Your Digital Marketing Coach with Neal Schaffer
Your Digital Marketing Coach with Neal Schaffer
From Idea to Exit: Building an E-Commerce Empire with Neil Twa
In today’s episode, we’re diving into the exciting world of e-commerce with Neil Twa, co-author of Almost Automated Income with FBA. Neil has spent over a decade helping businesses go from nothing to building scalable, profitable brands that thrive on platforms like Amazon, TikTok, and more. E-commerce is one of the fastest-growing opportunities in digital marketing, offering incredible potential for entrepreneurs who are ready to identify profitable niches, connect with their ideal customers, and leverage multiple sales channels. Whether you’re new to the game or want to scale your current business, this episode is packed with insights to help you grow your brand and even prepare for a lucrative exit. Get ready to learn how to turn your ideas into income!
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Have you ever wondered how to build a thriving e-commerce business from scratch, even without a product or experience? In this episode, we're joined by Neil Twa Now he spells his name N-E-I-L, but I won't hold that against him. He is the co-author of Almost Automated Income with FBA, and he will break down the strategies to find profitable products, scale a brand and even prepare for a multi-million dollar exit. Whether you're just starting out or looking to take your existing businesses to the next level, this episode is packed with actionable insights.
Speaker 2:So stay tuned to this next episode of your Digital Marketing Coach Podcast digital social media content, influencer marketing, blogging, podcasting, vlogging, tick-tocking, linkedin, twitter, facebook, instagram, youtube, seo, sem, ppc, email marketing. There's a lot to cover. Whether you're a marketing professional, entrepreneur or business owner, you need someone you can rely on for expert advice. Good thing you've got Neil on your side, because Neil Schaefer is your digital marketing coach helping you grow your business with digital. First marketing, one episode at a time. This is your digital marketing coach and this is Neil Schafer.
Speaker 1:Hey everybody, this is your digital marketing coach, neil Schafer. Welcome to episode number 395 of the your Digital Marketing Coach podcast. You know I cover a wide variety of industries in this podcast. I really try to serve any and every business, whether you are a nonprofit, a B2B, a consumer-focused brand or an e-commerce brand, and I know I have a lot of e-commerce marketers and e-commerce business owners that listen to this podcast. So today this is for you. But even if you're not in e-commerce, I think you're going to learn a lot, today at least, about brand building.
Speaker 1:So today we're diving deep into the world of e-commerce with Neil Twa. He is a seasoned entrepreneur and also co-author of Almost Automated Income with FBA. Neil, it sounds really weird to be saying my own name when I'm talking about my guests, but nevertheless, neil shares his blueprint for turning product ideas into profitable brands and scaling them to the point of a successful exit. Now he's going to give a lot of advice that I think, obviously if you're in e-commerce especially, but just a lot of advice that I think is going to make a lot of sense and that you are going to be able to apply to your business. So, whether you're a beginner or already in the e-commerce space. You'll learn how to identify opportunities, leverage platforms like Amazon and TikTok and optimize for growth. If you're serious about building a business that thrives in today's digital landscape, this interview is a must listen. So, without further ado, here's my interview with Neil Twa.
Speaker 2:You're listening to your digital marketing coach. This is Neil Schaefer.
Speaker 1:Hey, this is Neil Schaefer.
Speaker 1:Welcome to another exciting edition of the your Digital Marketing Coach podcast. Today we are going to go deep into e-commerce and all the different ways and strategies and tactics that, even if you do not have a product today, how you can build a e-commerce powerhouse, find product, find profitability, build brand and even be able to exit. And, obviously, if you already are doing e-commerce or already have a product or service that you're thinking about doing e-commerce marketing for, you're going to get a lot out of today's episode. So today I have the author well, one of the co-authors of this book called Almost Automated Income with FBA Build a Profitable, lifestyle-driven Amazon Business Exit for Millions Even Without Any E-Commerce Experience.
Speaker 1:Neil is someone and we were just talking before we hit the record button but Neil is someone who has personally seen experienced brands that start with nothing, people that start with nothing, and have been able to build exitable businesses purely with the strategies that he's going to teach today. So, no matter where you are in your e-commerce journey, I think you're going to get a lot out of today's episode. So, with no further ado, neil, welcome to your Digital Marketing Coach podcast, my friend.
Speaker 3:Well, thank you for having me on. I appreciate it. It's not very often I get to talk around with another. Neil, this is true.
Speaker 1:I have to remind everybody I am the real Neil, because it's spelled with an A, but that's okay, the I spell is actually more popular.
Speaker 1:I get it. You got your phonetics right. I didn't All right, that's my mom's fault, nowhere. So, neil, you're over at Voltage and e-commerce is something, when we were born, might've been around, might not have been around, but obviously you become a real expert in really understanding how profitability, brand building, how all these things go together into creating a business that could be exitable should you want it to be. So my first question is how did you get started in the e-commerce world? Did you start with your own product? Were you an e-commerce consultant? Do you used to work at Amazon? Please do tell.
Speaker 3:So I didn't work at Amazon. Although when I dropped out of college, I thought about going to work for Amazon, I thought about planting my butt outside their door just to try to get a job and get inside. I actually ended up going a different direction, but maybe it's fine where it ended up at. Long story short, I got into it through affiliate marketing after getting more online marketing as a part of my experience to build a management consulting firm that I had when I left IBM in 2007,. And I say I burned the boats and fired the man, but I didn't burn the bridges.
Speaker 3:I built a management consulting company ended up having 10 consultings traveling the world underneath my brand and subcontracting the public and private sector, including IBM itself, and when that got going enough, I had some free time on my hands.
