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Ecommerce project with squeeze pages and customised niche product

A detailed account of a Fastlane process...

DamienP

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I have some Ecommerce experience, in fact I built and sold a small Ecommerce business a couple of years ago, but I'm the first to admit that my knowledge in this area is not particularly broad.

I can build websites (as long as no heavy custom coding is required), I know a little about systems and processes and I'm good at SEO. My weak areas are PPC, graphic design, shipping, inventory and other areas that most would consider pretty critical in this field. I have always been a classic do-it-yourself kind of guy, but I realised recently that this mentality is holding me back, and thankfully I have a lot of experience in hiring freelancers on behalf of other people. So I'm building a new Ecommerce business utilising my skills, but outsourcing tasks whenever possible to speed things up and to get out of the habit of trying to do everything myself.

This is an entirely different concept to what I did before. My last Ecommerce business was a classic web shop model, selling car accessories via a substantial product catalogue, with automated order notifications sent direct to drop shippers. The business was totally reliant on SEO.

The new business will focus on one product only - a niche hair care product aimed at a very specific market that isn't being served effectively right now. I know that finding gaps in the hair market is virtually impossible, however without even a shred of naivety I can honestly say I believe I've found one. My cost of goods is about 25% of my anticipated retail price, so there is plenty of margin to play with. For this reason I'm bypassing SEO and I'm going to drive most of my traffic through paid ads, product reviews on major blog sites, offline magazine reviews and hopefully get some YouTube reviews too. I've never done anything like this before, so it should be fun.

Financial estimates

I don't want to go into too much detail because this is glorified guesswork right now.

The product will cost me about £4.30 + VAT (British tax at 20%). I want to retail the product for £19.95. I'm happy to spend up to £10 to acquire each customer and make approx £5.00 profit on each item.

Longer term, I should be able to reduce the product cost to about £3.80 + VAT, and after some A/B testing and fine tuning, il like to get my acquisition cost down to about £5.00, leaving me with about £10.00 profit on each item. Fulfilment costs should be covered by shipping charges.

I believe I can sell 50 units per day fairly quickly. That's £500 profit per day, or £182,500 profit per annum. There are at least 2 additional products I can add to the range later, and I'd also like to explore wholesaling.

It's really easy to get over excited and project unrealistic figures. These numbers are conservative and are used with feet firmly on the ground, so they should be achievable quite quickly.

Actions taken so far

I know it's all about action here, so this is what I've been doing over the last week or so:

1. Identified my target market and competing products. Whilst there is some crossover from competitors, no one markets their product in the way I intend to, nor does anyone specifically target the segment of the market I have identified.

2. Made some decisions about the format of the product. To cut a long story short, there were some options and I believe I have settled for the format that will generate the most sales.

3. Setup an account on Alibaba, browsed around and found a bunch of terminologies I knew nothing about. Did some quick googling to figure them out, and started looking for potential suppliers

4. Have had lengthy and meaningful discussions with 3 Chinese manufacturers. I found these discussions were really easy and informal, however I have a lot to learn about shipping, customs, taxes etc.

5. Following advice from a member of this forum, I also researched UK manufacturers and found just one to suit my needs. Thankfully after nearly 2 hours on the phone, I feel very comfortable dealing with this company and was surprised to discover how small the cost difference was after shipping, taxes and insurance. Decision made.

Packaging samples are on their way. The manufacturer has agreed to customise my product to my specification within a very reasonable cost and MOQ, and it can also be rebranded.

Sourced an additional ingredient I want to add from an American supplier. This ingredient is great for marketing and means the product is much more likely to work well. I want to add value here by selling products that actually help people.

6. Briefed my freelance coder to build a landing page driven Ecommerce website with strong call to actions and a focus on conversions. Showed him exactly what I want. He gets it, and hopefully site will be ready soon.

7. Crowd sourced a logo design, awaiting results

8. Identified a fulfilment company I would like to work with. Will contact them closer to the time.

9. Found a great deal on a mailbox address in London.

10. FINALLY settled on a brand name for the product. This was the hardest part by far.

Guys, if I could ask some questions:

My primary sales channel will be my landing page oriented website, but do you think a hair care product by a brand no one has ever heard of would sell on Amazon? If I could get a few reviews and subsequently better rankings, or sell it at cost for a while, what do you think?

The fulfilment house can also handle customer calls and payments. Costs aside, is this worth considering?

Should I choose a fulfilment house close to my location, or close to my manufacturer?
 
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DamienP

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Small update guys.....

