FBAM 4: Doing Whatever It Takes and Adjusting as Necessary- Steve Simonson

FBA Millionaires was live with Steve Simonson. Wonderful guy and he knows his stuff. Make sure to share us with friends and and give us an honest review on iTunes: https://itunes.apple.com/us/podcast/fba-millionaires-lets-10x-your-amazon-fba-business/id1322011998?mt=2FBA

Podcast Discussion:

– Getting into Big Box Stores

– Wholesale VS. Private Label

– Work Like balance

– Amazon in 2003

– Amazon is still the best business model out there

– Relying on Experts to help

– Horror Stories with China manufacturers

– Always get inspections (Always)- Biggest seller mistakes

Resources:

FBA Millionaires: http://fbamillionaires.com/
Facebook Group: https://www.facebook.com/groups/224714747899500/
Sponsored by: Upfund.io https://www.upfund.io/

 

Jeff Allen: What does your typical college graduate have in common with a successful, professional Amazon seller? Well, actually, that’s, that’s more of a trick question than anything else, (laughs) but we may get some answers to that question from today’s guest, and it’s all coming up from the West Coast to the world, this is FBA Millionaires.
[00:00:30] Welcome to FBA Millionaires. This is the program that is geared toward helping you pursue your goal of earning a seven-figure income selling professionally on Amazon via fulfillment by Amazon. My name is Jeff Allen, and once again, I want to, uh, welcome you to the program and welcome in my cohost, my co-producer, partner-in-crime, and really a resident expert, Amazon sales animal. His name is Will Moffett. Will, how are you, sir?
[00:01:00]
Will Moffett:
Hey, I’m wonderful, Jeff. How’s it going?
Jeff Allen: This man, Will Moffett, he is, uh, the reason that this show is rocket powered. Uh, talk about successful on Amazon. First month on Amazon, you sold what?
Will Moffett:
[00:01:30]
Jeff, you’re too kind. My first month, um, was-was pretty unique, as you know. Um, uh, my first sale was on my firstborn. The first sale was when she was born, and that was pretty exciting. Um, uh, I went up to $40,000 within the first month and a half. That was the beginning, and we quickly grew from there, but we have a guest on that is phenomenal, and it would be a pleasure to learn more about Steve Simonson. Uh, you there, Steve?
Steve Simonson: I’m right here, yeah.
Jeff Allen: Steve, welcome you to the program, man. It’s nice to have you on board, and thanks so much for agreeing to share a slice of your time. I know you’re a busy guy.
Steve Simonson:
[00:02:00]
Yeah. Happy to be here. Uh, as you guys know, I love entrepreneurs, and, uh, talking about, you know, business is, uh, kind of my hobby, so, uh, thank you for, uh, having me.
Jeff Allen:
[00:02:30]
Will, I know that you were really anxious to get Steve on, and, Will, uh, you consume so many podcast hours. I know you probably heard one of Steve’s shows in the past. Did you know that this guy got his start back before really before Amazon was open to the public in terms of, uh, those people able to sell their own products on Amazon, mainly books at that time, uh, but, uh, this guy was from what I remember, Steve, reading about you. You led one of the first truly successful eCommerce businesses back in the late ’90s. And, Will, I don’t know if you saw anything about that, but, um, I believe, Steve, the name of the, the company was iFLOOR. Is that correct?
Steve Simonson:[00:03:00] Yeah, back in the olden days, uh, we started a company basically late ’90s, and, uh, had some fun, scaled along the way, and, uh, you know, had some, uh, success here and there and some, you know, fun times here and there. And also some bruises and scrapes along the day. That’s how I learned stuff. And, uh ultimately exited, you know, through a-a private equity type company, uh, in the, uh, mid-2000s, or maybe late 2000. I don’t remember.
Jeff Allen: Well, what was it about? Steve, when you kind of found out that he was available to do this show, what was it about him that stood out to you, uh, when you were kind of tracking him down there?
[00:03:30]
Will Moffett:
Well, I saw that Steve was very diversified in business. And-and that’s what so important. And Steve, you-you went to big box stores, right?
Steve Simonson: yeah, yeah, because I’ve been around. I’ve-I’ve sold online. I’ve sold, uh, big box. I’ve sold, uh, in many, many different channels in many different ways.
Will Moffett: Well, we know that you-you first started off and you had your exit. So what happened from there?
Steve Simonson:
[00:04:00]
[00:04:30]
Yeah, so the … uh, as I sometimes tell the story, one stroke of bad luck after another. Uh, and-and really, I saw that completely tongue in cheek because when I first got started, way back in the old days, it was very tough going. You know, we-we struggled with everything that everybody else struggles with today just in a different context, right? Uh, people are struggling with Amazon changing rules or FBA changing fees. Um, review rules, terms of service, etc. But the-the constant is always change, right? And so I dealt with change back in those days in-in different ways. Um, after that, you know, I kind of worked on some-some companies as a … as a CEO or a chairman.
Uh, just to try to keep-keep loose. Uh, I wasn’t ready to start something. Uh, but after about a year or so, I did start, uh, some new companies just because my brain wasn’t working. In fact, uh, when I was, um, I think in the 2012, I kind of did a little retirement attempt.
[00:05:00] I said, “Uh, I’ve got a couple shekels to rub together. I’ll be okay. Uh, I want to just hop out of a rat race.” So I actually stopped being a CEO for a Chinese company and a chairman for a British company. And just kind of unplugged for a year. And I went on vacations. I went on cruises. And, uh, and it was a nightmare. I hated it.
Will Moffett: (laughs).
Jeff Allen: Got that out of your system quickly.
Steve Simonson: I did like parts of it, but it was definitely one of my worst times in my life in terms of happiness.
Jeff Allen:[00:05:30] Hey, Steve, I’ve [crosstalk 00:05:20] got a … So, I’ve got a question real quick, Will. If you don’t mind, I’m just going to piggy back off of that, because I kind of feel that way about my particular life. And Will, you may even as well, because I know that you love to go to work in the morning. Would you consider, Steve, one of your hobbies is the work you do?
Steve Simonson: Without a doubt. In fact, people often ask me, you know, so, “Uh, what do you like to do? Do you like to go golfing? Do you like to collect stamps, you know? What are your hobbies?” And I’m like, “My hobby is buying and selling companies.” Uh, that’s what I love to do, and talking business is extraordinarily rewarding to me.
Jeff Allen:[00:06:00] Yeah, Will, how about you? How do you feel about that? Because sometimes I’m made to feel like, uh-uh, you know there’s something wrong with me because I like to spend so much time uh-uh thinking about, wha-wha-what my next move might be or what kind of strategies I need to have in place for maybe one or two of my clients, whatever the case may be.
How do you feel about, uh, work and hobbies and all of that? Or-or are you one of those guys who’s perfectly balanced, and you’ve just got yourself all together?
Will Moffett:
[00:06:30]
[00:07:00]
Well, I am so not together. I am so not together, Jeff and Steve. Um, but I must tell you, my wife want to put her arms around my neck. I love business, entrepreneurship. I love helping people as far as business, I can wake up in the morning, work and I can go to bed late at night while working. Um, and-and so I have to really be conscious to balance out, because it’s so fun. It’s a rush. And my thing is building companies. I like the startup environment where-where you come up with a concept and you’re building, and you’re-you’re acquiring customers, and-and-and that whole hustle is-is what I love.
Jeff Allen: Well, you know, I kind of harshed your-your vibe, in-in kind of where we were going with the original question in all this. But it was kind of an interesting interjection, because Steve, I know that there are a number of other entrepreneurs out there like all of us, like the three of us here talking together who also feel the same way.
[00:07:30] You were getting ready to talk about how you, uh, you know, you obviously you got that vacation stuff out of your system. Your-your cruising and your touring the world and all that stuff. When you came back and you decided to kind of get into Amazon, just kind of pick up from that point, how your Amazon career began at that stage.
Steve Simonson:[00:08:00] Yeah, so, um, you know, just for clarity. We-we were introduced to Amazon marketplace back in probably 2002, 2003 in prior businesses. Uh, and there’s been a number along the way. They … back then, they called it the z-shops. And z-shops, as a point of history, a little relic for you guys, was designed to compete with Ebay. Ebay was kicking the crap out of Amazon. And Amazon did not like it so they invented this concept called z-shops, which kind of had a buy it now and an auction format, and this and that.
[00:08:30] And I think we put 15,000 items, uh, from one of our little companies called Corner Hardware.com in there. And it did pretty well, but not well enough to-to kind of rationalize all the work and all the efforts that we had to do, uh, to make it happen. So, uh, there was probably a good, you know, several year pause on Amazon until probably about 2010 or 11, when some of the companies I advise, or-or have uh-uh either friends of equity in. We started working on ways of making the-the marketplace channel more viable.
[00:09:00] And so, you know, when you start thinking about that timeframe of 2012, ’13, Amazon was really taking off, and that’s-that’s when we focused. And I had a couple small consumer companies that we focused on trying to make Amazon a very, very important channel amongst the other channels that we already were developing, wholesale, and our own website and so forth. Wholesale being the focus of, uh, one of the companies involved.
[00:09:30] And so, uh, it turns out the Amazon, because of their growth and because of all the fun little hacks you can do with, uh, these crazy, you know titles and keyword searches and launches, and reviews and all that stuff. You can get a lot of sales velocity for very, very low impact. And I … that’s one of the things I love about Amazon. It’s the-the highest potential ROI with the lowest potential risk business model that is out there. And I-I believe that for any entrepreneur regardless of experience. That remains true today.
Will Moffett: And with that, you’ve got to be willing to spend some money, right Steve?
Steve Simonson:[00:10:00] Oh, yeah, yeah. Listen, everybody’s got their own budget, but it does … You’ve got to have money to make money. Now, I could show you stories where a guy started out with millions and they did great. But I know, uh, one of my brothers started an Amazon business with only $200, and, uh, his first inventory purchase. And with … In less than a year, he was doing $50,000 purchases from a supplier.
Will Moffett:[00:10:30] Ho, boy. That’s what I like to hear. So tell me this, from the beginning, when you were involved with Amazon, and you were … you were selling the products. When did you get that ah ha moment, and you discovered that, you know, you may have something here? Um, and-and it may work. Tell us about that-that situation or that-that time when you said, “You know what? This is … this is how we’re going to make some money.”
Steve Simonson:[00:11:00] Yeah, so the … as many Amazon sellers know, there’s frustration that goes with selling on Amazon. We struggled getting variations on certain listening. You know, they told us it was impossible. And we finally figured out how to get it done. And because I like to rely on experts, I-I went through all of my Rolodex to find out, uh, who I knew at Amazon who could help me. And I finally tracked down a guy that I knew, and he hooked me up with somebody at Amazon. And they became kind of our interim account rep.
[00:11:30] And the ah ha was, they said, “Oh, yeah. We’ll put you in a deal of the day.” And I-I didn’t even know what a deal of the day was at the time. And-and the thing blew up. I mean that one item was sold out instantly. And we’re like, “Wait a minute. This-this really has something that we didn’t fully understand or appreciate at the time.” And the-the power and the velocity of them making one simple placement and selling thousands and thousands of units in a single day, was, uh, extraordinary.
Jeff Allen: I know that, Steve, you are a big proponent of, um, sourcing from, uh, China. You have sourced, uh, thousands of products from China over the years. Working with Chinese suppliers though, from what we know, some of us have experienced it firsthand, you know, can be tricky and even intimidating, uh, particularly for those folks who are new at it.
[00:12:00] Did you ever experience, uh, a situation where things didn’t go well? Where you lost money?
Steve Simonson:[00:12:30] Certainly. I-I think, you know, it’s always a matter of time, uh, when you’re doing any kind of trading and it doesn’t matter who it’s with, uh, you know, China, America. You, there’s deals that you can, you know, do well on or not do well on based on, you know, different variables. Uh, I can say that, you know, China is intimidating because of language barriers. It’s intimidating because of cultural differences. There’s-there’s just a lot of uncertainty and unknowns. And so I get it, and it’s okay to be, uh, you know, kind of nervous about it.
But, the … What we found in working with Chinese suppliers is you-you really have to be absolutely clear about what you want. If-if your clarity is focused solely on price, they’ll give you the price. You know, when you-you tell them, “Hey, it’s got to be a dollar, not a, uh, a penny more.” Then they’ll engineer that product to become a dollar.
[00:13:00][00:13:30] And we had a case where, uh, we ordered some-some really high end, uh, keyboard cases, um, really, you know, the LED backlight. I mean beautiful, beautiful thing. The entire product was really, really well done, but we probably leaned on them a little too hard on price. And when we sent them in to our-our, you know, first few hundred units sent to reviewers, most of the reviewers came back and said, “Hey, we turned this keyboard.” And, um, it had some hinges in it, uh, because it would support a tablet or whatever. ” and the hinge broke.” And so we called the-the supplier and we’re like, “Hey, what’s the deal with the hinge?”
And they’re like, “Yeah, yeah. Uh, you said you wanted, uh, this price, so you got this hinge.” We’re like, “Well, we want the-the good hinge. The one that won’t break.” They’re like, “Well, you know, that’s going to cost you.” And we’re like, “Well, how much?” And it was like $.22 a unit, on, like a $22 item. And we’re like, “Duh. We’ve learned this lesson a million times. Why don’t we know this by now?”
Jeff Allen: Oh, unbelievable.
[00:14:00]
Steve Simonson:
And so that-that’s a typical example. If you beat them down too hard on money, they’ll engineer the price you want, but if you don’t understand the-the aspects of your product that are critical for quality and for the customer experience, you’re-you’re potentially making a mistake. That’s a big one, and the Chinese supplier thinks he’s doing you a favor by taking the cost out of it without understanding the-the five star long term impact.
Will Moffett:
[00:14:30]
That is so true. I’ve also had that experience. And you know, if you leave out any type of detail. They’ll give you exactly what you want, but if you miss any detail, it will not be there unless you say it should be there. So I totally, um, concur. How do you separate the good, reputable manufacturers from the bad ones? How do you know who and who you do not want to work with?
