Impressive, to say the least.
I immediately thought of my own experience in online retail.
It took my company about eighteen months to cross the one million dollar revenue threshold — slightly longer than it took Justin, but not half bad as we did it holding no inventory, employing very little capital up front (about five hundred dollars).
My retailer was DesignPublic.com, and we sold home design items (cribs, bedding, furniture, lighting), all drop-shipped from more than two hundred manufacturer-vendors. I sold the business in December of 2011.
Like Justin, I learned a lot in our ramp-up to one million. With the benefit of hindsight, I can identify several take-aways for those of you on a similar quest.
Peruse these recommendations and see if you can apply any to your retailer.
Nothing new here, only a recommendation driven home by everyone from academics like Michael Porter and W. Chan Kim ,to entrepreneurs like Rob Walling ,and ecom gurus like Andrew Youderian and Dan and Ian.
Choose a ‘Blue Ocean’ — an attractive niche/market/industry with little competition and lots of potential. It’s more than half the battle.
We chose the home design niche. I wish I could say that we sat back and built a robust spreadsheet listing thousands of niches, then used Porter’s five forces to rank them all, causing “home design” to rise to the top.
But we didn’t. We just thought the design was cool, so we built a design retailer.
Were we lucky. We accidentally stumbled upon one of the sweetest ‘blue ocean’ niches at the time. Here’s why:
Given these dynamics, we owned the market for several years. Revenue ballooned.
Niche selection is the most important decision for entrepreneurs.
Notwithstanding our dumb luck in finding our niche, don’t let your passion for a certain product category dictate your decision to get into that category.
Instead, use your head. Assess the niche. Look at the potential competition. Consider going boring and off the radar to a Blue Ocean.
The retailers who are knocking the cover off the ball today — FindItParts (the Aftermarket Heavy Equipment Parts Guys), RealTruck (the Pickup Truck Accessories Guys), Net Direct Merchants (the Electric Fireplaces Guys), to name a few — chose a niche that they could dominate.
Learn from them and play a game you know you can win.
One of my favorite business books is Jim Collins’ Good to Great.
In it, Collins examines more than one thousand firms in an effort to answer the question: “How do some good firms achieve sustained greatness?”
He finds that truly great firms do several things, but two stand out:
We were able to pass one million in revenue over a short time period because we adopted this framework. We nailed on one thing, then built a strategy around it.
Our one thing was content marketing; we aimed to do it better than any other retailer:
Our emphasis on content marketing produced the following growth flywheel (scanned from my 2004 ideas notebook):
Design Public produced great content. Top bloggers noticed and distributed it.
The inbound links drove traffic and higher rankings. The result was relevant traffic, opt-ins, and revenue which we could plow back into content marketing.
It was a nice little self-reinforcing flywheel that drove the top line.
Growing companies all have their own flywheel. Gilt’s amazing exclusive merchandise pulls in customers who refer even more new customers. DiscountMugs.com operates massive AdWords campaigns that drive the top line and finance even more massive AdWords campaigns. Threadless’s t-shirt contests attract voters who end up becoming customers. And so on.
You don’t need a content marketing flywheel — you just need a flywheel. As soon as you can, figure out your flywheel, then focus on that.
Steve Blank talks about the importance of figuring out what your customers want.
I’ll add my two cents: it’s so elementary but so many startups completely whiff on it, bringing products to market that potential customers could care less about.
If you do this, no amount of conversion optimization is going to help you.
Don’t be those startups.
Our company had a systematic approach to merchandising, one that allowed us to identify and merchandise the products/categories/brands that potential customers desperately wanted:
This approach almost ensured that each new product we offered was a success.
DwellStudio was one such line. Women were fanatical about the brand, searching low and high for it online.
And yet only brick-and-mortar retailers carried it, and they rarely put the brand on their websites.
High demand, low supply. Within months after convincing DwellStudio to sell online, we became their top retailer, on- or off-line.
We took a similar approach when considering what categories to get into (This is why five single guys decided to make “Nursery Furniture” a top category priority) and even what names to call each category (“Modern Bedding” vs “Contemporary Bedding”).
It’s not just search data that offers this insight into customer demand — Threadless and Quirky have demonstrated that user-generated content might even be a better way to ensure merchandising success.What’s important isn’t your method, it’s just that you do it -- think systematically about what your customers want, then sell it. Click To Tweet
This is the essence of product-market fit for retailers. If you can achieve it, merchandising becomes marketing.
Sell what people want.
As an online retailer, you need to eat and breathe web analytics. I don’t care what you sell or that you aren’t a “math person.”If you don’t understand 75% of what is going on in your free Google Analytics account, you don’t understand your business. Click To Tweet
Kinda harsh, but if you want to grow, the answers are in there.
Some of your online marketing campaigns are working better than others — do you know which ones? What are your goals — increased memberships? Email sign-ups? Product purchases?
Which campaigns consistently give you heaps of high lifetime value customers, and which give you a steady stream of discount-hungry, customer-service-taxing, returns-prone customers who will absolutely kill your company?
Knowing the answers to these questions allows you to focus on what is working.
At DesignPublic.com, I conducted regular weekly and monthly analytics reviews to give me an accurate snapshot of our business performance. [I wrote about some of my key early-stage e-commerce metrics in another post.]
