Dr. Weisz: [00:00:15] Dr. Jeremy Weisz here. I’m founder of InspiredInsider.com, where I talk with inspirational entrepreneurs and leaders like the founders of P90X, Baby Einstein, Atari, many more. How they overcome big challenges in life and business. This is part of the Skubana eCommerce mastery series where top sellers and experts teach you what really works to boost your eCommerce business.[00:00:35] Wes is nodding because he is one of these experts. He’s going to talk to us today and founder of Ezonomy.
[00:00:42] Skubana is a software platform to manage your entire eCommerce operation.
[00:00:45] Today we have Wes Grudzien. I’ve been practicing your name for a few days now. He’s co-founder of Lullaby Lane. Wes helped grow the company’s Amazon sales to over $7 million annually in less than three years. That’s amazing, Wes. He’s also founder of Ezonomy where he teaches exact methods used to grow the seven figure business and consult with large scale sellers. Wes, thanks for joining me.
Wes: [00:01:11] My pleasure. Thanks for having me.
Dr. Weisz: [00:01:12] I’m excited to chat, and you’re like the most lovable person, and we’ll get into some of your fun facts. You have some crazy fun facts about you which we’ll talk about. But I want to get into a few of the…I just said some mind blowing things for some people, for myself, growing this to $7 million annually in less than three years. So I have to start with that. So what do you think has created some of the biggest leaps in the huge jump in revenue in just three years?
Wes: [00:01:44] Sure. Sure. That’s a great question. I think our ability to grow was directly impacted by our access to inventory. And so with Amazon, a lot of times you have three major ways you can basically sell on Amazon. Retail arbitrage, which is literally going out to a store, buying something on clearance and selling it. You have private labeling which is contracting with companies in China to design products for yourself. And then you have companies like us that contract directly with brands, branded manufacturers, and sell those products.
[00:02:25] And so the beautiful part about that is that the products that we sell we don’t really have to create too much of a demand for them because the demand is already there. All we have to do is be very good at putting those products in front of the customer’s eyes because that’s what they want. That’s what they’re searching for. That is definitely the number one reason why we’ve been able to scale to the size that we have in the time that we have.
Dr. Weisz: [00:02:50] With the branded components, there are people out there who are also selling these brands and they’re not as successful as you. So what separates what you’re doing from them?
Wes: [00:03:02] Sure. Sure. That’s a great question. Interestingly enough I would say one of the major reasons is we actually just put traditional business practices in place. I know it sounds maybe simple, but a lot of times you can get lost in the volume and the hype and the excitement that maybe you don’t put those traditional practices in place.
[00:03:27] So we have budgets that we work from. We have buying cycles. We have inventory reconciliation. It’s all the parts of a traditional business, maybe not through Amazon, that I think make a great difference.
Dr. Weisz: [00:03:42] Yeah, that’s some non-sexy stuff that actually works.
Wes: [00:03:46] Exactly, it’s the foundational principles on which any business is based. You can’t get away from those pretty much no matter where you are or whatever you do.
Dr. Weisz: [00:03:56] Yeah. So Wes, speak to one of those. What’s one of those foundational principles that most people get wrong or they aren’t doing?
Wes: [00:04:05] That’s a great point. Probably our number one I would say is creating an area of focus. And this is particularly for Amazon in that if you sell everything on Amazon that’s fine. And there’s some people who do that and have that business model. But we believe that if you sell everything, you’re not really an expert at anything.
[00:04:28] So by focusing in the category that we did, which is baby, we build relationships with manufacturers. We build relationships with our distributors, with our transportation companies. We’re able to understand the market and not just go on Amazon and see what’s a good selling product and sell that. We’re able to look at that and create an opportunity that is not currently on Amazon by having that information. And we do that because we know the market. We know what people are looking for. It’s proactive instead of reactive basically.
Dr. Weisz: [00:05:00] We’re going to go into more detail later, but I have to ask, how did you even get into babies?
Wes: [00:05:08] We have a prior…There’s four partners in our company, and we have another small business that we originally started which was direct eCommerce. Only eCommerce, basically drop shipping. And we we’re pretty successful at that. But the problem is there was a real market cap. It was mostly small niche medical supplies.
[00:05:27] Right around that same time we were looking for new avenues, new areas of growth, and it’s a classic story in our industry, but my partner, him and his wife got pregnant. So they started looking at strollers and realized she wanted this $700 stroller that they had to drive an hour and a half to even just go look at. So we were like, “Huh.” Did a little research on the market and realized there was a nice opportunity there for that niche. That’s definitely how we got into it.
Dr. Weisz: [00:05:56] Was the foundation early on working in your dad’s business, too? We won’t talk about that now, but was that…Okay, so we’ll talk about what your dad’s business was and some of the things you did with that.
[00:06:09] So we talked about some of the big leaps. It’s putting those foundational principles. What’s another one? You mentioned a bunch. What’s another important one that most people miss or don’t do?
Wes: [00:06:21] Sure. Sure. I say planning out, not only financially, so looking at your cash flow, looking at profitability, but also planning new products. Because the other thing about Amazon is that it’s almost like the stock market in that there’s ups and downs, dramatic shifts. You gain new products. You lose products. So you always have to have products waiting in the wings and manufacturers waiting in the wings that you might not be actively pursuing. But building that foundational relationship so when the time comes, when maybe you lose the ability to sell a certain brand or line for whatever reason, that new company is there and you just start selling that. So you always have products waiting in the wings for yourself.
Dr. Weisz: [00:07:09] So you always have a pipeline of new things that you’re looking at? What’s your method for…Like you said, they’re very capital intensive especially looking on your site, Lullaby Lane. Strollers are not a $30 product. They’re hundreds of dollars. So what’s your method for deciding okay, this deserves to be in my pipeline for a new product and then getting to that point where you decide to release it?
Wes: [00:07:34] Sure. Sure. Well like you mentioned, with our direct website Lullaby Lane one of our philosophies is we only sell really high quality baby products, and so we identify that. And the other part of it is that buying directly from the manufacturers and being of value to them within the industry allows you to have terms. So you can negotiate credit terms and you really leverage those credit terms to build the business.
[00:08:05] That’s one of the other areas we really focus on is increasing our credit terms with our manufacturers because that directly correlates. The more credit you have, the more products you can buy, the more products you can sell, the more money and it’s just a virtuous cycle.
Dr. Weisz: [00:08:18] Yeah, that’s a really important point. So what about new products? When you vet new products…Because I’m thinking there’s only so many strollers out there, or baby bottles, or whatever, but you’re constantly coming up with new products. Where do you start in your thought process of coming up with those new product ideas?
Wes: [00:08:38] Sure. Well, being in one category, in the baby category, we have two major trade shows a year. So we spend a lot of time at the trade shows talking to people and working with our manufacturer’s representatives. Identifying upcoming brands, upcoming products, and we try to get it in here and really use it. We have moms in the store that work in the store. We have moms that work in the office and the warehouses here. Personally vetting the product and trying to also look at that product’s placement within the market. So is it a niche? Is it a me, too? Really just trying to understand not just on Amazon, but what’s the dynamic of that specific product?
Dr. Weisz: [00:09:21] I like when you mentioned about the trade shows because you probably get a lot of different ideas. Can you tell me about the last trade show or one of the trade shows that you were like, “Wow.” You saw something that just stuck out to you that you probably would have never figured out if you hadn’t gone to a trade show.
Wes: [00:09:36] Sure. Sure. Well I can tell you that with the baby show, which ABC Baby is Baby and Kids Show, it’s in Las Vegas, the fall show every year. It was a couple years ago, but there was a company called Four Moms and they are a newer company. They have a stroller that you push a button and it automatically folds for you. Then you press the button and it automatically unfolds. I was like, “Man, that’s just crazy.” So it’s Bluetooth enabled. It’s an iPhone hookup. Has lights on it. Has everything.
Dr. Weisz: [00:10:19] All the bells and whistles.
Wes: You got it.
Dr. Weisz: Wow, that’s cool. What other mistakes do you see? Obviously with Ezonomy, you’re doing a lot of consulting. What are other people doing that is working really well when you’re talking to them? And then on the flip side, what do you tell them as far as directing them away from certain mistakes that they may be making?
Wes: [00:10:41] Sure. Sure. Well it’s very popular right now, particularly through the Amazon to create private label products. And so with Alibaba coming up it’s very, very simple relatively speaking process of identifying a product, buying it from China, listing it and putting it on Amazon. The upside is that there are so many niches that there’s still a market out there to be pretty successful.
[00:11:10] One of the things that I’ve seen that folks have been doing that may not be the best is they are shipping the product directly to Amazon’s fulfillment centers without testing it and without getting their hands on it. And it sounds good, and in practice it saves you in shipping costs and what not. But again, going back to those traditional business principles and practices, you want to make sure you put quality assurance checks in place. And if you don’t and the manufacturer sends a poorly produced product and you get a ton of negative reviews on these products, you’re really going to be risking the health of your account.
Dr. Weisz: [00:11:49] Yeah, that’s a great point. So do you suggest people send small sample size at first and then Amazon? Or should they send the whole shipment to themselves? What do you suggest?
Wes: [00:11:59] Sure, there’s a couple different ways you can do it depending on your business. The simplest way probably is to work with your manufacturer and have them send a sample of that exact lot of product that’s been produced to you first. And then when you green light it, then they send directly to Amazon’s fulfillment centers. The safest way, which is what we would do, we don’t do private label, but if we did, we would have it shipped all directly to our warehouse. Because even if they put just the wrong sticker, all of a sudden the product’s listed under the wrong listing, you have dozens if not hundreds of returns, it just turns into a giant mess.
[00:12:34] So yes, on the front end it may cost you a little more in shipping, but on the back end it’s a piece of mind and a sense of security that you’re not risking something major with your business.
Dr. Weisz: [00:12:44] Yeah, that’s a good point. Quality control is huge.
So Wes, you bring up a really good point. I like how you separate the arbitrage to the private label to the branded to the manufacturer. Talk about that because people have very different opinions on…Some people are like, “No, I don’t want to compete with everyone else.” But it’s not even the same product, they want to do private label. And then the brand is like, “This is quality stuff. It’s already trusted. It’s already selling.”
[00:13:13] So talk to me about the private label side, when people bring up that about, “Okay, it’s my brand so I’m not competing with other people selling the exact same thing.”
Wes: [00:13:26] Sure. That’s a good point. There’s positives and there’s negatives in each of the styles right? So with retail arbitrage, your profitability is higher than any other area.
Dr. Weisz: Really? Oh wow.
Wes: [00:13:41] Yeah but you have a…Depending on how deeply you search and dig for product, your per unit profitability is significantly higher. However, you have time cost associated [inaudible 00:13:54]. Do you want to spend seven days a week, five, six hours a day hunting for product? If you do, great, that’s not my avenue. But it’s difficult.
[00:14:07] The private labelers, that is true that you are your own brand and you’re your own product. There’s two issues that you run into with that. One is that you have people that jump onto your listings that are maybe even the exact manufacturer in China that is producing your product because there are programs and there are folks that do that. They literally contact these manufacturers in China and they say, “Hey we can help you sell direct on Amazon for products that are already being sold.”
Dr. Weisz: Got you.
Wes: There’s ways around that as well.
[00:14:38] The second issue is that there are courses out there which are great and they help folks, but they teach you the exact step by step process for private labeling. And so that’s great for the first group and maybe the second, and the third, and the forth, but you have waves of folks coming and doing this identifying the same products.
[00:14:57] So yes, you may be the only person that has a wide handled spatula under your brand, but there are possibly 8, 10 other listings of wide handled spatulas that are the exact same product, they’re just a different brand. So in a sense, that’s going more to that EBay model than it is to the Amazon model of all sellers on one listing.
