Episode 35: Chad Rubin on the Development of Skubana

Our guest today is Chad Rubin, the co-founder and CEO of Skubana. Chad shares with us how he and his business partner developed Skubana, an All-in-One E-Commerce Operation software. It allows Amazon sellers and other e-marketplace sellers to run their business from one central location without tons of employees or software costs.

During the show today Chad tells us about his background and how Skubana has changed the way e-commerce get done. He offers his insight on the future of Amazon and how the Chinese market is going to change things. There is a ton of great information on today’s podcast.

Some of the topics we cover are:

  • Chad’s background on Wall Street and Crucial Vacuum
  • How multiple software packages can get expensive and useless
  • The ups and downs of running a warehouse
  • Working with Wal-Mart.com and Jet.com
  • How e-commerce is like Monopoly
  • Chad’s opinion on the future of marketplaces
  • How ecommerce has embraced “Amazon-faction”

Also today Chad is offering to give a free copy of his book Cheaper, Easier, Direct to our listeners. To redeem, please visit this link below:

Use coupon code at checkout: PB26D (code is not case-sensitive)

If you enjoy the book, we highly encourage you to leave a review for Chad at Amazon once you are done reading:

Plus anyone needing referrals to 3PLs can e-mail Chad at chad@skubana.com.

Resources Mentioned Today:


Cheaper, Easier, Direct, by: Chad Rubin and Frank Turner


Crucial Vacuum

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. Thanks for listening! 

Full Audio Transcript

Mike:   This is Mike.

Grant:  And this is Grant.

Mike:   And welcome to this week’s edition of the EcomCrew podcast.  The first thing I want to do to our audience is apologize for the noise you’re going to hear in the background on today’s podcast.  They’re actually installing pallet racks back in our office and it seems like the drywall between my office and the warehouse part is no match for some of the noise going back there.  So I’ll try to keep my earphone on mute, but you guys will probably hear some stuff in the background and I’m not sure that the editors are going to be able to clean all of it out, so just want to let people know what’s going on back there.  So that’s kind of what’s going on with me today, Grant.  What’s happening with you, man?

Grant:  Not too much.  I’m just unloading a few pallets of cutting boards over here so, you know, if you had those, you could use that as a sound barrier because wood works great.  You just need a few thousand pounds of it.  So no big deal right?

Mike:   Nice.

Grant:  But yeah, I [crosstalk 01:33] –

Mike:   [Crosstalk 01:33] might find something that can actually eclipse the weight limit of these pallet racks.  That might be the one thing that could do it.

Grant:  Wow.  I hope you’ve got –

Mike:   Like marble cutting boards.

Grant:  Yeah.  Hope you’ve got a good insurance policy ready.

Mike:   Yeah.  Today is a pretty cool episode.  We have Chad from Skubana that’s going to be joining us here in a second.  And just so you guys know, Grant’s actually already been using Skubana.  I’m in the process of moving over to it so we excited to get him on the show today.  Just currently moving over from Stitch Labs, which had some operational deficiencies that they just couldn’t overcome and we’ll talk about some of those specifically on the call today.  And we’ve found Skubana to be really the only thing out there than can not only handle what we’re doing today, but also be able to grow.  You know, making these switches is a pain in the butt so it’s not something we want to have to do all the time.  So yeah, definitely really excited to get Chad on the show today.

Grant:  And Chad, if you could go ahead and just talk about yourself a little bit, maybe your background as an Amazon seller and kind of what let to Skubana, I’m sure our audience would love to hear that.

Chad:   Absolutely.  Guys, thanks for having me on the call today and I appreciate your support on Skubana.  My background: I was on Wall Street.  I was covering internet stocks, giving advice to hedge funds, institutional investors to buy, sell, or short carious stocks, specifically internet sector.  I got laid off in 2009.  By that point, my parents had a vacuum store that was failing but I created them an Amazon store and it was doing extremely well, and what I realized very early on was that I’d be competing for the [Buy Box? 03:12].  So once I got laid off and I did a little happy dance, I decided to create a direct consumer brand called Crucial Vacuum, going direct to consumer straight from the factory and making all types of replacement vacuum parts.  That business scaled very, very quickly and today, I’m in the top 250 of Amazon sellers, but I also sell on 15 other channels.

Grant:  Wow.

Chad:   So back then I was on [inaudible 03:39] and moved over to Magento and just built a new site on Shopify.  So I’m all about multi-marketplace selling and then on top of that, I do so much order volume that I always ask myself, “Why do things have to be this way?” and one of the problems I had with scaling my business with software as you guys are quickly realizing that, the technology stack that you have is so important to your success.  And there’s a lot of glam and glitz out there when it comes to software promising you the world, but most of them – actually all of them – we found were under-delivering, and so I decided to build a software not only for myself, but for every ecommerce seller out there.

Grant:  Mm-hmm.  Now, if you don’t mind me asking, when you first were kind of growing through that stage and you thought to yourself, “Man, maybe I should build my own solution,” I mean that had to be a pretty big jump.  What kind of platforms were you looking at at the time when you decided that you were just going to roll your own solution?

