“I think perpetual unhappiness with everything about an entrepreneur's business is probably the only way they're going to be successful, right? Always be thinking that something needs to be improved.” – Kevin Stecko, 80sTees.com
Our guest for the last episode before we hit the 100 mark is my good friend Kevin Stecko from 80sTees.com. We jokingly call Kevin as one of the “grandfathers of ecommerce”, having started his business way back in 1999. He has seen the good, the bad, and the ugly in the business, and has gone with the wave of changes of what made ecommerce what it is today. In this episode we talk about his entire ecommerce journey–how everything started, where he stands in his ecommerce business now, and the joys and challenges of being in a constantly changing business for 18 years.
This episode is quite longer than usual, and that's because it's fully packed with lessons from Kevin's almost 2 decades of ecommerce experience. Below are the highlights:
- The funny story of how Kevin and I met
- How 80sTees started and how the littlest things can change the course of one's life
- How starkly different ecommerce was back then
- My own start at eBay
- When he decided to quit his job and give ecommerce his full time attention
- The interesting story of his transition to Shopify which included a website hacking and a visit by the Secret Service
- His experience with Shopify Plus and how he got around Shopify's SEO problem
- His inventory and fulfillment struggles
- His big picture outlook on ecommerce
This has been a really fun conversation with Kevin (especially the Secret Service stuff) and it is a good close before we hit the 100th episode. It's always great to hear about a fellow entrepreneur's ecommerce experience, but hearing from someone who's been riding the ecommerce wave for almost 2 decades is nothing short of amazing.
UPDATE: After receiving requests from a few folks about Kevin's Shopify SEO strategies, Kevin put together this post to discuss it in more detail.
Thanks for listening to this episode and feel free to post any comments down below or message us at email@example.com. Stay tuned for our special 100th episode next week!
Full Audio Transcript
Mike: This is Mike, and welcome to the EcomCrew Podcast episode number 99, the last one before the century mark. We have a special episode coming out next Monday, November 27th, episode 100. I'm going to leave the topic to be a surprise. But definitely check that out. We have some things planned out, pretty special for episode 100. But for today I have another special episode. My good friend Kevin Stecko from 80sTees is on the show today, and I'm excited to interview him.
I do apologize, the first few minutes, there was like some wind blowing in his microphone. So we had some interference there, but it does get better towards the end. And you'll definitely want to stick around for about the last ten minutes of the interview. Kevin is one of the most interesting guys I've met in ecommerce. He's one of the grandfathers. He got started back in 1999. He has a similar past to me.
He got started selling on eBay, which is pretty funny, because I did the same thing even before I was in ecommerce when I was in affiliate marketing. I was someone stuff on eBay as a power seller. It's interesting how many people on ecommerce get their start there, or got their start way back, went there back when eBay was more relevant I guess you would say.
But yeah, I mean Kevin again is a good friend of mine. He's a member of the EcommerceFuel community. We've done a few in-person retreats together, and he’s just someone that I really enjoy being around. Great family guy, and has a great story. And the thing that I love about him more than anything is he's been able to continue to reinvent himself year over year as things have changed a lot of ecommerce over the last 18 years and the last ten minutes of this interview really speak to that.
And before that it's basically a journey of his ecommerce life. And I think this stuff is important to listen to. It's fun as an entrepreneur to listen to other people's journeys and kind of how they got there, and this is that. It's kind of us just sitting down, fireside chat style, and talking about his ecommerce life. So I hope you guys enjoy it, and we'll talk to you on the other side.
Kevin: I think perpetual unhappiness with everything about an entrepreneur’s business is probably the only way they're going to be successful, right? Always be thinking that something needs to be improved.
Mike: Hey Kevin, welcome to the show man.
Kevin: Hey Mike, thanks for having me on. I'm glad to be on.
Mike: No doubt. So I was just here thinking like where did we first meet? I think it might have been one of the ECF live events, or was it something else before that?
Kevin: Yeah it was, I think it was a lunch or breakfast at ECF Live. And I remember I didn't really get to know you well. But I think we actually had — you said something to me, and I was like, I don't know if I like this guy.
Mike: Now you tell me.
Kevin: Well, then we met at the other retreat later, and I was like, man I love this guy. At the very least I loved listening to your stories.
Mike: All polarizing really, at least one way or the other right? I actually — one of my biggest takeaways from — it wasn’t the first time that it was maybe like the fifth time I met you or something. But it was after I spoke at ECF Live last year, you really put me in my place.
I don’t know if you remember this conversation or not. But I had just got done speaking about email marketing, and like how good we’re doing there, and I was kind of pounding my chest and feeling all good because I was almost like saying good job. And you walked up to me and said, man you've got a 30% open rate, but what about the 70%, the people that don't open up your emails?