Dr. Weisz: [00:15:21] So the positive side of the branded, you going direct to the manufacturers, obviously there’s a credibility. You know there’s a demand there. Any disadvantages?
Wes: [00:15:32] Absolutely. The disadvantage is that you have less control over your pricing. And so if you’re buying from a manufacturer they, a lot of times particularly for well sought after items, there is a minimum price that you’re able to sell the product for.
Dr. Weisz: I got you.
Wes: [00:15:56] Your margins typically are thinner than if you’re working private label or if you’re in retail arbitrage. So you have to be of the mindset of volume. Now you still have to be profitable, but your profitability is going to be less.
[00:16:11] So that’s the negative of that is you have to do a lot more volume to be as profitable. But the volume is there.
[00:16:18] I would say the benefit of that though is that one of the things we’ve done and we’ve leveraged is that when we started off, we were a baby company. We were a small retailer. We had a 1200 square foot store. Our manufacturers labeled us as a small retailer, a mom and pop shop. And that is a label that you get in our industry. When you start buying tens of thousands or hundreds of thousands of dollars of product a month all of a sudden these manufacturers say, “Huh, they’re not really a small potato anymore.”
[00:16:51] So from that, we’ve been able to leverage better pricing, better terms, and that actually helps us on our channel outside of Amazon. So that definitely benefited our own website. When you have better terms you can get more aggressive with some of your pricing or with some of your discounts or promotions that normally you wouldn’t have if you didn’t have the sales volume that we had through Amazon.
Dr. Weisz: [00:17:14] Yeah. So talk about with the branded on Amazon, specifically about the buybacks. I don’t know how it works. Do they let only a certain number of people sell that particular baby stroller or whatever the case is? I can imagine there’s other people selling it. How do people get the buybacks so when someone’s purchasing it they’re purchasing it from you?
Wes: [00:17:39] Sure. That’s a great question. The first thing is that every person’s experience is different. But our personal experience is that we don’t sell against Amazon retail for anything. If Amazon retail sells that product, that’s great. It creates awareness. But we won’t sell that under that listing. We might create a bundle or we might do an alternate product listing or something that adds value to the customer.
Dr. Weisz: [00:18:09] So you’re saying if the manufacturer sells directly to Amazon in bulk and Amazon sells it through their own channel, then you won’t also sell it unless it’s in a bundle situation?
Wes: [00:18:22] Right, we won’t sell under that same ASIN for Amazon folks out there.
Dr. Weisz: Got it.
Wes: [00:18:26] That same listing. We’ll create a separate listing that adds value. That’s again one of the other things that we do or keys to the kingdom on how to understand how to build those bundles and what makes sense.
Dr. Weisz: [00:18:41] What other factors affect the buybacks in your opinion?
Wes: [00:18:46] Well, like I mentioned, a lot of the products we sell are MAP pricing, or minimum advertised pricing. So basically everyone is supposed to sell the product at the same price. There’s almost no competitive advantage if you don’t deal with price. All you’re dealing with are people that do fulfillment by Amazon.
[00:19:09] So it’s somewhat of a negative, but it’s also positive because if we look at a listing on Amazon and we use our software that calculates sales volume, per units per month, if we know the sales volume, and we know the price, and we know the number of FBA sellers, we can calculate how much gross sales we’re going to be doing on a monthly basis for that product without even having to sell that product.
Dr. Weisz: That’s amazing.
Wes: [00:19:38] So you can forecast what your growth is going to look like over three or six months by using that formula.
Dr. Weisz: [00:19:45] So I feel sorry for people competing with you. You have this whole formula in place.
Wes: [00:19:49] It’s software tools and we’ve been doing it for a while. I’m sure other people do it too. You kind of know the other big sellers in your area. We know there’s probably four or five other larger sellers that do similar things to what we do.
Dr. Weisz: [00:20:03] Well there’s a reason they’re larger sellers, because they’re doing these things. So I don’t know if you can share, we can have a software conversation later, but can you talk about what was that software you’re talking about that does that calculation, or reprice, or calculates it?
Wes: [00:20:17] Sure. Sure. Well there’s multiple that you can use. Everyone’s got their own brand. But basically the software goes in and looks at the sales rank of the products and they know from historical data how many units are sold because of that sales rank. And so we use Jungle Scout, there’s AMZ Tracker, there’s multiple ones out there that give you that data. That’s what’s really important is getting that data as opposed to how you get it.
[00:20:48] So on the other calculation of expected volume. If we’re to become a FBA seller of that product, it’s internal. It’s just sales volume divided by FBA sellers.
Dr. Weisz: [00:21:01] Right. You’re not even letting me get to your fun facts, Wes, because you’re bringing up some really good points. The other point you brought up was bundles. This is really intriguing and I find a lot of people aren’t doing these things. What do you find works for a good bundle?
Wes: [00:21:17] That’s a great point. It’s definitely some of the stuff that I work with my…As a consultant, when I work with some of the companies on doing this exact thing, what you want to find is…
Dr. Weisz: [00:21:30] Yeah, what would you advise someone? What do they come with? Did they have no bundles, and what did you tell them?
Wes: [00:21:35] Yeah. For a retail seller, a seller that contracts directly with brands, what you want to do is find a high ranking base product, so the main product of the listing. So for example, with us, if there’s a popular stroller, what you want to do is identify that listing, you can tell what the sales are on that, and then identify the secondary product that goes with it.
[00:22:03] So, for example, we have a stroller that is sold individually but it has a second seat.
Dr. Weisz: [00:22:10] Yeah, I saw that on your site. It’s on the homepage. It’s front and center. I didn’t even realize that was possible and it shows you how you can add another one. That’s really cool.
Wes: [00:22:23] So Amazon Retail buys that stroller and buys the second seat and sells them both, but they don’t sell them together. It’s a somewhat common sense thing.
Dr. Weisz: It makes sense, yeah.
Wes: [00:22:38] On the Amazon pages, there’s what’s called frequently bought together products. [inaudible 00:22:44] look at those. Maybe that’s something that…
Dr. Weisz: That’s a great suggestion.
Wes: [00:22:48] And again, focusing on one industry and one area allows us to do that. So we create some pretty unique bundles that aren’t frequently bought together. Or maybe intuitive that are pretty successful because of what we understand how the market works.
Dr. Weisz: [00:23:04] Yeah, and you have moms that you probably talk to and they’re like, “Oh, this makes perfect sense in your mind.”
[00:23:10] So what’s the most popular bundle that you’ve created and/or that you’ve advised someone else to create?
Wes: [00:23:19] Sure. Like I’d mentioned early on in our conversation, you always got to have products in the pipeline. So this product Amazon Retail does sell now. So we don’t really sell this one much anymore. But what I was telling you about the stroller with the second seat, and the retail on the product is about $650. At one point in our peak, we were running about $85,000 a month in sales on that one listing.
Dr. Weisz: [00:23:50] That’s amazing. So Amazon sucks? They took it over? What happened?
Wes: [00:23:55] That is the market place. That’s part of Amazon. Listen, Amazon Retail it’s their ball, it’s their court, it’s their rules. They are going to track what’s popular for their third party sellers, and they are going to try to take it. That’s the nature of the beast.
Dr. Weisz: That is cruel.
Wes: [00:24:15] If you complain about that…
Dr. Weisz: It’s part of the game.
Wes: [00:24:18] It is. That’s part of doing business. That’s part of it. So have product lined up and ready to go when you know that happens.
Dr. Weisz: [00:24:26] So then how do we get them buying more on your site? How does that work?
Wes: [00:24:31] Well Amazon pretty strictly forbids driving traffic off of their site to your own website. So we don’t do that. Outside of Amazon we do some Facebook marketing.
Dr. Weisz: [00:24:45] Right, that’s what I mean, outside of Amazon.
Wes: [00:24:47] Sure. Sure. I’m really, really blessed to have the four of us total. Three very smart partners, each has their own strength. One of my partners is very gifted in marketing, Facebook marketing, digital marketing in general. So we’ve seen some pretty nice gains from that. The other thing…
Dr. Weisz: So…Yeah, go ahead.
Wes: [00:25:14] The other thing that we’ve gotten is from our relationship with one of our manufacturers, building it through Amazon we became close. We had an opportunity when the Affordable Care Act was implemented to…What happened was the federal mandate for health care plans to provide a breast pump at no cost to moms. And so that seems kind of simple, but we actually, like you were talking about with my father’s company in the past, had the ability to bill these health care providers.
[00:25:49] And so from that relationship on Amazon, we leveraged that to create a new website and a completely new business sending out breast pumps and billing these insurances. So that in a sense is an indirect but a way to market to our own site. But in a sense it’s also direct because of that relationship.
Dr. Weisz: [00:26:08] Yeah, we’ll get into that a little bit too. What I was going to ask you is your four partners, what is the unique skill that everyone brings to the table?
Wes: [00:26:16] Sure. Sure. Well one of them is my father. And so he’s just been around a long time and he had his own business and he’s a smart guy. So intuitional things, or gut reaction things guide him.
Dr. Weisz: [00:26:31] So what’s his super power in your mind?
Wes: [00:26:34] He has the ability to look out and kind of see what’s going to happen.
Dr. Weisz: [00:26:39] Because he has so much experience that he can see trends easier than other people?
Wes: [00:26:44] Yeah, so he’s good for that.
Dr. Weisz: Got it.
Wes: [00:26:47] One of our other partners was also a very successful businessman. He bought a business, grew it from about 25 employees to 130 employees in 5 years and ended up selling it. So he actually made an investment in our company. So he’s actually an angel investor. He wasn’t one of the original investors, but he put a sizable amount of money into our company. That’s great, but I would say even more important has just been his experience and knowledge in terms of growing a business because that’s what we’re doing.
[00:27:22] Dad’s company was about the same size for quite a while. This other gentleman, Tim, he did it. He took it like I said, from small to large and sold his business. So he has an amazing wealth of knowledge that we’ve been able to tap into. And then our…
Dr. Weisz: [00:27:37] Stop on Tim for a second, Wes. Tell me, what is your favorite or best advice you’ve gotten from Tim or that you’ve heard him say?
Wes: [00:27:46] That’s a great question. So much. In terms of the Amazon piece, which I thought was very, very smart, one of the things he says is, “Control the controllables.” And that’s one of the things I use with my clients as well.
Dr. Weisz: Talk about that, yeah.
Wes: [00:28:05] There’s so much that you’re not in control of on Amazon. Amazon does the marketing, the search engine, basically everything outside of having the product. So you’re very limited in what you can control. So you have to focus on at least controlling the things that are in your power.
Dr. Weisz: [00:28:23] So what did that mean to you? What were you like okay what can you control?
Wes: [00:28:30] That’s a great question. Before he came on, how we would buy, so how we’d go about buying inventory, there’s many ways you can do it, but at first we’re buying two or three months’ worth of inventory and then basically sitting on this inventory. So you’d get this bullwhip effect of inventory levels.
Dr. Weisz: [00:28:54] I’m sure that’s very common. Most people probably do that.
Wes: [00:28:56] Absolutely, and the problem is that you can really get into cash flow issues when you do that if you time it incorrectly. You have a million dollars out in payables with your manufacturers, and some companies…
Dr. Weisz: [00:29:09] Yeah, you got to sell that stuff.
Wes: You can’t pay the taxes in strollers.
Dr. Weisz: Exactly.
Wes: [00:29:13] Or pay the bills in strollers. So going to a biweekly ordering pattern really helped solve a lot of those issues. So that’s one example…
Dr. Weisz: [00:29:22] So is that a tracking thing or what was the issue with buying in bulk, a timing thing? The new tract of okay at this point, we know the lead time when the stroller gets delivered so we know we have to order…What was the change that you had to make so it wasn’t so up and down?
