you know, probably $1 million of inventory at any one time just hanging around and suddenly, your sales go to zero, your inventory is stuck and now what do you do? You know, fire-sell it on eBay?
So these are kind of the side issues that you can never really quite anticipate and that’s kind of one of the issues of not owning your own brand. Does that mean you should not sell on Amazon? No. That’s not at all what I’m trying to say. I’m just saying that, you know, a good strategy is diversification and just like any good portfolio manager will tell you, having a variety of ways out is always the best way to go. So with that, going to hand it back to you, Mike.
Mike: Yeah, and I couldn’t agree more and it’s actually, you know, piggybacking on what you said. They made my next few points here or lead into them at least, which is the only thing constant in this world is change and I, you know, keep on mentioning this book, Who Moved My Cheese?, but the reality is that Amazon is a public company and while right now, they aren’t really focused on profits, they’re focus on growth, at some point that will change. And when, you know, the hammer comes down and they decide to start focusing on profits, at any time they can change the rules on you and there’s nothing you can do about it. They can charge 10 times more for fulfillment. They can charge 10 times more for shipment or [pick pack? 08:06] or, you know, change all kinds of things on their site to make it more advantageous for them and there’s nothing you can do about it. So, you know, to be prepared for that day by owning your own brand is certainly a much better position to be in and there’s all kinds of other bad things that can happen, like Grant said, with them shutting your account down or whatever, that you have to be prepared for that if you have all your eggs in the Amazon basket there’s nothing you can do.
Now with all that said, at the same time, I think that we’re in an unprecedented time in history where you can use Amazon to your advantage to launch a brand where you wouldn’t otherwise be able to do that. And this coloring book brand that we’re doing is a perfect example of that. You know, if were to have launched a coloring book brand without Amazon, if we were told, “Hey, you can’t use Amazon as a channel. Now go launch a brand,” well, in order to do that, you’ve got to produce the same amount of inventory because there’s minimum orders for getting books published, which are into the thousands, and you’re sitting on, you know, lots of inventory. You have to build out a very expensive ecommerce site that, you know, looks good and professional enough to get sales and, you know, build your brand and you have to pay for lots of traffic whether it’s PPC or otherwise and, you know, it’s very, very expensive, very tough. Multiple years – I mean multiple, multiple years to bootstrap a brand without Amazon, versus what we’ve done is we use them to actually bootstrap our brand.
We didn’t even launch ColorIt.com until we were, you know, almost six months into this project and we just basically proved out the brand on Amazon, made sure that the market was going to be as good as we had hoped and thought it would be, but we were getting all our initial sales on Amazon and then we also built out Etsy and we built out eBay and all of our sales were coming from there, and only at the point when we got to the point where we were selling, you know, somewhere between 40 to 60 units per day between all those other channels did we launch ColorIt.com. And the day that we launched it we put up a, you know, just out-of-the-box Shopify template because we have already designed a template in the background with a designer and everything. We did a custom store but we had to put up, you know, just a default Shopify install so we had something there to be able to build off of and the very next day we got a sale.
And, you know, the thing here that’s important is, like I was mentioning, we’re using Amazon to bootstrap that brand. We’re using them as leverage. You know, we had already sold thousands upon thousands of units by the time we had launched ColorIt.com. And on every book that we send out, we have our name, we have our address, we have our telephone number, we have our website, and now inside the books we’re including a sheet to come back to our website and register your book and get 10 free images. So, you know, we’re getting more email addresses and we do some type of similar things with all of our other products, whether it be our pencils or sketchpads or whatever, we’re putting in some sort of an insert that doesn’t break Amazon’s terms of service. We’re not [distance trending? 10:59]. We give them some value add to get them back to our site and then we’re building our email list and everything.
So, you know, again, I think we’re in an unprecedented time in history where you can leverage Amazon to bootstrap that brand and also have it be a very strong sales challenge for you. but our long-term goal, long-term plan is to flip flop our sales percentage from, you know, being a majority of Amazon to being a majority on ColorIt.com and having Amazon just be one of several other channels that we’re doing like Etsy or like eBay where, if, for some reason, Amazon were to shut us down or make a major change, whether it be, you know, a year, two, three, whatever down the road, that we’re in a good position to handle that. And that’s really the position that, you know, I’m coming from in this and the idea is to build a very strong brand name with a bunch of products that complement each other well, that feed off through each other, that don’t make you lose sales by having other – or cannibalize sales is the word I was looking for. So we have all these other products that complement each other well like pencils complement a book well and vice versa, and we have all these different titles that rank well for different keywords. And, you know, we have people that have become fanatics about our brand and the reason they’re fanatics is because we have a really high quality product with really high quality designs. And, you know, it’s a passionate industry.
