May 20, 2016
Greg Mercer is well-known for being the founder of the company Jungle Scout, but he started off like many others building his Amazon FBA empire.
In this episode, I really wanted to cover 3 topics with him:
Greg delivers the goods in a very transparent interview, sharing numbers and the specific criteria he’s used to build his FBA empire.
Whether you’re involved with FBA (maybe considering it) or trying to build your own SaaS company, I think you’ll enjoy this episode with the Jungle Scout founder.
Are you digging our podcast? Make sure to stop by iTunes and leave us a review! We’d deeply appreciate it and would be happy to give you a shout on an upcoming episode!
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“Instead of dropping the price give a little bit more value.” – Justin – Tweet This!
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Justin Cooke: Welcome to the Empire Podcast, episode 155. Greg Mercer has been in the Amazon FBA game for years now. Not only has he proven himself successful in the niche, he’s now built a seven-figure software company by simply scratching his own itch. This week, I sit down to dig into how he found success, what he’d do differently today, and the growth of his super successful software company, Jungle Scout. You can find the show notes and all links discussed in this episode at empireflippers.com/junglescout.
Alright, let’s do this.
Announcer: Sick of listening to entrepreneurial advice from guys with day jobs? Want to hear about the real successes and failures that come with building an online empire? You are not alone. From San Diego to Tokyo, New York to Bangkok, join thousands of entrepreneurs and investors who are prioritizing wealth and personal freedom over the oppression of an office cubicle. Check out the Empire podcast.
And now your hosts, Justin and Joe.
Justin Cooke: Alright Joe, the Amazon FBA model is on fire in 2016. From not many listings at all in 2015, I think we got one in December, to blowing up this year. What do you think about that?
Joe Magnotti: Yeah, it’s interesting. I think there’s a demand on both sides. Both the buyers want a head start into FBA. People don’t want to choose products. People don’t want to find suppliers, and sellers who have had a limited amount of success, or even deep success, are looking to exit and go into the next project or do whatever they’re going to do with the capital.
Justin Cooke: There are a lot of questions and excitement from both buyers and sellers about FBA. Buyers are wondering how does it work? What’s the transfer process look like? How many products should I be selecting? That kind of thing. Sellers are wondering can I actually sell my business? Is this really an asset that buyers are looking to purchase? And the answer is a resounding yes, right?
Joe Magnotti: Yes, absolutely. There’s a lot of things that happened during the migration process that are interesting and a little bit different than a normal business, but in the end, it’s an e-commerce business. That’s really what it is, and we have an effective strategy for moving those.
Justin Cooke: Alright, man, Greg Mercer is the real deal. He’s built a super successful FBA business, and then after that, went ahead and created Jungle Scout, which is the leading niche research tool in the Amazon FBA space. I have three main questions I want to talk to him about. I broke it up a little bit. The first was how did he do it? How did he get his start with FBA? What was his trajectory like? What kind of road blocks did he come up against?
The second one was how would he do it if he were starting over again now? See, the thing is, when you start a few years earlier, the path is a little different and things change. I want to know if he was starting over today with the tools that are available, what he might do differently than he did when he started.
Then the third thing I wanted to know about was how he built Jungle Scout into a seven-figure company by scratching his own itch. Joe, you and I talk about this, but when it comes to developers and setting up software, that is not a strong suit of ours. It’s something we want to get better at, but we haven’t been terribly successful in that arena.
Joe Magnotti: Yeah, whenever we talk to people that have this sort of success getting a seven-figure company, I always want to hear about it just for selfish reasons and because obviously there’s a lot of buyers and sellers I talk to that run their own businesses, and they want to know the path to success. So it’ll be interesting to hear this from Greg and what he has to say.
Justin Cooke: Alright man, before we do that, let’s talk about the featured listing of the week. What do you got for us, buddy?
Joe Magnotti: We’re talking about listing 40425. This is an affiliate site created back in December 2014 in the finance niche. It’s centered around different financial institutions that offer credit repair services, so obviously that’s a very valuable niche. It’s making net profit just over $12,000 a month, and we have it listed at $304,000. I’ve already done a bunch of phone calls with buyers and sellers on this. There’s a lot of interest on our marketplace for sure, and I’ve talked to the sellers extensively about the business. It’s a great business. It’s really good. I mean it’s definitely taken off to that hockey stick type growth. It’s leveled off maybe the past two or three months, but it has very consistent numbers, good growth signs, and a lot of what people look for when they acquire these larger businesses.
Justin Cooke: Yeah, if you look on the listing, Joe, from October all the way through February, March, and April, it has just crushed it in terms of growth and earnings and traffic. It’s been doing much, much better. I think it’s an interesting listening. This is one of those really competitive finance space type niches, so I think someone’s going to snatch this one up relatively quickly. I know you said you had some buyers. I know you did a buyer seller call on it to try and see if someone was willing to move forward on this, but we’re going to do this anyway, because I want other people to get a chance to look at this listing before it’s off the marketplace.
Joe Magnotti: Yeah, absolutely. I think that finding the right buyer is the right thing for the sellers to do here too. Not that it’s a hard site to run. There’s only about an hour of work a week, and that’s mostly due to updating content, but they do want to see it go to a good home. It has been their baby, so we are still entertaining offers.
Justin Cooke: Alright man, let’s dig into the heart of this week’s episode.
Announcer: Now for the heart of this week’s episode.
Justin Cooke: So today I’m really excited to be talking to Greg Mercer, the CEO of Jungle Scout over at junglescout.com. He’s done some really extraordinary things in his business, and I’m excited to talk to him. Greg, how ya doing buddy?
Greg Mercer: Good. How are you doing, Justin? I appreciate you having me on here. I’m excited to chat with you today. It’s going to be fun.
Justin Cooke: Yeah man, let’s get it on. So first off, let’s tell our listeners a little bit about kind of where your business is at. Last I heard, it was like three months ago or something you did a podcast, you said you were doing $400,000 a month in Amazon FBA sales. Is that about right?
Greg Mercer: Yeah that’s about right, so any given month we’re doing between 400,000 and 500,000 in sales. Keep in mind, that’s a net revenue number. That’s definitely not profit numbers, but yeah. We’re doing a fair amount in FBA sales.
Justin Cooke: Cool, and then as part of your Amazon FBA business, you end up creating Jungle Scout, which is basically a keyword research tool or a niche selection tool for the Amazon FBA businesses. And where’s that business today?
Greg Mercer: Yeah that’s exactly right, so Jungle Scout now has grown quite a bit as well. It’s only about a year old. We have an even dozen people on the team now, and we actually have over 20,000 users, so it’s grown quite nicely as well.
Justin Cooke: Yeah, that’s absolutely amazing, man. So let’s talk about FBA a little bit just for someone who is brand new to this, never even heard of this before. Can you break down what Amazon FBA is as opposed to a regular e-commerce business?
Greg Mercer: Absolutely, so what’s so cool about Amazon FBA is a lot of people … Or everyone is probably familiar with the Amazon Marketplace. It’s huge in the states, it’s growing in Europe and other parts of the world. What’s so cool about FBA, which stands for Fulfillment By Amazon, is what you can do is us, as third party sellers, we can sell through the Amazon marketplace. We have a listing that looks just like all the other ones, including the ones that Amazon are selling. We can mail our inventory in to Amazon, they’ll store it at their warehouses, and then when an order is placed on their marketplace, they pick, pack, ship the item, they do the customer service. So they handle all those less desirable tasks for you, and they’re really good at it, because they have distribution centers all over the states, all over the world. They have a great customer service network and everything, so it’s a really cool opportunity for us as smaller third party sellers.
Justin Cooke: So it’s like an e-commerce lite, whereas an e-commerce business I need to still source the goods, I need to ship them to the US, but that’s where it ends. With a regular e-commerce business, I might have to have a warehouse myself or put all this stuff in my garage or whatever. With Amazon FBA, you simply ship those items to Amazon and they handle … Well it’s a sales channel for you, but they also handle the shipping and a lot of the things you have to deal with with an e-commerce business. Is that about right?