Wes: [00:29:44] Weekly, just getting on a cadence of accountability. So instead of buying and then not watching it for a while and saying, “Oh crap, I need to buy it again.”
Dr. Weisz: I see.
Wes: [00:29:53] It’s, “Okay, we’re going to look every two weeks, we are going to check this every day, and then track this. Two weeks from now we’re going to create a purchase order, then we’re going to do this.” And it’s just putting again those fundamental business basics in that allow a lot of that success.
Dr. Weisz: [00:30:08] I see. So before it would be like, “Okay, I ordered this bulk amount I probably don’t have to look at it for a month.” And then now you kind of look and you kind of see, “Okay we’re selling about this number a week.” And you’re paying really close attention of how many you need to buy, that kind of thing?
Wes: [00:30:22] Absolutely. There’s other risks that are involved when you buy two or three months’ worth of inventory as well. If something happens to that product listing, you may have to pull all that inventory back and those are cash monsters. Those just eat up cash. So by ordering biweekly, you have a lot more free cash flow so you can invest in more profitable opportunities when they come down the road.
Dr. Weisz: [00:30:45] Yeah, and that, Wes, takes discipline. So what do you do to employ those routines in your daily, or someone else, as far as…Because it’s much easier to buy it, not look at it for a month and harder to, “Okay, we need to check this every week or every few days.” What systems do you put in place that make sure you actually do it, or someone does it?
Wes: [00:31:09] Sure, it’s interesting that you say that. There is an incredible book called “4DX,” or “The 4 Disciplines of Execution.” Basically it talks exactly about that. If you want to, you need to identify one or two major areas of your business that you want improvement on. You need to understand the levers that would create that improvement. And then you need to create, and again this is a very abridged version, but you need to create…
Dr. Weisz: [00:31:45] Now none of us has to read it, Wes. No, I’m just kidding.
Wes: [00:31:49] So there’s [inaudible 00:31:49] measures which are things that happen after you work, after you’ve done the work. And then there’s lead measure things that you do before the result happens. And so you have a cadence of accountability for those lead measures.
[00:32:02] So we meet once a week talking about what those lead measures are, what they’ve done, what we’re going to do next week. So it really just sets a pattern of precedence for how you go about doing your business.
Dr. Weisz: [00:32:12] Now did you discover that just randomly, or did someone say you need to read this?
Wes: [00:32:19] That was actually my partner. We’re both big, big readers. But he came up with that one and it really inspired him and implemented it within the company and I’ve seen a big change since then.
Dr. Weisz: [00:32:33] I want to talk about the other partners. Any other good resources or books that you’d be like, “If you are in eCommerce business”…Just business, but obviously eCommerce, what should people get?
[00:32:47] So we have the 4DX, what other ones are must reads? Like I said, I listen to three to six audible books a week, so I’m asking personally too, what else I should be putting in the cue.
Wes: [00:32:59] I’ve got the Audible hook up. That’s my thing there.
[00:33:04] I love Jim Collins. He did “Good to Great,” “Great by Choice.” He’s a professor that basically went in and analyzed, particularly in “Good to Great,” why these certain Fortune 500 companies were so good for that certain time period. And he identified common characteristics among each of the companies. Those were his principles of what “Good to Great” was.
[00:33:30] Peter Thiel wrote, he was one of the founders of EBay I believe, “Zero to One.”
Dr. Weisz: [00:33:34] “Zero to One,” I’m listening to that right now. Yeah.
Wes: [00:33:37] Dude that’s such a great book. That is a great book. Any of the “Lean Startup,” there’s a whole series of them.
Dr. Weisz: [00:33:45] Anything specific to eCommerce that you can think of? Obviously these are all business books. I can’t think of one any specific to eCommerce sellers.
Wes: [00:33:56] Sure. That’s a good question. I haven’t focused specifically on eCommerce just because, like I said, we did some of the foundational [inaudible 00:34:06] Your business is business is business no matter what you’re selling and where you’re selling. So you’ve got to focus on those things first.
[00:34:13] I will say though that I’ve recently been getting in to a gentleman by the name of Ryan Deiss and Digital Marketer. He has some pretty fabulous stuff going on. It’s do it yourself, so you’re not paying a consultant tens of thousands of dollars to do it. But if you can put in the time and it makes sense for you to do it, then he’s probably…
Dr. Weisz: [00:34:40] Cutting edge, leading edge of marketing. Yeah. For sure. Anyone else that you think other people should be following or looking at online?
Wes: [00:34:53] I’ve been so dug into my business that I don’t spend too much time [inaudible 00:34:59]
Dr. Weisz: [00:34:58] That’s smart. You’re disciplined. The 4DX, so I’ll stick to that. So your dad, Tim, and then next?
Wes: [00:35:07] Ryan, he is our managing partner of the Lullaby Lane side. He has the day to day responsibilities as our CEO which is beautiful for me because you have Ryan who’s about my age, a little bit younger, go getter, I’d even call him a visionary in a lot of senses. We’ve had multiple businesses that’s been created.
[00:35:29] You have him and then you have Tim, the gentleman who’s been there, done that successfully, and then I’m caught in the middle. It allows me to be a little free and creative and figure out what makes sense. And that’s what helps me and allowed me to start Ezonomy is that, having the freedom.
[00:35:49] I’ve been so caught up in my own business that it’s been great. But I also love to talk with people and educate and communicate. That’s one of my passions. And so this has given me an outlet to do that.
Dr. Weisz: [00:35:59] So what would you say Ryan’s superpower is?
Wes: [00:36:06] I don’t use this term lightly, but genius is probably a good term. And the ability to…
Dr. Weisz: [00:36:13] Give me an example of that. Where do you say normal person and then Ryan does something to the site or did something that you’re like, “This guy’s a genius”?
Wes: [00:36:22] Well he was the person I would say that came up with the, what I mentioned before, the breast pump idea and going direct, selling these to people. And it’s just being able to see how something’s going to happen and being slightly different and slightly that it makes a little more sense. I don’t know if that makes sense, what I’m trying to say, but just the ability to make connections.
Dr. Weisz: [00:36:44] Yeah, he put two things together. He saw the Affordable Care Act, he saw you were already selling breast pumps, and then instead of just doing it the same old way, put them together and maybe people would see a lot of obstacles with going direct and maybe dealing with insurances and other things. He saw an opportunity there.
Wes: [00:37:03] Yeah, like tip of the spear king of thing.
Dr. Weisz: Yeah, sure.
Wes: [00:37:06] We have a great group. I think all of us have our own strengths and weaknesses that we bring to the table.
Dr. Weisz: [00:37:12] So you, what’s your superpower? I ask you last because it’s the hardest to identify your own. And you’re a very humble person, so I’m going to ask you to just really tell me, with the business, if you think about the business, what does everyone else tell you that is your superpower?
Wes: [00:37:35] I don’t know. I don’t pay too much attention. Discernment.
Dr. Weisz: [00:37:41] What do you mean by that?
Wes: [00:37:43] In other words, I think that’s a good skill I have. Discernment would be like if two people were having a conversation, I can sit there and I can watch this conversation and I can pretty clearly understand if they’re actually communicating with each other, what one person’s trying to say, if the other person’s understanding it, what needs to be said. It’s almost a facilitation of [inaudible 00:38:00]. So that would probably be one of my…
Dr. Weisz: [00:38:08] So Wes, on that note, user feedback. It seems like you do testing. You talk to people who are moms. I don’t think you’d call it discernment, but user feedback that you were talking to some moms and how that created maybe a new product or a thought process that created new products. Because I think oftentimes we don’t ask our users enough on what they want, or what they’re not liking in certain products?
Wes: [00:38:36] Sure. Sure. It goes back to the bundles. And actually that’s what inspired some of the bundles early on is just folks would say…You have this set of baby bowls and someone would ask, “Hey are the baby spoons, or do you have something that goes with this? That would be great.” And so we’d look at that and that would be again another…
Dr. Weisz: [0039:01] It’s like hitting you up side your head. You’re like, “Okay, maybe we should order spoons.”
Wes: [00:39:06] Can’t see the trees through the forest, that’s what it is.
Dr. Weisz: [00:39:09] Right. What’s also interesting in what you guys do is you do a lot of great content marketing. I look at your blog. You have baby wearing safety tips or carriage buying guide, a lot of different things. So what’s the direction? Who sets the direction of that? I don’t know if it’s the lady Rachel Sowers is the lady doing it. So tell me her role and then how you decide what to put out as far as content.
Wes: [00:39:39] Sure. Sure. Well, from a 30,000 foot perspective, to be successful in retail, whether it’s online or in business, you have to create a following. You have to bring value to people. That’s what sets you apart. The point of the content is to connect with people, is to create a community, is to create value with folks. If you’re just trying to sell them a stroller or a breast pump, they can get that anywhere. They can get that on Amazon. They do get that on Amazon and that’s why we can sell it.
Dr. Weisz: [00:40:11] Hopefully from you.
Wes: [00:40:13] Yeah. But if you want an actual community where you can continue to offer products and services and build the lifetime value of a customer, you got to give them great content. And so that’s why we try to focus on content so they feel like we’re not just trying to sell them something.
Dr. Weisz: [00:40:33] You’re delivering value.
Wes: [00:40:34] Yeah, I’ve said this from the beginning with our staff is that when someone comes into the store and they’re having their first child, you have the ability to directly impact how well that experience, or how good that experience is by the products that you offer. If you give them something that doesn’t work for them, they know that and it could negatively affect some of that experience. And I know that sounds like grandiose but in a sense it’s pretty accurate. If you give them something that causes issues, that’s directly affecting them. So you have a lot of power in folk’s lives. You have to take that seriously.
Dr. Weisz: [00:41:12] So what has worked with building the community as far as content goes? What, for you guys, content has worked the best?
Wes: [00:41:20] Sure. Sure. Well, like you said, with blogs, that’s a great part of it. In our retail location, which we have a 7,000 square foot retail location in northwest Ohio, we offer classes.
Dr. Weisz: [00:41:32] Oh, really? Okay, cool. What kind of classes?
Wes: [00:41:35] Baby food making classes, baby yoga, baby sign language, music classes.
Dr. Weisz: [00:41:42] That’s amazing.
Wes: [00:41:44] It’s not there to retire off of early.
Dr. Weisz: [00:41:48] What’s the most popular class, or most popular two classes?
Wes: [00:41:52] That’s a great question. I’d be lying if I said I knew at the moment because my head’s been so buried in the Amazon piece. I don’t want to give you a…
Dr. Weisz: [00:42:01] Is there a best guess? I’m just curious. So you have the sign language class, the food making class, what other classes?
Wes: [00:42:08] Baby yoga, baby art. Probably the music classes would be popular, most popular.
Dr. Weisz: [00:42:18] I love that you’re talking about this, Wes, because oftentimes when people are focused online, they’re not dealing directly with real people. And so I find adding that component in there is really powerful. Do you video tape these classes or anything?
Wes: [00:42:31] Not really just because it’s such a personal and almost a one on one experience with the folks. So to go with what you’re saying, you really have to…To be successful you have to have Omni channel presence. It can’t just be your website, can’t just be your store, can’t just be Amazon. To actually build your brand, you have to really focus on all of them.
Dr. Weisz: [00:42:53] You’ve side tracked me a lot, but I’m going to get back onto from the beginning with your dad’s company. Before we talk about that and what you did for that, then we’ll get more into the story with Lullaby Lane.
[00:43:08] Your fun fact is crazy, you know? And so I wanted to mention that. So you were in body building competitions and you also are a trained opera singer. So, on the body building front, I’m not going to ask you to take off your shirt and flash me, but me about it.
