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Here’s what I learned this week

Ignore the sponsorship message at the top, it’s explained at the end of this email as to why it’s there.

You’ve got to wonder how many people abandon checkout simply because a coupon code doesn’t work…

I know I did.

Well it worked, but then it said it didn’t.

I mean it showed me the lower price, then a few seconds later took it away, which means it was valid, just not for me.

But with no explanation.

Looks like you can trick it by just putting in [email protected] into the email field which is a common fake email people provide when testing things.

So looks like it’s tied to some rule.

Talk about a complete kill joy of an experience, I mean I searched for coupon codes on Google and that one showed up multiple times on multiple websites.

I’m half tempted to just trust it and check out with [email protected] as the email address then just send support an email to update it.

A discount is a discount.

If they provided me with a discount when I added a value to the cart, boom done.

I was so interested I ended up finding these guys: https://us.upsellit.com/

Welcome to why I talk so much about the customer experience and why I’m a big fan of using coupon codes at cart value thresholds by just building in the discounts.

I love finding things like this that literally cost brands millions per year, is a sale better than no sale at all, is 10% savings better than moving two units instead?

The truth is I don’t think anyone knows.

But there’s one thing I do know, I’ve known about the brand for a while and the last time I was close was when they had a big sale.

I’m also not in a rush because it’s about to be spring and summer and the item I was looking for will be less important.

The irony is these sorts of things happen to people on a near daily basis and brands have no idea.

I even searched for this problem in the forums of Shopify, I’m not alone in thinking there should be a solution to this.

Checkout extensions are live but I’m not sure anyone can do much with this one quite yet. There’s probably a little app though that people could do and get some pretty good traction with.

I mean I’m using a cart value popup currently and it converts at over 65% on average across desktop and mobile.

How I’m working with agencies moving forward

There’s a gap in what an agency provides and what they say they can provide.

Our brand got pitched by another agency, this typically results in issues.

In truth, I don’t have enough time to vet an agency’s process, gaps, etc.

I’m more of a just prove it kind of guy.

If you’re really good at what you do, you don’t need weeks, you need one brainstorm session with your team and less than an hour to create the creatives to test your angles.

If you’re as good as you say, prove it:

1 campaign
1 ad set
3 ads

I’ll fund the campaign for 7 days, you won’t be paid for your work.

Agencies are going to hate doing free work, but this is a competitive market, there’s no shortage of agencies and I do like the idea of tryouts.

We benefit and see results we can discuss next steps.

This is really just an aggressive tactic to push them towards option number 2.

Alternative arrangement:

1 campaign
1 ad set
3 ads

Agency funds the campaign, I’ll add a Shopify Collabs url parameter to link for 25% of total sales from your ads which is equivalent to our average net margin.

If you do great work, you make our cut.

Anything less, you bare the risk.

Love some good skin in the game.

We see what happens and we can discuss next steps.

This is likely going to be the best way to handle influencers too.

Everyone thinks of themselves as an influencer.

I’m willing to bet I’m going to get a lot of pushback, which is good, I like things that make people feel uncomfortable or uneasy in this regard. If you’re spending my money and not making a return, you shouldn’t get paid.

If you’re spending your own money and making a return, you should get paid but only a portion of the profit, not just revenue generated.

Proper business alignment.

This is how I see agency work being vetted moving forward same goes for influencers too, it will follow a similar model.

Send content, we’ll spot test with our budget see it it works, if it works, we’ll add a collab code to our ad and get you paid. You make residuals as long as your ad is performing and running.

Which takes me to the next part of this newsletter…

What do I want to be when I grow up?

I ask myself this question every 6 months.

My goals have changed a lot over the years, at 18 I wanted to retire by 21, I was a naive undergraduate student majoring in computer science, the year, 2002.

But this was the just after the dot.com boom in San Francisco and I grew up in San Francisco. The late 90s in San Francisco was the dawn of the internet, where companies were raising enormous amounts of money to make everything digital.

I loved computers, loved the internet, loved the idea that you could get all sorts of information from everywhere.

I wrote my first line of html in 1996, some of you reading this probably weren’t even born.

As I grew, I always loved technology, the promise of what it was capable of, the grit that people had when building things that could change the world.

That’s how all entrepreneurs start.

Then you start to realize how the game is really played, in most cases money begets other money, valuations are only a reflection of interest in the round.

It’s all hype. The vast majority of businesses go out of business.

The old model that served the titans today, grow fast, spend money to build a huge moat, then monetize later.

The new model is early traction with profit, strategic partnerships, deeper integration, and exit to larger partner or Private Equity Group.

That’s how things have changed.

Your company is just a pawn in the chess board of people that have made billions of dollars speculating on technological advances with connections to nearly everyone across the industry.

No joke it’s a small world.

Which takes me to a few of the larger problems.

Random acts and quick wins will be the future

I hate to even say this, but we’re an entertainment first society right now and social media is the stage.

The amount of reach of people posting to social is going to be crazy over the next 10 years including the amount of ai generated stuff too.

It’s going to be a race to monetize on popularity and quick wins for the audience.