I spent the day mapping out the new website, working out what I want it to do, how I want it to look, and which parts are based on SEO, lead pages etc. I worked out that I can push all my ad clicks through a focused sales funnel without losing the option to target clients via SEO. To be fair I don't expect SEO to play a big role for this site, but even if it can trickle just a few orders through, the profit margins on those orders make it worth it.

Starting to get really excited about the possibilities with this business. I've planned out some conservative estimates based on previous experience and a few other factors, and I think I can hit 100 sales per day very quickly. At £5.00 profit per sale (about $7.50), that's over £180k per year in profit. This assumes I spend £10 CPA to sell a £25 product, and I'm sure I can do better than that.

I have learned a massive lesson today. I read somewhere on the forum (think it might have been @Walter Hay or @Andy Black ) that the magic happens when you have a high LTV (customer lifetime value) with a strong margin, because you can afford to spend more on ads and really hit the big numbers. As a devout SEO guy with very little experience of paid traffic, this is a totally different mindset and to be honest, it's quite liberating to treat SEO as a secondary consideration because it puts me IN CONTROL.
 

Andy Black

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Andy Black

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Andy Black

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Jon L

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Should I choose a fulfilment house close to my location, or close to my manufacturer?

I have some experience with this. I'd pick a fulfillment house that minimizes your total shipping costs. Its pretty cheap per unit to ship product to the warehouse. One big truck can carry quite a bit of product. Its not so cheap to ship out each individual order. That stuff adds up quickly.
 

DamienP

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@Andy Black Thank you very much for the links. Reading them now.

I have some experience with this. I'd pick a fulfillment house that minimizes your total shipping costs. Its pretty cheap per unit to ship product to the warehouse. One big truck can carry quite a bit of product. Its not so cheap to ship out each individual order. That stuff adds up quickly.

You're talking about the cost in moving product from the manufacturer to the order fulfilment company, right? Actually they charge a small flat fee per delivery, regardless of quantity. It's a relatively small product that fits 24 in a box. Not sure if they would still charge the same if we start shifting pallet-loads though.

Right now I'm looking for a fulfilment house that respond quickly to my questions, that can explain things in plain English and can offer the lowest prices for international deliveries. What I'm finding is that many of them have obviously negotiated hard with couriers for their domestic delivery rates, but don't fight as hard when it comes to international shipping. For my product, this is an issue so I'm trying to find the best overall deal I can.

@Jon L , how do you choose a fulfilment house? What are your criteria and is there anything I should be aware of that you haven't already mentioned?
 
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Jon L

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@Andy Black Thank you very much for the links. Reading them now.



You're talking about the cost in moving product from the manufacturer to the order fulfilment company, right? Actually they charge a small flat fee per delivery, regardless of quantity. It's a relatively small product that fits 24 in a box. Not sure if they would still charge the same if we start shifting pallet-loads though.

Right now I'm looking for a fulfilment house that respond quickly to my questions, that can explain things in plain English and can offer the lowest prices for international deliveries. What I'm finding is that many of them have obviously negotiated hard with couriers for their domestic delivery rates, but don't fight as hard when it comes to international shipping. For my product, this is an issue so I'm trying to find the best overall deal I can.

@Jon L , how do you choose a fulfilment house? What are your criteria and is there anything I should be aware of that you haven't already mentioned?

I was talking about the cost of shipping your product to each individual customer that buys from you...that is where the big shipping cost will come from, and you want to minimize that.

Let's say that shipping a truckload of your product to the warehouse costs $1000. A truckload would have, what, 50,000 bottles in it? The cost of postage for each item would be at least a couple dollars. That's $100,000 in shipping to your customers. If the warehouse location you pick saves you an average of $.50 in shipping, that's $25,000 right to your bottom line just because you picked the right location.


I've only used one contract warehouse, and this was 8 year ago. They charged me $2 per item to ship + shipping expenses.

My experience was in running an Ebay business where I had truckloads of Home Shopping Network customer returns shipped to the warehouse and then I sold them on Ebay. What I learned was that they were very good at doing things they were used to doing, but not so good at stepping out too far outside their expertise. For example, I wanted them to inspect each package before it got shipped (some returns were broken). They only ended up doing this about 1/2 the time. I also tried having them take pictures of things for me. That didn't work well either. I was apparently their largest client, so overall they did treat me really well.

Based on that experience, I can recommend two things:

1) look at overall costs from start to finish (storage, receiving, pick and pack fees, shipping fees, etc) and compare apples to apples with other warehouses
2) find a distributor that is used to handling a decent volume of the types of things that you're selling. They might already have specialized equipment set up to handle bottles of lotion, etc.