Following this routine gave me several incredible insights:
I could go on.
How many of these insights would I have had in the shower? None.
How many did I have by committing to a metrics-first approach? All of them.
How many showers did I take? Trick question.
Each insight is actionable. Each action drove revenue:
You might look at this list and think our lessons are relevant to your business.
Maybe they are, maybe they aren’t — embrace the process instead.
Emphasize metrics across your business. Institute regular metrics reviews. Act on the data.
Once you shed the dead weight of what’s killing your business, your top line will soar.
You run an online business, you have to be comfortable with techmology. What’s that? IT, servers, hosting, code, APIs, CSS, FTP, etc.
No, you don’t have to be a grade-A developer like Zuck or Gates, but you have to embrace learning about all of these things if you don’t know about them already.
I don’t think I’ve ever meet a SAAS entrepreneur who doesn’t know a thing about software, but every week I meet e-commerce entrepreneurs who don’t know a thing about the platforms and technology that power their businesses.
Why is this so bad? Because the technology — the online part of online retailer — is what enables the rapid testing, the massive scalability that is a precursor to achieve truly significant growth.
If you remain ignorant of the tech, you have a couple of strikes against you from the get-go on your quest for one million.
My business partner and I weren’t developers, but we taught ourselves some basics on the job.
And with this knowledge, we were capable of making several key shifts that grew our business:
One month after launching DesignPublic.com, it was clear to us that the top customer question was, “When is my order going to ship?”
This was a perfectly reasonable question when we were selling everything from baby bedding that would ship via next-day FEDEX to custom Italian sofas that would ship in six months…maybe.
So we spent a weekend building out a simple system to get that information from our vendors and present it to users on the product page, in the cart, and in the order receipt.
The result? Customer inquiries fell by 50% and sales increased as users appreciated our openness and transparency.
Knowing that modern design presented a long, long tail of potential search terms we decided to familiarize ourselves with SEO.
Wow — earth-shattering insights, right? Not exactly.
But by thinking through SEO before we built the system then cooking it into our platform, we were able to achieve near lifelong #1 or #2 rankings for all our brands and products.
Our SEO was so good that SEO legends like Rand Fishkin called us out as an exemplar of SEO.
Final example. After a few months running the business, my business partner Sina was pulling his hair out — drop-shipping was killing him.
Every night he would manually copy order data from our cart, paste it into Quickbooks, use Quickbooks to generate purchase orders, send those POs to each vendor, and log everything in a spreadsheet so he could track when the orders shipped.
As orders were increasing month over month, this task was taking Sina well into the night. The man was losing hair that he didn’t have to lose (Exhibit A: photo to the right).
After a particularly bad week, he had had enough. He wrote a simple script that dissected each order and generated both the purchase orders and an import file for Quickbooks.
Pretty basic stuff, but it enabled him to focus more on growing the business instead of on running spreadsheets.
He grew that system over the years until it became a stand-alone SAAS app, Duoplane.
If you are a drop-ship retailer, and you are starting to pull your hair out, I encourage you to check it out.
If you run an online retailer, tech is your store, your marketing, and your operations. Embrace it. Embrace I.T.
Learn to write a few lines of code; learn how things like HTML and CSS work. Think about what is possible.Instead of thinking of tech as something that is the responsibility of an external agency outside of your company, own it. Click To Tweet
You’ll get a sense of what can be changed and for how quickly.
You adopt a policy of listening to your customers and your team for feedback.
And you will make massive growth possible.
Finally, if you want one million in revenue, my last recommendation is to go all in.
The Internet is filled with stories about companies that have skyrocketed to millions within weeks or done it while the founder was on a beach in Bali.
I don’t dispute that that is possible, but those outcomes are harder to plan around because they involve a fair amount of luck.
Make your own luck. With a little hard work and discipline regarding the other five recommendations on this list, you greatly increase your odds of success.
At Design Public, my co-founder and I thought about our business seven days a week, 24-hours a day for each of our first few years in existence.
I’d wake up at night and write down ideas on a notepad by my bed. Other ideas would come in the shower or on the way to lunch or while I was on vacation.
John Bresee, co-founder of Backcountry.com, once told me that “Winning in e-commerce is nothing sexy, just pressure over time.” We were applying that pressure — always testing, always improving, always tweaking.
Making your own luck is hard, but it works.
It’s not as sexy as working on a beach in Bali, and not as thrilling as stumbling upon the right market and getting to one million in a week, but it’s more predictable. You control it.
If you adopt the “all-in” approach, you may not get to one million in a year like Justin did or a year and a half like I did, but you do increase your odds of getting there at all.
Inking one million is hard work, but it’s also fairly straightforward.
Nail your market (#1) and your strategy (#2), then optimize and improve your business (#3, #4, #5). And work hard at it (#6).
This approach worked for us. It’s not the only approach, but it’s one I believe has a high likelihood of success for an e-commerce retailer.
I hope this post gave you some ideas that you might apply to your e-commerce journey.
If you want some more specific growth techniques that worked for me — or some further insight on how to get from one to five million — sign up for my regular newsletter where I publish hacks, tips, and tricks regularly.
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