By Ezra Firestone | April 14, 2020
I wanted to share this clip from a private recording I made exclusively for my Blue Ribbon Mastermind.
In it, I give you a quick update on how I’ve been navigating Covid-19 in my businesses, what challenges I’ve been facing, and what my plans are going forward.
I talk about:
- • My business’s initial reaction to Covid-19, and the difficult decision we now have to make
- • What my data says about the ecommerce landscape and current buyer behavior
- • Why I believe that even if you’re having a hard time right now (like I am), there are big positives for ecommerce businesses
- • My business plan going forward
My Business Strategy and Current Challenges So Far
Our initial response to Covid-19 was to do what I believe every business should do to protect itself, and that is to improve its cash position. The more money your business has on hand, the safer it will be.
So to do that, we ran a 3-day sale to our past buyers and email list. It was a small promotion, but it was enough to generate about $200,000 and strengthen our position for the next few months.
After the sale, we learned our New York manufacturer was completely shut down (dang!). They make our two hero products, and without those we can’t acquire new customers because that’s what people buy on the front end. That meant we only had 2.5 months of inventory left.
(To make matters worse, one of our fulfillment centers had a Covid-19 outbreak and also had to shut down. Fortunately, our products are distributed between 3 warehouses so we were still able to fulfill orders.)
So, with my supplier down, I was left with 2 options:
• Option 1: Do we operate at full capacity and sell out of our inventory while we still can? (This would potentially leave me out of business in 2.5 months if my supplier doesn’t reopen; I would have to furlough everybody, shut down and reopen when I can.)
- • Option 2: Or, do we throttle back and extend the inventory that we have? (This has many benefits: I can make better use of the stimulus package, guarantee employment for my team, keep my Facebook pixel fresh, and continue serving my existing customers — just to name a few.)
But while all this was happening, I was getting really interesting insight into the ecommerce landscape through OneClickUpsell, my upsell app for Shopify.
The Ecommerce Landscape and Current Buyer Behavior
From March 1–13 (before Covid hit for real), OneClickUpsell’s checkout processed an average of about $1.7 million and 40,000 orders per day for the thousands of stores that use the app.
From March 15–April 9 (after things started heating up), these numbers went up significantly:
- • $2.7 million a day in revenue coming from the same number of stores
- • Upsell take rate increased from 15% to 19%
- • Order completion rate increased from 36% checkout completions to 42%
Here’s what this data tells me about the ecommerce landscape:
While it’s true that Covid has put some of us in a tight spot — say, sellers with their inventory stuck at Amazon; or people like me having supply issues — the good news is that buyer interest in ecommerce is growing at a rapid pace.
My theory is that Gen Y-ers and Boomers, neither of whom have fully adopted the technology of ecommerce and don’t shop online as much as younger demographics, are now coming online. And I think they’re going to stay.
This is going to speed up the ecommerce growth rate in the U.S. a solid 50%–100%. (As of 2019, we were at 12% of total commerce transactions, and growing 15% each year.)
Big Picture: This is Great for Us
From March 15–25, BOOM!’s acquisition costs skyrocketed. Since then ad costs have decreased, and now they’re even lower than before the crisis started. Why?
A big reason is because most brick and mortar businesses are out of the auction Yes, we are in a recession, but demand hasn’t dried up — it’s just been reallocated. People who sell coolers and luggage might be out of luck, but markets like home improvement, pet supplies, supplements, and tactical gear are all up.
So even if you’re struggling right now (like I am), you can still look forward to a lot of opportunity when we come out the other side of this.
And I don’t expect the ad markets to rebound quickly, which means we’ll have a good amount of time to advertise at these discounted rates.
Big picture: This is great for us. (Meaning: Obviously this is awful in a lot of ways, but there are positives.)
My Business Plan Going Forward
So what did I decide to do about my inventory problem from earlier?
I decided to throttle back our ad spend at every level, but mostly in our awareness pillar so I can still serve my loyal customers:
- • Lower acquisition spend from $14k a day to $4k a day
- • Lower remarketing and loyalty spend from $6–8k to about $2.5–3k a day
My goal is to generate around $30–40k a day in revenue, which will cover my overhead, keep my team employed and give me a little profit, while extending 2.5 months of inventory to 5 months of inventory.
Now, this is a pretty conservative decision on my part: I think my NY supplier will be operational in about 2 months, so I could keep selling at my normal rate and bet on restocking then.
But I thought about it, and I’m not willing to take the risk. I’m committed to keeping my team employed, and if something unexpected happened and I wasn’t able to restock… Well, that’s not an outcome I can accept.
To avoid this problem in the future I’m onboarding 3 new suppliers. I’ve got about $20k in bets placed to duplicate my products, which could happen in as few as 8 weeks and as many as 16. So, no matter what, I have new product coming in 4 months.
In the meantime, we’ve stopped all of our promotions and we’re continuing our content marketing as per normal.
Want expert coaching to help your business stay healthy and profitable through Covid-19?
I always do my best to update the blog on what I’m up to…
But if you want to see everything I’m doing to keep my businesses healthy and profitable during these difficult times (and how you can copy these strategies for your brand)…
Then check out my new 6-week coaching program, Compass Coaching: