645: What 300 7-Figure Sellers Told Us About The State Of Ecom With Andrew Youderian

645: What 300 7-Figure Sellers Told Us About The State Of Ecom With Andrew Youderian Speaker 1: Welcome back to the podcast, the show where I cover all the latest strategies and current events related to ecommerce and online business. In this episode, my buddy Andrew Youderian is back to walk me through his annual survey of 307, eight and nine-figure store owners from his community. And honestly, some of what came back caught us both off guard. We get into the stuff every store owner is quietly wondering about, where the smart money is moving, what's working, what's quietly falling apart, and a couple things that genuinely surprised us. But before we begin, I just wanted to take a second to mention that I have a free ecommerce community that I'm incredibly proud of and would love for you to be a part of. It is a place where real sellers come together to share wins, troubleshoot problems, and support each other through the ups and downs of building an online business. You can join completely free at MyWifeQuitHerJob.com slash community, and I would love to see you there. That's MyWifeQuitHerJob.com slash community. Now on to the show. Welcome to The My Wife Quit Her Job Podcast. Today, I'm thrilled to have my good friend, Andrew Youderian, back on the show for like the seventh time, I think. And if you don't know Andrew, he's one of the OG ecommerce creators in the space. I think we've been both doing this since 2009. He's run a number of ecommerce companies over the years, including Right Channel Radios, Trolling Motors, and an incredible seatback organizer company called Rough Routes. He's best known for ecommerce fuel. He has a podcast and his community of seven, eight, and nine-figure ecommerce entrepreneurs. Every year, he surveys his entire community to get a view of the entire ecommerce landscape. It's a long ass survey, which I always take. The benefit of putting out such a comprehensive survey is that there's a lot of interesting data to be gleaned from it. In this episode, We're going to discuss the state of the ecommerce merchant from this data. And with that, welcome back. Speaker 2: What's up, Andrew? I think this is the first time in an intro you haven't taken the chance to get a couple of jabs in, which I'm surprised about, man. Usually, you come at me a little faster. Speaker 1: How's Rough Routes doing? How's that company doing? Speaker 2: It's great. It's great. We had a huge exit to private equity, so I'd keep them down low. Speaker 1: Yeah, because paper maps are coming back, I hear. Speaker 2: Dude, paper maps are awesome. There's definitely people out there that know what I'm talking about. There's something about having a paper map that just, it's analog. People understand this stuff. Thanks for having me back on. It's good to be here. Speaker 1: I was meaning to ask you, did you skip a year for the survey? Because I complain every single year when I'm filling out. I don't remember complaining about it last year. Speaker 2: Yeah, well, I think what you mean is that normally you just rely on it to help with the keynote at Sellers Summit. You didn't have it last year and so you were like, I actually have to write this from scratch. What is this, Youderian? Come on, write my keynote for me. So yes, I did skip last year. I'm sorry. Apologies for making your keynote more difficult than it had to be. Speaker 1: Actually, why did you skip last year? It was a hard year, I know. Speaker 2: We just had some family. We were doing some family stuff, taking a little time off and just didn't prioritize it. Speaker 1: That was your year off, your sabbatical year. Okay. All right. So this report is 61 pages long. I don't know where you want to start with this. I guess let's just go with the key points here. It'll be very interesting for everyone listening if you want to know what the landscape is like. Speaker 2: Yeah, do you want me to hit the kind of the four? I have kind of four biggest takeaways, four or five biggest takeaways. You want me to go through those quickly and then we can kind of... Speaker 1: Well, actually, before we even get there, like how many people took this survey? What was like the dollar value of the merchants in the survey? Just to get an idea of what... Speaker 2: Yeah, so we had 300 ecom stores take this survey. I'd say you're probably median store owner was probably in the, I'd say probably the $3-5 million range. But we had a lot in the eight, I'd probably say, just guessing, I can follow up with these, but probably 20-25% in the eight-figure range and then maybe even 5% in the $50 million and above, a handful of $100 million plus stores. Yeah, so 300 and probably represented about $3.5 billion in aggregate revenue in GMV. Speaker 1: Okay, nice. And it's a good slice of the small business ecommerce crowd. And then I think in your community, you have over 1,000 people, right? Speaker 2: We do, yep. Ecomfuel, it's 1,000, right around 1,000, seven, eight, nine-figure ecommerce businesses, yeah. Speaker 1: I thought this last survey was longer than normal. Do you think that's why 300 out of the 1,000 filled it out? Speaker 2: It was probably roughly about the same size. It's about 50 questions, so it's a big ask, right? Speaker 1: Right, yeah. Speaker 2: We'll give away a free round-trip business class ticket anywhere in the world as kind of a carrot for it. In the past, we've had a little more adoption of it, but yeah. Maybe we got to shorten this up a little bit. It's so hard to know because that's where all the good data comes from, but it isn't this. Speaker 1: I know. I know. Speaker 2: Yeah. Speaker 1: I know. I mean, I curse each time. I'm like, I fill out 30 questions. I'm like, what? There's like another five pages? Yeah. Anyway. Okay. Let's get to the data because it's really good. I mean, that's the reward, right? You