If you attended this year’s IRCE (Internet Retailer Conference and Exhibition) this past month in Chicago, you undoubtably walked away with lots of new ideas to bring to your business. But if you weren’t able to attend, then you’re in luck! Bill D’Alessandro joins me today to discuss the events of the conference. We talk about our biggest takeaways, the challenges and some surprising insights we gained from the world’s largest eCommerce conference and exhibition.
On this episode, we’ll also dive in on what’s new with our own businesses and share news about Bill’s new warehouses, my trips to China, as well as the app that an eCommercefuel listener created that we are both very excited to explore.
In our breakdown of the IRCE conference, we talk about the interesting takeaways regarding USPS that Bill is already checking into incorporating into his business. Listen in to learn about the latest in legality, prices, branding, as well as the upcoming challenges in the eCommerce world that you need to know about.
The Full Conversation
Andrew: Today, we’re going to be chatting about IRCE, the internet retailer’s biggest conference, kicked off in late May, early June. A little bit late here, but we wanted to do a recap of the event and of what went down, some of the takeaways that we had from it. And joining me to talk about that is the man behind rebelCEO.com and my roommate for the weekend in Chicago . . . had a blast with him . . . Mr. Bill D’Alessandro. Welcome, Bill.
Bill: That’s right, so this might get a little behind-the-scenes.
Andrew: Ooh. Yeah, I’m glad I have the editing power on this one.
Andrew: But it was, it was a really fun weekend. Man, I had a great conference. I’m excited to get into the details with you about some of the things we learned. But quickly, we don’t always do this, but let’s maybe take a couple of minutes and just chat about, kind of, what we’ve been up to. Between you and me, we’ve had a lot going on in the last month. So what’s been going on on your side?
Catching Up: New Warehouses, Trips to China and More
Bill: A lot’s been going on over here. I have moved to North Carolina, as I mentioned on one of the previous shows, and we are now up and running in our own 5000 square foot warehouse and office here in the south of the neighborhood. I hired several employees and fully switched over from outsourced fulfillment to in-house fulfillment and warehouse. Tim Ferriss is cringing if he’s listening to this. And so we have all of it in-house now. It’s been really awesome. The power of full-time employees, I think, is really underestimated.
Andrew: It’s such a huge shift. What are the things that you’ve noticed on a day-to-day basis that are different, the good, the bad, and the ugly, from going completely location-dependent to more or less, like, being tied down, for better or for worse?
Bill: Yeah, that’s one of the downsides. But then, the two huge upsides for me are one, the lack of friction. When you deal with outsourcers, VAs, you have to manage people through email and phone. And if you need something changed, you send them an email. You wait for them to get back to you. If they don’t get it 100% right, you send another email back. And there’s just a lot of friction in managing people that way. But here, with employees in the office, I just stand up, I walk to the next office down, and I say, “Hey, let’s fix this thing.” And they fix it, and there’s zero fiction. Not having an email client or a telephone between you and a person is so much more powerful than you would think, as far as efficiency, so that has been awesome.
And then the other semi-related thing is, when you use outsourcers for everything, outsourcers are task-based. So you write up a task. You try to be very explicit. You tell the outsourcer to do it. They do it. They deliver you a result, and then you describe to them the next task, and so on and so forth. But with employees, you describe to them their job, and then they just do it on a day-to-day basis, which is awesome.
Once you’ve got them trained up, you just say, like, “It’s your job to make sure we never run out of inventory, and to make sure all the orders go out the door every day.” And then they do it. My employees now are working with each other to solve problems directly, without having me in the middle, which is incredible. Because I’ve been the hub of the wheel for so long, and I’m removing myself from the middle. And allowing people to solve their own problems directly with each other has been . . . it’s doubled our velocity around here, because I’m now not having to filter everything. I was the chokepoint, and I’m not anymore, which is great.
Andrew: So that’s awesome. Well, congrats, man, on getting it up and running. And, man, I’d probably love to revisit them in the coming weeks or months and maybe do a full-on episode on lessons learned from opening your warehouse. That’d be great.
Bill: Yeah, we’ll do a four-hour work week blasphemy episode. When does it make sense to go from the four-hour model to a more traditional model?
Andrew: That sounds great.
Bill: So what’ve you been doing? Tell me what you been up to.
Andrew: I feel like, the last six weeks, I’ve been on the road a ton. I kind of had a road trip in the U.S. for a couple of weeks with the family and got back. And then we did IRCE, of course, in Chicago. And on the front end of that, Annie and I went out there and spent two or three days just hanging out, enjoying Chicago. She went to school there, so it’s fun to go back and tour around. And then we had the event, of course, where you and I had a blast.
