Without passion in your products or having a great vendor relationship you cap your e-commerce business’s growth. For Tom Sanders, his passion for selling and his beginnings with his family’s vacuum shop, grew his business into a top 100 overall seller on Amazon.
In the sixth episode of Skubana’s E-Commerce Mastery Series where we invite experts of their respected fields to share their best practices for success, our host, Dr. Jeremy Weisz of InspiredInsider.com interviews Tom Sanders, founder of OurPamperedHome.com.
In this episode you’ll learn how Tom Sanders’s passion for competitive selling gave him the edge of owning his product’s brand and excelling it through the ranks of Amazon.
During his rise to a top 100 seller on Amazon Tom Sanders learned:
How careful product selection and a growing relationship with his vendors allowed him to save money and test his markets
How using mistakes as learning experiences for his employees can not only influence his their growth, but inspire them to stick with the Our Pampered Home family
How ads and being on multiple sales channels boosted his business more-so than SEO content
And the importance of utilizing Google Ads and PLA’s in giving your business the edge it needs for your brand’s growth
How the costs and contractual agreements of Software can affect decision making.
Raw Transcript: Tom Sanders of OurPamperedHome.com
Jeremy: Dr. Jeremy Weisz here, I’m founder of inspiredinsider.com where I talk with inspirational entrepreneurs and leaders like the founders of P90X, Baby Einstein, Atari, and many more and how they overcome big challenges in life and business. This is part of the Skubana E-commerce Mastery series where top sellers and experts teach you what really works to boost your e-commerce business. Skubana is a software platform to manage your entire e-commerce operation.
And today we have Tom Sanders. I searched near and far, Chad helped me because he can be nowhere to be found on the Internet. Tom Sanders is founder of ourpamperedhome.com. They were ranked among the top 100 sellers overall in Amazon. To give you an idea they have had over 212,756 reviews at the present time and counting. They’ve had a year-over-year growth of over 40% for the past 12 years and have grown into one of the top online retailers.
Tom, thanks for joining me.
Tom: Thank you. Thanks for having me.
Jeremy: I’m really excited. And like I was saying before, you’re really hard to track down. There is not much information about you. And so I want to get into talking about some of the benefits to staying hidden because right now obviously you’re not, because we’re talking. What are some of the benefits to that?
Tom: As a small retailer, as a start-up, somebody selling something on eBay, Amazon, one of the emerging marketplaces like Newegg or Sears that as you start to build some momentum and some steam, some of the bigger sellers like we are today, or whoever the big sellers were when we were small, don’t really want their pie to be eaten into.
So not putting yourself out there in as much as the, not necessarily public eye but even in a hidden sense but gloating about what you’ve done and so forth makes other people want to maybe kick your butt.
Jeremy: Replicate you?
Tom: Yeah, take and do what you’ve done, take a piece of that action. We just never saw a need to put ourselves out there. It didn’t help in a sense to growing the business. And I was asked to hear and speak and thought that it would be something good.
Jeremy: Yeah, so what are the benefits to getting out there now?
Tom: At this point getting out there for us is just telling our story. Helping some of the people who…when we were small, there was never, there was not a “How to” book. There was not a, “This is what you should do to run an e-commerce business,” “This is what you should do when you hit some of those roadblocks.” I stayed up many, many late nights, years of late nights and weekends trying to get this business model running into something that I can feed my family, I can afford a house and food and a car.
Jeremy: Right.
Tom: And in the beginning it was a struggle. Just nobody had an idea of what to do. There wasn’t anything 8, 10 years ago of what to do.
Jeremy: Just trial and error. So I want to get into when you were up those late nights, what was working and then what were some mistakes you made. But I want to start with some of the challenges because you were talking right before we were starting what some of the biggest challenges in the beginning and then now. So tell me about those.
Tom: The challenges in the beginning versus now are really a lot of the same things. It’s when we were small and we were operating actually out of our house at the time, it started in the closet, went to the bedroom, went to the rest of the house and then so forth, was space. And where do you put it? How do you operate? And as we continue to grow, it’s still space. It’s just we need a lot more of it.
And capital. How do you buy stuff? In the beginning we bought $500 in product from a vendor and we kept reinvesting it. And to sell online you need a lot more product than just a couple thousand dollars in goods.
Jeremy: Right.
Tom: Depending on what you sell that may last you the afternoon and you’re needing, at this scale, millions of dollars in inventory to be able to last you 30 days. It’s a struggle.
Jeremy: It’s a lot.
Tom: Yeah, going from a business that has $500,000 in inventory to double in size you need to find another half million dollars. You’re either reinvesting in yourself to get to that critical scale or you find banks that somehow have a knowledge of what an e-commerce business does. Both are difficult.
Jeremy: So what are the best solutions that you have found for capital purposes, and what are maybe some of the worst that you’ve discovered never to do again?
Tom: The absolute best is discipline. When we started this business…and my dad is the other owner. That’s where the T&T Enterprises comes from.
Jeremy: Got you, got you.
Tom: It’s me and my dad, Tom and Tom. It was a strict discipline of if you profit $100, that…at least in the beginning $100 wasn’t enough to take out and do anything with. But if you profit let’s say $10,000 you need to be reinvesting a whole lot of that, not just cutting yourself a check for $10,000. Because you get used to that, your business all of a sudden doesn’t have as great of a week, a month, whatever and you still want to take out that $10,000, your business starts to scale down.
Jeremy: Right.
Tom: And ultimately goes into the death spiral and we all forget your name.
Jeremy: So how long did you take before you guys were reinvesting everything?
Tom: We were reinvesting everything for years.
Jeremy: Years?
Tom: Years, without…I didn’t take a dollar paycheck until a couple years into the business being at that point a halfway decent size. We were still small compared to what we are now but we went years without taking any real money.
Jeremy: How do you decide that this is the time to take some money?
Tom: Once it was full time. Once I had no other source of income and quit my other job and said this is it. A lot of people said, “You’re not a real business until you start taking a paycheck,” and we more or less to prove them right took a paycheck just to have it justifiable.
Jeremy: So what about other ways to get capital? Obviously reinvesting, what about outside? Are the outside means necessary?
