Rolando Rosas 6:42
It got to be Jeffrey. Giraffe.
Dave Kelly 6:45
So we were talking about the mascots. You know, I thought Jeffrey might actually show up at that store. But just the idea of going there, you know, was just that I feel like that’s just nostalgia. It’s things that kids really aren’t getting these days, you know, but a feeling of walking into a store where it was for you. I mean, that was for kids. That was for kids. What happened? What happened to Toys R Us what happened to Circuit City? What happened at RadioShack? I mean, I know a lot of is blamed on hey, you know what? E commerce, e commerce. But I think some of these companies, they went out of business. Before Amazon was all the hype? Well,
Rolando Rosas 7:27
let’s see that I’ve got the actual dates, there were at least when they declared bankruptcy Circuit City, 2008, RadioShack, 2015. And Toys R Us in 2017. All of them have tried to make a comeback one way or another. But you know, Amazon didn’t go online until I believe it was 1999. And over time, they did add more products. And then more online retailers came came into the space. But all of them when I looked at in the research that we did, they all had issues that had also nothing to do with the online aspect of it. It’s a very non glamorous back end story of good old fashion inventory. mismanagement. Yeah, as well as those other factors that we talked about. But it was interesting to find out that Circuit City had issues with inventory. RadioShack also ran into issues with inventory and Toys R Us was no exception in this list, also had issues with inventory. And you know, Dave, I’m reminded of a story that Daymond John had for one of the Shark Tank, Shark Tank, contestants back and Senate Shark Tank contestants. And he passed on this contestant because he knew that the climb was going to be very difficult when it came to managing inventory. This particular woman was she had a very interesting line of bathing suits. And he passed on her because then he outlined all the challenges specifically about how to manage all the different skews and what happens with returns. And year two and year three and year four
Dave Kelly 9:20
moving I mean, Damon’s gonna know about the clothing industry, right? Exactly.
Rolando Rosas 9:23
He knows about the clothing. And he talked about very matter of fact, on how are you going to go about not just managing this, but having a roadmap on yours beyond 123 or four because you could throw money at this. And now instead of a $1 million problem in inventory. As you grow, you have a $10 million problem. And then a $40 million in year four, five and six. And so as you keep going in time, if you aren’t doing not just a good job, but an excellent job of managing that inventory. It all of a sudden becomes one warehouse, you gotta manage two warehouses, three warehouses, and a lot of those warehouses have products that are mixed in that are either old discontinued, to be liquidated kind of merchandise, and now your profits get smaller, get cut, can get cut in, that’s what he was trying to convey to this woman that the profits get eaten up by inventory. And we could have cited several more companies that are brand names that also had this big issue with inventory. And it’s a it’s not really a sexy and glamorous thing to talk about Dave. But it interesting that that thread repeated itself, among 10 other companies that I had researched that inventory played a role in the demise of these companies.
Dave Kelly 10:53
Yeah, yeah. Well, I mean, we have a lot of those challenges. You know, I’ve, I have asked other organizations that are in our space, how they manage product returns. We’re not getting it. It’s almost like they’re like, it’s kind of like this afterthought, we, I’ve asked some of our partners, how do other partners of yours that are doing what we’re doing, how do they manage their returns? I don’t know. They don’t know. So I so I think that’s why we’re trying while we thought it’d be a good idea to have this conversation is, like Damon, he may have thought that that product was phenomenal, hot seller, right price point was going to fit in with the trends. But even if you know that product is hot and sexy, if you don’t have some sort of a management with that back end with your either inventory supply, or what do you do with the inventory of returns, I mean, he was smart enough to back right out of that, he’d already been down that river, gone down that path.
Rolando Rosas 12:02
And whether it’s with you, whether you’re in fashion, whether you’re in electronics, or whether you’re in some other space, anything that deals with a with a physical product, there’s a percentage that are always going to not like it, and return it for XY breaks, it gets damaged. And you have to account for that. Because if you look at the profits, I’m told that, on average, the really good Amazon sellers, at the end of the day, after they pay every single expense, the really good ones are doing 20% profit margin 20%. That’s nothing to get crazy about. So if you’re doing a excellent job, 20% is what you at the end of the day you take home. And so if inventory eats up into that in year number 234, you go from 20 to 19. And sometimes it just kind of creeps that way. Because there isn’t the oversight, there isn’t the data, there isn’t the analytics, there isn’t the system in place. And that’s what we’ve learned over the years. And you know, we spend quite a bit of time a week, discussing it, analyzing it here. This having inter having intergroup discussions with customer service, with our logistics people, with our warehouses with our fulfillment partners, all along every week, because that’s what I would say, Dave, that’s what it takes. Because there’s data that’s outside of your own bubble that you just don’t know, don’t see. But if you don’t have the information, like, you know, there’s a product that got returned, and it’s piling up at the reverse logistics warehouse, over six or eight months, and this happened to us. A couple of years ago, we went to our facility that handles the reverse logistics, and they had cartons of stuff that were returned and we were like, what happened? Why is this just sitting here? You remember that day?
Dave Kelly 14:11
I do. I do remember that. And, you know, we were chatting earlier about you know, reverse logistics. It’s challenging working with warehouses because you take you take some Amazon sellers that are embracing new technology, you know, who’s using AI more than anyone out there? We we are, you know, we’re using it in every aspect of our business, customer service, but we also do a lot of it with we’ve been using it for forecasting and using it with just many different processes that we do inside internally. But when I take this excitement back to a reverse logistics warehouse, they’ve heard of AI they have not tried it in AI is so cutting edge that it’s going to take them a long time to catch up. So we’re trying, here we are, we are a modern e commerce, full service business. And some of the folks on the three PL the reverse logistics side. They’re, they’re just, they’re still in the world of spreadsheets and data that really that we can’t really crunch it as deep as we’d really like to do that. And that’s kind of a challenge.