Kevin: Oh I don't think I meant it that way, but yeah I get it why that would make you feel that way. The conversation was more about having a hard time reaching all those other people.
Mike: No, no exactly. I didn't take it in a bad way at all. It was exactly that, and that's actually what got me into a lot of Facebook marketing that I do, a lot of Facebook retargeting. And just Klaviyo has that syncing feature where you can — people that you email or that are on your list, you can also sync it up to Facebook. And that definitely got me doing that stuff. So yeah, it was definitely well received, and definitely well thought out, because like sometimes you don't think of the other side of the coin, right?
Kevin: Yeah for sure.
Mike: Cool, so let's tell people little bit about what you do, and why we got you in the podcast. I mean obviously I have known you now for a while. I've become really good friends with you, we've been able to hang out at retreats, and talk on the phone quite a bit, and then part of a mastermind together. And I just love getting interesting people on the podcast. I think this is going to be one of our best episodes.
I think you have a really interesting story. You've been in ecommerce for forever; you're one of the grandfathers. But kind of tell us a little bit of the background of who you are, and what you're selling, and how you came to do all that and when you got started?
Kevin: Sure yeah. So the genesis of my business was in 1999, and this is one of those things where it's, you can like trace back a series of events that got you where you are. And it's like the littlest thing that changed your direction. And so for me I think the crazy thing is I went to Penn State, and they gave questions that they gave. I should say Microsoft wanted to get everyone into their office suite. So they gave all the Penn State students Microsoft Office.
So in my back pocket I've got Word and Excel and Access and all that, but there was also FrontPage. So yeah literally if this had not happened, I doubt that I would have gone this route. So when I graduated, it was actually a winter semester, so I went an extra semester. So it was December of ‘99 when I graduated. And I already had a full time job lined up and that was in the engineering–well it was called Geo Environmental Engineering. It’s like part geology part engineering major.
And my job didn't start until like January 5th, but graduation – I shouldn’t say graduation, ended the finals, it was like December 8th or 10th. So I had three weeks to kill, and I had this copy of FrontPage. In the summer before that last semester, I'd worn a He-Man t-shirt to an amusement park, and all these people were asking me where I got it.
So having the FrontPage in my pocket, and knowing that I've got a product that a lot of people are interested in and don't know where to get, I made a deal right before I left for the pretty much forever, right before I left college, the college town as a permanent resident. And I bought a few t-shirts off the guy that I bought it from for a little bit of a discount. I might have bought like ten shirts I think. And three of them were He-Man; three of them were like ThunderCats.
I just bought stuff that I liked and I thought would be hard to find. So I threw them up on eBay with the idea that I'm going to use eBay to drive traffic to a website, so then I threw up a very, very rudimentary FrontPage website without e-commerce capability in terms of no transactions. People had to send me checks. And that was actually — it wasn't pre PayPal, it was at the very least pre me knowing about PayPal.
So that was the genesis of the start and I used eBay to drive traffic to the site. At first it was a trickle of orders, and I would — actually my girlfriend at the time was still in college. So when she would come back, she would bring me my orders to restock my inventory. And it was all based on my mother and father's dining room table. I had a box of t-shirts on the dining table, and eventually I bought a laptop. Originally I was on an old Compaq desktop that I was borrowing from them, and using Net Zero internet to get on the Internet. It was truly good stuff.
Mike: That’s awesome. And so I mean at what point did — you obviously run 80sTees now, so what point was that born? Was that back in 99, or did it take you a year or two selling on eBay before you started doing the actual ecommerce site?
Kevin: So there was a — I was too cheap to buy a domain. But there was an 80stees.hypermart.net, pretty much at the very beginning. And then I think it was March where I had made enough money that I decided to invest the $70 to get the domain, because I remember it so well. I mean $70 at that time I was like, oh I guess this is worthwhile. So I had the eBay name 80sTees, and then I had like the subdomain of a free internet hosting provider. But yeah I officially used the URL in March.
Mike: It's so funny because we’re talking about like so many things that bring back memories. Like FrontPage obviously I think all of us designed our first websites, if you're of our age or in fact that age as a blank space, but if you're of our age I mean I think FrontPage was like the first tool that all of us used to develop a website. And it's also funny just to hear paying $70 for a domain name, because it's become so commoditized now. I mean 9.99 or 12.99 now to register a domain name versus back then. It was quite expensive.
Kevin: Yeah it's crazy. I actually wish it was that expensive now also, maybe squatting wouldn't be quite as lucrative an effort.
Mike: Yeah, no doubt. I mean even in all these other domain extensions now like .infos and — I mean there's just so many of them, it's like crazy. I can’t even name them all. But yeah I mean people just go nab up domains they’re so darn cheap. So the other interesting thing is that it sounds like you got your start on eBay, which it seems like there's a lot of parallels to a lot of people in ecommerce. I was a eBay power seller at one time selling out of print DVDs.
I would go buy like every last copy I could find of a DVD once I found it was going to go out of print, and sit on it for six months and then sell it. That was kind of my business. But it's interesting, there's so many people that I run into in ecommerce that have been around for a long time that got their start in eBay.
Kevin: Yeah, eBay was great, especially whenever you could link to a website from it. That was amazing. I would list a size small which I knew was the least popular size, and send traffic to the other sizes.
Mike: The thing that's funny is eBay still looks the same. It hasn’t changed, it's like it looks like they're still back in 1999, the website versus I'm sure your original FrontPage website, your site looks better now than it did back then.
Kevin: Yeah and I can't say I'm super proud of it right now, but we are in the midst of a redesign. But yeah, we're better than we were back then at the very least.
Mike: I think all of us ecommerce owners are constantly in between a redesign. It’s like you launch a site and you're happy with it for about three days, and then like, man I could change this and that or the other, and you’re already thinking about the next thing you could do.
Kevin: Yeah, I think perpetual unhappiness with everything about an entrepreneur’s business is probably the only way they're going to be successful, right? Always be thinking that something needs to be improved.
Mike: Yeah, so now it's like I guess the year 2000ish, I’m not sure whatever and you've got 80stees.com up. I mean you've been running now for what, 17 years since then, and we've talked a lot about your journey. I think that's interesting to me is just how you’ve constantly reinvented yourself. I mean and we’ll kind of get into some of that later, but let's talk about some of the early years. I mean was this like an instant success? Did you immediately quit your job, and you've or did you never really have a job? It sounds like you started out of college. I mean how quickly were you able to make this a full time business?
Kevin: So I didn't trust it as a full time business until like September of 2002 was when I actually quit. Earlier in 2002 was whenever I realized that I could do this. And I think what it really was, was I was at the point where during the slowest part of the year, I was making as much like net profit as I was getting paid for my full time job. And then obviously we are a seasonal business, so you're going to do a lot better in December than you do in January.
So in January I was like, okay I can actually replace my income. And then in December, it would obviously be multiple times than what I was able to make it a full time job. Well back then — it maybe this way now too, I don't know, but a lot of people kind of didn't really understand that this thing called the internet could be a source of full time income, and you have a legitimate business and stuff like that. I mean I know that my dad was very nervous I think whenever I started talking about quitting the job.
And I think it made a lot of sense to be nervous, because once you leave engineering, it's probably not going to be something that you come back to if you're away from it. I know for sure right now there's no way I could go back to it. So I mean it was somewhat of a risk. But just the line that was growing in terms of revenue and everything was just like this is crazy for me to do anything less than 100% of my hours towards this.
Mike: So December or September 2002 is kind of roll along [ph]. You quit your job. How many SKUs were you kind of selling at that point, and what was your business model at that time?
Kevin: Yeah in terms of number of SKUs at that point, boy I don't really recall. I mean it would have been hundreds of t-shirts, so average t-shirt for me back then probably went five SKUs. So at least 500, maybe 1,000 SKUs. It maybe more than that actually, maybe even like 1,500 SKUs. So yeah and at that point in time like the way — my calculation that I did to figure out that my net was bigger was that I was $700, $800 a day. I figured $400 in cost of goods, and then another 200 in various other expenses.
Luckily, back then advertising was not as expensive for me because Google sent us lots of free traffic, and remember goto.com. I don't know if you’re familiar with that one or not, but that was…
Mike: I don’t, no.
Kevin: Well goto.com was the pay per click search engine, which ended up being bought by Yahoo. But prior to Google having a pay per click, that was the only pay per click search engine.
Mike: Interesting, well and I don't remember that one. I remember Yahoo obviously and Google, but like I kind of lost in that shuffle somehow.
Kevin: Yeah, it got acquired and basically Yahoo absorbed their technology. And I don't remember, I guess it was on Goto.com is the search, I can barely remember that. But I do remember it being a good place to advertise, like we would make money on.
Mike: So a lot of your early traffic and sales are based off of that, or were you getting kind of a bunch of organic traffic as well.
Kevin: Yeah, organic was a big thing. And it all kind of started through the fact that I was using FrontPage and hand-building the navigation. So instead of having like a database driven site like Yahoo stores at the time was probably the only other alternative. But those sites were not at all SEO friendly, because it was – it would be like the store name dot com slash maybe have a products folder, and then it would be some sort of mumbo jumbo database, letters and numbers in the URL. Whereas my URLs were organized so that I could find the products when I needed to myself.
