This post is contributed by Kunle Campbell of 2X eCommerce. This post was first published on 2x eCommerce blog: From an 8-Figure Amazon Private Label Seller to a SaaS Entrepreneur w/ Chad Rubin [Crucial Vacuum & Skubana]
Learn Key Points to E-commerce Success w/ Chad Rubin
Discover Chads early experiences disrupting the vacuum space and becoming a TOP 300 Amazon Private Label seller. You’ll learn his approach and philosophies around adding the ‘e’ into e-commerce for your business. This episode is packed with sage e-commerce advice, especially for those looking to start selling on Amazon.
Chad explains why you need to be on Amazon and every other sales channel, how to start doing that, and the key importance of customer service and branding. Top it all off with a breakdown of Skubana and what this tool can really do for your e-commerce business.
Amazon as a Sales Channel:
Amazon was a great entryway for us into e-commerce. But I view Amazon has a selling channel, not as a business. I think that’s a mistake a lot of people make, is that they create a business around Amazon. But you want to be on every sales channel out there, including your own storefront.
Disrupting the Space
In terms of money, I’m very risk-averse. You want to just start with one product and start slowly. Talk to your factories overseas and say, ‘Hey I can’t hit your minimum order quantities but what can I hit? And I want to start with one product. And one product leads to a container over time. One product, to a case, to a pallet, to container, it’s baby steps but you get there.
Customers, Branding, and Selling on Amazon
The value proposition of Crucial has always been doing it better, faster, cheaper, direct to consumer. So doing it better: that is not only offering free shipping, free returns, but we have a live chat, we have our phone number right on top of our page. In fact there’s a sign above my customer support team that says it takes years to find a customer, seconds to lose one.
Skubana: A lot of people in e-commerce today use fragmented softwares, many different tools which is very inefficient and cost ineffective to run their entire business. I also didn’t understand why you needed to run your business with 10 different tools. So you have an FBA tool, then you need a purchase order tool, maybe you’re using spreadsheets, then you need to use a entry-level shipping solution, then you need entry-level inventory solution and you still don’t know what your analytics are because they’re not real time. So imagine all these things are connected in one platform for visibility into your entire business, real-time. That’s what we’ve built.
Recommended Books from Chad Rubin
The 4-Hour Workweek by Tim Ferriss changed my viewpoint on how I see the world.
Tony Hsieh, ‘Delivering Happiness’, the founder of Zappos.
Virtual Freedom, by Chris Ducker, talks about outsourcing and how you could successfully get repetitive tasks off of your plate so you can focus on what you’re good at.
Blogs: I really like Quick Sprout, which is Neil Patel’s blog. He just shares everything, he just drops golden nuggets and makes it rain and you can learn an incredible amount for free.
(02:05) Introducing Chad Rubin
(06:16) Amazon as a Sales Channel
(17:32) Brand vs Private Label
(20:38) Disrupting the Space
(26:17) Customer Service
(38:53) Tools for Amazon
(49:18) The Future is Amazon + Parting Advice
When they started telling me ‘No’, that was a great segue for me to figure out and solve that problem. Because the answer was ‘Yes’ and ‘How do I accomplish taking that product and selling it on the Internet?’ So they said no and I decided to find an alternate avenue, which was going direct to the factories. (Chad Rubin)
[Intro clip] Welcome to the 2X eCommerce podcast show where we interview founders of fast growing seven and eight figure eCommerce businesses and eCommerce experts. They’ll tell their stories, share how they 2X’d their businesses and inspire you to take action in your own online retail business today. And now, here he is, the man in the mix, Kunle Campbell.
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Kunle: Hi guys. I have with me on today’s show Chad Rubin. Right. So let me give you a backstory. Right in the heat of the recession seven years ago, back in 2008, Chad took over his parents business. It was a vacuum store business. And he pretty much… They were struggling, really. And he pretty much converted it to an e-commerce and Amazon business selling vacuum accessories. So vacuum accessories such as bags, rollers, hoses, filters, belts, you name it. He used Amazon as a channel to build his business. Now over time, he has turned Crucial Vacuum into a leading brand in vacuum parts and accessories in Amazon, so he leads that category on the Amazon marketplace, where he currently ranks pretty much number one. I picked up on a few things. On Amazon his Crucial Vacuum is a top 300 seller in Amazon US and a top 1000 seller in the world. They rank about 540. So yeah, I brought him onto the show to tell us all we need to know pretty much as to how he’s built his business. And he also has a background in Wall Street and he is a graduate from Boston University in finance, something related to finance. Anyway, so without further ado, I’d like to welcome Chad to the show. Welcome to the show, Chad.
Chad: Thank you for having me.
Kunle: Good stuff. Could you take a minute or less to introduce yourself, your elevator pitch so to speak, please?
Chad: Sure. So I graduated University in Massachusetts Amherst, just to correct you.
Kunle: Okay. Okay, sorry about that.
Chad: Yep, finance major, went on to Wall Street for a couple of years doing research on Internet stocks. So telling hedge funds/institutional investors to buy, sell, or short various stocks. I got laid off during the whole crisis, January 2009. My parents had a vacuum store, they were going out of business. In fact they simultaneously were going bankrupt as I got laid off. I bought their inventory out of bankruptcy, listed it on the Internet, sold it, and when I went to replenish it I couldn’t get it at the same price again and I decide to go direct to consumer before direct to consumer was really the cool thing to do. Fast forward now, it’s been eight years roughly. I’ve created a software to enable me to manage my entire business and I’ve started selling that at as SKUbana to other e-commerce sellers.
Kunle: Okay, okay. That sounds really, really interesting. Very bad time for the family, including you, and you turn that to an opportunity. You built something out, you were a pioneer in Direct to Consumer, and right now you’ve been a successful and accomplished Amazon seller and you have software for Amazon sellers to help them manage their inventory and their entire operations called SKUbana. Okay, we’re going to talk through every single point here on the show. But before we start, I noticed you have an Amazon UK and an Amazon US store. Actually before we go into that, what is the value proposition of Crucial Vacuum?
