Steve Chou On Shopify vs Amazon – How To Choose Which Model When Starting Out?

In the podcast:

02:47 – Product selection05:46 – Product seasonality06:39 – Price range of products08:40 – How to source your product10:00 – Shopify or Amazon10:50 – Best ways to start your initial sales online12:42 – Boosting sales and traffic volume14:31 – How to start using Messenger bots20:44 – How often to send an email to subscribers?22:50 – Dynamic product ads

Steve Chou from MyWifeQuitHerJob.com joins me in talking about the differences between selling on Shopify vs Amazon. He also discusses which model you should choose and why.

Ilana: Welcome back to another episode Talking Web Marketing. Today I’m interviewing a guest under the name of Steve Chou. Now you may have heard of Steve I actually met him on a recent trip to traffic and conversion in San Diego. We actually kind of met at a booth which is a different story in itself. Anyway you might have heard of Steve because he’s got a pretty successful podcast called My Wife Quit Her Job where he talks about online business and his e-commerce store and lots of other topics related to entrepreneurship.

So I’ve brought him on to today’s episode to really talk about his adventures with his e-commerce store and importantly the different models that you can apply with e-commerce and how he got started. Which is actually a very interesting story as well as how he generates traffic for his e-commerce store.

So if you’re brand new to e-commerce or even if you’re seasoned you will no doubt get a lot of value from today’s episode. So let’s get stuck in today’s show. Welcome to Talking Web Marketing Steve Chou. It’s wonderful to have you on today’s episode.

Steve: I am happy to be here.

Product Selection

Ilana: Awesome. Thank you so much. We were just talking offline and in my research for this podcast I can see that you have a number of different ventures but your main venture is with your e-commerce store bumblebee linens and I kind of wanted to bring you on today’s episode to talk to you about that because you know it’s no shock that e-commerce is not going anywhere anytime soon. I want to talk around how you built bumblebee linens. You mentioned offline that you started up in 2007. That’s certainly been around for a really really long time. So I want to sort of touch on how you chose your product selection for that and also how you start to generate the traffic for it. So are you happy to talk about that in today’s show?

Steve: Yeah absolutely. And you know to be honest with you we kind of just accidentally stumbled upon it. We sell handkerchiefs online and it definitely wasn’t my first choice the way we stumbled upon that niche was when my wife and I got married. She knew she was going to cry at our wedding and we’ve had all sorts of money for photography and that sort of thing and she knew she was going to try and she didn’t want to be in the photos using like a nasty tissue. She wanted a nice handkerchief embroidered with our name on it.

Ilana: That’s a really cool story.

Steve: Yeah I mean at the time there was nothing in US. We ended up finding this factory in China. We had to order a couple of hundred of them. We ended ended up using six and then we got rid of the rest on eBay. And I remember they just sold like hotcakes.

Ilana : Wow. That’s very cool. So you kind of I guess I’m not the traditional route of wanting to start an online business and then searching for a product. You were I guess customer yourself before you started.

Steve: That’s correct. I mean we didn’t actually start the store until three years after we got married. And that didn’t happen until my wife became pregnant and she wanted to stay at home with the kids and we live in the Silicon Valley. You pretty much need two incomes to get a good house and a good school district. And so we started looking for different businesses and remembered that we sold handkerchiefs on eBay a long time ago and that’s when we decided to launch the store.

Ilana: I understand. Okay. So I think you know so many people these days have an e-commerce store but what is often not really spoken about in the world of e-commerce is product selection and I would imagine product selection really that hinges on the success of your e-commerce store regardless of your traffic generating strategies or really anything like that. So do you have some thoughts around how like I say you’re starting out and you’re looking to start an ecommerce store and you don’t have a product. What are some kind of things that you look for in choosing a product.

Steve: Yeah absolutely. And in fact you know we kind of stumbled upon our first niche which is handkerchiefs. But every single product that we released since then follows kind of like a search criteria. And I teach a class on this and what I kind of advise if you like brand new right is to pick something that tends to be light nothing fragile and most importantly you want to pick something where you can’t really do a lot of easy comparison shopping like you can’t just go out onto a brick and mortar store and then find this object. It has to be something special and have a really good value proposition.

Ilana: Okay so it’s not like a real price race to the bottom.