I see a lot of people just creating things, then filming content, then commenters asking where they can purchase what they see and the people creating the content selling the products.

This is going to be how people experience products. It will be integrated into the content that they are already consuming.

How do I know this?

I have a group of friends that all owns tiger jungle themed track suits, when we wear them out as a group, everyone stares, comments, comes over and says hi, etc, we started going out in and adding wigs into the mix too over the last few occasions and it just keeps ramping up the attention.

In a world of the same, when you stand out, people take notice.

I’ve been sitting on a few domains for a while that I’ve long been interested in exploring deeper, both alcohol related.

Why?

There’s big money in alcohol.

socialdrinkingclub.com

wedrinkonmondays.com

Now I know there’s a whole movement away from alcohol in general, but the fact remains it’s socially accepted and plays a major role in most social events.

There are a few industries that don’t really hit dips, booze, porn, and makeup.

The modern technology problem

The problem though is the technology is becoming easier and easier by the day, but with that the prices people are willing to pay, are being driven down in non-monopolistic environments.

This is going to change the role that Venture Capital plays and in a lot of respects, I’m not sure what the future of Venture Capital really looks like.

I don’t think market domination will win out long term.

The most recent example of this in our field of ecommerce is Klaviyo.

They own a large portion of the Small Business market but they’ve cut off support from the bulk of their customers that are on the smaller end.

Gorgias has made a lot of traction too, but Zendesk, Salesforce etc is where people get serious about support and Klaviyo is not really enterprise either.

So although they own a large segment of their markets it’s very low end.

I don’t see this ending well for a platform with no moat and no ancillary services.

I honestly, don’t think they will be able to build fast enough and have enough resources to continue their growth. We’re seeing a lot of things simplify and streamline and we’re on the precipice of a lot of automation coming out.

That artificial spike during covid crushed Shopify back down, they have a solid base though, but mark my word, someone is going to come in and likely dent what they’ve built eventually.

There’s just too many basic gaps in their platform to build out something that just nails the basics properly for the modern customer journey.

A platform with basic drag and drop elements, mobile first design, and integrated data collection with basic email capabilities and the ability to create ads on the fly will likely beat what we currently have.

Shopify relies too much on apps to power functionality.

Same as we’re seeing consolidation in the app space, I’d be keen to see where a new platform shows up to take over some of the other spaces.

The fact that you can’t drag and drop more elements or build separate looks for mobile and desktop natively is a huge problem.

They are already silently making moves to open up their own marketplace for real through the shop app.

They haven’t said it publicly, but the problem they are going to have is they are cheap and every vendor that is currently on Temu and Shein and drop shippers are going to invade the shop app and make it worthless.

Klaviyo though, if they can’t turn things around, someone may look to buy them out similar to what Salesforce did to Slack.

Now the problem is those two tickers that I put up there, yeah they have their own internal platforms that are better for enterprise.

IF Klaviyo was to make meaningful headway into enterprise, something I don’t see happening, it would be on the back of Shopify growing into enterprise.

Now Shopify is bringing in some larger brands to the Shopify ecosystem and doing a pretty good job, but I don’t think that’s their long term play, instead the long term play will be making everyone a marketplace.

Much how they make their money more on transactions than their baseline platform, they are eying the larger prize, an ad network built on a marketplace.

Welcome to the long game everyone.

I’ll leave you with this, every brand’s largest problem is distribution, every shopify brand’s largest issue is mobile first usability.

1. Product

2. Model

3. Sizing

4. Video

5. Pricing

6. Sale

These are the elements that are missing when it comes to most product pages.

There’s so much room for improvement.

As I typed this, I immediately went to our store website to rearrange some things.

Yup, reminder, I don’t always practice everything I preach at the time I’m preaching it, even I forget things.

My main focus moving forward is going to be mobile experience that highlights all these parts, which is part of my UGC play that I’m working on, in a perfect world, customers video reviews will sell our product for us.

I’ve just actually moved those up on our pages.

Next on my list is to look into streamlining our product pages a bit more, make sure everything is super valuable, and looks great on mobile.

This is the ongoing evolution of the brand.

I’m also looking to do some very outside of the box advertising over the next few months, taking some small bets in overlooked areas.

Last week was a reminder that things are hard

Last week’s post was written early in the week, because I ended up playing golf Friday, Saturday, and Sunday.

Lost money on Friday, played terrible, switched putters, and played 5th gross and 2nd net in our tournament with some frothy skin wins, wiped out my losses and then some.

That’s life, sometimes it’s going great, sometimes something isn’t clicking and you just need to switch it up.

It’s really humbling to play a sport of centimeters that takes 4+ hours and is completely dependent on the elements that you can’t control.

Friday was windy, Saturday was beautiful, Sunday had me wearing a beanie until my 18th hole of the day.

There’s so much to the game of golf that I can relate to with business.

Business is the long game.

This is the formula I’m using to play the long game:

1. Aggregate your experience or your industry’s experience

2. Build an audience around that information

3. Create a course/program for that audience that provides real value

4. Build a technology company/service or tools for that audience

The problem today is there are too many resources out there that all say the same thing. Eventually, when a market matures to the point of saturation, which ecommerce as a whole is pretty close to doing, you’re invariably going to run into a lot of the same things.