Chad: So Crucial Vacuum, we also own Crucial Air, Crucial Coffee, and we’re just about to launch a fourth brand called Think Crucial. But the value proposition is very simple, right. We buy, we manufacture from the factory, direct to consumer home appliance accessories and filters and sell them direct. We cut out the middleman and we give free shipping, free returns. That’s our value proposition.
Kunle: Okay, fantastic. So value and cost, pretty much. Okay, so low-cost and high-value. Are you based in New York or?
Chad: So my e-commerce operation is based in New Jersey. And the value prop really is that we do it better, we do it faster, we do it cheaper than anyone out there.
Kunle: Okay, okay. Sounds good. You have an Amazon UK and an Amazon US store. Could you tell us your reasoning for expanding to the UK and how that’s panned out? I’ve seen your success in the US. Could you also shed some more light on your success on Amazon US and the Amazon UK, please?
Chad: Sure. So Amazon was a great entryway for us into e-commerce. But since then, like I view Amazon has a selling channel, not as a business. And I think that’s a mistake a lot of people make, is that they create a business around Amazon. But my viewpoint of the world is that you want to be on every sales channel out there, including your own storefront. So in terms of just my success in the United States, we just wanted to replicate that same success internationally. So we’re focusing on Amazon UK, Canada, and Germany.
Kunle: Okay. They’re pretty decent, big markets. Okay, and what has been your experience internationally? What’s been the outcome internationally out of the US?
Chad: We’ve done fantastic and I think we’ve just hit the starting point. Because we actually have to phrase things differently in Amazon US than we do in the UK and especially for Germany, especially for changing the way we write our listings on Amazon Germany. And a lot of people think that Amazon UK is the second-biggest marketplace for Amazon but actually it’s Amazon Germany is the second-biggest market place. So we’re focusing across Canada, UK, and Germany right now. And our success has been tremendous but we’ve just hit the starting point of that success.
Kunle: Okay. Cool. And good point about Amazon being a channel, that’s a very, very good point. Because I was just going to say I noticed you have a website and a well-built website at that. One of the things I pick up on websites, especially websites that sell somewhat complex products like what you guys do, is the availability of videos, you know, help videos. You had that on your homepage. Could you shed some more light as to when you decided to set up an e-commerce website and what your philosophy basically is on selling on a website versus Amazon?
Chad: So I’ll start with the philosophy first. My philosophy is that I view e-commerce like playing the game of Monopoly. So you want to be on every piece of the board because when somebody lands on that board, whether it’s utility or railroad or even Park Avenue, they pay out.
Kunle: That’s pretty right.
Chad: So it’s all about the real estate space and you want to be everywhere. So I want to be on Amazon, I want to be on eBay, I want to be on Sears and Newegg. And I want to have my own shopping cart. Because my own shopping cart is where I’m going to have the highest margin consumer, where I can actually remarket to those customers and I own those customers.
Kunle: Okay, okay. And how is the website doing as compared to Amazon?
Chad: Fantastic. I mean starting on Amazon you’re 100% of, you know you start off, and you start selling on Amazon, it’s 100% of your revenue. But coming from Wall Street, I said to myself, ‘Would I ever invest in a stock that has one customer? I would never. So why would I build a business that way?’ So the idea is that you want to take Amazon revenue from 100% of your revenue to about 40%. Because 40% of product searches happen on Amazon today. So the rest, 60%, should be off of Amazon. And that’s really a great goal to accomplish.
Kunle: Okay, okay. And Amazon was pretty much your launching pad to actually even funding the website and other channels. Okay, so what other channels are you active on besides Amazon?
Chad: So you want to be on Amazon, Sears, Newegg, Rakuten, it’s formally Buy.com, Sears, all the international properties. So it’s Amazon, all the international Amazon properties but also getting your website to focus on international as well. EBay, UK etc. So I leave no channel behind.
Kunle: What are your thoughts on Jet.com? You think it’s just a fad or gimmick or do you think it has something to it?
Chad: So I only wish Jet.com the most success but unfortunately I don’t see the need that they’re solving for. So you know people go to Amazon for selection, for convenience, and for the best price and I don’t see people shopping on Jet to save 5% on paper towels or Kleenex.
Kunle: Interesting. Okay, right. Let’s talk about your super-impressive Inc 5000 rank: 1,843 and 215% three-year growth. What kind of revenues are you doing now?
Chad: In this year we are on track for 10 million in revenue.
Kunle: Okay, awesome.
Chad: Which is well above the e-commerce growth rate. The averages 15%, so anything above 15% is you’re doing great in e-commerce.
Kunle: Okay, okay. That’s pretty impressive because when I checked out the Inc website you were 6 million last year so it’s an added 4 million. Okay, what about Crucial Air and Crucial Coffee, how are they doing? Crucial Coffee I noticed you sell coffee filters for Nespresso, Melitta and Krups, you know filter accessories. What does Crucial Air do and what does Crucial Coffee do, and has it significantly impacted on revenue share to your total 10 million?
Chad: So what we did was we replicated… when I first started Crucial Vacuum, I had this myopic vision that I was always going to be in the vacuum industry. And I think a lot of people do that when they create a brand, they don’t think 10 years down the line. So I ended up disrupting the vacuum space very quickly. And then said to myself okay, what is the next thing I want to get into? And I decided to find… to take a passion, which is coffee, and combine it with what I already know, which is e-commerce. And then Crucial Coffee was born. And I disrupted that industry, making coffee filters and accessories. Then we moved into the next Space, which was air. But after all, right, each brand that you have you need to have a Facebook presence, you need to manage your Instagram, it just gets very complicated. So we decided to create a fourth and what I believe is the final frontier for our brand, which is Think Crucial, which has everything under one roof. So anything for the home that’s replaceable that you can think of, that’s crucial: that’s Think Crucial.
Kunle: All right. Awesome. Like Virgin. Richard Branson mindset. Okay. And how many employees do you have?