Rolando Rosas 15:28
Indeed, because what you need in order to manage products that just manage Dave, but to excel at it, you need the right kind of data, and you need it in real time. And quite often, and I’m surprised I’m, I’m astounded by how a lot of organizations don’t have the information they need, at their fingertips understand, yes, SKU XYZ, we have 1000 units sitting here. And we haven’t sold one of those in six months, because those are returned items. And so having that information at your fingertips is valuable. And then having the plan of action, which I think where the breakdown happens. I saw something the other day where something like 60% of data is not utilized by organizations. So it’s just there. It’s not being put into any action. It’s not visible, because we are drowning in data, so to speak. So what I what we’ve been able to do is put the data we need in front of the right people. And a lot of times the people that hold that data or have that in front of them, then communicate about, hey, you know, we were starting to see a blip in this. And then that information gets shared with the different teams to then take actions. Because if you have stuff that’s coming back, and now you understand Oh with the manufacturer, put the wrong label on it right now you know how to correct that problem. But quite often in a lot of organizations, especially as you get larger with more management and more skews. That’s not my department. That’s not my problem, right. And over time, incrementally, one SKU two skews, three skews, five skews. And then you get this big problem of what do we do with all this stuff? Okay, let’s liquidate it. And well, sometimes it’s hard to liquidate merchandise that’s old, not not fashionable, if you’re in the fashion industry. Sometimes. If it’s if it’s electronics, it may be too old, or there may not be enough demand. So you may never collect on it, you may get pennies on the dollars. That’s why systems are important. And I know for us, one of the things that we’ve been able to do that’s work is to try to connect as many of the data points to a central source of truth. So we have a repository of where all the orders funnel in where all the inventory information comes in, where all the inventory going out. Because that’s just as important to know, where’s it going out as well as it coming in. And that lives in one centralized location. And then people have access to the different points so that they can understand, whoa, we’ve got an issue here. We’ve got pallets sitting here and piling up. Otherwise, you know, Dave, these a lot of the warehouses and we work, I want to say what at least 19 different warehouses, one when some form or another that is doing either reverse logistics or fulfillment for us. And when you don’t have the visibility into those facilities, and what inventory is there. Things could get really out of hand very fast. And they all have their different systems. They all have their different ways of fulfilling of shipping of cut off times. And the more skews that you manage, the more difficult it is. I mean, I think about what Walmart’s been able to do. You know they’re a physical retailer. They’re also online now. They are known for their fulfillment and logistics systems. And they’ve invested in keeping reinvesting because things change over time. And to excel in the space of physical goods, where inventory chews up cashflow like it’s nobody’s business. It’s the one area where you can exert the greatest control over as a as an enterprise as a company, even as a startup, because inventory. For us, it’s the most expensive line item when it comes to expenses. And I would venture to say that it’s like that For most folks that are, whether they’re starting out whether they’re going online, and I would, I would say that this is probably the same for those three brands, Circuit City RadioShack. And Toys R Us had to be one of the biggest sources of from a cost perspective that that they were that they were holding on to on the books. And so without a really good way of having visibility of having the people in place, and having these systems work together, because they, you know, somebody’s on one system at this warehouse, and then another one over here, and then another over here, you know, I’m reminded of the one of the facilities that we worked with Dave, they weren’t able to keep track of the different bundles that we have, for example, in their system, and it was a very elaborate system didn’t account for all the different variations of the bundles. So we had to set something up with them. So that as we created bundles, their system recognized all the different skews, they knew exactly what needed to go out the door. And we were able to get over this hurdle of why why are we having an issue with bundles over there? It should be straightforward. Oh, yeah. But we can only do one bundle at a time in the system. That’s a problem. Right? And I, I’d venture to say that a lot of other companies run into that, whether from the technology perspective, maybe the system they’re on doesn’t have that. But there are ways around that. There’s some third party applications as well, that can be brought in house brought to bear. But it does takes it does take somebody that is definitely going to be on top of it, if it’s you have a project person or a technologist, because it just requires and I think that’s probably why Walmart has excelled. You know, they keep reinvesting into their system.
Dave Kelly 22:05
Rolando, I want to, I want to go back to when you started on Amazon. So a lot of Amazon’s most Amazon sellers, we start small, right? Have a few listings out there. Maybe we’re doing our own shipping and logistics. We’re just we’re just starting up. What was it like for the first few few months or a few years when you started doing it on your own? And when did when did you look into other like three PL resources? Like a Returns Warehouse? When did that come about? How are you doing it before Returns Warehouse? And when did you say let’s we need to bring someone else into the mix.
