The Roadmap to Building a 7-Figure Ecommerce Business [Beyond Ordinary Podcast]

Myles Youngblood: Welcome back everybody to the Beyond Ordinary Podcast. I am your host, Myles Youngblood. We have another special guest here today, we are going to be talking everything ecommerce with Mike Danford. Mike, how are you doing today?

Mike Danford: Great. I was looking forward to diving in. Thanks for having me.

Myles Youngblood: Let's start off by telling the people who you are and what you are doing.

Mike Danford: Absolutely. My name is Mike Danford, I have been in the ecommerce space since early 2014. I launched a few products in the health space and then apparel, and found out one of my most expensive hires was around advertising, so I brought that in house, and I was like, this is numbers, I can figure it out. Now 10 years later I have touched a lot of different categories, understanding how to work with large catalogs and the complications that come with more products, and being on different marketplaces like Amazon, Walmart, Target, Instacart for a while, Shopify, and Google. It is fun to stay on the pulse, each platform is unique and being able to find those nuances and leverage the opportunities. It has been a fun ride and I do not see it stopping anytime soon.

Myles Youngblood: How do you approach selecting the right products to sell on Amazon, especially since ecommerce is highly competitive?

Mike Danford: It really depends. For most brands, I would recommend getting something you know, or know of a void, a product that cannot quite meet the needs you have. There is a great story, we have a Corgi and my wife is all about Corgis, and there is one, Maxine, and this guy was sharing life with the Corgi for a year and developed a backpack for it, very specific for Corgis with no tail, and with no advertising or marketing launches a product and it goes out of stock within about 14 minutes of being live. That is a unique situation, but the more passionate you are about your target market and who the product serves, the better. My first product was a joint supplement formulation to help my dad, who has osteoarthritis, and the OTC formulations out there did not give him the anti-inflammatory response he needed. So I researched it, he was my first customer, and the rest is history. We commonly look at the reviews and the sentiment for a product, especially a top seller, what are they missing, what are they doing well, how can we do it. Then it is having synergies in the product offering, creating efficiencies and economies of scale, and on multiple marketplaces you can use market basket analysis to see other products purchased with your products. Sometimes it is as simple as a different color or size variation, other times a different product where people in this space also have an affinity to purchase these types of products, can you bring that into your brand. Go with the data, the data is helpful, and you are going to have some singles, doubles, triples, and home runs, you just have to be prepared. Not every product you think will do well, will. We have products that sit on shelves for a couple years because it was not the right time, you bring them back, throw a little money at them, and now this product is doing well. It is a combination of a little gut and a little data. Some brands have a pilot program, an MVP, minimum viable product, they get it out and see what sticks, and if it does well they reorder and push. Try not to have too much capital tied up in the beginning until you know it is going to work, that is the biggest mistake we see, going all in before the product is proven.

Myles Youngblood: That is pretty much why I did not start FBA, because you need a lot of capital up front, and I had no idea if it would work, so I decided to start a marketing agency instead.

Mike Danford: Arbitrage is pretty good for that. I did some arbitrage at the same time in the beginning, slinging Nikes, people are going to buy Nikes, just switch ones.

Myles Youngblood: You mentioned some products you had to sit on for years. When do you know it is time to move on from a product versus switch up the marketing strategy?

Mike Danford: Great question. It depends on how much you have tied up in the product. If there is not much and liquidating it is more costly than letting it sit where you have space, that plays into it. Once you have pulled a few levers, different marketplaces and audiences, and it does not work, it is generally time to call it, and you try to find a secondary market, can you rebrand, sell it on a lower-cost marketplace. We do like to sit on products, usually six months to a year, then revisit, because if you are innovative and there is just not the demand yet, somebody will post something and the product goes viral or starts to get search traffic. Sometimes you are just out of the game, we had extra hand sanitizer and PPE during COVID, that is the whole process. Can you repurpose or repackage the product, add more, or break it up to the one thing somebody wants, maybe they do not want all eight bars in the pack, just a two-pack. Being creative, especially if there is a lot of inventory capital tied into it.

Myles Youngblood: You mentioned this is a very data-driven business model. What are some of the important metrics you look at for whether a store or product is successful?