Chad:   So, at the time this all happened, I had just gotten rid of my warehouse so I moved to an outsourced environment, a third party logistics company.  And I actually had no plans of starting a software and so I was using ShipStation at the time and I was getting all my orders from all the marketplaces, exporting them, importing them back in, but there’s no inventory components.  So I was doing all this diligence and I got introduced to my co-founder and partner, DJ, at Skubana, and he analyzed the space with me.  And so we did like 30 demos and we quickly realized that they’re all junk.  So that’s really where we started to build it.  Initially, we were just going to be a little abacus inventory counting software and DJ, who’s a very bright guy, was like, “Look, Chad.  We’re just going to be a little middle-ware solution.  We need to be the central nervous system of somebody’s business, right?  We want to be everything operationally to that seller because, in order to be real-time inventory, in order to have the real analytics to know if you’re profitable, everything needs to be unified,” and that’s how we came up with Skubana.

Grant:  Ah.  Yeah, I figured it was kind of the Nirvana aspect of everything.  But yeah, I know when we started looking around, that was definitely one of the things that stood out to us, which was that Skubana actually had the shipping built in.  And it’s funny that you mention ShipStation because we used to use, as Mike said, Stich Labs and ShipStation and I think more every other SKU platform out there.  And I’m kind of like you.  I ended up doing research for about 20 to 25 of the platforms and I demoed at least 16 of them.  It was just insane.  And most of them really just decided that ShipStation does it so well that they’re just going to balance it out, but in my opinion, that gives you a little bit of issues and whatnot so you’ve got a few more moving parts, but with Skubana, you guys are one of the few guys that keeps it under one roof, which, to me, makes a big difference.  And I don’t know, Mike, do you like it better now that everything’s under one roof as well?

Mike:   Yeah, I mean we’re still kind of getting our feet wet with it.  We’ve been doing a lot of the stuff that we have set up so far in Skubana that we’ve actually implemented is all automated so we’re using Fulfill by Amazon and we do very little label printing right now but we’re about to flip the switch and start doing all of our in-house fulfillment with it.  So the jury’s still kind of out on that, but it seems really great so far.  And the main thing that drove us to Skubana from Stitch Labs – it just goes to show you the power of Skubana – is that with Stich Labs when you set up a channel (let’s say you have a Shopify channel for instance) you can set it to ship with FBA but you can only select one shipping speed.  So basically if you want all your orders to go to FBA, with Fulfillment, you can select standard or expedited shipping and that’s it.  And there’s no other rules.  Like you can’t say, “If it’s international, I don’t want it to go to FBA,” or, “If it’s going to Alaska or Hawaii, I don’t want it go to FBA.”  And the biggest issue was if someone picks expedited shipping, it would still go to FBA and go standard.

So that’s one thing that Skubana just really excels at.  You can set up a lot of rules.  I mean if you’ve ever done programming, it’s basically almost at a level where you’re writing if/then statements.  In a programming environment, you can say, “If it’s coming from this particular Shopify store and the customer’s in the lower 48 states and they just got free shipping, send it out Amazon this way.  But if they’re international or any of these other type of criteria, have it go so we fulfill it in-house.”  And that’s where Skubana just excels in my opinion.  So I’ve been loving those functionalities.  I think they’re called order bots if I remember correctly.

Chad:   Yeah, for sure.  Look, I’m not here to be on the podcast and just self-promote my software.  Like actually, there’s been times where I think to myself, “If I wasn’t the CEO of Skubana, would I think my software’s the shit?”  And I constantly go back to that statement and I analyze and I’m just self-aware and I deploy that self-awareness in a way where I think that Skubana is built around a seller’s needs.  Like I’m a seller myself.  I’m a very large seller.  And so we built the software around a Top 250 seller’s needs and vulnerabilities.

Mike:   Yes.

Chad:   And we had the audacity to actually take that and build it out for everybody else that exists today at a very low entry point to get started.  But, you know, Stitch Labs is a great software and it’s more entry level for people that are starting out.  And ShipStation is an amazing shipping software, but you need to have five, six other softwares to run your business.  And at that point, not only is it costly, but you don’t get real-time inventory.  You still need Excel spreadsheets to even piece together.  So I think that’s really where Skubana succeeds where other fails, is that not only are we multi-marketplace and we take all these fragmented softwares and we bundle them together in one place, but the Holy Grail of what you get when you unify everything is you get business intelligence, like profitability by SKU.  I’m not sure if you guys saw that yet.  But profitability by SKU access every channel you sell on trending over time.

Mike:   Yeah, I’ve definitely been looking at those reports.  I mean, like I said, we don’t have our entire business in there yet.  I know Grant has everything he’s doing in there, and the thing that I’m most excited about is getting everything in there just so we have a better insight into that and inventory turns.  And there’s definitely some things that I’ve uncovered.  You know, when you think you’re making money on a product but you’re not, and obviously that’s one of the things we’re really looking forward to Skubana being able to tell us.

Grant:  Yup.  I’ve got –

Chad:   I would love to show you how I’m doing it too.  After this call, I’m happy to give you guys a tour of what we’ve launched, what we’ve got, and just how to unlock more of your selling potential.  Happy to do it.