Greg Mercer: Yeah, it’s absolutely right. What’s so powerful about it, I think, is Amazon is the largest marketplace for people going to look for physical goods. There is existing traffic on this channel, there is existing customers with their credit cards out and ready to buy. If you go to Google or YouTube, you might be looking for how-to videos or instructions on something. When people go to Amazon, they’re already in that mindset that they’re ready to buy. They’re looking to spend some money, and it’s super powerful.
Justin Cooke: It’s one of the best things about Amazon is with your own e-commerce site, you might not have the best conversions, you may not be perfectly optimized to sell. With Amazon, they already have their credit card information, they are used to shopping on Amazon, they know, like, and trust Amazon, they like the layout of Amazon. So it makes it a lot easier, I think, to do business, but you weren’t always an Amazon seller. At one point, you were, and I know this because I was stalking you online a little bit, but I know that you were an engineer at one point, and then you converted to being a seller on Amazon. What’s the transition like there? What happened?
Greg Mercer: Yeah, so my whole life I’ve had this entrepreneurial spirit, right? I wanted to work for myself, I wanted to start my own company or something. I did the normal track in the states. I went to college. Didn’t really know what I wanted to do, so I got a degree as an engineer. I started working as an engineer, and what I found was the job was fine, you know, it paid pretty decent. It was just your stereotypical normal life. I had a suburban home and I worked as an engineer. What I found is it just wasn’t very fulfilling for me. I wanted something more. I still had this strong entrepreneurial drive. So through selling on Amazon is kind of how I got there, how I was able to replace my income as an engineer. I was able to quit that job and focus solely on my own ventures.
Justin Cooke: Did you wait until you have replaced your income before you quit, or were you just on the path there and said, “If I really want to turn up my business, I’m going to have to quit my job and focus on this full time?”
Greg Mercer: So I pretty much set a date. It was January 1st. It was like by January 1st, even if I haven’t replaced my income, I’m going to quit anyway, so that was my goal. I had a little bit of money saved up, so I was like, “Okay, I know I can live at least a few months or half year, whatever, until it takes that time,” but I actually was able to replace my income by the date that I had set. So that made me feel good.
Justin Cooke: Awesome. So a lot of people, I think, got started with Amazon FBA maybe 2014. I think I know a ton of people that started right around there. You got started in early 2013, so what was it in 2013 that got you started? Was it a course, did you have a friend that was in the space? How did you find out about it and what kind of path did you follow?
Greg Mercer: Yeah, so it wasn’t really a course or anything. Actually, my uncle, at the time, was an e-commerce seller. My dad had some e-commerce stores, and they were selling on Amazon a little. Didn’t really know the power of it. Through, I think, just talking to them and doing research online is when I learned more about it. I actually had started by selling wholesale items, or reselling items. So I was ordering products from existing big brand names that everyone’s heard of, whether it be Black & Decker or Kitchen Aid or something like that, and then reselling those on Amazon.
Justin Cooke: And you weren’t wholesaling? You were literally ordering like five drills or something and selling them, is that-
Greg Mercer: No, I had a wholesale account set up with them.
Justin Cooke: Did you use your uncles or your fathers at the time or did you set up your own?
Greg Mercer: Yeah, that’s exactly right. So I used them as a connection to get to these sales reps and everything, because it’s pretty difficult to set up those accounts if you don’t have an existing brick and mortar store or an existing e-commerce site, because they already know that all of their products are already on Amazon, so they’re not capturing any more market share by selling to one more Amazon seller.
But what I quickly found was that was getting more and more competitive, even a few years ago when I started maybe only selling a listing with two or three or four other sellers. Then there was like 10 or 15. What happened? It was kind of like a race to the bottom, and that’s when I started getting into the private label type sales model that’s pretty popular, and that’s what I’m a big fan of today.
Justin Cooke: Alright, so can you explain the difference briefly between the private label FBA and the, “I’m selling the same goods as everyone else FBA?”
Greg Mercer: Yeah absolutely. So when I got started, like I was talking about sourcing from wholesalers or reselling items, these are existing products, existing brands. I’m just ordering them at a wholesale price from these companies and reselling them on Amazon. On Amazon unlike Ebay, there’s only one listing per SKU. So for one Black & Decker drill, there’s only one listing there. If you want to sell that, you sell on that same listing. So a lot of people don’t realize this, but there might be 10 or 20 or 100 sellers on that listing, and Amazon has an algorithm to show who gets the buy box. So that means if you go to that listing on Amazon, click “buy now”, you’re really purchasing from one seller, whether it be Amazon or a third party seller.
Justin Cooke: Yup and there’s a bunch of providers that are behind that, and then the algorithm determines who goes in the buy box and who gets the business, but you’re competing with sometimes Amazon themselves, but definitely other third parties that are doing the same thing, right?
Greg Mercer: Yup, that’s exactly right. So there’s an advantage and a disadvantage to that. The advantage is there’s already a listing set up on Amazon. It’s already making sales. It might already be ranked well for good keywords and so forth. The downside is you pretty much have to be the lowest price in order to get the buy box. That’s a major part of their algorithm, or at least within 1% of the lowest price, and you’re rotating through with a bunch of these other sellers. So what quickly happens is a race to the bottom. It’s who can get the best prices from the wholesalers and who’s willing to take a 5% margin or something ridiculous.
Now compared to our private label type model, what you’re doing is you’re actually creating your own brand and your own listings on Amazon. So what I mean here is we’re sourcing these items from an actual factory instead, we’re putting our brand, our label on it, and then selling it on Amazon. So this is now our brand as opposed to other existing name brands. So the huge advantage here is you’re going to be the only person selling this item on Amazon. So you have your own listing. You control the pricing. You always have the buy box on that listing, and so forth. And what you find is you get these items a lot cheaper, because you’re getting them straight from the factory. You can control the listing a lot better, you can justify putting in the work to make the listing better, to get reviews on that listing, and so forth. So it’s a much more profitable model, whereas my margins were super slim with the wholesale stuff. The margins selling these private type items are really good.
Justin Cooke: So the private label, it can be anything as simple as taking the same product, I’m just going to use, for example, a yoga mat. Take the same yoga mat that every single person uses and slapping my label on it all the way to completely redesigning it, making it super special, and making it really mine. Do you recommend basically using the same yoga mat, putting a label on, or actually making changes to it that make it unique?
Greg Mercer: Yeah, so when I first started, I was literally just slapping my brand on any product, so I guess just to clarify to the listeners here, I’m not talking about inventing a new product. I’m not drawing up blueprints with this elaborate design and getting patents and all that kind of stuff. This is just stuff, like Justin said, like a yoga mat that’s already being created by this factory and I’m just putting my label on it. So that’s where I started.
Nowadays, I’ve started to try to make improvements to more items. What I mean here is, again, I’m not reinventing an entirely new item, I’m making small improvements. We publicly launched a product, they’re marshmallow sticks, and the improvement we made here was we included 10% more per package. So instead of 100 bamboo marshmallow skewers, we did 110, and we made them a little bit longer, because some of the negative reviews on other items were saying they’re too short, it was too hot on their hands, or it’s a safety hazard, and so forth. So again, I’m not recreating this item. I just packaged a few more per pack and I made them a little bit longer to cater to some of those people who were leaving negative reviews on my competitors’ items.
Justin Cooke: Alright, so really interesting ideas there. Give a little bit more. So instead of just dropping the price, give a little bit more value, right? So give them a little extra. That helps separate you from the competition. I love the idea of looking at reviews from the others and seeing ways you can change. You can make improvements, you can make it better, make your product better than theirs, which will get you more customers. I remember there were some guys that did the household electronics niche. They’re out of New York or something, and they have a whole team, a call center, and this huge team of people doing, I don’t know, a billion dollars a year or something on Amazon. You remember the guys I’m talking about, right?
Greg Mercer: Yeah, there was a huge article about it. I think they were calling them the Amazon whisperers or something. Is that what you’re talking about?
Justin Cooke: Yeah, that’s it, and that’s exactly what they would do though is they would look for household electronics that could be improved, and they would look at the reviews on other products and then make those changes to improve them. So that makes lot of sense to me.
Greg Mercer: Yeah, so it’s so cool because back in the day, these big companies spent God knows how much money on market research and product research, finding out what to improve. Nowadays for free, just me or you can hop on Amazon, read all the negative reviews. If there’s 1,000 reviews, 100 of them are one star, you’ll quickly see that it’s the same theme, right? For another one of my products, it had plastic buckles on it, and all these one star reviews are saying the plastic buckles break. The plastic buckles break. So I just replaced these with heavy duty metal buckles, and I made sure that was really clear in my advertising and marketing, and I’m charging $10 more than my competitors. I’m outselling all of them like crazy, because I have all five star reviews where their average is three or three and a half star reviews. People are willing to pay more money for a higher quality product, so it’s really cool.
Justin Cooke: So do you generally head that way, improve the value of the product, rather than drop the price?
Greg Mercer: Oh yeah, absolutely. That’s like the absolute worst case scenario is I try to drop the price, because I think that’s a lose-lose situation for everyone if you’re just competing for price, so I always try to add more value and even charge more than my competitors.
Justin Cooke: Yeah, because some people are happy to pay that premium when they know they’re getting a higher quality product because of it, so they’re happy to do it. Let’s go back a minute. So when you started selling on Amazon FBA, was it an immediate success? Specifically the private label stuff. Your first order, did you order 500 from China, put it in there? Were you nervous about whether they would sell or not, or did you have a pretty good feeling?
Greg Mercer: I was definitely nervous about it. So I have about three dozen private label products now. I don’t have any products that are just sitting in Amazon’s warehouse that I can’t sell. I have had some which, to me, I classify as failures. The margins or the return on these items weren’t good enough for me to justify reordering them.
Justin Cooke: Yup.
Greg Mercer: So for instance, I might say I’d rather just invest my cash in new product that I know will have 50% margins instead of this product which is giving me 20% margins. You know what I mean? But yeah, I was definitely human, and I got nervous. I still get nervous on some of them, and again, like that public product we launched. At this point, I’ve launched like three dozen products, but since all the eyes were on me, right? There were tens of thousands of people following along with this product launch. Again, I was nervous about it, but I found there’s a system that I can follow and I can systematically launch new products that I know will do well.
Justin Cooke: So your first few, or your first few products, whatever, they made money, but were you like, “Oh my God. This is going to crush it?” Was there a turning point on the first product or two, or was it kind of like, “Oh I’m making a little bit of money. I think that if I add more products, I can scale this out?”
Greg Mercer: If I remember it, my first few products all did pretty well. You know some of them sell more than others, but my general rule of thumb is as long as it’s selling 10 a day and my margins are pretty good, so like 30 or 40% margins, and in there I’m including Amazon fees, then I’m happy to keep reordering and keep selling. Most of the work’s on the front end, like finding a supplier, setting up your listing, that sort of thing. So pretty much all you have to do after that is just reorder, so as long as it’s selling pretty well and I’m making good money, I’ll continue to reorder.
Justin Cooke: So we’ve been selling a few FBA businesses. We’ve listed some over at Empire Flippers, and something I’m seeing that’s pretty common with some adjustments, the cost of goods plus shipping to the US is about a third the price point. Amazon takes about a third, and you end up with somewhere between 30 and 40% in profit. Does that sound about right?
Greg Mercer: Yeah that’s like a good rule of thumb to use. Of course, the exception to these are going to be really big, and heavy, and bulky items, because they’re a lot more expensive to ship, Amazon fees. There’s a certain tier which they call oversized items, and once you’re in that tier, which essentially would be bigger than a shoebox or over I think it’s like 10 or 15 pounds, once you jump into that oversize tier, the fees dramatically increase. So on these larger items, it might be 50% of your items’ fees, but yeah the 1/3 rule is a general rule of thumb to use.
Justin Cooke: Okay so you started off, you did a couple of products, you did a couple more. Did you have the problem … I see a lot of early people with FBA starting off have this problem where they run out of inventory. They have weak inventory control and I’m thinking to myself, as a business guy, “Oh no, don’t run out of inventory. You’re losing money!”
Greg Mercer: Yup, it’s very frustrating.
Justin Cooke: And so I have a buddy in FBA, and what he’ll do is … It’s cheaper to freight it over, right? But he’ll just fly the item saying if he’s running a little bit behind or whatever, just so it’s faster. As you started to grow, how did you sold the inventory problem. Are you doing spreadsheets? Do you use software? What do you use there?
Greg Mercer: Yeah, so I still haven’t perfected this, but yeah, I started out with spreadsheets. At one point I was using a software called Restock Pro. Recently moved over to this other piece of software called Forecastly that it does a really good job of making the predictions of how many I’m going to sell and telling me when to reorder and stuff, because, as you said, it’s tough when you’re ordering these items from China, because if you’re shipping ocean freight … Ocean freight alone, if you’re shipping to the west coast of the states, takes like 20 days. A lot of times it’ll take the factory 30 days, so if I place an order today, realistically, it’s going to be two months before it gets into Amazon’s warehouse.
So you have to do quite a little bit of predicting, especially if it’s a more seasonal type item, right? You have to say, “Man, how many am I going to sell in the next two months?” I actually just placed an order this morning for an item that I still have 1,200 units left for, but I just know that I’m selling 600 a month, so I have to plan that far in advance.
So even though I have a bunch of items now, and I try to be a lot better, just like you said about your buddy, I do the same thing sometimes like, “Crap, go ahead and just send me 300 units by air, because I know I’m going to run out of stock.” Even if I have to ship these Air Express, I’m still making money on them, right? So it’s like okay, I’d rather have a little bit of profit than just be out of stock for a few weeks, right?
Justin Cooke: Than nothing, and have your customers be mad or upset about it. Yeah, way better to have it in stock. Yeah, I think my buddy would do it. Even there was a time when he was starting out where he wasn’t making a ton of money on it at all but was like, “No, I’m just not going to run out of inventory.”
As you’re scaling up your business, because you started with a couple of products and grew, and you said you have a few dozen now, did you run into the inventory problems that a lot of people seem to have? Sorry, not inventory, but cash flow problems. So because you’re constantly adding new products, and you’re having to invest in those products, and bring them out. Was the cash flow drained? How did you solve that?
Greg Mercer: Yeah, so it’s definitely pretty cash intensive, especially if you’re trying to scale up to a pretty good size, because a lot of these factories will require a 30% deposit. That’s pretty normal, so if I place an order today for $10,000, I’ll have to give him 30% of the money today and 70% when it leaves the port in China. So my cash is pretty tied up, right? So I’m giving 30% of the money today for these goods that aren’t going to reach Amazon’s warehouse for two months, and the final payment for items that aren’t going to reach the warehouse for another month. Comparatively for me, I started out in wholesale, like I said, a lot of times you can get net 30 or talk them into net 60-day terms. So for that stuff, a lot of it I was selling before I even had to pay for it. So that’s much different.
So yes, absolutely. That was one of the things that held me back from scaling up. I was able to talk a few family members into making some investments for inventory for me. So you just have to get creative like that, you know? I know some people will pay with credit cards that they might not have to pay off for 60 days, or some people, I guess, just have a lot of cash, or other people look for creative ways to get investments from other people. If I was just starting out, I’d recommend to … It’s a little bit hairy if you’re borrowing money for your first shipment to prove it, right? But after you’ve proven it and you’ve gotten good at it, if you have a few items that aren’t doing well, it’s like, “Okay. Now all I need is more cash.” That’s when you can start looking into these other creative ways to get some cash to start scaling up.
Justin Cooke: I’m going to put some links in the show notes, too. Some ideas for cash. Amazon has ways you can borrow cash from them over time, right?