get a lot of good data. Speaker 2: It is. Speaker 1: It is. So let's talk about it. Speaker 2: Yeah. Speaker 1: All right. So where do you want to start? Speaker 2: Let's start. Oh, great. Good. Speaker 1: No, I was going to say, let's start with trends because I know in my audience, there's people interested in drop shipping, domestic wholesale, private label, manufacturing and whatnot. Let's start with that because I think that's where a lot of people are listening. Speaker 2: Yes, absolutely. So if you look at, there's kind of two things we track. There's business models and then there's competitive advantage. And so we track both of these. And I think what's interesting is not even necessarily I think the trends are most interesting as opposed to just the aggregate, who's doing what. Let's take business models first. We have manufacturing, reselling products, a hybrid approach, private label and drop shipping. Those are roughly the five big buckets we measure. And the big takeaway for this year's report was that every single category decreased or roughly stayed the same in terms of what people were doing as their business model except for manufacturing. Manufacturing was up almost 50%, like a massive jump. Everything else either decreased meaningfully or stayed the same. So I thought that was fascinating in terms of just huge adoption of manufacturing over the last three years and this is over a three-year period. Speaker 1: Can we define a few things real quick? Speaker 2: Sure. Speaker 1: What's the difference between private label and manufacturing? Because when you have a private label brand, you're having it made, right? Speaker 2: You are. Yeah. So I think it speaks to the level of unique proprietary value add you're putting into your product. If a private label is like, you go on Alibaba, you find an existing product, you slap your brand on it and resell it. Manufacturing is like, hey, I've got, like right, I'm looking at my desk, there's this thing called the Roost Stand here. It's this laptop stand that one of our, James Olander, one of our committee members makes. That's proprietary. He built that from the ground up, manufactured it. That's the difference. Speaker 1: Got it. Okay. So your definition of private label is my definition of white label. When you take something existing, you put your brand on yourself. Okay. Got it. Makes total sense. Okay. Yeah. I feel like, I'm surprised though, did dropshipping not fall off a cliff? Speaker 2: Dropshipping did too. Dropshipping went from 9% three years ago to 4% this year. So yes, took a huge hit. Private label or white label as you call it, 18% down to 11%. The hybrid model, so you're reselling existing items as well as your own stuff, 20% down to 14%. Reselling stayed about the same at 11% to 12% and then manufacturing saw that huge jump. Speaker 1: Yeah, I mean, that's definitely the trend that I see within my community. Well, first off, thanks to the de minimis going away, that basically destroyed all dropshipping, in my opinion. And the reselling market, which is white label, I guess, in your survey, it's just too competitive now on Amazon to just slap in two products, right? I mean, it's just a race to the bottom. So private label, or in your case, manufacturing, is definitely the way to go. Speaker 2: Yeah, so you call, yeah, so private label, okay, I think you, private label, white label, we're using those words interchangeably, so. Speaker 1: Yeah, white label is when you do nothing. Private label is when you, which is what I call manufacturing, because we're confusing the audience here. Private label is my, your manufacturing is my private label, yeah. Speaker 2: Oh, interesting, okay. We'll argue about that off mic. Unknown Speaker: No, there's no arguing, it's just. Speaker 1: Okay, well, that's good to know. So if you guys are listening and you're thinking about, Taking the shortcut is what I always think about it and just, you know, taking something from Alibaba and just throwing it up. It's going to be a hard road. Speaker 2: Yeah, and I think this kind of ties into maybe the next, reel me in here if I'm getting way out of line on the leash, Steve, but I think one of the other big takeaways was looking at Amazon and we looked at two things. We looked at how many people are selling on Amazon and that is actually at an all-time high. About two-thirds of sellers are actually selling on Amazon. But when you look at how much revenue is being generated from Amazon, that actually has fallen and cratered back to like 2017 levels, almost 10 years ago in the earlier days of the Amazon kind of gold rush. And what that tells me is that People are using Amazon as a supplemental channel, as a demand capture channel but they are increasingly building their business off of Amazon and I think the reason is because it's like you talked about, it's gotten a lot harder for white label for if you're just reselling existing items or very light, just repurposing. Fees have gone up there, competition has gone up there and so I think it's A lot of people are just looking at it and saying, you know, I'm going to go, if people are searching for Bumblebee linens there, it's great. I'll capture that demand, but I'm not going to go try to make this the point of my spear in terms of growth. Speaker 1: I just wanted to take a moment to tell you about a free resource that I offer on my website that you may not be aware of. If you are interested in starting your own online store, I put together a comprehensive 6-day mini-course on how to get started in ecommerce that you should all check out. It contains both video and text-based tutorials that go over the entire process of finding products to sell all the way to getting your first sales online. Now, this course is free and can be obtained at MyWifeQuitHerJob.com slash free. Just sign up right there on the front page via email and I'll send you the course