Mike:   Yeah.

Grant:  Mm-hmm.

Mike:   I’ll definitely take you up on that.

Grant:  Now, I want to take a step back, Chad, because earlier, you had mentioned something regarding using like a warehouse and doing everything 3PL.  And Mike and I, we’ve had many a difference conversation, especially on the podcast, about trying to maximize your time and when you should start sending stuff out.  For example, me and Mike both have warehouses right now, but I use a 3PL.  Mike tends to use Amazing, but we generally are both trying to ship off most of the logistics to outside parties.  And with being a Top 250 Amazon seller, for the podcast listeners out there, that’s probably an insane amount of inventory that you’re moving.  I can just imagine.  How many units do you think you’re moving a month right now?

Chad:   We’re doing about 60,000 orders a month, which is the other reason why I needed Skubana, is that any other software out there would cripple with my order volume.  So that’s the other piece of the equation.  Like I remember we were looking at software initially for Crucial and I got an email back from Brightpearl saying, “Your order volume will cripple our server.”  And remember, I sell to Amazon, I sell on Amazon, and there’s two million sellers that are out there, so I’m in the top 1%.

Grant:  Mm-hmm.  Yeah, that’s a very impressive feat.  And with that many units, what kind of issues do you run into essentially having to source everything to 3PL?  I’m sure you get miss-picks and everything.  I mean do you just kind of price it in or do you actually have controls in places?  I’m curious myself because the biggest scare that I have from outsourcing my entire warehouse is losing that kind of control, and I’m curious how you did it.

Chad:   Okay, so I’ll tell you it wasn’t easy at all, firstly.  I am a control freak through and through and it got to the point where my wife, she was like, “Chad, you need to definitely get rid of this warehouse.”  Like I had 17 employees in the warehouse.  My core competency is not running a warehouse operation and making it efficient and with pick and pack.  So by getting rid of the warehouse, I liberated not only my health and not only my marital health, but I’ve been able to actually free up my time and grow far quicker than I would’ve ever.  So my 3PL, which is in New Jersey, was courting me for about a year.  And I was like, “Oh my God, my margins are going to get hit.  This is not going to work.  Like what if I go out of business?”  And the exact opposite happened.

One quick really interesting nugget here is that when you first start a warehouse – and I know you guys are installing some pallet racks right now – you have the infrastructure costs, and then you’re growing out the business and you sign a lease, you get more and more employees, then you get an operations guy running the warehouse.  Your costs are always scaling upwards, right?  now only is your fixed cost going to scale upwards, but your variable costs scale upwards as well.  So with a 3PL cost structure, it’s actually an inverse cost structure.  So you start off at a higher price and the more you scale, the cost goes down over time, and the more orders you do, you actually can go renegotiate with the 3PL.  So you can’t renegotiate with your warehouse employees that are being paid $8/hour.  Now we’re being bumped up to $10 and to $12 and to $14.  Whereas I can now go to my 3PL and say, “Look, I’m delivering you 20,000 more orders a month, right?  Give me a discount.  I want 20% off.”  So I’m a customer versus an employer.  And I think that’s a really interesting dynamic to be in.

Grant:  That is.  And that’s a really great point and I had actually never thought about it that way and probably just because I’m not – I would love to be at 20,000, let alone 60,000 orders a month.  But that’s so true about renegotiating.  And I’m based out in Seattle over here and one of the biggest problems that I have is that Seattle’s got a $15 minimum wage that’s pretty much going to be taking place very soon.  So I see so many warehouses just in the Seattle area just going, “We’re moving our pick and pack operations out of the city,” or whatnot.  Or people that are staying in here are just saying, “You know, costs are just going up.  What are you going to do?  I mean you’ve got to pay a guy packing a box so much money, so your cost is set.”

So I’ve been looking at 3PLs specifically almost in places that are going to be maybe more economically challenged just so I know that my costs are going to be a little bit more stable in the future.  So –

Chad:   So by the way, if you email me, I’m happy to make introductions.  And anybody in the audience that’s listening, if you need some 3PLs, you just tell me if it’s a high touchpoint item, a low touchpoint item.  Give me kind of more around your business and I’ll be happy to make referrals.  We have a lot of referral partners in the 3PL space.

Grant:  Awesome.  We’ll be happy to put that in the show notes.

Mike:   So I just unmuted my microphone.  You guys are going to be hearing crazy noises in the background here.  But Chad, I’m curious.  Can you just kind of run through the logistics of your operation from when you’re buying from manufacturers in the U.S. or Asia, does everything go directly to 3PL first and then it goes to Amazon, and if you’re selling on which channels, which ones get filled through 3PL versus Amazon, and just kind of the logistics of the operation from a high level?  I’d be kind of curious to know how you’re doing that.