Speaker 3:I'm like, well, I need to market more of the business and make sure I do more of the online marketing. Got really good at it, actually enough that I was making more in marketing other people's products as I was learning the mechanism of online marketing than I was making in the management consulting firm. So I just shut that down and focused mostly on the online marketing side. That led me to doing really well with the direct response marketing side, but I didn't own the product, and so I'd run into constant problems with product and product owners who really weren't doing a great job with the product, although I was doing a great job with the marketing. So originally that occurred to me I need to own the entire thing, like I need to own the end to end. If I'm going to own the direct response, I need to own the product too. So as I got towards that understanding, I ran into a friend who said, hey, I'm selling some products on Amazon. I said, if it's anything like eBay, I don't want anything to do with it.
Speaker 3:He's like no, no, no, this is private label, this is branding. This is very different, you know, and I was like, well, explain it to me. So he showed me some of the and I saw that mechanism of traffic and direct response marketing and I thought, oh my gosh, this thing is going to be huge. Turns out, that little bit of epiphany was, of course, right. As you know, amazon today delivers it into the sixth largest logistics company in the world, and if you aren't ordering from Amazon then you probably don't exist in America. So it's become a juggernaut engine. But learned how to do the physical product backside of manufacturing creating the products, building the brands, trademarking it.
Speaker 3:I got in with a gentleman named Reed Larson who he and I hit it off right off the bat in a one-hour phone call 12 years ago. We've been doing business together ever since. He's a CFO, coo, mindset, very tactical, oriented in the details and the business operation side. I'm the direct response marketing CEO guy who kind of operates the front end of the business and the direction and overall vision of it, but together we make one entire brain. So owning the physical product and owning the direct response now is our business model.
Speaker 3:We own the end to end and from that it is not, by any definition, a side hustle or a hobby business. This is a full professional business of e-commerce, holistic channels. Amazon is just one of an omni-channel, multi-channel strategy. We deploy, and have gone on to do this for quite a long time 12 years on the Amazon channel, because Amazon was a great place to start and prove and then move into multiple channels beyond it once we can capture that huge amount of demand that Amazon has and then move that into a full scale brand and then build it from growth to scale into an exit. So as we exit these companies, we go back and do it again and we're now actually into acquisitions as an incubator of products and brands, either brand new or those that are existing. We're now buying companies and adding them to our investment portfolio.
Speaker 1:Very cool, Neil, and I totally sympathize with being the consultant and not having full control. So, no matter how well your marketing consulting is, if you don't execute on the product and the brand and everything else, then all of that works. So I totally get that and total respect. One thing I want to ask you about this is something we don't really talk about or I've never talked about in this podcast, which is the concept of direct response marketing, which maybe some people don't think goes hand in hand with e-commerce or omni-channel. Well, I guess it is obviously one channel, part of omni-channel, but think of direct response as more of like old school traditional marketing, traditional internet marketing. Sure, Can you educate us on direct response marketing, what it means and how it applies to everything you talked about?
Speaker 3:Well, I will do my best. From my perspective, direct response is just an ability to talk to a consumer, meet the needs and the questions in their head and get them to come to a realization that whatever problem or solution or opportunity they're trying to attach a product to is going to be the one that we're selling them. So we call it problem reaction solution, which is a concept of direct response marketing. If I can build the problem, or they have a problem that's been built in their mind from an audience conversation or a conversation with their mom, dad, sister, uncle or somewhere with their friends, and there is a product that they believe will fit that solution, then I want to create the reaction in their mind that says, oh, it's that brand that can solve this, it's that brand that has the answers to my problem, it's that brand that has the product. Well, I want that product. That's the solution that I'm after. And understanding how to speak to that right avatar, talk to their language, is a direct response.
Speaker 3:Whether you're doing it through direct mailing, whether you're doing it through a newspaper, online advertising, is basically the same thing, it's just a different media. So how do I communicate in direct response? Through creatives, video, language, graphics, et cetera, just come down to a system by which online can be done extremely fast much faster than pushing a lot of stuff out to newspapers, simply faster than going to billboards and much quicker than sending out, you know, just regular direct response. Now here's the thing I know about direct response because we've been testing it in the e-commerce world. It actually works really well, much better for the 18 to 24-year-old demographic, the ones who don't normally get mail, who have been really inundated their entire lives with communications devices and marketing online. They're actually buying in the fastest buying demographic for direct mailing campaigns.
Speaker 3:So if you've got a product or service that's touching 18 to 24 year olds, you need to be direct response mailing. It's really easy this day and age to create a 16 by nine insert and upload all your data directly into the U S post office and have them ship all of that directly to your consumers with your call to action to come check out your product or service. If you're selling products and physical products in that space 18 to 24 year old range, you should definitely be hitting them up with traditional old school direct response cards in the mail. I love it. They love to get mail.
Speaker 1:What is?
Speaker 3:old is new again. It really has come cyclical right. In the online response world the grow is the fastest growing market segment for us is 40 plus typically ladies, 40 plus in age. 40 plus typically ladies, 40 plus in age. They buy 80% of everything online. When it comes to, you know, the physical product, the consumable goods, home goods, you know, outdoor goods, et cetera, up from 50 to $200 in retail price point, they are buying the most amount of stuff online. So once we get into products that meet and match that demand segment, we can distribute that into multiple products and brand variations that can meet the demand and the need of that customer and once they're bought into that brand, they're bought into that brand.
Speaker 3:You know, when my wife was picking out certain baby types for our kids, she eventually came up with Carter's as the right kind of clothes and material in the fabric and the price point, and so all of our kids got outfitted in Carter's clothes for quite a long time because it became her choice for that kind of product.