Steve: That’s correct. And it also helps, you know it’s not necessary but it also helps if it’s like a small product because then people will come back on a regular basis to buy more of them.

Ilana: And when you say small like is there a sort of a minimum or maximum size.

Steve: Yeah I generally say if he can finish showbox and the only reason for that is you know Amazon has really taken off in the last five years or so and Amazon has an oversized product requirement where if you go above a certain size the costs of storing that item go up tremendously.

Ilana: Interesting. Okay. And also Fred Jehle I guess sort of what’s that like thing that a class.

Steve: Yeah I mean I think breaking the mail and even though it might not be your fault you are as a business liable for it. So it just makes things a whole lot easier.

Product Seasonality

Ilana: I understand. Okay. What about seasonality of products, so let’s say like Halloween products, do you kind of avoid things like that?

Steve: Yeah I mean I generally don’t like it when all of your revenue comes on like one or two days out of the year. So yeah Halloween falls into that category. In general you know if you’re going to launch a store rather like a single product it’s actually better if you buy products that have demand that could use throughout the entire year.

So for example in our store our handkerchiefs are mainly purchased during the wedding season. But then as soon as the wedding season ends we have napkins and towels and other items that are more for the holiday season. And so we kind of haven’t even demand all throughout the year.

Ilana: And I would also imagine in me being in Australia, our wedding season is the opposite of your wedding season so there’s potential to capture other wedding seasons around the world, maybe?

Steve: That’s correct yes if you ship internationally, absolutely.

Price Range of Products

Ilana: Right. Okay. What about price range of the actual item. Do you have any thoughts?

Steve: Yeah I would say anything under 200 bucks tends to be like an impulse buy and 200 US dollars I guess tends to be an impulse buy online.

Ilana: And what about a minimum price range. You know being a PPC person I’m always mindful that I want to be out and buy a customer.

Steve: Okay. So in terms of let’s talk about Amazon I recommend at least like 20-25 dollars, if you’re going to be buying ads, your average order size preferably be above 50 bucks, I would say. So if you have cheaper items you can buy them together and maybe create some sort of higher priced item. What are your guidelines just curious for PPC in terms of average order size?

Ilana: Say it’s a tough one because it’s all about the margin right. Steve: Assume like a you know 60% margins.

Ilana: Look in my experience, and it’s also it depends on if it’s a one off product versus a recurring item. But in my experience it always costs more than you think to buy a customer. I’ve had customers or clients come to me and they’re trying to sell a five dollar product. And that’s the top line revenue versus their margin. And it’s just not going to happen. And with no remarketing least in no database. I usually am the bearer of bad news. I’m sorry. I don’t think paid traffic is going to be profitable on the front end unless you’ve got some kind of back end or unless you can bundle a few products together to boost the order size and therefore margin selling individual products like that.

In my opinion is just it’s a loss leader. I guess if you can make it back then it’s a different conversation. But if you can’t make it back then I would say not to do it which is a little bit controversial because there’s so much talk around PPC for ecommerce products but I think that is a part a piece of the puzzle that people don’t really consider when starting an e-commerce store. What about sourcing your products. I would imagine this is a real sticking point for people and I heard a lot of people, kind of struggled to get over. What would you say the best ways to source a product?

How To Source Your Product

Steve: I mean there’s different ways to source a product like one model is to dropship and that’s basically where you take orders and someone also fills your orders. You can do the traditional wholesale method where you contact you know popular brands get a hold their distributors and then hold inventory or you can actually have your products manufactured with your own brand and sell them as your own. And that actually is the way that I recommend because you know you’re in full control of your brand. You’re actually developing some intellectual property that you own and that’s what we do.

Ilana: Interesting. So how did you find that original sourcing company?

Steve: That original sourcing company was just found on google and traditionally factories don’t even have a web page or whatnot. It turns out this first venture ours actually wasn’t a factory. It ended up being like a trading company and the best way to find factories is to go to China or these days you can use Alibaba. But we like to just go to China and go to the Canton Fair.

Ilana: So can you tell me a little bit about the Canton Fair?

Steve: Yeah basically it is a fair that occurs twice a year it has three phases and all of these Asian vendors congregate in this place in Canton. And you can pretty much hit like hundreds and hundreds of vendors in the course of several days. It’s really speeds things up.

Ilana: So you would go there to source your product and create a arrangement with a vendor, is that right?