Chad:   Yeah, yeah.  No worries.  So everything goes to the 3PL.  That’s my distribution point.  And then I actually replenish FBA, FBA Canada from the United States.  So all the replenishment is happening from my 3PL in New Jersey right to FBA, to all the FBA distribution centers.  The 3PL does its own pick and pack as well because we sell in other channels outside of Amazon, so we’re doing pick and pack and we’re doing FBA.  I have a 3PL in Ireland doing my orders in Ireland because essentially, people in the Eurozone expect two-day shipping.  Like two days is a requirement, and shipping from the United States to Eurozone was taking me about seven to eleven and just not good enough.  So we do all of our FBA prep from my 3PL in Ireland and there’s also some interesting tax benefits that you can incur there as well.

But yeah, and then, of course, just to plug it again: remember, I used to be on ShipStation, which is not really meant for 3PL iterations.  Skubana handles as many 3PLs as you want, as many FBA distribution centers as you have.  So everything is kind of coming in from all the marketplaces and channels that I sell on.  There’s about 16.  We’re just about to launch Jet.com and Walmart.com at the end of this month.  And those orders are dropped on to the 3PL server and the 3PL drops on tracking and drops on inventory.  Skubana immediately reads it and pushes that to the channel or marketplace.

Grant:  This might be a little bit of a side topic, but since you just mentioned Jet.com and Walmart, are you saying that you personally are selling on there or Skubana’s going to have connectors to both of them?

Chad:   So, I sell currently on Walmart.com, Walmart’s marketplace.  And the answer to your question is yes, Skubana will support Jet.com and Walmart.  Currently, right now, I sell on Walmart.com and, myself, will be getting on Jet.com very shortly.

Grant:  Okay.  That’s neat.  I have so many questions for Jet.com and like how they’re even making money and like they just kind of showed up out of nowhere.  With your data, what do you actually think about Jet.com?  Do you think they’re going to be like a real force in the future or do you think they’re just going to burn through all their money and just go by the wayside?

Chad:   So, my public statement on that would be I believe in selling across every marketplace you can.  Right now, Jet.com is spending a lot of money buying their [GMV? 19:02] so they’re buying their revenue right now.

Grant:  Right.

Chad:   And they’re spending a ton of money in PLAs where Amazon is not.  And so, for me, I look at selling across marketplaces and seller’s channels.  Like I look at life in ecommerce today as playing Monopoly and I’ve spoken about this many times.  But the way to win in Monopoly is to own each piece of the board, right?  The railroad, the utilities, Park Avenue.  And so I look at ecommerce the same way.  So right now, I’m just going to capitalize on Jet.com.  And the way that they’re spending and where they’re putting me, I’m going to get on Jet.com.  Walmart.com, same thing.  NewEgg, Rakuten, Sears, eBay, Amazon.  I just want to be everywhere.

Grant:  Mm-hmm.  I thought that was a very well-put, politically correct statement for Jet.  My personal view over here – and I don’t know about you, Mike, if you pay that much attention, but – I actually did put an application in for Jet and I got denied.  I heard they were only going for a lot of the customers for ChannelAdvisor just because most of those guys are pretty big movers.  But yeah, I just see Jet spending so much money on advertising and I’ve heard stories about them just underselling Amazon and fulfilling orders by buying off Amazon, which is just absurd in so many ways.  It’s like they’re scalping their own head.  Like it makes the customers happy obviously and, you know, you can get a lot of return customers but you just need a big war chest to sustain that kind of burn rate.  I don’t know, Mike.  Have you heard about Jet or do you have your opinions about them?

Mike:   Oh yeah, I’ve definitely heard about it.  I mean we haven’t used it to this point because there isn’t a Stitch Labs and there wasn’t a Skubana integration, but now it sounds like there’s going to be one.  It would definitely motivate me to do it.  It’s just there’s so many moving parts to our business, trying to run on another platform that doesn’t have an integration with our backend just seems crazy to me.  But yeah, if Skubana has an integration coming out, that would be something we would look at exploring for sure.  As Chad said, I mean I love the Monopoly analogy, but yeah, for us, they’re spending so much money and obviously, if there are sales to be gotten there and it’s profitable, it’s kind of like why not?  So it’s something we’ll definitely look at when the integration comes out.

Grant:  And –

Chad:   As Skubana customers, by the way, I’m happy to make a reintroduction to Jet and to get that conversation going again.  So, another follow up after the call.

Grant:  Okay, awesome.  Now, speaking of marketplaces, because you’ve got actually two good things working for you over here – you know, you’ve got your selling experience whereas most customers might not have the same demographic on the air filters and whatnot.  Because of your ability to look at what Skubana is doing, what are the marketplaces that you see moving?  And we just talked about Jet.  Like do you think eBay is still going to be a big powerhouse in the future?  Sears and Rakuten, you mentioned them.  For some maybe medium-level sellers, do you think it’s worth it for them to get on Sears or Rakuten?

Chad:   So, I see Walmart.com as being the next major, major marketplace and I’m already seeing that with my own business.  Walmart just actually announced in their quarterly earnings that they were going to be deploying about a billion dollars to their ecommerce operation.  And the CTO of Walmart is going to be now reporting to the head of ecommerce, which is a very interesting move.  It shows how powerful ecommerce has become.  So I see Walmart as being an up-and-comer, like serious up-and-comer.  I can tell you it’s probably my third biggest channel right now.

