EPISODE
15

Under-Utilized Growth Opportunities, Selling on Amazon, and SMS Marketing with Andrew Youderian of eCommerceFuel

with
Andrew Youderian

In the last episode, Brad Pedersen of Pela talked about his hiring process to create the best ecommerce marketing team.

Andrew Youderian built and sold numerous eCommerce stores. He now runs eCommerceFuel, a highly curated community of 7-figure+ eCommerce merchants. Over the years, he’s seen what works, and what doesn’t in terms of growth strategies, and what opportunities lie ahead for merchants in the coming year. He's also recently released his State of the Merchant Report, and he'll share with us the top insights. In this episode, you'll learn who should sell on Amazon (and why you may not want to), the top marketing opportunities for the coming year, and much more.

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Raphael Paulin-Daigle:

Yes, well, as you know, this Minds of Ecommerce Podcast is all about diving deep into growth strategies that seven, eight figure ecommerce companies have used to really scale their business. You are in a very unique position where you run the eCommerceFuel community and you don't necessarily run an ecommerce company right now, but you have experience running companies and you know what's happening with some of the most successful ecommerce companies today. You also release State of the Merchant ecommerce reports. I definitely want to talk a little bit about that, but first let's begin with eCommerceFuel and what you've been noticing in the community in terms of growth strategies, how are companies thinking about growth, now that some traditional advertising methods like Facebook and Google are starting to become less and less effective?

Andrew Youderian:

Yes, I think since last year, especially, it's been pretty obvious that you look at Facebook, has gotten significantly more expensive, harder to acquire customers. Google just keeps pushing their ads down, it's harder to rank there. Amazon's getting a little more difficult or significantly more difficult. We'll talk about some of the strategies people are using. I think it's less of an issue of people have found these new areas, these new panacea marketing channels that are just killing it for them. I don't think that's the case. I think this is a year where there's just been a lot of recognition of, "Man, our ad spend is not returning what it used to, what do we do about this?" I think it's more of a level of awareness of people starting to wake up to this and start trying to think how can they do it.

There's some other areas we can talk about that they're starting to explore with and some that are working really well for certain people, but I don't think there's anything quite yet that has popped up. You think about Facebook five years ago, it was an area that people I think, we're pretty excited about because it was pretty affordable, a large reach and pretty widely recognized, at least in terms of certain internet circles, like this is a great opportunity. I think there was a few like that, texting or SMS, I think is one that's going to be big this next year. Companies like Klaviyo, they just rolled that out, or will be in the very near future. I've seen a lot of smaller startups in that area. I think texting is a big one, more so than anything else. I think people are starting to wake up and realize, "Crap, it's kind of a scary place to be as a business owner, or an ecommerce store owner."

Raphael Paulin-Daigle:

Totally, I love what you said about texting, right? SMS with Klaviyo, like you said, releasing features for that. What have you seen that companies are doing that's very successful in the realm of text messaging for marketing? Is it just sending newsletters via text message, special offers? What are you observing?

Andrew Youderian:

I don't know about you, I usually don't like getting business messages, unwanted.

Raphael Paulin-Daigle:

I'm just like you.

Andrew Youderian:

Even if it's someone in the business world who texts me about something business related, usually if I have my phone and I'm with my family, I'll see it. I kind of like keeping those a little bit separate, and it drives me crazy. I think most people are like us or a lot of people are, and so you have to be very careful. If you're just blasting newsletters every day via text, it's not going to go well. Once I've seen that it has worked well and again, this is still fairly nascent, I think with people, but it was a guy I chatted with, he had a very tight community of 30,000 people. They opted into his couple of deals per week text stream and it performs incredibly well for him.

I think shipping notifications work really well, everyone likes getting those. Essentially, if you start with those, you can ease into other things. If you're going to use it, use it for something that's substantial. If you're going to do discounts, a serious discount or a new product that's been released that you have a high degree of confidence is going to be of interest to people. The people that I've seen, and again, very small sample size that have done well, have been very careful about using it appropriately and in a way that doesn't annoy people.

Raphael Paulin-Daigle:

So to be very careful about frequency and the value that those texts brings, I guess sounds like it's really the key to make that strategy work.

Andrew Youderian:

Yes, 100%. The reason it's so effective is because it's so personal. I would be surprised if marketers didn't trample this and destroy it, like we often do, if that works in the next five to six years. Even still, early on, I think that's important if you're going to do it well and have it be effective and not piss off all your customers.

Raphael Paulin-Daigle:

Yes, and I can confirm on our side as a conversion optimization agency, we've seen our clients that are doing SMS marketing have some of their highest conversion rates through SMS. Now, the challenge here is that you're also going to have way more unsubscribes than email, you'll get more annoyed people It's really about making sure, I think, that your message is relevant and you're utilizing really well.

Andrew Youderian:

What have you seen for merchants using platforms for SMS? What are some of the platforms you've seen them use? I've seen people use Postscript is one, Octane, I can't remember if Octane is an SMS or not, I think it might just be messenger. Klaviyo's rolling out, but apart from those three, there's been one or two more, but I can't remember the names of them, have you seen any that have been coming out?

Raphael Paulin-Daigle:

Yes, there's one, it starts with an A, I forgot the name, we'll link it in the show notes, but it's a strategy that I think it works in conjunction with email, it doesn't replace email. It's not a solution to replace anything, but it's something to use strategically. Andrew, now we've got SMS as one of the really cool strategies that might be underutilized right now that could be something interesting to jump on before marketers ruin it. Is there anything else on a marketing perspective? Maybe it could be on traffic acquisition or conversion perspective that companies are doing?

Andrew Youderian:

Sure, let me give you in that State of the Merchant that you mentioned at the top, surveyed about 400 store owners of average sizes. I think two or three million and I did two things. I asked them what the most popular marketing channels or marketing techniques that they spent their time on were and then I asked them what were the most effective channels and techniques that they use. The most popular ones, in order, from top to bottom, email marketing was number one, Facebook Ads, number two, AdWords, number three, SEO four, Instagram five, blogging six and Amazon ads seven. That's the rank in terms of popularity.

In terms of most effective, so these are the ones that give the highest ROI for the time put in, Amazon Ads was number one. 50% of people who use Amazon Ads say it was the most effective strategy that they employed, which is impressive. Email marketing was number two, that's not a surprise. Email, even though it's still crowded or getting more crowded, I think it's still pretty effective. SEO three, Google AdWords four, and a very distant number five, not even a close number five, but a very distant number five was Facebook Ads.

Raphael Paulin-Daigle:

That is so interesting.

Andrew Youderian:

Yes, I think there are a lot of people who hear all these stories about companies that scale up in six months and go from zero to 50 million with Facebook Ads and they wonder what they're doing wrong, but I think it's harder out there than people think.

Raphael Paulin-Daigle:

Yes, and those were stories that were much more likely to happen five years ago than today. I think it's something to keep in mind that the diversity of your strategy really has to be taken into account and you can't just focus on Facebook ads as your main traffic acquisition strategy. You mentioned Amazon, and I think that is super interesting because we do see so many brands being hesitant as to whether they should actually move and start selling products on Amazon, or just keep it all to themselves. If a company decides to go on Amazon and they're hesitant on whether they should go on Amazon or not, how are those companies seeing it?

Andrew Youderian:

It depends on a lot of things. It depends on how much brand recognition that they have but it's also a double edged sword. If you have a reasonable level of brand recognition and you go on Amazon, it's going to be easier for people to buy from you. Everyone shops, not everyone, most people shop on Amazon, but the other problem is too, is if you go on Amazon, you're going to deal with much more counterfeiting issues. I feel like that's the number one issue I've talked to merchants in the last six to 12 months about why they've decided to get off of Amazon. You had Eric Bandholz on the show, he decided to completely go off Amazon. One of the things they found partially was once they did, people stopped buying on Amazon, and just went and bought from their site. I think they had a better year once they left Amazon. We've had people in our community who have had entire businesses destroyed because they sold a product and it started being copycatted and counterfeited and it wasn't manufactured well, it broke a lot, it was of poor quality. People would buy it, thinking it was authentic, it would break, and then they would reach back out to the company and say, "Hey, you need to warranty this" when it wasn't the company who actually manufactured it, so they were having a warranty, send out items for other people's products and then also the reviews became horrible because the products were so bad.

When you're thinking about if you're going to go on Amazon, I think part of that question is how much do you want to weigh into that intellectual property and the rip off game? Because that's hard. How much do you want to manage it as well? There's a lot of time and effort that goes into it, even if you set up FBA style, you've still got a lot of issues to track and manage. I think a lot of it also ties into what kind of business do you want to run, too? Are you willing to take the headaches to deal with the additional sales volume? I think that's the biggest part, because I don't think it's as much clear and kind of a case to be on Amazon today as it was two, three years ago.

Raphael Paulin-Daigle:

Gotcha. Now, if we look again at your State of Merchant Report, what were some of your most interesting findings when it comes to growth in general, things that companies are doing that others aren't? I know we talked about SMS, but if we're looking at it at a broader scope, what are those surprising findings to share?

Andrew Youderian:

On a growth front, I already shared a lot of the findings from that report on the growth front, but there's one, I think that stood out and that was, if you look at the number of merchants selling on Amazon, look at a three year trend, two years ago, 49% of merchants were selling on Amazon. The last year, 55% of merchants were selling on Amazon, so I noticed a full pop up. This year, barely only half a percent more, 55.8% were selling on Amazon and so when you look at what is fuelling the growth, the revenue growth of these stores, because it's pretty strong, it's about 37%, at least in terms of new channels that they're pursuing, not that many more are going to Amazon. My prediction for this year is that for the first year in ever, we're going to see the percentage of these mid seven figure stores that are deciding to sell on Amazon, to either stay the same or decline, we're not going to see growth there. I think that's interesting, this isn't something that was necessarily directly represented by the data, but we looked at average return on ad spend and increase in CPA costs. CPA costs went up about 15% across the board, second year in a row rather. I think people are going to start this next year really looking at channels that they have some level of control over, as opposed to the big three. Think of things like direct mail, email marketing, business to business sales or wholesale accounts, SMS, we talked about. I talked with someone recently this last week, who's seen incredible results from TV advertising, believe it or not, and able to see CPA is a third of what they would normally see on Facebook.

Andrew Youderian:

It's kind of funny, I think what's old is new, kind of the loop, or what's old comes back into vogue, not even vogue, just comes back into being effective because digital has been at the forefront for so long. Those are some of the trends I either can see or can read into the data there.

Raphael Paulin-Daigle:

Love it. You mentioned direct mail and I think that is so interesting because often strategies that have been abandoned by marketers are resurfacing. What have you seen amongst the members of your community being done when it comes to direct mail?

Andrew Youderian:

A decent amount of postcard, and again, direct mail, I think it's still fairly niche. I would say probably 10% or less of people are doing it, but postcards is a big one. I was surprised talking to a fashion retailer, they get 50% of their orders from direct mail. They send out a big catalog, they're a little old school in that sense, but the thing that surprised me was, firstly, that they drove 50% of their revenue from direct mail in 2019, from a catalog. Secondly, the pricing of the catalog, to print it out was not that expensive. You know how you get sometimes these 100 page catalogs in the mail and they're colour and you go to Flex and they charge you like 2.50 to print one colour piece of paper. I just think, "What are they doing wasting their money?" You do it at scale and apparently you can get one those catalogs printed for not too much money, like $2, $3 if I'm remembering right. Maybe I'm a little off, but maybe even cheaper, surprisingly. The other thing I thought was interesting and I can't name the tech here, but he said that they were able, they had some software technology or service they subscribed to, that allowed them with the IP address of the customer to be able to 40 to 50% of the time getting a mailing address that they could send to. When you think about retargeting campaigns, when you think about cart abandonment campaigns. Without them ever having to start the checkout process, slightly terrifying, but also slightly cool from a marketing perspective.

Raphael Paulin-Daigle:

That's awesome, so for people listening, this is a really interesting insight. Try something with direct mail. Obviously it could be a big black hole and drain for your money if you don't know how to do it properly, but so is Facebook, right? So might as well experiment and try something a little different. Now, let's talk about email because forever experts have been calling for the death of email, yet, I look at our clients' performance reports and email is still the top performer. You saw the same in your report, but how is email evolving? Because obviously email today is not the same as email five years ago. How have you seen it change for ecommerce retailers?

Andrew Youderian:

I don't know if email has evolved as much as people say it has evolved. I think there's a lot of tools out there now that make it much easier to send highly segmented email, very on point messages based on what your customers have done that are automated. You build them out once and they fire automatically based on certain conditions and behaviours. The other thing too, is that I think people have gotten more aware of their sender reputation and the ways in which they either maintain a clean list or the ways in which they send too much or don't have the right engagement is going to affect the deliverability. That's something people probably think more about now. Email itself hasn't changed a whole lot in terms of the way you get it, but I think the ways people are sending it, in terms of the automation, being more careful and thinking about their deliverability. I think that's something that's a little bit more on people's minds.

Raphael Paulin-Daigle:

Awesome. Now, if we move onto things that people are really paying attention to compared to before, are there things that you're realizing people are waking up to? One of them being conversion optimization. It used to be an afterthought and now companies are slowly starting to wake up to it. Are there any other industries like that, that companies were ignoring, they're starting to look into?

Andrew Youderian:

I'm thinking about some of our top discussions over the last month in the forum, and oddly enough I can't remember the last time we had a conversion discussion in the forums, which is crazy because as it gets harder to get customers, as your costs go up, the more you can convert, you're effectively driving it the other direction because if you can double your conversion rate, then your ad cost can go up by two X and you're still breaking.

Andrew Youderian:

I would say one thing that people are thinking a little bit more about is potentially manufacturing. I had an interesting discussion with someone recently, who are still manufacturing in China, but I think more and more people are thinking maybe a little bit more seriously about manufacturing in the States, especially with certain types of products, higher end products. It's not just all the tariffs and everything we've had in the US and the trade war with China, but some of the issues surrounding the convenience of it, the ability to iterate faster, fewer delay times. Again, it makes sense for only a certain sub segment, but I have seen more talk and more people thinking more seriously about not just assuming that China is the best place to manufacture stuff, but sort of think like, "What if we did this here, how would that look?"

Raphael Paulin-Daigle:

Really interesting and especially with the decline in drop shipping as well. It's not what it used to be, so I'm guessing that brings up new conversations around how do we manufacture, where do we manufacture and all of that.

Andrew Youderian:

One thing I check in that survey is the type of business model that people use. This last year, about 16% of all the people on the survey were drop shippers, this year that got cut to 8%, that's a 50% decrease in drop shippers in one year.

Raphael Paulin-Daigle:

Crazy.

Andrew Youderian:

I think Amazon has had a huge role in taking a hack out of that. If you look at the number of people manufacturing, that was up by over 30%. Almost two thirds of those people went into manufacturing or were replaced by people who were manufacturing and so, I think that's interesting to see how gutted the drop shipping world got the last year.

Raphael Paulin-Daigle:

Totally. Now, we're literally out of time, but I'd love to know, if there are three takeaways that an ecommerce merchant who's listening to this right now needs to remember, what would those three takeaways be? From what you've seen in the report and your community.

Andrew Youderian:

I would say don't be scared of Amazon, but think very carefully about how you sell and engage on the platform, that's one. Number two is I would think very strongly about if you're not already building off some off marketplace off the big three: Amazon, Google, Facebook marketing techniques and audiences. If you're not doing that, now you're going to be in a world of hurt in the next two to three, four years. The third one I think would be, look at all your marketing channels and tactics, and try to be really intentional at making sure you're spending the time, most time on the ones that are not just the biggest, but are the most effective. You reach limiting scales, really effective stuff that maybe converts great, but it has a limited reach, but make sure you're hitting that first before you go to places like Facebook. I would say those would be the top three.

Raphael Paulin-Daigle:

Fantastic. Well, thank you so much, Andrew. Now you've got a thriving community, you've got an awesome podcast. If people want to learn more about you and the community, the podcast, where should they go?

Andrew Youderian:

Obviously you're a podcast listener, so I have been doing an ecommerce podcast for about six years now. It's just called The eCommerceFuel Podcast and talk about stuff like, I mention that the community that's selling seven figures from a private group, a guy who's just killing it with TV ads, trying to talk about a lot of these things to store owners. You can find that wherever you listen to podcasts and then I also run, like you mentioned, a community for a seven figure plus store owners. We have a thousand plus members, been doing it for years, really active, thriving forum, thousands and thousands of comments a month. We also have a private review directory, one of the things we do is if you think about where do you go to get unbiased reviews and advice about software? That's really hard, if you type in Shopify review or NetSuite review, a lot of the reviews you see are going to be biased, they're going to have affiliate links and some of them are okay, but a lot of them are not. We have a review directory internally where all of these store owners are sharing what service providers are great, which ones aren't, what software's fantastic, which one isn't. They're trusted, there's no affiliate plays and you can follow up with store owners to get more details. Anyway, so if you're interested in learning more about that community, ecommercefuel.com is the best place to do it.

Raphael Paulin-Daigle:

Awesome. Perfect.Thank you so much, Andrew, for all these insights. Everyone that wants to follow what he's been up to and what he's doing, just go on ecommercefuel.com.

Andrew Youderian:

Awesome, thanks for having me, man.

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