How to Build an Online Retailer to $1M in 18 Months (“EZ-Guide”)

The lessons I learned while building a $1M online retailer in 18 months, from choosing a niche market, to developing a marketing strategy that will work, to optimizing your business over time.


I recently read Justin Winter’s post over on Clarity about how he grew Diamond Candles to one million dollars in one year.

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.

HEY! Before we get started… This post is a beast. Seriously, there’s a ton of great stuff in here and I want to make sure you are able to digest it all. You can download this entire post as a PDF by clicking here, you’ll also get my “Million Dollar Mindset” Cheat Sheet.

1. Choose a Blue Ocean

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.

The pale dude did not choose a niche he could dominate. Don't be the pale dude.

The pale dude did not choose a niche he could dominate. Don’t be the pale dude.

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 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:

  • Competition was negligible — only one major retailer sold home design products online (DWR), and online wasn’t their focus. DWR was a catalog and studio retailer first, a web retailer second. They were weak on SEO; their pricing was uncompetitive.

  • Home design products essentially marketed themselves online: every product had a proper name (it wasn’t just a table—it was a Blu Dot Strut Table in Watermelon), and as a result each one attracted long-tail, targeted, purchase-hungry customers who arrived via a Google search.

  • Design consumers were flocking online to compare prices against their local (expensive / elitist / poor-service) brick and mortar design shops.

  • Home design manufacturers already knew how to drop-ship, so the Internet didn’t represent an operational shift for them. (Before the Internet, when customers would walk into a shop and ask for a sofa in a different color, the shop would call the manufacturer and have it shipped direct. So convincing these same manufacturers to drop-ship for us was easy-peasy.)

The Blu Dot Strut Table in Watermelon

The Blu Dot Strut Table in Watermelon — pretty cool, huh? Products like this one are why I got involved in design in the first place.

Given these dynamics, we owned the market for several years. Revenue ballooned.

The takeaway? 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.

2. Focus on Your Flywheel of Growth

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:

  1. they do one thing better than anyone else (the “hedgehog effect”)

  2. they create a self-reinforcing flywheel around that one thing.

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): 

Image-1

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.

3. Sell What People Want

Steve Blank talks about the importance of figuring out what your customers want. So do Paul Graham (“make something people want”) and Peter Drucker (“create customers”).

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.

Do you live your life with the Million Dollar Mindset? What are you waiting for? Click here to download this post as a PDF + my Million Dollar Mindset Cheat Sheet.

Be sure to sell what people want unless you are a big company like Apple or Coke in which case you can dictate demand.

Be sure to sell what people want unless you are a big company like Apple or Coke in which case you can dictate demand.

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:

  1. Before merchandising a new product / category / brand, we would enter the relevant keywords into an analysis tool like Wordtracker, Market Samurai or the Google Keyword Tool.

  2. The tool would give us two important pieces of information: 1) the number of searches for that keyword, which we used as a rough proxy for demand, and 2) the number of competing sites that were targeting that keyword, which we used as a rough proxy for supply.

  3. Knowing the supply and demand for every relevant keyword, we could then merchandise products / categories / brands with high demand and low supply.

  4. Repeat while customers knock down our doors.

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.

DwellStudio nursery bedding. There was a time when mommies were driven into a frenzy to buy this, and no one was selling it online.

DwellStudio nursery bedding. There was a time when mommies were driven into a frenzy to buy this, and no one was selling it online.

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.

This is the essence of product-market fit for retailers. If you can achieve it, merchandising becomes marketing.

Sell what people want.

4. Measure Everything

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.

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 ecommerce metrics in another post.]

Google Analytics ベンチマーク by suzukik, on Flickr

I am always at a loss to find royalty-free images that depict “metrics”. In this case I have opted for a Japanese Google Analytics dashboard which is slightly more funny because it is in Japanese. Enjoy.

Following this routine gave me several incredible insights:

  • Email campaigns absolutely crushed any other campaign in terms of average order size and repeat order rate.

  • Certain product purchases, like crib bedding, were triggers for other purchases, like cribs.

  • 20% of our brands drove 80% of our business

  • 20% of our brands took up 80% of the customer service time

  • 20% of our customers — the ones who emailed frequently and asked about discounts — drove our returns and follow-on customer service issues.

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:

  • We emphasized email marketing as our primary marketing lever, complete with opt-in forms on every page and strong segmentation on the back-end. Revenue increased.

  • We de-emphasized social channels. Costs decreased.

  • We ditched magazines as an advertising outlet and embraced blogs. Revenue increased.

  • We eliminated our coupon-driven affiliate program. Revenue increased.

  • We instituted a vendor review process to try to rehabilitate or kill brands that were causing too many issues and hindering our ops team. Revenue increased.