Grant:  Wow.

Chad:   I see Google launching their own marketplace or maybe acquiring a marketplace in the near future because with PLAs, they can make a lot more money if they take a percentage of the revenue versus just paying per click.  So that’s kind of something I see in the future happening.  And in terms of international, I think it’s not really spoken about enough, but you’ve got the largest marketplace for Amazon International, which is Amazon Germany.  Most people think it’s actually Amazon UK, but actually Amazon Germany has about 30 million users coming to it a month and is bigger than the UK with a lot more sales.

Grant:  Yeah –

Chad:   So Germany and the UK are major ones to keep your eye on for Amazon.

Grant:  Okay.  That’s great to know.  And that’s actually seconded I think – was it Greg from Snagshout that said that, too, Mike?  That Amazon.de was pretty much where they see a lot of the growth coming from?

Mike:   Yeah, from Jungle Scout –

Grant:  Right.

Mike:   I think was mentioning it.  So yeah, and I agree.  I mean obviously Germany, it’s the largest population center in Europe I believe.  I think the UK’s smaller than Germany so it makes sense that Germany would be – I think it’s like 80 million people or something like that.  It’s been a while since I’ve looked at this but there’s definitely a lot of people in Germany.  It makes a lot of sense and we’re looking to move and do some of this international as well.  We’re going to start with Amazon.ca because I think that’s the lowest-hanging fruit, easiest one to figure out, and then move over to Europe.

Grant:  Mm-hmm.

Chad:   Mm-hmm.

Grant:  Now, speaking of the international growth, in terms of ecommerce as a whole and just Amazon in the U.S. side, where do you see things three to four years from now?  I know a lot of people talked about the Amazon window kind of closing, the Chinese sellers coming in.  From your perspective as head of Skubana and just with your own sales, do you think Amazon is still going to be competitive enough for new sellers to come in or do you think it’s going to be pretty mature?  Where do you see things going?

Chad:   Yeah, there’s a major Amazon-ification of ecommerce that’s happening right now, and I think a lot of people are now starting – like three years ago, at Internet Retailer Conference, people were like, “Oh, screw that.  I’m not going to join.  I’m not going to do Amazon.  I don’t want to do Amazon.”  And two years ago, they were like, “Mm, yeah.”  You know, some sellers were like, “Yeah.”  Bigger brands were like, “Yeah, I’ll go on Amazon.”  And this year, when we went to the Internet Retailer Conference, which just happened in Chicago 2016 in June, everybody was embracing Amazon.  So they’re like, “If I can’t beat them, I’m going to join them.”  So even the GAP just recently announced they’re going to be getting onto Amazon.

So I think what’s happening is that more and more people are kind of piling on this gravy train on Amazon.  I would say that it’s becoming a natural monopoly to a degree where 40% of product searches start on Amazon and people typically don’t leave Amazon.  So I think the next problem that’s happening is that all these sellers that are taking all these guru classes online and just eating up – you know, there’s armies of people that are creating spatulas and Silpat  nonstick baking –

Grant:  Garlic presses.

Mike:   Garlic presses.

Chad:   Garlic presses.  There’s so much bullshit out there and now it’s like, “Okay.  There’s enough garlic presses on Amazon.com.  Like Jesus Christ, everybody.  Let’s start creating products that are a little bit more innovative and that solve problems.”

Mike:   Yeah.

Chad:   And I think that’s the big issue right now is that nobody is actually solving problems on Amazon and that’s the way you’re going to win going forward on Amazon.  But I also –

Mike:   Yeah, I couldn’t agree more.  We’ve been talking about that on this podcast several times.  I mean even with our coloring brand that we’ve been doing, it’s just creating things that are works of art and have hand-drawn designs, things that just can’t be copied, things you can’t go to Alibaba Express and like bring in, like a spatula or a garlic press.  And even with the art supplies we’ve been doing, like pencils and pens and markers and these things, it’s super high-end, like customized product that includes like a customized case and we’re using like three manufacturers to put together one SKU to deliver a really high-end product that is different than everything else out there.  Maybe you search “garlic press” – we keep on using that as the funny example because it comes up over and over again – but there’s a zillion people using the same thing.  So it’s definitely interesting.

Chad:   Mm-hmm.  For sure, and I mean even when I started on Amazon six years ago, when I first started at Crucial Vacuum, I was like, “I have six months of an opportunity here to disrupt this industry.”  It turned out it was about a six-year cycle for someone to actually copy me.  So it took six years for someone to actually catch on to what we were doing, but now that cycle is like I can launch a product and six months later, there’ll be ten other sellers selling it now.  Like that’s how savvy these sellers have gotten.  So, like Wayne Gretzky says, you have to go where the puck is going, not where the puck is.  There’s this Amazon product death cycle that happens and it’s like a year.  Unless it’s aspirational and innovative, like you’re going to be copied and you’re going to become a victim, not a victor.

