Interview: A masterclass in ecommerce – and why there’s still room to grow

1
00:00:04,110 –> 00:00:06,450
Sean Aylmer: Welcome to the Fear and Greed Business Interview. I’m Sean

2
00:00:06,450 –> 00:00:09,090
Sean Aylmer: Aylmer. We’re coming into the busiest time of the year

3
00:00:09,090 –> 00:00:12,300
Sean Aylmer: for retailers as they gear up for Christmas and Boxing

4
00:00:12,300 –> 00:00:15,329
Sean Aylmer: Day sales. But in recent years, we’ve seen November’s Black

5
00:00:15,330 –> 00:00:19,590
Sean Aylmer: Friday and Cyber Monday sales starting to outsell that Christmas

6
00:00:19,590 –> 00:00:23,430
Sean Aylmer: period. It sounds great for plenty in business, but what

7
00:00:23,460 –> 00:00:26,700
Sean Aylmer: if they’re becoming overly reliant on Cyber Week for their

8
00:00:26,700 –> 00:00:30,360
Sean Aylmer: annual sales? Paul Waddy is an eCommerce leader and strategic

9
00:00:30,360 –> 00:00:33,749
Sean Aylmer: advisor to brands selling online. He’s the founder of learnecommerce.

10
00:00:34,830 –> 00:00:38,820
Sean Aylmer: com, learnecommerce. com. He says it concerns him just how

11
00:00:38,820 –> 00:00:41,400
Sean Aylmer: many online retailers are going through most of the year

12
00:00:41,760 –> 00:00:44,880
Sean Aylmer: making not too much profit, and then relying on that

13
00:00:44,880 –> 00:00:47,638
Sean Aylmer: November, December period to pay all the bills. Paul, welcome

14
00:00:47,639 –> 00:00:48,420
Sean Aylmer: to Fear and Greed.

15
00:00:48,870 –> 00:00:49,979
Paul Waddy: Sean, thanks for having me.

16
00:00:50,219 –> 00:00:52,799
Sean Aylmer: Just give us the big picture first. Right now as

17
00:00:52,799 –> 00:00:56,370
Sean Aylmer: it stands, how important has Black Friday and Cyber Monday

18
00:00:56,580 –> 00:01:00,750
Sean Aylmer: become, and then what’s that Christmas period? How important is that?

19
00:01:01,500 –> 00:01:05,639
Paul Waddy: Short answer is too important. So I think this Black

20
00:01:05,639 –> 00:01:09,780
Paul Waddy: Friday, Cyber Monday, cyber period now seems to go for

21
00:01:09,780 –> 00:01:14,160
Paul Waddy: weeks has come on the back of this typically US

22
00:01:14,160 –> 00:01:18,060
Paul Waddy: Thanksgiving sales. Aussies have jumped on board, no doubt. So

23
00:01:18,060 –> 00:01:22,650
Paul Waddy: November revenue in retail is now considerably bigger than December.

24
00:01:22,650 –> 00:01:26,850
Paul Waddy: So November is the biggest retail month of the year,

25
00:01:27,509 –> 00:01:29,700
Paul Waddy: which is unheard of a decade ago. It’s always December.

26
00:01:29,699 –> 00:01:31,979
Sean Aylmer: It’s happened so quickly.

27
00:01:32,190 –> 00:01:34,800
Paul Waddy: It’s happened so quickly. I mean, I didn’t even know

28
00:01:34,800 –> 00:01:39,690
Paul Waddy: about this five or six years ago, but we’ve embraced

29
00:01:39,690 –> 00:01:42,450
Paul Waddy: it. When I say we, I mean well both online

30
00:01:42,450 –> 00:01:47,069
Paul Waddy: shoppers and online retailers, and that’s fine. My concern is

31
00:01:47,069 –> 00:01:50,610
Paul Waddy: just that it’s sort of this holy grail and it

32
00:01:50,610 –> 00:01:52,170
Paul Waddy: can be a bit of a false profit. You’re sort