Chad: So we have, at Crucial we have six now I believe. And we run a very tight ship. When people say, well how big is your company of six people, that’s unbelievable – six people on 10 million revenue. It’s really because we’ve outsourced our warehouse. So we used to run a pick-and-pack operation which was the bulk of our employees and we decided to outsource that, I think it’s now been three years.
Kunle: Okay, okay. Have you ever been an FBA or Fulfilled by Amazon, or have you always fulfilled by yourself first versus FBM, the fulfilled by merchant?
Chad: Yeah we do a hybrid of both.
Kunle: Okay. Okay, we’ll talk about all that later on. From your Amazon store I could see it’s 927 SKUs. But I read elsewhere on the web that you have over 1,400 products and import 88 containers a year across various verticals. Could you shed some more light on first of all SKU management, what your experience is within the Amazon space and your approach to it please?
Chad: Amazon has made it really, really easy. Amazon’s like a gateway drug. They’ve made it really easy to start using it and really hard to ever stop. So if we look at the world like I said before, we want to sell everywhere we possibly can and unfortunately there’s a lot of software out there that’s not sufficient to run a true multi-marketplace business. And that’s why we created SKUbana. So I use SKUbana, which I built for myself and but now I’m offering to everybody else to help and enable and empower sellers to sell everywhere across-channel. So in terms of our SKU count, like some people focus on four products, five private label products. We, we’re focusing on over 1,400 products. But imagine having those 1,400 products selling across 11 different channels. Then things start to get really complicated. And that’s why I created this software.
Kunle: And you manage, well you’ve outsourced the warehouse and your SKUbana software manages that interface between the warehouse and all the channels in which you sell through, is that kind of like the picture or is there more to it?
Chad: Well yeah, the idea is you want to get rid of any repetitive task that is not your core competency. So pick-and-pack was never my strong suit, and managing these employees who are a little bit different, you know people who spend their life picking-and-packing is a different type of employee than people who focus on building a brand. So I really wanted to focus on what we’re good at, which is building a brand. So we outsourced our warehouse to a third-party warehouse three years ago, never looked back. But then I was like, what else, what other repetitive tasks can we outsource. Because I was using all these fragmented softwares to run my business and it was just unnecessary and it was very costly. So I couldn’t find anything to really automate all the processes so SKUbana focuses on any way you fulfill. So whether you’re an FBA seller or you have a 3PL connector or connection, you drop ship or you print shipping labels in-house, we accommodate anybody who does any of those things. But then you need to manage your inventory across channels. You also need to create purchase orders. We automate the purchase order process. Again it’s all about, the word SKUbana derived from the idea of Cubana. We thought to ourselves, ‘What do sellers want in life? Sellers want to spend more time with their family. They want to take a nap during the day. They want to work on the business not in it.’ So that what SkyDrive takes care of. It’s an end-to-end software to run your business and I could never be the CEO of two businesses without this software in place. It would be impossible.
Kunle: Okay, okay. So that’s pretty impressive, because it’s software built by an entrepreneur, addressing your pains. And you’re scaling that out now. We’re going to talk more about SKUbana and all the tools you use for managing an Amazon store. What about profitability for Crucial Vacuums? What does profitability look like? What are your margins like, are they sizable, good, decent?
Chad: Yeah, our margin profile is great and I’m constantly focusing on higher-margin products. So the private labeling in e-commerce today, everyone is doing it now. Everyone’s taking these training courses, everyone’s private labeling. And like Wayne Gretzky said, you have to go to where the puck is going, not to wear the puck is today. And I’m constantly reinventing ourselves and focusing on higher-margin products as others sellers invade our category that I currently play in today.
Kunle: In your space. Because I actually had a question about PL, you know private label sellers, I’ll just jump into it right now. Okay. So in my opinion you are what I call a super private-label Amazon marketplace seller really, as compared to what’s going on now in Amazon. And all you need to do this type up private label on Google and you’d see what I’m talking about. Now that said, you were early in the game and you have focused on your brand for a wide range of products. What’s your opinion on niching down? The advice is you know out there saying niche down on one product and then scale slowly. Should people go for brand with the wide range of products or should they focus on one product starting out?
Chad: I think they should focus on one product starting out, but pick a brand that’s scalable over time. Because it’s likely that the product that you pick today may not be the product of tomorrow. And I like to call myself not really a private labeler; I like to call myself a brand. Because that’s what we’ve built. Like some people go on Amazon and just throw up a name on to Amazon and that’s their private label. But if you’ve built a true brand, that’s recognizable, like if you type in Crucial into Amazon, it comes up right into the search results.
Kunle: Good stuff, good stuff.
Chad: Right, like Amazon indexes. People are searching now for Crucial Vacuum and that’s when you know that you built a brand, when they’re coming back for more.
Kunle: Exactly. I was talking to a client last week and we were looking at their dashboard, their marketing dashboard, and I had to put in brand name search you know in comparison to their competitors, as a metric. You know, you should measure on a monthly basis because at the end of day that has a lot of weight. That’s direct demand. It’s more likely to convert because they trust your brand, they’re coming to your store. It’s almost like a walk into your store rather than a walk down a High Street or a shopping center.
Chat: Absolutely. And I just want to follow up with that. That a lot of these private labelers, they’re private labelers because they’re only on Amazon, which is a channel. Going back to what I said when we first started the conversation is Amazon is a channel, it’s not a business. So you need to parlay your successes from Amazon everywhere you can. And that’s when you’ve built a brand.
Kunle: Absolutely agree with you. Okay, let’s go back to the early days of Crucial Vacuum and talk about how you moved from dealing with distributors to that move. Because I read an article that you moved from dealing with distributors to dealing with manufacturers. How did you deal with that? It is a leap. You said you were rejected by dealers, by distributors your parents had worked with and then you said, you know what, this is more an opportunity rather than a door, rather than a barrier really. And you moved into dealing with manufacturers. How did you handle that, at that point in time?