Speaker 3:Her kind of choice in strollers became the kind of. We ended up with three or four strollers and while this was the one that did the best for our kids, we have four daughters and we had all of them in four and a half years, so we needed like multiple strollers and multiple bags and multiples of everything times four. So she became, you know, really driven to you know, figure out what was the best of those versions that worked for us but also, you know, was cost effective and, and so she became very driven into certain types of consumer brands and I watched her as a as a segment of that emotional now that our daughters are in their teens, and I see the way she does it. She's just a perfect segment of, you know, a big demographic buying group online that you know needs once and is attached to the emotional connectivity of these brands and what it means to their family. You dial that in and you can sell millions of dollars in products. Obviously, you got to do great at it.
Speaker 1:And the brand loyalty that exists. I mean I, you know, I've been using Speedstick for decades, right, so you know if I asked you, you know what's your.
Speaker 3:You like Android or iPhone. You're going to tell me which one you like and you going to be passionate about it because you've always owned it. You know I've always owned iPhones and this is the reason. And blah, blah, blah. Yeah, I prefer New Balance over Nike. It's for dads, right? You know I always buy Hondas and not, or I would buy a Toyota, but I'll never buy a Ford. Right?
Speaker 3:You have your incubate that product in there to define the need and demand of that brand and once I have that dialed in, I can then take that first system and automate it into other marketing channels because it's a giant fulfilled by Amazon, is a giant system and logistics company that Amazon actually purchased and rebranded. I can take that, understand the demographics, build a seven figure brand on Amazon and then go to like TikTok shop and have Amazon fulfill all the product orders for TikTok shop and then I can open my direct response website or whatever and I can have all the orders fulfilled by Amazon. I can do a wholesale. I can put out ads on media and channels and television and I can have Amazon fulfill those products. So once I create that base structure so I liked about Amazon, quite honestly, is that it creates this spindle effect of being able to not you have to touch the product. Set up third-party logistics, go beyond complicated, you know things like warehousing and employees, and you'll be able to run this operation very lean and mean.
Speaker 1:Yeah, so literally right before you said TikTok, we already got this question. Do you use TikTok we?
Speaker 3:do use TikTok. Yeah, it's a demand creation platform. Okay, Think of, in the demand response world, okay, or the demand marketing and direct response world. We have demand creation and demand capture. Okay, TikTok is a demand creation platform. Products that have not been heard of, people that you don't really know about, are influencing them and influence marketing. Videos are being pushed out across that system into millions of views. Live streams now are breaking records for the fastest live stream In the last three months. We went to the first one million dollar live stream Not sure if you saw this or not, Neil and then that record got broke a couple of months later with a two and a half and $3 million live stream, and then a $5 million live stream broke that record. And so that is a demand creation platform in a nutshell, and so you should get on there when you know your audience and you have your products and you understand where you're after, and get that influence marketing behind it.
Speaker 3:Now, 30% of our TikTok traffic flows backwards to Amazon, right? 30% of the TikTok traffic we get flows backwards to Amazon, meaning they go to Amazon to buy that product. They don't necessarily like or trust the product. They're not really sure they're going to buy it on TikTok. Maybe they bought something, Maybe they don't. They go over to Amazon 30% of the time and go is that product there to check whether or not it's legitimate. If it's legitimate and they find it, they may buy it. If they don't find it, they're going to buy another one, just like it from somebody else.
Speaker 3:Okay. So when you have that demand capture platform, that's how we see Amazon. There's a SEO organic traffic flowing 24-7, 365 at 8,600 units a minute. Neil, 8,600 units a minute. So that is a demand capture platform. Okay, People are there.
Speaker 3:They understand it. They know how to buy something and return something If they don't like it. They know they can leave negative reviews or they can leave positive reviews. They understand that ecosystem. Today they can subscribe and save and have things show up every month or every quarter If they want certain things. People really get it. Now they're getting sophisticated.
Speaker 3:So in yes for tick tock from a demand creation. If I want somebody to know more about my product, if I want more people to influence the product by videos they're in marketing they're making, then I go to TikTok and I set that up, I attach it to my Amazon system and then I let it go so as long as I feed the Amazon system and warehousing system with my product and I have multiple channels that I can focus on and capture demand in two different places, and these two play really well together. So much so that in the last week Amazon has now made an arrangement with TikTok to actually allow the ordering of Amazon products through TikTok shop directly. So this is going to become a very powerful unit here shortly.
Speaker 1:Yeah, that was a lot you know. Just to point out, I have a Gen Z daughter and she is purchasing brands that I have absolutely never heard of and she's on TikTok several hours a day. So you know, if you are not on TikTok, it is a world that you don't understand, but it really is.
Speaker 3:It's a different world, no doubt.
Speaker 1:Yeah, it's driving tremendous.
Speaker 3:But here's what's fascinating you mentioned Gen Z, but you should also understand demographically. The fastest growing demographic is 40 plus on TikTok.
Speaker 1:Right.
Speaker 3:And so the capitalization of those who are also that same demographic on Amazon has now approached and grown as the fastest demographic on TikTok. So if you're selling to that demographic, you're now hitting both spectrums.
Speaker 1:And with every day the demographic will age, like it did for Facebook, for Instagram.
Speaker 3:And 100%, but it's aging like 10 times faster through the TikTok shop mechanism than any other mechanism yet, so its speed is huge.
Speaker 1:Yeah, I want to take a step back and because already we're getting a question, do niches matter? And I want to get into that. And obviously you're talking multi-channel, so Amazon is one way of fulfillment and Shopify is another way of fulfillment and there's other ways of fulfilling.