Mike Danford: One of the most common is the percent of the product's margin going toward advertising and marketing on each platform, that helps us keep the pulse of not putting too much in and not relying only on paid traffic. Then comparing organic versus paid, can we get more organic over time and less dependent on ads, that usually means it is something they can stand on. When you look at advertising, a lot of people look at ROAS, but it is really an efficiency metric, not the efficacy of how well the ads are working, so it is understanding the nuances and having your two or three KPIs. A lot of folks look at month over month, you have to tie in seasonality and what is going on with the market. Year over year is often neglected, and some marketplaces make it hard to get year over year data unless you store it yourself, so having a solution that works for yourself is a big part. Now we are tying in machine learning, AI, and NLP to understand where the market might be going so we are more proactive than reactive.

Myles Youngblood: You touched on organic versus paid traffic. Everybody likes organic because it is free. What are some of the best ways that have helped you grow using organic traffic?

Mike Danford: For organic, technically it is not fully organic, but the influencer and affiliate push right now is pretty big, and platforms are starting to reward more organic placement based off external traffic. They do not always know if the external traffic is paid, they just know traffic is coming and converting. That has really picked up in the last year and a half, and you can jumpstart organic on a platform by driving external traffic, from your email list, paid, or social. It is pretty hard to get truly grassroots organic unless you are building hype in the audience ahead of the launch to get your first hundred for the product. Once you do that, organic is a lot easier to maintain. Each platform has a lot of betas that come out, and if you are enrolled in more of those, whether a coupon or deal or placement, they seem to reward you for being an early adopter. It also depends on your vertical, certain products do better with organic UGC, TikTok, and others just do not have that audience, they are more of a I need this right now because I have this problem. So you have to account for that in your go-to-market plan. And there is so much more pay to play now than there used to be.

Myles Youngblood: What do you mean by pay to play?

Mike Danford: In order to be in front of the audience on these platforms, you have to have paid placements. If you do not, the organic placements are pushed so much further down the search results page, so you have to pay to even get to the top where the audience clicks, which is unfortunate, but it is where we are.

Myles Youngblood: What were some of the biggest mistakes you made when you first started selling on Amazon, and how did you overcome them?

Mike Danford: My first product I do not even include in my story, we did a spatula, and the whole thing was learning don't cut corners on R and D and product development, really have good QA and understand how to make the product last. If you have a good product that fits the need and lasts longer than the perceived value, you are in a good space. If you can be a user of your product, that goes a long way. We had a food torch where the packaging did not clearly illustrate you have to refill the butane upside down, so everybody was trying to refill it right side up and it does not work, that was costly to redo the packaging and it takes a few months to trickle through the reviews. So try to answer as many questions as you can before they purchase, and after they purchase, whether in your email or packaging, so they are not unsure how to use the product, which leads to negative reviews. And there is over-ordering, not ordering enough, trying to be predictive. If you could find out how much you will sell before you sell, you have it nailed, but that takes data. One of the biggest takeaways over the last four or five years is a lot of people did not have great supply chain redundancies pre-COVID, one supplier, figure it out, and now they understand having multiple suppliers actually gives them better margins because they can get a little bidding between vendors.

Myles Youngblood: Would you say this is a beginner-friendly business model for someone who has never sold anything online?

Mike Danford: Retail arbitrage has changed, easier in some ways and more difficult. If you can get into something where the brand is known, licensing, you already know there is demand and people are searching for it, it is just can you be that supplier. All in all, you have to have a good capital outlay, there are a lot of moving parts, be prepared to have some losses and make mistakes, but work with someone who has made those mistakes to reduce the learning curve. I would not say it is easy. Digital products like Kindle and ebooks are a little easier to get off the ground. Most businesses take years to get into the black, but with ecommerce done right you can shorten that a lot, being net positive in your first year is amazing and it happens, but you have to be diligent and resilient and okay with abandoning a product and moving to the next. Reading the signals and being an open sponge helps. There are other ways to make money online that are easier and less capital intensive. The biggest brands have been doing it a while and can sit on cash to weather the lulls, but if you are relying on the income it is way more challenging and pressure. It is a good way to learn, I did not get an MBA, I took the money I would have contributed and tried real estate, ecommerce, service, and Kindle, spent considerably less than an MBA, and my net positive at the end of two or three years was much higher than an MBA would have been. You have to be willing to do it, and having someone to help, a different right-brain, left-brain, is going to make it easier than by yourself.

Myles Youngblood: It is definitely tough by yourself. How do you determine the right content creator or influencer to partner with on a product?

Mike Danford: Different platforms have different ways of going about this. You have macro influencers, well-thought-out larger campaigns with a cost, and micro influencers, a lot of people putting a lot of little signals out there. It comes down to commissions and what is favorable for everyone, understanding what the influencer is looking for. If you have the time, understand the audience, is it saturated, are they already promoting your competitors. You have to have your brand style guide and how you want your product spoken about, what you do not want, hey we are not organic, we are natural, or we are organic not natural, those nuances. The back end is getting access to UGC, user generated content, so you can use it in your advertising elsewhere instead of paying for a studio promo video, multiple uses of the same content. And creating a packaging and unboxing experience that is social media and TikTok friendly, if it is a boring bland package it makes it hard. We work with brands trying to shape their protein bar into a dumbbell or barbell, something unique among all the rectangle bars, how do you make your box stand out. Mike Michalowicz is one of my favorite authors, he has a book Get Different about thinking outside the box and standing out. One of our mascots is a rhino, how do we be the purple rhino among all the gray rhinos, we do not want to be Where's Waldo where you cannot find us.

Myles Youngblood: Always got to stand out. What strategies do you use to ensure high customer retention and repeat business?

Mike Danford: First is the quality of the product, if it is quality you will have word of mouth and folks who come back to repurchase. Then appreciating and showing them appreciation with as many thoughtful touch points as you can. With email it is complicated now, certain platforms own the email so you cannot communicate directly, but if you have your own email list, how do you stand out from the white noise, if you can educate your audience without pushing product, then when they are ready adoption is higher. Engaging with the audience, there are people who will really support and fall in love with your brand if you have a good product meeting the need, tap into them, what else do you wish we made, have those brand loyalists be your evangelists, listen to them, compensate them, let them be part of the pre-release. Give them a forum to reach out when a product got damaged in shipping, respond quickly and genuinely. And digging into the data, where do we lose them in the funnel, what is the perfect cadence, when do we ask for a review, giving them enough time to know the product is working. There are general rules of thumb for each brand, but each product is unique.

Myles Youngblood: What did you do to take yourself from the six figure range to a seven figure business?

Mike Danford: Finding products, and hey we already have these products, what else can we do from combining multiple products together, bundling, different variations, sizes, or colors, that is the easiest way to start. Then Amazon has a market basket analysis report that shows the top two other ASINs purchased with each of your products, and with AI now it helps you manage larger catalogs, you can see consistencies of other brands purchased with your products and go down those pathways. Being synergistic in your brand is the best way, and if you want to go into another vertical you most likely need to build another brand so you are not confusing your audience. Seasonal products help, like Starbucks releasing pumpkin spice, only available a certain time of year, we do that with flavors. And engaging with the audience, asking what they want, if we could release products what would you want, and looking at your COGS. Sometimes we go after a product a year ago and the COGS were too high because of a shortage, and now those raw materials are a third of the cost, so let's revisit. We try that once a year, it is a cool little thing we do.

Myles Youngblood: When do you know when to put more money into a product versus when to add a product?

Mike Danford: In certain marketplaces you can have an idea of the cap, the market share, and you are trying to understand your marginal cost to acquire more customers, looking at customer acquisition cost versus LTV. They will all reach a point of plateau or equilibrium. For us it is usually a push for a month or two, see if we have growth or increase market share, more top line and less focus on bottom line, then pull back and say can I keep this new level of sales and bring back my efficiency. If that happens you keep doing it until it no longer works, there will always be a point where you push and increase or push and do not increase anymore, there is your answer. And revisiting stagnant products, let them rely on organic sales and six months or a year later push them a little more.

Myles Youngblood: The market is constantly changing. What are you doing to stay ahead of the market or pivot quickly enough?

Mike Danford: Rely on as much data from each platform, because each is completely different, and track, is everyone else's sales down, is this seasonality, is there a new competitor. There are tools to track organic share of voice and page share. That is tough because you cannot always increase your share just by pushing more money, you reach a point where the marginal return is not there. We even take a product that does really well and rebrand it, make a small aesthetic change, and push it through the same promotion process, so we become number one and number two in the market because we cannot push our already-ranking product higher, so we do it again under another brand. It does not always work as fast, but it is a way to think outside the box, you already know how the product does, the manufacturer, and the cost. Years ago we had a geriatric clock where we just changed the dial a little, it was the same thing, and it was one, two, and three for a while, Amazon even came after the brand to acquire it. It is also a way to stay below the radar so a platform does not realize you are taking up so much market share and try to copycat you, it is like being your own copycat because you know what worked.