right away. Once again, that's MyWifeQuitHerJob.com slash free. Now, back to the show. So, did you say the percentage of Amazon revenue or pure dollar value of Amazon revenue? Speaker 2: Ah, percentage. So, it used to be like, yeah, so it kind of, back in 2017 was about 20% of revenue. It grew to almost 30% of revenue back. And like, you know, early 2020s, and then it's come back down to about 20% again. So like a big U-shape over the last 10 years. Upside down U-shape, I should guess. Speaker 1: That totally makes sense based on what I've read, according to like Marketplace Pulse, where it said that the number of new Amazon sellers coming in from the U.S. is at an all-time low, right? It's actually dropped. Speaker 2: Yeah. Tons of foreign competition. And yeah, I mean, it's just gotten a lot, it's just gotten brutal. Speaker 1: I know for me, like we've de-emphasized Amazon for several years now, mainly for mental reasons, because you have no control when something bad happens. It's like a colossal waste of time to get things back. And yeah, I've chosen to just focus on my own brand because I have full control over everything. Speaker 2: Would you say the percentage of revenue that you get from Amazon as a percentage of your store sales has decreased over the last five years as well? Speaker 1: Oh, it definitely has because we put less emphasis on it, mainly for my marriage, actually, because whenever something bad happens, Jen is in a horrific mood because she's the one who would handle that. It's just bullshit, right? Because you have to go on support and you have to play all these games, go back and forth and it's just not worth the headache in my opinion. But on the flip side, there's a lot of people in my community that are doing TikTok shop and just putting out social media posts and getting affiliates has augmented their Amazon sales naturally without them paying a lot more for advertising. Speaker 2: Interesting. We also asked store owners how much they enjoyed selling on different channels, right? So you take a look at DTC, 90% of people, of store owners, enjoyed their own website. I think about 20% of store owners enjoyed selling on Amazon, significantly lower. The only one that people hated worse than Amazon was TikTok Shops. I think that was like 11% to 15%. People hate that platform. Speaker 1: Yeah, and the reason is because they purposely make it hard to be successful. Because when they first started out, they let everyone in and they just got creamed in terms of reputation because they were selling all these spammy products or something would go viral and then the sellers couldn't fulfill anything. So they really had to put the stamps down. It's gotten better now as long as you use Fulfilled by TikTok. Speaker 2: Oh, that's great. I didn't even know TikTok had its own Fulfilled. Is this like FBA? They have their own warehouse? Speaker 1: Yeah, it's called FBT, yeah. Speaker 2: No kidding. Okay, I didn't know that. Speaker 1: But yeah, but there's also, there's always a great halo effect because you see something on TikTok, first place you go to is do a search on Amazon. So, you know, the branded searches on Amazon have gone up for some of those people. So I think it's still important to be on Amazon, you know. But like, you know how advertising on Amazon has gone up like 20-something percent, you know, consecutive years. So it's getting harder. And then Amazon's done a lot of Stuff that's pissed everyone off like they're blocking AI from scraping all their listings. And so pretty much in order to get Amazon visibility, you have to go through Amazon's AI search or search. Speaker 2: Interesting. Okay. Although I kind of like that though. When I'm on ChatGPT or Claude or whatever doing product research, I enjoy not having Amazon in the fray because I don't trust the reviews as much. I feel like Amazon's really good for very cheap items or very expensive, very well-known national brand items. But that kind of middle where you're looking for unique, interesting, quality products discoverability-wise, I hate Amazon for that. So I actually like that those results are not showing up in the LLMs. Speaker 1: Interesting. You know, whenever I do shopping searches on ChatGPT, I get a lot of Walmart, which is just as bad if not worse than Amazon in my opinion. Really? Speaker 2: I never get Walmart stuff. That's crazy. Speaker 1: Maybe you're just shopping for the high-end stuff and I'm shopping. Speaker 2: Steve is like, where can I buy the cheapest 10-pack of underwear on the internet? Unknown Speaker: And it pops up Walmart. Speaker 2: No wonder you're getting Walmart. $15? That's outrageous. Where can I get it for $10? I want a dollar pair, dollar per pair. Come on. Speaker 1: But I mean, I would like to see the Amazon listings in there too, just for maybe price comparisons, if anything. I don't know. That move might backfire for them though. We'll see. Speaker 2: Yeah. It'll be interesting to see how Amazon works. I mean, if you're not Over time, they're kind of slowly killing their golden goose or maybe they can just do a great business with those two ends of the market. The very high-trusted brands are the USB cables you just need tomorrow and you're fine paying $9 for if it doesn't work, it's not a big deal. But yeah, I feel like discoverability there for cool products is all-time lows. Speaker 1: I've been a member of your community since the beginning and I've always felt like your entire community skewed, I don't want to say anti-Amazon, but away from Amazon and more D2C, right? Speaker 2: Yes, that's fair. There may be some component of that in the data as well. Our threshold for membership is you need to run a 7-figure business and we have higher thresholds if people are just Amazon. So if somebody runs 100% Amazon or even like a 75-80% Amazon business, they have to meet a higher threshold for revenue just because it's very