Speaker 3:They're all just omni-channels.
Speaker 1:It's all part of the strategy. So getting to the niches matter, I think we need to begin with, obviously, if you already have a business, it's one thing, and if you want to leverage more of omni-channel e-commerce, direct response marketing, everything you're talking about but if you don't have a, you know, let's say, you're trying to think of a new product or you see e-commerce is growing and somehow you want your business to get into the action. We talked before we hit the record button of this. You know, from consumer driven to a product driven mindset, that you can discover daily profits from products that you buy on Amazon. I'd like you to dig a little bit deeper into this, because I think it does answer this sort of niche question. Which is this product driven mindset? What is it that we should be investing in to build brand round?
Speaker 3:Yeah, so we call that. What the heck do I sell right and who do I sell it to? And there's a defined process and something you need to understand that most people get backwards about this. Ok, and this is not going to be radical, but for some people it may sound kind of weird at first, but we don't actually sell products to consumers. All right, we sell product data to an AI engine as a direct response marketer. We're selling product data, the response, the images, the graphics, the videos, and the realization of that digitally consumed information is to create that problem, reaction and solution in the mind of the consumer so that the product that is received by them two days later or less fulfills the transaction in the mind of the consumer and completes the loop of credibility mind of the consumer and completes the loop of credibility. They're called the no like and trust relationship, right? So that is simply a transaction old thing. Now I'm going to create a great product. That's number two. To actually focus on is creating a great product.
Speaker 3:Now we discussed a minute ago what we know great products are from our own perspective. We know, you know, certain shoe types or whatever aren't great. They wear out. We like certain burger joints versus other burger joints even though there are 15, because we like their type of burger better than the others, or maybe we like their price point. You know we are consumer driven in that mindset. But to turn that into a producer driven mindset is to understand that there is a specific data set within each of these niches. That is an opportunity for me to jump in and, you know, create a product that might initially be exactly like the other product in the market, but I'm out there to prove can I sell that product? And this is a data-driven conditioning and analysis that we go through to change that mind into a producer, to discover those products, to validate the data and numbers and profitability correctly what we call going by the numbers and then to understand who I'm selling it to and ensuring I'm dialing in and optimizing that language and conversion, language, image graphics, et cetera to get them to buy my product faster. So we're just kind of tweaking the dial on that lock a little bit, right. So with that then I can innovate products we don't invent. We innovate in ideas and changes to those products, a little bit of R&D in which we can take that and expand it into greater profitability.
Speaker 3:Okay, since it's already existing in the marketplace. We don't have to question whether or not there's demand for it. We don't have to question whether or not someone wants this product. We can go in and find out that they want it 17 million searches a year. So the question is how do I take up a percentage of that? And then how do I grow into the percentage of market share for that product?
Speaker 3:And then what we define as you've ever read good to great by Jim Collins is going from good to great is actually getting into a niche, staying in the niche and becoming a hedgehog as you hedgehog down into that niche. It goes something like this in the physical product, private label world that we work in, not the product, wholesale product flipping nonsense. That's not what we do, not a side hustle, not a hobby business. This is full business, building with an exit in mind, a real asset, and that is to define the data points by which these products will be sellable and then understanding what makes them great, so that we are able to speak in the terms of great data, great product, great brand and simply sell more of that to a consumer. We go in and we hedgehog down.
Speaker 3:So, for an example, if I were to say do you have an iWatch? There's a good chance. You probably have an iPhone, you have an iMac, you've got the iPad. You've got more of the same product in different packaging. So we borrowed a trick from retail. But on the consumer side it's not really that different. It's just another transactional difference versus going down to a store, versus buying one online, but the same psychological output happens. The same reaction occurs If I like the iPhone, I'm going to get the iWatch.
Speaker 3:If those become practical, usable, if I get certain status or affinity or emotional response, I'm going to sell more of those. And that's a niche which means when we dial in a particular product okay, like an air mattress that we sell on Amazon then we're going to just sell more of the same product and different packaging. We're going to sell the big one, the large one, the extra one, the black one, the gray one, the 18 inch one, the 24 inch one. We're simply going to go deep into that niche. So then we're going to end up with a brand that may have 12 SKUs doing 15 million a year in sales.
Speaker 3:Right, because that's all that brand does. Success is boring when you hedgehog Okay, it means I don't have to go wonder can I sell outdoor gear? Can I sell all this stuff? It's I'm in that one brand, one niche, one, one variable and I'm continuing to get deeper and deeper into that variable. So I touch a consumer who's willing to buy two or three versions of my product, tell their friends and family about it, maybe leave me a positive review, and just keep digging, digging, digging into that niche.
Speaker 1:So you know, taking a step back. So this is a data-driven exercise in. Is there actual, you know, using the tools, you know search engine tools. There's a number of Amazon tools to understand.
Speaker 3:We've built an entire system ourselves to do this. We call it our green light dashboard system and it's based on the metrics of selling tens of millions of dollars in 10 plus years of doing this. We go by the data in that system green light, yellow light, red light, competition analysis, what we call our Amazon burden score, which is profitability above cost of goods, sales, warehouse, manufacturing, marketing, et cetera. And that profitability number has to be at a certain point or that score doesn't go green. And when that data set goes green, competition is green. There's no saturation or limited saturation we can overcome and all the data set says go, then we're going to test the market Right.
Speaker 1:Right, so that's like one step. Then we have this like from good to great. So are you reaching out to suppliers to add another feature, or what does that look like in reality?