Steve: That’s correct yes.

Shopify or Amazon

Ilana: And then let’s say you go to Canton Fair and you find a product and you go yep this is what I’m going to do the next step for somebody as I understand is Shopify store where they’re in charge of their own traffic or Amazon.

Steve: You know these days I actually, when you first come up with a product you never know if it’s going to do well until you actually try to sell it, right? And so I actually advise that people start on Amazon. Amazon already has a built in marketplace, a lot of customers. And sell it on their first and if it gets some traction then work on your store.

Ilana: So the whole Amazon FBA model did that first.

Steve: That’s correct yes.

Ilana: So send the Canton products to Amazon warehouse and they will do it for you.

Steve: That’s correct. I mean you should obviously take a look at them, inspect them and that sort of thing in the beginning and then you know once your supply chain is all set up then you can ship stuff directly to Amazon’s warehouse.

Best ways to start your initial sales online

Ilana: I see. Okay, so let’s say you go down that route start selling, you start your own Shopify store. In your experience what some of the best ways you can start to make those initial sales online. You mentioned before we hit record that you started with Google Adwords. Do you still recommend that?

Steve: Yeah I think it really depends on what you try to sell. If something that you’re selling is widely searched for online then you know google something like Google Adwords will work. Google Shopping will also work.

In fact I think Google shopping, I haven’t looked in my Adwords account a little bit but I believe Google Shopping is our highest earner right now followed by just regular keyword ads. And we also run a dynamic retargeting on Google as well. And that converts well.

Ilana: Do you do much on the Google display network?

Steve: Only the retargeting.

Ilana: I would say that’s probably an area of opportunity for you.

Steve: It perhaps is. And I’ve actually tried it in the past and I think it requires a lot more spend just to figure out what works and what doesn’t. And at the time I just I was just hemorrhaging money and I decided to stop.

Ilana: Yeah, I mean here’s a suggestion for you. Maybe you could look at the converting placements in your remarketing campaign and make them a direct placements campaign for all traffic. We find that works well for our clients. Did you try that?

Steve: I tried targeting individual pages that were talking about the products that we sell and we had you know some marginal success there but those individual pages actually didn’t end up scaling. You know I’ve given a lot more effort on Facebook because it’s been easier right even though the Google display in Adwords is infinitely larger.

Ilana: Yes it is. But you know they’re such different platforms as you and I both know. But I think what with Facebook really is superior for e-commerce is the fact that people can tag a friend or share it. I mean that vine reality aspect of Facebook is just such an amazing advertising opportunity.

Steve: And then the audience targeting is just so much better.

Boosting sales and traffic volume

Ilana: So starting out you would recommend PPC but then sort of once you start getting some traction. What are some strategies that you use to boost sales and traffic volume?

Steve: Yeah I mean here’s what we did with our store. We first started out we did a lot of content marketing so we started writing articles that would help would be brides with their weddings craft projects involving the products that we sell. And one thing we also did is we noticed that certain people were buying a large volume of our products.

And so we started calling these people and it turns out that a lot of the people buying our products were event and wedding planners. And so we got a hold of them and yeah we basically offer them like a dedicated rep and coupons if they want to purchase from us going forward.

And after that you know, soon after that, whenever there’s like a large order that comes in we kind of put them on this list so that we can contact them. And so today you know a decent sized portion of our business is actually B2B as well. So we’re the three-pronged attack. We have PPC, we have content marketing which brings in organic traffic and then we have the B2B aspect.

Ilana: Interesting. So I met you at traffic and conversion recently and there was a lot of talk at the conference about Facebook messenger bots, etc. Have you kind of experimented with some of the latest tests that are going on?

Steve: Yeah I’ve been experimenting that for several months now and it’s been working almost too well to the point where I feel like things are going to, you know once people start adopting it more I’m sure it won’t perform as well it just kind of reminds me of how email was 10 years ago when I first got started. I would send email and I would get like 30-40% open rates and like 10% click through rates with bots and messenger, I’m getting like 90% open rates 40% click through rates and right now it’s just pretty insane.

How to start using Messenger bots

Ilana: So can you like for those of you who are listening and don’t know the first thing about bots so how to get started can you kind of talk us through with it a bit how you started with it and I guess recommendations on how you would stop?