Wes: [00:43:30] When I was a kid, I always was heavier and one day…I’d run marathons, I’ve done other kind of stuff like that. I really tried to push myself. And one day I said, “I want to do a body building competition.” So I took a couple months and educated myself, researched, and just understood how you really have to go about doing it. And basically I ate just chicken and rice and eggs for four months or five months straight.
Dr. Weisz: [00:44:04] So how old were you at the time when you did this?
Wes: [00:44:05] The first one, I’ve done two…They’re drug tested by the way, so it’s nice because it’s not the guys, the big, big boys, aren’t in there doing it.
Dr. Weisz: No steroids.
Wes: [00:44:16] My first one was about five years ago now I think, at this point. The last one was about three years ago. The thing about body building, not to get too deep into it, it’s an incredibly selfish sport. And it’s not even the time spent in the gym, it’s the time spent in the kitchen. It’s hours and hours.
Dr. Weisz: [00:44:34] I’ve watched video on YouTube of some of these professional body builders, and this guy, his whole morning routine. You’ve probably seen it. He talked about what Tupperware he buys because he’s packaging all this stuff up in different things for the day. So I know exactly what you mean.
Wes: [00:44:51] So if any private label is out there, there’s a niche market for you.
Dr. Weisz: [00:44:54] My eCommerce mind went to that when you talked about bodybuilding. I’m like, “He’s in the baby industry.” I would think immediately when you said that, that you…Because that’s a huge industry. With bodybuilders taking different supplements, all sorts of things, why didn’t you decide to go that route?
Wes: [00:45:13] It’s a great market. There’s a lot of it is a great market in the sense that it’s not regulated by the FDA. It’s an ingestible. You have liability issues from a business standpoint, that’s not a road that we wanted to go down.
Dr. Weisz: [00:45:25] I’m paranoid about babies.
Wes: [00:45:32] Well the nice part is you’re working with manufacturers. You’re on their insurance.
Dr. Weisz: [00:45:34] Yes, I got you.
Wes: [00:45:36] Obviously we have a million dollar policy of insurance ourselves. You also work with other folks on there.
Dr. Weisz: [00:45:43] So the trained opera side of things.
Wes: [00:45:47] Yeah, that was definitely from college. So again, following in the old man’s footsteps, he got his degree in operatic performance.
Dr. Weisz: [00:45:54] Really?
Wes: [00:45:55] Yeah, and in ballet believe it or not. So we’re kind of artists in our family.
Dr. Weisz: [00:45:59] Holy cow!
Wes: [00:56:01] So mom’s the same way. She was in music history. I went into college on a…I was kind of a slacker in high school. So really the only reason I got in to college was on a scholarship. So it was almost like an athletic scholarship because I only had a 3.6 GPA.
Dr. Weisz: [00:46:19] That’s not a slacker.
Wes: [00:46:20] Well to get into the school that I went to, it was. The average was weighted was 4.2 or something. The University of Florida is where I went to college. I got wait listed and I was lucky enough because I was on scholarship for singing they boosted me in. I’ll admit that.
Dr. Weisz: [00:46:38] I said before that I wouldn’t put you on the spot, or may not put you on the spot to sing, but if you feel inclined at any time, I’d love to clip something in at the end if you have it.
Wes: [00:46:50] I looked. Mom and dad just moved away so when I go up there…
Dr. Weisz: [00:46:54] I knew I’d get the “I looked” excuse. So the big influence for you, Wes, was obviously your dad. You started with him. He had the durable medical equipment company and you did some interesting stuff for that company. What kind of stuff were you doing?
Wes: [00:47:14] Sure. Sure. About 12 years ago when he’d been in it for 10, 12 years already, we had an opportunity to provide durable medical, like you were saying, wheelchairs, basically custom wheelchairs for folks with severe disabilities. And so I was just out of college and we started working together. So I really focused my time and energy on that. I got certified as an assistive technology professional. Basically that’s what I did for 10 years was design custom rehab wheelchairs for people with severe issues like Christopher Reeve and Stephen Hawking type wheelchairs. So that was…
Dr. Weisz: [00:47:52] We’re talking like 10 years ago, right, or more?
Wes: [00:47:57] Yeah, absolutely. It’s wonderful because of the direct impact that you have on people’s lives. So I still clearly to this day remember a lady that I built a custom wheelchair for her, and she was pretty severely obese and so it was really, really custom. And I was there and it probably took me about five hours to fit this lady, once I had built it and designed it and took it to her house to try and deliver it.
[00:48:22] But when we finally got it, she went outside. And it’s the first time she’d been out of her house in two years.
Dr. Weisz: [00:48:28] Holy cow, seriously?
Wes: [00:48:30] Yeah. So we went for a little walk together, which is obviously not part of the job description, but I just loved it. She was so appreciative of that, so it was really cool to have direct patient care basically.
Dr. Weisz: [00:48:42] That is amazing. I want to talk about one other thing on that note, but I don’t want to forget. I want to ask about when you went online with that company, when you started putting stuff online. Because I’m sure it was brick and mortar for a long time. But before, you have a really interesting fact on an experience with muscular dystrophy.
Wes: [00:49:02] A couple years into the business of doing this I heard of an opportunity for volunteering at a camp. So Muscular Dystrophy Association, Jerry’s Kids Telethon, a lot of people know about that. Well another one of their big programs is MDA Camp. And so what that is, is basically for one week a year, you go and you do 24 hour direct patient care with a child with muscular dystrophy. So kids that are, what’s the age? Six to seventeen I believe is the age of the kids. And I did it that the first year and I absolutely fell in love with it. It’s such an incredible experience. I’ve missed a couple years, but this was my tenth year that I did camp.
[00:49:52] It’s really hard to explain, because I was trying to think about this. You know when you have a really, really close friend that you can maybe not talk to them for six months, or eight months, or three months and…
Dr. Weisz: [00:50:071] You just pick up where you left off sort of thing.
Wes: [00:50:09] Exactly, you pick up right where you left off. That is what this is, but for a hundred attendants and a hundred kids. So it’s like 200 best friends meeting for a week a year, every year, picking up exactly where you left off.
Dr. Weisz: [00:50:21] I think this is powerful to talk about, not just from a personal standpoint, also partially from a business standpoint. Probably you see some amazing things of drive and determination in these kids that they are bound to a wheelchair and in horrible shape and they probably have sunny dispositions more than someone who’s so well off. Can you talk about one experience, maybe the one person that impacted you?
Wes: [00:50:48] Absolutely, you nailed it in that it’s a reality check. “Oh I didn’t get my Starbucks this morning,” or whatever. And you can think about there’s a young girl or boy that’s never walked, that’s in a wheelchair, that life expectancy is maybe 20, 21 years and they have an incredible disposition on life and just are carefree and they love it. It’s like, “Oh okay, I guess things aren’t so bad.” I’ll tell a story…I’m trying to figure out…There’s bodily humor involved in it.
Dr. Weisz: [00:41:24] Go ahead. Shoot.
Wes: I feel like you’re looking at me like…
Dr. Weisz: [00:51:29] I’m up for anything, go on.
Wes: [00:51:32] But it has a point. The first year I volunteered at MDA Camp, I had a young man who was I think nine at the time. And this is again my first experience. I’ve done wheelchairs, but I’ve never cared for someone with a disability.
[00:51:48] So the first camp, the first kid, the first night…We all stay in cabins, so I got to say that. There’s like eight or nine of us in these cabins. Some of these kids, they have to sleep in a hospital bed. They can’t sleep in bunk beds like everyone obviously because they have a sever issues.
[00:52:05] So the first night, it’s about 3:00 a.m. and I hear him and he says, “Wes? Wes?” And I’m, “What?”
Dr. Weisz: [00:52:20] You’re like, “Go back to bed.”
Wes: [00:52:22] He’s like, “Wes? Wes? I ‘blanked’ myself.” I pooped, which you know, that’s what happens. It’s part of life, it’s bodily humor.
[00:52:31] And so I get up and I go look and he absolutely had. And it was overflowing the diaper. And again, it’s not a criticism. It’s just part of life. And it took me about two and a half hours to get him all cleaned up, roll him over. This was my first time I’d ever done this. So that was like welcome to MDA Camp. That was my first experience.
[00:52:55] But I’ll tell you, I loved it. I absolutely loved the experience and there’s nothing like it. If there’s any filmmakers out there, small filmmakers, please contact me. I think it would make an incredible movie. It’s hard to explain without [inaudible 00:53:09]
Dr. Weisz: [00:53:10] An amazing documentary.
Wes: Yeah, exactly.
Dr. Weisz: [00:53:13] So I’m going to go back on the eCommerce path for a second. Thanks for sharing that story. And don’t listen to this story before you eat. So the eCommerce, in your dad’s business, when did you first go online?
Wes: [00:53:29] Sure. Sure. So you remember there’s four partners, myself, Ryan…
Dr. Weisz: [00:53:34] So were they there from what point?
Wes: [00:53:37] Tim, the gentleman who invested, was after. But the three of us started it. And so Ryan worked at my father’s company.
Dr. Weisz: Oh really? Okay.
Wes: [00:53:44] Yeah. And we realized real quickly that it was really difficult to bill Medicare and Medicaid and these private insurances. So we wanted to get out of that.
Dr. Weisz: [00:53:55] I’m in the health profession. I understand completely. They control you and they can slash your prices and everything else.
Wes: [00:54:03] And there’s nothing you can do about it, exactly. I could tell some horror stories on that. So we realized quickly that we wanted to do something more free market where you’re rewarded for the effort that you put in. So like a lot of people, we first just slapped up a website and put every product on there and figured people would just come in droves and buy our products. That didn’t happen. That never happens.
[00:54:27] So we reassessed and we looked at it and we came up with an idea of niche websites. And so we still have that business. It’s small, but websites dedicated to basically one product or a line of products where we fulfill those orders. That was really our first experience with customizing a website for search engine optimization for that one key product.
Dr. Weisz: [00:54:52] What were they? Initially it sounds like there were a lot of wheelchairs. What other durable medical equipment were popular?
Wes: [00:54:58] Sure. Sure. We have a couple websites that do wheelchair cushions. They’re not huge. Each site does maybe $250-$300,000 dollars a year. So it’s not massive.
Dr. Weisz: [00:55:10] To some people that’s really good.
Wes: [00:55:12] Yeah, that is good. So yeah, wheelchair cushions, a piece of medical equipment that allows a person to stand who can’t stand. It’s called a standing frame. We sell those. There’s four or five sites out there.
Dr. Weisz: [00:55:33] Did you put them all online at once, or did you say, “I think we’ll choose this piece of equipment and go with that first”? What was your thought process?
Wes: [00:55:42] We started with one sight as a niche site, and that was one of our wheelchair cushions. The type of cushion is called a Rojo cushion. Our website is pressuresorecushions.com, that’s a real niche. But hey, if you have a bed sore…
Dr. Weisz: [00:55:57] That’s what you want.
Wes: [00:55:59] That’s exactly what you want.
Dr. Weisz: [00:56:00] That’s huge for their quality of life.
Wes: [00:56:02] It is. And it helps that we’re not just online sellers. We have a history and a background and experience in that. So we’re able to not just sell products, but we can help out with how it needs to be worked and other questions as well that we can answer because of our history in health care.
Dr. Weisz: [00:56:20] So you went from pressure sore cushions to what was the next progression?
Wes: [00:56:25] Well actually it was originally it was the brand name Rojo Cushions. But we found quickly…
Dr. Weisz: People buy [inaudible 00:56:36]
Wes: [00:56:36] The brands didn’t like us using their names in our URLs.
Dr. Weisz: [00:56:39] I see.
Wes: [00:56:41] So trademark issues.
Dr. Weisz: I got you.
Wes: [00:56:42] We had to transition away from that which was a good experience. So it was that website and another website for wheelchair cushions, and then the easy stand standing frame website.