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.

5. Embrace ‘Techmology’

Techmology. Science. Know it, understand it, embrace it.

Techmology. Science. Know it, understand it, embrace it.

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 ecommerce 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:

Get my best tips and some suggested reading to take your business to $1M. Click here to download the cheat sheet Comes with a PDF of this full article.

Example #1: Improving service

Estimated ship date on a DP product page.

Estimated ship date on a DP product page.

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.

Example #2: Nailing SEO

Knowing that modern design presented a long, long tail of potential search terms we decided to familiarize ourselves with SEO. I spent a week learning the basics from sites like Seomoz and (the now-defunct) Spider-food, then sketched out some take-aways:

  • We should emphasize our brands with dedicated brand pages – people search for brands.

  • We should emphasize product names – people search for products.

  • We should use proper tagging.

  • We should integrate a blog into our site – people like to read about design.

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.

Example #3: Scaling drop-shipping

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.

Look how happy this man is now that he doesn't have to copy and paste orders anymore.

Look how happy this man is now that he doesn’t have to copy and paste orders anymore. Check out his drop-shipping app at Duoplane.com

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. You’ll get a sense for 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.

6. Go All In

one million revenue in a year

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 ecommerce 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.

Summary

building an online retailer

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 ecommerce retailer.

I hope this post gave you some ideas that you might apply to your ecommerce 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 below where I publish hacks, tips, and tricks regularly.

Good luck!

Leave a Comment:

Dana says

Great post Drew! Glad I saw Larry’s link on FB.

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Drew Sanocki says

Thanks Dana, I’m glad you did too–

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Drew Sanocki says

Solid. De rien.

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Tiffany says

Several takeaways, thanks!

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Colin Fitz-Gerald says

Your blog ranks right up there with KissMetrics. Definitely a top bookmark in my online retail how-to folder.

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Drew Sanocki says

Ha! Colin you can comment here anytime, my friend! And he isn’t even on payroll folks! Thanks for the kudos, I’ll keep trying to crank out good material.

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M. Sharon Baker says

Hi Drew,

Stumbled onto your site while doing research for a client on ecommerce sites. Great Reading and info!

How to Build an Online Retailer to $1M in 18 Months (“EZ-Guide”) – sounds like a perfect book title to me, and obviously you have the talent and experience to write it.

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Drew Sanocki says

Thanks M. Sharon, I appreciate it.

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Steve says

The best article/post I’ve read on the subject. All I can say is thanks.

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Alex says

This is inspiring! Thank you for sharing.

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Drew Sanocki says

Anytime Alex, thanks for the feedback! Makes it worthwhile to write —

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Drew Sanocki says

Thanks Steve, glad you liked it. I’ll keep trying to crank out good content with feedback like that–

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Eric says

This is an awesome article. The best I’ve read yet. It covers some great topics and makes it very easy to understand. However it seems like the most difficult aspect of this entire idea would be actually setting up practices with manufacturers to actually deliver products to the consumer. It seems like there are tons of articles online that explain the marketing aspect, but virtually non that describe working with the actually supply chain and manufacturers. Any idea where to start looking for this information?

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Drew Sanocki says

Eric — you hit the nail on the head. Internet marketing is easy and makes people money, so that’s what they write about. Ops is hard. Developing vendor scorecarding is hard (and boring). But that’s a lot of the systems and processes approach we had to have in place in order to scale. Where should you look for it? Well I think I’ll touch on it in some of my posts, but someone out there should focus on it 100%. I know just the person, and he is launching a podcast within a month. I’ll shoot you an email when it goes live.

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Eric says

Awesome. Until then I’ll keep up on your posts here because there is lots of good info. Thanks!

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Carole @ Rustic Artistry says

Great suggestions here Drew. As a one-person business it’s challenging to be proficient at all the different aspects, especially the technical tasks. I’m much more in tune with the front end of my site than the back end. If you have any suggestions for good tutorials/resources for coding for beginners, or how to really intepret our Google analytics I will use them. I also like your idea of creating landing pages by brand. As a seller of visually appealing products (artisan crafted rustic furniture) I’ve had excellent success in organic search though image search and setting good alt descriptions.

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Drew Sanocki says

Brand pages is a hugely successful SEO hack for multi-brand retailers. Definitely give it a try. As for resources, have you tried CodeYear?

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[email protected] Artistry says

Thanks for suggesting CodeYear. I just started and in the first 3 minutes already understand more than I did before. Psyched to go through the course.

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Richi says

Hi Drew,
Recently I started an online store and struggling to get my first sale. I read, re-read this post several times and understood what mistakes I’m currently doing. I’m going to fix all my mistakes now.
Thanks for the great post and tips.