Chad: Yeah so, it was really quite easy. A lot of these distributors who are what I would say the ‘legacy incumbents’, who have been doing business the same way for 30 40 50 years, were very slow and resistant to understanding the Internet and the power of the Internet. And even till today people are still trying to figure out…these distributors are still trying to figure out e-commerce because the letter ‘e’ in commerce, that addition is still quite new. So these distributors were like, ‘Oh, you’re going to sell our product on the Internet. We don’t want that. We don’t want any of our product on the Internet.’ So, when they started telling me ‘No’, that was a great segue for me to figure out and solve that problem. Because the answer was ‘Yes’ and ‘How do I accomplish taking that product and selling it on the Internet?’ So they said no and I decided to find an alternate avenue, which was going direct to the factories.
Kunle: And what was their reaction to…did you need to go in with a lot of cash or did you sort of test the waters more or less, and slowly expand the business?
Chad: Oh, so their reaction was very negative because I disrupted an industry that’s been stagnant for years and years and years. So I would go to an Expo and they would say, ‘Oh you’re Crucial? We can’t talk to you; we don’t want to talk to you.’ And that’s when you know that you’re onto something. Right, that’s an early indicator. And so in terms of the money, in terms of spending money and how you begin, you have to begin in what I call a very scrappy way. I’m not one that likes to spend a lot of money and to lose it all at one time. So I’m very risk-averse believe it or not. So you want to just start really with one product and start slowly. Talk to your factories overseas and say, ‘Hey I can’t hit your minimum order quantities but what can I hit? And I want to start with one product. And one product leads to a container over time. One product, to a case, to a pallet, to container, it’s baby steps but you get there.
Kunle: Yup. Yeah, you are now on 88 containers, so yeah. Let’s talk about the difference. What’s in your opinion the difference between a private label and a real brand?
Chad: So the difference is just a private labeler follows a guideline that they have learned in some training course where they’ve learned minimum skills to run a business. So they say, ‘Okay your product needs to be below a certain weight, it needs to be in the kitchen category, it needs to be above $9 but under $16 and typically most of those people are creating these spatulas and they sell them on Amazon. [laughs] No, I’m being completely serious.
Kunle: [laughing in background] Yep, yep, [laughs] okay.
Chad: So a lot of these sellers don’t even have a trademark name, they don’t even understand the concept of selling on other channels or creating your own brand off-line. And I think that’s really where there’s a discrepancy and that’s what I would consider ‘whitewater’, right. The area where a lot of sellers aren’t focusing on, and those that are doing it really well are focusing on the brand. And just to follow-up, I don’t believe in the groupthink mentality of ‘it needs to be under this weight, it needs to be in this category, it needs to be this price point.’ I don’t believe in that because if everyone’s following the same guidelines and rules, like everyone’s just going to do the same thing.
Kunle: You’re narrowing the market really, you’re narrowing the opportunities, it would be much more crowded, in fact.
Chad: Exactly. So like, what I tell people, and I don’t even have a training course but when I’m talking to people and giving them advice is I say look, what are you passionate about? What are some of your hobbies that you like to do? Where do you find that there’s some sort of itch that needs to be scratched? And how do you actually parlay that into creating something online? Finding what you’re good at and then finding that problem area, that friction point, and putting the two together to create success.
Kunle: I mean that would fuel your passion to…your passion would fuel your drive to push on even if things are not really going as planned initially into that category. Because you’re addressing your itch, which you’ve validated with a bit of research really. Yeah, it just gives you that fuel to push on. I absolutely agree with you.
Chad: Yeah, the world doesn’t need another spatula. When you walk around in life and you say, ‘Oh my God, that really pisses me off that doesn’t exist today,’ or ‘Why can’t I can’t get a speaker for cheaper price or yoga pants. Why do yoga pants have to be a hundred dollars?’ And the answer is they don’t. And that’s when you know that you’ve found an opportunity.
Kunle: And in the scheme of everything, how important is customer service to your brand? When people think about, say, Crucial Vacuum or any other of your brands whether it’s Crucial Air or Crucial Coffee, do they think ‘customer service’? Is that part of your value proposition and how do you execute customer service, effective customer service?
Chad: So part of the value proposition of Crucial from day one has always been doing it better, faster, cheaper, direct to consumer. So part of my value proposition is doing it better. And that is not only offering free shipping, free returns, but we have a live chat, we have our phone number right on top of our page. In fact there’s a sign above my customer support team that says it takes years to find a customer, seconds to lose one.
Kunle: Good one.
Chad: And in this world where customers can just go and ruin a brand overnight, whether it’s Facebook or Twitter or anywhere else, we manage that reputation. And we do whatever it takes to make a customer happy.
Kunle: There’s really, really good quotables in this talk we’re having. On the show notes I’m going to quote you on a lot of stuff you just mentioned. Okay let’s talk about… To me I find a challenge with Amazon, one challenge is the fact that you don’t have access to email addresses of your customers. And emails, as you alluded to earlier…the essence of having a website is to be able to remarket to your customers and actually have repeat customers and customer loyalty. How do you drive in repeat customers on a platform such as Amazon?
Chad: You really don’t. And that’s why you want to create your own brand. Now if somebody buys a Crucial Vacuum filter from Amazon and it’s sitting in their closet from two years ago and they go to replenish, sometimes they’ll go to Amazon. In most cases if they are a loyal Amazon customer they will. But some people may go on Google. And they might be like, ‘Wait, where did I buy this filter again? Oh, I’m going to go on Google and check it out. Crucial Vacuum etc. etc.’ And so people have the option. And if you’re not selling on Amazon today, you need to be because you’re not relevant, right. Like we talked about when we first started the show, 40% of product searches are happening on Amazon. So I want to capture that real estate space one way or another, and that’s why I’m on and off Amazon.
Kunle: That makes a lot of sense because, I just want to circle back into your listings on Amazon. Every single one of your listings is branded at the top and at the bottom. You can’t miss it. With the particular color, you use green, there’s a logo there. Is that intentional?
