Dootch » ecommerce

E-commerce, 3 months in. What I’ve learned so far

Luke — Sat, 08 May 2010 00:05:30 +0000

So about three months ago now myself and my e-commerce business partner Dave took over at Clock Central and we also launched Board Game Central. I thought now would be a good time to reflect on the things I’ve learned so far.

1. Price is king. At first we tried raising prices and adding a shipping fee to maximise profits, but sales took a massive dive. Since our products are only sold from a few different shops, I thought it wouldn’t be price sensitive. Boy was I wrong!

So after 2 weeks of very slow sales, we tried the next extreme. We put free shipping back on and reduced prices to be the cheapest on the internet. Everything that was available elsewhere cheaper, we marked down, though we left prices up where we are the only ones selling.

The way we did it on Clock Central was in the form of a permanent sale, so the markdowns show up on the site and also in a “Sales items” category. Since then, around 80% of our sales have all been items that we marked down.

It’s not scientific data, but it’s enough for me… Price is king in e-commerce.

2. Customer service is king. I’m lucky enough to be partnered with a the best customer service guy you could ever get.

For a while, we didn’t have a phone number listed on Board Game Central. Amateur mistake. As soon as we did, it started selling a lot more.

The most common questions we get are product questions. Customers like to ring up for assurance or for some questions about the product.

The next biggest question we get is “Will I have it by xx day”?

People are concerned about whether the product is right for them, and whether they will get it by a certain date (almost always for gifts). Sometimes people just want to be assured and talk to another person.

3. Unique and high margin is best. Without high margins, you need volume. Without unique products, it takes a lot of investment to get volume. (I’ve written more about product/market combinations here). Also with high margins and unique products, there’s not as much of a chance of a price war.

We’ve decided on high margin, unique products, and I believe it has been a good decision. We’ve been profitable from day one and it’s a scalable model.

Whats the goal for the next three months?

The goal for the next three months is horizontal expansion. More products, especially on BGC, and hopefully at least one more store. Stay tuned for updates!

All about passive and diversified income for freelancers

Luke — Tue, 16 Feb 2010 17:29:41 +0000

People say that one of the joys of being a freelancer is the freedom. That you don’t have to work for ‘the man’.

That’s true in some senses, but in reality, it’s the same stuff with a different man. Especially as you work for bigger clients and make more money. There are still deadlines and still difficult people to deal with.

Our clients are our bosses.

That’s why I like building up multiple sources of income. It diversifies risk, keeps life interesting, and sometimes removes the need for me to be actively working to produce income.

Here are some ideas for creating alternative income streams.

Create a product and sell it. I often looked at sites for sale on Flippa and on the old Sitepoint marketplace. I saw an iphone unlocking site sell for 1.5 million. I have seen a simple forum population script making over $70k per year.

I see those things and realise I can do the same thing. As a result, selling software is an area I am moving into increasingly.

You already know about Freelance Total, but you may not know I also have two other software products, with two more products planned for this year.

Doing these projects not only creates a bit of money on the side, it also makes me a better freelancer. My marketing skills have increased dramatically. I have experience making sites and products for myself, and especially when I’m talking to potential clients that are a start-up, that experience counts for a lot.

Offer webhosting. It takes some knowledge to offer web hosting, but I believe it’s well worth it. I offer hosting packages to my clients and my clients only. Probably about 60-75% of clients host with me. I’ve been doing it for three years now, and the income just keeps building.

The downside is increased responsibility, but well worth it if you ask me.

Other income producing websites. Maybe you’ve got an idea for a website that can make some money. Whether it be publishing, blogging, affiliate marketing or whatever.

For me, I am a partner in a couple of e-commerce stores. The agreement is that I manage the websites, and my partner handles the operations side of the business. This allows me to work on it when I have the time. It allows my partner to have access to sweet websites without having to lay down large sums of cash up front.

Like creating a product, having experience in ecommerce is great when talking to potential ecommerce clients. My money is where my mouth is.

Other examples that I’ve seen other web designers do is niche informational sites, adsense sites, etc.

Designing themes. This is a great one for designers. I’ve never personally created a theme to sell, but it’s an endeavour that’s well worth it for designers. Especially if it helps to build a portfolio.

Stock photography. Again, this is something I don’t have personal experience with. But if you have the skills, it’s a great thing to do.

Be smart about it

I’m a strong believer in constantly building alternative and passive income streams. But there are pitfalls to avoid. It’s easy to spend more time on things than they’re worth, especially if you’re like me and really hate working for any sort of ‘man’. Building passive income streams takes a large investment of time up front, and it’s important that the time you put in is likely to see returns. There’s no point putting 200 hours of effort in a project, if over 5 years it will pay $2000.

There’s an element of risk in going after passive income. Do your research and make sure the reward is there.

Don’t spread yourself too thin

There’s nothing worse than over-committing and under delivering/being late. And I have to admit I have done it on some occasions. If clients are making the majority of your income, clients come first. After all, they’re the ones paying the bills. (for now =))

Leverage your resources

Leverage the resources you have and the situations you’re in. One of my products, I made after one of my clients wanted a solution, and the current market offerings were lacking. Because it looked like I had to do it anyway, it made sense to capitalize on it and sell it.

Partnerships and other people are resources. There’s no way I have time to process orders in an e-commerce store. There’s no way I can code as much as I would like.

Partner with people where they get the most out of your skills, you don’t spread yourself too thin, and you get the most out of their skills.

Do you diversify your income streams?

I’d be really interested to hear some of the other ways people are diversifying their income. If you have something to share, please do!

Strategies that win: How to be successful in e-commerce

Luke — Sat, 16 Jan 2010 15:29:10 +0000

Starting an ecommerce business can be hard. Since I often get requests about starting ecommerce store, I thought I’d write down what I tell all these prospects.

Before I go in to what you need to be successful, let’s define some terms.

Resources: I’ve defined resources here as the amount of time or money you have. If you are starting a part time business with a few grand in the bank, you’re starting with low resources. The more time you have and the more money/people you have, the higher your resources.

Margins: How much you make per sale. With high margins, you make a high percentage of the sale price, and vice versa for low margins.

Demand: How much pull there is for your product. E.g. The size of the market.

Competition: Who you’re up against.

You’ll notice that the first two are internal (margins are set by the market, but you have control over them), and the second two are external factors.

Combine the first two, and you’ve got your internal limitations. Combine the second two, and you’ve got the “pull” of your product.

Let me explain “pull” a little more. If you were the only outlet that sold Nike shoes in the world, you would have tremendous pull. There’s massive demand, and you would have no competition. If you were to sell no name digital camera’s in the current market, there’s not much pull at all because of the massive competition. You can find this out using the Adwords keyword tool. Be careful to be very very specific.

If you’re starting an ecommerce business, join me in this exercise.

Classify yourself from 1-10 in each one of the metrics above.

Now consider these charts.

margins-resources

demand-competition

To be successful, I believe you need to match up (or better) in both charts.

That is, if you have low resources, you need high margins and low competition.

If you have high resources, you can deal with competition as long as demand is high.

If there’s high competition, you need to have high resources, or target a specific niche of the market.

The idea of the charts is that it lines up your internal situation with your external situation.

And a quick disclaimer: In the words of someone much wiser than me “You can quote me an exception, but I’m giving you the rule”