And then, like, three days later, left for China for eight days. So I went to Hong Kong, went to Shenzhen. I went to Wuhan, China, half business, half fun family trip. I met my brother there and we toured all over the place. And I’ll be doing an episode in the future about that, but it was . . . I’ve been to Hong Kong before, but it was my first time in mainland China. And it was really, really fascinating. So I finally got back from that, like, two days ago, and going to have a chance to finally sit down and actually get back into the flow of work, and looking forward to doing that, too. But it’s been a fun six weeks, because I had to get back into it.
Bill: Wow, so you’ve been trucking. You’ve hardly been home.
Andrew: I know, yeah. We should do an episode, too, on how to work from the road and keep things moving. Because I felt I got a reminder crash course on how to that works.
Bill: That is tough. That is tough.
Andrew: Yeah, so . . .
Bill: It was interesting to me. I had never even heard of Wuhan, China. And you said, how many million people does this city . . . I have never heard of in middle China? How big is it?
Andrew: Oh, it’s crazy. I’m shooting from the hip here. I could be wrong by a couple of million, but I think it’s in the 10 to 13 million-ish range.
Bill: Good Lord, which is, New York is 9 million . . .
Bill: . . . right?
Andrew: Yeah, it’s enormous. But that’s the thing, though, in China, I don’t know. I guess . . . shooting from the hip . . . but I’m guessing there’s at least maybe half a dozen, maybe a dozen cities of that size that . . . it’s a large city, but it’s not one of the largest, I don’t think.
Bill: That’s insane. That scale just boggles my mind, that New York is like a very midsized city in China.
Andrew: It is. It’s crazy. One of the things that just stood out was just the vast number of people, and just high-rise apartment building after high-rise apartment building, even when you weren’t in the heart of the city. It was crazy. It was . . .
We Inspired An App!
Andrew: Yeah, it was crazy to see. Well, hey, before we get into the IRCE wrap-up, one more thing I wanted to mention is, Bill, you remember, of course, the episode we did on the eight e-commerce metrics you need to be tracking. And I got an email a couple of weeks ago from Charles Clermont from Redpoint apps. And he wrote in and said, “Hey, guys, listened to your episode. Loved it. And I also heard that there was some pain points that you guys had. For example, it was really hard to calculate what percentage of your customers were returning customers, and the average number of orders each customer placed . . .” These things we were complaining about.
Andrew: He was like, “Hey, I just built an app based on that. No big deal.”
Andrew: I know. So really cool. I think it’s called Store Statistics. We’re going to link up over to it. It’s a Shopify app free, for now, in beta. I’m sure he’ll start charging for it eventually. But one, awesome hustle, Charles. It’s really cool. And two, I’m excited to dive in and check it out. We haven’t had the chance, given all the stuff I talked about. But if you’re going to build an app and kick something off the ground, taking initiative to build something like that, is what gets you shout-outs by people and gets you press. So apart from just doing it, I think the approach was really cool.
Bill: That’s awesome, Charles. Congratulations. I can’t wait to try it. That sounds cool. I think you’ll do well.
Andrew: Yeah, I am, too. I’m very impressed. All right. Let’s go ahead and get into today’s primary segment on IRCE wrap-up for 2015.
Andrew: So IRCE . . . Bill, this is my first time there. You’ve been there before, right?
Bill: Yeah, this was my second time in IRCE.
Insights on the USPS
Andrew: Okay, yeah. So for me, I wasn’t quite sure what to expect. And why don’t you dive into one of your takeaways, on the Postal Service front, from it?
Bill: Well, yeah. So that was actually one of the things that I found interesting is, like, the Postal Service had a whole presence there. They had a booth, and then Endicia had a booth, and then Stamps.com had a booth. And it was interesting to me. I’m always just thinking of the Postal Service as your local mail carrier, and that it’s this giant government-run bureaucracy. But I was actually kind of impressed that, to some degree, there’s a side of the Postal Service where they function like a business, because they compete with FedEx and UPS for your package volume. And you can get a rep from the Postal Service, like a salesperson from the Postal Service.
I actually made an appointment, and they were just here yesterday at my warehouse. And they came out with a bunch of different boxes. They sat with us and helped us to figure out what boxes we should be using, which helps get us on commercial-plus pricing. And you can negotiate prices with them, just like a regular carrier. I saved a boatload of money negotiating new prices with the Postal Service that easily paid for my trip to the conference. So I was actually pretty impressed at how non-government they felt.
Andrew: That’s cool. I remember, at the conference, you mentioned that huge savings you were getting by pushing something from Priority to First-Class Mail. How did that work?
