171 – Ezra Firestone Discusses The Growing Ecommerce Industry With James Schramko

Podcast: Download (Duration: 29:34 — 27.2MB)

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Highlights in this podcast:

02:59 – What is Ecommerce is?
03:26 – Why should you be interested in it?
05:06 – How do you start doing ecommerce?
07:32 – Minimum and maximum ticket price and the safe margin
09:39 – How Drop Shipping works
10:54 – Importance of modifying product descriptions
12:32 – Owning the Racecourse
14:10 – The Fragmented Market Test
15:44 – Applying the “Buy Local Rule” in ecommerce
16:30 – The seasonal aspect of a business and Ezra’s fave tool
18:11 – What is an SKU and how many should you have?
19:35 – Onsite conversion tips
23:51 – You absolutely need to “Chunk!”
24:57 – Where can we find out more about Ezra and ecommerce?
25:31 – He’s coming to FastWebFormula 4!
26:15 – Questions that people should have asked
28:34 – Ezra’s new ecommerce course is coming out soon

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Trancription:

James:         James Schramko here. This podcast episode is all about ecommerce, and the reason I wanted to cover this topic is because I think that it is a hot topic. The big retailers are struggling. A lot of them are going broke in real, actual stores, which opens up the question: why are they going broke? It’s because people are buying online.

Let’s face it, the Internet is here to stay, it’s not just a fad, and who’s making the money? It’s people who set up online stores and sell things online. And so what I thought would be good is go and talk to someone who actually does this for a living and does it pretty well, and it just so happens that one of my very best friends and co-host on our other podcast, ThinkActGet.com, Ezra Firestone, is an ecommerce specialist. Good day, mate, how are you?

Ezra:          I’m so good, thanks for having me. And it’s so true, you know, 10 percent of retail sales are done online. Total retails sales. 10 percent. And that’s growing each year. 15 percent, year over year, in US and Canada, as we are crossing the chasm and as the technology adaption curve is becoming lower. They say the Internet is in its infancy. Well I like to say, and I actually heard this on Terry Lynn’s podcast, ecommerce is a baby. Like we’re so young in ecommerce, and now really is the time to be getting into ecommerce. It’s not a played-out market at all. It’s actually a really, really good time to be thinking about retailing physical products online.

James:       Right. So, just to give us some context, tell us just a bit about the Ezra Firestone ecommerce empire. What makes you qualified to even talk about this on a show like SuperFastBusiness.com?

The Ezra Firestone ecommerce empire
Ezra:            Well, I’ve been very successful with it, and I’ve had my attention on it for a very long time. And there’s different business models, with ecommerce. There’s drop shipping, there’s wholesaling, there’s manufacturing, and my preferred business model is the drop ship business model, and I had a store that I just sold, that was the number one retailer of a specific line of Halloween products in America, and we’ve done really well, and I’ve done a lot, a lot, a lot of testing to platform testing.

I’ve had stores on ShopSite, on X-Cart, on Yahoo, and Magento, and BigCommerce – I’m actually just building on BigCommerce now – but I’ve tested platforms, I’ve tested different traffic sources, I’ve tested layouts, I’ve just really had a lot of attention on this for the past couple of years, and I’ve done really, really well. And I’m happy to share what’s worked for me with your group of people.

James:         Alright, well we are going to ask you what’s worked. I think that’s the whole point. We’re going to get to the good bits. I’m going to say, listen, Ezra, if you only had twenty minutes or so to quickly educate someone about ecommerce, let’s just make sure we’ve covered the “What is ecommerce?” That is a store that is online. Is that how you would describe it?

What is ecommerce?
Ezra:        Yeah. I’d describe it as the – you know, everything is ecommerce, right? Electronic commerce. But the way the nomenclature, the parlance of our time, to use a quote from The Big Lebowski, ecommerce is commonly referred to as the retailing of physical products online. So a store that actually sells something that when someone buys it it’s shipped to them in a box.

James:         Okay. Now, why should we be interested in ecommerce? Well, it’s got a high barrier to entry, so smart guys like you and all the smart traffic conversions specialists look at an ecommerce store and they think, “Oh, you know, I have to set up a relationship with the supplier. And I have to…” you know, people perceive it as having a high barrier to entry, so not a lot of people get into it, which makes it a lot better for the folks of us who are doing it. Most of the work is done upfront.