Grant:  Mm-hmm.  Let’s say that you had just been laid off in 2016 from your trading job and you are trying to rebuild your parents’ online business and the landscape is like it is now.  Do you think you would be able to achieve the same level of success or do you think – I know that’s kind of way out into theory land, but do you think like realistically that you could still fight in this kind of environment with what you’ve talked about with like a one-year kind of lead production head time?

Chad:   So right now, in 2016 on Amazon, it’s survival of the fittest.  For sure.  I think that the bigger they are, the harder they fall though, so the bigger I get, the more people can actually just take from market share, so there’s a lot of market share to grab.  But I believe that new products and new innovations with new angles coming out – for example, a lot of people count the quantity of their reviews on Amazon.  For me, I really care about the quality of the review, and when I look at other products on Amazon and I go to the negatives, no one’s looking at negative reviews really and reading them like on a surgical level.  Reading the negative reviews and seeing how I can iterate and improve a product is the way to win going forward if I was going to start right now, in 2016.

Grant:  Mm.  That’s very interesting.  Yeah, I know I personally do that.  I look at the negatives and me and Mike kind of joked about it, but being Amazon sellers, it’s like since you know how the game is played and how everybody gets the reviews, it’s almost like you can’t trust anything; you just have to look at all the negatives in order to really figure out who’s telling the truth and just go by that.

Chad:   Mm-hmm.  But if people are like, “Hey, I hate this,” or, “I don’t like how the plastic is this way or how it’s this way,” there’re so many negatives that are happening where people are complaining that you can take those and iterate on it to create a better product.

Grant:  Mm-hmm.

Chad:   You know, not just going on these off-the-shelf products that are on Alibaba.

Grant:  Now, what do you think about the whole thing with the Chinese sellers coming onto Amazon?  I don’t know how much of an eBay presence you guys have.  I assume that it’s pretty big, but you must know that eBay has essentially been taken over, especially for anything under I’d say $10, by the Chinese and sending e-packets in and whatnot, and on Amazon, I think in the last year, a lot of people we’ve talked to – and I’ve seen it myself – there’s a lot of Chinese listings.  A lot of those guys are coming in on FBA and you’ve got to think a lot of the manufacturers are coming in directly.  Do you see any like Chinese sellers trying to go up and sign up for Skubana or do you see your own listings getting, like you mentioned, maybe either counterfeits or copycats from China directly?

Chad:   Sure.  So, A, yes, we have counterfeits, yes, we have hijackers and yes, Skubana has a ton of these Asian sellers.  They essentially built a 3PL in the United States and run their business from Asia.  They get their products into the 3PL and with Skubana, you can distribute right to the FBA warehouse, but also you can do multi-channel fulfillment through Skubana.  So they never have to step foot in America to sell online.  I think the biggest weakness they have is they don’t actually understand how to build really unique, optimized listings.  I would say that’s an issue that I see on a regular basis.  But the Amazon issue of people copying a lot of these off-the-shelf products or factories that are going direct is going to keep happening.  Like Amazon is actively recruiting those sellers.

Grant:  Wow.  So any plans to have Skubana in Chinese in the future then?

Chad:   I mean we’ve thought about it but we’re still working on dominating the United States market.  We have a lot of work to do, so we’re launching seller-fulfilled Prime, we’re launching Walmart, Jet.com.  We’re launching this really awesome graph where you can see how your profitability trends over time, and then we’re launching FBA workflow inside of Skubana.  So there’s a lot of things that we’re working on where like those are priorities over going into Canada or going to Australia or anywhere else right now.

Grant:  Mm-hmm.

Chad:   Or China.

Mike:   What’s the FBA workflow going to look like?

Chad:   It’s going to be getting the most efficient way to ship your product with the least amount of clicks.

Mike:   Cool.  I love it.

Chad:   That’s what it’s going to look like.

Mike:   Yeah, that sounds cool.  So you’ll be able to like actually order an FBA shipment from a 3PL kind of thing and they’ll supply them all the labeling and everything like that?  I mean how is it going to work like logistically on the backend?

Chad:   You’ll be able to do your entire FBA prep, like what you typically do in Seller Central right now.  You’ll be able to do that through Skubana with a lot less clicks to make it happen and far more efficient.

Mike:   Yeah, that sounds wonderful.

Chad:   And Skubana will tell you, “Okay, be sending this shipment, if I sold all of it, this is how much margin I’m going to make, this is how much profit I can expect from the shipment.”

Mike:   Very cool.

Chad:   So there’s a lot that’s going into it.  But right now, in terms of like multi-channel fulfillment with FBA, you can multi-channel fulfill on Skubana, no problem, as it is right now.  You can do that internationally too.  So let’s just say you started on Amazon UK and you want to fulfil for eBay UK, which is actually very large in the UK, you can actually multi-channel fulfill for the UK using our software.

Mike:   Cool, yeah.  We’re doing that in the U.S. but we obviously haven’t done that internationally yet.  That’s cool to know that that’s there.

Chad:   But I would say our focus, really guys, is how can we help sellers run their business with the least amount of employees?  And it’s like a self-driving car, right?  There’s a lot of cars out there that take you from Point A to Point B, but the fact that Skubana – like we’ve worked on this, I call it POAI, purchase order artificial intelligence, that’ll automate a purchase order awaiting your approval with a bow on top.  Like that kind of stuff, nobody is working on that right now.