So it was like I had like 80stees.com/t-shirt/80smoviet-shirt/rockyt-shirts. Because of that, I think a lot of it was, I just had this great human readable and machine readable categorization. And so we really did well with organic.
Mike: Was that one of those things that was completely by accident, or do you know what you were doing?
Kevin: No, no, no it was absolutely by accident.
Mike: That's how the best businesses, right?
Kevin: Oh yeah for sure, and the thing was is once I realized what had happened, then it became like protect that at all costs. So any decision I made, SEO was the first and foremost before literally any other consideration.
Mike: So we're going to talk about how you ended up on Shopify then.
Kevin: Oh yeah.
Mike: because Shopify is like an anti-SEO. I mean it's the best platform out there by far, but SEO is definitely the one thing it's not strong at.
Kevin: Well I have some thoughts on that, but yeah we can talk about that whenever you want.
Mike: Awesome, so we’ll talk about that when we get to how you got on Shopify, because I mean obviously in 2002, we were kind of at that point, Shopify didn't exist at that point. So I mean when did you transition from FrontPage to being able to actually take transactions on your own website?
Kevin: Okay, well I found a plug-in for FrontPage called Storefront.
Mike: You don't want to disrupt page, you are going to hold on to that at all costs?
Kevin: Yeah, I didn't know anyway — when you have a hammer, everything is a nail, right? So I was just looking for more nails to put in my toolbox.
Kevin: So this add on, much the way like a Google browser add on work it, just kind of like sat there in the top of the navigation of FrontPage. And it was essentially database management with a shopping cart built in. And yeah so that actually was — it's paid but open source in terms of you could edit the code. And it was kind of like the original developer ecosystem around ecommerce was around that plug-in as far as I know.
Now you have a million apps or whatever that you can subscribe to on Shopify, but back then what it was is there was like ten developers around this platform. And they all knew each other, and they all kind of like stayed away from each other's expertise areas. So I ended up with like five or six different plug-ins that I bought from these guys that then just get integrated in your system. So you buy them once and you own it. And I actually used — now we kind of like sculpted FrontPage out of it eventually, but I actually used that database structure all the way up to 2013.
Mike: Wow crazy.
Kevin: It was heavily modified.
Mike: You’ve been using it for a long time.
Kevin: And it ended with disastrous results, which we can talk about too, but yeah.
Mike: Yeah, that's probably a good time to chat about because I never realized you were doing it for that long as that. What kind of precipitated the move to Shopify? You just kind of–finally everything kind of came to a head, and you made that move, or was there something else in between that was well?
Kevin: Well, so what precipitated the move was we got hacked. We were on that old platform with dot ASP technology, and I had been in the pretty heavy planning stages to make a transition to new technology whenever. We were actually in a company meeting about like evaluating these potential options which way we're going to go. And this was — in 2013 even Shopify wasn't really what I would consider a prime time, slam dunk ecommerce platform the way it is now.
I believe it was very good then, but especially if you're like a legitimate business doing millions of dollars a year, I think their highest plan was like a 100 bucks or something like that, and it just doesn't seem right that the most important part of your business for that large of a business cost $100. So I kind of like didn't really even consider it — considered that much. But anyway we were looking at everyone, but Shopify.
We were in a meeting where we were evaluating some different partners. And these two guys pull up to the front of the building. And so this is how I found out that we got hacked is that the Secret Service, because they're involved with like counterfeiting and some financial transaction stuff, it's not just like protect the president. But they came to the door, like so literally like the men in black came to the door, and informed us that we got issues.
Mike: My God! You never told me this. This is absolutely crazy.
Kevin: Yeah, and the funny thing was, is that when they came to the door, I was in a meeting and I was the one doing most of the talking in the meeting. So, one of my employees went out there. And he came and he kind of whispered what goes on, but he had sent them away. I’m like yeah I probably would have been the one to talk to them. But they gave a card, and I ended up talking to them.
And believe it or not, like through the whole journey, and it was super stressful and super expensive, through the whole journey this — having the Secret Service was probably like one of the most comforting things actually, because I had a person I could talk to that had kind of been there and done that. And they were not at all like the boogey man type scary guy that you know the men in black type of thing that you — they were pretty cool about the whole thing and it helped tremendously.
Mike: So I guess the thing that's crazy to me just real quick is that like you had been hacked, but you didn't realize it I guess. I mean so this was like a virus was kind of running in the background or something that was scrubping data or something, and you had no idea it was there kind of thing?
Kevin: Well, so what happened was — and to this day I don't exactly know how they gained access. But the hackers had gained access to our checkout, and literally at that stage where the site submits the form through HTTPs and everything. I mean we had the security stuff going on, but they just made it so it also sends an email to random Gmail accounts. And they buried the code, and I don't know if you've ever seen a .ASP code.