Chad: Oh yeah. I mean we want to have our brand in every aspect of the listing but we also don’t want to cause customer confusion. So it’s important to identify the brand anywhere we can in our listing and that’s what we do. We also don’t want others selling in our listing so some people have tried to what I would say ‘hijack’ our listings over time and we work with Amazon very closely to prevent that from happening.
Kunle: Okay. Well, that makes a lot of sense. Now let’s talk about inventory management on Amazon. What camp on you on: filled by Amazon or…well you alluded to earlier that you’ve outsourced fulfillment, well your warehouse, so why are you not in FBA and what advice would you give to listeners, there are various kinds of listeners. Some are about to start and others have existing businesses looking to go into Amazon. So what’s your advice with regards to FBA, FBM, and even to drop-shipping?
Chad: All right, so those are big questions. Number one is, I do both FBA and FBM.
Kunle: Okay, okay.
Chad: Because on Amazon, people prefer Prime. In fact I just read a statistic from NPD Group that a quarter of US households are Prime Members, which is unbelievable. So if you’re not Prime, a lot of the times you’re not even going to be indexed in Amazon’s search algorithm, number one. And people won’t even want to buy unless they get that two-day shipping. So I do the mix and I see which products are doing well and will make sure that I have stock FBA. So if you’re on Amazon, the idea is to start moving across other marketplaces at the same time. So you need to take your FBA inventory and if you don’t want to open up your own warehouse, you need to do what they call is multichannel fulfillment. And by the way, SKUbana allows you to do that, right. It allows you to take your FBA inventory and to fulfill it and automate it off-channel.
Kunle: Across channel, okay.
Chad: Across channel, yeah. And updating all the inventory levels and all the tracking information to manage your business is done on SKUbana and is automated.
Kunle: Okay so just to get you, sorry I just need to clarify a certain point. So merchants can FBA, which is Fulfill by Amazon. They could outsource their warehouse and fulfillment to Amazon not just for sales on Amazon but for sales on other channels. So if you’re selling on your website, on eBay, you know anywhere else, Sears.com, Jet.com, Rakuten… Amazon could fulfill it for you. Is that right or?
Chad: Yeah, that’s absolutely correct.
Kunle: Okay, all right.
Chad: But it’s pricey. Sometimes it could be a little bit expensive so it’s a great way to test the market before deciding on your next…
Kunle: And invest.
Chad: Yeah, before deciding, ‘Okay, do I want to have a third-party warehouse and do the fulfillment off-channel? Or do I want to take it in-house and print shipping labels? Or do I make enough money in my products where I can just do multichannel fulfillment all day long and not have to worry about it?
Kunle: Okay. And SKUbana, your software, which we’re going to talk about pretty soon, understands what inventory you have, takes a record of inventory and will record and take orders from every channel as they come in and send that data through to Amazon, who would then fulfill your orders coming in from various channels. Is that kind of like..?
Chad: Absolutely. And then market shipped, take the tracking from Amazon market shipped on your other channel and updating your inventory from FBA on your other channels as well.
Kunle: And it just doesn’t cover FBA alone, it would cover if you were managing your warehouse yourself or you had it outsourced.
Kunle: Okay, makes sense.
Chad: And that’s groundbreaking
Kunle: Yep. Absolutely.
Chad: Now I just wanted to answer your other question. For merchants that aren’t on Amazon today, even if they don’t have e-commerce presence…
Kunle: There are loads of them believe you me. Yep.
Chad: There’s loads of them out there. And I think you need to take your business to the next level and sell online everywhere you possibly can, right. And that’s how I’ve done it. But before just creating a listing on Amazon you need to make sure you have the right operational infrastructure in place. It’s kind of like building a house. You can’t build a house on swampland even though it happens in New Jersey all the time. But you gotta build the right foundation so you can properly scale because there’s a lot of newbies that come on to Amazon, they get into a product listing, they start selling and then they get suspended right away. You need to adhere to the Amazon policies, you need to literally give the same if not better-than customer support on Amazon.com or else you’re not going to be there.
Kunle: And it kind of teaches you. So if you start out from Amazon, and as you said it’s a gateway drug, if you start out from Amazon and you stick to their terms, it will teach you habits, good habits you know on how to treat your customers and how to stick to your promise, you know deliver on your promise really. So I think it’s a good breeding ground for new e-commerce businesses.
Chad: Completely. And you know Amazon has taught us on how to be a better seller. So our response times, which I probably wouldn’t even have tracked when I first started the business but Amazon tracked it so I was like, ‘Oh wait, I need to really think about our response times.’ So our response times are less than three hours.
Kunle: Wow. Okay, that’s pretty good. Okay. Now let’s talk about reviews on Amazon. How important are reviews? And I’d like a more anecdotal perspective, from your experience on Amazon what was the impact of reviews? Is it overhyped or is it something people or e-tailers should really look into, you know the metrics on reviews? Both product reviews and seller reviews.
Chad: So I think both reviews are very, very important. Seller reviews are more important obviously for Amazon, and product reviews are important for both to getting your product indexed on Amazon but also to people just by buying your product. So I think they’re both really important, I mean if you’d like to I think we can start breaking them down.
Kunle: Yep, yes please. Let’s go ahead.
Chad: So seller reviews are super important and I think if you’re not a direct to consumer brand and you’re competing for Buy Box, those seller reviews become even more important. Because now Amazon is prioritizing in their algorithm, at least one of those processes is looking at your seller reviews. And are you 100%, are you 98%, RU 95%, are you under 90%? If you’re under 90%, there’s a problem. I think if you looked at my mine, I’m probably around lifetime of either 99 or 98. So we spend a lot of time making customers happy. Now in terms of product reviews, product reviews are super, super important. Because it determines if people are actually going to look at your product compared to another product. So I know a lot of customers, I mean Amazon has been suing people these days around fake reviews. But either way, even if you build fake reviews, the truth is going to come out over time it. Like people are going to start posting negative reviews and will dilute those positive reviews. So I would take product reviews as feedback from customers so that you can iterate on your product over time. Like look at your reviews and see what customers are actually saying. Use that as part of your customer support experience so that you can make changes to the product over time.