Grant:  Yeah.

Chad:   Nobody has that.

Grant:  I remember playing around with a few of those and it looks like it can get pretty deep.  So that’s one of the things I know I’m going to be wanting to do.  Right now I’m not quite at the volume where I need to have automated POs but I think Mike would probably be a prime candidate for that for the ColorIt stuff for sure.

Chad:   Awesome.

Mike:   Yeah.  I’ve already been playing around with looking at that.  We’re just issuing like our first POs out of Skubana because we’ve still been using Stitch to do that.

Chad:   Mm-hmm.

Mike:   But we did issue a couple POs.  We haven’t done anything automated yet, but I saw that functionality there and it’s definitely – the guy that handles that for us right now will be happy to take that off his plate and do something else, I’m sure.

Grant:  Yeah.

Chad:   Sure.  Or you can give him nine weeks’ vacation too, you know, right?

Mike:   I hope he doesn’t listen to this podcast.

Grant:  I actually had a funny story where I issued a PO to one of my vendors and it was using the Inco term so it had a FOB or Free On Board and this is like one of the few things how I can tell that Skubana was developed by an ecommerce guy or somebody that actually does this for a living because there’s those terms in there and somebody that will do international shipments or whatnot.  But when I sent it to my domestic supplier, they’re like, “Sorry, you don’t get free shipping with this order.  You need to be above a certain amount,” and I’m like, “No, no, no.  Free On Board just means you’re going to ship it from where the destination.”  They’re like, “Oh.  Okay.  I’ve never heard anyone use like FOB for a domestic order.”  I’m like, “Yeah, it’s all right.”  Using a new software.  But yeah, you know, you just don’t get like that level of granularity with some other platforms out there.

Chad:   Well, yeah.  A lot of these guys got their MBA, they heard about Amazon marketplaces and they were like, “I’m going to build a software to help them.”  And by doing it that way, it’s totally, totally different.  Like with Skubana – now, I know you guys are coming to us from Stitch.  We don’t really have a lot of customers come to us from Stitch unless they’ve completely outgrown Stitch.  Most of our customers are the medium to – like we have probably the largest market share of top Amazon, top Shopify Plus merchants on our platform today.  But like a lot of people come to us from ChannelAdvisor, which is very, very interesting.

Grant:  Well, not having used ChannelAdvisor, I don’t want to talk out of my other parts over here, but I mean I think in our very precursor talks with them, maybe when we were doing Treadmill, I mean they wanted an absurd amount of money just to even have any kind of level of integration to begin with.  And again, not to like speak outside of area of knowledge, but I think they are so removed from like the medium-level companies that a lot of guys just aren’t even interested in talking to them because they don’t have any pricing; they’re just not very transparent with what they’re doing.  And everyone that I know that has used ChannelAdvisor, I mean they’re okay with it but the pricing is just like so far above and beyond what you would want to do.

Chad:   Sure.

Grant:  And do they actually take a cut of revenue as their pricing model or do they not do that anymore?

Chad:   No, no.  From what I understand – you know, it’s not public on their website but – from the sellers there coming to us, they were giving a percentage of revenue.  The interesting thing is that (and this is a thematic theme over the course of any commerce in the past decade) in the early 2000s, people were going from analog to digital, right?  “How do I get my SKUs onto the internet?”  And we realized that that’s not really a problem anymore, especially if you’re a reseller and you don’t have your own brand.  Skubana can suck in those SKUs that are already on Amazon for you.  There’s no creation that needs to happen.

So even though people are kind of using ChannelAdvisor as an operational system, it’s really a listing tool first and foremost.  And so they’re realizing, “Hey, my SKUs are already on Amazon.  Let’s just have Skubana actually run the operation.”  So we look at ourselves as a complement to ChannelAdvisor for those that still want to stay there and creating listings, but Skubana is the central nervous system to run and operate your entire business.

Grant:  Mm-hmm.

Mike:   Cool.

Grant:  Now, I know we’re getting close to the end of our general allocated podcast time and of course we’re running a little bit over but I always like to ask a few last things going out.  And I like to get into kind of the theory areas and I think, again, with your visibility, you’ve got one of the rare positions to have a lot higher view than anybody else.  I’m curious, Chad.  If you were to, say, be in charge of Amazon an in Jeff Bezos’s position and focusing just on Amazon, not the other kind of things, what would you do to make Amazon different or would you do anything to pivot Amazon’s business model?  Would you continue like the FBA growth or would you just keep building warehouses?  I’m curious what you would do if you were in the position.

Chad:   I think Jeff is firing on every cylinder he possibly can.  Seller-fulfilled Prime was genius.  They don’t have to create more warehouses anymore; all they have to do is allow you get their UPS rate, which they don’t allow you do yet, right?  You still have to use your own UPS shipping number to actually send two-day packages and get the seller-fulfilled Prime.  But once he actually figures that out, I think it’s going to be a major, major game changer.  You know, you’ll be able to use Amazon’s UPS shipper rate to ship seller-fulfilled Prime.  So that’s a huge game changer.  So I think he’s doing everything correctly.