Steve Simonson:[00:15:00] Well, that’s a very good question. I think everybody needs to understand this and know this. Uh, I-I get to cheat at this point, because I have a full time China team over there. And-and that means we’re talking to people we’re-we’re meeting with them. We’re-we’re looking at factories. Um, but I would say for the average person that you may not have those resources, it still is very important that you follow a standard protocol. Um, you’re going through your quote procedure, and you know, getting the various quotes.
[00:15:30] Then you’re going through the sample procedure, getting various samples. Then, you decide, “Well, I’m going to narrow it down to this person. And you use your-your gut feel in some ways, and your judgment. Like, they’re easier to communicate with. I’m getting answers that I think are more clear. The sample quality was good. The timing of all of this, uh, worked out well. Use some of those thing. But I highly, highly recommend sending in an inspector before your first shipment is done.
[00:16:00] And the inspector should have very clear instructions. Uh, to be sure that you get, you know, the-the results you intend. And as you talked about, Will. If you don’t specify it on your purchase order, and I’ll back up in that-that a minute. But if you don’t say exactly what you want on your purchase order, then it’s your fault if you don’t get it. Let me just say that again. It’s your problems, as the entrepreneur, if you don’t specify.
Will Moffett: That’s right.
Jeff Allen: So you really need … you need to be extremely specific and very, very literal in your … in your meaning and in your language to them. And, uh, in making sure too, that as you said, you, uh, find an inspector, someone to make certain that the products, before they go out, are built to your specifications and exactly the way that you want them done.
[00:16:30] Now, that’s an inspector, I’m assuming who also works for the company so that I’m … Do they not have their own company’s best interests in mind? And are you sure that you can trust your inspector 100% of the time?
Steve Simonson:[00:17:00] (laughs). Well, the answer is no. Uh, so first of all, for clarity’s sake, the inspector is a third party inspector. They do not work for the factory. Uh, but I can just tell you as a culture, you know, China is a very unique place. And this is not about judgment. This is just about cultural reality. If-if the inspector shows up, and the factory anticipates a problem, there’s going to be a nice, long lunch with a few drinks thrown back, uh, for that inspector. And it’s like, “We’ll get to the, uh, inspection in a minute.” And so you can’t always trust. But I-I I do think that many third party inspectors are trying to provide good services.
[00:17:30] They-they write things down. Um, so you get an inspection report that measures the key things on your item. I’m talking about specifying things like, you know, what’s the gauge of the material they’re using whether it’s plastic or metal or wood. What’s the thickness? What’s the density? We have some things where we measure the gloss level on products.
Now, I realize, most people aren’t ready to get to that level of detail today, but I want people to start thinking at this extraordinarily detailed level. And you can test all of this through production. And then, it doesn’t matter really if the third party inspector goes out for drinks or not. They should be showing you a picture of the gloss meter that shows the product within range.
[00:18:00] They should show you pictures of the-the, you know, whatever instrument they’re using to measure, you know, thickness, width, density, gauge, whatever the case is. There are lots of ways that you can kind of use a system to ensure that the-the humans don’t get in the way.
Jeff Allen:[00:18:30] There you go, making sure too ensuring that your inspector’s getting the job done by being able to provide you with that evidence, uh, sending that back to you in the form of the pictures, documentation and all of that stuff. And all of those specifications you detailed very nicely, Steve, are the types of things that we, as the entrepreneurs, the heads of our business are very responsible for making clear from the outset, to make sure that there isn’t any miscommunication. And if it’s, uh, built incorrectly, if we get it back wrong, then as you put it, it’s pretty much our fault, really, at the end of the day whether we like to admit that or not.
[00:19:00] That man, Steve, Simonson, uh, entrepreneur, many times over along with my partner, Will Moffett. My name is Jeff Allen. We’re going to continue our conversation with Steve, and we’re going to get a little bit more into the nitty gritty here in terms of some things that might help you with your Amazon business when FBA millionaires returns right after this.
[00:19:30] You know one of the biggest mistakes Amazon sellers make is taking out loans with sky high interest rates that eat up all their cashflow. Don’t fall into that trap. If you’re looking to borrow money to grow your business, do it the responsible, smart way, with UpFund. See how much you qualify for in 30 seconds by going to upfund.io. That’s upfund.io.
[00:20:00][00:20:30] You know the first thing you need to do after listening to this program is to join the FBA millionaires club so you can stay connected with all that we’re doing on the program. Plus, you’re going to receive expert tips and advice to help you take your Amazon business to the highest level possible. And we’re not going to do that for just anybody. You need to sign up for the FBA millionaires clue. The really great thing about it is that at least for now, it doesn’t cost you actually. And this is even the best part, you-you don’t have to be a millionaire to join. You know what I mean? It doesn’t cost you anything. And you don’t actually have to be bringing in six or seven figures in revenue every month. So stop on by the website fbamillionaires.com to learn more about it.