different. The skills required to run a successful Amazon primary business versus one that's a little bit more of a good channel mix or more D2C are very different skills. Speaker 1: Yeah, I would agree. Cool. Okay. Well, everything so far is in line with what I'm expecting here. What else we got? Speaker 2: What else we got? So we talked about Amazon's slow fade. This is kind of interesting. This is one of the big takeaways, AI adoption. So one thing, granted, this is all data from 2025. So we're looking a little bit behind the curveball here. But I still think it's interesting. I looked at I looked at brands that self-reported that they had meaningfully embraced AI for their business versus those that didn't. About two-thirds did. About a third had not. Actually, maybe closer to three quarters did. And what I found was that there was no meaningful financial alpha that was generated or outsized return from using AI. And so fascinating, right? Metrics were half a dozen here, half a dozen there. There wasn't a meaningful difference. And I think what that said to me was a lot has changed. AI changes so quickly that the cost to learn and Implement and see results. It takes a while. And then also, I think if you look at like 2026, Q1 2026, we had some pretty big advancements in tech on the AI front, especially in terms of programming and other things. I also think that a lot of people built stuff in 2025 that was not totally necessary. When you can build everything, you have to be really careful you don't build everything, right? It's fun. It's interesting. We were guilty of this. We spent a lot of time and money on internal tools that just didn't really pay off or that were kind of fun to have but didn't move the needle. So fascinating and my prediction going forward is that people are going to get more disciplined about that and that with the tools improving, we're going to start to see some alpha and some outsized performance for people using AI. But I thought that was an interesting stat from 2025 and a pretty good warning in terms of being careful what you build and how much time you're pouring into AI. Speaker 1: I don't remember those questions in the survey, but I've gotten tremendous alpha from AI. I think when I went on your podcast, I talked about the on-site search, the cross-sells and the up-sells, all measurable stuff. The little database that I created of all wedding planners where AI tells me, hey, you need to call this person. I think it's hard for me to remember the timeline of some of these things. The savings in content creation versus hiring someone I think has been pretty huge. I don't remember what the questions were structured like on the survey itself in terms of alpha. Is saving money Have you considered moving the needle in the service? Speaker 2: Yes, but I think what happened, I didn't ask people if they saved money because I think almost everyone would say that they did. I don't think we're very good at being objective about these things. What I asked was, have you meaningfully embraced AI in your business and invested time into it? And then I looked at the previously, I compared the profit margins and the growth and all those other things that they had previously answered before. Speaker 1: Oh, I see. I see. That makes sense. Speaker 2: Yeah. And I think you're right. This is not to say There aren't people. You have a programming background. I think you were very pragmatic and pretty disciplined. These are probably the nicest things I'll ever say about you, so savor them. Speaker 1: Who is this guy I'm interviewing? Speaker 2: But I can see, I think there are definitely people who have been able to use AI in a very high ROI way. That's not what I'm saying. I'm saying as an aggregate group, it's not moving the needle. But I do think there are people that have made incredible use of it. Speaker 1: You know what's funny is in my community, the adoption has been kind of slow. I'm trying to get everyone up to speed on CloudCode, but there's some resistance there that I've been seeing because it's new and the sentiment isn't great outside of Silicon Valley for some strange reason. I guess it's because the tech leaders have been saying that it's going to take over everyone's job and everything, which is kind of dumb, right? They shouldn't be saying stuff like that. Speaker 2: Did you see the commencement speech from Eric Schmidt at the University of Arizona in Tucson? Speaker 1: He got booed is all I know. I don't know what he said. Speaker 2: Yeah. He pretty much was telling people, hey, I know you're scared of AI, but you just got to lean into this. You got to adopt it. You can either kind of become a high, from the club side. Anyway, he was trying to be, and I think his points We're probably pretty reasonable, but yeah, there was not a big appetite for them at the commencement address. Speaker 1: Yeah. I mean, I live in a bubble here in the Valley where everyone's like pro-AI as far as I can tell, but like in my classes and whatnot, like the adoption has been a little slower. Speaker 2: Yeah, that makes sense. Speaker 1: Your community is much more advanced, I think, in that 75% of people, that's a lot. Speaker 2: Yeah, and people are doing some really cool stuff with it. I would say for a while there, it's tapered off a little bit. But when Claude Code, Codex, especially Claude Code, really started to advance earlier this year, every week we were getting two, three, four people posting, hey, look what I built with Claude. I built an inventory planning system, a demand management system, a mini ERP, did it in two weeks. It's pretty cool what you can build if you've got the time and discipline to go through it. Speaker 1: It's been great for my marriage. Jen always wants features for Bumblebee. In the past, I would ask her, how would you rate this on a priority scale of 1-10? If it wasn't a 9, 8, 9 or 10, I would just put it on