Tom: Finding a good credit card company, that will at least get you 30 days of funds. You’ll be shocked at some of the credit card limits that you can get if you’re really, if you’re good about paying your bill. That’s a 30-day. If you get 30 days from your vendor and 30 days on a credit card you get 60 days. You can buy and sell stuff and get rid of it in less than 60 days a lot of times.
Jeremy: Right.
Tom: On top of that you’ve got…we bank, I’m not plugging Bank of America whatsoever but we bank with Bank of America. We have a halfway decent line of credit with them as we continue to grow. And Amazon Lending as their new program. The interest rate isn’t as great as you’d get from a bank.
Jeremy: Yeah, that’s a lot I think.
Tom: Yeah, you’re getting, depending on what status you’re at with Amazon it determines your rate and your experience there. But it’s still not the best. But it’s easy. You can have money in three days into your checking account, which is awesome.
Jeremy: So reinvesting, line of credit, Amazon Lending, credit cards. At the height Tom, how many credit cards would you say you had out?
Tom: We still have credit cards out.
Jeremy: No, I mean, you still have them out but I mean…one person I talked to, I think they had, they took, I forgot how many, 10 credit cards or something.
Tom: Oh no.
Jeremy: They put $30,000 each on and they were $300,000, so.
Tom: We’ve had a lot better success having one really large credit card that is our go-to card. We have three credit cards, well four, sorry. We have four credit cards for this business, one just as a minor expense card. I don’t want to carry around the big card with us because you can pay off your house with it.
Jeremy: Right, you can [inaudible 00:09:39] the house with it.
Tom: Yeah, and then just a minor expense card if you need something on it. And then we have three other cards that we use for purchasing, an American Express and a Visa. And then a backup American Express if our cards get hacked or fraud, whatever you want to call it.
Jeremy: Yeah.
Tom: It seems like every couple of weeks Bank of America is calling.
Jeremy: Really?
Tom: Yeah, well, we deal with so many different vendors that they have something and it seems like UPS is delivering a new credit card for one of us here that has them on a weekly basis.
Jeremy: So is it truly someone scamming your card or is it just like an off purchase you made with a vendor?
Tom: No, it’s somebody used it for a collect call to an inmate to try it. They went to Home Depot and bought something, they went to Pizza Hut and bought $200 in pizza.
Jeremy: They did the same thing.
Tom: We’ve had it all happen on credit cards. And Bank of America is really good, they have a list of all our vendors and they can check it out.
Jeremy: Yeah, they detect fraud really quickly.
Tom: Yeah.
Jeremy: What about terms Tom? So the big thing obviously capital is big and then terms with vendors, tell me, what should people know and do when dealing with their vendors in terms?
Tom: We won’t even go for terms on vendors when they’re what we would consider smaller. There are some that we will but you really, you have to be diligent about paying them to keep that relationship because as your business grows you don’t want them to say well your line of credit with us is $5000, $10,000 whatever it may be, and your orders now are $25,000. And them not scale your line of credit because you’re slow paying your invoices.
Jeremy: Right, right.
Tom: You have to be able to rely on them as they rely on you. They get your product, you get them money. You do that, everything goes perfect.
Jeremy: Yeah, I want to go into the early days in a second, how you went from a closet to your bedroom, to the house, to a warehouse. But first just in general what mistakes should people avoid? What common mistakes do you see other people making?
Tom: Not knowing how to buy and what to buy. You can’t buy just what you think is going to sell. You have to have some hard data. And if you’re buying something just to try it out, don’t go taking pallet loads of them because if it fails, if it doesn’t work, if there’s no margin in it, whatever the reason may be, you don’t want to be stuck with something.
We’ll see vendors, not vendors but other sellers going out and buying stuff that we look at and just say there’s no rhyme or reason to what this person is doing. And why are they buying some of these items that by all means, probably are not great sellers?
Jeremy: So what’s an example of that if you could say? What was one that you saw that was a horrible and you’re like, “Why are they buying this?”
Tom: I don’t want to call out the seller.
Jeremy: You don’t have to call out the seller but what was the actual product? What type of product was it?
Tom: We’ve seen it so many times that it’s really difficult to pick up on examples. But you’ll see some people buying toys that just, they’re toys from a movie three years ago or something along those lines. And they’re either stuck with the inventory still or they just, they went through a catalog and said, “Give me six of everything.” And you probably could have parsed that order down quite a bit, saved yourself some money and put it into products that are going to serve your business better than just trying to increase your SKU count.
Because there are sellers out there with 100,000 SKUs in their catalog that are still doing less business than we are. It’s picking the right items and knowing what you’re buying before you buy it. It’s kind of a science, kind of an art. New vendors are more the art where the repurchasing and how many you buy is the science behind it. It’s something that when you’re a little seller you don’t have that history, you don’t have that knowledge, you have to really build up that, essentially your black book of in a home and kitchen category at a whatever sales rank you need this many. And if you’re competing against five other sellers you need to deduct some sort of multiple from that.
And being able to know how things are going to do just by looking at a page. And fortunately here we’ve got a lot of that data that we’ve compiled over years but it does change with, let’s say Amazon for example, growing year-over-year at this hyper rate, what your data says now is not going to be the same. It’s not gravity, it’s not a constant.
Jeremy: Right.
Tom: Things do change on all mark basis.
Jeremy: Talk about, Tom, your decision making in the beginning compared to now. What type of data, what things were you looking at in the beginning? And now how has it grown and how has it gotten more sophisticated?
Tom: In the beginning we took a real, what we called in the beginning, a shotgun approach. You just, you sawed off the barrel of your shotgun and you fired it out at a few hundred products.
Jeremy: Right.
Tom: And we did what small sellers typically do. They don’t have that data and we…in the beginning we sold vacuum supplies. That’s what this business started on, was the home and kitchen vacuuming products. And it was like, “Bring in 100 different bags.” And we’ll bring in a couple of each, what sold you re-buy, what doesn’t we…
Jeremy: You used it home.
Tom: We probably still have in the back of the warehouse here 10 years later. In the beginning it was just a, “Let’s go out there and let’s increase SKU count.” There was a whole lot more money to be made online though 10 years ago. Before there was like two million, two and a half million seller accounts on Amazon. Pricing has eroded. Fees have gone up. Not that either of those are necessarily a bad thing. They are both a bad thing but in the beginning you could gamble a bit more on stuff and it would work out where now if you drop a bunch of money on goods and you don’t have a backup amount of cash to keep you going, you could really do some negative impact to your business.