Rolando Rosas 22:46
So at the very beginning, it was purely dropship. So dropship, for those that are not familiar with it, some some some other facility has that inventory. And we purchase that inventory as it’s sold. And they being the drop shipper or this facility sends it to the customer. So that was our modus operandi for a long time. As that started growing. Then there were times where we would get special deals on inventory. And so we I would take that and put it in my garage. And so there was the start of this whole fulfillment fulfilled by Rolando within Global Teck?. Right. And so I had to get up. I had to understand how I never shipped stuff before, right? So I opened a ShipStation account. I had the wrong printer for a long time. And then I suddenly said you need a Zebra printer. What the hell’s Zebra printer? Well, Zebra printer is this printer where the labels, it spits it out and they don’t smudge the ink doesn’t come off. Oh, boom, that was like boom, a light bulb moment. Zebra printers. Okay, so we were Zebra printers. Then slowly over time, the garage was a place to put the stuff that got too small. And that that point was where we’re getting deals on stuff we’re growing. We got to there’s no way I could stay on top of this by myself. And that’s when the journey began on how to how do we best get the inventory we need to the customers as fast as possible. And then that’s when I started looking at warehouses that could do that for us. Now a lot of people at this point in the story, they will say it was time to move into an own warehouse, my own warehouse, my own facility, and for some that’s going to work, but I gotta tell you, there’s a lot of reasons not to do it. Especially or Early on, if you’re not a logistics champion, if shipping is not your forte, if the prospect of of today people not being available to come to the warehouse, and managing people that don’t show up, this is a real problem. And I know that there are a lot of sellers out there that want to jump in, in both feet into the warehouse space. And I know a lot of others that have gotten out of it because of that managing warehouse is no joke, Dave. And I wouldn’t think so. And in today’s economic environment, important, you know, there’s a challenge to have people, period people, and doesn’t matter what state you’re in, and having people manage and run a warehouse for you efficiently, without issues, right. And I’m sure if you’re listening to this, and you in the warehousing industry, you probably understand that yep, that’s a big challenge. So I decided, let me use a facility like a three PL, a third party shipping logistics provider, that can do all of that they handle all the people, they make sure they’re staffed, I don’t have to worry about that, I don’t have to worry about buying a warehouse, the capital required. And that’s the thing, the dollars you have, you want to try to reinvest that back into the business, you can do that by acquiring a warehouse and you you manage everything from A to Z, if we were to use the Amazon words on that, or you decide, You know what, I could redeploy that cash a little better. If I can, maybe have the right people in place, or systems in place, or automation, or back end systems. And that’s the route I decided to take is that I bet on on automating, putting technology, putting back end systems because if I could do that I can, in the long run, I can absorb more orders, because I could turn them around more quickly than scaling up a warehouse. Scaling up requires a lot more capital A lot more people. And then if you invest in robots is a whole different story. But that also requires a lot of capital. So technology was for me the avenue to grow. And to do that efficiently without tying up as much capital as possible.
Dave Kelly 27:28
You know, as you continue to scale this business, when you’re in this retail world, you can always expect on, there’s always going to be a return. You know, first if you’re on Amazon, when you need to offer people some sort of sense of mine that, hey, listen, if this doesn’t work out for you, you can return it. I think that’s what a lot of people like about Amazon, they know that if they make a mistake, they can return it and they can do it from the comfort of their home. I don’t, I don’t see many shops that don’t have some sort of a return policy. Sometimes there’s a boutique that will say you know, 10 days store credit only whatever it might be. But I think for the folks that are really scaling out here in the E commerce space, the more you sell, expect more returns. Now, we’re, I think we’re in a good space where the percentage of returns may not be as high as others. I think it was you that said clothing is one of those things that a lot of a lot of
Rolando Rosas 28:31
a lot of clothing, especially clothing that were females buy, they’ll buy two or three sizes, to make sure that they’re, they’ve got the right size on and they’ll send the ones back that they don’t need. I know that’s the case, here, you know from now I just give me two or three, I’ll pick I’ll get the right size. Oh, yes, that’s the right one. And then send back the rest. But in we don’t as consumers don’t think about it, but as a business without the proper oversight without the proper systems in place, without the proper visibility, and then analytics to tell you, hey, things are piling up. If this keeps going this way, you’re gonna end up with you know, X amount of cash tied up. And so having returns to up profits is not a very glamorous thing. It’s not a good thing. And it requires constant vigilance, really coarse over that piece of the business because a book is I read Circuit City. Well, it ran into this issue RadioShack for sure and into this issue. And you know, the toy business is you know, people do return stuff and people you know, pile the inventory for Toys R Us piled up as well. So it requires a constant constant monitoring of this because at any moment in some of this is more cyclical, right. If you’re in the toy business, you probably going to get more Shopping in done in certain parts of the year, whereas maybe RadioShack, and Circuit City, their stuff is probably more level and on a Black Friday, things probably go through the roof. But I don’t think we had Black Friday in 2008, I’d have to go check if we had that. But so being able to have visibility into that part of business, that’s not very glamorous, instead of just sending stuff off to liquidation is a much better approach. Because you’re better able to understand then on the front end, when you’re buying things where you need to hit the gas pedal or the brakes. And that’s what part of the feedback loop that sometimes doesn’t get tight. And then the folks handling reverse logistics or returns or warehouse, that information doesn’t get back to the people that are buying, right. So now if you’re a bigger business, right? Imagine this day, you, instead of being responsible for million dollar worth of products that are being acquired, you’ve got $10 million, or $30 million, or $50 million, if you’re one of these larger organizations. A mistake can cost at that level, could be catastrophic. Oh, yeah, could be detrimental. It could also be detrimental to the small business where you know, a million dollars or half a million dollars in inventory can sink you. But the mistakes are just magnified that much more when you’re talking to an organization that has multiple departments, multiple layers of different offices and, and that could be just just just a fatal mistake, that that could cost the operation. And then think about the number of people that are part of an operation that are constantly buying, right, and if they don’t get this feedback loop of hit the brake pedals, because the cash flow is getting tight, because of too much inventory, because of things not selling, as well as things being returned. And then over time, just think about that. Dave, accumulate six months, 10 months, a year, two years, four years, five years, six years. And then you find yourself in the situation that Daymond John was talking about, right?
Dave Kelly 32:18
Well, hey, you know, there’s some of these folks there, their job is to buy the drugs. Yeah. So it’s now time to not buy. Well, the people that are doing that jobs like well, we don’t know how to not buy things, we know how to buy things. So they so they may be rushed and make split decisions. These I know within the real retail space, everyone tends to blame ecommerce and Amazon. But I wholeheartedly believe that Toys R Us Circuit City RadioShack just those three, they could have coexisted within the same marketplace. You don’t always want to order online. Like I asked you earlier today, what was the last big appliance that you
Rolando Rosas 33:01
purchased at a store and that was that was at Best Buy? I went in and looked at all the TV screens. And I wanted to see side by side, what they looked like what the picture looked like. Yeah, and that’s how I made a decision that was probably like seven years ago.