the back burner. Now, if she wants something simple, I can easily just whip it up really quickly. I did her inventory system in a weekend. It's been great for me. Speaker 2: That's cool. Steve, I think you might want to pivot into, instead of teaching people about ecommerce, talking about how to help people's marriages. This is the second time in this conversation you've been like, hey man, this was dropped to Amazon, huge for our marriage. AI, huge for our marriage. We're just in the honeymoon phase. I think this could be a good niche for you. Speaker 1: Yeah. Well, I've learned that I shouldn't ask the priority question very often. Anyway, moving on. I think Jen might listen to this episode since you're in it. Speaker 2: Jen, you're a good woman to put up with this guy. That's all I'm going to say. Where do you want to go next? Speaker 1: Do you want to talk about warehousing? Yes. Because I can jump in on that since I own a warehouse. Speaker 2: Yes, warehousing. So this was probably one of the most Interesting stats. Let me pull up the data here. Okay. Here we go. Yeah. So I looked at the performance differentials between people who own their own warehouse And people who either leased or outsourced their fulfillment, leased a warehouse or used a 3PL. And probably the biggest step that I thought was the most fascinating was even when we controlled for revenue on this front, owning your own warehouse meant that you were growing 80% to 90% slower compared to those people who leased or outsourced. So your revenue was about 4% growth versus 34%. If you lease your own warehouse and 22% if you were outsourced. Anyway, and I thought this was fascinating. It kind of blew up on Twitter and I think that there's a couple of things here. Obviously, this is correlation, not causation. I think potentially you could have some elements at play where maybe you grow slower but you've got a really deep inventory and that's your moat, right? So you've got the durability question. Maybe your business is growing slower but it's more durable. Maybe it's, I think there's probably a component where, hey, we maxed out some of our opportunities. We kind of hit a ceiling in our niche. There weren't better ROI areas to put the money. So we bought a warehouse and maybe there's a correlation there. But I also think there is an element of like, hey, if you're managing your own fulfillment, it's less time to be able to work on product and growth and all these things. And I had a number of people who reached out after I talked about this and they were like, I lived this story exactly. Anyway, so I thought that was one of the most fascinating stats from the report. Speaker 1: I 100% agree with that stat because we have our own warehouse and it sucks. You'd be surprised how complicated things can get. There's labor involved and moving stuff around, keeping track of stuff, scrapping stuff. The only reason we have a warehouse is because we do personalized items. We have to handle this stuff in-house. There are 3PLs now that handle embroidery and whatnot, but I would have a lot of problems. If anyone does embroidery listening, it's actually a pain in the butt with embroidery even. I wouldn't feel comfortable outsourcing that. If I did outsource it, I think it would be prohibitively expensive. That's the only reason why we do it. It's just not a mental energy. Speaker 2: But wouldn't you say too that? I mean that's part of the moat of your business, right? That like nobody can easily spin up a warehouse that does all the... The personalization is a huge unique selling proposition for your business. How much harder do you think it would be to run your business competitively and defensively if you didn't have that? Speaker 1: Yeah, I mean that's one of our modes, yes. But if you don't have embroider or personalization where you're not providing much of a value add in your warehouse, then yeah, I think you should use a 3PL. Like maybe like three or four years ago, maybe not the case, but there's 3PLs everywhere now. They're popping up like, you know, everywhere. You should see my inbound for people who want me to help promote their 3PL services, right? It's ridiculous. It exploded during the pandemic, I want to say, right? Speaker 2: I can see that. Man, all sorts of new little subcategories you're going to be in. The ecom marriage guy, the 3PL consulting guy. I'm excited to follow your career here in the next couple of years, Steve. Speaker 1: See, I would never promote a 3PL just because just talking to people, 3PLs are always great until they fill up or something goes wrong and then all of a sudden you got Mike Jackness having to take a U-Haul over at his warehouse and unloading and taking everything out. I mean that's happened to him a couple of times. Speaker 2: I feel like if you were going to do a 3PL, there's definitely a number of instances where it's just a bad idea to outsource your fulfillment. Personalization is one. If you've got a ton of SKUs or they're complex or you have really high touch or you need your eyes on it, I feel like 3PLs are best if you've got limited catalog size, fairly straightforward products and a lot of IP in the actual product itself. It seems like that's where the 3PL is the sweet spot. Speaker 1: Yeah, but I would say yes, say no to warehousing. Speaker 2: Say no to warehousing. I love that. Speaker 1: The other reason why we did it also is we used to lease and the rent was going up 30% every year. That's why we decided to buy. It was for peace of mind reasons. We never now have to worry about our products. I guess that's another factor in there, peace of mind. Speaker 2: Interesting. Another thing we looked at was inventory burden versus performance and inventory turns versus performance. This is something I thought was fascinating. So, being savvy and intelligent about how quickly you are turning your inventory. Inventory turn is how quickly you