We’ve had some buys in the beginning that didn’t work out. There wasn’t the money that we thought, there wasn’t the volume. But the last time we’ve had a real bad instance that what I myself and I still purchase product here or my wife is another purchaser and my father purchases, that we had a really bad one is, it’s been a while. So we’ve been very, very fortunate.
Jeremy: So tell me what does some of the decision making process look like today that you can share.
Tom: I’ve stopped taking on as many new vendors. My wife and father both are still building out their let’s say catalog, individual catalogs. My wife, when she came on to the business, I told her originally, “Hey, we have this vacuum supplier, we’re buying stuff from them, we’re doing really well with it. Just look through their look catalog, figure out what you want to buy.” And she had quit her job and moved here to where we operate and I gave her about 48 hours and she was ready to leave. Just go find stuff.
Jeremy: Why?
Tom: Because she hates, she doesn’t like vacuum stuff. She doesn’t want to buy vacuum stuff.
Jeremy: I can see that, I can understand that.
Tom: “I’m not going to come in here for the next how many years and buy vacuum stuff because it bores me to tears.”
Jeremy: Right.
Tom: So at the time I said, “What do you want to buy? What are you going to…?”
Jeremy: Famous last words Tom.
Tom: Yeah, what’s going to entertain you and keep you excited?
Jeremy: Right.
Tom: And the first product that she bought we still sell to this day, we’ve done very, very well with it. And since then it’s just been, “Here is a credit card and go to town.” The nice thing is she shops here at work instead of shopping as much at home because she’s worn out by it, which is great.
When my dad started purchasing, it was the same thing. It’s, “Don’t try to buy something that you have no interest in.” I would be terrible at buying women’s clothing or purses or something that just completely is uninteresting to me. It’s ultimately going to lead to failure because you’re not going to put your 100% into it.
Jeremy: Yeah.
Tom: She likes buying pet stuff and she likes buying kitchen goods. She likes cooking. And does exceptionally well at finding those products.
Jeremy: And she probably knows a lot about it, whatever it is, so she…
Tom: But you still learn. You’re always learning. If you’re not willing to learn or at least listening to what other people are telling you, you don’t have to read into it as if it’s gospel or anything but you have to have an open mind. Otherwise you’re really just losing out on that free information, whether it be from vendors, customers, anyone. The information that you can get for free from listening to people is well beyond what you can get from just Googling something a lot of times.
Jeremy: So what would you say are mistakes to avoid? What would you say the biggest mistake was throughout the years that you or the company made as far as product goes?
Tom: The biggest mistake we made as a company, as a company, business decision, was we figured a number of years back that we would buy some property. We were growing out of what we had at the time. We bought a dirt lot. We were going to build a building because in this town there’s not a lot of commercial warehousing. There’s not much at all. So we were going to build something. It was at the time going to be 22,000 square feet.
Jeremy: Wow.
Tom: That’s going to be what gets us to retirement. That will last us forever. Fortunately, we didn’t go through with it.
Jeremy: Why?
Tom: The cost to build was…
Jeremy: It was really expensive.
Tom: It was significantly more than we paid for our current warehouse per square foot. And the building that we’re in is in a multi-unit complex. So we have our store that’s on the front of the building. It’s the corner of the entire building on the street side which gives us some great retail frontage on one of the main, not thoroughfares, but it’s in a pretty populated area, still in the residential district. And there’re 16 units in this building so if we need more space all we’ve got to do is go buy another.
And we can take little nibbles as we get bigger instead of having to relocate and buy a whole another warehouse. Unfortunately the building that we’re in now is starting to become harder to acquire space in so we’re back to that balancing how do we continue to grow without having a lot of space? But it costs a lot of money that we still own that dirt lot.
Jeremy: Oh, you do?
Tom: We still do. We haven’t sold it. We’ve tried to sell it. We paid for an engineer, an architect, all those prints to be drawn up and it was an expensive learning experience. The most expensive learning experience we’ve had in this business.
Jeremy: Yeah, it could have been more expensive if you ended up building the building though.
Tom: Yeah, we were fortunate to know, “Let’s get out,” and that saved us a lot, millions of dollars.
Jeremy: So this is interesting Tom, I didn’t know you have a storefront. What was the decision? What made you decide to have a store and the warehouse and the offices?
Tom: We’ve always had a store. My parents actually owned a brick and mortar retail store together before my dad jumped into this business.
Jeremy: Got you.
Tom: Having a store opens a lot of opportunity for you. Brick and mortar retail is not a huge part of our business but it allows us to service customers locally. And I think as you grow, just being an online retailer becomes something you can’t do. You cannot just be a brick and mortar retailer and get to a real large scale because they’re a dime a dozen. You need to be servicing customers not just selling to customers.
Jeremy: Right.
Tom: If you just sell on eBay and you have no customer service and you just tell all your customers that, “I don’t care if you have any questions, go ask somebody else and then buy from me…”
Jeremy: It’s not going to happen.
Tom: You’re going to have a real tough time scaling.
Jeremy: So Tom, what has worked the best in the beginning and what works the best now as far as increasing sales?
Tom: You’ve got to have a catalog, a good catalog. There is nothing that will get around having good products. You can have 100,000 of the world’s worst selling products, not that they’re bad, but the worst selling products and your business is destined to have struggles, where if you have 500 of the top 500 sellers on Amazon, you’re going to be minting money like there’s no tomorrow. So you definitely want to pick those right items.
And something that there is a cohesiveness too. There are some people that just sell random, this, this and this. And we do so a lot of somewhat seemingly random stuff but we try to keep everything in a normal school of thought. We sell kitchen goods, we sell…
Jeremy: Yeah, you do a good job actually breaking it when I was looking at it into categories. You have the health category, the beauty category, the home and kitchen category. So it doesn’t seem as random because you’ve got it segmented.
Tom: Yeah. And you could almost put names of people who purchase a lot of that stuff above them. My wife does very, very well with the baby stuff. Don’t have kids, I’m not going to get entertained by buying a lot of baby stuff, but she does. Essentially anything that is baby is purchased by her because she likes it. I would get bored to tears by just looking at baby stuff because I don’t understand it, which is where having a really good team of people that you can rely on is critical to getting a business to the scale.