Dave Kelly 33:17
You know, I think television is one of those. I’ve never bought a television online, I’ve done the exact same thing. I’ve made it a day of it, you know, like, like my parents used to learn me in to go into the mall by telling me that we’re going to take make a two second appearance at Toys R Us. My wife would say, Let’s go out for lunch. And then after lunch, maybe we’ll go look at TVs it’s like I want to I want to look at some tech, I want to see what’s on there. So I think with something like that it’s nice, it’s still serves a purpose to go into a store. Now someone might say hey, Rolando, the stores were there so that you could go compare the models with your own eyes, and then go home and order it on abc.com Wherever, wherever it might be, you know, and that’s where the salesperson comes into play. And they need to show their value so that they can sell their customer. It’s just it’s a shame that some of these stores could have coexisted. But like you said it’s not good inventory management.
Rolando Rosas 34:17
It’s gonna think about why I remember going into Circuit City went before the end happened and I was thinking it was something wrong here because I remember a lot of shelves being empty and it wasn’t a Friday it was not on a blue one of these big shopping days. There wasn’t a lot of foot traffic as well. And those two things not very good. And from what I see here I’ve got I’m just gonna read you this this clipping is at Circuit City failed to accurately forecast consumer trends and ended up stocking up on goods that were not in high demand. This led to a glut of unwanted products and significant loss. says when they were focused, sorry, when they were forced to discount these items again. So profits got hurt because too much inventory, not the right one not being able to forecast us, I almost have a love hate relationship with the word forecast. Because that’s what everybody wants in this hardware industry, they want to know the forecast. But then ultimately, they were forced to discount those goods, which means that less profit, the business is in business to make profit. And if profits get eaten up, because inventory and inventory management systems aren’t up to up to par, then in their case, it led it can it just kind of pushed them over the edge, right, even though they had a big brand, and that’s the thing, the brand alone wasn’t able to save them. And yeah, by 2007 2008, there were more online retailers and they, they were too late in the game. To be able to pivot, you know, you got to be able to also keep an eye on the future. All right. And that’s what happens to some of these physical retail stores. And we got a list of some other ones is the Radio Shack I mean, Radio Shack dominated the electronics space for accessories.
Dave Kelly 36:20
Anytime anytime I think of Radio Shack. Everyone out there that might be listening. Remember your last trip to RadioShack? Did they try to upsell you batteries? Yes. On your way out? I think I think if you didn’t do that you were put on a performance plan. And look at this. That’s what we’re looking at.
Rolando Rosas 36:42
I know we’re not listening to the audio. But if you’re following us on the video side, look at all the celebrities that were on the other Back to the Future Hulk Hogan ALF as an alpha elf, alpha alpha, alpha alien life form. Yes, alpha and G’s was said to gymnasts that was on there. Go ahead. Roll that again. All right. And are you married? Mary Lou Retton? That’s right. And not all the store a kid ship launch from an AZ that was a Twisted Sister.
Dave Kelly 37:18
I was Twisted Sister good call on that. The
Rolando Rosas 37:21
Hulk Hogan, Mary Lou Retton the Back to the Future which is enormous. So in I think this particular AD AD 2014 is Am I right Ori the one that we’re looking at?
Dave Kelly 37:35
I’m seeing a Twitter that has a Twitter handle. Oh, maybe that you know, I take that back. It says goodbye 80s of right so I think that was added on after after. I think that was kind of a throwback type thing. But everyone that was in there. From the Hulk to elf to Mary Lou Retton to twisted Dee Snider from Twisted Sister was the BBC and that cliff Klavan from
Rolando Rosas 37:59
Kid and play. He had the big High Top Fade.
Dave Kelly 38:04
The team wolf was in there. Chatter was in there. These are all my this is my childhood wrapped up in a commercial. I didn’t know we were going way back like this today. On the good radio, remember, it had the stacks of a remote control cars and Oh, yes.
Rolando Rosas 38:22
Yeah. You know, what is the thing? That’s the thing I was gonna call he already knew that already in my brain, Dave. There’s some winners that they had. And that’s the piece that I think it may have may be harder for folks that have a physical store sometimes in the online space that this happens to picking the winners and then saying, Hmm, what if we double down on this one and that one, maybe get a white or black variation on it, or a line extension where we make a smaller or larger version of that. And that’s usually what will keep on being of a cash cow. Sometimes you do have to take risks, right? And you’re kind of all over the place. And those risks don’t pay off but then it’s time to cut the losses. We got to get rid of that or we’re less than that we’re not going in that direction. That’s not where our like you’re talking about our see look at that. If if RadioShack would have been able to stay in business. Imagine if you can go to a radio shack where they have drones, right? You don’t like
Dave Kelly 39:32
boring for you delivering for you.
Rolando Rosas 39:35
Just a different types like so people buy that rage right now as is the quadcopters right there. Yeah. Right. So if you have and that’s the thing now and the quad copters and the different type people want to fly those that’s a really hot hot hot thing. In 2015 It was probably a very small industry. I mean look, but you have to know where things are going, as well as the things that are right in front of you all the goods that we have, how can we tell them? How can we all that? And I think, to a large extent, that one, their website I remember wasn’t wasn’t great. The other thing
Dave Kelly 40:19
is attachment batteries.
Rolando Rosas 40:22
You know, when you talk about the batteries, and every company wants to upsell, right, just like, do you want fries with that. But you’re only as good as your weakest link. So I think about a football team played football. So I think about if we have a center that is weaker than the guard, and the tackles, gonna get exposed, and a quarterback is gonna get hurt, or me carrying the ball, I’m gonna get hurt. So what do we got to do with that center against this team, so we don’t get exposed. And I think that a lot of times, organizations sometimes don’t know that the weakest part and they just ignore it. And if you’re walking into a store, and you’re getting badgered as you’re walking around, you aren’t batteries, you all the time, you know, your experience isn’t great, you don’t love it, you’re gonna go somewhere else. And I think that’s where self examination of where you’re good and where you’re not, in trying to amplify the things you’re really good and create a bigger moat. And that’s where organizations can excel. But yeah, RadioShack Dominator had stores everywhere, everywhere, 1000s of stores. And so with 1000s of stores, I remember once they went into the online space, not everything that you wanted was in the store. It was like, oh, it’s online, what’s online? I can’t I get it here. And so that, that kind of aspect of like, I can’t quite have a unified experience between on and offline. And, and understanding. Good side over here, I saw it in your store, I saw it online, which is now the more common thing I saw it online, and I can go pick it up like at BestBuy and a lot of other places. So understanding what the customer wants, if I see something on your on your online shop. Is there a way for me to go get it? And I think more retailers that are on the physical side are starting move in that direction and follow the lead of other folks like like Best Buy and Home Depot and and the rest.