You pick your market, you build up your platform, you get everything set, and all that stuff happens upfront and after that, all you have to worry about is generating traffic and doing conversion testing. So all your work’s upfront.

And the other cool thing about ecommerce is you get first visit transactions. Between 80 and 95 percent of the transactions that happen across my ecommerce stores and my clients’ ecommerce stores happen on the first day. And the other thing is, you have a really high value per visit in an ecommerce store. It’s not uncommon to see one dollar, two dollar, and three dollar values per visit. That means every visitor that comes to your site is worth a dollar.

And the other beautiful thing about ecommerce – and you know, just to give you some context, an average blog might have a value per visit of five cents, whose doing advertising as a revenue model. The other thing is, and this requires testing, I knew we’d talk about this, so I got some conversion best practices here, is conversion rates.

I’ve got one of my stores right now that’s converting at five and a half percent, that means that five and a half out of every hundred people who visit the site buy something. People are coming, looking for whatever it is you have to offer already. You don’t need to persuade them, you don’t need to convince them. You just need a good picture and an Add to Cart button. So it’s a lot easier to make sales on an ecommerce store.

James:          And that’s first time transactions?

Ezra:              Well, 5 percent conversion rate across the store, 80 to 90 percent of the people who visit buy on the first day.

James:          Nice. Okay, so how do we actually do it?

How to do it
Ezra:            Well, the first thing that you need to do is pick a market, and you know a lot of people really, really struggle with this, but it’s not very hard to pick a market. The best markets out there, in my opinion, are the niches of other niches. And what that means is like you have dog supplies, and you have dog beds. Well, dog beds would be a subcategory of the greater dog supplying niche, and if you look on Amazon and eBay, you can see they have all the big categories listed and you can go in there and you can look for the smaller categories within those categories.

Another pretty sneaky way to find really good markets is to have a look at the different shopping cart platforms. We’ve got about 30 shopping cart platforms out there right now that are usable you know – Shopsite, Magento, Yahoo, Volusion, X-cart. All these different platforms whatever they are – 3dcart, Zen-cart – they all have designers and developers and these designers and developers like to feature their case studies on their websites.

So if you go and you look at the top designers for each platform and all you have to do is Google the platform name designer or developer and whoever is paying for advertising is doing well at that space so they wouldn’t be buying ads. And they will show you that the websites that have had redesigns. Now, if someone can afford to have a redesign done by the top designer in their platform, well they probably got a pretty hot market. Their market’s probably working out for them. So it’s a really good way to do it.

A good buddy of mine who is in a group with me said another way to find market is “hobbies”. People who are interested in hobbies, they’re passionate buyers. People who are into golf, people who are into model trains, people into yoga, whatever it is. People who are hobbyists are really passionate.

And then the other good market idea before I give you a resource are weird and embarrassing markets, so stuff that people don’t want to look someone in the eye while they’re buying like their pubic hair grooming kits or their toe nail fungus cream or whatever it is. The stuff that’s a bit embarrassing to buy, that you don’t want to look someone in the face when you’re purchasing is really good stuff to sell online.

And there’s a great resource out there for anyone who’s interested in eCommerce, I absolutely recommend that you pick this up. It’s called “The Top 500 Guide”. And it’s put by a company called internetretailer.com and it’s the North American guide for eCommerce and it tells you all the markets that are on the rise, all the markets that are on the decline. It tells you all the stores that are really doing well. It’s just a great place to get ideas for eCommerce and find out what’s going on the eCommerce world.

James:           Nice. Now I watched your presentation at traffic and conversion summit and I took some notes, so I’m going to dig straight into the gold here. What’s your favorite ticket price minimum?

Setting the price minimum
Ezra:             Minimum ticket price is $75. Maximum ticket price is $300 and here is why. With the drop of eCommerce store where most people is going to have to start with because it’s the lowest barrier of entry to get into eCommerce, you’re doing 20-30% margins. You really can’t make money these days in my experience if you’re not making at least $25 profit per order and in order to make $25 profit per order, you got to have a $75 average order value. Now that’s not average cost of the product because you could be selling a product that costs $50 and has accessories, right?