Bill: Yeah. So typically, First-Class package is like the super-cheap version. It’s up to 13 ounces. It costs $2.90 or something, really cheap. And then as soon as you get over 13 ounces, you flip over into Priority Mail, which is $5 or $6 a package. So if you can get in that First-Class Mail weight range, it’s much, much cheaper. And I found out that, if you establish an account directly with the Postal Service through Endicia, they can raise your cutoff for First-Class Mail from 13 ounces to 16 ounces, which is huge for us. Because we have a lot of stuff that weighs in at 6 or 7 ounces, so you get two of those in a box, and we’re shipping a ton of packages at 14 and 15 ounces right now. Probably 30% of our packages are in that range. And now, with a move from First-Class from 13 to 16 ounces, 30% of our packages cost half as much, which was very helpful.
Andrew: That’s huge. That’s huge.
Bill: And that was negotiating straight with the Postal Service. I didn’t even know you could do that. That was cool.
Legality of MAP and MRP Pricing
Andrew: That is really cool. I think one of my favorite presentations there was on MAP pricing. And this sounds really geeky, but I’ll admit, the high points of anyone out there who’s as geeky as I am. And so MAP pricing, of course, it stands for Minimum Advertised Pricing. A lot of times manufacturers say you can’t advertise to sell a product lower than this level. And there’s also a similar thing called MRP, Minimum Retail Pricing. And that’s saying, “Hey, Bill, nurture my body. So you can’t sell this. You can’t sell, or advertise it, or even sell it below, let’s say, $20 for product X.”
And I’ve always wondered, “Is that legal?” With antitrust laws and all these kind of things. And so I’ll link up to the presentation that was done by a law firm at the event. But the bottom line is, pretty much MAP pricing is legal under Federal law. And it’s completely legal. MRP, being able to say, “Hey, you can’t sell below this,” technically is also legal under Federal law, based on some changes that happen in 2007. But it’s also technically illegal in 18 states, like New York, in California, a lot of these places. But it’s super, super hard to fight.
So for all practical purposes, as long as you’re a manufacturer, you’re saying, “Hey, this is my product. You can only sell at this level and above.” If you get into a point where you’re colluding with other . . . if I went out within my CB business and rounded up all the guys and said, “Hey, we’re all going to sell this radio at $50 or above,” that would be highly illegal. But if it’s just your product, your proprietary product, it’s pretty tough to fight against that if you’re a retailer trying to sell below that level.
Bill: That makes me pretty happy, as a brand and manufacturer. Because for those of you out there that don’t know why you would want to do MAP price or Minimum Retail Price, as a brand, let’s say your widget retails for $20. You sell it to a retailer for $10. If you sell it to two retailers . . . in a simple economy, you sell to two folks . . . they each sell it for $20. They look across the street or across the Internet at the other guy. And they go, “Man, we got the same product. What if we take a little less margin and sell for $18? Then everybody will buy the widget from us.”
And so they lower their price. And then the other guy goes, “Well, crap, we’re not selling any anymore. We got to lower our price to $17, and take a little less margin.” And they eat each other’s margin all the way down until they’re selling your product for $12 and buying it from you for $10. And neither of them are making any money, and they go, “Why do we even have this thing?” And they drop your line.
So as a manufacturer, you have to sort of look out for the retailers when they won’t do it for themselves and say, “I’m going to protect all of your margins, because I need my product to have a nice margin for retailers, so more and more retailers want to carry it.” So that’s why, as a manufacturer, you want to enforce Minimum Advertised Price.
Andrew: Yeah, and also, the retailer has an incentive to sell it and be able to offer a decent level of customer service and support. Because if you’re making 3% on something, any legitimate quality retailer isn’t going to sell something for 3% margin. The only people that are going to do it are the fly-by-night guys or people who have super-lean operations with no customer service. And that’s exactly the last person in the world you want being the face of your brand.
Challenges for Multi-Channel SAAS Apps
Andrew: Yeah. Bill, you had some thoughts on multi-channel SaaS apps at the event. What did you see there?
Bill: So much, like whole rows and rows. It seemed like the theme of the conference was multi-channel e-commerce. And from all of the, sort of, the classics like Stitch Labs and Linnworks was there. And there were a bunch of others that I had heard of. And then there were so many that I hadn’t heard of. Guys that were clearly old-school, like Windows-based e-commerce software, and we’re trying to evolve into the Cloud. There were so many. We saw Skubana there, which was just launched by . . . is he a forum member or just a friend?
Andrew: No, I don’t think he is a forum member. But yeah, Chad Rubin is who you’re thinking of.
Bill: Chad Rubin. They had a booth there, so I got a cool demo from them. But the thing I took away was, man, it was hard to tell the difference between all of these. The multi-channel e-commerce space is very, very crowded right now. And at the high-end, ChannelAdvisor sort of dominates it. They have knocked out almost all the competition. They take a percentage of sales, but everybody integrates with ChannelAdvisor. They have become, sort of, the de facto hub. And yet on the lower end, there are 101 guys slugging it out to try to be the ChannelAdvisor of small brands, and it’ll be interesting to see who wins.
Andrew: Was there one or two in particular that stood out to you for any reason?
Bill: No. That was kind of what my takeaway was. It was so noisy and it was so loud, as far as, everybody was doing a lot of the same things. I got the sense they were all, 90%, 95% the same, and it was very, very hard as a consumer or as a business owner, a customer of theirs, to discern which one I would want to use and why, without trying to do demos with all of them. It would have been very time-consuming to try to figure out ones. I think people need to try to differentiate in their marketing or something. It was just a very crowded space.
The Importance of Strong Branding
Andrew: Speaking of marketing, this isn’t necessarily strictly e-commerce takeaway, but one thing I noticed . . . and I heard from other people . . . was a lot of the companies that had booths there, their branding was very, very vague. Bill, you know this. When you’re walking through the floor, you try to avoid making eye contact as much as possible . . .
Andrew: . . . and it’s because, if you make eye contact, you’re sucked in. And they come out, and you’re in a 15-minute conversation that is going to be hard to extract yourself from if it’s not a good fit. And so when I was walking the floors, my eyes would be just above head level looking at the booths to find names for places I want to check out. And if I didn’t, to try to find taglines or figure out what it was that the company did. These companies have five seconds, maybe 10 tops, to be able to convey what they do to pull me in. And I was really just blown away at how many companies had the tagline like, “e-commerce evolved . . .”
Andrew: . . . or, “e-commerce elevated.” And I was just like, “I have no idea what that . . . I don’t know if you’re a cart. I don’t know if you’re helping me to sell to India.” There was no idea for me to know that. And so for me, from a personal standpoint, thinking about branding, I was like, “How am I doing on my own business?” Granted, I don’t have booths and it’s not quite the same. But someone lands on your website, your brand, your blog, whatever it is, can they find out in five seconds who you are and what you’re about? And if not, the same thing’s happening that was happening to me was, I would just walk right past those booths.
Bill: So many businesses don’t think about that. They don’t put themselves in the mind of the customer. And at a trade show, your customer is bombarded with brands, walking down the aisle, trying not to make eye contact with you to find out what you do. He wants to read your display and figure out if he wants to talk to you. And so many brands don’t realize that. And they just try to put together a slick-looking booth. And I think even if your booth is more ugly, but you have points about what you do in large font that draws you in, I think that’s much more compelling.
It’s like, some brands half-ass this by having pizza at their booth or whatever to try to draw you in to talk to them. You kind of make the agreement, like, “All right, I want a slice of pizza. I will listen your sales pitch for three minutes.” That’s, I think, a huge takeaway of marketing generally. Put yourself in the mind of your customer, whether you’re in a tradeshow trying to get people to stop, or you’re a website trying to get people not to bounce, whatever it might be. What is my customer thinking? And you got to sometimes be harsh because they don’t love you as much as you love you at the time.
Andrew: Yeah, going back to, I think, a lot of those booths who are giving away stuff. Sometimes they’d hire very attractive people to represent their booth. And then you would start talking to these people, and it was obvious they didn’t know . . .
Bill: Anything, I know.
Andrew: . . . anything about their company. For the trade shows you’ve been to, you were saying, Bill, I mean, off that last episode, of course . . . that when you’ve done trade shows, you intentionally do not do that because you’re pulling in people who don’t care about your product and wasting time on them, when you’d much rather have a smaller number of people that were coming that cared about what you’re doing.
Bill: Right. What is your worst nightmare at a tradeshow? Because when you go to a tradeshow, you go there to meet . . . you put on a booth. You spend $10,000, and you’re there to meet one or two big accounts. And your worst nightmare is you’re talking to some idiot who wanted free pizza, and the buyer from your key account walks by, right? And you can’t peep at his name tag and grab them. That’s the worst nightmare of tradeshows. So why would you try to draw in people . . . you don’t want to talk to anybody. You’re there to meet one or two people, period. So just wait for them. Slow play it. I don’t hire booth babes or have food.
