Margen im E-Commerce-Geschäft verbessern

0:00Unternehmer/Gast I run a DTC uh skin care brand, e-commerce. Oh, yeah, you did like 12 million top line and you have like a bunch of different brands that you have. But, they're all white labeled, right? Yeah, yeah. So, we do actually 10 million. Yeah. And you want to get to 100, right? >> We want to get to 100. Yeah. Uh the key constraint right now is margins, right? So, 15% margins. Yeah. Um and >> your margins are low? I think we I'm going to tell you why your margins are low.

0:27Yes. You don't have a brand. So, we we just to to give you some numbers like 100 million >> [laughter] >> we might have scaled too fast Uh-huh. or like scaled too much to uh because here's the thing, the more we scale, the higher the CPA, right? The cost per acquisition. >> right? Yes. You have to learn brand. Yes. You're not going to arbitrage your way out of it.

0:52You're falling into the trap that I did and was stuck there for 3 and 1/2 years. All right, so you can stay for 3 and 1/2 years or you can take 3 and 1/2 minutes. All right. So, what happens is you're going to keep scaling spend, right? And revenue's going to keep going up, but your margin is going to compress, Yes. which you're already seeing, right? And that makes sense because you go to less profitable audiences you continue to scale, right?

1:18Alex And so, I think I see like my visual for this is like in each rung we have like the same number of sales that are going to happen, but I only have to buy this much traffic to get the same number of sales versus this much versus this much versus this much. And so, for you to scale long term, you need to get to the point where 70% of your advertising is brand driven, not direct to direct to buy, but it's building founder story, it's building narrative, unique differentiation, things like that that are top of funnel awareness like associations with things that your ideal avatar would find interesting so that you can not just be a media arbitrage white label thing because you're just always going to be beholden to like the newest hack, the newest bidding strategy, the platforms where you can get the cheapest clicks, and you'll never build something that's actually like sellable in the long run.

2:10I'm assuming that's what you want to do. Yeah. So, we want to build for an exit. Right. You have to build a brand. No one wants to buy these arbitrage businesses. A few investments that we made right now is first of all rebranding like with a branding agency. Uh second is product >> it. Sorry? Like as a physical product e-commerce owner, like your core most important skill is the brand.

2:35Alex Like you can't outsource that. It's the most important thing. Got it. Like so, you need to learn the skill of branding. Branding. Which is fundamentally making associations with things that people in your audience find positive. Got it. Do you think we have a model problem as well because for example, right now >> ads, you sell stuff, you ship it, right? Yeah. No, I don't think it applies. >> I was thinking about changing to a subscription model because we're not doing that yet.

3:01>> You have a percentage. What is the What's for all of them or for Are they consumables? Uh so, we sell gadgets like skin care gadgets and then we also sell consumables. Uh we usually do bundles. >> Well, the gadgets are going to be really tough for for subscription. >> Yeah, yeah, of course. And we want to like we just um manufacturing a a new serum in the US. Um and the idea would be Like hair or like supplement? Uh skin care like topical topical uh yeah. And

3:30>> Lotions and potions. Yep. Yes. >> [laughter] >> And the idea would be to slowly be shifting towards subscription because >> that that's fine. To me that's again, that's you still thinking with your performance marketer hat. You're just trying to like how do I increase cart value? How do I increase LTV? Yes. >> Like yeah, and that's fine. There's nothing wrong with that. I think like So, think about think Okay. So, think about conversion optimization overall as steroids, which is like you can use them once and then that's it. You get a one-time pop and then that's your new baseline.

4:01And so like whatever you're doing, you can get a double, sometimes a triple from CRO improvements. But, after that you still need to solve the big gaping hole in the front end, which is like how do I get more traffic? How do I get more repeat buyers? How do I How do I command a premium? Cuz the only way that you can outspend competition in the long haul who are just as good as you are performance marketing. Yeah. Because again, it's not even you versus them, it's your employees versus their employees. And if you have access to the same talent and you have the same undifferentiated products, you're running on the same margins. So, you're just going to be a completely commoditized business functionally in terms of how much you make versus how much you spend. And so, the only way to decommoditize this is that you have to build the associations that allow you to command a premium price that get people to be more loyal to you so you can attract better talent as well because they actually believe in what you're what you're what you're about. All right, like you have for sure spreadsheeted your life in terms of how you thought about your business. Yes.