33
00:01:52,170 –> 00:01:55,230
Paul Waddy: of waiting, waiting to make all your money in November,

34
00:01:55,560 –> 00:01:58,110
Paul Waddy: and obviously you’re going on sale, so your margins are

35
00:01:58,110 –> 00:02:02,820
Paul Waddy: under pressure. My concern is that good business operations and

36
00:02:02,820 –> 00:02:05,549
Paul Waddy: business metrics have been largely forgotten for the rest of

37
00:02:05,549 –> 00:02:09,270
Paul Waddy: the year. So I’m a bit worried about this overdependence

38
00:02:09,270 –> 00:02:12,960
Paul Waddy: on the period, and maybe I’m getting old, but I

39
00:02:12,960 –> 00:02:16,619
Paul Waddy: call it the most unexciting part of the retail calendar

40
00:02:16,620 –> 00:02:19,770
Paul Waddy: because I think people are way too focused on this

41
00:02:19,770 –> 00:02:23,639
Paul Waddy: big discounting month, and we don’t really love discounting right?

42
00:02:23,639 –> 00:02:24,720
Paul Waddy: Hurts our margins.

43
00:02:25,080 –> 00:02:28,858
Sean Aylmer: Okay. So what about how’s it compared to that Christmas

44
00:02:28,860 –> 00:02:33,630
Sean Aylmer: period in the Boxing Day sales and early January? That

45
00:02:33,630 –> 00:02:36,809
Sean Aylmer: period must be bigger than, I mean, I agree that

46
00:02:36,809 –> 00:02:39,990
Sean Aylmer: it’s becoming weeks, not days, but that period is bigger.

47
00:02:39,990 –> 00:02:40,259
Sean Aylmer: Is it?

48
00:02:40,590 –> 00:02:42,239
Paul Waddy: Yeah, look, I mean, I work with a lot of

49
00:02:42,360 –> 00:02:45,480
Paul Waddy: online retailers from anywhere from kind of 5 million a

50
00:02:45,480 –> 00:02:48,600
Paul Waddy: year to a $ 200 million a year in revenue. I would

51
00:02:48,600 –> 00:02:53,639
Paul Waddy: say on average, November sales are at least 50% bigger

52
00:02:53,639 –> 00:02:57,149
Paul Waddy: than the month of December. So even just with that

53
00:02:57,240 –> 00:02:59,729
Paul Waddy: week, which has become a fortnight, and it is a

54
00:02:59,730 –> 00:03:03,149
Paul Waddy: little bit sad, but Boxing Day sales, they’re not real.

55
00:03:03,870 –> 00:03:06,030
Paul Waddy: A bit of a novelty to go into stores. But

56
00:03:06,120 –> 00:03:09,690
Paul Waddy: on the online retail calendar, they’re getting smaller and smaller

57
00:03:09,690 –> 00:03:13,500
Paul Waddy: because I think people are pretty much overspent in November.

58
00:03:13,830 –> 00:03:17,099
Paul Waddy: So there’s no question like these big November sales are

59
00:03:17,100 –> 00:03:20,820
Paul Waddy: pulling some of the revenue away from December, and definitely

60
00:03:20,820 –> 00:03:23,940
Paul Waddy: January. January has become a really, really soft month in

61
00:03:23,940 –> 00:03:27,660
Paul Waddy: terms of particularly online retail, but it’s just November is

62
00:03:27,660 –> 00:03:29,220
Paul Waddy: straight ahead of the rest at the moment.

63
00:03:29,610 –> 00:03:31,920
Sean Aylmer: Okay, so if I’m an online retailer and I do

64
00:03:31,950 –> 00:03:35,789
Sean Aylmer: 10 million, 20 million turnover a year, so it’s a decent size

65
00:03:36,240 –> 00:03:40,710
Sean Aylmer: and I am overly reliant on November 1st and then December,

66
00:03:41,040 –> 00:03:43,440
Sean Aylmer: what would you recommend? How should I spread it out

67
00:03:43,650 –> 00:03:44,520
Sean Aylmer: throughout the year?