Dave Kelly 42:32
Yeah, retail retail is not dead. I mean, we’ve I’ve we obviously have some contenders out there that are doing a good job with inventory management. But now I think we’re seeing this trend of this mix of retail and online coming together I’ll tell you. So we we have a calls in town calls. I don’t. I don’t usually go shopping, but I do hear stories of my wife going to Kohl’s but half of the stories she’s going to Kohl’s to make an Amazon return. So that’s kind of cool, right? They, they bring in the person that’s shopping online. They’re making, they’re making a return at a physical location. And then if I’m not mistaken, Kohl’s will then reward that person that walked into their store with a couple of dollars in Kohl’s cash, just to entice that person to shop. And I liked what they’re doing there. So their marketing idea was, hey, we’ll help out with returns, will take your website, your traffic will manage your returns, bring it into Kohl’s. Hey, customer while you’re here, here’s a couple of bucks. shop our store. Really good idea.
Rolando Rosas 43:47
Very, very good idea. I mean, that’s what Amazon’s doing with whole foods. And that’s why they’ve made the returns. They’re free. Now. Get this Dave. Let’s do a Henri wake up and give me a pro tip. Here comes a pro tip. If you think the party with free returns is going to last forever. In your business. I’m talking about businesses that selling products, the party is going to end. Amazon has already signaled that for returns, they are going to charge they’ve already started that not all returns but this is the beginning. This is only the beginning. They’re charging for returns. And so if you’re returning something through the UPS store, they’re going to charge you for it now. I would expect that I should let me let me rephrase that. I would imagine that one of the reasons that Amazon is doing this is that returns are eating the profits and the profits of every organization no matter what you’re doing. Selling. And add, I think at some point, the customer is going to be a are gonna say, Well, we’re going to stop shopping on Amazon, which I’m not really see that happening especially based on last quarter’s numbers where they killed it. Or they say, Okay, this is part of life. Now I’ve got to think about the easy just like, I don’t like it. I think that customer behavior around this is going to change over time, Dave, because if businesses are saying, you know, hey, every 1% of profit that I can get under control adds up over time, then returns is that part where, you know, Amazon made it easy to return, everybody went to free returns, Amazon’s now reintroducing, hey, there’s a fee for return. I think other companies are going to follow suit, and see how they can introduce that. Others may see it as an opening to say, Amazon, you’re a bad guy, you’re charging for returns? What are you thinking, but Amazon’s big enough where they can influence the behavior. Only time will tell Dave, if Amazon’s approach is the way to go.
Dave Kelly 46:19
There’s there’s people that take advantage of Amazon returns, I had watched the podcast recently, and one of the one of the hosts was giggling as he’s admitting to buy to buying his wardrobe on Amazon with full intention of returning everything that he was buying. So he was in this circle of buying outfits, wearing outfits, ordering more clothing, while he’s returning clothing. And it was just he’s like, I had a full wardrobe for a year. I didn’t pay for it at all. And then they said, that’s a that’s a is that not a violation of Amazon’s policies? He said, No, I actually got kicked off of amazon for doing exactly that. So he got kind of found. But what I guess what I meant to say is, yes, you have these people that are taking advantage of it. But I think as consumers. Amazon has removed the weariness that we should all have before making a purchase. Before I’m buying something, you do enough of your own research so that you’re making the right decision. And I think what Amazon has done for some product categories, is just taking away the responsibility from the consumer to do any homework themselves. Go by it, see if it works or not see if it fits or not, and then decide from there. And they just feel there’s this level of responsibility that’s been removed. We sell high ticket items we want. We want our customers to obviously be thrilled with what they purchase from us. But we also don’t want customers to haphazardly buy a high ticket item and say I figure if it doesn’t work, it doesn’t work. It’s okay. There is a business at the other end of this. And some of these businesses aren’t billion dollar organizations. You know,
Rolando Rosas 48:20
Dave, I think some of what you’re saying is well, and one of the frustrations as a customer if I put myself in the customer role and choose a that when I get a product and I’m not sure what to do. You can say, Ah, hell with it, I’m going to return it. But I think a lot of people don’t have very good options. I know I’ve tried with multiple companies to get in touch with them. And the phone number to get in touch with them is hidden. It’s somewhere on their website. But it’s so hard to find. It’s you know, 3567 clicks deep into the support, do you really want support? You made it so hard? Forget it. I’m saying it back. Or you manage to get online. And here’s the part that I absolutely hate to get somebody either to chat with or on the line and they can’t fix it. In the first phone call. Like, what I gotta wait for you to open up a case with the tech that ticket ticket ticket, take a day or two go by and forget it. I’ll just return. Yeah, by
Dave Kelly 49:28
that time the return has been requested, the A to Z button has been hit.
Rolando Rosas 49:34
Exactly. And so in that’s what’s happened. That’s what happened and what you just say so true. You hit a to z because you know, in the case of Amazon, they’re going to authorize the return. But Amazon now has you know realized hey, there’s abuse going on until like you saying they’re kicking bad actors off. They they know they know from what I understand they know the return rate of what it should be within the category. So if you As an individual are returning double, triple that amount, they are going to flag your account for suspension, right? And so what you were saying was, yeah, you get returns. And in some cases, if you don’t have a very easy way to let customers see videos, a knowledge base, a support team, or be able to take action, when a customer calls and says, Hey, I’m having a problem here, can you help me, if that interaction goes south, where that person is not able to help them on the first call, or the first email, your increase your odds of the return going back to your organization flat out, the easier it is, whether it’s a self service option to consume videos or information, along with easy to find support that is empowered to make a decision on a product, and why it’s not working, or to help that person get over the problem. Then, if that all doesn’t fall in line, then you really, really will have a problem. Because imagine 1000s of orders, Dave over time, and it just starts, things just start coming through the back end and through the warehouse. And now you’ve got a big problem, because just incrementally over time, all these little orders started piling up.