Speaker 3:So, once we do a market test and the market says, hey, you got it right, we'll buy your units, we'll buy them in volume. We see that you like it. Then I'm going to actually order a lot more units. When I order a lot more units, that's when I actually innovate. I don't innovate from the very beginning. I simply go and say can I sell this? Sales fixes everything first. Now I know that I'm going to create a great product, so I'm not abusing the market. I actually want to provide for the market long-term with a great product that is highly in demand and meets the solution that the customer wants. I am customer focused, value first. By that equation, my purpose and value will equal profits. If I do a great job, it'll be profitable and people will want the product, like the product and it will be a good product. So as they go to manufacturers and we say, okay, this product is successful, I want a thousand units, I want a 40 foot container, I'd like you to change these three to four things of the product that make it unique, holistically mine, and also increase the value of the product in the mind of the consumer. They could be things that they gave me feedback on. They could be things in the process of walking through the steps and method of getting it to market that I discovered along the way they could be things that changed in trends that are more real. Time that says, oh, if I just do this one little thing to this product, I'm matching up with the trend I see in the market and it's going to be more in demand because of that, more timely. And so I'm going to make those small two or three or four innovative changes to that product Again, make it uniquely mine, make it market, make it trend, make it more valuable. I can even increase the price point of the product when I do that. And then I'm going to make that product my full product launch. I'm going to come back with known data, putting good money after good product, knowing I can sell it. And then I'm going to go to the market and say how profitable, for how long can I make this product? And my process is going to tell me, over 12 months, what's the profitability of that single SKU if I'm moving X amount of units every 90 days over a 12 month run rate. So if I'm moving a thousand units every quarter and 4,000 a year, I'm going to know what that total profitability for that single SKU looks like and let's say it's 69,750 bucks Great, that's what that product is going to do, at a minimum with my data set knowing, in my process and system, it's what it's going to be the outcome. I'm going to go get 10 more of those, right, I'm going to go and repeat 10 more of those. I'm going to make a great brand.
Speaker 3:Products have a life cycle they always do, but it's the brand that lives on. Do you understand that? So if you're a direct response marketer, is the brand that lives on, not the products. That's why there's 10 burger joints and 15 pizza places and your favorite soda pops have been around forever. It's brand driven, right. So I want to create that great brand, that intrinsic growth by years three, four and five. With that in mind, I have a saleable asset. I have built a house that somebody wants. It's worth a lot of value and I can take it to the market and I can get multiples of EBITDA, multiples of profit for that business and I can sell it for maybe a windfall.
Speaker 1:This is really amazing and you've sort of like painted the picture of what this four step how to how to build in an exit. I want to get to that at the end, but in between I wanted to ask you about understanding profitability. So part of this was you mentioned sort of like test marketing and then finding the product and then making improvements. Where do you take a step back and say is this going to be profitable or not, and how do you assess that?
Speaker 3:From the very beginning. I go by the numbers. I'm going to have an 80% confidence that I know all the costs of a single unit and then I know, after all of those costs marketing, logistics, returns, warehousing, freight, taxation and other things that I'm going to make a minimum of $12 in net profit per unit. If I can't make a minimum of $12 in net profit for one unit sold, I'm not going to sell it. So that means my retail price points have been 50 to 200 plus in price point. They average between 100 and $150 in retail price point. For that reason I know when that product goes to market it is going to have a profitable unit of sale From there.
Speaker 3:My question is how many of those units can I sell profitably? Now, if I sell 24 or 36 or $48 in profit per unit, I'm not going to argue with that either. Why? Because if you're competing with me in the market and I'm going to test market a product, I want to go see if I can do a full launch into a full marketing engine behind this product. I want to know that I have more profit than you. Why would I want to know that, neil? What advantage would I have if I know that I've got more net profit per unit than you do.
Speaker 1:Well, I'm assuming that you can outspend out-advertise.
Speaker 3:He who acquires the most customers wins. Yeah, thank you, dan Kennedy. So the end result is I can acquire more people through my paid marketing channel with a good return on that advertising spend, a ROAS that allows me to acquire one both organically and through pay-per-click mechanism on Amazon. Okay, when I get a good what's called advertising cost of sale and it is what it is Okay, a lot of people are like well, my advertising cost of sale is 80%. Well, that's fine. What is your total advertising cost of sale? That's the real metric to actually look at in terms of physical product sales Amazon, tiktok, shop, any channel of physical e-com product. What's my total advertising cost of sale? That means how many organic sales did I get and how many did I acquire through pay-per-click marketing? That total advertising cost of sale should be between eight to 15%. When my total advertising cost of sale organic and paid is eight to 15%, I blow my budgets up. It means I can now acquire customers faster than you can, okay, and as my total advertising cost of sale in this first channel engine of Amazon, this happens in different ways and I'll talk about that if you want to, but on Amazon it is an organic return that occurs so, as I build in the data and metrics, as my PPC gets better and comes down in, certain costs and conversion rates go up, the organic side goes up. My goal for every brand we launch, okay, is to get 60, 70, and 80% of our sales through organic and 20 to 30% through PPC. When I have got those numbers correctly, okay, we call it the 10 click to one sale ratio. That means for every 10 clicks I get one sale.
Speaker 3:When I've got that dialed into, that organic engine and it's AI system called the A9 engine, is going and turning on that data, it is going to love me. It's going to love me and it's going to have a new requirement of me. When I do that, it's going to require me to capitalize that inventory. If I feed that beast more inventory than you and I am also acquiring more than you because I can Okay, I have $18 in profit per unit and you have 10 and we're competing in the same niche Well, I can use that extra $8 to acquire more customers than you can. You're going to lose, right? So then I have to inventory above you.