4:53Yeah. [laughter] For sure. I get it. Yeah. But like you actually have to put a different hat on if you want to go to the next level. Got it. So, you actually have to stop thinking as quant and start thinking in terms of psychology of customers and not like oh, this specific type of ad convert It's not like that. You have to expand out your window in terms of attribution of how long it takes to make a sale. You should start looking at how many people actually follow the account. Um like there's a great There's a great article. Um I think it was a CMO of Chubbies wrote this. I want to say it was Chubbies. Um but he talked about the uh the ROAS doom loop or the direct response doom loop and you're in that now. Yes. Which is that you just keep spending more to make less and then you're like I'll just spend more and you make less and it just gets until eventually you're like I'm just putting money in and getting it back out and I'm just like I have a number, but I don't make anything, right?

5:38So, it's a very vicious loop and cash flow sucks for the business. Yeah. Yeah, I get it. >> [laughter] >> And so, the only way out of that is you have to rethink It's a strategic change. Uh you have to rethink how you're advertising. Got it. In In terms of branding, what do you mean by branding? Cuz sometimes for me branding looks like woo-woo, you know? Totally. I thought the same thing and then I built like multiple billion dollar companies off of it. So, like >> [laughter]

6:02Alex >> like I get it. But what what I like the if you can put it in a framework, Yeah. >> what would be like the key levers of branding for you? You can charge more money. People buy more times. Do you need to go more or is that good enough? You get higher CTRs, higher conversion rates. All of that. Yeah. But I mean in terms of like building a brand.

6:27You post your stuff next to the that people like so they think it's cool. Mhm. Okay. And then eventually you take the cool thing away and then your thing's still cool. And so then they pay a cool premium to buy your thing versus the other guy's thing that's not cool. And they keep buying your thing because they feel cool when they buy it. Got it.

6:52So, do you know Gymshark? Yes. Why would they pay Sam Sulek to become an ambassador? Why would they pay him money when he can't directly drive ROAS? Branding is higher return on spend than direct response does over a longer time horizon. So, the thing is is your problem is you have a 30-day window for everything you're looking at, maybe 60.

7:20If you look at brand, you have to extend to 6 to 12 months. But when you do that, you can actually start getting insane returns on capital, but you have to start thinking like a capital allocator rather than just a direct response performance marketer. Got it. I could talk to you more about it, but like I want to I don't want to go too deep in it, but that's that's fundamentally that's the frame shift you need and you having many businesses I don't think helps you. There's probably one of them that's your flagship one that's probably the best one that has the most potential.

7:47>> No, I just have one business. I thought you had multiple brands under there. No, no, no, no, no. I mean, it's we just have one skin care brand. >> gadgets and widgets and then you have No, no, no. Gadgets is like skin care gadgets. So, skin care devices. Yeah, exactly. And then It's one one >> Just one brand. Okay. Fine. I feel a little better. Okay. >> [laughter] >> But that I stick by what I said. You have to have a frame shift. Otherwise, you're not going to get past where you're at. Okay. Thank you. If you are a business owner and you are not growing as fast as you like, I'd like to give you a free gift. So, my team and I put together the 100 million dollar scaling road map, which is basically 200 hours of us looking over all the portfolio companies we've had and what stages of growth they went through and more importantly where they got stuck and how they got past it. And so, we broke it into these 10 stages and we made this little kind of quiz thing where if you put in your business information, it'll tell you where you're at and the most important part for you, what to do for each of functions of the business across product, marketing, sales, customer success, recruiting, IT, human resources, and finance. And so, no matter what you're struggling with, someone else has already struggled with it and solved it. And so, I'd like to give you this thing absolutely free. You can go to acquisition.com/roadmap, plug in your business information, and if you want us to actually help you deconstruct the business and you're trying to scale, we'd love to help you out. On the thank you page, you can just book a call with my team and we will look at the business, see if we can help, and if we can, we'll invite you out to Vegas and we'll do this in person live.