And we’ll talk about, you know, things that you should be looking for when you’re getting into a brand. I mean an example of things that people wouldn’t be passionate about is like our ice packs that we sell on IceWraps.com. I mean they’re good products, people leave good reviews, but we don’t have a built-in sales force now because people are using our ice packs versus with ColorIt, we have a passionate following behind us and we’ll talk about that here as we go into how to build a brand and what to look at for that. So I’ve kind of been rambling here for a while. I don’t know if, Grant, you had any other things to add to that before we get into, you know, how to pick products and what you should be thinking about when you’re starting your own brand.
Grant: I think the only thing I would really add to that is that it’s probably never too early to start your own brand. Like you were saying in regards to Amazon and using that to boot it up, it’s certainly a great way of getting visibility. In terms of getting your own website up and everything, you know, there is kind of a cost-reward or a cost analysis that you kind of want to put into that, which is, you know, how much would it take to really get my own website going versus getting in on a channel such at Etsy or eBay. And, you know, using channels is very cheap and really it’s only cost is whatever commission that you pay for the channel provider to get you the leads and the sales and whatnot. But in terms of just getting like, you know, even a small footprint in a website, you know, if you just put on just a ragtag template, it can’t really hurt you or anything and, like you were saying, Mike, you’d be surprised at how many people kind of just look for your brand if you’ve got a product that they have enough of a connection with
I’m going to be doing something along that route when I got some clothing products and other fashion products in on Amazon, for example. I’m kind of doing the same route as Mike. I’m going to put them on Amazon first, but I’m also going to probably, in parallel, get my own website going on pretty early on into the game just because I believe that it’s going to have a little bit of more traction and that kind of stuff. But at the same time, I know how to get a website launch for, you know, pretty cheap and get it done under my own supervision pretty easily so there’s that, too. But I would say that it’s never too early to really think about building your brand, but putting a lot of money into the marketing, that might be something that you should, you know, really reconsider versus the ability to just get free eyeballs by using other people. So yeah, just kind of think about it smartly. But yeah, other than that, I don’t have too much to add.
Mike: Cool. So I have a list of benefits and disadvantages of having your own brand. I want to kind of go over those first and then we’re going to get into specifically, you know, my list that I put together here of things that you should be thinking about before you even get started on your own brand. But just real quickly here, you know, the benefits of having a brand.
Complete control is the first one I have here and it’s nice to be in the driver’s seat and have full control over everything. You know, we had an episode last week where a listener had submitted a question about MAP pricing, and you don’t have MAP pricing to deal with, you don’t have anybody competing against you. You set rules of who you sell to. If you do want to get into the reselling game, you can sell, obviously, to other stores, like I was mentioning but you can also control the channel. You can say, “Hey, you aren’t allowed to sell on Amazon or Etsy, eBay, whatever. You’re only allowed to sell on XYZ.com or in your own brick and mortar store,” or whatever might be. But again, you have complete control over everything. You have complete control over your listings, your images, your ad copy, your descriptions, et cetera, and I think that that is a huge benefit. I mean for me, I guess I am kind of a control freak and I enjoy having that control, but I also wanted to mention some downsides because I don’t always like to give all the bright points of something like this.
So I mean, the downsides to me: number one, you probably are going to need to carry more inventory. Not probably; definitely going to be carrying more inventory than if you were buying from a third party manufacturer. I mean I can call up one of our vendors for IceWraps.com and buy $100 worth of stuff or $1,000 worth of stuff or $2,500 worth of stuff depending on what their minimum is or what we need to order to get free shipping or those types of things and, you know, the investment to get that inventory is quite small. Now if you’re going to be starting your own brand and you’re going to have, you know, at least three to five SKUs to start with, you could be looking at a low- to mid-five figure investment to really get that brand up and off the ground, which can be quite scary for people. You know, it’s tough to launch a brand with just one SKU, but it’s certainly something you can do on Amazon. Again, it’s a nice thing about having Amazon. We certainly launched with one SKU. Put one book title out, just kind of tested the waters to see how it would go and then we saw it doing well and now we have, you know, upwards of 10 titles that are in the works.
So yeah, I mean having to make that initial investment in inventory’s going to be significantly higher per SKU. The other downside would be longer lead times. I mean, again, calling one of those third party manufacturers, you know, they have that stuff sitting in a warehouse ready to go, ready to ship. You know, our lead time from placing an order to receiving it here is almost always less than 10 days, you know, versus having your own brand. You know, you’re looking at a minimum – really a minimum – of 90 days to get something from overseas. Even from North America. I mean some things that we do in the U.S., you know, it’s still a 45- to 60-day lead time because they’re printing larger quantities, you have to get in a queue behind people, and they’re creating something from scratch versus just picking it up off the shelf and sending it out to you.