Dr. Weisz: [00:56:56] When did you get into the Lullaby Lane?
Wes: [00:56:59] Well we had that going, and that was around the time that we were looking for something with a larger market cap than medical equipment. And so we identified one specific type of stroller, tried to implement that model, basically the named branded for that one item…
Dr. Weisz: [00:57:18] Did you start with strollers or was there something else before that?
Wes: [00:57:23] Yeah, we started with that one stroller.
Dr. Weisz: The one where the person had to travel miles just to look at the $700 stroller, or was it a different stroller?
Wes: [00:57:30] It was a different stroller but it was very similar. Not to get too deep into it. One of the things we’d look at when choosing a product was the search volume on a monthly basis. Rojo Cushions is probably somewhere around 30,000 for all of the unit searches a month, if that, for all the keywords.
[00:57:53] This one particular stroller, baby jogger was 800,000 or 900,000 searches a month. I was like, “Huh, this is a different ballgame.”
Dr. Weisz: [00:58:04] So someone goes on Google Keywords or something and searches the volume?
Wes: [00:58:09] Yep. A slight tangent off that, the interesting thing is that some of my research I’ve been doing with consulting is that Amazon, to go back to Amazon, is now the number one place where people start their product research. In 2009, 19% of the people started product research on Amazon. In 2015 a recent survey showed 44% start that research…
Dr. Weisz: [00:58:34] Wow, that’s amazing.
Wes: It’s a game changer. It’s a complete game changer.
Dr. Weisz: [00:58:38] So is there a service that you like to use to figure out…Obviously Google Keyword tool is free. Is there a way to figure out the monthly searches on Amazon, certain tools for that?
Wes: [00:58:50] There is, there’s multiple ones. We use a service called Merchant Words.
Dr. Weisz: [00:58:58] I’ve heard of it, yeah.
Wes: [00:59:00] The thing is, is that the volume is so much more massive in terms of monthly searches than what’s on AdWords on the keyword tool that I’m having trouble believing that it’s actually that volume. It could be. I could be wrong. We don’t use it as gospel. We use it more just to trend.
Dr. Weisz: [00:59:22] So you look at Google Keywords compare with the Merchant Words and see how comparable they are and just use the highest one? Maybe the data isn’t accurate but it’s the highest search term or something like that.
Wes: [00:59:36] Correct, and it may be.
Dr. Weisz: [00:59:39] You just don’t know how accurate it is because it’s not coming directly from Amazon.
Wes: [00:59:44] You got it. It’s not published information, it’s somebody’s algorithm. We found in general it works, but again, there’s no way to track the specific volume.
Dr. Weisz: [00:59:53] So you start with the first stroller and how does that go?
Wes: [00:59:58] That went well. We created a website specifically for that stroller just like the old business model. It had a little success. It was a lot more competitive market than what we were used to with the medical supplies.
Dr. Weisz: Less niche type of thing?
Wes: [01:00:13] Yeah, so that was fine. And then we said, “All right, let’s try to get a couple more products.” But then that was when we really quickly realized that you needed a physical retail location to contract with these manufacturers.
Dr. Weisz: [01:00:29] Why is that, trust purposes?
Wes: [01:00:32] It is for use. You have to bring value to these brands. Understanding that these are sought after brands that people are knocking on their door on a daily basis to try to sell their products. These brands don’t really need a contract with anyone. They don’t care in the sense that if you say, “Hey, I can sell $100,000 of your product online, that’s all that I’m doing.” They’re like, “Well, okay, we’re not interested.”
Dr. Weisz: [01:00:58] Why is that?
Wes: [01:01:00] The channel online is already saturated in terms of where to get product.
Dr. Weisz: [01:01:07] I see.
Wes: [01:01:08] If a brand was worried about someone typing in and trying to find their product, that’s a different story. But people are searching specifically for these products, and there’s already major companies out there selling them. So there’s no value to just selling online.
[01:01:21] So we realized quickly that you have to bring some other tangible value to these companies. And you have to identify on a per industry basis what that is.
Dr. Weisz: [01:01:32] Per manufacturers they may have different values that would hit home for them.
Wes: [01:01:37] Absolutely, it’s a trench warfare kind of thing. You got to figure out what these guys want and then you have to do your best to give it to them to contract with them. And so one of the things that they wanted was a nice retail location for their products to be displayed in. We have a really beautiful big old store for that reason. We do well in it too. We sell a lot of product in our store, but originally it was almost just the cost of doing business.
Dr. Weisz: [01:02:02] What other value surprised you, Wes, that you’re like, “Why do they want me to do whatever it is?” Or that brings value to them.
Wes: [01:02:11] Sure. That’s a good question.
Dr. Weisz: [01:02:14] Because we’re talking online. We could have a million people do it online. You could search for it online. Retail location, that makes perfect sense, any others that you could think of that through talking to the manufacturers that added value that you discovered?
Wes: [01:02:30] I don’t know about a specific thing, more that you are vested in that industry. You have to show them that you are a baby retailer. Whatever it is, whether it’s a website, retail location, you have to pass the sniff test, not just be someone that wants to buy and sell product online. There’s no value to it.
Dr. Weisz: [01:02:54] They want an expert.
Wes: [01:02:55] Yeah, exactly. It’s just a combination of a bunch of small things. It took a while to contract with these guys. But once we did and then once the flood gates opened, that’s really when our Amazon sales also just hit the roof because we never have to worry about finding possible product opportunities to sell.
Dr. Weisz: [01:03:18] I know we were talking before we hit record about the barrier to entry. The barrier to entry is a little bit higher, which is good for people. But then if you’re wanting other people to do it, or teaching other people, it makes it a little bit challenging. How do you help people navigate that barrier to entry?
Wes: [01:03:39] That’s a great question. You nailed it when you said that the barrier to entry’s high. But when you get there, it’s unbelievable. It’s a matter of one, setting expectations ahead of time. Which thank you, you actually helped me with this in our conversation.
[01:04:00] Thinking about educating and thinking about doing consulting, I want to be up front with these folks and say, “Listen, it’s a lot of money that you’re paying for this. Please understand that this is not easy. This is really difficult.” A lot of people will probably fail at this. But if you persevere, if you put in the time, you put in the energy, then you can make it happen. And when you get there, it’s very valuable.
Dr. Weisz: [01:04:28] What advice do you have for people? How should they start the conversation with one of these manufacturers? They’ve identified what industry they want. They’ve identified maybe these three manufacturers. How should they start a conversation?
Wes: [01:04:44] Sure. Well I would back up slightly from there. Once they figure out what industry that they want to be a part of, create a company and name it. It doesn’t have to be as blatant as Wes’ Toy Shop, or Wes’ Baby Store, but something that identifies you as part of that industry.
[01:05:08] From there, you take the mindset that you’re in X industry. And then when you start that conversation, you’re not just someone that is buying and selling online, you are part of that industry. And it permeates your conversation and people get that. They want to see that you’re there. And if it’s in your mindset that you’re in that industry, you’re going to be more successful.
Dr. Weisz: [01:05:31] Yeah, we’re not DME Company, we are Lullaby Lane. So people know immediately you’re in the baby industry.
Wes: [01:05:37] Exactly.
Dr. Weisz: [01:05:39] So you went from the first stroller, tell me what was the first big milestone that you hit online?
Wes: [01:05:46] That’s great. So that first stroller that we sold on our own website and in the store, that was…What happened was Amazon contacted us and said, “Hey, we want you to be a third party seller on Amazon.”
[01:05:59] I think the reason they did that is because Amazon is all about being the everything store. They want people that…They want to offer everything in the freaking world. And so some brands that they don’t have access to, I think what they do is find people that do have access to them and reach out to them. There’s no proven of that, but I think that’s what it was.
[01:06:20] And so this same stroller that we would sell maybe one to two a week in the store, maybe one to two online, we said, “All right we’ll give it a shot.” So we listed this stroller.
Dr. Weisz: [01:06:34] And for people who don’t know, this is a $500 or $600 purchase. Selling two a week is selling $1200 a week, if you’re selling online and in the store, that’s $2400 a week. I’m just making that notation because, “Oh, he’s just selling one or two.” But this is a high ticket item.
Wes: [01:06:54] That’s a great point. Yeah, that’s right. $659 I believe is the retail on this stroller.
Dr. Weisz: Right.
Wes: [01:07:00] And so we would, like I said, one, two in the store, one, two online. We listed on a Friday, over the weekend, came back on Monday and we had sold like 13 units.
Dr. Weisz: Wow.
Wes: [01:07:10] That was the first light bulb. “Interesting.”
Dr. Weisz: [01:07:17] So what do you do? So when you see that happen, how do you increase it? You’re thinking, “Okay, how can we do more of this?” What do you do next?
Wes: [01:07:25] For me, I just started reading. I started reading and I started getting everything I could and started getting my hands dirty. Let’s just get in with Amazon, let’s talk to Amazon. There’s a lot of information out there online and some of it’s good, some of it’s not very good. But the best way for us was just to roll up our sleeves and start learning about Amazon in Amazon. That’s really what we did. We spent at least hundreds of thousands of dollars over the last couple of years just educating ourselves on how to properly sell on Amazon.
Dr. Weisz: [01:08:01] So this is just one product? So what did you do next with introducing other products or to increase the sales of this one?
Wes: [01:08:11] Sure. We did a little research to understand and found out about sales rank, found out about the basics of Amazon. And then started identifying other products that we could sell that had high sales rank on Amazon. We looked at selling initially against Amazon Retail and found real quickly that we did not want to do that.
Dr. Weisz: [01:08:35] They’ll crush you.
Wes: [01:08:36] They’ll crush you, yeah. Like I said, some folks say that they shared a buy box, and they probably do in a lot of cases and experiences, but we don’t want to risk that. Like, “Hey, let’s have $20,000 worth of inventory…”
Dr. Weisz: [01:08:50] How do you know that? Does it say this is Amazon? If someone’s doing research and they see the baby jogger, is there something that says this is from Amazon? What’s the designation that you know this is the Amazon retailer?
Wes: [01:09:03] Sure. So when you look on Amazon, it will say, “Prime eligible. Shipped and sold by Amazon.com.”
Dr. Weisz: [01:09:11] I got you.
Wes: [01:09:13] When you see that, you know that that’s Amazon.
Dr. Weisz: [01:09:14] Don’t go there.
Wes: [01:09:14] Exactly. For us, again, everyone’s a little different, but how we grew was staying away from Amazon. Again, it’s controlling…
Dr. Weisz: [01:09:23] How did you figure that out? Did you try it and then it just…?
Wes: [01:09:29] Yeah, I tried it and read. Try something, read about it. Try something else and read about it. Try something else and read about it. Strategy, implement, watch. Strategy, implement, watch. Strategy, implement, monitor. And we were pretty lucky early on to run into the bundles and to have all that different inventory available and all those different brands available. But still, it took us a long time to understand that. At first that wasn’t even FBA.
Dr. Weisz: [01:09:56] That’s what I was going to ask actually. So tell me about the transition of shipping out of your warehouse or shipping FBA, because there’s logistics with the bundles too.
Wes: [01:10:06] Absolutely. Now, if I showed you, we actually have a whole production line on how we do bundles including machinery. But back then I was just working out of our little stock room in our 1200 square foot store.
Dr. Weisz: [01:10:22] So it was picking the bundle, right?
Wes: [01:10:25] Yep, and just have boxes and boxes lined up on the wall as we grew and finally we said, “Hey, we need to get out of here and get a warehouse and get a main office.”
Dr. Weisz: [01:10:35]So how do the bundles work now? If I picture it, are they going down a conveyor belt and something’s wrapping them all together? How does that work?
Wes: [01:10:44] It’s still manual.
Dr. Weisz: Oh, okay.
Wes: [01:10:45] We have a shrink wrap machine and a heat tunnel that we do use for our large quantity SKUs. But some of the smaller ones are still done by hand. It’s a combination.
Dr. Weisz: [01:10:56] Okay, I’m just trying to visualize what that looks like.
Wes: [01:11:01] You’ve got it.
Dr. Weisz: [01:11:02] And do you ship them all through FBA, or do you ship them out from your warehouse now with the bundles?
Wes: [01:11:09] Sure. We’re about 90 or so percent FBA right now. Most of the merchant fulfilled stuff that we do is typically because of an advantage for shipping. For some reason, if it’s a low margin item, and it’s not cost effective to send it FBA and then send it out to the customer, we’ll do merchant fulfilled. We’ll also do merchant fulfilled for testing purposes. Like for when we test a new bundle, we’ll do a merchant fulfilled because you can use one item in multiple bundle tests. So if I had a stroller and a car seat, I could do a bundle of a stroller and a car seat, a stroller and a sunshade, and use that same base stroller. But then once you find and realize what’s a high selling SKU or [inaudible 01:11:57] then you commit to an FBA.
Dr. Weisz: [01:11:59] I got you. Does someone need you for a second by the way? I’m just curious.
Wes: [01:12:03] No, that’s okay.
Dr. Weisz: Okay, if you need to take a minute because I saw you look up. I’m like, “Am I interrupting a meeting that you’re supposed to be in?”
Dr. Weisz: [01:12:12] So you sold 13 by Monday morning. So what was the next major milestone with Lullaby Lane?
Wes: [01:12:22] It was a blur, to be honest with you, since the beginning. I would say probably my first $50,000 month which was about 2 or 3 months later.
Dr. Weisz: [01:12:32] And how many for that $50,000 month…How many products…Because that was just the one stroller, which was the 13, right? So how many products are you talking? Is it still just the one baby stroller or where there other things that you could use?
Wes: [01:12:45] No, I think I had about six or seven or eight products. Again, it’s been a while. [inaudible 01:12:50] products at the time.
Dr. Weisz: [01:12:50] I’m dusting off the cobwebs for a second.
Wes: [01:13:03] When you grow to a certain size, I call it hitting the invisible Amazon wall.
Dr. Weisz: [01:13:05] Yeah, tell me about that.
Wes: [01:13:06] You grow to a certain size and you can no longer do it by yourself. I’ve talked with other sellers, they’re like this too. There’s a point where you can basically go in, look at your Seller Central account, check a few things here and there, and then fully get a full understanding of where all your inventory is and where all your sales are.
Dr. Weisz: [01:13:23] Right.
Wes: [01:13:24] At some point, when you’ve grown enough, you look up and you realize you’ve got like $10,000 worth of inventory that’s been sitting there for 2 months or 3 months that you’re like, “Oh crap, I can’t do this anymore by myself.” So then is when we started looking at bringing in people. I was probably doing about a million dollars a year in sales before I brought someone on. There’s more people, obviously Ryan and Steve, but I was doing the majority of it. It was about a million dollars in sales a year before we brought someone else on.
Dr. Weisz: [01:13:55] Yeah. Wes, I think this is a really important point to hone in on for a second, the invisible Amazon ceiling. What other metrics do you look at? What should people be looking out for? Maybe it’s a million dollars in sales, maybe it’s X amount of inventory. What are those things that now looking back you’re like, “Okay, I should’ve started implementing some things and looking at these specific metrics beforehand.” What are those?
Wes: [01:14:21] Sure. Really for us, there’s a lot. But the two main ones I would say. One is inventory turnover rate. So how fast you turn over your inventory. And two is your profit margin. A lot of people, when they do Amazon sales, they think of Amazon as a customer. So if we have 300 SKUs and some of them make money, some of them lose money, but as long as the end of the month I’m up, I’m in the positive, then it’s okay. Okay, you can do that. But to be a real successful Amazon seller, you got to go SKU by SKU.
Dr. Weisz: [01:15:01] You have to cut the ones that aren’t working.
Wes: [01:15:03] It’s 80/20 that bad boy, absolutely. Always be focusing on you top performers and testing new ones. So yeah, inventory turnover rates, which is basically the more inventory you have sitting there, the more cash you have just sitting on the shelf, dollar bills on the shelf, and then profitability per item as well.
Dr. Weisz: [01:15:19] So at that million dollar mark you realized, “Okay, I need other help or software or stuff.” What was that that you needed to inject in to get to the next level?
Wes: [01:15:30] Sure. If we could have done it over, I would have invested in software earlier. I think we would have invested for sure in software earlier. What we brought on was another buyer. We call them portfolio managers. Because as I mentioned earlier, Amazon’s almost like the stock market, it changes up and down quickly. So we have portfolio managers that manage books of business, each of them. And then they have their numbers that they’re expected to hit, profitability and sales.
Dr. Weisz: [01:16:00] How do you find and train a buyer?
Wes: [01:16:04] We’ve home grown it. That’s what I did first is to train someone basically to do exactly what I did. From there, I think next was one warehouse person. Because we started with higher priced items and worked our way down into lower priced and higher volume items.
Dr. Weisz: [01:16:25] Okay. So that was one thing. You brought in the buyer which makes perfect sense. What else needed to be injected to get to the next level?
Wes: [01:16:33] More space for sure. That’s when we moved around and got a new warehouse. It just gave us the freedom to have and store more inventory, and move more inventory. Our warehouse is basically a turnaround center. It’s not a traditional warehouse. We just get it in and we have metrics on how fast we can get it back out.
[01:16:56] You also have to be very careful of how you send inventory into Amazon. One of the things they grade you on as a seller that’s not published in your account health is your inbound inventory issues. And the rate, the percentage that you mess up stuff into them. So that can negatively affect your account as well. So we have to create quality control checks and double checks of inventory. It’s really just a whole process that you go through.
Dr. Weisz: [01:17:25] Yeah, and, Wes, you mentioned software, so you would have done software earlier. What software do you use, or recommend others use that maybe you don’t use?
Wes: [01:17:35] Sure. We started out with just Excel spread sheets. Then we went to QuickBooks and Enterprise with their inventory add-on piece. We would have changed that, definitely would have not done that again if we had the choice.
[01:17:52] So we went to more of a pier inventory management recently and went to QuickBooks online because they integrate with each other. And we have internal software that we deigned to look at age of inventory, turnover rate. It’s interesting, it’s one of the things that I’ve found with a lot of these big sellers, especially folks that have been around for a while, is they all have their own home grown software because there was nothing out there that met their needs.
Dr. Weisz: [01:18:25] People were piece mealing stuff together.
Wes: [01:18:27] Yeah, and it’s interesting about Skubana is that Chad, the guy that created this, he was an Amazon seller. He created his own brand. He had a lot of his own…
Dr. Weisz: [01:18:38] Still is, yeah.
Wes: [01:18:39] Absolutely. We don’t use his software personally because of the health care division with the breast pumps we were talking about.
Dr. Weisz: [01:18:46] So I’m going to ask you about that. So I’m going to do a quick word from our sponsor, Skubana, for a second and then I’m going to ask you why you don’t use it actually. I always tell people, imagine if you can combine all the software tools you currently use to run your eCommerce business into one centralized Cloud platform at a small cost. Would you use it? Of course you would.
[01:19:12] Skubana does all that. I personally use them. And exactly what you were talking about before, Wes, is the profitability of SKUs is huge because…I don’t know…Okay, there’s this fee, there’s return fees that factors in all these things, and I can actually look in the dashboard and see what the profitability is without piece mealing an Excel spreadsheet and trying to figure it all out. So I personally love it, use it. So now I’ll give you the floor to tell me why you don’t use it.
Wes: [01:19:41] Sure. Like I’d mentioned before, we have another division of our company that bills health care providers, or insurance, basically insurance contracts. We need a very specific software that is electronically connected to these companies. And so we end up using that software specifically for that purpose. It’s such a specialty software that it doesn’t really talk to anything else. So because of that, we had to build our own software.
[01:20:10] But yeah, at the time before we were doing breast pumps, and this is a plug as well, I did a ton of research on these different softwares. There’s a class of software, enterprise level software basically, that does most things. And a lot of these guys were charging 5, 6, $7,000 a month…
Dr. Weisz: [01:20:32] Tens of thousands, yeah.
Wes: [01:20:34] Yeah, absolutely. I met Chad at a seller’s conference this past spring. We got to talking. He was telling us about the software that he’s designing. I love it because it has all those same functions, but it’s a very small 15 cents or 12 cents per FBA shipment. Relatively speaking, it’s a much smaller percentage.
Dr. Weisz: [01:20:55] You only pay more if you’re selling more, essentially.
Wes: Yeah, exactly.
Dr. Weisz: Exactly.
Wes: [01:20:58] That’s great, it’s good stuff.
Dr. Weisz: [01:21:00] And so what type of people, obviously you do consulting too, what type of people would you recommend? And we were talking off that obviously you recommend different tools and that’s one of them in your tool box that you recommend to people. What type of people do you recommend using it?
Wes: [01:21:19] Sure. Jeremy, it would almost be, as opposed to the type of person, the number of SKUs that you’re carrying. So and that goes back to that wall that you had. I think if you have just a few SKUs at least early on, even if you have pretty significant volume, you may be able to do it on your own because it’s pretty quick calculations. We did that.
[01:21:41] But when you get over maybe over a dozen, two dozen SKUs, somewhere around there, whatever your volume is, it’s just so easy to just hit that dashboard and check out what’s going on. Any seller I think would benefit from it. The other part is, is that if you’re only selling on Amazon right now, it does integrate into other platforms, so EBay, Shopify.
Dr. Weisz: [01:22:09] It automates a lot of different things that you don’t have to do. I don’t trust my calculation enough, Wes, to not go with something like that. Tell me about what do you guys talk about behind closed doors? So you and Chad, two top Amazon sellers, what is the conversation like?
Wes: [01:22:29] We had a little different business models in a sense.
Dr. Weisz: [01:22:31] Yeah, completely different.
Wes: [01:22:33] He built his private label brand. That was and continues to be some of his bread and butter.
Dr. Weisz: [01:22:38] For sure. That’s why I want to be a fly on the wall with that conversation.
Wes: [01:22:43] There’s common threads that big sellers run into.
Dr. Weisz: [01:22:50] Which is what?
Wes: [01:22:52] Software, people, Amazon Retail, a lot of stuff that is higher level stuff in terms of API integration. It was interesting. I was at an invite only seller’s conference hosted by Amazon Retail. The keynote speaker was the VP of all FBA.
Dr. Weisz: [01:23:16] You wanted his personal number.
Dr. Weisz: [01:23:18] What did he say?
Wes: [01:23:20] What was curious is that…And this was all sellers that were probably at least a million dollars a piece. There was probably 50 or 60 of us in the room. It was in Detroit. And what was really interesting is that there were two areas that he had no clue of that they wanted to focus on. One was seller performance. Seller performance is apparently taking weeks and months, if at all, to get back to some of these larger sellers. And the second is knockoffs and brand registry. These Chinese companies come in, or foreign companies, that’s probably a better and hijacking product listings. So they really, and I believe this, they truly had no idea that this was going on.
Dr. Weisz: [01:24:03] What do you mean by seller performance, explain that.
Wes: [01:24:07] So Seller Central and you have seller support which helps us as third party sellers. Seller performance is the group of people that has no names, no faces, no email address and no telephone numbers to get to these people. What they do is they look at your account, the health of your account, and if you are not healthy for certain metrics, shipping, late shipping, your account can risk being suspended. And so these big sellers are trying to get in touch with seller performance and they’re just not even hearing back from them.
[01:24:45] So Amazon’s system has grown so fast and is so automated that there’s some real kinks that they have to work out. It was eye opening for this guy.
Dr. Weisz: [01:24:53] And the knockoffs also?
Wes: [01:24:55] Yep, absolutely. There’s such a movement for private label on Amazon that with any movement there’s always kind of a grey and black market.
Dr. Weisz: [01:25:05] People abuse things.
Wes: [01:25:06] Yep, that goes along with it. So that is what’s happening and these folks that are doing six, seven figures in private label are having people come in and wreck these product listings.
Dr. Weisz: [01:25:17] What does that mean? How do the wreck product listing? Not to give anyone an idea out there, but I’m just curious.
Wes: [01:25:24] If you’re selling a shower curtain, and it’s a very popular shower curtain, you have three different colors. They’ll either come in and put their product which is a different color on that same listing, or they’ll just send their product directly to your FBA listing.
Dr. Weisz: [01:25:46] Really?
Wes: Yes, absolutely.
Dr. Weisz: [01:25:48] How does that even get past?
Wes: [01:25:51] Well again, Amazon is so automated that we as sellers have the ability to create variations and create parent child listings.
Dr. Weisz: [01:26:02] So it’s like me sending some defunct stroller to your Amazon FBA account, or something?
Wes: [01:26:09] Sure, absolutely.
Dr. Weisz: [01:26:10] And people do that? They’ll just send product to someone else’s account?
Wes: [01:26:14] Yep, yeah. More again, it’s the foreign people that just send product in. They don’t fully know what they’re doing so they can wreck people’s $100,000 product listing. It just goes away.
Dr. Weisz: Wow.
Wes: [01:26:26] It’s really negatively affected by these foreign sellers.
Dr. Weisz: [01:26:29] That’s crazy. So what else is interesting about that Amazon event?
Wes: [01:26:34] Sure. Well it’s the first time I’ve ever seen more than two Amazon employees in the room at the same time. That was the first time they were reaching out to big sellers or to sellers in general to try to understand what was going on. So that part was great. I took some photos of basically all the pain points for all these major sellers. I have them with me. It was interesting to see what the common pain points among us.
Dr. Weisz: [01:27:08] I’m sure there were a lot. What were a few that would be noteworthy?
Wes: [01:27:12] The two that we talked about. Obviously those were the big ones. Integration, API integration, product searching, how our systems talk to Amazon systems, MWS, Merchant Web Services, basically how we are able to connect with and talk to Amazon’s systems and what we can do to improve or what they can do to improve.
Dr. Weisz: [01:27:36] Does that mean on the backend what you put in the description or keywords how that affects the listing?
Wes: [01:27:43] The backend of how you record your sales, how you get your data, how you reconcile your inventory, how you reconcile your sales, just that whole aspect.
Dr. Weisz: [01:27:55] So Wes, we talked about the invisible Amazon ceiling, right? So the million dollar mark. What was the next major milestone that you had to breakthrough for the ceiling?
Wes: [01:28:06] At that point when we were still fairly young, it was all about cash flow. When we did those bullwhip buys…
Dr. Weisz: [01:28:16] Yeah. You have huge amounts of physical product. You’re talking hundreds of dollars for each one unit. So how do you manage cash flow?
Wes: [01:28:26] Again, it’s that cadence of accountability, buying biweekly or weekly, really just ramping that up on somewhat of a slower basis. At any one time we probably have near a million dollars in inventory.
Dr. Weisz: That’s a lot.
Wes: [01:28:39] You have to just always make sure it’s healthy. So the next thing that we focused on, we designed our software ourselves for this, is aging inventory. There’s reports through Amazon, but I want something that’s real quick on a dashboard that I can look at see what the age of our inventory is. And so that’s another one of the metrics for our portfolio managers is make sure that you don’t have any inventory that’s over 60 or 90 days.
Dr. Weisz: [01:29:05] Yeah, that’s really important actually. So the next one was looking at the…And so what level are we talking about that helps you push through by looking at that takeaway, that aging inventory?
Wes: [01:29:19] We were between two and a half and three million in sales I think at that point.
Dr. Weisz: [01:29:23] And the cash flow, at what point to you realize, “Okay, we need something outside”? Or do you just get more credit cards?
Wes: [01:29:32] That’s a good question. We don’t use any credit cards.
Dr. Weisz: [01:29:35] Really?
Wes: [01:29:36] No credit cards whatsoever. Absolutely don’t use any. We have a line of credit from the bank, but we don’t use it on inventory purchases. We use it for capital expense, so forklift, shelving, whatever, something that you can depreciate over time. We use pretty much the credit limits of our manufacturers. And so we leverage them and leverage that for that sale.
Dr. Weisz: [01:30:03] Yeah, and obviously you’ve built relationships with people over decades, right? What should people be thinking is normal when they’re first dealing with the manufacturer and then maybe 5 and 10 years out what they should be asking to improve terms?
Wes: [01:30:17] We only started debating about that four years ago. So all of those relationships are less than five years old, just to clarify. It’s not just about that initial understanding of what the manufacturer wants, you have to…This is another action thing that Tim, you were asking about [inaudible 01:30:39].
Dr. Weisz: [01:30:41] His expertise?
Wes: [01:30:42] Yeah. Treat these people as partners. They’re not just someone that you buy from. They’re not vendors. They have hopes and dreams and wants. What can you do to help them get to that place? And they’re responsive to help you get yours as well. It’s classic business. Build the relationships. That’s what allowed us to grow.
Dr. Weisz: [01:31:02] What’s an ideal for someone terms wise?
Wes: [01:31:06] Unlimited…
Dr. Weisz: [01:31:08] Unlimited? Realistically. Let me rephrase that.
Wes: [01:31:13] It all depends on the manufacturer.
Dr. Weis: [01:31:15] Someone would be like, “Oh, this is awesome. I have 45 days to pay, or 2 months.” So what should we think about?
Wes: [01:31:22] Every industry is obviously a little different. Our lead time is about 11 to 12 days depending on the product on average. So if you have a net 30 and a 12 day lead time…
Dr. Weisz: [01:31:36] So when you order it, it doesn’t get into the facility for two weeks or something like that?
Wes: [01:31:41] Yeah, to Amazon’s store. Yeah, two weeks. You have to sell through that. If it’s net 30, the bill comes to you…
Dr. Weisz: [01:31:49] You’ve got two weeks.
Wes: [01:31:50] You got it. You got to sell through it. So we try for a net 45, net 60.
Dr. Weisz: I see.
Wes: [01:31:55] And obviously high terms. So if you have net 60 in our way, you’re only limited by the amount of credit that you have.
Dr. Weisz: [01:32:05] Okay, that’s what I wanted to know was, is net 60 unrealistic, is that realistic? Should we only really be shooting for 45 day? So that is helpful. And at what point do you decide that we need outside capital? Because you went bootstrap and then you realized we’re growing a lot and we need money for inventory. What point should people think about injecting or have someone else inject capital?
Wes: [01:32:30] When we got our first investment in the company, we were not as sophisticated as we are now in terms of profitability. So I would say we should have focused on that first. And then if we would have done that, then really it’s just a matter of how quickly or how slowly you want to grow. So if you don’t need a capital investment you can do without. But you have to bootstrap it and you have to go a little slower. It’s going to be how fast you want to [inaudible 01:33:03]. Once you’re profitable, and you’re sure that you’re profitable…For us there’s basically an unending amount of opportunity. So it’s just a matter of how fast do you want to grow.
Dr. Weisz: [01:33:14] Wes, this is fantastic. I can literally take 10 more hours and ask you all these questions. I’m looking at it, and we’re right at an hour and 33 and I told you I’d finish in an hour and 30. So maybe just two more things. You talked about the million dollar invisible ceiling, then the two and a half million. What are the next levels that allowed you to break through maybe into five million and then into seven million, or whatever those points are? This is amazing so I appreciate your time with us.
Wes: [01:33:47] No problem at all. So really it goes back to that profitability and understanding if you’re profitable or not, and then your cash flow. And then it’s the terms with your manufacturers. So it’s incremental at that point. I would say if you want to make leaps and bounds at that point, again, you need one of two things. You need cash, hard cash that you can spend on inventory, or two, exclusive relationships with manufacturers to sell their products still under their credit terms.
[01:34:18] So that is how you can build your business quicker too, is working with manufacturers, building these relationships, educating them on what you do with Amazon, and then ultimately the goal is working towards being the exclusive distributor of their product on Amazon.
Dr. Weisz: [01:34:33] We’re still talking even if you do those things, you still have to sell seven million dollars of product. What gets you to the actual just selling the stuff?
Wes: [01:34:46] Yeah. It’s infrastructure. You need an accounts payable and accounts receivable person at that time. You need probably multiple warehouse folks.
Dr. Weisz: [01:34:58] I want you talking about this stuff because people think, “Oh, you could do seven million dollars annually,” and there’s a lot of stuff that goes into that. I want you to talk about, briefly, some of the systems in place that allow this to actually work.
Wes: [01:35:14] Sure.
Dr. Weisz: You’re not sitting on your couch eating popcorn and watching TV.
Wes: [01:35:18] No, and the people that say you can do something overseas and make a zillion dollars, no. There’s a cap to it. You can do that to a point, but you can’t…You’re right, it’s typical business stuff. You have multiple employees, HR, health plan, retirement plan, all that kind of stuff.
Dr. Weisz: [01:35:39] Don’t tell me this. This is sounding complicated.
Wes: [01:35:45] You say that, right? What you want to do is create a great culture, and that really is the success. I’m fairly smart, my partner’s smart, all these guys are smart folks, fine. Smarts are nothing if you don’t have a great staff and crew around you that love what they do and like to come into work. What we’ve tried to do is build a really great culture within the company. And that really allows you to grow just as much as anything else.
Dr. Weisz: [01:36:14] For this type of business, what kind of staff count does it take to put in to create that infrastructure?
Wes: [01:36:21] That’s another great question. I was just talking with a client about that the other day. In our company we have about 22 people. But again, we have that medical side and we have the retail side.
Dr. Weisz: [01:36:35] There’s this probably whole billing stuff that they have to do that’s separate from probably the eCommerce and Amazon stuff.
Wes: [01:36:45] What I was thinking about is that if we really paired it down and it was just a bare bones crew and we did nothing but Amazon, you could probably do that with six people, maybe.
Dr. Weisz: [01:36:59] Then you wouldn’t be able to sleep at night. You’re thinking Amazon is the only channel?
Wes: [01:37:03] Exactly. You want to diversify, you’re right. We’re probably not going to grow to 30 or 40 million dollars on Amazon because we want to focus on other channels as well. You’re right, you don’t sleep at night if 99% of your business is on one channel.
Dr. Weisz: [01:37:19] All right, Wes, I’m going to let you off the hook. I love this conversation, and I want you to tell people where they can find you, Lullaby Lane, and then Ezonomy.com. My last question, since this is the Skubana eCommerce Mastery Series, my question is what’s been the lowest point eCommerce wise and what’s been the proudest?
Wes: [01:37:47] Sure. Let’s see, the lowest point, which it’s good, we haven’t talked about this yet, and this was one thing that helped us clean up our act on Amazon. We were doing probably about a million and a half on average of sales a year at this point. We got some information from one of the Amazon sellers support staff about weights of boxes that you can ship in. And even though it’s in Amazon’s rules that the maximum amount of weight you can ship multiple items in a box is 50 pounds. We had it documented clearly that this seller support person said no, it’s more than that as long as you do X. We did that multiple times and they stopped our selling privileges for three days because of it.
Dr. Weisz: [01:38:33] Holy cow!
Wes: [01:38:55] We could sell the products, but we couldn’t ship anything new into Amazon. So that cost us like $35,000 or $40,000 from one mistake that was even documented by Amazon. So that was an eye opening, “Hey, you really got to get your act together and be proactive and be super cautious on what you do with Amazon because it’s such an automated system.”
Dr. Weisz: [01:38:58] How do you even avoid that because they told you this and then you followed it and the automated system basically kicked it, whatever verdict that was?
Wes: [01:39:10] You check and double check and probably triple check on what’s going on. We’re lucky. After that, we’ve never had an issue with our account. So that was the get your act together kind of thing.
Dr. Weisz: [01:39:21] So is that just a matter of contacting the right people to show them the documentation?
Wes: [01:39:26] We were contacted by our performance team, that seller performance team at the time, and said, “Hey, listen, you guys. We’re going to stop your account.” Actually they didn’t even contact us first. They just said, “Nope, you can’t ship product in.” So we had to contact them and then they contacted us back and stuff.
Dr. Weisz: [01:39:44] Got you.
Wes: That was it.
Dr. Weisz: That’s a low moment.
Wes: [01:39:48] High moment is probably the first time we hit five million.
Dr. Weisz: [01:39:55] Tell me about that.
Wes: [01:39:57] That was one of our goals. Again, with that 4DX, trying to increase our sales that year, we did it. We hit it and in a pretty big way and went pretty significantly over that. It was just nice to know that that kind of stuff works and it actually creates tangible differences in your business.
Dr. Weisz: [01:40:14] So what did you do to celebrate?
Wes: [01:40:16] Nothing too big.
Dr. Weisz: [01:40:19] Did you go to karaoke with the opera? What did you do?
Wes: [01:40:24] That was a celebration of the staff. It’s not about us, it’s about the folks that actually did the other work and put in heart and made it happen.
Dr. Weisz: [01:40:33] Did that staff know that you’re a trained opera singer, or no?
Wes: [01:40:38] Probably some of them. We’ve grown fairly fast.
Dr. Weisz: [01:40:44] Wes, I really appreciate it. This has been hugely valuable and thank you so much for sharing your knowledge.
Wes: [01:40:51] Absolutely, it’s been valuable for me as well because it’s not often that I talk, and talk, and talk. You can definitely learn something when you’re speaking or communicating. You’re a great facilitator of that.
Dr. Weisz: [01:41:04] Thank you, Wes. Congratulations. Everyone check out Lullaby Lane and Ezonomy.com.
[01:41:12] So I messaged Wes and we had to hop back on because there were two things that we had to talk about and so we needed to include this. One is an amazing story which we’ll talk about which leads into what we talked about in the actual interview.
[01:41:29] The first thing is we were talking about some mind blowing results and things you do for brands. I wanted to make sure we include that. I had that notated on my notes and I didn’t get to it. So Wes was kind enough to hop back on.
[01:41:45] So talk about obviously with Ezonomy you consult with brands and talk about the Almondina Brands story.
Wes: [01:41:57] Oh yeah, absolutely. Early on when we started doing consulting, we talked with a local venture capital firm here in northwest Ohio. And they had invested in a local company called Almondina Brands that makes almond cookies basically. They’re kosher almond cookies. They’re a seven figure seller. They do typical distribution channels, Walmart, grocery stores, Target, that kind of stuff. But they were looking for a new avenue and they were interested in Amazon.
[01:42:37] So basically what we did is I worked with them to on board selling on Amazon. It’s interesting because it’s different than a typical model. You have your private label sellers and you have third party. Well there are some brands that are starting to sell directly on Amazon, which to me makes good sense if you want to go down that path.
[01:42:57] Well what’s happened is the sales channel for them, Amazon, has turned into their most profitable sales channel. So it’s not their biggest, but at the end of the day, the biggest doesn’t really matter. You pay the bills with the money that you bring home. And so that’s turned into their most profitable sales channel.
[01:43:16] I’ve had conversations with some other folks that are possibly looking at going that route as well.
Dr. Weisz: [01:43:20] They must love you over there.
Wes: [01:43:24] I got a lot of free cookies and that was totally worth it.
Dr. Weisz: [01:43:27] Give them my address. So what are some of the key things you do with on boarding?
Wes: [01:43:36] Amazon in a sense is like a no limit hold in poker. The saying for it is, is it takes a minute to learn and a lifetime to master. Well that’s pretty true.
[01:43:50] But what we do, or what I do is with that company specifically, different companies do different things, we did an on boarding in education basically just how to sell on Amazon. So we went through fulfillment by Amazon versus merchant fulfilled, pay-per-click, search engine optimization, catalog optimization, all the different basic aspects of selling on Amazon. So since then they’ve wanted to focus on that channel and it’s turned out pretty well for them.
Dr. Weisz: [01:44:20] What do you think was the biggest challenge for them going on Amazon?
Wes: [01:44:25] I think for them and for brands in general, it’s the mindset of selling direct. Typically if your sales channel is through wholesalers and through retailers, you just don’t have much experience with that direct consumer model. And so that I think is one of the biggest hurdles that folks have to get over.
Dr. Weisz: [01:44:48] Is that an objection, too? What objections do they come with? Because I can see them being resistant, they’re used to selling through your typical channels and then you’re coming and saying go direct to consumer, go on Amazon. What are some objections you get?
Wes: [01:45:02] Sure. Well they come to me, just as a difference. But yeah, it’s easy for a brand to fill one PO from one major company. That’s an easy process. That’s what they’re used to, whereas if you do it and sell through Amazon, it’s not that. It’s basically the opposite. You’re tracking and monitoring hundreds, if not thousands of sales.
[01:45:31] So it’s different for every brand and how they want to pursue that. We are seeing some brands take that step and they’re finding it very beneficial.
Dr. Weisz: [01:45:42] I ask that because you were mentioning before about mindset. And it takes a little different mindset from what they’re used to doing compared to what you’re telling them they should add into their repertoire as well. So somebody listening to this and thinking about their brand should be doing that but they’re thinking of different objections. So I wasn’t sure, is that a no brainer for them or are they bringing up certain things, that to you, are sticking points?
Wes: [01:46:18] Yeah, I would say the technical nature of selling on Amazon, and there is a significant cost associated with educating themselves as a manufacturer on doing it. So what we’ve found is that smaller brands would be more apt to selling directly on Amazon because just of how the company’s set up. There’s less folks, they can dedicate more time to it, in general that’s what we’ve found. So the larger brands are not themselves trying to sell through Amazon.
Dr. Weisz: [01:46:51] I want you to tell this amazing story. But before I have you tell it, anything else, any other tips or advice on brands going on Amazon?
Wes: [01:47:02] Well, I think I mentioned it earlier. Just that five years ago in 2009, 19%…Did I say this earlier? I’m not sure.
Dr. Weisz: [01:47:14] Do you mean the searches wise?
Wes: [01:47:17] Yeah. In 2009, 19% of people started their product research on Amazon, so 1 in 5 basically started educating themselves on Amazon. This year, 2015, that number’s grown to 44%.
Dr. Weisz: [01:47:34] Right.
Wes: [01:47:34] So there’s been a pretty dynamic shift in the market to where people begin their product research. And I think brands just need to take notice of that and understand that that’s a real number. And they’re bypassing Google. They’re bypassing Bing. They’re bypassing the manufacturer’s sites. They’re bypassing everyone. They’re going right to Amazon. So they just need to position themselves correctly for that change.
Dr. Weisz: [01:48:00] I guess the better question is, is there anyone who should not be selling on Amazon? Who maybe is not a good fit? Like if a brand came to you, you’d probably tell them no, don’t even bother with it.
Wes: [01:48:14] Sure. Probably your extremely large brands that are so integrated with Amazon Retail. So basically selling directly to Amazon, they’re letting them sell. They probably wouldn’t find the value in it. So like a Nike, or a Reebok, or just a ginormous brand. They’re so tightly integrated that it may not make sense for them to do that.
Dr. Weisz: [01:48:38] So, Wes, you have a really amazing story which feeds back into the muscular dystrophy camps.
Wes: [01:48:50] Absolutely. It’s proof that if you want to call it spirituality or karma or whatever term you use, it’s definitely real and in full effect.
[01:49:02] Like I said, I’d been doing MDA Camp for years now. About five years ago one of my favorite MDA campers, it was her last year at camp.
Dr. Weisz: [01:49:17] They only do it to a certain age, or something? They only let a certain age…
Wes: [01:49:21] Seventeen.
Dr. Weisz: Seventeen okay.
Wes: [01:49:23] Yep, seventeen years old. So it would have been her last year at camp. The problem was is the location of the camp changed and it was three hours from her house. And so there was no way for anyone to get her power wheelchair, which is 400 pounds, 500 pounds, from her house to the camp. So she would not have been able to have gone. So I said, “All right, Katie,” that’s her name, “I’ll take your chair out there.”
Dr. Weisz: [01:49:52] So you were going to rent a van or something? What were you going to do?
Wes: [01:59:56] Well I had a van. Being in the wheelchair business, I had a van and I had a ramp. So that part of it was set. But I still had to drive three hours.
[01:50:05] So I drove her wheelchair up there, put it in the van, drove it up three hours, dropped it off at camp, and right around that same time she was being dropped off. And her sister, Ally or Allison, drove her sister up. And so I met Ally. That was the first time I really met Ally and started talking to her. And we’ve been friends since then. We’ve been friends for years and officially started dating a couple years ago.
[01:50:38] So I call her the love of my life. So it’s proof that if you try to be good and do good things, that you’re rewarded for it. So I definitely feel rewarded.
Dr. Weisz: [01:50:47] That’s amazing. The last thing I would think is you’re picking up a girl at a Muscular Dystrophy Camp as a volunteer.
Wes: [01:50:55] Right. Luckily she was definitely not a volunteer. She’s a wonderful caring and kind woman so I feel pretty lucky.
Dr. Weisz: [01:51:04] That’s amazing. So thank you for sharing that. Thank you again, Wes. If people didn’t love you more before, now they love you even more now.
[01:51:14] I really appreciate it, and fantastic, everyone again, Lullaby Lane, Ezonomy.com.
Wes: Thanks J.
[00:21:35] Yeah. For a retail seller, a seller that contracts directly with brands, what you want to do is find a high ranking base product, so the main product of the listing. So for example, with us, if there’s a popular stroller, what you want to do is identify that listing, you can tell what the sales are on that, and then identify the secondary product that goes with it.
Wes: [00:13:26] Sure. That’s a good point. There’s positives and there’s negatives in each of the styles right? So with retail arbitrage, your profitability is higher than any other area. Yeah but you have a…Depending on how deeply you search and dig for product, your per unit profitability is significantly higher. However, you have time cost associated [inaudible 00:13:54]. Do you want to spend seven days a week, five, six hours a day hunting for product? If you do, great, that’s not my avenue. But it’s difficult. The private labelers, that is true that you are your own brand and you’re your own product. There’s two issues that you run into with that. One is that you have people that jump onto your listings that are maybe even the exact manufacturer in China that is producing your product because there are programs and there are folks that do that. They literally contact these manufacturers in China and they say, “Hey we can help you sell direct on Amazon for products that are already being sold.”
[01:35:45] You say that, right? What you want to do is create a great culture, and that really is the success. I’m fairly smart, my partner’s smart, all these guys are smart folks, fine. Smarts are nothing if you don’t have a great staff and crew around you that love what they do and like to come into work. What we’ve tried to do is build a really great culture within the company. And that really allows you to grow just as much as anything else.
[01:46:18] Yeah, I would say the technical nature of selling on Amazon, and there is a significant cost associated with educating themselves as a manufacturer on doing it. So what we’ve found is that smaller brands would be more apt to selling directly on Amazon because just of how the company’s set up. There’s less folks, they can dedicate more time to it, in general that’s what we’ve found. So the larger brands are not themselveHow Wes Grudzien Optimized LullabyLane to $7 Million in 3 Yearss trying to sell through Amazon.