So, you definitely want to sell something that’s over $75 and I find the sweet spot to be under 300 because I’ve got a buddy who sells trampolines and pool tables an a bunch of other stuff and I actually have a store where I sell bar stools and people who buy those higher end products, those tickets that are $500 and $600 and $700, call you. They want customer support. They are just not going to pull out their card and buy that.

So when you stay under $300 you’re still in that sort of space where people don’t require as much support and they’ll just pull out their card and they’ll buy that right on your site. So it’s kind of a nice little range that you want to look for as far as higher order value.

James:           Right. I have a friend who sells expensive heavy things online, so there’s two no-nos. And they have heavy phone support but they’re doing it on such a scale like the super category and I guess if you want to take that into the market, you’ll have different complexities. And for memory they won’t care about drop shipping because they lose control of the ability to deliver things properly and to get the best freight management and to be able to control timing and quality. Is that where you integrate if you want to make a more mature, deeper eCommerce store?

Start with drop shipping
Ezra:             What happens is you start with drop shipping because with drop shipping you don’t pay until you get paid, you only buy the product once someone ordered it for you. But as you grow your drop shipp business, what you do is you take your best sellers and your warehouse those. You manufacture those and you import those so that you’re as highly leveraged as you as you can be. Your risk is as highly leverage as possible meaning, yes you’re taking risk but you’re only taking that risk of warehousing and purchasing that product upfront, on the products that you know from experience that you’re going to retail a whole bunch of.

James:           Right. So you better explain what drop ship is.

What is drop ship?
Ezra:             So drop ship is where you go to- you have a line of products, right? Let’s take the dog supplies line and you’ve got all these brands, manufacturers rather, and it used to be that the manufacturers would only give their products to wholesalers who then supply those products to stores and online stores. But nowadays, all theses manufacturers are looking for more avenues to retail their products and so they’re willing to let you or give you a disc that has all their product images on it and a CSV spreadsheet that has the prices that they’re going to charge you.

Let’s say, they’re going to charge you $50 for a dog bed. They give you the image, they give you the description for that dog bed and they give you their price. You take that dog bed. You put it on your website and you charge a hundred dollars. And you do the work. You’re like Target.

Target doesn’t make its products. It just does the work to get the customers in there and it sells other brands’ products. So you do the work to get the customers to your store by doing traffic like Pay Per Click or Facebook or SEO or however you generate traffic to your store and when you make a sale, someone pays you a hundred dollars and then once you get paid on your hundred dollars, you go to the manufacturer and say here’s he $50 and here’s the address of this person. Please send it to them. And so they ship it for you. So you don’t handle inventory. You don’t have to worry about stocking, you don’t have to worry about anything but generating the sale.

James:           Now, I’ll go the last question here. How important would it be to modify those descriptions if you can?

Modifying product descriptions
Ezra:             It is absolutely 100% crucial to modify those product descriptions because everyone else on the internet has those same product descriptions.

James:           That’s what I was thinking.

Ezra:             If you want your pages to rank, you need unique content on there. It can’t be the same content as everyone else. And you know we could do a whole podcast just on how to write product descriptions. But it’s not really difficult to modify your product descriptions. And one of the big things about eCommerce- what I call eCommerce 3.0 – what’s changing about eCommerce right now is the day and age of the store, of the faceless eCommerce store is dying. The eCommerce that just puts up products and list manufacture descriptions is dying.

What’s working now is adding value to your market, writing your product descriptions, ordering your products that are selling best and shooting videos about them, creating buyer’s guides like keep bundling products together that people want, figuring out ways that you can serve your community and creating a face and a brand and owning the race course within your eCommerce store. So creating a weekly video that has content that is relevant to the community of people who buy your products at your store. It’s really what’s changing abut eCommerce right now.

One of the cool things is most people who do drop shipping don’t rewrite their product descriptions. What you do is when you take the manufacturer’s product description and you feed them out to all the comparison engines like PriceGrabber, Thefind and whereever else and you keep the unique descriptions for your store.