Greg Mercer: They do, so after you start making some sales, a lot of people will see in their Seller Essential dashboard like, “Hey, we can loan you money for a certain percentage rate,” and I think PayPal has some stuff. Yeah, I’m sure you probably know some other ways too, Justin. Yeah, there’s ways to borrow money.
Justin Cooke: Cool. I’ll put some of those links in there. I think those are definitely … Like you said, when you’re just starting out and you’re putting your first order in, you might want to use your own cash for that, but yeah, later on there are lots of ways to finance, especially if the business is growing and you’ve got all these orders. There’s people out there willing to give you money at a rate, so that’s not too difficult.
Greg Mercer: Yeah, exactly.
Justin Cooke: So as you added more products and you started saying, “Okay, I need some kind of systems in place.” I’m sure, at first, it was just you, right? You were doing most of the work and you were learning everything and figuring it out, but over time you had to add software. What was the software you used again for inventory tracking?
Greg Mercer: Forecastly is the best one out there now.
Justin Cooke: Yeah, you mentioned that last week when we spoke, and I ended up looking it up. It’s pretty cool.
Greg Mercer: Oh yeah? Cool.
Justin Cooke: How did you hire people? What other pieces of software have you used that helped systematize your business?
Greg Mercer: Yeah, good question. So I can start from a personnel standpoint. To start out, the first person I ever hired was one person back in the states. This is when I was still living there, and he was doing warehouse type stuff for me. At the time, I remember I was ordering all this wholesale stuff. So I was getting big shipments with a bunch of different products in it, right? So I’d maybe get a few palettes worth of stuff, but it had 30 different SKUs in it. These had to be un-boxed, labeled, and then sent in.
Comparatively, today when I’m ordering much bigger orders of just one item, so 1,000 units of the same SKU, I’ve systematized a lot better now so that I’m just using a freight forwarder. So we don’t actually ever have to touch this inventory. So now I use this company called Flexport. I order from China, they ship it on a boat, it arrives at their warehouse in LA, and they unpack it from the containers. They put it either on palettes or just mail it and UPS to Amazon’s warehouse, and I never actually have to touch the inventory anymore. So that employee, now he’s just part-time for me, because I still have a few of these items that I’m selling wholesale, but not many.
Other than that, most people find that probably the most time consuming part is finding products and setting up the listings, because after that literally pretty much all you have to do is just reorder, right? Which that only takes a few minutes once you figure out how to do that. Over the years, I’ve definitely systematized it better by using more third parties, like I said, the freight forwarder. That was a big part of it, because before I was literally receiving all these boxes at my house and having to reship them.
As far as software goes, of course, I’m using Jungle Scout to do all of the product research type stuff. Before, that was the biggest bottleneck was finding new products to sell, and that’s kind of how it was born. Other than that, I don’t use too much. Like I said, I use Forecastly now for my general inventory management, and then other than that, essentially just the Amazon Seller Central dashboard.
Justin Cooke: When you start off niche selection, wondering if you’re going to get the right product, potentially running out of inventory, making sure you have enough cash on hand to re-up, those are the concerns of someone who is just starting out. As someone who’s built their business and has quite a bit of sales every week, every month, every day, what are your struggles now? Why are you not tripling your business next year? What are your challenges today as opposed to when you’re starting out?
Greg Mercer: Yeah, that’s a good question. It’s something I’d probably need to think about more, because why aren’t I planning to do two million, or five million, or 10 million a month in sales? Probably a lot of it is I divide my personal efforts a lot more to the software, just because, to be honest with you, it’s a little more exciting to me. It’s not even really a monetary thing, it’s just I’ve been doing the FBA thing for a few years now. The software stuff is only a year old to me, so it’s more exciting to me, right? It’s a new …
Justin Cooke: Your new baby?
Greg Mercer: Yeah, my new baby, a new challenge, and so forth. But still the thing that’s kind of I guess holding me back the most now, I don’t have the cash flow problem as much anymore. Now it’s a lot of just selecting more items to sell that I know will do well, working with the factories, creating the packaging, and so forth. All those little things start to just add up with time.
Justin Cooke: Yeah, it’s easy when it’s just you, and you’re adding another product, and then a month later or whatever, you’re adding another product. And you can do that, but if you really want to scale, now you need a team of people that are doing product research. You have to take the knowledge that’s in your head and put it into them, and have them do it and execute on it well, right? And then select it, and then test through it. So yeah, your challenges start to change. Now it’s a hiring, it’s a training thing, it’s making sure you’re hiring the right people, and so I think it’s interesting as people’s businesses grow, how much their challenges and their business overall chance.
But let’s talk a little bit about … I got your backstory. I understand where your business is at, in terms of the FBA business. How would that change for someone starting today? Because this always happens, right? Where someone had their path, their entrepreneurial path, and they had some setbacks and some successes, but it may be significantly different for someone starting in 2016. So if you knew what you know know, how would you get started today? Let’s say I had five grand or 10 grand willing to invest in this, I’ve got the time, and I want to start an FBA business. Where should I start?
Greg Mercer: This is a really good question. I think you ask this question on a lot of your podcasts, which is what makes your podcast so valuable, so this is cool. So if I were starting out today, this is what I would do if I had a few thousand dollars to spend. Right away I’d start out with a private label type item, okay? And, I’m going to go ahead and say-
Justin Cooke: Let’s talk about that real quick. So your items, you said in previous podcasts, so I’m going to ramble through them. Tell me if this is wrong, but you’re looking at items probably between 20 and 50 bucks, you’re looking for impulse buys, you’re looking for lightweight and small that’ll fit in a shoe box, you want items that are selling 10 per day or more, you want fast-paced, high volume items, and you want to be able to source at less than a third of what they’re selling for, you want to know if they do ship by air, you want to have no more than 100, 200 reviews. Is that about right?
Greg Mercer: Yeah, or probably even less reviews than that. So essentially I’m looking for a high demand item without much competition.
Justin Cooke: Cool, okay. So it’s-
Greg Mercer: Just add onto that, but all that other stuff was correct, like small, lightweight. Everything else you just said was spot on.
Justin Cooke: Gotcha, okay. So you’re going to look for a product, and the best way to do that is just go to Amazon and start looking through the most popular lists, go to subcategories and additional subcategories, and start finding which products are there. I mean, obviously a better way to use it would be Jungle Scout, which is a software you created. We’re going to talk about that in a bit. I think that’s fantastic as well.
So let’s say that I’ve got that. I think I’ve found one or two products I want to start with. Should I start with two? Should I start with three? Should I start with one?
Greg Mercer: I’d probably just start with one, unless you were really trying to get ramped up quickly. If you’re like, “Man, I need to quit my job in three months,” then you might want to start with a few, but otherwise I’d probably just start with one. Ship it air just so you can get it a little bit quicker, and then right away you’ll learn so much just by doing the first product.
Justin Cooke: Source from AliBaba, ship it by air to myself, take some nice high quality photos, right?
Greg Mercer: Yeah, and photos aren’t somewhere you’re going to want to short out on, you know? So go ahead and just pay a few hundred dollars and have a professional do those. It makes a big difference.
Justin Cooke: And then ship it off to Amazon and hope and pray people buy it?
Greg Mercer: That’s the main gist of it. To get it going, you’re going to need to do a promotion, giveaway items, added discount in order to get reviews. So we’ve created a review group called Review Kick, but there’s a bunch of others, too. Essentially these are just real Amazon shoppers that are willing to say, “Hey, if you give me a 90% off coupon, I’ll leave a review for you,” so it’s a good deal for you, it’s a good deal for them. You need reviews to make sales on Amazon, so it’s a win-win for everyone involved.
Justin Cooke: These are sneaky, but they’re approved, right? You just have to say that you’re leaving a review based on a discount?