Dave Kelly 51:27
And you need to get in front of it. You know, we were talking earlier about, it’s not the it’s not the sexiest part of the business. But I almost think it kind of is if you go into this knowing, listen, we’re going to scale we have more listings, our sales are growing Listen, with 20% over the last quarter 20% over the quarter over that we’re going to keep going. Alright, so now we examine returns. All right, returns are 7%. It’s the more we sell as we continue to grow, even if we just stay at 7%, we’re going to be loading up with this, get in front of it now make it just as fun as the strategy of creating the best listing, you know, that support piece in it. And if you’re ignoring it, perhaps your returns aren’t an issue. Each category is slightly different. I’d be interested, I would love to find the folks that have 0% or 1% return rate, I don’t think it exists. Unless maybe you sell an item that’s so low cost. That might be one of those, what do they call that a return less refund thing? Yes, is a different story, but a strategy, nonetheless. web data. But when we put things in place to support the client to make the client know, listen, we’re not going to tell this customer, we don’t want you to return your product, that’s not our angle, our angle is you bought a product, you were trying to solve a problem, you still need help solving this problem, because it’s a little bit tricky to set up, here’s our phone number at the front, right at the top,
Rolando Rosas 53:09
that’s that is a pro tip within itself, Dave put your support information at the very top, front and center. Don’t hide it, you just just help yourself, you know, I know that I won’t call this particular company out. Because we’ll just won’t do that. But they’re much, much, much, much larger organization that sells electronics. And one of the things that you can do as a consumer as a business, if you want to know if these, if this particular entity you’re trying to buy from does a good job of it. on Amazon, every company gets rated. And there’s a rating for it from all their consumer feedback. There’s the product side that has you know, the actual product feedback, and then there’s feedback that’s particular to the entity you’re buying. So Amazon, you may you might buy something, but you’re buying it through a third party like ourselves or something else. And what I was stunned Dave, to find out that this really large electronics entity has a very mediocre rating online when it comes to consumers providing feedback on their customer support or lack thereof. Yeah. And it’s not a lack of resources. It’s just, it’s, it’s just when you get the problem, how are you addressing it, or they empowered to fix it? Or, you know, what, what we’ve done that’s helped a lot is when we get those customer returns, you know, we go we go over them, you know, what are they saying? Well, they said that, you know the cable that came with it is not clear or they don’t understand or they may see some variation of that and sometimes that is the signal the bat signal to okay, how can we make the product we’re selling? Either more visit But or that aspect that is causing the problem to be more visible. And it’s it may be as simple as an insert or as simple as a QR code, or as simple as on the website when they order it to make it very clear this product, you need to do X and then it turns on how you know what the number one of the number one searches is for electronics products that have Bluetooth is how to pair number two how to mute number three, how to turn it on? I kid you not look, you didn’t look at do a search for a particular electronics device. You know, how to turn on your iPhone, for example, how to turn off how to mute you know, headset, how to pair how to you will find an in ordinate amount of videos online for those three things.
Dave Kelly 55:49
That’s crazy. Yeah, so. So what was your suggestion? Something like, I like what you’re saying I can insert something simple
Rolando Rosas 55:57
insert, certainly a video because people are reading less, I’m guilty of that myself. Where I’m online, I want to look at something in I want to see myself turning it on knowing what’s in the box, which is you see a lot of those unboxing. But that’s where a lot of videos and Dave, the end that the unboxing Okay, now I know what I’m getting? Is the more complicated, obviously, if it’s something very simple, like, you know, supplements or something like that. Okay, maybe a suggestion on how to use it. But for things that get more complex and more involved, how do I use it? How do I operate it? How do I get it? Right?
Dave Kelly 56:38
Give me some images make it easy? You know, I don’t know, I don’t know some of these brands still do it. But some of these, some of these international brands, they would include a user manual in 20 different languages. So when you took it and you open it and you just kept open it. And English was only you know, your language was only this little section of it. But you were so intimidated. You’re like, Nope, this is why men don’t read instructions, throw it away. And then you go online, and just something simple. But I’ve seen some brands. I’m looking at a box right here, I’m not gonna grab it. But I bet if I look in the inside of this new product that we got from me, pa, so I’m gonna call him out. If I open up this box, right on the inside of the box, it’s not gonna it’s not even a ladder. I bet it’s not even a language. I bet they just communicate with pictures and icons. Yes, absolutely. Like talking about making things easy. Keeping costs low, saving a little bit of garbage in a landfill always like that. But yeah, it’s always been that tricky piece. How do you so your customers made the purchase? That’s great. You don’t want them returning that you’ve worked so hard for that sale? You’re not at the end of your journey? Yeah,
Rolando Rosas 58:01
you told me a good one. It’s a full lifecycle. Dave, you know, when you think about it, you’ve got you got the customer buying you you as an entity buying more of that inventory, you storing it and managing it and fulfilling it and shipping it. And then you have this, right? The maybe the tail end part of that lifecycle is how do we manage the end? Right, whatever the end means whether it’s a return, whether it’s disposal, whether it’s recycle, whether it’s donations or liquidations, there is a component, that is the end. And it’s not always the most fun. But there’s, it’s an important part of the mix.
Dave Kelly 58:42
And it’s so important. I mean, if we’re talking if we’re talking about products that were returned, that’s money sitting, sitting, sitting, it’s money sitting, sitting there, money is just money sitting there. What’s important is to have the right data so that you can make those next steps. Absolutely connecting those dots. And
Rolando Rosas 59:02
you know, when I think about where the dots need to be connected next, Dave, I think the hockey puck is going in direction that’s slightly different than in the past and other companies have tried to do some of this went into what were the media world, social media and, and things that are online that are that are that are media that can be consumed, and commerce. Let me give you some examples on youtube today, you will see that YouTube has an integration with Shopify that allows some content creators to show merchandise or other items. That wasn’t the case before. On the Amazon side, Amazon does have their prime video but that’s more for movies and that kind of thing. But from the E commerce preside of things they’re trying to encode braid more influencers, they have an app that’s more influence based. I think if they’re really going to make some noise, they would, they would probably need to leverage another platform or partner with another because they don’t have that social media piece. like YouTube or Tik Tok, which I want to also highlight, they’re also getting into this play, where you’ve got the media side, the social media side, converging, now they’ve got tick tock shop done phenomenal in other parts of the of the country of the world outside the US. But now they’re making an effort here, in order to, to merge those two worlds of E commerce and media. Now, there’s two things that really need attention on that to see if they’re going to be successful one, are they putting resources and they are they are hiring a lot of people paying them? Well, they are. They have facilities, and they have their own seller, central their own tick tock Seller Central. So a lot of things like Amazon, in order to try to get to that piece where Amazon dominates, which is the logistics, the fulfillment, getting you the item when you need it fast and quick. And so in this new landscape, it is going to be very interesting to see what tic TOCs what tic toc does and influences on the E commerce side because what they’ve done on the media side is they forced all the media companies to go to shorts, and go to clips and go to short form video. All of them have placed an emphasis into Facebook, YouTube. All right, all of them have have tried to that snapchat all of them have tried to deliver this short form experience. So they’ve changed that the game. It’s interesting to see what’s going to happen on the on the E commerce side because now if I’m a consumer, I’m watching a video of some sort. And I like it. I like my influencer or I like the personality that I’m watching consuming this video. I want to support them. What’s your feeling organization,
Dave Kelly 1:02:06
but what’s your feeling about sponsored ads versus organic stuff that pops up in your feed? Well, you know, because I tend to be less attracted to some of the sponsored stuff.
Rolando Rosas 1:02:18
So the so the promotional ads, I think it’s a mixed bag. Dave, you’ve got some companies doing really well, you know, we had Jon Morgenstern from VaynerMedia, which is Gary V’s company. And he gave us a so go check out that episode with Jon Morgenstern. By the way, he had a lot of good insights. But the algorithms are getting to the point where Dave Kelly, the person when he goes on Facebook, as well as when he goes on Tik Tok, or Instagram, it knows what you’ve what you’ve clicked on what you’ve watched. And now the backend AI to all these algorithms are to a point from what John Morgenstern was telling us, they know you so well, that they will serve up at this type of creative ad. The next one is going to be this one, the next one is going to be this one. And oh, you clicked on this fourth one, it was about software editing. Let’s serve him up more software editing. And you may not even click on the other ones. But there’s something about the creative aspect of an ad. And that’s something that is a data point that gets fed back into the algorithms. And so what Jon was telling us is, hey, the algorithms do a better job than you now as a human as a buyer, trying to place bets on here, here, here and here. That they know your interests and they’re feeding you interest both on the organic, as well as sponsored. And so now, that’s where at some point, that’s why tick tock so good. It keeps serving you what? Right, that’s why it’s so addictive. And the one platform that has the highest watch time of any of the other ones right now. Right? So the algorithms are getting better and better understand their human psychology to some extent, right and your specific personalizing to You did, right? So we’re gonna give you more more videos of people making it or baking why make use gradients, right? Yeah,
Dave Kelly 1:04:30
it my feed has me. They, they know Me too. Well. I like I like it, and I don’t like it and but it’s weird. I’ll find myself watching something pretty sophisticated, right? And then I’ll have the dumbest thing ever jump in front of me right after I’m like, Alright, so I’m entertained by lowbrow humor and, you know, very scientific studies. Right? I would think the algorithms like I don’t know if I should be given this guy a chemistry set or not. and some band aids because he’s going to walk into a, it’s going to walk into a door or something he doesn’t, doesn’t seem extremely intelligent at one
Rolando Rosas 1:05:08
way. But the thing about you, let’s say you’re into cookies. And there are companies that sell cookies, and they have ads for cookies, you may not necessarily go after the first ad or the second Ed, because the third one catches your attention, because maybe they’re they’re more scientific about the way they are doing their cookies, or because it’s more humor based, right? You know, hahaha, I burned my cookies, bla bla, but if you use this wonderful tool, it’ll never burn. Right? Hmm. That’s, again, a data point. And the, I think chat GPT is up to a trillion data points. So the the amount of power that’s behind these algorithms, is getting exponentially larger the ability to connect all these different dots. And so that’s why I think, as we move forward, that media play where they’re where they understand the consumer really well, they know what you liked, they they know what you’d like to consume, and I get you to click on an ad that has a greater likelihood, you’re never going to hit 100 You are playing the probabilities when you’re talking algorithm, what’s the probability we can get Dave to click on this? And what’s the probability Dave isn’t gonna buy? And you’re playing those numbers out Amazon does this on all the social media platforms do it? So I think it’s going to be very interesting to see how the TIC tock experience is going to play out because ecommerce is not their thing that’s Amazon Yep. You could throw Walmart in there although Walmart’s have very far behind their number two player in the E commerce space and but they’re further behind but they’re really good at logistics, you know, how’s the FBA ish situation because fulfilled by tick tock is not going to be the same as fulfilled by Amazon. Right? Where, where Amazon could get you something now today? I’ve started seeing on on Amazon, I can get some stuff. Oh says delivery by 9pm. Today? I’m like, great.
Dave Kelly 1:07:11
And they didn’t try to upsell you batteries.
