The E-commerce Formula, Mastering The Four Core Building Blocks Of Online Selling Success
Commerce is in the middle of a massive transition - slowly creeping from offline transactions to some version of their online equivalent. Like an iceberg, slowly moving downhill, this creeping transactional - transition is at the same time incredibly slow, and crushingly fast.
I feel lucky to be an observer, right up close, seeing the transition from ground level. As a former SVP of Marketing at an old-world organization (A University) I led a team as we struggled through the transition to online selling (and online delivery of our programs) - and as a kitchen table entrepreneur with my wife, we struggled (and struggle daily) to find our way in the brave new world of competitive online selling.
I've also had the privilege of teaching Online Marketing at the University level - as well as teaching my Shopify Power course to over 1,000 students via Udemy (an online learning marketplace).
In this post, I'd like to share what I call the E-commerce Formula - The Four Building Blocks Of Online Selling Success. But first, a tiny bit of context...
We Are Just Getting Started
When you're 1-inch away from an iceberg rolling over the top of you - you've gotta move briskly because for you the transition is imminent - you're in the life or death zone. There are parts of the global economy that have hit that spot.
But if you step back for a moment and look at the entire world of retail selling (let alone things like B2B, services, and institutional selling (Like my old University), then you begin to realize the transition is slower and in some niches, industries, and parts of the world, it is barely on the radar. For them, it's incredibly slow.
Overall, according to the Department Of Commerce, by the end of 2015, we were only at 7.2% of all retail sales occurring online. Newer estimates have it closer to 9% as we begin 2017. Either way, at the macro level - we are just getting started. That's good for us as entrepreneurs.
The E-commerce Formula
I've taught over 1,000 students how to use Shopify - and I've taught Online Marketing at the University level for 3 years. I've also been selling online since 2007 and have sold several million dollars worth of goods online at this point. I'm certainly no Jeff Bezos (Genius), but I'm in the game in a legitimate way - and so after reflecting on what it takes to succeed, I've boiled it down to four core topics. They are,
Building Block One - Technical Aptitude
In the 1980s when I was a kid they used to say about a nerd, "he's into computers". I wasn't one - I was into football. But now almost everyone is "into computers". Obviously, not everyone can set up an e-commerce website, but the technical requirements to set up a blog or e-commerce website are getting simpler and simpler each year.
Sites like Shopify have made the process of setting up a beautiful, full-functioning, safe, e-commerce site fairly easy. But that doesn't mean my mom will ever be able to do it. There are some people who simply don't / won't have the technical aptitude to attempt it. They get frustrated too quickly and give up. So although they might be able to do it if a gun was to their head, they won't enjoy it.
But each year, the hurdle gets lowered a bit, and the option to sell online becomes more real to more people. Sadly, some people who have looked into the idea of selling online in the early days smashed into this hurdle and decided it wasn't right for them, but they never checked back to discover that the hurdle is getting lower and lower - and their particular point of frustration may very well be a non-issue now. This building block, therefore, is time sensitive for the entrepreneur. There is an advantage for those who are early adopters.
I break Technical Aptitude into two broad categories, but it can include many things,
Website basics - which includes how to use a WYSIWYG editor to create pages and the related "parts" of a website.
E-Commerce basics - which includes how to set up a product listing, shopping cart, and payment options.
Building Block Two - Product Marketing Aptitude
The second building block is what I call Product Marketing Aptitude. This is not necessarily an online/offline skillset. There are tons of old-world retailers that are great at product marketing. When they come online - watch out! They can (if they master the 3 other building blocks) crush it. At the same time, there are tons of new-world sellers that are great at marketing online products that the old-world folks don't even understand.
When Jeff Bezos began to dream of Amazon he scoured industry journals to determine which product category might be a good match for an e-commerce business. He decided upon books for several specific reasons that he felt were important - and launched Amazon in his garage in Bellevue (just up the road from us here in the Seattle area).
Product marketing aptitude is like any other skillset, there is a huge range from horrible to exceptional. Most of us start with average aptitude and need to learn the skills. We are open to the idea of being a product marketer but don't know how to do the job.
But sadly, some people are not pre-disposed to enjoy this type of business activity. I've worked with a lot of them and they fall into a couple categories of mindset. They won't do well as a Product Marketer on their own. They include,
The Product As Art Mindset - I'm married to an artist, so I'll describe this mindset in very careful terms. Artists are world changers. They do things that are as close to miracles as humanly possible. They do that by being uncompromising, obsessive, painfully critical of their work, and visionary in exciting ways. I think Steve Jobs was an artist - and obviously changed the world. So I'm not saying artists can't make amazing product marketers, they can. Of course, some artists are artists at heart, but not talented at their craft.