Mike: I have, we used to be on ASP as well for all of our stuff back in the day.
Kevin: Yeah, it's called spaghetti code for a reason, because if you like literally try to draw a flow chart of this stuff, you couldn't. It was just file upon file references another file, and to follow logic is just really difficult. So it took us forever to find it, and we had to just be on — just accepting PayPal there for a while. Yeah it was an absolute nightmare. And then with that, it was then obviously put my plans to change platforms on overdrive. Instead of a nice smooth transition, we were going to have a very rocky landing one way or the other.
So I did not choose Shopify. I chose a fully serviced and fully managed ecommerce service that has their own proprietary cart. I can't even tell you the name of them, because there's literally like a court order/agreement, like I'm not allowed to mention them because that's how badly that ended.
Mike: That's never a good sign, that's obviously your bread and your way of conducting business.
Kevin: I will say they got us active in taking transactions, but like so many broken promises, and oversell, underdeliver, so we were just like panicking. We were like, okay we've tied ourselves to this company, and it's like a disaster in terms of what we can get done towards growing the company, so what can we do here? And that's whenever I had an employee that used to work on the .ASP site that could do a little bit of front end. I just said, hey, see if you can build our product page on Shopify, like we'll sign up for a trial account.
And if you can do that, I figured that was our most complex page. So I was like if you can mimic all the functionality we want, then we're going to — we're making a switch to Shopify. So we did that, and when we first launched on Shopify, we weren't even on Plus. So I love the platform, it's really strong. And if you want I can talk about the SEO part.
Mike: Yeah that's probably a good time to do it. I mean and also Plus as we've talked — you and I have talked about this at length. We're not on Plus yet, and you are and you seem to really like it. And I feel like the value is there, a couple of thousand dollars a month. But yeah, the SEO stuff and Plus, I definitely want to chat about that. So yeah, take it away.
Kevin: Yeah, so and just to give you a preview of the Plus conversation. The math has changed a lot since they've raised the price. But anyway so with a lot of the out of the box themes that you're going to get from Shopify, they are kind of disastrous for SEO because — and this is a platform feature maybe. I don't know if you want to call it feature. I would call it like bug, but it's designed to do this, where if you were to search — I shouldn’t say search. If you were to navigate to a page via a collection page, so you get to a product page via a collection page. Then your URL reflects the collection within the product URL. Is that making sense?
Mike: Yeah, you end up with like 80stees.com/collections/products/ABCproduct.
Kevin: Yes exactly. And if that product resides in more than one collection, you can end up with more than one URL representing the same product, which under no circumstance should any SEO concerned website owner allow that to happen. And that is baked right into the Shopify platform. But if you take your theme, and you disallow that feature, which is something that anyone can do, then you can basically, you can always have your — if you land on a product page, it's just simply URL/products/handle.
Mike: Interesting, is that like a setting in everybody’s Shopify store, or is that a plus thing?
Kevin: No, no, anyone can do that. We had that from the beginning. So yeah you can definitely make it. Now, if you were to go to my site and take a collection and add it to the URL manually, and then put the product URL — I'm sorry the product handle in there, you could make one of those bad URLs and it would work. But because my site's not making them, there's nothing for Google to spider.
Mike: Alright, it’s not crawlable.
Kevin: Right so yeah, like I guess if someone really wanted to try and give me duplicate content, they could link to some weird URL that they created on their own. But even in that case, you have the canonical tags. That hopefully would be such unlikely thing to happen as well as rare thing to happen. It's not really an issue.
So yes. The other thing that we did is bread crumbs. So the bread crumb also follows that same sort of whack structure of like literally in Shopify the bread crumb is the Hansel and Gretel. Here's how we get back to where we came from type of bread crumb, which in my mind has little value because if you want to go back, that’s what they invented the back button for on the browser. So what we always did was we use the bread crumb as the hierarchy of where we want them to see that they are.
So like in our case, we organize t-shirts by like movies, and then within the movies like each collection would be like Rocky or Bloodsport or whatever you have. And so whenever someone's on a Bloodsport shirt, we want the bread crumb to say 80smovie/Bloodsport, like pretty simple, right? So that's what we do. We actually define for every product; we define our own bread crumb. So we don't let the platform do that. And I think those are the two big things that if you do both of those, Shopify is fine for SEO.
If I could have best SEO practice, I would ask for like more control over inside the same products, something that has like a keyword that I like.
Mike: Exactly yeah.
Kevin: But I don't think that's the end of the world either though.