go through all of your inventory. $500,000 per year product, you're roughly 2.5X as your inventory turn. And what we found was, we compared turns per year to average net income growth and to average revenue growth. And it's tough, right? You can speak to this better than I can, Steve. But if you have too little inventory, you can't fulfill orders, right? You need some buffer there to be able to have good fulfillment and not miss out. But you have too much, you've got all your working capital tied up. And we found the sweet spot was about five to six turns per year or turning your inventory every couple months led to the highest revenue growth and the highest net income growth in the survey. I can totally see that. Speaker 1: You know what's funny about this is we're in this pretty bad position with inventory right now. We have way too much because one of our biggest suppliers went out of business. And they were like, hey, do you want to buy us out? And I was like, sure. And I didn't realize how much space it was going to take. Because I just heard 50% off. Speaker 2: Of course you did. This is how you get to Steve. If you want to do anything, just package it in an amazing discount. Speaker 1: So we bought them out and now we've got probably a year and a half's worth of inventory. Speaker 2: But it's still probably a good investment for you because you're going to turn the cash at a lower rate but it'll work out. Speaker 1: It'll work out in the long run but it's actually quite painful in the warehouse right now to be fair because it's a lot more cramped than it should be. And I'm not young anymore. I can't move stuff. We got to hire people to move stuff around. Speaker 2: You got to get rid of this warehouse for Jen, man. Prioritize your marriage. Speaker 1: The warehouse saved the marriage. Speaker 2: How does that work? Speaker 1: Well, because it was very stressful dealing with leases and moving. So we have this home base now. It's like owning a home. Here, it might not make sense to own a home because it's so expensive. You could rent, but then you got to find new places every now and then. It is a colossal pain to move a warehouse because we've had to do it three or four times already. Speaker 2: Can I jump to financial intelligence and implications for us? Speaker 1: Yeah, let's do that. Speaker 2: So this is one. I'm a bit of a finance geek. I know you are too. One of the things that I asked was I asked respondents to rate themselves on one to five stars in terms of their financial knowledge. And then we compared that to their average net margins, the average runway personally they had, money in the bank, net income growth, etc. And the biggest thing is you would expect there obviously to be the more financially literate you are, the better your business is going to do, right? So you maybe go from a 2 to a 4, a 3 to a 5 that you see some meaningful difference. But the biggest thing that I found was that going from a 3 to a 4 was a tiny bump. Let's look at average net margin. So net margin is the percentage of revenue you make as profit. Your profit margin, 3 out of 5 net margin. On average, people had, excuse me, 3 out of 5 financial knowledge rating. People on average made about 9% in terms of their profit margin. 4 out of 5, people made 9.7%. So a little bump, a nice bump, but not huge. But going from 4 out of 5, which is reasonably good, right? 4 out of 5 is like, yeah, I have a reasonable handle on this. Maybe not a pro, but reasonable. To a 5 out of 5, true deep competence Average net margin went from 9.7 to 14.3%, so almost a 50% bump in profits. We saw this in some of the other data here and I think what it said to me is apart from deeply understanding your customers and your product, the next best thing or maybe even tied for the number one position to determine success in your business Is to really deeply understand your finances and that goes all the way from understanding your financial reports to understanding how to take money out of your business to understanding debt and risk because if you understand, you can make better decisions. If you don't, you're kind of flying blind and so anyway, as a part of this, We put together this whole financial mastery series. If people are interested, it walks through everything from the basics of the financial series. Speaker 1: It was on your podcast, right? Speaker 2: Yeah. Did like an eight-part series and put together a big guide on it. So ecommercefield.com forward slash mastery if you're interested in the deep dive on that, going through all that. It's complimentary but it's helpful. Speaker 1: And I want to give credit to Kevin Stecko. He came on my podcast a while ago and we talked about contribution margin. And that conversation changed the way I did a lot of things. So if you guys don't know, I'll just kind of summarize in 30 seconds. So basically, whenever I sell an item now, I know exactly what the expenses and everything are on that one item. And so now, whenever I make a sale, I know exactly how much profit I'm making every sale per item. And it took a lot of time to put that together. But now, like for every sale, because a lot of people just kind of eyeball it. They're like, oh, you know, I have like 60% gross margins. I'm probably okay. But by putting this system into place, you know exactly how much profit you're making per sale, including all expenses. Speaker 2: And when you say all expenses, obviously fulfillment, COGS, do you also bake into there? Speaker 1: So there's CM1, there's different levels of that, right? Where different expenses get added in. So you're talking about CM1 is like all COGS shipping and packing materials and all that stuff. And then there's a second level that takes into account advertising. And there's another level that takes into account like how much you're paying for the roof over your head and all that stuff. Yeah. Most of my calculations