We had an exhibit at a ski show and stuff, to try to find retailers, and we’re just looking for the guy from that one or two big accounts from REI, from Christy Sports, and say, “We’re here to meet you.” This year, actually, at the tradeshow, we made a sign above our booth that said, “Wanted,” and we put the REI logo, the Christy Sports logo, a Sports Authority logo, and a Vail Resorts logo. Just a giant wanted sign above our booth and it said, “We came all the way here to meet you.” And we got three out of four.
Andrew: And how many of those people did you meet?
Bill: Yeah, it was like somebody . . .
Andrew: Wow, that’s pretty good.
Bill: . . . came up. One of them came up to the booth and was like, “My friend said that you basically got our name on a sign and I had to come over.”
Andrew: That’s brilliant.
Bill: You got to figure out, what do you want? You don’t want to talk to all the hangers that only want free pizza. You want to talk to your guys. I agree with you, that the people were bad at that, at IRCE.
Andrew: The only way that could have been better is if, at the very top of that, you just went, “No freebies. Wanted: REI,” etc. etc.
Bill: “We’re only here for you. Everybody else, piss off.”
Andrew: “Looking for swag? Go elsewhere.” That’s awesome. Bill, the other thing I learned was that Blackhawk fans are crazy.
Bill: Yes, man. I guess they were in the process of winning the Stanley Cup. I could hardly blame them.
Andrew: They’re a little justified.
Bill: But yeah, man, they were into it.
Our Private Forum Meetup
Andrew: And I say that because we had a private forum meet up at the event, had about 30 people show up, had a lot of fun. And we booked it a couple of months ago. Well, there was no way we could have planned for this, but the Chicago Blackhawks won the Stanley Cup. It was, I can’t remember, maybe game one. Anyway, the venue we picked, went from becoming a nice, casual place to have a nice get-together and a nice chat, to being, like, a crazy, rowdy, insane sports bar. And it made the discussions a little bit harder to have, but it was a pretty cool environment to have. And I remember, I sauntered up to the bar at one point to get a drink, and ended up chatting with a Blackhawk fan from Chicago. He was a super nice guy.
So it was a fun event, meeting everyone in person. Man, there’s something about meeting someone face-to-face that you’ve been chatting with, knowing virtually for months or years. It was also cool seeing the environment there and seeing Chicago. And they won the game, too, which is awesome.
Bill: You mentioned the meet up. That was, for me, one of the biggest takeaways. I was on the fence about going to IRCE. And then you told me you were organizing the eCommerceFuel meet up, and that pushed me over the edge. What started as 30 guys in a bar having some apps and some drinks, I think, ended several bars later at some after-party at two in the morning. But it was great, just to meet everybody in person.
The networking of . . . and maybe this sort of echoes my comments at the beginning of the podcast . . . getting people in person and not . . . there’s such a deeper connection to this Bill, face-to-face, then there is over the phone or on email or on a forum. And it was so cool to see all the different storeowners, all the other small guys, all the guys doing what we’re doing. Really fascinating. I would recommend to everybody, come out to IRCE next year, assuming, Andrew, you’re going to organize the same meet up, that you’ll get enough value. You’ll get some value from the show, but you’ll get even more from meeting people in person. That was a blast.
Andrew: Yeah, it was a lot of fun. And we will definitely be doing the meet-up next year. Like you said, you learn things about people that you would never know, not hanging out with them in person. We roomed together, for example, Bill, and I had no idea you slept with a teddy bear. No idea.
Bill: I don’t really put that on my blog.
Andrew: He was so cute. Cuddles, was that his name? Yeah, I woke up in the middle of the night, looked over to the other bed. Because we did have two beds, for the record. And I just saw you nestling in. Yeah, the things you learn about people. It’s crazy.
Bill, it was fun. It was a blast hanging out, looking forward to doing it again next year. Bill D’Alessandro, rebelCEO.com.
Bill: Thanks, see you next time.
Andrew: Thanks for joining me, man. That’s going to do it for this week. But if you’re interested in launching your own e-commerce store, download my free 55 page ebook on niche selection and getting started. And if you’re a bit more experienced, look into the eCommerceFuel private forum. It’s a vetted community for store owners with at least $4,000 in monthly sales or industry professionals with at least a year or more experience in the e-commerce space. You can learn more about both the ebook and the forum at eCommerceFuel.com. Thanks so much for listening and I’m looking forward to seeing you again next Friday.
What Was Mentioned
- Connect with Bill: Rebel CEO
- eCommerceFuel Podcast: eCommerce Metrics
- Shopify: Store Statistics
- Chad Rubin
Photo Courtesy of IRCE/Facebook.com/IREventsGroup