You can run an e-commerce business at a small scale with just a few people but we’re doing a million, 1.5 a year in orders. You can’t do that hypothetically just selling vacuum bags.
Jeremy: So what’s your favorite category personally?
Tom: For me, I’ve tried to disassociate myself a lot with the products because there’s a lot of other stuff that I do with the business now that I did three years ago when I was growing catalogue. It’s become more of who do I like buying from and who do I want to pick up the phone and call and talk to or send an e-mail to. Having those relationships make it a lot easier than just liking the product.
I don’t like buying vacuum bags for the sake of buying vacuum bags, I like buying vacuum bags, which is the category that I buy, one of the categories that I buy. I like buying them because I like the people that I deal with on a consistent basis when I’m buying them.
Jeremy: Yeah.
Tom: So if all of a sudden I had to switch vendors or switch sales reps or something like that it would be a whole lot more tedious to come into work and try to buy that product. I buy the sports nutrition products in our account and it’s the same thing. I enjoy dealing with those sales reps and those people with that company. So it makes it easier, for me at least. There is a lot more.
Jeremy: Yeah, tell me this, in the beginning, let’s go back to the beginning for a second. Early on, what was the big influence for you? Your parents had what kind of store when you were growing up?
Tom: They ran a vacuum retailer, Brick and Mortar Vacuum Store. Which is how, essentially how I got a foot in the door. Real similar to Chad.
Jeremy: Yeah, it’s so funny. It’s exactly the same.
Tom: There’s a lot of weird similarity.
Jeremy: Yeah.
Tom: Our stories. But we’ve never met or anything. But my parents had a brick and mortar retailer for vacuum stuff they had for a number of years. And when I had lost my job as a financial advisor, stock market went down, it just went to crap. And I was like, “I need a job.” Me and my wife were getting married, recently married and I had to pay the bills, I had to get food on the table. So I was, “Let me go apply for some jobs during the day and when I get home let me sell something online.”
They were a couple of hundred miles away. I contacted their supplier that they did because they didn’t care. I was just going to sell it on eBay.
Jeremy: What made you decide to sell it online? You could have just do like, “I was going to apply to jobs,” and never think about selling online.
Tom: When I was in high school I sold some of their stuff online. They would take trade ins for vacuum cleaners. They sold somebody a new one, “Hey we’ll give you $50 off if you trade in that old one that you have here.” And I would take them, I’d clean them up and I would sell them on eBay as a high school job at the time. You still can do that but you could do that pretty easy as a high school kid. And that was my first real experience with online retail, was ways ago. Maybe 15, 18 years ago.
Jeremy: So that stuck in your head at the time?
Tom: Yeah, I knew that I could make some money. It might not have been enough to pay all the bills but at least I was contributing to our newly formed household when we were just married. And even though we didn’t take anything out I still felt at some point we can just sell all this inventory off and then we can maybe pay the mortgage one month or pay the car payment or whatever it may be. And we were fortunate enough at the time that my wife could sustain us as a family. And we’re very, we don’t do a lot.
Jeremy: Not big spenders.
Tom: Yeah. We have our dog and we have our TV and just hang out and enjoy that.
Jeremy: Yeah, so Tom, I want to hear about the early days when you started selling online after the financial crisis. Go back, what did you learn from your parents growing up? Because you saw them running and they’re entrepreneurs running a store. What are you laughing about? There is a good story here.
Tom: Yeah, there’re a lot of good stories of that one. When my parents ran their store my dad would go out and he would…you’re a vacuum cleaner salesman. They had a store that they sold out of but it was never, there was never a lot of money, let’s say. And he worked really hard, really, really hard to support the family as we were growing up and I’m like I don’t want to…I’m not going to go into that family business and do that, I’m not.
So I tried, a couple of months. Tried working with him after losing my job and I hated it.
Jeremy: Why?
Tom: I was like…
Jeremy: What didn’t you like?
Tom: You’re there trying to sell people something and I’ve never liked high pressure sales. I want to buy something at the store and I have a question about it, I’ll ask you. If I’m there looking at something, just browsing around, I don’t need a sales person coming to me telling me that I need to buy this because their commission depends on it. So online sales is really low pressure. You can do it from the couch.
Jeremy: That’s no pressure.
Tom: I’m not pressuring people to buy anything. It’s if you want something, buy it from me.
Jeremy: What did you learn from your parents about selling? Because you can translate that selling in person to online too, right?
Tom: Yeah, you might. I don’t know if it was more the selling as the running a business that I got from them.
Jeremy: Okay.
Tom: Because I don’t feel like I’m a great sales person. If I was, I probably would have liked it and been really good at it and this business wouldn’t exist.
Jeremy: What did you learn about running the business?
Tom: That I never really wanted to work for the man of sorts. I wanted to be able to reap the benefits of doing a really good job because I feel like I work pretty hard. And I’m working 60/70 hours a week still. That I don’t want to just make $10 an hour, $12 an hour if I’m really, really good at something because it makes me work harder at it. And the harder my parents worked at selling stuff the more they made and I saw that. And not that they did a bad job running a business but I learned a lot of things, how we do things differently than how they did things.
One of the biggest was reinvest in the business and grow it. Because if you have a bad month or two you still want to be able to be growing that business, taking steps forward and forward and forward. It’s not going to be as big as the stuff but if you’re taking out 100% of your profits or anywhere close to it growing that business the next month is immensely harder than getting to be able to grow it as you’re taking out all that money just to pay your bills on a monthly basis.
They closed their business down when this business started taking real paychecks, regular paychecks and enough to sustain life as a human being.
Jeremy: Right.
Tom: And I’m happy about that. They’ve done well for themselves owning this business instead of that one.
Jeremy: So what was it like? So you started off then selling…you come home from your job or searching for a job and then you’d start selling in the evening. What was next? What did it progress to?
Tom: I ended up, as the business was growing I ended up getting a job and I worked in…we lived in Henderson, right outside Las Vegas and I worked at a casino.
Jeremy: Oh really, what did you do?
Tom: I initially started in the sports book and then I ended up working in a poker room. And working a poker room for a while while this business grew. I was very fortunate to have that experience. It taught me a lot about calculated risk and…
Jeremy: Yeah, tell me about it. What did you learn from watching poker players?