Steve: Yeah I mean the simplest thing that we did just to get started was to implement like a live chat bot and so basically I mean we bring running business for a while. We know what the frequently asked questions are. And so it’s just a matter of putting together a live chat bot that answers those questions and so the tool that I use is called many chat.

And you can actually have it recognize certain keywords and questions. And if someone types in a question they uses those keywords you have a canned answer that answers that. And so for example in our store it’s like where’s my order or how long is it going to take to fill my order. How can I check up on my order. And so we have buttons for these so if you click on one you can instantly check up on your order. Like if you type in your email address and your order number and do so internationally to do so wholesale. All these questions are kind of encapsulated into this database that we’ve created.

Ilana: Cool. So people find the site correctly. People were already messaging you through the page you’ve just implemented a bot to respond to them is that right.

Steve: So we actually had a regular chat before but we implemented the Facebook Messenger version because anytime someone interacts with you they instantly become a subscriber and then you can contact them going forward.

Ilana: So you are generating subscribers purely by people initiating that chat and once they become a subscriber, where you then sending broadcasts to them as well, through Messenger?

Steve: That’s correct. Yes that’s correct.

Ilana: With an offer or just more saying confirming we’ve got your order.

Steve: So funny I was just talking with McHale many chat and turns out had been doing something that was in a gray area. So I had been sending mess broadcasts saying hey we just got a new shipment of new product would you like to see them? Yes, No, Unsubscribe. Then you know once they said yes we give them a coupon code to go shop in our store. And that actually converted really well turns out that that’s kind of like a gray area because you’re talking about product if you want to be absolute white hat you should give them some piece of content.

So for example going forward I might say hey we have a new arts and crafts project with our you know for weddings. Would you be interested in seeing it. And then once they click yes then you can give them a coupon code or something to shop on the store.

Ilana: And do you have a sense of your unsubscribe right?

Steve: Yes. So for our list right now I had been running messenger ads to it with a plus shipping offer. So let me just describe what that is. So we run an ad on Facebook where we give away a FREE handkerchief. And when they click on that ad it goes in the messenger and it says you know if you want to redeem this order click on this button and they click on the button. They go on our page and we actually try to get an email address as well. And once they enter their email address we give them a free handkerchief.

So a lot of our live chat subscribers are messengers subscribers right now fall under that category. And so a lot of those people are just looking for free product. And so whenever I’m broadcasting to those people my unsubscribe rate has been on the order of like 10% .

Ilana: And can you segment those people within the many chat?

Steve: You can. Yes you can. You can tag them, you can segment them. You kind of have to plan ahead a little bit. Meaning like in a certain flow you tag them if they do a certain action. But the people who opt in through the live chat widget on our site the unsubscribe rate for those people are much less like on the order of 1 to 2%.

Ilana: Right. And how else are you promoting? Are you putting a link in your email saying you can talk with us on Facebook Messenger.

Steve: Yes so right now the way we’ve been doing it so we have a Facebook audience for people who have shopped on our store and haven’t purchased in a while. That goes to a messenger. We also occasionally blast deals on our e-mail address and we’ve been having a portion of those people go to Messenger to get the coupon as well. So it’s just kind of a way to kind of move our e-mail subscribers over to chat because the open rates are so much better.

Ilana: And is there any way for somebody within Messenger to share that with other people or it’s just exclusively a one to one.

Steve: I think it’s a one to one. Facebook is really, really strict about not spamming your messenger subscribers. I mean there are certain rules right. You can only send a promotional message within 24 hours after an interaction. And outside of that you have to send content.

Ilana: That might be a new development. I don’t know about that.

Steve: Oh yeah, I know it’s been a while. It’s been there for a while actually.

Ilana: Oh, alright. Good to know. I guess what would you say is some tips with starting out with messenger bots for e-commerce?

Steve: Yeah I think at the very minimum just implement like a live chat widget. It actually ends up reducing your support load as well because you’re answering the frequently asked questions. The next low hanging fruit would be to just take your email list and try to move some of those people over to a messenger so that when you send out something you’re sitting out through email as well as chat and you get a lot more interaction that way as well. So that’s like low hanging fruit.

Ilana: Yeah. Cool I guess it’s a good starting point for people and obviously that’s some way they can build on.