Speaker 3:If you've got a thousand units or 5,000 or 10,000 units, I have to increase my inventory at or above you or the organic engine of Amazon simply won't let me overtake your market share because you're already meeting their customer demand. So for me to take over their customer demand and prove that I can meet the needs of that customer, I have to have enough inventory to do it and once I do, I can start overtaking your market share. So once I'm dialed in, my direct response is good. I'm acquiring more customers organically and profitably with PPC than you are. The organic engine is going to go like this. It's going to go extremely fast, so fast that we have brands that have been built. Daniel Espy is a case study. He's on my website. He's on my podcast. David LeBlanc, adam there's a number of podcast case studies you can check out. He's going to be 16 million by the end of this year, fourth year in business.
Speaker 1:Wow. So this leads to sort of the final question, which is summarizing a lot of what you were just talking about, of how we began from nothing and we built something. How do we know if the product will grow into a brand? And you mentioned like a four-step build grow scale exit. So I'm assuming that not every product will develop into a brand. Maybe the potential's there and it probably has to do with how you began doing this in the first place, but curious as to your thoughts about that.
Speaker 3:So we've been at the product research stage with the end in mind, meaning that when we look at products valuable products in their market, we look at how many other types of gear, accessory and product types revolve around a primary product Okay, and then we're going to look at saying how many of those other products can I put in the market to build a more holistic brand? If you think about it in just in terms of retail, because it's easier sometimes for people to see in their mind, when I walk into an Academy sports store, do I see a 25,000 square foot building with two products in it? No, what does Academy mean as a brand? It means when I go there, there's all the product, gear and accessories I need if I'm going to play soccer. The idea is to give you all the possible options for that brand If I go in and decide I'm playing soccer and I want a soccer ball and I want the mitts and I want the jersey and I want the cleats and I want all the stuff that goes with it.
Speaker 3:So in a brand we provide all of that additional gear and accessories. So as I think of these products, as I test these products in the market, I'm looking at not only variations of the primary products. I'm looking at all the other gear, accessories and ancillary products and even consumable products that will get people to come back more often, that match with that brand and round it out into an entire portfolio. So that isn't just products. It's brand driven, with products as the transactional method of belief that if I start with this brand, I have all the other options available to me too when I fall in love with it. If I don't have all those other options, I'm simply just selling products. Brand moves into a direct response method, into not just products but emotional connectivity to the entire brand and everything that's available within it.
Speaker 1:So we've gone through and we've found our product. We're beginning to build our brand. We have a line of products. Now we're building emotional attachment. How do we go about scaling? And maybe because we're adding multiple products, that's how we're scaling. How do we go about scaling and then exiting from all this?
Speaker 3:So it depends on channel. So if we're starting with Amazon, we won't unless it's a very large channel. We won't buy an Amazon-only brand. We require for our acquisitions for it to have multiple, omni-channels, to be a holistic brand Amazon, shopify, tiktok, wholesale, other revenue streams beyond just a single channel. If it has only a single channel but is very large, say above 10 million, then we're going to say, well, that is right for a TikTok shop, shopify, direct response, wholesale. We now see exactly how we're going to take an omni-channel scale that brand from growth into scale by opening up these additional sales channels of direct response marketing, whether it's again Shopify store website, tiktok, et cetera. We know we're going to open up these additional channels and create scale out of that by simply reaching a larger direct to consumer marketing. So with that it will be additional products but it will also be additional marketing. It'll be additional channels it could be Facebook, youtube, meta, tiktok ads et cetera that are going to go out and acquire that customer. We've got the profitability to do it. We know the market and demand.
Speaker 3:We typically won't start a secondary channel until the first channel of Amazon FBA reaches more than seven figures. Once it does, we are really dialed in. We're locked into growth. Our systems and SOPs are now engaged, so we have time, energy and attention and money to go over and open a secondary channel, go create that creation. So we'll go to TikTok usually first, because it's a simple platform to set up very quickly and when we go through a particular 90 day launch process, all the fulfillment will be done by Amazon anyways.
Speaker 3:So really we're just focused on who's the influencer, who's the video, what are the first couple of videos that'll pop off in virality? Because once that happens the whole engine of TikTok will lift you up. More influencers want to get on. It will be seen more. You get traffic on millions of views on a video and all of a sudden all these other people want to pile onto it and that becomes kind of an avalanche that works backwards from there. But you also have to be aware that it can move extremely fast. So you have to be able to capitalize that. So when you have that opportunity, that's where growth and scale comes in. It really gets down to capitalizing on the inventory and the marketing to reach scale, and that will usually be an inventory play. It will also be a marketing play. Can you reach eight figures on Amazon without any other channels. Absolutely Ask me how I know.
Speaker 1:Right, and then what about and I mean this has been completely amazing, neil, by the way I mean I'll talk about that at the very end, but what about the exit? Now, I know that your company specializes in, in you know buying, buying or incubating companies, but at what point do you think a brand that has done everything you talk about is is ready for exit?
Speaker 3:At what point do you think a brand that has done everything you talk about is ready for exit. Typically they're going to have two to three sales channels and if they have a primary sales channel, let's say 80% of it is on Amazon and the other 20% is made up by the two or three other channels that are acquiring customers but don't make up a majority of the percentage of profit. That is going to be an opportunity for us. We're going to see that they're open, they've already done the legwork, they've started the process. At this point it could be their skills are not strong enough in the additional channel spaces because you know one, there's not everybody's a unicorn who can market and manage every channel. I have different people with different skill sets and different channels for that reason, because you can't be, you know, an expert in every vertical platform, but there are people who have become vertical experts or subject matter experts in those and you bring them into those additional channels and each of those could potentially blow up and maybe even overtake the primary channel, right? So it's gonna be that there's a percentage of revenue and profits coming in, even if not terribly large.