are at the CM1 level. And I do take into account like human hours and doing the embroidery and whatnot. So gross margins for like an embroidery handkerchief are like 90 plus something percent, right? When you factor in like how much we're paying for labor here and how much time it takes per handkerchief and all that stuff, it actually isn't as great as it sounds. Speaker 2: Yeah. And I think one of the things too is it helps with thinking through like if you're running discounts and things like that, right? Speaker 1: Oh, yeah. Speaker 2: Because if you think like, let's say you're 90%, like if you say, hey, we're going to run a 30% off sale, right? Okay. Well, we still have 60% left. Like we're giving away a third of our profitability. It's like, no, If you don't understand that you're paying for advertising, you're paying for the labor, all that kind of stuff, it's more like you're giving away half, maybe two-thirds of your profit if you don't understand those numbers. So the discounts can kill you too if you don't have a grip on that. Speaker 1: Yeah. I think in business, my frugality really helps. I don't like app costs get out of control or I don't know. I think it helps to be frugal. Speaker 2: Here's a question for you. There's like eight pillars in that Financial Mastery Series. One of them is called evolve your habits. That's kind of further along because I think earlier on, it is much better to be on the more frugal side versus the more kind of easy spending side, hands down. But once you start getting some resources, It can also be like I have in my own business journey, under-invested in my business at times, taken out more money from my business than I should have, missed opportunities because I was risk adverse or even like you, Steve, you are able to code anything and let's talk about even pre-AI, right? I'd bust your chops sometimes. Sometimes you'd spend a weekend building out a full-on app that you could have bought for like $100 a year. So my question to you is do you think that that has also hamstrung you later on in your business career? Speaker 1: Oh yeah, absolutely. But I don't consider it hamstrung because I don't want a team, right? So I know that if you want to grow – and there's always this like spot in revenue where it's like a struggle to hit. I think it's I think No Man's Land is what, like 5 million or something, 5 to 10 million, something like that? Speaker 2: Yeah, right around there probably. Sounds right. Speaker 1: So the way I have it, I don't spend that much money and so I can run everything by myself if I have to and that has made things, from a peace of mind perspective, really good. I'm not trying to start a 20 million or whatever company because I don't need that kind of stress. Tony hears me say that all the time. You're absolutely correct. It does hamstring you. Arguably, I don't think I've ever crossed that realm of scaling. Speaker 2: Yes, but I would say even if you're a solo operator or near solo, that still applies because it may be even more so because if you have less ability to delegate things, you need to be more ruthless about spending your time on the things that move the needle and is the best use of, let's say it takes you 20 hours to build that and it was $100 for the year, you're effectively making $5 per hour per year, maybe even 5X that, that's $25 an hour. Is that where you want to spend your time? Speaker 1: Okay, so the flip side of that argument is I'm in full control. So let's take Zero Shoes, someone in your community. They initially created their own app for this one feature and then they moved to Shopify and they purchased an app. And then that app creator decided to make a change right before Black Friday. And they ended up selling a whole bunch of shoes because the app broke the store and only sold small size shoes to everyone. They ended up losing $50,000 and they got a whole bunch of one-star reviews and complaints because of that. They're not in control of the app. Think about Shopify. I don't know what it's like in your community. In mine, most people have between 7 and 10 apps. That is 7 to 10 sources of failure compounding because it could be just some Chinese dude in a white beater coding up that app. Speaker 2: I would argue that even with AI coming in and us being able to custom code things, we still shouldn't be coding most of the apps we're using. We shouldn't be coding the shopping cart. Could you? Yes. Does that also make you a developer? Speaker 1: Maybe not the shopping cart. Okay, so I actually just gave a lecture on this at Sellers Summit. 60% of the apps on Shopify have zero reviews, right? And a lot of the ones are just stupid apps that don't do very much. I think if it just takes you like 30 minutes to code up one of those, you should do it. For example, there's a schema markup app that wants $400 a year. I vibe coded that in front of the Sellers Summit audience and that took maybe 30 minutes to do. That's a no-brainer. Where you do have to think about it some more is like I probably wouldn't vibe code a Klaviyo for example. Well, maybe I would actually because it's gotten really expensive at this point. But there's always like some trade-offs that you have to think in your head depending on how mission critical it is to your business, right? Speaker 2: Yes, but I think this kind of goes back to the warehouse discussion, right? Like the reason, this is kind of like running a separate version of your warehouse. The more time that you are, there's some no-brainers like you're, you know, I can close up in 30 minutes, minimum dependencies, not a lot of surface area to screw up, high important part of the business. Okay, yeah, code it up. But the more you do that, the more you run your own digital warehouse, building all your own apps, even if you can vibe code it, the less time you can spend on marketing, on product, on all these other things. Just like the warehouse focus drags down your growth, I think overly focusing on building everything out with AI is going to do the same thing. Speaker 1: I would agree with you there. Yeah. There's a lot of things I shouldn't be doing, but I like it. Speaker 2: Oh, so many. We're not even going to talk about half of them. We talked about those before we hit record, so. Speaker 1: Yeah. I guess it just depends on what your mentality is. If you're just like pedal to metal, absolute growth and efficiency, then yeah. I'm not that guy, actually. 