One other thought, and this is not something I have much experience with, so take it for what its worth:

Consider focusing only on Europe right now. International shipment can be a royal pain in the butt. (I chose not to sell internationally because of that). For whatever reason, certain countries were known to try to scam Ebay sellers out of their money. (Italy was one of them, if I recall). Also, dealing with customs paperwork is a hassle too.

International shipping would be much cheaper if you shipped to a local distributor in bulk, and then had your product shipped from there.
 
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DamienP

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Ok, time for an update.

I have made some improvements to my core product, that should make it more effective and encourage customer loyalty, recommendations and repeat purchases. I feel it is important to get this right from the start.

So...

The product will now cost me about £5.00. I have narrowed down the fulfilment cost to about £5.00 including packaging, fulfilment house fees and domestic delivery charges. I want to allow a maximum of £10.00 in advertising costs per unit to ensure I can REALLY scale this project. So let's call it a round £20.00 total cost of sale. These numbers include taxes by the way, and credit card fees.

I originally planned to retail the product for £19.95 and charge £5.00 for delivery, leaving me with about £5.00 profit per item sold. However I realise my margins will be quite tight, and I actually believe I can sell this product for £24.95 plus £5.00 delivery, leaving me with a much healthier £10.00 profit per sale.

Might need to split test this.

Longer term, I should be able to reduce my acquisition cost to about £5.00, leaving me with about £15.00 profit on each item. Right now however, I'm treating £5.00 margin as worst case, and £10.00 margin as best case.

When I looked at this before, I assumed I could sell 50 units per day within a couple of months. However I REALLY want to scale this, and I believe 100 units per day is possible in my domestic market. I'm already talking to the manufacturer about selling in Europe too with translated packaging, but for now let's use 100 orders per day as a milestone to aim for.

@Jon L , thank you very much for your advice, which I have considered carefully. Shipping to the UK and Europe through my UK fulfilment house is actually pretty cost effective, however I have my sights also set on my biggest market - the United States. I have run some numbers, and decided not only to use an American fulfilment house, but an American manufacturer too. So I'll have one system servicing the UK and Europe, and a totally separate system servicing the USA. This will take a little more setting up, but it also spreads my risk and insulates me to a certain extent from any catastrophic events.

These are the questions I have right now....

1. My entire plan rests on whether or not I can sell a £20-25 product consistently using no more than £10 worth of advertising per sale. I am aware of the customer lifetime value element, but to really scale this quickly I need one sale per £10 spent as a minimum.

Can anyone draw any comparisons to their own activity? Have you sold products in this price range using PPC?

2. I plan to start with Facebook advertising to drive customers to product sale squeeze pages. Later on I'll develop a more sophisticated sales funnel, but I think this will work for now.

From an Ecommerce perspective, can anyone comment on how Facebook ads compare with Google PPC, Bing PPC etc? Am I right in thinking that Google is generally way more expensive than Facebook? I know it depends on the market of course, but what is the general consensus?

3. I'd like to sign up with a major affiliate network to drive additional sales. Can anyone recommend the best affiliate network for selling physical products in the Uk in the health/beauty niche? Most affiliate networks seem to be heavily biased to the US, and I don't want to spend a bunch of money when most of the affiliates are running American websites. Not until I'm ready to launch in the States anyway.

Thank you all as always.
 

John Monarch

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Hey guys. I own a fulfillment center, and am pretty experienced in this side of things. Even without promoting myself I'd be happy to guide you on picking a good center - we're not always the right fit, and the right fit IS always out there. It just depends on your needs, where the goods are made, and mostly - where your average customer is.
 
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DamienP

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Would love some answers to the questions above guys, if anyone can help.

A few small but significant steps forward today. Packaging samples arrived. Packaging confirmed. Postage packing ordered (I'm shipping the first 100 products myself before handing over to my fulfilment house), pricing is decided and initial test strategy finalised.

Needed before launch:

1. Website completion with squeeze pages (about a week away)
2. Delivery of initial order of 100 units (about a week away)
3. Creation of Facebook ads (not started yet)
 

DamienP

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Sep 27, 2015
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Hey guys. I own a fulfillment center, and am pretty experienced in this side of things. Even without promoting myself I'd be happy to guide you on picking a good center - we're not always the right fit, and the right fit IS always out there. It just depends on your needs, where the goods are made, and mostly - where your average customer is.

Hi John, where is your centre located?
 

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