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Rena says

Hi Drew: Thanks for the excellent article. I have a quick and I hope not stupid question about blogging. I’ve just started my business and wonder how people will come across my blog (that’s on my site), will they simply find it if they make it to my site, or do I promote it somehow? Also, any suggestions for a first blog — introduction of the site; my background; something funny/entertaining regarding my field (women’s clothing) to grab attention? Thanks!!!

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Brian Gluck says

Well written Drew, it’s going to be easier to point some people to this article than try to explain it myself 😉

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Dale says

Working on building my email list. It’s the gold magnet. Thanks for simply articulating the other ideas. Good ideas. I’ll subscribe too.

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Drew Sanocki says

That was probably our #1 key success factor–

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Drew Sanocki says

BG! Thanks. But I find it’s better to listen to you in person.

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Drew Sanocki says

Ha. Do you want me to sell your products for you too? Check out some resources for beginners: http://nerdmarketing.wpengine.com/great-resources-to-get-started/

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Why You Should Charge More (Or Nothing At All) | FireMoney says

[…] have known about it if he hadn’t shared what he knew? Instead, he put together an awesome post on how to build an online retail business to $1MM in 18 months and published the Small Online Business M&A […]

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Jacob McMillen says

Incredible article. Thanks for offering such a thorough walk-through.

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Drew Sanocki says

Thanks Jacob — I’m working on “Part 2” right now.

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Mark Rafferty says

Perfection. Lots of detail. I’m all-in on the idea of measuring everything. To an extent it may take me five weeks to read it all. Gotta love analytics.

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Jacob McMillen says

Looking forward to it!

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Drew Sanocki says

Thanks Mark!

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Kulwant Nagi says

One of the best articles I came across recently. Too many awesome advises to touch the sky..

Thanks for these suggestions.

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Drew Sanocki says

Thanks Kulwant — I appreciate it

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Nicole says

Hi! I have a question about clothing manufacturing in general that perhaps you can give me some insight on. Say I have an idea that I’m 95% sure would be very successful. Do I have to start a business myself with actual products to get going, or is there a way I can offer my idea (essentially partner) with an actual manufacturer? Thanks!

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Drew Sanocki says

You could do either: drop-shipping is a great way to get started with low capital, but it isn’t offering up any sort of competitive advantage

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Nicole says

Ok, thanks for the reply!

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Chris P says

Great read thanks a Million 🙂 stumbled onto your page via stumbleupon 🙂 Now you have a new subscriber 🙂

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Drew Sanocki says

Glad it helped Chris!

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Serwana Spivey says

Great article and thanks for sharing. But for clarity what exactly does, “We de-emphasized social channels. Costs decreased”, refers to/mean? Thanks for the in depth information!

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Drew Sanocki says

We didn’t spend on labor to manage our social media accounts. We didn’t put any effort into them.

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Serwana Spivey says

Oh I understand now. Thanks for the clarification!

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Amin saleh says

Thank you indeed for the tips. VG post.

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Theunis Stoffberg says

I wished I had this article a month ago before I selected my niche. My niche is very red ocean – high demand but equally high supply. Damn!

Q’s
Is there a way to go sub=-niche to make the ocean a bit bluer?As drop shipper what is the best way of differentiation?

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Grant Boscamp says

Is there anywhere you can get Blu Dot products for drop shipping or even wholesale for that matter?

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Drew Sanocki says

BluDot.com

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Drew Sanocki says

I think the best thing you could do these days is buy an existing venture. It takes a lot of the risk out of the equation, and they are cheap!

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Drew Sanocki says

Thanks Amin

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egeli says

Great article Drew! Learned so many things!

So you go into home design niche and sell products around that. We have several product ideas. We done keyword search etc. However, those are not related to each other.

One of them is in “beauty” category, one of them is in “car accessory” category.

Do you think it is a good idea to sell 5-6 different products from different categories?

Thanks for article.

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Drew Sanocki says

Maybe, but not on the same site. I’d think of the customer and what she wants and let that dictate what you offer them

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Longboards USA says

Great write up,
Thanks for sharing.

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ALFWITS says

Drew. Appreciate the post. Getting more from you in 1 post, than I would from 50 other sites/blogs/podcasts. Thank you for saving me time!

Question – You say to ‘do one thing better than anyone else’, and to create a flywheel around that thing. How did you establish that content marketing was your best direction to go in?

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Drew Sanocki says

Lots of testing until you can find a channel where LTV > CPA. Wish there were more to it. Check out the book Traction by Weinberg.

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I don’t want a billion dollar company; here’s what I want instead - Nerd Marketing says

[…] did grow. In Years 1 and 2, we went from $0 to $1.5m in revenue. Hey, that was growth, right? So was I […]

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