And then the other this is, you know, it’s cash flow intensive. It’s one thing that’s been a big wake up call for Grant and I. You know, the other businesses that we had done before didn’t really have any cash flow issues. I mean we were doing affiliate marketing. We actually even used the cash accounting method up until the last few years, you know, because everything was cash basically. You know, we got paid in February for business that we did the previous month in January and all of our expenses were attributable to that month and it was very simple. But in an inventory-based business like this, I’ll just throw out an example. I mean let’s say you’re placing an order for $100,000 with China. You know, from the day that you place the order, that’s a 30% deposit typically so there’s $30,000 you’ve got to shell out on day one. Now, it usually takes 90 days to have that manufactured and then about 90 days later, they’ll come back to you and say, “Okay, the product’s ready.” So now you have to go pay for an inspection, which is going to be about $200 to $300 or maybe more depending on the size of the order. And then you wait a few days for that and another week goes by and let’s say you do accept it at that point. Now you’ve got to pay the 70% that’s due, which is going to be another $70,000 and now you’ve, you know, come out of pocket for a little bit over $100,000 and you still don’t have any product to show for it in your warehouse.
Guess what? Now you’ve got to pay for shipping to get it over here – you know, another $2,000, $3,000 and you’ve got to pay customs fees if there’s any applicable and then a final trucking fee to get it to your door, and next thing you know, you’re into it for $105,000 to $110,000 and 120 days to 150 days into the process without a single item at Amazon to actually sell yet, you know, and you’re really looking at another couple weeks before it’s in Amazon’s channel ready to sell. And then, you know, once you’ve sold through about a third to half of your inventory, guess what? You’ve got to go through that process all over again and place a reorder because you know the lead time is going to be so long and you certainly don’t want to run out of stock. So, you know, it’s very cash flow intensive, which is a downside.
But going back to the benefits, you know, you’re looking at significantly higher margins. I mean with the Ice Wraps products we’re doing, you know, our markup is about 100% but we’re paying a lot of times for inbound shipping and other costs that really kind of eat into that. We found on our own branded stuff we’re really able to, you know, be at the 200% or more markup, which is significantly higher. So, you know, yes, there’s a much higher demand on cash flow, but the benefit is you’re making a heck of a lot more money for it and, you know, it’s always that complexity or cost or whatever is your opportunity, people that don’t have that kind of cash laying around to start a brand. And you don’t have – I mean $100,000 obviously is a huge number. You know, you don’t have to place anywhere near that size order to get a brand off the ground. I think you can do it for $10,000 to $20,000 realistically and do a really good job, but it’s still a very cash flow intensive business. You don’t really get cash back into your pocket and money to live off of, if that’s the situation that you’re in, for a very long time.
So those are some of my ups and downs. Grant, I don’t know if you have anything to add to that list real quick before we move onto the next part.
Grant: Yeah, I think cash flow is a pretty big topic, especially for building your brand, and, you know, some of our listeners are going to be able to put up that kind of money and pony up $100,000 and spend on inventory but the reality is that a lot of people, $100,00 is a pretty damn big chunk of change and I’m not going to like stand here and say that’s not a big chunk of change for me and you either. Of course it is. I mean, you know, any time I’m sitting on huge piles of inventory it just kind of makes you have like a kind of tingle in that special area. It just, you know, makes you nervous because what happens if it doesn’t sell or what happens if you just have like a big meteorite that hits your warehouse or, you know, something like that? For that, you’ve got insurance hopefully, and if you don’t have insurance out there, get some damn insurance. Like don’t be that guy that just is going to be so cheap that he bets his whole business on not paying, you know, $1,000 or $2,000 a year just to have your — covered in case of an entire net asset, you know, wipeout situation.
But yeah, having an idea of how much money you can put into your brand in terms of like getting a SKU is really going to be, for most people I think, the predominant factor in deciding like how or what kind of brand you can even launch. Some items, some niches, you know, you can get quite a few SKUs if you have let’s say $10,000. Others you might just be able to get one. And with the economies of scale like Mike was saying, you really make a ton more money when you become the guy that is, you know, getting your own stuff made for you if you do your own design and everything. Of course that generally requires the highest amount of capital because companies really don’t want to deal with you unless you’re doing a MOQ or, you know, minimum order quantity upwards of $5,000 to $10,000. You know, you’re just kind of a small fry at anything under $5,000.