Greg Mercer: Yeah, that’s absolutely right. So it’s per Amazon’s terms of service. It’s totally legit. They even have a particular section in there that specifically says, “You can give away a product at a promotional price in exchange for a review, but you do have to leave a disclaimer.” So these reviews just say, “I’ve received this product at a discount, but the review I’m leaving here is honest,” or something along those lines.
Justin Cooke: Yup, cool. And so the ones that take off, they take off. Worst case, right? Let’s say you get a product that’s just not crushing it, right? You’re getting, I don’t know, a week goes by, you got three or four sales, you got 500 of these. This will take some time, but it’s not like you’re screwed. Now some of your money is tied up in inventory. It’s going to be there for a little while, so if you don’t have access to more cash to try other products, it’s bad, but it’s not that bad, is it?
Greg Mercer: No, and that’s what’s so cool about being in the physical products business, right? It’s different from software, like building these websites, whatever. You always do have an asset on your hands, and with a little bit of good product research, you can always sell these products on Amazon. You might have to lower the price cheaper than you’d like, you might have to give away some more promotional type items, but pretty much worse case scenario is always a break-even scenario where it’s like, “Okay, I learned a lot from my first item. I didn’t make any money, because I had to lower my price so much or spend so much on pay-per-click,” but Amazon’s so powerful that if you pick the right niche or product or whatever, you can always move these items.
Justin Cooke: So at what point … Let’s say that you’re just growing out, you found a product. It’s working. You’ve got some sales and you’re trying to scale that up, right? There’s some Amazon paid traffic I can use. There’s some other things I can do to get a bit more traffic to it. I know some people that are building actually Amazon affiliate sites around the niche and then sending them to their listeners.
Greg Mercer: That’s cool.
Justin Cooke: Which is a great way to get affiliate income and get in the FBA business. Some people are buying affiliate sites to then build an FBA business off of, which I think is really cool, too.
Greg Mercer: Nice.
Justin Cooke: So I think those are interesting strategies, but at what point to do you say my efforts, time, and resources are better invested in getting to that second, third, and fourth product than trying to focus on this one?
Greg Mercer: Yeah, so me personally, I don’t use any of those kind of tactics you just named. All I do is pay-per-click inside of Amazon, and for me it’s almost like a set it and forget it thing. I set it up once, I’ll check it in a week and make some tweaks to it, like turn off some words or turn off others. After that, to be honest, I should probably be better about this, but a lot of my products I haven’t check the pay-per-click in months and months. I’ll see that my average cost of goods sold, or the price I’m paying for it is a good amount, say less than 10% on ad spend for each sale. Then I’ll just leave it there, so I don’t try to drive any traffic outside of Amazon on there.
Justin Cooke: Which is cool, because Amazon, it is it’s own traffic source, but what’s cool is if you can get SEO traffic to it aside from Amazon, you’re just increasing your sales additionally. So yeah, I think that’s pretty cool. So let’s say that I’m looking at that second product. Is it better to start with a second product that’s related to the niche? Is there value in doing that? Or could it be completely separate, at all related? Is there any value in trying to think about a customer, let’s say a health and diet focused customer, over one that sells, I don’t know, lamp shades, another one that sells workout gear?
Greg Mercer: Yeah, so I think there may be some small advantages to keeping all your products in the same line. For instance, all health and fitness type products or all patio, lawn, and garden type products or whatever. It’s a little bit neater to have an entire brand. That might help you if one day you try to go off Amazon and create your own website, or if you try to sell this entire brand or whatever, but against popular belief, I haven’t found that having multiple products in the same brand increases sales. So it doesn’t seem like to me that I can ever get these products to show up together and the customers who bought this also bought that or whatever. Some people say that it is true. I haven’t personally found that. So for me personally, I pretty much just … I have quite the hodgepodge of different items. I usually just sell whatever is a good opportunity, even if it’s not related to any of my existing products.
Justin Cooke: I like the concept of kind of a blended e-commerce approach, right? But that doesn’t seem to be the approach you took. So you’ve got the advantage of you know Amazon FBA really well. You’ve got that down, and so you’ve doubled and tripled down on Amazon FBA, right? So that’s going really well for you, but doesn’t it put you at risk to some degree? You’re on the Amazon platform. If you had a problem with Amazon, it would all go away. What if you did some e-commerce, and you started building a brand off of Amazon to where if the Amazon stuff went away, it would be a huge blow, but you still have businesses and sales coming in through other channels?
Greg Mercer: Yeah, so like you said, I’m definitely at a huge risk. I’m totally reliant on Amazon for this, right? I’ve obviously thought about this a lot before, and what I’ve decided was time is obviously my most limited resource. At one point I was starting to try to build a Shopify store for one of my brands. Essentially just needed a lot more work, a lot more time. I wasn’t very good at it, and what I just decided was I’m just going to milk this cow for everything it’s worth while the getting is good. Seriously.
Justin Cooke: I get it.
Greg Mercer: It’s like I could spend a lot more time on diversifying my income and all these other e-commerce stores or whatever right now, or I can just make as much money while the getting is really good, and just reinvest that into maybe just, you know, other avenues where there’d be just stocks or whatever it may be.
Justin Cooke: Yeah, your personal income.
Greg Mercer: Sure.
Justin Cooke: Yeah. So Joe and I chose the same route. It was last year or the year before. We had a bunch of other things we were doing. We were helping people with keyword research, and we were helping people build sites, and we just looked at everything. We’re making money with this. It’s profitable, and we said, “Look, we should focus on our biggest opportunity and really own that.” There’s just so much value in that, so like you, we decided to double down on buying, selling, and investing in sites. It was a question as to whether that would work out, but it’s gone really well for us. Obviously, FBA has gone really well for you.
Again, and we’re going to talk about this in just a second, but the software business that you built, which is basically helping people with niche selection for Amazon FBA, again, is based on Amazon, but you know, if you’re going to hitch your wagon to another company, Amazon’s not a bad company to do it with, right? I mean they are massive. I don’t think they’re going anywhere anytime soon, so it could be worse for sure.
Are you worried at all about the competition? Everyone and their brother and sister are selling courses on how to get into Amazon FBA. Are you less worried about it because it seems like a lot of people that join don’t really know what they’re doing or they’re business newbs, and so it’s easy to beat them, or is it just there’s just so much out there that it’s not that big of a worry?
Greg Mercer: It’s probably a little bit off both. So the really cool and sexy items are just so saturated that it’s no longer worth it. So if I was just trying to think of items off the top of my head, you’d probably come up with a bunch of ideas that are way too saturated or competitive. So what I’m selling now is a lot of these really strange, weird items. Stuff you never think of that once you start seeing all these, it’s amazing how many products on Amazon. There’s like millions and-
Justin Cooke: Yeah, like people are buying these? Really? Like 40 of these a day? This is crazy? Yeah, I got it.
Greg Mercer: Right, so just millions and millions of these really just weird items you probably didn’t even know existed. I was looking at one the other day and it was a board people twist on to practice ballet, and these are just all the really weird things people are buying on Amazon, but you probably don’t know exist. Those are the good opportunities now. I think there’s plenty of-
Justin Cooke: A little more obscure.
Greg Mercer: Yeah, a little more obscure, but I think there’s just plenty of products to go around even for years to come. If you think about it there’s literally millions and millions of products that are selling well on Amazon. Even if these courses are selling to 5,000 people and 8,000 people here, it’s still just not that many people compared to how massive Amazon is and how many products are on Amazon.
Justin Cooke: It’s shocking, right? You’re like, “Wow, people are buying this, and they’re buying a lot of them.” I ask that question, I think it’s a fair question. I think some of our listeners would ask it, but there’s another part to that question where in any business, in any business model, when it’s new, everyone’s all fired up about it. A couple years go by, especially these online businesses, a couple years go by and people go, “Ugh, that’s old news. That’s used up. No one’s doing Amazon FBA anymore,” and people were saying that when we got into building AdSense sites back in 2010, and we crushed with those. So they’re like, “Oh AdSense is dead. It’s dead!” Right? And so absolutely not.