Tom: There is a cost benefit analysis that you do as a good poker player. And you can take risks, take gambles if you can afford to lose something. And know that what you’re doing is going to work out for the best in the long run because it’s not like you’re playing blackjack. If I worked as a blackjack dealer I would just know not to gamble. But as a poker player there was consistently people winning.
And I played a lot of poker as a poker dealer. And one of the, really the biggest things that happened was as I was working as a poker dealer near the end of that part of my life, I had a boss who was a friend as well. And I started at five days a week. And I went, I asked him, “Hey I’m having to work so much. I’m getting off work and I’m going home and I’m working until three, four in the morning. I’ve got to get a break. Can I go down under four days?” And went down to three days, went down to two days. Then it got to be that I would show up for work and I would eat lunch or breakfast or whatever time I got in and they would be like, “Hey we’re slow today, does anybody want to go home?” and I’d be like, “Right here.” I worked for half an hour, all I did was eat.
And he pulled me into his office and he said, “Tom, you’ve got to think about what you’re doing because clearly you don’t need to be here.” And that was the real tipping point of somebody not firing me, sir if you want to come in and when we need, we’re not letting you go, but you don’t need to be here. This is no longer your job, this is just you’re here because you’re friends with the people here and you like it when you’re here. But if you want to be here just come play poker some day.
Jeremy: Yeah.
Tom: I wish I could reconnect with him because it was a great experience. Just being told stop showing up for work and do this. It paid off many dividends.
Jeremy: So I want to hear about what you were doing to grow the business during that time but I have to ask, what’s your favorite poker room story?
Tom: I used to play on the clock when things were slow and they would, they still do if you’re a poker dealer in Vegas, they’ll let you play on the clock if it’s to get a game started and so forth. And there is not really a specific story of sorts but when things were slow personally, I helped pay our bills playing poker. It’s I guess a little known fact but we, every year at one of the trade shows they have a charity poker event and I think three of the four years I’ve come in at the top, I think four, out of a bunch of people. So it’s a lot of fun. I still enjoy it but we live an hour away from a casino and I’m usually at work so I don’t get the chance to play as often as I…
Jeremy: I figure you and I go on I went head to head with Michael Jordan when he came in Vegas Hotel.
Tom: No, at the time I had enough to play but not enough to get trouble.
Jeremy: So what were you doing to grow the business during the time so that you can go from five…because I mean someone listening may be in the same situation, they want to go from five days to four to the boss saying you don’t need to show up anymore. What were you doing to grow the business?
Tom: We constantly reinvested in inventory. Because at first we only bought a little bit of inventory and we were…we’d sell $500 and you made $100 you buy $600. And you can’t buy just $600 of that same product. Some products you can. But it was really growing. So we started with maybe a dozen or two SKUs and just, instead of buying just the Hoover vacuum bags, buy the Dyson filters and buy the Bissell bags and whatever other items it was until you get a sizeable catalog. Because anybody can sell 10 SKUs. It’s getting to the thousands of SKUs that a lot of the smaller and midsized sellers now have to be a sustainable business. A meaningful, not that small sellers aren’t a meaningful business but something that was enough for us to pay our bills and quit our day jobs.
Jeremy: Do you have a certain formula like we want to get a new SKU every two weeks or month and that really stages? How fast did you want to grow or did you see it sustainable to grow?
Tom: At the beginning?
Jeremy: Yeah.
Tom: It was just grow as fast as you can. When you’re buying inventory I would say okay, and I would call them up on the phone. I would roll through what I needed for inventory to how much does that add up to be. And I knew what the balance was in our account at the time and they would say your balance, what you owe us today is $5000 and I had $6000 in the account. And we didn’t have other expenses because we were operating out of the house. We’d get to six then and I would spend the other thousand on product.
Jeremy: Right.
Tom: And we would sell it and I would call them up a week or two later and say, “I’ve got seven. I’m going to order what I need,” and do the same thing over again. It’s a bit different now as we’re large because we’re not spending everything that we have because there are other expenses to have to cover.
Jeremy: Right.
Tom: But the formula is still the same. It’s grow as much as you can as fast as you can because if you’re not growing you’re shrinking. I say that all the time here to business people that we deal with, to vendors, to our employees. If we do the same thing that we did the past 12 months we’re shrinking actually. Because somebody else is getting bigger than us, the world of e-commerce is growing at 15% a year and if we’re going any less than that 15% a year, somebody else is kicking our butt and we’re just taking it because we want to do the same thing we did a year ago.
And a lot of people just get to a point of being okay, not realizing that really sooner or later your market share, even if it’s just a sliver of what the real market is, is actually shrinking as more and more people are buying online.
Jeremy: What was working at that time for you to get through inventory quicker?
Tom: Well, a lot of times as we…when times are needed we’ve built a program for our inventory management and how much we buy and so forth. And we can say okay, instead of having 90 days’ worth of inventory or 78 days’ worth of inventory, you can shave it down to okay, we’re only going to hold 27 days’ worth of inventory or something smaller. So you have more capital. And you can grow that catalog really fast by holding less days of inventory because you still have the same amount of money to buy goods with.
So shrink it down to 30 days instead of 90. Take the other 60 days that you now sawed off of everything else and go by 2,000 new SKUs, see how those do. And then when you start building things back up and it’s over a year period of time. During fourth quarter you’re not buying a lot of new stuff. You’re typically concentrating on just getting as much of everything that you sell in-house and being able to afford it so that way when come Black Friday, all of a sudden you sell 1000 of something, you didn’t only sell 500 because that’s all you bought or that’s all you could afford. Then come January, it’s let’s buy 2500 new SKUs.
For us it’s more than that now but it’s catalog growth. Because we sell somewhere in the 14,000 SKU range right now. How do we get from those 14,000 SKUs this year if we want to grow at 40%? We probably need to get to somewhere in the what, 30,000 range by next year at this time to continue our trajectory. That’s a lot of SKUs.
Jeremy: It’s a lot of SKUs, yeah. A couple of things come up around that time, one…
Tom: It would actually be a 21/22, sorry.
Jeremy: Yeah. A couple of things come up. One is the breakdown, what do you tell people about having your own brand versus selling other known brands?