100%. Not that guy. I would argue that I don't think you are either. You're more of a lifestyle guy too, right? Speaker 2: I want to build As meaningful of a business as I can within constraints that still let me live a really rich life outside of work. So yes, I would say we're in the same ballpark for sure. Speaker 1: And you're better at it, man. Do you even do anything? Speaker 2: No, man. Someday when we actually talk, I'm going to get a bottle of champagne. I'm going to hire a masseuse to come and give me an encounter. I'm just going to be bawling out when we do a video call. Speaker 1: I just want to shatter you one day and just see what you actually do all day because I I don't know. The forum was like the best business ever. Speaker 2: I love the business model, but I will say there's a lot more like when you think about things to run a community, there's a lot of stuff that we do. We are pretty heavy on our vetting. We've been doing a lot more in person, excuse me, live virtual meetups for very niche topics. So we've been doing a lot and the team helps a lot with this, but Dana does a great job of spearheading this. Meetups for people with really expensive SKUs or fulfillment for really expensive SKUs or talking about using AI just exclusively for paid traffic generation and creative. So there's those things. There's the development side on our own platform. I will spare you but happy to shout at me for the day. There's more that goes into running a community and moderating it and onboarding and helping than meets the eye. Speaker 1: That's not what I meant. You have a team that does all the heavy lifting, right? Speaker 2: I have a great team. I have a great team. Speaker 1: Yeah, dude. How do people join your community? I know it's very exclusive. You only accept like the top of the top, especially when it's like the first 30 members, like the founding members of ecommerce fuel. Those are like your best members, I would say. Speaker 2: Yes, with a couple exceptions. I think somebody had to vouch for you to get in early. We had two or three people. Speaker 1: I know you were desperate for members in the beginning. You were desperate for members in the beginning. Things have changed dramatically. Speaker 2: Obviously, since we brought you in. But yeah, so quickly before we talk about the community, thank you for mentioning it. If you do want to get this report, it's 65 pages. I think it's like 50 plus charts. Each section, we break down what it means for your business, not just like data, but How should you think about this data and in a way that you can position your business to succeed given the implications? So ecommercefuel.com forward slash blueprint is where you can download, see the big takeaways and download the full report. We also have benchmarking data. So if you want to say like, hey, I'm a $4 million brand. I manufacture. I have no idea if my gross margins are good. I have no idea if my net profit margin is good or not good. Like we break down all those financial figures based on business size and niche. So you can get a sense of, hey, I'm doing great here. Ooh, I could probably tighten the belt a little bit here. So ecommercefield.com forward slash blueprint. And then if you just want to be in a community where you're surrounded by people that actually get what you're doing, that if you have a killer month in a great way, you can actually go and post about it and you won't piss people off because they are excited for you as opposed to being thinking it's weird. Or if you have a really esoteric question about what kind of 3PL you want. Like, hey, I'm thinking about going to X 3PL versus Y. What are the experiences? One of the few places in the world if If only you can go and post and by the afternoon have four or five or six great answers from people who are doing this stuff. So anyway, ecommercefuel or ecomfuel.com with one M is how you can learn more about the community and join. Speaker 1: What I like is you don't really let vendors take part in these discussions either, right? It's all very candid and truthful and blunt, actually, in a lot of cases. Speaker 2: Yeah, we don't. We are for store owners. We don't let big SaaS vendors in. We have a very small number, I think probably sub 5% of our membership is service providers and those are people that we deeply trust to add value that don't sell, that don't pitch. 90-95% of our membership is all store owners that are running meaningful stores. So yeah, it's not a pitch fest that store owners actually talk about what's working. Speaker 1: I will link all that stuff in the show notes. Andrew, thanks a lot for coming on. It's been a while. Speaker 2: Yeah. Steve, thank you for having me on. I appreciate it. I'm looking forward to your new branching off. All the things we talked about, man. You've got some fun niches to explore in the future. We'll have to do a follow-up post on that. Speaker 1: Hope you enjoyed this episode. Things in ecommerce are changing quickly, and hopefully this snapshot in time was useful for your business. For more information and resources, go over to MyWifeQuitHerJob.com slash episode 645. And once again, if you're interested in starting your own ecommerce store, head on over to MyWifeQuitHerJob.com and sign up for my free six-day mini-course. Just type in your email and I'll send you the course right away. Thanks for listening.