During the pandemic, the entire retail landscape changed. Online shopping dominated while people were stuck at home, but the trend has begun reversing as life returns to normal. Aaron Apple, the founder of e-commerce business Impresa Products, has seen the good and bad throughout this cycle. He joins the ETF Think Tank to share his experiences running a retail business.
When COVID hit, Apple knew what was coming and knew he needed to prepare for an influx of new business. After two months of uncertainty, the company’s sales went up 120%, but where the sales were coming from was very bifurcated. Health and fitness products sold well as did office supplies. With COVID lockdowns, supply chains took a hit and delays hit up to 3 weeks. He knew the company needed to change its advertising, inventory, and supply chain strategies.
Apple discovered quickly that the most fragile point along the supply chain was the port. Getting the items on a ship from China usually isn’t the problem. Getting it into the United States where it could sit for 15-20 days, or you weren’t able to find a trucker was the real sticky spot. Once it’s moving, things usually aren’t that bad. Technology could be improved. In the United States, it is people doing the work. Some places have no humans involved.
How did Apple know when he was getting things right? He notes that he had a low bar for success at first. Today, he uses return on capital as a measuring stick and is generating about 2.5 times ROC. He was fortunate to get a lot of feedback right away and was able to pivot towards what was working. Some products with only one or two primary competitors were able to gain traction quickly, while others could take months. Apple says his company is price agnostic at this point. Overstock, for example, tries to focus on bigger ticket items, while Amazon just wants to sell you everything. For Impresa, selling one item at $5000 could be just as meaningful as selling 80 items at $5.99.
Apple says that creating a better customer experience goes beyond just price. He emphasizes making sure the customer knows whether or not the product is for them. A product may be good, but the image, instructions and other factors become part of the overall deal. Whenever his company sold a product that had to be installed, they watched videos to try to understand how someone could get messed up. Staying in stock, especially now, is the most important thing. If you bring a customer to your site, you may only have one shot with them. If you’re out of stock, that hurts conversions and customers may never come back. His advice – stay in stock at all costs.
Other key takeaways:
- How does Apple view a key partner? A lot of people aren’t good at sourcing, and you need to find out what people are receptive to. You hope to see positive signs, but even if the price is great, it’s not worth it if response times are slow or quality is poor. If you get a poor-quality batch of goods, there may be no coming back from that.
- Most Amazon sellers are flat to a little bit down today. Some had a big COVID bump, but then came right back down. A lot of growth got pulled forward and now things are returning to what we’ve seen before. Some of it is people shopping in person again.
- The return-on-investment advertising on Amazon can be insane. You could move to the #1 spot for a product simply because no one else is advertising. Advertising costs can go way up when competitors arrive, but there’s a lot of low hanging fruit out there.
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