My name is Jeff Allen, Will Moffett on the other end in northern California. I’m in southern California, and we have Steve Simonson on the line. Got a start with his own company back in the earliest days of eCommerce with iFLOOR and has recommended, I think, Steve, correct me if I’m wrong, as one of the top companies by Ink. Is that correct? Ink magazine?
Steve Simonson:[00:21:00] Yeah, we, uh, you know, we had a pretty good run. Uh, we were on Ink 500 three consecutive years, uh, for growth. And, uh, yeah, had some-some nice accolades along the way. That was uh-uh a lifetime ago it seems, but yeah. It was a fun ride for sure, and a lot of really brilliant people put that thing together.
Jeff Allen: Well, Will, I know that I’ve been enjoying our conversation so far with him, and I know that you’ve got some other things that you want to, uh, to ask Steve to, uh, kick off here as we round out this, uh, addition of our program.
Will Moffett:[00:21:30] Very interesting, uh, how you climbed your way to the top, Steve. What all did you have to really, really do to make it to that level where you were on Ink for three consecutive years, because that takes some serious work. It takes some strategy. It takes something, something that a lot of people don’t have.
Steve Simonson:[00:22:00] Well, you know, I like to think of myself as a pretty lucky guy. And I, uh, genuinely feel to be, you know, that I’m very fortunate, uh, in my life and-and career and so forth. Uh, but I-I-I don’t think it’s anything magical. And-and that’s-that’s, you know, maybe a let down, but it’s-it’s really just when you establish an idea, and you’re willing to do whatever it takes to pursue the idea and adjust as necessary. Uh, I can tell you that, you know, in the olden days, uh, before the company was called iFLOOR, it was called efloorcovering.com. Uh, you know, a-a-a worse name than iFLOOR. And so we pivoted really early, and we got better and smarter. There were times where we struggled, uh, in-in a number of my companies until we kind of pivoted and adjusted.
[00:22:30] So for me, it’s a combination of just, you know, willing to gut it out and be persistent. Uh, but also willing to tweak and adjust along the way. We had a-a regular saying in a number of companies that these-these values tend to go with me everywhere I go. And we say, you know, “We fly the plane as we build it.” You, we’re not afraid of risk. We’re not afraid to fail. We would rather just make progress and learn and get better, smarter, and faster.
Jeff Allen:[00:23:00] What is it that we’re doing as Amazon sellers that we should not be doing? What’s the-the biggest time waster or biggest mistake that is causing some of us to just kind of either jump off the rails, or just stop growing?
Steve Simonson:[00:23:30] Yeah, there’s … At different levels, I think there’s different challenges. Uh, you know, the-the journey from zero to a million is one journey, and it’s, you know, chock full of its own challenges and-and obstacles and-and opportunities for that matter. Uh, then the one … the one to 10 million is-is another journey. And has unique challenges. And then 10 to 50, and so on and so forth. I-I do think that a common thing that I … that I follow the Amazon community is they get caught up in the-the, um, magical tactic of the day. And everybody then tries to go and do this tactic thinking that’s going to be the single silver bullet that changes the world.
[00:24:00] And sometimes the tactic will work, and sometimes it’ll even be lucrative for some period of time. But the pursuit of these endless tactical battles to me often comes at a cost of strategy. You know, people really need to back up and ask themselves, you know, why are they doing this? What’s-what’s their objective, you know, not just with the-the business, but their personal longterm objectives. And too often the-the strategic vision is-is being outflanked by the tactical immediacy of, you know, today I’ve got to do something. And, uh, I hope that people start thinking longer term.
Will Moffett:[00:24:30] That is definitely what a lot of Amazon sellers need to do is look at longterm, the end result, would you recommend wholesale? Private label? Like, what do you think should be a part of the journey for a longterm bet when dealing with Amazon? Do you think going international? Do you think building a private label brand to get acquired? Can wholesaling be a way to the end, making a living doing that?
Steve Simonson:[00:25:00] Well, this is … this is one of my, kind of, general philosophies that context matters, right? So everybody’s personal why of what they want really matters. So the person who says, “I’m going to build a public company, an empire, and I’m going to, you know, take this thing into the stock market and so forth.” Then they really have to start thinking about aggressive growth. That means multi-channel, multi-country in a very significant way as fast as possible. And it’s going to take time and money and hard work.
[00:25:30] Uh, whereas somebody who may say, “Hey, I just want a laptop lifestyle. You know, if I can put, you know, five grand in the … in the bank every month, or 10 grand, or whatever their magic number is.” And and-and live on the beach and travel around, then I would be happy. So, that context matters. You, as a general rule, I think that-that the business, I have the most fondness for and I think has the highest potential for the-the average entrepreneur who’s-who’s getting started.
[00:26:00] The private label business has the-the best economics and has the best upside, and I’m talking about building equity and building wealth, because you can actually sell that type of, uh, business in an easier way than you can, uh, getting started with wholesale, which is a very, very different animal, extraordinarily complex. We can talk about it in detail if you wish. But I would never start with that as your … as your focus unless you have deep experience with it. Start with private label, sell on Amazon. As that builds up and you get a certain level of scale, sell on Amazon in other areas, and then maybe some other channels, um, online as well that you can execute with excellence. So it-it … Private label all the way for me.
Jeff Allen:[00:26:30] Will, I know that you have a lot to say in this regard too, because really, this is how you jumped in, uh, and got involved with Amazon and really hit that home run out of the park in that first month of business there. Many of us are led to believe … I was led to believe in the beginning, uh, during my first conversations with, uh, professional Amazon sellers that wholesale was the thing to do, that that was the thing to start, and that private label is something that you should aspire to because it can, well cost a lot of money.
[00:27:00] M if you don’t have that, uh, financial backing, that you’re never really going to be able to get off the ground. So, I mean, is that just kind of another myth that should be busted? Or thrown out? Or is it just really kind of different for everybody?
Will Moffett:[00:27:30] I’d choose private label, because I felt that it fit my lifestyle. Um, it-it’s something that I can, you know, I know how to source in China. I know how to brand a product, build a product, import it into the US, get it sold. So and-and I-I was able to do that from the comfort of my own home. Um, with wholesaling was a different monster. Now, I’ve never tried wholesaling, and sometimes it seems like the grass is greener on the other side. When you hear about some of the numbers that these people are pulling. But I am definitely interested about learning more about the wholesale business.
[00:28:00] And I’ll ask you this, Steve. How exactly does that work? I mean, do-do people get, you know, I’m a private labeler. Do they get-get money from liquidation? Like, for example, if you’re making, um, 10 million or $30 million a year on Amazon through wholesale, what are these guys doing? Are they … are they getting shelf pulls? Are they actually getting wholesale, because I know wholesale has small margins. Um, how do they survive?
Steve Simonson:[00:28:30] Well, this is, uh … this is a very interesting question. One-one thing that people don’t realize is that their margin structure, if they intend to sell wholesale needs to be able to support viability. And I-I think a lot of Amazon sellers in the quest for quick turnover, uh, don’t think about that longterm profitability. And this definitely directly impacts wholesale, but it also impacts your-your normal business. You need to have a margin. I think a lot of folks aren’t building in enough margin up front.
[00:29:00] The-the problem with wholesale that people don’t fully understand is, you know, getting in the door, getting, you know, somebody to make a buy whether it is the online version of wholesale, which I think is the easiest way for most people to begin. Uh, you can get big boxes, uh, to put your stuff online. Uh, and they will then sell the product online. If something gets traction, then you can start looking at in store placement or things like that. But the-the onerous terms of those contracts, and the financial impact of those things is very, very tough even if you do have a margin. And we sold at nice margins.
[00:29:30] Uh, so you-you really have to be prepared for … it’s an entirely different beast. So my recommendation is that if people really think that they’ve built a world class brand, and they really have the margin to support it, then you have to start thinking about, “All right, how am I deploying a sales force? What am I going to do to, you know, um, manage the-the pricing in the marketplace, minimum advertised price, making sure that people don’t just buy my product wholesale and sell it on Amazon cheaper.” And all kinds of different things. So there-there’s a number of things that go with it. And it’s-it’s complex.
And that’s why I think, for most people, starting on Amazon, starting on existing online channels and then expanding geography with their own private label will set you up for future opportunities you may not be ready for today. But may be ready for in the future.
[00:30:00]Jeff Allen:
[00:30:30]
Steve Simonson has been there and done that, and he has owned many, many businesses. And you heard what he said earlier. It’s … One of his hobbies is to talk about businesses, talk about buying and selling businesses. And, uh, one of those things that he’s done is, he’s built up a, uh, very rapidly scaled up Amazon business. And that’s what we’re talking to him about today, because we’re really about the Benjamins here, and we want to make sure that we can see you take your business to the ultimate level, just using some of the things that we’ve talked about today.
And, Steve, I know that one of your new businesses is one that is, uh, just starting to gain a little bit of traction now, and, um, in fact, uh, it’s something that I think could help our Amazon listeners today. And that is parsimony.com. Tell us a little bit about it, and how it can help, uh, those folks who are professional sellers on Amazon improve their business.
Steve Simonson:
[00:31:00]
Thanks Jeff. The-the-the principal of parsimony.com is that a-a lot of entrepreneurs lack a system. And by system, I mean kind of a comprehensive business operating system. Something that most all the inputs and outputs of their business go through the system so that there’s measurement and accountability.
[00:31:30] Today, I call it, you know, either death by a thousand spreadsheets or death by a thousand apps. To run an Amazon business, you’re buried neck deep in spreadsheets. And you’ve got so many apps to log into. And many of those have good contributions, you know, in terms of clarity of data and management of things. And some of those, you know, have very high, uh, future potential as well, even working with parsimony. We can integrate some of those things into parsimony. But the main principal of parsimony is to give small to medium sized businesses access to something called an enterprise resource planning suite of software, ERP that they normally wouldn’t have access to.
[00:32:00] Normally, it is extraordinarily expensive to implement and maintain, and, uh, typically if you’re going anything less than $20 million, you don’t have a-a very good shot at it. So, uh, it’s a cloud based system, and we think it’s going to help eCommerce entrepreneurs, in particular. And we’re, uh, excited to see, you know, how people are able to embrace, you know, the usage of technology without having to have, kind of the high overhead of it.
Will Moffett: Definitely, we’re going to have to add, um … We’re going to have to add that to our resources page so we can get, uh, viewers or listeners out there, so we can, uh … They can check it out.
[00:32:30]Steve Simonson: It’s going to be fun. You know, we’re actually going to launch in January. We’ve got a-a number of, uh, folks in the alpha and betas. And it’s going to do things that-that people don’t even yet know they need done. In fact, one clear example I use for-for, uh, entrepreneurs all the time, especially Amazon, uh, cornerstone businesses is the idea that, you know, many of these transactions they’re doing with suppliers don’t even use a purchase order.
[00:33:00] Most often they get a quote from the supplier, and they’re like, “Yeah. I’ll take the 1,000 units or 10,000 or whatever it is at the, you know, $2.87 or whatever the price is.” And then they do some, you know, financial transactions. Or if they don’t have terms. And that’s not a good enough system, uh, to really become a-a true enterprise and have true management, and true systems, you’ve got to put everything into the system. So it’s going to be a little bit learning curve for folks, but I think a good one longterm.
Will Moffett: Yep, but what everybody needs. I love it.
Steve Simonson: Yeah.
Will Moffett:
[00:33:30][00:34:00]
So you know what? I wanted to get into … And I know we’ve taken up a lot of your time, Steve. And-and I appreciate you coming on the show. Um, before you leave, I’ve got to … I’ve got to get something out of you. And-and-and that’s talking about the big box stores. How did you pull that off? What-what did that take? Can you tell us a little bit about that process when you first said, “You know what? Let’s do this.” When you first make the first contact to the big box, and the financing for the product, and the, um, getting the manufactured, shipped over to the big box, the net 30, net 90. How did that work?
Steve Simonson: (laughs). yeah, net 90 is-is more accurate. Believe me.
Will Moffett: (laughs).
Jeff Allen: (laughs). That’s a no no as far as I’m concerned, Will.
Steve Simonson:[00:34:30] Uh, plus, there’s a million little back charges that you get. So first of all, I-I want to just start by saying big box can be very lucrative, and can be very, uh, substantial in many, many different ways. But it’s not for everybody. Uh, it really is a different animal.
Uh, to me, the way you get started with a big box, is that you decide that your brand has, um, opportunity in big box. But you do it by going and looking at the assortment in a particular target customer. Uh, so for example, if your … if your target customer is CVS, you should go find something you can sell to CVS that you think is, uh, missing and that you can demonstrate that, you know, this is, uh, you know, has high potential.
[00:35:00][00:35:30] And if you have a-a highly regarded product on Amazon already, you’re ahead of the game. You should think of your Amazon listing like a product resume. Uh, but you should also think of your price on Amazon as the retail selling price at the big box store. And most big boxes … it changes by category, so there’s some that are higher and some that are lower, but it’s very common that they’re going to expect at least 50%, um, margin. And that’s after all the little add backs like co-op, like cash discounts, like, uh, shipping allowances. And, you know, returned allowances and thing like that.
So that-that means you have to have substantial margin, uh, to support these, uh, important retailers. And let’s not kid ourselves. Retail land base is still more than 90% of total transactions, right? And as I told a group, uh, may … not-not long ago, the entire … the entire amount of eCommerce business was less than the growth in the anemic retail business.
[00:36:00]Jeff Allen: It’s hard to believe, and we-we don’t even really think about it so much anymore, Steve. But it’s a really good point.
Steve Simonson:[00:36:30]
[00:37:00]
It is. It’s a massive thing. But it comes with a lot of complexity. So you-you need to be able to understand how to do EDI transactions. You need to be able to understand how to manage a sales force. And there are now freelance manufacturer sales representatives. And you can just go search for … If your, um, target customer is Walmart or Sam’s Club or Costco, or whoever, just go search for manufacturer sales reps Costco, and you’ll find a number of those resources that come up. And then your objective is to pitch to that sales rep who already has their foot in the door. Not you trying to go and get your foot in yourself. There … Many, many of these manufacturers’ reps have, you know, weekly, um, meetings. And in some case it’s a little more or less frequent. Uh, in some cases, they physically have an office on the premises of the big box. Like I know a few agents who have offices in Costco in Issaquah, Washington. And Th-those agents can talk to buyers every single day.
