Here’s what I learned this week

I’m working on the future of ecommerce.

I set out a goal around 5 years ago to automate ecommerce.

A blueprint that would be ruthlessly efficient to take an idea into fruition and profit at warp speed with limited budget.

It will happen in 2024, sorry agencies, you’re probably not part of the equation.

First though, my thoughts on cashback

So cashback hit my inbox last week from a client that wanted to add Fondue to Formtoro, I’m not giving them strategy advice so I’ll ignore that side of it, but I do want to explain what happens with Cashback from a technical perspective because I haven’t seen anyone tell you how it really works.

So Cashback is just a product that is fulfilled on your behalf by another company usually.

So the company creates a product, then they add a url extension to add it to the cart upon form completion.

Similarly, as it’s a product, in Formtoro we just add it to the cart behind the scenes when someone hits a step on a form, it’s hidden from the user.

We did cashback a few years back, I loved the idea of using gift cards rather than discounts, in fact I loved it so much I thought I had cracked the holy grail.

We started by offering a gift card during signup but you had to check out to claim it. Add a bit of friction, then people started abusing that but not purchasing and combining gift cards with their friends and family to unlock free orders.

Then we shifted to gift card with purchase, this worked ok, but then we saw people using gift cards on products that shouldn’t have been eligible for them as they weren’t eligible for coupon codes.

Then we started to notice that it wasn’t improving our subscription to conversion rates or that people were buying once to unlock it, then buying again creating double orders in the system and costing us double shipping costs.

I was so bullish on this until I wasn’t.

Discounts can have expiration dates. Gift cards cannot.

Discounts can have product restrictions. Gift cards cannot.

So companies doing it now had to think about how to work through some of these issues, the easy solution, hold back the actual cashback for the return period to prevent people from just returning the product then using the free money to repurchase, usually this is 30-60 days.

Want to know something statistically crazy though, on average more than 50% of repeat purchases happen within 30 days. So holding back an offer during a time when people are most likely to purchase again is just delaying a repeat purchase behavior.

I can’t fight with data unfortunately, I can only report on it.

Then we noticed fraud and abuse of the system, at scale for a larger company this is big trouble. Though it’s being pitched to small stores as a way to protect margin, for a small store it will be hard to see the amount of liabilities out there.

Ok mini rant done.

It may be a good idea if your average AOV is more than $200 or a product that has low repeat purchase rate, but again it’s company journey not customer journey.

This is why you often see stores that sell mattresses just add a bunch of bundled freebies to incentivize purchases.

So now you know, and knowing is half the battle.

(The first person to respond to this email that can tell me this reference will get my customer journey course for free)

Speaking of which, I’ve taken a few calls over the last week where people started asking for strategy advice. Legit the majority of the questions people have around conversion rates are all answered in that course.

www.jonivanco.com you know I don’t pitch this stuff in these emails, but when I find myself answering the same questions over and over it’s a great place to start.

OK so now back to our regularly scheduled program around what’s going to happen in ecommerce and what the future holds.

What’s it going to look like?

Over the past few weeks I’ve been providing everyone reading this my exact blueprint of how I am going to grow brands this year.

(Past Newsletter Collection)

What I haven’t told you though is that there’s a pretty good chance if/when all my tests complete that I’ll have a playbook for launching and growing a brand largely on autopilot from scratch with very limited up front capital needed.

$0 - $1m in the first year profitably with a blueprint that leverages paid advertising in whole new way.

There’s one area I’ll probably build a business in. Golf.

Higher net worth clients, growing sport that is moving more streetwear and fashion forward, game is expanding to new audiences since the pandemic, not a ton of competition in a few specific areas, decent margins, and if you do it right, products without sizes (this is important for me).

I haven’t jumped in yet simply because I don’t have all the pieces lined up that would allow it to make sense, product is solid, website stuff is easy, I even have an existing mini audience sitting in a newsletter.

I’m missing the last few pieces that I’m currently working out right now.

You see for the past 3 years I’ve been advising and helping Krakatoa Underwear go from a few thousand a year to millions per year largely on paid ads.

It’s never been my preferred way to grow a business, but it is how most businesses are told to get started these days so I wanted to fully immerse myself in what people were commonly doing to grow.

And while going through this exercise, I also took lots of notes about all the inefficiencies that come along with growing a brand that way.

Well I’ve just about earned my second post graduate degree from the experience and all I have to say is things are very very broken in the ecosystem.

I’ve been using Krakatoa Underwear as my playground to test ideas, concepts, crazy things (like gift cards during signup more than a year and a half ago).

I tried gaming every single KPI I could.

Now it’s surgery, specific and strategic initiatives that compound in value.

Although I’ve been working on it behind the scenes, my only goal moving forward is focused on extracting a more fair value exchange from customers.

For the longest time, we just give discounts for nothing in return on than a sale, that’s just the way it’s worked, but that sale provides us little reusable value.

Read that sentence again.

There is no reusable value in our current approach, we collect nothing from a customer that can be used as an asset.

THIS IS POSSIBLY THE MOST BROKEN THING OF ECOMMERCE TODAY.

If this sounds like an obsession, it is, it’s why we built Formtoro to begin with, to collect and extract more value from an existing customer behavior that could be better leveraged beyond a single customer.

I want us all to pause here and think about how we currently extract or trade value from customers. You’re going to realize that we don’t really do a good job of creating reusable assets from them.

It’s what I realized a few years back, it’s what I’ve been relentlessly looking to solve.

For me whenever I approach a business or concept I look at how I can create assets that can be leverage in multiple ways, every test I run is one that moves the existing audience to a different place seamlessly that is more lifestyle focused than individual brand.

Every customer has a limit to how many of your products they can buy.

So I told you earlier that I would start a golf company but I won’t do it until I can create a full funnel that allows me to collect the assets I need to grow a business on autopilot.

That means if you’re signing up for a discount, I’m collecting data that I can leverage, if you’re getting a deal on something or access to an early release I’m sweetening the pot via a rebate program for social proof coming back in the form of guided and prompted video.

That means that I’m working on partnerships already to ensure that I can provide value to my audience in every single email I send out even if I have nothing to sell because it talks to the lifestyle I’m courting not the products I’m selling.

This also means that I have to have my automation on point, everything scheduled, and everything on lock.

I’ve been doing this stuff long enough to no longer put myself in a position of learning on the fly, instead I’ll leverage existing assets to learn before jumping in to be another statistic.

This is me, who actually knows how to do this stuff saying this, because the margins just aren’t as good as software.

I’d truly only build a brand that I really enjoyed creating around a hobby I enjoy doing.

Now back to testing.

Side note on this, I’ve found through this process that doing what I want to do requires way too much manual work, there’s a massive gap in the market for a streamlined Shopify App that can fix some of this stuff, have to add it to my pile of things that I want to build because of existing inefficiencies.

But if this process all works, we’re talking about streamlining go to market and being able to spin up a brand super easily.

Another note on all this, I’m rambling now, but trust it makes sense in my head.

If you haven’t started a content play yet, start now. There’s going to be a massive shift in the next year where you’re going to wish you had.

The Takeaway

I’ve got a lot of stuff going on and this year is already starting off very very busy.

A lot of things are going to shake out this year, next week I’m going to talk about where we’re headed in technology land and how the changing landscape will forever change the focus of ecommerce.

Hint: Advanced process automation combined with strategy will be the future.

Have a great week!

-Jon

Catch up on past posts: https://ecomwithjon.beehiiv.com/