Kunle: Because that’s what they were set out to do anyway, but you know people being human would try and game the system them regardless.
Chad: Well I think actually Amazon set out for reviews to help their consumers buy things off Amazon. But sellers could be using the reviews too. The reviews don’t have to be negative, right. Don’t get upset when you get a negative review. Take the review and understand how you can improve on your product. How can you offer a better product and make this customer happy? So maybe the customer wrote, bought like a coffee grinder from you and they didn’t know how to use it. Well that means you need to literally give better directions in your coffee grinder when you create it. So that’s what we do, we read the reviews and we try to make things better, try to understand, is this a customer… did they just not understand the product, were there not proper directions or is there really a defect? Or, you know, what happened here?
Kunle: Okay, so it’s really feedback… for getting customer feedback from a seller perspective. Okay, okay, right. Let’s talk about tools. What tools have had the highest impact to your business on Amazon?
Chad: So, we’ve been doing everything from scratch from day one. Everything was done manually, we’ve never used a listing tool to push listing to channels. We really believe in building unique content across all of our marketplaces. So from a listing perspective we’ve done everything manually and I can go into why. And then operationally, we had to build the software, which was SKUbana, to run everything for our business. Now I use other tools that are helpful for me over time, to help me run my business, but SKUbana is the tool I use end-to-end to run my business.
Kunle: Okay. Before we talk about SKUbana, what are your top three tools?
Chad: Well, obviously one of them is SKUbana. I do a lot of zero inbox. So I get a lot of emails coming in so I use Boomerang for my inbox to manage my inbox and I use that as my sort of get-things-done tool. So I manage all my accomplishments… all my goals are managed from my inbox, because a lot of it happens digitally.
Kunle: Nice. What do you think about G… are you a Gmail user or?
Chad: Yeah, I use Gmail.
Kunle: What do you think about Gmail Inbox?
Chad: I haven’t migrated to Gmail Inbox yet. It’s funny, I still use the legacy Gmail. But I use Boomerang inside my inbox to help me run everything.
Kunle: You know when you described your inbox as your to-do-list tool, that’s how the Google Inbox is actually built for.
Chad: Oh really?
Kunle: Yeah. It’s it feels like an inbox and less like email. And it doesn’t have any counters so it very cleverly brings up what’s most relevant and you just check… well you can swipe and just sort them out you check stuff in your to-do-list. It’s really, really clever stuff. Really clever. Okay so you said you do zero, you use Boomerang, and is there any other tool or…?
Chad: So I use Boomerang all the time, just thinking about tools I use all the time that increase my productivity and make my life…and like what could I not live without?
Kunle: Absolutely, for your business, yep.
Chad: So whether it’s Boomerang or Evernote or Dropbox, I use Feedly for all my blogs, for reading my blogs that I subscribe to and I subscribe to a lot of them. A lot of my learning happens via blogs.
Kunle: Blogs versus books. Do you read books?
Chad: Oh yeah.
Kunle: We’ll talk about books anyway later. Okay so let’s talk about SKUbana. Prior to our call I asked a question: what is the difference really between SKUbana and ChannelAdvisor? You know, I think there’s one from Stitch Labs. What is your core value proposition for SKUbana?
Chad: So SKUbana is an end-to-end software to run your business. A lot of people in e-commerce today use fragmented softwares, many different tools which is very inefficient and cost ineffective to run their entire business. So ChannelAdvisor is simply a listing tool that takes a percentage of your revenue. And it doesn’t matter to us or any other seller for that matter whether your order is $1000 or one dollar. Because it’s the same processing power to process that transaction regardless. So it’s one of the things I’ve always said no to and I didn’t understand percentage of revenue, I didn’t understand the concept. But I also didn’t understand why you needed to run your business with 10 different tools. So you have an FBA tool, then you need a purchase order tool, maybe you’re using spreadsheets, then you need to use a entry-level shipping solution, then you need entry-level inventory solution and you still don’t know what your analytics are because they’re not real time. So imagine all these things are connected in one platform for visibility into your entire business, real-time. That’s what we’ve built.
Kunle: Like an ERP system and a bit…does it have CRM elements to it in terms of customer interaction is it more or less the backend, the real backend, the nuts and bolts, the moving parts of the business?
Chad: It’s the backend of the business. We haven’t touched anything with the customer. Through SKUbana and you can actually create return labels through the system, in SKUbana, all in the cloud. But we don’t do like any email tickets. So it is an ERP but in the traditional sense an ERP… all these ERP’s were built before e-commerce, what it is today. Before there was an ‘e’ in commerce. So we are the first system that, it’s an ERP with shipping all under one roof. That’s scalable for the smallest sellers and the biggest sellers.
Kunle: So there’s the warehouse management, inventory management rather, there’s the fulfillment module, and there’s the printing module. Are there any other modules have missed out?
Chad: Well, let me break it down. In terms of orders. Fulfill any way, your way. So whether it’s dropship, 3PL, FBA, printing shipping labels, any way you fulfill, we support it. That’s just orders.
Kunle: Okay, let’s talk about drop shipping and I’ll give you a use case. I’m a furniture retailer and some of my stuff is in my warehouse. And some of my other stuff just due to space restrictions and cost restrictions are with third-party suppliers of mine. And every morning they send me perhaps like a CSV email or they have a live, raw feed which gives me their numbers with regards to their inventory, account as to what they have available, their stock, basically. Can I use SKUbana to monitor there their feeds and auto-update what I show or what I have on the channels I sell through.
Chad: So what you just described is what everyone has been doing before SKUbana. So that’s manual. So the idea is you want to have your suppliers drop on your CSV file onto a server that gets read in FTP, that gets read by SKUbana. We will read your inventory, show that inventory to all the channels and as you get orders coming in, we’ll drop on those orders for that vendor, that furniture vendor, onto the FTP, which the vendor will read, scan it. Once they ship it, we read that tracking information and we push that to all your channels. So everything is automated, you can schedule automated runtimes, whether it’s a CSV file, an Excel file, or a text file. And that’s just one example. And that’s just on the order side.