68
00:03:45,059 –> 00:03:48,540
Paul Waddy: Well, again, I just today was on a call with

69
00:03:48,540 –> 00:03:51,059
Paul Waddy: a retailer who’s planning to do four and a half

70
00:03:51,059 –> 00:03:54,840
Paul Waddy: million dollars in revenue in November, and I was sort

71
00:03:54,840 –> 00:03:57,630
Paul Waddy: of a little bit nervous because I know that they’ve

72
00:03:57,630 –> 00:04:01,320
Paul Waddy: lost money basically up until this point. It’s quite a

73
00:04:01,320 –> 00:04:04,650
Paul Waddy: stressful moment because you’re putting all your eggs in one

74
00:04:04,650 –> 00:04:08,910
Paul Waddy: basket. And my idea of good business, and that’s why

75
00:04:08,910 –> 00:04:12,209
Paul Waddy: I am in business, is that owning a business should

76
00:04:12,209 –> 00:04:15,480
Paul Waddy: improve your life. I’m not sure that making profit in

77
00:04:15,480 –> 00:04:18,029
Paul Waddy: one month of the year is really improving your life.

78
00:04:18,029 –> 00:04:21,029
Paul Waddy: I actually think that is making your life stressful. So

79
00:04:21,029 –> 00:04:24,960
Paul Waddy: for me, I much prefer those good stable businesses that

80
00:04:25,020 –> 00:04:28,590
Paul Waddy: you’re pulling a profit from January through to December. So

81
00:04:28,920 –> 00:04:32,760
Paul Waddy: the advice that I would give to online retailers is

82
00:04:33,450 –> 00:04:36,180
Paul Waddy: any mug can make sales in November. If I throw

83
00:04:36,180 –> 00:04:41,010
Paul Waddy: up a 30% discount code to my customers, great, I’ll

84
00:04:41,010 –> 00:04:43,529
Paul Waddy: make plenty of money.
But that’s really going to impact

85
00:04:43,529 –> 00:04:45,839
Paul Waddy: your bottom line. So you’ve got to remember to focus

86
00:04:45,839 –> 00:04:48,149
Paul Waddy: on your unit economics. It’s not just about filling my

87
00:04:48,150 –> 00:04:50,550
Paul Waddy: bank account. You’ve got to remember you actually paid for

88
00:04:50,550 –> 00:04:53,279
Paul Waddy: that stock at some point. You’ve now discounted it and

89
00:04:53,279 –> 00:04:57,480
Paul Waddy: you’re selling it. So I would much prefer that retailers

90
00:04:57,480 –> 00:05:02,279
Paul Waddy: think about good business practices from January through to December.

91
00:05:02,460 –> 00:05:04,800
Paul Waddy: Does that mean I think you shouldn’t discount in November?

92
00:05:04,889 –> 00:05:08,490
Paul Waddy: No, but I think you should discount as part of

93
00:05:08,490 –> 00:05:11,400
Paul Waddy: your strategy to improve your balance sheet to clear old

94
00:05:11,400 –> 00:05:16,109
Paul Waddy: stock, not as the primary strategy, because any retailer, I

95
00:05:16,110 –> 00:05:20,250
Paul Waddy: think with some exceptions, but any retailer that leads with the ”

96
00:05:20,549 –> 00:05:23,308
Paul Waddy: I’m cheaper than everyone else” strategy is really playing a

97
00:05:23,309 –> 00:05:27,779
Paul Waddy: stressful game against some really big, big retailers. And I

98
00:05:27,779 –> 00:05:29,969
Paul Waddy: don’t think we want to be in that price war

99
00:05:30,060 –> 00:05:31,080
Paul Waddy: really as retailers.

100
00:05:31,440 –> 00:05:33,300
Sean Aylmer: Stay with me, Paul. We’ll be back in a minute.