Steve: Yeah absolutely. And then later on you know you can try running ads to get message subscribers. And right now you know not a whole lot of people are using them. So it’s relatively inexpensive to get a messenger subscriber.

How much inventory someone should have?

Ilana: Interesting. So you mentioned before that message is working a little too well. Is that in terms of your stock availability like what would you say some recommendations for how much inventory someone should have at any one time?

Steve: You mean in terms of scaling?

Ilana: Yeah exactly like, you know for e-commerce it’s a sticking point for many e-commerce people that you know they sell out of stock and then they’re going to get more shipments and they are turning their ads off and they go to their ads back on to these constant management of inventory.

Steve: Yeah I mean that’s a hard question to answer just because every business is going to be different. Right now the purpose of our ads that we run are actually to build up messenger subscribers which we then will use to generate more sales. And right now like we’re just trying to break even on those ads because we know we can make up for it on the back end with messenger and email.

How often to send an email to subscribers?

Ilana: So speaking of email how often do you email your subscribers with offers versus content? It’s as I know it’s a balance between providing value also you know emailing office.

Steve: So almost all of our email correspondence is automated. So the way we get them on the list is we have this Wheel of Fortune pop up and if they give their email address they get to spin this wheel to win valuable prizes in our shop and after they get on that it’s like this. I want to say it’s like a four month sequence where they’re emailed like every week. And usually it’s just content.

But every now and then we sprinkle in a coupon code. If they haven’t made a purchase yet but if they’ve made a purchase they don’t get any coupon codes and they just get the content. And if they’ve made a purchase but they haven’t made a purchase within a certain period like let’s say 60 days or so or 30 days then we send out people a coupon and if they haven’t purchased so we have differing increments right 30 60 90 days. So they haven’t purchased in 30 days we just send them a small coupon if they still haven’t purchased within 60 days we send them a larger coupon and then finally if they haven’t purchased in 90 days we give them an even larger coupon.

So that’s to get people kind of like back in the swing of shopping in our store. We have a post purchased sequence that tries to get them to leave reviews and that sort of thing. We have another sequence that you know if they’re already on our list and they looked at our product we’ll send them email telling that it’s running out of stock to just kind of get them to make a purchase. So I like keeping a little bit more automated and occasionally we actually have someone who writes blog posts for our store blog as well. And occasionally we will send out those posts just the list as well.

Ilana: Cool. And would you say the handkerchiefs is sort of a repeat purchase really?

Steve: Yeah so for the longest time and this is really funny. For the longest time we thought that people were using these handkerchiefs just for weddings and then I punched in our you know our purchased audience into Facebook audience insights. And that’s when we discovered that a large percentage of our purchasers are aged 55 and above.

And so these are actually people who collect handkerchiefs and really like buying handkerchiefs just because you know it’s an old school type thing. And I didn’t realize that. And so I started using Facebook broad matched dynamic product ads just targeting people 55 and above. And so far that’s been working pretty well.

Dynamic product ads

Ilana: I haven’t talked about the dynamic product ads on the podcast before. Do you want to maybe just touch on how what it is and how you’ve used it just for those people?

Steve: Yeah it was just a leap of faith and it actually I think it just came out within the last year and a half, I want to say right? It’s basically where you allow Facebook to determine the targeting like it’s like a blanket audience so for us we’re just having Facebook target people 55 and above who are women and just letting Facebook decide who to show the ads to.

And you know you have to let it run for a little bit to kind of prime the pump and give Facebook enough conversion information but after that it ends up working pretty well like it’s converting like two to one. Right now on the top of funnel like brand new people which is really good.

Ilana: But I would say your Facebook Pixel does need to be well and truly sees them.

Steve: That’s correct. You wouldn’t do it with a brand new account. So you know if you have a brand new account then you really need to just put together some sort of creative that really defines your unique value proposition. And usually what I try to do is I try to collect the message subscriber or e-mail subscriber when I run Facebook ads our way.

Ilana: So you’ve kind of done so much in the handkerchief niche. If I was in America I’d say niche. We see it differently if you’re starting from scratch what would you, what kind of e-commerce products would you also consider like you mentioned at the start of the episode as you know it’s going to be small, it can’t be breakable. Is there any other criteria that you would also factor in if you are starting from scratch?

Steve: Yeah I mean you know I can talk about you know the criteria. I can’t I won’t. I don’t want to comment on like specific products or so but I can tell you that the criteria that I would use there’s a whole bunch of tools right now out there that will tell you you know how well certain products are selling on Amazon.

Ilana: Oh, okay. What are some of those tools?

Steve: Like jungle scout, viral launch is another one and you know back when I got started none these tools were available and you know Amazon wasn’t as huge either but now it’s really easy to get an idea of how well certain product is selling like in real life right. And on the eBay side there is a tool called Terapeak that basically scrapes all the complete eBay listings. So you actually get exact sales numbers.

So based on that information you can use jungle scout just kind of browse Amazon and see what is selling and the way you can kind of judge competition is by looking at the number of reviews that a product has had. And in general you know if a product has less than 100 reviews then that means that that listing is not well seasoned and perhaps that is an area that you may want to go into because it’s not that competitive.

Ilana: Cool. Okay. Well you certainly covered a lot of information.

Steve: We covered a lot of stuff on the surface. I mean if you want to go any deeper into the topics feel free.

Ilana: What about some other tools? I guess you know I just, I really feel like product research is you know success with your e-commerce store really really hinges on your product ultimately I guess you can really have fancy marketing and fancy messenger bots and email marketing but if you’re just trying to sell something that people don’t want then it’s your job is infinitely more difficult. You also mentioned some differentiating your products somehow and sourcing it directly. I guess this is a creative process for people. Can you kind of provide some insight?

Steve: You know it doesn’t have to be a creative process like a very simple way like don’t release a product that’s already being sold. You always have to make it better in some way. So an easy way to do that is to simply go on Amazon once you’ve figured out something that you want to sell and go look at like the two and three star reviews and see what people are complaining about it.

So one example would be like this picnic blanket that we just bought right. We bought this picnic blanket and we took it outside. The grass was, it was early in the morning so the grass is a little bit wet and it ended up making the picnic blanket all wet on the top. And so a simple way to combat that would be to just add a waterproof liner for example or you know if it’s too thin just make like an extra thick picnic blanket. Basically look at the reviews and find ways to differentiate yourself.

Ilana: As an e-commerce provider yourself, what are some ways that you really encourage people to leave reviews since it’s such a huge you know having that social proof from others it would help your own selling a beautiful product.

Steve: Yeah I mean on Amazon it’s really tough now because Amazon has strict guidelines on the fact that you’re not allowed to ask for review in return for anything. So if Amazon land basically you just have to send out an e-mail. And the way we usually do it is we pitch ourselves as a small family owned business and then we just ask for the feedback with your store. However you have a lot more freedom so you can bribe them to leave a review for you.

Ilana: To leave a review on Amazon?

Steve: Not on Amazon on your own site or any review service that is recognized by Google. So we actually don’t bribe anyone but you know we just say you know if you’ve had a good experience with us please leave a review and we just make it very easy for them to do so.

But certain other people they’ll give out coupon codes in return for review. And what’s nice is once your product has a sufficient number of reviews it’ll actually show up in Google with stars which improves the click through rate.

Ilana: And sadly Google are retiring their review extensions in your ads which is disappointing. You also do a bunch of other stuff you have a course that teach people how to do exactly that way could people find out information about that?

Steve: Yeah. So the class that I offer is located at profitableonlinestore.com. But I also offer like a free day mini course that just kind of walk you through the basics of ecommerce college stuff we discussed today so you can decide whether you want to even go into selling physical products online. And that is located over mywifequitherjob.com/free and you can just sign up easily there.

Ilana: Awesome. Well you have been a wealth of information. Thank you so much for coming on today’s show and sharing your amazing insights and expertise. It’s been a pleasure having you on. And yeah I guess those two places where people can find out more information about you.

Steve: And one more thing like if any of you guys are getting married, my online store is over a bumblebeelinens.com. Come on over and will look you up. And I also run an annual e-commerce conference over at sellerssummit.com if you want to stop by and say hello.

Ilana: Sounds good when’s that coming up.

Steve: That is on May 3rd. Unfortunately we’re already sold out for this year but it is an annual conference.

Ilana: Congratulations on sold out.

Steve: Thank you.

Ilana: Awesome. Well thank you so much Steve. And it’s been a pleasure having you on. And I’d love to have you back maybe some time in the future.

Steve: Sounds good. Take care Ilana.