Kunle: Okay, okay.
Chad: So then you have inventory management. When they drop on the inventory, we send it to all the marketplaces out there. And as one is sold, we update the inventory appropriately. And then still you need to have purchase orders, right. You need to have purchase orders to run your business and we automat it based on all the velocity, all the sales velocity that you have in your business, your lead times your mins. SKUbana will automate a purchase order awaiting your approval.
Kunle: Are the purchase orders in real-time per order or do you just aggregate orders in a single day and put that into a single purchase order?
Chad: So the PO process is if you don’t authorize it and you just let it sit there, it will take that vendor and just start adding more and more products to that PO for you. And then just to add on top of that, analytics. So right now people that are selling FBA today, Fulfillment by Amazon…so a lot of people are losing money and they don’t know if they are because there’s a lot of hidden fees in FBA. There’s dormant inventory fees these that Amazon charges you, long-term storage costs. There’s return fees that are astronomical that can really take away profitability. So one of our investors at SKUbana is an ex-Amazon executive and he gave us a propriety formula to pull in all these fees.
Chad: And I hear you laughing but the interesting thing about this report is that…you know, we’ll take sellers, we have sellers that are using our platform, they’re doing let’s just say 20 million in revenue. And we have SKU profitability report that will break down your SKUs and show you where you’re making money and where you losing money. So for one seller this is the holy Grail. He found a line item where he was losing $17,000 on one item.
Kunle: Ouch. Okay. That scales.
Chad: Totally. And right there and then SKUbana paid for itself and then some.
Chad: I’m just trying to give you an idea like what we’re talking about here. This is a real enterprise software that we’ve built for every seller. Our motto is leave no seller behind.
Kunle: Okay, that sounds good. What about your price point with SKUbana?
Chad: So our price point is also disruptive. The same way I’ve disrupted the vacuum space and you know the direct-to-consumer space, we’re replicating that success in the software space. So the disruptive price that we offer is you pay for what you use when you use it. It’s kind of like your energy bill. And the more orders you do, the less it costs and we split up the world between FBA and non-FBA orders. And if you go to SKUbana.com you can see, I know it’s very refreshing: pricing is right there on our page. And we say no to a lot of things. There’s no setup fees, there’s no custom development required, there’s certainly no percentage of revenue. And we don’t lock anybody into a contract or a commitment. Because if you love our software, you’re never going to leave. And it’s up to us to keep on making you happy.
Kunle: That makes sense. So it’s almost like a pay-as-you-go service. Okay. All right. Cool. Let’s move on to your thoughts on the future of Amazon. Where do you think Amazon is headed in the future? Do you think another platform would disrupt Amazon or there’ll be a rise of direct to consumer websites with platforms such as Shopify emerging?
Chad: So I have a lot of thoughts on this. I think that over time, people’s buying behaviors are going to converge onto the most trusted site out there, which is Amazon. A lot of people think that you know Jet.com is going to disrupt Amazon and I think that comparison is actually not correct. I think the biggest competitor that Amazon has today is Uber. And the reason why I say that is because not only does Uber know where the driver is, they also know where the consumer is. And all they need to do then is upload inventory into the app and now they have this holy triangle. They know the consumer, they know the driver, and they know where the product is. And now they triangulate and get that delivery right to you, same day.
Kunle: I’d have thought that enhances Amazon so if they latch on Uber to it they could improve their fulfillment, if that makes sense.
Chad: Interesting but Amazon just launched Amazon Flex. Which is trying to compete with Uber. So Amazon already sees, I think Jeff Bezos sees the writing on the wall here. And is trying to take steps. You know that’s why there hasn’t been a formal announcement between Amazon and Uber. Because over time I believe that that is going to be the true competitor.
Kunle: Interesting. Very, very interesting.
Chad: I don’t think pricing. Like Jet.com is solving an issue of pricing and there is no issue with pricing. That’s the thing is there’s no issue on pricing today. They’re not solving the true problem with technology.
Kunle: So what is the problem? What can disrupt Amazon? You know, what is a current problem at the moment? What are primary pains of consumers?
Chad: So firstly, differentiation by price is just a race to the bottom.
Chad: And Smart Carts is not a revenue maker in my mind. So the issue…there really is no issue. If you get a thousand Amazon purchasers today in a room, they’re going to say…99% of them are going to be happy. It’s because they love the selection, they love the price, they love the convenience. So the next step is even getting people to get their product even sooner, from their mobile phones. And I think Uber already is started with the UberEATS, doing delivery, they’re doing some package delivery services now too. So there’s the UberRUSH which just connected to Shopify and Bigcommerce.
Kunle: Very, very interesting development. Very, very interesting. Okay let’s…just your final piece of advice to retailers. What would you advise retailers looking to sell, well retailers who sell on their website but not yet on Amazon, what is your advice to them? Versus manufacturers who have yet to discover the ‘e’ as you alluded to earlier in e-commerce? Would you advise manufacturers to jump onboard Amazon? And what’s your advice to retailers on selling on Amazon?
Chad: Right, so that’s a lot of questions at once, let’s break it down.
Kunle: Retailers, retailers first.
Chad: So retailers that have their own store.
Kunle: Yes. And are looking to move into Amazon. What’s the best risk-averse way to move into Amazon? Should they even start Amazon? Should all retailers move to Amazon? And if they should then what approach is most risk-averse to moving on to Amazon?
Chad: And do these retailers have their own brand? Or are they just…?
Kunle: That’s a good point. A lot of retailers are merchandisers of other brands and they would have a few own brand.