Mike: I mean like the one downside, because we switched from Big Commerce to Shopify for one of our stores. And our SEO traffic has been cut almost in half just — I think it's almost all because of the URL structure. I mean I don't really know any other reason why it would've brought any problems. So yeah it's definitely frustrating.
I mean they have a couple of other things that drive me crazy. Like you can't turn off e-mails, like for instance like when you have a sale, you can't turn off the order confirmation, or shipped emails. They just don't want you turn this off or any other platform does. I don’t know if in plus it's available or not, but in the standard version of Shopify it's not.
Kevin: Yeah, I don't know if it is. I think it might be available for at least back in the day Plus had some. If you were on plus, you could kind of get someone to go into the guts of Shopify and make a change for you even if they didn't have like a true like configuration option. And I know why you would want to change the service provider, maybe use Klaviyo or some other service.
Mike: Yeah exactly.
Kevin: You can get pretty complex with your liquid logic in the Shopify order confirmation though. But obviously it doesn't — it's not part of your flow within Klaviyo. So I’m not saying that answers anything, but I do think that you can get pretty — you can do some pretty cool stuff to the point where if it's someone's third order, you can even reference that inside of your order confirmation e-mails that you send out via Shopify.
Mike: Got you. Cool, we can talk about that offline; you can nerd out about that.
Kevin: No doubt. So yeah, what was the other thing, oh the Plus. We want to talk about Plus. Yeah Plus was amazing whenever I first went on because it was half the price that I'm paying now. So I can't say I'm as in love with Plus as I had been, and I think that for a lot of companies, it's a real decision to make, because at its core, Plus is the same with the exception of you get the launch pad app, and you get the flows. I think it's flow, yeah Shopify flows app.
Mike: Shopify flow, yeah.
Kevin: And scripts. So I use all three of those. Launch pad is — it's okay for us. We're not doing like a lot of like timed sales, like a lot of stores might use it to – what do they call it? Like a flash sale or whatever. We don't do all flash sales. So it's not as valuable. The scripts we use heavily though. And with a script you can do complex stuff, like if someone buys three items in the collection, then the least expensive one is free. You can do — we've done crazy stuff like we had some clearance stuff we just want to get rid of. It’s like buy three, you get seven free or something like that.
Mike: Right. That stuff is pretty cool.
Kevin: Yeah, and so that I think the scripts are nice. And we actually use the shipping scripts as well to set pricing on, or to basically display a free option. And just by not having to do it within the actual – the shipping modules, it just makes it a little easier for us. But yeah, I mean unless you're going to be doing that kind of discounting, scripts are really maybe even not that — maybe not valuable enough.
So it's a real question. I think if you're a certain size company, then it's a no brainer to be on Plus. But if you're even two to three million in revenue, I don't think it’s as big a slam dunk as it used to be, especially since the reps. And I've had a number of different reps, but they're brand new. They aren't ecommerce experts. And Shopify likes to make that a selling point, and I know anecdotally I've heard from some more people the same way. The same way I feel is how they feel, which is not — you're not really getting that much value there.
Mike: Yeah. I mean just the price differential is just crazy. If it's something like $100 let's say a month, I think it's actually $80 a month for the standard version that we're on. And we prepaid for three years now. So we got like a massive discount. So let’s just say it's like 1900 bucks a month more for Shopify Plus. You multiply that by twelve months, it’s $22,800 a year or more that you're paying in software. And I mean just to cover the cost of that, I got to sell basically a quarter million dollars more stuff per year, increase my sales by a quarter million dollars, which is not a small number.
Now that's just to break even on the justification of going Plus. I mean everything else you should be getting 3X ROI on your money. So really I got to sell 600, 700, 800,000 dollars a year more, basically double my revenue on my Shopify store to make it worthwhile to go to Plus. That’s just probably not going to happen.
Kevin: Yeah and I'm glad that you used math that makes sense, because a lot of people don't do the calculation properly, which is what you need to do is let's assume you have like a net profit of 10%. That means that every dollar in expenses, you need to have ten dollars in sales to justify it. So people need to know their net profits to really see how even though — and you have you have a legitimately large business. But $1900 is a huge thing to overcome when you have to multiply it by ten.
Mike: Yeah, that's basically our rent. We don't have a warehouse in the middle of a small town in Pennsylvania. So it's expensive here.
Kevin: Yeah. Well mine is expensive too only because I have a gigantic warehouse at this point now bigger than it needs to be.
Mike: Right, well it's actually like a great segue. It's the thing I want to kind of end the episode on, because I think one the most fascinating things about you, it's just again how you've kind of reinvented yourself. At one point you bought this gigantic — how big is your warehouse again? I forgot the exact footprint of it. It's tens of…
Kevin: It’s 45,000 square feet.