Myles Youngblood: People have tools to scrape how much you are selling. How do you compete with that?

Mike Danford: You differentiate yourself and constantly differentiate, you cannot race to the bottom of price. Figure out a way to add more value in your product, and point out quality, especially if the copycat is not the same quality. Getting patents and protection on your designs is challenging, especially overseas. And understand if they are a long-term threat, because when a product first comes out a lot of data is skewed, they are doing promos and giveaways and may be losing money, and after two or three months they realize they lost a bunch of money and dry up or go out of stock. On most platforms being out of stock is extremely detrimental to your momentum, so have better inventory management and be more strategic around any pricing changes, willing to take a month or two while they are pushing and then sweep in later. Sometimes you just cannot compete with someone who has a lot larger pockets, and you have to be willing to cut it when you stop putting too much behind it.

Myles Youngblood: What has been the most important hire for you to get where you are today?

Mike Danford: Having someone to help with operations and organization of your enterprise, especially as your team increases with more contractors and vendors, it is a lot more balls to juggle, and having someone keep that so you can keep focusing on innovating. As soon as you are in the operations, it becomes very difficult to keep growing. I wish we had hired someone sooner, it is not my strongest point, the best thing is hire your weaknesses as fast as possible. And it is not the person hired, it is being prepared for the new hire and setting them up for success, making sure they have the tools and resources, that is still one of our biggest challenges as a new role or service line develops.

Myles Youngblood: A common reason people do not get into ecommerce is low margins, 20 to 30 percent. What has your experience been?

Mike Danford: Margin is hard, it is a numbers and volume game, how much capital you put into your minimum order quantities, how fast you can produce. If you are going to be concerned with margins the whole time, do not do it, that is not going to be fun. Try to find a product with the margin, and maybe the first year the margin is not there but once you hit a certain volume you can double your margin, thinking long term. COGS and suppliers can change, once you have volume you can get a more negotiable supplier or redesign the product to make it more cost effective. And how can you add more to that product or bring up the basket size, a product may only have 15 or 20 percent margins, but if you get two or three added, the customer has more value.

Myles Youngblood: How do you see technology and AI shaping the future of ecommerce, especially marketing and product optimization?

Mike Danford: It is shaping it right now, it is so hard to keep up with. AI also has a lot of hallucinations, it is just a prediction, it spits out what it thinks you are looking for, so you have to ask how confident it is, it is a probability and prediction machine. Once you have confidence in the answers, you can scale. For us it is data, crunching more data than we could through a macro in Excel or Sheets, larger data sets and lookbacks, looking at data daily as opposed to weekly. And teaching the machine our research and process improvement so it can apply that and take our own bias out, it is very hard when training AI not to train with your own bias, so I like to ask it what would you do before I give it any information. Right now there is a big push in scanning images and video and pulling data out, understanding context, the listing may not say the product is good for outdoor weather, but if the images show it can be outdoor or waterproof, it picks up on those, which is interesting because it lets you answer questions without stuffing the listing with copy that does not read well. You can download reviews and get NLP to understand sentiment. Do not have shiny object syndrome, it is advancing at such a fast pace, I was looking at Y Combinator and maybe 60 percent of the brands are tagged as AI based, so there is a lot coming. You have to understand it and not be afraid of it, it is here and not going anywhere, and think about how it can help you do more, reduce the mundane tasks, and help with ideation.

Myles Youngblood: Last question. What trends do you foresee in ecommerce over the next five years, and how should entrepreneurs prepare?

Mike Danford: I like the question, but I think it was Jeff Bezos who got asked that early on, and he likes to flip it, what do you think is not going to change in the next five or 10 years, and that is what he focused on, and that is what we focus on. Ask the opposite of the question, we are focused on what is not going anywhere and how to build that stability while being aware of what is being developed. If I build this right now, am I going to use this in a year, two years, five years. A lot of things we already know, people want quality and cheap prices, those are not going anywhere, so how do you incorporate that in your products and service. If you can do that, you will stay in business regardless of what is going on.

Myles Youngblood: I love that reframe, instead of chasing a shiny object, focus on what is working and what is going to be evergreen. Mike, it was great having you on. Where can everybody find you?

Mike Danford: Thanks again for having me. Adverio.io, there is a kit with a bunch of tools we have built and give out to other sellers, just go to our free tools, and LinkedIn as well.

Myles Youngblood: We will put all that in the show notes. Beyond Ordinary podcast, another extraordinary guest. Until next time.