I think it’s the same thing with Amazon FBA. It’s been out for a little while. People have heard of it, and they’re just like, “Oh. They’re chasing some new, shiny object,” right? So if you’re looking to get into Amazon FBA, I still think it’s viable. I mean, there is some concern about how many people are going to get in and where it’s going to go, but I think if you’re smart, you’re savvy, you can make this business work.
Let’s get into your software business a bit, because I think this is really interesting. You’re excited about it. I’m excited about it. Joe and I have had our own development and software issues, so this will be helpful for me, but you built this software company. It’s basically … Our audience is familiar with LongTailPro. It’s a keyword research thing for organic keywords and trying to rank your sites. Yours is like the LongTailPro of FBA. Is that a fair description?
Greg Mercer: Yean, that’s a good analogy. Yeah, Jungle Scout helps a user find a good niche or a type of product to sell on Amazon. So like I said it’s pretty … I shouldn’t say it’s tough. It’s really time consuming to do it without any tools, right? You could find a good keyword to target without LongTailPro, but it’d be pretty tough and time consuming, right? So Jungle Scout would be similar to that.
Justin Cooke: So were there other tools out there and you said, “Oh I think I can make them better,” or it’s still a new market? Or were there no other tools, and you said, “Oh I think this is going to be big. I can build this now,” and also did you build this for yourself or did you build this externally?
Greg Mercer: Yeah, so there weren’t many tools out there. It was pretty much a new market. There was a few that were kind of doing it a little bit, but not very well. So originally, I was like I needed this for myself. I think I talked about this earlier, but it was the biggest bottleneck in scaling my business then, and probably still is is finding new products to sell. So I literally had a bunch of VAs from the Philippines that were … I would give them keyword ideas, and they would literally spend a few hours filling out a spreadsheet with all this information that the Jungle Scout extension, which was our first product, does in a few seconds. So it was literally just like, “Man, I need this spreadsheet filled out quicker. How can I do it?” And that’s how the first product was born.
Justin Cooke: So we talked to you before the show. You’re not a developer, and so how did you even think you’d be able to develop something? You had a couple of VAs. They were doing spreadsheet magic, right? Doing all this behind the scenes research to give you all the numbers so you could determine whether it’s a good niche or not. What led you to thinking, “Ah I can turn this into software?”
Greg Mercer: Yeah, so prior to that, I had a few failed software attempts. Essentially they just were never developed well enough for me to even be embarrassed to sell them. They were so bad. So I guess previous attempts, I tried to outsource to some of these low-cost areas. Before I had a few developers from India, and so forth, and the communication barrier was pretty tough. I, for one, was not even good to communicate with them, because I had no idea what he was talking about. I wasn’t a technical guy and so forth.
So I think one thing that really helped me with this one is right off the bat I hired someone from Vancouver. He was really sharp. There was no communication issues with me. He had prior software products he’d built that were similar that he could show me. He cost a lot of money, but that was like … Without hiring him, I probably would have never gotten this one off the ground also.
Justin Cooke: So I gotta ask, because we’ve hired developers, too. Were you paying him $100 an hour? Was it like an Upwork thing? Did you pay him five grand a month? Two grand a month? Part-time? How did that work?
Greg Mercer: So this one I hired on a project basis, but good developers, expect to spend to spend 60,000-70,000 for more entry or intermediate level, and then over 100,000 to 150,000 a year for a more advanced type programmer or something. That’s what these really good guys demand, and that’s what takes a higher-
Justin Cooke: So you were doing this more of a three-month project or a two-month project or however long the project took, but you want to pay them X amount. I’ll pay you 10 grand, 20 grand, whatever, and you do this project for me. He said sure, and he helped design it?
Greg Mercer: So I had come up with some really good wire frames to give him. I was like this is what I want it to do, I want it to look just like this.
Justin Cooke: Good for you.
Greg Mercer: So we specked it out pretty good from the beginning. That would be something I learned from my two failed attempts. My two failed attempts, I was terrible at … It’s all about communication, so I would just try to write something out without any wire frames like, “I want it to do this and this and that,” and that’s just not how a developer’s mind will think. So a lot of it was a learning curve for me on just communication, management skills, all the [crosstalk 00:45:43]
Justin Cooke: Yeah, when you try to send them an email describing it, you can feel them rolling their eyes with this kind of description. They’re like, “That doesn’t work for me, buddy. I need the wire frame. I need to know where to click, where you want the button on. I need to know many options you have.” They’re very technical, so I totally feel your pain here. So you had it wire framed, gave it to this guy on a project basis, and what was his goal? Or what did you want him to do with it?
Greg Mercer: So at that point, I wanted him to turn it into a working prototype, and I went for the lean startup approach. So I wanted every thing to work really well, but I cut out as many features as I could. So really stripped it down to the bare minimum, and this was just good enough so that it’d work well for me, it’d work well for others, but it wasn’t very feature-rich yet. So that’s a great way to try to prove demand or just, if nothing else, a good way to vet a developer, make sure you guys can work well together, and so forth.
Justin Cooke: And you fought the scope creep, the, “Oh this would be cool,” and, “Wouldn’t it be nice to have this?” You fought that and said, “Look, let’s get something working,” and you got that up and working, and it worked, right? It was something you could use.
Greg Mercer: Absolutely, so it worked. Like I said, it was pretty stripped down, not many features, and I was actually able to … One of the beta versions that he sent me, I was able to make a quick five minute YouTube of it. I actually posted it in some YouTube groups, and I was actually able to pre-sell it to a few people before it was even ready to be launched. That’s when I really proved that there is a market for this.
Justin Cooke: That’s like like the Foundation Approach. I don’t know if you’re familiar with those guys, but they like to do the pre-sale stuff. Yeah okay, that’s cool. So you’re able to pre-sell it. So that helped you, even earlier on, know that there’s demand, because they weren’t just telling you they wanted it. They were actually paying you for it?
Greg Mercer: Yeah, that’s exactly right. I said, “It’s going to be X amount of dollars in a few weeks. If you want to buy it now, I’ll give it to you for half price,” and I think I made eight or 10 sales or something on it, which to me was just incredible, but at that point, they saw a video of it. I was like, “I’m just putting the few finishing touches on it and so forth. Yeah, you can get in on it at a cheaper price now.”
Justin Cooke: So you got this plug-in. It works for you. It’s at the point where you find it helpful, but it’s not amazing, it’s not like, “Oh my God. This is the most beautiful software I’ve ever seen.” You’re just like, “Okay, it’s cool, and it helps me. It’s functional.” At that point, do you decide to sell it? Do you put up a site? What do you do for marketing and sales channels?
Greg Mercer: Sure, so I just put up a basic WordPress site. Had the video on there, whatever, description, screenshots, etc So I put up the WordPress site, I shared it with some of these people I’d been previously communicating with in Facebook groups and so forth, and then I was like, “Crap, how do I continue to spread the word?”
Justin Cooke: Yeah, okay got it up. Now what do I do? Okay, so did you know a bunch of people in the FBA at the time? Did you reconnect to any of the communities? What were your first thoughts on how you’d bring in customers?
Greg Mercer: Yeah, so I was fairly connected with some other communities. Like I said, essentially just through Facebook groups. Places that I was going and asking questions. I was getting value back by answering people’s questions and so forth. I think a few of them knew that I had a fairly successful FBA business. I would try to help out as many people as I could, so I was well-known in some of these very small communities.
Justin Cooke: Yeah like niche known like, “Yeah, I know him. He’s a really good FBA guy,” and you were helping them out, so they knew you from that a bit. So when you launched this, they said, “Oh shit. It’s gotta be pretty helpful.”
Greg Mercer: Yeah, I think so.
Justin Cooke: Cool, okay. So you started to get some sales that way. At what point did you actually start to realize that you were on to something big with Jungle Scout?