Mike: 45,000 square feet, and it's a building that you purchased, right? So you own the warehouse. So just – I mean so maybe even I have to come and see this thing, because it’s hard to even get my head around a 45,000 square foot warehouse somewhere, and 3,000 square feet here. But I mean obviously you did that, you had a justification for doing it because you were — your revenue justified it. The number of SKUs you had, you were packing and shipping basically all of your own stuff. But I mean you've completely changed your business model now to not doing that.
And I'd love to just talk about that a little bit, because I think what ends up happening, and like every entrepreneur’s journey is the grass is always greener on the other side like no matter where you're at. When I was doing drop shipping only, I was like man, like this drop shipping stuff sucks, I got to — and when I was doing treadmill, like I got to be selling my own products. And I was like when I'm selling other people's products, I got to be selling my own products.
And then at some point I was like, what the hell am I doing? Like I have all this inventory. I should be drop shipping, it's like so much better. So I mean you’ve kind of gone through that life cycle. And I'd love to just chat about that for a few minutes, and talk about what precipitated the change and how you got to that point and all that, because it's fascinating to me.
Kevin: Yeah sure, so part of all this is we got to kind of set the environment. And the environment is a changing world for me, where everyone used to go to Google to shop for a product, to where now 55% of people don't even start at Google, they start on Amazon. So even though we still are doing well in SEO terms, that's actually a shrinking market. And kind of like an aside, we've had some conversations in the forum, the Ecommerce Fuel forum where people are like – some people, the old timers say SEO is dead, and the new people are like, oh no, SEO is super important.
It's just funny because if you've been around long enough, then you know that SEO is not what it used to be, and most likely never will be. So that's the environment I'm in, where I used to get free cash from Google. You see like Google used to be Oprah, you’ll get a sale, and you’ll get a sale. And even to the point where their shopping thing when they launched it was called Froogle, but it was also free.
Mike: And it was free for a long time.
Kevin: Yeah and it was great. So it was like, okay, well they've changed the game a little bit, but it's still free, so who cares. To the point now where if you're doing a shopping search on Google, chances are you're going to look at those pictures, and you're going to compare like a million things. So even if you rank well on organic, you've got this like visual competition that is using pictures. And Google is not dumb either; they don't make money when people click on those organic links. So they don't want anyone to click on the organic links.
And they've made it really, really hard I think to build a business around free traffic from the search engine, which makes sense for their business. And they're trying to build a ladder to the moon or something like that. You can't do that if you’ve given away the traffic. So that's the environment that we're in. And on top of that, we did have some success with Amazon. But then all of a sudden, Amazon allowed Chinese counterfeiters to flood the market. So that even like come on our listings, because we weren't brand gated. So basically our Amazon sales just went off a cliff.
And I'm like, oh boy, what can I do here? So I knew I needed to cut expenses. And we were pretty efficient to pick, pack, and ship operation, and I would even say pretty efficient to receive, pick, pack, and ship operation. But I was doing the math, and a lot of my suppliers were offering drop ship where it was print on demand. So they didn't have any upfront inventory costs other than storing blanks, and then they were printing them after they got the order.
And it was like a dollar, they would charge a dollar per item to do this for us, and then a dollar per order. So essentially if you have one piece order, your fulfillment costs were two dollars. And I'm thinking, when I bring in products, usually it's not like truckload or anything. I bring in parcels on UPS typically, and the average depending on how many I bought was anywhere between a quarter and fifty cents in inbound shipping. So if we look at that two dollars I'm paying right there…
Mike: That’s just the freight charges at this point.
Kevin: Just to bring it to my building.
Kevin: So let's say it's fifty cents to get it to my building for the high end of my expenses there. Well the two dollars to pay someone to pick and pack at some third party I should say. Now I'm down to well only a dollar fifty difference, because fifty cents I don't have to pay to bring into my business. And then to put it on our shelves, we have to count it. We basically have to take them and carry them to the spot in the warehouse, and all the while you're recording what's going on, how many.
You're also dealing with the fact that some of them are going to be defective, and now we've got to reconcile an invoice to make sure that we got a credit for the defective ones, and what if they shorted us. So I've got an employee that has to handle that reconciliation process. I've got warehouse employees touching them, and then when we pick and package, we still have to touch them again. So comparing how efficient could I get moving this product from my supplier’s warehouse to my customer, I couldn't beat two dollars, like I just absolutely couldn’t beat it.