Tom: We’ve taken the approach of not being, not selling our own brand, not going to like to China, which is where most of comes from these days. Not everything. But not saying we’re going to import a filter, a vacuum bag, whatever it may be and put our name on it because there is a lot of really well established brands out there that we can buy and we don’t have as much risk of sorts of saying, “Let’s bring in a container of goods for an unproven brand that we call it Our Pampered Home widgets.”
We could, at this point we’re at a scale where that probably wouldn’t be really difficult. But why not just…if we’re going to bring in kitchen glasses or mixers or something like that, why not just go with the well-known home run hitters? The Rito [SP] glassware or Lenox or Waterford or something along those lines. There is no need for us to try to recreate that wheel. We’re giving customers those specialty brands that we sell and not…if we tried to sell Kitchen Aid mixer, our version of a Kitchen Aid mixer, Kitchen Aid would squash us, so why try to compete? We just never thought the need would arise for us.
And I know other people have and done well with it but it’s not our specialty.
Jeremy: I always like to hear both sides of that, why some…because I know people do, people don’t. That makes sense. And then what about okay, software-wise, what software do you use? What kind of tools? Because you say, okay we need to add 10,000 SKUs of something. Somehow it has to get entered onto your website, onto Amazon and onto all these other platforms.
Tom: If you were to see our browser history on just random stuff that we’re looking for, it would be mind boggling. It’s nonstop. Between myself, my wife, my dad who are really looking for some of those brands and going to trade shows, we go to trade shows all the time to find products. But as far as software goes, our software that we use? Google Chrome, Microsoft Excel and Microsoft Outlook for email. That’s our powerhouse of what we use every day.
We are a customer of a software platform for getting stuff out there and warehouse management but it’s not critical to finding product. Really it’s…there’s a lot of feel for it, going through looking at, if you want to sell you want to sell…if you want to be a vacuum bag seller and there is a number of them out there, you have to know what you’re looking for because you can’t go sell the brand that doesn’t do well and there is a couple. You want to go for the stuff that you’re going to be able to turn inventory, instead of selling a few a year. Because that’s a tough sell in that sense too.
But it’s a lot of just browsing online, finding brands, listening to what your customers tell you, and talking to your customers. Talking to your customer service people, saying, “Hey, what did somebody ask for? Did somebody say, “Hey, do you have a widget?” And you have that widget. And when they tell them no, that’s key information right there, because somebody wants to buy it, so why can’t we sell it? Right?
Jeremy: So what have you done differently because you listened to your customers, whether it was a certain product or category?
Tom: In the beginning we were very home and kitchen, whether it be vacuums, whether it be mixers, whether it be small appliances, glassware, tabletop. Those type categories. And going into stuff, why don’t you sell baby stuff? Well, we didn’t sell baby stuff because it didn’t occur at the time. So we’ve expanded into that. Why didn’t you sell toys? Well, we didn’t know where to buy them. You have to have a good buyer or multiple buyers, purchasers, people who are looking at the products, looking at what vendor is selling.
Listen to your sales reps too because they know what sells. Absolutely. And you have to trust your sales reps too. You don’t just buy what they’re getting a huge commission on because they want a new car. You have to build that trust over a long period of time, especially when you’re putting your livelihood at risk because I don’t need 1000 blenders. I can’t send them to my electric company and say here is blenders for my electric bill. So listen to everything around you. Listen to your customers who say, “I want this brand baby carrier or stroller or something like that.” Listen to this person who says, “Hey, why don’t you sell this pet toy?” Or this person who says, “Hey, this new vacuum cleaner, I’ve heard about it. Do you sell parts for it?” Probably not yet but I’m going to try to find out if I can. And grow your catalog that way.
Jeremy: So Tom, what about not software finding products, what about just like whether they’re entering them into one of your website or Amazon or wherever, or any tools you use just to run the business software-wise.
Tom: We use so much of that manually.
Jeremy: Really?
Tom: Yeah, we’ve…
Jeremy: I don’t know how you do that. Like 10,000 SKUs?
Tom: Yeah. Everything has been done manually.
Jeremy: Wow.
Tom: We don’t, at least for Amazon we don’t do data feeds. And there’re reasons behind it because we want to make sure that when we’re putting in a specific SKU, that it matches the detail page on that website. That we’re not just trusting that whoever created that detail page on Rakuten, which is notoriously…I’m not throwing them under the bus but they’re bad at their data feed. If you do a data feed to them just by what you think is the correct information and somebody else said that, “Hey, they took the UPC number for the vacuum bags and put all the pictures and details and so forth to the vacuum cleaner,” you’re going to get a customer who buys the vacuum cleaner for $20 and you send them the bags which you think is correct. And you now have a customer wanting a $800 vacuum cleaner that they knew was wrong but they’re trying to beat you out of it.
Jeremy: Right.
Tom: On Amazon we don’t have that because we put in everything manually to get it right. And our customers, we have 100% positive feedback over the past 365 days on Amazon. With that volume, that’s…it’s a lot of inventory.
Jeremy: Amazing.
Tom: It’s a lot of manual work to get there.
Jeremy: Yeah.
Tom: And we’ve always done it that way and I don’t think that we’ll change. We now have people to help us with it because it used to be just me, my dad and my wife who would put stuff in and now we have essentially assistants and helpers to help us with that. But even up to about a year ago we did it all manually ourselves. So…
Jeremy: No, I think it’s amazing. I was just thinking how do you even begin to do that? I mean you probably have like 10 people entering in SKUs or something. So you go from selling the vacuum bags and cleaners and parts and growing, so what was the next category that you decided to go into?
Tom: The next with me purchasing, when I was still doing all the purchasing myself, was sports nutrition. Your proteins, your pre-work outs, stuff like that. And it was for no other reason other than I was going to the gym, obviously not anymore. But I was like, “Hey, why can’t we sell this stuff?” And found a vendor and I still deal with that same sales rep today that I did for the past seven years. And we’re good friends at this point. We’ve talked pretty much daily for years. But in the beginning he’s just like, “You’re just a crazy dude who thinks he can run a supplement business like everybody else that calls me up.”
And at the time, that was the case. We probably shouldn’t have entered that market.
Jeremy: Why not?
Tom: That product is one of the hardest to purchase because your prices are never the same.
Jeremy: Really?