Much the same with the amount of instruction and gadgets and training aids for golf (might be the most in the entire sports world) we have too much focus on how to get there rather than the fundamentals of caring about that one point that matters, impact.

Quality of service, quality of product, are what will eventually win out.

But you need quality distribution.

Does the process matter as much as the impact? Probably not.

The gap highlighted in last week’s email is solvable. It’s just going to require a fresh look at the existing problems that we’re so desperately lying to ourselves about.

I have access to a lot of the core financials of ecommerce companies.

I’ve seen consistent trends appear across multiple types of businesses.

I’ve seen it on repeat over the last 4 years, you can absolutely 100% tell from the dashboards we’ve created who is in for a rough ride.

Common themes:

• Decreasing ROAS

• Overleveraged or dependent on a few items

• Overdependent on paid ads

When I see this combination, the writing is on the wall for most of these companies, they are always searching for something magical to save them rather than actually taking a long hard look at their business and evaluating if there is a large enough market to keep growth going.

The one thing I see more than anything else is a slowness to react to changing market dynamics and channel dynamics.

Markets change over time.

I keep saying it, margins keep shrinking for most DTC brands.

Lean up your skus, double down on what’s working, cut the fat, focus on profit at all costs, don’t chase revenue gains.

I’m witnessing a shift to a sea of the same

I’ve been very vocal about how all brands used the same branding agencies, how most fail to stand out in the crowd.

I’ve also been very vocal about how there isn’t one right way to do things, but instead there are multiple ways to leverage assets to drive revenue.

I have a feeling much like the ocean looked over the weekend things are about to get pretty choppy.

The thing is, it’s all self imposed by pretending that everything is just one break through ad from taking off.

Facebook is a casino, they get paid no matter your results except instead of just having them throw you some cards or pull a lever, you have to do all the design work, own your website, create the creative, work the angles, hooks, do the product photography, then spend money in hopes of something working.

For the vast majority of people running ads on Facebook, I think gambling might even result in higher earnings.

I’ve seen the budgets that people are spending on ads and the net returns in profit, the whole model is suspect at this point.

Example:

Spend $100 on an ad campaign, doing great would look like $300 in sales.

Margins on the products, shipping costs, storage costs, etc. even assuming 5x margin on your product, that would be $60 in raw costs, for a profit of $240 minus the $100 you spent on the ad campaign, so you’ve netted out $140 total ish. Before the other costs, in reality, it’s probably closer to $100.

Take that same $100, break it up into $20 and play roulette and bet red the entire time and you’d likely have similar odds to make your money back and have none of the sunk costs and logistics and other issues.

You’d be betting $100 to get back $140, splitting the $100 and betting $50 on red and winning would net you $150 total in your pocket, $10 more than you would make running ads.

You could lose too, but then so do most ads that don’t drive 3x returns.

Kind of crazy right?

I’ve been saying that Facebook is a casino for a while, but I’m willing to bet the odds for most people to make money on Facebook and the sheer amount of time it takes to build an entire funnel, source products, write descriptions, do photography, create ads, then hope for the best with massive amounts of testing…

This is why VC has all but dropped out of funding anything ecommerce related these days, the math just doesn’t add up like it used to.

It’s a weird world where no matter what you do, large companies are taking a piece.

Google Cloud, Amazon Cloud, all the costs associated with running businesses are being filtered up into the pockets of a few corporations.

I’ll end on this bit, I wasn’t going to include this ad, but it’s a learning experience.

Let’s talk about SaaS distribution.

Beehiiv allows me to place the ad below on this newsletter, Black Crow AI is paying $3.20 per click, then in their offer they are giving $100 gift cards to anyone that shows up to a 30 minute meeting with them.

Generate more repeat purchases with Black Crow AI

Black Crow AI helps merchants recognize 100% of returning users and predicts shopping behavior patterns so you can effortlessly acquire more sales.

Their Shopify app plugs into your tech stack with zero development work required. And everything is set up for you to see clear incremental revenue so you can judge the value for yourself during a 30-day free trial. 

Their team is so confident you’ll see 5-8X ROI that they’re offering a $100 Amazon gift card to Shopify brands with $2M+ in annual revenue just to get a demo.

Let’s do some math on this, I’m not the only one that they sent out this offer to, but it tells you they are willing to pay $3.20 per click and $100 to anyone that books a 30 minute meeting.

They are willing to pay $200 an hour for your time at that rate.

So this has to be factored into the cost of acquisition.

They do require 12 month contracts. But in theory if this gets them booked out they are literally giving away tens of thousands of dollars just to book meetings.

This kind of thing has been going on for a while, Attentive is another company that does this a lot, but I don’t see this kind of thing working out over the long term. It feels like a bribe to listen to a pitch like a time share.

The Takeaway

It’s been a week. There’s a lot of interesting stuff going on, a lot of tests that are also happening.

I continue to have my mind changed daily.

Have a great week!

-Jon

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

You can learn from me: jonivanco.com