Chad: I believe that selling in e-commerce in general is just incremental revenue. So if you’re not, you should start. And the question is how do you begin? And so it requires a lot of research and a lot of hard work and dedication to finding out if there is margin to be made. So a lot of these retailers are late to the party. So trying to see if there is an opportunity on Amazon will require a lot of digging and a lot of research. If you have your own brand and you have a real differentiated products, why not sell on Amazon? But why not sell everywhere? So the issue is how do you get started? How do you figure out whether you should be on Amazon or you shouldn’t be? And that really requires you to just spend as much time shopping online as you possibly can. My wife, she’ll get home on a Saturday night, she’ll see me to see me at my computer and I’m just like browsing Amazon database, I’m looking on Google, I’m sitting there, I’m just dedicated to seeing what’s happening in the Internet world. So people have to have that dedication or else they’re not going to succeed.
Kunle: What’s your opinion on merchandisers of other brands, I’ve been ranting in this in my Instagram, and owning your brand?
Chad: My thesis is going direct-to-consumer. That’s how I’ve created my success. So I never believed in the reseller model. I never thought that that was really a value play. Like, what value do you create if you’re building somebody else’s brand?
Chad: So I always wanted to build my own brand because I own it. I own the logistical supply chain at the end of the day. I own the intellectual property behind my brand. So I’m a huge advocate of direct-to-consumer. And now direct-to-consumer has blown up. You look not only a Crucial Vacuum, and Air, and Crucial Coffee, but you look at Bonobos, you look at Warby Parker, Dollar Shave Club, Casper, I could just go on and on.
Kunle: They’re all D2C.
Chad: Everlane. They’re all B2C and they’re disrupting the industry. They’re beating incumbents at their own game with technology.
Kunle: Absolutely agree with you. Absolutely agree. Which circles back to manufacturers. Your advice obviously would be sooner rather than later, I suppose #
Chad: Oh yeah. And a lot of them are already late. So you look at Gillette. They were late to the party and they still haven’t captured the direct-to-consumer share. I don’t know if they will be able to. Dollar Shave Club has roughly about 10% of their shaving market now. Which is incredible.
Kunle: And the other thing is like, you know shaving off, sorry, pardon the pun [laughs], but taking off from, well, unlearning old habits. Because a lot of manufacturers are just focused on making products, right. And they have these distributors who are there and they’re just used to talking to or dealing with distributors. And then distributors work with retailers. And that’s how it’s always been. And how do they sort of change that habit and start to work directly to consumers, with consumers. I guess some distribution channels will be there, like grocery stores always be there, department stores will always be there. But yeah, what are your thoughts on manufacturers learning to go direct-to-consumer?
Chad: It’s hard to teach an old dog new tricks.
Chad: So my advice, I mean I’ve talked to a lot…I spoke at the Internet Retailer Conference last year and I spoke to a lot of manufacturers who were still trying to figure out e-commerce. And a lot of them never made headway with it because they just don’t know how. It’s too new, it’s a market that they just don’t understand. So the easy thing is to just sell to somebody who does understand it. But if you hire the right people or…like I said, it goes back to being dedicated. Dedicated, commitment, the hustle. And a lot of these manufacturers don’t have it. So if you look at even Caspar today, I’m pretty sure they don’t manufacture their own mattresses. They found a factory that can do it for them. So if you actually partner with people that can do it for you and subcontract the manufacturing process, so that Casper can focus on billing that brand, I think that’s a great option in.
Kunle: So I suppose the winners of the future, well, the winners now are the people who do branding well, are marketing the best, you know tell that story that convinces people, obviously with proof of concept with their products. But you know, the best marketers seem to be winning the game right now.
Chad: Yep. It’s a millennial generation that grew up with the internet when Al Gore invented it. That’s a joke [laughs]. And so it’s those people that understand the technology that are going to win, that are focusing on building their brand and using technology to help them build that brand on the internet.
Kunle: Okay. Okay. Sounds good. All right. Any books you’d recommend? What single book or resource has made the highest impact on building your business, you know, growth in general for Crucial?
Chad: So I think when i was still on Wall Street I read a book on vacation called ‘The 4-Hour Workweek.’
Kunle: Tim Ferriss.
Chad: Tim Ferriss. Exactly. Which changed my viewpoint on how I see the world. And then I read Tony Hsieh, ‘Delivering Happiness’, the founder of Zappos. And most recently a book that has had a major impact on me has been Virtual Freedom, by Chris Ducker.
Kunle: Gotcha. Haven’t read that one, okay. Really good.
Chad: That’s a fantastic book. It talks about outsourcing and how you could successfully get repetitive tasks off of your plate so you can focus on what you’re good at. And in terms of blogs, I really like Quick Sprout, which is Neil Patel’s blog. He just shares everything, he just drops golden nuggets and makes it rain and you can learn from it, an incredible amount for free.
Kunle: I just wonder how he just…hit upon hit upon hit on a daily basis, almost on on a daily basis. He’s amazing. Amazing. Okay, okay. Finally how can our audience reach out to you, just reach out to you with regards to both SKUbana, the Crucial brand, you know what’s the best way to reach out? Are you on social media?
Chad: I am on social media. I’m on Twitter. I believe my Twitter handle is ChadRubin.
Kunle: I’ll link to it in the show notes.
Chad: Feel free to always email me chad (at) SKUbana.com. I’m always around to help.
Kunle: Well Chad, it’s been an absolute pleasure having you on the show and I wish you the very best with SKUbana and it was a really, really good talk. But for our audience listening, just head over to SKUbana.com to checkout SKUbana. And also just check out, just Google ‘Crucial Vacuums’ on Google. You get to either the Amazon.com or Amazon.co.uk store, you know if you’re in Germany same thing or in Canada. Just check out what they’re doing, it’s just fantastic. It’s been amazing having you anyway Chad. Thank you.
Chad: Yeah, thank you so much.
Kunle: Okay, Cheers.
Kunle: Thank you for sticking to the very end of today’s episode and hope you found Chad’s story about Crucial Vacuum inspiring and his Amazon marketing and business tips very helpful. To download the show notes and read full transcript of this show, head over to 2XeCommerce.com/Podcast for updates and tips to help grow your business be sure to sign up to our email alert list on 2XeCommerce.com. And until the next show, do have a fantastic one! Bye for now.
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