When an artist creates a product and it fails commercially, they can get stuck mentally and resist the need to pivot to match customer demand. They will stand their ground for artistic reasons and find another answer to the 'why it didn't work' question. The market might never come around to their way of seeing the product - and their efforts may never be successful in the real world of competitive marketing.
The Quality Compromiser Mindset - on the other end of the confidence spectrum you'll find people who believe their product is going to change the world - even though it's not unique in any way. These people could sell a basic commodity like bottled water and believe deeply in their heart that it's going to save people's lives, because after all, tons of people need clean water.
As the old saying goes, these people get high on their own smoke and tend to believe their product is better than it actually is. Full-Disclosure, I struggle with this issue. Now, if a Quality Compromiser is very early into a market/product concept, then they might still do very well. To loosely quote Guy Kawasaki, (I believe it was in the Art Of The Start),
To loosely quote Guy Kawasaki, (I believe it was in the Art Of The Start), "In Silicon Valley 20 people can have the same idea at roughly the same time - and it's the one that executes it best that wins." So if you're early and can grab customers with your product - cash out - and move on - you're going to be rich.
But over time, in any market, quality begins to matter more and more. Customers expectations rise, and a product of inferior quality won't get them excited. As options increase - quality becomes a central issue. You can't win in the long-term with a quality compromiser attitude. So if you start there - you've got to make the commitment to continually update, refine, and improve your product. Your new versions better make big jumps in quality.
Famous Silicon Valley titan Reid Hoffman wisely said, "if you're not embarrassed by the first version of your product, you've launched too late." However, most of us aren't in Silicon Valley, and if your first version is ignored by all of humanity, then you better revisit your approach to the product.
Building Block Three - Business Aptitude
The decision to sell online is the decision to start a whole business. Some sellers have the illusion that they can sell online, particularly digital items, and be like a ghost in the machine - just collect the cash and keep your head down. But it doesn't work that way. An e-commerce business is just like any other business. Accounting matters. Taxes matter. Payroll matters. Accounts payable matters. Finance matters. Legal matters. Most importantly of all, good business decision-making skills matter.
The Case Of The Two Amazon Rookies: Here is a story that illustrates this point. In 2015 I helped teach two people how to sell on Amazon, one was my son who is in college, the other was my friend who has 25 years experience owning and running a fast food franchise. My son wanted money, my friend was intrigued by the idea and wanted to learn a new skill (and didn't need the money).
Their two paths diverged in the e-commerce woods and here is how their stories played out...
My son... started with retail arbitrage (buying items on clearance at stores and sending them into Amazon). He realized he didn't care for in-store shopping. So, we connected him to someone that provided a weekly list of Online clearance deals that could be purchased and sent into Amazon for resale.
After selling a few thousand dollars worth of product, my son realized that the margins involved in this business weren't very good. He got frustrated as other sellers lowered their prices to levels he couldn't match (and still make a profit) so he concluded that selling on Amazon wasn't for him.
He has since moved on to selling on Fiverr and is happy making a side income selling services.
My friend... started with retail arbitrage and immediately noticed that a 2 or 3 times markup (buy an item for $10 and sell it for $20 or $30) was never going to cover the associated selling fees of the Amazon platform and also deliver any substantial profit. He also observed the "race to the bottom" that happens amongst sellers on Amazon. Here is where his business aptitude kicked in.
He quickly heard about garage sale sourcing - finding new-in-the-box items at garage sales and sending them into Amazon. This delivered him astonishing markup potential. Buy an item for $1 and sell it for $150 (yes, he really found these types of deals).
But although he liked going to garage sales to get out of the house on the weekend, the sourcing proved too unpredictable for his liking. Funny enough, he would use Craigslist to find the garage sales each week, so he clicked over to the "going out of business" section. He began to hunt in that new land for product opportunities.
He found a seller offering an entire storage unit of new-in-the-box Star Wars action figures, (the old ones from the 1980s and 1990s). The seller had inhereted them from his brother who passed away and just wanted to be done with them. My friend inspected the items, build rapport with the seller, and negotiated a fantastic deal for the entire storage unit, roughly 4,000 items, at a cost under $4 per unit. He rented a Uhaul truck, paid some of his kids to help him load it up, and was the proud owner of a massive pile of high-value products. He paid one of his kids to scan all the items, pack them up, and send them into Amazon. It took them 3 months and they finished just in time for the 2015 Christmas holiday, which also corresponded with the release of the exciting new Star Wars movie The Force Awakens. His goal was to time the item listings to the movie release and keep his prices very high. It worked. His total profit from the project? Over $80,000.