And that's not even factoring in my warehousing costs. Like if I just count labor and inbound freight, I'm at two dollars easy, and then if I allocate whatever my rent and electricity and utilities are, and when I say rent I just mean like the cost of the building. I do have a mortgage on it, so it's not like I…
Kevin: There was no way I could beat that. And so I was just like, man this is craziness. And I'm also even factoring in the fact that like since I wasn't buying in bulk to bring into my warehouse, I'm paying a little bit more when I drop ship a product, because I'm buying one at a time as opposed to maybe buying 300. But again what's better, is it better to spend — and these are probably real numbers here within the few pennies. Is it better to spend $9 to buy one at a time, or say like 7.50 to get 300 at a time? Well when you only sell one, I'd rather have all my money than 299 t-shirts.
Mike: I always say you can't pay your taxes with gel pens, or your mortgage with gel pens, it’s the same thing. In fact we’ve got those items now in the office, or in the warehouse. It doesn't — it's tied, it's kept all tied up, but you can't do anything with it.
Kevin: Yeah exactly. And then obviously, once you get in at least — and this might be a grass is greener thing, so I apologize if I'm like totally off base here. But at least on the gel pens, you're not getting like the three inch version and the five inch version and the seven inch.
Mike: Right yeah. I mean variations are definitely a killer. We’ve learned that the hard way ourselves on baby clothing now that we've been selling baby clothing. And I've kind of made a directive here that we're not going to do anything with sizes. So we are going to continue with the SKUs we've developed because they're doing okay, but I’d much rather do something like a diaper bag, or a bib or a blanket where it's one size. So like you're saying, it just adds an exponential level of cost and headaches by having all those different variations.
Kevin: Absolutely yeah. And yet I haven't even mentioned whatever I was talking about the drop shipping disadvantage or advantages of drop shipping. When I order 300, I have to try and guess the size ratio that I'm going to sell over the next period of time, which we've tried to do, look at the past and use the same ratios. But I mean it's all pretty random. So I mean you can tell that the size large is probably going to be the most popular. But that doesn't mean that — put it this way, I never achieved where size small, large, and three XL all sold out within a couple weeks of each other.
Mike: Now it's frustrating, it's such a mind f*cker. We try not to use the curse words here, but yeah I mean there's a lot things in this business to end up in that. And that's definitely one of them, ordering inventory because you just you — you want to get a perfect, right? That's like kind of the entrepreneur dilemma. You don't have any extras laying around, you basically don't have like one exactly left when the next order shows up. And it's hard to get that perfect.
Kevin: Yeah and then you end up with the subpar experience on your website too if you end up with — like let's say we don't want to restock it, but we have small and three XL up on the site still, because those are the two slower selling sizes maybe. And unless you're communicating that to people, or unless you're like only showing people the size that they specifically told you they want to see, you end up with a lot of like wasted effort and upset customers. And just there are so many advantages to drop shipping.
And just in general I think that looking at the big picture for e-commerce, I think there's going to be two types of companies. There's going to be those that thrive on Amazon, and the other version is those that are just like really good marketers with low, low overhead. So that's where I see myself trying to fit in is in the other version.
We've never really had a whole lot of success with Amazon, and unless they figure out the – let’s say we were to get brand gating. I don't think I'd have much of a chance to do it there either. So I'm just concentrating on becoming a very lean company with where we can concentrate on marketing.
Mike: So what are you going to do with the other 43,000 square feet of your warehouse now?
Kevin: Oh I'm trying to sell it or lease it. I've talked to real estate brokers. And don't get me started on trying to select a real estate broker, because it's not been an easy chore at all. And I think they're pretty terrible marketers. I think that that's one area that's pretty ripe for a huge disruption.
Mike: I'm going to – I have to get out there and go bowling in your warehouse or something, or ride go carts in there or whatever that you can do with all that space before you sell it. It would be fun to do.
Kevin: My son rides his bike in there, it's pretty fun.
Mike: Cool. Well we have gone way over, but it's because you've been such an awesome and interesting guest. I think we could keep talking for hours. I know we’ve done over beers or whiskeys or whatever in the past, and had some great conversations. At least this was a lucid, thoughtful conversation compared to some of the other ones that we've had. But definitely really appreciate you coming on the show man.
Kevin: I was glad to do it. Thanks for having me.
Mike: And we'll see you in January.
Mike: And that's a wrap. I hope you guys enjoyed that interview with Kevin, again just a great friend of mine. I really appreciate him taking the time to come on the show, and do it today. If you have any questions, you can go to EcomCrew.com/99 for the show notes, to leave a comment, and Kevin will be watching as well. So if there's anything there, he'll respond as well.
And again I hope you guys really enjoy this episode. Next week Monday, Nov 27th, episode 100. We've come a long way folks. It's been a heck of a ride. I appreciate all the comments and stuff that we've gotten to this point. It'll be fun having a triple digit episode number starting next week, and I definitely appreciate everybody supporting the EcomCrew podcast. So again EcomCrew.com/99, and until next week everyone, happy selling.