I would say the biggest issue right now – the competitors I see to Amazon are really twofold right now, outside of Google, and we wrote a blog post about this in Skubana.  But you’ve got Google having their own marketplace.  You’ve got Uber.  I see Uber doing shipments and delivering packages because they know where the driver is, they know where you are, and they don’t have the inventory in their system yet but I think that they can be a major ecommerce player at some point.  So we’ve got Google, we’ve got Uber, and then we’ve got Amazon.  And Facebook of course.  I think Facebook has the ability to be a major, major powerhouse for millennials for ecommerce shopping.  So if I was Jeff, I would be scared of Facebook and Uber.  And Jeff already started working on Amazon Flex and they’re starting to do their own packages deliveries and they already started having people having cars and doing deliveries of packages.  So he’s on the right track for sure.

Grant:  Okay.  And if you’re Jeff,  do you try to maybe like partner with or buy a logistics company in terms of like package delivery, or like you said, just keep partnering with people?  Like do you think they would every just straight up up and buy UPS or anything like that?

Chad:   So the reason why Amazon is leasing these aircraft carriers right now – they’re leasing them – is because actually UPS and FedEx couldn’t even handle their order volume that they had.  They were still hitting delays.  They were at capacity.  So Jeff had no choice but to now start up his own delivery system.  And I don’t really see Amazon buy – like I see them just building it natively.  They already have their trucks doing deliveries.  Somebody rented an Enterprise car and delivered me my package from Amazon just recently.  So I already see this happening and I also see FBA shipments being picked up from Amazon at a point soon, right?  Amazon will actually have the ability to pick up your packages right from your destination and bring it to their distribution center.  So I see that as a reality going forward but I don’t see them buying their way into this market; I see them just dominating and organically doing it themselves.

Grant:  Cool.  Well, very neat.  I appreciate your viewpoints.

Mike:   Well, Chad, man, I can’t thank you enough for coming on the show today and I apologize for all the noise that’s been happening on the backend in this one.  It sounds like they’re kind of done back there.  I hear the forklift moving around back there now so I think they’re done.  It was actually pretty funny.  I had the thing on mute.  They were like doing the anchors to the floor and they were like jackhammering back there, so luckily that didn’t end up on the podcast but I appreciate your patience and every out there today.  One quick thing.  Chad had mentioned he’s actually releasing a book, Cheaper, Easier, Direct, which just sounds awesome.  I’m going to definitely get my free copy.  He offered a free copy for everybody that’s listening today.  Chad, do you want to tell people how they can go ahead and get that copy of the book?

Chad:   Yeah.  So hopefully it’ll be in the footnotes of the podcast.  I actually haven’t launched it yet; I just have a paperback copy that I launched at the Internet Retailer Conference, but it’s really the secret sauce of how I built my business from a validation and execution perspective and discovery perspective of building a brand.  And so just you can reach out to me over email, you can look at the footnotes and there should be an Amazon link when we go live, and just contact me for a free copy and I would love to get an honest and awesome review from you in exchange.

Mike:   Cool, definitely.  So we’ll get that link from you in the next few days or couple of weeks, whenever you have it available, and we’ll throw that in the show notes.  And if people do want to get ahold of you, do you want to give an email or do you have a contact form or something?  What’s the best way to get ahold of you to talk about Skubana and the book?

Chad:   Yep, I’m always around.  I answer very promptly.  It’s chad@skubana.com.  S-K-U-B-A-N-A.com

Mike:   Perfect.

Grant:  Okay, and before we go, guys, as always, full disclosure, our guests do not pay us to be on the show; we simply invite people on.  We use Skubana.  We’re not compensated by Chad for any of this.  So yeah, we keep everything in full disclosure.  On our website, we will have a few affiliate links that do go to Skubana, so if you click on those, obviously, we do get compensated but we are not compensated for this podcast.  So I just want to put that out there.

Mike:   Cool.  Now that we’re in full FTC compliance, definitely appreciate your time again today, Chad.  Really appreciate it and have a great rest of the week.

Chad:   My pleasure.  Thanks, guys.

Grant:  Yup.  Thank you, Chad.

Outro:  If you have any questions or comments, we’d love to hear from you.  Head over to EcomCrew.com and sign up for the EcomCrew newsletter to get regular updates on what’s working in ecommerce today, and get the latest from our blog.  If you haven’t already, we’d really appreciate an honest review in iTunes.  These reviews help us make sure we’re delivering exactly the content you need to be successful.  And make sure you subscribe to the show for more tips to move you up in the business ladder and into success.  We’ll see you next week.

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8 years ago

Amazon’s Chinese counterfeit problem is getting worse – short video interesting problem on amazon

Grant Chen
8 years ago
Reply to  Clifford

Thanks Clifford, that’s a very interesting read. I keep thinking that Amazon’s end game strategy is to have direct factory->customer streamline efficiency and this keeps pushing the MO that direction.

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