101
00:05:39,450 –> 00:05:42,600
Sean Aylmer: My guest today is Paul Waddy, e- commerce leader and strategic

102
00:05:42,630 –> 00:05:47,760
Sean Aylmer: brand advisor. Okay, so I’m this fictitious retailer that I

103
00:05:47,760 –> 00:05:51,359
Sean Aylmer: am, and I’m turning over at however many million a

104
00:05:51,360 –> 00:05:54,719
Sean Aylmer: year. What’s your advice then to get me into a

105
00:05:54,719 –> 00:05:57,928
Sean Aylmer: pattern of selling in January and February and March and

106
00:05:57,928 –> 00:06:01,110
Sean Aylmer: April? Are there just a few really basic rules around e-

107
00:06:01,110 –> 00:06:02,460
Sean Aylmer: commerce that I need to follow?

108
00:06:03,029 –> 00:06:05,400
Paul Waddy: Yeah, well, I’ve got a rule that I developed. It’s

109
00:06:05,400 –> 00:06:09,510
Paul Waddy: called my 50/30/ 20 rule. And the reason that I built

110
00:06:09,510 –> 00:06:11,639
Paul Waddy: it was because so many people got into online retail

111
00:06:11,639 –> 00:06:14,249
Paul Waddy: from all different walks of life, including myself. No one

112
00:06:14,250 –> 00:06:17,189
Paul Waddy: really has a background in e- commerce. They don’t teach

113
00:06:17,190 –> 00:06:19,140
Paul Waddy: it at school. They don’t teach it at uni. So

114
00:06:19,440 –> 00:06:22,470
Paul Waddy: I found a lot of online retailers were exploding, like

115
00:06:22,470 –> 00:06:25,170
Paul Waddy: got to $ 10 million a year, and you would’ve seen

116
00:06:25,170 –> 00:06:28,110
Paul Waddy: it over the last year, collapse after collapse, after collapse.

117
00:06:28,589 –> 00:06:31,650
Paul Waddy: And I created this rule called the 50/30/ 20 rule. So in

118
00:06:31,650 –> 00:06:34,680
Paul Waddy: online retail, and probably in maybe to a lesser extent

119
00:06:34,680 –> 00:06:37,589
Paul Waddy: in bricks and mortar retail, you need a 50% gross

120
00:06:37,589 –> 00:06:41,910
Paul Waddy: margin at all times minimum.
You need to be focusing

121
00:06:41,910 –> 00:06:45,928
Paul Waddy: on spending 30% of your monthly revenue in your operating

122
00:06:45,928 –> 00:06:48,029
Paul Waddy: expenses. So you’ve got to stay under 30% of your

123
00:06:48,029 –> 00:06:50,609
Paul Waddy: revenue in running your business, and that leaves you with

124
00:06:50,610 –> 00:06:55,080
Paul Waddy: 50 minus 30 equals 20. That leaves you with a 20% net

125
00:06:55,080 –> 00:06:58,710
Paul Waddy: profit. And so that’s a very basic framework that I

126
00:06:58,710 –> 00:07:02,610
Paul Waddy: think online retailers can stick to in their worst months.

127
00:07:02,849 –> 00:07:04,890
Paul Waddy: So you’ve got to be hitting those numbers in your

128
00:07:05,190 –> 00:07:08,878
Paul Waddy: quiet Januarys and so on. And if you are achieving

129
00:07:08,940 –> 00:07:13,049
Paul Waddy: that 50/30/20 rule in your quiet months, you are setting

130
00:07:13,049 –> 00:07:16,980
Paul Waddy: yourself up for massive success. So just do great things,

131
00:07:16,980 –> 00:07:19,380
Paul Waddy: have a great brand, great product, but stay in that

132
00:07:19,380 –> 00:07:23,010
Paul Waddy: 50% gross profit, 30% operating expenses that’ll give you that

133
00:07:23,010 –> 00:07:25,950
Paul Waddy: 20% net profit that you really need to improve your

134
00:07:25,950 –> 00:07:27,240
Paul Waddy: life as a business owner I think.

135
00:07:27,780 –> 00:07:30,059
Sean Aylmer: How do you cut through all the noise in e-

136
00:07:30,059 –> 00:07:32,940
Sean Aylmer: commerce? If I’m an operator, how do I get my

137
00:07:32,940 –> 00:07:33,900
Sean Aylmer: message out there?