So by finding a rep who essentially becomes like a-a commission only partner. They eat what they kill. Uh, you are able to kind of get your foot in the door, and you can make pitches. And they will also give you very salient and sage wisdom about how bad you suck. Right? (laughs).
Jeff Allen: Sometimes we need that kind of straight talk. Yeah, we-we-we need to hear that sort of thing.
Steve Simonson:
[00:37:30]
Without a doubt. So they’re going to tell you your packaging sucks. You don’t … You can’t even spell EDI let alone execute it. They’re going to … they’re going to give you the reality of the situation. And then you have to take a hard look and go, “Yes, I can overcome these things that they brought forward.” Because they’re-they’re, again, in it to win it. They don’t make a dime if they can’t make a sale. And so with that kind of alignment of interest, you’re going to have the-the straight truth from, uh, these folks.
[00:38:00] And there’s different ways to kind of vet and go through and find the-the best, uh, folks. But it’s just like any other hire, chemistry, fit, transparency, you know, references, uh, to the extent required. This is how you get started. And if you really have that burning desire to get into … to big boxes and-and retail outlets, I always would find, a-a-a sales rep. And I have a very strong rule about sales reps. I always dance with who brung me. And too often, entrepreneurs are like, “Well, they’ll get me in there. And maybe our contract’s for a year or two. But after that, I’m going to just try to sell direct and cut them out, and keep that money.
[00:38:30] And I think that is a-a short term, idiotic idea. You dance with who brung you and make these people longterm partners. You’ll do far, far better in the long run if you think like that.
Jeff Allen:[00:39:00] Man, I think that’s a great note to go out on. And really, it’s just all about building relationships. And, uh, you-you know, Will. I mean, okay, so that salesperson, maybe they get 10, 15% whatever the case may be. It could be more than that, but just think about how they can make your life so much easier. And also, too, another thing, you know, I’m thinking about. We always talk a-about those of us who are-are entrepreneurs in it to win it. We know that multiple in-income streams are so important. Why wouldn’t you want to add a big box retailer to your list of outlets? I mean even if it’s just Amazon and one other big box, uh-uh brick and mortar, uh, location, or store, or chain of stores. Why wouldn’t you want to do that, when you consider, Steve, the information you just provided that 90% of retail is still with, uh, brick and mortar, uh, retailers out there.
[00:39:30] It just seems like you’re-you’re cutting yourself short on that, and, uh … I just, uh, think that that was really a great way to end this program today. And I wish we had more time, Will. Uh, we could talk to Steve, uh, probably all day. And maybe one of those days we have a marathon broadcast is just Steve Simonson all day long. And we’ll just kind of go right down the line. We’ll order out lunch. We’ll take a break, and people hearing us chewing our food and stuff like that. That’d be great radio, I think.
But, uh, Steve, I want to thank you so much for joining us on the program. And hopefully, we can have you back on FBA millionaires, uh, again in a short time soon.
[00:40:00]
Steve Simonson:
Certainly my pleasure, guys. I appreciate being here. And, uh, I love entrepreneurs. Keep up the good work.
Jeff Allen: There we go. Will, great job, man. Great job.
Will Moffett: Thanks, Steve. Thanks, Jeff.
Jeff Allen: And that’s going to wrap up this edition of the program. Thanks again to our guest, Steve Simonson for joining us. Don’t forget, by the way, to check out his website at parsimony.com. That’s that new, uh, software as a service business that Steve has set up. Uh, you need to check it out, parsimony.com. Please do.
[00:40:30] If you have any questions or comments for us on this program about anything you’ve heard on today’s edition of the program, we’d love to hear from you. Shout us, uh, shoot us an email that is, over to, uh, www, uh, .fbamillionaires.com. Now, that’s not actually where you’re going to send your mail. But you’re going to find a way. There’s a form there, and you can fill that out. Send your comments, questions, your remarks, whatever it is that you have.
[00:41:00] Also, too, please do, if you wouldn’t mind, rate us over there at i Tunes. We would appreciate that. Let us know how you, uh, felt about this show. Send us some love, and we would love you forever for that as long as you give us five stars, of course. Uh, and also too, be sure to connect with us on Facebook, Twitter, and all the usual places, Instagram, and of course, fbamillionaires.com. Again, thanks so much for clicking in. Until next time in SoCal, I’m Jeff Allen. And in NoCal, that man is-
Will Moffett: Will Moffett.
Jeff Allen: And we’re going to go out as we usually do on three with our chant of encouragement for you. One, two, three.
Will Moffett: Let’s kill it, guys. Let’s make it happen.