Tom: What you buy it for today…it’s really weird and you have to be very good at math and figuring out what your landed cost is for something because you may buy three of product X and they’re going to give you a product Y as a promo unit and you’re going to lose money if you just sell product X. So you have to assign a value that you’re going to sell product Y for and know you’re going to sell product Y to be able to make your money. Because you’ll never make money just selling product X.
Jeremy: So they give you a bonus product if you buy certain products or?
Tom: In the supplement industry, sports nutrition supplement industry pretty much everything is a buy 3 get 1, buy 4 get 1, buy 5 get 1, buy 11 get 1. And I think they do it honestly so that way instead of just buying one of everything you have to step up and by 11 or whatever it may be to get some real volume there. And you’re not just buying one of everything to get your SKU count up.
But that’s a tougher one because you have to be very, very careful of your landed cost and competing against some of the other sellers, who honestly I am curious some days how they are making money because we fight for the best price that we can get.
Jeremy: Right.
Tom: And if I wasn’t the one purchasing I wouldn’t just trust somebody else to try to bring in that product. You have to be very, very careful. And we’ve had some really big, big losses. It also expires. If you’re not going to sell it fast and know that you’re going to sell it fast, the worst thing that you can have a something that says expired on…
Jeremy: Right, it’s not like a vacuum bag filter that it will never go bad.
Tom: If it’s a food item or something that does expire and you get stuck with it, they’re paperweights. They’re not even good paperweights, they’re trash. And you can lose a lot of money and we have. We’ve had some big, big losses there that we’ve done fine with but they’re never, you never want to lose on anything.
Jeremy: Right. So what’s your research process like? Because especially with let’s say you’re working out, there is a million different types of proteins or protein powders and this and that, how did you decide or evaluate, okay, we’re going with this company and this product?
Tom: That was at the time listening to the sales rep in the very beginning, even before I trusted him like I do now. It was, “What do you have a great deal on that you think I could really do well with?” And research it the same way we do vacuum bags. You look it up, you see what the reviews are, is it getting good reviews, bad reviews? How long has it been out? Where does that fit on Amazon? If you Google it, is there 20 other things that come up before it that it’s buried on the third page of the search results?
There’re lots of little things here and there that you’re looking at. What’s the sales rank on it? Is your sales rank on it number one? Is it the number one item on Amazon? I think that’s the Kindle but anyway, is it the number one in protein powders? Because if it is, you might have a shot of moving quite a bit of volume. If it’s number 300,000 in whatever, in sports nutrition, you’re going to have a bad time, have a real bad time. And you might want to think about just taking it yourself. And it’s just stuck.
The same process works for everything, whether it’s sports nutrition or vacuum bags or baby carriers, you’re looking at all the same information and making those fine calculations in your head, on the fly a lot of times of, “I want 2 of those,” or “I want 60 of those.” You learn it, it’s a learned skill of doing it a lot of times. But in the beginning you do have to be really cautious until you have that skill set.
Jeremy: How do you compete? Because as you said, with you or is someone’s selling your known brands and you can go on and let’s say there’s 30 other people selling these vacuum cleaners or whatever it is, what are some things that people can do to compete so that people are actually buying from them and not the 50 other people selling the same thing?
Tom: If you’re just taking a vacuum bag and saying, “I want to sell a brand A vacuum bag,” and there’s brand B, C and D also listed and you all of a sudden want that to be selling better, there’re some tricks to it. It’s a definite fine line of what I would want to go into.
Jeremy: I like hitting these fine lines. So what can you share about competing with other sellers with the same brand that won’t one give away your secret sauce?
Tom: The same brand or?
Jeremy: Same brand.
Tom: If we’re all selling the same thing, the number one thing is you can defeat Amazon’s Buy Box with price. You sell something for $5 cheaper on a $10 item and you’re able to ship it next day, you can probably get the Buy Box and you can probably sell something.
Jeremy: You can lose a lot of money too though.
Tom: You could. We are a very large FBA seller. We do a lot through for them by Amazon because we do, we’ll do somewhere in the 1.5 million orders this year range. Shipping those all out of here, yeah…our staff, we have somewhere in the high 30s of staff. If we were to ship all those orders to individual customers and pack them and so forth and label everything to every individual customer, that’s a lot more than just 30 people doing it.
Jeremy: Yeah.
Tom: So we will use that as…we also don’t have the space for it to stock all the…if we took everything back that we have in third party warehouses, we wouldn’t have room for it unfortunately. So FBA price, definitely when you’re a small seller and you don’t have a lot of reviews, it’s harder. Some people like to buy from the little guy and give him a fair chance and so forth but I know myself, I’m looking for who has 100% feedback and it’s a lot of feedback. You know that they’ve done a lot of orders that if I want a TV I go to Amazon, Amazon now. Beforehand when Amazon didn’t exist I’d go to Best Buy.
Jeremy: Right.
Tom: Because they were big and I trusted them. I don’t go to the guy selling out of the back of his van, right?
Jeremy: Of course, yeah.
Tom: So it’s the same concept online. Where do you think of when you want to buy most stuff nowadays? It’s Amazon. Yeah, about 40% of products are just start on Amazon. So if you’re not there you’re having a tough issue with relevance for your brand.
Jeremy: How do you decide whether to keep it in-house and ship it or ship it all FBA?
Tom: There’s not much that we ship out of here to customers for Amazon. So if it’s an Amazon item, we’ll FBA it 99% plus of the time because they’ll handle the shipping, they’ll handle the returns, they’ll handle…if it’s late, the customer can call Amazon. And they can call Amazon 24 hours a day, which for us is great. And Amazon shipping rates are awesome. Any real, even small seller, they can see what it costs to ship. Compare that to your own UPS rates and your jaw is going to drop. It’s awesome. Not as a plug for Amazon or anything but their rates with whoever they ship with…
Jeremy: They can compete. They have buying power or whatever it is, yeah.
Tom: Their UPS rate has got to be just ridiculously low to be doing that.
Jeremy: So why ship anything out of a warehouse?
Tom: Well, if we’re shipping to customers on our website, if we’re shipping internationally and so forth and we want to control that customer experience, we stock…we have our warehouse that we stock everything in as well so that way we can service international customers, customers for a web platform that might not want you to be having a box show up from Amazon that has a big old smile on the side of it and they bought it on eBay or Newegg or something like that. So that way we’re not just blasting it out in front of customers faces that hey, you bought at Newegg but Amazon shipped it to you. So that’s the reasoning behind it.