138
00:07:34,980 –> 00:07:37,470
Paul Waddy: Never as hard as it is right now, Sean, because

139
00:07:37,830 –> 00:07:41,190
Paul Waddy: everybody’s doing it and people think it’s as easy as

140
00:07:41,190 –> 00:07:43,889
Paul Waddy: throwing money at Facebook and Facebook ads and so on,

141
00:07:43,889 –> 00:07:46,019
Paul Waddy: and it’s really not. I think there’s actually an over

142
00:07:46,020 –> 00:07:49,170
Paul Waddy: dependency on Facebook ads. It’s seen as this kind of

143
00:07:49,170 –> 00:07:52,710
Paul Waddy: salvation that is getting harder and harder. I think that

144
00:07:52,890 –> 00:07:56,820
Paul Waddy: you need to aim for 50% of your revenue and

145
00:07:56,820 –> 00:08:00,569
Paul Waddy: your traffic to your site coming from organic sources, so

146
00:08:00,570 –> 00:08:03,660
Paul Waddy: by organic, I mean free.
So way too many brands

147
00:08:03,660 –> 00:08:06,750
Paul Waddy: thinking about, oh, Facebook ads, Facebook ads, Google Ads, SEO,

148
00:08:07,320 –> 00:08:09,960
Paul Waddy: you’ve got to think about your free channels more than

149
00:08:09,960 –> 00:08:12,690
Paul Waddy: your paid channels. So you think about the best brands

150
00:08:12,690 –> 00:08:15,540
Paul Waddy: that I work with, like your Budgy Smugglers household name,

151
00:08:16,110 –> 00:08:19,259
Paul Waddy: they spend less than 10% of their revenue on ads.

152
00:08:19,590 –> 00:08:21,420
Paul Waddy: And people don’t believe me when I say that because

153
00:08:21,570 –> 00:08:24,539
Paul Waddy: a lot of brands spending 20, 30% or more, but they

154
00:08:24,540 –> 00:08:27,300
Paul Waddy: don’t have to because they’ve got such a great organic

155
00:08:27,300 –> 00:08:30,090
Paul Waddy: brand. And if you look at their social media, they’re

156
00:08:30,090 –> 00:08:31,980
Paul Waddy: funny. One of their pillars is, ” We’re funny and we’re

157
00:08:31,980 –> 00:08:35,220
Paul Waddy: cheeky.” So you’ve got to lean into social media and

158
00:08:35,580 –> 00:08:38,099
Paul Waddy: find your pillar. Find what can you do, Sean, that’s

159
00:08:38,099 –> 00:08:40,679
Paul Waddy: better than everybody else. And for me, I say, well,

160
00:08:40,679 –> 00:08:42,690
Paul Waddy: I’m going to give out e- commerce advice, and people

161
00:08:42,750 –> 00:08:45,480
Paul Waddy: resonate and they follow that.
So you’ve got to find what you’re

162
00:08:45,480 –> 00:08:48,208
Paul Waddy: really good at and use as many of the social

163
00:08:48,210 –> 00:08:51,749
Paul Waddy: channels as you can to grow an organic or free

164
00:08:51,990 –> 00:08:54,240
Paul Waddy: following. They will pay you back. And if you can

165
00:08:54,270 –> 00:08:58,259
Paul Waddy: find the people first and the product second, rather than saying, ”

166
00:08:58,260 –> 00:08:59,910
Paul Waddy: Oh, I’ve got a product,” and just flogging it off

167
00:08:59,910 –> 00:09:02,670
Paul Waddy: to as many people as possible. Build the people, build

168
00:09:02,670 –> 00:09:06,300
Paul Waddy: the community through your organic social media channels first, and

169
00:09:06,300 –> 00:09:08,429
Paul Waddy: then introduce the product and the revenue comes later.

170
00:09:09,330 –> 00:09:12,838
Sean Aylmer: Just a final question, Paul, where’s e- commerce up to?