Speaker 3:There is multiple omni channels. An Amazon only channel can get up to 3X if its profitability is above 18% to 20% net profit. That's EBITDA. If that is occurring then they may get about a 3X return. If they sell the single channel only, they may get a little bit less because we may have to plow a lot more money and capital inventory into opening additional channels. So the offer might be a little bit less if it's a single only channel.
Speaker 3:If they have a multiple channel we're looking at if it's Shopify, tiktok, if it's got additional profitability and revenue streams up to 20%, even 10 to 20% of the additional sales revenue channels, that multiple could go up as high as 5x to 7x depending upon the profitability of the additional channels as it ties to the bottom line completely.
Speaker 3:If they're operating 18 to 20% bottom line on all the channels and they have two other variables that play in and that is a subscribe and save group on Amazon that are buying their products every week, month, six months, one year continuously on subscribe and save and have a good base built up Say three, 500, 600 or more people on subscribe and save and they've gone over to some other channel and opened up more subscriptions. Say a Shopify store that has subscriptions that also build in a monthly recurring revenue an MRR into that channel we see, through customer acquisition, an average order value that's growing, a number of subscriber base that's growing and it's all picking up and growing momentum. Those could potentially reach 10 to 15x on the multiples of EBITDA. So those are literally SaaS evaluation style businesses. Now, when it comes and SaaS has been some of the highest evaluations in the technical marketplace E-commerce companies are now vying for that space in terms of multiples.
Speaker 1:So, neil, I mean just to summarize all this and I work with both B2C and B2B companies as a fraction of CMO, but I'm thinking of this e-commerce startups that I worked with in the past and it almost sounds like you have a lot of companies that are developing products without going through this process that you just described and then wondering there are too many who don't understand how the fundamentals of business operations work and then how to apply that to an e-commerce P&L of marketing and direct response and physical products.
Speaker 3:They either haven't been trained, they're knowledgeable or I wouldn't go as far as saying they're being stupid. A lot of times they just don't know what they don't know. It's a vertical channel. I had a $30 million company come to us on the direct response side and we're doing $30 million in business on their Shopify and direct response marketing Amazing. They tried for an entire year to sell on Amazon and you know how much they did in the entire year $16,000 in total sales.
Speaker 1:Yeah, I'm not surprised, yeah, I can see the big difference. And it's almost as if companies, they're not doing the research, they don't have the data and they're not. You know, your definition of direct response marketing is really powerful because you're really locking in on that of that person.
Speaker 3:Very much. The consumer avatar is the most important part. They will find you, no matter where you are. When they get emotionally attached to your brand, they will figure out how to reach you and come get that product on whatever channel they could figure out how to get it on. That is definitely a demand response activity when you do this correctly. But that you know the channels are different by nature. Their channels are different by psychology of the buyer. You can't just simply say, well, if it sells really well on the DTC channel, I'll just throw it up on Amazon and then it'll just sell really well because it sells on DTC. What you're going to find is that does not happen because it is a professional selling platform now.
Speaker 3:The days of it being a little side hustle flipping were back in 2012. Now they're against those businesses. They are shutting down the wholesale businesses and the product flippers and the arbitrage people, et cetera. If you are not a brand registered business, registered in their system with viable means to the your warehousing and product supply chain that you can verify, they're going to shut you down. It's just a matter of time and they're doing it faster and faster. If you are a brand playing within the right platform and you are a registered business with trademarks, et cetera. You, they open the doors to you and are like, hey, come on in, let's do all these things together. They really will. Are they the perfect channel? Absolutely not, and I'm not a fanboy. They do some dumb stuff.
Speaker 3:All the platforms do, and right now, tiktok is shutting down mini videos and products out of their violations system because it looks like the AI violation system of audit has gone just haywire lately and seems to be flagging everything on every video, every person in violation, violation, violation. It's like what the heck are you guys doing over there? So every platform has its challenges. Right, shopify has had its challenges right now in the marketplace.
Speaker 3:Its business has gone down. Its stock has dropped dramatically. They were able to prop it up for a while on the drop shipping platform and the AliExpress, but now that Teemu and Shine came in, now that they're about ready to get rid of the 301 exemption for products that are being shipped in, aliexpress is going to be killed. So is Teemu and Shine. So that whole model has been affected by the market. Their stock has dropped. There's a lot of problems going on with that platform. So, again, every platform has its problem and its challenges and its opportunities, its strengths and its weaknesses. You just have to figure out which one you're going to play the vertical in and then you play the game. And you play the game as smart as you can.
Speaker 1:Yeah, or you want to work with an expert like Neil and the folks over at or you get help. Yeah. So, Neil, this has been incredible. I mean your enthusiasm, your passion, your experience clearly comes out in your speak. So thank you so much. I think that a lot of people are going to get a lot of help from this interview.
Speaker 3:That's wonderful.
Speaker 1:There might be people that want to engage with you deeply. Obviously you are the co-author of Almost Automated Income with FBA, so that's a good starting point. But maybe there's some companies that want to reach out to you and say, hey, I could really use your help with this Obviously over Voltage, but where can we send people your way?