As we get bigger having control over our own website and so forth is needed.
Jeremy: Yeah, and that’s the biggest thing, Tom, is how do you diversify? A lot of the sellers I talk to, they have a large percentage on Amazon. What advice do you have for people to diversify and what tips? Maybe start with your personal site, ourpamperedhome.com or eBay or any other platforms, what do you recommend?
Tom: You need a good warehouse management system. And I’ve talked with Chad about Skubana a lot and I’ve seen it from its infancy grow into what it is now. And I’m happy with what Chad has done. And for full disclosure, we’re not a Skubana customer, but I can say that their software is great.
Jeremy: What did you like about it, what did you think was good?
Tom: For where it’s at now, it doesn’t do everything that the largest guy out there does that is a competitor of theirs. I don’t know if you want to put it out there but we’re a ChannelAdvisor customer.
Jeremy: Is it that that’s a lot more expensive or why do people not go?
Tom: We’re at ChannelAdvisor.
Jeremy: ChannelAdvisor, is that what…
Tom: If we tried to be a ChannelAdvisor customer when we were real small, it would have been extremely expensive because their minimum per month for a small seller is pretty sizable.
Jeremy: Yeah.
Tom: And we’ve looked into ChannelAdvisor before we became a customer years later actually and we couldn’t fade that monthly bill unfortunately.
Jeremy: Yeah.
Tom: Skubana is cheaper, from entry level you can…you’re paying per order. I like their interface. It’s all cloud based and so forth. For everything that we do here, for all our ordering and so forth I have a custom computer built under here that runs all the software because it will…you put it on just on a cheap $200 computer and it will smoke that computer.
Jeremy: Really?
Tom: Yeah. You can go do the dishes while you’re waiting for spreadsheet calculations to happen. I love the computer I use, it’s great, but not everybody wants to have that system, and the computing power in the cloud that Skubana has access to is great. The reason why we’re a ChannelAdvisor customer is we’re actually a managed client of theirs so they do a lot of the back end stuff with us that we wouldn’t do ourselves a lot of times. They’re a big help there for us. But it comes at a huge price.
Jeremy: So what point, I’m sure you and Chad had had this conversation. And I’m just interested because for sales purposes and for sellers purposes, I’m sure you’ve had a conversation and he is like what would it take for you to become a Skubana customer? Or switch. Is it just too big of a pain because you’re a big seller or what?
Tom: Yeah, there is some definite work there. The biggest reason, we’re in contract with ChannelAdvisor. Not long term but we’re in a contract with them. So even if I switch I’m still paying them and then I’m going pay…
Jeremy: You have to pay both.
Tom: Which gets expensive.
Jeremy: I always like, and this is not a commercial, obviously Skubana sponsors us but it’s not a commercial for any one vendor, but I always want to know what is in the head of the founder that would make him switch or stay the same?
Tom: If they do a lot of things that we have put together, a lot of pieces of software ourselves over the years to do. But if we were much smaller than we are and we were still trying to build these pieces of information, having them now at just one site, at one company, would have saved me so many hours of building out spreadsheets and ordering programs and so forth.
And I’ve given Skubana, I’ve talked to Chad over the phone very candidly about this is what I think your software should do because this is what we do.
Jeremy: Right.
Tom: And if you can have somebody build this in, it helps us so much that you just have to have one of your programmers do what I did and it’s…
Jeremy: Like hack together different solutions that work for you. So this is interesting. It’s nothing like, Tom, learning from people and talking to people in the trenches. And you and Chad they started around the same time and have grown to today, what good advice have come out of your conversations with him?
Tom: In the beginning when we were direct competitors?
Jeremy: Right, that’s another thing, is you guys sold and were direct competitors.
Tom: Yeah, you could split screen this from six, seven years ago when we were both much smaller growing and you’d be bleeping out most of this conversation because we weren’t…we were both small and at the time direct competitor, selling in the same listings, the same everything.
Jeremy: Right.
Tom: And it got to be, once Chad stepped in to branding his own products that there wasn’t that direct competition in a listing, competing for the Buy Box, he is competing for his brand and we’re selling a different brand.
Jeremy: Were you just sitting there, Tom, and you’d be like just swearing at this…and hey, having his picture or his company name on the dart board? I mean, you didn’t even know each other at the time but you knew of each other.
Tom: We’d talked over the phone.
Jeremy: Oh, you had?
Tom: We’ve spoken at some trade shows in the beginning.
Jeremy: Yeah.
Tom: And we weren’t going out to dinner together or anything like that. When you’re small and you’re fearful for your business and it’s still my child of sorts and I’m still going to fight for it but I’m not as fearful of…we’re small and we can’t really make any missteps, we can’t let somebody come in and steal our business to sell our products and so forth. And it was one of those you don’t want to ever let off the gas and stop trying. And we, yeah…
Jeremy: So what were those early conversations that helped that you actually, maybe something he said helped you or vice versa?
Tom: We would discuss, we didn’t really have great conversations until we got to be a little bit more sizable.
Jeremy: Yeah, tell me a little about one of those.
Tom: Now a lot of it is in regards to where we are going next? Where are we expanding? So we can bounce ideas off of each other. And I really feel like Chad and his company is growing into…there is Crucial Vacuum, which does very well and he’s built that brand to what it is and now I feel like a lot of his desire, and he could correct me if I’m wrong and I wouldn’t mind at all, is going into building Skubana and he still has great information and great insight into the next marketplace. Which marketplaces are doing well for him. And we converse about what’s doing well for us. We’re on Jet and he had some real, maybe…he had an opinion on Jet before it launched. I tend to think that his opinion was wrong. But it was really, it’s really hard to compete with Amazon. But I think Jet really threw us both for a loop because we expected them to try to take on Amazon. And I feel like what Jet’s doing is really trying to take on eBay where people are really hungry for deals, where Amazon, they’re really hungry for great service and fast shipping and everything’s on there. There’s not everything on Jet yet but the price that you get there is pretty good.
Jeremy: Yeah.
Tom: We’ve compared notes on product and so forth that products come and go. He’s asked why we do one thing versus another, why do we branch out and we used to go buy a diff