And just as an example, what I’ve been doing a little bit on the Amazon side just to kind of test out some ideas is pretty much buying a few different items on AliExpress and just shoving them onto Amazon. And AliExpress is kind of like AliBaba Jr. The prices are going to be quite a bit more than that you pay on AliBaba with the difference that, you know, generally they’re a lot easier to get to you. Most of them, you know, shipping is included and that kind of reflects in the pricing and it’s pretty much just easy eBay version of, you know, AliBaba and you get the items to you, then you can put it on Amazon and see how they do. So unfortunately, you know, if it’s easy, then that means everyone else is going to be doing it, which a lot of people do. But if you’re just trying to get an idea of a market, you know, it’s a good way of kind of just getting a little test out there.
And so what I’m pretty much doing is I do that just because I don’t need a giant cash outlay because I don’t need to spend $5,000 to test an idea. I can spend $500 to test an idea, which is great because I’ve made a lot of wrong $5,000 like idea choices in my life before, which really suck. And I can remember every single wrong, you know, $5,000 idea that I’ve made and they always come back to haunt me and I just hate doing it. And I know most people, that’s a huge chunk of investment that you would hate to do. And so me and Mike have kind of learned the hard way. You know, we’ve committed cash to like bad ideas and that’s just kind of – it’s going to happen and the way of trying to mitigate that – instead of like not making bad decisions is to reduce the damage of your bad decisions. That’s really what it comes down to.
So in terms of, yeah, what Mike was saying on branding, if you can get the most minimum buyable product – that’s kind of a term that they use in the Silicon Valley or the text-based MBP – and get it out there just to see how well it does and if you’ve got, you know, quite a few good bites, then you can really commit behind it. But if you put out your MBP and it’s just kind of, you know, struggling, then don’t commit to it. So a lot of what I’m trying to say is that before you really commit to your brand, you know, just test it our first, see how it does. A lot of times you might be able to negotiate with a vendor to see if you can get just a smaller quantity out and most of them will work with you; they’re just going to change you a lot more. That’s okay. You don’t have to make money off your first 100 orders. If you just can find out that if you can sell your first 100, that’ll pay for itself. You know, you don’t need to make money off of initial stuff. So don’t be too worried about making money early on with your brand. You just really want to see if it’ll work. So that’s kind of what I have to add.
Mike: Yeah, and that’s actually the way that I got started as well and we did that minimum buyable product kind of strategy to start with and I think, you know, it’s really necessary in a lot of ways to get the confidence under your feet to be able to pull the trigger on these larger purchases. And, you know, we kind of skipped that step now. You know, we’re at the point where we have over 50 SKUs up on Amazon. Lost track of the exact number but it’s a significant number of SKUs and, you know, we – knocking on wood here – haven’t had a single failure yet. I think a lot of it goes into the work we put in up front. You know, we don’t ever just grab a product that’s off the shelf and do minimal work to it to get it up there. I mean we put a lot of thought and energy into designing our products and getting a high quality product. So we do put a lot of work in advance up into it. But at this point, we’re basically batting 1,000. We’re, you know, probably a little cocky if anything. You know, I’m trying not to let that get in the way because I think it’s a bad position to be in in business when basically your ego’s getting in the way.
So we try to, you know, not let that influence our decisions and cut corners or anything, but yeah, we pretty much skip that minimum buyable thing when we’re launching SKUs now. I mean now it’s all about, “Okay, well the first couple things that we did, you know, we were worried about it and we did the minimum buyable product and we ended up running out of stock, which hurt more in the long run than the other side of that coin.” So now we just place larger orders knowing that we’re probably going to sell that product. And even if it just takes longer than expected, that’s probably the worst case scenario: to sell through the inventory. You know, we’re using a strategy of researching the market and depth, and there’s lots of other podcasts out there that get into that so we don’t really need to probably cut into that but, you know, we’re looking at other products in the same niche that are similar to what we’re looking to do that we can do better. You know, we know that we can do better and we look at those products and we see their sales ranking and we see the negative reviews that they’re getting and we go, “Yeah, we can improve upon those negative things and build a brand around that and products around that.”
And we also look at the depth of the market to see is it just one product that’s getting results for that market, or are there, you know, a couple dozen where things on page two are still selling quite well as well, to where, you know, even if we’re not the bestselling product, which we never aspire to be in most situations, are we still going to sell enough every day to make it worth our while? And, you know, once we answer all those questions and we don’t go outside of our formula of doing that type of research and taking those types of items, we feel very comfortable at this point. But I definitely agree with what Grant said. Just from a perspective of, you know, it’s good to learn how to do this and get your first few items under your belt to where you have a minimum buyable product and confidence to move forward. So couldn’t agree more with all that.
And, you know, as the clock on this podcast hits 30 minutes exactly right now, which if our target for shows, it’s a great time I think to pause here and get ready for episode number two in this series, which’ll come out the following week. So Grant and I are going to hit the Pause button and we’ll be back with part two of how to build a brand and why it’s a great thing to do.