Greg Mercer: I think it started to spread through word of mouth pretty well. I kind of just put it up, I was still completely focused on my FBA business, and just through word of mouth, we were starting to do one or two sales a day. At this point, I still just had this WordPress site. I wasn’t really doing any outside marketing yet, and that’s when I was like, “Okay, I may be really onto something.” The feedback I was getting from people was like, “Oh my gosh. This is saving me hours and hours worth of time,” and so forth. I was getting this awesome feedback. They were giving me like, “Men, if it could just do this, that would be so cool,” so I was making down a future feature list. It just really seemed to be picking up steam.
Justin Cooke: And this is a Chrome extension, right? And you were charging, I’m guessing, not that much for it at that time. What was it? Like $30, $50?
Greg Mercer: Yeah, so at that point, when it was really stripped down, I think I was selling it for $67.
Justin Cooke: Okay $67, and then over time you bumped prices. How did you … Well two things. You expanded obviously, made it look prettier and shinier, you added features and functionality, and that was based on feedback you were getting from users, I’m guessing. So they were basically paying you to beta test, which is helpful and awesome.
Greg Mercer: Yeah.
Justin Cooke: At what point did you … Because one of the concerns is Amazon changes and you have to change the extension, right?
Greg Mercer: Uh-huh.
Justin Cooke: So were you constantly having to update your tool or was it not that bad in all, in terms of what it was scrapping?
Greg Mercer: I was updating it all the time anyway. Each week we’d add a new feature that someone requested or so forth, so I was reinvesting this money I was making in sales back into developing more features to make it shinier and prettier, whatever. So we were constantly making lots of updates anyway. So it was pretty rare for the whole thing to break. Sometimes one little spot stopped working well, but like I said, since I kept working with this developer, I’d just be like, “Oh can you fix this real quick?” We’d have it fixed in a few hours, so it’s never really been a very big problem.
Justin Cooke: Cool. Okay was it the same guy who did the initial setup, or did you start working with new developers?
Greg Mercer: Yeah, so I started with the same guy from the very beginning. Still on with us. So now we have six full-time developers, including him. The rest of them are actually all essentially buddies of his. I hired him from Vancouver. He had two friends that came on to work on Jungle Scout with him. They had friends or whatever, so now we have six guys, all in Vancouver, where the rest of our team is distributed throughout North America, and yeah. That’s how it happened.
Justin Cooke: Yeah that’s cool, so basically he’s working on a project … I know what happened. He’s working on this project, he’s like, “Wow.” He’s like, “People are really digging it. I really like the project, it’s fun. I think I can get other people to be interested in this project. They would find it fun and challenging,” so they start working on it, too. All of a sudden you’ve got a bunch of people over there helping you out, and luckily the business grew to a level to where it could support hiring these people and actually needing these people. So at some point you switched it to a web app. What’s the change that brought that about?
Greg Mercer: I guess I was looking for more functionality than our Chrome extension could offer, so that solved one large pain point I had. Like I said, I was filling out these spreadsheets with all this relevant information, like how many sales it had each month and so forth. At that point, that solved one bottleneck of my business, so I had a new one. So at that point my new bottleneck was, okay, I need to come up with … So essentially the extension can verify a particular niche or it can tell you whether it’s a good one to go after or not. My next problem was that I needed more product ideas, more niche ideas to go after, so that’s how the web app was born to solve the next bottleneck. Then it was too robust and powerful to fit into a Chrome extension. So that’s when we built a more typical SAS base product.
Justin Cooke: It’s heavier, it does more, it’s got all the bells and whistles. Also has that sweet, sweet recurring, right? So from an entrepreneur’s perspective, you’re like, “Oh my God. If I can do recurring, I can see this stacking up. It’s going to be awesome.” So was there a point at which you were like what can I add to this? What would be valuable enough to charge a recurring fee, and did you have any hesitation is switching over? Did you worry about negative feedback from customers, or were you not worried about it?
Greg Mercer: Yeah, I was worried about that a little bit. A lot of the … Still to this day, the features that were developed and so forth are based off customer feedback. I imagine it’s probably like this everywhere, but out customers are really good about constantly … We get emails every day saying, “Man, I wish it did this. Man, I wish it did this. Man, I wish it did this,” and a lot of it you do have to kind of filter through, because it’s like, “No, that’s not the path that we’re headed. This is a product research tool. It’s not a whatever tool.”
Some of it you have to filer out, and then some of it are really good gems, or you’ll start to see recurring themes. It’s like, “Man, a whole bunch of our customer base wants it to do this.” We’ve also sent out surveys, so those would be really helpful. So that’s how the features evolve and the product evolves. Just like everyone else, you’re always worried like, “Man, I don’t know if I can get this much money for it,” right? But looking back, it’s always silly, because it seems like every time you raise the price, you still get the same amount of business, right?
Justin Cooke: Yeah. Have you though about this? You have a recurring right now, and you must know, or maybe it’s still early because it’s relatively new, but at some point you’re going to know how long the average customer stays. How do you balance … It might be better to charge … Let’s say that your average customer pays let’s say $70 and stays 10 months. Right? $700. It might actually be better to sell it lifetime at $997. Are you going to test price points like that, or there’s some fear and concern that comes with that, too? Do you think you’ll stick just with the recurring?
Greg Mercer: Like you said, we’re just now starting to figure out a good lifetime value of a typical customer. So we do definitely need to test that. Like you said, it is I think scary for any business owner to test pricing, because inevitably there’s going to be some people upset. I don’t want any of our customers to be upset, right? This is my baby. I want all of you guys just to love it and love Jungle Scout and so forth.
Justin Cooke: You don’t want to piss anyone off. It’s easier to raise prices though than lower them. If you lower them, you’re going to have some customers that are like, “What? You didn’t tell. This is crazy or outrageous.” It’s-
Greg Mercer: I guess that’s the thing that terrifies you, right? It’s like if I raise it and no one continues to buy it, and then I have to lower it, I guess you can give all those people the new price who bought it for more expensive a refund or whatever, but at some point we do need to do some more price testing like that. I think that’s a sign of any healthy business.
Justin Cooke: It is, but that transition’s really cool, so our buddy Spencer over at LongTailPro, he had, for the longest time, a set price, and then he tested it really slowly, but the platinum version. Put this little piece of recurring, it was $10 or $20 a months or something. Then he just sold it, and they’re now doing the full on recurring at $60 or $70 a month or something like that. Yeah, in terms of your path, they’re following that same model. It’ll be interesting to see how it turns out for them. I know that it’s been good for you, and I expect you guys to continue to grow. Yeah, man, really exciting stuff. What are your plans for Jungle Scout? Where do you see it, just being the best niche selection tool out there or product tool out there, or do you plan on expanding wider and doing more things?
Greg Mercer: Yeah, so with Jungle Scout, we are very focused on just being the best product research tool out there. I don’t think it will ever do anything else. Jungle Scout is going to be where you want to go if you’re looking for a product to sell on Amazon. That being said, we’ve started another side project called Review Cake, which again is another software product. It’s in beta right now, and we want it to be the go-to place if you’re doing a product launch and you need reviews and so forth, which is going really well so far. So yeah, those are the plans right now. I don’t know if it’s ever going to expand out of there. What I’ve learned is developing software, and I’m still learning this today, is way more time consuming and way more costly than you can ever plan for.
Justin Cooke: That’s a good point. Everyone likes to think … They’ll look at Jungle Scout now or they’ll look at other businesses that are like yours and at your position, and be like, “He got so lucky,” or the negative people will say, “He got so lucky,” and other ones will be like, “Oh it just seems so easy. He got it to that level. It seems so easy.” You’re like, “No, you have no idea how much money, how much sweat and tears they’ve put into this,” right? No one sees that, because no one’s paying attention when you’re building it, right? They only pay attention when you’ve started to do really well.
So anyway, Greg, I think it’s amazing. I think Jungle Scout is really helpful. I know a bunch of people that personally use it for their FBA businesses, so I know you’re definitely on the right track, man. If anyone wants to get in contact with you are you on Twitter? Email? They want to check out junglescout.com, obviously they can do that. Where else do you hang out?