James:           No wonder they describe your presentation as the firehouse of content. I loved this. Now people who normally speed this up they’re probably just playing this on half speed. I love it. We’re going to keep going with this. Now Own The Racecourse. You just gently drop that in there. You’ve been applying Own The Racecourse to your eCommerce store. Does it work?

OTR theme for ecommerce stores
Ezra:             Ah it’s working so well. It’s the absolute, most genius thing that we’ve done. Our skin care company Boom by Cindy Joseph were starting the video blog and we are taking this video more obviously doing all Own The Racecourse strategies with it, transcribing it and uploading it and syndicating it and pinning it and all that good stuff. But what’s really cool about it is we’re building  this community of people who are- it’s fortifying us from channels.

The thing that you are afraid of us in eCommerce store is that one of your channels goes away or you lose your Adwords account or you lose your SEO rankings in a  Panda or Penguin update or your Facebook Ad account or page gets banned or your Google product shopping listings are no longer free which just happens in August 2012.

So what happens is these channels come and go but if you build a brand and a community around your store, what happens with Boom right now is 50% of the traffic we get from that store is coming from people typing either our brand name right into the search engine or our URL right into the the URL bar at the top of the page. So we’re building this brand for our company and what that does is when we sell this company we now have an asset that’s going to get us a one or two higher multiple because we have a brand around it.

We got a community of people engaged with us, who communicate with us on a weekly basis and I think it is the absolute most important thing you can do for any business right now is build a community. And I think Own The Racecourse strategy is the best way to do it as I’ve seen.

James:           It’s great if you’re sitting on stock as well, you have to make sure you’ve got that traffic machine. Now tell us about the fragmented market test that you’ve mentioned to look for opportunities.

Fragmented Market Test
Ezra:             Sure. So, one of the things that I think- and this is a purely search engine optimization perspective- is that you know you want to be able to do SEO for your store and it’s not really hard to do. But if you take your top 20 keywords in your market and you google them and it’s the same 10 players every single time, that’s a market that’s not fragmented. It has got a really strong stock of players. The same people advertising on those keywords. You just want to make sure that there’s space.

The market’s fragmented, that there’s not the same 10 folks and the cool thing is that most markets are. I’ve only run in the 3 or 4 that are really just kind of taken, that are really sort of solid, that are hard to get into in these niche eCommerce stores.

So I think that the fragmented market test for me is – are there ten-pound gorillas in this niche who are competing for every single one of my keywords. And the answer to that question is usually absolutely not. And the other thing is – are the people in the market, if you’re doing a drop-ship store is, are they drop-shipping?

Well if they’re not drop-shipping they’ve got better margins than you and you’re not going to be able to compete with them in pay-per clicks, so one of the ways to figure that out is to give them a call and say “Hey I’m considering ordering this product. Do you ship it out or do you ship it from the manufacturer?” and the customer service personnel often tell you where it’s being shipped from and you can find out if those people are drop-shipping or not if they’re stocking and manufacturing.

So if you’re going to be doing a drop-ship market you’re going to want to be sure that the other folks in that market are also drop-shipping those products or at least there are some people who are drop-shipping those products because that way you’ll be able to compete from the pay-per click perspective as you’ll have the same margins.

James:              Nice, okay now what about the bi-local rule?

The bi-local rule
Ezra:             Well the bi-local rule is absolutely key for eCommerce. Don’t sell a commoditized product. Don’t sell something that someone can walk down the street and buy. Why you’re able to sell so many of those dang Halloween things is because if you don’t live in New York City, if you don’t live in San Francisco, you’re not going to be able to find one of those right? If someone lives in Tuscaloosa Alabama, can they find this kind of thing down the street from them?

Now you might think – let’s take fire pits as an example – Walmart has fire pits but does Walmart have the selection of fire pits that you can have on an eCommerce store? No, they’ve got 1 fire pit so just because you find something locally doesn’t mean that it’s not a great market online but if something is readily available and it’s been commoditized, it’s a horrible, horrible idea to sell it online because you’re going to have a hard time competing with those local stores.

James:           Okay now tell us about the seasonal business trends that you mentioned.