Rolando Rosas 1:07:14
But no, but they tried to sneak in something other things you may be interested in. They do. Yeah. I’m
Dave Kelly 1:07:21
starting to see that now, though. What are we get recently? Oh, you know what, I think it may have been one of those food programs, like a,
Rolando Rosas 1:07:32
like a meal plan type of
Dave Kelly 1:07:33
meal plan, I can’t quite remember. But in the box, it was like, they try try some of these energy bars. And have you tried this, they just gave you like a couple of samples with some coupons. In
Rolando Rosas 1:07:46
homes, like what Kevin King told us to, he said something like that, that you know, the thing that he sells, and then the bestseller, she’ll send a sampler package. Yeah, bundled in with some of the other items to see if you can get if you get hooked on some of the, the little sampler items, and then buy and make a purchase on those other items as well.
Dave Kelly 1:08:08
Hey, you’re trying to make repeat customers and fans, hey, if you can get that repeat customer, that’s a pretty big deal.
Rolando Rosas 1:08:17
That no doubt. And so we were talking about Walmart, and you know, you gotta throw eBay, I don’t know what’s going to happen, you know, with with eBay. They’re, they’ve found a niche in the automotive side. And, you know, they’re hanging on somewhere, you know, I think the space is going to get very crowded. If things go in this direction, where the media companies and ecommerce, either merge converge, or the media companies muscle their way in as like, what Tiktok they’re there. They’re not partnering with anybody, they’re doing it solo. It’s gonna have to eat into something, you know, the pie isn’t an unlimited pie. You know, I could see maybe an entity that’s looking for an E commerce play and buying eBay. That could be very interesting. Because they come in with infrastructure and software and people and know how, and now, maybe a retailer that didn’t have that infrastructure is set up for that, although eBay doesn’t have fulfillment centers. Ultimately, I think it comes down to that. Dave, back to the original thing. Fulfillment inventory returns, how do you manage that? eBay doesn’t do that. They’re not involved in that it’s on this individual seller on eBay. But being able to have that ecosystem where it’s a closed loop, and you manage it in a way where it’s managed, well, not just managed, but managed well, like a Walmart like an Amazon and taking those examples of what they do well and then incorporating it. I think that’s the winning formula. So it’s going to be very interesting to see what happens Just a pure media or pure e commerce, I think there’s still room for a lot of folks. But as these other players converge those two worlds, it’s gonna get harder for those that are on the edge of the periphery to excel now, hold up, something went kablooey on land. That was weird. So that’s, that’s what I think will happen. It’ll, it’ll be interesting. This stuff could happen overnight, as sometimes things take a little while for them to shake out. But I think we keep an eye on tic tock and see how they’re able to shape the landscape. We keep an eye on Amazon, because they have a lot of influence. That there’s a there’s a there’s a possibility that they’re going to be taken into court by an antitrust lawsuit. It’s being thrown around a lot in the media. So at the time of this airing, we’ll see what happens, you know, a year or two from now, if that forces change on the Amazon side? I don’t know. It’s gonna get really interesting here the next six to eight months.
Dave Kelly 1:11:06
Yeah, I would say and I would also say, Listen, if you’re an Amazon seller out there that’s been in it for 10 years, or you’re just getting going or maybe you’re a 20 year old 20. Vet 20 year veteran? Guess that’s not possible. 99? When was Amazon
Rolando Rosas 1:11:21
99? Think 99. All right, so
Dave Kelly 1:11:23
there’s could potentially be some 20 year old sellers out there. What I’m hearing alando is, Listen, if you’re an E commerce, retailer, full service retailer, or you’re just dabbling in it, you might want to also think about a media team and your social media player because it won’t all reside right here on Amazon. You know, John Morgenstern is talking about AI and the different data points from all of the places you’re at, which could influence that Amazon sale when when your buyer eventually gets there. Man, there’s, there’s a lot. It’s this living, breathing animal, there’s so many different parts of being successful on Amazon in E commerce. You really can’t let your guard down for a minute. Can you
Rolando Rosas 1:12:11
know to think think about just to rewind the clock a little bit. Back in the day, you either sent stuff via direct mail, you put in a billboard, or you tried to get something in the phonebook and you called yourself a one super plumbing, right? Because you’re at the void Drupal a plumbing. Right, those people still send direct mail phonebook gone, right? That’s pretty much the dodo bird. Billboards, they’re still around, you know, they have some value. But my point is that you had an omni channel back in the day, and that was your Omni channel. Yeah, I guess you had radio and TV. The Omni channel now is some of that, but a whole lot of social because more and more. I think the latest stat says something like 40% of searches for Gen X, and Z, all come or Gen Y. I always kind of screw those two up. The younger kids up to the age of 30 40% are starting their searches on Tik Tok, amazing stat. So Google is taking notice on that. And I think we’re not going to go backwards when it comes to the consumption of media and where people start their search. And I think having a well rounded omni channel strategy, as we said, from our friend from VaynerMedia, John, big props to you for, for coming on, and letting us know how all this is shaking out is that you know, there’s going to be more decisions made around what people consume online, and then ultimately, the click that comes as a result from consuming that social media. All right,
Dave Kelly 1:13:59
amazing stuff. While Rolando has a really good conversation today, and it was just the two of us will be bringing on some more guests in the near future. But in the meantime, tell him where they can see some of our other episodes who was our Who did we want to give a shout out to or closing?
Rolando Rosas 1:14:17
Yeah, you know, if you’d like if you want to nerd out on what’s happening in the Amazon world, or an E commerce. We talked to Kevin King Dave, who is probably one of those four most sought out consultants as well. He’s a seller, he’s still selling when it comes to online products. And we had him on our show, and he came in gave us a whole bunch of nuggets. And so if you want to learn more about how to excel in a very competitive world, as an online seller as a full service retailer, go ahead and check out Kevin King episode and we’ve got all of that action on circuitloops.com as well as well. Where ever you consume your podcasts. So I want to thank you for joining us today on this episode and Dave and I will see you the next time in that episode.
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