Speaker 3:Yeah, if they go to VoltageDMcom, that voltage dmcom, that's voltage digital marketing, or dmcom, or you simply google voltage or my last name. It is twa and, as you can see if you're watching this on video, I'm not a small asian dude. A lot of people mistake that when they hear my voice on the podcast and then they see me, they're like, oh, you're not like, I expected you to be. Um, but yeah, you can check that out. There's a free training. Myself and kevin go over the you know business presentation. There's free trainings and seminars and virtual events that we do. There's the book, of course. There and on Amazon, you're willing to check out and to always just ask, as people do their due diligence.
Speaker 3:Understand this is not a course. I'm not a program maker, I'm a business builder, all right. We're a business heads down operations incubated platform. If someone wants to engage with us, there's a 12 month agreement. It is a done with us understanding of mentoring and consulting. We can help them with operations, if that's part of the agreement.
Speaker 3:We typically are going to consult and engage with them on optimizations of growth and scale, giving them some of the hard truths. We act as a board of advisors for some of these companies who just need an outside board of advisor and they pay us for that reason, so that we can help guide them and their team on the best actionable steps to do next. And we are always focused on how to optimize the profits for growth and scale so that it becomes an exitable business model. And so that's one of the major things we do for existing companies is help them optimize for existing growth and scale and then present their ability to be exited and help them with the exit or potentially acquire them. If it's a great deal, if they're brand new, we walk them through the entire five-step process over a year period, one-on-one heads down.
Speaker 3:So it's all invitation only. I'm not an agency, we are an incubator, all right, and in that way I only take on those who I feel are serious and will do the business and understand the value of getting in the rowboat together. What I don't want to do is go in circles together. So you know, just understand you're not going to be paying for a course. This is a business. If I'm going to spend time with you, understand it's going to cost. I don't mean that to be negative, but I just mean that to you know, I have businesses to run. We have six, seven operations ourselves that we're already heads down in.
Speaker 1:So yeah, neil you're. You're clearly locked in on what you're doing. So if you're listening or watching, you want to get locked in. Neil is your guy. His great first name helps, but but you know this has been awesome. Thank you so much for your time. You know we went through the whole from beginning to the end to exiting, but any you know additional tip of advice or any you know mistake that. You see, I think we covered some of those, just some parting advice you want to give our listeners.
Speaker 3:Well, I think, in simple terms of I would just say your opportunity with this business model begins at the end of your excuses. If your excuse is you don't like the platform, then you're never going to do it, because every platform has its challenges. If your excuse is I don't have the resources, then be resourceful. If your excuse is I don't know, then invest in the knowing, and if you don't know, then invest in what you do know. The end result is every business opportunity is success when people put their tenacity, perseverance and grit to the test and they get in there and do the things that others are not willing to do for three to five years, so they can live like no one else can for three to five years. If you're willing to do that, every business opportunity from real estate to car flipping truss to e-commerce is going to be something that you're ultimately successful in because you're going to go farther and faster than those who give up.
Speaker 3:And guys, ladies, gentlemen, people, the bar is really low today. The stuff we've dealt with, the systems we've had to deal with and the things we've had to overcome to get to this point there are automations, technology, ai and so many things doing it now time, compressing and speeding and giving us the data we need. It's so much easier in many ways than it has ever been, but it's, in some ways, is extremely difficult. So I would always encourage you, no matter what you do, to look at coaching and mentoring, even if it's going to be in the real estate world. Go out there, do it the right way, learn and educate yourself, apply yourself, and your success is right at the end of that.
Speaker 1:Yeah, amen, brother, and this is going to be one of those episodes where I think you're going to have to listen again, because there were so many amazing tidbits, knowledge bombs. So, neil, thank you so much for your time and, once again, that is VoltageDMcom, if you want to reach out to Neil and the book Almost Automated Income with FBA. Neil, thanks again.
Speaker 3:Thank you, sir. You're a wonderful host. I appreciate you.
Speaker 1:All right, I hope you enjoyed that conversation and learned a thing or two. Hey, I know that you're listening to this podcast, but do you know that I also have a weekly newsletter, in fact? Well, I used to give a preview of that newsletter in this podcast. I've since stopped doing that to try to streamline things and keep really to the point with these interviews and my solo podcast recordings. But you can actually go and not only subscribe to my weekly newsletter. You can actually check them out in advance to make sure if it's something you want to subscribe to. Go to newsletterneilschafercom and you can find all of my previous editions over the past year or so, as well as a subscribe button, should you wish to subscribe. I generally send them out every Friday morning or so, so I'd love to have you on board. And, obviously, talking about subscriptions, if you haven't subscribed to this podcast, well, I just want to let you know that it is not just an e-commerce podcast. It really is digital marketing in general.
Speaker 1:We cover a wide variety of topics. Half of the episodes are my solo recordings and the other half are guests have a lot of great guests coming up. We have Michelle Garrett. We're going to be talking about PR for digital marketers. We have Dave Charest, who is VP of marketing over at Constant Contact. We'll be talking about email marketing, digital marketing. We now have John Gillum, who is the founder and CEO of Originalityai, talking about AI. So those are just a few of the many, many interviews I have lined up, and I'll let you know that I almost have interviews lined up to last the entirety of 2025. Just, there's a lot of amazing people, a lot of amazing ideas and information and insight that I know you're gonna love. So make sure you hit that subscribe button and until next week. This is Neil Schaefer, your digital marketing coach, signing off.
Speaker 2:You've been listening to your digital marketing coach. Questions, comments, requests, links go to podcastneilschafercom. Get the show notes to this and 200 plus podcast episodes at neilschafercom to tap into the 400 plus blog posts that Neil has published to support your business. While you're there, check out Neil's digital first group coaching membership community If you or your business needs a little helping hand. See you next time on your digital marketing coach.