As his sales concluded, my friend decided that his learning goals were met, and he's since moved on to other offline ventures. He has no interest in continuing to sell online.
Business Aptitude includes skills in a really wide range of topics including,
- Opportunity analysis
- Research skills
- Business math
- Finance management
- Legal, tax, and regulatory compliance
- Negotiation tactics
- People management
These skills all swirl together to give some people a massive competitive edge. As with the other skills mentioned in this post, most of these are acquired over time through practice and learning. Most e-commerce sellers won't (and don't) need to start out with a huge resume of business skills, but they can't hate these topics either. The willingness to learn and grow in each of these areas is the main thing. You may never be good at book-keeping, but if you're the owner of an e-commerce business, you're responsible. The same goes for each of these topics.
Building Block Four - Motivational Aptitude
Did you notice that in the case of my son vs. my friend, only one of them is currently selling online? Motivational aptitude is an amazing intangible that separates people over time. The dreamers from the doers. The tinkerers from the emotionally committed. Some people want it bad enough to push through the pain, learn the hard lessons, buckle down, and get things done. They find a motivating energy that helps them keep going. In my son's situation, it was simple - he needs gas money for his truck. My friend, on the other hand was motivated by the novelty of learning a new skill and once achieved, he was done.
15 Years A Slave (to the 9-5)
(Here is my motivation story - taken as an excerpt from my Craft Business Power book)...
I'll never forget the night I heard about someone making $1,000 a day with an online business. It was 1998 and the Internet was still very new to all of us. Although I’m usually an early adopter and had been using online services since 1995, I hadn’t heard too many examples of people actually earning a living online.
In 1998 email was still relatively new. Beyond that, there were message boards, new websites from various companies, and content on AOL, but there weren’t that many obvious ways to make money online.
I was looking for a second job at the time, trying to make ends meet for my young family. Cinnamon and I had just had our first son, Jordan, so I was open to anything and everything that could help us get a little bit more income.
One Sunday evening, Cinnamon and I took Jordan to a home group meeting. I asked our group to pray for my job search, and someone said,
“Maybe you should connect with Steve — he’s making $1,000 a day on the Internet and I think he needs help.”
Here is how the dialogue continued:
Me: “$1,000 a day . . . on the Internet?”
Them: “Yeah, I guess his idea has really taken off.”
Me: “That’s $365,000 a year. Over the Internet?”
Me: “What does he do?”
Them: “He got a traffic ticket, then got frustrated that he had to actually go to an all-day traffic school to get it removed from his driving record. So he created an online traffic school training course and got the county judge to approve it as an acceptable online version of the regular program. The judge sends people to Steve’s website, then they take the course and print out a certificate.”
Me: “Wow, what’s his number? I’m going to give him a call.”
“$1,000 a day on the Internet” - those were the most magical words I had ever heard. It was like they went into my head and echoed for months — actually for years. In fact, they are still up there echoing loudly right now (although the number is higher now). I guess it’s something similar to gold fever, Internet income fever.
I did talk to Steve, and he needed someone for just a few hours a week. I needed more work than that, so I passed on the opportunity to work with him. That was probably a massive mistake, but life goes on. I’ve heard since then he’s now making more like $4,000 per day (and that was years ago - I'm sure it's higher than that now).
Call us slow learners, but it took us ten full years after that conversation happened to create our own online business. It was ten years of that phrase rattling around in my mind — “$1,000 a day online.”
Ten years of that idea haunting me every time I was stuck in traffic, every time I had a bad interaction with my boss, every time I felt like I was traveling too much for my job, every time we couldn’t afford something and had to use a credit card. Why in the world did I wait ten years? I have no good answer (other than I didn't have the Four Core Building Blocks figured out yet). But the idea never left the back of my mind, regardless of the highs or lows we were going through.
For several reasons, the time was finally right in the winter of 2007 and in early 2008 we launched Liberty Jane Clothing, an online business based on my wife’s design talent. It started really small, with a $39 dollar sale on eBay, and it was a lot of hard work.
The first financial goal was to start making $1,000 a month. My only regret is that we didn’t start the business in 1998 when we first heard about Steve. Fifteen years after hearing about Steve, and five years after starting our online selling, I was able to retire from the 9-5 and go full-time with the family online selling biz. (My only regret is that I didn't learn the Four Core Building Blocks sooner.)
In 2017 I'm going to write 100 blog articles about the Core Four as they relate to Shopify... and I hope you'll join me on that journey! If you want to go deeper/faster, consider joining our mentoring program so I can work with you directly too. If you can't afford it, then just keep reading these blog posts. I'll do my best to make the 100 articles the best content on e-commerce selling you've ever read.
January 2nd, 2017
1 of 100.