171
00:09:12,870 –> 00:09:17,429
Sean Aylmer: Obviously COVID was spectacularly good for e- commerce. It has

172
00:09:17,429 –> 00:09:20,580
Sean Aylmer: come off the boil somewhat, but no one thinks it’s

173
00:09:20,580 –> 00:09:23,160
Sean Aylmer: ever going back to where it was. Will it just

174
00:09:23,160 –> 00:09:26,910
Sean Aylmer: continue to grow and dominate retail spend more generally?

175
00:09:27,660 –> 00:09:29,999
Paul Waddy: Well look. So I wrote a book called Shopify for

176
00:09:30,000 –> 00:09:33,089
Paul Waddy: Dummies and Selling Online for Dummies, and last week my

177
00:09:33,089 –> 00:09:36,299
Paul Waddy: book went number one in Amazon in the US last week.

178
00:09:36,330 –> 00:09:36,480
Sean Aylmer: Wow.

179
00:09:36,510 –> 00:09:39,330
Paul Waddy: There has never been more interest. Yeah, it’s a little

180
00:09:39,330 –> 00:09:42,780
Paul Waddy: bit harder than it was. Where are we at now? E-

181
00:09:42,780 –> 00:09:46,440
Paul Waddy: commerce is probably at about 20% of total retail. So

182
00:09:46,770 –> 00:09:50,160
Paul Waddy: Sean, in my opinion, in 10 years it’ll be 50/50

183
00:09:50,160 –> 00:09:53,309
Paul Waddy: with traditional retail. Now how I can tell you that

184
00:09:53,309 –> 00:09:55,830
Paul Waddy: is I’ve got three daughters under the age of five.

185
00:09:56,250 –> 00:09:58,950
Paul Waddy: They can use an iPad better than I can. So

186
00:09:59,280 –> 00:10:02,578
Paul Waddy: evolution when I’m old and gray, although I’m already gray,

187
00:10:02,580 –> 00:10:04,828
Paul Waddy: but when we get older and we move on, it

188
00:10:04,830 –> 00:10:07,860
Paul Waddy: is inconceivable for me to think that the younger generation

189
00:10:07,860 –> 00:10:10,139
Paul Waddy: won’t come through and be more digitally savvy than we

190
00:10:10,139 –> 00:10:13,380
Paul Waddy: are. So evolution tells me that, as weird as it

191
00:10:13,380 –> 00:10:16,740
Paul Waddy: sounds, we’re still pioneers in e- commerce. You could start

192
00:10:16,740 –> 00:10:20,699
Paul Waddy: an online store this week and in 20 years have

193
00:10:20,700 –> 00:10:23,968
Paul Waddy: created a legacy brand and still be considered a pioneer.

194
00:10:24,210 –> 00:10:26,340
Paul Waddy: So it’s bizarre to say it Sean, but we’re still

195
00:10:26,340 –> 00:10:28,739
Paul Waddy: in its absolute infancy. There’s a long way to go

196
00:10:28,740 –> 00:10:29,640
Paul Waddy: in the scheme of things.

197
00:10:29,969 –> 00:10:31,830
Sean Aylmer: Paul, thank you for talking to Fear and Greed.

198
00:10:32,220 –> 00:10:33,179
Paul Waddy: Thanks for having me, Sean.

199
00:10:33,600 –> 00:10:37,530
Sean Aylmer: That was Paul Waddy, e- commerce leader and strategic brand advisor.

200
00:10:37,830 –> 00:10:42,689
Sean Aylmer: He’s founder of the website, learnecommerce. com. This is the

201
00:10:42,690 –> 00:10:45,000
Sean Aylmer: Fear and Greed Business Interview. Join us every morning for

202
00:10:45,000 –> 00:10:47,639
Sean Aylmer: the full episode of Fear and Greed, Australia’s best business

203
00:10:47,639 –> 00:10:50,160
Sean Aylmer: podcast. I’m Sean Aylmer. Enjoy your day.