Greg Mercer: Yeah, so the best place is probably junglescout.com. In our blog we’re really active. I post at least once, usually twice a week, so I’m really good about responding to the comments in there. We have a Facebook group called the Amazon FBA Competitive Edge. If you just search for that on Facebook, I’m pretty active in there. I hang out. There’s also a whole bunch of other really smart people in there if you want to ask questions, and you can always tweet me @mercer_greg, and yeah. That’s the best way to get into contact with me.
Justin Cooke: Awesome, Greg. Really appreciate you coming on the show, man.
Greg Mercer: I appreciate you having me. I’ve enjoyed it, and I think your audience should get some great takeaways from it.
Justin Cooke: Thanks buddy.
Greg Mercer: Take care.
Announcer: You’ve been listening to the Empire podcast. Now some news and updates.
Justin Cooke: Alright Joe, let’s get into some news and updates. First off, I want to mention that we’re upping our case studies on Empire Flippers. We’re doing a lot more content about case studies, both with buyers and sellers talking about their experiences. We’re also starting a new business model series of blog posts for people that are brand new. Understanding the AdSense model, the Amazon affiliate model, the FBA model, what it means for you as a potential buyer, what you should look for. I think these are all interesting bits that our audience is going to appreciate. We’re also doing more podcasts. We’ve got a ton of emails going out in the next few weeks and months. We’ve been really busy on the content side of things.
Joe Magnotti: Yeah, I’ve been noticing that. You and the new guys over there. Actually, we’ve had a lot of … Well, maybe not a lot, but we’ve had an uptick in phone calls from newbie buyers and people that are not familiar with Empire Flippers, people leaving a message that says, “Hey, call me back. I don’t understand what this is all about. Found you online,” so it is having an impact.
Justin Cooke: One of the things that we’re changing too is that you can, as a potential website buyer, you can specify which types of sites you want to buy, so you can give us the price range, you can tell us what specifics you’re looking for. We’re going to start sending emails that match that particularly. So if you give us this range, we can send you listings in that range, and I think that will really … If I’m looking for a $300,000 or larger website or online business, I don’t want to hear about these $15,000 affiliate sites. So I think we’re going to be able to really hone in on the message and what people are looking for, and deliver it to them.
Joe Magnotti: Yeah, and so many buyers have been asking for this as our marketplace gets bigger and more listings. It just makes sense that people are segmented and we target them correctly.
Justin Cooke: The second thing I want to mention is we finally got a program off the ground that you and I have wanted to do for a long time and just haven’t, and that’s our customer love program. So this is finally underway in beta, and what this is is it’s a way for us, as a company, to thank specific buyers and sellers that have done business with us after the deal. So we’re able to send them a gift and communicate with them, and we’ve got that running.
It’s weird because we’re in a position where we didn’t start this from the beginning, so it just looks like a cost, right? You and I were talking about this after we got started. I had a call with you, right? And I said, “Joe, we’re going to spend a few thousand bucks on this, several thousand dollars a month. We don’t really know what the return it. Is that really the best use of our money?” and you said, “Look if we don’t start it now, when are we going to start it?” Right? Because we’re not going to do it when it costs even more, and it just feels right, right?
Joe Magnotti: Yeah, I think I’ve said this before, but I’ll say it again. You press when you’re ahead, and I think this is one of those marketing type of initiatives that we’ve always wanted to do. It’s something that distinguishes us from everybody else, and we can afford to do it.
Justin Cooke: Another point of interest is, Joe, do you remember that guy that sold the Ship Your Enemies Glitter site a while back? He sold it for $85,000.
Joe Magnotti: Yeah, an amazing little business for sure.
Justin Cooke: Yeah, so I remember talking to you about it. I remember seeing other people talk about it online and we were all like, “I don’t know about that deal, man.” The seller, the guy who built the site got a ton of interest, right? A bunch of press about it. Then he was getting so many orders to ship their enemies glitter that he just shut it down, and then he turned around and sold it for $85,000, and we were like, “I don’t know about that deal.”
There was actually another broker, one of our competitors in the space, that said he would get on video and dump glitter over his head if the guy actually made it make sense and made if profitable. Well, I want to do a nice little follow-up with the buyer and say was this guy a donkey? What is the deal? How did he spend the $85,000 on this, and did he actually get a return. So we reached out to him and asked him, and we’ve got a guest post of that on our blog. Turns out he did pretty good. He’s building a nice six-figure empire on the back of a glitter site he purchased on Flippers, so that’s pretty interesting. I’ll like to that in the show notes if anyone wants to check it out.
Joe Magnotti: Yeah, I’m very interested to hear it straight from the horses mouth. Did he have any struggles?
Justin Cooke: He did, but not really. As soon as he turned it back on … He’s kind of in the gag kind of business, so it made sense. It was kind of an opening for him to do a bunch of other things. I think he said something about that being the roughest, the most aggressive thing he’ll do, and some of them are more fun and silly, but it really opened him up to do some of these other things, and his business has been going really well. The sales have been really steady and strong for the business.
Joe Magnotti: Cool.
Justin Cooke: Las point of interest, man. We’re trying to come back from a killer April where we did the most deals we’ve ever done, the largest amount deals we’ve ever done at more than one million in sales in April. So we crushed it, and now we’ve got this hangover month in May where I think we’ve only done to date $200,000 for the month or something. We’ve got some good things lined up for the end of the month, but yeah, dude, we crushed it in April.
Joe Magnotti: The broker game, man. You always start back at zero, but yeah, I think we can have a good month. More than a half million dollar month for sure, and if we get lucky with a couple of the big whales that I’m working on, we might even get close to eight or 900,000.
Justin Cooke: Alright man, time for some listener shouts, also know as the indulgent, ego-boosting, social proof segment. First up, we’ve got a five star iTunes review by Ace Is Great podcast from Paul Lipsky. “I really like these guys. They’re funny, smart, engaging, and they have a ton of relevant content when it comes to my new e-commerce store. Definitely a huge inspiration for me. Thanks for the great podcast.” Well thank you for listening, Paul. Glad we could provide some value.
Joe Magnotti: Yeah, thanks a lot, Paul.
Justin Cooke: I asked a question on Twitter about FBA or Amazon affiliate sites. Which business site would you prefer to own? And I got some interesting responses. Bluesheepdog sent me a message and said, “Affiliate. Less risk, less time and investment. Making money from electrons.” I thought about that. I was thinking yes, I kind of agree. If the sites are earning the same right now, just to use FBA or Amazon. FBA has more moving parts. I’d take the Amazon affiliate site, but I think FBA in general, when you’re starting off, could probably be bigger in the niche. You’re going to make more money. It’s going to be a larger, more involved site, so I don’t know that that’s a fair comparison.
Joe Magnotti: Yeah, I understand where you’re coming from, but, man, I still like that Amazon affiliate program, especially if you’re going out there and you’re building something for the first time, the amount of capital needed to build a small Amazon affiliate site is limited, whereas you can get stuck with a lot of inventory if you don’t know what you’re doing with Amazon FBA.
Justin Cooke: That’s true. Tyler Burt says, “Definitely Amazon affiliate. It would be great to pair the Amazon affiliate with a FBA model,” so he’s thinking along our lines. I love that kind of model, the affiliate site mashed with an FBA business. I think that is a best of both worlds, Tyler.
Joe Magnotti: Yeah, I think it’s really cool, and if you can convert them as well, that’s the end all, be all of a really good business as well.
Justin Cooke: That’s it for episode 155 of the Empire Podcast. Thanks for sticking with us. We’ll be back next week with another show, and you can find the show notes for this episode and more at empireflippers.com/JungleScout. And make sure to follow us on Twitter @empireflippers. See you next week!
Joe Magnotti: Bye bye, everybody!
Announcer: Hope you enjoyed this episode of the Empire Podcast with Justin and Joe. Hit up empireflippers.com for more. That’s empireflippers.com. Thanks for listening.